Partner Article

Family partnerships only work so long as good relationships persist

Family partnerships can be highly effective vehicles for running businesses, but that depends on good relations being maintained reports Kam Majevadia, Partner at Sydney Mitchell LLP. In one High Court case in which ties of blood were sadly not enough to prevent discord, a father and son engaged in a bitter dispute over ownership of a hotel and campsite.

The father ran the business in partnership with his son and daughter-in-law. After a breakdown in relations, they agreed that the partnership had been dissolved, that its affairs should be wound up by a receiver and that its assets and liabilities should be divided between them.

The father and son were, on paper, equal joint tenants of the property which formed the main asset of the partnership. However, the father argued that this did not reflect the true position and that he was the beneficial owner of 80 per cent of the property. He launched proceedings seeking a declaration to that effect.

Ruling against him, however, the Court compared his thoroughly unreliable evidence with the convincing testimony of his son. Even if the father had contributed more to the property’s purchase price, it had been agreed between them at the outset that they would hold it in equal shares. The son had entered into the transaction on the faith of that agreement.

This was posted in Bdaily's Members' News section by Sydney Mitchell LLP .