Business Law: Victoria Spellman on the definition of ‘partnership property’

Victoria Spellman, a partner at Gotelee Solicitors

Victoria Spellman, a partner at Gotelee Solicitors - Credit: Archant

The recent case of Coward v Phaestos Ltd and others considered the ownership of partnership property. The dispute concerned the ownership of software which was the core asset of a successful business, IKOS, carried on by the defendant companies.

The claimant, Dr Coward, wrote the original software and made a significant contribution to its development, while his estranged spouse, Ms Ambrosiadou, founded the IKOS business and was chief executive and a director of two of the defendant companies

In around 2009 Dr Coward and Ms Ambrosiadou parted. Dr Coward claimed he wrote a substantial part of the software and owned the copyright in that software, that it was never partnership property and could not be used by the defendants. The defendants counterclaimed for copyright and database infringement and breach of confidence, Dr Coward having downloaded a copy of the software although he denied he intended to use it commercially.

Various points of law were considered including Section 20(1) of the Partnership Act 1890 which provides a definition of “partnership property”: “All property and rights and interests in property originally brought into the partnership stock or acquired… on account of the firm, or for the purposes and in the course of the partnership business, are … partnership property, and must be held and applied by the partners exclusively for the purposes of the partnership....”

The court noted that whether an asset has been brought into the partnership is a question of fact. Where an asset belonging to one partner has been used by the partnership and treated as its property, there is a presumption that it has been brought into the partnership and is therefore partnership property. In this case it was found that the software had been owned by the couple’s partnership rather than the claimant personally because the software was the bedrock of the partnership business without which the arrangement would have lacked business efficacy.

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As a result the claimant’s claim of copyright infringement and breach of confidence failed. Worse still for the claimant, the court found that there was no implied licence from the defendants to allow the claimant to use the software himself. The claimant was therefore liable for copyright infringement and breach of confidence.

The simple message for partnerships is that, to avoid disputes and unexpected consequences, partners should consider and document their intentions in relation to partnership property.

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: : Victoria Spellman is a partner in the dispute resolution department at Gotelee Solicitors.

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