039-NLR-NLR-V-67-E.-B.-W.-C.-MOHOTTI-Appellant-and-K.-A.-GUNAWARDENA-Respondent.pdf
1961 Present: H. If. 6. Fernando, J. and L. B. de Silva, J.E. B. W. C. MOHOTTI, Appellant, and K. A. GUNAWARDENA
respondentS. G. 645/58—D. G. Ratnapura, 1798
Partnershij^~Capital over Rs. 1,009—Absence of written agreement—Admissibilityof parol evidence—Prevention of Franis Ordinance, s. li (c).
M was the sole owner of a business from 1932 to 1950. The defendant wasemployed by M in 1946 as the manager of the business and was admitted as ade facto partner from April 1950. He did not contribute any capital but, inlieu of capital, he contributed his managerial skill and acumen for the conductof the business. Although the capital of the partnership was over Rs. 1000,there was no written agreement signed by the parties to satisfy the requirementsof section 18 (c) of the Prevention of Frauds Ordinance. In the present actionthe plaintiff as executor of the estate of M sued the defendant for a declarationof title to and recovery of the possession of the business.
Held, that the defendant was entitled to lead parol evidence to prove that therelationship between him and the deceased M was one of partnership and thatin consequence of the absence of any written agreement the plaintiff could notmaintain the action.
.ApPEAL from a judgment of he District Court, Ratnapura.
V. Perera, Q.O., with L. 0. Weeramintry and N. R. M. Daluwatte,for the Plaintiff Appellant.
W. Jayawardena, Q.C., with O. D. C. Weerasinjhe and G. P.Fernando, for the Defendant-Respondent.
Cur. adv. vult.
December 15, 1961. L. B. de Silva, J.—
The plaintiff as executor of the Estate of S. W. C. Mohottihamu suesthe defendant for a declaration of title to and recovery of the possessionof the business referred to in paragraph 2 of the plaint. The defendantalleged that Mohottihamu and he carried on this business in partnershipin equal shares and that the initial capital of the partnership business wasover Rs. 1000. He maintained that the plaintiff could not maintainthis action as the contract of partnership was not in writing as requiredby section 18 of the Prevention of Frauds Ordinance, Chapter 57 of theLegislative Enactments.
The learned District Judge held that Mohottihamu started thisbusiness in 1932 and continued to be the sole owner thereof till theend of March, 1950. The defendant was employed by Mohottihamu
as the manager of this business in 1946 and he was admitted as a de factopartner from 1/4/1950 in equal shares as evidenced by the document Dl.The defendant alleged in his answer and evidence that the partnershipcommenced in October, 1946 but this was not accepted by the learnedDistrict Judge. The Judge further held that the capital of thepartnership was over Rs. 1000 whether the partnership commenced inOctober 1946 or on 1st April, 1950.
The findings of fact by the learned District Judge have not been can-vassed in ths appeal. The learned District Judge held that the partner-ship cannot be established in view of the provisions of section 18 of thePrevention of Frauds Ordinance and dismissed plaintiff’s action on thatground.
The relevant provision of this Ordinance is section 18 (c) which states—" No promise, contract, bargain or agreement, unless it be in writingand signed by the party making the same, or by some personthereto lawfully authorised by him or her, shall be of force or availin law for any of the following purposes :—
. For establishing a partnership where the capital exceeds onethousand rupees. ”
The proviso to this sub-section is not relevant to this case.
There was no written agreement signed by the parties to satisfy therequirements of this section. The learned Queen’s Counsel for theAppellant argued that the deceased Mohottihamu was the sole owner ofthis business prior to the coming into existence of the ‘ de facto ’ partner-ship and as there was no written promise, contract, bargain or agreementas required by this section, the deceased continued to be the sole owner ofthis business and that the defendant could not in law claim to be a partnerof this business or seek to establish the * de facto ’ partnership.
Though this argument appears to be attractive, the real question thatthe Court has to decide in this case is this—“ Who is seeking to establishthe partnership for the purpose of enforcing his legal rights Thetrue position is that there was in fact a partnership in existence at thetime Mohottihamu died and the plaintiff is seeking a declaration of titleto the business of the ' de facto ’ partnership and possession of thatbusiness.
The business that was in existence at the time of the death of Mohotti*hamu when this action was filed, was clearly not the business that existedbefore the 'de facto ’ partnership was established on 1st April 1950.The original business may very well have developed and expanded asa result of the activities of the * de facto ’ partnership or it may even havefallen on evil days. The fact that the defendant did not contribute any
capital when the partnership was established is immaterial. In lieu ofcapital, the defendant has contributed his managerial skill and acumenfor the conduct of the business.
In these circumstances, is it open to the plaintiff to base her claim onfalse premises by stating that the business solely belonged to the deceasedMohottihamu at the time the cause of action arose when in fact it did notand that the defendant was only the manager of the business underMohottihamu when the defendant was in fact his business partner ? Ifshe had stated the truth in her plaint, clearly her claim could not havebeen maintainable as the agreement to establish the partnership was ofno force or avail in law.
In Bala&ubramaniam v. Valliappar Chettiar1, it was held that in anaction brought by the Executor of a deceased person to recover money onthe basis of a gratuitous agency between the deceased and the defendant,the defendant is not precluded by section 21 (now 18 (c)) from leadingparol evidence of a partnership, in contravention of the section in orderto exclude the plaintiff’s claim. In his judgment, Keuneman, J., atpage 558, stated as follows :—
“ The present case stands on an entirely different footing. Theplaintiff alleges that there was a gratuitous agency on the part ofdefendant in relationship to Pillai. The defendant seeks to rebut thatallegation, and to prove that the relationship between these personswas one of partnership, but that in consequence of the absence of anywritten agreement, that relationship was of no force or avail at law,and that the plaintiff cannot maintain this action. The defendantcannot be said to found his case on the allegation of partnership, norto make parol evidence the basis of his suit. On the contrary his alle-gation is that the relationship between the parties was such that it wasof no force or avail at law. If a defendant in this position were notallowed to give such evidence, a ready means would be available for adishonest plaintiff so to frame his action as to escape the effect ofsection 21.”
I am unable to distinguish the claim of the present plaintiff-appellantfrom that of the plaintiff-respondent in Balasubramaniam v. ValliapparChettiar. In the present case, I am quite satisfied that the plaintiff-respondent has dishonestly framed her action in an attempt to escape theeffect of section 18 (c) of the Prevention of Frauds Ordinance. I hold thatshe is not entitled to succeed in this action by such a course. I accordinglydismiss the appeal of the plaintiff with costs.
H. N. G. Fernando, I.—I agree.