The So‐Called Lien Of A Partner
| Date | 01 October 1949 |
| Author | Walter Raeburn |
| Published date | 01 October 1949 |
| DOI | http://doi.org/10.1111/j.1468-2230.1949.tb00138.x |
THE
SO-C.ALI,ED
LIEN
OF
A
PARTNER
WHETHER
or not it was Lord Hardwicke who first described as
a
‘
lien
’
the partner’s right to have the debts of the firm paid out of
partnership property in priority to the distribution
of
the shares
of the partners themselves, this expression has come in for much
judicial criticism.
So
far
as
the present law is concerned, the word
‘
lien
’
nowhere occurs in section
89
of the Partnership Act,
1890,
which defines the right in question as follows
:-
‘39.
On the dissolution of a partnership every partner is
entitled, as against the other partners in the firm, and all
persons claiming through them in respect of their interests as
partners, to have the property of the partnership applied in
payment of the debts and liabilities of the firm, and to have the
surplus assets after such payment applied in payment of what
may be due to the partners respectively after deducting what
may be due from them as partners to the firm; and for that
purpose any partner
or
his representatives may on the termina-
tion of the partnership apply to the court to wind up the
business and affairs of the firm
’.
The section, it is to be observed, declares a right
(a)
arising
only
on the dissolution of the partnership, and (b) applying
only
to
partners,
in
that capacity, against partners in a like capacity
(or-
those claiming through them),
to
have the partnership property
applied in a particular way. The property is to be twice screened
:
first, with a view to arriving at a general surplus, by eliminating
the debts and liabilities of the firm; and then, with a view
to
ascertaining each partner’s particular share of that surplus, by
adjusting their own respective liabilities as partners of the firm.
Machinery is thereupon provided for putting this right into
operation.
That is the right which is called
a
‘
lien
’.
It
is certainly not a legal lien, the essence
of
which is the right to
detain
a
chattel from its owner as security for
a
particular indebted-
ness, and which is lost
as
soon
as possession
of
the chattel is for any
reason surrendered.
It
is thus defined in
Chitty
on
Contracts,
30th
ed., pp.
1151, 1152
:-
‘
A
lien at common law is a personal and incommunicable
right, which may be defined as a possessory interest in
a
specific
chattel, arising by implication
of
law, as distinguished from
express contract, either out of the right
of
a
person to remunera-
tion for work executed
or
services rendered on
or
in connection
with the fabric
or
substance of the chattel, or else by reason of
the indebtedness of the owner to the person having the custody
of the chattel
’.
432
Ocr.
1949 THE SO-CALIXU
LIEN
OF
A
PARTNER
433
As distinct from this, equity creates a lien in the nature of an
automatic mortgage
or
charge which attaches
to
the property
of
another, not necessarily in the possession of the person in whose
favour
it
operates, to secure payment
of
money owirlg to that person
in relation
to
that property.
A
common example of an equitable
lien is that of an unpaid vendor
who
has parted with possession
of
the property
sold,
but has nevertheless a lien in the nature of a
charge on
it
for the purchase price. Another example is that
of
trustees who have
a
lien on both capital and income of the trust.
property for all costs and expenses properly incurred in the execu-
tion
of
the trusts
(Stott
v.
jldtw,
25
Ch.L).
710,
715);
and, again,
there
is
the lien of a beneficiary on security on which trust moricy
has been advanced by the trustees, who have been ordered
to
replace the fund on the ground
of
the insufficiency of the security.
(Rt?
Whiteley,
33
Ch.D.
847;
12
App.Cas.
727.)
Thus, unlike the lien
at
common law, the equitable lien is neither
merely a personal right nor one which is bound up with possession
or
continued possession of the property to which it attaches. Apart
from agreement, the only way of shaking it
off
is either by satisfac-
tion of the obligation on which it is founded
or
by the unequivocal
substitution
for
it
of
other security. Speaking in particular of the
vendor’s lien (though the observation may aptly be applied
to
equitable liens in general) Cozens-Hardy
L.J.
said
:
‘
Now it
is
quite settled that
a
vendor’s lien is not a mere
personal equity, and that it really creates a charge upon and
an interest in the property sold, in the same manner as
if
that
charge had bccn created by writing’.
(Re
Stucley
[lOOS]
1
Ch.
67,
88.)
It
is to the equitable lien that the partner’s right under discus-
sion has been likened. The resemblance
is
seen in the operation
of
the right as a fetter upon the distribution of partnership property
until certain obligations have been discharged. But there the
analogy strictly ends. Whereas an equitable lien attaches to the
property
of
another to secure what is payable to oneself, the right
of
a
partner attaches
to
what is partly his own to secure payment
to another of what
is
contingently due from the partner himself.
The essence
of
a charge (and therefore
of
an equitable lien) is to
graft upon property a temporary interest which is intended
to
be
released
so
soon as
a
particular and independent obligation has been
performed. Whereas
a
partner’s right operates rather as a trust
designed to keep
a
fund in being until it has been ascertained what
part
of
the fund itself permanently belongs to each individual
partner.
Long before the law was codified in the Partnership Act,
1890,
the nature and scope of this lien-like right of partners was
frequently discussed in the courts.
In
1848,
the case
of
Green
V.
Rriggs
(6
Hare
895,
401
;
67
E.R.
1219,
1223)
came before Wigram V.-C.
It
was
a case in which the
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