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“Partner Up” – The Importance of knowing your Partner

The case of Kommalage -v- Sayathakumar [2015] EWCA Civ 1832 provides an interesting practice point for practitioners and credit controllers when considering which Partners of a Partnership can be pursued when enforcing a Judgment. 

The case highlights the importance of knowing who the Partners of a particular Partnership were at the material time in question, and further highlights what practitioners and credit controllers need to look out for when suing Partners.

It should not be forgotten that where proceedings are simply brought in the name of a partnership, (without the Partners listed) before any steps are taken to enforce a Judgment against an individual Partner, it is important to obtain a Partnership Membership Statement from the Partnership. This will help you to determine that the Partner you are seeking to enforce a Judgment against was a Partner at the material time in question.

Ideally, if you are unsure who the Partners are then steps to obtain the statement should be taken during the course of proceedings.

Case details

The key dates for this case are as follows:

  • Mr Kommalage entered into a Partnership Agreement on the 13 December, 2007 which was terminated on 15 December, 2009. This was for a Partnership known as Srinivasans Solicitors.
  • On 5 August, 2009 a Mr Sayathakumar issued legal proceedings against Srinivasans Solicitors concerning a contract dated 20 October 2006 and bills raised between 1 June, 2006 and 13 December, 2007. Both parties agreed that Mr Kommalage was not a Partner at the time in question.
  • Mr Kommalage then became a Partner for a second time on 13 April, 2012 and the second Partnership Agreement was terminated on 10 April, 2013.
  • On 24 October, 2012 Master Haworth ordered Srinivasans Solicitors to pay Mr Sayathakumar legal costs of approximately £19,000. It was agreed that at this point Mr Kommalage was again a Partner of Srinivasans Solicitors.
  • On 8 November, 2012 Mr Sayathakumar served a statutory demand on Mr Kommalage. The question for the court to determine was whether Mr Sayathakumar had a right in law to make a recovery from Mr Kommalage.

As part of the case a particular rule (Paragraph 6A of CPR Practice Direction 70) was scrutinised. This was because Mr Kommalage had stated in his witness evidence that he was a Partner of the Partnership when he acknowledged the claim.

The decision

The Court of Appeal, commenting on how confusing the decisions of the lower court had been, distilled the case down into two questions. These were:

  1. Who is liable for the debts of a Partnership?
  2. Were the paragraphs of 6A.2 applicable so as to allow Mr Sayathakumar to enforce the costs Judgment against Mr Kommalage by the service of a statutory demand?

In respect of the first question, the court decided that the Partners that are liable for Partnership debts and may be sued for these are those that were Partners and/or carried on the Partnership business when the cause of action accrued. Here, the bills in respect of which Mr Sayathakumar was suing were all rendered before 13 December, 2007 which pre-dated Mr Kommalage’s first appointment as a Partner.

However, that left the second question and whether or not acknowledging the claim as a Partner was enough to make Mr Kommalage personally liable. In respect of the second question, the court determined that paragraph 6A is merely a procedural provision and has no bearing on the legal position for liability as a Partner of a Partnership debt. If it is a fact that a Partner was not a Partner at the material time in question then paragraph 6A will not assist a creditor in any way, even if that Partner acknowledges the claim.

The use of statutory demands - on the rise?

Following the recent increase in court issue fees it is likely that more statutory demands will be served in the future, because doing so for claims such as simple debt matters will, more times than not, prove to be cheaper. There is also the potential benefit of getting a quicker result for clients by making a full recovery without issuing any legal proceedings.

However, great care must still be taken when employing this tactic, which is often frowned upon by the courts. This case also illustrates again how failing to understand principles of law can quickly become costly for clients if mistakes are made.

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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