26th June 2019
A recent case in the Court of Appeal is a stark warning to family businesses to ensure that when significant assets are involved (not just personal ones like property, but also commercial ones) it’s crucial to formulate a succession plan for the business. Richard Harris, a solicitor with Myers & Co who specialises in probate disputes, commented “these cases show how complex, upsetting and expensive probate litigation can become”.
Sue Hall, Director & Head of Wills and Probate, added “We would advise anyone who is in this situation to draw up a will and to regularly update it if there are significant life events, such as a divorce or a death in the family. We also encourage parties to consider and implement a succession structure to ensure that cases such as this one do not end up tearing a family and all its hard-earned assets apart.”
Usually, wills are contested using the Inheritance (Provision for Family and Dependants) Act 1975. But there is an alternative remedy which is becoming more commonly used, particularly in cases involving farms, where (typically) a younger member of a farming family works long hours for little reward relying on a promised interest from an older relative. This is the doctrine of promissory estoppel.
In one farming case, Uglow-v-Uglow, a will was made by Mr Percy John Uglow, a childless bachelor known in the family as “Uncle Percy”. The Uglows are an old Cornish farming family, working several farms close to one another in the Launceston area. The family became deeply divided by a ruinous inheritance dispute about one of the farms. The litigation stemmed from an oral assurance of inheritance given nearly 30 years before in 1976 by Uncle Percy to his nephew Richard and from a later will, which failed to give effect to it.
Uncle Percy died on 5 July 2001 at the age of 86. Uncle Percy’s great-nephew, Peter, was left Treludick, a freehold farm consisting of about 235 acres of agricultural land, an Elizabethan farmhouse and some cottages and buildings. It was valued for probate at £775,000. The will also provided that Uncle Percy’s unmarried younger sister, Marion, should be permitted to continue to occupy, for as long as she wished, the Treludick farmhouse, in which she and Uncle Percy lived for many years.
The gift of Treludick to Peter was challenged by Richard Uglow, a nephew of Uncle Percy. Under the will Richard was not left Treludick, contrary to what Uncle Percy had assured him in 1976. Instead, he received only a quarter share of the residuary estate and a legacy of £1,000. Richard contended that he was entitled to more generous treatment by Uncle Percy on account of his oral assurance.
Richard’s expectation of inheriting his uncle’s farm was held by the Court of Appeal to have been satisfied by his uncle’s grant to him of a protected tenancy of it, under which Richard had paid no rent during his uncle’s lifetime. Hence Richard had received something in exchange for the detriment upon which his claim had been based. The Court referred to Robert Frost’s poem “The Road Not Taken”, as showing how different life choices make all the difference. The Court also observed that “the just man observes standards of decency and honour and shuns shabby conduct in his dealings with others.”
In the more recent case of Habberfield -v- Habberfield the Court of Appeal pointed out that there is another line by Frost in “Stopping by Woods on a Snowy Evening“;
“The woods are lovely, dark and deep,
But I have promises to keep.”
Underpinning the whole doctrine of proprietary estoppel is the idea that promises should be kept.
In 2018 the High Court heard the case of Habberfield -v- Habberfield in which Lucy, (the youngest daughter of a Yeovil farmer) brought a claim against her mother Jane, claiming that she had been promised the farm after her father died. The Court granted Lucy a substantial cash payment in lieu of her rightful share of Woodrow Farm, reliant on the doctrine.
The 220-acre Woodrow Farm belonged to Frank Habberfield and his wife Jane, who had bought it in stages between 1961 and 1989. It was operated by them as a partnership, and they held the property as beneficial joint tenants until Frank’s death at the age of 74 in April 2014, when the title passed automatically by survivorship to Jane. He had left a will giving her his entire estate, cutting out their 4 children.
The couple had a son and three daughters. The youngest, Lucy, had worked on the farm since her childhood, and her partner also worked there. Lucy began working on the farm when she left school in the early 1980s, earning just £40-50 per week. She worked up to 87 and a half hours and seven days a week, getting up at 4.30am, and had just five weeks’ holiday in more than three decades.
Unfortunately all was not well with the family, and for several years there had been arguments and even litigation among the family about what benefits they ought to be receiving from the business for their work. Lucy and her partner left the farm in 2013, after a fight with one of her sisters in the milking parlour.
Lucy claimed that her late father had assured her that she would take the farm over when he retired. Her mother denied this, and said that all she was entitled to was a modest inheritance. Lucy therefore brought an action in proprietary estoppel claiming the whole farm, as well as under the 1975 Act claiming that the will her father had left made inadequate provision for her.
The judge placed particular weight on a 2008 letter from a surveyor employed by Frank and Jane Habberfield, which recorded a proposal to be put to Lucy for a new limited partnership to run the business, that Lucy should end up being the owner of the overall farm after her parents’ deaths, and that some of the property was to go to her brother and sisters.
After a 5 day trial the Court concluded that Lucy had proved her claim, though only to the extent that she was entitled to 45% of the farm rather than all of it. The Judge was reluctant to split the farm property up, partly for business reasons, but also because Jane would then need to leave her home. He ordered Jane to pay Lucy the cash equivalent of her interest in the farm, plus the costs. The judgment meant that Jane would have to sell the farm; both sides appealed to the Court of Appeal in 2019.
Before the Court of Appeal, Jane (now 82) said that Lucy, her estranged daughter, would get far too much of the family wealth, and that she wanted her share reduced to be fair to her other 3 children. Lucy, 51, said that she had not had control of the farm (as she had been promised) for a decade or thereabouts. She wanted to begin farming on her own account before it was too late. Without access to the cash award she would not be able to do so.
The Court of Appeal tried to justice to both sides; the Court said that, on the face of it, it seemed hard that an 82-year-old woman should have to leave the house which has been her home for over 40 years. Lucy had acknowledged that her claim was not such as would require her mother to leave the farmhouse. But that expectation was predicated on the continuation of a harmonious family relationship; not on the aftermath of ruinously expensive litigation, in which her claim was denied.
The Court of Appeal dismissed both appeals.
For more information about probate, wills and trusts contact Sue Hall in the wills and probate team on 01782 525001 or email susan.hall@myerssolicitors.co.uk. For advice about contested wills, claims of proprietary estoppel and the Inheritance (Provision for Family and Dependants) Act 1975, contact Richard Harris on 01782 525019 or email richard.harris@myerssolicitors.co.uk.
