Analysis
A father made repeated promises to his son that he would inherit an undefined part of a farm, sufficient to enable him to operate a viable farming business on it, after the death of his parents. Relying on that promise, the son spent the best part of his working life on the farm, working at very low wages and accommodated in a farm cottage. After a deterioration in the relationship between the father and son, it proved no longer possible for the two to work together, and the son therefore moved out, and the father cut him out of his will.
The son claimed an interest in the farm as a result of a proprietary estoppel.
At first instance, the judge concluded that there had arisen an equity to be satisfied. No specific case had been offered on behalf of the father and mother as to the appropriate remedy. The judge – beginning his analysis with the expectation of the son, encouraged by his father’s promises – ordered that the son should receive, net of tax, 50% of the farming business and 40% of the proceeds of sale (or valuation) of the farm after tax, reduced by crediting to his parents a life interest in the farmhouse. The judge modelled his approach on the terms of a will that had been made by the father prior to the falling out.
Permission to appeal to the Court of Appeal was granted only as to the question of remedy. There, it was contended on behalf of the parents that the judge had been wrong to focus on the extent of the son’s expectation as opposed to that of his reliance, in framing the order. It was further argued that the order had wrongly conferred an immediate interest on the son, rather than a reversionary interest, which would have equally well honoured his expectation of inheritance upon the death of his parents (ie that inadequate account was taken for the ‘futurity’ of his expectation), and relatedly that the order had not discounted the son’s entitlement to reflect the accelerated receipt of his benefit.
Floyd LJ held that the judge had been entitled to adopt an expectation-based approach, because by the time the promise was reneged on, the son had substantially performed his side of the quasi-bargain, and because of the grave difficulties in assessing the precise value of a lifetime of work and the concomitant loss of opportunity.
The same criticisms were pursued again in the Supreme Court.
Held (Lord Briggs, with whom Lady Arden and Lady Rose agreed):
As to whether an expectation-based or detriment-based approach ought to be taken, an extensive survey of the authorities and their development throughout history demonstrated that a long line of authority had generally followed the expectation-based approach, but there had not been a single English authority favouring the approach that the essential aim of the remedy was to protect the claimant’s reliance interest and therefore to compensate for the detriment. The nearest that the English authorities had come was to say that there had to be some proportionality between remedy and detriment, but this was always accompanied by a rejection of the notion that compensation for the detriment was the aim.
Moreover, the detriment-based approach was misconceived. It failed to recognise that while reliant detriment was necessary to engage the equitable relief, and formed a large part of its moral justification, it was the repudiation of the promised expectation which constituted the unconscionable wrong. A detriment-based approach would require that the detriment was interpreted as the harm suffered consequent upon an earlier wrong, which in the circumstances, would have to be the earlier assurance. But the assurance was not itself a wrong. It was the later repudiation which was the wrong. Furthermore, it would arrive at the wrong result because it would entirely replace what was meant to be a flexible conscience-based discretion, aimed at producing justice, with the mechanical task of monetarising the detriment and the expectation and then awarding whichever produced the lower figure, on the misconceived basis that this was the ‘minimum equity needed to do justice’. The expectation-based remedy would only come into play therefore where the court could not satisfy itself as to one or other of those two figures. This would undermine the traditional English approach: that the purpose of the estoppel is, prima facie, to hold the promisor to their promise. In relevant cases, it would ignore the view of equity that land is unique and that not every wrong can and must be remedied by monetary compensation. It would directly contradict the warning from Robert Walker LJ in Jennings v Rice [2002] that it would hardly, if ever, be appropriate to undertake a precise mathematical task of calculating the monetary value of the detriment. Finally, it would make a nonsense of the principle of proportionality of detriment and expectation. If the aim of the remedy was to compensate for the detriment, then surely the remedy should compensate for this precisely, and concerns of proportionality would be irrelevant.
The court’s normal approach should be first to determine whether the promisor’s repudiation of their promise was, in the light of the promisee’s detrimental reliance upon it, unconscionable at all. If the court finds that the repudiation was unconscionable, then as a second stage it should normally start with the assumption (not presumption) that the simplest way to remedy the unconscionability constituted by the repudiation is to hold the promisor to the promise. The promisee cannot complain that their detrimental reliance had cost them more than the value of the promise, were it to be fully performed. But the court may have to listen to many other reasons from the promisor (or their executors) why something less than full performance will negate the unconscionability and therefore satisfy the equity. These reasons may be based on one or more of the real-life problems such as the need for a clean break, the fact that an immediate award would be an acceleration of the entitlement, that there are third parties with legitimate claims on the relevant assets etc. The court may be invited by the promisor to consider one or more proxies for performance of the promise, such as the transfer of less property than promised or the provision of a monetary equivalent in place of it, or a combination of the two.
If the promisor asserts and proves, the burden being on them for this purpose, that specific enforcement of the full promise, or monetary equivalent, would be out of all proportion to the cost of the detriment to the promisee, then the court may be constrained to limit the extent of the remedy. Even then, the court would not be seeking precisely to compensate for the detriment as its primary task, but simply to put right a disproportionality which is so large as to stand in the way of a full specific enforcement doing justice between the parties.
There is a spectrum between on the one hand a case where both the promise and the detriment are reasonably precisely defined by the time the promise is repudiated, and on the other hand where either or both are left much less certain. The ‘almost contractual’ end of the spectrum is likely to generate the strongest equitable reason for the full specific enforcement of the promise if the reliant detriment has been undertaken in full, regardless of a disparity in value between the two. At the other end there may be much greater scope for a departure from full enforcement, even if there are no other problems making it just to do so.
Neither expectation fulfilment nor detriment compensation was the aim of the remedy. The aim remained what it had always been, namely the prevention or undoing of unconscionable conduct. In many cases, once the equity was established, then the fulfilment of the promise was likely to be the starting point, although considerations of practicality, justice between the parties and fairness to third parties may call for a reduced or different award.
The ground of appeal criticising the order for adopting an expectation-based approach would therefore be rejected. The son had spent over 25 years working on the farm for minimal wages, with incalculable whole-life consequences in terms of the sacrifice of opportunities for an independent career and the ownership of his own home. It would be simply impossible to identify some monetarised value of his detriment in a way which would render a fulfilment of his expectations disproportionate.
The appeal would however be allowed as to the issues of futurity and acceleration. There was no equity to give a claimant more than their promised expectation, either in total amount or by unaccounted for acceleration. There was discretion to accelerate an award, but only where an appropriate discount to it was then applied. 40% of the farm was an appropriate division for the purpose of making good the parents’ promise, subject to tax, but it could have been achieved by an award of a reversionary interest to the son, with a life interest for the parents in the meantime. That would have protected the parents from being forced immediately to give up occupation and use of the farm and to sell it, which they had never promised to do. Given that the parties may have wished for a cleaner break than this, the parents should have been given the option instead to follow the framework of the first-instance judge’s order, but with an appropriate discount to the son’s interest to reflect the acceleration of his interest. Since either option would remedy the unconscionability of the repudiation, the people against whom the equity had been raised should be the ones to make the choice.
Dissenting (Lord Leggatt, with whom Lord Stephens agreed):
The core principle underpinning the grant of relief in a case such as this is that equity will not allow a person A to go back on a promise made to B, without ensuring that B does not suffer detriment as a result of B’s reliance on it. The aim of the remedy was thus to prevent detriment to B in the circumstances which had arisen. In principle, there were two methods of achieving this aim. One was to compel A to perform the promise (or to award a sum of money calculated to put B into as good a position, as best money can do it, as if A’s promise had been performed). The other was to award a sum of money calculated to put B into as good a position, as best money can do it, as if B had not relied on A’s promise: in other words, to compensate B’s reliance loss. Since both methods would in principle achieve the aim of preventing detriment to B, if on the facts both are practicable then the court should adopt whichever method results in the minimum award necessary to achieve that aim.
In deciding what remedy to grant, there was a distinction between cases where the promise had already fallen due for performance and cases where performance was conditional on an event (typically, the promisor’s death) which had not yet occurred. In the former type of case where the promise had fallen due for performance, a remedy designed to give effect to the promise is likely to be appropriate if:
- (1) B’s reliance loss is of a kind which is very difficult to quantify in money terms; and
- (2) the value of the interest in property promised by A was not clearly disproportionate to B’s reliance loss.
But where, even though B’s reliance loss is difficult to quantify, the value of the interest in property appeared clearly disproportionate to it, the court should generally make the best estimate that it can of B’s reliance loss, approximate as it will inevitably be, to avoid granting a remedy which is unjust to A because it goes beyond what is necessary to avoid detriment to B. In the second type of case where the promise had not yet fallen due to be performed but A had resiled from it, the court should see whether A had made an offer of compensation to B. Where A had made an offer which represented a genuine and reasonable attempt to prevent B from suffering detriment as a result of the changed circumstances, the court should be slow to order relief which goes beyond the offer made.
Where no such offer had been made, the court will have to decide between:
- (1) awarding a remedy assessed by reference to the prospect of a future gift; and
- (2) awarding compensation for B’s reliance loss.
Where A’s promise is to give B property on A’s death and B’s reliance on that expectation consists of working on A’s farm or caring for A, it will often be an unspoken condition of the promise that the work or care will continue until A dies. If the parties fall out during A’s lifetime, that condition may well become impossible to fulfil because the parties can no longer be expected to live or work together. In such cases any expectation-based remedy would need to take account of the fact that an immediate remedy gives B property or money sooner than was promised and without fulfilling all the conditions of the promise. If such a remedy was contemplated, the award would therefore need to be discounted to allow for the contingencies to which performance of the promise was subject (including A’s freedom to use their property for their own purposes during their lifetime) and the acceleration involved. Generally, awarding compensation for B’s reliance loss, even if difficult to quantify, is likely to be less uncertain and to produce a fairer result.
In this case, the judge had rejected as unrealistic any notion that the son, who had already been evicted by his parents in 2015, might return to farming at the family farm. There was therefore no question of granting a remedy which sought to implement – albeit prematurely – what Andrew had been informally promised. Therefore, the only practicable remedy was an award of money, which would almost certainly have to be funded by selling the farm, either now or following the parents’ deaths (assuming of course that Andrew did not predecease them). In turn, the only practicable way of protecting the son from detriment, given that it would not be possible to enforce the relevant promises, would be to make an award of compensation calculated to put him in as good a position as if he had not built his career on those promises.
Although the Court of Appeal thought that the judge was entitled to take the view that, in circumstances where ‘the claimant has largely performed his side of the bargain, it is fair to take what the claimant was promised as a rough proxy for what he has lost’, the first-instance judge had specifically rejected the notion that this was a quasi-bargain type of case where it can fairly be inferred that the parties themselves regarded the expected benefit and the accepted detriment as broadly equivalent. He was correct to do so since it would seem dubious to draw an inference of this kind in most cases involving close family members. Parents and children do not generally strike quasi-contractual bargains. In cases where a child works for many years on a family farm which the parents have promised to pass on to them, it was unlikely that either party would weigh the opportunity cost of working for low pay for a given number of years against the value of the land.
Therefore, the first-instance judge had erred in basing their remedy instead on the expectations of the son, and the court should exercise the remedial discretion afresh, instead aiming to put the son in as good a position as if he had not built his career on the relevant promises.
An award so framed would not have to take into account any acceleration since, by contrast with his expectation which lay in the future, the loss suffered by the son by working at the family farm for low pay until 2015 rather than in a better-paid job elsewhere had already been incurred by the time of the trial.
For those reasons, the court should have allowed the appeal and substituted for the remedial order made by the judge an order requiring the parents to pay a sum of £610,000 to the son as equitable compensation.
JUDGMENT LORD BRIGGS (with whom Lady Arden and Lady Rose agree): [1] ‘One day my son, all this will be yours’. Spoken by a farmer to his son when in his teens, and repeated for many years thereafter. Relying on that promise of inheritance from his father, the son spends the best part of his …Continue reading "Guest & anr v Guest [2023] WTLR 431"