The recent High Court decision in Cobden v Cobden has seen a different approach to partnership dissolution than we’ve come to expect.
In this case, the Court considered that the circumstances of the farming partnership were exceptional enough to deviate from the usual presumption for winding up under the Partnership Act 1890 (involving sale of partnership assets on the open market) into a Syers v Syers order, an order that one partner can buy out the partnership interest of another. The court took a number of factors into account when reaching this decision, including:
- a shared understanding between the partners;
- how this shared understanding was relied upon by one partner, leading to significant individual efforts by this partner to run the partnership over a number of years;
- the unfairness that would result from an order for sale in these circumstances; and
- the likely adverse impact an open market sale would have on third parties (such as business employees and customers).
Whilst the decision may yet be appealed, it is one to take into account when dealing with partnership disputes and dissolutions, and encourages practitioners to look carefully into the circumstances leading to such dissolutions.
It is also one which perhaps highlights the age of the Partnership Act and the welcomed scope for discretion where exceptional circumstances apply.
I specialise in a wide variety of contentious matters, including civil and agricultural disputes.
The High Court has considered, in the context of the dissolution of a farming partnership at will with two equal partners, whether there were exceptional circumstances to grant a Syers order and depart from the usual course of a full winding up of the partnership and selling the assets on the open market.