APPEAL COURT, HIGH COURT OF JUSTICIARY
|
Lord
Eassie
Lord
Wheatley
Lady
Paton
|
Misc 119/07
Misc 121/07
Misc 120/07
|
|
|
2008 HCJAC 44
OPINION OF THE COURT
delivered by LORD MACFADYENEASSIE
in the petitions
to the nobile
officium of the
High Court of Justiciary
by
(First) THOMAS WILLIAM BALMER,
(Second) ANNE BALMER, and
(Third) ALAN THOMAS BALMER
Petitioners;
against
HER MAJESTY'S ADVOCATE
Respondent.
|
Act: (First
Petitioner) Brodie; Levy & McRae, Glasgow
(Second Petitioner) Duguid Stacey, Q.C., AndersonBalfour; HBM Sayers, Glasgow
The Anderson Partnership.
(Third
Petitioner) Stacey DuguidAnderson Q.C.,
Balfour; HBM Sayers, Glasgow
Alt:
Bain Q.C., A.D., Gill; Crown Agent.; The Anderson Partnership.
February 200825
July 2008
Introduction
[1] Each of the
three petitioners, Thomas William Balmer, Anne Balmer and Alan Thomas Balmer,
has presented a petition to the nobile
officium of the High Court of Justiciary.
The three petitions are in similar terms and raise
the same issue relating to tthe competency
of an indictment brought by the respondent against "Rosepark Care Home also
known as Rosepark Nursing Home, a now dissolved firm". The petitions were heard together.
[2] The first and second petitioners are husband
and wife, and the third petitioner is their son. They formerly carried on business in
partnership under the firm name of Rosepark Care Home (or Rosepark Nursing Home). The firm formerly owned and operated a care
home ("the home") under that name at 261 New Edinburgh Road, Viewpark, Uddingston. The firm was dissolved, apparently by
agreement among the partners, on 28 February 2005.
It is hereinafter referred to, as the context requires, as "the firm" or
"the dissolved firm".
[3] It is alleged
by the respondent that on 31 January 2004 a fire occurred at the home, and
that as a result fourteen residents in the home died, four others were injured
and the remaining twenty two were evacuated.
The present indictment
[4] The
respondent has served on each of the petitioners an indictment in inter alia the following terms:
"ROSEPARK CARE HOME also known as
ROSEPARK NURSING HOME, a now dissolved firm, in respect of which Thomas William
Balmer ... Anne Balmer ... and Alan Thomas Balmer .....are the whole surviving
partners thereof, and which firm between the dates of 1 April 1996 and 28
February 2005 at 261 New Edinburgh Road, Viewpark, Uddingston, carried on
the business or undertaking of a residential care home; ...
you are indicted at the instance of
The Right Honourable ELISH ANGIOLINI, Queen's Counsel, Her Majesty's Advocate,
and the charges against you are that ...".
The indictment contains seventeen charges against the
firm.
[5] A second
accused has also been indicted, namely Balmer Care Homes Limited, and fourteen
separate charges are laid against that company in respect of the conduct of a
different care home. These petitions are
not concerned with the charges brought against Balmer Care Homes Limited.
[6] Each charge
libelled against the firm is a charge of contravention of a statutory
provision. All the charges against the
firm proceed on an averment that the firm was at the material time an employer
in terms of the Health and Safety at Work etc. Act 1974 ("the 1974 Act"). It is unnecessary to set out the terms of the
charges in detail. Charge 1 may be taken
as an example. It libels that between 1
April 1996 and 31 January 2004 at the home the dissolved firm did carry on the
business or undertaking of a residential care home registered to provide care
and nursing for up to 43 residents in the categories of frail elderly, elderly
with mild mental illness, terminally ill and young physically disabled, and
being an employer in terms of the 1974 Act, did fail to conduct its undertaking
in such a way as to ensure so far as was reasonably practicable that persons
not in its employment who might be affected thereby were not thereby exposed to
risks to their health and safety, and did fail to devise, institute, implement and
maintain an adequate and effective system or strategy for fire safety at the
home. There then follow averments giving
further specification of the alleged failures.
The narrative then sets out the occurrence of the fire on 31 January
2004, and the
consequent death and injury of named residents.
The charge concludes by stating that in these circumstances there was a
contravention of sections 3 and 33(1)(a) of the 1974 Act.
The previous indictment
[7] In order to
understand how matters have developed, it is necessary to note certain events
that preceded the service of the present indictment. On 9 December 2005 the petitioners appeared at Hamilton Sheriff Court to answer a petition at the instance
of the Procurator Fiscal which charged them with certain contraventions of the
1974 Act. The statutory provisions which
they were alleged to have contravened placed duties on employers. The petition narrated that they were at the
material times partners in the firm, and that they were employers in terms of
the 1974 Act.
[8] On or about 14
August 2006
an indictment was served on the petitioners charging them with certain
contraventions of the 1974 Act and related statutory provisions. Again, the statutory provisions which they
were alleged to have contravened placed duties on employers. The indictment contained averments that the
petitioners were at the material times partners in the firm and were employers
in terms of the 1974 Act. Further
indictments in the same terms were subsequently served.
[9] At a preliminary
hearing on 19 and 20 February 2007 Lord Hardie sustained pleas to the
relevancy of the indictment against the petitioners, and dismissed it. He did so on the ground that the employer of
those working at the home was at the material time the firm; that the firm was
a separate legal person from the partners; and that accordingly the petitioners
were not employers in terms of the 1974 Act.
[10] The respondent
appealed against Lord Hardie's decision, but at the hearing of the appeal on 27
June 2007
abandoned it.
The petitions
[11] Following the
abandonment of the appeal, the present indictment, summarised in paragraphs [4]
and [5] above, and relative citations were served on the petitioners. They each presented a petition to the nobile officium of this court. The remedies which they sought were (a)
declarator that the dissolved firm had not been competently indicted; (b)
dismissal of the purported indictment; (c) declarator that the petitioners were
not "accused" within the meaning of section 66 of the Criminal Procedure
(Scotland) Act 1995 ("the 1995 Act") and thus under no compulsion to attend
court in answer to the purported citations served on them; and, (d) in any
event, declarator that in the event that the dissolved firm was convicted, the
Crown might not recover from the petitioners any penalty imposed on the
dissolved firm.
[12] In her Answers
to the petitions, the respondent admitted that the only parties to the indictment
proceedings were herself and the accused, the accused being (1) the firm and
(2) Balmer Care Homes Limited. It was
averred that the Crown did not consider the petitioners to be parties to the
proceedings.
[13] The respondent
pleads that the petitions are incompetent.
The issues raised by that plea are not, however, readily separable from
those relating to the merits of the petitions.
At a procedural hearing on 25 September 2007 the petitions were
accordingly appointed to a conjoined full hearing on the whole issues therein. When the petitions came before the court for
the latter hearing, it was agreed among the parties and accepted by the court that,
notwithstanding the respondent's plea to competency, the petitioners would
address the court first.
[14] In the very
briefest outline, the petitioners' contention is that the firm was a legal
person which ceased to exist when it was dissolved on 28
February 2005,
and that it therefore could not thereafter be indicted. The present indictment is therefore
incompetent. The respondent's
contention, also in briefest outline, is that a partnership continues to exist
after dissolution for the limited purpose of winding up its affairs and
settling its outstanding liabilities; that the former partners continue to have
authority to act on the firm's behalf for that limited purpose; and that the
present indictment against the firm is such an outstanding liability. The present indictment is therefore
competent.
The Partnership Act
1890
[15] The issues
between the parties to the petitions turn on aspects of the law of
partnership. The law of partnership is
partially codified in the Partnership Act 1890 ("the 1890 Act"), and it is
convenient at this stage to set out for reference those provisions of it which
are relevant to the issues which will be discussed.
[16] Section 1(1)
of the 1890 Act deals with the definition of partnership, and provides:
"Partnership is the relation which
subsists between persons carrying on a business in common with a view of
profit."
[17] Section 4
deals with the meaning of firm.
Subsection (1) provides:
"Persons who have entered into
partnership with one another are for the purposes of this Act called collectively
a firm, and the name under which their business is carried on is called the
firm-name."
[18] Section 4(2)
provides:
"In Scotland a firm is a legal person distinct
from the partners of whom it is composed, but an individual partner may be
charged on a decree or diligence directed against the firm, and on payment of
the debts is
entitled to relief pro rata from the
firm and its other members."
[19] Section 5 deals
with the power of partners to bind the firm, and provides:
"Every partner is an agent of the
firm and his other partners for the purpose of the business of the partnership;
and the acts of every partner who does any act for carrying on in the usual way
business of the kind carried on by the firm of which he is a member bind the
firm and his partners, unless the partner so acting has in fact no authority to
act for the firm in the particular matter, and the person with whom he is
dealing either knows that he has no authority, or does not know or believe him
to be a partner."
[20] Section 38
deals with the continuing authority of partners for the purposes of winding
up. It provides inter alia as follows:
"After the dissolution of a
partnership the authority of each partner to bind the firm, and the other
rights and obligations of the partners, continue notwithstanding the
dissolution so far as may be necessary to wind up the affairs of the
partnership, and to complete transactions begun but unfinished at the time of
the dissolution, but not otherwise."
[21] Section 46
provides:
"The rules of equity and of common
law applicable to partnership shall continue in force except so far as they are
inconsistent with the express provisions of the this Act."
Submissions for the
petitioners
[22] The
submissions for the first petitioner were made on his behalf by Mr Brodie. Mrs Stacey for the second petitioner, and Mr
Duguid for the third petitioner, each adopted Mr Brodie's submissions without
qualification, elaboration or addition.
[23] At the outset
of his submissions, Mr Brodie summarised the topics which he would cover under
five headings:
(1) The Crown had
purported to indict the dissolved firm.
None of the former partners were was indicted.
(2) On dissolution of
a firm, the firm (and its separate legal persona) ceases to exist.
(3) If, contrary to
that submission, the firm had some continuing existence after dissolution, it
was for the limited purpose of winding up.
Liability to prosecution for crime does not fall within the scope of
winding up. The limited continued
existence for which the Crown contended therefore was of no avail as a basis
for indicting the dissolved firm.
(4) Thus, on either
view of the question of the dissolved firm's continued existence, there was no
basis for prosecution of the dissolved firm.
(5) In the
circumstances, recourse to the nobile
officium of the court was necessary to afford the petitioners a remedy, and
the petitions were therefore competent.
[24] Mr Brodie's first
topic required little, if any, elaboration.
Although the form of citation used by the respondent in serving the
indictment led to some apprehension on the petitioners' part that they were
being treated as if they were accused persons, it is evident from the form of
the indictment that that is not so.
Although it is narrated that the petitioners are the "whole surviving [sic] partners" of the dissolved firm,
they are not named as accused, and the charges are not laid against them. The matter is put beyond doubt by the terms
of the respondent's Answers referred to in paragraph [12] above. It was not suggested in argument before us
that the petitioners were indicted. The
respondent's submissions proceeded on the basis that the sole accused in
charges (1) to (17) is the dissolved firm.
[25] The major
proposition on which the petitioners relied, namely that on dissolution a firm
ceases to exist, and ceases to be a legal person, was elaborated upon in the
second topic of Mr Brodie's submissions.
He began with reference to sections 1 and 4 of the 1890 Act. In terms of section 1(1), the partnership is
the relationship which subsists between or among persons carrying on business
in common with a view of (or to) profit.
In terms of section 4(1), the firm is the collective term for the
partners as a body. In terms of section
4(2), the body of partners, so collectively described, is in Scots law given a
legal personality distinct from those of the individual partners. Mr Brodie thus sought to preserve, in his
submissions, the distinction that the term "partnership" laid emphasis on the
relationship of the partners inter se,
whereas the term "firm" laid emphasis on the collective body of partners which
has, in Scots law, a separate legal personality. Mr Brodie acknowledged that the
distinction was not uniformly maintained in ordinary usage, but relied on it
for the sake of clarity in his own submissions.
[26] Mr Brodie went
on to emphasise the contrast between sections 5 and 38 of the 1890 Act. Section 5 defines the power of a partner to
bind the firm and his partners. Section
38 defines the limited powers of the partners after dissolution of the
firm. If, contrary to his submissions,
the firm has a continued existence after dissolution, there would be no need,
he suggested, for section 38, because the partners' powers under section 5 to
bind the firm would continue to exist.
It was because the firm ceased to exist as a separate legal person on
dissolution that the specific provision in section 38 giving the partners of
the dissolved firm certain limited continuing powers was necessary.
[27] The language
of the 1890 Act, Mr Brodie pointed out, was the language of civil rights and
obligations. There was no use of
language appropriate to crime or criminal proceedings. That, he suggested, was scarcely surprising,
since partnership was a vehicle of mercantile usage. In the nineteenth century, it was not thought
that a partnership could be prosecuted as such (Clark on Partnership, Vol. 1, 591).
For an illuminating discussion of the relationship between the 1890 Act
and the antecedent common law, Mr Brodie referred to the opinion of Lord Reed
in Duncan v MFV Marigold PD145, 2006 SLT 975 at paragraphs 24 to 27.
[28] In making his
submissions on the effect of dissolution of a firm, Mr Brodie turned first to Inland Revenue v Graham's Trustees 1971 SC (HL) 1.
The issue in that case related to the valuation of a farm. That turned in part on estate duty
legislation and in part on whether, on the death of a partner, the surviving
partners were entitled to take up the firm's secure agricultural tenancy. Mr Brodie first cited the following
observations made (at page 4) by Lord Hunter in the Lands Valuation Appeal Court:
"Considerable argument was presented
to us on the question whether, after dissolution of a partnership by the death
of a partner, the firm has any continued existence. In the argument presented on behalf of the
respondents a good deal was made, in this connection, of passages from the
institutional writers and from textbooks, which were said to suggest that,
despite dissolution by the death of a partner, the firm as a legal persona continues to exist ... The matter depends largely on the particular
choice of language and, in a sense, the dissolved firm might be said to
continue in existence in such circumstances, although only for certain limited
purposes, in order that it may be wound up and the assets distributed in
accordance with the law. Possibly a more
accurate statement may be that the surviving partners of the firm have, in such
circumstances, the rights and powers necessary to enable them to wind up the
affairs of the dissolved firm and distribute its assets ... Such rights and powers may, in appropriate
cases, include the completion of depending contracts. In my opinion, the foregoing view of the law
accords with the terms of section 38 of the Partnership Act 1890 and avoids the
logical difficulty of asserting that the partnership continues in existence
after it has been dissolved by the death of a partner."
Reference was also made to Lord Fraser, p 11. Those observations were relevant, Mr Brodie submitted,
in the context of any dissolution, not only one resulting from the death of a
partner. In the House of Lords, Lord
Reid said (at page 19):
"There is no doubt that in Scotland a partnership or firm is and always
has been a legal persona distinct
from the partners ...".
Having rejected arguments based on the terms of the
particular contract of co-partnery (a) that there was agreement that the partnership
should continue notwithstanding the death of a partner, and (b) that the lease
was a contract with the "house", Lord Reid went on (at page 20) to say:
"So, in my opinion, it must be held
that this contract of co-partnership came to an end on the death of Mr
Graham. All that remained was to wind up
its affairs. It follows that thereafter
there was no tenant, because the farm had been let to the partnership and to no
one else."
His Lordship then considered section 38, and said (at page
21):
"In my view ... the surviving partners
have the right and duty to complete all unfinished operations necessary to
fulfil contracts of the firm which were still in force when the firm was
dissolved. Otherwise the position would
be intolerable. ... In my opinion, section 38 does not make the
surviving partners parties to the firm's contracts and so keep those contracts
alive. That would involve a radical
change in Scots law. But I see no difficulty
in holding that this section does require unfinished operations to be completed
under the conditions which would have applied if the contract had still
existed."
His Lordship added that the surviving partners were entitled
and bound to carry on the work of the farm at least to the end of the year
current at the date of death, but added (at page 22):
"In order to do this the surviving
partners had to occupy the farm. But
they would not thereby become tenants under any lease. The lease had gone, and they would be in
occupation merely for the purpose of winding up the firm's affairs, as required
by section 38."
Mr Brodie referred also to the speeches of Lord Guest at 23 to
25, and Lord Upjohn at 26 ("upon
the death of R. F. Graham the lease came to an end, because it was a lease to a
legal person who had ceased to exist") and 37.
[29] Mr Brodie then
referred to Dickson v The National Bank of Scotland Limited 1917
SC (HL) 50, per Lord Finlay LC at 52, to Duncan
v MFV Marigold per Lord Reed
at paragraphs 18, 30, 31 34 and 37 et seq., and to Lujo
Properties Limited v Green 1997
SLT 225 per Lord Penrose at 233L, 234A and J, 236G and 237F.
[30] From Graham's Trustees and those other cases
Mr Brodie drew five propositions, namely (1) that a firm has separate legal
personality; (2) that on dissolution of the firm that separate legal
personality ceases to exist; (3) that on dissolution, the affairs of the firm
require to be wound up by the partners; (4) that prior to dissolution the
partners' powers to bind the firm are to be found in section 5 of the 1890 Act;
and (5) that following dissolution those powers are continued by virtue of
section 38, but only in so far as is necessary to wind up the affairs of the
partnership.
[31] Mr Brodie
recognised that for the contrary view - that a dissolved firm had continuing
existence as a separate legal persona
- the respondent relied on passages in Clark
on Partnership and Bell's
Commentaries and on the case of Gordon
v Douglas, Heron & Co (1795)
3 Paton's App 428, and therefore turned his attention to those
authorities. In Clark on Partnership, Vol. 2, 672 the view is expressed that:
"When a partnership is brought to a
termination, it still continues to subsist for the purpose of winding up; and
until this has been accomplished, the partnership relation cannot be said to
have entirely ceased. In the absence of
special agreement to the contrary, the former partners have the right and power
of winding up. ...
But the partnership, and with it the
agency of the former partners to bind their fellows, at once ceases as to all
future contracts; it subsists only for the purposes of winding up."
That passage, Mr Brodie submitted, was concerned with the
continuation of the relationship between the partners for the limited purpose
of winding up. It did not vouch the
continued existence after dissolution of the firm as a separate persona.
A similar construction should be put upon the passage in Bell's Commentaries at 527 (the page
references given in this Opinion are to the 1990 reprint of the seventh
edition) where it was said that: "Partnership subsists after dissolution for
the purpose of winding up the concern".
In Gordon v Douglas, Heron & Co (which is cited
by Clark and by Bell)
the Lord Ordinary is recorded as having pronounced an interlocutor in the
following terms:
"Finds that every copartnery must,
from its nature, subsist after it has been dissolved, or the term for which it
was entered into expired, to the effect of winding up its affairs, although
there were no proviso in the contract constituting it for that purpose: Finds,
that the contract in question does, in the 15th Article, contain a
special proviso for that purpose, which has been followed out, by naming
persons as therein directed: ... On all,
and each of these grounds, repels the defender's objection to the title of the
pursuers to insist in this action."
The report indicates that on appeal in the House of Lords it
was ordered and adjudged that "the interlocutors be affirmed". Some doubt on that latter point is introduced
by the fact that in the Appeal Papers relating to the case there appears a
manuscript version of the order of the House of Lords which omits reference to
the interlocutors being affirmed. That
aside, Mr Brodie submitted, first, that the case was concerned only with title
to sue, and secondly, that the terms of the Lord Ordinary's second finding
rendered the more general observation in his first finding obiter. In any event, there
was actually no dissolution of Douglas, Heron & Co. That was evident from the report of the
related case of Douglas, Heron & Co v
Hair (1778) M 14605. In that report the terms of the resolution
passed by the partners were set out: "That, from and after that date, the
Company shall give over the business of banking in all its branches"; and a
committee was appointed for winding up of their affairs, with "ample powers". At page 14606 it is reported that the Court
were of opinion: "That the Company was not dissolved by the resolution August
1773, and that the propriety and necessity of the measure were sufficiently
ascertained by the situation of their affairs."
In all these circumstances, Mr
Brodie submitted, Gordon v Douglas, Heron & Co, despite its subsequent
citation, could not be treated as good authority for the proposition that a
firm continues to subsist as a separate legal persona after dissolution. Later
in his submissions Mr Brodie referred to Buchanan
v West of Scotland Malleable Iron Co (1855)
17 D 461. It contained in the opinion of
Lord Curriehill (at 474) a strong assertion of the continued subsistence
of the separate persona after
dissolution. His Lordship said:
"I am of opinion that, according to
the law of Scotland, a company, although dissolved in
any of the usual modes, subsists to the effect of winding up its affairs as a
separate person in law. ... The Company itself continues to be a separate
persona in law".
Mr Brodie pointed out, however, that that observation was obiter, because the resolution which the
company had passed expressly provided for its continued subsistence for the
purpose of winding up. It was, moreover,
a joint stock company rather than a simple partnership. The case thus did not support a general
proposition that the personality of a firm continues to subsist after
dissolution. Mr Brodie also referred to Grant v Chalmers (1771) M 14581, Paul
v Taylor (1826) 4 S
572 and Butchart v Dresser (1853) De G, M & G 542 per
Turner LJ, but submitted that they added no support for the respondent's
contention. In particular, Turner LJ's
observations must inevitably be regarded as referring only to the continuing powers
of the partners for the purpose of winding up, since no question of the
continuing subsistence of a separate persona
could arise in English law.
[32] Mr Brodie
submitted that, on the contrary, there were cases which demonstrated that in
the nineteenth century it was recognised that upon dissolution a firm ceased to
exist as a separate persona. He referred first to Snodgrass v Hair (1848) 8
D 390. In that case it was held that one
of the former partners of a dissolved firm had no power, after dissolution, to
grant a bill in name of the firm for an unconstituted debt alleged to be due by
the firm. Lord Medwyn said (at 397-398):
"After the dissolution of a company,
it is quite true that it subsists to a certain effect, and that the partners,
and more especially the partner who is appointed to wind up the concern, may
use the firm in gathering in the effects and discharging the obligations of the
company ... [His Lordship then set out a
number of examples, and continued.] Now,
all such acts fall under the character of acts in the necessary administrative
powers for winding up the concern. But I
think such powers go no further, and they do not extend to the effect of
constituting a debt by granting a bill for it, thus giving the creditor of the
dissolved company rights and privileges which he had not acquired during the subsistence of the company
... I can find no authority for saying
that the former partner of an expired or dissolved company has this power of
binding his copartners, by using the company firm after the company no longer exists" (emphases added).
In Campbell of
Shawfield v The Calder Iron Co 11
December 1805,
cited in Bell's Commentaries at 78,
it was held that an un-assignable mineral lease in favour of a partnership came
to an end when the partnership was dissolved through bankruptcy; the note in Bell puts the matter succinctly: "here the
company, the tenant, is gone". In Hoey v MacEwan and Auld (1867) 5 M 814, the pursuer was a clerk employed
by a firm on the basis of remuneration which included a share of profits. On dissolution of the firm by the death of a
partner, the contract was held to be at an end.
Lord President Inglis said (at 817):
"The only contracting party with Hoey
was the firm, and when it was dissolved by the death of MacEwan the contracting
party ceased to exist. ... This seems a purely personal contract, and
one that cannot exist after the death of the employer; or, what is the same
thing, the dissolution of the partnership by the death of one of the partners."
In Walker v McKnights (1886) 13 R 599 it was held
that the sequestration of the tenant firm brought an end to a lease which
excluded assignees. Lord President Inglis
said (at 602):
"... it is a fundamental rule in the
law of partnership that when a company is sequestrated it is thereby ipso facto dissolved; and if a company
which is a tenant is a dissolved company, it no longer exists, except for the
purpose of the partners who may be left winding up the business. ... There
is no persona to represent the tenant
at all."
In Collins v Young (1853) 15 D (HL) 35, which was
cited by Lord Hunter in Graham's Trustees
in support of his preferred view of the effect of dissolution, the following
observation of Lord Cockburn was quoted with approval by Lord Cranworth
LC:
"When a partner dies, a right to wind
up the partnership concerns is by law vested in the surviving partners."
In Muir v Collett (1862) 24 D 1118, following the
dissolution of a firm that had carried on business in Bombay, one of the partners, who was in Scotland, was sued for a debt of the firm
contracted in Scotland.
The defender pleaded "all parties not called". In argument the pursuers pointed out that,
after dissolution, "There was ... no company to call." Lord Justice Clerk Inglis acknowledged (at
1122) that "where there exists a separate persona
known as a company, with a separate estate, it would be in the highest
degree inequitable to proceed against a single individual". At 1124, his Lordship concluded:
"When a company has been dissolved,
the partners are put in the ordinary position of correi debendi. If you sue
one of them for a company debt, you are bound to call all the others if you
can. You are not bound to do so if it is
impossible."
That, Mr Brodie submitted, illustrated that on dissolution the
separate persona of the firm was
lost. In Nicoll v Reid (1877) 5 R
137 a firm was dissolved by agreement.
Thereafter, one of the partners died.
The surviving partner sued in his own name for a firm debt. The defender challenged his title to sue
"otherwise than in name of the firm (which still subsists for the purpose of
winding up)". That plea was repelled. It
was submitted that if the firm continued in existence, it would then be the
firm that undertook the winding up. Were
the Crown's argument correct, namely that the firm continued after dissolution, that would produce
the uncomfortable result of the continuance of the firm after all but one of
the partners had died.
[33] Mr Brodie then
turned to the third topic of his submissions.
If, contrary to his primary submission, a firm continues to have some
form of existence after dissolution, he submitted that that continued existence
(a) is for the purpose of winding up only, and (b) does not lay the dissolved
firm open to criminal prosecution for an offence allegedly committed by the
firm before dissolution.
[34] The limitation
of the partners' post-dissolution rights and obligations to winding up, and the
scope of what is understood by "winding up", are illustrated in a number of
authorities. Mr Brodie referred again to
Clark on Partnership at 672-673:
"When a partnership is brought to a
termination, it still continues to subsist for the purposes of winding up; and
until this has been accomplished, the partnership relation cannot be said to
have entirely ceased."
That passage, Mr Brodie submitted, was concerned with the
post-dissolution rights and obligations of the former partners. He did not accept that the "partnership
relation" continued; the post-dissolution rights and obligations of the
partners were not part of that relation, but were a legal consequence of the
cessation of that relation. If, however,
it was right to say that the partnership relation continued to subsist after
dissolution, it was clear that it did so only for the purposes of winding
up. In Bell's Commentaries the matter is put thus (at 533):
"When a partnership expires, whether
by death, or by lapse of time, or by bankruptcy, the partnership is considered
in one sense as determined, but in a sense also as continued, that is, continued
till all the affairs are settled. After
this no act can be effectually done, or contract entered into, in the name of
the firm as in partnership, but every act of administration which is necessary
for winding up the concern may effectually be done. See above, page 527."
In the passage from his opinion in Snodgrass v Hair quoted
in part in paragraph 23 above, Lord Medwyn said (at 397):
"... the partners, and more especially
the partner who is appointed to wind up the concern, may use the firm in gathering
in the effects and discharging the obligations of the company; he may receive
payment, and grant a discharge in name of the company; he may draw a bill upon
a debtor, and indorse it; nay, he may pay a debt due by the company funds in
his hands, and these funds may be the produce of such bills, or even the bills
themselves, provided always the debts paid be just debts; and he will be liable
to his partners if he act improperly, and admit debt as just against the
company which are not so. Now all such acts
fall under the character of acts in the necessary administrative powers for
winding up the concern. But I thinks
such powers go no further ...".
(See also Lord Cockburn at 399).
[35] The criminal
prosecution of the dissolved firm in respect of acts or omissions allegedly
committed before dissolution, and the defence of the dissolved firm against
such prosecution, does not, Mr Brodie submitted, fall within the scope of the
winding up of the firm's affairs. There
is no support in the decided cases for the inclusion of criminal prosecution in
such winding up. That is not surprising
in light of the nineteenth century view reflected in the passage from Clark on Partnership at 591 cited in
paragraph 27 above. It appeared that the
respondent, in arguing for the inclusion of criminal prosecution in the process
of winding up, sought to draw an analogy between civil and criminal
liabilities. That analogy was
ill-founded. Criminal liability was
substantively different from civil liability.
The common law has always been unwilling to regard criminal liability as
anything other than personal to the wrongdoer.
In Erskine's Institute IV, 4,103,
it is said that:
"... it is a received rule, Crimina morte extinguuntur; crimes are
extinguished by the death of the criminal."
In Keane v Adair 1941 JC 77 a person convicted on
summary complaint brought an appeal by stated case to the High Court of
Justiciary, but died before the appeal was heard. It was held that, as there was no passive
representation in crime, his executors could not be sisted as parties to the
appeal. Lord Justice General Normand
said (at 79):
"I take the view that there is no
basis whatever in our criminal law for passive representation or for the
transmission in any shape of a criminal proceeding against the executors of the
alleged criminal or offender. It is a
maxim which has been recognised by Erskine in his Institute that crimes do not
in any sense survive the death of the criminal: crimina morte extinguuntur; and I think that it is an unassailable
principle. ... The root of the matter is that crime is
personal to the individual criminal, and does not affect his representatives."
In 1997 it was made possible for the executor or other
representative of a deceased convicted person to institute or continue any
appeal that had been or could have been instituted by the deceased (1995 Act,
section 303A, as inserted by the Crime and Punishment (Scotland) Act 1997), but
Mr Brodie submitted that that limited statutory intervention demonstrated the
soundness of the underlying common law rule.
[36] In general
principle, Mr Brodie submitted, the criminal law rejects vicarious
responsibility. In Gair v Brewster 1916 SC
(J) 36 at 38, Lord Justice General Strathclyde said:
"I do not think anyone disputes that,
by the criminal law of Scotland, a man is not held guilty of a crime unless he
has committed that crime himself, and that the doctrine of vicarious
responsibility has no place in our criminal jurisprudence."
The same appears to be the case in England.
In Tesco Supermarkets Limited v
Natrass [1972] AC 153, Lord Morris of
Borth-y-Gest said:
"In general criminal liability only
results from personal fault. We do not
punish people in criminal courts for the misdeeds of others. The principle of respondeat superior is applicable in our civil courts, but not
generally in our criminal courts."
For criminal responsibility to be transferred from one person
to another, there requires to be very clear provision. The examples to be found of circumstances in
which the issue was considered are all in cases of one legal person being
succeeded by another. In Higson v Aberdeen City Council 1999 SCCR 708, a case dealing with the
transfer of functions between a local authority and its successor, the court
declined to hold that the statutory provisions effected transfer to the
successor authority of criminal responsibility for the actions of the
predecessor authority. Lord Prosser said
(at 715C and E):
"One would expect civil rights,
obligations and liabilities to be transferred in some way, rather than be
terminated by the extinction of the former regional councils. But we are not persuaded that the very
special case of criminal liability involves a similar expectation that some new
body will stand in the shoes of the old body, inheriting its guilt.
...
[We] cannot find in [the statutory provisions] any sufficient indication
of either a direct intention to impose criminal responsibilities on new
authorities for criminal conduct on the part of their predecessors, or the
consciousness that such a responsibility might result from the provisions
actually expressed."
In British Airways
Board v Taylor [1976] 1 WLR
13 at 20 Viscount Dilhorne said:
"[Paragraph 2 of the Air Corporation
(Dissolution) Order 1973] provides for the transfer of 'all property, rights
and liabilities' of BOAC to the British Airways Board. That paragraph does not extend to criminal
liabilities".
In R v Pennine NHS Trust [2004] 1 All ER 1324
at paragraph 22 Tuckey LJ said:
"Logically the first question is
whether [the legislation under consideration] gives the Secretary of State
power to transfer criminal liability from an old to a new trust. In considering this question one is bound to
start by thinking that it is unlikely that this was intended. The criminal law renders the offender liable
to a penalty. What purpose would be
achieved by making someone else liable as if they were the offender? ... We
do not say that it is impossible to transfer criminal liability but our view is
that if that is the intention of the legislature it should say so clearly. This legislation does not."
These cases illustrated the general approach that, even where
statutory provision is made for the succession of one body to the liabilities
of another, such provision is not lightly to be interpreted as covering
criminal liability. Even if, contrary to
his submission, criminal liability could be equated with civil liability, that
did not, Mr Brodie submitted, carry the respondent to the point of being
entitled to indict the dissolved firm, since the liability had not been
"constituted" against the firm prior to its dissolution.
[37] Mr Brodie
recognised that, if on dissolution a firm ceased to exist as a separate person,
and criminal liability could not be regarded as part of the winding up of a
dissolved firm, the result would be that a firm facing the prospect of
prosecution could be dissolved, and would thus avoid criminal liability. He submitted, however, that that was not as serious
a consequence as it might at first seem.
If the prospective prosecution was in respect of a common law crime and
was well founded, the doctrine of identification meant that an individual
natural person or persons must also have committed the crime (Transco plc v H. M. Advocate 2004 JC 29).
Dissolution of the firm would not allow that person or persons to escape
prosecution. In the case of statutory
offences, there might be express statutory provision allowing individuals to be
held criminally responsible, which responsibility would not be avoided by the
dissolution of the firm. An example of
that situation was to be found in section 36(1) of the 1974 Act.
[38] Turning to his
fourth topic, Mr Brodie submitted that, whether he was right in his primary
contention that on dissolution the firm ceased to exist as a separate legal persona or in his alternative contention
that, if the persona subsisted after
dissolution, it did so only for the purpose of winding up, the consequence was
that the dissolved firm could not be made the subject of criminal prosecution.
[39] Mr Brodie
submitted that statute required that a copy of an indictment be served on the
accused, and that, if that requirement were not obtempered, the whole
proceedings were incompetent (McAllister v
H. M. Advocate 1985 SLT 399). The relevant current statutory provision was
section 66(4) of the 1995 Act. If the
firm, after dissolution, no longer existed as a separate legal person, there
was no accused, and that requirement accordingly could not be complied
with. Equally, if the firm subsisted only
for the limited purpose of winding up, that did not include criminal
prosecution, and again the statutory requirement could not be complied
with. Citation of the former partners
without calling them as accused, the procedure that had been adopted by the
respondent, did not comply with section 66(4).
Section 70(5) of the 1995 Act, which provided for proceedings in absence
against a body corporate was of no assistance to the respondent. A partnership was not a body corporate. Douglas v Phoenix Motors 1970 SLT (Sh Ct) 57, which held otherwise, was
wrongly decided. The point was
illustrated by section 141(2)(b) of the 1995 Act which, in the context of
summary proceedings, made provision for "a partnership, association or body
corporate". Many other statutory
examples of partnerships being treated separately from bodies corporate, thus
demonstrating that the latter did not include the former, could be given.
[40] Finally, Mr
Brodie turned to his fifth topic, the competency of the petitions to the nobile officium. `The accused, in respect of charges 1
to 17 of the indictment, was the dissolved firm. The petitioners, although named in the
narrative of the indictment as the former partners of the firm, were not
indicted as such. They were thus not parties
to the indictment proceedings. That was
expressly the Crown position. That being
so, the petitioners were not entitled to present a preliminary plea to the
competency of the indictment against the dissolved firm. That was the effect of sections 72(3) and
79(1) of the 1995 Act (BBC Petitioners
2000 SCCR 533, as noted by Lord Macfadyen at paragraph 10, page 543F-G). Nevertheless, the petitioners had a very real
interest in opposing proceedings against the dissolved firm which they regarded
as incompetent. If the prosecution of
the dissolved firm proceeded to conviction and sentence, there was a real risk
that any fine imposed on the dissolved firm would be enforceable against
them. The petitioners had no other
remedy by which to protect their interest.
Recourse to the nobile officium was
therefore competent (Express Newspapers plc, Petitioners 1999
JC 176 at 178-179; La Torre, Petitioner 2006
SCCR 671 at paragraphs 4 and 5).
The respondent's
submissions
[41] At the outset
of her submissions the Advocate depute indicated that she would present them in
four chapters. The first would set out
the background of the prosecution, and explain why it was in the form it
was. Secondly, she would make reference
to the statutory framework in which the issues raised by the petitions required
to be considered. Thirdly, she would
address the competency of the indictment.
Lastly, she would address the competency of the petitions and the remedies
sought by the petitioners. Reverting to
the third chapter, two alternative bases for the contention that the indictment
was competent would be advanced. The
primary contention was that notwithstanding the dissolution of the firm, it
continued and continues as a separate persona
for certain purposes. After
dissolution, the rights and obligations of the partners continue so far as
necessary for the purpose of winding up the affairs of the firm. As part of the winding up, the partners could
be involved in defending criminal proceedings in respect of an offence
committed by the firm before dissolution.
The alternative contention was that, if the firm was wholly extinguished
on dissolution, that did not reflect practical reality. Dissolution does not discharge pre-existing
liabilities of the firm. The dissolution
of the firm could not be equated with the death of a natural person. The continued rights and obligations of the
partners after dissolution (section 38 of the 1890 Act) meant that, criminal
liability having been incurred before dissolution, it was proper to indict the
dissolved firm. The only way to do so
was to cite the former partners in a representative capacity, for the purpose
of completing that aspect of the winding up of the affairs of the firm. Given the dissolution of the firm, the
process of resolving the criminal liability for the pre-dissolution offences
could not be achieved in any other way.
That did not involve any transfer of criminal liability. The dissolved firm and the former partners
were not prejudiced in any way.
[42] In explaining
the background, the Advocate depute outlined the conduct of the business of
Rosepark Care Home by the firm of which the petitioners were all latterly
partners; the occurrence of the fire on 31 January 2004 and its consequences;
the transfer of the business on 28 February 2005 to a limited company, Rosepark
Care Home Limited, of which the petitioners were directors; the dissolution of
the firm on 28 February 2005; and the conduct of the same business from the
same premises with the same staff and the same residents from 1 March 2005
onwards.
[43] In terms of
the present indictment, the firm faced charges under the 1974 Act and various
other legislative provisions. All of the
provisions founded upon place imposed duties on employers. Reference was made to sections 2 and 3, and
33(1) of the 1974 Act. By virtue of
Schedule 1 to the Interpretation Act 1978 the reference in those provisions to
a "person" included reference to a non-natural person, including a Scottish
partnership. It was not now disputed
that at the material time it was the firm that was the "person" who was the
"employer" of those employed at the home, and that the firm was therefore the
person who had allegedly committed the offences libelled (John Gray & Co v Mackenna
(1899) 2 Adam 691 at 697).
[44] The Advocate
depute referred to section 36(1) of the 1974 Act which provides:
"Where the commission by any person
of an offence under any of the relevant statutory provisions is due to the act
or default of some other person, that other person shall be guilty of the
offence, and a person may be charged with and convicted of the offence by
virtue of this subsection whether or not proceedings are taken against the
first-mentioned person."
That provision, she submitted, required the Crown to identify
and libel particular acts or omissions on the part of the "other person" which
led to the commission of the offence libelled.
To proceed under that provision against the petitioners would require
that degree of specification. The Advocate
depute gave us to understand that, although there was sufficient evidence of
corporate failings to justify proceedings against the dissolved firm, there was
difficulty in identifying sufficient evidence to proceed against any individual
petitioner under section 36(1). Section
37(1), which permits proceedings against any "director, manager, secretary or
other similar officer of a body corporate" where an offence was committed "with
the consent or connivance of" or was "attributable to any neglect on the part
of" such a person, was of no relevance for present purposes, because it was
accepted that a Scottish partnership was not a body corporate.
[45] Turning to the
1890 Act, the Advocate depute emphasised that it was only a partial
codification, and that by virtue of section 46 the antecedent common law
remained in force except in so far as it was inconsistent with the provisions
of the Act. Both at common law and under
section 4(2) of the 1890 Act, a Scottish firm is a legal person distinct from
its partners. The Advocate depute did
not accept the distinction which Mr Brodie sought to draw between the terms
"partnership" and "firm". Their meaning,
she submitted, was the same. The
separate persona of a firm was
qualified; a partner might be charged on a decree or diligence against the firm
and had a right of relief against the firm and the other partners. The separate persona of a firm was therefore something different from that of a
limited company. In England, since each partner is the employer,
a partner would be liable for breach of the provisions of the 1974 Act libelled
in the present case (Drake on Partnership,
108), so the situation that arises in the present case would not arise under
English law. The Advocate depute went on
to refer to sections 5 and 9 of the 1890 Act.
Decree against the firm is sufficient to warrant diligence against a
partner (Stair Memorial Encyclopaedia,
Vol. 8, paragraph 128; Ewing v McClelland (1860) 22 D 1347). Reference was also made to the provisions
regulating dissolution in sections 32 and 33.
[46] The Advocate
depute pointed out that, if the petitioners' primary submission were correct,
any criminal proceedings against a partnership could be defeated by dissolution
of the firm before or during the prosecution.
By virtue of section 38, however, following dissolution, certain rights
and obligations of the partners remain.
The language of section 38 supports the contention that the firm
continues to subsist after dissolution.
What continues after dissolution includes "the authority of each partner
to bind the firm" (emphasis added). That language is inconsistent with there
being no subsisting firm after dissolution.
In Graham's Trustees, Lord
Reid said (at 20-21) that section 38 should, if possible, be construed so as to
reach a reasonable result. The section
was designed to provide a solution to a practical problem. There was a real risk that an overly strict
or conceptually pure construction would fail to achieve that result. As Lord Penrose suggested in Lujo Properties Ltd v Green at 236H, the rationalisation of
the continuing rights and obligations is of less significance than the
fundamental recognition of the fact that they continue.
[47] The Advocate
depute reiterated that the 1890 Act is only a partial codification (Joint Report
of the Law Commission and the Scottish Law Commission on Partnership Law,
paragraph 13.33; Prime & Scanlan, The
Law of Partnership, page 1; Miller, The
Law of Partnership in Scotland, second edition, pages 1-2). Since the common law continued to play a
part, therefore, it was relevant to note an observation made by Lord Nimmo
Smith in paragraph 2 of his opinion in Lord
Advocate's Reference No. 1 of 2001 2002 SCCR 435 at 461:
"Ours is ... a 'live system of law' ...,
and it lies within the power of this court, as custodians of the common law, to
review it, and to correct the way in which it is stated, when it is necessary
to do so in order to take account of developments in the law and to meet the
needs of the community."
Reference was also made to Transco plc v H. M. Advocate 2004 SCCR 1, per Lord Hamilton at paragraphs 46 and 56.
[48] The Advocate
depute submitted that whether a firm could be prosecuted was regulated by the
common law. Sections 70 (proceedings
against bodies corporate) and 143 (summary prosecution of inter alia partnerships) of the 1995 Act were merely
procedural. At common law, "where a firm
or company may be guilty of ... an offence, it is sufficient to cite the firm or
company as the offender" (City and
Suburban Dairies v Mackenna 1918
JC 105 at 110). Reference was also made
to Mackenzie, The Laws and Customs of
Scotland in Matters Criminal (1678), pages 19 to 20, and Miles v Findlay & Co
(1830) 9 S 19. In LindlayLindley, The Partnership Act 1890, (1891) at page
25 the view was expressed that "A firm can neither prosecute nor be prosecuted socio nomine in a criminal or penal
action. The proceedings must be by or
against the individual partners". The
same view was repeated in LindlayLindley, Law
of Partnership, sixth edition, in the "Notes on Scotch Law" by J. Campbell
Lorimer at 780. Reference was made to Lord Advocate v Thomson and Hutcheson 1897 SLT 217 and (on appeal) 315, which
concerned the liability of partners in civil proceedings for recovery of
penalties under the Stamp Acts. What
these references bore out was that the source of the power to prosecute a
non-natural person was to be found in the common law, and that it was wrong to
suggest that around the time of the 1890 Act the question of criminal liability
of a partnership was not in contemplation.
[49] Turning to the
issue of the effect of dissolution on a firm, the Advocate depute submitted
that the correct view was that the firm as a separate entity continues in
existence with its own distinct rights and obligations despite
dissolution. It was not just the case
that what survived was the relationship between the surviving partners to
regulate the winding-up of the firm. In
support of that proposition, she placed considerable weight on Dickson v National Bank of Scotland 1917 SC (HL) 50. She referred in particular to the following
passage in the speech of Lord Finlay LC:
"Section 38 of the Partnership Act
1890 really embodied the old law relating to partnership derived originally
from the Roman law, and it is this - that for certain purposes a partnership
continues notwithstanding dissolution."
That observation was neither overruled by nor disapproved in Graham's Trustees. Numerous similar formulations of the position
were to be found. In Bell's Commentaries at 527 it is said that:
"Partnership subsists after
dissolution for the purpose of winding up the concern.
1.
The partnership is dissolved in so far as the power of contracting new
debts is concerned; but continued to the effect of levying the debts, paying
the engagements of the company, and calling on the partners to answer the
demands";
and at page 528 that:
"The question of chief importance
relative to the Dissolution of Partnership arises with third parties; for there
may be a complete dissolution as between the partners, and yet they may all
continue responsible to the public."
At page 533, under the heading "Powers of Partners after
Dissolution", Bell states:
"When a partnership expires, whether
by death, or by lapse of time, or by bankruptcy, the partnership is considered
in one sense as determined, but in a sense also as continued, that is,
continued till all the affairs are settled.
After this no act can be effectually done, or contract entered into, in
the name of the firm as in partnership, but every act of administration which
is necessary for winding up the concern may effectually be done".
And at p.535 it is stated:-
"... until the final settlement of the
partnership affairs and payment of joint debts and distribution of joint
property it cannot be said that the partnership is determined."
[50] The
proposition that partnership continues after dissolution was supported by Gordon v Douglas, Heron & Co. The
decision was referred to in the Appendix by Lorimer to the 6th
Edition of Lindlay Lindley at page 805. Lorimer also referred to Bell's Commentaries. In his Opinion in Duncan v MFV Marigold,
Lord Reed appeared to detect in Inland
Revenue v Graham's Trustees a
different approach, but Dickson v National Bank of Scotland was not dis-approved. Those cases were referred to in Lujo Properties Ltd v Green 1997 SLT 225 and at page 236
Lord Penrose said:
"...the rationalisation of the
continuing rights and obligations appears to me to be of much less significance
than the fundamental recognition of the fact that those rights and obligations
continue".
[51] Turning to Inland Revenue v Graham's Trustees, the Advocate depute stressed that the decision
in that case did not overrule or question what had been said in Dickson v National Bank of Scotland.. Indeed there was no real judicial discussion
of Dickson. The case was furthermore concerned with a
lease which did not vest in the surviving partners. A new contract of lease would be required,
which would not fall within
s.section 38 of the
1890 Act. It was thus distinguishable
from Dickson since it was essentially about leases, and it might be
possible to say that for the purposes of a lease the persona had ceased to exist. That
was the approach of the Court, reflected in the speeches of Lord Guest, p.page 24 and Lord Upjohn,
p.page 27. The Advocate depute also referred to the
Opinion of the Lord Justice Clerk in Dickson
v National Bank of Scotland 1916 SC 589, which had received
endorsement in the speeches in the House of Lords. While at page 594 the Lord Justice Clerk
observed of section 38 of the 1890 Act that it was "noticeable that the statute
does not say that the partnership is to continue" he later, at page 595, stated
the effect of the statute to be that the partners "still remained after
dissolution invested with an authority entitling them to use the firm's
signature and that the partnership continued for anything that was required to
wind up its affairs or to complete any transaction begun and not then
finished". Reference was also made to Snodgrass v Hair; Goodwin v Industrial and
General Trust (1890) 18R 193; Butchart v Dresser; and to the discussion of section 38 of the Act in Lindley
8th Edition (1912) at pages 263-4.
[52] The Advocate
depute submitted that there was accordingly authority for a partnership
continuing after dissolution for the purpose of winding up its affairs. This meant that the separate juristic or
legal person of the partnership continued to exist for those purposes. Further, s.section 38 of the
1890 Act provided for the partners' having continued authority "to bind the
firm". For the term "the firm" one had
to refer back to s.section 1(1) and s.section 4(1),
which defined "the firm" in terms of separate personality. The logic was that the persona continued to exist for some purposes, and logic therefore
required that it continued to exist for the purposes of dealing with a criminal prosecution
arising out of what had happened prior to dissolution. In the same way as that a dissolution did
not remove or destroy existing civil liabilities, dissolution should not remove
or destroy existing criminal liabilities. During winding up the partners are were able to defend
civil proceedings brought against them.
They would be able to defend criminal proceedings against them. It was arguably more important that such
pre-existing criminal responsibility should be accounted for following
dissolution of the firm.
[53] The Advocate
depute went on to submit that the dissolution of a partnership was not to be
equiparated with the death of a natural person.
The principle is was that criminal liability is personal to
the individual and does not survive his death:
Keane v Adair 1941 JC
77. There were practical reasons for not
applying the same rules to the dissolution of a partnership. Erskine iv 4,103 explained the basis of the
rule crimina morte extinguuntur as
being that a dead person can make no defence and was beyond mortal punishment
and that to punish his innocent children or heirs would be unjust and contrary
to the principle culpa tenet suos
auctores. Reference was also made
to Kaimes Historical Tracts, 4th
Edition (1792) at page 331. None of
those reasons applied in the case of the dissolution of a partnership. By contrast, said the Advocate depute, dissolution of
the firm did not destroy any source of defence evidence; the partners of the dissolved firm are were acquainted with
the history of matters and the same means of justification as they would have
had, had the firm not been dissolved. The
only punishment which could be imposed on a partnership was a fine and a fine
imposed on a subsisting partnership would ultimately be recoverable from the
partners. The equities applying against transferring
criminal responsibility to children or heirs were not relevant in considering
whether former partners should remain liable for criminal acts.
[54] Moreover the
argument for the petitioners implied that the prosecution of a partnership
could be brought to a halt at any moment by a decision of the partners to
dissolve the partnership. While it might
be contended that a decision to dissolve taken for the purpose of the frustrating
the prosecution
might amount to an attempt to pervert the course of justice, that was not a
satisfactory result. Policy issues
favoured developing the common law theory of a continuing legal personality to
enable the prosecution of a dissolved partnership. In the case of a company incorporated under
the Companies Acts, a resolution to wind up the company did not effect
immediate loss of separate justice juristic personality, which only occurred
once its affairs were finally wound up.
Moreover, the Lord Advocate could oppose the winding up of an
incorporated company and, if need be, seek in its restoration to the Register
of Companies for the purpose of prosecuting it.
Reference was made to In re
Townreach [1995] Ch. 28.
[55] The Advocate
depute also advanced what she described as an alternative limb to this chapter
of her argument. She submitted that even
if it were the case that the separate legal persona
came to an end on dissolution, the fact of dissolution could not affect the
liabilities of the firm. However one
might rationalise the post-dissolution situation, the civil liabilities
incurred by the partnership remained and could be enforced against the former
partners. Where criminal liability had
been incurred prior to dissolution, that liability ought similarly to
continue. So, in terms of section 38 of
the Act, the partners continued to be responsible for that criminal
liability. That an indictment had not
been served, or criminal liability established, prior to dissolution could should not be of
significance. The indictment had been
framed to avoid transfer of criminal liability to the partners as
individuals. The former firm was
indicted and an appropriate way to convene the former firm was to convene the
former partners in the indictment. The Advocate
depute then referred to Plotzker v Lucas 1907 SC 315 per the Lord President, 318; McNaught
v Milligan (1885) 13R 366 per Lord Sands, 369 and Neilson v Wilson (1890) 17R 608.
The Advocate depute turned next to Aitkenhead
and Another v Fraser 2006
SCCR 411, which was concerned with the proper method of convening trustees
in a summary prosecution. She pointed
out that in paragraph 9 of its Opinion the Court indicated that the method of
convening a party in civil proceedings may be relevant in criminal proceedings
and, having further examined the decision, she suggested that on the approach
in that case it might be open to the Crown to indict the former partners as
such. She then put up to the Court a
manuscript draft of a possible version of the opening terms of such an
indictment.
[56] In regard to
the competency of the petitions, the Advocate depute stated that the Crown
accepted that the petitioners had an interest and had raised an important
matter. If the petitioners' argument on
the merits were sound, the Crown did not challenge the competency of the
petitions, though it would not be appropriate to grant all sub-heads of the
prayer.
Response for
petitioners
[57] In his
response to what had been said by the Advocate depute, Mr Brodie stressed
at the outset that his clients' client's petition addressed only the
competency of this indictment. He was not currently in a position to
consider, nor was it appropriate to consider, possible alternative draft forms
of indictment. The possibility of there
being alternative forms of indictment in the case of a dissolved partnership
was not one which he sought to refute.
However it was for the Crown to frame the indictment and it was not in
the petitioners' interest to set up an alternative in these proceedings.
[58] Turning to the
substance of matters, counsel observed that the way in which various phrases
had been used in the authorities sometimes obscured the underlying principles
of law. Noting that - as pointed out by
Lord Reed in Duncan v MFV Marigold, para.26 - the 1890 Act was
not drafted using conventional techniques of parliamentary draftsmanship, Mr Brodie
pointed out that section 1 of the Act defined "partnership" as the
"relationship" between persons carrying on business with the view of
profit. Section 4(1) then used the word
"firm" as a collective term for those in such a relationship; and section 4(2) told one that in Scotland the relationship constituted a
juristic person. On dissolution of the
relationship a wholly different situation arose since there was no longer the
relationship of persons carrying on business.
Accordingly the purpose of section 38 was to allow some of the powers of
the partners to continue so that the affairs can be wound up and third parties
enabled to know that they can get a good discharge. It was however neither necessary nor
appropriate to read section 38 as meaning that the juristic personality
continued. The phrase "to bind the firm"
in section 38 simply meant that, as part of the winding up, a single partner
can bind the collectivity.
[59] For the
reasons given in the course of his principal submission, Mr Brodie
reiterated that Gordon v Douglas, Heron & Co was not authority for
the proposition that after dissolution the separate juristic persona of the partnership continued in
existence. In fact, in that case there
had been no dissolution of the partnership.
Furthermore to say that following dissolution a partnership continued
for the purposes of winding up did not mean, and was not to be equiparated
with, continuance of the juristic personality.
Clark on Partnership, page
551, contained a clear statement to contrary effect. Dickson
v National Bank of Scotland was not
about persona but about the scope of
the partner's authority after dissolution and whether uplifting the funds
consigned in that case was truly part of the winding up of the
partnership. In that respect, reference should be made to the Opinion of the Lord
Justice Clerk (1916 AC 589, 584) with which their Lordships generally concurred. Because Dickson
v National Bank of Scotland was not
about persona it did not need to be
discussed or distinguished in any way in Graham's
Trustees.
[60] Insofar as it is was said that
partnership continues after dissolution for limited purposes, those limited
purposes are the winding up of the affairs of the partnership or the completion
of transactions already begun. Winding
up is
was the
gathering in of assets and the paying of existing liabilities. Criminal prosecution was not a part of
winding up. Criminal responsibility did
not sit happily with civil liabilities and their treatment. But in any event, drawing on the analogy in
civil proceedings, a debt had to be constituted against all the former
partners. The alternative argument which
the Advocate depute had advanced implied the necessity of calling the partners
in their representative capacity. That is was something which the
indictment under consideration certainly did not do.
[61] Finally, if
there were practical problems about prosecuting in cases where a partnership
had been dissolved, the solution was one for the legislature. Mr Brodie observed that it appeared that, in so far as a statute might
provide for the prosecution of a partnership in England, it was accepted that a
dissolved partnership could not be prosecuted - see R v Wakefield [2004]
EWCA Crim 2278, para.14. The
legislation involved in that case - the Trademarks Act 1994 - made specific
provision for the criminal responsibility of partners additionally or
alternatively to the responsibility of the partnership. In the present case there was available to
the Crown section 36 of the Health and Safety at Work Act 1974 which
provided for individual criminal responsibility additional to or independent of
the criminal responsibility of the employer.
Moreover, health and safety legislation had been around for a long
time. One was accordingly not faced with
recent radical societal change.
Ultimately if the law were unsatisfactory the matter was something which
should be addressed by Parliament.
Discussion
[62] As we noted in
the opening paragraphs of this Opinion, under the terms of the indictment with
which these three petitions are concerned, the only accused - apart from Balmer
Care Homes Limited - is the dissolved firm of Rosepark Care Home (or Rosepark
Nursing Home). In particular the
petitioners are not parties to the indictment.
Although in the course of her submission the Advocate depute touched on
other possible forms in which an indictment might be drafted and tentatively put proffered up one
manuscript version of a possible style, the issue for decision in these
petitions is indeed whether the particular indictment to which these petitions
are directed is a competent indictment, in view of the fact that the
partnership which it seeks to indict is dissolved.
[63] It is of
course unquestionable that in Scotland a partnership has its own separate
legal personality independent of the partners.
The longstanding common law rule to that effect is restated in section
4(2) of the Act. Whether that separate persona ceases to exist on the
occurrence of an act or event dissolving the partnership is the principal issue
dividing the parties to these petition proceedings.
[64] Although in Bank of England v Vagliano Brothers [1891] AC 107, Lord Herschell said
(pp.144-5) as respects the approach to a codifying, or partially codifying,
statute (in casu the Bills of
Exchange Act 1882) that the proper course was, in the first instance, to
examine the language of the statute for its natural meaning rather than start
with the pre-existing law, he recognised that such an approach need not be
universally adopted and that there would indeed be instances in which it would
be appropriate to examine first the previous state of the law. In the present case, having regard to the
nature of parties' submissions and the absence of any express provision in the
Act respecting the duration of the separate legal personality of a Scottish
partnership, we think that this is a case in which it is appropriate and
convenient first to examine the authorities prior to the passing of the 1890 Act.
Authorities prior to the 1890 Act
[65] It is evident
that most of these authorities do not address directly and expressly the
consequences of dissolution on the juristic persona
of a partnership. An exception is Clark on Partnership. On occasion the author does of course refer
to a partnership subsisting after dissolution for the purposes of the winding
up. Thus, for example, at page 672
he says:
"When a partnership is brought to a
termination it still continues to subsist for the purposes of winding up; and until this has been accomplished, the
partnership relation cannot be said to have entirely ceased".
In the footnote to this passage reference is made to Gordon v Douglas,
Heron & Co. However at page 551 Clark says:
"The law of Scotland sees in an unincorporated
association, both the quasi person of
the society, and the persons of the individuals composing it. Now on dissolution the quasi person is lost, and nothing remains but the individual
members who, as correi debendi, must
all be brought into the field".
In our view, it is clear that Clark understood the separate personality
to end with the dissolution and it appears to us that the references elsewhere in
the work to partnership subsisting for the purposes of the winding up must be
seen in the light of that understanding.
In other words, to say that the partnership subsists for winding up
purposes is not the same as saying that the separate juristic personality
continues.
[66] The particular
context in which Clark states that the juristic persona thus ceases to exist on dissolution is that of recovery of
a partnership debt after dissolution, he having stated, immediately before this
passage, the general rule as being that the action must be directed against all
the surviving partners and the representatives of those deceased. That context is not without significance. One of the important practical consequences
of the existence of the separate juristic persona
is that, in the case of subsisting partnership, a creditor of the partnership
cannot proceed directly against the partners, or any of them, but must first constitute
the debt against the firm,
and the partnership must have failed to pay, before a call may be made on the
partner (cf. Bell's Commentaries¸ Book VII, Chapter 1, section IV).
If it were the case that the separate personality continued notwithstanding
the dissolution of the partnership one would expect the same rule to apply
post-dissolution, there still being in existence the juristic person which is
the party to the debt. However, it
appears to us that the authorities are to contrary effect. Thus, in Muir
v Collett the defender, who was only
one of the partners, pled, in answer to the claim of the creditor of the
partnership, that the creditor had failed to constitute the debt against the
partnership, which had traded in India.
Among the grounds upon which the Court rejected that plea was the fact
that the partnership had been dissolved.
At 1124 the Lord Justice Clerk said -
"When a company has been dissolved,
the partners are put in the ordinary position of correi debendi. If you sue
one of them for a company debt, you are bound to call the others if you can".
Lord Cowan (at 1124) said:
"I find a sufficient ground of
judgment in the admitted fact that this company is dissolved, and has been
non-existent for many years. The view I
take of the case is shortly this, that when a creditor has to constitute and
recover payment of a debt incurred by a company which has been dissolved, he is
bound to call as parties all the partners of that company who are subject to
the jurisdiction of this Court; but that,
if he does so, he does all he can be required to do".
The need, after dissolution, for a creditor to proceed
against all the partners individually is also stated by the Lord President
(Hope) in Snodgrass v Hair at 396:
"The case was put of an action being
brought against the company after dissolution and of Fraser therein
acknowledging the debt. If the other
partners were not called in that action, I apprehend no acknowledgement by
Fraser called alone would support a charge on the decree, against the partner
not called; for after dissolution, all
the partners must be individually called".
[67] The existence
of separate personality has a similar, but converse, result in the case of
pursuit of partnership debtors. Prior to
dissolution, since the debt is owed to the persona
that is the partnership, any action must be at the instance of the
partnership. Again, if that persona were to survive dissolution, one
might logically expect the same rule to have applied after dissolution. But in Nicoll
v Reid, in which a partner sued for a
debt due to the dissolved partnership, a plea that the action had to be brought in
the firm name was rejected and it was held that the pursuer was entitled to sue
in his own name as the sole surviving partner.
In his opinion the Lord President (Inglis), having stated that the
pursuer as surviving partner had the sole power of winding up, and within that
power the power of suing for debts due to the company, went on to say;
"The only remaining question is whether in
exercising that power, he must as a matter of form use the firm name? I know of no authority for that proposition".
Lord Deas said, 140:
"I know of no ground for holding it
necessary that he should use the name of the dissolved firm as pursuers in this
action. I do not say it would have done
any harm to have done so, but the question is whether it is essential, and I am
not prepared to say that it is".
[68] In our view,
while the cases to which we have just referred do not talk expressly in terms
of the extinction of legal personality on dissolution, they are entirely
consistent with and properly explicable by an acceptance that dissolution of a
partnership brings with it the ending of the separate juristic personality, and
hence a cessation of the juridical consequences flowing from separate
personality.
[69] A further
manifestation, or consequence, of separate personality is the rule that in a
lease to a partnership the tenant is the separate legal persona of the partnership.
If it were the case that the separate persona survived dissolution, one would expect that even a
non-assignable lease would survive dissolution.
However, in Walker v McKnights the Court held that a non-assignable lease to a
partnership was terminated on dissolution of the partnership by its estates
being sequestrated on insolvency. The
basis for so holding was clearly the extinction of the separate person. The Lord President (Inglis) said at 602:
"It is laid down by Mr Bell in his
Commentaries [i 5th ed.82, 7th ed.78] that 'where a lease
is granted to a company with an exclusion of sub-tenants and assignees, the
bankruptcy of the company puts an end to the lease'; and he cites the case of Campbell v Calder Iron Co
in support of the dictum. Now putting that case entirely out of view,
in the first place, I think that his dictum
is in itself irresistibly well-founded in principle, for it is a fundamental
rule in the law of partnership that when a company is sequestrated it is
thereby ipso facto dissolved; and if a company which is the tenant is a
dissolved company, it no longer exists, except for the purposes of the partners
who may be left
winding up the business. How, then, can
a company in such a position be a tenant which requires that the whole of the
lease should possess capital, &c? There
is no persona to represent the tenant
at all, and therefore, if there had never been such a case as Campbell, my judgment would have been exactly the same".
[70] Contracts of
employment are similarly contracts involving a continuing relationship dependent
on the continuing existence of the two persons concerned. In Hoey
v MacEwan an employee of a
partnership, one of the two partners of which had died, brought proceedings
founded on his contract with the partnership.
The Lord President (Inglis) expressed himself thus at page 817:
"The only contracting party with Hoey
was the firm, and when it was dissolved by the death of MacEwan the contracting
party ceased to exist. The case was the
same as if the contract had been with MacEwan as an individual, and his death
had put an end to it".
Although the Lord President does not use the actual
terminology of legal persona, it is
in our view plain that he is proceeding on the basis that dissolution effects
the extinction of the persona of the
firm.
[71] Reliance was
placed by the Advocate depute on Gordon v
Douglas, Heron & Company, which was referred
to by Bell (page 527) for the proposition that after dissolution partnership is
"continued to the effect of levying the debts, paying the engagements of the
company, and calling on the partners to answer the demands". The case was also referred to by Lorimer in
his commentary on section 38 of the Act (see Lindlay Lindley 6th
Edition, page 805). The decision in Gordon v Douglas,
Heron & Company is relatively briefly reported in 3 Paton 428 but
we were provided from the appeal papers in the Advocates Library with copies of
the respective cases lodged by the parties in the House of Lords which give a
fuller understanding of the issues in the case.
There is no record of any speeches having been delivered in the
Lords. It may be observed at the outset
that the company - Douglas, Heron & Company
- which carried on a banking business was not what one might term an "ordinary"
partnership but was in effect a joint stock company with numerous
shareholders. It appears from the appeal
papers that having sustained heavy losses, the shareholders in general meeting
passed a resolution to cease carrying on business and to call on shareholders
to contribute the further capital necessary to achieve solvency according to
their respective shareholdings. A
committee was appointed to conduct this operation and, in accordance with
powers given to it, the committee in turn appointed a factor with full powers
to get in the funds from the company's debtors and shareholders. As counsel for the petitioners pointed out,
in the related case of Douglas Heron
& Company v Hair, the Court
held that the resolution in question - to "give over" banking - did not
constitute dissolution. Gordon, a shareholder,
declined to pay the levy on the shareholders and proceedings were brought
against him by the Bank and the factor.
The action was accordingly not one by a partnership against a third
party debtor. It appears from the appeal
print that while Gordon objected to the bringing of the action in the social
name of the company, the basis of that objection was essentially that he was
being sued by his co-partners, who should do so as such. Thus at page 6 of his case, having noted the
proposition in the interlocutor appealed from that "every co-partnery must from
its nature subsist after it has been dissolved, or the term expired to the
effect of winding up its affairs"; the case for the appellant goes on to say of
that proposition:
"...if it is thereby meant that the
joint and separate Obligations of Partners to discharge Partnership Engagements
to Strangers, and their implied Engagements to one another subsist, and may be
enforced after the Partnership Business is given up, the Appellant never
dreamed of disputing it; but that noways
entrenches on the Proposition he maintains;
namely that no given Number of the Partners can bring an Action against
their Co-partners, in the Name and by assuming the Style or Firm of the late Co-partnership
to compel those Co-partners to pay Money, either for discharging the
partnership Debts, or for equalizing the Loss amongst the Partners".
We would add that the penultimate paragraph on page 5 of the
respondent's case reflects that this is the nature of the objection taken. A further matter which must be noted is that
the action was also brought by the factor appointed by the members of the
company,
and a contention for the respondent (see respondent's case page 8) was that the
factor had in any event the authority of the other co-partners to pursue the
claim against Gordon. A further complication which may be noted is
that whereas the report in Paton
states that the House of Lords affirmed the interlocutor of the
Lord Ordinary in the Court of Session, the order of the House of Lords
which is inscribed in the appeal papers, while otherwise essentially identical,
does not contain that part of what is reported in Paton as being the affirmation of the Lord Ordinary's
interlocutor.
[73] Having regard
to these matters we do not consider that the decision in Gordon v Douglas, Heron & Company
can be seen as authority for the proposition that the separate juristic
personality of a partnership continues after dissolution. Nor, in the light of the decisions which we
have earlier discussed, does it ever appear to have been regarded as
establishing that particular proposition.
We would observe, as already indicated, that Clark was well aware of Gordon v Douglas,
Heron & Company but yet states (at p.551) that the separate personality
of the partnership is lost on dissolution.
It is of course in the nature of the institution of partnership, which
may be brought to an end not only at the wish of a partner but also by events
such as death or bankruptcy, the timing of which is not controlled by the
partners, that rules must exist for winding up its affairs. To the extent that partnership law - and
possibly the particular terms of a given contract of co-partnery - provide for
that winding up it may be possible to talk, perhaps loosely, of partnership
continuing or subsisting after dissolution.
But that is not, to say that the separate juristic persona continues or subsists after
dissolution; and in our view, when one
looks for the indiciae of
separate legal personality continuing after dissolution, the cases ante-dating
the 1890 Act to which we were referred exhibit the absence of those indiciae and are
entirely consistent with the statement by Clark that on dissolution the persona of the partnership is lost.
The 1890 Act
[74) Against that understanding
of the common law, we turn to the 1890 Act.
[75] The submission
of the Advocate depute respecting the construction of the Act was, put shortly,
founded on the reference in section 38 to each partner having "authority to
bind the firm". That reference, it was
submitted, indicated that the legal personality must continue after dissolution
(or at least was consistent with the contention of the Advocate depute that
such was the position at common law) because section 44(2) defined the firm in Scotland as having legal personality. We think that there is force in Mr Brodie's
submission that in view of the approach to legislative drafting adopted by
Pollock, the author of the Act, one should not take what Mr Brodie termed
a "conveyancer's" approach to construction of this statute. For our part we do not consider that the use
of the phrase "authority to bind the firm" in section 38 carries the
necessary implication that the separate persona
continues notwithstanding dissolution.
In our opinion the text can be read, as counsel for the petitioners
submitted, as referring to the collectivity of persons formerly in the
relationship which constituted partnership and we would add that, as a codifying
statute, it should be interpreted consistently with the common law which it
sought to codify. Further, as Mr Brodie
also pointed out, if the firm's persona
continued after dissolution, it is not easy to see why it was necessary to
enact section 38 in addition to section 5 of the 1890 Act.
Authorities subsequent to the 1890 Act
[76] The case upon
which the Advocate depute placed most reliance was Dickson v The National Bank
of Scotland. She invoked in
particular the passage in the speech of the Lord Chancellor, at 52, which
is in these terms:
"Section 38 of the Partnership Act,
1890, really embodied the old law relating to partnership derived originally
from the Roman law, and it is this - that for certain purposes a partnership
continues notwithstanding dissolution.
There is an interesting passage quoted from Paulus in the Digest by Sir
Frederick Pollock in his edition of the Partnership Act, where it is pointed
out that, although when one of a firm dies the survivors cannot undertake new transactions
on behalf of the firm, they can complete what is left unfinished, and that
distinction is really what animates this section 38 and law of which
section 38 is the embodiment".
In
relation to Paulus, the reference is identified by Lord Reed in his
Opinion in Duncan v MFV Marigold PD145 and as being to Justinian's
Digest III 5.21:
"Si vivo Titio negotia eius administrare coepi, intermittere mortuo eo
non debeo: nova tamen inchoare necesse mihi non est, vetera explicare ac
conservare necessarium est. Ut accidit cum alter ex socius mortuus est: nam
quaecumque prioris negotii explicandi causa geruntur, nihilum refert, quo
tempore consummentur, sed quo tempore inchoarentur"
("If I began to manage Titius's affairs during his lifetime, I ought not
to leave off at his death. However, there is no necessity for me to enter into
new transactions, though it is necessary to complete and look after old ones.
It is the same as when one of two partners has died; for as regards any
transactions to complete previous business, the issue is not when these are
finished, but when they were begun").
We would
merely observe that it is difficult to see in Paulus a support for the notion
of continuing juristic personality. The
other members of the Judicial Committee expressed approval of the Opinion of
the Lord Justice Clerk in Dickson v National Bank of Scotland and, as
respects that Opinion, the Advocate depute pointed particularly to the
following passage at page 595:
"I think the effect of the statute [section 38] was that the partners of
A, B and C still remained after dissolution invested with authority entitling
them to use the firm's signature, and that the partnership continued for
anything that was required to wind up its affairs or to complete any
transaction begun and not then finished".
[77] The circumstances of Dickson v National Bank of
Scotland were that trustees instructed their solicitors to consign certain
of the trust funds with the Bank. A
consignation receipt was given by the Bank, stating inter alia that the funds would be payable against the signature of
the firm of solicitors. The firm of
solicitors was subsequently dissolved and some time later a former partner uplifted the
deposited funds,
signing for them with the former firm's signature. He then embezzled the funds. The residuary beneficiary, having taken an
assignation from the trustees of their interest, then sued the Bank on the
basis that the Bank had paid the money to someone not entitled to it. The issues in the case were, or came to be,
whether section 38 of the Act enabled the former partner to adhibit the firm's
signature of the dissolved partnership and whether the uplifting of the
consigned money formed part of the winding up of the dissolved
partnership. The case was thus concerned
only with the application of section 38 and it was not at all concerned with
the juristic persona of a partnership
or its duration. Accordingly we do not
consider that the passages to which the Advocate depute referred are to be read
as stating that the separate persona
continues notwithstanding dissolution.
It is also to be noted that at page 594 the Lord Justice Clerk said
respecting section 38 of the statute:
"It is noticeable that the statute does not say that the partnership is
to continue. What it does say is that
the authority of the partner to bind the firm and the other rights and
obligations of the partners are to continue - notwithstanding the dissolution -
limited only by this, that what is done must be necessary, first, to wind up
the affairs of the partnership, or, second, to complete transactions begun but
unfinished at the time of the dissolution".
[78] On the other hand, Inland Revenue Commissioners v Graham's
Trustees is, in our opinion, a case concerned with legal personality. The principal issue decided in the House of
Lords was whether a non-transmissible agricultural lease to a partnership
continued after the partnership was dissolved by the death of one of the
partners. The House of Lords held that
it did not continue because on dissolution the persona that was the tenant ceased to exist. Lord Reid, at page 20, put matters thus:
"So, in my opinion, it must be held that this contract of co-partnership
came to an end on the death of Mr Graham.
All that remained was to wind up its affairs. It must follow that thereafter there was no
tenant, because the farm had been let to the co-partnership and to no one
else. Where agricultural land was let to
an individual, his heir was entitled to succeed him, and now the matter is
regulated by the Agricultural Homings Holdings Act.
But there is no provision anywhere for anyone being, so to speak, the
heir of a partnership. The sudden end of
a lease because there is no one left who can claim to be tenant is no
novelty;...."
At page 23, Lord
Guest states:
"By section 33(1) [of the Act], subject to any agreement between the
partners to the contrary, a partnership is dissolved as regards all the parties
by the death or bankruptcy of any partner.
Accordingly the lease between the late Mr Graham and the
partnership came to an end on his death unless it was continued or revived".
In his
speech, Lord Upjohn said, at pages 25-26:
"By English law it is quite clear that a partnership is not a corporate
body distinct from the members of the partnership. But by section 4(2) of the Partnership Act
1890 it is expressly provided that in Scotland a firm is a legal person
distinct from the partners of whom it is composed. Secondly, unless the contrary is expressly
provided - and there is no trace of any such provision in the lease of the
farmland to the partnership by the deceased - a lease is not assignable. This, of course, is in marked distinction to
the law of England on the subject. It seems to me,
therefore, necessarily to follow that upon the death of R F Graham
the lease came to an end, because it was a lease to a legal person which had
ceased to exist".
[79] The Advocate depute sought to distinguish Graham's Trustees on the basis, as we
understood, that it involved a non-assignable lease and that on that account
the case involved some speciality and that it might be that the personality of
the partnership was extinguished only to the limited extent of its ability to
be a tenant. We do not consider that the
case can be distinguished in that way.
In our view, the importance of the decision for present purposes is that
the issue was decided, and required to be decided, by reference to the separate
juristic persona of the partnership
which it was clearly held did not survive the dissolution.
Other matters
[80] As we have just mentioned, in the course
of her submission respecting Graham's
Trustees the Advocate depute appeared to suggest that dissolution might
extinguish the personality of the partnership in a limited way confined to its
ability to be a tenant. At other points
in her wider submissions there was a similar suggestion that after the
dissolution of a partnership some limited form of personality might exist. We do not consider that this suggestion has
any validity. First, as respects Graham's Trustees, the speeches are
clear in treating dissolution as the complete cessation of the persona of the partnership; any subsequent right to occupy the farm to
complete cultivation was attributable only to the powers given to the former
partners under section 38 of the Act.
On a wider basis, we have great difficulty with the notion of varying or
limited degrees of juristic personality.
While it is no doubt possible for a person, whether natural or juristic,
to have limitations on his or its powers of or capacities, the
notion of some limited degree of personality is not readily understandable in
juridical terms and, importantly, has no support in any of the authorities to
which we were referred. In our view, in
principle, there is either a person or there is not a person. Personality, whether natural or juristic, is
not created or extinguished in slices or instalments.
[81] The suggestion that personality might
exist for some purposes but not others underlay a further aspect of the
submission for the Crown, namely that for what might shortly be termed policy
reasons, the Court should hold that a dissolved partnership retained a limited
separate persona for the purposes of
criminal prosecution. While naturally
acknowledging the existence of the policy reasons to which the Advocate depute
referred, we did do not consider that the structures and
principles of the law relating to the creation and extinction of legal
personality can lightly be departed from on the simple ground of expediency so
as to enable one to say that a person in all respects having died or ceased to
exist, is yet deemed to be alive or extent extant as a person who
can receive and accept service of an indictment and instruct entry of a plea
and conduct a defence. The present positions petitions are in some ways an
exemplification or
reflexion of the fundamental juridical difficulty of this indictment,
namely that it bears to accuse a person who does not exist.
[82] We are of course very conscious of the
undesirability of prosecution of the commission by a partnership of a criminal
offence being frustrated by the partnership's ability to dissolve itself, or by
its susceptibility to dissolution by other events, particularly if by dissolution the partners
are also to be exonerated. However, we
would observe that, as was pointed out by counsel for the petitioners, matters
are not as stark or extreme as might appear at first sight. In the case of most common law crimes and
many statutory offences the individual partner responsible for the act or
omission will be readily identifiable and can be prosecuted in his personal
capacity. In the present case there is
section 36 of the 1974 Act which creates individual responsibility for an
offence committed by the employer. We
appreciate that the evidential challenge facing the prosecutor in establishing
individual responsibility under section 36 (and equivalent provisions in other
health and safety or consumer protection legislation) may be different and
possibly greater than that involved in establishing criminal responsibility on
the part of the employer. But it will
normally be capable of being met, particularly if the principles of art and
part involvement are borne in mind.
Finally, as the Advocate depute herself canvassed in her argument, there
may be other forms in which an indictment may be brought against the partners
of a dissolved partnership in their capacity as former partners. We have however, as already indicated, come
to the view that it would not be appropriate to express any concluded opinion
on other possible forms of indictment in the absence of an actual indictment
with which it is proposed to proceed. As
we have already stated, these petitions, and the argument, had have been directed at
the particular indictment in which the purported accused is a dissolved
partnership.
[83] For the reasons which we have indicated,
we conclude that the dissolved partnership does not have any continuing legal
personality following dissolution and accordingly we consider that the
indictment to which the petitions are directed is incompetent.
[84] We would add that, asAs respects that part of the
alternative branch of the Advocate depute's submission to the effect that even
if the persona ceased on dissolution,
the partners of the former firm yet retained responsibility for what she
described as the criminal liabilities of the partnership in the same way as
they had responsibility for its civil liabilities, we would add that her argument would on any
view require an indictment directed against themthe partners of the former
firm. It is however clear that the
former partners are not parties to the indictment with which these petitions
are concerned.
[85] We shall accordingly pronounce a
declarator in terms of head (a) of paragraph 15 of each of the petitions.
[86] We also think it appropriate to record
that the hearing of the extensive and well conducted oral debate in these
petitions took place under the chairmanship of the late Lord Macfadyen, with
Lords
Eassie and Lord Wheatley
as the other members of the Bench. Following
an initial deliberation on parties' submissions, Lord Macfadyen valiantly then volunteered to
prepare a draft opinion for
consideration by other members of the Court. He made progress on that draft opinion of the
Court to the extent of
preparing the bulk of what was later submitted to parties as the "Note of
Facts, Issues and Submissions" but, sadly, the illness, which lead to his
untimely death, then accelerated and he was unable to do any further work on
the draft. The finalised Opinion which
we now issue is to a that material extent based on the groundwork
of Lord Macfadyen, to whose valiant industry we are indebted.
[87] It is also appropriate for us to recognise
and commend the way in which the parties to these petitions have co-operated in
resolving the problems presented by Lord Macfadyen's death by their
agreement that matters could should proceed on the basis of the summary "Note of factsFacts, and issuesIssues and Submissions" presented to them, with such alterations as
they proposed, and
laid before the additional member of the Bench, Lady Paton, for her consideration and
the opportunity of her raising any matters upon which she considered she should
be addressed. In the event, she did not
require to make
use of that
opportunity and it
was agreed that the Court should proceed to issue judgment, which we have just
done.
.
