342 Chapter 12Partnership, limited liability partnership and choice of legal status
Accounting for profits
Section 29 provides:
Every partner must account to the firm for any benefit derived by him without the consent of the
other partners from any transaction concerning the partnership, or from any use by him of the
partnership property name or business connection.
If a partner makes any personal profit as a consequence of his being a partner, he must hand
this profit over to the firm.Competing with the firm
Section 30 provides:
If a partner, without the consent of the other partners, carries on any business of the same nature as
and competing with that of the firm, he must account for and pay over to the firm all profits made
by him in that business.
This section is similar to s. 29. The difference is that under s. 30 the partner is liable merely
as a result of competing with the firm. He or she does not need to use partnership property
or assets. Under s. 29, a partner is liable for misusing partnership property or assets. He or
she does not need to be competing with the firm.
Note that it is permissible for partners to compete with the firm or use the firm’s assets
to make a profit as long as the other partners consent to this. In Bentley vCraven, one part-
ner, Craven, also carried on a business as a sugar buyer in his own right. This did not breach
his duty not to compete with the firm because the other partners knew about it and agreed
that he should be able to do this.Law vLaw (1905)Two brothers, W and J, were partners in a manufacturing business in Halifax. J ran the firm
while W lived in London and took little part in the firm’s affairs. J bought W out for £21,000,
but later W discovered that the business was worth far more than J had led him to believe.
HeldThe court set aside W’s agreement to sell his share of the partnership. J had not put
W in possession of all material facts relating to the partnership’s assets.Bentley vCraven (1853)Bentley and Craven were in partnership together in a firm which bought and sold sugar.
Craven was the firm’s buyer and on account of his business skill was occasionally able to
buy sugar at a greatly reduced price. On one occasion he was offered a consignment of
sugar at well below the wholesale price. He bought this sugar himself and then sold it to
the firm at the going wholesale rate.
HeldCraven had to account to the firm for this secret profit. That is to say, he had to pay
the profit he had made to the firm. He had used a partnership asset (his position in the firm)
to make the profit.