The farming dispute finale: Guest v Guest in the Supreme Court
Inheritance disputes in the farming industry remain a hot topic for both legal practitioners and famers alike, who must grapple with the legal principle of proprietary estoppel, which generates much debate both in its concept and the potential consequences if the principal can be established.
Proprietary estoppel is often characterised by the idea of a farmer saying to his hard-working son who is helping him on the farm “one day my son, this will all be yours” and the idea that the farmer should be held to that statement if the son continues to work hard on the farm for little or no pay when otherwise he may have gone off and made a different life for himself, earning substantially more. There are a number of cases which discuss and make decisions relating to this principle but this particular case – Guest & another v Guest [2022] UKSC 27 – is a recent decision of the Supreme Court which has attracted significant attention.
This case concerns a family dispute over a family farm, “Tump Farm”, and the farming business carried out there. Andrew Guest (“Andrew”), pursued a proprietary estoppel claim against his parents, David Guest (“David”) and Josephine Guest (“Josephine”), in respect of representations made to him that he would inherit a substantial interest in Tump Farm. Andrew devoted his working life to the farm in return for minimal wages only to be written out of his parents’ wills after a family dispute.
Sadly, this remains an all-too-common scenario, with an increasing number of families facing personal disputes.
To some extent this is an unusual scenario for a proprietary estoppel claim as the battle has played out during the life of those who would be passing the wealth on (i.e. the parents) whereas more commonly it will play out after their death. However, in this case, there was no secret that the relationship breakdown had led to Andrew being excluded from his parent’s wills and so the dispute took place before Andrew would ever have expected to receive his inheritance, creating additional considerations for the Court in terms of what the appropriate remedy should be.
The background
Tump Farm has been in the Guest family since 1938, over three generations, and comprises a series of dwellings plus more than 150 acres of land and woodland. The freehold value of the land was c.£2.85 million in 2018, whilst the value of the farm as an agricultural business was c. £3.35 million.
David and Josephine married in October 1964 and had three children together: Andrew, Janice and Ross. At this time, David was cultivating the farm with his mother under the name of “ML & DG Guest Partnership”. In October 1981, David and Josephine put wills in place which ensured that both Andrew and Ross would inherit Tump Farm and its business in equal shares as well as ensuring provision for Janice.
In 1982, Andrew began working on the farm full-time, having left school at the age of 16. In September 1982, Andrew started to receive minimum wage for his work on the farm. Around this time, he attended agricultural college once per week. Andrew was involved in milking the cattle, making silage, bailing, and carting straw as well as harvesting the maize crop. Andrew soon became solely responsible for rearing calves, utilising practical and management skills which he learned at college. In 1984, Andrew undertook a course in the artificial insemination of cattle, following which he took responsibility for this on the farm. In 1985, Andrew’s apprenticeship finished and he subsequently completed two annual part-time courses in farm enterprise management and whole farm management.
In June 1989, Andrew married his partner Tracey. They moved into Granary Cottage, which is a semi-detached dwelling on Tump Farm. They did not pay any rent, but did pay for its upkeep.
In 1991, the “Integrated Administration and Control Scheme” was introduced, which was a new land-based system requiring cropping records to be kept and an annual claim to be submitted. Andrew attended a workshop in relation to this and later took responsibility for submitting such claims in respect of Tump Farm. He did the same for further schemes which were subsequently implemented.
In 1992, David’s mother died. Thereafter, farming business at Tump Farm was carried on by David and Josephine in partnership under the name “DG Guest”.
In July 1997, Andrew and Ross launched a partnership business under the name “Chepstow Quad Trekking Centre” (“CQTC”), which involved quad bike trails. The initial start-up costs of around £10,000 were funded by the DG Guest partnership and the business operated on Tump Farm land. David supported this venture as he wanted to encourage his sons to work together. Ross took the leading role in CQTC once he left his previous employment, whilst Andrew focused primarily on the farm.
In 2000, CQTC began offering paintball games, so the name of the business was changed to “Chepstow Outdoor Activity Centre” (“COAC”). However, in 2001, the business suffered as a result of the foot and mouth crisis which restricted public access to agricultural land. Furthermore, Andrew and Ross had a disagreement involving accusations of forged signatures to withdraw money from the business. Ross involved David in this disagreement, which is thought to have marked the beginning of the decline in relations between David and Andrew. In 2005, Andrew bought Ross out of his share of COAC for £15,000 and carried on the business until 2013 when it became financially unviable.
In October 2006, Andrew was awarded a postgraduate diploma in Agricultural Business Management.
In 2007, the DG Guest partnership took a five-year Farm Business Tenancy of the neighbouring farm to Tump Farm, known as “Dayhouse Farm”. Farming operations at Dayhouse Farm were integrated with those on Tump Farm and the size of the herd and amount of cereal cropping was increased.
In 2012, David and Josephine decided to split the DG Guest partnership into two separate partnerships: (1) “The Ladysmith Farming Partnership”, between Andrew and his parents running Tump Farm, and (2) “The Dayhouse Farming Partnership”, between Ross and his parents running Dayhouse Farm. These partnerships were formed on the basis that the profits would be split 50/50 between the son running the farm and the parents. Unfortunately, the Ladysmith Farming Partnership did not work as envisaged and was negatively impacted by the breakdown of Andrew and David’s relationship.
In May 2014, a draft Notice of Dissolution of the Ladysmith Farming Partnership was prepared by David and Josephine. Around the same time, they both executed new wills which excluded Andrew from any entitlement to Tump Farm, bar his right to occupy Granary Cottage.
At this time, their legal representative engaged in correspondence with Andrew, trying to achieve an outcome where he could remain working on Tump Farm and in occupation of Granary Cottage in return for an annual lump sum payment. Andrew did not consider any of the offers made to be acceptable nor fair. Because no agreement could be reached, the Ladysmith Farming Partnership was dissolved on 14 April 2015.
In June 2015, Andrew instructed Clarke Willmott Solicitors to act for him in a claim, based on proprietary estoppel, which was subsequently issued in August 2017. During proceedings, in January 2019, David made a further will which removed Andrew entirely from it, thus revoking his right to occupy Granary Cottage. The essence of Andrew’s claim was that his parents had promised him that he would inherit a substantial part of Tump Farm and that he had relied on that promise to his detriment devoting his life to the farm at the expense of other, more lucrative employment and it would be unconscionable for them to be allowed to go back on their promise.
The decision at first instance
In 2019, this matter was heard before HHJ Russen QC in the High Court. He dealt with the three essential elements of the proprietary estoppel claim individually as follows:
1. Representation / Assurance
HHJ Russen found that sufficient representations were made by David to Andrew that he would inherit a substantial stake of Tump Farm once he passed away. Up until the parties fell out in 2014, David consistently led Andrew to believe he would inherit the farming business, albeit in early 1997 Andrew became aware that this would be alongside Ross.
Such representations were supported by Josephine when she entered into the Ladysmith Farming Partnership with Andrew and David.
2. Reliance and detriment
HHJ Russen stated that Andrew reasonably relied upon the representations made to him by not pursuing other forms of employment. By dedicating his life to Tump Farm and its farming business from the age of 16, for very low wages in return, Andrew suffered financial detriment in that he sacrificed working in an alternative job where he would have received a more substantial wage and been able to save to purchase a home. The Judge said this was the case despite a home, in Granary Cottage, having been provided for him as well as certain living expenses being paid. It was concluded that Andrew would not have committed to the farm had he known he would not inherit at least a substantial interest in it.
3. Unconscionability
HHJ Russen had to consider whether it was unconscionable or inequitable for David and Josephine to go back on their representations to Andrew by effectively removing him from their wills. David and Josephine sought to rely on how Andrew had been able to find employment after the farm. However, HHJ Russen stated this was immaterial to Andrew’s claim and he found an equity had been established in Andrew’s favour.
In light of the above analysis, HHJ Russen had to exercise his discretion to do what was necessary to avoid an unconscionable result or, alternatively, to identify the minimum equity to do justice. He concluded that the appropriate remedy to satisfy this was a lump sum payment which reflected the following components:
- 50% after tax of the market value of the dairy farming business; and
- 40% after tax of the market value of the freehold land and buildings at Tump Farm.
The specifics of this remedy bore relation to an earlier will of David which may well have been the Court’s thinking in putting this forward remedy as this would suggest it was inherently reasonable and reflective of what Andrew’s expectation may have been.
The slight confusion with the logic of this judgment was when you look more closely at what Andrew’s expectation would have been and his expectation could only ever be that he would receive a substantial proportion of the farm on his parents’ death (i.e. not at his current age). This outcome arguably gave a more favourable outcome to Andrew, which had been arrived at principally due to the Court’s desire to achieve a clean break as he would receive his expected inheritance early.
Josephine and David, perhaps understandably, sought to appeal the decision – most likely due to their concern that the decision would require them to sell the farm. Farms have often been in families for a number of generations and so it will no doubt have been a painful consequence of the litigation to discover that this would need to change and a lifetime of hard farming work by themselves and their ancestors would simply be sold and fall away into the hands of a new purchaser.
David and Josephine were refused permission to appeal in respect of the fact a proprietary estoppel had occurred and but granted permission to appeal in respect of the remedy. Accordingly, the appeal proceeded as regards the appropriate remedy for Andrew in these circumstances.
The decision on appeal
In February 2020, this matter was heard before Lord Justices Floyd, Newey and Arnold in the Court of Appeal.
As regards the appropriate remedy, David and Josephine had three grounds of appeal:
1. That HHJ Russen was wrong to hold that the appropriate approach to relief was to base the remedy on Andrew’s subjective expectation and that he should have limited himself to no more than what was necessary to avoid an unconscionable result.
2. That the relief granted went beyond what was necessary to avoid an unconscionable result or the minimum equity to do justice. They argued this could have been satisfied by a charge on the farming business, or Tump Farm, for:
- a sum representing the extent to which the business was enhanced by Andrew’s contribution, beyond what was required by his employment; and/or
- to compensate Andrew for the loss of opportunity to save money to purchase a home; and/or
- such other sum as the court deemed necessary to avoid an unconscionable result.
3. That, insofar as any equity is “anticipatory”, such that in the current circumstances it would be unconscionable for David and Josephine not to make provision for Andrew in their wills, such equity can be satisfied by the making of a declaration or by the grant of injunctive relief, anticipating that the issue of whether or not to grant further relief and the extent of any such relief should be considered in the light of all the circumstances at the date of death.
Mr Adams, David and Josephine’s legal representative, referred to Scarman LJ’s decision in Crabb v Arun District Council [1976] 1 CH 179, which highlighted three key questions in these types of cases. Firstly, is there an equity established? Secondly, what is the extent of the equity if one is established? And, thirdly, what is the relief appropriate to satisfy the equity? Mr Adams submitted that HHJ Russen failed to ask himself the second question and that such question must be answered by an objective bystander test i.e. what arrangement the owner should be implied to have intended in order to avoid an unconscionable result.
This submission was not accepted. Lord Justice Floyd stressed how in Crabb both Lord Denning MR and Lawton LJ, unlike Scarman LJ, only adopted a two-stage approach: whether an equity had arisen and how that equity could be satisfied. He therefore concluded that the judicial approach adopted, whether in two stages or three, is unlikely to be of significance due to the very broad and flexible discretion which is applied in the final stage. Turning to the objective bystander test, Lord Justice Floyd rejected this stating that it injected an unnecessary layer of complication into the established approach as it considers all the circumstances, including the expectations of any detriment to the claimant.
Lord Justice Floyd then considered the alternative remedies proposed by David and Josephine (listed above at (i) to (iii)) and assessed them in turn as to whether they would have been adequate to avoid an unconscionable result. He rejected the first proposal as it did not consider the nature of the assurances given and Andrew’s losses as a result of his parents’ unconscionable failure to honour their promise to him. He also rejected the second proposal on the ground that the loss/detriment suffered by a claimant who is persuaded to take a poorly paid job on the understanding he will obtain an interest in land in the future is not limited to the quantifiable difference in wages. He stated there is a large but unquantifiable element attributable to loss of opportunity which will undoubtedly increase the size of the remedy awarded.
Lord Justice Floyd was also unable to accept Mr Adams’ submission that the judge ought not to have accelerated Andrew’s expectation, as it was only ever an expectation that he would inherit on the death of his parents.
Whilst he recognised that such a course was a possibility, Mr Adams had not submitted that it is not open in principle for a judge to accelerate the claimant’s entitlement in a proprietary estoppel case based on assurance of inheritance. Consequently, it was necessary for him to show that HHJ Russen exceeded the wide bounds of his discretion by adopting the course of settling Andrew’s entitlement now. Lord Justice Floyd also noted that HHJ Russen had had to balance a number of factors in deciding what course to take, including the fact that the parties could not continue to work together, nor live in close proximity to one another. He thus concluded that, in those circumstances, he could not accept that HHJ Russen had exceeded the bounds of his discretion.
In conclusion, David and Josephine’s appeal was dismissed.
The decision in the supreme court
On 18 October 2022, judgment was handed down by the Supreme Court (Lord Briggs, Lady Arden, Lord Leggatt, Lord Stephens and Lady Rose) who were asked to consider the correct principles to apply in awarding a remedy in cases of proprietary estoppel. This judgment will no doubt be of pivotal importance to farming families and their advisors where the expectation to be balanced is that of a future inheritance rather than for an immediate benefit.
The issues for determination were:
- Whether Andrew’s expectation was the appropriate starting point for consideration of the remedy; and
- Whether the remedy granted (which would require the sale of the farm) went beyond that which was necessary in the circumstances
The Supreme Court (Lord Briggs, agreed by Lady Arden and Lady Rose) was concerned with the point in relation to accelerated receipt; Andrew had in effect received more than he was promised (as he received it early) and David and Josephine lost more than they had ever promised to give (as they were going to be forced to sell the farm in their lifetime to pay Andrew off). Despite an argument about whether the aim of the remedy is detriment-based or expectation-based, what was clear was that equity did not intend Andrew to get more than his promised expectation.
The Supreme Court considered that David and Josephine should be entitled to choose between two alternative forms of relief:
- if Josephine and David’s preference was for a clean break with Andrew then they were able to sell the farm to make a lump sum payment to Andrew with a discount for accelerated receipt; or, alternatively
- the farm could be placed in trust such that Andrew would have the benefit of it after Josephine and David’s death but such that David and Josephine had the benefit in their lifetimes.
This is a clever solution and will not leave Josephine and David feeling forced out of the family home and business that had been in David’s family for generations but it does give Andrew the redress sought for the promises made to him that had been broken by his exclusion from his parent’s wills.
It is hoped that in order to avoid get more costs and delay, sensible agreement on the manner in which any lump sum payment will be calculated will assist the decision-making process for David and Josephine.
The clear message here is that the answer to the appropriate remedy is that it should be based on the fulfilment of the expectation but do more than required to do justice and certainly not to give more than originally promised or expected.
This case evidences the wide discretion available to the Court to decide these sorts of disputes and the fact it will be hard to predict the outcome of any other such cases because of that discretion. It also highlights the range of opinions across the judiciary of what should be the appropriate conclusion.
The best advice, as always, is to discuss your plans with your family and reach agreement in your lifetime (even where there are family disputes) in order to avoid the uncertainty and significant legal costs that will otherwise be incurred in debating the issue.
These issues are not straightforward and this conclusion comes with the third round of a legal battle that will have cost both sides considerably – both financially and emotionally.
This dispute commenced seven years ago; no one should have to go through such an extended legal dispute with their family. What is certain is that the combined family wealth is now considerably lower, due to substantial legal costs on both sides, than it would have been had the parties been able to avoid the legal battle.
Alison Parry, Partner and Head of Will and Trust Disputes at JMW Solicitors