Scottish Court of Session Decisions

This was a petition presented by Alexander Gow, one of the partners in the dissolved firm of Schulze, Gow & Company.

The following narrative is taken from the Lord Ordinary's note:—“The petitioner in this case seeks sequestration of the copartnery estate of Schulze, Gow, & Company, and the appointment of a judicial factor thereon, with certain special powers mentioned in the prayer. The petition is resisted by Mr Schulze, who was the only other partner of the now dissolved firm. The copartnery of Schulze, Gow & Company was dissolved by expiry of the agreed-on term so long ago as 31st July 1875, and both parties have been engaged since that date in winding up its affairs. Its whole stock-in-trade and corporeal moveables have been sold and realised; all the debts due by the concern have been paid and discharged, and the only assets still outstanding are certain debts which were due to the company at its dissolution, and which have not yet been recovered. It seems that the business was carried on in two branches—one branch at Dundee under the charge of the petitioner, and the other branch at Galashiels, under the charge of the respondent. The debts due to the Dundee branch still unrecovered are said to amount to £5047, 6s. 3d., and hitherto the petitioner has been doing what he can to recover these. The outstanding debts of the Galashiels branch are said to amount to £7890, 9s. 5d.; and hitherto the respondent, who had managed the Galashiels branch, has been attempting to recover these. The recovery of these two sets of debts is the only thing wanted for the complete realisation of the whole assets. The parties, however, are at issue as to an accounting inter se. In particular, the petitioner says that the respondent has failed to account for his intromissions, and to exhibit proper balances and states of affairs of the Galashiels branch. The petitioner also says that he has various claims against the respondent, including apparently claims of damages—that he has entirely lost confidence in the respondent— that he mistrusts his action in the further realisation of the debts—that he has asked in vain a full accounting; and he now seeks sequestration of the estates and the appointment of a judicial factor. The Lord Ordinary, after hearing parties, continued the case for eight days that the petitioner might examine, with what assistance he chose, the Galashiels books, which it appears he had never yet done. On 9th current, however, he intimated that he declined to look at the books or to say what should be done “with any of the outstanding debts, or to give any assistance or advice either in recovering the debts of his own branch or those of the Galashiels branch, but that he simply insisted in the prayer of his petition.”

Thereafter the Lord Ordinary refused the prayer of the petition.

In his note the Lord Ordinary, after the narrative given above, added:—“The Lord Ordinary after full consideration is of opinion that the petitioner is not entitled hoc statu to the sequestration of the debts and the appointment of a judicial factor.

“One of the main grounds—indeed the principal ground—on which the petitioner relied was, that the accounts between the two partners—that is, the count and reckoning inter socios—were in a state of confusion; that the books, and especially the Galashiels books, had not been properly kept; and that the respondent had failed to account for his intromissions; and he insisted that the first duty of the factor, if appointed, would be to call the respondent to account, to examine into the respondent's whole intromissions, both during the partnership and since its dissolution, and to as-certain and fix the balance now due by the respondent to the petitioner.

“The Lord Ordinary cannot concur in this view. He thinks that when a judicial factor is appointed to wind up a company estate, his primary duty is to realise outstanding assets, and not to settle past questions of accounting inter socios. No doubt his actings in realising may often facilitate accounting inter socios, and when there is no dispute he will also distribute among the partners; but where serious disputes arise between the partners as to their shares, or as to their past actings, especially as to claims of damages, a factor is no judge of such matters. He has no power to give any binding deliverance or to take proof of any kind as between partners; and his probable course would be, in the case of serious differences, simply to consign the net funds recovered, and allow the partners to compete for them inter se by a multiplepoinding or otherwise. Accordingly, if in any case there are no outstanding assets at all to recover—if, for example, in the present case there had been no outstanding debts, the Lord Ordinary, as at present advised, would never sequestrate and appoint a judicial factor merely because there are unsettled disputes between the partners.

“The only ground therefore upon which, in the Lord Ordinary's opinion, the present application can rest is, that a judicial factor is

Page: 582↓

necessary in order to ingather the bad and doubtful debts still outstanding.

“But the Lord Ordinary is of opinion that in the present case there is no necessity for the appointment of a judicial factor in order to collect or turn into value as far as possible the bad and doubtful debts still outstanding; on the contrary, he thinks that the appointment of a judicial factor for such a purpose would, in existing circumstances, probably lead to serious loss to both parties.

“As to the outstanding debts due to the Dundee branch of the business, the collection of these debts is now, and has hitherto been, under the charge of the petitioner himself, as was natural, the petitioner alone having managed the Dundee branch. The respondent stated at the bar that he was both willing and anxious that the petitioner should continue to realise these debts—that he committed the whole steps to be taken to the petitioner's own discretion, giving the petitioner carte blanche and the respondent's full authority to do whatever the petitioner thinks best, and to take what assistance he thinks right. The respondent also offered his own advice and assistance whenever required. In reference to the Dundee debts, the Lord Ordinary thinks the petitioner can ask no more than this. The petitioner says that these Dundee debts are in danger of being lost; but if so, it must be the petitioner's own fault. He has full power—both his own and the respondent's authority—to do whatever is necessary, or to employ agents to do what is necessary. In short, the petitioner can do, and do now, everything that a judicial factor could do, and he has knowledge and means of judging which a judicial factor could never have.

“This leaves only the Galashiels outstanding debts. As to them, also, the respondent's offers are fair and reasonable. The respondent offers either (1) To continue to do his best to recover these debts, which are all due abroad, and many of them in peculiar positions, and that, so far as the respondent is personally concerned, gratuitously. (2) He offers to concur with the petitioner in any steps the petitioner might suggest as to any or all of these debts. This offer was verbally rejected at the bar by the petitioner, who said he knew nothing whatever about these foreign debts. (3) The respondent offered either to sell or to purchase the outstanding debts by sealed tender. Or (4) To dispose of the whole outstanding debts by public roup, both partners being at liberty to bid.

“The Lord Ordinary thinks that these offers are reasonable, and fully meet all that the petitioner can ask. It is both the manifest interest and the bounden duty of both partners to give their best services for winding-up their own affairs, and, in the present case, it is thus alone that there is any hope of making anything of the Galashiels debts. They are all due abroad, chiefly apparently by tailors in various cities in Italy, Sicily, Hungary, Austria, Russia, Turkey, Egypt, and elsewhere. They would almost certainly be lost if, as the petitioner suggest, a Glasgow or Dundee accountant should be employed to recover them, and it is difficult to say what expense might not be incurred. The petitioner is bound to concur with the respondent in taking the best and most reasonable measures, or, if the partners cannot agree on this, then sell or buy the debts inter se by tender or public auction. This is not unreasonable, two years having now elapsed. The petitioner is not entitled, as he has done for two years, to refuse to look at the Galashiels books, which, though kept by the respon-dent, are really the petitioner's own books, and have always been at his command; and to insist on throwing the whole foreign debts into the hands of an accountant, with almost a certainty of their being lost. The petitioner has never yet made one suggestion as to what ought to be done as to any of the debts in question. Still less is the petitioner entitled to get an accountant who will litigate with the respondent at the expense of the firm—that is partly at the expense of the respondent himself. The partners must vindicate their rights inter se at their own risk and expense. In existing circumstances, therefore, and having regard to the respondent's offers, which meet almost ever alternative, the Lord Ordinary refuses the petition.”

The petitioner reclaimed, and argued—“When parties differ between themselves we are familiar with the appointment of a judicial factor”—per Lord Deas in Miller v. Walker, Dec. 10, 1875, 3 Rettie 242. The result of the cases of Dickie v. Mitchell, June 12, 1874, 1 Rettie 1030, and Russel v. Russel, Nov. 14, 1874, 2 Rettie 93, is— (1) that where a copartnery is dissolved by the death, or what is equivalent, the marriage of a female partner, the Court will leave it to the remaining partners to carry on the business; (2) if all the partners are dead, the Court will appoint a factor to wind-up the concern; (3) if a surviving partner is unfitted by fault or incapacity for carrying on the business, the Court will appoint a factor. There was such fault here as to justify such an appointment.. The practice in the Outer House had been to appoint factors in similar circumstances. In the case of Steel v. Hamilton, in 1871, Lord Mackenzie made such an appointment on the application of one partner against another—[By the Court — The other partner there acquiesced]. In the case of Hillson, in 1872, a similar appointment was made—[By the Court—One partner there was in jail, the other bankrupt]. There was no security here to the petitioner that the respondent would do his utmost to ingather these debts, for his object really was to secure the company debtors as customers for himself in his new business.— Dixon v. Dixon, Dec. 22, 1831, 10 Shaw 178, 6 W. and S. 229; Young v. Collins, Feb. 24, 1852, 14 D. 540, 1 Macq. 385

The respondent lodged a minute offering the outstanding debts due at the Galashiels branch should be exposed to sale by auction, leaving it open to both parties to bid.

At advising—