Hocking v Western Australian Bank [1909] HCA 68

Hocking v Western Australian Bank [1909] HCA 68 - HCA 1909 case summary — Zoe

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provisions of the Act. Now, sub-sec. 1, so far from substantially altering the common law, takes that law as the basis of its pro- visions. The condition of the application of the new rule is that the " two or more persons " shall be persons who acquire a mining tenement or engage in working or using it, or jointly employ others to do so for them. The terms "acquire" and "engage" import the fact of working in association, whether as partners strictly so called or not, but they do not in my opinion include the case of sub-partners. This was not indeed contended. That sub-section both lays down a positive rule as between the persons so associated, and also facilitates, as between them and third per- sons, the proof of the fact of partnership. So far it may be said to alter the law, but no further. Sub-sec. 5 alters the law as declared by the Partnership Act in two important particulars. Sec. 44 of that Act provides that a partnership may be dissolved by written notice at the option of any other partner if any partner assign his share (not a part of his share) in the partner- ship property, whereas under sub-sec. 5 of sec. 281 a partner's interest in a mining partnership may be assigned without any such consequence, Again, sec. 34 (6) of the Partnership Act provided that no person may be introduced as a partner without the consent of all existing partners, whereas by sub-sec. 5 the assignee of the interest (not any part of the interest) of a partner in a mining partnership becomes a member of the partnership without the consent of the other partners. The respondents con- tend that, in addition to these important alterations in the law, a further alteration has been made to the effect that a partner may by separate assignments introduce as many new partners, either with him or in his place, as he thinks fit. This would be an entirely new rule, quite contrary to the law as it was before the Partnership Act as well as after it. Moreover, on this construc- tion, the number of members of a mining partnership would be unlimited, whereas sec. 7 of the Companies Act 1893 forbids the

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They did not make the syndicate their agents for any such pur- pos If it be conceded for argument's sake that sub-see. (1) operates in favour of persons having claims against the co-owners or co-workers, as well as between the co-owners or co-workers themselves, it cannot so operate as against those who have not joined in "acquiring" or in " working" the tenement. And it seems to me that these terms are inapplicable to the case of sub- partners of individual members of the associated owners or workers. What then of sub-see. (5)? Under it, "A partner's interest in the mining partnership may be sold or assigned with- out dissolving the partnership." Such a transaction is therefore freed of the consequences which might have followed it under sec. 44 of the Partnership Act, namely, the dissolution of the partnership "at the option of the other partners or any of them, by written notice." But a more important change, for the pur- poses of this case, is that if the partner's interest is "sold or assigned . . . . without the consent of the other members," then " from the date of such sale or assignment the purchaser or assignee shall be deemed to be a member of the partnership." In a mining partnership, therefore, there is no longer, in the case of such a sale or assignment, a prohibition of the introduction of a person as partner, without the consent of all existing partners (see Partnership Act, sec. 34 (6)). But does this apply to anything but a complete substitution of a new partner for an old one? Does it extend to the admission as partners of a number of persons who before this enactment would have been no more than sub-partners ? Supposing the transactions which have taken place to be sales or assignments, but only of portions of interests, is each of these a sale or assignment of an " interest" within the meaning of this sub-section ? The construction contended for is that an "interest" includes as many portions of an interest as may be made the subjects of sales or of agreements for sale. If this were correct, a partner might create by assignments, simul- taneous or successive, an indefinite number of new interests, the holder of each one of which would be a partner, while the vendor himself, by retaining a fractional interest, would remain a partner if he did not choose to make his exit by getting rid of all that he

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sum in the present claim. There can be no doubt that in making the advance the bank dealt directly with the syndicate, and on the face of the transaction it seems clear that credit was given solely to the original members of the syndicate who signed the letter to the bank of 16th September 1905. There is no suggestion of any misrepresentation by word or conduct on the part of the appellants which could be relied upon by the bank as estopping them from now contesting their liability. The rights of the parties must therefore depend entirely upon the question whether at the time when the advance was made the appellants had by their purchase of interests become members of the part- nership. If they had, the original partners were empowered to bind, and did bind them in dealing with the bank. If they had not, the original partners were not authorized to bind them, and have not made them liable for the advance of 20th September or any portion of it. The question must be regarded from two points of view. First, having regard to the express terms of the partnership, prohibiting the alienation of partnership shares without the consent of the majority of partners, and to the pro- visions of the Partnership Act 1895 to the same effect. Secondly, taking into consideration the meaning and operation of sec. 281 of the Mining Act 1904. As to the first point of view it is unnecessary to say much. It is common ground that consent of the other partners in accordance with the partnership's deed was not obtained in respect of any of the assignments of interests by virtue of which it is sought to make the appellants liable. But it is contended that the actions of all parties concerned at the meeting of intending shareholders in the company, held eight days after the advance had been made, amounted to a waiver of that provision of the partnership deed, and also that the defendants, having with full knowledge of all the circumstances shared in the benefit of the advance without which the formation of the company would have been futile, cannot now escape liability. The clear answer to the first contention is that the business of the meeting referred to was to decide on the formation of the company and to arrange the terms and con- ditions of its articles and memorandum. It was called for that purpose and for no other, and might well have been attended by

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who had not then any interest in the syndicate. It had no authority to bind any partner to a waiver of the terms of the partnership, and it did not even purport to deal in any way with that subject. The inferences which the respondent bank asks the Court to draw in this respect are, it seems to me, founded on exceedingly vague and inconclusive evidence, entitled to little weight against the express provisions of the deed. One view of the case, upon which Burnside J. apparently based his decision, amounts in substance to the ground of estoppel. But the facts as proved are wanting in one essential element of estoppel. It may be conceded the appellants well knew that without the bank's advance the contract of sale could not have been com- pleted, the lease could not have been secured, and the company would not have been formed. But those facts will not of them- selves prevent the appellants from relying on the invalidity of the assignments by virtue of which it is sought to make them liable, inasmuch as there was no misrepresentation or conceal- ment by word or conduct on their part, and the manager of the respondent bank, as shareholder in and secretary of the syndicate, must have known at the time of the advance that the deed for- bade the introduction of any new partner without the consent of partners representing a majority of shares, and that in respect of the several sales of interests to the appellants no such consent had been given. I concur, therefore, in the view of McMillan J. and Rooth J., that it is only by virtue of the Mining Act 1904, if at all, that the appellants can be constituted partners in the circumstances that have arisen. I do not think it necessary to refer to all the important and difficult questions of law involved in Mr. Pilkington's objections to the applicability of sec. 281 to a state of facts such as that now under consideration. In the view I take of the matter the whole question of the applicability of the Statute may be disposed of by one of those objections. The contention is, I think, unanswerable that sub- section 5 of section 281 has no application to the sale or assign- ment of such interests in a mining partnership as were alleged to have been assigned in thiscase ? To that objection I intend to

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into existence a partnership so entirely indefinite as to its numbers from day to day that no partner would know at any time amongst how many or how few the liabilities of the part- nership were to be distributed? The enabling of one partner, 'without the consent of his co-partners, to substitute another for himself in the partnership is in itself a material alteration in the nature of the partnership relation as it had been up to then known. But to read the sub-section as conferring power upon each partner to multiply partners indefinitely by the sale of subdivided interests would be to make a radical alteration in the whole nature of the partnership relation in the case of mining business, which the scope and purpose of the section in no way requires or justifies. Looking at the various sub-sections of the Act which bear on the obligations of the mining partnership to the Government, and of the partners to each other in the dis- charge of those obligations, I find it difficult to see how the pro- visions of the section can be made workable if the wide meaning for which the respondents contend is to be placed on sub-see. 5. This view is strongly supported if the liability of each partner for partnership debts is considered. What is the extent of liability in respect of the debts of the partnership which a partner by purchase of a fraction of a share will incur? Is he, asthe Supreme Court has decided, to bear a responsibility for the whole debts of the mining partnership, or is he, as Rooth J. held, liable only for a sum in proportion to the value of his interest in the partnership? The latter view would no doubt represent the provision which the legislature might be expected to make in such circumstances. But I have been unable to find "any indication in the Act itself of such a limitation of liability. It appears to me, therefore, to be a strong reason why the sub- _ Section should not be read as imposing the full obligations of a partner as to partnership debts on the purchaser of a fraction of ra partnership share, that the legislature has made no provision for limiting the liability of a partner in a mining partnership in pro-

At a glance

Court

Decision date

Source

Judgment (87 paragraphs)

1909, 281* - Partnership Act 1895 (W.A.) (59 Viet., No. 23), secs. 34, 42 - Com-

Cited By (2)