This months case summary comes from Lexis PSL.
Guest and another v Guest [2022] UKSC 27
https://www.supremecourt.uk/cases/docs/uksc-2020-0107-judgment.pdf
The Supreme Court, in a case concerning the proper basis for awarding remedies in cases of proprietary estoppel, held that the test of proportionality was the correct way of assessing a remedy although the detriment formed part of that test. The best summary of the proportionality test was that the remedy should not, without some good reason, be out of all proportion to the detriment, if that could readily be identified. In the case, the respondent, the eldest son, had brought proceedings against his parents, the appellants, seeking a declaration of entitlement under the principles of proprietary estoppel, to a beneficial interest in a farm (owned and operated by the appellants) together with a declaration of entitlement to reside in the cottage on the farm. Applying that test, it could not be said that the trial judge had been wrong to have adopted adopt an approach based on the respondent’s expected inheritance. However, the judge had not adequately discounted the sum awarded to reflect the fact that the respondent would receive compensation earlier than he had expected to inherit an interest in the farm. The appellants should be entitled to choose between putting the farm into trust for the children subject to a life interest in the parents’ favour; or making an immediate payment of compensation on the lines that the judge had ordered but with sufficient discount to reflect the early receipt.
The respondent, the eldest son, brought proceedings against his parents, the appellants, seeking a declaration of entitlement under the principles of proprietary estoppel, to a beneficial interest in a farm (owned and operated by the appellants) together with a declaration of entitlement to reside in the cottage on the farm. Following a trial, the appellants were ordered to make a lump sum payment to the respondent of £1.3m (subject to certain adjustments) to satisfy his expectation as to what he would have inherited. That was calculated as 50 % of the value of the dairy farming business plus 40 % of the value of the freehold land and buildings at the farm. The judge found that a sufficiently clear assurance had been given to the respondent by the appellants that he would inherit a sufficient interest in the farm to enable him to farm there. That assurance had been intended to be, and was, acted upon. As a result, the respondent had given up the possibility of being able to pursue a successful career elsewhere. The assurances had been relied upon, in one form or another, for over 30 years, the best years of the respondent’s life. The respondent had received little financial return. Finally, the judge held that, by repudiating that assurance and effectively disinheriting the respondent, the appellants had acted unconscionably. It was the almost inevitable consequence of the judge’s order that farm would have to be sold in order to realise the lump sum payable to the respondent. The appellants appealed in respect of the remedy. They argued that the trial judge had been wrong to fashion the remedy based on the respondent’s expected inheritance and that the award should instead have been calculated by reference to his contribution to the value of the farm or his loss of opportunity to work elsewhere. They also argued that the remedy had wrongly accelerated the respondent’s expectation, as he had not expected to receive an interest in the farm until the appellant’s death. The Court of Appeal dismissed the appeal holding that it was appropriate to order a remedy by reference to the respondent’s expectation and that the trial judge had been entitled to make the order he had. The appellants appealed to the Supreme Court. The appeal concerned the proper basis for awarding remedies in cases of proprietary estoppel. Proprietary estoppel arose when a person gave a promise or assurance to another person that they had or would be given an interest in the property and that other person reasonably relied on the promise or assurance to their detriment.
Issues and decisions
What were the correct principles to apply in awarding a remedy in cases of proprietary estoppel. Namely: (i) whether a successful claimant’s expectation, in the case of inheritance of a family farm, was an appropriate starting point when considering a remedy and; (ii) whether the remedy granted, namely payment of a lump sum which would in effect result in the sale of the farm, went beyond what was necessary in the circumstances.
(i) Relief on the ground of proprietary estoppel was a purely judge-made remedy. The remedy was there to eliminate, or at least mitigate, the affront to conscience constituted by a decision by the maker of a non-contractual promise or assurance about property upon which the recipient had relied to their detriment to go back on it (see [8] of the judgment).
The court should firmly reject the theory that the aim of the remedy for proprietary estoppel was detriment-based had formed any part of the law of England. By contrast, the concept of a proportionality test did appear to have taken root in England, as part of the assessment of whether a proposed remedy to deal with the proven unconscionability based on satisfying the claimant’s expectation worked substantial justice between the parties. Like most tools or rules for the examination of whether something produced justice, it was a good servant but a bad master. It was no more nor less than a useful cross-check for potential injustice. The true ‘value’ of the detriment might be impossible to assess with anything approaching confidence. But that did not mean that the non-financial element of the detriment should be ignored, as if it were too remote. Prima facie, wherever the reliant detriment had (as here) lifelong consequences, a detriment valuation analysis fell upon stony ground. As noted in the relevant cases, it was where the detriment was specific and short-lived, and in particular shorter than the parties were likely to have contemplated, that it was likely to serve a useful purpose. That purpose was not generally to serve as even an approximate yardstick for a monetary award. The best summary of the proportionality test was that the remedy should not, without some good reason, be out of all proportion to the detriment, if that could readily be identified. If it could not, then the proportionality test was unlikely to be of much use (see [71], [72] of the judgment).
The question of proportionality was not to be carried out on the basis of a purely financial comparison. The court’s normal approach should be as follows. The first stage was to determine whether the promisor’s repudiation of his promise was, in the light of the promisee’s detrimental reliance upon it, unconscionable. It usually would be, but there might be circumstances (such as the promisor falling on hard times and needing to sell the property to pay his creditors, or to pay for expensive medical treatment or social care for himself or his wife) when it might not be. Or the promisor might have announced or carried out only a partial repudiation of the promise, which might or might not have been unconscionable, depending on the circumstances (see [75] of the judgment).
The second (remedy) stage would normally start with the assumption (not presumption) that the simplest way to remedy the unconscionability constituted by the repudiation was to hold the promisor to the promise. The promisee could not (and probably would not) complain, for example, that his detrimental reliance had cost him more than the value of the promise, were it to be fully performed. The court, however, might have to listen to many other reasons from the promisor (or his executors) why something less than full performance would negate the unconscionability and therefore satisfy the equity. The court might be invited by the promisor to consider one or more proxies for performance of the promise, such as the transfer of less property than promised or the provision of a monetary equivalent in place of it, or a combination of the two (see [76] of the judgment).
There was principled justification for treating a perceived need to abandon full enforcement as a reason for moving straight (or at all) to compensation on the basis of an attempt to value the detriment. That would suggest something approaching a binary choice which would be alien to the flexible and pragmatic nature of the discretion (see [76] of the judgment).
In the end, the court would have to consider its provisional remedy in the round, against all the relevant circumstances, and ask itself whether it would do justice between the parties, and whether it would cause injustice to third parties. The yardstick for that justice assessment would always be whether, if the promisor was to confer that proposed remedy upon the promisee, he would be acting unconscionably. ‘Minimum equity to do justice’ meant in that context, a remedy which would be sufficient to enable that unconscionability question to be answered in the negative (see [80] of the judgment).
(ii) Applying these principles, it could not be said that the trial judge had been wrong to have adopted adopt an approach based on the respondent’s expected inheritance. However, the judge had not adequately discounted the sum awarded to reflect the fact that the respondent would receive compensation earlier than he had expected to inherit an interest in the farm (see [96]-[100], [92]-[95] of the judgment).
Considering the remedy afresh, the appellants should be entitled to choose between putting the farm into trust for the children subject to a life interest in the parents’ favour; or making an immediate payment of compensation on the lines that the judge had ordered but with sufficient discount to reflect the early receipt. If the amount of such payment could not be agreed following valuation of the farm it would be remitted to the Chancery Division to determine the amount (see [100]-[105] of the judgment).
Per Lord Leggatt (dissenting): The core principle underpinning relief for proprietary estoppel was to prevent a party going back on a promise without ensuring that the party who relied on that promise would not suffer a detriment as a result of that reliance (see [188]-[191], [255] of the judgment).
To achieve that a court might either: (i) compel performance of the promise (or order equivalent payment to put the promisee in the position they would have been if the promised had been performed); or (ii) award compensation to put the promisee into as good a position as if they had not relied on the promise (see [192]-[195], [256] of the judgment).
The court should adopt whichever method resulted in the minimum award necessary to meet the aim (see [197], [256] of the judgment).
On that basis, the respondent should have been awarded £610,000 to compensate for the detriment he had suffered as a result of working on the farm in reliance upon his parents’ assurances. That reflected the estimated additional amount the respondent would have earned by working elsewhere (see [275]-[282] of the judgment).
Decision of Court of Appeal (Civil Division) [2020] All ER (D) 120 (Mar) Reversed In Part.
Tara Psiala, Barrister, Lexis Nexis.
