Hibben v. Collister, (1900) 30 SCR 459

Supreme Court of Canada

Hibben v. Collister, (1900) 30 S.C.R. 459

Date: 1900-06-12

Janet Parker Hibben and Willaim Henry Bone (Defendants) Appellants;

and

Elizabeth Christina Collister and James Kammerer Lewis (Plaintiffs) Respondents.

1900: April 18; 1900: June 12.

Present: Sir Henry Strong C. J. and Taschereau, Gwynne, Sedgewick and King JJ.

ON APPEAL FROM THE SUPREME COURT OF BRITISH COLUMBIA.

Partnership—Construction of deed—Continuance after expiry of term—Deceased partner—Purchase of share—Discount—Goodwill.

A deed providing for a partnership during seven years from its date provided for purchase by the survivors of the share of a deceased partner with a special provision that if one partner should die the value of his share should be subject to a discount of 20 percent. After the seven years had expired the partners continued the business by verbal agreement for an indefinite period and while it so continued K. died.

Held, varying the judgment of the Supreme Court of British Columbia, that even if the parties had not admitted that the business was continued under the terms of the partnership deed such terms would still govern as there was nothing in the deed repugnant to a partnership at will; that the surviving partners had, therefore, a right to purchase the share of K. and to be allowed the deduction of 20 per cent therefrom as the deed provided ; and that in the absence of any stipulation in the deed to the contrary the goodwill of the business and K's interest therein should be taken into account in the valuation to be made for such purpose.

APPEAL from a decision of the Supreme Court of British Columbia affirming the judgment at the trial in favour of the plaintiffs.

The appeal was brought on a special case agreed to by the parties which, omitting immaterial portions, was as follows :

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SPECIAL CASE STATED BY CONSENT FOR THE OPINION OF THE COURT, PURSUANT TO THE RULES OF THE SUPREME COURT, ORDER XXXIV.

1. This action was commenced on the 13th day of December, 1898, by the plaintiff as executrix of Christian William August Kammerer, deceased, against Janet Parker Hibben, as executrix of Thomas Napier Hibben, deceased, and William Henry Bone, to have an account taken of the partnership dealings of the firm of T. N. Hibben & Co, and to have the affairs of the partnership wound up and for a receiver, and for a declaration that the proceedings purported to have been taken by the defendants under the deed of 1st August, 1884, for the purpose of determining the disputes between the parties are void as against the plaintiff, to the writ in which action the defendants appeared on the 15th December, 1898.

2. By a deed of partnership dated the 1st day of August, 1884, Thomas Napier Hibben, the said Christian William August Kammerer (therein called Christian William Kammerer) and the said William Henry Bone agreed to become and remain partners in the business of wholesale and retail booksellers and stationers for the term of seven years from the date of the deed, if they should so long live, upon the terms set out in the deed.

3. The deed is in the following terms :

"THIS INDENTURE made the first day of August, one thousand eight hundred and eighty-four, between Thomas Napier Hibben, of the City of Victoria, British Columbia, of the first part, Christian William Kammerer, of the same place, of the second part, and William Henry Bone, of the same place, of the third part:

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" Whereas the said Thomas Napier Hibben has been carrying on business in the City of Victoria aforesaid under the style or firm name of "T. N. Hibben & Co." as wholesale and retail bookseller and stationer up to the date hereof:

" And Whereas, the said Thomas Napier Hibben is (among other liabilities) indebted to the said Christian William Kammerer in the sum of $10,400.00, and is also indebted on the security of his stock in trade to the Needham Estate in the sum of $5,000.00, and is also indebted to one Thomas Sawdy Bone, on a certain promissory note dated the fifteenth day of July, 1884, in the sum of $1,500.00.

" And Whereas, it has been agreed between the parties hereto that in consideration of the said Christian William Kammerer releasing the said Thomas Napier Hibben from the said debt of $10,400.00, and in consideration of the said William Henry Bone paying off and discharging the said sum of $5,000.00 due on the said stock and taking up and cancelling the said note of $1,500.00, and paying in cash to the credit of the partnership intended to be hereby created the sum of $1,750.00, that the said Christian William Kammerer and William Henry Bone shall become and be partners and owners with the said Thomas Napier Hibben in the said business and in the lease or leases or tenancy of premises, stock, chattels and effects whatsoever now belonging to the said business or used and enjoyed in connection therewith, upon and subject to the terms and conditions hereinafter contained, the shares or interests of the parties to be in the proportions following, that is to say: The share of the said Thomas Napier Hibben to be 165/538. The share of the said Christian William Kammerer to be 208/538. The share of the said William Henry Bone to be 165/538. The profits and losses to be received and paid

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in equal shares, and all liabilities of the said business to the date hereof (except those to be paid as aforesaid) to be paid by the parties in equal shares.

NOW THIS INDENTURE WITNESSETH :

"1. That the said Thomas Napier Hibben, Christian William Kammerer and William Henry Bone will become and remain partners in the business aforesaid for the term of seven years from the date of these presents if they shall so long live.

"2. Nevertheless the partnership may be determined at any time during the term aforesaid by any of the partners who shall give to each of the others six months' notice in writing expiring on the last day of some month of the said term of his intention so to determine the said partnership. Any such notice shall be taken to be properly and personally served when the same shall be mailed within three days after the date thereof in a registered letter addressed to each of the partners at Victoria aforesaid in the post office at the said City of Victoria, and at the end of the six months mentioned in any such notice the said partnership and business shall be wound up as hereinafter mentioned.

23. Within three months after the expiration of the partnership or at the expiration of any notice to be given as aforesaid (except in case of death of one of the partners) a general account shall be taken by the partners of all the capital, property, engagements and liabilities of the partnership, and immediately after such last mentioned account shall have been so taken and settled the partners then concerned shall make due provision for the payment of the debts and all other liabilities of the partnership and subject thereto all the property of the partnership shall be divided

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between the partners in the shares aforesaid and more particularly mentioned in clause eight hereof, and such instruments in writing shall be executed by the partners respectively for facilitating the getting in of the debts due to the partnership and for vesting the whole right in the said respective shares of the said property in the partner to whom the same shall respectively upon such division belong, and for releasing each to the others or other all claims on account of the partnership and otherwise as are usual in cases of a like nature: Provided always that any partner giving such notice as aforesaid shall before taking or disposing of his share in the partnership when ascertained as aforesaid to any other person or persons offer the same during the space of fourteen days for sale to the partner or partners not giving such notice the price to be paid for the share of any partner giving the notice aforesaid to be the ascertained value of his share at the time of taking such general account after deducting the proportion of liabilities, and if the said Christian William Kammerer shall give such notice he shall allow off the ascertained value of his shares after deduction of liabilities as aforesaid a discount of twenty per cent to the partner or partners desiring to purchase.

"24. If any partner shall die during the term of the partnership the survivors shall within six months after such death cause a general account to be taken in manner aforesaid and shall pay to the executors or administrators of the deceased partner the ascertained value subject to the terms and conditions of these presents of the share of the partner so dying. And if the said Christian William Kammerer shall die then the value of his share subject to the discount aforesaid, and the partnership hereby created shall cease and determine, or it shall be lawful for the survivors and

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the executors and administrators of any deceased partner or partners to carry on the partnership business subject to the terms and conditions hereof as if such death had not taken place, and the account of the deceased partner or partners shall be charged with the salary of a suitable person or persons to be selected by the survivor or survivors to perform the physical work which the deceased partner or partners should have performed if he or they had not so died, and if the business shall not be so carried on by the survivor or survivors and the respective executors or administrators of the deceased partner or partners, the survivor or survivors shall execute to the respective executors or administrators of the deceased partner or partners a good and sufficient bond or bonds of indemnity against all claims and demands whatsoever on account of the business of the debts, liabilities or engagements thereof. And further, it shall be lawful for the survivors of the partners, if the executors or administrators of a deceased partner shall not wish to carry on the business as aforesaid, or for the remaining partners after notice as aforesaid, if they or either of them purchase the interest of any deceased or retiring partner, to carry on the business under the like terms and conditions as herein contained to the end of the term hereinbefore mentioned, such intention to carry on the business to be signified by writing indorsed on these presents, and to be for the term aforesaid or for any extension thereof as may be mentioned in such indorsement. And the interests or shares of the partners so carrying on shall be the respective shares for the time being owned by the partners at the time of such death or withdrawal added to the interest or share or part thereof acquired by purchase from the executors or administrators of any

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deceased partner, or by purchase as aforesaid from any retiring partner."

4. Prior to the execution of the said deed the said C. W. Kammerer and W. H. Bone had been for some years in the employ of the said T. N. Hibben, who had theretofore for many years carried on the business of a wholesale and retail bookseller and stationer, under the name and style of T. N. Hibben & Co.

5. The shares of the respective partners in the property of the partnership were arrived at upon the basis of the value of the stock in trade and book debts belonging to the said business as compared with the amounts contributed by the said C. W. Kammerer and W. H. Bone, as recited in the said deed.

6. In valuing the said stock in trade and book debts no allowance was made for the value of the good will.

7. The said Thomas Napier Hibben died on the 12th January, 1890, having duly made his will whereof he appointed the said Janet Parker Hibben sole executrix, who duly proved the same in the Supreme Court of British Columbia on the 27th January, 1890.

8. The said Thomas Napier Hibben, C. W. A. Kammerer and William Henry Bone carried on the business under the said partnership deed until the death of the said Thomas Napier Hibben, and thereafter the said Janet Parker Hibben and Christian William August Kammerer and William Henry Bone carried on the said business under the said partnership deed until the end of the said term.

8a. After the expiration of the partnership term the said C. W. Kammerer, Janet Parker Hibben and W. H. Bone entered into a verbal agreement that the said partnership should continue on under the terms of the said deed, but the period of time during which the said partnership should continue was not fixed by the

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said agreement, and the said partnership was so carried on by the said persons until the death of the said C. W. Kammerer.

9. From time to time during the continuance of the partnership a general account was taken under Article 19 of the said deed of all the capital, property, engagements and liabilities of the said partnership, and in taking the said accounts no regard was paid to the value of goodwill.

10. The said Christian William August Kammerer duly made his will, and thereof appointed the plaintiff and James Kammerer Lewis executors, and thereby devised and bequeathed all his property, real and personal, to the plaintiff and the said James Kammerer Lewis absolutely, and the said James Kammerer Lewis in 1898 sold and assigned his interest in the said business of T. N. Hibben & Co., to the plaintiff absolutely.

THE QUESTIONS FOR THE OPINION OF THE COURT ARE:

1. Whether the said Janet Parker Hibben and William Henry Bone are entitled as of right to buy the share of the said C. W. Kammerer under section 24 of the said deed.

2. If the said Janet Parker Hibben and William Henry Bone have such right, whether they have the right to buy the said share by paying to the plaintiffs the value of that share in the said business (ascertained by an account as provided in the partnership deed) less a discount of twenty per cent, or in other woids, whether, if the said Janet Parker Hibben and William Henry Bone are entitled as of right to buy the share of the said Christian William August Kammerer in the said business, the plaintiff is not entitled to be paid the sum equal to 208/538 of the value of the partnership property without any discount.

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3. Whether the defendants are entitled to buy the share of the said Christian William August Kammerer, the plaintiff is entitled in valuing the share of the said Christian William August Kammerer to anything in respect to the goodwill of the said business.

The courts below decided, in favour of the plaintiffs, that defendants were not entitled to buy the share of the deceased partner, Kammerer, and that the plaintiffs were entitled to value the goodwill. The defendants appealed to this court.

Aylesworth Q.C. for the appellants.

Riddell Q.C. for the respondents.

The judgment of the Court was delivered by:

THE CHIEF JUSTICE.—This is a special case stated for the opinion of the Supreme Court of British Columbia pursuant to order 34 of the rules of that court. The opinion of the original court is by the Supreme and Exchequer Courts Act expressly made the subject of appeal to this court.

The case was originally argued before Mr. Justice Drake, whose judgment was carried by way of appeal to the full court, which, after argument, expressed its opinion in favour of the present respondents. The facts which are fully set forth in the special case may be concisely stated as follows:

By deed dated the 1st of August, 1884, and made between Thomas Napier Hibben of the first part, Christian William Kammerer of the second part, and William Henry Bone of the third part, the same parties agreed to become partners in the business up to that time carried on by Mr. Hibben alone at Victoria, in British Columbia, of a wholesale and retail bookseller and stationer, and it was thereby agreed

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that the shares and interests of the parties were to be in the proportions following, namely, the share of Thomas Napier Hibben was to be 165/538ths; the share of C. W. Kammerer was to be 208/538ths, and the share of Bone was to 165/538ths. The partnership was to be for the term of seven years determinable by six months notice during the term. The deed which is set forth in extenso contains minute recitals as to contributions of capital and other matters and precise and somewhat intricate covenants as to the carrying on of the business, and regarding the dissolution of the partnership and the division of the assets. Amongst other clauses it contained two, numbered respectively, 23 and 24, a difference of opinion as to the construction of which and their application in the events which have happened, has led to the present action. These clauses 23 and 24 are as follows :

23. Within three months after the expiration of the partnership, or at the expiration of any notice to be given as aforesaid (except in case of death of one of the partners) a general account shall be taken by the partners of all the capital, property, engagements and liabilities of the partnership, and immediately after such last mentioned account shall have been so taken and settled the partners then concerned shall make due provision for the payment of the debts and all other liabilities of the partnership and subject thereto all the property of the partnership shall be divided between the partners in the shares aforesaid and more particularly mentioned in clause eight thereof, and such instruments in writing shall be executed by the partners respectively for facilitating the getting in of the debts due to the partnership, and for vesting the whole right in the said respective shares of the said property in the partner to whom the same shall respectively upon such division belong, and for releasing each to the others or other all claims on account of the partnership and otherwise as are usual in cases of a like nature : Provided always that any partner giving such notice as aforesaid shall before taking or disposing of his share in the partnership when ascertained as aforesaid to any other person or persons offer the same during the space of fourteen days for sale to the partner or partners not giving such notice, the price to be paid for the share of any partner giving the notice aforesaid to be the ascertained value of his share at the time of taking such

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general account after deducting the proportion of liabilities, and if the said Christian William Kammerer shall give such notice he shall allow off the ascertained value of his shares after deduction of liabilities as aforesaid a discount of twenty per cent to the partner or partners desiring to purchase.

24. If any partner shall die during the term of the partnership the survivors shall within six months after such death cause a general account to be taken in manner aforesaid and shall pay to the executors or administrators of the deceased partner the ascertained value subject to the terms and conditions of these presents of the share of the partner so dying. And if the said Christian William Kammerer shall die then the value of his share subject to the discount aforesaid, and the partnership hereby created shall cease and determine, or it shall be lawful for the survivors and the executors or administrators of any deceased partner or partners to carry on the partnership business subject to the terms and conditions hereof as if such death had not taken place, and the account of the deceased partner or partners shall be charged with the salary of a suitable person or persons to be selected by the survivor or survivors to perform the physical work which the deceased partner or partners would have performed if he or they had not so died, and if the business shall not be so carried on by the survivor or survivors and the respective executors or administrators of the deceased partner or partners, the survivor or survivors shall execute to the respective executors or administrators of the deceased partner or partners a good and sufficient bond or bonds of indemnity against all claims and demands whatsoever on account of the business of the debts, liabilities or engagements thereof. And further, it shall be lawful for the survivors of the partners, if the executors or administrators of a deceased partner shall not wish to carry on the business as aforesaid, or for the remaining partners after notice as aforesaid, if they or either of them purchase the interest of any deceased or retiring partner to carry on the business under the like terms and conditions as herein contained to the end of the term hereinbefore mentioned, such intention to carry on the business to be signified by writing indorsed on these presents, and to be for the term aforesaid or for any extension thereof as may be mentioned in such indorsement. And the interests or shares of the partners so carrying on shall be the respective shares for the time being owned by the partners at the time of such death or withdrawal added to the interest, or share or part thereof acquired by purchase from the executors or administrators of any deceased partner, or by purchase as aforesaid from any retiring partner.

The partners, Hibben, Kammerer and Bone carried on the business under the articles of partnership until

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the death of Hibben, on the 12th of January, 1890. Thenceforward the business was carried on under the articles by the executrix of Hibben, the present appellant, Janet Parker Hibben and the surviving partners Kammerer and Bone up to the expiration of the term of seven years.

Subsequently to the expiration of the original partnership term the business was carried on by Mrs. Hibben, Kammerer and Bone up to the death of Kammerer, at a date not specified in the case, as a partnership at will.

The special case contains the following paragraph relative to the terms on which this last mentioned partnership business was carried on, viz. :

8a. After the expiration of the partnership term the said C. W. Kammerer, Janet Parker Hibben and W. H. Bone entered into a verbal agreement that the said partnership should continue on under the terms of the said deed, but the period of the time during which the said partnership should continue was not fixed by the said agreement, and the said partnership was so carried on by the said persons until the death of the said C. W. Kammerer.

Upon the death of Kammerer the other partners Mrs. Hibben and Bone resolved to continue the business exercising the power conferred upon them by section 24, that is, they gave to Kammerer's executors the notice provided for by section 24 (called therein the notice under clause two) that they would purchase Kammerer's share. Their right to do so having been contested by Kammerer's representatives, the question submitted by the special case as to the proper construction of clause 24 and its applicability under the circumstances stated was raised.

That clause 24 was applicable the parties themselves expressly admit when they say in the words of paragraph 8a. of the special case that the partnership at will was carried on under the " terms of the said deed."

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Without this admission however the result would have been the same, since there was nothing repugnant to a partnership at will in the provision as to the purchase of Kammerer's share in case of his death, and a prolongation of a partnership business at will by surviving partners and representatives of a deceased partner is in the absence of express agreement always presumed to be in the terms of the original partnership so long as these terms are not inconsistent with a partnership at will. Authorities need not be cited for so plain a proposition of law.

Then the question arises whether the deduction of twenty per cent is to be made from the valuation of Kammerer's share. I see no reason why the appellants should not have the benefit of that reduction. According to the plain meaning of paragraph 8a it must be now assumed by the court that the last partnership was expressly carried on on these terms, and I am at a loss to find ground for refusing to give effect to it. I have heard no good ground assigned in argument and I am of opinion that none can be propounded.

Lastly the respondents who are the executors of Kammerer insist that they are entitled to have the goodwill of the business and Kammerer's interest in it taken into account in the valuation to be made for the purposes of the purchase of Kammerer's share. The goodwill is one of the partnership assets and most certainly ought to be taken into account in valuing the business and assets. The case of Steuart v. Gladstone[1] relied on as an authority for the appellants is clearly not applicable ; in that case there was an agreement to pay a retiring partner the value of his share as shown by the last annual account. It was held that this did not entitle the partner retiring to have the goodwill included as it was not included in

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but rightly omitted from the last annual account. Thus by the clearly expressed terms of the agreement it was excluded. There is nothing of this kind in the present case.

The questions submitted for the opinion of the court in the special case are as follows, viz. :

1. Whether the said Janet Parker Hibben and William Henry Bone are entitled as of right to buy the share of the said C. W. Kammerer under section 24 of the said deed.

2. If the said Janet Parker Hibben and William Henry Bone have such right, whether they have the right to buy the said share by paying to the plaintiffs the value of that share in the said business (ascertained by an account as provided in the partnership deed) less a discount of twenty per cent, or in other words, whether, if the said Janet Parker Hibben and William Henry Bone are entitled as of right to buy the share of the said Christian William August Kammerer in the said business, the plaintiff is not entitled to be paid a sum equal to 208/538ths of the value of the partnership property without any discount.

3. Whether if the defendants are enitled to buy the share of the said Christian William August Kammerer, the plaintiff is entitled in valuing the share of the said Christian William August Kammerer to anything in respect to the goodwill of the said business.

These questions must in accordance with the foregoing opinion be formally answered as follows :

(1) The said Janet Parker Hibben and William Henry Bone are entitled as of right to buy the share of the said C. W. A. Kammerer under clause 24 of the said deed.

(2) The said Janet Parker Hibben and William Henry Bone having the right to buy the share of O. W. A. Kammerer, the value of that share is to be ascertained by an account as provided in the partnership deed, and the said parties so purchasing the share are entitled to a deduction or discount of twenty per cent from the value of the share so ascertained.

(3) If the appellants (defendants below) elect to exercise their right of purchasing Kammerer's share

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the respondents are entitled to have allowed to them in taking the accounts for ascertaining the value of the share, his proportion or share of the goodwill of the business, to be valued as a partnership asset.

There must be no costs of this appeal. The appellants succeed on the two first questions submitted, but they fail on the third the important question as to the goodwill.

An order is to be drawn up stating the formal answers as above which with the record is to be transmitted to the Supreme Court of British Columbia.

Appeal allowed without costs.

Solicitor for the appellants: James H. Lawson, Jr.

Solicitor for the respondents: A. P. Luxton.