Partner Who Resigned Entitled to Share of Partnership Assets

When partners resign or retire from a partnership, the partnership agreement will normally govern their rights and responsibilities following their resignation. However, where the terms of their departure are not agreed, are they entitled to the value of their share of the partnership assets? The Court of Appeal recently considered this question in the context of a family farming partnership.

The partnership consisted of a farming business and a golf course. The claimant had resigned from the partnership in July 2010. The partnership deed did not contain any provisions allowing a partner to unilaterally resign, but the other partners had accepted that she ceased to be a partner. She subsequently brought a claim arguing that she was entitled to a one-quarter share in the partnership's assets, specifically a tenancy it held over most of the land used in the businesses. After the High Court upheld her claim, her brothers appealed on the grounds that there was no agreement to that effect and no basis for implying such an agreement, and that no legal basis for such an entitlement existed.

The Court of Appeal noted that, as of 2010, the claimant had owned a share of the partnership assets, which she had not agreed to sell or give away. It gave weight to the argument that, when a partner leaves a partnership, the partnership is technically dissolved and a new one created. While this is very different from a general dissolution of a partnership, the Court observed that in the latter situation the partners would be entitled to receive their share of the partnership assets.

The Court concluded that, where the partnership agreement does not expressly state the rights of outgoing partners, and nothing is agreed at the time of retirement, a retiring partner is entitled to a share of the partnership assets at their market value, as they would be in a general dissolution of the partnership. Accordingly, the appeal was dismissed.