BUSINESSDESK: A Western Australian couple has lost a High Court case over the dissolution of a farm partnership in Canterbury where late businessman Allan Hubbard's idiosyncratic record keeping made it difficult to prove what the partners had actually agreed to.
Ealing Farm, a 1245ha property of 16 titles between Timaru and Ashburton was bought by a farm partnership that was 25% owned by Allan and Jean Hubbard, 25% by Andrew and Rachele Morris, who ran and lived on the farm, and 50% by Pullington, an investment vehicle of WA couple Geoffrey and Frances Holman.
The deal was effectively pulled together by Mr Hubbard and the other partners left it to him to come up with the paperwork. No partnership agreement signed by all parties could be provided to the High Court and the structure Mr Hubbard devised was made up of two partnerships, holding the land and the operating assets.
The dispute arose because the Morris's wanted to buy out the Hubbard's stake and annul the partnership, splitting the property into two farms, while Pullington argued it was entitled to share in the acquisition and had the right to acquire all of the assets.
Justice Jillian Mallon ruled in the High Court that the Ealing Land Partnership was able to be terminated under the Partnership Act and had been terminated in November last year. The Ealing Pastures Partnership was terminated by the death of Allan Hubbard on September 2 last year.
The judge ruled that the Morris's weren't required to sell their interests in the assets of the two partnerships.
None of the partners were set to lose from the investment. Ealing was bought for $5 million in 2000 and is now worth about $60 million, according to the August 30 judgment.
It had a bank loan of about $20 million secured over the property and assets, and was guaranteed by the partners.
The judgment says Andrew Morris, Geoffrey Holman and Allan Hubbard would meet about once a year to discuss the partnership and that it appeared Mr Hubbard had fallen out with Mr Holman, who had specific requirements for the structure of the deal, giving him a tax advantage on the sale of an Australian business.
The Hubbard stake became available when the Timaru businessman and his wife were put into statutory management. It turned out Mr Hubbard had transferred his interest in the partnership to charitable trusts, including one where he "purported to sign in Mr Morris's name" though the transfers "were done without Mr Morris's knowledge".
The judgment cites a letter Mr Holman wrote to Timaru solicitor Edgar Bradley, who had acted on instructions from Mr Hubbard in relation to drawing up papers for the partnership, shortly after Mr Hubbard's death last year.
"He [Hubbard] leaves behind a mess at Ealing that I shall have to deal with when I should be fishing," Mr Holman says.
No draft partnership agreement signed by Mr Homan has been located, though it also appeared Mr Holman did not follow this up until after the Hubbard's statutory management, the judgment says.
"Mr Hubbard's unsystematic file keeping could also explain this," it says.
Elsewhere, the judgment says that Mr Hubbard "was non-committal" when solicitor Mr Bradley sought further instructions on the draft partnership.
"Mr Hubbard appears to have made a deliberate decision not to respond to Mr Bradley's request for instructions (although he may just have been too busy)," the judgment says.
"Mr Bradley got the impression that Mr Hubbard had fallen out with Mr Holman at this early stage in their relationship.
"Mr Hubbard was an experienced businessman. He may well have decided that it was better to have no written agreement at all and therefore no obligation to stay in partnership with Pullington for even five years," it says.
The partnership had been envisaged as being for five years, though Mr Holman had sought to have it made permanent.
This article is tagged with the following keywords. Find out more about MyNBR Tags
- Xero makes a special alteration to rival's billboard
- Fintech start-ups coy about asking for money at Wellington demo day
- MARKET CLOSE: NZ shares rise as blue-chips follow Asia's lead
- Vodafone new sponsor for All Blacks and NZ Rugby
- Dotcom's Seth Rich claim earns him a chance to appear on Sean Hannity's show
Most listened to
- Business leaders on Budget 2017: Theresa Gattung will be disappointed if the Budget doesn’t capitalise on "the biggest opportunity facing NZ"
- NZAMI chairwoman says the government's planned changes to immigration rules will hurt key NZ sectors
- Lewis Gradon explains what contributed to F&P Healthcare's record results
- Vodafone chief executive Russell Stanners won't reveal the financial details of the deal with NZ Rugby
- NBR Radio: best of the week ended May 19, with Grant Walker