Partnerships Basic Principles In Australian Law : A Discussion

By Author: Premkumar Nadarajan.
Total Articles: 26
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The Law of Partnerships is composed of Common Law and the Partnership Act of each State of Australia. The Partnership Act will imply various rights and liabilities into the Partnership agreement. Partnerships are groups of 2 or more legal persons who associate in a mutual business enterprise and distribute the profits amongst themselves. Partnerships are defined as the relation which subsists between persons carrying on a business in common with a view to profit. But the relation between members of any company or association which is-registered as a company under any Act for the time being in force and relating to the registration constitution or incorporation of companies; or formed or incorporated by or in pursuance of any Act or letters patent or Royal Charter, is not a partnership within the meaning of this Act.
Partnerships are defined by whether a commercial relationship exists between the parties; whether there is a common, mutually agreed or systematic business conducted by the parties; whether the business is conducted with a view to profit which is then distributed as dividends to the partners. Whether a partnership ...
... exists is a question of fact. Partnerships may be implied or they may be express or deliberately created by the persons. Sometimes persons may not be aware they are in a Partnership, they may believe
it to be a Joint Venture. Canny Gabriel. United Dominions v Brian. An Association and a Joint Venture are not Partnerships because an Association does not distribute dividends to its members, and the Joint Venture does not carry on a mutual business. A Business is defined as every ‘trade, occupation or profession’. A Business is normally an ongoing commercial relationship and a series of activities undertaken between mutual persons. A single transaction does not normally constitute a business in common. Turnbull v Ah Mouy.A Partnership must be a Business in Common. Where the persons conduct separate businesses and contract as separate entities, then they do not have a business in common. Checker Taxicab v Stone. Keith Spicer v Mansell.A person may still be a partner where they do not participate actively in a business, but have mutual rights. A Partnership must have a view to profit, this excludes an Association. There are rules for determining the existence of a partnership. In determining whether a partnership does or does not exist regard shall be had to the following rules-(1) Joint tenancy tenancy in common joint property common property or part ownership does not of itself create a partnership as to anything so held or owned whether the tenants or owners do or do not share any profits made by the use thereof.(2) The sharing of gross returns does not of itself create a partnership whether the persons sharing such returns have or have not a joint or common right or interest in any property from which or from the use of which the returns are derived.(3) The receipt by a person of a share of the profits of a business is prima facie evidence that that person is a partner in the business, but the receipt of such a share or of a payment contingent on or varying with the profits of a business does not of itself make that person a partner in the business and in particular-(a) the receipt by a person of a debt or other liquidated amount by instalments or otherwise out of the accruing profits of a business does not of itself make that person a partner in the business or liable as such;(b) a contract for the remuneration of a servant or agent of a person engaged in a business by a share of the profits of the business does not of itself make the servant or agent a partner in the business or liable as such; (c) a person being the spouse or child of a deceased partner and receiving by way of annuity a portion of the profits made in the business in which the deceased person was a partner is not by reason only of such receipt a partner in the business or liable as such; (d) the advance of money by way of loan to a person engaged or about to engage in any business on a contract with that person that the lender shall receive a rate of interest varying with the profits or shall receive a share of the profits arising from carrying on the business does not of itself make the lender a partner with the person or persons carrying on the business or liable as such: Provided that the contract is in writing and signed by or on behalf of all the parties thereto; (e) a person receiving by way of annuity or otherwise a portion of the profits of a business in consideration of the sale by that person of the goodwill of the business is not by reason only of such receipt a partner in the business or liable as such. Joint Tenancy and Tenancy in Common (Ownership) does not by that very fact create a Partnership. People may co-own property but not be in a Partnership. French v Styring. Davis v Davis.Sharing of Gross Returns (Revenue) does not by that very fact create a Partnership. Persons may share the Gross Revenue from property but for reasons other than being in a Partnership. Cribb v Korn. Receipt of a Share of Profits does indicate that there is a Partnership, unless the persons can show that they do so for some other reason than being in Partnership. Profits as distinct from Gross Revenue shows that there is some mutual understanding and assessment of costs which makes the relationship look more like a Partnership. There are various reasons why a person may receive a share of profits without being
in a Partnership, these are: Repayment of debt as a share of profits; Payment of Agent or Employee with a share of profits. Cox v Hickman; Payment to a widow or child of dead partner in the form of a share of profits; Repayment of a loan by a share of profits. Walker v Hirsch; Payment of a share of profits on a yearly basis in exchange for the sale of a business. There are different types of partnerships. Salaried Partners, do not own the Partnership but are recognized as senior persons in the business. Silent Partners, may own the business but take no part in the running of the business. Sub-Partnership, one Partner shares the interest they have in one Partnership with another Partnership, effectively being in 2 Partnerships at the same time. There are also Limited Liability Partnerships: Silent Partners who contribute Capital but take no part inthe running of the Partnership may have limited liability (to the extent of what they contribute). The Partnership must have at least one general member.

lecturer at a private learning institution ( UTAR).