NHS Litigation Authority wrong to determine that…

Introduction

Changes in composition of partners is a common feature of GP practices—a partner may retire, die or change practices—and these changes are usually effected through a variation of the General Medical Services Contract (“GMS contract”). GMS contracts are the usual means by which NHSE contracts with GPs for their services to be provided to members of the public. However, a GMS contract is not necessarily between GPs and NHSE only, the partners can include salaried partners, such as practice managers.

In Bhat v NHS Litigation Authority [2024] EWHC 375 (Admin), the court had to determine whether NHS Litigation Authority (the Defendant) was wrong to determine that the dissolution of partnership between the Claimants and a salaried partner terminated the GMS contract. The High Court ruled that the dissolution of partnership, which effectively expelled the salaried partner, did not terminate the GMS contract. The decision allowed the GP and the practice manager—both equity partners— to continue to run the practice.

The facts

The GP Practice in question had a history of changes to its composition that were effected through variations of the GMS contract, which allowed services to continue undisrupted. In November 2021, a dispute arose between the salaried partner and two equity partners (the Claimants), both of whom were lessees of the salaried partner. At the time of dispute, the salaried partner, who had previously worked as the Practice Manager, had no active involvement with the Practice. The equity partners, one of whom was a registered medical practitioner, served a notice of dissolution of partnership on the salaried partner. The salaried partner did not challenge the notice. The equity partners continued to run the practice as before. The assets and liabilities of the partnership were retained in their ongoing partnership and there was never a full scale winding up of the partnership.

The equity partners also served the notice of dissolution on the local CCG (now the ICB, who administer GMS contracts on behalf of NHSE). The Claimants and CCG fell into a dispute over the consequences of the dissolution for the GMS contract and referred the dispute to the NHS Litigation Authority (the Defendant).

The Defendant’s determination

It was common ground before the Defendant that the partnership between the Claimants and the salaried partner was a partnership at will, i.e. there was no written agreement between the Claimants and the salaried partner following the dissolution. The Defendant also accepted that there had been technical dissolutions, and not general dissolution (i.e. full scale winding up) of the previous partnerships, despite the changes in the composition of the partners, by operation of Regulation 15 of the National Health Service (General Medical Services Contracts) Regulations 2015 (“the 2015 Regulations”) and Schedule 1 of the GMS Contract. Schedule 1 provided that the GMS Contract will continue to subsist notwithstanding the retirement, death or expulsion of any of the partners.

In respect of previous dissolutions, the Defendant concluded Regulation 15 and Schedule 1 of the Contract applied because those changes were made by consent and resulted in technical dissolutions only. In contrast, the Defendant determined that in November 2021, there was a general dissolution by operation of law because the salaried partner did not agree to leave the partnership. Therefore, it was determined that Regulation 15 and Schedule 1 of the Contract did not apply and that the GMS was terminated and replaced by a fixed term contract until March 2022.

The Claimants brought a claim for judicial review of the Defendant’s determination.

The Judgement

The judge held that the Defendant had erred in concluding that the GMS Contract terminated following the dissolution of partnership between the Claimants and the salaried partner. The notion that a dissolution of the partnership automatically terminated a GMS contract is at odds with paragraph 67(3)(t) of Schedule 3 of the 2015 Regulations and paragraph 26.10.3(t) of the GMS Contract. A GMS contract may only be terminated in the circumstances provided for by Part 8 of Schedule 3 of the 2015 Regulations [118].

The correct position, the Judge held was that:

The Defendant’s reliance upon the distinction between a technical and a general dissolution was ill-founded. Where the partnership continues in business without a break, it is described as a technical dissolution. In practice, this will usually be with the agreement of all the partners, but agreement is not an essential ingredient of a technical dissolution [85] [108];
On the dissolution of the partnership, and the creation of a new partnership, Regulation 15 of the 2015 Regulations and Schedule 1 of the GMS Contract provided that the Contract was to subsist and “to be treated as made with the partnership as it is from time to time constituted” [115];
That a change in the membership of such a partnership is the very situation Regulation 15 of the 2015 Regulations is intended to deal with. Its effect is that, despite the previous partnership being dissolved (or “ceasing to exist”), the GMS contract is treated in law as being made between NHSE and the new partnership carrying on the same practice [121]. In this case, the newly-formed partnership was still the partnership under the same name carrying on business at the same address with whom NHSE had contracted [106];
That there is no lawful basis for implying into Regulation 15 of the 2015 Regulations and Schedule 1 of the Contract, a requirement that any change in composition of the partnership must be with the agreement of all the partners, or that it should be a technical not a general dissolution, or that there must be a written partnership agreement, not a partnership at will, or that these provisions will not apply where a partner has served notice of dissolution of the partnership [113].

The Defendant’s determination had the unattractive consequence of automatically bringing to an end the contractual arrangements between GP practices and NHSE following dissolution of partnerships where the expelled partner neither challenges the dissolution nor agrees to it in writing. The decision in Bhat would negate the need for NHSE to start afresh with a tender process for a new contract, or for the partners to have to compete for the renewal of the GMS contract for their practice in an open tendering exercise in similar circumstances.

This blog was written by - Fiona Scolding KC, a Barrister at Landmark Chambers.