Shareholder, Partnership & Director Disputes

We like to think we will always be around. Unfortunately, our inability to confront our own mortality can have a disastrous effect on those closest to us and our businesses. All businesses need to deal with succession, but farming families are particularly vulnerable to the effects of failing to deal with succession. Why is succession planning so important within farming? One of the main reasons is that children are often involved in working on the family farm and there is this unwritten understanding that one day all of this will be yours. Farming families are also notorious for not having partnership agreements in place, which again can leave the business open to potential disputes over the ownership of the business and its assets. Issues within farming One of the most common disputes that arise in farming families from a lack of succession planning is a proprietary estoppel claim – briefly put this is where: A representation, promise, assurance or other encouragement by the defendant giving rise to an expectation by the claimant that he/she would have a certain proprietary interest. There is reliance by the claimant upon that expectation. Finally, the claimant suffers a detriment in consequence of his/her reasonable reliance on the promise. When can mediation help? During the planning discussions Getting to the actual discussion about succession is often the first hurdle. Farmers are often so busy running the farm that they don’t have time to think about succession planning and for many people having this sort of discussion doesn’t come easy. Family members don’t want to rock the boat – children don’t want to disappoint their parents by admitting they don’t really fancy running the farm. Parents may feel that they are forcing their children into running the farm, but then equally children can be insensitive with their new ideas for the farm, which can often lead to disputes with their elders. Having an open and honest conversation as early as possible – and before a problem arises, is the best course of action. The children may not want to carry on the farm, but by knowing this the parents can plan for their retirement and have something to aim for. Sometimes these discussions will get out of hand. Heated debate may take place and people may get offended and upset. Mediation enables an independent third party to come in and speak with all of those involved. The mediator can: Explore the goals of each family member and what they want to achieve Facilitate conversations between family members so that they understand what others feel and want Enable the family to come up with a way forward together Where no discussions have taken place and litigation ensues Proprietary estoppel cases are fuelled with emotion and often to lead to lengthy, bitter and very expensive litigation. Whist there are practical steps you can take to avoid claims such as avoiding making promises and succession planning, this isn’t always the case. If faced with a claim for proprietary estoppel the parties should consider the use of mediation over litigation as the advantages of using mediation include: Confidentiality – farming communities are small, and these cases are ripe for local gossip and media attention. Cost – a mediation costs between £1500 - £3000 per party vs legal costs of around £100,000 if it went to trial. Speed – the mediation can be arranged within a few weeks and dealt with in one day - in comparison to the time it will take to bring the matter to trial (at least a year) and a possible 3 to 5 day hearing. The parties decide on the solution rather than a Judge making a decision (which often suits neither party).