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As the partners agreed to run a high-quality nursery and had specifically avoided buying the type of pots Matthew purchased because they were not high-quality enough, Matthew's actions could be argued to prejudicially affect the carrying on of the business with "regard being had to the nature of the business." As the nature of the business was for quality products, Matthew's purchase could be grounds for dissolution.
Paragraph D. Of Section 35 of the New South Wales Partnership Act of 1892 provides for Court-directed partnership termination, "when a partner, other than the party suing, willfully or persistently commits a breach of the partnership agreement, or otherwise conducts himself or herself in matters relating to the partnership business so that it is not reasonably practicable for the other partner or partners to carry on the business in partnership with the partner." Matthew's purchase definitely constituted a breach of the partnership agreement, in that the partners had agreed only to spend $10,000 on a top-quality product while Matthew spent $20,000 on an inferior product, and it can also reasonably be argued that Matthew's acceptance of a personal $2,000 commission from this purchase is both in contravention of the partnership...
Finally, under Paragraph F, the Court is given the power to dissolve a partnership in any case in which it is judged to be just and equitable, which could present a final means of recourse should these other options fail (NSW Partnership Act, 1892).
Conclusion
Though it is likely that Jerry and Shen will be able to dissolve their partnership with Matthew through an appeal to the courts, they should be aware that they may need to reach a financial settlement with Matthew or continue to pay him a portion of any profits the business makes (NSW Partnership Act, Sec. 42, 1892). As the business might continue to make a profit from Matthew's efforts and resources while he was a partner, he could insist that he is entitled to a commensurate portion of the profits. A cash settlement and written agreement that terminates any such profit sharing might be distasteful but the best option.
References
Latimer, P. (2012). Australian Business Law 2012. CCH Australia Ltd.
Mitchell, R., O'Donnel, a., Marshall, S., Rmsay, I. & Jones, M. (2013). Law Corporate Governance and Partnerships at Work. Ashgate Publishing Ltd.
New South Wales Partnership Act. (1892).
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