Primary Healthcare Centres (Broadford) Limited V Dr A. Humphrey, Dr P. Ravangave and Dr S. Turville [2010] Csoh 129
In this tricky case, the basic principle to bear in mind is that partners are jointly and severally liable for partnership debts, even after dissolution. As such, in principle, you can sue any partner individually for the whole debt and he can, in turn, sue his partners for a right of relief for their pro rata share. So far, so good. However, in practice, problems can arise....
Round 1
In the first action, the landlords sued only two of the partners of their tenant, Dr Ravangave and Dr Turville, agreeing that they had released the third partner, Dr Humphrey, from liability under the lease when he retired in March 2003 (under a mistaken belief as to the date of dissolution of the partnership).
When the landlords realised their mistake, the court refused to allow them to bring Dr Humphrey into the action. The court granted decree absolving both Dr Ravangave and Dr Turville.
Round 2
Subsequently, the landlords raised a fresh action against all three of the doctors, retracting their previous statement that they had released Dr Humphrey from liability under the lease.
As Dr Turville and Dr Ravangave had previously been absolved, they were initially removed from the landlords' case. However, Dr Humphrey brought both of them back into the action on the basis that he was entitled to pro rata relief from both, if he were to be found liable for 100% of the tenants' obligations, under the principle of joint and several liability.
Complications for any Right of Relief
In this second action, Lord Hodge explained that the decree of absolvitor granted in the first action was a "conclusive statement" that Dr Ravangave and Dr Turville had no obligations under this lease. As a result, Dr Ravangave and Dr Turville were already 'liberated' from any liability and the landlords had no claim against them. Equally, if the landlords were able to recover 100% from Dr Humphrey, Dr Humphrey would have no right of relief against them.
As such, the court found that the release of Dr Ravangave and Dr Turville from liability also limited the landlords' claim against Dr Humphrey to his one third pro rata share.
Comment
Pay close attention to who your debtors actually are - if more than one, a release of any may diminish your claim proportionally - or altogether!
Disclaimer
The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.
