1. `Mr.Coulson was a theater manager who agreed with Mr.Mill to provide his theater for one of Mill’s production. Under the agreement, Mr.C was to receive 60% of the gross takings whilst Mr.M was to receive the balance 40%. The plaintiff (an audience)was shot during performances of one of the scenes. She sought to make Mr.C liable on the basis that Mr.C and Mr.M are partners and therefore liable for the incident. `Held: The claim is rejected because sharing of gross returns did not create a partnerships within the meaning of the PA.
2. Dr Rajan Sinha v Dr P.C. Herman Partnership can be created either by oral or written
3. Defintion of Partnership
3.1. Definition of Partnership : Sec 3(1) of Partnership Act 1961 Partnership is the relation which subsists between persons carrying on business in common with a view of profit
4. Elements of partnership
4.1. Relations between persons
4.1.1. An agreement or a contract between parties to form a partnership VC George J : A partnership is a contractual relationship which subsists between persons carrying on business in common with a view of profit. (Tan Eng Choon v Foo Kai Yuen)
4.2. Carrying on business in common
4.2.1. A single act or undertaking could not amount to carrying on a business Smith v Anderson Brett J: The expression of carrying on implies a repetition of acts…That series of act is to be series of acts which constitutes a business. Compare with Windsor v Schroeder Held: One commercial adventure undertaken by the parties would be considered as business and the parties were partners
4.2.2. Carrying on -Means existing - Keith Spicer Ltd v Mansell The def and Mr.B agreed to carry on a business.The def ordered some goods to be used for the prospective business. Held: There was no evidence that def and Mr.B carried on business within the meaning of the PA
4.2.3. In common : means together Held: No partnership resulted from the joint venture agreement between a landowner and a housing developer as each party intended a wholly separate business. - Chooi Siew Cheong v Lucky Height Development Sdn Bhd
4.3. View of profit
4.3.1. - Sharing profit of the business - An important element in constituting a partnership. - Profit means net profit i.e. the balance after expenditure/cost has been deducted- Sec 4(b)); Sharing of gross return prima facie not a partnership.
4.3.2. Cases
4.3.2.1. R v Robson Lord Coleridge : … the participation in profits essential to the English idea of partnership
4.3.2.2. Re Spanish Prospecting Co. Ltd Fletcher Moulton LJ : Net profit means paying out of the receipts of a business, all the expenses incurred in obtaining those receipts.
4.4. Additional points
4.5. The word ‘partnership’ is not necessary - Ratna Ammal & Anor v Tan Chow Soo - Gulazam v Noorzaman and Sobath - Aw Yong Wai Choo & Ors v Arief Trading Sdn Bhd & Anor Peh Swee Chin J:In my view to find the existence of such relation, the Court must find the real intention of the parties involved. The real intention is not necessarily the expressed intention of the parties so that even if the parties express they are partners, the Court may decide to the contrary after the Court considers all relevant factors taken together, refer to the leading case of Cox v. Hickman [1860] 8 HCL 268.
4.5.1. A father left his two sons his business and three freehold houses in equal shares as tenants in common. They let one of them and employed the other in enlarging the workshops attached to the two houses. They continued to carry on the business. They also shared the rent of the third house. Held: The brothers are partners in the business but not as to the freehold houses. The property belonged not to the partnerships but to them as tenants in common.
4.6. RULES FOR DETERMINING PARTNERSHIP
4.6.1. SEC 4(A)
4.6.1.1. Sec 4(a) – joint tenancy, tenancy in common, joint property, common property, part ownership
4.6.1.1.1. The above circumstances are not sufficient to conclude that there is a partnership between the parties who are joint tenant / joint owner. If there is a business on the property, there might be partnership in the business but not the property Partnership property is not to be presumed
4.6.1.2. Davis v Davis
4.6.2. Sec 4(b) - Sharing of gross return
4.6.2.1. Cox v Coulson
4.6.3. Sec 4(c) - general rule
4.6.3.1. If a person receives share of the firm’s profit, prima facie, he is a partner.
4.6.4. Sec 6
4.6.4.1. The word firm refers to partners – vice versa
4.7. However, circumstances whereby sharing profit does not qualify a person to be a partner: Sec 4 (c)(i) –(v)
4.7.1. Sec 4(c)(i)- Payment of debt by installment
4.7.1.1. Cox v Hickman
4.7.1.1.1. The partnerships business was in financial difficulties. The creditors appointed two trustees to manage their interests in the partnerships. The agreement was that upon full payment of the creditors’ debt, the trustees will be out of the firm and return full management to the original partners. Mr. Hickman sought to make the two trustees liable as partners of the firm. Held: Sharing of the gross return of the business did not of itself make them partners. There was neither representation nor financial involvement which indicate a partnership.
4.7.2. Sec 4(c)(ii)- Remuneration of servant or agent by share of profit
4.7.2.1. Chua Ka Seng v Boonchai Sompolpong
4.7.2.1.1. The def was a partner in an architect firm, RSP of which the plf was an employee. The def later left the firm and set his own architect firm under the name CKS. The def requested the plf to resign from RSP and work with him at CKS. The plf alleged that in their agreement, he will be a partner who is entitle to 20% of the net profits. The def on the other hand claim that the plf was merely a salaried partner who was to receive 20 % of profit inclusive of salary and bonus. Held: The plf was only a “salaried partner” remunerated by a 20% of net profits inclusive of salary and bonus.
4.7.3. Krishnan v Abdul Razak & Anor
4.7.3.1. Held: An action against the firm’s name is an action against all the partners collectively
4.7.4. Sec 4(c)(iii) -Annuity to widow or child out of the partnership’s profit.
4.7.4.1. IRC v Lebus’s Trustees
4.7.4.1.1. A partner of a firm involved in making furnitures bequeathed(through his will) his share of the profits to his widow. In 1930, the widow’s share amounted to large sum but owing to a financial strategy, the firm was unable to pay her the money. However, the widow was assessed to income tax for that year. A question arise as to whether the assessment ought to include the sum representing her shares in the profits of the business.
4.7.5. Sec 4(c)(iv) - Payment of a loan or interest of a loan out of profits
4.7.5.1. Re Young (1896) 2 QB 484
4.7.5.1.1. A and B entered into an agreement by which A will lend certain sum of money and payment will be made out of the profits. A was to assist the office, have control over the money advanced and empowered to draw bills of exchange. The issue here was A a partner? Held: Not a partner.
4.7.6. Sec 4 (c)(v) - Sale of goodwill in exchange for a share of profits
4.7.6.1. Pratt v Strick
4.7.6.1.1. A man sold his practice and goodwill to another. It was agreed that he would continue to generate goodwill for his purchaser for a certain period in return for a share of the profits. Held: No partnership. No intention could be construed between the two men to establish a partnership.