S. Ibrahim Saibo v. Jainambeebee Ammal.
[In the Privy Council]
Present : Viscount Sankey, Sir Lancelot Sanderson and Sir Philip
SEYYACO IBRAHIM SAIBO et aJ. v. JAINAMBEEBEEAMMAL et al.
Partnership—Land purchased by partnership—Brought into pa; tnership stock—Claim by heirs of partner—Onus on plaintiffs to prove that land isindividual property.
Where land, purchased by a partnership in the name of the partnerson account of the partnership and in the course of the partnership businessand brought into the partnership stock, was claimed by the heirs of adeceased partner,—
Hold, that the onus was on the plaintiffs to, prove that the land was theprivate property of the individual partners.
Sir PHILIP MACDONELL—S. Ibrahim Saibo v. Jainambeebee Animal.
PPEAL from a judgment of the Supreme Court.
N. Pritt, K.C. (with him R. K. Handoo), for the appellant.
Stephen Chapman, for the respondent.
Cut. adi wilt.
November 30, 1939. Sir Philip Macdonell—
This is an appeal from a judgment and decree of the Supreme Court ofCeylon setting aside a judgment and decree of the District Court ofNuwara Eliya and sending the case back to that District Court for anorder of partition of certain land to be entered in an action wherein therespondents-plaintiffs in the action, sued the appellants-defendants inthe action for a partition of that land.
The land, an extent of 2 acres 1 rood and 22 perches, situate withinnamed boundaries at Nuwara Eliya in Ceylon, and known as “ FountainStore ” or “ Fountain House ”, was, on May 7, 1902, conveyed on anotarial deed P 3 to certain seven co-partners who had by notarial deedP 27 entered into a trading partnership on ApTil 4, 1902. This, the firstpartnership of seven members, was succeeded on September 17, 1906, bya second partnership of six, five of them of the first partnership and onenew member, and that on March 7, 1912, by a third partnership of nine,three members of the first partnership, the one brought into the secondpartnership, and five new ones. These three deeds of partnership P 27,P 28 and P 29, were, each of them, notarial and similar in their mainprovisions. Each deed recites the total capital of the firm, the amountbrought in by each partner and his share of profits, provides a time limitfor the duration of the partnership and that the death of a partner is notto dissolve it, appoints by name one or more of the partners to be “ princi-pal partners ” with express power to purchase and sell land for thepartnership and to mortgage such land, and provides for the dissolutionof the partnership and distribution of the assets, with an option to theprincipal partner or partners to take over the assets and continue thebusiness. Each of the two latter partnership deeds P 28,.P 29, refers bynumber and date to the deed preceding it, making the second partnershipa successor to the first, and the third a successor to the second, andreciting that the accounts of the immediately preceding partnership havebeen gone into and agreed to. The second and third partnership deedsrecite that the firm has landed properties—there is evidence that it hadsuch, besides the land the subject of this case—but does not state theirlocality or extent. The third partnership deed while, like the others,giving to the principal partners full power to sell land the property of thepartnership, also provides that on dissolution of the partnership “noneof the said partners shall at any time be entitled to or ask to be given anylands or buildings or any shares in the lands and buildings of the saidpartnership wheresoever situated ”, and gives power on such dissolutionto the principal partners to obtain from the other partners conveyance of“ their respective shares, right, title, and interest in all the landed propertyand buildings of the said partnership ” to them the principal partners,the other partners being “ hereby bound to convey their respective shares,
Sib PHILIP MACDONELL—S. Ibrahim Saibo v. Jaindmbeebee Ammal. 299
right, title, and interest in all the said landed property of the saidpartnership to the said principal partners ” and their heirs or other legalrepresentatives.'
No. 5 of the original partners, by name Pavanna Ibrahim Saibo, wasalso a member of each of the two succeeding partnerships and executedeach of the three partnership deeds. The three plaintiffs-respondentsclaim under him as his intestate heirs, being his widow and his two sons.He himself died intestate on February 16, 1915, during the currency ofthe third partnership. His estate was not administered until 1931, thisaction being commenced in 1933. Owing to absence from the jurisdictionand minority, an issue of prescription does not arise.
The third partnership had occasion to mortgage portions of the landin question by three several notarial deeds executed on October 7, 1915—after, that is, the death of partner No. 5—and eventually on February 12,1916, sold it by notarial deed P 9 to some of the defendants and a pre-decessor in title of other defendants-appellants. This deed P 9, givesthe numbers and dates of the three partnership deeds and of that bywhich the land had originally been conveyed to the partnership. Itrecites the mortgages on this land, the fact that No. 3 is the only one ofthe original partners still alive, also that the third partnership had boughtin their respective shares in this land from a retired partner, No. 6, andthe heirs of a deceased partner, No. 2, also that partner No. 5 under whomthe plaintiffs claim, had died. It recites further that “although thepremises” (i.e., this land) “were acquired in the names of the sevenpersons of whom the said partnership was originally composed and ofwhom the only person now alive is ” (the original partner No. 3) “ the saidpremises have always been regarded as property of the said firm andhave been possessed as such up to date without any disturbance orinterference whatsoever on the part of the heirs, executors or administra-tors of such of the original partners” as are dead, the: said No. 3“ himself having always allowed the rents and profits of the said premisesto be included in the accounts of the said partnership and to be distributedamongst the partners for the time being of the said firm according to theirrespective.shares in the said business”, also that “on the same principlethe said premises have always been considered as part of the assets of thesaid partnership, and its value at the time of the taking of a generalaccount has accordingly been included in estimating the amount availablefor distribution among the different partners ”, and that “ on that footingeach deceased or retiring partner has actually been paid the price of hisinterest in the said premises ”. This deed P 9, selling to the defendants,or to their predecessors in title,, gives in the schedule a description byextent and boundaries of the land sold, showing that it is identical withthe land acquired by the first partnership on deed P 3. At different times,not material, the defendants and their predecessors in title bought in theoutstanding interests of all the partners in this land, save that of No. 5under whom the plaintiffs claim.
On July 17, 1917, the third partnership dissolved itself by notarialdeed D 5.
The plaintiffs claim that under the deed P 3 conveying the land to thepartners, No. 5 acquired in his personal capacity and without reference
30.0 Sir PHILIP MACDONELL—S. Ibrahim Saibo v. Jainambeebec Animal.
to the partnership, the legal and beneficial right to a one-seventh sharetherein. They also claim two sixty-third shares in it as follows:—Theretired partner No. 6 and the heirs of deceased partner No. 2 on May 14,1912, sold to the third partnership consisting, as will be remembered ofnine persons, of whom No. 5 was one, their two one-seventh shares. Ofthese two-sevenths No. 5 would be entitled to a one-ninth or two sixty-thirds. These must be added to No. 5’s original one-seventh makingeleven sixty-thirds in all.
The notarial deed P 3 of May 7, 1902, which conveyed the land to thefirst partnership, recites that the vendor has contracted for the sale andconveyance of the land “ for the exclusive use and benefit …. ofthe said co-partnership business also that the seven partners, namingthem, pay the purchase price “ out of partnership funds ” and “ asco-partnersand it conveys to the seven partners, nominatim, “ as
co-partners ”, habendum “ for ever for the use and benefit …. ofthe said co-partnership ”. The law of Ceylon as to partnership is to befound in section 1 of Ordinance No. 2 of 1866, as follows: —
In all questions or issues which may hereafter arise or which mayhave to be decided in this Colony with respect to the law of partnerships…. the law to be administered shall be the same as would be
administered in England in the like case, at the corresponding period,if such question or issue had arisen or had to be decided in England,unless in any case other provision is or shall be made by any Ordinancenow in force in this Colony or hereafter to be enacted: Provided thatnothing herein contained shall be taken to introduce into this Colony. any part of the law of England relating to the tenure or conveyance orassurance of, or succession to any land or other immovable property,or any estate, right, or interest therein.
The portion of the law of England relevant to the present matter issection 20 (1) of the Partnership Act, 1890: —
All property and rights and interests originally brought into thepartnership stock or acquired whether by purchase or otherwise onaccount of the firm or for the purposes and in the course of partnershipbusiness are called in this Act Partnership propeity and must be heldand applied by the partners exclusively for the purposes of the partner-ship and in accordance with the partnership agreement.
This land was “ brought into the partnership stock ” and “ acquired…. by purchase …. on account of the firm and ….
in the course of partnership business ” since it was conveyed to theseven partners “ as co-partners ”, and the price for the purchase of theland was to be paid “ out of partnership funds ”. It was acquired “ forthe purposes of the partnership business ”, one of these by the firstpartnership deed being the purchase of landed properties. The deedconveying it recites, as has been said, that the vendor has contracted tosell the land “ for the exclusive benefit …. of the partnership ”,and the habendum is to the partners, their heirs, executors, administratorsand assigns “ for ever for the use and benefit ” of the partnership. Thusby this deed it became partnership property under the provisions ofsection 20 (1) of the Pa. ♦n.ership Act, 1890. As the law to be applied,
Sir PHILIP MACDONELL—S. Ibrahhn Saibo r. Jainainbeebee Ammal. 301
that of England, does, not recognize a partnership firm as a legal persona,it was conveyed, as is a usual method under that law, to the seven partnersof the firm nominatim, and by the instrument conveying it each of themacquired a one-seventh share in the legal title to the land and, since hewould be entitled to share in any profits the land produced, in thebeneficial interest also, but so that each of them used his share exclusivelyfor the purposes of the partnership4 At the trial of this action theDistrict Judge was satisfied that the land thus became partnershipproperty, but on appeal the Supreme Court dissented from this. In it?view the Ceylon Statute of Frauds, Ordinance No. 7 of 1840, section 2,created against holding this land to be partnership property, difficultieswhich might not have seemed so great had it been kept in mind that theonus was on the plaintiffs to show that each partner’s one-seventh sharein the land was his for his personal use, and that therefore the land wasnot partnership property.
Much of the argument for the plaintiffs on this appeal was accordinglybased on this Ceylon Ordinance, No. 7 of 1840, section 2 of which providesthat:—
No sale, purchase, transfer, assignment, or mortgage of land or otherimmovable property and no promise, bargain, contract or agreementfor effecting any such object, or for establishing any security, interestor incumbrance affecting land or other immovable property ….shall be of force or avail in law
unless in writing and by notarial deed. The second and third partnershipdeeds do not refer specifically to this land, or state that the. partnershipsucceeding to the first one took or held it as partnership property, hence,il was argued, the members of the second and third partnership, No. 5being one of these, took it for their own benefit and not as partnershipproperty; conversely, to enable the partnership to claim it as suchproperty, the second and third partnership deeds should have containedwords definitely stating it to be so. Various Ceylon cases were cited insupport of this line of argument, and their Lordships were also invited toascertain the intention of the deed P 3, conveying this land, by examiningthe subsequent conduct of the persons who executed it, a method ofinterpretation applied also by the Supreme Court in its judgment: thuswhen the retired partner No. 6 filed in August, 1909, the inventory of theestate of the deceased partner No. 2, he included therein a one-seventhshare of “ Fountain Store and premises ”, valuing that share at Rs. 8,000and inserted an item “ Rents due Rs. 4,420 ”, and it was. argued that these" rents ” would be the deceased partner’s share of rents due to theindividual partners from the partnership for its occupation of the land,but this overlooks the fact that the partnership owned other lands inwhich this inventory also claimed shares, likewise that deed P 9 by whichthe third partnership sold this land, recites that its “rents and profits”were included in the accounts of the partnership, consequently these“ rents ” may have been due from tenants to the partnership, not fromthe partnership to individual partners.
An argument from the subsequent conduct of the parties to deed P 3,stronger at least prima facie, is the fact that in May, 1912, the thirdpartnership bought on notarial deed P 6, from this* same retired partner
302Sir PHILIP MACDONELL—S. Ibrahim Saibo v. Jainambeebee Ammai.
No 6 and from the heirs of the same deceased partner No. 2 -the two one-seventh shares of those two partners in this land and in other partnershiplands, for Rs. 10,000 to each of them, and this sale and purchase for sucha substantial consideration'was claimed by the plaintiffs as an admissionby the members of the third partnership, that this land was not partner-ship property but that, of individual partners. The notary’s attestationto the deed P 6 is however that in his presence No. 6 received by cheque,only Rs. 3,055.58 out of the consideration of Rs. 10,000, and the heirs ofNo. 2 only Rs. 8,871.41 out of a similar consideration, also by cheque.At the trial of the action in the Distinct Court, a witness, Ena SheikDavood, who had been in the employ of all three partnerships, producedfor the defendants document D 7, being extracts from the firm’s lqdgeraccount for 1911 and 1912, which showed that at the date when the thirdpartnership bought these one-seventh shares, these sums Rs. 3,055.58and Rs. 8,871.41 were the amounts standing in the firm’s books to therespective credits of these former partners, and that cheques for thesesums were put through the firm’s bank account on their behalf about afortnight later. Thus the notarial attestation and the document D 7confirm each other. The recital to the conveyance P 6 describes theland, shares in which the third partnership was purchasing as “ part ofthe property and assets ” of the first partnership. The evidence in thiscase does not entirely explain why the third partnership bought theseLand shares for an ostensible consideration greater than the amount thenstanding in its books to the credit of the vendors, but the deed formingthe third partnership executed about two months before, had providedthat no retiring partner was to be entitled to any lands or shares in landsbelonging to the partnership, also that on the dissolution of the partnershipthe partners were each to convey to the • principal partners their severalshares in such lands, and the conveyancers who inserted these provisionsin the third partnership deed may have advised it to get in the outstandinglegal titles of the retired partner No. 6 and of the deceased partner No. 2.On the administration in 1914 of the estate of partner No. 1, the inventoryduly mentioned his one-seventh share of “ Fountain Store ” as well as ofother partnership lands, but in the same proceedings the administratorsof that estate moved the testamentary court to transfer to the firm thoseone-seventh shares, as being “ property which forms part of the assets ofthe said firm”, receiving in exchange "the sum of Rs. 81,563 whichrepresents the deceased’s interest iri the said firm ”.. The same witnesswho had produced the ledger extracts, produced also the accounts of thesecond partnership for the year 1911, D 1, signed in two places by partnerNo. 5, which accounts showed the amounts then due to certain of thepartners, including No. 5, as their respective shares in the profits, but bysetting out the lands owned by the firm as an asset valued together atRs. 96,200, these accounts tended to negative the idea that any partnerhad a separate interest in them. This sa^e to the firm of partners’ sharesin this land does not, therefore, give an unequivocal support to theplaintiffs’ case, and the same seems true of the purchases by thedefendants, after they had acquired this land from the third partnershipon P 9, of other outstanding partners’ shares. That these things lackcomplete explanation may well be due to lapse of time. If the estate of
Sir PHILIP MACDONELL—S. Ibrahim Saibo v. Jainambeebee Ammal.
a man dying in 1915 is only administered in 1931, and’ action only takenfor. what is claimed thereunder in 1933, evidence may have becomeunavailable which was available in 1915 and following years.
But generally this line of argument for the plaintiffs, namely, interpreta-tion of the deed of conveyance P 3, hy the subsequent conduct of theparties to it, overlooks the fact that in this case the onus is on the plaintiffs;it is not for the defendants to show that this land was partnership propertybut for the plaintiffs to show that it was the property of the individualpartners. Parties to a partition action must make clear title to the landthey seek to partition and must identify what land it is that they claim.If plaintiffs here begin with the deed P 9 by which the third partnershipsold the land in derogation, as they claim, of their rights, it/jvill be noticedthat that deed describes the land fully by boundaries and extent but alsoasserts in clear terms—set out above—that the land had always beentreated as partnership property, and recites the power of the partners tosell it. If the plaintiffs rely on the deed P 29 establishing the thirdpartnership, it will be noticed that that deed, while it states that thepartnership owns lands, and while it gives the principal partners powerto sell them and on dissolution of the partnership to call for conveyancesfrom the several partners of their interests therein, yet does not specifywhat those lands are or where. The deed creating the second partnership,P 28 describes the partners as “ of the shop …. Fountain Store ”but again does not specify the lands of the partnership while stating thatit does own “ properties ”, and while giving the principal partner powerto sell them. The plaintiffs must go then to the deed P 3 by which thefirst partnership obtained a conveyance of this land. This deed specifiesthe land by boundaries and extent but also makes it partnership propertywithin section 20 (1) of the Partnership Act, 1890. The plaintiffs’ actionthen fails. The only two deeds executed by the partnership whichidentify this land or mention it specifically, are the notarial deed P 9, thesale of the land under a power given by inter alios partner No. 5, whichdeed states the land always to have been treated as partnership property,and the notarial deed P 3, the purchase of the land by the partnershipwhich, executed under a power given by inter alios partner No. 5, makesit partnership property. On this view of the case, the failure of theplaintiffs to make out the partners’ personal claim to this land, the onusbeing on them to do so, it becomes unnecessary to consider how farOrdinance No. 7 of 1840, section 2, and the cases cited thereon inargument, are applicable in the present matter.
The interest in the land of partner No. 5, Pavanna Ibrahim Saibo, isoutstanding as a dry legal titleqyhich by their counterclaim the defendantsask the plaintiffs to transfer to them. They must, however, pay to theplaintiffs the share of the partnership assets due to partner No. 5. Oneof the defendants, in his evidence in the District Court, said that the shareof this partner had been deposited with “ the Katugastota firm ”, andthe defendants’ answer in a connected case gave the name of that firm,and said that the amount so due to No. 5 was originally Rs. 2,766.82 buthad now increased to Rs. 6,090.53, and was available to his heirs, butthere is no evidence to show whether the plaintiffs admit or deny thesefigures. It is to be hoped that the parties will agree as to the sum due to
DE KRETSER J.—Arulampalam v. Kandavanam.
the plaintiffs for partner No. 5’s share in the assets of the firm, and soavoid further litigation, but failing agreement there must be an inquirywhich should be carried out in accordance with such directions as theSupreme Court may give.
Their Lordships are of opinion by reasori of the foregoing considerationsthat this appeal must be allowed, the judgment and decree of the SupremeCourt set aside and the judgment and decree of the District Court ofMay 24, 1935, restored, the defendants to have their costs in each court.On the counterclaim the plaintiffs on receiving the amount agreed to asbeing, or found on inquiry to be, the share of the partnership assets dueto No. 5, Pavanna Ibrahim Saibo, must execute to the defendants a
conveyance of the shares of the land which they claim in this action.
Their Lordships will humbly advise His Majesty accordingly. Theappellants will have the costs of this appeal.
SEYYADO IBRAHIM SAIBO et al. v. JAINAMBEEBEE AMMAL et al