Of all of the types of business ownership disputes which I come across, ones relating to farms are usually the hardest to resolve. Sometimes the basis of the dispute can go back for generations with the warning signs having been there for a long time.
It is usually quite rare for the partners in a farm to have actually sat down and selected each other. Most have inherited each other as a result of family circumstances such as deaths, retirements, marriages, childbirths and divorces. It is perhaps not surprising that very often the partners values and goals are not aligned and disagreements as to the direction of the business come to the fore.
As with many partnership disputes, but dare I say perhaps more so with farmers, strong personalities can play a large part in preventing the resolution of what could simply be a genuine difference of opinions. When personalities clash it does not take much before positions become entrenched, battle lines are drawn and the family splits. It can be very difficult, if not impossible, later to reconcile such differences.
Quite often it is changing circumstances or the behaviour of particular partners which causes cracks to emerge in a previously harmonious arrangement. Resentment being caused by uneven workloads, marital or mental health problems which appears to show commitment to the business from a partner waning or simply one of the partners deciding they no longer want to carry on farming – these may all be the source of major problems. In some situations the misconduct of one of the partners can lead to friction with the others. Discontent can brew where one partner feels that the other is funding personal expenses from the business or where profits are being diverted from the partnership’s account to the pocket of the offending partner.
Perhaps cynically, it seems in recent years that increasing land prices may be acting as something of a catalyst for disputes where one of the partners comes to the conclusion that they should ‘cash in’ for what some might see as an easier life. This can be very problematic for the remaining partners who need the others to keep going in order to keep the business viable. A splitting of the assets may be possible in some circumstances, but it very much depends on the size and nature of the farm.
Although it may not be a cause of dispute in itself it is undeniable that the absence of a written Partnership Agreement, which sets out how the business is to be managed and, if appropriate, come to an end, makes all of the above factors much worse. Without explicit agreement partnerships fall back onto statutory provisions which are over 100 years old and which offer little in terms of practical help when things go wrong. Where there is uncertainty, there is room to argue and that, in itself, can produce a toxic environment which prevents the effective running of the business.
As always, prevention is better than cure, but if a dispute does occur getting legal advice can make a real difference. Often a resolution can be found which retains the value of the business rather than allowing it to be destroyed as a result of partners who, for whatever reason, just cannot get on.
Matt Hill is a Partner in the Dispute Resolution Unit and specialises in Property and Commercial Disputes. To contact Raworths telephone 01423 566666 or visit our offices at Eton House, 89 Station Parade, Harrogate, HG1 1HF. Alternatively, you can email Matt – firstname.lastname@example.org