Aas v Benham

BY articles of partnership, dated the 24th of June, 1874, Horace A. Clarkson, Leon Benham, and the Defendant Henry Benham, renewed and modified a partnership previously existing between them in the business of ship and insurance brokers, commission agents, and owners of ships and shares of ships, for a period of twenty-one years. The business was to be carried on in the name of “H. Clarkson & Co.” H. A. Clarkson was to be entitled to the largest share of the business, and was not to be obliged to take an active part in carrying on the business. If any of the three partners should retire or die during the term the other partners might purchase his share, and it was provided that employes of the firm might be admitted as partners in the business, or in a limited branch thereof, but the control and management was to remain in the senior partners. Under the last-mentioned provision several persons were admitted from time to time as subordinate partners.

By fresh articles, dated the 28th of December, 1880, it was agreed that the business of ship-owning should be separated from the business of ship-insurance and ship-broking and the other business of the firm, and that the separate branches of the business should be carried on under the terms of the original partnership deed of 1874, for a period of five years, from the 1st of January, 1880.

Leon Benham died on the 25th of April, 1881, and all his interest and share in the partnership of H. Clarkson & Co. were acquired by the surviving principal partners, H. A. Clarkson and the Defendant.

By a memorandum of the 10th of May, 1882, H. A. Clarkson entered into a separate agreement with the Defendant, by which, as between themselves, the ship-broking and insurance business was to be absolutely vested in the Defendant, with power to make any arrangements by taking in new partners, paying to Clarkson 12 per cent. of the profits. And as to the ship-owning business, the Defendant was empowered to put it into a limited company, but if this was not done before 1884, it was agreed that Clarkson and the Defendant should each hold his shares in the ships in his own name for his own absolute property free from interference by the other.

No company was formed to take over the ship-owning business, but Clarkson or his trustees and the Defendant divided the shares of the ships between them.

Acting under the last-mentioned powers the Defendant, on the 1st of January, 1885, made a new arrangement with the subordinate partners, who were the Plaintiffs in the present action, and a deed of that date was executed, by which it was provided that the partnership theretofore existing under the articles of 1874, as varied on the death of Leon Benham in 1881, and by the memorandum of the 10th of May, 1882, should continue, but that the partnership theretofore existing under the articles of the 28th of December, 1880, should be dissolved and should exist only for the purpose of winding-up the said ship-owning business; and that the said business of ship-broking, insurance broking, and commission agency should be carried on under the style of “H. Clarkson, & Co.”

By one of the articles it was provided that the leading control and direction of the business should rest with the Defendant during his life, but the Defendant should not be obliged to give more of his time than he should think fit to the business.

The firm of H. Clarkson & Co. thenceforward carried on no ship-owning business, and the affairs of that branch of the business had long been completely liquidated.

H. A. Clarkson died in June, 1886.

The Plaintiffs complained that the Defendant had recently commenced to use the style of “H. Clarkson & Co., ship-owning,” and to carry on a ship-owning business for his own benefit under that style at the office of the firm.

It was an important part of the ship-broking business to bring about arrangements between buyers and builders of ships, for which they obtained commission. In 1887 the firm of H. Clarkson & Co. became aware that the Spanish and Portuguese Governments were contemplating the reconstruction of their navies, and were inquiring concerning the building of new ships of war and torpedo-boats. The firm of H. Clarkson & Co. sent out Mr. Giton, one of their principal clerks, who was acquainted with the Spanish language, to try and obtain the conduct of the negotiation between these Governments and the English ship-builders. In furtherance of this purpose they endeavoured to form a syndicate of British ship-builders from whom they hoped to obtain authority to enter into such negotiations. A gentleman named Major Spilsbury intervened in this business, having obtained an introduction to the firm, and attempted to assist in carrying out their object as he was going to Spain on other business, and it was arranged that if he succeeded he should have a share of the commission that might be earned. It appeared that, at least in Spilsbury's opinion, any firm which would engage to set up a ship-building yard in Spain would be more likely to get Government orders.

While this negotiation was pending, the Barrow Ship-building Company, which was not in a flourishing condition, applied to Lord Rothschild for advice as to an improvement in their ship-building business, and he recommended them to consult the Defendant Benham as a person likely to be of use to them, especially by procuring orders for ships. Benham was accordingly consulted, and he recommended them to employ a new manager of great skill, and to lay themselves out for constructing ships of war, and for that purpose to reconstruct their company under a new name. Benham went out himself to Spain in order to procure orders for the Barrow Company, and ascertained that the Spanish Government would prefer to give orders to persons who would build ships in Spanish yards, and that a yard at Bilbao belonging to one Thomas Murietta might be obtained. Benham also came to the conclusion that if such orders could be got for the Barrow Company they would facilitate its reconstruction on a broader basis. There was a good deal of correspondence on these matters in April and May, 1887, and many letters were written by Benham and Giton on H. Clarkson & Co.'s paper, and some were signed H. Clarkson & Co., and were copied in their letter books. In one of these letters the reconstruction of the Barrow Company was referred to as “being in our hands,” and in others the reconstruction scheme, and the scheme for procuring a building yard at Bilbao were referred to as matters in which the firm had an interest.

Benham took some part in preparing a prospectus for the new company; but the prospectus ultimately issued was prepared by Mr. Nordenfelt, the celebrated engineer, and by a different firm of solicitors from those who usually acted for H. Clarkson & Co. The new company was formed under the name of the Naval Construction and Armaments Company, Limited, and the Defendant became a director with a fixed salary and percentage on the profits of the company. He was also paid considerable sums for his services in reconstructing the company.

Some further details of the matters mentioned above are referred to in the judgments of the learned Judges.

The present action was brought by the subordinate partners in the firm of H. Clarkson & Co., against Benham, complaining...