VOL. XIII.] CHANCEEY DIVISION.

839

YATES v. F I N N . v.-c. H.
[1873 Y. 12.] 1880

Partnership—Death of Partner—Business carried on by Surviving Partner Jan. 28.

Use of Deceased Partner's Capital—Division of Profits.

A. and B. having carried on business in partnership with unequal capitals

for a term of years, under articles which provided for an equal division of
■ profits after payment of interest upon their respective capitals, continued,
after the expiration of the articles, to carry on business until A.'s death upon
the footing of the articles. At A.'s death his capital was more than three
times as large as that of B., and B., who claimed under the expired articles
the right to purchase the business, continued, without the consent of A.'s
representatives, to carry it on and to use A.'s capital therein. In 1873, A.'s
representatives commenced this suit against B., and at the hearing in 1875,
it was decided that B.'s option to purchase ceased when the articles expired.
The business was then sold under the order of the Court, after having been
thus carried on for about three years:—
Held, on further consideration, that after making a proper allowance to B.
for managing the business, the profits earned since A.'s death must be divided
between A.'s representatives and B., according to the proportion in which
the partners were entitled to the capital employed in the business.

15 Y partnership articles dated the 31st of December, 1847, Yates

& Finn agreed to carry on the business of lamp manufacturers in
New Bond Street, under the firm of Smethurst & Co., for the term
of ten years from the 16 th of August, 1847; the capital of the
partnership was to consist of the sum of £14,057 18s., of which in
effect £11,057 18s. was brought in by Yates and £3000 by Finn.
Before any division of profits was made, each partner was to be
entitled to interest after the rate of £5 per cent, per annum upon
the amount of capital from time to time remaining to his credit
in the business, and,'subject thereto, the profits were to be equally
divided between them. The articles also contained a proviso that
in case Yates died during the partnership, leaving Finn surviving,
Finn should, upon making certain payments, be entitled to the
entirety of the estates, stock in trade, and effects, constituting the
capital of the partnership.
Under these articles Yates & Finn carried on their business in
partnership together until the 16th of August, 1857, when the
840 CHANCEEY DIVISION. [VOL. XIII.

V.-C. H. term of ten years expired, after which time they continued to
1880 carry on the business upon the footing of the articles without any
Y^3 express agreement, dividing the profits in equal shares.
FINN Yates died on the 30th of June, 1873, having by his will
appointed the plaintiffs his executors. After his death Finn con­
tinued to carry on the business, and to retain and employ Yates
capital therein, claiming to be entitled to the entirety of the
business under the proviso in the partnership articles.
In December, 1873, the Plaintiffs filed their bill in this suit for
a declaration that after the expiration of the ten years' term the
partnership was carried on as a partnership at will, and that the
proviso in the articles entitling Yates to the entirety of the
partnership property in case of Finn's death, was not operative
after the expiration of the term, and they prayed that the partner­
ship affairs might be wound up upon the footing of these declara­
tions, and that Finn might account for and be charged with a
proper proportion of the profits of the business since the death of
Yates ; that the business and goodwill might be sold as a going
concern, and for a receiver and manager.
Upon the hearing of the cause on the 1st of May, 1875, the
Vice-Chancellor held that the partnership was, after the 16th of
August, 1857, a partnership at will; and that the proviso for pur­
chase was not operative or applicable after the expiration of the
ten years term; and made the ordinary partnership decree direct­
ing the usual accounts and inquiries, with liberty to apply as to a
sale of the business and goodwill as a going concern; and this
decree was affirmed on appeal by the Lords Justices.
The business with the goodwill was sold under the direction of
the Court in July, 1876.
On taking the accounts directed by the decree, the question
arose whether the Plaintiffs were entitled to interest from the
death of the testator upon the amount by which the capital be­
longing to him, and retained in the business, exceeded the capital
of Finn therein ; and in April, 1877, the Vice-Chancellor decided
that they were not.
By the certificate of the Chief Clerk, dated the 23rd of July,
1879, it was found that the surplus assets consisted of a balance of
£15,912 15s. 9d., of which £12,018 lis. 2d. was capital belonging
VOL; XIII.] CHANCERY DIVISION. 841
to the estate of Yates, and £3294 4s. Id. capital belonging to ;v.-c. H.
Finn ; that he had taken an account of the trading since the death 1880
of Yates, and that the net profits arising therefrom amounted to YATES
£8483 9s., and after allowing {inter alia) to Finn £1450 for his v.
FINK.
services in managing the concern, he found in effect that the net
profits were divisible between the estate of Yates and Finn in
equal shares.
The Plaintiffs then took out a summons to vary this certificate
by disallowing the £1450, and by dividing that sum and the net
profits between the estate of Yates and Finn, according to the pro­
portions in which that estate and Finn were respectively entitled
to the capital in the business.

W. Pearson, Q.C., and Everitt, for the Plaintiffs:—

This is a case in which the Defendant, as the surviving partner,
has carried on the business for three years after the dissolution of
the partnership by the death of his co-partner, and has, without the
consent of the representatives of the deceased partner, retained
and employed in the business the capital of the deceased partner.
That capital was nearly three times as large as his own, and the
profits earned since the testator's death ought to be divided rate-
ably between the testator's estate and the Defendant in proportion
to the amount of capital belonging to each: Lindley on Partner­
ship (1) ; Mellersh v. Keen (2) ; Crawsliay v. Collins (3) ; Wedder-
burn v. Wedderlurn (4); Willett v. Blanford (5).
[HALL, V.O., remarked that it might be necessary to continue a
business for the purpose of winding it up, and referred to Simpson
v. Chapman (6).]
This is a case of wrongful retainer, under a claim of right which
has been disallowed; and as it has been held by the Court, fol­
lowing Barfield v. Loughtorough (7), that we are not entitled to
interest on the testator's excess capital, the case is still stronger
in favour of our being allowed the full profits earned by his
capital. In case the profits are divided in proportion to the
(1) 4th. Ed. p. 976, et seg. (4) 22 Beav. 84.
(2) 28 Beav. 453. (5) 1 Hare, 253.
(3) 15 Yes. 218; 1 Jac. & W. 267; (6) 4 D. M. & G. 154.
2 Buss. 325. (7) Law Hep. 8 Ch. 1.
842 CHANCEEY DIVISION. [VOL. XIII.

V.-O. H. capital, we shall not object to the sum of £1450 allowed to the
1880 Plaintiff for management, to which he is probably entitled:
YATES Brown v. De Tastei (1).
v.
FlNN
' Eastings, Q.C., and G. Curtis Price, for the Defendant:—
The Defendant did not exclude the Plaintiffs, but carried on the
business for the benefit of all parties. If the Plaintiffs had been
dissatisfied with the conduct of the Defendant they might at any
time have obtained a receiver. The case of Willett v. Blanford (2)
shews that there is no general rule that as between the surviving
partner and the estate of the deceased partner the amount of the
capital belonging to each is to be the basis upon which the propor­
tion of profits is to be calculated. I t is obvious that the skill or
connection of the surviving partner may have had more effect in
earning the profits than the capital of the deceased partner. The
general rule is rather that the profits earned after dissolution must,
in the absence of agreement, be divided equally, whether the
capital of the partners has been equal or n o t : Watney v. Wells (3).
And the cases in which this rule has been departed fiom have
been either cases in which the capital has been wrongfully em­
ployed, or cases in which the trader continuing the business has
been a trustee: Lindley on Partnership (4). In the present case
there has been neither wrongful employment of capital nor fiduciary
relationship, as is in fact shewn by the decision of the Court, in
1877, refusing interest on the capital of the testator.

Everitt, in reply.

HALL.V.C.:—

This case is one in which a partner has died leaving a surviving

partner, who has carried on the business, keeping and using in it
the larger capital of the deceased partner, as well as his own
smaller capital, to which I may add, as a material ingredient
existing in this particular case, claiming to be entitled as sur­
viving partner to take the business, including the goodwill of the
concern, on certain terms, and to carry on the business on his own
(1) Jac. 284. (3) Law Rep. 2 Ch. 250.
(2) 1-Hare, 253. (4) Pages 976, 977.
VOL. XIII.] CHANOEEY DIVISION. 813
account, a contention which the Court has held not to have been V.-C. H.
well founded. In such a case as this I think that, notwithstand- 1880
ing what was done in Watney v. Wells (1), the correct principle to YATES
be applied (in the absence of other special circumstances affecting Fi ^ N
the rights of the deceased partner on the one hand and the sur-
viving partner on the other) is this: that the representatives of
the deceased partner are entitled to say to the surviving partner,
" You have been using our testator's money in trade, and making
profits by the use of it, and we are therefore entitled to an account
of the profits you have made by continuing that money in the
concern and trading with it." Of course I do not mean to say that
there may not be special circumstances which may vary the case.
The observations of the Vice-Chancellor Wigram, in Willett v.
Blanford (2), that you must look at all the circumstances of the
case to see what is right and equitable as between the parties in
reference to the continued business, may be applied to all these
cases; and where there have been profits made by the joint capital
of the two partners, and the capital of one of the partners vastly
exceeds the capital of the other, I should say it is ordinarily just
and right that the profits made by the business should be appor­
tioned according to the capital employed in it. I quite admit at
the same time that there may be sums which could be legitimately
and properly claimed on behalf of the surviving partner before the
ascertainment of what were profits. In that view it seems to follow
that it is not otherwise than proper, in this case, to allow this sum
which has been allowed for management, and to make that allow­
ance before the ascertainment of profits. I cannot, however,—
because in the ordinary case of partners living and acting together
and trading with unequal capitals, the profits would, in the absence
of agreement to the contrary, be divided equally—apply that rule
to a case like this, where the business has been carried on after the
death of one of the partners, the partnership having, as I conceive,
ceased entirely at the time of the death. The partnership having
so ceased, I do not consider there is anything in this partnership
contract to which I can have regard upon the question what rights
there may be as to sharing the profits after the death. I cannot
have regard to that. If I could have regard to it in an ordinary
(1) Law Rep. 2 Ch. 250. (2) 1 Hare, 253.
S44 CHANCERY DIVISION. [VOL. XIII.
V.-C. H. case, I could not do so here, where, as it seems to me, the sur-
1880 viving partner has asserted rights in respect of this partnership to
YATES which he was not entitled, the effect of which was to defer for a
"• considerable period of time the ascertainment and distribution of
the funds between the parties entitled to them. Therefore, it
seems to me that the certificate was wrong in dividing the profits
equally.
I should say, with reference to the case of Watney v. Wells (1),
that the arguments which were addressed to the Court in'that case
upon the state of the assets were such as rather to shew that it
was thought not improbable that giving back to each partner his
capital, with its accumulations, would, or might pretty nearly,
exhaust the whole fund. It does not appear at all from the
report, whether the mode of division of the surplus profits was
thought worth consideration. I do not think that I can regard
that decision as at all a considered judgment upon that part of the
case; or as standing in the way of the view which I think ought
to be taken as to the principle to be adopted in a case like the
present with reference to the division of profits in a partnership
business carried on after the decease of one of the partners by
the surviving partner; and so carried on not temporarily for the
purposes of, and with a view to, a winding-up of the concern. As
to the principles to be adopted in the case of such a temporary
carrying on, I say nothing one way or the other. I do not con­
sider that in reality is this case. It seems to me the certificate is
wrong, and therefore it must be altered as I have indicated.

Solicitors: Harrison, JBeal, & Harrison; Frederick Taylor.

(1) Law Eep. 2 Ch. 2o0.