Corporate and Partnership - Lesson 3

d. The act must be done by the partner as a partner of the firm and not in his own personal capacity

• This is as stated in Section 9 of PA

Re Briggs & Co Ex parte Wright
FACT: Father and son is partner in a partnership. The son used the name of the partnership for the purpose of burrowing money from the creditor. The money was used for the purpose of the partnership but the decision was made solely by the son.
HELD: The court held that the usage of the name of the partnership made all of the partner's liable even though there is no consent from the other partner

Asamaju Enterprises v Malayan Banking Berhad
ISSUE: Whether the partnership is liable when the cheque is sign by one of the partner
HELD: The court held that even 1 party sign the cheque; it will bind the partnership as stated under Section 8 of the Partnership Act (PA)

e. The third party must have knowledge that the particular partner has no authority to act on behalf in the partnership

• If a third party has no knowledge that a particular partner has no authority to act on behalf of the partnership, the partnership is still liable

Nature of the liability for debts and obligation

• Section 11 of PA
• Joint liability - a third party can sue all of the partnership
• Several Liability - a third party can also sue any one of the partners
• The procedure is that, a third party need to see the partnership first then only sue the partners individually
• It is not material whether the partner is a sleeping partner or a secret partner

Kendall v Hamilton
FACT: Kandall, the plaintiff (P) gave loan to X and Y who are partners in a trading firm. When X and Y cannot pay the loan, P then take action against them. Judgment was entered against them. Subsequently, both of them have been declared bankrupt. After that P had found the defendant (D) who is wealthy person and also a secret partner to X and Y. P then initiated a proceeding against D
HELD: The court held that P had the right to sue D legally, however, the court dismiss the case application because once the action has been completed against the firm, no one cannot be made liable for a same action in a different proceeding

Guinness Anchor Marketing Sdn Bhd v Chellam Joe Vetha Thya Singh
PRINCIPLE: Joint liability can be defined as there is only 1 course of action for the recovery of debt. Once the course of action had been exhausted, a second course of action or a new proceeding is no longer available against any partners by the creditor who failed to sue at the first instance

Other liability on the partner

a. Wrong and tortuous liability

• Section 12 of PA stated that a firm can be made liable provided it happen on the ordinary course of business

Hamlyn v Houston & Co
FACT: A partner in the defendant’s (D) firm bribes a clerk in a rival firm for the purpose of obtaining private and confidential information relating to a legal matter. The rival firm had suffered losses because of the particular information. The rival firm then sued D
HELD: The firm is liable even though the act was done by 1 of the partner because it was made for the purpose of the business

b. Criminal liability

• Section 12 of PA does not mention clearly the position of criminal liability as it only emphasize on tortuous liability

Chung Shin Kian v PP
FACT: This particular partnership has been dealing with imitation goods called Texwood but it was handling by only 1 partner. He then get caught in a raid
HELD: The court held that the other partner shall not be made liable because the partnership act provide for joint liability on contract and tortuous liability but not for criminal liability

c. Liability for misapplication of money or property

• Section 13 of PA stated that one partner acting within the scope of his apparent authority received money of the property from third person, he misapplied it, and he will be made liable
• The other assent of section 13 is that a firm in the course of its business receives the money or property, and then misapplies it, the firm is also liable
• Section 14 of PA provide that liability only exist when that particular partner still in the partnership

d. Misuse of trust property

• Section 15 of PA stated that the other partner who is not the trustee shall not be liable if the partner who is a trustee misuse the trust

Ex parte Heaton
FACT: A partnership consists of a father and son. The son is a trustee of a will. They had been using the trust money for the business of the firm. When the firm was declared bankrupt, an action was also taken to the father
HELD: The court held that the father is not liable because the father was not the trustee of the trust even though the money was used for the purpose of the business of the firm

e. Liability of persons for holding out

• Example situation - A, B and C who is a partner were talking with E and F. A third party who deal with E and F has been lead to think that both of them are partner to A, B and C. Nevertheless, A, B and C did not denied or correct the statement. If the third party sued E and F, A, B and C will also be liable

William Jack Co (Malays) Ltd v Chan & Yong Trading Co
FACT: A minor who is on of the partner in the partnership had approached a salesman for the purpose of obtaining a supply
ISSUE: Whether the partnership should be made liable when the partnership cannot pay for the minor dealing
HELD: The court held that when there is no correction on the statement by a person, the firm is liable. Holding out must be read together with the doctrine of estoppels which mean that the firm will be stop from denying that the particular person is not the partner

i. Retiring partner
Retiring partner needs to give notice of his retirement to any person who used to deal with the firm by way of publication

Re Siew Inn Steam Co
FACT: A retired partner had put in notice of his retirement in several issues of a newspaper in which certain old customer were proved to be regular subscriber. However after his retirement, some of the old customer lends money to the firm partnership. Nevertheless, the firm failed to pay back the loan
HELD: The court held that the retired partner as liable because he failed to serve actual notice to the customer. However, this is not a good judgment as for today, publication is a sufficient notice

Tower Cabinet Co Ltd v Ingram
FACT: There is a partnership of 2 person; Christmas and Ingram and the name of the partnership is Merry's. The partnership was dissolve in April 1947, but Christmas still carried on the business under the same name. In 1948, the plaintiff (P) had supplied the partnership with furniture but there was no payment made by Christmas. Before the supplier sent the goods to the partnership, they relied on the old headed note paper bearing the partnership's name. The order was made without any authority from Ingram. Ingram, on the other hand did not destroyed all of the paper containing the letterhead of the firm
ISSUE: Whether Ingram can be made liable to pay the debts made by Christmas
HELD: The court held that Ingram was not liable because he had not knowingly suffered himself to be represented as a partner because he did not know that the old partner still carrying the business under the same partnership's name

ii. Death of partner

• Section 16 of the PA stated that the death partner will not be made liable on any liability incurred to the partnership after his death
• Furthermore, there is no requirement to give notice to the public at large

f. Liability of incoming and outgoing partner

i. Incoming partner

• Section 19(1) of PA stated that in the case of incoming partner, the liability will only incurred upon him after he become partner to the firm
• Further, any liability imposed to the firm before the incoming partner arrival, he will not be made liable for that liability

Rolfe and Bank of Australasia v Flower Salting & Co
HELD: The court held that the new partners were held liable to the debts of the old firm as they had impliedly agreed to accept liability by not objecting to the accounts provided by the creditors. In other word, a new partner will still be made liable to the debts of his old firm even though he has joint a new firm

ii. Outgoing partner

• Section 19(2) of PA stated that in the case of outgoing partner, the liability will only be imposed up until the day he leaves the partnership
• Further, any liability imposed to the firm during his time in office will still be carried even after he leaves the partnership

Malayan Banking Bhd v Lim Chee Leng & Anor
FACT: The respondent (R) was partners to a firm know as Berjasa Corporation. A sued R under a trust receipt which matured and become payable on 14 June 1975. Nevertheless, R leaves the partnership on 26 August 1976
HELD: The court held that R is liable because the liability incurred prior to his resignation

Court v Berlin
FACT: A firm engaged solicitor to sue on their behalf. 2 partners retire while the case in ongoing.
ISSUE: Whether the retiring partners are liable for the solicitor's costs incurred after their retirement
HELD: The court held that they were, as the solicitor's appointment consists of one entire contractor carry on the action to the end

• Nevertheless, Section 19(3) of PA, the outgoing partners can be exempted from liability by way of agreement made between the partners

That's all for now.