Parental promises and proprietary estoppel
Ideally, families should be tight-knit, happy groups who are nice to each other and treat each other fairly. Unfortunately, this is not always the case and when families do fall out, sometimes the results can be spectacular.
The case of Davies & Another v Davies  is one example of what can go wrong: Eirian Davies and her two sisters grew up on their parents’ dairy farm in Carmarthenshire. Both of Eirian’s sisters moved away to pursue their own careers and although Eirian also moved away herself, she soon came back after her ageing parents Tegwyn and Mary asked her to help them on the farm. In return for many years’ salary free assistance, Eirian was promised by her parents that she would inherit the farming business to the exclusion of her sisters.
However, despite Eirian’s work on the farm and her parents’ promise in 2008 to give Eirian a 49% share in the farm, the promise did not materialise; Tegwyn and Mary placed the farm into trust, instead. This meant that most of the farm was to be split between Eirian and her sisters equally. The result of this was a rift in the family and in 2012, Eiran departed from the farm.
Despite the fact that she had no contract and although her parents still had control of the farming business, so were able to leave it to whoever they wanted, Eiran still had the ability to make her parents honour their promise with a type of claim called ‘proprietary estoppel’, which can help prevent this type of unfairness.
In order to succeed, Eirian needed to demonstrate that:
- Her parents had made a promise to her (i.e. ‘in exchange for your unsalaried work for us, we will give you the farm’);
- She had relied on that promise (e.g. she continued to work for her parents instead of developing a career elsewhere);
- She had suffered detriment (i.e. she had lost out in some way, such as working somewhere else for someone who would pay her);
- In the circumstances of this case, it would be unfair for her parents to renege on their promise.
Eiran took her case to court in 2013 and it decided in her favour; however, the court did not decide on the amount she was entitled to. Tegwyn and Mary appealed but this was rejected by the Court of Appeal, who asked Eiran and her parents to negotiate an amount without further involvement from the courts.
This turned out to be impossible and the family went back to court in February 2015. Eirian was awarded the value of approximately a third of the business (£1.5 million) as compensation, enough to let Eirian set up her own farming business.
Tegwyn and Mary appealed again, arguing that Eirian’s expectations could be met by an accommodation payment of £180,000 plus a partnership element of £22,000. The Court of Appeal accepted some of their arguments and, in May 2016, reduced Eirian’s compensation from £1.5 million to £500,000.
The case highlights two things: that parents should not take their children for granted and should be cautious about what they promise them. It also serves as a reminder not to assume that entitlement to anything that has not been explicitly given, even if it involves close family. Unfortunately, the Davies family learned the expensive way that family and businesses does not always mix.
For more information on any of the issues raised in this article or on wills and trust matters in general, contact the head of our Private Client team Tamara Hasson by emailing [email protected] or calling 0117 394 5030.
Posted on Jun 9th, 2016 by Lyons Davidson