t: 051 401 9111 [email protected] law of partnerships court cases

T: 051 401 9111 [email protected]

LAW OF PARTNERSHIPS

COURT CASES

GOODRICKES V HALL

FACTS

• Hall and Burn were partners in a restaurant – The Snail • Burn instructed Goodrickes to apply for a liquor licence • Hall knew about the instruction by Burn. • Partnership terminated after that. • Goodricke’s, a firm of attorneys, sued the two defendants (Hall and Burn )

jointly and severally or professional services rendered•

DECISION IN MAGISTRATE’S COURT

• Burn had the authority to represent partnership• Authority arose as a result of the express agreement between Hall and Burn • Could be implied from “the customary dealings of the partnership” • Hall then appealed based on the magistrate’s findings of fact and credibility

GOODRICKES V HALL

DECISION IN NATAL PROVINCIAL DIVISION • • From the evidence it was clear that Hall knew that Burns instructed the

attorneys,• In Burns’ dealings wit the attorneys never questioned that Burns did

not have the authority • Goodricke could rely on express or implied authority• In this case it was implied authority • If there was an agreement between Burns and Hall that limited Burn’s

authority?• Hall needs to proof such limitation• From facts no such limitation existed • No agreement to limit authority : Was it concluded in furtherance of the

business of the partnership? • Yes

WEGNER V SURGESON

• FACTS

• Messrs Bichoff and other leased erwen from the United Dutch Church• These 2 erwen were subleased to Surgeson • Leased expired on 30 and 31 July 1909.• In March 1908 Surgeson took in Wegner as a partner (eating house) • Partnership agreement stipulated the partnership will continue until the sublease ended

or three months’ written notice by either partner • The eating house licence was in Surgeson’s name• After 31 July 1909 – partnership continued until Bischoff informed partnership that lease

has ended. • Firm then wanted to lease directly from Church and partnership approached the Church• Surgeson offered to lease premises personally – he would negotiate liquidation with

partners and the church said it would be in order. • The firm continued to pay the lease to the Church until December. • He then gave partners notice that partnership should be liquidated before 31 December

WEGNER V SURGESON

QUESTIONS

• When was the partnership terminated?• To whom does the renewed lease belong? • To whom does the licence belong

WEGNER V SURGESON

• JUDGE WESSELS : QUESTION 1 WHEN WAS THE PARTNERSHIP TERMINATED?

• Partnerships existing for indefinite periods may be terminated by any partner: “It is my pleasure on this day to terminate the partnership”

• May not terminate unreasonably to benefit himself – damages

• Possible dates: Surgeson claimed 7 September (when notice was given that lease ended); 8 December (when notice of termination was given 31 December (liquidation date?)

• The intention of Surgeson from facts is that it ended on 31 December

WEGNER V SURGESON

• QUESTION 2: WHOSE PROPERTY IS THE NEW LEASE AGREEMENT

• Contract uberrimae fidei contract between brothers • Therefore may not try to overreach the other partner • May not try to take benefits as a result of the dissolution of the partnership • 8 September – Renewal for partnership • 8 December: Notice to end and acquiring new lease would have occurred

simultaneously – partnership would be the power • 31 December – property of partnership • “He was therefore, when he wrote the letter to the church (I think 8

December) asking for a renewal in his own name, dealing on his behalf and behind the back of his partner,

• Under these circumstances it is perfectly clear that the authorities I have read apply, and that therefore such a lease becomes the property of the partnership”

WEGNER V SURGESON

• QUESTION 3 : WHOSE PROPERTY IS THE LICENCE?

• Partnership agreement stipulates the assets of the partnership – licence does not form part of the assets .

• Therefore private property of Surgeson

CURTIS AND CURTIS V BEART

• FACTS:

• Curtis, Curtis and Beart were in a partnership in Johannesburg.

• The partnership agreement was later renewed for another 7 years

• Curtis and Curtis approached court requested dissolution the partnership:

i) Relationship of confidence between partners no longer existed

ii) Object of the partnership, namely to make a profit has failed


QUESTION• Can a partnership be dissolved before expiry date?

JUDGEMENT • Yes, it can be dissolved in terms of the Roman Dutch law if

there was iusta causa (Maasdorp) • Misconduct • Gross and persistent negligence • Business cannot be carried on at a profit


Misconduct:

• Keeping of stock• Supervision of office and shop • Engagement and control of clerks • Treatment of customers • Served customers with hat on (not respectful)• Going out to drink with customers • That in itself does not warrant dissolution • The senior partner, however, repeatedly spoke to him about

his inappropriate behaviour – said he would improve, but did not = ground for dissolution


Business cannot be carried on at a profit

In Jennings v Baddeley (supra), WOOD, V.C.,said (p. 1032), in reference to an argument that the Court could not dissolve a partnership on the ground of its being incapable of being carried on at a profit: "I very much doubt that proposition. The doctrine of this court has always been that expectation of profit is implied in every partnership; that every partnership is entered into by the partners with the view to deriving profit from the concern. No one can suppose that persons, who have agreed to carry on a business for a certain term, will continue to carry it on during as many years as the term may have to run, when it is clear that during the residue of the term they must be working at a certain loss


• Lost was increasing every year

• Since the contract was renewed, no profit was made , and the lost was increasing every year

• • Oder to dissolve partnership

KOEKEMOER V LANGEBERG STENE BPK

Facts • Langeberg sold bricks to Koekemoer before he was in partnership – goods were

paid for everytime• Then Koekemoer entered into partnership with the second defendant (son) Later

another partner was added and onother – the partnership became Wilco Contractors.

• Koekemoer terminated partnership – and Walco was actually a CC, but Langeberg was never told about this state of affairs.

• Langeberg sold goods to Koekemoer (and or partnership) Koekemoer said that the goods were not sold to the partnership, but to CC that was liquidated.

• Langenberg said that Koekemoer negligently presented the company as a partnership and Koekemoer was therefore estopped from relying on the true state of affairs.

• He would never have sold goods to the CC without a new credit application and if he knew that Koekemoer was not in partnership anymore.

• Cheques until 25 February 1995 in the name of Koekemoer and Son and thereafter Wilco Contractors


Agreed on the following:

• that the goods were in fact delivered to the close corporation, Wilco Kontrakteurs CC and the close corporation had not paid for the goods;

• that the Appellant and his son had dissolved their partnership but had not notified the Respondent that they were no longer trading as a partnership;

• The Appellant and his son had been negligent in not notifying the Respondent of the dissolution of the partnership.


The issues in dispute

• whether Koekemoer had known that the partnership was dissolved;

• whether Langeberg knew at the time of the transactions that he was actually doing business with Wilco;

• whether the fact that the Respondent was conducting business with Wilco was so obvious that knowledge of this fact had to be imputed on Koekemoer;

• whether the Appellant and his son were legally liable for the amounts claimed in respect of the goods delivered to Wilco.

• The court a quo found in favour of the Langeberg and the Kokeremoer appealed


Judgment: Common Law

• Dissolution of a partnership would only be enforceable against a third party (Langeberg) if he was notified thereof or if he obtained knowledge thereof in some other manner.

• Where proper notice of dissolution was not given to a third party, a partner could also be held liable under the common law or on the grounds of estoppel where the third party subsequently contracted with the successor of the partnership in the belief that the original partnership still existed, especially where the third party had previously transacted with the partnership.

• In order to prevent these consequences, the partners should give notice in the Government Gazette or in a ordinary newspaper that the partnership was dissolved.


Estoppel

• Langeberg had to show that the Koekemoer and his son negligently represented that the Langeberg was still contracting with the partnership during the relevant period and that such representation resulted in prejudice to the Respondent.

• The Respondent’s acceptance that the Appellant was at all relevant times a partner of Wilco Contractors could not be seen as unreasonable.

• The Court held that the defence of estoppel should succeed.

• The Court concluded that the Appellant and his son were liable to the Respondent.

• The appeal was accordingly dismissed with costs

BERCO SAMEDAY EXPRESS V MC NEIL AND OTHERS

• Facts: • Cox and Joubert started a business in partnership • Mc Neil appointed as manager in Jhb branch – later joined as a

partner• Partnership carried on a business as courier• McNeil resigned and give notice “close of day” (allocation of costs,

expenses for Cox’s son) • McNeil started a competing business soon afterwards • Joubert and Cox approached Court for an order that McNeil:

Not to use confidential information

Not to solicit employees

Not to approach customers of the partnership

Return costing file and tickler box


• Point raised in limine by McNeil:

• The new partnership had no locus standi to institute proceedings against him

• There was no evidence that the remaining partners had acquired business or its assets as a liquidator had not been appointed


• Unilateral notice

• Can be restricted in partnership agreement

• Good faith, reasonable, inopportune time

Consequences – partnership dissolves

- breach of fidiciary duties

- damages

- share in benefits


• Dissolution of partnership

• The partnership was dissolved by the withdrawal of McNeil

• The resignation requires the dissolution of the partnership

• However, the partnership agreement or dissolution agreement usually prescribes that the remaining partners take over the business without a formal liquidation process

• If partnership agreement does not prescribe this – formal liquidation is required

• Present case – no dissolution agreement – based on the conduct of the parties, Cox and Joubert acquired Mc Neil’s share in the partnership


• What needs to be done?

• Financial statements prepared, capital accounts prepared, goodwill calculated

• Refer to Robson v Theron


• May not use information in tickler box – should be returned

• May not approach specific employees of partnership: (employees in operations room; supervisors, managers, employees involved in regular contact with clients

• Referred to Trego v Hunt

Resigning partner should conduct business in the same way he would have done if he was never a partner in the previous business

If he contacts customers of previous business – takes unreasonable advantage

May not approach customers of the partners

T: 051 401 9111 [email protected]

t: 051 401 9111 [email protected] law of partnerships court cases

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