Cameron Stuart Allan v Alistair Robert Allan

A partnership agreement expressly providing that the partnership will continue while two or more partners are alive may create a partnership for joint lives, preventing dissolution by notice. A partner’s share passing by will ordinarily carries undrawn profits and the entitlement arising on dissolution, but not a continuing right to future profits unless clear words provide for it.

Partners must act in good faith and account for benefits derived from partnership business or property without consent. This obligation applies even where the benefit is taken through a company. Deliberately diverting a substantial part of the business, excluding a partner, and making continued cooperation impracticable may justify dissolution under the Partnership Act 1890.

The claimant and defendant were brothers carrying on a farming partnership under an unwritten arrangement later recorded in a 2008 partnership deed. Their father was also a partner and his share had been reduced to 10% before his death. His will left his partnership interest to the defendant.

The claimant sought declarations concerning land ownership and profit shares, an account of profits from a straw-baling business transferred to the defendant’s company, dissolution of the partnership, and consequential relief. The defendant disputed the claimant’s entitlement to dissolve the partnership and claimed the continuing benefit of their father’s former profit share.

The court determined whether the deed created a partnership for joint lives, whether the father’s will transferred a continuing right to future profits, whether the defendant was accountable for the straw business, and whether dissolution was justified.

1. Partnership term. The deed provided that the partnership would continue while any two or more partners were alive. Read naturally, this created a partnership for joint lives rather than a partnership at will. The claimant could not imply a right to retire voluntarily, and service of the proceedings did not dissolve the partnership. The general rules in Moss v Elphick [1910] 1 KB 846 and Abbott v Abbott [1936] 3 All ER 823 did not displace the express agreement.
2. Father’s partnership share. A partner’s share ordinarily means the proportion of the partnership assets remaining after realisation and payment of liabilities. On death, that does not ordinarily include a continuing right to future profits. Sections 39, 42 and 44 of the Partnership Act 1890 supported that conclusion. The deed permitted assignment of whatever share the partner possessed, but did not use sufficiently clear words to transfer a continuing profit entitlement after death. The defendant was therefore entitled to accrued and undrawn profits, but the brothers remained entitled to future profits equally.
3. Straw business. Under sections 28 and 29 of the Partnership Act 1890, a partner must act in good faith and account for benefits derived from partnership business, property, name or connections without consent. The claimant initially consented to ending the existing contract and the defendant taking a new contract for his own company, but withdrew that consent while the new contract could still be transferred to the partnership. The defendant was therefore accountable for the profits.
4. Dissolution. The defendant’s conduct was calculated prejudicially to affect the business, involved wilful and persistent breaches, and made it impracticable for the claimant to continue in partnership with him. It was also just and equitable to dissolve the partnership under section 35 of the Partnership Act 1890. The court would have reached the same conclusion based on the defendant’s exclusion of the claimant even without the straw-business finding.
5. Orders. The Mepal land was owned equally by the brothers personally. The partnership had a tenancy of the specified Kings Farm land protected by the Agricultural Holdings Act 1986. Declarations were to be made, the partnership dissolved and wound up, and unresolved accounts and inquiries were adjourned to a Master.