The Cost of No Contract: Lessons from a Family Farming Dispute

In farming families, the family bond is often considered to be so strong that the farming business does not require any formal legal structure to protect against disharmony. However, farming families are no more immune from disputes than any other business and, when those disputes arise, that trust can evaporate without warning and the dispute become bitter and entrenched. 

A recent case involving three generations of one farming family shows how a lack of a signed partnership agreement and diverging interpretations of ownership can lead to a messy and costly fallout.

Aaron & Partners recently acted for a multigenerational farming partnership in such a dispute. Involved were the elderly matriarch (Mrs A) whose parents had originally started the farm, her son (Mr D), and his two sons, all of whom had worked on the farm since childhood. This farm was firmly considered to be a family business. There was no signed partnership agreement. By the time of the dispute, the farm’s original landholding and property was owned equally between Mrs A and Mr D, though other parcels of land and property had been added to the farm and been assigned to various combinations of family members over the years.

Following Mr D’s divorce and his subsequent relationship with a new partner, he decided he no longer wished to be in a partnership with his blood family and moved to claim his mother’s half share of the farm, by way of proprietary estoppel (a legal doctrine which enables a person to claim property which they say they were promised and which induced them to act in a particular way).

He did offer to buy his sons out, at far less than market value, but they believed they had also been promised the farm by their father and grandmother and would therefore inherit it all on his death. A bitter and destructive two-year battle ensued over control of the farm.

This case is a stark reminder that trust and tradition doesn’t always prevail and that all business arrangements, including family farming businesses, should be backed by legally sound agreements. If your family farm operates without a formal partnership agreement, or land is owned across generations, specialist legal advice can provide peace of mind and take away a lot of the bitterness that can ensue when people (genuinely) believe that they are entitled to take everything.