Partnership court case clarifies inheritance issue

Farming partnership and inheritance issues continue to lead to stressful, expensive and lengthy legal proceedings.

Partnerships are still governed by Victorian legislation – the Partnership Act 1890 – points out Tom Bradfield, associate in the tax, trusts and family team at law firm Burges Salmon.

However, this does not mean that uncertainty about the law in this area is settled. It can still throw up surprising questions, reinforcing the need for a sound written agreement, says Tom.

He outlines a recent case concerning a mother and son, Monica and David Lane, who had farmed in partnership.

See also: How limited partnerships can smooth the succession path

Monica’s will left her “share and interest” in the partnership to David.

Their written partnership agreement stated that the partnership would end if either partner became permanently incapacitated.

Monica Lane died in 2019 and her will made her daughter Susan the executor. David Lane died in 2021, and his wife Karen was made the personal representative of his estate.

Susan claimed that Monica had become incapacitated before she died and, therefore, that the partnership had ended before Monica’s death.

This led to her claim that Monica’s partnership share could not pass to David under her will because it no longer existed. David widow disputed this.

The court had to decide whether Monica still had a “share and interest” in the partnership when she died, which would fall within the terms of the gift in the will.

Susan argued that Section 43 of the Partnership Act 1890 had converted Monica’s partnership share into a debt owed to her (Monica) when the partnership ended.

Susan maintained that this was a different thing to a “share and interest” in the partnership and it did not come within the terms of the gift in the will.


“The court decided that, after a partnership has ended, each partner still has a “share and interest” in that partnership until the partnership has been wound up – that is, until the partnership debts have been paid and the remaining assets have been divided among the partners,” says Tom.

“The meaning of that phrase includes the Section 43 debt, but also other important rights, such as the right to be part of the winding up process.

“The partnership would have ended on Monica’s death even if she had not been incapacitated – David would have been the only remaining partner and a partnership by definition must have more than one partner,” says Tom.

“No one was suggesting the gift would have failed in those circumstances. The court said the will did not draw a distinction between the two scenarios and that it would be surprising if it had done.

“Many farming families will take comfort in the certainty provided by this decision. Monica clearly intended that David should inherit her share in the partnership.

“It is reassuring to see the court deal so robustly with the matter.”

Important result

Tom says: “This is a High Court judgement which sets a precedent. It should apply to any legacy of a partnership share in similar circumstances.

“In principle, it should also apply to lifetime transfers of partnership interests by attorneys.

“The most likely reason it would not apply is if the partnership agreement says anything different.

“However, it is also a reminder that disputes over farming wills are, sadly, common. David’s untimely death and Susan’s poor relationship with Karen appear to have been factors in this case.

“Many advisers will reflect that strong relationships and good communication are as important to succession planning as well-drafted legal documents.”