HYPOTHETICAL ILAC QUESTION: (25 marks)

Keith, Greg and Bob enter into a partnership agreement in 2018 to run their auto parts business called "Auto Spider". Keith and Greg are expert mechanics while Bob has many years of experience as a spray painter in the auto parts industry.

The partnership agreement does not make any mention of expulsion powers, profit or loss sharing or duration or dissolution of the partnership. Keith, Greg and Bob agree that all major expenditure would require their joint agreement.

The partners rent a warehouse in Yatala from which they operate their business, which is successful and grows rapidly. Bob convinces Keith and Greg to buy a larger warehouse, as they could hold more stock and greatly increase their market share. Keith, Greg and Bob enter into a contract to buy a large warehouse in Coomera when their current lease on the Yatala warehouse expires in three months.

Bob visits the Coomera warehouse for a final inspection prior to Auto Spider moving into the building. While examining the site, Bob engages in conversation with the real estate agent who is managing the property, who shows Bob the adjoining block of land and asks Bob if he would be interested in buying it. Bob sees an opportunity to further expand the business and immediately agrees to buy the land for $200,000 on behalf of the partnership, without discussing it with Keith and Greg. Bob authorises a payment of 20% of the cost of the land to be paid by direct debit from the partnership's bank account. The real estate agent gives Bob a gift voucher worth $5,000 to Cunnings Hardware as a "thank you gift" for buying both properties.

Bob decides to keep the voucher for his own personal use. Bob does not inform either Keith or Greg about the land purchase. Two months later, Keith and Greg discover the purchase after reviewing the partnership bank statements and they are infuriated. Keith and Greg refuse to pay for the land purchase.

Bob, who considers himself to be a fine art expert, hears of an exhibition by a well-known Australian artist. He attends the exhibition on Friday night and sees a painting that looks like a real bargain at $30,000. He buys the painting using Auto Spider's credit account, saying to the seller that it will look great in the entryway to the auto parts business. Bob does not mention the purchase to his other partners, but several days later contacts a friend who deals in art and asks if he would like to buy the painting for $45,000. The friend agrees and Bob does not mention the sale to Keith and Greg. He deposits the profit of $15,000 into his personal savings account.

When Keith and Greg find out about Bob's actions, they decide that they can no longer trust Bob and they would like to know what steps they can take in relation to the partnership.

Advise the partners of Auto Spider as to whether they are liable to pay for the purchase of the land, whether Bob has breached any duties to the partnership, what money the firm can recover from him (if any) and whether Keith and Greg can expel Bob or bring the partnership to an end.

Using the ILAC method, explain your answers by making reference any relevant sections of the Partnership Act 1891 (Qld) and the relevant supporting case law. You only need to refer to sections and cases relating to partnership law.