Holme v. Hammond(1872) L.R. 7 Ex. 218; 41 L.J. Ex. 157

Case Summary

Full Case Details

Thomas and William Henry Fisher and George Henry Smith carried on business in copartnership as auctioneers, under a deed which provided that in case of the death of
Thomas Fisher, the other two partners should carry on the business, or what was called
the co-partnership and should pay to the executors of Thomas Fisher the share of the
profits to which he would have been entitled if he had survived. Thomas Fisher died in
August, 1869; the two survivors carried on the business until the death of Smith, when
William Henry Fisher continued to carry it on alone. W.H. Fisher and Smith having sold
a mill and machinery in May, 1870, on account of the plaintiff and having received the
proceeds of the sale in the following month of July. The plaintiff brought an action
against W.H. Fisher and the defendants to recover that sum as money had and received
insisting that the defendants, who are the executors of Thomas Fisher, and who have
claimed to be entitled to the share of the profits which the testator would have been
entitled to if he had lived and in respect of which they have received certain sums
together with other moneys due to the estate of Thomas Fisher not specifically as profits,
but generally on account), became partners with W.H. Fisher and Smith upon or after the
death of Thomas Fisher, and as such are liable to the demand in this action.
KELLY, C.B. – The single question in this case is, whether the defendants at the time when
this money was received were the partners of W.H. Fisher and Smith; and this depends upon
whether they have expressly or impliedly entered into a contract of co-partnership, since the
death of Thomas Fisher, with W.H. Fisher and Smith, who survived him. It is contended that
having claimed and actually received portion of the profits of the business as supposed to
have been ascertained upon an account taken from the 30th of June, 1869 to the 30th of June
1870, the defendants have made themselves, or must be taken to have become, partners, and
as such liable to this action.
Upon a careful consideration of the authorities bearing on this question, it certainly
appears to have been thought in former times, and there are judicial dicta to that effect, that
the mere reception of a share in the profits of a commercial co-partnership made the
participator a partner and liable to the debts and losses of the firm. But looking to the
decisions themselves in which the question has arisen, it will be seen that in no one case has
the party sought to be charged been held liable except where a contract of co-partnership has
been found to have been entered into.
In Grace v. Smith[Wm. Blacks 998] in which the language of De Gray, C.J., and
Blackstone, J., appears to support the argument for the liability as partners of all who
participate in the profits of a commercial concern, the decision was that there was no
sufficient evidence of a contract of co-partnership and so no liability as partners.

In the leading case of Waugh v. Carver [(1763) 2 Hy. Bl. 235] where the defendant was
held liable as partner, it was because the contract proved was decided, and rightly decided, to
be a contract establishing a commercial co-partnership, and the agreement in the articles that
neither should be liable for the acts or the losses of the others, but each for his own (though
valid and binding inter se), was of no effect against the creditors of the co-partnership firm.
So in Cox v. Hickman [(1860) 8 H.L.C. 268]; Bullen v. Sharp, [(1865) L.R. 1 C.P. 86],
and the Irish case of Shaw v. Galt [16 Irish Com. Law Rep. 357], the parties sought to be
charged were held not liable, on the ground that the acts done and the contracts entered into in
those cases did not amount to contracts of co-partnership so that the parties had not become
partners. It is necessary to consider the various terms and provisions of the contracts which
were brought into question in those and other cases. It is enough to say, that whenever the
plaintiff has failed to establish a contract of co-partnership the action has failed and the
decision has been that the defendant was not liable.
In some of those cases the law of principal and agent has been referred to as governing
the matters in question, but this branch of the law has really no bearing upon the case of
partnership, except, indeed, that whenever a contract of partnership among commercial men
exists, each partner is in point of law the agent for the others and for the firm collectively, and
they are bound by any contract he may enter into within the scope of the partnership with
reference to the nature of the undertaking, this agency being an incident to the contract of copartnership.
It has also been argued that the statute 28 & 29 Vict. C. 86, enacting that widows, lenders
of money, and some other classes of persons taking a share in the profits of a co-partnership
shall not be deemed partners, would be useless if these and other classes of persons might at
common law become sharers in profits without incurring such liability. But it seems to me
that the effect of the statute is sharing in profits shall be no evidence at all of a contract of
partnership, whereas, with regard to others, it is evidence, though insufficient of itself to
establish the liability.
We have, therefore, now to look to the facts of the present case to determine whether
upon the evidence the defendants have become parties to contract of partnership. Upon the
death of Thomas Fisher the partnership before subsisting was dissolved by operation of law;
W.H. Fisher and Smith from that time carried on the business; But this was, in contemplation
of law, a new partnership. The defendants could not become partners with them but by some
agreement, express or implied, to which they were parties. At the trial, taking into
consideration the claims of the defendants to a share in the profits the acquiescence in that
claim by the two survivors, and the actual payment and acceptance of the proportion of the
profits supposed to have been ascertained, together with the accounts made out of the
transactions of the firm, which were alleged, and which indeed did seem, to show that the
defendants instead of calling for an account of the state of the partnership at the death of their
testator, and withdrawing from the concern whatever money or stock of property belonged to
his estate, had left a portion of his capital and his share in the partnership stock and property
in the business. I was, with all the circumstances before me and the accounts unexplained,
inclined, to think that, upon the whole evidence, a contract by the defendants to succeed their
testator and to become partners in his stead might be inferred. But now that it appears that

there was no capital at all, either of the testator’s or the other partners, employed in the
business; that the stock and co-partnership property consisted merely of a small quantity of
furniture and fittings in the office of the value of £ 100.00; that the defendants neither left in
nor drew out any money of the testator’s except that they drew out several successive sums of
£100.00, upon the general account of what might turn out to be due to the estate; and that,
consequently, the whole case for the plaintiff was reduced to the single fact that, in pursuance
of the clause in the articles of partnership, the parties considered that in paying and receiving
those sums they were to be taken as well on account of the share of the profits as of other
moneys due to the testator; I am of opinion that there is no evidence whatever to establish a
contract of co-partnership on the part of the defendants, and, consequently, that the action is
not maintainable.
MARTIN, B. – I was under the impression that Thomas Fisher had left capital in the
concern, and that the defendants had suffered this capital to remain, but it appears that this
was not so, and that the testator, Thomas Fisher, had drawn out all his capital, and that the
defendants did nothing more than claim and receive profits under the above clause. In my
opinion this act did not make them liable to the plaintiff’s demand. They did nothing on their
own behalf at all; they merely did that which a court of equity would have compelled them to
do as executors under the will, and in my opinion it would be contrary to reason to hold them
liable by that act to a responsibility which must of necessity be borne by them in their own
personal capacity, and paid out of their private funds; Wightman v. Townroe [(1813) 1 M. &
S. 412]. It seems admitted by the learned counsel for the plaintiff that the defendants could
not have interfered in or meddled with the sale; so also the money, the proceeds of it; was not
their the property, and if they had taken possession of it against the will of the surviving
partners in order to pay it to the plaintiff they would have been trespassers; and it is difficult
to understand how defendants can, in contemplation of law, have received money of which
they had neither right nor possession, and their taking which against the will of the surviving
partners would have been a wrongful act.
As I have said, up to a certain time in the argument I was in favour of the plaintiff. I
understood that part of Thomas Fisher’s capital remained, by the permission of the
defendants, in the firm, and that they took a share in the profits in part earned by it. Under
such circumstances I thought it not unreasonable that they should be liable upon a valuable
contract by means of which the profits were in part earned, and that the principle of Waugh v.
Carver [(1793) 2 Hy. Bl. 235], applied; but upon consideration, I doubt whether this was
correct. The principle of Waugh v. Carver has been much broken in upon…(I)t seems to me
that the principle on which their opinions Lord Wensleydate and Lord Cranworth in Cox v.
Hickman [(1860) H.L.C. 268] proceeds is correctly stated by O’Brien, J., in the case of
Shaw v. Galt [16 Irish Com. Law Rep. 357]. He there expresses himself as follows: “The
principle to be collected from them appears to be, that a partnership, even as to third parties, is
not constituted by the mere fact of two or more persons participating or being interested in the
net profits of a business; but that the existence of such partnership implies also the existence
of such a relation between those persons as that each of them is a principal and each an agent
for the others.” If this principle be correct, the defendants are clearly not liable. The surviving

partners were not agents of theirs in any sense; all that the defendants did was in an adverse
character to them, and was a requirement that they should fulfil their contract with the testator
by paying the one-third of the net profits for the benefit of his estate…As I have already said,
in my opinion the defendants are entitled to the judgment of the Court.