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Promises, promises...and the family farm

View profile for Julie Robinson
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Promising your farm to one of your children is fine as long as you find a way to deliver. In this blog, we take a look at some recent “proprietary estoppel” cases where the courts have upheld claims to the family farm.

There are few areas of law where the language of the courts is as impenetrable as proprietary estoppel; detrimental reliance, unconscionability, equity and crystallisation make for complex legal rulings. And yet the scenario is a familiar one. Parents (or one of them) make promises to one of their children that the family farm will be theirs one day. The child relies on those promises, foregoing alternative opportunities, working long hours for very little, with little time off, in the knowledge that they will get their reward in due course. Relationships subsequently deteriorate and what seemed a done deal at the time is no longer in play. Cue for irreparable damage to relationships, untold stress and legal costs to match.

Three farming disputes based on similar scenarios have been ruled on by the High Court so far this year: Gee v Gee, Thompson v Thompson and Habberfield v Habberfield. In all three disputes the claimants were successful. In all of the cases, the promise was not a one-off, casual comment, but was repeated at various points over a long period of time; this seems to have been a critical factor, overruling any later change of mind. Also critical is the fact that the claimants had relied on the promises made; in one case a daughter had prepared a formal tender with her husband for a farm of their own but was persuaded not to submit it after her father persuaded them that the ‘home farm’ was their future.

All of the claimants had suffered detriment by relying on the assurances they had been given. In all cases this took the form of working for significantly less than if they had taken jobs elsewhere; time-off was a rarity. Other work opportunities were turned down.

Importantly, siblings and their needs and claims had played a part in all of the disputes, demonstrating once again what we all know to be true: how to treat children equally while passing the whole farm to one child poses a dilemma which is difficult to resolve.

Making an award

Fairness, proportionality and pragmatism underpin the courts’ decisions on what award to make. There is no windfall to the claimant; the aim is to provide the minimum needed in order to avoid an unconscionable outcome, weighing up not just losses suffered but expectations denied. The courts carry out a careful balancing act and take into account the nature of farming businesses (e.g. the need for control over decision-making), the housing needs of other family members and even the tax implications of splitting farmhouses from the rest of the farm.  This resulted, in one of the cases, in a clean-break cash payment to the claimant rather than an award of the farm itself. In another case, a son was awarded a controlling shareholding in the family farming company.

Avoiding succession disputes

The potential for expensive and drawn-out legal proceedings if succession planning goes wrong is very real, as shown by this year’s High Court output. Below is a checklist which, if followed, may help to limit the risk of future litigation on a similar theme.

Make plans

  • Take the long view
  • Distinguish between property ownership and managing the farm business
  • Consider how to cater for other family members (insurance policies/non-farming assets/use of farm cottages/future roles)
  • Bring in outside help if needed (a facilitator can help unlock difficult discussions)
  • Get advice on tax implications

Document things

  • Make sure your will is in line with what you say to the family
  • Check partnership agreements to make sure that they are also in line with your intentions
  • Use a professional

Avoid secrecy

  • Keep plans out in the open with all family members
  • Formal family meetings, with a follow-up note or minutes, will help avoid nasty surprises

Revisit plans

  • Take stock every few years.
  • Have circumstances changed?
  • Are family members still on board with the plans?
  • Is the original plan still tax efficient?

Even when careful plans are made, ticking all the best-practice boxes, fall-outs and differences in opinion can happen. With the best will in the world some relationships cannot be salvaged but early action, such as the use of a facilitator, mentor or mediator, can get things back on course.

As specialist agricultural solicitors Roythornes are well placed to advise on agricultural succession and disputes affecting farming families. For succession planning, get in touch with Julie Robinson or Jarred Wright. For farming disputes, contact Tim Russ.

 

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