Proprietary estoppel in a nutshell: Guest and Another v Guest [2020] EWCA Civ 387

There is something quite nostalgic about having a family-run business, as it is reminiscent of a time in the UK, where most businesses operated as such. Nevertheless, one of the disadvantages of a family-run business is that when there is a breakdown in the family relationship, it can equate to a breakdown in operating the business. The recent case of Guest and Another v Guest [2020] EWCA Civ 387 demonstrates that the courts are not shy about using their wide discretion to intervene, where the criteria of proprietary estoppel have been established.

Facts of the case

The owners of a farm (Tump Farm) worked on it with their son to run it alongside their related dairy business. Unfortunately, the relationship between the parents and the son broke down, making it impossible to continue working together. The son made a claim to court and was able to prove the following:

  • An assurance (with sufficient clarity);
  • Reliance by the claimant on the above assurance; and
  • The claimant has made reasonable reliance on the above assurance to their detriment and has experienced the consequences from this.

The High Court made a ruling in favour of the son, awarding an amount representing 50 percent of the business and 40 percent of the farm property. Consequently, the parents would have to sell the farm to obtain the funds for the above amount. The parents filed for an appeal with the High Court. This appeal was dismissed for the below reasons.

The Court of Appeals judgment

The Court of Appeal stated the following:

  • When proprietary estoppel is based on the assurance by the claimant, it can be assessed in two stages asking whether an equity arises and how it is to be satisfied so that justice is done. The court has a wide discretion in assessing this

 

  • Where the claimant has mostly performed their obligations under the bargain made between them and the defendant (the promise made by the parents as landowners that the son would receive some interest in the land, if he worked on the farm and did not pursue employment elsewhere), it is fair to use what had been promised by the defendant as a roundabout guide for what the claimant has lost.

 

  • A clean break solution could be reached to achieve an ‘unconscionable’ result (any relevant business assets could be separated from any unrelated family assets, allowing for a solution to be reached without needing the son to apply to the court for any financial orders in the future) could be reached to achieve an ‘unconscionable’ result.

Please call the Lawdit Commercial Property Team for any questions raised by the article

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