Robin Steve Harry Holden v David Andrew Holden & Anor

An existing partnership is not varied merely because partners continue operating after receiving an unsigned draft deed. The objective question is whether words or conduct demonstrate an intention to replace the existing terms. Conduct is inconclusive where it is equally consistent with continuing under the existing agreement.

Partnership terms may be varied expressly or by a course of dealing. Partners who repeatedly approve accounts may thereby consent to the accounting treatment, or become estopped from challenging it later. Settled accounts will ordinarily not be reopened after many years absent fraud or undue influence. On dissolution, partnership property need not invariably be sold: the court should consider any fair alternative settlement.

The claimant and defendants were brothers who had operated a farming partnership since 1989. The claimant sought declarations that the partnership was a partnership at will governed by terms recorded in a signed meeting note and by the default provisions of the Partnership Act 1890. The first defendant contended that an unsigned 1990 draft deed had replaced those arrangements.

The claimant also sought to reopen partnership accounts, while the first defendant relied on the partners’ conduct, settled accounts and delay. The court determined whether the draft deed had been adopted, whether disputed accounting practices had been agreed or accepted, and whether notices dissolving the partnership were effective.

1. Governing terms. The partnership agreement was contractual. Formation or variation was to be assessed objectively by considering what was communicated through words or conduct. Because an existing agreement governed the partnership, conduct was insufficient if equally compatible with continuing under that agreement. The claimant’s continuation in the partnership did not objectively demonstrate acceptance of the materially different dissolution provisions in the unsigned 1990 Draft Deed.
2. The signed Meeting Note had contractual effect. It governed matters addressed by it, supplemented by the default provisions of the Partnership Act 1890. The proposed partition and pre-emption arrangements were too uncertain to create enforceable obligations. The draft deed was never adopted.
3. Disputed accounting matters. The reduction in partner salaries and the fuel invoicing arrangement were agreed orally. Consent to the interest treatment could be inferred from the partners’ repeated approval of accounts and tax returns. Alternatively, the course of dealing established consent under section 19 of the Partnership Act 1890.
4. Reopening accounts. Accounts acquiesced in by partners may constitute settled accounts even without signatures. In the absence of fraud or undue influence, the court would not ordinarily reopen matters dealt with in those accounts. Further, any failure to agree the salary and interest arrangements would be overcome by estoppel by representation or convention, because the partners acquiesced in the recorded assumptions and the first defendant relied on them to his detriment. The fuel mark-up was not sufficiently apparent from the accounts to establish acquiescence by signing, but the court found it agreed on the evidence.
5. The notices terminating the partnership were effective under section 32(c) of the Partnership Act 1890. On dissolution, section 39 did not require surplus partnership assets to be sold. A sale was the normal position where no alternative had been agreed, but the court should consider a fair valuation purchase or partition.

The governing-terms issue was resolved for the claimant. The accounts were not reopened on the disputed matters. The remaining issues were left for the winding-up or later determination where appropriate.

First-instance decision following a costs and case management order made on 6 October 2022. The judgment determined preliminary liability issues concerning the partnership’s governing terms, disputed accounts and dissolution.