The Importance of Partnership Agreements for GP Practices
There can be many benefits to both an individual GP and to a practice, of a GP being appointed as a new partner. But once the decision has been made for a GP practice to take on one or more new partners, it’s important that the arrangement is formalised quickly by way of a written partnership agreement so that all partners are very clear as to the terms of the working relationship. Once signed, the partnership agreement will set out matters such as each partner’s obligations and responsibilities, financial commitments, profit share and any restrictions on the partners. Importantly it should also deal with retirement from and dissolution of the partnership.
In practice however, negotiations as to the terms of a partnership agreement with incoming partners can take some time to finalise. Whilst it may be tempting for GPs to start working together in partnership pending the finalisation of a new partnership agreement, this should be avoided where possible. As discussed in my article here concerning the Court of Appeal case of Cheema v Jones, the risk of proceeding whilst new terms are still being drafted, is that the arrangement is likely to create a new ‘partnership at will’ between the continuing and incoming new partners which is governed by the provisions of the Partnership Act 1890 (the Act).
The Act is somewhat outdated and not really suited to a modern GP practice. It doesn’t contain any useful provisions such as probationary periods to help deal with issues which might arise whilst the suitability of new partners is under review and provides that profits are to be equally shared between all partners from the outset. Further it does not sufficiently set out the partners’ duties and restrictions or allow any partner to be expelled even if there are grounds to do so. Under the Act any partner can serve notice to end the partnership at any time and certain events such as the bankruptcy of a partner can also trigger dissolution of the partnership which may put the NHS Contract at risk. The provisions of the Act are therefore likely to be very different from what partners might intend or usually agree in a written partnership agreement. Ensuring that a written partnership agreement is concluded between all partners at the outset will avoid the implications of the Act and help minimise the risk of disputes arising in the future.
Service of documents by email – follow the court rules
The Civil Procedure Rules do not allow documents to be served via e-mail unless the other side expressly agrees to accept e-mail service. Where there is no express agreement, but documents are served via e-mail anyway, do solicitors have a duty of care to inform the other side of their mistake?
There have been two recent cases which appear to be at odds with each other and which make the answer somewhat unclear. Either way, solicitors and non-lawyers alike should be careful to stick to the court rules.
In the recent case of Barton v Wright Hassall LLP a litigant in person served a claim form on the defendant’s solicitors via e-mail without prior express agreement. The court held that service was invalid; the fact that the claimant was not legally represented was not an excuse because the rules on e-mail service were sufficiently clear and publicly available. The court also held that the solicitors did not owe the claimant a duty of care to warn him that his service was invalid. Accordingly, the Supreme Court struck out Mr Barton’s claim. This was, by all accounts, a harsh outcome for Mr Barton, given that the other side had in fact received his claim.
However, in the later case of Woodward & Anor v Phoenix Healthcare Distribution Limited the court held that the defendant’s solicitors did owe the claimant (who in this instance was represented by a solicitor) a duty of care to warn him that his service was invalid. In this case, the defendant’s solicitors had been deliberately silent to capitalise on the claimant’s solicitors’ mistake, which the court called “playing a technical game”. This goes against the overriding objective of the Civil Procedure Rules – to deal with cases justly and at a proportionate cost. Quite the contrast to poor Mr Barton.
At the moment, there is a balancing exercise that legal professionals must make – whether to capitalise on the other side’s mistakes on the one hand, or politely point them out (potentially to their clients’ detriment) on the other. It looks likely that this issue will be considered further by the Court of Appeal.
However, those who are issuing or defending court proceedings without professional legal advice should be careful. The courts will not necessarily excuse a layperson from complying with the publicly available (but lengthy and sometimes technical) rules that govern civil court proceedings.
Cases: Barton v Wright Hassall LLP  UKSC 12, Woodward & Anor v Phoenix Healthcare Distribution Limited  EWHC 334 (Ch)
Shareholders behaving badly in s.994 petitions
When does a petitioner’s conduct in shareholder litigation merit a penalty in terms of legal costs? The case of Re Tradeouts Ltd (2018) provides some answers.
This was a successful defence of an unfair prejudice petition by the respondent. As is usual, the petitioner, as the unsuccessful party, was ordered to pay the legal costs of the successful party, the respondent.
The first point to note is that those costs were stated to be in the region of £1.8 million, illustrating the potential legal spend that can be required in bringing or defending this type of litigation.
The respondent applied to the court that these costs should be paid on an indemnity basis on the grounds of the petitioner’s behaviour. This would mean that the respondent would recover a higher proportion of their costs. The behaviour alleged was that the petitioner had conducted the case in an unreasonable way including:
- Failing to engage in appropriate pre-action conduct
- Pursuing litigation with a view to exerting commercial pressure
- Advancing claims that were not consistent with contemporaneous documents
- Using hostile cross-examination
The court considered these arguments but concluded that overall it had not been a case that had been brought in bad faith. It accepted that unfair prejudice petitions were by their nature hostile and the petitioner’s actions did not take the case out of the norm. On that basis an award of indemnity costs was declined.
The petitioner had cross-applied for the respondent’s costs award to be reduced on the basis that the respondent had refused to mediate. There is a line of cases where the court has penalised parties who have declined to engage in mediation. However, the court concluded that on the facts of this case the failure to mediate did not justify the respondent being penalised. It is likely that the petitioner’s behaviour in the litigation had some bearing on this decision.
The upshot was that the respondent’s costs would need to be assessed by the court on the standard basis and the petitioner was ordered to pay £1.2 million on account.
The lesson from this case is that s.994 petitions are hostile by nature and correspondingly expensive. Behaviour that might attract censure in other litigation may be more tolerated in this arena but what is sauce for the goose is sauce for the gander. If you go in all guns blazing and your opponent fires back then expect little sympathy in terms of costs if you lose.
Intellectual Property Claims are on the Rise: mitigating the risks to your business
The number of claims heard by the specialist Intellectual Property court in England and Wales (IPEC) hit a record high last year. This correlates with an increased understanding of IP rights generally; with more accessible guidance online, individuals and businesses perhaps feel more confident enforcing their IP rights.
In light of this, it is good practice for business owners to consider establishing an effective strategy for dealing with such disputes.
Dispute Resolution Outside of Court
Court proceedings can be an effective method of IP rights enforcement, however it’s important to note that with litigation comes risk, and court is not always the best place to resolve disputes. For example:
- It’s possible to tackle cybersquatting through the UDRP process, seeking the cancellation and/or surrender of a domain name registered in bad faith;
- The take-down of a website displaying stolen content (infringing Copyright) can be sought through a Notice and Takedown procedure, at a pre-issue stage; and
- Alternative Dispute Resolution (ADR) can provide a faster route to resolution, through for example Mediation, saving time and costs.
Dispute Resolution in Court
If, despite the above, you still wish to resolve the dispute in court, doing so is a serious step, exposing you to a potentially significant costs risk. It’s important to be aware:
- The value of the claim does not necessarily correlate with its legal complexity and even a Small Claim can still be a tricky claim to prove. There are common misconceptions with regard to the ownership of IP rights which can catch out the unwary, particularly with regard to Copyright;
- Once a claim is issued, you cannot discontinue without potentially being held liable for the other side’s legal costs;
- It can also be difficult or impossible to amend a claim once it’s issued, so you should begin with carefully drafted Particulars of Claim at the outset;
- Claims can typically take 18 to 24 months (or more) to reach trial, so it’s important to understand the strengths and also weaknesses of a claim early on, preventing nasty surprises at trial a year or 2 down the line; and
- If a claim is misconceived and completely groundless, a Defendant could apply to strike it out, and seek an order for its costs against you.
There are options available both inside and outside of Court, and a carefully thought-out IP enforcement strategy can mitigate the risks inherent in litigation.
Therefore, if you’re considering enforcing IP rights (in court or not), it’s recommended that legal advice is sought from a solicitor specialising in IP law, even before a threat of IP infringement is made (to avoid for example, the risk of being sued yourself under the Groundless Threats provisions).
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Facebook Faces Consumer Action
Following a recent EU ruling, ‘privacy activist’, Max Schrems, can bring an individual action as a consumer against Facebook. However, he cannot bring a class action on behalf of 25,000 others in relation to Facebook’s privacy practices. EU regulations generally state that proceedings can only be started in the member state where the defendant is domiciled (where the defendant lives). However, where a person is a ‘consumer’, they can bring a claim in the country that they, the consumer, live.
Mr Schrems used his private Facebook account for publishing books, lecturing, operating websites, fundraising and being assigned the claims of other Facebook users. Facebook tried to argue that these activities meant that he was not a consumer, but a ‘professional litigant’. The Court of Justice of the European Union (CJEU) however, ruled that he was still a consumer because the use of his account was ‘predominantly personal’. He therefore can bring an action in Austria, the country where he is domiciled.
A further question before the court was whether Mr Schrems could bring a class action and pursue claims assigned to him from 25,000 other Facebook users. The court directed that he would not be allowed to pursue a class action on behalf of others. The consumer exception is limited to the specific parties to the contract.
Mr Schrems has a long-running dispute with Facebook over their privacy policies and their data-sharing with US spy agencies. He was behind the recent decision that brought about the collapse of the EU-US Safe Harbour framework, which had allowed Facebook Ireland to transfer data to Facebook USA. Fundamentally it was a data sharing scheme.
This recent decision puts an end to Mr Schrems plans to bring a class action, however, he is now free to pursue Facebook as a consumer, where he is domiciled, in Austria. He insists that he will use this decision to bring a ‘model case’ against Facebook instead.
Case: Schrems v Facebook Ireland Ltd (Case C-498/16)