On an appeal in the case of Dhillon v Sandhu (2014 WL 5411909) His Honour Judge Hodge QC (sitting as a High Court Judge) has affirmed the application of sanctions imposed by an unless order made by Chief Master Marsh in the course of the taking of a partnership account.
The judgment gives guidance as to what being debarred from participating in a partnership account means in practice.
The Master’s decision not to grant relief from sanctions had been made prior to the decisions in Denton v T H White Limited and two related appeals ( EWCA Civ 906), but nonetheless the Judge found that the Master had not erred in his consideration as to whether relief should be granted.
The relevant part of the order concerned was, “Unless the defendants give disclosure of the books and records of the partnerships known as DS Property Investment and D&S Holdings by making them available for inspection and copying at the offices of FBS at a date no later than 14 days after the date of service of this order by the solicitors for the claimant on the solicitors for the defendants, then the defendants be debarred from participating in the taking of the partnership accounts.”
At an earlier stage the Master had expressed the view that refusal to grant relief would not prevent the appellants from participating in the taking of the account at all. It would simply mean that they had no entitlement to rely upon evidence. They would be permitted to attend the oral hearing and make submissions concerning the respondent’s evidence.
On appeal the Judge took the view that the effect of the order was that the defendants were not simply debarred from adducing any evidence on the taking of the accounts; they were debarred from participating in any way in the taking of them.
However, given the view that had been taken by the Master as to the interpretation of his own order when considering whether relief from sanctions should be granted, the Judge granted relief to the limited extent that the appellant could make submissions on the documents in the account to say that the documents produced do not support the conclusions in the respondent’s accountant’s report and to challenge inferences to be drawn from the documents. But he would not be permitted to call evidence.
The Judge also declined to set aside an interim payment of £350,000 ordered by the Master. This serves as a reminder that substantial financial remedies are sometimes available prior to finalisation of a partnership account.