PARTERSHIP

Question 1

Which sections of the Partnership Act 1890 deal with the nature of partnership?

Answer 1

ss 1-4 - the nature of partnership.

Question 2

Which sections of the Partnership Act 1890 deal with the relations of partners to people dealing with the firm. ?

Answer 2

ss 5-18

Question 3

Which sections of the Partnership Act 1890 deal with the relations of partners to one another.?

Answer 3

ss 19-31

Question 4

Which sections of the Partnership Act 1890 deal with the dissolution of the partnership and its consequences.?

Answer 4

ss 32-44

Question 5

What is the statutory definition of Partnership?

Answer 5

Section 1(1) of the Partnership Act 1890 states:

“Partnership is the relation which subsists between persons carrying on a business in common with a view of profit.”

2 or more individuals come together in order to carry on a business with a view to making a profit (do not actually need to make a profit).

Question 6

What is the definition of ‘business’ and what section defines it?

Answer 6

s 45

“every trade, occupation or profession”

Question 7

Must a partnership be in writing.

Answer 7

No it can be verbally or inferred by conduct of the parties.

Question 8

Was there a partnership in Khan v Miah?

Answer 8

Khan v Miah

Yes

Held: the parties had in fact embarked on the activity. The business was setting up a restaurant, and it was held that because they had bought the premises, instructed works on it and also set up a bank account the activity of the partnership had begun. It did not matter that they had not begun trading, it was still held that there was a partnership.

(HoL bench of 5 - english - but highly persuasive?)

Question 9

What was held in Christie Owen & Davies plc v Raobgle Trust Corp ?

Answer 9

Christie Owen & Davies plc v Raobgle Trust Corp [2011]

Purchase of property was enough to constitute a partnership.

Even though plans to operate restaurant might require execution in the future - the first step is to acquire property.

Question 10

Was there a partnership in Worbey against Campbell?

Answer 10

Worbey against Campbell

a meeting to discuss launching a new dating app was dismissed as not constituting the start of a partnership. In this meeting, the roles of the parties were discussed, a choice of name was agreed upon and other details - such as the app’s GPS function. It was held that no partnership existed.

Question 11

What things indicated a lack of partnership in Pine Energy Consultants Ltd v Talisman Energy (UK) Ltd ?

Answer 11

“There are certain features which are usually to be found in a partnership. None are present here. There was:

• no firm name,
• no partnership premises,
• no partnership employees and
• no partnership bank account.

Nor is there any averment that steps were being taken to establish any of these. There were no partnership accounts or tax returns.

None of these is fatal to the contention that there was a partnership, but the lack of any of such things points strongly against the likelihood of there being one.”

Question 12

As the relationship between persons is often far from clear, there are guidelines in s.2 of the Act to assist in determining whether a partnership exists.

What are the 3 guidelines?

Answer 12

1. A joint tenancy, or ownership of joint or common property does not in itself create a partnership - whether or not you’re sharing profits of the property
2. Sharing of gross returns does not in itself create partnership.
3. Sharing of profits of a business is prima facie evidence they are a partner - it is a pointer.
   There are circumstances where although it is shared, there is not a partnership:

Question 13

What case illustrates Guideline 1: A joint tenancy, or ownership of joint or common property does not in itself create a partnership - whether or not you’re sharing profits of the property

Answer 13

Sharpe v Carswell 1910 SC 391.

• Sharpe seeks compensation for husband’s death on fishing vessel.
• Defender argues he was not an employee but was a partner since he held shares in fishing vessel. The property owned jointly. Therefore legislation providing for employee compensation does not apply

Held: Ownership of boat and shares did not in itself make Mr Sharpe a partner.
That alone without anything more does not indicate a partnership.

Question 14

What case illustrates Guideline 2: Sharing of gross returns does not in itself create partnership?

Answer 14

Clark v Jamieson 1909

• Compensation for death on fishing vessel.

Held: Clark was remunerated with regards to how much the boat made - not a salary - was not enough to establish there was a partnership.

Clark had not contributed to capital of the business and had no liability for loss - those tend to be present in a partnership.

Question 15

What case illustrates Guideline 3:
Sharing of profits of a business is prima facie evidence they are a partner - it is a pointer.
There are circumstances where although it is shared, there is not a partnership:

Answer 15

Dollar Land (Cumbernauld) Ltd v C I N Properties Ltd

????

Question 16

What is the key distinction between Scottish and English partnerships?

Which section of the Partnership Act states this?

Answer 16

Scottish partnerships have separate legal personality - english partnerships do not.

s.4(2)

Question 17

What does it mean that Scottish partnerships have a separate legal personality?

Answer 17

• Partnership can enter into a contract in its own right (legal actor (could own property in name of partnership etc).
• Court actions can be raised in the firm’s name.

Question 18

What is the liability for a firm’s debt? (statute section)

Answer 18

**Must sue the partnership FIRST though, and only then can you use joint and several liability. **

Section 9 of the Act. Joint and several liability.

For all the debts and obligations of the firm whilst they are a partner.
In contrast to limited liability where personal items not included.

Question 19

Is an incoming Partner liable for liabilities incurred before joining?

Answer 19

General rule is that an incoming partner is not usually liable for the pre-existing debts of a firm.

s 17(1) Not liable to creditors for liabilities before you became partner.

(exceptions: agreement otherwise (s19), or new partnership is formed and they’ve taken on debts of old)

Question 20

What were the old cases on Liabilities of Incoming Partner and what did they hold?

Answer 20

Heddle’s Ex v Marwick & Hourston’s Tr (1888)
- there is a presumption that new partnership takes on debts of old partnership

Thomson and Balfour v Boag & Son 1936
- But, presumptions can be overturned when there is evidence otherwise.

Sim v Howat [2011] CSOH 115; [2012] CSOH 171

• Start seeing change, Lord Hodge does not like this presumption - unrealistic
• Better way to solve: it is an agreement that the new partnership is willing to take on the debts of old partnership.

Question 21

What are the implications of the new 2018 case Scottish Solicitors’ Staff Pension Fund ?

Answer 21

Scottish Pension Fund Trustees Limited v Marshall, Ross and Monroe and Others

Inner House of the Court of Session affirmed Sim v Howat basically.

Held that where a business continues on the same basis before and after a change in the partnership running it, there is a legal presumption that all liabilities stick with the business – (including ‘contingent’ liabilities to pay contributions to meet pension scheme deficits.)

In other words, they become liabilities of the new partnership, and do not disappear along with the old partnership.

Question 22

Which section is about liabilities of retiring partners? what does it say?

Answer 22

s 17
(2) a partner who retires from a firm does not thereby cease to be liable for a partnership debts or obligations incurred before his retirement

(3) a retiring partner may be discharged from existing liabilities, by an agreement…
(in practice you would want to do this)

Question 23

What does s5 say?

Answer 23

s 5: Partner is the agent of the firm

A partner may be limited by his partners as to the extent of his authority - but his action will be binding on the firm, unless:

a. the person dealing with the partner knows the partner lacks authority for the act in question; or
b. that person did not know or believe the partner is a partner

Question 24

What are the 2 situations i where firm will be vicariously liable for wrong? (section)

Answer 24

s10:

i. a partner acting in the ordinary course of business;

OR

ii. a partner acting with the authority of his co-partners

as long as it is NOT one company injuring another.

Question 25

Mair v Wood

Answer 25

Mair v Wood 1948

• Partnership running a fishing boat.
• One partner removed floorboards from ship’s decks covering the propeller.
  Another partner falls off deck onto propeller and is severely injured.

Held: s10 will not apply and make the firm vicariously liable, because it is a partner v partner issue.
Lord keith: partners are agents to the outside world, but not to each other.

Question 26

In the absence of a written agreement, which sections will govern the duties of partners?

Answer 26

ss 19-31

Question 27

What are the 4 fiduciary duties (and sections) of Partners?

(n.b. fiduciary is higher than good faith, subjugating your own interests to the firm).

Answer 27

s 28 - Duty of disclosure not only of the partnership financial affairs, but also of ‘all things affecting the partnership’.

s 29 - A partner is under a duty not to make a secret profit

s 30 - A partner is under a duty not to compete with the firm

s 25 - Expulsion of partners - need express term in agreement to be able to do this

Question 28

How do you get rid of a partner? (case)

Answer 28

Blisset v Daniel (1853) 10 Hare 493.

Power to expel must be an express term in the contract.
However even if you have a power in written agreement, it must be exercised in good faith and for best of partnership - can’t just expel them because you don’t like them.

Question 29

What is partnership property?

Answer 29

s20
(1) if property is acquired for purposes of partnership and held exclusively for it = it is partnership property.

S.21
If i partnership money is used, it is deemed to be partnership property.

Partnership property can be of any kind - but just because property is used by the partnership does not necessarily mean that it is partnership property.

Question 30

Which section deals with Retirement of Partners under the Partnership Agreement?

Answer 30

s 26

Question 31

4 grounds partnership can be dissolved other than in court?

Answer 31

s 41 - Rescission of partnership agreement.

s 32 - Dissolution by notice or expiry of term.

s 33(1) - Dissolution by death or bankruptcy.

s 34 - Dissolution by illegality.

Question 32

What section lists the judicial ways court can decree a dissolution?

Answer 32

s 35

(a) – permanently unsound mind
(b) : - permanent incapacity.

(c) : prejudicial conduct.
Carmichael v Evans [1904] 1 Ch 486.

(d) : breach of contract or where not reasonably practicable for other partners to carry on partnership due to conduct of another partner
(e) : loss.
(f) : - just and equitable.

Question 33

Dissolution is not the end.

In what circumstances do Partners still have authority to bind the firm and each other.
section

Answer 33

s 38

1. As far as is necessary to dissolve partnership

AND

2. To complete transactions started before the dissolution.

Question 34

What happens to partnership property on dissolution? (section)

Answer 34

s 39

If there are debts, partnership property should be used to pay the debts.Where there is a surplus - pay partners what is due to them.

Question 35

What did LJ Romer say in Re Bourne [1906] re: Winding up and Distribution of Assets.

Answer 35

Re Bourne [1906]

per Romer LJ:

“When a partner dies and the partnership comes to an end, it is not only the right, but the duty, of the surviving partner to realize the assets for the purpose of winding up the partnership affairs, including the payment of the partnership debts”.

Question 36

Who was the Limited Partnership 1907 created for?

Answer 36

Added for people that wanted to put capital into the business, but not have any role in the management. Essentially just an investor.

Question 37

What is an LLP? What does it require?

Answer 37

s4(2), 1907 Act.

The limited partnership or LP provides limited liability to only certain of the partners.

There must be at least one general partner who takes on unlimited liability (general partner).

The limited partner’s liability is capped at what they put into the partnership.

Question 38

When is a limited partnership not governed by the same rules as ordinary partnerships?

Answer 38

s 7 - where the 1907 Act states otherwise.

Question 39

What was the main purpose of the Limited LIABILITY Partnership?

Answer 39

To create a new form of legal entity known as a limited liability partnership (“LLP”).

The LLP Act 2000 therefore creates something of a hybrid between a partnership and a company.

Question 40

Does an LLP have separate legal personality? (section)

Answer 40

s 1 LLP Act

Yes

Question 41

What is needed for an LLP needed to be incorporated? (section)

Answer 41

s 2 LLP Act

2 or more people must subscribe their names in an incorporation document.

The document must state:

a. name of the LLP.
b. registered office.
c. give required particulars of each person who will be a member of the LLP on incorporation.
d. state who the designated members will be (see below).

Question 42

How can members be added to an LLP?

Answer 42

s 4 2000 act

with the agreement of the original members

Question 43

In the absence of agreement between the members, regulations may be made which will govern their relationship.

In what reg are the default rules listed (similar to the s24 default rules for a partnership under the 1890 Act.)

Answer 43

Reg 7 of the Limited Liability Partnerships Regulations 2001 (SI 2001/1090) sets out default rules that apply to LLPs in the absence of express agreement to the contrary.

Question 44

Which 3 cases illustrate that it is unclear if LLP Partners owe fiduciary duties?

Answer 44

F & C Alternative Investment (Holdings) Ltd v Barthelemy [2011]
Court: suggested members of LLP would not owe fiduciary duties to each other.
If you wanted this high level, it would have to be explicit in the agreement.

Hosking v Marathon Asset Management LLP ([2016] - - - Wasn’t main focus of the case, but it was assumed that claimant had breached fiduciary duties in the LLP.
(can only breach that duty of you owe that duty)

Kidd v Paull & Williamsons LLP [2017]- SCOTLAND
- Concession was made that a member of the LLP owed fiduciary duties.
(Court made decision based on that concession. So not clear if there was a fiduciary duty. )

Question 45

What is a designated member, how many must there be? (section)

Answer 45

s 8 LLP Act

• A designated member has additional administrative burdens on behalf of the LLP.
• S/he is responsible for filing annual accounts and, for example, for advising the Registrar of Companies of, e.g. changes in membership or in addresses of members.
• At least two members must be designated members at any given time.
• Failure to nominate two designated members means that all members are designated members.

Question 46

Every member is an agent of the LLP. An LLP is not bound by anything done by a member if:

Answer 46

s 6(1):

(a) the member has no authority to act for the LLP in doing the act in question and
(b) the third party knows that the member has no authority or does not know or believe him to be a member of the LLP.

This is the same as the situation with partners of a partnership (see above).

Question 47

Where a partner has been negligent in carrying out work then the client (“C”) has 2 different possible courses of action to obtain compensation for his loss. what are they?

Answer 47

1. C can raise an action primarily against the firm, but also against the individual partners who are jointly and severally liable.
2. Alternatively, C can raise an action in delict against the individual partner who provided C with negligent advice.

Question 48

How does the situation re liability when a partner in an LLP is negligent as compared to in and 1890 Partnership?

Answer 48

The limited liability partnership is a separate legal entity and C’s contract lies with that entity alone.

C may raise an action against the LLP. There is NO joint and several liability, and C cannot sue the individual partners. The delictual route remains available as an alternative against the member who negligently gave the advice.

Clearly, C will prefer to sue either the LLP. These bodies are more likely to have sufficient funds to bear the loss.

Question 49

LLP Act, s.14. Provisions of the Insolvency Act 1986 are applied to LLPs with modifications by the Limited Liability Partnerships (Scotland) Regulations 2001, reg. 4(1) and sch. 2 and the Limited Liability Partnership Regulations 2001, reg 5 and sch. 3 and 4.

Answer 49

????