Does repudiation apply to general partnerships? In short: no

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Does repudiation apply to general partnerships? In short: no - .PDF file.

When the actions of one partner mean it is not reasonably practicable for a second partner to carry on in business with him, the partnership must come to an end by mutual agreement but the second partner may sue for breach of contract. The High Court’s recent decision in Golstein v Bishop [2013] EWHC 881 (Ch) confirms that, as a matter of law, it is not possible for a breach to be repudiatory in a partnership context, even where the partnership consists of only two partners. It remains to be seen how this principle applies to LLPs and further case law is required in that regard.

Due to the financial crisis, the solicitors’ practice in which Mr Golstein and Mr Bishop were the sole partners fell on hard times. Mr Golstein was contractually guaranteed a salary for himself and his wife (one of the partnership’s secretaries) of £120,000. His billings fell well short of this target and from 1 September 2008 onwards Mr Golstein agreed to reduce his salary by half. However, there was a genuine misunderstanding between the two partners as to whether this was a temporary arrangement to assist cashflow or a permanent reduction. The dispute became acrimonious and the partnership came to an end on 30 June 2010.

The crucial question was how the partnership came to an end. Mr Golstein claimed it terminated either under a clause of the partnership agreement or following his acceptance of Mr Bishop’s cumulative breaches, which had the effect of a repudiatory breach. These breaches included the reduced payment to Mr Golstein, excluding Mr Golstein from the management of the partnership and accounting malpractice for which Mr Bishop was subsequently fined £5,000 by the Solicitors’ Regulatory Authority. Mr Bishop claimed the partnership terminated by mutual agreement…

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