Person using yellow boots and shovel in a garden

There has been a recent case decided by the Supreme Court on proprietary estoppel relating to a farming family which could have a major impact on a divorce where a farm is involved.

In principle, before the Court gets involved, what happens when the parents say to a child, all or part of this will be yours one day, and subsequently go back and change their minds.

Inheritance arrangements | Family farm

In this case, the son had worked for limited wages and lived on a property at the farm for some 33 years, relying on a promise from his parents that when they died, he would have a share of the farm with his siblings. However, the family fell out, as sometimes happens, and the parents made new Wills excluding him and offering him a farm business tenancy, which he rejected. He then left the farm and commenced a claim alleging he was entitled to a share of the farm in light of the promises made by his parents.

At first instance and in the Court of Appeal, the son was awarded 50% of the farm business and 50% of the value of the farm itself. The parents took the case to the Supreme Court saying this would force them to sell the farm now. The Supreme Court agreed and unusually, gave the parents a choice. Either to put the farm into a trust for the children now, so it went to the children when they died (as was the original deal) or they had to pay compensation now to the son based on his loss, but taking into account the fact that this should be reduced as he was receiving it earlier than under the original deal. The impact of the second option was that if this route were used, he would receive approximately half of what the lower courts had previously awarded to him.

The lesson to be learnt from this must be, however hard it is to work out, leaving the future of a farm without a clear written agreement, can lead to animosity and upset whilst potentially costing a lot of money and even lead to the sale of a cherished family asset.

Each case is dependent on its facts but if in the above case the parents were to divorce, it would have had a major impact on what they each would have received in spite of the promises made. Therefore, sorting this out is sensible for so many reasons including what might happen in the event of a divorce.

Here at Stephen Scown, we have a number of specialists who are used to advising in this situation, both in respect of inheritance planning and making arrangements for a farm and also in dealing with the issues in the event of a divorce.