Bathurst v Scarborow

The statutory presumption that property acquired with partnership money is partnership property does not conclusively determine the partners’ beneficial ownership. Under the Partnership Act 1890, the partners’ express or inferred agreement is paramount. Partnership property may therefore be held by the partners as beneficial joint tenants, allowing survivorship to operate between them while the property remains subject to partnership obligations. A formal transfer, independent evidence from the solicitor and correspondence explaining survivorship may establish that agreement. The court must distinguish the status of the asset from the separate question whether the presumption against survivorship has been displaced.

Michael Bathurst and Philip Scarborow were business partners who jointly acquired a house intended for use in connection with their business. The transfer described them as joint tenants, while the purchase was financed and administered through the partnership. After Mr Bathurst’s death, his estate claimed an equal beneficial share, arguing that the house was partnership property and that survivorship did not apply.

Master Bowman held that there was no express agreement to purchase the house outside the partnership and gave judgment for the estate. Mr Scarborow appealed. The central questions were whether the house was partnership property and, if so, whether the partners had nevertheless agreed to hold the beneficial interest as joint tenants.

Lord Justice Rix delivered the judgment, and Lord Justice Jacob agreed.

1. Appeal allowed. The court declared that the house belonged to Mr Scarborow and ordered costs here and below.
2. The first-instance judgment had treated the issue solely as whether the house was partnership property. It had failed to weigh the transfer, the solicitor’s evidence and her correspondence explaining the effect of survivorship. In those circumstances the Court of Appeal was entitled to reconsider the matter for itself.
3. The court distinguished the status of the property from the question of beneficial ownership. Under the Partnership Act 1890, section 19 was the primary rule: partners could vary their mutual rights by express or inferred consent. The statutory rules concerning partnership property and property bought with partnership money therefore remained subject to contrary agreement. Partnership property and beneficial joint tenancy were not legally incompatible. The property remained available to partnership creditors on dissolution, but the partners could agree that it would accrue to the survivor as between themselves.
4. The evidence showed that the house remained partnership property. The purchase and refinancing were financed through the partnership, the purchase monies passed through its account, the property was used to store partnership stock and continuing payments were made from partnership funds. There was no sufficient evidence of a positive decision to acquire it outside the partnership.
5. Nevertheless, there was clear evidence of an agreement for beneficial joint tenancy. If the transfer had been executed by both partners, it would have been an express agreement and declaration of trust. Even assuming it was not executed, the transfer form, the independent and unchallenged evidence of the conveyancing solicitor, her letters explaining that the survivor would take the whole beneficial interest, and the absence of any corrective response established the parties’ intention. The presumption against survivorship was displaced, and no subsequent severance had been shown. Barton v Morris [1985] 1 WLR 1257 was distinguishable because the parties and surrounding circumstances differed.

Permission to appeal to the House of Lords was refused.

• Court of Appeal (Civil Division). The appeal was allowed, with a declaration that the house belonged to Mr Scarborow: [2004] EWCA Civ 411.
• Chancery Division. Master Bowman held that the property was partnership property and that there was no express agreement giving rise to survivorship. Judgment was entered for Mr Bathurst’s estate.