P/S : Hi, I am sharing my personal notes of law-related subjects. Some parts of them are explained in a very informal-relaxed way and mix of languages (BM and English). Secondly, as law revolves every day, there will be outdated parts in my notes. Two ways of handling it.. (1) double check with the latest law and keep it to yourself (2) same with No. 1 coupled with your generosity to share with us, the LinkedIn users (hiks ^_^). Till then, have a nice day!

1. 1
Ch.3: Relationship Between Partners
Contents
I. Relationship between partners is based on the contractual agreement
between them................................................................................................. 2
ii. Duties of partners ................................................................................. 2
iii. Rights of partners (section 26) .............................................................. 6
iv. Rights of assignee of share in partnership ............................................ 11
v. Concept of partnership property.......................................................... 12
vi. 3 ways of identifying p’ship property:................................................. 13
vii. Procedure againat partnership property................................................ 15

2. 2
I. RELATIONSHIP BETWEEN PARTNERS IS BASED ON
THE CONTRACTUAL AGREEMENT BETWEEN THEM
A. S 21:VARIATION ON TERMS OF
The mutual rights and duties of partners, whether ascertained by agreement or defined
by this Act, may be varied by the consent of all the partners, and such consent may be
either express or inferred from a course of dealing
B. CRUIKSHANK V SUTHERLAND (1923) 128 LT 449
Facts : The accounts of the partnership were prepared based on book value as the
assets were taken over from a previous firm was based on book value. fair value of
assets or book value.
Isu : When the plaintiff died, the issue was whether his share of the partnership’s
profit should be based on, (using fair value/book value.)
Held : fair value as no course of dealing had been proved to show that the value
should be book value.
II. DUTIES OF PARTNERS
A. CONCEPT
1. Partners stand in a fiduciary relationship with one another. …based
on an ‘uberrimae fidei’ type of contract, a contract that places a duty on
partners to display utmost good faith in all dealings and matters affecting the
partnership.
2. The concept of good faith and honesty of a fiduciary’s duty under
Partnership Act 1961 can be seen in the below sections.

3. 3
B. S. 30:TO RENDER TRUE ACCOUNTS AND FULL INFORMATION
1. Provision: ….. information of all things affecting the partnership to
any partner or his legal representatives
2. When one partner is dealing with another partner in a situation where
he has access to certain information regarding the matter they are dealing in
which is not known to the other, the one having information has a duty to act
in good faith. .. to disclose it in full to the other.
3. However, if the partner who has a right to the information is
a) aware that such information is withheld from him, or
b) he willfully or negligently acts in such a way that shows that he
will not make any claims,
c) then there is no duty of disclosure & the contract between the
partners is considered valid and the partner will lose all claims against
the other partner. This was established in : Law v Law [1905]
Facts : A partner sold his share in the partnership to another partner for
£21,000. At the time of sale he did not know that the partnership assets
included mortgages and other securities. The buyer knew of this but
never told him about it. The seller took legal action to have the contract
he had made, be declared void.
Hekd : the order setting aside the contract would have been made.
However, a settlement out of court has been agreed to by the parties
involved
4. Duty not only between existing partners, but also to those intending to
enter into partnership, meaning future partners.
a) Fawcett v Whitehouse (1829)
Facts : A future partner had negotiated to buy a piece of property for
a firm that was to be established. He was paid a commission for his
effort.

4. 4
Held : he had to surrender the commission to the firm after the firm
was established
C. S. 31: NOT TO MAKE SECRET PROFIT / TO ACCOUNT FOR ANY
BENEFIT DERIVED FROM ANY TRANSACTION CONCERNING THE
PARTNERSHIP
1. Provision : A partner must not, without the consent of the other
partner, make any profit or benefit for himself by making use of his position or
any information(name or business connection) that he had obtained in the
partnership business.
2. Advantage or benefit obtained without consent, is said to be secret
profits. Partner under a fiduciary duty to other partners, not to make any secret
profit out of their position.
3. A partner can keep his profits only when his partners give their full
consent.
a) But firstly, the partner must make a full disclosure to his co-
partners of all relevant facts relating to the acquisition of the profit
before the co-partners can be said to be in a position to give consent.
4. Pathirana v A.Pathirana [1967]
Facts : Both A and AP were running a petrol station as agent of Caltex. On
1948, AP gave 3 months’ notice to dissolve the partnership. Before the notice
expired, P informed Caltex that his partnership with AP had ended. Without
the knowledge and consent of the AP, P managed to persuade Caltex to have
the agency changed to his name after one month AP gave the notice, which is
still within the period of 3 months’ notice. AP claimed a share of the profits to
which he was still entitled.
Held : AP was entitled to the profits as the P had obtain the renewal of the
petrol supply agreement before the partnership had ended.

5. 5
D. S. 32: DUTY NOT TO ALLOW CONFLICT OF INTERESTS/ TO
ACCOUNT FOR PROFIT DERIVED FROM A COMPETING BUSINESS
1. Provision : If a partner, without the consent of the other partners,
carries on any business of the same nature as and competing with the firm, he
must account for and pay over to the firm all profits made by him in that
business.
2. where a person has his own personal business which is of the same
nature with that of his partnership business, his personal interest and his
interest as a partner would be seen to be competing and therefore, in
conflict.
a) if it is the same, but it is not competing, it will not be against
s.32, if it is the same, but it is not competing, it will not be against s.32.
3. Even if the business is the same and competing, it can be carried on
if the other partners give express or implied consent.
Case Facts n issue Held
Trimble v
Goldberg
[1906]
 T, G and B set up a partnership for the
purpose of buying & selling certain
properties belonging to one Hollard.
 Trimble went out to S. Africa and bought
the Hollard’s property for the firm as
agreed.
 At the same time time T also brought
some plots of land from Sigma Syndicate
for himself and B.
 When G learnt about this, he brought an
action against T for the benefit that he had
gained.
the action failed as the
purchase of the plots of land
was not within the scope of
the partnership, nor was it in
competition with the
partnership business.
Aas v
Benham
[1891]
 A partner of a firm of shipbrokers called
‘H. Clarkson & Co.’ later wanted to form
a separate business as a ship-owner under
the name of ‘H. Clarkson & Co., ship
• defendant cannot use name
of the business because the
new business was beyond the
scope of, and

6. 6
owning’.
 The other partner brought an action to
stop him from using the name of the firm
in a separate business, and claimed an
account of his profits and salary in
connection with the new co.
• The new business is not in
competition with the
partnership business, thus
defendant did not have to
account for the benefit or
profit he had made in
connection with the new co.
III. RIGHTS OF PARTNERS (SECTION 26)
 The rights of partners under s. 26 are based on the common law assumption -that
in a partnership, everything is enjoyed or shared equally.
 Rights under will apply to the partnership if there is no express agreement between
the partners
A. 26 (A) :CAPITAL & PROFIT
1. Provision : Subject to any agreement express or implied between the
partners, all the partners are entitled to share equally in the capital and profits
of the business, and must contribute equally towards the losses of capital or
otherwise sustained by the firm
2. Interpretation :
a) ‘equally’: If capital is contributed in unequal amounts, it is
implied that an agreement exist among the partners that their rights to
capital will be based on the ratio of their contributions
b) Where the capital provided in different forms, e.g.; A provides
the money and B provides skill or knowledge, the skill or knowledge
of such partner would be considered as equally between them. If the
partners do not want it to be considered as equal, may make express
agreement as to how the profits are to be divided bet. them.

7. 7
3. Re Albion Life Assurance Society (1880) : In ordinary partnership
businesses, where there is a share of the profits in certain amounts, it could
thus be fairly concluded that the losses would be divided in the same
proportion.
a) If one of the partners become insolvent and is not able to
contribute his share of lost capital, the solvent partner is not under any
duty to contribute his share of lost capital, the solvent partner is not
under any duty to contribute for him.
B. S 26 (B) (I) & (II) :INDEMNITY AGAINST LIABILITY IN THE FIRM'S
BUSINESS
1. Subject to any agreement (Section 22) express or implied between
the partners, the firm must indemnify every partner in respect of payments
made and personal liabilities incurred by him :
(i) in the ordinary and proper conduct of the business of the firm
(ii) In or about anything necessarily done for the preservation of the business
or property of the firm;
2. Kok Hong Leong v Seow Kah Cheng [1950]
Facts : Firm had defended action brought by third party who obtained $1 in
damages, with each side ordered to pay own costs.
Held : Defending third party’s action was preservation of firm’s assets, thus
partner is entitled to receive from partnership expenses incurred in performing
the duty.
C. S. 26 (C) :ADVANCES TO THE FIRM MADE BY A PARTNER
1. Provision : Subject to any agreement between the partners,

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 a partner making any actual payment or advance beyond the amount of
capital which he has agreed to subscribe for the purpose of the
partnership
 is entitled to interest at the rate of 8% per annum from the date of the
payment or advance
2. Explanation :
 Where the partners have originally agreed to certain amounts to be
contributed by each partner as capital.
 When the sum contributed by one or more of the partners is less, and
the full capital is not achieved, one of the partners may contribute more
than the agreed amount.
 The advance made by a partner above and beyond the amount he has
agreed to contribute to the capital is considered as a loan, and not as
an increase of his contribution to the capital. As such interest ought
to be paid. The rate of interest however may vary by agreement.
D. S 26(D):INTEREST ON CAPITAL
1. Subject to any agreement between the partners,
 a partner is not entitled, before the ascertainment of profits, to interest
on the capital subscribed by him
2. Interpretation : kalau partner nak tuntut interest, kena tggu
pembahagian untung selesai dulu
E. S. 26(E) :MANAGEMENT OF THE PARTNERSHIP BUSINESS
1. Provision : Subject to any agreement between the partners, every
partner may take part in the management of the partnership business.

9. 9
2. It would be best for the firm to make provisions to appoint those
partners who are suitably qualified by seniority or ability to manage the
business to manage the firm. They probably could be paid a salary, or, as an
alternative, the firm may engage a manager to run the partnership business.
F. S 26(F) :REMUNERATION
1. Provision : Subject to any agreement between the partners,
 every partner may take part in the management of the partnership
business.
2. This provision may not be fair in a partnership where there are sleeping
and active partners, thus an agreement may be drawn up to provide the
payment of a retainer to the active partner.
3. However, during a winding-up of the partnership, where one of the
partners die, or retire, or becomes of unsound mind, then the partner or
partners left to sort out the business should also be compensated.
G. S.26(G) INTRODUCTION OF A NEW PARTNER
1. Provision : Subject to any agreement between the partners,
 no person may be introduced as a partner without the consent of all
existing partners
2. A partnership agreement can provide that one or more of the
partners have the option of introducing a new partner.
a) If there is such an agreement, then the other partners are bound
to accept the introduction of new partner.
b) A person who has been nominated as a partner as allowed
under the partnership deed, has
c) a right of action when other partners refuse to admit him.

10. 10
3. Byrne v Reid [1902]
Facts :A father nominated his son as partner as allowed under a partnership
deed, but other partners refused to admit the son. Later they agreed to execute
all deeds necessary for his son’s admission. However, they did not fulfill their
promise. The son sued them.
Held : partners were bound by partnership deed. The son was a partner in the
eyes of the law upon nomination and therefore could exercise his rights as
such.
H. 26 (H) DIFFERENCES AS TO ORDINARY MATTERS
1. Provision : Any difference arising as to
 ordinary matters connected with the partnership business may be
decided by a majority of the partners,
 but no change may be made in the nature of the partnership business
without the consent of all existing partners
2. Highley v Walker (1910)
Held : the decision to admit an apprentice to be trained in the firm’s business
was an ordinary matter that could be decided by a majority of the partners,
thus allowing the partner’s son to be admitted.
I. S 26(I) :ACCEES TO THE PARTNERSHIP BOOK
1. Provision : Subject to any agreement between the partners,
 the partnership books are to be kept at the place of business and
every partner may when he thinks fit, have access to and inspect
and copy any of the them.
2. Partnership books would include all records kept by the partnership on
the firm’s affairs such as accounting records, minutes of their meetings, etc.

11. 11
J. SECTION 27 :RIGHT TO EXPEL PARTNERS
1. Provision : No majority of the partners can expel any partner, unless a
power to do so has been conferred by express agreement between the parties.
2. Where there is such a provision, such as in cases where a partner has
obviously breached the partnership deed, then a notice of expulsion can be
served on the partner who has misbehaved, without first having to tell
him about his misdeed.
a) Green v Howell [1910]
Facts :The partnership articles of a firm contained a provision that
allowed one partner to expel another partner who is in obvious breach
of his duty. This, however, is subject to an appeal to an arbitrator. The
other partner then served a notice of expulsion on his partner without
giving him an opportunity to explain as he felt his partner was guilty of
being in breach of the partnership articles. The issue here was the
notice valid?
Held : The court held that the notice was valid.
IV.RIGHTS OF ASSIGNEE OF SHARE IN PARTNERSHIP
A. CONCEPT
When a partner assigns his share in the partnership to another party, it does
not make the other party a partner, but the assignee is merely assigned the
partner’s rights in the partnership assets and profits
B. S 33(1):
An assignment by any partner of his share in the partnership does not entitle the
assignee to interfere in the management or administration of the partnership
transactions, or to inspect partnership books during the continuance of the partnership
C. S. 33 (2)
Assignee has 2 rights when firm is dissolved:

12. 12
 to assignor’s share;
 to an account as from the date of dissolution to ascertain that share.
D. WATTS V DRISCOL
Facts : A partner assigned his share in a firm to his father as security for a loan his
father gave him to set up the firm. He then sold his share to the other partner. The
father claimed he was entitled to an account to ascertain the value of his son’s shares.
Held : the sale to the other partner did not affect an assignee’s rights since the sale
took place without his consent.
V. CONCEPT OF PARTNERSHIP PROPERTY
A. IMPORTANCE & MEANING
In Mat Shah bin Mohamed & Anor v Foo Say Meng & Ors [1984]1 MLJ 237, Wan
Suleiman F.J. considered 3 reasons why it is important to determine Partnership
property:
1. It’s value - to firm or partner.
2. Creditors right in event of firm’s insolvency.
3. To those who take partner’s real estate or personal estate.
a) selalu jadi isu apabila tanah didaftarkan atas nama partner,
adakah firm n other partners boleh claim itu partnership property?
B. S. 22(1) :ALL PROPERTY BOUGHT USING PARTNERSHIP ACCOUNT
IS A PARTNERSHIP PROPERTY
1. Provision of 22 (1): All property/rights/interests in property originally
brought into the partnership stock on account of the firm or for the purposes
and in the course of the partnership business, are called as partnership property

13. 13
VI. 3 WAYS OF IDENTIFYING P’SHIP PROPERTY:
A. ALL PROPERTY BROUGHT IN ORIGINALLY AS PARTNERSHIP
STOCK.
1. The question of whether the property has been originally brought in as
partnership stock or not depends on the agreement between the partners.
Case Facts Held
Miles v
Clark
 A photographer who ran a sole
enterprise brought in the plaintiff as
partner as he had more business
contacts.
 He allowed his equipments to be used in
the cause of the photography
partnership, without any definite
agreement between them.
 Despite the business doing well, they
ended the partnership over some
differences.
 assets such as the lease of
the business premise,
photography equipments,
and the firm’s ‘goodwill’
were not partnership
property,
 but the personal property
of the partners who had
brought them into the
partnership.
B. WHERE PROPERTY IS ACQUIRED THOUGH PURCHASE OR OTHER
MEANS, FOR THE FIRM.
1. This is normally where the purchase is made using partnership money
and property for the firm. This is a much easier way of determining
partnership property.
2. S. 23 : Unless the contrary intention appears, property bought with
Partnership Money is deemed to have been bought for the firm.
C. WHERE PROPERTY IS ACQUIRED THROUGH ANY LAWFUL MEANS
FOR ALL MEANS AND PURPOSES FOR THE PARTNERSHIP BUSINESS. TO
THE FIRM
1. Concept : Not all property bought that is used in the partnership
business is assumed to be partnership property.
Case Facts Held

14. 14
Ponnukon v
Jebaratnam
Appellant entered into
partnership with the
respondent to build houses
and shops for sale, and to
share such profits. Land in
question was owned by
him.
land was not partnership property because
(i) no agreement between parties for land to be
treated as partnership property;
(ii) object to develop land does not necessarily
mean land must be owned by the firm;
(iii) land was not paid from partnership money.
D. DEVOLUTION (PENURUNAN KUASA) OF PARTNERSHIP PROPERTY
1. Proviso of S. 22 (1)
a) Provision : Provided that the legal right/interest in any land
which belongs to the partnership shall devolve according to
 the nature and tenure and
 the general rules of law applicable thereto
 but in trust, so far as necessary, for the persons beneficially
interested in the land under this section.
2. Section 24
a) Provision: Where land / interest has become partnership
property, it shall be treated
 as between the partners (including the representatives and hiers
of a deceased partner),
 and also as between the heirs of a deceased partner and his
executors or administrators, as personal and not real estate
 UNLESS the contrary intention appears,
b) Interpretation :
 Once if it is proven to be partnership property, even though the
property registered under a partner’s name, land law would not
be applicable

15. 15
 A property cannot be registered under the firm’s name because
partnership is not a legal entity
E. CO-OWNERS OF ESTATE IN LAND S 22(2)
1. Provision : Where co-owners of an estate/interest in any land are
partners as to profits made by the use of that land, and purchase other land in
the absence of any agreement to the contrary, not as partners, but as co-owners
for the same respective estates and interests as are held by them in the land
first mentioned at the date of the purchase.
 Remain as co-owners n not partners
2. Davis v Davis [1894]
Depe bangunkan bisness guna duit sewa rumah.
Apa2 penambahan daripada harta co-owners menyumbang kepada adalah
harta perkongsian tapi the freehold house remain as their personel property.
VII. PROCEDURE AGAINAT PARTNERSHIP
PROPERTY
A. S. 25 (1) :WRITS OF EXECUTION
1. Provision ; A writ of execution shall not issue against any partnership
property except on a judgment against the firm
2. Interpretation : walaupun perkongsian tak boleh memiliki harta tapi
apa2 action against partnership such as bankruptcy metilah merujuk kepada
partnership property bukan kepada individu.
3. Peake v Carter
4. Brown, Janson v A Hutchinson (N0 2) [1895]

16. 16
B. S. 25 (2) :CHARGING ORDER
1. Provision : The court may on the application by summons of any
judgment creditor of a partnership property:
a) make an order charging that partner's interest in the partnership
property
b) appoint a receiver of that partner’s share of profits and give all
other orders which might have been directed or given if the charge had
been made in favour of the creditor
2. Interpretation of S. 25 (2): Kalau partner A ada buat personel loan
and securd the loan with his share in the partnership property. Mahkamah can
order only his part in the property can be claimed by the claimant, plus court
may give any order necessary to uphold creditor’s right.
3. S 35(2): other partners have the option to dissolve the firm if any
partner suffers his share of the partnership property to be charged for his
separate debt.