Questions about the Partnership Act 1890


S

SteveR

For those on uk.legal, I'm sorry to bother you all about this again -
I'll be putting something back into the group later today. I'd love to
put this thing to bed permanently and I don't want anyone thinking I'm
obsessed with it - I've been busy with other things recently which is
why I haven't been posting over the last few weeks. I just feel a sort
of sense of responsibility to do what I can to prevent "business A" from
doing the same sort of thing to other people that she did to me.

I have a bit of a lengthy question about the Partnership Act 1890. I am
a layman and I have been researching it as much as possible but I'm not
certain about the meaning of some of the information I have and also
where I should go from here.

I, a consumer, successfully petitioned for the bankruptcy of a business
that wouldn't pay me a refund. As the bankrupt didn't have many
apparent assets, I am now busy trying to persuade the Official Receiver
to investigate the matter properly. In the course of my investigations,
I have turned up evidence that the business, I sued, which I will call A
to keep it simple, may be in partnership with another business, B. I
have brought this evidence to the attention of the Official Receiver
but, as he wishes to wash his hands of the matter because he doesn't
think he is going to find very many assets, he hasn't looked into the
matter properly.

I have been doing some research into the Partnership Act 1890 and have
found some case law that suggest that there is a very good case that the
two businesses are in partnership. First, here is the documentary
evidence I have found:

(1) Business A and B use the same domain name for their web pages. Prior
to May of this year, they used a domain name which was the name of
business B; the domain name was owned by business B. As of 9 May this
year, they now use a different domain name, which is neither of the
names of their businesses, with each business being a subdomain of the
same web site; the domain name is owned by business B. They both linked
their web sites to the new domain name at the same time.

(2) On the part of the web site linked to business B, business B has a
button simply marked 'Uniforms', which, when clicked, takes the visitor
to the part of the web site linked to business A. This arrangement has
been in place for at least a year. This arrangement gives the
impression that business A is a part of business B which provides a
complementary service.

(3) I had contracted with business A to make me a suit; the fittings
for the suit took place not at business A's premises, but at the
premises of business B. She had the use of a shed used as a workshop
and she seemed to have full run of the premises, which are at a private
house.

(4) In January 2001, business A posted messages on several newsgroups
announcing an award won by business B.

(5) On the part of the site linked with business A, on the press
cuttings page, is an article written in 1996 that describes the two
businesses as being in partnership. This article also makes it clear
that the two businesses shared premises at that time.

(6) The trader trading as business A has called business B her partner.
Given the ambiguity in the usage of the term today, what she meant by
that is unclear, but it is clear that the two of them have a commercial
relationship. She used this term in court and I have a transcript
showing that she used this term.

(7) The trader trading as business A has stated that she regularly
travels about 200 miles from where she lives to stay at the premises of
business B.

(8) The Official Receiver himself has acknowledged that the two
businesses work in close conjunction and have had a long established
relationship.

Setting against this evidence that they may have a partnership
relationship, as I wish to be fair, there is also this information that
they may not be:

(1) Both have claimed not to be in partnership when asked by the
Official Receiver.

(2) When I made the contract with business A, I never even knew of the
existence of business B. When I went to the premises of business B,
which are at a private house, the trader trading as business A never
said one way or the other why she had the use of the house, and I
received a sort of impression that it might be just a friend's house,
but nothing definite was said.

(3) Business A has listed business B as a creditor and business B says
that he is a creditor. I suspect that they have said this to cover up
their partnership relationship and that they could even use a loan as a
cover to share profits (via interest) or for business A to move money to
business B so that it couldn't be taken by her creditors, and, as she
had quite a bit of notice about the impending bankruptcy, by the
Official Receiver. I suspect, but, of course, have no proof, that
business B acts as the 'clean part' of the partnership, that is, he has
no blemishes on his credit record (that I can find) and so can get
credit easily if the partnership needs it, while she takes the hit of
any problems on her credit record.


The essence of the matter, from my research, appears to whether they are
working together with a 'view of profit'. The Official Receiver says
that they are not because they say they invoice separately. Looking at
the law, this appears to be a red herring because the Partnership Act
itself is silent on how profits are to be shared, and, in fact, joint
invoicing would only be proof of sharing gross receipts, not profits. I
have been dealing with several people in the Insolvency Service about
other matters to do with the case and have found that when they don't
wish to deal with a matter of law, they redefine the law to suit
themselves and so it is in this matter as well.

The Official Receiver is basically saying that there has to be proof
that the two are sharing a profit, otherwise, the two are just working
closely, that is, are engaging in some joint venture. The case law to
which I have found references suggests that this isn't the case, but I
am not certain and I have a few questions to ask (note: I haven't read
either of the cases I mention below, because I couldn't find them on
line, but I read reports and sites mentioning them and some of their
implications):

(1) Does the effect of Khan v Miah [2001] mean that no profit sharing
has to be shown, just possible?

(2) Does the effect of Newstead v Frost [1980] mean that only if there
was no motive to make a profit or if it could be shown that there was
some other reason for the sole purpose of the creation of the
partnership mean that if there is or could be a profit motive for the
two business working together, that they are in partnership?


The other questions I have are:

(1) Is there a case for the Official Receiver investigating the matter
more carefully or am I just reading too much into things? I wish to be
fair here.

(2) If the Official Receiver should agree, finally, to properly
investigate the matter, and if he finds that the two businesses are in
partnership, should I just let the Official Receiver sort out getting
money from business B (which means I wouldn't probably get any money,
but I'm not really worried about that, it's more about not letting
business A get away with possibly concealing assets)?

(3) If the Official Receiver investigates and finds that the two are in
partnership, should I sue business B myself for the money owed to me? If
so, would I have to prove to the court that there was a partnership or
would the Official Receiver's findings be good enough for the court? I
am owed less than £5000, so the matter would end up in the small claims
court.

(4) I have a feeling that the HM Revenue and Customs might be interested
in the relationship between the two businesses. Should I tell them now
or should I wait to see whether I can convince the Official Receiver to
investigate the matter properly?

(5) The trader trading as business A has said that she is claiming
benefits, in particular, income support. If the two businesses are in
partnership, it may be that she was claiming money to which she wasn't
entitled. Should I tell the benefits agency now or wait to see whether
I can convince the Official Receiver to investigate the matter properly?


I really don't want to go to court again, so I am hoping that I can just
convince the Official Receiver to investigate the matter and deal with
it himself. I am not concerned about the money owed me because I
frankly do not expect to ever get it, but more about protecting the
public. If business A gets away with just walking away from her debts
then I think she will treat her customers even worse than she treated
me. I have good reason to believe this: in the course of my research I
found that in 2000, the Office of Fair Trading found that all but two of
her contract terms were unfair. She gave the OFT an unofficial
undertaking to withdraw those terms. She, however, went back to using
those *exact same terms* and she uses them even today. I informed the
OFT of this, but it is understaffed and overworked and nothing happened.

As I said at the beginning, I'm not really certain where to go from
here. I have looked up as much about the case law as I can find
on-line. I'm just a layman I don't even know where to look for the
actual cases if they aren't on-line.

I have found, on Amazon, a book called _The Law of Partnership_ by
Geoffrey Morse, which looks good, but I don't know whether it will
answer my specific questions, particularly about the case law. I have
found in my research into various matters about the case much variation
between legal books. For instance, the book I have on contract law goes
into great detail about case law but the book I have on insolvency law
assumes that the reader will look up the case law himself and only
mentions it in passing. Given this is it a good idea for me to get a
copy of _The Law of Partnership_?

There are other matters in this case into which I am trying to convince
the Official Receiver to investigate, such as the bankrupt stating, in a
letter, that she was paying her other creditors when she wouldn't pay
me, but I'll leave these for the moment so I can deal with this issue.

Oh, and by the way, looking at the Partnership Act 1890, that's one
scary act. Stephen King could learn a few things reading UK statute and
case law.

--
SteveR
(throw away the dustbin, send to stever@... instead)

Humans are way too stupid to be dumb animals.
http://www.accidentalcreditor.org.uk/
 
T

troysteadman

SteveR said:
(3) I had contracted with business A to make me a suit; the fittings
for the suit took place not at business A's premises, but at the
premises of business B. She had the use of a shed used as a workshop
and she seemed to have full run of the premises, which are at a private
house.
Surely it isn't the least bit unusual for people to run several
businesses at the same time, to be married to or associated with people
who are running businesses, or for businesses to share premises and
resources.

A suit measured up in a shed? C'mon!
 
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R

R. Mark Clayton

SNIP very long post
Oh, and by the way, looking at the Partnership Act 1890, that's one scary
act. Stephen King could learn a few things reading UK statute and case
law.
For there to be a partnership there has to be some intention set up business
jointly. Even if there is common interest there may be other legal
relationships consider the example of a pub: -

The brewery can own the pub and employee the licensee (managed pub).
The brewery can own the pub and rent it to the licensee (tenanted pub).
The licensee can own the pub, but in exchange for capital assistance (in
purchase or improvements) agree with the brewery to preferentially market
its beers (tied pub)
The licensee can own the pub and sell what s/he likes (free house)
Someone else can own the pub and agree to share the profits with the
licensee who does the work (partnership)
A couple can own the pub (joint owners)
A [limited] company can own the pub and the licensee [shareholder] receive
dividends ([joint stock] company).
and probably a few variations I have not thought of.

Just because two businesses share premises, marketing and provide goods and
services to each other does not mean that they are a partnership.

You have lost money by dealing with an insolvent [personal] business. All
you are trying to do attack the assets of someone else so you can get
preferential treatment as a creditor.

IMHO the issues you cite stack up to very little. Indeed the only one the
authorities might be interested in is if one of a couple was [improperly]
claiming benefits when the other had income. OTOH if they live 200 miles
apart I doubt they are cohabiting and this still doesn't make any businesses
they might have a run a partnership.
 
A

Andrew McGee

[long intro snipped]
The essence of the matter, from my research, appears to whether they are
working together with a 'view of profit'.
Yes

The Official Receiver says
that they are not because they say they invoice separately.
evidence, but not conclusive
The Official Receiver is basically saying that there has to be proof that
the two are sharing a profit, otherwise, the two are just working closely,
that is, are engaging in some joint venture.
they have to be 'carrying on business in common'

which would not be the case if they simply shared premises or if one helped
the other or supplied goods/services to the other. the 'in common' bit is
crucial
(1) Does the effect of Khan v Miah [2001] mean that no profit sharing has
to be shown, just possible?
profit sharing is very strong evidence of a partnership, but not crucial.

(2) Does the effect of Newstead v Frost [1980] mean that only if there was
no motive to make a profit or if it could be shown that there was some
other reason for the sole purpose of the creation of the partnership mean
that if there is or could be a profit motive for the two business working
together, that they are in partnership?

this is back to 'carrying on business in common with a view of profit'.
there must be a profit motive, though of course there may be no actual
profits.
The other questions I have are:

(1) Is there a case for the Official Receiver investigating the matter
more carefully or am I just reading too much into things? I wish to be
fair here.
there seems to be a case, but the evidence you present is at best ambiguous.
(2) If the Official Receiver should agree, finally, to properly
investigate the matter, and if he finds that the two businesses are in
partnership, should I just let the Official Receiver sort out getting
money from business B (which means I wouldn't probably get any money, but
I'm not really worried about that, it's more about not letting business A
get away with possibly concealing assets)?

do you have a claim against B? if it was in p'ship with A, then presumably
so, and you could and should sue.

(3) If the Official Receiver investigates and finds that the two are in
partnership, should I sue business B myself for the money owed to me? If
so, would I have to prove to the court that there was a partnership or
would the Official Receiver's findings be good enough for the court? I am
owed less than £5000, so the matter would end up in the small claims
court.
OR's findings would be evidence, but not conclusive.
(4) I have a feeling that the HM Revenue and Customs might be interested
in the relationship between the two businesses. Should I tell them now or
should I wait to see whether I can convince the Official Receiver to
investigate the matter properly?
nothing to lose by telling them
(5) The trader trading as business A has said that she is claiming
benefits, in particular, income support. If the two businesses are in
partnership, it may be that she was claiming money to which she wasn't
entitled. Should I tell the benefits agency now or wait to see whether I
can convince the Official Receiver to investigate the matter properly?
again, nothing to lose by telling them now
I really don't want to go to court again, so I am hoping that I can just
convince the Official Receiver to investigate the matter and deal with it
himself. I am not concerned about the money owed me because I frankly do
not expect to ever get it, but more about protecting the public. If
business A gets away with just walking away from her debts then I think
she will treat her customers even worse than she treated me. I have good
reason to believe this: in the course of my research I found that in 2000,
the Office of Fair Trading found that all but two of her contract terms
were unfair. She gave the OFT an unofficial undertaking to withdraw those
terms. She, however, went back to using those *exact same terms* and she
uses them even today. I informed the OFT of this, but it is understaffed
and overworked and nothing happened.

As I said at the beginning, I'm not really certain where to go from here.
I have looked up as much about the case law as I can find on-line. I'm
just a layman I don't even know where to look for the actual cases if they
aren't on-line.

I have found, on Amazon, a book called _The Law of Partnership_ by
Geoffrey Morse, which looks good,
it is

but I don't know whether it will
answer my specific questions, particularly about the case law.
but it mat not go into this much detail. Anyway, iy seems to me that your
issues are factual rather than legal. it all depends on the actual
relationship between A and B, and you have only limited evidence as to that.
I have
found in my research into various matters about the case much variation
between legal books. For instance, the book I have on contract law goes
into great detail about case law but the book I have on insolvency law
assumes that the reader will look up the case law himself and only
mentions it in passing. Given this is it a good idea for me to get a copy
of _The Law of Partnership_?
I doubt it, for the reasons given abiove.
Oh, and by the way, looking at the Partnership Act 1890, that's one scary
act. Stephen King could learn a few things reading UK statute and case
law.
If you think that's scary, try the Companies Acts sometime.

Andrew McGee
 
R

R. Mark Clayton

Andrew McGee said:
If you think that's scary, try the Companies Acts sometime.
You risk a hernia just trying to pick them up...

Even before the recent doses (1985...) the statute law shelf in the library
was revealing - most years in the 20th century 1 volume thinner or thisker
depending on events (like was there a war going on), and then 1948 - two
thick volumes, the larger part of which was the Companies Act 1948.
 
A

Andrew McGee

R. Mark Clayton said:
You risk a hernia just trying to pick them up...

Even before the recent doses (1985...) the statute law shelf in the
library was revealing - most years in the 20th century 1 volume thinner
or thisker depending on events (like was there a war going on), and then
1948 - two thick volumes, the larger part of which was the Companies Act
1948.
some years ago, when the term 'Greenhouse Effect' was first becoming common
currency, an academic colleague of mine identified the 'Company Law
Effect' - he had calculated that if company law statutes and SI's went on
increasing at the same rate as they had done in the previous ten years, then
by 2047 the entire Earth's surface would be covered in company law.

Andrew McGee
 
R

R. Mark Clayton

Andrew McGee said:
some years ago, when the term 'Greenhouse Effect' was first becoming
common currency, an academic colleague of mine identified the 'Company Law
Effect' - he had calculated that if company law statutes and SI's went on
increasing at the same rate as they had done in the previous ten years,
then by 2047 the entire Earth's surface would be covered in company law.

Andrew McGee
I think they have speeded up - SI's, regulation etc.. OTOH new law is
available on the web e.g.

http://www.opsi.gov.uk/acts/acts2004/20040027.htm so the problem of running
out of trees might be avoided.
 
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S

SteveR

Surely it isn't the least bit unusual for people to run several
businesses at the same time, to be married to or associated with people
who are running businesses, or for businesses to share premises and
resources.
Yes, that's true, but the partnership law (statute/case) will sweep up a
fair few of them, especially in the latter case. It's astonishingly
easy to be judged to be in a partnership (well, I was astonished,
anyway), hence my confusion and my questions.
A suit measured up in a shed? C'mon!
It's true! Sounds silly, I know, but it was large enough that I could
stand there while she took measurements. The shed was clean, and
clearly was used as a workshop rather than as storage for the lawnmower.
There was even an in-use PC in there!

--
SteveR
(throw away the dustbin, send to stever@... instead)

Humans are way too stupid to be dumb animals.
http://www.accidentalcreditor.org.uk/
 
S

SteveR

R. Mark Clayton said:
SNIP very long post
Oh, and by the way, looking at the Partnership Act 1890, that's one scary
act. Stephen King could learn a few things reading UK statute and case
law.
For there to be a partnership there has to be some intention set up business
jointly. Even if there is common interest there may be other legal
relationships consider the example of a pub: -

The brewery can own the pub and employee the licensee (managed pub).
The brewery can own the pub and rent it to the licensee (tenanted pub).
The licensee can own the pub, but in exchange for capital assistance (in
purchase or improvements) agree with the brewery to preferentially market
its beers (tied pub)
The licensee can own the pub and sell what s/he likes (free house)
Someone else can own the pub and agree to share the profits with the
licensee who does the work (partnership)
A couple can own the pub (joint owners)
A [limited] company can own the pub and the licensee [shareholder] receive
dividends ([joint stock] company).
and probably a few variations I have not thought of.

Just because two businesses share premises, marketing and provide goods and
services to each other does not mean that they are a partnership.
I agree. From my reading of the law, partnership is judged based on a
totality of factors rather than any one of them. This is why I am
confused - how much (or little) does it take to be judged to be a
partnership. Some of the web sites I've seen make it clear that it is
very easy to be unintentionally judged a partnership, as in the example
of the MoD working with contractors (long URL):

http://www.ams.mod.uk/ams/content/docs/toolkit/gateway/guidance/linkdocs/partner/pvp.htm
You have lost money by dealing with an insolvent [personal] business. All
you are trying to do attack the assets of someone else so you can get
preferential treatment as a creditor.
No, actually, I'm not. Perhaps you missed what I said before:

"I am not concerned about the money owed me because I frankly do not
expect to ever get it, but more about protecting the public."

When I first raised the issue of partnership with the OR's staff, they
just asked the bankrupt if she had a partnership with the other
business, and because she said that she did not, that was that as far as
they were concerned. I didn't think that this was a satisfactory
investigation, as you might expect, and since then I've been pushing on
the point, and more information *has* emerged, adding to the "score" in
favour of there being a partnership.

If there was a partnership involved, and in the unlikely event
thereafter that I went to court against the other business, I wouldn't
be doing it for the money so much as to redress the anti-preferential
treatment I had received as a creditor in amongst the initial legal
action. The bankrupt (then only a debtor) admitted in a letter to my
(then) solicitors that she had been paying other creditors in preference
to me (i.e. she had been paying them something (she said), but she had
not been paying me anything).
IMHO the issues you cite stack up to very little. Indeed the only one the
authorities might be interested in is if one of a couple was [improperly]
claiming benefits when the other had income. OTOH if they live 200 miles
apart I doubt they are cohabiting and this still doesn't make any businesses
they might have a run a partnership.
Both the Benefits Agency and HMRC seemed quite interested when I told
them about this case, especially the part about the bankrupt travelling
down on a fairly regular basis to the other business's premises in
London.

--
SteveR
(throw away the dustbin, send to stever@... instead)

Humans are way too stupid to be dumb animals.
http://www.accidentalcreditor.org.uk/
 
S

SteveR

First of all, thanks for your in-depth and useful response.


Andrew McGee said:
[long intro snipped]
[snip]
The Official Receiver is basically saying that there has to be proof that
the two are sharing a profit, otherwise, the two are just working closely,
that is, are engaging in some joint venture.
they have to be 'carrying on business in common'

which would not be the case if they simply shared premises or if one helped
the other or supplied goods/services to the other. the 'in common' bit is
crucial
I see your point here. Here's a (probably incomplete) list of evidence
that points toward there being an 'in common' part:
* A shared web domain
* Specific links from one web site to the other (not just on the "links"
page, but on the main page itself)
* Assistance at trade fairs
* Announcements of awards to the other
* Clear supportive statements in web and other forums
* Evidence provided by the bankrupt (with other intent) that shows them
working closely together to supply a single order for a single client
(sorry, I had forgotten about this one previously)
* Provision to the bankrupt of access to the other business's premises
for business purposes

[snip]
there seems to be a case, but the evidence you present is at best ambiguous.
Fair enough. It's very confusing based on the sites I've seen and the
other material I've read. It's certainly possible (see my list above),
and it's definitely not on for the OR's staff to simply take the
bankrupt's word for it, which is what they had done.
do you have a claim against B? if it was in p'ship with A, then presumably
so, and you could and should sue.
I don't know whether there is any partnership, and finding a critical
piece of evidence is pretty unlikely, so it's unlikely to arise.

This raises an interesting question: If I can prove that there is a
partnership, then, given that I have a proven debt owed by the bankrupt
to me, can I just proceed directly to issuing a Statutory Demand on that
basis? I apologise if this is a stupid question, but the grinding of
the Mill of the Law is so mysterious at times, and this whole area of
partnership and debt law is one of them.

[snip]
nothing to lose by telling them


again, nothing to lose by telling them now
I've told both HMRC and the Benefits Agency, and they were both very
interested, especially in the bankrupt's use of the second business's
premises. They asked a lot of hard questions at the beginning (to make
sure I'm serious and talking to them about a specific real person, I
suppose).

[snip]
If you think that's scary, try the Companies Acts sometime.
Eek. It sounds like lawyers could tell some pretty good scary stories
around the campfire. :)

--
SteveR
(throw away the dustbin, send to stever@... instead)

Humans are way too stupid to be dumb animals.
http://www.accidentalcreditor.org.uk/
 
T

Tim

Both the Benefits Agency and HMRC seemed quite
interested when I told them about this case, especially
the part about the bankrupt travelling down on a fairly
regular basis to the other business's premises in London.
Perhaps they think that she should be classed as "employed", and they have
not been paying full (e-ee & e-er) NI ... ?
 
J

Jonathan Bryce

SteveR said:
I see your point here. Here's a (probably incomplete) list of evidence
that points toward there being an 'in common' part:
* A shared web domain
* Specific links from one web site to the other (not just on the "links"
page, but on the main page itself)
* Assistance at trade fairs
* Announcements of awards to the other
* Clear supportive statements in web and other forums
* Evidence provided by the bankrupt (with other intent) that shows them
working closely together to supply a single order for a single client
(sorry, I had forgotten about this one previously)
* Provision to the bankrupt of access to the other business's premises
for business purposes
Remember that even if they are working together as a partnership, that
doesn't mean that yours is a partnership debt.

Did you contract with the "partnership", or did you contract with Costume
Woman herself?
 
S

SteveR

Jonathan Bryce said:
Remember that even if they are working together as a partnership, that
doesn't mean that yours is a partnership debt.

Did you contract with the "partnership", or did you contract with Costume
Woman herself?
This is a fair point, I suppose. I had no idea that there was a
partnership at the time when I placed the initial order. She has in
fact gone to considerable lengths to conceal whatever relationship she
has with the other business, and that other business may have been
responsible for work that was meant to be done on my costume.

However, we do need to consider the 1908 case of Pillans Brothers v
Pillans. One of the partners in a business that manufactured nuts and
bolts bought another nut and bolt factory a few miles away and began
operating as a sole trader. The court held that he had to share profits
with the partnership. Presumably, then, the other partners had to take
on a "share" of the liabilities connected with the new factory.

I've read that the members of a band are considered a partnership, and I
can imagine that makes the legal implications of starting a solo career
a bit interesting, especially when, as some of them do, the would-be
soloist continues working with the band...

--
SteveR
(throw away the dustbin, send to stever@... instead)

Humans are way too stupid to be dumb animals.
http://www.accidentalcreditor.org.uk/
 
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P

Peter Saxton

This is a fair point, I suppose. I had no idea that there was a
partnership at the time when I placed the initial order. She has in
fact gone to considerable lengths to conceal whatever relationship she
has with the other business, and that other business may have been
responsible for work that was meant to be done on my costume.

However, we do need to consider the 1908 case of Pillans Brothers v
Pillans. One of the partners in a business that manufactured nuts and
bolts bought another nut and bolt factory a few miles away and began
operating as a sole trader. The court held that he had to share profits
with the partnership. Presumably, then, the other partners had to take
on a "share" of the liabilities connected with the new factory.

I've read that the members of a band are considered a partnership, and I
can imagine that makes the legal implications of starting a solo career
a bit interesting, especially when, as some of them do, the would-be
soloist continues working with the band...
Most would get contracts as soon as things like that happened.
 

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