TOWER CABINET CO., LTD V. INGRAM (1949) 1 KBD 1032
FACTS
Mr. Christmas and Mr. Ingram were business partners in Merry's, a household furnishing business, which they commenced together in January 1946.
The partnership continued until April 22, 1947, upon which they agreed to dissolve it. Mr. Ingram duly notified the firm's bankers of his cessation as a partner in the business carried on in the name of Merry's.
In January 1948, Mr. Christmas erroneously included Mr. Ingram's name on an order form for furniture from Tower Cabinet Co., Ltd., falsely representing him as a partner.
The Tower Cabinet Co., Ltd. sued Merry's for £23.17s. for furniture sold and delivered.They sought to make Mr. Ingram liable for Merry's debts under sections 14 and 36 of the Partnership Act, 1890.
ISSUE
Can Mr. Ingram be held liable for Merry's debts after his departure from the partnership?
JUDGEMENT
The court ruled that Mr. Ingram cannot be held liable for Merry's debts post-departure. There was no evidence of Mr. Ingram representing himself as a partner or knowingly allowing such representation.
LEGAL ANALYSIS
Liability under the Partnership Act requires either a direct representation of partnership or knowing allowance of such representation.
Section 14 of the Partnership Act, 1890 deals with holding out a person as a partner, either through direct representation or knowing allowance of such representation, but the court found no evidence that Mr. Ingram represented himself as a partner to Tower Cabinet Co., Ltd. Nor did he knowingly allow such representation.
Section 36 of the Partnership act, 1890 addresses dealing with a firm after a change in its constitution; however, the company lacked knowledge of Mr. Ingram's departure thus, he could not be held liable.
The court's interpretation of section 36 focuses on actual knowledge rather than presumed knowledge based on notepaper or representation as referred in Farrar v. Delfinne.
It clarified that mere notoriety of a partnership or indirect knowledge by others is not sufficient to establish liability. Actual knowledge, either by general report or direct communication, is required.
COMMENTARIES RATIO
A retiring partner who fails to give the requisite notice will not, however, be liable for the future aspects of the firm to third parties dealing with the firm without knowing that he is a partner. This is expressly laid down in the proviso.