The Supreme Court decision in Guest and another (Appellant) v Guest (Respondent)  UKSC 27
"One of the principal functions of equity is to put right injustice to which the law is otherwise blind, by restraining the rigid application of legal rules where their implementation would be unconscionable."
Lord Briggs, Supreme Court decision in Guest v Guest
So said Lord Briggs, in his leading judgment in the recent Supreme Court decision in Guest v Guest. Lord Briggs goes on to set out the way in which equity can provide a remedy for the claimant, Andrew Guest, whose parents had reneged on their promise to leave him part of the family farm, a promise on which he had relied, to his detriment, for many years. The equitable doctrine in question is, of course, proprietary estoppel.
First instance and Court of Appeal
The trial judge had found that an estoppel arose and ordered the parents to make an immediate payment of £1.3 million (subject to certain adjustments) to Andrew to satisfy his inheritance expectation. This was calculated as 50 per cent of the value of the dairy farming business plus 40 per cent of the value of the freehold land and buildings at the farm. The parents appealed to the Court of Appeal arguing that the trial judge should not have based the remedy on Andrew’s expectation but rather it should have been calculated by reference either to the value he had contributed to the farm or the detriment he had suffered from his loss of opportunity to work elsewhere. There was also an argument that the trial judge had wrongly accelerated Andrew’s expectation: he had no expectation of benefit until his parents’ death, which should be many years hence. Their appeal was dismissed.
The appeal to the Supreme Court
The parents then appealed to the Supreme Court on the same grounds. The key issue for the Court was whether the "true underlying aim of the remedy" should be (a) to satisfy the expectation arising from the promise, or (b) to compensate for the detriment suffered in reliance of an unfulfilled promise.
In reaching his conclusion on the true underlying aim of the remedy, Lord Briggs undertook a comprehensive review of the case law going back to 1845 (which examined what is, in fact, the antecedent to the principle now known as proprietary estoppel) right up to 2019, and then across the globe to review the Australian jurisprudence. Lord Briggs noted that the principles applicable to proprietary estoppel have never been before the Supreme Court, and only twice in recent times before the House of Lords, in Cobbe v Yeoman’s Row  1 WLR 1752 and Thorner v Major  1 WLR 776 but that “neither yields rich pickings for a reasoned understanding of the principles governing the identification of appropriate relief to satisfy the equity once established”.
What is the "true underlying aim" of the remedy for proprietary estoppel
Following his review Lord Briggs concludes: “In my view this court should firmly reject the theory that the aim of the remedy for proprietary estoppel is detriment-based forms any part of the law of England…the cases show that equity did not take that course, and there is no good reason for doing so now, by a reversal of over 150 years’ careful development of the remedy upon a different foundation.”
However, he is also careful to state that the underlying aim of the remedy is “neither expectation fulfilment nor detriment compensation...The aim remains what it has always been, namely the prevention or undoing of unconscionable conduct.”
Stages in the analysis
Instead, Lord Briggs sets out various stages to be undertaken in the analysis of the appropriate remedy:
- The court should start by determining whether going back on the promise is unconscionable in the circumstances.
- If it is, then the court should assume (but not presume) that the simplest way to remedy that unconscionability is to enforce the promise to transfer the property in question.
- If that is not possible, for example if the property has been sold or if its transfer would cause injustice to others, it may have to consider alternatives, for example a monetary equivalent.
- If the enforcement of the promise, or monetary equivalent, would be out of all proportion to the detriment to the promisee, then the court may need to limit the remedy. However, this does not mean it should seek precisely to compensate for the detriment to the promisee.
- If the remedy involves acceleration of a future promised benefit, it will generally require a discount for accelerated receipt.
- Finally, the court should consider in the round whether a particular remedy would do justice in the circumstances, by considering whether the promisor would be acting unconscionably if they were to confer the proposed benefit on the promisee.
Application to the facts of the case
Applying this to the facts of the case, Lord Briggs rejected the parents’ argument that the trial judge had erred in failing to adopt a detriment-based remedy. However, the trial judge had not adequately discounted the sum awarded to reflect the acceleration of Andrew’s interest. As such the trial judge had exceeded the ambit of his discretion and Lord Briggs therefore exercised the discretion afresh.
Exercising the discretion afresh
Lord Briggs found that, by the time of the parents’ repudiation of their promise to Andrew, he had performed the bulk of his “working on the farm” commitment to his parents. He had a reasonably well-settled expectation that he would inherit both half the farm business and a viable part of the farm on which to continue farming and to live. This was therefore a case in which satisfaction of his expectation was, prima facie, an appropriate remedy. Andrew was already entitled to 50 per cent of the business under his partnership with his parents. 40 per cent of the farm was an appropriate division for the purpose of making good the parents’ promise, subject to tax and any discount for acceleration of his interest. He found that the parents should be entitled to choose between putting the farm into trust for the children subject to a life interest in the parents’ favour; or, if they prefer a clean break, making an immediate payment of compensation on the lines the judge ordered but with sufficient discount to reflect the early receipt.
The dissenting judgment
The dissenting judgment of Lord Leggatt offers an alternative analysis. Lord Legatt’s review of the authorities leads him to the conclusion that the aim of the remedy in proprietary estoppel is to prevent Andrew from suffering detriment as a result of his reliance on the promises made to him by his father. As enforcing those promises is not an option, the only practicable way of seeking to achieve that aim is to make an award of compensation calculated to put Andrew, so far as money can do it, in as good a position as if he had not built his career on those promises. The appropriate course is to estimate his reliance loss, reflecting the estimated additional amount Andrew would have earned by working elsewhere. Lord Leggatt conducts this exercise and finds that he would have ordered the parents to pay a sum of £610,000 as equitable compensation.
The case was decided by 3-2 majority. The fact that the dissenting judgment extends to 64 pages of the 108-page judgment shows how intertwined the concepts of expectation fulfilment and detriment compensation have become, over recent years, in determining the appropriate remedy in proprietary estoppel cases. As such, it is useful to have some in depth analysis from the Supreme Court and some clarity, at last, over how to fashion a remedy. In particular, the clear statement rejecting a detriment-based remedy should make it easier to advise clients accurately as to the value of a claim based on this antiquated equitable doctrine.
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This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
© Farrer & Co LLP, November 2022