Business Law Assignment: Legal Case Analysis on Partnership Act

Question

Task: Purpose of Business Law Assignment
The purpose of this assignment is to provide an opportunity to develop the following skills:
1. Navigating legislation and identifying sections relevant to a particular issue;
2. Reading and interpreting sections of legislation;
3. Use the IRAC method to engage in preliminary legal problem solving in a commercial scenario; and
4. Referencing and footnoting using the Australian Guide to Legal Citation v4

1) Scenario and Questions
Natalie (Nat) and Melanie (Mel) are friends who are studying business at a university in Adelaide. However, their true passion is health and fitness. Nat is seriously into yoga and is a qualified yoga instructor. Mel is a pilates enthusiast and recently completed her pilates instructor course.

Nat and Mel met earlier this year at an online tutorial and, despite Nat being 10 years older than Mel, they became good friends. They shared videos of each other doing yoga and pilates. One evening, over virtual drinks, they came up with the idea of formulating their own method of exercise, combining Yoga and Pilates called “Yogilates”, and decided to set up a studio to record instructional videos for online distribution. The next day, even after the wine had worn off, they were still keen on the idea. They proceeded by:

• Creating a YouTube channel account with the username “Nat and Mel’s Yogilates”. They did this following a brief discussion about whether to use YouTube, TikTok or both. Mel thought TikTok was a better option, but Nat thought it wouldn’t work because the videos are too short. Mel, not wanting to get into an argument with her older friend, agreed they would use YouTube.

• Creating a GoogleAdSense account which was linked to a joint bank account which they opened online.

• Nat told Mel they coulduse the garage at Nat’s house for a yoga studio. Nat fit-out her garage as a fitness studio with padded mats and various pictures of bamboo, rocks and water. The centrepiece of the fit-out was a large banner with a logo comprised of the words “Nat and Mel’s Yogilates” superimposed on a green and gold yin-yang symbol. When Mel saw the new garage-based studio she smiled and said:“nice logo, did you design that”Nat replied: “yeh I just pulled it together from some pictures I found on the internet.”The next day Mel moved her laptop, video-recording equipment and gym equipment (worth approximately $5,000) to the studio at which time she said: “this will come in handy for our videos.”

Besides this, they did not do anything to formally register the business or document the nature of their commercial relationship. Over the next few weeks, they developed a hybrid yoga / pilates system and created series of twentyx 10-minute instructional YouTube videos. The YouTube Channelwasinitially successful and over a period of three months they generated approximately $3500 in advertising revenue. However, enthusiasm began to wane and the following problems emerged:

• Nat discovered that Mel had been re-editing videos as memes with catchy music and posting them on TikTok. Mel had made some money from this via her ownTikTok account and kept the money for her. Nat confronted Mela bout this via text message. Mel responded by sending the following text message:

Mel: “You don’t own me … I can do what I want. It was you that wanted to stick to YouTube and do these super-long videos.”

• A few days later, they both discovered that their idea wasn’t very original and that “Yogilates” was a system already developed by someone else, and that the logo they used included an image and words that were subject to a registered trade mark. They received a letter via email from lawyers representing the owner of the registered trade mark. The letter demanded that they cease and desist with their use of the logo as well as the word Yogilates. The letter also notified them that they were being sued for trade mark infringement, with the owner of the trademark seeking compensation.

After they received this letter, the following text message exchange occurred:
Mel: “I am totally over this, you should never have stolen that guy’s logo. You are on your own”.
Nat: “You can’t do that,we are partners. You need to pay the TikTok money to the joint bank account.”
Mel: “I don’t think so boomer. I am done here.”
Based on this information, you need to use the IRAC method to answer each of these questions:
A. Did a partnership exist between Nat and Mel?
For questions B and C, you should assume that a partnership does exist.
B. Is Mel liable to pay the money she earned from the TikTok videos to the partnership bank account?
C. Who is liable for any compensation payable as a result of the trade mark infringement?
Note: for Part C, you are not being asked whether there has been a trade mark infringement. For the purpose of this question, you can assume that there has been a trade mark infringement. The question is about who is legally liable for any compensation that may become payable.

Answer

Question A: Existence of Partnership Issue
The partnership Act 1891 (SA) considered in the present context of business law assignment depicts that a contract signing according to the subsection (1) (c) (iv) is mandatory for doing partnership business. Subsequently, the joint tenancies, tenancy in common or joint property are evaluated for identifying whether a partnership exists really between two parties or not. In the case of Nat and Mel, it has been identified that they are not registered legally according to the Partnership Act 1891. Hence, the first issue, in this case, is whether the creation of YouTube channel is legal based on Partnership Act 1891 (SA) or not and it is important to identify the existence of partnership in this case.

Rules Partnership Act 1891 (SA)
Based on the chapter 2 part 1 of Partnership Act 1891 (SA), it has been identified that existence of a partnership between two parties is the important matter in the case of evaluating the applicability of partnership act. Furthermore, joint tenancies, tenancy in common and joint property are needed to be evaluated. According to part 2 of chapter 2, it is essential to identify whether there is an effective relationship with partners or not. Part 2 of chapter 2 also states that limited partnership is evaluated according to the agreement. It implies that the registration according to the act between two parties is mandatory for identifying limited liabilities or not. Based on the subsection (2) of this act, it can be stated that wrongful deed or any decision that has hampered the partnership agreement should be considered a punishable offence . Hence, it is clear from the analysis of Rules of Partnership Act 1891 that without legal and commercial relationship partnership act cannot be used.

Application of rules
As the registration has not been done legally between two parties, it is clear that a partnership does not exist between Nat and Mel. The legal registration helps to identify the limited partnership liabilities of two parties. Hence, according to chapter 2, part 1 of the Partnership Act 1891; it is found that partnership does not exist between two parties. Furthermore, part 2 of chapter 2 reveals that there is no effective relationship between two parties due to lack of registration.

Conclusion
The above discussion depicts that the commercial relationship between two parties does not exist and hence, the Partnership Act 1891 (SA) is not applicable. The legal registration is the basic area of creating a partnership between two parties.

Question B: Sharing Money of TikTok
Issue
Although Nat and Mel have agreed to publish video through YouTube channel, however, Nat has found that Mel has published the video after re-editing the existing one. It is another issue to identify whether the publishing video through TikTok is legal or not. The reason is the partnership is valid while both the partners would work according to the agreed policy. Mel has published video through TikTok and it was not agreed between two parties. Generally, this has been considered as a violation of rules and regulations according to the Partnership Act. It is needed to be evaluated further according to the rules of Partnership Act 1891 (SA). The core issue here is Mel is liable to pay money from TikTok Videos to the partnership bank accounts or not.

Rules: Partnership Act 1891
The penalty has been charged on the wrongful activities and in this case, the important fact is that the agreement should be made properly between two parties to specify any matter. According to section 12(2), there is a joint liability of partners for providing help in the partnership activities. As both the parties have entered into a legal agreement to perform partnership activities, it is clear that in the case of wrongful deeds both the parties would be charged.

Case Laws: John Grimes Partnership Limited vs. Gubbibs (2013)
Based on this case law, it is found that the loss of business is needed to be borne by partners according to the agreed policy. In this case Plaintiff (John Grimes Partnership Limited) has appealed against the delay of the delivery of goods to the company . In this case, the damage has been found and the penalty has been charged on the defendant. As the company has incurred loss, the damage has been provided to the plaintiff based on the case law decision.

Application
Based on the application of Partnership Act 1891 (SA) and the case-law of Gubbies, it is found that any activity which is not properly mentioned in the partnership deed would be treated as a wrongful activity. It is a punishable offence and legal action has been adopted by the court for identifying the loss or damage. In this case, the section 12(2) is also applicable and Mel would be responsible for the wrong deeds in the partnership.

Conclusion
Any activity that is excluded from the partnership activity would be considered as wrongful work if it is done by any or both the partners. Hence, the money earned from TikTok is the violation of rules and regulations.

Question C: Trademark Infringement
Issue
The third issue that has been identified from the case is Yogilates is a registered trademark of another party. Hence, it is needed to justify whether the use of the name is a punishable offence to Mel and Nat or not. In this case, the rules and regulations of Partnership Act 1891 are needed to be justified properly to evaluate the issue. Stealing of trademark right is not legal in the case of a partnership or any business. Under these circumstances, it is important to identifywho is legally liable for any compensation for the trademark infringement. If the trademark infringement has been proved in the court, the penalty would be charged on a liable person.

Rules (Relevant Laws and Case Laws)
According to the subsection (2) of the Partnership Act 1891, it is found that the trademark infringement is a punishable offence as it prohibiting the general rules of Partnership Act 1891 (SA). The name Yogilates has been used by another party and hence, the use of this name is the breach of rules of Partnership Act 1891 .

Kenny &Good Pty Ltd. vs. MGICA (1992)
The case law of Kenny & Good Pty Ltd reveals that the infringement of rules and regulations is a serious offence and penalty has been charged on the party who has conducted the issue . The case is important as the plaintiff (MGICA) has achieved success in the case against the misrepresentation.

Application of Law
The case law application and the application of the Partnership Act 1891, it has been found that trademark infringement or any misrepresentation is an offence according to the law. In this case, also the section 12(2) is applicable for providing remedial measurement. From the case law application, it is found that duty of care is an important matter in the case of trademark infringement. Hence, Nat and Mel cannot defend the case and they are liable to pay the compensation to the person of the trademark of Yogilates.

Conclusion
The overall discussion in the case reveals that trademark infringement is a punishable offence and hence, both the parties Mel and Nat would liable to pay compensation to the person who owns the trademark.

References
austlii.edu.au, "PARTNERSHIP ACT 1891", Classic.Austlii.Edu.Au (Webpage, 2020)

Legislation.sa.gov.au, Legislation.Sa.Gov.Au (Webpage, 2020)

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