Cases On Partnership-1-1
Cases On Partnership-1-1
Cases On Partnership-1-1
Allport Ports Freight Service V Julius Kamanyi & Anor. [1996] V KALR 21.
At the instance and on the order of the defendants who were carrying on business as a
partnership in the name and under the style of Aero International Limited which was
unregistered, the plaintiff delivered to the defendants cement valued at 20Om but the defendants
reneged on the debt balance of 147m. The second defendant denied liability but the first
defendant admitted.
Whether there was a partnership between the first and second defendants?
Held:
i. If two or several persons jointly purchase goods for resale with a view to dividing the
profits arising from the transaction, a partnership is created and each of them will be
liable to third parties. In the instant case it was clear that both defendants obtained
cement from the plaintiff, for resale at a profit to be shared. Therefore, a partnership
relationship was established as under s.3 (1) of the Partnership Act.
ii. A partnership need not be established formally and in writing. It is sufficient to
establish that a community of interest exists between the parties. This was amply
proved in this case.
The second defendant appealed to the Court of Appeal which dismissed the appeal, and he
appealed to the Surpreme Court in Francis Sembuya Vs. Allports Services (U) Ltd – SCCA No.
6 of 1999
Whether there was a partnership?
The Supreme court concluded that two courts below were correct in their findings that a particular
partnership had been established. The evidence of the respondent established that the two men had
got a contract to supply cement to Northern Uganda Rehabilitation Programme. Evidence showed
that the two men would sell the cement and share out the profits. Appeal dismissed.
Cyprian Inyangat v Andrew Bob Oligo (HC Misc. Appl. No. 280 of 2000)
The basic of the application as set out in the motion is that by a Partnership Deed created on the
26th day of April 1984 between the applicant and respondent, the two partners made a submission
to refer any dispute arising out of the partnership to arbitration. It is also contended by the
applicant that the respondent has breached the terms of the Partnership Deed by filing civil suit
No. 72/2000 before referring the matter to arbitration. On the 26 th April, 1984, a partnership
under the name and style of Invo Consult Uganda was created by the parties to these
proceedings. On or about the 6th August, 1995 the partnership ended.
“any dispute, question in connection with partnership or this deed shall in the first instance be
decided upon by the partners and in the event of failure to settle the dispute the same shall be
referred to the Arbitration under the provisions of the Arbitration Act Cap 55 or any statutory
modification or reenactment thereof for the firms being in force”.
Held;
Section 2 of the Arbitration Act, defines “submission” to mean a written agreement to submit
present or future differences to arbitration whether an arbitration is named therein or not. The
Partnership Deed which the parties are relying on fits the definition I have referred to although
no arbitrator was appointed.
Section 3 of the same Act provides that “a submission unless a different intention is expressed
therein, shall be irrevocable, except by leave of the court”.
The provisions of the Act seem to be mandatory in that a submission or an agreement to refer a
dispute to arbitration is irrevocable except with the leave of court
The matter now before court involves a partnership deed which is no longer subsisting, the
partners having parted ways in 1995. Therefore there are no terms to enforce or to refer to
arbitration. That before the separation, the partners must have taken stock of what they had and
shared out whatever was available at the time. For that reason alone, the orders being sought
cannot be granted and the application is dismissed with costs.
Summary
The law firm of White & Case dissolved in 1988 to expel a partner and immediately reformed
under the same name. The expelled partner sought an accounting. Disputed in the accounting
was the treatment of the law firm's goodwill and its unfunded pension plan. The partnership
agreement deemed goodwill to be of no value. The firm's financial statements reflected neither
goodwill nor the pension plan. The trial court included the law firm's goodwill was an asset but
did not include the unfunded pension plan as a liability of the partnership. The Appellate
Division affirmed both rulings.
Whether White & Case possessed goodwill that was capable of distribution upon dissolution.
Whether the law firm's unfunded pension plan is a liability of the firm
Held;
i. Goodwill is an asset unless the partnership agreement deems it of no value and the
course of dealing of the partners confirms that status.
The Court of Appeals recognized that goodwill is "presumptively" an asset of a partnership.
However, the court found that the law firm deemed goodwill to be of no value based upon the
express language of the White & Case partnership agreement as well as the partnership's course
of dealing,
When applied to law firms, the term "goodwill" refers to the "ability to attract clients as [a] result
of [the] firm's name, location, or the reputation of [its] lawyers" (Black's Law Dictionary 695
[6th ed]).
"Good will, when it exists as incidental to the business of a partnership, is presumptively an asset
to be accounted for like any other by those who liquidate the business. * * * The course of
dealing, however, can stamp it with a different quality. Partners may contract that good will,
though it exist, shall not `be considered as property or as an asset of the co-partnership' * * *.
The contract may `be expressly made,' or it may `arise by implication, from other contracts and
the acts and conduct of the parties
ii. If the partnership does not treat the unfunded pension plan as a liability in its financial
statements, the partners cannot later claim it as such. That the future pension
payments pursuant to White & Case's unfunded pension plan were properly
disallowed as a partnership liability. White & Case never included the unfunded
pension plan as a liability in the firm's financial statements
Order of the Appellate Division modified, without costs, and, as so modified, affirmed.
The defendant disputed the existence of a partnership were not written and because the plaintiff
was not in the daily management of the taxi business. As it was held in Bubare Company vs.
Mbale Kente (supra) a partnership can be informal. It is also trite that not every partner in a
partnership should get actively involved in the management of the partnership business for a
partnership to exist. In fact there are partnerships with inactive partners known as sleeping
partners.
Court thus concluded that the parties had agreed to buy a vehicle jointly and operate a taxi
business with a view to profit. The parties went a step further by opening a joint bank account for
collecting the proceeds of their businesses. That a partnership was the intention of the parties and
that their conduct pointed to the existence of a partnership.
Uganda Freight Forwarders Association and Another Vs Attorney General and Another,
Constitutional Petition No. 22/2009
The petitoner’s brought a petition challenging the acts of the first respondent as unconstitutional. A
preliminary objection was raised by the respondent as to the capacity of the petitioners in filing the
petition since they were not incorporated or registered as companies in Uganda. The petitioners
contended that they formed these unincorporated associations to advance their common interests
and to that extent their respective associations are akin to partnerships for the purposes of
achieving the objectives of each association.
Held;
In order to qualify under the art 50(2), the organisation must be recognised by law since it is an
elementary principle of law that an unincorporated association is not a legal entity capable of
suing or being sued.
Regarding the Order 30 of the Civil Procedure Rules, our view is that the Order does not apply to
the petitioners. It reads in part as follows:
1. Suing of partners in name of a firm.
Any two or more persons claiming or being liable as partners and carrying on business in
Uganda may sue or be sued in the name of the firm……………”
The members of the petitioners are not a partnership which is defined by S.2 of the Partnership
Act as “ the relationship which subsists between persons carrying on a business in common
with a view of profit.”
The petitioners are, on the other hand, described in the opening paragraphs of the petition as
follows:
“an unincorporated association of business entities, engaged in various aspects of the
business of clearing, forwarding and handling goods imported into and/or exported
from Uganda.
There is no mention in those paragraphs or anywhere in the petition that the petitioners are
representing members who carry on business “in common with a view to profit”. As their
counsel submitted, they are actually individual companies who could have petitioned
individually or collectively in their own names.
Objection upheld.
National Drug Authority Vs. John Chris Bakiza T/A Kabyesiza and Co. Advocates HCCS
NO. 34 of 2008
Held;
The Plaintiffs claim against the defendant as disclosed in the plaint is for Uganda shillings
99,064,000/= being money collected by the defendant's firm for the plaintiff but which the
defendant failed to remit to the plaintiff plus interest at 15% per month from January 2004
December 2007, general damages and costs. The facts disclosed in the pleadings that since 30th
of January 2001 the defendant firm was appointed managing agent of property belonging to the
plaintiff situated at plot 59 Nkrumah Road. Under the appointment the defendant's responsibility
was to collect rent from the tenants on the premises and remit to the plaintiff on agreed
commission basis. The plaintiff alleges that on several occasions for the material period the
defendant received the rental payments from the tenants but did not remit it to the plaintiff.
Subsequently the defendant's agency was terminated with effect from 31 December 2003 and a
firm of auditors Messrs Lawrie Prophet and Company was appointed to carry out a verification
exercise and confirmed the correct position of the tenant’s balances by 31 December 2003
It is an a proven fact that the service agreement was executed after the demise of the sole
proprietor of Messieurs Kabyesiza and Company Advocates according to the registration
documents of the firm. Particulars of registration of the firm show that the sole proprietor was
Francis B. Kabyesiza. The firm was a registered under the Business Names Registration Act.
Francis Kabyesiza passed away in 1999 while the service agreement was executed in January
2001 about one year later. The plaintiff suit is entitled as a suit against John Chris Bakiza
Trading As Kabyesiza and Company Advocates. The plaint in paragraph 4 (a) describes the
defendant as a firm which was appointed the managing agent of property belonging to the
plaintiff.
The first contention is whether the defendant held himself out as a partner in Messieurs
Kabyesiza and Company Advocates
Held
By the year 2001 the Partnership Act cap 114 and section 2 thereof defines a partnership. Section
2 (1) defines a partnership as: "Partnership is the relation with subsists between persons
carrying on business in common with a view of profit." The definition presupposes that a
partnership can only subsists when there are two or more persons carrying on business in
common with a view to profit from the business. Words and Phrases Legally Defined third
edition defines a partnership as involving a contract partners who engage in business with a view
to profit. It has to be a joint operation for the sake of gain. There are rules for determining the
existence of the partnership under section 3 of the Partnership Act cap 114. In other words
section 3 of the Partnership Act gives the rules for determining whether a partnership exists or
does not exist. Underlying all the definitions is the existence of more than one person in a
relationship. Secondly there is the aspect of the sharing of profit. The receipt of a share in the
profits is prima facie evidence that he or she is a partner in the business (see section 3 (c) of the
Partnership Act cap 114). Consequently, a partnership can be based on an agreement or it can be
implied by law.
By the time Messieurs Kabyesiza and Company Advocates was registered, it was a sole
proprietorship and not a partnership.
There is a clear distinction between the business name for a sole proprietor and a firm. Section 1
of the Business Names Registration Act defines a "business name" to mean "the name or style
under which any business is carried on, whether in partnership or otherwise." On the other hand
the word "firm" means an unincorporated body of two or more individuals, or one or more
individuals and one or more corporations, or two or more corporations, who have entered into
partnership with another with a view to carrying on business for profit. In other words a sole
individual cannot register a firm. Only two or more individuals may register a firm. Or one or
more individuals and one or more corporations may register a firm. The defendant was therefore
not a firm because it was the sole proprietorship trading under the business name of Kabyesiza
and Company Advocates.
By the time the defendant executed the service agreement with the plaintiff, Mr Francis
Kabyesiza, the sole proprietor had died. First and foremost, it was not a partnership, neither was
it a firm. Secondly what was registered was a business name of an individual advocate.
Therefore by the time of execution of the service agreement, the defendant acted under the name
and style of Messieurs Kabyesiza and Company Advocates.
The evidence is clear that the defendants continued carrying on business under the name and
style of Messieurs Kabyesiza and Company Advocates after he passed away in 1999. . Neither
the defendant nor his associates should be permitted to avoid the contract on the basis that it was
done on behalf of the estate of the deceased. By the time they undertook to meet the obligations
under the service agreement, Mr Francis Kabyesiza was known to be a deceased person by both
parties. Because they were providing a professional service, they are liable as advocates to the
client for receiving instructions and the manner in which the carried out those instructions. It is
not sufficient to look at the technicalities of the service agreement. Advocates carry out
professional work for which they are personally liable.
In the case of an individual ceases to carry out the business under the business name, section 14
of the Act require the removal of the name from the register. Section 14 of the Business Names
Registration Act provides as follows:
“14. Removal of names from register.
(1) If any firm or individual registered under this Act ceases to carry on business, it shall
be the duty of the persons who were partners in the firm at the time when it ceased to
carry on business or of the individual, or if he or she is dead of his or her personal
representative, within three months after the business has ceased to be carried on, to send
by post or deliver to the registrar notice in the prescribed form that the firm or individual
has ceased to carry on business; and if any person whose duty it is to give that notice fails
to do so within such time as aforesaid, he or she commits an offence and is liable on
conviction to a fine not exceeding one thousand shillings; but the Minister may in his or
her absolute discretion, on reasonable cause therefore being shown, extend such time as
aforesaid to such time as he or she may think fit.
(2) On receipt of the notice required by subsection (1), the registrar may remove the firm
or individual from the register.
(3) Where the registrar has reasonable cause to believe that any firm or individual
registered under this Act is not carrying on business, he or she may send to the firm or
individual by registered post a notice that, unless an answer is received to the notice
within one month from the date thereof, the firm or individual may be removed from the
register.
(4) If the registrar either receives an answer from the firm or individual to the effect that
the firm or individual is not carrying on business or does not within one month after
sending the notice receive an answer, he or she may remove the firm or individual from
the register.”
Section 14 (1) of the Business Names Registration Act cap 109 makes it obligatory for a
partnership to report the death of one of the members. If it is a sole proprietorship, the legal
representative of the deceased's estate shall make the report within three months. Failure to do so
constitutes an offence. However if the business continues, it does so as part of the estate of the
deceased and the legal representative of the deceased possessed of probate or letters of
administration, ought to notify the registrar of having taken over from the deceased. The Minister
has powers to extend the period within which the report may be made. Because Francis
Kabyesiza was a sole proprietor, it was the duty of his legal representative to report his demise to
the registrar of business names.
In any case, having traded under the name and style of Messieurs Kabyesiza and Company
Advocates, it is deemed that they ought to have ensured that the necessary particulars about
determination of the business by the death of the sole proprietor was brought to the attention of
the registrar of business names. Or at least the associates should have notified the registrar of
business names about possible representation of the estate by a holder of letters of administration
or probate, if any
Held – Although the acceptance by one party of a repudiatory breach of contract by the other
party discharged both from further performance of their obligations, it did not operate to divest
rights that had already been unconditionally acquired. Rather, rights and obligations which arose
by the partial execution of the contract continued unaffected. In the instant case, H’s liability to
contribute to the accrued and accruing liabilities of the firm, and his partners’ rights of
contribution, arose from the fact that the liabilities were incurred by the firm when H was a
partner. Once the firm had undertaken or assumed liability for the rent, each partner in the firm
was entitled to have the liability taken into account in ascertaining his share of the firm’s profit
or losses both before and after dissolution. That right was not lost merely because H’s partners
afterwards repudiated the contract and H accepted that repudiation. Thus H could neither avoid
his joint liability to the creditors of the firm arising from past transactions entered into while he
was a partner nor, without rescinding the partnership agreement ab initio, throw his proportionate
share of the liability onto his partners. Accordingly, the appeal would be dismissed.
The first respondent who was the judgment creditor of the second respondent sought to attach by
garnishee proceedings money which the second respondent who was an unregistered partner in
the Native African Trading Company had lent to the partnership.
Held;
Money contributed by a partner becomes an asset if the partnership firm.
Whilst the failure to comply with the requirements of the partnership Ordinance as to the
registration of partners may expose the firm to penalties, it cannot affect the rights of the partners
per se.
Held – Per Lord Millet; There is no rule of law that the parties to a joint venture did not become partners until actual trading
commenced. Rather, the rule was that persons who 20 agreed to carry on a business activity as a joint venture did not become
partners until they actually embarked on the activity in question. It was therefore necessary to identify the venture in order to
decide whether the parties had actually embarked upon it, but it was 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.
In the instant case, the majority of the Court of Appeal had been guilty of such nominalism, and had taken an impossibly narrow
view of the enterprise on which the parties had agreed to embark. They had not intended to become partners in an existing
business, and had not agreed merely to take over and run a restaurant. Instead, they had 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 had all been part of the joint venture, had been undertaken with a view of ultimate profit
and had formed part of the business which the parties had agreed to carry on in partnership together. Thus the question was 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. They had done so, and accordingly the appeal would be allowed.
The plaintiff and the defendant, with a view carrying on business jointly, executed a Partnership
Deed dated 23rd July, 2008. While the plaintiff contends that the partnership is still in existence
and business is still being carried on using partnership property, the defendant contends that the
partnership business, on the agreement of both the plaintiff and the defendant, was brought to an
end and a company in the names of Jazzbridge Hotel Limited was incorporated and it took over
the partnership business and all its developments. The defendant contends that the partnership
ceased to exist then.
Held; The Partnership Deed defined the relationship between the parties but did not provide for
the event of the partnership coming to an end. That in such an event, the subsequent existence of
the partnership could not be perceived from the Partnership Deed but from extrinsic evidence
and from the conduct of the parties.
Quoting the definition of a partnership in S. 2 of the Partnership Act, Court held that in order to
say that a partnership is in existence and operational, there must be business being carried on by
the partners.
Agreed with David.J Bakibinga in his Partnership Law in Uganda, where he states as follows,
“The High Court of Nothern Nigeria (as it then was) held that no partnership existed between
the parties. The court further stated;
The judge found that that the partnership between the plaintiff and the defendant ceased to exist
on the agreement of the parties and upon incorporation of Jazzbridge Hotel Limited. In that
regard, no order can be made for the dissolution of the partnership.
There is no proof that the partnership had registered a business name so as to be compelled to file
a notice of cessation of business with the Registrar, in accordance with Section 14 of the
Business Names Registration Act. Even then, the wording of the said section does not imply
that incase the parties do not file a notice of cessation of business, then the business is to be
presumed as being in existence even when it was ended by the parties.