Case No.:

AC-APP-1961

Court:

Court of Appeal

Issue No.:

1962

Principles

·  Partnership—Holding out—Question of fact

·  Civil Procedure—Appeals-May reverse if decision below is “obvious!)’” against weight of evidence

·  Partnership—Holding out—Facts constituting partnership by estopple

Defendant’s Sons were partners in a business formerly owned by defendant father. Plaintiffs lent money to the partnership and now claim the defendant father was holding himself out as a partner for the purposes of obtaining credit for his sons, and is therefore a partner by estopple. The sons need their father’s name in the business. The business operated in the same location and with the same furniture as it had with the father. The father sat on the verandah during working hours. The sons were paid a salary similar to that received when the father owned the business. The Sons had no knowledge of the formation of the partnership. The father was known to sign on behalf of the partners.
Held: (1) Whether a defendant has or has not so held himself out to the plaintiff as a partner that he becomes a partner by estoppel is a question of fact, not a question of law.

(2) The Court of Appeal may reverse a judgment of a lower court which is obviously and manifestly against the weight of evidence.”

(3) In this case defendant father, as a matter of fact, so held himself out that he is a partner by estoppel and properly joined as a defendant here.

Judgment

(COURT OF APPEAL) *

CHOTALAL SAMJEE VIRANI (S.), LTD. v. AHMED EL SAYED EL BARBARY

AC-APP-1961

Advocates: E. M. Kronfli for plaintiffs-appellant

Abdel El Hassan ... for defendants

B. Awadalla J. March 12, 1962: —This is an appeal against the decree and judgment of His Honour the Province Judge, Port Sudan, in CS-1 1956.

Plaintiffs-appellant are a limited liability company carrying on business at Port Sudan and the defendants-respondent were:

(a) Ahmed El Sayed El Barbary, a merchant of Port.Sudan, and

(b) a firm registered under the Partnership Registration Ordinance,

1926, under the name of Ahmed El Sayed El Barbary & Sons and

Consisting of the three sons of Ahmed El Sayed El Barbary, namely,

Alawi, Mohamed and lbrahim, and his three daughters, Amna,

Mahfouza and Hanim.

The claim was one for the recovery of a sum of £S. cash loan advanced to the partnership against promissory notes and interest thereon. Litigation started against the partnership and the heirs of Alawi who died in the interval, but Ahmed El Sayed El Barbary was joined as a third defendant by order of the court, dated January i8, 1958. and mad consequent on application by plaintiffs made the same day.

The partnership as well as the heirs of the deceased partner admitted claim but Ahmed El Sayed El Barbary denied all liability on the ground that he had nothing to do with the firm of Ahmed El Sayed El Barbary & Sons. The plaintiff company, on the other hand, alleged that they were induced to make the loan on the assumption that Ahmed El Sayed El Barbary was a partner, and that it was he who was operating the accounts of the firm prior to the advance loan in question.

The following issues were framed:

(a) Was Ahmed El Sayed El Barbary at the time of the transaction a partner by estoppel in the firm of Ahmed El Sayed El Barbary

& Sons?            (Onus on plaintiffs

(b) Is Ahmed El Sayed El Barbary liable as such (together with the two other defendants) to settle the amounts as per promissory notes P.1 to P.5 and the interest thereon? (Onus on plaintiffs)

(c) In any case to what relief, if any, are plaintiffs entitled against all or any of the defendants?

After hearing evidence for and against claim, His Honour the Province Judge rejected the plaintiffs’ claim against third defendant, but passed a decree against the other defendants for claim and costs. The reason given by His Honour the Province Judge in dismissing the case against third defendant is that it did not appear from the evidence that the said defendant was either a partner in the firm of Ahmed El Sayed El Barbary & Sons or represented himself or held himself out so to be.

From this decision the plaintiffs’ company is appealing to this court. The appellant company represented by advocate Emile Kronfli, contends that the decision of the court below was against the weight of evidence. The respondent on the other hand, represented by advocate Abdalla El Hassan, argues that this is simply an appeal against a finding of fact by the court below, and so ought not to be entertained by this court.

In my view the learned advocate for respondent overlooked the point that although there is a general rule against this court disturbing findings of fact, yet such a rule does not go to the extent of protecting decisions that are obviously and manifestly against the weight of evidence. In my view, the present case in which the name of the wealthy father was invoked as a cloak for enabling the business to be carried on by the impecunious sons, affords the best example of the doctrine of holding out in the law of partnerships. The obvious purpose in utilising the name of the wealthy father was to enable the sons to obtain credit, and if credit is in fact obtained in face of the implicit but false representation the law will not allow the person who has stood by and watched the fraud, to renounce liability on the ground that he was not a partner. In the present case, the evidence which in the view of His Honour the Province Judge was not enough to constitute holding out, in my view goes a long way not only to prove that the father is a partner but that he was all-in-all in the business and that the partnership had no real existence except in the pages of the Sudan Government Gazette. The business, prior to November 1953, was owned by the father and so it is now, i.e., since the dissolution of the partnership in October: 1956. During the subsistence of the partnership it was carried on in the very place where the father used to carry on his business before 1953, the same shop and the same furniture. Even the face of respondent seems never to have been a missing element, for it is stated both by D.W.2 and D.W.3 at pp. 35 and 42 of the Record that the father used to stay on the veranda during all working hours. The creation of the partnership brought about no appreciation in the welfare of the partners, f& they used to get the same poor salary during its subsistence as they used to be paid when they were serving their father before its formation. I think that the best evidence that the partnership was simply a bogus affair is that none of the two surviving sons knows how it came to be formed. At p. 36 of the Record, D.W.2 said “I do not know I myself became a partner. Alawi (that is the deceased brother) was the director and was doing everything.” D.W. says the same thing at p. 40 where he states “I was told by Alawi about the formation of partnership when he asked me to sign.” There is even evidence that respondent was signing on behalf of the partnership: he admits the signature on document D.1 and does not deny that on document P.8 (p. 2). He denied all the other signatures put to him on cross- examination. On comparison of those signatures denied by him with the one admitted it would be evident that the resemblance in the signatures is so close that it makes his denial highly questionable.

This leaves us with two facts which are relied on by the defence as negativing the existence of an estoppel: the first is that sometime before the date of this advance, respondent sent P.W.2 to warn appellants against lending money to his (respondents) sons; the second is the allegation that appellants were warned by the sons at the time they were negotiating the loan that the father was not a partner.

As regards the first point, I entirely agree with the learned advocate for appellants that, if anything, this incident, even if it is to be believed, cannot be said to’ be inconsistent either with respondent being a partner or having held himself out as such a partner. It is quite unusual for an outsider to any business, even if he were the father of the owners of that business; to interest himself in the way customers have to act in their dealings with the owners.

But let us consider the statement itself and see whether it would convey the meaning it is now contended it was meant to convey. P.W.2, Bakr Ahmed Shams, says at the bottom of p. 24: “Ahmed El Sayed El Barbary sent me to tell Chotalal that if his, Ahmed’s, sons asked for money as loan, etc., he, Chotalal, should not give them.” How can this statement at all convey to appellant any idea that respondent was not a partner? When discerned with accuracy, it will be found that the statement does not tell appellants that the sons have no authority to raise or receive loans on behalf of the partnership nor does it say that respondent is not a partner. All that it does is to solicit appellant not to make a loan, which he is quite at liberty to make to the owners of the business, who, in turn, are quite empowered to demand it. In my view, therefore, this fleeting, highly equivocal and most unbusinesslike statement, should not be allowed to outweigh or disturb the effect of the evidence of conduct displayed by respondent during the three years of the partnership.

As regards the second point, this of the statement of D.W.2 who stated that when he was negotiating the loan he disclosed the true facts to appellant by referring the latter to the Gazette which showed the names of the true partners. The appellant is denying this incident and I have no doubt he is telling the truth. It is most unlikely that a person who is negotiating a loan of a considerable sum of money will volunteer and point out facts, which would defeat the end he has in view by revealing that his financial position is in fact much worse than what his prospective creditor believed.

For the above reasons, I am of opinion that the decree of His Honour the Province Judge should be set aside and judgment entered in favour of appellants for claim and costs (here and in the court below) against all defendants jointly and severally.

M. A. Abu Rannat CJ. March 12, 1962: —l concurs. Salah Shibeika D March 12, 1962: —I concur.

‘Court: M. A. Abu Rannat C.J. B. Awadlla I., Salah Shibeika D.J