Joseph Golstein v Colin Bishop
| Jurisdiction | England & Wales |
| Judge | Mr Christopher Nugee |
| Judgment Date | 02 May 2013 |
| Neutral Citation | [2013] EWHC 881 (Ch) |
| Docket Number | Case No: HQ11C01339 |
| Court | Chancery Division |
| Date | 02 May 2013 |
[2013] EWHC 881 (Ch)
Mr Christopher Nugee QC sitting as a Deputy Judge of the High Court
Case No: HQ11C01339
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand. London, WC2A 2LL
Robert Salis (instructed by Simons Muirhead & Burton) for the Claimant
Amanda Eilledge (instructed directly) for the Defendant
Hearing dates: 30 and 31 October, 1,2, 5 and 7 November 2012
Mr Christopher Nugee QC:
Introduction
The Claimant ("Mr Golstein") and the Defendant ("Mr Bishop") were in partnership together as solicitors under the name B & G Solicitors ("B&G") from 1 October 2007 until 30 June 2010. (It was common ground at trial that the partnership came to an end on that date although the legal mechanism by which it did so is not agreed). In this action Mr Golstein claims, and Mr Bishop counterclaims, for various relief arising out of the partnership.
The parties are agreed that dissolution accounts will have to be taken. But there are certain issues which have to be decided before the accounts are taken; and certain other issues which have to be decided in any event, and I am asked to decide such of these as can be decided now.
Outline of facts
I give here a brief outline of the facts. This does not include any of the more controversial issues of fact which I will consider when considering the specific issues.
Before the creation of B&G Mr Golstein and Mr Bishop each had their own practices and B&G was formed by the merger of the two practices. Mr Golstein, who was admitted as a solicitor in 1976, had for many years practised under the style Arbeid & Golstein from various addresses in central London, latterly from premises in Tavistock Place, London WC1. He had formerly been in partnership but immediately before the merger was the sole owner of the practice although he had a salaried partner, Mr Simon West. He was a general practitioner but his main forte was litigation. The only staff he employed were a full-time secretary, Miss Leonie Peploe, and his wife, Mrs Barbara Golstein, who provided part-time secretarial assistance; he also used the services of a bookkeeper, Mr Sam Benson, who was self-employed.
Mr Bishop was also admitted in 1976. He carried on practice under the style Colin Bishop & Co from offices called Shakespeare House in Dollis Park, London N3. His practice was primarily conveyancing. He had a larger practice than Mr Golstein and employed a number of staff including his sister, Mrs Julie Warner, who ran the office and did the bookkeeping. He had owned his own practice since 1980 although he too before the merger had a salaried partner, Mr James Green.
The parties had held merger discussions in 2004. These had not in the event come to anything. In August or September 2007 Mr Bishop approached Mr Golstein to resume discussions and agreement was quickly reached on a merger of the two practices. A merger appeared to have attractions for both parties. So far as Mr Bishop was concerned, Mr Green was leaving at the end of September, and Mr Bishop wished to have another name on the letterhead as some institutional lenders were unwilling to instruct a firm with only one practising solicitor to act in conveyancing transactions. Mr Golstein asserts, but Mr Bishop denies, that another consideration was that his professional indemnity premium fell due on 1 October, and a lower premium might be obtainable if he had a partner.
So far as Mr Golstein was concerned, his lease at Tavistock Place was coming to an end at the end of December 2007, and relocating to Mr Bishop's premises in Finchley would avoid the need for him to renegotiate the lease. The Finchley premises were also nearer his home, and Mr Bishop said that he had litigation work which he would pass to him. Mr Golstein also found the terms agreed (including a minimum term of 4 years with guaranteed earnings) attractive; this would give him an assured minimum income for 4 years when he would be almost 65 at which stage he would wish to review his position as to whether to continue in practice (full-time or part-time) or not.
Mr Golstein drafted Heads of Agreement (adapting them from a draft which he had prepared at the time of the 2004 talks) and these were signed by the parties and dated 17 September 2007. They provided for a merger on 1 October 2007. I give details of its provisions below, but among other things it was agreed that profits and losses should be shared in the proportion 70% to Mr Bishop and 30% to Mr Golstein (reflecting the fact that Mr Bishop's profits at Colin Bishop & Co had been more than twice as much as Mr Golstein's profits at Arbeid & Golstein), but that Mr Golstein should have a guaranteed salary of £120,000. This was a first charge on profits and Mr Bishop also undertook to indemnify Mr Golstein for it.
So far as the duration of the new partnership was concerned, the Heads of Agreement provided that partners could retire on 6 months' notice, but (save on the ground of serious ill-health) neither partner should retire before 4 years. They also provided for dissolution on certain specified grounds.
After the merger date, Mr Golstein continued for a short while at Tavistock Place where he carried on practice much as before, but in mid-December 2007 he relocated to Shakespeare House. Neither Mr West nor his secretary moved with him so that apart from his wife (who continued to provide secretarial assistance for him at home but did not come into the office to work), he was dependent on Mr Bishop's existing employees.
From quite early in 2008 the practice suffered from a downturn in work due to the recession; and neither party found the experience of being in partnership together a happy one or as successful as they had hoped. Among other things, Mr Golstein, who had hoped for a warm personal relationship with Mr Bishop, found him aloof and unfriendly, rebuffing his suggestions that they should socialise with their wives after hours, declining an invitation to his daughter's wedding in August 2008, and not inquiring after Mr Golstein's health when he had to attend hospital for operations as he did on several occasions. When he made suggestions in relation to the practice, for example as to what searches to carry out for a purchaser, Mr Bishop rejected them; although they were supposed to have an equal say in management, Mr Golstein felt that Mr Bishop treated him more like a salaried partner, running the practice just as he had before. Nor did he receive the same level of support from the staff that he was used to.
Mr Bishop for his part thought that Mr Golstein was not bringing in as much by way of fees to the practice as he had expected him to; and in July 2008 expressed concern about the amount that Mr Golstein was billing compared to the guaranteed salary he was entitled to. This led to a conversation in August 2008 in which Mr Golstein volunteered to take only half his guaranteed salary. There is a dispute as to the effect of this which is one of the issues I have to resolve: Mr Golstein says that he was only referring to halving his drawings and that he remained entitled to the other half; Mr Bishop says that he understood that Mr Golstein was giving up half his entitlement.
The parties had agreed that the partnership accountants should be Richard Anthony & Co, who had been Mr Bishop's accountants for many years. Mr Levy of Richard Anthony & Co prepared draft accounts for the partnership for the year to 31 December 2007 which were provided to the partners at a meeting in January 2009. Mr Golstein had a number of queries on the draft accounts which he considered did not reflect the Heads of Agreement. As far as Mr Golstein is concerned, his queries have never been satisfactorily addressed and although a number of drafts of the 2007 accounts (and later the 2008 accounts) were in due course produced, none of them have been agreed.
During 2009 the relationship between the partners deteriorated. Mr Golstein found that his queries on the draft accounts were not being answered and his requests for payment of what he considered to be due to him were ignored; he was anxious to have a meeting with Mr Bishop and Mr Levy to review and agree the draft accounts, but no meeting took place and Mr Golstein blames Mr Bishop for this. Mr Bishop himself had come to the conclusion that he was deriving little benefit from the arrangements, and did not wish to continue with matters as they were. He started looking for another firm who could take over the practice; and in September 2009 told Mr Golstein that he would close B&G by 31 March 2010 if it had not been absorbed into another firm. Mr Golstein's response was a long letter of 30 September 2009 setting out his position and his complaints against Mr Bishop. Among other things he said
"We could always discuss our own respective positions afresh. However I personally think we are both far too unhappy to consider continuing and leave our fates in the hands of the Law Society and the SRA."
(The reference to the SRA is to the Solicitors Regulation Authority which was in the process of carrying out an investigation into various aspects of the firm's accounting practices.)
At a meeting between the partners on 28 October 2009 Mr Bishop went so far as to say that he did not regard the Heads of Agreement as binding on him (an assertion subsequently withdrawn), and by November 2009 the relationship had completely broken down. Mr Golstein relied on his rights, as he saw them, under the Heads of Agreement; Mr Bishop regarded Mr Golstein as trying to take more out of the partnership than he was bringing in, which he saw as unfair, unreasonable and unrealistic.
By the end of November 2009 Mr Golstein had consulted outside solicitors, Healys LLP, who conducted a...
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