McPhail & Anor v Bourne & Anor

A partnership requires a binding contractual relationship between the parties. Collaboration in a common commercial project does not, without more, establish contractual relations or a partnership. A contract may be implied from conduct only where the evidence supports a confident conclusion that the parties intended contractual relations and identifies the contract’s terms.

Where no partnership exists, negotiations resolving disputes between collaborators are arm’s-length contractual negotiations. They do not attract partnership fiduciary duties or a duty of disclosure. A settlement will not be rescinded for undue influence or misrepresentation absent threats, improper pressure, misrepresentation or a relationship of influence supporting that relief.

The claimants, Kiley Fitzgerald and Owen Doyle, and the defendants, James Bourne and Mathew Sargeant, had collaborated as aspiring musicians. The claimants alleged that the four had formed a partnership, agreed to share songwriting rights, and acquired rights in songs, the name Busted and related assets.

After the collaboration ended, the parties executed a settlement agreement allocating six songs between them. The claimants sought declarations, accounts and other relief, and sought to rescind the settlement for non-disclosure, undue influence and misrepresentation. The central questions were whether a partnership or songwriting agreement existed, whether the settlement was binding, and whether any equitable or contractual basis justified setting it aside.

1. The claim failed. The settlement agreement dated 22 March 2002 remained binding. The claimants were not entitled to declarations, accounts, rescission, damages or fiduciary relief. The claim concerning “Loser Kid” was stood over.
2. Section 1 of the Partnership Act 1890 defines partnership as the relation between persons carrying on a business in common with a view to profit. As explained in Hurst v Bryk [2002] 1AC185, a partnership is consensual and contractual. A binding contractual relationship is therefore a precondition to partnership.
3. The four boys had no express agreement creating contractual relations. Their early discussions and subsequent collaboration were consistent with an informal, non-contractual arrangement. The formal management agreement did not imply a parallel contract between them. The evidence also did not justify implying a contract from conduct. Contracts are not lightly implied; the court must be able to conclude with confidence both that contractual relations were intended and what the terms were, applying the approach cited from Blackpool and Fylde Aero Club Ltd v Blackpool Borough Council [1990] 1 WLR 1195.
4. There was consequently no partnership, partnership property, partnership dissolution or fiduciary duty. The negotiations leading to the settlement were arm’s-length contractual negotiations. The defendants owed no partnership-based duty of disclosure, so the claim for rescission for non-disclosure failed.
5. The factual findings also defeated the claims based on actual or presumed undue influence and misrepresentation. There were no threats, misrepresentations, improper pressure or relevant relationship of influence. The claimants accepted the settlement because they preferred its terms to the alternatives available to them.

First-instance decision. No prior appellate decision is stated in the judgment.