002-NLR-NLR-V-13-SOCKALINGAM-CHETTY-v.-GUNAWARDENE-et-al.pdf
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Dee■ 20,1909
Present: The Hon. Mr. J. P. Middleton, Acting Chief Justice,and Mr. Justice Pereira.
SOCKALINGAM CHETTY v. GUNAWABDENE at al.
D. C., Colombo, 29,796.
Partnership deed—Arbitration clause—Action for dissolution—Appoint-ment of receiver.
The arbitration clauseina deedofpartnershipprovided that
if at any time during the partnership any dispute, doubt, orquestion should arise among the partners or their representativeson the construction of the partnership deed, or respecting theaccounts, transactions, losses, or- profits of the business, then suchdispute, &c., was to be referred to the arbitration of two disinterestedpersons, one to be named by each party in dispute,-&c.
Held, that such a clause does not enable a question of dissolutionof partnership to be referred to arbitration.
Even where a Courthasreferredaquestion ofdissolution to
arbitration, it has the power to appoint a receiver.
T
HE plaintiff sued the defendants for the dissolution of thepartnership existing between him and the defendants. The
13th clause of the partnership deed was as follows: “ That if at anytime during the partnership any dispute, doubt, or question shallarise among the said partners or any of them or their or any of theirlegal representatives, either in the construction of these presents, orrespecting the accounts, transactions, losses, or profits of the saidbusiness, then every such dispute, doubt, or question shall bereferred to the arbitration of two disinterested persons, one to benamed by each party in dispute, or in case either of the parties indispute shall upon the request of the other refuse or neglect to joinin such nomination, then both of the said arbitrators to be named bythe other, and in case any such arbitrator shall not agree upon anaward, then the dispute, doubt, or question shall stand referred tothe arbitration of such one person as the two arbitrators shall beforethey proceed in the reference appoint as their umpire, and theaward or determination which shall be made by the umpire shall befinal and conclusive on the parties respectively and their respectivelegal representatives, and it is hereby agreed that this submissionto reference shall be made a judgment of the Court in terms ofthe Ceylon Procedure Code on the application of any of the partiesto the reference.”
. The reasons stated in the plaint for the dissolution were, inferalia, the following: —
” It has become impossible to carry on the said business inpartnership with advantage to the parties owing to the followingamong other reasons: The defendants have been unfaithful to the
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plaintiff in matters connected with .the business, and have been Deo. 20,1909careless in the discharge of their duties, and have misappropriated Sockalingamvarious sums of money belonging to the partnership, and have Chetty t>.without lawful excuse removed from the office the press copy bookbelonging to the partnership business, and have refused to makeand subscribe to a full and correct statement of accounts of all thecredits and effects due, owing, and belonging to the partnership,and have been trading in the name of the firm for their privategain, and have not brought into the partnership the profits gainedthereby.’’
The plaintiff applied to the Court that a receiver be appointed .pending the action. The defendants opposed, on the ground .thatthe matters in dispute should be referred to arbitration under thearbitration clause.
The learned District Judge declined to appoint a receiver andstayed proceedings in the action, as he thought that the matters indispute ought to be referred to arbitration under the arbitrationclause.
The plaintiff appealed.
Sampayo, K.C. (with Balasmgham), for the appellant.—Thedefendants did not move that the case be referred to arbitration,though they opposed the application for the appointment of thereceiver, on the ground that the arbitration clause made provisionfor the settlement of these disputes. The matters involved in thisaction are not within the arbitration clause (Lindley on Partnership,pp. 491-493; Russell on Arbitration, p. 46 et seq.). Even if mattersinvolved in this action are within the arbitration clause, there issufficient reason disclosed in the plaint for not referring the caseto arbitration (Wallis v. Hirsch,1 Barnes v. Young 2). In any eventthe Court was wrong in refusing to appoint a receiver (Pini v.
Rancoroni,3 Senegal v. Woods *).
The arbitration clause is unworkable, as it refers only to twoparties.
■ A. St. V. Jayewardene (with him Dassanayahe), for the respond-ents.—The 13th clause practically covers all matters in dispute inthis case. . It is for the arbitrators to decide whether the mattersin dispute come within the arbitration clause (Willisford v. Watson *).
Even where some matters in dispute are outside the arbitrationclause, the Courts would refer to arbitration (Ives and Barker v.
Williams •). No facts have been placed before the Court for theappointment of a receiver.
Cur. adv. vult.
1 (1356) 26 L. J. C. P. 72.
(1898) 1 Oh. 414.
(1892)1 Oh. 633.
(1883) S3 L. J. Ch. 166.
(1873) L. R. 8 Ch. 473.
(1894) 2 Ch. 478.
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Deo. 1909 December 20, 1909. Middleton A.C.J.—
S°C^yvn This is an appeal against an order referring the matters in dispute<?tmofcOT. • between the parties to arbitration and thereby staying the pro-*****ceedings in the action. The plaintiff and two defendants were
partners under a deed, by which it was agreed to carry on businessas fibre merchants in partnership for seven years from July 11, 1908,subject to its being dissolved by six months' notice.
The District Judge, in making the- order appealed against, appearsto have done so on the ground that as the articles of agreementbetween the parties provided that any dispute between the partieswas to be referred to arbitration, there was no reason why thedispute raised in this action should not be referred.
The plaintiff brought an action against the defendants, however,and in the 3rd paragraph of the plaint claims dissolution on theground, amongst other allegations, of misappropriation of moneys,unfaithfulness in business, abstraction of a partnership book, andtrading in fraud of the partnership agreement.
The 13th clause of the partnership deed provides that if at anytime during the partnership any dispute, doubt, or question shallarise among the partners or their representatives on the constructionof the partnership deed, or respecting the accounts, transactions,losses, or profits of the business, then such dispute, &c., was to bereferred to the arbitration of two disinterested persons, one to benamed by each party in dispute, &c.
■ It is contended by counsel for .the respondents that this clause' meets all the allegations made in the plaint, and the judgment ofLord Selborne in Willisford v. Watson1 was strongly insisted on ascovering the facts of the present case. In that case Lord Selbornesaid in most of such cases the real question between the parties iswhether the matter in dispute -is within or without the agreement,and the Lord Chancellor there held it was within the agreement.This is eminently the question here, and having read the judgmentrelied on by Mr. Jayewardene, I am strongly of opinion that thematters in dispute here do not fall properly within the limits of the13th clause of the partnership agreement, nor do I think thatclause 13 gives the arbitrators power to decide if matters in disputefall within their power to deal with.
In Piercy v. Young 2 Jessel M.R. remarked that the case of Willisfordv. Watson 1 had been quoted to him to show that the Court wouldnot decide the point whether the matter in question was one whichthe party proposing the reference has agreed to refer to arbitration,and the Master of the Rolls said that Lord Selborne's decision wheDit came to be examined appeared to him by inference to show the
contrary.
1 {1873) L. Tt. SCh. 473.
* (J879) 14 Ch. T). 200.
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In the present case there is no general submission of all matters Dee. 20,1909in dispute to arbitration, and the plaintiff seeks a dissolution, and
am by no means clear that the 13th clause enables such a questionA.CJ.to be deoided by the arbitrators. In my view clause 13 appears to -~~contemplate disputes pending the partnership rather than disputes chettyv.which might involve a dissolution of it. The clause is not a general Gunawar-submission by partners of all matters in difference between them,
but a limited one (Bel field v. Bourne *, Vawdry v. Simpson 2). Inboth those cases it seems -to me that the terms of the clauses ofreference were far wider than they are here, where there is nogeneral submission of all matters in difference such as mightempower an arbitrator to dissolve the partnership.
There is also an allegation of fraud in the plaint, and in Wallis v.
Hirsch 3 it was held that where there was an allegation of grossfraud, the matter being in the discretion of the Court under section
of 17 and 18 Viet., C. 125, the Court would not grant a stay ofproceedings. In Russel r. Russel,4 however, Sir George Jessel, theMaster of the Rolls, held that the mere making of a charge of fraudwas not sufficient, but that there must be primd facie evidence offraud to entitle the person charging thp fraud to object to arbitration.
In Cook v. Catchpole s the submission clause was similar, but evenwider than the terms of clause 13 here, but it was held that thearbitrator would have no power under the submission clause todeclare a dissolution in consequence of .the conduct alleged there.
In my opinion the order of the District Judge must be reversed,on the ground that the submission clause 13 of the Articles ofPartnership is not sufficiently wide to enable the arbitrators todissolve the- partnership.
There is still the further question raised by the appellant of theinsuf’ 'iency of clause 13 with regard to the number of arbitrators.
There are three parties to the agreement, and the 13th clause,although contemplating one arbitrator to be named by each party,only provides for the arbitration of two disinterested persons, oneto be named by each party in dispute. It seems to me this makesa further difficulty, and constitutes a sufficient reason under section8 of the Ordinance, No. 15 of 1866 why the matter here should notbe referred to arbitration.
Then there comes the question as to the appointment of a receiver,which the District Judge appeared to think was unnecessary ashe had stayed proceedings. In Compagnie du Senegal v. Woods •
Kay J. held that, even pending arbitration, the Court had powerto appoint a receiver (see also Pini v. Rancoroni ’). In the presentcase I have no doubt that a receiver ought to be appointed underchapter L. of the Civil Procedure Code. 1
1 (1893) 1 Ch. D. 621.'‘ (1880) 14 Ch. D. 471.
* (1896) 1 Ch. D. 166.« (1864) 34 L. J. N. S. Ch. 60.
»(1866) 26 L. J. C. P. 72.• (1883) 63 L. J. N. S. Ch. D. 166.
’ (1892) 61 L. J. N. S. Ch. D. 218
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Dec. 20,1909 in my opinion, therefore, the order of the District Judge stayingMiddleton proceedings should be set aside and the case sent back, plaintifE
O.J.being at liberty to apply for the appointment of a receiver pending
Sockalingam action; the costs of the appeal and of the order in the District Court
Ghettyv. to be paid by the respondents.
Qunawar-
dene
Pereira A.J.—
Mr. Jayewardene argued that the question whether the mattersin issue fell within the purview of the arbitration clause of the deedof partnership was itself a question for decision by the arbitrators,and cited, in support of his contention, the case of Willisford v.Watson.1 That case, as pointed out by the Chief Justice, was thesubject of comment in the case of Piercyv. Young-,2 from which itwould appear that the provisions as to reference to arbitrationrelied on in the former case were so wide that they included not onlythe construction of the document itself, but.also the question as towhether the acts complained*of were or were not within the termsof the matters referred to arbitration.
As regards the question as to whether the arbitration clause inthis case includes such disputes as are complained of in the plaint,the case of Cook v. Catchpole 3 appears to me to be in point. Theterms of the arbitration clause relied on in that case were, in parts,material to the present inquiry, almost identical with those of theclause of the deed in this case, and it was there held that the clauseapplied only to questions arising upon the construction of thearticles and to matters of internal disputes thereunder, and not toa case where it was charged that the partnership * articles had beenbroken through, and a dissolution was sought on that ground.
I agree to the order proposed by the Chief Justice.
Appeal allowed; case remitted.
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1 (1873) L. R. 8 Ch. 473.* (4879) 14 Ch; D. 200.
* (1864) 34 L. J. N. S. Ch. 60.