Partnership AssetsA partnership is not a separate entity and is simply the aggregate of its members. The interest of an individual partner in the partnership assets is a chose in action. It is a “bundle of rights” which derive from the partnership agreement or the default Partnership Act provisions, which is enforceable between the partners, ultimately, by legal action. Show The partnership property may be vested in one or more partners on behalf of the partnership. However, the rights or entitlement of a partner to it in a personal capacity may be determined only on the ultimate winding up of the partnership. The partner is not entitled to any particular item of partnership property. His ultimate entitlement is to a share of the net proceeds of the partnership assets, after paying off liabilities.In order to be categorised as separate property outside the scope of the partnership, the asset/ property must cease to be partnership property or the partnership itself. The partnership must be wound up and its net assets must be distributed. Until winding up, the partnership assets although vested in the partners, are a fund which is primarily available to meet partnership debts and thereafter (only) available for distribution to the partners. To some extent, the partners are in the nature of trustees of the partnership assets, for the benefit of those ultimately entitled on them on winding up. Departing PartnerA technical dissolution of the partnership may arise when the composition of the firm changes. Where, as is common, there is an agreement (made in advance or at that time) that the firm should not be wound up in such a case, then the departing partner’s interest is his share of the net partnership property/assets, which is valued for the purpose of payment at that time. The default position under the Partnership Act is that on the departure of a partner, that partner is entitled to have his share ascertained and realised by forcing the sale of the partnership assets (if necessary) in order to pay off the partnership liabilities and distribute his share of any surplus. Commonly, this position is changed by the partnership agreement or by an agreement made by all partners on dissolution. Where there is an implied agreement that the firm will continue on the departure of a partner from a partnership, and no mechanism exists for valuation and payment of his share, the court may order that his share be acquired by the other partners at a valuation. The courts have the discretion to refuse to order the sale of the partnership assets and allow the continuing partners to buy the departing partner’s share at a valuation. Technical DissolutionA significant difference between a partnership and a company is that in the absence of an agreement to the contrary, any partner is entitled to dissolve the partnership by notice. The effect is that in the absence of an express or implied agreement to the contrary, the partner may realise his share by compelling a process whereby the firm assets are realised. This is significantly different to the position in respect of a shareholder. In the absence of provision to the contrary in a partnership agreement, any change in the composition of the partnership constitutes a technical dissolution. The partners may expressly or impliedly waive a full winding up and agree that a partner takes the value of his interest in the partnership. In this case, upon the arrival or departure of a partner, the business will continue without a winding up. A well-drafted partnership agreement will provide a mechanism (such as a notional winding-up) upon the change in the composition of the partnership. The right of the partner to insist on a forced winding up is generally considered too disruptive so that partnership agreements almost invariably remove this right. Non-Judicial DissolutionUnless otherwise agreed, any partner may dissolve the partnership by giving notice of dissolution to the other partners. Notice in writing is desirable, although a verbal notice or even notice inferred from conduct may suffice. The notice is effective as of its date or the date mentioned in the notice; A partnership will dissolve by the expiration of a fixed term or by the termination of a venture or undertaking for which it was set up. In each case that the contrary may be agreed. As with any contract, a partnership agreement may be terminated if one party repudiates it by making it clear that hs does do not intend to be bound by it. Similarly, a contract may be rescinded on certain grounds such as misrepresentation or very exceptionally, a fundamental mistake. Regardless of what the partnership agreement provides, the parties may agree (unanimously) to dissolve the partnership at any time. An agreement to dissolve may be verbal or in writing; A partnership may be dissolved at the option of the other partners if one partner’s share becomes subject to a charge. The court may charge a partner’s interest by way of enforcement of an individual debt. Automatic DissolutionA partnership is dissolved if its purposes become illegal. It is void if it was unlawful from its inception. The principles are broadly those applicable to unlawful contracts and lawful contracts performed in an unlawful manner. The death of a partner dissolves the partnership unless the partnership agreement otherwise provides. The bankruptcy of a partner dissolves the partnership with effect from the date of adjudication. It is not clear if the courts will treat the dissolution of a corporate partner as equivalent to death. The commencement of insolvency of a corporate partner is likely to be treated as the equivalent of the bankruptcy of an individual partner No Automatic DissolutionThe loss of mental capacity of a partner is not an automatic ground for termination and dissolution of the partnership. It may be the basis for an application to Court for dissolution. The retirement of a partner from the partnership business does not automatically lead to dissolution. To do so without consent may breach the particular partnership agreement. A well-drafted partnership agreement will make provision for the retirement of partners. A retiring partner may choose to give notice of dissolution in order to compel realisation of his share unless the partnership agreement precludes him from so doing. There is no general right to expel a partner. In the absence of an agreement otherwise, the partnership may be dissolved, but continuation may be impaired by winding-up. A right to expel a partner may be provided in a partnership agreement. It is possible to apply to the court for a dissolution of a partnership on terms, on the grounds of a partner’s misconduct. There is no equivalent to oppression applications in the case or partnerships, whereby a Court may compel the purchase of an interest of another partner on the grounds of misconduct (equitable grounds). The court may order winding up where it is just and equitable. Any partner may dissolve the partnership by notice, leading to a complete winding up, unless the right has been precluded. Court DissolutionA partnership may be dissolved by the court on certain grounds. An application to court may be necessary where the partners have agreed to exclude the default right to terminate the partnership by notice. An application may be necessary where the partners’ relationship has broken down or in certain other circumstances. The court has the discretion to order a dissolution. The courts will generally grant a dissolution where the relationship has broken down, They recognise the impracticality of forcing unwilling partners to work together. There is no statutory power to order the sale by one partner of his share to the other. The application must be made by a partner of the firm or by somebody on his behalf. The application may be made to the High Court. It mat be made to the Circuit Court where the partnership assets and property are below certain values. All partners should be made parties in the action. An agreement providing for a reference to arbitration in a partnership agreement may displace the right to apply to the court. The court may have regard to the grounds for dissolution set out in the partnership agreement. However, it is not restricted to the grounds set out in the agreement. The statutory grounds on which the court may dissolve a partnership are dealt with briefly below and are discussed in a separate article. IncapacityThe mental incapacity of a partner is a statutory ground for dissolution by the court. There is a separate power under the mental capacity legislation, whereby the High Court may make orders in relation to the disposal of partnership assets on such grounds as it sees fit, without dissolution. This latter provision may be more desirable to invoke. The permanent incapacity of a partner is a statutory ground for dissolution by the court. The application must be made by the other partners. It contemplates physical incapacity which renders it impossible for the partner concerned to continue in business. It may also cover such matters such as loss of a necessary professional practising certificate. MisconductConduct calculated to prejudicially affect the carrying on of a business of a partner is a statutory ground for dissolution by the court. The application must be made by the innocent party. The behaviour of the partner concerned must be culpable. It may be necessary to show that it was done with the intent of causing harm to the business. Reckless conduct may not be enough. Willful and persistent breach of the partnership agreement of a partner is a statutory ground for dissolution by the court. The innocent party or parties may apply. The ground covers the willful and persistent breach of the partnership agreement. It embraces other conduct relating to the partnership business such that it is not reasonably practicable for the other partners to carry on business in partnership with him. Misconduct on the part of a partner, rendering the continuation of the partnership impractical is a statutory ground for dissolution by the court. The innocent parties may apply where there has been an irretrievable breakdown of the relationship Minor disagreements would not be sufficient. If one partner undermines the necessary relationship of trust and confidence, then the ground may be available. Other GroundsThe fact that the partnership business is carried on at a loss is a statutory ground for dissolution by the court. Any partner may petition on this basis. It must be shown that the partnership can be carried on, only at a loss and that there is no prospect of a return to profits. It is not necessary that the firm should be insolvent. It may be solvent, but unable to carry on its business profitably in the future; The just and equitable ground for dissolution is the final catch-all grounds for a Court ordered dissolution. The just and equitable grounds is broadly similar to that for winding up under the Companies Acts on an equivalent basis. Unlike the Companies Acts provisions, there is no provision allowing alternative remedies for oppression such as an order by one shareholder to purchase the shares of another. Any partner may petition for winding up on this ground. In a sense, it is equivalent to a no-fault divorce. It may be appropriate where there is deadlock and where the relationship has broken down. Because the remedy is equitable, the Court may, however, refuse relief to a partner who has been guilty of serious misconduct. References and SourcesIrish Sources Partnership Act, 1890 Partnership Law 2000 Twomey M. Butterworths UK Sources Lindley & Banks on Partnership: (19th Revised edition) 2016 Banks, Roderick I’Anson Partnership & Llp Law (8th edition) 2015 Morse, G. Partnership Law (5th Revised edition) 2015 Blackett-Ord, Mark; Haren, Sarah; Partnership ActExpulsion of partner.25. No majority of the partners can expel any partner unless a power to do so has been conferred by express agreement between the partners. Retirement from partnership at will.26.—(1) Where no fixed term has been agreed upon for the duration of the partnership, any partner may determine the partnership at any time on giving notice of his intention so to do to all the other partners. (2) Where the partnership has originally been constituted by deed, a notice in writing, signed by the partner giving it, shall be sufficient for this purpose. Where partnership for term is continued over, continuance on old terms presumed.27.—(1) Where a partnership entered into for a fixed term is continued after the term has expired, and without any express new agreement, the rights and duties of the partners remain the same as they were at the expiration of the term, so far as is consistent with the incidents of a partnership at will. (2) A continuance of the business by the partners or such of them as habitually acted therein during the term, without any settlement or liquidation of the partnership affairs, is presumed to be a continuance of the partnership. Duty of partners to render accounts, &c.28. Partners are bound to render true accounts and full information of all things affecting the partnership to any partner or his legal representatives. Dissolution by expiration or notice.32. Subject to any agreement between the partners, a partnership is dissolved— (a) If entered into for a fixed term, by the expiration of that term: (b) If entered into for a single adventure or undertaking, by the termination of that adventure or undertaking: (c) If entered into for an undefined time, by any partner giving notice to the other or others of his intention to dissolve the partnership. In the last-mentioned case the partnership is dissolved as from the date mentioned in the notice as the date of dissolution, or, if no date is so mentioned, as from the date of the communication of the notice. Dissolution by bankruptcy, death, or charge.33.—(1) Subject to any agreement between the partners, every partnership is dissolved as regards all the partners by the death or bankruptcy of any partner. (2) A partnership may, at the option of the other partners, be dissolved if any partner suffers his share of the partnership property to be charged under this Act for his separate debt. Dissolution by illegality of partnership.34. A partnership is in every case dissolved by the happening of any event which makes it unlawful for the business of the firm to be carried on or for the members of the firm to carry it on in partnership. CasesHurst v. Bryk and Others[2000] UKHL 19HOUSE OF LORDS LORD NICHOLLS OF BIRKENHEAD Repudiatory breach of contract as an independent ground of dissolution The consequences when a contract is brought to an end by the acceptance by one party to it of a repudiatory breach of contract by the other party are well established. They were clearly stated by Dixon J. in McDonald v. Dennys Lascelles Ltd. (1933) 48 C.L.R. 457 at 476-477, where he said: “When a party to a simple contract, upon a breach by the other contracting party of a condition of the contract, elects to treat the contract as no longer binding upon him, the contract is not rescinded as from the beginning. Both parties are discharged from the further performance of the contract, but rights are not divested or discharged which have already been unconditionally acquired. Rights and obligations which arise from the partial execution of the contract and causes of action which have accrued from its breach alike continue unaffected.” This passage has been expressly approved by your Lordships’ House: see Johnson v. Agnew [1980] A.C. 367, 396 per Lord Wilberforce; and Bank of Boston Connecticut v.European Grain and Shipping Ltd. [1989] A.C. 1056, 1098-1099 per Lord Brandon of Oakbrook. The doctrine of accepted repudiation is of general application in the law of contract, and there is no reason why it should not apply to an agreement to enter into partnership or to the contractual obligations which the partners mutually undertake to observe after the partnership has come to an end. But I have considerable doubt that it can be employed to bring about the automatic dissolution of the partnership itself. The use of the doctrine for this purpose would certainly be unhistorical. In its modern form it is of relatively recent origin. There appears to be no trace of it before Freeman v.Taylor (1831) 8 Bing. 124, and it was not fully understood until much later. Of course, it had long been recognised before then that the refusal or inability of one party to perform his part of the bargain should immediately excuse the other party from performing or preparing to perform his part. As Williston on Contracts, vol. 1, 3rd ed., pointed out, the reason why the plaintiff must ordinarily have performed his contract in order to recover is that the mutual performances in a bilateral contract are given in exchange for one another, and if the exchange fails on one side the other party may likewise decline to perform. Before the middle of the 19th century, however, the common law treated the innocent party as discharged from further performance, not because the other party had committed a breach of contract, but because he had failed to perform a condition precedent to the obligation of the innocent party. Even where what was relied on was a breach of contract, therefore, the critical question was whether the parties’ contractual obligations were mutually interdependent or independent. The question whether there has been a mutual discharge of reciprocal obligations can arise only in a bilateral context. Where one party was in breach of contract, the voluntary exercise by the innocent party of the right to refuse to perform his part of the bargain was usually described as “bringing the contract to an end” or “rescinding” it, with the result that he could not also claim damages for the breach. This fallacy was exposed by Bowen L.J. in Boston Deep Sea Fishing and Ice Co. (1888) 39 Ch. D. 339, 365 and by Holmes C.J. in Daley v. Peoples Building Association (1901) 178 Mass. 13. But it persisted until modern times, particularly in the Chancery Division: see Henty v. Schroder (1879) 12 Ch. D. 666 and the cases which followed it down to Barber v. Wolfe [1945] Ch. 187 and Horsler v. Zorro [1975] Ch. 302. It was not finally laid to rest until Heyman v. Darwins Ltd. [1942] A.C. 356 and (in relation to sales of land) Johnson v. Agnew [1980] A.C. 367. The failure to distinguish between discharge by breach and rescission ab initio has led many courts astray and continues to do so. It is impossible to say whether the modern contractual doctrine of accepted repudiation might have infiltrated the law of partnership if partnership had been treated as merely a particular species of contract enforceable in the common law courts. Disputes between partners and the dissolution and winding up of partnerships, however, have always fallen within the jurisdiction of the Court of Chancery. This is because, while partnership is a consensual arrangement based on agreement, it is more than a simple contract (to use the expression of Dixon J. in McDonald v. Dennys Lascelles Ltd); it is a continuing personal as well as commercial relationship. Neither during the continuance of the relationship nor after its determination has any partner any cause of action at law to recover moneys due to him from his fellow partners. The amount owing to a partner by his fellow partners is recoverable only by the taking of an account in equity after the partnership has been dissolved: see Richardson v. Bank of England (1838) 4 My. & Cr. 165: Green v. Hertzog [1954] 1 W.L.R. 1309. Only the Court of Chancery was equipped with the machinery necessary to enable such an account to be taken, and the basis upon which the account was taken reflected equitable principles. These could be modified by agreement, but they did not find their source in contract. The basic principles of partnership law are set out in the Partnership Act 1890 (“the Act”), which was drafted by Sir Frederick Pollock and is still in force today. It codified (though not exhaustively) the law of partnership and reflected the pre-existing principles of equity which had been developed by the Court of Chancery. These did not include the contractual doctrine of repudiation. It is noticeable that section 1 of the Act, which defines the concept of partnership makes no reference to contract. It defines partnership as “the relation which subsists between persons carrying on a business in common with a view of profit.” Given this history, it is not surprising to find that until recently there was no recorded case of the automatic dissolution of a partnership being brought about by the acceptance of a repudiatory breach of contract, and no indication that this is a ground of dissolution in the Partnership Act 1890 or (except to doubt it) in successive editions of Lindley on Partnership over a period of more than 100 years. Generations of Lord Chancellors in the 18th and 19th centuries would have failed to recognise the concept. Thereafter, if the judges of the Court of Chancery had recognised the concept at all, it is likely that they would have rejected the idea that the dissolution of a partnership at the instance of one partner, however wronged, and against the wishes of his fellow partners can be withdrawn from the discretion of the court and left to the unilateral decision of the innocent partner. Repudiation as a ground of dissolution first saw the light of day in Hitchman v. Crouch Butler Savage Associates (1982) 80 L.S.Gaz. 550, where Harman J. treated as axiomatic the proposition that the doctrine of repudiatory breach applies to partnership agreements as it applies to other contracts. The question, however, is not whether the doctrine applies to the contract of partnership, but whether it operates to bring about the automatic dissolution of the partnership relationship. This is much more doubtful. In the first place, the Act expressly states the circumstances in which a partnership is dissolved (expiry of a fixed term or termination of the adventure or undertaking, notice, bankruptcy or death of any partner, supervening illegality or order of the court). It makes no mention of repudiatory breach of contract. It is true that a partnership may also be dissolved by mutual agreement, and it may be objected that this is not mentioned either; but in fact it is catered for by section 19 taken in conjunction with section 32(a). This cannot be relied on to support the admission of an accepted repudiation as an automatic ground of dissolution. The theory that a repudiatory breach of contract is an offer to terminate the contract which can be accepted by the offeree, thereby bringing the contract to an end by mutual consent, is discredited. The contract is brought to an end by the exercise of a right conferred by law on the parties to the contract from the outset, not by virtue of a new agreement between them. The admission of a new ground of dissolution which is not mentioned in the Act and which would not have been recognised by the Court of Chancery is far from axiomatic. But the supposed ground also sits uneasily with section 35(d) of the Act. This gives the court a discretionary power to decree a dissolution of a partnership when a partner, other than the partner suing, “wilfully or persistently commits a breach of the partnership agreement, or otherwise so conducts himself in matters relating to the partnership business that it is not reasonably practicable for the other partner or partners to carry on the business in partnership with him.” It is difficult to envisage a case in which conduct of this description would not constitute a repudiatory breach of contract which the party suing could accept by bringing proceedings. Even if this brought about the automatic dissolution of the partnership, it would not follow that paragraph (d) was altogether empty of content. It would not be needed where there are only two partners, but it would still be needed where there are more than two partners and there is at least one partner who is innocent of any wrongdoing and who does not accept the repudiation. It would also arguably be needed even in a case like the present where there are numerous partners who fall into only two camps, those who are alleged to have committed a repudiatory breach and those who claim to have accepted it. What is there to bring the contract to an end as between the parties who are in the same camp? It is noticeable that the Act expressly provides that the death or bankruptcy of any partner operates to dissolve the partnership as regards all the partners. The contractual doctrine applies to multiparty as well as to two party contracts, but it merely effects the mutual discharge of reciprocal obligations. It necessarily operates bilaterally as between each party in breach and each party accepting the breach as repudiatory by discharging them from their reciprocal obligations. It is difficult to see how it can operate to discharge the parties in the same camp, whether guilty or innocent, from the obligations they owe each other. This can only be achieved by agreement. This would lead to a very odd distinction between those (few) cases where dissolution was automatic and those cases where it was not. To my mind, however, the strongest argument against admitting repudiatory breach as a further ground for the automatic dissolution of a partnership is that, wherever applicable, it would circumvent the discretionary power of the court under section 35. Even where the plaintiff establishes conduct on the part of his fellow partners which comes within section 35(d), the court is not bound to order a dissolution. This reflects equitable principles, but is in sharp contrast to the approach of the common law. By entering into the relationship of partnership, the parties submit themselves to the jurisdiction of the court of equity and the general principles developed by that court in the exercise of its equitable jurisdiction in respect of partnerships. There is much to be said for the view that they thereby renounce their right by unilateral action to bring about the automatic dissolution of their relationship by acceptance of a repudiatory breach of the partnership contract, and instead submit the question to the discretion of the court. For a similar principle in a different contractual context see Johnson v. Agnew [1980] A.C. 367, 399 per Lord Wilberforce. The courts below, however, found that the dissolution of the partnership was brought about by the acceptance by Mr. Hurst of his partners’ repudiatory breach of contract and not by mutual agreement. That finding, and the assumption on which it is based, have not been challenged before your Lordships. In these circumstances I am content to proceed on the basis of the same assumption while reserving for future consideration the question whether it is correct. BJ & Co. Solicitors[2011] IEHC 108 Clarke J. Status of Judgment: Approved 4. When did T T come to an End? 4.1 As pointed out earlier, while there is a difference between Mr. T and Mr. T as to the precise date in March, 2006 when the partnership between them can be said to have come to an end, both suggest that their partnership had ended at the very latest by the 30th March. The principal underlying facts are not in dispute. Mr. T wrote to Mr. T, through his solicitors Messrs. Groarke & Co, on the 14th March. One possible conclusion is that that letter, of itself, brought the partnership to an end. In Halsbury’s Laws of England Vol. 35, para. 164, the circumstances in which the dissolution of a partnership by notice can occur are stated in the following terms:- “Subject to any agreement between the partners, a partnership for which no fixed term has been agreed, and for no fixed adventure or undertaking, may be dissolved by any partner by giving notice of his intention so to do to the others. The Partnership Act 1890, does not require the notice to be in writing. The firm is dissolved from the date mentioned in the notice as the date of dissolution or, if no date is so mentioned, as from the date of the communication of the notice. The notice must amount to an unambiguous intimation of a final intention to dissolve the partnership and must be given to all partners unless the articles otherwise provide.” 4.2 The first issue to be addressed is as to whether the letter of the 14th March, 2006 meets that test. Two questions seem to me to arise. Both stem from the terms of the letter itself. In material part that letter provides as follows:- “Dear Mr. T, We are instructed by the above named Seamus T in respect of regularising matters regarding the determination of the partnership practising under the style and/or title of T T & Company, Solicitors […] Finally we have been instructed, in the absence of your consent to dissolve the partnership, to apply to Court pursuant to Section 35© and 35(d) of the [Partnership] Act to dissolve the Partnership on the grounds of your professional misconduct. […]” 4.3 It is clear, therefore, that the letter does not specify a date from which the partnership is to be treated as coming to an end. However, as is clear from the passage from Halsbury cited above, in the absence of the relevant notice specifying a date from which the partnership is to be dissolved, the date of receipt of the notice will be the operative date. The fact, therefore, that the letter does not specify a date is not, of itself, fatal. 4.4 The second question which arises concerns the terms of the letter and whether it can be described as being “an unambiguous intimation of a final intention to dissolve the partnership”. That the notice must be unambiguous is clear from cases such as Stewart v. Gladstone [1878] 10 Ch.D. 626 at 650. On balance I have come to the view that the relevant letter is not sufficiently unambiguous to amount to a sufficient notice of dissolution. The letter speaks of the intention of Mr. T to seek a dissolution from the High Court. It is, of course, open to a partner to go down the route of applying to court for a dissolution of the partnership. Where dissolution occurs as a result of a court process the dissolution is normally taken to date from the issue of proceedings. There is, therefore, a difference in substance between a dissolution by notice and a dissolution by the court. Insofar as the letter addresses the question of dissolution, it appears to do so in the context of intimating that the dissolution will take place by court process. If that be so, then the dissolution was not to have immediate effect but rather would have had effect whenever that court process was begun. At a minimum the letter is ambiguous as to whether it is intended to immediately bring the partnership to an end rather than to threaten that the partnership will be brought to an end, in the absence of agreement, by the issuing of appropriate proceedings. It can, of course, be the case that a party who has actually caused the dissolution of a partnership by notice may nonetheless issue proceedings seeking ancillary relief including, if there be a dispute, a declaration that the partnership has already dissolved. However, there is a difference between an application to the court to dissolve the partnership, on the one hand, and an application to the court to declare that a partnership has already been dissolved by notice, on the other hand. 4.5 It is next necessary to consider whether the meeting of the 30th March gave rise to a dissolution of the partnership. All who attended that meeting and who gave evidence are agreed that it was clear, as a result of that meeting, that the partnership was to come to an end. All that was left, it is said, was to agree the financial terms. There would appear to have been some discussion as to those financial terms at the meeting of the 30th March, but no agreement was reached. I accept, therefore, as a fact, that at the meeting of the 30th March it was agreed between Mr. T and Mr. T that the partnership would be dissolved with immediate effect. In addition, it was agreed that Mr. T would take over the business of the partnership as it stood. It remained for the parties to agree the financial terms on which Mr. T would take over the partnership business. However, it does not seem to me that the fact that the parties had not agreed those terms is fatal to the conclusion that the partnership had been dissolved on that date. If it had proved impossible for Mr. T and Mr. T to agree the amount which Mr. T was to pay to Mr. T, then it would have been open to Mr. T to commence proceedings which would have led to a recognition by the court that the partnership had been dissolved on that date and which would also have led to the court making ancillary orders to provide for a valuation of the partnership assets as of that date and the like. 4.6 Before leaving this topic I should deal with two points made on behalf of Mr. Johnston against the proposition that the partnership can be said to have been dissolved on the 30th March. First, it is said that there was no agreement between the parties as to the date by reference to which the partnership was to be valued. That is true so far as it goes. However, it is clear on the facts as I have found them, that there was an unambiguous intention displayed by both parties at the meeting of the 30th March to bring the partnership to an end. That is, for the reasons which I have already set out, sufficient. It is also clear that, by operation of law, the date for the valuation of the partnership then becomes the date on which that unambiguous intention is notified to both parties. It seems to me that where all parties agree that a partnership is to be dissolved then same amounts to a mutual notice by all parties to the others, immediately communicated, which notice is unambiguous as to the dissolution of the partnership. It follows that the partnership is, subject to the parties having agreed some other date, to be dissolved as of that date and any valuation process is to occur as of that date. 4.7 In that regard argument is made on behalf of Mr. Johnston that no one was given instructions to value the partnership as of that date. That is again true so far as it goes. However, it does not seem to me that it is appropriate to draw any inference adverse to Mr. T’s contention arising from that fact. The valuation of Mr. T’s entitlements was not an exact science. The evidence established that a preliminary valuation of the partnership had been arrived at some months earlier. The key elements of that valuation involved certain limited tangible assets of the partnership but were principally concerned with the value of work already done in the solicitors practice while the partnership subsisted. The valuation involved fees already billed to clients but not yet paid, together with work in progress being work already done on files in the solicitor’s office which had not yet been converted into a fee note to the client concerned. There must, necessarily, have been a significant amount of estimation in coming to any view as to the value of the partnership under both of those headings. Fees billed will not necessarily be paid. In some cases a client may be unable to pay or significant difficulty might be encountered in forcing payment thus incurring collection costs. Therefore, the full value of fees already billed is unlikely, in practise, to be recovered or recovered without some cost. Likewise, any estimation of the value of work in progress, being work done on cases or matters which have not yet been billed, necessarily involves an estimation. Similar questions concerning recoverability would also arise under those headings. If the court, or an arbitrator, were required to value the partnership for the purposes of determining the rights and obligations of the former partners on a dissolution, then obviously a best estimate under all of those headings would need to have been made. Likewise, an estimate of the value of any goodwill attaching to the partnership would need to have been made. However, such a process is far from an exact science. 4.8 When added to those factors it is also necessary to consider the practical realities of the situation whereby the value of the partnership would be significantly reduced unless its business could continue. In those circumstances, it is hardly surprising that Mr. T regarded both the amount which he was to receive from Mr. T and the time over which it was to be paid to be matters primarily for a practical commercial negotiation (admittedly one conducted against the background of Mr. T’s actual entitlements) rather than a rigorous exercise of valuation. That practical negotiation is what Mr. T anticipated on the 30th March, and that practical negotiation is what, in fact, ensued leading to an agreement on the relevant commercial terms which was incorporated into the written document of the 30th August. 4.9 The second point concerns the terms of that document itself. There is no doubt but that the way in which that document is drafted implies that the partnership continued up to the date of the agreement. Indeed the agreement itself is open to ambiguity. For example, Clause 3 provides:- “Joseph T acknowledges that the firm remains the property of Seamus T subject to any payment to which the said Joseph T may be entitled (which is not admitted) until payment in full of the amounts specified at Part III hereunder is made to and receipted by Seamus T.” On the other hand Clauses 18 and 19 provide:- “18. Upon the signing hereof Seamus T shall no longer be a partner of the firm and in consideration of the terms and provisions of the within agreement shall have no share, interest or entitlement in any assets or business of the firm. Seamus T shall at that time sign each and every document necessary to transfer the business and assets of the firm to Joseph T or his assigns and/or nominees and shall surrender his authority over each of the bank accounts of the firm. 19. As and from the date of the signing hereof Seamus T shall have no responsibility whatsoever to the clients of the firm (including in respect of their funds held in the clients account(s) and Joseph T shall and hereby does provide a full and absolute indemnity to Seamus T in this regard.” How it is possible to reconcile Clause 3 with Clause 18 is difficult to say. Two points need to be made in that regard. First, if, in truth, the partnership had been dissolved as of the 30th March, it does not seem to me that the partnership can be revived retrospectively by an implication derived from the terms of the agreement subsequently entered into on the 30th August. It would, of course, notwithstanding an actual dissolution on the 30th March, have been possible for Mr. T and Mr. T to have reached terms on the 30th August which made express provision for events that occurred between the 30th March and the 30th August and to provide for the rights and obligations of the parties in respect of those events. That did not happen. It does not seem to me that it is appropriate to treat the 30th August agreement as retrospectively providing for the continuation of a partnership which had, in fact, dissolved on the 30th March. Likewise, I am not satisfied on the facts that the wording of the agreement of the 30th August ought lead me to come to a different conclusion as to whether the partnership had, in truth, been dissolved on the 30th March. I am satisfied on the evidence that there was an unambiguous acceptance by both Mr. T and Mr. T, on the 30th March, that the partnership was then at an end leaving only negotiations as to the precise financial arrangements to be concluded. The terms of the agreement of the 30th August are, in my view, a result of unfortunate drafting rather than reflecting the actual legal and factual situation. 4.10 In all those circumstances I am satisfied, as a matter of fact, that the partnership between Mr. T and Mr. T came to an end on the 30th March. In follows that there was, in fact, no partnership in existence between them at the time when any of the relevant undertakings were given on the notepaper bearing the heading “T T”. However, as pointed out, that finding does not resolve the case, for Mr. Johnston places reliance on ostensible authority. In those circumstances it is necessary to turn to the question of whether Mr. T had the ostensible authority of Mr. T to give undertakings on behalf of an apparent continuing partnership between them on any of the dates when the undertakings relevant to these proceedings were given. I, therefore, turn to the question of Mr. T’s ostensible authority. 5. Mr. T’s Ostensible Authority 5.1 It seems to me to be appropriate to start, under this heading, by setting out the fundamental legal principles which underlie the ostensible authority of a partner to take action on behalf of the partnership, at least insofar as those principles have some relevance to the issues which arise in this case. 5.2 It is, perhaps, appropriate to start by stating the obvious. Ostensible authority is only relevant when there is no actual authority. If the relevant partner has actual authority then that is sufficient to bind the partnership. Ostensible authority is, therefore, concerned with circumstances where partners may be bound for each other’s actions even though the partner actually committing the wrongful act may not have actual authority. 5.3 Second, it is important to note that, in order for any person to have the ostensible authority of another, the person relying on ostensible authority must be able to point to actions or omissions on the part of the person sought to be bound which justify implying authority. It is not possible to rely simply on the statements or actions of the person who is said to have implied authority. This is sometimes referred to as the bootlaces or bootstraps problem. A person cannot pull himself up by his own bootlaces. A person cannot create a situation where they have the implied authority of a third party simply by asserting or acting as if they have that authority. These general principles apply equally to the ostensible authority of employees or agents as much as they do to partners. In the context of partnership, therefore, the mere fact that someone says that they are a partner of a third party or acts in a way which implies that they are such a partner, does not give that person ostensible authority to bind the third party. The third party has done nothing to create the ostensible authority. It is necessary, therefore, that a person claiming the existence of such an implied authority must be able to point to some act or omission on the part of the alleged partner from which it is reasonable to imply the existence of the partnership and the entitlement of the putative partner to bind that partnership. 5.4 However, beyond those general principles it is important to note that the case law concerning ostensible authority of partners (and, where relevant, by implication similar authorities in the field of employer/employee and principal/agent) is concerned with a whole variety of different types of cases which are separately concerned with different bases on which it might be suggested that ostensible authority does not exist. In some cases (such as Re: Hall [1865] Ir. Ch. 287, Martin v. Sherry [1905] 2 I.R. 62 and DPP v.McLoughlin [1986] I.R. 355 and many others) the question was as to whether there was a partnership relationship at all. In other cases (such as Allied Pharmaceutical Distributors & Anor v. Walsh & Ors [1991] 2 I.R. 8) there was undoubtedly a partnership but the question was as to whether the particular actions of a partner were within or without the implied authority of the partner concerned to act. That authority will extend to the ordinary business of the partnership but not beyond in the absence of additional circumstances which would justify implying authority on the particular facts of the case. In the context of professional partnerships it might be reasonable, to use an Irish terminology, to describe this as the “nixer” problem. The fact that someone may be a partner (or, indeed, an employee) in or of a professional firm does not necessarily mean that that partner may not do work outside the scope of firm in the form of what is often colloquially referred to in Ireland as a nixer. It would be a question of fact in each case to decide whether the firm acted in any way which could be said to confer ostensible authority on the relevant person in respect of the transaction concerned. That problem deals with situations where the work is of the type normally done by the partnership but may not, in fact, have been done by the partner on the occasion in question within the parameters of the partnership’s business. If the work is not actually done within the parameters of the partnership business, then the question will nonetheless arise as to whether the partner had implied authority to bind the partnership in all the circumstances of the case. It was this type of issue that arose in Kooragang Investments Pty Ltd v. Richardson & Anor [1982] AC 462. 5.5 A different but analogous problem may arise where the work done is outside the scope of what the partnership normally does but where there may be reason to believe (viewed from the perspective of the person dealing with the partnership and having regard to acts or omissions on the part of the other partners) that the work was nonetheless being done for the partnership. If, for example, a partnership became aware that a partner was, in the partnership offices and using partnership resources, providing services which were outside the ordinary scope of the partnership, and continued to permit the partner to carry out those tasks, then it might very well be that implied authority would be present even though as and between the offending partner and the remainder of the partnership different considerations might apply. 5.6 It is, therefore, in my view, important, when analysing any of the decided case law, to pay particular attention to the precise problem which the court confronted in the case in question. The court’s analysis is necessarily informed by the question which the court is being required to answer. In this case the question is of a particular type. There was undoubtedly a partnership in existence. Mr. T had, certainly until March, 2006, ostensible authority to bind the partnership within the ordinary course of the partnership’s business. It seems to me that, on the facts of this case, two real questions arise. The first is as to the status of Mr. T’s ostensible authority after the dissolution of the partnership. The second is as to whether the giving of undertakings of the type given by Mr. T in this case can be said to be within the scope of the ordinary course of a solicitor’s practice. I should emphasise that there is no question in this case of special circumstances which would confer implied authority on Mr. T outside the ordinary scope of a solicitor’s practice. I propose addressing both of those issues in turn. 5.7 The first question concerns the ostensible authority of an undoubted former partner to bind, on an ostensible authority basis, other former partners after the partnership has been dissolved but where the former partner said to have bound others continues with the partnership business. The Partnership Act 1890 (s. 36(1)) does suggest that a partner who has left the partnership may continue to be bound by partnership actions unless and until notice of departure is given. In that context, the law makes an entirely logical distinction between existing customers and new customers. A partner leaving the partnership may give public notice in Iris Oifigiúil of the new status of the partnership and, thereafter, the remaining partners will no longer have implied authority to bind the retiring partner so far as new customers are concerned. In relation to existing customers then something more is required for those customers as they must have the departure of the relevant partner brought to their attention and unless there is actual evidence of such customers having had a public notice brought to their attention, then something more may well be required. 5.8 In the course of argument it was suggested on behalf of Mr. T that the wording of s. 36(1), referring as it does to a continuing firm, has no application to a case where there were only two partners and the partnership is dissolved for, it is said, in those circumstances there is no longer any firm because, in turn, a firm requires at least two partners. Whatever may be the merits of that argument as a matter of textual analysis, it seems to me to be clear that most of the provisions of the Partnership Act 1890 were simply declaratory of the common law position that had evolved prior to its enactment. It is clear from cases such as Parkin v. Carruthers 3 Esp. N. P. C. 248, which is cited in Carter vWhalley (1830) 109 E.R. 691, at 692, that the common law position that existed prior to the Partnership Act 1890 imposed the same obligations of notice on parties to a completely dissolved partnership, where one continued the business, as the common law did in respect of a retiring partner from a partnership where, in substance if not in theoretical legal form, the partnership continued to do business with two or more remaining partners. I describe that position as being one of substance rather than theoretical legal form for it is, of course, theoretically the case that a new partnership can be said to come into existence where a partnership is dissolved by the resignation of an individual partner. Given that the Partnership Act 1890 was largely designed to codify existing common law provisions, it does not seem to me that that Act should be taken, by implication, to have amended the common law, unless the Act expressly and specifically purports so to do. I see no reason to depart, therefore, from the common law position which was that notice of the dissolution of a partnership involving just two partners was required in order that persons continuing to deal with the apparent partnership should be deprived of being able to argue that the partner continuing on with the business of the partnership was acting with the ostensible or implied authority of the former partnership. 5.9 Applied to the facts of this case it seems to me that, where a firm of solicitors is dissolved, but where, to the knowledge of those solicitors, the business of the firm is to be continued by one or more of them, then those carrying on that continuing business have the ostensible authority of those who are no longer involved unless and until those departing from the business give appropriate notice of that fact. In that context, appropriate notice is general public notice in respect of persons who are not former clients or persons who had dealings with the former firm and specific notice in the case of those who were former clients or had such dealings. 5.10 The reason for that position is obvious. If someone never was a partner then it requires some act or omission on their part to give rise to an implication that they would be bound by the partnership. If, for example, Mr. T and Mr. T had never been partners, then an assertion by Mr. T that Mr. T was his partner could not create implied authority on the part of Mr. T to bind Mr. T. It would require some act or omission on Mr. T’s part, from which a person dealing with Mr. T might reasonably be entitled to imply that Mr. T was acting on Mr. T’s behalf, to create such a situation. In those circumstances there is no implied authority until Mr. T does or omits to so something that creates that implied authority. 5.11 However, where there is an existing partnership then the situation is different. Mr. T had, in fact, authority up to a certain point. Persons dealing with the firm were entitled to assume that, as long as the firm continued in existence, Mr. T had the authority of Mr. T. Mr. T was bound because he had acted, by actually being Mr. T’s partner, in a manner which held himself out as being bound for Mr. T’s actions within the ordinary confines of the solicitors practice. This is not, therefore, a case about whether there ever was implied authority on the part of Mr. T in the first place. Rather it is case where there undoubtedly was implied authority on behalf of Mr. T and the question is as to when it ends. It seems to me clear that implied authority, once given, continues unless and until circumstances become apparent which would not entitle a third party to treat that authority as continuing. Of course there may be circumstances, not relevant in this case, where it might not be reasonable to infer that authority continues even in the absence of notice. A person who had ostensible authority, for example, solely to carry out one transaction or a specified series of transactions, could not be said to have any continuing implied authority once the relevant transactions had been completed. But this is not such a case. Mr. T had general authority to carry out the solicitor’s practice which he conducted in partnership with Mr. T for as long as that partnership should subsist. By that course of action Mr. T conferred an implied authority on Mr. T to continue to bind him until such time as notice or other circumstances would have led any particular person dealing with the firm to reasonably conclude that the partnership was no longer in place. 5.12 In that context, it is appropriate to refer to Tower Cabinet Co Ltd v Ingram size=”2″ face=”Verdana”> [1949] 2 K.B. 397 in which case the fact that a former partner’s name continued on the notepaper did not create ostensible authority. Be that as it may, the partner in the case in question was clearly unaware that the former partner continued to use notepaper with his name on it. In addition, the claimant company had not dealt with the partnership while the defendant was a party. Neither matter is the case here. 5.13 On the facts of this case a number of matters are absolutely clear. Mr. T took no steps to inform either the public generally or the clients of T T or those dealing with the firm, in particular, that the partnership was at an end. As pointed out earlier, Mr. T accepted that someone going into the office on the 1st April, 2006, would not have been aware of any change. There is no evidence of any general public awareness or any specific awareness on the part of Mr. Johnston, of the change in circumstances, at any time which is material to the undertakings which are relevant to this case. It does not seem to me to be necessary to decide whether that was a deliberate policy on the part of Mr. T (as counsel on behalf of Mr. Johnston suggests) or whether, as Mr. T alleges, it was simply that Mr. T assumed that Mr. T would be more than happy to tell anyone that he was now the sole proprietor of the firm. Even on the latter basis it is clear that Mr. T took a chance by leaving it to Mr. T to inform clients, the public generally, and other firms of solicitors (such as Mr. Johnston) who might have to deal with T T, of the fact that T T was no longer a firm involving Mr. T. There is no evidence that Mr. T, in fact, took it on himself, at any material time, to inform any persons about the change in circumstance. It follows that Mr. T continued to have implied or ostensible authority to bind Mr. T at the time when any of the relevant undertakings in these proceedings was given. The second question to which it is now necessary to turn is as to whether it can be said that those undertakings were given in the ordinary course of business. 5.14 There was much concentration at the hearing as to whether it was reasonable for Mr. Johnston to accept the relevant undertakings in all the circumstances of the case. While that question is also relevant to the degree of culpability of Mr. Johnston, on the one hand, and Mr. T (and, if necessary, Mr. T), on the other hand (an issue to which I will turn), it does not seem to me to be relevant to the issue with which I am now concerned. The question under this heading is not as to whether it could be said to be in the ordinary course of business for Mr. Johnston to take the undertaking, but rather whether it can be said to have been in the ordinary course of business for Mr. T to give it. In that context, I accept the evidence of Mr. Felix McTiernan, who is, of course, a most experienced conveyancing solicitor, which was to the effect that undertakings of the type given by Mr. T were regularly given by solicitors in the course of the completion of conveyancing transactions. The undertaking was to the effect that T T would only use monies for a particular purpose, in this case the completion of a sale or the payment of stamp duty. It may be, for reasons which are gone into in some detail in the principal judgment, that the practise of closing on undertakings in that way was a practice which exposed many clients to unnecessary additional risk, which risk should not have arisen without express advice and instructions. However, the fact that carrying out a transaction in a particular way may have been an unwise way of conducting the transaction, does not alter the fact that undertakings as to what is to happen to money paid over formed (and, to an extent, continue to form) a normal part of many conveyancing transactions. To put it at its lowest, there appears to have been a practice that solicitors acting for vendors regularly give undertakings to use portions of purchase monies to discharge existing encumbrances, such as mortgages. Conveyancing is a central part of many solicitors business. Giving undertakings as to where money which is handed over in conveyancing transactions is to go is a part of that business. 5.15 It is important to recollect that the focus in this case is on whether the actions of Mr. T in giving the undertakings can be said to have been actions taken in the ordinary course of a solicitor’s practice. That is, it seems to me, a significantly different question from one as to whether it was negligent of Mr. Johnston to accept those undertakings without his client’s authority. Indeed, it is implicit in the principal judgment that had Mr. Johnston, in fact, had ACC’s authority, then there would have been nothing wrong with the transaction at all. There was some additional risk. If, for whatever commercial or other reasons, ACC were willing to take that additional risk, then that was ACC’s decision. If ACC had given its consent, then how could it be said that the giving of the relevant undertaking by Mr. T would have been outside the course of Mr. T’s solicitors practice. On that basis, whether Mr. Johnston was authorised to take the undertaking concerned cannot determine whether it was within the course of Mr. T’s business to give it. In the circumstances, I have no doubt that the giving by Mr. T of an undertaking as to what was to happen to the proceeds of sale, in the form in which he did, was within the ordinary course of business. The case law on undertakings, such as United Bank of Kuwait v. Hammond & Ors [1887] 1 W.L.R. 1051, is more concerned with undertakings given which might be outside of the type of transaction which a solicitor normally engages in as a solicitor or where the solicitor had no reasonable expectation of getting the funds the subject of the undertaking. Those questions do not seem to me to arise on the facts of this case. 5.16 It follows that Mr. T had the ostensible authority of Mr. T to carry on the ordinary solicitors business which they had previously carried on, and had that ostensible authority at all times material to the giving of the undertakings in question. This is because Mr. T took no steps to inform the public, the practice’s clients, or other firms of solicitors who might have to deal with it, that the partnership was at an end. In addition, as it happens, Mr. Johnston was not aware of the termination of the partnership. In those circumstances, and having regard to my finding that the relevant undertakings were given within the ordinary course of a solicitors practice, I am satisfied that Mr. T is responsible, as a partner, for the undertakings given by Mr. T and Mr. T’s failure to comply with them, even though Mr. T was not directly aware of the undertakings concerned. In that regard, Mr. T is no different from any partner who may ultimately have to answer for negligence or other wrongdoing carried out by partners. His personal innocence is not, unfortunately, in those circumstances, any defence. 5.17 Given my finding that Mr. T is liable for the actions of Mr. T, two further questions arise which go to the liability of T T, rather than the independent liability of Mr. T, for the acts of Mr. T. I turn to those questions the first of which involves the provisions of the Civil Liability Act 1961 (as amended), in relation to concurrent wrongdoers.” White v Minnis & Anor[2000] EWCA Civ 149 LORD JUSTICE CHADWICK: 20. It is necessary to have in mind that the provisions of a partnership agreement take effect in the context of the general law as set out in the Partnership Act 1890; in particular, to have in mind that the provisions as to dissolution contained in sections 32 and 33 of the Act will apply – with the consequences set out in section 39 of the Act – unless, and to the extent that, those provisions are displaced by agreement between the partners. 21. Section 33 of the Partnership Act 1890 provides that, subject to any agreement between the partners, every partnership is dissolved as regards all the partners by the death or bankruptcy of any partner. Upon a dissolution, in the sense in which that word is used in the Partnership Act 1890, every partner is entitled, as against the other partners in the firm, to have the property of the partnership applied in payment of the debts and liabilities of the firm, and to have the surplus assets after such payment applied in payment of what may be due to the partners respectively after deducting what may be due from them as partners of the firm – see section 39 of that Act. 22. It is, I think, clear that section 33 of the Act was not to have effect in relation to the successive partnerships regulated by the terms of the 1949 deed; either on the death of a partner or (subject to the service of the requisite notice) on his bankruptcy. It is also clear that a power to expel, in cases other than bankruptcy, has been reserved by clause 21 of the 1949 deed – see section 25 of the Act. It is rather less clear whether a partner can retire unilaterally without thereby bringing the dissolution provisions of section 39 into effect; but that is not a question which arises on this appeal. Nor did it arise when Mrs Jessie Turner left the partnership; because the parties entered into a further agreement to provide for her retirement. But on death, bankruptcy or expulsion the intention is clear enough. The partnership is determined between the deceased or outgoing partner on the one hand and the surviving or continuing partners on the other hand; but the surviving or continuing partners remain in partnership, amongst themselves, and are entitled, as against the deceased or outgoing partner, to continue to carry on the partnership business. In order to give effect to that intention it is necessary to exclude the operation of the dissolution provisions in section 39 of the Act. An intention that the partnership business should continue to be carried on by the surviving or continuing partners, in partnership amongst themselves, is inconsistent with the winding up of the business and affairs which is the object of that section. How is the amount of the payment to the estate of the deceased partner to be ascertained? 23. It follows, of course, that some other provision has to be made for the payment to the estate of the deceased partner, or to the outgoing partner (or his trustee) in a case of expulsion or bankruptcy, in respect of the value of his former interest in the partnership assets. In the case of a deceased partner, provision for payment is made by clause 18. The estate of the deceased partner is to be paid “his share in the capital of the Partnership and any undrawn profits when ascertained”. The difficulty is that clause 18 does not give any guidance as to how the value of “his share in the capital of the Partnership and any undrawn profits” is to be ascertained. But two matters are clear. First, the value has to be determined by reference to an account between the partners (including the deceased partner); and, second, it was not intended that a General Account (within the meaning of clause 15 of the partnership deed) should be taken as at the date of the death. 24. The first of those propositions is self evident. If the value of a partner’s share in the capital of the partnership is to be ascertained without there being a dissolution under section 39 of the Partnership Act 1890 – that is to say, without there being a realisation of partnership property and the discharge of partnership debts and liabilities so as to produce an actual surplus available for distribution amongst the partners – the valuation has to be based on an account. There is no other way in which the exercise can be done. Confirmation that there has to be an account is found in clause 20. The purpose of a provision which requires that “the figure appearing in the Partnership accounts” is to be deemed to be “the value of the freehold property and land at Brantwood Road” is to meet the need that some figure for the value of that property will have to be brought into an account between the partners for the purpose of ascertaining the value of the deceased’s partner’s share in the capital of the partnership. 25. The second of those propositions is founded on the words “(otherwise than by the death of one of the Partners)” which appear in clause 16. Clause 16 provides for a case in which there is not going to be a dissolution under section 39 of the Partnership Act 1890. That must follow from the use of the phrase (in two places) “the remaining Partners or Partner”. The dichotomy is between the out-going partner and the remaining, or continuing, partner or partners. The clause is directed towards a division of the partnership property between the out-going partner on the one hand and the continuing partner or partners on the other hand. The division is to be made on the basis of a General Account. The account is to be taken within six months after the date on which the out-going partner leaves the partnership; but (as it seems to me) it is to be an account of the capital, property, engagements and liabilities of the partnership as at that date (and not at any other date). But clause 16 does not apply where the partnership comes to an end by reason of the death of one of the partners. That is made clear by the words in parenthesis to which I have referred. 26. What account, then, is to be the basis of the valuation which has to be made of a deceased partner’s share in the capital of the partnership? The answer, as it seems to me, is that the valuation must be made on the basis of the last General Account – that is to say, in the usual case, the most recent of the annual partnership accounts which are required by clause 15 to be taken on 31 March in each year. If, as clause 16 makes clear, there is not to be a special General Account as at the date of death, there is really no other sensible candidate. Further, the reference in clause 18 to “any undrawn profits” suggests that there may be expected to be a period between the relevant General Account and the date of death during which profits will have accrued and may have remained undrawn. It is pertinent to have in mind the provisions of clause 14. In the usual course, profits accruing over the year which are undrawn by the partner entitled to them will be credited to that partner’s capital account at the year end; so that a General Account taken under clause 15 will not be expected to show any undrawn profits – they will have been added to capital on the taking of that account. So the “undrawn profits” referred to in clause 18 must be profits which have accrued since the last General Account. The scheme, therefore, is that the payment to the deceased partner’s estate comprises two elements (i) his share in the capital of the partnership, valued on the basis of the last General Account, and (ii) his share of the profits earned by the partnership since the date of the last General Account, so far as not already drawn. 27. So understood, it is not difficult to see how clause 20 fits into that scheme. If the share of the deceased partner in the capital of the partnership falls to be valued on the basis of the last General Account, then it is necessary to know whether the value which is to be put upon the Brantwood Road property for the purpose of ascertaining the value of the deceased partner’s share is to be taken as the figure appearing in that account or some other value. Is it necessary to have a special valuation of the Brantwood Road property, either at the date of death or at some other date? Clause 20 supplies the answer. The value of the Brantwood Road property is to be taken at the figure appearing in “the Partnership accounts”. In that context, “the Partnership accounts” means the last General Account taken under clause 15. Which account is to treated as the last General Account for the purpose of ascertaining the payment to be made to the deceased’s estate? 28. Clause 15 requires that a General Account shall be taken on 31 March in each year; and that the account shall be signed by each partner “immediately after the same shall have been taken”. But it cannot have been contemplated that the account would be taken, approved and signed all on the one day, 31 March. It must have been appreciated that, in practice, a period of some weeks or months would elapse after 31 March before the partners were in a position to approve and sign a General Account taken as at that date. It must have been appreciated, also, that the death of a partner would not necessarily occur outside that period; a partner could well die during that period. If he did so, then the last General Account approved and signed before the death would not be the General Account for the year ending on the 31 March immediately before the death. It would be the General Account for the previous year – or, as occurred in the present case, for the year before that. That raises the question whether the relevant General Account, for the purposes of clause 18, is the account for the year ending on the 31 March immediately before the death – notwithstanding that that account will not have been approved by the deceased and will not have become available for approval by anyone until after the death – or is the last account that has actually been approved and signed – notwithstanding that that may be the General Account for an earlier year. 29. That question was considered by the Court of Appeal in Hunter v Dowling [1893] 3 Ch 212. The articles of partnership in that case provided, at clause 15, for an annual account to be taken on 31 March in each year; and, at clause 23, for a retiring or deceased partner to be paid out “at the amount standing to his credit in the last balance sheet which shall have been signed previously to the date of such retirement or death . . .” . On the death of a partner on 10 April 1891, no account had been taken for the year ending 31 March 1891. The question was whether his share should be ascertained by reference to the previous year’s account (which had been taken and signed) or whether the correct course was to direct that an account be taken for the year to 31 March 1891 and ascertain the share by reference to that account. A literal construction of the words “shall have been signed” would have led to the conclusion that the relevant account was that for the year ending 31 March 1890. But the Court rejected that construction; holding that it ought to act on the basis that that which ought to be done must be treated as if it had been done. From 31 March 1891 each partner had an accrued right under clause 15 to have an account taken as at that date; and the personal representatives of a partner who died after that day had a right to be paid out as if that had been done. 30. In Hunter v Dowling [1893] 3 Ch 212, this Court followed the decision of Sir John Leach, Vice-Chancellor, in Pettyt v Janeson (1819) 6 Madd. 146. The principle has now stood for over 180 years and I have no doubt that it should be applied in this case also. The relevant General Account for the purpose of ascertaining the payment to be made to the personal representatives of Mr Dennis White is the account for the year ending 31 March 1993. 42. Taking these factors together, I am satisfied that the answer to the question “what did the expression `a just valuation’ mean to the two brothers, in relation to the treatment of the Brantwood Road property in a General Account of the partnership, when they adopted the terms of the 1949 deed (including clause 15) on entering into a new partnership on 28 July 1961” is not open to any serious doubt. The expression required the Brantwood Road property to be included in a General Account at historic cost. That was how they had always dealt with the matter. In particular, that was the basis upon which they had come into the partnership in 1949; that was the basis on which they had paid out their father’s estate; and that was the basis upon which they had dealt with their sister on her retirement. I have no doubt that each brother would have thought it “unjust” for the other to seek to insist (in the absence of agreement) on the inclusion of the property in a General Account at market value. And I have no doubt that each brother would have been right to take that view. The basis of their partnership was that, if they continued as partners throughout their joint lives, the survivor would be able to carry on the business on payment of a relatively modest sum to the estate of the deceased. That was an arrangement which was likely to benefit one at the expense of the estate of the other – but which would be the beneficiary would not be known until one or other died. It was not open to either to alter that arrangement unilaterally – save in the context of a dissolution of the partnership under section 39 of the Partnership Act 1890; and a dissolution of the partnership would mean an end to the family business. 43. It follows that the question “would Mr Dennis White have been entitled, in the months between 31 March 1993 and his death in November 1993, to refuse to approve and sign a General Account for the year ending 31 March 1993 which had been prepared on the basis that the Brantwood Road property was included at historic cost value” must be answered in the negative. And, if he would not have been entitled to refuse to approve and sign a General Account prepared on that basis, then his estate is bound by the 1993 Account that was prepared on that basis. Cruikshank v Sutherland 44. Unless there is binding authority which compels a different result, the reasons which I have set out above lead me to the conclusion that this appeal should be allowed. The only authority to which we were referred which is binding on this Court is the decision of the House of Lords in Cruikshank v Sutherland (1923) 92 LJ(Ch) 136. 45. The appellants were the executors of a deceased partner, Mr Cruikshank, who had entered into partnership with the respondents upon the terms of a deed executed on 1 May 1914. The assets of that partnership had been taken over from an earlier partnership between the parties and had been brought into the accounts of the new partnership at the values at which they had stood in the books of the earlier partnership. Article 13 of the 1914 deed required there to be a full and general account of the property, credits and liabilities of the partnership as at 30 April in each year. The accounts as at 30 April 1915 and 30 April 1916 were prepared on the basis that the assets were included at book values. Mr Cruikshank died on 27 October 1916. Article 16 of the 1914 deed had the effect that his estate was entitled to be paid his share in the partnership ascertained by reference to the accounts prepared under article 13 for 30 April next after the death – that is to say, on the basis of the 1917 accounts. The question was whether those accounts should be prepared on the basis of book values, or on some other basis. 46. Lord Wrenbury, with whose speech the other members of the House of Lords agreed, addressed that question, first, by construing the articles of partnership. He said this, at pages 137 to 138: It is not, I think, disputed – and if it were, I should be of opinion that it could not successfully be disputed – that a full and general account of the partnership property will be an account at which the property will be brought in at its fair value. The articles are wholly silent as to the principle to be adopted in preparing this full and general account of the property – it remains simply that it must be a proper account of the property, whatever that is. What are the values to be attributed to the several assets falls to be determined by the partners by agreement, and – in case of dispute – is a matter for arbitration under clause 21 of the deed. . . . What the value is does not concern us. That is for an arbitrator, if there be a dispute. Your Lordships are concerned only to say what is the principle on which an arbitrator ought to act. 47. Thus far, as it seems to me, the decision is that, as a matter of construction of the articles of partnership with which House of Lords was concerned on that appeal, the requirement that a “full and general account” be taken was met by bringing assets in at a “fair value”. But, as Lord Wrenbury pointed out, the articles were “wholly silent on the principle to be adopted”. In particular, there was nothing in those articles comparable to clause 20 of the 1949 deed in the present case. 48. Lord Wrenbury then went on to consider whether there was any usage or course of dealing “such as that an inference is to be drawn that on the death of a partner his share is to be paid out on the footing of book values?”. He answered that question in the negative. He said this, at page 138: How could there be a practice and usage uniform and without variation to pay a deceased partner’s share on the footing of book values, where no partner had died before and no partner had retired before? The only practice which existed – and that only on two occasions, namely, in April, 1915, and April, 1916 – was to prepare the account – when the interest of all the partners was the same – on the footing of book values. When a partner died or retired, the interests of all parties were not the same. The executors of a deceased partner were, so to say, vendors whose interest it was to put the highest sustainable value on the assets – the continuing partners were, so to say, purchasers whose interest was the reverse. Where was the practice and usage evidencing a new agreement outside the written articles to found a right to buy out the deceased partner on the terms which were best for the purchasers? . . . The fact is that in this partnership an account has never been stated with a view to fixing the case of a retiring partner, or a deceased partner, or a senior partner who is going to take over all the assets. The partners have never had any such event in view in making the account which they have made. There has never been an account prepared which was intended to meet all the various contingencies of events such as these. The judgment below. 66. Mr Justice Park’s judgment is reported at [1999] 1 WLR 2079. He identified the principles which, as he thought, were to be derived from Cruikshank v Sutherland, and from the Scottish cases to which I have referred, in a passage at page 2083E-G: Where a partner dies or retires and his interest in the partnership assets accrues to the continuing partners, the amount payable to him is determined by reference to the partnership agreement. However the court leans to the conclusion that the agreement requires the amount payable to be ascertained by reference to the true current values of the assets, not by reference to their historic costs. That conclusion can be displaced by contrary provisions in the partnership agreement, but the provisions need to be clear. If the wording is broadly neutral as between taking current values or historic costs, it is very likely that the court will take current values. Further, a decision to take historic costs is unlikely to be justified merely on the ground that in earlier balance sheets which have not been relevant to the death or retirement of a partner the book values of assets have been their historic costs, without revaluations to current costs. 67. For my part, I doubt whether it is correct to approach the construction of a partnership agreement – or any other document – on the basis that the court leans towards one conclusion rather than another. The correct approach, as it seems to me, is to seek to ascertain what the parties intended by the words which they actually used, having proper regard to the circumstances in which they made their agreement. Those circumstances will include the obvious fact that, as they must be taken to have appreciated, valuation of the share of a retiring or deceased partner on the basis that assets are taken at historic cost is likely (with past experience of inflation in mind) to lead to the result that the retiring or deceased partner receives less for his share than he would do if the assets were taken at current market value. The question, in any particular case, is whether that is a result which they must be taken to have intended. As the judge, himself, pointed out at page 2089H-2090C, it was not unusual in a family partnership to find provisions designed to ensure that the business passed from one generation to another at a value which excluded goodwill, so avoiding a charge to estate duty – see Attorney-General v Boden [1912] 1 KB 539. There is, as it seems to me, no room for a presumption (at least in the context of a family partnership) that the partners do or do not intend that a retiring or deceased partner should receive full value for his share. Each case must depend on its own facts. 68. In my view the judge was misled by the principle which, as he thought, was to be derived from the earlier decisions to test each factor which he considered against a presumption that the partners must have intended that assets should be taken at current market value. His approach was, I think, that that presumption must prevail unless it was displaced. For the reasons which I have sought to explain, I regard that as the wrong approach. It led the judge to the conclusion that the March 1993 General Account should be re-opened; and that the Brantwood Road property should be re-valued to its market value. In my view that was the wrong conclusion in this case. Conclusion 69. For the reasons I have set out, I would allow this appeal. Important Notice: See the Disclaimer and Terms of Use McMahon Legal, Legal Guide Limited and Paul McMahon have no liability arising from reliance on anything contained in this article nor on this website.  |
