Promises, promises – proprietary estoppel and succession planning

‘One day this will all be yours’ is a common conversation within farming families, when younger generations are promised inheritance of the family farm. What happens, though, if that promise is broken?

If you break a promise to leave your estate to someone on your death, you could face a proprietary estoppel claim, and even though the claim is about inheritance, it can be brought against you before you die, with life-changing results.

Nowhere is this better illustrated than the Court of Appeal’s decision given in March 2020 in the long running dispute between the Guest family about their farm.

Relationship breakdown

It started with a breakdown in family relationships between Andrew Guest and his parents, David and Josephine, and brother, Ross. Andrew dedicated 33 years of his life to working on the family farm, with the expectation that it would be passed down to him in later years. Initially his parents had designed their wills to ensure Andrew and Ross inherit the farmland and business in equal shares.

However, over time as family disagreements heightened, the parents changed their wills to effectively exclude Andrew from any inheritance of the farm and then furthermore removing his right to reside at a cottage on the farm, where he had lived with his wife and children for over 20 years.

Andrew brought a proprietary estoppel claim against his parents and the High Court upheld the claim, ordering the parents to pay Andrew a lump sum of almost £3 million equating to 50% of the value of the farming business and 40% of the land value.

Their appeal to the Court of Appeal failed and inevitably, David and Josephine had no choice but to sell the farm to raise the money to pay Andrew.

Why the proprietary estoppel claim succeeded

The court decided Andrew Guest was successful because his case met the following criteria:

1. A representation or assurance is made by the owner of the property/interest

Since starting work on the family farm, Andrew’s parents had made assurances that he would inherit the farm, both in conversation and in conduct. For example, if ever a disagreement over farming decisions arose, his father David would respond by saying things such as “It’s my farm, when you take over you can do what you want.”

Similarly, his mother also wrote to him to say that the farm was “all in [his] lap.” Promises about his inheritance of the farm were made consistently over time, therefore establishing a clear assurance.

2. Reliance is then (reasonably) placed on that assurance, giving rise to an expectation about inheritance

Given the long hours and low pay received by Andrew, it was reasonable to assume that he would not have continued to work on the farm if he was not relying on the assurance of his inheritance of it in the future.

3. The person to whom the assurance was made suffers a detriment in consequence

Andrew invested 33 years into the farm, all the time working very long hours for a very basic pay. The acceptance of these conditions by Andrew were no doubt due to the fact that he believed his future to be tied up in the farm.

The Judge noted that it was likely that Andrew had the opportunity to better himself elsewhere and that in dedicating his life to the farm he had suffered financial detriment as a result.

4. It would be unconscionable to deny that person a remedy.

The High Court found that to allow Andrew’s parents to go back on their promise to Andrew would be unconscionable; to do so would have left Andrew with no home, job or pension despite the years of work he had put into the family farm.

The Court appeared to have been impressed by his investment into the business by taking various training courses and successfully developing the business.

The life-changing impact of proprietary estoppel

The cost of the fall out within the family was life changing for all of them and, arguably, harsh on Andrew’s parents who had only ever contemplated passing the farm onto the next generation, not selling it.

While no two cases are ever identical, and these inheritance claims are always fact specific, the Guest v Guest case serves as a reminder that estate planning in farming families can have a unique perspective, and the stakes are high.

For more advice on estate planning, contact our team. You can also start your estate planning journey at any time and find out what you’ll need to consider using our no-obligation online tool.

This article was first published in the December 2020 edition of South East Farmer.

This content is correct at time of publication