The Importance of Farm Succession Planning

The South Australian case of Rodda v Rodda [2015] SASC 95 highlights the costs of a lack of proper succession planning in damages, legal fees and in the unforeseen breakdown of family relationships.

The father, Ian, and son, Stuart, worked together on their family farm for almost 20 years. Ian had inherited the farm from his father and Stuart was under the impression that he would inherit the farm the same as Ian did.

In 1994, Stuart was completing his wool classing course and undertaking practical training in sheep stations across the country. By the end of the year, he was called back to the family farm where he worked until 2012. Throughout this time, Stuart took on more and more managerial responsibility (well beyond that of a farm hand), and was paid only $150 per week, significantly under the $450 average for a farm hand at the time. 

Ian told Stuart that he had to take low wages and not play football to give the farm priority and buy more land. Ian purchased another property for Stuart’s siblings as something for them because “you (ie. Stuart) are going to take control of the family farming business one day”.  It was made clear to Stuart that the farm was only big enough for one sone and that son was Stuart. 

Ian also encouraged Stuart and his wife Shannon to extensively renovate a homestead on the farm. Over time Ian placed FMDs in the names of Stuart and later, Shannon, on the clear understanding that this was the farm’s money and not Stuart’s and Shannon’s money.    

Frustrated by his father’s lack of clarity and certainty about succession, the relationship between Ian and Stuart deteriorated to the point where Ian ordered Stuart to leave the farm in December 2012. 

The Court relied on the equitable principle of promissory estoppel. This principle is used to rectify a situation where one party has suffered a detriment in reliance on a promise made by another, who has revoked that promise unconscionably. 

The judge decided in favor of Stuart and ordered that Stuart and Shannon should receive $750,000 and either, (a) receive part of the farm plus $1.5m in compensation or (b) an extra $4.75m in compensation. The total value of Ian’s farm assets was about $8.75m. Ian had off farm assets of about $3m.

We can assist if you require advice in respect of succession planning.