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When is a GMS partnership dissolution not a dissolution? Lessons from the Bhat case.

A recent High Court ruling has clarified the rules regarding the continuity of General Medical Services (GMS) contracts after partnership dissolutions. The case establishes important precedents for practices operating without formal partnership agreements and highlights the key distinction between “technical” and “general” partnership dissolutions.

What happened in the case?

The dispute centred around a GP partnership at the Sai Medical Centre, involving two equity partners (Dr & Mrs Bhat), and a salaried partner (Mrs Patel, who owned the practice premises).

There was no written partnership agreement in place (a ‘partnership at will’), and the conflict arose when the Bhats served a dissolution notice on Mrs Patel, who was no longer actively involved in the practice. The Bhat’s immediately formed a new partnership, and continued trading under the same name as previously. This led to uncertainty about the status of the GMS contract, with the Clinical Commissioning Group (CCG) interpreting the dissolution as triggering automatic contract termination because the contract was with the partnership which had been dissolved.

Key legal issues

The case hinged on two critical questions:

  • whether partnership dissolution automatically terminates a GMS contract
  • the distinction between “technical” and “general” dissolutions in healthcare partnerships

The High Court’s decision

The Court made several significant determinations:

  1. GMS contract continuity: the regulations make clear that a GMS contract is made ‘with the partnership as it is from time to time constituted’. It is, therefore, perfectly possible for partners to join and leave without impacting the GMS contract
  2. Technical dissolution: when the practice continues uninterrupted after the departure of a partner, the effect can be a “technical” rather than a “general” dissolution. Unlike a general dissolution, where the business is wound up, a technical dissolution would not necessarily terminate the GMS contract.
  3. Partner consent: partnership changes can be made without the consent of all the partners (or indeed the commissioner), so a partnership dispute does not preclude the possibility of a technical dissolution

Practical implications for GP practices

This ruling has important implications for practices:

  • GMS contract protection: partnership changes do not necessarily terminate GMS contracts so long as service provision continues uninterrupted
  • Partnership documentation: the case re-emphasises the importance of formal partnership agreements
  • Property considerations: the case highlights the complexities when property ownership and partnership interests intersect
  • Partnership disputes: this is now a very complex area, and advice should be sought early in a dispute. Any delay when taking advice could seriously prejudice your position since events will create facts about the nature of a partner’s departure and its impact on the partnership.

Reducing the risk

For many years, practices have been warned about the dangers of being a “partnership at will’, and this remains good advice even after the Bhat case. Undocumented partnerships now have an additional level of complexity, since GPs will have to grapple with the question of whether a partnership change constitutes a general or a technical dissolution. Unfortunately, these terms are not defined in statute so there is only case law to guide us, and this risks further litigation as these definitions are hammered out.

To best protect themselves, GMS partnerships should:

  • Ensure they have an up to date partnership arrangement signed by all the current partners which makes clear how partners join and leave without dissolving (‘determining’) the partnership
  • Ensure that surgery occupation arrangements are properly documented – a dispute around the property was at the heart of the Bhat dispute
  • Be aware that a two person partnership is unlikely to be able to continue in the event of a partner leaving, and the rules around becoming a GMS single hander are different to partnership changes
  • Seek specialist legal advice for partnership matters

Remember: the best way to avoid expensive and unpredictable disputes is to document arrangements properly at the outset.

Other considerations

Whilst the Bhat case helps to clarify what might happen in the event of a technical GMS partnership dissolution, it is a very specific case which turns on its facts. Indeed it overruled an earlier decision of NHS Resolution, and as we saw with the similar Cheema vs Jones case in 2018, court decisions can be unpredictable. The Bhat case now opens up a potentially significant difference between the treatment of GMS and PMS contracts in the event of a dispute.

GMS contracts are generally held by the partnership as constituted from time to time, but a PMS contract is personal to the persons who signed it, so the impact of dissolution will be different. Historically, the commissioner has treated changes in the partnership of GMS and PMS contractors in the same way, but this is unlikely to be possible after the Bhat case. We will keep readers informed as policy and case law develop in this area, but in the meantime, PMS practices must keep their partnership deeds up to date to minimise the risk of falling into a legal uncertainty about the impact of partnership changes.

For more information or a free, no obligation call with one of the DR Solicitors team, please contact us.

DR Solicitors can help

At DR Solicitors, we specialise exclusively in supporting primary care professionals, including GPs, dentists, and consultants. With our unparalleled expertise in NHS regulations and contracts, we help practices navigate complex legal landscapes while avoiding regulatory pitfalls.

  • Specialist advice: we work only with primary care providers, ensuring you receive tailored advice from experts who understand the challenges of your sector.
  • Regulatory awareness: our advice accounts for the NHS regulations that permeate all aspects of your business, helping you avoid breaches or missed opportunities.
  • Holistic approach: we identify interconnections that generalist solicitors might miss, such as how contractual decisions impact NHS pensions or compliance with GMS contracts.

Many of our clients come to us after encountering issues caused by non-specialist advice. Whether you need support with GMS contract disputes, PCN disputes, or partnership disputes, DR Solicitors is here to help you navigate these complexities with confidence.

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