Number of partnership squabbles hitting courts doubles in last year
The number of partnership disputes reaching the High Court Chancery division rocketed by 96 per cent in 2009, statistics published by the Ministry of Justice (MoJ) have revealed.
The MoJ report, Judicial and Court Statistics 2009, shows that the High Court heard 106 partnership dispute cases in 2009 compared with 54 a year earlier.
Serle Court barrister John Machell warned that the figure was “only the tip of the iceberg”. Machell said: “Most partnerships and LLPs value their privacy and many disputes are either settled by confidential mediation or determined by arbitration.”
Employment lawyers said the sudden rise was a direct consequence of the economic downturn.
Russell Jones & Walker employment partner John Marshall commented: “This is not evidence of redundancy programmes taking hold but rather the knock-on effect of PEP [average profit per equity partner] figures being squeezed in a tough economic climate and individuals being given the proverbial ‘tap on the shoulder’ to leave.”
Forced retirement programmes have also become a problem, he added. In July, the Court of Appeal held that firms can legitimately retire partners at 65 as long as the action is justified.
The ruling was given after lawyer Leslie Seldon brought a discrimination claim against his firm Clarkson Wright & Jakes (CWJ) after it forced him to retire when he turned 65.
In handing down his judgment in the case Lord Justice Laws said: “My experience would tell me that it’s a justification for having a cut-off age that people will be allowed to retire with dignity” (29 July 2010).
The number of professional negligence claims against lawyers reaching the High Court has also escalated significantly, with 210 claims brought in 2009 compared with 80 in 2008.
Readers' comments (3)
Ashley Balls | 23-Sep-2010 11:21 pm
If 100+ actions reached the courts it is likely an even greater number were settled through mediation or other form of dispute resolution. Either way it is indicative of major stability problems in partnerships. It is interesting to note that as there may be factors other than recession at work. We have been tracking another indicator (for 20+ years) and there is enough evidence to show a causal link between the pecentage of pay for performance that is received by partners and the stability of their partnership in terms of partner attrition T/O rates. Perhaps the pursuit of 'what's in it for me' is where this all starts. Get the level of pay for performance back down to 15% (approx) of total remuneration and stability improves dramatically.
As for the professional negligence claims it is likely that the provision of poor or inadequate advice is NOT the cause. Research is likley to confirm cleint expectations are rising faster than the profession is adapting to changing needs. Add in a bit of pressure/stress and a toxic brew develops. As ever teh cause is likely to be centred on poor and/or inadequate communication.
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Roderick I'Anson Banks | 24-Sep-2010 9:08 am
Does this not say more about the approach of the advisers rather than that of the firms/partners in question? Some of us try very hard not to let it get that far...
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Ron Pol | 26-Sep-2010 11:07 pm
Absolutely, which reinforces Ashley's point about communication being critical.
In some firms the 'underperforming' partner may be last to learn about any perceived issues, sometimes after the remaining partners have already decided that 'action' is necessary.
In other firms, that partner is first to learn, well before anything is set in stone and the firm typically works with him/her more constructively.
Both approaches also relate more to communications than the approach of advisers; if they too are only brought in late, to help 'resolve the issue' they may by that stage only have existing entrenched positions to work with.
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