Summary

The Partnership Act 1890, so far as material, provides: '1(1) Partnership is the relation which subsists between persons carrying on a business in common with a view of profit. … 2(3) The receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business … 21 Unless the contrary intention appears, property bought with money belonging to the firm is deemed to have been bought on account of the firm.

The parties had worked together at a builders' merchants as employees. When C, the owner of the business, decided to close it, they decided they would continue it together. They obtained the agreement of C for the transfer to them of the name of the business and its telephone number. They negotiated the purchase of the stock and arranged with a bank for an overdraft facility which was secured by a charge over a property owned at the time by the defendant's mother. That property was subsequently bequeathed to the defendant. In November 1984, a bank account was opened in the names of both parties and both names appeared on the cheque book along with the phrase 'trading as Cunninghams'. At a later time, a deposit account was also opened in joint names. The parties made equal weekly drawings from the business. From 1985 to 2004, the accounts for the business were prepared on the basis that the parties shared equally in its profits. The accounts were approved by the defendant before being submitted to the Inland Revenue. The claimant and the defendant paid tax on the basis that they were entitled to an equal share of the profits. In 1994 and 1999, properties were purchased with the profits of the business and transferred into joint names. In December 2003, the claimant was injured and was unable to work. In June 2004, he wrote to the defendant suggesting that, in the circumstances, it would be best to terminate the business and claimed a 50 per cent share of the proceeds. The defendant did not challenge the assertion made in the letter that the business was a partnership. In 2007, a letter before action was sent to the defendant asking him to agree to the partnership being dissolved from July 2004 and that the profits generated be shared equally. The defendant did not agree and the claimant commenced proceedings claiming, inter alia, a declaration that the partnership between him and the defendant had been dissolved as from July 2004. The master ordered the following issues to be tried: (i) whether there was a partnership within the meaning of s 1 of the Partnership Act 1890; (ii) if there was, when it had commenced and when it was dissolved; and (iii) whether the properties were assets of the partnership.

The defendant contended that the relationship between the parties was not a business partnership but a 'working partnership' and, in reality, he employed the claimant. The court ruled:

The fact that accounts had been prepared on the basis that the parties had shared equally in the profits of the business; that they had opened a bank account in joint names; and that they had acquired property with profits from the business were critical in establishing that there was a partnership within the meaning of s 1 of the 1890 Act between the parties.  Further, the properties had been bought with the partnership profits and were, accordingly, partnership assets.

There had been a partnership between the parties.

Alison Blood Barrister.

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