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Case law: Court clarifies how it will deal with claims to inherit property based on promises by the owner

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  • Publish date: 01 May 2018
  • Archived on: 08 May 2019

People claiming an interest in land because the owner has promised them that land, and they have relied on that promise to their detriment, will welcome guidance on how the court will assess and value such claims.

May 2018

This update was published in Legal Alert - May 2018

Legal Alert is a monthly checklist from Atom Content Marketing highlighting new and pending laws, regulations, codes of practice and rulings that could have an impact on your business.

A mother and father ran a farm in partnership. Their youngest daughter worked at the farm. In 2008 the mother and father offered to take her into the partnership, with her husband joining two years later. The daughter rejected this as it only gave her a third interest and she was worried that her siblings, none of whom she got on with (there was a background of disputes and legal proceedings between family members generally), exercised too much influence over her parents, and gave her husband no immediate interest.

As a result of one of her fallings out with her sister she left the farm in 2103. The sister took the farm over. However, the father died in 2014 and the farm stopped operating as a dairy farm in 2015.

When the father died the youngest daughter claimed she was entitled to the farm, which was worth £2.55m, because the legal principle of proprietary estoppel applied. Proprietary estoppel stops someone from backing out of a promise to do something (such as leave someone land, or an interest in it) if:

  • They made a representation or gave an assurance to a person that they will do so (which can be oral – although this may cause problems when it comes to proving what was said).
  • That person has reasonably relied on it.
  • That person has suffered a ‘detriment’ – which need not be financial, but must be substantial - as a result.

and it is unconscionable, in the circumstances, for the person making the representation to renege on it. If it applies, a court can order the person making the representation to deliver on it, or to compensate the other person for failing to do so.

The daughter said the principle applied because she had worked long hours on the farm from the age of 16 for little pay, in reliance on a representation or assurance by her father that she would eventually take the farm over if she did. In reliance on his assurances, she had not pursued any other career option or lifestyle.

The mother, who still lived at the farm, said that neither she nor the father had ever promised the farm to the daughter. Even if the father had done so, promissory estoppel did not apply in this case because:

  • The daughter had exaggerated her contribution to the farm.
  • The daughter had already been partially rewarded for her work because she had enjoyed various benefits, such as free accommodation at the farm.
  • It would be disproportionate for the youngest daughter to get the whole farm. She suggested her daughter should receive a small cash payment instead.

The daughter was able to produce a letter from a surveyor to her mother and father which referred to a plan for the farm to operate as a limited partnership run by her, with some property going to her brother and sisters. The court therefore found that the father and mother had made the assurances the youngest daughter was claiming, but they did not necessarily apply to the whole farm. There had, however, been a 'coherent promise' that she would inherit 'a viable dairy farm'.

It also ruled that she had suffered a detriment in reliance on those assurances, working long hours, with few holidays, for more than 30 years on lower pay than she could ordinarily have expected. Proprietary estoppel did apply.

The court had to decide whether to award her the difference between what she would have been paid over the 30 plus years she worked on the farm, had she received market rate wages, or the value of a viable dairy farm. The first was worth around £220k, and the latter a lot more.

It ruled that, because the assurances given to her had been so clear, the detriment had been so significant and had lasted for so long, her compensation should be based on the value of the farm.

However, the court ruled that, because she had rejected the reasonable proposal to bring her into the partnership in 2008, the daughter was entitled to only 45% of the farm. As the court did not want to split the farm up it ordered that the mother pay the daughter the cash equivalent of her share, which was £1.17m.

Operative date

  • Now

Recommendation

  • Landowners such as farmers should take care not to make representations to a family member (or anyone else) that they will inherit that land, or may find the land passes to that person because the person relied upon the landowner’s representation to their detriment.

Case ref: Habberfield v Habberfield [2018] EWHC 317 Ch

Disclaimer: This article from Atom Content Marketing is for general guidance only, for businesses in the United Kingdom governed by the laws of England. Atom Content Marketing, expert contributors and ICAEW (as distributor) disclaim all liability for any errors or omissions.

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