Campbell v Campbell

A partnership may include an agreement between individuals concerning shares in, and businesses operated through, companies. The decisive question is the parties’ agreement and conduct, not the companies’ separate legal personality. Partners owe duties of good faith, care, information and accounting. A partner controlling overseas corporate structures must protect the other partner’s interest and obtain informed approval where conflicts or ownership risks arise. On dissolution, the court has a wide supervisory jurisdiction to order accounts, valuation, distribution in specie or a buy-out. The reflective-loss rule does not prevent personal accounting between partners where the claim concerns duties owed directly between them.

The claimant and defendant were brothers who had operated a jewellery business in London, Thailand, the BVI and the United States. The claimant alleged that they were equal partners in the whole business and that the defendant had breached duties by controlling overseas companies, transferring shares to nominees, withholding information and excluding him from management.

The defendant contended that the partnership was confined to London, that the overseas companies and their assets could not form part of a partnership, and that the claims were barred by limitation, laches, acquiescence or reflective loss. The court determined the parties’ interests, the scope of the partnership, breaches of duty and the appropriate winding-up and accounting relief.

1. Partnership interests and scope. The parties were equal partners. The partnership extended to the jewellery business wherever conducted, including business carried on through RCJL, MLL, AGL and LCC. The partnership assets included the parties’ rights in the relevant company shares. Company personality did not prevent a separate agreement between the individuals concerning those shares and businesses. The agreement was sufficiently certain and complete to be enforceable.
2. Duties. The defendant owed duties of good faith, care, information and accounting. He was required to protect and preserve the partnership assets, keep the claimant informed and respond truthfully and promptly to reasonable requests. Procuring transfers to family nominees without informed approval, failing to preserve effective control arrangements, excluding the claimant and withholding information constituted breaches.
3. Winding up and accounts. On dissolution, the court could supervise the winding up and fashion an appropriate remedy. It could order accounts, valuation, distribution in specie, equalisation, a buy-out or mandatory steps concerning partnership assets. The proposed division of the overseas interests to the defendant and the London interests to the claimant was appropriate, subject to accounting and valuation.
4. Reflective loss and limitation. The reflective-loss rule did not apply to personal accounting obligations between the partners. The partnership account was not time-barred because limitation ran from dissolution. The alternative concealment case was also established in principle, and laches and acquiescence did not bar relief.
5. Disposition. Judgment was entered for the claimant. Accounts, inquiries and compensation for loss caused by breaches were ordered. The counterclaim was dismissed except for matters arising in the mutual accounts and distribution in specie. Precise consequential orders and costs were reserved.