Where a partnership deed makes no provision for retirement and no agreement is reached when a partner retires, the outgoing partner remains entitled to be paid their share of the partnership assets.
The Court of Appeal has considered this issue dismissing an appeal in Procter v Procter and others [2024] EWCA Civ 324.
The case concerned a long-running and multi-faceted dispute between the claimant, Suzanne, and her brothers Philip and James, the first two defendants. The siblings and their father were involved in a farming partnership, which commenced in October 1980, to farm around 460 acres of arable farmland in Skelton, Yorkshire. The partnership had the benefit of a yearly tenancy created in 1994 of the majority of the land which was protected by the Agricultural Holdings Act 1986.
Suzanne resigned from the partnership on 8 July 2010 in what the judge described as a “technical dissolution”, one which did not result in a full winding up but where the non-retiring partners agreed to continue in partnership taking over Suzanne’s assets and liabilities. The judge regarded it as “fairly plain” that the ongoing partners would acquire Suzanne’s share at a valuation and upheld her claim for a quarter share of the then value of the 1994 tenancy as at 8 July 2010. James and Philip appealed on the ground that there was no express agreement to such an effect, no basis for implying such an agreement and no statutory or legal basis for such an entitlement.
The Court of Appeal upheld the judge’s decision. There was only a dissolution in respect of Suzanne as the outgoing partner. The partners together own the partnership assets so each partner has a proprietary interest in a proportion of the net proceeds of sale of the assets. What happens to that proprietary interest when a partner retires depends on what the parties agreed in the partnership deed or at the time of retirement. Both would fall to be construed on normal principles without any presumption.
By resigning, all Suzanne was saying was that she wished to cease being in partnership with her father and brothers, not that she was giving up her proprietary interest in the assets and by accepting her retirement all the other partners were doing was agreeing that she should cease to be a partner. Suzanne was entitled to a quarter share in the value of the 1994 tenancy, to be paid by Philip and James, such value to be determined by an inquiry, together with 5% interest from 8 July 2010.
Louise Clark is a property law consultant and mediator
