This recent Court of Appeal decision continues a long-running family farming succession saga. The result was a refusal of the appeal by the farm owner, David Guest, and re-affirmation of the High Court’s decision to award Andrew Guest (his son), a significant payment for his claim based on the doctrine of proprietary estoppel.
Background
The main farm, Tump Farm, had been farmed by the Guest family for three generations. It was owned by David Guest (the father), who bought it in 1964. Andrew, the eldest of two sons, was the claimant in the original case.
Andrew worked on his father’s farm for 33 years after having left school, undertaking additional training which was said to contribute to improvements and the overall success of the farm. Andrew received a comparatively basic wage and lived rent-free in a cottage on the farm.
It was Andrew’s case that he had been led to expect that he would inherit a substantial interest in the farm. The precise nature of the inheritance expectation changed over the years from inheriting the farm outright to inheriting alongside his brother. What was consistent throughout, though, was that Andrew anticipated inheriting a portion of the farming business significant enough to enable him to farm himself.
David and Andrew formed a 50:50 farming partnership together in 2012. Separately, his younger brother, Ross, had a separate partnership with the parents over a second farm. Andrew and his father didn’t always see eye to eye in the management of the farm, and the partnership failed due to a breakdown in relations and was dissolved in 2014. During this breakdown, members of the family secretly recorded conversations with Andrew in which he acknowledged and complained that he was only receiving half the farming business alongside his brother, despite his additional work.
Following this breakdown, David and his wife revoked Wills they had made in 1981, which had shared the farming business 50:50 between sons, and in new Wills wrote Andrew out completely.
The Claim
Andrew issued a claim for proprietary estoppel: disputing the transfer of ownership due to reliance upon a sufficiently clear assurance. The ingredients for this are laid out clearest in the case of Thorner v Major:
- An assurance of sufficient clarity
- Reliance by the claimant on that assurance and
- Detriment to the claimant in consequence of his reasonable reliance
First Instance Decision – High Court
- It was confirmed that ‘sufficient clarity’ was to be judged objectively, albeit with a knowledge of the habits, relationship and character of those involved. The repeated off-hand assurances were deemed sufficiently clear given the manner of communication between the two. David’s failure to correct Andrew during the secretly recorded conversations also supported this claim. Andrew’s changing expectations weren’t deemed fatal to the idea that there was ‘sufficient clarity’. This was aided by the facts of the case, in that the expectation ran for a 33 years and that having full control of the farm and 50% ownership of it weren’t mutually exclusive
- It was clear that Andrew had relied upon the assurances given
- Detriment was shown by Andrew having continued employment at a below-market wage, working particularly hard for the farm and not having taken opportunities elsewhere. His new (comparatively junior) role as a salaried herdsman earning £33,000 p/a was taken to show that he had spent ‘the best years of his life’ working for the farm, rather than a lack of skill.
As a remedy, Andrew was awarded a lump sum payment composed of 50% after tax of the market value of the farming business, and 40% after tax of the market value of Tump Farm. It was acknowledged that this would almost inevitably lead to Tump Farm being sold, which would make proper inheritance tax planning impossible. However a clean break was required due to the breakdown in relations.
The Appeal
David and his wife appealed both the decision and the remedy. Permission to appeal the decision was refused, meaning the remaining grounds were:
- The remedy should be based on what David and his wife would have intended to do, and not on Andrew’s subjective expectation, to avoid an unconscionable result
- The relief went beyond the minimum necessary to avoid an unconscionable result, and should instead be an amount representing:
- The enhanced value of the farming business resulting from Andrew’s work over and above what was required by his employment
- The loss of Andrew’s opportunity to save for a house
- Any other sum the court judges necessary to avoid an unconscionable result.
- Andrew’s equity was ‘anticipatory’ in that he expected to receive something on David’s death. David was still living and could never be said to have anticipated this. A better remedy would therefore be, for example, a charge over the property to be realised on David’s death.
The Appeal Outcome
The appeal was refused on all grounds.
- This was rejected in that the remedy should avoid an unconscionable outcome objectively, not from the perspective of David; doing so would skew matters
- It was acknowledged that in other cases the courts had used differing methods regarding remedy. The court’s view was that it has a very broad and flexible discretion; slight differences in approach (i.e. using a two-stage test or three-stage test) were all intended to have the same result. The methodology used by the lower court was appropriate and in some respects more straightforward than suggested by the appellant
- The court reiterated that remedy shouldn’t be skewed by David’s perspective. Irrespective, the court stated that a clean break was an available remedy and necessary following the breakdown in relations. If decisive weight was given to the wish to not sell the farm, then a clean break would barely ever be possible. It was noted that Andrew expected to take over management once his father retired, not merely upon his death.
How We Can Help You
Nockolds has succeeded in resolving many disputes regarding proprietary estoppel arguments and disputes over Wills and inheritance, and currently have a number of ongoing instructions regarding such claims. Please contact Daniel Winter should you require further information or assistance.