Proprietary Estoppel: Guest v Guest

The law has a way of dealing with certain broken promises, the legal term for which is proprietary estoppel - see the full definition below. Typically, such claims are brought when a person has died, and a promise has not been fulfilled. But in the case of Guest v Guest, the claim of proprietary estoppel was brought while those who had made the promises were still alive.

This case will have a significant impact on future legal claims of proprietary estoppel – especially family farm disputes. The key issue in this case was how much the claimant should receive - in assets or in money - following the success of his claim.

David and Josephine Guest owned a family run dairy farm business. Their eldest son, Andrew, had worked on the farm since the age of 16 and received a basic wage. Andrew lived in one of the cottages on the farm, rent free, and had accepted a modest income as his parents had promised that he would inherit a significant proportion of the farm when they died. However, there had been a breakdown in the family relationship and Andrew had been disinherited. 

What is proprietary estoppel?

Proprietary estoppel is a legal principle intended to stop someone from going back on a promise they had made to another person that they relied on to their detriment. In the case of Guest, Andrew claimed that his parents had promised him a significant proportion of the farm, but then disinherited him from their estate by excluding him from their wills.

The first trial

Andrew succeeded in his claim as the judge said there was clear evidence that declarations had been given by Andrew’s father, David, over a substantial period of time, on which Andrew had reasonably relied. The fact that David had broken those promises was to Andrew’s detriment. Andrew had worked on the farm for 33 years, receiving only a basic wage with the  future incentive of inheriting a large proportion of his parents’ estate. 

Andrew’s claims on the inheritance were further supported by previous wills that had been revoked prior to the breakdown in family relations, as well as the terms of the partnership agreement between Andrew and his mother and father. The court concluded that Andrew would not have worked for so long, for so little, without his parents promising such a substantial reward. 

The judge considered the following factors when deciding how much Andrew should be awarded: 

• The fact that Andrew’s parents were still alive and had a continuing interest in the farm
• Other family members who may have a claim to the farm 
• Andrew’s expectations that he would take over the running of the farm and his promised inheritance. 

The judge awarded Andrew 50% of the net market value of the business, and 40% of the net market value of the farm. Although this might result in the farm being sold, the judge concluded that this was the best way forward as it would ensure a ‘clean financial break’ in the light of the ongoing poor family relationships.

The appeal

Andrew’s parents, David and Josephine, appealed the decision as they believed the amount awarded was more than was necessary to compensate their son. They also argued against his inheritance being accelerated and wanted Andrew to receive his share of the farm and business on their deaths. David and Josephine’s appeal was rejected.

The Supreme Court

But the case did not stop there. The Supreme Court ruled that Andrew’s award in the initial trial had failed to adequately consider the interests of his parents or others who may have a claim on the farm and the business. The court gave David and Josephine two options: they could either pay Andrew a lump sum, but this would be reduced to reflect the fact that he would be receiving it now rather than when they died; or they could put the farm into a trust so that Andrew’s interest would be protected for him to inherit on their deaths and, by so doing, avoid the need for the farm to be sold now. 

The Supreme Court’s decision is important because it clarifies how claims for proprietary estoppel should be valued. Until now there has been confusion as to whether a successful claimant should be given an award that reflects their expectation of the promise made or whether it should reflect the detriment suffered. The guidance is that the award should be based on expectation but should only be sufficient to do justice and should not be more than was originally promised or expected.

If you have been promised an interest in a property or land, you have relied on that promise and are concerned that it has not been or will not be upheld, our inheritance disputes team can help. Our specialists will explain clearly what options you have and what action you can take.