(COURT OF APPEAL)

GABIR ABDEL HAMID v. AHMED ABDEL AZIZ AND OTHERS

AC-REV.345.1967

Principles

  Civil Procedure—Appointment of a receiver or a manager—Civil Justice Ordinance, S. 146—In case of partnership no receiver or a manager to be appointed when the partnership is subsisting unless a partner in charge of the management commits an act of fraud or willfully denies the rights of his partners

In case of partnership property no receiver or manager is to be appointed under the Civil Justice Ordinance S. 146, to take over the management of the property, when the partnership is subsisting, unless a partner in charge of the management commits an act of fraud or gross misconduct of some kind or willful denial of his partners’ rights.

Advocates: Ishag El Gasim Shaddad for the applicant

M. A. Hassib for the respondent

Judgment

Osman El Tayeb J. January 16, 1968 :—This matter is concerned with the appointment of a receiver to take over and manage a Cinema- house, the subject of a partnership between the parties, applied for by respondent, subsequent to their institution of a civil suit claiming, virtually, accounts and their share of profits from defendant who has been in charge of the management of the said Cinema-house. from the record of the civil suit it appears that there is no dispute about the partnership nor about the conditions relating thereto, as embodied in the written agreement dated September 30, 1959. The dispute and issues are about the accounts only.

Before putting before our eyes the order the subject of this matter, it may be useful to look into the proceedings preceding it. On application of respondents an order under the Civil Justice Ordinance, s. 141, was passed on April 20, 1964, ordering applicant to deposit all the profits of the Cinema-house in court. This order was set aside on revision by the learned Province Judge on September 28, 1964. The grounds were that the Civil Justice Ordinance, s. 141, deals with temporary injunction and this was not a case to which it applied.

On February 25, 1965, an application was made for appointment of a receiver. It was supported by an affidavit stating that applicant refused to allow the commission, appointed to take accounts, to investigate his accounts. An order to appoint a receiver was passed without giving applicant a chance to show cause why it ought not to have been made. Eventually an application was made by advocate for applicant against that order and it was accordingly stayed. On September 25, 1966, another application was made by advocate for respondent praying for appointment of a receiver. Reply was submitted on January ii, 1967, by advocate for applicant opposing that application. Later the, learned District Judge ruled as follows:

“Nothing remained for the completion of the evidence and the final disposal of the suit, save the cross-examination of the president and members of the commission of accounts, who were previously heard. The suit was fixed for March 28, 1967, for their examination by advocates of the parties. So the court does not think t necessary to appoint a receiver for the short remaining period.”

On March 7, 1967, the learned District Judge recorded as follows “A letter is received from Police Magistrate Khartoum South, showing that the dispute between the partners of the Cinema-house, the subject of this case, has reached a stage that is likely to cause breach of the peace. That plaintiffs and other partners went and used force to take possession of the Cinema, and they so closed it. Before this letter and on the same day the Police Magistrate informed me by telephone that on complaint of defendant, the plaintiffs were arrested and remanded into custody.”

“So for these changing conditions, and in order that the differences between the parties do not exasperate more than that, I think it necessary that a receiver be appointed to take over the management of the Cinema until disposal of a suit.”

The learned District Judge then fixed the date of March 9, 1967, for advocate for applicant to be summoned to appear to agree on who shall be appointed a receiver. The learned advocate appeared and opposed the appointment of a receiver on the ground that the same court had previously decided that it was not necessary to appoint a receiver, and rejected the application thereto. He added that it cannot entertain the matter again. The learned District Judge dismissed this argument and proceeded to appoint the person suggested by respondents.

Here there is an order to appoint a receiver, which is the subject of this revision. The revision made against this order to the High Court was dismissed on June 3, 1967. Hence came this revision.

The learned Province Judge, in his judgment on revision, stated the law and referred to the relevant passages from Kerr on Receivers and II Mulla, The Code of Civil Procedure, and stated: “Applicant proved that respondent has committed an act of misconduct and has denied the rights in the partnership. This is enough to grant an order of appointment.”

It seems that the law as stated by the learned Province Judge is clear, and there is no controversy about it between the advocates for the parties. The Civil Justice Ordinance, s. 146, reads: “When it appears to the court to be necessary for the realization, preservation or better custody or management of any property, movable or immovable, the subject of a suit or under attachment, the court may by order appoint a receiver....” This section applies where the property, the subject-matter of the suit, is in imminent danger of being lost, wasted or disposed of contrary to the interests of the parties, through incapability of the person or party who has the property or by any act of bad faith. II Mulla, The Code of Civil Procedure (13th ed., 1965), p. 1537, commented on this subject as follows:

“The appointment of a receiver is in the discretion of the court. The power to appoint a receiver is not to be exercised as a matter of course or for the reason that it can do no harm to appoint one. A receiver should not be appointed in suppression of a bona fide possessor of the property in dispute unless there is some substantial ground for interference. The court has to consider whether special interference with the possession of the defendant is required, there being a well-founded fear that the property in question will be dissipated or that other irreparable mischief may be done unless the court give its protection. The mere fact that a plaintiff in his plaint makes violent and wholesale charges of waste is no ground for the appointment of a receiver.”

In case of partnership property the rule is that no receiver is to be appointed to take over the management of that property when the partnership is subsisting, because it is clear that such all, action will be contrary to the subsistence of the partnership; and it is tantamount to its dissolution which is not sought. But where the defendant partner in charge of the management commits an act of fraud, or gross misconduct of some kind, or willful denial of his partners’ rights, a receiver may be appointed. It is important here that there must be sufficient proof of any charge of such acts before the order of appointment is made.

I stated before that the learned Province Judge thought that the appointment of a receiver in this case was justified on the ground that applicant denied the rights of his co-partners. Unfortunately no reference was made in the judgment to the facts constituting the alleged denial, nor to whether they were proved. Going back to the record of the District Court we find that it contained nothing with respect to the said denial. Furthermore, in the pleadings in the suit between the parties, there is no denial of the rights of respondents as partners. As I mentioned above the dispute is about the position of the accounts. This is where I disagree with the learned Province Judge, that he relied on a matter of fact which has not been proved in the court of first instance, nor before him. So I think his decision cannot stand.

The learned Province Judge was influenced by what came in the sub mission of respondents’ advocate, viz, that respondents, on January 3, 1967, held a meeting and resolved the dismissal of applicant from the management of the Cinema-house. They wrote about this to him, and he replied, on January 10, 1967, telling them that there was no partnership between them and they should no longer communicate with him. This letter is, it seems, a provoked retaliation to that resolution, the legality of which is doubtful. Can the partners dismiss a partner from the management of the partnership that has been given to him by their written agreement? This is a serious issue, on which I have to restrain myself from giving an opinion, since it is not in litigation. So also the letter of applicant, which for the purposes of this litigation cannot be considered as a denial of the partners’ rights. Those rights are under consideration in the suit before the District Judge.

I come to the reasons given by the learned District Judge as justifying the appointment of the receiver. The learned Province Judge seems to agree with them. There is no doubt that the attitude of respondents was wrong in trying to take over or close the Cinema-house by the use of force. As the learned Province Judge described them, they tried to take the law into their own hands. On the other hand applicant was wise enough to seek the help of law. Does this state of affairs justify grant to respondents of their claim for the appointment of a receiver? I do not think it does.

A case of this class, where the appointment of a receiver is required to take over and manage a Cinema-house, and be vested with it, its buildings, equipment, furniture, staff and contracts with manufacturers or importers of films, is not a matter to be taken lightly or done hurriedly. The grounds, that must be special grounds, have to be distinctly stated and sufficiently proved. The court must be satisfied that it is necessary in all the circumstances that a receiver be appointed. Being partnership property, proved gross misconduct or the like has to be shown to have been committed by the defendant on sufficient proof of the facts constituting it.

As I have indicated above nothing of substance has been proved against applicant in this case, and it is not shown that it is necessary that a receiver be appointed.

For these reasons this revision has to be allowed and the orders of the courts below be set aside.

El Rayah El Amin C.J. January 16, 1968:—I agree.

Hassan Abdel Rahim J. January 16, 1968 :—I agree.