Scottish Court of Session Decisions

In March, 1836, the Glasgow Ship Bank, under the firm of Carrick, Brown, and Company, were carrying on the business of banking under a contract which had commenced in June, 1829, and was to expire on 30th June, 1836. The shares were divided into eighth-parts, of which John Buchanan of Ardoch held two, and John Lennox Kincaid Lennox of Woodhead held one. A second contract was then entered into for carrying on business under the same firm, which was to endure from and after 30th June, 1836, to 30th June, 1841. Under this second contract the interest of Buchanan was to be only one-eighth part, and that of Lennox was to be two eighth-parts; the interest of Lennox under the second contract being increased in the same proportion in which that of Buchanan was diminished. Both the first and second contract provided that the death of a partner during the subsistence of the contract should not dissolve the company, and that his interest in the concern should accrue to the surviving partners, its value being paid by the company to his representatives.

On May 22d, 1836, James Smith of Craigend, one of the partners, died, so that the shares of the survivors became seventh-parts, in place of eighth-parts. No intimation was made by any of the partners of a wish to withdraw from entering on the new contract, in consequence of the death of James Smith. On July 1, the company proceeded in carrying on business as usual, but, on July 19th, an agreement was concluded between them and the Glasgow Bank, for uniting their interests, and merging the business of Carrick, Brown, and Company in that of the Glasgow Bank, as from and after July 1, 1836. One of the conditions of the agreement was the payment of a bonus of 200 shares, stock in the Glasgow Bank, valued at £32,000, to Michael Rowand, a partner of Carrick, Brown, and Company, for behoof of himself “and as trustee for the other partners of the said company of Carrick, Brown, and Company, according to their respective interests in the same, as fixed by their present contract of co-partnership.” The agreement expressly bore that the primary consideration for which the above bonus was given, was the transference in their favour by Carrick, Brown, and Company of their “whole banking business and establishment, and their whole property, bonds, &c., bills, notes, &c.” (under certain exceptions), “together also with the good-will of their said banking business, and the whole rights, privileges, and advantages thereof, as presently enjoyed by the said Carrick, Brown, and Company as a banking concern.”

Under this agreement a competition arose between John Buchanan and J. L. K. Lennox, as to their respective interests in the bonus; each maintaining a right to two seventh-parts of it, and that the other had right to only one seventh-part. A multiplepoinding was raised in the name of Michael Rowand, in which, Buchanan, in support of a claim for two seventh-parts of the bonus, pleaded, that he had held two seventh-shares, under the contract of Carrick, Brown, and Company, which continued from June, 1829, till 1st July, 1836; that the second contract never came properly into operation, and was superseded by the agreement between the two banks, which carried back the merging of the business of Carrick, Brown, and Company to July 1, 1836; and that the distribution of the bonus according to the interests of the partners of Carrick, Brown, and Company referred to the interests under the contract which had continued up to that date. In support of this view, he founded on the death of James Smith on May 22, as having of itself dissolved the second contract of Carrick, Brown, and Company, seeing that the provision against its dissolution by the death of a partner, referred to a death occurring during the subsistence of the contract, whereas the death of Smith occurred prior to its commencement, and, at common law, operated ipso facto a dissolution of the contract.

Lennox pleaded in support of his claim to two seventh-shares of the bonus, that, as he was a holder of two seventh-shares in the company of Carrick, Brown, and Company under their second contract, commencing on July 1, 1836, he was entitled to two-sevenths of the bonus; and that Buchanan, holding only one-seventh under that contract, must be limited to one-seventh of the bonus. The agreement between the two banks was concluded on July 19, after Carrick, Brown, and Company had carried on business as bankers under the second contract for 19 days, and it expressly provided that the bonus was to be distributed among the partners of the company of Carrick, Brown, and Company “according to their respective interests in the same, as fixed by their present contract of copartnership.” This was, of itself, decisive; but, farther, the primary consideration for which the bonus was given, was the merging of the business of Carrick, Brown, and Company in that of the Glasgow Bank, and their transferring over to the Glasgow Bank “their whole banking business, and establishment, &c.,” and their “whole property, bonds, &c. bills, notes, &.,” “together also with the good-will of the said banking business, &c.” The whole of that which was thus transferred, belonged to the existing company of Carrick, Brown, and Company, as then carrying on business under their second contract; and the bonus, which was part of the counter-considerations, was necessarily divisible among the partners according to their shares under the second contract. The death of one of the partners prior to the commencement of that second contract did not affect the question. None of the co-partners had intimated any desire on that account to draw back from the second contract, nor could they, according to its bona fide import, have done so. On the footing of that contract, the company commenced business on July 1, 1836, and if loss had been sustained, Lennox must have borne it in the proportion of two seventh-shares in place of one; and his share of gain should be in the same proportion.

The Lord Ordinary “ranked and preferred the claimant, John Lennox Kincaid Lennox, to the fund in medio, in terms of his claim and interest produced, and decerned in the preference, and for payment against the raiser of the multiplepoinding accordingly; and found the said John Lennox Kincaid Lennox also entitled to expenses.” ^*

_________________ Footnote _________________

* “ Note.—By the original contract of copartnery of the Ship Bank, which was to expire on the 30th of June, 1836, the claimant, Mr Buchanan, held an interest double in amount of that held by the other claimant, Mr Lennox. By a new contract executed on the 9th, 10th, and 11th March, 1836, and of which the operation was to commence on the 1st of July, when the former expired, these proportions were reversed, Mr Lennox having a share double of that of Mr Buchanan. In the present discussion, each of the parties claims two shares out of three of the bonus, which, by an agreement between the Ship Bank and the Glasgow Bank, was to be granted by the latter to the former, in consideration of the Ship Bank joining with the Glasgow Bank, and merging their establishments in one joint concern, bearing the latter designation; so that the fund in medio consists of one share of that bonus. And the question truly is, whether the agreement was entered into with the old company or the new. Even if the dates had been less conclusive, the fair presumption would have been, that as the consideration was granted for the Ship Bank giving up business, the agreement was made with the company, which, but for that transaction, were to carry on the business, and not with the company whose operations were about to cease.

“But it is not necessary to resort to presumption. The first contract expired on the 30th of June, the new contract was to take effect on the 1st of July, and as the separate business was carried on for some time, though but a short time, after that date, by the Ship Bank, it must have been so carried on under the new contract. For, even supposing the death of Mr Smith, one of the partners, between the date of the execution of the new contract and the date of its coming into operation, to have the effect contended for on the part of Mr Buchanan (of which the Lord Ordinary entertains great doubt), still, as no objection was made by Mr Buchanan to the business proceeding, the continuance of the business must be ascribed to the new and existing contract, and not that which, by the express terms of the deed, expired at the end of the preceding month. So standing matters, the agreement with the Glasgow Bank was concluded, and the deed executed on the 19th of July, being nearly three weeks after the new contract had come into operation. And the clause relative to the consideration to be granted by the Glasgow Bank, binds them to transfer a certain number of shares of the bank to ‘Michael Rowand, for himself, and as trustee for the other partners of the said company of Carrick, Brown, and Company, according to their respective interests in the same, as fixed by their present contract of copartnership.’ In these circumstances, the Lord Ordinary thinks that the ‘present contract of copartnership’ must mean the new and existing contract, and cannot, without the greatest latitude of construction, or rather misconstruction, be applied to the contract which had expired.”