Proprietary Estoppel Since Guest v Guest

The publicity surrounding Guest v Guest has made more families look again at their circumstances and consider taking advice on how they can avoid future disputes and the associated costs.

Over the last year, we have seen a significant increase in enquiries about disputes involving proprietary estoppel claims.

Proprietary estoppel claims are most common in farming families, where, for example, a child works on the farm for limited pay because they have been promised that they will inherit land or property on their parent's death.

To bring a claim, they must suffer a detriment, such as working for little or no pay, and have done this in reliance upon the promise of what they will eventually inherit.

Modern farming families have moved away from the tradition of passing the farm on to the eldest son, and with this change has come new difficulties.

The price of arable land has soared in recent years, making even modest family farms increasingly valuable assets.

Myerson Solicitors' Contentious Probate Team explore the case of Spencer v Spencer.

The effect of increasing the value of arable land can be seen in the recent case of Spencer v Spencer [2023] EWHC 2050. This claim involved a 400-acre family farm where the claimant, Michael Spencer, had worked alongside his father, John Spencer, for more than 40 years.

Michael had been assured that he would inherit the farm upon his father John's death, but shortly before he died, John changed his Will, leaving the farm in a discretionary trust for the benefit of his children and grandchildren.

The Judge, Rajah J, accepted Michael's evidence that his father had promised him the farm, even though the assurances made by John had been general and Michael's memory of events and exactly how and when they occurred was unreliable.

He held that, despite their difficult working relationship, John's promises had been sufficient to ensure that Michael spent the entirety of his working life on the farm.

The Judge held that the Will was unconscionable under all circumstances. He found that there was a quasi-bargain between Michael and his father, and Michael had kept his side of the bargain.

This conclusion was drawn despite Michael having been left in a comfortable financial situation. In that respect, he received free accommodation and living expenses, a partnership capital account, and a pension fund worth over 2.1m.

The Judge held that, nonetheless, Michael's conduct in reliance on his father's promises would be detrimental to him unless those promises were kept:

"As Mr Jourdan says, however, where a parent promises a child a farm if they work on the farm until the parent dies, and the child does what they were asked to do, giving up the possibility of other options, and positioning their working life based on the assurances, that is likely to amount to detrimental reliance. It is not possible to put a money value on the unquantifiable detriment of committing a life to a farm and not building a different life elsewhere, nor to recreate a world without the assurances".

The estate contained a section of land for which planning permission had been granted to extract minerals, referred to as the "New Quarry Land".

The planning permission to extract minerals was not granted until some two years after John's death. This meant that the land had significantly increased in value to around £1.9 million, as against the estimated agricultural value of £8,500 per acre, or £765,000.

It was held that, unlike the rest of the land, which had potential alternative uses, the 'hope value' of the New Quarry Land had crystallised, and the transfer of this land to Michael would have constituted a windfall not in line with the expectations he had of inheriting the farm.

The proposed remedy was that Michael should inherit the farm without the New Quarry section of the land but that he should also be entitled to the agricultural value of the New Quarry Land so he could purchase alternative fields if he wanted to and was able to do so.

The case of Spencer v Spencer also highlights how families are looking at new ways to use land previously used for farming.

Interest from investors, expansion into multiple businesses and a growing interest in environmental concerns and sustainability means that with this change comes generational tensions and an increase in disputes over what should happen to what was once the 'family' farm.

Avoiding these disputes and the associated costs will be the best way to try and preserve as much as possible for future generations; communication is key for this.

It is vital to take professional advice on the best structure to pass on family land.

Otherwise, the legal costs of a dispute could mean that there is very little to pass on to future generations.