Question 4 (10 marks)

Caroline is an acupuncturist and partner in an alternative medicine treatment centre in Blackburn. Xin and Deva are the other two partners. Xin and Deva are both herbal therapy specialists. Caroline contributed the most to the starting up of the partnership, as it was originally her idea. The practise is run from a leased property, which was acquired by the partnership when they started business. The lease had an option to renew that had to be exercised by all three partners.Although all three partners have worked in harmony for 5 years, recently their relationship has started to break down.The three partners decide to part ways, despite the successful relationship. Caroline has always felt that even if the partnership were to fail, that she would like to remain in the same premises, as she lived very close by and loved the area. She negotiates a new lease of the property with the landlord, and does not inform Xin and Deva, despite the fact that the partnership had yet to be wound up. Further to this, she does not settle the accounts with Xin and Deva and continues to run the herbal therapy arm of the business alongside her acupuncture therapy. A year later, Caroline sells the centre, making a profit of $300k. Xin and Deva later become aware of the new lease and the sale of the business.

Advise Xin and Deva. Use IRAC

Please use statutory provisions and/or cases to support your answer.