Stephen Jourdan KC and Ciara Fairley appear in farming partnership dispute where a Syers order was made
On 1 July 2024, HHJ Russen KC, sitting as a High Court Judge, handed down judgment in Cobden v Cobden [2024] EWHC 1581 (Ch)
Stephen Jourdan KC and Ciara Fairley appeared for the successful Claimant.
The Claimant, Matthew Cobden, had farmed in partnership with the Defendant, Daniel Cobden in Somerset. Their relationship had broken down and the partnership had been dissolved.
The issue was whether:
- the partnership assets should be sold on the open market
- whether one brother or the other should be entitled to buy the other’s share at a price based on valuation evidence – what is known as a “Syers order”.
The Judge determined that a Syers order should be made in Matthew Cobden’s favour. He reviewed the authorities, including the very recent decision of the Court of Appeal in Bahia v Sidhu [2024] EWCA Civ 605. He explained that such an order is only to be made in exceptional circumstances. He held that there were such exceptional circumstances for reasons summarised by him as follows:
“The equal partners in a partnership at will have, since its inception, shared an understanding that one partner would himself carry on the business when the partnership eventually comes to an end, by being permitted to buy out the other partner at a fair price to be determined at that end point, and that partner has devoted himself accordingly to the firm’s business and its development in anticipation of that event.
The understanding is sufficiently clear from the dealings between the partners and the subsequent reliance upon it (throughout the life of their partnership) sufficiently identifiable and substantial to support the conclusion that it would be unfair and inequitable for the other, at the partnership’s end, then to insist that both partners’ shares in the partnership assets should be liquidated through their sale.
Any consideration of the “detrimental” nature of the first partner’s reliance (“the partner has devoted himself accordingly”) must make allowance for the fact that the relationship between the partners arises out of their shared endeavour in making profits and that he has benefited equally from any profit during the life of the partnership; and also that any unequal injections of capital will be reflected in the partners’ respective capital accounts. Nevertheless, the court is entitled consider his individual efforts in developing the partnership business and to do so with particular focus upon a comparison with the business as it was at the partnership’s inception and the relative efforts of the other partner in that regard.
The understanding and reliance upon it give rise to an ‘equity’ in the first partner which may operate to prevent the liquidation of the partnership’s assets if the court concludes that, in all the circumstances, an order for sale would be unfair and unjust.
Other factors, such as the likely adverse impact a sale may have on third parties (including employees of the business and others whose financial interests may be damaged by a sale) or upon the business’s customer base, may feed into the court’s assessment of the equity in deciding what is fair and just.
The court is entitled to act upon the equity where expert valuation evidence supports the conclusion that the price payable under the Syers order is equivalent to what the other can reasonably have expected to receive for his own share. The likely costs of a sale and any potential adverse tax consequences resulting from a sale may be factored into the court’s comparison of the two.
The court is entitled to act upon the equity despite any suggestion by the second partner that he would be willing to pay more for the first partner’s share than is offered in return, as the price of himself carrying on the business, and notwithstanding the prospect that such a sale might have produced a greater financial return for him than that indicated by the valuation evidence accepted by the court.”
A copy of the judgment can be downloaded here
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