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JANICE OOI
FACAULTY OF LAW
COMPANY & PARTNERSHIP LAW
CHAPTER 4
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Liability of partners for debts and obligation
a
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For the purpose
of the business, they entrusted 2 persons to manage the business which is the second defendant
(2D) and C
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2D then burrowed money from the plaintiff (P) using the partnership name
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P then sued the partnership
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Not only that, they failed to mention that 2D only have apparent authority
b
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He then issued a receipt to
acknowledge that he has received the money on behalf of the partnership
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HELD: The court held that since the money was used to pay the debt of the partnership, the
partnership is therefore liable to pay the wife the burrowed money
Osman Haji Usop v Chan Kong Swil
FACT: 3 Malays and 3 Chinese formed a partnership where the 3 Malay did not participate in the
business, and this is including the plaintiff (P)
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The particular loan was
secured by a guarantor
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Later, the guarantor put the liability on all of the
partners
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The act of the partners must be done in the firm ordinary course of business or in the usual
way of business


Bank Of Australasia V Breillat, hold that ordinary course of business are; i
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buying goods on the firms name, iii
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contracting debts and paying it back, and v
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The nature of the business partnership was to provide garage and repairing car
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The P then sued Garrod and the partnership as Parkin did not have the
right to sell the car
HELD: The court stated that action subsided as the act of selling the car is the usual way of
business
d
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The son used the name of the partnership for
the purpose of burrowing money from the creditor
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HELD: The court held that the usage of the name of the partnership made all of the partner's
liable even though there is no consent from the other partner
Asamaju Enterprises v Malayan Banking Berhad

JANICE OOI
FACAULTY OF LAW
ISSUE: Whether the partnership is liable when the cheque is sign by one of the partner
HELD: The court held that even 1 party sign the cheque; it will bind the partnership as stated
under Section 8 of the Partnership Act (PA)
e
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A partner who is judged liable can claim contribution from other partners
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g: A, B and C are partners
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Judgment will be given against A and B
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A partner can be sued individually
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g: A, B and C are partners
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A company’s or partnership debt cannot be set off against the debt owed to a member
of the partners since it is joint and not joint and several liability
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

Therefore, we have two actions here i
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one against the alive partners-they are jointly
liable
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

The procedure is that, a third party need to see the partnership first then only sue the
partners individually



It is not material whether the partner is a sleeping partner or a secret partner

JANICE OOI
FACAULTY OF LAW
Kendall v Hamilton
FACT: Kandall, the plaintiff (P) gave loan to X and Y who are partners in a trading firm
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Judgment was entered against
them
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After that P had found the
defendant (D) who is wealthy person and also a secret partner to X and Y
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Guinness Anchor Marketing Sdn Bhd v Chellam Joe Vetha Thya Singh
PRINCIPLE: Joint liability can be defined as there is only 1 course of action for the recovery of
debt
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Re Doetsch (S11)
Fact: Firm was indebted to another firm
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The creditor of the firm brought action against
D’s estate alleging that the firm’s assets were insufficient to pay the debt
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Bagel v Miller [1903] 2 KB 212
Fact: B Supplied goods to a partnership business where M was a member
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B brought an action to recover the price from M's executor
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Lord Alverstone CJ "a claim for goods sold and delivered would not amount to a debt and the
duty to pay would also not amount to an obligation until there was an actual delivery"
Note: Refer to the last line of Sec 11, but subject to prior payment of his separate debts
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Wrong and tortuous liability


Section 12 of PA stated that a firm can be made liable provided it happen on the
ordinary course of business



In the case of negligence, when one of the partners gave negligence advice to a client,
all of the partners will be liable of the negligent act
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JANICE OOI
FACAULTY OF LAW
Hamlyn v Houston & Co
FACT: A partner in the defendant’s (D) firm bribes a clerk in a rival firm for the purpose of
obtaining private and confidential information relating to a legal matter
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The rival firm then sued D
HELD: The firm is liable even though the act was done by 1 of the partner because it was made
for the purpose of the business
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Criminal liability


Section 12 of PA does not mention clearly the position of criminal liability as it only
emphasize on tortuous liability

Chung Shin Kian v PP
FACT: This particular partnership has been dealing with imitation goods called Texwood but it
was handling by only 1 partner
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Liability for misapplication of money or property


Section 13(a) of PA stated that one partner acting within the scope of his apparent
authority received money of the property from third person, he misapplied it, and he
will be made liable
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-----THE FIRM IS LIABLE FOR THE LOSSES)

Willet v Chambers
Fact: Firm of solicitors and conveyancers
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Held: Other partners were liable
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Harman v Johnson
Fact: Firm of solicitors
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The partner misapplied the money
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Plumer v Gregory
Fact: A solicitor borrowed money from a client without the knowledge of other partners
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

Under Sec 13, the firm will be liable provided that the third party dealt with the
partner as a partner, not as an individual
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Two years after that A gave notice to the company that he had taken P
into the partnership and the name of the firm change to A & P
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The cheque was misappropriated
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Held: P was not liable, because the company had dealt with A in his personal capacity and not as
a partner of the firm
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-----THE FIRM IS LIABLE FOR THE LOSSES)

Rhodes v Moules
Fact: Firm of solicitors
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R obtained the loan but falsely sated that the mortgage required collateral
security
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R misappropriated it
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Evidence showed that the firm was
in the habit of receiving the share warrant
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The warrants had been received by the firm in the ordinary
course of business
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Tendring Hundred Water Works Co v Jones
Fact: Plaintiffs wished to purchase an estate
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For their convenient the plaintiff arranged for the
property to be conveyed into G’s name
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Plaintiffs sued the other partner, J, claiming he was liable for the fraud of his partner
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The deed were given to G by the plaintiffs as an individual, not as a partner
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Note: By virtue of Sec 14 the liability under Sec 13 is joint and several
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Misuse of trust property


Section 15 of PA stated that the other partner who is not the trustee shall not be liable
if the partner who is a trustee misuse the trust

Ex parte Heaton
FACT: A partnership consists of a father and son
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They had been
using the trust money for the business of the firm
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Liability of persons for holding out (S16)


Example situation - A, B and C who is a partner were talking with E and F
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Nevertheless, A, B and C did not denied or correct the statement
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Holding out must be read together with the doctrine of estoppels which mean that the
firm will be stop from denying that the particular person is not the partner
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This refer to the situation when that person did not actually make the representation but the
representation was made by a partner in the capacity as a partner
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The P some money to D in
consideration that he is to be made as one of the partners
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However, he did not take part in the management of the firm and only attended
two meetings before the firm was dissolved
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3) Third party has given credit based on such representation
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Mr S a client, and had his account handled by L
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S gave money to the firm
and the son misappropriated it
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JANICE OOI
FACAULTY OF LAW
i)…Where a person has by words/ conduct represented himself or knowingly suffered himself to
be represented as a partner
Held: Mr
...
L had held and suffered
himself to be represented as a partner
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Secondly, the client gave credit in that he entrusted the firm and thirdly, there is evidence
that the client gave the credit because he believe that Mr
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



It is sufficient if the representation is communicated to the creditor by a third party
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B
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B conveyed this to F, who gave debt
based on this statement to CDE
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It must have influenced the third party to give debt to the firm/ give credit
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As long as the plaintiff acted reasonably and there
was a representation by a person that he is a partner
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Not related to Sec 16 however it shows how estoppel is used to prevent a person from evading
liability
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Retiring partner
Retiring partner needs to give notice of his retirement to any person who used to deal with the
firm by way of publication
Re Siew Inn Steam Co
FACT: A retired partner had put in notice of his retirement in several issues of a newspaper in
which certain old customer were proved to be regular subscriber
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Nevertheless, the firm failed to
pay back the loan
HELD: The court held that the retired partner as liable because he failed to serve actual notice to
the customer
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The partnership was dissolve in April 1947, but Christmas still carried on the business
under the same name
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Before the supplier sent the goods to the
partnership, they relied on the old headed note paper bearing the partnership's name
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Ingram, on the other hand did not
destroyed all of the paper containing the letterhead of the firm
ISSUE: Whether Ingram can be made liable to pay the debts made by Christmas
HELD: The court held that Ingram was not liable because he had not knowingly suffered himself
to be represented as a partner because he did not know that the old partner still carrying the
business under the same partnership's name
ii
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

Note: Under Sec 16 a person will be liable as a partner in that particular transaction
only
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Liability of incoming and outgoing partner
i
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In other word, a new partner will still be made liable to the debts of his old firm even
though he has joint a new firm
Court v Berlin
Facts: The plaintiff was a solicitor who was employed by a partnership, to recover a debt due to
the firm
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While the action brought by the solicitor to recover the debt was in the proceeding the
two dormant partners retired from the partnership
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But the dormant partners refused to pay
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Held: Dormant partners were liable for the costs
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ii
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Goh Hooi Yin
Facts: Plaintiff was a retired partner and the deceased was the continuing partner
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Later
when the partnership was dissolved, the plaintiff was assessed for tax in respect of the
partnership income 9 ½ months preceding the dissolution
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Malayan Banking Bhd v Lim Chee Leng & Anor
FACT: The respondent (R) was partners to a firm know as Berjasa Corporation
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Nevertheless, R leaves the
partnership on 26 August 1976
HELD: The court held that R is liable because the liability incurred prior to his resignation
Court v Berlin
FACT: A firm engaged solicitor to sue on their behalf
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ISSUE: Whether the retiring partners are liable for the solicitor's costs incurred after their
retirement
HELD: The court held that they were, as the solicitor's appointment consists of one entire
contractor carry on the action to the end


Nevertheless, Section 19(3) of PA, the outgoing partners can be exempted from
liability by way of agreement made between the partners



An agreement between a retired partner, other partners and creditors to discharge the
liability of the retired partner
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