Across the Commonwealth: A Modern Review of Proprietary Estoppel and the Malaysian Context

Introduction

On 19.10.2022, the United Kingdom Supreme Court handed down judgment in respect of the case of Guest v Guest [2022] UKSC 27.  In this case, the United Kingdom Supreme Court’s undertook a modern review on the principles of proprietary estoppel. This is expected to have a wide-ranging effect on the development of the law in Malaysia.

What is Proprietary Estoppel?

In summary, proprietary estoppel is a principle of equity that regulates the conduct of parties in a dispute. It arises when a person gives a promise or assurance to another person that they have or will be given an interest in property and that person reasonably relies on the promise or assurance to their detriment.

The Facts of Guest v Guest

The Guest family ran a dairy farm called Tump Farm since 1938. The future of the farm became the center of a legal dispute involving the parents of the Guest family and their eldest son, Andrew. 

Andrew had been promised by his parents that he would inherit a substantial but unspecified share of the farm that was sufficient to enable him to continue a viable farming business even after his father’s death. His parents eventually made wills in 1981 stating that he and his brother were to inherit the farm in equal shares subject to financial provision of 20 percent of the estate for his sister. 

In reliance on this promise, Andrew continued to work on the farm for around 32 years. He was paid for his work but at low rates. Yet, his responsibilities kept increasing as time went on. Around 2008, the relationship between Andrew and his parents had deteriorated and in May 2014, his parents made new wills removing Andrew’s inheritance. In April 2015 they dissolved their farming partnership with Andrew and served him a notice to quit the property on the farm in which he and his family had lived in. This led to legal proceedings where Andrew claimed a beneficial interest in Tump Farm.

The High Court ruled in Andrew’s favor and found that, inter alia, that the elements of estoppel were satisfied. The High Court then ordered that £1.3 million (subject to certain adjustments) be immediately paid to Andrew based on his expectation as to what he would have inherited. The Court of Appeal dismissed the appeal. The United Kingdom Supreme Court, in a majority decision, allowed the appeal in part. Surprisingly, the United Kingdom Supreme Court allowed the parents to elect between putting the farm into a trust in favour of their children or to pay compensation at a reduced rate to Andrew.

Proprietary Estoppel in a Post-Guest World

One of the key observations of the majority of the United Kingdom Supreme Court panel was a rejection of the theory that the aim of proprietary estoppel is to provide compensation for the promisee's detriment. 

Instead, the emphasis should be placed on preventing any unconscionable conduct between the parties and that the remedy should be proportionate to those unconscionable actions. The court then set out a loose framework in approaching such a claim: 

1. Firstly, the court had to determine whether the promisor's repudiation of his promise was, in the light of the promisee's detrimental reliance upon it, unconscionable at all.
2. After that, the court would have to start with the assumption (not presumption) that the simplest way to remedy the unconscionability constituted by the repudiation was to hold the promisor to the promise. 
3. If the promisor asserted and proved that specific enforcement of the full promise, or its monetary equivalent, would be out of proportion to the cost of the detriment to the promisee, then the court might be constrained to limit the extent of the remedy.
4. In the end, the court would have to consider its provisional remedy against all the relevant circumstances on the basis of a yardstick that would always be whether, if the promisor was to confer that proposed remedy upon the promisee, they would be acting unconscionably. 

Proprietary Estoppel in the Malaysian context

The general principles of proprietary estoppel has long been adopted by the Malaysian courts. An example of its application can be seen in the High Court of Malaya case of Laksamana Realty Sdn Bhd v Yeo Tin Sang [1998] 4 MLJ 48.

The facts of Laksamana Realty (supra) concerned a plaintiff who was the registered owner of certain lands since 1982 while the defendant was the registered owner and ground tenant of a building on the land since 1965. The defendant had been paying a monthly ground rental, first to the previous owner and then subsequently to the plaintiff. On 20 July 1994, a notice to quit was issued by the plaintiff's solicitors to the defendant. However, the defendant continued to remain on the land. 

The Sessions Court found that the plaintiff was aware that at the time of his purchase of the land, the defendant was the registered owner of the premises. Ultimately, it was held that there was a tenancy coupled with equity and therefore, a sum of RM40,000.00 was awarded to the defendant as compensation. The plaintiff appealed to the High Court. 

The High Court allowed the appeal and found that while a tenancy with equity did exist in the circumstances, s.221(3) of the National Land Code 1965 limits this equity to a 30-year period. Having stayed on the land for longer than 30 years, his equity had since been satisfied and he was no longer entitled to receive RM40,000.00 in compensation. 

While the case of Laksamana Realty (supra) is unique to Malaysia’s statutory land laws, it is notable in its application of the general principles of proprietary estoppel. The High Court in Laksamana Realty (supra) adopted the view that a successful invocation of the defence of proprietary estoppel requires a plaintiff to prove that that the legal owner has made a representation or created an expectation that the claimant is or will become entitled to some right or interest in the former's land. This is consistent with the overall decision and spirit of proprietary estoppel as set out on Guest (supra).

Where Malaysian law presently differs, amongst others, is the manner in which the remedy is to be assessed and granted after a successful defence of proprietary estoppel is raised. In Laksamana Realty (supra), the High Court maintained that while a remedy based on proprietary estoppel is to be assessed based on the expectation created or encouraged, the court does not set out any limits to this expectation. Additionally, the court does not provide for the ability of the wrongdoer to elect between two options to remedy the said expectation loss which was something that took place on the outcome of Guest (supra).

Conclusion

At the time of writing, the case of Guest (supra) has not been cited by any Malaysian court. However, its persuasiveness should not be overlooked and a Malaysian court may be tempted to incorporate the remedial framework that was proposed by the United Kingdom Supreme Court in assessing the remedies for the invocation of proprietary estoppel. It therefore remains to be seen as to whether the courts in Malaysia will follow the UK’s lead or develop its own jurisprudence in this area.