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Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
Dissolution of Partnership
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Dissolution of Partnership

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  • 1. Dissolution of Partnership. By; Muhammad Izzat & Muhammad Izuan.
  • 2. Definition of Dissolution.  Business terms  Act of dissolving; winding up; termination.  Domestic relation  Ending of a marriage through divorce.  Millenium Medicare Services v Nagadevan a/l Mahalingam [2013] 9 MLJ 873  “The literal meaning of the phrase „dissolution of partnership‟ was the official ending of a partnership … The word „dissolution‟ as defined in Collins Cobuild English Dictionary to mean: „the act of officially ending a formal agreement, for example a marriage or a business arrangement‟. The literal meaning of 'dissolution of partnership' clearly means that the official ending of a partnership. “
  • 3. What is Dissolution of Partnership?  The dissolution of a partnership is the process during which the affairs of the partnership are wound up (where the ongoing nature of the partnership relation terminates).  The initial process where the partnership or the firm becomes dissolve.
  • 4. How to Dissolve a Partnership? Dissolution Court intervention Without Court‟s intervention
  • 5. When is the Dissolution?  By expiration of a fixed term.  Termination of a single adventure or undertaking.  Dissolution by notice from a partner.  Bankruptcy.  Death.  A charge of partnership property for a partner's separate debt.
  • 6. Contd.  Illegality of the partnership.  An order by Court.
  • 7. Reception of Common Law in Dissolution of Partnership.  Tan Mooi Liang v Lim Soon Seng & Ors [1974] 2 MLJ 60. (per Suffian CJ, at 62).  [H]- '[b]ecause of the many provisions relating to partnership in the Contracts (Malay States) Ordinance, 1950, which ... constitute "other provisions relating to partnership" within the meaning of ... subsection (1) of section 5 of the Civil Law Ordinance, 1956, the English law of partnership does not apply„.
  • 8. Dissolution. Without Court‟s intervention. Court‟s intervention. Section 34. Fixed term. Single Notice. adventure . Section 35. Death. Bankrupt. Charge. Section 36. Illegality. Section 37. Lunatic. Permanentl y incapable. Guilty. Breach of partnership . Loss. Just and equitable.
  • 9. Statutory Provisions.  Section 27 of Partnership Act 1961.  Section 34 of Partnership Act 1961.  Section 35 of Partnership Act 1961.  Section 36 of Partnership Act 1961.  Section 37 of Partnership Act 1961.  Section 38 of Partnership Act 1961.  Section 39 of Partnership Act 1961.  Section 40 of Partnership Act 1961.
  • 10. Contd.  Section 41 of Partnership Act 1961.  Section 42 of Partnership Act 1961.  Section 43 of Partnership Act 1961.  Section 44 of Partnership Act 1961.  Section 45 of Partnership Act 1961.  Section 46 of Partnership Act 1961.  Section 47 of Partnership Act 1961.
  • 11. Section 27 PA 1961.  Section 27; expulsion of partner.  “No majority of partners … unless … express agreement …”  Expulsion must be made by all partners in consensus.  Majority votes are insufficient.  Majority votes are only made applicable by an express agreement.  The agreement must be made in writing (proof).
  • 12. Section 34 PA 1961.  Section 34; dissolution by expiration or notice.  “(1) Subject to any agreement … a partnership is dissolved (a) … fixed term, by expiration of that term;  (b) … single adventure or undertaking, … termination of that adventure or undertaking …  (c) … undefined time, … any partner giving notice … intention to dissolve the partnership.  (2) … last-mentioned case, … partnership is dissolved … date mentioned in the notice … date of the communication of the notice.”
  • 13. Contd.  1. Subject to any agreement.  Refers to relevant clause[s] in a partnership agreement.  Syarikat Wing Heong Meat Product Sdn Bhd v Wing Heong Food Industries Sdn Bhd & Ors [2010] 7 MLJ 504.  [I]- Whether the person managing the partnership business had actual or ostensible authority to sell the partnership's business, goodwill and intellectual property assets.
  • 14. Contd.  [H]- There was actual authority accorded for the sale.  2. Expiration of a fixed term.  Where the partners have decided that the partnership arrangement would have a limited or fixed term, it follows that the partnership would dissolve once that term has expired subject to any agreement to the contrary.
  • 15. Contd.  Lee Lay Lay v Wong Yiik Tai (unreported, 24 May 2007; Originating Summons No 24-433-2005-I), [2007] MLJU 585.  [F]- The defendant claimed her act of dissolving the partnership was valid since it was entered into for a fixed term.  [H]- Applying the provisions of the Partnership Act 1961 S.34 to the facts, the Court found that there was no evidence that the partnership was entered into for a fixed term.
  • 16. Contd.  3. Termination of a single adventure or undertaking.  A partnership may have been formed solely for purposes of carrying out a single transaction, adventure or undertaking. In such an event, the partnership would naturally dissolve by operation of law once the transaction, adventure or undertaking has been completed subject to any agreement to the contrary.  A joint venture may or may not be a partnership.  In deciding whether or not a partnership exists, the court must have regard to s 4 ante and the intention of the parties as appearing from the whole facts of
  • 17. Contd.  Whether or not the parties can be regarded as partners could only be determined if the joint venture between them constituted a partnership 'for a single adventure or undertaking' subsumable under this section.  Sinnathamby Klondakoundan & Ors v Brijkishore Shuparshad [1998] 1 MLJ 31, CA.
  • 18. Contd.  Lee Lay Lay v Wong Yiik Tai (unreported, 24 May 2007; Originating Summons No 24-433-2005-I), [2007] MLJU 585.  [F]- The defendant claimed her act of dissolving the partnership was valid since it was entered into for a single adventure or undertaking.  [H]- there was no evidence that the partnership business was entered into for a single adventure or undertaking.
  • 19. Contd.  4. Dissolution by notice.  Where a partnership has been formed for an indefinite period of time, the partnership can be dissolved by a partner simply giving notice of his intention to do so to the other partners. The partnership will then be dissolved as from the date mentioned in the notice as the date of dissolution or, if no date is mentioned, as from the date of the communication of the notice.
  • 20. Contd.  Teoh Swee Hee v Tio Hock Thye & Ors (unreported, 26 November 1996; Civil Suit No 22225 of 1991), [1996] MLJU 409.  [H]- The court found that the plaintiff's notice to retire vide the newspaper advertisement was effective and the partnership being a partnership at will, it was therefore determined upon its service on the defendants, under s 34(2). The court held that since the defendants in that case had failed to render the true accounts of the partnership assets, the plaintiff was right in taking the further step to dissolve the partnership under s 34(1)(c).
  • 21. Contd.  Arif v Yeo & Anor [1990] 1 MLJ 218.  [H]- The partnership was a partnership at will; as such the partnership was dissolve on the date of the service of the writ on the first defendant. The court referred to Unsworth v Jordan [1896] WN 2, Harris v Burgess & Thorne [1937] 4 DLR 219 and Phillips v Melville [1921]NZLR 571.  Any partner giving notice to the other: Sukhinderjit Singh Muker v Arumugam Deva Rajah [1998] 2 MLJ 117.  [H]- A legal firm was held to be dissolved by the giving of notice of dissolution by one partner to another.
  • 22. Contd.  [H]- If a partner gives notice to determine on a given date     and dies before that day, the partnership is dissolved by death. Date of communication of notice: Arif v Yeo & Anor [1990] 1 MLJ 218. [H]- The effective date of dissolution is the date of service of the notice. McLeod v Dowling (1927) 43 TLR 655. [H]- If a partner dies before receipt of notice signed by him, the partnership is dissolved by death.
  • 23. Section 35 PA 1961.  Section 35; dissolution by bankruptcy, death or charge.  “(1) Subject to any agreement … partnership is dissolved … death or bankruptcy of any partner.  (2) … at the option of other partners … any partner suffers his share … charger under the Act for his separate debt.”  Unless otherwise agreed between the partners, every partnership is dissolved as regards all the partners by the death or bankruptcy of any partner.
  • 24. Contd.  1. Subject to any agreement.  If an agreement to the contrary is made, such agreement must have been made prior to the death of the partner.  otherwise, the agreement is not binding on the deceased partner and the partnership must be dissolved accordingly.  Pembinaan Thin Chai Sdn Bhd v Citra Muda Sdn Bhd & Anor [2002] 3 MLJ 107.
  • 25. Contd.  The agreement between the partners not to dissolve the partnership either by death or bankruptcy of a partner may be oral or inferred from the conduct of the surviving partners and the heirs of the deceased partner.  Khoo Yoke Wah & Ors v Lee Choo Yam Holdings Sdn Bhd & Ors [1991] 1 MLJ 414 at 415, SC.
  • 26. Contd.  [H]- (per Gunn Chit Tuan SCJ): While partners have a duty to render accounts to the legal representatives of deceased partners, the converse does not apply. The Partnership Act 1961 S.30 does not provide that the personal representative of a deceased partner is bound to render accounts.
  • 27. Contd.  2. Partner's share in the partnership is charged for his separate debt.  Where a partner's share in the partnership is charged for his separate debt, the other partners may, at their option, decide to dissolve the partnership.  Section 25(2).
  • 28. Section 36 PA 1961.  Section 36; dissolution by illegality of partnership.  “… partnership … dissolved … happening of any event which makes it unlawful …“  If the business of the partnership becomes illegal for whatever reason, the partnership may be dissolved by the happening of any event which makes it unlawful for the business of the firm to be carried on or for the members of the firm to carry it on in partnership.
  • 29. Contd.  It is immaterial whether the partners knew of the illegality or not.  Hudgell Yeates & Co v Watson [1978] QB 451, [1978] 2 All ER 363, CA (Eng). *  [F]- One of the members of the firm carrying on business as solicitors allowed his practising certificate required under the relevant English legislation to lapse.  [H]- This event brought about the dissolution of the partnership regardless whether the partners knew of the lapse of the certificate or not.
  • 30. Section 37 PA 1961.  Section 37; dissolution by the court.  “ … court may decree a dissolution … :  (a) … lunatic … of permanently unsound mind … ;  (b) … permanently incapable … ;  (c) … guilty of such conduct … affect prejudicially … business;  (d) … breach of the partnership …;  (e) … business … carried out at loss; and  (f) … just and equitable that the partnership be dissolved.”  A partnership may be dissolved by the court on the application of a partner.
  • 31. Contd.  Thein Hong Teck & Ors v Mohd Afrizan bin Husain and another appeal [2012] 2 MLJ 299.  [H]- Part V of the Partnership Act 1961 deals with the dissolution of partnership. The court may decree a dissolution of a partnership under s 37 of the Partnership Act 1961. However, it must be noted that the application can be made only by a partner of a partnership. A creditor such as the respondents in the instant case cannot make an application under that s 37 to dissolve a partnership.
  • 32. Contd.  Grounds for dissolution of a partnership have included refusal to meet on matters of business, continued quarrelling and such a state of animosity as precludes all reasonable hope of reconciliation and friendly co-operation.  In practice, the fact that such an application is made and the other partners' response to it, may lead, directly or indirectly, to an inference that there is no longer mutual trust and confidence between the partners.  Appointment of interim receiver: Where a partnership is still subsisting, a receiver will only be appointed
  • 33. Contd.  1. Lunacy or unsoundness of mind.  Court may decree a dissolution.  Applicant must satisfy the court regarding the mental state of the partner in question.  Permanently unsound mind.  The application to the court may be made by a committee on behalf of the partner found to be lunatic, his next friend or a person having title to intervene as by any other partner.
  • 34. Contd.  2. Permanent incapacity.  Partner is permanently incapable (other than being lunatic) of performing his part under the partnership contract.  Partner making the application (ie the partner suing) must be a partner other than the partner who is found to be permanently incapacitated with regard to his duties under the partnership contract.
  • 35. Contd.  It should be noted that the emphasis in this provision is 'permanent incapacity' and as such, an application to dissolve the partnership can only be made where it can be shown that the partner in question has been rendered permanently incapable of carrying out his duties under the partnership contract.  In the event of a temporary incapacity, such temporary incapacity will not form a sufficient ground for his co-partners to apply to the court for a decree dissolving the partnership.
  • 36. Contd.  3. Conduct prejudicially affecting the partnership business.  Misconduct by one or more partners.  The carrying on of the partnership business is affected prejudicially.  The court will also have regard to the nature of the partnership business in determining whether such conduct, in the opinion of the court, is calculated to affect prejudicially the operations of the business.
  • 37. Contd.  The conduct in question must be conduct which is prejudiced as against the partnership business, and not of a personal nature.  Snow v Milford (1868) 18 LT 142.  [F]- One of the partners committed an adultery towards another partner.  [H]- The adultery of a partner was conduct insufficient to warrant expelling that partner or dissolving the partnership.
  • 38. Contd.  Dishonesty could be construed as conduct prejudicially affecting the carrying on of a partnership business which would then entitle the other partners to apply to the court for a decree of dissolution.  Carmichael v Evans [1904] 1 Ch 486.  [F]- A partner in a drapery business was served with a notice of expulsion in consequence of his conviction for travelling on a railway without paying his fare and 'with intent to avoid payment thereof„.  [H]- Of first instance inclined strongly to the view that the notice was valid.
  • 39. Contd.  4. Willful breach.  Where a partner willfully or persistently commits a breach of the partnership contract or otherwise conducts himself in matters relating to the partnership business such that it is not reasonably practicable for the other partner or partners to carry on the partnership business with him, the other partner(s) would be entitled to apply to the court for a decree of dissolution of the partnership.
  • 40. Contd.  Breach concerned must be willfully made or persistently done such that the continued relationship as between the partners is sufficiently jeopardized.
  • 41. Contd.  5. Carrying on the partnership business at a loss.  When the business of the partnership can only be carried on at a loss, the court may, on an application by the partners, decree a dissolution of the partnership.  This provision reflects the basic definition of a partnership whereby the partners are in business with a common view to profit.
  • 42. Contd.  The court will decree a dissolution under this provision where there is a practical impossibility of making a profit and this impossibility must be proven.  Handyside v Campbell (1901) 17 TLR 623.  [F]- The plaintiff applied to the court for a decree of dissolution on grounds that the partnership could only be carried on at a loss. The other partners admitted that there was a loss at that time but alleged that it was owing in part to past mismanagement by the plaintiff and in part to his long absence from business due to illness and that his absence still continued.
  • 43. Contd.  [H]- The evidence did not amount to a practical impossibility of profit and refused to grant a decree of dissolution.
  • 44. Contd.  6. Just and equitable grounds.  The court will grant a decree of dissolution where circumstances have arisen which, in the opinion of the court, render it just and equitable that the partnership be dissolved.  In deciding whether a partnership ought to be dissolved on just and equitable grounds the court will scrutinize wholly.  Lee Lay Lay v Wong Yiik Tai (unreported, 24 May 2007 Originating Summons No 24-433-2005-I), [2007] MLJU 585.
  • 45. Contd.  [H]- Where the application to dissolve the partnership is made on 'just and equitable' grounds which are seriously disputed, it would be wrong or inappropriate for the court to decide the issue purely on affidavit evidence.  The court has taken an approach similar to considering whether a company incorporated under companies legislation should be wound up on just and equitable principles.
  • 46. Contd.  Re Yenidje Tobacco Co Ltd [1916] 2 Ch 426at 430, CA (Eng).  [H]- the circumstances which would justify the winding-up of a partnership are circumstances which should induce the court to exercise its jurisdiction under the just and equitable clause and to wind-up the company.
  • 47. Section 38 PA 1961.  S.38(1); Right of person dealing with firm against apparent member.  “….person deals with a firm after a change in its constitution…  entitled to treat all apparent members of the old firm as still being members firm….  …until he has notice of the change.”  Michael Sim Hang Chuang v Syarikat Sri Puspa & Ors [2000] 6 MLJ 189. [H]-Defendant was entitled to treat the plaintiff as still being member of the first defendant because there was no proper notice of the change in the first defendant's constitution.
  • 48. Contd.  S.38(2) ; Right of person dealing with firm against apparent member.  For persons who have had no dealings with the firm before the date of the dissolution or change, an advertisement (the Federal Gazette , Sabah Gazette & Sarawak Gazette ).  Will constitute sufficient notice of any change in the constitution of the firm.  Ang Lay Sim v Choo Lay Poh [2004] 8 CLJ 7. [F]- The appellant failed to show that she had given any notice to the respondent of the dissolution of the partnership, whether in the form of special
  • 49. Contd. [H]- Mere notice to the Registry of Businesses was held to be insufficient that the appellant must continue to be treated as a partner and was liable for the firm's debts by reason of s 11.
  • 50. Contd.  S.38(3) ; Right of person dealing with firm against apparent member.  a partner who dies or who becomes bankrupt, or of a partner who, not having been known to the person dealing with the firm to be a partner, retires from the firm  he ceases to be liable for further debts contracted by the firm with that person  before the retirement of a partner, that partner will not cease to be liable for such debts or liabilities
  • 51. Contd.  S.39 ; Right of partner to notify dissolution.  …entitled to notify the public regarding the dissolution of the partnership or his own retirement or the retirement of a partner.  to protect the retiring partner from any debts or liabilities of the firm following his retirement.  Chop Yew Seong, ex p Sri Sundari Palayakat Co [1958] MLJ 239. [H]- When a known partner retires, or a partnership is dissolved, notice of that fact must be given to the world at large by advertisement, and to old or existing customers by specific notice.
  • 52. Contd.  S.40 ; Continuing authority of partners for purpose of winding-up.  …the authority of each partner to bind the firm and the other rights and obligations of the partners will continue  …to wind-up the affairs of the partnership and to complete transactions begun but NOT finished at the time of dissolution..  partners are not authorised to enter into any other sort of arrangement after the dissolution of the partnership.  The Chartered Bank v Yong Chan [1974] 1 MLJ 157. [H]- existing relationship of banker and the partners would continue but only for the purpose of completing transactions begun but unfinished at the time of dissolution.
  • 53. Contd.  S.41 ; Rights of partners as to application of partnership property.  ….property of the partnership applied in payment of the debts and liabilities of the firm….  …surplus assets …applied in payment of what may be due to the partners respectively…
  • 54. Contd.  Mohamed Ismail Mohamed Shariff v Zain Azahari Zainal Abidin & Ors [2010] 5 CLJ 153, CA. [F]- Upon a partner's retirement from the partnership, his entire share in the firm must be dealt with, irrespective of whether it is an 'absolute share' or not, in the absence of any unequivocal agreement to the contrary which is not illegal or against public policy.
  • 55. Section 42 PA 1961.  S.42; Apportionment of premium where partnership prematurely dissolved.  “…..the court may order the repayment of the premium or of such part …  …regard to the terms and to the length of time during which the partnership has continued.”  The court will NOT order the repayment of the premium : the dissolution wholly or chiefly due to the misconduct  partnership agreement containing no provision for a return of any part of the premium
  • 56. Section 43 PA 1961.  S.43; Rights where partnership dissolved for fraud or misrepresentation.  “…partnership contract is rescinded on the ground of the fraud or misrepresentation of one of the parties thereto…”  …. entitled to rescind is, without prejudice to any other right..” 1. 2. 3. to a lien on, or right of retention of, the surplus of the partnership assets to stand in the place of the creditors of the firm for any payments made by him in respect of the partnership liabilities to be indemnified by the person guilty of fraud or making the representation against all the debts and liabilities of the firm
  • 57. Section 44 PA 1961.  S.44; Rights of outgoing partner in certain cases to share profits made after dissolution.  Where a partner dies or otherwise ceases to be a partner..  …the surviving or continuing partners carry on the partnership business with its capital or assets without any final settlement ..  …the rate of 8 per cent per annum on the amount of his share of the partnership assets…  …subject to there being no agreement to the contrary between the outgoing partner or his estate and the firm.
  • 58. Section 45 PA 1961.  S.45; Retiring or deceased partner's share to be a debt.  any amounts due to an outgoing partner or representatives of a deceased partner..  …such amount will be construed as a debt owing as at the date of dissolution or death of the partner..  This position may be varied upon mutual agreement of the parties
  • 59. Section 46 PA 1961.  S.46; Rules for distribution of assets on final settlement of accounts.  In settling accounts between partners after dissolution of the partnership, the following rules are to be observed:1) all losses must be paid first out of profits, next out of capital, and lastly, if necessary, by the partners individually in the proportion in which they were entitled to share profits 2) the assets of the partnership (including the sums, if any, contributed by the partners to make up losses or deficiencies of capital) must be applied in the following manner and order: a) payment of the debts and liabilities of the firm owing to persons who are not partners, b) payment to each partner rateably what is due from the firm to him for advances as distinguished from capital,
  • 60. Contd    c) payment to each partner rateably what is due from the firm to him in respect of capital;4 and d) the ultimate residue if any, to be divided among the partners in the proportion in which the profits are divisible partnership is dissolved and after the debts to third parties have been paid and advances made by partners have been repaid the assets are insufficient to repay each partner his capital in full, any deficiency must be borne by the partners in the same proportion as the profits would have been divided Garner v Murray [1904] 1 Ch 57. [H] each partner was liable to contribute one-third of the deficiency because this was the proportion in which the profits were divisible.

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