Khan and Another v Miah and Others
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE ROCH,LORD JUSTICE THORPE,LORD JUSTICE BUXTON |
| Judgment Date | 03 December 1998 |
| Judgment citation (vLex) | [1997] EWCA Civ J1203-9 |
| Docket Number | FC3 97/739l/C |
| Court | Court of Appeal (Civil Division) |
| Date | 03 December 1998 |
[1997] EWCA Civ J1203-9
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CENTRAL LONDON COUNTY COURT
(HIS HONOUR JUDGE RICH QC)
Royal Courts of Justice
Strand
London W2A 2LL
Lord Justice Roch
Lord Justice Thorpe
Lord Justice Buxton
FC3 97/739l/C
THE FIRST APPELLANT (lst Defendant) appeared in person.
MR EDWARD DAVIDSON (instructed by Messrs Saf Awan, Luton, Bedfordshire) appeared on behalf of the 2nd and 3rd Appellants (2nd and 3rd Defendants).
MR NICHOLAS YELL (instructed by Messrs Jenkins Evans, Reading, Berkshire) appeared on behalf of the Respondents (Plaintiffs).
The primary issue in this appeal is whether there was a partnership between the 2nd plaintiff and the lst, 2nd and 3rd defendants in December 1993 and January 1994 or whether there was merely an agreement to enter into a partnership? This issue turns on whether the parties had, prior to the 26th January 1994, started to carry on a business with a view to profit as restaurateurs at 18, Cheap Street, Newbury. On the 17th July 1996 at the trial of two preliminary issues, HHJ Rich QC found that there had been such a partnership, as contended by the plaintiffs who are the respondents to this appeal. The lst, 2nd and 3rd defendants have appealed against the declaratory judgment based on that finding, the 2nd and 3rd defendants being represented by Mr Davidson, QC and Mr Hancox, whilst the lst defendant has appeared in person and has adopted the submissions of Mr Davidson.
The story of this case started in 1993. At that time the lst defendant was the head waiter of the Passage to Indian restaurant in Barton, and the 2nd defendant was a chef at the same Indian restaurant. The lst plaintiff who is the brother of the 2nd plaintiff was a chef in an India restaurant in Milton Keynes. The lst and 2nd defendants approached the 2nd plaintiff, who had capital available, to interest him in a proposed venture, namely the opening with the lst and 2nd defendants of an Indian restaurant in Newbury. The idea was that the lst defendant would manage the restaurant while the 2nd defendant would be the chef and the lst plaintiff would be the 2nd chef. The lst plaintiff was not to be a partner. He was simply to be an employee of the partners.
A search for suitable premises began and the lst defendant found 18, Cheap Street which had been a showroom. It had been unoccupied for some 3 years. It was owned by British Gas.
British Gas were approached with the view to them granting the lst and 2nd defendants and the 2nd plaintiff a lease. British Gas were unwilling to grant a lease to those three, taking the view that they did not have the appropriate commercial experience. It was at that stage that the 3rd defendant was brought into the project. The 3rd defendant was the proprietor of the Akash Restaurant, Radlett and had had a number of years experience of the restaurant trade. British Gas were prepared to and did grant a lease to the 3rd defendant as one who had the experience and standing they required. The lease was a lease for lO years from the 29th October 1993. It was executed on the 9th November 1993, planning permission having already been granted to the 3rd defendant on the 18th August 1993 for the conversion of the premises from a showroom into a restaurant.
On the 3Oth October 1993 a contract for the work needed to convert the premises was signed between building contractors, the 3rd defendant as a proprietor of the projected restaurant and a designer retained by the parties, a Mr Michael Sharp of MSA Design Consultants.
At that time, that is to say at then end of October 1993, the 2nd plaintiff and the 3rd defendant opened a joint bank account. The precise date was the 2lst October 1993. Both signed the application for the account and both were authorised signatories. In making the application they described themselves as "partners in a business called The Nawab", (which was to be the name of the restaurant) and the nature of the business as "a restaurant and take-away set up on the lst December 1993", although, as the judge observed, when the application form was filled in by them that date had not yet arrived.
The works of conversion set out in the contract of the 3Oth October were to be paid for from this account. The works were priced in the contract at £3l,5OO. All the moneys paid into that account were provided by the 2nd plaintiff save for a few payments in by his brother the lst plaintiff. All the payments out were to the contractors for the conversion works or for other works or services obtained in preparation for the establishment of the restaurant.
British Gas having leased the premises decided in November 1993 to sell the freehold. The parties heard that and on the lst December 1993 they went to see Mr Corkett, the business manager of Barclays Bank's Luton Branch, in the company of Mr Sharp. Mr Sharp introduced them as partners. The purpose of the visit was to borrow money to enable the 3rd defendant to bid for the freehold of the premises. The roles that the partners would play in the running of the restaurant were described. The 3rd defendant's role was said to be that of "a sleeping partner". Mr Corkett was told that the restaurant would formally open on the 13th December 1993 and would commence trading from that date. Mr Corkett was also told that the partners had between them spent some £5l, OOO on the project; that was all their spare cash and they would not have the required 2O% of the price of the freehold available as a deposit for a commercial mortgage.
The bank did undertake to lend to the 2nd plaintiff and the lst and 3rd defendants a sum up to £6O, OOO. The freehold was acquired by the 3rd defendant, his brother bidding for him, on the 13th December 1993 at auction. It had been agreed that the 2nd plaintiff and the 3rd defendant would each subscribe half the 2O% of the purchase price not covered by the bank's loan. The freehold was acquired for £74, OOO.
The restaurant did not open on the 13th December 1993 as originally planned. It did not open until the 14th February 1994. Prior to that in January furniture and equipment was purchased for the restaurant. The restaurant was advertised in the local press. A contract was entered into for the laundry of table clothes, napkins and so forth. The 2nd plaintiff had difficulty in finding the half of the 2O% which was some £7,4OO. By the 12th January 1994, as the judge found, the 2nd plaintiff had obtained the means to subscribe that sum to complete the purchase of the freehold and had made that known to the defendants. Completion had been due to take place on the 14th January 1994. In fact completion occurred on the 2lst January 1994, the freehold being conveyed into the name of the 3rd defendant.
There were also difficulties in the later part of December 1993 and early January 1994 over the works of conversion. The builder insisted on receiving part payments to which the judge suspected he was not entitled. The result was, as the judge put it, "the works ground to a halt". That and the difficulties that the 2nd plaintiff had in finding his half of the 2O% lead to a falling out between the plaintiffs and the defendants. On the 25th January 1994 the 2nd plaintiff's solicitors, on his instructions wrote to the defendant's solicitors:
"Unfortunately there now appears to have been a breakdown in communications between the respective clients. Accordingly, and in order that matters may be resolved in as amicable a manner as possible, we would ask you to let us know as a matter of the utmost urgency what proposals your client are prepared to put forward with regard to the purchase of the freehold interest where we understand completion is imminent and with regard to the partnership at will which appears to have been created in this matter."
The judge found that whether it was a partnership or a mere agreement to form a partnership the relationship between the 2nd plaintiff and the lst, 2nd and 3rd defendants was terminated by that letter and the 2nd plaintiff had by that date been entitled to treat the partnership as at an end. On the 28th January 1994 the defendant's solicitors replied:
"Certainly if there was ever a partnership between our clients, which we doubt, it is no longer in existence and as a result sadly of the breakdown in communications to which you refer, equally it is clear there can be no possibility of our clients continuing together in a business relationship. Our client owns the leasehold interest but in the circumstances he recognises that he must make immediate arrangements to reimburse your client the financial contribution he has made."
The judge at page 3 of his judgment reminded himself of the essentials of a partnership. He began by setting out s. l(l) of the Partnership Act 189O, namely:
"Partnership is the relation which subsists between persons carrying on a business in common with a view to profit."
The judge went on to say that before a partnership can be said to exist three preconditions had to be satisfied. First there must be a business, second which is carried on by two or more persons in common, and third with a view to profit.
There was no dispute that the business in this case was that of a restaurant at 18, Cheap Street in Newbury. The sole issue before the judge on the question whether or not a partnership had come into existence was "had that business been carried on by the parties prior to the 26th January 1994?"
The judge's decision on this issue came at page 8 of his judgment where the judge said:
"That there existed a business which was actually being...
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