Partnership Dispute Lawyers in Melbourne

What this practice area covers

This page anchors our work for clients in a contested partnership. The cluster includes partners in professional services firms, including legal, medical, accounting, and consulting practices, family partnerships running operating businesses or holding rural property, two and three way partnerships in trades and service businesses, and commercial joint ventures that may or may not be partnerships in law. It also includes the disputes that begin as a relationship breakdown and become a partnership dispute as the underlying business unwinds.

The pressure points in partnership matters are predictable. A partner takes a private profit through a related entity. A partner sets up in competition while still in the firm. A partner stops contributing to the work or to the capital. The agreement is silent on what happens when one partner wants out and the other wants the business to continue. A partner has died or become incapacitated and the agreement does not deal cleanly with the consequences. A joint venturer claims a share of profits the lead party says were never on the table. In each scenario, the question is the same. What does the agreement actually say, and what does the Act say where the agreement is silent.

We act on partnership matters where they meet a separate workstream. That includes professional partnerships exiting partners under indemnity and run off insurance arrangements, partnerships conducted through a unit trust or service company where the dispute pleads both partnership remedies and shareholder oppression in parallel, and matters where a separating spouse is also a partner and the corporate position must be coordinated with family law for business owners. We are comfortable in the Commercial Court of the Supreme Court of Victoria and run urgent applications under interlocutory injunction procedures where the partnership business or its assets are at risk in the interim.

The legal framework in Australia

Partnerships in Victoria are governed by the Partnership Act 1958 (Vic), which substantially mirrors the Partnership Act 1890 (UK) from which it descends. Section 5 of the Vic Act defines partnership as the relation which subsists between persons carrying on a business in common with a view of profit. A partnership is not a separate legal entity. Its property is held by the partners. Its obligations are obligations of the partners. Each partner is an agent of the firm for the purposes of the partnership business. These features distinguish partnership from incorporation and dictate most of the unusual features of partnership litigation.

Sections 32 to 34 of the Vic Act impose three statutory duties on partners. Section 32 requires every partner to render true accounts and full information of all things affecting the partnership to any partner or the partner's legal representative. Section 33 makes every partner accountable to the firm for any benefit derived by the partner, without the consent of the other partners, from any transaction concerning the partnership, or from any use by the partner of the partnership property, name, or business connection. Section 34 prohibits a partner from carrying on a business of the same nature as, and competing with, the firm without the consent of the other partners, and requires the partner to account for any profits made in such a business. These three sections are the statutory expression of the partners fiduciary duties to one another.

The leading Australian authority on the scope of those fiduciary duties is Birtchnell v Equity Trustees, Executors and Agency Co Ltd (1929) 42 CLR 384. The High Court held that a partner in a real estate firm who had taken a share of profits from land transactions involving a firm client, without disclosure to the other partners, was liable to account to the firm. Dixon J held at 408 that the subject matter over which the partners fiduciary obligations extend is determined not only by the character of the undertaking actually conducted by the firm, but also by the course of dealing actually pursued. The decision sets the test for whether an opportunity is captured by the partnership obligations or is genuinely outside them.

Chan v Zacharia (1984) 154 CLR 178 deals with the continuation of fiduciary duties after dissolution. Two doctors dissolved their medical practice. One former partner took the renewal of the lease over the practice premises in his own name. The High Court held that the former partner held the benefit of the new lease on constructive trust for the dissolved partnership. The fiduciary duty between partners continues at least until the winding up of the partnership is complete. Deane J's formulation of the fiduciary principle in Chan v Zacharia is the most widely cited articulation of the rule in Australia.

United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1 extended the analysis to joint ventures that are not partnerships in law. The High Court confirmed that the mutual confidence which imposes fiduciary duties on partners may, in appropriate circumstances, also be found to exist between joint venturers, even though the relationship is governed by contract rather than by the Partnership Act. The decision is important because much commercial work is structured as a joint venture rather than a partnership for tax and liability reasons, and parties commonly assume that the joint venture form excludes fiduciary obligations. It does not, where the necessary confidence is reposed.

Dissolution by the Court is dealt with in section 39 of the Vic Act. The Court may decree dissolution on six grounds, including that a partner has been guilty of conduct which, having regard to the nature of the business, is calculated to prejudicially affect the carrying on of the business, that a partner wilfully or persistently commits a breach of the partnership agreement, that the business of the partnership can only be carried on at a loss, and that circumstances have arisen which, in the opinion of the Court, render it just and equitable that the partnership be dissolved. The just and equitable ground is the workhorse provision where the agreement is silent and the relationship between the partners has broken down beyond repair.

How we work across this area

Our approach begins with the partnership agreement, the accounts, and the capital position. Many partnership disputes are resolved or reframed by what the agreement actually says about admission, retirement, expulsion, deadlock, and what happens to goodwill on exit. Where the agreement is silent or out of date, the default provisions of the Partnership Act 1958 (Vic) apply, and these defaults rarely reflect what the parties would have chosen if they had thought about it. The first ninety days of a partnership dispute are usually spent mapping the gap between the agreement and the Act.

Joint and several liability of the partners is the exposure that drives the conduct in correspondence. A partner can be sued personally for partnership debts entered into in the ordinary course of business. This is true even of an outgoing partner, who remains liable for obligations incurred during the period of their partnership unless an effective novation has occurred. Mapping exposure to creditors, financiers, and counterparties happens before any position is taken in correspondence, not after.

Where there is a serious risk of dissipation of partnership assets or diversion of partnership business while the dispute is on foot, we move on interim relief. The pathway is the same as for other commercial disputes, including interlocutory injunctions to restrain the misuse of confidential information or business connections, and freezing orders to preserve assets pending the substantive proceedings. Our urgent injunction practice runs these applications regularly in partnership matters.

For professional partnerships, the work is often less about whether the partnership will dissolve and more about how the goodwill, the client connection, the run off liabilities, and the office lease are allocated between the continuing and outgoing partners. Independent valuation matters. We brief valuers with professional services experience and instruct on methodology, because the valuation approach drives the dollar number far more than the percentage interest does.

Tone of correspondence matters. We are direct in pleadings and at the bar table, and measured in everything else. Partnership disputes inside professional firms are often resolved by negotiated exit because no party wants the matter to run in public. The firm has clients, employees, and a reputation to preserve. Process aggression for its own sake tends to produce a worse settlement than a measured pace and a credible willingness to seek dissolution under section 39 if it is not resolved.