A Warning for Partners in a Farming Business
When a partner in a farming partnership dies the surviving partners, often relatives, may assume that the land farmed or the farmhouse form assets of the partnership. As a recent case illustrates that isn't necessarily so.
The principles in Wild v Wild and Others  EWHC 2197 (Ch) apply equally to all partnerships, but often reflect issues prevalent in farming partnerships, where assets are brought into the partnership by different generations and there is no written partnership agreement.
In this case there had been a family farming business dating back to the 1950s. The legal title to the farm has been passed down from first William Wild and then his widow Dorothy to their son Ben in 1973. From 1952 until the partnership was dissolved in November 2016 the partnership farmed the land. Gregory Wild had been a partner since 1994, together with his father Ben, mother Jean and brother Malcolm. Ben Wild died in 2003 leaving his estate to his wife Jean in his Will.
The partnership carried on but Gregory and Malcolm had seemingly never got on well together and, after their father's death, relations between them deteriorated. Consequently the partnership broke up in 2016.
Proceedings were issued by Gregory who claimed that the farm was an asset of the partnership. After a three day hearing, and presumably to the considerable expense, he failed. The court ordered that the land, including the farmhouse, outbuildings and a bungalow were owned by Jean Wild.
In his ruling, Judge Eyre noted that:
- the mere fact that there is a partnership and profits produced by a particular asset does not indicate that the asset itself is a partnership property;
- a property owned by a partner at the start of the partnership will only become a partnership asset if this is agreed between the partners;
- it is not normally necessary for it to be implied that land owned by one of the partners, as was the case here, was a partnership asset.
Gregory sought to argue that reference in the partnership accounts to "Property", although not identified in any further detail, was evidence of an agreement to make the farm a partnership asset. The Judge found though that it was not sufficiently clear that the "Property" referred to in the accounts included the land claimed by Gregory.
The message to partners in a farming or any other partnership should be clear. Do not assume that an asset used by the partnership is a partnership asset. If that is what the parties want, arrange for the property to be transferred into the names of all of the partners and described as such in the partnership accounts. It is quite possible, of course, that the partner who previously owned the land in their own right will want to see this reflected as an increased capital contribution in the partnership accounts or receive payment for the land transferred. As the Wild case shows if the position is not clear, disappointment and potential extensive costs can await partners who wrongly assume that assets used by the partnership are partnership property, without establishing the ownership position.
For further advice or help with any of the issues raised in this article, please contact Andrew Bogle.
Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.