Following the landmark judgment handed down by the Supreme Court in October 2022 in the case of Guest v Guest, there have been a string of reported decisions from the High Court on proprietary estoppel claims in recent months. The latest decision is that of Teasdale v Carter & Anor (2023), where the dispute centred on the ownership of a converted barn, Cow House, on Burne Farm in Todwick near Sheffield. 

The successful claim was brought by Rebecca Carter, daughter of Pamela and Daniel Teasdale. Mr and Mrs Teasdale were the joint legal owners of Cow House which was valued at £245,000 at the date of the trial in December 2021. 

Ms Carter’s claim was founded on expenditure of £200,000 (mainly raised through a mortgage which she paid) and associated work in renovating Cow House to turn it into her family’s “forever home” in reliance on Mr Teasdale’s repeated promises (which were known to Mrs Teasdale) that the property would be hers. 

Mr Teasdale did not dispute his daughter’s claim to a transfer of the property in her favour, but Mrs Teasdale did, asserting that her daughter’s payments amounted to no more than putting her stamp on the property in the knowledge that she was only a tenant.

The trial judge accepted that on the evidence, a clear picture had emerged that Ms Carter had been promised the house if she settled the mortgage. The judge was also satisfied that Ms Carter had acted to her detriment in reliance on the promise and that it would be “unconscionable” for equity not to intervene. He made an order transferring Cow House outright to Ms Carter.

This remedy was not interfered with on appeal, the appeal Judge being satisfied that such remedy was proportionate, given that Ms Carter had paid for the construction of Cow House by direct payments and by discharge of the mortgage and she had lived there for 13 years.

The decision in Teasdale can be said to follow the guidance of the Supreme Court in Guest as to how the Courts should approach identifying the remedy for this type of claim.

Guest makes clear that the court will look to enforce a promise-based remedy based on expectation, that is giving the claimant that which they have established they were promised, rather than compensating for detriment, unless specific enforcement of the full promise would be out of all proportion to the cost of the detriment suffered by the promisee, in which case the court may be constrained to limit the extent of the remedy. 

In Teasdale, the cost of the detriment broadly corresponded to the value of Cow House which perhaps made the Court’s decision on remedy more straightforward. There are however circumstances where it may be disproportionate to enforce a promise in full, for example if the length of the detrimental reliance is short or performance of the promise is not due until the future.

In all cases, the Court will have a wide discretion as to remedy, but following Guest there appears to be a move towards giving a claimant what they were promised where possible. 

Remedies fashioned on a claimant’s expectation may have wide-reaching consequences, and where a family member’s expectations have been raised, uncertainty as to how a Court might give effect to those expectations has the potential to interfere with tax-efficient estate planning. A court order giving effect to equity can have IHT, CGT and income tax consequences.

If there is a declaration that a house or land belongs beneficially to a successful claimant, was the house or land ever part of the estate at all for IHT purposes? Deductibility of the asset for IHT will depend on whether the equity is a “liability” and will be deductible if and to the extent that it is either a liability imposed by law or for consideration in money or money’s worth. 

This gives rise to the nuanced question of whether the creation of the equity is a “transfer of value”. Further, there will usually be a CGT disposal at the point where an asset is transferred to a successful claimant pursuant to a court order unless giving effect to a pre-existing trust right.

Can an equity arising in satisfaction of a proprietary estoppel claim be described as a pre-existing trust right? These types of issues can be highly complex. 

Once again, the message must be that open discussion and communication between family members on estate planning is crucial as is the documenting of arrangements and keeping the discussions and arrangements under regular review to reflect changes over time. Whilst these can be difficult matters to tackle, clarifying expectations is a preferable alternative to costly litigation.