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Consideration Affecting Existence of Partnership

(1) Joint Tenancy and Tenancy in Common[5] Joint Tenancy and Tenancy in Common refers to ownership of property by two or more persons. Such an ownership alone does not imply the existence of a partnership if it is not designated to share the net profit as a result of the relationship. A joint tenancy arises where there exists (a) unity of possession (b) unity of title (c) unity of time (d) unity of interest. The most distinct element in such tenancy is survivorship, on the death of a joint tenant, the entire property vests in the survivor or survivors A tenancy in common arises when two or more persons own distinct and undivided share in the property. The death of a tenant in common does not result in the acquisition of his shares by the surviving partners but passes to his next of kin or according to his will if he has left one. A joint ownership of a land or any property by two or more parties does not necessarily make them partners, not even if the actually conducted their business activities on the property.

(2) Sharing of Gross Returns[6] A distinct must be made between a specific interest in the profits and a claim on the gross takings. This is best illustrated in the case of Sutton & Co v Grey[7] in which the court held that the commission earned by one, for business introduced by his to a firm to stockbrokers, did not amount to a specific interest in the profit. In Cox v Coulson[8] the defendant, a theatre manager was sued as a partner, for an injury alleged to have been caused to the plaintiff by a person the plaintiff claimed to be the defendants partner. The only relationship between the defendant and that person was an agreement to share whatever might come from a theatrical group performance. The court held that there was no partnership in this situation.

Sharing of Profits[9] As general rule, a person who receives a share of the profits is prima facie deemed to be a partner of the firm but the receipt of such share, or of a payment contingent on or varying in the profit of a business, does not of itself make him a partner in the business. Here the court has to examine all the circumstances of the cases in order to ascertain the intention of the parties, without giving undue weight to any of such circumstances including the question of

the sharing of profit.[10] In Davis v Davis [1984] 1 Ch 393 two brothers held certain houses as tenants in common. They also had a business. They let one of the houses and employed the proceeds in enlarging the business. It was held that they were partners as to the business but not to the houses, and the property acquired for expanding the business was not partnership property.

If one advances a sum of money (RM 25,000) to a firm and receives payment by installments of RM 500 monthly, this does not qualify him as a partner. Payment can be in the form of a salary plus a commission of the share of the profits. This arrangement does not make the recipient to be considered as a partner. Sometimes this category is also known as salaried partner.

In Walker v Hirsh[11] plaintiff advanced a monetary sum to H & Co, controlled and owned by two individuals. P signed an agreement with H & Co which included clauses, inter alia, that P would be paid salary plus one eight (1/8) of the profits, and losses and the agreement could be determined with four moths notice. P was previously a clerk and continued to discharge clerical duties in H & Co after the agreement. The firm gave his notice as agreed, in which case he brought an a action claiming to be a partner and demanding the dissolution of the firm. The court held that he was only a servant of the firm and not as partner as what he claims to be.

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