The seemingly harsh treatment of an individual partner within a business partnership was legally permitted in a recent ruling, with important lessons for the business community. The specialist company and commercial lawyers at Bahamas law firm ParrisWhittaker are highly experienced in advising businesses and their partners/directors where a dispute arises.
A ruling1 from the UK’s Court of Appeal, which has persuasive authority on the courts in The Bahamas, highlights the dangers where there is tension between an individual partner and the business itself. The principles will also apply to a limited liability company in The Bahamas.
What’s the background?
Deloitte LLP is a global accounting firm structured as a limited liability partnership. An express term in the partnership agreement empowered the firm to give notice of retirement to an equity partner. The partner had the right to request that the decision be reconsidered by the board – and put to a special partners’ meeting (of some 1700 partners in 13 countries).
The partner was invited to attend the board meeting but he made written representations instead. He was formally told of its decision not to withdraw the notice and, the next day, he asked again for a partners’ meeting to be convened. The response was met with a refusal, on the basis it was out of time.
As the Court of Appeal succinctly said: “[The partner] was one day late in exercising his right to demand that a partners’ meeting be convened. It is entirely understandable that he waited for the board’s decision before doing so. He was assured that he would be informed of the board’s decision by 9 October 2019, but the Board did not comply with that self-imposed deadline.”
The appeal court had every sympathy for the partner, acknowledging that he was “entitled to feel harshly treated”. But that didn’t entitled him to a legal remedy – Deloitte had acted within its strict legal rights and it was not for the court to alter the contract, but rather to ascertain what the contract was.
What does this mean?
Businesses should take this ruling as a reminder of the need to ensure all their commercial arrangements are clear and robust, and that each party understand their rights and the consequences for them should the other party assert those legal rights. ‘Harsh treatment’ does not necessarily mean it is unlawful.
Businesses may be interested to note the observations made by the court on the particular partnership document in issue in this case:
Businesses should be cautioned to take specialist advice from experience commercial solicitors when negotiating their agreements to avoid unexpected disputes.
How can we help?
We advise and represent companies and other business clients in all types of disputes, whether with clients and suppliers or internally with partners and employees. Where there is uncertainty as to the meaning or implications of a contractual clause or a potential dispute may arise, it is crucial to take early advice from the experts.
Contact the experienced company and commercial disputes lawyers at ParrisWhittaker for strategic assistance and representation.
