Retiring partner wins case for share of whole firm assets

A judge has ruled that a solicitors' partnership agreement made no provision for division of the firm's assets on the retirement of a partner due to age, and that the rules of the general law applied instead.

Lord Doherty in the Court of Session found in favour of David Eason, a former partner in Inverness firm Munro & Noble, in actions between himself and the other partners in the firm to determine his rights under the partnership agrement.

Under the agreement Mr Eason was bound to retire in 2012 after reaching the age of 65. He argued that the clauses dealing with the continuation of the firm and the sharing of its assets following retiral of a partner specifically only referred to the clause dealing with voluntary retiral and that in the absence of other provision, his rights fell to be determined by the general law.

The remaining partners argued that it was clear that the agreement intended that the partnership should continue notwithstanding a retirement, that the obligation to retire at age 65 fell to be implemented by serving notice to retire as provided in the voluntary retirement provision, failing which a deeming rovision applied. The court ought to prefer the construction which was more consistent with commercial common sense and which better reflected the fact that the agreement was intended to encapsulate a co-operative enterprise.

Lord Doherty said it was common ground, and clearly correct, that the partnership was not a partnership at will. It was also clear that on retirement there was at least a technical dissolution of a partnership. 

Dealing with the provisions for retirement, the age related provision was unambiguous and the defenders' construction was at best "strained and convoluted". If the parties had intended compulsory retirement for age to be dealt with in the same way as other forms of cessation it would have been very easy to have said so. The pursuer's construction was not obviously contrary to commercial common sense.

"The pursuer’s retirement... was a technical dissolution of the partnership as constituted between the pursuer and his co-partners, albeit that a firm comprising the remaining partners was immediately reconstituted", he concluded. The agreement did not incorporate an agreed basis for the pursuer to obtain a share of the net partnership assets in the circumstances which he ceased to be a partner. Accordingly, his entitlement falls to be determined by the general law."

Click here to view Lord Doherty's opinion.