Sprackling v Sprackling

Approved Judgment

Hearing dates: 27-30th October 2008

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

Richard Sprackling (“the Deceased”) died on the 17 February 2006 of a brain tumour. He had been a farmer and agricultural contractor in the Petersfield area. The professional advisors who worked with him described him as cautious, careful, extremely thorough and a man who thought about things a lot. His daughter described him as a non-confrontational man who would do what is right.

He was survived by his second wife Felicity Ann Gonsalves Sprackling (“Felicity”) whom he had married in March 200She had trained as a plant scientist but had become a solicitor in the early 1990s. The Deceased quite plainly adored her: and at trial his family was generous in their acknowledgement of the happiness of the Deceased and Felicity's marriage.

The Deceased was also survived by the children of his first marriage to Ann Sprackling who had died in 2000. His eldest son was Simon. He had moved away from the farming business in 1977 but had returned in 1986. He and his family lived in the farmhouse of one of the tenanted holdings at Thorney Island, Emsworth. The Deceased and Ann had a second son, Shon who had been in the farming business since his education finished. He and his family lived in the farmhouse on another tenanted holding at Dangstein Farm, Rogate, Petersfield. Simon and Shon had a sister Joanna. She has children by an earlier marriage but at the time of the events in question, was married to Charlie Barlow, a businessman, and lived in France. As is so frequently the case, there were mild tensions between the Deceased's second wife, and the children of his first marriage: but it is important not to over emphasise the significance of this feature.

At the time of his death the Deceased's assets may be conveniently described as falling into six categories:-

(1) His shareholding in RN Sprackling Ltd (“the Company”);

(2) Freehold land at Sandilands Farm, Rogate;

(3) Freehold land at Nyewood Farm, Rogate;

(4) A holding of tenanted land at Thorney Island (held on a joint tenancy by the Deceased and his brother Arnold David);

(5) Other tenanted land at Chilgrove, Ditcham, Dangstein and Wakeham (tenancies held by the Deceased, either alone or jointly with one of his sons);

(6) Modest personal chattels and the proceeds of an en-cashed NFU Bond.

It is necessary to expand a little on three of these assets.

First, the Deceased's shareholding in the Company. The Deceased had for many years farmed in a equal partnership with his first wife Ann. On her death she left her farming interests to the Deceased outright. The Deceased arranged for a Deed of Variation to be entered under which his wife's 50% share in the farming partnership was given equally to Simon and Shon. Following that redistribution of the partnership interests the Company was incorporated on the 1 February 2002 and commenced trading on 1 April 2002. These formal business arrangements were thus put in place contemporaneously with the Deceased's marriage to Felicity. The Company had 30,000 issued shares, of which the Deceased, Simon and Shon each held 10,000. Each of them was a director. Their interests in the partnership were treated as loans to the Company, and the appropriate directors' current accounts were created. In consequence the Deceased's director's current account was larger than that of either of his two sons. These current accounts are important in two respects. (a) It was from the outset the intention of the Deceased and his sons that the Deceased should withdraw his capital by drawing down on his director's current account. This he did at the rate of £1000 per fortnight until 200(b) Simon and Shon each took the minimum by way of wages and director's remuneration, so that to pay the living expenses of themselves and their families they too had to draw down on their director's current accounts. The object of this was to save National Insurance, the intention being that the Company would declare dividends which would remain un-drawn and thus would be added to the current accounts to fund further drawings.

The Company's farming enterprise consisted of a number of different profit centres. In the period immediately preceding the Deceased's death they included:-

(a) A 500 head herd of organically reared Aberdeen Angus cattle: these were run in rotation on Sandilands Farm and other organic land. They were never brought in and therefore required no buildings.

(b) A very substantial agricultural contracting and grass cutting business (which had been the prime responsibility of Simon). It was highly cash generative, but significantly dependant on securing long term contracts.

(c) A composting business operated on some of the farms, which was low cost, highly profitable and also cash generative.

(d) Various share farming arrangements on the arable land relating to vegetable and other crops.

Over the years a number of other businesses had been tried by the Deceased on the land, some of which continued in a small way, and some of which had been abandoned. These included horse livery, the construction of a cross country eventing course, chicken production and egg production. This was typical of the Deceased's thoughtful approach to his affairs, but equally demonstrated his ability to look coldly at (and to abandon) unsuccessful ventures.

As part of the evolution of the farming enterprise during the course of 2000 the Company had established in a building on Sandilands Farm a meat processing plant. The economic case for this was sound. Whereas a beef carcass could be sold Waitrose for £500, the same carcass if processed and sold directly by the Company could yield £1,500. This involved the Company in venturing to a significant degree into the retail market, which it did by establishing “Rother Valley Organics” as a brand. This occasioned very heavy start up costs: not only was there the capital expenditure on the building, but there was an addition to current costs in the employment of butchers and in the engagement of a marketing and public relations consultant. It also took the Company into areas of administration of which it had no real experience (such as stock control). Since one of the outlets for processed meat were burger vans operated by or on behalf of the Company this raised issues of micro management, of which neither Simon nor Shon had any experience.

The Deceased, Simon and Shon decided not to borrow in order to establish the meat processing plant, but to rely upon internally generated cash (ie from the contracting and composting businesses) supplemented by a rural enterprise grant that would be repayable in the event that the processing plant closed. This imposed heavy strains on cash flow (further depleted by the current costs of operating the plant) and led by mid 2005 to a severe “cash pinch”. This was exacerbated by the notorious departmental delays in the making of the single farm payment. It therefore represented a general challenge to the business of the Company. The Deceased responded by ceasing withdrawal of his capital. Simon and Shon (particularly the latter who had significant school fees to find) did not respond in the same way.

It is also necessary to deal at some further length with Sandilands Farm. This had been inherited by Simon, Shon and Joanna's mother. It consisted of approximately 105 acres held in a single block traversed by the River Rother. Approximately 70 acres consisted of organic arable on which, in rotation, the Aberdeen Angus herd grazed. The River Rother ran across the middle of this organic land before flowing into the adjoining holding and then bending round to form the northern boundary of Sandilands Farm, where the farm enjoyed fishing rights. In one of the fields adjoining the river where it traversed the organic land Simon had dug a lake of some two acres or more and in the adjoining field had constructed a car park. Access to the car park was over an un-metalled farm track which ran eastwards along the northern boundary of the parcel to the main road. At this point there was a little peninsula of land of some two and half acres. On this a bungalow had been constructed called (at the time of the Deceased's death) “Sandilands Farmhouse”. The bungalow was set in a small garden carved out of the surrounding fields, which were two paddocks (the southern one crossed by the access way which served the lake). There was only a small common boundary between the paddocks in which Sandilands Farmhouse was set and the rest of the holding. Between the organic arable and the peninsula of land were two further fields (called “Orchard Field” and “Stable Field”) which were non-organic, and which were let together with some buildings in the southern field, as an equestrian centre. In the buildings immediately adjoining the equestrian centre itself were to be found the farm office (which was the central administration point for the whole of the Company's enterprises) and a building in which the meat processing plant had been constructed. The lease of the equestrian centre was due to expire in July 2006. It had originally produced a monthly rent of £2,420: but the construction and operation of the meat cutting plant had upset the tenant and...