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JANICE OOI
FACULTY OF LAW

DISSOLUTION OF PARTNERSHIP

1
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1
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Refers to relevant clause[s] in a partnership agreement
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[I]- Whether the person managing the partnership business had actual or ostensible authority to
sell the partnership's business, goodwill and intellectual property assets
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a
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[F]- The defendant claimed her act of dissolving the partnership was valid since it was entered
into for a fixed term
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34 to the facts, the Court found that
there was no evidence that the partnership was entered into for a fixed term
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Sec 29(2) – There is continuance of a fixed term partnership if partners continue
business without any settlement or liquidation of the partnership affairs
...
In such an event, the partnership would naturally
dissolve by operation of law once the transaction, adventure or undertaking has been
completed subject to any agreement to the contrary
...




In deciding whether or not a partnership exists, the court must have regard to s4 ante
and the intention of the parties as appearing from the whole facts of the case and the
contract the joint venturers have made
...


Sinnathamby Klondakoundan & Ors v Brijkishore Shuparshad [1998] 1 MLJ 31, CA
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[F]- The defendant claimed her act of dissolving the partnership was valid since it was entered
into for a single adventure or undertaking
...


JANICE OOI
FACULTY OF LAW
c
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(Sukhinderjit Singh Muker v Arumugam Deva Rajah)

Abbot v Abbot
There is a clause in the partnership agreement which provides ‘If any partner shall …do or suffer
any act which could be a ground for dissolution of the partnership by court, he shall be
considered to have retired
...
He
claimed that he has right to issue the notice as the firm is a partnership at will
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The partnership was not a partnership at will but one to continue
unless dissolve by court or some other event
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W
...
E Balasingam
Fact: The pp agreement has two clause which provides for dissolution
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Held: A notice of dissolution would be ineffective to dissolve the p’ship having regard to the fact
that there is in existence an agreement which has otherwise provided for a means of
terminating the pp
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Their partnership agreement
provides that the agreement shall be terminated by mutual agreement only
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Held: Where no fixed term has been agreed for duration of the pp, it should be determined
according to the agreement, I
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only by mutual agreement
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Because according to the partnership deed
termination could be by mutual arrangement only
...



Where a partnership has been formed for an indefinite period of time, the partnership
can be dissolved by a partner simply giving notice of his intention to do so to the other
partners
...




Communicated to all partners

Kam Hoy Trading v Hup Aik Tin Mining
H: In a dissolution of a partnership, partners should sent notice to all persons who have trusted
them as partners…or taken steps to see that their withdrawal was duly registered with the
Registrar of Businesses
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[H]-The court found that the plaintiff's notice to retire vide the newspaper advertisement was
effective and the partnership being a partnership at will, it was therefore determined upon its
service on the defendants, under s 34(2)
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

Date of communication of notice

Ariff v Yeo
H: Effective date is date of service (not date of filing) of the writ on the defendant
...



Notice once given cannot be withdrawn, unless there is consent from all partners
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McLeod v Dowling
The notice would have no effect if before the operative date, an event occurred and it dissolved
the partnership
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A Clause; if either p’ner died during the term, the biz and goodwill will
go to the surviving p’ner
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JANICE OOI
FACULTY OF LAW
23rd March 1927, McL gv notice to terminate the p/ship, posted on 23rd march
...
McL died on 24th 3
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D claimed the dissolution was by death (Sec 33-ours
Sec 35) thus entitled to the biz and good will
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The dissolution by notice was not brought about until it had been
communicated as required by Sec 32 (c);i
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Sec 34 (c)
[H]- If a partner dies before receipt of notice signed by him, the partnership is dissolved by
death
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Tan Boon Cheo
Held: Actual verbal or written notice of his retirement should have been given by the plaintiff to
the defendant
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Difference between S28 and s34(1)(c)
Section 28(1)- Mutual Agreement, apply in when there’s no fixed term for duration of
partnership
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Section 34(1)(c)- apply when there’s absence of any contrary agreement
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Death or bankruptcy


Section 35 of PA



Every partnership will be dissolve as regards all the partners by the death or bankruptcy



Death and bankruptcy are grounds for dissolution of a partnership, unless otherwise
provided by the agreement
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1
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

If an agreement to the contrary is made, such agreement must have been made prior to
the death of the partner
...


JANICE OOI
FACULTY OF LAW


When a partner was declared bankrupt, the partnership will be dissolved unless
otherwise provided by the pp agreement
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

The agreement between the partners not to dissolve the partnership either by death or
bankruptcy of a partner may be oral or inferred from the conduct of the surviving
partners and the heirs of the deceased partner
...
The Partnership Act 1961
S
...






S35(2) Dissolution due to involuntary assignments
2
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Where a partner's share in the partnership is charged for his separate debt, the other
partners may, at their option, decide to dissolve the partnership
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e
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R v Kupfer
Issue: Whether the partnership was dissolved by the outbreak of war
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

It is immaterial whether the partners knew of the illegality or not
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[F]- One of three partners in a solicitor firm forgot to renew his practicing certificate without
which he is not allowed to practice
...
There
could not be a partnership between professionally qualified partner and a non qualified
partner in a professional firm
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This event brought about the dissolution of the partnership regardless whether the partners
knew of the lapse of the certificate or not
...




Illegality is the only ground for automatic/immediate dissolution
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With court interference/orders


Section 37 of PA, Any clause in the partnership agreement which states that the
partnership is to continue in the event of illegality was ineffective
...




A partnership may be dissolved by the court on the application of a partner
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The court may
decree a dissolution of a partnership under s 37 of the Partnership Act 1961
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A creditor such as
the respondents in the instant case cannot make an application under that s 37 to dissolve a
partnership
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In practice, the fact that such an application is made and the other partners' response to
it, may lead, directly or indirectly, to an inference that there is no longer mutual trust
and confidence between the partners
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i
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The state of insanity should be permanent
Court will seek expert evidence

Jones v Noy
Held: Insanity of a p’ner is a ground for dissolution of a pp because it is immediate incapacity but
it may not be the result prove to be a ground for dissolution if the partner may recover from his
malady
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Permanent incapacity


no prospect of recovery
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Other partners sought for the diss
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H: Medical evidence showed that the D’s health was improving – order for dissolution was not
granted
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In the event of a temporary incapacity, such temporary incapacity will not form a
sufficient ground for his co-partners to apply to the court for a decree dissolving the
partnership
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Conduct of a partner that cause prejudice to the business - A religion motivator of a
partnership flirting with the people that he motivated


Means a partner had committed serious misconduct which prejudicially affect the firm’s
business
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He was convicted of traveling on a railway without a
ticket
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The plf applied or interlocutory
injunction to stop the other partners from dissolving the firm
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The publicity upon his criminal conviction was not calculated
to injure the firm’s reputation in the eyes of its customers
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They were also
also partners of a dental clinic in England
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He was involved in a self-puffing advertisements
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Held: The app conduct was prejudicial to the firm’s business and the pp should be dissolved




The court will also have regard to the nature of the partnership business in determining
whether such conduct, in the opinion of the court, is calculated to affect prejudicially
the operations of the business
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Snow v Milford (1868) 18 LT 142
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[H]- The adultery of a partner was conduct insufficient to warrant expelling that partner or
dissolving the partnership
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Carmichael v Evans [1904] 1 Ch 486
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[H]- Of first instance inclined strongly to the view that the notice was valid
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Wilful or persistence breach of the partnership agreement - A partner in a construction
company by a cheap and unquality product



Wilful or persistently commits a breach of the partnership agreement
Express term of the agreement or breach of statutory duties imposed upon the partners
by the PA 1961

Cheeseman v Price
It was held that the persistent failure of a partner to account to his co-partners for money
which he had received from the firm’s customers was a ground upon which the court had
jurisdiction to make a decree of dissolution
v
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This provision reflects the basic definition of a partnership whereby the partners are in
business with a common view to profit
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Handyside v Campbell
A pp had been running at a loss but the evidence show that this was due the absence of the
active partner due to his illness
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H: Dissolution not granted, loss due to temporary circumstances
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The situation is not temporary
in nature
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When the court feel it is just an equitable to dissolve the partnership



The court will grant a decree of dissolution where circumstances have arisen which, in
the opinion of the court, render it just and equitable that the partnership be dissolved
...


JANICE OOI
FACULTY OF LAW
Lee Lay Lay v Wong Yiik Tai (unreported, 24 May 2007 Originating Summons No 24-433-2005I), [2007] MLJU 585
...

The court has taken an approach similar to considering whether a company incorporated under
companies legislation should be wound up on just and equitable principles
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Held: It is just and equitable to dissolve the business as the exclusion of the management rights
was in breach of a clear understanding that the director should be so entitled
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[H]- The circumstances which would justify the winding-up of a partnership are circumstances
which should induce the court to exercise its jurisdiction under the just and equitable clause and
to wind-up the company
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Dissolution by order of arbitrator
A partnership may be dissolved by an order of an arbitrator if there is such provision in the
partnership agreement
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(a) S
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



“…
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…until he has notice of the change
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[H]-Defendant was entitled to treat the plaintiff as still being member of the first defendant
because there was no proper notice of the change in the first defendant's constitution
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38(2), Right of person dealing with firm against apparent member



For persons who have had no dealings with the firm before the date of the dissolution
or change, an advertisement (the Federal Gazette , Sabah Gazette & Sarawak Gazette )
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Ang Lay Sim v Choo Lay Poh [2004] 8 CLJ 7
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[H]- Mere notice to the Registry of Businesses was held to be insufficient that the appellant
must continue to be treated as a partner and was liable for the firm's debts by reason of s 11
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38(3) ; Right of person dealing with firm against apparent member
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39 ; Right of partner to notify dissolution
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to protect the retiring partner from any debts or liabilities of the firm following his
retirement
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[H]- When a known partner retires, or a partnership is dissolved, notice of that fact must be
given to the world at large by advertisement, and to old or existing customers by specific notice
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40 ; Continuing authority of partners for purpose of winding-up
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partners are not authorised to enter into any other sort of arrangement after the
dissolution of the partnership
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[H]- existing relationship of banker and the partners would continue but only for the purpose of
completing transactions begun but unfinished at the time of dissolution
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41 ; Rights of partners as to application of partnership property
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property of the partnership applied in payment of the debts and liabilities of the
firm…
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[F]- Upon a partner's retirement from the partnership, his entire share in the firm must be dealt
with, irrespective of whether it is an 'absolute share' or not, in the absence of any unequivocal
agreement to the contrary which is not illegal or against public policy
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42; Apportionment of premium where partnership prematurely dissolved
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the court may order the repayment of the premium or of such part …
…regard to the terms and to the length of time during which the partnership has
continued
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43; Rights where partnership dissolved for fraud or misrepresentation
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entitled to rescind is, without prejudice to any other right
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44; Rights of outgoing partner in certain cases to share profits made after dissolution
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…the surviving or continuing partners carry on the partnership business with its capital
or assets without any final settlement
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8) S
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



any amounts due to an outgoing partner or representatives of a deceased partner
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This position may be varied upon mutual agreement of the parties

9) S
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

In settling accounts between partners after dissolution of the partnership, the following
rules are to be observed:1) all losses must be paid first out of profits, next out of capital, and lastly, if necessary,
by the partners individually in the proportion in which they were entitled to share
profits
2)the assets of the partnership (including the sums, if any, contributed by the partners
to make up losses or deficiencies of capital) must be applied in the following manner
and order:
(a) payment of the debts and liabilities of the firm owing to persons who are not
partners,
(b) payment to each partner rateably what is due from the firm to him for advances as
distinguished from capital,
(c) payment to each partner rateably what is due from the firm to him in respect of
capital;4 and
(d) the ultimate residue if any, to be divided among the partners in the proportion in
which the profits are divisible



partnership is dissolved and after the debts to third parties have been paid and
advances made by partners have been repaid

JANICE OOI
FACULTY OF LAW


the assets are insufficient to repay each partner his capital in full, any deficiency must
be borne by the partners in the same proportion as the profits would have been divided

Garner v Murray [1904] 1 Ch 57
...


Receivers and managers





The continuing authority of the partners may be taken away by the court if the parties
fall out, or by special grounds are shown by the personal representatives of a deceased
partner, or the trustee in bankruptcy of a bankrupt partner either by the appointment of
(i) a receiver to get in the outstanding assets; or
(ii) a receiver and manager to conduct the entire winding up
Davy c Scarth [1906] 1 Ch 55
Yeoh Tat Beng v Leong Chiew [1957] MLJ 161

Goodwill (Definitions)





Lord Eldon – “…was nothing more than the probability of the old customers resorting to
the old place” Cruttwell v Lye (1810) 17 Ves 335
“a connection formed by years of work”
per Jessel MR in Ginesi v Cooper (1880) 14 Ch D 596 at 599
“the benefit arising from connection and reputation” Lindley at 221
“the whole advantage whatever it may be, of the reputation and connection of the
firm, which may have been built up by years of honest work or gained by lavish
expenditure of money”

Trego v Hunt [1896] AC 7 at 24 (per Lord Macnaghten)
“the advantage, whatever it may be, which a person gets by continuing to carry on, and being
entitled to represent to the outside world he is carrying on, a business which has been carried
on for some time previously”
Hill v Fearis [1905] 1 Ch 466 at 471 (per Warrington J)



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