SUPREME COURT.

Otago Witness, Issue 2251, 22 April 1897, Page 9

SUPREME COURT.

IN CHAMBERS. Tuesday, April 13. (Before his Honor Mr Justice Williams.)

SULLIVAN V. GUNTON.

This was a special case stated for the opinion of the court under " The Mining Act, 1591." At the neariDg which took place at a sitting of the court in Banco on Friday, Mr Sim appeared on behalf of the complainant, James Sullivan, miner, of Horseshoe Band, and Mr Haggitt, on behalf of the defendants, John Gunton and George Gunton, miners, of Iloraeshoe Bend. The questions submitted for the opinion of the court were as follow :— (a) Was the partnership a partnership at will, or a partnership between the parties for any, and if any. what term ? (&) Has the partnership been dissolved by the service of the summonses on the defendants or by any other acts or conduct of the parties ? (c) If the partnership is still subsisting, is the complainant entitled to a dissolution by reason of the conduct of the defendants ? (d) If -the partnership is still subsisting, is the complainant entitled to a dissolution until the defendants have been repaid the whole cost of the procuring and erection of the plant and other outlay as aforesaid ? (c) If the partnership has been dissolved, or if the complainant is entitled to a dissolution by reason of the conduct of the defendants, will the cost and outlay mentioned in paragraph d be a debt duo by the parnership to , the defendants? (/) After payment of all debts and liabilities of the partnership, in what proportions should the balance of the pavtner.ship as.sets be distributed amongst the partuers ? C<7) Is the proposed form of judgment and decree bad in law in. any, and, if in any, in what respect? His Honor now delivered the following judgment in the case : — The main question to be determined is whether the outlay of the defendants in erecting and putting in order the plant is an advance by ttein to the firm, to be repaid by the firm, as distinguished from a contribution to the capital. If it is an advance due from the firm, it then conie3 within subsection 2 of section 47 of "The Partnership Act, ISfll," which regulates the distribution of partnership assets on a dissolution, and the view taken by j the warden was correct. I think if there is a pro- | vision in an agreement for partneiship that j moneys p^id by one partner for firm purposes are to be repaid to him out of what are in effect the profits of the firm, and arc to hs a first charge on such profits, that suflicitntly indicates that such moneys aie an advance to the firm, to be repaid by the firm. If they were not an advance they would not he paid back at all. B:canse a particular fund is indicated out of which moneys advanced are to 1m repaid, it does not follow— if the fuud is insufficient to repay the moneye advanced in full — th?.t the balance emnot be recovered as an advance, or that in such an event the balance ceases to be an advance to the firm, and becomes a contribution to capital. The provision for the repayment out of profits is inconsistent with the moneys being a contribution to capital, or being anything else than an advance. Moreover, the agreement nowhere says that they are to he a contribution to capital. In order, therefore, to eupporfc the plaintiff's contention it must appear that by the terras of the agreement, although these moneys were an advance to the firm as from a contribution to capital, yet that there was no liability of the firm at any time to account for them beyond the amount of profits actually received. If thero is an I agreement for what is in eiTect a loan, and it is intended that if it cannot bo repaid out of a particular fund it is not to he repaid at all, the agreement should state so clearly, aud if it doerf ! not the court ought not to draw what is at b?st » '• doubtful inference in favour of such a construe- j tiou. The court is, however, a^ked to draw this ; inference on the ground of hardship. Ido not ] think much weight should be given to thie con- i sideration. If people enter into loo>e agreements j unexpected results frequently follow which inflict hardship on one party or tho other. Hei'e it is said that as on the true construction of the agreement the partnership was a partnership at will, and could be dissolved by either partner at any moment, the defendants could have dissolved the partnership immediately the machinery was erected. If the outlay for machinery was an advance to the partnership, they would on a sale of the partnership assets he entitled. fir a t to be recouped their outlay, and then be entitled to two-thirds of the value of the plaintiff's special 1 claim, for which they would in effect have paid him nothing. No doubt, this re-ult was not ! anticipated. The parties entered into partner- i ship with a view of working in partneiship pud : making profits, and_ neglected to take; into con- | sidevation the contingency of an early dissolution, and to make provision for it. It was, indeed, the less woith while to. provide for this contingency, as either party if he were dissatisfied could, sell his share without dissolving the partnership. Although there may be a hardship in adopting tho construction contended for by the defendants, yet in ceitain circumstances The opposite construction might equally ouse a hardship. The value of the claim might be trifling as compared with tha amount of the outlay on xhe machinesy, and if the value of the claim was anything less than half the amount of the outlay, then to lump the two values together and to give the complainant a third of tbe whole woul'l give him more than his whole claim was worth. Tho question, however, mu^t be determined on the language of the written instrument. If the parties have omitted to provide in it against possible contingencies they must suffer the couseiiuences. I think, therefore, the view taken by T,he warden was correctr The answers to the questions on which the opinion of the court i 3 asked are as follow :— (a) At will. . Ib) By the service of the summons (c) (d) As the partnership is not subsisting no answer is required. (c) Yes. ( f) One-third to the complainant, one-third to each of tho defendants. (0) A question ought not to be framed in tbis form. It is suggested, however, that the decree bhould give leave to any party to bid at the sale Further, the debts of the firm should he directed to be paid in priority to the costs of tho proceedings£f> 6s certified as a proper s« m to be given to tha defendants as costs.