Promised the farm?
Disputes involving promises about the future of the family farm are common and highlight the importance of succession planning.
Comments such as “all this will be yours when I’m gone” or “your hard work will pay off one day” can give rise to claims.
Promissory estoppel is a legal principle which can allow a person to enforce promises made, including casual statements or remarks made over time.
For example, a parent might promise land to a child in return for their continued work or support on the farm. The child who remains on farm did so based on that promise, giving up other opportunities without adequate financial reward for their work at the time.
If the promise is not fulfilled (for example, if the parent leaves the farm to someone else in their will or tries to sell the farm during their lifetime) the child might raise promissory estoppel as a basis to say they should receive the land they were promised.
To establish a promissory estoppel claim, a representation or promise must be made upon which the other person relies to their detriment (for example, the person does not pursue off farm work opportunities or works for less than market wages). The person who makes the promise must be aware the other party relied on the promise, and it would be unconscionable for them to not honour the promise.
Family farm disputes can be complex, costly and cause breakdown of family relationships affecting generations. Proper succession planning with professional assistance can avoid or reduce the risk of future disputes.
Families are encouraged to engage in a formal succession planning process to document agreements about the future ownership or control of the family farm and any off-farm assets. This may involve a transfer of assets or interests during lifetime, or on death.
A thorough succession plan considers how to manage land, stock, debts and assets critical to the farming enterprise, as well as off-farm assets that may be used to provide for other family members without prejudicing the continued viability of the farming enterprise. The future needs of the parties and tax effective strategies can all be considered to achieve a positive outcome benefiting the farming operation and family unit.
With the right advice and assistance to guide and document the process, succession planning can be rewarding and should be a key objective for farming and other family agribusinesses.
Daniela Pavlovic
Principal
T: 03 5225 5227
E: dpavlovic@ha.legal
Amy Jenkinson
Principal Lawyer
T: 03 5225 5236
E: ajenkinson@ha.legal
