Compromise. and to entrust them to the arbitrament of private persons. We should be led to the conclusion, that no such presumed power exists, on the general grounds that its exercise is nowise necessary for the ordinary purposes of a mercantile association, and is never deemed to be conferred by any contract in which it is not specially mentioned. This view is supported by the English authorities, though it may be said that their non-recognition of the firm has considerably affected the ratio decidendi (a). The Scotch case of Lumsden v. Gordon (b) is not necessarily decisive of the question, for there the Court merely decided that a single partner could not bind the company by a reference; neither is the case of Mackintosh v. Robertson (c) an authority in point, as the question there lay not between partners, but joint-tenants. It may be observed, however, that the view which denies to the majority the power binding the company by reference to arbitration, receives great countenance from the fact that the Legislature has deemed it necessary to confer this power per expressum in the Consolidation Acts applicable to joint-stock companies formed in Scotland for public undertakings. of Second, as to compromise. The question, whether majorities have power to compromise questions affecting company rights, stands in a somewhat different position. So far from this being to be considered an extraordinary power, its exercise may, in numerous cases, be of essential advantage, if not of absolute necessity, for the due management of the company business. There are many debts whose recovery in full is impossible, as there are many obligations whose complete enforcement is hopeless. And many claims may be made against a company, which, though not strictly exigible, ought in common prudence to form the subject of compromise rather than of litigation. To deny, therefore, to a majority the power of conclusively settling such matters on the best terms that can be procured, would in many cases be to sacrifice the common interest to the crotchets of one or two wrongheaded individuals,—a proposition that it cannot be supposed was seriously intended at formation of the association. It would therefore seem that, in the absence of any express provision to the contrary, this (a) Stead v. Salt, 3 Bingham 101. (b) 1728, M. 14567. power of compromise must be presumed to be vested in the majority. We are not, however, aware that the pure question here under consideration has ever been judicially settled either in this country or in England. no power to refer or compromise. A partner has no power to bind the company by referring Partners have claims made either by or against it to arbitration. This is an act of extraordinary administration, which entirely transcends the sphere of general agency, and will receive no effect unless agreed to or ratified by the company. It makes no difference whether the claim has only been made, or whether action has already been raised for its enforcement (a). In like manner, he has no implied power to compromise; for on the common principles of agency, authority to receive payment of debt does not imply authority to settle it otherwise (b). REFERENCE TO OATH. According to the law of Scotland, while a civil action is pending, it is competent for either pursuer or defender to refer the matter in dispute to the oath of his adversary. When this is done, a judicial contract is said to be entered into between the parties, whereby they are held to agree that, renouncing every other mode of proof, the matter in dispute shall be settled by the oath of one of them (c). Reference to contract. oath creates a power to refer to oath? The question never appears to have been settled by any reported Has a partner decision, whether a partner has implied power to bind the firm by agreeing on its behalf that the subject-matter of a lawsuit in which it is a litigant, shall be settled by reference to the oath of the opposite party. We are therefore left to be guided by general principles. In considering this question, a distinction must be made between a reference to oath in initio litis, before a finding or verdict has been obtained on the evidence, and a similar reference after the (a) Lumsden v. Gordon, 1728, M. 14567. See also M'Intosh v. Robertson, 1834, 12 S. 321. 2 Bell's Com. 618. English authorities: Stead v. Salt, 3 Bing. 101; Antram v. Chace, 15 East 209; Strangford v. Green, 2 Mod. 228; Hatton v. Royle, 3 H. and N. 500. Russell on Arbitration 19 sqq. (b) See Nottidge v. Prichard, 2 CI. and Fin. 379; Wallace v. Kelsall, 7 M. and W. 264. (c) Per Lord Justice-Clerk in M Nab v. Lockhart, 1843, 5 D. 1021. General considerations. Have directors this power? company has failed in every other kind of proof. With regard to a reference of the company's cause to the oath of its opponent before a decision has been given on the ordinary evidence, or at least before it has become clear that such evidence is not to be obtained, there seems no reason to doubt, from theory as well as from analogy, that no such implied power exists. In the first place, it is by no means necessary as a means of carrying on the business of the firm; and, like the power to refer to arbitration, it seems altogether to transcend the sphere of ordinary management. It may, no doubt, in many cases be the means of terminating a costly litigation in a cheap, brief, and satisfactory manner; but, on the other hand, it may as often involve the risk of perilling on the veracity of a doubtful opponent an action or defence which could be made good by the ordinary legal machinery. Even law-agents, who are employed to act for litigants in the conduct of a cause, require special authority to enable them to bind their clients by such a reference (a); and though an exception is made in favour of counsel, this arises from the exuberant authority with which, for the client's benefit, they are held to be invested: yet even in their case there is no instance of the exercise of this power in initio litis (b). In fact, it would seem that this is a matter in which, when practicable, all the partners should consult and determine, as it may often equal in importance the question whether a claim or a defence should be simply abandoned. Perhaps an exception may be made in cases where some of the partners are abroad, or where the management of the company is committed to managing partners; but even this is very doubtful. As to directors of incorporated companies, the case is somewhat different; and in the absence of any decision to the contrary, it is probable that when they have full powers to institute legal proceedings for their companies without taking special instructions for that purpose, the power in question will be inferred in cases which do not vitally affect the interests of their constituents. When a final judgment has been given against the copartnery, it would seem that any partner may insist on referring the matter (a) Hardy v. Allan, 1709, M. 12248; and cases immediately following. (b) Gilfillan v: Brown, 1833, 11 S. 548; Currie, 1846, 9 D. 308; Forbes v. Duffus, 19 Jan. 1837, F. C. in dispute to the oath of the opposite party. Here no great harm beyond an increase of expense is likely to ensue; and as it always affords a chance of success, it would be hard to deprive any partner of its benefit, if he conscientiously believes it will be of avail. Besides, as the competency of such a reference is always within the equitable discretion of the Court, there is not much danger of its being abused to the injury of either party (a). When a reference has been made to the oath of a firm or ordinary partnership, the general rule is, that the oaths of all the partners must be taken. This is particularly the case where it is sought to prove by the oath of the company that payment of a debt duly constituted against it had not been made; for in such a case, unless all the partners were examined, it would be impossible to ascertain that some of their number had not made payment without the knowledge of the others (b). And the rule becomes all the stronger after the firm has been dissolved; for here agency having ceased, there is not even ground. for assuming that one partner holds authority to bind the others by deposition (c). Mode of procedure when reference is made to oath of company. the rule. It is not to be inferred, however, from this, that when from Limitations of death it has become impossible to examine all those who were partners at the contraction of the debt, the oaths of the survivors may not be taken on the question of resting owing. To give effect to such a view, would be in many cases to deprive a creditor of his only mode of proof; and although it is possible that payment may have been made by a deceased partner, it is the fault of the survivors that they did not examine into the matter in time, and preserve legal evidence of the fact (d). Where the whole business transactions of a company have been entrusted to the exclusive management of one of the partners, it would seem that the reference may be confined to his oath (e); but if the reference has been made de facto to the oaths of all the (a) Ritchie v. Mackay, 1829, 3 W. and S. 490. (b) M'Nab v. Lockhart, 1843, 5 D. 1014; Broom v. Edgley, 1843, 5 D. 1094, opinion of Lord Justice-Clerk. (c) Nisbet's Trustees v. Morrison, 1829, 7 S. 307; Easton v. Johnston, 1831, 9 S. 440; M'Nab v. Lockhart, (d) Stewart, 1823, 2 S. 483. (e) Gow v. M'Donald, 1827, 5 S. 472, as compared with Kendal v. Campbell, 1766, M. 12351. When busi ness carried on by one partner. Question of constitution of obligation by agency of one partner; and by agency of directors. partners, it will not be exhausted by the deposition of one of their number (a). The case becomes somewhat different when the question is not one of resting owing, but whether a debt or obligation had been constituted, or an agreement had been entered into. Here, if the alleged transaction fell within the agency of a single partner, there seems no reason to doubt that it would be properly referred to his individual oath. And, indeed, it is difficult to see of what use the oaths of the other partners could possibly be, where it is admitted that the transaction was covered by the partner's agency, and it is alleged that it was with him only that it took place. This is a principle of common agency (1). As directors of public companies are the sole agents of the company for the transaction of business, they are undoubtedly the proper parties to whose oath the constitution of obligations against the company should be referred. But it should be observed, that when the obligation sought to be established is one which could only, from the constitution of the company, be undertaken through the joint agency of a board or a majority of directors, or is competent only when it receives the assent of a sine quo non, the reference ought to be in similar terms, unless where the public were entitled in contracting with the company to presume otherwise. The same rule will apply where the transaction alleged could only have been validly entered into with a certain servant or official of the company, e.g. the secretary of a railway, or the cashier of a banking company. When part ner's admis ADMISSIONS. When representations are made by one partner in relation to sions bind the matters falling within the limits of the company's business, they will bind the company (c); and admissions made by a partner in such circumstances are conclusive evidence against the company, company. (a) Cleland v. M‘Clellan, 1851, 13 son v. Ker, 1830, 9 S. 125. See antea, D. 504. p. 279. (b) Smith v. Falconer, 1831, 9 S. 474, and 1833, 11 S. 323; Campbell v. Ballantyne, 1839, 1 D. 1061; Dick (c) National Ex. Co. v. Drew, 1850, 12 D. 950,-1851, 13 D. 770; aff. 1855, 2 Macq. 103. |