Scottish Court of Session Decisions

Dr John Trail, the pursuer of the present action, had for many years been in practice as a physician in Arbroath. In 1860 he entered into a contract of partnership with J. A. Dewar, M.D., the defender, which was to last for ten years. In 1869, however, this partnership was brought to an end by mutual consent, and it was arranged that a new partnership should be entered into in conjunction with a third party, Dr Anderson, this new arrangement to subsist for ten years from 1st May 1869, “hereby declaring, that notwithstanding the death of any of the said partners during the continuance of the said period, the said copartnership shall not come to an end, but shall be carried on by the surviving partners to the effect and subject to the provisions hereinafter written, until the same be dissolved in manner after mentioned: But it shall be in the power of any of the partners to put an end to the copartnership at the said 30th day of April 1879, or at the 30th day of April in any year thereafter, provided such partner shall give notice in writing to his copartners of his intention to do so six months previous to the date at which he wishes to withdraw from or to terminate the copartnership.” This contract provided for payment out of the profits of the business of an annuity to Dr Trail's brother, to whom the practice had at one time belonged, a fixed allowance to Dr Anderson, and “in payment to the said John Traill of an allowance at the rate of £500 per annum, and to the said James Alexander Dewar of an allowance commencing at the rate of £360 per annum for the first year of the copartnership, and increasing by £20 yearly thereafter until it reach the like slim of £500 per annum.” Very shortly after the execution of this contract it was found that sufficient profits were not likely to be drawn from the practice to pay the £500 to Dr Traill and £340 to Dr Dewar, and on the 14th October of the same year (1869) these two gentlemen, on the narrative of the contract, and without prejudice to it, but in supplement thereof, executed a memorandum of agreement whereby Dr Traill, in the event of the expected deficiency in the profits, guaranteed to Dr Dewar his allowance of £340, increasing by £20 per annum, notwithstanding that his own allowance of £500 should not be paid in full, provided that the obligation should extend no further than to give himself and Dr Dewar equal shares in the profits. Dr Dewar admitted in this process that the result of this agreement was that he received £200 more than he would have done under the contract of copartnery. The second head of this agreement was as follows:—“The said parties hereto agree and bind themselves respectively that on the termination of the fixed period of copartnership provided by the said contract, being ten years from 1st May Eighteen hundred and sixty-nine, neither of them shall enter into any new arrangements connected with the carrying on of their profession and business in Arbroath without the concurrence and consent of the other, and, unless otherwise agreed, each of the said parties hereto shall then be entitled to retain an equal interest of not less than one-third in the present business, subject to the deduction of two pounds per week, or one hundred and four pounds per annum, for the services of an assistant, in terms of article sixth of the said contract, in case of absence or inability to attend to duty.”

On 1st May 1879, in terms of written notice provided for in the contract, the partnership was brought to an end. No arrangement for a new partnership had been entered into, and a question arose between Drs Train and Dewar as to the effect of article 2 of the supplementary agreement just quoted, as the result of which Dr Train raised this action against Dr Dewar for declarator that upon a sound construction of the memorandum of agreement “the defender is bound to enter into a partnership with the pursuer … the said partnership to continue during the lifetime of the parties, and to be terminable by the death of either; and the terms and conditions of the said partnership being as specified in the said memorandum of agreement, and so far as not specified being to be found by our said Lords,” or otherwise for declarator that the defender was bound to enter into a partnership in such “usual and reasonable period” as the Court should determine. In the event of the defender not entering into any contract he concluded for £3000 in name of damages. At the time of raising the summons the pursuer was in his seventy-second year.

The defender stated that before the action was raised he offered to enter into a partnership for one year from May 1879, but that the offer was refused. He pleaded—“(2) The agreement does not constitute any obligation upon the defender to enter into a copartnership with the pursuer, and no termini habiles of a contract of copartnership are therein contained.”

The Lord Ordinary ( Adam) assoilzied the defender, adding this note to his interlocutor:—“… It is sufficiently clear that the parties intended, on the expiry of the existing contract, to carry on business in partnership. It will be observed, however, that nothing is provided as to the disposal of one-third share of the business in the event which has occurred of neither party desiring to have a third partner. But what is more material in the present question is, that there is no provision as to the duration of the partnership. In particular, it is not provided that it shall endure during the lifetime of the parties, and the Lord Ordinary can discover no data from which it is to be inferred that such was the agreement of parties. If the partnership is not to be for the lifetime of the parties the Lord Ordinary does not know what would be a usual and reasonable period’ for the duration of such a partnership. It was suggested that as the two previous partnerships in connection with this business had each been for a period of ten years, it ought to be inferred that this one was intended to be for a like period. But the Lord Ordinary cannot think that that would be a legitimate inference to draw. The Lord Ordinary is therefore of opinion that the supplementary agreement cannot be enforced against the defender to the effect of compelling him to enter into a new partnership with the pursuer, seeing that one of the essential terms of the partnership has not been fixed.

“The pursuer has an alternative conclusion for damages; but the Lord Ordinary thinks, in accordance with the principles laid down in the case of M'Arthur v. Lawson, 19th July 1877,

Page: 382↓

4 R. 1134, that the pursuer cannot recover damages.”

The pursuer reclaimed, and argued—The supplementary agreement was to bind the defender to enter into a new partnership for life or for a reasonable term. In any event, if he did not, the pursuer was entitled to damages— M'Arthur v. Lawson, July 19, 1877, 4 R. 1131; Walker v. Milne, June 10, 1823, 2 S. (n.e.) 338; and Jan. 29, 1825, 3 S. (n.e.) 333.

The Court continued the case for a week with a view to a settlement, when the defender repeated the offer made by him before the case came into Court, to hold that the partnership was renewed for one year, and that the pursuer was entitled to one-third of the net profits of that year.