I read the other day about a farmer who loves flying back into the UK after a holiday and looking down on the patchwork of fields below. For many lawyers, that is the nearest that we get to the countryside. It presents itself in a bucolic way; crops in the fields, livestock grazing, farmers at work and harvest festivals. England’s green and pleasant land – what could go wrong?
As you might expect, there is much that can and does go wrong in this rural idyll of ours. But how do these difficult disputes arise? This article explores why this is the case and how problems can be fixed.
I believe that there is a fundamental factor, which, at first blush, seems to be ideal but inevitably creates tensions which can spill over into something altogether more serious. This is the very nature of the family farm. You can picture the scene; it is one which is replicated throughout the length and breadth of the country. The family business is usually farmed by more than one generation with everyone involved both living and working in the same place. Sounds claustrophobic? It often is! It is worth looking at some of the pinch points.
It may seem glib to pass many of them off as inevitable family problems which are exacerbated by the fact that everyone inhabits and works in the same space. However, that seems to be the reality and so many families appear to find it reasonably difficult to debate and resolve those hot topics which arise every now and then. Some of the principal issues may be seen to be predictable:
Tensions between generations, especially where sons and daughters look to vary established ways of working;
Sibling rivalry, where sons and daughters vie with others for control of the business; or where there is a mis-match of ambition for the business or parts of it; or where one party has established a successful income stream and perceives that another is not pulling his or her weight.
The classics – Mum and/or Dad refuse to relinquish the reins of the business; or lack of money or profit, unhappy marriages or relationships, housing arrangements…
…the list goes on!
It is relatively easy to identify the weaknesses and fault lines; more difficult, of course, to resolve them. One of the problems that so many farming families have is an inability to talk to each other about the business in anything like a strategic way. Sometimes, of course, they cannot talk to each other at all!
Many families trade in partnership and, hopefully, there is a partnership agreement to govern the business relationship between the parties. The problem with many of the farming partnership agreements which I see is that they are out of date and, more often than not, observed in the breach. Put simply, they have outlived their time and badly need renewal. Modern and alert businesses recognise this and do something about it; most do not. The best that can be said for some agreements is that they provide a mechanism for paying out a partner who leaves, whether by death, retirement or even expulsion. Too often, though, that mechanism has not been properly thought through by the partners and the consequences have not been fully considered. At least, an agreement prevents the operation of the fall back position set out in the Partnership Act 1890 which is an ancient and usually unsatisfactory means of resolving partnership matters.
In the agricultural sector, it is unfashionable to provide for a decision-making mechanism in the partnership agreement but this may well be part of the solution. Why not agree to have a quarterly partnership meeting with, if thought necessary, an independent chairman or facilitator? In this way, the partners have an early opportunity to air and confront the difficult issues in an orderly and controlled environment. Even if a quarterly meeting is considered to be too frequent, then at least have an annual meeting. Whichever route is adopted, the common and crucial factor is the non-family chairman. The identity of that person is irrelevant; it could be the family accountant, agri-consultant or solicitor. Whoever it is must, self evidently, command the respect of the partners and have the requisite skills to promote compromise or agreement. The cry will inevitably go up, “We cannot afford that!” The easy and entirely appropriate response is, “You cannot afford not to!”.
The issues are not restricted to partnerships, of course. They apply equally to other businesses structures such as private limited companies where the shareholders are members of the family. The norm in a commercial environment is a shareholders’ agreement but this is rarely seen in an agri-context. Once again, though, it is so important for the participants to have the opportunity to be able to meet and resolve problems. The obvious solution of an independent chairman applies just as much in this scenario as in partnerships.
Unfortunately, sometimes this will not happen for a variety of reasons. The reality is that very few agri-family disputes flare up into full blown litigation. Rather they rumble on and become an unpleasant elephant in the room. It means that there is a running sore on the fabric of the family and business which operates to impinge upon decision making and progress across a wide spectrum of the family’s affairs. The parties involved become used to managing the problem and professional advisers learn to tread carefully around them. Everything becomes uncertain and a deeply unsatisfactory stand off ensues.
How much more satisfactory it could be if the parties resorted to a mediation process in order to try and resolve the situation and, effectively, move on. Mediation does not have to be an alternative to litigation; it can be an end in itself. In so many ways, it may well be the answer to a whole range of family-orientated business disputes which the parties find it difficult to resolve themselves. The non-adversarial nature of mediation is ideally suited to such problems and, indeed, a very good case can be made for ensuring that these disputes are mediated sooner rather than later. After all, the longer the argument lasts, the less likely it will be that harmonious relationships will ever be restored.
We will never be able to prevent our clients from falling out with each other but we can help them to find a way through the problems and mediation should be one of the first strategies which we apply, rather than the last.