Home Information Cases Richard Campbell v Robert Campbell (2017)

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Richard Campbell v Robert Campbell (2017)

Summary

The court ordered the rendering of accounts to effect the winding up of a partnership on the basis of an in specie division of the assets. The partnership, which had extended to a number of UK and overseas companies, had broken down, one partner having breached his duty to take reasonable care to protect and preserve the business and its assets for the benefit of the other.

Facts

The court was required to determine how a partnership between the claimant (Richard) and the defendant (Robert) should be brought to an end.

The parties were brothers who had run a jewellery business through an English limited partnership based in London, two Thai companies, a British Virgin Islands company, and a company registered in the US. Richard managed the London and US businesses, while Robert controlled the BVI and Thai companies. Because Thai law imposed restrictions on the foreign ownership of Thai land and company shares, Robert had transferred the shares in the Thai companies to his wife and children, who were Thai nationals. When the brothers' relationship broke down in 2012, Robert sought to exclude Richard from the Thai and BVI businesses. Richard sought an account, an equal division of the value of the business as a whole, and compensation for any loss caused by Robert's breaches of fiduciary duty. The court had to determine how the ongoing commercial relationship was to be brought to an end.

The issues were whether (1) the brothers' interests in the partnership were 50/50, or 51/49 in Robert's favour; (2) the partnership extended to the Thai and BVI companies; (3) Robert had breached duties he owed to Richard in relation to his dealings with the Thai and BVI companies; (4) the business should be wound up, and how the accounting was to be done.

Held

(1) The evidence showed that the brothers were 50/50 partners. Their relationship was governed by English law, and the Partnership Act 1890 s.24 provided that, subject to any agreement to the contrary, partners were entitled to share equally in the capital or profits of their business. Robert's case for a 51% share depended on his evidence that that was what had been agreed at a meeting in 1990. However, there were no documents supporting his case, and many that were contrary to it. Richard disputed Robert's version of events, and his evidence was to be preferred.

(2) Robert's case was that the partnership did not extend beyond the London business. However, there was ample evidence that the brothers had agreed to an equal partnership extending to the overseas companies. The terms of the partnership, being a relationship by agreement, were sufficiently certain and complete to be enforceable. There was strong evidence in support of the partnership covering the Thai companies, even though the brothers had not wanted Richard to overtly own or control the shares in those companies. Robert had been trusted to do so on behalf of the partnership, and his use of Thai nominees did not relieve him of his personal obligations to Richard. Indeed, the restrictions imposed by Thai law made those obligations even more important. Even if the court was wrong about the scope of the partnership, it would still seek to wind up the brothers' business relations and ensure full and accurate accounting on the basis of their admitted co-ownership and fiduciary duties.

(3) It was common ground that the brothers owed each other duties to act in good faith and to render accurate accounts. They also owed each other duties of care in relation to those aspects of the partnership business for which they were each responsible, Tann v Herrington [2009] EWHC 445 (Ch), [2009] Bus. L.R. 1051 applied. That amounted to a duty to take reasonable care to protect and preserve the business and its assets for the benefit of the partners. Robert had breached those duties by procuring dealings with the Thai and BVI companies in favour of his family without Richard's approval, causing prejudice to him. He had also breached his duty to provide information to Richard about the businesses.

(4) The court had a supervisory jurisdiction over the winding up of partnerships and could fashion such order as was appropriate. It could order an in specie division of the assets, a partition of the assets or co-owned land, and an equalisation payment if necessary. It could order one partner to buy out the other, and where one partner had appropriated an asset for himself, he could be ordered to account for its value. The court's powers were also wide enough to require one or more of the partners to take steps to realise, preserve or enhance the value of the partnership assets. In cases of co-ownership in an association falling short of partnership but involving duties of mutual trust and confidence, the court could make orders bringing the relationship to an end, for example by requiring a sale of the assets or the winding up of any corporate entities. In the unusual circumstances of the instant case, there would be an account enabling the business to be wound up on the basis of an in specie division of the assets. Richard's assets in the Thai and BVI companies would be transferred to Robert, and Robert's interests in the London and US companies would be transferred to Richard. Each would account to the other for half the value of, and his drawings from, the companies he had controlled, and Robert would pay compensation for his breaches of the duties he owed to Richard.

Judgment for claimant

Chancery Division
Murray Rosen QC
Judgment date
26 January 2017
References

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