Disputes over the future of a business are problematic at the best of times, especially in farming. But when family is involved, it can make things even more complicated.
If you’ve devoted years to the farm on a promise that you will one day take over the family farming business, or are facing a claim that someone has, here’s what you need to know about proprietary estoppel claims:
What is proprietary estoppel?
For farmers, a promise made by parents that “one day, all of this will be yours” might seem iron clad if you’ve spent your entire working life on the family farm. However, it’s not uncommon for the parents to potentially go back on their promise by splitting the farm between multiple children in their wills.
Proprietary estoppel claims offer the unhappy farmer a legal route to potentially inherit the farm, either from a challenge to the will or even, in certain circumstances, during the parents’ lifetimes.
Where it is not possible to rely on a broken contract, the farmer must be able to prove in court that:
- there has been a promise made;
- the farmer has relied on that promise to their detriment;
- the farmer has maintained and improved the farm in expectation that it will be inherited in due course;
- that the parents have gone back on that promise unfairly.
What do you get if you win?
Whilst proprietary estoppel claims have plenty of precedent in the law, it was in 2022 where the Supreme Court addressed a specific question in the case of Guest v Guest – where Thrings represented the successful appellants – Where a claim succeeds, what does the farmer receive?
The Supreme Court was asked to determine whether the farmer should be awarded what they “expected” from the promise or what “detriment” they had suffered in the belief that they were inheriting the farm. In this case, the value of their sacrifices and extra effort on the farm, any higher wages they could have received on the farm or in another job, their lost holidays, investments and even properties.
Depending on the farmer’s commitment to the farm, the value of their expectation could be significantly higher than their detriment, so the Supreme Court’s decision would impact all existing and future proprietary estoppel claims.
The decision established a two-stage test for determining what a successful farmer should receive:
- Is it unfair to go back on the promise, when your parents knew you have spent your life relying on it and have been waiting to inherit the farm?
- If so, the court must start with an assumption that the promise is enforced in full and you get what you expected – i.e. the farm is passed to you now, even if the Will says otherwise. The Court should only move away from and reduce that award if specific factors about the case justify it.
There have been numerous cases since the Guest decision which have applied this approach and confirmed the starting point will be that the farmer receives the farm, unless the defendants can convince the court to make a lesser award.
In two examples, Winter v Winter and Spencer v Spencer, the decisions emphasised the new starting point that, where a farmer succeeds in court and proves that the promise was for “the farm”, the Court will look to ensure that this expectation is fulfilled and the whole farm is passed on to the farming child - even where the farmer has already gained a substantial financial benefit from his time on the farm.
Where a claimant has legitimate grounds for a claim, both sides must adopt the mindset that the promise will likely be fulfilled if it goes to trial – moving the burden from proving they must receive the whole farm to the defendant having to convince the court that there are legitimate grounds to not fully uphold the claim.
Richie Rees, Senior Associate in the Thrings Agriculture Litigation team, said: “The emerging case law since Guest has confirmed that proprietary estoppel claims will continue to be a complex but potentially fruitful way for farming children to secure what they believe to be theirs. In order to make sure you know how strong your claim is before risking long term family relationships, we would always recommend seeking legal advice. The same applies to parents or representatives of estates who are faced with defending a claim.”
Thrings’ Agriculture team is one of the biggest of its kind in the country and has been an official Farmers Weekly Business Clinic expert partner since 2015, providing expert advice to the readers of Farmers Weekly on a wide range of legal topics. Find out more about how we can support farmers, food producers and rural communities on our Information for Farmers page.
Returning on Friday, 10 November, Thrings’ renowned Agriculture Seminar will see the firm’s agriculture, planning and development experts discussing the biggest issues for the rural sector as part of this year’s topic “The Future of Farming”. To find out more and to book your place, visit here.
