At first glance, the case of Kommalage v Sayathakumar appears to be purely procedural and, frankly, fairly boring. However, beneath the surface lie a series of fundamental and important cardinal principles of partnership law.
Vos LJ helpfully identifies what he describes as the “single question”, namely “whether that costs order can be enforced by the service of a statutory demand against a member of the partnership at the date of the costs order, who was not a member of the partnership either when the cause of action to which the claim related accrued or when the proceedings were issued”.
Before embarking on an exploration of the answer to that question, allow me a side issue. One crucial point was, rightly, common ground between the parties (little else was!). The point was that the provisions in the partnership agreement that were binding as between the partners could not affect liability to third parties. This is an important cardinal principle and one which is often misunderstood or forgotten. Unless the third party is himself part of the contractual agreement (for example by agreeing to release one partner from liability), whatever the partners agree between themselves will not affect liability to third parties.
Moving on and cutting through considerable factual and procedural complexity, the competing answers to Vos LJ’s question were essentially as follows:
- The individuals who are liable on a costs order are those who were the partners at the time the cause of action accrued (Mr Kommalage’s answer).
- Alternatively, the individuals who are liable on a costs order are those who were the partners at the time the costs order was made and the costs debt or obligation was incurred (Mr Sayathakumar’s answer).
The Court of Appeal placed considerable reliance on the all-important and often overlooked provisions of PD7A.5A. It emphasised that claims in a traditional partnership context are brought against those who were partners at the time the cause of action accrued. Section 9 of the Partnership Act 1890 does not alter that position. Indeed (as Vos LJ said), it is merely reflected in these CPR rules. Likewise, this proposition was a significant part of the rationale in the earlier case of Dean & Dean (a firm) v Angel Airlines SA. As Patten J put it in that case (at para 47), “Although costs orders do not relate back as such, they can only bind the parties to the action against whom they are made”.
In Kommalage v Sayathakumar:
- When the cause of action accrued, Mr Kommalage was not a partner in the firm.
- It followed that the costs order made against the partners as defendants in the litigation cannot have been an order against him, because he was not a party to that litigation (given that he was not a partner in the firm at the time the cause of action accrued).
In that way, one gets to a fairly straightforward, wholly consistent and principled answer to the question. The fallacy in Mr Sayathakumar’s answer was to think that PD 70.6A somehow altered the underlying position. All that provision did was to set out the natural persons against whom an order made against a partnership may be enforced. It did not change who was actually liable in respect of a costs order.
The upshot was that Mr Kommalage was correct and he was neither liable in the original cause of action nor for the costs order that flowed from it. Stripped back to its basics, this case makes good clear common sense. It provides an object lesson in the crucial importance of returning to first principles.
