THE ACTION TO REMOVE A PARTNER Guto Roberts MN20010 University of Bath

TABLE OF CONTENT 1.Introduction to Partnerships 2.The Case 3.The Partnership Act The Partnership Deed 5.Removal of a partner i.By the default of the Partnership Act 1890 ii.Expressed in Partnership Deed 6.Termination of a Partnership 7.Conclusions

INTRODUCTION TO PARTNERSHIP Defined: “ Persons carrying on business in common with a view to create profit ” (S.1 Partnership Act 1890). Formation: None required by law. Usually contractual; normal contractual principles apply. Duration: Usually defined by the Partnership Deed, completed task, at will or at notice Introduction to partnership

THE CASE PhitzKitFabAbs plcAbFabz PartnershipPublic Limited CompanySole Trader Supplier Fitness and Health Clubs Main Focus Full PartnerShareholder Staff and Training recruitment Name Type of business Relationship Cecil Vyse The case

THE PARTNERSHIP ACT 1890 Includes 44 Sections that govern partnerships. 4 Main Areas 1.Nature of Partnership. (s.1- s.4) 2.Relations of partners to persons dealing with them. (s.5 - s.18) 3.Relations of partners to one another. (s.19 - s.31) 4.Dissolution of partnership and its consequences. (s.32 - s.44) The Partnership Act 1890

PARTNERSHIP DEED A Partnership Deed overrules the Partnership Act of Usually addresses issues of: Purpose Contributions Distributions Ownership Decision Making Dispute Resolution Critical Developments Dissolution The Partnership Deed

PARTNERSHIP DEED (PHITZKIT) The Partnership Deed

REMOVAL OF A PARTNER 1 st Instance - The default provisions of the Partnership Act nd instance - Expressed in the Partnership Deed This is governed by three rules Removal of a Partner

1 ST INSTANCE- THE PARTNERSHIP ACT 1890 If specific terms about removal of partner are not specified in the Deed, then we refer to default provisions of the 1890 Act. Section 25)- "No majority of partners can expel any partner unless a power to do so has been conferred by express agreement between the parties Section 28)- “ Partners are bound to render true accounts and full information of all things affecting the partnership to any partner or his legal representatives." Removal of a Partner

1 ST INSTANCE- THE PARTNERSHIP ACT 1890 Section 29: Accountability of partner for private profits Every partner must account to the firm for any benefit derived by him without the consent of the other partners from any transaction concerning the partnership, or form any use of the partnership property or name Applies when the partnership has been dissolved by the death of a partner and before the affairs have be wound up Section 30) - “If a partner, without the consent of the other partners, carries on any business of the same nature as and competing with that of the firm, he must account for and pay over to the firm all profits made by him in that business.” Removal of a Partner

2 ND INSTANCE- EXPRESSED IN PARTNERSHIP DEED If expressed in the Partnership Deed, then 3 rules apply 1.Express Power 2.Good Faith 3.Rules of natural justice Removal of a Partner

EXPRESS POWER Partnership Deed: 8. Full partners may be removed by majority vote of the other full partners subject to Deed by the senior partner Case: Carmichael v. Evans [1904] 1 Ch Removal of a Partner

ACT IN GOOD FAITH Partners act in good faith, so that exercising a power of expulsion the partners must have been acting bona fide for the benefit of the partnership as a whole and not for their own ends Case: Blisset v. Daniel [1853] 68 ER Removal of a Partner

ACT IN GOOD FAITH: FIDUCIARY DUTIES Good Faith a)To avoid any conflict of interest b)Not to make a secret profit c)Not to take a bribe d)To account to the principle, if receive money hand it over e)To disclose to principal Case: Aberdeen Railway Co v Blaikie Brothers [1854] 1 Macq Removal of a Partner

NATURAL JUSTICE Whether the rules of natural justice apply to such expulsion procedures and if so whether they have been applied with. Specifically, this would require the partner concerned to be given the precise cause of the removal against him and be offered an opportunity to defend himself. Case: Barnes v. Young [1898] 1 Ch 414, 67 LJ Ch Removal of a Partner

GENERALLY: STRICT INTERPRETATION Generally, a strict interpretation. Case: Hitchman v. Crouch Butler Savage Associates [1983] 127 SJ Removal of a Partner

TERMINATION OF PARTNERSHIP Three ways: 1.Under the Partnership Act Under contract Law 3.Under court Order Termination of Partnership

1: UNDER PARTNERSHIP ACT 1890 Section 32: Expiration of a fixed term Performance Notice (unless stated otherwise can give notice orally) Section 33: Death or bankruptcy of a full partner Termination of Partnership

2: CONTRACT LAW Frustration: the purpose of the partnership cannot be achieved Illegality: the partner of the partnership is, or becomes illegal. If a business is intended to avoid taxation then partnership Deed considered void Termination of Partnership

3: UNDER COURT ORDER This power of the court is exercised when: 1.A partner has permanent mental or physical incapacity 2.A partner’s conduct is prejudicial to the business Cases: Cheeseman v Price [1865] 35 Beav. 142; 55 ER 849 Snow v. Milford [1868] 18 LT The business can only continue at a loss Must prove that making a profit is impossible in practice 4.It is just and equitable to do so Some actions leading to the breakdown in the relationship which dissolves the trust and confidence which is the foundation of the partnership. Case: Re Yenidje Tobacco Co Ltd [1916] 2 Ch Termination of Partnership

CONCLUSIONS Removed: Cecil Vyse may be removed as per express term stated in Partnership Deed including the Senior Partner, if other requirements of good faith and natural justice are satisfied. Terminated: under court order for conduct that is prejudicial to the business or if the court deem it just and quitable to do so Conclusions