Douglas Stuart Ponsford & Anor v Mesud Habib Sali & Anor

In taking partnership dissolution accounts, the court determines the partners’ financial entitlements by applying the agreed or legally applicable accounting rules to the available evidence. The process is not a forum for introducing unpleaded complaints that assets were sold at an undervalue or that a partner exercised poor business judgment.

Partnership assets must be realised and applied in the statutory order, subject to agreement. The court may adopt a practical final balance-sheet methodology where a further formal profit-and-loss account would be disproportionate and the relevant party has not advanced a positive case on post-dissolution profits. Costs incurred in winding up may be paid from partnership assets, while costs of hostile issues may be borne by the unsuccessful partner.

The claim arose from the dissolution and winding up of an equal partnership trading as Move On Now. The court had appointed Mr Ponsford receiver and manager and ordered accounts and inquiries following a consent order recording dissolution on 1 December 2021.

Earlier preliminary issues included ownership of 2 Walsingham Road and the status of 13 Mill Lane. The ownership decision concerning 2 Walsingham Road was set aside on appeal by order of Trower J dated 31 October 2024. The present hearing concerned the accounting evidence, disputed partnership liabilities and assets, remuneration, costs, and the method for final distribution between the former partners.

1. Accounting exercise. The taking of the partnership account was an accounting exercise governed by the Partnership Act 1890 and the parties’ agreement. It was not the forum for complaints that properties had been sold at an undervalue, or that a partner had shown poor business judgment, where those complaints were not justiciable within the accounting process.
2. Statutory order and methodology. The statutory scheme required partnership assets to be applied first to third-party liabilities, then to sums due to partners for advances, then capital, with any residue divided according to the profit-sharing proportions. The court accepted the expert’s methodology for valuing the properties and making appropriate deductions. There was no double-counting error.
3. Finality. The account was directed to conclusion on the evidence available at the hearing. A formal post-dissolution profit-and-loss account was unnecessary where no positive case had been advanced as to profits attributable to Mr Sali’s share and the practical final balance-sheet approach would include any profits in the eventual surplus.
4. Remuneration and costs. Mr Ponsford was entitled to remuneration as receiver and manager. In the absence of reliable time recording, 5% of net realised asset value was reasonable. Costs of the general winding-up and accounting exercise were payable from partnership assets and, insofar as funded by Mr Ponsford, were reimbursable on the indemnity basis subject to assessment. Mr Sali was ordered provisionally to pay 85% of the costs of the hostile disputes concerning 2 Walsingham Road and 13 Mill Lane, on the standard basis subject to detailed assessment.
5. Orders. The remaining properties were to be sold, a final balance sheet prepared, and the proceeds applied to third-party debts, the receiver’s remuneration, Mr Ponsford’s debt, and distribution of the surplus according to the partners’ capital shares. The court reserved the form of the final order.

The judgment records that Master Marsh determined preliminary property issues, including that 2 Walsingham Road was held on trust for Mr Sali. On appeal, Trower J set aside that order by order dated 31 October 2024 and directed that the accounts and inquiries proceed. The present judgment determined the accounting issues at first instance.