Partnership disputes

Sonia Bhachu explains how you might be able to resolve a partnership dispute in your practice

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.

An example of a dispute could be a breach of an expense sharing agreement, whereby 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 any other agreement (e.g., a sale and purchase agreement), outstanding money is owed to the other partner, the partners 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. In this note we discuss various options for you to consider 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 that you should do is to try to resolve the issues 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 practice.

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 roundtable 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, which did not result in a positive outcome, then you would need to seek legal advice.

What happens next?

As mentioned earlier, we always try to avoid the matter escalating as this could cause disruption to the business and be costly and time consuming. Your solicitor should correspond with the other partner on your behalf; this would take the stress away from you and would enable you 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 escalated to the courts, 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 or expense sharing 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 depending upon your business arrangement or the drafting or your agreement, you may look to the Partnership Act 1890 and relevant case law to offer assistance.

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 and you could incur significant legal fees.

If you require assistance or general advice in respect of the above or you have any other queries, then please contact our litigation team.

FTA Law acts for dentists, dental practice owners and managers in all aspects of buying selling and running a practice. For further information, call 0113 834 3740 or email [email protected]

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