Partnership-Liability between partners-Whether an action can lie by one
partner against another for losses caused by negligence

A partner cannot bring an action for damages against his co-partner on a
claim that the latter has caused the firm to suffer losses or to fail to make
profits by neglecting his duty under the partnership agreement. An action for
damages for breach of an express agreement entered' into by one partner with
another will lie only if the damages recovered will belong to the claimant alone,
and not to the firm, or the matter arises from something independent of or only
collateral to the partnership agreement. Partnership should be based on mutual
trust and confidence, and if that is misplaced, the sufferer can do no more than
claim that the relationship be dissolved.

Revision

October 27, 1929. Owen J.: The contract was dissolved by
consent in the course of the proceedings, and the learned Judge found
on the second part of the claim, that whilst £E.65.550 m/ms was due

• Court: Bell C.J., Owen and Halford II.

to the appellant from the respondent on account of partnership losses
and expenses, the respondent" was entitled to set off against that sum
two sums amounting in all to £E.34 by way of damages for what was
described as neglect by the appellant to do his duty under the agree-
ment.

With regard to the claim for expenses it is clear from the respon-
dent's own admission that the sum of £,E,55.550 m/ms was due from
him, but the Judge of-the High Court has added the sum of £E.I0,
being half the sum of £E20 claimed by the appellant in the course
of the case. The basis for this claim of £E.20 and the evidence in
support of it are very unsatisfactory, and the reasons for the allowance"
of a half are by no means clear. I am of opinion that the appellant
did not substantiate his claim in respect of it and that n? more than
the £E55,550 m/ms admitted by the respondent can be allowed him
under the head of expenses. Against "this sum must be set off £E.5.120
m/ms representing the respondent's share in the profits, and this
brings the total sum due from the defendant to the appellant to
£E.50.430 m/ms only.

, Next arises the question of the respondent's counter-claim of
£E34 against the appellant for damages for neglecting to do his duty
under the contract. It' is, in effect this: Can one partner bring an
action against another saying, "If you had not been negligent, our losses
would have been less, or our profits greater, and therefore there must
be brought into account by you the sum which represents the partner-
ship loss, caused by your neglect?"

No such action can be brought. It must be remembered that
such a claim is based on breach of duty to the partnership, not
to the individual partner who seeks to establish it. But every member"
of ail ordinary finn is, to a certain extent, both principal and agent;
he is liable as a principal to the engagements of the finn, and all
obligations are zhe obligations of the co-partners as much as of any
one of theme All the partners are co-adventurers who have agreed
between themselves for the attainment of a particular object," and
each one must share the credit for success or the responsibility tor"
failure! It is true that where a particular loss is directly attributable                                                                                                             .

to ;raud, gross neglect or wilful default of .one of the partners, that

p.~rtner may be called upon to suffer the whole of the loss himself,
~ut a claim based on such facts is not a claim for damages at all.
An action for damages for breach of an express agreement entered

into by one partner with another will only lie if the damages when

recovered will belong to, the claimant alone, or the matter arises from
something independent of or only collateral to the partnership articles.

In this case the allegation of the respondent is that the appellant
did not supply enough money, and that he did not exhibit reasonable
enterprise enough to ensure the success of the adventure. But even
if the allegation is true, and even if the amount of money which is
said to have been lost by such conduct is correctly assessed, it is
the joint adventure which must bear the burden of it, and not the
defaulting partner alone. The neglect of one partner is the neglect
of the other, and no action for damages can lie by reason of mere
failure to realise expectations, any more than the damages which have
been said to result from such failure can be brought into partnership
account. There has been no fraud alleged in this case. It is simply
a case of one partner being dissatisfied with the other's method of
doing business and alleging in effect that the partnership would have
shown less or more profit if the other had shown more energy and
enterprise.

I think there is very good reason for the courts refusing to inter-
fere in cases of this sort. Every adventure that failed would most
probably be followed by proceedings in court, where each partner
would try to saddle the blame on to the other or others and demand
compensation. There would be no end to litigation, and partnership
as a means to an end would fail by reason of the insecurity and
doubt arising from the relationship. Partnership should be based on
mutual trust and confidence, and if that trust and confidence is mis-
placed, the sufferer can do no more, and should do no more than
claim that the relationship which he, has created be dissolved, less
greater loss befall.

In the case under review the damages were allocated in respect
of two periods. At the end of the first period an-account was stated,
between the parties and a supplementary agreement entered into. In
my opinion, apart from the reasons given above, the claim for damages
in respect of the first period also fails because the .account stated,
together with the fact of the supplementary agreement of October 4th,
1927 creates a complete estoppel. The respondent's. acquiescence in'
the state of affairs disclosed at the end of the first period cannot
in the circumstances be doubted. For the above reasons I am of
opinion that the judgement of the learned Judge should be varied, the
appellant's-claim should be allowed at £E.SO.430 m/ms and the set
off or counterclaim for damages struck out.