Case No.:

(HC-CS-25-1958)

Court:

The High Court

Issue No.:

1960

Principles

·  Partnership—Verbal agreement—Term that plaintiff would manage the business—In absence of a contractual term to tl effect one partner cannot, unilaterally terminate partnership-p--Plaintiff ejected by defendant—Entitled to damages for breach of conttact .Damages—Whether damages recoverable for loss of profits—Damages calculated in the form of salary—Actual amount contributed recoverable

(i) Once a partnership agreement has been entered into, the mere fact that one partner considers that the other is not contributing as much to the partnership as he himself is contributing does not, in the absence of a contractual term to that effect, entitle him unilaterally to terminate the partnership and to eject the other partner from the partnership business.
(ii) In calculating damages for breach of the contract of partnership no account will be taken of possible loss of profit if it is uncertain in the circum stances that the partnership would have made any profit. A managing partner is entitled to a salary, quite apart from any question of profit or loss, and if there is no agreement on this it may be calculated on the basis of a quantum meruit. He is also entitled to damages in the form of salary, and in respect of the actual amount contributed by him to the partnership.
 

Judgment

(HIGH COURT)

NABIL MACARIOUS v. IBRAHIM MOHAl HABIB

(HC-CS-25-1958)

Action

Advocates: Fawzi El Tom……… for plaintiff

                    Mansour Khalid…… for defendant

February 6, 1960. T. Cotran Acting I.: —On or about June 1957 the plaintiff and the defendant entered into a verbal partnership agreement. The agreement pro that each would contribute a capital of up to £S.2oo towards opening a sandwich shop and profits and losses would be divided rateably according to the capital advances of each member. The shop was opened on September 9. 1957. The parties made an account on September 31, 1957. These accounts were agreed to between the parties. On October 31, 1957, the defendant came to the shop and forcibly ejected the plaintiff without making an account. The defendant took the account books relating to the month of October.

I have no doubt in my niind that there was a term in this verbal partnership contract that the plaintiff would manage the business. The whole conduct of the defendant shows this clearly. Indeed defendant himself admitted in his evidence that he knew nothing about milk-bar management. He goes on to say that when he saw that he ‘as spending all the money he intended only to employ the plaintiff with a salary, not as a managing partner. In my opinion this statement is nonsense because it appears clear that plaintiff has spent some of his own money on purchases and equipment for the shop, in pursuance of the contract. The fact that defendant felt that the plaintiff was not contributing towards the joint venture as much he was does not entitle him unilaterally to regard plaintiff as not a partiner. Nor did this fact entitle him to eject plaintiff from the shop and take the account books, because if there is no term in the agree ment regarding expulsion, the partner cannot expel the other partner. “As there is no method,” said Lord Lindley in his famous book on Partnership at p. 698, “except a dissolution, by which a partner can retire against the will of his co-partners, so there is no method except a dissolution by which one partner can be got rid of against his own will “: Clarke v. Hurst, 6 H.L.C. 633.

It has now to be considered if the plaintiff was misappropriating the partnership funds. The plaintiff commenced to manage the shop on September 9,1957 On September 30, 1957, the plaintiff and the defendant sat down together to examine the accounts of the shop from September 9. 1957, to September 30, 1957. The accounts were, as one look at them would show, very poorly kept by the plaintiff. Defendant found that plaintiff had put on the debit side an amount of £S.9.400 which is an instalment on the refrigerator bought for the shop in plaintiff’s name. Defendant further found that the grocer and the butcher had not been paid, further that the rent of the shop was not paid and that the September accounts (admitted by plaintiff showed a profit of £S.34.o3om/ms which was not actually there.

In spite of that I am not prepared to hold that plaintiff misappropriated the proceeds. On the other hand the partner who manages the business must act extremely honourably and must keep his account books of expen- diture and profit very clear. Those books were not and I am not surprised that there was a complete breakdowi’i of confidence between the two partners. The answer to issue No. 3 is in the negative. The answer to issue No. 4,as has been explained, is also in the negative. The answer to issue No. 1 is in the affirmative with the proviso that this salary was not agreed between the parties even after plaintiff started work.

Now with regard to the accounts between the parties, in my opinion it would have been much better if, as soon as the action was lodged way hack in January 1958, the court had ordered an account to be taken between the parties. Now the shop has had many mishaps and it will be nearly impossible to go through all the fixtures and fittings and goods the plaintiff brought into the shop and value them. The court must itself go into the accounts of the parties and examine and see how much plaintiff spent on the shop and how much defendant is entitled to set off against plaintiff’s claim.

In the first place I accept all plaintiff’s alleged expenditure which i supported by vouchers, viz:

Exh.                          2 for                    Ls.12.000m/ms

Exh                           4 for                    Ls.147.1oom/ms

Exh                            5 for                    Ls. 31.520m/ms

Exh                      6&7 for                     Ls. 28.120m/ms

Exh                            8 for                     Ls.5.000m/ms

                                                                Ls.223.740m/ms

In addition to the above sum of £S.223.74om/ms I shall allow plaintiff for diverse expenses incurred in connection with shelves, benches, etc., the sum of £S.3o.25om/ms which is the assessment of a carpenter as is clear from Exh.D.6, thus making a total of:

LS.223.74om/ms

£S.3o.25om/ms

£S.253.99om/ms

It will be noted that this is a few pounds less than the claim in the particulars submitted by plaintiff’s advocate in Exh. 3.

The plaintiff has recei from defendant the following amounts in c ash on

September 9. 195/                £S.3o.000m/nis

IS ynç oorn/ms 31, 1

August 31, 1957                 Ls.30.500m/ms                  Exh. D.2

August 31,1957                   Ls.45.000m/ms                  Exh. D.3 (to pay 

                                                                      rent to shop but was unpaid

Septemper 9,1957                Ls.30.000m/ms                    Exh.D.4

                                              Ls.105.500m/ms

(all of  those document are signed by plantiff)

The court did not take into consideration in plaintiff’s favour two sums of money, viz.: £S.9.4oom/ms and £S.3.500m/ms being the refrigerator instalment and printing expenses, since these were added to the expenses of the September month when plaintiff and defendant made their accounts (receipts are produced but unmarked). The court does not consider the £S.46 paid by the defendant to plaintiff as part price of the refrigerator as a debt, because after all defendant took it when he ousted plaintiff from the shop. The position as on September 8, 1957 appears in short a follows:

Plantiff spent                                     Ls.235.990m/ms

 Plaintiff received in cash

from defendant                                   Ls.105.550m/ms

Amount actually paid                          Ls.184.440m/ms                          

On September 30, 1957. plaintiff and defendant sat together and made their accounts. They produced Exh. D.7 (expenditure) and D.8 (income) for September 1957. Both those documents have been signed and accepted by both parties. The court also accepts them. The income over expendi ture was £S.34.775m/ms The plaintiff has recouped himself for his wages from the loan of £S.23.865m/ms in Exh. D.7. I accept that £S.34.775m/ms were not paid, but I hold that defendant is only entitled to one-half of that, viz., £S.17.387m/ms. It follows that this sum will be deducted from the sum which plaintiff expended, viz., £S.17.387m/ms it follow that defendant is only entitled to one-half of that ,viz,Ls.17.387m/ms. It follows that this sum will be deducted from the sum which plaintiff expended, vis .,Ls148.440m/ms leaving a blance of:

£                                                     S.I48.4400m/ms

                                    -Ls. 17.387m/ms

                                    Ls.130.035m/ms  for plantiff

In addition to this, the plaintiff is entitled to some salary for the month of October before he was ousted and I assess this at £S.25 because in September defendant allowed him nearly that sum. It is also a sum which in any event I would have assessed on the quantum meruit rule.

The plaintiff, having been unlawfully and physically expelled is, in my opinion, entitled to damages for breach of contract. But what is the measure of these damages? The plaintiff claims the sum of £S.36o.ooom/ms. for loss of profit. He also claims £S.100 for loss of business (whatever that may mean). The plaintiff, however, has not told the court how he calcu lated his loss of profits. In the sort of business on which plaintiff and defendant embarked there might not be any profits at all. There is too much uncertainty to give plaintiffany damages under this head. But he is entitled as a managing partner who would, apart from any question of profit or loss, be etftled to a salary. The plaintiff said he remained wltbomt employment for five zponths. Before plaintiff joined defendant be was earning £S.20 per month working in two-places (Exh. p. rand p. 2). But I think I shall adopt the normal practice of giving plaintiff three months’ pay at the rate of £S.20 per month.

For these reasons judgment will be given in plaintiff’s favour for:

1-Ls.130.035m/ms actual amount contributed by him.

2-Ls.25.000m/ms salary for October 1957.

3-Ls.60.000m/ms damage for wrongful dismissal

   Ls.215.053m/ms    Total

with cost on this ratio.                                                   (Judgment for plaintiff)