Dissolution refers to the termination of the partnership which may be, but may not necessarily be, followed by the winding up of its assets and liabilities. A technical dissolution, without a winding up, may occur on a change in the membership of the partnership.
Upon a technical dissolution, the partnership may continue with new or with the continuing partners. The outgoing partner may receive a lump sum or another payment for his interest.
The dissolution does not require recourse to the court. The default position is that a partnership may be terminated on notice and that it must be thereupon wound up. Partnership agreements may provide to the contrary. A fixed term partnership can be wound up before the termination of its term, only with the agreement of all partners.
Grounds for Termination
The default position is that of a partnership at will. Any partner may dissolve the partnership by giving notice of dissolution. Once given, a notice can be withdrawn only the with the consent of all partners.
There are certain other statutory grounds by which the partnership can be terminated, by reason of the occurrence of certain events. Unless the agreement provides otherwise, a partnership is dissolved;
- by the death or bankruptcy of any partner;
- by the charging of a partner’s share of a separate debt;
- if the partnership business is unlawful or becomes unlawful.
This position is commonly varied in a partnership agreement. The partnership agreement will usually provide for an indefinite term and displace the right to terminate the partnership at will.
The partnership may be dissolved by the termination of the partnership agreement for breach.The partnership may terminate when the term or purpose has expired or run its course.
There may be termination and dissolution upon a fundamental breach of the partnership agreement, by another partner. In this case, the innocent party only has the right to terminate the agreement. General contract law rules apply.
Court Dissolution I
The courts have powers to dissolve and wind up partnerships. The grounds for a court order dissolution are as follows
- permanent incapacity of another partner;
- conduct of another partner which is as calculated to affect the running of the business prejudicially;
- wilful and persistent breach of the partnership agreement or other conduct which renders the continuance of partnership impracticable;
- where the partnership can only be carried on at a loss;
- where partnership dissolution is just and equitable.
Court Dissolution II
In the case of winding up due to loss, a temporary loss is not usually enough. It must be shown that the partnership business is not capable of making a profit in the short to medium term.Where a partnership is insolvent, it may be wound up under the bankruptcy legislation.
The order for dissolution on the “just and equitable” ground, is the residual basis. This ground is commonly invoked where there has been a breakdown of mutual trust and confidence.
The just and equitable basis may be invoked, even where there are other grounds which allow the court to order dissolution. The court has discretion in ordering dissolution and need not do so.
Termination by Notice
A partnership at will continues until terminated. The default position is that a partnership is a partnership at will. It may be terminated by any partner by notice at any time. No grounds or basis is required for termination.
Termination by unilateral notice may be highly disruptive. In contrast, in a company, a minority in the value of the shareholders, are not usually entitled to wind up the company. They must obtain a court order of dissolution, which may be granted only for good reason.
Partnership agreements almost invariably remove the possibility of termination by without good cause. A partnership for a continuing term may be implied, in some cases, even in the absence of a formal agreement.
Term or Purpose I
A partnership may be for a fixed term or fixed purpose.Most written partnership agreements provide that they cannot be terminated, by a partner giving notice to do so. An alternative mechanism, providing for the consent of a majority of the partners may be substituted.
A continuing term may be implied by the terms of the partnership agreement. In some types of agreement, it is presumed that the partnership may not be terminated by notice. The continued existence may be expressly provided in the agreement.
Where the partnership agreement provides that the partnership is to continue for a term or indefinitely, it may be implied that a partner cannot unilaterally withdraw from the business, even without formal termination. If one partner purports to leave or withdraw in this case, this may constitute a breach of contract.
Term or Purpose II
After a fixed term partnership expires, the partnership may continue as a partnership at will, so that it can be then terminated by any partner by giving notice. This may occur where the original partnership is established for a venture or task which has been completed. Where the partners continue in business without any dissolution, it is presumed to continue as a partnership at will.
There may be events that cause the fixed term to end, such as by breach and expulsion. Where the innocent partners elect not to terminate by reason of the breach, the fixed term partnership may continue as a partnership at will, unless the breach is wholly waived.
Departure of Partner
The default position under the Partnership Act is that on the departure of a partner, the partnership is dissolved. The departing partner is entitled to have his share ascertained and paid by forcing the sale of assets to pay off liabilities and distribute the net proceeds, as necessary. Generally, this position is amended by the terms of a partnership agreement or by other agreement entered by the partners on departure.
Where there is an implied agreement that the firm will continue on the departure of a partner from a partnership, and no mechanism exists for valuation and payment of his share, the court may order that his share be acquired at a valuation. The courts have the discretion to refuse to order a winding up and sale of the partnership assets, in which case they may order that the continuing partners buy the departing partner’s share at a valuation.
The assignee of a partner’s share is entitled to the assignor’s shares of the partnership assets. He has a right to an account of the partnership income, although he cannot participate in the partnership without consent. If the assignor dies, the partnership will be dissolved under the default rules. The assignee is entitled to a share of the partnership assets on the dissolution.
Admission and Expulsion
The admission of the new partner constitutes the technical dissolution of the old partnership and the formation of a new partnership, under the default provisions. It requires the consent of all partners.
There is no right to expel a partner unless it is provided for in the partnership agreement. In the absence of a provision in the partnership agreement or one made at the relevant time, the alternative is to apply to dissolve the partnership by notice (where possible) and /or secure a court order for dissolution and winding up the partnership.
The admission or expulsion of a partner without the consent of each may be a breach of contract, which terminates the partnership. A continuing partnership will be a partnership at will unless an express or implied agreement can be found that the “new” partnership is to be for a specific or indefinite term.
When a partner retires or departs, in circumstances where the partnership continues, he may continue to be liable to existing customers until they receive notice of his retirement. Generally, new customers may not hold him liable. If his name remains in the firm name, he may be held to be liable as if he is a partner, by allowing himself to be held out as such.
A notice published in the Official Gazette is deemed notice that the person concerned is no longer a partner, as regard new customers. However, if he continues to hold himself out as a partner, the protections may not apply.
The Partnership Act provides that persons who had no previous dealings with the firm are deemed to be on notice of partner’s retirement once it is advertised. Although a change in partnership composition may have to be registered under the Registration of Business names, this is unlikely to be deemed noticed to the third party of the change.
A third party continuing guarantee is revoked at common law by a change in the composition of the partnership. This refers to a guarantee for the partnership, not a guarantee by the partners. Because the identity of the party guaranteed is presumed to be of importance, the change involves a prospective alteration in the risk to the guarantor.
The revocation applies only as regards a future transaction. This rule is subject to an agreement to the contrary. Generally, bank guarantees will provide to the contrary to ensure this default rule does not operate.
Where a partnership is subject to a technical dissolution, and it has continued with a changed membership, the former partner is entitled to a share of the profits of the firm attributable to the use of his share of the partnership assets or to interest at 5% on a share on the value of the partnership assets. The right to post-dissolution profits may be excluded by the terms of the agreements. The partner remains liable for the pre-departure partnership obligations.
The value of the partner’s share is that on dissolution. If there is a later sale, this is generally taken to be the price realised on the sale of the assets unless the other partners can show that the value at dissolution varied appreciably from that at the time of the sale.
The right applies only to profits attributable to the use of the former partner’s share of the partnership. It does not apply to the extent that the profits are attributable to the skill and work of other partners. The Courts presume that the profits are attributable to the share of the former partner, but this presumption may be displaced.
Credit is given to the continuing partners for their work. This is valued and deducted from the post-dissolution profits. Profits arising from appreciation in the value of stock and partnership assets is included.
The former partner may claim interest at 5% on the share of the partnership assets as an alternative This may be more attractive as it is less subject to argument and interpretation. It is still necessary however to ascertain the value of the former partner’s share. The right to post-dissolution interest may be excluded by the terms of the partnership agreement.
Where a partnership contract provides an option for the surviving or continuing partners to purchase the interest of the outgoing partner, and that option is exercised, the estate of the deceased’s partner or outgoing partner is not entitled to any further or other share of profits. If, however, the party purchasing does not comply with the terms of the option strictly he is liable to account under the above provisions.
Where there was a 19-month delay between the receipt of the purchase price and the exercise of the option and the agreement did not make specific provision for interest, the Supreme Court held that no interest was payable without a specific provision in the agreement.
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;
Expulsion of partner.
Retirement from partnership at will.
Where partnership for term is continued over, continuance on old terms presumed.
Duty of partners to render accounts, &c.
28. Partners are bound to render true accounts and full information of all things affecting the partnership to any partner or his legal representatives.
Dissolution by expiration or notice.
32. Subject to any agreement between the partners, a partnership is dissolved—
(a) If entered into for a fixed term, by the expiration of that term:
(b) If entered into for a single adventure or undertaking, by the termination of that adventure or undertaking:
(c) If entered into for an undefined time, by any partner giving notice to the other or others of his intention to dissolve the partnership.
In the last-mentioned case the partnership is dissolved as from the date mentioned in the notice as the date of dissolution, or, if no date is so mentioned, as from the date of the communication of the notice.
Dissolution by bankruptcy, death, or charge.
33.—(1) Subject to any agreement between the partners, every partnership is dissolved as regards all the partners by the death or bankruptcy of any partner.
(2) A partnership may, at the option of the other partners, be dissolved if any partner suffers his share of the partnership property to be charged under this Act for his separate debt.
Dissolution by illegality of partnership.
34. A partnership is in every case dissolved by the happening of any event which makes it unlawful for the business of the firm to be carried on or for the members of the firm to carry it on in partnership.
Williams v. Harris
 ILRM 237
In 1970 the plaintiffs and defendants had formed by deed a fourfold partnership to farm and breed bloodstock in county Tipperary. The deed provided inter alia that, if a partner chose to retire, his share would be purchased by the others in proportion to their stakes in the business. The plaintiffs retired from the partnership on 30th July, 1976, but the value of their shares fell to be decided by arbitration and they were not paid until 1st March, 1978. The partnership deed provided that the shares of retiring partners should belong to the remaining partners as from the date of retirement. It made no provision for circumstances in which payment might be delayed. The Partnership Act, 1890, ss. 42 and 43, accords retiring partners rights to share in the profits of the business pending a final settlement of accounts unless there is an agreement to the contrary. In the High Court on 15th January, 1980, (1978 No. 3858P, unreported) McWilliam J. had awarded the Plaintiffs interest amounting respectively to £59,781.85 and £19,927.25 on shares that the arbitrator had valued at £524,150 and £174,717, the interest accruing from 30th July, 1976, to 1st March, 1978. From this judgment the defendants appealed to the Supreme Court. Held, by the Supreme Court (O’Higgins C.J., Griffin and Kenny JJ.) in allowing the appeal: (1) the partnership agreement, as it contained a mechanism for the purpose of a retiring partner’s share, was a complete contract which rendered the relevant provisions in the Partnership Act, 1890, inapplicable; (2) the partnership agreement stipulated that the shares of retiring partners should belong to the continuing partners from the date of retirement, and the latter could not be made to account for profits attributable to those shares; and (3) as the partnership deed made no provision for interest, the High Court judge had erred in awarding interest and the appeal would be allowed.
McClelland v. Hyde
 NI 1
The plaintiff and the defendant carried on business in partnership as carriers. Under the partnership agreement the capital of the partnership was £2,700, of which £2,200 was contributed by the plaintiff and £500 by the defendant, and it was thereby agreed that out of the net profits for each year there should be paid to each partner interest at five per cent. per annum on the capital invested by him, and that the balance of such profits should belong to the partners in equal shares, and that in the event of the dissolution of the partnership a general account of the partnership property should be taken and the net profits should belong to the partners in equal shares, and that the capital should be divided between the partners in proportion to the capital invested in the partnership by the partners as therein before stated. The partnership business was compulsorily acquired by the Northern Ireland Road Transport Board and the partnership was dissolved. The compensation paid in respect of the acquisition included £6,031 for goodwill. Held, by the Court of Appeal (Andrews, L.C.J., Babington and Murphy, L.JJ.), that the compensation for goodwill was not in the nature of capital, but was in the nature either of assets and distributable according to sect. 44 of the Partnership Act, 1890, or in the nature of profits and distributable as profits in equal shares under the partnership agreement.
J. L. Smallman Ltd. v. O’Moore and Another
 I.R. 221
The facts in this case are briefly these. The defendants for some years prior to 1954 were partners carrying on business as building contractors under the firm name of O’Moore and Newman. The plaintiffs are a company describing themselves as “plumbers’ merchants” and they supply building contractors with sanitary and other plumbing fittings. The defendants dealt with the plaintiffs and bought goods on credit from them, keeping a running account with them. In July, 1954, they decided to turn their business into a limited company. According to the evidence of Mr. Hennessy and Mr. Newman they informed Mr. Black, the plaintiffs’ manager, since deceased, of their intention and circularised all their suppliers, including the plaintiffs informing them of the fact that the company was being formed and was taking over the business of the partnership, its assets and liabilities. The company was formed in due course and was registered as O’Moore and Newman and Company Limited on the 15th September, 1954. Notice of formation of the company was published in Stubbs’ Weekly Gazette in the issue of the 29th September, and in the Merchants’ Gazette in the issue of the 22nd September. Each notice contains the usual particulars as to nominal and subscribed capital and the objects of the company. The nominal capital was stated to be £5,000 divided into 5,000 one pound shares, and each defendant was stated to have subscribed one share making the subscribed capital £2. The objects of the company were stated to be the provision of dwelling-houses and other buildings and structures and to carry on the business of builders, contractors and decorators, and estate agents. The objects were not stated to include the acquisition of the business of the firm of O’Moore and Newman with its assets, and liabilities.
After the formation of the company the defendants appear to have carried on business very much as before. The company’s minute book contains minutes of three meetings only, in none of which is any reference made to the acquisition of the partnership business. The defendants produced in evidence two ledgers showing their account with the plaintiffs. The earliest entry is of date the 1st March, 1953, and the last is of the 1st April, 1956, though no goods were supplied after the 24th February, 1956. There is nothing in the account to indicate any change occurring in September of 1954, and no reference anywhere to the formation of the company or the acquisition of the partnership business. Goods continued to be supplied by the plaintiffs in accordance with orders written on bill-heads under the partnership name as no new stationery was purchased. Delivery dockets were made out by the plaintiffs in the partnership name and were duly signed by the defendants’ foreman acknowledging receipt. The goods were invoiced to the partnership and statements of account made out and receipted in the partnership name. Before the formation of the company payments were made to the plaintiffs by cheques signed by the two partners. After it was formed the cheques were signed, “Terence O’Moore, Director” and “Martin Hennessy, Secretary”; and, when the company acquired a new cheque book the name,”O’Moore and Newman & Co., Ltd.,” was prominently displayed on each cheque.
Notwithstanding the fact that the plaintiffs take both Stubbs’ Gazette and the Merchants’ Gazette, the notices of the formation of the company escaped the attention of the plaintiffs’ book-keeper, Mrs. Greene; nor did she notice the alteration in the cheques received. She has no recollection of receiving any circular nor could she find any on the appropriate file. No change was recorded in the plaintiffs’ ledger account which continued in the partnership name. Mr. Black did not tell her of any change, nor instruct her to make any alteration in the account. Letters pressing for settlement of amounts due on the account were addressed to the partnership at 151 Griffith Avenue on six occasions between the 17th August, 1955, and the 3rd March, 1956. The only written reply is a letter of the latter date asking for time and stating that “the firm” were owed a considerable amount of money for work done which would be coming to hand shortly. This letter is on the partnership notepaper with “& Co., Ltd.” added in manuscript and is signed,”Martin Hennessy, Secretary, O’Moore and Newman & Co., Ltd.” It was about this time apparently that Mrs. Greene and the plaintiffs’ manager, Mr. Woodman, first became aware of the fact that the partnership had become a limited company.
The plaintiffs failed to get a settlement of their account on which a balance of £984 11s. 0d. was due; and on the 23rd August, 1956, they issued the summary summons in these proceedings to recover this amount. There has since been a payment of £350 without prejudice to the position of the parties and the amount now claimed is £634 11s. 0d. The plaintiffs claim this from the defendants as the balance of the price of goods sold and delivered; and the defendants each deny that they bought the goods and plead that the goods were supplied to the company and not to them. The sole issue in the case is whether the goods were sold and delivered to the defendants.
A motion for summary judgment was unsuccessful. In resisting it the defendant, Patrick Newman, swore an affidavit denying that the goods were supplied to him or Mr. O’Moore and averring that they were supplied, if at all, to the company. The affidavit contained the following:”Since the formation of the said company no goods have been ordered by myself and my co-defendant in any manner which would convey that the said partnership was still in existence. While we were in association in the said company all goods were ordered expressly for and in the name of the said limited company and all payments made by cheque on the company’s account.” Mr. Newman in evidence said that in July, 1954, he called in to the plaintiffs’ office with a cheque in payment of the account as it then stood and that he gave it to Mr. Black, remarking that it was the last cheque he would get from the partnership as they were forming a company. He said that he asked Mr. Black would the formation of the company affect the credit which they had with Smallmans‘ and that Mr. Black said it would not, and that they were very wise to form a company.
It is particularly unfortunate that the evidence of Mr. Black is not available, as he could doubtlessly have cleared matters up considerably. I am sorry to say that I do not find the evidence as to conversations with him very convincing. It is hard to believe that if they took place he could have failed to give the proper instructions to Mrs. Greene as to changing the name in the ledger account. As regards Mr. Newman’s evidence, the passage quoted from his affidavit is, with the exception of the averment as to the payments by cheque, clearly not in accordance with the facts; and the omission from the affidavit of any reference to conversations with Mr. Black is significant. In the circumstances, I am not satisfied to act on this evidence.
Counsel for Mr. Newman placed much reliance on the circular and on the payments made by the company’s cheques as constituting effective notice to the plaintiffs of the taking over of the partnership business by the company; and he cited Barfoot v. Goodall (1), and Jenkins and Another v.Blizard and Another (2). In the former case, a change in the form of a bank’s printed cheques from “Dickenson Goodall, and Fisher,” as bankers, to “Dickenson, Goodall, and Co.” and, later, to “Dickenson, Goodall, and Dickenson,”was held to be effective notice to a customer of the bank, who drew many cheques on these forms, that Fisher was no longer a partner in the banking firm. In the latter case, it was held that publication of a notice of dissolution of a partnership in a newspaper taken by the party sought to be affected is evidence of notice sufficient to be left to a jury; but that the more prudent and usual course is to give notice by circular letter. It has to be remembered that the purpose of a notice of dissolution of partnership is to inform the party sought to be affected that the authority of each partner, to act as agent for the other or others, has been withdrawn. Assuming that the plaintiffs had effective notice of the ending of the partnership in this case the result would be that they must be presumed to know that O’Moore had no authority to act as Newman’s agent and vice versa.This would be nihil ad rem if both of them joined in ordering goods from the plaintiffs.
I was at one time inclined to the view that the issue in this case was whether there was ever any agreement between the parties that the plaintiffs should supply the company with goods on credit, instead of supplying the partnership, as was done previously. On consideration, I am of opinion that that is not the correct view to take. This is an action for the balance of the price of goods sold and delivered. The plaintiffs allege a contract of sale with the defendants. In my opinion they have not established such a contract. Unless I am to assume fraud on the part of the defendants, which has neither been alleged nor proved, it is, I think, reasonably clear that the parties were not ad idem. The plaintiffs believed they were supplying the goods to the partnership while the defendants believed they were being supplied to the company. The only contract which can be spelt out of the circumstances is that the company, which accepted and used the goods, is under the obligation to pay for them.
It may be that the plaintiffs would have an arguable case that the defendants are by their conduct estopped from pleading or proving that they did not order the goods from the plaintiffs and contract to pay for them. The reply in this case is, however, a mere joinder of issue and no estoppel is pleaded.
Having regard to all the circumstances I come regretfully to the conclusion that judgment must be for the defendants.”
Murphy v. Power
 1 I.R.72
Molony C.J. Appeal. (I. F. S.)
“the rights and duties of the partners remain the same as they were at the expiration of the term so far as is consistent with the incidents of the partnership at will.
It is clear that Thomas Power and John Henry Power were partners at will from 31st May, 1919; and it has been held in several cases, both before and after the passing of the Partnership Act, that an option to purchase the share of a deceased partner is applicable to the partnership at will constituted by the carrying on of the business without fresh articles after the expiration of the partnership term: Cox v. Willoughby (1); Daw v. Herring (2); Brooks v. Brooks (3); and M’Gown v.Henderson (4).
The principle to be applied in determining a case such as this is well stated by Lord Selborne in Neilson v. The Mossend Iron Co. (5), where he was dealing with a state of facts similar to the present: “There is no doubt about the law that when there is a partnership for a term of years and it is afterwards, after the expiration of the term, continued at will, the rule, in the absence of contract to the contrary, is that it may be presumed that the new business is carried on upon the old terms so far as they are applicable to it, and only so far; and as far as the principle is concerned, I do not think there is any discrepancy between any of the authorities. It is not at all necessary to examine into the particular cases in which it has been held that a particular term of a written contract did or did not go into the new or unwritten contract, because every case has turned upon its own particular circumstances and upon the question as applied to the words of the particular instrument whether the old term was or was not applicable to the new contract.”
We have now to examine the provisions of a deed, and in particular clause 16, and to determine whether the provisions contained in it are, in their essence, applicable or inapplicable to a tenancy at will. It is apparent from the deed that Thomas Power was to be the working partner, and accordingly clause 7 provides that he shall be paid a salary of £200 per annum, and that no salary shall be paid to the said John Henry Power; and clause 12 provides that while Thomas Power shall devote his whole time and attention to the business, John Henry Power shall not be required to attend to the business at all. The deed consequently, by clause 16, makes separate provisions for (a) the event of John Henry Power predeceasing Thomas Power during the period of ten years, and (b) the event of Thomas Power predeceasing John Henry Power during the same period. In the first event (which did not, in fact, happen) John Henry Power could appoint his interest in the partnership by deed or will to some person who was not to interfere in the management of the business, but was to be entitled to a share in the profits, and to be liable for the losses during the remainder of the period; but if he did not appoint such person, Thomas Power was to be entitled to purchase the share of John Henry Power in the partnership on the terms mentioned.
It has been held in Cuffe v. Murtagh (1) that a right to nominate a partner continued after the term of the partnership had expired. Chatterton V.-C. thus states the reason: “The disputed term here is not one the purchase of which can be accomplished in any other manner, nor is it inconsistent with any of the rights of the other partners if by tacit agreement they should continue the business after the expiration of the term of seven years. I can see nothing insensible or repugnant in such a clause if inserted in a deed establishing a partnership at will. It amounts to this and no more, that one partner may put a substitute for himself into the firm, who will have just the same rights as he would have had if he had continued a partner. If he was but a partner at will, so would his substitute be; if a partner for the residue of a term, so would his substitute be.”
This provision is not, therefore, repugnant, nor is the further provision that if John Henry Power shall not appoint any such person, then Thomas Power shall be entitled to purchase the share or interest of the deceased partner.
The article then proceeds to deal with the event which has happened of Thomas Power predeceasing John Henry Power. In that event John Henry Power gets an option to purchase the share or interest of the said Thomas Power in the partnership, or, if he shall not so purchase same, to have the said Thomas Power’s share of the partnership assets continued in the business for the remainder of the said period of ten years; but the personal representative of Thomas Power is not to be entitled to interfere with or take part in the management of the business, but shall be entitled to Thomas Power’s share of the profits, and shall be liable to bear his share of the losses in the same manner as he would have done if he had lived. It is admitted by Mr. FitzGibbon, on behalf of the plaintiffs, that the right to compel Thomas Power’s share of the partnership assets to be continued in the business at the option of John Henry Power was a provision applicable only during the period of ten years, and does not extend to a tenancy at will; but he claimed that he is entitled under the previous clause to now purchase Thomas Power’s share, irrespective of the fact that the alternative provision cannot be given effect to.
The whole clause, however, must be read together, and so read it seems to me to apply only during the period of ten years.
The object of the clause, apparently, was to prevent the displacement of capital during that period, and had no reference to the possible extension of the partnership beyond that date. I can find no authority for the proposition that when alternative rights are given to a person, and one of these alternatives is obviously inapplicable to a partnership at will, the person is entitled to claim the benefit of the other, when it was obviously the intention of the framers of the instrument that there should be two alternatives and the right to choose between them. I therefore consider that the Master of the Rolls was right, and that consequently the appeal should be dismissed.
In this case we had a very powerful and elaborate argument from Mr. FitzGibbon, which appeared to me to require a fuller answer than was given to it by Mr. Brown. The law of partnership at present is partly regulated and I say this advisedly by the Partnership Act, 1890. It is remarkable that during the argument practically no reference was made to that statute. Mr. FitzGibbon relied, I think I may say, substantially upon two cases: Cox v. Willoughby (2); Daw v. Herring (3). The first was decided before the passing of the Act, and the other Daw v. Herring (3)was decided about a year after the Act had come into operation. I have read that case carefully, and from beginning to end there is no reference to the Act. Therefore I may take it that it was on the law as it was before the Act Mr. FitzGibbon relied; and in my judgment he was right in so doing. The Act was drawn by Sir Frederick Pollock, who, in the preface to his Digest on the Law of Partnership, 7th ed., says: “It will be observed that the Partnership Act does not purport to abrogate the case law on the subject; but, on the contrary, declares that ‘the rules of equity and common law applicable to partnership shall continue in force except so far as they are inconsistent with the express provisions of this Act’ (sect. 46). The Act therefore has to be read and applied in the light of the decisions which have built up the existing rules. Should any practitioner imagine that he might now relegate Lord Lindley’s book to the shelf, he would be soon undeceived. Codes are not meant to dispense lawyers from being learned, but for the ease of the lay people and the greater usefulness of the law. The right kind of consolidating legislation is that which makes the law more accessible without altering its principles or its methods. So far as judicial references to the Act have gone, they tend to show that it has accomplished its object of declaring the law as it was settled and understood, without prejudging any remaining doubts on questions of principle, and without raising any new doubts on points of detail.” Those observations completely establish the correctness of the course taken by Mr. FitzGibbon of relying on the decisions before the Act; and may I say that I thought it better not to relegate Lord Lindley’s book to the shelf because on referring to it I find that it throws light on the subject. Text-books throw light on the law as understood by the profession, and the greatest weight ought to be given to the views of Lord Lindley. Practically speaking, his book on partnership is divided into three main parts, viz., 1, the nature of partnership and the rights and obligations of partners as regards non-partners; 2, the rights and obligations of the partners between themselves; 3, the dissolution of partnership and its consequences. The present case comes within the last of these categories; and by the common law and by the statute the effect of dissolution is to regulate the rights of the parties to the partnership assets, and, apart from special agreement to the contrary, they are regulated in a certain definite way.
In this case clause 16 of the deed is relied on as showing an agreement to the contrary. The party who alleges an agreement to the contrary is bound to prove it. In its literal construction clause 16 does not apply; but there is a principle that where parties do not dissolve the partnership at the time limited for its duration in the partnership agreement, then certain provisions in the agreement are supposed to continue. The provision we have to consider here is one in the nature of a right of pre-emption. Anxious to ascertain the existing law, the first book I consulted was Halsbury, vol. xxii, Art. 36, p. 23. There I find that if a partnership is continued beyond the stipulated period, it is governed, in the absence of agreement to the contrary, by the terms of the partnership as they were at the expiration of the period so far as they are applicable to a partnership at will; and among the clauses applicable a right of pre-emption is mentioned. In the next sentence it is stated that “provisions suitable to an agreement for a term of years are not so applicable, such as . . . rights of pre-emption.”That article does not afford much assistance. The writer refers to Cox v. Willoughby (4) as an instance where it was held that the right of pre-emption applied to a partnership at will constituted by the carrying on of the business after the expiration of the partnership term. He also refers to Yates v. Finn (5),decided ten days earlier, where the contrary was held. What, then, is the test? In my opinion the test is to be found in the passage read by the Lord Chief Justice from the judgment of Lord Selborne in Neilson v. Mossend Iron, Co. (6), where the question was whether a right of this nature was one of those which applied to a continuing partnership. [His Lordship read from pp. 303-4.] Now, that being so, I turn for a moment to Lord Lindley’s book. Having referred to sect. 27 of the Partnership Act, 1890 (53 & 54 Vict. c. 39), the book states, 8th ed., p. 473: “Even where a partnership is entered into for a term of years, and the articles provide for events happening during the term or during the partnership, the above rule has been still applied. Thus where two persons agreed to become partners for fourteen years, and stipulated that it either died during the said co-partnership term, his share should be taken by the other at a certain sum, and the fourteen years expired, and the two persons continued in partnership together without coming to any fresh agreement, and then one of them died; it was held that the above stipulation was binding, and that the share of the deceased belonged to the survivor upon payment of the sum mentioned.” That is Lord Lindley’s exposition of Cox v.Willoughby (7). In Neilson’s Case (8) the words in the clause in question were: “If three months before the termination of this contract.”