At the beginning, in this case, we may identify two issues needed to be discussed. The first one is whether Kwan or Lau&Kwan Co. would be liable for the debt incurred by Lau. The second issue is whether Lau&Kwan Co. has established a place of business in Hong Kong.
In the light of s.7 of the Partnership Ordinance, “acts of every partner, who does any act for carrying on in the usual way business of the kind carried on by the firm, bind the firm and his partners, unless the partner so acting has no authority to act for the firm in the particular matter”. That is, Lau and Kwan are both liable for the debt owing to Cheung & Co., Kwan has not been informed though.
Thus, for Cheung & Co. to be able to hold the partnership liable for the debt incurred by Lau, she may need to prove that the followings are being satisfied:
(1) The purchase of silk by Lau had been done in relation to the business (sale of antique) of Lau & Kwan Co.
(2) The purchase of silk must be such as would be usual for carrying on that business in the usual way; and
(3) The act must be done by Lau as a partner, and so understood by Cheung & Co.
If the above requirements are all satisfied, the firm (and Kwan) “will be bound even though the activities of the individual partner constitute a fraud on his co-partners, unless the third party is privy to the fraud.”, as clearly stated in sections 8 and 17 to 18 of the partnership Ordinance.
First and foremost, in Polkinghorne v Holland , the plaintiffs and the defendant are partners in a business. Their business had finally incurred a huge loss as the defendant has made a one-side investment decision. It was held that the all the partners were liable for the debt. "His partners are responsible, notwithstanding that it is done fraudulently and for his own benefit, as the investment advice was within the 'usual course of business' of that firm" The Lord explained.
Therefore, for Lau and the creditors to... [continues]
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