Relation of Partners with One Another Presentation Transcript
RELATION OF PARTNERSWITH ONE ANOTHERRights & Duties ofPartnersDuty of Good FaithPartnershipProperty
Rights & Duties of Partners Sec 26 -‘subject to any agreement’- secondary in natureTan Eng Choon v Foo Kai YuenMutual duties & rights maybe set up inthe partnership agreement. If there isnothing in the partnershipagreement,then only it will be referred tothe provisions of the Act Sec 21- varied or changed with consent
Sec 26 (a) Partners share equally inCAPITAL,PROFIT & LOSSES Un equal if stated in the agreementBinney v MutrieHeld:In the absence of the agreement tothe contrary the partner must dividethe profit and shared the lossesequally.
If there is insolvent partner, otherpartners have no duty to bear his lossesGarney v MurrayHeld: Each partner shall only be liable tocontribute 1/3 of the deficiency to thebusiness because this was the proportionwhich the profits were divided
Sec 26(b) Firm will indemnify anypayment/liabilities incurred:- In the ordinary conduct of thefirm’s bizor- Is necessary to preserve thebusiness or property of the firm
CasesMatthew v RugglesKok Hong Leong v Seow KahChengOng Keng Huat v Hong Kong UnitedCo Ltd
Ong Keng HuatRigby J:“ in order to make one partner liablefor any loss arising out of thepartnership it was necessary toprove that he had committed fraudor culpable negligence”
Sec 26(c)Partners can contribute to the firmby way of advancement and areentitled for an interest (8%).Lord Lindley: Such an advance is nottreated as an increase of capital butrather as a loan on which interestought to be paid.
Sec 26 (d)Interest on capital can onlybe given after theascertainment ofprofit
Sec 26(e)Every partner may take partinthe management
Sec 26(f) Partners are not entitle to aremunarationunless otherwise provided If a partner is appointed as areceiver (dissolution) –entitled for aremunerationCase: Re Aldrige
If a partner has to do all the workdue to death,sickness,retirement etc– entitle to a remunerationCase: Airey v Bonham Upon death of another partner, hebecomes an executor – NOT entitlefor a remunerationCase: Burden v Burden
Sec 26(g) Introducing new partner- consent ofALL partners. Consent must not be unreasonablywithheldCase: Byrne v Reid
Sec 26(h)Decision making: Differences as to ordinary matters;-by majority Changing the nature of the business;-consent by allCases: Highley v WalkerTham Kok Cheong v Low Pui Heng
Sec 26(i)Partnership books;- kept at the place of the business- every partner has access/copyCase: Krishinchand Bahjawi & Anor“partnership books should not beconstrained to accounting records butother records kept by the partnershipfor example minutes of partnersmeeting.”
- agent of a partner can also haveaccess/copy- Cases: Bevan v WebbGan Khuan v Tan Jin Luan
Expulsion of a partnerSec 27 By majority , partners cannot expelany other partner unless authorisedexpressly, either in writing or byoral.Case: Re A Solicitors Arbitration
Expulsion of a partner must be exercisedin good faith and for good reason.Blisset v Daniel‘power of expulsion should be exercised ingood faith’H:Notice of expulsion was invalid – not ingood faith.
The duty of Good Faith Important element in a relationshipbetween partners Being honest in all partnershipdealings Cover by Secs 30,31 & 32
R v Lee Kiong KiatTerrel J:One has to remember what apartnership is. It is an associationrequiring the utmost good faithbetween the partners – each partnerowes a duty to his co-partner andeach partner is entitled to haveconfidence in his co-partner andgood faith towards him.
Vasu Devan & OrsMohamed Azmi J:..the utmost good faith is due from everymember of a partnership towards everyother member…Good faith requires that apartner shall not obtain a privateadvantage at the expense of the firm…Heis bound in all transactions to do hisbest…to share with his co-partners anybenefit…
Sec 30 Every partner should render true accountand give full information Example: Sale of shares from a partner toanother. A partner must reveal allmaterial facts relating to it, otherwise thesale will be voidable and maybe set aside.Cases: Maddeford v AustwickLaw v Law
Maddeford v AustwickHeld: Purchase of a share in the firmwithout disclosure of material factswith reference to the partnershipassets would render the transactionvoidable.
Law v LawF: A partner sold his share to anotherpartner. Later he found out that theshares worth more that it should. Hewould have known about it if theexistence of certain securities of thepartnership had been revealed to him.H: In principle, the transaction could be setaside.
Sec 31 Accountability for private profitsobtained from : - partnershiptransaction or- use of partnershipproperty,- use of partnership name,- business connection.without the consent of other partners
CasesBentley v CravenHeld: The partner was accountable to thefirm for the profits made.Clegg v FishwickHeld: Though the other p’ners cannotrestrain the landlord frm granting thelease to only one p’ner, as btwn p’nersthat p’ner was a trustee for the firm.
Pathirana v PathiranaHeld: The other partners are entitledfor the profits made by a partner.
ExceptionA partner may keep the profits:1)When there is full disclosure ofinterest2)Consent from other partners3)Profit is derived from the use ofinformation which is whollyoutside the scope of partnershipbusiness
CasesRe Coffey’s Registered DesignH:The firm involved in buying &selling products manufactured byors and not in manufacturing theproducts itself. Therefore thepartners are not accountable
Sec 32 A partner must not compete withthe firm in the business of the samenature. If he did so, must account anyprofits made to the firm.Aas V Benham
Case:Trimble v GoldbergHeld: Action for the share of profitfailed. The purchase of the propertywas not within the scope ofpartnership nor was it in rivalry withthe partnership.