Dissolution Of Partnership: Methods

General rule:

Dissolution can be in any manner and for any reason as stated in the partnership agreement.

In the absence of any agreement reference should be made to the Act.

Dissolution by Agreement

Clifford v Timms

F: ‘if either p’ner …guilty of professional misconduct the other party…give notice to dissolve…’. App had made scandalous remark. Resp gave notice to dissolve on the ground of professional misconduct.

H: Notice valid in accordance with the deed.

Dissolution – Sec 34

Sec 34(1)(a)

A partnership entered for a fixed period, is dissolve by the expiration of that period.

Sec 34(1)(b)

A partnership entered for a single adventure, is dissolve by the termination of that adventure.

Sec 34(1)(c)

A partnership with undefined time, is dissolved by notice.

Partnership at will

When the partnership agreement does not have any provision relating to dissolution

Abbot v AbbotThere is a clause in the partnership agreement which provides ‘If any partner shall …do or suffer any act which could be a ground for dissolution of the partnership by court, he shall be considered to have retired .’A partner decided to dissolve the firm and gave notice of dissolution to other partners. He claimed that he has right to issue the notice as the firm is a partnership at will.

Held:

The notice was ineffective. The partnership was not a partnership at will but one to continue unless dissolve by court or some other event.

J.W.W Lewis & Ors v W.E Balasingam

The pp agreement has two clause which provides for dissolution. The first one stated that the pp may be dissolved by giving notice and the second clause provides that the pp may be dissolved by the court.Held: A notice of dissolution would be ineffective to dissolve the pp having regard to the fact that there is in existence an agreement which has otherwise provided for a means of terminating the pp.

Moss v Elphick

In 1907, the plf and def entered into a pp of tobacconist. Their partnership agreement provides that the agreement shall be terminated by mutual agreement only. In 1909, the plf gave a notice to dissolve the firm to def but the def contended that the notice was not effective as the pp agreement provides that pp shall only be terminated by mutual consent.

Held: Where no fixed term has been agreed for duration of the pp, it should be determined according to the agreement, I.e. only by mutual agreement.

Retirement from p’ship at will

Sec 28(1) – no fixed term for the duration of partnership - a partner may determine by noticeSec 28(2) –where there is written pp agreement,

then the notice should be in writing and signed

Notice to Dissolve

Communicated to all partners Effective date – once communicated

Ariff v Yeo

H: Effective date is date of service (not date of filing) of the writ on the defendant.

Notice once given cannot be withdrawn, unless there is consent from all partners.

Notice may be prospective.McLeod v Dowling

The notice would have no effect if before the operative date, an event occurred and it dissolved the partnership.

Notice should be well informed to others.

Tan Boon Cheo

Held: Actual verbal or written notice of his retirement should have been given by the plaintiff to the defendant.

Sec 29-Conversion of fixed term pp into pp at will

Sec 29(1) – Upon expiration of the fixed term and the partners decided to continue without any new terms,the pp agreement shall still be valid as long as the terms are consistent with a pp at will. Sec 29(2) – There is continuance of a fixed term partnership if partners continue business without any settlement or liquidation of the partnership affairs.

Re Chop Yew Sing

H: When a known partner retires or a partnership is dissolved, notice of that fact must be given to the world at large by advertisement and to old customers by some special communication.

Kam Hoy Trading v Hup Aik Tin Mining

H: In a dissolution of a partnership, partners should sent notice to all persons who have trusted them as partners…or taken steps to see that their withdrawal was duly registered with the Registrar of Businesses.

Dissolution – Sec 35(1)

Death and bankruptcy are grounds for dissolution of a partnership, unless otherwise provided by the agreement.

Lee Choo Yam Holdings Sdn BhdH: No evidence either oral or in writing that the

partnership should continue thus death of a partner dissolve the partnership

When a partner was declared bankrupt, the partnership will be dissolved unless otherwise provided by the pp agreement.

Date of the dissolution will be the date of the commencement of the bankruptcy.

Dissolution due to involuntary assignments– Sec 35(2)

If a partner’s share in the partnership property has been charged by a court order for his separate debts, the other partners have the option to dissolve the partnership.

Dissolution due to illegality – Sec 36

A partnership would be dissolved upon the happening of an event which makes it unlawful to carry on the business

For example, a partnership comprising enemy aliens will be illegal due to the outbreak of war.

Hudgell Yeates & Co v Watson

One of three partners in a solicitor firm forgot to renew his practicing certificate without which he is not allowed to practice.

H:The partnership shall automatically be dissolved under sec 34 (equivalent to sec 36). There could not be a partnership between professionally qualified partner and a non qualified partner in a professional firm. Whether the other partners knew about the lapse was immaterial.

Any clause in the partnership agreement which states that the partnership is to continue in the event of illegality was ineffective.

Illegality is the only ground for automatic/immediate dissolution.

Dissolution by the court

Sec 37: Upon application by a partner, the court may dissolve the pp on any of the following grounds.

Grounds for dissolution by the court

(a) Insanity- The state of insanity should be permanent- Court will seek expert evidence

Jones v Noy

Held: Insanity of a p’ner is a ground for dissolution of a pp because it is immediate incapacity but it may not be the result prove to be a ground for dissolution if the partner may recover from his malady.

(b) Permanently incapable- no prospect of recovery.

Whitwell v Arthur

F: A partner had a paralytic attack. Other partners sought for the diss. of the pp.

H:Medical evidence showed that the D’s health was improving – order for dissolution was not granted.

(c) Prejudicial Conduct- Means a partner had committed serious misconduct which

prejudicially affect the firm’s business.Carmichael v Evans

The plf was a partner in a drapery business. He was convicted of traveling on a railway without a ticket. The other partner sent a notice of dissolution to the plf. The plf applied or interlocutory injunction to stop the other partners from dissolving the firm.Held : Injunction was not granted. The publicity upon his criminal conviction was not calculated to injure the firm’s reputation in the eyes of its customers.

Clifford v Timms

The app and resp are dental surgeons registered under the Dentist Act 1878. They were also also partners of a dental clinic in England. The app was also a director of a company in USA, the American Dental Institute Ltd. He was involved in a self-puffing advertisements. The General Medical Council found him guilty and removed him from the register.

Held: The app conduct was prejudicial to the firm’s business and the pp should be dissolved

(d) Wilful and persistent breach Wilful or persistently commits a breach of the

partnership agreement Express term of the agreement or breach of

statutory duties imposed upon the partners by the PA 1961

Cheeseman v Price

It was held that the persistent failure of a partner to account to his co-partners for money which he had received from the firm’s customers was a ground upon which the court had jurisdiction to make a decree of dissolution

(e) Business was at a loss -must prove that it is impossible to make profit

Handyside v Campbell A pp had been running at a loss but the evidence show that this was due the absence of the active partner due to his illness. If the business is given proper attention, it could run at a profit.H: Dissolution not granted, loss due to temporary circumstances.

(f) Just and equitable

-Give court a wide discretion

Ebrahimi v Westbourne Galleries Ltd

A director of the company was excluded from participating in the management of the business.

Held: It is just and equitable to dissolve the business as the exclusion of the management rights was in breach of a clear understanding that the director should be so entitled.

Re Yenidje Tobacco Co Ltd

the company was ordered to be wound up because the two person who were the only directors and the only shareholders had reached such a state of personal antagonism that they refused to communication each other.

Dissolution by order of arbitrator

A partnership may be dissolved by an order of an arbitrator if there is such provision in the partnership agreement.