Liddle & Anor v Liddle & Ors

Clear contractual language must be applied according to its ordinary meaning. The court will not imply a qualification merely because the agreed machinery may produce an inconvenient result, particularly where the contract allocates control over the relevant determination to one party.

Where a contract provides machinery for ascertaining a debt, the debt is not liquidated for statutory-demand purposes until that machinery has produced a correct ascertainment. A calculation that is successfully challenged does not liquidate the debt merely because much of the amount may be readily calculable.

The claimants were outgoing partners or personal representatives of outgoing partners in a family farming partnership. The defendants were the continuing partners. The dispute concerned the construction and effect of clause 13 of the partnership agreement, which provided for the purchase of outgoing partners’ shares by a 20 per cent payment followed by 40 quarterly instalments.

The court considered whether the purchase price had become accelerated and payable in full, whether contractual or statutory interest was payable on the 20 per cent element, and whether statutory demands served on the defendants were valid. The statutory-demand applications followed earlier case-management and valuation decisions of District Judge Goldberg.

1. Payment and acceleration. Clause 13(2)(d)(ii) was clear and unambiguous. It did not postpone the first quarterly payment until the purchase price had been ascertained. The proposed additional wording would amount to implying a term rather than construing the agreement. The provision was commercially workable, and the continuing partners had substantial control over the ascertainment process.
2. The acceleration clause in clause 13(2)(d)(vi) applied when an instalment, including the 20 per cent payment, remained unpaid for more than 21 days. The whole outstanding purchase price therefore became due. In Edith’s case, the 20 per cent payment accrued when the contract arose on exercise of the option because the obligation could not arise earlier.
3. Interest. The agreement made no provision for contractual interest on the 20 per cent element. The interest provisions relating to the remaining quarterly instalments did not extend to it. Interest could therefore be sought under section 35A of the Senior Courts Act 1981, but whether interest should be awarded and at what rate remained discretionary.
4. Statutory demands. A debt for statutory-demand purposes must be both liquidated and immediately payable. Under clause 13, the accountants’ work product was the mechanism by which the purchase price was ascertained. If their calculation was successfully challenged, the debt was not liquidated until a correct calculation was produced by agreement, revised calculation or, potentially, court order. A debt could not be partially liquidated merely because part of the amount was accepted or readily calculable.
5. The statutory demands were accordingly set aside. The further issue concerning demands naming the personal representatives by description rather than individual names did not require determination; the judge indicated that the demands were not defective and that any such defect would in any event have been waivable.

The judgment records earlier decisions by District Judge Goldberg concerning valuation, the role of the partnership accountants and interest. This court determined the outstanding contractual and statutory-demand issues and set aside the statutory demands.