COBDEN v COBDEN
I and my team (in particular, Gemma Staddon) were delighted to work with the outstanding Stephen Jourdan KC and Ciara Fairley of Falcon Chambers on behalf of our client, Matthew Cobden, in the case of Cobden v Cobden, both in the High Court and, at the end of last month, in the Court of Appeal.
On our team we all agree that, however important a case is in relation to the law, fighting cases in Court is a failure. The objective always remains trying to seek a solution without going to Court. Sadly, on this occasion, settlement could not be achieved. Where that happens, it is then important to win. We were delighted that we were able to achieve success for Matthew in both Courts.
The decision of the Court in Cobden is groundbreaking. It is without doubt the most important decision in the world of farming partnership disputes for a very long time.
In the dissolution of a partnership, if the court takes the view that it would be preferable to require one or more of the partners to buy out the partner or partners in the course of the dissolution, rather than to have a full winding up of the partnership, then the court has a power to make such an order. That power was originally derived from a decision of the House of Lords in the case of Syers v Syers in 1876, a case which even predated the Partnership Act 1890.
In practice Syers orders have not often been made. As Hoffman LJ said in Hammond v Brearley (1992), the Syers case is more frequently cited than applied, but he did apply it in the Hammond case, where the outgoing partner’s interest was small. In the Syers case itself, the partner whose interest was bought out had a one-eighth share in the partnership.
Lord Hoffman, as he subsequently became, is regarded as having established, through the case of O’Neill v Phillips [1999], an approach in nearly all quasi-partnership cases where the remedy for the injured minority shareholder will be a buyout under Section 996 of the Companies Act 2006, rather than a liquidation. That is consistent with the Syers principle.
In the textbook, Partnership Law (Blackett-Ord/Haren), it is recognised that the general rule is that upon a dissolution, a departing partner or the personal representatives of a dead partner after dissolution, may insist on all of the partnership assets being sold: see Hugh Stevenson & Sons Limited v AG für Cartonnagen-Industrie [2017].
Upon the enactment of the 1890 Act (which still governs the law of partnership) what would happen in respect of the rights of partners upon a dissolution became a matter of statutory discretion, contained in Section 39 of the 1890 Act.
The question which was considered in the Cobden case was how the Court’s discretion might be exercised in a farming partnership of equal shares between two brothers, Matthew and Daniel.
In 2022 the relationship broke down and the partnership was dissolved. Matthew applied to the Court for a Syers order, although Daniel was a partner with an equal share in the Partnership. By the time the case came before the High Court in May 2024, Daniel’s position had developed, so that he was seeking to have the partnership assets sold on the open market, with each brother permitted to bid.
The partnership’s business is one of the largest dairy units in the UK. It was Matthew’s case, accepted by the Court, that developing the business into what it is today was as a consequence of his drive and his determination. He took the lead in the business. His evidence was accepted by the Court.
In the High Court, HHJ Russen KC delivered his Judgment in July 2024, determining that a Syers order should be made in Matthew’s favour. The Judge undertook a careful review of the authorities, including a decision of the Court of Appeal in the case of Bahia v Sidhu [2024]. The decision in that case was made between the end of the Trial in the Cobden proceedings and Judgment being delivered.
Judge Russen concluded that a Syers order could only be made in exceptional circumstances. He found that such exceptional circumstances existed in favour of Matthew: hence the Syers order being made.
The Judge summarised the exceptional circumstances in the following way:
“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 to 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.”
The Judge described this equity as being one which was “proprietary estoppel-ish”.
Daniel appealed against the High Court decision on three grounds:
1 The decision was contrary to the principles derived from the Court of Appeal’s decision in Bahia v Sidhu.
2 The “proprietary estoppel-ish” equity was not established on the facts.
3 The Judge was wrong to make a Syers order on the basis of the expert valuation evidence, which recognised that the farm might be sold for substantially more than the valuation if exposed to the open market.
The Court of Appeal dismissed Daniel’s appeal on all three grounds. Judgments were given by Newey LJ and Lewison LJ. The latter agreed with the former. The third Judge, Nugee LJ (who had been part of the Court in the Bahia case) agreed with both Judgments.
As regards the first ground of appeal, the Court of Appeal considered that the decision in Bahia, which recognised that a sale on the open market is the normal course after dissolution, was nevertheless subject to exceptions, where either a sale would not be the best means of achieving full value or would be unfair.
The Court of Appeal expressly rejected the argument that a Syers order may only be made if it is the best way of achieving full value. A Syers order can also be made where a sale would be unfair or unjust. The Court concluded that one instance where it might be unfair or unjust is where the constituent elements necessary for an estoppel to arise have been established on the facts.
As to the second round of appeal, the Court identified the reasons for the Judge’s conclusions, which justified his decision, and accordingly rejected the appeal on this ground.
As regards the third ground of appeal, the Court decided that the Judge was entitled to conclude that the valuation evidence provided a reliable indication of the market value of the Partnership’s assets and that making a Syers order in reliance on that valuation did not involve an unwarranted gamble with Daniel’s prospects.
The usual conclusion that one sees in relation to any article about farming partnership disputes is: get a written partnership agreement. I am not suggesting that this is bad advice, leaving aside the fact that so many partnership agreements are not well drafted, but the fact is that the Syers jurisdiction runs in parallel with any contract that exists between the partners.
In relation to proposed dissolutions of farming partnerships, it is now going to be necessary to consider what the likely outcome will be before the Court, whether there will be a sale of the assets or whether one or more of the partners will be allowed to buy out a partner who wishes to leave the partnership or indeed (as in the Cobden case) a partner who himself, for a long time in the proceedings, sought a Syers order in his own favour.
The analysis of each case will involve a review of the dealings between the parties, in exactly the same way as where there are arguments about the application of proprietary estoppel: promises made and relied upon where a party acts to his/her detriment in circumstances where the Court would regard any departure from the promises as being unconscionable. These considerations will now apply in relation to the outcome of a dissolution of a farming partnership. That is in the context of the Court of Appeal’s decision that the rights of the parties can be determined by reference to the valuation evidence.
A new canvas!
P R Williams
Ebery Williams
20 December 2025