The Rural Voice, 1999-09, Page 80Agrilaw
The family farm — who gets what?
By Paul G. Vogel
On a family farm, grandparents.
parents and grandchildren may all
work together and contribute their
labour and capital to provide an
income for all. In the course of day-
to-day life. formalizing such
arrangements by plan or contract may
appear unnecessary as each family
member provides their contribution.
However, should there come a time
when the enterprise must be sold or
divided, ambiguity with respect to the
business relationship and contribution
of various family members may lead
to bitter, protracted and expensive
litigation.
In a recent case decided by the
Ontario Court of Appeal, a son and
the estate of another son (represented
by a grandson) sued their mother
(represented by another son) to
recover the investment of the two
sons in buildings and farm equipment
on a family dairy farm owned by the
mother. Prior to his death, the father
had transferred the milk quota
required for the dairy operation to the
two sons and, through his will, he had
left the farm property (including all
buildings, equipment and the dairy
herd) to his wife. Throughout the
father's life and for 14 years
following his death, the two sons
carried on the dairy operation,
depositing all proceeds in the farm
bank account from which all
expenses were paid and from which
each family member drew an
equivalent amount every month. In
addition, after their father's death, the
two sons periodically withdrew larger
sums which they individually
invested in guaranteed investment
certificates.
At the same time as the mother's
health began to fail and she ceased
drawing from the farm bank account,
the two sons redeemed a portion of
the guaranteed investment certificates
to undertake a significant expansion
of the farm which included
construction of a new barn,
renovation of the existing barn, and
76 THE RURAL VOICE
purchase and installation of milking
and manure -removal equipment.
Although their mother was aware of
this investment, and had in the past in
fact encouraged them to modernize
the dairy operation, there was no
evidence that she consented to this
expansion. With her declining health,
there was even some issue as to
whether she
had the neces-
sary mental
capacity to
understand the
expansion was
being under-
taken. In the
meantime, the
mother, the
two sons, and
a grandson
continued to
reside on the
farm property.
Four years
after the expansion was undertaken,
one of the sons became ill and the
two sons decided to terminate the
dairy operations and sell the milk
quota. After the death of one of the
sons, the remaining son and his
brother's estate (represented by the
grandson) commenced a court action
against the mother (who, because of
her incapacity, was represented by
the other son) to recover the
investment in buildings and
equipment which had, of course,
accrued to the benefit of the mother
as the legal owner of the farm.
Although the trial judge had decided
that the brothers should recover their
investment because otherwise the
mother would be unjustly enriched,
the court of Appeal disagreed. In
reversing the trial judge's decision
and dismissing the claim by the
brothers for reimbursement, the Court
stated:
"In my view ... the only
reasonable finding open to the trial
judge was that (the sons) knew
that (their) mother had not
consented to the construction of
Lack of
written
agreement
cart lead
to bitter,
expensive
litigation
the barn, that she appeared to
disagree, that she was not in her
right mind at the time, that he
ignored her and proceeded to
construct the barn. The absence of
(the mother's) consent to the
construction of the barn and the
making of the other improvements
to the farm — indeed, the absence
of any evidence that she expressly
requested her sons to undertake
this work — is the essential reason
why the respondent's claim, based
on unjust enrichment, should fail".
For the brothers to have recovered
their investment because of their
mother's unjust enrichment, the
Court held that the brothers were
required to prove not only their
mother's enrichment and their own
deprivation, but also the absence of
any justification for the enrichment.
The Court found that the brothers
could not succeed in demonstrating
absence of justification for the
enrichment unless they could
establish not only their own
reasonable expectation of
reimbursement at the time of the
investment but also their mother's
knowledge of that reasonable
expectation. Even if the brothers had
expected to be reimbursed, their
mother was not required to account to
them if she was unaware of their
expectation because to do so would
be to allow the brothers to
unilaterally create legal obligations
binding upon their mother. The Court
concluded:
"Simply stated, this is a case
where the evidence shows that (the
sons) constructed the barn, and
otherwise improved the farm
property, without the consent of
their mother who was the owner of
the farm property, and
subsequently expected that she
would reimburse them for having
done so. However, there was no
evidence that when they incurred
these expenses, (the sons)
expected to be reimbursed by their
mother. Moreover, even if the sons