Q: Ronny and Rickie each operated a small kiosk offering tax return and book keeping help at opposite ends of Belconnen Mall. Ronny called his business Ronny Smith's and Rickie called her business Rickie Xu's. They both worked 5 days per week for 8 hours each day.

Over coffee one day, they decided that instead of competing they should continue their businesses together and increase the price of their services. As a result, they changed the name to R&R Tax Returns and Bookkeeping ("R&R"). Instead of operating a kiosk, they leased a shop that cost $5,000 per month in rent for 5 years. As Rickie was on holidays when the lease was signed, Ronny signed it by himself for R&R.

Things went very well in the first year and they each made considerably more money. They shared the work both the work, each working 8 hours per day and they shared their profits 50-50. Rickie realised that there was an opportunity to make even more money if she opened another shop dedicated to her Chinese speaking clients in the city.

Rickie decided to open up a tax return business in Canberra Centre. She called it Xu's Taxes and Bookkeeping. Although Rickie brought many of her Chinese clients from the Belconnen shop, she was surprised to see how many more clients she found just having a shop in Civic. She had a good reputation as an accountant.Initially she was only working on Saturdays and Sundays when the Belconnen shop was closed, but she realised that she was making good money, the demand was increasing and that she needed to work in Civic during the week as well.

She began working in the city at her new shop during the week and told Ronny that she was often sick or that she had other commitments and so could not work at R&R. Ronny accepted this explanation and they hired staff to help in Belconnen.After some time, however, the profits of R&R started to slip and R&R began to lose money. Belconnen Mall, which has a right in its lease to call for the balance of the lease if it is worried about the business, has advised R&R that all amounts outstanding under the lease, another 24 months being $120,000 are due in 15 days.

Rickie has come to see you about the situation. Ronny is furious and worried about losing all of his money. Rickie does not understand why because she says they are sole traders. They never agreed to be partners and even wrote down on paper "R&R is not a partnership." Further, Rickie did not sign the lease. Only Ronny did. Please advise her of her liabilities.