When business partnerships fail or partners wish to go their separate ways, there can often be a degree of argument as to who owns what. The Partnership Act of 1890 makes it clear that:

“property originally brought into the partnership stock or acquired, …, for the purposes and in the course of the partnership business…“

Belongs to the partnership, subject to the terms of any partnership agreement. However, the act is silent as to how such property is held by the partners.  It is therefore really important that the partners specify, what is partnership property but also how partnership property is held. In the absence of anything specific, there is a presumption that business partners hold partnership real property (land) as beneficial tenants in common as opposed to beneficial joint tenants.

The recent case of Williams v Williams and others [2024] EWCA Civ 42, provides a useful illustration of this presumption in practice.

Facts

Mr Williams created a partnership with his parents in 1985, with the view of taking over the family farming business from his father. The parties acquired the farm in joint names, but the transfer did not specify whether the beneficial title to the farm was to be held as joint tenants or tenants in common. The partnership deed was also silent on this point. The farm also provided a home for the family. Mr Williams’ parents died and he then subsequently argued that the farm was held by the parties as beneficial joint tenants and that on his parents’ death, he inherited the whole farm as a result of the principle of survivorship. Survivorship applies to beneficial joint tenancies but not to beneficial tenancies in common.

Decision

The Court of Appeal considered how land is held beneficially in the absence of an express declaration of trust and held:

  1. Where land is transferred into joint names, the background to the transaction will shed some light on the context in which it took place. In the case of pure residential property, the starting point would be that the property is held as beneficial joint tenants but this was not a case of pure residential property;
  2. The farm was a family home, but its primary purpose was as a business which provided the family’s livelihood. For the purpose of the farm, Mr Williams’ relationship with his parents was as business partners. Buying the farm had been a commercial decision for the benefit of partnership business; and
  3. That there is an established equitable principle that co-owners acquiring real property for business purposes do not intend survivorship to apply.

In this case, the court concluded that there was no evidence to suggest that the parties had intended survivorship to apply and therefore the farm had been held as beneficial tenants in common, meaning that the parents’ shares in the farm fell to be distributed in accordance with the terms of their respective wills.

Comments

As can be seen, the courts will take some convincing that the parties to a business partnership, intended survivorship to apply, when there is no express declaration to that effect. This case is probably as close as you could get to the residential property presumption of a beneficial joint tenancy applying to a business relationship, given the residential nature of the business asset. Notwithstanding this, the court still found favour in determining the farm to be a business, thereby applying the tenancy in common presumption.

The contents of this post do not constitute legal advice and are provided for general information purposes only. Photo designed by Freepik.

The contents of this post do not constitute legal advice and are provided for general information purposes only ■