Hammonds attended the High Court today for a £3m profit dispute hearing that will determine whether the firm’s managing partner Peter Crossley (pictured) will become embroiled in the case.
The case management conference, which is set down for three days, was delayed by half a day to allow the presiding judge Mr Justice Warren to read the papers.
Alan Steinfeld QC of XXIV Old Buildings commenced proceedings for Hammonds, which is suing eight of its former partners in a bid to regain alleged overdrawings for the 2003-04 and 2004-05 accounting years.
The silk laid out that the two issues to be determined by Warren J. The first is a preliminary issue as to whether outgoing partners are bound to the partnership deed as well as continuing partners. The second is Hammonds’ request for summary judgment, which seeks to strike out representations made by the defendants.
On the latter issue, Steinfeld looked to strike out the defendants’ claims against Crossley and the estate of former senior partner Richard Burns, who the former partners are looking to sue for misrepresentation.
Hammonds’ counsel told the court: “You can’t sue individual members of the [management] board for the breach of good faith to partners if it’s in the interest of the partnership as a whole.”
In relation to the preliminary issue, Steinfeld argued that the partnership deed had an implied term that outgoing partners are bound by the agreement where they have been served the firm’s accounts while still at Hammonds.
The QC gave the hypothetical example of a partner due to leave the firm on 1 November. Steinfeld explained: “Say on 25 October he receives the accounts. He’s still a partner but he had 10 days to file an objection. By the time the 10 days have expired he’s no longer a partner. According to the defendants it would mean he’s not bound by the accounts.”
Steinfeld also made the point that claims by some of the defendants that the court should stick to the letter of the partnership deed as it is “a well crafted document” were ill-judged as there were several errors in the agreement. As an example he said there is no provision in the deed to collect interest from partners who overdraw.
“He [the draftsman of the deed] gets himself into a muddle due to the way he expresses himself,” said Steinfeld. “This is not the most felicitously crafted document.”
Steinfeld was instructed by Hammonds’ Leeds chief Simon Miller, while seven out of the eight ex-partners are being advised by Addleshaw Goddard partner Pietro Marino and Charles Flint QC of Blackstone Chambers. The other former partner David Jones is being represented by Ian Croxford QC of Wilberforce Chambers.
Herbert Smith disputes partner Gary Milner-Moore has been instructed to act for Crossley and the estate of Burns.
For more on the Hammonds drawings dispute, see our feature.