Titanium Capital Investments Limited & Anor v Jonathan Hughes & Ors

Section 29 of the Partnership Act 1890 requires a partner to account for benefits derived without consent from a transaction concerning the partnership, or from use of its property, name or business connexion. The statutory questions should be applied directly. The concept of a maturing business opportunity is not an additional requirement.

The obligation to account continues during the period in which the partnership’s affairs remain unresolved. Section 38 does not limit the scope of section 29. A business connexion is a question of fact and degree and need not involve exclusivity or preferential terms. Sections 29 and 42 may overlap. A partner may be liable for benefits received through companies used to continue the partnership business after dissolution.

The claim arose from the breakdown and dissolution of a partnership formed by Philip Manduca and Jonathan Hughes to sell lateral-flow tests. The business traded as Hughes Healthcare and operated with administrative and financial support from Hughes Group Limited.

The first trial concerned alleged pre-dissolution diversions of business opportunities, an undisclosed interest in a distributor, post-dissolution continuation of the business, profits from sales including a large Danish transaction, breach of fiduciary duty, statutory accounts, knowing receipt, dishonest assistance, unlawful means conspiracy and breach of a shareholders’ agreement.

The court was also required to construe sections 29, 38 and 42 of the Partnership Act 1890, particularly whether the statutory accounting obligation depended on a maturing business opportunity or was confined by the winding-up provisions.

1. Statutory accounting. The relevant questions under section 29 of the Partnership Act 1890 were whether a partner derived a benefit without the other partner’s consent, and whether the benefit derived from a transaction concerning the partnership, its property, name or business connexion. The expression maturing business opportunity was not statutory language and should not be treated as an additional legal requirement.
2. The statutory obligation was not conditional on the existence of a particular fiduciary obligation at the relevant time. Section 29 and section 38 addressed different matters. Section 38 continued authority and obligations so far as necessary for winding up, but did not restrict section 29. The duty of good faith and honourable conduct continued during the twilight period, and failure to account for benefits within section 29 could constitute a breach of that duty.
3. Sections 29 and 42 could overlap. A continuing business after dissolution could therefore engage section 29 as well as section 42. A business connexion was a question of fact and degree. It did not require exclusivity, a special relationship or preferential pricing. Acon was a business connexion because it supplied a market-leading test selectively, was central to the business and referred attempted circumventions back to the partnership.
4. The partnership’s name and goodwill, customer information and confidential business information were partnership assets. The court found that Hughes Group Limited and Medical Supplies Direct Limited continued the Hughes Healthcare business after dissolution. Benefits received through those companies could fall within section 29 and section 42.
5. The Danish transaction was not a maturing opportunity existing at dissolution, because the relevant emergency and procurement circumstances arose later. Nevertheless, benefits from it could be accountable to the extent derived from the partnership’s property, name or business connexions. The extent of the account and related remedies were reserved for Trial 2.
6. The court found that Manduca had an undisclosed 30% interest in Newfoundland’s pre-dissolution profits and had breached fiduciary obligations in relation to Digital 2000 and Cignpost, but not in relation to the other principal alleged diversions. The knowing receipt claims were substantially left for Trial 2. The dishonest assistance claim against Lyn Hughes failed because her conduct was not dishonest by ordinary standards.
7. The unlawful means conspiracy claim against Hughes, Hughes Group Limited, Medical Supplies Direct Limited and Lyn Hughes succeeded. There was a combination formed around 15 June 2021, an intention to injure Manduca by taking over the partnership business without accounting, and unlawful acts consisting of breaches of fiduciary and statutory accounting obligations.
8. The claim for breach of the shareholders’ agreement was not established because no present refusal to execute a document transferring the Acon claim had been shown. Further directions and a hearing were required for the form of order and Trial 2.

The judgment was a first-instance decision on the first of two trials. Master Kaye directed the division of the claims into two trials by order dated 28 April 2023. A further hearing was required to determine directions, the form of order and matters reserved for Trial 2.