Partnership Law: Problem Solving - Assignment Example

Name: Professor: Course: Date: 1a- “A precise of the Kak Loui Chan v Zacharia [1984] HCA 36; (1984) 154 CLR 178 (7 June 1984)” The case pitted Dr. Chan as the plaintiff and Dr Zacharia as the defendant. It was an appeal against a ruling made the supreme court of South Australia. In his plea, Dr. Chan contested the ruling in favor of an application by his partner in the Seaside Serenity business. The parties, who are Dr Chan and Dr Zacharia, had erstwhile been partners in a medical practice. They had a lease from Ajay Investments Pty Ltd of the premises Mayfield parks where they conducted the practice. The lease had an option for renewal in which for a renewal both Dr Chan and Dr Zacharia had to make a written request, on or before 30 September 1981. Months prior to then, the partners were in disagreement, which led to dissolving the partnership (21st May 1981), and litigated against each another. This prompted a receiver to be paced to wind up the partnership. The bone of contention arose when Dr. Chan acquired a new lease subsequent to the period that the partnership had been dissolved but prior to the winding up of the partnership. After the termination, the partners’ obligations went on so far as was necessary to dissolve the affairs of the partnership (Partnership Act 1891, S.A.), as amended. In those circumstances the obligation of "perfect fairness and good faith" which is owed by one partner to another continued: In Thompson's Trustee v. Heaton (1974) 1 WLR 605, Pennycuick, alleged at page 613, “that it follows ……that where the property of a dissolved partnership includes a leasehold interest, then subject to any other arrangement which may be made between the partners concerning that interest, each of the former partners owes the same obligation to the other former partner in respect of that interest as he did while the leasehold interest remained the partnership property.” The judges drawing from previous cases (precedents) ruled that Dr. Chan acted as an associate who, devoid of consent of his other partner, went on and obtained a restitution of a lease of the partnership assets in his own name. In such a case prima facie cleaves to the rent on a positive trust for the business. The phrase "renewal" in this declaration includes the award of a new lease, irrespective of whether there was a right of restitution of the lease that was originally held by the partners. The ruling ending was that the two associates held the lease of the said premises and any constitutional rights under this lease as sole trustees for the business and after termination for the partnership in receivership. Furthermore, there was some fiduciary association between the two partners arising from the corporation which continued to exist after its dissolution and then extended to the business property. Therefore, Dr Chan who is both a trustee and a former partner was necessitated to account as a helpful trustee for any the advantage or the gain that he has obtained in seeking to get hold of a new lease for him in regard of his place as a trustee of the charter and as an associate in the business being dissolved. The request was thus dismissed with costs. “The contribution of the KakLoui Chan v Zacharia [1984] HCA 36; (1984) 154 CLR 178 (7 June 1984) case to the law of partnership” The above case made tremendous contribution to the law of partnership and gave a good precedent to judges making rules in partnership cases. The first most important contribution was the enforcement of the partnership act chiefly section 39 that states that for existing reasons, that, on termination of a business, every associate is allowed as beside the other associates to have the possessions of the corporation applied in resolving of debts and any outstanding liabilities of the business and to have the excess property, after such declaration, applied in imbursement of what might be due to the associates uniformly after deduction of what might be outstanding from them as associates to the firm under solvency. This will act as a guide in the formation, running and eventual dissolution of partnerships especially on the subdivision of the assets and the liabilities. 2. Problem Solving; Winding Up Of the Seaside Serenity Business Issue The issue is whether there was a formal partnership between Bill and Ben and whether the property that was being used in the business was a business asset (partnership property) or was individually owned. This would help on deciding on how the outstanding debts would be cleared. Rules A partnership is a form business formed by more than one person otherwise known partners. It’s determined by a valid agreement between the parties to carry out a joint venture common with a view of making profit. Therefore, a partner is one who participates in formation of a business that’s owned jointly, participates in the sharing of gross returns the according to ownership of shares in the business, sharing of profits and losses, and exercises the partners rights. However, at the end of the day, there is flexibility in the partnership agreement and it is possible for the partners to consensually agree to exclude one or more of these partner's rights in relation to any given circumstance (Partnership Act, 1892) There are generally two types of partnerships- namely general and limited partnership. In Bill vs Ben’s case, the partnership would best be categorized in the former as it meets the legal criterion for a partnership case in that category. When making a ruling on the matter, a jury will have to employ the terms of reference of a general partnership. By definition, a general partnership is a form of business where the partners are actively engaged in the day to day running of the joint venture, share all the profits and debts that accrue to the venture. In this case, partners’ properties can be attached in order to offset a business that’s in debt. The personal assets of the business can be attached in the offsetting of the business liability as opposed to in a limited partnership (Cornell University, 2010). Application In any partnership, it’s essential for one to know his/her liability. Each partner has a stake in the running and management of the business and is thus held responsible for the actions of his colleagues in the business both in the legal and financial aspects. For instance, if the action of one partner leads to the business making losses, all the other partners bear the loss as they will take. In the Bill and Ben case their business under the name of Seaside Serenity had an outstanding account of $50,000 to a wine supplier and $40,000 was due soon for the up-front quarterly license fee for the poker machines. When the two partners were forming the business, they both mad various contributions. One of the partners namely Bill contributed the piece of land where the car park was put up and also brought in new equipment. On the other hand, Ben contributed the hotel premises as well as the license and initial hire fee for the poker machines. As per the partnership act, these assets belonged to the business and not to the individuals as the business and the person are two different entities. It’s therefore illegal for any of the partner to claim sole ownership of such assets. The above preposition is supported by the definition of a partnership by the civil law which states that a partnership is a nominate contract between individuals who, in a spirit of cooperation, agree to carry on an enterprise; contribute to it by combining property, knowledge or activities; and share its profit (Partnership Act: 1892) Dissolution of a partnership occur when there is a change in the relationship of the partners, as a result of a partner ceasing to be associated or a part of carrying on with the business. Situations which could lead to the dissolution of a partnership are many. These include when there is a call for dissolution when partners engage in a manner that implies that the joint venture can’t continue operating maybe after the expiry of an agreed period and both are not for an extension. The business may be dissolved by a court on the ground of its illegality, unlawful conduct of its partners, breach of contract or the bankruptcy of a partner/business (Partnership Act, 1892) Seaside Serenity is an informal form of partnership which is being dissolved on the ground of disagreement between the two partners, Ben and Bill. Upon dissolution, the partnership Act comes into play as Bill wants to quit from the partnership without clearing the outstanding liabilities owed by the business which he is a partner and is bound by the terms of the Partnership Act. A partner relationship is generally the result of a contract either expressed or implied with no formal requirements (such as a signed document). To determine whether a partnership exists, juries look at the intention of the parties, resolve to share of profits and losses, joint administration and control of business operations, capital investment by each partner, and common ownership of property. The case of Bill and Ben satisfies the above condition hence qualifies as a partnership. Conclusion Going by the Partnership Act which states that all assets are to be shared equally upon settlement of all outstanding liabilities, if there was any cash balance either in bank or at hand, it would be used to offset the outstanding accounts totaling $ 90,000.The remaining balance if any, would be offset through the sales of the business assets and the rest divided equally. The ground behind the equal sharing of liabilities and assets is based on the presupposition that when one commits an asset to a business and not unless stated otherwise, the asset becomes an asset of the venture (Partnership Act, 1892) Juries presiding over such partnership cases have got various points from which they put into consideration in determining whether the matter at hand passes the test of being considered as a partnership case. In the Bill vs Ben case, the ultimate guiding proof would’ve been the presences of a formal agreement. The guiding points include fact that there was the joint administrative role by both partners and sharing of profits. This is further supported by the input made in the form of contributions by both partners at the start of the business. The case therefore satisfies the requirements of partnership case and the Partnership Act can be employed to put the matter to rest. Work Cited Partnership Act: 1892 (NSW) Pt 3 ss 49–81; 1958 (Vic) Pt 3 ss 49–79; 1891 (SA) Pt 3 ss 47–83. Kak Loui Chan v. John Zacharia [1984] HCA 36; (1984) 154 CLR 178) Keith Fletcher, Partnership Act: 1892 (NSW) Pt 3 ss 49–81; 1958 (Vic) Pt 3 ss 49–79; 1891 (SA) Pt 3 ss 47–83. Cornell University: Law School. Partnership law.2010, Kak Loui Chan v. John Zacharia [1984] HCA 36; (1984) 154 CLR 178) Partnership Act: 1892 (NSW) Pt 3 ss 49–81; 1958 (Vic) Pt 3 ss 49–79; 1891 (SA) Pt 3 ss 47–83. Read More