Week 10 – Partnerships Partnerships: o Partners ..., Study notes of Business

Download Week 10 – Partnerships Partnerships: o Partners ... and more Study notes Business in PDF only on Docsity! Week 10 – Partnerships Partnerships: o   Partners are both principles and agents of each other Formation: o   Created by an agreement o   Agreement can be: o   Oral o   Written o   under seal or inferred by a course of dealing Number in a partnership: o   under Corporations Act 2001 (Cth) s15 the maximum number is 20, except where partnerships are formed to carry on certain professions or callings (Partnership Act 1958 (VIC) o   A person who participates in an ‘outsize’ partnership will be penalized $500 Nature of a partnership: o   The Partnership Act defines a partnership as “the relationship which subsists between persons carrying on a business in common with a view of profit” o   When there is no formal documentation, must look at three elements o   Elements elements ss 5 and 6 of the Act: o   Carrying on a business (1): §   Implies a repetition of acts, and excludes the case of an association formed for doing one particular act which is never to be repeated” ‘ §   Requires a pattern or series of acts §   Smith v Anderson §   Group of investors subscribed for the purchase of shares through a trust in various submarine cable companies. §   The shares were sold to these investors by the trustees of the trust who then issued certificates to the subscribers. §   A question arose as to whether the trust was a partnership. It was not as there was no “carrying on a business” §   Khan v Miah §   K invested in a restaurant venture with M etc. §   They needed more capital, which Khan provided. Miah was to run the restaurant. They did many things before the restaurant opened. Then relationship ended even before opening. §   Khan was not given any profits §   Held that prepatory acts done prior to opening constituted a business §   Goudberg v Herniman Associates §   HA did architectural work for Williams. §   At the original trial, it was held that Williams was in a partnership with Goudberg, and on that basis he was held to be jointly liable with Williams for unpaid fees amounting to $55,000 due to HA under the contract. §   The appeal court held that although there was a clear view of profit, nothing done by them leading up the date constituting “carrying on of a business”, thus not being prepatory. §   Therefore, Goudberg was not liable for the fees, as he was not a partner. §   Keith Spicer v Mansell §   Mansell and Bishop planned to establish restaurant and intended to form a compny for this purpose. §   Before the company was formed, and a suitable location was found, Bishop purchased furniture from Spicer. §   The furniture was not paid for. §   Shortly afterwards, Bishop went bankrupt and Spicer sued Mansell on the basis that he and Bishop were in a partnership, making him also liable for the debts. §   The court said there was no partnership as Mansell and Bishop were not “carrying on business in common” at that stage but were preparing to do so. §   Ordering the goods was contemplation, but not sufficient. o   In common (2); and §   The business must be operated by or on behalf of all the partners §   There must be mutuality of rights and obligations. §   Degiorgio v Dunn §   A rock band formed who performed covers, then split up. §   The defendant then put together another band with new members, inviting the plaintiff. §   The court held that a partnership no longer existed, as they were no longer “in common”. This was due to the following factors were: -the plaintiff didn’t share the establishment cost -he chose to be [aid a fixed fee for each performance -he did not mention the partnership in his tax returns -after the partnership was forned, the plaintiff went to Canada for 17months and did not involve himself. -the plaintiff approached performers in the band and tried to persuade them to join his new band §   Re Ruddock §   Ruddock, a sole trader, owed debt to B. There were a series of terms under the agreement, which in essense made B a partner. §   Ruddock went backrupt and B argued that she was a creditor and not a partner. §   Other creditors found that she was a partner and therefore not entitled to priority as a creditor. §   Court agreed with creditors, as B and Ruddock acted like partners i.e. there was a mutuality of rights and obligations. o   With a view to profit (3) §   There must be an intention to create profit, even if they do not make any. §   Members of clubs, societies or charities are not ‘partners’. Evidence of partnership: the statutory rules o   An extension of s5 o   To assist in determining whether a business has been carried on in common, the Act contains rules “to which regard shall be had” in determining whether a partnership exists.