Our Expertise

Lorem ipsum dolor sit amet, consectetur adipisicing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat.

Practice Direction 57AD – Disclosure in the Business and Property Courts

<!-- wp:paragraph --> <p><strong><u>Introduction</u></strong></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>A disclosure pilot scheme (known as PD51U) operated in the Business and Property Courts (the “BPC”) in a number of courts including Leeds, Manchester, Newcastle, and London from 1<sup>st</sup> January 2019.&nbsp; Practice Direction 57A (“PD57A”) substantively reproduces PD51U and came into force on 1<sup>st</sup> October 2022.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>Eighteen months on, my experience of PD57A is that it is still slowly filtering through to practitioners and courts, notwithstanding that for practitioners in Leeds, Manchester, Newcastle, and London, these provisions (or some very similar) have been in force for over five years.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>This article hopes to de-mystify PD57A and provide some practical assistance to those still grappling with the provisions<a href="#_ftn1" id="_ftnref1">[1]</a>.&nbsp; You will however still need a copy of the most up to date PD57A to hand, and I apologise in advance for the number of acronyms used.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><strong><u>When does PD57A apply?</u></strong></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>The first thing to ascertain is whether PD57A applies to your case, or whether you’re still looking at disclosure under CPR 31.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>The clue here is in the title of the article - PD57A applies to existing and new proceedings in the BPC (whether London or the provinces).&nbsp; It does not apply in the County Court and it does not apply to proceedings which are</p> <!-- /wp:paragraph --><!-- wp:list --> <ul class="wp-block-list"><!-- wp:list-item --> <li>Proceeding under Part 8</li> <!-- /wp:list-item --><!-- wp:list-item --> <li>Within a fixed costs or capped costs regime</li> <!-- /wp:list-item --></ul> <!-- /wp:list --><!-- wp:paragraph --> <p><strong><u>Which Regime?</u></strong></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>Under Appendix 5 of PD57A you will find provisions for a simplified disclosure regime for Less Complex Claims (“LCC”).&nbsp; An LCC is a claim which by virtue of its nature, value, complexity, and the likely volume of Extended Disclosure (“ED”) may not benefit from the full procedure set out in the main body of Practice Direction 57AD.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>Deciding whether your claim is a LCC is akin to deciding to which track your case should be allocated.&nbsp; If the value of the claim (both financial and non-monetary) is less than £1M then the starting point is LCC, but the other factors (nature, complexity etc) can tip a claim under £1M into the full regime and cases over £1M into a LCC.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>The parties can agree to treat a claim as LCC or the court can order it.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>If your claim is LCC, you follow the provisions under Appendix 5, so this is something that needs to be agreed at the outset.&nbsp; If LCC is not agreed, the LCC regime does not apply unless and until the court makes an order to the contrary.&nbsp; The court may make such an order upon its own volition or by application by any party.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><strong><u>LCC Regime</u></strong></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>My experience is that most practitioners agree to designate their cases as LCC and I have therefore considered this regime first so that when you read the main provisions you have in mind the parts which don’t apply or which are varied on the LCC.&nbsp; However, I’m afraid you still have to read the notes for the Full Regime below as I have not repeated the relevant parts of the Full Regime here.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>For LCC, Appendix 5 varies the provisions in the main body of PD57A – paragraph 1 of Appendix 5 provides that all the provisions of the main body apply unless they are expressly varied by Appendix 5.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>The simplified LCC procedure is found at paragraph 10 of Appendix 5.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>ED is confined to Models A, B, or D.&nbsp; Models C and E are not available for a LCC (Models considered under Full Regime below).</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>The relevant Disclosure Review Document (“DRD”) for a LCC (which is referred to in the PD as the “LCCDRD”) is that set out at Appendix 6, and the timetable is that which appears at paragraphs 7 and 10 of the main body and Appendix 7.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>The LCCDRD only needs to be completed where one or more parties are seeking ED.&nbsp; If nobody wants ED or only Models A or B are proposed, there is no need to complete a DRD.&nbsp; If, however, in circumstances where Model B is proposed, the parties believe that it would be of assistance to identify and agree upon on List of Issues for Disclosure (or to complete any other sections of the LCCDRD), they may agree to do so.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>It is the Claimant’s responsibility to ensure that the LCCDRD is completed and a single agreed version filed with the court (although the parties can agree to pass this responsibility to another party).</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>Completing the LCCDRD – don’t forget that the relevant DRD for a LCC is at Appendix 6.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>The only mandatory part of the LCCDRD is section 1 - “Issues for Disclosure and Disclosure Model Proposals”.&nbsp; The rest of the LCCDRD should only be completed if applicable and relevant.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>Paragraph 9 of Appendix 7 encourages the parties to confer about the LCCDRD in person rather than by letter/email, and my experience suggests that this is very good advice.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>The timetable for completing the LCCDRD is set out at paragraph 13 of Appendix 7, and I have set this out below.&nbsp; The parties may agree to revise the timetable provided it does not affect the date set for the CMC.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><strong>NOTE</strong> – the first deadline in the timetable is “<strong>within 28 days of the closure of statements of case”.&nbsp;</strong></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><strong>HOWEVER &nbsp;</strong>- also remember that under paragraph 5 of the main regime, each party must provide to all other parties <strong>at the same time as its statement of case</strong> an Initial Disclosure List of Documents with copies of those documents.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>Disclosure is not something that can be considered ‘later’.&nbsp; It needs to be in the forefront of your mind from the start of your involvement with the case,</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><span style="text-decoration: underline;">Timetable for completing the LCCDRD</span></p> <!-- /wp:paragraph --><!-- wp:table --> <figure class="wp-block-table"><table class="has-fixed-layout"><tbody><tr><td></td><td><strong>Stage to be completed</strong></td><td><strong>Deadline</strong></td></tr><tr><td><strong>Step 1</strong></td><td>Each party should state, in writing, whether or not it is likely to request Extended Disclosure Models A, B and/or D on one or more issues in the case. At this point it should not particularise the Model(s) or the issue(s) in the case.</td><td>Within 28 days of the closure of statements of case</td></tr><tr><td><strong>Step 2</strong></td><td>Where one or more of the parties has indicated it is likely to request search-based Extended Disclosure (i.e. Models D), unless the parties agree otherwise, the claimant must prepare and serve on the other parties a draft List of Issues for Disclosure unless the equivalent of such a list has already been agreed between the parties (for example, as part of a fuller list of issues). At the same time, the claimant shall identify for each Issue for Disclosure which Model of Extended Disclosure it proposes for each party. If the claimant fails to take these steps, the defendant may, but is not obliged to, prepare and serve its own draft List of Issues for Disclosure on the other parties.</td><td>Within 42 days of the closure of statements of case</td></tr><tr><td><strong>Step 3</strong></td><td>A party served with a draft List of Issues for Disclosure and proposals on Models shall indicate within section 1 of the LCCDRD whether it agrees with the proposed Issues for Disclosure and corresponding Model(s) for Extended Disclosure by completing the “Issue Agreed” and “Model Agreed” columns in section 1. If the party does not agree, or wishes to propose alternative or additional Issues for Disclosure or other Models, it should set out its alternative or additional proposals in section 1 of the LCCDRD and briefly explain and set out in section 6 of the LCCDRD the reasons why it disagrees with the Issues for Disclosure or Models proposals of the other party the reasons for the alternative proposals it is proposing.</td><td>As soon as practicable but in any event no later than 21 days after service of the draft List of Issues for Disclosure</td></tr><tr><td><strong>Step 4</strong></td><td>Having sought to agree the List of Issues for Disclosure and proposals on Model(s) for Extended Disclosure, the parties should prepare and exchange drafts of the LCCDRD (with all applicable sections of the document completed) in accordance with the guidance in Appendix 7.</td><td>As soon as reasonably practicable and in any event not later than 14 days before the case management conference</td></tr><tr><td><strong>Step 5</strong></td><td>The parties must seek to resolve any disputes over the scope of any Extended Disclosure sought or any other aspect of the completion of the LCCDRD.</td><td>In advance of the first case management conference</td></tr><tr><td><strong>Step 6</strong></td><td>Unless otherwise agreed by the parties or ordered by the court, the claimant(s) shall be responsible for ensuring that the form is completed and a single agreed version is filed with the court.&nbsp;&nbsp;Related correspondence and earlier drafts should not ordinarily be filed.</td><td>Not later than 5 days before the first case management conference</td></tr><tr><td><strong>Step 7</strong></td><td>The parties must independently file a signed Certificate of Compliance substantially in the form set out in Appendix 3 to the Practice Direction.</td><td>Not less than two days before the case management conference</td></tr></tbody></table></figure> <!-- /wp:table --><!-- wp:paragraph --> <p></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>I cannot urge you strongly enough to engage with this process as early as possible and to meet the deadlines.&nbsp; If you get to CMC and you have not complied with PD57A you may find that the court simply adjourns your CMC (costing you and your clients both time and money).&nbsp; It also makes it very difficult (if not impossible) for the court to determine which Model to order if the issues for disclosure have not been identified.&nbsp; Both of these examples have arisen in cases I have been involved in within the last month.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>In relation to the completion of the LCCDRD, ‘issues for disclosure’ has the same meaning as in the main body of PD57A:</p> <!-- /wp:paragraph --><!-- wp:quote --> <blockquote class="wp-block-quote"><!-- wp:paragraph --> <p>“Issues for Disclosure” means for the purposes of disclosure only those key issues in dispute, which the parties consider will need to be determined by the court with some reference to contemporaneous documents in order for there to be a fair resolution of the proceedings. It does not extend to every issue which is disputed in the statements of case by denial or nonadmission.  (see paragraph 7.6 main body)</p> <!-- /wp:paragraph --></blockquote> <!-- /wp:quote --><!-- wp:paragraph --> <p></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>However, the issues for disclosure in a LCC must be brief, should rarely exceed 5, and should not be defined by reference to sub-issues if that will materially increase the length and complexity of the list.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>The list of issues for disclosure is not the same as the list of issues for trial, and the parties should have regard to the function of the list as set out at paragraph 10.5 of Appendix 5, which includes helping the parties to consider, and the court to determine, whether ED is required and, if so, the appropriate Model, and to identify the documents and categories of documents that are likely to exist and are required to be disclosed.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>If the parties cannot agree the terms of ED, the court will determine the issue at the CMC.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><strong><u>Full Regime/Main Body of PD57A</u></strong></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>Save where expressly modified by Appendix 5, these provisions also apply to a LCC.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>The regime starts with initial disclosure and paragraph 5 of the main body of PD57A provides that when a party serves its statement of case, it must also provide to all other parties an Initial Disclosure List of Documents that lists and is accompanied by the key documents that party has relied on and the key documents that are necessary to enable the other side to understand the case it has to meet.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>This form of disclosure is known as initial disclosure and is not required where the parties have agreed <span style="text-decoration: underline;">in writing</span> to defer or dispense with it.  In the event of such agreement the parties should record their reasons so as to be available to the court if requested at the CMC.  Any disagreements about whether initial disclosure should be dispensed with can be referred to the court.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>There is no requirement for a party to search for documents or to disclose adverse documents by way of initial disclosure.&nbsp; There is also no requirement for any document disclosed by way of initial disclosure to be translated.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>In <em>Breitenbach v Canaccord Genuity Financial Planning Ltd</em> [2020] EWHC 1355 (Ch) it was held that documents that were said to be necessary to evaluate and weigh the Defendant’s prospects of success were not key documents, as this went beyond enabling the claim to be understood.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>A party seeking disclosure in addition to or as an alternative to initial disclosure must request extended disclosure (“ED”).&nbsp; Where ED is sought, the parties are expected to complete the Disclosure Review Document (“DRD”) set out at Appendix 2.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>ED involves using Disclosure Models which are set out at paragraph 8 of PD57A:</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><strong>Model A</strong>: Disclosure confined to known adverse documents<br>As set out in the title</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><strong>Model B</strong>: Limited Disclosure<br>The key documents a party has relied on in its statement of case and the key documents that are necessary to enable the other side to understand the case it has to meet (ie, Initial Disclosure), plus known adverse documents.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><strong>Model C</strong>: Disclosure of particular documents or narrow classes of documents<br>The court may order a party to give disclosure of particular documents or narrow classes of documents relating to a particular Issue for Disclosure. </p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><strong>Model D</strong>: Narrow search-based disclosure, with or without Narrative Documents<br>Documents which are likely to support or adversely affect a party’s claim or defence or that of another party in relation to one or more of the issues for disclosure.  Under D the parties are required to undertake a reasonable and proportionate search in relation to the Issues for Disclosure.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><strong>Model E</strong>: Wide search-based disclosure<br>Documents which are likely to support or adversely affect a party’s claim or defence or that of another party in relation to one or more of the issues for disclosure, or which may lead to a train of inquiry which may then result in the identification of other documents for disclosure. </p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>Although the parties can (and should where possible) agree the issues for disclosure and the Model, the court retains control and will determine whether to order ED at the CMC.&nbsp; If the parties cannot agree, the court will determine disputes at the CMC.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>A practical point – The parties may, at any time, ask the court to determine any disclosure issues, or provide guidance on any point concerning the operation of PD57A, by issuing an application notice.&nbsp; This is worth remembering if there are significant areas of disagreement, as the standard time allowed for a CMC may not be sufficient to deal with CMC issues and disclosure.&nbsp; I have recently had a CCMC adjourned to deal with budgets at a later date as the 90 minute hearing was largely taken up with disputes over disclosure.&nbsp; Dealing with disclosure at a separate hearing before the CCMC would have been more appropriate.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>The Court will only order search based models – C, D, E – if persuaded it is appropriate, and Model E will only be ordered in an exceptional case.&nbsp; Paragraph 6.4 sets out the factors to be considered when determining whether ED should be ordered:</p> <!-- /wp:paragraph --><!-- wp:list {"ordered":true} --> <ol class="wp-block-list"><!-- wp:list-item --> <li>the nature and complexity of the issues in the proceedings;</li> <!-- /wp:list-item --><!-- wp:list-item --> <li>the importance of the case, including any non-monetary relief sought;</li> <!-- /wp:list-item --><!-- wp:list-item --> <li>the likelihood of documents existing that will have probative value in supporting or undermining a party’s claim or defence;</li> <!-- /wp:list-item --><!-- wp:list-item --> <li>the number of documents involved;</li> <!-- /wp:list-item --><!-- wp:list-item --> <li>the ease and expense of searching for and retrieval of any particular document (taking into account any limitations on the information available and on the likely accuracy of any costs estimates);</li> <!-- /wp:list-item --><!-- wp:list-item --> <li>the financial position of each party; and</li> <!-- /wp:list-item --><!-- wp:list-item --> <li>the need to ensure the case is dealt with expeditiously, fairly and at a proportionate cost.</li> <!-- /wp:list-item --></ol> <!-- /wp:list --><!-- wp:paragraph --> <p>There is no presumption that a party is entitled to search based ED, and it is for the party requesting ED to show that what is sought is appropriate, reasonable, and proportionate.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>When it is necessary to decide any question of what is reasonable and proportionate under a particular Model, the court will consider all the circumstances of the case including 6.4 and the overriding objective.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>At paragraph 2AA-63.1 the White Book 2024 states:</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><strong>Approach to determining choice of disclosure model</strong></p> <!-- /wp:paragraph --><!-- wp:quote --> <blockquote class="wp-block-quote"><!-- wp:paragraph --> <p>In <em>McParland &amp; Partners Ltd v Whitehead</em> [2020] EWHC 298 (Ch), Vos C at [50]–[52] provided guidance on the approach to be taken determining the appropriate disclosure model under the disclosure pilot scheme. The same approach will apply to PD 57AD. Where a party had made a reasonable request for further documentation and disclosure could not be agreed, Model C disclosure was appropriate. Where parties did not trust each other, Model D disclosure was likely to be the simplest, most appropriate choice. Care should also be taken to consider if different disclosure models should apply to different parties. There is no reason in principle why the same issue might not be subject to disclosure Model D for one party, while it is subject to disclosure Models B or C for another party. Model D disclosure may also be appropriate in respect of issues that are central to a party’s pleaded case: <em>Lombard North Central Plc v Airbus Helicopters SAS</em> [2020] EWHC 3819 (Comm), Bryan J, at [20]–[30] following McParland at [51].</p> <!-- /wp:paragraph --></blockquote> <!-- /wp:quote --><!-- wp:paragraph --> <p></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>The DRD for cases proceeding under the full regime is found at Appendix 2, and the timetable pertaining to the same is at paragraph 7 of the main body of PD57A.&nbsp;</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>Again, there is a handy timetable provided (which can be found at the end of Appendix 2).&nbsp;</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><span style="text-decoration: underline;">Timetable for completing the DRD</span></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>The timetable should be read in conjunction with paragraph 7 as paragraph 7 sets out exactly what each party needs to do.</p> <!-- /wp:paragraph --><!-- wp:table --> <figure class="wp-block-table"><table class="has-fixed-layout"><tbody><tr><td></td><td><strong>Stage to be completed</strong></td><td><strong>PD Ref.</strong></td><td><strong>Deadline</strong></td></tr><tr><td><strong>Step 1</strong></td><td>Each party should state, in writing, whether or not it is likely to request search-based Extended Disclosure to include one or more of Models C, D or E on one or more issues in the case. At this point it should not particularise the Model(s) or the issue(s) in the case.</td><td>Para 7.1</td><td>Within 28 days of the closure of statements of case</td></tr><tr><td><strong>Step 2</strong></td><td>Where one or more of the parties has indicated it is likely to request search-based Extended Disclosure (i.e. Models C, D and/or E), the claimant must prepare and serve on the other parties a draft List of Issues for Disclosure unless the equivalent of such a list has already been agreed between the parties (for example, as part of a fuller list of issues). At the same time, the claimant shall identify for each Issue for Disclosure which Model of Extended Disclosure it proposes for each party. If the claimant proposes Model C Disclosure for any Issue for Disclosure it should indicate, using Section 1B of the Disclosure Review Document, the particular documents or narrow class of documents it proposes should be defined for that purpose. If the claimant fails to take these steps, the defendant may, but is not obliged to, prepare and serve its own draft List of Issues for Disclosure on the other parties together with its proposals on Models and any Model C requests.</td><td>Para 7.2</td><td>Within 42 days of the closure of statements of case</td></tr><tr><td><strong>Step 3</strong></td><td>A party served with a draft List of Issues for Disclosure and proposals on Models shall indicate using Section 1A (and, if applicable, 1B) of the Disclosure Review Document whether it agrees with the proposed Issues for Disclosure and corresponding Model(s) for Extended Disclosure (including any proposals as to how Model C Disclosure should be defined). If the party does not agree, or wishes to propose alternative or additional Issues for Disclosure, other Models and/or other Model C proposals, it should set out its alternative or additional proposals in Sections 1A and 1B of the Disclosure Review Document.</td><td>Para 7.9</td><td>As soon as practicable but in any event no later than 21 days after service of the draft List of Issues for Disclosure</td></tr><tr><td><strong>Step 4</strong></td><td>The parties must discuss and seek to agree the draft List of Issues for Disclosure, the Models identified for each Issue for Disclosure, and the wording of any Model C proposals. They should consider whether any draft Issue for Disclosure can be removed.</td><td>Paras 7.10 and 10.6</td><td>In advance of the first case management conference</td></tr><tr><td><strong>Step 5</strong></td><td>Having sought to agree the List of Issues for Disclosure, proposals on Model(s) for Extended Disclosure and the wording of any Model C requests, the parties should prepare and exchange drafts of Section 2 of the Disclosure Review Document (including costs estimates of different proposals, and where possible estimates of the likely amount of documents involved). Section 2 of the Disclosure Review Document should be completed only if the parties are seeking an order for Extended Disclosure involving a search-based Disclosure Model (i.e. Models C, D and/or E).</td><td>Para 10.5</td><td>As soon as reasonably practicable and in any event not later than 14 days before the case management conference.</td></tr><tr><td><strong>Step 6</strong></td><td>A finalised single joint Disclosure Review Document should be filed by the claimant. Related correspondence and earlier drafts should not ordinarily be filed..</td><td>Para 10.7</td><td>Not later than 5 days before the case management conference</td></tr><tr><td><strong>Step 7</strong></td><td>The parties must independently file a signed Certificate of Compliance substantially in the form set out in Appendix 3 to the Practice Direction</td><td>Para 10.8</td><td>Not less than two days before the case management conference</td></tr></tbody></table></figure> <!-- /wp:table --><!-- wp:paragraph --> <p></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>Guidance on completing the DRD is found at paragraph 10 and in the explanatory notes which come after the DRD in Appendix 2.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><span style="text-decoration: underline;">Adverse Documents</span></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>“Adverse Documents” and “known adverse documents” are defined at paragraphs 2.7 and 2,8:</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>2.7 Disclosure extends to “adverse” documents. A document is “adverse” if it or any information it contains contradicts or materially damages the disclosing party’s contention or version of events on an issue in dispute, or supports the contention or version of events of an opposing party on an issue in dispute, whether or not that issue is one of the agreed Issues for Disclosure.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>2.8 “Known adverse documents” are documents (other than privileged documents) that a party is actually aware (without undertaking any further search for documents than it has already undertaken or caused to be undertaken) both (a) are or were previously within its control and (b) are adverse.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>Note as well that a company or organisation is “aware” if any person within the company/organisation with accountability or responsibility for the events or circumstances which are the subject of the case or for the conduct of the proceedings is aware, and at paragraph 2.9 it is expressly said that it is necessary to take reasonable steps to check the position with relevant persons who have left the company/organisation.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>If an order for ED is made, the disclosure made must also include any known adverse documents not already disclosed.&nbsp; If ED is not ordered, all known adverse documents must be disclosed within 60 days of the first CMC, and a Disclosure Certificate provided.&nbsp;</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><span style="text-decoration: underline;">Complying with ED</span></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>Paragraph 12 sets out how to comply with an order for ED:</p> <!-- /wp:paragraph --><!-- wp:list --> <ul class="wp-block-list"><!-- wp:list-item --> <li>service of a signed Disclosure Certificate (Appendix 4) confirming all known adverse documents have been disclosed</li> <!-- /wp:list-item --><!-- wp:list-item --> <li>service of an ED Disclosure List of Documents</li> <!-- /wp:list-item --><!-- wp:list-item --> <li>production of the documents</li> <!-- /wp:list-item --></ul> <!-- /wp:list --><!-- wp:paragraph --> <p>Note paragraph 12.5 -</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>12.5 A party may not without the permission of the court or agreement of the parties rely on any document in its control that it has not disclosed at the time required for Extended Disclosure (or within 60 days after the first case management conference in a case where there will be no Extended Disclosure). For the avoidance of doubt the party and its legal representatives remain under the duties under paragraph 3.1 (the Disclosure Duties) and 3.2 above.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>Where there has been a failure to comply with ED the court may make orders which may include ordering the service of a further, or revised Disclosure Certificate, to make further searches, provide a further or improved Extended Disclosure List of Documents, produce documents, or make a witness statement explaining any matter relating to disclosure.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>A party applying for such an order should normally file a witness statement in support and must satisfy the court that making the order is reasonable and proportionate (paragraph 17).</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>A court may, at any stage, make an order varying an order for ED.&nbsp; Any party applying for such an order must file a witness statement, and must satisfy the court that varying the original order is both necessary for the just disposal of the proceedings, and that it is reasonable and proportionate (paragraph 18).</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>Paragraph 14 deals with the right to withhold documents, paragraph 15 deals with confidentiality, and paragraph 16 deals with redaction.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>Pursuant to paragraph 21, a party may at any time request a copy of a document mentioned in</p> <!-- /wp:paragraph --><!-- wp:list --> <ul class="wp-block-list"><!-- wp:list-item --> <li>a statement of case</li> <!-- /wp:list-item --><!-- wp:list-item --> <li>a witness statement, summary, or affidavit</li> <!-- /wp:list-item --><!-- wp:list-item --> <li>an expert’s report</li> <!-- /wp:list-item --></ul> <!-- /wp:list --><!-- wp:paragraph --> <p><span style="text-decoration: underline;">Costs</span></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>Parties are required to provide an estimate of what they consider to be the likely costs of giving the disclosure proposed by them in the Disclosure Review Document, and the likely volume of documents involved, in order that a court may consider whether such proposals on disclosure are reasonable and proportionate.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>In cases where the cost budgeting scheme applies, if it is not practical to complete the disclosure section of Form H in relation to disclosure prior to the court making an order in relation to disclosure at the CMC, the parties may notify the court that they have agreed to postpone completion of that section of Form H.&nbsp; The court will give a date at the CMC for completion of the disclosure section, and where possible the court will then consider (and if appropriate, approve) that part of the cost budget without an oral hearing.</p> <!-- /wp:paragraph --><!-- wp:paragraph {"align":"right"} --> <p class="has-text-align-right">Nicola Phillipson<br>Parklane Plowden Chambers<br>May 2024</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><em>This article has been written by a trusts and probate practitioner for the benefit of practitioners who attended Parklane Plowden’s Annual Trusts Conference in June 2024.&nbsp; Therefore, whilst this article may be of use to other practitioners, please be aware of the intended audience.</em></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><em>This article is also intended to provide guidance only and should not be relied upon as legal advice.</em></p> <!-- /wp:paragraph --><!-- wp:separator --> <hr class="wp-block-separator has-alpha-channel-opacity"/> <!-- /wp:separator --><!-- wp:paragraph --> <p><a id="_ftn1" href="#_ftnref1">[1]</a> Please see disclaimer above – this article has been written with trusts practitioners in mind</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p></p> <!-- /wp:paragraph -->

Harrogate &amp; District Law Society Property Law Talk | March 18th, 2025

<!-- wp:paragraph --> <p>Join three members of Parklane Plowden Chambers as they share their knowledge on Property Law.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>Harrogate &amp; District Law Society is holding a talk at the Cedar Court Hotel, where <a href="https://parklaneplowden.co.uk/our-barristers/adam-gould/" target="_blank" rel="noreferrer noopener">Adam Gould</a> will be speaking on the Art of Litigation, <a href="https://www.parklaneplowden.co.uk/our-barristers/sean-kelly/" target="_blank" rel="noreferrer noopener">Sean Kelly</a> on Partnership Property, and <a href="https://www.parklaneplowden.co.uk/our-barristers/dominic-crossley/" target="_blank" rel="noreferrer noopener">Dominic Crossley</a> on Proprietary Estoppel.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>Come along and expand your knowledge in a friendly and welcoming environment. Don’t miss out on this opportunity to engage with like-minded individuals and gain valuable insights.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><strong>Date:</strong> Tuesday, March 18<sup>th</sup>, 2025</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><strong>Time: </strong>3 – 5pm</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><strong>Location: </strong>Cedar Court Hotel, Park Parade, Harrogate, HG1 5AH</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><strong>Cost: </strong>£10.00 and £20.00 for non-members</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><strong>How to book your place:</strong> Please book using the Eventbrite link below:</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><a href="https://www.eventbrite.co.uk/e/harrogate-district-law-society-property-talk-tickets-1236176740909?aff=oddtdtcreator" target="_blank" rel="noreferrer noopener">Harrogate &amp; District Law Society Property Law Talk</a></p> <!-- /wp:paragraph -->

17 October 2024 | Half Day Property Seminar | Leeds

<!-- wp:paragraph --> <p>Join our property specialists at our half day property seminar for an afternoon of talks and networking at the <a href="https://www.google.com/maps/place/The+University+of+Law+-+Leeds/@53.7986878,-1.5492722,17z/data=!3m1!4b1!4m6!3m5!1s0x48795c1c43d77e67:0xaebb12f5c6663dd3!8m2!3d53.7986878!4d-1.5466973!16s%2Fg%2F11b7rtlzkx?entry=ttu&amp;g_ep=EgoyMDI0MTAwNS4yIKXMDSoASAFQAw%3D%3D" target="_blank" rel="noreferrer noopener">University of Law, 15-16 Park Row, Leeds, LS1 5HD</a>.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><strong>Programme</strong></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><strong>12:45-13:30 – Registration with Lunch</strong><br></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><strong><a href="https://www.parklaneplowden.co.uk/our-barristers/bryan-patterson-whitaker/" target="_blank" rel="noreferrer noopener">Bryan Patterson-Whitaker</a> </strong><br>Building Safety Act - <em>Remediation Contribution Orders – A Beginner’s Guide</em><br></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><strong><a href="https://www.parklaneplowden.co.uk/our-barristers/stuart-roberts/" target="_blank" rel="noreferrer noopener">Stuart Roberts</a> </strong><br>Landlord and Tenant - <em>The Renters Rights Bill – where do we stand?</em><br></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><strong>14:30 - Break with Refreshments<br></strong></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><strong><a href="https://www.parklaneplowden.co.uk/our-barristers/dominic-crossley/" target="_blank" rel="noreferrer noopener">Dominic Crossley</a> </strong><br>Proprietary Estoppel - <em>What is the point of proprietary estoppel?</em><br></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><strong><a href="https://www.parklaneplowden.co.uk/our-barristers/robert-allen/" target="_blank" rel="noreferrer noopener">Robert Allen</a> <br></strong>Nuisance, Boundary, Adverse Possession - <em>Mine or my neighbours'? Securing boundaries by adverse possession</em><br></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><strong>15:30 - Break with Refreshments<br></strong></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><strong><a href="https://www.parklaneplowden.co.uk/our-barristers/sean-kelly/" target="_blank" rel="noreferrer noopener">Sean Kelly</a> &amp; <a href="https://www.parklaneplowden.co.uk/our-barristers/cait-sweeney/" target="_blank" rel="noreferrer noopener">Cait Sweeney</a> <br></strong>Partnership (Property) Workshop - <em>Partnership property seminar and workshop</em><br></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><strong>16:30 - Networking and drinks</strong></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>If you wish to attend this event, please contact our <a href="mailto:events@parklaneplowden.co.uk" target="_blank" rel="noreferrer noopener">events team</a>.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p></p> <!-- /wp:paragraph -->

Fraud Unravels All? Not Always…

<!-- wp:paragraph --> <p><strong>Bryan Patterson-Whitaker</strong> <strong>considers the Court of Appeal’s recent decision in</strong> <strong><em>Kevin Ralph William Riley &amp; Anor v National Westminster Bank Plc (NatWest) </em>[2024] EWCA Civ 833.</strong></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>Mr and Mrs Riley were directors of Riley (Holdings) Limited (“RHL”). The company was involved with residential property development.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>In or about 2004, RHL acquired a site on the river Trent, the development of which was financed by NatWest, via a series of loans totalling £26.5m. In 2008, these facilities were replaced by an on-demand loan for £32m linked to LIBOR (“the LIBOR Loan”).</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>Those familiar with the history of the NatWest / RBS Global Restructuring Group (“GRG”) will be aware that many thousands of UK businesses were allegedly pushed into the banks’ controversial “turnaround” division so that their assets could be seized.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>In the index case, RHL became insolvent, and the Rileys’ alleged that such insolvency had come about because of various fraudulent misrepresentations made by the bank. They said that the LIBOR Loan was made under the stated guise of trying to support and help their business, whereas the reality was that the bank had a strategy of exiting the relationship by disposing of RHL’s assets cheaply to one of its subsidiaries and, pending exit, profiteering from the relationship.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>At first instance in 2023, Freedman J granted NatWest reverse summary judgment on the Riley’s claims of fraudulent misrepresentation. The Judge decided that such claims had been compromised and released by a settlement deed (“the Settlement Deed”) in 2014 and that they had no real prospect of successfully establishing otherwise.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>It is worth noting that the Settlement Deed was drawn in very wide terms, releasing all and any claims, whether known or unknown, and encapsulating claims that the Rileys may or could have in the future against NatWest. By clause 7.2, the Rileys also undertook not to bring any proceedings whatsoever in connection with the released claims.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>The <em>quid pro quo</em> for entering the Settlement Deed was a significant reduction in the Rileys’ indebtedness to the bank, arising from related personal guarantees.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>The twist in the tale was that RHL was not a party to the Settlement Deed, with the company having been wound up, dissolved, and finally struck off the register of companies in 2015. Its assets, including any claims it may have been entitled to make, then passed to the Crown under the rules of <em>bona vacantia</em>.&nbsp;</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>In 2022, Mr Riley acquired the benefit of RHL’s own claims in misrepresentation from the Crown, and undertook to apply any funds recovered in accordance with the terms of its liquidation, for the benefit of its creditors.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>In the index proceedings, Mr Riley asserted that RHL was not a party to the Settlement Deed, and could not therefore be bound by it. Furthermore, he claimed not to hold his acquired claim in a personal capacity, but rather as a trustee on behalf of RHL’s creditors.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>In upholding the first instance decision, the Court of Appeal rejected the argument that because RHL’s claim had been acquired by assignment, or was said to be brought in a representative capacity, it was somehow immune from the terms of the Settlement Deed. Bean L J opined that <em>“the whole point of the Settlement Deed was that the Rileys would pay a significantly reduced sum, over an extended period, in full and final settlement of their personal liability to the bank and would not and could not reverse or in any way undermine the finality of that arrangement by themselves bringing any subsequent proceedings….” . </em>Whilst acknowledging that a third party acquiring the claims from RHL’s administrators may have been untroubled by the Settlement Deed, that was clearly not the facts of this case, which the Court agreed had no real prospect of success.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>The Rileys arguments did not end there. They also asserted, amongst other matters, that the “equitable sharp practice” doctrine prevented the bank from relying on the Settlement Deed in relation to the fraud claims. They said that the bank had committed a fraud upon them, of which they had no knowledge. Their argument was that it was sharp practice for the bank to sit by whilst they entered into an agreement discharging its own liability. At first instance, it had been held that the Rileys had settled unknown claims, which extended to fraud, so there was no scope to find that the bank was guilty of sharp practice.&nbsp;</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>On appeal, the Rileys argued that a generally worded release should not preclude the victim from being able to pursue a claim in fraud, where facts are subsequently identified which enabled such a claim to be brought. &nbsp;In the index case, Bean LJ noted that the first instance judge had put the case in a nutshell when he said that allegations of deliberate wrongdoing formed the backdrop of the Settlement Deed. In the Court’s view, anything discovered subsequently added very little to the thrust of the case.&nbsp; The Court also observed that the index case had a striking similarity to the Court’s own binding decision in <em>Maranello Rosso Ltd v Lohomij BV and</em> Ors [2022] EWCA Civ 1667, which made clear that express words are not always, or even generally, required to release a claim in fraud. &nbsp;&nbsp;</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>The Court of Appeal acknowledged that there were strong policy reasons why, when a party was an innocent victim of concealed fraud, which was not reasonably capable of being discovered before a settlement was reached, a generally worded release clause may not preclude the victim from pursuing a claim in fraud. Conversely, it was also noted that there were strong policy reasons for settlements to be upheld and that it was in the nature of wide-ranging settlement agreements, such as the one under discussion, for a party to give up a potential cause of action of which he was not aware. Furthermore, in the index case, the clear background to the Settlement Deed were allegations of fraudulent conduct. There was therefore no scope for the equitable sharp practice doctrine to be deployed and such a claim had no real prospect of success.&nbsp;</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>The appeal was therefore dismissed, albeit it is understood the Rileys are seeking permission to appeal to the Supreme Court.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><span style="text-decoration: underline;">Learning Points</span></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>Firstly, it would have been a safer prospect for Mr Riley to have acquired RHL’s rights in the name of a third-party entity, unconnected with the Settlement Deed (or at least assigned those rights on), before instigating proceedings.&nbsp;</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>Secondly, lawyers often cite the phrase <em>“fraud unravels all” </em>indiscriminately<em>,</em> but as <em>Riley</em> clearly demonstrates, this is not always accurate. Where parties enter into wide ranging settlement agreements, for their own benefit, against a background of fraudulent allegations, they will very likely be held to their bargain, regardless of whether the “F-word” is used.</p> <!-- /wp:paragraph -->

Club Property Problems

<!-- wp:paragraph --> <p></p> <!-- /wp:paragraph --><!-- wp:list {"ordered":true} --> <ol class="wp-block-list"><!-- wp:list-item --> <li>Unincorporated associations (which include clubs and associations) are extremely varied and range from barristers’ chambers, which are commercial in nature, to party political associations and working mens clubs, which are directed towards improving the lives of their members and the larger community. No specific statute applies to unincorporated associations. The general law of trusts and property does.<br><br></li> <!-- /wp:list-item --><!-- wp:list-item --> <li>Under English law a trust for a (non-charitable) purpose is void under the Rule Against Perpetuities. In particular, party-political purposes are not charitable. As a result, any gift of land or any other asset to an unincorporated association has to be made to (and will be construed by the Court as having been made to) the members for the time being of that unincorporated association and subject to its rules (see <em>Re Recher’s Will Trusts </em>[1972] Ch 526). Land has to be held by up to four trustees upon such trusts. The rules of an unincorporated association may restrict the right of members to occupy or make use of specific parts of the premises held on trust for them (such as separate changing rooms), but it would be very rare for such rules to restrict entirely the right of a member to use the premises. Accordingly, each member of an unincorporated association has a largely unrestricted right to occupy and make use of the premises of that unincorporated association.<br><br></li> <!-- /wp:list-item --><!-- wp:list-item --> <li>This article deals with five practical issues affecting the ownership of club property, being as follows:<br> 1) Issues relating to joining and leaving<br> 2) Alienation<br> 3) Adverse possession<br> 4) Missing or deceased trustees<br> 5) Missing conveyances<br><br><span style="text-decoration: underline;">1) Issues relating to joining and leaving<br></span><br></li> <!-- /wp:list-item --><!-- wp:list-item --> <li>The fact that the premises are held upon trust for the members of the unincorporated association for the time being means that (unless the rules state otherwise) no introduction payment is made when a member joins and no exit payment is made on departure.  No document has to executed in either case. Beneficial ownership is tied to the list of members. The adequacy is such a list is a problem for many clubs especially where the rules provide for automatic cessation of membership on non-payment of subscriptions.<br><br></li> <!-- /wp:list-item --><!-- wp:list-item --> <li>An unincorporated association may decide that its premises should be held in a different way. This could be by way of a separate trust or a company. In either case, the decision has to be made as to whether each member of the unincorporated association is to have an equal interest in the separate trust or an equal shareholding in the company or whether there should be fixed interests in the separate trust and set shares in the company.  Fixed interests and set shares may create an “us” and “them” problem particularly where senior members have beneficial interests in the separate trust or shares but junior members do not. However, tying beneficial interests in the separate trust or share ownership to membership of the unincorporated association also carries with it problems as it is necessary to acquire such interests on joining and sign away such interests on cessation of membership. In practical terms, this can be difficult. In many unincorporated associations it is often assumed that the beneficial interest in premises held on a separate trust or shares in a company holding the same will be relinquished on cessation of membership. However, if this assumption is not set out expressly in the rules (or in the trust deed or the articles of association), this may cause disputes if the premises have to be sold. The issue should not be considered retrospectively when this occurs. I dealt with a case some years ago (<em>Faulkner v Bennett </em>[2011] EWHC 3702) where it was necessary to obtain the approval of the Court to enable shares in a company incorporated to hold premises used by an unincorporated association to be expropriated on cessation of membership even where it was accepted that share ownership was tied to membership. <br><br><span style="text-decoration: underline;">2) Alienation</span><br><br></li> <!-- /wp:list-item --><!-- wp:list-item --> <li>Trustees of premises held upon trust for an unincorporated association often assume that they have a right to decide whether such premises are to be sold. This is not the case. Such trustees hold the premises upon trust for the members of the unincorporated association for the time being and subject to its rules. Invariably, rules provide that management is vested in the management committee and not the trustees. Accordingly, the trustees hold the premises at the direction of the management committee. In any event, as each member has a beneficial interest in the premises there is no power for the management committee, or the trustees or for a majority of the members to alienate the premises of the unincorporated association against the wishes of a “significant minority” of the members (see Ashton &amp; Reid, Second Edition, paragraph 8.5; <em>Murray v Johnstone </em>(1896) 23 R 981). “Significant minority” is not defined as this is case law. Each member is allowed to vote and “significant minority” is tied to voting rather than membership. I have always taken the view that 10 per cent of voting members is a “significant minority”.<br><br></li> <!-- /wp:list-item --><!-- wp:list-item --> <li>As regards premises, “alienation” involves either a sale or the grant or a long lease or the grant of a tenancy subject to the provisions of Part II of the Landlord and Tenant Act 1954.<br><br></li> <!-- /wp:list-item --><!-- wp:list-item --> <li>As the trust is now a trust of land, the trustees could apply to the Court for a direction as to whether the premises ought to be alienated under section 14 of the Trusts of Land and Appointment of Trustees Act 1996. There is no suggestion that the principle described above does not apply. However, the trustees might be able to persuade the Court that an alienation ought to be made against the wishes of a “significant minority” of the members in exceptional circumstances. Such exceptional circumstances might arise if the premises became dangerous or impossible to maintain.<br><br></li> <!-- /wp:list-item --><!-- wp:list-item --> <li>Subject to the difficulty described above, the ability of the members of an unincorporated association to alienate premises is crucial because it prevents premises from becoming unused if not required. This is against the public interest and is the main reason for the Rule Against Perpetuities. Subject to any rules to the contrary, if the premises are alienated, the members can in theory merely divide the proceeds between them equally even if there is an underlying party political or moral purpose to the unincorporated association. <br><br><span style="text-decoration: underline;">3) Adverse possession<br></span><br></li> <!-- /wp:list-item --><!-- wp:list-item --> <li>As the members of an unincorporated association are entitled to occupy at least the majority of its premises (by reason of their beneficial interest), there can be no question of members claiming adverse possession as against the trustees. Claims for adverse possession of other land which is not within the “paper” title of the trustees are problematic because the membership fluctuates from year to year. It is the members who are in possession and not the trustees. It is also far from clear who would make a claim for adverse possession. <br><br><span style="text-decoration: underline;">4) Missing or deceased trustees<br></span><br></li> <!-- /wp:list-item --><!-- wp:list-item --> <li>Trustees of the premises of an unincorporated association are usually selected for long-service or status. In practical terms, this does not make sense because such persons are likely to die first or leave the area. As unincorporated associations continue to operate for decades without change, it is inevitable that situations will arise when some or all of the trustees have died or cannot be located.<br><br></li> <!-- /wp:list-item --><!-- wp:list-item --> <li>Section 44 of the Trustee Act 1925 gives the Court the power to vest the property of an unincorporated association in new trustees where the Court has appointed new trustees or when it is “uncertain” as to who the trustees are.  In practice, the Court is reluctant to exercise this power where the same result can be obtained by other means. The identity of trustees cannot be uncertain merely because no efforts have been made to trace. Other means usually involve extensive research by the current officers or members of the unincorporated association. Where premises are conveyed to the unincorporated association (whether by gift or otherwise), it will usually be possible to identity the original trustees. There may be a minute which records this or articles in the local newspaper. The legal title is held on joint tenancy and survivorship applies. It will usually be possible (albeit difficult) to identify when each original trustee died and thereby identify the last original trustee to die or a surviving original trustee. The surviving trustee or (if dead) his or her personal representatives can use section 36 of the Trustee Act 1925 to appoint new trustees. If necessary, a chain of representation with grants of probate can be used.  Where there is no such chain, it may be possible to persuade a relative of the last trustee to die to take out a grant of letters of administration or for a member of the unincorporated association to take out a limited grant (a grant de bonis non) merely in relation to the premises. <br><br><span style="text-decoration: underline;">5) Missing conveyances<br></span><br></li> <!-- /wp:list-item --><!-- wp:list-item --> <li>Compulsory registration of title commenced area by area in 1975 and only affected the whole country in 1990. Where premises are conveyed to the trustees of an unincorporated association, it would be rare for any necessary compulsory registration to be omitted. Even so, there are many situations where conveyances were made before 1990 and there has been no requirement to register since such time. Inevitably, pre-1990 conveyances are often lost particularly when the same are held by trustees who have died. More often than not, this problem is combined with the missing trustee problem described above.<br><br></li> <!-- /wp:list-item --><!-- wp:list-item --> <li>The position adopted by HM Land Registry on an application for first registration of premises held upon trust for an unincorporated association can be difficult to predict. It is necessary to provide evidence of the existence of the lost conveyance (whether by minutes or press articles or the like), and any documents necessary to perfect title but HM Land Registry is often overly concerned as to the possibility that there might be alternative claimants even where this is unlikely. A period of long-user by the unincorporated association might persuade HM Land Registry that potential alternative claims are to be ignored. If HM Land Registry is not prepared to grant first registration on the evidence tendered to it, it will be necessary to apply to the Court for a declaration that particular trustees hold the premises upon trust for the unincorporated association. HM Land Registry will then be obliged to give effect to such declaration.     </li> <!-- /wp:list-item --></ol> <!-- /wp:list -->

Partnership Property

<!-- wp:paragraph --> <p>These are the notes from the seminar and workshop provided by Sean Kelly and Cait Sweeney to the Property Bar Association on 30<sup>th</sup> April 2024.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>1.&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; It is often thought that partnership claims revolve around issue of expulsion and the mechanics of winding-up. However, in most cases the major issues which have a monetary value concern the ownership of assets (and in particular land) used by or generated by the partnership. This will be the case whether the partnership is to be wound-up by the Court or the interest of a departing partner is to be bought under the terms of a partnership agreement. It would be rare for a partnership agreement to deal with land which is not partnership property.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>2.&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; In relation to land used by a partnership, the issues to be considered are (in order) as follows:</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1)&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Is the land partnership property?</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2)&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Is the land held at a joint tenancy or tenancy in common outside the partnership?</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><strong><u>Partnership property</u></strong></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1) The nature of partnership property</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>3.&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Section 20(1) of the Partnership Act 1890 ("the Act") provides as follows:</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>                                    <em>"All property and rights and interests in property originally brought into the partnership stock or acquired, whether by purchase or otherwise, on account of the firm, or for the purposes and in the course of the partnership business, are called in this Act partnership property, and must be held and applied by the partners exclusively for the purposes of the partnership and in accordance with the partnership agreement."</em></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>4.&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp; No partner has any interest in specie in partnership property. Rather, each partner has an interest in the net balance of the assets and liabilities of the partnership as manifested in the capital account (see <em>Popat v Shonchhatra </em>[1997] CA, 1 WLR 1367). Accordingly, partnership property is something distinct from property held:</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1)&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; By one partner beneficially</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2)&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; By some or all of the partners as beneficial joint tenants</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3)&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; By some or all of the partners as beneficial tenants in common</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 4)&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Under some other specific trust arrangement.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Partnership property is to be applied for the business of the partnership while trading and, following dissolution, it is available to meet the demands of creditors (under section 39 of the Act) with the ultimate surplus to be distributed between the partners in accordance with the partnership agreement.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2) The significance of partnership property in winding-up</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>5. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The significance of partnership property is tied-up with the manner in which accounts of a partnership are produced.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>6. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; In the context of partnership law, "capital" is a sum of money which is invested by a partner in the business of the partnership on the basis that the same is not to be returned until dissolution (or ceasing to be a partner in a joint lives partnership). It is similar to the concept of capital in a limited company or an LLP. An "advance" is a sum of money which is loaned to the partnership which is expected to be repaid. At least as a matter of law the two are different and such difference is accepted by the order of priority of payments set out in section 44 of the Act.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>7. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Income profits arise out of the usual trading of a partnership. Capital profits arise from the sale of partnership property otherwise than as a result of normal trading such as the sale of the land from which it trades. Capital profits follow income profits save where the contrary is agreed expressly (which would be rare). Each is dealt with differently following dissolution.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>8.&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; On dissolution, the right of the departing partner to income profits ends. However, the departing partner can claim under section 42 of the Act either interest at 5% per annum on the value of his share in the partnership or the profit generated thereby. This is the “net” share, so that if the capital account of the departing partner is in deficit, he can not claim a section 42 account (see <em>Sandhu v Gill </em>[2006] Ch 456). The logical extrapolation from this decision is that the capital accounts of the partners have to be calculated to dissolution (using valuations if necessary) so that the departing partner’s claim to interest or profits can be quantified properly.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>9.&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Section 42 of the Act does not apply to capital profits. Partnership property remains such until it is sold. The value of any partnership property in the accounts of the partnership is merely an estimate (and often a historic value). The value crystalises on sale (whether to a third party or one of the partners). On sale, the value in the accounts is replaced by the sale price and the capital profit which arises is divided between the partners in the capital profit sharing ratios over the period involved. Where there has been a change in profit shares over a number of years, the allocation of capital profits will be difficult.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>10.&nbsp; &nbsp;&nbsp;&nbsp;&nbsp; A capital account in its strict sense is merely a statement of the amount of capital introduced by the partners. A current account in its strict sense is an account of what has happened since the partnership has commenced in terms of:</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1)&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Undrawn profits</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2)&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Advances made to the partnership</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3)&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Expenditure incurred by the partnership for individual partners.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; In practice, it is rare to find accounts for a partnership which distinguish between capital accounts and current accounts in any way. The only general exception would be old farming partnerships. The usual capital account is a combined capital and current account where the total of the capital accounts of the partners equates to the net assets of the partnership. "Capital account" is normally used to refer to this combined account. Accordingly, it is possible (and indeed quite common) to have a negative balance on a partner's capital account.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>11.&nbsp; &nbsp;&nbsp;&nbsp;&nbsp; There is no Statement of Standard Accounting Practice (“SSAP”) for partnerships. Accordingly, there is no requirement to revalue partnership property and strong tax reasons for not doing so. Accordingly, partnership land is often included in accounts at extremely low historic cost and the capital profits on sale will need to be dealt with in winding-up.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>12. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; This logical analysis of the position does not accord completely with the decision of the Court of Appeal in <em>Bathurst v Scarborow </em>[2004] EWCA Civ 411. In this case, land was purchased during the course of a short-lived partnership in respect of which no signed accounts were ever prepared. Although it seems likely that the land was purchased with partnership funds, it was not alleged that this was the case. The conveyancing solicitors were instructed to purchase such land on a joint tenancy but the box on the transfer was not executed. At first instance, the Master held that the land was purchased as partnership property because this was the clear intention of the partners on the facts. The Court of Appeal overruled this finding of fact as it was clear that the partners intended that the land should be purchased by them as joint tenants. This is what the conveyancing solicitors had been asked to do. So far so good. The Court of Appeal then went on to suggest that partnership property could be held on joint tenancy without explaining how this might affect the sale of the same to enable the payment of creditors. <em>Popat v Shonchhatra </em>&nbsp;was not cited to the Court of Appeal in <em>Bathurst v Scarborow </em>and <em>Bathurst v Scarborow </em>itself was not cited to the later Court of Appeal in <em>Sandhu v Gill</em> (which followed <em>Popat v Shonchhatra). </em>It is suggested that this (obiter) part of the judgment needs to be treated with care.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>13.&nbsp; &nbsp;&nbsp;&nbsp;&nbsp; The fact that the interest of a partner is reflected in his capital account means that a partner's capital account can be considered to be an interest in property in its own right. Thus, capital accounts can be held as joint tenants and can pass by survivorship. This principle was accepted by the Court of Appeal in <em>Hopper v Hopper </em>[2008] EWCA Civ 1417 where the only issue between the parties was as to whether there was a joint capital account between father and mother, with children having separate capital accounts or whether there was a single joint capital account. It was suggested in argument that joint capital accounts are common. This may be overstating the case. They are not uncommon as between husband and wife in farming partnerships. Indeed, this arrangement has many benefits because it means that the death of the first spouse does not lead to a general dissolution. The partnership can carry on as before (see also <em>Graham v Graham </em>[2018] 5 WKUK 132, HHJ Pelling, KC).&nbsp;&nbsp;&nbsp;&nbsp;</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3) Land becoming partnership property</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>14.&nbsp; &nbsp;&nbsp;&nbsp;&nbsp; Unless the business of the partnership is selling land, there is no requirement that any land which it uses should be partnership property. The land can be owned by one or more of the partners outside the partnership and made available to the partnership either by way of a lease or licence whether subject to payment or otherwise. The mere fact that land is used by a partnership does not make it partnership property (see <em>Davis v Davis </em>[1894] 1 Ch 393). Nor does paying the rent make a farming lease a partnership asset (see<em> Eardley v Broad </em>[1970] 215 Estates Gazette 823).</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; a) Land purchased before the partnership commenced</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>15.&nbsp; &nbsp;&nbsp;&nbsp;&nbsp; Where the land was purchased before the partnership commenced, it has to become partnership property. This can arise by express declaration of trust in the usual way and such an express declaration of trust will be binding (see <em>Pettitt v Pettitt </em>[1970] AC 777).&nbsp; The land would be transferred to A and B “as partners” or similar. This would be unusual. Such a declaration of trust can also be included in the partnership agreement. Otherwise, it is necessary to rely on the bringing in of the land into the partnership under section 20(1) of the Act.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>16.&nbsp; &nbsp;&nbsp;&nbsp;&nbsp; The transfer of land into a partnership necessarily requires the agreement of all partners because the partner who transfers the land into the partnership will require credit for the value of the same as an addition to his capital account. Without such credit, the accounts will not balance in any event. While this agreement can be express or implied (see<em> Miles v Easter </em>[1953] 1 WLR 581, Harman J), an implied agreement is unlikely to arise in the case of land as land can be made available to the partnership in a variety of ways. Section 20(1) of the Act is in effect a conveyancing section (see <em>Wild v Wild </em>[2018] EWHC 2197 (Ch) HHJ Eyre, KC). There needs to be an agreement to bring the land into the partnership and section 20(1) of the Act avoids the need to comply with section 2 of the Law of Property (Miscellaneous Provisions) 1989.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <em><u>i) Bookkeeping entries</u></em></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>17.       It is unclear whether bringing in needs to be accompanied by appropriate bookkeeping entries. Physical assets such as stock or machinery can be “brought in” to the partnership by delivery to the partnership premises. However, land does not move. All of the leading cases involve situations where the accounts show land as a partnership asset and the Court has been asked to determine whether this is sufficient evidence of an agreement to bring in. It is unlikely that there could be an agreement to bring in without this being accompanied by bookkeeping entries.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>18.       In practice, it can be very difficult to show bookkeeping entries to record the bringing in of land into a partnership. Invariably, the problem is the starting position. The accountant who produces the first accounts of the partnership ought to record the individual pieces of land which (when combined) give rise to the total land value. However, this is rarely the case for farming partnerships. The record (if made) might well become lost. Accountants also tend to treat money spent on improvements to land held outside the partnership as land investments of the partnership which can provide a further complication.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <em><u>ii) Evidence of agreement</u></em></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>19.       It is often assumed by clients that the bookkeeping entries themselves will provide sufficient evidence of an agreement to bring land into the partnership. Surely, that is the whole point of the exercise. Clients tend to assume that this is the case. This is not the way that the Court looks at the matter.  Accountants who produce partnership accounts rarely have access to conveyancing documents and accountants often assume that all land used by a partnership is partnership property. In a line of cases starting with <em>Barton v Morris </em>[1985] 1 WLR 1257 and ending with <em>Wild v Wild</em>, the Court has refused to accept bookkeeping entries as reliable evidence of an agreement to bring land into the partnership. Insofar as it is evidence, it has to be weighed against other available evidence. As no partner has an interest in specie in any part of partnership property, statements made by a partner that he has an interest in a specific piece of land (whether by including it in his Will or in a trust document) may provide a strong rebuttal to the contention that the land is partnership property.       </p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; b) Land purchased during the partnership</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>20.       Section 21 of the Act provides as follows:</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp; <em>"Unless the contrary intention appears, property bought with money belonging to the firm is deemed to have been bought on account of the firm"</em></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>21.       This provision usually deals with the ownership of land bought using partnership funds.  A contrary intention will only appear if there is an express declaration of trust or evidence that this is what was actually intended by the partners. Contrary intention is not merely failure to include land within partnership annual accounts unless that failure is intentional (see <em>Mehra v Shah </em>[2004] EWCA Civ 632)</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>22.       There are a number of issues relating to whether in any particular case property is bought with money belonging to the firm. These are as follows:</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1)&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Partnership funds can only be used if the partnership has a bank account or payment can be otherwise proven.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2)&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The section is dealing with monies owned beneficially by the partnership at the date of the purchase. Monies taken by a partner as agreed drawings and then applied by him in buying property are not monies of the partnership. However, it is not clear whether this principle applies to drawings which are not agreed. In practice, monies misappropriated by a partner are treated as drawings when the next annual accounts are drawn up (because there is no other way of making the accounts balance). The accountants with often do this without explaining what has been done. In <em>James v James </em>[2018] EWHC 43 (Ch) the Court accepted at face value the fact that monies used by one partner had been treated as his drawings and that such drawings had been used to buy land as indicating that such land was not partnership property. There was no analysis of whether the drawings were agreed.&nbsp;&nbsp;</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3)&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The section is most obviously directed at one off purchases. It is far from clear</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>that the section applies to a situation where one partner buys land with the</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>assistance of a mortgage and the partnership pays the sums due under the</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>mortgage. It can be easily inferred that such payments are to be treated as rent</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>(see <em>Morton v Morton </em>[2022] EWHC 163). &nbsp;</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 4) Land transferred out of a partnership</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>23.       Section 2 of the 1989 Act (relating to the agreement for the sale or an interest in land) and section 53 of the Law of Property Act 1925 Act (relating to the actual transfer of an interest in land) need to be considered in respect of each transaction whereby land is to leave a partnership. Section 20(1) of the Act is a one-way ticket in.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>24.       Where parties agree to a transfer of a share of a partnership, whether on dissolution or retirement, section 2 of the 1989 Act must be complied with if the partnership owns land. Where an option is granted by one partner to another to sell or purchase another's share, the option must also comply with section 2 of the 1989 Act if the partnership includes land.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>25.       Strictly, any transfer of an interest in land into or out of a partnership must comply with section 53 of the 1925 Act. The fact that there is no written transfer may indicate that there was no actual agreement for the transfer of land into or out of the partnership. The strength of this indication will depend on the extent to which the partnership otherwise complied with legal formalities. If the parties agree that land is to be transferred into a partnership and act in reliance upon the fact that it has been, then it is very likely that an estoppel will be found to this effect. This is probably why points based upon section 53 of the 1925 Act are rare.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 5) Rights of occupation</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>26.       If the land is not an asset there has to be some right to occupy. There will not be a lease implied for the benefit of a partnership which occupies land which is not a partnership asset. The use made of it by the firm and all the partners is given effect to by the creation of implied ‘non-exclusive' licences to the partners, not to the partnership (see <em>Harrison-Broadley v Smith </em>[1964] 1WLR). These licences will not be determinable during the partnership if it is inconsistent with the duty of good faith. On dissolution given the right of all partners to wind up the firm, the licences will continue for this purpose</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 6) Rules for determining whether non-land assets are partnership property</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>27.       The fact that an asset is not capable of being sold does not prevent it from being partnership property (see <em>Don King v Warren </em>CA [2000] Ch 291). The partner in whom it is vested will have to account for its value. Non-alienable assets cannot be sold as part of winding-up. However, the partner in whom they are vested can be made to account for their value.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>28.       <em>Miles v Clarke </em>is an important case because it is often assumed that all of the non-land assets used by a partnership in the conduct of its business will be assets of the partnership. This will be the case where the asset is bought using the funds of the partnership. Otherwise, the asset will only be a partnership asset by implication is this is required as a matter of business efficacy which will be unusual.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 7) Property generated by the partnership</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>29.       Where an asset is generated by one partner through his position as a partner, there is no presumption as to whether such asset is partnership property. The Court will have to determine whether there is an agreement to this effect (see <em>Goldup v Cobb </em>[2017] EWHC 526 (Ch).) In this case a partner in a solicitors practice acquired pension rights as a result of being a coroner. Income derived from such position was treated as partnership income. However, the Court held that the pension rights which had accrued to such partner were not partnership property because there was no agreement (express or implied) to this effect.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8) The sale of partnership assets after winding-up</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; a) Presumption that all of the assets of the partnership should be sold</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>30.       Following dissolution the Court has the power to order the sale of all of the assets of the partnership (including land) and will usually do so because to do otherwise would or might deprive the former partners from realizing the maximum return from the assets of the partnership. The practice is only departed from in two situations, namely (i) when a <em>Syers v Syers </em>Order is made and (ii) where the sale of the partnership assets would offend statute or would otherwise be difficult to achieve</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>31.       It follows that in many cases it will be obvious that there will need to be a sale of the assets of the partnership and that the winding-up of the partnership cannot commence in proper without such sale. Although the current editors of Lindley state that the practice of the Court is not to order a sale at an early stage of a partnership dispute, this is not the practice of the Court. Unless there is some good reason why a sale would not be ordered at the trial of the claim, there is no good reason to delay a sale until such time. For example, if the issue between the partners is whether the profits are to be shared equally or one third two thirds, there is no good reason why the sale should be delayed until the trial. Obviously, of there is an issue as to whether a particular asset is a partnership asset, the sale might not be ordered until this issue has been determined. However, if the issue is whether the asset is partnership property or held as tenants in common in equal shares, sale might well be ordered as the Court has power to order sale of assets held as tenants in common in any event (see <em>Bagum v Hafiz </em>[2016] Ch 241).</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; b) Method of sale</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>32.       In principle, there is little difference between the conduct of the sale of partnership assets and a sale of co-owned assets. Any partner will be allowed to bid and the likelihood that a particular partner may bid will affect which who has conduct of the sale. A partner cannot bid and have conduct of the sale. The only concern of the Court is that the assets of the partnership should be sold at the best price reasonably obtainable in the circumstances. It is common for one partner to be given conduct of the sale on the basis that he will sell at or above a particular price provided that his agent considers that the price is the best price reasonably obtainable in the circumstances (which is a deliberately vague expression).</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>33.       It would be normal practice to allow a purchasing partner P effectively set off his share in the partnership against the price which he has to pay for a particular asset. P would agree to pay the purchase price and this would be included in the accounts as the value of the asset concerned.  P's capital account would be adjusted accordingly and would be set off against the purchase price.  P would normally be expected to pay a deposit pending the calculation of the set-off.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; c) Syers v Syers Orders</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>34.       The majority of partners (either in number or by partnership share) may apply to the Court for an Order that they be entitled to buy out the minority usually at the date of dissolution at a price to be determined by the Court. As remarked by Hoffmann LJ in <em>Hammond v Brearley </em>[1992] WL 12678533, <em>Syers v Syers </em>is more often cited than applied. It is an unusual order because it deprives the minority of the ability to test the market so as to ensure that the assets of the partnership are sold at the best price obtainable.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>35.       A <em>Syers v Syers </em>Order was made in <em>Mullins v Laughton </em>[2003] Ch 250, Neuberger J. In Mullins the partnership was a joint lives partnership where the defendants had attempted to expel the claimant for breaches of the partnership agreement. The claimant sought the dissolution of the partnership under section 35 of the Act. This was granted, but the Court gave the majority the opportunity to buy out the claimant at a valuation. There are a number of unusual features of the case which make it easy for the Court to make a<em> Syers v Syers </em>order. These were as follows:</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1)&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The application was heard at the same time as the partnership was dissolved.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2)&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp; The majority could have expelled the claimant if they had properly used the procedure of the partnership agreement</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3)&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp; There was no real opposition to the making of the order and no suggestion that the assets of the partnership could not be valued easily.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>36.       A <em>Syers v Syers </em>Order was refused in <em>Benge v Benge</em>, 13/02/17, Murray Rosen, KC where there was a real risk that a valuation would not achieve the result achievable on a sale in the open market.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>37.       Where the Court makes a <em>Syers v Syers </em>order, the usual rule is that the sale will take place following the order. However, the order can be retrospective so that the assets of the partnership are deemed to have been sold on dissolution. This may be an advantage for the departing partner in that retirement relief for CGT can be retained.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><strong><u>Land bought for business purposes</u></strong></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>38.       Once it has been determined that land has not been bought as partnership property, it is necessary to determine whether it has been purchased as joint tenants or tenants in common. As always, a declaration of trust will determine the issue. However, if there is no declaration of trust, how is the issue to be determined.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>39.       In a domestic context, the starting point is that equity follows the law. Where land is transferred to A and B, the initial starting point is that they hold the same as joint tenants (see <em>Stack v Dowden </em>[2007] 2 AC 432) and <em>Jones v Kernott </em>[2012] 1 AC 776). However, where land is purchased for business purposes, the starting point has always been that survivorship is not to apply as this is inconsistent with a business relationship. In <em>Williams v Williams </em>[2024] EWCA Civ 42, the Court of Appeal held that the presumption relation to business purchases still applies as no purchase could be approached “in a vacuum”.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>40.       Accounts of a partnership do not operate as severance of joint tenancy (see Bartin v Morris).</p> <!-- /wp:paragraph -->

Conflict and “The Tendency To Be Swayed By Human Nature Rather Than Duty”

<!-- wp:paragraph --> <p><em>Irwin Mitchell Trust Corporation v PW (By Her Litigation Friend The Official Solicitor) and The Public Guardian </em>[2024] EWOP 16</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>Marisa Lloyd and Lucy Evanson&nbsp;summarise and comment on the judgment on Irwin Mitchell Trust Corporation v PW (By Her Litigation Friend The Official Solicitor) and The Public Guardian [2024] EWOP 16 in which Marisa represented the Public Guardian</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>Full Judgment here - <a href="https://www.bailii.org/ew/cases/EWCOP/2024/16.html" target="_blank" rel="noreferrer noopener">https://www.bailii.org/ew/cases/EWCOP/2024/16.html</a></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>The court considered self-dealing and conflict in circumstances where Irwin Mitchell Trust Corporation (‘IMTC’) acting as deputy for PW, appointed Irwin Mitchell Asset Management (‘IMAM’) to manage the investment of PW’s funds. &nbsp;</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><strong>Factual background</strong></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>PW suffered global cognitive impairment which resulted in a loss of capacity. After a successful claim against the treating healthcare trust, she received significant damages. IMTC was appointed as her property and affairs deputy and subsequently held a ‘beauty parade’ after which the deputy appointed IMAM as investment manager for PW.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>In 2019, IMTC made an application to the Court of Protection for authority to execute a statutory will for PW. Concerns were raised by the Official Solicitor (‘OS’) about the appointment of IMAM as investment manager. IMTC was directed to make an application to seek retrospective authority to instruct IMAM. The Public Guardian was joined as a party.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><strong>Legal background</strong></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>Section 19(6) of the Mental Capacity Act 2005 (‘the MCA’) provides that, ‘<em>A deputy is to be treated as P’s agent in relation to anything done or decided by him within the scope of his appointment</em>’. HHJ Hilder noted that “<em>the relationship between a deputy and the person for whom the deputy is appointed is a fiduciary one</em>”.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>The basic proposition about the position of a fiduciary in a position of conflict was set out by Lord Herschell in the House of Lords decision of <em>Bray v Ford</em> [1896] AC 44 at 51-52, ‘<em>It is an inflexible rule of a Court of equity that a person in a fiduciary position… is not, unless otherwise expressly provided, entitled to make a profit; he is not allowed to put himself in a position where his interest and duty conflict. It does not appear to me that this rule is, as has been said, founded upon principles of morality. I regard it rather as based on the consideration that, human nature being what it is, there is danger, in such circumstances, of the person holding a fiduciary position being swayed by interest rather than by duty, and thus prejudicing </em><em>those whom he was bound to protect.’</em></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>The general principle was restated in <em>Boardman v Phipps</em> [1967] 2 AC 46 which also referred to <em>Aberdeen Railway v Blaikie</em> (1854) UKHL 1 Macq. 461 at 136 per Lord Cranworth LC who said &nbsp;‘<em>and it is a rule of universal application, that no one, having</em> <em>such duties to discharge, shall be allowed to enter into engagements in which he has, or can have, a personal interest conflicting, or which possibly may conflict with the interests of those whom he is bound to protect</em>.’</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>HHJ Hilder considered the law of agency stating: ‘<em>Conversely, the law of agency generally provides that an act of the agent may rank as the act of the principal if the principal ratifies it … Where the principal lacks capacity to make decisions about their property and affairs, only the Court of Protection may grant such ratification. Its jurisdiction for doing so … is found in the conjunction of sections 15(c) and 19(4) of the Mental Capacity Act 2005</em>.’</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><strong>The Question</strong></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>There were several questions agreed between the parties but the predominant question for HHJ Hilder to determine was whether the rule relating to conflict of interest was applicable to the appointment of IMAM by IMTC.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><strong>Decision</strong></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>There is no English authority that directly deals with the question of whether the engagement by a fiduciary of a related investment company presents ‘<em>a real possibility of conflict of interest.’ </em>IMTC accepted that its engagement of IMAM gave rise to the ‘<em>theoretical potential’ </em>for a conflict of interest, but contended that there was<em> “no real, sensible possibility</em>” of conflict because it had adopted procedures by holding a beauty parade etc. which eliminated that potential. Counsel for the OS and PG disagreed contending that there was an actual conflict that was not mitigated by the processes followed by IMTC.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>Having reviewed the evidence, HHJ Hilder held that :</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><em>61. The Court of Protection is no stranger to conflicts of interest…</em></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><em>62. The conflict of interest in question in this matter comes down to IMTC being financially better off if IMAM is appointed. IMTC accepts this as a “theoretical potential”. IMTC’s argument is that such potential is extinguished to the point of no “real sensible possibility” because of procedures it has adopted. Yet nowhere in the development of those processes or in these proceedings has IMTC ever denied either that the decision to appoint IMAM is made by IMTC in its fiduciary role… or that, even with full implementation of those processes, IMTC is better off if IMAM is appointed. At a most basic level, those two concessions amount to recognition of the existence of a conflict of interest: one plus one makes two.</em></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><em>63. The processes which IMTC has adopted when considering the appointment of IMAM do not target the substance of the self-dealing rule: that is, they do not remove the financial gain to IMTC. Such processes </em>could<em> have been adopted, for example by agreeing to waive any fee to IMAM where the instruction comes from IMTC as deputy. Then there would be no financial advantage to IMTC in the instruction of IMAM, no interest to be in conflict with the interests of the person for whom IMTC acts. Of course, I recognise that the Irwin Mitchell group would be likely to reject this approach as lacking commercial sense but that merely reinforces the existence of IMTC’s interest in the appointment of IMAM.</em></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>After further discussion of the processes adopted by IMTC, and the involvement of a family member in a beauty parade in ratifying or reducing the ‘theoretical potential’ of conflict of interest, HHJ Hilder concluded that there was a ‘<em>very clear, not remotely fanciful, actual conflict of interest in IMTC appointing IMAM to manage PW’s funds,</em>’ [67] This breached the self-dealing rule. She concluded that &nbsp;‘<em>The processes adopted by IMTC do not and could not extinguish that conflict. In my view, that these proceedings have been necessary at all is a paradigm example of Lord Herschell’s wise recognition of the tendency of human nature to be swayed by interest rather than duty.”</em> [93]</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p><strong>Commentary</strong></p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>The judgment confirms that there is a conflict of interest in a trust corporation instructing a connected company to act as an investment manager. The issue of conflict cannot be mitigated by conducting a beauty parade which includes the connected company. Further, the appointment cannot be ratified by a family member. &nbsp;Ratification must be carried out by the Court.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>The Public Guardian has already changed her guidance in the wake of <em>Re ACC </em>[2020] EWCOP. This reflects the view of the PG that, if financial advice is provided by a member of the deputy’s firm, potential conflicts of interest must be considered in the context of adhering to fiduciary duties, &nbsp;and where the deputies own interest and the interest of P are linked there must be an application to court for authorisation to instruct your own firm.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>There was insufficient evidence before the court to determine whether the appointment of IMAM was in PW’s best interests and should be ratified or whether it should be set aside. This will need to be determined in the future.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>However, there are many other cases where IMTC and other trust corporations have instructed connected companies. These cases will need to be reviewed and consideration given to the way forward. Given the need for court ratification of existing cases and prospective approval in respect of future new instructions, it may be viewed as highly unlikely that the ongoing instruction of connected companies can be justified as being in P’s best interests. In my view, it follows that &nbsp;in the absence of a successful appeal, this judgment is likely to signify the end of instructions of an asset manager from connected companies to the deputy.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p>Further, the judgment may also be viewed as relevant to the question of whether professional pension scheme trustees associated with firms providing other professional services can properly appoint their own firms to provide services.</p> <!-- /wp:paragraph --><!-- wp:paragraph --> <p></p> <!-- /wp:paragraph -->