Litigation aftermath of failed partnership returns to High Court

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12 September 2016


High Court: judge partially allowed appeal of district court decision

High Court: judge partially allowed appeal of district judge decision

The latest skirmish in a long-running row between two solicitors whose partnership dissolved in acrimony, has seen the High Court rule that the failure of one to mention to his creditors that he had been struck off was a “material irregularity”.

The former partners, Joseph Golstein and Colin Bishop, who in 2007 founded two-partner B&G Solicitors in London (not to be confused with the Grimsby-based firm of the same name), had a heads of agreement (HoA) that governed the partnership, which was supposed to last four years. But after a complete falling-out between the partners it ended in June 2010.

Mr Bishop was subsequently struck off the roll of solicitors in 2012 after the Solicitors Disciplinary Tribunal (SDT) found he had been dishonest in relation to a restraining order made under the Proceeds of Crime Act 2002.

Separately, the Court of Appeal ruled in Bishop v Golstein [2014] EWCA Civ 10 on questions about how a partnership could be dissolved. The first instance decision, by Nugee J (then Christopher Nugee QC), which the appeal court upheld and described as “masterly and painstakingly detailed”, is now an authority on the issue in two-partner firms.

Mr Nugee found the cause of the early termination of the partnership was that the cumulative effect of Mr Bishop’s conduct during the previous year had made it intolerable for Mr Golstein to continue in partnership with him.

In the latest High Court case ([2016] EWHC 2187 (Ch)), at a hearing in April Mr Justice Warren rejected the first ground of appeal from a 2015 decision of DJ Hart, sitting in the Central London County Court, but upheld the second.

The first was that DJ Hart erred in law by determining that Mr Golstein’s claim against Mr Bishop for around £122,000 by way of unpaid salary under the partnership agreement was an unliquidated claim rather than a liquidated claim.

Mr Golstein relied on clause 2.2 of the HoA, which among other things gave him an annual guaranteed salary of £120,000 a year irrespective of the profits made by the firm, and clause 2.3.2, which included that Mr Bishop “undertakes to indemnify Mr Golstein for his guaranteed salary and against all liabilities”.

Secondly, Mr Golstein claimed the judge erred by finding that the failure of Mr Bishop to disclose in an IVA (individual voluntary arrangement) proposal in 2012 that he was subject to disciplinary proceedings, which ultimately led to him being struck off, was not a material omission and that the proposal would have been passed anyway.

Warren J dismissed the first claim, saying: “In my judgment, Mr Golstein’s claim under clause 2.3.2 of the HoA was an unliquidated and uncertain claim, at least until the ascertainment of the amount of the shortfall under clause 2.2, and thus unliquidated and uncertain at the time of DJ Hart’s decision.

However, in upholding the second ground of appeal, the judge said: “In my judgment, there was a material irregularity in the [IVA] approval meeting as the result of Mr Bishop’s failure properly to disclose the SDT proceedings and the allegations being made against him.”

The question of remedies in respect of the second ground was left to a further hearing.

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