Conventional provisions. however, that the application of this doctrine in practice is often a matter of great difficulty. It is frequently difficult to ascertain in a given case to what extent the profits of a partnership are to be attributed to capital as distinguished from skill, personal qualifications, or connection. Indeed, in some instances, large profits may be realized in a partnership possessed of little or no capital. The English courts accordingly apply this doctrine with special reference to the circumstances of the individual case (a). If the realized profits cannot be fairly attributed to capital, the former partner or his representatives will not be held entitled to any share (b); if the profits are in part attributable to capital, and in part to personal qualifications, the share will only be given after deduction of an allowance for time, skill, and trouble, to the partners by whom they were realized (c); but if fraud on the part of the continuing partners can be established, the rule is applied in all its rigour (d). With the view of obviating questions as to accounting between partners, it is usual in deeds of copartnery to provide that the company books shall be balanced at regular intervals, and that the interest of a retiring or deceasing partner shall be regulated by the balance immediately preceding. Such regulations are most advantageous if they are only carried out; but it too often happens that balances are not struck at the prescribed periods, either from carelessness or from difficulties in arranging the accounts, so that when death or retirement takes place, it is found that no balance has been struck at the period prescribed. In such cases the Court has endeavoured to give effect to the true intentions of parties, so as to deal equally with all concerned. In Forster v. Orr's Trs. (e), the contract provided that a balance should be annually struck, ascertaining each partner's share of the stock, profit, and loss. No specific term was fixed, but it was always done in May. It was further provided that, on the death or insolvency of a partner, it should be optional to the remaining partners to wind up, or to pay the representatives of the deceased or insolvent partner his share as at the last balance. A partner died in July 1797, but no balance (c) Featherstonehaugh v. Turner, 25 Beav. 382. (a) Per V.-C. Wigram in Willet v. Blanford, 1 Ha. 253. (b) Wedderburn, 22 Beav. 84; Simpson, 4 De G. Mac. and G. 154. (d) Docker v. Somes, 2 M. and K. 672. (e) 1800, aff. 1802, 4 Pat. App. 295. had been struck since May 1796. The Court held that the right of the representatives must be determined according to the balance which should have been, but was not, struck in May 1797, and directed it to be ascertained accordingly. The same decision was given in Buchanan v. Muirhead, 1800 (a). But where the regulations had been strictly adhered to, the Court would not allow the last balance to be impeached except on the ground of error calculi, or of such errors as were apparent on the face of the balance-sheets, and the means of correcting which were to be found in the writings themselves (b). Of course such documents may always be impeached on the ground of fraud (c). Even where the date at which the balance in terms of the contract was to be struck had been altered by subsequent resolution, the Court held that the alteration was valid, and that a balance so struck was conclusive against all concerned (d). Such regulations are, however, inoperative when circumstances What if cirsupervene to which they are plainly inapplicable, and which could not have been in contemplation of their framers. Thus, where it inapplicable? was provided that the heir of a deceasing partner should be obliged to receive his share in the stock and profits as they stood at the balance immediately preceding, and the company became insolvent before the death, it was held that the heir could not resort to the previous balance as fixing his right (e). Clauses of this kind are often framed in such a way that it is difficult to arrive at an interpretation suitable to emerging circumstances. In such cases, attention must be given to the spirit of the provisions and the presumed intention of parties, in opposition to a literal interpretation, which would lead to results unjust in themselves, or which could not have been contemplated when the articles were framed (ƒ). Thus, where it was stipulated that, in case of a partner's bankruptcy, his share in the company should determine, and that his creditors should take according to the preceding balance, the Court held that the expression bankruptcy should be taken to imply bankruptcy under the Act 1696; and that as this kind of (a) 1800, M. 14593, 2 Bell's Com. 648, n. 2. (b) M'Laren v. Liddell, 1862, 24 D. 577. (c) North British Bank v. Collins, 1852, 1 Macq. 369, 15 D. (H. of L.) 29. (d) Russell v. Glen, 1827, 5 S. 206. (e) Blair v. Douglas, Heron, and Co., 15 Feb. 1776, M. 14577, and App. Society 1; aff. 1777, 6 Pat. App. (Sup.) 796. (f) 2 Bell's Com. 647. cumstances render them Rule as to accounting inter socios. Stipulations as to arbitration. Partnership continues for purposes of winding up. bankruptcy had not taken place, the insolvent partner was entitled to the profits of the trade subsequent to the appointed balance (a). So, where it is provided that, on the bankruptcy of a partner, his creditors shall take his share according to the preceding balance struck, and it happens that, from some misfortune, the company is so shaken, that while one of the partners soon becomes bankrupt, the whole concern, though struggling for a time, is ultimately rendered bankrupt also, it should seem that the creditors of the partner who first became bankrupt would not be entitled to found on the provision in question, and insist for payment out of the balance struck prior to his bankruptcy (6). As to the taking of accounts between partners at dissolution or retirement, the following rules may be stated as of general application:-1st, In the absence of express provision, the accounts must be taken in accordance with the rules of the common law already explained; 2d, Where special provisions have been made, these, if they have been acted on, must be carried out; and 3d, Where they have been allowed to go into abeyance by never having been acted on, the accounts must be taken in the ordinary way, as though such special provisions had never been framed (c). It is sometimes provided that, on death or retirement, the interest of the partner or his representatives shall be determined by arbitration. Such a stipulation will be effectual if it contain a specific reference to persons named, and contain also the nomination of an umpire. But if it do not contain the names of individuals as referees, or if they cannot agree as to the choice of an umpire, it does not appear that it can be enforced (d). It is doubtful whether an agreement of this kind can be made so as to hold good on the bankruptcy of a partner (e). When a partnership is brought to a termination, it still continues to subsist for the purposes of winding up; and until this has (a) Munro v. Cowan and Co., 1813, 17 F. C. 354. (b) 2 Bell's Com. 648; and see Blair v. Douglas, Heron, and Co., 15 Feb. 1776, M. 14557, and App. Society 1; aff. 1777, 6 Pat. App. (Sup.) 796. (c) 2 Bell's Com. 648. Jackson v. Sedgwick, 1 Wilson 297. (d) 2 Bell's Com. 648. See Morgan v. Milman, 3 De G. Mac. and G. 24 ; Blundell, 17 Ves. 232; Darbey v. Whitaker, 4 Drew. 134; Milne v. Magistrates of Edinburgh, 1770, aff. 2 Paton's App. 209; Buchanan v. Muirhead, 1799, M. 14593. (e) Wilson v. Greenwood, 1 Swanst. 471. been accomplished, the partnership relation cannot be said to have entirely ceased (a). In the absence of a special agreement to the contrary, the former partners have the right and power of winding up (b). This power is, however, strictly confined to the partners, and is not therefore, without special agreement, competent to the directors or trustees by whom the company was managed prior to its dissolution. It would also appear that it cannot be competently exercised by one partner, but that all must concur (c). In the case of dissolution by death, this power vests in the surviving partners, to the exclusion of the representatives of the deceased partner (d); and in like manner, a dissolution by the bankruptcy of a partner vests it in the other partners, to the exclusion of the trustee of the bankrupt partner (e). But the partnership, and with it the agency of the former partners to bind their fellows, at once ceases as to all future contracts; it subsists only for the purposes of winding up, which will be strictly construed to mean recovering of debts, fulfilling existing obligations, and calling on the former partners to contribute (ƒ). It would also appear that the power of a majority of partners or shareholders to bind the minority terminates with dissolution of the company, even as regards the mode in which the company affairs are to be wound up (g). Such powers of agency as the partners retain is strictly confined to winding up or completing transactions begun, and not terminated at the date of dissolution (h). (a) Gordon v. Heron, etc., 1792, aff. 1795, 3 Paton's App. 428. See West of Scotland Malleable Iron Co., 1855, 17 D. 461; Paul v. Taylor, 1826, 4 S. 580. (b) Gordon v. Howden, 1853, 15 D. 378. (c) Barclay v. Lawrie, 1857, 19 D. 488; Anderson v. Rutherford, 1835, 13 S. 488. See M'Leod v. Langmuir, 1824, 3 S. 270. (d) 2 Bell's Com. 638. Fraser v. Kershaw, 2 K. and J. 496; Allen v. Kilbre, 4 Madd. 464. (e) Thom v. North British Bank, 1850, 13 D. 134. (f) Snodgrass v. Hair, 1848, 8 D. 390; Gordon v. Douglas, 16 June 1792, (g) Lyon v. Haynes, 5 Man. and Gr. 541. (h) Butchart v. Dresser, supra. Agency ter minates as to all future acts. Partners alone entitled to wind up. Remedies competent to of former partner. As a general rule, the partner or partners who survive after dissolution by death, or who on dissolution by bankruptcy remain in possession of the management of their own estates, are alone entitled to sue for, recover, and discharge the company claims. The representatives of a deceased partner, or the trustee of a partner who has become bankrupt, have no right to intermeddle in the matter (a). And it has been held that the executor-creditor of a deceased partner had no right to sue for a debt libelled as due to the company, although the surviving partner was stated to have disclaimed all right or interest therein (b). When the representatives of a deceased, or the trustee of a representatives bankrupt partner are not satisfied with the credit or fidelity of the continuing partners in winding up the concern, their remedy is to apply to the Court for the appointment of a judicial factor, in England a receiver, for the benefit of all concerned (c). It must be observed, however, that the Court will not, except upon good cause shown, interfere with the right of partners to wind up the concern, and take the management out of their hands to entrust it to an officer of Court (d). A judicial factor will, however, be appointed in the following and similar circumstances:-Where all the partners consent (e); where all the partners are dead, and disputes have arisen among their representatives (ƒ); where a surviving partner or partners are, from imprisonment or otherwise, incapacitated from acting (g); where, by bankruptcy or otherwise, the management has already passed out of the control of the partners (h); where a partner grossly misconducts himself (i); where fraud on the part of a partner or partners is established (k); (a) Boyds v. Fraser's Trs., 1822, 1 S. 231; Child v. Ferguson, 1835, 13 S. 768. See p. 525. (b) Roger v. Jamieson, 1838, 16S. 418. (c) Fullarton v. Dixon, 1834, 12 S. 750; Young v. Collins, 1852, 14 D. 540, 15 D. 35 and 1 Macq. 385; Thomson v. Stephenson, 1855, 17 D. 739; 2 Bell's Com. 638 and 645. See Drysdale, 1842, 4 D. 1061; Bell v. Williamson, 1857, 19 D. 704. (d) Young v. Collins, 1853, supra ; Drysdale v. Lawson, 1842, 4 D. 1061; Maxtone v. Muir, 1845, 7 D. 1006. (e) Bell, 1857, 19 D. 704; Southern Bank of Scotland, 1849, 11 D. 1494. (f) Dixon v. Dixon, 1831, 10 S. 178, aff. 1832, 6 W. S. 229; Phillips v. Atkinson, 2 Bro. C. C. 272. (g) Jarvis v. Anderson, 1841, 3 D.989. (h) Fraser v. Kershaw, 2 K. and J. 496; Davis v. Amer, 3 Drew. 64; Candler v. Candler, Jac. 225. (i) Estwick v. Conningsby, 1 Vern. 118; Sheppard v. Oxenford, 1 K. and J. 491; Madgwick v. Wimble, 6 Beav. 495. (k) Ex parte Broome, 1 Rose 69. |