Scottish Court of Session Decisions

Lord Gillies.—I cannot concur in the ratio assigned by the Lord Ordinary in his note, for holding Baird's liability to be less than that of a partner. His Lordship says, “In a question with third parties, not partners, the unauthorized subscriber subjects himself directly to the liabilities of a partner; but in a question with the other partners who had an opportunity, and were bound to examine his authority before they admitted him to subscribe, the more correct view seems to be, that, as he is unquestionably not a partner, so he should not be subject to liability farther than damage can be qualified, in consequence of his unauthorized subscription.” Now, whatever negligence may be thought to attach to the company, for not examining the authority of Baird before allowing him to subscribe, certainly it is not for Baird, or one in his right, to state that plea. He was much more blameable for acting without authority, than they were for relying on his character, as men often do in similar transactions, and allowing him to subscribe, without requiring inspection of his authority. And it would occur to me that, supposing him liable as a partner, he must be liable for this very debt, along with the rest; and we ought not now to subject the defenders in payment of a larger proportion of it than that which their subscriptions bear to his.

Lord President.—It is clear that the conduct of Baird could not have entitled him to a share of the profits of the concern, had there been profits, or to any of the privileges of a partner. But it is a different question, whether it did not expose him to the liabilities of a partner; and I incline to think it did.

Lord Balgray concurred.

The case was allowed to stand over for a time, after which it was again resumed.

Lord Balgray.—I do not think it possible that Baird can be viewed as a partner of this company or joint-adventure, in consequence of his subscribing, as for two of the partners, or joint-adventurers, but without their authority. Still he appears to me to have thereby placed himself in their shoes, as to all the liabilities which would have attached to them, had their subscriptions been duly authorized. I am of the same opinion with Lord Gillies, that, in suing for this debt, he should be viewed as liable for it along with the other defenders, so that a proportion corresponding to the amount of subscription (£400), for which he is responsible, should be first deducted, and decree given against the defenders for the difference only. Suppose the pursuer, as in Baird's right, had selected but one partner, and brought his action against him, he should only have got decree for one half; if there were two defenders, he should only get decree for two thirds; and so proportionally, deducting, of course, the payment to account, and the calls already made, as allowed by the Lord Ordinary.

Lord Gillies.—I hold that the late Mr Baird, by his unauthorized subscription, as for two partners, has incurred all the liabilities which would have fallen on these two parties by subscribing. He could not have drawn profits, as they could have done, supposing profits to have been realized; but he is liable to the full extent to which they would have been. I think that the amount of that subscription being taken into view, along with the amount subscribed by the individual partners in this action, a proportional part should be deducted from the account now claimed by him, and decree given only for the balance.

Lord President.—I am of the same opinion.

Lord Mackenzie,—I concur. This is a company with a common stock of loss, and nothing else. Their railway was never made, and thus there was no. thing, and could be nothing, but disbursement and loss incurred. In these circumstances, while it is true that a partner, who is also creditor of a company, may recover his debt against it, it is equally true that he must bear a share of that debt, as a partner, the whole of which he demands as a creditor. He cannot cite himself, or sist himself as a defender; but he has in him the double character of being creditor of the company, on the one hand, and debtor along with his co-partners, on the other. I think, therefore, the decree to be now given for the pursuer's account must be under deduction of such a proportion as corresponds to the amount of the subscribed stock for which he is responsible, compared with the amount belonging to the defenders.

The Court pronounced this interlocutor:—“Recal the interlocutor reclaimed against: Find that, as the deceased Hugh Baird, by his subscribing for J. H. and C. H. Baird without authority, became himself, as much as the defenders, according to the extent of their subscriptions, liable for the debt libelled, the pursuer, as his executor-creditor, is only entitled to five-sixths of the sum of £215, 1s. 10d., with interest as libelled, under deduction from said sum of £60 paid to account, with interest from the date of that payment from the defenders; and sustain the defender's plea of retention, hoc statu, to the extent of the calls of £16, payable in January, 1825, and September, 1826, with interest from the terms of payment, and decorn, and declare accordingly; reserving all questions, quoad ultra, between the parties, either as to a claim for farther payment on the part of the pursuer, or of repetition, or on other grounds, on the part of the defenders, until the affairs of the company are wound up; also all claims of relief at the instance of the defenders against each other, or at their instance or the pursuer's against the other partners of the said company, or those who may be liable for its obligations: Finds no expenses due, and, in respect of the joint minute now lodged for the parties, decern against the defenders for the sum of £171, 5s, 4d., being the amount of principal and interest due under the foregoing findings, and for interest on £115, 18s. 3d., being the principal from the said 10th June.”