Because of uncertainties about the agreements that were reached, there were family disputes and ultimately a court hearing culminating in the decision of the Supreme Court of New South Wales in March 2024 (Frager v Frager [2024] NSWSC 193).

At the meeting were Linda and Barry Frager, the parents of Jeffrey, and Jeffrey’s wife Katherine.

Prior to the meeting, the business of the farm was conducted by a partnership between Linda, Barry and Jeffrey.

The business, at the time, was under financial stress and Katherine offered to contribute $300,000 to the partnership that she was to receive by way of an inheritance in her family for an equal interest in the partnership. After the meeting, the partnership became a four-party partnership. Although Linda and Barry wanted to step back from an active participation in the business, they were not eligible at that time to receive a pension and therefore remained as partners. They were, however, able to purchase a house in Dubbo and other items for their personal use using the $300,000 contributed by Katherine.

At the meeting, there was no final agreement as to basis on which Linda and Barry would retire.

On 30 June 2014, Linda and Barry retired from the partnership. After that date the partnership was between Jeffrey and Katherine.

At the hearing in February 2024, judge Hmelnitsky was required to decide on a following issues:

• Was the receipt by Barry and Linda of $300,000 from Katherine in full satisfaction of their interest in the four party partnership?
• Was the farm property a partnership asset or the personal property of Barry and Linda?
• Was a government road purchased in the name of Barry and Linda held on trust for the two party partnership between Jeffrey and Katherine?
• What happened when Barry and Linda retired in 2014?
• Was Linda entitled to any money from the two arty partnership?

It was necessary to answer these questions because of doubts and disputes following the February 2013 meeting.

As to the first issue, his Honour examined the terms of the conversations that the parties said had occurred at the time and the notes of the business advisor who also attended and concluded that there was no final agreement as to the basis upon which Barry and Linda would retire from the partnership.

The one thing that his Honour held that was agreed at the February 2013 meeting was that the property was a partnership asset. Statements were made that it was always to be help as joint tenants so that it would pass by operation of law to Jeffrey. The accountants and business advisors gave evidence that they always regarded it as a partnership asset and it was treated as such in the partnership books.

The government road that was purchased was paid for by the partnership and was put in the name of Barry and Linda because that was a requirement of the government department. It was recorded in the books of the partnership as a partnership asset. His Honour held that Linda held the property for the partnership.

On the dissolution of the four-party partnership in 2014 on the retirement of Barry and Linda, His Honour held that the partnership share of Barry and Linda was converted to a loan account. In the books of the partnership, it was treated in this way and drawings by Linda and Barry reduced the loan balance.

The final orders of the court were that the farm and the crown road that were in Linda’s name were held by her on trust for the partnership between Jeffrey and Katherine.

The partnership between Jeffrey and Katherine were indebted to Linda for $440,880.02 which represented the balance of the loan account.

Apart from the many stresses associated with family disputes, Barry and Linda had an additional unfortunate experience. Part of their strategy on retirement was that they would receive a full government pension. For some time this is what occurred. However, in October 2018, they were notified that because of their continued ownership of the land they were not entitled to a full pension and a sizable debt was raised. The truth was that they were not the beneficial owner of the property, but a trustee. Had they known this, the issue with the department of social security could have been avoided and they would have continued to receive the pension.

The decision of the court in this matter highlights the value of having the assistance of a solicitor to help in the implementation of decisions made by family members as to the future of a farming business.