Elite Business Systems UK Ltd v Price

J U D G M E N T

1. THE MASTER OF THE ROLLS: This is an appeal from a judgment of His Honour Judge Chambers QC sitting as Mercantile Judge at Cardiff. The judgment was delivered on 8th April 2005. He awarded the claimants, Elite Business Systems UK Limited ("Elite"), £105,522.27 plus interest in relation to mobile telephones supplied by Elite to the defendant's son. I shall describe the defendant as "Mr Price" and his son as "Andrew", following the example of the judge.

2. The claim was brought on an alternative basis. First it was alleged that Mr Price was trading in partnership with Andrew; alternatively it was alleged that Mr Price represented himself or permitted himself to be represented as trading in partnership with Andrew and was consequently liable to Elite pursuant to section 14(1) of the Partnership Act 1890.

3. The judge rejected the first basis upon which the claim was advanced but accepted the alternative basis. He did so in somewhat unusual circumstances. After the hearing additional documents came to light which showed, as I shall explain in due course, that Mr Price had opened a bank account in order to assist his son to run the business. It was the particular description of the account that led the judge, as I shall explain, to conclude that Mr Price authorised his son to hold him out as being in partnership with his son. The judge offered the parties the opportunity for a further hearing at which witnesses could be asked about the evidence that had come to light but neither party took up that invitation.

The facts

4. The material facts fall into a very small compass, having regard to the findings made by the judge which are not now challenged. They are as follows. At the material time, 2001, Andrew was aged about 23. He was a difficult son; a source of concern to his parents. Mr Price was a benevolent father.

5. In or about May 2001 Andrew wanted to set up business in South Wales as a dealer in mobile telephones. His father helped him to do this in a number of ways. Only one of those is now material. Andrew had no banking facilities. Mr Price agreed that he would open an account in his own name which could be used to receive payments due to Andrew in connection with his business and to make disbursements both to Andrew and in discharge of Andrew's business obligations. I shall call that account "Mr Price's bank account".

6. The account was set up with Mr Price's bank, Natwest, and the cheques to be drawn on that account bore the legend "H Price T/A Price Communication" (the T/A being of course "trading as"). The account number was 25183672 and the sort code was 51-61-20. The account was to be under the sole control of Mr Price.

7. About a month later, on or about 12th June 2001, Andrew entered, in the name of Price Communications, into an agreement in writing with Elite described as a "Dealer/stockists Registration Form". The first page of that agreement had a number of boxes one of which was designed to be ticked in order to indicate the trading status of the dealer. Andrew ticked the box for sole trader. That tick was however inconsistent with what Andrew then entered under section 3 of this standard form agreement, which with its entries read as follows, under the heading "Please complete this section if sole trader or partnership. Please provide full names, home addresses and telephone numbers of all partners. Previous addresses would also be required if you have lived there less than three years". There were three spaces for names and addresses. Andrew filled in two. In the first space he wrote "Andrew Price. Home address: Apartment 6 Glanmor Mews, Glanmor Road, Sketty, Swansea, South Wales", with the post code and the telephone number, and against percentage share of the business he entered "75 per cent". In the next space he wrote the name "Huw Price. Home address: Inglenook, Cottshill Drive, Mumbles, Swansea, South Wales", with the post code and against the percentage share of business he entered "25 per cent". Section 4 was headed "Bank Details". In that section Andrew entered: "Name of bank: Natwest Ltd. Address: Swansea City Centre Branch, 9 Belle Vue Way, Swansea (and the post code). Manager's name: David Tiptton. Account No: 25183672. Sort Code: 51-61-20". He also stated, against the question "How long with current bank: 4 months".

8. The statement made in section 3 that Andrew was in partnership with Mr Price was untrue and Mr Price was at all material times unaware that Andrew had made it.

9. The judge made the following findings as to the effect on Elite of the information in the registration form:

"Elite accepted the application constituted by the registration form and entered into the agreement. I do not think that Elite took any particular interest in the fact that Mr Price was stated to be a partner. The credit check was run on Andrew as the first named partner. But the form was clear enough, the applicant was 'Price Communications' which was the name under which the two stated partners Andrew Price and Huw Price traded. Elite's evidence was sufficient to show that, in no very definite way, it drew comfort from the fact that Mr Price appeared as a partner. It relied upon the statement in entering into the agreement. But, although the matter was not really explored, I doubt whether the application would have been rejected if the statement had not been made. So I find that there was a causal connection between the statement and the entry into the agreement. But if the 'but for' test applies to what is essentially a matter of estoppel, then it has not been satisfied by Elite."

10. The reasoning that led the judge to his conclusion that Mr Price was liable appears in the following passages in his judgment. He first found as a fact that some cheques drawn on Mr Price's account were paid to third parties - in particular Post Office Counters Limited and Orange. He commented:

"The payees are being told in terms that Price Communication is Mr Price."

11. Towards the end of his judgment he set out the provisions of section 14(1) of the Partnership Act 1890 which are as follows:

"Every one who by words spoken or written or by conduct represents himself, or who knowingly suffers himself to be represented, as a partner in a particular firm, is liable as a partner to any one who has on the faith of any such representation given credit to the firm, whether the representation has or has not been made or communicated to the person so giving credit by or with the knowledge of the apparent partner making the representation or suffering it to be made."

The judge commented:

"It seems to me that by opening the bank account, Mr Price must have suffered himself to be represented as a partner in Communication. Communication had only one bank account. Any businessman must have known, what was in fact the case, that the business dealings of Communication would involve giving details of its bank account. If the agreement had contained the full description of the bank account, as opposed to its number, Mr Price could have raised no complaint. I do not see how, if this was so, he can deny the suggestion on the agreement that he was a partner. Once he had permitted himself to be described as a partner in circumstances that were likely to come to the notice of Elite and be relied on by them, he cannot say that he did not suffer himself to be described as a partner in the circumstances that actually occurred. I find that his conduct falls within section 14(1). There being no suggestion in the relevant law that the 'but for' test applies, it must follow that Mr Price is to be treated as having been a partner in Communication and I so find. There will be judgment for Elite."

12. Mr Atkins, who has appeared for Mr Price on this appeal, has submitted in admirably succinct submissions that this reasoning is flawed. I agree. The only representation upon which Elite can rely as falling within section 14(1) is that made by Andrew in section 3 of the registration form. The issue is simply whether Mr Price knowingly suffered this representation to be made, to use the old fashioned language of the section. The judge's reasoning appears to have proceeded as follows:

1. The full description of Mr Price's bank account constituted a representation that he was in partnership with Andrew.

2. Mr Price could not have complained if Andrew had set out the full description of the account in the registration form.

3. It followed that Mr Price consented to Andrew describing him as his partner when concluding the agreement with Elite.

13. I would identify the following flaws in this reasoning:

1. The full details of Mr Price's bank account did not represent that he was in partnership with Andrew in the name of Price Communications. It simply stated that he, Mr Price, was trading as Price Communication. Mr Deegan, appearing for Elite, accepted this. He submitted, however, that what applying an objective test Mr Price must have foreseen was that in due course the checks would be issued in circumstances that would lead those receiving them to conclude that Mr Price must in fact be trading in partnership with his son.

14. I would first observe that there is no evidence that this happened at all. Secondly, I would observe that I do not think that Mr Price should reasonably have foreseen that by opening this account to assist his son it would lead third parties to form the view that he was in partnership with his son. I can see that there would be circumstances in which it might cause enquiries to be made as to the precise nature of this account. To take the facts of this particular case, imagine that Andrew had acted honestly and not merely ticked "sole trader" on the front page, but when he got to section 3 to be filled in "if sole trader or partnership" had simply filled in his own name and address as the sole trader, but that then when he had gone to fill-in section 4 with the bank details he had set out the full description of the account. It does not seem to me that that would or should have conveyed to Elite that he was trading in partnership with his father. What one would have expected would be that if the representative of Elite who was entering into this agreement with him had even noticed the description of the account he might have asked him to explain why it was that the bank account being used was in the name of his father and it seems to me that Mr Price could reasonably have expected Andrew to give an honest answer to that question. Thus, in my judgment, the foundation for Mr Deegan's argument is undermined. Opening the account was not objectively calculated to give rise to third parties concluding that father and son were conducting the business of Price Communications in partnership.

15. In those circumstances I do not need to resolve the interesting question of what the effect would have been if opening an account in that name had objectively been calculated to convey the impression that father and son were in partnership. It is a considerable jump in reasoning to go on to say that having done that without subjectively appreciating that he was going to give rise to this impression, Mr Price consequently would be deemed knowingly to have suffered himself to be represented as a partner by quite different representations made to that effect. As I say, there is no need to decide that question on my reading of the evidence.

16. It follows that by opening an account bearing the description "H Price T/A Price Communication" Mr Price did not authorise Andrew to represent that he was trading in partnership with his father. The representation made by Andrew in section 3 of the registration form was untrue and made without authority. There is no basis in law for making Mr Price liable for Andrew's debt to Elite and I would accordingly allow this appeal.

17. LORD JUSTICE DYSON: I agree. The threshold question that arises on this appeal is whether, as the judge held, by opening the bank account Huw Price suffered himself to be represented as a partner in Price Communications. I regard the fact that the account was in the name of "Price Communication" rather than "Price Communications" as immaterial. But the fact that the account was in the name of "H Price T/A Price Communication" - and I would emphasise the letters "T/A" - is crucial. In my judgment it is inconsistent with the representation that Mr Huw Price was in partnership with anyone, let alone in partnership with his son Andrew. The legend on the bank account and the cheques represented that Huw Price was trading as a sole trader. The judge said at paragraph 15:

"Any businessman must have known, what was in fact the case, that the business dealings of Communication would involve giving details of its bank account. If the agreement had contained the full description of the bank account, as opposed to its number, Mr Price could have raised no complaint."

I cannot agree. It seems to me that, even if the agreement had contained the full description of the bank account, it is a non-sequitur to reason as the judge did that Huw Price would thereby have knowingly suffered himself to be represented as being in partnership with Andrew. For the reasons already given the words used are inconsistent with a representation of a partnership. This seems to me to be clear. I should add that, even if that were not the case, at the very least the representation contained in the title of the account and the legend on the cheques is not clear and unequivocal. In my judgment, just as in order to found an estoppel, so too to found a claim based on section 14(1) of the Partnership Act 1890 there must be a clear and unequivocal representation of partnership.

18. For these reasons, as well as those given by the Master of the Rolls, I would allow this appeal.

19. LORD JUSTICE WALL: I agree with both judgments and do not have anything to add.

20. MR ATKINS: My Lords, I am grateful. My Lords, all I ask for is the appeal to be allowed and the claim to be dismissed.

21. THE MASTER OF THE ROLLS: I hoped you might be asking for a bit more which would be a summary assessment of costs which is the normal course where there is a short appeal.

22. MR ATKINS: We are going to have the costs of the trial assessed by way of detailed assessment so we propose just to add those in.

23. THE MASTER OF THE ROLLS: If you are not in a position to ask us to summarily assess the costs of the appeal we obviously cannot do so.

24. MR DEEGAN: Can I just make one representation so far as costs are concerned. I would ask that the costs incurred between 2nd November of last year when the defendants disclosed the additional material and the date of judgment are treated separately. In my submission the documents that were disclosed, which was not simply confined to the bank statements but also there were other records, VAT - not VAT - a number of credit hire agreements were also disclosed at the same time. As a result of that there was then a further telephone hearing on 20th December followed by further written submissions and then ultimately judgment. In my submission if those documents which were material had been disclosed prior to the trial that further work would not have been necessary and as a result costs incurred. I would submit therefore that the claimant should have all costs after 2nd November, the date of judgment.

25. LORD JUSTICE DYSON: Is that not something that can be ventilated on the assessment.

26. MR DEEGAN: It could be, but in my submission it would be of assistance if the court would could make a ruling at this stage.

27. LORD JUSTICE DYSON: Is it not better that the costs judge will no doubt go into all these matters in much more detail than we are in a position to do. Is it not better for all matters like these to be dealt with before the costs judge?

28. MR DEEGAN: It is a matter for you. I simply raise it.

29. THE MASTER OF THE ROLLS: In principle the defendant should have the costs here and below, but the costs below should be such costs as were reasonably incurred. If the costs judge forms the view that costs were unreasonably incurred because the defendant had not made proper discovery then I would expect him to disallow those costs.

30. MR ATKINS: My apologies for not having the summary assessment schedule. So the order is as per the appeal notice.

31. THE MASTER OF THE ROLLS: The appeal will be allowed with costs here and below.