security, that the deed only gave them a discretion as to the nature of the security which they should take, and that they had been culpably negligent in not taking any security at all, had not, it is submitted, sufficient weight with the court.

Losses arising from the unauthorized acts of dirctors or individual partners ought, it is submitted, to fall upon them alone, with whatever bona fides or good intention they may have acted, and were it not for the decisions in the cases of Ex parte Chippendale and Ex parte Bignold, the law might be said to be in conformity with this view of what is right. But the decisions referred to cannot be reconciled with it, and whilst they stand unexplained great allowance must be made for directors who exceed their powers, provided only they do so bona fide, and for what they believe to be the good of the shareholders at large.

Unauthorized, negligent or fraudulent act of partner ratified by firm binds it.

SEC. 314. When it is said that losses incurred by the unauthorized, culpably negligent, or fraudulent conduct of one partner, must be borne by him alone, it is assumed that his conduct has not been ratified by the firm, and that the loss has not been treated by the partners themselves as a partnership loss. A loss which is properly chargeable to the account of one partner only, becomes chargeable to the firm if the partners have knowingly allowed it to be so charged in their accounts, and thus taken it upon themselves. A strong instance of this is afforded by the case of Cragg v. Ford,' already referred to on another point. There the plaintiff and the defendant were partners; the defendant had engaged in adventures not authorized by the partnership articles. The plaintiff protested against this, but although the adventures ended in loss, and that loss was charged against the firm in the partnership books, the plaintiff did not at the time object or insist that the loss should be borne by the defendant. When, however, the partnership was dissolved, and its accounts made up, the plaintiff refused to allow the losses in question to be charged against the firm. But the court held that under all the circumstances of the case the master who had charged the losses against the partnership had not done wrong, and exceptions which had been taken to his report by the plaintiff were overruled.

The same principle must apply to companies; and if losses not chargeable to them are placed to their debit in the accounts and

11 Y. & C. C. C. 285; but see, as to losses arising from illegal acts, the ob

servations of Lord Eldon on Watts v. Brook, in Aubert v. Maze, 2 Bos. & P. 371.

reports in such an open and fair way as to enable the shareholders to see and understand what is done, and these accounts and reports are not objected to, but are, on the contrary, approved and adopted by the shareholders, it will be too late for them afterward to dispute the propriety of what they may thus have sanctioned.' Moreover, those shareholders who do not choose to attend meetings of which they have notice, cannot complain of their ignorance of what they might have known had they attended.'

3

Doctrine denying contribution among wrong-doers does not apply to partners. SEC. 315. There is a saying that there is no contribution amongst wrong-doers; but this doctrine is certainly inapplicable to partners in the general form in which it is enunciated. It is true that if a partnership is itself illegal, no member of it can, in respect of any transaction tainted with the illegality which infects the firm, obtain relief either in law or in equity against any other member; but there is no authority whatever for saying that if one of the members of a firm sustains a loss owing to some illegal act not attributable to him, but nevertheless imputable to the firm, such loss must be borne entirely by him, and that he is not entitled to contribution in respect thereof from the other partners. Even at law, the doctrine in question is not carried so far as this; and in equity it is not recognized to the extent to which it is at law."

Firm liable for illegal acts of partners.

SEC. 316. The claim of a partner to contribution from his copartners in respect of a partnership transaction cannot be defeated on the ground of illegality, unless the partnership is itself an illegal partnership or unless the act relied on as the basis of the claim. is not only illegal, but has been committed by the partner seeking contribution, under circumstances such that he must have known of its illegality. In either of these cases he can obtain no assistance against his copartners, and must abide the consequences of his own willful breach of the law. Upon this ground was often held (before

1 Both Ex parte Chippendale, 4 De G. Mac. & G. 19, and Ex parte Bignold, 22 Beav. 143, might perhaps have been properly decided on this ground alone. 2 See 22 Beav. 165.

3 Merry weather v. Nixan, 8 T. R. 186, and 2 Sm. L. C.; Colburn v. Patmore, 1 Cr. M. & R. 73; A. G. v. Wilson, Cr. & Ph. 1.

4 See Betts v. Gibbins, 2 A. & E 57, E. C. L. R. 29; Adamson v. Jarvis, 4 Bing. 66.

See Lingard v. Bromley, 1 V. & B. 114; and Baynard v. Woolley, 20 Beav. 583.

6 See Adamson v. Jarvis, 4 Bing. 66, E. C. L. R. 13; Betts v. Gibbins, 2 A. & E. 57.

it became lawful for partners to carry on the business of marine insurance) that if one of a firm of marine insurers paid money in respect of a loss insured against by the firm, he could not recover any part of the payment from his copartners.'

But if the partnership is not itself illegal, and if the partner claiming contribution has not himself been knowingly guilty of a breach of the law, his claim will prevail, although the loss in respect of which it is made may have arisen from an unlawful act. This appears from Campbell v. Campbell, where a firm of distillers had incurred a penalty in consequence of a purchase of illicit whisky. The purchase was made by the managing partners, and one of the members of the firm, who took no part in its business, was entirely ignorant and innocent of what had been going on. The firm was convicted for the full amount of the penalties claimed, but the crown, on being memorialized by the innocent partner and the principal of the acting partners, remitted the penalties except to the amount of 3,000l. This sum was levied partly on the property of the firm and partly on that of the innocent partner only. He then claimed to have the whole of what he had been compelled to pay made good to him by his copartners, on the ground that they alone had been guilty of the illegal purchases. The innocent partner obtained a verdict for the whole amount claimed, with interest; and his copartners were adjudged liable, jointly and severally, to indemnify him. A motion for a new trial was refused. An appeal to the Lords was dismissed with costs, for technical reasons, to which it is not necessary to allude; but the Lord Chancellor, in giving the judgment of the house, expressed a strong opinion that the defense of illegality which was set up could not be supported. His Lordship said, "If this objection could prevail, that because these parties were all guilty of a common offense, therefore out of such a transaction no contribution could arise, it would be an answer to him (i. e. the innocent partner) if he had paid the whole, and demanded contribution only against the other parties. Again, in a recent case where a company had illegally commenced business before the amount of capital required by statute to be paid up had been paid up, it was held that the shareholders were nevertheless liable amongst themselves to contribute to the discharge of the debts of the company."

1 Aubert v. Maze, 2 Bos. & P. 370. 27 Cl. & Fin. 166. See, too, Woolley v. Bate, 2 Car. & P. 417; Pearson v. Skelton, 1 M. & W. 504.

Ex parte Longworth's Executors, 1 Johns. 765, and on appeal, 6 Jur. (N. S.) 1.

When all are in pari delicto.

1

SEC. 317. The case which presents most difficulty is one in which an unlawful act has been knowingly performed by all the partners, so that all are in pari delicto. There is a dictum of Lord Cottenham to the effect that in such a case each partner must bear all the loss he may happen to sustain, and that he cannot require his copartners to share that loss; but, on the other hand, there is a recent decision which goes far to show that the loss ought to be apportioned between all the partners, unless the illegal act in question is a pure tort, or a direct violation of some statute, or unless the contract of partnership is itself void on the ground of illegality. It is apprehended that if all the members of a firm were equally guilty of a breach of trust, and one of the firm alone had made it good out of his own moneys, he would be allowed, in taking the partnership accounts, to charge his copartners, ratably with himself, with the amount paid by him.

Of interest.

SEC. 318. The principles upon which, in taking partnership accounts, interest is allowed or disallowed, do not appear to be well settled. The state of the authorities is, in fact, not such as to justify the deduction from them of any general principle upon this important subject.

By the common law, in the absence of a special custom or agreement, a loan does not bear interest; and notwithstanding many dicta to the contrary, the same rule appears to prevail in equity. But by the custom of merchants interest is payable in cases where, by the general law, it is not; and mercantile usage and the course of trade dealings have been held to authorize a demand for interest on moneys bona fide advanced by one partner for partnership purposes, even where the advance was made without the knowledge of the other partners."

Inasmuch as what is fair for one partner is so for another, and the firm when debtor is charged with interest, it seems to follow that if one partner is indebted to the firm either in respect of money borrowed, or in respect of balances in his hands, he ought to be charged

1 See A. G. v. Wilson, Cr. & Ph. 1. 'See Baynard v. Woolley, 20 Beav. 583. 3 See Calton v. Bragg, 15 East, 223; Higgins v. Sargent, 2 B. & C. 349; E. C. L. R. 9; Shaw v. Pickton, 4 id. 723; E. C. L. R. 10; Page v. Newman, 9 B. & C. 738; E. C. L. R. 17; Gwyn v. Godby, 4 Taunt. 346.

'See Tew v. The Earl of Winterton, 1

Ves. Jr. 451; Creuze v. Hunter, 2 id. 157; Booth v. Leycester, 1 Keen, 247, and 3 M. & Cr. 459.

'See Ex parte Chippendale, 4 De G. Mac. & G. 36; Ex parte Bignold, 22 Beav. 176, and Omychund v. Barker, Coll. on Partn. 231, note; Denton v. Rodie, 3 Camp. 496. But see, contra, Stevens v. Cook, 5 Jur. (N. S.) 1415.

3

with interest on the amount so owing, even though on the balance of the whole account, a sum might be due to him.' In practice, however, it would appear that interest is not charged on money belonging to the firm, but outstanding in the hands of one of the partners; unless fraud in its retention can be imputed to him. Nor in taking a partnership account, will interest be computed on the capital of the partners unless there is some agreement to that effect, or the partners have themselves been in the habit of charging such interest in their accounts.*

Where one partner claims a benefit obtained by his copartner, and succeeds in establishing his claim, he is charged, as the price of the relief afforded, not only with the amount actually expended by his copartner in obtaining the benefit, but with interest on that amount." On the other hand, if one partner has, in breach of the good faith due to his copartners, obtained money which he is afterward compelled to account for to the firm, he will be charged with interest upon the amount at the legal rate."

Where a partnership has been dissolved by the death of one partner, and the surviving partner keeps the accounts in such a way as to render it impossible, until after the lapse of a considerable time, to ascertain the balances due to himself and his deceased partner, it is clear that neither the surviving partner nor his representatives can claim interest on the sum ultimately found due to him or his estate,'

Of the division of profits and of dividends.

SEC. 319. The realization and division of profit is the ultimate object of every partnership, and the right of every partner to a share of

I See Beecher v. Guilburn, Moseley, 3. In Rhodes v. Rhodes, 8 W. R. 204, the court held that a partner could not be charged with interest on moneys of the firm drawn out by him in excess of what had been drawn out by his copart ner. There were no articles of partnership.

See Webster v. Bray, 7 Ha. 591, where interest on balances in the hands of the defendant was asked for but not given. See, too, Stevens v. Cook, 5 Jur. (N. S.) 1415.

3 As in Hutcheson v. Smith, 5 Ir. Eq. 117, where, however, the partner retaining the money was also a receiver appointed by the court.

See Miller v. Craig, 6 Beav. 433, where interest was allowed.

'See Hart v. Clarke, 6 De G. Mac. &

G. 254; see, too, Perens v. Johnson, 3 Sm. & G. 419.

See Fawcett v. Whitehouse, 1 R. & M. 135.

Boddam v. Ryley, 1 Bro. C. C. 239; 2 id. 2; and 4 Bro. P. C. 561; Mumford v. Murray, 6 Johns. Ch. (N. Y.) 111; Taylor v. Young, 2 Bush (Ky.), 432; Bowlings v. Dobyns, 5 Dana (Ky.), 438. No general rule in reference to this matter exists, but the question must be determined by the facts and circumstances of each case. Gyger's Appeal, 62 Penn. St. 80. Generally, interest is not allowable upon advances unless there is an agreement to that effect. Day v. Lockwood, 24 Conn. 186. such an agreement may be implied from their former course of dealing. Pond v. Clark, 24 id. 384.

But