Golstein v Bishop

JurisdictionEngland & Wales
CourtCourt of Appeal
JudgeLord Justice Briggs, Lord Justice Sullivan, Lord Justice Maurice Kay
Judgment Date05 Feb 2014
Neutral Citation[2014] EWCA Civ 10
Docket NumberCase No: A3/2013/1784

[2014] EWCA Civ 10

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT CHANCERY DIVISION

Mr. Nugee QC

HC11C01339

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Lord Justice Maurice Kay, Vice President of the Court of Appeal, Civil Division

Lord Justice Sullivan

and

Lord Justice Briggs

Case No: A3/2013/1784

Between:
Bishop
Appellant
and
Golstein
Respondent

Amanda Eilledge for the Appellant

Robert Salis (instructed by SIMONS MUIRHEAD & BURTON) for the Respondent

Lord Justice Briggs

Introduction

1

On 1 st October 2007 the Appellant, Mr. Bishop, and the Respondent, Mr. Golstein entered into a solicitors' partnership together. By the Heads of Agreement which governed that partnership, dated 17 th September 2007, it was to have lasted for a minimum term of four years, following which either partner could retire on giving six months' notice. In fact, it ended by agreement on 30 th June 2010, after a complete falling-out between the partners which had developed during the previous year. The trial judge Mr. Christopher Nugee QC (now Nugee J) decided, as one of a number of preliminary issues in the partnership proceedings which followed, that the cause of the early termination of the partnership was that the cumulative effect of the conduct of Mr. Bishop during the year before its termination had made it intolerable for Mr. Golstein to continue in partnership with him. Since that conduct had been, both in general and in detail, in breach of the partnership agreement, the judge held that Mr. Bishop was, in principle, liable to Mr. Golstein in damages for the adverse consequences to him of the early termination of the partnership. The main adverse consequence for Mr Golstein was that he lost, for the remaining year and a quarter of the agreed minimum term, the benefit of a guaranteed minimum level of drawings from the firm, guaranteed that is by Mr. Bishop, regardless whether the firm's business yielded sufficient profits to support such drawings by reference to Mr. Golstein's 30% share. The quantum of those damages remains to be determined, if it cannot be agreed, and is not an issue on this appeal.

2

The primary pleaded basis of Mr. Golstein's claim for damages had been that Mr. Bishop had repudiated the partnership agreement, but the judge decided, following dicta of Lord Millett in Hurst v Bryk [2002] 1AC 185, at 193–196, and the decision of Neuberger J in Mullins v Laughton [2003] Ch 250, that the contractual doctrine of repudiation does not apply to the dissolution of a partnership. He decided (and this is not challenged on appeal) that the partnership had come to an end by mutual agreement rather than by Mr. Golstein's acceptance of a repudiation by Mr. Bishop. Nonetheless, this left open the question whether Mr. Golstein's agreement to dissolve the partnership early had been caused by Mr Bishop's breaches of the partnership agreement.

3

The main reason why Lord Millett had concluded (albeit obiter) that there could be no automatic dissolution of a partnership by repudiation was because it was inconsistent with the court's discretionary power to dissolve a partnership under Section 35(d) of the Partnership Act 1890, which provides that the court may decree a dissolution of a partnership when a partner, other than the partner suing:

"wilfully or persistently commits a breach of the partnership agreement, or otherwise so conducts himself in matters relating to the partnership business that it is not reasonably practicable for the other partner or partners to carry on in partnership with him."

4

It was (realistically as the judge said, and I agree) conceded on behalf of Mr. Bishop at the trial that if the judge were to find that Mr. Golstein could have brought himself within Section 35(d) of the Act, and that that was why the partnership ended, then he would be able to claim damages for breach. The judge went on to find that:

i) if, rather than dissolve by agreement, Mr. Golstein had sought a dissolution under Section 35(d) of the Act by proceedings commenced at the end of June 2010, he would have succeeded;

ii) the conduct of Mr. Bishop which had by then made it not reasonably practicable for Mr. Golstein to carry on business in partnership with him had consisted of breaches of the partnership agreement, and

iii) those breaches had indeed been the cause of the early, consensual, termination of the partnership.

5

On this appeal Miss Eilledge challenges the first and second, but not the third of those conclusions. In paragraph 4 of her helpful Supplementary Skeleton Argument, she says:

"For the avoidance of doubt Mr. Bishop does not challenge any of the individual adverse findings reached with regard to particular allegations made against A (the Appellant) (the primary facts) nor the judge's overall assessment of A's conduct in the context of the partnership relationship (the evaluation of the facts) and in particular his findings that the underlying cause of the dissolution was A's conduct."

6

Rather, Mr. Bishop's appeal may be summarised as based on the following grounds:

i) None of the breaches of the partnership agreement identified by the judge were continuing as at the date of termination. Rather, many of them had ended, or been remedied, some months previously, and the latest of them had occurred, or been remedied, by March 2010.

ii) Thereafter Mr. Golstein elected to affirm the partnership agreement, both by asserting the continued existence of the partnership relationship in correspondence, by his solicitors during March and April 2010, by continuing to work in the furtherance of the partnership business and to receive drawings, and by continuing to participate in the management of the firm.

iii) Although all this had been pleaded, the judge had failed to deal with it in his judgment. He had not considered the consequences of these matters during the period March to June 2010, and had in particular identified no further breach during that period capable of amounting to a 'last straw' within a doctrine habitually applied to the repudiation of employment contracts, upon which a case of continuing breach as at the end of June 2010 could be constructed.

Summary

7

It is fair to say that the judge did not, in an otherwise masterly and painstakingly detailed reserved judgment, devote a specific section of it to Mr. Bishop's pleaded defence of affirmation, even though (out of caution) he addressed the detail of the claim based upon an accepted repudiation notwithstanding his conclusion that it had no place in the partnership context. Furthermore, he did not indeed find some specific further breach during the last three months of the partnership capable of constituting a trigger for the acceptance of a repudiation at the end of June, under the last straw doctrine.

8

Nonetheless, and although I shall of course deal in more detail with Miss Eilledge's excellent submissions, it is convenient at the outset for me to make clear my view that his appeal fails for three main reasons. The first is that it wrongly assumes that contractual principles of repudiation and, in particular, affirmation, including the last straw doctrine applied in employment cases, are directly applicable to a discretionary dissolution under Section 35(d) of the Act. Secondly, it wrongly equates affirmation (that is, refusing to treat a repudiatory breach as putting an end to the contract) with an outright waiver of all rights, including a right to claim damages, arising from the same breach of contract. Thirdly, its detailed criticism of the findings about Mr Bishop's conduct failed to pay sufficient regard to their effect when considered in the round. It treats the judge's careful findings as confined to a series of specific breaches, and ignores his overall conclusion that they, or most of them, were symptoms of a more fundamental failure by Mr. Bishop to comply with his partnership duties toward Mr. Golstein. This was a course of conduct which, viewed as a whole, represented a continuing breach of his essential obligations, which he had done nothing to remedy during the last three months of the partnership, and which amounted to conduct designed (in the end successfully) to squeeze Mr. Golstein out.

9

It is at this point worth emphasising what this appeal is not about. It is not about deciding, after conflicting first instance decisions, and a powerful obiter dictum from the House of Lords in the meantime, whether repudiation has any place in the context of dissolution of partnerships. Nor does the appeal raise for decision the interesting question whether there is any exception to Lord Millett's analysis, in the case of a two-partner firm, where some but by no means all his objections to the recognition of dissolution by accepted repudiation fall away. Neither Hurst v Bryk nor Mullins v Laughton were about two-partner firms.

10

In the present case the judge decided, largely but not entirely out of comity with the earlier first instance decision of Neuberger J, that there cannot be automatic dissolution of any partnership by accepted repudiation, and Mr. Golstein has not challenged that decision by respondent's notice or cross-appeal. That said, I would not wish my note of caution on this point to be taken as indicating any real doubt about the correctness of Lord Millett's analysis, of the decision in Mullins v Laughton, or of the judge's application of the principles recognised in both of those cases to a two-partner firm. My own view that Lord Millett, Neuberger J and the judge were all correct about this adds nothing of substance, since the point was not subjected to any adversarial...

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3 cases
  • Eoghan Flanagan (Petitioner) v Liontrust Investment Partners Llp and Others
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    ...application to traditional partnership agreements governed by the 1890 Act: see Mullins v Laughton at [87] to [93] per Neuberger J and Golstein v Bishop [2013] EWHC 881 (Ch), [2014] Ch 131, at [114] to [123] per Christopher Nugee QC. The latter case went to the Court of Appeal, but on diff......
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2 firm's commentaries
  • Professional Partnerships- When Differences Of Opinion Become Legal
    • Ireland
    • Mondaq Ireland
    • 28 July 2015
    ...of the High Court in respect of issues surrounding the termination of a solicitor's partnership. The case of Bishops V Goldstein [2014] EWCA Civ 10 gives a very clear signal from the court in relation to its view of conduct of partners designed to squeeze out partners from professional part......
  • Partnerships Update – March 2014 Edition
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    • Mondaq United Kingdom
    • 14 March 2014
    ...practicable for the other partner or partners to carry on the business in partnership with him'. The recent case of Bishop v Golstein (2014) EWCA Civ 10 considered the question of whether one partner's conduct could nevertheless be viewed as the cause of the early termination of a partnersh......