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Proprietary estoppel: how verbal promises made in life can impact decisions made after death

Dec 4, 2018

The outcome in a recent case brings with it an important reminder, particularly to those in the farming industry, that succession planning and clear conversations with your family can prevent claims against the estate in the future.  Kevin Horn, Private Client Partner, reviews the case here and advises as to the steps that should be taken when estate and succession planning. 

Habberfield v Habberfield – the facts

Mr and Mrs Habberfield owned their farm, which was predominantly dairy farming and worth approximately £2.5million in 2017.  They owned it as joint tenants, meaning that on his death, Mr Habberfield’s share of the farm would pass automatically to his wife.  In his Will, the rest of the estate was also left to his wife.

Lucy, their youngest daughter, had worked on the farm since 1983 when she left school at the age of 16.  She was heavily involved in the running of the dairy farming, more so than her siblings.  After her marriage, her husband also worked on the farm and during this time there were many examples of assurance from Mr Habberfield that she would inherit the farm in the future.  With this in mind, Lucy worked long hours with little pay and few holidays. 

Following her husband’s death in 2014, Mrs Habberfield became the sole owner of the farm.  Lucy subsequently brought a claim of proprietary estoppel in the High Court which she won.  There are three factors that the Court will consider in a claim of proprietary estoppel:

  • Assurance – Mr Habberfield’s assurances during his lifetime referred to Lucy owning a part of the farm and not simply running a part of it.  This was demonstrated not just in casual comments, but through Lucy’s management of the dairy farm staff and in conversations with a surveyor in 2008.  After this meeting an offer was made to Lucy and her husband in relation to her being the eventual owner of the farm. 
  • Reliance – Lucy had then relied on this assurance, as demonstrated by the fact she remained at the farm for 30 years instead of seeking a livelihood elsewhere.
  • Detriment – Lucy resolved herself to working long hours with little remuneration as inheriting the farm would be her reward.

With all three factors met, Lucy was awarded a cash sum equivalent to the value of the farmland and farm buildings; a figure of £1,170,000. 

Succession planning

“One of the key facts of this case which led to the final decision was highlighting the difference between stating current intentions for the future and promises which are intended to be relied on for the future,” explains Kevin.  “When making plans for the succession of a family business, any intentions of the parents should be discussed openly and honestly with the children while they can, preferably at the time of making a Will, so that any disputes can be resolved before a parent dies, and children are not made to rely on potentially empty promises when making their life choices.  Any decisions of this sort will naturally have inheritance tax implications, and so seeking legal advice will not only ensure your family is understanding the options suitable for you but you are also aware of the impact of any decisions you make.”

For advice on contesting a Will, you can contact Kevin or the Private Client team on 01329 222075 or email privateclientenquiry@warnergoodman.co.uk.  

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.