Guest v Guest: Aims of proprietary estoppel and principles governing relief (2)

Introduction

An earlier blog post outlined the facts and the judgment of the majority of the UK Supreme Court in Guest v Guest ([2022] UKSC 27).  

One of the distinctive features of proprietary estoppel, in comparison with the common intention constructive trust for example, is the judicial discretion as to the relief to be awarded. This discretion gives judges some flexibility and an ability to seek solutions that are fair to all concerned in the circumstances of a particular case.

It is desirable, however, that there should be a conceptual framework to guide the exercise of judicial discretion. Judges can then draw on this framework as they exercise their discretion and can use it to give reasons for their decision.

Judges will then be helped to focus on, and properly assess, the facts of the case that are of most importance in the light of the guiding principles.  Clarity of exposition as to the relative importance of these facts and the part they played in designing the relief will help appeal courts to assess whether a first instance award was soundly based.

This clarity must also be helpful to the parties and their advisers when negotiating a potential settlement, surely a good thing.

This blog post outlines the approach taken by the majority in Guest v Guest which proposed an expectations-based model for relief. This approach gave rise to the outcome described in the earlier blog post. A minority of the Supreme Court advocated a different approach placing a heavier emphasis on detriment.

Guest v Guest concerned the promise of a future right

Lord Briggs made the point that Guest v Guest concerned the promise of a future interest, rather than an assurance of a supposed existing right. The same doctrine applies, he thought, but he implies that the relevant considerations might differ ([8]).

Expectation v detriment

A description of the detriment-based approach of the minority in the Supreme Court in Guest v Guest can help us to understand why the difference in approach can have very significant practical consequences.

The majority took the plaintiff’s expectation (of sufficient land to run a viable farming business) as the starting point, modified so that accelerated receipt of the award did not mean that the plaintiff got more than his expectation.

The minority took the plaintiff’s detriment as the guiding principle. It thought that the detriment was easy to identify and quantify. The plaintiff worked for many years at low wages on his father’s farm because of the assurance. The detriment was the difference between market-level wages for the work he did and the wages he actually received ([278]).

This could be identified with certainty (GBP 267,748). The plaintiff was also entitled to interest on the sum at 2% above base rate (GBP 342,162). Rounded up, he total relief that the minority would have awarded was, thus, GBP  610,000.

The value of the majority’s award is not specified in the judgment but it is presumably much more valuable than the sum arrived at by the minority’s detriment-based approach.

Proprietary estoppel seeks to undo unconscionability

While the main focus of the judgments is on the principles governing equitable relief in proprietary estoppel, some attention is paid to the broader question of the aim of proprietary estoppel.

Giving the majority judgment, Lord Briggs said:

‘neither expectation fulfilment nor detriment compensation is the aim of the remedy. The aim remains what it has always been, namely the prevention or undoing of unconscionable conduct’ ([94]).

Fulfilling expectations while avoiding an award that is out of all proportion to the detriment

Lord Briggs’ review of the authorities led him to the conclusion that expectation fulfillment has always been the starting point for equitable relief ([5]).

But specific enforcement of the promise might sometimes be disproportionate to the detriment and so be much more than is required to undo the unconscionability ([6] and [10]).

So ‘the concept of a proportionality test does appear to have taken root in England, as part of the assessment of whether a proposed remedy to deal with the proven unconscionability based on satisfying the claimant’s expectation works substantial justice between the parties’ ([72]).

And ‘the best summary of the proportionality test is that the remedy should not, without some good reason, be out of all proportion to the detriment, if that can readily be identified. If it cannot, then the proportionality test is unlikely to be of much use’ ([72]).

Lord Briggs close his discussion of proportionality by observing that, ‘the question of proportionality is not to be carried out on the basis of a purely financial comparison’ ([73]).

Other factors that might mean that it is not appropriate to fulfil the plaintiff’s expectation

Proportionality is a relevant factor, then. Other factors too may mean that specific performance of the promise would be unjust:

‘The promise may be incapable of specific enforcement, for example where the underlying property is no longer in the hands of the promisor or his estate. The promised date for performance may lie so far in the future, or the date may be so unpredictable, that an order for performance on the promised date would be too insubstantial as a remedy. Or the early enforcement in full of a promise which, although repudiated, is years away from the due date for performance may give the promisee too much, or something radically different from that which was promised. The promisor may have other powerful equitable or moral claims on his bounty, so that the appropriation of the whole of the promised property to meet the claim of the promisee may be unjust to those other claimants, and be more the cause of unconscionable conduct than a remedy for it. Finally the magnitude of specific enforcement in full may be so disproportionate to the detriment undertaken by the promisee that something much less than full specific enforcement is needed to clear the conscience of the promisor ([6]).

In some cases, as in Guest v Guest itself, the need for a ‘clean break’ between the parties might also be an important factor ([64]) so that solutions that would require the parties to live or work together might be unworkable.

The majority’s principles for the design of equitable relief

Lord Briggs argued that the court should approach equitable relief in the following stages:

1. Decide whether repudiation of the promise is unconscionable in the circumstances ([74]);
2. Start with the assumption that the appropriate relief is full performance of the promise performance (or a monetary equivalent) but be aware that there may be factors which would render this disproportionate ([75];
3. The burden of proof is on the party arguing that full performance is disproportionate ([76]);
4. Full performance is likely to be appropriate in cases that fall just short of a contract ([77];
5. Just because full specific performance is inappropriate does not mean that detriment should be taken as the yardstick ([79];
6. ‘In the end the court will have to consider its provisional remedy in the round, against all the relevant circumstances, and ask itself whether it would cause injustice to third parties’ ([80]).

Appropriate to focus on detriment where it is specific and short-lived

Despite the insistence on performance of the promise as the starting point, Lord Briggs acknowledged that it might be appropriate to focus on detriment (and undoing it) ‘where the detriment is specific and short-lived, and in particular shorter than the parties are likely to have contemplated’ ([72]).

But, ‘wherever the relevant detriment has (as here) had lifelong consequences, a detrimental valuation analysis will fall upon stony ground’ ([72]).

Fulfilling expectations where the promise has had life-changing consequences: harm v detriment

Throughout his judgment, Lord Briggs distinguishes between ‘detriment’ and ‘harm’. Detriment is an essential element of a proprietary estoppel claim and, as we have seen, the court should consider whether the proposed award is proportionate given the detriment; this presupposes that detriment can always be measured in some way.

‘Harm’ seems to be a broader concept, less susceptible to being reduced to a specific sum of money. The idea seems to be that repudiation of a promise may give rise to harm that is incalculable or difficult to calculate. In such cases, it seems that the court should be more ready to give full effect to the promise.

Lord Briggs explained the harm in Guest:

‘In a case like the present, the harm consists of the soul-destroying, gut-wrenching realisation of being deprived, and then actually being deprived over the rest of a lifetime, of an expected inheritance of land upon which the promisee has spent the whole of his life and work to date and which, in due course, he expected to be able to pass on to one or more of his own children, making the same promise to them as his father made to him  … this cannot necessarily be valued with any reliability ([11]).

Specific performance recognises the inability to assign a monetary value to expectations concerning land ([12]). It also seems appropriate where the promise has induced ‘life-changing choices’ ([51]).

A detriment-based approach, ‘mistakenly treats the detriment rather than the loss of expectation as the relevant harm’ ([53]).

In Guest, the fact that the father’s promise induced the son to make decisions ‘with incalculable whole-life consequences’ ([95]) meant that it would be inadequate for relief to be based on the detriment (reduced wages over the course of a career).

Thus, it would be, ‘simply impossible to identify some monetarised value of his detriment in a way which would render a fulfilment of his expectation disproportionate’ ([95]).

Michael Lower

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Guest v Guest: Aims of proprietary estoppel and principles governing relief (1)

Introduction

The judgment of the UK Supreme Court in Guest v Guest ([2022] UKSC 27) provides an authoritative review of the fundamental aims of proprietary estoppel and the principles governing equitable relief. The majority judgment was given by Lord Briggs (with whom Lady Arden and Lady Rose agreed).

This blog post provides a description of the facts and of the outcome. The next blog post looks at the account of the fundamental principles concerning equitable relief and the structured approach proposed by the majority of the Supreme Court.

Facts

A father (David) owned Trump Farm (‘the farm’) and promised one of his sons (Andrew) that on the death of his parents, Andrew would inherit enough of the farming business, and of the farm where the business was carried on, to establish a viable farming business. In response, Andrew worked for many years for low pay on the farm and did not pursue any alternative career opportunities.

Andrew and David fell out and David made it clear that Andrew would not receive the promised inheritance. Andrew brought proceedings in proprietary estoppel. The claim succeeded but there was disagreement as to the approach to be taken to the relief to be awarded.

At first instance and in the Court of Appeal, Andrew was held to be entitled to a monetary payment equivalent to 50% of the market value of the farming business and 40% of the market value of the farm. This sum was to be reduced by the value of the parents’ entitlement to a life interest in the farmhouse (see [88] in the Supreme Court judgment).

The problems with this were that the order would probably require the parents to sell the farm during their lifetimes and it meant that Andrew would enjoy accelerated receipt of the sum, in effect giving him more than his expectation.

The Supreme Court therefore gave the parents an option either:

• The creation of a trust over the farm and business under which the parents were to have a life interest with Andrew to be entitled to 50% of the farming business and 40% of the farm only on their death, thus overcoming the accelerated receipt problem. Andrew would not be entitled to compensation for being off the farm in the meantime ([101] – [102]); or
• The original first instance award but with a sufficient discount for early receipt built in  ([103]). The first instance approach of reducing the award by the value of a notional life interest in the farmhouse could be taken as the discount if the parents agreed. This would avoid the costs of a further dispute over the discount ([105}).

It was appropriate to allow David to make the choice since:

‘Either remedy if afforded to Andrew would draw the sting of unconscionability from the outright repudiation of their promises to him. Since the aim of the remedy is to prevent or remove unconscionability, then where there are two different ways of doing so the persons against whom the equity is asserted should in principle be the ones to make that choice.’ (104)

Conclusion

This post describes the facts and the outcome in Guest. Its importance lies in its approach to the roles of expectation, detriment and other factors in the design of equitable relief. The next blog post looks at what the majority judgment had to say about these fundamental issues.

Michael Lower

Habberfield v Habberfield

Habberfield v Habberfield [2019] EWCA 890

A mother and father owned a farm. They assured one of her daughters that she would inherit it. She worked long hours for low pay for many years. More generally, she did not pursue any alternative career plans. The father died and a dispute arose between mother and daughter.
The daughter’s proprietary estoppel claim succeeded. One of the issues that the Court of Appeal (Lewison LJ) had to consider was the relief.
Should it be calculated by reference to the detriment (GBP 220,000) or the expectation (GBP 1.1 million). The first instance judge decided that it was the latter. The mother was ordered to pay the daughter a sum sufficient to allow her to buy a farm of the type promised.
The mother argued that this failed to respect the principle that the relief should be proportionate to the detriment suffered.
There was some discussion of the question as to whether this was one of those ‘not far short of a contract’ cases and a recognition that this is not a hard and fast category but is at one end of a continuum.
Reluctantly (because of the hardship caused to the mother who would be forced to sell the farm and the farmhouse in which she lived) Lewison LJ upheld the first instance order.

Proprietary estoppel: expectations and proportionality

In Davies v Davies ([2016] EWCA Civ 643, CA (Eng)) a couple owned a farm. E, the second of three daughters, lived with the parents for much of the time up to the time of her final falling out with them. E worked for her parents for little money, although her pay increased over time. Around 1985 her parents assured E that the farmhouse would be hers one day. She later fell out with them and moved out.  E was later reconciled with her parents but left the farm a second time after another falling out. E’s father induced her to return by promising that she could live rent free in the farmhouse. During part of the time that she lived away from the farm she worked as a technician for a company that provided livestock reproduction services. She enjoyed this work and was good at it. After a third dispute with her father, he brought proceedings to evict her from the farmhouse. She relied on proprietary estoppel to claim some interest in the farmhouse and / or the business. The Court of Appeal had already considered the threshold question as to whether or not E had established a right to some form of relief and decided that she had (see here ). These proceedings were concerned with the question as to the form that the relief should take.

The parents made an offer to their daughter which was calculated by reference to the detriment that she had suffered in reliance on the assurances made to her. The daughter sought a much larger sum that would reflect the expectations induced by the assurances. Lewison LJ gave the only full judgment. He set out some core propositions about the law of proprietary estoppel ([38]). He referred to the controversy as to whether expectations or detriment should govern the relief ([39]) and the proportionality test in Jennings v Rice and to the idea that in ‘bargain’ type proprietary estoppel  cases the claimant’s expectations represent a starting point([40]). But where to go from there if the expectation is only a starting point? Lewison LJ accepted the following proposition suggested by counsel as a useful working hypothesis:

‘there might be a sliding scale by which the clearer the expectation, the greater the detriment and the longer the passage of time during which the expectation was reasonably held, the greater would be the weight that should be given to the expectation.’ ([41]).

The assurances that had been given envisaged that the daughter would work long-term in the family farming business but she left the business (twice temporarily and then permanently). This was not like the decades-long arrangements in Gillet v Holt or Thorner v Major ([48]). While E had some expectation of inheriting the business, it was relatively vague and so a modest award would suffice ([64]). Modest sums were also in order in respect of the ‘non-financial detrimental reliance’ involved in giving up her work as a technician and moving from her home to the farmhouse ([65] and to reflect the delay in receiving payments relating to past expectations (such as her unmet expectation that she would be a partner in the farming business) ([68]). So a modest uplift from the payment offered by the parents was in order but this would fall far short of a payment that would reflect E’s expectations in full.

Michael Lower

 

Post-acquisition constructive trust: evidential burden where there is reliance on an express statement. Detriment: where the plaintiff’s benefit outweigh any detriment

In Kwan So Ling v Woo Kee Yiu Harry ([2015] HKEC 694, CFI) the plaintiff (a widow) claimed that her parents-in-law had promised to give her and her husband two flats that they owned in Hong Kong. The plaintiff followed her husband to Hong Kong from the mainland. The parents-in-law transferred the title to one of the flats to the plaintiff and her husband. The plaintiff and her husband were allowed to make full use of the other flat (‘the second flat’) for several decades. Sometimes they lived in the second flat and sometimes they rented it out. The plaintiff’s husband and father-in-law died. The mother-in-law, shortly before her own death, transferred the title to the second flat to one of the plaintiff’s nephews. The nephew claimed that the plaintiff was a mere licensee of the second flat and he revoked this licence. The plaintiff claimed that she was the sole beneficial owner of the flat under the terms of a common intention constructive trust. Alternatively, she sought relief on the basis of proprietary estoppel.

The plaintiff’s claims failed for the simple reason that Godfrey Lam J found that there was no common intention / assurance. Nevertheless, he commented on the assertion that a more compelling standard of proof was needed since this would be a post-acquisition constructive trust. He suggested that this idea had no application where the trust was based on an express promise ([24]).

Godfrey Lam J also considered whether there was detriment. The plaintiff and her husband spent several hundred dollars to create internal partitions within the second flat in the 1970s. While this could potentially be detriment, it was not in this case since the income and other benefits that the plaintiff and her husband derived from the second flat far outweighed the expenditure ([53]). The same consideration was also relevant at the level of calculating any relief (53)).

The fact that the plaintiff made significant changes to her life by moving to Hong Kong was potential detriment. There was no causal linkage between this and any possible assurance by the parents-in-law. She moved to Hong Kong because of her love for her husband (54)).

Michael Lower

When is a statement clear and unambiguous for the purposes of equitable estoppel?

In Kim v Chasewood Park Residents Ltd ([2013] EWCA Civ 239, CA (Eng)) K was one of the flat owners at an estate called Chasewood Park (holding under the terms of a 125 year lease). The reversion (a much longer lease) came up for sale. Chasewood Park Residents Ltd was set up by the Residents’ Association to acquire the reversion. On 24th August 2006, the committee of the Residents’ Association sent out a circular letter to residents inviting them to contribute to the cost of acquisition. The letter summarised the benefits of the scheme and these were said to include the fact that those who participated would no longer need to pay the ground rent (then GBP100 annually) and that the 125 year terms could be extended to much longer terms at minimal extra cost.

K, believing that Chasewood Park would acquire the freehold and that a commonhold scheme would be established, agreed to participate. In fact, the reversion was a leasehold and what was proposed was an extension of the leases. Chasewood Park acquired the reversion and those who had agreed to participate were offered longer terms (as promised) but Chasewood Park said that a ground rent of GBP 100 would continue to be payable under the new leases.

K refused to pay the ground rent. In her defence to Chasewood Park’s claim for the rent arrears, she  argued that Chasewood Park was estopped from including a ground rent in the new leases since the circular letter contained statements that:

1. there would be no ground rent to pay following the purchase of the reversion; and

2. that participating residents would be able to extend their leases at no additional cost except a small fee.

The first, and as it happened determinative, issue was whether there had been a clear and unambiguous representation that participants would not have to pay a ground rent. On this, Patten L.J. said:

‘There is no doubt that in order to found a promissory estoppel (in the same way as any other estoppel based on a representation of fact) the representation or promise must be clear and unambiguous. But this principle raises a number of subsidiary questions. Does it mean that the estoppel cannot arise unless there is only one possible meaning of the words used or is the existence of other possible (but perhaps less probable) meanings not fatal to the creation of an estoppel where the Court can say that it was reasonable for the representee to have interpreted the words used in the way he did? There is also an issue about the test to be adopted by the Court. Few, if any, statements are not capable of being interpreted in more than one way. The Court’s usual role in construing, for example, a contract is to arrive at the legally correct meaning of the words. Their construction is a matter of law and the Court’s function is to resolve any ambiguities in reaching its conclusion. But it is arguable that in the case of estoppel it should not go any further than to identify the existence of any real ambiguities in the language. If the statement is open to more than one reasonable interpretation (one of which is fatal to the estoppel defence) then the representee was not entitled to rely on what was said without further clarification and there is no basis for an estoppel.’ ([23])

There was no clear and unambiguous statement here. The circular letter was simply a list of potential benefits. The suggestions were conditional and set out in an early stage in the scheme. They did not amount to the assurance contended for ([31] and [34]).

Nor had there been the necessary reliance since K had misunderstood the nature of the scheme. She had relied on her understanding that there would be a commonhold scheme and that she would not be a tenant at all. This was not merely a question of the legal mechanism to be put in place to give effect to an assurance. She had relied on an assurance that had not been made ([38] – [40]).

Patten LJ considered whether, had there been a promissory estoppel defence, its effect would have been merely suspensory. Would it have been unconscionable to withdraw any assurance that no ground rent was payable? It would not have been unconscionable. There was nothing to lead to such a conclusion. Chasewood Park had offered to reimburse K’s contribution but she had declined the offer. While Chasewood Park’s offer to reimburse K was not determinative, it reinforced the conclusion that it was not unconscionable to withdraw any assurance that no ground rent was payable ([42]).

Similar reasoning applied if one looked at the matter as a claim based on proprietary estoppel. The conclusion that any promissory estoppel would only be suspensory suggested that relief in proprietary estoppel should not take a form that would result in the permanent removal of a liability to pay ground rent. It would be inappropriate to grant relief in the form of a lease with no ground rent ([45]).

Michael Lower

Reliance: burden of proof shifts to property owner when inducement can be inferred from claimant’s conduct

Where there have been assurances and conduct from which reliance can be inferred, the burden of proof shifts to the property owner in a proprietary estoppel claim. The fact that the assurance was not the only cause of the conduct is not fatal (there can be mixed motives). Giving full effect to the assurance might be disproportionate.

In Campbell v Griffin ([2001] EWCA Civ 990, CA (Eng)) C was the lodger of Mr and Mrs A for nearly twenty years. The relationship was close. As they grew frailer, he devoted a lot of time and attention to looking after them. They assured him frequently that he had a home for life. After their death, he claimed an interest in the property on the basis of proprietary estoppel. The claim failed at first instance because he had agreed in cross-examination that he would have helped them because of friendship and common humanity.

His appeal succeeded. Robert Walker LJ referred to the principle from Wayling v Jones that where there have been assurances and conduct from which reliance can be inferred, the burden of proof shifts to the property owner in a proprietary estoppel claim. C had done much more than could have been expected of even the friendliest lodger. The English Court of Appeal pointed out that too demanding a test of reliance would work to the detriment of honest witnesses. Little weight should be given to answers to hypothetical questions in cross-examination concerning reliance.

As for the remedy, giving full effect to the expectation (a life interest) would be disproportionate. C was to receive GBP 35,000 and to vacate the property when needed for the purposes of a sale of the house.

Michael Lower