Case Law Update: Whose asset is this anyway?

An asset is property of a partnership if it was originally brought into the ‘partnership stock’. In this family farm partnership, it was not clear whether this was the case, and the Court conducted several legal tests as to how the asset, the old farm which had been an asset of a previous partnership, was an asset of the current partnership.

Interestingly, the Court clarified that the fact that profits from an asset went into the accounts as new partnership profits did not mean the asset itself was necessarily partnership property. This would be different had the asset been acquired using partnership profits. 

In this case, the Court held that the husband and wife had made very clear that they considered they had retained personal ownership of the farm, despite the new partnership. They had recorded the same in their wills, which constituted helpful evidence. 

The lessons? Partners in a business, however informal, should record in writing what property constitutes assets of the partnership. Otherwise, a dispute could become the subject of complex legal argument over original intentions and how the asset was used. 

The Case? Ham v Bell [2016] EWHC 1791

Partners carrying on business in partnership should ensure there is a clear, written record of what they have agreed in relation to property used by the partnership, particularly when there is a change in partners