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Manley v Sartori: ChD 1927

The death of a partner caused the dissolution of the partnership. The survivors continued the partnership business on their own account. The question arose as to the entitlement of the personal representatives of the deceased partner to a share of the profits earned between the death of the partner and the winding up.
Held: Romer J said: ‘Where . . the surviving partners, instead of realizing the assets and distributing the proceeds amongst the partners in accordance with their rights and interests, choose to carry on the business and make profits by virtue of the employment of any of the partnership assets, then, subject no doubt to making a proper allowance to the surviving partners for their trouble in so carrying on the business, such profits belong to all the persons interested in the partnership assets by means of which the profits have been earned in accordance with their rights and interests in those assets; that is to say, proportionately to their interests in those assets. That has been laid down in numerous cases and is affirmed by s. 42 of the Partnership Act of 1890 . . [The] profits . . were not divisible between the parties in accordance with their rights and interests in profits earned while the partnership was a going concern . . . Now the rights of the deceased partner or his legal person representatives are rights over all the assets of the partnership. He has an unascertained interest in every single asset of the partnership, and it is not right to regard him as being merely entitled to a particular sum of cash ascertained from the balance-sheet of the partnership as drawn up at the date of his death . . . [as] was pointed out by Wigram V-C in Willett v. Blanford, it does not necessarily follow that because the surviving partners have been carrying on the business the profits or the whole of the profits are attributable to the use of the partnership assets . . . it may well be that in a particular case profits have been earned by the surviving partner, not by reason of the use of any asset of the partnership, but purely and solely by reason of the exercise of skill and diligence by the surviving partner; or it may appear that the profits have been wholly or partly earned not by reason of the use of the assets of the partnership, but by reason of the fact that the surviving partner himself provided further assets and further capital by means of which the profit has been earned. Those profits, so far as earned by sources outside the partnership assets, are not profits in which the executors of the deceased partner could be entitled to any share . . . Where surviving partners continue to carry on the business, prima facie they are carrying it on by reason of their possession of the assets of the partnership; and the executors of the deceased partner are prima facie entitled to a share of the profits proportionate to his share in the assets of the partnership. It is for the surviving partners to show, if they can, that the profits have been earned wholly or partly by means other than the utilization of the partnership assets . . ..’

Judges:

Romer J

Citations:

[1927] 1 Ch 157

Statutes:

Partnership Act 1890 42(1)

Jurisdiction:

England and Wales

Cited by:

AppliedPopat v Shonchatra CA 25-Jun-1997
Partnership assets, both as to capital and revenue were to be divided equally between the partners in the absence of an agreement otherwise even though they had made an unequal contribution. . .
CitedHardip Singh Gill v Kulbir Singh Sandhu ChD 26-Jan-2005
The partnership had been dissolved. It had involved conversion of a property to be run as a nursing home. The claimant was to manage the home, and the profits would be used first to pay him a salary, and then to be divided equally. When wound up . .
Lists of cited by and citing cases may be incomplete.

Company

Updated: 04 October 2022; Ref: scu.222921

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