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Family partnership ends in tears

In the recent decision of the High Court of England and Wales in Smith v Crawshay, the Court gave a wide-ranging judgment considering various aspects of partnership law. Such partnership law is mirrored in large part in the Cayman Islands.

The claim was brought by the executors of the estate of a deceased person against the defendant, one of her children.

The claim related to the affairs of a partnership or partnerships carried on between the testatrix and her son, in the years leading up to her death. Essentially the claim was for the repayment of money which was alleged to be due from the defendant to the estate upon dissolution of the business on her death.

The claimants’ position was that there was one partnership (rather than two or three as contended by the defendant) between the testatrix and the defendant. The partnership agreement contained the usual provision that annual accounts must be signed by all partners and that those accounts would be binding on all, absent manifest error. The Court referred to the Scottish case of Montgomery v Cameron & Greig which set out the principle that in the absence of fraud or other dishonourable conduct, such a provision renders those accounts binding on the partners. No such allegation was made against the testatrix in these proceedings.

The Court also considered whether terms can be implied into a partnership agreement entitling a partner to remuneration for acting for the partnership, holding that under the Partnership Act 1890 (which is mirrored by the Partnership Law (2013 Revision) in the Cayman Islands) no partner is entitled to remuneration, unless there is an agreement, express or implied, that they are so entitled.

The well-known authority of Gestmin SGPS SPA v Credit Suisse (UK) Ltd was discussed with reference to the ever relevant concept of human memory. That case commented on modern research into the nature of memory and the unreliability of eyewitness evidence. The judge in this case quoted, with approval, from Gestmin reinforcing the view that in commercial cases, documentary evidence is to be preferred to witness’ recollections of what was said in meetings and conversations.  The judge adopted the approach that it is important to avoid the fallacy of supposing that, because a witness is confident in his or her recollection and is honest, that their evidence is any reliable guide to the truth.

The claimants successfully made out their case.

Family partnership ends in tears

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