Scottish Court of Session Decisions

The complainers, Mrs Goodall and others, in this suspension and interdict were the majority of the partners of the Denend Coal Company, and the respondents were Andrew Landale and Alexander Thomson, the remaining members of the company, together with Robert Frew, mining engineer, Glasgow, who was nominated arbiter in the contract of copartnership.

The company was a private partnership consisting of five members, who were all related to one another either directly or through marriage. The fifth article of the contract of copartnery was as follows—“Each of the said parties shall do his or her utmost endeavour to promote the interest of the foresaid joint trade, and for the more efficient conduct of said trade or business the partners shall appoint from time to time some qualified person, either of their own number or a stranger, to take the management thereof, to whom they shall allow from the concern suitable remuneration for his trouble, and who shall, if required, be obliged to find security.” &c. The eleventh article was as follows—“In all matters relating to the copartnership, whether during its subsistence or at and after its dissolution, and also in all matters relating to the meaning of these presents, where any question or dispute or difference of opinion shall arise between the partners or between any of them and the representatives of a deceasing bankrupt or insolvent partner, and which is not otherwise herein specially provided for, every such question, dispute, or difference shall be and is hereby referred to Robert Frew, mining engineer, Glasgow, whom failing,” &c.

‘A dispute arose with reference to the appointment of the manager, the three’ partners who formed the majority being desirous that the old manager should be superseded in favour of a near relative of their own. The two remaining partners resisted this, and took the matter before Mr Frew, the arbiter. The majority declined his jurisdiction, but Mr Frew decided that the matter was one falling within the reference. This note of suspension and interdict was then presented.

The complainers pleaded, inter alia—“(1) The appointment of a manager being a matter of ordinary administration, regarding which the partners cannot be held to have delegated their powers, and, separatim, being provided for in the contract, the same does not fall within the arbitration clause. (3) Upon a sound construction of the arbitration clause in the contract of copartnery, the question of the powers of a majority of the partners to appoint a manager is not a matter referred to the arbiter; and being therefore ultra fines compromissi, he has no jurisdiction, and should be interdicted from dealing with the question in any way.”

The respondents pleaded, inter alia—“(2) A dispute having arisen between the parties to the contract of copartnery, in matters relating to the meaning of the said contract and to the copartnership, the clause of reference has come into operation, and the reference to Mr Frew should be allowed to proceed.”

The Lord Ordinary on the Bills ( Adam) passed the note and granted interim interdict without caution.

The respondents reclaimed, and argued—This was a dispute arising between the partners, and therefore was within the arbitration clause. To hold otherwise would be to deprive the clause of most of its meaning.

The complainers argued—This was a matter affecting the internal management of the business — it was not a dispute between the partners in the sense of the arbitration clause. To hold that it was would be to make the arbiter the sole manager of the concern— Lauder v. Wingate, March 9, 1852, 14 D. 633.

At advising—