Cowan v Wakeling

Partnership disputes are not ordinarily claims at law for contractual damages between partners. A partner’s monetary entitlement is generally pursued through an account in equity after dissolution, rather than by a damages action founded on the partnership agreement. Where parties consent to treat an existing damages assessment as an account on dissolution, the appellate court will consider whether the figures should be adjusted. A claimant must prove the loss relied upon. Without reliable evidence of rental value, actual receipts, or asset value, a broad-brush or nominal assessment may be appropriate and will not be increased merely because it may under-compensate.

George Cowan appealed from an order of Mr Recorder Price QC in the Central London County Court awarding him £11,146.47 against Brian Wakeling. The dispute concerned a partnership agreement relating to commercial premises, printing plant and a printing business. Mr Cowan claimed damages for lost rental income and for the disposal of plant and equipment after Mr Wakeling excluded him from the premises.

Mr Wakeling had been debarred from defending the claim after failing to comply with orders for witness evidence and disclosure. The recorder assessed damages in his absence, awarding £5,000 for alleged lost rents and £1,000 for the plant and equipment. On appeal, the parties consented to dissolution of the partnership, to treat the award as an account on winding up, and to an order for sale of the property. The central issues were whether the two challenged figures should be increased and whether the original damages claim was legally available.

1. Appeal dismissed. The parties’ consent permitted the appeal to be treated in substance as an appeal against the taking of an account of Mr Cowan’s entitlement against Mr Wakeling following dissolution of the partnership. The parties also agreed to the sale of the property, with conduct of the sale committed to Mr Wakeling’s solicitors.
2. Rimer LJ adopted the principle stated by Lord Millett in Hurst v Bryk and others [2002] 1 AC 185. Partnership is more than a simple contract. Neither during the partnership nor after its determination does a partner ordinarily have a cause of action at law to recover money due from fellow partners. Such sums are recoverable by an account in equity after dissolution. Accordingly, the original claim for contractual damages was not legally available, although Mr Cowan retained a possible claim for an account.
3. The court noted that any account or winding-up proceedings could raise a jurisdictional issue because the county court’s jurisdiction over dissolution or winding up was confined by County Courts Act 1984, section 23(f), where partnership assets exceeded £30,000. The later proceedings had been transferred to the High Court.
4. The £5,000 award for lost rents was not disturbed. The evidence established an intention that the property should yield rent of about £200 per week, but did not reliably establish that rent was paid, received, or could be obtained at that level. There was no expert evidence of rental value, and the recorder’s broad-brush assessment could not be replaced with a more reliable figure.
5. The £1,000 award for the plant and equipment was also not disturbed. There was no evidence of the plant’s value when sold, its value as part of a going concern, or the price obtained. The burden remained on Mr Cowan to prove his loss. A larger award could not be justified on speculation, even though the nominal assessment might have under-compensated him.

• Court of Appeal (Civil Division): [2008] EWCA Civ 229. Appeal from the Central London County Court dismissed. The parties agreed that the award would be treated as an account following dissolution of the partnership.
• Central London County Court: Mr Recorder Price QC awarded £11,146.47, including £5,000 for alleged lost rents and £1,000 for the disposal of plant and equipment. The remaining elements of the order were not challenged in this appeal.