Questions assigned: A partnership may be dissolved by several methods. Discuss the circumstances where the partnership will be dissolved automatically. Zahir and Zahid formed a partnership in a computer business in December 1996 The partnership is for a period of twenty years and both played an active part in the business Early this year in January 2019 Zahir was involved in a serious car accident Until today he is awarded in the intensive care unit at Putri Medical Centre He suffers from brain damage Zahid intends to dissolve the partnership and comes to you for advice Discuss

1. COMPANY LAW I
1
UUUK3053
Tutorial slot : Tuesday, 9 a.m. until 10 a.m.
Group : 4
Members : 1) Insyirah binti Ishkandar (A165398)
2) Nurul Sofea binti Jaysal (A163829)
3) Nur Aliah bt Amran (A166840)
4) Nurdiana Binti Rosmin (A166608)
5) Komathi a/p K.Raman (A163611)
Prepared for : Prof. Dato' Dr. Aishah Binti Bidin
Q&A SESSION

2. Q22(a)

3. QUESTION
A partnership may be dissolved by several methods.
Discuss the circumstances where the partnership will be
dissolved automatically.

4. DEFINITION OF
DISSOLUTION OF
PARTNERSHIP
• Black’s Law dictionary:
Cancellation or abrogation of it by the
parties themselves, with the effect of
annulling the binding force of the
agreement, and restoring each party to
his original right.
4

5. 5
There are several
ways for partnership
to be dissolved
automatically.
Dissolution under
S.34(1)(a) &
S.34(1)(b) PA 1961
Dissolution by
illegality
Dissolution by a
change in
composition of the
firm
Dissolution by
bankruptcy, death
or charge

6. 1
DISSOLUTION UNDER S. 34(1)(a) & S. 34(1)(b) OF
THE PARTNERSHIP ACT 1961

7. 7
Section 34(1) of the PA 1961 provides:
▹ Subject to any agreement between the
partners, partnership is dissolved –
(a) If entered into for a fixed term, by the
expiration of that term;
Read together with Section 29(1) PA 1961:
▹ Where a partnership entered into for a
fixed term is continued after the term
has expired, and without any express
new agreement, the rights and duties
of the partners remain the same as
they were at the expiration of the
term, so far as is consistent with the
incidents of a partnership at will.
• When the duration of the partnership is fixed, the
dissolution will occur upon expiration of that
period.
• If the partnership still continues after the
expiration of the fixed term, then it will be
regarded as a partnership at will.

8. • A partnership concern may be formed to carry
out a specified work. On the completion of that
work the partnership will be automatically
dissolved.
• Example; A partnership relationship is formed
to construct a road, then upon the moment the
road is completed, the partnership will be
dissolved.
8
Section 34(1) of the PA 1961
provides:
Subject to any agreement
between the partners, partnership
is dissolved –
(b) If entered into for a single
adventure or undertaking, by the
termination of that adventure or
undertaking;

9. “
▹ Two persons had agreed that the
partnership business was to be sold
to whichever of them tendered the
higher bid.
▹ It was held that as soon as the price
was tendered; there had been an
agreement to dissolve, without any
formal notice.
9
Loveridge v Taylor
[1896] 17 LR (NSW) 50

10. 2
DISSOLUTION BY ILLEGALITY

11. • Regardless of the wishes of some of the
partners.
• A partnership is dissolved automatically when
the purpose or the business of the firm
suddenly becomes unlawful.
• It is immaterial whether the illegality is done
intentionally or omission by another partner, or
whether the partners knew of the illegality or
not.
11
Section 36 of the PA 1961
provides:
A partnership is in every case
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.

12. “
▹ When the ceritificate lapsed, the
partnership immediately dissolved
since it was illegal for unqualified
person to be a member of solicitor’s
partnership.
▹ The dissolution is valid regardless
whether the partners knew of the
lapse of the certificate or not.
12
Hudgell Yeates & Co v. Watson
[1978] 2 All ER 363

13. 13
DISSOLUTION BY BANKRUPTCY, DEATH
OR CHARGE
SECTION 35 OF PARTNERSHIP ACT 1961

14. “
SECTION 35(1)
Subject to any agreement between the
partners, every partnership is dissolved as
regards all the partners by the death or
bankruptcy of any partner
14
Death
Bankruptcy
Partnership will not be
dissolved automatically if:
there exists an agreement

15. 15
ARCUS V RICHARDSON [1933] NZLR 348
• An agreement between
the partners means an
agreement between all
of them entered into
before the date of the
relevant death or
bankruptcy
• An arrangement that
the partnership was
not to be dissolved by
death or bankruptcy
of a partner was still
found to be a
partnership for an
undefined time
CASES

16. 16
KHOO YOKE WOH V LEE CHOO YAM HOLDINGS SDN BHD [1991] 1 MLJ 414
WU SHU CHEN V RAJA ZAINAL ABIDIN BIN RAJA HUSSIN [1997] 3 AMR 2186
No evidence of any agreement between the partners
to displace section 35(1)
CASES

17. DEATH
17
Lee Choo Yam Holdings Sdn Bhd & Ors v Khoo Yoke Wah & Ors [1990] 2
MLJ 431
Anuar J
As between the partners, the partnership is
dissolved by the death of a partner. However, this
would be subject to any agreement to the contrary
between the partners.
The death of a partner in the eye of the law leads to the
total dissolution of the partnership unless the partners
have expressly provided to contrary by their agreement

18. BANKRUPTCY
18
Dissolution is effective from the moment an act of
bankruptcy is committed.
Pembinaan Thin Chai Sdn Bhd v Citra Muda Sdn Bhd [2002] 3 MLJ 107
Whether an order for winding up of a corporate partner will automatically dissolve a
firm?
Abdul Malik Ishak J
An order for the winding up of a corporate partner is the
nearest equivalent to the bankruptcy of an individual.
Section 11: every partner in a firm is liable jointly with the other
partners for all debts and obligations of the firm incurred while he
is a partner.
In the absence of an agreement governing the dissolution of the partnership in the event of
death or bankruptcy, the partnership would automatically be dissolved on June 20, 2000
when the Kuantan High Court made a winding up order of the first defendant.

19. “
SECTION 35(2)
A partnership may, at the option of the other
partners, be dissolved if any partner suffers his
share of the partnership property to be charged
under this Act for his separate debt.
SECTION 25
A judgment obtained against a partner could be
executed against his share in the partnership rather
than against the property of the partnership.
19
Charge
Partnership will not be
dissolved automatically if:
there exists an agreement

20. 20
DISSOLUTION BY A CHANGE IN THE
COMPOSITION OF THE FIRM

21. What type of change in the
composition of the firm can
result into a partnership
dissolution?
• retirement or death of any
partner
• an addition of a new partner
21
Technical dissolution General dissolution
the new firm will usually
take on the assets and
liabilities of the old without
any break in the continuity
of the business.
a dissolution involving a
full scale winding up, which
may well be brought about
at the instance of one
partner, against the wishes
of the others.

22. Q22(b)

23. QUESTION
Zahir and Zahid formed a partnership in a computer business in
December 1996. The partnership is for a period of twenty years
and both played an active part in the business. Early this year in
January 2019 , Zahir was involved in a serious car accident. Until
today, he is awarded in the intensive care unit at Putri Medical
Centre. He suffers from brain damage. Zahid intends to dissolve
the partnership and comes to you for advice. Discuss.
23
?Zahir

24. LEGAL ISSUES
1) Whether Zahid can dissolve the partnership on the ground of
expiration or notice?
2) Whether Zahid can apply for a decree of dissolution on the
ground of permanent incapacity of Zahir to perform his duty in
the partnership?
3) Whether there is a need for Zahid to serve a notice of
dissolution to all the customers?
4) What is the authority of partners after the dissolution of
partnership?
5) What is the settlement of accounts after dissolution?
24

25. FIRST ISSUE
Whether Zahid can dissolve the partnership on the ground of
expiration or notice?

26. 26
Section 34(1) (a)of the PA provides:
Subject to any agreement between the partners, a
partnership is dissolved –
(a) If entered into for a fixed term, by the expiration of
that term;
RULES
DISSOLUTION BY EXPIRATION

27. 27
The applicability of s34(1)(a) depends on:
a) Subject to any agreement.
b) Expiration of a fixed term.
RULESRULES
DISSOLUTION BY EXPIRATION

28. 28
1. Subject to any agreement.
❖ Refers to relevant clause[s] present in a partnership agreement.
❖ S.34 will only be applied in the absence of any contrary agrelement
❖ What is meant by “subject to any agreement??”
Sukhinderjit Singh Muker V Arumugam Deva Rajah
The question to be considered is whether there was an implied agreement
to the effect that the said partnership was not to be dissolved by the given
by the plaintiff.
Khoo Yoke Wah V Lee Choo Yam Holdings BHD
There was no evidence either written or oral or to be inferred from the
conduct of surviving partners, to justify that the partnership should continue
notwithstanding the death of a partner
RULES
DISSOLUTION BY EXPIRATION
a) Subject to any agreement
To determine the absence of “subject
to any agreement”, the question that
has to be considered is whether there
was an implied term in the agreement
to the effect that the partnership
between Zahir and Zahid was not to
be dissolved within the fixed term?

29. 29
RULESRULES
DISSOLUTION BY EXPIRATION
b) Expiration of a fixed term
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.
Lee Lay Lay v Wong Yiik Tai (unreported, 24 May 2007), [2007]
MLJU 585
The defendant claimed her act of dissolving the partnership was
valid since it was entered into for a fixed term. The court applied
s.34 to the facts and found that there was no evidence that the
partnership was entered into a fixed term.
To establish the expiration of a fixed
term, the question to be considered is
whether the partnership between
Zahir and Zahid was entered into a
fixed term? If the answer is a yes,
then has the fixed term expired?

30. 30
APPLICATION
So here in order for Zahid to successfully dissolve on the
ground of expiration of the fixed term the questions need to
answer is:
a. Whether there was an implied term in the agreement to
the effect that the partnership between Zahir and Zahid
was not to be dissolved within the fixed term? (ie upon
entering complete 20 years the partnership will be
dissolved; if either partner serves a notice). In the above
question, it is clear that the fixed term of 20 years is not
limited by another clause. There is no precondition which
needs to be fulfilled to dissolve the partnership upon the
expiration

31. 31
APPLICATION
b. Whether the partnership between Zahir and Zahid
was entired into a fixed term?
In the above question, it is clear that Zahir and Zahid formed
the partnership in December 1996 and it is for a fixed term of
20 years. Zahid taking an effort to dissolve the partnership in
2019 means that the partnership has subsisted for almost 22
years. Given the fact that it has been more than 20 years (which
exceeds the expiration date), would it affect the applicability of
s 34?
According to s29 (1) where a partnership entered into for a
fixed term is continued after the term has expired, and without
any express new agreement, the right and duties of the
partners remain the same as they were at the expiration of the
term, so far as consistent with the incidents of a partnership at
will.
What is a partnership at
will?
❑ A partnership at will is
a form of business pa
rtnership where there
is no fixed term agree
d for the duration of
the partnership.

32. A partnership may expire by the mere efflux of the time, which limits and bounds its duration u
nder the terms of the original contract. This is the natural and the necessary result of the desig
nated terms in the contract; for the same consent, which originated, terminates it; and the con
sent cannot be presumed to exist beyond the fixed term, since this the presumption would be
in contrary to the actual limitation. Hence if in fact continued, it must be continued by a new a
greement not under the old agreement.
The prolongation beyond the period must be proved by some act in writing which required by t
he law. But the question that arises here is when a partnership actually continues after the exp
iration of a fixed-term what is to be deemed about the true effect and the interpredation of the
act? Is it to be treated as a continuation of the partnership upon all the original terms thereof o
r to be deemed as a mere continuation at the parties will?
It may be affected by various considerations. But in the absence of all facts and
circumstances, the just legal conclusion seems to be, that the partnership is to considered as
a partnership during the joint will and pleasure of the parties.
Joseph Story, Commentaries on Law of Partnership, pg 403-404)

33. 33
CONCLUSION
In the above question, the facts are silent
regarding a new agreement to continue
the partnership after completing 20 years.
Hence it will be deemed as a partnership
at will. However, taking into consideration
the current status of the partnership, it is
not suitable for Zahid to invoke a
dissolution by the expiration of the fixed
term.
.

34. 34
CONCLUSION
As a conclusion, although the fixed term of 20 years is not
conditioned to any implied term however since the
partnership has exceeded the fixed term of 20 years, Zahid
cannot invoke a dissolution by the expiration of a fixed-
term, since the current state of this partnership is
“partnership at will”. However, I would like to advise Zahid
to invoke dissolution by notice as per mentioned in section
28(1) and section 34(1)(c) of PA.

35. 35
RULES
.
.
DISSOLUTION BY NOTICE
28(1) Where no fixed term has been agreed upon for
the duration of the partnership, any partner may
determine the partnership at any time on giving
notice of his intention to do so to all the other
partners.
34(1)(c) if entered into for an undefined time, by any
partner giving notice to the other or others of his
intention to dissolve the partnership.
Why dissolution by notice???
In Sukhinderjit Singh Muker V Arumuga
m Deva Rajah, Arijin Jaka J, stated that “t
he partnership is a partnership at will an
d in such circumstances it is open to eith
er partner to dissolve the partnership up
on giving of notice to that effect pursuan
t to s 34(1)(c) or 28(1).”
▪ A partnership at will is uncertain and
undefined in terms of the duration it
would be continued, in which it suita
ble to dissolve it by notice(fulfil
. The main element.)

36. SECOND ISSUE
Whether Zahid can apply for a decree of dissolution on the ground of
permanent incapacity of Zahir to perform his duty in the partnership?

37. 37
As for the second issue, section 37(b) PA states:
“On application by a partner, the court may decree a
dissolution of the partnership when a partner, other than
the partners suing become in any other way permanently
incapable of performing his part of partnership contract.”
RULES
DISSOLUTION BY PERMANENT INCAPACITY

38. 38
Section 37 of PA is only applicable WHEN:
One of the partner to the partnership is permanently
incapable (other than being lunatic) of performing his part
under the partnership agreement.
Partner making the application (ie the partner suing) must
be must not be the partner who is found to be permanently
incapable to perform his duty as a partner.
An application to dissolve the partnership can only be made
where it can be shown that the partner in question has
rendered permanently incapable to perform his duty as a
partner.
In a event of a temporary incapacity, will not form a
sufficient ground.
RULES
DISSOLUTION BY PERMANENT INCAPACITY

39. 39
In applying the said section, Zahir has been in
ICU for almost 10 months (presuming ‘until
today’ is the month of October 2019) and the
fact that he suffers from brain damage, implies
that he is most likely to be permanently
incapable to perform his duty as a partner to the
partnership.
RULESAPPLICATION
DISSOLUTION BY PERMANENT INCAPACITY

40. 40
Zahid can apply for a decree of dissolution of the
partnership on the ground of Zahir’s permanent
incapacity to perform his duty as a partner to
the partnership.
RULESConclusion
DISSOLUTION BY PERMANENT INCAPACITY

41. THIRD ISSUE
Whether there is a need for Zahid to serve a notice of dissolution to
all the customers?

42. 42
RULES &
APPLICATION
NOTICE OF DISSOLUTION TO CUSTOMERS
As per the requirement of s 39 PA, notice must be given
to all customers of partnership. If not given, customers
are entitled to treat all the former members as
continuing to be members.
Section 39PA: Any partner may publicly notify the
dissolution of partnership and may require other
partner(s) to concur. Hence, applying the requirement
of this section, after successfully dissolving the
partnership, Zahid should serve notice to all customers.

43. FOURTH ISSUE
What is the authority of partners after the dissolution of partnership?

44. 44
RULES &
APPLICATION
AUTHORITY OF PARTNERS AFTER DISSOLUTION
After dissolution of partnership, authority of partners
remains only for matters dealing with the winding up of
the partnership and to complete “unfinished transactions”
(s 40 SPA).
The application of this section could be seen in the case of
Tai Lee Oil Mill Co v Ng Ok Ling [1967] 1 MLJ 285 where
the High Court upheld the right to institute an action for
the refund of overpayment of rental even after the
dissolution of partnership. However, to distinguish with
Zahid’s situation; Zahid has no unfinished transactions but
he can still continue his authority as a partner for matters
dealing with the winding up of partnership.

45. FIFTH ISSUE
What is the settlement of accounts after dissolution?

46. 46
RULES &
APPLICATION
SETTLEMENTS OF ACCOUNT AFTER DISSOLUTION
According to s 41 PA, upon dissolution of partnership
every partner is entitled to:
a) Have the property of the partnership applied in
payment of the debts and liabilities of the firm, and
b) Have surplus assets after payment of the debts
distributed among the partners.
S 46 PA lays down Rules of dissolution of partnership
assets on final settlement of accounts.
Therefore, Zahid and Zahir are entitled to the property
of the partnership and the surplus assets after payment
of debts.

47. Zahid proceed with dissolution on the ground by serving a notice as
per 28(1) and 34(1)(c) and following the dissolution, Zahid should
follow the procedures in which advised previously.
FIFTH ISSUE

48. Appendix
• Partnership Act 1961
• Sukhinderjit Singh Muker v Arumugam Deva Rajah [1998] 2 AMR 1694; [1998] 2 MLJ 117
• Tai Lee Oil Mill Co v Ng Ok Ling [1967] 1 MLJ 285
• Loveridge v Taylor [1896] 17 LR (NSW) 50
• Hudgell Yeates & Co v Watson [1978] 2 All ER 363
• Arcus v Richardson [1933] NZLR 348
• Khoo Yoke Woh v Lee Choo Yam Holdings Sdn Bhd [1991] 1 MLJ 414
• Wu Shu Chen v Raja Zainal Abidin Bin Raja Hussin [1997] 3 AMR 2186
• Lee Choo Yam Holdings Sdn Bhd & Ors v Khoo Yoke Wah & Ors [1990] 2 MLJ 431
• Pembinaan Thin Chai Sdn Bhd v Citra Muda Sdn Bhd [2002] 3 MLJ 107
48

49. THANK YOU!
Any questions?
49