CHAPTER IV. RIGHT TO SHARE PROFITS AND DIVIDENDS. principle. THE acquisition of gain and its division among the members form General The share to which each partner is entitled, and the periods at which a division of the profits is to take place, generally are, and always ought to be, specifically fixed in the instrument of formation, or in some written agreement subsequently signed by all the partners. When this, as sometimes happens, has been neglected, questions of a very embarrassing kind are apt to present themselves. In the absence of any written agreement, the proportion in which the several partners are to share profits is a question of fact which it properly falls within the province of a jury to determine, having regard to the whole circumstances of the case and certain rules of law (a). As has been seen, it is a fixed principle of law, founded on the most equitable considerations, that wherever a partnership has been proved to exist, every partner is entitled to at least some share of the profits. Beyond this, there is a legal presumption for equality among all the partners, which, in dubio, ought to form the rule of division (b). But as this is merely a (a) Campbell's Trs. v. Thomson, 1829, 7 S. 650, as revd. 5 W. and S. 16, 7 Bligh 432; Aberdeen Town and County Bank v. Clark, 1859, 22 D. 44. See p. 135. See also Bruce v. Ogilvie, 1813, House of Lords, 1 Dow (b) Fergusson v. Graham's Tr., Shares and sion ought to contract. periods of divi be fixed in the In absence of such provisions, the propartner's share for a jury. portion of each is a question Suggestions which have been made on this subject. Jury trial the only feasible mode. presumption, it may be overcome by evidence prout de jure of an agreement to share profits in some other manner, as is often the case when the contributions of skill, of capital, or of connection and interest are unequal. In such cases it has been said that the extent of the partners' interests in the concern, or, in other words, their rights to share profits, ought in the absence of express stipulations to be measured by the amount of their respective contributions; and there can be no dispute as to the equity of this principle considered in the abstract (a). But in practice it will be found extremely difficult of application; for in disputed cases it is often impossible to ascertain the proportionate value of the contributions made by the partners respectively. If, indeed, nothing were to be deemed contribution but money or goods, the problem would become one of great simplicity; but it is evident that such a view would be fraught with absurdity and injustice, since connection, interest, skill, business habits, and many other personal qualifications, are often of far more importance than pecuniary contributions. It has also been suggested that the extent to which a partner is liable inter socios to defray partnership losses might be fairly taken as the measure of his right to share profits; yet it is obvious that this cannot be relied on as an invariable rule, for it sometimes happens that a person possessed of great skill in a particular line of business, but of no capital, enters into a partnership with wealthy persons, on the express condition that, in consideration of his operative skill, he shall receive an equal share of profits, while the losses shall be entirely, or to a great extent, borne by them (b). These considerations serve to show how peculiarly fitted such questions are for the determination of a jury, and how important it is that nothing calculated to throw light on the matter should be excluded from consideration. Hence the jury are entitled to look at every available kind of evidence, and ought to return their verdict on a sound construction of the whole circumstances of the case (c). 1821, 1 S. 122; 1825, 4 S. 119; House (a) Struthers v. Barr, supra. Farrar v. Beswick, 1 M. and Rob. 527; M'Gregor v. Bainbridge, 7 Ha. 164; Benford v. Dommett, 4 Ves. 756; Finlayson v. Rutherford, 1830, 8 S. 374. (c) See Stewart v. Forbes, 1 Mac. and G. 137, and preceding cases. Yet it is important to observe, that they have no right to make a contract for the partners, or to apportion the profits according to any rule which they may consider equitable in the circumstances of the case; neither are they entitled to give effect to what may have been the intention or understanding of some of the partners, however reasonable it may appear, unless they are satisfied that such intention or understanding was raised to a contract by receiving the consent of the others (a). Their duty is to inquire, in the first place, whether any special contract or arrangement was ever made on the subject; for, in the absence of this, the presumption of law for equality ought to be taken as the true exponent of the intentions of the partners at formation. But if they shall be satisfied that the matter was specially provided for, it will then become their duty to endeavour to ascertain what the special provisions were (b). It is sometimes said that, according to the existing law of Scot- Presumption for equality. land, there is no presumption for equality in sharing profits; and the case of Campbell's Trustees v. Thomson (c), as reversed in the House of Lords, is appealed to in support of this proposition. But when the decision in that case is taken in connection with the other Scottish authorities, and the circumstances in which it was given, it seems merely to amount to this, that while there is a presumption for equality, that presumption is not juris et de jure, but may be rebutted by evidence to the contrary, and that the question is not one to be decided by abstract legal presumptions, but by laying the whole facts of the case before a jury (d). This view derives strong confirmation from the consideration that such is, and always has been, the law of England (e). The same rules hold good in partnership confined to a single transaction, commonly called a joint adventure (ƒ). (a) Struthers v. Barr, 1821, 1 S. 122; as revd. 1826, 2 W. and S. 153. (b) See Steward v. Forbes, 1 Mac. and G. 137; Webster v. Bragg, 7 Ha. 159; Copland v. Toulmin, 7 Cl. and Fin. 349. (c) 1829, 7 S. 650; revd. and remitted for trial by jury, 1831, 5 W. and S. 16, 7 Bligh N. S. 432. (d) 2 Bell's Com. 645-6. See antea, p. 136. (e) See Lindley, p. 573 et seq. (f) See Robinson v. Anderson, 20 Beav. 98; Webster v. Bray, 7 Ha. 159; Hauslip v. Kitton, 8 E. Jur. N. S. 835; M'Gregor v. Bainbridge, 7 Ha. 164, note; Hobkin v. Hog, 1715, Robert. Ap. 147, rev. judgment of Court of Session; Keith v. Penn, 1840, 2 D. 633. An arrangement once made is presumed to continue. Company debts must be paid before division of profits. Partner must pay his debts to the company before he can claim profits. Profits payable by trustees. If an agreement for division of profits in a particular manner is established to have once existed, it will be presumed to continue until the contrary is made out. Thus, where the shares of partners were originally equal, proposals made by one of them for an alteration in the proportions, but not definitely assented to, were held of no importance (a); and where partners retire, it is presumed that their shares have been taken by those who remain, in the proportions in which these last previously held shares in the concern (b). When, however, a second contract altering the proportions in which profits are to be divided, is fairly established, full effect will be given to its provisions (c). Before division, or at least payment of profits, all debts due by the concern ought to be paid off or properly provided for, and arrangements should be made to defray the current expenditure. This mode of procedure, which is only fair to the company creditors, will be found in the end most conducive to the interests of the partners, and is consequently presumed in law to have been their intention. Thus a clause in the contract of a shipping copartnery, relative to the division of free profits,' was held to imply gross profits under deduction of repairs on the vessels, etc., and of a sum equivalent to the loss caused by their annual deterioration from age, although a limited sinking fund had been provided for upholding the number of vessels necessary for carrying on the company's trade, and meeting any risks which the company may have incurred,' etc. (d). Furthermore, a partner cannot claim any share of profits while he remains debtor to the concern in contribution, indemnity, or any other admitted claim, unless indeed some arrangement has been made by which such claims are to be allowed to lie over for the time. When his share of profits exceeds his liabilities, he will be entitled to the balance after deduction of the latter (e). Trust funds are sometimes improperly invested by the trustees (a) Struthers v. Barr, 1821, 1 S. 122; as revd. 1826, 2 W. and S. 153. (b) Robley v. Brooke, 7 Bligh N.S.90. (c) Buchanan v. Lennox, 1838, 16 S. 824. See, as to the rigid construction of contracts in relation to this matter, Samuel and Co. v. Brown, 1842, 4 D. 1518; Ballandene v. Glasgow Union Bank, 1839, 1 D. 1170. (d) Flowerdew v. Dundee Ship. Co., 1831, 9 S. 373; aff. 1832, 6 W. and S. 160. (e) Whytlaw v. Coats, 1800, 4 Pat. App. 148. in the business of copartneries of which they are members; and when this is the case, they are liable in payment to the beneficiaries of the profits made upon such investments. In computing these, there must be taken into account not only the input capital of the partners, but all other funds obtained on loan or otherwise, and invested in the partnership business; and the proportion which the trust monies bear to the whole funds so employed, regulates the share of profits to be made over to the beneficiaries. Periodical docquets, fixing the interests of the partners inter se, are of no importance (a). division. When no agreement has been made in the partnership contract Times of as to the particular time at which profits are to be divided, and the amount to be divided at any given time, it would seem that the will of the majority will determine such matters (b). But this only holds true within certain limits; for when all company obligations and debts have been settled, every partner would seem entitled to insist for at least an annual division of profits, and a refusal to comply with such a demand would seem to form a good ground for dissolution. may be ex As a general rule, it may be laid down that the right to share How partners profits is indefeasible in every partner, so long as the partnership cluded from relation continues. Provisions may, no doubt, be inserted in the profits. contract, empowering a majority to exclude a partner from his share of profits for a time, as a penalty for transgressing some specified rule, just as they may be empowered to expel him from the society altogether; but the exercise of such powers will be very narrowly scrutinized by the tribunals, and will not be sustained where any of the prescribed provisions have not been rigorously adhered to, or where there is the least reason to suspect corrupt motives (c). Bye-laws imposing forfeiture of profits as penalties are only valid where they form part of the original contract, or where they have received the assent of every member after the company was brought into existence (d). (a) Cochrane v. Black, 1857, 19 D. 1019. (b) See Stevens v. South Devon Ra. Co., 9 Ha. 327; Browne v. Monmouthshire, etc. Co., 13 Beav. 32; Powers of Majorities, antea. (c) See, as to this, Harris v. North Devon Ra. Co., 20 Beav. 384; Stubbs (d) Adley v. Whitstable Company, |