A clause in a family farming partnership agreement set out what was to happen in the event that a partner ceased to be a partner for any reason and provided for the continuing partners to have a call option to purchase the share in the partnership of the outgoing partner and for the outgoing partner to have a put option requiring the continuing partners to purchase his share in the partnership. Two of the original partners died and one retired. It was common ground that options had been exercised in respect of those three partners and that the respective purchase price for each of the three partnership shares had been agreed. The claimants, the outgoing partners or their representatives, issued a Part 8 claim form seeking an order that the partnership be wound up. They also served statutory demands in the County Court on the defendants demanding payment of sums said to be due in respect of the purchase price of two of the partnership shares. The defendants applied to set aside the statutory demands. A question arose whether the purchase price, or part of it, was immediately payable prior to the service of the statutory demands on the continuing partners, such that the demands were valid. The claimants contended that once the partnership accountants had produced the accounts for the relevant agreed year end and the relevant expert valuation was to hand then it was possible to say that the purchase price regarding the partnership share had been liquidated.
On the application—
Held, application granted. Under the contract the value of the partnership shares had to be ascertained by a formula applied by the accountants and they had to produce the valuation by way of adjusted dissolution accounts or using the expert valuation and relevant year-end accounts and producing a calculation by way of a schedule of value. The valuation of the partnership share, in effect the purchase price, had to be determined by the work product of the accountants. If the valuation they produced was challenged, unsuccessfully, then it could be said that the debt had been liquidated or ascertained by their schedule. However, if, as in the present case, the schedule they prepared was successfully challenged, then the claimants could not say that the purchase price was ascertained or liquidated at the time of service of the statutory demands. The debt was not immediately payable for statutory demand purposes until the debt had been ascertained under the machinery provided for by the clause and that machinery was one requiring the accountants to provide figures. The application to set aside the statutory demands succeeded (paras, 55, 56, 60).
Blavo v Law Society for England and Wales [2017] EWHC 561 (Ch); [2017] WLR (D) 254; [2017] BPIR 909 applied.
James Malam `(instructed by Steel Switalskis Solicitors) for the claimants.
Sean Kelly (instructed by Berwins) for the defendants.