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Decisions of the Superior Courts of New South Wales, 1788-1899

Grose v. La Mestre (1843) NSW Sel Cas (Dowling) 820; [1843] NSWSupC 9

company law

Supreme Court of New South Wales

Dowling C.J., Burton and Stephen JJ, 24 July 1843

Source: Dowling, Select Cases, Vol. 7, S.R.N.S.W. 2/3465, p. 144.

The Union Assurance Act, 7 Wm 4 (1836) allows suits either at law or in equity to be commenced in the name of the chairman of the company, and places members of the company on the same footing as other debtors to bring claims against the company.*

Dowling C.J. This was an action by plaintiff by virtue of the act of the Governor in Council 7 Wm 4 (11 August 1836) as chairman of the Union Assurance Company of Sydney for and on behalf of the said company against the defendant on 3 promissory notes, 1 as maker and others as payee and severally endorsed by him to the company.

The defendant pleaded to all counts of the declaration that before and at the time of making the notes and from thence hitherto the defendant and the plaintiff were and have been and still are co-partners of and in the said Union Assurance Company and during all that time have jointly and with other co-partners of the company carried on and still jointly carry on the business, trade and dealing of the company and that the notes declared upon were severally endorsed to the company and by them held for and on account of and in relation to the purposes, business and concerns of the company and in the course of the co-partnership business thereof and not otherwise, and that the causes of action arose out of co-partnership accounts of the company, and that the notes and the proceeds and the benefits to be derived there from have been and still are part of the partnership stock of the company, and are common to all of the parties thereon; and the claims and demands of the company in respect thereof became and were and are matters of account between the several partners constituting the company; and that the said accounts in respect thereof at the time of the commencement of this suit were not, nor are, settled or adjusted, nor has any financial balance been struck between the company and the defendant and the said accounts are still open and unadjusted; concluding with the verification.

To this plea the plaintiff replied that by the act of Council mentioned in the declaration (which received the Royal Approbation on 12 February 1837 and was notified on 21 September in the same year in the colonial Government Gazette) it was amongst other things enacted that from and after the passing thereof " all actions and suits and all proceedings at law or in equity to be commenced, instituted and constituted or carried on by or on behalf of the said company or wherein the said company was or should be in any way concerned against any person or persons, body or bodies politics or corporate, or whether member or members of the said company or otherwise should and might be lawfully commenced, instituted and prosecuted or carried on in the name of the person who should be the chairman of the said company at the time any such action, suit or proceedings should be commenced or instituted as the nominal plaintiff, complainant or petitioner for and on behalf of the said company". The replication then went on to aver the identity of the company mentioned in the Act with that mentioned in the declaration and that the causes of action accrued to the plaintiff as such chairman, after the notification of the act of Council in the Colonial Gazette.

To this replication, the defendant demurred and assigned several causes but that on which he mainly relied and on which alone it is necessary for the Court to pronounce any opinion was " that the act of Council did not prevent or stop him from availing himself of the defense set forth in his plea, nor at any way answer the same " . The question raised upon this demurrer is whether notwithstanding the term of the Union Assurance Act , a member of the company may plead partnership to an action at law brought in the name of the chairman for cause of writing out of the partnership transaction in which all the members of the company are jointly interested, and before any final adjustment of partnership accounts; or in other words does the Act stop the defendant from availing himself of the general principal that partners cannot sue each other at law.

The ostensible object of the Union Assurance Company Act is to enable the company to sue and be sued in the name of the chairman for the time being, and it recites that difficulties may arise in recovering debts due to the company or in maintaining actions or proceedings for damages done to the property &c and further recites that it would be convenient and just that persons having demands against the company should be entitled to sue some member thereof in place instead of the whole, but as these purposes cannot be affected without the aid of the legislature, it then proceeds to enact as set forth in the plaintiff's replication. Referring to the ostensible object of the legislation, it was contended in support of the demurrer that the section relied upon could only be construed to authorize the use of the chairman's name against members of the company in equity suits, and not to deprive members of their common law right of pleading partnership in actions at law against them in the name of the chairman. If this were otherwise the enacting part of the clause would go beyond the recital of the mischief intended to be remedied. Nothing but express words could deprive the defendant of his right of pleading partnership. No such express words could be found and as the Act must be construed strictly in which it seeks to deprive a party of a common law right, the plea could not but be allowed.

In Gutherie v. Fisk (1824) [ Gutherie v. Fisk (1824) 3 B. & C. 178, 107 E.R. 700 ] where a private act of Parliament entitled " An act to enable a certain insurance society to sue and be sued in the name of their secretary " enacted that they might commence all actions and suits in his name as nominal plaintiff, it was held that this did not enable the secretary to petition on behalf of the society for a commission of bankruptcy against their debtor. This was an authority to shew how strictly such Acts should be construed and that the intention to deprive the defendant of his right to plea must be distinctly expressed. The section in the Union Assurance Act was evidently copied, almost in terms, from the statute 7 Geo. 4 c. 46 (1826), s. 9. Since the passing of that Act no express decision has determined that notwithstanding the right of suing there given, a member of a company might not plead partnership, but it was to be inferred from the subsequent statute, 1 & 2 Vic. c. 96 (1838) that the point was extremely doubtful, as by that Act it is enacted "that all such actions, suits and proceedings shall be conducted and have effect as if the same had been between strangers". This was a legislative declaration of the existence of a doubt, and strengthens the argument in the present case that unless the right of a partner to plead partnership was distinctly and expressly taken away, the Court must limit the words of the local Act merely to the right of proceeding against members of the company in suits in equity.

In the case of Ex Parte Hall (1838) [ Ex parte Hall (1838) 1 Mont. & Chit. 365 ] , a question arose founded on Gutherie v. Fisk whether upon the construction of the two Acts 7 Geo. 4 c. 46 and 1 & 2 Vic. c. 96 or either of them, a banking company could through the medium of their public officers sue out a fiat in bankruptcy against one of their own shareholders in respect of a debt due to them for call and to a small extent on his banking account. The Court of Review in Bankruptcy seemed to consider that the company could not under the first Act alone sue out such a fiat in as much as the debt was primly equitable, but they held that coupling the apparent intention of the legislature in the former Act, which expressly mentions petitions in bankruptcy, with the more specific and stringent provisions in the latter Act, such a fiat was maintainable. As in the local Act, there was no specific or stringent exclusion of the common law right of pleading partnership - no express enacting words and it must be taken that the legislature did not intend to deprive a member of that right which he had at common law. It could not be intended that an action of law should change its nature and subvert all the principles by which it is governed and enable that to be done now in a court of law, which could not be done before. However desirable an express law might be on the subject, to remove all doubts, the remedy was applicable to the legislation. The present Act was inoperative if the Governor and Council who passed it really intended to exclude the plea of partnership by a co-partner in this company.

We have fully considered the point raised on the pleadings and are clearly of the opinion that looking at the plain intent and meaning of the legislature to be collected from the language used, that the effect of the local Act is to give the company a right of suing and proceeding either at law or in equity in the name of their chairman against members of the company for partnership debts and transactions, in the like manner as if such members were strangers to the company.

The section enacts that all actions and suits, and all proceedings at law or in equity, to be commenced, instituted and prosecuted or carried on by or on behalf of the company, against any person or persons or whether a member or members of the said company or otherwise, shall and may be lawfully commenced &c in the name of the chairman. This section in its language is nearly similar to the ninth section of 7 Geo. 4 c. 46, but there is an important difference which will be pointed out presently. The section in the English Act permits the word "or", before the words "whether a member of members &c" and enacts "that all actions and suits &c and also all petitions to found any commission of bankruptcy against any person or persons who may be at any time indebted to any such co-partnership carrying on business under the provisions of this Act, and all proceedings at law or at equity &c to be commenced or instituted for or on behalf of any such co-partnership against any person or persons, bodies, politic or corporate or others (omitting the word "or") whether members of such co-partnerships or otherwise, for recovering any debts or enforcing any claims or demands due to such co-partnership &c shall be commenced &c in the name of any one of the public officers and for him being of such co-partnership as the nominal plaintiff or petitioner for and on behalf of such co-partnership &c". The omission of the word "or" is not however the material difference between the English and the local Act. The more important one has reference to the supposed cause of enacting the statute 1 & 2 Vic. c. 96.

It was argued that the last mentioned Act must have been introduced for the purpose of removing the very doubt which it is said that the local and English Acts respectively give rise to. But when we come to look at the ninth section from which the section in the local Act is supposed to have been literally copied, we find a variance, which may have given rise to the doubt which the 1 & 2 Vic. c. 96 was intended to overcome. The ninth section of the English Act says " that all actions and suits against any person or persons who may at any time be indebted to any such co-partnership &c " stopping here, a partner could not be said to be indebted to the company as partner except under special circumstances and a doubt may have arisen whether a partner could come within the meaning of person or persons indebted to the co-partnership and so the reason assigned for passing 1 & 2 Vic. c. 96 may not have been the same one. The local Act omits altogether the words pointed out and proceeds to enact at once "that all actions against any person or persons &c whether a member or members of the company or otherwise shall be commenced in the name of the Chairman".

There is nothing however to shew us that there was any real doubt entertained by any competent authority as to the true construction of that part of 7 Geo. 4 c. 46 which has been introduced into the local Act. A passage has indeed been cited from a text writer on the Law of Partnership (J. Collyer, A Practical Treatise on the Law of Partnership , 2nd ed., London, 1840, p. 773) to this effect: " It seems to have been doubted whether under the provisions of 7 Geo. 4 c. 46 a joint stock banking company could have brought an action against any of their own share holders; and it is apprehended that in order to remedy this doubt, amongst others, the statute 1 & 2 Vic. c. 96 was passed. When looking at that Act it is true that it recites the 7 Geo. 4 c. 46 but there is no recognition or recital of any doubt of the construction to be put on that part of the ninth section under review and enacts of other provision "that all actions commenced in the name of the nominal plaintiff against a member of the co-partnership shall be conducted and have effect as if the same had been between strangers".

In the construction of the local Act we are left unfettered and are bound to give effect to it if the obvious intention of the legislature was to place members of the company on the same footing with strangers as to liability to partnership debts. It appears to us that the only doubt which could possibly be raised was the passing of the Act 1 & 2 Vic. in 1838, which was to continue until the end of the next session of Parliament; but notwithstanding that Act we think the construction of the local Act upon the whole is too plain to admit of any serious argument. It allows suits either at law or in equity to be commenced in the name of the chairman of the company against any person or persons and whether a member or members of the company or otherwise. This provision was introduced for some purpose. It cannot be rejected altogether as having no meaning at all. If it has any meaning, it is to place members of the company on the same footing as other debtors and give the members a remedy at law for damages against their co-partners in the name of the chairman, instead of drawing them into an expensive and dilatory suit in equity for adjustment of accounts. The intention was obviously to afford the company a legal remedy against persons indebted to the company whether members or not. The Act may not in terms have included a member for pleading partnership but this restriction is necessarily implied by this strong and unequivocal language used by the legislature.

On first impression it appeared to us that the construction was too plain for argument, and subsequent consideration leaves no doubt in our mind that the expressed intention of the legislation was to give a right of action to the chairman in the name and on behalf of the company for partnership debts due to the company, notwithstanding the party sued happens to be a member. Without giving any decision as to any alleged infirmities in the plea itself, as being insufficient, independently of the local Act, we think judgment must be given for the plaintiff on the demurrer to the replication.

Published by the Division of Law, Macquarie University