Carmichael v Evans
Rule established
Where the partnership deed confers a power of expulsion for conduct detrimental to the business, a conviction for dishonesty is such conduct and expulsion is valid. The power must be exercised in good faith and strictly within the terms conferred.
Facts
- The partnership deed contained a clause permitting the expulsion of any partner guilty of scandalous conduct detrimental to the partnership business, or of wilful and persistent breach of the partnership articles.
- One partner was convicted of travelling on a railway without a ticket, with intent to defraud the railway company.
- The other partners served notice expelling him under the clause.
- The expelled partner challenged the validity of the expulsion, arguing the offence had nothing to do with the firm's business.
Issue
- Whether a conviction for dishonesty unconnected with the firm's trade amounted to scandalous conduct detrimental to the partnership business, so as to justify expulsion under the deed.
Held
- The expulsion was valid. Dishonesty in a partner is necessarily detrimental to a business that depends on the confidence of the public and of those who deal with the firm. The conduct came within the clause, and the power had been exercised in accordance with its terms.
Ratio Decidendi
A power of expulsion is a creature of contract and must be exercised strictly within the words of the clause and in good faith for the benefit of the firm. Where the clause speaks of conduct detrimental to the business, the court looks to the effect of the conduct on the firm's standing and credit rather than to whether the act was committed in the course of the firm's trade. Dishonesty in any dealing tends to injure the reputation on which the business rests.
How to use it in an exam
- Direct authority on S.33 of the Indian Partnership Act 1932: expulsion is valid only if (i) conferred by contract, (ii) exercised by a majority of partners, and (iii) exercised in good faith.
- Illustrates the third limb: the purpose must be the interest of the firm, not the elimination of an inconvenient partner.
- Useful for the point that misconduct outside the firm's business can still be detrimental to it.
- Note the consequence of an invalid expulsion: the partner is not expelled at all and the firm may face a suit for dissolution under S.44.
Source
Source: [1904] 1 Ch 486; leading authority on valid exercise of a contractual power of expulsion; citation and bench checked against Indian Kanoon and reported sources, audit of 12 August 2026
This is an educational summary, not the judgment itself. Cite the reported version in professional or academic work.