Resolving agricultural divorce

Agricultural divorces can be “notoriously difficult to resolve” (Wilson J in R v R [2004] FLR 98). There is often a departure from equality in farming divorces due to the non-matrimonial nature of some farming assets.

For example, a farm that has been gifted, inherited and/or in the family for generations, in the expectation that it will be handed down, is a factor that the court will take into consideration. Each case will turn on its facts, and the outcome will depend on a wide variety of different factors.

Sharing and equality

The landmark case of White v White [2000] FLR 98 1 was itself a farming case.

The key points taken from this case are:

• Home-making contributions are treated the same as financial contributions.
• The end of “reasonable requirements”. This term had become synonymous with “needs” and used as a limiting factor on the award (usually) made to wives. In White, the House of Lords steered us back towards the statutory language of “needs”.
• Inheritance was an important factor. The House of Lord’s approach was to recognise inheritance and family contribution and take this into account in the settlement. However, the inheritance factor will carry little weight, if any, in a case where financial needs cannot be met without recourse to this inherited property.

The outcome of White v White changed how all family lawyers approach a case, with reference to the starting point of equality. The main principle derived from this case is that equality should only be departed from if there is a very good reason for doing so and, there should be no bias in favour of the breadwinner.

Soon after White v White, reasons to depart from equality crept in. In N v N [2001] 2 FLR 69, another farming case, the court took the view that the theory of equality was impractical. For example, equality may cripple the family’s finances to the ultimate detriment of the children. In N v N, the wife received around 40% of the matrimonial assets, but this was done over time because the husband’s farming business needed to continue with little disruption to retain its value.

In the same year, in the non-farming case of S v S [2001] 2 FLR, there were grounds for departing from equality on the basis of the existence of the husband’s second wife and family. If an agreement was harder on one party than the other, then this was a good reason to depart from equality. The court should aim to provide both parties with a comfortable house and sufficient money to discharge their needs and obligations.

After S v S, the non-farming landmark case of Miller v Miller; McFarlane v McFarlane [2006] 1 FLR 1186 highlighted that the concept of sharing had replaced the concept of equality and confirmed that sharing was not the same as equality. The needs of the parties were the emphasis in this case, and the straightjacket of “needs” may not result in an equal division of all assets.

Cases of equal sharing in agricultural divorces have been rare. The reason for a departure from equality in farming cases is often justified due to the nature of farming assets. Put bluntly, the needs of the parties can perhaps be satisfied without dividing a farm in half.

Thorny issues in farming cases 

Farms can be valued like any other asset. However, common problems that distinguish farming cases from non-farming cases are as follows:

• The farm itself may be owned by a corporate entity with third party interests or held in Trust(s). It is not unusual for extended family to have part ownership in a farm.
• Farms may be run by several members of the family, all of whom have different roles and interests in the business. Farms are typically inherited and have been part of one family for many years.
• The farm may be the only source of income.
• It is not uncommon for farm income to be reduced to enable farmers to claim tax benefits to support their income, to reduce tax, or in some circumstances, reduced in an attempt to limit the claims of the other spouse in financial proceedings after separation.
• Farmland is often rented out to long term tenants, which generates an income but may prevent the land from being sold for a period of time.
• It is not as straightforward to mortgage or otherwise charge farmland to extract cash.
• Farms that have diversified (for example, commercial offices, farm shops and holiday lets) may add complexities to the valuation process.
• The farm owner may be party to an environmental stewardship agreement, which provides an income. Financial incentives are a valuable feature of any farm, but there can be difficulties in transferring these entitlements between spouses.

Extracting value from a farm, whilst keeping the farm alive, is the crux of the problem in many agricultural divorces.

Conclusion

Since the case of White, there are no widely reported farming divorces where an equal division of assets has been ordered.

Whilst for non-farming divorces, an equal division of assets and wealth accumulated during the marriage is considered a fair outcome. The reality is often unachievable because of the desire and needs to preserve assets that were owned long before the marriage inherited by one party. However, fairness still requires financial needs to be met.

Nichola Bright, Senior Associate in Family Law, Myerson