Many farmers rely on their children to work on the farm based on verbal promises that when they die the farm will pass to them.
However, what happens when verbal promises are broken?
What is proprietary estoppel?
Proprietary estoppel is a legal claim which often arises in farming cases due to verbal promises not being fulfilled.
The factual background is normally as follows:
- A promise was made to the applicant that one day they would inherit the farm.
- The applicant has worked on the farm in reliance on that promise.
- The applicant has worked on the farm for low pay, and lost other employment opportunities, due to them relying on the promise that one day they will inherit the farm.
- Upon death, the applicant discovers that the farm has been left to someone else.
The case of Guest v Guest  UKSC 387
Guest v Guest concerned a dispute in relation to a family farm (Tump Farm). Tump Farm was owned by David and Josephine Guest and the dispute was between David and Josephine and their eldest son, Andrew.
Andrew had worked on the farm for 33 years and his evidence was that he had done so in reliance on his parents' promise that he would inherit a significant proportion of the farm when they died.
By 2015, the relationship between Andrew and his parents had broken down to such an extent that they removed him from their Wills. Andrew, therefore, issued a claim on the basis of proprietary estoppel.
The High Court's Decision
At first instance, the judge held that there was evidence that Andrew had relied on assurances given by his parents, and he had worked hard on the farm to his detriment.
As such, the elements required for a successful proprietary estoppel claim had been established, and the judge decided that a "clean break" award should be made.
Andrew was awarded 50% of the net market value of the farming business and 40% of the market value of Tump farm.
The Court of Appeal's Decision
Andrew's parents appealed on the basis that the "clean break" went beyond what was necessary, and the remedy granted should be calculated based upon Andrew's contribution to the value of the farm or the detriment he had suffered.
The Court of Appeal held that the "clean break" award was appropriate and dismissed the appeal.
David and Josephine therefore appealed to the Supreme Court.
The Supreme Court's Judgment
The Supreme Court was required to determine:
- whether Andrew's expectation was the appropriate starting point when considering the relief to be granted; and
- whether the lump sum payment went beyond what was necessary in the circumstances.
The Supreme Court were divided (3:2 majority) but they allowed the appeal in part. Lord Briggs, who gave the leading judgment, emphasised that the starting point should be to remedy the fact that David and Josephine had not fulfilled Andrew's expectation of inheriting a significant proportion of the farm.
However, the award made to Andrew of an immediate "clean break" payment meant that his inheritance was effectively being accelerated.
The Supreme Court held that where a claimant is receiving an accelerated receipt of their inheritance, a substantial discount should be applied.
A key point made by the Supreme Court was that the court should not award a claimant a remedy that equates to more than they have been promised.
In this case, the Supreme Court held that Andrew's parents could either:
- put the farm into trust for the children, subject to a life interest to the parents; or
- make an immediate payment to Andrew, but with a deduction to account for Andrew's early receipt.
Proprietary estoppel cases will continue to be very fact-specific, but the ruling in Guest v Guest has outlined that the starting point will be to enforce the promise made.
This case highlights the importance of formalising family arrangements to avoid potential disputes from arising.
Alternatively, if a dispute has already arisen, you can get in touch with our Contentious Probate team below.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.