Partnership Business and Creditors
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Added on 2020-03-23
Partnership Business and Creditors
Added on 2020-03-23
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After going through the facts that are present in this version, the issue arises if Friendly Bank canrecover the loan taken by Busy Bee Florist Shop. This issue arises due to the fact if Violet andSonny can be treated as the partners of the business. Therefore, in order to decide the presentissue, it has to be considered if Violet and Sonny can be treated as the partners of the business.According to section 1 of the Partnership Act, (Vic), it has been stated that the presence of threeelements is necessary in order to describe a particular relationship as a partnership. Therefore insuch cases, it needs to be seen if the parties have been carrying on a business; in common; andfor the purpose of making a profit. Therefore, if in case of a particular relationship, even a singleelement does not exist, such relationship cannot be termed as a partnership. In order to decide themeaning of 'carrying on business', it has to be seen if the parties have to establish some type ofrepetitiveness of action or if even a single action by the parties sufficient. There have beenseveral decisions delivered by the courts in which the courts have maintained that a repetition ofaction or a continuity of action is required. Therefore, for example, in Smith v Anderson, 1880,there was a group of depositors. They have subscribed to purchase the shares by forming a trust.These shares were sold to the investors by the trustees. They also gave them the certificates. Theissue that was present in this case was if this particular test can be described as a partnership. In order to deal with this issue, the court had to decide the nature of business as well as therelationship that existed between the parties involved in the trust. It was noted by the court thatthe trustees lacked the authority to speculate. Similarly, the trustees were not having mutualrights and obligations. After going through all these facts, and also looking at the nature of the
trust, the court concluded that the trust was not a partnership. The reason was that there was noassociation among the persons to "carry on business". Under the relevant provision has been mentioned by section 2 of the Partnership Act. Thisprovision contains the rules that can be applied for the purpose of deciding if the relationshipbetween the parties can be treated as a partnership. But at the same time, it also needs to bementioned that the decision regarding the presence of a partnership cannot be made only on thebasis of these rules. Therefore, these rules are not the only determinants regarding the existenceof a partnership. Therefore, the court asked to look at all the circumstances related with theagreement. For this purpose, the court has discovered the real substance of the agreement. That ispresent between the parties. Similarly it is also required to consider the express and impliedintention of the parties for this purpose. In Wiltshire v Kuenzli, 1945, it was mentioned by RoperJ. After the discovered that the parties have the intention of doing everything that makes thempartners under law, the intention declared by the parties that they should not be considered aspartners, was not valid.Stekel v Ellice (1973) is the other case that can be mentioned in this regard. In this case, thedefendant had given employment to the plaintiff in his accounting firm. According to theagreement created between them. In 1968, it was provided that the plaintiff had become asalaried partner and a salary will be given to him. At the same time it was also mentioned in thisagreement that in April 1969, the parties will enter into another agreement. It would be providedin this agreement that the plaintiff will become a full partner. The agreement provided that theterm of employment was still at the 1969. The defendant was made liable for the losses, if any,of the business. But the parties never entered into any of the event and they continue to operateas before. There was a breakdown of relations between the parties in August 1970. As a result,
the petition under the business and he also took his clients. At the same time, the plaintiff wanteda declaration from the court that the partnership had come to an end and it should be ordered tobe wound up. The decision of the court in this case was that a partnership was present betweenthe parties and it continued even in the lack of an explicit agreement (Exparte Coral InvestmentsPty Ltd., 1979). Section 2(3), Partnership Act is also relevant provision in this regard. This provision mentionsthat when a person receives a share in the profits of the business, it has to be considered as primafacie evidence regarding the fact that that person is a partner. But receiving a share of the profitsof the business or receiving a payment that is based on the profit made by the business does notin itself establishes that the person is a partner. However, the difficulty may arise due to the term'prima facie' qualifying the term evidence. Hence, it can be said that the presence of a profit-sharing scheme can be treated as evidence in favor of the presence of a partnership but only onthe basis of this fact, it cannot be concluded that a person is a partner. A significant case relatedwith this issue is Cox v Hickman (1880). The brief facts of this case are that B and J Smith havebeen taking as partners. The company started to face financial difficulties. Under thesecircumstances, the Smiths entered into a deed of arrangement with its creditors. According to theprovisions of the deed, the partnership business and its property were assigned to the creditors.The deed also provided that the creditors may continue the business under a new name. It alsoprovided that the income generated by the business will be divided by all the creditors. Similarly,the deed also mentioned that after the loan has been repaid in full, the business will be returnedto the Smiths. To creditors, Cox and Wheatcroft were appointed as the trustees for the business.While Cox never acted as a trustee, Wheatcroft was selected in this position only for some time.After Wheatcroft ceased to be a trustee, certain debts were incurred by the other trustees to
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