To determine whether Nazir and Omar has a valid partnership or not.We need to look and understand the definition of partnership by Partnership Act, 1961.S.3(1) define partnership as ‘Partnership is the relation which subsists between person carrying on a business in common with a view of profit’.5 words need to be examine,first is ‘relation’,’person’,‘a business’,’carried in common’ and ‘with a view of profit’ .We will look into what type of relation they are in,is the business running carried in common and are they doing the business with a view of profit.The words ‘person’ and ‘a business’ already stated that these 2 person have decided to go a business together.The business is rental off the ballroom and function hall for seminars,weddings,parties and other similar events.
First,we will examine the words ‘relation’ between Nazir and Omar.This 2 person can be assumed that they have informal relation.This because the have conduct that they are partner.This similar to cases of ‘Chan Yin Jee VS William Jack.In this cases ,both partner shown they are partner by doing some work for the business.Same with Nazir and Omar situation.Nazir has convert a building for the business taking place ,meanwhile Omar contribute RM 50000 and does all the paperwork.Nazir actually doing some work for the business by promoted their ballroom and function hall to his friends and family.So,i think there is relation between these 2 person.The relation is informal and by conduct.
We also need to look the rules for determining the existence of partnership as set out under s.4 that concerns 3 situations,joint tenancy and tenancy in common,sharing of gross return and receipt of share profits.S.4(a) rules have stated that a partnership does not exist just because any property that is held or owned jointly or common is used,and out of the use of the property there is profit.This regardless of whether such profit obtained is divided amongst the co-owners or tenants or not.There are sharing of of joint property between Nazir and Omar .But,i it will not valid if there is no ‘carried in common’ by both partners.
‘Carrrying in common’ means by or behalf of both or all the partners.Even when there is sharing of profits out of a business,it is not a partnership unless the business is carried on by or behalf of all the partners.The both partnes must can sacrifice.They also need use their energy and ideas for their business and willing to share profits and loss.Nazri and Omar has sacrifice their own property by convert the building and contribute RM 50000 for their business uses.So,i think there is element of carried in common between them .
The business must be running with a view of profit.Meaning that acceptable is in Re Spanish where is business must be carried out with the intention of making a profit.Where several person carry on a business with a view of making profit,it fulfils the definition of s.3(1) even if they do not make any profits.Nazir and Omar clearly has divided equally profits of the business between them at the a year later.It have been cleared that s.13(1) has been fulfilled. So,after examine through all the words from the definition,there is valid partnership between Nazir and Omar. QUESTION 1(B)(10 marks)
In the partnership business,such as an auditors’s firm or a legal firm ,many transactions may take place on behalf of third parties by the firm.Certain documents of title necessary for certain matter or even money or other property may be deposited with the firm.Sometimes unscrupulous partners may use the property or money for their own personal purposes.The firm would be liable for the misapplications under the circumstances given by s.13.In the following cases,namely S.13(a) stated that “where one partner,acting within the scope of his apparent authority,receives the money or property of a third person and missaplies it”.S.13(B) also stated that ‘where a firm in the course of its business receives the money or property of a third person,and the money or property so received is misapplied by one or more of the partners while it is in the custody of the firm.The firm is liable to make good the loss.”.
First cases we should look where the money or property is received by a partner.Where one partner acting within the scope of his apparent authority receives the money or property of a third person and misapplies it,the firm is liable to make good the loss.For example solicitors receiving money and misapplies it.In the cases of Blair V Bromley,the plainttiff paid a sum of money was into the joint account of a firm of solicitors to be used for investments in certain securities.One of the partners misappropriated the money,but told the plainttiff that the money had been invested as required.It was held by the Court,receiving money for investing in certain or specific securities comes within the ordinary course of a solicitor’s business and as such all the other partners were liable for the misapplications of the money.
Second cases that may occur where the money or property is received by the firm.In Rhodes V Moules case,Rhodes wish to obtain a loan,so he mortgaged his property.He was told by Rew a partner in the solicitors firm of Messers Hughes and Masterman that the mortgagees wanted additional security,so he handed him some share warrants payable to bearer.Rew misappropriated them.Rhodes then sued the firm in respect of the loss under the English equivalents of s.13 of the Partnership Act,1961.Held by C.A that the action succeeded,for the warrants had been received by the firm in the ordinary course of the business.
To render the firm liable,the misapplications must be made while the money or property was in the firm’s custody.Where the money or property is placed in the possession of one of the partners by fraudelents means of such partner,the money is not considered as in the custody of the firm.