A will clarifies how you would like your assets to be distributed after your death says Stephanie Whitchurch, Head of Litigation at Tallents Solicitors. But for business owners, a will is a vital succession tool which can safeguard and protect the future running of the business.
However, in family-owned businesses, a clearly written will is even more important when leaving shares in the business to family members.
A recent England and Wales High Court ruling regarding a will challenge brought by two brothers against their late father’s estate has significant implications for the succession of family businesses ongoing and highlights the need for clarity and formality to prevent future disputes.
Winter and another vs. Winter
The Winter family ran a successful market garden business. It was claimed that Albert and Brenda (the parents) had consistently expressed to their sons that, should they contribute to the business’s growth, they could expect an equal share of the business in return on their deaths.
Albert and Brenda had made wills in 2000. When Brenda died in 2001, her will left her share in the farming partnership to her three sons in equal shares, and the remainder of her estate to Albert.
Albert revised his will in 2015, and when he died in 2017, the new left the entirety of his business share and the residue of his estate to his third son Phillip, leaving absolutely nothing to the two older sons, Richard and Adrian.
The challenge
Following Albert’s death, Richard and Adrian (the claimants) brought a challenge against the 2015 will on two principle grounds.
Claim 1 – Mutual wills
Firstly, the claimants contended that their parents had made mutual wills in 2000. Mutual wills require that both testators agree that their wills would be irrevocable after the death of the first testator, thereby establishing a contract that they will not be changed.
Phillip, the defendant, disputed the fact that the wills made in 2000 were indeed mutual wills, and instead argued that his father was free to change his subsequent will as he wished.
Claim 2 – Proprietary estoppel
Based on the verbal assurances given to the three sons by their parents over the years regarding the eventual distribution of the family business and, as they had relied on those verbal assurances to their detriment, Richard and Adrian contended that a proprietary estoppel claim arose and the promises should be honoured, with each brother receiving an equal share in the business.
The ruling
Claim 1 – Mutual wills
The executed version of the will Albert had made in 2000 could not be found, and there was no subsequent evidence to show that their parents had intended the wills they had both written in 2000 to be irrevocable. As such, the court rejected the contention that mutual wills had been made in 2000 and Albert was therefore free to change his will as he wished in 2015.
Claim 2 – Proprietary estoppel
With regards to this claim, evidence was presented to the court which satisfied the court that the claimants’ late parents had indeed on several occasions, told other people that the sons were working with them to build the business for their own futures. Both Richard and Adrian had made plans to pursue other careers, but Albert had made it clear that if they did, then they would lose any shares in the business. Therefore, both brothers committed to working in the family business, alongside Philip and profits made by the business were retained within it.
The judge found in favour of the claimants on their proprietary estoppel claim in respect of their father’s share of the business, ruling that they had relied to their detriment on the assurances made by their parents. As such, the family business and company assets would be divided equally between the three brothers.
Verbal promises can be as important as written ones
This case highlights how verbal promises given by parents in relation to family businesses can have significant legal consequences, especially if important life decisions have been made based on those verbal promises, to the detriment of the recipient.
Remedies for proprietary estoppel
In deciding that the business assets should be divided equally between the brothers, the case also followed the decision in the 2022 Supreme Court decision in the case of Guest v Guest, by adopting the starting assumption that the appropriate remedy was to give full effect to the assurances.
Tallents Solicitors have experts who can advise on disputes that arise from proprietary estoppel, wills and businesses. Please call us at our Newark, Southwell or Mansfield offices to make a confidential appointment.
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This legal content of this article is correct at the date of publishing. We recommend you seek legal advice with regards to your personal circumstances before acting.
