Partnership propertyPartnership property

Property in a partnership biz

• Belong to the firm i.e by partners as partners

• Belong to the partner as individual. - by an agreement the property is allowed to be used for partnership business.

Partnership Property

• Any property belonging to the partnership and all the partners are entitled to it and can deal with it in the performance of the partnership business.

Section 22(1) – Existence of PP

• Originally brought into the partnership stock, i.e brought as the capital.

• Acquired by purchase or otherwise on the firm’s account.

• Acquired by purchase or otherwise for the purpose and in the course of partnership business.

• If the partnership agreement has clearly stated what is/is not pp – no problem.

• If the partnership agreement fails to identify which is pp then reference has to be made to sec 22 as a guidance.

• Circulating capital like stock in trade is pp.• Freehold/leasehold is fixed capital – might have

problem.• # 1- circumstances of acquisition, when obtained.• #2 &3 – purpose(matter of convenient) and mode in

which it has been dealt with.

Section 22(1) – Nature of a partner’s interest in the property

• Should be held for partnership purposes and in accordance with the partnership agreement.

- every partner is consider to have interest in the pp.

- All pp held by the partners as co-owners.- Thus pp must not be used for private purposes.

Miles v Clark

F: P and D- partners – photographers. Both contributed to the stock in trade. The leasehold premises, furniture and studio equipment belonged to the D. They intended to enter into an agreement to treat the above as PP but failed.

Upon dissolution, what are PP?

Miles v Clarke

H: No terms ought to be implied except those essential to the business efficacy. Therefore only the consumable item of stock in trade were to be regarded as PP.

Note: It is a general rule that stock in trade is more likely to be treated as PP.

N.B. Menon v Abdullah Kutty

F: K and M were partners running a restaurant in Kelantan. K was the tenant-living in Johore and M managed the restaurant. Later there was a dissolution.

Issue: Who was the tenant K or P’ship?H: K had not assigned the tenancy to the

partnership. The tenancy was a personal asset. Not PP.

Tan Kiaw & Gian Singh v Nahar

H: The tenancy was granted to the partners and not to the partnership. Thus tenancy was not PP.

In tenancy though the premise is used to carry on the partnership business it is not necessarily be considered as PP.

Privy Council in Gian Singh:Property used for partnership purpose was not necessarily PP.

Malaya Café Bar & Restaurant

H: The tenancy belonged to the partnership.The facts of the case showed that the partner

through out the period had regarded the premise to be inseparable from his business and he had accordingly treated his tenancy as partnership asset after he formed the partnership.

Ponnukon v Jebaratnam

F: App formed a p’ship to develop a land. The p’ship failed to obtain bank loan to buy the land. Later the Resp (p’ner) bought the land with his own money. The App sought a declaration that the land was held in trust for the partnership.

Ponnukon v Jebaratnam

H: The land was paid by the Resp and it was clearly his separate property. The fact that the object of p’ship was land development, did not necessarily mean that the land must be owned by the firm. Furthermore there was no agreement between the p’ners that the land was to b purchased & treated as PP.

Tay Guan Ho

F: Prop. Bought in a p’ner’s name. Treated it as his own & tranferred to App. Resp(p’ner) claimed that App hold it in trust for the benefit of all partners.

H: Not PP. The deceased partner had treated the property as his own from the very beginning.

Sec 22(2)- Subsequent land bought using P’ship money

Where partners are co-owners of a land which is not PP, but share the profits from the land as p’ners & later bought other land using the shared profits and used in the same manner.

The presumption is that the subsequent land is not PP.

Davis v Davis

F: A father left freehold business premises to his son. The sons carried on business & borrowed money by mortgaging the premises and used it to expand the workshop.

H:There was a partnership in the business, but not the premises.

North J: (applying Sec 22(2)) The improvement remained outside the partnership,

there was no evidence that the parties had such an intention.

Here the expansion of the workshop was not paid by a cheque drawn on the firm’s account, but by a loan on the security of property which did not belong to the firm but rather to the partners as joint owners.

Exception

• However if the land heavily involved with the partnership business it is regarded as PP.

• Waterer v Waterer• Jackson v Jackson

Waterer v Waterer

F:A man carried on nursery business on a land. Devised all his property to his three sons. After his death, the sons continued the business and bought some more land for the purpose of the business and paid it out of the father’s estate. Later one of the sons died.

Issue: Whether the land is PP.

H: All the land (left by the will & later purchased) – PP.

James LJ: The property was so intimately mingled with the business that it became an integral part of the partnership business activity.

Basis: in a nursery gardening business it is impossible to separate the land from the business.

Jackson v Jackson

F: A man devised to his two sons jointly his trading business and land used by him for the purpose of carrying the business. The sons took the business and carried it in partnership.

H:The lands form part of PP.A trading business was left to them and the land

was necessary for that trade.

Section 23• Where the prop was bought with the firm’s

money then the property is deemed to be PP , although in the name of a partner.

Cases:Ponnukon v JebaratnamJones JonesWray v Wray• Deemed: raised the presumption. Not

automatically PP. • Refers to money which is actually PP.

Jones v Jones

F: The partnership bought a shop out of partnership profit to be used for the business.

H: Since the property(shop) had been acquired out of the partnership profits and used for partnership business, it was PP.

Wray v Wray

F: The partnership was carried on in the name William Wray( one of the partners). Later the partners bought few properties paid out of the partnership assets. The property was conveyed to WW.

Issue: The identity of WW, firm or individual.H: PP. It was conveyed to the partnership.

Sec 25(1)procedure against partnership property

• A writ of execution against PP will only be applicable when the judgment has been made against the firm.

Case: Peake v Carter

• F:P&B-partners, bought some property which include a machinery. The purchase price of the machinery was paid by P. C obtained judgment against B in respect of a debt. The Sheriff seized the machinery to satisfy the judgment. P claimed it was his.

• H: Even if P failed to prove that the machinery was his, execution could not be issued against the machinery except on a judgment against the firm.

Peake v Carter • F:P&B-partners, bought some property which include

a machinery. The purchase price of the machinery was paid by P. C obtained judgment against B in respect of a debt. The Sheriff seized the machinery to satisfy the judgment. P claimed it was his.

• H: Even if P failed to prove that the machinery was his,execution could not be issued against the machinery except on a judgment against the firm.

Sec 25(2)- personal debt of a partner

A private creditor may apply for court order:1)To charge that partner’s interest in the PP2)Appoint a receiver for that partner’s share of

profits3)To direct all account and inquiries.

Option for other partners

• Sec 25(3)• Sec 35(2)