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Caroline Gumbrell

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Farming in partnership

Agriculture and rural business / 15 June 2017

Although Jack v Jack is primarily a case concerning divorce, it is of importance to those in the rural sector due to the concerns it raised in respect of farming partnerships.

Background

Mr Jack’s father (Jack Snr) purchased a farm in 1954 and operated as a sole trader.  His son (Jack Jnr) worked on the farm and in 1972 he married his wife and they lived at the farm with their children.  In 1997 Jack Snr retired and Jack Jnr and his mother (Mrs Jack Snr) went into partnership together.  There was no written agreement and as such, a partnership at will existed.  Mr Jack Snr gifted the land that the partnership farmed to his son.  In 2006 Jack Jnr brought his wife into the farming partnership and in the following year Mrs Jack Snr retired.  In 2011, the marriage of Mr & Mrs Jack Jnr broke down and the couple separated.  As part of the proceedings that followed the marriage breakdown, the court was asked to consider who owned the land which had been gifted to Mr Jack Jnr.

The court’s decision

At first instance and later on appeal the court was asked specifically to consider the two following key points:

  1. Was the farmland partnership property?
  2. To what extent was Mr Jack Jnr’s interest in the farm matrimonial property?

It was crucial in this case that the land had not at any point been included in the partnership balance sheet.  The court recognised that although Mr Jack Snr’s farming business was transferred to the partnership in 1997, the land that had been gifted to Mr Jack Jnr was separate.  It decided that as a result the land was not partnership property and hence the value of it could not be taken into account in valuing Mrs Jack Jnr’s share in the partnership at the time of the divorce.  The court also confirmed that as the land had been a gift from Jack Snr to Jack Jnr, it was excluded as matrimonial property.

The case serves as an important reminder to those farming in partnership to ensure that the partners are clear on what is and what is not partnership property.  The best way to do this is by entering into an express declaration in the form of a written partnership agreement.

For more information or advice, get in touch with a member of our Agricultural team who would be more than happy to help you.

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