Case Memo: Howard Wolowitzz & Rajesh Koothrappalii
Case Memo: Howard Wolowitzz & Rajesh Koothrappalii
1.Howard Wolowitzz: eighty-seven years old, was an excellent engineer. He was a retired soldier who had served with the Canadian Army. He worked in Ontario later, and became a realtor and a developer of lands. 2.Rajesh Koothrappalii: fifty-five years old, was a chartered accountant. He has abundant experiences and background knowledge about the hotel businesses.
Howard Wolowitzz and Rajesh Koothrappalii first met in 2000. From then on, Wolowitzz and Koothrappali decided to begin investing in the hotel businesses to make profits under the suggestion of Koothrappalii as Koothrappalii was very familiar with the hotel industry. Through several investments on the similar projects, Howard Wolowitzz fundamentally believed that he and Rajesh Koothrappalii had been into a “partnership” when conducting business activities. After Koothrappalii personally made some investments without Wolowitzz, Wolowitzz thought that he was “betrayed” by Koothrappalii and should be compensated by a portion of earnings from Koothrappalii since Koothrappalii violated the “fiduciary duties” towards his “partner” to make a “secret profit.”
2001-2003: Invested in North Etobicoke
In 2001, Howard Wolowitzz and Rajesh Koothrappalii invested one hundred thousand Canadian dollars each in a company in north Etobicoke which is an electoral district in Ontario, and both became the shareholders of the company. After the subdivision of the company was sold in 2003, Howard Wolowitzz and Rajesh Koothrappalii received five hundred thousand Canadian dollars respectively. In this situation, Howard Wolowitzz and Rajesh Koothrappalii are not in a partnership, but both are the equal shareholders of the same company.
First of all, they never conduct a written or oral agreement that ensures their partnership in doing any kinds of business. Moreover, according to the Partnership Act., the partnership means two or more people running a common business and having the aim of earning profit are in a relationship called partnership. The partners in the partnership have to share the same venture and profit in business which they are carrying on. Each partner is fully liable for the debt of the firm in their partnership, and general partners should get actively involved in the management of the business.
However, in terms of the definition of the partnership entity, Howard Wolowitzz and Rajesh Koothrappalii did not carry on the same business and not be fully liable for the debt of the firm they invested. Instead, they are the shareholders with limited liabilities, and they do not have authorities to make any decisions in management while investing in business. Additionally, they do not share the profit earned in real. The profit they earned is based on their personal investment rather than the shared one. Therefore, at that time, Howard Wolowitzz and Rajesh Koothrappalii were two persons who individually invested in the same firm and obtained their own profit under the suggestion of Koothrappalii.
2004-2006: Invested in Mr. Sport Hotel
In June 2004, Rajesh Koothrappalii advised again that he and Howard Wolowitzz invested in the same hotel near Niagara Fall, called the Mr. Sport Hotel. This time they invested and became the shareholders of the Mr. Sport Hotel. Differently, Rajesh Koothrappalii, who was based on his excellent experience and knowledge about the hotel industry, involved in the management and arrangement of the hotel. As a “manager,” Koothrappalii was remunerated by an amount of ten thousand Canadian dollars per month. Until the early 2006, the Mr. Sport Hotel was sold. Meanwhile, Howard Wolowitzz and Rajesh Koothrappalii received one million Canadian dollars respectively from their shares through the sales of the hotel. Although Rajesh Koothrappalii participated into the management of the hotel and also invested his capital to the hotel, he and Howard Wolowitzz were still not in a partnership under this condition.
To make sure a partnership legally exists, the Nature of Partnership in the Partnership Act states a few rules have to be followed. One of them claims that all partners who contribute the same amount of capital to the firm should share the same responsibility of debts and profits earned. Also, they all ought to actively participate in the management, arrangement and decision making of the business they run. Nevertheless, even though Rajesh Koothrappalii involved in the management of the Mr. Sport Hotel, Howard Wolowitzz did not involve in. As demonstrated above, they still did not assume the same venture and share the same profit of the business together; even they did not run the same business. Obviously, their business actions violate the Nature of the Partnership which claims “Partnership is the relation that subsists between persons carrying on a business in common with a view to profit.”
It is undoubted that there was no any partnership relationship between Wolowitzz and Koothrappalii. The business relationship between these two persons is just that they are the shareholders of the same hotel, and Rajesh Koothrappalii is the manager of the Mr. Sport Hotel as well. We suppose that the Mr. Sport Hotel was run by a corporation. Rajesh Koothrappalii would be a director and shareholder in this situation since he managed and invested in the Mr. Sport Hotel. Considering about the duty of good faith, a director holds this duty towards his shareholders for making his own best judgments to fulfill the best interests of the company. However, Rajesh Koothrappalii did not increase the loss and cost of the company when he was the director of the Mr. Sport Hotel. On the contrary, he generated the profits of shareholders, and we can assume that he executed the duty of good faith towards Howard Wolowitzz and other shareholders.
A Few Years Later: Invested Separately
In a few years later, Rajesh Koothrappalii sometimes suggested Howard Wolowitzz to invest on the same project with him; sometimes he followed the investment opportunities alone without noticing Howard Wolowitzz. Those actions made Wolowitzz feel that he was betrayed and excluded by Rajesh Koothrappalii who made a “secret benefit.” In fact, there is still no partnership here among Howard Wolowitzz and Rajesh Koothrappalii. Besides what was illustrated above that they repeated the same actions and fell into the same circumstances: no shared profits, no shared risks, no personal liability towards the full debts, no involvement in management of the business and no running of the same business. There were several core problems appeared.
More fundamentally, no written or oral agreement was given to prove their business relationship, and neither Howard Wolowitzz nor Rajesh Koothrappalii was entitled to be an agent of their partnership if the business relationship exists. When a person becomes a partner of a partnership to carrying on a business, he is entitled to sign as an agent or a representative of the whole partnership and the other partners as well. A person, as a delegate of the partnership, has an apparent authority to sign a contract and conducts business activities to make a profit to the partnership. The contracts he signs and the business activities he involves in should be considered as an effective document. However, none of them has an apparent authority when they conduct business activities outside their “partnership.”
In other words, none of them can be considered as a legal agent of the “partnership,” and they cannot make decisions on behalf of the “partnership” legally. Moreover, without notification, no other people outside their “partnership” would consider them into a partnership and treated them as legal partners in business. The public did not realize and acknowledge that Howard Wolowitzz and Rajesh Koothrappalii are legal partners in a partnership. The absence of the apparent authority is not the only problem. To be one partner in a partnership, everyone has a responsibility to fulfill the fiduciary duties with each other. As noted in Partnership Act, “[p]artners are bound to render true accounts and full information affecting the partnership to any partner or his legal representatives.”
That is to say that the accurate information and accounts having influences on the partnership must be available to all partners. Standing on the Howard Wolowitzz’s point of view, Rajesh Koothrappalii “concealed” the information of investment opportunities of their partnership, and reserved the beneficial opportunities to himself. Furthermore, Howard Wolowitzz believed that “[e]very partner must account to the firm for any benefit derived by him without the consent of the other partners from any transaction concerning the partnership or form any use by him of the partnership property, name or business connection.” Indeed, Rajesh Koothrappalii did not notice Howard Wolowitzz about some investments although he invested by himself. It is not necessary for him to inform Howard Wolowitzz since no real partnership exists between them.
2011： Purchased a Hotel
Rajesh Koothrappalii spent two million Canadian dollars on an obsolete hotel located on Queen Street at the downtown area of Toronto and started to renovate it with his two sons. Then, he had an agreement with Triden Investment Inc. (abbreviated as TII) and allowed TII to set up residential condominiums on his place. Also, they agreed that they would divide their profits through selling the condominiums. Koothrappalii estimated that he would gain a profit of around six million Canadian dollars. The Partnership Act clarifies some elements of partnership, including having a real relationship between partners, carrying on a business in common and having a view to profit. At first, according to this time period of this case, it is certain that Rajesh Koothrappalii and Triden Investment Inc. had an agreement about the construction of the condominiums and his two sons Rajesh Koothrappalii entrusted TII to build the condominiums.
However, they did not create any agreement about a partnership relationship between them in a written or oral manner. In addition, Koothrappalii and TII did not run a business in common. It is a fact that Koothrappalii had an ownership of property which was the hotel he purchased, but he did not manage and operate the construction. Not only did TII construct the hotel, but also managed the whole process of construction. Furthermore, Koothrappalii and TII had a share of profit. Although the share of profit is a key point of partnership, they cannot be regarded as a partnership if this point is only condition they have in common. With the perspective of TII, Rajesh Koothrappalii and Howard Wolowitzz do not have any partnership relationship in this construction project. Rajesh Koothrappalii individually signed an agreement with TII about the construction of condominiums without acting as a partner of the “partnership” with Howard Wolowitzz.
TII, as an outsider from the “partnership” between Rajesh Koothrappalii and Howard Wolowitzz, did not acknowledge and discover the partnership’s existence between Rajesh Koothrappalii and Howard Wolowitzz. Thus, it shows that Wolowitzz does not have an apparent authority of a partnership and does not make the third party know he had a partnership with Rajesh Koothrappalii. In addition, Rajesh Koothrappalii purchased the hotel and had an agreement with TII by himself and Wolowitzz did not get involved in these procedures. Therefore, Koothrappalii and Wolowitzz do not carry on a business in common. More importantly, Koothrappalii and Wolowitzz do not share the profit of the construction. Sharing a profit between partners is an essential element in the partnership.
In terms of the above facts and analysis of this case, Rajesh Koothrappalii and Howard Wolowitzz do not have a partnership relationship. There is no adequate evidence to show that they acted as partners. The business behaviors and actions of Koothrappalii and Wolowitzz do not correspond to the definition of the partnership. Firstly, they never make a written or oral agreement of partnership between them in each business investment from the beginning to the end. Secondly, they do not carry on one business in common. Last but not least, they do not have a share of profits and costs. In this case, their actual business role are shareholders or investors, they do not form any typical forms of business.
The main reason is that they undertake and invest their own business separately. Despite of considering about the partnership relationship, Koothrappalii and Wolowitzz do not have any partnership liabilities since they do not form a partnership. From a legal point of view, Wolowitzz is not entitled to have claims on the compensation about fiduciary duties like secret benefits from Koothrappalii. Conversely, Koothrappalii has no an obligation to compensate for Wolowitzz in fiduciary duties because they are not in a partnership. In conclusion, the partnership between Rajesh Koothrappalii and Howard Wolowitzz does not exist in this case.
To Howard Wolowitzz：
According to my analysis and conclusions of this case, I suggest Howard Wolowitzz not to sue Rajesh Koothrappalii. The above analysis reveals that his appeal is likely to be rejected and he may lose a lawsuit because there is no any evidence to show that Rajesh Koothrappalii and Howard Wolowitzz have a partnership relationship. Wolowitzz’s business actions cannot prove that he has the conditions of partnership. Thus, Koothrappalii does not have any liability of partnership to compensate for Howard Wolowitzz. Also, Wolowitzz misunderstand the concepts of partnership. He thinks that he is in a partnership but actually he is not in law. So Koothrappalii has no liability to him. However, there are some situations in this case I’d like to mention. Initially, Koothrappalii suggested Howard Wolowitzz to invest many businesses every time.
If Koothrappalii mislead Howard Wolowitzz to invest a business with his advice, Wolowitzz may lose a lot of money and this investment is very beneficial to Koothrappalii to earn more profit. It is apparent that he provides Howard Wolowitzz with inaccurate information in order to achieve his business purpose. When this kind of situation happens, Wolowitzz can sue Koothrappalii and he has a personnal liability to Wolowitzz because his business behavior violates the law of business defraud. Nevertheless, If Koothrappalii suggests him to invest and offer true and reliable investment information to Howard Wolowitzz and Wolowitzz obtains the loss of profits in his own investment, this problem will be attributed to Wolowitzz instead of Koothrappalii. In this situation, Koothrappalii has no any liability to Wolowitzz, and he does not violate the law of business defraud as well. In addition, if the Mr. Sport Hotel is run by a corporation, Koothrappalii will be a director and shareholder of the Mr. Sport Hotel from 2004 to 2006.
At that time, Howard Wolowitzz is also a shareholder of that company but not a director of the company. If Wolowitzz can find evidence that Koothrappalii’s investment as a director does not give the best interests to the Mr. Sport Hotel, Howard Wolowitzz may sue him in fiduciary duties as a shareholder. In this situation, Rajesh Koothrappalii violates the duty of good faith. But I’d like to warn Howard Wolowitzz that there is a limitation period of a contract and tort appeal which is two years. From the time of this situation to now, the time range is around six years. Thus, it is less likely to appeal successfully for Wolowitzz. An another thing I’d like to suggest to Howard Wolowitzz is the concept of apparent partners. We know Howard Wolowitzz are not in a partnership so he cannot be related to the concept of apparent partners in this case.
However, if he wants to establish a partnership with other people in the future, he has to pay attention to his apparent authority of a partnership. When he and his partners are going to corporate with the third party, he is bound to make the third party notice that he and his partners have a partnership relationship. This is one of the most significant points in the partnership. Furthermore, this case will cost Howard Wolowitzz a plenty of money, energy and time. If he loses the lawsuit, he will spend more costs on it since he has to bear a part of the winning party’s legal fees. Howard Wolowitzz should realize that he almost has little chance to win this lawsuit so I suggest that he had better not to sue Rajesh Koothrappalii. It will be not good for him. Time and energy are very important to him because the opportunity cost of time and energy are earnings.
He can take advantage of the time he puts on this lawsuit to invest and develop more businesses for earning profits. Eventually, I’d like to recommend Howard Wolowitzz to study and learn the statutes and laws of business in Canada via different kinds of social media like TV news, magazines, newspaper or Internet. These are good and convenient ways for Howard Wolowitzz to understand the business law further. He can develop his law knowledge better. He also can know various cases about business law on news. It is a good source to pay attention to many laws that he does not really know. Also, Howard Wolowitzz can search for some laws on the Internet. This method will show him about laws fast and efficiently. There are some good business laws on the website, such as e-laws on Service Ontario website. Furthermore, going to library is a nice choice to read the statutes of business law if he is interested in more business law.
To the lawyer, Ms.Littigator:
From my analysis and judgments of this case, I advise that Ms.Littigator had better not help Howard Wolowitzz sue Rajesh Koothrappalii because the probability of losing a lawsuit for this case is very large. Firstly, it is hard for you to win a lawsuit for this case because Howard Wolowitzz and Rajesh Koothrappalii do not have a partnership legally. They just acted as shareholders to invest their business separately all the time. With the perspective of a lawyer, Ms.Littigator cannot have sufficient and strong evidence to prove that they have a real partnership relationship. Secondly, I found that a situation may bring a benefit to Howard Wolowitzz. If the Mr. Sport Hotel is run by a corporation and Howard Wolowitzz have evidence that Rajesh Koothrappalii did not make the best interests to the corporation called the Mr.Sport Hotel rather than himself as a director, it is possible that you may help Wolowitzz sue Koothrappalii in the fiduciary duty of corporation rather than the fiduciary duty of partnership.
However, the most important thing is that a limitation period of contract and tort appeal is two years. Thus, I still think that it is good for you to not help Wolowitzz sue Koothrappalii. What is more, you are more likely to lose your profit, energy and time. If you lose the lawsuit, you will not attain the remuneration from the losing party. You also lose your time and energy on it. Actually, you can use the time you put on this lawsuit to deal with a new lawsuit which you can win. Finally, if you really would like to help Howard Wolowitzz, I have another several suggestions. Howard Wolowitzz was a veteran in his early life. He may not know the newest version of the business law. As he became a land developer and always carry on a business by himself, Howard Wolowitzz may not have much chance to collaborate with others and form a partnership when doing business.
This makes him unfamiliar with and misunderstands the meaning of a partnership, and was mistaken about the business relationships between Koothrappalii and him. To this point, since Koothrappalii and Wolowitzz have been in an acquaintanceship for a long time, they must know each other very well, and may know that Wolowitzz did not know the business law of partnership a lot. However, when Koothrappalii and Wolowitzz conducted investments, Koothrappalii did not indicate their relationships in business unequivocally to Wolowitzz and even did not mention that they are personal investors but not partners.
There is a point hidden here that Koothrappalii may mislead Wolowitzz with the “partnership” relationship between them, and made Wolowitzz firmly believed that they are in a partnership. The key conditions including the age, a retired soldier, the familiarity with business laws and the mistake caused by a long-time friend Koothrappalii can lead Ms.Littigator and Howard Wolowitzz to a relatively advantageous position in the court. Unless Ms.Littigator emphasizes the characteristics of Wolowitzz that he is older, not knowing business laws so much and believed Koothrappalii but was misled by him, Ms.Littigator does not have any chance to win this lawsuit.
IMPRESSION OF HOWARD WOLOWITZZ:
Howard Wolowitzz was once an engineer and a war veteran. Thus, he did not have any business experiences in the past few years. That’s why he does not totally understand and know the business laws. In any court action, Howard Wolowitzz is a typical person who is hard to win the lawsuit. He does not have patience to analyze his situations in different ways. He does something on impulse and does not considerate about one thing carefully and comprehensively. This kind of incautious personality is more likely to lead him to make mistakes in other cases as similar as the case we analyzed before. Also, Howard Wolowitzz is an easily angry and not tolerant person.
When he thought Rajesh Koothrappalii hide him to make a “secret benefit”, he was very angry about Rajesh Koothrappalii and want to sue him immediately. This fact also reveals that he made decisions fast and this kind of attitude causes him to make mistakes easily. What’s more, he did something with his emotions. For example, he loves Rajesh Koothrappalii as “a son”. Actually, Rajesh Koothrappalii is not his son and Howard Wolowitzz did not realize that he did not have authorities to interfere with Rajesh Koothrappalii’s own business. Therefore, a person has similar personalities and attitudes like Howard Wolowitzz is more likely to make mistakes in and misinterpret the law.
University/College: University of Arkansas System
Type of paper: Thesis/Dissertation Chapter
Date: 19 December 2016
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