Scottish Court of Session Decisions

John Kerr Orr and his brother Daniel Orr carried on business in partnership as distillers in Campbeltown and Jura, and as merchants in Glasgow. The business at Campbeltown was carried on under the name of “The Glenside Distillery Company;” that in Jura under the firm of “J. K. and D. Orr ;” and that in Glasgow under the firm of “John K. and Daniel Orr.” For many years the partnerships were carried on without any written contract. But on 24th September 1866 a contract was entered into in regard to the Glenside Distillery. By article six it was thus provided,—“In the event of the death of either of the partners during the currency of this contract, the trustees or representatives of such deceaser shall have the power and option of either allowing the capital of such deceaser to remain in the concern, and to become partners therein, subject to all the rights and liabilities of their author, or to withdraw from the concern. Either of the partners, or their trustees under their respective settlements, shall have the like power and option of nominating one of their sons to succeed him, or sons in succession, as a partner in the said concern, along with the survivor, and in that case the surviving partner shall be bound to receive such trustees or nominee as a partner, and the copartnery shall thereafter continue and endure

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under, and be regulated by, these presents for the remainder of the contract, and for such farther period as the partners may agree upon; said nominee being bound in that case to allow the share and interest of his predecessor to remain in the concern.” By article seven it was provided that the company should not be dissolved by the death of either of the partners; and by article eleven a power of alteration was reserved.

John Kerr Orr died on 4th October 1866, survived by a widow and two children. He left a trust-deed and settlement dated 21st September 1866, by which he conveyed to his wife, his brother Daniel Orr, and his son John Mackintosh Orr, his whole estates, heritable and moveable. By the third purpose he made the following declaration, “and in regard to the Glenside Distillery Company, in which I am a partner to the extent of two-third parts or shares, and the Jura distillery in which I am a partner to the extent of one-half, it is my wish that, on the death or second marriage of my said spouse, my son John Mackintosh Orr, whom failing, my son William Orr, shall have the option of succeeding me as a partner in said distilleries, and with that view I authorise my said trustees to sell my said shares and interests in the said distilleries to my said son John, whom failing to my said son William ;” “and until the death or second marriage of my said spouse I authorise my said trustees, if they should deem it expedient, to allow my capital to remain in the said Glenside Distillery Company and Jura Distillery, and to carry on the said business of distilling as at present, and to apply the profits, or such portion thereof as they may deem necessary, for the support of my said spouse, and the upbringing of my said children.”

Thomas Orr was manager of the Jura business at a salary of £80, and a creditor of it to the extent of £433, 7s. 9d.; and Dugald Campbell Macintyre was manager of the Glenside business at a salary of £100. By agreement dated 19th and 30th October 1867, entered into by John Kerr, Orr's trustees, Daniel Orr, D. C. Macintyre and Thomas Orr, it was agreed that Macintyre should become a partner of the Glenside and Jura firms, and Thomas Orr of the Jura firm. Each was to receive two-tenths of the profits, and to contribute to the capital of the firms, Macintyre £1500, and Thomas Orr the sum in which he was creditor of the firm. They were also to receive certain small commissions on the sales, according to the rates heretofore received by them. Mrs Orr and her son, with the concurrence of Macintyre, now sought to reduce this agreement. There were also various other conclusions not at present persisted in.

Solicitor-General and M'laren, for them, argued—The agreement of 1867 is ultra vires of all the parties thereto, and is reducible in so far as it supersedes or alters the contract of co-partnery of 1866, and substitutes for the two companies of the Glenside Distillery Company and J. K. and D. Orr, two new and different companies, composed of different partners, alters the risks of trade in respect of both concerns, defeats the right conferred by the trust-deed on John Mackintosh Orr and William Orr, the truster's sons, to acquire by purchase in succession the truster's share and interest in the stock and profits of both the Glenside Distillery Company and J. K. and D. Orr, and disposes of a part of the truster's shares and interests in the stock and profits of the Glenside Distillery Company, and in the stock and profits of J. K. and D. Orr respectively, by giving a part thereof to the assumed partners, all in contravention of the truster's deed of settlement, and in violation of the contract of co-partnery of 1866. The agreement is also reducible in so far as it authorises the payment of commission, or of an allowance for time and trouble to Messrs John K. and Daniel Orr of Glasgow, in respect that Daniel Orr, a partner of that firm, being a trustee, was personally disqualified from entering into a remunerative contract with the trust.

Watson and Black, for Daniel and Thomas Orr, replied—The pursuers are barred personali exceptions from insisting in the action. The agreement was entered into with the knowledge and consent of the whole beneficiaries under the trust-deed. It has been homologated by the pursuers. The acting of the trustees was not ultra vires. Under the powers given to them it was quite competent to assume new partners with small shares as here. It is often prudent to give a manager a small share in the business.