Does a representation to own a farm constitute “property” available for division between a separated couple?

Under the Family Law Act 1975 (Cth) Family Law Courts have jurisdiction to make orders to divide the interests of parties in their property.  The first step is to identify the existing legal and equitable interests of the parties in property.  However, what constitutes “property”?

The most obvious examples include real estate, cash, furniture, shares, vehicles and debts that are in the names of the parties either jointly or individually.  Less obvious examples include goodwill, trademarks, debts and rights under a contract.

What of representations?

It is not uncommon in farming families for a son to work on a farm for very little pay in the expectation of succeeding to own the farming land and enterprise in the future.

In the case of Rodda v Ian Rodda Pty Ltd[1] the eldest son returned to a farm owned by his parents on the Yorke Peninsula.  He was 20 years old.  He worked as an employed farmhand for his parent’s farming enterprise for very low wages.  At 23 he married and he and his wife lived on the farm.  They then renovated and lived on one of the homesteads on the farm.  He worked full time on the farm for the next fifteen years until his mother died.  His three siblings had pursued careers away from the farm. 

A few years later his father became engaged to another woman, which caused his relationship with his father to irretrievably breakdown.  Although they had worked together on the family farm for eighteen years, his father abruptly excluded him from the farming business and removed him from his will. 

The son argued that throughout their working relationship his father had represented to him he would one day take over the land and farming enterprise.  His father denied having made such representations.  He said the son’s expectation to take over the farming business was unfounded and unreasonable.

The son issued proceedings at Court arguing he had relied on his father’s representations to his overall detriment by committing his life to working on the farm and, as a result, he had an equitable interest in the farm.  His father countered that the son and his wife had been handsomely rewarded for their contribution. 

The Supreme Court of South Australia found (a) that over many years the father had made various promises to his son about his future ownership of farming land and equipment, and (b) the son had relied on those promises which was amply demonstrated by the way the son and his family had arranged their affairs. 

As a result, the Supreme Court found the father owned one of the three farming properties on a constructive trust for the son.  On that basis the Court ordered the father to immediately transfer that land and to pay equitable compensation of $1.5 million for plant, equipment and other assets to his son. 

While this is not a case about marriage breakdown (which is testament to the son and his wife after enduring a four week Trial in the Supreme Court), the equitable principles which underpin it can have far reaching implications for family law matters. 

What happens when a son and his family have survived on limited earnings from a family farm and the son’s marriage breaks down before he succeeds to own the farm? 

At this stage the son does not own the farming assets.  Will the marital property pool available for division between the separated couple include the farming land and enterprise? 

This question can have very significant implications – if the farming assets are not included, the marital property pool may be very modest.

These equitable principles may provide a basis for the wife to argue that although her husband does not own the legal right, he does own an equitable interest in the farming land or enterprise or both.  On that basis the value of that interest ought to be included in the property pool – which will no doubt increase the value of assets to be divided between the couple. 

In summary it may well be highly advantageous for a party who wants to assert that an equitable interest in farming assets exists to obtain careful and considered legal advice on the specific circumstances under consideration. 

[1] [2015] SASC 95