Instructions
1. Please read the documents attached and, by reference to them, produce:
• The memorandum requested in Part A;
• The paragraphs for a letter requested in Part B;
• The list requested in Part C;
• The memorandum requested in Part D.
You should commence your answer for Parts A and D in the following format:
To: Supervising Solicitor
From: A Trainee
Date: [xxx]
Matter: [Insert relevant matter from question]
You do not need to use any particular format for Parts B and C.
2. Do not use your real name: instead, please adopt the name ‘A Trainee’.
3. Marks are NOT allocated for each question.
4. You are expressly referred to the Coursework Assessment Guidance for
information as to the writing of this coursework with respect to footnotes,
bibliography and an executive summary.
PART A
Assume that it is six months ago.
Nadia Petrescu, Anisha Abbas and Jack Hill practise in partnership as dentists, trading
under the name “Albadent”. The business was originally established by Jack in the
1990’s, and Nadia and Anisha became equal partners in the business in 2015.
Extracts from their partnership agreement are set out in Document A.
Nadia recently visited a trade fair with instructions to purchase new set of dental drills.
Whilst she was there, however, she noticed that a dental chair manufacturer, Lo-recline
Ltd (“Lo-recline”), had a display chair on special offer for £6,000 instead of the usual
price of £10,000. She went up to the Lo-recline stand and informed them that she was
a partner in the firm of Albadent. She discussed the purchase with Lo-recline’s sales
manager, who informed her that as it was the last day of the fair, she had to decide
there and then whether Albadent wished to buy the chair. Nadia considered that it was
too good an opportunity to miss, so agreed to buy it.
Nadia was expecting Anisha and Jack to be delighted with the purchase, so was very
surprised when they said that it was a waste of money, and did not want to take the
chair unless they had to.
Your supervising solicitor has been instructed by the other partners in Albadent, who
wish to know:
• whether the firm is bound by the agreement reached between Nadia and Lorecline;
• if so, whether there are any steps which can be taken against Nadia.
Prepare a memorandum for your supervising solicitor in relation to these two
matters.
PART B
Assume the dispute with Nadia was resolved. However, the partners have had
continued disagreement about the direction of the partnership business. Nadia and
Anisha are keen to develop the cosmetic dentistry side of the business. Jack is not
interested in cosmetic dentistry, and wishes to practise dentistry which solely reflects
an ethos of healthcare. Things have got to the point where Jack now wishes to retire
from the partnership.
Extracts from the partnership’s balance sheet, showing all of its assets and liabilities
(with the exception of goodwill) are set out in Document B. In addition, in accordance
with the provisions of the partnership agreement, the partnership accountant has
valued the goodwill of the partnership business at £300,000. All of the partners have
contributed and drawn identical sums from the business during its existence.
Assume you have been instructed by Jack. By reference to these matters and
the Partnership Agreement, draft paragraphs for a letter for your supervisor to
send to Jack explaining:
• how much Jack’s interest in the partnership business is worth;
• the significance of clause 20.6 of the Partnership Agreement, having regard
in particular to the provisions of the Partnership Act 1890, section 17.
(You do not need to draft a complete letter).
PART C
A proposal has been reached for the partnership business to be transferred into a new
company, Albadent Ltd (“Albadent”). The interests of Nadia and Anisha in the
partnership business will be transferred in exchange for the issue of shares in
Albadent. Nadia and Anisha will be appointed as its two directors. Anisha and Nadia
have indicated that they do not at this stage have any further cash which either of them
could invest. Jack plans to leave the business.
It has not yet been settled what form the consideration from Albadent for Jack’s interest
in the business might take. Jack is planning to attend a negotiating meeting at which
this matter will be addressed. He has asked you to prepare a list of options, explaining
their advantages and disadvantages from the points of view of all of the various parties.
Prepare the list requested by Jack. You do not need to adopt any particular
format for it, and may assume that your list will be inserted into a more formal
communication.
You do NOT need to have regard to issues relating to taxation, on which the
parties will seek separate advice.
PART D
Albadent continued successfully for a number of years, with Nadia and Anisha as
directors and equal shareholders. However, Anisha is currently in the process of an
acrimonious divorce, and Anisha’s husband decided to inform Nadia of some matters
which he “thought Nadia ought to know about” in order to make Anisha’s life as difficult
as possible. He produced a number of documents which conclusively showed:
(a) that the company from which Albadent had bought all of its gloves, masks and
hygiene products over the last two years is, in fact, a company wholly-owned and
managed by Anisha. Nadia had always wondered why these items had seemed
quite expensive.
(b) that when Albadent had entered into a lease of new premises, Anisha had
received a private payment of £5,000 from the landlord which she had not told
Nadia about. Further, that £5,000 was then used to purchase shares in a
company called Reach plc, whose shares have since gone up in value by a factor
of four.
Nadia raised these issues with Anisha, but was met with the response that Anisha
would vote against any proposals Nadia put forward.
Your supervising solicitor has now been instructed by Nadia. Draft a
memorandum for your supervising solicitor, explaining:
• whether Anisha is in breach of any of her duties as a director of Albadent;
• any remedies which may available in respect of any such breach of duty;
• any steps which Nadia can take to enforce Albadent’s claims.
DOCUMENT A
Extracts from Partnership Agreement
…
8. DECISION MAKING
…
8.4 The following matters require the prior unanimous approval of the Partners:
(a) any alterations to this agreement;
(b) any change in the nature of the Business;
(c) the acquisition or disposal of the Premises or interests in them;
(d) changing the place of Business or opening a new place of Business;
(e) any expenditure in excess of £5,000;
…
9. INDEMNITY AND EXPENSES
9.1 Any partner who is in breach of any of the provisions of this agreement shall
indemnify and keep indemnified the other Partners from and against all losses,
liabilities, expenses and payments resulting from that breach, without prejudice to
any other right or remedy of the other Partners howsoever arising.
…
14. EXPULSION
14.1 The other Partners may expel any Partner, by giving him written notice, if he:
(a) commits any serious breach or persistent breaches of this agreement;
…
20. RETIRING PARTNERS
…
20.3 A Retiring Partner whose interest in the Partnership is purchased hereunder shall
be valued according to a balance sheet drawn up to take account of:
20.3.1 all the assets of the Partnership, together with goodwill at such amount as
shall be certified by the Partnership Accountant based upon a fair value
taking account of the income profits of the Partnership for the preceding
three years;
20.3.2 the debts and liabilities of the Partnership.
…
20.6 The Remaining Partners shall indemnify the Retiring Partner from and against
any claims, costs and demands arising out of the debts and liabilities taken into
account in ascertaining the amounts due to him.
…
DOCUMENT B
Extracts from Balance Sheet of Albadent partnership
Non-current assets
Land and buildings 500,000
Equipment, fixtures and fittings 350,000
850,000
Current assets
Inventories 75,000
Trade and other receivables (debtors) 100,000
Cash and cash equivalents 25,000
200,000
Total assets 1,050,000
Current Liabilities
Trade and other payables (100,000)
Short term borrowings (25,000)
Current tax liabilities (50,000)
(175,000)
Non-current liabilities
Long term borrowings (50,000)
(50,000)
Total liabilities (225,000)
NET ASSETS …
…