(1906) AC 494 (PC)
The Earl of Halsbury, Lord Macnaghten, Sir Arthur Wilson, Sir Alfred Wills
Author of the Judgement
16 July 1906
Brief Facts and Procedural History
There was a partnership between Goldberg- a land speculator, Trimble- an auctioneer and Bennet- a merchant, object being purchase and re-sale of certain properties belonging to Hollard (including 5500 shares of a company Sigma Building Syndicate Limited engaged in the business of selling stands of land). All transactions were to be made through Trimble, to whom the other two were to give their power of attorneys. The transaction went smoothly. Later, Trimble along with Bennet bought stands of land from the company secretly at a bargain. The reason for such secrecy given was that Goldberg was an undesirable partner and was not financially stable. A suit was instituted by the Plaintiff/Respondent.
Contentions of the Plaintiff/Respondent
- Contended that the partnership had given Trimble a mandate to buy the stands on a joint account.
- It was a general principle of a partnership that he was entitled to the profits made from the purchase.
Trial Court and High Court– in favour of the Appellant/Defendant
Supreme Court– founding on account of equity decided in the favour of the Plaintiff/Respondent declaring him entitled to share in the profits made by the other party purchased in secrecy.
Issue Before the Privy Council
Whether the Plaintiff/Respondent is entitled to share in the profits made by the Appellants.
Ratio of the Case
- Neither the purchase in question was a part of the partnership nor it was an undertaking in the rivalry with the partnership or indeed connected with it in any sense.
- The decision by the Court of Appeal was criticised. Such a purchase was not expressly prohibited under the agreement but was held by the Court of appeal as a violation of trust, the basic foundation of a partnership. It was analysed by the House of Lords that even if it was expressly prohibited, then also the remedies available would have been an immediate dissolution of the partnership or claim for damages. Nonetheless, a share in the profits made from such a purchase would still have been held out of scope.
- Lord Blackburn in one of the earlier cases observed that it is advisable in a partnership as a matter of prudence and on other grounds that all matters be above board. But in the present case, there was no legal duty on Trimble or Bennet to disclose the purchase to Goldberg unless he had a right to take part in speculation.
- Also, the partnership eventually gained from such a purchase as the company got to sell at a higher price than what it would have gotten from the Government and the partnership as a shareholder of the company was proportionately the gainer.
Decision of the Court
It was held by the Privy Council that the decision of the Court of Appeal could not be supported either on authority or any recognized doctrine of equity and hence cannot be maintained. The purchase was held “not within the scope of the partnership” despite the fact that the Appellant got to know about it while doing partnership business or that it was a similar transaction as that of the partnership.
Hence, the Appeal was allowed and the Respondent was directed to pay the cost of the Appeal.
This case analysis is done by Munmun Kaur, a Law student from Law Centre-I, Faculty of Law, Delhi University
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