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by Julian Norris

The Partnership Act 1890, provides at section 1 (1), “Partnership is the relation which subsists between persons carrying on a business in common with a view of profit. ” Of course there is often a bit more to it than this and whilst there are usually profits to share, these can fluctuate and there can sometimes even be losses as well as all manner of other stresses that come with life in a commercial world. For a whole variety of reasons, partners sometimes do fall out and money, in some shape or form, is very often at the bottom of it all.

So, what happens when the relationship between partners breaks down and a feeling develops that things are unfair? Perhaps one of them has digressed, is not pulling their weight, is perceived to be benefiting more than they really should do, or is failing to comply with some other obligation? Small disagreements can often be resolved quickly between partners but even these sometimes escalate and require external support to resolve. And when the dispute concerns a larger sum of money or the facts and law are more complicated, partnership disputes will often require specialist legal advice and representation to resolve.

The Partnership Act 1890 governs those partnerships where there is no written agreement (the partnership agreement or deed). The first thing to say is that there is no right to expel a partner under the Partnership Act and so, you either work things out, or if that is not possible, dissolve the partnership. That of course can have serious ramifications and it is always wise to seek early legal advice.

Many partnerships do have a written agreement and this usually builds upon but sometimes displaces the provisions of the Partnership Act. Almost always, these agreements will make provision for a new partner to join or a partner to choose to retire. They will often also contain provisions which allow for the expulsion (with grounds) of a partner in certain circumstances.

Some of these grounds may be clearer than others. For example, “if his name is erased or suspended from the GMC register” has a natural meaning and is a matter of certainty. It either has or has not happened. But, if for example a clause reads “if in the reasonable opinion of the other partners he is guilty of deception, theft, fraud or dishonesty” this is more complicated. What amounts to guilt and what amounts to reasonable opinion?

Perhaps these things suggest criminal behaviour – a matter for the Police to investigate and if the evidence supports it, ultimately a trial where a judge and jury will hear the evidence. The judge will direct herself or the jury on the law and what if any evidence is to be disregarded before reaching a decision. The extracts from a typical partnership deed above however provide that the other partners may come together and form their own reasonable opinion.

When can an expulsion be challenged?

• Procedure: Where the process prescribed by the partnership deed is not followed, any apparent expulsion may be fatally flawed.
• Grounds: Where the grounds relied upon are not made out. Investigating the facts underlying the expulsion of a partner is essential; an opinion formulated after adequate investigation which, whilst yielding less evidence than that required for a criminal prosecution, is more likely to be found to be “reasonable.”
• Natural justice: Expulsion is a serious matter and a partner who has not had the opportunity to be heard and present their side of the story before any decision is made may well successfully challenge expulsion. Various legal cases amplify the importance of natural justice being done in the exercise of a quasi-judicial function.
• Decisions: Partners must act in good faith towards one another and when making decisions about expelling a partner, ensure that their decision is made in the best interests of the partnership as a whole and not for any personal gain.
• Braganza: Braganza emphasises the need for decisions to be made rationally, based upon consideration of all relevant facts whilst ignoring any irrelevant matters and then asking whether the decision that has been reached is so absurd, that no reasonable decision maker could possibly have made it.

Partner disputes are complex matters that require specialised legal advice to navigate effectively. Each case is unique and requires careful consideration of the specific circumstances involved. This briefing note is intended to provide a whistle stop overview of some important legal and factual considerations within a complex area of the law and should not be relied upon as individual advice.

Julian Norris is a solicitor at BMA Law specialising in commercial dispute resolution and regularly advises and assists GP partners in resolving disputes. You may contact him directly by emailing j.norris@bmalaw.co.uk or telephone our enquiries line to arrange a meeting.