Jaswinder Singh Bahia v Inderdeep Singh Sidhu (as personal representative of the Estate of Tara Singh Sidhu)

JurisdictionEngland & Wales
JudgeLady Justice Andrews,Lord Justice Nugee,Lord Justice Arnold
Judgment Date03 June 2024
Neutral Citation[2024] EWCA Civ 605
CourtCourt of Appeal (Civil Division)
Docket NumberCase No: CA-2024-000114
Between:
Jaswinder Singh Bahia
Claimant/Respondent
and
(1) Inderdeep Singh Sidhu (as personal representative of the Estate of Tara Singh Sidhu)
(2) A Star Liquor Mart Ltd
Defendants/Appellants
And Between:
(1) Inderdeep Singh Sidhu (as personal representative of the Estate of Tara Singh Sidhu)
(2) Satpal Kaur Sidhu (in her personal capacity and as personal representative of the Estate of Tara Singh Sidhu)
Part 20 Claimants/Appellants
and
(1) Jaswinder Singh Bahia
(2) Baliber Kaur Bahia
Part 20 Defendants/Appellants

[2024] EWCA Civ 605

Before:

Lord Justice Arnold

Lady Justice Andrews

and

Lord Justice Nugee

Case No: CA-2024-000114

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES

BUSINESS LIST (Chancery Division)

NICHOLAS THOMPSELL (sitting as a Deputy High Court Judge)

[2023] EWHC 3028 (Ch)

Royal Courts of Justice

Strand, London, WC2A 2LL

Peter Knox KC and John Carl Townsend (instructed by Anthony Gold Solicitors) for the Appellants

Robert-Jan Temmink KC and Gabriel Buttimore (instructed by Hill Dickinson LLP) for the Respondents

Hearing date: 8 May 2024

Approved Judgment

This judgment was handed down remotely at 10.30am on 3 rd June 2024 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

Lady Justice Andrews

Introduction

1

When a business partnership is dissolved, on the winding up of its affairs, each partner is entitled to receive his or her proportionate share of the realised value of the partnership assets after the partnership liabilities have been discharged. To that end, after the conclusion of any necessary inquiries, an account will be taken of the assets and liabilities, including any liabilities of the partners to and from the partnership. The value of the assets will be realised and the proceeds applied in the first instance to settle the partnership debts. If any of the assets is incapable of being sold, then its value will be brought into account by the partner who retains it. Any surplus will be distributed between the partners pro rata to their respective partnership interests.

2

Sometimes the partners will agree how the assets are to be valued and distributed or accounted for between them, and when they do, the court will give effect to that agreement. But sadly, all too often a partnership will terminate in circumstances as acrimonious as many divorces. In cases of that nature (of which this is a paradigm example) the prospects of the former partners being able to agree on anything are fanciful. In the absence of agreement, the court has to do its best to achieve a fair outcome, which involves seeking to maximise the realised value of the partnership assets for the benefit of all the former partners.

3

The way in which this is normally achieved, if the assets are capable of being sold, is by directing a sale in the open market, usually at auction, but sometimes by private treaty. In this case, Mr Nicholas Thompsell, sitting as a Deputy High Court Judge (“the Judge”), departed from that practice, and instead directed the outright transfer to one of the partners of four of the properties owned by the partnership, (“the Schedule A properties”) treating him as having received the higher of the values ascribed (or to be ascribed) to each property by surveyors and an expert valuer.

4

The Appellants (to whom I shall refer, as in the court below, as “the Sidhus”) did not seek a stay of execution, though they did seek an order for expedition of the hearing of the appeal. The Judge's order was executed without waiting for the outcome of the application for permission to appeal on the papers. On 26 January 2024, Lewison LJ directed that the application for permission to appeal against that aspect of the Judge's order be adjourned into court with the appeal to follow if permission were granted. He accepted that a degree of expedition was desirable, but refused to direct that this case should take precedence over other appeals. He subsequently permitted the Respondent (“Mr Bahia”), the partner to whom the Schedule A properties were transferred, to adduce in evidence a witness statement from his son which sets out what happened to those properties in the period between the date the order was sealed and 12 March 2024 (the date of that statement).

5

The issue for us is not, as might at first appear, whether there are circumstances which would justify an appellate court in interfering with an evaluative judgment. It is whether the Judge erred in law. For the reasons I shall explain, I have concluded that he did. Although I have no doubt that the Judge considered his solution to be both pragmatic and fair, it was not in accordance with established legal principles, and his justification for adopting it was based upon irrelevant considerations.

6

There may be circumstances in which a realisation of the assets in the open market is not feasible or would produce an unjust outcome, but this was not that type of case. Indeed, the Judge himself accepted that selling the properties at auction was workable and could be done without causing unfairness to Mr Bahia, the surviving partner who wished to acquire them. In the light of that assessment, there was no basis for departing from the normal practice, let alone for making an order in the terms that he did. In those circumstances, I would grant permission to appeal and allow the appeal.

Background

7

It is unnecessary to set out the factual background in detail; the full history of the dispute between the parties is to be found in the judgment of Joanna Smith J. [2022] EWHC 875 (Ch), which preceded the judgment and order giving rise to this appeal. The following summary will suffice for the purposes of this judgment.

8

Mr Bahia and the late Mr Tara Singh Sidhu (“Mr Sidhu”) formed a partnership in 1972 (“the Partnership”) which, over the years, acquired a sizeable investment property portfolio comprising both residential and retail premises, situated mostly in and around Greater London. In 1976 the partners formed a company, A Star Liquormart Ltd. (“ASL”), in which they were equal shareholders and directors, and which was treated as a Partnership asset. ASL carried on an off-licence business from one of the Partnership properties, 8 King Street, Southall, until March 2020. It was joined as second defendant to these proceedings for enforcement purposes, and has never taken any active part in them.

9

The Partnership was a partnership at will, and it was dissolved on 28 October 2016. Mr Bahia and Mr Sidhu were equal partners, and thus each was entitled to 50% of the net proceeds of a winding up.

10

In 1990 Mr Bahia and Mr Sidhu and their respective wives entered into a second partnership, known as “the Greatway Partnership”. That partnership was dissolved on 20 November 2018, which coincidentally was the date on which Mr Sidhu died (notice of dissolution under section 32 of the Partnership Act 1890 had already been served.) This appeal is not directly concerned with the Greatway Partnership.

11

The relationship between Mr Bahia and Mr Sidhu had begun to deteriorate in around 2007/2008, when each began to harbour suspicions about the other in respect of the collection of and accounting for rental income from Partnership properties, and the unauthorised use of Partnership monies. The relationship between the two families had irretrievably broken down by 2012, long before the dissolution of the Partnership. For many years, no proper partnership accounts were drawn up; the last set of signed accounts for the Partnership property were signed in April 2011. The record-keeping in relation to both parties was described by Joanna Smith J. as “wholly inadequate.”

12

The underlying legal proceedings had already been commenced by Mr Bahia before Mr Sidhu died. He sought, among other matters, declarations as to the existence and dissolution of the Partnership, an order for the taking of a dissolution account, an order for payments out to or in by each party as were found to be due on the taking of such account, an order that the affairs of the Partnership be wound up, and “such directions as to the sale under Court direction of the assets of the Partnership (including to the parties or either of them) as the Court thinks fit.”

13

On 8 November 2019, Chief Master Marsh gave summary judgment confirming the existence and dissolution of both partnerships. He ordered that both partnerships be wound up and that there would be the taking of a dissolution account and such inquiries as may be necessary, with the scope of those inquiries to be determined at a separate hearing. The court subsequently ordered a trial of 17 separate inquiries arising in the dispute, some of which were resolved and others adjourned before the trial took place.

14

Following the trial of the remaining issues in January and February 2022, Joanna Smith J. resolved the disputed matters substantially in favour of the Bahias and against the Sidhus. She was highly critical of the evidence of Mrs Satpal Kaur Sidhu and Mr Inderdeep (“Andy”) Sidhu, respectively the wife and son of the late Mr Sidhu, who are the personal representatives of his Estate, and largely accepted the evidence of Mr Bahia, whom she found to be an honest witness. She appointed a Receiver and manager over all the assets of the two partnerships, and directed a hearing for the taking of a dissolution account of the Partnership from 6 April 2011. She subsequently directed that at that hearing, the court would determine, among other matters:

“whether the properties of the Partnership should be sold or whether they should be dealt with, or disposed of, in a different manner …”

15

By the time that hearing took place before the Judge on 2 November 2023, the amount owed by Mr Sidhu's Estate to the Partnership in consequence...

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