“… The trial judge was entitled to order separate accounts for diversion of profits and for dissolution …”
The Court of Appeal yesterday confirmed an award of an interim payment against a partner prior to the taking of a dissolution account.
In Mukerjee v Sen (unreported at first instance so far as I am aware) Mr Sen had diverted profits to himself. In the course of dissolution proceedings Mr Mukerjee applied for an order for an interim payment for his share of the diverted profits. Mr Sen contended that the profits were subject to a number of accounting adjustments, which taken together with his counterclaim meant that no moneys were owed by him to Mr Mukerjee. The judge found that he had jurisdiction to order an interim payment. He rejected Mr Sen’s argument that his capital contribution should be taken into account, and awarded an interim payment for the minimum amount that he considered that Mr Mukerjee would recover after deducting the amount of Mr Sen’s counterclaim.
Mr Sen argued that there had been no jurisdiction to order an interim payment because it was established by Hurst v Bryk that one partner was not accountable to another except via an account on dissolution. Furthermore, it had been held in Hathurani that claims for dissolution of a partnership were not claims within the court rules permitting interim payments, and that Mr Sen’s capital contribution should not have been disregarded.
The Court of Appeal found (see  EWCA Civ 1895) that the judge had been correct and that he had jurisdiction to order an interim payment. The particulars of claim sought an order for payment of Mr Mukerjee’s share of the profits paid to and retained by Mr Sen and the alternative claim for dissolution did not detract from that claim. The statement of Lord Millett in Hurst, to the effect that no partner has any cause of action at law to recover moneys due to him from his co-partners, save via the taking of an account, had not formed part of the reasoning in the case, and thus created no binding legal authority. This case was different from Hathurani, because in that case the claim had not been quantified. The trial judge was entitled to order separate accounts for diversion of profits and for dissolution. Mr Mukerjee was not precluded from recovering his share of the diverted profits now rather than waiting for an account on dissolution. The judge had been correct to find that Mr Sen’s capital contribution should be dealt with in the dissolution accounts and should not impact on the calculation of the interim payment.
The importance of being able to seek an interim payment prior to the commencement or completion of the taking of an account cannot be over-emphasised. Accounts tend to be laborious, long-winded and expensive. In some cases they can involve fact-finding exercises which require a full trial to resolve. In a suitable case an application for an interim payment enables the injured party to recover at least some of the money due to him or her more quickly. This aids cashflow and also tests the solvency of the paying party before greater time and money is spent on the account-taking process.