Farming partnership of two brothers - surviving brother continuing business following death of other - compen-sation paid to survivor following cull during foot-and-mouth disease outbreak to be treated as post-dissolution capital profit for purposes of distribution on death of survivor

Emerson (Executrix of Estate of James Henry Emerson) v Estate of Thomas Matthew Emerson: CA (Lords Justice Brooke, Chadwick and Scott Baker): 5 February 2004

Two brothers were farmers working in partnership.

When one died the other brother continued in business.

Following the national outbreak of foot-and-mouth disease in 2001, and a cull, the surviving partner received compensation monies from the government.

When that partner subsequently died, the issue arose of how the compensation should be distributed between the estates: under a discretion, by virtue of section 42(1) of the Partnership Act 1890, or under section 24(1) of the 1890 Act?

The judge found that section 42(1) did not apply to the facts and shared the fund between the estates, subject to certain adjustments.

The defendant appealed.

Andrzej Kolodziej (instructed by Smith Roddam, Bishop Auckland) for the claimant; Tim Hirst (instructed by Scotts Wright, Catterick Garrison) for the defendant.

Held, allowing the appeal in part, that section 42(1) of the 1890 Act had no application since the compensation monies constituted capital, and post-dissolution capital profits could not properly be regarded as profits within the meaning of section 42(1); that distribution was accordingly to be carried out pursuant to section 24(1) of the 1890 Act; that the monies were therefore to be divided, but the judge's order would be varied to the limited extent of making certain adjustments relating to matters such as the cost of new livestock and wages expenses.