Partnership property in the law of Partnership. This subject is taught under company law II at kulliyah of law at IIUM

1. Partnership propertyPartnership property

2. Property in a partnership biz
• Belong to the firm
i.e by partners as partners
• Belong to the partner as individual.
- by an agreement the property is allowed to
be used for partnership business.

3. Partnership Property
• Any property belonging to the partnership and
all the partners are entitled to it and can deal
with it in the performance of the partnership
business.

4. Section 22(1) – Existence of PP
• Originally brought into the partnership stock,
i.e brought as the capital.
• Acquired by purchase or otherwise on the
firm’s account.
• Acquired by purchase or otherwise for the
purpose and in the course of partnership
business.

5. • If the partnership agreement has clearly stated what
is/is not pp – no problem.
• If the partnership agreement fails to identify which is
pp then reference has to be made to sec 22 as a
guidance.
• Circulating capital like stock in trade is pp.
• Freehold/leasehold is fixed capital – might have
problem.
• # 1- circumstances of acquisition, when obtained.
• #2 &3 – purpose(matter of convenient) and mode in
which it has been dealt with.

6. Section 22(1) – Nature of a partner’s
interest in the property
• Should be held for partnership purposes and
in accordance with the partnership
agreement.
- every partner is consider to have interest in the
pp.
- All pp held by the partners as co-owners.
- Thus pp must not be used for private purposes.

7. Miles v Clark
F: P and D- partners – photographers. Both
contributed to the stock in trade. The
leasehold premises, furniture and studio
equipment belonged to the D. They intended
to enter into an agreement to treat the above
as PP but failed.
Upon dissolution, what are PP?

8. Miles v Clarke
H: No terms ought to be implied except those
essential to the business efficacy. Therefore
only the consumable item of stock in trade
were to be regarded as PP.
Note: It is a general rule that stock in trade is
more likely to be treated as PP.

9. N.B. Menon v Abdullah Kutty
F: K and M were partners running a restaurant
in Kelantan. K was the tenant-living in Johore
and M managed the restaurant. Later there
was a dissolution.
Issue: Who was the tenant K or P’ship?
H: K had not assigned the tenancy to the
partnership. The tenancy was a personal
asset. Not PP.

10. Tan Kiaw & Gian Singh v Nahar
H: The tenancy was granted to the partners and
not to the partnership. Thus tenancy was not
PP.
In tenancy though the premise is used to carry
on the partnership business it is not
necessarily be considered as PP.
Privy Council in Gian Singh:Property used for
partnership purpose was not necessarily PP.

11. Malaya Café Bar & Restaurant
H: The tenancy belonged to the partnership.
The facts of the case showed that the partner
through out the period had regarded the
premise to be inseparable from his business
and he had accordingly treated his tenancy as
partnership asset after he formed the
partnership.

12. Ponnukon v Jebaratnam
F: App formed a p’ship to develop a land. The
p’ship failed to obtain bank loan to buy the
land. Later the Resp (p’ner) bought the land
with his own money. The App sought a
declaration that the land was held in trust for
the partnership.

13. Ponnukon v Jebaratnam
H: The land was paid by the Resp and it was
clearly his separate property. The fact that the
object of p’ship was land development, did
not necessarily mean that the land must be
owned by the firm. Furthermore there was no
agreement between the p’ners that the land
was to b purchased & treated as PP.

14. Tay Guan Ho
F: Prop. Bought in a p’ner’s name. Treated it as
his own & tranferred to App. Resp(p’ner)
claimed that App hold it in trust for the
benefit of all partners.
H: Not PP. The deceased partner had treated the
property as his own from the very beginning.

15. Sec 22(2)- Subsequent land bought using
P’ship money
Where partners are co-owners of a land which is
not PP, but share the profits from the land as
p’ners & later bought other land using the
shared profits and used in the same manner.
The presumption is that the subsequent land is
not PP.

16. Davis v Davis
F: A father left freehold business premises to his
son. The sons carried on business & borrowed
money by mortgaging the premises and used
it to expand the workshop.
H:There was a partnership in the business, but
not the premises.

17. North J: (applying Sec 22(2))
The improvement remained outside the partnership,
there was no evidence that the parties had such an
intention.
Here the expansion of the workshop was not paid by a
cheque drawn on the firm’s account, but by a loan
on the security of property which did not belong to
the firm but rather to the partners as joint owners.

18. Exception
• However if the land heavily involved with the
partnership business it is regarded as PP.
• Waterer v Waterer
• Jackson v Jackson

19. Waterer v Waterer
F:A man carried on nursery business on a land.
Devised all his property to his three sons.
After his death, the sons continued the
business and bought some more land for the
purpose of the business and paid it out of the
father’s estate. Later one of the sons died.
Issue: Whether the land is PP.

20. H: All the land (left by the will & later purchased) – PP.
James LJ: The property was so intimately mingled with
the business that it became an integral part of the
partnership business activity.
Basis: in a nursery gardening business it is impossible
to separate the land from the business.

21. Jackson v Jackson
F: A man devised to his two sons jointly his
trading business and land used by him for the
purpose of carrying the business. The sons
took the business and carried it in partnership.
H:The lands form part of PP.
A trading business was left to them and the land
was necessary for that trade.

22. Section 23
• Where the prop was bought with the firm’s
money then the property is deemed to be PP ,
although in the name of a partner.
Cases:
Ponnukon v Jebaratnam
Jones Jones
Wray v Wray
• Deemed: raised the presumption. Not
automatically PP.
• Refers to money which is actually PP.

23. Jones v Jones
F: The partnership bought a shop out of
partnership profit to be used for the business.
H: Since the property(shop) had been acquired
out of the partnership profits and used for
partnership business, it was PP.

24. Wray v Wray
F: The partnership was carried on in the name
William Wray( one of the partners). Later the
partners bought few properties paid out of
the partnership assets. The property was
conveyed to WW.
Issue: The identity of WW, firm or
individual.
H: PP. It was conveyed to the partnership.

25. Sec 25(1)procedure against
partnership property
• A writ of execution against PP will only be
applicable when the judgment has been made
against the firm.
Case: Peake v Carter

26. • F:P&B-partners, bought some property which
include a machinery. The purchase price of the
machinery was paid by P. C obtained judgment
against B in respect of a debt. The Sheriff seized
the machinery to satisfy the judgment. P claimed
it was his.
• H: Even if P failed to prove that the machinery
was his, execution could not be issued against the
machinery except on a judgment against the firm.

27. Peake v Carter
• F:P&B-partners, bought some property which include
a machinery. The purchase price of the machinery
was paid by P. C obtained judgment against B in
respect of a debt. The Sheriff seized the machinery
to satisfy the judgment. P claimed it was his.
• H: Even if P failed to prove that the machinery was
his,execution could not be issued against the
machinery except on a judgment against the firm.

28. Sec 25(2)- personal debt of a partner
A private creditor may apply for court order:
1)To charge that partner’s interest in the PP
2)Appoint a receiver for that partner’s share of
profits
3)To direct all account and inquiries.

29. Option for other partners
• Sec 25(3)
• Sec 35(2)