Partnership 2 PDF

17/4/2024 RELATIONS Partnership 2 WITH OUTSIDERS NHAS 1 RELATIONS OF PARTNERS WITH OUTSIDERS At common law, the law of partnership was considered to be a branch o...

17/4/2024 RELATIONS Partnership 2 WITH OUTSIDERS NHAS 1 RELATIONS OF PARTNERS WITH OUTSIDERS At common law, the law of partnership was considered to be a branch of the law of agency ie. the agent owes a fiduciary duty to his principal. NHAS Partnership 2 2 1  17/4/2024 RELATIONSHIP OF PARTNERSHIP & THIRD PARTY  Partners are agents May act on behalf of the firm  Firm is the principal.  agents’ / partners' authority Actual Apparent NHAS Partnership 2 3 POWER OF AN AGENT  Sec. 7 PA 1961 Every partner is an agent of the firm and his other partners for the purpose of the business of the partnership; and the acts of every partner who does any act for carrying on in the usual way business of the kind carried on by the firm of which he is a member bind the firm and his partners, NHAS Partnership 2 4 2  17/4/2024 POWER OF AN AGENT  1APPARENT AUTHORITY  If the Principal's words or conduct would lead a reasonable person in the Third Party’s position to believe that the agent was authorized to act.  (a conduct in ordinary business of the firm was done)  Sec. 7 The partner’s conduct will not bind if he is in fact has no authority to do so AND the person dealing with the firm either: i. Knows he has no authority to do so; or ii. Does not know that he is a partner; or iii. Does not believe him to be a partner. NHAS Partnership 2 5 APPARENT AUTHORITY – S7 3rd party having business with the firm has right to assume that each partner has authority to act for the firm. A partner’s conduct may bind the firm if the following conditions are fulfilled:- i. The conduct was done for the purpose of partnership’s business.  Osman Hj Mohamed Usop v Chan Kang Swi (1924) 4 FMSLR 292 ii. In the usual way business of the kind carried on by the firm  Mercantile Credit Co. Ltd v Garrod ]1962] 3 All ER 1103 iii. 3rd party knows / believe that he is a partner.  Chan Yin Tee v William Jacks & co. (Malaya) Ltd (1964) 30 MLJ 290 iv. 3rd party does not know that he has no authority to carry on the transaction. NHAS Partnership 2 6 3  17/4/2024 POWER OF AN AGENT ACTUAL AUTHORITY Definition: actual authority given by the principal either orally / by conduct. S.9:A partner cannot pledges the credit of the firm for the purpose apparently not connected with the firm’s ordinary course of business UNLESS he is specially authorized by the other partners Kendall v Wood LR 6 Ex. 243 NHAS Partnership 2 7 LIABILITY OF PARTNERS CONTRACTUAL LIABILITY S11 – has two parts: a. Every partner in the firm is liable jointly with the other partners for all debts and obligations of the firm incurred when he is a partner. b. on the death of a partner, his estate is severally liable in due course of administration for such debts and obligations.  Osman Hj Mohamed Usop v Chan Kang Swi  Restoran Rizqin v Asia Commercial Finance (M) Bhd. MLJ 157  Kendall v. Hamilton NHAS Partnership 2 8 4  17/4/2024 LIABILITY OF FIRM FOR WRONGS TORT S12 - any loss or injury caused to any person as a result of any wrongful act or omission of any partner acting in the ordinary course of business of the firm or with the authority of his co- partners, the firm will be liable Hamlyn V John Houston & Co. (1902) 87 LT 500 / 1 KB 81 Dubai Aluminium Co. Ltd. V. Salaam 2 AC 366 NHAS Partnership 2 9 Misapplication of money or property received for or in custody of firm S13 In the following cases namely:- a. Where one partner, acting within the scope of his apperant authority, receives the money or property of a third party and misapplies it; b. Where a firm in the course of its business receives the money or property of a third party and the money or property so received is misapplied by one or more of the partners while it is in the custody of the firm: The firm is liable to made good the loss. Blair v. Bromley (1847) 2 Ph. 354 Partnership 2 10 NHAS 5  17/4/2024 LIABILITY OF WRONGS JOINTLY OR SEVERAL S14 –Every partner is liable jointly with his co-partners and also severally for everything for which the firm while he is the partner therein become liable under section 12 or 13. Kata mudah – pekongsi boleh didakwa secara bersama @ berasingan bg liabiliti di bawah seksy. 12 & 13. NOTE : This is in contrast to liability under sec. 11. NHAS Partnership 2 11 IMPROPER EMPLOYMENT OF TRUST PROPERTY FOR PARTNERSHIP PURPOSES  S15 – If a partner, being a trustee improperly employs trust property even for partnership, no other partner will be liable.  EXCEPT the in cases where the other partners have notice of such breach. Walker v. Stone 4 All ER 412 – liability under sec. 15 is outside the ordinary course of the firm’s business. Ex parte Heaton (1819) Buck 386 Re Bell’s Indenture : Bell & Anor v. Hickley & Ors. 3 All ER 425 NHAS Partnership 2 12 6  17/4/2024 CRIMINAL LIABILITY Criminal liability is a private liability. Need to prove “mens rea”. Lord Widgery CJ in the case Garrett V Hooper: A principal will not be made liable for any offences which requires mens rea, Chung Shin Kian v. P.P. 2 MLJ 246 NHAS Partnership 2 13 LIABILITY UNDER “HOLDING OUT” DOCTRINE S16 – This section impose liability of a partner to those who is actually not a partner in a firm. It occurs when he represent himself as a partner in a particular firm to another person. The principle is based on the doctrine of estoppels. Doctrine of estoppels – once a person make a statement to another and that other person by relying to the statement take certain action, the person making the representation is prohibits from contradicting his original statement. NHAS Partnership 2 14 7  17/4/2024 S 16 There are THREE principles embodied under this provision and need to be satisfied 1 a person by words spoken or written or by conduct represents himself / knowingly suffers himself to be represented as a partner of a particular firm Datuk X informs his friends that he is a partner of Firma Putar Alam / Datuk X knowingly let his name to be used or represented as partner of Firma Putar Alam. Tower Cabinet Co. Ltd. V Ingram 2 KB 397 NHAS Partnership 2 15 2nd element Direct representation is not required. Datuk X informs Cong that he is a partner of Firma Putar Alam. Chong informs Munah of the facts. Munah based on the facts give loan to Firma Putar Alam. Datuk X is considered making a “holding out” that he is a partner of Firma Putar Alam. Therefore Datuk X is liable as a partner. NHAS Partnership 2 16 8  17/4/2024 3rd element on the faith of such representation, a third party gives credit to the firm. In other words, the conduct of giving credit to the firm by the third party was made on the influence of such statement / act of “holding out”.  Munah give credit to Firma Putar Alam as she was influenced by the “holding out” action and believes that Datuk X is a partner of Firma Putar Alam. NHAS Partnership 2 17 LIABILITY OF INCOMING & OUTGOING PARTNERS GENERAL – a person will only be made liable for any liability incurred while he was a partner. He will not be liable for any liability incurred after he has retired EXCEPT if there is a conduct of “holding out”. NHAS Partnership 2 18 9  17/4/2024 S19 3 principles: 1. A newly admitted partner does not become liable for anything done before he became a partner. 2. A partner who retires from a firm does not cease to be liable for partnership debts or obligations incurred before his retirement. 3. A retiring partner may be discharged from any existing liabilities if there is an agreement to such effect between himself and the new partner and the creditors. NHAS Partnership 2 19 contd. S19 Novation – creditors agreed with all parties involved including the new partner that he will replace the debtor. It can be either express or inferred as the fact from the course of dealing between creditors and the firm. NHAS Partnership 2 20 10  17/4/2024 S38  This provision must be read together with S19 Changes in membership of a firm:  S38 (1): for parties having engagement with the firm, actual notice on any changes must be given.  S38 (2): for others, publication in Gazette is deemed as a notice.  S38 (3): the estate of a deceased partner @ a bankrupt partner or a retired partner will not be liable for any partnership debt contracted after the date of the death, bankruptcy or retirement.  Re Siew Inn Steamship Company (1934) 3 MLJ 180  Philips Singapore Pte. Ltd. V Han Jong Kwang 2 MLJ 119  Michael Sim Hang Chuang v. Syarikat Sri Puspa 6 MLJ 189 NHAS Partnership 2 21 11