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Book Fight

Book Fight

Published on November 20, 2017 by Nicholas Huang and Selwyn Black

The case of Murray & Ors v Lesicar & Ors [2016] SASC 71 illustrates some of the principles that can apply to the rights of a partner to inspect the books of a dissolved partnership.

The Key Facts

  1. Murray and Lesicar were in a partnership.
  2. The partnership dissolved on September 2013. The partners were in the process of finalising the partnership account.
  3. The partnership emails were stored on a server which Lesicar now used in the conduct of a new partnership.
  4. As part of finalising the partnership account, Murray wanted to access the partnership books.
  5. Murray sought access to the emails on the partnership server. Lesicar produced 100,000 emails he said were relevant, but did not permit Murray unrestricted access in the same manner that Lesicar had.
  6. Lesicar argued:
    • some emails may be subject to legal professional privilege;
    • some of the emails on the server were private and personal;
    • Murray was not entitled to view all of the emails just because they were sent through partnership email systems; and
    • many emails do not constitute partnership books.
  7. Section 24 of the Partnership Act 1891 provided:

24 — Rules as to interests and duties of partners other than partners in incorporated limited partnership subject to special agreement

(1)           The interests of partners in the partnership property and their rights and duties in relation to the partnership will be determined, subject to any agreement, express or implied, between the partners, by the following rules:

(i)            the partnership books are to be kept at the place of business of the partnership (or the principal place, if there is more than one), and every partner may, when the partner thinks fit, have access to and inspect and copy any of them.

  1. There was no relevant agreement between the partners regulating rights of access to the partnership books.

Issue before the Court of Appeal

  1. The issue was whether Murray was entitled to unrestricted access to the emails on the server.

The primary judge’s decision

  1. The judge noted the fiduciary relationship between partners. That relationship continues during the winding up of the partnership (including while the partnership account is being taken).
  2. By acting in such a manner, Lesicar was acting in an adversarial manner and in a manner that was not in Murray’s interests. This was inconsistent with Lesicar’s fiduciary duty to Murray.
  3. The judge noted that no partner has an interest in any particular partnership asset.
  4. The judge noted that partnership book in today’s context includes electronic records, including email databases stored on a partnership server.
  5. The judge rejected Lesicar’s arguments because:
    • Murray did not want access to documents which were subject to legal professional privilege;
    • the email database was created for the business of the partnership – all records stored there are a part of the partnership books;
    • a person who uses the partnership email system for private purposes cannot claim those communications are confidential to them;
    • the intermingling of private and partnership emails does not prevent access – Murray has a statutory entitlement to access the emails, even if some are unrelated to partnership affairs.
  6. The judge held that it was inappropriate for Lesicar to have full access, but to oppose Murray having the same rights of access.

Conclusion

This case highlights the continued rights and obligations of partners, even after a partnership has dissolved. Partners must act in a manner consistent with their fiduciary duties to each other partner until at least the winding up is complete.

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