Inheriting the family farming business


29 April 2019

Fail to document informal family agreements at your peril: the latest family quarrel within the farming community reiterates the need for clear succession plans and written agreements.

The High Court handed down judgment earlier this month in favour of a son who had been given assurances by his father that he would inherit the family farming business. The son based his claim on the principle of 'proprietary estoppel’. Very simply, proprietary estoppel may prevent (or estop) a person from going back on a representation or assurance (however informally made), where that assurance was relied upon by the other person to their detriment.

Proprietary estoppel claims require the determination of three main questions.

  1. Was a representation or assurance made and, if so, on what terms?
  2. Did the person to whom the assurance was made rely upon that assurance and, if so, how?
  3. Did the person to whom the assurance was made suffer a detriment in consequence of that reliance and, if so, what?

Where a claim is successful, the court has a broad discretion to require that promise to be upheld. Two ways of doing this are to rectify the detriment suffered or to uphold the expectation / promise. 
The latest case concerning proprietary estoppel in the farming community is that of Guest v Guest. This was a family dispute concerning Tump Farm. The farm was owned by David Guest (the defendant). Andrew Guest (the claimant and the defendant's son) had worked on the farm for over 30 years because he believed that he would take over the farm and inherit the land upon the death of his parents. However, following a series of disagreements over the running of the farm, Andrew's business partnership with his parents was dissolved, and his father cut him out of his will. Andrew brought a claim under proprietary estoppel as a result, seeking to have the original assurances made by his father upheld.

Assurance 

The court found that Andrew's father had made various assurances to Andrew over the years that Andrew would take over the business when his father retired and eventually inherit the farm. This was evidenced by various letters and conversations, including an article in a local newspaper in which David was quoted as saying that he wanted to keep the farm in the family and hoping that Andrew's son would in turn take it over one day.

Reliance / Detriment

In reliance on his belief that he would ultimately take over the farm and inherit the land, Andrew worked on the farm full-time, since leaving school at the age of 16, for a period of over 30 years. He had worked long hours for a low wage, despite having several qualifications in farming and business management. The court was satisfied that, if Andrew had sought alternative employment, he could have enjoyed a higher wage and a much greater degree of security. He would have been able, for example, to buy his own home, just as both of his siblings had done. It was thought that Andrew’s qualifications would, in particular, have put him in a good position to seek alternative, higher-paying employment. Accordingly, Andrew’s reliance on the understanding that he would inherit the business had been to his significant financial detriment.

Additionally, on the assumption that he would one day own the farm, Andrew had spent his own money on the land, including taking out a loan to pay for improvements to one of the cottages. The court highlighted that such expenditure would have been nonsensical if Andrew had not been under the assumption that he would one day benefit from the investment. 

Award

Having found that a promise had been made to Andrew in respect of the farm, upon which Andrew had relied to his detriment, it fell to the court to decide how to uphold this. Deciding what award to make was complicated by the fact that both of Andrew’s parents were still alive, as the promise was only ever that Andrew would inherit the land upon his parent’s deaths. By fulfilling the promise now, this would effectively have amounted to an advancement on Andrew's inheritance. 

Nevertheless, the court considered that, due to the depth of ill-feeling between the parties, it would no longer be practical for the parties to work together on the farm; to have joint interests in the property; or live in close proximity. Therefore, an award was made with the objective of establishing a clean break between the parties. 

It was ordered that Andrew should receive, by way of a lump sum payment, 50% of the market value of the business and 40% of the market value of the freehold land and buildings comprising the farm.

This case demonstrates the importance of good succession planning and the need to have adequate documentation in place to record this and the intended ownership of the business / land. 

The content of this article is for general information only. If you require any further information in relation to property disputes of this nature, please contact Laura Tanguay on 01473 299188 or [email protected]. Law covered as at April 2019.