Abdul Rahman Hayel v Abdul Aziz Hayel (a protected party, by Tarek Hayel, his litigation friend)
| Jurisdiction | England & Wales |
| Judge | Cadwallader |
| Judgment Date | 19 April 2024 |
| Neutral Citation | [2024] EWHC 885 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: BL-2023-LIV-000014 |
[2024] EWHC 885 (Ch)
HHJ Cadwallader SITTING AS A JUDGE OF THE HIGH COURT
Case No: BL-2023-LIV-000014
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN LIVERPOOL
BUSINESS LIST (ChD)
Liverpool Civil and Family Courts,
35 Vernon Street,
Liverpool L2 2BX
Pepin Aslett (instructed by Quinn Barrow) for the Claimant
David Green (instructed by Hill Dickinson LLP) for the First Defendant
The Second Defendant did not appear and was not represented
Hearing dates: 26, 27, 28, 29 February 2024, 1 March 2024 and 19 April 2024
Introduction
This is a partnership action in which the principal issue is whether, as the First Defendant contends in his counterclaim, partnership accounts going back to 2008 should be reopened, or the First Defendant should be given leave to raise certain specific objections to specific figures in them (that is, to surcharge or falsify them), on the ground of certain errors which he seeks to establish. The question whether the partnership had been dissolved, and if so when, or whether the partnership should be dissolved, was originally in issue, but it is now no longer in dispute, and the evidence plainly supports it, that the partnership was dissolved by agreement on 31 May 2018, and I will declare accordingly. It follows, also, and it is agreed, that an order should be made that the partnership be wound up and that for those purposes all necessary accounts and enquiries should be taken and made.
Background
The partnership in question was in a family business called A. A. Hayel & Company and based in Liverpool. It was originally a dairy and property business, and continued as a property business after March 2011, when the dairy business was sold. The property business was, broadly, in the nature of acquiring and letting property, principally residential property in Liverpool. By the time of these proceedings it had acquired over a dozen properties.
The family are originally from Yemen (formerly Aden). Back in 1971 the original partners were Hayel Mukbel (or Hayel Mukbel Ghaleb), his brother Ghalib Mukbel, and the 3 male children of Hayel Mukbel, namely Abdul Aziz Hayel (now aged 87), Abdul Rahman Hayel (now in his late 70s), and Nageeb Hayel (2 years younger than Abdul Rahman Hayel). The partnership was governed by a partnership deed dated 21 October 1971 which, however, was not in evidence.
It is common ground that Hayel Mukbel had come to the UK in 1948. Abdul Aziz Hayel and Abdul Rahman Hayel joined their father in the UK in 1956. Abdul Aziz Hayel was already a young man. The family spoke to each other in Arabic, and he learned to speak English following his arrival, but he received no education in the UK, and never learned to read or write English. Abdul Rahman Hayel, being younger, received a secondary education in the UK, and is able to read and write English. Nageeb Hayel was educated in Yemen, and did not move to the UK until 1974 (although he became a partner in 1971).
The older generation, Hayel Mukbel and Ghalib Mukbel, retired from the partnership with effect from 1 January 1984 on the terms of a deed dated 30 January 1984, which was before the court, leaving the three brothers as equal partners upon the terms on the 1971 deed as varied.
There was no dispute as to the roles of the partners. Abdul Rahman Hayel had sole control of the partnership paperwork, collected the rents, kept the records, held the bank card and controlled the bank accounts, dealt with the partnership accountants and other professionals, and provided all the information required by Kinsella Clarke, the accountants, to prepare the partnership accounts and dealt with any questions. He also had a power of attorney for Abdul Aziz Hayel for many years, and a third party mandate over two of his personal bank accounts. This reflected and no doubt reinforced his superior command of English. He said he also carried out physical work for the partnership, and I think it likely that he did, but that was not his main role.
Abdul Aziz Hayel delivered the milk and handled the renovation and maintenance of the partnership properties, carrying out the physical and manual work. He continued to do so until his health prevented it. He had suffered a serious head injury in 2010 which, among other things, left him depressed. His health deteriorated: he had heart surgery and then knee surgery, was diagnosed with vascular Parkinsonism in 2018. He suffered strokes in early 2021 and was diagnosed with vascular dementia in July 2021.
The way in which the partnership accounts were prepared is not in dispute. Once Kinsella Clarke had prepared the annual accounts on the basis of information provided by him, Abdul Rahman Hayel would sign them, and either give them to his brothers to sign, or leave them at the family home for them to sign. His evidence was that, seeing that he had already signed them, his brothers would be happy to countersign without asking for any supporting documentation, and never raised any questions until much later when relations deteriorated. Whether they did in fact countersign all the accounts before 2012 is not wholly clear, but I do not need to resolve the issue because it is accepted that all the accounts material to this dispute were settled accounts, and I am satisfied that whether or not they were countersigned, the parties treated them as such, because the other partners trusted the Claimant. All the accounts from 2012 must have been signed by all three brothers, because I accept the evidence of Mr Kirkham of Kinsella Clarke that from then on their policy had been to require all partners to sign, although he had no personal knowledge of whether they had in any particular case.
There were family meetings in 2006 and 2007 at which Abdul Aziz Hayel had called for a dissolution, but none was agreed. The relationship between the brothers broke down between 2015 and 2018. The parties disagreed about the reasons, but since they are immaterial, I need not decide. However in late May 2018 the parties agreed to dissolve the partnership. Whether they did so upon binding agreed terms is an issue between them.
The Claimant, Abdul Rahman Hayel, brought these proceedings against his brothers and former partners on 13 January 2023 for an order that the partnership be dissolved, that its affairs be wound up and that all necessary accounts and enquiries be taken and made. As is now agreed, the partnership was dissolved as from 31 May 2018, so that an order for dissolution is not required. However, the Claimant also alleged that a binding dissolution agreement had been reached (the tension between this and the claim for a dissolution by the court need not be explored). By the time of these proceedings the First Defendant, Abdul Aziz Hayel, lacked capacity, and, as a protected party, was represented by one of his sons, Tarek Hayel. Through him, he denied that a binding dissolution agreement had been reached, alleged that the partnership had been dissolved in May 2018 by agreement and contract, claimed an order that the affairs of the partnership be wound up, and an order to reopen, alternatively to surcharge and falsify, the partnership accounts for the periods ended 31 March 2008, 2011, 2016, 2017 and 2018 (at least some of which had been signed off by all the partners) on the basis that they contained serious and significant errors as specified in the Defence and Counterclaim. The Second Defendant, Nageeb Hayel, has chosen to take no part in the proceedings, but to be bound by the result.
Issues
The issues for determination at trial are as set out in the closing submissions of the First Defendant. They are formulated slightly differently in those of the Claimant, but nothing turns on the precise formulation.
(1) Should the Court declare that the partnership was dissolved on 31 May 2018? Both parties agree that the Court should make such declaration.
(2) Should the Court order the winding up of the affairs of the partnership? This follows as a consequence, and the parties are agreed that the Court should make such an order.
(3) Should the Court permit settled accounts to be re-opened or surcharged/falsified?
(4) Do the 2008 partnership accounts contain such an error (drawings of £146,959 to the First Defendant and no drawings to the Claimant and Second Defendant) to justify re-opening or surcharging/falsifying that account?
(5) Do the 2011 partnership accounts contain such an error (sale proceeds of the dairy understated by £10,000) to justify re-opening or surcharging/falsifying that account?
(6) Do the 2016 partnership accounts contain such an error (equal drawings of £406,819 for each of the Claimant, First Defendant and Second Defendant) to justify re-opening or surcharging/falsifying that account?
(7) Do the 2018 partnership accounts contain such an error (failure to account for the proceeds of sale of 127A Upper Stanhope Street) to justify re-opening or surcharging/falsifying that account?
(8) Do subsequent partnership accounts in the years after errors have been identified (including 2017 and 2018) contain corresponding errors in the capital accounts to justify re-opening or surcharging/falsifying them?
(9) What is the effect of the documents signed by the parties on 28 th May 2018?
(10) What accounts and inquiries should be directed, or other orders made to give effect to the winding up of the affairs of the partnership?
Dissolution
It is clear from the evidence on both sides that the partnership was dissolved by agreement and conduct on 31 May 2018, and both active parties agree that the Court should make such declaration. I will therefore do so.
Winding up
Whether there was a dissolution agreement or not, it is...
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