Proprietary estoppel: Supreme Court divided on the appropriate remedy

The long-awaited judgment from the Supreme Court in the case of Guest and another v Guest [2022] UKSC 27 was handed down recently. We summarise the key issues and highlight relevant points for farming families and rural practitioners.

In summary, Andrew Guest’s parents had provided their son with assurances for over 30 years that he would inherit a sufficient interest in the farm, which Andrew had relied upon to his detriment for little financial return. The parents then repudiated that assurance and effectively disinherited Andrew. Fuller details are set out in our previous articles (Proprietary Estoppel: Habberfield and Guest confirm the direction of the Courts | Michelmores) on the High Court decision and (Proprietary Estoppel: Two cases – two different outcomes | Michelmores) on the Court of Appeal decision.

Focus on remedy

It had been hoped that the Supreme Court would provide clear guidance on what the Appellants’ barrister referred to as the ‘lively controversy’ about how proprietary estoppel claims should be remedied:

1. by compensating claimants for the detriment they have suffered in reliance on the promise made; or
2. by enforcing the defendant’s promise so as to fulfil the claimant’s expectations.

Some ten months after the hearing, however, the five Justices of the Supreme Court who heard the case could not themselves agree and instead handed down a split judgment on a 3/2 basis.

The outcome

The leading judgment was delivered by Lord Briggs, with whom Lady Arden and Lady Rose agreed. Lord Briggs allowed the appeal in part, determining that the High Court Judge had been correct to award the claimant his expected inheritance, despite that effectively meaning that the farm had to be sold; but that he had been wrong not to apply a discount for the claimant’s early receipt of the award.

The aim of proprietary estoppel

In his judgment, Lord Briggs emphasized that the debate about whether the aim of the remedy is to fulfil the expectation or to compensate for the detriment suffered is ‘misconceived’. Rather, the aim of proprietary estoppel is and always has been to prevent or undo unconscionable (or unfair) conduct. The starting point for the court, once a claimant has successfully established that an estoppel has arisen, should therefore be to enforce the promise.

However, while the court should start with the assumption that the promise should be fulfilled, ‘considerations of practicality, justice between parties and fairness to third parties may call for a reduced or different award.’ Flexibility remains key, and remedies will continue to be fact specific.

Minimum equity

The idea that the appropriate remedy is the one that is cheapest for the promisor – i.e. does the least to satisfy the equity – was rejected. Following a detailed review of the relevant case law, Lord Briggs determined that this oft-quoted dictum from 1976 has developed out of context, and what remains key is that the injustice of the promisor going back on his word is rectified.

Detriment & proportionality

Lord Briggs confirmed that although detriment is a fundamental element in establishing an equity, quantification of the detriment is not relevant when it comes to the remedy. This is welcome news given the difficulties of quantifying detriment where the ‘harm’ suffered by claimants in farming cases like this is often vague, speculative and non-monetary.

The expectation will not always be proportionate to the detriment:

there is nothing in principle unjust in a full enforcement of the promise being worth more than the cost of the detriment, any more than there is in giving specific performance of a contract for the sale of land merely because it is worth more than the price paid for it.

However, Lord Briggs clarified that the remedy should not be ‘out of all proportion to the detriment’ and confirmed the continuing relevance of the proportionality test set out in the 2002 Court of Appeal case of Jennings v Rice. However, this test is only relevant where the detriment can readily be identified and should always be applied with caution.

Accelerated receipt of the promised property

The High Court’s award saw the claimant receive his promised inheritance while his defendant parents were still alive. Lord Briggs determined that in failing to apply a discount, the High Court award had given the claimant more than he was promised and had thus exceeded the ambit of the Court’s discretion.

The Supreme Court held that the correct remedy to avoid unconscionability was either:

• that the claimant receive the awarded sum now but with an appropriate discount applied to take into account the accelerated receipt (to be agreed or determined); or
• the claimant’s share of the farm be held on trust by his parents for their lifetimes.

It was for the parents to choose which of these alternative forms of relief to give, as either would avoid an unconscionable result.

Five Key Points

1. The aim of proprietary estoppel is to prevent or undo unconscionable (or unfair) conduct.
2. The now well-established principles of establishing a proprietary estoppel claim continue to be necessary for a successful claim: i.e. a sufficiently clear promise or assurance of a future interest in property which is relied on to the detriment of the promisee, so that it would be unconscionable for the promisor to later rescind their promise.
3. The starting point for the remedy is the satisfaction of the promise, as it is the going back on that promise which is unconscionable.
4. Each case is fact specific, and there are in practice a variety of relevant factors which may mean that something other than fulfilment of the promise in full is the appropriate remedy.
5. The remedy should not be out of all proportion to the detriment suffered, where that detriment can readily be identified.

The Other View

The dissenting judgment given by Lord Leggett and supported by Lord Stephens demonstrates a fundamentally different approach to proprietary estoppel. The established rules of contract law and the legal requirements for valid transfers of land are clearly preferred to the uncertainty of this ‘potent legal doctrine’. The aim of avoiding an unconscionable result is acknowledged but criticised for failing to provide practical guidance on remedy.

The key difference between the judgments on remedy is Lord Leggett’s view that what should be avoided is the claimant suffering detriment if the promise is not kept. It follows that this can be done either by enforcing the promise or by putting the claimant in the position he would have been in had he not relied on the promise – i.e. by compensating his loss. The correct remedy is whichever of these two options ‘imposes the least burden on the defendant’. Lord Leggett’s conclusion was that he would allow the appeal and give an award based on the detriment suffered by the son in reliance of his parents’ promise.

Summing Up

The fundamentally different approaches and attitudes to proprietary estoppel between the leading and dissenting judgments is evidence of the continued uncertainty over how these cases will be resolved by the courts.

However, it is Lord Briggs’ leading judgment which the lower courts are to follow. There is therefore some clarity in what a potential claimant might expect to receive if he/she can make out a claim successfully. What it means in practice, however, given the broad scope for variations, dependent on the facts of each individual case, is yet to be seen.

Interestingly, there is discussion in both the leading and dissenting judgments about how uncertainty in this area of the law is a potential barrier to constructive settlement discussions between disputing parties. Our experience is the opposite: when the outcome at trial is so unpredictable, our view is that parties should seek to reach their own settlement agreement as early as possible.