Matthew Halstead Cobden v Daniel Halstead Cobden

Hearing dates: 13 th to 17 th May 2024

Supplemental written submissions dated 10 June (Claimant) 13 June (Defendant) and 17 June 2024 (Claimant)

Draft judgment circulated to the parties on 20 June 2024

Approved Judgment

This judgment was handed down remotely at 10.00am on 1 July 2024 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

HHJ Russen KC:

A. INTRODUCTION

The subject matter of this judgment

This is my judgment following a trial in a partnership dispute. It addresses the evidence and submissions made at the trial and the supplemental submissions made by the parties in the light of the decision of the Court of Appeal in Bahia v Sidhu [2024] EWCA Civ 605, which was handed down on 3 June 2024 and therefore after the conclusion of the trial.

The judgment concerns the question as to what should happen to the equal shares of the two partners in a partnership which has been dissolved. Specifically, the issue to be determined is whether or not the court should make a Syers order (see Syers v Syers (1876) 1 App Cas 174 addressed in paragraphs 112 to 116 below) in place of a full winding-up of the Partnership which would see its assets sold on the open market (each partner being free to bid for them) and, if so, which partner should be permitted to buy out the other under the terms of that order.

Distilling that issue from the pleaded cases

This litigation between two brothers (referred to throughout the case and also in this judgment as Matthew and Daniel respectively) concerns the farming partnership known as Witcombe Farm Partnership (“ the Partnership”). The Partnership operated the business of a dairy farm (“ the Farm”) and that business has been carried on by the brothers pending the court's decision as to how the assets of the now dissolved Partnership and their rights in those assets are to be dealt with.

The Partnership was dissolved by Matthew's service of a notice of dissolution dated 25 August 2022. The next day Matthew issued his claim in the Chancery Division, London, seeking a declaration that the Partnership had been dissolved (alternatively that the court should dissolve it on the “just and equitable” ground). Matthew's Claim Form also seeks a declaration that:

“… [Daniel] having decided to cease being in partnership with [Matthew]

(a) it is a term of the Partnership, either express or implied, or

(b) [Matthew] has the benefit of an equity

whereby [Daniel] is required to sell his interest in the Partnership, together with his interest in both The Old Dairy, Witcombe Farmhouse, Ash, Martock and Cobden Investments Limited to [Matthew] at a fair value.”

Those claims were supported by Particulars of Claim which referred to a constructive conversation between the brothers in October 2021 involving Daniel saying ‘yes’ to the suggestion that Matthew should buy him out of the Partnership, so that Daniel could leave the Farm, set up a new farming business with his son Charlie and be his own boss. The background to that, Matthew said, was an understanding, reached between them in 2005 in the period leading up to the point where their brother Willy left the farming business, in 2006, that one day Matthew would buy out Daniel from the Partnership. It was alleged that, since 2006, Matthew had, in effect, run the Farm as a sole trader with Daniel's tacit support; and that Matthew has been the driver in the Partnership's business, planning its substantial expansion (from December 2013 onwards as explained in Section B below) and liaising with all the professionals involved in that expansion.

The Particulars of Claim referred to Matthew having obtained a formal valuation in the light of the October 2021 conversation and then, in April 2022, making an offer to buy Daniel's share in the Partnership (and his shares in other property on the Farm and a company associated with the business) for £3m. In mid-July 2022, through his solicitors, Daniel rejected that offer and then, on 15 August 2022, said Daniel wished to buy out Matthew. A counter-offer of £3.852m was made. That offer was open for acceptance for 14 days, the alternative being said to be a formal dissolution of the Partnership. By that stage Daniel's position was that his relationship with Matthew had irretrievably broken down and that it was not possible for the Partnership to continue. Matthew alleged that in May 2022 Daniel had contacted the Partnership's bank with a view to freezing its bank account and, since August 2022, had caused Matthew and his wife Hayley Cobden ( Hayley, who works in the office on bookkeeping and administration) not to be paid by the Partnership. Matthew dissolved the Partnership one week after Daniel's counter-offer.

By his order dated 5 September 2022 Deputy Master Scher transferred the proceedings to the Business & Property Courts in Bristol.

Daniel then served his Defence. In addition to stating that the Particulars of Claim were an abuse of process (including by reference to the lack of necessary particulars to support the alleged agreement, or equity, for Matthew's buy-out claim) the Defence denied that there had been any agreement between the brothers, let alone any enforceable contract, to justify Matthew's claim to be entitled to buy out Daniel, or that Matthew had an equity to support that claim. It stated that unless the court was prepared to make an order that Daniel should buy out Matthew (at a price to be agreed or otherwise determined by the court) the Partnership should be fully wound up.

On 17 February 2023 Matthew served Amended Particulars of Claim (“ the APOC”) which referred to the important initial conversation, relied upon by Matthew as setting the basis on which the two brothers went forward following their brother Willy's departure from the Farm, as “ the 2005/2006 Conversation”. The APOC dated this to around the time that Willy left the Farm and emphasised that the basis of it was Daniel's indication that his involvement in the Partnership was “time-limited”. At the end of that time, Matthew would have to buy him out. The APOC alleges that the brothers have also spoken about that on three or four occasions since the significant expansion of the business which began in 2013.

The APOC introduced (or perhaps identified more clearly) the claim that, not only is it fair and just that Daniel should be ordered to sell his Partnership share to Matthew, but also that Matthew was entitled to such an order through a proprietary estoppel. This was the ‘equity’ mentioned in the Claim Form. The basis of it, in summary, was that at all times since the 2005/2006 Conversation, reinforced by the later ones, Matthew has invested all his time and resources in building up the Partnership business in the reasonable belief, encouraged by Daniel, that Daniel would leave the business at some point and Matthew would buy him out.

Daniel's Amended Defence and Counterclaim denies the 2005/2006 Conversation took place or that Daniel ever said to Matthew that his own involvement in the Partnership was time limited. The subsequent conversations along the same lines, alleged by Matthew, are also denied. Instead, the Defence said the brothers occasionally had rows which involved Matthew threatening to dissolve the Partnership, Daniel challenging him to call in the auctioneers and (his bluff having been called) Matthew backing down. Daniel also challenges the detrimental reliance alleged by Matthew. He says that he has spent more time than Matthew working for the Partnership and that he has managed its day-to-day business with little involvement of Matthew.

As was the case with the much shorter original Defence, which indicated an application to strike out the Matthew's original pleading was being prepared, the Amended Defence did not engage with the more recent developments relied upon by Matthew. The October 2021 conversation was not admitted and its relevance was denied. Daniel obviously admits that in 2022 each brother had made an offer to buy out the other but Daniel did not plead to the other exchanges...