Page images
PDF
EPUB

for wrongs

Every partner is liable jointly with his co-partners and Liability also severally for everything for which the firm while is he a partner therein becomes liable under either of the two last preceding sections.

joint and several.

employment of

If a partner, being a trustee, improperly employs trust- Improper property in the business or on the account of the partnership, no other partner is liable for the trust-property to the persons trust-probeneficially interested therein:

Provided as follows:

perty for partnership pur

(1) This section shall not affect any liability incurred by poses. any partner by reason of his having notice of a breach

of trust; and

(2) Nothing in this section shall prevent trust money from being followed and recovered from the firm if still in

its possession or under its control.

ners.

The law with regard to the liability of a firm of solicitors for Solicitors the default of a partner who has been intrusted with money for as partthe purpose of investment has been considered in a great many cases. Where money is received by a partner for the purpose of being invested on a particular security the firm is liable, as this is regarded as within the ordinary business of the firm. Where, on the other hand, one of a firm receives a sum of money from a client for the general purpose of investing it as soon as he can meet with a good security, this is not inside the ordinary business of the partnership, as such a transaction is not part of the business of solicitors, but of scriveners. The firm, however, may be rendered liable by a course of conduct of the other partners (1).

It has been laid down that it is within the ordinary everyday practice for a firm of solicitors to receive moneys from a client for the purpose of satisfying the demands of the creditors with whom they are employed to arrange; to receive from a client or executor moneys sometimes to pay the demands of Government, sometimes to pay legatees, and sometimes to pay into Court; in short, to receive money for any specific purpose connected with the professional business they have in hand (2). It must, however, be borne in mind that the liability of a

(1) A firm is liable for frauds committed by one of its members while acting for the firm, and in transacting its business; and the innocent partners cannot divest themselves of responsibility on the ground that they did not authorize the fraud. Lindley on Partnership, 5th ed.

VOL. II.

p. 150.

(2) Blair v. Bromley, 5 Hare, 542; 2 Phil. 354; Harman v. Johnson, 2 E. & B. 61; Earl of Dundonald v. Masterman, L. R. 7 Eq. 504; Plumer v. Gregory, L. R. 18 Eq. 621; Cleather v. Twisden, 28 Ch. Div. 340; and see Brett's Leading Cases, 77, et seq.

2 T

Persons liable by "holding out."

Admissions

firm for the acts of its co-partners is not so extensive as nonlawyers sometimes imagine. The act of one partner to bind the firm must be necessary for the carrying on of its business. If it was only convenient, or only facilitated the transaction of the business of the firm, that is not sufficient in the absence of evidence of sanction by the other partners. Even necessity is not sufficient if it be an extraordinary necessity. What is necessary for carrying on the business of the firm under ordinary circumstances, and in the usual way is the test (1).

It should also be borne in mind that a man may by his conduct in holding himself out as a partner, and leading other people to suppose that he is a member of a partnership, incur the liabilities of a partner, though he does not share either the profits or the losses of the business. This is an illustration of the doctrine of estoppel of which we shall speak hereafter (2) (post, p. 862). The provisions of the Partnership Act, 1890, on this subject and the kindred subject of admissions and representations of partners (sects. 14 & 15), are as follows:

(1) Every one who by words spoken or written or by conduct represents himself, or who knowingly suffers himself to be represented, as a partner in a particular firm, is liable as a partner to any one who has on the faith of any such representation given credit to the firm, whether the representation has or has not been made or communicated to the person so giving credit by or with the knowledge of the apparent partner making the representation or suffering it to be made.

(2) Provided that where after a partner's death the partnership business is continued in the old firm-name, the continued use of that name or of the deceased partner's name as part thereof shall not of itself make his executors' or administrators' estate or effects liable for any partnership debts contracted after his death.

An admission or representation made by any partner concernand repre- ing the partnership affairs, and in the ordinary course of its of partners. business, is evidence against the firm.

sentations

Notice to acting partner to be notice to the firm.

What is sufficient notice to a firm, and what consequences result from changes in a firm? These questions were settled by the Partnership Act, 1890, as follows:

Notice to any partner who habitually acts in the partnership business of any matter relating to partnership affairs operates

(1) Lindley on Partnership, 5th ed. p. 126, cited by North, J., in In re Cunningham & Co., Limited. Simpson's Claim, 36 Ch. D. 539.

(2) Lindley on Partnership, 5th ed. 40; Scarf v. Jardine, 7 App. Cas.

345.

as notice to the firm, except in the case of a fraud on the firm committed by or with the consent of that partner.

A person who is admitted as a partner into an existing Liabilities firm does not thereby become liable to the creditors of the firm for anything done before he became a partner.

A partner who retires from a firm does not thereby cease to be liable for partnership debts or obligations incurred before his retirement.

A retiring partner may be discharged from any existing liabilities, by an agreement to that effect between himself and the members of the firm as newly constituted and the creditors, and this agreement may be either express or inferred as a fact from the course of dealing between the creditors and the firm as newly constituted.

of incoming

and outgoing

partners.

of con

A continuing guaranty or cautionary obligation given either Revocation to a firm or to a third person in respect of the transactions of a tinuing firm is, in the absence of agreement to the contrary, revoked as guaranty to future transactions by any change in the constitution of the by change firm to which, or of the firm in respect of the transactions of which, the guaranty or obligation was given (1).

The release of one debtor by the substitution of another is called "novation' '—a term borrowed from the Roman law. A common instance of novation in partnership cases is where, upon the dissolution of a partnership, the persons who are going to continue in business agree and undertake, as between themselves and the retiring partner, that they will assume and discharge the whole liabilities of the business, usually taking over the assets; and if in that case they give notice of that arrangement to a creditor, and ask for his accession to it, there becomes a contract between the creditor who accedes and the new firm, to the effect that he will accept their liability instead of the old liability, and, on the other hand, that they promise to pay him for that consideration (2).

in firm.

Novation.

articles.

The rights and obligations of partners, so far as they concern Partnerthe members of the partnership, are generally regulated, at least, ship to some extent, by "partnership articles." With regard to the construction of these articles the following important principles should be borne in mind (3): (1) they are not intended to define the rights and obligations of the partners, which, so far as they are not expressly declared, must be determined by general principles; (2) they must be construed with special

18.

() 53 & 54 Vict. c. 39, ss. 16, 17,

(2) Scarf v. Jardine, 7 App. Cas.

345, 351.

(3) See further, Lindley on Partnership, 5th ed. p. 406, et seq.

Variation

reference to the end and object of the partnership so as to defeat fraud and unfair dealing, and they may be waived by the consent of all the partners, which may be inferred from conduct, if not declared by express words.

The following are the provisions of the Partnership Act, 1890, with regard to

Relations of Partners to one another.

The mutual rights and duties of partners, whether ascertained by consent by agreement or defined by this Act, may be varied by the consent of all the partners, and such consent may be either express or inferred from a course of dealing.

of terms of

partner

ship.

Partner

ship pro

perty.

Property bought with part

nership

money.

into per

Partnership property is defined for the purposes of the Act as "all property and rights and interests in property originally brought into partnership stock or acquired, whether by purchase or otherwise, on account of the firm, or for the purposes and in the course of the partnership business," and such property must be held and applied by the partners exclusively for the purposes of the partnership and in accordance with the partnership agreement (1).

Unless the contrary intention appears, property bought with money belonging to the firm is deemed to have been bought on account of the firm.

Where land or any heritable interest therein has become Conversion partnership property, it shall, unless the contrary intention appears, be treated as between the partners (including the representatives of a deceased partner), and also as between the heirs of a deceased partner and his executors or administrators, as personal or moveable and not real or heritable estate (2).

sonal estate of land held as partnership property.

A very important change is introduced into the law with regard to procedure when a judgment has been obtained for a partner's separate debt.

(1) 53 & 54 Vict. c. 39, ss. 19, 20. Sect. 20. Sub-sect. (2) provides that the legal estate or interest in any land, or in Scotland the title to and interest in any heritable estate, which belongs to the partnership shall devolve according to the nature and tenure thereof, and the general rules of law thereto applicable, but in trust, so far as necessary, for the persons beneficially interested in the land under this section.

(3) Where co-owners of an estate or interest in any land, or in Scotland of any heritable estate, not

being itself partnership property, are partners as to profits made by the use of that land or estate, and purchase other land or estate out of the profits to be used in like manner, the land or estate so purchased belongs to them, in the absence of an agreement to the contrary, not as partners, but as co-owners for the same respective estates and interests as are held by them in the land or estate first mentioned at the date of the purchase.

(2) 53 & 54 Vict. c. 39, ss. 21, 22.

against

Sect. 23 provides that after the commencement of the Act a Procedure writ of execution shall not issue against any partnership pro- partnerperty except on a judgment against the firm. (1)

debt.

ship proA series of rules by which the interests of partners in the perty for a partner's partnership property, and their rights and duties in relation to separate the partnership are to be determined, subject to any agreement, judgment express or implied, between the partners, have been prescribed by the Partnership Act, 1890, s. 24. These rules are as follows:(1) All the partners are entitled to share equally in the Rules as capital and profits of the business, and must contribute equally towards the losses whether of capital or otherwise sustained by the firm. (2) The firm must indemnify every partner in respect of payments made and personal liabilities incurred by him(a) In the ordinary and proper conduct of the business of the firm; or,

(b) In or about anything necessarily done for the preservation of the business or property of the firm. (3) A partner making, for the purpose of the partnership, any actual payment or advance beyond the amount of capital which he has agreed to subscribe, is entitled to interest at the rate of five per cent. per annum from the date of the payment or advance.

(4) A partner is not entitled, before the ascertainment of profits, to interest on the capital subscribed by him.

(1) The further provisions of the section on this subject are as follows:

(2) The High Court, or a judge thereof, or the Chancery Court of the county palatine of Lancaster, or a county court, may, on the application by summons of any judgment creditor of a partner, make an order charging that partner's interest in the partnership property and profits with payment of the amount of the judgment debt and interest thereon, and may by the same or a subsequent order appoint a receiver of that partner's share of profits (whether already declared or accruing), and of any other money which may be coming to him in respect of the partnership, and direct all accounts and inquiries, and give all other orders and directions which might have been directed or given if the charge had been made in favour of the judgment creditor by the partner, or which the circumstances of the

case may require.

(3) The other partner or partners shall be at liberty at any time to redeem the interest charged, or in case of a sale being directed, to purchase the same.

(4) This section shall apply in the case of a cost-book company as if the company were a partnership within the meaning of this Act.

(5) This section shall not apply to Scotland.

See as to previous law: Whetham v. Davey, 30 Ch. D. 574, where the form of order is considered and given, pp. 579, 580; Helmore v. Smith, 35 Ch. D. 436; Lindley on Partnership, 5th ed. p. 356, et seq.; and as to charge on money in hands of receiver: Kewney v. Attrill, 34 Ch. D. 345. The present section is said to have been suggested by Mr. Justice Lindley: Pollock's Digest of the Law of Partnership, 5th ed. p. 68.

to interests and duties

of partners subject to special agreement.

« EelmineJätka »