Tower Cabinet Co., Ltd v. Ingram (1949) 1 KBD 1032

Tower Cabinet Co., Ltd v. Ingram  (1949) 1 KBD 1032

[Holding out – section 28]

LYNSKEY, J . – The respondent company, the Tower Cabinet Co., Ltd., claimed from Merry’s, who in the writ were described as “sued as a firm”, the sum of £23.17 s. for the price of six suites of furniture sold and delivered. Judgment was obtained, and the company then sought to render a Mr. S. G. Ingram liable for the debts of Merry’s. They alleged that he was liable, first, under s. 14, and, secondly, under s. 36, of the Partnership Act, 1890. The matter was referred for trial before Master Grundy, the issue being whether Mr. Ingram had represented himself to be, or knowingly suffered himself to be represented to be, a partner under S. 14, or was liable under the provisions of S. 36 as, a partner.

The facts found by the learned master were that in January, 1946, Mr. A. H. Christmas and Mr. Ingram commenced together to carry on business in partnership as household furnishers under the name of Merry’s at Silver street, Edmonton. The partnership was registered under the Registration of Business Names Act, 1916, as being carried on by Mr. Christmas and Mr. Ingram. That partnership subsisted until Apr. 22, 1947, on which date the parties agreed to dissolve it. The master was satisfied that there was a dissolution of this partnership in April, 1947, and that Mr. Ingram had given notice to the firm’s bankers that he had ceased to be a partner in the business carried on in the name of Merry’s. From then until some time in May, 1948, Mr. Ingram had no connection with the partnership except that Mr. Christmas had agreed to pay him for his share of the partnership a sum of some £3,000, and by May, 1948, about £1,000 had been paid by instalments. Mr. Ingram was not professionally represented at the time of the dissolution. He arranged with Mr. Christmas to notify those dealing with the firm that he (Mr. Ingram) had ceased to be connected with it, but he did not advertise or procure the advertisement in the London Gazette of the fact that he had ceased to be member of the firm. After his cessation of membership, new notepaper was printed for use in the future business of the firm. While Mr. Ingram had been a partner, the notepaper had been headed “Merry’s” and thereunder had borne the names: “A. H. Christmas and S. G. Ingram”, indicating that they were both partners. After the dissolution the name “Merry’s” appeared on the new notepaper, and “A. H. Christmas, Director”, apparently as being the person responsible for the running of the business.

In January, 1948, Mr. Christmas, or Merry’s, were approached by the Tower Cabinet Company through their representative, a Mr. Harold Selbey, who obtained an order for six suites of furniture. He reported the order to one of the directors of the company, Mr. Jack Smead, who telephoned to Merry’s and asked for a director in order to secure confirmation of the order. It is not clear to whom he spoke. In pursuance of that conversation, a letter was written in the form of an order, and dated Jan. 5, 1947, in mistake for Jan. 5, 1948. That order form read: “ Merry’s, A. H. Christmas, S. G. Ingram. Household Furnishers. To Tower Cabinet Co., Ltd. Please supply six light bedroom suites …. 168 units on delivery”. It was signed by Mr. Christmas as the manager. That order or confirmation was given on the notepaper which had been the notepaper of the firm at the time when Mr. Ingram was a member, but Mr. Christmas had no authority from Mr. Ingram to use it, and in using it he was acting in direct conflict with the arrangement that he had made with Mr. Ingram that he should notify people that Mr. Ingram was no longer interested in the firm.

In May, 1948, Mr. Ingram was worried about the state of the business, and he came to try and see if he could resuscitate it in order to salvage his share in the previous partnership. He seems to have put some £300 into the business, and to have endeavoured to take control again. A letter was written by Mr. Christmas to the company in May, 1948, saying:

Dear Sirs, I wish to advise you that as from today I am no longer connected with the above business. Mr. S. G. Ingram is now sole proprietor and responsible for all outstanding debts. Yours faithfully, (signed) A. H. Christmas.

According to the evidence of Mr. Ingram, that letter was written without his knowledge and without his authority and he had no idea it was being sent, but it is not of any great materiality from the point of view of the questions which we have to decide in this case. It is clear on the master’s finding that in January and February, 1948 when the goods were ordered and delivered Mr. Ingram was not in fact a partner in this business. The question is whether the company are able to make him liable as a partner by reason of the provisions of the Partnership Act, 1890, dealing either with holding out or with failure to give notice when a partnership has ceased and credit has been given to the partnership firm as if the outgoing partner were still a partner.

[Section 14 of the Act of 1890 was identical with the provisions of section 28 of the Indian Partnership Act, 1932. The court re-produced section 14 and proceeded.]

Before the company can succeed in making Mr. Ingram liable under this section, they have to satisfy the court that Mr. Ingram, by words spoken or written or by conduct, represented himself as a partner. There is no evidence of that. Alternatively, they must prove that he knowingly suffered himself to be represented as a partner. The only evidence of Mr. Ingram’s having knowingly suffered himself to be so represented is that the order was given by Mr. Christmas on notepaper which contained Mr. Ingram’s name. that would amount to a representation of Mr. Christmas that Mr. Ingram was still a partner in the firm, but on the evidence and the master’s finding that representation was made by Mr. Christmas without Mr. Ingram’s knowledge and without his authority. That being the finding of fact, which is not challenged, it is impossible to say that Mr. Ingram knowingly suffered himself to be so represented. The words are “knowingly suffers” – not being negligent or careless in not seeing that all the notepaper had been destroyed when he left.

The company also rely on s. 36 which provides:

(1) Where a person deals with a firm after a change in its constitution he is entitled to treat all apparent members of the old firm as still being members of the firm until he has notice of the change. (2) An advertisement in the LONDON GAZETTE as to a firm whose principal place of business is in England or Wales, in the EDINBURGH GAZETTE as to a firm whose principal place of business is in Scotland, and in the DUBLIN GAZETTE as to a firm whose principal place of business is in Ireland, shall be notice as to persons who had not dealings with the firm before the date of the dissolution or change so advertised. (3) The estate of a partner who dies, or who becomes bankrupt, or of a partner who, not having been known to the person dealing with the firm to be a partner, retires from the firm, is not liable for partnership debts contracted after the date of the death, bankruptcy, or retirement respectively.

It is said by counsel for the company that sub-s. (1) deals with the case in which it appears to the world that a man is still a partner in a firm and notice must be given before his liability as a retiring partner can cease. Secondly, he says that sub -s. (2) equally applies to the position of a partner when it is apparent to the world that he was a partner.

Referring to the old authority of Farrar v. Delfinne, counsel for the company says that the distinction has to be drawn between what are described by Cresswell, J., in that case as notorious partners of the partnership and partners who are “profoundly secret” members of the partnership. Counsel says that this section, being in a codifying Act, re-enacts the law as it existed in 1843 and later. It should be noticed that even in Farrar case Cresswell, J., laid considerable emphasis on the question of actual notice. He said (1 Car. & Kir. 580):

Todd and the defendant were once in partnership, but they have not been so since the year 1837. The plaintiff dealt with the firm during the partnership, and he continued to do so afterwards; and the question is, whether the defendant is liable in respect of such subsequent dealings now that the partnership is dissolved. The law stands thus: If there had been a notorious partnership, but no notice had been given of the dissolution thereof, the defendant would have been liable. If there had been a general notice, that would have been sufficient for all but actual customers; these, however, must have had some kind of actual notice. If the partnership had remained profoundly secret, the defendant could not have been affected by transactions which took place after he had retired; but if the partnership had become known to any person or persons, he would be in the same situation, as to all such persons, as if the existence of the partnership had been notorious. The question for you, therefore, is was this partnership actually known to the plaintiff, either by general report, or by direct communication? Because, if it were, and he did not know, either from notice of the fact, or from surmise, that the dissolution had taken place, you must infer that he still dealt on the faith of the partnership, and the defendant will therefore be liable.

It is said by counsel for the company, who seeks to adopt this judgment in his favour, that s. 36(1) and (2) are dealing with what are described in the judgment as “notorious” partnerships, and sub-s. (3) is dealing with cases of “profoundly secret” partnerships. Looking at the Act itself, I find difficulty in adopting that suggested construction. The words of sub-s. (1) are:

Where a person deals with a firm after a change in its constitution he is entitled to treat all apparent members of the old firm as still being members of the firm until he has notice of the change.

The point depends, in my view, on what is the meaning of sub-s. (1) of “apparent members.” Apparent to whom? Does it mean apparent to the whole world, or notorious, or does it mean apparent to the particular person with whom the section is dealing? In my reading of that sub-section, “apparent members” means persons who appear to be members to the person who is dealing with the firm, and they may be apparent either by the fact that the customer has had dealing with them before, or because of the use of their names on the notepaper, or from some sign outside the door, or because the customer has had some indirect information about them. Both sub-s. (1) and sub-s. (2), in my view, deal with cases where they are apparent members.

Sub-section (3) again deals with the particular individual. It does not deal with the public at large. Its words are, to my mind, simple and obvious. It does not deal merely with question of apparent members or non-apparent members. It implies the test: “… a partner who, not having been known to the person dealing with the firm to be a partner…” Whether he was to other people an apparent partner, or whether he was a dormant partner, the words seem to me to be equally applicable. If the person dealing with the firm did not know that the particular partner was a partner, and if that partner retired, then, as from the date of his retirement, he ceases to be liable for further debts contracted by the firm with that person. The fact that later the person dealing with the firm may discover he was a partner seems to be to be irrelevant, because the date from which the sub-section operates is the date of the dissolution. If the person who subsequently deals with the firm had no knowledge prior to the dissolution that the retiring partner was a partner, then sub-s. (3) comes into operation, and, in effect, relieves the person retiring from liability.

It is said by counsel for the company that the company did know that Mr. Ingram was a partner because the order for the goods contained a statement to the effect, or, apparently, to the effect, that he was a partner of the firm. In my view, that document, which only came into existence in January, 1948, was, no doubt, a representation by Mr. Christmas that Mr. Ingram was a partner at that particular date. That representation was untrue. He was not a partner at that date, and it seems to me one cannot draw the inference that that gave the company knowledge that, in fact, Mr. Ingram had been a partner prior to the date of his dissolution of the partnership in April, 1947. Even if it did give such notice, in my view, the section had already commenced to operate, and it would not avail, subject to s. 14 dealing with holding out, to render Mr. Ingram liable.

The result is that, in my view, the learned master was not correct in his view of the effect of the sub-section or of the decision which he quoted. In my view, it is established that the company had no knowledge that Mr. Ingram was a partner prior to the date of the dissolution. That being so, Mr. Ingram is brought directly within the words of sub-s. (3), and is, therefore, under no liability to the company in respect of the debts subsequently incurred by Mr. Christmas at a time when he was not a partner. This appeal ought to be allowed.

LORD GODDARD, C.J. – I agree. I need only add that, in my opinion, the words “all apparent member” in s. 36(1) mean all members apparent to the person dealing with the firm. Secondly, I think sub-s. (3) exactly applies to the facts of this case, and I can see no good reason for holding that that they apply to the case of a dormant partner. I think that the Act, which is a codifying Act, intends in this section to incorporate the law, except with regard to the notices in the LONDON GAZETTE, which was new, laid down by Cresswell, J. in Farrar v. Deflinne (1), to which my brother has referred, or, at any rate, to adopt the statement of law which he there lays down when he told the jury that the question for them was : “Was this partnership actually known to the plaintiffs, either by general report, or by direct communication?” I feel convinced that the true construction to put on this section is that there must be actual knowledge which may be acquired either because of the fact that it is notorious, or because it has been directly communicated, but it is not enough to say that other people knew. The fact may be so notorious that a jury would be justified in finding that the person did know a certain fact, but it does not follow because other people know it that he knew it. I think what Cresswell, J. meant in that case was that the jury must be satisfied that there was actual knowledge, which might be gained from either of one of two sources.

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