Our Partnerships Dispute Resolution team provide advice to individuals involved in partnerships or joint ventures in property and other business sectors. We provide high quality partner and counsel-led advice from our first advice meeting. We review your partnership / Joint Venture dispute and dispense the correct advice at the outset, when it matters the most.
Business Partnership Disputes
Our multi-disciplinary practice will advise you as to the different methods of resolving your dispute. Many partnership disputes can be resolved by us with clever strategy and negotiation at the outset using alternative dispute resolution without resort to litigation. However, where ADR cannot provide the requisite result, our experienced Business Disputes solicitors know when to litigate and will guide you through the process in order to protect your legal rights and achieve optimal financial results.
We aim to add value to our case management and advisory work for clients by our knowledge of their trade or profession; we have expert knowledge of trade sectors such as large-scale Property Development, Wholesale Cash and Carry, Commodities and Diamond trading, Aerospace, Overseas development, Travel, Internet, Crypto coins, NFTs and other Retail. We regularly act for high net worth private clients and companies in high value litigation.
What is a partnership?
A partnership describes the legal relationship that exists between two or more persons carrying on business in a joint venture with a view to a profit. Partnerships are not necessarily a separate legal corporate entity and partners individually themselves generally have unlimited liability. In essence, in a traditional partnership, each partner acts as an agent on behalf of all the other partners. This is important because an individual partner (when contracting with third parties) is acting on behalf of all of the other partners and can bind them to a contract without their express agreement.
Partnerships are either governed by the Partnership Act 1890; or established as a limited partnership under the Limited Partnerships Act 1907 or established under the Limited Liability Partnerships Act 2000 as a limited liability partnership.
What if I don’t have a written partnership agreement?
If you trade as a partnership, it is sensible to have entered into a written partnership agreement tailored to your circumstances, which sets out the rights and obligations of you and your fellow partners. If you did not do this the law will statutorily imply a partnership agreement by force of the Partnership Act 1890 or in equity via implying a fiduciary joint venture relationship.
In a partnership dispute, ordinarily the terms of the partnership agreement will be interpreted in order to resolve the dispute. However, in circumstances where there is no partnership agreement which defines the relationship then the terms of the Partnership Act 1890 will automatically apply by default.
What is the Partnership Act 1890?
An Act of the UK Parliament to codify the Law of Partnership, i.e. the relationship between persons carrying on unincorporated business together intended to make a profit. Persons who enter into partnership are collectively a firm, and the name under which their business is carried on is the firm-name. Such partnerships are commonly known as ‘Partnerships at Will’.
Partnerships at Will
The Partnership Act 1890 mandates equality and simplicity. It is designed as a catch-all for those businesspersons that failed to record a written partnership agreement. Consider the following:
- Equal Division of Profit/Loss. All profits and losses (in both income and capital) are divided equally. All partners are equally liable for debts incurred by the firm, and all firm profits are shared equally.
- Majority Decisions. Decisions are made by majority which can lead to deadlock situations in a 2 person firm.
- No Expulsion. It is not permitted to expel a partner; instead the firm is brought to an end by dissolution by any partner at any time.
- Easily Dissolved. The firm will automatically come to an end in the event any partner determines, retires, dies, or becomes bankrupt.
These provisions are not ideal and it is much more sensible to have a written partnership agreement which often sets out a method to resolve business partnership disputes.
Case Study: Joint Venture Property Dispute
Two individuals entered into a property development to buy and refurbish a number of properties. There was no written agreement but the terms of the joint venture could be identified from email and text message evidence. An SPV was set up to develop the properties and one person organised purchase of the assets and the other organised the day to day planning and building works. The two individuals fell out and they stopped corresponding. One of them and sold off the properties that were in his name.
Whilst in this case the joint venture was not subject to the Partnership Act 1890, the two parties were in a fiduciary relationship and owed each other duties of good faith to manage the assets and deal with any liabilities jointly. Upon sale they would have had to reach a fair consensus on distributing any surplus but this did not happen.
After advice on the pre-action process and issue of a letter before action and service of a litigation claim form, the matter was successfully settled in an organised mediation (with the threat of continuing litigation as the leverage to force the opponent to reach a deal and share the profits gained). Were it not for judicial scrutiny and the pressure of litigation, the opponent would have walked away with around £0.5m which was owed.
How to resolve a partnership dispute
Given that a general partnership and limited liability partnership (LLP) gives all partners equal rights within the partnership, when a dispute occurs it can often be difficult to resolve given that the parties all have equal bargaining positions and equal rights and duties.
It is essential to seek legal advice from a Partnership Dispute Resolution specialist at an early stage of a conflict with a fellow partner. Our lawyers will advise you on the optimal way to settle your dispute:
- Conflict resolution through negotiation and/or settlement with the other partners;
- Analysis of the partnership agreement to ensure maximum protection of your rights;
- advising on the merits, preparing for and presenting your best case at any arbitration to resolve the dispute;
- expert advice on mediation. For example, one dispute involved our lawyers taking part in a 24 hour mediation with another central London top 10 law firm. We mediated and ensured the successful conclusion of the dispute and our client was delighted with the optimal settlement we secured.
- Our team are expert litigators, and in cases where a dispute cannot be resolved via ADR, our lawyers have market-leading experience of handling multi-million pound litigation and bringing complex claims to settlement.
What is the default position in partnerships? When can disputes arise and how can they be resolved?
The following represents the default position under the Partnership Act, all these terms can be varied by agreement between the parties, but they are demonstrated here to illustrate the types of scenarios where a dispute can arise. Our Partnership Disputes lawyers will provide tailored advice depending on your individual circumstances and depending on the terms of your partnership agreement (if any):
- all profits and losses are shared equally between the partners. Partners must also consider whether any can draw on account of profits or whether some profits should be used to invest in the future of the partnership.
- all partners are joint and severally liable for all the debts accrued by the partnership. The crux of this means that any partner can be sued individually or jointly.
- all partners owe each other fiduciary duties. Therefore a claim can be issued which alleges that, for example, a partner has not promoted the success of the company or that there is a conflict of interest and one partner is competing with the partnership without the consent of the other partners. Another example could be the failure to render accounts that are true and failure to deliver up profits received.
- restrictive covenants need to be considered because in the absence of a terms in a Partnership Agreement, a departing partner could technically start a competing business.
Our Partnership Disputes Practice Areas
Our Partnership Disputes Resolution team can advise on issues which commonly arise in a partnership, including:
- Advising on breaches of partnership/LLP members’ agreements;
- Conflicts of interest e.g. competing with the partnership business without consent;
- Enforceability of restrictive covenants;
- Breach of fiduciary duties;
- Failure to render true accounts and deliver up profits received;
- Fraud by a fellow partner;
- Partner expulsions/removal;
- Tracing of a Partnership assets;
- Unlawful discrimination and other employment claims;
- Winding up or dissolution of the Partnership; and
- Partnership accounts and valuation issues.
City of London Partnership Dispute Resolution Solicitors
Our leading Partnership Dispute Resolution Solicitors and Barristers provide bespoke legal advice. We invite you to contact us so one of our legal team can assess your dispute. We can subsequently provide urgent help, advice or representation from our expert team of leading business dispute resolution lawyers. We regularly advise companies, directors, shareholders, partners and sole traders on all legal business disputes. Call or email us to start the process of instructing us; our Business Disputes Resolution team are waiting to help. To contact a leading London Business Disputes Lawyer ☎ 02071830529
LIMITATION ACT 1980 – WARNING
The Limitation Act 1980 sets out strict statutory deadlines within which you must bring litigation claims. Your legal rights will become irreversibly time-barred if you fail to take legal action (or defend a claim on time). Therefore, you should seek specific legal advice about your legal dispute at the very first opportunity so that you understand the time you have left. Failure to take advice or delay in taking action can be fatal to your prospects of success.
Please note that for regulatory reasons we do not offer any free advice.