Wilson v Carmichael [1904] HCA 45; (1904) 2 CLR 190 (22 December 1904)

HIGH COURT OF AUSTRALIA

Wilson Appellant; and Carmichael Respondent.

H C of A

On appeal from the Supreme Court of New South Wales.

22 December 1904

Griffith C.J., Barton and O'Connor JJ.

Dr. Cullen and Loxton, for the appellant.

Gordon K.C. (with him Rich) for the respondent,

Dr. Cullen in reply.

Griffith C.J.

This is an appeal from the Chief Judge in Equity, turning almost entirely upon questions of fact. The learned Judge below had the advantage of hearing the parties, who gave their evidence orally, and the evidence of another witness who may be regarded as an independent witness, and whom the Judge regarded as an accurate witness and a witness of truth. Weighing the evidence of these parties, he arrived at the conclusion that there was in point of fact an actual partnership subsisting between the appellant and the respondent during the period in question. An appeal is made to us on the ground that the finding is erroneous in point of fact. In a case where a Judge of first instance has had the opportunity of seeing the witnesses, where it turns on the matter of credibility, where they have been cross-examined, and where he has deliberately come to a conclusion as to which side has given the correct version, it is very difficult to induce a Court of Appeal to differ from the decision of the Judge of first instance. Apart from this rule, in the present case I think it would be very hard to differ from him. If the learned Judge had come to any other conclusion I think we should have had great difficulty in agreeing with him.

The appellant contends that there never was a partnership between him and respondent. It has been well said that it is better to rely upon contemporary writings relating to any understanding or agreement than upon the accuracy of memory of a person verbally recalling it, especially where the feelings of the persons have been heated by controversy. We find that in February, 1902, a company was incorporated expressly for the purpose of taking over the business alleged by the respondent to have been carried on by the appellant and the respondent. The appellant's case is that there never was a business, yet in February, 1902, a company was formed for the purpose of taking it over, and of paying for it with 6,660 shares fully paid-up in a joint stock company. This is an agreement which is signed by both the parties, appellant and respondent being described in it as "vendors."

The agreement runs:—

The vendors shall sell and the company after incorporation shall purchase—

Firstly, the benefits and advantages of the said agency (that is the agency of the American International Paper Co. which the vendors had acquired);

Secondly, all the plant, machinery and office furniture acquired by the vendors in connection with the said agency;

Thirdly, all the book debts due and other debts due to the vendors in connection with the said business, and the full benefit of all securities for such debts;

Fourthly, the full benefit of all pending contracts and engagements to which the vendors are or may be entitled in connection with the said business;

Fifthly, all cash in hand at the bank and all bills and notes of the vendors in connection with the said business;

Sixthly, all other property which the vendors are entitled to in connection with the said business.

And, in face of that, we are asked to believe by one of the signatories to that document that there never was any business, and that the whole transaction was illusory, that he had nothing to do with the concern, but only lent money to the other party. That may be true, but in face of such a document it would be hard to accept the story; and, after the learned Judge, having heard the evidence, has come to the conclusion that the facts set out in the document are substantially true, it is almost hopeless to ask a Court of Appeal to reverse it. If, then, there was a partnership, either party is entitled to have the accounts of the partnership taken, and the right continues until an end is put to it by release, or by settled accounts, or by the lapse of such time as may induce the Court to refuse to interfere. I do not know of any other answer, and none of these things are shown in the present case. The decree declaring a partnership and directing a partnership account to be taken is clearly right. One of the incidental results of such an order is a stay of proceedings of actions brought by one party against the other in respect of matters which primâ facie form part of the partnership agreement.

One matter may be referred to which the learned Judge has not mentioned particularly. One term of the partnership was that the respondent should be entitled to be credited with a salary of £8 per week between specified dates; and, at one part of the argument, we had some difficulty in understanding how an agreement of that kind could be held to be continued after the business of the partnership had been transferred to the company, and when the partnership no longer existed except for the purpose of being wound up. But the circumstances under which the company was formed must be looked at,its object being really to take over the business of a partnership. It had no assets, no capital, no means of carrying on its business, and, in order to get started, it had to get the assistance of Messrs. Dalton Bros., who stipulated that until it was a paying concern the remuneration of the managing director, the respondent, should be arranged between him and the appellant. Under the circumstances there is nothing absurd in supposing that the appellant, who came into the business without contributing anything, should agree that his co-partner should be credited with a salary of similar amount to that which he himself received. That difficulty is therefore removed.

The agreement for the formation of the company, provided that as part of the consideration for the transfer of the going concern 6,660 shares should be allotted to the vendors or their nominees. The provision was not that they should be allotted to the vendors severally, that is, 3,330 each. It is apparent, therefore, that under that agreement the shares were to be held by both subject to the terms of the old partnership, and not separately by the individual members of it. Therefore it seems difficult to come to any other conclusion than that they were partnership assets. The respondent brought the first suit. It was the usual partnership suit claiming a stay of proceedings, and the appellant brought a cross suit claiming a division of the 6,660 shares.

The two suits were heard together, and it appeared that the 6,660 shares are partnership assets, each partner accordingly being entitled to a lien on the partnership property for the balance due to him after the taking of the partnership accounts. It would be unnecessary, if that balance would in any event be a very small one, to make an order that the whole partnership property should be subject to the lien. The learned Judge below made no order on that point except by the appointment of a receiver of the shares.

On the appeal before us it appears that the whole of the decision of the learned Judge was quite right, and the appeal consequently fails, but, as the respondent's counsel has offered to consent to a variation of the decree which will give the appellant something of what he wants, and the appellant is willing to accept it, and as we have jurisdiction to make any order which the Court below might have made, and there can be no objection to our making it by consent now, we therefore order, by consent, that the decree be varied by omitting the order for the appointment of a receiver of dividends and of the 6,660 shares, and substituting a direction that the parties shall severally execute a proper transfer each of 3,330 shares to the other party, with a declaration that the shares so transferred shall be subject to a lien for the balance, if any, found on taking accounts to be due to the transferee by the other party; the appointment of the receiver of the shares so held in severalty and the dividend thereon to be in the same terms as declared in the decree.

With that variation in the Judge's order the appeal is dismissed. The appellant must pay the costs of the appeal.

Barton J., and

O'Connor J.,

concurred.

Order accordingly.

Solicitors for the appellant, Minter, Simpson & Co.

Solicitors for the respondent, Norton, Smith & Co.