INTRODUCTORY CHAPTER II.

ON THE COST-BOOK SYSTEM.

It appears to the writer to be almost impossible to give a succinct definition of the Cost-Book system, and it will not be attempted here. It is sufficient for present purposes to say that it is a customary form of partnership for working mines within the Stannaries, according to which each partner is at liberty to transfer his shares without the consent of his co-partners; any partner is at liberty to determine his liability at any time by relinquishing his shares; no fixed capital is necessary, but money is called up as it is wanted; the partnership affairs are managed by an agent called

purser, subject to the control of the partners in their periodical meetings; such purser and any one of the partners is the agent for and can bind. the whole body in respect of any contract relating to the carrying on of the mine other than transactions in the way of borrowing money; the accounts are open to the inspection of the partners at such meetings as aforesaid; and lastly, the agreement into which the partners have entered, the receipts and expenditure of the mine, the names of the shareholders, their respective accounts with the mine, and the transfers of their shares are entered in a book or books called "the Cost-Book."

The judgment of the present Master of the Rolls in the case of "In re the Bodmin United

Mining Company" (23 Beav., 370) contains the following important remarks upon the Cost-Book system :

"It is material to ascertain the terms on which this mine was conducted. In the first place it was carried on on the Cost-Book principle. What is this principle? Partnerships of this description have been brought before the attention of the Court very frequently of late years; but what is included in this expression has never been, so far as I am aware, defined. It is extremely vague, and I concur with Lord Justice Knight Bruce in saying that this is no recognised principle of partnership which, in the absence of evidence, the Court is bound to understand. It certainly does not depend on immemorial custom, the institution and practice being comparatively modern. There may have grown up, since these partnerships have been in practice, a custom understood amongst the shareholders in them, which would bind the parties to it; but if any such exists, none such is proved before me. Mr. Smirke's book and Mr. Collier's book, which have been cited, even if they could be admitted as evidence in this case, do not go beyond what is admitted by the counsel for the company's official manager to be the custom or practice of these mines, viz., that as between the existing shareholders, and apart from their liability to the then existing creditors of the concern, any shareholder may retire on paying up all the calls then due from him at that time. I am of opinion, therefore, that in absence of evidence there is nothing to indicate with precision what, with reference to the point before me, is includsd in the terms "Cost-Book principle," and that the parties who join in carrying on and working a mine may by contract, either expressed in writing or agreed

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upon by parol, add to, alter, or qualify as they please whatsoever may be necessarily included in the term "Cost-Book principle," and may interpret these words to have any particular meaning they may please to agree upon."

The value of this judgment consists in the fact that it states clearly the point of view from which the Cost-Book system is regarded by the superior Courts, viz., that it is not a judicially recognised set of customs, and that where the customs are disputed, the superior Courts will not act without evidence to show what these customs are; and this was the view taken by the Lords Justices in the recent case of In re Prosper United Mining Company, exparte Palmer (reported on a question of costs, L. R. vii. Ch. 286).

With great deference to the authority of so learned a judge as the Master of the Rolls, the writer, though not for an instant wishing to contend that the Cost-Book system, as such, ought to be taken judicial notice of by the superior Courts in the absence of evidence to show what its true nature is, submits that the system is of a somewhat remoter origin than might be inferred from his lordship's words, quoted above; that in one or two of its leading characteristics it is perfectly well known and understood in the west of England, and may be traced back as existing as a customary form of partnership at least to the days of James II., and that there is a great difference between partnerships really working on the customary principle of Cost-Book and partnerships pretentiously calling themselves "Cost-Book companies" for the purpose of evading the Legislature and working by rules of their own, differing from those universally implied by the custom of the west of England.

It appears that mining partnerships are commonly spoken of as carried on upon the Cost-Book system in two cases, i. e., they are either made to rely entirely upon the unwritten law or custom, which in its material features has been sketched above (and this, the writer apprehends, is the case with most mines in the west of Cornwall), or they are subjected to an express code of rules and regulations which may either be mere utterances of the custom, or it is apprehended, at any rate since the passing of the Companies Act, 1862 (of which hereafter), may to some extent vary or add to it, and yet not be necessarily illegal.

It remains, then, to be seen how far such partnerships, whether worked by the pure custom or by such rules and regulations as above-mentioned, are in harmony with the common law of partnership, and how far they may contravene it without illegality.

The lex mercatoria, or law merchant (which, although formerly thought to have a distinct existence, is now firmly established as part of the common law of England) distinctly recognises partnerships determinable at will, and it is quite in accordance with the common law that partnerships should be formed with provisions entitling a partner to retire from the business under special circumstances, and thereby, upon due notice given of his retirement to the creditors or customers of the partnership, get rid of all further liability, remaining liable, of course, for all debts owing up to the date of his retirement. A common law partnership may entrust the management of affairs to any one of their body, such manager or any of the partners may bind the firm in respect of all contracts necessary for carrying on the business or within the scope of the partnership articles, and a

member of a common law partnership is not liable to repay money lent to any other member of it in the way of business, if the power to borrow money should happen to be neither expressly contained in the partnership articles nor inferrible from the nature of the business to which the partnership relates, and all partners have at common law a right to inspect the partnership accounts at reasonable times. In all the above particulars it appears that partnerships said to be worked upon the Cost-Book system may be in harmony with the common law.

The chief points in which a Cost-Book partnership differs from a partnership at common law are these:

1. It must have for its object the working of mines or working for metallic minerals, and nothing else.

2. Any one partner in it may transfer his shares without the consent of his co-partners, 3. Capital may be raised at any time by way of calls without the consent of every individual member of the partnership.

4. It is essentially conducted upon a ready money system, and does not, under any circumstances, admit of a power in any one member of the partnership to bind another, either at law or in equity, in respect of the repayment of borrowed cash. (It will, however, appear hereafter that this proposition must not be taken as being quite indisputable.)

5. It permits a partner to retire and get rid of further liability without the consent of his co-partners and without any special notice. to creditors or customers.

These appear to the writer to be, in logical