Practice exam of ILAC Answer of Partnership Act 1891 PDF

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Anne Tran...

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Ka Man, NG

s5119265

Anne Tran, Thursday 5 pm

Hypothetical ILAC Answer: ISSUE(S): Under the Partnership Act 1891 (Qld) and the common law: 1. Was there a partnership between Luke, Chris, and Liam? 2. Has Chris committed a tort against Loki’s Logistics? Who is liable to Loki’s Logistics? 3. Has Chris breached a contract with Loki’s Logistics and who is liable to Loki’s Logistics? 4. Has Chris breached his duties: Duty of partners to render accounts, accountability of partners for private profits and duty of partner not to compete with Thundering Tacos? 5. What remedies are available to Luke and Liam or Thundering Tacos? (2) Minter v Minter (2000): Partnership LAW: despite initial losses Legislation: The Partnership Act 1891 (3) Polkinghorne v Holland (1934): (Qld) Partnership liable for wrongful ss5: Partnership advice ss13: The firm will be liable (4) Molinas v Smith (1932): binding on ss8: Actual express, implied and apparent authority partners ss12: Jointly liable (5) Kendall v Hamilton (1879): Only ss17: Persons liable for holding out one action available ss31: Duty of partners to render accounts (6) Law v Law (1905): failure to ss32: Partner’s responsibility for private disclose assets profit (7) Birtchnell v Equity Trustees (1929): ss33: Duty of partner not to compete Liable to account for profits ss27: Sharing of profits and losses (8) Kilpatrick v Mackay (1878): profits Common Law: shared equally (1) Keith Spicer Ltd v Mansell (1970): Partnership hasn’t carried on business; not “in common” APPLICATION: Partnership Section 5 states that it is the relationship which subsists between persons carrying on a business in common with a view of profit (“slide, 36”). The partnership must have started “carrying on” the business and there is no partnership because Mansell and Bishop haven’t started a business (Keith). The business must be carried on by or behalf of all the partners, in this case, the respondents carried on their accounts rather than together (Khan). Partnerships do not need to make a profit, but they must plan to do so at the beginning of the partnership (Minter). Based on the above elements, there is a partnership between Luke, Chris, and Liam because there are over two people and they have started on the business. Also, they operated the business together and has made plans for profit. The firm will be liable Section 13 states that the firm will be liable if a partner is committing a wrongful act or inaction; the partner acts in the normal course of business of the company or acts under the authority of other partners; and loss or injury to third parties (“slide, 39”). In this case, the partnership is liable because of wrongful advice (Polkinghorne). In applying s 13, Chris has committed a tort against Loki’s Logistics and Thundering Tacos is liable to Loki’s Logistics because Chris has signed the original contract of $40,000 on behalf of Thundering Tacos without joint approval from Luke and Liam and the restaurant, Thundering Tacos will be liable to Loki’s Logistics. 1

Ka Man, NG

s5119265

Anne Tran, Thursday 5 pm

Actual express, implied and apparent authority Section 8 states that if the partner has actual express authority, the other partners will be bound by the behavior if completed in the usual business process (“slide, 40”). It also states that all partners will usually have power unless the partnership agreement says otherwise (“slide, 41”). Molinas purchased a tractor and refused to pay it and the court held principle partner had approved the contract (Molinas). It states that the partner was carrying on the business of the kind carried on by the firm; the transaction was carried out in a usual way and the third party honestly and reasonably believes that the partner has authority (“slide, 42”). In applying s8, because Luke was in charge of the day to day running of the restaurant; Liam was in charging buying ingredients; Chris was in charge of employing suitable staff and joint approval is required if any expenditure involving over $5,000, there is an actual implied authority. There is also actual express authority because the other partners will be bound by the partner’s acts. However, the apparent authority did enter into the contract because Chris has agreed with Luke and Liam to be a partnership for operating a restaurant, but he also runs another restaurant for private profit. Section 12 applies and states that every partner shares all the debts and obligations of the company at the time of the partnership (“slide, 43”). However, the creditor has only one litigation right and best to sue in the name of the company (Kendall). Section 17 states that persons are liable for holding out. In applying it, Chris has breached the partnership agreement, Thundering Tacos (Liam and Luke) can sue Chris personally by suing in firm name, but Chris and they can still be liable. Breach duties Section 31 states that partners must provide real-time accounts and information to all partners or their legal representatives on all matters affecting the partnership (“slide,44”). Law did not disclose all partnership assets; therefore, he breached the duty (Law). Chris also breached this duty because he did not disclose the cash that he received. Section 32 states that every partner must pay the company any benefits that they receive from any transaction in the partnership without the consent of other partners (“slide, 44”). Chris has breached this duty because he has been receiving payments from customers when running his restaurant in cash and did not pay to TT. Section 33 states that if a partner conducts any business of the same nature as the company’s business and competes with the company without the consent of the other partners, they must account to the company and pay all of the profits it has earned in the business (slide, 46). It is liable for the profit from using a partnership connection (Birtchnell). CONCLUSION On the balance of probabilities, the Queensland Magistrates Court would likely to find that there was a partnership between Luke, Chris, and Liam. Also, Chris has committed a tort against Loki’s Logistics; breached a contract with Loki’s Logistics and Thundering Tacos is liable to Loki’s Logistics. Besides, Chris also breached his duties of partners to render accounts; accountability of partners for private profits and duty of partner not to compete with firm. Section 27 states that partners will share any profits and losses equally unless the partnership agreement states otherwise (“slide, 47”). Profits were shared equally from the sale of the hotel (Kilpatrick), which means that cash that has been received from Chris has to be shared with Liam and Luke. It also means that Liam and Luke are liable to the contract that has been signed from Chris from Loki’s Logistics. However, although Liam and Luke are liable to the contract that was signed by Chris, on behalf of Thundering Tacos, they can sue Chris personally in the restaurant name. 2

Ka Man, NG

s5119265

Anne Tran, Thursday 5 pm

Short Response Answer: Question 1: a) Chapter 3, Part 2, 49 What is a limited partnership b) A limited partnership is not an incorporated limited partnership. If there are more than two people, both or one person can be in a general partner and the others are limited partners. A Corporation person may be general partners or limited partners of a limited partnership. Question 2: a) The chief executive has the responsibility for keeping a register of all limited partnerships. b) Chapter 3, Part 2, 51 Register – proof of registration Question 3: a) Chapter 3, Part 3, 53 Liability of limited partner b) A limited partner is likewise a partnership that can be liable to the liabilities of the firm. However, they should not go over the amount shown that is in relation to a limited partner as the extent in which the liable partner is able to contribute to or part of the amount that is unpaid for. Question 4: a) A limited partner is permitted to run the daily business of the partnership. b) Under Queensland law, the registered office of a limited liability partnership cannot be located outside of Queensland. Question 5: a) The form that needs to be completed to register a limited partnership is called Application for registration of limited partnership. b) The registration fee that must be paid when the form is lodged is $150.90.

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