Many farmers understandably wish to keep their businesses in the family after they are gone but, without professional inheritance planning, that can be very difficult to achieve. The point was powerfully made by a Court of Appeal ruling which, whilst seeking to resolve a bitter feud between a couple and their own son, would almost inevitably force the sale of a farm which had been in the same family for three generations.
The case concerned a thriving dairy farm which was run in partnership by a married couple. After leaving school, their oldest son worked on the farm for over 30 years, receiving basic agricultural wages for much of that period, and lived with his wife in a cottage in close proximity to his parents’ farmhouse.
The traditional father and more forward-thinking son differed in their approach to farming and, after relations between them soured, the son was offered a farming business tenancy (FBT). He turned down that offer on grounds that it was unaffordable and moved away from the farm with his wife, taking a new job as a herdsman. His father subsequently changed his will, disinheriting him.
After the son launched proceedings, a judge upheld his claim to a beneficial interest in the farm. Following a six-day trial, his parents were ordered to make him a lump sum payment equal to 50 per cent of the market value of the farming business and 40 per cent of the market value of the land and buildings. There was no doubt that satisfying that order would almost certainly require the farm’s sale. It had been professionally valued at around £3.35 million.
The judge found that, prior to their falling out, the father had consistently reassured the son with words to the effect that the farm would one day be his. In working hard on the farm for many years, taking on duties well beyond those to be expected of someone on basic agricultural wages, the son had relied on his father’s word to his detriment. The judge ruled that to cut him out of the inheritance that had effectively been promised to him would be unconscionable.
In challenging the judge’s ruling, the parents submitted that he had gone too far in taking a course that rendered the farm’s sale almost inevitable. They argued that their son’s compensation should be limited to a sum reflecting his loss of opportunity to work elsewhere or the extent to which the farm’s value had been increased by his contribution to its management.
In dismissing the appeal, however, the Court found that neither of those options gave just effect to the son’s entitlement to inherit a sufficient interest in the farm to enable him to make his own way as a farmer. Granting him an FBT at a discounted rent would also be insufficient in that he would hardly have been likely to dedicate his life to working on the farm on the strength of a mere promise that he would one day become a tenant farmer. There was nothing wrong in principle with the clean break solution that the judge had devised.