RELATION BETWEEN PARTNERS _ THIRD PARTIES

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					RELATION BETWEEN PARTNERS & THIRD PARTIES
POWER OF PARTNER TO BIND THE FIRM
A) B)

USUAL/APPARENT AUTHORITY ACTUAL AUTHORITY

A) USUAL/APPARENT AUTHORITY
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It is the authority that 3p can see/understand as power that the partner normally has in carry out duty as a partner. Same authority/power in other businesses of a similar nature Where a partner does an act that normally other partner would have the power to do, the firm would be bound

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2. 3. 4.

S. 7 PA 1961 recognized the agency relationship between partners. Third party could bind the firm if the following conditions are fulfilled: The act done must be of the type of business that is carried out by the firm Usual way 3p know/believe he deal with is a partner 3p not know he deal with the person who has no authority/power to act for other

Condition no 1
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The act done must be related to the type of business Case : Mercantile Credit Co Ltd v. Garrod [1962] 3 AII ER 1103 (held: Garrod was liable for Parkin’s action where it is the type of activity that is normally associate with a garage business, which is apparent to the outside world)

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Case : Higgin v. Beauchamp [1914-1915] AII ER rep 937 (held:action failed; the business was not a trading business, thus Miles had no implied authority to bind the firm) Case : Chan King Yue v. Lee & Wong [1962] 28 MLJ 379

Condition no 2
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The act will bind the firm if it is done in usual and ordinary manner. If not, the act would not bind the firm/other partners

Condition no 3
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The 3p know/believe that the partner has authority/power to act. Law allow 3p to assume from several ways:

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From previous experience with the firm Holding out 3p believe that the person has authority to act from his conduct Case : William Jack & Co. (Malaya) Ltd v. Chan (held:the acts of a person who had been introduced as a partner was binding on other partners)

Condition no 4
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If 3p enter into a transaction and he now that the person does not have authority to act, the firm will not be liable.

B. ACTUAL AUTHORITY
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Sec 8 PA 1961 Case : Hock Hin Chan v. Ng Kee Woo [1966] 1 MLJ 223 Where the act is not related to the firm business, the act will be binding on the firm only where a person have been expressly been given the authority to act

 sec 9 PA 1961 Where a partner has been prohibited from carrying out certain act this mean his actual authority is lesser than usual authority The firm is liable/not depends on whether 3p was aware of the restriction If 3p not aware & the partner’s act was within his usual authority the firm would be bound If 3p aware & know the partner acted beyond actual authority, firm not liable

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EXPRESS ACTUAL AUTHORITY
Authority given to a partner to do an act – bind the firm Example : _____________

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IMPLIED ACTUAL AUTHORITY
Authority given to a person who has been given express actual authority. To enable a partner to carry out express authority Example : ____________

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CONTRACTUAL LIABILITY
 Sec 11 PA 1961  This section imposes liability on all the partners generally for the firm’s contract that had been made while they were a partners.  Only a different in partner’s liability after his death.  2 types of liability under section 11: 1. Joint liability 2. Several liability

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JOINT LIABILITY

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Every partner liable jointly with the other Legal action can be taken against one or all partners Plaintiff only can bring one action If plaintiff chooses to sue only one partner he loses his right against those whose names he omitted to mention However it does not mean the other partners are not liable, they still if directed by the court Action also can be taken in the firm’s name

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If the order made to a person who is bankrupt, the plaintiff will lose the right to claim from other partners Case : Kendall v. Hamilton [1897] Case : Bagel v. Miller [1903] 2KB 212

2.
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SEVERAL LIABILITY
When partner dies he still liable His estate is severally liable for the debts

TORTIOUS LIABILITY
Negligence, defamation, trespass allow 3p to claim unliquidated damages These are wrongful act that can be committed by partners To see whether partners liable or not look at s 12 PA 1961 Liability is seen in 2 instances a) Wrongful act is done in the ordinary course of business of the firm case : Hamlyn v. Houston & Co [1903]

b) Acting in the ordinary course of business, the wrongful act is done with the consent of the other partners  if no actual authority and committed
outside the scope of partners usual authority, the firm and other partners are not liable  If the first one sued bankrupt it is not be a bar to a second action against another partner – s 14 PA 1961

CRIMINAL LIABILITY
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Involves a personal liability especially a crime that requires “mens rea”

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Case : Chung Shin Kian & Ors v. DPP [1980] 2 MLJ 246

MISSAPPLICATION OF MONEY/PROPERTY OF A 3P
 consider with a situation where the firm involves into a transaction on behalf of a 3p  Certain documents, property or money may be deposited with the firm  Sometimes a partner use the money/property for their personal purpose  The firm will be liable for the misapplication under situations given by s 13 PA 1961

a) Acting within the scope of his apparent authority b) A firm in the course of it business receives money/property and misapplied it while it is in the custody of the firm, the firm is liable The liability arises in 2 cases: 1. Where a money/property is received by a partner 2. Where a money/property received by the firm

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RECEIPT BY PARTNER

 Where one partner acting within the scope of his apparent authority receives the money/property of 3p & misapplies it, the firm is liable  Case : Blair v. Bromley [1847]  Case : Harman v. Johnson [1853]  Case : Earl of Dundonald v. Masterman [1869]  In order to make the firm liable, 3p must show that he dealt with the partner as a partner and not in his capacity as an individual

2. RECEIPT BY THE FIRM
Where the firm receives money/property of 3p, misapplies by a partner while it in firm’s custody, the firm is liable Case : Rhodes v. Moules [1895] Case : Tendering Hundred Waterwooks Co. v. Jones [1903]

LIABILITY OF HOLDING OUT
 A person who is not a partner, makes it known either by his words/conduct to 3p that he is a partner  Due to this representation, he would be liable.  Case : Fox v. Clifton [1830] 2 AUTHORITIES

 S 16 PA 1961
 Basis of holding out is doctrine of “estoppel” – (where a person makes a representation to 3p and he believes on it, act, the person making the representation will be estopped from denying that the statement had been made

Three basic principles for holding out are:

1. Representation  where a person consent/know his name is used as a partner  He holds himself as a partner  Expressed/implied  Case : Tower Cabinet Co Ltd v. Ingram held : the fact that failed to destroy, negligent in not destroying the notes does not mean that he consented to be held out as a partner

2. Relience on representation by the 3p

Such action, statement is communicated to the 3p who then believes on that statement/action 3p must show that he aware of holding out. Based on that statement/conduct he gives credit to the firm

3. As a consequences credit is given to the firm

It applies in favour of the persons who have dealt with the firm on the faith that the person whom they seek to make liable is a member of it. Not applicable in cases of tort, crime Case : Public Prosecutor v. Wong Held : holding out only applies in favour of 3p who dealt with the firm. It does not apply to a criminal cases

LIABILITY OF INCOMING PARTNER
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General principle – Liable as a partner for all firm’s liabilities while he was a partner. Not liable for all firm’s liabilities incurred while not in partnership unless he holds himself as per s 16 PA 1961 Liability of a new partner is under s 19(1) PA 1961 “a person who is admitted as a partner into an existing firm does not thereby become liable to the creditors of the firm for anything done before he became a partner” ????? – (explain the above concept) under the principle of “novation” the new partner is liable when he agree to take over the liabilities of the firm This can be implied/express as per in the case of ROLFE & BANK OF AUSTRALIA v. FLOWER SULTING & CO

LIABILITY OF RETIRING PARTNER
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S 19(2) PA1961 A partner who retires does not cease to be liable for all liabilities of the firm before retirement A retiring partner may be discharged from any existing liabilities by an agreement between himself & the members of the firm as newly constituted, and this agreement may be either express/implied as a fact from course of dealing between the creditors and the firm as newly constituted. ????? – (explain the above concept) If the future dealings are with those who had been dealing with the firm before retirement, the retired partner would still be liable unless 3p notice about the changes

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3p is entitle to treat all apparent members of the firm as a partner until he has actual notice (clear, specifically directed to 3p) of the changes For 3p who had never been dealt with the firm before the retirement, the retired partner would not be liable. For this 3p a constructive notice is sufficient (advertisement in certain gazettees or paper of wide circulation) But if retiring partner still allowing his name to remain on the form’s invoices or at the shop entrance, then he will be liable

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