Case Extracts Partnership Law
Case Extracts Partnership Law
Case Extracts Partnership Law
Graw, S., (2001) An Outline of the Law of Partnership, 2nd Ed., Lawbook Co., Pyrmont, NSW.
Held: The mere fact that Cox and Wheatcroft, as creditors, had actually shared in the profits of the business did not make them partners in that business or liable for its debts. They had not been carrying on the business in common in the required sense.
Stekel v Ellice [1973] 1 WLR 191; [1973] 1 All ER 465 (Graw 42; 2001)
Facts: The parties were chartered accountants, Ellice having practised for some considerable time in partnership with one Jennison. When Jennison died, Ellice took Stekel on as an employee on the clear understanding that, if things worked out, Stekel would be made a partner. Things did work out but Ellice delayed giving Stekel the promised partnership because there was some doubt as to how much the firm would have to pay Jennisons estate. As a compromise it was agreed that Stekel would become a salaried partner until the firms liability to the estate could be ascertained. A written agreement to that effect was signed in 1968 but it also stipulated that the salaried partnership was only to last until 5 April 1969 and that the parties would enter into a deed or agreement on or before that date making Stekel a full partner. The agreement went on to recite that Stekel was to receive a salary of 2000 per annum, that the capital of the firm was to be provided by and shall solely belong to Ellice, that the relationship could be terminated by notice and that, upon any such termination, Ellice was to be entitled to all the capital and clients of the firm. After this agreement had been signed the parties continued the practice as before except that, thereafter, Stekel had his name on the firms letterhead as a partner and, within the firm, he acted as if he were a partner. No further steps were actually taken to make him a full partner however and, in August 1970, Stekel left the firm and brought an action seeking an order that the affairs of the partnership be wound up and that all necessary accounts be taken. Held: In the circumstances, a partnership between Stekel and Ellice had come into existence. Although their agreement for Stekel to receive a salary and for Ellice to have sole ownership of the firms capital was unusual, the other aspects of their 1968 agreement and their actual conduct thereafter were all consistent with the existence of a partnership. That partnership had terminated through mutual agreement in August 1970 but, because under the terms of the 1968 agreement Stekel was to have no interest in the capital or clients of the firm upon termination, he had no entitlement to either a winding-up order or an account. On the question of the legal status of a salaried partner Megarry J commented at 199; at 473: It seems to me impossible to say that as a matter of law a salaried partner is not necessarily a partner in the true sense. He may or may not be a partner, depending on the facts. What must be done, I think, is to look at the substance of the relationship between the parties; and there is ample authority for saying that the question whether or not there is a partnership depends on what the true relationship is, and not on any mere label attached to that partnership. A relationship that is plainly not a partnership is no more made into a partnership by calling it one than a relationship which is plainly a partnership is prevented from being one by a clause negativing partnership.