Disputes within partnerships do unfortunately happen. When they do, they are hugely disruptive to the business.
Common scenarios giving rise to partnership disputes are:-
- Disagreements around the strategic direction of the partnership;
- Allegations that a partner has taken “secret profits”;
- Allegations that a partner is not performing satisfactorily or is not pulling their weight;
- Absence of a partner from a partnership or retirement of a partner from a partnership.
The first port of call when a partnership dispute arises is the written Partnership Agreement. This will set out the rights and obligations of the partners, the procedure for dealing with retirement and/or absence from the partnership and the procedure for the expulsion of a partner. The Partnership Agreement may also contain a Dispute Resolution clause setting out how the parties have agreed the resolution of any dispute that arises will be dealt with.
If there is no written Partnership Agreement, the Partnership will be governed by the Partnership Act 1890.
It is important to take early advice and action in relation to any partnership disputes to avoid (or at least minimise) the loss of management time and disruption to the business as well as the stress and legal costs.
It is important to consider whether early recourse to a method of Alternative Dispute Resolution, such as Mediation or Expert Determination may result in a swift, fair and cost effective resolution to the dispute.
The written Partnership Agreement may provide that any dispute is to be referred to Arbitration. If this is the case, the Partnership Agreement is also likely to set out how the Arbitrator is to be selected and appointed. An Arbitrator’s decision at the end of the Arbitration process will be final and binding.
Arbitration is generally regarded as being faster, cheaper and more flexible than court proceedings. That said, the parties do still need to go through the various steps generally involved in the litigation process such as Statements of Case, a Preliminary Hearing, disclosure, witness statements, experts’ reports and a Final Hearing.
Arbitration is by no means a speedy process. However, the parties do have some flexibility in terms of determining the speed at which the dispute proceeds (outside the restrictions of the currently congested court system).
There are no court fees but the parties do pay the fees of the Arbitrator.
In addition, Arbitration is a private process and generally has the benefit of confidentiality.
The Dispute Resolution Team at SAS Daniels LLP, are experienced in dealing with partnership disputes by way of court proceedings and Arbitration and are also experienced at negotiating sensible and cost effective resolutions by Alternative Dispute Resolution methods used either before proceedings are commenced or during the course of such proceedings.
Job Title: Partner
Phone: 0161 475 7655