Business Law Partnerships

Well I must love going through my old assignments as I just found another one that looks good. This time is all about Partnerships in a Business Scenario.

This case involves the law of business in Particular whether a Partnership exists and whether a Salaried Partner is liable to the creditors for the debts of other partners.

Partnership:

 A Partnership is defined as individuals carrying on a business in common to a view to profit.

Salaried Partner:

  They are promised definite salary to a certain amount. But in regards to law they are just advances of salaries in expectation of profit.

Well here we go the Scenario Scene:

Peter Toohet and Glen Stabb are partners in an Accounting partnership. They trade under the business name of Toohey and Stabb. In December 1985 they employ an employee accountant, Sandy Edwards. Sandy was paid $30 000 per year together with 5% of the net profits of the firm.

In December 1989 both Peter and Glen agreed to make Sandy a Salaried partner. She was now to receive 10% of the gross profits of the firm. Her name was to appear on the firm’s letterheads and she had agreed to this, she was introduced to all of their clients for the firm as a Partner. However, she took no part in the management of the firm. It was agreed that she would not be liable for any of the trading losses of the firm.

In January 1992 the firm opened a trust account in which it invested clients’ money. In March 1995 both Peter and Glen absconded with the firms trust account and left debts totalling $100 000. The creditors for the firm commenced legal proceedings against Sandy, claiming that as a partner in the firm she is jointly liable with Peter and Glen. The Creditors seek to recover $100 000 from Sandy as both Peter and Glen are in Tel Aviv, Israel, a country which has no extradition treaty with Australia. Advise:

Whether Sandy is a Partner as between Peter and Glen?

Well the conclusion for the first part of this is that  she was portrayed at first as a Salaried Partner, so under section 9 of the act she is just a salaried partner and not liable for the firms expenses etc.

 Whether Sandy is a partner between herself and the creditors?
Unfortunately Yes Sandy is a Partner towards the creditors, because she portrayed herself to be one under section 18 of the act.

Whether Sandy is jointly liable, with Peter and Glen for the $100 000 owed by the firm to the firm’s clients?

Unfortunately for Sandy it be difficult for her to claim to be less than a full partner, due to the fact she was held out to the firm’s clients that she is a partner of firms and she also had agreed upon her name to be on the firms letterheads, where it had come to a cost to her of the liability for the partnerships of Glen and Peter’s debts for her to be liable for the debts they have left her.

This has been supported by the case of Lynch v Stiff and Nationwide Building Society v Lewis.

So is Sandy liable in the conclusion unfortunately for Sandy she is liable for $100 000 owed by the firm to the firms Creditors.