Relations between partners themselves Flashcards
What governs the relations between partners themselves?
In the absence of a written contract, ss 19-31 of the Act will govern the relationship between partners themselves.
What regulates the duties of partners?
Sections 28-30 of the Act regulate the duties of the partner and the role of partnership property. As with agents, partners are under fiduciary duties, including the obligation of utmost good faith.
What are the duties of partners?
1) Duty of disclosure (s 28)
⁃ A partner must not only disclose financial affairs but also “all things affecting the partnership”. This is an incredibly widely drafted section - it prevents the partners from doing anything which damages the partnership financially
2) Duty not to make a secret profit (s.29)
3) Duty not to compete with the firm (s 30)
What regulates the expulsion of partners?
s 25 of the Act states that the power to expel a partner must be written into the partnership agreement. As the following case shows, any expulsion must be carried out in good faith and for the good of the partnership.
Blisset v Daniel 1853
Blisset received notice that he’d been expelled from a partnership. There had been a disagreement between Blisset and another partner called Vaughn. Vaughn had appointed his son as a manager of the partnership even though he was completely unqualified. The expulsion happened in conformity with the partnership agreement. The partnership agreement stated that there was a power to expel and there was no duty to give reasons or to hold a meeting. However, the court held that this was not a valid expulsion because this power must be exercised in good faith and for the good of the partnership.
Finlayson v Turnbull 1997
[Management of partnership affairs rule]
Certain partners in a firm went into the firm at night, took files and then set up a competing firm. This was held to amount to a breach of fiduciary duty. Also, it was noted that the solicitors had no ownership of the files. The measure of compensation was the profits of the new firm.
What does section 24 govern?
It governs rules to regulate the interests and duties of the partners.
Donaldson v Williams (1833)
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Const v Harris (1824)
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Bissell v Cole unreported, 1997 (CA), but noted in [1998] 2 CL 497.
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What are the presumptions in section 24 and when do they apply?
There are a number of presumptions in this section which apply in the absence of agreement to the contrary:
⁃ 1) Presumption of financial equality
⁃ Ie that partners contribute equally and share profits / losses equally.
⁃ 2) Duty of indemnity
⁃ 3) Interest on advances
⁃ 4) No payment of interest on capital before profits are ascertained
⁃ 5) Every partner has the right to participate in management
⁃ 6) No remuneration for acting in the partnership business
⁃ This is saying that partnership is about sharing profits so you are not being remunerated.
⁃ 7) Delectus personae
⁃ Here this operates so that you can’t introduce a partner without everyone’s agreement - everyone has a right of veto (unless agreed to the contrary).
⁃ 8) The right to vote and majority rule
⁃ See also s 25.
⁃ 9) Keeping of access to books and accounts
⁃ See also s 28.
What is partnership property?
1) Partnership property can only be dealt with for the purposes of the partnership (Partnership Act 1890 s 39)
2) 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.
Robinson v Ashton [1981]
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ss 20 and 21 of the Act
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Which cases govern the retirement of partners?
Forster v Messrs Ferguson & Forster, Macfie & Alexander [2010] CSIH 38; 2010 SC 867
Reid v Crabbe [2009] CSIH 81; 2010 SC 268
Bell & Scott LLP v Kaye [2009] CSOH 51; [2009] CSOH 111
s 26 of the Act
