Cheema v Jones & Ors

An existing partnership agreement may be abandoned by conduct where the partners and incoming partners focus on negotiating a new agreement for an enlarged partnership, without treating the old agreement as a fall-back. The fact that the new agreement is never signed does not prevent that inference. Incoming partners are not impliedly bound by the old agreement without evidence that they knew of it and intended to accept its terms. A partnership formed without an agreed duration will ordinarily be a partnership at will and may be dissolved by notice.

Dr Cheema and Dr Jones entered into the April Agreement governing their partnership. Three further doctors joined the practice on 1 July 2016 while the parties negotiated a new agreement, which was never signed. Dr Cheema contended that the new doctors had acceded to the April Agreement. The Deputy High Court Judge found that all five doctors had formed an oral partnership at will which superseded the old partnership, and that a notice served on 14 October 2016 dissolved it. He dismissed Dr Cheema’s claim for injunctive relief and ordered the partnership’s affairs to be wound up. Dr Cheema appealed on the terms of the new partnership and the respondents relied additionally on the just and equitable dissolution jurisdiction.

1. The appeal was dismissed. Lady Justice Asplin gave the leading judgment, with Lord Justice Newey and Lord Justice Longmore agreeing.
2. The evidence permitted the inference that Dr Jones and Dr Cheema intended to abandon the April Agreement and enter into a new contractual relationship with all five doctors from 1 July 2016. The discussions consistently concerned a new agreement and did not identify the April Agreement as a fall-back position. The fact that the new agreement was never signed did not undermine that inference. The proposed provisions concerning unanimity and probation did not show that the April Agreement continued.
3. The incoming doctors could not be taken impliedly to have agreed to the April Agreement. There was no evidence that all of them had seen it or intended to be bound by it. None received a signed copy, Dr Rawal had not seen it, and Dr Rasheed had not read it. A draft new agreement modelled on the April Agreement, and an ambiguous application form, did not establish knowledge or assent.
4. The court treated the dictum in Austen v Boys (1857) 24 Beav 598 as addressing a different situation, while applying its principle that an incoming partner is not bound by terms of which he was unaware. The conclusion was also consistent with Firth v Amslake (1965) 108 SJ 198.
5. The five-doctor partnership was therefore a partnership at will and was validly dissolved by the notice. It was unnecessary to decide whether the court would exercise the alternative discretion under section 35(f) of the Partnership Act 1890.

• Court of Appeal (Civil Division), [2017] EWCA Civ 1706 — dismissed the appeal.
• High Court of Justice, Queen’s Bench Division, Commercial Court — David Pittaway QC, sitting as a Deputy High Court Judge, granted declarations that the five-doctor partnership was a partnership at will formed on 1 July 2016 and dissolved by notice, dismissed the injunction claim, and ordered the partnership’s affairs to be wound up.