GP partnership disputes: deed or no deed?

Capsticks’ solicitor Daniel Kirk considers GP partnership disputes following a recent Court of Appeal case

GP partnership disputes: deed or no deed? Practice BusinessA GP partnership is a formal business arrangement and the terms under which it operates should be clearly documented. A recent Court of Appeal case highlights the risks that arise when a GP partnership does not have an up to date Partnership Deed in place.

In that case, the lack of a Partnership Deed meant that there were very limited rules governing the partnership, including how it could be ended. The legal interpretation of each situation will depend on the specific facts and specialist advice should be sought. However, the Court’s judgment provides an interesting overview of key issues and reinforces the strong recommendation to have a current Partnership Deed in place, reflecting any changes in the partnership.

Disputes within a GP partnership can arise for many different reasons. Common causes include between property-owning and non-owning partners (landlord/tenant disputes) and when partners retire or are removed from the partnership.

Partnership Deed

A signed and up to date Partnership Agreement or Partnership Deed is a key document to record the terms on which a GP partnership operates. It sets out the arrangements between the partners and what should happen in a range of scenarios, such as when a dispute arises or a partner leaves.

However, the reality is that many GP partnerships change and develop without having a current, or indeed any, Partnership Deed in place. This can arise when new incoming partners are negotiating over appropriate terms or, simply because limited available time and the demands of the ‘day job’ mean that a Partnership Deed was not considered or completed.

A partnership agreement should be seen as a ‘living document’ and kept up to date with all changes affecting the partnership. Having a Partnership Deed in place does not prevent disputes occurring but it reduces the risk by giving greater certainty about the agreed terms within the partnership.

Cheema vs Jones; the background

Although most partnership disputes do not end up in Court, they can nevertheless be time-consuming, costly and stressful for those involved. The lack of a Partnership Deed made that even more so in the case of Cheema v Jones; the former partners required the Court’s involvement to determine whether or not the partnership had been ended.

A summary of the case is interesting as it shows how things developed to a significant dispute, because of the lack of clarity on the partnership terms:

  • Dr Cheema, a salaried partner, was invited to join a partnership with Dr Jones when another partner retired. They signed a written partnership agreement on April 8, 2016.
  • Dr Cheema and Dr Jones then discussed taking on three new partners to expand the practice. There was one formal meeting between four of the five proposed partners on April 21, 2016 and solicitors were instructed to prepare a draft Partnership Deed. A question of probationary periods was raised.
  • The GMS Contract was varied to a partnership of the five partners with effect from July 1, 2016; the GPs started working at the Practice but the draft Partnership Deed was not finalised.
  • Partnership meetings were held in July and August with all five partners.
  • In August 2016, Dr Cheema and Dr Jones fell out over allegations concerning Dr Cheema’s fitness to practice.
  • Dr Cheema was refused access to patients and sought a Court injunction to allow him to return to work. The relationship between Dr Cheema and the other partners broke down.
  • A dispute arose over the nature of the partnership in place, either that: (i) the Dr Cheema and Dr Jones partnership of April 82016 remained in place; or (ii) a new partnership between the five GPs arose as a ‘partnership at will’.

The court judgements

The trial took place in March 2017, with judgement being given in May 2017. It can take significantly longer to get to trial in some cases. All five GPs gave evidence at Court, including being cross-examined by the barrister for the other side. In this case, the practice manager did not give evidence although s/he could be required to do so.

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The Court of Appeal confirmed the decision that a partnership at will between the five GPs had replaced the April 8, 2016, Partnership Deed between Dr Cheema and Dr Jones. Dr Jones could, on his own, terminate that partnership to remove Dr Cheema.

The GPs had not agreed the draft Partnership Deed and were not bound by it, instead, a partnership at will arose. The judge said: “The disputes that have arisen is as a result of the failure of the parties to enter into a written partnership… or to reach agreement on all the terms…”.

Interestingly, NHS England sought to terminate the practice’s GMS Contract as a result of this partnership dispute and the dissolution of the partnership arising from these Court cases. The remaining four GPs successfully challenged the attempted termination of the GMS Contract at the FHSAU, under the NHS Dispute Resolution procedure, and at the High Court.

A partnership at will

A partnership at will can arise where the partners have not agreed other terms. The Partnership Act 1890 applies and will incorporate very limited terms into the partnership; such as any partner can terminate the partnership on notice and all profits and liabilities are shared equally. In this case, it meant that Dr Jones could, without Dr Cheema’s agreement, terminate the partnership at will to remove Dr Cheema from the partnership.

A partnership at will does not cover the wide range of provisions that a standard GP Partnership Deed will include. It is not a suitable basis for a GP partnership and it is much safer to have clear agreed terms in place.

No deed?

The exact legal interpretation of a partnership, where it is disputed, will very much depend on the factual background such as the terms of any previous Partnership Deed, the content of emails, partnership meeting minutes and conversations between the parties. In the Cheema case, the Court reviewed emails and minutes of meetings between the partners in determining the relevant facts on which it made its decision.

Broadly, depending on the specific situation, where there is no signed, up-to-date Partnership Deed, the following could apply:

  • The terms of a previous Partnership Deed remain in place
  • There is a partnership at will with very limited terms
  • Other terms apply which may be disputed.

Other dispute resolution methods

A Partnership Deed can contain a Dispute Resolution process setting out the steps that partners should take before issuing Court proceedings. This can require a ‘without prejudice’ meeting to try to reach a settlement or a mediation, where an independent mediator, often a lawyer, will try to facilitate an agreement. Mediation has a good success rate and lower costs and risk than pursuing a Court claim. Court should be the last resort. Seeking advice early and planning a strategy can help resolve a dispute cost effectively.

What to take away

This case highlights some key principles in managing a GP partnership:

  • Uncertainty over the terms of the partnership can lead to significant additional cost and risk in the event of any dispute or a partner leaving
  • The partners can protect themselves with a clear, signed Partnership Deed, updated to reflect changes in the Partnership. The same principle applies to having a documented lease in place where required
  • Try to resolve disputes early and amicably before they escalate
  • Correspondence and records of meetings will be important evidence
  • Court proceedings may be required as a last resort but other cost-effective methods for dispute resolution exist.

About the author
 Daniel Kirk is an associate in the litigation division and member of the dedicated GP team at Capsticks LLP.  To find out more about Capsticks legal services for GPs visit www.capsticks.com/gps