Cobden vs Cobden: the importance of a written partnership agreement

In the recent case of Cobden v Cobden [2024] EWHC 1581 (Ch), the High Court addressed the dissolution of a farming partnership between two brothers, Matthew and Daniel Cobden, who jointly operated a substantial dairy enterprise in Somerset. The case was noteworthy for farmers, as it involved a complex dispute regarding the interpretation and enforcement of an unwritten family agreement.

The Cobden brothers had been equal partners in their farming business since 2006, following the departure of their third brother. Operating without a formal written partnership agreement, their collaboration persisted until relations deteriorated, leading Matthew to serve a notice of dissolution on 25 August 2022.

Subsequently, Matthew sought a court declaration to dissolve the partnership and requested that Daniel be compelled to sell his interest to him at a fair value, based on alleged mutual understandings from discussions in 2005/2006 and 2021.

The central question was whether the court should order a standard winding-up of the partnership - involving the sale of assets on the open market - or issue a “Syers order.” A Syers order is a rarely taken course of action and permits one partner to buy out the other’s share at a court-determined fair value, deviating from the typical asset liquidation process.

The court concluded that exceptional circumstances justified granting a Syers order in Matthew’s favour, highlighting:

• Mutual Understanding: evidence indicated that both partners had an implicit agreement allowing Matthew to continue the business by buying out Daniel upon dissolution.
• Matthew’s Commitment: Matthew had significantly developed the dairy operations, expanded the herd, and modernised facilities, demonstrating reliance on the mutual understanding.
• Equitable Considerations: the court deemed it inequitable for Daniel to insist on an open market sale, given the established understanding and Matthew’s contributions.
• Impact on Third Parties: An open market sale could adversely affect employees and disrupt business continuity.

 This case underscores the importance of having a formalised written partnership agreement, especially in family-run farming businesses. Such agreements should clearly outline exit strategies and dispute resolution mechanisms to prevent costly and emotionally taxing legal disputes. The decision also illustrates the court’s willingness to consider equitable factors and the partnership history when determining fair outcomes following dissolution.

If you need advice on agricultural law, contact Richard Howells, Director and Head of Inheritance and Trust Disputes at JCP Solicitors, by calling 01267 248981 or email richard.howells@jcpsolicitors.co.uk.