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Mobile Dating Applications and Partnership Law: Worbey v Campbell

Document Cited authorities 1 Cited in Related
Vincent
Author
DOI10.3366/elr.2018.0486
Published date01 May 2018
Date01 May 2018
Pages274-282
INTRODUCTION

Worbey v Campbell is an Inner House decision that provides an updated understanding of how a court determines whether a partnership exists.1 A business must be carried on “in common”. The “rules” for determining partnership are non-exhaustive, and a court may consider other factors outside of these “rules”. Parties must be sufficiently ad idem, although this does not preclude a court from filling gaps in a contractual agreement or from characterising a business as a partnership at an inchoate stage. Overarchingly, there are practical policy reasons why the ordinary rules of contract apply to partnership formation.

 FACTS AND DECISION

W and F – the pursuers – are entertainers. E – the defender – is a web developer. In Vienna in October 2009, a discussion arose about developing mobile dating applications to improve upon those already in the market.2 E offered to ascertain whether he could create such mobile dating applications, and the pursuers agreed to purchase a second-hand laptop for that purpose.3 On 17 October 2009, E emailed the pursuers and expressed a desire to put their relationship in writing. He saw himself as the developer of the mobile dating applications and the pursuers as “a mixture of investors/marketing gurus”.4 To safeguard his stake in the project, E suggested a 51/49 ownership split in his favour in case the pursuers decided to take a buy-out offer in future. The pursuers agreed with these particulars.

In due course the mobile dating applications were very successful, but E ultimately sent the pursuers a letter on 9 May 2011 terminating the relationship.5 Several events led up to that. First, from February 2010 to May 2011, E made several requests for funding to develop the mobile dating applications. The pursuers made small contributions irregularly (forty to fifty pounds sterling), but their overall response was that they would make contributions as and when circumstances permitted.6 Second, on 14 December 2010, E emailed a business plan to W, which he did not discuss with F. The business plan provided, inter alia, that the pursuers would be required to invest monthly (£200) in the project for a year, until sufficient revenue came in from advertising.7 W replied and agreed; the pursuers made payments from January to March 2011.8 Third, on 18 March 2011, E emailed the pursuers a royalty agreement in which the pursuers would receive a share of net profits, since E saw the pursuers as “initial investors/co-founders” and not partners.9 W agreed with this characterisation of the relationship. Fourth, on 8 April 2011, E emailed the pursuers stating that he had not received the £200 for April. W replied and only apologised.10 In the end, the pursuers' inability to fulfil their financial obligations vis-à-vis the project rendered their relationship of no effect.11

The pursuers averred that a partnership had been formed with E for the purpose of developing and exploiting the mobile dating applications from 17 October 2009 till its dissolution on E's bankruptcy on 29 January 2015. The Lord Ordinary (Tyre) held that, while some sort of business agreement had been envisaged in Vienna, the parties' relationship did not amount to partnership.12 On appeal, the issue was whether, having held that the parties regarded themselves as being in some kind of business relationship with a view of profit, the Lord Ordinary was obliged to hold that the parties had entered into partnership as a matter of law. The appeal was unanimously refused. The court indicated that an evaluation of the facts must point to parties carrying on a business “in common”. This does not automatically follow from a finding that parties entered into a business relationship with a view of profit.13 The Lord Ordinary also did not find that the parties had entered into a business relationship as such; they foresaw a business relationship that was never contractually concluded.14 In this way, whether the parties' relationship amounted to a partnership was immaterial.

 BUSINESS “IN COMMON”

The Partnership Act 1890 (the “Act”) provides that “partnership is the relation…between persons carrying on a business in common with a view of profit”.15 The “relation” is one where two or more persons are carrying on a business “in common”. If this can be established on the facts, then, as a matter of law, a partnership exists. Therefore, it is a mixed question of fact and law. The expression, “in common” is not defined by the Act. However, the authorities specify that there must be a single business carried on for common benefit, and, concerning the business, parties must have expressly or by implication accepted some level of mutual rights and obligations between themselves.16 This punctuates both the pre-contractual17 and continuing fiduciary nature of partnership.18 ...

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