Patel v Patel

A contractual variation by conduct requires an objective consensus. The conduct must unambiguously show an intention to vary existing terms, accepted by the other party. The number of acts is not decisive. Giving up a profit entitlement for particular accounting periods may be a waiver rather than a permanent variation. Qualified or equivocal evidence cannot, without more, establish an agreement to vary.

The claimant challenged an arbitrator’s award under sections 68 and 69 of the Arbitration Act 1996. The award concerned profit-sharing rights under written partnership agreements for dental practices in Purley and Mitcham. The arbitrator concluded that the agreements had been varied, reducing the claimant’s share.

The claimant argued that the arbitrator had erred in law by treating prior profit allocations, signed accounts and evidence given during the arbitration as variations. He also alleged serious irregularity because the proposed Mitcham variation had not been raised for submissions.

1. Purley partnership. The section 69 appeal succeeded. The relevant question under section 19 of the Partnership Act 1890 was whether the acts objectively demonstrated an unambiguous intention to vary the existing agreement, accepted by the other party. The claimant’s allocation of all profits to the defendant for two accounting periods could be understood as a waiver for those periods, not a surrender of his continuing right to share profits.
2. The requirement for clear and unambiguous conduct was supported by the authorities. The written agreement’s requirement that variations be by deed reinforced the conclusion. If variation had otherwise been established, consideration would also have required consideration, but that issue was not necessary to decide.
3. Mitcham partnership. The section 69 appeal also succeeded. The claimant’s qualified and equivocal evidence could not be interpreted as an offer to vary the agreement, and the defendant’s evidence disclosed no acceptance. The profit-sharing provisions therefore remained unvaried.
4. The section 68 challenge was unnecessary. Had it been necessary, the arbitrator’s failure to raise the proposed variation and permit submissions would have amounted to serious irregularity contrary to section 33 of the Arbitration Act 1996.
5. The court varied the award rather than remitting it. Both partnerships remained subject to equal sharing of profits and losses. The supplementary costs award was also varied.

Permission to appeal was granted by Mr Justice Snowden on 20 August 2018. The High Court determined the section 69 appeals and varied the arbitrator’s award and supplementary costs award.