Patel v Patel
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lloyd,Lord Justice Laws,Lord Justice May,Lord Justice Thomas,Lord Justice Pill |
| Judgment Date | 18 December 2007 |
| Neutral Citation | [2007] EWCA Civ 384,[2007] EWCA Civ 1520 |
| Court | Court of Appeal (Civil Division) |
| Date | 18 December 2007 |
| Docket Number | Case No: B4/2007/0505,Case No: B2/2007/0647 |
[2007] EWCA Civ 1520
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CENTRAL CIVIL JUSTICE CENTRE
(HIS HONOUR JUDGE COWELL)
Lord Justice May
Lord Justice Thomas and
Lord Justice Pill
Case No: B2/2007/0647
Mr J McGhee QC (instructed by Messrs Hugh Cartwright & Amin) appeared on behalf of the Appellant.
Mr D McCue (instructed by Messrs Dklm) appeared on behalf of the Respondent.
Ramesh Patel died on 2 June 1996. He and his brother, Ashok Patel, had for some years been in partnership. Their business was a corner shop in East London and the partnership owned a property in Lewisham which provided a rental income. In 1991 and 1992, perhaps before that as well, Mr Khanderia acted as accountant for the partners. He prepared the accounts up to December 1992, after which he ceased to be the accountant for the partnership. Ramesh Patel's drawings from the partnership were greater than Ashok's and, in December 1991, Mr Khanderia made an accounting transfer in the accounts for that year of an amount of £24,000 from Ashok's account to Ramesh's account. When HHJ Cowell came on the 8 March 2007 to determine in the Central London County Court various disputes between Ramesh's widow (the claimant in the proceedings) and Ashok, he clearly thought it might have been possible that the Inland Revenue might have regarded this as a dubious move. But the Inland Revenue had not taken this line, although they looked into partnership matters for other reasons, and the possibility was not relevant to the issues which the judge had to decide, nor is it centrally relevant to the single main issue on this appeal.
The judge held, having heard and considered oral and written evidence and documents, that the £24,000 was a simple or discreet loan from Ashok to Ramesh. Part of the evidence which contributed to this conclusion was a letter from Mr Khanderia to Ashok, dated 20 October 2000, in which Mr Khanderia explained what he had done in the 1991 accounts and why.
By section 33 of the Partnership Act 1890, subject to any agreement between the partners, every partnership is dissolved as regards all partners by the death of any partner. There was no suggestion in the evidence that Ramesh and Ashok had agreed that their partnership should not dissolve on the death of either of them, so this first partnership dissolved by operation of the statute upon Ramesh's death on 2 June 1996. By section 43 of the Partnership Act 1890, subject to any agreement between the partners, the amount due from surviving or continuing partners or the representatives of a deceased partner in respect of the outgoing or deceased partner's share in a debt is a debt accruing at the date of dissolution or death. If the £24,000 loan was a loan within the partnership this section would apply to the debt constituted by that loan from Ashok to Ramesh, subject to any agreement between them, so that, subject to that qualification, Ashok's claim against Ramesh's estate accrued due on 2 June 1996. The claimant is the administratrix of Ramesh's estate.
After Ramesh's death a second partnership came into being between Ashok and the claimant and between them they continued to run the partnership business. In succeeding years, accounts or draft accounts were prepared until this second partnership was dissolved on 29 August 2000. There was a partial distribution of assets until, in 2003, more than six years after Ramesh's death, the claimant began proceedings as administratrix of her former husband's estate, seeking an order for the sale of the rented Lewisham property and an account of rent due to her on the dissolution of the second partnership. Ashok did not oppose a sale and by 2005 had asserted as due to the claimant the sum of £10,217 for her share of the Lewisham rent. This was the amount for which the claimant eventually succeeded on her claim before the judge in 2007. The real issues at the trial were on Ashok's counterclaim. So far as is relevant, he claimed to be entitled to four amounts arising from events which happened during the first partnership. The judge largely rejected three of these claims on the facts. They were claims for £10,129.32 and £10,000, and another claim for £5,000 for which Ashok said he had put into the first partnership in various dates between 1990 and 199Ashok did recover a comparatively small amount of £1,020, constituting the transfer of £510 from the claimant's account to his account, making a difference of twice that amount.
The fourth sum which Ashok claimed was the £24,000 to which I have already referred. For this the judge held that it had been a simple or discreet debt which accrued due on Ramesh's death, but that it was statute-barred as having accrued more than the relevant statutory six years before the start of present proceedings. Ashok appeals against that finding with permission of Sir Henry Brooke —that is to say, against the finding on limitation. There is no appeal in relation to the other parts of the claim which failed. There is a consequential appeal on the judge's costs order.
The written grounds of appeal in essence relied on submissions which failed on findings of fact before the judge. There were two, possibly three points made in writing, but Mr McGhee QC who now appears for Ashok does not pursue these. This was, in brief, that there was an agreement to which the opening words of section 43 of the 1890 Act would apply. Those words: “subject to any agreement between the partners” to the effect that the debt would not become payable upon Ramesh's death, but when the partnership was finally brought to an end. This submission blurred the necessary distinction between the first and second partnership and blurred the claimant's capacity as her husband's administratrix on the one hand and her separate capacity in law on her own account as partner in the second partnership. As Mr McCue rightly pointed out in writing, the agreement for section 43 would have to have been an agreement between Ramesh and Ashok before Ramesh's death. The judge held on the evidence that there was no such agreement. Mr McGhee, understandably, does not pursue this in the face of evidence marshalled in writing by Mr McCue, which amply sustained the judge's finding that there was no such agreement.
The ground of appeal which is pursued is that, by continuing the business seamlessly after her husband's death, the claimant implicitly or tacitly agreed to adopt or bring into the second partnership as part of its starting assets her husband's share of the assets and his liabilities of the first partnership. The judge found against this on the facts, holding among other things that the claimant did not even know about the £24,000 loan and that she did not, in any event, understand accounts. For my part, I do not see how a debt owed by a former partner to another —which accrues due on the former partner's death —can become an asset of the new partnership, and certainly not in the absence of some express agreement between the partners of the second partnership. It is said more generally that the accounting position under the first partnership, in which there was no dissolution accounts, was by agreement carried into the new partnership. It is said that the claimant signed some of the accounts of the second partnership. Mr McGhee took us to the unaudited 1996 accounts, which do show that, upon her husband's death, the claimant was credited with the balance of her husband's account at the date of his death. What they do not show is any reference to the £24,000, either expressly or by any form of derivative arithmetic.
The judge's findings of fact relevant to this ground of appeal are as follows: in paragraph 28 of his judgment, he referred to the letter written by Mr Khanderia of 20 October 2000 and he described it as probably the best account of all as to what happened, and he quoted from the letter at some length and I shall read some parts of it. The letter included the following:
“Ramesh's drawings up to 31 December 1990 were higher than yours [the letter being addressed to Ashok] as he was paying off his personal bank loan on his first house mortgage through the business account. As his drawings account was always in the red, both the partners paid more tax as a result because the business bank interest was disallowed when computing the partnership income. I will illustrate the effect of this by enclosing a copy of the tax computation for 1991–92 which you will find at the back of the 1990 accounts. This was relevant for five years or so whilst the mortgage was being paid off. That is why I transferred an amount of £24,000 from your current account to that of Ramesh. Look at the accounts for the year ended 31 December 1991.”
And, parenthetically, Mr McGhee took us to those accounts and showed us where the figure of £24,000 was transferred. Going on with the letter:
“When the business money is finally divided between you and Ramesh's family, the business should pay to each partner the amount it owes to each on the current account which has been built up over the years and is actually undrawn profits plus capital invested at the start of the business. So when the final accounts have been drawn up, the business should pay to each one of you the balance outstanding on the partners' current account after charging Ramesh with £24,000.”
I will not read the rest of the letter, but it can be found in paragraph 28 of the judge's judgment. The submission that Mr McGhee emphasised on a number of occasions was that...
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