Farm Table says:
This article looks at a common issue present across farming families:
A farmer’s son or daughter who have devoted their life to the family farm, forgoing career or other financial opportunities in order to draw a (usually low) wage in anticipation of a reward in the future – namely a verbal promise/understanding that they will “get the farm” when the parents retire or die.
Although the circumstances can vary widely, in the absence of a documented succession plan, when a verbal
promise is broken, a costly and uphill battle can ensue.
The article looks at two key areas:
- Promises broken during parents’ lifetime.
- Promise broken after parents’ death.
Promises broken during parents’ lifetime:
Recourse is usually by one of two ways:
- an equitable claim of ‘estoppel’ – that the parents are prevented from asserting that their promises were unenforceable, as the child has relied upon those promises to his/her detriment.
- an equitable claim of ‘constructive trust’ – that the parents hold a part of the farming property ‘on trust’ for the benefit of the child, despite the parents being the only registered proprietors on the legal title, as the child has spent a considerable amount of money on improving the property.
Most claims fall under the first category. However, claiming the farm assets may be a difficult commercial decision. Elise Croft explains that the worst case scenario is a full trial (likely in the Supreme Court) that will cost in excess of $150,000.00 in legal fees.
Promise broken after parents’ death:
- In WA, When the promise is broken by virtue of the Will, the child’s recourse is usually via a claim
pursuant to the Family Provision Act 1972 (WA).
However, the promise is often not the key focus, rather personal financial resources of the child making the claim, the size of the estate and the relationship between child and deceased are the main factors taken into
Croft finishes the article with the following comment:
- Whilst it may be possible to rectify the legal situation through litigation, the cost of prosecuting the matter through to a trial is usually prohibitive.