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Universal partnership: Asset sharing

A case claiming the existence of a universal partnership between a former couple and a family trust and subsequently requesting distribution of the assets making-up the trust upon divorcing – Adcock v Adcock and Others (3617/09) [2012] ZAECPEHC 28 (26 April 2012)

The plaintiff had divorced the first defendant during 2010. The first defendant is also the third defendant and is trustee of the Wilton Trust. The second and fourth defendants are the plaintiff’s parents-in-law.

The plaintiff now claimed that there had been a universal partnership between herself and the Wilton Trust. The second and fourth defendants were also trustees of the trust. The plaintiff contended that the main business of the partnership was the farm Wiltonside. She claimed that she, the first defendant and second defendant contributed equally to the business of the partnership their labours, service and skill. The plaintiff also alleged that a further property at 4 Cyril Street, Mount Pleasant, Port Elizabeth, had also been acquired by the partnership.

The four essentials of a universal partnership as formulated by RJ Pothier in his “A Treatise on the Contract of Partnership” (as translated by Tudor) are:

Each of the partners must bring something into the partnership, or bind themselves to bring something into it whether it be money, or labour or skill;
The partnership business should be carried on for the joint benefit of the parties;
The object should be to make a profit; and
The contract should be a legitimate one.

The plaintiff maintained that the purpose of the partnership would be for the joint benefit of the plaintiff, her former husband and the trust with the express purpose of making profits, and that upon the marriage being terminated it was an implied term that the partnership would be terminated and its net asset value distributed equally among the partners according to the partnership ratio. Some of the evidence which the plaintiff gave related to how she assisted on the farm. She gave evidence that she helped dig out a swimming pool, renovated the old dilapidated brick farm house and enhanced the prefab house on the farm, and organized the staff. She fed crocodiles and sometimes slaughtered chickens. She also liaised with the accountant who was responsible for keeping the books of the trust.

The Court found that the second defendant did not see the farm as a partnership asset. He created trusts, specifically with the purpose of keeping property such as the houses and farms he bought, in his family, for the benefit of his two sons and their biological offspring, but not for any former daughters-in-law, of which he had two. He disliked them.

The Court furthermore found that the manner in which the plaintiff and the first defendant came to live on the farm was no more than a family arrangement to provide them with a place to stay and an opportunity to earn a subsistence.

The Court found that there were no legal obligations which would bind the trust as a partner in a universal partnership with the plaintiff. The fact that the plaintiff had liaised with the second defendant’s accountant, does not give rise to an inference that the trust was in partnership with the plaintiff and her husband either.

The Court found that the plaintiff failed to establish a universal partnership between herself, the trust and her husband. Accordingly the plaintiff’s claim was dismissed with costs.

article written by Cape Town divorce specialist, Peter M Baker

Trust lawyers

Do not be shy to hire a trust lawyer when there are complexities, if there is a lot of money at stake; the cost of the lawyer, whilst expensive, is often a fraction of what is sitting in the trust.

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