Partnership Law: Case Study

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Part a) Legal position enabling expulsion of Annabel from the partnership. Step 1:-
The problem at hand deals with Partnership law as governed by the Partnership Act 1895 in the absence of a written agreement. Principles of Common law and Equitable principles also apply. Partnership Act governs the partnership of ‘Health Plus’. Sec. 30 of the Act, as it relates to misappropriation of partnership property. The application of Sec. 39 Partnership Act 1895 and the Fiduciary Duty breached. Supreme Courts position to dissolve the Partnership due to absence of an agreement. Step 2:-

The partnership of Health Plus is a verbal agreement. Hence it is governed by the Partnership Act 1895. Firstly it is evident that a Partnership exists as there is an intention to create and carry on a business with a view to profit. There is an element of Agency, where one partner acts on the behalf of the other. A sharing of profits, liabilities and joint ownership of partnership property establishes a clear existence of a partnership as per Sec 8 PA. Has there been a misappropriation of funds as was discussed in Mann v. Hulme (1961). Case deals with the receipt of money by an agent/partner and the scope of authority conferred. A partner in his role owes a fiduciary duty to his other partners, to act in good faith and in their best interests, Helmore v. Smith. Law v. Law and the Sec 39 PA, emphasizes the need to render true accounts and all other information to any other partner. A partner not governed by a written contract cannot be expelled by a majority vote (S. 35(1) PA ) Dissolution by court can be invoked as under S. 46(c) PA – in instances where the court is moved to infer that the carrying on of business will be affected by the actions of the guilty partner. A reconstitution of the partnership can take place on the dissolution of the old partnership and a new constitution being put in place.

Step 3:-
Annabel is a partner of Health Plus for all intents and purposes of the business. Annabel is liable for the misappropriation of partnership property in the form of money ( Everett v. Federal Commissioner of Taxation (1980) ). There is evidence, as per the auditors, that funds were used for personal benefit in the form of payments. As there is no written agreement, Annabel is governed by the PA 1895, Common law principles and Equity. The partners of Health Plus can raise concerns that Annabel’s actions can prejudice the carrying on of business and petition for relief under Sec. 46 (c) PA. A new firm can be then reconstituted with the new members with notice being issued as per Sec 47 (1) and 47 (2) PA. Step 4:-

Given that the Partnership is that of a verbal agreement, it sets no guidelines for the expulsion of a partner. Annabel can be expelled on a successful application as under Sec. 46(c) PA. Annabel will be liable to account for the Partnership property misappropriated by her, other than for that obtained by her in the position of a trustee. A reconstituted partnership must notify third parties of the dissolution and the new constitution along with the names of the partners. As Annabel has breached her fiduciary duties and has acted only in the interests of herself and given the lack of transparency as per the use of funds, leading to a drop in profits, an application under S.46(c) PA would succeed. Part b) Adrian’s authority to contract as a partner of Health Plus & liability of Health Plus to pay Quick Cure on the contract. Step 1:-

The problem at hand deals with the principles of Partnership law as governed by the Partnership Act of 1895. The dominant feature is the operation of the law of agency and if Adrian was authorised to so contract on behalf of Health Plus with Quick-Cure. Given that Adrian is a partner, is he then a partner as per the law and not a mere representative of Heath Plus. In what manifestation of authority did Adrian contract? , Apparent or actual authority. In prior dealings with Quick – Cure did the...
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