PRIVY COUNCIL CASE.

Otago Daily Times, Issue 20292, 28 December 1927, Page 13

PRIVY COUNCIL CASE.

WATSON v. HAGGITT AND OTHERS. APPEAL FAILS. (From Our Own Correspondent.) LONDON, November 19. The New Zealand appeal case, Watson v. Haggitt and others, came before the Judicial Committee of the Privy Council, the council consisting of the Lord Chancellor, Lord Buckmaeter, Lord Carson, Lord Darling, and Lord Warrington F. H. Maughan, K.C., and Mr J. H. Stamp appeared for the appellant, Mr Watson; Mr G. B. Hurst, K.C., and Mr H. Brasch (of the New Zealand bar) for the respondents. Lord Warrington of Clyffe, in delivering their lordships’ judgment, said that the appeal raised a question of construction upon articles of partnership between the appellant, Mr John Lachlan M’Gillivray Watson, and Mr Arthur Bryan Bryan Haggitt. The business of the partnership was that of barristers and solicitors. The articles were dated May 18, 1905, and the term of partnership was 15 years from that date. The term expired on May 18, 1920, but the partners continued the business as partners at will without fresh articles, and, therefore, upon the old terms so far as they were applicable to a partnership at ■will. Mr Haggitt died on January 3, 1926, and the partnership was thereby dissolved. The respondents were his executors. The articles contained the following clause (No. 21); —“If at any time during the term of the said partnership either of the said partners shall die or become permanently incapacitated for work, or shall become insane or of unsound mind to such an extent ns to render him unable or unfit to carry on the business of the partnership, then, and in any such case, the surviving or remaining partner shall during the period of five years from the occurrence or happening of such event or contingency pay to the executors and administrators of such partner so dying as aforesaid, or as the case may be to the committee or representatives of such partner so incapacitated as aforesaid, a sum equivalent to a one-third part or share of the net annual profits of the said partnership business for each year of the said term of five years.” Taken by itself that clause presented no difficulty of construction. The net annual profits, by which the amount of the sum to be paid by the surviving partner in each of the five years was to be measured, would be ascertained by deducting from the receipts and earnings of the business such outgoings and expenses as were, under the articles or by the use and wont of the partners, so deducted during the partnership, the business being for that purpose treated as a continuation of the partnership business (ox parte Harper 1 De G. and J., 180). A payment, however, which under the articles coased with the dissolution of the partnership would not bo properly deducted. PAYMENT OF SALARIES. The appellant, however, contended that he was entitled to deduct, in addition to the ordinary business expenses and outgoings, an annual sum_ payable to him by way of “ salary ” during the partnership. Whether that contention was correct was the question for decision. The clause of the articles providing for payment of “ salaries ” to the partners was clause 3, which was in the following tsrnis The said Arthur Bryan Haggitt shall receive a salary of £6OO for the first year of the said partnership term, a salary of £750 for the second year of the said partnership term, and the said John Lachlon M'Gillivroy Watson shall draw all the net profits of the said business during the first two year s aforesaid. During each o* the third, fourth, and fifth years of the said partnership term the said J. L. M. Watson shall draw a salary of £ISOO per annum and also one-half of the net profits for each such year, and the said A. B. Haggitt shall draw a salary of £750 per annum for each of the said third fourth, and fifth years, and also one-half of tne net profits {or each such year, i hereafter, during the continuance of the said partner ship term, the said J. L, M. Watson shall draw a salary of £ISOO per annum and one-half of the net profits each year, and the s aid A. B. Haggitt a_ salary of £IOOO per annum end one-half of the net nrotit-. for each rear during the term of the saul partnership, and the said partners shall be allowed to draw the aforesaid amount? by monthly instalments in anticipation ot their respective shares or profits m the said partnership business. BASIS OF THE CONTENTION. Clause 5 was a common form of provision for the payment of expenses, outgoings and losses out of the receipts ami earnings of tho business And m case of deficiency thereof then by the said partncit. in tho shares in which they shall for the time being be entitled to the net profits of the said business. The contention of the appellant was based upon a supposed rule of construction that the same meaning ought to be given to an expression in every part of the document in which it appeared. Applying that supposed rule it was sa d that “net profits” in clause 3aml " clause 6 meant what was left after the deduction of salaries, and, tbeicfoio it must have the same meaning in c ause 21. If that conclusion were logically ap plied the “ salary ” of Mr A. B. Haggitt should also be deducted and paid to lus executors, but the absurdity of pajirv a “ salary to tho executors of a dead partner who could not give any assistance in the business was recognised and tho judges who were in the appellant s favoui stopped short of the logical application of their conclusion by deciding th.it tie “salary” of the appellant alone ought to be deducted. APPEAL DISMISSED WITH COSTS. The truth was that there was no rule of such general application as was contended for by the appellant. A difficulty or ambiguity might be solved by resorting to such a device, but it was only in such cases that it was necessary or permissible In the opinion of their Lordships, it was in the present case quite clear that in clause 21 the expression net profits had a different application from that which it had in clause 3 and clause o Clause 21 was dealing with a state ot things vvhollv different from that dealt with° in clause 3. The partnership was dissolved, the “ salaries ” which were payable “ during the continuance of the partnership term ” had ceased, and the business was being carried on by the appellant on his own sole account and for his own benefit, the annual sum payable to his deceased partner’s executors being, m substance, purchase money for bis interest in the assets of the business. In those circumstances it was impossible to bold, without an express provision to that effect, that the partners intended to allow a salary to the surviving partner. Their Lordships were of opinion that the appeal failed, and ought to be dismissed, with costs, and they would humbly advise bis Majesty accordingly.