* 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.
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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
43L2, Asignment #1, Submission date; 26th