Deacon v Yaseen

A retiring partner’s entitlement is ordinarily the value of the partnership share at the retirement date, including partnership assets. Once ascertained, that entitlement is a debt due from the continuing partners, unless the partnership agreement provides otherwise.

Payments made under a general medical services contract towards premises costs are not goodwill merely because they exceed the contractual rent. Their relevance to valuation is a matter for the expert valuer appointed under the partnership agreement. The court will not determine abstract questions about entitlement to payments under the premises-cost directions where those questions are entrusted to the valuer or depend on discretionary decisions of the NHS body.

The claimant and defendant were former partners in a general medical practice. The defendant retired, and the claimant exercised an option under the partnership agreement to purchase his share. A dispute arose concerning the valuation of leasehold practice premises, the relevance of payments made under the National Health Service (General Medical Services – Premises Costs) Directions 2013, and the defendant’s continuing interest in the premises.

The claim under CPR Part 8 sought declarations on whether premises-cost payments could be considered in valuation, how such payments and any premium should be treated, and whether the defendant retained an ownership interest or entitlement to further payments. The court also considered the interaction between the partnership agreement and general partnership law.

1. Premises-cost payments and goodwill. The parties agreed that the valuer could have regard to sums received from the NHS Board under the 2013 Directions or otherwise. The court accepted that agreement. Payments made in respect of premises costs, even if historically they exceeded the apparent limits of direction 32, were not referable to the business or its success and were not goodwill for the purposes of the National Health Service Act 2006 (paras [16], [26]).
2. Questions reserved to the valuer. The court declined to determine how those payments should be treated in the valuation. Under the partnership agreement, disputed valuations were to be determined by an independent valuer acting as an expert. Abstract questions about entitlement to current market rent, actual rent, payments to a hypothetical buyer or subtenant, and the treatment of premiums under the 2013 Directions were matters for the valuer in the first instance. Entitlement could also depend on decisions entrusted to the Board (paras [17], [30], [32], [34]).
3. Goodwill authorities. Trego v Hunt [1896] AC 7 and Commissioners of Inland Revenue v Miller and Co’s Margarine Ltd [1901] AC 217 provided useful starting points, but their statements about goodwill arose in different legal contexts and could not be applied as a universal statutory definition. The contractual and statutory scheme governing this medical practice had to be examined specifically (paras [19]–[24]).
4. Retiring partner’s interest. The general position, subject to express or implied contrary agreement, is that a retiring partner is entitled to the value of his share in the partnership, including partnership assets, at the retirement date. Once ascertained, that entitlement is a debt due from the continuing partners. The usual process is inquiry, valuation and account. The partnership agreement did not demonstrate a contrary arrangement. The defendant therefore had no entitlement to the premises in specie, but only to the purchase price calculated under clause 27, with interest where applicable (paras [37]–[49], [52]–[58]).
5. The defendant retained no interest in the premises apart from a possible unpaid vendor’s lien, and was entitled to no additional sums in respect of them. Questions 1.2, 1.3 and 1.4 were not answered; question 2.1 was answered accordingly and question 2.2 was answered no (paras [56], [58]–[59]).