Court awards farm to son in inheritance promise dispute

Michael Spencer won his claim against the estate of his late father, John Spencer, on the basis that he had been promised he would inherit the family’s Lincolnshire farm.

The claim in Spencer v Spencer followed the father’s death in October 2018. In March of that year, John Spencer had made a new will, his third.

Under its terms, the farmland passed into a trust, rather than to Michael, as in an earlier will.

See also: Analysis: Supreme Court rules on disinherited son’s claim to farm

This type of claim is known as “proprietary estoppel”, in which the claimant must show that a promise was made to them, that they relied on that promise, and that it had been to their detriment to do so.

The defendants on the other side of the case were the estate of John Spencer and Michael’s sisters Penny Spencer and Jane Flower.

History

The family farmed in Lincolnshire, with Michael leaving school at 15 to work on the farm. They had a tenanted holding of 166ha and an owned farm of about 164ha.

John farmed as a sole trader until 1983, when a partnership was formed between John, his wife Jean, Michael and his sister Penny.

The four partners initially shared the farming profits equally. By 1991 John reduced his profit share to 5% in favour of Michael and Penny, who then became entitled to 35% each.

During these years Michael lived rent-free in the farmhouse with his parents, or in a cottage on the tenanted farm, with the partnership paying many of his living expenses.

Penny and Jean retired from the partnership in 1996. From then, and until his death, John farmed in partnership with Michael, with 5% of the profits going to John and 95% to Michael. Jean had passed away in 2015.

Michael succeeded to the tenancy in 2007 following an application to the Agricultural Lands Tribunal.

The partnership business generated good profits, which were added to each partner’s capital account following their partnership share.

Michael’s capital account stood at more than £1.4m in the accounts examined in the case. The partnership also made substantial pension provision for Michael, whose pension fund was worth more than £745,000 at John’s death.

Succession promises

Justice Rajah accepted Michael’s claim that his father had often promised him that the farm would all be his one day.

“I find that there were general statements made by the deceased to Michael, usually during arguments, the gist of which was that Michael would inherit the farm. They were made on many occasions.

“These were assurances intended to be taken seriously – they were John’s means of mollifying Michael and ensuring he stayed committed to the farm,” Justice Rajah said in his judgment.

“From 1993 to 2018 John’s wills did indeed leave Michael the farmland and it is therefore likely that in his conversations with Michael about succession to the farm that John intended to communicate, and did communicate, to Michael that Michael would inherit the farmland.”

Witnesses

Witnesses for Michael included the farm’s agronomist, a neighbour and a neighbouring farmworker.

They all referred to conversations with John that had given them the clear impression that Michael would inherit the farm and land.

“If John gave others to understand that Michael was going to inherit the land, it is likely that he also gave Michael that understanding,” stated the judgment.

“I have no doubt that the assurances were a significant inducement to Michael to stay at the farm, to work hard and to bend to John’s will.

“There was clearly a difficult working relationship between Michael and his father, with regular arguments.”

In the mid-1990s, Michael had wanted to buy a truck stop as an additional venture.

Justice Rajah accepted Michael’s evidence that his parents had been against this and that his father told him that if he pursued this, he would be “out of the farm”.

The family friend who owned the truck stop said in a witness statement that John had told him that if Michael showed any interest in another business he would take him out of his will.

The fact that John had changed his will in 2018 and not left the farmland to Michael was in a sense irrelevant, said the judge, as the assurance of inheritance had been relied upon to Michael’s detriment. “The assurance itself is irrevocable.”

John’s reason for making a new will in 2018 was seen as combination of factors, including Michael’s multiple sclerosis diagnosis in January that year.

This resulted in a fear on his father’s part that Michael would die early, in turn producing a general unease on John’s part about what would happen to the land on Michael’s death.

Detrimental reliance on assurances

The court found that Michael had committed himself to working with his father and being subject to his control, despite their difficult relationship.

“He and [his wife] Anita lived in a farm cottage which was cold and damp for six years because John would not allow Michael to take money out of his capital account to buy a house in nearby Colsterworth, insisting that he had to live on the farm.

“For many years John retained a tight control of the finances.

“When Michael was starting on the farm he was paid a low wage of £30 per week… significantly lower than the £50 per week paid to his sister Penny, and much lower than the farmhand Vince Mitchell, who was accommodated in a farm cottage, and was being paid £70 to £100 per week.

“In later years he and Anita lived frugally, John preferring to accumulate profits in the partnership (albeit on Michael’s capital account) rather than permit larger drawings.”

Abandoning the truck stop idea was also seen as detrimental, as it was an opportunity which Michael had given up in favour of his father’s wishes.

Justice Rajah did not accept the other side’s argument that the benefits that he accrued from remaining on the farm outweighed any hardship he had suffered, stating in his judgment: “It is not possible to put a money value on the unquantifiable detriment of committing a life to a farm and not building a different life elsewhere, nor to recreate a world without the assurances.”

An important consideration in proprietary estoppel is whether it is unconscionable for a promise to be broken – in legal terms, repudiated.

Justice Rajah found that in this case, it was unconscionable and awarded Michael the owned farm, save for 90 acres – the “New Quarry” land – on which there is now planning permission for mineral extraction.

In exchange for losing this land, the judge ordered that Michael should receive the equivalent agricultural value to allow him if possible to find alternative land.

Remaining questions include who is to buy out whom in relation to the New Quarry land, and at what value, or whether it should be sold to a third party.

The issue of inheritance tax was also left open, although with a suggestion in principle from Justice Rajah.