Keeping it in the Family (Business): When “one day it is yours” becomes legally enforceable

Handshakes Leading to Headshakes

Family businesses form the backbone of the Canadian economy.

Famous are the names of the family businesses that have been built over decades, with each succeeding generation using their talents to grow the family enterprise.

It is natural for such businesses to want their legacies to endure and stay within the family.

It is also common for succession in family businesses to be relatively informal.

A parent may tell their child: “one day this will all be yours”, and for the child to believe that the parent means it.

When that promise does not come to pass, things can get messy and courts have to step in.

Matters are further complicated when succession planning rests on simple handshake agreements, with little put into writing.

So, what is the law on the promise of inheriting the family business?

“Steaking” a Claim on a Dairy Farm: A Recent Case

The recent case of Metske v. Metske from the Ontario Court of Appeal (2025 ONCA 418) explores this situation.

In Metske, a family owned a farming business. The parents had run the farm for many years and were in talks with their son and his partner to eventually take over the business.

The parties agreed that the son and partner would inherit the farm in stages.

First, the son and partner purchased the dairy herd. The father co-signed the loan that allowed the purchase of the herd. The son and partner left their jobs and came to work at the farm full time.

The parties had further discussions about what the next stages of the succession would be, but nothing concrete was ever agreed.

Over time, the parties’ relationship became tense and then broke down.

The farm was rented and then sold to someone else.

The son and partner then sued the parents, alleging that the parents promised to sell them the dairy farm.

The trial judge found that there was an enforceable promise between the parties, relying on a legal doctrine called “proprietary estoppel”.

The Ontario Court of Appeal disagreed and overturned the trial judge’s decision.

Ever “herd” of Proprietary Estoppel?

The Ontario Court of Appeal ruled that the doctrine of proprietary estoppel will apply if three conditions are met:

1. There must be some representation or assurance made to a person, on the basis of which that person expects that they will enjoy some right or benefit over a property;
2. That person then relies on that expectation by doing (or not doing) something, and their reliance on that expectation is reasonable in the circumstances; and,
3. That person suffers some detriment as a result of relying on the representations or assurances made, and it would be unfair or unjust for the other person to go back on their word.

The Court held that a representation or assurance must be “clear, unambiguous, and intended to be taken seriously”, and this was missing in the Metske case.

The parties had only had general discussions about how the son and partner would inherit the farm.

They had enacted one stage of the succession, but had not agreed on how they would carry out the rest of the plan. They had only agreed that it would be on favourable terms.

In the circumstances, the Court found that the parties had only “agreed to agree”, which is not legally enforceable.

The son and partner were not completely out of luck. The Court upheld the trial judge’s finding that the parents had been unjustly enriched by certain work completed by the son and partner, and awarded some damages.

The “Udder” Consequences of Metske

The Metske case provides some important insight into whether informal succession planning in a family business can be legally enforceable.

If promises have been made to someone that they will inherit the family business, then the doctrine of proprietary estoppel can apply.

While in the Metske case the promises were too vague, other cases may well emerge where the promises are sufficiently clear and unambiguous to become legally enforceable.

Planning to pass your business to the next generation? Clear, documented agreements can prevent costly disputes. Contact our team to ensure your succession plan is legally sound.

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