A phrase which has been uttered in numerous variations over the years in many families and which has led to many a dispute.
Over the years the Courts have concluded that if someone relies upon such a promise to his detriment then, if the promisor later reneges from it, the promisee can seek redress through the Courts.
Such a claim has become known as a claim in proprietary estoppel although in the Supreme Court case of Guest -v- Guest where judgment was given on 19 October 2022, Lord Leggatt described that label as a misnomer and suggested that property expectation claim was a better term.
Whatever one chooses to call it, Guest -v- Guest confirmed that to establish a right to be “compensated”, the Claimant needed to establish a promise, usually to transfer an interest in property, reasonable reliance on the promise and then detriment to the Claimant on the basis of reliance on that promise.
Guest -v- Guest was concerned about the remedy available to the Claimant if they were able to prove those three elements.
For those with time on their hands, it is interesting to read the case and see two law Lords sifting through the same historical cases, going back about 150 years and crossing continents, and coming to diametrically opposed conclusions. For lawyers, that is what makes the law so interesting; but for clients who just want to be advised with certainty as to whether they are going to win or not and how much they will get, it can make life an absolute nightmare.
However, for the moment at least, we have an answer because three law Lords came down on the side of one answer against two law Lords on the other side.
The question that the Supreme Court framed was whether a Claimant should be compensated for the detriment he suffered or whether the promise should be enforced, and the majority came down on the side of enforcing the promise. Naturally, being the law, it was not quite as simple as that in that they then said, this being an equitable remedy, that one needed to look at the result of enforcing the promise and decide whether doing that produced a proportionate outcome.
There are in the main two types of circumstance where proprietary estoppel arises. The first is where a promise is made that on death property will be transferred. The promisor dies and at that stage it is discovered that the promise has not been honoured. Secondly there are those cases where there is a falling out during the lifetime of the promisor and promisee and the promisor makes it plain that he is not going to honour his promise and the promisee brings a claim during life.
The Supreme Court in its previous incarnation as the House of Lords had considered proprietary estoppel in Thorner -v- Major. As in Guest, the claim concerned a broken promise by a farmer that he would leave his farm on death to the son of a cousin, David, and as a result David worked full time for no payment for many years. The House of Lords ordered that David should receive the whole of the farm, including animals and stock on the farmer’s death.
In Guest -v- Guest it was David the farmer who promised his son Andrew not the whole of the farm, as he had other children, but a sufficient part of it to enable him to operate a viable farming business after the death of his parents. However, in that case Andrew fell out with his mother and father, leaving the farm in the process, and it was plain that the promise was not going to be honoured despite the fact that, in reliance upon it, Andrew had worked for many years on the farm for very little reward.
In the circumstances when looking at the award that was to be made, and bearing in mind Lord Justice Scarman’s dictum that they should do “the minimum equity to do justice”, the majority decided that whilst the starting place was to seek to honour the promise and not to calculate Andrew’s detriment, nevertheless because the promise was meant to be honoured on death and was being brought forward by a number of years, they needed to consider both the promisors who were still alive and indeed utilising the farm, and the fact that Andrew was getting accelerated receipt of the promise.
They found that by the time of the parents’ repudiation of the promise to Andrew, he had performed the bulk of his commitment to working on the farm. He had a reasonably well settled expectation he would inherit half the farm business and a viable part of the farm on which to continue farming and to live. He was already entitled to 50% of the business under his partnership with his parents. Accordingly, the majority of the Court took the view that 40% of the farm was a perfectly appropriate division for the purpose of making good the parent’s promise, subject to tax if that was unavoidable (since they were losing the usual taxation benefits that would come from farms passing on death). But the Court went on to say that it was only appropriate at that level once the parents had died. That could have been achieved by an award on appropriate terms to Andrew of a reversionary interest under a Trust of the farm with the parents having a life interest in the meantime.
The Court would not have given Andrew additional compensation for being off the farm pending his parent’s death. He had obtained alternative employment elsewhere. The parents remained dependent on the farm business for their own sustenance if it was not to be sold. Accordingly, it was not unconscionable for Andrew to receive no additional compensation for that part of his disappointed expectation.
The Court went on that there may be a wish on all sides for a more complete break. Andrew might find the postponement of the receipt for part of the farm until the date of his father’s death less attractive than a discounted monetary equivalent now. His parents might prefer to sell the farm to provide capital to support their care needs. The Court felt the Judge’s order provided an appropriate framework for such a break only if a sufficient discount for early receipt by Andrew was built in. That would be to reflect the continued notional life interest the parents had, not only in the farmhouse but also in the whole of the farm.
Thus, the majority of the Court felt that the parents should be entitled to choose between the two alternative forms of relief. They could be spared, if they chose, having to sell up and leave early but they should also be given the opportunity of selling up and having a completely clean break. If that were to be the case that would have to take into account accelerated receipt by Andrew and therefore they would be paying him far less then the Judge had ordered. Finally, the Court made it plain that the aim of the remedy is to prevent or remove unconscionability and so where there were two different ways of achieving that, the people against whom the equity is asserted (in this case the parents) should be the ones to make that choice.
As I have said, interestingly two of the five Lords came to the opposite conclusion. They took the view that the remedy should be decided by calculating the detriment that the promisee had suffered. They calculated that compensation at £610,000, having reached that figure by deciding that the detrimental reliance on the promise began in 1990. They calculated what Andrew could have earned against what he did earn to come to a calculation of lost earnings from 1990 onwards of £267,748. Then they had to add compensation for the delay in receiving that sum, by way of interest. Adopting a rate of return at 2% above base, they calculated that the interest was £342,162. Adding that to the principal sum and rounding enabled the two dissenting members of the Court to come to a total financial loss of £610,000.
They too said that one had to do an overall assessment of whether it was appropriate to add to or reduce the figure in arriving at the overall award. They said that the object is to work out the compensation required to put Andrew in as good a position (insofar as money can) as if he had made a career away from the farm from a much younger age. In his witness statement, Andrew had said he worked incredibly long hours at his parents’ farm for 32 years and had nothing to show for it. If he had left the farm at 16, he and his wife would probably now own the house outright and have savings. As things stood, they had no house and no savings. The minority in the Court felt that an award of £610,000 was enough to repair that loss.
So, in short, the Court has for now at least decided that detriment has no place when it comes to calculating the award to a Claimant who has successfully shown detrimental reliance on a promise, but rather one starts with looking at what has been promised and making that the award unless to do would be unconscionable.
From the examples given in the case it is fair to say that the longer one has suffered the detriment and the closer one gets to the date when the promise would have to be honoured before breach, the more likelihood there is the full amount of the promise would be regarded as being equitable compensation; whereas if the parties were to fall out and it became clear that the promise was not going to be honoured after a short period of reliance and detriment, then the less likely it is that an award of the full promise would be regarded as being equitable. The advantage of a detriment based award in such circumstances is that it would be relatively easy to calculate, whereas working out just what should be awarded in place of a broken promise which has only run for a few years is more difficult, and indeed it may well be that the manner in which the fairness of such an award would be calculated would be by way of a comparison with the detriment suffered.
