1. Dissolution of Partnership.
By; Muhammad Izzat & Muhammad
Izuan.

2. Definition of Dissolution.
 Business terms  Act of dissolving; winding up;
termination.
 Domestic relation  Ending of a marriage through
divorce.
 Millenium Medicare Services v Nagadevan a/l
Mahalingam [2013] 9 MLJ 873
 “The literal meaning of the phrase „dissolution of partnership‟
was the official ending of a partnership … The word
„dissolution‟ as defined in Collins Cobuild English Dictionary to
mean: „the act of officially ending a formal agreement, for
example a marriage or a business arrangement‟. The literal
meaning of 'dissolution of partnership' clearly means that the
official ending of a partnership. “

3. What is Dissolution of
Partnership?
 The dissolution of a partnership is the process
during which the affairs of the partnership are
wound up (where the ongoing nature of the
partnership relation terminates).
 The initial process where the partnership or the
firm becomes dissolve.

4. How to Dissolve a Partnership?
Dissolution
Court
intervention
Without
Court‟s
intervention

5. When is the Dissolution?
 By expiration of a fixed term.
 Termination of a single adventure or undertaking.
 Dissolution by notice from a partner.
 Bankruptcy.
 Death.
 A charge of partnership property for a partner's
separate debt.

6. Contd.
 Illegality of the partnership.
 An order by Court.

7. Reception of Common Law in
Dissolution of Partnership.
 Tan Mooi Liang v Lim Soon Seng & Ors [1974] 2
MLJ 60. (per Suffian CJ, at 62).
 [H]- '[b]ecause of the many provisions relating to
partnership in the Contracts (Malay States)
Ordinance, 1950, which ... constitute "other
provisions relating to partnership" within the
meaning of ... subsection (1) of section 5 of the
Civil Law Ordinance, 1956, the English law of
partnership does not apply„.

8. Dissolution.
Without Court‟s
intervention.
Court‟s intervention.
Section
34.
Fixed
term.
Single
Notice.
adventure
.
Section
35.
Death.
Bankrupt. Charge.
Section
36.
Illegality.
Section
37.
Lunatic.
Permanentl
y
incapable.
Guilty.
Breach of
partnership
.
Loss.
Just and
equitable.

9. Statutory Provisions.
 Section 27 of Partnership Act 1961.
 Section 34 of Partnership Act 1961.
 Section 35 of Partnership Act 1961.
 Section 36 of Partnership Act 1961.
 Section 37 of Partnership Act 1961.
 Section 38 of Partnership Act 1961.
 Section 39 of Partnership Act 1961.
 Section 40 of Partnership Act 1961.

10. Contd.
 Section 41 of Partnership Act 1961.
 Section 42 of Partnership Act 1961.
 Section 43 of Partnership Act 1961.
 Section 44 of Partnership Act 1961.
 Section 45 of Partnership Act 1961.
 Section 46 of Partnership Act 1961.
 Section 47 of Partnership Act 1961.

11. Section 27 PA 1961.
 Section 27; expulsion of partner.
 “No majority of partners … unless … express agreement …”
 Expulsion must be made by all partners in
consensus.
 Majority votes are insufficient.
 Majority votes are only made applicable by an
express agreement.
 The agreement must be made in writing (proof).

12. Section 34 PA 1961.
 Section 34; dissolution by expiration or notice.
 “(1) Subject to any agreement … a partnership is dissolved (a) … fixed term, by expiration of that term;
 (b) … single adventure or undertaking, … termination of that
adventure or undertaking …
 (c) … undefined time, … any partner giving notice … intention
to dissolve the partnership.
 (2) … last-mentioned case, … partnership is dissolved … date
mentioned in the notice … date of the communication of the
notice.”

13. Contd.
 1. Subject to any agreement.
 Refers to relevant clause[s] in a partnership
agreement.
 Syarikat Wing Heong Meat Product Sdn Bhd v Wing
Heong Food Industries Sdn Bhd & Ors [2010] 7 MLJ
504.
 [I]- Whether the person managing the partnership
business had actual or ostensible authority to sell the
partnership's business, goodwill and intellectual
property assets.

14. Contd.
 [H]- There was actual authority accorded for the sale.
 2. Expiration of a fixed term.
 Where the partners have decided that the
partnership arrangement would have a limited or
fixed term, it follows that the partnership would
dissolve once that term has expired subject to any
agreement to the contrary.

15. Contd.
 Lee Lay Lay v Wong Yiik Tai (unreported, 24 May
2007; Originating Summons No 24-433-2005-I),
[2007] MLJU 585.
 [F]- The defendant claimed her act of dissolving the
partnership was valid since it was entered into for a
fixed term.
 [H]- Applying the provisions of the Partnership Act
1961 S.34 to the facts, the Court found that there
was no evidence that the partnership was entered
into for a fixed term.

16. Contd.
 3. Termination of a single adventure or undertaking.
 A partnership may have been formed solely for
purposes of carrying out a single transaction,
adventure or undertaking. In such an event, the
partnership would naturally dissolve by operation of
law once the transaction, adventure or undertaking
has been completed subject to any agreement to the
contrary.
 A joint venture may or may not be a partnership.
 In deciding whether or not a partnership exists, the
court must have regard to s 4 ante and the intention
of the parties as appearing from the whole facts of

17. Contd.
 Whether or not the parties can be regarded as
partners could only be determined if the joint
venture between them constituted a partnership
'for a single adventure or undertaking'
subsumable under this section.
 Sinnathamby Klondakoundan & Ors v Brijkishore
Shuparshad [1998] 1 MLJ 31, CA.

18. Contd.
 Lee Lay Lay v Wong Yiik Tai (unreported, 24 May
2007; Originating Summons No 24-433-2005-I),
[2007] MLJU 585.
 [F]- The defendant claimed her act of dissolving the
partnership was valid since it was entered into for a
single adventure or undertaking.
 [H]- there was no evidence that the partnership
business was entered into for a single adventure or
undertaking.

19. Contd.
 4. Dissolution by notice.
 Where a partnership has been formed for an
indefinite period of time, the partnership can be
dissolved by a partner simply giving notice of his
intention to do so to the other partners. The
partnership will then be dissolved as from the date
mentioned in the notice as the date of dissolution or,
if no date is mentioned, as from the date of the
communication of the notice.

20. Contd.
 Teoh Swee Hee v Tio Hock Thye & Ors
(unreported, 26 November 1996; Civil Suit No 22225 of 1991), [1996] MLJU 409.
 [H]- The court found that the plaintiff's notice to
retire vide the newspaper advertisement was
effective and the partnership being a partnership
at will, it was therefore determined upon its
service on the defendants, under s 34(2). The
court held that since the defendants in that case
had failed to render the true accounts of the
partnership assets, the plaintiff was right in taking
the further step to dissolve the partnership under
s 34(1)(c).

21. Contd.
 Arif v Yeo & Anor [1990] 1 MLJ 218.
 [H]- The partnership was a partnership at will; as such
the partnership was dissolve on the date of the service
of the writ on the first defendant. The court referred to
Unsworth v Jordan [1896] WN 2, Harris v Burgess &
Thorne [1937] 4 DLR 219 and Phillips v Melville
[1921]NZLR 571.
 Any partner giving notice to the other: Sukhinderjit
Singh Muker v Arumugam Deva Rajah [1998] 2 MLJ
117.
 [H]- A legal firm was held to be dissolved by the giving
of notice of dissolution by one partner to another.

22. Contd.
 [H]- If a partner gives notice to determine on a given date




and dies before that day, the partnership is dissolved by
death.
Date of communication of notice: Arif v Yeo & Anor [1990]
1 MLJ 218.
[H]- The effective date of dissolution is the date of service
of the notice.
McLeod v Dowling (1927) 43 TLR 655.
[H]- If a partner dies before receipt of notice signed by
him, the partnership is dissolved by death.

23. Section 35 PA 1961.
 Section 35; dissolution by bankruptcy, death or
charge.
 “(1) Subject to any agreement … partnership is dissolved …
death or bankruptcy of any partner.
 (2) … at the option of other partners … any partner suffers his
share … charger under the Act for his separate debt.”
 Unless otherwise agreed between the partners,
every partnership is dissolved as regards all the
partners by the death or bankruptcy of any partner.

24. Contd.
 1. Subject to any agreement.
 If an agreement to the contrary is made, such
agreement must have been made prior to the death
of the partner.
 otherwise, the agreement is not binding on the
deceased partner and the partnership must be
dissolved accordingly.
 Pembinaan Thin Chai Sdn Bhd v Citra Muda Sdn
Bhd & Anor [2002] 3 MLJ 107.

25. Contd.
 The agreement between the partners not to dissolve
the partnership either by death or bankruptcy of a
partner may be oral or inferred from the conduct of
the surviving partners and the heirs of the deceased
partner.
 Khoo Yoke Wah & Ors v Lee Choo Yam Holdings
Sdn Bhd & Ors [1991] 1 MLJ 414 at 415, SC.

26. Contd.
 [H]- (per Gunn Chit Tuan SCJ): While partners
have a duty to render accounts to the legal
representatives of deceased partners, the
converse does not apply. The Partnership Act
1961 S.30 does not provide that the personal
representative of a deceased partner is bound to
render accounts.

27. Contd.
 2. Partner's share in the partnership is charged
for his separate debt.
 Where a partner's share in the partnership is
charged for his separate debt, the other partners
may, at their option, decide to dissolve the
partnership.
 Section 25(2).

28. Section 36 PA 1961.
 Section 36; dissolution by illegality of partnership.
 “… partnership … dissolved … happening of any event which
makes it unlawful …“
 If the business of the partnership becomes illegal for
whatever reason, the partnership may be dissolved
by the happening of any event which makes it
unlawful for the business of the firm to be carried on
or for the members of the firm to carry it on in
partnership.

29. Contd.
 It is immaterial whether the partners knew of the
illegality or not.
 Hudgell Yeates & Co v Watson [1978] QB 451,
[1978] 2 All ER 363, CA (Eng). *
 [F]- One of the members of the firm carrying on
business as solicitors allowed his practising
certificate required under the relevant English
legislation to lapse.
 [H]- This event brought about the dissolution of the
partnership regardless whether the partners knew of
the lapse of the certificate or not.

30. Section 37 PA 1961.
 Section 37; dissolution by the court.
 “ … court may decree a dissolution … :
 (a) … lunatic … of permanently unsound mind … ;
 (b) … permanently incapable … ;
 (c) … guilty of such conduct … affect prejudicially … business;
 (d) … breach of the partnership …;
 (e) … business … carried out at loss; and
 (f) … just and equitable that the partnership be dissolved.”
 A partnership may be dissolved by the court on the
application of a partner.

31. Contd.
 Thein Hong Teck & Ors v Mohd Afrizan bin Husain
and another appeal [2012] 2 MLJ 299.
 [H]- Part V of the Partnership Act 1961 deals with the
dissolution of partnership. The court may decree a
dissolution of a partnership under s 37 of the
Partnership Act 1961. However, it must be noted that
the application can be made only by a partner of a
partnership. A creditor such as the respondents in
the instant case cannot make an application under
that s 37 to dissolve a partnership.

32. Contd.
 Grounds for dissolution of a partnership have
included refusal to meet on matters of business,
continued quarrelling and such a state of animosity
as precludes all reasonable hope of reconciliation
and friendly co-operation.
 In practice, the fact that such an application is made
and the other partners' response to it, may lead,
directly or indirectly, to an inference that there is no
longer mutual trust and confidence between the
partners.
 Appointment of interim receiver: Where a partnership
is still subsisting, a receiver will only be appointed

33. Contd.
 1. Lunacy or unsoundness of mind.
 Court may decree a dissolution.
 Applicant must satisfy the court regarding the mental
state of the partner in question.
 Permanently unsound mind.
 The application to the court may be made by a
committee on behalf of the partner found to be
lunatic, his next friend or a person having title to
intervene as by any other partner.

34. Contd.
 2. Permanent incapacity.
 Partner is permanently incapable (other than being
lunatic) of performing his part under the partnership
contract.
 Partner making the application (ie the partner suing)
must be a partner other than the partner who is
found to be permanently incapacitated with regard to
his duties under the partnership contract.

35. Contd.
 It should be noted that the emphasis in this provision
is 'permanent incapacity' and as such, an application
to dissolve the partnership can only be made where
it can be shown that the partner in question has
been rendered permanently incapable of carrying out
his duties under the partnership contract.
 In the event of a temporary incapacity, such
temporary incapacity will not form a sufficient ground
for his co-partners to apply to the court for a decree
dissolving the partnership.

36. Contd.
 3. Conduct prejudicially affecting the partnership
business.
 Misconduct by one or more partners.
 The carrying on of the partnership business is
affected prejudicially.
 The court will also have regard to the nature of the
partnership business in determining whether such
conduct, in the opinion of the court, is calculated to
affect prejudicially the operations of the business.

37. Contd.
 The conduct in question must be conduct which is
prejudiced as against the partnership business, and
not of a personal nature.
 Snow v Milford (1868) 18 LT 142.
 [F]- One of the partners committed an adultery
towards another partner.
 [H]- The adultery of a partner was conduct
insufficient to warrant expelling that partner or
dissolving the partnership.

38. Contd.
 Dishonesty could be construed as conduct prejudicially
affecting the carrying on of a partnership business which
would then entitle the other partners to apply to the court
for a decree of dissolution.
 Carmichael v Evans [1904] 1 Ch 486.
 [F]- A partner in a drapery business was served with a
notice of expulsion in consequence of his conviction for
travelling on a railway without paying his fare and 'with
intent to avoid payment thereof„.
 [H]- Of first instance inclined strongly to the view that the
notice was valid.

39. Contd.
 4. Willful breach.
 Where a partner willfully or persistently commits a
breach of the partnership contract or otherwise
conducts himself in matters relating to the
partnership business such that it is not reasonably
practicable for the other partner or partners to carry
on the partnership business with him, the other
partner(s) would be entitled to apply to the court for a
decree of dissolution of the partnership.

40. Contd.
 Breach concerned must be willfully made or
persistently done such that the continued
relationship as between the partners is sufficiently
jeopardized.

41. Contd.
 5. Carrying on the partnership business at a loss.
 When the business of the partnership can only be
carried on at a loss, the court may, on an application
by the partners, decree a dissolution of the
partnership.
 This provision reflects the basic definition of a
partnership whereby the partners are in business
with a common view to profit.

42. Contd.
 The court will decree a dissolution under this
provision where there is a practical impossibility of
making a profit and this impossibility must be proven.
 Handyside v Campbell (1901) 17 TLR 623.
 [F]- The plaintiff applied to the court for a decree of
dissolution on grounds that the partnership could
only be carried on at a loss. The other partners
admitted that there was a loss at that time but
alleged that it was owing in part to past
mismanagement by the plaintiff and in part to his
long absence from business due to illness and that
his absence still continued.

43. Contd.
 [H]- The evidence did not amount to a practical
impossibility of profit and refused to grant a decree
of dissolution.

44. Contd.
 6. Just and equitable grounds.
 The court will grant a decree of dissolution where
circumstances have arisen which, in the opinion of
the court, render it just and equitable that the
partnership be dissolved.
 In deciding whether a partnership ought to be
dissolved on just and equitable grounds the court will
scrutinize wholly.
 Lee Lay Lay v Wong Yiik Tai (unreported, 24 May
2007 Originating Summons No 24-433-2005-I),
[2007] MLJU 585.

45. Contd.
 [H]- Where the application to dissolve the
partnership is made on 'just and equitable' grounds
which are seriously disputed, it would be wrong or
inappropriate for the court to decide the issue purely
on affidavit evidence.
 The court has taken an approach similar to
considering whether a company incorporated under
companies legislation should be wound up on just
and equitable principles.

46. Contd.
 Re Yenidje Tobacco Co Ltd [1916] 2 Ch 426at 430,
CA (Eng).
 [H]- the circumstances which would justify the
winding-up of a partnership are circumstances which
should induce the court to exercise its jurisdiction
under the just and equitable clause and to wind-up
the company.

47. Section 38 PA 1961.
 S.38(1); Right of person dealing with firm against
apparent member.
 “….person deals with a firm after a change in its constitution…
 entitled to treat all apparent members of the old firm as still being
members firm….
 …until he has notice of the change.”
 Michael Sim Hang Chuang v Syarikat Sri Puspa & Ors
[2000] 6 MLJ 189.
[H]-Defendant was entitled to treat the plaintiff as still
being member of the first defendant because there was
no proper notice of the change in the first defendant's
constitution.

48. Contd.
 S.38(2) ; Right of person dealing with firm against
apparent member.
 For persons who have had no dealings with the firm
before the date of the dissolution or change, an
advertisement (the Federal Gazette , Sabah Gazette &
Sarawak Gazette ).
 Will constitute sufficient notice of any change in the
constitution of the firm.
 Ang Lay Sim v Choo Lay Poh [2004] 8 CLJ 7.
[F]- The appellant failed to show that she had given any
notice to the respondent of the dissolution of the
partnership, whether in the form of special

49. Contd.
[H]- Mere notice to the Registry of Businesses was
held to be insufficient that the appellant must
continue to be treated as a partner and was liable for
the firm's debts by reason of s 11.

50. Contd.
 S.38(3) ; Right of person dealing with firm against
apparent member.
 a partner who dies or who becomes bankrupt, or
of a partner who, not having been known to the
person dealing with the firm to be a partner,
retires from the firm
 he ceases to be liable for further debts contracted
by the firm with that person
 before the retirement of a partner, that partner will
not cease to be liable for such debts or liabilities

51. Contd.
 S.39 ; Right of partner to notify dissolution.
 …entitled to notify the public regarding the dissolution of the
partnership or his own retirement or the retirement of a
partner.
 to protect the retiring partner from any debts or
liabilities of the firm following his retirement.
 Chop Yew Seong, ex p Sri Sundari Palayakat Co
[1958] MLJ 239.
[H]- When a known partner retires, or a partnership
is dissolved, notice of that fact must be given to the
world at large by advertisement, and to old or
existing customers by specific notice.

52. Contd.
 S.40 ; Continuing authority of partners for purpose of
winding-up.
 …the authority of each partner to bind the firm and the other rights
and obligations of the partners will continue
 …to wind-up the affairs of the partnership and to complete
transactions begun but NOT finished at the time of dissolution..
 partners are not authorised to enter into any other sort of
arrangement after the dissolution of the partnership.
 The Chartered Bank v Yong Chan [1974] 1 MLJ 157.
[H]- existing relationship of banker and the partners
would continue but only for the purpose of completing
transactions begun but unfinished at the time of
dissolution.

53. Contd.
 S.41 ; Rights of partners as to application of
partnership property.
 ….property of the partnership applied in payment of the
debts and liabilities of the firm….
 …surplus assets …applied in payment of what may be due
to the partners respectively…

54. Contd.
 Mohamed Ismail Mohamed Shariff v Zain Azahari
Zainal Abidin & Ors [2010] 5 CLJ 153, CA.
[F]- Upon a partner's retirement from the
partnership, his entire share in the firm must be
dealt with, irrespective of whether it is an
'absolute share' or not, in the absence of any
unequivocal agreement to the contrary which is
not illegal or against public policy.

55. Section 42 PA 1961.
 S.42; Apportionment of premium where
partnership prematurely dissolved.
 “…..the court may order the repayment of the premium or
of such part …
 …regard to the terms and to the length of time during
which the partnership has continued.”
 The court will NOT order the repayment of the
premium : the dissolution wholly or chiefly due to the
misconduct
 partnership agreement containing no provision
for a return of any part of the premium

56. Section 43 PA 1961.
 S.43; Rights where partnership dissolved for
fraud or misrepresentation.
 “…partnership contract is rescinded on the ground of the
fraud or misrepresentation of one of the parties thereto…”
 …. entitled to rescind is, without prejudice to any other
right..”
1.
2.
3.
to a lien on, or right of retention of, the surplus of the
partnership assets
to stand in the place of the creditors of the firm for
any payments made by him in respect of the
partnership liabilities
to be indemnified by the person guilty of fraud or
making the representation against all the debts and
liabilities of the firm

57. Section 44 PA 1961.
 S.44; Rights of outgoing partner in certain cases
to share profits made after dissolution.
 Where a partner dies or otherwise ceases to be a partner..
 …the surviving or continuing partners carry on the
partnership business with its capital or assets without any
final settlement ..
 …the rate of 8 per cent per annum on the amount of his
share of the partnership assets…
 …subject to there being no agreement to the contrary
between the outgoing partner or his estate and the firm.

58. Section 45 PA 1961.
 S.45; Retiring or deceased partner's share to be a
debt.
 any amounts due to an outgoing partner or representatives
of a deceased partner..
 …such amount will be construed as a debt owing as at the
date of dissolution or death of the partner..
 This position may be varied upon mutual agreement of the
parties

59. Section 46 PA 1961.
 S.46; Rules for distribution of assets on final
settlement of accounts.
 In settling accounts between partners after dissolution of
the partnership, the following rules are to be observed:1) all losses must be paid first out of profits, next out of capital,
and lastly, if necessary, by the partners individually in the
proportion in which they were entitled to share profits
2) the assets of the partnership (including the sums, if any,
contributed by the partners to make up losses or
deficiencies of capital) must be applied in the following
manner and order:
a) payment of the debts and liabilities of the firm owing to
persons who are not partners,
b) payment to each partner rateably what is due from the firm to
him for advances as distinguished from capital,

60. Contd



c) payment to each partner rateably what is due from
the firm to him in respect of capital;4 and
d) the ultimate residue if any, to be divided among the
partners in the proportion in which the profits are
divisible
partnership is dissolved and after the debts to third parties
have been paid and advances made by partners have been
repaid
the assets are insufficient to repay each partner his capital
in full, any deficiency must be borne by the partners in the
same proportion as the profits would have been divided
Garner v Murray [1904] 1 Ch 57.
[H] each partner was liable to contribute one-third of the
deficiency because this was the proportion in which the
profits were divisible.