PARTNERSHIP

 According to Section 3(1) Partnership Act:

 Partnership is the relation which subsists

between persons carrying on business in
common with a view of profit.
 Relationship between persons
 there must be a relationship between the
partners.
 Acc. to Section 47(2):
 partnership must consist of more than a
person and not more than 20
 professional firm like lawyers and
accountants, members of not more than 50.
CASE:

 Tan Teck Hee v Cheng Tian Peng

 Carrying business with 25 members was not
a valid partnership. Cannot take legal action
 Carried on business in common
1. Carried on business means:
 is carrying on business (√) not will carry a
business (х).
 there must be a series or repetition of act
which constitute business (continuity in
business transaction)
 Carried on business in common
CASE:
Keith Spicer Ltd v Mansell
FACT: The defendant and Mr. X plan to have a business in the form of a
limited company. Prior to the incorporation, Mr. X order goods from the
plaintiff's company (supplier) intending to used it in the company's business.
The goods were delivered to the defendant's address. The defendant and Mr.
X had open an account in the name of of the proposed company, but the
account was never used by them. Mr. X subsequently become insolvent and
the supplier sued the defendant for the price of the goods on the ground that
the defendant and Mr. X were carrying on business together
ISSUE: Whether parties who get together to form a company will be
considered as partnership or not
HELD: The fact that they were working together to set up a company does
not make them doing business with a view of making profit, hence, there is
no partnership agreement
 Carried on business in common
2. In common means:
 Business must be made jointly between
partners
 Alternatively, business can be made on behalf
of all of the partners
 It is not important to whom handle the
business
 Carried on business in common
2. In common means:
CASE:
Checker Taxicab Ltd v Stone
FACT: Taxi owner hired a driver on the basis of daily contract. Based on
the agreement, the driver had to bear the cost of running the taxi but at
the same time he is permitted to used the facilities of the owner's
garage. It was also agreed that the driver had to return the taxi in good
condition and pay the owner of the perceantage of the daily income
ISSUE: Whether they are doing a business in common or together
HELD: Even though there is a kind of relationship between the owner
and the taxi driver but it did not satisfied the element of partnership
 With a view of profit
 Profit means net profit (revenue – expenditure)
 The business must be made for the purpose of
making profit
 Each partner has a share a profit.
 Non profit organization which are purposes on
charitable, religious, societies, clubs not considered
as partnership.
 Example: SUHAKAM, Pengasih, PERKIM
 Sec. 4(a): Joint tenancy, tenancy in common, joint property.
 It means ownership of property by two or more persons
does not imply the existence of partnership.
 Example:
 Situation 1:
 Ali and Hassan own a four-storey shophouse and they are
merely share the rental derived from the shophouse and
nothing else, Ali and Hassan are not partners.
 Situation 2:
 However, if Ali and Hassan run a departmental store in the
shophouse and they put in capital and run the business with
a view to making profits, so they are partners.
 Sec. 4(a): Joint tenancy, tenancy in common, joint property.

CASE:
Davis v Davis
FACT: A father left his 2 sons his business and 3 houses. 2 of the
houses were occupied by the son and the other house were rented
out. The profit made from the rented house will be divided equally
ISSUE: Whether there is a partnership formed by the 2 sons for
the rented house
HELD: The court held that the business left by their father made
them partners, but, for the rented house in relation of income or
profit, there are no partnership as there is no element of business
 Sec. 4(b): Sharing of gross profits

CASE:
Cox v Caulson
FACT: The defendant (D) and Mr. Mill has agreed that the later will
provide theater, pay for the lighting and pat they play bill. He was
to receive 40% of the gross profit. Mr. Mill was to provide and pay
for theatrical company and provide scenery receive the remaining
60% of the gross return. Problem arose when the plaintiff (P) was
injured when he was accidentally shot by one of the actor during
the performance. P then sued D and Mr. Mill claiming that they are
partners.
HELD: The D is not liable because he was not a partner pursuance
to the Partnership Act 1890 and it is equivalent to Section 4(b) of
Malaysia's PA
 Sec. 4(c): A person who receives a share of profits (net
profits) is a partner. However, there are special situations
whereby the receipt of the share of the profits does not
qualify the person to be a partner.
 Sec. 4(c)(i) : Payment by installments

 A person received payment from the profit of a business is not a

partner when he gives loan for that purpose of business A creditor
getting back from his loan from the partner of the debtor's
business does not make him a partner .

 Example situation - B need to start a business and apply for a

loan. Creditor has loan some money to B. B pay back the loan
using profit from his business. Even though the creditor received
profit from B's business, they are not partner
 Sec. 4(c)(i) : Payment by installments
CASE:
Badely v Consolidated Bank
FACT: Plaintiff (P) had borrowed certain amount of money
from Defendant (D) to construct a railway project. In order to
secure the loan, a charged was created. Further, D will
charge 10% interest and 10% nett profit derive from the
project.
HELD: P and D are not partner even though D is entitled for
the nett profit of the business
 Sec. 4(c)(ii) : Payment of servants / agents
 Example situation - A employed B and pay the salary. If B
bring project to A's company, B will received commission
from the net profit of the project. Any payment/commission
to B under any arrangement does not made him partner's to
the partnership
 Sec. 4(c)(ii) : Payment of servants / agents
CASE:
Walker v Hirsch (1884)
Facts: P lent money to H & Co which was controlled and owned by
two persons. P signed an agreement with H & Co. which provided
that P would be paid a salary and one-eighth of the profits and
losses and the agreement could be determined with four months’
notice. P, who was a clerk, continued as such in H & Co. after the
agreement.
Held: P was merely a servant and was not a partner.
 Sec. 4(c)(iii) : Annuity to the widow or children of a
deceased (pass away) partner.
 Example situation - Joe was a partner of Syarikat Rich
Men’s Tailor. Joe passed away recently. Joe’s widow, Jenny,
and her children, Jim and John, receive from Sykt. Rich Men’s
Tailor, an annuity which is portion of the profits made by the
firm. Jenny and her children are not partners of the firm even
though they receive part of the firm’s profits.
 Sec. 4(c)(iii) : Annuity to the widow or children of a deceased
(pass away) partner.

 CASE:
 IRC v Lebus's Trustee
FACT: The deceased had leave a will to give a share and profit in
the partnership to his wife. Later, the government has imposed tax
to the wife on the ground that she is a partner in the partnership
HELD: She is not entitled to pay the tax even though she received
share and profit as she is not a partner in the partnership
 Sec. 4(c)(iv) : Loan given with a rate of interest varying
with profits.
 Example situation - Sally lends RM30,000 to Alison and
Bobby who intend to operate a chain of burger stalls. Sally
enters into a written contract with Alison and Bobby that
Sally will be repaid RM30,000 as well as 15 per cent interest
on the said sum if the profits derived in a year exceed
RM30,000, 10 per cent interest if profits exceed RM20,000
but less than RM30,000 a year, and 5 per cent interest if
profits made are less than RM20,000 but more than
RM10,000 a year, and no interest if profits made a year are
less than RM10,000. By virtue of this arrangement alone,
Sally is not a partner.
 Sec. 4(c)(iv) : Loan given with a rate of interest varying with
profits.
 CASE:
 Re Young v Jones
FACT: Lloyd has given Young a loan for £500. based on the
agreement agreed by both parties, Lloyd will received £3 per week
from Young, Lloyd will assist in the management of the
partnership, and was given a chance to enter into the partnership
within 7 months from the date of the agreement. Nevertheless, he
refuse to join the partnership
HELD: The court held that, Lloyd is not a partner as he refuse to
join in
 Sec. 4(c)(v) : Sale of goodwill
 Example situation - A sell his business to B. When he do
this, he is not only selling his business, but he is also selling
the reputation of the business to B. If A received profit from
the goodwill, this will not make him partner to B
 Sec. 4(c)(v) : Sale of goodwill
 CASE
 Pratt v Strick
FACT: A man sold his practice and goodwill to another
professional man. In the agreement, it was agreed that he
will continue to received profit
HELD: The court held that, the man was not a partner
 Each partner has the duty of good faith to the other partner
in the partnership
 Duties of a partners are laid down under section 30, 31 and
32 of PA
i. Duty to render true accounts and full information

 Section 30 of Partnership Act

 Partners are bound to render true accounts and full
information about the partnership business
 In a simple way what ever that you do in the partnership,
you need to do it with sincerity, faithful and committed
i. Duty to render true accounts and full information
CASE:
Law v Law
Facts: A partner (P) sold his share in the partnership to another
partner (D) for £21,000. Subsequently he discovered that,
unknown to him, the partnership assets included mortgages and
other securities. The other partner (D), who knew about them,
never told him of this fact. The partner (P) who sold his share
sought a court order for the sale and purchase agreement to be
set aside.
HELD: The court held that D has a duty to disclose all material facts
with reference to the assets.
ii. Accountability of partners for private profits.

 Section 31 of Partnership Act

 Every partner must account to the firm for any benefit
derived by him, without the consent of the other partners,
from any transaction concerning the partnership or from
any use by him of the partnership property, name, or
business connection.
ii. Accountability of partners for private profits.
CASE:
Pathirana v Pathirana
FACT: Both plaintiff (P) and the defendant (D) are partners in a
partnership. The partnership belonged to a company who has
appointed them as an petrol selling agent of the company (Caltex
Ceylon). D gave 3 months notice to terminate the partnership, but
negotiated a new agreement with the company to transferred the
agency into his own name. Not only that, he also continued to trade in
the same way at the same premises of the previous partnership
HELD: The court held that P was entitled to a share in the profits form
D business. the agency agreement was a partnership asset and D's use
of it was a breach of fiduciary duty
iii. Duty of partner not to compete with firm

 Section 32 of Partnership Act

 If a partner, without the consent of the other partners,
carries on any business of the same nature as and
competing with that of the firm, he must account for and
pay over to the firm all profits made by him in that business.

 CASE: Trimble v Goldberg

Section 26 (a) – (i), Partnership Act
 The meaning of partnership property:
 property that has been brought in originally into the
partnership
 used in the course of the partnership business
 applied by the partners exclusively
 accordance with the partnership agreement.

 Property bought using the partnership money is a

partnership property unless there is a contrary intention
CASE:

Wray v. Wray (1905)

Facts: Joseph Turnbull and William Wray together with his sons, Henry Wray
and William James Wray, formed a partnership under the name ‘William
Wray’. William Wray died in 1885 and his widow become a partner. In
1890, the partners bought a house out of the partnership assets and the
property was conveyed to ‘William Wray’, this name being signed by
Henry Wray with the concurrence of the other partners. Henry Wray died
in 1902. The three continuing partners sought a declaration that the
conveyance of the house to William Wray passed to the persons carrying
on business under the name of ‘William Wray’ because it had been
purchased out of the partnership assets.
Held: The declaration was granted.
CASE:
Miles v Clarke
FACT: the defendant (D) was a professional photograph who
carried on his business at premises which he lease for 7 years from
1948. 2 years later, he entered into a partnership with the plaintiff
(P). When the partnership broke up due to a dispute arose
between them, P alleged that consumable stock-in-trade, the
personal connection brought in by each partner, the lease of the
premises and the furniture, fitting, and equipment of the studios
shall be regarded as the partnership property
ISSUE: Whether the premises can be considered as the
partnership property
HELD: The court held that only consumable stock-in-trade
belonged to the partnership property
 Authorities of partners:
EXPRESS / IMPLIED AUTHORITY
Actual authority which have been
mentioned either in the partnership
agreement or orally or from the conduct
of the parties.
APPARENT / OSTENSIBLE AUHORITY
The partners hold out to the others
that he has the authority even
though in fact he does not have the
authority
 Section 7 of PA stated that every partner is an agent for the
partnership (other partner) and his firm
 The principle (other partner) is bound by the act of the
agent if the agent acted within his authority / ordinary
course of the business (apparent authority).
 What is Ordinary Course of the business?

i. pledging or selling partnership goods

ii. buying goods on the firms name,
iii.burrowing money
iv. contracting debts and paying it back
v. drawing, marking, signing, endorsing, or accepting
negotiable instrument
vi. employment of staff
CASE:
Merchantile Credit Co. V. Garrod (1962)
FACT: P and G were partners in a firm which carried on a garage
business. Their partnership agreement stated that their usual
scope of business would exclude the buying and selling of cars. P,
without G’s authority, sold a car to which he had no title, to
Merchantile Credit Co. Ltd. for £700. The company brought an
action to claim back £700 since P had no title to the car.
HELD: The firm was liable as the sale of the car to the company
was an act for carrying on in the usual way of business of the kind
carried on by the firm within the scope of the Partnership Act 1961.
CASE:
Chan Kin Yue v Lee & Wong
FACT: Lee borrowed money from his wife for RM35,000. He
then issued a receipt to acknowledge that he has received
the money on behalf of the partnership. When the
partnership refuse to pay back the money borrowed, the
wife then sue the partnership.
HELD: The court held that since the money was used to pay
the debt of the partnership, the partnership is therefore
liable to pay the wife the borrowed money
 Section 10 of PA explain that if the third parties knows that
the person has no authority to act as the partners but
allowed the dealing, he then cannot sue the partnership
 Section 9 of PA explain where one partner pledges the credit
of the firm for a purpose apparently not connected with the
firm’s ordinary courses of business, the firm is not bound,
unless he is in fact specially authorized by the other partners
 Section 11 PA:
 Liability of partners.
 “Every partner in a firm is liable jointly with the other
partners for all debts and obligations of the firm incurred
while he is a partner”
CASE:
 Osman Haji Usop v Chan Kong Swil
FACT: 3 Malays and 3 Chinese formed a partnership where the 3 Malay did
not participate in the business, and this is including the plaintiff (P). The other
3 partners obtain a loan of RM10,000 form a chattier and sign a promissory
note in the name of the firm. The particular loan was secured by a guarantor.
Since there was a default in the payment of the loan, the chattier sued the
guarantor who obediently pay for the loan. Later, the guarantor put the
liability on all of the partners. All of the 5 partners accept the liability but P
objected, on the ground that the loan was nor obtain for the purpose of the
partnership
HELD: The court held that since the money was used for the purpose of the
partnership, therefore the partnership and all of the partners are liable for
the liability imposed to them by the guarantor
 Section 12 PA:
 Liability of firm for wrongs
 “Where, by any wrongful act of any partner acting in the
ordinary course of the business of the firm or with the
authority of his co-partners, loss or injury is caused to any
person not being a partner in the firm, or any penalty is
incurred, the firm is liable”
Liability of firm for wrongs
Example 1:
 All the partners of an accounting firm would be liable if any one of them
has been negligent in the handling of accounts for their client.
Similarly, a firm of lawyers would be liable for the negligence of one of
the partners.
Example 2:
 Position of criminal liability
CASE 1:
 Hamlyn v Houston & Co
FACT: A partner in the defendant’s (D) firm bribes a clerk in a rival firm for
the purpose of obtaining private and confidential information relating to
a legal matter. The rival firm had suffered losses because of the particular
information. The rival firm then sued D
HELD: The firm is liable even though the act was done by 1 of the partner
because it was made for the purpose of the business
CASE 2:
 Chung Shin Kian v PP
FACT: This particular partnership has been dealing with imitation
goods called Texwood but it was handling by only 1 partner. He
then get caught in a raid
HELD: The court held that the other partner shall not be made
liable because the partnership act provide for joint liability on
contract and tortuous liability but not for criminal liability
 Section 15 PA:
 Misuse the trust property
 The other partner who is not the trustee shall not be liable if
the partner who is a trustee misuse the trust
 However, the other partner who aware about misuse the
trust by the trustee should also be liable
CASE:
 Ex parte Heaton
FACT: A partnership consists of a father and son. The son is a trustee of a will.
They had been misuse the trust money for the business of the firm. When the
firm was declared bankrupt, an action was also taken to the father
HELD: The court held that the father is not liable because the father was not
the trustee of the trust even though the money was used for the purpose of
the business of the firm
 Section 16 PA:
 Liability of persons for holding out
 Everyone who by words spoken or written or conduct
presents himself to be represented as a partner in a
partnership firm is liable as a partner to anyone who has on
the faith of any such representation given credit to the firm.
Liability of persons for holding out
 Example situation - A, B and C who is a partner were talking
with E and F. A third party who deal with E and F has been
lead to think that both of them are partner to A, B and C. If
the third party sued E and F, A, B and C will also be liable
 Section 16 PA:
 Death of partner
 The death partner will not be made liable on any liability
incurred to the partnership after his death
 Section 16 PA:
 Death of partner
Tower Cabinet Co Ltd v Ingram
FACT: There is a partnership of 2 person; Christmas and Ingram and the name of
the partnership is Merry's. The partnership was dissolve in April 1947, but
Christmas still carried on the business under the same name. In 1948, the plaintiff
(P) had supplied the partnership with furniture but there was no payment made
by Christmas. Before the supplier sent the goods to the partnership, they relied
on the old headed note paper bearing the partnership's name. The order was
made without any authority from Ingram. Ingram, on the other hand did not
destroyed all of the paper containing the letterhead of the firm
ISSUE: Whether Ingram can be made liable to pay the debts made by Christmas
HELD: The court held that Ingram was not liable because he had not knowingly
suffered himself to be represented as a partner because he did not know that the
old partner still carrying the business under the same partnership's name
 Section 19 PA:
 Liability of incoming and outgoing partner
 Incoming partner
 Section 19(1) of PA stated that in the case of incoming
partner, the liability will only incurred upon him after he
become partner to the firm
 Further, any liability imposed to the firm before the incoming
partner arrival, he will not be made liable for that liability
 Section 19 PA:
 Liability of incoming and outgoing partner
 Outgoing partner
 Section 19(2) of PA stated that in the case of outgoing
partner, the liability will only be imposed up until the day he
leaves the partnership
 Further, any liability imposed to the firm during his time in
office will still be carried even after he leaves the partnership
 Section 19 PA:
 Liability of incoming and outgoing partner
 Outgoing partner
 Nevertheless, Section 19(3) of PA, the outgoing partners can
be exempted from liability by way of agreement made
between the partners

CASE: Court v Berlin

 Section 43(1) PA:
 By agreement
a. If duration of the partnership has been specified in the
partnership agreement, the partnership is terminated on
the expiry of that period.
b. If the partners mutually agree to dissolve the partnership.
 By notice
 Section 34(1)(c) PA:
 A partnership is dissolved if entered into for an undefined
time, by any partner giving notice to the other or others of
his intention to dissolve the partnership

 If in the partnership agreement allot different way of

dissolution (instead of giving notice), dissolution by notice is
not applicable.
 By notice
 Section 34(2) PA
 The partnership is dissolved as from the date mentioned in
the notice as the date of dissolution, OR
 If no date is so mentioned in the notice, the date of
dissolution is on the date of the communication of the
notice.
 Case: Tham Kok Cheong v. Low Pui Heng
 If the partnership has been formed by written partnership
agreement for an undefined time, notice dissolution of
partnership should be in written.
 By bankruptcy, death and charge
 Section 35(1) PA
 Subject to any agreement between the partners, every
partnership is dissolved as regards all the partners by the
death of bankruptcy of any partner.
 Unless there is a contrary concurrence in the partnership
agreement.

 Case: Khoo Yoke Wah v. Lee Choo Yam Holdings Bhd. (1991)
 By bankruptcy, death and charge
 Section 35(2) PA
 A partnership may, at the option of the other partners, be
dissolved if any partner pledges his share of the partnership
property to pay his separate/private debts.
 The dissolution can be avoided if there is a contrary
concurrence in the partnership agreement.
 By illegality of partnership
 Section 36 PA
 A partnership is in every case dissolve 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.

 Case: Hudgell Yeates v. Watson

 By the court
 Section 37 PA
 On application by a partner, the court may decree a
dissolution of the partnership in any of the following cases:
a. when a partner is found lunatic or is shown, to the
satisfaction of the court to be of permanently unsound
mind.
b. when a partner, other than the partner suing, permanently
incapable of performing his part of the partnership
contract.
 By the court
 Section 37 PA
 On application by a partner, the court may decree a
dissolution of the partnership in any of the following cases:
c. when a partner has been guilty, in the opinion of court,
affect prejudicially the carrying on of the business.

Case: Essell v. Hayward

 By the court
 Section 37 PA
 On application by a partner, the court may decree a
dissolution of the partnership in any of the following cases:
d. when a partner, persistently commits a breach of the
partnership agreement that is not reasonably practicable
for the other to carry on the business in partnership with
him.

Case: Cheesman v. Price

 By the court
 Section 37 PA
 On application by a partner, the court may decree a
dissolution of the partnership in any of the following cases:
e. When the business of the partnership can only be carried on
at a loss
Case: Handyside v. Campbell (1901)
d. Whenever in any case, in the opinion of the court, equitable
that the partnership be dissolved.
Case: Re Yenidje Tobacco Co Ltd