Julie Anne Morton (as executrix of the state of Jennifer Ruth Morton Deceased) v Simon Nigel Morton
| Jurisdiction | England & Wales |
| Judge | Halliwell |
| Judgment Date | 15 December 2023 |
| Neutral Citation | [2023] EWHC 3223 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: BL-2020-MAN-000005 |
[2023] EWHC 3223 (Ch)
His Honour Judge Halliwell sitting as a Judge of the High Court
Case No: BL-2020-MAN-000005
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN MANCHESTER
BUSINESS LIST (ChD)
Giles Maynard-Connor KC and Alfred Weiss (instructed by Aaron and Partners LLP) for the Claimant
Thomas Dumont KC and Jonathan Edwards (instructed by Quinn Barrow solicitors) for the Defendants
Hearing date: 6 October 2023
HHJ Halliwell
(1) Introduction
This is my judgment on costs following the trial of proceedings relating to the dissolution of a family partnership and taking of post dissolution partnership accounts. The partnership was between the late Jennifer Ruth Morton (“ Jennifer”), her son, Simon Morton (“ Simon”), and his wife, Alison Morton (“ Alison”). It related to farms in Cheshire and Staffordshire. The partnership was dissolved during Jennifer's lifetime but Simon and Alison continued to carry on the partnership business from the time of dissolution.
Jennifer's daughter, Julie Morton (“ Julie”), sued as claimant. She did so principally in her capacity as executrix of Jennifer's estate. Simon and Alison defended the action and counterclaimed for relief which has been disposed of with Julie's claim.
At this stage of the proceedings, Mr Giles Maynard-Connor KC continues to appear on behalf of Julie together with Mr Alfred Weiss, of counsel. Mr Thomas Dumont KC now appears with Mr Jonathan Edwards, of counsel, who previously appeared before me alone on behalf of Simon and Alison.
Issues arise as to the operation of CPR Part 44.2, where each party achieves a measure of success. Having made offers to one another under CPR 36, there are also issues as to whether they have obtained judgment at least as advantageous to themselves as the proposals in their respective offers and, if so, whether it would be unjust to award additional relief in respect of interest, indemnity costs and payment of the additional amount specified in CPR 36.17(4)(d).
(2) Background
On 27 January 2022, I gave judgment, [2022] EWHC 163 (Ch) (“ My First Judgment”), on the claim for declaratory relief as to ownership of the partnership assets, Julie's claims for specific performance of a post dissolution option and the taking of accounts. I also gave judgment on the counterclaim for rectification or rescission of the trusts of a transfer (“ the 2008 Land Transfer”) of the main part of one of the farms, mirror claims for equitable relief and the taking of accounts together with an order giving effect to an equity arising from proprietary estoppel.
In doing so, I concluded that the material issues as to ownership were generally to be determined with respect to the date on which the assets were introduced to partnership by a deed made on 19 December 2012 (“ the 2012 Deed”). Most of these issues were resolved in favour of Julie, as Jennifer's executrix. However, I determined that, by proprietary estoppel, Simon was entitled to credit for an enhanced share of the capital of the partnership. On this basis, I set aside an executory agreement following the exercise of the option, awarded Simon and Alison the right to serve a new option notice (“ the Extended Option”) and dismissed Julie's claim for specific performance of the executory agreement. However, I also dismissed the counterclaim of Simon and Alison for an order rectifying or rescinding the trusts of the 2008 Land Transfer. In this judgment, I shall borrow from the nomenclature of My First Judgment. This includes references below to “the Second Partnership”, “ the Third Partnership” and the “ Fourth Partnership”.
By order dated 26 April 2022, I made directions for the taking of post dissolution partnership accounts. The post dissolution partnership accounts came before me for hearing in September 2022. I gave judgment on 29 September 2022, [2022] EWHC 2689 (Ch) (“ My Second Judgment”) valuing, at £2,053,278, Jennifer's share of the partnership assets. If exercised, this was the amount payable under the option.
At this stage, the main issue was whether Julie was entitled, at her election, to interest on Jennifer's share of the partnership assets under Section 42(1) of the Partnership Act 1890 regardless of whether Simon and Alison exercised the option. I determined this issue in Julie's favour. Section 42(2) precludes an outgoing partner from her statutory right to an account of profits or interest where the partnership contract furnishes the continuing partners with an option to purchase her interest and the option is duly exercised. However, I concluded that, as Jennifer's personal representative, Julie was entitled to statutory interest regardless of whether the option was exercised since the rights of Simon and Alison under the Extended Option were derived from my judgment and superseded the parties' rights under the 2012 Deed. Statutory interest was calculated at £726,394.44.
The hearing in September 2022 had been listed to resolve all issues consequential upon My First Judgment in addition to the taking of post dissolution accounts. This included liability for the costs of the proceedings as a whole.
At the end of the hearing, my attention was drawn to a letter dated 19 February 2021 from Julie's solicitors containing an offer, under CPR Part 36”, to compromise the proceedings for the sum of £2,000,000 plus costs (“ Julie's Part 36 Offer”). Simon and Alison had been given 21 days for acceptance. The parties were in agreement that the period for acceptance of Julie's Part 36 Offer – denoted in CPR 36.3(g) as “the relevant period” — came to an end on 15 March 2021.
I awarded Julie 50% of her costs to this date. However, Julie's Part 36 Offer was a valid Part 36 offer under the Rules. It was not suggested otherwise. On the agreed basis that time for acceptance expired on 15 March 2021, I awarded Julie the whole of her costs from that date, to be assessed on the indemnity basis, plus interest at 2% and, pursuant to CPR 36.17(4)(d), an additional sum of £75,000. This was on the grounds that My Second Judgment was at least as advantageous to her as the proposals in Julie's Part 36 Offer and I was not satisfied it would be unjust to make such an order. I also made provision for Simon and Alison to make an interim payment on account of Julie's costs, in the sum of £250,000.
My judgment on the Section 42 issue was subsequently reversed by the Court of Appeal, [2023] EWCA Civ 700. In their judgment, on 20 June 2023, they concluded, at [49], that in substance my award required the parties to read the partnership deed in a particular way rather than creating a new option. On this basis, the Extended Option was given by the 2012 Deed. Upon exercise of the Extended Option, Section 42(2) would thus exclude Julie's statutory right to interest. The Court of Appeal thus made an order providing that statutory interest would only be payable in the event that the Extended Option was not exercised. They extended the option period further and ordered Julie to pay the costs of the appeal. Since Simon and Alison had made a discrete Part 36 offer in respect of the appeal itself which Julie had failed to beat, they ordered Julie to pay an additional amount under CPR 36.17(4)(d)(ii). She was ordered pay to £60,000 on account of their costs.
The Court of Appeal's judgment has potentially brought into play another Part 36 offer, on behalf of Simon and Alison, in respect of the substantive proceedings (“ Simon and Alison's Part 36 Offer”) and a Calderbank offer (“ Julie's Calderbank Offer”) on behalf of Julie. Simon and Alison's Part 36 Offer was enclosed in a letter dated 30 August 2022, under which they offered to pay £2,150,000 under the Extended Option on the basis Julie would not be entitled to statutory interest, under Section 42, in the event the Extended Option was exercised. She would also be liable for Simon and Alison's costs under CPR 36.17. Julie's Calderbank Offer was contained in an email message dated 13 June 2021 from Mr Maynard-Connor to Mr Edwards and again incorporated an offer to compromise the proceedings for £2,000,000 plus costs subject, this time, to a scheme for payment in three instalments between 30 October 2021 and 29 October 2023. By return of email on 13 June 2021, Mr Edwards implicitly rejected Julie's Calderbank Offer with a counter offer to compromise the whole proceedings for £950,000 inclusive of costs subject, again, to a scheme for deferred payment. These email messages were exchanged by counsel during a weekend when the trial was in progress.
Following the Court of Appeal's judgment, Simon and Alison gave notice exercising the Extended Option. Pursuant to the Court of Appeal's judgment, the option price of £2,053,278 thus became payable in two instalments on 27 September 2023 and 27 September 2024. After setting off Julie's interim costs liability of £60,000, Simon and Alison have paid the first instalment in the sum of £1,190,000. The balance, following detailed assessment of Simon and Alison's costs and payment of the additional amount due to them, under CPR36.17(4)(d), is payable on 27 September 2024. The net amount payable will also be subject to the overall outcome of the hearing before me.
Under the Court of Appeal's order, all issues as to the costs of and incidental to the High Court proceedings were remitted to me for further consideration in the light of their conclusions. I have done so by revisiting CPR 44 and the statutory scheme of CPR 36 in the light of the parties' offers and counter offers following a hearing at which the respective cases of each party were argued more fully than before and in uncompromising terms.
(3) The Court's...
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