Case Facts / Summary - Mr. Ingram and Mr Christmas were partners in a firm called ` Merry`s `.

*   The  Civil  Liability ( Contributions ) Act 1978 now  provides  that a judgement  against  one partner  does  not  bar  a  subsequent  action  against the  other  partners.

Reference  may  also  have  been  made  to  the  judgement  passed  in  the  previous  case  of  Court v Berlin  [ 1897] 2QB 396  where  the  Court  of  Appeal  held  that  retiring  partners  may  find  themselves  liable  for  debts  after  retirement.   However  as  the  debt  involved  in   Tower  Cabinets Ltd  v Ingram [1949]2 KB 397   was  incurred  post-retirement  any  relevance  here  is  questionable.    

.

The  judgement

The  King’s Bench  Division  held  that  Ingram  was  not  liable  under  section  14  of  the  Partnership  Act  because  he  had  never  knowingly  suffered / held  or  allowed   himself  to  be  represented or  held out  as  a  partner  as  was  the  case  in  Hosie v Waddle (1866)3 SLR 16..  The  word  `knowingly` in  the  Partnership  Act  1890  s.14 (1)  does  not  mean  mere carelessness  in  allowing  himself  to  be  represented  as  a  partner.   Ingram  was  not  liable  under  section  36(1)  of  the  Partnership  Act  1890  as  an  `apparent ` partner.    Lynskey, J said;

“  apparent  members  means  members  who  are  apparently  members  to  the  person  who  is  dealing  with   the  firm,  and  they  may  be  apparent  either  by  the  fact  that  the  customer  has  had  dealings  with  them  before,  or  because  of  the  use  of  their  manes  on  notepaper,  or  from  some  other  sign  outside  the  door,  or   because  the  customer  has had  some  indirect  information  about  them. “

As  this  was  Tower  Cabinet’s   first  transaction  with  Ingram,  which  had  occurred  over  eight  months  after  his  retirement,   it  could  not  be  argued  that  the  third  party  had  any  previous  knowledge  or  information  that  Ingram  had  been  a  partner  of  the  firm.   Apparent  in  section  36(3)  meant  “ appeared to be members  to persons dealing with the firm “    Therefore  “ apparent” could  not  apply to  members  who  were  not  known  to  the  person  ( third party )  concerned to  be  a  partner  of  the   firm.

This  latter principal  was  applied  in  this  case  as  Ingram  was  not  known  by  Merry`s  prior  to  his  retirement  and  there  was  no  holding  out.  The  case  of  Graham  v  Hope  ( 1792 ) Peake 208  set  out  that,  in  the  case  of  persons  dealing  with  the  firm  to  whom  the  retiring  partner  was  not  known as  a  partner,  no  notice  is  necessary.   However  if   Tower  Cabinet  had dealt  with  Mr  Ingram  previously  as  a  partner  of  Merry`s   and  had  not  received  adequate  notice  of  his  retrial  they  could  have  sought  to  rely  upon  the  fact  that  they  had  acted  in  good  faith  therein  binding  the  partnership.

Commentary

This  case  dealt  with  Law  of  partnership  and  specifically  areas  of;

Change  of  constitution, Notice of dissociation, Advertisement, Rights of third parties dealing with the firm  &  definition of  “Apparent”  members.

The main source of law relied upon  by the Court was  the Partnership Act 1890  and specifically  the sections  and sub-sections as out-lined previously.

This  judgement  helped to  clarify  the  liabilities  of  retiring  partners  which  had  been  founded  upon  in  the  case  of  Court v Berlin   (1897).2 QB 396  

A   retired  partner  normally  only  remains  liable  for  obligations  incurred  by  the  partnership  prior  to  retirement.  However  the  retiring  partner  is  required  to  take  steps in  order  to  avoid   liability  under  the  heading  of  `apparent`  partner.  

Tower  Cabinets Ltd  v Ingram [1949]2 KB 397  also classified  creditors  into  two  distinct  groups  for  the  purposes  of  liability  and  notice  required..

For  creditors  who  knew  members  to  be  partners  of the firm ( i.e. apparent ) notice  must  be  issued  to  all..  This  could  be  complied  with  via  personal  notice  for  individuals  known  to  the  firm  or ,  for  the  public , an  advertisement  in  the London Gazette.    However to  persons  who  had  no  previous  dealings  with  the  firm,  and  therefore  no  knowledge of  the  member  being  a  partner , no  such  notice  is  necessary.  This  latter  ruling  was  applied in  this  case.  Failure  of  any  retiring  partner  to  effectively  dissolve  the  partnership  or   ensure  appropriate  notice  as    outlined  above   may  result  in  him  being    liable  for  debts  incurred  by  the  firm.   This  case  reminded  that  liability  could  be  incurred  through  “ holding  out “.   However  in  this  respect  it  was  noted  that  Ingram  had  effectively  dissolved  the  partnership in  that  he  no  longer  took  part  in managing  the firm  and  that  he  had  ceased  to  share  equally   in  the  capital  &  profits  of  the  business.  

Another  affect  of  this  case  applies  to   retired  partners  who  die  in that  there  are  obvious implications  for  the  estate  of  the  deceased  in  that  definition  of  “apparent” would  dictate  if  the  estate  could  be held  liable  or  not.

The  principals  and judgement  expounded  in  the  case  of   Tower  Cabinets Ltd  v Ingram [1949]2 KB 397   remains  central  to  present  day  partnership  law  and  it  has  served  to  clarify  and  strengthen  the  Partnership  Act  1890.

Bobliography / Points of reference

Nocole Busby,  Bryan  Clark, Richard  Mays, Roderick Paisley  and Paul  Spink.

( 2000 ), Scots Law,  A Students  Guide 

Ann Holmes  and David Kelly, ( 1997 ),   Business Law,  second  edition

Professor Ivamy, ( 1981 ) ,  Underhill`s  Principles of the Law of Partnership.

Nicole Busby ( 2001 ),  Business Law II,  The  Law  of  business organisations,  

43L2  &  4L92,  Course  Manual,  Spring  Sumester 2002.

Internet  Resources