No. 154. This is an appeal in a suit instituted by the Respondents for recovery from the Defendants of the sum of Rs. 11,642-3 on account of materials supplied and work done under contracts entered into between the Plaintiffs and the Defendant, Krummel. The Plaintiffs alleged that the Defendants were partners carrying on business under the name and style of Messrs F.C Krummel and Co., “The Home Farm;” that Krummel had entered into contracts with them as one of the partners, and that all the Defendants were, therefore, liable. They further alleged that, even if all the Defendants were not actually partners, they by their representations, acts, and conduct, had led the Plaintiffs to believe that they were partners, and the Plaintiffs having supplied materials and executed works in that belief, they were jointly and severally liable for the claim of the Plaintiffs.
The Defendant, Krummel, admitted the justice of the claim of the Plaintiffs, but denied his own liability on the ground that the other Defendants had undertaken to pay all the debts of the Home Farm, having obtained an assignment of his share in it under which he ceased to have any interest in the Farm.
The Defendant, Col. Porter, denied that he was a partner, and his liability as such, and also denied the allegation of the Plaintiffs as to representations, acts, and conduct on his part such as might induce the Plaintiffs to believe that he was partner and act on such belief. He pleaded that he was merely a lender advancing money for a share of the profits in addition to interest.
The Defendant, Mrs. Evennett, denied any concern with the “Home Farm,” at the time the contracts were entered into between the Plaintiffs and Krummel and when the materials were supplied and work was executed under the contracts.
The material issues raised in the case related to the liability of the Defendants, Col. Porter and Mrs. Evennett, either on the ground of their having been actually partners or on the ground of their having led the Plaintiffs by their representations, acts, and conduct, to believe that they were partners and to act on such belief.
On the 6th March 1905 the lower Court dismissed the suit with costs as against Mrs. Evennett and decreed it against Col. Porter and Krummel but without costs.
Col. Porter has preferred the present appeal, and the Plaintiffs, Respondents, have submitted objections, under sec. 561 of the Code as regard the order for costs.
It is conceded by the Respondents that the decree made by the lower Court must be varied, deduction being allowed for Rs. 277-5-6 an additional amount for which credit ought to have been given by the Plaintiffs. But the material points argued before us involve the consideration of somewhat difficult questions of fact and law.
In 1902, Col. Porter was the Assistant Adjutant General at Fort William and Krummel, a German, was engaged in the Wense Tannery office in Bentinck Street, Calcutta. They were strangers to each other until about the end of October. They met accidentally either about the end of October or the beginning of November at the Wense Tannery office. From the conversation they had Krummel could make out that Col. Porter had some experience in cattle farming and was interested in the business. Shortly after this meeting at the Wense Tannery office, Krummel called on Col. Porter, and, after two or three such visits, proposed the starting of a piggery business, if Col. Porter would supply the capital. After making some enquiries, and satisfying himself that Krummel could be trusted, Col. Porter agreed to lend money up to Rs. 10,000 on a proper agreement drawn up by a solicitor. Krummel's evidence on this point is in conflict with that of Col. Porter. Krummel says that Col. Porter agreed to advance up to Rs. 10,000 as a secret partner, and not as a lender. But we have no hesitation in accepting Col. Porter's testimony in preference to Krummel's, and in this matter we agree with the lower Court. Col. Porter says that he had no intention and did not give expression of any intention of being a partner until later on, as we shall presently see; and he is fully supported by the admitted documents on the record, of which Krummel's letter to Col. Porter, dated the 10th November 1902, has an important bearing on the nature of negotiations between the parties. Col. Porter is, also, supported by the testimony of Given Wilson, a Solicitor of this Court, who, acted as a solicitor in drawing up the agreements between Krummel and Col. Porter.
On the 24th November 1902 the first agreement between Krummel and Col. Porter was signed—instructions having been previously given to the firm of Messrs Morgan & Co., Solicitors, for the purpose of drawing up an agreement, and Given Wilson who was an assistant in that firm was entrusted with the duty. The agreement of the 24th November 1902 was to the effect that Col. Porter would advance money up to Rs. 10,000 to Krummel, and that Krummel would appropriate the money exclusively to the piggery business he was at once to start, and repay the money with interest at twenty-four per cent, per annum and also pay, in addition to interest, a one-third share of the profits of the business as long as any money would remain unpaid and for the period of ten years thereafter. Krummel says that there was a secret agreement as to partnership between them in shares of one-half, the necessity for the secrecy being that Col. Porter was a high Government official in the Military Department. But, agreeing with the lower Court, we entirely disbelieve the story of a secret partnership.
After getting the capital Krummel had to secure land for the business and contractors for the supply of materials and the erection of the necessary buildings. He entered into negotiations with the Barals, the owners of the land known as 4, Old Ballygunj Road, and with the Plaintiffs in this suit as well as with Mukerjee, the Plaintiff-Respondent in the next appeal. The negotiations with the Barals for the land were successful mainly through the influence of Col. Porter, and Krummel took possession of the land early in January 1903. A lease for five years as also an agreement for the conveyance of the land for Rs. 15,000 was executed later on by the Barals, i.e, on the 6th April 1903. The first agreement with the Plaintiffs was completed on the 31st January 1903, Krummel signing the estimate, “F.C Krummel. The Home Farm.” The business went by the name. “The Home Farm,” and all the documents showed that Krummel alone was its owner.
But it wan soon found that Rs. 10,000 was insufficient for the business and Col. Porter had to advance Rs. 12,888-3-0 before the 6th February 1903. On that day he and Krummel entered into a fresh contract cancelling the one of the 24th November 1902. By it Col. Porter agreed to advance up to Rs. 25,000 including Rs. 12,888-3-0 already advanced by him—Krummel was to pay interest at 12 per cent, per annum, on the advances, and, in addition thereto, a one-third share of the profits as long as any money would remain due and for fifteen years thereafter. The last agreement contains a clear covenant to repay to Col. Porter within one year the amount already advanced and to be advanced in future with interest, and also a clause by hypothecating the machinery &c., and an undertaking to execute on demand a formal mortgage of the land No. 4, Old Ballygunj Road and the buildings, fixtures and therein. Before the end of February Col. Porter advanced more than Rs. 25,000 and that amount being exhausted, Krummel applied to Col. Porter for further espital. But Col. Porter fell ill, he had to be in hospital and had, then, to go to Shillong. He, however, advanced Rs. 7,000 more than the promised sum of Rs. 25,000.
On the 6th April 1903, as we have seen, the lease and an agreement for the sale of premises No. 4, Old Ballygunj Road, were completed. The parties were the Barals and Krummel was to hold the land as a lessee for five years from the 1st January 1903, at the monthly rent of Rs. 50 and he agreed to purchase it for Rs. 15,000 before the end of the terms. Col. Porter had, to all appearances, nothing to do with the lease and the agreement, except that Krummel had already agreed to execute a formal mortgage of the land with the fixtures in it in favour of Col. Porter.
The sum of Rs. 32,000 advanced by Col. Porter failed to meet Krummel's requirements. He wanted more money and Col. Porter was not in a position to make any further payments at the time. Krummel was obliged to have recourse to other means. He applied, with Col. Porter's consent, to the Defendant Mrs. Evennett who was willing to advance Rs. 10,000. Before the middle of April a draft agreement between Krummel, Col. Porter, and Mrs. Evennett, was prepared by Graham, a Solicitor of this Court, and by the 18th April the draft was in Col. Porter's hands. Col. Porter wrote to Krummel for repayment to him of Rs. 2,000 and for Krummel to insure his life for Rs. 20,000. But it is clear, from his letters written to Krummel at this time, that he did not like Mrs. Evennett to have anything to do with Krummel's business. On the 25th April 1903 he wrote to Krummel saying, amongst other things, that it all depended on Krummel whether she (Mrs. Evennett) would ever have anything to do with the business clearly indicating that Krummel was the master of the situation and Col. Porter merely a lender. On the 7th May, Col. Porter wrote from Shiliong stating that, until the agreement with Mrs. Evennett was drawn up and signed, the existing agreement of the 6th February must hold good, again indicating in the clearest terms that, as between himself and Krummel, the terms of the agreement of the 6th February giving him the status of a lender only were operative and binding.
The agreement between Krummel, Col. Porter, and Mrs. Evennett, was completed on the 23rd May 1903, and then, for the first time, the three became partners, Krummel having a share of Col. Porter and Mrs. Evennett on terms and conditions stated in the deed. It is clear from this agreement, as well as the subsequent deed of the 7th July 1903, by which the partnership evidenced by the agreement of the 23rd May was dissolved and Krummel assigned his entire interest in the business, land, buildings, machinery &c., to Col. Porter and Mrs, Evennett for Rs. 3,500 that Col. Porter was not, and was never, thought by the parties to be a partner of the Home Farm before the 23rd May 1903.
Col. Porter took an active interest in the business started and carried on by Krummel, and it was not unnatural that he should do so. He had advanced a large sum of money and was necessarily interested in its success, perhaps more than Krummel himself who did not pay a single rupee. But there is clear and indubitable evidence of the real business relationship between Krummel and Col. Porter before the 23rd May 1903, and, in the absence of any ambiguity, the evidence of Col. Porter's oonduct with reference to the management of the “Home Farm” is of very little use in the determination of the question whether they were partners or not. In our opinion, the case clearly comes within sec. 240 of the Indian Contract Act and the rule laid down in Mollwo, March v. The Court of Wards and Badeley v. Consolidated Bank.
In Mollwo, March v. The Court of Wards the Judicial Committee held that, where a contract is entered into with a creditor that he shall receive in consideration of advances a commission on the net profits of a partnership business, and large powers of control over the business are also given to him; but no power to direct transactions, the Court, if satisfied that the contract was in fact one of loan and security, will not Interpret it as constituting a partnership. The question to be answered is one of fact, and not law, the answer depending on the real intention of the parties.
The facts of the case of Badeley v. Consolidated Bank are very similar to the facts of the present case. The Lord Justices held in that case following a catena of cases beginning with Cox v. Hickman(3) that participation in profits, although strong evidence is not conclusive evidence of a partnership, and that the question of partnership must be decided by the intention of the parties to be ascertained from the contents of the written instruments, if any, and the conduct of the parties. Their Lordships further held that the conduct of Badeley, the creditor, in looking to the advancement of the interests of the partnership, and the expressions to that effect in the correspondence, were consistent with the object of securing repayment of the money advanced and were not sufficient evidence of a partnership between the parties.
We are unable to distinguish the present case from Badeley v. Consolidated Bank. The oral evidence of intention, and the documents propounded can, in our opinion, lead to no other inference. The conclusion we arrive at is that Krummel and Col. Porter were not partners before the 23rd May 1903, and that the latter is not liable as a partner for the claim of the Plaintiffs.
On the second question argued before us, the decision of the learned Judge in the Court below is very meagre. He says— “With regard to Col. Porter, I have already held that he was a partner. I need only add that if I had held otherwise I would have been prepared to hold that he permitted himself to be held out as a partner.” An Appellate Court can derive very little assistance in coming to a conclusion of fact from a judgment worded like this. The evidence is not discussed; the reasons for the finding are not given. The record, however, is complete and we must decide the question without the help an Appellate Court ordinarily derives from the judgment of the Court which has had the advantage of recording the evidence.
The Indian law on the responsibility of a person leading another, by his words and conduct, to believe that he is a partner, is contained in sec. 245 of the Contract Act, which runs in these words— “A person who has, by words, spoken or written, or by his conduct, led another to believe that he is a partner in a particular firm is responsible to him as a partner in such firm.” The rule of law thus laid down is a part of the law of estoppel and has been treated as such in the leading authorities on the subject. Surat Chandra Dey v. Gopal Chandra Laha is a leading case in India on the subject of estoppel. There the Judicial Committee observe— “The law of this country gives no countenance to the doctrine that, in order to create estoppel, the person whose acts or declarations Induced another to act in a particular way must have been under no mistake himself, or must have acted with an intention to mislead or deceive. What the law and the Indian Statute mainly regard is the position of the person who was induced to act: and the principle on which the law and Statute rest is that it would be most inequitable and unjust to him that if another by a representation made or by conduct amounting to a representation, has induced him to act as he would not otherwise have done, the person who made the representation should be allowed to deny or repudiate the effect of his former statement, to the loss and injury of the person who acted on it. If the person who made the statement did so without full knowledge, or under error, sibi imputet. It may, in the result, be unfortunate for him, but it would be unjust, even though he acted under error, to throw the consequences on the person who believed his statement and acted on it, as it was intended he should do.” Touching the word, “intentionally” used in sec. 115 of the Indian Evidence Act, their Lordships says—“A person who, by his declaration, act, or omission had caused another to believe a thing to be true and to act upon that belief must be held to have done so ‘intentionally’ within the meaning of the Statute, if a reasonable man would take the representation to be true and believe it was meant that he should act upon it. And to this view effect was given in the case of Cornish v. Abington and the later cases.” Sec. 245 of the Indian Contract Act omits, it should be noted, the word “intentionally” which is used in sec. 115 of the Indian Evidence Act. The two Acts were passed in the same Legislative Session of the Council of the Governor-General.
In considering, therefore, the facts relating to the question of estoppel raised in this case, it is immaterial whether Col. Porter fraudulently, or even negligently led the Plaintiffs to believe that he was a partner and to act upon that belief. Even the want of knowledge on his part, of the effect of his acts and conduct would not absolve him from liability, if his acts and conduct were such as would induce a reasonable man to believe that he was a partner and to act upon such belief. In Carr v. London and North Western Railway Company, Lord Esher points out— “If a man, whatever his real meaning may be, so conducts himself that a reasonable man would take his conduct to mean a certain representation of facts ??? and that it was true representation, and that the latter was intended to act upon it in a particular way, and he with such belief does act in that way, the first is estopped from denying that the facts were so represented.” In Dickenson v. Yalpy, which is a case of partnership, Parko, J., said— “The Defendant would be bound by an indirect representation to the Plaintiff, arising from his conduct, as much as if he had stated to him directly and in express terms that he was a partner, and the Plaintiff had acted upon that statement,” No evidence of intention or knowledge of the consequences of his acts and conduct is necessary to make the apparent partner liable, as it is an established principle of the law, applicable even to the criminal law, that people are presumed to Intend the reasonable consequences of their acts.
We believe that Col. Porter never knowingly made any representations, that he was a partner, or acted or conducted himself with the knowledge that his acts or conduct would induce the Plaintiffs or Mukerjee to believe he was a partner. We do not believe that there was any direct communication between him and the Plaintiffs and Mukerjee as to his partnership with Krummel. His evidence is marked with the impress of truth and straight forwardness and we cannot, in preference to it, give credence to the testimony of the witnesses examined on behalf of the Plaintiffs and Mukerjee who attempt) to prove the contrary. Krummel is ??? unworthy of belief. In fact, ??? perly, no attempt has been made before us to induce us to act on it as to representations, either wilful or direct, by Col. Porter. We, also, do not believe the Plaintiff Silk when he says that Krummel Introduced Col. Porter, saying, in the latter's presence, that he was Krummel's “partner.” Krummel might have represented, perhaps he did represent, to the Plaintiffs and Mukerjee, behind Col. Porter's back, that the latter was his partner. Col. Porter never could have said to either the Plaintiffs or Mukerjee that the piggery business was his. The case of estoppel set up by the Plaintiffs and Mukerjee cannot, in our opinion, be supported on the ground of either direct communication or wilful misrepresentation on the part of Col. Porter.
The question, therefore, narrows itself to the effect, or rather the reasonable consequences, of the conduct of Col. Porter. We entertain no doubt that he acted throughout honestly, and, we may add, honourably, never claiming or pretending to claim any other interest, in the Home Farm, than that of a bonâ fide lender; but, it seems to us, he overstepped, on various occasions and in various matters, the limits of prudence. He acted negligently and being zealous for the improvement of the “Home Farm,” he failed to regulate his conduct in the manner appropriate to the position of a mere lender. By his conduct he led the Plaintiffs and Mukerjee to entertain the reasonable belief that he was a partner and to act on that belief. His conduct was certainly such that we cannot impute unreasonableness to the ??? Plaintiffs who are business The right to participate in the profits of trade is in itself a strong test of partnership. (Mollwo, March & Co. v. The Court of Wards and Badeley v. Consolidated Bank cited above); and, although we have held that, as between Krummel and Col. Porter, there was no contract of partnership, persons dealing with the “Home Farm,” not knowing the precise nature of the contract between them, would naturally be led to think that they were partners. It is not a violent presumption to make that Krummel spread the report, an untruthful report, that he and Col. Porter were regular partners. In fact Krummel says so and he is corroborated by Silk, Mukerjee and Baral, it was Krummel's interest to do so. The witnesses Silk, Mukerjee and Baral assert that Krummel did so.
But the unauthorized and untruthful statement of Krummel would not have affected Col. Porter, if his own conduct had not lent support to Krummel's statement and had not given ground for believing the existence of a contract of partnership between him and Krummel. At Krummel's request, Col. Porter went to the shop of the Plaintiffs and was there introduced to Silk. Silk showed him the plans and estimate and he examined them carefully and pronounced ??? that was Krummel's object.” He might not have suspected at the time Krummel's ulterior motive but the effect of his visit, his examination of the plans: and estimate and acceptance of the same is clear enough so far as the Plaintiffs are concerned. They knew that he was supplying the capital, also, that he went very often to the Farm and always showed anxiety for its success, and so Krummel's story received what we may call reasonable corroboration. Silk was led to believe and reasonably led to believe that. Col. Porter was a partner.
Again Col. Porter went to the Barals to facilitate the lease of the land; and, as he himself says his presence and influence had the desired effect. His solicitor. Given Wilson, took part in the negotiations with the Barals. The conduct of Col. Porter was no doubt in this as well as in some other matters consistent with that of a lender [Badeley v. Consolidated Bank], but it was equally, if not more, consistent with that of a partner. If we place ourselves in the position of the Plaintiffs, and realise what they saw and heard, it would be difficult to come to any other conclusion than that they believed, and had good reason to believe, that they could hold Col. Porter liable for their claim and, in that belief, they acted as they did. Every one knew that ??? as it was not unreasonable on the part of the Plaintiffs to have believed that Col. Porter was a partner having a substantial interest in the Home Farm and liable as such.
We are, therefore, of opinion that the decree passed by the lower Court is substantially correct, and we accordingly affirm it with the slight modification indicated in the beginning of the judgment. The Appellant must pay the full costs of the Plaintiffs, Respondents, in this appeal as well as the costs incurred by them in the lower Court in proportion to their success. There is no reason why they should not get proportionate costs of the original trial.
No. 155. The Plaintiff, Respondent, supplied to the Home Farm certain building materials from the 12th January 1903 to the 17th June of the same year. His suit, for the balance of the money due to him was tried along with the suit giving rise to the appeal in which we have just delivered judgment. The two appeals were, also, heard together. For the reasons given by us in that judgment, we find that the Defendants, Col. Porter and Krummel, were not partners but that they are both liable for the claim of the Plaintiffs on the ground that the former held himself out, by his conduct, to be a partner and the latter oil the ground of ??? applied to for payment, but he did so without denying his own liability, and the Plaintiff necessarily understood that Krummel was referred to as the latter was the managing partner. Col. Porter's letter to Krummel, dated the 10th March 1903, sufficiently corroborates this view. In it he says “Can't you keep Mukerjee quiet by promising him 3 or 4 per cent, interest on his account till we can settle it?” It is immaterial whether the Plaintiff did or did not see this letter until later. It shows how the Plaintiff was treated by Col. Porter.
The Plaintiff supplied materials even after the 23rd May 1903 and on the same terms as before and as if the same state of things was continuing.
We, accordingly, dismiss this appeal with costs which we assess at 5 gold mohurs.
Decree in Appeal No. 154 modified.
Appeal No. 155 dismissed.