COMPENDIUM

OF THE

LAW AND PRACTICE

ΟΡ

JOINT STOCK COMPANIES,

And other Associations.

PART I.

CHAPTER I.

HISTORY OF LEGISLATION.

chapter, to

of statutory

statutory

knowledge of

THE object of the following chapter is to give a short object of history of the origin, progress, and existing state of give history the Statutory Law relating to trading companies and law." other public associations. To explain that law, it is History of necessary to state the principles of the common law law involves with respect to private partnerships-for the difficulties common law. which gave rise to the interference of the Legislature were caused by the persistence of the Courts in placing large public companies on the same level as private partnerships, and applying to associations consisting of numerous members, and managed by boards of direc

B

Definition of partnership.

Example in illustration

sition that

tors, rules of procedure and principles of law adapted only to firms composed of a few active partners.

Partners, in the ordinary acceptation of the term, are two or more persons engaged in any joint enterprise; partners, in contemplation of law, are two or more persons engaged in a joint enterprise of such a nature that the law confers on each person engaged an implied authority to bind his companions by any contract which is necessary or proper for carrying the enterprise into effect.

The enterprise which gives so large an authority must be one of which gain is the object; for if it be charitable, or formed for any other purpose whatever except that of making a profit, the adventurers in it neither incur the liabilities nor enjoy the rights of partners (a).

For example, John Jones and Robert Brown comof the propo- bine together to build a school, found a hospital, or participation set up a club, and both engage most actively in the stitutes a undertaking; there is no legal partnership between partnership. them, because neither party can in any event become

in profit con

entitled to any profit. On the other hand, if John Jones, living at Brighton, lend 10,000l. to Robert Brown, on condition that Robert Brown pay him one-half of the profits made in his business as a mer

(a) "Charity," Glenester v. Hunter, 5 C. & P. 62; Lake v. Duke of Argyll, 6 Q. B. 477; "Club," Flemyng v. Hector, 2 M. & W. 172; Todd v. Emly, 8 M. & W. 504; the St. James's Club, 16 Jur. 1075, 2 De G., M. & G. 383; Protection Society," Caldicott v. Griffiths, 8 Exch. 898. incomplete partnerships, see next chapter.

"Trade

As to

chant conducted in London, John Jones is at cɔmmon law a partner of Robert Brown, on the ground that he participates in the profit of the business carried on by Robert Brown.

dormant

It will be observed, that in the example put, John Active and Jones in no way interferes with the business, and partners. does not hold himself out to the world as a partner with Robert Brown, yet the common law invests him with that character even against his will, on the ground that he takes a portion of the fund upon which the creditors have a right to rely for payment (a).

(a) Smith's Mercantile Law, chap. 2; Waugh v. Carver, 1 Smith Lead. Ca. 838; Pott v. Eyton, 3 C. B. 32. As to the fine distinction between participation in the profits and the receipt of a sum proportional to the profits, see ex parte Hamper, 17 Ves. 403; ex parte Hodgkinson, 19 Ves. 291.

Agents and servants receiving by way of salary a portion of the profits, are not partners with their employers, though partners as respects third persons. Ex parte Watson, 19 Ves. Jun. 461; Meyer v. Sharpe, 5 Taunt. 74; Stocker v. Brockelbank, 3 M. & G. 250; Reg. v. Wortley, 15 Jur. 1137; 2 Den. C. C. R. 333; ex parte Hickin, 3 De G. & S. 662; Pott v. Eyton, 3 C. B. 32; Andrews v. Pugh, 24 L. J., Ch. 58; but see now Cox v. Hickman, 8 H. L. C. 268; Reg. v. McDonald, 7 Jur. N. S. 1127.

The principle of law that a receipt of the profits makes the recipient a partner towards third parties, whether he receives such profits in the character of principal or agent, would seem to have been firmly established prior to the case of Cox v. Hickman, 8 H. L. C. 268. This principle was recognized in its fullest extent by the Legislature in the Partnership Law Amendment Act, 28 & 29 Vict. c. 86, of which an abstract is given below, at page 25.

By that Act lenders of money to a trader, in consideration of receiving a portion of his profits. are, under certain conditions,

John Jones in such a case is called a dormant partner, to distinguish him from Robert Brown, the

exempted from the liabilities of partners. This amounts to little less than a statutory declaration that, as stated in the text, the lender of money is at common law a partner. The same statute provides that annuitants standing in a certain degree of relationship to a trader, and agents and servants under all circumstances shall not, by reason only of their receiving a portion of profits be deemed in law to be partners. Here, again, the inference is irresistible that the Legislature considered that, at common law, agents and servants remunerated by, and annuitants receiving their annuities out of profits, were partners, at all events as against third parties.

In opposition to all these authorities stands the case of Cox v. Hickman, decided by the House of Lords. There two iron masters, B. and S. Smith, becoming embarrassed, by a deed, to which their creditors were parties, transferred their business to trustees on trust to carry it on under the name of the Stanton Iron Company, and to pay the net income which was declared to belong to the original owners, in liquidation of the claims of the creditors, and subject thereto, on trust to hold the property for the original owners. Under this state of circumstances, it was held that no partnership existed between the general creditors and the trustees, on the ground, as it would seem, that the trade was not really carried on by persons acting on behalf of the creditors, but on behalf of the sureties; and it was said that participation in profits was certainly cogent, often conclusive, evidence, that the trade in which the profits were made was being carried on in part for or on behalf of the person receiving such profit, but that such evidence might be rebutted; in short, the case seems to have decided that, in order to make a person a partner who is not so ostensibly, it must be shown that he stood in the relation of principal towards the persons acting ostensibly as partners.

An attempt was made to distinguish Cox v. Hickman from