Ampalam v Karthik

A partnership may arise from an oral agreement where two or more persons carry on a business in common with a view of profit. Joint ownership of the business property is not essential. The court determines objectively whether the parties reached an agreement, while treating their statements and subsequent conduct as evidence of what was agreed. Unequal financial contributions, unequal experience and registration of business assets in one party’s name do not prevent a partnership. The agreement’s terms must be construed objectively. Subsequent conduct may assist in deciding whether agreement was reached, but does not generally determine the meaning of an agreed term.

The claimant alleged that he and the defendant had orally agreed in 2015 to establish and operate a supermarket partnership. He claimed to have contributed £50,000 towards the property, a further £10,000 towards renovations and equipment, and his labour, in return for an equal share of the profit on sale after six months. The defendant denied any partnership and said that the claimant had merely been employed in his sole-trader business.

Following a trial, the court was directed to determine whether a partnership existed, what its terms were, and whether those terms had been breached.

1. Partnership established. Applying the objective test under Partnership Act 1890, s 1, the court found that the parties had made an oral agreement to carry on the supermarket business together with a view to profit. A partnership could exist even though the defendant contributed more money and experience and the property and business arrangements were largely in his name.
2. The claimant’s payment of £50,000 was found to be a contribution towards the acquisition of the partnership property, rather than money advanced to repay the claimant’s debts. That finding, together with the claimant’s decision to leave secure employment, his work in the supermarket and the agreed plan to sell the business and property, supported the existence of the partnership.
3. The terms pleaded by the claimant were established. The business and property were to be sold after six months, with expenses deducted and the profit divided equally. The court applied an objective approach to construction. The factual matrix could be considered, but the court could not rely on negotiations or subjective intentions to alter the objective meaning of the agreement.
4. The defendant breached the partnership terms by failing to account for proceeds connected with the supermarket trading, the lease of the premises and the later sale of the freehold site.
5. The claimant was entitled to an account. That issue was to be dealt with in proceedings before a County Court judge pursuant to the earlier order. The claimant was awarded the costs of the trial, subject to assessment if not agreed.