Golstein v Bishop

The Claimant (“Mr Golstein”) and the Defendant (“Mr Bishop”) were in partnership together as solicitors under the name B & G Solicitors (“B&G”) from 1 October 2007 until 30 June 2010. (It was common ground at trial that the partnership came to an end on that date although the legal mechanism by which it did so is not agreed). In this action Mr Golstein claims, and Mr Bishop counterclaims, for various relief arising out of the partnership.

The parties are agreed that dissolution accounts will have to be taken. But there are certain issues which have to be decided before the accounts are taken; and certain other issues which have to be decided in any event, and I am asked to decide such of these as can be decided now.

I give here a brief outline of the facts. This does not include any of the more controversial issues of fact which I will consider when considering the specific issues.

Before the creation of B&G Mr Golstein and Mr Bishop each had their own practices and B&G was formed by the merger of the two practices. Mr Golstein, who was admitted as a solicitor in 1976, had for many years practised under the style Arbeid & Golstein from various addresses in central London, latterly from premises in Tavistock Place, London WC1. He had formerly been in partnership but immediately before the merger was the sole owner of the practice although he had a salaried partner, Mr Simon West. He was a general practitioner but his main forte was litigation. The only staff he employed were a full-time secretary, Miss Leonie Peploe, and his wife, Mrs Barbara Golstein, who provided part-time secretarial assistance; he also used the services of a bookkeeper, Mr Sam Benson, who was self-employed.

Mr Bishop was also admitted in 1976. He carried on practice under the style Colin Bishop & Co from offices called Shakespeare House in Dollis Park, London N3. His practice was primarily conveyancing. He had a larger practice than Mr Golstein and employed a number of staff including his sister, Mrs Julie Warner, who ran the office and did the bookkeeping. He had owned his own practice since 1980 although he too before the merger had a salaried partner, Mr James Green.

The parties had held merger discussions in 2004. These had not in the event come to anything. In August or September 2007 Mr Bishop approached Mr Golstein to resume discussions and agreement was quickly reached on a merger of the two practices. A merger appeared to have attractions for both parties. So far as Mr Bishop was concerned, Mr Green was leaving at the end of September, and Mr Bishop wished to have another name on the letterhead as some institutional lenders were unwilling to instruct a firm with only one practising solicitor to act in conveyancing transactions. Mr Golstein asserts, but Mr Bishop denies, that another consideration was that his professional indemnity premium fell due on 1 October, and a lower premium might be obtainable if he had a partner.

So far as Mr Golstein was concerned, his lease at Tavistock Place was coming to an end at the end of December 2007, and relocating to Mr Bishop’s premises in Finchley would avoid the need for him to renegotiate the lease. The Finchley premises were also nearer his home, and Mr Bishop said that he had litigation work which he would pass to him. Mr Golstein also found the terms agreed (including a minimum term of 4 years with guaranteed earnings) attractive; this would give him an assured minimum income for 4 years when he would be almost 65 at which stage he would wish to review his position as to whether to continue in practice (full-time or part-time) or not.

Mr Golstein drafted Heads of Agreement (adapting them from a draft which he had prepared at the time of the 2004 talks) and these were signed by the parties and dated 17 September 2007. They provided for a merger on 1 October 2007. I give details of its provisions below, but among other things it was agreed that profits and losses should be shared in the proportion 70% to Mr Bishop and 30% to Mr Golstein (reflecting the fact that Mr Bishop’s profits at Colin Bishop & Co had been more than twice as much as Mr Golstein’s profits at Arbeid & Golstein), but that Mr Golstein should have a guaranteed salary of £120,000. This was a first charge on profits and Mr Bishop also undertook to indemnify Mr Golstein for it.

So far as the duration of the new partnership was concerned, the Heads of Agreement provided that partners could retire on 6 months’ notice, but (save on the ground of serious ill-health) neither partner should retire before 4 years. They also provided for dissolution on certain specified grounds.

After the merger date, Mr Golstein continued for a short while at Tavistock Place where he carried on practice much as before, but in mid-December 2007 he relocated to Shakespeare House. Neither Mr West nor his secretary moved with him so that apart from his wife (who continued to provide secretarial assistance for him at home but did not come into the office to work), he was dependent on Mr Bishop’s existing employees.

From quite early in 2008 the practice suffered from a downturn in work due to the recession; and neither party found the experience of being in partnership together a happy one or as successful as they had hoped. Among other things, Mr Golstein, who had hoped for a warm personal relationship with Mr Bishop, found him aloof and unfriendly, rebuffing his suggestions that they should socialise with their wives after hours, declining an invitation to his daughter’s wedding in August 2008, and not inquiring after Mr Golstein’s health when he had to attend hospital for operations as he did on several occasions. When he made suggestions in relation to the practice, for example as to what searches to carry out for a purchaser, Mr Bishop rejected them; although they were supposed to have an equal say in management, Mr Golstein felt that Mr Bishop treated him more like a salaried partner, running the practice just as he had before. Nor did he receive the same level of support from the staff that he was used to.

Mr Bishop for his part thought that Mr Golstein was not bringing in as much by way of fees to the practice as he had expected him to; and in July 2008 expressed concern about the amount that Mr Golstein was billing compared to the guaranteed salary he was entitled to. This led to a conversation in August 2008 in which Mr Golstein volunteered to take only half his guaranteed salary. There is a dispute as to the effect of this which is one of the issues I have to resolve: Mr Golstein says that he was only referring to halving his drawings and that he remained entitled to the other half; Mr Bishop says that he understood that Mr Golstein was giving up half his entitlement.

The parties had agreed that the partnership accountants should be Richard Anthony & Co, who had been Mr Bishop’s accountants for many years. Mr Levy of Richard Anthony & Co prepared draft accounts for the partnership for the year to 31 December 2007 which were provided to the partners at a meeting in January 2009. Mr Golstein had a number of queries on the draft accounts which he considered did not reflect the Heads of Agreement. As far as Mr Golstein is concerned, his queries have never been satisfactorily addressed and although a number of drafts of the 2007 accounts (and later the 2008 accounts) were in due course produced, none of them have been agreed.

During 2009 the relationship between the partners deteriorated. Mr Golstein found that his queries on the draft accounts were not being answered and his requests for payment of what he considered to be due to him were ignored; he was anxious to have a meeting with Mr Bishop and Mr Levy to review and agree the draft accounts, but no meeting took place and Mr Golstein blames Mr Bishop for this. Mr Bishop himself had come to the conclusion that he was deriving little benefit from the arrangements, and did not wish to continue with matters as they were. He started looking for another firm who could take over the practice; and in September 2009 told Mr Golstein that he would close B&G by 31 March 2010 if it had not been absorbed into another firm. Mr Golstein’s response was a long letter of 30 September 2009 setting out his position and his complaints against Mr Bishop. Among other things he said

“We could always discuss our own respective positions afresh. However I personally think we are both far too unhappy to consider continuing and leave our fates in the hands of the Law Society and the SRA.”

(The reference to the SRA is to the Solicitors Regulation Authority which was in the process of carrying out an investigation into various aspects of the firm’s accounting practices.)

At a meeting between the partners on 28 October 2009 Mr Bishop went so far as to say that he did not regard the Heads of Agreement as binding on him (an assertion subsequently withdrawn), and by November 2009 the relationship had completely broken down. Mr Golstein relied on his rights, as he saw them, under the Heads of Agreement; Mr Bishop regarded Mr Golstein as trying to take more out of the partnership than he was bringing in, which he saw as unfair, unreasonable and unrealistic.

By the end of November 2009 Mr Golstein had consulted outside solicitors, Healys LLP, who conducted a sustained but largely fruitless correspondence with Mr Bishop. A mediation was held in March 2010, but that too was unsuccessful; for the purposes of the mediation, Richard Anthony & Co produced a number of redrafts of the 2007 accounts in an attempt to satisfy Mr Golstein, but none of them in his view accurately reflected the Heads of Agreement. After the mediation had failed, Mr Bishop by letter dated 29 March 2010 purported to dissolve the partnership with effect from 31 March 2010, saying that the relationship between them had been damaged beyond repair and that a dissolution was inevitable. As Mr Bishop had predicted, Mr Golstein by his solicitors denied the validity of the notice, and it was not in the event relied on before me.

On 12 May 2010 the SRA’s Adjudicator handed down her findings on the investigation into the accounting matters. She found a number of breaches of the Solicitors’ Accounts Rules. She accepted that Mr Golstein was not actively involved in the matters that had given rise to concern, but found that he was nonetheless responsible under the rules for having failed to ensure the firm’s compliance with them. She reprimanded him for the misconduct involved and directed him to pay £675 costs to the SRA. She referred Mr Bishop’s conduct to the Solicitors Disciplinary Tribunal (“the Tribunal”).

On 30 June 2010 Mr Golstein in turn served notice on Mr Bishop purporting to dissolve the partnership “forthwith”. The notice of dissolution said that it was given “pursuant to clause 18.3.4 of the Heads of Agreement dated 17 September 2007 and due to the breakdown of the relationship between us”. Clause 18.3.4 allows a partner to dissolve the partnership where the other partner is subject to “severe disciplinary proceedings from the Law Society” and Mr Golstein relies on the decision to refer Mr Bishop to the Tribunal.

Mr Bishop’s response of the same day denied that Mr Golstein had any grounds for a termination under the Heads of Agreement but continued:

“Nevertheless, if and in so far as the partnership was not dissolved on the 31^st March 2010, I am prepared to accept that it has been dissolved by agreement with immediate effect.”

The reply from Mr Golstein of 1 July 2010 said:

“we have both now agreed that the firm has been dissolved”

and before me it was common ground that the partnership had indeed come to an end on 30 June 2010. One of the issues for me to resolve however is whether it came to an end by Mr Golstein serving notice under clause 18.3.4, or by accepting a repudiation of the contract by Mr Bishop; or whether it came to an end by mutual agreement.

Mr Golstein went to work as a consultant with a firm called Wayne Leighton; but he did not earn very much with them, not least because of the demands of this litigation on his time, and the consultancy has now come to an end.

Mr Bishop has also stopped practising. He continued practising on his own account after the dissolution for a short while but told the Tribunal that he retired as a solicitor on 1 October 2010. The Tribunal considered the allegations against him in relation to accounting irregularities in May 2011 at a hearing which Mr Bishop did not attend: they found the allegations substantiated and fined Mr Bishop £5,000 and ordered him to pay costs. Mr Bishop was later referred again to the Tribunal on a separate matter concerning a breach of a Proceeds of Crime Act Restraint Order, which came before the Tribunal in September 2012 (a matter with which Mr Golstein had no involvement). Again Mr Bishop did not attend the hearing; he explained in evidence that although he did not admit the allegation and did not accept it was correct, he no longer wished to belong to the Law Society (a body of which he had a jaundiced view), and saw no point in spending time defending an allegation when if he were struck off it would achieve the result he wanted. The Tribunal in his absence found the charge proved, and Mr Bishop to have been dishonest, and did indeed strike him off the Roll of Solicitors.

I must now set out the terms of the Heads of Agreement so far as relevant. Under the heading “Background” they record, among other things, that

“2. ...

The parties have agreed to merge the two firms and that from 1^st October 2007 (the Merger Date) join together in partnership as solicitors. Mr Golstein will at a time convenient to both parties relocate to Colin Bishop & Co’s office at Shakespeare House, Dollis Mews, Dollis Park London N3 1HH.

....

4.

The Parties agree to devote the substantial majority of their time and attention to the New Firm within normal business hours and to act in utmost good faith to each other.”

The remainder of the document is headed “Operative Provisions”. This provided, among other things, as follows

Clause 4 (“Costs”):

“The New Firm will be responsible for the costs of Mr Golstein of

4.1

relocating from 4 Tavistock Place WC1H 9RA from the Merger Date rent, rates and other expenses of 4 Tavistock Place WC1H9RA

4.2

The costs of redirecting and forwarding mail to the New Firm’s Premises for one year and

4.3

the re-routing the telephone and fax lines for one year

4.4

Any legal costs, rents and rates, in respect of any period of time after Arbeid & Golstein have vacated 4 Tavistock Place London WC1H 9RA and any claims for dilapidations.”

Clause 6 (“Work in progress”):

“Work in progress shall be brought into the New Firm at its proper and full charge out rate. The New Firm will invoice all work brought into it at the relevant time and account to the old firms for the value attributed to the Work in progress at the Merger Date upon payment received. The transfer of such proportionate part shall be effected 14 days after receipt of payment.

...

At the end of the first accounting year for the New Firm such work in progress shall be adjusted and apportioned fairly between the partners.”

Clause 8 (“Drawings”):

“8.1

Monthly drawings from the New Firm on account of profits will be as follows :-

i)

Mr Golstein £10,000

ii)

Mr Bishop £10,000”

Clause 14 (“Expenses”)

“Each partner in the Firm will be entitled to be reimbursed in similar amounts for

14.1

the running and cost of maintenance, road tax, insurance and petrol to operate the expense of a motor vehicle

14.2

use of home and mobile telephone

14.3

Club memberships

14.4

Any difference as to expenses shall be adjusted so that each partner receives the same. The difference in expenses shall be treated as a deduction from the partner drawings in excess on that partner’s share in profits.”

Clause 17 (“Miscellaneous”)

“17.1

Mr Golstein and Mr Bishop shall equally manage the New Firm with equal rights

...

17.4

The New Firm shall provide its bookkeeper to maintain the books and accounts records of Arbeid & Golstein after Merger Date for as long as is necessary however while Mr Golstein remains at 4 Tavistock Place the New Firm if it considers it necessary shall continue to engage Arbeid & Golstein’s bookkeeper, Mr S Benson on a self-employed basis.

17.5

Both parties have to jointly agree

17.5.1

The admission of a new partner or employment of staff whose salary shall exceed £30,000 per annum

17.5.2

Any proposed merger discussion or merger with another firm

17.5.3

Acting for a particular client

17.5.4

Relocation from Shakespeare House

..."

A second clause 17 (“Retirement”):

“17.1

Neither partner shall retire before four years other than on the ground of serious ill-health

...

17.4

If Mr Bishop wishes to retire then Mr Golstein shall have the option to do likewise and the parties shall endeavour to sell the goodwill of the New Firm and divide such capital sum as is achieved in their partnership profit sharing rations. If the partnership ends without any successor practice taking over then the run-off indemnity insurance shall be borne by the parties at the rate they have shared profits averaged over the last three years, but if less than five years in the ratios of the professional indemnity policies of Arbeid & Golstein and Colin Bishop & Co prior to the Merger Date.”

Clause 18 (“Dissolution”):

“Grounds

18.1

No age requirement

18.2

Any partner can retire on service of six months notice subject to clause 17.1 above

18.3

If a partner described here as an Offending Partner is subject to the matters set out in sub-clauses 18.3.1 to 18.3.5 the other partner may terminate the Agreement with an Offending Partner at any time

18.3.1

Bankruptcy

18.3.2

Criminal offence

18.3.3

Loss of practising Certificate

18.3.4

Severe disciplinary proceedings from the Law Society

18.3.5

Gross misconduct such as to bring the New Firm into disrepute

18.4

Death”

Clause 21 (“Future intentions”):

“It is hoped the New Firm will prosper and after TWO years the partners will re-assess their profit percentages taking into account the respective fees billed and work undertaken by the parties hereto and the work generated by the New Firm....”

x)

Clause 22 (“Good faith”):

“The parties shall at all times act in good faith to each other and confirm that they have disclosed to each all actual claims to each other and all potential claims and disputers with clients for which they are aware.”

xi)

Clause 23 (“Formal partnership”):

“The parties propose to enter into a formal deed of Partnership at such time as they both agree adopting the matters herein.”

The parties helpfully agreed a list of issues. There are 17 in all, numbered from (i) to (xv) with an additional (iA) and (xiiA). Not all of them however are to be determined at this stage of the proceedings, as some of them have to await the taking of accounts. The issues which I am asked to decide include questions of construction of the Heads of Agreement and various factual matters which are in dispute.

I heard evidence from Mr and Mrs Golstein and from Mr Bishop. I am satisfied that each was trying to assist the Court to the best of their recollection. Mr Golstein was not always able to be precise about the dates of various incidents and some other details, but this is not surprising. Mr Bishop was more precise in his answers, and on occasion was rather careful in what he said, but he did not give me the impression that he was seeking to mislead.

Issue (i) is in these terms:

“Did [Mr Golstein] represent to [Mr Bishop], at the time of the merger negotiations, that he would be able to maintain his existing fee income of £240,000 after the merger ?”

This issue arises on a counterclaim by Mr Bishop for damages for misrepresentation. His pleaded case is that throughout the discussions and negotiations for a merger in August and September 2007 Mr Golstein repeatedly stated to, or assured, him that he would be able to maintain his fee income following the proposed merger at no less than £240,000 per annum. He confirmed this in his witness statement, where he points out that the figure of £120,000 for Mr Golstein’s “salary” is exactly half £240,000; in cross-examination he said that not only did Mr Golstein assure him he would be able to maintain the same level of billings, he thought he could do better.

Mr Golstein’s evidence was that he had told Mr Bishop that his practice was at least 70% litigation, mainly for individuals and a small number of small companies which meant that there was little or no repeat business; that his clientele changed from year to year; that he had been fortunate in that in most years he had had a substantial case or transaction or probate instruction which had a substantial impact on fees; that he never knew what was round the comer; that he obtained work on personal recommendation; and that he could not guarantee his future fees as one could never tell what the future holds. He denied making any assertions or representations as to his future fee income, and said that he had told Mr Bishop he could not guarantee his future fees.

The contemporaneous documentation sheds little light on this question. At the time of the merger discussions in 2004 Mr Golstein had written (on 18 October 2004)

“Looking at potential profits and merging our firms combined figures there would be additional profits if fees stay as they are. However we both know there is no guarantee that the business will continue at previous levels and as I am taking the greater risk by relocating and you need a litigator it was agreed that I receive a guaranteed annual salary.”

At that stage the guaranteed salary was to be £100,000 per annum.

There is nothing similar in the letters at the time of the 2007 merger discussions, most of which were from Mr Golstein to Mr Bishop. There is however in Mr Golstein’s first letter of 5 September 2007 this:

“It was my pleasure to meet you yesterday when we agreed to merge our respective firms. I pointed out to you the fact that my hourly charge out rate is likely to decrease as I will no longer be a Central London solicitor but this was not of any concern to you.”

Miss Eilledge, for Mr Bishop, made the point that Mr Golstein was apt to record important matters in his letters and made no reference in this letter to his having said there was no guarantee.

In the same letter Mr Golstein promised to let Mr Bishop have accounts for Arbeid & Golstein for the last 3 years. These showed a consistent picture under which the gross profits for the years ended 31 March 2004, 2005 and 2006 were £237,469, £236,031, and £237,410 respectively. The accounts for 2007 were not available but Mr Golstein told Mr Bishop that his unaudited sales (bills) for the year were £234,725 (and for the 5 month period 1 April 2007 to 31 August 2007 £119,395). It has not been suggested before me that any of these figures were wrong or misleading.

The first time that Mr Bishop referred in writing to what was said at the time of the merger discussions was not until 5 November 2009 when he said in an e-mail to Mr Golstein (having referred to the amounts Mr Golstein had billed over the last 2 years):

“Can you see now why I am unhappy. You said your average fee income would be £240K pa based on the Accounts you produced. So what has gone wrong ?”

It is of course difficult to be confident about what was said in oral discussions over 5 years ago when there is no contemporaneous record and the parties’ recollections differ. My conclusions however are as follows. I think it probable that Mr Golstein did say something to the effect that he hoped or expected to be able to maintain his fee income despite the move, and despite dropping his charging rates, and even do better; and that based on his accounts that would mean £240,000 per year. Mr Golstein was I think quite excited about the merger and optimistic as to the prospects, and expected to be able to pick up litigation from Mr Bishop’s clients. As Mr Bishop said in a letter of 10 September 2007

“I dare say that we both want to be in the same financial position after the merger as we would have been prior to it”

and I think both parties assumed that there was no particular reason why the merger would result in either of them generating lower fees.

On the other hand I am quite unpersuaded that Mr Golstein gave any assurance or promise as to what his fee income would be. This would have been entirely contrary to what he had said in 2004, namely that there could be no guarantee that business would continue at previous levels; and it would have been entirely contrary to his own perception that one could never tell what was round the comer, and that it was difficult to predict the future. This was especially so as he was a litigator with little repeat business, who in most years had been fortunate to pick up a substantial matter.

The most therefore that I am prepared to find is that Mr Golstein said that he hoped or expected to maintain his fee income at about £240,000 per year.

Does this give rise to an actionable representation ? In my judgment it does not. A representation has to be a representation of an existing fact; and one upon which the representee was intended, and entitled, to rely; and in considering what representation has been made the Court has to consider what a reasonable person would have understood from the words used in the context they were used: Chitty on Contracts (31^st edn) vol 1 §6-006. Here a statement that Mr Golstein hoped or expected to be able to maintain his fee income at about £240,000 per year is not a statement as to an existing fact. It is a prediction as to the future. It would not in the context be reasonably understood as saying anything about the then existing state of facts other than that his average fee income based on his accounts for the last few years was about £240,000 (which was true).

In opening submissions Miss Eilledge referred to a passage in Chitty at §6-012. This concerns the principle that a statement as to a person’s intention can be a representation of an existing fact. The principle is undoubted, but I do not see that it has any relevance here. It would only be relevant if a case were sought to be made that Mr Golstein had had no intention at the time of the merger discussions of doing enough work to bring in fees of £240,000. Mr Bishop does indeed complain about the amount of fees that in the event Mr Golstein brought in but I did not understand his case to be that Mr Golstein had never had the intention to work hard enough, nor is there before me any material which would support such a case.

In closing Miss Eilledge relied on the well-known principle that a statement of opinion may carry an implication that the representor had reasonable grounds for his belief: see Chitty §6-009. She referred to Mr Golstein’s own evidence that the future was uncertain as showing that he had no such reasonable grounds and contended that this made his statement a false representation. In my judgment this principle has no application on the facts of this case either. As is said in Chitty if it is clear that the person who expressed the opinion had no real way of knowing whether or not it was correct, no such implication can be made. On the facts of this case, Mr Golstein had no real way of knowing what his future fee income would be, and I find that this was obvious to Mr Bishop. As Mr Golstein said in cross-examination the most he could say was that if things carried on as they were he would expect his income to be similar. Mr Golstein on my findings was expressing confidence as to the future, but in circumstances where both he and Mr Bishop knew there could be no guarantee. It was not necessary for Mr Golstein to say that in terms; his statement would not reasonably be understood as saying anything different. This is particularly so when he had in terms said in 2004 that there could be no guarantee as to the future, and indeed this had formed the basis of his desire to have a guaranteed salary. There was no reason to think that the position was any different in 2007.

Miss Eilledge also relied on the principle that a contract for partnership is a contract of the utmost good faith and that a person negotiating for a partnership owes a duty to the other negotiating party to disclose all material facts of which he has knowledge and of which the other negotiating parties may not be aware: Conlon v Simms [2006] EWCA Civ 1749 at [127]. I do not doubt the duty but I do not think there were material facts which Mr Golstein knew and Mr Bishop did not. The facts as to Mr Golstein’s actual past billings were disclosed; the fact that there could be no guarantee as to the future was known to both parties; and Mr Golstein’s expectations as to his future income were just that: expectations not facts.

In my judgment therefore this claim is not made out. I will answer Issue (i) by saying that although Mr Golstein said he hoped or expected to maintain his fee income at £240,000 after the merger he gave no assurance to that effect, and his statement did not amount to an actionable representation, or to a breach of the duty to disclose material facts.

Issue (iA) is in these terms:

“Did [Mr Golstein] breach his fiduciary duty in any of the respects set out in paragraph 56 of the Amended Defence and Counterclaim ?”

Paragraph 56 of what is now the Re-Amended Defence and Counterclaim is in these terms:

“Following the merger on the 1^st October 2007 and notwithstanding the statements and/or assurances pleaded in paragraph 7 hereof, the Claimant

(a)

neglected B&G’s practice by devoting an inordinate amount of his own time and the time of employees of B&G in trying to change the way the practice was run and insisting on the introduction of antiquated and pointless accounting practices

(B)

showed little or no interest in carrying out chargeable work and/or in initiatives to bring in new work

(C)

did little to collect in fees once billed

by reason whereof he failed to maintain his fee income at anything approaching the level of £240,000 per annum. The Defendant avers that, over the 2 year period from the 1^st October 2007 to the 30^th September 2009 and after deducting such work as was (notwithstanding the matters pleaded in paragraph 5 hereof) passed to him by the Defendant, the Claimant carried out professional work to a value of only slightly more than £240,000 and brought in actual paid bills of less than that figure.”

These matters are relied on as breaches of the duty of good faith owed by one partner to another which is implicit in a contract of partnership (and here express in the Heads of Agreement, in fact being set out twice, once at paragraph 4 of the Background and again at paragraph 22 of the Operative Provisions.)

As can be seen the allegations under (a) to (c) are wide-ranging but unparticularised. In the event little evidence was led on this aspect of the case. The only findings of fact I am able to make on the evidence are as follows.

Under paragraph (a) Mr Golstein did disagree with the way in which the firm accounted for bills. The practice at Colin Bishop & Co had been to enter bills when they were paid, on the basis that if they were entered earlier the VAT due on them would have to be paid. The same practice continued at B&G. Mr Golstein’s evidence was that when he discovered this, he told Mr Bishop and Mrs Warner that they could enter the bills when rendered, and by switching to a cash receipts basis for VAT (which the firm was eligible for as being below the relevant threshold) it would still not be necessary to pay VAT until the bills were paid. This was what he had done at Arbeid & Golstein. The response was that they could not change the system and he was wrong. Mr Golstein took the matter up with the accountants Richard Anthony & Co who initially confirmed Mr Bishop’s view but after (at Mr Golstein’s insistence) consulting their tax partner confirmed that he was correct.

Mr Bishop’s evidence was that Mr Golstein was very concerned about this point; he (Mr Bishop) had said he didn’t think it could be done. The problem was that the system couldn’t do it. They spoke to Alpha Law (who provided the accounting system) and asked them if it was possible to reformat, but it was not possible. But due to Mr Golstein’s insistence the practice was changed with the result that the VAT was paid.

Mr Golstein also asked for the way his bills were drawn up to be changed so that disbursements were shown on the front of the bills as he had done at Arbeid & Golstein. The practice at Colin Bishop & Co, carried over to B&G, was to show only profit costs on the front of the bill. In this case Mr Golstein’s requests were ignored.

I find therefore that Mr Golstein did spend some time trying to change the firm’s accounting practices. But I am quite unable on the state of the evidence to make any findings at all as to how much of his time this took up or whether it had any discernible effect on his practice or earnings. In any event I very much doubt whether spending time on matters such as this is a breach of the duty of good faith: under clause 4 of the Background to the Heads of Agreement the parties’ obligation was to devote “the substantial majority of their time and attention to the New Firm”, but this does not exclude spending time on matters of administration.

As to (b), Mr Bishop’s evidence was that Mr Golstein gave every indication of having eased off on chargeable work; Mr Golstein however said that he always worked hard, and indeed worked harder and longer hours at B&G than he had done at Arbeid & Golstein. Mr Bishop made a brief reference in his witness statement to Mr Golstein having tried to push a difficult client of his onto him and to refusing to take on clients of Mr Bishop’s because they would not agree to his charging rate: Mr Golstein on the other hand says that his charging rate (which he had dropped from the £300 an hour he charged at Tavistock Place to £285 per hour) was comparable to local firms and that he was not willing to charge out at the same rate as Mr Bishop’s conveyancing rate (£140 per hour). None of these matters were explored in evidence at any length, and in the absence of evidence as to the hours Mr Golstein in fact worked or specific occasions when he did not do so, I am unable to make any relevant findings. Nor do I have any material on which to find that the charge out rate he applied was unreasonable. I therefore do not find that Mr Golstein eased off on chargeable work or unreasonably refused to take on clients.

Mr Bishop also complains that Mr Golstein was not interested in initiatives to bring in new work. Miss Eilledge submitted that if his fee income was dropping he was under a specific obligation to go out and get new work. But again I have very little detailed evidence. The only example which I was referred to was that Mr Golstein had made a claim against B&G’s insurance brokers in relation to the handling of the firm’s professional indemnity renewal in October 2008, and had successfully negotiated a significant sum in compensation. Mr Bishop says he encouraged Mr Golstein to exploit this but Mr Golstein showed no interest in doing so. Mr Golstein pointed to an article in the Law Society Gazette which gave his name and that of B&G and had a photograph of him and which said that he was poised to sue the broker. I accept that this article pre-dated his success in negotiating compensation and so did not refer to it; and that a subsequent article which he pointed to did not refer to his success either; but I am unable to conclude that there was more that Mr Golstein realistically could and should have done. It might in any event be thought rather doubtful whether a firm of solicitors who thought it had a claim against its insurance brokers would use another firm to bring the claim.

More generally, Mr Golstein in oral evidence said that Mr Bishop told him not to go to a breakfast club (a networking opportunity), that Mr Bishop didn’t want to advertise the firm, and that Mr Bishop had tried advertising on the internet but it had been a total waste of time. He (Mr Golstein) operated on personal recommendations and did not know what else he could do. He also said that the recession kicked in in January 2008 and by the end of the year was quite bad; it in fact impacted far more on the conveyancing than on the litigation work and Mr Bishop was himself not fully occupied. The partners addressed this by agreeing to reduce the hours of the staff (although Mr Golstein said that Mr Bishop took all the relevant decisions unilaterally).

On this evidence I am unable to find that Mr Golstein failed in any relevant respect to seek or exploit opportunities to get in new work.

Miss Eilledge invited me to look at the amount of fees that Mr Golstein billed. I have some evidence of this, as follows:

I heard no evidence explaining the difference between the various figures put forward, and am unable to reach any firm view as to the actual figure. I accept however that Mr Golstein’s contribution to the earnings of B&G over the 2 year period from 1 October 2007 was noticeably less than £240,000 per year. Indeed he had never disputed that: his solicitors said in a letter of 9 April 2010 that

“Our client does not accept that he “took the foot off the accelerator” as you seek to allege. He agrees there was a decline in work but this was partly due to the recession, the move and the fact that your promises of passing him a substantial amount of litigation work turned out to be inaccurate.”

Miss Eilledge invited me to infer that the dramatic reduction in Mr Golstein’s earnings from those he had enjoyed previously could not be explained by the recession or the other matters put forward. My difficulty with this submission is twofold: first, I cannot be confident quite what the reduction is. I agree with Mr Golstein that any fair comparison should include work in progress at 31 October 2009, and bank interest which was included in Arbeid & Golstein’s gross profits. It is therefore entirely possible that the figures put forward in his letter of 17 November 2009 are essentially correct. This gives a total of about £430,000 over two years as compared with £480,000, which is a reduction of a little over 10%. If this is the correct figure, it is a significant reduction but I would not regard it as dramatic.

Second, and more importantly, I am simply unable to find what the causes of the reduction were. Miss Eilledge accepted that the recession had some effect from at least August 2008, but I have no basis on which to quantify what effect it, or the other matters relied on by Mr Golstein, had. I am unable to infer from the fact of the reduction that Mr Golstein acted in any way improperly or whether it was not rather due to factors beyond his control.

In my judgment no breach of the duty of good faith by Mr Golstein has been established, and I therefore answer Issue (iA) No.

Issue (ii) is in these terms:

“With regard to clause 2.2b. of the Heads of Agreement, which on its face entitles [Mr Golstein] to receipt of an annual guaranteed sum based upon the savings costs achieved as a result of moving his practice to Finchley and closing down the offices in Tavistock Place, in any event, regardless of the level of profits made by the firm:

•

What is the true construction of this clause ?

•

Are the rights which the clause appears to grant to [Mr Golstein] too uncertain to be enforceable ?”

I have set out clause 2.2(b) above. The general purpose of the clause is readily apparent: since Mr Golstein was going to be giving up the premises at Tavistock House and relocate to Shakespeare House, the overheads of the combined firm once he had moved would be less than the overheads of the separate firms, as the combined firm would no longer have to bear the costs of Tavistock House. This provision gives the benefit of such savings in overheads to Mr Golstein exclusively rather than leaving them to be shared by both partners in accordance with their shares of profits.

Mr Golstein seeks the costs of rent, rates, equipment maintenance, an allowance for DX charges, accountants’ fees and bookkeeping. He quantifies these amounts by taking the figures in the accounts for Arbeid & Golstein for the year ended 31 March 2007.

Miss Eilledge took a number of points on the clause. She first argued that as the clause referred to “savings”, it was necessary to look to the net figure after taking into account any increase in costs attributable to the move to Shakespeare House, which she argued would, for example, include the increased costs of the professional indemnity premium due to the increased fee income. I do not think this is right. As Mr Salis pointed out, the clause does not simply refer to savings but identifies how they are to be identified: viz the former costs of certain specific items. This does not seem to me to contemplate an exercise in comparing all the costs of the former practices and the costs of the new merged firm under one roof, but the simpler exercise of identifying those costs of Arbeid & Golstein which would no longer be incurred after Mr Golstein’s relocation to Shakespeare House.

Of the specific items listed, Miss Eilledge did not take issue with rent or rates, subject to proof of the amount in the taking of the account. I agree with her that the question of quantum is a matter for the taking of the account rather than for me: in principle it seems to me that the amount of rent that is to be regarded as saved is the passing level of rent at the time of the relocation. This may very well be the same as the amount of rent shown in the 2007 accounts but I do not know whether it is or not, and I do not think it is for me to try to assess the amount. The same applies to rates.

In relation to the costs of equipment maintenance, Miss Eilledge disputed that it was within the clause. She said that the clause was dealing with savings as a result of the relocation and hence should be understood as limited to savings in relation to property costs. On this basis she argued that the reference in the clause to “maintenance charges” was to service charges in the lease. I do not accept this submission. No doubt a service charge in a lease is a charge made, among other things, for the maintenance of the property, but the standard way of referring to such charges is “service charges”; and if this had been intended it is difficult to believe that that would not have been said. As a matter of language therefore one’s immediate impression on reading the clause is that it is likely to have been intended to refer to something else. Moreover I agree with Mr Salis that for this purpose one can look at the Arbeid & Golstein accounts which Mr Golstein had supplied to Mr Bishop and which were therefore background facts known, or available, to both parties. Each of the accounts for the years ended 31 March 2004, 2005 and 2006 includes an entry in the profit and loss account under “Expenditure” for “Equipment maintenance”. In my judgment Mr Salis is correct when he says that the reference in clause 2.2(b) to “maintenance charges” is to be understood as referring to this item. As to Miss Eilledge’s point that the savings were limited to property savings, I do not think the clause can be read as narrowly as this. It is true that it refers to savings in respect of the relocation; but this can, it seems to me, extend to more than property costs. Suppose, for example, that Mr Golstein had a photocopying machine at Tavistock House on which he was paying maintenance charges. If he took it with him to Shakespeare House, there would obviously be no savings. But if he gave it up when he moved (because there was already a photocopier at Shakespeare House and a second one was not needed) then the cost of the maintenance charges would be saved. In the latter case I do not think it would be inaccurate to regard this as a saving in respect of the relocation. It would therefore in my judgment fall within the clause even though it could not be said to be a property cost. Whether there were any such savings and, if so, what they were, are again matters for the taking of the account rather than for me.

Miss Eilledge’s next point was on the DX charge. She accepted that an allowance should be made for the annual box charge, which she told me was a fixed charge for the year; but said that no allowance should be made for the additional charge which she told me depended on the number of items going through the system. On the basis that her explanation of the DX charges is correct (and I have no formal evidence to this effect, but I did not understand Mr Salis to take issue with it), this seems to me to be right. Once Mr Golstein had moved to Shakespeare House he no doubt gave up the DX box he had had, thereby saving the annual box charge; but there is no reason to think he stopped putting items through the DX system, using thereafter the DX box at Shakespeare House. In other words he took his use of the DX system with him. As with the example I gave of his taking a photocopier with him, there would not appear in this respect to be any saving in respect of the relocation. I therefore think the claim under this head is limited to the annual box charge rather than to the whole cost of the DX as claimed by Mr Golstein. I have no evidence as to what the annual box charge was but it will presumably be readily identifiable.

Miss Eilledge’s next submission concerned accountancy fees. She said that this was nothing to do with the relocation: any saving was due to the merger rather than the relocation. I agree that strictly speaking the saving in accountancy fees from the merged firm only having to instruct one firm of accountants to draw up accounts rather than two is a result of the merger of the two firms rather than a result of Mr Golstein relocating to Shakespeare House. The difficulty I have with this submission however is that the clause specifically lists accountancy fees as one of the savings even though if the parties had thought about it they must have realised that this was a saving due to the merger rather than the relocation. That means one must either ignore the reference to accountancy fees as included in error, or construe the clause as extending to accountancy fees despite the latter not being affected by the relocation as such. I have little doubt that on general principles one should give more weight in construing the clause to the specific mention of accountancy fees than to the general reference to relocation. In my judgment the saving in the merged firm not having to pay Arbeid & Golstein’s accountants is included in the scope of the clause.

The final item claimed is bookkeeping fees. Miss Eilledge makes two submissions here. First she says that save in respect of the items specifically listed in the clause, the clause is too uncertain to be given any effect. I do not agree. The list of specific items ends with “etc” which shows that the list was not intended to be exhaustive but illustrative. The Court should try and give effect to this apparent intention if it can. Of course if it is not possible to give any sensible meaning to the clause, the Court is forced to declare it too uncertain to have any effect, but it is well established that the Court should not be too ready to resort to a finding of uncertainty. It should strive to give meaning to a clause which was intended to have effect. In the present case I do not think the phrase “savings in respect of the relocation” is meaningless or impossible to give effect to; as I have said the general idea behind the clause is easy enough to grasp.

Miss Eilledge’s second submission on this head was to say that this too, like the saving in accountancy fees, was a result of the merger rather than the relocation. This submission seems to me to fail on the facts. So long as Mr Golstein remained at Tavistock House, he needed someone to keep his books. Once he relocated to Shakespeare House, he could use the services of Mrs Warner who kept the books for Colin Bishop & Co and then B&G. But there was no practical way that he could use Mrs Warner’s services to perform this function so long as he was still at Tavistock House and he in fact carried on using Mr Benson for this purpose. In my judgment the saving in no longer having to use Mr Benson’s services after the relocation was a saving in respect of the relocation rather than a saving caused by the merger, and is within the clause.

The parties also made brief submissions on how the clause worked in practice. These however were not developed at any length. Two points seem to me to be clear:

There are other questions on the practical operation of the clause which might arise. If one assumes for the sake of argument that the amounts due to Mr Golstein under clause 2.2(a) (guaranteed salary) and clause 2.2(b) (savings) were £120,000 and £30,000 pa respectively, one can see that there could be argument in the following situations:

There is however one point which does seem likely to arise. Mr Golstein’s pleaded case is that he is entitled to an annual sum in respect of the savings for the entirety of the period from 1 October 2007 to 30 June 2010. This does not seem to me to be right: until some time in December 2007, Mr Golstein was still occupying Tavistock Place and incurring costs there. The savings did not therefore start in October; they will only have started after his relocation to Shakespeare House.

I will answer Issue (ii) by saying that the true construction of the clause is as I have sought to set out above; and it is not too uncertain to be enforced.

Issue (iii) is in these terms:

“If [Mr Golstein] was entitled to a guaranteed sum based upon the savings costs, as referred to in clause 2.2b of the Heads of Agreement, how is the value of the sum to which [Mr Golstein] is entitled to be ascertained ?”

I have already made some comments on the identification of the relevant savings under Issue (ii) above. I do not think it is necessary to repeat them. In principle the annual savings are the annual cost of each item at the time of relocation which would have been incurred had Mr Golstein continued as before, and which were not in fact incurred. This would not necessarily be the same as the annual costs shown in the previous year’s accounts as that might contain items which would not have been incurred anyway: suppose for example that the equipment maintenance charges in the previous year’s accounts included maintenance on an item which Mr Golstein had disposed of before the merger. But in the absence of some reason to think that the annual costs would have been different, I can see that the annual costs of items as shown by the previous year’s accounts would be likely to be a good indication of the amount of savings for those items.

I will answer Issue (iii) by saying that the ascertainment of the amount of savings is a matter for the taking of the account, and that it should be ascertained in line with the general guidance I have given above.

Issue (iv) is in these terms:

“Clause 4 of the Heads of Agreement entitles [Mr Golstein] to reimbursement in respect of the cost of relocation from Tavistock Place to Finchley. What items of expenditure fall within the scope of this clause, and what is the total amount of reimbursement to which [Mr Golstein] is entitled ?”

Clause 4 (set out above) entitles Mr Golstein to have certain costs borne by B&G. The relevant part of clause 4 for present purposes is clause 4.1 which I repeat for the sake of convenience:

“The New Firm will be responsible for the costs of Mr Golstein of

4.1

relocating from 4 Tavistock Place WC1H 9RA from the Merger Date rent, rates and other expenses of 4 Tavistock Place WC1H 9RA”

I agree with Miss Eilledge that this contains two separate sub-clauses dealing respectively with (i) Mr Golstein’s costs of relocating and (ii) rent, rates and other expenses of Tavistock Place.

Mr Golstein claims a total of £32,897.35 under the following heads: rent, rates, postage and stationery, telephone, maintenance, motor expenses, salaries and national insurance, office insurance, bookkeeping, health club subscription, sundries, Charles French, ICS, bonus to Leonie Peploe and Ace Deposit (removal).

In the event I heard little argument on this issue. It is agreed that (despite the terms of the issue) I am not concerned with quantum or the total amount but only with the principle of what is covered by clause 4. In opening Miss Eilledge accepted that rent, rates (subject to any rebate), telephone (post-merger), maintenance and removal costs were covered. In closing she went further, as she accepted, correctly in my view, that Mr Golstein would in any event as a partner be entitled to have the New Firm (B&G) discharge any proper expenses incurred by him on partnership business after the date of the merger, so that this part of clause 4 was really for the avoidance of doubt. This would not cover any pre-merger costs (for example pre-merger telephone expenses), but would cover post-merger costs incurred on postage and stationery, and salaries and national insurance. It is to be noted that (as appears from a letter of 22 July 2009 from Mr Golstein to Richard Anthony & Co) the figure claimed by Mr Golstein for salaries (£19,851.01) includes Mrs Golstein’s salary, which is a recognition that B&G was to be responsible (under clause 2.2(a)) for paying her salary.

I can deal with the remaining items quite briefly:

Issues (v) to (viii) concern the details of work done, monies received by the partners, monies paid into client and office account, and expenditure. It is agreed that they are not for me to decide, but are to be left to the taking of the accounts.

Issue (ix) is in these terms:

“When [Mr Golstein] agreed in August 2008 to take a fifty per-cent reduction in salary, did this take the form of a temporary deferment in respect of his annual guaranteed salary of £120,000, which [Mr Golstein] is entitled to receive under clauses 2.2a. and 2.3.2 of the Heads of Agreement, pending the improvement in the firm’s financial condition, with credits entered into the firm’s accounts in respect of each shortfall in payment, as [Mr Golstein] contends, or was this a permanent arrangement whereby [Mr Golstein] agreed, from that point onwards, only to receive £60,000 per annum by way of guaranteed salary, as [Mr Bishop] contends ?”

The facts relevant to this issue are as follows.

On 28 July 2008 Mr Bishop e-mailed Mr Golstein saying that he thought they ought to “keep a watchful eye on the office account”. He continued

“I can see that my weekly transfers are going to be way down on normal so my ability to sustain the account will be difficult.

Are you sure that you have sufficient work in hand to be able to sustain your drawings, Linda’s Salary and a share of the overheads.

As at last Friday your fees received were £100,019.00. If you have drawn £10k per month then that will account for £70k and I suspect Linda’s salary etc will be another £20kish so far making £90k against £100k without considering all the other overheads.

Do you think we should start panicking ?”

The reference to Linda was to Linda Stewart, one of the secretaries. Initially secretarial assistance was provided to Mr Golstein on a pool system but it came to be provided largely by Miss Stewart.

Shortly after in an e-mail (which is undated but which has been marked “August 2008” and which I accept was sent in early August), Mr Bishop wrote again to Mr Golstein as follows:

“Following our conversation this morning I took a look at the Partnership Agreement and note that you are entitled to add the A&G savings to your profits and income of £120K. I don’t know what the savings are but assuming they are £80k you will then be entitled to £200K this year.

On present fee turnover your fees are not going to reach £200k for the year and Linda will have cost about £32K ish.

That will mean I will have to pay Linda and meet all the other overheads. Probably resulting in me working for nothing.

I think we need to reconsider the Agreement and the arrangement generally otherwise there is little point in me continuing. I had not anticipated that this situation could arise but I am sure you will agree there is no point in me earning nothing — I would be better off retiring now that I can draw my pension.

Please let me have your comments.”

This led to a meeting between the partners, also in August 2008. At this meeting Mr Golstein said something to the effect that he would take only half his salary. Mr Golstein’s account in his witness statement is that he used words to the effect that to help cash-flow he would take half his guaranteed monthly salary until matters improved as there was no point in drawing monies that the firm did not have and that the reduction would be added to his capital account by the accountants and in due course it would all sort itself out; and that he made it clear that he was not surrendering any of his salary but only deferring drawing it. In oral evidence he said that Mr Bishop had referred to cashflow problems to which he replied something to the effect that “if it helps the cash-flow I’ll take the same salary as my drawings at A&G, namely £3,000 for me and £2,000 for my wife Barbara and hopefully it will only be short-term and will all come out in the wash.” He added that under no stretch of the imagination could Mr Bishop have thought that his salary was being cut in half.

Mr Bishop’s account in his witness statement was that by the summer of 2008 he could see that Mr Golstein’s underperformance was going to cause financial problems; this led to a dialogue between them and the e-mails of 28 July and August 2008 which shortly thereafter resulted in a verbal agreement that Mr Golstein would reduce his guaranteed share to £60,000 and would draw only £5,000 a month (less his wife’s salary). It was not until a year later that Mr Golstein claimed that he had not agreed to reduce his guaranteed share but only his drawings in order to assist B&G’s cashflow. Mr Bishop said this was an absurd position for him to take as there were never cashflow problems, and it came as a shock to him as it was not what was agreed. In oral evidence he said that he could not remember the exact words used, but that the gist of it was “I will take a reduction of half.” Nothing was said by Mr Golstein about leaving the other half in his capital account: he never mentioned the capital account and never mentioned that it was only temporary.

I come back to my conclusions on this meeting below.

From 1 September 2008 Mr Golstein only drew the reduced amount. In his long letter of 30 September 2009 to Mr Bishop Mr Golstein said

“Due to the recession after a short period about in mid 2008 I voluntarily to assist cash-flow reduced my drawings to half as I was unconcerned as I had your personal indemnity under the Heads of Agreement. In effect it has meant that my income has only paid my income tax. This was only meant to be a temporary measure, when can I revert to a full draw ?”

After Healys became involved for Mr Golstein, Mr Bishop took advice. In a letter of 2 December 2009 he said

“I have now taken counsel’s advice on the minimum guaranteed salary. In or about August 2008 JG agreed to reduce his salary by 50%. Such a variation was not expressly temporary in nature, and as such, his entitlement to a minimum guaranteed salary reduced to £60,000 per year with effect from 1 September 2008.”

In a letter of 1 February 2010, Mr Levy of Richard Anthony & Co explained to Mr Bishop that the draft accounts of the partnership for the year to 31 December 2008 credited Mr Golstein with a profit share of £100,000 and added

“He is aware of this figure as it was discussed with him when we met to review his taxation position.”

This I take to be a reference to a meeting on 22 January 2009 at which Mr Levy told Mr Bishop that his tax due in January 2009 was £26,810.85 and in July 2009 would be £22,265.46, as shown by Mr Golstein’s letter of 23 January 2009 to Mr Levy. My understanding is that the tax payable in January and July 2009 would have been for the tax year 2008-9, and that it would be based on the profits for the accounting year falling within that tax year, that is for the year ended 31 December 2008. The significance of this is that it shows that Mr Golstein was accepting in January 2009, before any dispute over the nature of the arrangement in August 2008 had arisen, that his profit share (and hence his taxable income) for 2008 was £100,000. It was suggested at one point in the course of cross-examination that this might be made up of 8 months at £10,000 and 4 months at £5,000 (which would indeed total £100,000) but I do not think this can be right. Clause 2.2(a) of the Heads of Agreement provided that the £120,000 would include Mrs Golstein’s salary of £20,000, she being an employee of the firm “and dealt with accordingly”. This can only be understood in my judgment as an agreement that the firm would pay Mrs Golstein a salary of £20,000 as an employee, Mr Golstein’s profit share being reduced accordingly. Indeed the whole purpose of this arrangement was no doubt so that the £20,000 would be taxed as her income and not his, so that it would be taxed at a lower rate. This means that Mr Golstein’s entitlement under clause 2.2(a) was not in fact to have £120,000 himself but to have £20,000 paid to his wife and the balance of £100,000 as his share of profits. This is consistent with the fact, also referred to in Mr Levy’s letter of 1 February 2010, that the first draft of the 2007 accounts showed Mr Golstein’s share of profits as £25,000, being the pro rata rate for the three months from 1 October to 31 December 2007 (and hence equivalent to £100,000 pa not £120,000).

It follows that the reference to Mr Golstein’s profit share in the draft 2008 accounts being £100,000 was to his full entitlement. The effect of this, as Mr Golstein appreciated, was that he was paying tax on the full £100,000 even though he was drawing less. Indeed in a letter of 23 August 2009 to Mr Levy he said that his drawings were barely paying his income tax, and this was repeated in his letter of 30 September 2009 (above).

On 23 February 2010 Mr Golstein wrote to Mrs Warner saying, among other things

“I have been advised that the temporary reduction in my drawings which I did to assist the partnership, and was not I emphasise a waiver or variance of my entitlement, must now end and my full drawings/guaranteed salary be re-instated.”

Although addressed to Mrs Warner, a copy was sent to Mr Bishop under cover of a letter from Healys of 24 February 2010.

I can now state my conclusions on this evidence. At the meeting in August 2008, I find that Mr Golstein said words to the effect that he would “take” half his salary. This conversation was very brief and nothing was said about whether this was a permanent or temporary measure, nor was anything said about the other half being added to capital account. What Mr Golstein intended by this statement, and understood he had agreed to, was that he would reduce his drawings without reducing his overall entitlement. The guaranteed salary was important to him and it is unlikely that he would have volunteered to cut it in half; if he had really intended to do so, he would have made it much clearer, not least because it would have represented a considerable sacrifice on his part which he would have wanted Mr Bishop to appreciate. He would also have wanted to record it in writing as he would have seen it as a significant variation to the Heads of Agreement.

I accept therefore that so far as Mr Golstein is concerned he was not willing to, and did not mean to, give up half his salary: this is supported not only by his wife’s evidence (which was to the effect that he had told her at the time that he had offered to reduce his drawings but that the undrawn monies would still be added to his account), which I accept, but by the fact, which I have already referred to, that he accepted that the full entitlement of £100,000 should be shown as his profit share in the accounts for 2008 even though this meant he was paying tax on a larger income than he was actually drawing. It is also supported by the terms of Mr Golstein’s letter of 30 September 2009 which refers to “revert[ing] to a full draw”. Mr Golstein volunteered to reduce his drawings because he understood Mr Bishop’s concern to be about cashflow. There was some support for this in Mr Bishop’s e-mail of 28 July 2008 with its reference to Mr Bishop’s ability to sustain the office account.

On the other hand, I am not persuaded that he made matters as clear to Mr Bishop as he now believes. I accept Mr Bishop’s evidence that his concern was not in fact about cashflow but about what he saw as the unfair correlation between what Mr Golstein was bringing into the firm by way of fees and taking out of it by way of profits. A fair reading of his e-mails shows that this is indeed what was worrying him. I do not accept that Mr Golstein expressly referred to making this reduction to assist with cashflow. Had he done so, Mr Bishop would I think have explained that this was not his real concern. Mr Bishop was left with the impression that Mr Golstein was volunteering to reduce his salary by half. This explains why he was shocked when Mr Golstein sought to claim the other half: he saw this as Mr Golstein going back on what he had agreed, and this was in my judgment a genuine, not a feigned, reaction.

What are the legal consequences of this ? Although Mr Bishop’s pleaded case is that the conversation amounted to a binding contractual variation of the Heads of Agreement, Miss Eilledge, whose submissions throughout were noticeably realistic, did not seek to support this in closing, and accepted in terms that there was no such variation. That makes it unnecessary to consider what the consideration for such a variation might have been.

Miss Eilledge did however submit that Mr Golstein’s statement that he would only take half his salary created an estoppel. Her argument was that although the parties understood the statement differently it had to be construed objectively and, so construed, was to be understood, particularly in the light of Mr Bishop’s e-mails, as referring to Mr Golstein waiving his right to the other half of his salary; and that this was relied on by Mr Bishop in not doing anything to bring the partnership to an end. She accepted that Mr Golstein’s statement was not a permanent giving up of his rights and that he could therefore withdraw it; but she said that until he did so it operated to reduce his entitlement.

I agree with Miss Eilledge that the statement has to be construed objectively: see Woodhouse AC Israel Cocoa Ltd v Nigerian Produce Marketing Co Ltd [1972] AC 741. That case had some similarities in that the seller of cocoa wrote letters to the purchaser which it was accepted did not constitute a variation of the contract but which were relied on by the purchaser as giving rise to a promissory estoppel waiving the seller’s strict contractual rights. The House of Lords held that the meaning of the letters was a question of construction (and hence of law), not a question of fact as to how the purchaser in fact understood them; and that on their true construction the letters did not bear the meaning the purchaser had put on them.

But I do not accept that so construed the statement is to be understood as Mr Golstein volunteering to give up half his entitlement. The word “take” is ambiguous, but in context I consider that the more natural meaning of Mr Golstein’s statement that he would only take half his salary is that he would only draw half his salary. The very informality of the expression suggests that it should not be understood as meaning that he was reducing his entitlement from £120,000 to £60,000. And a representation has to be clear and unequivocal to give rise to a promissory estoppel: see again the Woodhouse case. In my judgment Mr Golstein did not make a clear and unequivocal statement that he would reduce his entitlement to half.

This conclusion makes it unnecessary to resolve whether Mr Bishop acted in reliance on the statement: I will just briefly say therefore that I accept that Mr Bishop was in August 2008 very concerned that the combined effect of Mr Golstein’s guaranteed salary and his claim for expenses meant that his entitlement from the firm exceeded what he was contributing to it, and that if he had understood that Mr Golstein was only giving up half his drawings not his entitlement, he would have taken steps to see what he could do about it, if necessary by bringing the partnership to an end. I am not sure that it would have been easy for him to do so, but he might have had an argument that the partnership be dissolved by the Court under the just and equitable ground (s. 35(f) of the Partnership Act 1890). I do not think it is necessary for me to be satisfied that such an argument would have succeeded; the fact that he did not take any steps to deal with the situation is I think enough, whether or not those steps would have ultimately been successful. Had I found the representation to have clearly waived Mr Golstein’s right to half his salary I would therefore have held him estopped from claiming it; the effect of such an estoppel would, as Miss Eilledge accepted, have been merely temporary and would have ceased on 24 February 2010 when Mr Golstein made it clear that whatever the effect of his statement he was bringing it to an end.

As it is however the estoppel argument in my judgment fails; and Mr Golstein is entitled to be credited with the full amount of his profit share, although for reasons explained above that is I think more properly to be regarded as £100,000 pa rather than £120,000 pa.

It is agreed that Issue (x) (which concerns the profits of the firm) is not for me to decide.

Issue (xi) is in these terms:

“The partnership came to an end on 30^th June 2010. Was the partnership brought to an end by:

•

Service of a notice by [Mr Golstein] invoking his rights under clause 18.3.4 of the Heads of Agreement and communicating his acceptance of [Mr Bishop’s] repudiatory conduct, as [Mr Golstein] contends, or

•

mutual agreement to dissolve the partnership, as [Mr Bishop] contends ?”

It can be seen that Mr Golstein relies on two alternative ways in which he brought the partnership to an end, namely by reliance on clause 18.3.4 of the Heads of Agreement, and by acceptance of Mr Bishop’s repudiation of the partnership. I will take the clause 18.3.4 point first. As appears above, this clause permits a partner to terminate the partnership agreement if the other partner is subject to “severe disciplinary proceedings from the Law Society.”

I have made some reference to the facts above. A fuller account is as follows:

Two questions were argued on these facts. The first is whether Mr Bishop was “subject to disciplinary proceedings” on 30 June 2010. The second is whether, if he was, they were “severe”.

In connection with the first issue, I was referred to the relevant statutory provisions, which are as follows. Under s. 44B of the Solicitors Act 1974, the Law Society may require a solicitor to provide information for the purpose of investigating whether there has been professional misconduct. Under s. 44D, the Law Society has power, where it has been satisfied that there has been professional misconduct, to rebuke a solicitor or direct him to pay a penalty up to £2,000, this section being without prejudice to its power to make an application to the Tribunal, s. 46 provides for any applications and complaints under the Act (save as otherwise provided) to be made to the Tribunal, and confers power on the Tribunal to make rules about the procedure to be followed.

The relevant rules made by the Tribunal under s. 46 are the Solicitors (Disciplinary Proceedings) Rules 2007 SI 2007 No 3588. Rule 5 provides that an application to the Tribunal in respect of any allegation or complaint made in respect of a solicitor shall be in the form of Form 1 in the Schedule to the Rules; rule 5(2) requires this to be supported by a statement (which must include a statement of truth) setting out the allegations; and rule 5(3) provides that the application, the statement and any documents exhibited with them shall be delivered to the Clerk to the Tribunal. Rule 6(1) provides that an application under rule 5 shall be considered by a solicitor member of the Tribunal, who shall certify whether there is a case to answer (meaning an arguable or prima facie case); rule 6(4) provides that if he decides not to so certify, the application shall be dismissed without formal order; and rule 6(5) provides that if it is certified that there is a case to answer, a clerk shall serve the application, the statement and any exhibited documents on the respondent.

Although the Solicitors Act refers to the Law Society, the relevant functions are carried out on its behalf are by the SRA. I was shown rule 8 of the SRA (Disciplinary Procedure) Rules 2010 which provided that the SRA might make an application to the Tribunal in respect of a regulated person (which includes a solicitor) if satisfied that (a) there was sufficient evidence to provide a realistic prospect that the application would be upheld by the Tribunal; (b) that the allegation to be made was sufficiently serious that the Tribunal was likely to order the person to be struck off, suspended, pay a penalty exceeding the maximum that could be imposed by the SRA, or to be subject to any other order the SRA was not empowered to make; and (c) that it was in the public interest to make the application. Rule 8(3) provided that an application to the Tribunal might be authorised by, among other persons, a single adjudicator.

It can be seen that in the present case the procedure followed the statutory framework. The SRA (acting on behalf of the Law Society) first investigated the matter. The single adjudicator then decided to authorise an application to the Tribunal, having satisfied herself that the evidential and public interest tests were satisfied. It was then passed to the Legal Department who prepared the application and supporting statement under rule 5(2). These were then lodged with the Tribunal. The Tribunal no doubt considered whether there was a case to answer, and then served the application and statement on Mr Bishop.

The question is when in this process Mr Bishop became subject to severe disciplinary proceedings. Mr Salis did not suggest that the investigation by the SRA constituted such proceedings, but submitted that Mr Bishop became subject to disciplinary proceedings when the SRA’s Adjudicator decided to refer him to the Tribunal, namely on 12 May 2010. Miss Eilledge submitted that he did not become subject to proceedings until the Tribunal accepted there was a case to answer and served the proceedings on him, namely on 25 October 2010.

Both counsel are therefore agreed that the proceedings in question are the proceedings before the Tribunal, the investigation by the SRA not being sufficient to trigger clause 18.4.3. I agree; and the question is when Mr Bishop became subject to them. In my judgment he did not become subject to them on 12 May 2010. What happened then is that the adjudicator decided that he should be referred to the Tribunal. But this did not by itself start the proceedings or subject Mr Bishop to them. In terms of rule 8 of the SRA rules what it did was authorise the SRA to bring proceedings. Proceedings were not actually brought until the legal department had considered the matter, prepared the application in the form of Form 1 scheduled to the Tribunal’s rules and lodged the application together with the rule 5(2) statement setting out the allegations and supported by a statement of truth. It is clear from Mr Barnett’s letter of 15 October 2010 that that process had not then taken place, although it was about to; and the rule 5(2) statement itself is dated 18 October 2010 (I have not seen the formal application). In my judgment Mr Bishop did not become subject to the proceedings until, at the earliest, that had happened. It is not necessary to decide whether it was the lodging of the application that was the relevant date, or, as Miss Eilledge submitted, the slightly later date when the Tribunal, having decided that there was a case to answer, served the application on Mr Bishop. Both dates are well after 30 June 2010 when Mr Golstein served his notice.

I conclude therefore that Mr Bishop was not subject to disciplinary proceedings on 30 June 2010 and Mr Golstein’s notice could not therefore validly take effect under clause 18.3.4. This conclusion makes it unnecessary to decide whether the proceedings were “severe”, but I will briefly give my views. Miss Eilledge submitted that this must have been intended to add something to the concept of “disciplinary proceedings” and that it should be understood as limited to allegations of such seriousness that the Tribunal would be likely to suspend or strike off a solicitor (or perhaps make a restriction order imposing conditions on the way a solicitor practises). She referred me to the Tribunal’s Guidance Note on Sanctions, which contains a list of orders the Tribunal can make (in ascending order of severity: no order, a reprimand, a fine, a restriction order, suspension and striking off) and which also contains guidance on the principles by which the Tribunal chooses between the various sanctions open to it. I have considerable sympathy with the submission that the word “severe” was intended to add something, and that the clause should be read as confined to allegations of really serious misconduct which would merit a severe punishment; and that conduct of the type alleged against Mr Bishop (which was limited to breaches of the Accounts Rules without any suggestion of loss, or complaint, by a client, or improper gain by the firm) was not likely to be regarded as meriting a severe penalty, nor in the event could a £5,000 fine be described as such.

The difficulty however with this, as Mr Salis submitted, is that it puts the innocent partner in an impossible position. The SRA does not ask for any particular sanction when it applies to the Tribunal. Although some cases may be clear, in very many cases it may be wholly uncertain whether misconduct of the type alleged would if proved be likely to lead to a suspension or striking off. The Guidance issued by the Tribunal is necessarily in general terms and in any event is not intended, as it makes clear, to fetter the Tribunal’s discretion, every case being fact-specific. If the innocent partner had to form a judgment whether the allegations alleged against the other partner were likely to lead to a striking off or suspension it would in practical terms often be impossible. Mr Salis submitted that clause 18.3.4 should be interpreted in such a way that the innocent partner could tell whether it applied or not, and submitted that any matter which was serious enough to warrant a reference to the Tribunal (as opposed to being dealt with by the SRA itself) constituted severe disciplinary proceedings. With considerable hesitation, I would, had it been necessary to resolve the point, have accepted Mr Salis’s submission. But for reasons I have given clause 18.3.4 did not in my judgment apply on 30 June 2010 as Mr Bishop was not then subject to such proceedings.

The second part of Issue (xi) concerns the question whether Mr Golstein’s notice was valid as the acceptance of a repudiation of the partnership by Mr Bishop. Mr Golstein relies on a number of particulars where he has instanced what he alleges are repudiatory breaches of the partnership; Mr Bishop has particular answers on the facts but also makes two general submissions. The first is that the doctrine of repudiation has no application to a partnership contract. The second is that if the doctrine applies at all Mr Golstein affirmed the relationship after the particular breaches on which he relies.

I will take the question of law first. It is at first sight a surprising proposition that the relationship of partnership, which is essentially contractual, should not be subject to the same incidents as other contractual relationships. But the question whether the doctrine of repudiation applies to partnership is in fact what Lindley & Banks on Partnership (19^th edn) at §24-05 describe as having been “a vexed issue for many years.”

The current state of the law is as follows:

Mr Salis also referred me to various commentary on the point:

Mr Salis also drew my attention to Greenham v Gray (1855) 4 ICLR 501, a decision of the Court of Exchequer in Ireland to which Mr Jacobson refers. In this case Mr Gray engaged Mr Greenham to run his cotton-mill for 5 years at £150 pa plus 20% of the net profits, but some 8 months into the agreement forcibly expelled him. Mr Greenham, claiming that the agreement constituted him a partner, sued for damages for what was described as “the hindrance offered by Mr Gray to the plaintiffs fulfilling his contract and for Mr Gray’s repudiation of the agreement” (at 503). One of the issues left to the jury was whether the agreement did create a partnership; the trial judge directed the jury that it did, and they assessed damages at £600. On appeal, the only question was whether the agreement created the relationship of partners or that of master and servant (per Greene B at 508), the Court holding that Mr Greenham was indeed a partner. This is certainly a case in which damages were awarded for repudiation of what was held to be a partnership agreement; but in that case there is no doubt that Mr Greenham had been wrongfully deprived of the benefit of the contract, and the present question is not whether damages can be awarded in such circumstances but whether a dissolution can be brought about by the acceptance of a repudiation. So far as appears from the report, this issue simply did not arise, it no doubt being common ground, without any further analysis, that the agreement had come to an end. The Court was therefore not concerned with this question, and said nothing about it. I do not think the case assists, or undermines Lord Millett’s analysis.

Although one judge sitting in the High Court is not strictly bound by the decision of another, the practice is for a second judge to follow a previous judgment of the same Court unless satisfied that the earlier judgment is wrong: see the remarks of Lord Goddard CJ in Police Authority for Huddersfield v Watson [1947] 1 KB 842, 848 where he said that a judge of first instance, although certainly not bound to follow the decision of a judge of equal jurisdiction, would follow the decision of another judge of first instance as a matter of judicial comity “unless he is convinced the judgment is wrong”.

I should therefore follow the decision of Neuberger J in Mullins v Laughton unless either I am satisfied it was wrong, or it can be satisfactorily distinguished. I am certainly not satisfied it was wrong, based as it was on what Neuberger J rightly described as the thorough and careful analysis of Lord Millett. It is true that Lord Millett did not hear argument, and did not express a final view, but this does not diminish the force of the points he made. I accept that there are points to be made on the other side: the point is plainly arguable and indeed difficult (as Neuberger J described it at [93]). In particular I can see, as Lindley & Banks suggests, that Lord Millett’s view can leave the innocent partner in a position of some difficulty pending an application to the Court for dissolution. The force of this however is somewhat diminished by the considerations that (i) as Neuberger J said (at [92]) even if the doctrine applies, the parties may be left in uncertainty until the Court has ruled on whether the conduct was in fact repudiatory; and (ii) I suspect it will often be the case (as happened in both this case and Hurst v Bryk itself) that in practice the parties will agree that the partnership is undoubtedly over even though there is a dispute over the legal mechanism by which it came to an end. In any event this does not detract from the central points made by Lord Millett that the discretionary power in the Court to dissolve sits uneasily with a right for the innocent party to bring about an automatic dissolution out of court; and that the relationship of partnership subsists not just between the repudiating and accepting partners but between all the partners, and a legal mechanism is needed to bring about a dissolution as between all partners. In the circumstances I conclude that I should follow Neuberger J unless his decision can be distinguished.

Mr Salis invites me to distinguish it on the basis suggested by Blackett-Ord, namely that it does not or should not apply to the case of the two-partner firm. In the case of a two-partner firm one of the difficulties mentioned by Lord Millett would not arise, and Blackett-Ord in fact cites from a speech made by Lord Millett himself, extra- judicially, to the AGM of the Association of Partnership Practitioners in 2005 where he said

“The contractual doctrine of repudiation is essentially bilateral. It could work if you had two partners, or if the partners fell into two rival camps. But it could not possibly work with (say) 25 partners...”

Mr Salis suggested that this showed that Lord Millett had subsequently had doubts about whether his views in Hurst v Bryk applied to two-partner firms. I do not read this brief extract from his speech (the rest of which I have not seen) as suggesting this; I think it more likely he was simply saying that although the doctrine could in theory work with two-partner firms or cases of two rival camps, it could not work in other situations and it would be very odd if dissolution were available in some cases but not others. This was a point he had already made in Hurst v Bryk (see at 196A); in any event it is no answer to what he regarded as the strongest argument which is that admitting repudiatory breach as a ground for the automatic dissolution of a partnership would circumvent the discretionary power of the Court under s. 35 (ibid).

I accept of course that neither Hurst v Bryk nor Mullins v Laughton was a case of a two-partner firm but I do not regard this as a sufficient ground to distinguish the reasoning in them. Mullins v Laughton was squarely based on Neuberger J adopting and following Lord Millett’s views in Hurst v Bryk. But Lord Millett’s reasoning goes well beyond the point that there are theoretical objections in a case other than a two-partner firm or a case where there are two rival camps; and Hurst v Bryk itself was a case where there were in fact two rival camps, all 19 of the partners other than Mr Hurst being equally in breach. Lord Millett plainly regarded the doctrine of repudiation as inapplicable in all cases, not just those where there were more than two partners. In my judgment it is not possible to distinguish Mullins v Laughton on the basis that the law is different where there are only two partners: cf Lindley & Banks (1^st suppl to 19^th edn) at §24-06.

I will therefore follow Mullins v Laughton. This means that it was not possible, as a matter of law, for Mr Golstein to bring about a dissolution of the partnership by accepting a repudiation by Mr Bishop. I will therefore answer Issue (xi) by saying that the partnership came to an end on 30 June 2010 by mutual agreement to dissolve the partnership, it being accepted that if Mr Golstein’s notice was not a valid notice terminating the partnership, then the exchange of letters on 30 June 2010 brought the partnership to an immediate end by mutual agreement.

I should however deal with the conduct relied on by Mr Golstein, both in case I am wrong on the question of law, and because Mr Golstein claims damages for breach of the partnership agreement, his case being that Mr Bishop’s conduct effectively brought about a premature end to the partnership on 30 June 2010, before the completion of the minimum 4-year term, and thereby deprived Mr Golstein of his guaranteed salary for that period.

Mr Golstein relies on 15 separate matters, set out in sub-paragraphs (a) to (o) of Paragraph 8 of the Re-Amended Particulars of Claim. I will deal with them in turn, and consider not only whether Mr Bishop acted in breach of contract but also whether his conduct was repudiatory. In doing so, I take the law to be that a repudiation of a contract consists of either a denial of the contract, or a breach of a term that goes to the root of the contract so as to evince an intention no longer to be bound by it. In the case of a partnership, a denial that the other party is a partner at all (as in Greenham v Gray) or an unjustified but de facto termination of the relationship (as in Hurst v Bryk and Mullins v Laughton) are fairly clear cases of repudiation, but beyond that the position is more arguable.

Mr Salis draws an analogy with the contract of employment where it is well established that there is an implied term that the employer will not without reasonable and proper cause conduct himself in a manner calculated or likely to destroy or seriously damage the relationship of trust and confidence between employer and employee; that breach of the implied term will amount to a repudiation of the contract; and that under what has come to be called the “last straw” doctrine, a relatively minor act may be sufficient to entitle the employee to resign and leave his employment if it is the last straw in a series of incidents which have cumulatively undermined the relationship and which taken together amount to a repudiatory breach of the implied term of trust and confidence: see Lewis v Motorworld Garages [1986] ICR 157, Omilaju v Waltham Forest LBC [2004] EWCA Civ 1493, [2005] ICR 481 at [14]-[15],

Miss Eilledge submitted that one should be wary of the analogy. The relationship of employer and employee (where the employee is obliged to follow the reasonable instructions of the employer) is inherently different from that of partners where one can expect partners to be reasonably robust in their dealings with each other. An employer is in a position to “squeeze out” an employee by making his position so uncomfortable he resigns (see Omilaju at [19]); although this might be potentially possible in a partnership, one should be slow to find it was the case.

In my judgment the analogy with the implied term of trust and confidence is a useful one. The relationship of partners requires mutual trust and confidence just as much as, if not more than, the relationship of employer and employee. I bear in mind Miss Eilledge’s point that an employment relationship is an inherently unequal one in which the employer is in an inevitable position of dominance over the employee, and where the implied term is as much as anything a technique by which the law controls abuse of that dominant position, whereas the relationship of partners in principle is an equal one. But each partner is to a considerable extent in the hands of his fellow- partners and if as a matter of fact one partner so conducts himself as to undermine without reasonable and proper cause the mutual trust and confidence that should subsist between partners, I see no reason why that should not be classed as repudiatory conduct. Indeed in Hurst v Bryk Lord Millett referred to the statutory ground of dissolution in s. 35(d) of the Partnership Act 1890 which applies when a partner other than a partner suing

“wilfully or persistently commits a breach of the partnership agreement, or otherwise so conducts himself in matters relating to the partnership business that it is not reasonably practicable for the other partner or partners to carry on the business in partnership with him”

and commented:

“It is difficult to envisage a case in which conduct of this description would not constitute a repudiatory breach of conduct which the party suing could accept by bringing proceedings.”

I consider I am therefore justified in applying the language of s. 35(d) of the Act as a good working test as to whether a partner’s conduct is repudiatory on the basis that it undermines the mutual trust and confidence that should subsist between partners. I also accept that for these purposes there is no reason why the “last straw” doctrine should not apply in the sense that in assessing whether a partner’s conduct falls within s. 35(d), the Court can have regard to conduct over an extended period, even if the most recent conduct taken by itself would not be regarded as sufficient.

The first of the matters relied on by Mr Golstein, in sub-paragraph (a), is that Mr Bishop instructed B&G’s accountants not to provide Mr Golstein with the draft accounts for the year ended 31 December 2008 and not to prepare the accounts in accordance with the Heads of Agreement.

So far as the first part of this is concerned the usual course of events (according to Mr Bishop’s evidence) was for Richard Anthony & Co to visit the practice in November or December to get all the information to prepare accounts for the previous year; they would then be discussed during January with a view to calculating the tax due at the end of January. This procedure was followed in the case of the 2007 accounts: on 4 August 2008 Mr Levy of Richard Anthony & Co wrote to Mr Golstein saying that they would be preparing the Colin Bishop & Co accounts for the year ended 31 December 2007 in the next couple of months and he would then sit down with the two partners to consider the journal entries that needed to be created to reflect their agreement; the 2007 draft accounts were ready by 16 January 2009; and Mr Levy met the partners on 22 January 2009 to discuss them and to advise them of the tax payable at the end of January.

Mr Golstein was not happy with the way the 2007 draft accounts had been drawn up, and wrote to him with a number of queries. On 4 March 2009 he wrote to Mr Levy saying he looked forward to seeing him shortly to discuss the accounts; Mr Levy replied on 10 March saying he hoped to arrange a meeting with him and Mr Bishop within the next week or so. On 22 July Mr Golstein wrote again to Mr Levy, saying that he understood that they were shortly seeing him, and on 19 August Mr Levy replied to Mr Golstein saying that they were completing the accounts of the practice, that they hoped to be able to see him and Mr Bishop in early September and that he would prefer to deal with all the other queries when he met with them to discuss the 2008 draft. On 7 September Mr Levy e-mailed Mr Golstein to say that he hoped to arrange a meeting for the next week and once he had received joint instructions, they could amend the 2007 accounts and finalise the 2008 accounts.

No meeting however had taken place by 30 September when Mr Golstein wrote his long letter to Mr Bishop, in which he said among other things that he thought it was imperative that they meet with Mr Levy the week after Mr Bishop returned from vacation. On 12 October 2009 Mr Levy e-mailed Mr Golstein to say that they were restating accounts and would get them over to him in draft form; but they were not sent. Mr Golstein’s evidence is that Richard Anthony & Co told him that they had been instructed by Mr Bishop not to prepare them, which Mr Bishop confirmed at a meeting on 28 October 2009. What Mr Golstein said in a letter of 4 November 2009 to Mr Bishop was:

“As I understand the 2008 accounts have been prepared and the 2007 have been revised, could you please instruct the accountants to immediately let me have same so that I could consider them as you told me that you have told them not to forward the drafts on to me.

I am a partner and I am entitled to know the firm’s financial position and your comment that the accounts are not necessary until we have resolved our differences is unhelpful.”

By the end of November Mr Golstein had instructed Healys who among other things repeated the complaint that Mr Bishop had told Richard Anthony & Co not to provide Mr Golstein with draft accounts. Mr Bishop’s response was that Mr Golstein had never accounted to B&G for fees received between 1 October 2007 and 10 February 2008 and the accountants would need this information to adjust the draft accounts for 2007 and 2008, so it was pointless for him to ask to see draft accounts for either year until the information had been supplied.

Thereafter the parties agreed to a mediation; it was also agreed that draft accounts were needed for that purpose and a second draft of the 2007 accounts and a draft of the 2008 accounts were provided by Richard Anthony & Co to Mr Bishop on 1 February 2010, and a copy forwarded by him to Mr Golstein on 2 February 2010.

On this evidence I accept that Mr Bishop did tell Richard Anthony & Co in September or October 2009 not to forward draft 2008 accounts to Mr Golstein. I consider it probable that he did so because by then he had come to the view that if Mr Golstein was right about what he was entitled to under the Heads of Agreement, it produced a wholly unfair result (“unfair, unreasonable or unrealistic” was the phrase he used in an e-mail of 5 November); and that there was no point in drawing up accounts until the partners had seen if they could agree something fair reasonable and realistic. His view was that matters such as this were not matters to be discussed with the accountants but for the partners themselves to discuss and agree on.

I also find that it was a breach of the partnership agreement. The Heads of Agreement expressly provided that the parties would act in utmost good faith to each other. The precise content of this obligation is no doubt elusive but I consider that it must include an obligation to co-operate in identifying what is actually due to each partner, and for this purpose to co-operate in the drawing up of accounts. The production of draft accounts, which can then be discussed by the partners, is a normal part of this process; the partners will either then be able to agree the accounts (and hence what is due to and from each partner) or at least identify what are the areas of dispute. Obstructing this process, as I find Mr Bishop did, is in my judgment a breach of the obligation. The fact that he wished to negotiate before the accounts were drawn up was not a justification; there is considerable force in Mr Golstein’s position which is that until one knew what the draft accounts showed it was not possible to have a meaningful negotiation in any event. I am also satisfied that Mr Bishop prevented the holding of a meeting between the partners and Richard Anthony & Co. I have referred to the correspondence above from which it is clear that Mr Golstein was anxious to have a meeting and Mr Levy was perfectly willing to arrange one, but no meeting was in fact held until April 2010 after the failed mediation. I draw the inference that it was not held because Mr Bishop was unwilling for there to be one.

By itself, I do not regard such a breach as repudiatory. I doubt if obstructiveness in having accounts drawn up satisfies the requirement of evincing an intention no longer to be bound by the contract; in any event the draft accounts were provided at the beginning of February 2010, some 5 months before the partnership came to an end. It is however part of the overall conduct of Mr Bishop.

The second part of sub-paragraph (a) is to the effect that Mr Bishop instructed Richard Anthony & Co not to prepare accounts in accordance with the Heads of Agreement. It is not clear precisely what is relied on under this head. Mr Golstein did undoubtedly take the view that the first draft of the 2007 accounts which he received in January 2009 was not in accordance with Heads of Agreement. Among other things they were drawn up for the year to 31 December 2007 instead of for the 3 month period from 1 October 2007 to 31 December 2007; they did not include any payment in respect of Mr Golstein’s savings under clause 2.2(b) (although as I have said above I do not think Mr Golstein was entitled to any such payment until after he had relocated), or show his relocation costs under clause 4.1; Mr Golstein did not consider the treatment of fixtures and fittings was correct; and the balance sheet showed B&G to have net liabilities of over £200,000. This first draft of the 2007 accounts was no doubt based on the matters shown on the practice’s AlphaLaw accounting system; but save in respect of one point I heard no evidence to the effect that Mr Bishop gave instructions to Richard Anthony & Co as to how these accounts should be drawn up, let alone that in doing so they should depart from the Heads of Agreement.

The one point on which there is some relevant evidence is that Mr Golstein said that Mr Levy told him that the accounts had been prepared for the 12 month period as he was instructed to do so by Mr Bishop; this is supported by a note Mr Golstein wrote to Mr Bishop on 10 February 2009 to the effect that Mr Levy had told him the day before that he had initially prepared the 2007 accounts on a 9 month and a 3 month split, but that Mr Bishop had instructed him otherwise. Mr Bishop denied this in evidence; he said that at the meeting in January 2009 both partners queried why the accounts were prepared for the whole year, to which Mr Levy said that it didn’t really matter. Mr Golstein’s own evidence was that Mr Levy said at the meeting that adjustments would be made in future accounts. I have not heard from Mr Levy or anyone from Richard Anthony & Co, but I accept that Mr Bishop probably did say something to Mr Levy about the accounts being drawn up on a 12 month basis, although why and in what circumstances must remain unexplained. On the other hand I do not think Mr Levy would have done this unless he thought it an appropriate way to proceed, and the evidence from both partners about the January meeting was to the effect that Mr Levy did not think it really mattered and necessary adjustments could be made later. A letter of 1 April 2010 from Mr Horesh, the audit partner of Richard Anthony & Co, said that although Mr Golstein referred to a new partnership, the books did not reflect that at the time, which may explain why the accounts were drawn up as a continuation of the Colin Bishop accounts. I do not regard this as being a repudiatory breach of contract by Mr Bishop.

So far as the other respects in which Mr Golstein took issue with the first draft of the 2007 accounts are concerned, I do not find that Mr Bishop was responsible for them, or gave instructions to that effect. Mr Golstein has formed a very unfavourable view of Richard Anthony & Co, believing them to have taken Mr Bishop’s side and to have simply acted on his instructions, describing them in evidence as “tame accountants”. This is not I think a fair conclusion to draw. The role of partnership accountants is no doubt to draw up accounts which give a true and fair view of the financial position of the partnership. Where there is a dispute between the partners as to their respective entitlements, I do not think it is the role of the accountants to be drawn into a debate as to who is right, let alone to adjudicate on the issue: this is a matter for the partners to agree on or in default of agreement for a Court to rule on. Richard Anthony & Co did produce various other drafts, namely a second draft of the 2007 accounts and a first draft of the 2008 accounts on 1 February 2010; and revised drafts which were sent on 4 March 2010. In all, 4 drafts of the 2007 accounts and 2 drafts of the 2008 accounts appear to have been produced although it is not possible to date them all securely. In revising the drafts Richard Anthony & Co sought to reflect various points made by Healys on behalf of Mr Golstein. Indeed it appears from a letter of 4 March 2010 that they sent Healys a draft profit and loss account for the 3 month period from October to December 2007, which was one of Mr Golstein’s main requests, although Mr Golstein appeared to have forgotten this by the trial and it seemed to come as a surprise to him when Mr Bishop produced a copy. It is fair to add however that it is not a complete set of accounts but merely a statement of income and expenditure over that period.

I find that Richard Anthony & Co were trying to assist the parties by reflecting what they understood to be agreed, and were not acting simply on the instructions of Mr Bishop; and save for the one respect mentioned above I do not find that Mr Bishop instructed them to draw up accounts otherwise than in accordance with the Heads of Agreement.

Sub-paragraph (b) is to the effect that Mr Bishop failed to render true accounts and full information of everything affecting the partnership contrary to section 28 of the Partnership Act 1890. Mr Salis in closing said that this overlapped with the previous head and again it is not clear precisely what is relied on, although various matters were touched on in the evidence.

One was a complaint by Mr Golstein that Mr Bishop drew during 2008 more than the £10,000 per month specified in clause 8.1 of the Heads of Agreement, the management accounts for 2008 showing his drawings as some £141,000. Mr Bishop’s response was that the payments over and above the £10,000 per month were monies due to him for work in progress as at the merger date, payable under clause 6 of the Heads of Agreement. I am not in a position to determine whether such monies were properly due to Mr Bishop or not as that would require an investigation into each file where payment was received. Mr Salis pointed out that Mr Bishop had accepted in evidence that there had been no discussions about apportionment with Mr Golstein and submitted that he had paid himself without properly apportioning and properly accounting for the monies. Again I do not have the material to form any view on that, although it seems to me that clause 6 does not envisage that the apportionment of work in progress was something that had to be discussed and agreed beforehand: instead it envisages that there would be a discussion “at the end of the first accounting year for the New Firm”. The natural meaning of this in my judgment is the end of the first full accounting year for B&G, namely 31 December 2008, not the end of the first accounting period on 31 December 2007 which was only a three- month period.

Another matter raised in evidence was a series of queries which Mr Golstein had on the expenditure shown in the accounts. By way only of example, he queried an item appearing on the draft 2008 profit and loss account of £7,258 for repairs and renewals. He first took this up with Mrs Warner on 22 July 2009, the figure appearing on the profit and loss account for 2008 produced by the AlphaLaw system; he does not appear to have had a response as it was one of the matters raised by Healys with Richard Anthony & Co on 10 February 2010 to which an answer was given on 4 March 2010.

A third matter referred to by Mr Golstein was that the firm had a second office account, labelled the office tax account. He only discovered this in March 2010, and complains that he should have been told about it beforehand. On the other hand there is not I think any suggestion that Mr Bishop was concealing the existence of this account or not properly accounting for it: he refers to it in a letter to Mr Levy on 28 November 2007, and Mr Horesh said in a letter of 1 April 2010 that movements from that account had been reflected in the accounts. Mr Golstein may not have been aware of it, but this is not the same thing as saying that Mr Bishop was not rendering a true account or full information. It is a little surprising that Mr Bishop did not sit Mr Golstein down when he first joined and explain what the partnership accounts consisted of; but equally I have no evidence that Mr Golstein made any attempt to discover what partnership accounts there were and in general he seems to have left the accounting side of the firm entirely to Mrs Warner and Mr Bishop.

I do not find that any breach has been made out under this head. A failure to render a true account is I think directed at the sort of case where a partner misrepresents the true position; I do not find that this is the case in relation to any of the matters I have referred to. Whether monies were properly due to Mr Bishop for work in progress or whether expenditure shown in the accounts was properly chargeable to the firm are not matters that I can determine. Nor has there been in my judgment any failure by Mr Bishop to render full information to Mr Golstein; the most that can be said is that he did not volunteer the existence of the office tax account, but I have seen no evidence that he took steps to conceal it, or deny its existence. Detailed queries on the entries in the accounts were I think rightly matters for Mrs Warner to answer as she kept the books, rather than for Mr Bishop.

Sub-paragraph (c) refers to Mr Bishop asserting at a meeting on 28 October 2009 that the Heads of Agreement were not binding on him. There is no dispute either that he did say this, or that it has been withdrawn: in a letter of 24 January 2010 he confirmed in terms that the Heads of Agreement were and are binding. His initial statement, which he explained as having been given in the heat of the moment, was at a time when he was very unhappy with what he saw as Mr Golstein’s unreasonable stance over his entitlement. It was no doubt a repudiation of the contract, but it was withdrawn before being acted on in any way and Mr Salis does not suggest that it has any consequences save as part of the background that can be taken into account under the last straw doctrine.

Sub-paragraph (d) refers to Mr Bishop having purported to terminate the lease of Shakespeare House. The facts are as follows. It appears that the lease (which I have not seen) was for a fixed term which was due to expire on 30 November 2009. Shortly before then a Mr Doran, a representative of the landlord, Service Hotels Ltd, visited Mr Bishop and asked what his proposals were. This led to a letter from Mr Bishop to Mr Doran of 23 November 2009 in which he said:

“It is not my intention to renew the Lease. However the premises are currently occupied by two sub-tenants and Mr Golstein, my partner, wishes to continue in occupation. I will probably also have to do so while I sort out my position with Mr Golstein and the practice itself.

However, my purpose in writing is to ensure that my liability under the Lease expires and terminates on Monday 30 November next.”

He then suggested that Mr Doran contact Mr Golstein with regard to his future occupation.

Mr Golstein then instructed Healys who wrote the next day complaining among other things about the termination of the lease, followed by an e-mail on 26 November asking what was to happen to B&G’s occupation. Mr Bishop’s response was that

“Nothing is to happen to B&G’s occupation. As from 30 November the Lease will no longer exist but we will have a statutory continuation under the 1954 Act, so occupation is secure. The Landlord is fully aware of the position and there is no threat of having to leave next week.”

There matters rested. So far as the evidence before me goes, B&G remained in occupation, the rent continued to be paid and the landlord continued to accept it. Assuming that the lease was indeed protected by Part II of the Landlord and Tenant Act 1954 (and the contrary has not been suggested) it would seem right that the firm’s occupation was secure, as a tenancy of premises occupied for the purposes of the tenant’s business does not terminate until brought to an end in accordance with the Act, and Mr Bishop’s letter was not (and did not purport to be) a statutory notice. He was technically wrong in saying that the lease would cease to exist, as the protection given by the 1954 Act is to continue the lease past its expiry date, but he was correct in saying that there was no effect on the right to occupy.

Mr Bishop’s letter has to be read in this light. It does not purport to terminate the lease at all; in it Mr Bishop recognises that the fixed term of the lease will come to an end on 30 November and declines to seek a renewal. But I think it recognises that the firm’s occupation would continue: this is why he refers to Mr Golstein remaining in occupation and he himself doing so while he sorted out his own position with Mr Golstein. The purpose of the letter was not to jeopardise the continued occupation of the premises but was an attempt to limit his own personal liability (an attempt that was no doubt ineffective as the continuation of the lease would in fact continue Mr Bishop’s liability as tenant).

Miss Eilledge in closing was willing to accept that this was conduct evincing an intention to bring the partnership to an end. I do not however see it quite like that: I read it as a letter written at a time when Mr Bishop thought that the partnership would inevitably come to an end but that this was something that he still had to sort out with Mr Golstein. In an undated e-mail in response to one from Healys of 26 November he said:

“Clearly the partnership needs to be brought to an end but only in a proper, dignified, professional and negotiated manner”

and in a letter of 30 November to Healys, Mr Bishop stated in terms:

“I have no intention of dissolving the Practice unilaterally.”

Thus although Mr Bishop had on 6 November written in an e-mail to Mr Golstein “unless you see sense very quickly I will be off at the end of this month when my lease ends”, I do not read the letter of 23 November as an attempt to bring the partnership to an end, or as evincing an intention to do so. Rather it evinced a recognition that an end to the partnership was probably inevitable, but would need to be sorted out.

On the other hand I do not think it was appropriate for Mr Bishop to write this letter unilaterally without consulting Mr Golstein. Although the lease was presumably in his name, it was a partnership asset (and partnership liability) and both partners had a right to participate in decisions as to how it should be dealt with.

I therefore find that Mr Bishop’s action in writing the letter unilaterally was a breach of the provision in the first clause 17.1 of the Heads of Agreement that the parties should equally manage the firm with equal rights. Again it was not in my judgment by itself a repudiation of the partnership, but it was symptomatic of an attitude that Mr Bishop had that he need not consult Mr Golstein on matters pertaining to the partnership.

Sub-paragraph (e) refers to Mr Bishop since around November 2009 ignoring Mr Golstein and refusing to discuss matters with him. It refers in particular to an e-mail of 10 December 2009 in which, in response to Mr Golstein’s request as to whether a new computer base should be bought, he said “I am no longer dealing with management.” This rather petulant response was at a time when relations between the parties had completely broken down, and Healys had been instructed. I am satisfied that at that date Mr Bishop had stopped communicating with Mr Golstein entirely on partnership matters save for the correspondence being conducted with Healys.

Sub-paragraph (f) refers to Mr Bishop failing to permit joint management of B&G by excluding Mr Golstein. Mr Golstein complains that Mr Bishop in practice made all the decisions, continuing in effect to run the practice just as he had before and treating Mr Golstein as a salaried partner rather than a partner with an equal say in decisions.

I have already referred to one example, which is how Mr Bishop dealt with the lease of Shakespeare House unilaterally. Other examples given by Mr Golstein include an incident in early 2008 when Mr Golstein suggested that the firm should carry out more searches for residential conveyancing clients than just local searches, which Mr Bishop brushed off dismissively, saying that he did not care what the Conveyancing Handbook said; and, in particular, decisions taken in relation to staff. Two specific cases relied on by Mr Golstein were those of Uchi Chawda and Gavin Farrell. Miss Chawda was a licensed conveyancer. Mr Golstein said that the recession had particularly affected the conveyancing side and that by the end of 2008 it was quite bad. He and Mr Bishop had agreed that Miss Chawda should be put on half-time or released in early 2009. However Mr Bishop, without further reference to Mr Golstein, changed his mind and decided she should be kept on. I accept this evidence which was not challenged. Mr Farrell was a junior clerk. Mr Golstein hoped to train him up to assist with litigation. Mr Bishop however thought that he was taking liberties, often being away on Mondays or Fridays, and decided to dismiss him. He told Mr Golstein he was going to do it, and then, despite Mr Golstein wishing to keep Mr Farrell on, went ahead, presenting him with a fait accompli, saying “I’ve sacked Gavin”. Mr Bishop said he thought that it had been mutually agreed, but on this I prefer Mr Golstein’s evidence. Mr Golstein also said that he was never consulted on staff increases or bonuses.

I find that Mr Bishop did indeed make unilateral decisions in relation to management without reference to Mr Golstein, and carried on making decisions in relation to the practice very much as he had done before the merger. I also find that this was a breach of (the first) clause 17.1 of the Heads of Agreement. It is true that the matters complained of are not among those which are specifically said to require joint agreement (in clause 17.5), so that in the end if the partners disagreed the Heads of Agreement do not specify how decision was to be reached, but it is implicit in the requirement for equal management that the partners should at least discuss and try to agree matters rather than take unilateral decisions.

Sub-paragraph (g) refers to two matters. One is Mr Bishop instructing or encouraging members of staff to act contrary to Mr Golstein’s instructions, and telling members of staff that he would not assist or co-operate in any way with Mr Golstein. The other is Mr Bishop refusing to take any action in respect of his nephew Jonathan Bishop.

So far as the first part of this is concerned, Mr Bishop accepted that Mr Golstein’s relationship with the staff got noticeably worse in the last 6 months or so, although he said that he did not personally witness the staff being rude or unco-operative to Mr Golstein. I find that they were: particular examples include (i) Linda Stewart, Mr Golstein’s own secretary, who refused to photocopy some files for Mr Golstein, throwing them on the floor and telling him to “stick them up your arse”; (ii) Lorraine Dunleavy, another secretary, who in April 2010 refused to help Mr Golstein and told him he would soon be gone; and (iii) Jonathan Bishop, employed as a clerk and to provide technical support, who was repeatedly rude to Mr Golstein. Mr Bishop’s explanation was that he did not encourage the staff to behave like this, but that he had noticed the atmosphere in the office deteriorate after Healys had sent letters to his e- mail inbox, to which members of the staff had access, with the result that the dispute between him and Mr Golstein had become common knowledge.

There is no evidence that Mr Bishop took any active steps to instruct or encourage the staff to behave in this way; but I find that he did nothing to prevent it, or rebuke the staff involved, regarding it as Mr Golstein’s problem not his. In addition I accept that on one occasion (after Healys had become involved) he told Miss Stewart in front of other staff that he would not do anything to assist Mr Golstein or his clients. None of this can have assisted Mr Golstein’s standing in the firm, or was conducive to a continuation of the partnership; and I accept that the natural effect of Mr Bishop being disrespectful to Mr Golstein in front of the staff was that they too would treat him without respect.

So far as Jonathan Bishop is concerned, the complaint is that Mr Bishop refused to discipline him. Mr Golstein’s evidence was that almost from the start Jonathan Bishop was rude and unhelpful to him. One well-documented instance was on 15 December 2009, when Mr Golstein asked Jonathan Bishop for some help with his computer. Jonathan Bishop refused, said he would do nothing to help him, swore at him and said he would soon be gone. On 17 December 2009 Healys wrote requiring Mr Bishop to issue a formal written warning to Jonathan Bishop. There is no evidence before me of any response. Mr Golstein said that when on other occasions he asked Mr Bishop to reprimand Jonathan, Mr Bishop told him there was no point and that Jonathan was rude to him too, and that Mr Bishop shrugged it off with a “c’est la vie” attitude. One matter which was of particular concern to Mr Golstein was that someone left a drawing pin on his chair on three occasions (on the third of which he sat on the pin); he strongly suspected Jonathan and asked Mr Bishop to do something about it, but nothing was done.

Mr Bishop in evidence said that he accepted that Jonathan was difficult to Mr Golstein; he said that Mr Golstein was unable to operate his computer and Jonathan was upset constantly being asked to resolve problems which weren’t really problems. He regarded this as not a matter for him, but for Mr Golstein to sort out with Jonathan. He also accepted that Jonathan was rude; that by December 2009 (after the dispute between him and Mr Golstein) he had been abusive; and that the drawing pin incident was serious and should never have happened: he had told Jonathan off in case it was him, but Jonathan had denied that it was.

I find that Mr Bishop was well aware that there was a problem from quite early on between Mr Golstein and Jonathan but did little if anything about it; and that in December 2009 he did not react as one would expect to a case of serious indiscipline. Again I regard this as contributing to the undermining of Mr Golstein’s position in the firm.

Sub-paragraph (h) refers to two matters. The first is to the e-mail of 6 November 2009 (see paragraph 151 above) where Mr Bishop said he would be off at the end of the month. Mr Golstein found this threat to quit the partnership alarming as he was concerned that if he carried on in practice he would be classed as a “successor practice” for insurance purposes which would mean that he would inherit responsibility for B&G’s liabilities, whereas if both parties stopped practice, it would be necessary for the firm to buy run-off insurance which threatened to be very expensive. Although the Heads of Agreement provided (by the second clause 17.4) that the cost of this would be shared in the ratios of the professional indemnity policies of the predecessor practices (which would mean Mr Bishop would bear the majority of the cost) Mr Golstein feared that if Mr Bishop just took off, he would be left to bear the cost himself. Miss Eilledge accepted that this threat did evince an intention not to continue with the relationship and I agree that it was unjustifiable and repudiatory in character. It was not persisted in, and no immediate consequences flowed from it, but again it is part of the background.

Second, sub-paragraph (h) refers to Mr Bishop’s service on 29 March 2010 of a notice purporting to terminate the partnership. Mr Bishop did so under a particular clause of the Heads of Agreement (clause 19.5, which it is not necessary to set out), which he contended conferred a free-standing right to terminate the partnership. His letter said that he had received advice to that effect, and I heard no evidence which suggested that this was anything other than a bona fide attempt to invoke a contractual right to terminate. I do not think that this can be characterised as repudiatory: it is well established that a party to a contract does not repudiate it if he seeks to bring it to an end by relying on a right given by the contract, even if he turns out to be wrong in his view of what the contract provides. This principle was applied to a case of a purported termination of a partnership by the Court of Appeal in Hitchman v Crouch Butler Savage Associates, relying on the well-known decision in Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] 1 WLR 277. I see no justification for taking a different view here.

Sub-paragraph (i) refers to Mr Bishop failing to maintain proper accounting procedures, thereby leading to the SRA investigation. I accept that the facts are as the SRA found them to be. It is not clear to me however what term of the agreement Mr Bishop is thereby said to have broken. None of the express terms deals with compliance with the Solicitors’ Accounts Rules, and although I can see that it is arguable that a term to that effect should be implied, no such implication is pleaded. I do not regard the accounting irregularities, which I accept were not intentional, as a breach of the duty of good faith. Nor do I think they were repudiatory in character; Mr Golstein was understandably upset at being reprimanded by the SRA for matters for which he bore no direct responsibility after an unblemished record of many years, but I do not see Mr Bishop’s inadvertent failure to operate the accounts in all respects in accordance with the rules as evincing any intention in relation to the partnership at all.

Sub-paragraph (j) refers to the failure of Mr Bishop to pay Mr Golstein any of his guaranteed salary for April 2010. The facts are that neither Mr Golstein nor his wife received any payment for April 2010. On 29 April 2010 Mrs Warner told Mr Golstein that the reason was that B&G’s office account was £22,000 overdrawn, that is £2,000 over its overdraft limit. Mr Golstein took this up with Mr Bishop, who confirmed that this was the case. Healys wrote to Mr Bishop on 30 April 2010 asking for copies of bank statements and a confirmation that Mr Golstein would be paid when B&G was in funds. Mr Bishop’s response on 4 May 2010 was that Mr Golstein could provide bank statements as he had full access to them. Mr Golstein in due course did receive the full amount, in two parts. First, he suggested to Mr Bishop that he withdraw £5,000 on account of his salary from money paid on account of costs in a case called Bradley v The Windsor House Group (referred to in more detail below) in the confident expectation that the costs due to him would exceed £5,000, to which Mr Bishop said he could do what he liked as it was his money. This £5,000 was paid on 14 May 2010. The balance of the monthly amount due to Mr Golstein was subsequently paid, later in May 2010.

The pleading is that Mr Bishop failed to pay Mr Golstein “on the pretext” that the account was overdrawn. If this is intended to be understood as an allegation that the statement that there was no money available was a pretence, I reject it. I have not seen the relevant bank statements and have no evidence as to whether there was in fact money in the office account to meet Mr Golstein’s drawings. It seems to me I must proceed on the assumption that what Mrs Warner said was true. On this basis it is not obvious that Mr Golstein was entitled to draw money that the firm did not have. Mr Golstein’s real complaint may be that Mr Bishop drew money for himself leaving none to pay Mr Golstein, but this is not the complaint that has been pleaded or addressed in evidence. Mr Golstein also no doubt had a right to claim any shortfall of salary from Mr Bishop personally under clause 2.3.2 of the Heads of Agreement but so far as appears from the evidence before me he did not then invoke this clause and Healys’ letter is inconsistent with his having done so. In the circumstances I do not regard the failure to pay Mr Golstein promptly as repudiatory. As Miss Eilledge submitted, Mr Golstein was a partner with his own right to draw monies on the partnership bank account, not an employee dependent for his salary on payment by an employer.

Sub-paragraph (k) refers to Mr Bishop’s failure to discipline his nephew Jonathan Bishop. It largely duplicates sub-paragraph (g), and I have dealt with the complaint above.

Sub-paragraph (1) refers to Mr Bishop’s failure to discipline Linda Stewart after the incident referred to above (paragraph 159). Since Mr Golstein’s own reaction to this incident was that he had been going to write to her but she then apologised and he accepted her apology, I do not think it was incumbent on Mr Bishop to do anything more.

Sub-paragraph (m) refers to Mr Bishop continuing to act for a Mr Steve Lok, despite Mr Golstein warning him not to, and Mr Bishop agreeing not to. The facts are as follows. Mr Lok was an established client of Mr Bishop at the time of the merger. In January 2008 Mr Bishop went on holiday and engaged a locum, Mr Paul Tobias. Mr Tobias was an experienced solicitor and expressed concern to Mr Golstein that Mr Lok appeared to be making substantial profits on selling property after only a short period of ownership, the purchasers often using the same solicitors. Mr Golstein suggested that Mr Tobias write a note for Mr Bishop, which he did, saying that he was a little concerned at the Lok matters, the volume and extent of the mark up had grown dramatically, he found it difficult to put an explicable interpretation on those deals and he was afraid that the firm might be exposed. Mr Golstein later spoke to Mr Bishop. Mr Golstein’s evidence is that Mr Bishop agreed not to act for Mr Lok as he was more bother than he was worth. Mr Bishop denied agreeing this, but it is supported by a contemporary note and I accept Mr Golstein’s evidence. Mr Bishop in fact did continue to act for Mr Lok. His explanation was that he had contacted the Law Society’s ethics department and had been advised that he should write to the purchaser’s solicitors to the effect that if their client was obtaining a loan on mortgage they should ensure that the lender was aware of the circumstances, which he thereafter did every time. He said he did not recall if he told Mr Golstein about it; I find that he did not, and that Mr Golstein only discovered by chance that Mr Bishop was still acting for him. I should make it clear that I have not heard from Mr Lok or seen any details of the transactions to which Mr Tobias was referring, and I make no finding as to whether there was any impropriety in fact involved, but I accept that there was legitimate cause for concern.

On my findings however Mr Bishop agreed with Mr Golstein, because of these concerns, not to act for Mr Lok, but thereafter in fact did so without telling Mr Golstein that he was going to do so, let alone attempting to reach agreement with him. I consider that this was a breach of the duty of good faith: a decision to act for Mr Lok was a matter that concerned the firm and hence Mr Golstein, and should have been discussed between the partners. By itself again this is not repudiatory, but it is another instance of Mr Bishop acting unilaterally without consulting Mr Golstein on a matter which concerned him.

Sub-paragraph (n) refers to a statement in a letter of 4 May 2010 from Mr Bishop to Healys to the effect that a dissolution must take place, thereby demonstrating an unwillingness to remain in partnership with Mr Golstein. What Mr Bishop actually said in the letter is

“As far as I am concerned my notice under clause 19.5 is effective and a dissolution must now take place.”

This is clearly based on the supposed validity of Mr Bishop’s notice under clause 19.5. I have already held that the service of the notice was not repudiatory (paragraph 165 above), and the same must be true of this statement.

Sub-paragraph (o) refers to a statement by Mr Bishop that he would do nothing for Mr Golstein or his clients. Mr Golstein accepted in cross-examination that this was the same incident as pleaded at sub-paragraph (g) which I have already dealt with above (paragraph 160).

That completes the pleaded allegations which are relied on as a repudiation of the contract by Mr Bishop. With the exception of Mr Bishop’s statement in October 2009 that he did not regard the Heads of Agreement as binding, and his threat in November 2009 to be off at the end of the month, neither of which was in fact acted upon, I have not found the individual matters relied on to constitute a clear and specific repudiation of the contract. But in accordance with the view of the law I have expressed above, I consider that I should also have regard to the whole course of conduct to see whether its cumulative effect is such as to satisfy the test in s. 35(d) of the Partnership Act 1890, namely whether Mr Bishop

“wilfully or persistently commit[ted] a breach of the partnership agreement, or otherwise so conducted] himself in matters relating to the partnership business that it [was] not reasonably practicable for [Mr Golstein] to carry on the business in partnership with him.”

In my judgment Mr Bishop’s conduct does satisfy this test. I have detailed the matters above and do not need to repeat them all, but Mr Bishop’s persistent obstructiveness in co-operating in having accounts drawn up and agreed; his ignoring of Mr Golstein in making unilateral decisions in relation to the partnership premises, the staff, and other matters; and his undermining of Mr Golstein’s position in the firm in my judgment cumulatively meant that it was not reasonably practicable for Mr Golstein to carry on practice in partnership with him. I accept Mr Salis’s submission that his position had become intolerable and that by June 2010 he was at the end of his tether. Miss Eilledge submitted that for the last straw doctrine to apply there had to be some triggering event which constituted the final straw, and on the facts there was none here. However it seems to me that Mr Salis is right when he says that where conduct is continuing, it may not be necessary to identify a specific act which constitutes the trigger. If an employer is squeezing out an employee, or a partner is conducting himself in such a way as to make it impracticable to carry on in business with him, this may well be enough even if it is not easy to point to a specific act.

If therefore this had been an application for dissolution under s. 35(d), I would have held that this ground had been made out; and if the doctrine of repudiation had applied to partnerships, I would have held that Mr Golstein had brought the partnership to an end by accepting a repudiatory breach by Mr Bishop. As it is however I answer Issue (xi) as I have indicated in paragraph 123 above.

Issue (xii) is in these terms:

“How much of such monies as may be found by the Court to be owed to [Mr Golstein] [are] payable by [Mr Bishop] personally as opposed to the partnership ?”

At first blush this issue is not entirely happily worded as once the accounts have been taken they will show a balance due one way or the other; and if there are monies due to Mr Golstein, he will no doubt be able to claim them from Mr Bishop personally. But the intention behind this issue is to determine the nature of Mr Bishop’s liability for Mr Golstein’s salary under clause 2.3.2.

There is no dispute that Mr Bishop is liable under this clause to pay for any shortfall in the salary. But the question is whether Mr Bishop is primarily liable for the salary, or whether he is only liable to make good any shortfall. Mr Salis accepts that if Mr Golstein has been paid his salary by way of drawings, he cannot claim the same amount over again from Mr Bishop, but he submitted that Mr Bishop was primarily liable for the whole sum, with the right to deduct or set off whatever had already been paid. Miss Eilledge by contrast said that one first had to assess what was due from the firm, and Mr Bishop was then only liable for the shortfall. It is not clear to me to what extent this is a live issue in practical terms: I have not been asked to assess precisely what Mr Golstein has already received, and this must await the taking of the accounts; I therefore do not think there is any question of entering judgment against Mr Bishop until that has been done. If there is then money remaining due from the firm, either it will be paid or it will not; if it is not, it does not seem to me to be disputed that Mr Bishop will be personally liable for whatever is not paid, whichever analysis is correct. But taking the issue on its merits, I prefer Miss Eilledge’s submission: clause 2.3.2 is not expressed as a guarantee or as a primary obligation but as an undertaking to indemnify, and the natural meaning of an obligation to indemnify is I think to make a payment to cover a loss. I therefore consider that Mr Bishop’s obligation is only to make good any shortfall in salary once any such shortfall has been identified.

Issue (xiiA) is in these terms:

“What, for the purposes of the Solicitors’ Accounts Rules 1998, was the status of the money paid to B&G by The Windsor House Group on account of costs in the case of Bradley v The Windsor House Group at the time [of] payment in ? Did its status change at any time, and if so, what was the basis of the change in status ? When District Judge Bedford ordered the repayment of the money on 10.01.11, upon whom did the liability to repay the money rest, what was the total extent of such liability, and upon what basis did such liability rest ? If [Mr Golstein] was not liable to repay any of these sums, is he entitled to an indemnity from [Mr Bishop] in respect of any claims arising out of any failure to repay this money ?”

This issue raises a discrete matter. The facts are as follows:

I start with the obvious point that neither Mrs Bradley, nor Windsor, nor Quinn, are parties to these proceedings and none of the claims which they may or may not have are matters which are before me or which I can adjudicate on. I can only determine whether Mr Golstein himself has any claim against Mr Bishop arising out of these circumstances.

In his particulars of claim Mr Golstein seeks relief under two alternative heads: (i) a declaration that he should not be held liable, whether to Mrs Bradley, Windsor or otherwise, for any losses suffered as a result of the failure by Mr Bishop to pay over the sum of £29,000 as directed by DJ Bedford; and (ii) in the alternative an order that Mr Bishop repay £29,000 to Mrs Bradley out of the assets of B&G which he controls.

Neither head of relief seems to me to be made out. As to the first, there are two problems with it. First, it proceeds on the basis that DJ Bedford directed Mr Bishop to pay over the monies. The only relevant orders that I have seen are his Order dated 18 January 2011, which ordered Mrs Bradley to repay monies to Windsor, and a subsequent Order dated 11 May 2011, which dismissed an application to vary that order or stay execution on it. Neither order is addressed to Mr Bishop or requires him to do anything. Mr Golstein’s evidence is that DJ Bedford stated when he gave judgment that he considered that the monies on account were held by whichever solicitor had them on trust for Windsor and should be paid over to them; I have no reason to doubt that this comment was made, but the issue was not before him, he did not hear from Mr Bishop, it seems very unlikely that he had any argument on the point, it is not mentioned in his judgment and it forms no part of his order. I consider it plain that it did not constitute an enforceable direction against Mr Bishop. The second problem with this head of relief is that it seeks a declaration that Mr Golstein is not liable for losses to Mrs Bradley or Windsor. I clearly cannot declare, in proceedings to which they are not parties, that he is not liable to them. That can only be determined in proceedings to which they are parties.

As to the second head of relief, I do not understand what locus Mr Golstein has to seek an order that Mr Bishop pay money to Mrs Bradley. If she has a claim against him that is a matter for her. Even if Mrs Bradley had an unanswerable claim against Mr Bishop, I do not see that Mr Golstein would be entitled to an order requiring him to pay her. As it is, Mr Golstein’s own oral evidence was variously that Mrs Bradley had been “effectively reimbursed” by Quinn, or that Quinn had reimbursed Windsor. In the absence of clear documentary evidence, I am left quite unclear precisely what has happened, but on this state of the evidence I certainly cannot conclude that there remains any claim by Mrs Bradley against Mr Bishop or anyone else.

In opening the case Mr Salis sought rather different relief from that which had been pleaded. Mr Golstein’s concern now is that Quinn may have a potential claim against him for the £29,000 odd which it is said that they have reimbursed. He seeks a declaration that he is not liable for any monies paid by Quinn and an indemnity from Mr Bishop against any such liability. (Quinn also has a claim against B&G for a £10,000 excess on the policy but it is not I think suggested - and if it is I see no basis for the suggestion - that Mr Golstein is entitled to an indemnity for that).

The difficulty I have with this claim is that there is no material before me to suggest that Quinn has asserted or intends to assert any such claim. Mr Golstein said in evidence that they had written reserving their rights to bring such a claim; but there is nothing in the documents I have seen to support this. It is not mentioned in Hill Dickinson’s e-mail of 26 March 2012, or in any of the other limited correspondence I have seen. This is in contrast with Hill Dickinson’s letter of 10 August 2011 in which they did reserve their rights to seek recovery from Mr Bishop.

Moreover, as Miss Eilledge correctly submitted, there is before the Court no document, no witness statement nor even any pleading explaining the basis on which Quinn settled the claims against B&G. It is simply impossible to tell whether Quinn might have any claim against Mr Golstein in respect of the £29,000 odd or not; what can be said is that no such claim has been advanced in the material before me. I do not think it appropriate to speculate on whether there might be such a claim or what it might be; nor do I think it appropriate to grant a declaration or indemnity in these circumstances.

I will therefore make no order in relation to this aspect of the case. That makes it strictly unnecessary to answer the particular points raised in Issue (xiiA), but I will give my views on them, subject to two caveats. First, as I have already mentioned, neither Mrs Bradley nor Windsor nor Quinn is a party to this litigation and any views I express cannot affect any rights they have. Second, I was not referred to any authorities on this aspect of the case and it did not receive detailed analysis in counsel’s submissions. My views are therefore reached without the benefit of extended argument. With those caveats they are as follows.

The essential question it seems to me is the first, namely what was the status of the monies when they were paid ? Mr Salis, echoing the reported comment of DJ Bedford, submitted that the monies were at all times trust monies, but did not explain in any detail why this should be so. In general a payment on account of a debt or other liability does not I think give rise to any trust. If A owes B £200 and pays B £50 on account, this is plainly intended as a part payment of A’s debt. When B receives the money it becomes his to do what he likes with, and A thereafter only owes the balance of £150. The same I think must apply if A owes B an uncertain amount and pays B £50 on account of what he owes. Here too the payment of £50 is intended as an immediate part payment of whatever A in fact owes and again becomes B’s money to do what he likes with when it is paid. If the debt is later quantified at £200, A will again only owe the balance of £150. It is not intended that B will keep the £50 separate until the debt has been quantified: the very notion of a payment on account is that it is intended as a payment to B. If the debt is later quantified at less than the payment on account, say £40, then it seems self-evident that A has a claim against B for the £10 overpaid. Whether this is properly analysed as a contractual claim based on an implied term in B’s acceptance of the payment as a payment on account, or as a restitutionary claim based on A’s mistake of fact that he owed at least £50, does not for present purposes matter. In such a case it is natural to speak of A having a claim to “repayment” of £10, but this is not a proprietary claim to have the same money repaid to him, but a personal claim against B. If the true analysis of the claim is restitutionary, it is possible that A may have a proprietary claim if he can identify the money paid over or its proceeds in B’s hands at the time that B becomes aware that he has been overpaid, on the basis that a constructive trust then attaches to the money (see the comments of Lord Browne-Wilkinson in Westdeutsche Landesbank v Islington LBC [1996] AC 669 at 715A-C where this point was left open); but this does not affect the fact that at the moment of payment the legal and equitable property in the money passes to B. Exactly the same must apply if it turns out that A owes nothing to B. A is entitled to repayment from B, but this is a personal claim; when A makes the payment to B on account, the money becomes B’s money for him to do what he likes with.

So much for the general position. The question is whether it is any different here. There are two aspects to this. One is the impact of the Solicitors’ Accounts Rules which are highly prescriptive and which I consider below. The other is that Windsor paid at least some of the money direct to B&G but was not itself liable to B&G (even assuming that the costs were assessed at a substantial figure): it was not a client of B&G and was neither contractually liable to pay B&G nor had been ordered to do so. The person contractually liable to pay was Mrs Bradley, and although I have not seen the consent order I assume it provided that Windsor should pay costs to her. I do not think this particular point makes any difference. If A owes money to B and B owes money to C and A pays C direct, this is no doubt a discharge to that extent both of A’s liability to B and B’s liability to C (this assumes B is content with the payment; A no doubt cannot discharge B’s liability against B’s wishes). If the payment is a payment on account, it is intended to be a payment to C and I see no reason why it does not become C’s money in the same way as in the two person case.

Leaving aside the impact of the Solicitors’ Accounts Rules, therefore the position I think would have been as follows. If Windsor paid money to B&G on account of the bill, it was intended as part payment of the bill and as such became B&G’s money to do what it liked with. It was not trust money, and did not need to be kept separate.

The question is whether the Solicitors’ Accounts Rules make any difference. The relevant version of the rules is the Solicitors’ Account Rules 1998 as they stood between 31 March 2009 and 5 October 2011 (when they were replaced by the 2011 Rules), and all references to the rules are to this version. The rules draw a distinction between “client money” and “office money”, the general idea being that client money is money which is held by the solicitor for a client, and office money is the solicitor’s own money. Under rule 19(1) when a solicitor receives money paid in full or part settlement of the solicitor’s bill, the solicitor must follow one of four options. He can either (a) determine its composition without delay and deal with it accordingly (paying office money into an office account and client money into a client account); or (b) if the money comprises only office money and/or client money in the form of professional disbursements incurred but not yet paid, pay the entire sum into an office account, in which case he must then pay any unpaid disbursement or transfer a sum for its payment to a client account within two working days; or (c) pay the entire amount into a client account, in which case he must transfer any office money out of the account in 14 days. (The other option concerns legal aid payments and is not relevant).

Rule 13 provides what is client money and what is office money. All money received in the course of practice is one or the other. The definition of client money includes not only money held or received for a client but “all other money which is not office money”. The definition of “office money” is “money which belongs to the solicitor or the practice.” The notes to rule 13 give examples of what is included in client money and office money. Note (i) provides that client money includes money received

“(b)

for payment of unpaid professional disbursements...

(d)

as a payment on account of costs generally.”

(Rule 2(2)(s) provides that professional disbursements include the fees of counsel, other lawyers and experts). Note (xi) provides that office money includes payments received in respect of

“(a)

fees due to the practice against a bill or written notification of costs incurred, which has been given or sent in accordance with rule 19(2)”

Rules 19(2) to (4) provide as follows:

“(2)

A solicitor who properly requires payment of his or her fees from money held for a client or trust in a client account must first give or send a bill of costs, or other written notification of the costs incurred, to the client or paying party.

(3)

Once the solicitor has complied with paragraph (2) above, the money earmarked for costs becomes office money and must be transferred out of the account within 14 days.

(4)

A payment on account of costs generally is client money, and must be held in a client account until the solicitor has complied with paragraph (2) above.”

The notes to rule 19 include:

“(ix)

“Properly” in rule 19(2) implies that the work has actually been done, whether at the end of the matter or at an interim stage, and that the solicitor is entitled to appropriate the money for costs.”

I can now state my conclusions. I will take first the payment of £32,500. The argument proceeded on the basis that this had been paid by Windsor to B&G, and the wording of Issue (xiiA) reflects this. In fact I think this is an oversimplification. Although the evidence is not as clear as it might be, it seems likely from the correspondence that what Irwin Mitchell sent to B&G in February 2010 was not North West Law’s cheque but a cheque drawn by Irwin Mitchell on their own account. If so, the correct analysis would appear to be that Windsor made a payment to Irwin Mitchell which they received on behalf of Mrs Bradley; and Irwin Mitchell then made a payment to B&G, again on behalf of Mrs Bradley. This means that when B&G received the £32,500 it was technically a payment by Mrs Bradley. Mrs Bradley had been B&G’s client and I will assume (without deciding) that she was still a “client” within the meaning of the rules, even though B&G had by then ceased acting for her. I will also assume that the effect of rules 19(2) to 19(4) is that where a solicitor receives money from a client in respect of costs, he cannot pay himself out of that money until he has complied with rule 19(2). This seems to me the intention behind those rules.

If this is right, B&G were only entitled to treat the £32,500 as a payment to them in respect of their costs if they could “properly” do so. Under note (ix) “properly” implies that the work has been done, which it had been; it also implies that the solicitor is entitled to appropriate the money for costs. It is not clear if this is intended to add anything to the requirement that a bill or other notification had been sent, but even assuming that it is, I consider that since the money had been expressly paid on account of costs, B&G was entitled to appropriate it for that purpose. I do not think that the fact the CFA was later held to be unenforceable with the result that nothing was in fact due, something unknown at the time to both Mr Golstein and Mrs Bradley, means that B&G were not entitled to appropriate the money to meet costs. Under rule 19(2) it is also necessary for the solicitor to send a bill of costs or other written notification of the costs incurred to the client or paying party. I will assume that even though it was Windsor who was ultimately paying, rule 19(2) required the bill or notification to have been sent to Mrs Bradley as technically she was the person liable to pay B&G. Mr Salis submitted that no bill had been sent to her (as opposed to Windsor) and rule 19(2) was therefore not satisfied. This does not seem to me to be right. Although the bill of costs is addressed to Windsor, it was lodged and served by Irwin Mitchell, who were acting for Mrs Bradley. There is therefore no doubt that they had received it. It seems to me that it amounted at the very least to a written notification to her of the costs incurred by her: indeed the whole basis of her claim against Windsor must have been that she was liable in that amount to B&G. It is true that the bill contained some items for unpaid professional disbursements, for example expert’s fees and the costs draftsman’s own fee, but the amount claimed for paid disbursements and Mr Golstein’s costs were considerably larger, and in the absence of any suggestion that an identifiable part was to be retained to meet unpaid disbursements, I think the intention was that the payment would be a payment to B&G, and was to be regarded as being paid first towards B&G’s own costs and paid disbursements.

In my view therefore, even assuming that the £32,500 was paid by Mrs Bradley rather than by Windsor, and that she remained a client for the purposes of the rules, and that it was necessary under rule 19(2) for there to be notification to her, the money was office money under rule 19(3) and either should have been paid into an office account in the first place under rule 19(1)(a) or transferred out of the client account within 14 days under rules 19(1)(c) and. 19(3).

That leaves the second payment of £3,750. This was paid direct by North West Law (on behalf of Windsor) to B&G as part payment of the bill of costs which had been lodged. As such it was in my view, in accordance with the general principles I have set out above, prima facie B&G’s money and hence office money. It is not at all clear to me that it was ever subject to rule 19(2): it went straight from Windsor to B&G and never became Mrs Bradley’s money, although it was used in partial discharge of her (assumed) liability to B&G. I do not think it was a “payment on account of costs generally” within rule 19(4), it was a part payment of the specific bill of costs which had been served on Windsor, even though the bill remained subject to assessment. But even assuming that it was subject to rule 19(2), for reasons already given that rule had in my judgment been complied with, and the money was therefore office money.

My answer to the first part of issue (xiiA) asking what the status of the money was at the time of payment in is therefore that it was office money and belonged to B&G. I may add that Mr Golstein at various stages has asserted that all the work was done by him while at Arbeid & Golstein and the money should not have been paid to B&G; but this seems to me to be wrong. The matter was ongoing at the time of the merger and under clause 6 of the Heads of Agreement was therefore brought into the New Firm, and it was B&G that should have billed for the work. It appears from the bill of costs that it did so, and that the bill included costs for work done after the merger. Once paid, B&G was then liable to account to Arbeid & Golstein for the value of the work in progress at the time of the merger, but this is a claim that Arbeid & Golstein had against B&G (which in the event turned out to have no value); it did not affect the fact that the client’s liability was to pay B&G, and the money when received was B&G’s money. In my judgment therefore Mr Bishop was right in saying that the money should have been paid into B&G’s office account.

The second part of Issue (xiiA) asks if the status of the money changed at any time. My answer is No. When in July 2010 Mr Golstein arranged for Mrs Bradley to ask Mr Bishop for the balance on her client account to be transferred to Wayne Leighton, I agree with Mr Bishop that he was entitled to refuse because at that stage it was B&G’s money and should have been transferred to office account not client account. (This was of course before the bill was assessed at nil). As I understood the evidence Mr Bishop then treated the money like any other B&G money and spent it on B&G liabilities; I do not have any details of that, but assuming it to be the case and that the liabilities were proper liabilities of the firm (and not his own), he was I think entitled to do so: under s. 38 of the Partnership Act 1890 a partner’s authority continues for the purposes of winding up the affairs of a partnership even after the partnership has been dissolved. Once Mr Bishop was aware that the bill had been assessed at nil, it is possible that any monies still in his hands became subject to a constructive trust in favour of the payer, but I have no evidence (or any reason to think) that there was any money left at that stage.

The third part of Issue (xiiA) asks upon whom the liability to repay rested when DJ Bedford made his order. The only person liable under the Order itself, as I have already said, was Mrs Bradley who was ordered to repay money to Windsor. But I suspect that what is meant is what liability Mr Golstein and Mr Bishop were under. My answer is that since the monies were received by the firm of B&G it is the firm of B&G that is liable to repay. As with other liabilities of the partnership this was a joint liability. If I am right in my analysis above of who actually made the payments, I think that the £32,500 was technically repayable to Mrs Bradley; and the £3,750 to Windsor, they being the respective parties who had overpaid.

The final part of issue (xiiA) asks if Mr Golstein is entitled to an indemnity from Mr Bishop. I do not see that he is. On my analysis it was the firm of B&G that (correctly) received the money, it is the firm of B&G that was liable to repay it, and like other firm liabilities it is to be borne by the partners in accordance with the partnership agreement between them. I do not think that the fact that Mr Bishop retained the bulk of the money and then spent it (assuming he did) on other liabilities of the firm affects this question.

Issue (xiii) asks the general question how much each party is entitled to receive on the taking of an account. It depends on the other issues and is not for me.

Issue (xiv) is in these terms:

“Taking into account the answer to [Issue (xi)] is [Mr Golstein] entitled to receive any monies by way of damages in respect of the period from 1^st July 2010 to 30^th September 2011 ? If so, how much is he entitled to receive, taking into account any reasonable mitigation of loss ?”

This issue refers to Mr Golstein’s claim that he is entitled to damages for the premature termination of the partnership, calculated by reference to the guaranteed salary that he would have received during the minimum 4-year term under (the second) clause 17.1 of the Heads of Agreement. It raises the question of what brought the partnership to an early end. In a purely formal sense there is no difficulty about this. Since I have held that the doctrine of repudiation does not apply to partnerships, Mr Golstein’s notice of 30 June 2010 was of no contractual effect, and what formally terminated the contract between the parties was the parties’ mutual agreement.

Miss Eilledge however accepted in closing submissions that this is not determinative. She said that if I were to find that Mr Golstein could bring himself within s. 35(d) of the Partnership Act 1890, and that that was why the partnership ended, then he would be able to claim damages for breach. This seems to me to be a realistic concession and I will proceed on this basis. I have indeed found that Mr Golstein can bring himself within s. 35(d) (paragraph 176 above). So the question is whether this was the real or effective cause of the partnership coming to an end.

Miss Eilledge submitted that it was not; that although Mr Bishop had in 2009 as she put it “not covered himself in glory”, he had taken advice and after the failed mediation had adopted a pragmatic attitude; far from wanting the partnership to end, he had wanted it to continue. Mr Bishop had not abandoned Mr Golstein and walked out but had sought to find another firm to merge with. She pointed out that when she asked Mr Golstein why he had served the notice of dissolution, his answer was that he had found a consultancy, rather than pointing to any particular event.

I find however that it was the cumulative effect of Mr Bishop’s behaviour as set out above which made it intolerable for Mr Golstein to continue. As he said when asked why he had served the notice, the fact that he had been fortunate enough to find a consultancy was the immediate reason why he served the notice, but it was also the case that he could not carry on. I have detailed above the matters which led me to the conclusion that it was not reasonably practicable for Mr Golstein to continue to carry on practice in partnership with Mr Bishop; and I find that it was the cumulative effect of these matters which led to the partnership coming to a premature end. It follows that Mr Golstein is entitled to damages for breach of contract.

As to the quantum of such damages, Mr Salis opened the case on the basis that I should decide the quantum, and that it was a simple calculation of the guaranteed salary that Mr Golstein would have received for the 15 month period 1 July 2010 to 30 September 2011 at a rate of £120,000 per year (amounting to £150,000), less the amounts actually received from his consultancy with Wayne Leighton.

Miss Eilledge makes two submissions on quantum. The first is that Mr Golstein can only claim guaranteed salary at a rate of £100,000 per year as £20,000 would have been payable to his wife. I accept this submission. Although clause 2.2 refers to a guaranteed salary of £120,000 “out of which” Mr Golstein would meet his wife’s fees of £20,000, it also makes clear that she will be an employee of the firm and as I have said above (paragraph 89) the whole purpose of the clause was no doubt that the £20,000 should be her income and not his and so taxed at a lower rate. I agree with Miss Eilledge that having chosen to arrange his affairs this way, he must take the consequences, namely that his loss is £100,000 per year not £120,000.

The second submission Miss Eilledge makes is that quantum cannot be assessed now and should await the taking of the accounts. I accept this submission as well. I should record that she accepted in terms that she was not suggesting that Mr Golstein had failed to mitigate his loss, but she said that the amount of credit that that Mr Golstein will have to give for his earnings from his consultancy with Wayne Leighton requires further investigation. Mr Salis’s position in his written opening was that Mr Golstein should only give credit for the profit shown in the accounts of JG Legal Ltd, a company of which he is the sole director and through which he offered his services to Wayne Leighton. This cannot be right: the profit shown in the accounts for the year ended 30 June 2011 is a mere £405, but even a brief glance at the accounts shows that this figure was based on a turnover of £21,270 and reached after charging a director’s salary of £6,000, and wages and salaries of a further £6,000. I heard very little evidence explaining these, or any of the other, figures in the accounts but I assume that the £21,270 is what Wayne Leighton actually paid JG Legal for Mr Golstein’s services, and that the £6,000 director’s salary was paid to him; and it is likely that the other £6,000 was paid to his wife. It seems clear that the correct amount for which credit should be given for this year is not £405 and is likely to be at the very least £6,000 more, and could be up to £21,270; it is also clear that I am not in a position to determine the correct amount. I will therefore direct an inquiry into damages.

Issue (xv) is in these terms:

“Taking into account the answer to [Issues (i) and (iA)] is [Mr Bishop] entitled to receive damages for misrepresentation and/or for breach of fiduciary duty, and if so how much ?”

Given my findings on Issues (i) and (iA) above, the answer to this Issue is No.

I believe I have now answered all the questions that I have been asked to answer. I am grateful to counsel for their considerable assistance and will hear them on any consequential matters.