[2025] EWHC 2054 (Ch)

I have determined that Alan’s execution of his 2020 will constituted a repudiation of the promises he made to Richard and was unconscionable. I therefore start with the assumption that the simplest way to remedy the unconscionability is to hold Alan’s estate to the promises that were made to Richard.

The promises made to Richard were that he would inherit North Cowton from his parents. They were not promises that he would inherit North Cowton free of debt or subject to any particular level of debt. Moreover, when the division of the businesses took place in 2017, involving the creation of a separate trading partnership at North Cowton of Alan, Margaret and Richard and the allocation of £625,000 of the Lloyds debt to that trading entity, I do not consider that this apportionment of debt formed part of the promises made by Alan and Margaret to Richard, such that the court has to start with the assumption that the fulfilment of the promise to Richard requires North Cowton to be allocated only the level of debt with which the North Cowton partnership was allocated at the time of the 2017 split.

The context in which the meeting on 19 June 2017 took place is important. I address this at [39-48] and [206-207] of the liability judgment. There was no discussion either at the meeting itself or subsequent to the meeting leading to any agreed division of the bank debt as between the Allerton Grange and North Cowton businesses. David arranged the meeting in circumstances where Alan had told him Richard would have to leave North Cowton because it was losing money and Richard was running the business into the ground. David thought Richard should be given a chance to run the business on his own. Kathryn’s notes typed up after the meeting state:

“The following was discussed with Richard:

Richard is to have:

The Farmhouse, Bungalow and Farm Yard

£500K overdraft

Pay rent to mum and dad for the land – (£50/acre??)

Richard is happy to pay a monthly haulage Belford John and wagon

The 270 acres approx at North Cowton Grange is to stay in Dads name”

These were the terms put to Richard at the meeting and he accepted them. There was no negotiation. They were terms which David, Kathryn and Margaret (with Alan’s blessing) thought would give Richard a chance to make the business at North Cowton stand on its own two feet. It was never explained in evidence at trial why £500,000 of the bank borrowing (or as Kathryn put it a “£500K overdraft”) was being allocated to the North Cowton business. It was certainly never suggested by any of the witnesses that this allocation was intended to be a definitive and permanent division of the Lloyds loan as between the two businesses. Equally, the assumption by the North Cowton business of an overdraft of £125,000 was not done in the context of a considered separation of the overdraft liabilities of the two businesses. It arose as a result of a subsequent telephone conversation between Richard and Alan when Richard proposed that he would need an overdraft of £80,000 and Alan suggested Richard would need a bigger overdraft of £120,000 (which became £125,000) in order to allow himself a six week cushion in which to pay his bills.

Mr Thomas’s October 2017 notes (which were not available at the liability trial) provide useful insight into the circumstances in which the separation of the businesses took place. His note of his meeting with Alan and Margaret on 16 October 2017 (nearly 4 months after the meeting on 19 June 2017) talks about forming a new partnership of Alan, Margaret and Richard with Richard retiring from the existing partnership. Mr Thomas records that “[d]ue to the current troubles with the release of monies from the solicitors (2.7M roughly) it is not yet advisable to split the farms on a financial basis due to the debts etc” (emphasis supplied). It was envisaged that the golf course monies would be received by 6 April 2018 and the farm debts settled, giving Simon and Richard “a clean slate”. For that reason, Mr Thomas noted that a further meeting would happen later in the year “to discuss things further and establish where the client is with regard to the 2.7M”. This demonstrates beyond doubt that no agreement was reached in 2017 as to the basis on which the bank borrowing would be split between the respective farm businesses. There were “troubles” with the release of the golf course monies which it was anticipated would be resolved within six months. In fact, nearly 8 years later, these “troubles” have still not been resolved.

Mr Thomas’s note of his discussions the next day with Simon and Richard shows that the position regarding the golf course monies was not as straightforward as Alan had caused him to believe. Simon told him he was owed approximately £1M+ of the golf course monies. The note then states: “Richard is to take on 500k of the 2M bank loan and will set himself up with a 125k overdraft - he will walk away from the business and take no money from the golf course money to be recd”. Although Richard has not been asked questions about this note because it was not available when he gave evidence at trial, I can safely infer that he was aware he had only taken on 25% of the bank borrowing as it stood at that time. It is not clear who told Mr Thomas that Richard was not going to share in the golf course monies. Nor is it clear whether the intention may have been at that time to agree that the liability of the North Cowton business for the bank borrowing should remain at 25% in return for Richard foregoing any claim to a share in the golf course monies. That has never been suggested by either party. In any event, what is now clear from submissions made on Richard’s behalf at the remedy hearing is that he still maintains a claim to a share of those monies.

Although it was anticipated in 2017 that the bank debt would be repaid from the golf course monies, that has not in fact happened and there is no indication as to when those monies will be received or as to their likely amount when they are received. In the circumstances, I do not see how I can sensibly take account of the golf course monies in determining how the bank borrowing is to be divided between the two farms.

I have already decided that Alan never promised Richard that he would receive North Cowton unencumbered by debt or only subject to a particular level of debt. Even if I am wrong in my conclusion that I should not start with the assumption that the fulfilment of the promise to Richard would require North Cowton to be allocated only with the level of debt with which it was allocated at the time of the 2017 split, I consider that such provisional remedy would require revision when looked at in the round against all the relevant circumstances.

Alan’s promises to Richard did not involve making any promise to him about what was to happen to the golf course monies. I therefore do not consider that it is appropriate to take account of what might in the future be Alan’s estate’s share of the golf course monies in determining the appropriate remedy in the proprietary estoppel claim. Regrettable though it may be that there should be further litigation between these parties, if Richard considers he has any entitlement to a share of the golf course monies, he will need to pursue that claim separately.

In any event, even if (contrary to my finding) it was part of Alan’s promise to Richard that the golf course monies would be available to discharge all of the debts of North Cowton and Allerton Grange, the circumstances in which the court is now required to fashion a remedy are very different from those contemplated when any such promise was made and the detriment suffered. This is for two main reasons. First, the golf course monies have become subject to an intractable dispute with third parties for many years and it is impossible to know when that dispute will be resolved. Second, it is far from clear that Alan’s estate’s share of the golf course monies will be sufficient to discharge the debts of both North Cowton and Allerton Grange.

I am not attracted by Richard’s suggestion that the court could award Richard a 50% interest in the estate’s share of the golf course monies subject to a cap of the amount of debt above £600,000. Quite apart from the fact that this supposed solution would ensure that Simon and Richard are locked together until the indefinite date upon which the dispute regarding the golf course monies is resolved, there is a more fundamental objection which the defendants identified in their responsive written submissions filed after the remedy hearing.

I accept the defendants’ submission that, by the time of the split in 2017, the vast majority of the promises made to Richard had already been made and the vast majority of the detriment suffered. None of those pre-2017 promises were of a kind which could have led to any reasonable expectation as to the level of debt which Richard would be left with on the business at North Cowton following Alan’s death. Nor was any promise made to Richard as to the level of debt which would be allocated to North Cowton when he signed the deed of variation in 2019.

I also accept the defendants’ submission that, while Richard may not be left with what may have been contemplated in 2017, he will nonetheless be left with a valuable farm and the ability to continue farming it if he chooses to do so. The level of Lloyds debt which I consider below should be allocated to North Cowton will confer countervailing benefits upon Richard. He will be relieved of any liability he might otherwise have to account to the other partners of (i) the original partnership, including a liability of £130,000 for his overdrawn capital account, and (ii) the North Cowton partnership, including any failure to account for sums received on the sale of livestock and other assets of the partnership.

I do not consider that the just outcome is for Richard to receive North Cowton unencumbered or to receive a lump sum equating to its unencumbered value. Recognising that Richard’s strong preference is to keep North Cowton, I consider that this can be done by requiring Alan’s estate to transfer North Cowton to Richard (or at his direction) on terms that the business at North Cowton should assume responsibility for a fair proportion of the outstanding indebtedness to Lloyds bank.

I accept the defendants’ submission that the current debt allocation, by which Allerton Grange is allocated with 79.98% of the combined debts despite being less than 50% of the combined value of the two farms, means the net value of Alan’s gift of Allerton Grange to Simon would be only £612,767 and by contrast the net value of the transfer of North Cowton to Richard would be £2.523 million. It would mean that Allerton Grange was not a viable farming unit, with the result that neither Simon nor George would be able to continue farming. That would be unfair to Simon and George and would fail to do justice between the parties.

Although there was never any agreement as to the proportion in which the bank debt would be divided between the two farms, had Alan chosen to make that division by reference to the comparative values of the farms, that would not have been unconscionable. That is the approach I propose to adopt.

North Cowton has been valued at £3.128 million. This represents 50.81% of the combined value of the farms. Subject to one deduction from the combined debt which I consider ought reasonably to be made, it is just and appropriate that Richard should assume responsibility for 50.81% of the combined debts. That deduction should be whatever represents the outstanding balance of the £250,000 loan taken out by George and Simon in July 2021 (without Richard’s knowledge or consent) in order to build a shed or sheds at Allerton Grange. I do not think it is fair to require Richard to assume responsibility for any part of this loan where the outstanding balance is now some £200,000.

Taking account of that deduction from the combined debt and on the basis of the figures contained in the bank documents disclosed in advance of the remedy hearing (which will need to be updated), this would result in Richard assuming a bank debt of approximately £1.35 million and the net value of the transfer of North Cowton to him being approximately £1.75 million. If Richard chooses to resume farming at North Cowton, that ought to represent a viable prospect.

Allerton Grange and the Marton land have a combined value of £3.028 million. This represents 49.19% of the combined value of the farms. In addition to the outstanding balance of the £250,000 loan taken out in July 2021, the defendants should assume 49.19% of the remaining bank debt which would result in them being responsible for bank borrowing of approximately £1.7 million. This would mean the net value of the gift of Allerton Grange (including the Marton land) to Simon and George would be approximately £1.3 million.

In fashioning the appropriate remedy, I consider it essential that a declaration is made that the Marton land belongs to the defendants (or to such person or persons as the defendants direct) and that no part of it belongs to Richard. As noted in paragraph 38 above, Richard asserts a 25% beneficial interest in the Marton land and threatens to pursue that claim in further litigation. I accept Simon’s evidence that, since its purchase in late 2011, the Marton land has been farmed as part of the Allerton Grange unit and has never been treated as part of the North Cowton business. I find that Richard never expected to have any legal or beneficial interest in the Marton land and that his threatened claim to such an interest is opportunistic. It came as a surprise to him that the Marton land had been registered in January 2016 in the names of Alan, Margaret, Simon and himself, as the then partners in A & M Armstrong & Sons. I accept that this was done to reflect the advice given by Grant Thornton regarding the need for Simon and Richard to have an interest in partnership property. The Marton land has since its acquisition been shown as an asset in the accounts of the Allerton Grange partnership, both before and since the businesses were split in November 2017.

Accordingly, I consider that Richard should be prevented from asserting any claim in respect of the Marton land as part of the means by which an appropriate remedy is arrived at in this case, and in particular as part of the rationale underpinning the fair apportionment of bank indebtedness by reference to the comparative value of the two farms, the Marton land being an essential part of the Allerton Grange unit. I will make this declaration regarding the Marton land in order to do justice between the parties.

If a clean break between Richard and Simon is to be achieved (so that neither is dependent upon the other), much will depend on the attitude taken by Lloyds Bank to the future of its all monies charge over North Cowton. Clearly the most sensible course to adopt would be for separate charges to be granted over Allerton Grange and North Cowton in respect of those farming units’ respective shares of the bank debt. However, I fully accept this may not be straightforward, especially if there are prior charges over the land at Allerton Grange which cannot be satisfactorily dealt with. Moreover, it is self-evident that Lloyds will wish to have regard to its own commercial interests and should not be required to act in a way which weakens the strength of its existing security.

Those are matters which will need to be considered once the ramifications of this judgment are worked through. I agree with the defendants that all the court can do at this stage is to direct parties to use their best endeavours to procure from relevant third parties the necessary consents, with a view to the Lloyds debt being apportioned in accordance with the above proportions and that, should this not prove possible, the parties should have liberty to apply on notice to the relevant parties for further orders.