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11 April 2024 | Comment | Article by Sarah O’Grady

Avoiding family farm disputes: Understanding Proprietary Estoppel

Disputes within farming families over ownership of the family farm are unfortunately not uncommon, often leading to legal battles that can strain relationships and jeopardise the future of the farm. We regularly see cases in the newspapers about farming families who have fallen out and a claim for the family farm being brought by often, a son or daughter, against their parents. Sarah O’Grady, specialist in proprietary estoppel claims, explains what constitutes proprietary estoppel and offers insights into how farming families can prevent such conflicts.

Learning from legal precedents

Recent legal cases such as Guest v Guest (2021), Spencer v Spencer (2023) and Winter v Winter (2023) have brought attention to proprietary estoppel claims within farming families. Prior high-profile cases such as Davies v Davies (2014) (in which we acted for the successful claimant) and Habberfield v Habberfield (2018) underscore the familial nature of these disputes, typically involving children asserting claims against their parents or their estate.

What is proprietary estoppel?

Proprietary estoppel operates to prevent someone from reneging on a promise they have made where it would be unconscionable for them to do so. It most frequently arises in farming circumstances, due to the way in which family farms are owned and operated.

In order for someone to succeed with a proprietary estoppel claim, they need to prove that:

  1. a promise, or assurance, was made to them;
  2. they relied on the promise; and
  3. they have suffered detriment as a result of their reliance on the promise.

The usual circumstances are that the parents have owned the family farm and one (or sometimes more) of their children has joined them in working on the farm. This is often straight from school and the child will have already been working on the farm after school, at weekends and in the school holidays. The child is paid nothing or very little but they are told that the farm will be theirs one day. On this basis, the child decides to remain working at the farm and not go off to pursue other opportunities.

Sometimes there is a partnership formed between the parents and child and some of the cases arise when there is a falling out between the parents and child and the parents dismiss the child from the partnership. This means the child stands to lose everything they have worked towards to date and they bring a claim to challenge this. Other cases arise on the death of a parent, when it is discovered that their will has not left the farm to them as expected.

What sort of promises or assurances are needed to succeed with a proprietary estoppel claim?

Although it is possible for there to be only one promise or assurance made, it is more often the case in these type of claims for an assurance to be made regularly over time. The assurance can be indirect or informal: in the case of Thorner v Major [2009] there was never any express promise made but the deceased had made remarks to the claimant over many years that led the claimant to understand that he would inherit the farm. The way in which they communicated and dealt with each other was found to be such that it had been reasonable for the claimant to rely on the conduct and remarks made by the deceased and to expect that he would inherit the farm.

Looking at other examples of promises which have been upheld, in Winter the sons were told that by working long hours, reinvesting profits and taking a low wage they were working “for their futures”. In Spencer the assurance was the oft-heard one of, “it will all be yours one day”. In Davies the same assurance was made and when the claimant had asked about money she was told not to “kill the goose that lays the golden egg”. In the 2018 case of Gee v Gee, the father had repeatedly assured his son that he “would inherit the lion’s share of the farm”.

At the other end of the spectrum is the case of James v James [2018], where the judge found that the claimant having been told by his father what was in his will did not amount to a promise but a “statement of current intentions as to future conduct”.

What does someone get if they succeed with a proprietary estoppel claim?

If an estoppel is established then the way in which an award should be calculated, or the way in which a proprietary estoppel claim should be satisfied, has to be decided. This was the issue considered by the Supreme Court in Guest. The question was whether you should get what you’ve been promised or simply be compensated for the detriment you have suffered.

It seems, following Guest, that the starting point is to provide what was expected, i.e. to uphold the promise made. In this way, the unconscionability of reneging on the promise can be addressed. However, the court also said that there are likely to be times when the full amount of what was promised is not the correct remedy and some discount needs to be given.

Why do these cases arise so frequently for farming families and how can they be avoided?

I think that in all the cases I have dealt with, there has been a lack of communication between the generations. Sometimes some succession planning has been carried out but without the next generation being involved. At other times, a simple will has been written without any proper succession planning being carried out at all.

It is not always possible to avoid a case such as the ones I have discussed. However, engaging in succession planning at an early stage, involving the whole family and regularly reviewing the succession strategy is likely to minimise the opportunity for such claims to arise. It is important to ascertain the next generation’s wishes and expectations and to ensure that everyone understands what is to happen to the farm in the future. It is also important to consult with both your solicitor and your accountant and for them to work together in drawing up a succession plan with you, which should be kept under review. The process will involve an element of time and cost but that is nothing compared to the cost, both financial and otherwise, of a proprietary estoppel claim and the damage it does to both the family and the farm.

Should you require advice on proprietary estoppel cases, in a farming context or otherwise, please contact our Private Wealth Disputes Department.

Author bio

Sarah O’Grady

Senior Associate

Sarah O’Grady joined Hugh James in 2022 as a Senior Associate in the Private Wealth Disputes team. She specialises in all types of probate and trust disputes, including claims under the Inheritance (Provision for Family and Dependants) Act 1975, removal of trustees and executors, challenges to the validity of wills, construction and rectification claims and beneficiary disputes.

Disclaimer: The information on the Hugh James website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. If you would like to ensure the commentary reflects current legislation, case law or best practice, please contact the blog author.


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