Partnership in a tangle

Last updated 05:00 27/09/2012

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Allan Hubbard's death left "a mess" regarding the future of a $60 million Ealing dairy farm, the High Court has been told.

In a decision this month, the High Court detailed the complexities of a partnership in a 1245-hectare property bought for $5m in 2000 and now worth $60m, with borrowings of $20m.

The property was bought by farm manager Andrew Morris and his wife Rachele with a 25 per cent interest; Allan and Jean Hubbard with a 25 per cent interest; and Geoffrey and Frances Holman of Perth, Australia, with a 50 per cent interest.

After Mr Hubbard's death on September 5 last year, the Morrises sought to buy the Hubbards' interest which was then in the control of statutory managers. They then sought to dissolve the partnership and divide the property into two which caused the Holmans and Morrises' relationship to sour. Meanwhile, neither couple was able to locate a copy of the original partnership agreement.

The Holmans sought to stop the partnership dissolving through the High Court, arguing that they had pre-emptive rights to buy the other partners' shares. In her decision Justice Mallon found no pre-emptive rights existed and she allowed the property to be divided. The property already operated as two separate farms.

After Mr Hubbard's death Mr Holman wrote to the Hubbards' lawyer, Edgar Bradley, about a draft partnership agreement which had pre-emptive rights written into it but had not been signed, and was said to be for only five years.

"He [Mr Hubbard] leaves behind a mess at Ealing that I shall have to deal with when I should be fishing," Mr Holman said.

At one point Mr Hubbard had sought to put his 25 per cent share into a charitable trust with Mr Bradley and Mr Morris as trustees, unknown to Mr Morris.

"It seems that this was one of a number of other transfers of assets to charitable trusts which Mr Hubbard had put into place and which he had purported to sign in Mr Morris' name.

These transfers were done without Mr Morris' knowledge. On January 25, 2011, the statutory managers enclosed a deed of annulment."

Statutory managers later reversed this transaction and legal action is being pursued by Hubbard investors to recover the $15m share.

The 30-page court decision showed the Hubbards' support for the Morrises buying their share.

Mr Hubbard had written a letter before his death saying he would support the Morrises buying the share. After his death, Mrs Hubbard wrote to Mr Holman stating it was their intention to sell to the Morrises.

Ultimately it was found the partnership could be dissolved and was in part terminated by Mr Hubbard's death, and there were no pre-emptive rights for the Holmans to buy the other parcels of land. Morrises and Mrs Hubbard were entitled to "costs" for the legal action.

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- © Fairfax NZ News

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