[2025] EWHC 2180 (Ch)

In this section of the Judgment the Judge addressed herself to the first issue which she had to resolve; namely on what terms were the parties carrying on the Medical Partnership, as from 1^st April 2016 when the Second Defendant joined the Medical Partnership.

The Judge started by summarising the rival contentions of the parties, in Paragraph 18, in the following terms:

“18.

The parties’ positions on this are starkly opposed save that it is common ground that the draft agreements of 2016 and 2017 were never formally executed or signed. The defendants deny all knowledge of the draft agreements and assert that there was no meeting or discussion of terms of the partnership. The claimant insists that there was a meeting at which the draft agreement was discussed and agreed. She was clear that the defendants had seen the draft agreements and agreed to them. The first defendant accepts that he knew of the terms of the Original Agreement. He also told me that in 2015/2016 he was focussed only on the effort to have the second defendant admitted as a partner and was not concerned about any other terms although he expected them all to continue as under the Original Agreement. He was aware of a draft agreement being prepared. The second defendant states that she had not seen the Original Agreement, although she was aware of its existence, or the 2016 draft agreement. She said that if the first defendant signed up to it, she would go along with him. Ms Bhat told me that she didn’t ask about the terms of the partnership agreement but left it all up to the first defendant.”

At Paragraph 19 the Judge accepted that there had been a technical dissolution of the 2014 Partnership when the Second Defendant joined the Medical Partnership:

“19.

I recognise, as I must, that there was a technical dissolution of the original partnership between the claimant, the first defendant and Dr Jagadish when the second defendant joined as a partner. The issue is whether it was a mere technicality with no impact on terms of the agreement between the new partners because by their conduct they expressly or impliedly accepted those terms. Alternatively, is this a case where the original agreement was expressly or impliedly abandoned or where the second defendant was unaware of the terms of the original partnership and cannot or should not be held to it so that a partnership at will was established? The answer depends on the evidence, as set out in Cheema v Jones.”

In Paragraph 20 the Judge set out her findings of fact as to what had been agreed to by the Defendants on the occasion of the Second Defendant joining the Medical Partnership. As these findings are central to the Appeal, I should set out Paragraph 20 in full:

“20.

In my judgment the evidence shows that, on balance of probabilities, the defendants, at least impliedly and probably expressly, agreed and accepted that the partnership, with the addition of the second defendant, was to continue on the same terms as set out in the Original Agreement. The first defendant, in his oral evidence, told me that was his understanding, as stated above. I am satisfied that the second defendant was also aware that the partnership was to continue on the original terms. She was aware of the existence of the Original Agreement on her own evidence. Also on her own evidence, in May or June 2016 she saw the pages of that agreement that were to be amended on her joinder as a partner although she “may not have read them”. Those pages clearly refer to a deed and state that it contains the “arrangements which the parties have agreed shall govern relations between themselves”. The second defendant told me that she agreed to those documents being sent to NHS on her behalf. In the circumstances she knew there was a document setting out the terms governing the partnership and agreed to them. Further, as she told me, she agreed to whatever the first defendant agreed to. As the second defendant was aware of the Original Agreement, aware that the only changes were to the identity of the partners and consequent profit share, I infer that she was agreeing to be bound by the terms of the original agreement. If she chose not to read relevant documents or to ask for the full terms to be provided to her, that does not detract from her agreement to be bound.”

The Judge then dealt with the question of whether Clause 44 prevented the new partnership from being bound by the terms of the 2014 Partnership Agreement. In Paragraph 21 the Judge concluded that Clause 44 had not had this effect:

“21.

There is nothing in the Original Agreement that prevented a, technically, new partnership from being bound by its terms. Quite the contrary, clause 5.3 provides expressly that death, retirement or expulsion will not determine the partnership which may only be [wholly] dissolved if all of the parties unanimously agree in writing, or a dissolution is imposed by judgment or statute. To the extent that the addition of the second defendant as a party required writing pursuant to clause 44 of the Original Agreement, I agree with Mr Warner that the document sent to NHS dated 31 May 2016 (although not signed by Dr Jagadish until 6 June 2016) setting out the joinder of the second defendant as a partner and signed by all the then partners, constitutes a written variation for the purposes of clause 44. Mr Ojo, rightly, did not argue otherwise. The provision as to a variation taking the form of an addendum to the original agreement does not appear to be mandatory, as Mr Ojo also, quite properly, accepted.”

In Paragraph 22 the Judge made the further finding that there was a meeting at which the draft partnership agreement was discussed:

“22.

In the light of the above evidence and finding, it really doesn’t matter whether there was a meeting at which the draft partnership agreement was discussed. However, for the avoidance of doubt, I am satisfied that there was such a meeting on the strength of the claimant’s evidence. Her evidence was more reliable than that of the defendants. In saying this I am treating the first defendant’s evidence to the contrary as unreliable. There must have been conversations about the partnership and Ms Bhat’s joinder. It seems to me that, as he said in oral evidence, the first defendant was more focussed on getting the second defendant admitted as a partner. He was not interested in anything else and did not turn his mind to it. I regret to say that I simply did not believe the second defendant’s evidence in this respect.”

The Judge then turned, at Paragraph 23, to the question of what happened when Dr Jagadish retired from the Medical Partnership in 2017. The Judge accepted that this had worked a technical dissolution, but considered that this did not bring about a substantive dissolution of the Medical Partnership:

“23.

In 2017, when Dr Jagadish retired from the partnership, there was, again, a technical dissolution. However, in my view, in light of clause 5.3 of the Original Agreement, this did not result in a substantive dissolution of the partnership. On 16 February 2017, the claimant sent an email to NHS saying, “Please find attached Contract Variation to come into effect from 2 April 2017, Duly signed by all partners, no changes to partnership, only removal of Dr Jagadish all rest is the same”. The defendants were both copied into this email and did not demur. Again, the variation of the GMS Contract signed by all four partners in February 2017 and sent to NHS setting out the departure of Dr Jagadish, constitutes a written variation within the meaning of clause 44 of the Original Agreement.”

The Judge concluded, on the first issue, that the parties had agreed to be bound by the terms of the 2014 Partnership Agreement, when the Second Defendant joined the Medical Partnership, and that there had been no departure from these terms in 2017, on the retirement of Dr Jagadish from the Medical Partnership:

At Paragraphs 25-27 the Judge addressed the question of whether the Medical Partnership had been dissolved either by conduct on 7^th August 2019 or by the notice of dissolution on 5^th November 2021.

So far as the first of these dates was concerned, the Judge found that there had been no dissolution for two reasons. First, and pursuant to the findings made by the Judge in Paragraphs 18-24, the restrictions on termination in Clause 5 had continued to apply after the technical dissolution of the 2014 Partnership in 2016. As such, the Medical Partnership could not have been dissolved by conduct; see Paragraph 25. Second, the Judge did not consider that the commencement by the Claimant of the possession proceedings could constitute conduct capable of bringing the Medical Partnership to an end, even if the restrictions on termination in Clause 5 did not apply; see Paragraph 26.

So far as the second of these dates was concerned the Judge concluded in Paragraph 27 that the notice of dissolution had not had effect, by reason of the continuation of the restrictions on termination in Clause 5:

“27.

In light of my finding that the partners were bound by the terms of the Original Agreement, the notice of dissolution had no effect as it did not comply with the terms for termination of the partnership and was not accepted by the claimant who, at all material times, asserted her status as a partner and her entitlement to payment under the terms of the Original Agreement. There was no act or representation by the claimant that would found an estoppel.”

The overall result, on the basis of the Judge’s findings, was that the Medical Partnership continued until 18^th April 2023; being the date on which the Claimant accepted that the Medical Partnership had been brought to an end by the written agreement of the parties; such written agreement being constituted by the pleaded cases of the parties in their statements of case in the action.

The Judge then turned to the question of whether the Claimant was entitled to any Annual Payments in advance of the dissolution accounts of the Medical Partnership being taken. I will need to come back to this part of the Judgment (Paragraphs 28-34) in more detail later in this judgment, when I come to the grounds of appeal. For present purposes the following summary will suffice.

The Judge decided that the Claimant’s entitlement to be paid the Annual Payment was an entitlement to be paid out of the net distributable profits of the Medical Partnership prior to the division of the balance of the net profits between the other partners; see Paragraph 28. In other words, the Claimant’s right to the Annual Payment had priority and had first to be paid out of the net profits of the Medical Partnership, to the extent that there were net profits available for the relevant accounting year to meet the Annual Payment. Assuming that the Medical Partnership realised net profits of at least £50,000 for an accounting year, the Claimant was entitled to be paid the Annual Payment in full for that accounting year, in priority to the rights of the other partners to share in the net profits.

The Judge considered the available accounts of the Medical Partnership, and made the following findings, in Paragraphs 31 and 32, in relation to the net profits of the Medical Partnership for the accounting years in respect of which the Claimant had made her claim to arrears of the Annual Payment:

On the authority of Mukerjee v Sen [2012] EWCA Civ 1895, the Judge determined that the Claimant was entitled to be paid these arrears of Annual Payment in advance of the dissolution accounts of the Medical Partnership.

The Judge was not persuaded by the argument that the dissolution accounts must be prepared first because of the potential claim by the NHS. The Judge set out her findings in this respect in Paragraph 34:

“34.

I do not accept the argument that dissolution accounts must be prepared first because of a potential claim by NHS in relation the sums advanced by it to construct the additional buildings on the land adjacent to the medical centre. There is very little material before me in relation to this issue. It is not clear how much is at stake or what the parties’ liabilities are towards NHS or to each other. This potential liability is not referred to anywhere in the approved or agreed accounts even after letters from Capsticks and NHS in late 2021 or early 2022 suggesting that the NHS grant may be recovered. The defendants have continued to draw profits irrespective of this potential liability. If they may draw and retain profits in these circumstances, then it would be unfair to prevent the claimant from doing so too. That would be treating the partners unequally. Finally, under the terms of the Original Agreement, the claimant is not liable for any of the debts etc of the partnership as between the partners. As between them, she is entitled to the entire £50,000 without deduction. The only issue is that in relation to the extension on the Adjoining Land. I have not been addressed as to whether the indemnity clauses would alleviate the claimant from the consequences of a successful claim by the NHS. Judges in other cases between these parties have suggested the claimant may have some liability. In any event, if the defendants can draw freely on the profits notwithstanding this, then so too, may the claimant – any other outcome would be unfair.”

The Judge then turned to the issue of whether the Claimant had abandoned the Medical Partnership in such a way as to lose her entitlement to the Annual Payment. This issue does not appear to have been pursued by the Defendants to the conclusion of the Trial. The Judge explained the position in the following terms, at Paragraph 35:

“35.

Mr Ojo abandoned any reliance on this point during his closing submissions on the basis that it would have no effect in law on the claimant’s entitlement to payment of her share, whatever that share is. In my view, Mr Ojo was correct to concede this issue. In any event, it is clear on the evidence that the defendants’ excluded the claimant from the partnership by purporting to terminate her employment, by effectively locking her out of the premises and the computer systems. The police were called twice in relation to her attendance or her agent’s attendance at the medical centre. To be fair to Dr Bhat, he accepted in his oral evidence that he acted intemperately in these respects but by the time he realised this, the matter was in the hands of the solicitors.”

In terms of the sum due to the Claimant, the Judge concluded, at Paragraph 36, that the Claimant was entitled to judgment for the sum of £212,600, which was the total amount of the Annual Payment due for the relevant accounting years, after giving credit for the drawings of £37,400 for the 2018/2019 accounting year.