Bottrill v Harling

When an agreement is oral or partly oral, subsequent conduct may be considered to determine whether a contract was made and what its terms were. That differs from using subsequent conduct to interpret a written contract already concluded. An appellate court should exercise caution before reversing a trial judge’s factual evaluation, since expressed findings cannot capture every aspect of the impression formed from primary evidence. A party asserting an agreement bears the burden of proving it on the balance of probabilities. A fiduciary relationship may be relevant only tangentially. An unusual and burdensome term requires sufficient evidence that it was agreed. The court doubted that section 39 of the Partnership Act 1890 implies repayment of capital where a partnership continues without a winding-up.

John Bottrill, a retiring solicitor and partner, sued Julia Harling, the continuing partner, for sums said to be due on his partnership capital account, together with profits and consultancy fees. The parties had never executed a written partnership agreement.

The High Court, Queen’s Bench Division, Mercantile Court, found that the retirement arrangements included payment of the credit balance on Bottrill’s capital account, but found insufficient evidence that the partnership would bear overheads attributable to Bottrill’s retained private work. Harling appealed the capital-account finding. Bottrill sought permission to cross-appeal on overheads. The central questions were whether the judge had properly identified an oral agreement, whether subsequent conduct could be used in determining its terms, and whether the factual findings should be disturbed on appeal.

Appeal dismissed. Lord Justice Longmore, with whom Lord Justices Tomlinson and Sales agreed, upheld the trial judge’s conclusions. Permission to cross-appeal on the overheads issue was refused.

1. Oral agreement and subsequent conduct. The trial judge had not held that the parties made no oral agreement and that the contract arose only from conduct. He was deciding whether an oral agreement had been made and was entitled to consider how the parties subsequently conducted themselves in deciding whether an agreement existed and, if so, what its terms were. That was different from using subsequent conduct to interpret a written agreement already concluded.
2. Capital account. The judge was entitled to find that the retirement arrangements included payment of the sum standing to Mr Bottrill’s credit on his capital account. The accepted evidence concerning the obsolete Freer liability, the contemporaneous documents and the probabilities supported that conclusion. The appellate court should exercise caution before reversing a trial judge’s evaluation of facts, as explained in Biogen Inc v Medeva Plc [1997] RPC 1, with further reference to Re B [2013] 1 W.L.R. 1911 and Beacon Insurance Co Ltd v Maharaj Bookstore Ltd [2014] UKPC 21; [2014] 4 All ER 418.
3. Overheads and proof of agreement. A person alleging an agreement must prove it on the balance of probabilities. The parties’ fiduciary relationship was only tangentially relevant to that question. The finding that an agreement requiring the partnership to bear overheads attributable to Mr Bottrill’s private work was unusual and burdensome, and had not been proved, was a finding of fact which the Court of Appeal would not reverse.
4. Partnership Act 1890. The respondent’s alternative argument under section 39 was unnecessary to decide. Longmore LJ observed obiter that section 39 was expressed to operate on a winding-up of the firm, and doubted that an implied entitlement to repayment of capital would arise where the partnership continued without an agreement addressing the capital.

• Court of Appeal (Civil Division): In [2015] EWCA Civ 564, the appeal against the capital-account finding was dismissed and permission to cross-appeal on overheads was refused.
• High Court, Queen’s Bench Division, Mercantile Court: His Honour Judge Mackie QC found for Mr Bottrill on the capital-account issue and rejected the alleged agreement concerning overheads.