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Your Farm & Divorce: Know Your Field; Know Your Beast by Tony Roe
13 August 2009 :: Newbury Business Today

Farming divorce cases are a specialism even for family law experts. The mantra for the solicitor trying to resolve a farming couple’s separation is “know your beast”, and in all senses of the phrase. First, one needs to know the farm structure. Most non-farming businesses are sole proprietors, partnerships or limited companies. Farms may also be complex share farming or contract farming enterprises, neither of which creates a tenancy if properly organised.

The next step is to understand the farm’s assets which may include obvious items like freehold property, livestock and machinery but also, less obviously, sporting and mineral rights, Single Farm Payments, and potential development sites. It is not the lawyer’s job to put values on individual assets or the worth of the overall business. Rather, it is the job of the surveyor and the accountant, experienced in this area of practice. Instead of the husband and wife each having their own professional witness, the court will normally appoint a single joint expert whose duty will be to the court.

The House of Lords case, White v White, set a precedent for all matrimonial cases, and involved a farm in Somerset. Its principles revolutionised the way courts split assets on divorce. Farmland, unlike many other businesses, has historically been passed down from one generation to the next. Mr and Mrs White’s case involved their dairy farming business partnership. The 160 acre Blagroves Farm was bought early in the marriage and treated as partnership property. Rexton Farm, acquired by the husband 30 years later, just before marital breakdown, was not. The House of Lords held that the source of an asset, inherited or otherwise was relevant, and the weight to be given would depend on the parties’ needs. The wife kept her assets and received a lump sum. The sale of the farm was avoided. In a subsequent case, a husband kept the Cumbrian hill farm which had been in his family for four generations.

Once the courts would virtually never order the sale of a business but, over the last few years, they have been more ready to do so. Judges have a broad discretion and generally would make some other form of order, or combination of orders, which proved to be workable. In farming cases, this might include one spouse’s relatives raising capital to gain vacant possession. Another option could be to impose a deferred charge on property which, in one case meant that the wife would get her 25% share on the husband’s 65^th birthday but only if she did not remarry or die beforehand. A further route might be one party getting larger maintenance payments in return for a smaller lump sum. Any outcome must also take into account the incidence of capital gains tax. The impact of CGT can be significant and possible ways of minimising it must be looked at.

Although not romantic, more engaged couples are considering prenuptial agreements, especially where there is, or will be, significant property, for example a farm, inherited by one of them. Like farms themselves, “pre-nups” can be complex. Pre-nups do not bind a divorce court but, in recent years they have been given more weight. Hopefully, there will be greater clarity if the well-publicised Radmacher case goes beyond the Court of Appeal.

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