Legal

Proprietary estoppel claim

A recent judgment in Guest v Guest will have a lasting effect on future legal claims over family farm disputes.

 

 

22 Feb 2023

Team name
Martyn Trenerry

Martyn Trenerry

Nearly all of them involve the parent(s) encouraging their son or daughter to stay and farm the family farm. The son or daughter stays and farms the family farm based on this promise on the expectation that when the time comes, sometime in the future, the farm will be theirs. At some future point, there is often a fallout or misunderstanding which leaves the son or daughter faced with the situation where the parents do not give effect to the alleged promise.

Tump Farm had been in the Guest family for three generations. Andrew Guest left school when he was 16 years old and worked at the farm for over 30 years. In October 1981, Andrew’s parents made Wills designed to ensure that Andrew and his brother would inherit Tump Farm and its business in equal shares. However, by 2015 relations between Andrew and his parents had significantly deteriorated and he later stopped working and moved away from the farm. In May 2018 Andrew’s parents made new Wills excluding Andrew from any entitlement.

Andrew issued proceedings against his parents on the basis of their repeat assurances that he would inherit a substantial interest in the farm and that he had relied on that assurance to his own detriment. In the High Court proceedings, Andrew succeed with his claim and the court ordered that Andrew be entitled to 50% of the dairy business and 40% of the land. This was to be achieved by either an immediate sale or the parents could choose to pay him the monetary equivalent. The parents felt that this was too generous and appealed.

The remedy was appealed in the Court of Appeal with Andrew’s parents submitting that the relief given should have been based on what the parents intended as opposed to Andrew’s expectation. The appeal was dismissed.

The Supreme Court was asked to consider further the appropriate remedy, in particular:

Whether a successful claimant’s expectation was an appropriate starting point when considering remedy; and whether the remedy granted went beyond what was necessary in the circumstances.

In effect the court had to determine whether in circumstances whereby Andrew’s claim had been successful they should enforce the promise made by his parents or apply a different remedy to instead compensate him for the detriment he suffered as a consequence of working on the farm for 30 years for a basic wage.

The lead judgment confirmed that the starting point for remedy is to fulfil the expectation but noted that there could be factors that would lead a court to depart from strict enforcement of the promise.

Some examples of such factors, included:

  • the property may have been sold;
  • it may be unfair on others who may have claims over the estate;
  • it may be unfair on the promisor who may need to fund care costs; and
  • it may be entirely disproportionate and unjust on the promisor.

The court reinforced the point that the underlying aim of this type of claim, if successful,

is to avoid unconscionability and generally speaking that should be achieved by enforcing the promise. It did, however, recognise that in some situations the unconscionability can be remedied in other ways e.g. different parcels of land or assets.

The Court stressed that the claimant should never be in a position where they are in a better position than if the promise had been fulfilled and it had in mind the situation where there is accelerated receipt. In the event that a case requires a clean break which involves the promisee receiving something early, then that is permitted subject to there being a significant discount.

The Supreme Court allowed the appeal concluding that Andrew should be given either a lump sum payment but at a reduced sum to reflect the accelerated payment or that Tump farm be placed in trust for him but with a life interest in his parents favour. It was for the parties to reach an agreement as to which remedy should be applied.

M&P Commentary

Martyn Trenerry, a solicitor undertaking contentious probate, contested Wills and financial disputes, said:

“This type of claim is called proprietary estoppel and is a legal remedy that may be used in some circumstances to prevent a landowner who made a promise or statement to someone that part or all of the property would be transferred to them in the future, from later reneging on that promise.

“To claim proprietary estoppel, it’s necessary to show:

  • a clear promise or assurance has been made
  • the promise or assurance was relied on
  • a reasonable reliance on the assurance or promise caused the claimant to suffer detriment

“Proprietary estoppel is a complicated area of law, if you think it affects you please speak to a legal advisor about it.”

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