Dame Leonie Kramer and her husband Dr Harry Kramer owned a 100 acre farm at Colo near Sydney. David Stone lived on the farm and worked as a share farmer for a small percentage of the profits for almost 40 years from 1975. The original agreement between David Dame Leonie and Dr Harry was that David would work and maintain the farm, pay the operating expenses except for fuel, which were to be shared, live in the house rent free and receive a quarterly retainer of $600 plus half of the gross proceeds from the sale of produce and cattle. Over the years there were some minor changes to these arrangements.

During the 1980s, Dr Harry made promises to David about the ownership of the farm. The second of these was that he would give the farm to his wife in his will and that Dame Leonie would give the farm to David in her will.

In 1988 after the death of Dr Harry, Dame Leonie promised David that on her death the farm would pass to him. When the promise was made David thanked Dame Leonie.

David then continued to work on the farm as he had done for another 23 years in the belief that he would inherit the farm. In relying on the promise, he acted to his detriment. He earned less money than he would have had he sought other opportunities and the living conditions in the home were substandard.

Five years before her death, Dame Leonie made a will leaving the farm to her daughter Hilary.

David sued the executors of the estate of Dame Leonie, claiming that he was entitled to the farm on the basis of an estoppel by encouragement.

The question for the court to decide was whether Dame Leonie knew that David relied on the promise. The court held that any reasonable person would have known that David relied on the promise. This is referred to as constructive knowledge. Dame Leonie then argued that constructive knowledge is not sufficient to establish unconscionability and therefore an entitlement by David. On this point, the court held that there was no need for further encouragement after the promise is made.

The executors of the estate of Dame Leonie were ordered to transfer the farm to David and pay David’s costs of the litigation.

This is yet another case that highlights the need for clarity in arrangements that are made and the importance of putting these arrangements into writing.