nothing done by them at the meetings which they attended which can create a liability if the deed does not.

That deed contains no authority, I think, to pledge the credit of the defendants; but it is said that by executing the deed the defendants became partners as regards third persons, by reason of the interest they take in the net profits, and that the business carried on under the deed was the business of the defendants and the other creditors of the third part.

The provisions of the deed are carefully analyzed and sufficiently set forth in the judgment of the Master of the Rolls, which is with the *70] papers before your *Lordships; I refer to that judgment for the provisions of the deed. (a) I think that no new trade or concern was carried on. It seems to me that it was the old concern, though carried on under the management of trustees, and under a new name; that it was to be carried on by parties in whom the Smiths on the one hand, and the general body of creditors on the other hand, placed confidence, that is to say, by the trustees; but that it was the business of the Smiths; that the creditors who had rights against the Smiths, which they might have enforced by legal proceedings, in effect, in consideration of the arrangement that the trade for the future should be carried on by the trustees, and not under the management of the Smiths, agreed to forego their ordinary rights as creditors against their debtors, and to receive a sum equivalent to what was the amount of their debts, when the net profits (that is, as I understand, profits made after satisfying all new debts) should enable the trustees to pay the parties of the third part such equivalent sum.

The business was, I think, the business of the Smiths, carried on with a view to their ultimate benefit; and the fact that the creditors had power to put an end to the management by the trustees, and to discontinue the business, and to require the property, the capital, to be sold and divided amongst them in satisfaction or part satisfaction of moneys which, according to my understanding of the deed, and by virtue of the deed of arrangement, became a charge on the property of Messrs. Smith, does not vary the case so as constitute the creditors of the third part partners in the business. The creditors of the third part had no power, I think, by virtue of the deed, to take upon themselves the management

of the business.

*71] *Supposing that I am wrong in considering the business carried on under the deed as the old business under a new name, and that the business is to be considered a new business, I think the creditors, parties to the deed of the third part, may be likened to parties who had made loans to the new partnership to the extent of their debts against the old concern, and that, by stipulating to receive payment of their loans out of the net profits, the amount to be received not varying with the rate of the net profits so as to give them any interest beyond the amount of their loan, they did not render themselves partners. That was the view taken by His Honour the Master of the Rolls with reference to this deed. No doubt, the judgment is to be considered as only deciding that this deed did not constitute a partnership within the meaning of the Winding-up Acts. But the whole reasoning goes to show, that,

(a) In re Stanton Iron Company, 21 Beavan 164.

in the opinion of that learned judge, there was no partnership created by the deed and I adopt that view.

Cases were cited in the argument which appear to me to establish more or less clearly and satisfactorily certain principles of partnership law which do not apply to or govern this case; and it is not, in my view of the case, necessary to go into those authorities; but, as to Owen v. Body, 5 Ad. & E. 28 (E. C. L. R. vol. 31), 6 N. & M. 448 (E. C. L. R. vol. 36), I may say that I think that case only decided, that, where there was fair ground for contending that a certain proposed arrangement might amount to a partnership, a creditor might fairly object to execute the deed, and, so objecting, it was invalid against him, a nonexecuting creditor. See the observations of Maule, J., in M'Alpine v. Mangnall, 3 C. B. 496 (E. C. L. R. vol. 54).

Upon the whole, I think that an agreement by a debtor with his creditors, to apply net profits (if any) in payment of old debts, and on the part of the creditors to give up their rights to be paid out of [*72 the capital, taking their chance of being paid out of the net profits which may be made after payment of new debts, does not create, as regards third persons, a partnership, such third persons not knowing of the arrangement, and not having trusted the creditors, and the creditors not having held themselves out to such third persons as parties liable.

I therefore humbly answer your Lordships' question in the negative. CROMPTON, J.-My Lords, I take the same view of the effect of the deed in this case that was taken of it by my Brother Coleridge in the Court of Exchequer Chamber; and I quite agree in the reasons he there gave for our judgment. Vide 3 C. B., N. S. 564 (E. C. L. R. vol. 91).

It seems to me that the old concern of the insolvents, Messrs. Smith, being put an end to, the creditors, by the deed in question, came to an agreement amongst themselves that the business should be carried on by their agents under a new firm, for their benefit.

Whilst such business was so carried on, and until the amount of the debts was paid off, or until they should choose to discontinue the business, the net income of the business was, by the express words of the deed, to be "divided amongst the joint creditors in rateable proportions according to the amount of their respective debts."

I cannot doubt that an arrangement so to carry on a business with such a participation of profits, renders the parties liable as partners to persons furnishing goods or giving credit, according to the course of trade, to the firm.

The question, therefore, seems to be whether the defendants in error were right in the construction they put on this deed. The plaintiffs in error contended *that the real effect was, that the trustees were trustees for the Smiths, that the property was to be theirs, and [*73 that it was their assent only which invested the trustees with their trust. But the Smiths were to have no management or control in the new concern; they were not to be summoned to any meetings or to have any right to interfere in the slightest degree with the management of the concern, or with the disposal of the property, or with the duration of the trade. If by any chance the amount of the twenty shillings in the pound should be ever realized, they might take the trade and any capital left to themselves, but the trustees were not to carry on the business for them. It seems strange to say that they were interested in the profits

to arise whilst the business was being carried on under the deed, none of which profits they were to touch, but which were to go in discharge of debts to which they were no longer liable. They had in effect sold the business with its capital for so long a time as the creditors chose to carry it on for their own benefit, or until the amount of their abandoned debts should be realized. The creditors preferred to have the profits of the trade during the duration of the new business, to having the property which would have been distributable amongst them under a bankruptcy; and in effect they purchased the business for the limited time, each creditor giving up so much of his right to a share in the property, and by the deed his share of profits being proportionate to the amount of his abandoned debt. "The new provisions," that is, the payment from the profits, are expressly declared "to be a satisfaction;" and the formal words of immediate release are not included merely from fear of some technical difficulty as to collateral remedies; but, as between the Smiths and the individual creditors, the debts are entirely destroyed.

*For whom, then, are the trusts as to the profits whilst the busi*74] ness lasts? Surely, not for the Smiths, who can have nothing out of the business of the firm in question whilst carried on by the trustees. Their assent was necessary, and the bargain was a good one probably for them; but they really have no more to do with the business than a solvent firm whose business is purchased,-as put by my brother Coleridge.

It need not be discussed whether the Smiths might be made liable as partners by reason of their very remote interest in getting back the business for themselves after payment of the twenty shillings in the pound. That business, if ever they were to get it, was not, however, a business to be carried on under the deed; for, there is no trust for carrying on the business when their time arrives. The trust is only to carry it on whilst the creditors are interested, and choose to have it continued. It is difficult to my mind to see that the Smiths can be termed partici pators in the profits, as they take nothing from the fund to which the new creditors of the firm may look.

Stress was laid upon the provisions of the deed wherein it is said that the moneys are to be deemed the property of the two Smiths. When looked at, however, this provision points only to the joint and not the separate property, and regulates the distribution amongst the joint creditors. And, even if that were not so, such a provision could not alter the real nature of the transaction, according to which the property was by a binding deed to be traded with for the benefit of the creditors, and might be entirely lost or disposed of by them, and could not be withdrawn or touched by the Smiths so long as the creditors chose to carry on the business for their own benefit; and the only interest of the Smiths was in the somewhat remote contingency of the payment of the twenty shillings in the pound.

*It cannot alter the question, that the legal property was vested *75] in trustees for the creditors. The creditors had the equitable property and the full control over it vested in them, whilst the partnership lasted; and the trustees, as trustees, had no beneficial property whatsoever; and it can be of no consequence that the legal property in the capital of a concern is vested for convenience in trustees or managers. But it is said that the trustees are the persons really liable. If they

are liable, they must be liable as holding themselves out to the world, as it is called, as the real contractors. As creditors, two of them are in the same position as the rest of the creditors; but, taking them to be trustees merely, they could only be liable as the ostensible partners, as they really have no interest as trustees. They seem to me, however, as between them and the creditors, to be the mere agents of the creditors. The creditors have the most entire control of the whole concern. They are expressly empowered to give any "orders or directions for the present or future management;' they are to direct the continuance or putting an end to the business, and to make any composition as to debts and as to the property; and they are the only persons to whom the managers can look for funds, in the event of the property left in the concern being lost or insufficient. These managers seem to me not to differ in any respect from the managers of a joint stock company. Suppose such a company to have started before the Joint Stock Companies Act, and to have gone on at common law, there must have been the same arrangements as here for meetings when the number was too large for each partner or member to act individually; and they must have had managers to act for them, in whom the legal property might probably be vested for convenience. Though called trustees in the deed, the *persons so intrusted were really managers, and, as far as the [*76 management of the concern went, the mere agents of the creditors, who had the entire control over them.

In what, then, does the present case differ from that of ten persons setting up a new business in the names of two or three managers, they having to divide all the profits? The present case, indeed, is not even one of a trading in the names of the managers, but in a name which may comprehend any partners; and the clause of the deed so much relied on by the plaintiffs in error, which stipulates that they shall carry it on in the name of The Stanton Iron Company, must surely be quite inoperative as to any limitation of the liability to such persons, when the rule of law is so well recognised, that no agreement amongst partners can prevent the liability to third persons arising from the participation of profits. I can see no hardship, under this particular deed, in the creditors who are to have the profits being liable for the funds and goods from which the profits are to be made, except the general hardship of large liability from small investments, attempted to be remedied by the Limited Liability Acts.

The only authority at all at variance with the liability of the creditors, seems to be that of M'Alpine v. Mangnall, in which case, however, the point did not arise, and does not seem to have been very fully discussed, and in which it seems very probable that the deed was one according to which Bridson was himself to carry on the trade under inspection. On the other hand, Owen v. Body, and the recognition of that case by the Court of Common Pleas in Janes v. Whitbread, with the very decided approbation of Mr. Justice Maule in that case of the doctrine as explained by him, are in favour of the plaintiffs below.

[*77

* I cannot think that the limit of the amount which the parties are ultimately to receive, or the limited length of time during which the partnership may be carried on, or the object being to get more in payment of the debts than they would otherwise have done, or the fact that the debts might be paid and the interest in the profits of any one C. B. N. S., VOL. IX.-5

or more of the creditors might cease, can at all lessen the liability of the creditors. It seems to me, that, whilst the business is carried on for their profit under their control, they are liable for the debts of the concern upon very well-settled principles of law, which I think it would be dangerous to interfere with, except by an act of the legislature.

For these reasons, I answer your Lordships' questions in the affirmative.

WILLIAMS, J.-My Lords, I am of opinion that the defendants in this case are liable as acceptors of the bills of exchange.

The consideration of the case divides itself into two inquiries,-first, did the creditors who executed the trust-deed become partners in the business carried on by the trustees under the provisions of the deed? Secondly, if they did so, are they liable as acceptors of the bills on which these actions are brought?

The first question plainly depends on the construction of the trustdeed. On the part of the plaintiff it was argued, that the trust is for the benefit of the creditors; that the business is to be carried on solely for their benefit until their debts shall have been paid; and that the trustees are to carry it on under the authority of the creditors, as their agents. On the part of the defendants, it was argued that, the trust was rather for the benefit of the Smiths, the debtors, to enable them better to realize the assets to pay the *creditors in full, and to *78] obtain a surplus for themselves; and, further, that the authority conferred on the trustees by the deed, to deal with the plant and other property necessary for the conduct of the business, and also to carry on the business itself according to the provisions of the deed, is conferred on them by the Smiths, and not by the creditors; so that the trustees ought to be regarded as agents for the Smiths, and not as agents for the creditors.

But I am of opinion that these latter arguments are not well founded. It appears to me that the true construction of the deed is, that the creditors in effect buy the goodwill of the business, and the means for carrying it on for their own benefit until enough shall have been earned to pay their debts in full, at the price of consenting to accept the provisions of the deed in full satisfaction of their claims against the Smiths, and of entering into the covenant not to sue them in respect thereof. The business is then to be carried on, not under the old firm of "Benjamin Smith & Son," but under the new firm of "The Stanton Iron Company." The profits are to be appropriated exclusively to the payment of the debts of the creditors until they are paid off; and the trustees are placed under the control of the general body of creditors, who may, at their pleasure, alter, add to, or diminish, the powers, trusts, and provisions of the deed, and may (in effect) appoint new trustees, and may direct that the works shall be discontinued; and, in such case, the trustees are to wind up the business, and, after paying all the expenses and liabilities, divide the clear residue amongst the creditors rateably, in proportion to their respective debts. The effect of all these provisions appears to me to be, that the creditors, having by the sacrifice of their claims on the Smiths acquired the means of carrying on a trade for their own benefit, arrange the *mode of doing so by constituting a *79] certain number of themselves managers of the concern under the name of trustees, who are to carry it on subject to the control of the