UK case on the existence of a partnership and whether a limited company was a quasi-partnership

Oberman v Collins and another [2020] EWHC 3533 (Ch)
This case involved a dispute between two parties who had a personal relationship and lived together with their children, as to the entitlement to the beneficial ownership of a number of properties. The legal ownership of some was held by both parties jointly, some by a company which they operated jointly, some by the defendant alone, and some by a company operated by him alone.

Of particular interest is the court’s judgment that the parties had not been in partnership together. It noted that there was no express agreement for a partnership, there had been no discussion of matters such as the sharing of losses, mutual agency or dissolution, and there was none of the “usual” evidence of a partnership such as accounts, advertisements, agreements and other documents, bills, circulars, meeting and tax returns The parties had a joint bank account but it was not described as a partnership account and was explicable by the fact that the parties were living together. The Court of Appeal had held in Greville v Venables [2007] EWCA Civ 878 that it was possible to imply the existence of a partnership from conduct, but only where the court was “able to conclude with confidence both that the parties intended to create contractual relations and that the agreement was to the effect contended for”. The court concluded that in the present case the parties had chosen to organise their business relationship through a limited company, and it could not confidently conclude that they intended to create a legally binding contract which went beyond the relationship of shareholders and directors, let alone that they intended to enter into the legal relationship of partnership.

However, the court held that that the limited company set up by the parties was a quasi-partnership as defined in Ebrahimi v Westbourne Galleries [1973] AC 360: a small private company which additionally exhibited one or more of i) being being formed or constituted on the basis of a personal relationship, ii) being based on an understanding of shareholder participation, and iii) restrictions on the transfer of shares so that a shareholder who was removed from management could not simply withdraw his capital and leave. It held that, on the facts, the claimant had a legitimate expectation that she would be entitle to participate in the company’s management and be consulted on significant decisions, and that she had been excluded from management. The finding of a quasi-partnership allowed the court to impose equitable considerations equivalent to those on partners on the exercise of the rights and powers of shareholders. The court therefore ordered the defendant to purchase the claimant’s shares in the company without any discount for the fact that the claimant was a minority shareholder.

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