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2nd Feb 2012
The court was required to determine whether a partnership entered into by the first and second claimants (B and J) and second defendant (M) had been dissolved and what accounts and inquiries should be ordered.
The partnership had been established to bid for, procure and provide services to an oil company (BP) in Azerbaijan and Georgia. The partners agreed that those services would be provided by the first defendant (R), a company owned by M, as it was anticipated that BP wished to contract with a company based in Azerbaijan. It was also agreed that those services would be provided in the name of R. R secured the BP contract and the partners provided the relevant services. However, their relationship broke down when M excluded the other two partners from involvement in the contract. The BP contract was extended on a number of occasions and eventually replaced by a new contract. M obtained an order in the Azerbaijan court purportedly terminating the partnership agreement. B and J subsequently obtained a freezing injunction in England in respect of bank accounts held in R’s name both in the United Kingdom and Dubai.
(1) The BP contract, including the renewals and any variations, was an asset of the partnership and had to be held and operated exclusively for the benefit of the partnership in accordance with the partnership agreement, Don King Productions Inc v Warren (No.1)  Ch. 291 considered. The money held in the dedicated bank accounts was held by R on trust for the partnership until it was dissolved and winding up completed. Equally, any money in the possession of B and J derived from the BP contract was held on trust until the partnership was dissolved. The partnership agreement was not capable of being dissolved unilaterally by M, either by express or implied notice of dissolution or under the terms of the partnership agreement. The agreement did not provide any partner with the express or implied power to terminate in the absence of agreement of all the partners. The agreement was for a single venture or undertaking within the Partnership Act 1890 s.32(b) and could only be terminated prior to the expiry of the venture or undertaking by agreement between all the partners, or by order of the court. (2) As all three partners agreed that the partnership should be dissolved by the court that would be ordered under s.35(f) on the ground it was just and equitable to do so. In those circumstances, it was appropriate to order an account of the partnership’s assets and liabilities and an enquiry as to the capital value of the BP contract. The date that the accounts and inquiries should be taken would be the date of the judgment subject to any application and determination, during the winding-up of the partnership, that that date should be brought forward or postponed on account of the conduct of any of the partners. As no annual account had been taken, the accounts to be drawn up as part of the winding-up of the partnership, including any determination of gross profit, should be drawn up for the whole period of the life of the partnership and not on a year-by-year basis. (3) The interim relief previously granted should continue until the accounts and inquiries had been made. The form and extent of the interim relief should be such as to: (a) preserve the sums currently held and the future receipts and income of partnership assets for the benefit of the partnership; (b) provide the means of paying the costs of any partner that were ordered to be paid by another partner out of the profits; (c) permit the BP contract to continue without jeopardising its future and current value.
Under the Partnership Act 1890 s.35(f) the court ordered the dissolution of a partnership, that had been set up for a single venture of providing services to an oil company, on the ground that it was just and equitable to do so. The court gave directions in relation to the accounts and inquiries that were appropriate.
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