Rennie v Rennie: The Requirements of Natural Justice on Expulsion from a Scottish Partnership

Date01 September 2020
Published date01 September 2020

The extent to which duties of good faith, on the one hand, and fiduciary duties, on the other, operate within Scottish partnerships are complex questions. Given that the Scottish firm possesses separate legal personality,1 logically, partners should owe fiduciary duties to the partnership as a separate legal person. This is, broadly, the position reflected in sections 28, 29 and 30 of the Partnership Act 1890, which impose “classic” fiduciary duties such as the duty to account for private profits and not to compete with the firm. The section 28 duty to render accounts, however, is owed by an individual partner to each other individual partner rather than to the firm as a separate legal person. Not all fiduciary duties are therefore owed to the partnership alone.

There are clearly separate good faith duties at work in Scottish partnerships, operating on a partner-to-partner basis. These apply, for example, where representations are made to induce a partner to join a partnership,2 or where the relationship between the partners has broken down, and one partner has decided to leave the partnership, or where the partnership is being dissolved. During dissociation or dissolution, a “fertile time for disputes”,3 good faith duties from partner to partner become especially visible.

The recent Outer House decision from Lord Clarke, Rennie v Rennie,4 not only reminds us of the need to observe good faith duties when a partner is expelled, but also clarifies that requirements of natural justice may additionally apply at that time.


In cases of this type we must look carefully not only at the behaviour of the partners towards one another, but also the terms of the partnership contract governing what must happen should disputes arise. The dispute in this case concerned a farming partnership. The pursuer was in partnership with his son, the first defender. The second defender was the partnership itself and the third and fourth defenders, the pursuer's brother and sister, were partners. The fifth defender, not a partner, was formerly married to the pursuer. Another partner was a discretionary trust, of which the pursuer, and the first, third, fourth and fifth defenders were trustees.

The relationship between the partners appears to have deteriorated because of a dispute over the pursuer's entitlement to receive certain net rental income generated by rental properties at the farm. The pursuer indicated that he wished to withdraw a significant part of his capital from the partnership. The first defender resisted this, on the basis that the amount of capital held on behalf of the pursuer was not known and the partners had not reached agreement on the annual accounts. In October 2017, the pursuer transferred £273,000 from the partnership bank account to a bank account held in his own interests. The first defender commenced legal proceedings seeking...

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