Gary James Keane v David Sargen & Ors

In taking accounts following a judgment establishing no partnership, the court may determine accounting issues falling within the pleaded claim for an account, even if those issues were not litigated at the liability trial.

A party cannot introduce a substantially new case at the account-taking hearing, particularly where it seeks to reopen arrangements previously accepted and relied upon. Alternative estoppel may arise from a pleaded and maintained acknowledgment of the relevant account.

Where a business structure provides for payments through one entity on behalf of another, repayments may be recognised according to their substantive accounting arrangement rather than their physical payment route. Accounts and inquiries involving oral evidence are trials for the purposes of witness-statement requirements.

The claimant had previously succeeded at first instance in establishing a partnership with the defendants, but that finding was reversed on appeal. The Court of Appeal’s orders directing two accounts remained to be determined.

The First Account concerned loans made by the claimant to the fifth defendant to acquire interests in the sixth defendant. The Second Account concerned sums allegedly owed to the claimant by the sixth defendant. The claimant objected to the defendants’ accounts, principally challenging the treatment of repayments, profit allocations and management or service charges.

During the hearing, the claimant substantially changed his case and sought to argue that the loan accounts had been improperly transferred or never repaid. The central issues were the proper scope of the accounts, whether that new case could be advanced, the treatment of payments made through the LLP, the service charges, and compliance with CPR PD57AC.

1. Accounts and new case. The court rejected the claimant’s late attempt to reopen the accounting structure by asserting that the loans had never been repaid or had been transferred improperly between the companies. That case was not pleaded or properly put to the witnesses. It was speculative and sought to undermine arrangements which the claimant had previously accepted and from which he had benefited. Alternatively, his pleaded acknowledgment that £194,933 remained due on the loan account established reliance on the validity and partial repayment of that account, making it unjust and prejudicial for him to resile from it.
2. Repayments and accounting structure. The MIPAs required an account to be created. The evidence established that the current account fulfilled that function. Payments made by the LLP could constitute repayments by the LLP on behalf of the fifth defendant and out of profits. The absence of a separate physical loan account in the fifth defendant’s books did not disadvantage the claimant. Treating the payments as irrelevant because they were made by the LLP created a false distinction.
3. Management or service charges. The challenge to the charges fell within the account-taking process. The fifth defendant acted as the service company for the LLP, paid business expenses and recharged them, with a 5% uplift. The claimant ultimately accepted the general legitimacy of that arrangement. His late challenge to amortisation was rejected because it had not been properly advanced or supported by evidence or authority, and the court accepted the accounting evidence.
4. Witness statements. An account-taking hearing involving oral evidence is a trial for the purposes of CPR PD57AC. The witness statements should therefore comply with paragraph 2.1 of that practice direction.
5. The First and Second Accounts were approved. After crediting the claimant’s current-account balance of £134,238 against the £165,000 payment made on account, and allowing £45 on the capital account, the claimant owed the LLP £30,717.

• Court of Appeal: The judgment of ICC Judge Jones, [2022] EWHC 1006 (Ch), was reversed insofar as it found a partnership between the claimant and the defendants. The orders directing accounts remained.
• High Court (Business List): The outstanding accounts and objections were determined, the accounts approved and the final balance declared.