Umer Sufwan Pervaz & Anor v Mehboob Ahmed Pervaz & Ors

Partnership accounts are binding only within the scope of matters clearly dealt with and agreed. Annual accounts do not necessarily determine matters arising on dissolution. Even settled accounts may be reopened where fraud, misrepresentation or sufficiently material errors are proved, with the burden on the party challenging them. Partnership property acquired on account of the firm remains partnership property unless the partners agree otherwise, even where a company temporarily intervenes. A nominee partner’s rights may be varied or ended by an agreement, express or inferred from the parties’ course of dealing. Procedural non-compliance with witness-statement rules does not automatically require evidence to be excluded; the court may admit it and assess its weight.

The claim arose from the dissolution of a family partnership, Medina Meat & Poultry Group, on the death of Khalid Pervaz on 7 July 2016. The parties disputed the identity and shares of the partners, the status of partnership assets, the treatment of annual accounts, and numerous alleged withdrawals, diverted receipts and personal expenditures.

The court tried the claims and counterclaims, including whether Turley Cote Farm remained partnership property, whether Mumtaz was a nominee partner and whether the accounts could be reopened. It also addressed evidential objections, disclosure failures, and the appropriate form of winding-up relief.

1. Partnership property. Turley Cote Farm was acquired on account of and for the purposes of the partnership. Under Partnership Act 1890, s.20(1), it was held on trust for the partnership. The temporary transfer of the business to a company did not remove the Farm from the partnership assets, absent agreement that it should become Khalid’s personal property.
2. Partners and nominee status. The partners at dissolution were Khalid, Sufwan, Kasim and Hashim. Mumtaz had been a nominee partner only. Her removal and transfer of her share were authorised by her express or implied agreement and by the family arrangement between Khalid and Ahmed. Section 19 permitted variation of partnership rights by express or inferred consent; s.25 did not prevent removal where consent existed.
3. Settled accounts. The annual accounts did not clearly deal with the disputed withdrawals, unrecorded income, partnership shares or dissolution matters and were therefore not settled accounts in relation to those issues. In any event, the scale of the errors justified reopening them. The party seeking correction had to identify and prove errors on the balance of probabilities. The court could combine the usual permission and rectification stages where convenient and just.
4. Evidence and procedure. A witness’s own language under CPR PD 32 para.18.1 includes any language in which the witness is sufficiently fluent to give oral evidence, including cross-examination. Mr Ahmed’s statement therefore did not require translation merely because English was not his first language. The Defendants’ non-compliant statements were admitted and given appropriate weight. The Claimants’ extensive disclosure failures justified adverse inferences.
5. Accounting findings and relief. The court directed substantial corrections for unrecorded contract-kill income, bad debts wrongly written off, house-building expenditure, insurance proceeds, machinery-sale proceeds, personal payments and cheques received by Sufwan. The claims concerning the mortgage and most unproved rental shortfall failed. The partnership was declared dissolved on 7 July 2016; its affairs were to be wound up, with further accounts and inquiries. Further expert evidence was directed on goodwill, and a buy-out was left subject to proof of funding at a consequential hearing.

This was a first-instance decision in the High Court. Proceedings were issued on 7 December 2021. The judgment directed a consequential hearing concerning the winding-up, accounts, possible buy-out, proof of funding and costs.