18 St John Street Business and Property expert Dr Christopher McNall offers his initial thoughts on the Supreme Court decision on the case of Guest v Guest [2022] UKSC 27, which deals with Proprietary Estoppel.
Short(ish) thoughts on Guest v Guest [2022] UKSC 27 – an A4 (ish) guide
Although I am going to write something longer, these are my short thoughts, on one(ish) side of A4. Guest is an important decision. It is the first time since Thorner v Major that the Supreme Court has looked at proprietary estoppel at all. It is the first time ever that the Supreme Court has looked at how the appropriate (discretionary) remedy should be arrived at/measured.
What was it about?
A sad but not infrequently-encountered scenario. Andrew Guest spent his whole adult life – 33 years – working on the family farm. He expected to get it when his parents died. In his 50s, he and his parents fell out and he brought a proprietary estoppel claim. Andrew won his High Court trial in 2018 [2019] EWHC 869 (Ch). He was awarded, on a clean-break basis, a lump sum being 50% after tax of the market value of the dairy farming business, and 40% after tax of the market value of the freehold land and buildings. It came to about £1.3m. His parents’ appeal was dismissed by the Court of Appeal [2020] EWCA Civ 387. It couldn’t be shown that the trial judge had erred in the exercise of his broad discretion as to remedy.
The Supreme Court
His parents’ appeal was allowed: the trial judge’s solution was wrong because it failed to take account of accelerated receipt in a case where the promisors/parents were still alive. To have met the trial judge’s order would have meant sale of the farm. That would not have been fair to the parents. A forced sale to satisfy their promise to Andrew had never been in anyone’s mind. Hence, the remedy was not proportionate.
The Supreme Court split 3:2. Splits are unusual nowadays. Differences are normally worked out. They weren’t here.
Focussing on the majority (led by Lord Briggs), there is lot of stuff about how the ‘jurispriudence’ of proprietary estoppel:
1. The wrong is the repudiation of the promise and the harm is the repudiation of the promise thereafter (and whether that is, in the circumstances, genuinely unconscionable: it may not be) (Para 74). Hence, the remedy is expectation-based (what do I expect to get?) and is not detriment-based (what have I spent/foregone?) (Para 71): one hoary academic discussion laid to rest.
2. Start with the assumption that the simplest way of remedying the unconscionability constituted by the repudiation is to hold the promisor to their promise (Para 75).
3. BUT the remedy has to be just and proportionate. It is still open to the promisor to show that specific enforcement of the full promise, or monetary equivalent, would be out of all proportion to the cost of detriment to the promisee, or unjust (eg if the promisors might need money to pay for care home fees).
Outcome
50% of the business and 40% of the farm was only appropriate when the parents died. Otherwise, they would have to sell up or give up occupation, which they had never promised to do. The equity could have been achieved under an award to Andrew of a reversionary interest under a trust of the farm, with the parents having a life interest in the meanwhile. Any lacuna in management would have to be dealt with by order or agreement (Para 101). Alternatively, and at his parents’ choice, Andrew could take a discounted monetary equivalent now. If the latter, then the early receipt discount would have to be calculated, on the basis of expert evidence as to the value of the parents’ notional life interest in the whole farm: Paras 101-105. That would be a matter for the Court if not agreed.
Implications
A frequent issue is that the repudiation comes to light when the parents are still alive. People sometimes ask ‘Am I better waiting until they are dead’? Guest could well discourage claims against living promisors (because a clean break is difficult) and correspondingly encourage claims only when promisors are dead. That normally turns the inter-generational dispute from an inter-sibling dispute: just as nasty.
As for claims against living promisors, Claimants are presumably now going to think about the tramlines of what seems to be the Supreme Court-sanctioned menu of remedies. Neither (i) reversion under a trust subject to a life interest with interim farm management powers somehow bolted-on (or made subject to further court order) or (ii) cash (discounted for accelerated receipt) really look very attractive to the (Claimant) promisee. The prospect is even less attractive when the remedy is at the sole election of the (Defendant) promisors, with the promisee not having a look-in: Para 104. It is not usually left to Defendants to choose how they would like to remedy the wrong.
It might all be neat, and “commercial”, and perhaps would work nicelt with a dispute about a factory or warehouse, or some enterprise which did not involve animals, but it does not instinctively feel attractive. As to cash: cash is king, but no-one ever actually promised cash (and the problem of actually raising it remains). As to the trust interest – the Claimant is probably going to be very unlikely to want to carry on running the family farm bearing in mind (i) that the promisors have already usually booted them-off (ii) relations are poisonous and likely to remain so and (iii) the promisors are still there. It may require court supervision. Choppy waters.
The minority
The minority decision is given by Lord Leggatt. It is a long and powerful scholarly critique of how proprietary estoppel works. It is well worth reading. He is critical of the broad statements in many cases as to the need “to fashion a remedy that is appropriate in all the circumstances of the case”. He says that “English law needs to do better than this”. I respectfully agree.
The minority recognised that there could only be a clean-break, and that only an award of money was going to work. The only question was then how it was to be calculated. The right sum was the sum which would put Andrew in the position he would have been had he not built his career on the promises: Para 276. That was an estimate of his reliance loss – a fairly That sum was £610,000 (Para 282) – ie, about 45% of the £1.3m which the trial judge had ordered. The calculation was set out in an Appendix – earnings from 1989 (when Andrew was 23, got married and moved into a cottage on the farm restored by his parents); the difference between what he was paid and the appropriate AWB pay (£267,000), with interest.
We don’t know, and perhaps never will, what the cash payment authorised, but not directed, by the majority will end up as being. The starting point was £1.3m, but the parents, in their 70s, might have decades to live. That would effect a significant discount.
As an aside: £610,000 is not going to go very far in being able to buy a dairy unit of one’s own, and being your own boss, rather than working as a herdsman for someone else.
Dr Christopher McNall is the only barrister in the North of England recommended for work in Agricultural Law in the latest edition of The Legal 500.
Christopher specialises in disputes about tenanted and freehold farms and land (and especially agricultural tenancies under the Agricultural Holdings Act 1986), taxation (especially of agricultural land), proprietary estoppel, and inheritance.
He has appeared in many leading agricultural and tax cases in the Court of Appeal, the High Court, the Agricultural Lands Tribunal, and the First-tier Tribunal. He is Chairperson of the Agricultural Lands Tribunal for Wales, a Deputy District Judge, and a fee-paid Judge of the Tax and Property Chambers of the First-tier Tribunal.
Christopher was Consultant Editor for the ‘Agricultural Holdings and Allotments’ title in the 2018 edition of Halsbury’s Laws of England and writes the ‘View from the Bar’ column for the Agricultural and Rural Affairs section of Practical Law. His book, ‘A Practical Guide to Agricultural Law and Tenancies’, was published recently.
For more information on Dr Christopher McNall please contact Chambers Director James Parks or Senior Clerk Katie Brown by phone 0161 278 8261 or email bandp@18sjs.com.