The court considered the valuation of asets on the dissolution of a partnership at will.
Held: The appeal was allowed. The proper share of a partner in the assets was his proportion ascertained from the partnership assets after they had all been realised and converted into money.
Black J said: ‘the correct interpretation of section 42(1) is that which reflects the reality of the outgoing partner’s position vis-a-vis the partnership and not the interpretation adopted in the courts below. I am quite satisfied that the phrase ‘share of the partnership assets’ has the same meaning on both occasions when it is used in the section. In my judgment, the section contemplates that a figure will be ascertained, as at the date of dissolution, for the assets after payment of third party liabilities in accordance with section 44(b)1 and thereafter a calculation carried out as to what is due to the outgoing partner by way of advances, capital and share in any surplus. For the 5% interest option in section 42, no further calculation is necessary (except possibly in relation to a management allowance); the outgoing partner can claim 5% per annum on the figure calculated to be due to him. For the profit option, it will be necessary to work out the proportion that that figure bears to the total of the assets after discharge of third party liabilities; subject to arguments as to other factors that have contributed to the making of profit, the outgoing partner can claim the proportion of profit that his figure bears to the total assets. I have referred in this judgment to the accounting exercise as set out in section 44. As that section makes clear, however, contrary agreement will displace its provisions.’
Judges:
Mummery, Neuberger LJJ, Black J
Citations:
Times 08-Nov-2005, [2005] EWCA Civ 1297, [2006] 2 WLR 8, [2006] Ch 456
Links:
Statutes:
Jurisdiction:
England and Wales
Citing:
Appeal from – Hardip Singh Gill v Kulbir Singh Sandhu ChD 26-Jan-2005
The partnership had been dissolved. It had involved conversion of a property to be run as a nursing home. The claimant was to manage the home, and the profits would be used first to pay him a salary, and then to be divided equally. When wound up . .
Cited by:
Cited – Hopton v Miller ChD 31-Aug-2010
The parties had entered into partnership to open and run a restaurant, but without a formal agreement. They differed as to the values contributed by their respective efforts. After failures to disclose materials requested, the defendant we precluded . .
Lists of cited by and citing cases may be incomplete.
Company
Updated: 04 July 2022; Ref: scu.231661
