043-NLR-NLR-V-45-YOOSOOF-Appellant-and-HASSAN-Respondent.pdf
HOWARD C.J.—Yoosoof and Hassan.
137
1944Present: Howard C.J. and de Kretser J.YOOSOOF, Appellant, and HASSAN, Bespondent.
D. C. Colombo, 12,665.
Partnership—Claim for value of business fromdefendant—Alternative claim
as partner—Parol evidenceofpartnership torepelplaintiff's claim—
Prevention of Frauds Ordinance(Cap. 57), s. 18 (c).
Plaintiff, as administrator of the estate of M, sued the defendant torecover the value of a business which was carried on by the defendantas business manager of M.Inthe alternativeplaintiffpleaded that; the
defendant was partner withMin the saidbusinessand claimed a
half share ofthe business. The defendantpleadedthat asbusiness
manager of one Ismail, who was the proprietor, he was entitled to aone-third shareof the profits and that afterthe latter's deathhewas
a partner an the business with the widow ofIsmail,and thatMwas
only a nominee of the widow.
Held, that the defendant was not precluded byi section 18(<:) of the
Prevention ofFrauds Ordinance from leading parolevidenceofthe
partnership in order to defeat plaintiff’s claim.
Held, further, that plaintiff’s alternative claim could not be establishedin the absence of an agreement in writing.
A PPEAL from a judgment of the District Judge of Colombo.
H. V. Perera, K.C. (with him A. It. H. Canekeratne, K.C., Cyril E. S.Perera, M. 1. M. Haniffa and H. W. Jayewardene), for the defendant,appellant.
S. J. Y. Chelvanayagam (with him P. Navaratnarajah) for the plaintiff,respondent.
Cur. adv. vult.
March 9, 1944. Howard C.J.—
The defendant appeals from a judgment of the District Judge, Colombo,ejecting him from the business known as the Jezima Drapery Stores,ordering him to render an account of all the assets of the business reachinghis hands up to the time of -the death of one Mohideen and thereafter,and to pay to the plaintiff the sum so due on such accounting and indefault of so doing within three months of the date of the decree to payto the plaintiff, as the administrator of the estate of Mohideen, a sum ofBs. 30,000. The said sum was claimed by the plaintiff as the value of thebusiness carried on at No. 10, Main street, Colombo, under the name,firm and style of “ Jezima Drapery Stores ”. It was alleged by theplaintiff that Mohideen was entitled to the entirety of the assets of this
HOWARD C.-J.—Yoosoof and Hassan.
iaa
business which since the death of Mohideen had been in the possessionof the defendant who wrongfully refused to give it up and account for it.In the alternative the plaintiff pleaded that the -defendant was a partnerwith Mohideen in the said business and claimed the sum of Us. 15,000 as-Mohideen’s share in the partnership. The defendant by his answeralleged that the business had been the property of oneIsmail
Hadjiar. That he, the defendant, was the Manager of the business andentitled to a third share of the profits by agreement between himselfand Ismail. That, after the death of Ismail, his widow purchased thesaid business in the name of Mohideen who held the same in trust for her.That in February, 1932, in consideration of monies due to him as Managera half share of the business was transferred to the defendant. Thedefendant with Mohideen were registered as the Proprietors of thebusiness. Since the death of Mohideen the defendant asserted that hehad been in exclusive possession and control of the business holdingone-half share thereof in his own right and the other half share as theagent of Mrs. Ismail Hadjiar. Since July, 1934, he had been registeredas the sole proprietor. The defendant contended that the plaintiff’s-action was prescribed and that, as the capital of the partnership exceededIts. 1,000, the plaintiff cannot in law maintain the action in the absenceof a written agreement of partnership.
In deciding in favour of the plaintiff, the District Judge has held thatMohideen was the sole owner of the property and that the "defendantwas only an employee- therein and not a partner. In order to refutethe claim of the plaintiff, that Mohideen was the sole owner of the business,the defendant tendered certificates D 9, D 10, D 11 and D 12 ofregistrations of the business under the Registration of Business Names-Ordinance (Cap. 120). These certificates indicated that in February, 1932,the defendant and Mohideen were i-egistered as partners of the businessand that in 1934 and 1940 the defendant was registered as sole owner.The learned Judge took the view that, in order to succeed in his defencethat he was the sole owner of the business after the death of Mohideen,it was necessary for the defendant to establish that he and Mohideen werepartners before the latter died. That documents like D 9 and D 10 didnot establish a partnership proof of which was required in accordancewith the provisions of section 18 (c) of the Prevention of Frauds Ordinance(Cap. 57). The only question is whether the learned Judge was rightin coming to this conclusion. Section 18 (n) of Cap. 57 is worded asfollows: —
“ No promise, contract, bargain, or agreement, unless it be inwriting and signed -by the party making the same, or by some personthereto lawfully authorized by him or her, shall be of force or availin law for any of the following -purposes : —
(n) .
.
for establishing a partnership where the capital exceeds one-
thousand rupees:
Provided that this shall not be construed to prevent thirdparties from suing partners, or persons acting as such, and
HOWARD C.J.—Yoosoof and Hassan.
139
offering in evidence circumstances to prove a partnershipexisting between such persons, or to exclude parol testimonyconcerning transactions by or the settlement of any accountbetween partners
The effect of this provision has been considered in various decisions.In Pate v. Pate1 there was no written agreement between plaintiff anddefendant though the capital exceeded one thousand rupees. Theplaintiff, alleging a partnership between himself and the defendant,brought an action for an accounting and prayed for judgment for suchsum as might be found due. It was held by their Lordships of the PrivyCouncil that the action was not maintainable owing to the provision of thePrevention of Frauds Ordinance to which I have referred. At page 291Lord Sumner stated as follows : —
“ In their Lordships’ opinion the words * for' establishing a partner-ship ’ clearly apply to the present case, which was founded on theallegation of an agreement, not expressed in any writing, of whichparol evidence was adduced for the purpose of establishing a partner-ship as the basis of the suit. This agreement, in their opinion, wasof no force, and did not avail in law unless it could be brought withinthe proviso.”
Pate v. Pate was followed in the ease of Idroos v. Sheriff2. In this casethe defendant was sued by the plaintiffs, the heirs of one Idroos, for adeclaration of title to certain shop goods of the value of Rs. 21,000.The defendant pleaded that he and Idroos carried on business in partner-ship and that he was entitled to a half share of the business which hevalued at Es. 22,000. He, therefore, claimed a .sum of Rs. 11,000 inreeonvention. It was admitted that the capital of the partnershipexceeded Es. 1,000. It was held that, in the absence of an agreementin writing for carrying on the business in partnership, the defendantcould not succeed in his claim in reconvention. Pate v. Pate (supra)and Idroos v. Sheriff (supra) were followed in Rajaratnam* v. The Com-missioner of Stamps3. The material part of the headnote to this case isas follows: —
” A person, who carried on business under the vilasam S.V., decidedin 1929 to admit his two sons into partnership and registered thebusiness under the business name S.V. The business was describedas a partnership, the partners being the father and the two sons. Nowritten agreement of partnership was entered into. Although regularaccounts were kept, there was no separate account of the capital ofeach partner nor was the distribution of profits’ and loss shown asagainst each partner.
In October, 1933, a document was executed declaring that they hadbeen partners in the business. On the death of-the father in December,1933, it was claimed on behalf of the sons that S.V. had gifted a one-third share of the partnership to each of them and that these shares1 18 N. L. R. 289.2 27 N. L. R. 231.
3 39 N. Ij. R. 181
140
HOWARD C.J.—Yoosoof and Hassan.
should be excluded from the property of the partnership passing onthe death of S."V. for purposes of estate duty.
Held, that the partnership could not be established in the absenceof a written agreement.
Pate v. Pate and Idroos v. Sheriff followed.”
In the three cases I have cited, the establishment of a partnership wasthe basis of the suit. The parties endeavouring to establish such apartnership failed in the absence of an agreement in writing. In Bala-subramaniam v. Valliappar Chettiar1 it was held that in an action broughtby the executor of a deceased person to recover money on the basis of agratuitous agency between the deceased and the defendant, the defendantis not precluded by section 18 (c) from leading parol evidence of a partner-ship, in contravention of the section in order to exclude the plaintiff’sclaim. In his judgment, Keuneman J. at page 558, stated as follows: —
‘ ‘ The present case stands on an entirely different footing. Theplaintiff alleges that there was a gratuitous agency on the part ofdefendant in relationship to Pillai. The defendant seeks to rebutthat allegation, and to prove that the. relationship between thesepersons was one of partnership, but that in consequence of the absenceof any written agreement, that relationship was of no force or availat law, and that the plaintiff cannot maintain this action. The defend-ant cannot be said to found his case on the allegation of partnership,nor to make parol evidence the basis of his suit. On the contraryhis allegation is that the relationship between the parties was suchthat it was of no force or avail at law. If a defendant in this positionwere not allowed to give such evidence, a ready means would beavailable for a dishonest plaintiff so to frame his action as to escapethe effect of section 21.”
I find it impossible to distinguish the facts of the present case, whereit is suggested by the plaintiff that the defendant was a business Manager,from those in Balasubramaniam v. Valliappar Chettiar {supra) where thedefendant was a gratuitous agent. The defendant in this case does notfound his case on the allegation of partnersbip nor make parol evidencethe basis of his suit. In these circumstances I am of opinion that thelearned Judge has not given a correct interpretation of the variouscases he has cited. The plaintiff has not established that Mohideenwas the sole owner of the business. His claim based on that contention'must therefore fail. With regard to the alternative claim that Mohideenwas a partner with the defendant, it is quite obvious that this claim isfounded on an allegation of an agreement, not expressed in any writing,of which parol evidence was adduced for the purpose of establishing apartnership as the basis of the suit. It must therefore fail.
The appeal must be allowed and judgment entered for the defendantwith costs here and below.
De Kretser J.—I agree.
1 39 N. L. R. 553.
Appeal allowed.