Liddle & Ors v Liddle & Ors

A contractual payment mechanism linked to a purchase price cannot require payment of an unknown sum unless the agreement clearly provides for that result. Where the price is to be determined by accounts, the payment obligations arise only once the price has been ascertained through the agreed machinery. If accounts are later challenged but found or accepted to be correct, the price is treated as fixed from the date on which the correct accounts were produced, rather than from the later date of agreement or judicial confirmation. Once the price is ascertained, sums due and instalments become payable. Failure to pay an instalment for more than the contractual period can trigger an acceleration clause making the outstanding balance immediately due.

This was an appeal by continuing partners in a family farming partnership against a judgment of His Honour Judge Davis-White QC in the High Court dated 13 September 2017. The dispute concerned the operation of clause 13 of a partnership agreement dated 23 January 2001, which governed the purchase of the shares of partners who had retired or died.

The High Court held that payment was not suspended pending ascertainment of the purchase price and that the acceleration provision applied. It also set aside statutory demands because the sums claimed had not been liquidated when the demands were served. The appeal concerned when the purchase prices became ascertained and whether payment obligations and acceleration could arise before that time.

McCombe LJ delivered the leading judgment. David Richards LJ and Newey LJ agreed.

1. Disposition. The appeal was dismissed on grounds 1 and 3. It was allowed on ground 2 to the limited extent that the relevant date was 28 June 2017, rather than 25 July 2017. The setting aside of the statutory demands was not challenged.
2. Construction of clause 13. Clause 13, read as a whole, defined the purchase price by reference to the value shown correctly in the relevant accounts. Until that price had been ascertained through the contractual machinery, there was no price to pay. The agreement therefore could not require payment of 20% of an unknown price or equal instalments of an unknown balance. The court accepted the appellants’ construction by reading the first instalment provision as operating at the later of the expiry of the notice period and ascertainment of the purchase price.
3. Date of ascertainment. If accounts produced by the partnership accountants were challenged but later found to be correct, the price was fixed from the date on which those accounts were produced. The same principle applied where the parties later agreed revised figures: their agreement signified that the figures shown in the accountants’ documents already reflected the contractual purchase price. Accordingly, the prices were ascertained on 28 June 2017, although the appellants accepted the figures on 25 July.
4. Effect of ascertainment and default. Subject to the contractual condition concerning surrender of occupation, the 20% payment and the first quarterly instalment became due on 28 June 2017. No sums were paid within 21 days after that date. The acceleration provision therefore took effect, making the whole outstanding purchase price immediately due and payable.
5. The reference to statutory interest under section 35A of the Senior Courts Act 1981 remained part of the High Court’s order, but the Court of Appeal was not determining whether such interest should be awarded or at what rate.

• Court of Appeal (Civil Division) — In [2019] EWCA Civ 346, the appeal was dismissed on grounds 1 and 3 and allowed on ground 2 so that the ascertainment date was 28 June 2017.
• High Court of Justice, Business and Property Courts in Leeds, Business List (ChD) — On 13 September 2017, HH Judge Davis-White QC held that payment was not suspended pending ascertainment of the purchase price, that the acceleration clause applied, and that the statutory demands should be set aside because the sums were not liquidated when served.