Recent case law has highlighted the courts' willingness to allow interim relief in partnership actions in order to 'hold the ring' until the issues between the parties have been resolved. This was regardless of the cost of the interim proceedings and the delay by the applicant in bringing them.
The case of Catch a Ride Ltd and others v Gardner and others (2014), involved a dispute between the partners of hire car business over the management and ownership of a partnership asset (a chauffeur business run by a LLP). The Court granted interim relief to the applicant by appointing a sole receiver over the business. It was held that:
- the grant of interim relief in partnership and quasi partnership company actions was commonplace in order to maintain order whilst an underlying dispute was resolved
- what was important was the preservation of the value of the assets and the business pending sale
- although interim proceedings are expensive, that fact cannot be used to support one side acting unnecessarily obstructively so as to prevent resolution of the ultimate dispute
- delay in making the application for interim relief will not necessarily be a reason to deny interim relief, particularly where no prejudice is caused by the delay
- injunctive relief is available for these purposes (although the parties deemed it was not appropriate in this instance as the prospect of an injunction working was slim)
- the Court can appoint a receiver to step in and manage the assets in dispute under the Senior Courts Act 1981 s.37, if it is just and convenient to do so
- it is not for the parties to agree not to issue interim proceedings. In fact it should be taken as implicit that proceedings should be issued in order to determine disputes which are unlikely to be resolved otherwise.
In light of the above, businesses or individuals forming partnerships need to be aware of what might happen if the business relationship breaks down. The courts will not just sit back whilst the partners fight it out to the detriment of the business and third parties (such as creditors or employees).
Not only have the courts shown a willingness to grant injunctive relief where appropriate, they will also consider the appointment of a receiver to manage and potentially break up a business, even if it could have continued as a going concern but for the dispute.
The author, Hannah Braye, is a member of Burges Salmon's Partnership Disputes team, led by Paul Haggett.