Partnership; creation of partnership; when business operations begin.
Facts: Khan, Miah and various other persons agreed to join together to open and operate a new Indian restaurant to be called 'The Nawab'. They agreed to share the profits made. They acquired an unused showroom and employed contractors to refurbish it as a restaurant. However, before the work was completed and before the restaurant opened, the parties quarrelled and Khan decided to end his involvement in the restaurant. Some time later, preparations completed, the restaurant opened and the business began to operate successfully. Khan sued Miah for an accounting and payment of what he was owed from his earlier involvement in the venture. His entitlement depended on whether or not a partnership had been formed before he terminated his involvement. Miah argued that no partnership had come into existence before the restaurant opened.
Issue: Had a partnership been created before the restaurant actually opened for business? If so, Khan was entitled to an accounting and his agreed share of the partnership assets.
Decision: The partnership had been created as soon as the preparatory work of finding and refurbishing the premises had begun.
Reason: A partnership is only created when the parties actually begin their business venture, but this includes preparatory work such as acquiring and fitting out premises. Lord Millett said (at 2127):
"There is no rule of law that the parties to a joint venture do not become partners until actual trading commences. The rule is that persons who agree to carry on a business activity as a joint venture do not become partners until they actually embark on the activity in question … Many businesses require a great deal of expenditure to be incurred before trading commences… The work of finding, acquiring and fitting out a shop or restaurant begins long before the premises are open for business and the first customers walk through the door. Such work is undertaken with a view of profit, and may be undertaken as well by partners as by a sole trader."