What is a partnership

What is a partnership

1. Definition

   • S1(1) PA - Partnership is the relation which subsists between persons carrying on a business in common with a view of profit
     • Persons - Two or more
     • Carrying on a business
       • Keith Spicer Ltd v Mansell [1970] (EWCA): Preparatory acts taken to incorporate a company to run a business not counted as partnership
       • Miah v Khan [2000] (HL): No need for actual trading to have began so long as they have done enough to be found to have commenced the venture agreed to
     • Business in Common
       • S45 PA: “business” includes every trade, occupation or profession;
     • With a view of profit
       • M Young Legal Associates v Zahid [2006] (EWCA) - Division of profits is an “accident and not an essence of the partnership relation”
       • Does not matter if successfully profits, so long as original view was profit generation

2. Indicia

   • Labels inconclusive
     • Label used by parties is relevant but is by no means conclusive: Miller Freeman Exhibitions Pte Ltd v Singapore Industrial Automation Association [2000] (SGCA)
     • Courts will not merely look at the description label parties choose to attach but the nature of the business: Canadian Pacific (Bermuda) Ltd v Nederkoorn Pte Ltd [1999] (SGCA)
   • S2 PA - 'Rules for determining existence of partnership'
     • S2(1) Co-ownership of property does not of itself create partnership
       • Whether used for purpose of carrying on business
       • Frequency of Activity
         • Regular buying and selling of properties together might be regarded as a business (even if separate corporate vehicles used) Rabiah Bee Bte Mohamed Ibrahim v Salem Ibrahim [2007]
     • S2(2) Sharing of gross profits does not of itself create partnership
       • Unless the parties share in the net profits, the receipt of a share of the gross profits is not prima facie evidence of a partnership: Cox v Coulson [1916] (EWCA)
     • S2(3) Profit sharing = prima facie evidence but does not of itself make him a partner
       • While the sharing of profits did not in itself create a partnership, the fact that profits were shared tended towards the existence of a partnership: Rabiah Bee Bte Mohamed Ibrahim v Salem Ibrahim [2007] SGHC
       • Exception s2(3)(a) - debtor's receipt
         • Trustees running the business to pay off creditor does not make creditor a partner: Cox v Hickman (1860)
       • Exception s2(3)(b) - remuneration contract with profit share (wages/agency fee)
         • Question of partnership must in all cases depend upon the intention of the parties as it appears on the contract: Walker v Hirsh (1884) (EWCA)
           • See if have control in management etc
       • Exception s2(3)(c) - Annuity for deceased partner’s widow or child from profits
       • Exception s2(3)(d) - Repayment of loan or loan interests from profits (provided in writing)
         • different from s2(3)(a) debtor's receipt -> amount to be recouped is related to profitability
         • if lenders stipulate protective provisions circumscribing the borrower’s (partnership’s) powers which exceed those necessary for the protection of the loan, the transaction may be deemed more consistent with a partnership relation
           • e.g. management control to creditor in Pooley v Driver (1876)
       • Exception 2(3)(e) - Annuity from profits as consideration for sale of goodwill
         • Hawksley v Outram

3. Joint Venture

   • “whilst all partnerships involve a joint venture, the converse proposition does not hold good” Rabiah Bee Bte Mohamed Ibrahim v Salem Ibrahim [2007] SGHC
     • Differentiating factor is whether it was one-off business venture or not : Canadian Pacific (Bermuda) Ltd v Nederkoorn Pte Ltd [1998] SGCA

4. Salaried partners

   • The test for partnership depends on true nature of the relationship and not the label “salaried partner” attached to it: Stekel v Ellice [1973] Chancery Div
     • Possible factors identified: (1) whether there is joint management authority and powers; (2) whether presence of capital contributions were made; and (3) whether the agreement accords him rights usually extended to partners
     • Adopted in Chua Ka Seng v Boonchai Sompolong [1993] 1 SLR 482 (SGCA) to weigh totality of evidence

5. S3 PA - Postponement of Rights in Insolvency

   • Recovery of loan / profits postponed until other creditors have been repaid
     • Only applies to s2(3)(d) or s2(3)(e), ie those who take a share in the PROFIT of the business: Re Canada Deposit Insurance and Canadian Commercial Bank with PA equivalents