Court decides how two partners should divide their business

Published: 10 March 2017

Category: Legal News

The High Court has decided how two partners should divide their business after they fell out and could no longer work together.

The two men were brothers who had run a jewellery business through an English limited partnership based in London, two Thai companies, a British Virgin Islands (BVI) company, and a company registered in the US.

Richard managed the London and US businesses, while Robert controlled the BVI and Thai companies. Thai law imposed restrictions on the foreign ownership of Thai land and company shares so 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 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.

There were several issues including whether their interests in the partnership were 50/50 or 51/49 in Robert’s favour, and whether the partnership extended to the Thai and BVI companies.

The court found in favour of Richard. It held that the evidence showed that they were equal partners. Robert's case for a 51% share depended on his evidence that Richard had agreed to such a division 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.

There was also ample evidence that the brothers had agreed to an equal partnership extending to the overseas companies.

Robert had breached his legal duties as a partner 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.

The court decided that the partnership should be wound up while retaining each business as a going concern rather than have them sold off to realise cash. 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.

Please contact Phil Downing in our Business, Corporate & Commercial Property Team if you would like more information about the issues raised in this article or any aspect of the law relating to partnerships.