Summary

No partnership had subsisted between the claimants and the defendant. The defendant was the sole proprietor of the business. As an employee, the first claimant had been in breach of his contract of employment by carrying out private deals without the knowledge or consent of his employer.

Facts

Action by the claimants ('A' and 'B') seeking a declaration that, from 1995 to 2000 a partnership had subsisted between them and the defendant ('P') in respect of a business carried out by the three of them under the title James E Fisher & Son ('JEF'). JEF was an estate agents and property management business. A had been the sole proprietor of the business from 1984 until 1992 when he was made bankrupt and his assets, including JEF, vested in his trustee in bankruptcy. P acquired JEF from the trustees in 1992 and the business was continued by A, B and P. JEF's notepaper was amended to show P rather than A as sole principal, while its dealings with bodies such as the Inland Revenue and insurers showed P as sole principal and A and B as employees. A, B and P drafted some partnership agreements but never signed them. In April 1995 A was discharged from bankruptcy. In 1996 A and P purchased the property ('the property') in which JEF carried on its business. By a trust deed they held the property on trust for themselves in equal shares beneficially as tenants in common. In 2000 A served a notice purporting to dissolve the alleged partnership with effect from December 2000 and he left the business and the property. In January 2001 A gave P notice under the trust deed requiring P either to agree to a sale of the property or to purchase A's interest. Agreement could not be reached and in January 2003 A issued proceedings, which in May 2003 were compromised by a consent order in which A and P agreed to get the property independently valued with a view to a sale of the property or for P to purchase A's interest. They also consented that the issue of whether P was to pay A an occupation rent, following A's departure, in respect of P's occupation of the property be determined at the instant proceedings. P denied that there had ever been a partnership and claimed that since May 1992 he had been the sole proprietor and principal of JEK, that A was his employee and B a contractor. He also denied that he ought to pay A an occupation rent in respect of the property. P counterclaimed for payment of fees, commissions and profits earned by A from property transactions carried out by him in his own name or in the name of one of his companies or jointly with some other person without the agreement of P or alternatively damages for breach of contract or breach of fiduciary duties in respect of the same matters.

Held

(1) The evidence against there being a partnership was overwhelming. It indicated that from 1992 to 1995, following P's purchase of JEF, P was the sole proprietor. Nothing happened in or after April 1995 to indicate any change in the legal relationship between A,B and P. P therefore remained the sole proprietor of JEF and A and B were his employees. (2) It was appropriate that, in the equitable accounting between A and P on the sale of the property or the purchase of A's share by P, P should pay A half the notional occupation rent from January 2001. When A left at the end of December 2000 he and P remained equal owners of the property but P alone received the income generated by the business conducted in the property. As a matter of general principle A should be credited with any excess profit made after the mortgage interest had been paid. (3) A was in breach of his contract of employment by carrying out private deals without the knowledge or consent of P during his working time and accounts and enquiries would be taken of A's transactions.

Judgment accordingly.