“Unfulfilled inheritance promises can end up in court and can be very costly,” says Charles de Winton, Surveyor, CLA Cymru. A Supreme Court appeal decision revealed last week has highlighted the issue as a farmer’s son has been awarded compensation after he was cut out of his parents’ wills.
“It’s much more common than you think and we’re advising some members on this issue at the moment.” Charles adds, “This is not just all about a change of mind, a misunderstanding or even a generational fall-out - we know that circumstances can change at any time – so from this case questions may arise about how a range of succession issues could be avoided or resolved. And new cases might arise as the new farming support schemes in England and Wales might change the outlook for farm businesses for the foreseeable future.”
The Supreme Court case is in an area of law called Proprietary Estoppel. This concerns where property owners give assurances of inheritance – or an interest in it. The recipient of the assurance relies on it to his/her disadvantage - following which the property owner rescinds on the assurance – or simply dies – without fulfilling the commitment.
In the case which was resolved last week the defendant landowners owned a farm in Monmouthshire: the eldest son left school to work on the farm for 32 years on relatively low wages. His parents made wills making-good their assurances and he became a partner in the farm business – living with his family in a small farm cottage. However in 2014 son and parents fell-out: they cut their son out of their wills, dissolved the farm business and evicted him
“The burden of provision of evidence is with the claimant,” Charles explains. “There’s no formal contract to rely on here, so more subtle legal tests are required. A claimant has to demonstrate that a clear assurance has been made that they will acquire a right over a property. Secondly the claimant will have to demonstrate that they have acted in reliance of this assurance – and that they have made life-choices which have been to their detriment. A typical example might be foregoing investment into a pension-plan. Finally that it would be unconscionable for the defendant to go back on the assurance. So the legal test is: assurance, reliance, detriment and unconscionability.”
“Where things become more complicated, the 4-part test still holds true. For example, if the same promise was made to more than one party a judge is likely to advise all parties to come to an agreement by a deadline – or the property will be sold and divided as the judge might say: as I direct.” This would be a last resort as a highly costly solution, and unlikely to suit all parties.” In last week’s Supreme Court case, the judge ordered the farm to be sold and the proceeds divided.”
“Change of the property owner’s family inheritance circumstances will be tackled by the unconcionability part of the formula. So if eligible heirs emerge at a later date, it is not unreasonable for a landowner to change his/her will.”
“It’s more common than you think,” Charles repeats, “And landowners (or heirs) should take advice as early as possible to prevent a costly and unwelcome outcome. Wills should certainly be updated and interested parties should be informed. In November we are running two events on succession in North and South Wales respectively. This is only one issue which might come up on the subject, but the events provide a great opportunity to learn and pose questions. Landowners can bring their heirs for free!”