Partnership: joint liability of partnerships

A Court of Appeal decision provides a warning to owners of businesses that trade as a partnership. The court held that a partner was jointly and severally liable to a third party for the breach of fiduciary duty of another partner (L). This was the case even though L’s breach of duty occurred after L had resigned from the partnership.

In this instance, the innocent partner was not exonerated from liability arising from acts that were sufficiently closely connected with the acts that the defaulting partner had been authorised to do, as they were regarded as being done in the ordinary course of the partnership’s business.

The partners were also held to be jointly and severally liable for the claimant’s costs in pursuing the claim and appeal, subject to a 50% reduction to reflect the fact that the claim in negligence had failed.