Smith & Anor v Crawshay

Signed partnership accounts are binding between partners unless a manifest error is raised within the contractual period. A partnership agreement may govern successive property-development projects without a fresh partnership arising, and continuing bank-account activity is evidence against cessation. Property bought with partnership money is presumed to be partnership property unless a contrary intention is proved. A claim for remuneration or unjust enrichment cannot be used to reopen binding accounts where the services were covered by the partnership bargain and no unjust factor is shown.

The claimants, executors of Hope Crawshay’s estate, sued her son, the surviving partner of a property-development business. They sought an account and repayment of sums said to be due following the testatrix’s death and dissolution of the partnership.

The principal issues were the ownership of development properties, whether one partnership or several existed, the effect of signed accounts, an alleged agreement to equalise capital accounts, and an alternative claim in unjust enrichment. The court also considered evidential and procedural applications made during the trial.

1. Outcome. The claimants succeeded on all issues except undue influence, which did not arise for determination because no equalisation agreement was proved. The parties were invited to agree an order giving effect to the judgment.
2. Accounts. Clause 5 of the partnership agreement made signed annual accounts binding between the partners unless a manifest error was identified within three months. The defendant’s contrary argument, that the accounts were merely representations to third parties, was rejected. The principle was consistent with Ham v Bell [2016] EWHC 1791 (Ch) and Montgomery v Cameron & Greig [2007] CSOH 63 (OH).
3. Partnership and property. The original partnership continued from 1998 until the testatrix’s death. The agreement was not confined to one development, and ongoing bank-account activity contradicted cessation. Under ss 20 and 21 of the Partnership Act 1890, land contributed to or bought with partnership money was held for the partnership unless the contrary intention appeared. Plot 12 had later been taken by the testatrix at market value through the accounts, while Lower Polsham Road remained a partnership asset.
4. Equalisation. The defendant failed to prove any agreement transferring value from the testatrix to him. The absence of documentary evidence, notification to the partnership accountant, the testamentary arrangements, and the late emergence of the allegation all counted against it.
5. Unjust enrichment. The claim was not a proper defence to the account and should have been advanced, if at all, by counterclaim or set-off. In any event, s 24(6) of the Partnership Act 1890 barred remuneration beyond the agreed profit share where the claim rested on implied agreement. A modern unjust-enrichment claim still required enrichment, enrichment at the claimant’s expense, and unjustness. The defendant’s services were stipulated for by the partnership agreement and no unjust factor was established.
6. Other sums. The defendant was required to account for partnership money spent on living expenses and could not retain half of the proceeds of St Katherine’s Way, since there was no profit to divide and the proceeds remained partnership assets subject to s 44(b) of the Partnership Act 1890.