Farming News - Law firms stress importance of succession planning after landmark court case ruling
Law firms stress importance of succession planning after landmark court case ruling
The Habberfield farming dispute case, which was in the Court of Appeal last week ended with the Court upholding the original decision.
Rachael Williams, solicitor at Irwin Mitchell comments on the case.
"There has been a huge increase in litigation surrounding family farming businesses in recent years and last week, it was confirmed by the Court of Appeal that a broken promise to a child means an 82-year-old mother is going to be forced to sell her home of 40 years.
The case in question arose in relation to Woodrow Farm, a farming business that had been run by Frank and Jane Habberfield for around 40 years. Frank died in 2014 and left his entire estate to his wife. The property was jointly owned and would have passed to Jane regardless.
The farming business ended when Frank died and the youngest child, Lucy, brought a claim on the basis that she had been promised the farm by her parents. It was her position that she was to receive the farm once her parents retired in return for working 7 days a week for 30 years, in return for low wages. Her mother denied that there had been any promise of this nature.
The High Court accepted Lucy’s position in February 2018 and awarded her £1.17 million. In order to raise enough capital to pay this sum, Jane would have to sell her home. She therefore appealed the judgment on the basis it was unfair and that Lucy had turned down an offer made by her parents in 2008. The Court of Appeal rejected the arguments advanced and upheld the original order.
This result shows that in cases like this, where someone has relied on a promise and invested so much time into a business for little financial gain, the courts are not prepared to allow that promise to be broken, even by death.”
Elizabeth Armstrong, a director and solicitor in the Private Client Department and Head of the Tax and Trust Department at Latimer Hinks, said: “It is essential that all business families, particularly those involved in farming make it clear exactly what their businesses own, who owns which properties, and who will eventually inherit which assets when the senior members of the family pass away.
“This case has also shown that if promises are made regarding ownership, they should be clearly thought through, written down and agreed by all those involved. In this instance, an 82-year old will lose the home she has occupied for approximately half her life based on the fact that things she and her late husband had said, alongside their daughter’s reliance on those things have resulted in assets passing to the daughter when perhaps that wasn’t the parent’s intention.
“Much of the lengthy and costly dispute which involved court proceedings and an appeal could have been avoided had the family put in place a properly thought out succession plan.”