Land – Partnership – Pre-emptive sale order – Informal partnership subsisting between claimant and defendant – Assets of partnership including two properties – Parties seeking to end partnership – Properties having to be sold to effect winding-up of partnership – Claimant applying for pre-emptive sale order in respect of properties – Whether case being appropriate for making order sought – Application dismissed
The claimant and the defendants were brothers who had entered into an informal partnership, the assets of which included two freehold properties in Leicester. The parties fell out and wished to wind up the partnership. The claimant brought proceedings against the defendant seeking an order for sale of the two properties on the basis that the partnership had ended or, alternatively, should be brought to an end by the court under section 35 of the Partnership Act 1890. Accordingly, the partnership subsisted only for the purposes of its winding up. The two properties had to be sold in due course in order to effect the winding-up of the partnership.
The claimant applied for an order for the immediate sale of the properties. There was some measure of agreement and an order was drawn up to reflect those matters. However an issue was left outstanding as to whether a pre-emptive sale order ought to be granted in favour of a company whose shares were 70% owned by the claimant and 30% owned by one if his sons. The issue was whether the circumstances of the case made it appropriate to make a pre-emptive sale order in favour of the company.
Held: The application was dismissed.
The assets of the partnership had to be sold for the purposes of its winding-up. The court had power to control, and sanction, the terms of any sale. The court had power to allow any partner to bid on that sale, notwithstanding the fact that the claimant had only a 70% shareholding in the company. CPR 40.16 gave the court power to order a sale of land. Under paragraphs 2 and 3 of PD 40D the court had wide powers as to the manner in which such sale should be conducted, including authorising a party to bid. There was no reason why the court should not have power, in an appropriate case, to sanction a particular sale to occur immediately, even if it was to a party. The court should exercise extreme care in making such an order. It was an order for which there appeared to be no precedent and whereby, against the wishes of the defendant, the claimant would acquire an asset of the partnership.
In the present case, granted the perilous financial position of the partnership and the threat of enforcement proceedings from the bank, the property needed to be sold very quickly. In that context, the company’s offer looked extremely attractive. However, the court was not prepared to make the draconian pre-emptive sale order sought by the claimant unless and until independent solicitors and estate agents had been appointed and some attempt had been made to assess the present market. In those circumstances, the application for a pre-emptive sale order would be refused.
Christopher Lundie (instructed by Austin Moore & Partners LLP, of Nottingham) appeared for the claimant; Dr Mirza Ahmad (instructed by Direct Public Access) appeared for the defendant.
Eileen O’Grady, barrister
