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Buachaill
Buachaill, Barrister
Category: Law
Satisfied Customers: 10190
Experience:  Barrister 17 years experience
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I bought a property to refurbish with 2 business partners and

Customer Question

I bought a property to refurbish with 2 business partners and we had a Declaration of Trust drafted by our solicitor setting out how the net sale proceeds should be disbursed & what % should go to each partner. Subsequently I have had a dispute with my 2 partners and they have instructed our solicitor not to release any of the sale proceeds until the dispute is resolved. My concern is that I have been unable to access any of the money due to me since completion took place on September 4th. Our solicitor says he is unable to release any funds unless all 3 partners are in agreement. This is despite there being no partnership agreement in place and unfortunately the Declaration of Trust document is silent on any dispute resolution process. Is this correct that they can effectively block any release of the funds being made?
I have also offered various options to try and get this resolved:
1) The sum of money in dispute is c£15k-£20K. I have suggested that £20k be retained by our solicitor, held to his order, until we have agreed the sum in dispute. Based on this the balance of the net sale proceeds should be paid out immediately to the 3 parties.
2) Our creditors should be paid now as there invoices are not disputed and payment is overdue.
Please advise me whether 2 partners acting together can legally instruct our solicitor not to release any of the net sale proceeds. If they are do they have to determine their position within a defined timescale or this could drag on indefinitely or until I am forced into bringing an expensive legal action against them.
Submitted: 1 year ago.
Category: Law
Expert:  Buachaill replied 1 year ago.
1. Here, what you need to do is to serve a Notice of Dissolution of the Partnership under section 32 of the Partnership Act, 1890. This brings the partnership to an end and it ensures that the partnership is wound up in accordance with the winding up provisions of the 1890 Act. I know you have a Declaration of Trust drafted dealing with how the proceeds should be disbursed. However, the legal arrangement between all three of you is still a partnership and if you bring it to an end, the proceeds of sale and any liabilities must be paid in accordance with the terms of the 1890 Act. In other words the Declaration of Trust and the payment of all liabilities must occur and business relations between you brought to an end. Onr or two partners cannot stymie this process. Should they seek to do so and an application has to be made to the court, then the legal costs will come out of their share of the monies.
Expert:  Buachaill replied 1 year ago.
2. Section 44 of the Partnership Act, 1890, provides for what should happen when a partnership is dissolved. First, all losses must be paid. Then, all liabilities and then in the following order:1.In paying the debts and liabilities of the firm to persons who are not partners therein:2.In paying to each partner rateably what is due from the firm to him for advances as distinguished from capital:3.In paying to each partner rateably what is due from the firm to him in respect of capital:4.The ultimate residue, if any, shall be divided among the partners in the proportion in which profits are divisible.
Expert:  Buachaill replied 1 year ago.

3. By this method you can resolve the impasse between you and the two other partners. It also leads to the implementation of the Trust Declaration by a roundabout mechanism. The only other alternative would be a court application seeking Directions as to how the money would be dealt with. That would mean much of the proceeds would be dissipated in legal costs.

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