The recent High Court judgment in Wild v Wild  EWHC 2197 (Ch) confirms that one partner cannot unilaterally cause property to become a partnership asset without the prior agreement or subsequent acceptance of the other partners.
The claimant, Gregory, claimed that a farmhouse and bungalow belonging to his late father were assets of an unwritten partnership agreement and therefore subject to the partnership's dissolution proceedings following the breakdown of the relationship between the two remaining partners; himself, and his brother Malcolm. The three defendants, Malcolm, his wife and his mother (the Deceased's widow), submitted that these buildings did not constitute partnership property and should pass in accordance with the Deceased's Will to Malcolm's mother.
Malcolm's mother had resided in the farmhouse with the Deceased throughout his lifetime, and continued to live there following his death. Malcolm and his wife occupied the bungalow. In the alternative, they argued that, even if the bungalow was deemed to be partnership property, then they still held the beneficial interest in the bungalow arising through proprietary estoppel because of the substantial amounts they had spent on renovations to the bungalow, based on representations made by the deceased during his lifetime that it would eventually pass to them.
A key difficulty in this case was the lack of formal documentation. The Judge held that a vague reference on the balance sheet of the partnership accounts to 'property' was indeed a reference to the farmhouse and bungalow. However, as Malcolm was just 16 years of age at the time that the partnership agreement was formed, the Judge held that his likely lack of knowledge of the farm's accounts rendered him unable to consent to the inclusion of the property on the balance sheet, meaning that the farmhouse and bungalow passed to the Deceased's wife in accordance with his wishes under his Will.
As the Defendants successfully defended the partnership property claim, they did not pursue the proprietary estoppel claim. The judge commented that had it been necessary to decide the matter, he would have found in favour of the Defendants based on them having incurred substantial expenditure on the renovation of the bungalow.
Whilst this case may provide some comfort to those concerned about the suggested inclusion of certain assets as partnership property without formal mutual agreement, it highlights the importance of businesses maintaining up-to-date documentation, as well as accounting for assets with clarity through a will or a formal partnership agreement so as to avoid lengthy and costly disputes.
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