Karen Roberton v Stephen Collins

A business relationship is a partnership where the parties carry on a business in common with a view to profit, assessed objectively from all relevant features. Payment described as a salary is not decisive. A person may be an employee before becoming a partner, but partnership and employment cannot coexist in the same relationship at the same time.

A partnership may exist before the business begins trading. The relevant question is whether the parties have embarked on the agreed joint venture. A partnership formed for specific ventures may be terminated when those ventures have failed. The court may also dissolve it where mutual trust and confidence has irretrievably broken down.

The claimant and defendant agreed to acquire and develop a property in France as a hotel business. The claimant provided most of the cash investment and the defendant undertook the development work. The defendant was paid £2,000 monthly, described as a salary, but contended that he was initially an employee and would become a partner only if external investment was secured.

The claimant sought declarations that the relationship was a partnership, that it had been terminated, and that its affairs should be wound up. The defendant counterclaimed on the basis of employment and challenged jurisdiction. The issues were the parties’ legal relationship, whether and how it had ended, and the consequences for the defendant’s employment claim.

1. Jurisdiction. The defendant had lost the right to challenge jurisdiction. He had failed to make the required application within the prescribed period and had filed a Defence on the merits. That conduct constituted both statutory submission and common-law waiver.
2. Partnership rather than employment. Under section 1 of the Partnership Act 1890, the court assessed the whole relationship objectively. The relevant features included the agreed division of profits, contributions of cash and property as common capital, joint records, the parties’ mutual exclusion of third parties, and the defendant’s substantial autonomy in developing the project. Those features pointed to partnership.
3. The payment described as a salary was not conclusive. A salaried partner may exist, and the statutory test concerns the objective of making profits rather than whether profits have yet been achieved. Partnership could therefore arise before the hotel opened or generated income.
4. Although an employment relationship followed by a later partnership was legally possible, the evidence did not establish that arrangement. The parties’ agreement at the Canford meeting was for a partnership from July 2018. The defendant’s role was not subject to the control required for employment, and he would not reasonably have accepted that he could never become a partner merely because outside investment was not obtained.
5. The partnership was not a partnership at will. It was formed for one of two specific ventures: opening the hotel or securing outside investment to enable redevelopment. Both ventures had failed. The claimant therefore terminated the partnership by email on 15 December 2022. Independently, the court would have dissolved it under sections 35(d) and 35(f) of the Partnership Act 1890 because mutual trust and confidence had irretrievably broken down.
6. The defendant’s unfair dismissal claim could not succeed because he was not an employee under English law. In any event, such claims fell within the exclusive jurisdiction of the Employment Tribunal under section 2 of the Employment Tribunals Act 1996.
7. The court declared the partnership, its termination and the need for winding up, and ordered that all necessary accounts and inquiries be taken.

First-instance decision. No appellate history was stated in the judgment.