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‘Partner’ or ‘Employee’? – High Court Rules

PLEASE NOTE: Information in this article is correct at the time of publication, please contact DFA Law for current advice on older articles.

In treading the vexed borderland between ‘partnership’ and ‘employment’, the High Court has ruled that the former head of a law firm’s property department should not be exposed to a £1 million claim brought by a group of angry former clients.

The Solicitors’ Regulation Authority had intervened in the firm’s practice following an investigation into alleged misuse of client funds. A number of clients had launched proceedings, claiming that they had not been repaid substantial sums which they had invested in a scheme connected to bridging finance transactions.

The proceedings were brought against the firm itself and three named individuals, two of whom were its founding partners. However, a preliminary issue arose as to whether the third individual was a partner in the firm, or merely an employee who would have no personal liability to clients.

In striking out the claim against that individual, the Court found that, despite his senior role within the firm, there was no real prospect of establishing that he was a partner. Although, following his appointment, he had been named as a partner on the firm’s note paper, he had subsequently resigned from that position because he suspected malpractice and felt that he could not trust his colleagues.

Dismissing the clients’ appeal against an earlier decision to like effect, the Court noted that the individual’s letter of appointment had made repeated use of the word ‘employment’. Arguments that he had held himself out as a partner and that clients were entitled to rely upon that were also rejected.

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