EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
Lady Paton Lord Mackay of Drumadoon Lord Philip	[2013] CSIH 38 CA10/06 OPINION OF THE COURT delivered by LADY PATON in the cause KAREN ELAINE BUCHANAN Pursuer and Respondent; against (FIRST) JAMES GERARD NOLAN First Defender and Reclaimer; and (SECOND) CHRISTINE MARGARET MACLEOD or TOMLINSON Second Defender: _______________

Act: Ellis QC; Balfour + Manson LLP

Alt: McNeill QC; Francis Gill & Co (First Defender and Reclaimer)

(Second Defender, non-participating party)

26 April 2013

Dispute on the dissolution of a partnership

[1] In March 1986, the defenders set up practice as solicitors under the name Nolan Macleod. Their office was situated at 27 Newton Street, Glasgow. In 1991, the practice expanded to a second office at 39 Donaldson Street, Kirkintilloch. The Kirkintilloch branch focused on debt collection and litigation, while the Glasgow branch was concerned with conveyancing and executry work.

[2] In December 1995, a third partner was assumed, namely the pursuer. She brought no capital or clients to the firm. She worked at the Kirkintilloch office.

[3] In 1997, the three partners entered into a Contract of Partnership dated 7 July 1997. Clause Fourteenth provided that in the event of "irreconcilable differences arising between the parties" a partner could be forced to retire by notice given by the other partners. Clause Thirteenth A provided that if, in such an event, the first defender was forced to retire, the pursuer could exercise an option to purchase the first defender's "share in the capital and goodwill respectively of the business". Clause Fifteenth provided that "in the event of dissolution in any manner" the first defender could choose to:

"... retain and use the partnership name and to continue or be assigned by the firm any lease over property ... and all business files, ledgers, goodwill and any other property or assets referring to any client of the firm dealt with prior to First October 1995 by the firm at the address at 39 Donaldson Street [Kirkintilloch] ... shall belong solely to the first defender ... unless otherwise agreed in writing."

[4] In December 2003 and January 2004, irreconcilable differences arose between the pursuer and the first defender. On 21 January 2004, the pursuer and the second defender served a notice of enforced resignation on the first defender in terms of Clause Fourteenth. The date of dissolution was three months later, namely 21 April 2004. By letter to the first defender's lawyers dated 3 February 2004 the pursuer's lawyers advised that:

"... In terms of the Contract of Co-Partnery [sic] we hereby give notice in terms of Clause Thirteenth that [the pursuer] will exercise her option to acquire [the first defender's] share in the capital and goodwill respectively of the business. Accordingly you should advise your client that we are exercising our option to purchase [the first defender's] interest in the business ..."

[5] By his lawyers' letter dated 21 April 2004 the first defender intimated his intention to continue practising as a solicitor at the Kirkintilloch office under the name "Nolan Macleod". In other words he gave notice that he was exercising his entitlement in terms of Clause Fifteenth.

[6] As averred in the pursuer's pleadings (Condescendence 4 at page 12D of the Reclaiming Print):

"... It was important for the interests of all the parties to provide for orderly dissolution of the business as at 21 April 2004. There was a limited agreement which allowed for an orderly ceasing of the business of the former partnership on the 21 April 2004, but beyond that no agreement was possible ... The first defender intimated his intention to continue trading at the Kirkintilloch office using the partnership name. On the ceasing of business of the former firm on 21 April 2004, the second defender retained the Glasgow office and kept the files for the clients of that office. The pursuer was allowed to remove a certain but limited number of the current files for which she was responsible from the Kirkintilloch office. She was allowed to remove her own laptop computer. She moved into the Glasgow office and the pursuer and second defender commenced business as a new firm of solicitors under the name Buchanan Macleod ... "

Principal action and counterclaim

[7] No agreement could be reached about the division of the partnership assets and liabilities on dissolution. The pursuer raised the present action against the defenders, seeking:

1.             Declarator that the former partnership of Nolan Macleod between the pursuer and the defenders was dissolved as at 21 April 2004 and that subject to Clause Fifteenth of the Contract of Partnership between the pursuer and the defenders, the assets and liabilities of the firm fall to be dealt with according to the rules in section 44 of the Partnership Act 1890.

2.             A full account by the first defender of his intromissions with the assets and liabilities of the former partnership of Nolan Macleod in order that the true balances due to the pursuer may be ascertained, and for payment of those balances.

3.             Failing an accounting, for payment by the first defender to the pursuer of £120,750.

[8] The second defender did not enter appearance, and accordingly the litigation proceeds between the pursuer and the first defender alone.

[9] The first defender lodged a counterclaim, ultimately amended to seek payment to him by the pursuer of £185,195.50 in respect of goodwill (the First Conclusion) and £112,614 in respect of capital (the Second Conclusion). The supporting averments narrate inter alia the pursuer's exercise of the option in Clause Thirteenth A, namely to purchase the first defender's share in the capital and goodwill of the business, and the payments said to be due by her in respect thereof.

Procedural history

[10] A debate took place before Lord Malcolm on 5 and 6 July 2012. On 21 August 2012 the Lord Ordinary issued his opinion and the following interlocutor:

"The Lord Ordinary, having resumed consideration of the cause, continues the cause meantime; allows parties fourteen days in which to lodge written submissions as to the terms of the interlocutor in respect of the principal action; conform to opinion of even date; reserves all question of expenses."

[11] At a By Order hearing on 26 October 2012, the Lord Ordinary, in the light of counsel's joint minute and submissions, granted the following interlocutor (corrected to some extent by a subsequent interlocutor dated 30 November 2012):

"The Lord Ordinary, having resumed consideration of the cause, in terms and in respect of the joint minute no 61 of process, and having heard counsel By Order,

1.             appoints the first defender to lodge by 21^st December 2012 a full account of his intromissions with the assets and liabilities of the former partnership of Nolan Macleod between the pursuer and defenders which was dissolved on 21^st April 2004 and the distribution of those assets and liabilities between the parties in order that the true balances, if any, due by him to the pursuer, or by the pursuer to him, may be ascertained (the said account to be on the basis that the partnership has been dissolved as opposed to the basis of Clause Thirteenth of the contract of partnership, and on the basis that work-in-progress up to the dissolution of the partnership does not fall within the range of assets retained by or solely belonging to the first defender in terms of Clause Fifteenth of the contract of partnership);

2.             appoints the pursuer, if so advised, to lodge a note of any objection to the said account by 15^th February 2013;

3.             appoints parties to be heard By Order on 22 February 2013 between the hours of 9 am and 10 am to determine any further procedure and in particular about the period necessary for the lodging by the first defender, if so advised, of answers to any such note of objections, and for adjustment of the objections and answers;

4.             dismisses the counterclaim and decerns; finds the first defender liable to the pursuer in the expenses of the counterclaim and in 75% of the expenses occasioned by the debate; remits the accounts of expenses, when lodged, to the Auditor of Court to tax;

5.             continues consideration of all other questions of expenses until 2 November 2012 between the hours of 9 am and 10 am."

[12] On 2 November 2012, counsel for the first defender sought leave to reclaim. Leave was granted.

The Contract of Partnership

[13] A summary of the Contract of Partnership can be found in paragraphs [5] to [15] of the Lord Ordinary's Opinion. The "first party" is the first defender; the "second party" is the second defender; the "third party" is the pursuer. Clauses Thirteenth A, Fourteenth, and Fifteenth provide:

"THIRTEENTH A:

In respect of the first or third party only in the event of his death or on his giving notice of his intention to retire from the business in terms of Clause Fourteenth of the Partnership Agreement the right to acquire his share in the capital and goodwill respectively of the business is hereby conferred on the other party. If the third party declines within three months of the date of death or retiral to acquire that share in the business then and only then shall the second party hereto have the right to acquire within one further month that deceased or retiring partner's share in the business. In the event of neither party exercising their option to purchase, that part of the business will be sold on the open market and the proceeds used to make payment to the retiring partner or his representatives as hereinafter provided for ...

FOURTEENTH:

The partnership shall continue from year to year and any partner wishing or being required to retire shall give three months previous notice in writing to the others of his intention to retire at the expiry of that notice. In the event of such notice of retiral not being given the 'date of the event' mentioned in clause thirteen hereof shall be the date three calendar months after the date of actual retiral. The remaining partners shall be entitled to employ one or more persons to complete any work in progress during the said three month period and the reasonable costs thereof shall be deducted from any monies due to the said retiring partner under clause thirteen hereof. In the event of irreconcilable differences arising between the parties hereto the majority of partners shall be entitled to require the resignation of any other partner and the 'date of the event' mentioned in clause thirteen hereof shall be the date three calendar months after the date of intimation in writing of such a resolution to the party being required to retire. All parties by their signature hereto agree that in the event of being required to retire as herein mentioned he will elect to sign a partnership continuation agreement for Inland Revenue purposes and that prior to obtaining any payment hereunder.

FIFTEENTH:

The Parties hereto agree that in the event of dissolution in any manner James Gerard Nolan alone shall be entitled to retain and use the partnership name and to continue or be assigned by the firm any lease over property heritable and moveable at the discretion of the said James Gerard Nolan and all business files, ledgers, goodwill and any other property or assets referring to any client of the firm dealt with prior to First October 1995 by the firm at the address at 39 Donaldson Street aforesaid or any subsidiary or associated company of such clients shall belong solely to James Gerard Nolan or his representatives unless otherwise agreed in writing by the first party. The other parties hereto have and will have no claim whatsoever to the said business, profit or goodwill emanating from the said clients. The second and third parties hereto undertake not to act for or seek business from them for themselves or others or approach such clients for a period of five years from the date of dissolution ...".

Submissions on behalf of the first defender

[14] Senior counsel invited the court to allow the reclaiming motion, and to dismiss the principal action or alternatively to order the parties to make up dissolution accounts by reference to Clauses Thirteenth A and Fifteenth of the Contract of Partnership. In relation to the counterclaim, the court was invited either to allow a proof before answer at large, or a proof before answer in support of the second conclusion of the counterclaim.

[15] There were now only two issues in dispute, namely (i) the proper construction of Clauses Thirteenth A and Fifteenth (including the interrelationship between the two clauses); and (ii) the first defender's claimed entitlement to a certain element of work-in-progress in terms of Clause Fifteenth.

Clauses Thirteenth A and Fifteenth

[16] Senior counsel submitted that the Lord Ordinary had adopted a construction of the Contract of Partnership which had not been advanced by either party. That construction was erroneous. Contrary to the Lord Ordinary's view, Clauses Thirteenth A and Fifteenth could operate together. Accordingly the principal action was irrelevant, as it was founded upon the general dissolution provisions in section 44 of the Partnership Act 1890, whereas it should have been based upon the parties' Contract of Partnership (in particular, Clauses Thirteenth A and Fifteenth). Clause Thirteenth extended to an enforced retiral because the clause had a cross-reference to Clause Fourteenth which specifically referred to "any partner ... being required to retire". The contractual provisions were quite clear, and were not dependent on section 44.

[17] Clause Fifteenth provided protection for the first defender in respect of the client-base which he had built up prior to the pursuer's arrival. Clause Fifteenth did not render Clause Thirteenth unworkable. Failure to apply the agreed mechanism in Clause Thirteenth would deprive a partner of the ability to purchase the post-1995 share of the business; the right to impose an open sale; the right to a valuation and a preparation of accounts by the appointed accountants; the agreed basis of the dissolution accounts; the right to goodwill; and the agreed periods for payment and interest. In terms of Clause Thirteenth, the pursuer was entitled to acquire a "post-1995" share of the first defender's capital and goodwill in the business. If that was correct, the substratum of the counterclaim was sound, and the Lord Ordinary erred in dismissing the counterclaim.

[18] Initially, both parties appeared to agree that the pursuer had exercised her option in terms of Clause Thirteenth A (pages 39C and 40D of the reclaiming print). However the Lord Ordinary had taken a different view, namely that the pursuer had merely purported to exercise an option which was no longer available to her. Counsel for the pursuer had then adopted the Lord Ordinary's approach. By contrast, the first defender's position was that the pursuer, having properly exercised her option and received certain assets, was bound by a contract of sale, was unable to resile, and had to make payment to the first defender therefor (Gloag Contract (2^nd ed) 280; Helby v Matthews [1895] AC 471, at pages 476, 479, 484). Thus the First Conclusion in the counterclaim sought payment of £185,195.50, representing one-half of the goodwill attributable to pre-1995 clients valued at £370,391 (page 16 of the first defender's Note of Argument). The Second Conclusion sought payment of £112,614, representing the value of capital acquired by the pursuer. As was averred on behalf of the first defender at page 49A-B of the Reclaiming Print:

" ... the capital of the business, except insofar as falling under Clause Fifteenth, as at the date of dissolution, in terms of draft accounts prepared by Carrick Kerr & Co up to the date of dissolution, was stated at £225,228. The first defender's share was, accordingly, £112,614 ..."

[19] In summary therefore, the first defender's contention was that the principal action was irrelevant as it was not based upon Clauses Thirteenth A and Fifteenth. To seek a section 44 accounting (as set out in the interlocutor of 26 October 2012) was to deny the application of the contractual provisions. The interlocutor would only be appropriate where the partners were in complete disagreement and there were no contractual provisions such as Clauses Thirteenth A and Fifteenth. Nevertheless it was not suggested that the principal action should be dismissed. An alternative disposal was proposed in the first defender's Note of Argument at paragraph 32, as follows:

"In the alternative, assuming, in the whole circumstances, (i) that some form of order is required for the making up of accounts as between [the pursuer and the first defender] and (ii) that - as the interlocutor of 26 October 2012 recognises - a balance might be due to either party, an appropriate disposal would have been to order the parties to make up a dissolution account but (a) upon the basis of the operation of Clauses Thirteenth A and Fifteenth, (b) without dismissal of the counterclaim and (c) reserving to the parties the right to raise in notes to the account any matters of disagreement based upon the issues referred to in the counterclaim and answers insofar as relevant to the account."

In this way, final accounts would be based upon the operation of Clauses Thirteenth A and Fifteenth. Insofar as relevant, Clause Thirteenth B et seq could be brought into play. Parties' affairs could be wound up on the basis of their contractual agreement, rather than on the basis of a general dissolution account where parties were completely in open water.

[20] Alternatively, it would be for the pursuer and her advisers to seek to amend the principal action such that it was relevantly based upon Clauses Thirteenth A and Fifteenth.

Work-in-progress and Clause Fifteenth

[21] Clause Fourteenth made specific provision for the completion of work-in-progress in the three month period referred to in Clauses Thirteenth and Fourteenth, the cost thereof having to be borne by the outgoing partner. Because of that specific provision, the division of work-in-progress on dissolution was not governed by the normal profit and loss provision. Thus when dealing with work-in-progress on dissolution, it was inappropriate to take Clause Sixth into account. In the result, the first defender was, in terms of Clause Fifteenth, entitled to the whole work-in-progress relating to pre-1995 clients at the Kirkintilloch branch.

Submissions on behalf of the pursuer

[22] Mr Ellis QC submitted that the court should adhere to the Lord Ordinary's interlocutor, and refuse the reclaiming motion.

The Lord Ordinary's preferred construction
[23] The true interpretation of a contract was a matter of law. Having heard counsel's submissions, the court was not obliged to accept either side (Multi-link Leisure Developments Ltd v North Lanarkshire Council 2011 SC (UKSC) 53 paragraph [30]; Stair Memorial Encyclopaedia, Evidence (Reissue) 1(2)(c)(14)). The Lord Ordinary's construction was a possible one on the basis of the pleadings.

Clauses Thirteenth A and Fifteenth
[24] Where competing constructions were available, one which was more commercially sensible should be adopted (Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900, paragraphs 25, 29, and 30). If the first defender exercised his option in terms of Clause Fifteenth, what was envisaged in Clause Thirteenth A simply could not take place. It was not possible to transfer the goodwill of the business, but at the same time to keep most of it. It made no commercial sense for the pursuer to pay for the goodwill of the Kirkintilloch branch when the first defender, exercising his rights under Clause Fifteenth, kept the name, the premises, and the pre-1995 files. Clause Thirteenth A referred to the first defender's share in the whole capital and goodwill of the business, not to part or parts of that capital and goodwill: cf the approach to goodwill in Clause Thirteenth B and D. Thus if resort was to be had to the open market, the whole of the first defender's share was to be put on the market. Potential purchasers would not be interested in purchasing a part or parts. Clause Fifteenth quite simply trumped Clause Thirteenth A. If Clause Fifteenth operated, Clause Thirteenth A could not operate at all.

[25 ] As a result, there was no contractual mechanism applicable to the current situation. It was therefore necessary to resort to section 44 of the Partnership Act 1890. The First Conclusion of the summons was based upon section 44. The Second Conclusion did not necessarily depend upon section 44. The interlocutor of 26 October 2012 was unobjectionable. Whatever happened, there should be an accounting (and the parties should if necessary fashion a more helpful order for an accounting). Accordingly the court was invited not to dismiss the principal action as irrelevant, but rather to adhere to the Lord Ordinary's interlocutor. If the court was of the view that any accounting should be founded upon Clauses Thirteenth A and Fifteenth, the interlocutor of 26 October 2012 could be recalled and the case either (i) remitted to the Lord Ordinary to reconsider the interlocutor, or (ii) put out By Order before the Inner House for that purpose.

Work-in-progress
[26] Senior counsel submitted that, as part of the dissolution process, work-in-progress had to be taken into account when drawing up the profit and loss account. Clause Thirteenth D provided that accounts on dissolution were to be prepared on the same basis as previously, and Clause Sixth provided for an equal division of current profits and losses. If work-in-progress were to be removed from the closing accounts (as submitted by Mr McNeill), that would reduce the profits, which was not what was intended. The purpose of Clause Fifteenth was simply to protect the first defender's assets after dissolution. There was no commercial sense in depriving the pursuer of the profits earned during the period prior to dissolution, simply because of the attempt in Clause Fifteenth to protect the first defender's interests after dissolution. In any event, the list of assets to which the first defender could lay claim was qualified by the phrase "unless otherwise agreed in writing": the Contract of Partnership and Clause Sixth comprised such an agreement in writing. As for Clause Fourteenth, that clause simply made special provision for the situation where a partner departed without giving the required notice, leaving behind work which had to be completed. Accordingly work-in-progress should be treated in the closing accounts in the normal way.

The proper disposal of the counterclaim and the principal action
[27] Senior counsel submitted that dismissal of the counterclaim was the appropriate course of action. On a proper construction of the Contract of Partnership, the counterclaim proceeded on an unsound basis in law. Accordingly dismissal was appropriate. As a fall-back position, a proof before answer was necessary to resolve the counterclaim. As for the principal action, its basis (a general obligation to account) was not irrelevant. A conclusion for an accounting was not irrelevant. The principal action should be permitted to proceed.

Final reply for the first defender

[28] The submission that Clause Thirteenth A was unworkable if Clause Fifteenth was relied upon had not been foreshadowed in the pursuer's Note of Argument. Clauses Thirteenth A and Fifteenth could and did work together. The current situation was conceptually no different from insolvency, where there had to be a workable interface between Clauses Thirteenth A and Fifteenth in order to protect the general body of creditors. The reclaiming motion should be allowed.

Discussion
An accounting

[29] Clause Thirteenth A provides the pursuer with a right or option to purchase in the following terms:

"In respect of [the first defender and the pursuer] only in the event of his death or on his giving notice of his intention to retire from the business in terms of Clause Fourteenth of the Partnership Agreement the right to acquire his share in the capital and goodwill respectively of the business is hereby conferred on the other party. If [the pursuer] declines within three months of the date of death or retiral to acquire that share in the business then and only then shall [the second defender] have the right to acquire within one further month that deceased or retiring partner's share in the business. In the event of neither party exercising their option to purchase, that part of the business will be sold on the open market and the proceeds used to make payment to the retiring partner or his representatives as hereinafter provided for."

One question arising is whether the phrase "the right to acquire [the retiring partner's] share in the capital and goodwill respectively of the business", properly construed, refers to that partner's whole share in the solicitors' business carried out in both Kirkintilloch and Glasgow, or whether it is capable of referring to a part or parts of his share in the business: for example, to a "Kirkintilloch" part, or to "pre-1995 clients".

[30] In our opinion, on a proper construction of the Contract of Partnership read as a whole, the phrase refers to the partner's whole share in the solicitors' business, including both the Kirkintilloch and the Glasgow branches, and both pre- and post-1995 clients. We have reached that view for the following reasons.

[31] Clause First applies the firm name to "the whole business of the partnership". Clause Fifth refers to sums paid "into the business". Clause Seventh refers to the documents relative to "the business of the partnership". Clause Eleventh provides that, in the event of death, bankruptcy or insolvency, the person ceases to be a partner and no share or interest or title to interfere with the partnership "business", property, assets, or otherwise transmits to a representative.

[32] Against that background, the phrase in Clause Thirteenth A, namely the "right [of the pursuer] to acquire [the first defender's] share in the capital and goodwill respectively of the business", properly construed, refers in our opinion to the whole of the first defender's share in the business known as Nolan Macleod as carried on in Kirkintilloch and Glasgow, including both pre- and post-1995 clients. There is no provision in Clause Thirteenth A for an option to purchase a specified part or parts of the first defender's share in the capital and goodwill of the business (such as the capital and goodwill relating to post-1995 clients in the Kirkintilloch office). The phrase "that part of the business" in the last sentence of Clause Thirteenth A refers back, in our view, to the first defender's "share in the capital and goodwill respectively of the business". What Clause Thirteenth A envisages is an option to purchase the first defender's entire share in the capital and goodwill of the business carried on at both Kirkintilloch and Glasgow using the name "Nolan Macleod" including both pre- and post-1995 clients. In other words, the provision caters for the first defender leaving the practice and all its work entirely.

[33] It follows therefore that if the first defender elects to exercise his right under Clause Fifteenth by his retaining the business name Nolan Macleod, taking over the lease of the premises at 39 Donaldson Street, Kirkintilloch, and keeping "all business files, ledgers, goodwill and other property or assets referring to any client of the firm dealt with prior to First October 1995 by the firm at the address at 39 Donaldson Street", then the option contained in Clause Thirteenth A is simply not available to the pursuer, as it would not be possible for her to acquire the whole of the first defender's share of the capital and goodwill of the business known as Nolan Macleod.

[34] Thus we agree with the Lord Ordinary's view, expressed in paragraph [18] of his opinion (page 78 of the Reclaiming Print) that:

" ... once [the first defender] chose to exercise his entitlements under Clause Fifteenth and continued in practice, albeit on his own account, from the Kirkintilloch premises, the buy-out provisions in Clause Thirteenth ceased to have any application ... Once Clause Fifteenth was invoked, Clause Thirteenth A had no application ..."

We also agree with the Lord Ordinary's conclusion that any attempt made by the pursuer to exercise the option in terms of Clause Thirteenth A was merely a purported attempt, and not a valid exercise of any right or option under that clause (cf paragraphs [17], [19], [20], and [21] of the Lord Ordinary's opinion). The first defender's acceptance of the pursuer's purported exercise of a non-existent right cannot in our opinion create an obligation binding upon the pursuer. Thus authorities such as Gloag Contract (2^nd ed) 280 and Helby v Matthews [1895] AC 471 do not assist. In the result therefore it is our opinion that there is no obligation binding the pursuer to purchase any of the first defender's share of capital and goodwill, and the counterclaim is indeed irrelevant, as the Lord Ordinary has concluded.

[35] We should add, for completeness, that we do not accept that it was not open to the Lord Ordinary to reach the view he did simply because the parties had adopted different approaches in their pleadings, notes of argument, and even in submissions. In the circumstances of this case, the crucial question is the proper construction of the contract itself. That takes precedence over the parties' respective understandings or contentions about the meaning of the contract: cf the approach adopted by Lord Rodger of Earlsferry in paragraph [30] of Multi-link Leisure Developments Ltd v North Lanarkshire Council 2011 SC (UKSC) 53. Nor do we accept that the Second Conclusion of the counterclaim and the supporting averments can be regarded as some sort of counter-accounting claim by which the first defender seeks recognition for what has already been transferred to the pursuer. The basis of the counterclaim, in our view, is the alleged binding obligation arising from the pursuer's purported exercise of the option in Clause Thirteenth A, and the purported partial implementation thereof, which the Lord Ordinary (correctly in our view) has found to be irrelevant.

[36] Three questions remain:

(1) Is the principal action relevant.

(2) Should there be an accounting between the parties.

(3) Should the Lord Ordinary's interlocutor of 26 October 2012 ordering an accounting between the parties be qualified as contended for by counsel for the first defender.

The principal action
[37] In our opinion, the principal action is relevant. The averments are sufficient to support the First, Second, and Third Conclusions. It seems to us that there are lacunae in the partnership agreement. We consider that its provisions do not clearly provide for an accounting between the pursuer and the first defender in the circumstances which have arisen in this case. Where a partnership agreement fails to provide clearly for the mechanism of accounting to be applied in particular circumstances, that amounts, in our view, to a lack of "any agreement" referred to in the preamble to section 44 of the Partnership Act 1890. Accordingly we consider that the pursuer is entitled to rely upon section 44 for the purpose of "settling accounts between the partners after [the dissolution] of the partnership". The principal action is therefore in our opinion sufficiently relevant and specific, as the Lord Ordinary has concluded.

Whether there should be an accounting between the parties
[38] In our opinion, there should be an accounting between the pursuer and the first defender. There are disputes concerning the value of the pursuer's share in the Kirkintilloch practice, and the division of the Kirkintilloch files and assets. An accounting at large in terms of section 44 should resolve these matters. We accordingly agree with the Lord Ordinary that there should be an accounting at large with the aim of resolving the respective post-dissolution entitlements of the pursuer and the first defender.

Whether the Lord Ordinary's interlocutor of 26 October 2012 ordering an accounting requires to be altered in any respect, as contended for by counsel for the first defender
[39] We are not persuaded that the Lord Ordinary's interlocutor of 26 October 2012 requires any alteration (other than the substitution of different dates in the time-table incorporated therein). As indicated above, we consider that any post-dissolution accounting should be conducted in terms of section 44 of the Partnership Act 1890 as a consequence of the lack of appropriate provision in the partnership agreement for the particular circumstances which have arisen in this case. Accordingly the interlocutor of 26 October 2012 should remain as it stands.

Work-in-progress
[40] The Contract of Partnership must be construed as a whole. Clauses Sixth, Thirteenth, and Fourteenth are relevant in the context of work-in-progress and its division on dissolution.

[41] Clause Sixth (a) provides that the pursuer is currently entitled to fifty per cent of the profits (or will bear fifty per cent of the losses) from the business on all files from the Kirkintilloch office. Annual profit and loss accounts and balance sheets are to be made up on that basis.

[42] Clause Thirteenth provides that on dissolution, the same exercise as that outlined in Clause Sixth is to be carried out, the relevant date being the date of dissolution rather than the normal year end. Accordingly profits or losses for the Kirkintilloch branch should be divided equally between the pursuer and the first defender.

[43] Clause Fourteenth provides for the situation where a partner has left practice without giving three months' notice. The remaining partners are then specifically entitled to employ legal assistance to complete work-in-progress during the three month period, and to deduct the reasonable costs of such assistance from the monies due to the retiring partner. Had the partner remained and worked during the three month period, then that deduction would not have to be made.

[44] In our opinion, these clauses, properly construed, record the parties' intention to divide work-in-progress for the period between the previous set of accounts and the date of dissolution (21 April 2004) equally between the pursuer and the first defender. We therefore agree with the Lord Ordinary's conclusion at paragraph [28] of his opinion.

Decision

[45] For the reasons given above, we refuse the reclaiming motion, adhere to the interlocutor of the Lord Ordinary (with appropriate alterations to dates as necessary) and remit the case to the Lord Ordinary to proceed as accords.