In a recent decision the Supreme Court of the Australian Capital Territory found that a major accounting firm properly terminated the partnership interest of a senior partner for “just cause”. He was charged with assault at a bar, after having been warned for misbehaviour at a Christmas party.
The Facts
The partner of a major accounting firm was given a final written warning on 3 June 2022 alleging that he told a female business partner at a Christmas party that he would like to sleep with her, and that most of his affairs were with married women.
On 4 August 2023 the partner was recorded on CCTV pushing a bar manager and bumping his chest, and he was subsequently charged with assault.
The partner gave notice of retirement but the firm did not accept it and instead terminated his partnership for “just cause”, for breaching the firm’s Code of Conduct, and for failing to disclose the criminal charge to the firm or the relevant Law Society.
The Partnership Agreement gave power to terminate the partnership interest for “just cause”. The meaning of “just cause” included:
“… any act of… the relevant Partner, which is, in the sole opinion of the Country Managing Partner, of such a nature that the relevant Partner’s continuance as a Partner is likely to harm significantly the interests of the Firm or any Associated Entity…”
The partner commenced legal proceedings disputing that the termination of his partnership was for “just cause”, including because it occurred in his “private life”, and also because he had already given notice of retirement.
The Decision
The court dismissed the partner’s claim and upheld the termination of the partnership interest, finding that the Country Managing Partner could reasonably conclude that his conduct was “likely to harm significantly the interests of the firm” if he was to stay on.
Implications
Expectations about proper behaviour do not only apply to the general staff of a business. Business partners need to be aware that their behaviour at Christmas parties and other social functions may put their partnership interest at risk, even if it was not conduct in their work.
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