Tower Cabinet Co. Ltd v. Ingram (1949)

An outgoing partner faces two distinct dangers, and candidates run them together.

The first is holding out under s. 28: a person who represents himself, or knowingly permits himself to be represented, as a partner is liable to anyone who gives credit to the firm on the faith of that representation.

The second is failure to give public notice under s. 32(3): a retired partner and the continuing partners remain liable for acts of the firm until public notice of the retirement is given. But that sub-section has a proviso — a retired partner is not liable to any third party who deals with the firm without knowing that he was a partner.

Tower Cabinet decides both points against the creditor, and gives the two propositions students most often need: knowingly suffers means actual knowledge, not carelessness, and apparent partner means apparent to the person dealing with the firm, not apparent to the world.

In January 1946, Mr A.H. Christmas and Mr S.G. Ingram began to carry on business in partnership as household furnishers under the name Merry's, at Silver Street, Edmonton. The partnership was registered under the business names legislation as being carried on by Christmas and Ingram.

The partnership subsisted until 22 April 1947, when the parties agreed to dissolve it. The master was satisfied that there had been a dissolution in April 1947, and that Ingram had given notice to the firm's bankers that he had ceased to be a partner. From then until some time in May 1948 Ingram had no connection with the business, except that Christmas had agreed to pay him about £3,000 for his share, of which about £1,000 had been paid by instalments.

Ingram was not professionally represented at the time of the dissolution. He arranged with Christmas to notify those dealing with the firm that he had ceased to be connected with it, but he did not advertise the fact in the London Gazette, which was the statutory mode of public notice under the English Act.

After his departure, new notepaper was printed. While Ingram had been a partner the notepaper was headed Merry's and bore both names, indicating that both were partners; after the dissolution the new notepaper bore Merry's and A.H. Christmas, Director.

In January 1948 the Tower Cabinet Company, through a representative, obtained an order from Merry's for six suites of furniture. A director of the company telephoned Merry's and asked for a director to confirm the order. A confirmation was then written in the form of an order dated 5 January 1947 in mistake for 5 January 1948. That order was written on the old notepaper bearing both names, and was signed by Christmas as manager. Christmas had no authority from Ingram to use it, and in using it he was acting in direct conflict with the arrangement he had made with Ingram to notify people that Ingram was no longer interested in the firm.

In May 1948 Ingram, worried about the state of the business, put some £300 into it and tried to take control again in order to salvage his share; a letter went from Christmas to the company saying he was no longer connected with the business and that Ingram was now sole proprietor — a letter written, on Ingram's evidence, without his knowledge or authority.

It was clear on the master's findings that in January and February 1948, when the goods were ordered and delivered, Ingram was not in fact a partner. The company, having obtained judgment against the firm, sought to make Ingram liable.

1. Did Ingram represent himself, or knowingly suffer himself to be represented, as a partner?
2. Was he an apparent member of the old firm, so as to remain liable in the absence of public notice; and does the protection for a partner not known to the person dealing with the firm apply only to a dormant partner?

The appeal was allowed. Ingram was not liable.

On holding out. Before the company could succeed, it had to satisfy the court either that Ingram by words spoken or written or by conduct represented himself as a partner — and there was no evidence of that — or that he knowingly suffered himself to be represented as a partner. The only evidence of that was that the order was given by Christmas on notepaper containing Ingram's name. That amounted to a representation by Christmas that Ingram was still a partner; but on the evidence and the master's finding the representation was made without Ingram's knowledge and without his authority. That being an unchallenged finding of fact, it is impossible to say that Ingram knowingly suffered himself to be so represented.

Then comes the sentence to memorise. The words are knowingly suffers — not being negligent or careless in not seeing that all the notepaper had been destroyed when he left.

On apparent members. The company argued from an old authority, Farrar v. Deflinne, for a distinction between notorious partners and profoundly secret partners, and said that the protection for a partner unknown to the customer applied only to the latter. Lynskey J. found difficulty in adopting that construction. The point turns on the meaning of apparent members: apparent to whom? In his reading, apparent members means persons who appear to be members to the person who is dealing with the firm, and they may be apparent because the customer has dealt with them before, or because of the use of their names on the notepaper, or from a sign outside the door, or from some indirect information.

On the protection for an unknown partner. The words of that provision are simple and obvious and deal with the particular individual, not with the public at large: a partner not having been known to the person dealing with the firm to be a partner. Whether he was to other people an apparent partner, or whether he was a dormant partner, the words apply equally. If the person dealing with the firm did not know that the particular partner was a partner, then from the date of his retirement he ceases to be liable for further debts contracted by the firm with that person. That the customer may later discover he was a partner is irrelevant, because the date from which the provision operates is the date of the dissolution.

The company said it did know Ingram was a partner, because the order form said so. The judge held that the document, which came into existence only in January 1948, was a representation by Christmas that Ingram was a partner at that date — and that representation was untrue. One cannot infer from it that the company knew Ingram had been a partner before the dissolution in April 1947; and even if it did give such notice, the provision had already begun to operate.

Lord Goddard C.J. agreed, adding two points. The words all apparent members mean all members apparent to the person dealing with the firm. And the true construction requires actual knowledge, which may be acquired either because the fact is notorious or because it has been directly communicated; it is not enough to say that other people knew. A fact may be so notorious that a tribunal would be justified in finding that the particular person knew it, but it does not follow, because others know it, that he knew it.

A retired partner is not liable by holding out unless he made the representation himself or knowingly suffered it to be made; negligence in failing to withdraw old notepaper is not enough. And a person is an apparent member, and is affected by the absence of public notice, only in relation to a customer to whom he was apparent — a retiring partner is not liable to a person who, at the date of dissolution, did not actually know him to be a partner, whether that ignorance arose because the partnership was dormant or otherwise.

Section 28(1) is in the same terms as the English holding-out provision: represents himself or knowingly permits himself to be represented. So the actual-knowledge reading of knowingly applies directly.

Section 32(3) makes the retired partner liable until public notice is given of the retirement, and its proviso says that a retired partner is not liable to any third party who deals with the firm without knowing that he was a partner. That is the Indian counterpart of the provision Lynskey J. construed, and Tower Cabinet is authority that it protects any partner, dormant or not, from a customer who did not know of him.

Section 72 prescribes how public notice is given in India: for a registered firm, notice to the Registrar under s. 63 and publication in the Official Gazette and in at least one vernacular newspaper circulating in the district of the firm's place of business; in any other case, the Gazette and newspaper publication alone. Ingram's mistake was exactly the one s. 72 is designed to catch — he told the bank, and he asked his partner to tell the customers, but he gave no public notice.