Wadsworth v Lydall

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLORD JUSTICE ORMROD,LORD JUSTICE BRIGHTMAN,MR. JUSTICE REEVE
Judgment Date16 January 1981
Judgment citation (vLex)[1981] EWCA Civ J0116-1
Date16 January 1981
Docket Number81/0007

[1981] EWCA Civ J0116-1

IN THE SUPREME COURT OF JUDICATURE

THE COURT OF APPEAL

QUEEN'S BENCH DIVISION

Royal Courts of Justice,

Before:

Lord Justice Ormrod

Lord Justice Brightman

Mr. Justice Reeve

81/0007

Between:
David Howard Wadsworth
(Appellant)
and
Frank B. Lydall
(Respondent)

MR. J. BEHRENS (instructed by Messrs. Dransfield & Hodgkinson of Sheffield) appeared on behalf of the Appellant.

MR. T. HURST (instructed by Messrs. Eaton Smith & Downey of Huddersfield) appeared on behalf of the Respondent.

LORD JUSTICE ORMROD
1

Lord Justice Brightman will deliver the first judgment.

LORD JUSTICE BRIGHTMAN
2

This is an appeal from an order made by Mr. Justice Smith in an action by one partner to recover money said to be due from the other partner on the dissolution of the partnership.

3

In 1972 the defendant, Mr. Lydall, bought a dairy farm known as Cherry Tree Farm near Sheffield. His purpose was to accommodate his race horses rather than to farm the land himself. He entered into an informal partnership agreement with the plaintiff, Mr. Wadsworth, under which the partnership was granted by the defendant an agricultural tenancy and the farm was to be run by the plaintiff and his wife at a salary for each of them. The capital of the partnership was £6,000 contributed by them in equal shares in cash or kind. The nett profits of the partnership business were to be divided between the two partners equally.

4

Three years later the defendant decided to determine the partnership so that he could sell the farm, as he was entitled to do. The plaintiff had nowhere else to live and no other occupation and—not unnaturally—sought to protect his position. He had the advantage of a partnership share in an agricultural tenancy and that no doubt gave him a bargaining counter. Negotiations ensued between the plaintiff and the defendant. The defendant made arrangements to sell the farm by auction on 22nd January. The first dissolution agreement made between the parties proved abortive because the farm did not sell at the auction.

5

A second bargain was struck. It is contained in a letter dated 16th January 1976 written by the defendant's solicitors to the plaintiff's solicitors and altered in manuscript by the plaintiff and the defendant shortly after the auction. The agreement as recorded in this letter was as follows:

"1. Mr. Lydall will pay £10,000 to Mr. Wadsworth on vacant possession, on or before May 15th 1976, being given of Cherry Tree Farm, house, land and buildings, time being of the essence.

2. Mr. Wadsworth will do all that is necessary to facilitate the giving up of possession of the land and farm buldings (other than the house itself) prior to May 15th 1976, if so required.

3. Mr. Wadsworth will be entitled to no part of the partnership assets or the proceeds of sale thereof, all of which shall belong to Mr. Lydall.

4. The partnership now subsisting between our respective clients shall be treated as determined on the 22nd instant, the date of the auction sale of the farm.

5. Notwithstanding the contents of paragraph 4 above, Mr. Wadsworth shall be entitled (a) To his salary of £35 per week until the sale of the live and dead stock, which is to be agreed himself and Mr. Lydall, but is anticipated to be around February 1976. (b) To any underdrawn salary from the date of the commencement of the partnership current financial year to the above mentioned date of termination, the 22nd instant, but if such salary (at the rate of £35 per week) shall have been overdrawn, Mr. Wadsworth shall repay to Mr. Lydall the amount overdrawn.

6. Mr. Lydall's prior approval shall be required to the sale prices of all partnership assets sold."

6

That agreement was subject to a term arranged between the parties themselves that the amount due to the plaintiff under paragraph 5(b) should be referred to the parties' respective accountants for agreement. That is set out in the letter of 19th January 1976. In fact I understand that one firm of accountants acted for both sides. The partnership business continued down to the 31st March, and not to the date referred to in the agreement which I have read.

7

The plaintiff scrupulously fulfilled his part of the agreement. On 15th May he gave up possession of the farm house as the agreement required. At about the same time a bargain was struck between the plaintiff and the defendant that the plaintiff should take over from the partnership five items of farm equipment at an agreed total sum of £1,563. These items are detailed at page 110 of the record before the court. They consist of a pump valued at £1,015, a bottle filler valued at £140, a chain saw valued at £18, a tractor valued at £190 and a van valued at £200.

8

On 10th May the plaintiff, in anticipation of the receipt in five days time of £10,000 from the defendant under the express terms of the contract, entered into an agreement to purchase a property known as Overton Farmhouse near Wakefield from a Mr. Goscoyne. I take the details from the correspondence, the contract not being before us. The price was £16,000. £10,000 was to be paid on completion. The balance of £6,000 was to be paid three years later.

9

Unfortunately the defendant defaulted on his obligation to pay the £10,000 on 15th May under clause 1 of the agreement. On 16th July the plaintiff's solicitors wrote to the defendant's solicitors demanding payment, which they correctly stated was then already two months overdue. On 21st July Mr. Gascoyne's solicitors served on the plaintiff a 28 day notice to complete in accordance with the general conditions of sale incorporated in the contract for the purchase of Overton Farmhouse. The defendant was informed of this. The effect of the notice to complete was that, on the plaintiff's default, Mr. Gascoyne would be entitled to forfeit the deposit paid under the contract, to re-sell the property and to charge the plaintiff with any loss on the re-sale. The defendant remained in default. The plaintiff's position became desperate.

10

In October the plaintiff succeeded in extracting £7,200 from the defendant. This sum was immediately paid over to Mr. Gascoyne. Mr. Gascoyne had stayed his hand tinder the notice to complete. The sale was completed on 18th October on the basis that the balance shown due by the completion statement, namely, £2,861.20 should remain outstanding on second mortgage until 1st December 1976. The first mortgage comprised the balance of £6,000 to which I have already referred and which was to remain outstanding for three years. The figure of £2,861.20, which I mentioned as due on the completion date, included a sum of £16.20 representing the legal costs of the second mortgage.

11

The defendant declined to pay the balance of £2,800 due under the agreement until the partnership accounts to 31st March 1976 were signed. It was not until October 1977 that the accountants were able, for some reason or another, to complete the accounts. These showed that a sum of £246.33 was due to the plaintiff as at 31st March 1976. Accordingly, on 20th October, the plaintiff's solicitors wrote to the defendant's solicitors asking for payment by the defendant of the outstanding £2,800 plus interest, and the amount of £246.33 shown by the accounts as due to the plaintiff. By this time the plaintiff was almost 10 months in arrears in discharging the second mortgage and he was threatened with legal proceedings.

12

On 24th May 1978 the plaintiff, having exhibited exemplary patience, issued a writ against the defendant. He claimed £2,800, the balance of the £10,000; £246.33 the balance shown as due to him on the partnership accounts; £335 in respect of interest payable by the plaintiff to Mr. Gascoyne by reason of the delayed completion of the purchase of Overton Farmhouse; and £16.20 legal costs of the second mortgage.

13

The plaintiff succeeded in the action to the extent that the judge found that the plaintiff was entitled to receive £10,000 under the terms of the dissolution agreement, whereas he had only been paid £7,200. The judge expressed himself as follows (and I read from page 5 letter D of the judgment):

"In my judgment the defendant was liable by the terms of the agreement to pay £10,000, to which must be added an agreed sum of £200 in respect of the electric cooker which is referred to in the letter in bundle A, page 6, 28th April, 1976. To the total I should add to that a further agreed sum of £246.33 for profits, a figure which had been agreed and which emerges from the accounts which have been exhibited in the annexe in this case. From the total of £10,446.33 is to be deducted the payment of £7,200.00 and from the balance is to be deducted the aforementioned sum of £1,563.00 in respect of the items of equipment which the plaintiff bought from the defendant. If my mathematics are correct the plaintiff is accordingly entitled to judgment for £1,683.33."

14

That paragraph contains the error which the plaintiff submits has been made by the learned judge. It is the principal matter arising on this appeal. The plaintiff submits that the sum of £1,563.00 ought not to be treated as a deduction because it had already been taken into account by the accountants in arriving at the figure of £246.33.

15

In my view the plaintiff is correct in his submission. To demonstrate this I must refer to the accounts and I shall endeavour to do so in a way which will enable a reader to follow the point without having the actual accounts before him. The figure of £246.33 is an agreed figure between the parties, subject only to a small qualification relating to milk sales which is irrelevant at this point of my judgment. The sum of £246.33 is the credit balance on the plaintiff's current account with the partnership as at...

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