Ulrich Rued v Lloyd Dormer & Anor [2026] EWHC 1074 (Ch)

[2026] EWHC 1074 (Ch)Case No BL 2018 001790IN THE HIGH COURT OF JUSTICECHANCERY DIVISIONBUSINESS AND PROPERTY COURTS OF ENGLAND AND WALESVenue Royal Courts of Justice, Rolls Building, Fetter Lane, London, EC4A 1NLDate 8 May 2026
Before
CHIEF MASTER SHUMAN
Between
ULRICH RUEDClaimantLLOYD DORMERDefendantGABRIELLA DORMERDefendant
ALI REZA SINAI (instructed by BBS Law incorporating OGR STOCK DENTON LLP) for ClaimantMARK GALTREY and SIMON TEASDALE (instructed by CLARKE WILMOTT LLP) for First Defendant
Approved JudgmentThis judgment was handed down remotely at 9am on 8 May 2026 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

CHIEF MASTER SHUMAN:

[1]This is the judgment following the final consequentials hearing in this dispute between Mr Ulrich Rued and Mr Lloyd Dormer. I will refer to them by the first names, as I have throughout this case.[2]Ulrich and Lloyd agreed in the second half of 1997 to go into partnership together, developing land. They are brothers-in-law. The business commenced trading on 1 December 1997. Lloyd identified and purchased two parcels of land in Somerset, known as Wellington and Hill Farm. Ulrich, who has resided throughout in Switzerland, provided the cash funding and Lloyd developed residential houses on the two parcels of land. The funding was by way of loans which would be repaid with interest and after repayment of the loans and interest the parties would share the profits equally.[3]Following trials on liability, accounts and consequential hearings there are three outstanding issues to determine:(1) interest(2) costs and(3) the mechanics of sale.[4]Judgments have already been handed down following trials on liability and then on the accounts. Those judgments set out in detail the history of the parties’ relationship, the nature of the partnership, and my findings of fact, including findings as to credibility. They form part of the background to, and are to be read with, this judgment. There was also a further consequentials hearing and judgment was handed down on 18 July 2025. At that hearing it was also determined that the partnership had been dissolved when the claim form was served on Lloyd.[5]The court has also been assisted throughout by very detailed expert reports from the single joint expert, Mr Jonathan Dodge FCA CF, a partner at FRP Advisory Trading Limited. He was not called to give oral evidence.[6]For present purposes, three matters are of particular importance each of which is established by the earlier findings and the course of the proceedings:(1) Ulrich advanced substantial sums to the partnership over many years on the agreed basis that capital would be repaid with interest.(2) Lloyd retained day‑to‑day control of the partnership business, including control over the partnership banking arrangements and the manner in which the development was undertaken.(3) By 2015 the relationship between the parties had irretrievably broken down; Lloyd declined to make repayments of capital and interest and the dispute became entrenched, leading to the commencement of proceedings.[7]Against that background, I deal in turn with interest, costs, and the mechanics of sale. (1). INTEREST[8]Ulrich seeks interest on three bases: pursuant to section 42 of the Partnership Act 1890 (“the 1890 Act”) at the rate of 5%; on the basis of Lloyd’s alleged conduct, relying on paragraph 20-55 of Lindley & Banks on Partnership 21st Ed; and under section 35A of the Senior Courts Act 1981.[9]As I found at the liability trial, the monies advanced by Ulrich were loans made pursuant to the partnership agreement as it changed over time. The parties expressly agreed that capital would be repaid and that interest would be payable, and thereafter the profits would be divided between them.[10]Although the parties’ original understanding contemplated interest at a higher rate, it was common ground that the position evolved. By the early 2000’s interest was payable on a simple, not compound, basis and at a reduced rate, ultimately fixed at 3 per cent per annum. That position was accepted by Lloyd.[11]Interest was therefore payable so long as capital remained outstanding, subject to proper credit for any interest payments actually made.[12]Events from 2015 led to the final breakdown of trust between Ulrich and Lloyd, and the business relationship between them. Substantive work on the Hill farm development stopped in November 2016. The claim was issued on 7 August 2018, and the partnership formally dissolved when the claim was served on Lloyd.[13]All matters relating to interest were properly addressed through the account undertaken by Mr Dodge, which incorporated historical interest payments, the agreed rate of interest, and the treatment of the payment of £233,756.84 made by Lloyd in October 2016.[14]The question now, given that background, is whether further interest should be awarded to Ulrich at the final consequentials stage.[15]Mr Sinai set out in his oral submissions examples of the use of the partnership money by Lloyd. He referred in particular to a multi-coloured spreadsheet showing personal payments made by Lloyd amounting to £318,500 since 1 January 2022. Issue was taken by Mr Galtrey on the late service of this information: Ulrich’s solicitors have confirmed in subsequent correspondence that the ledger of trading expenses had been sent to Lloyd’s solicitors by email dated 15 August 2024. Although it is a fair criticism that serious allegations such as these should not be advanced for the first time in a skeleton argument and in oral submissions.[16]Mr Sinai in summary submitted that Ulrich is entitled to ongoing interest on the value of plot 9 and interest on the bank account. He also submits that monies should be paid into court and Lloyd provide an undertaking not to deal further with partnership assets.[17]Subsequently an order has been made by consent for the remaining sums in the partnership accounts to be held by Lloyd’s solicitors until further order or agreement between the parties.[18]Section 42 of the 1890 Act applies where a partner dies or leaves and the surviving or remaining partner(s) continue the business, using the partnership assets without any final settlement of accounts. The claimant partner must elect between a share of the profits and interest under section 42.[19]When analysed in this way it can be seen that section 42 operates as a default provision. It does not override an agreed contractual regime, nor entitle a party to displace an agreed rate with the statutory rate after the event.[20]Section 42 is also not concerned with the imposition of enhanced or penal interest by reference to alleged misconduct. Where interest is sought on the footing of dishonest retention or misappropriation of partnership monies, that depends upon properly pleaded and proved allegations of breach of duty or bad faith, not upon section 42.[21]In any event, the parties’ financial positions have been determined through the account directed by the court. Section 42 does not provide a mechanism for reopening or supplementing that outcome at the consequentials stage. I am not persuaded that section 42 has any application on the facts as found and that it cannot be permissibly deployed here as a ground for awarding further interest.[22]Turning to the other two bases for claiming further interest. Ulrich relies upon post‑account movements on the partnership accounts and the spreadsheet analysis of personal payments.[23]Mr Galtrey submits that this amounts, in substance, to inviting the court to proceed on the footing that Lloyd dishonestly misapplied partnership funds, and to award interest on that basis. There is force in that submission. Where a party seeks a financial consequence on the footing of dishonesty or bad faith, that case must be properly pleaded and proved. Serious allegations cannot be introduced indirectly at the final stage through submissions on interest.[24]The procedural history of this litigation illustrates this. At the liability trial, an issue arose in relation to the allegation that Lloyd had “misappropriated and diverted” funds. The matter was specifically raised by Mr Galtrey as a concern, it being said that it amounted to an allegation of dishonesty without a clear pleading. Directions were given requiring Ulrich to notify Lloyd in writing whether he was electing to pursue this allegation: he did not pursue it at trial.[25]I also observe in passing that not every complaint about a partner’s conduct amounts to bad faith. In my earlier account judgment I specifically referred to Lindley & Banks at 16-11 and the judgment of Sir Richard Scott VC Medforth v Blake [2000] Ch 86, 103B-D, which analysed the principles of good faith.[26]The proper mechanism for resolving the parties’ financial entitlements has been the account directed by the court. To entertain a submission for “further interest” on the footing that Lloyd wrongfully took monies for personal use would require me to make (or assume) findings of dishonest misappropriation or comparable misconduct without that case having been pleaded and tried at this stage.[27]The same difficulty arises in relation to the submission for ongoing interest “on the value of Plot 9”. Issues concerning Plot 9 were determined at the liability stage, including the declaration that it was transferred in breach of trust and the trust position. To the extent that the interest submission seeks to re‑cast those matters through a new allegation‑based lens, it is too late to do so at the consequentials stage.[28]The account prepared by Mr Dodge, and adjusted strictly in accordance with my findings in the liability and account judgments, already reflects interest accruing at the agreed rate, proper credit for payments made, and the financial consequences of Lloyd’s unilateral dealings with partnership assets and funds.[29]This is not a case where a further discretionary award of interest is required to achieve justice. To do so would risk double recovery and obscure the parties’ true financial positions. I therefore decline to award any further interest beyond that already embodied in the final account. (2). COSTS[30]Following the liability trial and the first consequential hearing an order was made on 9 September 2021 (the 9.9.21 Order”) which provided at paragraphs 22 and 23 as follows, “22. Subject to paragraph 23 below, the Defendants shall pay the Claimant’s costs of the Liability Phase on the standard basis, to be assessed if not agreed. Execution of such costs is stayed until the account hearing. 23. Permission is given to the parties to apply to vary the costs ordered in paragraph 22 after the account as follows:(i) to the Claimant to vary the basis of the costs ordered from standard to indemnity on the basis of any beaten without prejudice offers;(ii) to the Defendants to refer the Court to any applicable without prejudice offers.”[31]The 9.9.21 Order also declared that Plot 9 was transferred in breach of trust by Lloyd to himself and Gabriella, his wife, and that Plot 9 is held on trust for Ulrich as to 50% and Lloyd and Gabriella as to 50%. As to Ulrich’s original loan of £1,230,000; that was repaid on 17 February 2021 and interest due until that date was £307,158.60.[32]The 9.9.21 Order provided that Lloyd pay Ulrich’s costs of the liability phase, which reflected Ulrich’s clear success on the principal issues, including the continuation of the partnership, the breach of trust in relation to plot 9, and the entitlement to capital, interest and an account.[33]Following the conclusion of the account phase the court is now tasked with determining whether the costs order under the 9.9.21 Order should be varied and what order should be made in respect of the account phase.[34]Mr Sinai contends that Ulrich’s Part 36 offer dated 5 April 2019, made in respect of the repayment of capital and interest, was beaten and that he is therefore entitled to the costs consequences provided for by CPR 36.17 in relation to that aspect of the liability phase. He also seeks an order that Lloyd pay the costs of the account phase.[35]Mr Teasdale, counsel for Lloyd on costs only, contends that Lloyd’s Part 36 offer dated 21 December 2018, which was also a part offer Albeit not as narrowly focused as Ulrich’s Part 36 offer. , was not beaten by Ulrich and that Lloyd is entitled to recover 90% of his costs of the liability phase from 12 January 2019, acknowledging that Ulrich should receive 10% of his liability costs from 12 January 2019. As to the account phase he submits that Ulrich should pay Lloyd’s costs.[36]So the costs issues require the following overarching questions to be answered:(1) Should the court vary the order for costs in respect of the liability phase?(2) What is the appropriate order to make in respect of the account phase?

Liability Phase

[37]For an offer to be a valid Part 36 offer, CPR 36.5 requires (among other things) that it be in writing, make clear it is made under Part 36, specify a period of not less than 21 days within which the defendant will be liable for the claimant’s costs if accepted, and state whether it relates to the whole or part of the claim or to an issue.[38]Where a valid Part 36 offer is made, CPR Part 36.17 provides the following consequences, “36.17(1) Subject to rule 36.24, this rule applies where upon judgment being entered—(a) a claimant fails to obtain a judgment more advantageous than a defendant’s Part 36 offer; or(b) judgment against the defendant is at least as advantageous to the claimant as the proposals contained in a claimant’s Part 36 offer. (2) For the purposes of paragraph (1), in relation to any money claim or money element of a claim, “more advantageous” means better in money terms by any amount, however small, and “at least as advantageous” shall be construed accordingly. (3) Subject to paragraphs (7) and (8), where paragraph (1)(a) applies, the court must, unless it considers it unjust to do so, order that the defendant is entitled to— (a) costs (including any recoverable pre-action costs) from the date on which the relevant period expired; and (b) interest on those costs. (4) Subject to paragraph (7), where paragraph (1)(b) applies, the court must, unless it considers it unjust to do so, order that the claimant is entitled to— (a) interest on the whole or part of any sum of money (excluding interest) awarded, at a rate not exceeding 10% above base rate for some or all of the period starting with the date on which the relevant period expired; (b) costs (including any recoverable pre-action costs) on the indemnity basis from the date on which the relevant period expired;(c) interest on those costs at a rate not exceeding 10% above base rate;”[39]Further costs consequences are prescribed in rule 36.17(4).[40]However, the court also retains a discretion to disapply the consequences of Part 36 where it would be unjust to do so. “(5) In considering whether it would be unjust to make the orders referred to in paragraphs (3) and (4), the court must take into account all the circumstances of the case including—(a) the terms of any Part 36 offer;(b) the stage in the proceedings when any Part 36 offer was made, including in particular how long before the trial started the offer was made;(c) the information available to the parties at the time when the Part 36 offer was made;(d) the conduct of the parties with regard to the giving of or refusal to give information for the purposes of enabling the offer to be made or evaluated; and(e) whether the offer was a genuine attempt to settle the proceedings.”[41]If, and only if, there is an effective Part 36 offer and the relevant party fails to obtain a judgment more advantageous than it, are the costs consequences governed by CPR 36.17(3) triggered. Even then the court retains a discretion where it would be unjust to apply those costs consequences.[42]CPR Part 36.2 makes clear that an offer not made in accordance with CPR 36.5 cannot be a Part 36 offer, although it may still be an admissible offer relevant under CPR 44.2(4)(c).[43]Ulrich’s offer of 5 April 2019 was expressly limited. It related only to the repayment of capital and interest (the loan issue) and did not purport to resolve the wider liability issues, nor any issues relating to the partnership account, Plot 9, wages, commission, or the taking of the account itself. It was therefore an offer to settle only a discrete monetary component of a much broader and more complex claim.[44]Ulrich offered to accept £1,439,043.16 in settlement of the loan issue. Following the liability trial Lloyd was ordered to pay £1,537,158.60, of that Mr Teasdale calculates that approximately £67,029.30 was interest for the period 26 April 2019 to 17 February 2021. Mr Sinai’s position is that Ulrich has obtained a more advantageous judgment and the consequences from CPR Part 36.17 follow in respect of the liability phase costs on the loan issue.[45]At first glance it appears that Mr Sinai is correct. However as Mr Teasdale rightly points out this is not the entire picture. There had been an earlier Part 36 offer made by Ulrich on 7 September 2016. Lloyd response was to accept this but to state that he was obliged to withhold part of the sum which was attributable to interest in order to comply with UK tax obligations Income Tax Act 2007, section 874 where interest is being paid to a person whose usual place of abode is outside the United Kingdom. . The position being that part has to be paid direct to HMRC in satisfaction of the lender’s tax obligations, which the lender might then have a right to reclaim. The parties then became embroiled in a dispute as to whether sums could be paid directly to Ulrich or not, no agreement was reached.[46]Ulrich’s Part 36 offer dated 5 April 2019 contains the same position on tax: that the sum must be paid to him direct. It is submitted that the judgment ultimately obtained on liability was more advantageous than his offer, once interest calculations are taken into account. I disagree.[47]Properly analysed, the comparison required by CPR 36.17(1)(b) must be a true like‑for‑like comparison. That requires careful attention to(i) what the offer in fact proposed,(ii) how taxation and withholding were treated, and(iii) what the court ultimately ordered.[48]The Claimant’s offer was framed on the basis which assumed direct payment to him without accounting for the operation of withholding tax, whereas the liability judgment proceeded on a different and legally correct footing, under which sums properly payable to HMRC were treated as discharging part of Lloyd’s liability.[49]Once the judgment sum is adjusted to remove interest accruing after expiry of the relevant period, and once the differing treatment of withholding tax is correctly taken into account, Ulrich did not obtain a result more advantageous than his offer.[50]Even if I am wrong about that conclusion, it would in any event be unjust to apply the automatic consequences of CPR 36.17(4) in the circumstances of this case.[51]The offer concerned only a narrow aspect of the liability dispute and ignored the reality that substantial issues would still have to proceed to trial and determination. The comparison required under CPR Part 36.17(1) must be a true like‑for‑like comparison, assessed substantively and realistically, not by mechanical arithmetic divorced from the basis on which judgment was given. Furthermore in determining injustice, the court is required to look broadly at all the circumstances of the case, and in particular to assess who in reality is responsible for the incurring of costs which should not have been incurred and whether imposing Part 36 consequences would produce a just result overall: Smith v Trafford Housing Trust [2012] EWHC 3320 (Ch).[52]The purpose of indemnity costs under Part 36 is to compensate a claimant who has made an offer which should have been accepted and thereby assumed the risk of continuing litigation: East West Corporation v DKBS 1912 (No.2) [2002] EWHC 253 (Comm), at [14]. That rationale does not apply where acceptance of the offer would not have avoided the bulk of the litigation or its costs.[53]Acceptance of Ulrich’s narrow offer would not have avoided the determination of Plot 9 issues or the taking of a full account. The automatic imposition of indemnity costs and enhanced interest would therefore bear no proper causal relationship with the way in which the costs were actually incurred.[54]Turning then to Lloyd’s Part 36 offer of 21 December 2018, this was made at a very early stage of the proceedings, before disclosure or evidence, and arguably before Ulrich had access to the information required to understand how the settlement figure was constituted or how acceptance would operate in practice without an account.[55]Lloyd’s offer was framed as settling all claims save for Hill Farm and Plot 9. However, at the time it was made, the litigation had not reached a stage where the practical consequences of settling “all claims except” those two matters could be identified with any meaningful certainty.[56]The liability phase was not a simple money claim concerned only with quantification. It required determination of issues of entitlement and alleged wrongdoing, including: whether Lloyd was liable to repay the capital advanced by Ulrich; whether interest was payable, and if so on what basis; whether Lloyd was entitled to retain or appropriate Plot 9; whether the defences relied upon by Lloyd, including alleged regulatory, banking or money‑laundering impediments, had substance; and whether Ulrich was entitled to declaratory relief establishing basic partnership accounting obligations.[57]The offer figure of £1,601,000 therefore rested upon assumptions about liabilities and credits which, at that time, could not be reliably tested by Ulrich.[58]On 14 January 2019, Ulrich’s solicitors sought clarification of matters which were plainly material to an evaluation of the offer. In particular, Ulrich asked Lloyd to explain: how the global figure of £1.601 million had been calculated; what element of that sum, if any, represented partnership profits as distinct from repayment of capital and interest; and how acceptance of the offer was said to operate in circumstances where no account had been taken and where Lloyd’s position on wages and partnership liabilities remained undefined.[59]Those matters went directly to whether acceptance of the offer would resolve the liability disputes or merely postpone them in another form.[60]By letter dated 18 January 2019, Lloyd’s solicitors declined to provide any such clarification. I consider that refusal is a significant feature of the CPR 36.17(5) analysis. Ulrich was being asked to accept a substantial compromise without being told what, in legal or factual terms, he was being asked to concede or how the proposed settlement figure related to the pleaded and disputed liability issues. In a case of this kind, where Ulrich has no visibility into the accounting basis for a proposed figure at a preliminary stage, a refusal to clarify materially undermines the contention that the offer was one capable of being meaningfully assessed and accepted.[61]As I have already stated a Part 36 comparison requires that the court can identify, on a like for like basis, what Ulrich would have obtained under the offer and what he in fact obtained under the judgment and order. In particular, the offer: excluded Plot 9, which later proved to be a central issue at the liability trial; did not concede repayment liability on the footing ultimately established by the Court; and did not withdraw, qualify or narrow the substantive defences which Lloyd continued to advance through to trial.[62]At the time the offer was made, Lloyd was maintaining a positive case that repayment was not straightforward or was legally constrained, and that his conduct in relation to partnership assets was justified. Those contentions were not collateral; they lay at the heart of the liability dispute.[63]I am not persuaded that Lloyd’s Part 36 offer was a valid offer within the meaning of Part 36. If I am wrong on that it is difficult to evaluate whether Ulrich failed to obtain a judgment more advantageous than Lloyd’s Part 36 offer. Mr Sinai challenges the characterisation of Lloyd’s Part 36 offer as settling all issues, bar the carved out Plot 9 and Hillside. That is a fair point, it plainly did not cover all other issues. The later account proceedings demonstrate that the quantification of key items such as wages, overtime, commission and deductions were the subject of substantial dispute requiring expert analysis and judicial determination. That in turn demonstrates the practical impossibility of a reliable comparison between the offer and the eventual outcome. I am therefore not satisfied that the Part 36 offer can be said to have been beaten in any robust or meaningful way.[64]If I am wrong and Lloyd’s Part 36 offer was a valid offer to which the costs consequences of Part 36 applied, in order for CPR Part 36.17(3) to operate justly in respect of the liability phase there needs to be a meaningful causal connection between the refusal of the offer and the incurring of the liability phase costs.[65]Lloyd’s offer excluded Plot 9, but this was a substantial and central issue in the liability trial, including the question of whether it had been transferred in breach of trust and at an undervalue. Even if the “offered parts” were accepted, the liability trial would still have been required to determine the excluded Plot 9 issues, together with consequential matters that could not sensibly be severed without an account. I also reiterate that Lloyd did not accept liability on the basis ultimately found by the court and he advanced positive defences, which had they been accepted, would have defeated or undermined Ulrich’s claims[66]I am not satisfied that Lloyd can show that his offer was a genuine mechanism which, if accepted, would have avoided the incurring of the costs of the liability trial for which he now seeks to shift responsibility.[67]I consider it would be unjust to apply the costs consequences for the reason I have identified above. In summary and specifically focusing on the matters in CPR Part 36.17(5):(a) the terms of the offer: the offer was partial and issue‑selective. It excluded a central liability issue (Plot 9) and did not concede the basis of liability ultimately established at trial.(b) the stage of proceedings: the offer was made before disclosure, evidence or expert involvement, at a point when the liability issues had not crystallised.(c) the information available to the parties: Ulrich lacked the information necessary to evaluate the offer. He sought clarification of matters going directly to liability. That clarification was refused. Ulrich was being asked to accept a substantial compromise without being told what he was conceding.(d) the conduct of the parties in relation to information: Ulrich acted reasonably and promptly in seeking clarification. Lloyd chose not to provide it, thereby preventing informed consideration of the offer.[68]Taking all the circumstances together under CPR 36.17(5), there is no causal connection between the refusal of the offer and the liability‑phase costs incurred. The costs of the liability phase were incurred because Lloyd contested liability on serious grounds and failed on them at trial. To apply CPR Part 36.17(3) would be to permit Lloyd who unsuccessfully resisted liability and who declined to clarify his offer to achieve an unjust result because of an early, opaque and partial offer.[69]Mr Teasdale has also raised the question of an issue-based costs approach. However the liability phase did not consist of discrete, neatly severable issues capable of being cleanly costed in isolation. The evidence, witnesses and legal submissions overlapped substantially across the repayment claim, the Plot 9 dispute, the regulatory defences and the declaratory relief sought. The trial was conducted as an integrated whole.[70]In such circumstances, the court is not required—nor is it generally appropriate—to engage in forensic dissection of costs issue by issue. The authorities recognise that this risks introducing artificiality, uncertainty and disproportionate satellite litigation at the assessment stage. The proper approach is instead a broad‑brush, evaluative assessment, reflected if appropriate in a percentage order. That approach was articulated clearly by the Court of Appeal in Pigot v Environment Agency [2020] Costs LR 825, where it was explained that an issues‑based costs order is often best expressed as a percentage of the whole in order to avoid an unreal and overly technical partitioning of costs.[71]That guidance is of particular relevance here. Even on Lloyd’s case, his Part 36 offer excluded Plot 9, which the Court found to be a central liability issue on which Ulrich succeeded.[72]The difficulty lies in the fact that the costs attributable to Plot 9 cannot sensibly be separated from the rest of the liability trial. The evidence concerning Plot 9 was interwoven with the wider partnership narrative and the allegations of breach of trust advanced by Ulrich and resisted by Lloyd.[73]Any attempt to isolate those costs at detailed assessment would be artificial and speculative. That is precisely the mischief addressed in Pigot, where the Court of Appeal cautioned against elaborate issue‑by‑issue accounting exercises which bear little relationship to the way litigation is actually conducted.[74]More fundamentally, however, the adoption of an issues‑based or percentage‑based approach does not assist Ulrich on the question of Part 36. The question under CPR 36.17(5) is not merely how any costs order might be structured, but whether it would be just to apply the automatic consequences at all.[75]For the reasons already given, the liability‑phase costs were incurred because Lloyd contested liability on serious and wide‑ranging grounds and failed on the central issues. An issues‑based order which nonetheless transferred a substantial proportion of those costs to Ulrich would be inconsistent with the substantive outcome of the liability trial.[76]Accordingly, even applying the principles in Pigot, the only percentage‑based order consistent with justice and with the Court’s findings would be one which continues to reflect Ulrich’s success on the core liability issues. That is precisely what the existing costs order following the liability judgment achieved.[77]It also follows that had I been evaluating the liability of costs by reference to CPR Part 44.2 the same points as set out above can be made. I do not consider that the costs liability determined in the 9.9.21 order should be varied.

Account phase

[78]The account in this case followed directly from the findings made at the liability trial. Ulrich succeeded on the core liability issues, including repayment, interest, and the characterisation of partnership assets. Those findings plainly entitled him, as a matter of principle, to require Lloyd to account for partnership dealings following dissolution. Ulrich cannot fairly be criticised for seeking an account in circumstances where, without one, the financial consequences of the liability findings could not be worked out at all. When making the 9.9.21 order I rejected Lloyd’s submission that the liability trial had resulted in a “score draw”. The liability‑phase costs order reflected Ulrich’s success.[79]In the case of an account ordered following the dissolution of a partnership, the orthodox starting point is that there should be no order as to costs: Ma’har v O’Keefe [2014] EWCA Civ 1684 at [15]. That reflects the character of an account as a process designed to ascertain the parties’ respective financial positions rather than to determine liability as between adversaries.[80]That exercise may be complex, time-consuming and contested. That of itself is not a reason to displace the starting point of no order as to costs. However where the account proceedings can fairly be characterised as having been unnecessarily generated by one party, or where one party has plainly failed on the issues which justified the taking of the account at all, or where there are admissible offers the court may make a different order.[81]Both parties contend that they are each entitled to their costs of the account phase. Ulrich submits that the account was an inevitable and necessary consequence of the liability judgment and that, having succeeded at that stage, he should not be left to bear the costs of the accounting exercise which flowed from it. Lloyd, by contrast, submits that the account was a heavily contested and outcome‑driven process in which he was vindicated on the central issues, such that Ulrich should bear its costs.[82]Mr Sinai emphasises that the Court at the liability stage rejected Lloyd’s core resistance to repayment and found in his favour on fundamental issues going to entitlement and breach of trust. Against that background, the account was said to be the only mechanism by which the consequences of that judgment could be worked out.[83]He further submits that the account was rendered complex and costly because Lloyd had not kept proper records over many years, making it necessary for matters such as wages and expenses to be reconstructed and tested in detail. On that footing, he says it would be unfair for Ulrich to bear the costs of an exercise necessitated by Lloyd’s own shortcomings.[84]Those points only go so far. They explain why it would be wrong to characterise the account as speculative or opportunistic, and why Ulrich cannot fairly be criticised for having sought it.[85]He also relies on what he describes as successes on individual accounting adjustments, pointing out that a number of issues were resolved in Ulrich’s favour even if the final arithmetic outcome was not what he anticipated.[86]On that footing, Ulrich submits that fairness requires Lloyd to bear the costs of an account which followed from findings made against them and was made necessary by his poor record‑keeping practices.[87]This analysis explains why Ulrich was entitled to seek an account. However, it elides two distinct questions: entitlement to an account, and entitlement to recover the costs of the accounting exercise.[88]Once ordered, the account was no longer confined to implementing the liability judgment. It became a distinct forensic inquiry into wages, expenses and methodology over many years.[89]Ulrich’s reliance on liability‑phase success explains why he should not be penalised in costs for having sought an account. It does not, however, justify an order requiring Lloyd to fund a process in which Ulrich’s own accounting case did not succeed overall.[90]Mr Teasdale approaches the account from the opposite direction. Whilst accepting that the starting point is no order as to costs, he contends that this is a case where departure is justified because the account was heavily contested and outcome‑determinative.[91]He submits that the account was driven by Ulrich’s case that Lloyd’s wage and expense claims were overstated or illegitimate, and that the Court’s findings vindicated the overwhelming majority of those claims.[92]In particular, Lloyd stresses that the account left Ulrich “worse off than before”, and that he failed in what is characterised as the central purpose of the account, namely, to establish a net financial entitlement in his favour.[93]On that analysis, Lloyd submits that the account should be treated as an adversarial claims‑process in which he were the successful party, and that costs should therefore follow the outcome.[94]Lloyd is entitled to say that he was substantially successful on many of the issues within the account. The majority of Lloyd’s wage and expense claims were allowed, and the final accounting position was far closer to Lloyd’s case than that of Ulrich. However, this was not a freestanding adversarial claim, but rather a process that Lloyd was obliged to undergo because of adverse findings at the liability stage. In order to carry out that exercise Lloyd had to reconstitute years of diary entries showing what he was doing an any particular day and trying to cross reference that with sums said to be due to him by way of wages, commission or expenses. This is a case where Lloyd controlled the development, had access to all the financial records and elected to transfer a partnership asset without Ulrich’s knowledge to himself and his wife at an undervalue. It is hardly surprising that when Lloyd had to recreate records there was a level of distrust.[95]The account was not an option for Lloyd, it was required to give effect to declarations made against him. His success within that process explains why he should not be criticised for the manner in which it was defended. It does not follow that he is entitled to recover the costs of a necessary accounting exercise imposed by prior liability findings.[96]To accept Mr Teasdale’s characterisation risks converting the account process into ordinary outcome‑based litigation for costs purposes, undermining the long‑standing approach that accounts are, in substance, neutral mechanisms of ascertainment.[97]What both parties have in common is that each seeks to characterise the account phase by reference to success: liability success in Ulrich’s case, accounting success in Lloyd’s case.[98]That approach obscures the true nature of the account. The account was neither an extension of the liability trial nor a failed damages claim. It was a necessary implementing exercise, albeit one which required judicial resolution of contested issues. Its function was to ascertain the true financial position following dissolution. The fact that the answer was unfavourable to Ulrich on balance does not render the exercise unreasonable. The fact that it favoured Lloyd does not convert it into litigation for which costs should follow the event.[99]I am not satisfied that either party has pointed to conduct during the account phase which justifies a costs sanction. For example, Ulrich’s challenges to wages and expenses were not hopeless or abusive in the context of incomplete records. Lloyd’s defence of those claims was robust but not unreasonable.[100]The complexity and expense of the account were inherent in the partnership’s historic operation and affected both parties. The account was itself an interwoven complex process which required extensive input from Mr Dodge, the expert, and judicial evaluation. I have also considered whether an issues based or percentage‑based order might be appropriate but that would be artificial and would no doubt invite further satellite disputes.[101]In summary this is a case where the account was inevitable following the liability trial, it was a process legitimately sought by Ulrich following the breakdown of the business relationship and the account trial was properly defended by Lloyd. Both parties advanced perfectly arguable cases and the process achieved its intended purpose.[102]Neither parties submissions demonstrates that justice requires the costs burden of the account to be shifted to the other side. For the reasons set out above and notwithstanding that both Ulrich and Lloyd seek their costs of the account phase, my conclusion is that the appropriate order is that there be no order as to the costs of the account. (3). Mechanics for sale[103]The partnership has been dissolved. The remaining partnership assets comprise cash, the undeveloped land at Hill Farm, and plot 9.[104]The governing principles are well established. Subject to exceptional circumstances, partnership assets capable of being realised should be sold on the open market, so as to secure a fair value for both partners. Lloyd previously suggested that he would buy out Ulrich’s share in Hill Farm. That is no longer his position.[105]Following the liability and account judgments, the Court must now determine the appropriate mechanism for realisation of the partnership assets, and in particular the treatment of Plot 9, which is presently occupied by Lloyd and his wife as their home.[106]The Court has already found that Plot 9 was transferred into Lloyd’s and Gabriella’s names without Ulrich’s knowledge or consent, and at an undervalue, and that Lloyd’s case that there was a concluded agreement permitting Lloyd to acquire Plot 9 for £180,000 was rejected. Those findings are not revisited here.[107]The question at this stage is therefore not whether Lloyd is entitled to retain Plot 9 by reference to any historic agreement, but whether, as a matter of mechanics, the Court should permit Lloyd to purchase Plot 9 now, and if so on what terms.[108]Ulrich’s position is that the partnership assets should be realised by sale on the open market, with the proceeds applied in satisfaction of the parties’ entitlements. He submits that this is the ordinary and principled consequence of the findings made, particularly given the history of unilateral dealing and the breakdown of trust.[109]Lloyd, on the other hand, submits that the Court should permit him to purchase Plot 9, relying on the fact that it is now his home and that a forced open‑market sale would be disruptive and unnecessary if value can be realised without exposure to the market.[110]Lloyd does not contend, at this stage, that any historic agreement fixes the price at which Plot 9 should be acquired. Rather, his case is that the Court should adopt a pragmatic mechanism which allows him to buy the property at a proper valuation, avoiding sale on the open market if fair value can be achieved.[111]The Court approaches the issue on the basis that the partnership assets must be realised at proper value, and that Ulrich is entitled to receive the economic equivalent of an open‑market sale.[112]The fact that Plot 9 is Lloyd’s home does not, of itself, justify departure from that principle. However, nor does it preclude a structure which permits Lloyd to acquire Plot 9 provided that the mechanism delivers full market value and does not expose Ulrich to any further disadvantage.[113]Where a co‑owner seeks to acquire a property rather than see it marketed, the Court’s task is to ensure that the proposed mechanism is functionally equivalent to an open‑market sale, both in valuation and in timing.[114]The Court is satisfied that the fair and proportionate approach is as follows.[115]Plot 9 shall be valued by an independent chartered surveyor, jointly instructed by the parties if possible, or otherwise appointed by the Court. The valuation shall be on the basis of open‑market value with vacant possession, ignoring the fact that Lloyd is currently in occupation. Neither Lloyd nor any member of his family should be in attendance when the valuer carries out an inspection of Plot 9.[116]The valuation shall be carried out on the same basis as would be adopted for an open‑market sale, including proper allowance for the standard and completion state of the property, but excluding any discount for a private or “friendly” sale.[117]Upon receipt of the valuation, Lloyd shall be given the option, exercisable within a defined period, to purchase Plot 9 at the full valuation figure.[118]If Lloyd exercises that option, he shall be required to complete the purchase within a short and defined timeframe, and to pay the full purchase price into the partnership account (or as otherwise directed) without set‑off, save insofar as set‑off has already been determined by the account judgment.[119]The purpose of these requirements is to ensure that Ulrich receives the same financial outcome as he would on an arm’s‑length sale, without being exposed to delay, uncertainty, or further leverage.[120]If Lloyd does not exercise the option within the specified period, Plot 9 shall be marketed and sold on the open market in the usual way, with vacant possession if required.[121]This mechanism strikes a fair balance between the parties’ competing positions. It protects Ulrich by ensuring that Plot 9 is realised at full market value and that he is not compelled to accept a private sale at an undervalue or on uncertain terms. At the same time, it accommodates Lloyd’s understandable wish to remain in occupation of his home, but only on terms which fully respect Ulrich’s rights and reflect the findings already made.[122]Importantly, this approach does not give Lloyd any advantage flowing from the prior unauthorised transfer of Plot 9 or from any alleged historic understanding which the Court has rejected. His ability to purchase arises solely from the Court’s pragmatic management of the realisation process.[123]This mechanism gives effect to the Court’s findings, realises the partnership assets at proper value, and brings finality to the parties’ long‑running dispute.[124]I would now expect counsel to agree the terms of the order giving effect to this judgment. They should also provide for the payment on account of costs to Ulrich. If that cannot be agreed I would assume it could be determined on the papers, but I will hear counsel if necessary on this.