Together for better or worse

Michael Royden of Thorntons Law offers some advice on dental partnership disputes – avoid them where you can, resolve them where you can’t

  • Date: 03 July 2013

PRIOR to the introduction of the Dental Body Corporate in 2006, the vast majority of dental practices were operated as a partnership, and that is still the case today.

One of the fundamental aspects of a successful partnership is trust, and many dentists whom I act for recognise that the relationship with their partners is an incredibly close one – perhaps second only to the relationship with their spouse (and some spouses might disagree).

However, like any relationship, partnerships can be tested and some will survive the difficult times whilst others won’t be so lucky. Whilst you cannot predict complications that may arise during a partnership, there are ways in which practitioners can try to avoid disputes, or at least minimise their impact when they do appear.

Put it writing

One of the first things we say to any partnership is that they should have an appropriately worded partnership agreement in place, which is a contract governing their relationship. In the absence of an agreement, the partnership legislation implies certain arrangements between the partners, many of which will be entirely unsuitable and unacceptable to the partnership as a whole.

Having once become embroiled in a partnership dispute, clients often say it was never felt necessary to have a partnership agreement, as each of the partners trusted the others. Unfortunately, if there is no agreement, the outcome of a fallout can often be unexpected and undesirable. The other benefit of doing an agreement at the outset is that it will allow the partners to consider a range of issues which may never have occurred to them previously.

There are different styles of partnership agreements and it’s important that, whatever style is chosen, it reflects the circumstances of the individual practice. We often see agreements which are adapted from a particular source or template and which have not been adequately drafted. For example, they might have provisions in them which are relevant to property ownership, when in fact the practice premises have been leased. I would recommend that you seek both your lawyer’s and your accountant’s advice when producing a partnership agreement to ensure that it fits your specific requirements.

The agreement should cover a range of issues including the decision-making process – how are decisions reached regarding the management of the practice and how they are implemented. It should also set out in very clear terms exactly how the profits of the practice are shared.

Another important area to cover is retirement. Whilst it might seem odd to be recording provisions for this at the outset, just like death and taxes, the end of a partnership is inevitable and unless all of the partners choose to sell out at the same time, there is likely to be the need to address the departure of one or more partners at some stage. Some of the issues to consider in relation to retiral include how much notice needs to be given before a partner retires. How will the patient list be dealt with? If the premises are jointly owned, how will they be dealt with and what value will be placed on them?

Another important factor to discuss is restrictive covenants – this will prevent the departed partner from setting up a practice nearby, thus devaluing the continuing practice. Restrictive covenants are often felt to be unnecessary and unenforceable, however if one is not in place it can cause a great deal of anxiety to the continuing partners, particularly if a partner leaves the practice following a fallout.

Another key area is ownership of the practice premises. In some cases the partners and the owners of the property differ. In this scenario, the property owning partners will be the landlord and the partners as a whole are the tenant. In theory this should not necessarily cause any significant difficulties, however this does create two camps within the practice – property owning and non property owning – and there is the potential for this to cause tension.

Having considered the issues which need to be addressed in a partnership, an agreement should be put in place which is appropriate to the practice and gives a good framework for addressing a number of issues which could arise in the future.

Prevention best cure

An agreement in itself does not necessarily avoid disputes arising and the best practices will have a number of simple ways in which to minimise the risk of issues becoming a real problem.

Regular discussion on partnership matters is key to maintaining a good relationship. As dentists are very busy and spend most of the working day seeing patients, it can be very difficult to find time to meet and debate business issues. However, investing that time can help to maintain a good working and personal relationship.

If one of the partners has a concern within the practice, my advice would be to be open and to raise it with the other partners. Some of the worst scenarios we encounter are situations where a partner has allowed a problem to develop over a considerable period of time, without having raised it. In their mind, that issue has become a very significant one and sometimes it can be impossible to achieve an amicable resolution. So do not allow issues to fester; they will only become bigger and potentially irreconcilable.

Some simple rules

It might seem odd for me to say this as a lawyer, but I would advise dentists to avoid involving lawyers if at all possible. Whilst I do not mean that they should not take legal advice, as that can often be a useful way of getting an independent perspective, involving a lawyer in correspondence can be counterproductive. Receiving a letter from a lawyer on behalf of a co-partner can often heighten the tension quite considerably and obviously it would be better if that can be avoided.

Sometimes partnership issues which arise prove to be irreconcilable. With the best will in the world, relationships can break down to such an extent that there is no way forward, regardless of whether or not there may be a possible commercial resolution. Where this is the case, it’s important to follow some simple rules which will hopefully assist to bring the situation to a suitable conclusion.

Seek advice. Speaking to an experienced dental lawyer, who will have seen similar situations, will help you to put a perspective on the situation and help to find a resolution.

Try to avoid the blame game. In the majority of disputes that we see there is a degree of fault on both sides and it’s important not to get too carried away in arguing blame rather than trying to reach a commercial resolution.

Put the practice first. Your working relationship with your partners is one of the most important aspects of work life, and when it goes wrong it can become the main focus. However, a partner who becomes involved in a dispute should try to avoid it taking over his or her life. You have to recognise that you still need to run a practice, carry out dental treatment to the best of your ability – and, not least, maintain the goodwill of your patients.

Michael Royden is a partner in the specialist dental practice team within the Scottish legal firm, Thorntons

This page was correct at the time of publication. Any guidance is intended as general guidance for members only. If you are a member and need specific advice relating to your own circumstances, please contact one of our advisers.

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