013-NLR-NLR-V-52-ARALIAS-Appellant-and-FRANCIS-Respondent.pdf
Present: Dias S.P.J. and Gunasekara J.ARALIAS, Appellant, and FRANCIS, RespondentS. G. 510—D. C, Galle, X591
Partnership—Action for dissolution and accounting—Plea that there was no agreement
in writing—Burden of proof^-Meaning of “ capital ”—Prevention of Frduds
Ordinance (Cap. 57), section 18.
Where, in an action for dissolution of a partnership, the question "waswhether the capital of the partnership exceeded Rs. 1,000 and, therefore,required an agreement in writing in terms of section 18 of the Prevention ofPrauds Ordinance—
Held, (i) that the onus was on the defendant to famish strict proof of theexistence of facts bringing the ease within, section 18 of the Prevention ofPrauds Ordinance.
that the capital contemplated by section 18 of the Prevention of PraudsOrdinance was the original capital contributed by – the partners and the termdid not extend to the amount that stood as capital after additions or with-drawals at any time during the course of the business.
that stock-in-trade supplied to the partnership by a third party at thecommencement of the business and later paid fpr by the partnership could notbe regarded as part of the capital. The capital of a firm is the actual cash andthe value of the property contributed by the partners to the common propertyof the firm to be used for the purpose of the joint business.
APPEAL fi-om a judgment of the District Court, Galle.
jE. B. Wikramanayake, K.C., with Christie Seneviratne, for plaintiffappellant.
N. K. Choksy, K.C., with S. TV. Walpita, for defendant respondent.
Car arlv. vult.
June 15, 1950. Gunasekaba J.—.
' The plaintiff-appellant alleging a partnership between himself and thedefendant-respondent, who is his brother, brought this action for adissolution of the partnership and an accounting and for the recoveryfrom the defendant of a sum of Us. 6,382.54 or such sum as might befound to be due to him upon an accounting. The learned DistrictJudge held that there was a partnership as alleged in the plaint butlie dismissed the action on the ground that the capital of the partnershipexceeded Us. 1,000 and there was no agreement in writing as requiredby section 18 of the Prevention of Frauds Ordinance (Cap. 57).
The learned District Judge’s finding that there was a partnership issupported by the defendant’s own admissions that he and the plaintiff“ started the business on a partnership basis ” and that a part of thecapital was contributed by the plaintiff. In view of this finding theburden lay on the defendant to prove the existence of facts bringing thecase within section 3 8 of the Prevention of Frauds Ordinance—de Silva v. de Silva J.
According to the case for the defendant,' which was accepted on thispoint, the business in question was started on the 9th May, 1935, witha stock-in-trade of the value of Es. 6,999.22, which was supplied on thatday by Mendis, a brother of the parties. The learned District Judgeholds that this sum was the capital of the business.
“ By the capital of a partnership is meant the aggregate of the sumscontributed by its members for the purpose of commencing or carryingon the partnership business and intended to be risked by them in thatbusiness. ”
Lindley on Partnership, Booh 3 Chapter 3.
It appears from the evidence that the goods supplied by Mendis weresupplied by him to the partnership (and not to the plaintiff or thedefendant) and were later paid for by the partnership (and not by theplaintiff or the defendant). Thus, the evidence of Mendis himself,who was called as a witness by the defendant, is as follows: —
“ The business of M. M. Francis & Co., was started in May 1935.To start that business I bought Bs. 7,000 worth of goods as stock.That sum was paid back by the firm of M. M. Francis & Co. ”
(M. M. Francis & Co. was the name under which the partnership carriedon business.) It seems clear, therefore, that no part of this stock wasproperty contributed by either of the partners to be risked in the business,
{1935) 37 AT. L. R. 276.
but the whole of it was property purchased by the partnership. Itwas not part of the capital. “ Neither the stock-in-trade nor the assetsof the partnership at any particular time necessarily represent thecapital of the firm, which is the actual cash and the value of the property■contributed by the partners to the common property of the firm to beused for the purpose of the joint business. ” TVickreinaratne v. Fernando 1.
The defendant has also given evidence to the effect that he contributedas capital a sum of Us. 2,715 on the 10th May, 1935, and the plaintiffa sum of Rs. 2,084 on the 24th ^»'Iay, 1935. The learned District Judgeaccepts this evidence and holds that even if the value of the stocks suppliedby Mendis was not capital, there »were: these contributions to capitalmid it is “ idle for the plaintiff to state that the business did not startwith a capital of over Rs. 1,000 ”. Both here and in a later passage inthe judgment, where the learned Judge holds that “ the registrationof the business does not help the case for the plaintiff to establish thefact that the business was run on a partnership basis with a capital ofunder Rs. 1,000 ”, the language of the judgment suggests an asumption-that the burden lay on the plaintiff to prove that the capital of thepartnership was less than Rs. 1,000. Not only does the burden on thisissue lie on the defendant but that burden is, in the language of SirThomas de Sampayo in Sinno v. Punchihamy 2, a ‘‘ heavy ” one and,in the words of the same distinguished Judge, ‘‘ the defendant having.admitted the partnership, the Court will exact from him the most-strict proof of any facts on which he may rely as entitling him to takerefuge under the Ordinance ”.
The capital contemplated by section 18 of the Prevention of FraudsOrdinance is the original capital contributed by the partners (de Silva v.de Silva x) and the term does not extend to the amount that may stand as■capital after additions or withdrawals at any time during the course ofthe business (Sinno v. Punchihamy 2). It cannot be said that the-defendant has furnished strict proof that the sums of Rs. 2,715 andRs. 2,034, or either of them, were contributions to the original capital.Indeed the effect of his evidence is that they were contributions madeafter the partnership had been formed and after it had commencedbusiness on the 9th May, 1935..
In my opinion the defendant has failed to prove the existence of facts•that would bring the case within section 18 of the Ordinance. I wouldset aside the learned District Judge’s order dismissing the plaintiff’saction and send the case back to the District Court so that _an order mayhe made for the dissolution of the partnership and an accounting and fordetermination of the plaintiff’s claim in due course. The plaintiff willhave the costs of the trial that has been held in the District Court and thecosts of this appeal. The costs of further proceedings will be in the■discretion of the District Court.‘
IDias S.P.J.—I agree.
*Appeal allowed.
1 (1916) 2 O. W. R. 154, at. 155.
z (191 ) 19 .V.. ^ 43. at. 46