MEDCALF v MARDELL AND ORS

A partnership may arise informally from the parties’ conduct where they collaborate on developing and exploiting a commercial venture with a view to sharing profits. The venture need not have begun trading or received income. The scope of the business is material: developing and exploiting a television format could itself constitute the partnership business.

Under section 24(6) of the Partnership Act 1890, a partner is not entitled to remuneration for acting in the partnership business unless an express or implied agreement provides otherwise. A partner cannot obtain remuneration indirectly through a company under his control where he could not claim it personally. Costs incurred in defending a separate third-party claim were not deductible partnership expenses.

Roger Medcalf claimed that he, Terry Mardell and Mike Kemp had formed a partnership to develop and exploit the television game show format The Big Break. Lloyd J held that a partnership arose by the parties’ conduct on 29 May 1987, that it continued, and that the partnership owned the relevant intellectual property. He ordered an account of profits and made related costs and assignment orders.

Mardell and Terry Mardell Organisation Ltd appealed. They also appealed a later order disallowing deductions for Mardell’s work and for part of TMO’s revenue. The principal issues were whether a partnership had been formed before commercial exploitation, whether late amendments and new evidence should be permitted, and whether remuneration and litigation costs were deductible.

1. Appeals dismissed. The court refused the resisted amendments and applications to adduce further evidence, and dismissed both substantive appeals.
2. Under R59.10(2), further evidence is admitted only on special grounds. Finality is an important objective, and a party is not entitled to a retrial merely because different evidence or litigation decisions might have produced a better result. The proposed evidence could have been produced and tested at trial.
3. The trial judge had a discretion under R.S.C. O.20 r.5(1) to permit amendment at any stage. The relevant question was whether justice required the amendment, including whether the opposing party had suffered real prejudice. The judge was not shown to have exercised that discretion plainly wrongly.
4. A legally binding partnership may be inferred wholly from conduct. The partnership business may consist of developing and exploiting a commercial idea. It was unnecessary that trading or monetary receipts had begun. Khan v Miah was distinguishable because the business there was defined as operating a restaurant at a particular address.
5. Section 24(6) of the Partnership Act 1890 barred Mardell’s personal claim for remuneration. No express or implied agreement varying that rule had been established. TMO could not avoid the same result because Mardell chose to conduct the partnership work through a company he controlled.
6. O’Sullivan was distinguishable. Equitable allowance for skill and labour in that case addressed a different situation and could not soften the contractual rules of partnership. Boardman and Guinness did not justify remuneration here.
7. Costs of defending Scally’s separate claim were not expenses incurred to preserve partnership property and were not analogous to a mortgagee’s costs in protecting title.

• Court of Appeal (Civil Division): dismissed appeals from Lloyd J’s orders of 29 June 1998 and 31 March 1999.
• High Court, Chancery Division: Lloyd J held that a partnership existed, ordered an account and related relief, and disallowed the disputed remuneration and revenue deductions.