Supreme Court decision in long-running case of Guest

Beverley Morris, head of Lodders’ Family Law team, examines a recent case heard in the Supreme Court, and the complex concept of ‘proprietary estoppel’.

Farming family

Lodders has a long history of looking after clients in the agricultural sector. A not uncommon feature of a farming family relationship is for parents to own the farm/the value of the land which is either attributed to them personally or credited to their capital account within a farming partnership, and for their children to work for often little/modest pay but in the expectation that the farm and/or land will become theirs at some point in the future.

But what if there is a ‘falling out’ and the promise and/or expectation is withdrawn and/or thwarted?

Proprietary estoppel

This concept of detrimental reliance on promises made is referred to as ‘proprietary estoppel’, which has been the focus of much attention and expensive litigation in the long-running case of the Guest family.

Essentially, the background to the Guest case centred around the claims made by Andrew Guest (eldest son of David). His claim can be summarised as follows: –

• Andrew had spent the best part of his working life (32 years from the age of 16), working on his parents’ farm.
• He worked for low wages (below the minimum rate set by the Agricultural Wages Board) and was accommodated in a farm cottage.
• His expectation was that he would succeed his father and own a share of the farming business and the farm, be able to continue farming there and, in due course, pass the farm on to his own children. This expectation was reinforced by David’s repeated promise that “One day, my son, all this will be yours”.
• There was a family falling out to the extent that Andrew and David could no longer work together let alone live in close proximity – Andrew had to leave. David made a new will in which Andrew was disinherited.

Andrew took his parents to court. The trial judge in the lower court determined that Andrew had detrimentally relied on his parents’ assurance by working on the farm for years for very little financial reward. Andrew was awarded 50% of the value of the dairy farming business and 40% of the value of the farmhouse and land, requiring his parents to pay capital sums to Andrew.

Court of Appeal

Andrew’s parents failed to persuade the Court of Appeal to interfere with the trial judge’s order and they successfully sought permission, from the Supreme Court, to appeal the decision.

The Supreme Court wrestled with the complication of the concept of proprietary estoppel and in the competing arguments of Andrew and his parents.

The judgment is 108 pages long, which in itself speaks to the complexity of the issues. The matters the Supreme Court had to consider in determining what (if anything) a court should provide by way of remedy included: –

• There was no contract between Andrew and David for Andrew to enforce.
• Why should Andrew receive a share of the farm now, when the only promise that had been made was for that to happen on David’s and his wife’s deaths?
• Why was David not free to change his mind?
• The concept of estoppel is to put right an injustice – to prevent David from reneging on his promise, where to do so would be unconscionable.
• What should be the remedy, if the court considered David’s conduct to be unconscionable, given David and his wife had not died?
• Was the task to satisfy the expectation and/or compensate for detriment?

Central to the complaint made by Andrew’s parents was the fact that any court remedy should not accelerate Andrew’s expectation before their deaths.

Supreme Court

The five judges sitting in the Supreme Court allowed the parents’ appeal (for differing reasons), but did not agree on the correct approach to a remedy. By a majority of three to two, they determined that the correct approach was to assess the appropriate remedy according to Andrew’s expectation of an interest in the farm, but that any immediate monetary award should be discounted in order to reflect the fact that Andrew’s interest had been accelerated. It was the repudiation of the promised expectation which constituted the unconscionable wrong.

The Supreme Court substituted part of the trial judge’s award, giving Andrew – in addition to the 50% of the dairy farming business – a reversionary interest in 40% of the value of the farmhouse and land, with a life interest to Andrew’s parents. If the parents elected to pay a lump sum to Andrew now in satisfaction of such award so as to effect a ‘clean break’, the lump sum would be discounted to reflect acceleration of the payment before their death.

Avoid ambiguity and conflict

This case and the significant legal costs incurred by the litigants highlight not only the complexity of this area of law, but also the benefit of putting one’s affairs in order with a clear written succession plan, and ensuring that one’s legal advisors are fully apprised of all the family circumstances, to avoid ambiguity and conflict arising

This field of law impacts on much of the work the property dispute resolution, private client, family, and agricultural teams undertake at Lodders.

Carefully consider the planning that is necessary to avoid such conflict in your personal circumstances.

More information

Lodders Family Law team is consistently recognised for its experience and expertise across the spectrum of family law, placed Band 1 in Chambers & Partners and Tier 1 by the Legal 500.

Lodders has a long history of looking after clients in the agricultural sector, and provides farmers, land owners and rural businesses with advice across a range of legal services.

For more information or advice on a related issue, contact:
Beverley Morris, James Spreckley, or John Rouse