In the recent case of Christie Owen & Davies Plc v Raobgle Trust Corporation the Court of Appeal considered the question of when a partnership comes into existence.

The Partnership Act 1890 defines a partnership as a "relation which subsists between persons carrying on a business in common with a view of profit" but does not stipulate any requisite formalities which need to be complied with in order to establish a partnership. The basic principle, as stated in the House of Lords decision in Khan v Miah, is that a partnership can arise before trading commences. All that is required is some sort of commercial activity relevant to the particular venture which the partners have decided to carry on.

In the Christie case, an agent was seeking determination that he was entitled to commission in relation to the sale of a property as a result of his facilitating an introduction. He had introduced X to the seller, however the property was subsequently sold to Y - a relative of X - who purchased the property in Y's sole name (albeit with the assistance of a bank loan in the name of X, Y and another) for the purpose of development into a restaurant.

The court held that the property had been purchased by Y on behalf of a partnership of which X was a partner, and that the agent was therefore entitled to the commission. The purchase of the property was sufficient commercial activity to demonstrate the existence of the partnership.

It is important for anyone embarking on a joint venture through an unincorporated partnership to be aware of this principle, given that - once a partnership has been formed - each partner has authority to bind the others in relation to all actions carried out in the usual course of business.