Sec 21 Duties can be varied or changed by consent of ALL partners express or inferred
If one of the partners could not paid off his liability(maybe due to insolvency), the other partners are under no duty to pay/make contribution for him. Garney v Murray A partnership was formed on the terms that the capital should be contributed by 3 partners in unequal shares but shall received equal shares of net profits. A deficit arose by default of one partner who failed to contribute his share of deficiency- I.e. a deficit arose. Qn: How this deficiency should be borne. Further held nothing in PA 1890 which hold a solvent partner liable to contribute for an insolvent partner who failed to pay his share.
# 1 A lease hold was given to C & M(partners). They transferred the lease to the company they formed. C died and followed by M. The lessor sued the plaintiff(M’s executor) for arrears of the rent and breach of covenants in the lease. The firm was insolvent and the action was settled by surrender of the lease and payment of a certain amount. Plaintiff claimed a contribution from the defendant(C’s executor) for the payment made. Held: Action succeeded. Payment was a partnership debt. #2 The respondent was a partner who succeeded to lessen the business debt. When the partnership was dissolved, the court ordered the other partners to indemnify the respondent for the performance of the excellent duty
Facts: Parties formed a p’ship for the purpose of operating a cinema. The App. was entrusted with the management of the cinema. In 1957, the cinema was damaged by fire and the firm suffered loss as the fans in the cinema was not insured and the insurance against workmen’s compensation was inadequate. The other 2 parties sued the appellant for breach of duty. Held: Liability should be shared although there was breach of duty on the part of the App. The App. Is not personally liable by mere breach of duty.
If a partner is appointed as a receiver (dissolution) –entitled for a remuneration for extra work rendered.
#1 2 partners quarrel. So only one partner attended the partnership business. Ultimately the partnership dissolve.Should he be paid. Held: Should be paid remuneration for the extra burden incurred.
Clause in the partnership provides ‘ a partner has power to nominate his son as a partner’ A partner did so but other partners refused to accept him. COA: The clause was so wide and contained no restriction. The partners are considered to have consented in advance to the sons nomination.
#1 3 partners. One of the partners applied for injunction to prevent the other two partners who had resolved to introduce into the partnership a son of one of them with the purpose of learning the business. Held: Differences between the partners was an ordinary matter, thus should be determined by majority. #2 One of the partners in the firm was not inform in the sale of the partnership. i.e. change in the nature of the business. Held: As the plaintiff had not consented and aware of the sale of the partnership. The sale was ineffective. Partnership exist until the date when the plaintiff was informed.
#1 Sleeping partner wanted to sell his interest to the managing partner. He employed a valuer to inspect the partnership book. Managing partner – valuer has no right to do so.The sleeping partner applied for an injunction. Held: Granted. Right of inspection could be delegated to an agent provided: He was a person accepted by all partner (no reasonable objection frm them) Undertake that he will not use the information gather for any other purposes #2 the above decision was approved Facts: An independent accountant was appointed by a partner Held: An agent of a partner has a right to inspect and make copies of the firm’s book if…
Facts: Partnership of 3 partners. A clause in PA provides “If any partner shall commit or be guilty of any act of professional misconduct…the other partners may by notice in writing given to him …expel him from the partnership” One of the partners served on the other two partners a notice that expel them on the ground of misconduct. Held: One partner cannot exercise the power so as to expel, eventhough they may be guilty of misconduct. He must join with anyone of the other two partners.
Barnes v Young A clause allowed the majority to expel a partner for breach of certain duties and in case of dispute the matter should go to arbitration. The majority expelled B but give no detail about the act complained of. Romer J: Expulsion was unlawful. Good faith requires that B should be informed about the cause of complaint and he should be allowed to answer the allegation. Green v Howell Facts are similar with the above. The facts provided that the act of expulsion was done in good faith. H: not necessary to disclose the reasons and causes of his flagrant act.
To do things in the interest of the firm, not personal interest. Reveal all knowledge, being honest and does not compete with the partnership business.
Exception: Transaction is valid if the partner who is entitled to repudiate the agreement, knows that the material facts have been concealed, deliberately elect to stand by the agreement without insisting on his right to full disclosure.
However in this case a settlement of the claim had been made and the partner had elected to be bound by it. So the transaction would not be set aside.
Good faith requires a partner not to obtain any private advantage at the expense of the firm. A partner is not at liberty to use information acquired as a partner or/and to acquire gain at the expense of his co-partners without their full knowledge and consent either by directly making a profit or appropriating benefit which ought to have been acquired for the firm. Example: If a partner is selling or buying for the firm, he cannot sell to it or buy for it at a profit for himself.
Example:Purchase property which the partnership intended to purchase or renewed lease for himself which originally belonged to the firm. #1 Partnership – refining sugar. A partner was employed to buy goods for the firm. He supplied to the firm at market price good previously bought by him at a lower price.He make considerable profits. Can he keep the profits? #2 A partner renewed lease which originally belonged to the partnership
Partnership selling Caltex oil(agent of Caltex). Differences arose with one of the partners who subsequently gave notice to dissolve the partnership. Before the notice expired, without the knowledge of other partners he entered into an agreement with Caltex and carried on the business of selling Caltex oil by himself. He did not account the profits made to the other partners. The other partners claimed for the profits.
Relation of Partners with One Another
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.