Danielle Spalding, associate and property litigation specialist looks at he increase in claims involving farming families over the last few years where the son or daughter brings a claim alleging that their parents have failed to honour promises made to them about passing down the farm. These claims are based on the legal principle of proprietary estoppel.
The case of Habberfield v Habberfield ( EWHC 317 (Ch)) is another one of these claims and is an illustration of the issues the Courts are being asked to consider. This was a claim by Lucy Habberfield, daughter of Jane, who worked at her family's farm in Somerset for 30 years before leaving the farm in 2013. Lucy has been successful in arguing that her father promised her part of the farm for her years of work. She has been awarded £1.17m. The Court found that she had been promised a significant part of the £2.5m farm after her father died in 2014.
There is a three stage test in order to be able to bring a successful proprietary estoppel claim.
- A promise or assurance must have been made;
- The person the promise was made to must then rely on that promise; and
- In relying on the promise they have acted to their detriment.
The classic example is when mum and dad as owners of a farm say to their children 'one day this will all be yours' and as a result of that the child stays at home to work on the farm rather than pursuing another career path relying on the promise. Proprietary estoppel 'stops' the property owner from going back on the promises or assurances they have made.
The daughter in this case claimed she devoted her whole working life to the farm on the basis she would eventually take over the reins when her father retired. Her claim was she worked long hours, at low wage and with few holidays.
The daughter argued that her father in particular (and at times both her parents) had made a number of promises /assurances that she would inherit the farm.
Following a family dispute during 2013, the daughter left the farm. There is a colourful story about a fight in the milking parlour with her sister.
When her father sadly died in 2014 he left his entire interest in the property to his wife.
The daughter's claim was met with a robust defence by her mother who said no such promise or assurances had been made and that her daughter had suffered no detriment on the basis she had exaggerated her contributions to the farm and ignored the associated benefits she had received.
The judge found that various representations had been made over an extended period of time and they amounted to a promise involving the transfer of property. The judge did not accept it should include the entire farm.
Consideration was given to what would the daughter have done in the absence of the promises made by her parents and considered that she would have gone on to build her own successful farming business. A claim for proprietary estoppel had therefore been established.
The Court's thoughts then turned to how to compensate the daughter. There are two broad ways to approach compensation. Either giving effect to the expectation or compensating for the detriment suffered. In this case the daughter's expectation was the farm. However, the Court found the actual loss would be no more than £250,000.
The Judge took the view she should be awarded what she was promised i.e. a viable farm. The daughter was awarded £1.17m to be settled in cash. The Judge was reluctant to order transfer of property as it would require splitting the holding.
Another interesting point that came out of this case is around written evidence. Much of the daughter's claim rested on a 2008 letter from a surveyor which detailed plans for the daughter to increase her interest in the farming operation and upon the death of her parents to become the overall owner of the farm.
Most proprietary estoppel claims are very much one party's recollection of events against someone with a competing interest. If there is written evidence to show what assurances were given that will clearly be important and was in this case.
This case is another example of the importance of trying to avoid these problems ever arising. It is obviously sensible for families to be open, transparent and consistent with each other when discussing plans for succession. Doing that helps avoid these types of difficult and costly claims.