Family court disputes highlight inheritance issues

The statement “one day, all this will be yours” is one that has increasingly come to be relied upon in bitter family inheritance disputes.

To avoid such disputes, perhaps those making the statement should include a rider along the lines of “unless I change my mind”.

The ageing farming population and the rising value of farmland are likely to have increased the number of claims under a relatively little-known area of law called “proprietary estoppel”.

Two recent cases illustrate how this works.

The first is the case of Eirian Davies, who the national press dubbed the “Cowshed Cinderella” after she won £1.3m from her parents’ share of the family farm.

Eirian Davies

Eirian claimed she had worked on Henllan, her parents’ farm in west Wales, for many years in reliance on an assurance from them that she would one day own it.

Henllan was a pedigree dairy comprising a farmhouse, an attached cottage, outbuildings and 73ha of land. Part of Eirian’s evidence was that while her sisters were out enjoying themselves at Young Farmers’ parties, she was left back at the farm working long hours.

Many years later, Eirian fell out with her parents, who changed their minds and sought to go back on their assurances. Eirian claimed it was unfair that her parents could do this because she had devoted her life to the farm.

Written contract

As is often the case in similar circumstances arising between family members, there was no written contract between Eirian and her parents.

That is usually because at the time any assurances are provided, by extension relationships in the family are good and no one sees the need to commit such assurances to writing which might seem rather unsavoury.

In fairness to the family, there had been attempts to formalise agreements, but for various reasons these had not been set out in writing and signed.

Eirian’s claim was based on an old legal doctrine called proprietary estoppel. The leading case on this was Thorner v Major, which the House of Lords (the then top court in the country) considered in 2009. That provided the authority for what Eirian needed to prove, which was that:

• Her parents had made her a clear and unequivocal assurance
• She had reasonably relied on this
• She suffered sufficiently substantial detriment as a result of this reliance.

Eirian successfully proved these points before a High Court judge in Cardiff and therefore won her claim. However, the decision was then appealed by her parents to the Court of Appeal.

In the Court of Appeal, Eirian’s parents argued that she had not in fact “reasonably relied upon any assurances” and that the real reason she stayed on the farm after school was because she received board and lodgings there.

Her parents also argued that because Eirian had worked outside the farm for Genus for a period of time, this evidenced she had not relied on any assurance, otherwise she would never have left the farm.

Finally, the parents argued that Eirian had not suffered any detriment because although she may have been underpaid by comparison to what she could have earned elsewhere, this was endemic in the farming industry and such a comparison did not take into account other benefits she received, such as free accommodation.

Despite the parents’ representations, the Court of Appeal once again decided in favour of Eirian.

The case then went back to the High Court for the judge to consider how Eirian’s claim should be satisfied – in other words, what should she fairly receive as a result of winning her claim.

For example, should the assurance by her parents result in Eirian being given the entirety of the farm now, or at some point in the future?

Alternatively, should Eirian receive a sum of money instead and if so, what amount?

One of the leading cases in this complex area of law is called Jennings v Rice and it provides the guidance that a claimant such as Eirian should receive “the minimum to do justice”. There are also other farming cases that suggest the court has a wide discretion as to what relief to award and that the relief should be proportionate to the detriment suffered.

Payout

After much legal argument, the court awarded Eirian a cash payment of £1.3m to enable her to buy her own farm. The court considered all of the circumstances of the case and the QC representing Eirian described this payout as one that “felt about right”.

I speculate that the award of £1.3m may relate to it equating to about one-third of the value of the farm. The judge may have felt this appropriate, given that two-thirds would then be retained by the two parents and Eirian has two sisters who may have hoped to inherit the remaining two-thirds. But this was not something the judge said.

A second recent case, which has not been as widely reported, involved the Devonshire farming family of Mr and Mrs Seward and their sons Paul and Jonathan. The parents owned two farms (Bullaton and Northwood) and gifted Bullaton to the two boys, who farmed in partnership before falling out. Paul then wanted Bullaton sold so that he could receive his share.

The parents instead suggested that if Paul were to transfer his interest in Bullaton to Jonathan (worth £120,000) they would leave Northwood to Paul in the father’s will. Paul agreed and transferred Bullaton to Jonathan. However the father then went back on his assurance.

The father said the court should also take into account that the parents gave Paul various parcels of land. These included Bramble Farm – which in order to allow a comparison to be made was retrospectively valued at £86,000 in 1989. Four years later they gave Paul another 10ha worth £41,000 and other land which totalled £133,000. This was more than the £120,000 that the father had given to Jonathan and therefore the father said Paul had not suffered any detriment.

However, the judge said his decision was not as simple as comparing the assurance of £120,000 with the sum of £133,000 and that he needed to take all of the circumstances of the case into account. This included that Paul had relied on the promise, and expected to receive in the future a property worth substantially more than the half share which he had given up in Bullaton Farm.

He decided that Paul had suffered a detriment and it would be unfair for the parents to go back on their assurance.

Much like the case of Eirian Davies, the judge then needed to consider how to satisfy Paul’s claim and did so by awarding Paul an interest in a house the parents had bought for £289,000 from their share of the farm, subject to the parents having a right to stay in the house until their death.

Consider assurances carefully

These cases highlight that if an assurance is made by a parent farmer to one of their children and the child relies upon it, and acts to their detriment, the courts have a wide discretion and awards can be substantial.

While this area of law involving historic assurances can apply in many contexts, it is particularly relevant to farmers because many farms tend to be run by families where there tends to be less formality regarding assurances made.

These cases are merely examples of the sorts of farming disputes that the courts are dealing with.

They do not serve as a guide to what will happen in future cases, because every case depends on its own facts and legal arguments.

Therefore it is important to have a thorough knowledge of how these legal arguments interplay with one another.

One thing that is clear, however, is that these farm ownership and inheritance disputes are continuing to reach court.