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The future of your farm and the reliance on promises

14 Sep 2018

Since I reported in 2017 on the case of Davies v Davies we have seen a continued increase in claims of proprietary estoppel involving family farms.

Known as the “Cowshed Cinderalla” case in the media, Davies v Davies involved a claim on the family farm by one of three daughters. During her time in employment on the farm the daughter had been shown a draft Will leaving her the farm land and buildings together with a share in the company. In reliance on that promise she had worked hard on the farm and in doing so she had suffered a detriment. When relationships between her and her parents deteriorated, the daughter argued she was entitled to a proportion of the farm because of the detriment she had suffered by relying on their promise. This is proprietary estoppel.

Whilst originally, the daughter was awarded the sum of £1.3 million from a family farm worth in the region of £3.15 million, this was subsequently reduced to £500,000 by the Court of Appeal because they found she could not have relied on the promise presented in the Will for the whole of her time working on the farm.

Davies v Davies served as a cautionary tale to family businesses where it is not uncommon for children to work, perhaps for a smaller wage, in the expectation of receiving the business in the future or as an inheritance. However, with no formal arrangement or succession planning in place, disputes can and sadly do arise.

Recently in the High Court we have seen the case of Thompson v Thompson, a proprietary estoppel claim by a son on the family farm. This was on the basis that he had worked on his parents’ farm seven days a week, with few holidays for a low wage, since he left school in 1979. The partnership had been held as to one share for the son and two shares for his mother however, family relations deteriorated and in 2014, the son stopped working on the farm. This was due to illness and because he was excluded from the farm by his mother and sister. His mother, Mrs Thompson therefore wanted to distribute her share of the farming partnership elsewhere.

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The court found that whilst it was difficult to identify the precise occasion or words, it had been made clear that in return for his work, the son would inherit the farm. This was recognised and accepted in the family. It was also clear that in reliance on that promise, the son had acted to his detriment – working long days for a low wage with little or no financial independence. The court also found that the son’s share in the farm crystallized in 2014 when relationships between the parties deteriorated and suggested Mrs Thompson should receive a life interest in the partnership together with a right to live in her bungalow whilst the capital should be held for her son.

The case of Thompson v Thompson is by no means unusual (a further High Court proprietary estoppel claim can be found in the 2018 case of Gee v Gee) and we continue to see cases of this nature arising in the course of the farming business and following a business owner’s death. These cases highlight the importance of succession planning and the continued need to review the business structure.

At Hay & Kilner, our multi-disciplinary Rural Team advise on all legal issues for farmers, rural businesses and land owners, from succession and IHT planning, to development opportunities, employment and business law issues.

For more information on any of the above, or how we can help you business, please contact Alison Hall, or call 0191 232 8345.