While farmer Marcelyn Barnes prided herself on keeping family finances well recorded, her practice of mixing together business and personal transactions in a ‘mish-mash’ through one bank account led to litigation on her husband’s death. Marcelyn said assets totalling $931,400 were hers; daughter Gillian said the funds were partnership assets to be divided between members of the family.
The High Court was told Marcelyn and her late husband Alan had farmed in partnership at Dannevirke for over fifty years. Marcelyn kept the farm accounts and filed tax returns for both the business and themselves. Complications arose on Alan’s death in 2013. Recorded as partnership assets were a $600,000 loan made to son Richard and his wife and $331,400 invested in term deposits. Marcelyn said these financial assets were personal assets jointly owned by both herself and her late husband; she inherited full ownership by survivorship. Gillian pointed out they were recorded as a partnership asset; the farming partnership came to an end on Alan’s death and partnership assets do not pass by survivorship. Partnership law sees partnerships dissolved on the death of a partner and each partner’s share treated as their personal property. If personal property, Alan’s will left a life interest to his widow with Marcelyn entitled to interest only on Alan’s half share of the $931,400 so long as she lived.
Justice Cull ruled the $931,400 financial assets were personal assets of Marcelyn and Alan, not partnership assets. The loan and term deposits were derived from their personal savings. Marcelyn inherited her late husband’s share by survivorship. Recording them as partnership assets was a mistake. The court was told Marcelyn had no professional expertise in accounting and took a frugal approach to bank charges. Personal and farming transactions were all run through the same bank account. She was inconsistent in the way she treated partnership assets and personal income for tax purposes. It made no difference to Inland Revenue; the correct amount of tax was paid.
Justice Cull said evidence the disputed financial assets were personal assets, not partnership assets, was indicated by advice given their lawyer when preparing wills and account authorities signed when opening a joint bank account.
Cochrane v. NZ Guardian Trust Co Ltd & Barnes – High Court (31.10.18)
18.218