DISSOLUTION OF PARTNERSHIP

1. DISSOLUTION BY EXPIRATION

l  Sec 34(1)(a) - If a partnership entered into for a fixed term, by the expiration of that term.

l  Sec 34(1) (b) - If entered into for a single adventure or undertaking, by the end of that adventure or undertaking,

2. DISSOLUTION BY NOTICE

l  Sec 3491) (c) - If for an undefined time , by a notice given to the partners.

If a partnership agreement provides for a specific way to be dissolved – notice by a partner would be inoperative

l  Moss v. Elphick – termination by mutual agreement only

MOSS v ELPHICK [1910]  1 KB 843

M and E were partners in a partnership for an undefined time. A clause in the partnership deed stated that it could be terminated ‘by mutual arrangement only’. M gave notice to E of his intention to dissolve the partnership.

Held – that the notice was invalid. Since the clause stated that partnership could be terminated ‘by mutual arrangement only’the PA , s. 26(1) was inapplicable. Further, the partnership was not dissolved by notice under s.32 .

3. BY BANKRUPTCY, DEATH OR CHARGE

l  Sec 35 (1) - Subject to agreement between the partners, every partnership is dissolved as regards all the partners by the death or bankruptcy of any partner.

l  If it is agreed that death / bankruptcy will not dissolved the firm – the surviving partners and personal representatives of the deceased partner may carry on the business

l  Dissolved at the option of the other partner if any partner caused his share in the partnership assets to be charged for payment if personal debt

4. BY ILLEGALITY

Sec 36 - A partnership is dissolved in every case by the happening of any event which makes it unlawful for the business of the firm to be carried on for the members of the firm to carry on the partnership.

- solicitor not renew license

HUDGELL YEATES & CO v WATSON [1978] QB 451

A client of a firm of solicitors denied liability to pay the plaintiff’s firm’s bill of cost on the basis that as one of the partners, S who inadvertently failed to renew his annual practicing certificate until may of the relevant year had disqualified himself from acting as a solicitor, the firm was precluded from recovering cost for work done for the defendant in that period.

Court of Appeal (by majority) held – that when S’s certificate lapsed the existing partnership between himself and the remaining partners was automatically dissolved, since it was illegal for an unqualified person to be a member of a solicitor’s partnership, but the partnership was reconstituted during the relevant period as a partnership between the remaining partners. Furthermore J and G were not estopped from denying that S had been a partner during the relevant period for, although they had held S out as being a partner, the defendant had not instructed the firm in reliance on the representation that S was a partner. Accordingly, since no work had been done for the defendant by, or under supervision of S, during the relevant period , H and G as the remaining partners were entitled or recover their costs for the work done for him during that period.

5. DISSOLUTION BY THE COURT.

On application by a partner, the court may decree a dissolution of a partnership for:

            1. Insanity

            2. Permanent Incapacity

WHITWELL v ARTHUR [1865] 35 Beav. 140; 55 ER 848

A partner in a firm of pharmacists was disabled by a paralytic stroke and his co-partners applied to the court for dissolution of the partnership, on the ground that the stricken partner was incapable of carrying out his duties in the partnership business.

The application was stayed on the ground that there was some evidence before the court that there had been a recent improvement in the disabled partner’s condition. However, liberty to apply was reserved to the applicant in the event of there being a deterioration in his partner’s health.

            3. Prejudicial Conduct – Clifford v. Timms

            4. Persistent breach of agreement

CHEESEMAN v PRICE [1865] 35 Beav. 142; 55 ER 849

Held – the persistent failure of a partner to account to his co-partners for money which he had received from the firm’s customer was a ground upon which the court had jurisdiction to make a decree of dissolution, quite apart from any express provision in the articles of partnership providing for the rendering of account.

            5. Carrying business at a loss.

HANDYSIDE v CAMPBELL [1901] 17 TLR 623

Plaintiff was a partner in a firm of cargo extraction. Plaintiff made an application to the court to dissolve the partnership as the partnership could only be carried on at loss and no profit will be made at all. The other partners claimed that the loss was sourced by the weak management of the plaintiff. Furthermore the plaintiff had for a long period absent at work for health condition. The other partners was in confident that the business may made profit by a good management.

Held – Dismissed the application, for the court to order a dissolution on this ground it must be satisfied that for all practical purposes, it is impossible for the business to make a profit .

            6. Just and equitable ground.

RE YENIDJE TOBACCO CO LTD [1916] 2 Ch D 426

W and R are partners, they were only two of them directors and shareholders of the firm . They had reached such a state of personal antagonism that they refused to communicate except through the medium of their secretary. R constituted an action against W for a fraud.

Held- the company was ordered to be wound up, under the provisions of the Companies (Consolidation) act 1908. The order was made in spite of the fact the company’s business was highly profitable.

Lord Cozens Hardy: “I think that in a case like this we are bound to say that circumstances which would justify the winding up of a partnership between these two by action are circumstances which would induce the court to exercise its jurisdiction under the just and equitable clause to wind up the company”.