Permanent Imprint Leading Cases

Effect of minor partner in partnership firm

Garner v. Murray, The Solicitor’s Journal 21 Nov. 1903, Vol. 48, p. 51

Facts: Garner, the plaintiff, alleged in his statement of claim (App 8) that from about March 1899, Murray and Wilkins had carried on business in partnership with H.A. Curtis at Heytesbury Wiltshire, as woollen cloth merchants under the style of Curtis, Murray & Co. Most of the capital of that firm had been provided by Curtis’ father to whom was owed £2,500. Murray had contributed £200 as capital and Wilkins had not provided any capital. Murray and Wilkins had agreed with the younger Curtis to buy his interest for £150 and had borrowed £150 from Garner for that purpose. In addition, Murray and Wilkins requested Garner to enter into partnership with them as cloth merchant on terms that the capital of the new firm was to be contributed as to £2,500 by Garner, £1,000 by Murray, and £500 by Wilkins. Garner agreed to enter into that partnership on 1st March, 1900, and paid to the firm £2,500 which was used to pay off the claim of Curtis, senior, against the assets of the firm of Curtis, Murray & Co. Garner also advanced £300 to pay off further claims by Curtis, senior. Murray and Wilkins contributed £200 and £250 respectively towards their shares in the capital of the firm of Garner, Murray & Wilkins.

Garner further alleged that Wilkins had represented to him that the turnover of Curtis, Murray & Co. exceeded £15,000 a year and that sales by Murray were at a rate of £10,000 a year spread over 200 customers. It was later discovered by Garner that the rate of sales by Murray was £4,500 a year amongst 75 customers.

Issue: Whether at dissolution of Partnership Firm, the partners will bring the realisation loss and whether solvent partners shall bear the loss?

Held : When a partnership firm is dissolved then first of all, all partners shall bring the realisation loss in cash in their profit sharing ratio and if any partner is found insolvent then the solvent partners who have credit balance in their capital
A/Cs shall bear the loss of insolvent partner in their profit sharing ratio.

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