Fawcett v Whitehouse
| Jurisdiction | England & Wales |
| Judgment Date | 21 December 1829 |
| Date | 21 December 1829 |
| Court | High Court of Chancery |
English Reports Citation: 39 E.R. 51
HIGH COURT OF CHANCERY
S. C. 8, L. J. Ch. (O. S.), 50. See Imperial Mercantile Credit Association v. Coleman, 1871, L. R. 6 Ch. 563 n.; Dunne v. English, 1874, L. R. 18 Eq. 535; Hay's Case, 1875, L. R. 10 Ch. 601; New Sombrero Phosphate Company v. Erlanger, 1877, 5 Ch. D. 91. see also Partnership Act 1890 (53 and 54 Vict. C. 39) s. 29. For Hichens v. Congrere, 1 Russ. & My., 150 n., also see cases above.
[132] fawcett v. wkitehouse. De.t.. 15, 17, 21, [1829]. [S. C. 8, L. J. Ch. (O.S.), 50. See Imperial Mercantile, Credit Association \. Coleman, 1871, L. R. 6 Ch. 563 n.; Dunne, v. Enylixh, 1874, L. R, 18 Eq. 535 ; Hay's Case, 1875, L. E. 10 Ch. 601 ; New Sombrero' Phosphate Coin.pam/ v. Erlanye-r, 1877, 5 Ch. D. 91. .SV also Partnership Act 1890 (53 and 54 Viet. c. 39) s. 29. For Hicheiw v. (Jimgrere, 1 Huss. £ My., 150 n., also see cases above.] A person employed on behalf of himself and his co-partners in negotiating the terms of a lease is not entitled to stipulate clandestinely with the lessors for any private advantage to himself. Where, therefore, a sum of £12,000 was paid in pursuance of such a stipulation, the party receiving it was declared to hold it in trust for the partnership. Before the transaction was discovered, one of the partners withdrew; and, subsequently, another partner assigned a share in the stock and in his proportion of this claim to persons then admitted into the concern: Held, that the retired, the continuing, and the new partners were properly joined as co-plaintiffs in a suit to have the trust declared. Messrs. Knight & Co. were lessees for a long term, under Hill & Hopkins, of certain lands arid mineral property, with the iron works and furnaces thereunto belonging, situate at Verteg, in the county of Monmouth, where they carried on extensive business as ironmasters for a number of years. Latterly, however, they had found the works to be unprofitable, and had in consequence discontinued their operations; and as the premises were subject to a heavy rent, they became anxious to relieve themselves from farther liability by dissolving the company, and giving up or assigning their lease. With that view they set on foot a variety of negotiations with different persons, chiefly through the agency of Benjamin Whitehouse, whom they employed to look out for some enterprising capitalist, who might take the property off their hands; and finally, in November 1818, they concluded an agreement (which was afterwards, on the 2d of February 1819, carried into effect by a formal deed), whereby, in consideration of the same yearly rents and covenants as. were contained in their lease from Hill & Hopkins, they agreed to demise the lands, mines, and other premises comprised in that lease, together with certain contiguous freeholds of their own, unto William Fawcett, Charles Shand, and the said B. Whitehouae, for a term of twenty-four years. Contemporaneously with this transaction a co-partnership was formed between Fawcett, [133] Shand, and Whitehouse, for the purpose of working the mines, of which they obtained possession by virtue of .52 FAVVCETT i\ WHITEHOUSE 1 KUSS. & M. 134. their ntider-lease from Knight & Co. ; and tliey uccordiiigly continued in partnership as ironmasters, each holding an equal third share in the leasehold property and the stock till the month of November 1820, when Shand withdrew from the concern, and -assigned all hw interest in the premises, together with his share in the business, to the two remaining partners, Fawcett and Whitehouse, who carried on the trade as before. In the course of the following year several other persons were introduced into the firm, and, on the 23rl of October 1821, when, besides Fawcett and White-house, it consisted of James Hunt, Henry Hunt, Kenrick, and Priestley, a new deed of co-partnership was executed, specifying the amount of capital advanced by the different partners, and declaring the shares, which, under the arrangement then made, they were each to be considered as holding in the stock and profits of the òcompany. Shortly afterwards Whitehouse also became desirous to retire, and by an instrument, bearing date the 2d of February 1822, he released and assigned all his rights and interests under the lease and co-partnership deed to the remaining partners, in consideration of a sum of £13,i)00. The bill, which was filed by Shand, as an original partner, and by Fawcett, J. Hunt, H. Hunt, Priestley, and Kenrick, as the continuing partners, against K Whitehouse, set forth these transactions in detail. It then went on to state that, some time after the retirement of Whitehonse from the firm, the Plaintiffs had discovered, as the fact was, that, immediately on the execution of the deed of the 2d of February 1819, the Defendant had received from Knight it Co. the sum of [134] ,£12,000. It alleged that payment to have been made in pursuance of a previous agreement whereby Knight it Co. had undertaken to accommodate Whitehouse with £12,000 (at first in the form of a conditional loan, which was afterwards converted into an absolute gift) for the purpose, as was pretended, of enabling him to advance the capital required for the partnership into which he was then entering, but in reality by way of premium for his services in procuring responsible tenants for the premises, and thereby relieving the former lessees from their liabilities to Hill & Hopkins. It alleged that this agreement was studiously concealed by Whitehouse from the knowledge of his co-partners, and that it was made at the very time he was engaged, on their behalf and his own, in negotiating the treaty for the under-lease, when it was his especial duty to obtain, as he frequently professed he had done, the most favourable terms for the new company. It charged that the Plaintift's Fawcett òand Shand, in acceding to the terms of the inider-lease, and in embarking with Whitehouse in the joint adventure, had been mainly influenced by his representations, and had relied with implicit confidence on his integrity and honour ; that, inasmuch .as he had been confidentially employed for their common interest, he was not entitled to derive any private pecuniary benefit from the transaction, without communicating an equal share of it to them ; that, by accepting the alleged bonus from Knight it Co., he had intercepted an advantage that must otherwise have accrued to the partnership, which had of course sustained a loss in the terms of the contract to an equal amount; that under these circumstances his receipt of the £12,000 was, in equity, a fraud upon his partners ; and that, as to two thirds of that sum, he ought to be considered & trustee, who had received the money for their use. [135] The bill farther alleged that, doubts having arisen with respect to the rights acquired in this claim by the new partners under the deed of October 1821, the Plaintiff Fawcett, by a subsequent instrument, declared the...
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