Both proprietary and promissory estoppel are legal doctrines of which the essence is essentially the same i.e. both are designed to stop a party from reneging on a promise that they have made to another party which has relied on that promise to their detriment. A broken promise is often revealed when the deceased is found to have bequeathed an asset, which an individual expected to inherit, to someone else in their will.
Proprietary estoppel is primarily concerned with land and property (and a very high percentage of proprietary estoppel claims coming before the courts relate to land and farms rather than residential properties), whereas promissory estoppel claims concern other assets and are usually associated with an adjustment of a pre-existing contractual relationship between parties.
Proprietary estoppel
A proprietary estoppel is an equitable doctrine meaning that it is concerned with fairness, and where it would be considered unconscionable if the promise was not met. A claim arises when the following conditions are met:
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A promise or assurance is made to the claimant
“One day, all this will be yours” is a fairly standard piece of evidence in proprietary estoppel cases. Claimants will maintain a promise, in one form or another, was made over a period of time leading them to believe they would receive property, land or a business. Evidence from third parties with nothing to gain from the litigation is particularly valuable. Proprietary estoppel claims involve assessing the strength of one party’s recollection of events against the facts, and the recollection of those who usually have a competing interest. -
The promise was believed and relied upon by the claimant
The courts will look for evidence that the claimant used the promise as part of their decision-making process when making certain life or career choices. This could include deliberately forsaking a career outside farming and devoting one’s entire life to working on the family farm for little or no pay, or living on the farm in circumstances where, was it not for the promise, those living arrangements would not have been a logical life-choice. -
Reliance on the promise has caused the claimant to suffer detriment.
Although detriment can manifest itself in many different forms, it is often determined in financial terms whereby the claimant has lost out on years of earnings in expectation of inheriting the farm. However, recent rulings (see Winter v Winter) have made it clear that detriment can be assessed by reference to non-financial disadvantages, such as making a lifetime commitment to a particular course of action to the exclusion of other alternatives because of a promise made.
Proprietary estoppel in a farming context
As a general rule, proprietary estoppel claims normally arise in farming families after the parents die and the subsequent discovery by the child that, against expectations, they do not stand to inherit the farm as promised. However, the case of Guest v Guest is unusual in that it is an example of a proprietary estoppel claim being brought by the son against his parents while they were still alive, a case that reached the Supreme Court due to its very specific characteristics. On the ground, we are dealing with an increasing number of lifetime cases as the case law becomes increasingly well established, particularly in the agricultural sector.
As land values have risen, so have the number of proprietary estoppel-related cases brought before the courts. Attempts to apportion assets in the interests of fairness between farming and non-farming family members while not compromising the business can lead to some very convoluted arrangements. Every claim which relies on proprietary estoppel is peculiar to its own set of circumstances, but the principle of fairness and conscionability remains at the heart of each one.
Promissory estoppel claims
Imagine this scenario: you have a longstanding commercial relationship with a supplier. As a result of difficult trading conditions, your supplier agrees to your request to defer your monthly payments for three months and, in a gesture of goodwill, adds that they are happy to write off one month’s payment and spread the cost of the two months’ deferred payment. Relieved, you use the saved money to pay another, less understanding supplier who is demanding immediate payment.
Unfortunately, several months after your supplier’s original promise to waive a month’s payment, one of their other customers defaults so they ask you to remit the payment for the written off amount as soon as possible, albeit apologetically. What can you do? Because you relied on your supplier’s promise not to charge you for a month’s supplies, you are no longer in a position to pay as you’ve used the saved money to pay another supplier’s bill. Your supplier sues for the difference – after all, your written contract with them had not been altered – and in response you rely on a defence of promissory estoppel.
My word is my bond
Promissory estoppel relies on there being no ambiguity on the part of the party making the promise (which can be express or implied). They must be clear that they do not intend to enforce their legal rights, and the person to whom the promise is made must have acted on that promise either to their detriment or have altered their course of action as a direct result of relying on that promise. As with proprietary estoppel, the principle of promissory estoppel rests on equity rather than law; in other words, it would be inequitable not to uphold a promise made to someone who had acted to their detriment as a result of the promise.
Shield, not a sword
It is worth noting that promissory estoppel can only be used as ‘shield’ rather than a ‘sword’ i.e. used as a defence when a legal relationship exists. A defendant being sued by another party can claim promissory estoppel in their defence but cannot use promissory estoppel to claim against a party that has reneged on a promise. In court, an objectivity test is used to determine the equitability of the promise: for instance, if the party to whom the promise was made does not rely on it to change their course of action, a court would not consider it to be inequitable if the party making the promise reneges on it. This is not the same for proprietary estoppel where individuals do bring a claim relying on the principle.
Estoppel seeks balance between law and equity
For many, trading conditions continue to be difficult, and it is perfectly possible that many established supplier/ customer relationships are relying on promises to adjust the terms of their contracts in order to navigate choppy commercial waters. Most promises will be made in good faith and consequently kept; however, a small majority will fail as the company making the promise suddenly finds it can no longer afford to make good their promise. Relying on promissory estoppel in order to uphold a promise made is not straightforward – every case will turn on its own facts – and the balance between law and equity will be at the heart of each.
How we can help
It is common for Judges to emphasise in estoppel-based claims the importance of seeking professional advice about the merits of a claim as early as possible, not least in an effort to reach a settlement. The decision about whether or not to pursue a claim will be influenced by several things, not least the cost. However, a word of caution - legal costs are payable irrespective of whether your claim is successful, which is why you need to consult a lawyer who is experienced in dealing with claims of this sort, able to judge the likelihood of success and make you aware of the various different funding options available to you. If you would like to discuss a potential claim in confidence, do please get in touch.
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