Discuss the liability of a partner for tortious acts of another partner.

The Statutory Foundation

Section 2(a) of the Act defines an "act of a firm" to mean any act or omission by all the partners, or by any partner or agent of the firm, which gives rise to a right enforceable by or against the firm. The commentary explains that this definition is based upon the principle that every partner is, in contemplation of law, the general and accredited agent of the partnership, and it expressly notes that a wrongful act falling under Section 26, or a misapplication under Section 27, comes within the meaning of an "act of the firm" for this purpose. This connects the tortious liability provisions directly back to the mutual agency principle embodied in Section 18 — a partner's wrongful act binds the firm precisely because he is acting, or purporting to act, as the firm's agent when he commits it.

Section 26: Liability for Wrongful Acts

Section 26 provides that where, by the wrongful act or omission of a partner acting in the ordinary course of the business of a firm, or with the authority of his partners, loss or injury is caused to any third party, or any penalty is incurred, the firm is liable therefor to the same extent as the partner. The provision thus imposes vicarious liability on the firm — and, through Section 25, jointly on every partner — for two distinct categories of wrongful acts: those committed by a partner acting in the ordinary course of the firm's business, and those committed with the express authority of his co-partners even if outside the ordinary course.

Illustration. If A, a partner in a transport firm, negligently drives one of the firm's lorries while delivering goods in the ordinary course of the firm's business and injures a pedestrian, the firm — and therefore B and C, his co-partners — are liable to the injured pedestrian to the same extent as A himself, since the negligent act was committed while A was acting within the ordinary course of the firm's business. If, however, A commits an assault on a customer arising from a purely personal quarrel wholly unconnected with the firm's business, and without any authorisation from B and C, the firm would not be liable, because the wrongful act falls outside both limbs of Section 26 — it was neither done in the ordinary course of business nor authorised by the other partners.

Section 27: Liability for Misapplication of Money or Property

Section 27 deals with a particular category of wrong — misapplication by a partner — and provides for two distinct situations. Where a partner, acting within his apparent authority, receives money or property from a third party and misapplies it, the firm is liable to make good the loss, and equally, where a firm in the course of its business receives money or property from a third party, and the money or property is misapplied by any of the partners while it is in the custody of the firm, the firm is liable to make good the loss. This provision recognises that misapplication of funds entrusted to a partner or to the firm is a species of wrong distinct from ordinary tortious injury, warranting its own specific rule of firm liability, while still resting on the same underlying rationale that a partner's dealings within his apparent authority bind the collective firm.

Illustration. If a client entrusts money to A, a partner in a firm of solicitors, for investment on the client's behalf — a transaction within the apparent authority of a solicitor-partner — and A misappropriates that money for his own use, the firm is liable to the client for the loss, even though B and C, the other partners, had no personal knowledge of or involvement in A's misconduct, because A was acting within his apparent authority when the money was received.

The Joint Liability of Co-Partners

Once an act falls within Section 26 or Section 27, Section 25 completes the liability structure by providing that every partner is liable, jointly with all the other partners and also severally, for all acts of the firm done while he is a partner. This is the provision that directly answers the question of a co-partner's liability for another partner's tort: because the wrongful act, once shown to fall within the ordinary course of business or within apparent authority, is deemed an "act of the firm" under Section 2(a), it automatically becomes an act for which every partner — including those who neither committed nor knew of the wrong — is jointly and severally liable, exactly as if they had committed it themselves.

The Underlying Rationale

This scheme is the direct tort-law counterpart of the contractual implied authority discussed under Sections 19 to 21, and it flows from the same principal-agent character of partnership traced to Lord Wensleydale's observation in Cox v. Hickman that "the law as to partnership is undoubtedly a branch of the law of principal and agent". Just as a partner's contracts made within his implied authority bind the firm, his torts committed within the ordinary course of the firm's business, or with his co-partners' authority, likewise bind the firm and every partner in it. The justification is one of policy as much as principle: since partners derive the benefit of the business conducted through each other's agency, they must equally bear the burden of the risks that agency creates, including the risk that a co-partner, while genuinely engaged in the firm's business, may act negligently or wrongfully and cause loss to an innocent third party who dealt with the firm in good faith.