Jaswinder Singh Bahia v Inderdeep Singh Sidhu & Anor

On dissolution of a partnership, Partnership Act 1890, section 39 requires partnership property to be applied in payment of liabilities and what is due to the partners. It does not invariably require surplus property to be sold.

A sale is the normal starting point, but the court has a broad supervisory discretion to adopt another fair and workable method, including an in specie distribution or buy-out. The court should assess the justice of the case, including speed of payment, sale costs, valuation evidence, equality between the parties and the wishes of the surviving partner. Departure from a sale is exceptional, but the discretion should be used where justice requires it.

The judgment concerned the disposal stage following a trial before Joanna Smith J, whose judgment was reported as [2020] EWHC 875 (Ch). Substantial sums were owed to the partnership and to Mr Bahia by the Sidhus, but remained unpaid.

The court had to decide how partnership properties should be dealt with during the winding up, and whether Mr Pabla should be replaced as receiver. Mr Bahia proposed an interim distribution in specie of selected properties, with valuation adjustment. The Sidhus proposed an auction sale and a replacement receiver selected through a nomination process.

1. The court had a supervisory jurisdiction over the winding up and a discretion to fashion an order appropriate to all the circumstances. Section 39 of the Partnership Act 1890 did not require surplus partnership assets to be sold. A sale was the normal starting point, adopted to secure fairness, but it was not an inflexible rule.
2. The court preferred Mr Bahia’s proposal. It ordered the Schedule A properties to be transferred to him as an interim distribution in specie. Their value was initially to be taken from the Alexander Lawson valuation, subject to an independent expert valuation and adjustment if the portfolio’s final value was higher.
3. The principal considerations were that the proposal would enable swift reduction of the judgment debts, avoid auction costs and uncertainty, and reflect the wishes of the only surviving former partner. Both proposals were workable and fair, and the alternative order would not materially protect any genuine acquisition interest of the Sidhus.
4. The court rejected the contention that auction was determinative merely because it usually provided evidence of market value. Professional valuation followed by offers was also a recognised commercial method. The court’s discretion under section 39, and its other powers concerning partnership assets, permitted the chosen arrangement.
5. Mr Savvas Socratous was appointed receiver in place of Mr Pabla, with like powers. The court accepted his suitability and the competence of Alexander Lawson Surveyors Ltd. The parties retained liberty to apply if evidence later showed inadequate management or better-value services elsewhere.
6. The remaining properties were left to the receiver’s discretion for disposal, subject to consultation. Interim distributions were permitted, with directions intended to preserve equality between the parties and to account for all distributions on the final winding up.

The judgment followed a trial before Joanna Smith J in January and February 2022. The earlier judgment was reported as [2020] EWHC 875 (Ch). This was a consequential disposal hearing concerning the implementation of the winding-up arrangements.