Partnership Disputes
Overview
Partnership disputes are remarkably similar to family disputes - there is often a profound emotional element involved - trust has been betrayed, egos have been flattened, confidences breached and dreams dashed.
Like family breakdowns, the final dissolution is often made hugely more painful, and more expensive than it should be, because the problem is taken into an adversarial, legal environment where the focus is on assertion of rights and entitlements (which are always disputed), rather than on a rebuilding process for all parties after the passing of their personal apocalypse.
Our Approach
We take a problem solving approach that attempts to defuse tensions and keep the partners focussed on the practical issues they need to resolve. We use mediation and negotiation counselling techniques to help parties get over and through the emotional impediments to constructive negotiations - and then facilitate those constructive negotiations through to an agreement.
If necessary, drawing on forensic accounting and other skills as required, we can assess and determine specific valuation and quantum issues, or get external experts to do so on a responsible basis.
Where the parties require a decision to be made on a certain point, or collection of points, then subject to their full agreement, due process and appropriate written instructions, we are happy to switch into a determinative role to aid the process and respond to the parties' requests.
It is useful to illustrate the advantages of our approach through examples. In late 2003, we had two partnership disputes referred to us in a single week :
Case (1): In the first dispute we were engaged as experts to perform new goodwill valuations for a case that had been ordered for a complete re-trial. Various issues were in dispute and the matter had already been up and down in the Supreme Court and in the Court of Appeal.
In the end, the matter took almost 4 years to resolve and the parties paid more than 5 times the amount in dispute to their respective lawyers in legal fees.
What seems even worse to us is that, on a purely commercial basis (as opposed to a technical legal basis), we firmly believe the judge got it wrong!
Case (2): The second dispute was referred to us to mediate. The amount in dispute was more than double what was involved in the first partnership dispute. The ex-partners' attitudes towards each other was "unusual" and we recognised this by establishing a facilitated negotiation where the parties (who were still in the same offices) never had to sit across a table from each other to deal with the issues. An agreed solution was reached in just over 20 days from date of original referral - at a total cost to the partners of around $3,000 dollars.
Obviously, it doesn't always work out this way, although I've been involved in enough of these to say it's not a bad representation. Looking at this very simplistically in terms of efficiency of process:
| Case | $ in Dispute |
Time | Cost | Efficiency
(month/$) |
Efficiency $ |
| Case (1) | 300,000 | 48 months | $1,500,00.00 | 6,250.00 | 5.00 |
| Case (2) | 600,000 | 0.6 months | $3,000.00 | 1,000,000.00 | 0.01 |
The adversarial (court) process appears to be 160 times less time efficient and 500 times less cost efficient, based on time and cost taken compared to amount in dispute. We usually say that our processes should save 90% of the time and cost of conventional litigation - clearly, sometimes they do much better than this!
Benefits
An added bonus in Case #2 was the parties' ability to agree the most tax and cashflow effective way of making the necessary payouts - an option completely denied the partners in the other matter who simply had the lump sum decision "awarded" without discussion or input as to the best way to do it.
The parties in the second case believe they saved themselves, collectively, over $100,000 by simply being able to agree to a perfectly legal payment arrangement.
