A recent case in the law of proprietary estoppel

24 Jul 2019

The law of proprietary estoppel remains a difficult are area of law, which continues to develop many years after it first evolved after the Second World War.

The recent decision of Guest v Guest in the Bristol District Registry of the Chancery Division on 16 April 2019 gives further guidance of the practical application of proprietary estoppel, particularly in farming cases.

What is proprietary estoppel?

Proprietary estoppel is the court’s equitable response to unconscionable conduct. Typically where the conduct of one person leads another to expect that he/she will acquire an interest in a property and the other acts to his/her detriment in reliance on this expectation, a court may decide that it is wrong or inequitable for the first party to insist on his strict legal rights to deny the other part any interest.

In this situation it is said that an “equity” arises which the court may satisfy by awarding compensation. The terms of that compensation are complicated, but the court can make an award of property, lump sums or give a party the right to live in a property. The court will award each party the share which it considers fair having regard to the whole course of dealing between them in relation to the property.

The case

Judge Russen QC heard in Guest that the claimant Andrew Guest was born the eldest son into a traditional farming family in 1966. He left school in 1982 aged 16 and began work on the farm. His brother, Ross, was aged 4 at the time. Andrew’s case was that no alternative career path was discussed with him. He expected to work on the farm and for the next 32 years he lived and worked on the farm where he brought up his own family.

Andrew argued that he had positioned his entire life at the farm, working hard in the family farming business, for which he was ambitious, for low wages and with no financial independence or security, because he had been led to believe that he (and his younger brother, Ross) would inherit the farm and he was investing in his own future. Steps were taken by his parents David and Josephine Guest to hand over the reins to the claimant in 2012 by making him a 50% partner in the farm, but he farming partnership ended in a dispute in circumstances where David failed to give Andrew the independence he had been promised.

His parents subsequent steps of ending the partnership, seeking possession of the cottage where Andrew lived and making new wills disinheriting him entirely were claimed to be an unconscionable, reneging on the understanding fostered David that he, Andrew was secure at the farm and that he (and Ross) would inherit the farm in due course.

At the time of bringing the claim, Andrew Guest was in his 50s. He and his wife had no real assets, no permanent home and he said a most uncertain future.

The Judge found that on the evidence the claimant had reasonably relied on his parents’ assurance to his significant financial detriment and that this was obvious from the fact that he worked hard on the farm for many years for little financial reward, even taking into account of the provision of his home at a cottage on the farm and the payment of certain living expenses.

The result

The Court was satisfied that the claimant would not have done so had his parents not encouraged the idea of an inheritance. It also reinforced the court’s approach that detriment is to be looked at matters ‘in the round’ rather than with mathematical precision and found that the claimant had in this case invested what, for many, was a life-time’s worth of work for a very modest reward, which involved him sacrificing the likely prospect of bettering himself elsewhere.

It was held that the claimant had established an equity in his favour and as a result the Court exercised its broad judgmental discretion in an attempt to do what was necessary to avoid an unconscionable result, or, alternatively, to identify the minimum equity to do justice.

In his judgment, Judge Russen QC decided that the appropriate remedy to satisfy the claimant’s equity was a lump sum payment reflecting broadly:-

1. 50% after tax of the market value of the dairy farming business or of any actual value realised;

2. 40% after tax of the market value of the freehold land and buildings at the farm, or any actual value realised, subject to the defendants’ lifetime interest in the farm (or the value of that interest); and

3. A percentage share payable to the claimant was to be net of any taxes.

This case therefore shows that the doctrine of proprietary estoppel is alive and well and that the Court will adopt a flexible approach to ensure that, where it needs to, an equitable outcome is achieved.

If you require assistance with your own proprietary estoppel claim, our team of litigation solicitors are happy to help. Contact experienced litigation lawyer, Andrew Carswell, to get started.