1.Partnership is the business structure under which group of person or association carry any particular business and share profit or loss occurred from such business between themselves. Following are the basic characteristics of the Partnership which help in determining the whether business structure is partnership or not:
Section 7 of the partnership Act 1963 states the rules for determining the partnership existence, and as per this section:
Joint tenancy, common tenancy, joint property or part ownership in the property, does not automatically provides the evidence of existence of partnership, and it is important to determine whether tenants or owners of the property share or do not share profit which is occurred from the use of that property. This can be understood through case law Cox v Hickman (1860) 8 HCL 268, in which Court stated if two or more persons agree to carry on the trade and share profit which was generated from that trade, each person was principle as well as agent for other, and each person is bound by the contract with the other for carrying on the trade, then such business was considered as the partnership business.
It must be noted that sharing of profit or loss also cannot considered as the evidence of existence of partnership, unless person sharing the profit have or have not the common interest in the property from which such profits are derived.
If person is receiving the share of profits from the business carried on is considered as evidence that the person is the partner in the business, but in case person is receiving share in profit in context of debt or other liquidated demand, does not make the parson partner in the business.
In the present case, Julio, Carolyn and Trisha are the partners and collectively they conduct their business under partnership structure because all three elements of the partnership business are present:
All three partners conduct business of the common interest, and they share the profit of the business equally between themselves. As stated, sharing of profit or loss also cannot considered as the evidence of existence of partnership, unless person sharing the profit have or have not the common interest in the property from which such profits are derived. In case law United Dominions Corp Ltd v Brian Pty Ltd (1985) 59 ALJR 676, Court stated that profit which is shared between the partners was closely related to the business carried on by the partners. As per Section 7, all the essential features of partnership are present in this business, which means they adopt partnership structure for carried on their business. Julio, Carolyn and Trisha are the partners in this partnership.
However, Sarah is not considered as the partner of business because, in case person is receiving the share of profits from the business carried on is considered as evidence that the person is the partner in the business, but in case person is receiving share in profit in context of debt or other liquidated demand, does not make the parson partner in the business. She provides the loan of $40000 and in this context she receives 2% of the net profit over 5 years. Therefore, She is not the partner in the business.
2.Misrepresentation under the Contract law is considered as the false information by one person to another person before entering into the contract, and because of such false information another person enters into the contract. In case contract is based on the misrepresentation and suffers any loss, then person has any right to cancel the contract and sue the defendant for the damages. Misrepresentation is considered as the innocent misrepresentation in case trader believes that the advice given by them is true and they do not own any intention to deceive the buyer. It is fraudulent transaction in case statement is made by the trader by knowing that statement is false in nature or trader does not believe that statement is true, or this statement is made by the person without caring that statement is true or false. In these types of cases, person who made the statement is guilty in context of the offense of fraud and also the misrepresentation.
In case person depends on the statement made by the defendant for entering into the contract then such person has right to cancel the contract or file case against the defendant for getting the damages in lieu of any loss suffered by person.
Innocent misrepresentation is divided into two areas that are negligent and non-negligent. This can be understood through case law Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465, Court stated that damages can be given in context of the negligent misrepresentation or misstatement or for giving the careless information or advice. The most important three features for existing liability under this action are:
Section 9 of the partnership Act 1923 stated the provisions related to the power of certain partners to bind the firm. Clause 1 of this section states that partner of the firm which is other than the incorporated limited partnership is considered as the agent of the firm and also of the other partners in the firm in context of conducted the business of the firm. Clause 2 of this section states that any act done by the partner of the firm which is not the incorporated limited partnership for the purpose of carrying on the business of the firm, binds the firm and other partners of the firm unless:
This can be understood through case law Watteau v Fenwick [1893] 1 QB 46: V & L, in which Court stated that defendant, is liable for the damages. In this case, Humble was acting with an authority and acting in such manner that was inherently reasonable for the agent in that situation. Court further stated that, situation in case was similar to the partnership which means when one partner of the firm was silent, but still such partner was liable for the actions conducted by the other partners. The decision in this case was not depend on the apparent authority of the partner because principle was disclosed under the doctrine in which principle was held liable for the actions conducted by their agents.
Section 16 of the partnership Act 1983 defines the provisions related to the partners joint and several liabilities for wrongs. Clause 1 of this section states that each partner of the firm which is not the incorporated limited partnership is jointly or severally liable with the other partners of the firm for every action for which firm is liable under section 14 of the Act.
In other words, all the partners of the firm bear the liability for acts done by the other partners in the firm till the time they are the partners of the firm. This section defines the liability on part of the partners and this liability is imposed without considering the facts whether actions of the partner are right or wrong. However, it must be noted that this liability is not imposed on the limited partnerships in which it is not possible to hold the partners liable. A general partner of the limited partnership can be held liable for any obligations or debts which are incurred by the firm at the time when partner is a member of the firm. It can be said that extent up to which general partners of the firm are held liable depends on the extent up to which partners of the firm can consider their liability or liability stated under the partnership agreement (Construction Engineering (Aust) Pty Ltd v Hexyl Pty Ltd (1985) 155 CLR 541).
In the present case, Julio gives advice to the client X in context of the tax implications related to the purchase of particular real estate property. Later it is found that big mistake is made by the Julio while giving the advice because she is not aware about the latest ruling by the Australian Tax Office (ATO) and because of this mistake X is under obligation to pay extra $15,000 in tax.
In this case, Section 14 and 16 of the Act is applicable which makes both fir and other partners of the firm liable for any wrong act done by the one partner of the Firm. Julio misrepresents the fact to the X without taking proper care and because of this advice X enters in to the contract and suffered loss. Therefore, Julio and other two partners of the firm are liable for the actions of the Julio.
3.Section 52 of the Trade practices Act 1974 states the provisions related to the misleading and deceptive conduct, and as per this section any business shall not in the trade or commerce engaged in any misleading or deceptive conduct. Generally, law is not willing to allow the person to recover any amount of damages from the defendant if such defendant made any negligent statement which causes any economic loss to the plaintiff. However, position changed with the time and there are number of case laws which contributed in these changes.
A tort can be considered as the wrongful act or omission because of which civil action is arise in the Court against the person who commit such wrongful act. On the other side, Tort of negligent misstatement is the concept related to the misleading or deceptive conduct, and it is defined as an inaccurate statement which is made with honest intention but carelessly. Such statement is made in the form of advice which is given by the party who possess any special skill or knowledge to another party who does not possess any such special skill or knowledge.
For the purpose of making the negligence misstatement occurred we have to prove that the elements of the negligence are breached, and maximum negligence has common elements which are stated below:
It must be noted that, for the purpose of existence of the duty of care if there is no immediate relationship between the parties than there are number of factors which must be considered before taking the decision. Particularly, court will consider the most important factor in these matters such as reliance of plaintiff on the information. This can be understood through case law Tepko Pty Ltd v Water Board (2001) 206 CLR 1, in which Gleeson CJ, Gummow & Hayne JJ stated that further judicial amount was examined on the basis of the relevant factors, and one more case was also there Bryan v Maloney (1995) 182 CLR 609. All these cases are considered as the pure economic loss case, but these losses did not result from the negligent misrepresentation and there is no defined relationship between the parties. However, from the above cases it is clear that there must be any relationship between the parties.
In case law Esanda Finance Corporation Ltd v Peat Marwick Hungerfords, plaintiff entered into the financial transactions with the third party that was Excel, and later it was found that company went into receivership and this resulted in the heavy loss to the Plaintiff. Esanda file case against the peat Marwick Hungerfords (PMH) on the ground that while entering into the financial transactions with the company, plaintiff based on the accounts certified by the PMH negligently. Court stated that there was no liability on part of the PMH, because there is insufficient relationship between the plaintiff and defendant. In other words, it can be said that plaintiff fails to provide evidence that there was any special relationship with the PMH in context of the financial transactions conducted with the Excel.
In the present case, in context of question 2 scenario, X pass the advice given to him by the Julio to the third party that is his best friend Y, and on the basis of advice, Y decided to purchase the new property as well and because of this Y need to pay extra $15000 tax. In this case, there is no special relationship between the Y and Julio and in absence of special relationship there is no liability on part of the Julio. As stated in Essanda case, there was no liability on part of the PMH, because there is insufficient relationship between the plaintiff and defendant. In other words, it can be said that plaintiff fails to provide evidence that there was any special relationship with the PMH in context of the financial transactions conducted with the Excel. Therefore, Julio and other partners of the firm are not liable towards the Y.
4.Can change something in their procedure when giving written advice:
Partners can incorporate exclusion of liability clause in their agreement while giving advice to their clients. This clause limits the liability of the partners while giving advice to their clients. However, it is not possible for the partners to exclude any consumer guarantees which are provided by the ACL and firm cannot includes any provision which excludes the liability of the firm in case any loss or damage is suffered by the company (Mc Williams Wines Pty Ltd v. LS Booth Transport Pty Ltd, No 50179 of 1991).
Can make their responsibilities clearer:
Another option which is available before the firm is they can incorporate provisions in the company which limits the liability of the partners in the partnership business. Limited liability of the partners is the liability in which partners fix the amount for which they are liable in case firm bears any loss or damage, and it is not possible to extend the liability of the partners more than that amount. In this one partner of the firm cannot be held liable for the misconduct of another partner of the firm.
Change their business structure:
Partners can choose company as their business structure, as this is the type of business structure which can be used at the time when business of the firm is growing up. Company is considered as the separate legal entity which is completely different from the sole trader and partnership structure. In other words, company possess the similar rights as the natural person and can incur the debt, sue and be sued. It is possible for the owners of the company to limit their personal liability, and usually they cannot be held liable for the debts of the company. It must be noted that this business structure is complex in nature as compared to others, and set of this structure require high administrative costs. Company can be registered under the Australian Securities and Investments Commission (ASIC), and directors and other officers of the company are bound by the Corporation Act 2001.
On the basis of above facts, it is clear that partners must change their business structure and converted their partnership into the company because this structure provides the solutions off all the problems faced by partners, because it is possible for the owners of the company to limit their personal liability, and usually they cannot be held liable for the debts of the company. Following are the advantages because of which partners must choose third option:
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