Existence of Partnership
A partnership agreement need not be in writing. It may be verbal or implied from the conduct of the parties. The way a partnership is in fact conducted may provide evidence of an agreement which varies the written partnership agreement.
A partnership can exist inadvertently. A one-off transaction cannot be a partnership as it will not constitute the carrying on of business.
A partnership can exist irrespective of whether the participants designate it as such or otherwise. A partnership is deemed to exist once the participants carry on business in common with a view to a profit.
Once a partnership exists, the details of the relationship between the partners will be governed by the terms of their agreement or if there is no agreement, by the terms of the Partnership Act.
In the vast majority of cases, it will be perfectly clear whether or not there is a partnership or it will be a matter of indifference. There are a number of factors set out in the Partnership Act, which assist in the determination of the existence of a partnership.
The designation of persons as partners has important consequences for their rights in relation to each other and in relation to third parties. In the absence of a partnership agreement, a range of default rules apply under the Partnership Act.
Partners have authority to bind each other to contracts and liabilities entered in the course of the business. Partners owe each other duties of good faith. The must account to each other for assets, income and business opportunities which belong to the partnership.
Disputes may arise as to whether or not a partnership exists. This may arise where a person is suing somebody on the grounds that he is another’s partner and therefore liable for debts or damage caused by that party. Equally, a person may seek to establish that he is a partner and therefore entitled to share profits of a partnership business undertaken in common.
Business in Common
Partnership Law was consolidated in the Partnership Act 1890. The Act codified the existing statute, common law, and equitable partnership rules. The Act is still the principal legislation governing partnerships in the Republic of Ireland, Northern Ireland, and England and Wales.
The Act provides that partnership is the relationship which subsists between persons carrying on a business in common with a view of profit. It provides that the relation between members of any company or association which is registered as a company under the Companies Act or is formed or incorporated by or in pursuance of any other Act of Parliament or letters patent, or Royal Charter is not a partnership within the meaning of the Act.
In order for a partnership to exist, each element of the definition must be satisfied. There must be a relationship between the parties, which will usually be based on a contract. As with other contracts, the terms may be expressed in writing or may be implied in the circumstances.
Persons may be characterised as partners, even though they are not conscious that this is so. The courts may deem the relationship to constitute a partnership.
Matter of Substance
The parties may or may not designate the arrangement as a partnership. Indeed, they may specifically designate the relationship, not to be a partnership. They may designate the relationship as that of independent contractors or as an employer and employee.
The fact that the partners have not designated the relationship as a partnership is a factor, but is not definitive. If the facts and reality show that the parties are carrying on business in common, and the other elements of the partnership definition are satisfied, a partnership will exist, and partnership law will apply.
The courts will look at any agreement that purports to govern the position well as the actual conduct of the parties. If the agreement does reflect the reality of the parties arrangements and relationship, the courts may give effect to them as reflective of the true position.
A partnership involves and requires a relationship between persons. Persons, in this context, may be companies or individuals. There may be a partnership consisting only of companies or of individuals and companies. There may be partnerships including and between partnerships.
Shareholders in a company are, in one sense, involved in a business together. However, they are not partners. Shareholders in a company do not have mutual fiduciary obligations and can usually act as selfishly as they wish, in the absence of a shareholder’s agreement to the contrary.
Generally, when parties come together to incorporate a company and do not trade themselves, they are promoters and do not have the mutual obligations and duties of partners. Existing partners may form a company, in which case they may continue as partners pending the formation of the company.
Carrying on Business
A business must be carried on by the parties in order to be partners. There must be a business. A business includes every trade, occupation or profession, although it is not limited to these roles.
Whether or not there is a business is a matter of fact. An agreement to carry on business in the future is not sufficient. The partnership does not commence until a business is commenced.
The mere ownership of property together does not of itself, constitute a business/ partnership. This is the case even though the rent and income are shared and divided. The arrangement may be an investment as opposed to a business. The parties may, of course, carry on a business involving property that involves more than the mere holding of the property.
There is no requirement that all partners be actively engaged in the business. The partners must carry on business, but some partners may do so as dormant or sleeping partners.
A single venture (but not a single transaction) may be enough to constitute a partnership. There may be multiple partnerships on successive occasions. Each may relate to a particular venture or purpose.
View to Profit
The business must be carried out with a view to a profit. A partner may apply to the court for the dissolution of the partnership if it cannot trade profitably. A profit may be an increase in the value of capital assets.
Where an organisation does not seek to make a profit, it will fall outside of the definition of a partnership.A partnership must be distinguished from a voluntary association which is undertaken with a view to a profit. Many private clubs will fall into this category.
If the members constitute a not for profit club, partnership consequences do not follow. Nonetheless, members of clubs may or may not be liable wholly or in part for the club’s engagement. The position will depend on the nature of the contracts entered and on the club rules. In most cases, the members of a club will not be liable for the club’s engagement. The club’s trustees or managing committee may be liable.
Partners must act in common. This means that they must have a common interest or proprietary stake in the business. They will generally be co-owners of the business.
An employer and employee may otherwise satisfy the definition of a partnership, but for the requirement that they act in common, in this sense. The interests of the employer are fundamentally different to that of the employee so that the requisite commonality of interest is lacking.
The fact that the parties have actual authority on behalf of each other to undertake business, is a hallmark/ indication of undertaking business in common. If one person has complete control of the business, then this points away from the business being undertaken in common. Similarly if one is subordinate or an employee in substance, the arrangement is unlikely to be a partnership.
A range of factors goes to show whether a business is being undertaken in common. The Partnership Act sets out a number of indicative factors. The absence of one or more of the factors will not be fatal to the existence of a partnership. The criteria include;
- the existence of a partnership agreement;
- whether the parties receive a division of profits;
- control over accounts and management;
- being held out and described to the world as such;
- interest in the business assets;
- incorporation of the person’s name in the partnership name.
Sharing Profits & Losses
The sharing of net profits/ returns is indicative of partnership. It is presumptive evidence that the recipient is a partner.This is because the individuals share the business risk and share the net income. They are in business in common.
Although the sharing of profits and losses is a key characteristic of partnership, it is not conclusive. An agreement to share profits, but not losses, tends to indicate that there is no partnership. The sharing of both profits and losses is a hallmark of undertaking business in common. Losses are presumed to be shared in the profit sharing ratios.
Partners may label some of their income as salary and some as a share of profits. The fact that some or even all of the profits are labelled as a salary, does not mean that the recipient is not a partner. The designation of the income as a salary is an insignificant factor, where the arrangement is substance a partnership.
The receipt of a share of the gross returns does not of itself create a partnership. This is so, whether or not the persons who share the returns have or have not a joint or common interest in the assets from which the return is derived.
The sharing of gross returns may be indicative of a commission or a franchise arrangement. A franchise may involve the sharing of net profits, but there would not normally be sufficient commonality of interest to make the parties partners.
An employee who obtains remuneration from a share of the profits is not by that fact alone, a partner.The employer and employee are not in business in common.
Repayment of a loan or interest on a loan from the partnership income does not by itself indicate a partnership. The Act requires that a loan or repayment of interest from lender’s profit must be evidenced in writing in order to enjoy the presumption that it is the repayment of a loan, as distinct from a partnership interest.
Investment Return I
The receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business. However the receipt of such a share, or of a payment contingent on or varying with the profits of a business, does not of itself make him a partner in the business; and in particular
- the receipt by a person of a debt or other liquidated amount by installments or otherwise out of the accruing profits of a business does not of itself make him a partner in the business or liable as such;
- a contract for the remuneration of an employee or agent of a person engaged in a business by a share of the profits of the business does not of itself make the servant or agent a partner in the business or liable as such;
- a person being the widow or child of a deceased partner, and receiving by way of annuity a portion of the profits made in the business in which the deceased person was a partner, is not by reason only of such receipt a partner in the business or liable as such:
Investment Return II
The advance of money by way of loan to a person engaged or about to engage in any business on a contract with that person that the lender shall receive a rate of interest varying with the profits, or shall receive a share of the profits arising from carrying on the business, does not of itself make the lender a partner with the person or persons carrying on the business or liable as such. Provided that the contract is in writing, and signed by or on behalf of all the parties thereto:
A person receiving by way of annuity or otherwise a portion of the profits of a business in consideration of the sale by him of the goodwill of the business is not by reason only of such receipt a partner in the business or liable as such.
Ownership of Assets
Partners will usually each have an interest, stake or equity in the business. However, joint tenancy, tenancy in common, joint property, common property, or part ownership of property does not of itself create a partnership as to anything so held or owned, whether the tenants or owners do or do not share any profits made by the use thereof.
The sharing of gross returns does not of itself create a partnership, whether the persons sharing such returns have or have not a joint or common right or interest in any property from which or from the use of which the returns are derived.
Co-owners of property are not presumed to be partners, even though they may share the rents and income of the property/ asset. It is possible to have a partnership in relation to real property. Pure investment in common, without more, would not be generally sufficient to constitute a business. If the arrangements or activities extend beyond investment, there may constitute a partnership.
There are certain types of arrangements which are presumed not to constitute a partnership. They include
- payments to deceased former partners;
- payments arising from the sale of goodwill;
- repayment of loan capital based on profits from the business;
- remuneration of an employee even where it is determined with reference to profits.
- the receipts of a debt or liquidated amount by instalments or otherwise out of the profits of the business;
- an annuity or equivalent sum paid to a widow, a child of a deceased partner,
- the advance of a loan to a person engaged in or about to engage in business on terms that the lender shall receive a rate of interest varying with the profits, or shall receive a share of the profits arising from carrying on the business; provided that the contract is in writing, and signed by or on behalf of all the parties thereto;
- receipt of an annuity of reporting the profits of goodwill in consideration of the sale of goodwill.
The presumptions can be rebutted. In the event of a dispute, will look at the entire circumstances in deciding whether or not there is a partnership.
References and Sources
Partnership Act, 1890
Partnership Law 2000 Twomey M. Butterworths
Lindley & Banks on Partnership: (19th Revised edition) 2016 Banks, Roderick I’Anson
Partnership & Llp Law (8th edition) 2015 Morse, G.
Partnership Law (5th Revised edition) 2015 Blackett-Ord, Mark; Haren, Sarah;
Nature of Partnership
Rules for Determining the Existence of a Partnership
Stekel v Ellice
 1 WLR 191
‘I do not see why he should not be a true partner, at all events if he is entitled to share in the profits on winding up’ . . and ‘Certain aspects of a salaried partnership are not disputed. The term ‘salaried partner’ is not a term of art, and to some extent it may be said to be a contradiction in terms. However, it is a convenient expression which is widely used to denote a person who is held out to the world as being a partner, with his name appearing as a partner on the notepaper of the firm and so on. At the same time, he receives a salary as remuneration, rather than a share of the profits, though he may, in addition to his salary, receive some bonus or other sum of money dependent upon the profits. Quoad the outside world it often will matter little whether a man is a full partner or a salaried partner; for a salaried partner is held out as being a partner, and the partners will be liable for his acts accordingly. But within the partnership it may be important to know whether a salaried partner is truly to be classified as a mere employee, or as a partner . . It seems to me impossible to say that as a matter of law a salaried partner is or 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 relationship.’
Cox v Coulson
 2 KB 177
Swinfen Eady LJ
“Although the gross takings were divided between them, there was not any partnership; each had to discharge his own separate liabilities in respect of the venture. The travelling expenses, the remuneration of the actors, the cost of the appliances had to be borne entirely by Mill. The theatre rent and outgoings, the cost of the lighting, and the cost of playbills were wholly to be borne by the defendant. One of them may have made a profit out of the venture, and the other might have made a loss. Neither of them had authority to bind the other in anyway; there was no agency between them. The sharing of gross returns does not of itself create a partnership.’
Cox v Hickman
(1860) 8 HL Cas 268; 11 ER 431
Benjamin Smith and his son Josiah carried on business under the partnership name “B Smith and Son”. The business fell into financial difficulty and it was decided that the Smiths would assign their business to trustees, who would carry it on and pay its net income to the creditors. That net income was deemed to remain the Smiths’ property (though it was to be applied to pay their debts) and once all the debts were paid the assets of the business were to be returned to them. During the period of trusteeship, Hickman, a supplier, drew three bills of exchange on the business and the trustees accepted them, purportedly on behalf of the firm (thus making the firm liable to pay them when hey matured). The bills were dishonoured when they became due. Hickman sued Cox and Wheatcroft, arguing that they were members of a partnership (consisting of the firm’s creditors) that was running the business and that they were, therefore, liable on the bills .
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 (further extract)
 1 WLR 191;  1 All ER 465
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.”
Mary Ann Robinson v Edward Reeve
 EWHC 1179
Mr Justice Field :
Was there a partnership during the first period, and if so, what did it encompass: rental income alone or rental income and the properties?
Section 1(1) of the Partnership Act 1890 (“the PA”) provides that: “Partnership is the relation which subsists between persons carrying on a business with a view of profit.” By section 45 of the PA, “business” includes “every trade, occupation, or profession.” As is stated in paragraph 2-02 of Lindley and Banks On Partnership this definition of “business” means that virtually any activity or venture of a commercial nature will be regarded as a business for the purpose of s. 1 (1).
A relationship constituting partnership is a relationship resulting from a contract. It follows that where there is no express partnership agreement (as here), a court must determine whether a partnership existed by considering whether it is to be inferred from the parties’ conduct that they agreed to carry on a business with a view to profit. In making this determination, regard must be had to the rules for determining a partnership contained in section 2 of the PA. The rules relevant to this action are Rules (1) and (2) and the opening words of Rule (3). These rules read as follows:
(1) Joint tenancy, tenancy in common, joint property, common property or part ownership does not of itself create a partnership as to anything so held or owned, whether the tenants or owners do or do not share any profits made by the use thereof.
(2) The sharing of gross returns does not of itself create a partnership, whether the persons sharing such returns have or have not a joint or common right or interest in any property from which or from the use of which the returns are derived.
(3) The receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business, but the receipt of such a share, or of a payment contingent on or varying with the profits of the business does not of itself make him a partner;
When applying these rules the correct approach is not to conclude that there is a partnership simply because one of the presumptions arises on the facts and is not rebutted by something else; instead, all the facts must be considered, not just those giving rise to the presumption, and, without giving undue weight to any of them, an inference must be drawn from the whole; see Davis v Davis  1 Ch. D. 393. Further, the question is not whether the parties set out with the intention of establishing a relationship which the law calls “partnership” but whether they intended to conduct their affairs in such a way that amounts in law to a partnership.
…………..In my judgement, the letting of the Pimlico properties, involving as it did, the finding of tenants, the collection of rents, the keeping of the properties in repair and the furnishing of the properties (or most of them), plainly constituted a business. Mr. Reeve took the initiative in restructuring the way in which the properties were held after Alfred Reeve’s death, and also in managing the letting business, but he consulted with and informed his mother and sister on all significant matters. In other words he sought and obtained their agreement as to how the business would be structured and managed. Mrs. K. Reeve helped with the collection of the rents and beginning shortly after the properties had been distributed in specie, Mrs. Robinson also helped with the collection of the rents and did the work necessary to find tenants, acquired furniture, made curtains and cleaned and prepared the rooms that were to be let. It follows in my judgment that in the first period the letting business was carried on in common by Mr. Reeve and his mother and sister. There is also no doubt that the business was carried on with a view to the proprietors sharing in its profits and losses and that this was what the three of them intended. They saw no need for an express agreement establishing a partnership as to the income. They trusted each other and understood between themselves that they would run the letting business together and would share in its profits and losses in the same proportions in which they owned the Pimlico properties. The attitude of the Revenue to how the income was to be assessed is irrelevant. What matters is whether there was a business carried on with a view to profit (which there plainly was) and whether (as I find) the parties intended to carry on that business together and to share in its profits or losses.
……………………Although I have found this question difficult to answer, I have come to the conclusion that the partnership that existed in the first period encompassed not only the rental income but also the Pimlico properties and the interests acquired in 1971 save for the 20 year leases in the name of Mrs. K. Reeve. I find that the proprietors intended that the Pimlico properties should be part of and belong to the business they were engaged in after the winding up of ARIL. The position is analogous to that in Waterer v Waterer (1873) L.R. 15 Eq. 402 where it was held that land employed in the business of market gardening was partnership property and therefore personal estate. In giving judgement, Sir William James L.J. said:
“They [the partners] necessarily appropriated the soil itself for gardening purposes which could not be carried on without it. It is, in fact, in nursery gardening, practically impossible to separate the use of the soil for the trees and shrubs, from the trees and shrubs themselves that are part of the freehold, and at the same time constitute the substantial stock-in-trade.”
So too in the case of a business constituted by the letting of properties; it is practically (but not, I accept, legally) impossible to separate the use of the properties let from the rent paid by those who lease them.
It is true that the after-acquired properties were all purchased in the sole name of Mr. Reeve, save for one (which was purchased in Mrs. Robinson’s name) and that upon re-sale the acquisitions were reflected in the current account of the purchaser. However, even assuming that Mrs. Robinson knew that these purchases were in her brother’s sole name, they only began to be made almost nine years after the Declaration of Trust. It follows in my view that the purchase of the after-acquired properties is not inconsistent with there having been an intention several years earlier that the Pimlico properties and the freehold reversions in 23 Sussex Street, 29 Winchester Street and 99 Alderney Street should be partnership assets. It also follows that these purchases cannot found the estoppel for which Mr. Seymour contended. Even if Mrs. Robinson did know about the subsequent purchases in Mr. Reeve’s name, her acquiescence therein does not amount in any way to a rescission or variation of the original agreement that the Pimlico properties and the freehold interests acquired in 1971 should be assets of the business.
I do not accept the contention that the proprietors cannot have intended the Pimlico properties to be partnership assets because: (a) the freehold acquisitions in 1971 were in the name of only two of them; and/or (b) Mrs. K. Reeve between 1978 and 1987 transferred her interest in the Pimlico properties to her son and daughter; and/or (c) the income continued to be divided in accordance with the shares in the Pimlico properties established under the Declaration of Trust after the 1971 acquisitions and the transfer by Mrs. K. Reeve of her interest in the Pimlico properties. These matters are not inconsistent with the Pimlico properties becoming partnership assets. Mrs. K. Reeve was the largest shareholder in KRIL and contributed the largest share in the properties to the business. In the early years after the Declaration of Trust she assisted with the collection of rents. It was her intention at all material times that her share in the properties should pass to her children and remain in the business. The decision to acquire the freehold interests in 1971 in the names of Mr. Reeve and Mrs. Robinson only and the transfer of Mrs. K. Reeve’s interest in the properties to her children were based purely on estate duty considerations and did not stem from an understanding that the properties were not assets of the business. Likewise the continuation of the original profit shares after Mrs. K. Reeve no longer owned 46.3% of the properties: this did not stem from the property interests created by the Declaration of Trust but from the fact that Mrs. K. Reeve had contributed her interest in the properties in 1969 and had subsequently agreed to transfer that interest to her children for nil consideration, the properties in question remaining assets of the business.
I accordingly conclude that there existed a partnership in the first period which encompassed the Pimlico properties and the freehold reversions acquired in 1971. The business of the partnership was letting out the Pimlico properties for rent. The partners were Mrs. K. Reeve, Mrs. Robinson and Mr. Reeve. The partnership was a partnership at will. The profits were shared in the same proportions as the Pimlico properties were owned under the Declaration of Trust. The partners’ interests in the partnership property constituted by the Pimlico properties corresponded to the interests created under the Declaration of Trust. As for the freehold reversions acquired in 1971, Mrs. Robinson and Mr. Reeve alone had interests in these and those interests were equal shares.
Re Young, ex parte Jones
 75 LT 278
John agreed to lend Young £500 in consideration for the payment to Jones of £3 per week out of the profits. Pursuant to the agreement, Jones will assist in the office; have control over the money advanced and to be empowered to draw bills of exchange. He also had the right to enter into partnership within a period of seven months. Judge Williams said that, I ought to look at the agreement as a whole, and that taken as whole it negatives the existences of a partnership that it is plain that the agreement was made with reference to a completed partnership and that under it Lyod Jones had an option of entering into partnership. In spite of these clauses “which give such unusual and extended powers” to Jones, he is not a partner in the business but merely a lender and that “there was no intention of constituting a partnership.”
Davis v. Davis
 1 Ch.D 393
“although the language in this clause appears somewhat conflicting the true meaning of the clause is that the receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in it and if the matter were to rest there it would be evidence upon which the court must find the existence of a partnership. But if there are other relevant circumstances to be considered, they ought to be considered fairly together without attaching undue weight to any of them but drawing an inference from the whole. It would therefore appear that the import of paragraph (c) in Section 4 is that sharing of profits without more implies partnership. But if it is only one of several facts then all the facts must be evaluated together and no specific weight is to be given to the fact of profit sharing.”
Miah & Ors v. Khan
 UKHL 55
I think that the majority of the Court of Appeal were guilty of nominalism. They thought that it was necessary, not merely to identify the joint venture into which the parties had agreed to enter, but to give it a particular description, and then to decide whether the parties had commenced to carry on a business of that description. They described the business which the parties agreed to carry on together as the business of a restaurant, meaning the preparation and serving of meals to customers, and asked themselves whether the restaurant had commenced trading by the relevant date. But this was an impossibly narrow view of the enterprise on which the parties agreed to embark. They did not intend to become partners in an existing business. They did not agree merely to take over and run a restaurant. They agreed to find suitable premises, fit them out as a restaurant and run the restaurant once they had set it up. The acquisition, conversion and fitting out of the premises and the purchase of furniture and equipment were all part of the joint venture, were undertaken with a view of ultimate profit, and formed part of the business which the parties agreed to carry on in partnership together.
There is no rule of law that the parties to a joint venture do not become partners until actual trading commences. The rule is that persons who agree to carry on a business activity as a joint venture do not become partners until they actually embark on the activity in question. It is necessary to identify the venture in order to decide whether the parties have actually embarked upon it, but it is not necessary to attach any particular name to it. Any commercial activity which is capable of being carried on by an individual is capable of being carried on in partnership. Many businesses require a great deal of expenditure to be incurred before trading commences. Films, for example, are commonly (for tax reasons) produced by limited partnerships. The making of a film is a business activity, at least if it is genuinely conducted with a view of profit. But the film rights have to be bought, the script commissioned, locations found, the director, actors and cameramen engaged, and the studio hired, long before the cameras start to roll. The work of finding, acquiring and fitting out a shop or restaurant begins long before the premises are open for business and the first customers walk through the door. Such work is undertaken with a view of profit, and may be undertaken as well by partners as by a sole trader.
The respondents relied on a number of tax cases to support their arguments, chiefly Birmingham & District Cattle By-Products Co. Ltd. v. Inland Revenue Commissioners (1919) 12 T.C. 92 and Slater v. Commissioner of Inland Revenue  1 N.Z.L.R. 759. Such cases are of limited assistance. In the former case Rowlatt J. found that a company had not completed a full trade year before the outbreak of the First World War as required to obtain tax relief. Even if Rowlatt J.’s decision was right on the facts (which is doubtful) it was in an entirely different statutory context. It is worthy of note that in a later case (Kirk and Randall Ltd. v. Dunn (1924) 8 T.C. 663) Rowlatt J., acknowledging that the Court of Appeal had taken a different view, said, at p. 669 that he was inclined to think that he might have taken to narrow a view of the word “business.”
In the Slater case the question under section 104(b) of the Income Tax Act was whether expenditure was
“necessarily incurred in carrying on a business for the purpose of gaining or producing the assessable income for any income year . . .”
The court held, at pp. 764-765, that the taxpayer must embark on the actual course of conduct which it hoped would ultimately yield a profit, and that merely establishing a business structure and organising the decision-making, management and equity structures would not suffice. This would be equally true in the present context. However, the court also excluded the purchase of plant and drew a distinction between “carrying on a business” and “setting up a business”. In the context of that case this was entirely understandable, for the expenditure had to be incurred for the purpose of producing the assessable income in the tax year in which it was incurred. But the distinction makes no sense in the present context.
The question in the present case is not whether the parties “had so far advanced towards the establishment of a restaurant as properly to be described as having entered upon the trade of running a restaurant,” for it does not matter how the enterprise should properly be described. The question is whether they had actually embarked upon the venture on which they had agreed. The mutual rights and obligations of the parties do not depend on whether their relationship broke up the day before or the day after they opened the restaurant, but on whether it broke up before or after they actually transacted any business of the joint venture. The question is not whether the restaurant had commenced trading, but whether the parties had done enough to be found to have commenced the joint enterprise in which they had agreed to engage. Once the judge found that the assets had been acquired, the liabilities incurred and the expenditure laid out in the course of the joint venture and with the authority of all parties, the conclusion inevitably followed.
The judge found that the appellant was entitled to a 50 per cent. share in the partnership. The respondents appealed that finding to the Court of Appeal, but the conclusion of the majority made it unnecessary to decide it. Thorpe L.J. expressed the view that there was insufficient evidence to displace the statutory presumption of equal shares in the Partnership Act 1890. Buxton L.J., whose judgment made the point a live one, would have dismissed the appeal on this ground also. Roch L.J. expressed no view one way or another. In the light of the view which I take of the question which is the subject of the present appeal, there is thus an outstanding issue which remains unresolved.
At the conclusion of the argument before us, the respondents asked us to remit the case to the Court of Appeal for the issue to be decided. I would be very reluctant to do so when the issue was not raised by the respondents, either by way of cross-appeal or in their case, and no warning that the issue was still a live one was given to the House or to the appellant. I am especially reluctant because I consider that the respondents’ chances of success are, with due respect to Thorpe L.J. who thought otherwise, negligible. The various provisions of the Partnership Act 1890 which contain the terms to be implied into a partnership unless otherwise agreed are not statutory presumptions but default provisions. Very slight evidence is needed to exclude them.
The issue was supremely one of fact for the trial judge who saw and heard the witnesses, and who had to make the most of evidence which was often muddled and confused and sometimes self-serving. He evidently formed the impression that there were effectively two sides, the appellant who put up the bulk of the money and his brother (who did not become a partner) on the one hand, and the first two respondents who originated the idea (and who later brought in the third respondent as a sleeping partner) on the other. That fitted the commercial realities and was a plausible conclusion in the circumstances, and it was one which the judge was entitled to reach.”
I would allow the appeal and restore all the orders made by the trial judge.
Bradshaw -v- Murphy & ors
 IEHC 146
Finlay Geoghegan J.
17. Prior to 2012, the plaintiff and Mr. William Murphy had a business relationship in relation to a restaurant known as ‘The Station House’ in Tralee, County Kerry. Mr. William Murphy was the landlord of the premises and the plaintiff the tenant. From 2010, the plaintiff says he expressed a wish to move back to Dublin and looked for opportunities to start a restaurant and bar business in Dublin. In the meantime, he remained operating the restaurant at the Station House until January 2013. He says that he did scouting and formulated plans which crystallised and became the Copper Bar and Grill. The plaintiff contends that in the summer of 2012, in Spain, he and Mr. William Murphy reached agreement on partnership terms in accordance with a proposal set out in an email dated 12th May, 2012, from Mr. Murphy for the proposed restaurant and bar in Dublin.
18. Mr. Murphy disputes that there was any agreement with the plaintiff to form a partnership. The plaintiff deposes that the alleged partnership agreement included that a company would be formed with himself and Mr. Joseph Murphy (presumably as shareholders and directors).
19. It is agreed that pursuant to what the plaintiff contends to have been a partnership agreement and what Mr. William Murphy refers to as “discussions” between himself and the plaintiff, the Company was incorporated on 29th June, 2012. The initial directors were the plaintiff and Ms. Claire Murphy who also were 50% shareholders. The plaintiff does not dispute that it is the Company which carried on the business of the Copper Bar and Grill and that this was the intention pursuant to the alleged partnership agreement.
20. In August 2012, the plaintiff resigned as a director of the Company, and in January 2013, signed a transfer of the shares he held in the Company. There are significant disputes on the affidavits as to the reasons for which he took either of these steps, but it is not in dispute that he did take the steps.
21. The plaintiff, at para. 16 of his first affidavit, sets out in summary the terms which, he contends, form part of the partnership agreement. It is not contended by the plaintiff that the partnership, as such, was to carry on any restaurant or bar business separate and distinct from that to be carried on by the company to be formed. There are additional terms relating to the cessation of the plaintiff’s involvement in the Station House Restaurant and certain financial terms alleged in relation to the plaintiff’s entitlements in respect of the business which became the Copper Bar and Grill.
22. The interlocutory orders sought by the plaintiff insofar as they relate to the alleged partnership are injunctions restraining the defendants from terminating or purporting to terminate the partnership between the plaintiff and Mr. William Murphy and from removing the plaintiff from carrying on the common business or otherwise acting in breach of the partnership agreement. As appears, they are in very broad terms.
23. Counsel for the defendants submits that the plaintiff has not made out on the facts deposed an arguable case that there existed a partnership agreement between the plaintiff and Mr. William Murphy in relation to the business known as the Copper Bar and Grill. He relies, in particular, upon s. 1 of the Partnership Act 1890, which provides in s. 1 insofar as relevant:
“1.-(1) Partnership is the relation which subsists between persons carrying on a business in common with a view of profit.
(2) But the relation between members of any company or association which is-
(a) Registered as a company under the Companies Act, 1862, or any other Act of Parliament for the time being in force and relating to the registration of joint stock companies; or
(b) . . .
(c) . . .
is not a partnership within the meaning of the Act.”
24. On the facts deposed to, it appears to be common case that the agreement between the plaintiff and Mr. William Murphy included an agreement that a company be formed and that it was the company which was intended to carry on the proposed restaurant and bar business. I am not satisfied that the plaintiff on the facts deposed to has made out an arguable case that he and Mr. Murphy agreed that they would personally carry on a business with a view to profit. He had made out an arguable case that he was to receive certain financial payments for his contribution to the organisation and establishment of the business to be carried on by the Company. It appears to me unnecessary to determine whether or not that agreement is arguably a partnership agreement having regard to the provisions of s. 1(1) and (2)(a) of the Partnership Act 1890, for the following reasons.
25. Even if it is arguable that the alleged agreement between the plaintiff and Mr. William Murphy constitutes a partnership agreement, I am not satisfied that the plaintiff has established that damages would not be an adequate remedy for the alleged breaches or purported termination which he is seeking to restrain. The terms alleged are terms relating to the financial reward due to the plaintiff. If, at the full hearing of the action, the plaintiff succeeds in establishing that he had an agreement with Mr. William Murphy whereby he was to be paid certain sums over and above his salary as an employee, damages will be an adequate remedy. It is important to note that the plaintiff resigned as a director of the Company in August 2012, and transferred his shares in the Company in January 2013, and those two steps occurred long before the current disputes.
26. In reaching the conclusion I have reached, that the plaintiff has failed to establish that damages would not be an adequate remedy, I have also taken into account the undertaking given by the defendants in relation to the non-dissipation or disposal of the assets and business of the fourth named defendant as set out in para. 10 above.
27. As the plaintiff has not established that damages would not be an adequate remedy for breach of the alleged partnership agreement, in accordance with the Campus Oil principles, the Court must refuse the interlocutory injunctions sought.
28. The Court will note the undertakings given by the defendants pending the full hearing of the proceedings set out at para. 10 of this judgment in the order to be made on this interlocutory application. The plaintiff’s application for interlocutory relief will be refused. There will be liberty to apply in relation to the undertakings given by the defendants. The Court will give directions for the exchange of pleadings for the purpose of effecting a speedy determination of the matters in dispute between the parties and the matter will be remitted to the Chancery List with leave to apply for an early hearing date.
Macken v. Revenue Commissioners
 1 I.R.
With regret I have to find that prior to the final settling of the terms of partnership after the 1953 audit, no partnership existed; all that issued from the conference in September, 1953, and existed from then until the solicitors had completed the matter was an intention, or decision, to form a future partnership to be effective (whenever it should be formed) from the 1st January, 1954.
At first approach I was very much inclined to think that that, with the retroactivity of the deed, was sufficient to the petitioner’s case (as to the existence of the partnership as from the 1st January, 1954)”even after a first reading of Waddington v. O’Callaghan (1). On re-consideration, the reasoning of Rowlatt J. seems to me irresistible and I accept and follow it. Mr. O’Neill seeks to distinguish Waddington’s Case (1) on the grounds that the shares in that case were unequal, a circumstance making a deed of partnership more important than in a case of co-equal partnership; that the letter of instruction to the solicitors showed that all terms and conditions had not been agreed upon; and that the evidence (in Waddington’s Case (1)) disclosed that the partnership was conditional on a deed being executed by the parties. I cannot find a distinction when I consider the absence of significant change in the business operations and relations between the parties prior to the deed, to which I have already drawn attention; the terms of the instructions laid before the solicitors indicative of the future formation of a partnership; that the partnership was to take effect from the 1st January “or the nearest suitable date”; that the solicitors acted on the footing that the partnership was not in being but in course of formation; the testatum of the deed, clause 1,deeming the partnership to have commenced on the previous first day of January; and the use of the future tense in clauses 2, 3, 4 and 5 of the partnership deed. (The future tense in other clauses would be apposite if the deed were designed to regulate the future transactions of an existing partnership but the clauses I have singled out seem to me to be originative rather than declaratory of an existing fact.)
In any case, and were I to find the partnership to have existed as from the 1st January, 1954, the donor did not fully divest himself of the donation more than three years before his death.
As undoubtedly the intention at all times was that the partnership should run from the 1st January, 1954, it is with regret I have to decide against the petitioner.”
Walsh v. Walsh
 I.R. 409
Gavan Duffy J.
“ In applying English law to the facts, one has to begin by recognising the outlook of the persons immediately concerned. One of the persistent characteristics of Irish country life, perhaps, indeed, of peasant life elsewhere, is the prevalence of family feeling, the intense feeling of the family for the family; whatever may be the outlook in the towns, that essentially Christian society of our countryside treats the family in actual practice as the basic unit of the social order; that approach to the problem of life was indigenous, natural, traditional, among the unspoilt sections of our people long before the Constitution proclaimed it, though a very human avarice, understandable among men and women who earn their money hard, may at times be a competing factor. The father’s headship of the family was well understood and accepted without question. Every member of the young family at home had to work hard for the common weal, except during illness, and would do so as a matter of course; and, as a matter of course, the fruits of that labour would be regarded by all concerned as belonging to the father, who undoubtedly thought himself to be the owner, not only of his little homestead, but also of the family funds, the produce largely of his children’s work, so long as they remained at home. His right to cut off a child who misbehaved would not have been questioned, nor perhaps his legal right to cut off any child. But the natural anticipation would be that his property would go to his wife and the children at home and there is nothing to suggest any other intention here; the children were from a very early age the architects of his better fortune in old age; five of them were at home working; and to me it seems ludicrous to suppose that he meant arbitrarily to commit the injustice of depriving four of them of their just share in his principal asset in favour of his wife and of the son who acted as manager for him. In my judgment the presumption of advancement is effectually rebutted by circumstances of a kind familiar to us all, and the property in the moneys on deposit in the joint names of the wife and of Pat results to the father and those moneys form part of his assets on his death. Pat became head of the house and master on his father’s death; his mother still occasionally signed the bank deposit requisitions, and Nora kept for Pat the key of the box which held the deposit receipts. She and her mother, Michael, Pat, Tom and John were at home, and the invalid Bridget. Family life went on exactly as before, the father’s debility having left Pat virtually in control for some years. The mother, aged about 60, was fit for work at home with the help of Nora, a hard-working girl, who occasionally sold produce in Ballinrobe; John also worked mainly at or near home. The family continued to rely on its familiar resources, grazing and dealing in cattle and, until Tom went away, cutting and hauling timber, generally under contracts taken in Pat’s name and carried out by Pat and Michael and Tom, with occasional aid from John, and with the use of the family horse and cart, while saws were supplied by the other parties to the contracts. And surplus moneys continued to be paid from time to time into the bank on deposit.
The old home thus remained the family centre, with the mother of the family as presiding genius and the executive authority vested in the practical and efficient son, Pat, whose orders were law; everyone had his or her part to do and the functions of each member of the family group were well understood; the continuity remained unbroken. The facile and quite natural arrangement after the death of the father, under which everything goes on as before, with the most capable son in charge, is not uncommon. The family remained the unit and every member was expected to do his or her share of labour as before without pay of any kind, receiving only his or her humble keep and lodgment and the necessary apparel. Pat held the purse, handing out a few shillings for petty needs to a brother or sister on occasion; the home supported everyone and it was everyone’s home, though the energetic young men were not content to let the family subsist on the fruits of the little homestead alone. Each working brother and sister would look forward to a time, as John has testified, when (probably on marriage) he or she would get his or her “deal” and settle on another farm, receiving by way of endowment such sum as the family could afford at the time, or, alternatively, would remain to enjoy the family property alone after all the others should have had their portions; their mother for her part probably expected to continue to live in the old home and to end her days there with her children or such of them as should stay on with her. The recurrent problem is to fit that pastoral scheme of life into our utterly alien system of property law.
The legal relationship of the parties under such circumstances as these, in relation to pure personality, has not been clearly settled in the Irish Courts; that relationship must necessarily be based upon an understanding between the parties after the father’s death, a tacit understanding but a real one. Lawyers may feel inclined without further inquiry to say at once that the family co-workers were partners, because we are accustomed to classify relations under the ordinary legal categories, but that classification does not fit the facts; nobody can seriously maintain that the Walsh family in the running of its little farm was a firm, and I fail to see how the cattle operations, of a sort carried on by similar groups in many parts of Ireland, can have converted the family graziers into a firm. A firm consists of persons carrying on business in common with a view to profit, and it is for gain that the firm is made: that was not the position of the family at home; of course, there was a hope of making money and there was a risk of loss, but the essence of the combination was the fact that these persons were one family, who were working together for the sake of the family and because they were one family; the purpose of gain was an incidental; and, whatever may be said as to the grazing and timber, they were not, so far as the home farm was concerned, carrying on a”business” at all.
I cannot possibly accept the view that the proceeds of the timber contracts were the sole property of Pat, in whose name those contracts (when the timber work was done by contract) appear to have been made. The whole concern, farm, grazing and cattle dealings, and timber work was one family undertaking, whatever peculiar devolution our law may impose upon the family’s interest in the Maolais farm land, and there was a common fund at the bank for the surplus receipts of that common undertaking and, when occasion arose, for its expenditure. It is possible to assimilate the timber operations to a partnership; that was not the ordinary work of the farmer and grazier and it required journeys to places quite outside the home radius; only three sons appear to have participated regularly in these labours, though the fourth, I think, gave occasional help, as I have already noticed. But, if I call this a partnership, I must face the fact that, as I believe, Pat, the master, would not have tolerated any attempt by a brother, without express consent, to pledge his credit or otherwise act as agent of the group. However, it is not in fact practicable to differentiate the timber work from the other labours of the family; all these labours must be brought into one category, covering the three kinds of activity on which the members of the family were engaged, until 1916, when Tom left the farm and set up for himself.
I hold that the true relationship, as a matter of law, was that of co-owners of the common undertaking, and that this co-ownership constituted no partnership. But the parties were tenants in common; the rule has been established for more than 200 years that “in all cases of a joint undertaking or partnership, either in trade or in any other dealing,two or more persons who make a joint purchase will be considered in equity as tenants in common”: Lake v.Gibson (1) (the words in italics are italicised in White & Tudor, Leading Cases, Vol. II, 9th edn., at p. 885). Though there was here no purchase by the co-owners, I think the principle of the rule can appropriately be applied, and that the rule fits this case.
Who then were the co-owners? The answer is not easy, but I think the right answer is:The mother, Nora, Michael, Pat, Tom and John. While I cannot cut out the mother altogether, neither can I reasonably attribute to her the same third share of profits as she takes by law in her husband’s assets, because, for instance, one cannot, in evolving a tacit understanding, believe that Pat was spending long days on the felling of trees away from home, to give his mother the lion’s share of the resulting profits. And, if she is to share, she will naturally share as one unit in a group of six, or, after Tom’s withdrawal, five, co-owners, in much the same way as the law would treat her as one unit with each of her children, if the assets of a child dying unmarried and intestate after the father’s death had to be distributed among the next of kin. The mother and Nora contributed their respective quotas to the common weal by their home work, thus liberating each of the boys for his rougher labours.
Nora is equally entitled to a single share and each of the four boys takes one share at the outset. As to Bridget, I have felt some difficulty; dealing with persons who have let their rights fade into obscurity over a long period, I must act on the probabilities in the light of rather tenuous evidence; I gather that Bridget came back to Maolais after the birth of her third child, because she was ill, and lived there for some 20 years until her death, which is put in the year 1920, a permanent invalid; if she did at times get out of bed, she was probably unable to give any substantial help. Her father had given her a dowry of £60 on marriage and I must hold that she was accepted at home out of kindness and family feeling, but has no title to be classed as a member of the new, working family group, formed at Maolais after her father’s death.”