Succession: beware proprietary estoppel, the elephant on the farm!

11Apr2016

A 2015 study carried out by NFU Mutual and Farmers Weekly revealed that only 56% of farming businesses have put any plans for succession in place, raising serious concerns about the future of farms.

In some circumstances, farming families will have consulted their professional advisors and documented the plans which will be implemented to take the farming business forward. In other cases, those plans for the future will not be documented and will simply be on the basis that a senior member of the family has promised the farming business to a member of the next generation. This is known as proprietary estoppel and can cause problems when the promise which has been made conflicts with the understanding of other family members because the intention has not been clearly documented.

More and more proprietary estoppel cases are coming to us where the senior family member has passed away, he or she has made a promise of the farming business to a member of the next generation and the other members of the next generation do not agree that the farming business should pass in part or in its entirety to the person with the proprietary estoppel claim. There are some key requirements in order to establish a proprietary estoppel claim and these are that:  

  1. There must have been a specific and identifiable promise made; 
  2. Which was relied on; 
  3. To the detriment of the person relying on the promise. 

Often in farming proprietary estoppel cases, on the ground will take the form Mum or Dad promising the farm to a son or daughter; that son or daughter working on the farm for little or no remuneration during the course of their lifetime, instead of seeking work elsewhere for which they would earn a salary; in anticipation of receiving the farming business as promised to them by the parent. The problem that then arises on the death of the parent is that the person who could give evidence in relation to the promise having been made is no longer with us. If there are other children of the family they may feel aggrieved that potentially, the whole of the Deceased’s estate would pass to their sibling, meaning that they will receive little or no inheritance. Often, the matter then becomes disputed.

Proprietary Estoppel cases are often resolved before they reach the Court although a number have made it to the news in recent times. Generally, they take the same form as described above whereby the claimant will have worked on the farm all of their life in anticipation of receiving it on the death of their parent. When that parent passes away and the other siblings realise there is little or nothing to come to them, the claim for proprietary estoppel is then challenged.

These particular types of cases often lend themselves to alternative dispute resolution, usually mediation. This, if successful, prevents the matter from proceeding to Court and significantly reduces the costs which are incurred in resolving the matter.

The best possible way to deal with matters of this nature is to draw up appropriate documentation to record the intention of all parties in relation to the farming business to include what should happen in the future. Wills, Partnership Deeds and potentially Lasting Powers of Attorney in respect of the business should also be put in place.

It is very much the case that nobody wants to talk about the ‘Elephant on the Farm’ but to preserve both your faming business and family relationships, it is often best to get round the kitchen table, talk openly and make sure the plans for the future are documented.

If, the horse has bolted and a proprietary estoppel claim is made, a resolution which maintains the relationships within the family is always the preferential resolution.

Author

Katie Alsop is an agricultural disputes solicitor with Wright Hassall LLP