Proprietary Estoppel: Be careful of what you promise your children


Proprietary estoppel cases are becoming ever more frequent, especially in the farming community. Below I take a look at principles of proprietary estoppel, I analyse a recent case and then consider how to avoid any claims. If a claim should arise, I explain how mediation might just be the solution for your client.

The typical farming proprietary estoppel case usually goes something like this:

  • One of the children takes a keen interest in farming, and the parent (and owner of the farm) promises the child that if they work on the farm for a minimal (or non-existent) salary then upon the parents’ death they will inherit the farm.
  • The child works on the farm and gives up any opportunities to work or study elsewhere.
  • Upon the death of the parents, the child discovers they have gone back on their promise and left the farm or shared it with a sibling.

So how does proprietary estoppel work? Basically, it effectively allows the court to step in and stop the parent from going back on their promise – where to not do so would be unconscionable as the child has relied on their promise to their detriment.

The requirements of a claim

To establish proprietary estoppel, you have to satisfy 3 key elements (as set out in Davies v Davies [2016] EWCA Civ 463):

  1. A representation, promise, assurance or other encouragement by the defendant giving rise to an expectation by the claimant that he/she would have a certain proprietary interest.
  2. A reliance by the claimant upon that expectation.
  3. A detriment to the claimant in consequence of his/her reasonable reliance on the promise.

Once these 3 elements have been satisfied, the Court will consider what remedy to award. It has a wide discretion and each case is dependent on the facts. The Courts options can include:

  • monetary compensation,
  • removal of the legal owner’s right to possess the land, and
  • the grant of a lease.

Case example: Guest v Guest

In Guest v Guest the Court of Appeal dismissed a proprietary estoppel claim involving a family farm. Briefly summarised:

  • Tump Farm had been in the Guest family for three generations and was owned by David Guest, the father.
  • Andrew Guest, the eldest of two son and the claimant in the original case, had worked on the farm for over 30 years for low pay.
  • Andrew had always been led to believe by his parents that he would inherit a substantial interest in the farm.
  • In 1981 Andrew’s parents drew up wills ensuring that he and his brother would inherit Tump Farm in equal shares.
  • Whilst Andrew’s inheritance expectation did change over the years – from inheriting the farm entirely, to inheriting it along with his brother, what did not change was his anticipation and expectation that he would inherit sufficient to continue with the farming business.
  • Sadly by 2014 relations between Andrew and his parents has deteriorated and he stopped working at the farm.
  • In 2018 Andrew’s parents made new wills excluding Andrew from any entitlement.

The Court found that until 2014 the parents had led Andrew to believe that he would inherit the farming business. There were clear assurances on which Andrew had relied to his significant financial detriment. The court felt that although Andrew’s expectations of inheritance had changed there was still ‘sufficient clarity’.

The Court when awarding the appropriate remedy awarded a lump sum payment amounting to 50% of the market value of the farming business and 40% of the value of Tump Farm. The Court acknowledged that this would inevitably lead to Tump Farm being sold but felt that due to the total relationship breakdown a clean break was required.

How to avoid claims

As demonstrated in Guest v Guest, proprietary estoppel cases are fuelled with emotion and often to lead to lengthy, bitter and very expensive litigation. There are practical steps you can take to avoid claims:

  • Avoid making promises or expectations that you can’t keep
  • Plan – land owners should consider succession planning (with the subsequent tax savings) at an early stage with everyone fully aware of each other’s’ wishes.
  • Make a clear will – again discuss the contents with your family so that nothing comes as a surprise

Mediation

Whilst the above steps would help guard against any claim for proprietary estoppel, not everyone has the time or the knowledge of proprietary estoppel to put appropriate measures in place.

If faced with a claim for proprietary estoppel claim, the parties should consider the use of mediation over litigation as the advantages of using mediation include:

  • Confidentiality – farming communities are small, and these cases are ripe for local gossip and media attention.
  • Cost – a mediation costs between £1500 - £3000 per party vs legal costs of c £!00,000 if it went to trial.
  • Speed – the mediation can be arranged within a few weeks and dealt with in one day - in comparison to the time it will take to bring the matter to trial (at least a year) and a possible 3 to 5 day hearing.
  • The parties decide on the solution rather than a Judge making a decision (which often suits neither party).
  • Mediation allows the parties to have conversations and to get to the root cause of these disputes (these cases invariably involve a family breakdown and with mediation there is the chance that old wounds can be healed).

The one disadvantage of mediation is the cost of the day, if it does not settle, but from my experience even if the case does not settle the parties are able to narrow the issues and as a consequence they are able to make significant savings of time and cost during the litigation.


Victoria Greenwood