Bishop v Golstein

Section 35(d) of the Partnership Act 1890 establishes an independent, discretionary test: whether a partner’s breach or conduct makes it not reasonably practicable for the other partner to continue. The test is not governed by contractual repudiation or affirmation rules. Continuing after the conduct, or communicating that the partnership may continue, does not necessarily prevent dissolution, although curing the conduct or detrimental reliance may affect discretion. The employment last-straw requirement for a final triggering incident does not apply. Affirmation waives only the right to terminate for repudiation, not damages for loss caused by the breach. A course of conduct must be assessed cumulatively rather than divided into isolated incidents.

Mr Bishop and Mr Golstein entered into a solicitors’ partnership for a minimum term of four years. The partnership ended by agreement in June 2010 after a serious breakdown in their relationship.

On preliminary issues, the High Court Chancery Division held that Mr Bishop’s cumulative breaches and conduct had made it not reasonably practicable for Mr Golstein to continue in partnership under section 35(d) of the Partnership Act 1890. The breaches caused the early termination, giving rise in principle to damages.

Mr Bishop appealed the findings that the statutory dissolution threshold was met and that the relevant breaches continued or remained operative despite his alleged affirmation. The central issue was whether contractual repudiation, affirmation and last-straw principles governed the statutory discretion to dissolve a partnership.

The appeal was dismissed unanimously. Briggs LJ gave the leading judgment, with Sullivan LJ and Maurice Kay LJ agreeing.

1. Section 35(d) of the Partnership Act 1890 establishes a straightforward threshold for a discretionary dissolution. The statutory test does not depend upon repudiation and is not necessarily defeated by conduct which would amount to affirmation in ordinary contractual law. The distinction reflects the discretionary nature of statutory dissolution, compared with the automatic operation of discharge by breach. This approach was consistent with the analysis in Hurst v Bryk [2002] 1 AC 185, at 193–196, and Mullins v Laughton [2003] Ch 250.
2. A partner’s continuation in business after conduct making continuation impracticable does not necessarily prevent a later application for dissolution. Subsequent repair of the conduct or detrimental reliance may affect the exercise of discretion, but the issue is not governed by the rigorous contractual analysis of election and affirmation.
3. The last-straw doctrine described in Omilaju v Waltham Forest London Borough Council [2004] EWCA Civ 1493 [2005] ICR 481 is a doctrine of contractual discharge in employment cases. Its requirement for a final triggering incident has no application to dissolution under section 35(d). Continuing conduct may itself establish that partnership continuation is not reasonably practicable.
4. Affirmation waives the right to treat a repudiatory breach as terminating the contract. It does not, without more, waive a claim for damages for loss caused by that breach.
5. The judge was entitled to treat the pleaded incidents as particulars or symptoms of a continuing fundamental breach, rather than as isolated breaches whose effect ended when the last individual incident was remedied. The evidence showed continuing exclusion from communication and joint management, failure to address staff disrespect, and no attempt to rebuild the trust and confidence necessary for the partnership. The cumulative conduct therefore satisfied section 35(d).
6. The court did not decide whether accepted repudiation can ever dissolve a partnership, whether two-partner firms create an exception, or whether every breach of a partnership term gives rise to ordinary contractual damages. Partnership duties may arise from the legal nature of the relationship, and some breaches may instead attract equitable compensation or an account. Those issues had not been argued and did not affect the outcome.

1. Court of Appeal (Civil Division): In [2014] EWCA Civ 10, dismissed Mr Bishop’s appeal.
2. High Court, Chancery Division (Mr Christopher Nugee QC; HC11C01339): determined preliminary issues, holding that Mr Bishop’s cumulative conduct made continuation of the partnership not reasonably practicable under section 35(d) of the Partnership Act 1890, and that the conduct caused the early termination.