Partnerhips flow chart PDF

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Summary

Partnershipss7(1) PA: the relation which subsists between persons carrying on a business in common with a view of profit.ElementsIs there apartnership?StatutoryRules ss6 preserves common law rules on partnershipss7(2): relationship which subsists: true contract and intentions... as appearing from th...

Description

Partnerships s7(1) PA: the relation which subsists between persons carrying on a business in common with a view of profit.

Is there a partnership?

Elements

s6 preserves common law rules on partnerships s7(2): relationship which subsists: true contract and intentions... as appearing from the whole facts

Valid agreement

- shown by relationship, does not have to be in writing. - does not have to be a single agreement between persons

Carrying on a business

Court should have regard to the true contract and intention of the parties, as ascertained from the facts of the case Cox v Hickman

s3: business includes any trade, occupation,or profession

less than 20 people. s115 CA, s11 WAPA

Playfair Development pty ltd v Ryan

exception for law firms, acountants, other exceptions

Khan v Mier Trading does not have to have commenced.

Continuity and repetition: Conflicting authorities

Smith v Anderson: HELD: one-off investment in units were not a partnership because was a one-off. Was no continuing commercial arrangement or business. BUT Canny Gabriel FACTS: Touring JV organising tour. Finance obtained for CG. Agreement between promotors and volume sales described it as JV. HELD: were a partnership. 1. Common view to profit;. 2. Shared profits; 3. administration of business done jointly; 4. sought to assign interest together to other parties- dealt with interest in joint fashion 5. concerned about each other's financial stability. Looked to nature of the contract. UDC v Brian FACTS: Investment in shopping centre calle joint venture. UDC has mortgage over property to cover loans between parties, used land as security for loans of the JV, as well as individual borrowing. Unbeknown to Brian, these arrangements were set down in 'collaterisation' clauses. HELD: arrangement was partnership, continuity not necessary because it was a long term venture. UDC therefore breached its fiduciary duty towards Brian.

in common

1. agency

partners must be able to act on each other's behalf: Smith v Anderson

2. Mutual Rights and obligations

must share mutual rights and obligations

Sleeping Partners: UDC v Brian; Playfair Look at facts and circumstances of given case.

with a view to a profit: MOST IMPORTANT

Profit not product see s8(3)

UDC v Brian, Dawson J: 'the feature most likely to distinguish JVs from partnerships is the sharing of product rather than profit.'

s8(1) WAPA Co-ownership in itself is not enought to create partnership.

Statutory Rules s8

s8(2) WAPA: more than mere sharing of gross returns must be shown s8(3) WAPA: sharing profits is prima facie evidence of a partnership

Smith v Anderson no mutual rights and obligations therefore no partnership- didn't even know each other.

Egs: Keith Spicer; Collins v Locke

Cribb V Korn FACTS: Shared agreement for farm. Criib owned the land and leased to Korn, who worked in return for paying half proceeds. Cribb also lent some utensils. HELD: Nit partnership because: 1. Korn had exclusive rights to the land; 2. Cribb had n right to control farming operations; 3. Korn did not contract to do or execute any work on behalf of Crivv, not seek to bind self or act as agent. Wereawlays actions by Kribb on his own behalf.

Not conclusive:

Exceptions: s8(3)

Cox v Hickman FACTS: bankrupt business, was

(a): payment of debt paid out of accruing profits (b): remuneration of a servant or agents by a share of the profits (c) Annuities to widow or children of deceased former P. (d) Loan to person carrying on business with interest varying with the profits, or by share of the profits. (Badely v Consolidated Bank ) (e) Receipt of a share of profits in consideration for the sale of the goodwill of the business

ankrupt business owner in p'ship with trustee? HELD: simply payment ofum of money, not operating business together.

Principal Characteristics of a Partnership Not Separate Legal Entity Partners bear unlimited liability for debts and obligations incurred by the partnership. Partners can bind others in contract with 3rd parties and incur liability for all partners.

Unlimited Liability

s16 WAPA: Liability for partners s17 WAPA: liability for wrongs: 'any wrongful act of any partner acting in the ordinary course of business'

CHECK P'ship agreement: may limit liability. but cannot prevent and 3rd party claiming liability from any partner.

Creation of a Partnership Formalities Capacity to be a partner Terms of P'ship agreement

contract: normal rules of contract: no writing or registration required. Minors: yes but risky Corporations: yes Bankrupts: yes, subject to Bankruptcy Act Default rules in WAPA apply in absence of agreement. s6. s29: rules may be varied with consent of all partners. Key terms Rights and liabilities ♣ Sharing profits and losses. S34(1) WAPA ♣ Firm must indemnify partners… S34(2)WAPA ♣ Entitlement to interest for additional payment of capital: s34(3) WAPA fixed rate in the act ♣ Right to take part in management, duty to attend diligently to the business, no entitlement f for remuneration: s34(5) WAPA – this is often varied in partnership agreements ♣ Consent needed for new partners: s34(6) WAPA – because partners can bind each other. ♣ Disputes settled by a majority: of partners s35(7). – provided arrived at in good faith ♣ Consent needed to change conduct of p’ship affairs and nature of business: S35(9) ♣ Access to partnership books: s35(8). Duration ♣ Where no fixed term: it’s a partnership at will s37 WAPA. ♣ Fixed term: s36 ♣ Continuation after expiry of term: s38 Exclusion No power of expulsion (S35) – unless it’s in the partnership agreement and in good faith. If no partnership agreement, would have to dissolve the partnership and start again. Even if you have that power, must be exercised in good faith. Hanlon v Brooks, Bond v Hale: Multiple expulsions; Cameron v Murdoch: if no contract applies.

Relations Between Partners Partnership Property

s30(1) WAPA: p'ship property includes all property rights and interests in property: - Originally brought into the partnership - acquired on account of the firm - acquired fro the purposes and in the course of the partnership business. s30(3) WAPA: Land purchased with partnership profits.

Kelly v Kelly FACTS: 2 parties were de-facto. Conducted abalone business in partnership. Licence was only in husband's name. Law changed so that permit was attached to boat rather than person. Business carried on as if nothing changed. Broke up. Argument about licence. Contrasted to lobster licence, which as attached and put down as adding to the value of the boat, abalone licence was not in the books, only the value of the boat was calculated. HELD:Mason, Dean, Toohey, Gordon JJ: licence was personal property of the man. Depends on facts and circumstances. Nothing changed in the relationship even when the laws changed.

s33: Nature of partner's interest 'proportion of the then existing partnership assets... if the whole were... converted into money, and after all the then existing debts and liabilities of the firm had been discharged.' s42: If any partner assigns ter interest: does not entitle assignee to interfere in management or administration of the p'ship business.

Fiduciary Duties

a 'stronger case of fiduciary relationship cannot be conceived' Dixon J, Birtchnell v Equity Trustess

Trust and Confidence & Agency

Conflicts Rule: s41: must report any profits made which compete with the firm

partner must avoid conflicts wheween the interests of the p'ship and their own interests or duties

Profits Rule: s40(1): Partner must account for secret profits s40(2): even after dissolution by death of P

Chan v Zacharia FACTS: Doctor's partnership. Was wound up, but one partner continued operating. HELD: Each partner under ifduciary obligation to co-operate and act consistently with the agreed procedure for the realisation, appication and distribution of the p'ship property. Fiduciary obligations do not cease at disolution of p'ship,

P must account for secret profits made using the p'ship property, resources or opportunities, or within the scope of its business.

Chan v Zacharia; Birtchnell v Equity Trustees

Scope of obligation depends on the scope of the business 1. Type of business

o Type of business: function or object for the p’ship’s existence? Birtchnell o Even if firm benefits: P may be in breach Boardman v Phipps o Egs suggesting breach: Time away from the business; conflict between self and partnership; Conflict b/w duty to firm and duty to client o Egs suggesting no breach: Firm not in the business: Fleming. o Outside the scope of business: Ps may be accountable for benefits gained outside the scope of business where they’ve used p’ship property Fleming

2. Duration of Partnership Obligations

Until winding up is complete: Chan Obligations commence: oat least from when p’ship agmt executed UDC v Brian omay exist earlier UDC v Brian. omay exist even if parties never reach agmt UDC v Brian. Not terminated by agreement: Everingham

Partnerships and the Outside World Actual Authority

General Agency Principles (CL)

express actual authority or implied actual authority.

Apparent Authority

Freemans v Lockyer Mercantile Credit v Garrod & Goldberg Jenkin

partner or other person, without authority, performs acts which are in the ordinary course o business for firms of that type.

Ratification: transaction entered into without authority may be expressly or impliedly ratified.

Contracting with Third Parties Principal and Agent

s26 WAPA: 'the act of every partner who does any act necessary for or usually done in carrying on business of the kind usually carried on by the firm... shall bind his Ps ... as if he were their agent... unless the P... has ... no authority to act for the firm in the particular matter and the person w whom he is dealins; knows that he has no authority; or, does not know or believe him to be a partner (real and constructive knowledge.

Each partner is both a principal and an agent.

necessary or usually done

business of the kind carried on Question of fact Mercantile Credit; Polkinghorne v Holland

Knowledge of third party

question of fact Golberg v Jenkins. eg. P borrow money at interest rate of 60% when interest rate is 10%. probably not necessary.

may be express or implied. Effective only if partners are fully informed

Ratification

- If the TP knows the partner has no authority, firm not bound. - If TP doesn't believe person to be a partner, firm not likely to be bound. Higgins v Fletcher Undisclosed principle: where person says they are an agent, but does not disclose who they are agent for.

Liability of the Partners- WAPA Ps bound by acts of firm

relating to the business of the firm

s13: act must be

s14: Firm not bound, unless authorised by other Ps

P using credit of firm for private purposes Misapplication of money or property Improper employment of trust property

s18(1) Firm liable to make good the loss

s21(1) If a P:

s18(2): Custody of the firm

s20: no other P liable unless that P knew of the breach of trust.

Represents himself Liability of person 'holding out'

by any person authorised

Done or executed in the firm name (or in manner showing intention to bind firm

knowingly sufferes himself to be represented as a partner

That person is liable as a partner to anyone who has on the faith of the representation given credit to the firm

Regardless of whether P knew the representation was communicated to the person giving the credit

T avoid apparent authority: Exception for Must correct the representation death: s21(2) Reliance by third party: belief that a person is a partner does not need to be the sole cause for relying on the firm: Lynch v Stiff

Representation: words, spoken or written, or conduct: Lynch v Stiff

Admissions and Representation

s22: Admission made by any partner concerning the partnership affairs and in the ordinary course of business is evidence against the firm.

Notice to a Partner is notice to firm Changes to the constitution of the partnership Special Powers of Ps in Certain Firms

s23: Notice to any P operates as notice to the firm: except for fraud by consent of partner.

General position: changes in the composition of a partnership create a new partnership, and the liabilities of the members of the 2 firms are distinguished.

s24(1): New Ps: to the firms don't automatically become liable for things done before they became a P s24(2): Retiring Ps: remain liable for debts/obligations incurred before retirement. s24(3): May change this position by agreement.

s27: every member of a partnership carrying on business of a kind in which any of a list of acts is usually done, may bind the firm by the same respectively.

borrow money; pledge any goods or personal chattels belonging to the firm; mortgage goods belonging to the firm

Dissolution and Winding Up 6 Methods of dissolving P'ship s43: Subject to any Agreement between Partners s43(a): fixed term- passage of time s43(b): single venture of undertaking: end of venture of undertaking s43(c): p'ship at will: notice in writing s 44(1): Death or bankruptcy s44(2): at option of any partner, if the partner assigns his share s45: illegality: if an event hppens that makes it unlawful for the business of the firm to be carried on. s46: Court order: On application by a partner the Court may declare dissolution on 7 grounds

(a): P mentally ill (of unsound mind) (b): P becomes in any other way permanently incapable of performing p'ship duties (c): P guilty of conduct calculated to prejudicially affect carrying on of business (d): P wilfully or persistently commits beac of p'ship agreement, or makes it not reasonably practicable for other Ps to carry on business (e) P encumbers their interest in the property or profits of the firm (f): Business of p'ship can only be carried on at a loss.

Winding Up s49: Partners retain authority to bind the firm after dissolution s48: Any partner may notify of dissolution s47: Right of creditors against partners

s50: Application of p'ship property

(1) treat all apparent members of the old firm as still being members of the firm (2) Ad in Govt Gazette and Perth newspaper shall be notice of the dissolution to persons who had no dealings with the firm before dissolution (3) the estate of P who dies, becomes bankrupt, or retires, is not liable for p'ship debts contracted after the date of death, bankrpt or retirement. - in payment of debts and liabilities of the firm; and - in payment of what may be due to Ps respectively, after deducting what may be due from them; and - any P ,au apply to the Court to wind up

s 51: value of the name: goodwill sold for the common benefit of all s52: Use of P'ship name: may be restrained until firm wound up s53: Where premium paid by one P, Court may order premium be repaid s54: Where dissolved for fraud or misrepresentation, the other partners are entitled to indemnity s55: Profits after dissolution, but before settlement are to be shared. s56: Outgoing partner's share is a debt, owed by the continuing Ps to the outgoing P s57: Rules for distribution of assets

(a): Losses: Paid out of 1. profits, 2. capital, lastly, if necessary, Ps individually in the proportion in which they were entitled to share profits

(b) Assets: in order: (1) paying debts and liabilities to person who are not Ps; (2) repay advances by Ps; (3) repay capital contributed by Ps; (4) residue divide profits among partners in proportion in which profits divisible. Kelly v Tucker...