McGIll v Huang & Ors

An accounting party is chargeable with property received in an official capacity where the party had control enabling it to apply the property. The beneficiary proves the receipts or surcharges; the accounting party proves authorised discharges.

A partnership at will may be dissolved by a clear notice, even if the partner giving it does not understand the legal character of the relationship. After dissolution, fiduciary duties continue so far as necessary to wind up the partnership. A former partner must account for benefits obtained through partnership goodwill, business connections or opportunities, unless all partners consent to the use of those assets for personal benefit on agreed terms.

The claimant and defendants carried on a football-related advertising business through a partnership known as CIA Sports. The claimant’s dispute with two defendants was settled, leaving claims against the first defendant.

The issues were whether the first defendant had to account for money received in connection with the first advertising transaction, whether an email dated 6 December 2016 dissolved the partnership, and whether profits from a later transaction belonged to the partnership. The court also considered whether the parties had agreed, after dissolution, how any later advertising business would be pursued and distributed.

1. Vivo 1. The court applied the ordinary accounting principles stated at [51]. An accounting party is charged with property received in an official capacity where the party has control over its application. The claimant had to prove the receipts or surchargeable sums, while the defendant had to prove proper administrative outlays as discharges. The claimant did not prove that the intermediary was the defendant’s agent or that the defendant controlled the money before receiving £30,000. The defendant was nevertheless chargeable with £40,000 because, on his own evidence, he had sufficient control over its expenditure. Proper expenditure totalled £38,504. Judgment was therefore given for an account of £1,496.
2. Dissolution. The partnership was a partnership at will. Under section 26 of the Partnership Act 1890, a partner may determine it by notice to all the partners. The notice must be clear and unambiguous, but no technical language is required and the partner need not appreciate its legal effect. The words “I am out” and “this is end now” objectively communicated an intention to end the business relationship. The partnership was dissolved on 6 December 2016. The notice could not be withdrawn without the consent of all partners.
3. Vivo 3. In the absence of agreement, sections 29, 38 and 42 of the Partnership Act 1890, together with the authorities considered at [128], would have required an account. Partnership goodwill included the credibility and business connections generated through the earlier advertising transactions. That goodwill was used to obtain the later transaction, including through a corporate vehicle.
4. The parties nevertheless made a binding post-dissolution agreement. Read objectively in its factual context, the claimant’s “no problem with commercial” email accepted an arrangement under which the continuing partners could pursue the later advertising business, while the claimant and another former partner would receive an agreed share of the Lagardère commission through the remaining partner. Such consent released the defendant from the duty to account for the profits from the sale to Tomorrow Sunshine and the commission.
5. The claims concerning Vivo 3 were dismissed. The formal conclusions were that the defendant was liable to account for £1,496 in relation to Vivo 1, that the partnership was dissolved on 6 December 2016, and that he was not liable to account for Vivo 3 profits or the Lagardère commission.