Section 19 of the Partnership Act 1890 provides:
“The mutual rights and duties of partners, whether ascertained by agreement or defined by this Act, may be varied by the consent of all the partners, and such consent may be either express or inferred from a course of dealing.”
It often happens that during the course of a partnership business the partners’ practices diverge from the strict provisions of the partnership agreement they may have signed some years ago. The question is whether such a practice has had the effect of changing (varying) the terms of the partnership agreement for the future as opposed to on a one-off basis.
In Patel v. Patel [2019] EWHC 298 (Ch), the English High Court found that the dealing of the partners in relation to the allocation of profits did not infer a consent of the partners to vary permanently the written partnership agreement provisions on equal sharing.
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Most arbitrations arise from arbitration agreements contained in arbitration clauses that are part of a larger contract whether it be a contract for the supply of goods or services, a partnership agreement, a shareholder agreement or the like.
In modern times it is a generally accepted principle of most legal systems that the arbitration clause stands as a separate agreement. This means that if the larger contract is void for whatever reason, the arbitration clause is unaffected and indeed may be seen as covering the dispute over voidness of the larger contract.
In Scotland this principle is enshrined in section 5 of the 2010 Act. But that’s not the case in all countries. In South Africa the issue of severability was considered in Seabeach Property Investment v. Nunn [2019] ZAWCHC 9 where the larger contract was one for the sale of heritable (immoveable) property.
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Arbitrations, like all disputes, involve cost. The question is who should bear it at the end of the process ? Usually it’s the party who is unsuccessful. But what happens when both are unsuccessful ? That was the situation in the recent New Zealand case Gladvale Farms Ltd v. Batty [2019] NZHC 249 in an arbitration arising from a sharemilking agreement.
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An arbitration agreement binds only the parties who have agreed to it. That comes from the consensual nature of arbitration. It follows that an arbitrator has no jurisdiction or power over a person who has not agreed that he or she should arbitrate the dispute.
In Filatona Trading Ltd v. Navigator Equities Ltd [2019] EWHC 173 (Comm), an interesting situation arose.
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A key purpose of arbitration is to provide a speedy and cost-effective means of dispute resolution with a final decision that does not lead to appeal. For that reason arbitration awards are almost never overturned unless the aggrieved party can prove the arbitrator’s conduct was seriously irregular or their decision (award) on a point of law was obviously wrong, or if of general importance, open to serious doubt.
In Patel v. Patel [2019] EWHC 298 (Ch), the English High Court found both of these features to be present and overturned the award of the arbitrator in a partnership dispute.
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