Abdul Rahman Hayel v Abdul Aziz Hayel & Anor

A settled partnership account is binding within the matters for which it was agreed, but the court may permit specific items to be corrected where errors are positively identified and proved on the balance of probabilities. Long delay and subsequent acquiescence do not prevent correction where the error is substantial and the circumstances show that the partner did not understand or approve it. The court may collapse the usual permission and correction stages where convenient and just. Provisional documents intended to form the basis of further legal documentation do not create a binding winding-up agreement unless contractual intention and a concluded agreement are established.

The claimant and his two brothers were equal partners in a Liverpool family property business. The partnership accounts had been settled over a number of years, but the first defendant sought permission to reopen or surcharge and falsify specified accounts, alleging errors in drawings, sale proceeds and distributions.

The parties agreed that the partnership had been dissolved by agreement on 31 May 2018 and that its affairs should be wound up. The principal issues were whether the settled accounts contained proved errors requiring correction and whether documents signed on 28 May 2018 governed the winding up.

1. Dissolution and winding up. The partnership was dissolved by agreement and conduct on 31 May 2018. Its affairs had not been wound up, so declarations and a winding-up order were made.
2. Settled accounts. The accounts were settled because the partners had signed or acquiesced in them. A signature indicated approval even if the signatory did not understand the accounts. That did not prevent reopening or correction where fraud, misrepresentation or errors were proved. The present claim concerned errors, not a general challenge based on breach of duty.
3. Burden and standard of proof. The first defendant had to identify and prove the alleged errors. The standard remained the balance of probabilities. The observation in Gething v Keighley that doubt would be resolved against the person impeaching the accounts did not impose a different standard of proof.
4. Procedure. The usual two-stage procedure—permission to challenge specified items followed by correction—was a matter of practice. The stages could be collapsed or shortened where convenient and just, without changing the burden of proof.
5. Application. The 2008 entry recording substantial drawings by the first defendant was an error and was ordered to be deleted, with consequential corrections. The 2011 discrepancy in dairy-sale proceeds was not proved. Substantial errors in the 2016 accounts, including sums applied for the claimant’s benefit, required recalculation and consequential adjustment to later accounts. The 2018 accounts also required correction for the omitted sale proceeds of 127A Upper Stanhope Street.
6. Documents of 28 May 2018. The documents were provisional heads of terms intended to inform preparation of further documents. They were not intended to create legal relations and did not regulate the winding up. The partnership was therefore to be wound up under the partnership agreement and general law.

First-instance judgment. No earlier decision forming part of an appellate history was stated.