J.A. Judgment. It is perfectly evident from the terms of this deed, and MACLENNAN the circumstances under, and purposes for, which it was executed, that the parties did not intend thereby to give either Killey or his creditors any security by way of lien or charge either upon the partnership assets generally, or upon those received from Killey. Any such intention would be very improbable, considering that the liabilities would not all be due for two years, that a good part of the partnership assets consisted of plant, tools, machinery, &c, which were for permanent use by the firm, and further, that it was intended to put the business and assets into a company as soon as possible. I think the partnership goods are, under the deed, just as free to be dealt with according to the exigencies of the partnership as if no such liabilities existed, and that the assets brought in by Killey are put on the same footing as those brought in by the Osbornes. It was not intended to sell or dispose of them in any way, or to do anything to provide a fund for the payment of the liabilities so assumed. So far, therefore, as the assets are concerned the liabilities in question were not placed by the deed in any higher relation to them than any ordinary debts. The partnership was to assume the liabilities, but it was a mere agreement or covenant, and was quite independent of the assets. As regards an ordinary creditor of a firm, it is settled by the highest authority that the partners are not trustees for him, he has no equity against them or against the assets. In Kendall v. Hamilton, 4 App. Cas. at p. 517, Lord Cairns quotes, with approval, a passage from Lord Eldon's judgment in Ex parte Williams, 11 Ves. at p. 5, which makes the position clear: "Among partners clear equities subsist, amounting to something like lien. The property is joint; the debts and credits are jointly due. They have equities to discharge each of them from liability, and then to divide the surplus according to their proportions. But, while they remain solvent, and the partnership is going on, the creditor has no equity against the effects of the partnership. He may bring an action against the partners and get judg J.A. ment, and may execute his judgment against the effects Judgment. of the partnership. But when he has got them into his MACLENNAN hands he has them by force of the execution, as the fruit of the judgment, clearly not in respect of any interest he had in the partnership effects, while he was a mere creditor." A trust, as I understand it, is an equitable obligation in respect of property, that is in respect of some specific property. There must be some specific property on which the trust is to attach or operate: Fleeming v. Howden, L. R. 1 H. L. (Sc.) 372; Page v. Cox, 10 Ha. 163. I find absolutely nothing in this deed giving either to Killey or to Killey's creditors any claim, legal or equitable, upon the partnership property, and the above authorities shew that the mere fact of being creditors would give no such claim. The proper conclusion, therefore, in my judg ment, is that no trust was created by or arose out of the deed of the 29th of February, 1884, in favour of either Killey or his creditors in respect of the notes in question. If I am right in this conclusion, then it is the case merely of a covenant between Killey and his partners that the firm would pay the notes. I think it is well settled no trust arises out of such an agreement: Colyear v. Lady Mulgrave, 2 Keen, at p. 98, cited with approval by Strong, V. C., in Mulholland v. Merriam, 19 Gr. at p. 294; In re Empress Engineering Co., 16 Ch. D. at p. 127, per Jessel, M. R." A. being liable to B., C. agrees with A. to pay B., that does not make B. cestui que trust;" In re Rotherham Alum Co., 25 Ch. D. at p. 111, per Lindley L. J. "An agreement between A. and B. that B. shall pay C. gives C. no right of action against B. I cannot see that there is in such a case any difference between equity and common law; it is a mere question of contract;" and Gandy v. Gandy, 30 Ch. D. at p. 68, per Cotton, L. J. The high authority of Lord Eldon may also be cited on this branch of the case. In Ex parte Williams, Buck, 13, in which the facts were exactly the same as here, the creditor of the individual partner sought to prove against the joint estate, the partners having agreed between 61-VOL. XVII. A.R. Judgment. themselves to pay his debt. The case was argued by three MACLENNAN of the most eminent equity counsel in England, and if J.A. Lord Eldon had conceived that the creditor had become cestui que trust by virtue of the agreement the proof would have been allowed at once. But Lord Eldon held that the creditor must make out an agreement with the firm before he could prove. I think I have shewn that no trust attached to any of this firm's assets in favour of the plaintiff, and if so what is there in the nature of property to which it could attach. It is admitted that a chose in action may be the subject of a trust: Lewin, 8th ed., p. 47. This is the kind of case referred to by Story in section 1250, referred to by the learned Judge, for he goes on to say: "Thus, for example, if a chose in action not negotiable at all, or not negotiable by the local law should be passed to an assignee, the latter would be entitled in equity to sue the party liable." The chose here was the covenant between Killey and his partners. If this had been a covenant that the Osbornes would pay Killey's liabilities the authorities cited above shew that no trust would attach to the covenant. Does it make any difference that the covenant is, not that the Osbornes shall pay, but that the partnership shall assume, or shall pay? On principle I am unable to see how if no trust attaches to the one kind of covenant it should attach to the other. But the case before Lord Eldon, before referred to, is an authority that both cases are alike in this respect. But even if we were to suppose that a trust did attach to such a covenant, what would be the effect of it? It is a covenant between partners as to something to be done by the firm. It is not a personal undertaking to pay by either of them. Killey could not sue the partners at law. Upon any breach Killey would be as much the offender as the others, and it follows he could establish no personal. liability against them at law. The only effect of the covenant, as I conceive, is that Killey could himself apply any money of the firm which might be available to the J.A. payment of the notes as they matured from time to time. Judgment. The covenant authorised him to do what would otherwise MACLENNAN have been improper, namely, to pay his private debt with the partnership money. But if there were no funds in hand, so that he could not himself pay the note, what remedy had Killey under the deed? As I have shewn he could not sue at law, he could not call on his partners either by action or otherwise personally to pay. His only remedy would be to bring a suit for the dissolution and winding-up of the partnership, in order that this part of their partnership agreement should be carried into effect. Now, if that is all Killey could do, if he could not get a personal order against his partners to pay these notes, how did the plaintiff get into a position to do that? For that is the order that has been made. The Osbornes have been ordered by the judgment to pay these liabilities personally. The judgment proceeds on the theory that the plaintiff as cestui que trust, through her trustee Killey, has a right to enforce this covenant of the partners amongst themselves. If so then I think it should have been confined to a judgment for dissolution, winding up, and payment of the plaintiff's debt out of Killey's share. That is all Killey could get, and I think that would be the measure of the plaintiff's right, if, as the Court has held, Killey was her trustee, for I do not suppose any one would contend that Killey could under the covenant insist on having these liabilities paid either in priority to or pari passu with the ordinary creditors of the firm. It is curious to observe that under the judgment which the plaintiff has recovered against Killey on the notes, she can obtain the same measure of relief, as she could have obtained through the medium of a trust of the covenant contained in the deed; she can sell his interest in the partnership under her execution, which is the same interest which would be reached the other way. It is hardly necessary to say anything further on the question of trust but this, that there is here no evidence whatever, as far as I can see, of any assignment to the Judgment. plaintiff of the chose in action, on which alone any trust MACLENNAN Could attach, nor any evidence that Killey in any other way constituted himself trustee, either express or implied, of that chose in action for the plaintiff. J.A. It remains out of respect to the learned Judges whose judgment is in review to explain why I think the case of Gregory v. Williams, 3 Mer. 582, does not govern the present. The learned Judges consider that in Gregory v. Williams the agreement was, not to pay out of property, but to pay generally. As to this I respectfully differ from the learned Judges. I think that the letters written by Williams, when read in connection with the bill of sale, make it apparent that the agreement really was to pay out of property. Goods had been assigned to him, to sell and apply the proceeds to pay what was due to him, and to pay the surplus to Parker the debtor. These goods were not his, they were the goods of the debtor. Williams held them upon trust, and then he writes saying he will pay another debt of his debtor. He could I conceive mean nothing else than he would pay out of the proceeds of the goods. This is the way in which, after careful examination, the case is understood by the Master of Rolls and by the Lords Justices in In re Empress Engineering Co.,. 16 Ch. D. at pp. 129, 130, and also by Strong, V. C., in Mulholland v. Merriam, 19 Gr. 288. The judgment also lays some stress upon what took place between the parties after the partnership was formed -the application of the plaintiff to the Osbornes for payment, the payment of part, and the negotiations for extension of time,- and it has been argued before us that these circumstances either make out, or help to make out, a trust, or that they amount to an independent agreement by the partners to pay the notes, on which the judgment can be supported. For the reasons already stated, I am respectfully of opinion that these matters do not make out, or help to make out, a trust of any kind, nor do I think that any independent agreement has been proved. |