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Present: Ennis J. and Be SampayS J.AEEYAGOONESEBEBA et al. ». MENDIS et al.
366—D. G. Kandy, 23,632.
Partnership action—Capital over its. 1,000—Agreement not In writing—May defendant in hie answer admit the partnership, and raise theobjection that the agreement is void for want of a written agreement t
In a partnership action, the admission in his answer 'of theexistence of the partnership by a defendant does not prevent himfrom setting up by way of defence the Ordinance of Frauds andPerjuries, where the agreement is not in writing and the capitalOf the partnership is over Es. 1,000.
fjp HE foots are set out in the judgment.
Bawa, K.C. (with him A. St. V. Ja-yewardene), for plaintiffs, ,appellants.
Fernando, for first and second defendants, respondents.
Schneider, for third defendant, respondent.
Bartholomeusx, for the fourth defendant, respondent.
Our. adt. vult.
November 9, 1915. Bn Sampayo J.—
This is a partnership action. The plaint stated that' the firstplaintiff, the defendants, and two others named John Fernando andBon Juanis Appuhamy, had oarried on business in partnership astoddy renters from July 1, 1912, to July -SI, 1913, under articlesof partnership dated June 28, and that at the expiry of the saidperiod the first plaintiff and the defendants continued the saidbusiness* on certain terms until September 30, 1914, when thealleged partnership was dissolved; and the prayer was for theordinary partnership accounting. The second plaintiff was joined inthe- action, as the first plaintiff had assigned his interest to himon February 28, 1814. The defendants pleaded severally. Intheir answers the defendants in limine took the legal objection that,the capital of the business being admittedly above ,Bs. 1,000, the. action could not be maintained in the absence of a written agreementof partnership, as required by section 21 of the Ordinance No. 7 of1840. The first three defendants proceeded to admit the agreementto. carry on business as .toddy renters in partnership,. but deniedthe correctness- of some of .the alleged terms, and the fourth defend-ant pleaded similarly, but as regards the agreement he emphasized
16f. if. A 98808 (8/60)
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o o lOlfik ihe loot that it was an invalid parol agreement. At the trial theDb suOTAYoolegal objection was stated as a preliminary issue, and the DistrictJudge, in view ohite recent judgment of the Privy,.'Council in Patev* &***• 1 decided it Agagnst the plaintiffs and dismissed the action.
The appeal is supported on two grouda: (1), thaCthe partnershipsince, Julj, 1913, was only, a continuation of the partnership con-stituted by the articles of partnership of June SS, 1912; and,,,therefore tjh© requirement of section 21 of Orifaanoft No. 7 of 18^0'was satisfied; and (2), that the writing provided for lay the'Ordi-nance was only a matter of evidence, and that as *the'.agreementwas admitted by the defendants the action was maintainable underthe proviso to section 21 ter the purpose of settling accounts betweenthe partners. .
With regard to the first ground, it is to be noted in the first placethat the partnership constituted by the written agreement of June28, 1912, was for the purpose of carrying on certain specific toddyrents for the period ending July 81, 1913, on tire footing of licensesalready obtained in the name of some of ths parties. In tiie nextplace, .the continuation of the business was not tacit, but a newagreement for the further period of fifteen months was, accordingto the plaint, entered into. Moreover, the new agreement wasneither among the same parties nor,, as may be seen from a com-parison between the statements in the plaint and the previouswritten agreement, upon the same terms. The purpose of the newagreement was to buy sb many new rents as possible for the furtherperiod of fifteen months. New capital was contributed in differentproportions, and the shares and interests of the parties were also tobe different. I think it is impossible .to maintain that the partner-ship, if any, since the expiration of the period for the carrying onof the old toddy rents, was a mere continuation of the previouspartnership.
The main argument, however, related to the second ground ofappeal. There is no doubt, as pointed out by the Privy Council inPate v. Pate, 1 section 21 of the Ordinance contained an evidentiaryrule. If in any legal proceeding a person has to establish a partner-ship, the only admissible, proof will be that afforded by a writingsigned by the parties. The Privy Council contemplated the. possi-bility that if the partnership was admitted, and if thus there was nonecessity to establish the partnership, the proviso of section 21might be availed of for the purpose of settlement of accountsbetween "the partners. Their Lord&ips, however, did not decidethe point, and I think that, if it should arise in a particular case,the principle of such decisions as ChSLpm v. Corporation of London*would have to be taken into account. In that case it .was liid downthat (he mere admission of a right which' was asserted by tileplaintiff, but which had no existence in law, was not sufficient to
* L. R. 7 Ch. Div. 795,
1 (t91S) IS AT. L. R. m.
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entitle the plaintiff to a judgment establishing the right. Section
21 of our (Ordinance declares an agreement, whioh is not in writing,©* sahpayc
not to be of “ force or avail In law,”, and the question stall remains J-
to be considered whether 'the policy of law thus enunciated woiffd Abdfagooiu-
be met by an admission. In the present case, however, the^point
does not directly arise. For, what is the extent of the admission
in the defendants’ answers? It is at most a qualified admission
of the agreement upon which the plaintiffs rely. The fourth
defendant even calls it an invalid agreement. The answers of all the
defendants in feffeet amount to this: they in the first place take issue
with the plaintiffs on the validity of the agreement, and therefore
on the legal existence of the agreement, and then pleading to the
statement of facts in the plaint, they admit there was an agreement,
but on somewhat different terms from those pleaded. It may
*be remarked therefore that, notwithstanding the admission, the
plaintiffs would still have to prove the agreement so far as the terms
are concerned. But the main question is, where the defendant
demurs to the plaintiff’s action on the ground that the agreement
declared upon was invalid, but subsequently admits the de facto'
existence of the agreement, whether the demurrer must fail. I do
not think so. Counsel for the respondents aited Walters v. Morgan,*
whioh appears to me to be in point. There the plaintiff claimed
specific performance of an agreement to grant a lease, for which
there had been no writing &b required by the Statute, but admitted
the agreement. Lord Chancellor Eyre refused specific performance,
observing as follows: “The Court of Exchequer uniformly say
that where a defendant insists on the benefit of the Statute, his
admission shall not land himfor it has been determined
that in many eases a defendant cannot protect himself by theStatute from answering the faot that such a parol agreement wasor was not made; that it would be the grossest injustice in theworld, after making him answer, to turn that admission into thevery ground of taking the ease oat of the Statute.” Our systemof pleadings similarly requires a defendant in his answer to admit ordeny the several averments in the plaint, and it also allows alternativepleading. I-think that the ground of the decision in. Walters «.
Morgan1 applies to .this case, and that the admission of the defendantsin their answers, such as it is, does not prevent them from settingup tiie Ordinance of Frauds and Perjuries. This is further supportedby Lucas v. Dixon.* There Lord Esher, Master of the Bolls, said,that if tiie defendant demurred, and in his demurrer stated thatthere had been a contraot which was of such a kind that had it beenin writing it would have entitled the plaintiff to succeed, the defend-ant’s dpmurrer would be allowed. In the same ease Lord Bowenobserved: “ It was held po doubt that if the defendant admittedhis liability, that was sufficient—not on the ground- that hia< 2 Cox 369.a L. R. (1889) 92 Q. B. D. 857.
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admission was a memorandum of (he -ontraot, but that it was anmSampayo admission that there was suoh a memorandum but* he added,J- “ that is shown b^ the fact that, if at the same time he set up thefjeyagoone. Statute, his admission did not operate ", In my opinion the seaondSroun^ oi the appeal in this case also falls.
The appeal should, I think, be dismissed, with costs.
Ennis -T.—si agree.
ABEYAGOONESEKERA et al. v. MENDIS et al