Avoiding pitfalls of family disputes

Orlando Bridgeman suggests how farming families can avoid disputes.

There has been a steady flow of divided farming families taking each other to court over the past few years, usually following someone’s death. Such behaviour has doubtless been motivated by the sharp increase in the price of farmland over this century. The Wild family, dairy farmers in Derbyshire, are the latest farming family to fight out their differences in court and it is instructive to examine the case to draw lessons for other families.

Ben and Jean Wild farmed in partnership with their two sons Malcolm and Gregory, though there was no written partnership agreement. Following Ben’s death in 2003, Jean and her sons continued the business. However, relations between the sons deteriorated over the years to the extent that Malcolm was actually convicted of assaulting Gregory.

After they came to blows, Malcolm and Gregory dissolved the partnership and the question arose: who owned the land, which was worth £1.4 million? Was it the partnership (in which case the sons would all have a share in the land), or only Jean as the heir of Ben?

Historic accounts showed an entry of ‘property’ on the balance sheet, suggesting the partnership owned the land. However, it was Ben’s intentions in the 1970s that mattered – did he intend to transfer the land to the partnership (in which the 16 year old Malcolm was a partner)? The judge pointed out that accountants sometimes put land on the partnership balance sheet for tax reasons, without giving heed to the family’s wishes or intentions. The accounts are merely evidence and can be disregarded if they do not reflect everyone’s intentions.

After many people had given evidence in court, the judge concluded that the land belonged to Jean, not the partnership.

In my work as a solicitor advising farmers, I frequently find that they and, surprisingly, their professional advisors are unsure as to the ownership of land. Often, the issue has not mattered for decades. However, it is in the event of a dispute, or when administering a deceased farmer’s estate where children (or family members) have different needs and conflicting interests in the farm, that the question can surface with painful effects.

Clarifying ownership can also be important for tax reasons, especially if the land might have development value.

Preparing a written partnership agreement will ‘flush out’ the true position and forestall any dispute. A partnership agreement would also state what is to happen in the event of the death, retirement or expulsion of a partner, providing certainty to all.

The Wilds could have been helped by dispute resolution provisions in an agreement, which would have encouraged mediation or arbitration instead of litigation, thereby saving legal costs and preventing the family’s disagreements from being aired in public.

Where members of a family farming partnership are unwilling to enter into a written partnership agreement, it is all the more important for family members to have professionally drafted wills which they review regularly. Taking professional advice early will often avoid distress and expense later on.

Contact Orlando Bridgeman at our Malton office on 01653 600070 for more information and advice.