CHANCERY DIVISION
 

Before: The Hon. Mr. Justice Carnwath
 
 

B E T W E E N

JUDGMENT
 
DATED: 17 June. 1998

Mr. Justice Carnwath :

There are before me four sets of proceedings, all arising out of the breakdown of relations between Mr Gillett and Mr Holt in 1995, ordered to be tried together by Master Dyson on 3 September 1997. They comprise:

1. The main action. In this action Mr Gillett asserts a claim that Mr Holt has (and had by 1992) become subject to an obligation founded on proprietary estoppel to bequeath substantially the whole of his estate to Mr Gillett. Mr Wood is the second defendant to that action, because since 1992 Mr Holt has made Wills in favour of Mr Wood and transferred substantial assets to him. Mr Gillett's case, in summary, is that he devoted his entire working life to the service of Mr Holt on the understanding, fostered by Mr Holt, that he would inherit his estate, including in particular the farming business which he managed for Mr Holt until 1995.

2. The land action. In this action KA Holt Limited ('KAHL'), a company controlled by Mr Holt, seeks to recover farmland at 'The Beeches' from Mr Gillett, and from Countryside Companions, an unlimited company belonging to Mr Gillett and his wife, Sally. This farm (formerly known as Hatton Farm) was acquired by KAHL in 1971. Since about 1987 the Gilletts have carried on a business under the name 'Countryside Companions', using part of the land at The Beeches. The defendants claim that they hold this land under a protected agricultural tenancy.

3. KAHL petition. This is Mr Gillett's petition under s 459 of the Companies Act 1985. KAHL was formed by Mr Holt in 1957 to carry on his farming business. In 1983 he gave 2,500 shares each to Mr Gillett and his wife (representing in total 20% of the company). The petition alleges that the purpose of this transfer was to give partial effect to Mr Gillett's role as 'partner' in the business. It complains that since about October 1995 he has been excluded from management of the business, and that the business has been carried on in a way which is unfairly prejudicial to him. It seeks an order for his appointment as a director of the company and other steps to protect his interest.

4. The G&H Farms Ltd petition. This is a petition by Mr Holt, also under s 459. G&H Farms Ltd ('G&H') was incorporated in 1973. Mr Holt and Mr Gillett initially had equal shares (45% each), the remainder being held by Mr Holt's brother, Noel. In 1991 Noel's interest was transferred to Mrs Gillett, since when the Gilletts have had control. The company was set up to acquire plant and machinery for use in the KAHL business, one of the purposes of the arrangement being to transfer value out of KAHL and into a company in which Mr Gillett had a substantial share. The petition alleges that, since Mr Gillett was dismissed in November 1995, the primary object of the company has gone and 'with it the company's substratum', and that its affairs are being conducted in a manner which is unfairly prejudicial to Mr Holt. The relief sought is that the Gilletts should be ordered to purchase Mr Holt's shares at a fair value, or that the company be wound up.

Outline facts Mr Ken Holt was born in 1914. His father was a farmer in North Lincolnshire. There was a family trust, derived from his grandfather's shipping company in Liverpool, which was wound up in 1973 following the sale of the business for some £8m. Mr Holt received a substantial share. Mr Holt himself is unmarried and has no children.

Mr Holt began farming on his own account in 1936, when he became tenant of a farm known as the Limes, a holding of some 536 acres. The Limes Farmhouse has been Mr Holt's home ever since. The freeholders (from 1947) were Merton College. KAHL was formed by Mr Holt in March 1957 to take over the farming business, but he remained the tenant of the land. He bought the adjoining White House Farm in May 1963.

Mr Gillett was born in 1940. He first met Mr Holt in 1952. He began to work for him on the farm in 1956, and in the following year went to live at the Limes. He and Mr Holt developed a strong personal attachment. They shared social and recreational activities. There was even discussion of Mr Holt adopting him.

Mr Gillett met his future wife, Sally, in 1961. They married in December 1964. They had bought Rose Bank Cottage, Thimbleby, in August 1964 with a mortgage from the Abbey National. At about that time, at a dinner following the harvest, Mr Holt told them of his intention to allow Mr Gillett gradually to take over the complete running of the farm, and to leave the farming business to him after his death.

In February 1971 KAHL acquired Hatton Farm, later known as The Beeches. In the same year the Gilletts sold Rose Bank and moved into The Beeches farmhouse. In April 1971 the Gilletts' first son, Robert was born and Mr Holt became his godfather. The second son, Andrew was born in March 1973. In June 1973 G&H was established. In 1977 Mr Holt sought advice as to how to pass on the farming business to Mr Gillett and his family in a tax-efficient way. By September 1978 this had crystallised into a decision in principle to give 20% of the shares in KAHL to Mr Gillett, to sell White House Farm to KAHL, and (subject to tax considerations) to channel future machinery purchases through G&H. The transfer of the shares in KAHL was not implemented until the end of 1983 when Mr and Mrs Gillett were given 10% each of the shares in KAHL.

In 1987 Mr Gillett began to develop what was called the Countryside Companions Project. This was intended initially to involve commercial production of wild flower seed, but was then extended to include growing of native trees and shrubs, and fish farming. An oral agreement was reached between Mr Gillett and Mr Holt, recorded in Mr Gillett's note of 6 April 1988, allowing Countryside Companions to rent land at the Beeches Farm. Countryside Companions was incorporated on 27 April 1988. At his own wish Mr Holt was not involved as a shareholder or director. Although three other individuals were involved initially, for the purpose of these proceedings the company can be treated as having been at all material times owned by Mr and Mrs Gillett.

In July 1989 the Gilletts were given the controlling interest in G&H. In September 1991 Mr Holt made a codicil to his Will appointing a new executor but otherwise confirming his intention to pass the estate substantially to the Gillett family.

In April 1992 Mr Holt met Mr Wood, who was then a trainee solicitor, aged about 20. A strong friendship developed between them, and in 1993 Mr Wood came to live with Mr Holt. This relationship was not popular among Mr Holt's former friends. It began to cause friction with the Gilletts, which came in to the open on occasions. In February 1994, Mr Holt made a new Will, which included a legacy of £100,000 to Mr Gillett and smaller legacies to the sons, but otherwise left the estate to Mr Wood (subject to a request that Mr and Mrs Gillett be entitled to live in The Beeches for as long as they wished). Relations deteriorated during the remainder of 1994, and 1995. In April 1995 there was a further change in Mr Holt's Will, the legacy to Mr Gillett being reduced to £50,000.

On 4 October 1995 Roythornes, (the solicitors with whom Mr Wood was by this time working) wrote to Mr Gillett on Mr Holt's behalf, referring to the 'breakdown in recent months of the personal and working relationship' between them, and complaining among other things of Mr Gillett's abusiveness to Mr Holt and his attempts to exclude Mr Holt from the business. They gave notice that as from 6 April 1996 all operations would be taken over by contractors, and there would be no further need for the services of G&H; he was invited to discuss his likely redundancy. Mr Holt then instructed a Mr Vestbirk, of Aubourn Farming Limited, to conduct a review of the farming operations. Following his visits to the farm in November, and his preliminary report, disciplinary proceedings were commenced against Mr and Mrs Gillett. The grounds related principally to allegations of 'secret profits' derived from transactions carried out by them in the name of Countryside Companions rather than KAHL. At a disciplinary hearing on 27 November they were summarily dismissed. Mr Vestbirk took over the management of the farm. On 20 November Mr Holt made a new Will in favour of Mr Wood, excluding the Gilletts entirely.

Before considering the issues in detail, I should mention the slightly unusual course which the proceedings have taken before me.

The Amended Defence sought to justify Mr Gillett's dismissal by reference to a series of complaints, and a deteriorating relationship, beginning from the late 1970s (paragraph 59.3), leading up to the allegations that by 1993 he 'was devoting the bulk of his time to the affairs of Countryside and grossly neglecting KAHL's business' (59.10), that by 1995 he was spending 'virtually no time on KAHL's business' (59.16.1), and that by September 1995 Mr Holt 'could stand no more of (Mr Gillett's) intolerable hostile conduct towards him' (59.18). These powerful allegations were in substance repeated in the skeleton argument submitted by Mr Holt's Counsel at the beginning of the trial. For example, they said:-

"The close relationship between KH and GG deteriorated over time. It is (Mr Gillett's case) that the cause of this was (Mr Holt's) friendship with (Mr Wood). This is disputed; (Mr Holt's) evidence will be that the events of October/November 1995 were the culmination of a process that started in about the mid-1980s before he met (Mr Wood). In short, (Mr Gillett) gradually became hostile, abusive and intolerant towards Mr Holt, treating (him) as an interfering old fool" (paragraph 21-2).

They also promised detailed evidence dealing with 'GG's dishonesty/breach of duty' (paragraph 36ff) and justifying his dismissal, including evidence from Mr Holt and Mr Wood, and also Mr Plummer (of Roythornes) and Mr Vestbirk.

This was the case which the Gilletts faced at the beginning of the trial. Understandably, they responded with voluminous evidence covering the whole course of their relationship with Mr Holt, and their answers to the specific charges made in 1995; and they were cross-examined at length upon that evidence.

In the event, following the conclusion of the Plaintiffs' case, the Defence elected to call no evidence at all. They were entitled to take this course, but it is not one which fits easily with modern practice. One of the purposes of requiring the exchange of witness statements, and skeleton arguments, is that the parties should come to the trial knowing the cases they have to meet; and that the judge should be able to prepare himself and so save time at the hearing. Although witness statements are technically privileged until the witnesses are called (Balkanbank v. Taher [1995] 1 WLR 1067), it is normal for the judge to read them in advance. In this case I had, without objection, read all the Defence statements at an early stage in the trial, and I heard the case based on them put in cross-examination. Although it is my duty now to 'forget' those statements which have not been proved in evidence, I am conscious of the danger that my perception may remain coloured.

Another problem is that, under the rules (Order 35 r.7(3)), if a defendant elects to call no evidence, he is normally (in the absence of a direction to the contrary) entitled to make his submissions after the closing speech for the plaintiff. This is not a serious problem if the Defendant's skeleton argument has been prepared on that basis. But in the present case, it had the curious effect that Mr McDonnell found himself replying to a Defence case which had not yet been formulated. This aspect of the Rules may need review. (Had Mr McDonnell evinced any sign of embarrassment at the task, I would have been inclined to allow some flexibility in application of the Rule. However, he did not ask for any contrary direction. Indeed he may well have relished the opportunity to have two bites of the cherry before his opponent had had one.)

Against that background I will say at once how I assess the evidence which I have actually heard, in relation to the breakdown of relations between Mr Holt and the Gilletts, leading up to their dismissal at the end of 1995. In the first place, I find no evidence to support the original case that there was a serious cause for complaint before 1992. It is not in dispute that up until that time, Mr Holt treated the Gilletts, and was treated by them, as part of one family, and that he intended to leave the bulk of his estate to them. That intention was confirmed when in September 1991 he confirmed his 1986 will by a codicil. It is also clear that for the most part he was content to leave the management of the farming business to Mr Gillett. There is no suggestion in any of the correspondence over the years before 1992 that he was dissatisfied with Mr Gillett's work.

There is evidence that Mr Gillett on occasions became frustrated by the lack of any more tangible recognition of his services. For example, there are some manuscript notes, apparently prepared by him in 1981 for a possible presentation to Mr Holt which never happened. This was at a time when discussions with the accountants had been going on for some three years on possible ways of transferring value to him in a tax-efficient way. In one of his notes Mr Gillett complains:

"After a long series of intermittent discussions no conclusion has been reached. During this protracted period I have accepted a lower salary in anticipation of a substantial capital involvement over the years. I believe the time has come that a satisfactory solution must be reached as my total involvement in the farm must not be allowed to wane. As you are aware I have been for some time frustrated because of your policy of non-expansion. I ask myself at 40 years old just what on earth I will do with my untapped energy for the times on the farm when it is slack."

Another continuing concern which was raised on several occasions with Mr Holt was a desire for some more formal arrangement for their occupation of The Beeches farmhouse.

However, there is no evidence before 1992 that these frustrations were reflected in any failings in his management of the farm. As has been seen, by 1983 he was given a share in KAHL itself, and in 1987 he was able to turn his surplus energies to the Countryside Companions project. His evidence is that this project was encouraged by Mr Holt. Mr Gillett says that Mr Holt was 'very enthusiastic' about the idea but did not wish to be involved himself as shareholder or director:

"As he expressed his reasoning, if the company was successful, it would only add to his wealth and the problem of handing over assets to me and cause more tax complications."

Thereafter, according to Mr Gillett, Mr Holt took a 'close and genuine interest' in what was happening at The Beeches, and he would have been well aware of the land which was being used by Countryside Companions; their crops looked 'dramatically different' from normal crops. There is no reason to doubt this evidence. Even in 1994, in his correspondence with Mr Gillett's father, Mr Holt confirmed that the new project had been started with his 'blessing and support'. Furthermore, it is clear that close social contact continued between them. For example, the Gilletts organised a successful 70th birthday party for Mr Holt in 1984. He participated in their silver wedding celebrations in December 1989, and he had their son Andrew to stay while they were abroad on a 6-week celebratory cruise. There is not a hint of hostility on either side in the contemporary documents (for example, Mr Holt's friendly letters to his godson, Robert Gillett, in February 1990). In summary, while there may have been disagreements and frustrations in this period, the relationship remained close and successful.

As for the period after 1992, there is no doubt that the primary cause of the rift was the change in Mr Holt's affections, brought about by Mr Wood's appearance on the scene. This is not just the view of the Gillett family, but it is supported by Mrs Bell (Mr Holt's housekeeper since 1961) and his brother, Noel. From Mrs Bell's evidence it is clear that Mr Holt's relationship with Mr Wood, developed into something of an obsession, which was of concern to his family and other friends. Not having heard Mr Holt or Mr Wood (although they were sitting together at the back of the court for most of the trial), I have no reason to doubt her account. By February 1994 this relationship had developed sufficiently for Mr Wood to have replaced Mr Gillett as the principal beneficiary under Mr Holt's will.

The Gilletts' view of the matter at the time can be seen in an exchange of correspondence in February 1994 between them and Noel Holt. Noel had written on 1 February referring to a meeting with Ken and their solicitor from which it had become 'obvious that David is now in his will', but promised his own support for the Gilletts. He complained that on a recent visit he had been left on his own in the evenings, while Mr Holt and Mr Wood went out to dinner together; he said he did not expect to come to The Limes again, while David was there. In his reply Mr Gillett said:

"We guessed that Ken had altered his will and thank you for the support you offered. This very much disappoints Sally and I as we have been here for 40 years and worked for small remuneration on the basis that there would be a reward in due time. It now appears that we are to be put on one side for the new boy. I recently asked Ken to increase my pension, now only £2,700 per year plus profits, but he refused saying I had 'no right' to a pension. I then asked if he would give us the tenancy of The Beeches house secured for the rest of Sally and my days, but again he refused. This attitude leaves us with no peace of mind for our future and at this late stage in our lives gives us very little time to make any provision for a reasonable retirement."

In these circumstances it is not surprising that relations between the Gilletts and Mr Holt deteriorated, and that there were more overt disagreements. But there was no complete breakdown. Indeed, the Gilletts organised a successful 80th birthday party for Mr Holt in March 1994 (without Mr Wood). Mr Holt's own attitude is apparent from an exchange of correspondence between him and Mr Gillett's father at the end of 1994. This followed Robert's engagement party which was attended by Mr Holt. Mr Gillett senior wrote referring to his sadness at the 'deterioration in the relationship between you and Geoff . . .since David came on the scene.' Mr Holt in his reply said that the letter had come as 'quite a shock'. He went on to say that any deterioration in the relationship if there was one was of their own making. He referred to recent examples of what he considered to be discourtesy by Mr Gillett, and also his feeling that Countryside Companions had become his first priority and the farm was suffering. As to David, he referred to himself as acting as 'a grandfather' to him. He said: 'why should he be brought into this? Is it jealousy on their part.' Of course, Mr Holt was free to choose his friends as he wished, but it showed extraordinary insensitivity if he believed that this could happen without having any effect on his relations with the Gilletts. Of more relevance than the state of their personal relationships is the suggestion that Mr Gillett was neglecting the farm in favour of Countryside Companions. It is here that the lack of any evidence on the defendant's side causes particular difficulty. The case which was to have been made by Mr Holt, and supported by Mr Vestbirk and Mr Wilkinson, the farm foreman, has not been heard. Instead I have evidence from a number of witnesses, admittedly partial to Mr Gillett's cause, that Mr Gillett continued to carry out his duties as a farm manager effectively. For example, Robert Gillett, who was a horticultural worker with Countryside Companions, says that his father always made it clear that the farm had priority. Other witnesses confirm that Mr Gillett continued to enjoy the respect of the farm workers and was regarded as a good manager by them, up to his dismissal in 1995. Mr Wingate, who was Mr Gillett's brother-in-law, and another local farmer, was a regular visitor, and confirms that the farm was run to a high standard both before and after the wild flowers project. More independent corroboration is given by Mr Edwards, who worked for Countryside Companions from June 1994, and appeared to me to be an objective and reliable witness. He confirmed that Mr Gillett continued to be an effective and respected manager of the farm, and gave it priority.

Accordingly, the general impression given by the evidence is that Mr Gillett continued to discharge his duties as a farm manager properly, in spite of his deteriorating personal relationship with Mr Holt. The final breakdown in the relationship, which came to a head in Roythorne's letter of 4 October 1995, could not fairly be blamed on Mr Gillett.

Notwithstanding the lack of any positive evidence to contradict that impression. Mr Martin in closing persisted with the case that Mr Gillett was 'flagrantly in breach' of the trust which Mr Holt was entitled to expect from him, and that such misconduct was sufficient to destroy any equity which might otherwise arise (see eg. Willis and Son v. Willis [1986] 1 EGLR 62).

This was based on a number of specific complaints, which he supported by reference to the documentation and to his cross-examination of Mr Gillett and other witnesses. They included allegations as to the treatment in the accounts of the area of land occupied by Countryside Companions and the rent paid by it to KAHL; the arrangements for sale of peas and beans by KAHL to Countryside Companions, which, it is said, were structured to benefit Countryside Companions at KAHL's expense; the arrangements for charging for labour as between KAHL and Countryside Companions; an incident in 1994 when the documentation in respect of the purchase of a tractor was switched by Mr Gillett from KAHL to G&H; and other similar allegations.

Mr Gillett has responded to all these complaints, and has been cross-examined on his explanations. In view of the conclusions I have reached on the main issues (see below), I do not find it necessary to examine them in detail. I doubt, in any event, whether they would have affected the overall result. In the first place, it was not these complaints which led to the breakdown in the relationship. They only emerged in the investigation following the letter of 4 October. Secondly, whether or not I accept Mr Gillett's explanations, what matters much more is how Mr Holt would have reacted to these points if he had not by then been looking for reasons to justify the separation.

The complaints are largely concerned with the accounting between KAHL, G&H and Countryside Companions. Although it was understood that proper accounts would need to be kept between them, if only for tax reasons, for many purposes the businesses was treated as one enterprise. This clearly caused problems when the Gilletts were confronted by Mr Vestbirk and Mr Plummer with the detailed investigation in November 1995. As Mrs Gillett says:

"What they didn't seem to grasp was that the whole thing was treated as one enterprise and it was divided up in this way so that assets could be passed on to us before Ken died so as to save tax."

Whatever view I might objectively form of the propriety or otherwise of Mr Gillett's actions in relation to these matters, it is the perceptions of the parties themselves which matter. In the absence of evidence from Mr Holt, it is impossible to judge to what extent any of the complaints, if substantiated, would have been regarded by him, before Mr Wood's intervention, as sufficient to end a successful relationship of nearly 40 years.

Another difficulty is one of basic fairness. It seems to me fundamentally unfair to make findings against Mr Gillett on serious charges of breach of trust and impropriety, when those who make the charges have not in the event put their heads above the parapet to support them. If they had given evidence, it would have been possible for them to be cross-examined on the detailed responses made by Mr Gillett, and I would have had a balanced picture of the true significance of the individual points.

The plaintiff relies on the doctrine of proprietary estoppel as explained in re Basham (deceased) [1986] 1 WLR 1498. In that case, the plaintiff had looked after the deceased over a number of years in the expectation, encouraged by him, that she would inherit his property on his death. It was held that this was sufficient to establish her claim to his residuary estate. The principle was stated by Mr Nugee QC, sitting as a Deputy High Court Judge, as follows (p 1503 - 1504):

"Where one person, A, has acted to his detriment on the faith of a belief, which was known to and encouraged by another person, B, that he either has or is going to be given a right in or over B's property, B cannot insist on his strict legal right if to do so would be inconsistent with A's belief."

He continued:

"The principle is commonly known as proprietary estoppel, and since the effect of it is that B is prevented from asserting his strict legal rights it has something in common with estoppel. But in my judgment, at all events where the belief is that A is going to be given a right in the future, it is properly to be regarded as giving rise to a species of constructive trust, which is the concept employed by a court of equity to prevent a person from relying on his legal rights where it would be unconscionable for him to do so. The rights to which proprietary estoppel gives rise, and the machinery by which effect is given to them, are similar in many respects to those involved in secret trusts, mutual wills and other comparable cases in which property is vested in B on the faith of an understanding that it will be dealt with in a particular manner."

He referred to Re Cleaver [1981] 1 WLR 939, in which Nourse J explained such rights in the context of mutual wills:

"The principle of all these cases is that a court of equity will not permit a person to whom property is transferred by way of gift, but on the faith of an agreement or clear understanding that it is to be dealt with in a particular way for the benefit of a third person, to deal with that property inconsistently with that agreement or understanding. If he attempts to do so after having received the benefit of the gift equity will intervene by imposing a constructive trust on the property which is the subject matter of the agreement or understanding."

Mr Nugee continued:

"The factor which gives rise to the equitable obligation in the cases to which Nourse J referred is B's receipt of property on the faith of an understanding. In cases of proprietary estoppel the factor which gives rise to the equitable obligation is A's alteration of his position on the faith of a similar understanding." (p 1504D-E)

Re Basham was cited with approval by the Court of Appeal in Jones v. Watkins (26/11/87 unreported). In that case the plaintiff claimed to have helped the deceased on his farm over a long period, in reliance on promises that he would inherit it. The claim failed, principally because he did not establish that he had suffered substantial detriment in reliance on the promises. Slade LJ referred to the statement of principle in Re Basham, and added:

"If in such a case it would be unconscionable to permit A to rely on his strict legal rights, the court will exercise its equitable jurisdiction and by its order make good to him, so far as fairly may be done between the parties, the expectation which A has encouraged."

His judgment also discusses two particular elements: the nature of the representation required, and the meaning of 'detriment'. As to the former, he noted -

"… the equivocal nature of the promises (as found by the judge) which, by their nature, would not have been capable of giving rise to a legally binding contract even if supported by a mutual intent to create legal relations and consideration."

However (following cases such as Inwards v. Baker [1965] 2 QB 29, Crabb v. Arun DC [1976] Ch 179), he agreed with the judge that the equivocal nature of the promises did not prevent a proprietary estoppel arising, although it might affect the remedy:

"The equivocal nature of the promises found by the judge is clearly one relevant factor when considering whether or not it would be unconscionable to permit the administrators to rely on their strict legal title, having regard to any detriment suffered by the plaintiff in reliance on them."

With regard to the element of 'detriment', the claimant should have -

"… incurred expenditure or otherwise have prejudiced himself or acted to his detriment."

In considering whether the detriment was sufficiently substantial, the test was -

"… whether it appears unjust or inequitable that the representor should now be allowed to resile from his representation having regard to what the representee has done or refrained from doing in reliance on the representation";

(following Oliver J in Taylor Fashions Ltd v. Liverpool Victoria Trustees Co Ltd [1982] 1 QB 133).

Mr Nugee's formulation was also accepted as correct (without argument) by the Court of Appeal in Wayling v. Jones (1993) 69 P&CR 170, 172. In that case the plaintiff had lived with the deceased and helped him to run his businesses, and had been promised that he would inherit a particular hotel. Balcombe LJ added the following points:

"1. There must be a sufficient link between the promises relied upon and the conduct which constitutes the detriment.

2. The promises relied upon do not have to be the sole inducement for the conduct: it is sufficient if they are an inducement.

3. Once it has been established that promises were made and that there has been conduct by the plaintiff of such a nature that inducement may be inferred then the burden of proof shifts to the defendants to establish that he did not rely on the promise." (p173).

On the facts of that case the plaintiff succeeded.

More recently, in Taylor v. Dickens [1998] 1 FLR 806, HH Judge Weeks, sitting as a judge of the High Court, criticised Mr Nugee's formulation:

"In my judgment, in two material respects it is stated too widely. First, it omits the requirement of unconscionability which nearly all the judgments in this field insist on.

Secondly, it is not sufficient for A to believe that he is going to be given a right over B's property if he knows that B has reserved his right to change his mind. In that case, A must also show that B created or encouraged a belief on A's part that B would not exercise that right."

The claim failed in that case. The deceased had told the plaintiff that she would make a will in his favour. She had done so, but she later revoked it; he was aware that wills could be revoked, and she had never told him that she would not exercise that right. The judge said (p 32-3):

"As appears from Re Goodchild, there is all the difference between saying you will make a will and saying you will not revoke a will. Re Basham and Wayling v. Jones were both cases where a person said they would make a will and did not. This is a case where a person said she would make a will and did."

I understand that Taylor v. Dickens may be going to the Court of Appeal; and so Judge Weeks' criticisms of Re Basham may be considered at a higher level.

As the authorities stand, Mr Martin accepted that I should treat Re Basham as correct, but he asked me to approach it with care. It appears to be the only case in which a proprietary estoppel has been established in relation to an entire residuary estate, as opposed to a specific property Further, as Mr Martin said, if Mr Nugee's formulation is applied too literally '... any intending testator who mentions his intention to leave assets by will runs the risk that the representee will (unknown to the testator) rely to his detriment on the representation and so turn something that was merely an expression of intention into a binding promise.' He suggested that 'the overriding principle' is that the testator should be held to his representation 'only if it would be unconscionable for him to go back on it.' I agree with Mr Martin that this is the overriding principle. That was made clear in Jones v. Watkins. In so far as it is not expressly stated in Mr Nugee's formulation, that may be a valid criticism; but it is clear from later parts of his judgment that he had well in mind that the underlying 'concept' was to prevent a person from relying on his legal rights where it would be 'unconscionable' for him to do so (at p 1504A-B).

Another problem, as Mr Martin says, is that, under Mr Nugee's formulation, it appears to be sufficient for the plaintiff to act to his detriment in reliance on the promise, even if the promisor does not know he is doing so. The formulation requires that the promisor should have encouraged the promisee's 'belief', but not necessarily that he should have encouraged, or even been aware of, his course of action in reliance on that belief. Thus an equity may be created over the promisor's estate without his knowledge. Mr McDonnell supported that interpretation of Re Basham. He referred me to some words of Lord Denning MR in Moorgate Mercantile v. Twitchings [1976] QB 225, 242 (cited by him also in Crabb v. Arun DC [1976] Ch 179,187) -

"In such cases it has been held repeatedly that the owner is not allowed to go back on what he has led the other to believe. So much so that his own title to the property, be it land or goods, has been held to be limited or extinguished, and new rights and interests have been thereby created therein. And this operates by reason of his conduct - what he has led the other to believe - even though he never intended it." (emphasis added).

I do not accept Mr McDonnell's approach. As I read it, that dictum is saying no more than that the necessary ingredients for the estoppel may be found in the parties' conduct, without them having formed any actual intention to alter the property rights. In Moorgate Mercantile itself, the finance company was well aware how car-dealers were relying on the information which was supplied to them. In Crabb v. Arun DC itself (at p 188), Lord Denning spoke of the need for a promise, or the creation or encouragement of a belief, by one party 'knowing or intending that the other will act on that belief'. Similarly, in his classic statement of the principle in Ramsden v. Dyson LR 1 HL 129, 142 (adopted by Scarman LJ in Crabb v. Arun at p 193-4), Lord Kingsdown referred to the need for a 'verbal agreement' or an expectation, created or encouraged by the landlord', followed by action by the other party 'upon the faith of such promise or expectation, with the knowledge of the landlord, and without objection by him ...' (emphasis added).

Again, I doubt that Mr Nugee intended that to be the effect of his judgment. He referred in the following passage for the need for an 'understanding' analogous to that in the mutual wills cases. It is true that in the context of proprietary estoppel apparently, unlike that of mutual wills (cf Re Goodchild [1997] 1 WLR 1216), something less than a binding contract will suffice. However, by the word 'understanding' I understand the judge to mean a mutual understanding - which may be express or inferred from conduct - between promisor and promisee, both as to the content of the promise and as to what the promisee is doing, or may be expected to do, in reliance on it. On the facts of Re Basham, there was plenty of evidence of such a mutual understanding. For example, in relation to the work done by the plaintiff and her husband -

"The deceased never paid for any of this, but told them 'You'll lose nothing for this, doing all these jobs', and promised them that what was his would be theirs." (p 1503A).

Normally it is the promisor's knowledge of the detriment being suffered in reliance on his promise which makes it 'unconscionable' for him to go back on it. More generally, I agree with Mr Martin that particular care is needed where considering proprietary estoppel in the context of an alleged promise to make a will. I am not convinced, with respect to Judge Weeks, that it is critical whether the will is made and revoked, or never made at all; nor that the plaintiff's subjective awareness or unawareness of the possibility of revocation can be the vital factor. It would be odd if the plaintiff's proprietary rights should be diminished merely because he was unfortunate enough to have a wife who (as in Taylor v. Dickens) regularly reminded him 'not to count his chickens before they were hatched'.

Rather, I think that homely expression is an apt statement of how, in normal circumstances, and in the absence of a specific promise, any reasonable person would regard - and should be expected by the law to regard - a representation by a living person as to his intentions for his will. Subject to specific statutory exceptions (such as for dependants), the right to decide, and change one's mind as to, the devolution of one's estate is a basic and well understood feature of English law. The law allows one to disappoint the expectations of those who have no more than a moral claim on one's affections, however strong. During the lifetime of the potential testator, that is a risk which anyone seeking to rely on such a representation necessarily faces.

This point did not arise in re Basham and Wayling v. Jones, because the promisors' intentions, on which the plaintiff had relied, had remained unchanged until death, and there was no suggestion they had ever considered changing them. It is, however, supported and illustrated by Re Goodchild. The claim that the Goodchild parents had made binding mutual wills, for the benefit of their son Gary, failed because the father's actions could not be interpreted as an irrevocable promise:

"A mutual desire that Gary should inherit could not of itself prevent the survivor from resiling from the arrangement. What is required is a mutual intention that both wills should remain unaltered and that the survivor should be bound to leave the combined estates to the son. That is what is missing here. The judge found that Joan regarded the arrangement as irrevocable, but that Dennis did not. . . " (p 1225-6 per Leggatt LJ).

(It is noteworthy that Gary did not seek to argue that his father was bound, merely because he himself had ordered his life in the expectation that the estate would come to him.)

To summarise, the principle of proprietary estoppel, unlike that of mutual wills, does not depend on a binding contract in law. As Crabb v. Arun DC shows, it may be founded on an agreement in principle, or a mere 'expectation, created or encouraged' by the party alleged to be bound, in reliance on which the other party has acted to his detriment. But the party to be bound must have been aware that he was so acting. Further, in the application of the principle to statements about the intended contents of a will, the facts must be looked at against the ordinary presumption that such intentions are subject to change. It may be easier to infer a fixed intent when the subject matter is a particular property, which the plaintiff has been allowed to enjoy in return for services, than in relation to a whole estate. In any event, the plaintiff needs to show words or conduct by the prospective testator, which go beyond mere statements of intention, and which, having regard to all the circumstances, he can reasonably claim to have regarded as amounting to an irrevocable promise by the prospective testator as to how his estate would be disposed of.

Against that background, I turn to consider the evidence relied on in this case.

It is fundamental to Mr Gillett's case that Mr Holt indicated to him an intention to leave his property to him and that Mr Gillett acted on that indication. There are seven occasions relied on. Generally, in the absence of any evidence from Mr Holt's side, I accept the Gilletts' account as factually accurate.

Mr Gillett says that he and Sally (then his fiancée) were taken to dinner by Mr Holt at the Golf Hotel Woodhall Spa. The discussion was in line with earlier indications but was 'more specific'. Mr Holt explained that 'as time progressed I would be involved more and more with the farming business and in due course I would take over the complete running of the farm and when he died the farming business would be left to me in its entirety.' Mrs Gillett remembers Mr Holt saying that Mr Gillett was going to be in full charge of the farm in due course and 'that he also wanted to leave the farm to Geoff.'

There is some support from other witnesses. Mr Gillett's father speaks of a dinner at Mr Holt's house at about this time, at which Mr Holt said he wanted Geoffrey to run the farm which he saw as being 'a permanent arrangement' and that 'he would see to it that, when anything happened to himself, Geoffrey and Sally would be secure'. Sally's brother, Mr Wingate, remembers a conversation at his parents' house, at which Mr Holt said 'something to the effect that he was going to look after Geoffrey and Sally and that they would have an assured future'.

In paragraphs 13 and 14 of the Amended Statement of Claim these statements are expressed as being to the effect that 'upon his death the first defendant would bequeath all of his assets to the plaintiff'. On any view, that is overstating the effect of the evidence, which at most supports a statement of intention with respect to the farming business.

Mr Holt attended the christening as Robert's godfather and gave a speech. The Statement of Claim (paragraph 27) alleges that he stated words to the effect that 'Robert's birth would enable the farm to continue to the next generation'. This wording accords with Mr Gillett's evidence. He says it did not surprise him because it was already well settled between them that 'I would eventually succeed to his farming business'. The evidence of Sally and Mr Gillett senior is to similar effect.

According to the Statement of Claim (paragraph 32) Mr Holt held a dinner for Mr and Mrs Gillett at which he 'repeated once again that he would bequeath all his assets' to Mr Gillett, and 'specifically stated' that he believed that his non-farming assets would be sufficient to pay the tax liability on the estate 'leaving (at the least) the entirety of his farming business to be passed to the plaintiff free of liability to tax'.

The evidence does not go so far. According to Mr Gillett's statement, Mr Holt 'reiterated all he had said about leaving K.A. Holt Ltd to Sally and me on his death and the formation of G&H Farms Ltd'. As I understood his answers in cross-examination, he did not suggest that the representation extended to 'all his assets'. The other assets came into the conversation, because Mr Holt 'thought it would be possible' to use them to enable the Farm to be passed on free of tax; he was in consultation with his solicitors and accountants about this. According to Mrs Gillett, Mr Holt said that he was 'looking into the best way of passing assets over but he was worried about the tax side of it'.

According to the Statement of Claim (paragraph 34) Mr Holt told Mr Gillett that he had appointed him executor of his Will, and showed him some papers which 'appeared to indicate' that he had 'bequeathed his entire estate' to Mr Gillett. Again Mr Gillett's evidence is less specific. His statement says that at a dinner at the Golf Hotel, Mr Holt said that 'he had now made his Will in our favour', with him as one of the executors. Shortly afterwards, at the Limes, Mr Holt showed him a document which he understood to be this will, but he was not given it to read.

Mr Gillett says that he asked Ken for something in writing to confirm that the Beeches Farm would be theirs. He was told 'that was not necessary as it was all going to be ours anyway'. Mr Gillett was disappointed but after discussing it with his wife and parents decided 'that Ken was a man of his word so I accepted his assurances'. His statement supports the Statement of Claim in this respect (paragraph 35). In cross-examination he said that he understood this as a representation that the farming business would come to him on Mr Holt's death.

According to the Statement of Claim (paragraph 42) there was a party organised by Mr and Mrs Gillett. Mr Holt said that he was pleased that they and their children 'had a very secure future'. This wording accords with Mr Gillett's statement.

According to the Statement of Claim (paragraph 43), on 21 June 1989, Mr Holt had to go to hospital in Lincoln for a prostate operation. He was taken there by Mr and Mrs Gillett. He told them that, if anything went wrong with the operation, 'it is all yours, but I would like you to look after all the people who have worked for me'. Again this is supported by Mr Gillett's statement.

It is not in dispute that for a long period Mr Holt intended to leave the bulk of his estate to the Gilletts; and that he both made that intention known to Mr Gillett, and gave effect to it in wills executed by him. (The precise extent of the property covered by those statements from time to time is less clear.) What I am unable to find in the representations reviewed above is anything which could reasonably be construed as an irrevocable promise that the Gilletts would inherit, regardless of any change in circumstances. Nor do I believe that Mr Gillett himself did so construe them. In cross-examination, he accepted that if circumstances had changed materially, for example if Mr Holt had married and had children, he could not have complained if Mr Holt had made some provision for them. No doubt it was because of this insecurity that he pressed for something more formal in relation to the Beeches. On that he was unsuccessful. He must have been well aware that his expectations, however reasonable, were dependent on Mr Holt's continuing good will, and had no legally enforceable foundation.

In those circumstances the claim based on proprietary estoppel must fail.

Having reached the above conclusion, it is unnecessary to consider in detail the allegations of 'detriment', which is another essential part of the cause of action. However, in view of the time spent on this issue I shall express my conclusions. The main point relied on in this respect was the alleged acceptance by Mr Gillett of a lower salary than would otherwise have been appropriate, in reliance on the alleged promises of future inheritance. In the words of the Statement of Claim the salaries paid to him throughout the period from 1965 to 1995 were 'substantially lower than was reasonable at the time for the employment the plaintiff was undertaking.'

It is to be observed at once that, if, as I think, the Re Basham principle requires some mutual 'understanding' as to the quid pro quo for the promise, there is no evidence that Mr Holt thought he was paying less than the appropriate rate for the job. Mr Gillett puts it thus:

"I knew that I was a farm manager with an unusually high level of control and responsibility and I always felt that I was being paid as a 'run-of-the-mill' farm manager if not lower and that as a result I was grossly underpaid for the job which I actually did."

This is an expression of his own view, but he does not suggest that this view was shared by Mr Holt, nor indeed that he ever put it in those terms to Mr Holt. He says that he attempted to raise the question of his salary with Ken and -

"sometimes my attempts fell on stony ground, on other occasions he did agree to small increases in remuneration. . . "

But there is no suggestion that there was any common understanding between them that his salary would be kept below the norm because of Mr Holt's promises of future benefits in his will. As we have seen, in Mr Gillett's 1981 discussion notes, he speaks of having accepted a lower salary, not in return for expectations under Mr Holt's will, but in the hope of 'a substantial capital involvement over the years'.

The nearest he comes to alleging any specific representation by Mr Holt in this regard is when referring to a request for an increase at the time of his marriage in 1965. In his witness statement, he says that his wage was then £15 per week, but that a request for an increase was rejected when -

"Ken explained that I could not have everything at once and that Sally and I should learn to live within our means."

This is far too vague to show any clear understanding on the matter. In any event, Mr Gillett's recollection is faulty. Other evidence shows that Mr Gillett's salary was in fact increased, following his engagement to Sally at Easter 1964, from £15 to £17, and that about the time of the wedding Mr Holt wrote to his accountants proposing a more generous basis for the calculation of Mr Gillett's bonus.

For an objective comparison of his salary with the norm, he relies on evidence of Professor Giles. He is a former Professor of Farm Management at the University of Reading. He was the principal author of eight national surveys, carried out by that university, relating to farm managers' 'jobs and pay' between 1970 and 1995. These are widely recognised as the most authoritative data available on the subject. He is therefore well qualified to give expert evidence on this matter.

The exercise involved two elements: first, to identify Mr Gillett's relevant salary over the period; secondly, to assess a comparable reasonable salary for the same job. For the former, Professor Giles was dependent on information provided by Mr Gillett. Obtaining reliable figures did not prove a straightforward task. Indeed, the figures now relied on differ materially from those relied on in the Statement of Claim.

The figures now spoken to by Mr Gillett were set out in tabular form in App 4 to his witness statement. Although there was some criticism of the derivation of these figures, I accept them as sufficiently accurate for present purposes. The difficulties arise not from the figures themselves but from their attribution. Appendix 4 purports to set out the 'family income' of Mr and Mrs Gillett. Figures are given for the years for 1958/9 to 1995/6. They are set out under 10 columns with a final column giving 'total income'. Columns 1, 2 and 3 represent respectively Mr Gillett's 'salary and bonus' from KAHL, the KAHL pension contribution, and his fees from G&H Farms Ltd. Columns 4 to 7 relate to different categories of income of Mrs Gillett, the first of which is her 'farm salary from KAHL'. Column 8 is Mr Gillett's income from Countryside Companions, and columns 9 and 10 are income respectively from dividends, and building society or bank interest.

For the purpose of his exercise, Professor Giles has taken columns 1 and 3 as representing Mr Gillett's salary for his job as farm manager, accepting for this purpose that the division between KAHL and G&H Farms Ltd (starting from about 1987) did not affect the character of the job. He also included, for the years 1971 onwards, a figure representing a 'best estimate' of non-cash benefits. These included the provision of a house rent-free, a car for private use and its running costs, and other items such as a telephone. These figures again were provided by Mr Gillett, but Professor Giles says that he had satisfied himself that 'they provide a fair approximation of what was involved'. Taken together these items provided the data for Professor Giles' table of Mr Gillett's 'salary and other rewards' from 1964 to 1995.

Professor Giles then prepared a table of figures derived from the Reading University surveys for the same years, with amounts of the inter-survey years 'being imputed and with 'an appropriate average figure added for the pre-tax value of non-cash items'. The resulting figures were, he said -

'indicative of the average earnings for a manager of the same age as Mr Gillett, and ... similar levels of acres, men and capital, and with similar patterns of work and responsibilities'.

The figures are set out in tabular form in his App 6. To illustrate the exercise, the following table shows the comparisons from the survey years, although Professor Giles' table includes the imputed' figures for the intervening years:-

[Table not reproduced here]

Taking the whole of the period from 1964 to 1995, the Appendix shows Mr Gillett's earnings as about 80% of the average. In his statement, Professor Giles emphasises that Mr Gillett's responsibilities for 'virtually all aspects of management' would have justified a higher than average salary, which in his judgment would mean something between 5 and 10% above the average.

There are a number of problems with this comparison, some of which Professor Giles acknowledges. The first is the complexity of the factors which are reflected in such salaries. As Professor Giles says in his concluding paragraph:

"The writer is aware of the complexities of the 'market mechanism' which, in the absence of collective bargaining, enables individual farm managers and their employers to strike a bargain. the various levels of the reward above and below the averages, simply reflect variations in the personalities and skills of the individuals - employer and employee - as well as the physical and financial circumstances of the business in question. The variations are legion, and the more immediate questions concerning farm management and farm managers can often be over-ridden by wider, more personal and longer term considerations."

There is a similar 'warning' in the 1995 Reading survey. It says:

"This survey simply shows the average level of salary being received by a relatively small number of farm managers in the year in question. It is a guide therefore to what was happening at that time in those circumstances. It does not pretend to suggest what should be happening in any particular case and in subsequent years."

The wisdom of these cautionary notes is supported by the fact that the survey is based on a relatively small sample. The introduction to the survey explains how it was prepared, in conjunction with the Institute of Agricultural Management. The number of farm managers belonging to the Institute is in the order of 3-400. However out of a total of farm managers in the country of about 7,000. Of the 3-400 who were invited to partake in the survey, 119 submitted completed replies of which 114 were usable. There is no material to show how typical the members of the Institute (still less the respondents) are of the profession as a whole.

Turning to the comparison with Mr Gillett's own earnings, there are at least two serious problems to be faced in considering his figures at face value. First, the figures used by Professor Giles leave out of account altogether Mrs Gillett's earnings. Mr Gillett readily accepted in evidence that the earnings from KAHL, attributed to her in App 4 from 1977 onwards, were in substance part of the global salary paid for his services, but allocated to her for tax reasons. It seems likely therefore that they should be included if a fair comparison is to be made with the figures in the Reading survey (although it is possible that those figures may themselves be distorted by similar allocations). If this were done, it would narrow considerably the apparent gap with the national average.

Secondly, Professor Giles' comparison leaves out of account the time which Mr Gillett was devoting, after 1988, to Countryside Companions. In a letter on 5 April 1988, when he was discussing a possible increase, Mr Holt himself referred to the fact that Mr Gillett was 'putting in a lot more work with his new enterprise, which I hope will be successful'. Professor Giles did not have sufficient instructions to be able to judge how far this element could be used to explain any shortfall in the KAHL salary after that period.

Taking all these points together, the evidence does not persuade me that Mr Gillett did in fact receive less than a reasonable wage for his services as manager, nor, in any event, that he did so as part of an understanding with Mr Holt related to his expectations under his will.

Various other matters were relied on by Mr Gillett in support of his case of 'detriment': for example, his refusal of enquiries from other employers, the limited provision made for his pension, the domestic tasks undertaken by him and Sally for Mr Holt, and the money spent by him on improving the Beeches. Against that, he acknowledges that Mr Holt was generous with gifts to the family, in paying Robert's school fees, and in other ways. It is impossible and inappropriate to attempt to weigh the balance of advantage and disadvantage. The Gilletts decided at an early stage that their future lay with Mr Holt, and as with most human relationships that involved obligations and compensations. I cannot find in them such a balance of 'detriment' as to support the case for a legally enforceable obligation.

Accordingly, in so far as proof of 'detriment' is essential to the claim, I would reject the plaintiffs' case on this ground also.

The Statement of Claim in this action defines 'the land' as the agricultural land and buildings, about 100 acres, of The Beeches Farm, but excluding the dwelling house and outbuildings themselves. 'The holding' is defined as that part of the land, about 43 acres, shown edged red and hatched red on the plan served with the Statement of Claim. It is alleged that Mr Holt granted Mr Gillett an oral tenancy of the holding in or about 1988 at a rent of £43 per acre; that the tenancy was granted in consequence of Mr Gillett 's employment with Mr Holt and coterminous therewith; and that it came to an end on the end of his employment on 27 November 1995. Countryside Companions is also a defendant, it being alleged that, at a date unknown to Mr Holt, Mr Gillett parted with possession of the holding to Countryside Companions. It is denied that the defendants have acquired any interest protected by the Agricultural Holdings Act. The prayer seeks a declaration as to the respective interests of the first and second defendants in respect of the holding, accounts of sums due to the plaintiff and consequential orders including orders for possession.

The defence asserts that Mr Holt in 1988 granted Countryside Companions a tenancy of the land on terms that it could farm as much as it wished each year, up to a maximum of the whole of the land. Various alternative formulations are set out. As part of their further and better particulars served in October 1996, the defendants include a series of plans showing the areas of which Countryside Companions was 'in possession' each year from 1988 to 1996 inclusive. The accuracy of these was not materially challenged, and I accept them.

In his submissions for Mr Gillett, Mr McDonnell relied on an oral agreement made between Mr Gillett and Mr Holt in April 1988. The best evidence of that agreement is Mr Gillett's contemporary note, which reads as follows:

"K A Holt Esq on behalf of K A Holt Ltd

Agreement with K A Holt Esq and G S W Gillett Esq on behalf of Countryside Companions Ltd on 5th April 1988

Countryside Companions Ltd to allowed to rent land at 'The Beeches Farm' for the purpose of growing Wild flowers for seed production, trees and all other crops.

Acreage used may vary each year up to a maximum of 'The Beeches Farm'.

The rent paid to K A Holt Ltd, from Countryside Companions Ltd will be as per Jas Martin & Co who will assess the rental. This shall be the agreed figure.

Unfettered use of the Reservoir will be given to Countryside Companions Ltd and it is envisaged that it will be used for Fish Production, fishing and irrigation.

It is agreed that an interchange of labour is acceptable between the two Companies, accounts to be kept.

Surplus buildings at The Limes may be used at no rental; both large sheds known as the 'Duck' sheds, one small Nissan type shed and part use of the large 'shed' for seed cleaning machinery.

Will be estimated and reimbursed by Countryside Companions Ltd.

If required there will be no objection raised for the erection of Glasshouses/Polytunnels, store room, potting shed etc subject to planning permission re ELDC."

In the event, rather than having a valuation, a rent of £43 per acre was agreed. As part of the plan a reservoir was constructed. Although this was originally intended as a commercial fishing lake as well as for irrigation, the planning consent only permitted use for agricultural irrigation. It was stocked with fish for recreational use by Mr Holt and his friends and otherwise was used for occasional irrigation.

Rent has continued to be invoiced and paid between KAHL and Countryside Companions down to 5 October 1995. Since Mr Gillett's dismissal rent has been paid and accepted without prejudice. According to Mr Gillett, and I accept, Mr Holt was aware, from his regular visits, of the presence and activities of Countryside Companions at The Beeches, and of the areas used from time to time, the character of the crops being quite distinct from those of KAHL.

The principal issues are (1) whether Countryside Companions' occupation had the necessary element of exclusive possession; (2) if a tenancy was created, whether it was conditional on the continuance of the employment and therefore excluded by s 1 of the 1986 Act.

Section 1 of the Agricultural Holdings Act 1986 defines an 'agricultural holding' as follows:

"The aggregate of the land (whether agricultural land or not) comprised in a contract of tenancy which is a contract for an agricultural tenancy, not being a contract under which the land is let to the tenant during his continuance in any office, appointment or employment held under the landlord."

By subsection (5) a contract of tenancy means:

"… a letting of land, or agreement for letting of land, for a term of years or from year to year."

This is extended by s 2 which provides:

"(1) An agreement to which this section applies shall take effect with the necessary modifications, as if it were an agreement for the letting of land for a tenancy from year to year unless the agreement was approved by the minister before it was entered into.

(2) ... This section applies to an agreement under which -

(a) any land is let to a person for use as agricultural land for an interest less than a tenancy from year to year, or

(b) a person is granted a licence to occupy land for use as agricultural land, if the circumstances are such that if his interest were a tenancy from year to year he would in respect of that land be the tenant of an agricultural holding."

Where the Act applies, the occupation of the tenant is protected, and there are provisions for the rent to be settled by arbitration.

Turning to the issues in this case, Mr Martin for Mr Holt rightly submits that, to come within the Act, the tenant must have exclusive occupation. This applies even where what is in issue is a licence under s 2. It must be a -

'… licence to occupy land for use as agricultural land for use as agricultural land':

"To satisfy this requirement the right of occupation for agricultural purposes must be an exclusive right under which the grantee is entitled to prevent the grantor and any other person authorised by the grantor from making any use of the land, at any rate for agricultural purposes, during the period of the grant" (Bahamas International v. Threadgold [1974] 1 WLR 1514, at p 1527 per Lord Diplock).

There is, however, no evidential support for Mr Martin's contention that the occupation was other than exclusive. The effect of the agreement was that Countryside Companions were allowed to rent land of varying acreages, and the implication was that the acreages taken in each year should be for their exclusive use. There was no evidence of any shared use of those areas. (The reservoir, according to the evidence, was not used exclusively by Countryside Companions, and therefore should be excluded from the scope of the protected tenancy.)

It does not matter in my view that the occupied land varied from year to year. Countryside Companions' position can be no worse than if they were granted a series of licences year by year of the land they required in each year. If that had happened, then they would have still been brought within the Act by section 2, and entitled to protection in respect of the land occupied by them in that year. The extent of the protected tenancy, in my view, is governed by the areas occupied during the last period before the dispute, that is in October 1995.

Equally, I see no force in the contention that the tenancy is excluded from the Act because of its connection with Mr Gillett's employment. It is apparent from the history I have outlined that the purpose of the letting to Countryside Companions was to enable Mr Gillett to develop his own business, as part of the process of building up his share of the overall enterprise. Although it was related to his employment as manager of KAHL, and it was envisaged that the business would be run in conjunction with that of KAHL, there was nothing to suggest that it was limited to the period of his employment.

Accordingly, the defendants are in principle entitled to a declaration that Countryside Companions enjoys a protected agricultural tenancy of the land occupied in October 1995 (excluding the reservoir). Notwithstanding the curious discrepancies between some of the acreages quoted in the papers (including the IACS returns), the identity of the holding in October 1995 seems to be reasonably clear from the plans annexed to the pleadings. As to the rent, I see no reason to depart from the common understanding of £43 per acre. However, I will hear the parties as to the form of declaration, and any consequential orders required (including any directions needed to settle the precise extent and terms of the tenancy).

Section 459(1) provides that:

"A member of a company may apply to the Court by petition for an order under this part on a ground that the company's affairs are being or have been conducted in a manner which is unfairly prejudicial to the interests of its members generally or some part of its members (including at least himself) or that any actual or proposed act or omission of the company (including an act or omission on its behalf) is or would be so prejudicial."

By s 461, if the Court is satisfied that the petition is 'well-founded', it may make such orders 'as it thinks fit for giving relief in respect of the matters complained of'. These may include orders regulating the company's affairs for the future, requiring the company to do or refrain from doing relevant acts, or providing for the purchase of the shares of any members or by the company itself.

As summarised in Mr McDonnell's closing submissions, the prejudicial conduct of which complaint is made consists of four matters:

(a) Mr Gillett's exclusion from the management of the company, contrary to the 'quasi partnership understanding' that he was to manage the company and inherit it from Mr Holt.

(b) The purchase of the freehold of The Limes on terms which leave KAHL Ltd at the mercy of Edgescan Ltd., a company controlled by Mr Holt and Mr Wood.

(c) The handing over of the management of the farming business on expensive terms to a contractor, Aubourn Farming Ltd, for the sake of getting rid of Mr Gillett.

(d) The transfer of 600 KAHL shares by Mr Holt to Mr Wood.

The first matter is closely tied up with the allegations made in the main action. As to evidence of exclusion, Mr Gillett relies not merely on his dismissal as manager, but also on the fact that following that dismissal he was refused access to the detailed accounts of the company. Thus, in December 1996 he was provided only with a shortened set of accounts and was told that that was all he was entitled to receive and that the fuller versions which he had seen in previous years were solely in his capacity as manager. As he comments in his statement:

"This was wrong because K.A. Holt Ltd had always been regarded by Ken and myself as a partnership and that was why I had seen the full accounts in all previous years."

The reference to a 'quasi partnership' takes one back to the well-known passage in the judgment of Lord Wilberforce in Re Westbourne Galleries [1973] AC 360, at p 379 of the former report. In the context of the 'just and equitable' ground for winding up, he there discusses the circumstances in which the Court will look beyond the strict legal structure of the company, and have regard to considerations of -

"a personal character arising between one individual and another which may make it unjust or inequitable to insist on legal rights, or to exercise them in a particular way."

He refers to the kind of elements which may justify such an approach including:

"(i) An association formed or continued on the basis of a personal relationship, involving mutual confidence ... ;

(ii) An agreement, or understanding, that all, or some, … of the shareholders shall participate in the conduct of the business;

(iii) Restriction on the transfer of the members' interest in the company - so that if confidence is lost or one member is removed from the management, he cannot take out his stake and go elsewhere."

As I understand Mr McDonnell's submission, it is really on the first two of those that he would rely. I do not, however, see that this approach can fairly be applied to KAHL. The company was set up exclusively by Mr Holt to run his farm. Mr Gillett was brought in as a salaried employee and, in due course as a minority shareholder, and also had a hope ultimately of inheriting Mr Holt's interest. Mr Holt remained the controlling shareholder and the dominant party. Any hopes Mr Gillett may have had of becoming the owner of the company were in his personal capacity as a potential heir to Mr Holt. They were not expectations on which he was entitled to rely in his capacity as a shareholder of KAHL. Indeed, they pre-dated his becoming a shareholder.

The somewhat complicated arrangements by which the freehold of The Limes Farm was purchased by Mr Holt for £1m and then sold to KAHL, in return for an outstanding loan of the same amount to a company Edgescan, controlled by Mr Holt and Mr Wood, were explained to Mr Gillett as shareholder in a letter of 12 June 1997. The detail does not appear to me to matter. The key issue raised by Mr Gillett's petition was that the purchase of the freehold was an opportunity which should have been available to KAHL, and at a price considerably less than £1m having regard to its supposed rights of occupation. This allegation was not supported by the evidence. The evidence shows that the tenancy was always intended to be that of Mr Holt personally, and was so treated by Merton College. Furthermore, Mr Gillett's expert, Mr Walters, accepted that the figure of £1m paid by the company was not an unreasonable valuation for what it had received. It is true that the involvement of Edgescan gave Mr Holt and Mr Wood another route by which they could exercise control over KAHL, but since they had a controlling interest anyway this did not materially affect Mr Gillett's minority interest. As to the management of the farming business, Mr Gillett says that the contract with Aubourn Farming Ltd was 'a very expensive way' of providing for the management compared with his services. However, once the relationship between him and Ken had broken down, the business had to be managed by someone. There is no specific evidence that the arrangements with Aubourn were unreasonable. Finally, there was no restriction on Mr Holt's right to transfer his shares to Mr Wood if he so wished.

Accordingly, the s 459 petition in respect of KAHL fails.

The petition of Mr Holt asserts that the company was incorporated as a vehicle to shift capital value from KAHL to a company in which Mr Gillett had an interest, and that the arrangement presupposed that Mr Gillett would retain the trust and confidence of Mr Holt. It was thus, 'akin to a partnership (or quasi-partnership) between the petitioner and the first respondent in which the petitioner was only a 'sleeping partner''. It relies on the dismissal of Mr and Mrs Gillett for gross misconduct in November 1995, which was not the subject of any complaint before the Industrial Tribunal. That being the case, it is said, the primary object of the company and with it the company's sub-stratum has gone. The petition contains other assertions as to the conduct of the company by the Gilletts, which is said to have had the effect of shutting out Mr Holt and Mr Wood from the management. It also criticises a feasibility study of the company's future obtained by Mr Gillett from ADAS.

In the event, as I have said, no evidence was called by the petitioners in support of this case. Nonetheless, in closing Mr Martin maintained the petition, on the basis that the sub-stratum of G&H, that is its role as a provider of machinery to KAHL, had gone, and that there was no reason to think it had a viable future without that role.

There is no doubt that, with the breakdown in relations between Mr Holt and Mr Gillett, the original purpose of the company has gone. However, that, by itself, does not mean that its continued operation by the Gilletts is unfairly prejudicial to Mr Holt. Just as he is entitled to exercise his controlling interest of KAHL to ensure that that company is now managed in a way that accords to his wishes, he cannot complain if the Gilletts use to similar effect the controlling interest which he has given them over G&H Farms Ltd. The complaints made in the petition, that he and Mr Wood have been unfairly excluded from the management, have not been supported by evidence.

With regard to the viability of the company, Mr Gillett relied on a report from Julia Hawley of ADAS. The background is that a 'five year annual financial budget' for G&H Farms was prepared by her colleague, Mr Fraser, in 1996. This, in the view of ADAS, showed a viable contracting business with an expected profit in the first year of £12,622. But, as Miss Hawley said, the success of the business depended on finding sufficient acreage to cover the fixed costs indicated in the report. The budget did not include any 'build-up time' but assumed that sufficient work would be found from the start. Furthermore, it assumed that no remuneration would be drawn.

In the event, as she made clear in her report, the actual results achieved for the 12-month period ended December 1997 were well below what was assumed in the budget. For example, she gave the following comparisons between what was budgeted and what was achieved in that year:

Her conclusion is that although the level of work in the first year has been significantly lower than projected -

"... the borrowings have not risen to such an extent that the position is irretrievable. If the acreage is increased significantly to the level suggested in the plan - as should be possible - the increase in turnover should maintain the viability of the business, subject to the way in which labour is rewarded."

In practice her evidence is of little weight, because the assumptions in the budget and the report are wholly dependent upon the prospects of achieving the targets there set out. On this she was admittedly dependent on the advice of Mr Gillett. Nothing in her evidence gave any additional reason to support his confidence that he would be able to improve on the 'disappointing' performance in the first year. To make the business work Mr Gillett needs to be able to pick up some substantial contracts in what is a competitive market. It is at best speculative whether he will be able to do so. Against that, the cashflow of the business would be improved if G&H Farms is able to recoup the £60,000-odd, allegedly owing from KAHL (under invoices delivered 11 April 1996) in respect of plant and machinery hired between 1994 and 1996. That is the subject of separate proceedings.

As I understand it, however, the issue before me is not whether Mr Gillett is going to be able to turn G&H Farms into a successful business, but whether that business is being carried on in a way which is unfairly prejudicial to Mr Holt. As Mr Holt's actions have directly contributed to the problems of the business, it is hard for him to complain convincingly of resulting unfairness. If the company ceases to be viable there may be grounds for winding it up, but that stage has not yet been reached. I cannot conclude that the prospects are so hopeless that is unfair to Mr Holt if Mr Gillett is given an opportunity to try to make a success of it. In these circumstances I will dismiss this petition also.

The claim in the main action fails, as do the two s 459 petitions. In the land action there will be a declaration, in terms to be settled, confirming Countryside Companions' claim to a protected agricultural tenancy of the land occupied by them in October 1995.