"One day my son, this will all be yours..." is often the broken promise that the doctrine of equitable estoppel aims to remedy.
It is not uncommon in the context of family businesses, especially farming, that parties are encouraged to commit their time and lives to a venture on the promise that they will eventually be rewarded for their hard work and effort.
Sometimes this includes a promise to transfer ownership of assets at some future point in time, often upon death of the original owner. Rarely are such promises and plans properly documented, often because the parties are close family and trust one another.
The ensuing conflicts and disputes can be catastrophic and result in personal disappointment and costly litigation.
In the recent decision of Slade v Brose [2024] NSWCA 197, these facts were played out before the courts.
Parties
The appellants, (the Slades), owned several parcels of farming land in Quandialla.
The respondents, a daughter and son-in law, (the Broses) relocated in 2014 from Townsville to Quandialla.
The Promises
The Broses relocated following representations by the Slades that if they relocated to Quandialla and worked for the family partnership through which the Slades conducted their farming business, and things worked out, then they would receive an interest in certain parcels of the farming land.
The Broses alleged that, commencing in 2013 and continuing through to 2019, the Slades represented to them (including in the course of family estate planning meetings) that they would be the recipients of future transfers of land and partnership interests, with the intention that the Broses commit themselves to life on the farm. In reliance on those representations, the Broses remained in Quandialla, working the farm. Some properties were transferred to them over the years and there was an acknowledgement that they had a 25% interest (and later apparent acknowledgement of a 50% interest) in the partnership.
Several family meetings resulted in succession and estate plans and a Deed of Family Arrangements and a Partnership Agreement being signed.
Family dispute
Following a catastrophic falling out between the Slades and Broses in October 2021 and January 2022, described by the judge as being "borne out of frustration, hurt and confusion arising from intergenerational misunderstandings" and "spiteful" the Slades renounced the existence of any arrangement they had with the Broses, and began selling off their rural land holdings and partnership assets. The Broses lodged caveats on the titles to the properties which they alleged were held by the Slades on a constructive trust for them (the Disputed Properties), by reason of their detrimental reliance on the Slades' representations.
The primary judge, applying the equitable principles of proprietary estoppel by encouragement, found for the Broses and held that the Disputed Properties were held on a constructive trust as claimed.
The primary judge ordered that the Slades transfer three (not all) of the Disputed Properties to the Broses and that the Broses pay the Slades $500,000 (to reflect the acceleration of the interests that the Broses were acquiring). The primary judge ordered the parties to bear their own costs.
The Slades filed a Notice of Appeal, alleging errors in the primary judge's findings as to:
- the representations made by them,
- the Broses' conduct in reliance on those representations,
- the detriment that would be suffered should there be a departure from the representations and
- in the failure to find that there had been a relevant change in circumstances, such that it was not unconscionable for them to depart from the representations.
The Court dismissed the appeal and reviewed the legal principals to be applied against the facts.
Unconscionability
It is not necessary for a plaintiff invoking the doctrine of equitable estoppel by encouragement to show that he or she assumed that a particular legal relationship existed; rather, it is unconscionability which will be decisive. In this case the representations were sufficiently clear, and in a family context it was reasonable for the Broses to rely on the repeated assurances by the Slades that they could and should trust the Slades, and that they would then get most of the land.
Sole Inducement and precision of conduct
In determining reliance in the context of estoppel by encouragement, the relevant assumption need not be the sole inducement, rather it is sufficient if it is a "contributing cause;" nor is it necessary for the plaintiff to prove "precisely" how the plaintiff would have acted differently. The primary judge made no conflation error (as the appellants had contended). The primary judge made clear that the Broses' relocation to Quandialla occurred in 2014, before the later representations were made; and accepted that it was the Broses' conduct in remaining on the family farm and working for the partnership that was in reliance on the representations made between 2015 and 2019.
Detriment and Loss of Opportunity
The primary judge did not (as the appellants contended) wrongly assess detriment by reference to the loss of what the Broses expected to receive but, correctly, assessed their detriment by reference to the loss of the career opportunities that were foregone by the decision to move to and remain in Quandialla. The decision to remain, and not take up opportunities elsewhere, was more than sufficient to amount to detrimental reliance when assessed as at October 2021 or January 2022, when the Slades renounced their "agreement". In the context of a farming operation conducted over a number of properties and over a number of years, in reliance on the expectation that those properties and business would be transferred to the Broses, there was no error in the primary judge concluding that the countervailing benefits received by the Broses did not assuage the equity raised by the Broses' detrimental reliance.
Conditional representations
The Slades' characterisation of their representations as being "conditional" was not accepted; rather, matters such as the intent that family relationships remain intact, and that there be a fair outcome are more readily to be seen as assumptions underlying what was contemplated in the succession planning process. There was no error in the primary judge's conclusion that, in all the circumstances, it was unconscionable for the Slades to depart from the representations they had made and to act otherwise than in accordance with the expectations they had induced.
Summary
Human nature and family ties can sadly often lead to disappointment and litigation.
Parties who are close to each other, often family, frequently fail to recognise that they are essentially in a business relationship and that they need to have their arrangements fully documented, instead of relying upon relationships and trust.
Where the underlying relationships break down-it can be a painful and costly exercise to recover a position.
It is often much cheaper to engage us to provide peace of mind and certainty to have even your close family ventures documents-especially where you are changing your careers or lifestyles in reliance on promises, than to litigate when things go wrong.
Our experienced property and commercial lawyers at Rostron Carlyle Rojas Lawyers can help you to avoid litigation with carefully drafted agreements or if necessary protect and enforce your rights in court.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.