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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Purewall & Ors v Gurbax Kaur Purewall [2009] ScotCS CSIH_74 (02 October 2009)
URL: http://www.bailii.org/scot/cases/ScotCS/2009/2009CSIH74.html
Cite as: [2009] CSIH 74, [2009] ScotCS CSIH_74, 2010 SLT 120, 2009 GWD 33-567

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EXTRA DIVISION, INNER HOUSE, COURT OF SESSION

Lord Osborne

Lord Kingarth

Lord Carloway

[2009] CSIH 74

CA37/05

OPINION OF THE COURT

delivered by LORD OSBORNE

in reclaiming motion

in the cause

(FIRST) HARDEV SINGH PUREWALL & OTHERS

Pursuers and Respondents,

against

GURBAX KAUR PUREWALL

Defender and Reclaimer,

_______

Pursuers and Respondents: Davies, Advocate; Archibald Campbell & Harley WS., Edinburgh

Defender and Reclaimer: Paterson, Solicitor Advocate; Tods Murray LLP Solicitors, Edinburgh

2 October 2009

The Background Circumstances


[1] In this action, the four pursuers and respondents conclude for payment to them individually by the defender and reclaimer of certain sums, together with interest thereon, at the rate specified from
1 December 2004 until the date of decree to follow hereon; thereafter at the judicial rate. The respondents' claims arise out of the dissolution of a partnership in which the parties, together with the reclaimer's late husband, Jaipal Purewall, were partners. The partnership carried on business as restaurateurs under the name of Himalaya Tandoori. The reclaimer's late husband died in 2002, following which, on 22 April 2003, the respondents served a notice of dissolution of partnership, as permitted by the partnership contract. It is a matter of agreement that the effect of that notice was to dissolve the partnership as at 30 November 2003. Thereafter, the reclaimer intimated that she intended to carry on the business of the former partnership on her own account and she has subsequently done so.


[2] The nature of the subsequent events, the relevant features of the contract of partnership, dated 4 January 1991 and registered in the Books of Council and Session on 14 January 1991, which governed the operation of the former partnership, and the circumstances which have given rise to the present dispute have been narrated in paragraphs [1] to [4] of the opinion of the Lord Ordinary. It is evident from that narrative that the respondents' individual capital accounts, as shown in the balance sheet operative as at 30 November 2003 are no longer in dispute following a prior decision of the Lord Ordinary and the subsequent arbitration, in which the reclaimer's objections to the balance sheet and accounts were rejected. The respondents in the present action conclude for payment of the sums now decided to represent their capital accounts, together with certain amounts by way of interest. As the Lord Ordinary points out in paragraph [4] of his opinion, the dispute that now exists between the parties is confined to two matters: the date when the sums due to the respondents by the reclaimer are payable, and the interest that is due on those sums. He observes that both of these matters turn on the construction of Clause Ninth (b) of the contract of partnership. That part of that clause is in the following terms:

"(b)  a Balance Sheet shall be made up in terms of Clause Fifth hereof (and in which no value shall be placed on the goodwill of the business) as at the date of dissolution. Any Partner or his or her trustee shall be entitled to require that any asset or group of assets (other than goodwill) of the firm be valued for the purpose of any such Balance Sheet by a Valuer nominated by the Arbiter aftermentioned. Such Balance Sheet shall take into account all liabilities of the Parties as Partners for income tax to the date of dissolution and make due provisions therefor. The sum at credit of the outgoing Partner shall be ascertained from such Balance Sheet and paid by the surviving or continuing Partners to the outgoing Partner or his or her trustee by six equal half yearly instalments commencing six months after the date of determination with interest (in the event of dissolution by permanent incapacity or death but not otherwise) also payable half yearly on the same date as the said Bank's Base Lending Rate for the time being on the amount from time to time outstanding, with power to the surviving or continuing Partners to anticipate payment of all or any of said instalments with corresponding reduction of interest."


[3] On
21 October 2008, following upon the debate held before him, the Lord Ordinary issued his opinion. For the reasons that he gave, he favoured the pursuers' and respondents' construction of Clause Ninth (b) of the contract of partnership. Accordingly he held that the first instalment of the pursuers' and respondents' shares in the partnership property was due on 31 May 2004 and that contractual interest was due on the sums due to them from the date of dissolution, 30 November 2003. On 29 October 2008, the Lord Ordinary pronounced an interlocutor granting decree against the defender and reclaimer for the sums specified therein together with sums representing contractual and judicial interest, which were calculated upon the basis of the view which he had formed and in expressed in his opinion of 21 October 2008. Against the interlocutor of 29 October 2008, the reclaimer has reclaimed.

Submissions of the Reclaimer


[4] The solicitor for the reclaimer commenced by explaining the background to the dispute and drawing attention to the Lord Ordinary's opinion. He had correctly characterised the two issues in dispute in paragraph [4] of his opinion. It was the reclaimer's contention that contractual interest accrued from the date of determination of the sum at credit of an outgoing partner by the arbiter who had acted in the case. Interest accrued on unpaid instalments. Judicial interest ran on any late payment of interest.


[5] As regards the order which was sought, if the Court were to favour the reclaimer's submissions, the case should be put out by order at an appropriate time, to enable the arithmetical consequences of that decision to be calculated. If the Court were not to favour the reclaimer's submissions, the interlocutor of
29 October 2008 would require to be affirmed. It was not necessary for the Court to address how the pleas-in-law should be treated.


[6] The critical issue that the Court had to decide was whether or not the words "dissolution" and "determination" were used as synonyms in the partnership agreement and, in particular, in Clause Ninth thereof. It was submitted that, in holding that these words were synonyms, the Lord Ordinary had erred in law by misapplying the principles of contractual interpretation and had erred in his analysis of the partnership agreement. It was accepted that, when considering the meaning of the two expressions, it was necessary to have regards to the context in which those words had been used. In furtherance of that approach, the solicitor for the reclaimer went on to consider in detail the terms of the partnership agreement as a whole.


[7] Thereafter, our attention was drawn to authorities which, it was contended, provided assistance in a matter of contractual interpretation, such as this. Reliance was placed upon Bank of Scotland v Dunedin Property Investment Company Limited 1998 SC 657, at page 661; Charter Reinsurance Company Limited v Fagan [1997] AC 313, at page 384; Mannai Investment Company Limited v Eagle Star Life Assurance Company Limited [1997] AC 749, at page 771; and Investors Competition Scheme Limited v West Bromwich Building Society [1998] 1 WLR 896, at page 912. It was submitted that the passages relied upon derived from these cases represented the law of
Scotland.


[8] Proceeding upon the basis of the principles outlined in these authorities, it was submitted that an ordinary and natural meaning should be given to the words used in a contract, unless to do so would be to flout business common sense. If one took as the starting point that the words "determination" and "dissolution" were not synonyms and that they did indeed have different meanings, at least in ordinary use by the reasonable man, then, for the respondents to succeed, it would require the Court to hold that, first, to give the words their ordinary and natural meaning would be to flout business common sense, and, second, that something had gone wrong with the language, or the drafting. The partnership agreement was a formal document and the Court should not readily accept that individuals had made linguistic mistakes in such documents.


[9] The expression "determination" occurred twice in the partnership agreement, once in the preamble to Clause Ninth and once in Clause Ninth (b). The word "dissolution" was used on ten occasions in the partnership agreement. The natural and ordinary meaning of "determination" was a decision, or the ending of a controversy. It was accepted that it could also mean the bringing of something to an end. The natural and ordinary meaning of the word "dissolution" was separation or bringing to an end; it was commonly used in relation to partnerships.


[10] The purpose of Clause Ninth was to make provision for what was to happen to partnership assets when the partnership had come to an end. Clause Ninth applied to the ending of the partnership by reason of breach of what might be called fiduciary duties owed by a partner to the partnership (Clause Seventh) and where the partnership was dissolved by virtue of the death, lunacy, insanity or bankruptcy of one or more of the partners (Clause Eighth). The function of Clause Tenth was to make provision for what was to happen to the partnership assets when the partnership was brought to an end by one or more of the partners serving a notice under Clause First. Clause Tenth (One) applied to the situation where the partner to whom notice was given intended to continue the business and Clause Tenth (Two) applied to the situation where the partner to whom notice had been given did not intend to carry on the business.


[11] In April 2003 the respondents had given notice to the reclaimer in terms of Clause First. The effect of the notice, as provided for in that clause, was that the partnership was dissolved as at
30 November 2003. However, the reclaimer had wished to continue with the business and, accordingly, Clause Tenth (One) applied for the purposes of providing what was to happen to the partnership assets. In the circumstances which developed, the partnership agreement required that a balance sheet should be made up as at the date of dissolution. That had to be drawn up in accordance with the provisions of Clause Fifth. The draftsman of the partnership agreement would have been aware that the provisions of Clause Ninth were to apply to dissolution, whether under Clause Seventh, Eighth or Tenth and that a balance sheet would require to be drawn up in accordance with the provisions of Clause Fifth. Clause Ninth (b) made it clear at two points that the balance sheet had to be drawn up "as at the date of dissolution"; that is to say, it had to reflect the position as at the time when the partnership came to an end. Clause Ninth (b) made the provision for payment to the outgoing partners. It was important to note that the sum to be paid was to be "ascertained" from the balance sheet before it was paid. It was submitted that the essence of something being ascertained was that it was certain or definite or precise; it was not an estimate or an approximation. The relevant sum could be "ascertained" in two ways, either, first, by agreement between the partners, or, second, by a decision of an arbiter appointed under Clause Fifth; once the relevant sum had been ascertained it was then to be paid in the manner specified. It was submitted that the choice of words made in the partnership agreement indicated that the date at which payment was to be made to the outgoing partners was different from the date to which the balance sheet was to be made up. The balance sheet was to be made up to the date of dissolution until the amount payable could be ascertained, the issue of the outgoing partners entitlement was a matter of controversy. That controversy was to be resolved either by the parties agreeing to the terms of the balance sheet, or by an arbiter appointed under Clause Fifth for resolving any dispute. The word "determination" where it appeared in Clause Ninth (b) meant either resolving the controversy by agreement or by obtaining a decision from an arbiter. Thus on both occasions where the word "determination" appeared in Clause Ninth it was taken to mean a decision or something equivalent to that. In the preamble to Clause Ninth the reference to "determination" was a reference back to Clause Seventh, by virtue of which the partnership could be brought to an end by a decision of an arbiter. In Clause Ninth (b), it could mean either determination by the arbiter under Clause Fifth, or determination in the sense of being decided following preparation of an agreed balance sheet under Clause Fifth. In both cases the word referred to a decision being made.


[12] The solicitor for the reclaimer went on to examine in detail the manner of use of the words "dissolution" and "determination" in the partnership agreement. The only occasion when these words were used in association was in the preamble to Clause Ninth. He submitted that when the natural and ordinary meanings were given to these words, it had to be concluded that they were not synonyms. It was submitted that the partnership agreement, properly construed, would never provide for payment be made to the outgoing partners at the date of dissolution. The time for payment was to be calculated by reference to the time when the relevant amount could be ascertained, whether that was when the balance sheet had been agreed, or when it had been signed by an arbiter following resolution of objections. The partnership agreement envisaged a lapse of time between the partnership being dissolved and the amount payable to outgoing partners being ascertained and becoming payable. That approach was in accordance with the provisions of Clause Fifth, which envisaged a period of three months for the preparation of the balance sheet after the date to which it related and it's acceptance by the partners. The fact that the word "determination" was only used in Clause Ninth was a strong indication that it had a particular relevance to the provisions of that clause and that it was not used as a synonym for a "dissolution". However, even if the Court were to conclude that the words were used as synonyms in the preamble to Clause Ninth, it did not follow that they were used in the same way in Clause Ninth (b) and on a proper interpretation of Clause Ninth (b) the construction favoured by the reclaimer should be adopted.


[13] The solicitor for the reclaimer went on to examine the opinion of the Lord Ordinary in detail and to seek to identify errors in law which he contended existed in it. In particular, he contended that, while the Lord Ordinary recognised the general principles of contractual construction, he had failed to give the words used by the parties in the partnership agreement their ordinary and natural meaning. He had failed to give any weight to the fact that that agreement had been professionally drafted by a firm of solicitors and therefore it was less likely that two distinct words were meant to be used in an interchangeable fashion. Furthermore, the Lord Ordinary, in considering the intention of the parties and in attempting to arrive at a "commercially sensible construction" had failed to take into account the effect of Clause Third of the partnership agreement. That clause expressly provided that, in the event of a partner having any additional sum in the partnership, that sum was to be considered as a loan account, which did not attract interest. The policy of the agreement was to provide that interest should accrue on the fixed and known amounts which the parties had subscribed but not upon uncertain amounts, prior to their determination by an independent arbiter. The Lord Ordinary had neglected to consider whether the construction contended for by the reclaimer was also a "commercially sensible construction". The errors made by the Lord Ordinary were highlighted in what was said in paragraph [13] of his opinion. There, dealing with the possibility that the respondents construction might lead to an overpayment to them prior to a determination of the true amount owed, he postulated the implication of a term in the partnership agreement that any overpayment should be repaid with an appropriate allowance for interest. The need to imply such a term constituted a reason why the respondents' construction should be rejected.

Submissions for the Respondents

[14] Counsel for the respondents moved the Court to refuse the reclaiming motion and adhere to the Lord Ordinary's interlocutor of
29 October 2008. The Lord Ordinary had held that the words "date of determination" in Clause Ninth (b) meant the date of dissolution of the partnership and that accordingly the first instalment fell due six months thereafter on 31 May 2004. He had rejected the reclaimer's submission that the relevant date was the date of the arbiter's final order.


[15] The factual background to the case was the subject of agreement. The issue was as to the meaning of the expression "date of determination". There was no dispute between the parties as to the general law applicable to the interpretation of a contract, such as the partnership agreement. The starting point was the ordinary and natural meaning of the words used by the parties, read in the context of the contract as a whole and any relevant background information about the commercial purpose of the contract. A commercially sensible construction ought to be adopted and unreasonable results avoided. The Lord Ordinary had noted that the word "determination", considered in isolation, was capable of meaning either the dissolution of the partnership, or the decision of the arbiter, as appeared from paragraph [11] of his opinion. However, having regard to the opening words in Clause Ninth, it was clear that the words "determination" and "dissolution" were being used as synonyms meaning the ending of the partnership. The respondents' submission was that, in referring later in the same clause to the "date of determination" the parties to the agreement had to be taken as using the word "determination" in the same sense, that is to say "the date of determination of the partnership".


[16] Further, Clause Ninth was concerned with the settling of accounts following the dissolution of the partnership in a situation where the non-retiring partners were continuing the partnership business. In those circumstances, there was a balance to be struck between the interests of the retiring partners, who would wish to be paid their share of the business promptly, and the interests of the continuing partners, who would wish time to obtain the necessary funds to pay the retiring partners their shares. Clause Ninth (b) was intended to balance those interests by providing for the retiring partner or partners to be paid their share of the assets in instalments over three years, with the first instalment being due six months after the date of dissolution, thus giving the continuing partners time to raise the necessary funds. The clause further provided for the retiring partners to be compensated for the use of their funds in the business by the payment of interest at a reasonable if modest commercial rate from the date of dissolution. That represented a sensible commercial balancing of the interests of the retiring and continuing partners.


[17] It could not be argued that this result was unreasonable from the point of view of the reclaimer as the continuing operator. In the absence of an express provision governing the dissolution of the partnership, the general law of partnership would have provided that the continuing partners would come under an immediate liability to pay the retiring partners their whole share of the partnership capital, together with interest at 5 per centum per annum even if there had been no settlement of accounts, as provided for by Section 42(1) of the Partnership Act 1890. Thus it could be seen that the provisions of the contract improved the position of the continuing partner or partners, in that they had further time to pay the capital and, at least at present, would pay a much lower rate of interest. Furthermore, the final partnership accounts were to be prepared as at the date of dissolution of the partnership. That was the date on which the parties' legal relationship had changed and on which, but for the terms of Clause Ninth, the respondents would have become entitled to payment of their shares in the partnership. It was submitted that it was inherently more likely that the parties intended to fix the dates of payment of capital and interest with reference to that date, rather than the date on which the arbiter happened to issue his decision or that the account happened to be agreed.


[18] The reclaimer submitted that the words "date of determination" had to refer to the date of the arbiter's decision, or the date of the accounts being settled either by agreement or by default. However, the respondents contended that that construction would produce an unreasonable and unfair outcome for the retiring partners. If the reclaimer's submission were correct, no instalments and no interest would be due until after the final balance sheet had been settled; in the present case nearly four and a half years after the dissolution of the partnership. Thereafter the reclaimer would have a further three years to pay the sum due. She would accordingly have had the benefit of the substantial capital invested in the business by the retiring partners without any compensation being paid to them for that investment. Further, the reclaimer's interpretation created an incentive for the continuing partner or partners to delay agreement of the accounts, possibly by making unmeritorious objections, in order to avoid liability to make payments to the retiring partners of capital or interest. Such an interpretation did not make business sense, nor did it represent a fair balancing of interests between retiring and continuing partners.


[19] The reclaimer had submitted that there would be practical difficulties if liability to pay out the retiring partners arose before the accounts were settled and that such a liability would impose an unfair interest burden on the continuing partner or partners. However, it was submitted on behalf of the respondents that situations often arose where a liability to make payment came into being before the exact amount to be paid could be fixed. In the present case, but for the terms of Clause Ninth, the Partnership Act of 1890 would have created an immediate liability to make payment to the respondents of their capital together with interest. Furthermore, the reclaimer had had the benefit of the capital for many years with the opportunity of making significantly greater profits in the business as a consequence. The reclaimer could have mitigated any liability for interest by making earlier payment of at least part of the sum which was due, as was contemplated in Clause Ninth (b). It had been the reclaimer's choice not to make any payment to the respondents until compelled to do so by the Court. The reclaimer had argued that such an approach raised a risk of overpayment to the retiring partners. However, it was submitted that, in reality, there would be no real risk of this occurring, since in practice the continuing partners would only pay as much as they believed to be due. On the other hand, the risk that the continuing partner or partners might wrongfully withhold payment was significant and therefore it was to be expected that, on a reasonable interpretation, interest should be payable as both an incentive for prompt payment and as compensation for delay.


[20] Finally, the reclaimer had submitted that Clause Third was of significance in the construction of Clause Ninth. The former clause concerned the level of capital each partner was required to put into the partnership and further provided that no interest should be payable on any sum from time to time standing to the credit of a partner in excess of the required capital. It was submitted on behalf of the respondents that Clause Third, which concerned the treatment of capital accounts while the partnership subsisted, had no bearing on the interpretation of Clause Ninth, which concerned the implications of the dissolution of the partnership. During the operation of the partnership, the partners were entitled to withdraw their share of the profits, provided that the minimum level of capital was maintained. Any sums not so withdrawn would be credited to the capital account, or in accordance with Clause Third, credited to a loan account. It was not surprising that such sums should not carry interest, because, if they were to do so, that would alter the distribution of profits among the partners in accordance with Clause Fourth, as well as giving rise to complicated and cumbersome calculations when the sums involved were unlikely to be substantial. The situation following the dissolution of the partnership, when the retiring partners were receiving no share in the profits, was entirely different; in that situation, it was to be expected that the continuing partners would pay interest on the capital belonging to the retiring partners, but retained in the partnership business.


[21] The reclaimer's approach ignored business common sense in the interpretation of the partnership agreement; rather it was focussed upon the niceties of language, an approach which the authorities suggested was not to be adopted.

The Decision


[22] The factual background to the present dispute is uncontroversial. It is described in paragraphs [1] to [4] of the Lord Ordinary's opinion. Likewise, the issue which he had to determine is clear. As he points out in paragraph [10] of his opinion:

"The critical issue in the present debate is the meaning of the expression 'date of determination' as used in clause Ninth (b) of the contract of partnership."

It is upon the resolution of that issue that the disputed rights of the respondents to interest on their shares of the former partnership assets depend.


[23] The resolution of the disputed issue plainly involves the task of the interpretation of the contract of partnership and, in particular, Clause Ninth (b). Before us there was no dispute as to the proper approach that the law required to be taken to an issue of contractual construction, such as that. As the Lord Ordinary observed, the starting point of the process was the ascertainment of the ordinary and natural meaning of the words used by the parties, read in context. The context included both the whole terms of the contract and any relevant background information concerning the commercial purposes of the contract. It is necessary to identify a construction which is commercially sensible, avoiding unreasonable results. The modern approach to such matters was explained by Lord Steyn in Mannai Investment Company Limited v Eagle Star Life Assurance Company Limited [1997] AC 749, at page 771. There he observed:

"In determining the meaning of the language of a commercial contract, and unilateral contractual notices, the law therefore generally favours a commercially sensible construction. The reason for this approach is that a commercial construction is more likely to give effect to the intention of the parties. Words are therefore interpreted in a way in which a reasonable commercial person would construe them. And the standard of the reasonable commercial person is hostile to technical interpretations and undue emphasis on niceties of language."

That approach was adopted in a Scottish context in Bank of Scotland v Dunedin Property Investment Company Limited 1998 SC 657, by Lord President Rodger at page 661, where he said:

"During the hearing before this Court we were referred to a number of authorities on the approach which should be taken to the interpretation of a contract. In particular counsel analysed the five principles enunciated by Lord Hoffman in a speech in which both Lord Hope of Craighead and Lord Clyde concurred in Investors Compensation Scheme Limited v West Bromwich Building Society [[1998] 1 WLR 896.] at pages 114 to 115. For my part, however, in the present case I am content to follow Lord Steyn's general guidance that in interpreting a commercial document of this kind the Court should apply the 'commercially sensible construction' of the condition in question: Mannai Investment Company Limited v Eagle Star Life Assurance Company Limited [1997] AC 749, at page 771A."


[24] Approaching the issue in dispute in this way, therefore, attention must be focussed upon the provisions of Clause Ninth (b), in the context of the contract of partnership as a whole. The Lord Ordinary, in paragraph [11] of his opinion, rightly recognised that the critical issue was the significance of the word "determination" where it occurs towards the end of Clause Ninth (b) of the contract. He recognised that that word, standing alone, might refer either to the dissolution of the partnership through determination of the partnership contract, or to the determination of the sum due to an outgoing partner by the relevant accountant or arbiter. We would agree with the view that that word, standing alone, is clearly capable of bearing either meaning. The meaning that it should properly be regarded as bearing in the context of this contract must therefore depend upon the character of the contract as a whole, against the background of the circumstances of its creation.


[25] A feature which strikes us as of some importance in this connection is the form of the opening words of Clause Ninth. In that part of the clause are to be found the introductory words to parts (a) and (b) of the clause. The words used are:

"In the event of the determination or dissolution of the partnership in terms of Clause Seventh and Clause Eighth hereof ..."

It is evident from that wording and the juxtaposition of the words that the word "determination" is used synonymously with "dissolution". The context of that use is that a reference to the ending of the partnership in terms of Clause Seventh and Clause Eighth of the contract. Clause Seventh, of course, deals with a range of matters. However, while it makes provision for, in effect, the ending of the partnership by virtue of a decision of the arbiter provided for, following upon a contravention by a partner of certain other provisions of the clause, it is notable that neither the word "determination" or "dissolution" is used in that clause. That state of affairs appears to us to reinforce the view that, in the opening words of Clause Ninth, the relevant words are indeed used synonymously. Therefore, even the reclaimer's construction reads the word "dissolution" in the opening sentence of part (b) of the Clause as referring to the dissolution or determination of the partnership. It would be surprising indeed if later on in the Clause, designed to deal with "the determination or dissolution of the partnership", where the word "determination" is used, it does not refer to the determination of the partnership, but the determination of something else.


[26] Clause Eighth deals with the consequences of the permanent incapacity of a partner or the death, lunacy, insanity or bankruptcy of a partner, or if a partner is in breach of any of the conditions contained in the contract. The consequences of these events is that "the partnership shall be dissolved and the incapacitated or defaulting partner shall cease to be a partner and he or she or his or her trustee shall be settled with in manner aftermentioned", plainly a reference to Clause Ninth.


[27] It is of interest to note that Clause Tenth of the contract deals with the event of the "dissolution" of the partnership by notice in terms of Clause First of the contract. In that event, the provisions of Clause Tenth (One) operate. These provide:

"If the parties to whom such notice is given intend to continue the partnership business, a Balance Sheet shall be made up as at the date of dissolution in terms of Clauses Fifth and Ninth (b) hereof to show the sum standing at the credit or debit of the retiring Partner. Said sum (a), if a credit shall be paid to the retiring Partner in accordance with the terms of Clause Ninth as if he or she had died at the date of dissolution; (b) if a debit shall forthwith be paid by the retiring Partner to the continuing Partners."

Once again, the existence of these provisions appears to us to point to the conclusion that Clause Ninth is to be regarded as operating in a situation where the partnership is determined or dissolved.


[28] However, perhaps the most powerful pointer to a proper interpretation of the contract is to be found in the terms of Clause Ninth itself, against the background of the remaining provisions of the contract. It was submitted to us, rightly in our view, that, in a situation where the existing partnership is brought to an end, for example, by the death of a partner, and where one or more of the partners wish to continue the partnership business, inherent in that situation there would exist a conflict of interest between those partners who might wish to withdraw from the partnership, or the estate of a deceased partner, and a partner or partners who might wish to continue the partnership business. The conflict would simply be this. The interest of a retiring partner or partners, or the estate of a deceased partner, would lie in payment of their share of the partnership assets at the earliest opportunity; however, the interest of continuing partners, or a continuing partner, would be that such payment should be delayed for as long a period as possible, thus conferring upon the continuing partners or partner the opportunity to enjoy the benefit of the whole partnership assets until such time as they required to be paid to those entitled to a share in them. As we see it, Clause Ninth (b) is a provision designed to inject fairness to all parties to the contract into such a situation. However, in our opinion, the provisions of Clause Ninth (b) would operate satisfactorily in that way only if the words "the date of determination" are interpreted to mean the date on which the former partnership ended, as opposed to the date on which the entitlement of a retiring partner or partners to a share in the partnership assets was determined as regards quantification by an accountant or arbiter. One of the principal objections to the interpretation of the contract advanced on behalf of the reclaimer appears to us to be that, if the reclaimer's interpretation were adopted, there would be conferred upon a partner in the position of the reclaimer an opportunity to delay the date on which interest would commence to be paid by the stating of spurious objections to the quantification by an accountant or arbiter of the shares of the retiring partner or partners. We have insuperable difficulty in concluding that such an interpretation would be a "commercially sensible construction", to use Lord Steyn's words. We do not consider that any "reasonable commercial person" would construe the language concerned in that way. The interpretation contended for by the reclaimer, in our view, would unfairly confer upon her the opportunity of using the assets which ultimately would accrue to the benefit of the respondents potentially over a substantial period of time without recognition, by way of interest, of the ultimate rights to those assets.


[29] While, in the context of the present dispute the provisions of the Partnership Act 1890 have no direct application, we were favourably impressed by the submission made on behalf of the respondents that the commercial realities to which we have referred, which, in our view, support their interpretation, are to be seen as reflected in the provisions of Sections 42(1) and 43 of the 1890 Act. The Lord Ordinary dealt with this aspect of the case in paragraphs [14] and [15] of his opinion. We agree with what he said there as to the general significance of these statutory provisions in the present context. In our view it is inherently highly improbable that the parties to the partnership contract intended to achieve a result so far from a commercially sensible construction as that contended for by the reclaimer.


[30] It was contended on behalf of the reclaimer that a difficulty inherent in the respondents' construction of the contract would be that monies might be payable and interest might accrue before the amount of the reclaimer's obligations to the respondents had been quantified precisely. No doubt that is true, but it does not appear to us that that constitutes a serious objection to the respondent's interpretation of the contract. While it is plain that the calculation of the precise amount due to retiring partners or the estate of a deceased partner must take place after the date of the dissolution of the partnership, it does not appear to us that that amounts to a difficulty for the interpretation of the contract contended for by the respondents. When the precise entitlements have been calculated, so also may the amount of interest due be calculated. As the Lord Ordinary points out in paragraph [13] of his opinion:

"It is very common to find that moneys are not payable until some time after they become due, and after interest starts to run. That frequently occurs with contractual debts, and almost invariably occurs with claims for damages; an obligation to make reparation, for example, occurs when injuria concurs with damnum even though the amount cannot be calculated and paid until some time later: Dunlop v McGowans, 1980 SC (HL) 73, at 81."


[31] A further feature of the reclaimer's submissions was that it was contended that the respondents' interpretation would be undermined by the possibility that the contract of partnership did not make provision for the amount of any overpayment that might occur. While it is conceivable, though unlikely, that such overpayment would in fact ever be made, in our view, that possibility does not seem to us to militate against the respondents' interpretation of the contract. Although the Lord Ordinary refers to the possibility of the implication of a term that any overpayment made should be repaid, we do not consider that it is necessary to resort to such a concept. If overpayment were in fact made, the common law principles dealing with a situation in which unjustified enrichment had occurred would themselves provide a remedy.


[32] For all of these reasons, we consider that the reclaiming motion must be refused and the interlocutor of the Lord Ordinary of
29 October 2008 affirmed.


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