Proprietary estoppel – why succession planning is key for farming families

The number of cases involving farming family disputes over land and property, bequests in wills, sibling rivalries and family tensions, have reached an all-time high, and what these farming family fall-outs often have in common is proprietary estoppel. Caroline Cowley, a specialist in contentious probate in law firm Lodders’ Rural Sector Team, explains more.

The common thread running through many proprietary estoppel cases is that they begin with a child claiming they are entitled to the family farm or some property asset because of promises made by their parents as soon as they were old enough to start work.

It is then later revealed that the child is not going to receive what they were promised, either because of an alternative disposition under a Will or a family falling out.

See also: The key building blocks for future proofing your farm business

Proprietary estoppel can allow the court to step in and stop the parent from going back on their promise if the circumstances are such that it would be unconscionable for the parent to fail to uphold their end of the bargain.

What is proprietary estoppel?

Proprietary estoppel is a legal claim which can result in the claimant - usually the child - being granted rights to use the property of the owner - usually the parent - and may even lead to transfer of the ownership of the property.

The doctrine of proprietary estoppel is based on three main elements:

• A representation or assurance made to the claimant;
• Reliance on it by the claimant;
• And detriment to the claimant in consequence of his (reasonable) reliance.

The Court will intervene to grant relief if it considers that to do otherwise would be unconscionable, immoral or unacceptable, and in these cases, the principle of proprietary estoppel would come into play.

The farming world seems to be rife with these claims, in part due to the way children get drawn into working on the family farm, but encouraged by high land values and a reluctance of many families to discuss these issues until it is too late.

Case study example One: Son fails to win a claim to the family farm

In the case of James v James & others [2018] EWHC 43 (Ch) the deceased’s son’s claim to the family farm failed. The Court found that, whilst he had started work on the farm at an early age, and that there were some occasions on which his father had told him that he would be farming the land one day, he did in fact receive benefit in the form of bonuses and he later took control of the family haulage business which produced a significant income. He was also paid the going rate for farm work and had lived rent free. The Court found therefore that he was not able to show that he suffered a sufficient detriment.

Furthermore, the Court said that the representations made to the son by the deceased about leaving the farm to him on his death, were in fact “statements of current intentions as to future conduct” and did not amount to a promise, let alone a promise to be acted upon.

See also: The importance of succession planning for farming families

Case study example two: Daughter wins financial pay-out to compensate her for promises made

In the case of Habberfield v Habberfield [2018] EWHC, the claimant was able to show that her parents had promised her the dairy farm and that she had relied on this promise to her detriment. Upon her father’s death in 2014, the claimant discovered that her father had left his entire interest to Jane, her mother. The value of the farm was said to be £2.5 million. Lucy brought a claim and asserted that her parents had made consistent promises to her over the years that she would take over the running of the farm.

The High Court held that Lucy's case was proved. The court ordered Jane to pay Lucy a cash sum equivalent to the value of the farmland and some farm buildings which was calculated to be £1,170,000.

Why are such claims on the rise?

Land in general, and in particular farming land, is increasing in value. There are fewer but larger farming units and as a result, a family farm is invariably worth fighting over. The nature of a farming business, and the facilities, land and property on it, and the high percentage of farms that are owned and run by generations of one family, are all major contributors to why so many cases involving disputes and in turn proprietary estoppel, arise in the farming sector. That said, disputes and claims of this nature are not exclusive to farming and agricultural businesses.

More often than not, farming cases involve an interesting back story which involves a dispute about the land amongst siblings and family members. The press seems to pounce on these cases with their soap opera storylines as they make interesting reading. The publicity given to the headline cases then will inform potential litigants of the options open to them (and indeed it was reading about a previous proprietary estoppel case dubbed the “Cowshed Cinderella” case which prompted the claimant in Habberfield to bring her claim!).

See also: Diversifying a farm business as a tenant farmer: what you need to know

What steps should farming families take to avoid a dispute?

The disputes often arise when succession has not been provided for and clearly communicated to all the family, or an event occurs which turns the expected course of events on its head.

There really is no substitute for farming families sitting down and talking about the future and understanding the needs and expectations of all those involved. This is never going to be a once only exercise as circumstances do change but the key thing is to be clear at any moment how the assets of the farming business are to be applied. Questions to ask will include:

• Precisely what does the farming business own?
• Who owns what?
• What of the assets are partnership property and which are owned by individuals?
• Is there a written partnership agreement?
• Are there current wills in place?
• Do the two marry up?
• Who expects to inherit what and when?

It all comes back to the thorny issue of succession planning and the challenge of open communication.

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