In recent months we have seen a number of appeals against decisions in proprietary estoppel cases. The consequences in each case have had an enormous impact on the families involved.
Each of these cases have involved claims made by one family member against another, where the claimant has sought to assert that they have a proprietary right to land belonging to the defendant. The assertion is based on the claimant’s reliance upon the conduct of the defendant or promises made by the defendant that the claimant has, or will in the future acquire, an interest in the land. Proprietary estoppel works on the basis that it would be inequitable for the defendant not to keep their side of the bargain in these circumstances.
The cases of Habberfield v Habberfield, Moore v Moore and Thompson v Thompson involved farming families. In each case the son or daughter of the family had dedicated their lives to the farm, invariably working long hours with little holiday and for little remuneration for many years. In doing so, their lifestyles were very different to what they might have been had they worked off the farm; long working hours limit social opportunities and the limited remuneration would impact upon their ability to be financially independent or buy their own home.
In Moore v Moore, the son had been brought into the farming partnership with his father and uncle. When the uncle retired from the partnership, he had given his share of the business, somewhat unexpectedly, to his nephew (the claimant) in return for a relatively modest payment. The uncle stated to the court that he had done so in the belief that he was ensuring that the farm would stay in the family. The judge in the case referred to the ‘over-arching plan’ which would see the son inherit the whole farm. It was clear from the evidence of the uncle that this plan had been represented to the son by both his uncle and his father. By his conduct, the son had clearly relied upon those representations over many years.
Similarly, in Thompson v Thompson the son had spent all his working life on the farm, relying on promises made.
The daughter in the case of Habberfield v Habberfield had worked on her parents’ farm for 30 years but had left when disagreements arose. Her expectation was that she would inherit a viable dairy business on the farm and that expectation was derived from assurances made to her by her parents.
It is the claimant’s reliance upon the promises or assurances made which is key in these types of cases. Sometimes it may seem easier to tell a family member that they will inherit the farm and business rather than enter into difficult discussions about what will happen in the future. However, the decisions in these cases confirm that the easy option is by no means the best one. The implications of not discussing future plans or properly documenting agreements which are reached can be devastating.
Where the claimant’s expectation is clearly defined and they have performed their side of the bargain, the court favours fulfilling the expectations of the claimant rather than compensating them for any detriment that they have suffered. It is only where the expectations are uncertain or not fairly derived from the promises made that the court will seek to compensate the claimant for any detriment to them. The courts have found that where a person positions their whole life in reliance on promises made, that will be the detriment.
The longer the claimant holds the expectation, the longer they are likely to have been fulfilling their side of the bargain. If family circumstances change it is important to communicate with other family members so that any expectations can be adjusted.
Proprietary estoppel claims rely heavily upon evidence and that is often not available. More likely than not, the assurances will have been verbal and there will be no written record of what has been promised. It may not be practical to make a note of each assurance made, but without evidence of those assurances the courts will have to rely upon the recollections of the parties, which will no doubt be skewed by the passage of time and the differences which have brought the parties to the courts.
The costs of bringing or defending a claim for proprietary estoppel can be significant. Lord Justice Lewison noted in the Habberfield case that the mother could “have to leave the house that has been her home for over 40 years” as a result of the “ruinously expensive litigation”. There the whole farm was valued at £2.5 million and the court found that the daughter was entitled to a cash payment equivalent to the value of the farmland and farm buildings that the dairy enterprise operated from, which was in the region of £1.2 million.
In order to make cash payments of this magnitude, it is likely in most instances that assets will need to be sold. Indeed, it may well be that the very asset which is the subject of the proceedings ultimately has to be sacrificed in order to satisfy any judgment. There may well be further detrimental tax implications for the defendant in selling the property, which may leave them in an even worse situation.
The costs of this type of litigation can often be disproportionate. At the time of the appeal in Moore v Moore, the costs were believed to be in the region of £2.5 million – the farm had a value of approximately £5 million. Some families may have assets away from the farm, but if that is not the case, the farm may well have to be mortgaged or sold in order to pay the costs.
The message is clear: don’t avoid those difficult conversations. Families need to talk about their expectations and the older generation need to be clear if the expectations of the younger generation don’t fit with their plans. This is particularly relevant where there are non-farming children who need to be considered. The consequences of not discussing future plans could well prove to be catastrophic for the family. In these sad cases, the families may well lose their assets, but even more tragically, the families are divided, possibly irrevocably. Proper planning for the future, and being open with the family about your expectations, is the key to minimising the risk of these tragic tales being repeated.
Nicola Neilson, Partner and Head of Agricultural Property