Liability for partner breach of trust PA 1890 s. 13
Co-partners are not liable when a trustee partner misapplies trust property in the firm, unless they had notice or the firm still holds the funds.
If a partner, being a trustee, improperly employs trust-property in the business or on the account of the partnership, no other partner is liable for the trust property to the persons beneficially interested therein: Provided as follows:— This section shall not affect any liability incurred by any partner by reason of his having notice of a breach of trust; and Nothing in this section shall prevent trust money from being followed and recovered from the firm if still in its possession or under its control.
Text in force at .
Source: legislation.gov.uk — The National Archives (legislation.gov.uk), reproduced under licence Open Government Licence v3.0.
What it actually says
When a partner who serves as a trustee improperly uses trust money or assets in the firm's business, the other partners are not personally liable to the trust beneficiaries.
However, a partner who had notice of the breach of trust remains liable. Additionally, beneficiaries can trace and recover trust money directly from the partnership if the firm still holds or controls it.
When it applies
- A partner secretly transfers funds from a personal trust account to pay partnership operational expenses without the knowledge of other partners.
- A partner uses trust money to purchase equipment for the partnership, and co-partners were aware that the funds came from a trust breach.
- Trust funds improperly transferred into a firm's account remain in the firm's bank balance, allowing beneficiaries to trace and recover them.
What this section does not say
- Misapplication of property received by the firm from a client in the ordinary course of business.
- General wrongful acts or torts committed by a partner while running the business.
- Disputes over whether someone was held out as a partner to third parties.
That's the law. Now let's settle your problem.
Say what is happening. A neutral mediator hears your side and the other party's, and walks you both to a written agreement. In the advanced settings you can ask for the decision to be reasoned on the Acts of Parliament that apply in England and Wales.
Or open a session directly and invite the other party.
We copy this text from the official publisher and re-check it against that source on every page load, but we cannot guarantee it is complete, current or free of error, and we accept no liability for any reliance on it. An amendment can take effect before a consolidation catches up. The publisher's own copy is linked below; where the two differ, it is the official one that counts.
This page reproduces the text of PA 1890 s. 13 in force at the date shown and explains it in general terms. It is not legal advice and takes no account of the circumstances of your case, which can change the answer completely. For a live dispute, for limitation periods, and before taking any step in court, consult a qualified lawyer in England and Wales.