Proprietary Estoppel (claims based on a promise)
Disputes involving a broken promise can be highly contentious and in many cases there is very little anyone can do, however, in certain circumstances the law under proprietary estoppel can help in relation to land or property disputes where a person believes it was promised to them.
What is proprietary estoppel and what are the requirements to make a claim?
A claim for proprietary estoppel arises if a person makes a promise and someone relying upon that promise acts to his or her detriment. Most disputes often come to light when the deceased will is read and an asset such as property has not been left to them. These types of claims often arise in a farming and or family business.
In order to bring a successful proprietary estoppel claim, three essential elements must be present:
- Assurance – The claimant must have received an assurance which created an expectation that they would be entitled to a right of interest in the defendant’s land/property.
- Reliance – The claimant must be able to demonstrate a reliance on that promise.
- Detriment – The claimant must be able to demonstrate that they acted to their detriment.
Will the claim go to court and who will pay?
Quite often these types of cases do end up in court due to them being highly contentious, which means they can be costly. The unsuccessful party will usually have to pay their legal costs as well as the successful party’s costs as well. However, these claims are suitable for mediation and negotiation, which could lead to a settlement during the claim without having to to go court and which should always be the first option to try and keep the costs down.
How does the court judge a proprietary estoppel case?
Proprietary estoppel claims are handled on a case by case basis and the court will consider the claimant’s evidence and any other third-party evidence that can helps the court determine if promises were made.
The claimant must also prove that he or she relied on that promise and took a different path than they would have done had it not been for the promise. The claimant must also prove they have suffered a disadvantage by relying on the promise, there are many examples, the one we see most often is in farming cases where a family member has worked on the family farm or in the family business in return for a low wage having been promised he/she will inherit the farm or business in later life.
The eagerly awaited Supreme Court Judgment in the case of Guest v Guest was published on 19 October 2022.
The summary prepared by the Supreme Court press provides a useful snapshot of a judgment that runs to over 108 pages and focuses on the proper basis for awarding remedies in proprietary estoppel cases.
The Guest case focused on a farming family, where one son, Andrew, had worked on the farm for 32 years (from leaving school) he was paid but at low rates. Andrew was promised that in return he would inherit a substantial (but unspecified) share of the farm.
Relations within the family deteriorated resulting in Andrew issuing proceedings alleging that he was entitled to a share in the farm or its monetary equivalent on the grounds of proprietary estoppel. The trial judge held that Andrew had continued to work on the farm for little financial reward because he reasonably relied, to his detriment, on various assurances made by his parents as to his future inheritance of the farm. He thereby satisfied the conditions for the estoppel to arise.
The trial judge ordered the parents make an immediate payment of £1.3 million (subject to certain adjustments) to Andrew to satisfy his expectation as to what he would have inherited. This was calculated as 50 percent of the value of the dairy farming business plus 40 percent of the value of the freehold land and buildings at the farm.
Before the Court of Appeal, the parents argued that the trial judge had been wrong to fashion the remedy based on Andrew’s expected inheritance. They argued that the award should instead have been calculated by reference to Andrew’s contribution to the value of the farm or his loss of opportunity to work elsewhere. They also argued that the remedy wrongly accelerated Andrew’s expectation, as he had not expected to receive an interest in the farm until his parents’ death. The Court of Appeal dismissed the appeal holding that it was appropriate to order a remedy by reference to Andrew’s expectation and that the trial judge was entitled to make the order he did. The parents appealed to the Supreme Court.
If the claimant has satisfied these tests the court has a wide jurisdiction to remedy the situation and will be given depending on the facts of each case options can include – denying the legal owner’s right to possession of the land, award of compensation, grant of lease and monetary compensation.
Judgment of the Supreme Court
The appeal succeeded in part by a majority of 3:2 , with the court substituting alternate remedies of either putting the farm into trust in favour of their children or paying compensation to Andrew now but with a reduction properly to reflect his earlier-than-anticipated receipt. The parents are to be entitled to choose between these options. The two dissenting judges would also have allowed the appeal but on substantially different grounds and would have substituted a different remedy.
How to guard against proprietary estoppel claims
As the value of land and property rises there has been an increase in these types of case, especially in relation to family farms and businesses. This head of claim is often used in conjunction with another type of claim under the Inheritance (Provision for Family and Dependants) Act 1975 or in respect of property. These claims often arise in a family context or in circumstances where re close relationship has developed so are often difficult to avoid. To help avoid these situations we recommend the following to help safeguard for the future particularly in the context of a family business or family investments:
- Consider your succession planning at an early stage and where possible include all family members with an expectation of benefiting from the estates that they are openly involved in the decision-making process.
- Make a will which clearly addresses succession and clear explanation thinking behind the succession.
How our experience can help
Inheritance, Wills & Trust Disputes Team
Dagmara Kulczykowska Partner
Private Client Services 01908 689341Dagmara is Head of the Department and has many years of experience in all aspects of private client work. Dagmara’s strengths are working with families on very sensitive and emotive matters, providing them with specialist legal advice. She ensures clients are supported but also advised clearly and comprehensively on the legal issue(s) at hand so that they can make an informed decision.