Akakpo v. Soli & Ors. [1968] GLR 267.

AKAKPO v. SOLI AND OTHERS [1968] GLR 267.

 JUDGMENT OF AMISSAH J.A

STATUTORY REF.
Page 268

Amissah J.A. These proceedings are brought before me by way of a case stated under section 24 (1) of the Arbitration Act, 1961 (Act 38). The case is stated by the arbitrator appointed to go into the case arising out of a partnership dispute which was brought by the plaintiff against the defendants. The question of law arising for determination is whether in accordance with section 39 (7) of the Incorporated Private Partnerships Act, 1962 (Act 152), the second defendant, Mr. E. K. Narter-Olaga and the third defendant, Miss Genoveva Esther Marais, ceased to be partners in the Express Packing and Service Company as from 18 February 1966 or whether they remained partners in that company after that date.

There is no dispute that before 18 February 1966, all the parties to the action were partners in the company. At the end of 1966, one Mr. Soli, who is the husband of the first defendant but who was not a partner in the company, purported to dismiss the plaintiff from the company. Presumably Mr. Soli took this action because he thought he had such right conferred upon him by the fact that he had provided some of the funds for setting up of the company.

Page 269

But in January 1967, the irregularity in the purported dismissal was pointed out by the second defendant to him and the plaintiff was reinstated. I must confess that I am surprised at the open exercise of power by Mr. Soli in the company’s affairs which the partners permitted. After all he was not one of them. And the running of a partnership business is a matter for the partners. However, Mr. Soli’s interference with the company’s affairs is not the issue before me, I therefore refrain from further comment on him. Before the plaintiff’s purported dismissal one Mr. Lindsay had been employed as an auditor-secretary to the company. And disputes had flared up between him and the plaintiff. These disputes continued after the plaintiff’s re-instatement. The plaintiff, therefore sought an order from the court directing the defendants as partners of the company to submit themselves to arbitration as appears in the partnership agreement and to restrain the partners from changing the system of administration of the partnership business as agreed between the parties or from doing any act other than what the partners have agreed upon until any matters or disputes in the partnership business had been determined at an arbitration. The plaintiffs’ originating summons was filed on 18 January 1967. The arbitrator was appointed with the consent of all the parties to investigate their differences and to submit a report to the court. It was after this that Mr. Lindsay, now holding a power of attorney from the first defendant empowering him to represent her in all matters concerning the company, raised the question whether the second and third defendants had not ceased to be partners in the company on 18 February 1966, that is, on the date that the second defendant wrote a letter speaking of his and the third defendant’s withdrawal and retirement from the company. The question by Mr. Lindsay on behalf of the first defendant was raised on 17 June 1967. This was over fifteen months after the letter in question. From now onwards it would make matters clearer if I referred to the first defendant as the applicant. For the issue was substantially fought between her as applicant and the second and third defendants as respondents. I shall continue describing these respondents as the second and third defendants but the plaintiff, I shall call by his proper name, i.e. Mr. Akakpo.

The body of the letter written by the second defendant on 18 February 1966, is as follows:

“Dear Sir,

WITHDRAWAL OF PARTNERS

Pursuant to the general meeting of the partners or their representatives and senior staff on 17 February 1966, be it recorded that Mr. E. K. Narter-Olaga and Miss G. E. Marais

Page 270

have withdrawn and retired from the Express Packing & Service Company and are no longer partners thereof. The necessary changes in the company’s documents should be effected forthwith and the Registrar of Companies be informed forthwith under section 7 (1) of the Incorporated Private Partnerships Act.

Arrangements to publish the change in any of the daily papers shall be made accordingly.

You will keep the retired partners informed of their positions in the account books after the accounts are audited.

Yours faithfully,

(Sgd.) E.K. Olaga.

FOR MYSELF AND ON BEHALF OF MISS G.E. MARAIS.”

This letter was addressed not to any of the other partners of the company but to “The Manager, Express Packing & Service Company.” On 23 February 1966, the manager of the company replied in the following terms:

“Dear Sir,

WITHDRAWAL OF PARTNERS

With reference to your letter O/B/33/66 of 18 February 1966 I am directed by the management to inform you that your application is under consideration please.

Yours faithfully,

pp. EXPRESS PACKING & SERVICE CO.,

(Sgd.) Kelly V. de-Ally
MANAGER.”

Nothing more was heard from either the other partners or the “management” of the company. The letter from the manager was copied to Mr. Soli and to Mr. Akakpo. According to the evidence the second defendant wrote again on 26 December 1966, in which letter he referred to the manager’s letter of 23 February, quoted above, made some complaints about the accounts of the company, then added this paragraph:

“Finally I wish to refer again to the said letter [i.e. the manager’s letter of 23 February] in which the then manager stated that my application for withdrawal was under consideration. I understand that by that letter, I am still regarded as a partner. That is in consonance with the fact that my capital

Page 271

is being held and used by and for the partnership business. The paragraph applies to Miss Marais as well.”

Again nothing was heard from the other partners or the management of the company. When Mr. Akakpo resumed his position as an active partner of the company, the second defendant asked him whether he had seen this letter of 26 December 1966. Upon Mr. Akakpo saying no, the second defendant wrote on 12
January 1967, directly to him with a copy to Mr. Soli for the applicant attaching a copy of his letter of 26 December. In this latest letter from the second defendant, the second defendant said:

“Dear Charles,

Attached hereto is a copy of letter dated 26 December 1966 I wrote to the manager of which you say you are unaware.

By the said letter I have withdrawn my letter dated 18 February 1966 and the said withdrawal as partner is cancelled accordingly. I am therefore still a partner and so is Miss Marais.

It is necessary to mention that by the conduct and intention of all of us, all the four of us are continuing partners and it is the duty of every one to protect the interest of the partnership as a whole and of one another.

I do hope that you have realised the damage caused to the partnership business by Mr. Soli’s refusal to go into the anomalies I complained of. I also hope that you have now realised why he so refused and encouraged you to ignore me as a partner.

Sincerely yours,
(Sgd.) E. K. Olaga.”

Although this letter was copied to Mr. Soli for his wife, the applicant, it did not evoke any adverse comment from any of the partners. It was a full five months after that the applicant’s attorney, Mr. Lindsay, raised the point that by the second defendant’s letter of 18 February 1966, both the second and the third defendants had ceased to be partners of the company as from that date.

It has been submitted by learned counsel for the applicant that this must be the only possible interpretation to be put on section 39 (7) of the Incorporated Private Partnerships Act, 1962. That subsection provides as follows:

“Subject to any agreement between the partners, if the partnership is for an undefined term or has become a partnership at will in accordance with section 36 of this Act, a partner may at any time retire from the firm by giving notice in writing

Page 272

to the other partners of his intention to retire, and thereupon such partner shall cease to be a partner in the firm as from the date mentioned in the notice as the date of retirement or, if no date is so mentioned, as from the date of the communication of the notice.”

It is not a provision which to my knowledge has come up for interpretation in our courts before. And the only authority urged upon me was Lindley on Partnership (11th ed.), pp. 696–698. It was an authority relied upon by the second defendant in his submissions. At p. 698 of that learned volume appears the following general principles as to the retirement of partners according to English law:

“1. That it is competent for a partner to retire with the consent of his co-partners at any time and upon any terms.

2. That it is competent for him to retire without their consent by dissolving the firm, if he is in a position to dissolve it.

3. That it is not competent for a partner to retire from a partnership which he cannot dissolve, and from which his co-partners are not willing that he should retire.”

These were principles relied upon by the second defendant in showing that without the consent of the other partners neither he nor the third defendant could retire. But the English Partnership Act, 1890 (53 & 54 Vict., c. 39), is not the same as our Incorporated Private Partnerships Act, 1962. And one of the points of difference between the two Acts is that whereas the partner in England who insists on retiring against the will of his co-partners must be in the position to, and must, dissolve the partnership, our Act is designed purposely to avoid this result. Hence the provision in section 39 (7) of Act 152 which enables him to retire as from a specific date by merely giving written notice of the fact to his co-partners. The second defendant is himself a lawyer and it may be that he allowed his conduct to be guided by the words of wisdom in Lindley’s book. If he did, then he has certainly run a risk, namely, that of finding out later that not everything said in that authoritative book would necessarily be accepted as applicable in this country. Primarily it is to our own legislation that we must turn for inspiration and guidance on questions of partnership in this country. On this point I do accept Mr. Reindorf’s contention that Act 152 is the authority for my consideration and that it has to be construed as found.

Mr. Reindorf has contended that no agreement between the partners which may be said to have altered the provisions of section 39 (7) of that Act has been shown, therefore it must be presumed that there was no such agreement. That being the case once a written notice of his intended retirement is given by one of the partners to

Page 273

the others, that partner’s retirement automatically dates from the date of the notice. The consent of the other partners is irrelevant. Further, the retiring partner is not permitted to recall his notice.

This argument, taken at its face-value, is unexceptionable. But it does overlook one simple but fundamental fact, that, the association of two or more persons in a partnership is brought about by agreement and consent amongst those persons. Assume that one partner decides that because of his old age he ought to retire from the partnership and so writes to his co-partners to that effect. The others decided that because of the firm’s delicate position they need this partner to continue for at least another year and they persuade him to stay on, treating the letter that he wrote to them as ignored. Can it be said later that this partner retired as from the date he wrote his letter? Would it be right for those partners who succeeded in persuading him to stay on to turn round at the end of the year after he had given himself freely of those energies which he ought probably to be carefully husbanding at his age, to say that he had never been a partner during the year immediately passed? It does not seem right to me. Yet, if I understand the argument of Mr. Reindorf properly, that must be the result of section 39 (7), and that is his case. An interpretation of that subsection which produces that result would be unconscionable and unjust. And I would be prepared to hold that it is so only if the legislation is capable of no other interpretation which would do substantial justice between the parties.

Now, upon the retirement of a partner, certain steps should be taken. The remaining partners must, in accordance with section 7 of the Act, within 28 days of the retirement notify the Registrar of Companies of the fact. The registrar in turn is bound upon such notification to amend the certificate of registration of the company and insert a notice in the Gazette signifying the change. The partners who remained after the second defendant’s letter of 18 February 1966, did nothing about this. As a result the original certificate of registration with the names of all the original four partners remains to this day unaltered. It is argued for the applicant that failure to comply with this section is a matter between the registrar and the remaining partners, there being penalties provided by section 9 of the Act for a breach of the provision. That may be, but it may also be evidence, and I put it no higher than that, of the fact that all the partners had agreed that the letter of 18 February, whether it constituted notice to the partners or not, should be ignored.

Two items of evidence were put forward in support of the contention that there had been no agreement to continue the partnership with all the original four partners and I think I should here mention them. The first is an application for annual registration

Page 274

of the company which is called for by section 8 (1) of the Act. No doubt the object of this provision is to avoid the register being cluttered up with dead registrations. It certainly does not give appropriate method of notifying the registrar of a change in the partnership members. That we find in section 7 (1). The provision does not say that the application is valid only if signed by all the partners of the firm. It merely asks the partners to apply. I would have thought that this was an act which could be done by one or more of the partners on behalf of the others, the main purpose of the application being to show that the partnership continues an active existence. Nevertheless the fact remains that in an application dated 18 February 1966, that is, the same day as the second defendant’s letter of retirement, only the signatures of Mr. Akakpo and the applicant appear as the “signatures of all the partners of the company” making the application. It is significant that this was before the letter by the manager saying that the second defendant’s retirement was under consideration. The other item was a letter dated 2 March 1966, addressed to the manager of Barclays Bank by Mr. Akakpo and the second defendant as former signatories to cheques of the company. That letter is as follows:

“Dear Sir,

SIGNATURE FOR CHEQUES

You are hereby informed that there has been a change in the partners forming this firm and consequently the signatories for cheques issued or drawn by, for and on behalf of the partnership are affected.

With effect from 1 March 1966 the persons [sic] authorised to sign cheques shall be Diana N. N. Soli.

You will accordingly let us have your official card for the change.

Yours faithfully,

C. T. AKAKPO
K. NARTER-OLAGA

(Sgd.) Former signatories.”

It is worth noting that the second defendant himself signed this letter and that it was after the manager’s letter informing him that his letter of retirement was under consideration. But that this letter did not indicate the actual change which had taken place in the membership of the company, is another factor which ought not to be overlooked. Whether or not a man is a partner in a firm is not

Page 275

necessarily determined by his being a signatory of the firms’ cheques. The applicant, for example although a partner of the company from its inception, was until this letter apparently not one of the signatories to the company’s cheques. Again this letter may be evidence that all concerned had accepted that the second and third defendants should in pursuance of their letter of 18 February drop out of the company as partners. But having regard to all the circumstances of the case these two factors cannot be conclusive.

I think the issue is therefore one of evidence. It amounts to no more than this question, namely, which of the two views, retirement vel non, does the evidence support? I do not think that section 39 (7) operates in a vacuum. It is, as I have already remarked, by agreement and consent that partners are brought together. By agreement and consent they can continue to carry on together and in the course of their association choose to ignore a letter written by one of them to the others even if that letter contains the writer’s notice of retirement. To my mind section 39 (7) can operate in the manner contended for by the applicant only if the retiring partner insists on his decision to retire despite all efforts by the others to change his mind if they are of the persuasion that he should stay. So that whatever the views of the remaining partners and however much they wish their retiring partner to stay, if he says that he will not, there cannot be said to be agreement amongst the partners that the partnership should continue as it had been. Then as the law says, the retirement dates from the date of the notice. Of course the question does not arise if the surviving partners have no desire that the retiring partner should continue.

This view, I think is clearly supported by the terms of section 39 (7) itself. The subsection makes the retirement of a partner “subject to any agreement between the partners.” Mr. Reindorf in his argument said that no agreement of the partners had been shown. But his submission seems to me to be based on two assumptions, namely, that the agreement between the partners referred to in the subsection must be express and must also be prior to any notice of an intended retirement. The subsection does not say that the agreement. should conform to these conditions. And I think that in the circumstances the interpretation called for is unduly restrictive. Where for example the Act insists on an express agreement it says so, as is shown in section 41 (2). I would accordingly hold that the agreement may be inferred from the conduct of all the partners. Further, I think that it need not necessarily be prior to the notice. The simple question is whether there was any agreement that the second and third defendants should not retire when they put in their letter of 18 February 1966.

Page 276

The conduct of the parties as indicated by the letters exchanged between the manager of the company and the second defendant on the one hand and between Mr. Akakpo and the second defendant on the other, supports the contention that there was such agreement. So does the failure to notify the registrar. Against the contention is the evidence provided by the application for annual renewal of the registration of the company and also the letter to Barclays Bank making the applicant the sole signatory of the cheques. As regards this last item of evidence, Mr. Akakpo explained that he asked the second defendant to sign the letter at a time when Mr. Soli was threatening the company that if it did not allow the applicant, his wife, to be the sole signatory of the company’s cheques, he would close down the company. And I daresay it would not be impossible for Mr. Soli to cause his nominee, at least, to attempt to have the company wound up under the winding up provisions of the Act.

However, what I have said so far does not represent the sum-total of the evidence. Section 41 (3) (c) of the Act requires that within six months of one partner ceasing to be a partner, the surviving partners must purchase the interest in the firm of that former partner. The price of that interest is to be determined in default of agreement by a single arbitrator appointed by the parties or, failing agreement on the appointment, the President of the Association of Accountants in Ghana shall nominate the arbitrator. Nothing was done by any of the parties in this direction. Learned counsel for the applicant conceded to this but argued that all that failure in this matter gave rise to was an action by the former partner against the surviving partners. This may well be if the retirement was an accomplished fact and there had been a default. But in the circumstances of this case, where the conduct of the surviving partners in causing the letter of 23 February 1966 to be written has been to place the question of retirement in abeyance, the failure to comply with the particular subsection may be some evidence for consideration as to whether or not there has been an actual retirement. And in this regard it is surely extraordinary conduct on the part of the surviving partners that not only did they fail to take action under section 41 (3), not only did they continue to use the capital of the partners who were supposed to have retired, but in the case of the second defendant, they increased his share capital in the company in October 1966, namely, over seven months after they must have known that he had retired. Here again I am told that his remedy is an action at law for the illegal use of his capital. It is interesting that Mr. Reindorf submitted that this fact may be presumptive, though not conclusive, evidence of the continuation

Page 277

of the second defendant as a partner. Indeed I share that view. But he said that the presumption was rebutted by the second defendant’s letter of 18 February and the changes in the signatories to the cheques, that is, things done seven months previously. If anything I think the matter is the other way round.

There is also evidence that the other partners permitted the second defendant to solicit for the return of work which had been lost to the company, after his letter of retirement. Now the second defendant was, as far as I can find, an agent of the other partners only in so far as he was a partner. It has not been shown that he was employed in any other capacity for the company. It appears that the company has taken the benefit of the work they got but now one of the partners is anxious to deny that he was a partner and therefore an agent of hers when he performed this service. In what capacity therefore did he do the service? This I find difficult to supply an adequate answer to.

Finally, there is the all important question as to liability for the partnership debts and obligations. One may mention here section 12 (3) of the Act which provides that:

“12. (3) Notwithstanding that the firm is a body corporate, each partner therein shall be liable, without limitation, for the debts and obligations of the firm in the manner referred to in section 16 of this Act; but shall be entitled to an indemnity from the firm and to contribution from his co-partners in accordance with his rights under the partnership agreement.”

Section 16 provides that: “Every partner in a firm shall be jointly and severally liable with the firm and the other partners for all debts and obligations of the firm incurred while he is a partner.” According to section 17(4) and (5) if a partner has retired, notice of this fact ought to be given to all persons who knew that he was a member of the firm otherwise he continues to be liable to them for the partnership debts. If the outsider has had specific dealings with the firm then actual notice ought to be given to him otherwise an insertion in a daily newspaper circulating in the principal place of business of the firm is sufficient. As the liability will continue to attach to the retired partner, it is in his own interest that the required notices be given and the responsibility for giving them should be his. But how can any partner who has been led to believe by the conduct of his co-partners and to acquiesce in the position that he still is a partner give the notice? Surely he cannot. And if he does not, he continues to be liable for the partnership debts to third parties. If he has been so prejudiced only because by the conduct

Page 278

of his co-partners he has come to believe that his letter of retirement has been treated as a dead-letter, then it would be palpably unjust for any of these co-partners to be allowed to resurrect the letter at some later date, wave it triumphantly in the face of the prejudiced partner and say, “Oh, yes, you may be sued successfully for all the partnership debts incurred before today but that is your own fault because you ought to have known what the law is, ignored our conduct and given notice to all who should have had it.” I do not agree that a person should be allowed in this manner to take the benefit of a situation while shrugging off the burden. The second defendant had been led to believe that until a firm decision was taken by his other partners he and the third defendant should remain partners. He apparently had accepted the position. Not hearing about the decision for some time he removed the matter from the sphere of uncertainty by pointing out what he understood to be the current relationship amongst the partners. Nobody contradicted him. He then said he had withdrawn the letter under consideration, and this before the decision he had been waiting for was made or communicated to him. Still no dissenting voice was heard. He had all this time been prepared to accept the liabilities that his membership of the company entailed. He had even worked during this time to further the company’s interests. Then all of a sudden he is told that for every transaction that the company had undertaken since his letter was written he is to be held responsible as co-partner to third parties but he is not to enjoy the benefit of partnership because he ceased to be a partner from then. I think this monstrous.

I have no doubt that upon a consideration of the whole matter, the equities are against the applicant. And it would be wrong to interpret the law as she wants it. The conduct of the partners after the letter of 18 February overwhelmingly favours the view that that letter was treated by consent by all of them as of no effect. I think that should continue to be the case. I am reminded that there is no estoppel in matters of law. But that is not to say that there cannot be an estoppel as regards the facts to which the law must be applied.

Another point which seems fairly to arise for consideration in this case is whether a letter written by the second defendant for himself and on behalf of the third defendant to the manager of the company constitutes notice to the other partners of an intention to retire and if so whether it is an effective notice given by the two defendants. I am in considerable doubt about this. But taking the

Page 279

view that I do on the primary issue, I prefer to leave that point, which was not so seriously debated, upon.
In answer to the question posed by the arbitrator in the case he stated I hereby declare that in spite of the letter written by the second defendant on 18 February 1966, in spite of the second defendant’s withdrawal of his signature from the signatories to the company’s cheques and in spite of the omission of the second and third defendants’ names from the list of partners on the form for annual renewal of registration of the partnership, both the second and third defendants remained partners of the Express Packing and Service Company after 18 February 1966.

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button
Close
Close