|Neutral Citation No.: Master 62||Ref:||2000/2348|
|Judgment: approved by the Court for handing down||Handed down:||18 November 2008|
|(subject to editorial corrections)
1. an account of the credits, property and effects belonging to the former partnership ("the partnership") between John Foster deceased ("the deceased") and the defendant at 25 August 1994 the date of commencement thereof;
2. an account of all partnership dealings and transactions between the deceased and the defendant from 25 August 1994 until 6 November 1996 ("the dissolution date");
3. an account of the credits, property and effects belonging to the partnership at the dissolution date;
4. an account of the partnership debts and liabilities at the dissolution date;
5. an inquiry what has become of the partnership property and whether any, and if so what, parts thereof remain;
6. an inquiry whether any and which partnership debts or liabilities have been paid or satisfied and by whom and out of what fund.
(a) that the business would be that of "purchase management and letting of offices and premises for an unlimited duration …";
(b) the name of the partnership was to be "531";
(c) the business of the partnership was to be carried on at 531 Falls Road, Belfast which at the time of the agreement were agreed for sale to the defendant. Once purchased, the premises would be the property of the partnership notwithstanding that the "title was to be registered in the sole name of James McCorry" and each partner would have a half share in the property;
(d) the profits and losses of the partnership would belong to and be borne by the partners in equal shares.
Victims and Survivors Trust £ 3,420.00
Andersonstown Music School £ 3,360.00
Sanco Technologies Limited £28,800.00
"The relationship between partners and between personal representatives of a deceased partner was a fiduciary one so that those partners who continued the business were, in the absence of an agreement to the contrary, liable to account for the profits which they earned with the share of the retiring or deceased partner".
"Difficult questions may arise where there is an outlay of partnership money on an asset belonging to one of the partners or, conversely, an outlay of a partner's own money on an asset belonging to the firm. In either case, it must be determined whether such an outlay will confer any rights in respect of the asset benefited. Of the possibility that it might give rise to a charge over the asset, Lord Lindley observed:-
'The agreement of the partners, if it can be ascertained, determines the rights in such cases. But where, as often happens, it is extremely difficult, if not impossible, to ascertain what was agreed, the only guide is that afforded by the burden of proof. It is for those claiming an allowance in respect of the outlay to establish their claim. On the other hand, an intention to make a present of the permanent improvement is not to be presumed.'"
"Prior to the Partnership Act 1890, Lord Lindley pointed out that –
'… in taking an account of subsequent profits, the partner by whose exertions they have been made is usually allowed compensation for his trouble, unless he is, in the proper sense of the word, a trustee, guilty of a breach of trust, when no such compensation is allowed'.
Such an allowance is still afforded where an order is made under section 42".
In the present case therefore, should the defendant discharge the burden of proof, the capital profits arising by reason of the increase in the value of the property would (on his case) be subject to payment of an appropriate amount in his favour for expenditure and remuneration.
"If no books of account whatsoever are kept, or if such books as are kept are unintelligible or are destroyed or otherwise wrongfully withheld, on an account being directed by the court all necessary presumptions will be made against those partners responsible for the non-production of proper accounts. However, where all the partners are in pari delicto, this rule cannot be applied."
I have considered carefully the evidence including that of Mr Sean McParland, the defendant's accountancy witness, and the book of discoverable documents. Many of the invoices are addressed to one or other or both of the defendant's two companies. I am satisfied that accounts were prepared for these companies, albeit the responsible accountant Mr McParland cannot recall whether either company broke even or made a modest profit or a modest loss. As the accounts were not produced it falls to me to presume (in line with the legal principles I have mentioned) that all of the above expenses were included in the accounts of (a) one or both of the companies Systemex Limited and Megabytes Limited and (b) those of the current tenant (so far as applicable). Accordingly the defendant cannot successfully claim reimbursement of those expenses in these proceedings.
"42 – (1) Where any member of a firm has died or otherwise ceased to be a partner, and the surviving or continuing partners carry on the business of the firm with its capital or assets without any final settlement of accounts as between the firm and the outgoing partner or his estate, then, in the absence of any agreement to the contrary, the outgoing partner or his estate is entitled at the option of himself or his representatives to such share of the profits made since the dissolution as the Court may find to be attributable to the use of his share of the partnership assets, or to interest at the rate of five per cent per annum on the amount of his share of the partnership assets".
1. An account of the credits, property and effects belonging to the former partnership at 25 August 1994 the date of commencement thereof.
(a) The partnership property at 531 Falls Road, Belfast which was in course of acquisition at the date of commencement at a price of £15,000 (according to the deed of assignment) or £20,000 (according to other evidence) and which was vested in the defendant by a rectifying assignment dated 30 August 1994 of the leasehold estate created by a lease dated 24 February 1956 for a term of 9,000 years from 1 November 1955 subject to the yearly ground rent of £20.
(b) £8,500 lodged by the deceased and £10,000 lodged by the defendant into a joint current account in their names.
(c) Other incidental properties and effects, the value of which is unknown.
2. An account of all partnership dealings and transactions between the deceased and the plaintiff from 25 August 1994 until 6 November 1996 (the dissolution date).
Particulars of partnership dealings or transactions between the deceased and the plaintiff during this period cannot be ascertained or estimated. It appears however that the defendant's company Systemex Limited was operating at the partnership premises for at least a month prior to dissolution of the partnership.
3. An account of the credits, property and effects belonging to the partnership at the dissolution date.
(a) The partnership property at 531 Falls Road, Belfast. Although the value of this property would have been enhanced significantly during the period of the partnership by works carried out prior to dissolution, there is no evidence to indicate what the value of the property at dissolution was and given the other conclusions in this report it will not be necessary for the court to estimate a value as at that date.
(b) Incidental properties and effects of which there are no available particulars and in respect of which it is unnecessary for the court to attribute a value.
4. An account of the partnership liabilities at the dissolution date.
(a) For reasons stated earlier in this report the £10,000 loan obtained by the defendant and his wife appears to relate to their home and not to the property.
(b) The defendant is entitled to claim as a liability of the partnership £25,000 for pre-dissolution expenditure and remuneration but this liability should be set off against post-dissolution rental income.
5. An inquiry what has become of the partnership property and whether any, and if so, what parts thereof remain.
As at the date of hearing the property 531 Falls Road was on the market for sale at an asking price of £400,000. The property was at the time of hearing in the occupation of tenants Sanco Technologies Limited and had been previously in the occupation of other tenants including two companies owned and operated by the defendant, namely Systemex Limited and Megabytes Limited. I am satisfied that an appropriate figure for the rent which was paid in respect of the property or which ought had to have been paid and received since dissolution is £93,180 down to the date of hearing, 20 February 2008, and the value of the defendant's claim for (post-dissolution) reimbursement and remuneration should be £13,500 (as at hearing) which of course should be set off against the rental income, as should the sum of £25,000 for the defendant's like claim for the pre-dissolution period. It is impossible and unnecessary to attribute any value in these proceedings to incidental property and effects.
6. An inquiry whether any and which partnership debts or liabilities have been paid or satisfied and by whom and out of what fund.
As indicated under 5 the defendant's claims for expenditure and remuneration must be regarded as absorbed by post-dissolution rental income. If the property remains subject to a mortgage to a third party to secure a guarantee liability undertaken by the defendant alone without the consent of the plaintiff then it appears to me that on division of the proceeds of the partnership property an appropriate adjustment should be made as between the plaintiff and the defendant to ensure that the amount (if any) required to redeem the mortgage is borne out of the defendant's share alone. (This is without prejudice to the rights of the mortgagee, as it is not a party to these proceedings.) No other material partnership liabilities have been identified.