“Acon blew somewhat hot and cold on this question. Acon attached some value to its relationship with the Partnership as the Partnership was selling (via Newfoundland) a good number of its LFTs. Acon also thought that the Partnership had delivered tangible value in helping to secure its readmission into the Porton Down process. However, Acon never conferred on the Partnership the contractual status of exclusive distributor whether in the UK or any other jurisdiction.”
“8. Our client therefore requires you and your client to refrain from making any further incorrect assertions to ACON’s other customers, the DHSC and/or any third party that any exclusive distribution agreement exists between ACON and Hughes. Our client also requires you and your client to cease making baseless threats of court proceedings against ACON’s other customers. ACON reserves all its rights against your client in relation to any loss and/or reputational damage that it has suffered or may suffer as a result of your and your client’s assertions. 9. We note that both parties have already devoted considerable time and resource to their collaboration in the UK market. We trust that your client recognises the considerable benefits to it of its collaboration with ACON and that it wishes to continue that collaboration. ACON shares that wish, provided that your client ceases making incorrect suggestions as to the basis of its relationship with ACON.”
“22. Please note that should it become apparent upon the award of UK Governmental contracts arising from the Procurement that any other corporate entity stands to benefit by virtue of selling your client’s tests, we shall be further advising our client of its options, including challenging any award and/or issuing court proceedings for breach of contract and to seek an order for damages plus costs. In the alternative, our client will plead that your client is estopped from asserting the right to sell tests to other parties pursuant to the Procurement given the clear representations made to our client on which it relied, and acted to its detriment in facilitating the authorisation of the tests at Porton Down, amongst other things. 23. Notwithstanding all of the above, as is apparent from the tone and manner of our correspondence sent directly to your client, our client shares the same sentiments as your client outlined at paragraph 9 of your letter. Our client wishes to continue with its productive collaboration with your client in the UK market in the future. Our client sincerely hopes that any potential future dispute can be avoided with your client recognising the fact that the position it currently enjoys in the UK market place was facilitated by the efforts made by our client, which your client had initially recognised at the outset by virtue of agreeing to the exclusivity agreement confirmed by way of the Letter.”
“19. Our client is heartened by the willingness of your client to continue its partnership with ACON, as expressed at paragraph 23 of your letter. We trust that your client now accepts that this partnership was formed under the mutual understanding that it would be on a non-exclusive basis, unless otherwise formally agreed between the parties. 20. We reiterate that our client requires you and your client to refrain from making any further incorrect assertions to ACON’s other customers, the DHSC and/or any third party that any exclusive distribution agreement exists between ACON and Hughes. Our client trusts that, as per our letter, you have ceased making baseless threats of court proceedings against ACON’s other customers and our client expects you to continue to refrain from doing so. 21. ACON continues to reserve all its rights against your client in relation to any loss and/or reputational damage that it has suffered or may suffer as a result of your and your client’s assertions.”
“Please take this email as formal termination of our partnership. I’ve had several conversations with Freddy recently and it’s very clear you are doing business in isolation from our partnership (I will refrain from detailing in this email) hence I have lost trust and cannot continue any further business activities with you.”
“As I conclude later in this judgment, in the period up to the Dissolution Email, [Mr Manduca] had an interest in Newfoundland that he had not disclosed. However, [Mr Hughes] and [Ms Blyth] were not aware of this at the time. [Mr Hughes] also overlooked the fact that Newfoundland’s success was a direct consequence of decisions with which he had agreed and in some instances proposals he had made …. Following review of the Manducas’ emails on 25 or26 June 2021 , [Mr Hughes] and [Ms Blyth] came to believe that Newfoundland’s success was driven by [Mr Manduca’s] diversion of leads to Newfoundland and away from the Partnership. However, my analysis of the diverted leads set out below shows that to be wide of the mark. Most of the leads said to be diverted were contacts of Newfoundland which, in approving the system of cross-checking, [Mr Hughes] had agreed that Newfoundland was entitled to pursue.”
“218. [Mr Hughes] enjoyed a warm relationship with Anita Shuai in contrast to [Mr Manduca’s] frosty relationship with her. That was partly because [Mr Manduca] had shown much more interest in taking legal action against Acon for its asserted breach of the exclusivity arrangements whereas [Mr Hughes] was more emollient on this issue. However, there was a personal element too. Anita Shuai admitted to [Mr Freddy Manduca] in a WhatsApp chat on6 August 2021 that she liked [Mr Hughes] much more than [Mr Manduca] because she perceived that [Mr Manduca and his wife] adopted a hectoring and demanding tone with her which [Mr Hughes] did not. [Mr Hughes] leveraged that warm personal relationship to seek to persuade Anita Shuai that because as he said, he owned the ‘Hughes Healthcare’ brand, Acon should not supply either Newfoundland or the Manducas with branded LFTs. 219. Anita Shuai was positively helpful to [Mr Hughes] in those discussions. She suggested that a good starting point if [Mr Hughes] wanted to cut Newfoundland and the Manducas off from a supply of Acon tests would be for [Mr Hughes] to send a letter ‘in warning tone’ to Acon asserting that anyone purchasing ‘Hughes Healthcare’ branded tests from Acon would be infringing [Mr Hughes’], or HGL’s intellectual property rights. [Mr Hughes] took Anita Shuai’s cue. With the ground having been paved, on8 July 2021 , HGL purported to grant Acon a non-exclusive, royalty-free licence, to use the ‘Hughes Healthcare Trademarks’. However, as I have concluded, HGL had no intellectual property rights in the name ‘Hughes Healthcare’. That was the Partnership’s trading name and goodwill in that name belonged to the Partnership rather than HGL. On26 July 2021 , Anita Shuai sent an email to [Mr Hughes], Polly Phillips and [Ms Blyth] stating that Acon would not sell Hughes Healthcare branded tests to anyone without [Mr Hughes’] authorisation. 220. Following that, at least for a period, Acon would not supply either Newfoundland or [Mr Manduca] with branded LFTs. However, Newfoundland continued to be able to order unbranded tests [i.e. tests with Acon’s own branding rather than ‘Hughes Healthcare’ branding]. It is not clear to me, and I make no finding, as to whether [Mr Manduca] continued to be able to order unbranded tests from Acon.”
“29 Accountability of partners for private profits. (1) Every partner must account to the firm for any benefit derived by him without the consent of the other partners from any transaction concerning the partnership, or from any use by him of the partnership property name or business connexion. (2) This section applies also to transactions undertaken after a partnership has been dissolved by the death of a partner, and before the affairs thereof have been completely wound up, either by any surviving partner or by the representatives of the deceased partner. 30 Duty of partner not to compete with firm. If a partner, without the consent of the other partners, carries on any business of the same nature as and competing with that of the firm, he must account for and pay over to the firm all profits made by him in that business.”
“38 Continuing authority of partners for purposes of winding up. After the dissolution of a partnership the authority of each partner to bind the firm, and the other rights and obligations of the partners, continue notwithstanding the dissolution so far as may be necessary to wind up the affairs of the partnership, and to complete transactions begun but unfinished at the time of the dissolution, and in relation to any prosecution of the partnership by virtue ofsection 1 of the Partnerships (Prosecution) (Scotland) Act 2013 , but not otherwise. Provided that the firm is in no case bound by the acts of a partner who has become bankrupt; but this proviso does not affect the liability of any person who has after the bankruptcy represented himself or knowingly suffered himself to be represented as a partner of the bankrupt. … 42 Right of out-going partner in certain cases to share profits made after dissolution. (1) Where any member of a firm has died or otherwise ceased to be a partner, and the surviving or continuing partners carry on the business of the firm with its capital or assets without any final settlement of accounts as between the firm and the outgoing partner or his estate, then, in the absence of any agreement to the contrary, the outgoing partner or his estate is entitled at the option of himself or his representatives to such share of the profits made since the dissolution as the Court may find to be attributable to the use of his share of the partnership assets, or to interest at the rate of five per cent. per annum on the amount of his share of the partnership assets. (2) Provided that where by the partnership contract an option is given to surviving or continuing partners to purchase the interest of a deceased or outgoing partner, and that option is duly exercised, the estate of the deceased partner, or the outgoing partner or his estate, as the case may be, is not entitled to any further or other share of profits; but if any partner assuming to act in exercise of the option does not in all material respects comply with the terms thereof, he is liable to account under the foregoing provisions of this section.”
“Saving for rules of equity and common law. The rules of equity and of common law applicable to partnership shall continue in force except so far as they are inconsistent with the express provisions of this Act.”
“i) Did [Mr Hughes], or as the case may be [Mr Manduca], derive a ‘benefit’? ii) Did they do so without the consent of the other? iii) Did that benefit, or to what extent did that benefit, derive from any one of (a) any transaction concerning the partnership, (b) any use of the Partnership’s property, (c) any use of the Partnership’s name, or (d) any use of the ‘Partnership’s business connexion’?”
“[must] have a character that is specific to the partnership. It cannot be the case that, for example, because the partnership has purchased goods from a certain shop or supplier, that a former partner cannot purchase goods from the same shop or supplier. In order for the business connection to be an asset belonging to the partnership, it must have some character of exclusivity, or of a special relationship such as a preferential price, otherwise it is not a connection or opportunity belonging to the partnership.”
“I consider that to be an unjustified gloss on the meaning of the ordinary phrasing of s29. There is no statutory requirement for a ‘character of exclusivity’, or any ‘special relationship’. Rather, whether something amounts to a ‘business connexion’ is a question of fact and degree to be considered in the light of all relevant circumstances.”
“In my judgment, the relationship with Acon amounted to a ‘business connexion’ that consisted of the Partnership’s ability to purchase a highly regarded LFT from Acon in circumstances where (i) most people who sought to compete with the Partnership could not because Acon were selective about who they supplied, (ii) the ability to purchase tests from Acon was the life-blood of the Partnership and (iii) Acon took steps to ensure that potential customers did not ‘circumvent’ the Partnership by its practice of referring back to the Partnership attempts at circumvention. Acon was a ‘business connexion’ even though the Partnership did not (at least in Acon’s eyes) hold any position as an exclusive distributor in the UK. Acon did not need to offer the Partnership any preferential pricing terms in order to be a ‘business connexion’.”
“[Mr Hughes] is obliged to account to the Partnership under s29 for the following benefits derived by [Mr Hughes], HGL or MSDL: i) Benefits from the Danish Deal to the extent that they were derived from the Partnership’s property, name or business connexions. ii) Benefits from sales to Waitrose, UK Wholesales, Boots, PFW Labels and Hillside Hand Dryers in the twilight period to the extent derived from the Partnership’s property, name and business connexions. iii) Other benefits from sales in the twilight period to the extent derived from the Partnership’s property, name and business connexions.”
“I think the proper course is in the first instance to examine the language of the statute and to ask what is its natural meaning, uninfluenced by any considerations derived from the previous state of the law, and not to start with inquiring how the law previously stood, and then, assuming that it was probably intended to leave it unaltered, to see if the words of the enactment will bear an interpretation in conformity with this view. If a statute, intended to embody in a code a particular branch of the law, is to be treated in this fashion, it appears to me that its utility will be almost entirely destroyed, and the very object with which it was enacted will be frustrated. The purpose of such a statute surely was that on any point specifically dealt with by it, the law should be ascertained by interpreting the language used instead of, as before, by roaming over a vast number of authorities in order to discover what the law was, extracting it by a minute critical examination of the prior decisions, dependent upon a knowledge of the exact effect even of an obsolete proceeding such as a demurrer to evidence. I am of course far from asserting that resort may never be had to the previous state of the law for the purpose of aiding in the construction of the provisions of the code. If, for example, a provision be of doubtful import, such resort would be perfectly legitimate. Or, again, if in a code of the law of negotiable instruments words be found which have previously acquired a technical meaning, or been used in a sense other than their ordinary one, in relation to such instruments, the same interpretation might well be put upon them in the code. I give these as examples merely; they, of course, do not exhaust the category. What, however, I am venturing to insist upon is, that the first step taken should be to interpret the language of the statute, and that an appeal to earlier decisions can only be justified on some special ground.”
“It will be observed that the Partnership Act does not purport to abrogate the case-law on the subject, but on the contrary declares that ‘the rules of equity and common law applicable to partnership shall continue in force except so far as they are inconsistent with the express provisions of this Act’ (sect. 46). The Act, therefore, has to be read and applied in the light of the decisions which have built up the existing rules. Should any practitioner imagine that he might now relegate Lord Justice Lindley’s book, for example, to an upper shelf, he would soon be undeceived.”
“one partner must not directly or indirectly use the partnership assets for his own private benefit. He must not, in anything connected with the partnership, take any profit clandestinely for himself, nor must he carry on the business of the partnership or any business similar to the business of the partnership in his own or another name separate from it, otherwise than for the benefit of the partnership”; ii) Cotton LJ said at 354: “If profit is made by business within the scope of the partnership business, then the partner who is engaging in that secretly cannot say that it is not partnership business. It is that which he ought to have engaged in only for the purposes of the partnership. Again, if he makes any profit by the use of any property of the partnership, including, I may say, information which the partnership is entitled to, there the profit is made out of the partnership property, and therefore, of course, it must be brought into the partnership account. So, again, if from his position as partner he gets a business which is profitable, or if from his position as partner he gets an interest in partnership property, or in that which the partnership require for the purposes of the partnership, he cannot hold it for himself, because he acquires it by his position of partner, and acquiring it by means of that fiduciary position, he must bring it into the partnership account”; and iii) Thesiger LJ identified three principles at 355-356: “The first of those principles is that a partner shall not derive any exclusive advantage by the employment of the partnership property …. The second principle which is to be collected from the cases is, that a partner is not to derive any exclusive advantage by engaging in transactions in rivalry with the firm …. The third principle which is to be collected from the cases is, that a partner is not allowed in transacting the partnership affairs to carry on for his own sole benefit any separate trade or business which, were it not for his connection with the partnership, he would not have been in a position to carry on.”
“The variations between more precise formulations of the principle governing the liability to account are largely the result of the fact that what is conveniently regarded as the one ‘fundamental rule’ embodies two themes. The first is that which appropriates for the benefit of the person to whom the fiduciary duty is owed any benefit or gain obtained or received by the fiduciary in circumstances where there existed a conflict of personal interest and fiduciary duty or a significant possibility of such conflict: the objective is to preclude the fiduciary from being swayed by considerations of personal interest. The second is that which requires the fiduciary to account for any benefit or gain obtained or received by reason of or by use of his fiduciary position or of opportunity or knowledge resulting from it: the objective is to preclude the fiduciary from actually misusing his position for his personal advantage. Notwithstanding authoritative statements to the effect that the ‘use of fiduciary position’ doctrine is but an illustration or part of a wider ‘conflict of interest and duty’ doctrine (see e.g., Phipps v. Boardman [1967] 2 A.C. 46, 123; N.Z. Netherlands Society ‘Oranje’ Inc. v. Kuys [1973] 1 W.L.R. 1126, 1129), the two themes, while overlapping, are distinct. Neither theme fully comprehends the other and a formulation of the principle by reference to one only of them will be incomplete. Stated comprehensively in terms of the liability to account, the principle of equity is that a person who is under a fiduciary obligation must account to the person to whom the obligation is owed for any benefit or gain (i) which has been obtained or received in circumstances where a conflict or significant possibility of conflict existed between his fiduciary duty and his personal interest in the pursuit or possible receipt of such a benefit or gain or (ii) which was obtained or received by use or by reason of his fiduciary position or of opportunity or knowledge resulting from it. Any such benefit or gain is held by the fiduciary as constructive trustee ....”
“Undertaking the role of a fiduciary does not, of itself, prohibit the fiduciary from carrying on other profitable activities which have nothing to do with the subject matter of the fiduciary relationship. The director of a company making cars may perfectly legitimately carry on an activity of betting on horse races out of working hours, and keep any profits he makes for himself. But the opposite would be true of an executive director of a company operating a horse racing stable, if his betting was informed by what he learned while at work, unless the company gives its consent. Similarly (subject of course to any contractual restraint) the director of a company may, after resignation, set up and make profit from carrying on a similar business to that of the company, provided that he does not use information, or pursue opportunities that came to him, from his fiduciary position in the company. The duty, which may well extend beyond the end of the fiduciary relationship, is to account for profits made from, out of, or otherwise sufficiently connected with, the fiduciary relationship.”
“A trustee must not place himself in a position where his duty and interest conflict, and if he does so he must account for any profit thereby made or for the property thereby acquired …. The old business had been closed down after the bombing, but in a sense its ghost lay there waiting for a new lease of life. When the defendant resurrected the business on the premises at No. 7, Woolwich Road, she was undoubtedly to some extent putting herself in a position where her duty and interests conflicted. In another sense, the business that she opened was a new business, but it was of the same character as the old. It necessarily benefited from the goodwill attaching to the premises, because the newspaper and tobacconist business had been carried on there for 40 or 50 years down to the end of 1940. It may well be that the virtual closure for over three years, coupled with the great excess in those days of demand over supply, made the value of the goodwill small: but it was there because of the former activities of the testator, of whose estate the defendant was a trustee. Furthermore, the defendant was able to get some supplies of cigarettes and newspapers by reason of the testator’s earlier connexion with the suppliers. It seems to me clear on principle that the defendant must be accountable as a constructive trustee for those benefits which came to her because of her position as a trustee of the testator’s estate.”
“In my judgment on the facts so found, and applying the guidance of Deane J in Chan v Zacharia … , as approved by this court in Don King Productions Inc v Warren … , the defendants have obtained a benefit or gain in the form of the profitable licences in circumstances in which a conflict did exist between the defendants’ fiduciary duty owed to the claimants and the defendants’ personal interest in the pursuit of such benefit or gain, and which benefit or gain was obtained by use or by reason of their fiduciary position and opportunity and knowledge resulting from it.”
“29. In other words the essential steps in the argument in the case are, it seems to me, as follows. First, the opportunity to renew the licence or to obtain a new licence was an asset of the partnership. 30. Second, the relationship which the old partnership had with the ELDC was a ‘business connection’ for the purposes ofsection 29 of the Partnership Act 1890 …. 31. Likewise the goodwill of the partnership, its business connections generally were an asset of the partnership. 32. With respect to [counsel for the appellants], … his submissions ignore the fact that [LLCA] had goodwill with its customers and also an opportunity to renew the licence by reason of its relationship with ELDC, which was of a very long-standing nature. 33. Third, all the assets of the partnership have to be brought into account and divided between the partners on the dissolution of the partnership, and that the winding up of the partnership cannot be said to be completed unless this has happened. 34. Fourth, the duty to account imposed on a partner extends to assets which have come into existence prior to the dissolution and prior to the completion of the winding-up by reason of the maturation of some business opportunity in existence at the date of dissolution, because such opportunities are obtained in a situation of conflict of interest and duty and by use of the fiduciary position. 35. Fifth,section 29 of the Partnership Act 1890 provides that a partner is accountable for any benefit derived without the consent of his partners from the use of partnership property or business connection …. 36. Sixth, I agree with the judge that section 29 makes the appellants accountable for the benefit of the goodwill they have appropriated to themselves, and for the profits attributable to or the benefits derived from the use of any assets of the LLCA, including its goodwill from1st January 1999 to30th June 1999 and from1st July 1999 .”
“In the absence of any agreement upon the subject, a retiring partner is as much at liberty to set up for himself, in opposition to the firm he has quitted, as he would be if he had never belonged to it; and on a general dissolution of partnership, all the partners are at liberty to commence business in opposition to each other, as freely as if they had never been partners, unless they have entered into some agreement not to do so. A dissolution per se obliges no partner to retire from business, or to refrain from seeking a livelihood in the manner in which he has been accustomed so to do, and in the neighbourhood where he is known.”
“From one perspective it could be said that to commence such a business prior to the conclusion of the winding up would involve a prima facie breach of the duty not to compete imposed by thePartnership Act 1890 s.30 (as seemingly applied by s.38) and, perhaps, a breach of the duty of good faith; see also s.29(2). However, this would be to ignore the prohibition on taking on new work to be found in s.38 …. It follows that the new business carried on by the former partner would, by definition, not be competing with the old ‘run-off’ business being carried on by the dissolved firm.”
“He may do everything that a stranger to the business, in ordinary course, would be in a position to do. He may set up where he will. He may push his wares as much as he pleases. He may thus interfere with the custom of his neighbour as a stranger and an outsider might do; but he must not, I think, avail himself of his special knowledge of the old customers to regain, without consideration, that which he has parted with for value. He must not make his approaches from the vantage-ground of his former position, moving under cover of a connection which is no longer his. He may not sell the custom and steal away the customers in that fashion.”
“a partner who exploits the firm’s business connection in order to take on new business for his own benefit may be accountable for any profits realised, even though such business could not properly have been transacted by the firm without the agreement of all the other partners”
“Conceptually this must be correct, because the partner in the example has, in effect, appropriated part of the firm’s goodwill (i.e. customer connection) for his own benefit.”
“This is because in many partnerships and particularly professional partnerships, the partners will be closely identified with their partnership and therefore the business connection of the partnership will be partly due to the personal connections of the partners. It follows that business may come to a former partner because of his personal attributes, rather than because of his role as a partner in the firm and therefore will not involve a use by him of the partnership connection or name under s 29(1). This is illustrated by the unsuccessful claim for damages in the [Irish] High Court case of O’Connor v Woods [22 January 1976 ]. There, the plaintiff, a former partner in the accountancy firm of John A Woods & Co had come to know certain clients of the firm while he was a partner. When the plaintiff left the firm, these clients continued to use his services and the continuing partners in the firm claimed that the fees received by the plaintiff from these clients should be paid to the continuing partners, on the basis that the plaintiff had only come to know the clients ‘through his association with the partnership’. This was rejected by Kenny J who only countenanced granting damages if the plaintiff had enticed the clients away from the firm: ‘There was no enticement by him in connection with this work and there was no obligation on him to leave work with the partnership which he could do … This case illustrates the view of the first named defendant that the plaintiff is liable for enticement when a company, firm or individual who had been clients of the partnership took their business away when the plaintiff left. The plaintiff never entered into a covenant or agreement that he would not practise as an accountant after he terminated the partnership and if the parties to the [partnership agreement] wished to provide that a retiring partner should not practise, they should have inserted such a clause in the agreement … It does not follow that because a company or individual took any part of their business away from the partnership when the plaintiff left it, that the plaintiff is liable for the fees.’” ‘There was no enticement by him in connection with this work and there was no obligation on him to leave work with the partnership which he could do … This case illustrates the view of the first named defendant that the plaintiff is liable for enticement when a company, firm or individual who had been clients of the partnership took their business away when the plaintiff left. The plaintiff never entered into a covenant or agreement that he would not practise as an accountant after he terminated the partnership and if the parties to the [partnership agreement] wished to provide that a retiring partner should not practise, they should have inserted such a clause in the agreement … It does not follow that because a company or individual took any part of their business away from the partnership when the plaintiff left it, that the plaintiff is liable for the fees.’”
“Notwithstanding the universal application to partners of the rule requiring the most perfect good faith, if one partner repudiates the contract of partnership and will not perform his duty towards his co-partners, he cannot justly complain if they in return decline to treat him on a footing of equality with themselves”; v) In Purdon v Miller [1961 (2)] SA 211, a South African case, Ogilvie Thompson JA said at 230: “Partnership is a contract uberrima fidei and, in my view, that connotes that a partner wishing to invoke against his co-partner the stringent provisions of a summary cancellation and forfeiture clause contained in the partnership agreement must at least be honouring the terms of that agreement. In my judgment the equitable principles of our law do not permit a partner, who is himself repudiating his partnership obligations towards his co-partner, to enforce against that co-partner a forfeiture clause like clause 10 of the contract under circumstances such as those of the present case”; vi) The Manitoba Court of Appeal followed M’Lure v Ripley in Akman v Chipman (1987) CanLII 5286; vii) Citing Reilly v Walsh as authority, Twomey on Partnership, 2nd. ed, explains in paragraph 15.57: “The fiduciary duty owed by one partner to another is reciprocal. It follows that where one partner refuses to carry out his part of his duty towards his partners, he does not have a cause of action against the other partner if they fail to comply with their fiduciary duty to him”; viii) Lindley & Banks on Partnership, 21st. ed., observes in paragraph 16-12: “The duty is a reciprocal one: thus, if one partner chooses, in the words of Lord Lindley, to ‘repudiate’ the contract of partnership and refuses to perform his duty towards his co-partners, he cannot complain if they adopt a similar attitude towards him.”
“Section 42 governs what happens in relation to post-dissolution profits if (1) the business of the former partnership is continued by one or more of the former partners, not for the purposes of winding up the former partnership, but for the personal benefit of those continuing to run the business, and (2) those persons do not include all the former partners and the personal representatives of the deceased partner, but (3) there are retained within the continuing business all or part of the shares of the assets of the former partnership to which those non-participants in the continuing business were entitled (in their personal capacity or as personal representatives) on dissolution of the former partnership. In summary, this is a familiar situation, well covered by the cases and equitable principles which applied both before and after enactment of the 1890 Act, where one person’s property is employed in the business of another, who may or may not be in breach of trust in retaining that property, and the question arises what rights the owner of that property has in respect of profits of the business: see Lindley on Partnership (15th ed) pp. 719-723.”
“Section 29(2) and s 42 may both apply in a situation where the partnership assets are used by surviving partners during the period between dissolution and the completion of winding up (Pathirana v Pathirana; John Taylors v Masons): s 29(2) is concerned with the obligation of the surviving partners to account for benefits which they have derived, and s 42 is concerned with the right of the representatives of the deceased partner to be compensated for the use of the deceased’s capital.”
“The precondition for the application of s42 is satisfied since [Mr Hughes] did, through HGL and MSDL, carry on the business of the Partnership in the twilight period …. It will now be a matter for Trial 2 to determine the extent of the obligation to account, if any, that arises in consequence.”
“The Ds will deal with the conspiracy, the dishonest assistance claims and the knowing receipt claims in oral submissions.”
“Then I think I need to just address you, very quickly, on what we say is the remainder of the claim and counterclaims. I am grateful to Mr Gourgey [i.e. counsel then appearing for the respondents] for bringing to our attention the Racing Partnership case, which I have to say escaped me, which puts to rest the controversy of whether knowledge is required by the defendant conspirators that the means are unlawful. We do say that there was an unlawful conspiracy here. We rely on, for example, things like, well, Philip Manduca sending leads that come into the partnership to Freddy Manduca to be used in the Newfoundland business. The receipt of a secret profit from Newfoundland and Newfoundland’s involvement in that and Freddy Manduca’s involvement in that. The setting up of overseas satellites. The diversion of business that was properly partnership business, for example, Radisson.”
“5. I have looked through the transcript and the Defendants’ closing submissions. I can see nothing or very little addressing (i) the Claimants’ knowing receipt claim against MSDL, JH [i.e. Mr Hughes] and LB [i.e. Ms Blyth], (ii) the Claimants’ dishonest assistance claim against LB, (iii) the Claimants’ breach of trust claim against HGL (that was scaled back in the Claimants’ closing submissions). Please could the Defendants refer me to any parts of their written or oral closing submissions on these submissions that I may have overlooked. Please note that, in making this request, I am not inviting any further submissions in addition to those that were, or were not, made at trial. Whether or not the Defendants said much about them in closing, I still need to consider whether the Claimants have proved their case on these allegations. 6. I cannot see anything in the Defendants’ written or oral submissions about their ‘knowing receipt claim’ specifically. When making submissions on the ‘dishonest assistance’ element of the Defendants’ claims, Ms Hilliard KC occasionally used the phrase ‘knowing assistance’. I propose, therefore, to treat oral submissions on ‘dishonest assistance’ as relating also to ‘knowing receipt’ unless the Defendants wish to point me to aspects of the oral or written closings that I have overlooked. 7. The parties’ written closings suggest a divergence of view on whether a breach of contract or breach of fiduciary duty can be an ‘unlawful means’. Paragraph 393 of the Defendants’ closings suggests that the point is at large. Paragraph 436 of the Claimants’ written closings suggest that there is unlikely to be an issue as to whether the acts complained of, if established, are ‘unlawful acts’. I have formed the initial view that, at [15] of JSC BTA Bank v Ablyazov (No 14) the doubt expressed concerned the situation where Ds conspire to breach fiduciary or contractual obligations to a third party as a means of inflicting harm on a C. I am not, at least at this stage, convinced that their Lordships were suggesting doubt as to whether a conspiracy by Ds to breach fiduciary or contractual obligations owed to C is capable of being an unlawful act. I do not believe that anything was said on this topic in closing. Is there a disputed question of law here that I need to resolve, or are the parties content for me to proceed on the basis that if LB, JH and MSDL conspired with a view to JH breaching his fiduciary duties to PM [i.e. Mr Manduca] (or failing to account to the Partnership under s29), that is capable of being an ‘unlawful act’?”
“476. In written closing submissions, the Defendants submitted that a review of WhatsApp messages passing between the Manduca family demonstrate ‘as clear as day that the family were all working together’. Two particular instances of relatively peripheral behaviour were given. 477. In oral closings, further behaviour was relied upon, for example: [Mr Manduca’s] alleged ‘diversion’ of leads into Newfoundland, Newfoundland’s involvement in that and the setting up of ‘overseas satellites’. However, beyond a reference to alleged behaviour, little more was said about the alleged conspiracy. 478. These submissions did not explain why the participants in the alleged conspiracy should be taken as having an intention to injure [Mr Hughes] (a necessary ingredient of the tort …). Of course, I understand that intentions can sometimes be inferred from the nature of actions. However, care is needed before making such an inference given the distinction between an outcome that is an ‘end in itself’, a ‘means to an end’ and a ‘foreseeable consequence’, at [42] and [43] of Lord Hoffmann’s speech in OBG Ltd v Allan. Before drawing any inference as to the presence or absence of the requisite intention from what [Mrs Manduca], [Mr Freddy Manduca], Newfoundland and others actually did, I would have required fuller submissions as to precisely what inference I was invited to draw. I could then have heard, in Mr Gourgey KC’s reply submissions, argument as to whether the requisite intention had been made out or whether only ‘foreseeability’ had been established. 479. [Mr Hughes’] unlawful means conspiracy claim has not been made good in closing submissions and accordingly fails.”
“There was an intention to cause harm to [Mr Manduca]. The plan to take over the business of the Partnership only made sense if [Mr Manduca] received no account of profits generated post dissolution. All parties to the combination knew that [Mr Manduca] would not receive compensation. Causing harm to [Mr Manduca] was, accordingly, the natural and inevitable consequence of the unlawful means that were employed. The requisite intention to cause loss by the unlawful means was present in light of the analysis of Lord Hoffmann as to the nature of that intention set out at [41] and [42] of his speech in OBG Ltd v Allan[2007] UKHL 21 ,[2008] 1 AC 1 .”
“15. In relation to the conspiracy claim, the Defendants point to paragraph 408 of their closing submissions. However, that says nothing as to how the case on the ‘mental element’ was advanced in closing. The Defendants refer to some comments in their opening skeleton argument. However, I had specifically directed the parties to ensure that their written closing submissions superseded the opening skeleton and dealt with all points that were being pursued in closing so that I would not need to resolve for myself potential differences between written and oral submissions. 16. It is not realistically arguable that the Defendants ran out of time to make the necessary submissions in oral closings. They submitted written closing submissions running to 163 pages. The necessary matters should have been addressed in those. Indeed the court sent the parties some questions after the trial pointing out what it saw as the paucity of submissions on the dishonest assistance issue. At that point, the Defendants could usefully have reflected on the submissions that they had made and applied for permission to advance further submissions if they wished to do so. They made no such application.”
“126. Mr Hughes’ case is that Newfoundland and/or Freddy Manduca and/or Mr Hodnett and/or NeuroCED and/or Mrs Manduca received Partnership assets as a result of Mr Manduca’s breach of fiduciary duties. 127. In circumstances where Mr Manduca breached his fiduciary duties as Partner, and Newfoundland, Freddy Manduca, Mr Hodnett, NeuroCED, or Mrs Manduca, were the recipient of Partnership assets as a result, in the knowledge of Mr Manduca’s breach, it is submitted that the test for knowing receipt is made out.”
“We also say that there was knowing assistance by Newfoundland, Freddy Manduca and Mike Hodnett knowingly assisting Philip Manduca to breach his fiduciary duties, by being involved in carrying through the commitment to commence manufacturing and selling Hughes Veritas. Newfoundland then proceeding to sell Hughes Veritas tests. There is also evidence of [Mrs Manduca] being involved in an ostensible sale on behalf of Newfoundland, when, really, the sale should have been a partnership sale …. NeuroCED entering into agreements which should be partnership agreement, ie ZetaGene, NeuroCED making a trade mark application to register the Hughes Veritas tests on 6 June and Titanium receiving tranches of secret profit. We say that was all dishonestly assisting Philip Manduca to breach his duty to Jon Hughes and, obviously, to the extent that they received benefits as a consequence of the knowing assistance, we say we are entitled to trace those benefits into the hands of the recipients.”
“474. The Defendants’ written closing submissions said nothing about this claim. Nothing express was said about the claim in oral closings. However, when making submissions on the ‘dishonest assistance’ aspects of the claim, Ms Hilliard KC occasionally used the expression ‘knowing assistance’ and so I have taken those submissions as intending to refer both to the ‘dishonest assistance’ and the ‘knowing receipt’ claims. 475. However, those submissions still said nothing about the state of knowledge of [Mrs Manduca], [Mr Freddy Manduca], Newfoundland, [Mr Hodnett] or NeuroCED against whom the knowing receipt claim was made. Accordingly, a central aspect of the knowing receipt claim has not been made good in closing submissions and that claim fails.”
“13. The parties should bring necessary points before the judge by way of submission. That duty is not discharged by pleading a case but saying nothing in oral or closing submissions about how aspects of the law should be applied to the facts of that case in the light of the evidence given. Part of that discipline is so that the other side has an opportunity to say something on the matter. If a judge just rummages around in the evidence and the pleaded case and reaches conclusions unguided by any submissions from the parties, a necessary procedural safeguard would be disturbed …. 14. The Defendants now say that it was ‘obvious’ that Titanium was liable in knowing receipt since it would be fixed with all of [Mr Manduca’s] knowledge surrounding sums that it received arising out of [Mr Manduca’s] breach of fiduciary obligation. However, whether the Defendants considered the point to be ‘obvious’ or not, it was for them to explain in written or oral closing submissions (i) why all of the ingredients of a knowing receipt claim set out in [431] were present so that Titanium could meet that allegation if it wished to and (ii) the specific receipts of Titanium that were affected.”