Landlord granting lease to partners – Lease containing term that retiring partners to be exempt from obligations under lease – Partner giving notice of intention to retire from firm – Remaining partners giving joint notice to retire later on same day – Whether partners liable under lease – Whether all or any partners retired – Whether firm dissolved – Judgment for the landlord
In 1978 the partners in the solicitor’s firm of Pickering Kenyon ("the firm") agreed to rent a property at Great James Street, London, for a term of 19 years. The parties also agreed by way of a deed (the "collateral deed") that upon the retirement from the firm a retiring partner was to be released from all obligations contained in the lease with effect from the date of his retirement. However it was a condition in clause 2 of the deed that so long as two or more partners constituted the firm, a retiring partner was, prior to release, to procure an alternative partner. The plaintiff entered into a reversionary lease of the premises with the same partners as tenants and the parties entered into a deed which was the same as the collateral deed. In September 1993 a licence was granted by the landlord to assign the lease to the partners of the firm at that time, the four defendants. The lease became too burdensome for the partnership and attempts to solve the problem failed. Subsequently the second defendant accepted a new position and at a partners meeting on March 10 1995, within the terms of the partnership, gave six-months notice. The first, third and fourth defendants, the remaining partners, prepared and signed a joint notice of retirement later on the same day.
The plaintiff issued proceedings and claimed rent, insurance rent and interest said to be due under the lease. The defendants contended that the effect of the events of March 10 was that each partner had given effective notice of his intention to retire in accordance with the partnership agreement, and therefore each partner was entitled to be released from his obligation under the lease in accordance with the terms in the collateral deed. The defendants further contended that whatever the effects of the notices, there was a subsequent agreement between the defendants to dissolve the partnership with effect from August 31 which superseded the notices.
Held Judgment was given for the plaintiff.
1. If the second defendant had been the only departing partner at the end of his six-months notice, providing he could satisfy the condition in clause 2 of the collateral deed, he would have been released from his obligations under the lease. However, all the partners purported to retire on the same date, and they were not effective retirements for the purposes of the collateral deed. For all practical purposes the firm was thereupon dissolved and therefore it was not an event which gave any of the partners an entitlement to be released under the collateral deed.
2. In any event, the partnership had not continued until the date when the six-month notices would have expired. The notices had been displaced by a further agreement in August 1995 whereby it had been agreed by the partners that the partnership was dissolved in accordance with the partnership agreement.
Kim Lewison QC (instructed by solicitor to Axa Equity & Law Life Assurance Society plc) appeared for the plaintiff; Jonathan Brock (instructed by Taylor Joynson Garrett) appeared for the defendants.
