“Holding Out” under s14 of the Partnership Act 1890

UCB Home Loans Corporation Ltd v Soni & Anor [2013] EWCA Civ 62

Background

Each partner within in a firm is jointly liable under section 9 of the Partnership Act 1890 (PA 1890) for all debts, obligations and liabilities that firm incurs.  However, liability extends to any individual who, whilst is not an actual partner, holds himself out publicly to the outside world to be one, although some protection is afforded to such an individual as any Claimant bringing a claim has to show that they relied on that holding out when giving credit to the firm.

Section 14 PA 1890 provides:-

“Everyone 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.”

Facts

S was a solicitor who operated as a sole practitioner from an address in Kensington but who also had another practice (with the same company name) with a partner, K, from where business was conducted from another premises in Gants Hill.

S borrowed £2.5million from the Claimant, UCB, supposedly on security of five mortgages over properties in his own name, however, he had not actually given any form of security for the loans.  Part of UCB’s lending requirement was, if the borrower was a solicitor and his practice was acting on the transaction, the practice should be a partnership with it carrying out the conveyancing work and the certificate of title being signed by a partner other than the borrower.

S undertook the conveyancing work himself for all of the transactions through his sole practitioner’s office in Kensington representing to UCB that this office had two partners and that it was actually his partner, K, carrying out the conveyancing work for each transaction when, in fact, he had forged K’s signature (without K’s knowledge) on the documentation and had used letterhead of the Kensington address which made no reference to the other office in Gants Hill.

Whilst in the general course of business K had used letterhead of the Gants Hill office listing K and S as partners and using the company name, K had not listed S’s sole practitioner’s office in Kensington.

UCB obtained judgment against S for £2.4million but without security this was worthless and the court of first instance held that K was not liable to UCB.

UCB subsequently appealed.

Decision

The appeal was dismissed by the Court of Appeal as the requirements of s14 of the PA 1890 had not been met because the representations made by S and the basis upon which UCB lent the money were not made, authorised or knowingly suffered by K.  K therefore was not held liable to UCB.

Comment

This case shows how a court will look at the information relied on in a “holding out” claim under s14 of the PA 1890 and is a reminder to Partners to ensure their letterheads reflects their actual practice.