Week 13 (Principles of Partnership – actual/apparent authority, acting within the scope – duty not to compete)QUESTION 1Chloe is a lawyer located in Brisbane and Kate is an accountant on the Gold Coast. Chloe is in a partnership with Megan operati ng a law firm (“the Brisbane partnership”). Without Megan’s consent or knowledge, Chloe and Kate enter an agreement in which Kate will pay Chloe a fee for each client referred to Kate by Chloe. Chloe subsequently receives a number of payments from Kate and deposits them into her personal bank account.Noting the success of Kate’s accounting practice, Chloe agrees with Kate to form a partnership on the Gold Coast providing accounting and legal services (“the Gold Coast partnership”). Initially, it is agree d that Chloe will provide the legal services “after hours” until Chloe has a sufficient client base so that she can retire from the Brisbane partnership and move permanently to the Gold Coast. As an initial capital contribution to the Gold Coast partnership, Chloe combines her referral fees with $10,000 she withdrew from the Brisbane partnership trust account. The $10,000 represented compensation that was to be paid to one of Chloe’s personal injury clients. Megan finds out about the Gold Coast partnership one week after it commences business.Advise Megan as to all relevant matters under the Partnership Act 1891 (Qld).Issue 1: Is there has the partnership between Megan, Chloe and Kate? Law:Section 5Partnership Act (“PA”): Two or more pers ons who:1. carry on a business (Smith v Anderson (1880))2. in common (Kang-Kem v Paine (2004) )3. have a view of profit (United Dominions Corp Ltd. V Brian Pty Ltd (1995))Section 6 PA: Adds to the basic definition of partnership three specific rules as to whether a partnership exists:1. s6 (1)(a) - co-ownership of property,2. s6 (1)(b) - revenue sharing, and3. s6 (1)(c) - profit and loss sharing.Application: From the information given, it would appear that in this case, Chloe and Megan's party does not carry on the business between Chloe and Kate because there is a isolated transaction. are carrying on business,but, Chloe and Megan's party are in common because they operating a law firm (“the Brisbane partnership”)which is repetition of acts operating the same firm((Smith v Anderson (1880), (Kang-Kem v Paine (2004)), and they also have a view of profit because they intended to the profit((United Dominions Corp Ltd. V Brian Pty Ltd (1995)). (Section 5 PA). And they will share the profit. (Section 6 PA). while, Ch loe without Megan’s consent or knowledge, to enter an agreement by Kate, so, there is no partnership between Megan and Kate.Issue 2: Is the firm liable for the Chloe’s actions?Section8 PA- Power of partner to bind the firm(Polkinghorne v Holland (1934))Section10PA - Partner using credit of firm for private purposes (Goldberg v Jenkins)Section12 Liability of partners-(Kendall v Hamilton (1879))Section13PA Liability of the firm for wrongs (torts)Section14PA - Misapplication of money or property received for or in custody of the firmSection 15 - Liability for wrongs joint and several (Proceedings Commissioner v Ali Hatem [1999])Application: I n regard to the matter between Chloe and Megan,There is a partnership which means Chloe has authority to do the decisions for firm (S8 PA-(Polkinghorne v Holland (1934)), and Chloe receive the payment is not to personal use (S10PA - (Goldberg v Jenkins)), and both Chloe and Megan are liable for this payment. In the S13, Chloe was acting either in the ordinary course of the firm’s business or with the actual or apparent authority of his or her co-partners. And in S14 (1) (a), Chloe is acting within the scope of the partner’s apparent authority to receive the money. Therefore, Megan has separate liability.Issue 3: Has Chloe breached a fiduciary duty owed to the firm?Section 27(1)(a): sharing of profits and losses, unless partners have agreed to share profits and losses according to capital invested or in some other way.(Kilpatrick v Mackay (1878))Section 27(1)(b): Indemnity for incurring personal liabilities - What they did was necessarily done for the preservation of the business/property of the firm.Section 27(1)(g): Introduction of new partnersPartner cannot be introduced without consent of all partners, but may be entitled to assign partnership interest (Section 34)Section 28: Expulsion powerMust be contained in express agreement between the partners, and must be exercised in good faith and strictly in accordance with the terms of the agreement.Section 31-Duty to Render Accounts - Partners must render (i.e. provide) true accounts and full information of all matters affecting the partnership(Law v Law [1905])Section 32-Account of Profits- Duty to account for private profitsPartners must account to their co-partners for profits they make without their knowledge and consent or as a result of information gained during the course of the partnership.(Birtchnell v Equity Trustees (1929)Section 33-Competing with the Firm –The partner must not carry on a business of the same nature as the firm (Aas v Benham); and That business must not compete with the firm.Application: I n regard to the matter between Chloe and Megan, there is no agreement between Chloe and Megan, so, Megan is disagree to share the profit/loess (Section 27(1)(a) (Kilpatrick v Mackay (1878)), and there is not the ordinary and proper conduct of the business of the firm (Section 27(1)(b)), and also Megan do not know who is Kate (Section 27(1)(g)). In the S28, Must be contained in express agreement between the partners, and must be exercised in good faith and strictly in accordance with the terms of the agreement. In this case, Chloe do not have a good faith and strictly in accordance with the terms of the agreement because he does not ask Megan to have another partnership. So, there’s no relationship between Megan and Kate.Moreover, In regard to the matter between Chloe and Megan, Chloe subsequently receives a number of payments from Kate and deposits them into her personal bank account. But in Section 31, Partners must render (i.e. provide) true accounts and full information of all matters affecting the partnership(Law v Law [1905]). Observably, in this case, Chloe do not show her account to the Megan. This is also in Section 32, Partners must account to their co-partners for profits they make without their knowledge and consent or as a result of information gained during the course of the partnership (Birtchnell v Equity Trustees (1929). Moreover, in Section 33, Chloe can not have the same nature as the firm between her and Kate,(Aas v Benham) and she does not give the half part of money which receives from Kate from her personal account. And also .Issue 4: How is the Chloe and Megan dissolution of partnership?Law: Section 35 (a) (b):(a)Fixed term partnership (time period): Terminate upon expiry of time(c) A partnership at will: Terminates upon one partner providing notice to all the other partners of its intention to dissolve the partnership.Section 36 - By Bankruptcy or Death, subject to any agreementSection 37 - By IllegalitySection 38-(a)Permanent Insanity(b)Permanent Incapacity. e.g. paralysis(e)The business can only be carried on at a loss in which the loss must be of a permanent natureApplication: I n regard to the matter between Chloe and Megan, Chloe could wait the partnership terminate upon expiry of time because Chloe will retire as soon as possible, and she also could notice Megan who is her partner in the Brisbane partnership she intention to dissolve the partnership(Section 35 (a) (c)). Chloe and Megan’s business does not have the huge loss or bankruptcy to any agreement and also legality (Section 36, Section 37). Moreover, it is agreed that Chloe will provide the legal services “after hours” until Chloe has a sufficient client base so that she can retire from the Brisbane partnership and move permanently to the Gold Coast. Specifically, Chloe and Megan’s business can work normally and do not permanent insanity (Section 38 (a) (b) (e)).Issue 5: How Chloe and Megan distribution of assets on dissolution?Section 23: All property brought into the partnership or purchased on account of the firm is partnership property.Section 47 - Distribution of Partnership PropertyConclusion: in regard to the matter between Chloe and Megan, because of Chloe make a new partnership with Kate which time he do not finish his old partnership with Megan, so, we can suggest that Chloe receive the property is the partnership property(Section 23). Section 47 said that payment of remaining partnership property to the partners in equal shares, subject to a contrary agreement on profit/loss sharing. Therefore, Chloe receive the property must equal share with Megan. On the balance of probability, there us a partnership between Chloe and Megan, and the firm should liable for the Chloe’s work. However, in the situation of the business do not dissolution between Chloe and Megan, Chloe do not ask and provide a notice to Megan of she intention to dissolve the Brisbane partnership to make a new partnership with Kate, it is breach his fiduciary duty. Therefore, Chloe must equal share the property what receive from Kate about $10000, so, Megan can get $5000.。
