4. Miles v.

Clarke [1953] 1 All ER 779

• Brief Facts: The defendant, who was a gentleman of some means, was minded
to start a business in commercial and fashion photography.
• After looking about for some time, he found the premises which subsequently
became the place of business of the partnership and in June 1948,
• he entered into a lease whereby the property, which consisted of two squash
racquets courts, dressing rooms, and so forth, was demised to him for a period
of 7 years, at a rent of 400 pounds a year, which was an advantageous lease,
• bearing in mind the neighborhood and the fact that squash rackets courts are
easily adaptable as photographic studios, having a good overhead light.
• One court was left open as a large studio, the other was divided by partitions
and a floor put in, part of it being used as dark rooms, part as offices, and as a
smaller studio.
• The defendant started to carry on a photographic art or craft, but he employed
persons to carry out the photographic work for him.
• At the beginning he made a very considerable loss.
• In January, 1950, after some earlier approaches which were ineffective, he
applied to the plaintiff to see whether he would come into business as a
partner.
• The plaintiff has been taking photographs all his life, and he is, apparently, well-
known and has a good connection in this particular work.
• He was at that time working for others, using their studio partly for his own
purposes and partly on their behalf, and he was making a very considerable
income as what he called a free-lance photographer.
• He was not very anxious to come in initially, he came down occasionally to the
defendant’s studio and took photographs, but from about the beginning of
April he attended there as a full-time occupation and brought with him his own
considerable connection.
• He took photographs of such subjects and such models as the defendant on his
side should provide.
• The upshot of it was a very successful business.
• The plaintiff’s faithful clients followed him, and brought their work to him.
• The business is now in the hands of a receiver, after the partnership quarrel, in
a flourishing condition.
• Issues:
1. Was there a partnership at all?
2. If there was a partnership, what were the assets of the partnership?
• Observations: The following list of items to be separated:
I. The lease of the property at Shepherd’s Market where the business was
carried on;
II. The furniture and fittings in the studio;
III. And , perhaps, most important, the equipment of the studio;
IV. The plaintiff’s and the defendant’s photographic negatives and prints which
were brought in by each of them at the outset;
V. The defendant’s goodwill or reputation; and
VI. The plaintiff’s goodwill or reputation.
• These two people were too busy to think about the terms on which they should
carry on business.
• They agreed that the profits, if they should be any, should be shared equally,
and I take it the losses also, though, of course they did not contemplate losses,
and they did not have to face any.
• There also appears to have been an agreement reached that the plaintiff should
draw 125 pounds a month on account of his share of the profits, but that
arrangement did not always continue,
• because the plaintiff appears to be a rather improvident person who is almost
incapable of managing his own life.
• The only two matters that were agreed were that there should be an equal
sharing of the profits and that the plaintiff should have these monthly drawings
on account.
• They both contemplated a regular legal connection, and the plaintiff employed
as his solicitors, as early as January 1950, can be found writing to the defendant
setting out what the plaintiff understood.
• At that time the plaintiff, by the advice, no doubt, of his solicitors, contemplated that
there would be a limited company and not a partnership to carry on the business.
• It was written in these terms: we understand from (the plaintiff) that you and he are
desirous of forming a limited company to carry on business as photographers.
• The business will be carried on at 5, Shepherd Street and the assets of the company
will consist of [Link]’ goodwill, your goodwill and a lease and you will each hold
shares in accordance with the value of the assets you put into the company.
• On what terms were these people partners?
• The only answer one can give is that they were partners on the terms that they
shared the profits between them.
• What more?
• It is said that even though there was no further agreement, one must assume that the
stock-in-trade, such as stocks of the film, was put into the pool and cannot be taken
out again, but must become part of the partnership assets.
• That is not denied.
• The other important items, are first is the lease and the second is the plant
which may be worth 2,000 pounds.
• It is said with force by counsel for the plaintiff that those two classes of assets
were put forward throughout as being brought in as part of the assets of the
intended association, and,
• the plaintiff having come into the business on that footing, it would be
inequitable now to deny him a right to share in those assets.
• It is said on the other side that it is not necessary to assume any further
agreement between the parties,
• but one need only say that everything that belonged to one of them at the
beginning of the partnership still belonged to that one at the end,
• And that the law will not make any imaginary agreement between the parties,
it being ascertained as a fact that there was no agreement.
• In my judgment, no more agreement between the parties should be supposed
than is absolutely necessary to give business efficacy to that which has
• It is absolutely necessary to assume that things quae ipso usu consumuntur (on
consumed by the use itself), the stock-in-trade, must be treated as having been
brought into the partnership and their value must be ascertained by inquiry.
• The partnership could get on quite well if he gave his partner a license to go on
the leasehold property for the purposes of the business and to use the cameras
to make the joint profile.
• The stock of negatives which each of these partners brought in was for the use
of the business so long as it was going on.
• As I understand there is no great difficulty in separating them again now, and,
indeed, being ex necessitate negatives or photographs taken before 1950, so far
as they are fashion negative, except historically, they have any great value.
• However, if desired, the parties can each take away their negatives.
• The stock of negatives of photographs taken during the course of the
partnership must be a partnership asset.
• It was said that each party brought in a connection and that the plaintiff brought in
something of value in the shape of his good will or connection which must in some
way be quantified or valued and treated as an asset of his.
• The plaintiff came there because, having the connection he did, if he had the studio
and the equipment to his hand, he could make a good profit and presumably it would
be worth his while to take half that profit in return for the benefit of the use of the
studio and the equipment.
• I see no reason to suppose that, though his connection and skill were very useful to
make profits, one ought to treat them in some way as capital assets.
• Therefore, neither his connection, nor the defendant’s connection, if it was of any
value (which I doubt), should be treated in any way as being a partnership asset.
• The only partnership assets remaining are the studio name, or the goodwill and the
photographs in so far as they accumulated during the two years when the partnership
was subsisting.
• Now that the parties have separated, the plaintiff will take away his own connection,
no doubt, and his own clients, just as he brought them, and the defendant will
presumably keep his own.
• In regard to leasehold premises the defendant will be able to keep them.
• Conclusion:
• Therefore, I propose to answer the inquiries by declaring that the lease,
furniture and fittings, and the equipment of the studio did not form part of the
partnership property, but remained the separate property of the defendant.
• Neither the defendant’s nor the plaintiff’s goodwill or reputation form part of
the or should be treated as assets of the partnership.
• I will make a general declaration on the contrary that the stock-in-trade and
consumable chattels ought to be treated as partnership property brought in by
the defendant, and,
• in default of an agreement, I will direct a further inquiry, namely, as to what
value ought to be attributed to those things in taking the partnership account.
• Lastly, if the property remains that of the defendant, it is not right, in taking the
accounts, to treat any depreciation as a charge against the profits, which would
mean that the plaintiff would pay half of it.
• In my judgment, that is right.
• It would not be right to assume that the defendant leased or licensed
property or the plant in the partnership at any price at all,
• because he did not, and, therefore, in my judgment, the result of no
agreement works in the plaintiff’s favor, and is that he does not have to
contribute to wear and tear on those assets.
• That being so, in taking the accounts no sum ought to be charged against
profit by way of depreciation.
• It is also said that certain partnership profits have been devoted to
making improvements.
• For all I know that may be true or there may be nothing in it.
• The accounts are not sufficient to show.
• If it turns out that there is nothing in it the parties need not proceed with
that inquiry.
 Chapter III Relation of partners to one another
• S.9. General duties of partners:
Partners are bound to carry on the business of the firm
to the greatest common advantage,
to be just and faithful to each other, and
to render true accounts and
full information of all things affecting the firm
to any partner or his legal representative.

S.10 Duty to indemnify for loss caused by fraud:-

Every partner shall indemnify the firm
for any loss caused to it
by his fraud in the conduct of the business of the firm.
S.12. The conduct of the business:-
Subject to contract between the partners –
a) Every partner has a right to take part in the conduct of the business;
b) Every partner is bound to attend diligently to his duties in the conduct of the
business;
c) Any difference arising as to ordinary matters connected with
the business may be decided by a majority of the partners, and
every partner shall have the right to express his opinion
before the matter is decided,
but no change may be made in the nature of the business
without the consent of all the partners; and
d) Every partner has a right to have access to and
to inspect and copy any of the books of the firm.
S.13 Mutual rights and liabilities:- Subject to contract between the partners-
a) A partner is not entitled to receive remuneration for taking part in the conduct of
the business;
b) The partners are entitled to share equally in the profits earned, and shall contribute
equally to the losses sustained by the firm;
c) Where a partner is entitled to interest on the capital subscribed by him, such
interest shall be payable only out of profits;
d) A partner making, for the purposes of the business, any payment or advance
beyond the amount of capital he has agreed to subscribe, is entitled to interest
thereon at the rate of 6 % annum;
e) The firm shall indemnify a partner in respect of payments made and liabilities
incurred by him –
i). in the ordinary and proper conduct of the business, and
ii). In doing such act, in an emergency, for the purpose of protecting the firm from
loss, as would be done by a person of ordinary prudence, in his own case, under similar
circumstances, and
f) A partner shall indemnify the firm for any loss caused to it by his willful neglect in
the conduct of the business of the firm.
S.15. Application of the property of the firm:-
Subject to contract between the partners,
the property of the firm shall be held and
used by the partners exclusively for the purposes of the business.

S.16. Personal profits earned by partners.-

Subject to contract between the partners,-
a) If a partner derives any profit for himself from any transaction of the firm, or
from the use of the property or business connection of the firm or the firm-
name, he shall account for the profit and pay it to the firm;
b) If a partner carries on any business of the same nature as and competing with
that of the firm, he shall account for and pay to the firm all profits made by
him in that business.
• Order XXX of the CPC, permits suits to be brought against firms, and the
summons may be issued against the firm or against persons who are alleged to
be partners individually, however, the suit proceeds only against the firm.
• Any persons who is summoned can appear, and prove that he is not a partner
and never was; but if he raises that defense, he cannot defend the firm.
• When the decree is passed, it is against the firm and such decree is capable of
being executed against the property of the partnership and also against the
individuals.
• In regard to firm name, there are no prescribed forms for the style of a firm,
and the liberty of partners, to assume any firm-name they please, is bound only
by the general rules as to goodwill and trade names.
• In absence of a provision like S.20 of Companies Act, 1956 in the Partnership
Act, a firm can be registered with a name similar or identical to the name of a
firm already registered, however these are subject to Intellectual Property
Rights such as domain name etc.,
• S.23 of the ICA provides that every agreement of which the object or
consideration is unlawful is void and it lays down that the consideration of an
agreement is lawful unless, inter alia, it is opposed to public policy.
• A partnership is presumed to be legal unless the object is proved to be illegal or
the object necessarily involved something illegal.
• The illegality of a partnership affords no reason why it should not be sued.
• It cannot indeed be effectually sued by any person who, being aware of all
facts, seeks to enforce a demand arising out of a transaction tainted with the
illegality which affects the firm;
• But the illegality of the firm does not per se afford any answer to a demand
against it, arising out of a transaction, legal in itself, to which it is a party.
• It has been, however, consistently held that no suit can be filed for recovery of
the capital invested in an illegal partnership and/or for the accounts of the
partnership.
• A sleeping partner to provides finances to the partnership firm and the other
partners managed the affairs, it was held that he was entitled to accounts, as
he was not pari delicto.
• An illegal partnership can be taxed, it is certainly bound to be taxed either as an
unregistered partnership firm or an association of persons.
• If a person, by the fraudulent misrepresentation of another, is induced to enter
into an illegal contract while himself unaware of illegality, he may recover
damages from the person deceiving him.
• An illegal partnership can prosecute a person for theft of its property.
• Risk of criminal prosecution may be a consequence of an illegal partnership.
• ‘Persons engaged in an illegal business, whether partners or not, and whether
incorporated or not, are liable to suffer the sanctions of the criminal law.
• Sleeping partner is bound by contracts made by the ostensible partners in the
ordinary course of the partnership business.
• Sometimes partners are absolutely inactive or deliberately choose to be
inactive, for instance, in some cases where a partner is a government servant or
person with similar status who is, by service rules, prohibited from engaging in
any trade or business.
• Some confusion continues to persist in this regard.
 Trimble v. Goldberg
(1906) AC 494 (PC)

• Brief Facts: Goldberg was a land speculator.

• Trimble was an auctioneer: he had been acting chief detective of the whole of
the Transvaal before the war.
• The partnership agreement between Goldberg, Trimble and Bennett was dated
February 10, 1902.
• The object of the joint adventure was the purchase and re-sale of certain
properties belonging to a gentleman named Hollard.
• They consisted of 5500 shares in a company called the Sigma for building and
other real estates in Johannesburg and elsewhere in South Africa.
• There was nothing special in the partnership agreement of February, except
profits and losses were to be shared equally.
• No partner was to sell or dispose of his interest without the consent in writing
of his partners, all dealings with the property of the partnership were to be
transacted by and through Trimble, to whom the other partners were to given
powers of attorney.
• The Sigma Syndicate, whose full title was the Sigma Building Syndicate, Limited
had been formed in 1896 under the laws of the South African Republic with
limited liability.
• Its capital was pounds 25,000/- divided into 25,000 share of 1 pound each all
fully paid up.
• The Board of Directors was to consist of at least four and at most six members
of the company.
• The management of the company’s affairs was committed to the board “with
the most extended powers and without limit or reserve”.
• The powers of the board specially enumerated included “any purchase, sale, or
exchange of immovable properties”.
• The syndicate was formed for the purpose of making profit by purchasing and
re-selling a number of stands on Marshall Square and Government Square in
Johannesburg.
• In the early part of 1902 Hollard, a wealthy man and a director of the Sigma
Syndicate, was about to leave S.A. and anxious to dispose of everything he had
there before quitting the country.
• He put all his properties on the market for sale through Goldberg.
• Goldberg was furnished with a prospectus or proposal containing a schedule of
the various lots shewing the aggregate price of the lots and the value placed on
each. The total was 94,566/- pounds.
• The prospectus was accompanied by an elaborate report prepared by a
[Link], an attorney in Johannesburg.
• Goldberg’s original intention seems to have been to form a syndicate for the
purpose of purchasing the property, charging the syndicate 9500/- as
commission for his services
• The syndicate was not materialized and Goldberg proposed to accept Hollard’s
offer and buy on his own account.
• Bennet and Trimble joined him in the adventure, the one would not come in
without the other, and so the syndicate disappeared, and the partnership
agreement of February 10, 1902, was arranged.
• To meet Hollard’s requirements a remittance of 12,500/- was telegraphed in
advance and Trimble was dispatched to Johannesburg to complete the
business.
• Armed with powers of attorney from his two partners, Trimble went to
Johannesburg, saw Hollard there, and settled the terms of purchase offhand.
• The purchase deed was executed, the money advanced was acknowledged and
the balance was secured by mortgage bonds over the several properties
comprised in the purchase.
• After this matter was settled, Trimble went one day with Hollard to see the
stands belonging to the Sigma Syndicate.
• When they came to Government Square Trimble asked Hollard if the syndicate
would sell the stands there en bloc.
• Hollard said “yes”, adding that he thought the board would sell for 120,000
pounds.
• After negotiations with there was an option to buy for 110,000 pounds Trimble
at once communicated with Bennet, and told him that he thought from some
secret information he had gained, which it seems would not bear the light, that
money was to be made out of the deal.
• He asked Bennet to join with him in the speculation, intimating that he was
prepared to give even a larger price.
• Bennet consented to join, and agreed to finance the enterprise.
• The directors of the syndicate were only too glad to accept Trimble’s offer, and
thus he secured the stands for himself and Bennet.
• Goldberg was not told anything about this purchase at the time.
• Meeting Trimble one day in the street, he said, according to Trimble’s un
contradicted evidence, corroborated by an accountant, Winship, who was
present, “Don’t you think you might have let me have a show in”?
• Later on, he took a more exalted view of his rights, and he brought this action,
alleging that the partnership had given Trimble a mandate to buy the stands on
joint account.
• He also contended that, on general principles applicable to all cases of
partnership, he was entitled to share with his partners in the benefit of their
purchase.
• Issues:
1. Whether the Trimble had violated partnership agreement, if any?
2. Whether the Trimble violated the general principles applicable to all cases of
partnership?
3. Whether the purchase was within the scope of the partnership?
• Observations: As per the Lordships Judgment the subject of the purchase was
not part of the business of the partnership, or an undertaking in rivalry with the
partnership, or indeed connected with it in any proper sense.
• Nor was the information on which it seems Trimble acted acquitted by reason
of his connection with the Sigma Syndicate.
• The way in which the information was acquired may have been much to
Trimble’s credit, as the Court of Appeal has pointed out; but Goldberg is not in a
position to complain of that.
• He at least is not averse to sharing the profit to which it seems to have
conducted.
• Now if the purchase form Hollard had been completed so far as to make the
partnership the absolute and unencumbered owner of the 5500 shares in the
Sigma Syndicate, and
• if those shares had been divided between the three partners and registered in
their separate names any one of the three would have had as good a right to
buy any property of the syndicate which the direction might think fit to offer
for sale as any other shareholder in the syndicate or any member of the general
public.
• In regard to the purchase in question, though not expressly prohibited by the
partnership articles, as a breach of good faith and consequently as a violation
of the fundamental condition of the partnership.
• Suppose it had been forbidden in express terms, what would have been the
result?
• The other partner or partners discovering the breach of contract might have
claimed immediate dissolution, or even damages, on proof of actual loss to the
partnership.
• But a claim to share in the profits of the forbidden purchase would not have
been warranted by principle or precedent.
• And here there was no loss to the partnership; only a disappointment to the
partner left out in the cold.
• The purchase apparently was an advantage to the partnership.
• The Court of Appeal seems to have been much impressed by the secrecy of the
transaction.
• No doubt it would have been better if Goldberg had been told at the time that
Trimble and Bennet were making this purchase.
• In a case in which the circumstances were somewhat analogous, it was
observed that, “I generally think it is advisable as a matter of prudence, as well
as on other grounds, to let everything be above board”, that is a very proper
sentiment, worthy, perhaps of a more unhesitating acceptance.
• But still there was no legal obligation on Trimble or Bennet to tell Goldberg
what they were doing unless he had a right to take part in the speculation if he
chose to do so.
• Their excuse for silence, if be an excuse, was that they considered Goldberg an
undesirable partner and not financially strong.
• There was another argument that the moment Trimble determined to buy
these stands, he put himself in a position in which his interest and his duty
conflicted.
1. It was his interest to buy as cheaply as he could.
2. It was his duty to sell the Sigma shares as dearly as possible.
• The value of the shares depended on the value of the stands, and so it was his
duty to enhance the value of the stands by every legitimate means in his power.
• He ought not to have thought of buying them for less than the utmost price he
felt he might have been forced or tempted to give.
• He knew he was buying cheaply, he told Bennet so.
• The fallacy of this line of argument lies in assuming that Trimble had anything
to do with selling the stands, or any right to meddle with the conduct of the
sale.
• That was in the hands of the directors, they were dealing at arm’s length with
him.
• It seems extravagant to suppose that he would have advanced the interests of
the partnership by retiring from the field and declining to enter into a
competition which actually had the effect into a competition which actually
had the effect of raising the price of the stands and so improving the value of
the Sigma shares.
• In the case of Cassels v. Stewart, three gentlemen, Reid, Casseks and Stewart,
were partners in an undertaking called the Glagow Iron Company.
• The contract of co-partnership contained an article forbidding any partner to
assign his interest, or give any person or persons a right to interfere with the
business, and declaring further that any such assignation should be of no effect
as regards the company.
• There was also a clause declaring that on the retirement of a partner, the
remaining partners should have power to buy his interest at the amount
standing to his credit at the last balance.
• Reid sold all his interest to Stewart.
• Reid’s name, however, remained in the books, and he signed all deed relating
to the business until his death, which occurred seven years after the sale.
• Cassels was not till then informed of the arrangement.
• When he found it out he claimed to participate in the purchase on the ground :-
1. That a mandate had been given to Stewart to buy Reid’s interest for the
partnership;
2. That under the terms of the partnership agreement the purchase could only
be legally made with his consent;
3. That Stewart had secretly acquired a benefit for himself within the scope of
the partnership business.
• It was held that the alleged mandate was not proved.
• But it was argued that putting aside the alleged mandate “the agreement was
entered into under such circumstances as entitled the appellant to participate
in it”, “the acquisition of the shares of outgoing partners… was one of the
objects of the company”.
• “Apart from the express terms of the contract the secret agreement by which
the respondent acquired for himself alone a benefit falling within the scope of
the partnership business was a breach of the good faith of the partnership, and
when such a benefit was acquired each partner had a right to demand that it
should be communicated to each of them equally”-
• -“on general principles it was inequitable, having regard to the
fiduciary relations due to each other, that such an agreement should
be made behind the back of another partner”.
• Conclusion: It seems their Lordships that the decision of the Supreme
Court of the Transvaal in the present case cannot stand with the
decision in Cassels v. Stewart.
• There was at least as close a connection between the partnership and
the partner’s purchase in that case as there is in this.
• In their Lordships’ opinion the order under appeal cannot be
supported on authority or on any recognized doctrine of equity.
• Their Lordships will therefore humbly advise that the appeal should
be allowed and the order of the Trial judge should be restored.
• S.17 Subject to contract between the partners:
a) Rights and duties of partners after a change in the firm:- Where a change
occurs in the constitution of a firm, the mutual rights and duties of the
partners in the reconstituted firm remain the same as they were immediately
before the change, as the case may be;
b) After the expiry of the term of the firm:- Where a firm constituted for a fixed
term continues to carry on business after the expiry of that firm, the mutual
rights and duties of the partners remain the same as they were before the
expiry, so far as they were before the expiry, so far as they may be consistent
with the incidents of partnership at will; and
c) And where additional undertakings are carried out:- Where a firm constituted
to carry out one or more adventures or undertakings carries out other
adventures or undertakings, the mutual rights and duties of the partners in
respect of the other adventures or undertakings are the same as those in
respect of the original adventures or undertakings.
• S.19 Implied authority of the partner as agent of the firm:-
1. Subject to the provisions of the S.22, the act of a partner which is done to carry on,
in the usual way, business of the kind carried on by the firm, binds the firm.
The authority of a partner to bind the firm conferred by this section is called his
“implied authority”.
2. In the absence of any usage or custom of trade to the contrary, the implied
authority of a partner does not empower him to-
a) Submit a dispute relating to the business of the firm to arbitration,
b) Open a banking account on behalf of the firm in his own name,
c) Compromise or relinquish any claim or portion of a claim by the firm,
d) Withdraw a suit or proceeding filed on behalf of the firm,
e) Admit any liability in a suit or proceeding against the firm,
f) acquire immovable property on behalf of the firm,
g) Transfer immovable property belonging to the firm, or
h) Enter into partnership on behalf of the firm.
• S.22 Mode of doing act to bind firm:
In order to bind a firm,
an act or instrument done or
executed by a partner or
other person on behalf of the firm
shall be done or
executed in the firm name, or
in any other manner expressing or
implying
an intention to bind the firm.
 Holme v. Hammond
(1872) L.R.7 Ex. 218; 41 [Link].157
• Brief Facts: Thomas Fisher, William Henry Fsiher and George Henry Smith carried
on business in co-partnership as auctioneers, under a deed which provided that
in case of the death of Thomas Fisher,
• the other two partners should carry on the business, or what was called the co-
partnership and should pay to the executors of Thomas Fisher the share of the
profits to which he would have been entitled if he had survived.
• Thomas Fisher died in 1869; the two survivors carried on the business until the
death of Smith, when William Henry Fisher continued to carry it alone.
• [Link] and Smith having sold a mill and machinery in May, 1870, on account
of the plaintiff and having received the proceeds of the sale in the following
month of July.
• The plaintiff brought an action against [Link] and the defendants to recover
that sum as money had and received insisting that the defendants, who are the
executors of Thomas Fisher,
• and who have claimed to be entitled to the share of the profits which the testator
would have been entitled to if he had lived and in respect of which they have
received certain sums together with other moneys due to the estate of Thomas
Fisher not specifically as profits,
• But generally on accounts, became partners with [Link] and Smith upon or
after death of Thomas Fisher, and as such are liable to the demand in this action.
• Issues:
1. Whether the defendants at the time when this money was received were the
partners of the firm;
2. If they were receiving the profits of the business, the defendants had made
themselves must be taken as partners and as such liable to this action
• Observations : Upon a careful consideration of the authorities bearing on this
question, it certainly appears to have been thought in former times,
• and there are judicial dicta to that effect, that the mere reception of a share in
the profits of a commercial co-partnership made the participator a partner and
liable to the debts and losses of the firm.
• But looking to the decisions themselves in which the question has arisen, it will
be seen that in no one case has the party sought to be charged been held liable
except where a contract of co-partnership has been found to have been entered
into.
• In Grace v. Smith appears to support the argument for the liability as partners of
all who participate in the profits of a commercial concern, the decision was that
there was no sufficient evidence of a contract of co-partnership and so no liability
as partners.
• In Waugh v. Carver where the defendant was held liable as partner, it was
because the contract proved was decided, and rightly decided, to be a contract
establishing a commercial co-partnership, and
• The agreement in the articles that neither should be liable for the acts or the
losses of the others, but each for his own (though valid and binding inter se), was
of no effect against the creditors of the co-partnership firm.
• In Cox v. Hickman, the parties sought to be charged were held not liable, on the
ground that the acts done and the contracts entered into in those cases did not
amount to contracts of co-partnership so that the parties had not become
partners.
• It is necessary to consider the various terms and provisions of the contracts
which were brought into question in those and other cases.
• It is enough to say, that whenever the plaintiff has failed and the decision has
been that the defendant was not liable.
• In some of those cases the law of principal and agent has been referred to as
governing the matters in question, but this branch of law has really bearing upon
the case of partnership,
• Whenever a contract of partnership among commercial men exists, each partner
is in point of law the agent for the others and for the firm collectively, and
• And they are bound by any contract he may enter into within the scope of the
partnership with reference to the nature of the undertaking, it is evidence,
though insufficient of itself to establish the liability.
• We have now to look to the facts of the present case to determine whether upon
the evidence the defendants have become parties to contract of partnership.
• It has been observed that widows, lenders of money, and some other classes of
persons taking a share in the profits of a co-partnership shall not be deemed
partners.
• Sharing in profits shall be no evidence at all of a contract of partnership, with
regard to others , it is evidence, though insufficient of itself to establish the
liability.
• Upon the death of Thomas Fisher the partnership before subsisting was dissolved
by operation of law; [Link] and Smith from that time carried on the
business; but this was, in contemplation of law, a new partnership.
• The defendants could not become partners with them buy some agreement,
express or implied, to which they were parties.
• The defendants instead of calling for an account of the state of the partnership at
the death of their testator, and withdrawing from the concern whatever money
or stock of property belonged to his estate, had left a portion of his capital and
his share in the partnership stock and property in the business.
• In this case it appears that there was no capital at all, either of the testator’s or
the other partners, employed in the business;
• That the stock and co-partnership property consisted merely of a small quantity
of furniture and fittings in the office of the value of 100 pounds;
• That the defendants neither left in nor drew out any money of the testator’s
except that they drew out several successive sums of 100 pounds, upon the
general account of what might turn out to be due to the estate;
• The whole case for the plaintiff was reduced to the single fact that, in pursuance
of the clause in the articles of partnership, that paying and receiving in the share
of the profits as of other moneys due to the testator;
• I am of the opinion that there is no evidence whatever to establish a contract of
co-partnership on the part of the defendants, and the action is not maintainable.
• MARTIN.B.—Thomas Fisher had drawn out all his capital, and that the defendants
did nothing more than claim and receive profits under the above clause.
• In my opinion this act did not make them liable to the plaintiff’s demand. They
did nothing on their behalf at all;
• It seems admitted by the plaintiff that the defendants could not have interfered
in or meddled with the sale; so also the money, the proceeds of it; was not their
property, and if they had taken possession of it against the will of the surviving
partners in order to pay it to the plaintiff they would have been trespassers;
• And it is difficult to understand how defendants can have received money of
which they had neither nor possession, and their taking which against the will of
the surviving partners would have been a wrongful act.
• I understood that part of Thomas Fisher’s capital remained, by the permission of
the defendants, in the firm, and that they took a share in the profits in part
earned by it.
• Conclusion: The principle appears that a partnership, even as to third parties, is
not constituted by the mere fact of two or more persons participating or being
interested in the net profits of a business;
• But that the existence of such partnership implies also the existence of such a
relation between those persons as that each f them is a principal and each an
agent for the others.
• If this principle be correct, the defendants are clearly not liable.
• The surviving partners were not agents of theirs in any sense;
• All that the defendants did was in an adverse character to them, and was a
requirement that they should fulfill their contract with the testator by paying the
one-third of the net profits for the benefit of his estate….
• As I have already said, in my opinion the defendants are entitled t the judgment
of the Court.