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Court Laments Bitter Family Farm Partnership Dispute

country house, farmThe Court of Appeal has bemoaned the ‘unhappily common’ lack of clarity in the drafting of many partnership agreements after an elderly farming couple became embroiled in a bitter dispute with their son over how his share in the business should be valued following his retirement from the partnership.

The couple had spent many years building up their thriving 440-acre dairy farm before inviting their son to join them as a partner in 1997, when he was aged 19. He had worked industriously alongside his parents until 2009, when he withdrew from the partnership and his parents sought to buy out his share.

The couple argued that their son’s share should be valued on the basis of the ‘book value’ of the business as revealed in its published accounts. However, the son insisted that the full value of all the business’ assets – including the agricultural land, which had grown enormously in value during the course of the partnership – should be taken into account in calculating his entitlement.

The couple won that argument at the County Court. In overturning that decision, however, the Court of Appeal found that, on a correct interpretation of the agreement, the son was entitled to the value of his share in the whole of the partnership property, which could be fairly ascertained by an assessment of what he would have received had the business been wound up.

Describing the dispute as ‘unfortunate’ and expressing sympathy for the couple, the Court noted that the result of the case could be viewed as ‘a substantial windfall’ for the son. The ‘by no means clear’ drafting of the agreement had given rise to much expense and anxiety for the family and the Court noted, “It is unhappily common for this type of issue not to be clearly dealt with in partnership agreements.”