2 A partnership is ‘between persons’,but a company,
being a legal person, can be a partner with a human per-
son, provided that its memorandum of association gives
the necessary power. The members of the company may
have limited liability while the human person has not.
Two or more limited companies can be in partnership,
forming a consortium as an alternative to merging one
with the other. It should not be assumed that a limited
company is a limited partner. The company is liable for
the partnership debts to the limit of its assets. It is the
liability of the company’s members which is limited – a
very different thing.
3 Partners must be carrying on a joint business ven-
ture,and for this reason a group of people who run a
social club would not be an informal partnership.
Under s 45 a business includes ‘every trade, occupa-
tion, or profession’, but this does not prevent a particu-
lar profession from having rules forbidding members
to be in partnership, e.g. a barrister is not allowed to
be in partnership with another barrister, at least for the
purpose of practice at the Bar.
The importance of being in a joint business venture as
partners is also shown by Khanv Miah(2001).
4 Partners must act in common,and the most import-
ant result of this is that, unless the agreement says some-
thing different, every general partner must be allowed
to have a say in management, as s 24(5) also provides. A
partner who is kept out of management has a ground to
dissolve the firm unless there is something in the agree-
ment which limits the right to manage.
The specimen ordinary partnership agreement which
appears at the end of this chapter should be looked at to
see how management rights have been dealt with.
5 There must be a view of profit,and so it is unlikely
that those groups of persons who have got together to run
railway preservation societies are informal partnerships.
In this connection the Court of Appeal has ruled that
profit-sharing, i.e. actually taking a share of the profit, is
not a prerequisite of partnership.Part 2Business organisations
112
capital actually put in? The House of Lords ruled that
parties who agree on a joint venture to find, acquire and
fit out premises for business purposes which they intend
to run as partners become partners in the businessfrom
the time when they embark on those agreed activities
and it is irrelevant whether or not the business has com-
menced trading. In other words, there must be evidence
that the joint venture has commenced, not necessarily
traded.
Comment. The ruling of the House of Lords gives rise to
some problems with the earlier case of Keith Spicer Ltd
v Mansell(1970) where the Court of Appeal ruled that
the taking of preliminary steps such as ordering goods
and setting up a bank account for a restaurant business
did not create a partnership because the restaurant
never traded as a partnership. The distinction seems
to be that the parties did all these acts while in the the
process of forming a company to run the restaurant.
Therefore, they did not take the preliminary steps with
the intention of forming a partnership but as company
promoters. In this sense Spicercan be reconciled with
Khan. In fact, Spicerwas not referred to in Khan, pre-
sumably because it was not in point, being a company
promotion case.M Young Legal Associates Ltd v Zahid
Solicitors (a firm)(2006)
Mr Bashir, a solicitor, wanted to set up his own practice.
However, he had been qualified for less than three years
and the Solicitors’ Practice Rules require every prac-
tice to have at least one principal who has been qualified
for three years or more. To get round this problem,
Mr Bashir asked Robert Lees, who was a retired solicitor
and a defendant also in this case, to set up in practice
with him; and, from 2002, Zahid Solicitors (Z) began to
do business.
Mr Lees was named as a partner on Z’s letterhead and
received a fixed salary of £18,000 per annum. This was
not related to profits. However, Mr Lees was largely a
figurehead and spent little time at the office. He had
obtained from Z’s bankers a letter saying that he would
not be liable for the firm’s debts to the bank and ap-
peared to have agreed with Mr Bashir that he would not
be liable for any of the debts of the firm.
The claimant, a claims handling company, made an
agreement with Z in 2003 under which the claimant
would arrange insurance or funding for Z’s prospective
clients. The claimant alleged that Z owed it money under
this agreement that had not been paid.
When Z was dissolved in 2004, the claimant brought
this action against the firm and Mr Lees on the basis that
he was a partner at all relevant times. Mr Lees denied
this, and whether he was a partner or not had to be
decided as a preliminary issue before the claim could
be taken forward. Mr Lees was held to be a partner at
the initial hearing and made an appeal to the Court of
Appeal. The defence which Mr Lees put forward was