Broken promises? Safeguarding family land

Agreements between family members regarding ownership of land are not always formally recorded, as they are more likely to trust one another to abide by any promises or assurances made. However, where no formal agreement is in place, the owner of the land may not feel bound to abide by any promise, and recollections may vary about what was actually said, particularly when this goes back a number of years. It is important for advisors to be live to potential interests that may arise in land, even where formal agreements have not been put in place, to assist them in safeguarding their clients’ interests.

Proprietary estoppel is an equitable concept which arises in circumstances whereby (1) there is a representation or assurance made to an individual that he or she has or will enjoy some right or benefit over the owner’s property and (2) the individual relies on that promise to his or her detriment. The consequent inheritance dispute comes to be upon the death of the individual who goes back on their promise and bequeaths the property to someone else. Lifetime disputes can also occur if the land is disposed of sooner.

These types of claims arise regularly in relation to farms and landed estates where the common theme in each case is a purported reliance by the adult child on a promise from their respective parents that one day the farm in question will be theirs.

Once a finding of proprietary estoppel has been made, the court has a wide discretion as to remedy and the case of Guest v Guest [2022] UKSC 27 is now the leading authority in this area having identified the below step-by-step approach to determining that remedy.

1. Determine whether the promisor’s repudiation of the promise is “unconscionable” in light of the promisee’s detrimental reliance. If “yes” the starting point is the assumption that the simplest way to remedy the unconscionability is to hold the promisor to the promise.
2. Ask whether specific enforcement of the full promise would be “out of all proportion to the detriment” suffered.
3. Conduct a further cross-check (i) does it do justice between the parties, and (ii) is it fair to third parties.

Tump Farm had been in the Guest family for three generations. Andrew Guest left school when he was 16 years old and worked at the farm for over 30 years. In October 1981, Andrew’s parents made wills designed to ensure that Andrew and his brother would inherit Tump Farm and its business in equal shares. However, by 2015 relations between Andrew and his parents had significantly deteriorated and he subsequently stopped working and moved away from the farm. In May 2018 Andrew’s parents made new wills excluding Andrew from any entitlement.

In 2017, Andrew issued proceedings against his parents premised on their repeat assurances that he would inherit a substantial interest in the farm and that he had relied on that assurance to his detriment. At first instance, Andrew was successful and awarded a lump sum comprised of 50% of the market value of Tump Farm’s dairy farming business and 40% of the value of the freehold and buildings at Tump Farm.

The remedy was appealed in the Court of Appeal with Andrew’s parents submitting that the relief given should have been based on what the parents intended as opposed to Andrew’s expectation. The court determined that the High Court Judge was not wrong in his original valuation of detriment. The Court of Appeal acknowledged that differing methods to quantify detriment had been applied in other cases of a similar nature but considered that the discretion afforded to the court was very broad and flexible. In this case, the approach adopted by the court at first instance was found to be appropriate. The appeal was dismissed.

The Supreme Court was asked to consider further the appropriate remedy, in particular:

1. Whether a successful claimant’s expectation was an appropriate starting point when considering remedy; and
2. Whether the remedy granted went beyond what was necessary in the circumstances.

In effect the court had to determine whether in circumstances whereby Andrew’s claim had been successful they should enforce the promise made by his parents or apply a different remedy to instead compensate him for the detriment he suffered as a consequence of working on the farm for 30 years for a basic wage.

All five Justices of the Supreme Court allowed the appeal (albeit were split in their approach). Lord Briggs giving the lead judgment concluded that Andrew should be given either a lump sum payment but at a reduced sum to reflect the accelerated payment or that Tump farm be placed in trust for him but with a life interest in his parents favour. It was for the parties to reach an agreement as to which remedy should be applied.

These types of claims in the context of family farms continue to rise. The reasons are most likely the ageing population and significant increase in the value of farmland as well as the possibility of old fashioned views concerning gender (i.e. a son falls first in line to inherit) and a lack of communication between family members.

Seeking to guard against any such claim in the first place should, of course be the priority. The risk of a future proprietary estoppel dispute might be reduced where there is a will which clearly addresses succession along with a letter of wishes explaining the rationale and ideally contemporaneous written evidence should be created and retained to evidence what was discussed/agreed regarding the property in question.

Whilst adhering to the above provides no guarantee that a claim will not be bought, the prospects of success of any such claim are likely to be significantly diminished by doing so. However, if the matter does end up in court whilst Guest has provided some clarity around determining remedy as the position currently stands the court has a wide discretion and the outcome will continue to turn on the facts of each case.

further information

If you have any questions, please contact Katherine Pymont in our Dispute Resolution team.

about the author

Katherine is a Partner in the Dispute Resolution Team who specialises in Trust and Estate Disputes. Katherine’s experience in the field of Trusts and Inheritance Disputes covers challenging the validity of wills (including claims for lack of testamentary capacity, want of knowledge and approval, fraud, forgery and undue influence), claims under the Inheritance (Provision for Family and Dependants) Act 1975, removal of executors and trustees, breach of trust claims, fraud cases involving trust structures and professional negligence claims relating to wills and trusts.