Professional Partnerships- When Differences Of Opinion Become Legal

It is very rare to see a decision surrounding the facts of a dissolution of a professional services partnership. Most cases settle. Substantive insight in relation to the application of the legal principles surrounding the dissolution of partnerships is given in the recent decision of the UK Court of Appeal dismissing an appeal from the decision of the High Court in respect of issues surrounding the termination of a solicitor's partnership. The case of Bishops V Goldstein [2014] EWCA Civ 10 gives a very clear signal from the court in relation to its view of conduct of partners designed to squeeze out partners from professional partnerships.

There were two partners in the practice that was originally to be for the defined term of four years with guaranteed levels of profits to be paid to Mr. Goldstein, one of the partners. The partnership actually terminated early by the agreement of Mr. Goldstein and Mr. Bishop. It terminated as a result of Mr Bishop's conduct which included the taking of unilateral action in relation to the affairs of the partnership without consultation. If Mr. Goldstein could have brought himself within Section 35(d) of the Partnership Act, 1890, one of the grounds in the Partnership Act conferring a discretion on the court to give a decree of dissolution, he would be able to claim for damages for breach of the terms of the partnership agreement. Section 35 (d) allows a partner dissolve a partnership when a partner other than the partner suing "wilfully or persistently commits a breach of the partnership agreement, or otherwise so conducts himself in matters relating to partnership business that it is not reasonably practicable for the other partner or partners to carry on in partnership with him". The High Court Judge had already found that:-

If, rather than dissolve by agreement, Mr. Goldstein had sought a dissolution under Section 35(d) of the Act he would have succeeded. The conduct of Mr. Bishop which had by then made it not reasonably practicable for Mr. Goldstein to carry on business in partnership with him had consisted of breaches of the partnership; and Those breaches had indeed been the cause of the earlier, consensual, termination of the partnership. The points in paragraphs I & II above were not disputed but the point in paragraph III was challenged on the basis that effectively it was not the conduct that brought the affairs of the partnership to an end but it ultimately was brought to an end by consensual...