Dr Vikram Bhat & Anor v Smruti Patel [2025] EWHC 2180 (Ch)

“This Deed is made between the parties set out below and shall start on 1st April 2013 This Deed sets out the arrangements which the parties have agreed shall govern relations between themselves in the conduct of their business together, namely the provision of general medical services. This shall include enhanced services. And any other services required.”

“Each of the Partners shall punctually pay and discharge their present and future separate debts and liabilities including but not limited to their separate tax liabilities and shall at all times indemnify and keep indemnified the other Partners and the Partnership assets against such separate debts and liabilities and all actions, proceedings, costs, claims and demands in respect of such separate debts and liabilities. The Precedent Partner responsible for the submission of the Partnership tax return to the Inland Revenue shall be indemnified by each Partner against inaccuracies, errors or mistakes contained in the return caused by another Partner in the practice. Any Partner or Partners in breach of any clause of this Agreement shall indemnify the other Partners or any one of them against any losses, liabilities, expense, actions, proceedings, costs, claims and demands, whatsoever and howsoever resulting therefrom or in connection therewith. Partners 1 and 2 give full indemnity to partner 3 from all legal and financial liabilities of the partnership and the practice.”

“No variation to this Partnership Deed shall be valid and binding on the Partners unless agreed in writing and signed by all the Partners. Any variation should take the form of an addendum to this Agreement.”

“The Net Profits of the Partnership as shown by the accounts shall be divided between the Partners in the following manner or share:- Partner 1 Dr Vikram Bhat 50% Partner 2 Dr Nirupa Jagadish 50% Partner 3 Mrs Smruti Patel; Fixed amount of £50000 Plus superannuation per annum In addition Lease to be signed by Dr Vikram Bhat & Dr Nirupa Jagadish and pay the rent of the premises as per the lease agreement. All partners agreed to Partner 3 to work Part time and is required to work 20 hours and will be indemnified from all liabilities of this agreement. She will be entitled to same amount of holidays & sickness as other partners. Partner 3 will be the main managing partner.”

“3. The issues, as set out in an agreed list of issues, are as follows: i) On what terms were the parties carrying on in partnership from 1 April 2016 – pursuant to a partnership agreement dated 1 April 2014 made between the claimant, the first defendant and Dr Nirupa Jagadish (“Dr Jagadish”) as subsequently varied (“the Original Agreement”) or as a partnership at will from 1 April 2016, alternatively, from 2017? ii) Was the partnership dissolved by conduct, being the service of forfeiture proceedings on 7 August 2019 or by service of a notice of dissolution by the defendants on 5 November 2021? iii) Is the claimant entitled to any payment from the partnership pending the taking of a dissolution account? iv) Did the claimant abandon the business of the partnership so as to deprive her of an entitlement to a fixed share of the profit or was she excluded from the business by the actions of the defendants? v) What sum, if any, is due to the claimant? A further issue as to whether the partnership should be dissolved by order of the court has fallen away in light of the claimant’s acceptance that it was dissolved by written agreement on 18 April 2023.” i) On what terms were the parties carrying on in partnership from 1 April 2016 – pursuant to a partnership agreement dated 1 April 2014 made between the claimant, the first defendant and Dr Nirupa Jagadish (“Dr Jagadish”) as subsequently varied (“the Original Agreement”) or as a partnership at will from 1 April 2016, alternatively, from 2017? ii) Was the partnership dissolved by conduct, being the service of forfeiture proceedings on 7 August 2019 or by service of a notice of dissolution by the defendants on 5 November 2021? iii) Is the claimant entitled to any payment from the partnership pending the taking of a dissolution account? iv) Did the claimant abandon the business of the partnership so as to deprive her of an entitlement to a fixed share of the profit or was she excluded from the business by the actions of the defendants? v) What sum, if any, is due to the claimant? A further issue as to whether the partnership should be dissolved by order of the court has fallen away in light of the claimant’s acceptance that it was dissolved by written agreement on 18 April 2023.”

“14. I heard oral evidence only from the parties themselves. The claimant was a straightforward witness whose evidence I found to be honest and reliable. Her evidence was consistent with contemporaneous documentation.”

“Much emphasis was placed on findings of dishonesty against the defendants in earlier proceedings. However, it seems to me that I should form judgments and make findings on the evidence before me, without reference to the views of other judges in other cases. I start with a clean sheet. Initially, I formed the impression that the second defendant was an open and honest witness. However, as her evidence went on, she became evasive and, in my view, dishonest about the reasons for, and her memory of, various text messages passing between her and the claimant in 2018 and 2019. She portrayed herself as naive and wholly trusting in and reliant on the second defendant, her husband, in relation to the partnership negotiations and documentation. Her husband flatly contradicted this portrayal telling me that while he dealt with the negotiations around her becoming a partner, the second defendant would question him closely. I accept the first defendant’s evidence in this respect.”

“15. The first defendant plainly feels hard done by in the litigation, particularly in relation to the view taken by Recorder Geraint Jones KC of his honesty. However, the first defendant’s evidence as to the negotiations and agreements around the second defendant becoming a partner in 2016 is somewhat unreliable, does not reflect the contemporary documentation or the partnership accounts and differs between his oral and written evidence, particularly in relation to the percentage share the second defendant was to have on joining the partnership and from where that share was to come.”

“18. The parties’ positions on this are starkly opposed save that it is common ground that the draft agreements of 2016 and 2017 were never formally executed or signed. The defendants deny all knowledge of the draft agreements and assert that there was no meeting or discussion of terms of the partnership. The claimant insists that there was a meeting at which the draft agreement was discussed and agreed. She was clear that the defendants had seen the draft agreements and agreed to them. The first defendant accepts that he knew of the terms of the Original Agreement. He also told me that in 2015/2016 he was focussed only on the effort to have the second defendant admitted as a partner and was not concerned about any other terms although he expected them all to continue as under the Original Agreement. He was aware of a draft agreement being prepared. The second defendant states that she had not seen the Original Agreement, although she was aware of its existence, or the 2016 draft agreement. She said that if the first defendant signed up to it, she would go along with him. Ms Bhat told me that she didn’t ask about the terms of the partnership agreement but left it all up to the first defendant.”

“19. I recognise, as I must, that there was a technical dissolution of the original partnership between the claimant, the first defendant and Dr Jagadish when the second defendant joined as a partner. The issue is whether it was a mere technicality with no impact on terms of the agreement between the new partners because by their conduct they expressly or impliedly accepted those terms. Alternatively, is this a case where the original agreement was expressly or impliedly abandoned or where the second defendant was unaware of the terms of the original partnership and cannot or should not be held to it so that a partnership at will was established? The answer depends on the evidence, as set out in Cheema v Jones.”

“20. In my judgment the evidence shows that, on balance of probabilities, the defendants, at least impliedly and probably expressly, agreed and accepted that the partnership, with the addition of the second defendant, was to continue on the same terms as set out in the Original Agreement. The first defendant, in his oral evidence, told me that was his understanding, as stated above. I am satisfied that the second defendant was also aware that the partnership was to continue on the original terms. She was aware of the existence of the Original Agreement on her own evidence. Also on her own evidence, in May or June 2016 she saw the pages of that agreement that were to be amended on her joinder as a partner although she “may not have read them”

“21. There is nothing in the Original Agreement that prevented a, technically, new partnership from being bound by its terms. Quite the contrary, clause 5.3 provides expressly that death, retirement or expulsion will not determine the partnership which may only be [wholly] dissolved if all of the parties unanimously agree in writing, or a dissolution is imposed by judgment or statute. To the extent that the addition of the second defendant as a party required writing pursuant to clause 44 of the Original Agreement, I agree with Mr Warner that the document sent to NHS dated 31 May 2016 (although not signed by Dr Jagadish until 6 June 2016) setting out the joinder of the second defendant as a partner and signed by all the then partners, constitutes a written variation for the purposes of clause 44. Mr Ojo, rightly, did not argue otherwise. The provision as to a variation taking the form of an addendum to the original agreement does not appear to be mandatory, as Mr Ojo also, quite properly, accepted.”

“22. In the light of the above evidence and finding, it really doesn’t matter whether there was a meeting at which the draft partnership agreement was discussed. However, for the avoidance of doubt, I am satisfied that there was such a meeting on the strength of the claimant’s evidence. Her evidence was more reliable than that of the defendants. In saying this I am treating the first defendant’s evidence to the contrary as unreliable. There must have been conversations about the partnership and Ms Bhat’s joinder. It seems to me that, as he said in oral evidence, the first defendant was more focussed on getting the second defendant admitted as a partner. He was not interested in anything else and did not turn his mind to it. I regret to say that I simply did not believe the second defendant’s evidence in this respect.”

“23. In 2017, when Dr Jagadish retired from the partnership, there was, again, a technical dissolution. However, in my view, in light of clause 5.3 of the Original Agreement, this did not result in a substantive dissolution of the partnership. On 16 February 2017, the claimant sent an email to NHS saying, “Please find attached Contract Variation to come into effect from 2 April 2017, Duly signed by all partners, no changes to partnership, only removal of Dr Jagadish all rest is the same”

“27. In light of my finding that the partners were bound by the terms of the Original Agreement, the notice of dissolution had no effect as it did not comply with the terms for termination of the partnership and was not accepted by the claimant who, at all material times, asserted her status as a partner and her entitlement to payment under the terms of the Original Agreement. There was no act or representation by the claimant that would found an estoppel.”

“34. I do not accept the argument that dissolution accounts must be prepared first because of a potential claim by NHS in relation the sums advanced by it to construct the additional buildings on the land adjacent to the medical centre. There is very little material before me in relation to this issue. It is not clear how much is at stake or what the parties’ liabilities are towards NHS or to each other. This potential liability is not referred to anywhere in the approved or agreed accounts even after letters from Capsticks and NHS in late 2021 or early 2022 suggesting that the NHS grant may be recovered. The defendants have continued to draw profits irrespective of this potential liability. If they may draw and retain profits in these circumstances, then it would be unfair to prevent the claimant from doing so too. That would be treating the partners unequally. Finally, under the terms of the Original Agreement, the claimant is not liable for any of the debts etc of the partnership as between the partners. As between them, she is entitled to the entire £50,000 without deduction. The only issue is that in relation to the extension on the Adjoining Land. I have not been addressed as to whether the indemnity clauses would alleviate the claimant from the consequences of a successful claim by the NHS. Judges in other cases between these parties have suggested the claimant may have some liability. In any event, if the defendants can draw freely on the profits notwithstanding this, then so too, may the claimant – any other outcome would be unfair.”

“35. Mr Ojo abandoned any reliance on this point during his closing submissions on the basis that it would have no effect in law on the claimant’s entitlement to payment of her share, whatever that share is. In my view, Mr Ojo was correct to concede this issue. In any event, it is clear on the evidence that the defendants’ excluded the claimant from the partnership by purporting to terminate her employment, by effectively locking her out of the premises and the computer systems. The police were called twice in relation to her attendance or her agent’s attendance at the medical centre. To be fair to Dr Bhat, he accepted in his oral evidence that he acted intemperately in these respects but by the time he realised this, the matter was in the hands of the solicitors.”

“In law the retirement of a partner or the admission of a new partner, constitutes the dissolution of the old partnership, and the formation of a new partnership. Here upon the happening of such events there were no overt signs of dissolution; the partnership’s financial structure and arrangements were such that none was required but that does not alter the underlying legal significance of any retirement or new admission.”

“What is meant by the “dissolution” of a partnership is often misunderstood, not only because that word is used in two distinct senses but also because it has a very different meaning when applied to a company or limited liability partnership. In the case of a partnership, it invariably refers to the moment of time when the ongoing nature of the partnership relation terminates, even though the partners may continue to be associated together in a new partnership or merely for the purposes of winding up the old firm’s affairs. Indeed, the outward appearance of a partnership immediately prior to and immediately following a dissolution will frequently be unchanged. For a company or LLP, on the other hand, dissolution marks not the commencement of the winding up but its conclusion, i.e. the moment of extinction. It should be noted that dissolution is an absolute concept: there is no such thing as a “partial” dissolution.”

“It does not necessarily follow from the fact that a partnership has been dissolved that its affairs will fall to be wound up in the manner prescribed by the Partnership Act 1890. It has already been seen that, as a matter of law, a change in the composition of a partnership results in a dissolution of the existing firm and the creation of a new firm; in such a case, the new firm will usually take on the assets and liabilities of the old, without any break in the continuity of the business. This is often referred to as a “technical” dissolution and is usually, but not always, the result of agreement. Such a dissolution will almost inevitably require the taking of accounts to ascertain the entitlement of the outgoing or deceased partner. In contrast, the expression “general” dissolution is used to denote a dissolution involving a full scale winding up, which may well have been brought about at the instance of one partner against the wishes of the others. When a firm is referred to as “in dissolution”, this usually indicates that a general dissolution has taken place, but that the winding up of its affairs is still continuing. Once the winding up is complete and the accounts are finally settled as between the partners, there will be nothing left which could properly be referred to as a partnership, whether in dissolution or otherwise.”

“The above distinction between a technical and a general dissolution was accepted without demur in HLB Kidsons v Lloyd’s Underwriters,11 when considering the potential application of section 38 of the Partnership Act 1890 on a change in a firm, and again in Boyle v Burke. It was also accepted by the Supreme Court of Western Australia in Rojoda Pty Ltd v Commissioner of State Revenue, albeit that Murphy JA correctly observed that: “The reference to a ‘technical’ or ‘notional’ dissolution is somewhat of a misnomer, because it is not the dissolution itself, but, at most, the winding up of the partnership which is notional. The partnership practising after the retirement of a partner is a different partnership than prior to that partner retiring, but the assets and responsibility for liabilities of the partnership are taken over by the remaining partners.” “The reference to a ‘technical’ or ‘notional’ dissolution is somewhat of a misnomer, because it is not the dissolution itself, but, at most, the winding up of the partnership which is notional. The partnership practising after the retirement of a partner is a different partnership than prior to that partner retiring, but the assets and responsibility for liabilities of the partnership are taken over by the remaining partners.”

“20. In my judgment the evidence shows that, on balance of probabilities, the defendants, at least impliedly and probably expressly, agreed and accepted that the partnership, with the addition of the second defendant, was to continue on the same terms as set out in the Original Agreement. The first defendant, in his oral evidence, told me that was his understanding, as stated above. I am satisfied that the second defendant was also aware that the partnership was to continue on the original terms. She was aware of the existence of the Original Agreement on her own evidence. Also on her own evidence, in May or June 2016 she saw the pages of that agreement that were to be amended on her joinder as a partner although she “may not have read them”

“It is somewhat unclear as to what share of the profits the second defendant was to have and from whose share of the profits the payment to her was to come. Either she was to receive 10% of the profits which would come out of the first defendant’s share (per the Draft Partnership Deed of April 2026 [2016]); or she was to receive 5% of the profits reducing each of Dr Jagdish and the first defendant’s share (per the 2017 accounts and the latter’s evidence). A deed, described as an ‘Amendment of partnership agreement Adding of new partner from 1 April 2016’ was drawn up adding the second defendant as a partner (“the 2016 variation”). Clause 11 and Schedule B again provided that the claimant would receive a fixed sum of £50,000 plus superannuation per annum, Dr Jagadish would receive 50% of the profits, the first defendant 40% and the second defendant 10%.”

“No variation to this Partnership Deed shall be valid and binding on the Partners unless agreed in writing and signed by all the Partners. Any variation should take the form of an addendum to this Agreement.”

“21. There is nothing in the Original Agreement that prevented a, technically, new partnership from being bound by its terms. Quite the contrary, clause 5.3 provides expressly that death, retirement or expulsion will not determine the partnership which may only be [wholly] dissolved if all of the parties unanimously agree in writing, or a dissolution is imposed by judgment or statute. To the extent that the addition of the second defendant as a party required writing pursuant to clause 44 of the Original Agreement, I agree with Mr Warner that the document sent to NHS dated 31 May 2016 (although not signed by Dr Jagadish until 6 June 2016) setting out the joinder of the second defendant as a partner and signed by all the then partners, constitutes a written variation for the purposes of clause 44. Mr Ojo, rightly, did not argue otherwise. The provision as to a variation taking the form of an addendum to the original agreement does not appear to be mandatory, as Mr Ojo also, quite properly, accepted.”

“23. In 2017, when Dr Jagadish retired from the partnership, there was, again, a technical dissolution. However, in my view, in light of clause 5.3 of the Original Agreement, this did not result in a substantive dissolution of the partnership. On 16 February 2017, the claimant sent an email to NHS saying, “Please find attached Contract Variation to come into effect from 2 April 2017, Duly signed by all partners, no changes to partnership, only removal of Dr Jagadish all rest is the same”

“It is a well recognised rule that, whenever money allegedly belonging or owing to the firm in respect of a partnership transaction is sought to be recovered from a partner, an action for an account is required, unless an account has already been taken between the partners or, exceptionally, taking an account would serve no useful purpose. It should, however, be noted that the Court of Appeal in Mukerjee v Sen held that Lord Millett’s statement in Hurst v Bryk, to the effect that a partner does not have an action at law to recover monies due from his fellow partners otherwise than by means of an action for an account, was not part of the ratio of the decision. Be that as it may, the proposition behind that statement remains good law on the authorities. On the other hand, in Barber v Rasco International Ltd the court came up with a more startling formulation: “ … until a court prepares and settles the necessary accounts, its assets cannot be distributed, any assets acquired by the Partnership following the dissolution remain Partnership property and the partnership cannot be wound up.”

“My Lords, Mr Hurst has been wronged and is entitled to damages if he can show that the dissolution of the firm has occasioned him loss which he would not otherwise have sustained. But he can neither avoid his joint liability to creditors of the firm arising from past transactions entered into while he was a partner nor, without rescinding the contract of partnership ab initio, throw his proportionate share of that liability onto his partners.”

“It is impossible to say whether the modern contractual doctrine of accepted repudiation might have infiltrated the law of partnership if partnership had been treated as merely a particular species of contract enforceable in the common law courts. Disputes between partners and the dissolution and winding up of partnerships, however, have always fallen within the jurisdiction of the Court of Chancery. This is because, while partnership is a consensual arrangement based on agreement, it is more than a simple contract (to use the expression of Dixon J in McDonald v Dennys Lascelles Ltd 48 CLR 457, 476); it is a continuing personal as well as commercial relationship. Neither during the continuance of the relationship nor after its determination has any partner any cause of action at law to recover moneys due to him from his fellow partners. The amount owing to a partner by his fellow partners is recoverable only by the taking of an account in equity after the partnership has been dissolved: see Richardson v Bank of England (1838) 4 My & Cr 165; Green v Hertzog [1954] 1 WLR 1309. Only the Court of Chancery was equipped with the machinery necessary to enable such an account to be taken, and the basis upon which the account was taken reflected equitable principles. These could be modified by agreement, but they did not find their source in contract.”

“19. Mr McDonnell submits that Mann J was there following a well-established line of authority and that, subject to certain specific well-established exceptions, one partner is not accountable to another partner save only on the dissolution of the partnership and the taking of dissolution accounts in accordance with section 44 of the Partnership Act of 1890. In support of that proposition, he relied upon a number of authorities and Lindley & Banks on Partnership (19th ed.). He first referred to the following statement of Lord Millett in Hurst v Bryk [2002] 1 AC 185 at 194C to E: “It is impossible to say whether the modern contractual doctrine of accepted repudiation might have infiltrated the law of partnership if partnership had been treated as merely a particular species of contract enforcement in the common law courts. Disputes between partners, and the dissolution and winding up of partnerships, however, have always fallen within the jurisdiction of the Court of Chancery. This is because, while partnership is a consensual arrangement based on agreement, it is more than a simple contract, to use the expression of Dixon J in McDonald v Dennys Lascalles Limited, 48 CLR 457 at 476); it is a continuing personal as well as commercial relationship. Neither during the continuance of the relationship nor after its determination has any partner any cause of action at law to recover moneys due to him from his fellow partners. The amount owing to a partner by his fellow partners is recoverable only by the taking of an account in equity after the partnership has been dissolved; (see Richardson v Bank of England (1838) 4 My & CR 165; Green v Hestzog [1954] 1 WLR 1309). Only the Court of Chancery is equipped with the machinery necessary to enable such an account to be taken, and the basis upon which the account was taken reflected equitable principles. These could be modified by agreement, but they did not find their source in contract.” 20. Mr McDonnell described that statement as part of the ratio of the decision in that case, and emphasised that the other members of the appellate committee of the House of Lords agreed with Lord Millett. 21. Mr McDonnell referred to the following statements in Lindley as setting out the orthodox and correct position at paragraphs 23-82 and 23-83 as follows: “23-82 Although it was formerly considered that an account could only be taken between partners with a view to a dissolution, it has long been recognised that a strict application of this rule would lead to injustice. Lord Lindley observed: ‘The old rule ... that a decree for an account between partners will not be made save with a view to the final dissolution of all questions and cross-claims between them, and to a dissolution of the partnership, must be regarded as considerably relaxed, although it is still applicable where there is no sufficient reason for departing from it ...’ … 23-83 Lord Lindley then went on to summarise the three classes of case in which an action for an account without a dissolution is most commonly encountered, although these should, in the current editor’s view, more properly be divided into four classes, viz: 1. Where one partner seeks to withhold some private profits in which his co-partners are interested. 2. Where the partnership is for a fixed term and one partner has sought to exclude or expel his co-partner or otherwise to drive him into a dissolution. 3. Where the existence of the partnership is denied. 4. Where, exceptionally, the partnership venture has failed and the partners are too numerous to be made parties to the action, but a limited account will do justice between them.” 22. Mr McDonnell submitted that the present case did not fall within any of those exceptions. In particular, he said that, on the first defendant’s pleaded case, this is not an instance of secret profit, let alone dishonest appropriation of partnership assets. The first defendant’s case, he emphasised, was that, for reasons which it is not material to set out here, the first defendant was positively directed by his siblings not to provide them with accounting information and they were all perfectly well aware that the partnership properties were income producing and that he was not paying out the profit to them and that the tax treatment of their share of the profit was being dealt with by him in the way he did.” “It is impossible to say whether the modern contractual doctrine of accepted repudiation might have infiltrated the law of partnership if partnership had been treated as merely a particular species of contract enforcement in the common law courts. Disputes between partners, and the dissolution and winding up of partnerships, however, have always fallen within the jurisdiction of the Court of Chancery. This is because, while partnership is a consensual arrangement based on agreement, it is more than a simple contract, to use the expression of Dixon J in McDonald v Dennys Lascalles Limited, 48 CLR 457 at 476); it is a continuing personal as well as commercial relationship. Neither during the continuance of the relationship nor after its determination has any partner any cause of action at law to recover moneys due to him from his fellow partners. The amount owing to a partner by his fellow partners is recoverable only by the taking of an account in equity after the partnership has been dissolved; (see Richardson v Bank of England (1838) 4 My & CR 165; Green v Hestzog [1954] 1 WLR 1309). Only the Court of Chancery is equipped with the machinery necessary to enable such an account to be taken, and the basis upon which the account was taken reflected equitable principles. These could be modified by agreement, but they did not find their source in contract.” “23-82 Although it was formerly considered that an account could only be taken between partners with a view to a dissolution, it has long been recognised that a strict application of this rule would lead to injustice. Lord Lindley observed: ‘The old rule ... that a decree for an account between partners will not be made save with a view to the final dissolution of all questions and cross-claims between them, and to a dissolution of the partnership, must be regarded as considerably relaxed, although it is still applicable where there is no sufficient reason for departing from it ...’ … 23-83 Lord Lindley then went on to summarise the three classes of case in which an action for an account without a dissolution is most commonly encountered, although these should, in the current editor’s view, more properly be divided into four classes, viz: 1. Where one partner seeks to withhold some private profits in which his co-partners are interested. 2. Where the partnership is for a fixed term and one partner has sought to exclude or expel his co-partner or otherwise to drive him into a dissolution. 3. Where the existence of the partnership is denied. 4. Where, exceptionally, the partnership venture has failed and the partners are too numerous to be made parties to the action, but a limited account will do justice between them.”

“28. I do not accept that Lord Millett’s statement in Hurst v Bryk forms part of the ratio of that case. Lord Millett formulated the essential question for the decision of the appellate committee at page 189F as follows: “The question in this appeal is whether the innocent partner or partners are thereby discharged from all further liability to contribute to the debts and obligations of the partnership, whether accrued at the date of dissolution or accruing thereafter.” 29. That was a case where there had been a dissolution and the issue was whether the plaintiff could rely upon that dissolution as releasing him from his partnership liabilities on the ground that the dissolution brought about by his other partners was a repudiation of the partnership agreement. Lord Millett’s statement at page 194C to E was merely an illustration of his historical analysis as to why ordinary common law rules as to the consequences of accepted repudiation of contract did not and do not apply to partnerships. 30. Furthermore, it is perfectly clear that Lord Millett was there making a broad statement, which is more expansive than the cases support. Those cases show that there are well-established exceptions to the general rule. The editors of Lindley observe at paragraph 23-82 that Lord Millett “perhaps overstated the position”

“If the trust argument succeeds the Defendant will be declared to hold property on trust, but will not be required or will not necessarily be required, to pay money to the Claimant. The order for equitable compensation or damages is obviously potentially a claim within the rules. However, it is not apparent on the pleaded case or on the evidential case that there is such a valuable claim. There might be a claim for damages or compensation, but it is not pleaded or evidenced in monetary terms, and indeed the express pleading in the Particulars of Claim is that it cannot be quantified. It is possible that there will not be any damages claim at all if the position is that Mr Jassat applied the money properly to buy assets and all the assets are still there and there has been no misappropriation of monies. So the order for damages or equitable compensation is a qualifying claim that could give rise to a relevant judgment for the purposes of CPR 25.1 and CPR 25.7, but there is no attempt to quantify it at a minimum of £7.2m or any other sum.”

“32. I can see no logical, practical or sound jurisprudential reason why the present claim in respect of misappropriated profits should not fall within, or be applied by way of analogy with, the first category of exceptions from the general rule in paragraphs 22-83 and 22-84 in Lindley. Whether or not there was dishonesty on the part of the first defendant, and whether or not the first defendant’s siblings asked him not to provide them with accounting information, this is a case in which one of the partners, the managing partner, in effect paid to himself and retained for his own benefit partnership profit in excess of his one-quarter entitlement. Unlike Hathurani where, if the assets were held as partnership assets, they would be held for both parties and should be accounted for to the partnership as a whole, the present case is one where the claimants claim that one of the partners has been overpaid. I can see no reason why, where the overpaid partner does not wish to repay to the partnership all the profit received by him but wishes to retain for his own benefit that part to which he is entitled, he should not pay to the other partners their due share now rather than making them wait until dissolution to the partnership. The argument to the contrary seems to me against both good sense and fairness.”

“34. Nor do I agree with Mr McDonnell that at the trial the judge will be precluded, as a matter of law, from directing separate accounts in respect of the claim for diverted profits, on the one hand, and dissolution, on the other. This follows from my earlier analysis. I certainly agree that it would be unusual since the account in respect of profits would normally be part of the dissolution accounts in accordance with section 44 of the Partnership Act. On the other hand, if the claimants have a good and undeniable claim which can be quantified in respect of diverted profits, for the reasons which I have given I do not see why they should be precluded from receiving their due share of those now rather than waiting until the partnership properties have been sold and the dissolution accounts are finally concluded. 35. In those circumstances, no question arises on the issue of quantification. The Judge was right to say that issues of capital contribution and withdrawal are properly the subject of the dissolution accounts and are not appropriate to be included in the accounting and quantification of the profits received by the first defendant.”

“33. It does not seem to me that the principle in Mukerjee was limited to payment out to the innocent partners of only the excess sums paid to the overpaid partner. The words used were “… where the overpaid partner does not wish to repay to the partnership all the profit received by him but wishes to retain that part to which he is entitled, he must pay to the other parties their due share now, rather than making them wait until dissolution…”[my emphasis]. The net profits were sufficient to pay the claimant her full £50,000 in each relevant year. In my view, the fact that the defendants did not always draw their full share is irrelevant. They wish to retain their drawings therefore the claimant is entitled to her due share too. Applying that principle, the defendants must pay to the claimant the full £50,000 due to her every year save for 2019 when the sum owing is £12,600, taking into account the claimant’s own drawings in that year. I can do no better than echo the words of Etherton LJ and say, “The argument to the contrary seems to me against both good sense and fairness.”

“Unlike Hathurani where, if the assets were held as partnership assets, they would be held for both parties and should be accounted for to the partnership as a whole, the present case is one where the claimants claim that one of the partners has been overpaid. I can see no reason why, where the overpaid partner does not wish to repay to the partnership all the profit received by him but wishes to retain for his own benefit that part to which he is entitled, he should not pay to the other partners their due share now rather than making them wait until dissolution to the partnership. The argument to the contrary seems to me against both good sense and fairness.”

“28. It should be immediately apparent that Mukerjee v Sen was not concerned with the issue which arose in the present case. In that case, the principle and exceptions from the principle were concerned with the circumstances in which an account of profits could be ordered separately from dissolution of the partnership and the dissolution accounts which would be prepared at that stage. In the present case, the partnership had been dissolved and the question for the Judge was whether to order a payment to be made to the Respondent in the absence of dissolution accounts for the Patel-Bhat-Bhat partnership having been prepared. Mukerjee v Sen was not authority for the proposition that the Court may order payments to be made from one partner to another partner or former partner without any account being taken at all (or any application having been made for an interim payment in anticipation of the final accounts). It appears that the Judge wrongly regarded the judgment of Etherton LJ in Mukerjee v Sen as giving her general authority to order payment to the Respondent if that seemed to her to be fair and just (§33).”