RELATIONSHIP OF PARTNERS TO

ONE ANOTHER
By Dalila binti Amir
UiTM Pahang
Learning Outcomes :

• By the end of this topic, students shall be able to:

✓Identify the rights and duties of partners in their relation among themselves.
✓Explain the various duties of goodfaith.
✓Explain the law relating to partnership property.
✓Explain the rights of an assignee.
✓Apply the law to solve the dispute between partners.
DISCUSSION

Partnership Partnership
Agreement Property

Rights and
duties of
partners
PARTNERSHIP AGREEMENT
• A well drawn partnership agreement will contain provisions with regards to the existing
rights and obligations of each partner.
• Partnership is based on the mutual interest and trust between partners. Therefore the
liabilities between partners are heavily based on the partnership agreement.
• Section 21 - the rights and duties of partners may be ascertained by agreement
between them or as defined by the Act.
• However, there is partnership which does not have the partnership agreement. In this
situation, the court will look into the intention between the parties through the words
they used in order to determine whether there exist a partnership or not.
Cruishank V Sutherland
• ‘The mutual rights 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 expressed or inferred from the course of dealing’
 RELATION OF PARTNER TO ONE
ANOTHER

(A) (B) (C) (D)

Rules as to rights & Duty of Good Partnership Shares and
duties of Partners Faith Property assignment

Sec. 26 & 27 Sec. 30, 31, & 32 Sec 22 Sec 33

(A) Rights & duties of Partners

• Since partnership agreements is a mutual contract between partners, thus, the

rights and duties of partners normally spelled out in the partnership agreement.
• In the absence of partnership agreement, the rules as to the duties & rights of
partners provided by Partnership Act shall apply.
• Section 21- ”The mutual rights and duties of partners, whether, ascertained by
agreement or defined by this act, maybe varied by the consent of all the
partners, and such consent may be either express or inferred from a course of
dealing”.
• Section 26, section 27, section 30, section 31 and section 32 are the main
provisions which states the rights and duties of the partners with one another.
 *** Subject to any express/implied agreement to the contrary
Rights & duties of partner to one another
Sec 26 (b)
every partner shall be
Sec 26 (a) indemnified in respect of
All partners entitled payments made and
to share equally personal liabilities incurred
capital, profit & loss by him in the ordinary and
sustained by the proper conduct of the
firm business; or when it is
necessary to do so in order
to preserve the business or
the property of the firm.
Sec 26 (f)
no partner shall be
entitled to
remuneration for Sec 26 (g)
acting in the
partnership business no person may be
introduced as a
partner without the
consent of all
existing partners
(A)
Sec 26 (d)
Sec. 26 (c) Sec 26 (e)
a partner is not
A partner entitled to entitled, before the every partner may take
8% interest on extra ascertainment of part in the
capital contributed by profits, to interest on management of the
him to the firm the capital partnership business
subscribed by him
Sec 26 (h)
Section 27
majority of the partners Section 26 (i)
No majority of the
may decide any
every partner have partners can expel
difference arising as to
access to and any partner, unless a
ordinary matters of the
inspect and copy power to do so has
business , but no
any partnership been conferred by
change may be made
book express agreement
in the nature of the
between the partners.
partnership business
without the consent of
all existing partners
 Garner V. Murray
• Held : In the absence of the partnership agreement to the contrary, partners must
divide and share loss equally.
Adamson V Jarvis
• Under the normal rules of agency, a partner who incurs liabilities when acting in the
ordinary course of business, would be entitled to an indemnity for co-partners, who are
for that purpose his principals.
Byrne V. Reid
• Facts : The partnership agreement provides that each partner had the power to
nominate and introduce new partners. The majority partners refused to admit new
partner introduced by one of the partner.
• Held : the agreement must prevail.
Highley V. Walker
• Held : The agreement by majority partners to allow the son of one of them to be taken
in as apprentice to learn the business was an ‘ordinary matter connected with
partnership business’. Therefore, the minority may not object to the majority’s decision.
 Tham Kok Cheong V. Low Pui Heng
• Facts : The majority of partners transferred the partnership business to a company. One of
the partners was not consulted.
• Held : the change in the nature of the partnership business was not valid.

Krishinchand Bahjwani & Anor V Sunil Bhojwani & Anor

• The learned judge said that partnership books are not limited to accounting records. It
should include other records kept by the partnership, for example, minutes of partners
meeting.

Bevan V. Webb
• Facts : The dormant partners intended to sell his interest to the managing partners. They
employed a valuer to inspect the partnership books. The managing partners refuse to allow
the valuer to do so claiming that the right to inspect could only be exercised by a partner
personally.
• Held : The right of inspection could be delegated to an agent, assuming that he was a
person to whom no reasonable objection could be taken and the agent was willing to
undertake not to use for any other purpose, the information he acquired during the
inspection of the books.
• section 27 provides that no majority of the partners can expel any partner unless a power to
do so has been conferred by express agreement.
• The provision lays down the general rule that the majority of partners may not expel a
partner unless the partners unanimously and expressly agreed that the majority may do so in
a writing.
Green V Howell
• Facts : The Partnership agreement contained a clause to the effect that a partner would be
expelled if he committed a flagrant breach of his duties.
• Held : A partner who committed a breach as described in the clause was not entitled to an
opportunity to explain what had happened, so long as his co-partner acted in good faith
when he served him with the expulsion notice.
Re A Solicitor Arbitration
• Facts : The partnership consisted of 3 partners. There was a clause in the partnership
agreement which stated that “…if any partner shall commit or be guilty of professional
misconduct… the other partners may by notice in writing expel him from the partnership…”.
One of the partners served onto the other partners the expulsion notice, on the ground of
misconduct.
• Held : One partner could not expel his co-partners since the agreement provided that
partners could exercise the power , but not a single partner.

Duty to render/disclose true accounts and full information of all
Mascom (M) Sdn Bhd & Anor v Kamawang Enterprise Sdn Bhd
(B)
Duty of Good Faith
*impliedly imposed by law in
every partnership agreement for
every partner to inform each other
where reasonable, all important
points to the other
Sec. 30
things affecting the partnership to any partner or his legal
representatives
Case : Law v Law
& Anor
Sec 31
Duty to account for any benefit derived from any transaction
concerning the partnership or any use of the partnership
property or partnership name or partnership business
connection without the consent of the other partners
Case : Pathirana v Ariya Pathirana
Aas v Benham
Sec 32
Duty to account for profit derived from carrying a competing
business of the same nature without the consent of the other
partners
 Law V Law
• Facts : William & Jones Law were partners in a wool business. William lives in London
and took little part in the running of the business. Jones later bought William’s share for
$21K. However, William found out that his share is worth more than that and there was
some assets of the business which were not disclosed to him by Jones. William apply to
the court to set aside the contract.
• Held : There was a duty of good faith resting upon Jones who knows more about the
partnership account compare to William. He should have disclosed all material facts of
the business to William. The contract was set aside.
Bently V Craven
• Facts : B & C & 2 other partners were in a sugar refinery partnership business. C was in
charged as the firm’s buyer and as such he was able to buy sugar at a discounted
price. Having bought the sugar at a discounted price, he then sold the sugar at the
market price. The other partner discovered that C had been getting a secret profit
from the transaction.
• Held : the firm can claim C’s profit from the said dealing. Therefore, he has breached
his duty to disclose the profit he get from the transaction.
 Aas V Benham
• Held : A partner cannot make a profit or commission for himself by the use of his
position or any information acquired in the partnership business.
Trimble V. Goldberg
• Facts : T, G & Bennet formed a partnership to acquire some property belongs to
Holland. The property consisted of 5,500 shares in Sigma Syndicate Comp. T was given
the power of attorney by G & Bennet to negotiate the sale of the transaction smoothly.
• Later, T made an offer to Holland to purchase a land belonging to Sigma Syndicate
Comp. & it was granted. T then asked Bennet to join him in the transaction. G found
out the transaction carried on by T and Bennet. G applied for a share of profit from the
transaction on the basis of breach of fiduciary duty under S.32 PA.
• Held : The claim was rejected. The purchase was not within the scope of the
partnership nor was it rivalry to the partnership business. The subject of the purchase
was not part of the business of the partnership. It is neither a misuse of the partnership
business nor in competition with the firm.
 (C) PARTNERSHIP PROPERTIES
• What is partnership property?
• S22(1) : “All property and rights and interest in property originally brought into
partnership stock, or all property and rights and interest acquired, whether by
purchase or otherwise, on account of the firm or for the purpose and in the
course of the partnership business”
• S22(1) - “…partnership property must be held and applied by the partners
exclusively for the purpose of the partnership and in strict accordance with the
partnership agreement…”
• S23 : Unless the contrary intention appears, property bought with money
belonging to the firm is deemed to have been bought on account of the firm.
• Co-ownership under Sec 22(2)
• Cases: Davis v Davis, Miles v Clarke, Wray v Wray, Ponnukon v Jebaratnam,
Wong Sang Giap & Ors v Wong Keng Giap & Ors
 Miles V Clarke
• Facts : C carried on business as photographer at a premise which he owned the lease
for 7 years. C then formed a partnership business with M with an agreement that all the
profits were to be shared equally. M brought his personal connection. Both of them
quarreled and they fought against:
- The consumable stock in trade
- The personal connection brought by each partner
- The lease of the premise
- The furniture, fittings and equipment of the studios
• Held : Since their agreement was as to the share of profits, only the consumable stock
in trade should be regarded as partnership property.
 Wray V Wray
• Facts : William Wray carried on business under his own name. He then took into the
partnership his 2 sons and another person. The business was still carried on under the
name of ‘William Wray’. When he died his wife became a partner. The partnership then
bought North Hill House upon which the purchase price was paid out of the partnership
assets. The property was conveyed to ‘William Wray’. Later on the continuing partner
sought a declaration that the conveyance of North Hill House to ‘William Wray’ passed
to the persons carrying business under the style of ‘William Wray’
• Held : The declaration was granted.
Ponukkon V Jebaratnam
• ‘The question whether the property is a partnership property or a separate property of
the partners only depends upon whether there is an agreement amongst the partners
expressed or implied touching such property. When there is no agreement, the court
will look into the intention of the partners to treat the property as a partnership
property. Where there is no intention can be inferred, the property is the separate
property of a partner although it may be used or even essential to partnership business.
• These factors could be taken into account in order to determine a property as
partnership property : -
a) Agreement between partners
b) Intention of the partners
c) Sources of acquiring the property
• Reasons for the importance of determining property as partnership property :-
1) If considered as partnership property – law impose duty to
account profit derived from it as required under sec 31.
2) Any increase in value of partnership property - benefit to the firm
and to partners upon dissolution.
3) A judgment against partnership can be executed against
partnership property as provided under sec 25(1).
4) Upon dissolution, partnership property to be divided among
partners after all debts are paid as provided under sec 41.
 (D) SHARES AND ASSIGNMENT

• Shares of a partner defined as his proportional division of the joint assets after their
realization and conversion into money and after payment and discharge of joint debts
and liabilities. Known as surplus asset.
• Sec 26(g) – a partner cannot transfer his share to another person without unanimous
consent of all partner unless if there is express agreement to the contrary.
• Partnership Act however allows partners to assign his share in the assets and profits to
third parties. The assigning partner known as Assignor and the third party known as
Assignee (those who will receive all the rights & shares)
• The right of an assignee mentioned under sec 33.
• An assignee has:
(a) During the continuance of the partnership, right to receive the assignor’s share
of the profits ONLY and not the other right as a partner.
(b) On dissolution of partnership, to receive the assignor’s share of the partnership
assets AND to receive an account as from the date of dissolution in order to
ascertain his share of the partnership assets.
 Watt V Driscoll
• Facts : A father of one of the two partners lent his money to his son. His son assigned his
share in the partnership as security for the loan. Later on, the son sold his share to his
co-partner without informing his father. The father wanted an account to ascertain
the value of the share.
• Held : Since the partnership was dissolved, Section 33(2) applies and the father as
assignee was entitled to an account.
THANK YOU FOR YOUR
ATTENTION !