Smith against Betts and another.

Wellington Independent, Volume I, Issue 37, 6 August 1845, Page 4

Smith against Betts and another.

Before H. S. Chapman, Judge. Monday, July 28, 1845.

Betts and another against Revans.

This is a rule for a new trial of two issues directed by this Court under an interpleader rule obtained by the Sheriff to try the rights of the plaintiffin the issues to certain property seized as the property of Samuel Revans, the defendant in the action. The rule, as far as regards the second issue, is drawn in the alternative, namely, "that judgment be entered for the defendant notwithstanding the verdict, or that a new trial be granted;" but we are compelled to confine our consideration to the question of a new trial, because the remedy of judgment non obstante veredicto is only applicable where the defendant obtains a wrong verdict: where it is intended, as in this case, to impeach a plaintiff's verdict, the rule should be either to arrest the judgment, or to enter a nonsuit, according to circumstances. In a recent case in the C. B. Rand v. Vaughan, (1 Bing N. C. 767,) Tindal, C. J., said, "we are not aware that any instance can be produced where the defendants, after an issue has been found against him, has been allowed to have judgment entered in his favour non obstante." I mention this, because a departure from the ordinary course of practise is calculated to introduce laxity and uncertainty, where the rule is clear and well defined; and it is easy to conceive cases in which very serious inconvenience might arise from such a course. The practise as to trials of issues under an interpleader rule, does not differ from that as to ordinary trials. I regret, that in disposing of this trial, a degree of delay unusual in this Court, though not greater than the nature of the case justifies, has taken place, owing to the unfrequency of communication with Auckland. Anticipating that this was a case likely to call for the further consideration of the Court, under any conceivable verdict that a Jury might give, I had, some months before the trial, on personal grounds, requested the learned Chief Justice to : give me, as well as the parties, the benefit of his consideration of the case; but, unfortunately, no opportunity of communicating with Auckland occurred for nearly two months, namely, from the beginning of April to the end of May. -But this delay will, I trust, be deemed well compensated by the fact of the concurrence of opinion which exists between myself and my learned brother as to our judgment on this rule. The learned Chief Justice has given a very serious consideration to the whole matter; I •have myself weighed the evidence, oral and documentary, with as much care as I am capable •of, and the conclusion to which we have both come is, that the verdict on the first issue ought to stand, but that there should be a new trial of the second issue. The circumstances which led to these issues 'are breifty as follows-.—Before the September sittings of this Court, Messrs. Betts and Panton, ol Sydney, brought an action against Mr. Samuel Revans, to recover an ascertained balance of account amounting to £1,769 10s. Previous to the day of trial, namely, on the 2nd September, Mr. Revans executed a cognovit actionem under which judgment was duly signed on the 17th, and a writ of execution was forthwith placed in the Sheriff's hands. When the Sheriffproceded to execute this writ by seizing the reputed property of the defendant, an adverse claim to the whole property was made on the part of Captain Smith. To protect himself, the Sheriff obtained an interpleader rule under which •the present issues were directed. By the first of these, Captain Smith claims half of the property as co-partner of Mr. Revans, in consideration of payments for the use of the business, amounting to £ 2,000, by the second issue he claims the other half of the property by virtue of a certain deed of assignments executed by Mr. Revans in his favour two days before the execution of the cognovit. The pleas deny the right of the plaintiff to half of the property as co-partner, and aver that the deed is fraudulent and covinous, being made, to defeat and defraud the present defendants in their recourse against Mr. Revans, under the writ of execution. m The grounds on which a new trial of the first issue is sought are, that there was no proof of • any.payment by the plaintiff for the use of the .business, and no proof that the plaintiff was in- > titled to a moiety of the property as against the •defendants, and the learned counsel contends ■that the real question was not the partnership, but the right to half the cattle under a specific payment, and in answer to the alleged right, he relied upon the plaintiff's defective proof as to the relation of the payment to the alleged partnership and as to the share, and also upon the case of exparte Chuck, (8 Bing. 469.) upon which I shall presently remark. 1 think the question of •the partnership was the substantial question for •the Jury, because under the peculiar difficulties attending execution against one partner's share of partnership property, I do not see how it is .possible to dispense with an account, even had a deed been produced, and had that deed shewn equal contributions of capital, and an express stipulation for an equal distribution of profit and loss, I am aware of no means of ascertaining what interest the Sheriff can sell under a writ of 'execution, against the share of each partner, without an investigation of the accounts under 'the authority of the Court. There was no specific proof of the share of each partner, which is thus left to the presumption of law; which though sufficient to support the verdict, must not be interpreted to estop the parties or any of them from an account, should circumstances render it necessary. The verdict on this issue must be understood as establishing simply the fact of the partnership, and a second trial could operate no further. The case of ex parte Chuck, which the learned Counsel quoted at the trial and in supporting the .rule, require notice. He relied on it as an authority for this: that the creditors of an old firm have a recourse upon the whole of the property of a new firm, where the change of firm is merely the introduction of a dormant partner, I ruled at the trial that an incoming partner, whether dormant or not, was not chargeable on a contract made before he

joined the firm, and a subsequent examination of the authorities has confirmed the view I then took. Ex parte Chuck contains no such unqualified proposition as the learned Counsel contended. The principal point it decides is this:—That the creditors of the one firm who had notice that a dormant partner had been introduced, were entitled to prove their debts under a commission of bankruptcy against the new firm. If the case be interpreted as going beyond this, it cannotbe supported against the principle established by a long line of decisions. These decisions are well collected in Collier, and in the American work of Mr. Justice Story, a work (Comm: on the L. of Partn: p. 152, 153.) which, like all the productions of that learned Judge's pen, cannot be mentioned without admiration, and respect for the author. Evena present agreement for a future partnership will not operate to charge the incoming partner until the day fixed for its commencement, although the incoming partner may have paid money for the use of the undertaking some time before he joined, and may also have given directions from time to time about the management thereof (Howell v. Brodie, 0 B. N. C. c. 44.) Shareholders in Joint Stock Companies, other than directors, are dormant partners, but they have never been deemed liable on contracts before the date of their connexion with the Company; and so rigidly has this principle been supported, that in Whitehead v. Barron (2 Moo & Rob: 248) it was ruled that a shareholder in a joint stock company is not liable to be sued for the price of goods ordered before he became a partner, although they were actually delivered after he became so. To charge an incoming partner with an old debt there must be either mutual consent, or something from which such consent can be collected, and it cannot be inferred from the mere fact of joining the firm. Notice, renewed dealings, accounts current rendered and not objected to, correspondence between the creditor and the new firm have severally been held to be evidence of such mutual consent, but nothing of the kind has been shown in the case before us. The rule too is obviously just and equitable. Where the contract is complete before the change of firm the creditor's inducement to trust his debtor cannot have been affected thereby,• but where any of the above circumstances arise, it may be presumed that the creditor was betrayed into a renewal of credit, and therefore the new fiim is perfectly changed. As to the second issue it couid scarcely under any circumstances have been satisfactorily disposed of «by a single trial—at least without the further deliberate consideration the Court. The Court has shown by its decision as to the first issue, that it fully recognises the principle so strongly urged by the learned Counsel for the Plaintiff in the issues, that the verdict of a Jury should not be disturbed except on very cogent grounds; but on the other band we must be satisfied that the verdict fulfils the substantial justice of the case before we can permit our judgement to be recorded. " Without some powerof this nature," observed Chief Justice Tindal in a recent case, (Mellin <v. Taylor, 3, B. N. c 111.) •" residing in the breast of the Court, the trial by Jury would in particular cases be,productive of injustice, and the institution itself would suffer in the opinion of the public." Indeed, if the parties to a suit were to be bound by the hasty direction of the Judge at Nisi Prius, or the equally hasty determination of a Jury suddenly formed from perhaps complicated and not very clear testimony, I have no hesitation in saying that trial by Jury wonld be an intolerable nuisance, which would not have survived to our times. I intimated at the trial that an account should have been taken between Captain Smith and Mr. Revans, so as to show what debt, if any, was due from the latter to the former, and that a valuation of the property should have been made at the time, by competent persons, in contemplation of the assignment. From the very nature of a partnership, and the fluctuating character ofproperty including debts and credits, it is obvious that this is the only mode of ascertaining *the existence of a debt from one partner to another. The law will not allow an action to be brought by one partner against another, until after an account taken,; and in support of a recital of a debt in a deed, had there been such a recital, both law and equity would require a similar proof of the alleged debt. We are therefore confined to the express considerations named in the deed. These are, 1. Certain bills and notes upon which Captain Smith and Mr Revans were jointly liable, and which Captain Smith covenants to pay, and to indemnify Mr. Revans: 2. Certain debts due from Mr. Revans to Mr. Constable, Mr. Neilson, (parties residing in England,) and to others not named, and which Captain Smith in like manner covenants to' pay: 3. A release by Captain Smith to Mr. Revans of all partnership claims. Now, as to the bills and notes, Captain Smith was previously liable upon them. He takes upon himself no new liability, and so far they are not a consideration for,-this deed. Here again the want of a full disclosure of the state of the partnership accounts is very conspicuous It ts stated in the deed that these notes and bills were signed and given by Captain Smith without consideration. It may be so; but, as against an execution creditor, this should have been strictly proved. The state of the partnership accounts might show that these notes and bills or part of them at all events, were fully covered by abundant consideration, exclusive of the property conveyed by the deed; in other words, that the share,might be an equivalent for Captain Smith's advances. There is some evidence that when the partnership commenced, the property was worth about £6,000. It is very possible that the property may have since become depnciated in value to a greater extent than the increase of stock by births, but the depreciation of property is a contingency to which a partner is liable, and any subsequent arrangement which would protect him from that, would reduce the partnership to that sort of void compact which the civil lawyers called a lion-like association, (Dig. 17. 2.; 29. 2.) where one took profits but was secured from loss, which stipulation was not allowed to prevail even as against the co-partner. 1 mention these considerations to show how dangerous it would be to support, as part considera-

tion for a deed of this kind, where the most open faith is required, a covenant to pay bills on which the covenantor was before liable. Indeed in contemplation of law it is his own debt which he so agrees to pay; for even an accommodation bill in the hands of a bona fide holder constitutes a debt. I have looked at the case in the Rolls, quoted by Mr. Hart, Sherwood v. Walker, which was afterwards confirmed by the Lord Chanceller, (In Chancery, Feb. 17, 1844,) and of which I have a full report in the Law Journal, but it has really no bearing on this case. It was not a question whether a covenant was a good consideration in a deed of of assignment, but whether in a deed of covennant, a certain covenant was satisfied. Excluding the bills and notes in the hands of the Bank, and assuming that the debts to Mr. Constable and Mr. Neilsonare proved, even had they as creditors been parties to the deed and no question as to the fraudulency of the assignment been raised, there would still have remained an equity to the execution creditor, which the Court would be bound to ascertain, consisting of the surplus after satisfying Captain Smith's share and the proved debts. The case of Benton v. Thomhill, (7 Taunt. 149,) which was quoted by Mr. Hanson, goes the whole length of showing, that although a deed made, bona fide, may be supported to the extent of the grantee's claim, yet he cannot take a surplus which will be available to the execution creditor. But Mr. Neilson and Mr. Constable are not parties to the deed; hence the property is put as much out of their reach as out of that of the defendants in the issues; for the 15thclause of the Conveyancing Ordinance (which relates to the reality) does not operate to give them a right of action. The foregoing observations assume these two debts to have been proved, but as to Constable's claim there is no evidence, and as to Mr. Neilson's only the slight evidence of Waitt's belief that the debt remains unpaid. The recitals and covenant are couched in doubtful and unsatisfactory language, the recitals speak of the the alleged debts as " £500 or thereabouts," and the covenant is to pay £500 Mor such balance or sum of money as upon the taking of accounts shall be found to be due to him.'' Now the taking of accounts might have exhibited an amount to be due to one or both of these parties considerably below the sum specified. In the present state of the evidence nothing is shown to be due, and if the deed were a deed of trust for the benefit of creditors without preference or reservation each deed ought to be strictly proved. There are other features which have occurred to us, but which it is unnecessary to mention in this place. The above are the principal reasons why the rule for a new trial of this issue must be made absolute. _ Rule discharged- as to Ist issue- (saving the sight of the parties to an account), and absolute for a new trial of second issue. Costs of 2nd issue to abide the Court.