2nd Edition Intra Mediation and Client Counseling Competition, 2019

Mediation Problem1

ABC technologies, a partnership firm was started by Mr. Peter and his Wife Ms. Elena, around
10 years ago in Edinburgh. Peter with his aggressive approach, agitated the market and
launched many new apps & programs and took the turn over to $10 million. As the business
was achieving heights, strength of its employees has increased from 10 to 600.

Peter’s brother Mr. David, seeing the exorbitant growth of his Firm, invested $12 million for
60% share in partnership, through his Company David Enterprises Pvt. Ltd.

Peter owns a building, which has been leased out to their partnership office. The lease
executed for this purpose contains an “upwards only” rent review and the lease rent payable
by the partnership to Peter, is way higher than the usual market rates. The lease term is due
to expire in 2022. Mr. David feels that Peter is taking undue benefits out of partnership by
way of lease rentals. Mr. David intends to terminate the lease but as per the lease document,
if the lease is terminated before completion of lease term, partnership will be liable to pay
the rentals till new lessee is found. Given the high rentals being paid by the partnership, it is
highly unlikely to find a new lessee for the building.

Peter had been in a habit of making decisions alone, which was not going well with David.
Peter being the founder partner, is not willing to leave the control. Peter is the only partner,
who has been working towards the partnership business and but for Peter, partnership business
would have been in doldrum.

Partnership has entered into many outsourcing, License and other contracts with the David’s
Company.

Just within a year, the relationship between Peter and David became so strained that the
partnership was sliding into ruinous litigation. So, they planned on dissolving the partnership.

1
The Mediation Problem is drafted by Mrs. Manisha Sravan Unnam, MCIArb, Accredited Commercial Mediator
and Certified Arbitrator, Registrar & Secretary General – Hyderabad Arbitration Centre [HAC] and Partner at
Unnam Law Firm, Hyderabad. The participants shall refrain from contacting the drafter. Doing so will attract
penalty as per the 2nd Edition Mediation and Client Counseling Competition - Rules and Procedure, 2019.
Peter has developed all the apps and program in the partnership and therefore, he claims
exclusive IP rights over the same, after dissolution of the Firm. Partnership business has a
regular income model, wherein it receives annual royalty/License Fee for many of its apps
and programs from third-party business(es), which constitutes half of its annual income and
the remaining income is received by executing service and other contracts to third-party
business(es).

Peter had taken a business loan in the name of Partnership, for $18 million from Bank of
Scotland, which needs to be repaid, if the partnership goes for dissolution. Further, in event
of dissolution of the Firm, the partnership firm will have various liabilities under its active
service contracts with the third-party business(es).

As the dissolution involves many aspects to be considered, Chartered Accountant of the

partnership persuaded Peter and David to initiate the mediation process, to agree on the terms
of dissolution.

Today, Peter and David have their first meeting with the mediator.