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Partnership Disputes

Partners of a dental/medical practice generally enter into partnership agreements on good terms. In usual circumstances, the practice prospers in those first few years of start-up.  Unfortunately, however, situations can arise where there is a breakdown in the business relationship and a conflict arises.

An example of a dispute could be a breach of an expense sharing agreement, where one of the partners of the practice is wishing to sell its interest and goodwill of the practice and the defaulting partner fails to act in good faith when dealing with the transaction.

Further examples of where a dispute could arise are:

  • the breach of a term in another agreement (eg a sale and purchase agreement)
  • outstanding money is owed to the other partner
  • the partner's conduct (ie acting in bad faith)
  • a previous partner has breached a restrictive covenant and disputed accounts.

Most of the time, these disputes can be resolved by speaking with one another, however in some circumstances because the relationship has broken down, it becomes extremely difficult for the partners of the practice to resolve the issue.

You should consider the following options if you find yourself amid a dispute.  

What do you do at the outset of the dispute?

We would always advise that the first thing you should do is to try to resolve the issues between yourselves.

It is important to deal with any problems as quickly and promptly as possible as your primary aim is to ensure the continuing smooth running of the practice. If associates/employees are made aware of the dispute, this could cause upset and 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. If you have tried this option and it did not result in a positive outcome, you should seek legal advice.  

What happens next?

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 mediation or arbitration.

More than likely the partners of the practice would have entered into a partnership agreement which would assist as then we are usually guided by the agreement as to how the dispute should be dealt with. If there are no clauses or in fact no agreement was entered into, you would look to the Partnership Act 1890 and relevant case law to offer assistance.

What follows if an agreement is not reached?

If no agreement can be reached between the parties, 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 and you could incur significant fees.

Author: Sonia Bhachu

FTA Law

DISCLAIMER: This article should not be regarded as constituting legal advice in relation to particular circumstances. It is merely a general comment on the relevant topic. If specific advice is required in connection with any of the matters covered in this article, please speak to FTA Law directly.

Published on 18th June 2019
(Last updated 11th July 2019)

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