Вы находитесь на странице: 1из 10

Murdoch University: International Study Centre, Dubai

MBS 502:Law for Business


Assignment # 1: Legal Problem Solving
Seyed Hassan Moghames Zadeh Enrollment # 31457526

The Money Doctors Partnership Statutes Law

Lecturer: Saritha Krishnakumar

Page |2

What are the issues?


Is The Money Doctors a partnership, and if so, who are the partners? Who is liable for the contract with ECO? Who is liable to Mrs. McTavish?

Relevant Laws
The relevant laws which will be applied to the case provided are following: Issue 1: Section 7 (1) and (2)

Issue 2: Section 13 (1) Partners bound by acts of firm. Section 40 (1) Partners must account for all benefits derived.

Issue 3: Section 13 (1) Partners bound by acts of firm. A details of these laws with suitable references in provided in the appendix at the end of the case.

Page |3

Application of the Partnership law to the facts

Issue 1: Is The money Doctors a partnership? Who are the partners?

According to the Western Australia Law of Partnership Act 1895, Part I "Nature of Partnership" the Money Doctors was a firm owned by three friends called Moe, Jmo and Shmo. They were conducting a joint business with a common view of sharing the profit. They all had wide experience and deep knowledge in different areas of financial management, investment strategy and retirement planning, they have decided to establish the business and they have registered the name The Money Doctors. To add to this they also loaned money from Joes wife who was appointed as a Day to Day management with annual salary of $ 45000 and the loan will be repaid back by giving her the first $10000 of the profits made each year which will strengthen the point of view to profit. It is very evident from the beginning that the financial advisor firm The Money Doctors is a partnership and the three friends Moe, Joe and shmo are partners. Like in the case of Keith Spicer Ltd v Mansell [1970] 1 WLR 333. The partners in the given case also had a common partnership and were bound by joint liability. Similarly the Part of their agreement was all the major decisions relating to the management of the service would require all the three to agree hence they had a valid active partnership.

Issue 2: Who is liable for the contract with ECO?

By the common decision of all the partners to buy new computers worth $ 10000 Shmo visited an Exhibition in Perth for international education where incidentally he met an old colleague who was an agent for an IT organization called Educational Computer Operators ECO. Without the consent of all the

Page |4 partners Shmo closed a deal with ECO to supply the firm a new computer systems valuing an amount 0f $20000.

For ECO Shmo was an agent and acting within his actual authority, agreed by partners. But in reality he was breaching the terms and conditions of the agreement between partners by closing a deal higher than the agreed amount of investment. This case is similar to Walker V European Electronics Pty Ltd [1990] 23 NSWLR 1. New South Wales Court of Appeal and here also Money Doctors are indeed liable for the contract with ECO for buying the computer system and they must pay the full amount immediately. Young v Lamb (2001) NSWCA 225 Also When Shmo won a lottery which was actually a property of Money Doctors as the money used to obtain the ticket belonged to Money Doctors and he must share the prize with other partners and do not spend the money on a luxury holiday to the Bahamas

Issue 3: Who is liable to McTavish?

Mrs. McTavish a rich widow and without the knowledge of other partners Moe convinced her $1 Million in a company called Southern Land Opportunity SLO owned by him and disappeared with the money without any trace. The case relevant to Polkinghorne V Holland & Whittington ( 1934 ) 51 CLR 143 (High Court) where court gave a jurisdiction that the firm is liable to the client as the client dealt with the firm on the representation of the partner who was acting as an agent. Similarly with the case of Money Doctors Moe was acting as an agent of them. Moreover Moe was a direct partner of The Money Doctors and was dealing with Mrs. McTavish which is a client of the firm. But the fact that by

Page |5 associating themselves in a partnership with Moe the three partners made them selves responsible for his entire act done in the course of his authority as a partner. Hence the Money Doctors is fully liable to Mrs. McTavish. Polkinghorne V Holland & Whittington (1934) 51 CLR 143 (High Court)

However Shmo and Joe can take a legal action against Moe under the criminal law since Moe was not acting to the best interest of partnership and breached the partnership by advising the client to invest in his personal company this act called Conflict of interest and hence he is fully liable to the firm.

Conclusion

Issue 1: Based on the intentions, regularity and repetition of the actions a fact can be clearly established that Money Doctors is a partnership firm and three friends Moe, Joe and Shmo are active partners of the above said firm.

Issue 2: Shmo was acting as an agent of Money Doctors and for ECO he was a representative of Money Doctors who was acting his actual authority. Even if he breached the agreement between three partners ECO was not having any information on the same and As per Sec13 and Sec16 of the Partnership Act (WA) 1895 partners are binding each others for any act executed under the firm name. Therefore the firm is indeed liable for the contract with ECO for full payment of the order placed by Shmo.

Issue 3: Money Doctors is liable to Mc Tavish. Referring to case Polkinghorne V Holland & Whittington ( 1934 ) 51 CLR 143 and the similarity between the above case the wrong advise of Moe when he

Page |6 convinced Mrs. McTavish during the absence of Shmo to invest an amount of $1 Million in a company called Southern Land Opportunity SLO owned by him is a responsibility of Money Doctors towards Mrs. McTavishand. He was an agent of Money Doctors for Mrs. Mc Tavish and was representing Money Doctors while advising Mrs. Mc Tavish on investment. However, Money Doctors can sue Moe separately for not acting to the best interest of partnership and breaching the partnership by advising the client to invest in his personal company which also makes him liable to be prosecuted under act of Conflict of interest and hence he is fully liable to the firm.

(Word Count: Excluding References: and Cover Sheet: 2190)

Appendix:

Page |7 Partnership Law (Applicable for Issue 1): The Western Australia Partnership Act 1895, Part I "Nature of Partnership" Sections 7 and 12 and Part II "Relations of partners to persons dealing with them" Sections 13, 14, and 16. Part III "Relations of partners to one another" Section 30(1) and 33. These laws are regulated by commonwealth in various states of Australia. We will be applying WA Partnership ACT 1895 in the case provided based on the guidelines of the course. The contexts of all these acts are mentioned hereafter: (1) Partnership is an agreement (Written on papers on done with mutual agreement) done between 2 or more persons carrying on a common business with a view of profit. (2) To decide whether a partnership does or does not exist in a case, the court studies the true contract or look at the intentions of the partners as appearing from the whole facts of the case. (3) Partnership agreements are not public documents and are only binding on partners themselves. Carrying on a Business in Common: To decide whether a business is carried out in partnership, repetition and regularity of activities are the factors taken into consideration. However, a single venture may create a partnership. This is recognized by the Partnership Act 1958 (WA) s 36. It also becomes apparent in the following case. Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321 High Court. Facts: A company (Fourth Media Management Pty Ltd) had a contract with the British singer Elton John to perform in Australia. To finance the tours, Fourth Media entered into an agreement with Volume sales. Again Fourth Media granted an equitable charge over its right to the box office receipts to an advertising

Page |8 agency called Canny Gabriel Castle Jackson Advertisement. The case was who had the priority to the box offices takings? Decision: The verdict from the high court decided that the agreement was related to sharing of the profits and hence share a common view which is valid enough to decide that they were partners. Therefore Volume Sales had an equitable interest in the box office takings and took priority over the equitable charge of Canny Gabriel. Partners Duties of good Faith Relationship between partners is based on trust and for a matter of good faith all the partners should act to the best interest of partnership. Partners owe fiduciary duties to each other where these duties are built around the nation of good health. The fiduciary duties are apparent in the following cases. News limited v Australian Rugby Football league (1996) ATPR 41-521 United dominions Corp Ltd v Brian Ltd (1985) 157 CLR 1 High Court

Facts: A Security Projects Ltd (SPL) a property owner, UD a finance company and Brian an investor entered into a partnership to develop a land owned by SPL to a shopping center. SPL took a mortgage loan to finance the shopping center and other personal projects. When the shopping center was sold and made profit both SPL and UD use the profit to pay off other debts that it was owed by SPL and to which it claimed to be entitled under the terms of mortgage. Decision: The high court of Australia held that UD owed a fiduciary duty to Brian. It had breached that duty by taking a mortgage that advantage itself to the best interest of Brian without Brians consent.

Liability of partners (applicable for Issue 2) As per Sec13 and Sec16 of the Partnership Act (WA) 1895 partners are binding each others for any act executed under the firm name. As a partnership is not a separate legal entity each and every partner in a

Page |9 firm has equal unlimited liability, jointly with the other partners in terms of debts and liabilities. A major disadvantage of the partnership is joint liability. Partners are also jointly and severally liable for wrongful acts or omissions committed by a partner in the ordinary course of the business in the firm. This is the combined effect of Sec 14 & 16. Wrongful acts also include misleading and deceptive conduct under the trade practices Act WA Sec52. The wrongful acts is apparent is the below case Polkinghorne V Holland & Whittington (1934) 51 CLR 143 (High Court) Facts: Three partners Holland, Whittington and Harold Holland conducted a solicitors office. Harold advised a client of company (Polkinghorne) to invest in a company with assets owned by him in an act of tort. The other two partners were not aware of Harolds activity. The third party sued the three partners. Decision: The High Court held that Harold was involved with work which it was in the course of a solicitors business to perform (authority of the partner) hence under the joint liability all the partners were held to be liable to Polkinghorne. The court also announced that all the partners are active agents of the firm, and the acts of partners individually or together who does any transaction for carrying on in the usual way that partnerships of that kind with a third party bind the firm and his partners, unless the partner has no authority to act for the firm in a particular matter as per the written contract terms of a partnership. Walker V European Electronics Pty Ltd [1990] 23 NSWLR 1. New South Wales Court of Appeal Facts: A chartered accounts firm included three partners. One of the partner named Garrity misappropriated a large sum of money from European electronics for personal use which was not in the knowledge of the other two partners. European Electronics sued all three partners for the losses. Decision: The NSW court of appeal held that Garrity was having a authority of representation and was acting in the ordinary way of Business therefore the other two partners were jointly and severally liable. Young v Lamb (2001) NSWCA 225

P a g e | 10 Facts: Mr. and Mrs. Lamb and Mr. and Mrs. Newell conducted a partnership under the name Moruya Furniture and Bedding. The business was operated from lease properties owned by Young. Mrs. Newell negotiated a new 3 years lease and sent a letter to Youngs agent without having an actual authority from other partners to do this act and they argued that the partnership was not bound by Mrs. Newell letter. Decision: The NSW court of appeal held that Mrs. Newells act in sending the letter was an act relating to the business of the firm, done in the firms names hence the partnership was bound by Mrs. Newells act.

Partners bound by acts of firm Section 13 (1) (Applicable for Issue 3) An act or instrument relating to the business of the firm, done or executed in the firm name, or in any other manner showing an intention to bind the firm by any person thereto authorised, whether a partner or not, is binding on the firm and all the partners.

References
Latimer, Paul. In Australian Business Law. Sydney: CCH Australia Limited, 2008.

Sweeney, Brendan, and Jennifer O'Reilly. In Law in Commerce. NSW: LexisNexis Butterworths, 2007. Vermeesch, R B, and K E Lindgren. In Business Law Of Australia. NSW: LexisNexis Butterworths, 2005.