Lynch v Stiff [1943] HCA 38; (1943) 68 CLR 428 (8 December 1943)

HIGH COURT OF AUSTRALIA

Lynch Defendant, Appellant; and Stiff Plaintiff, Respondent.

H C of A

On appeal from the Supreme Court of New South Wales.

8 December 1943

Latham C.J., Rich, McTiernan and Williams JJ.

Barwick K.C. (with him Webb and Holden), for the appellant.

A. R. Taylor K.C. (with him May), for the respondent.

Barwick K.C., in reply.

The Court delivered the following written judgment:—

Dec. 8

Latham C.J.,

Rich, McTiernan and Williams JJ.

The appellant Lynch was for many years employed as a clerk by a firm of solicitors, variously constituted from time to time, known as John Williamson & Sons. When a second John Williamson (son of the founder of the firm) died in 1930, a third John Williamson, his son, was not qualified as a solicitor and Lynch, who was a qualified solicitor, carried on the business for nine months until the son became qualified and purchased the business from his father's executor. He then took first Lynch and one Breden, and then one Salmon in substitution for Breden, into his employment. They have been described as salaried partners, but they were in fact employees of Williamson. The letterpaper of the firm was headed:—

John Williamson & Sons

Solicitors.

John Williamson

Thomas Davis Lynch

Benjamin Melville Salmon.

The respondent Stiff had employed the firm for many years in conveyancing business, but not until 1938 for the purpose of making investments. In conveyancing matters he had always dealt with Lynch. In 1938, he sold a property and invested part of the proceeds of the sale through the firm. In making this investment he dealt with Williamson. John Williamson misappropriated the money which was invested, and Stiff sued Lynch on the basis that he had been held out as a partner in the firm, and was liable to recoup him for his loss. Halse Rogers J. held that Lynch was liable and his judgment was affirmed by the Full Court. An appeal is now brought to this Court.

The decision upon the appeal depends upon the application to the facts of s. 14 (1) of the Partnership Act 1892 N.S.W.. This provision is in the following terms:—

14.—(1) Everyone who by words spoken or written, or by conduct represents himself, or who knowingly suffers himself to be represented as a partner in a particular firm, is liable as a partner to anyone who has on the faith of any such representation given credit to the firm, whether the representation has or has not been made or communicated to the person so giving credit by or with the knowledge of the apparent partner making the representation or suffering it to be made.

The section operates in cases (1) where a person has by words or by conduct represented himself or knowingly suffered himself to be represented as a partner in a firm; (2) where another person has given credit to the firm; and (3) where that person has so given credit on the faith of the representation.

Upon the basis of Waugh v. Carver[1] it was contended that it was not sufficient to show that the person giving credit in fact gave credit on the faith of the representation, but that it was also necessary to show that, apart from the representation, he would not have given credit, and the following passage was quoted from the decision in that case: "But if he will lend his name as a partner, he becomes, as against all the rest of the world, a partner, not upon the ground of the real transaction between them, but upon principles of general policy, to prevent the frauds to which creditors would be liable, if they were to suppose that they lent their money upon the apparent credit of three or four persons, when in fact they lent it only to two of them, to whom, without the others, they would have lent nothing"[2].

In our opinion there is no justification for making any addition to the requirements of the section by holding that the person who has given credit must show that, apart from the holding out, he would not have given credit. The doctrine of holding out is a branch of the law of estoppel. So far as the element of action by the party relying upon an estoppel is concerned, it is sufficient if that party acts to his prejudice upon a representation made with the intention that it should be so acted upon, though it is not proved that in the absence of the representation he would not have so acted.

In the present case it is proved that Lynch held himself out and suffered himself to be represented as being a partner in a firm of John Williamson & Sons. The heading of the letter paper is conclusive upon this point. Secondly, it is proved that the respondent gave credit to the "firm" in that he entrusted the "firm" with his money for purposes of investment. In the third place there is evidence that he so gave credit because he believed that Lynch, whom he trusted, was a partner. Evidence which, if accepted (and it was accepted by the learned trial judge) is sufficient to establish the latter proposition is found in the following testimony of the plaintiff:—"Mr. Kinsella: Q. You were aware that there were three names on the letterheads? A. Yes. Q. Did that operate in your mind when you were making the investments? A. Yes; I felt it was a stronger firm, I thought, by the appearance of that, of them being partners. His Honour: Q. You said you took no interest in the third man, Mr. Salmon? A. Yes, that is right, not particularly, not in the business at all. Mr. Kinsella: Q. As to John Williamson personally, had you formed any opinion as to his ability, experience and reliability? A. I could not exactly say much about his ability. My trust was more trusting on the other man, Mr. Lynch."

And further:—"Mr. John" [Williamson] "himself in the first place said Mr. Lynch would do all my business, or else I would not have been perhaps inclined to have stopped on with them after the father died, not with young John." The fact that confidence in Lynch was developed before he apparently became a partner does not displace the conclusion that the respondent entrusted his money to the firm because Lynch appeared to be a partner: on the contrary, it tends to support that conclusion.

For these reasons in our opinion the appeal should be dismissed with costs.

Appeal dismissed with costs.

Solicitor for the appellant, Joseph D. Spora.

Solicitors for the respondent, Densley & Downing.

[1] (1793) 2 Bl. H. 235 [126 E.R. 525].

[2] (1793) 2 Bl. H., at p. 246 [126 E.R., at p. 532].