Workshop Week 10 - Answer Guide

(Partnership Law)

(a) Advise the partners of Snip Tuck as to whether they are liable to pay LaserBod.

Issue (i): Is Snip Tuck liable for the debt owing to LaserBod?

Law: (Note: In the Final Exam, you are NOT required to write the contents or
summarise the legal rules of the sections of the legislation Partnership Act.
For example, under Law, you may write s 8(i)(ii)(iii)(iv) Polkinghorne v
Holland, Goldberg v Jenkins)

Section 8: The firm will be bound to acts of partners with actual or apparent authority.
There are four requirements to establish apparent authority:-
(i) The transaction involved must be within the scope of the partnership business
(business of the kind): Polkinghorne v Holland; or Mercantile Credit Co. v
Garrod;
(ii) The transaction must be effected in the usual way (Goldberg v Jenkins);
(iii) The outsider must not know that the partner had no actual authority;
(iv) The outsider must have known, or believed, that the person with whom he or
she was dealing was a partner.

Section 12:
Every partner in a firm is liable jointly with the other partners for all debts and
obligations of the firm incurred while a partner: Kendall v Hamilton

Application of law

Did Sam have actual authority to purchase hips and legs laser machine? No.
explain why?
Did Sam have apparent authority to purchase hips and legs laser machine from the
point of view of the third party? Yes explain why?
Explain how each element of section 8 applies to the facts of the problem to
establish apparent authority.

Conclusion:
Snip Tuck is liable to pay LaserBod for the laser machine and the partners
(John, Sam and Rob) are jointly liable for the debt.

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(b) John no longer wishes to be in a partnership with Sam. Advise John what he can
do under the Partnership Act 1891 (Qld)

Issue (ii): What rights does John have to end his partnership relationship with Sam?

Law: (Do not write the contents of the sections of PA)

Section 28 (expulsion powers): no majority of the partners can expel any partner
unless a power to do so has been conferred by express agreement between the
partners: (Bond v Hale)

Section 35: A partnership at will (where there is no fixed term) terminates upon
one partner providing notice to all the other partners of his/her intention to dissolve
the partnership.

Section 38: Dissolution by Court order where

- A partner is guilty of conduct which, in the opinion of the court, is calculated to
prejudicially affect the business: s 38 (c);

- Conduct in relation to the partnership business which makes continuation of the

partnership impractical: s38(d);
-it is just and equitable to dissolve the firm: s 38(f);

Application of law:

Do Sam and John have power to expel Rob under the terms of the partnership
agreement as per s 28 PA? (NO). Explain why?
Can the partners give notice to terminate the partnership with Rob under
section 35 PA? Yes. Explain how.
Do the partners have grounds to apply to the Courts for dissolution of
partnership as per s 38 PA? Yes. Explain this in detail: It could be argued
that Sams conduct of purchasing the $100,000 laser machine prejudicially
affects the business of the partnership as the agreement was to purchase a
tummy tuck laser machine. John and Rob would argue that Sam would have
further clarified about which laser machine was required for the partnership
before incurring such a large sum of expenditure and using money from the
firms account. Sam may argue that he misunderstood about what was actually
agreed between the partners in relation to the purchase of a laser machine. On

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 the other hand, this would reflect lack of due care or negligent conduct in his
performance as a professional surgeon. This conduct would lead to a breach of
fiduciary obligations by Sam as a partner.

Also, John could argue that the relationship between Rob and Sam has broken
down as a consequence of the argument that occurred in the presence of a
client, Sam throwing a silicon implant at Rob and injuring him, and Sam being
evicted from the surgery by security guards. As a result, a confrontation and
disagreement have occurred between the partners. Under these circumstances,
Court would consider it would be just and equitable to make an order of
dissolution of this partnership.

(discuss the above points in detail by referring to the facts and the legal rules
(explained above)

Conclusion:
John has grounds to dissolve the partnership by notice or Court order as per
sections 35 and 38(c, d, f) of PA.