Partnership Disputes

Often we find ourselves advising clients who are experiencing a dispute with a business partner, colleague or a third party. these situations are emotive and can be complex, particularly whereby the business is still undergoing. More than often partners of a dental practice enter into partnership agreements on good terms. In usual circumstances the practice prospers in those first few years of start-up however, unfortunately, situations can arise whereby there is a breakdown in the business relationship and a conflict arises.

Examples whereby a dispute may arise:

• Breach of a provision contained within a Partnership Agreement;
• Breach of a clause contained within a Expense Sharing Agreement;
• Breach of term contained within a Sale and Purchase Agreement;
• Breach of an obligation contained with a Shareholder Agreement;
• Breach of a clause contained within an Associate Agreement;
• Breach of a commercial agreement; and
• Breach of an agreement with a third party.

What do you do at the outset of the dispute?

We would always advise that the first thing that you should do is to try to resolve the dispute between yourselves. It is important to deal with any problems that are occurring as quickly and promptly as possible as your primary aim is to ensure the continuing smooth running of the business. If associate/employees are made aware of the dispute this could cause upset/uncertainty, which is something you must try to avoid.  It could be that you arrange a round table discussion with the partner and have a note taker present and discuss the issues and seek a resolution there and then. Unfortunately, we understand that this usually is not an option because the business relationship has totally broken down and you no longer are able to communicate. It is at this point that we would urge you to seek legal advice.

Settlement

We always advice that settlement should be at the forefront of your mind and to avoid unnecessary legal costs. If you can reach an agreement with the other party early it will ensure:

• Legal costs are kept to a minimum. We understand that legal fees for a commercial dispute are in addition to the cost of your time.
• It would eliminate the stress of going to Court and awaiting a Judgement.
• Avoid the risk of potentially unwanted publicity and kept confidential.
• It allows parties scope to discuss and tailor what outcomes they wish to achieve rather than leaving it to the discretion of a court.

 What would we do?

 Usually the vast majority of disputes we encounter within dental practices has derived as a result of the lack of documentation being entered into between the parties. More than likely the partners of the practice would have entered into a partnership agreement which assists as then we are usually guided by the agreement as to how the dispute should be dealt with. If there are no clauses to assist or in fact no agreement was entered into then you would look to the Partnership Act 1890 and relevant case law to offer assistance.

As mentioned above, we always try to avoid the matter escalating as this could cause disruption to the business and be costly and timely. We would correspond with the other partner on your behalf, this would take the stress away from you and would enable us to try to achieve an early resolution. From experience this method has usually been effective, as it clearly sets out the dispute and, in the event, that the matter is furthered, what you would be likely to recover. However, there are times when this is not the case and then we would have to refer the matter to go to mediation or arbitration.

How we try to reach an agreement?

 If you are not successful in having a round table discussion then we would urge you to seek legal assistance and try the following:

• Entering into Without Prejudice conversations. Any communication that is headed “without prejudice” means that it cannot be referred to in any court proceedings providing (unless it is to determine costs) that it is a genuine attempt to settle the matter. The reasoning behind this rule is to encourage the parties to negotiate a settlement without the fear of anything that they say or do being used against them in some way.
• Alternative Dispute Resolution. this could be through mediation, conciliation and arbitration amongst the parties. The different methods of ADR have their own advantages and disadvantages. In mediation the mediator will attempt to help the parties reach an agreement but their decision is not binding, whereas in Arbitration, the arbitrators decision will be binding on the parties.
• Part 36 Offers. This is a special type of offer which must be made in a specific way. For a Part 36 offer it must be compliant with the rules contained within the Civil Procedure Rules. Just with the Without Prejudice offer to settle, a Part 36 offer cannot be put before the Court as evidence against the party who made the offer, and more importantly it is made without any admission of liability.
• Pre- action correspondence. This is a letter sent to the other party that is compliant with the pre-action protocols. This in essence is the last change the other party has to try and resolve the dispute before the other party issuing proceedings. It also encourages party to exchange meaningful information at an early stage to avoid litigation.

If an agreement is not reached?

If no agreement can be reached between the parties, then the final option would be to issue a claim in Court and seek an Order and/or Injunction. This would be the last resort and one that we would always try to avoid as these sorts of matters can be timely, stressfuly and you could incur significant fees. It is important to remember that settlement can be reached at any point throughout the course of the dispute and even if the matter commences to Court.

If you require assistance or general advice in respect of the above or you have any other queries, then please contact our Litigation team on 0330 88 2275.