Cappe v Tsung

The appeal concerned a dispute between partners of a partnership and a corporation that had acquired the partnership business. A special majority of partners had accepted the corporation's offer to purchase the business. The central question was whether this special majority possessed the authority to vary the inter se entitlement of the partners to share in the surplus proceeds arising from the sale of the partnership property. A further issue was whether the cash amounts and shares received by the partners constituted the wholly the proceeds of partnership property.

The court was required to determine whether the partners, acting by a special majority, had the power to alter the pre-existing entitlements of individual partners to the distribution of sale proceeds. This involved considering the scope of the partners' collective power to manage and dispose of partnership assets and to vary the terms of their partnership agreement, particularly in the context of a sale of the entire business. The court also had to assess the nature of the consideration received from the corporation, specifically whether it was entirely derived from the partnership's assets.

The court reasoned that the partnership agreement did not grant the partners, even acting by a special majority, the power to vary the inter se entitlements of the partners to share in the surplus from the proceeds of sale. The court found that the cash and shares received were indeed the proceeds of partnership property. Consequently, the appeal was dismissed with costs.