Uthyavel v Raviraj

A partnership may exist despite legal or practical arrangements placing business assets in one partner’s name. The court must determine the parties’ true contract and intention from the whole facts. Joint ownership, shared profits, joint accounts, shared liabilities, participation in management and the treatment of assets may together establish partnership. Property acquired for the purposes of the business is partnership property, even if legal title is held by one partner. In the absence of contrary agreement, partners share capital, profits, debts and losses equally under the Partnership Act 1890. On dissolution, partnership drawings and partnership income must be brought into the dissolution accounts.

The claimant and defendant were longstanding friends who operated two convenience shops and acquired two freehold properties and several joint bank accounts. The claimant alleged that they had agreed to trade as equal partners, although some assets and businesses were held or recorded in the defendant’s sole name. The defendant denied any partnership and claimed sole ownership of the principal business and related assets. The court tried preliminary issues concerning the existence and terms of the partnerships, the status of the properties and accounts, and the accounts required following dissolution.

1. The court found that the parties expressly agreed to acquire and operate the St Helier business for their joint benefit as equal partners. Whether a partnership exists is a mixed question of law and fact: Keith Spicer Ltd v Mansell [1970] 1 W.L.R. 333. The statutory definition in section 1(1) of the Partnership Act 1890 was applied, together with the requirement to examine the parties’ true contract and intention from the whole facts.
2. The evidence materially included the parties’ equal contributions, joint licences, joint trading and merchant accounts, a joint business loan, their management and work in the shop, business-funded vehicles, equal drawings and contemporaneous notes showing equal entitlement to withdrawals. The court assessed the witnesses by reference to consistency, contemporaneous evidence and other relevant credibility factors. It also applied the cautions identified in Martin v Kogan [2021] EWHC 24 (Ch).
3. The court found that 66 High Street was acquired as an addition to the existing partnership business. The parties jointly owned the property, operated the second shop together, used rental income to service the mortgage and applied partnership funds to the property.
4. The freehold of 131 Wrythe Lane was partnership property. Although registered in the defendant’s sole name, the purchase monies came directly or indirectly from the partnership business and the acquisition was for the parties’ joint benefit.
5. The Barclays, St Helier Santander and Costcutter accounts were partnership accounts and the monies in them were partnership monies. The parties shared capital, profits, debts and losses equally. This was their agreement and, alternatively, section 24(1) of the Partnership Act 1890 supplied the same result.
6. The partnership had been dissolved. Dissolution accounts were ordered. Both parties were to account for their drawings, and partnership rental income was to be included. The defendant’s separate claim against the claimant for mortgage-related loss failed.