The question of whether persons are in partnership is a question of substance and not form: the label which the parties choose to give to their relationship is not determinative.
Megarry J considered the status of a salaried partner: ‘Certain aspects of a salaried partnership are not disputed. The term ‘salaried partner’ is not a term of art, and to some extent it may be said to be a contradiction in terms. However, it is a convenient expression which is widely used to denote a person who is held out to the world as being a partner, with his name appearing as a partner on the notepaper of the firm and so on. At the same time, he receives a salary as remuneration, rather than a share of the profits, though he may, in addition to his salary, receive some bonus or other sum of money dependent upon the profits. Quoad the outside world it often will matter little whether a man is a full partner or a salaried partner; for a salaried partner is held out as being a partner, and the partners will be liable for his acts accordingly. But within the partnership it may be important to know whether a salaried partner is truly to be classified as a mere employee, or as a partner.
I have found it impossible to deduce any real rule from the authorities before me, and I think that, while paying due regard to those authorities, I must look at the matter on principle. It seems to me impossible to say that as a matter of law a salaried partner is or is not necessarily a partner in the true sense. He may or may not be a partner, depending on the facts. What must be done, I think, is to look at the substance of the relationship between the parties, and there is ample authority for saying that the question whether or not there is a partnership depends on what the true relationship is, and not on any mere label attached to that relationship. A relationship that is plainly not a partnership is no more made into a partnership by calling it one than a relationship that is plainly a partnership is prevented from being one by a clause negativing partnership. If, then, there is a plain contract of master and servant, and the only qualification of that relationship is that the servant is being held out as being a partner, the name ‘salaried partner’ seems perfectly apt for him, and yet he will be no partner in relation to the members of the firm. At the other extreme, there may be a full partnership deed under which all the partners save one take a share of the profits, with that one being paid a fixed salary not dependent on profits. Again, ‘salaried partner’ seems to me an apt description of that one. I do not see why he should not be a true partner at all events if he is entitled to share in the profits of a winding-up .’
Judges:
Megarry J
Citations:
[1973] 1 WLR 191
Statutes:
Jurisdiction:
England and Wales
Cited by:
Cited – Tiffin v Lester Aldridge Llp CA 1-Feb-2012
The claimant had been a partner with the respondent firm. He appealed against the rejection of his claim for unfair dsmissal on the basis that he had not been an employee.
Held: The appeal failed. Had this been an unlimited partnership under . .
Lists of cited by and citing cases may be incomplete.
Company, Employment
Updated: 03 November 2022; Ref: scu.450546
