RELATIONS OF PARTNERS WITH ONE ANOTHER

1. RIGHTS AND DUTIES OF PARTNERS

Subject to Section 26 of Partnership Act 1961 states that the interests
agreement of partners in the partnership property, and their rights and
duties in relation to the partnership, shall be determined, subject
to any agreement, express or implied, between the partners.
Tan Eng Choon v Foo Kai Yuen - The mutual rights and duties
between the parties are determined by the partnership
agreement which in the absence, reference should be made to
the provisions of the Partnership Act.
Varied by Section 21 of Partnership Act 1961 provides the mutual rights
consent and duties of partners, whether ascertained by agreement or
defined by this Act, may be varied by the consent of all the
partners, and such consent may be either express or inferred
from a course of dealing.
Sharing of profits Section 26(a) of Partnership Act 1961 reads all the partners
and losses are entitled to share equally in the capital and profits of the
business, and must contribute equally towards the losses,
whether of capital or otherwise, sustained by the firm.
Binney v Mutrie - In the absence of agreement with regards to
the sharing of profit and loss between the partners, they must
abide to this Act by dividing the profit and loss equally.
Other partners are not obliged to bear the losses of the insolvent
partner
Garney v Murray - nothing in PA 1890 which hold a solvent
partner liable to contribute for an insolvent partner who failed to
pay his share
Indemnify/Liability Section 26(b) of Partnership Act 1961 states the firm must
indemnify every partner in respect of payments made and
personal liabilities incurred by him (i) in the ordinary and proper
conduct of the business of the firm; or (ii) in or about anything
necessarily done for the preservation of the business or
property of the firm
Kok Hong Leong v Seow Kah Cheng – the court ordered the
other partners to indemnify the respondent for the performance
 of his excellent duty as he has succeeded to lessen the
business debt
Ong Keng Huat v Hong Kong United Co Ltd – the court
stated that the liability should be shared among the partners
although there was a breach of duty on one of the partner and
that a partner cannot be personally liable for a mere breach of
duty. However, a partner can be held as personally liable if fraud
or culpable negligence has been proved against him.
Interest for Section 26(c) of Partnership Act 1961 states a partner
advancement making, for the purposes of the partnership, any actual payment
or advance beyond the amount of capital which he has agreed
to subscribe, is entitled to interest at the rate of eight per cent
per annum from the date of the payment or advance
Lord Lindley - Such an advance is not treated as an increase
of capital but rather as a loan on which interest ought to be paid.
Ascertainment of Section 26(d) of Partnership Act 1961 provides a partner is
profits not entitled, before the ascertainment of profits, to interest on
the capital subscribed by him
Management of Section 26(e) of Partnership Act 1961 reads every partner
the partnership may take part in the management of the partnership business
business
Not entitled to Section 26(f) of Partnership Act 1961 provides no partner
remuneration shall be entitled to remuneration for acting in the partnership
business
A partner who has to do all the work due to death, sickness,
retirement of another partner will be entitled to remuneration
Airey v Bonham – the partner who has been attending the
partnership business all alone in the absence of another partner
is entitled to a remuneration for the extra burden incurred.
Consent to Section 26(g) of Partnership Act 1961 states no person may
introduce be introduced as a partner without the consent of all existing
partners partners
Wong Peng Yuen v. Senanayake - the defendant and Goh
were partners in a share-brokerage firm whereby Goh
transferred part of his interests in the partnership to his two
children who were minors. Tan joined the partnership as a new
 partner and acted as if he was a partner in the firm. Later, when
the firm was dissolved, the plaintiff claimed for the return of
RM20,000 he had paid on the ground that he was not a partner
because Tan and the children of Goh had never agreed to take
him as a partner in the firm. The Court held that there was
evidence to show that Tan's consent had been obtained and
that consent from Goh’s children was not necessary as it was
only a transfer of Goh’s interests in the partnership but not his
right as a partner in the firm. Therefore, the plaintiff had no right
to claim his money back
Consent of Section 26(h) of Partnership Act 1961 reads any difference
partners to arising as to ordinary matters connected with the partnership
change business may be decided by a majority of the partners, but no
change may be made in the nature of the partnership business
without the consent of all existing partners
Highley v Walker – two out of three partners have agreed to
train one of the partner’s son in the business. However, the
remaining one partner which was the plaintiff in this case
opposed to the agreement and applied to the court for an
injunction to prevent the two partners from proceeding with their
plan. The court dismissed the application on the ground that the
dispute or disagreement between partners is usual in a
partnership business and thus, majority agreement is sufficient
to resolve the dispute.
Tham Kok Cheong & Ors v Low Pui Heng - the Court held
that the act of the first, second and third partners who sold the
partnership business to a company without informing the fourth
partner was invalid.
Keeping of Section 26(i) of Partnership Act 1961 states the partnership
partnership book books are to be kept at the place of business of the partnership
(or the principal place, if there are more places than one) and
every partner may, when he thinks fit, have access to and
inspect and copy any of them
Gan Khuan v Tan Jin Luan - the Court held that the right to
examine and make copies of the partnership books is not limited
to partners.
 Expulsion of a Section 27 of Partnership Act provides no majority of the
partner partners can expel any partner, unless a power to do so has
been conferred by express agreement between the partners
Re A Solicitors Arbitration - A clause in partnership
agreement provides “If any partner shall commit or be guilty of
any act of professional misconduct, the other partners may by
notice in writing given to him to expel him from the partnership”
One of the partners served on the other two partners a notice
that expel them on the ground of misconduct. However, the
court held that one partner cannot exercise the power so as to
expel, even though they may be guilty of misconduct. Instead,
he must join with anyone of the other two partners.

2. THE DUTY OF GOOD FAITH

Every partner must act honestly because the relationship between partners is based
on the principle of uberrimae fidei (utmost good faith).
R v Lee Kiong Kiat – partnership is an association requiring the utmost good faith
between the partners whereby each partner owes a duty to his co-partner and each
partner is entitled to have confidence in his co-partner and good faith towards him
Vasu Devan & Ors - the utmost good faith is due from every member of a partnership
towards every other member. Good faith requires that a partner shall not obtain a
private advantage at the expense of the firm and that he is bound in all transactions to
do his best and to share with his co-partners any benefit.
Render true Section 30 of Partnership 1961 reads partners are bound to
accounts render true accounts and full information of all things affecting
the partnership to any partner or his legal representatives.
Maddeford v Austwick - Purchase of a share in the firm
without disclosure of material facts with reference to the
partnership assets would render the transaction voidable.
Law v Law - a partner transferred part of his shares to another
partner for £21,000. The partner who bought the shares knew
that the partnership assets comprised securities and charges
but concealed the facts from the partner's knowledge. The Court
held that the partner who had the information must disclose it;
otherwise the sale of the shares may be set aside.
 Accountability of Section 31(1) of Partnership Act 1961 states every partner
partners for must account to the firm for any benefit derived by him, without
private profits 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.
Pathirana v. Ariya Pathirana - The Court held that the profit
gained by the defendant from the agency contract belonged to
the firm because the defendant had used the firm’s goodwill to
obtain the new contract before the partnership was dissolved.
Not to compete Section 32 of Partnership Act 1961 states if a partner, without
with the firm 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
Ass v Benham - The Court held that other partners had no right
to claim for the benefit since the ship building business was of
a different nature from the ship-brokerage business.

PARTNERSHIP PROPERTY
Definition Section 22 (1) of Partnership Act 1961 provides all property and
rights and interests in property originally brought into the partnership
stock or acquired, whether by purchase or otherwise, on account of
the firm or for the purposes and in the course of the partnership
business, are called in this Act partnership property and must be held
and applied by the partners exclusively for the purposes of the
partnership and in accordance with the partnership agreement.
Miles v. Clark - The Court decided that since there was no clear
agreement pertaining to the use of the assets in the partnership, the
assets were not partnership properties but owned individually by the
partners who brought them into the firm.
Purchase of other Section 22(2) of Partnership Act 1961 states where co-owners of
land out of the an estate or interest in any land, not being itself partnership property,
profits gained in the are partners as to profits made by the use of that land, and purchase
partnership other land out of the profits to be used in like manner, the land so
business purchased belongs to them, in the absence of any agreement to the
contrary, not as partners, but as co-owners for the same respective
 estates and interests as are held by them in the land first mentioned
at the date of the purchase.
Davis v Davis - A father left freehold business premises to his son.
The sons carried on business & borrowed money by mortgaging the
premises and used it to expand the workshop. The court held that
there was a partnership in the business, but not the premises
If the land heavily involved with the partnership business it is regarded
as partnership property.
Waterer v Waterer – it is impossible to separate the land from the
nursery gardening business. Thus, the land became an integral part
of the partnership business as it was so intimately mingled with the
business.
Property purchased Section 23 of Partnership Act 1961 reads unless the contrary
with the firm’s intention appears, property bought with money belonging to the firm
money is deemed to have been bought on account of the firm.
Jones v Jones – Since the property(shop) had been acquired out of
the partnership profits and used for partnership business, it was PP
Procedure against Section 25 of Partnership Act 1961 provides a writ of execution
partnership shall not issue against any partnership property except on a judgment
property against the firm
Peake v Carter - Even if P failed to prove that the machinery was
his,execution could not be issued against the machinery except on a
judgment against the firm