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	Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Moffat & Ors v Longmuir [2000] ScotCS 218 (4 August 2000) URL: http://www.bailii.org/scot/cases/ScotCS/2000/218.html Cite as: [2000] ScotCS 218

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[1] This is a case stated by an arbiter for the Opinion of the Court in terms of Rule of Court 41. It concerns the disposal of the share of a partner in a farming partnership who died intestate. The appellant is her son and was also a partner. The respondents are the appellant's sisters.

[2] On 24 June 1976 the appellant together with his father and mother entered into a contract of co-partnership ("the agreement") to regulate the business carried on at Netherfield Farm, Coalburn, Lanarkshire, under the firm name of David Longmuir and Son. The appellant's father, David Longmuir, Senior, died on 22 June 1979. The appellant and his mother, Mrs. Margaret Longmuir, acquired the father's interest in the partnership business and became the sole partners of and trustees for the firm. They continued the business of the firm thereafter. It is agreed between the parties to the case that the provisions of the agreement continued to regulate the relationship between the two surviving partners. On 2 April 1994 Mrs. Margaret Longmuir died intestate. She was survived by the appellant and his three sisters.

[3] One of the provisions of the agreement was Clause Tenth. This clause provided as follows:

[4] On 24 May 1994 the appellant wrote into the farm diary an entry in the following terms:

[5] The appellant and his three sisters were appointed executors-dative by decree of the Sheriff of South Strathclyde, Dumfries and Galloway at Lanark on 26 July 1994 and confirmation following thereon dated 21 June 1995.

[6] The present case concerns the legal effect of the foregoing entry so far as it concerns the disposal of the late Mrs. Margaret Longmuir's share in the firm of David Longmuir and Sons. Subsequent to the death of Mrs. Margaret Longmuir a dispute arose between the appellant and his sisters as to whether or not the appellant had taken advantage of the provisions of Clause Tenth to purchase the interest of his mother in the firm. By interlocutor dated 17 January 1997 the Sheriff at Lanark referred the dispute to arbitration. In December 1997 the respondents raised proceedings in the Court of Session seeking, amongst other things, declarator that the partnership between the appellant and his mother was dissolved on 2 April 1994 upon the death of Mrs. Margaret Longmuir and an order that the firm be wound up pursuant to Clause Twelfth of the agreement. In the arbitration proceedings the respondents seek both a declarator and an order in similar terms. The appellant for his part seeks various declarators, including declarator that, in terms of section 33 (1) of the Partnership Act 1891, the firm of David Longmuir and Son was not dissolved on the death of his mother and declarators that he gave notice in terms of Clause Tenth of the agreement and is entitled to acquire his mother's share in the firm as provided in that clause. Further, he seeks declarator that "being also a personal representative of the deceased", he gave sufficient intimation to himself in terms of Clause Tenth "whether or not the intimation was in writing".

[7] The arbiter held an initial hearing to allow parties to present evidence as to whether or not, in terms of Clause Tenth, the appellant had within three months of the death of his mother given written notice to "the representative" of the late Mrs. Margaret Longmuir of his intention of purchasing her interest in the partnership business. Following the initial hearing the arbiter issued a draft part award. In it he held that the appellant did contemporaneously on 24 May 1994 write the entry set out above into the farm diary. The arbiter further took the view that for the notice properly to have been given in terms of Clause Tenth it would require to have been given not only to the appellant but also to the respondents. Since it was accepted by all parties that no notice was served upon any of the three respondents, he held that notice had not properly been given in terms of Clause Tenth.

[8] In the case stated for the opinion of this court at the request of the appellant, the arbiter sets out three questions for the opinion of the court. Parties are agreed that at present it is only appropriate for the court to answer two of them, which are in the following terms:

[9] Parties are also agreed that the first question be answered on the assumption that the appellant and the respondents alone were all the persons who were capable of being appointed as executors of their mother, although it had transpired that the late Mrs. Longmuir had also been survived by a brother of hers, who likewise would have been capable of appointment as her executor as one of her next-of-kin (see Currie on Confirmation of Executors para. 6.21).

[10] In his determination the arbiter noted that it appeared to be common ground between parties that in the present case there was a class or body of people who were entitled to be called the deceased's representatives following her death. He considered that it was not necessary to draw any distinction between executors and beneficiaries as these were, in this case, one and the same body of people, namely the appellant and the respondents. It is not disputed by either party that the arbiter correctly identified the issue as being whether the words "the representative" in Clause Tenth of the agreement, in the context of the agreement as a whole, could be only one person or whether it meant the entire class of people who fell within the designation, so that the giving of notice to one representative was sufficient notice for the purpose of Clause Tenth. The arbiter considered that in terms of that clause the "continuing partner" had to give notice to those who represented the late Mrs. Margaret Longmuir of what he was going to do so that the value of her share in the partnership business could be valued for the purposes of her executry estate, the value of which would be less if notice were given than if no notice were given and the firm were dissolved in terms of Clause Twelfth of the agreement. The avoidance of the partnership being dissolved was another main reason for the notice being given. The arbiter considered that the "continuing partner" had a right, "and indeed a correlative obligation" if he wished the partnership to continue, to give notice of his intention to purchase the interest of a deceased partner's share. If he gave notice, he stopped the dissolution happening and in addition got the deceased partner's share at "book" value and so, it was to be presumed, at a lower value. If there was no notice, the firm would be dissolved, the assets sold and the continuing partner and the representatives or beneficiaries of the deceased partner would all share in what the assets were worth as defined and determined by open market sales. If the firm was to continue and the "continuing partner" was to be "assisted" by having the money that he had to pay out for the deceased partner's share restricted to "book" value, against that background the arbiter posed the question as to who in the terms of the agreement should be told about this. He expressed the opinion that "the beneficiaries of such information" should be "the other continuing partners, if any", the trustee in bankruptcy if the dissolution arose on bankruptcy of a partner, the retiring partner or partners or, if the partner was deceased, "the representative" of that deceased partner. He expressed the view that the representative of a deceased partner "must be the people, and all of the people, who are involved, and interested, in what the assets of such a deceased partner is going to be worth, that is to say, the executors and beneficiaries of the deceased partner, or , at the very least, the executors of such deceased partner." In the result, he held that since notice had not properly been given in terms of Clause Tenth to all of the three respondents by the appellant, the partnership fell to be dissolved in terms of Clause Twelfth of the agreement.

[11] For the appellant it was submitted that meaning of the words "the representative" in Clause Tenth required to considered in the context of the agreement as a whole. It had been drawn up to enable a farming business to be carried on by family members and to be continued within those family members. The agreement had contemplated the firm continuing with two partners, as had in fact occurred. It also contemplated that when one of those two partners died, the business could be continued by the survivor. To effect this, Clause Tenth allowed the survivor a period after the death of the other partner within which to give notice of his intention to purchase the interest of the deceased partner . Having done so he became entitled to acquire that interest for the sum calculated in accordance with the formula set out in the clause. The word "representative" was capable of meaning an individual who came as a substitute, successor or heir to a deceased person. Reference was made to the Oxford English Dictionary definition. In M'Laren - The Law of Wills and Succession (3^rd ed) para. 1396 it was pointed out that the term "personal representatives", when used designatively, was understood to apply either to next-of-kin (in the large sense) or to executors in trust for them. Counsel also made reference to Stewart v. Stewart 1802 Mor. App. No.4 and Manson v. Hutcheon (1874) 1 R 371 . In the latter case Lord President Inglis had observed that the word "representative" was a word which was used in many senses, but that the true meaning in every case depended on the particular terms of the deed in which it was used. In the present case, whether the appellant was to be regarded as a beneficiary or as one capable of applying for appointment as an executor-dative was of no moment. In either capacity he was to be seen as "the representative" of his deceased partner. The deed postulated a single person in the capacity of "the representative" for the purposes of receiving notice in terms of Clause Tenth. If it had been intended to extend to more than one person, or indeed to all heirs and successors, that could have been said. Indeed specific mention was made of "heirs and successors" in the provisions of Clause Twelfth. The arbiter had determined that the words "the representative" extended to a plurality of individuals, namely, all of the people who were involved or interested in what the assets of the deceased partner were going to be worth. In doing so he had erred. The intimation by way of the diary entry was sufficient notice for the purposes of Clause Tenth. The first question should be answered in the negative and the second question in the affirmative.

[12] For the respondents it was submitted that the agreement was a commercial agreement. It required to be construed in a practical and common sense way so as to give effect to the underlying purpose and intention of those who were parties to it. Clause Tenth provided for an option which had to be exercised within three months of any event which gave rise to the dissolution of the firm, namely, death, bankruptcy or notice of termination by one or more partners (as provided for in Clause First). The Clause envisaged that the notice would be in writing and would be intimated to someone other than the partner giving such notice. Thus, in the case of retirement of a partner, the remaining partners or partner required to intimate to the retiring partner. In the case of bankruptcy, the intimation was to be made to the trustee in bankruptcy. In each case the person receiving the notice was one for whom it was important to know on what basis the share which would fall to him, was to be dealt with, namely, as a purchase for a price on an already agreed formula or by way of an accounting in a winding up. By the same token, where a partner died intestate and, accordingly, the interest of the deceased partner in the partnership assets formed part of the deceased's estate to be distributed in accordance with the law of intestacy, those who were interested in the distribution of the estate being the next-of-kin, whether as beneficiaries or as executors-dative or at least as being capable of appointment as such executors, were entitled to know on what basis that interest was to be valued. Furthermore, since the notice could be given at any time up to three months after the death, such next-of-kin were entitled to know on what basis the farming business was being continued during that period since unless and until written notice was given, the deceased partner's interest was retained in the business and no winding up could take place. At the conclusion of the three month period in the absence of any such written notice by the survivor, the next-of-kin whether as beneficiaries or as executors-dative would be entitled to seek winding up of the firm's business unless, for instance, agreement was reached with the survivor to enable the firm's business to continue upon other arrangements for its management. Counsel pointed out that the arbiter was incorrect in suggesting that intimation had to be given to "other continuing partners" since the provision for the giving of notice in Clause Tenth envisaged that the firm would only continue if the remaining partners, who had to be both solvent and capable, were of the same mind in the giving of notice. Otherwise the arbiter had not erred in construing the words "the representative" as requiring intimation to all those other than "the continuing partner" who had an equal interest with that partner in the share of the deceased partner. The requirement for intimation to all those who properly represented the deceased partner upon the death of that partner, was obvious since the receipt of the notice affected the value of the partner's interest as part of the estate of that partner which could come to be vested in the executors for distribution in accordance with the law of intestacy. The use of the word "the" in conjunction with the word "representative" implied that it was insufficient that intimation be given to "a representative", which must otherwise be the consequence of the appellant's contentions. In the circumstances the arbiter had been correct to find that no sufficient written notice had been given for the purpose of Clause Tenth.

[13] In any event counsel contended that there must be some doubt as to whether the words "the representative" were intended to appear in the singular or whether they appeared in the singular because of clerical error. Counsel pointed out that at the end of Clause Tenth, where provision was made to allow for variations in the number of instalments fixed for payment of the price, the reference was to "the outgoing partner or his representatives" (our emphasis). Clause Eleventh provided that upon dissolution of the partnership there was to be an option of calling on others to conjoin in serving "notice of continuation" under section 154 of the Income and Corporation Taxes Act 1970 or any subsequent statutory enactment to the same effect on the part of "the retiring or bankrupt partner (or his trustee) or the representatives of a deceased or mentally incapable partner..." (our emphasis). At other places in the deed it was clear that a singular noun had been used where the sense also required that the word be read as extending to the plural. Instances were to be found in the use of the word "partner" in Clauses First and Fifth where the sense required that it be read to include the plural. At the end of the day counsel invited us to answer the first question in the affirmative and the second question in the negative.

[14] We consider that the submissions for the respondents are well founded. We agree that the submissions for the appellant fail to give content to the word "the" as it appears in conjunction with the word "representative" in Clause Tenth. The requirement for written notice suggests that the "continuing partner" has to communicate with a third party, whether it be a retiring partner or one who stands in a full representative capacity for a bankrupt or deceased partner, as the case may be. Upon the death of Mrs. Margaret Longmuir the partnership relationship between her and the appellant was dissolved and came to an end. In that event and having died intestate, her interest in the partnership assets remained to fall into her executry estate for distribution to her heirs in intestacy equally. The only persons capable of succeeding to that interest as beneficiaries and of petitioning to be appointed as executor-dative were the appellant together with the respondents. No appointment of executors-dative had been made within the period of three months after the death. However, as next-of-kin the appellant and the respondents together made up the body which fully represented their deceased mother, at least until such appointment was made. The deed provided for the dissolution of the partnership upon the death of a partner and, in particular, upon the death of one of two remaining partners. The use of the phrases "the representative" and "the representatives" within the deed, and in particular Clause Tenth, in relation to a deceased partner suggests to us that it was contemplated that the deceased partner might die either testate or intestate. In the latter event nobody could have been nominated to act as executor and thus be identifiable as representing the deceased. But at the very least the next-of-kin with a right to succeed to the estate and, in particular, those capable of being appointed as executor-dative would be identifiable. The word "representative" is one which is apt to refer to an executor-nominate or to next-of-kin or to executors-dative, if already appointed. In our opinion, the deed provided that where the deceased partner died intestate, the survivor was required to communicate to "the representative" his intention to purchase the share of the deceased by notice in writing given within the period of three months permitted by Clause Tenth. We do not need to consider, in the circumstances of this case, the position that would arise where the survivor was the only person who answered the description of "the representative". It is sufficient that the appellant must have been aware that his sisters, as next-of-kin of their mother, stood in the same position as himself to the deceased. Accordingly, he alone could not answer the description of "the representative" of Mrs. Margaret Longmuir. Even if the entry be regarded as such intimation to himself as one of the next-of-kin, he failed to intimate his intention to the remaining next-of-kin. Nor do we need to consider the issue of whether he acted as auctor in suam which is touched upon in the arbiter's note but was not argued before us.

[15] For these reasons we answer the first question in the affirmative, the second question in the negative and find it unnecessary to answer the third question.