By Azam

Partnership Act 1961

No. 1 Ahmad, Firdaus and Wafi wish to form

a partnership. Define ‘partnership’ as stated in the Partnership Act, 1961.

No. 2 State the circumstances under which

‘partnership’ may be dissolved.

Question

Partnership Act 1961 was originally enacted in 1961 as Sabah Ordinance No. 1 of 1961 and revised in 1974 as Law of Malaysia Act 135.

The revised version come into force for Sabah (retrospective from 29 April 1961) and other states (1 July 1974).

Section 47(1) provide that “the rules of equity and of common law applicable in partnership shall continues in force, except so far as they are inconsistent with the express provision” of the Act.

Introduction

Definition

Section 3(1) defined partnership as “the relationship* which subsists between persons carrying on business in common with a view of profit”.

*Partnership is a relationship. It is established by an agreement, whether express or implied as the source of the relationship involving 2-20 persons.

3 Essential Ingredientsi. a businessii. carried on in common; andiii. with a view of profit.

Section 2 defined “business” includes every trade, occupation, or profesion.

There must be some commercial venture like selling goods or services for reward before a partnership can be established.

Chooi Siew Cheong vs Lucky Height Development Sdn Bhd, Federal Court held that no partnership resulted from a joint venture agreement between a landowner and housing developer because each party to the agreement intended a wholly separate business, there was no business in common with a view of profit.

Business

Although the word partnership does not appear in agreement, partnership still exists if the relationship between the individuals has the business character of partnership.

In the case Ratna Ammal & Anor v Tan Choo Soo, Federal Court held that notwithstanding of the avoidance of word partnership in the agreement by using “syndicate”, the parties has a relation of partnership as carrying the business “in common with a view of profit”.

Carriedon in Common

The view of profit must established in order to establish partnership.

For example, based on Question 1, if among the agreed terms is one of them is excluded from sharing any profit, he/she is will not considered as partner.

In the case Soh Hood Beng v Khoo Chye Neo, the Court held that partnership was not existed as intention or view of profit was not established.

View of Profit

Partnership Business must be registered:

1. Registration of Businesses Act 1956 (Peninsular Malaysia)

2. Sarawak Cap.64 and Cap. 33 (Sarawak)

3. Trade Licensing Ordinance No. 16, 1948 (Sabah)

Failure to register the partnership would not mean partners cannot enforce their right based on case Gulazam v Noorzaman and Sobath.

Registration of Partnership Business

Section

Exclusion

3(2) Co-operative Societies, Registered Statutory, Chartered Companies

Circumstance Not Prima Facie Partnership

4(a) Joint Tenancy / Tenancy In Common

4(b) Sharing Of Gross Return

4(c) Receipt Of Shares Of Profit

4(c)(i) Payments By Installment

4(c)(ii) Payment Of Servant Or Agent

4(c)(iii) Annuity To The Widow/Children Of Deceased Partner

4(c)(iv) Loan Given With A Rate Of Interest Varying Of Profit

4(c)(v) Sale Of Goodwill

Summary of Exclusion from Partnership Act

State The Circumstances Under Which ‘Partnership’ May Be Dissolved.Circumstances Section Case

Expiration Of Notice/ By AgreementoExpiration of termoTermination of adventure/ undertaking

oUndefined time – When any partners giving notice

oNo fixed term on duration – notice of retirement to all partners

34(1)PA

(a)

(b)

(c)

28PA

Sukhinderjit Singh Muker v Arumugam Deva Rajah.

Ariffin Jaka J. “provision in sub section 28(1) and 34(1)(c) are subject to any agreement between the partners.

State The Circumstances Under Which ‘Partnership’ May Be Dissolved.Circumstances Section Case

Bankruptcy, death, chargeoDeath or bankruptcy of any partner

oAny partner suffers his shares of partnership property to be charged for his separate debt under PA.

35(1)

35(2)

Khoo Yoke Wah v Lee Choo Yam Holdings. Supreme Court dismissed the appeal and reiterated the death of a partner dissolves the partnership.

Davies v Barlow. Held: an assignment by a partner of his share in the partnership assets, in circumstances amounting to bankruptcy brought an automatic dissolution of partnership.

State The Circumstances Under Which ‘Partnership’ May Be Dissolved.Circumstances Sectio

nCase

Illegality of partnershipoAny event led to unlawful for the business to be carried out by members.

36PA English case of Hudgell Yeates & Co v Watson, English Court of Appeal held in certain circumstances a partnership may remain legal but association between the partners may become illegal. The partnership is dissolve by operation of law but reconstituted as partnership between parties who are not incapacitated.

Dissolution by the courto Insanity of a partner

oPermanent incapacity of any partner to perform duties

37PA

(a)

(b)

Jones v Noy. Held: The permanent insanity of a partner is a ground for dissolution of partnership.

Whitwell v Arthur. Held. Permanent paralytic stroke of a partner is a ground for dissolution of partnership.

State The Circumstances Under Which ‘Partnership’ May Be Dissolved.Circumstances Sectio

nCase

Dissolution by the courtoPrejudicial Conduct

oWillful Or Persistent Breach

oLoss Making Business

o Just And Equitable Relief

37PA

(c)

(d)

(e)

(f)

Carmichael v Evans. Held: A partner criminal conviction injured firm reputation.Cheesemen v Price. Held: Persistent failure of a partner to account money receive from clients justified court to dissolve partnership.

Jennings v Baddeley. Held: Failed to make profit after exhausted all avenue, court may ordered partnership dissolution.

Re Yenidje Tobacco Co Ltd. Held. Court order dissolution of the company when the shareholder refused to communicate and the same principle were applicable to partnership.

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