024-NLR-NLR-V-73-S.-R.-KANDIAH-Appellant-and-P.-KANDASAMY-Respondent.pdf
T. S. FERNANDO, J.—Kandiah v. Kandasamy
105
Present: T. S. Fernando, J., and Alles, J.S. R. KANDIAH, Appellant, and P. KAN DAS AM Y, RespondentS. 0. 462/64 (F)—D. C. Jaffna, 374/M
Civil Procedure Code—Section 34—Scope—Partnership—Action between former
partners—Period of limitation—Prescription Ordinance (Cap. 68), a. 6—Trustt
Ordinance (Cap. 87), ss. 90, 111.
Section 34 of the Civil Procedure Code does not debar the institution of twoseparate actions on two different causes of action, oven though tho causes ofaction arise from the same transaction.
There is no fiduciary relationship between the partner who is the managerof the partnership funds of a business and another member of the partnership.Sections 90 and 111 of the Trusts Ordinance are not applicable in an actionbrought by the latter against the former for the recovery of his share of thecapital of the partnership business.
Where a partnership agreement for the period 1st October 1948 to 30thSeptember 1949 provided that the partners were to “ receive or bear the profitsor loss proportionately once in six months ”—
Held, that the institution of an action by one of the partners for tho recoveryof his share of the profits for the second half-year of the partnership businesswas ndt a bar to the institution of a subsequent action by him for bis share oftho capital of the partnership business. The provisions of section 34 of the. CivilProcedure Code could not prevent the plaintiff from maintaining tho secondaction.
Held further, that a claim made by a partner for his share of the partnershipcapital from the managing partner is barred, under section 6 of the PrescriptionOrdinance, after six years from the date of the termination of the partnership.In such a case the provisions of sections 90 and 111 of the Trusts Ordinanceare not applicable.
.A.PPEAL from a judgment of tho District Court, Jaffna.
Thiagalingam, Q.C., with P. Somalilakam, C. Gancsh aud
K.Kanag-Iswaran, for the 1st defendant-appellant.
S. Sharuananda, with P. Thuraiappah, lor tho plaintiff-respondent.
Cvr. adv. vult.
July 19, 1967. T. S. Pehn an do, J.—
By a partnership agreement No. 521 of tho 20th October 194S (PI),tho plaintiff, the 1st defendant (the appellant), the 5tli defendant andanother person of the namo of Pcrambalam agreed to undertake thobusiness of buying and selling Government arrack (arrack renters) fortho period 1st October 194S to 30th September 1949. In pursuance ofthis agreement the plaintiff contributed a sum of Rs. 13,423'GO as his
106
T. S. FJERNAXDO, J.—Kandiah v. Kandasamy
6hare of tho capital of the partnership. In this action instituted on1st June 1956 ho seeks to recover this sum from the appellant togetherwith legal interest thereon from 1st October 1949. Pcrambalam isdead, and the 3rd and 4th defendants are his heirs.. Tho 2nd defendantis the husband of the 3rd defendant. No relief is claimed by the plaintifffrom the 2nd to the 5th defendants, probably because it was his case thatall the monies of the partnership business were throughout in the hands oftho appellant. The trial judge has held (and this finding was not canvassed■ on appeal) that the appellant managed the entire business of thepartnership. The agreement PI, it may bo mentioned, provided forall monies of the partnership being in tho custody of the appellant.
There has been much, perhaps too much, litigation between the partiesto this appeal in respect of the monies forming part of the partnershipbusiness to which PI relates. This is in truth the third action filed by ,the plaintiff.
Under clause 5 of PI all the partners were to meet montlily and ascertainthe correctness of the accounts and they were to “ receive or bear theprofits or loss proportionately once in every six months ”. Even beforethe term of the partnership ended, the plaintiff on 12th September 1949sued the appellant in D. C. Jaffna case No. 5S96 to recover his shareof the profits for tho first half-year of tho partnership which heestimated as a sum of Rs. 9,000. He was successful (after twoappeals to this Court) in obtaining judgment against the appellantin a sum of Rs. 3,766. In that case it was also determined that thesum contributed by the plaintiff towards tho capital of the partnershipwas Rs. 13,423 60.
The plaint iff next filed a second case, D. C. Jaffna No. S646, also againstthe appellant, in which he seeks to recover his share of the profits forthe second half-year of the partnership, viz., 1st April to 30th September1049. That case appears to have been laid by pending the determinationof the present action (No. 374fM) which was instituted on 1st .Juno 1956and ended with the District Judge granting judgment for the plaintiff asprayed for, holding against the appellant, inter alia-, on two issues raisedby him, viz., that the plaintiff was barred from maintaining the action
by the Prescription Ordinance and (2) by the provisions of section 34 oft he Civil Procedure Code. Argument on the appeal before us was confinedto these two questions of law.
The argument for the appellant on the second of these questions couldbe dealt with concisely in the following way. The whole of the claimwhich section 34 requires the plaintiff to include in his action is limited tothe claim in respect of the cause of action for which the suit or proceedingis instituted. That was indeed tho view of the Privy Council in referringto a similar provision in the Indian Civil Procedure Code—see Pit tap urRaja v. Svriya Row K In dealing with this very section the same judicialbody stated in the local case of Palaniappa v. Saminathan2 that it '‘is- 11. L. R; Mad. 520.•» (1913) 17 N. L. R. at SO.
T. S. FERNANDO, J.—Kandiah v. Kandasamy
107
directed to securing tho exhaustion of tho relief in respect of a cause ofaction, and not to the inclusion in one and the same action of differentcauses of action, even though they arise from the same transaction.The first part of the clause makes it incumbent on the plaintiff to includethe whole of his claim in his action. The second portion makes itincumbent on him to ask for the whole of his remedies
The case of Somasunderam v. Sinnalamby 1 on _which the appellantrelied is distinguishable as the cause of action in both cases there concernedwas one and the same, viz., the refusal or failure of the defendant to accountto the deceased partncr’6 estate for the share of the profits due to it bytho partnership. The present case bears some resemblance on thispoint to the case of Saibo v. Abutkahir 2. There it was stipulated bybond that tho principal sum shall be payable on demand, and that theinterest shall be payable for a period of four years once in six months andthereafter monthly. The Court ruled that the covenants regarding thopaj'ment of principal and interest were separate and independent, andthat an action to recover the interest was no bar to a subsequent actionto recover tho principal. First when case No. 5S96 was instituted, andlater when case No. 8646 was filed, the cause of action relied on was. therefusal or failure to pay the profits for the two half-years respectively ofthe partnership term as had been agreed upon in PI. The present case• was founded on an entirely different cause of action, viz., the refusal orfailure to pay back to the plaintiff the share of the capital contributedby him, and section 34 provides no bar to that claim. The trial judgo wasright in .answering tho relevant issue as he did and the argument for theappellant- on the second question fails.
To turn now to a consideration of the first question of law, there canbe no dispute that section 6 of tho Prescription Ordinance ordiuarilybars the. maintenance of any action da tho agreement PI after the expiryof six years from the date of termination of tho partnership. Tho trialjudge, however, held against- the appellant on t his issue by reaching thoconclusion that as sole manager of the partnership funds he became aconstructive trustee in respect of tho funds of tho partnership.. liereferred to sections 90 and 111 of the Trusts Ordinance and, on thestrength of certain observations of Lord* Atkinson in Jliojh Stevensonand Sons v. Akliengcsellsehoft Fur Carlonnngen-I:>duslric 3 and of Bov.cn
J. in Saar v. A sh well4, held that the appellant was in a fiduciary positiontowards the plaintiff. With respect, the learned trial judge hasmisdirected himself in reaching this conclusion. Section 90 of tho TrustsOrdinance deals with what arc in the nature of secret gains made bypersons who arc bound to others in a fiduciary position, but the existenceof the fiduciary relationship lias itself to be decided according to the lawapplicable, and in the present case according to the law governing partner-ship which is the English I.aw. Nor docs section 111 assist the plaintiffbecause sub-section (5) thereof excludes its application to constructive
> {1013) C.A.C. (CVy-'on) 01.5 {10oi) J 7 xV. L. It. 210.
» (1015) A. C. 230 at 230.
• (/SOS) 2 Q.fl.D. a! 300and 337.
I OS
T. S. FERNANDO, J.—Kanliah v. Kan-J'is'im;/
frusta except in so far as such trusts are treated as express trusts by tholaw of England. Text-books and decided eases are all against themaintenance of an argument that one partner stands towards anotherpartner in the relation of an express trustee.
The- observations of Lord Atkinson in the case referred to abovo arein the nature of an obiter dictum and the citation he relics on is from thedissenting judgment of Lord Hatherley in Knox v. Gye l. The majorityopinion of the House of Lords in this last-mentioned case was againstthe view expressed by Lord Hatherley. The Court there held that asurviving partner, not being a trustee for the executors of his deceasedpartner, the payment of a sum of money received from a debtor of thopartnership within six 3years from the institution of the case did nottake the case out of the Statute of Limitations. The ratio decidendithere really favours the argument for the appellant. Said Lord Westbury,one of the judges who formed the majority, “ There is no fiduciary relationbetween a surviving partner and tho representatives of his deceasedpartner: there are legal obligations between them equally binding onboth ”. And again—vide p. 676—“ There is nothing fiduciary betweenthe surviving partner and the dead partner’s representative, except thatthey may respectively sue each other in Equity. There arc certainlegal rights and duties which attach to them ; but it is a mistake to applythe word ‘ trust ’ to the legal obligation which is thereby created ”.Lord Colonsay who agreed with Lord Westbury stated—at p. 677—
" I hold that the Statute of Limitations does apply to a suit broughtby the executor of a deceased partner against the surviving partnerdemanding an account of the partnership concerns; and I hold,that sucli is the relative positions of the parties, and that suchis the demand made in this suit. I further hold that, in the generalcase, the punctum temporis from which the statutory period of six yearsbegins to run is the date at which the partnership estate came to bevested in the surviving partner. At any time during the currency of thatpeiiod the executor of the deceased partner may bring a suit demandingfrom the surviving partner an account of the partnership concerns, butafter the statutory period has elapsed no such suit can be maintained”.
The case of Knox v. Gye {supra) which Evershed M.R. in Gordon v.Gonda 2 referred to as a ease of great complication was explained in thejudgment of the Privy Council in the Indian case of Gopala Chetly v.
Vi jay a rayhavacha riur 3 where Lord Phillimore went on to say “ If on thoother hand no accounts have been taken and there is no constat thattho partners have squared up, then the proper remedy when sucli anitem falls in is to have the accounts of tho partnership taken ; aud if it istoo late to have recourse to that remedy, then it is too late to claim ashare in an item as part of the partnership assets, and the plaintiff doesnot prove, and cannot prove that upon the duo taking of the accountsho would be entitled to that shire.”
» (1871) Z. X. 5 H. Z. 656.* {1965) 2 A. X. X. 762.
(1932) 1 A. C. 48S.
T. S. FERNANDO, J.—Kandiah v. Kandcmamy
109
Tho text-writers are explicit on tho question that the appellant hasraised in this ease.
In Pollock’s Law of Partnership (14th ed.)—p. 119—the positionis stated thus :—
“ A surviving partner has sometimes been said to be a trustco for thodeceased partner’s representatives in respect of his interest in thopartnership; but this is a metaphorical and inaccurate expression.Tho claim of tho representatives against the surviving partner is in thonature of a simple contract debt,-and is subject to the Statute ofLimitations.”
In Underhill’s Law of Partnership (Sth ed.)—p. 128—dealingwith the question of the date when an outgoing partner’s sharo is due :—
" It may be mentioned here, that under arrangements for payingout the share of a deceased or outgoing partner the amount is a debtaccruing at the date of the dissolution or death, and for the purposesof the Limitation Act, 1939, time begins to run from that date. ”
In Liadley on Partnership—(12th ed.)—p. 344—dealing with thegeneral duty of partners to observe good faith :—
“ It may, however, be observed that this obligation to good faithdoes not impose a fiduciary character upon the agency which exists
between partners; for instancethe ordinary Statutes
of Limitations apply to actions of account after a dissolution ofpartnership or the exclusion of a partner. ”
and, again—at p. 537—(dealing with the effect of the Statute ofLimitations on Actions between Partners):—
“ So long, indeed, as a partnership is subsisting, and each partneris exercising his rights and enjoying his own property, the LimitationAct has, it is conceived, no application at all ; but as soon asa partnership is dissolved, or there is any exclusion of one partner bythe others, the case is very different, and tho Statute begins to run.This has been decided by tho House of Lords in Knox v. Gye, in whicha surviving partner relied on the Statute as a defence to a suit for anaccount instituted by the executor of a deceased partner. ”
The case of Soar v. Ashiccll (supra) upon which sorao reliance wasplaced by the trial judge has no application to a case like the presentwhich is an action between former partners. That was a case of a solicitor,a person in a special poisition, receiving money on behalf of certaintrustees but retaining it in his own hands.
Tho misdirections referred to earlier led the learned trial judge to holdagainst the appclhint on. the issue of prescription. This action havingtern filed after tho expiry of six years from the date of termination ofthe partnership, section G of the Prescription Ordinance rendered itunmaintainable. It should therefore have been dismissed.
no
Fernonao v. Wijtsckcra
I would allow the appeal and direct that the plaintiff’s actionbe dismissed. The appellant is entitled to his costs in both Courts.
• Aixes, J.—I agree.-
Appeal allowed.