In Bishop v Golstein [2014] EWCA Civ 10, the Court of Appeal has dismissed an appeal against a decision that the early termination of a two-partner partnership was caused by the cumulative effect of one partner’s conduct in breach of the partnership agreement, making it intolerable for the other partner to continue in partnership with him and entitling the other partner to damages.
Mr Bishop (B) and Mr Golstein (G) entered into a partnership as solicitors in 2007. The partners agreed that the partnership would last for a minimum of four years, and that G would be guaranteed a minimum level of drawings from the firm. However, in June 2010, the partnership ended by mutual agreement after the partners fell out with each other. The year before the partnership ended, B had told the partnership’s accountants not to forward the accounts to G, had taken some unilateral management decisions - which breached the partnership agreement - and had refused to discuss partnership matters with G.
G issued proceedings against B and sought damages for the breach of the partnership agreement, as B’s conduct had ended the partnership before its minimum four-year term, which had resulted in lost drawings that had been guaranteed over the four-year term. The High Court held that that early termination of the partnership was due to B’s conduct in 2009, which had made it intolerable for G to continue in partnership with him. Consequently, B was liable to pay damages to G for the guaranteed minimum level of drawings that he should have received. Further details of the High Court ruling are here.
B appealed the ruling on the grounds that (1) none of his breaches of the partnership agreement were continuing at the date of its termination; (2) G had affirmed the partnership agreement in a number of ways: by asserting the continued existence of the partnership through correspondence, continuing to do work for the partnership, receiving drawings and by participating in the management of the firm; and (3) the High Court had not identified any further breach in the last three months of the partnership that was capable of amounting to a “last straw” within a doctrine applied to the repudiation of employment contracts.
The Court of Appeal dismissed B’s appeal, concluding that most of B’s breaches of the partnership agreement were due to his failure to comply with his duties of trust and confidence towards G. It held that contractual doctrines of repudiation and affirmation, such as the “last straw” principle, are not directly applicable to discretionary dissolution under section 35(d) of the Partnership Act 1890.
The ruling confirms that there cannot be automatic dissolution of any partnership by accepted repudiation.
