In determining awards for successful claimants in proprietary estoppel cases, courts have long had to grapple with a ‘lively controversy’, as coined by Lord Justice Lewison in Davies v Davies [2016].

The ‘controversy’ surrounds the fundamental aim of proprietary estoppel and, by extension, how to determine a claimant’s award. Lewison LJ explored whether the court should aim to always compel performance of the promise given, unless disproportionate to do so, or whether to order that the claimant is merely compensated for their detriment. In Davies, it was decided that an answer was not necessary to settle that particular dispute.

The long awaited judgment in Guest v Guest [2022], however, has gone some way to settling the debate and provides fresh guidance on how the court is to exercise its discretion in determining an award for a successful claimant.

Proprietary Estoppel

There are two types of proprietary estoppel: ‘acquiescence’ cases and ‘promise’ cases. Guest concerned the latter type, where proprietary estoppel exists to prevent a person from going back on their word when someone else has relied on it to their detriment.

The classic pattern is that of a promise made by A (promisor) to B (promisee). B acts in detrimental reliance of the promise. A then seeks to withdraw the promise. In such circumstances, it would be unconscionable for A to deny the promise.

Awards are granted on the ‘expectation basis’ or ‘compensation basis’. The former entails giving effect to the promise made, so far as possible. If not possible, perhaps because the property has been sold, the position is usually to award a monetary equivalent to the promise. The latter seeks to compensate the promisee for their lost opportunity due to relying on the promise. In other words, this would see the promisee put in the position they would be in had they not relied on the promise. This method seeks to provide the minimum award required to do justice. In any event, an award must be reviewed in the round, taking into account any countervailing benefits received.

Thus, courts have discretion as to how to satisfy the equity. This discretion is not fettered as a result of the decision in Guest. Rather, the majority judgment provides a clear steer as to how to avoid an unconscionability.

Guest v Guest Background

The case concerned ownership of a family-run dairy farm. The parents (David and Josephine) purchased the farm in the 1960s and in 1981 made wills leaving the farm to their two sons, with a monetary legacy for their daughter. In 1982, Andrew, the eldest son, began working on the farm full time, receiving a basic wage. He lived on the farm and devoted significant time to learning and developing farming techniques. Andrew claimed that he was told he would inherit the farm and the business, though later accepted that it would be shared with his younger brother.

Andrew’s relationship with his parents broke down and in 2014 David and Josephine created new wills, disinheriting Andrew. Andrew was also forced to vacate his cottage on the farm. An application was made to the High Court for proprietary estoppel.

High Court

At first instance, it was found that assurances amounting to a promise had been given by the parents to Andrew over many years. The promise was that the farm would be left to Andrew and his brother.

It was also found that Andrew had acted in detrimental reliance of this promise, going above and beyond what would usually be expected of a farm worker on a basic wage. Andrew had worked exceptionally hard to develop the business in the expectation of inheriting the farm.  

The judge decided that a ‘clean break’ was the best way ahead and awarded 50% of the farming business and 40% of the farm’s land and buildings to Andrew (broadly reflecting the 1981 wills).

Court of Appeal

Andrew’s parents appealed the above decision, arguing that the award unfairly accelerated Andrew’s benefit because he was receiving his share of the farm during his parents’ lifetimes, and the award would force the sale of the farm. Additionally, the parents contended that an award should not be based on Andrew’s expectation but rather on their expectations, as promisor.  

The appeal was rejected. The idea of a ‘clean break’ was not found unreasonable due to relations.   

Supreme Court

Again, David and Josephine appealed and the case was referred to the Supreme Court. Guest provided the opportunity to settle the ‘lively controversy’.

The appeal was allowed in part by a majority of 3:2 with Lord Briggs providing the leading judgment. Lord Briggs reviewed the authorities to date and rejected the concept that compensation is, or ever was, the aim of proprietary estoppel. Instead he confirmed that the proper purpose was to avoid unconscionability due to the withdrawal of a promise and that the best way to do so would usually entail enforcement of the promise. However, the idea of compensation should not be abandoned altogether, but rather used as a useful cross-check.

Lord Briggs continued to confirm that without ‘good reason’, the remedy should not be disproportionate to the detriment suffered by reliance, thus reinforcing the proper role of proportionality as a cross-check when looking at the award in the round.  

Lord Leggatt, with whom Lord Stephens agreed, would have allowed the appeal also, though on different grounds. Lord Leggatt considered the fundamental aim of proprietary estoppel to be in providing compensation to a party who had relied on a promise to their detriment where the promisor had not taken action to prevent an unconscionable from withdrawing the promise. As such, Lord Leggatt would have awarded monetary compensation for the loss to Andrew by working on the farm for a basic wage, the minimum award required to avoid an unconscionable result.  

Interestingly, in Guest, the court allowed the parents to decide between two options for Andrew’s award. Option 1 would see the farm put into trust for Andrew, with his parents made beneficiaries of a life interest. Option 2 was an immediate payment to with a discount for accelerated benefit.  

Summary

In short, Guest has affirmed the route to determining awards in promise based proprietary estoppel claims. Once it is established that reneging on the promise would be unconscionable, the court should proceed to enforce the promise. If this is not possible, a monetary equivalent should be considered. However, if the foregoing would result in an award out of all proportion to the detriment, the court may contemplate a lesser, compensatory award. This may be less than required to compensate fully for the detriment. As mentioned, acceleration of benefit must be taken into account, as must any other countervailing benefits. The ultimate cross-check is to ensure the award avoids an unconscionable result for the promisee and any injustice to third parties.

Written by Oliver Clark – Trainee Solicitor.