Farms and Estates Newsletter - Autumn 2019

A welcome from the editor...

I was just about to note that we do not mention the B word once in this newsletter but see that I started the Autumn 2018 introduction in exactly the same way so will not repeat myself! In any case, I am pleased to introduce our Autumn Farms and Estates Newsletter 2019 and hope that you find it interesting. Two of the articles are on similar themes of “proprietary estoppel” where, essentially, someone is put on the back foot because they rely on someone else doing (or not doing) something. In the detailed cases, a farm was lost and a right to build a wall was also foregone, causing difficulty and dispute. Estoppel is a difficult claim to argue but relevant in many agricultural situations and the 2 articles really demonstrate the need to document agreements properly. The third article “Subject to Contract” is on a very similar theme. After years of disruption and arguments a deal was struck in outline. When further refinement and tweaking was requested by one party, a court ruled that the terms were set in stone and could not be amended without all parties' agreement. This despite no formal “deed” recording the details.  Beware what you agree after a late night of negotiation! Finally we have a summary of what TUPE means and why it might affect you when selling your land and business. Employees can be anyone from a shepherd to an estate manager and they have rights which need to be accounted for when a business is sold.

 

As always, the Farms and Estates Team here at Freeths would be happy to assist with any queries you may have.

 

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The Importance of Being Earnest

Proprietary Estoppal is an equitable remedy, historically introduced to remedy cases where a claimant has been treated unfairly. If the facts of the case do not meet the core values of proprietary estoppel then it may prove difficult to rely upon the remedy.

Case: Perzaro and another v Bourne and another [2019]

 

Case

P owned two properties which were subject to a right of way over A's property. This right of way was listed on the titles of all three properties.  A had never used the right of way and it was blocked by fencing. A orally agreed to the removal of the right of way when P requested permission to build over it. A then sold the property to B. P had not attempted to remove the right of way from the titles until after the sale, and after planning permission had been obtained.

B refused to give permission for P to build over the right of way. B argued that he had the benefit of a legal easement over the right of way. P argued that his property was in actual occupation over the right of way and that the benefit of the right of way had been extinguished on the grounds of proprietary estoppel.

 

Decision

The Court found in B's favour. The estoppel, although enforceable by A would not be enforceable by B. The right of way had not been removed from the register and any estoppel created by the agreement was not binding on the new owner of the dominant land. It was pointed out that had P applied to register the agreement with A at the Land Registry, then any potential buyer would have been made aware of the agreement when conducting searches. The court rejected that P was in actual occupation of the right of way and held that the right of way was simply obstructed.

 

Comment

This case is a reminder of when it is appropriate to use proprietary estoppel. In this case, P was not treated unfairly as he had had every opportunity to legitimise A's promise by registering it with the Land Registry.

The decision of when proprietary estoppel is an appropriate remedy to use has been laid out in Thorner v Major [2009] as:

• There has been reasonable belief that a promise or assurance was made.

• The promise or assurance had to be relied upon by the claimant.

• Relying on the promise caused the claimant to suffer detriment.

• The claimant has been unconscionably treated.

 

Furthermore, this case is a good reminder of the purpose of the official title register. The register should show every interest which affects the land. Had P removed the right of way from the register, then B would have seen it when conducting searches for the property prior to its purchase. The decision in this case maintains that the purpose of the title register is to show every interest pertinent to the land and that you can rely on this.

If you have any questions please contact: Anna Moore Legal Assistant 01865 781 086 [email protected]

 

Promises Promises

Contentious farming cases continue to hit the headlines. Children are increasingly seeking the family farm through the courts on the basis that it has been promised to them.  Last year represented a particularly bumper crop, with seven such farming cases making it to the High Court.

All cases have been based on proprietary estoppel - where, in order to succeed, the claimant has to establish that (a) the farm has been promised to them, (b) that they have relied on that promise and (c) that that was to their detriment.  If that estoppel is established, a court must then do the minimum necessary to satisfy that equity.  That may match expectation, it may not. 

Such cases are difficult to win, however, with only three of those seven claimants managing to satisfy those requirements, with one of those cases still subject to an appeal.

 

Five of those seven cases are outlined below:

 

James v James [2018] EWHC 43 (Ch) - unsuccessful claimant

Sam James had worked with his father for almost 35 years on the family farm.  He had entered into partnership with his parents, but that partnership had dissolved in 2009 after his father had given some land to a daughter. Sam brought a proprietary estoppel claim, but that claim was dismissed.  Nothing had been said to Sam to amount to a promise to him and that, whilst there had been a “statement of current intentions as to future conduct”, that was different to a “promise of that conduct”.  Furthermore, and because Sam had been properly paid for his work, he could not establish that he had suffered any detriment.

 

Habberfield v Habberfield [2018] EWHC 317 (Ch) - successful claimant

Lucy Habberfield worked on the family farm for almost 30 years.  When her father died in 2014, she brought a claim alleging that she was entitled to the farm (worth approximately £2.5M) as a result of proprietary estoppel.  She said that both her parents had assured her that she would eventually take over the farm and that as a result, she had devoted her working life to it, working hard for low wages and taking almost no holidays. This claim succeeded with the judge finding that (a) representations had been made to the effect that Lucy would inherit the farm and (b) she had suffered detriment as she had worked long hours for little pay.  The judge then decided to satisfy that equity by awarding Lucy a lump sum of approximately 45% of the value of the farm (quantified at over £1M), which would mean that the farm would have to be sold.  The mother's appeal was dismissed, as was the claimant's claim for a greater share of the farm.

 

Thompson v Thompson [2018] EWHC 1338 (Ch) - successful claimant

Gilbert Thompson was the deceased's youngest child and only son who lived and worked on the family farm for 35 years, being paid £70 per week.  He had also become a partner with his parents, but following his father's death, he had fallen out with his mother. Gilbert's proprietary estoppel claim succeeded.  The judge accepted that Gilbert had been promised the farm and that he'd suffered detriment by dedicating his whole life to the farm, working long hours with little pay.  Whilst the question of how that equity should be satisfied was not then decided, the judge indicated that he was minded to grant Gilbert's mother an interest in the farm for the rest of her life, but that it would then pass to Gilbert on death.

 

Shaw v Shaw [2018] EWHC 3196 (Ch) - unsuccessful claimant

Clive Shaw had worked on his parents' farm from a very young age and claimed that he had not pursued any other career opportunities based on a promise that he would inherit the £1M farm when they both had passed away.  He then found out, however, that he had been written out of his parents' wills which did not provide for him at all.  Instead, the farm was left to his sister, who together with her parents claimed that Clive “hated the cows” on the farm and that he was incapable of managing the business. In the court case which then ensued, the judge held that prior statements by his parents about the provision made in their wills were insufficient to give rise to an estoppel.  Furthermore, it was found that Clive had not been motivated solely by his parents' assurances or had suffered any real detriment.  His claim therefore failed.

 

Gee v Gee [2018] EWHC 1393 (Ch) - successful claimant but appeal still pending

John Michael Gee had also worked on the family farm for over 30 years before he and his father fell out.  This resulted in John's father transferring his majority shares in the farming business and interest in the farm to one of his other children, Robert. John brought a proprietary estoppel claim against his father and Robert, arguing that he had always been promised that he would inherit the lion's share of the farming business and of the farm.  This claim succeeded, with the judge holding that for a period of over 20 years, John's father had made it clear that John would succeed his father as farmer.  John had relied on that promise to his detriment by working on the farm for long hours with low pay.  In order to satisfy the equity, there should be a series of transfers as a result of which John would end up with 52% of the shareholding in the company and 46% of the freehold reversion.

 

Comment

This recent flurry of proprietary estoppel cases would suggest that they continue to be fertile ground for litigation.  Much of that will be because of the emotive context in which such claims are made with family members often having diametrically opposed views on what is fair and reasonable, particularly where (as in all the above cases) one family member has worked on the farm for many years whereas others have not.  The outcome of these types of cases is also often very unpredictable which makes it difficult for lawyers to provide firm advice on prospects, particularly in relation to how an equity may be satisfied even if established.   Unless and until we have the utopia of families never having cause for complaint about succession issues, it would appear that proprietary estoppel claims particularly involving farms will be here to stay.

If you have any questions please contact: Sarah Foster Managing Partner - Oxford 01865 781 055[email protected]

 

Subject to Contract!

Rather alarmingly, in the recent case of Abberley v Abberley the judge controversially held that signed heads of terms were a binding contract.  This was because all terms agreed at a mediation were incorporated in the Heads of Terms which complied with statutory requirements for a binding contract, i.e. they were recorded in writing and incorporated all the terms which the parties agreed in one document. The case involved a farm break up concerning parents, 2 siblings and the division of a farm, land and assets. An agreement was reached after mediation and heads of terms were prepared referring to land coloured brown on a plan. Not plan was attached. A later attendance note was prepared which included references to transfers, a tenancy and cross indemnities. A year and a half later solicitors were instructed as the heads of terms were then in dispute.

To explain the reasoning “the judge held that the essentials of each of the heads of term were set out in the signed document with sufficient certainty to be capable of amounting to a binding agreement. The facts that attempts were made to agree further details and did not detract from the uncertainty. Whilst minor points were raised the next morning, the contemporary email correspondence strongly suggests that these points were afterthoughts. It was clear that the heads of terms contemplated further documentation such as transfer and a FBT, but on the face of if did not contemplate further formal agreement. ”Drawing on the case of Von Hatzfield-Wildenburg v Alexander [1912] 1 Ch 284, where it held that mere fact that a more formal document is envisaged does not of itself preclude the existence of a binding agreement.

An extract from the Judgment: “Given that the whole point of the mediation was to resolve the long running family dispute, and given that a written agreement was signed on behalf of the parties, as required by the mediation agreement for there to be a binding resolution, then if the heads of terms are sufficiently certain it is difficult to see how it can be said that the parties did not intend to enter into a legal relationship.

In my judgment it is likely in these circumstances that they did... It is clear that the parties understood which land was to be transferred, notwithstanding the lack of a coloured plan at the point when the heads of terms were signed... The fact that no uncertainty was voiced at the time of signing the heads of terms, or indeed in the months that followed, support this conclusion... Whilst it remained sensible to attempt to agree the details of the overage provision, the essentials were sufficiently set out in the heads of terms. ”The court will not save a bad bargain nor will it include “afterthoughts” into a binding agreement. This case simply stresses the need to get your ducks in a row, think about what you are agreeing and then make sure that it is clearly documented to everyone's satisfaction. Otherwise it might just be too late!

 

If you have any questions please contact the Real Estate team.

 

 

TUPE or not TUPE

If you ever sell or lease all (or some) of your agricultural land, you'll be asked by your lawyer 'do you have employees?' followed by 'have you ever heard of TUPE?'.  Having read this article, hopefully you will be able to say 'yes, and I understand'!

TUPE stands for The Transfer of Undertakings (Protection of Employment) Regulations.  The clue is in the wording:  when a business (undertaking) or part of a business transfers to a new 'undertaking' the employees who work in that business (or part of it) are 'protected' when they transfer - the default position is that there should be no change to their t&cs. Easy?  Not quite, because TUPE sets out significant procedural steps the seller has to take to avoid large pay-outs to employees. 

And there can be lots of disputes - what if the purchaser does not want these employees?  Or employees don't want to transfer?  Or there is a dispute about whether they are employed in the transferring part of the business?  Or the purchaser wants to maintain strict secrecy before the sale, and does not want you to inform employees of the transfer?  If you get some of these issues wrong, you could end up paying significant compensation.

 

The 'admin' side

There are a number of administrative tasks leading up to the business transfer:

1. Depending on the number of employees you may have to go through an 'election' process to elect staff representatives; usually you should have reps in place a month before sale.  You may need more than one rep if there are different parts of the business transferring.  Note that all staff potentially affected - even if they are to remain in your business - can take part in the election.
2. Information: you must keep reps informed of the sale of the business, the likely date of their transfer, the identity of their new employer, what the implications of the transfer are for staff.
3. Consultation:  You may be required to consult with reps if the new employer is considering taking 'measures' relating to the staff.  This may mean redundancies, changes to employment practices, change of machinery.  These steps can only be taken in limited circumstances.  'Consultation' is often difficult as employees are naturally concerned, and may require significant time/resources to deal.
4. Information to purchaser:  You must provide 'Employer Liability Information' to the purchaser at least 28 days before sale.  As well as details of employment t&cs, you have to provide details of disciplinaries, grievances, and outstanding claims by transferring employees.

 

What if the purchaser doesn't want my employees?

Particularly with agricultural land, the purchaser/lessee may have different methods of working - for example they may have significant other agricultural land and may operate by resourcing employees and machinery to work at different locations when required.  Often a purchaser will insist on redundancies prior to the transfer.  And in the sale/lease documentation they may insist that you take on all legal liabilities if employees sue as a consequence.  You will need careful advice on all of these issues to minimise your potential liability - including your negotiations with the purchaser, and what you say to your staff.

 

What if purchaser wants to change transferring employees' t&cs?

There are only limited grounds on which this can be done - 'Economic, Technical or Organisational' (ETO) reasons.  Essentially, the purchaser must be proposing redundancies along with other changes, and these can only be for ETO reasons.  Purchaser may insist these changes are made before the transfer.  Again, real care is needed in the sale negotiations and in the consultation process with staff to ensure you minimise your liability.

 

What if an employee doesn't want to transfer?

You may find employees “objecting” to their transfer.  Employees are legally entitled to do so - and if they do object the legal consequence is that their employment would terminate on the date of the transfer, and they would not be entitled to any notice or redundancy pay.  So it's best to be careful if employees start 'objecting', let them know the consequences, and ask employees to put it in writing if they still intend objecting.  Saying this early on may avoid legal disputes later.

 

Secrecy

It's not uncommon for purchasers to insist on strict secrecy, including not informing staff.  Occasionally there may be a good reason for this, but TUPE requires staff to be properly informed and consulted, with significant penalties if you don't.  Again, this will require careful handling in your negotiations with the purchaser.

 

Other disputes

A problem can occur if you have employees working in different parts of the business, part of which is transferring and some of which is not.  One common example is an agricultural farm worker who works half their time on land being transferred and half on land not transferring.  Should they transfer, or not?  What is a simple question can produce a complicated legal dispute if not handled properly. These are just some of the issues involved; I hope you can now say you 'understand' a little about TUPE and you appreciate its complexity and the need to 'get it right' to protect the sale and your legal liability thereafter.