Ainslie v Morrison (Civil Appeals Nos. 5 and 6 of 1951) [1951] EACA 96 (1 January 1951)

## COURT OF APPEAL FOR EASTERN AFRICA

Before WORLEY, Ag. President, LOCKHART-SMITH, Ag. Vice-President, and SINCLAIR, Ag. C. J.

G. G. T. AINSLIE, Appellant (Original Applicant)

ALEXANDER MORRISON, Respondent (Original Respondent)

AND

ALEXANDER MORRISON, Appellant (Original Respondent)

G. G. T. AINSLIE, Respondent (Original Applicant)

Civil Appeals Nos. 5 and 6 of 1951

(Appeal from the original order of H. M. High Court of Tanganyika—Paul, C. J.) Partnership dispute—Arbitration—Application to remit refused by High Court.

In a firm of advocates the first partner was appointed trustee in a bankruptcy at a remuneration fixed by the creditors. The first partner informed the second partner of the appointment but did not inform him that the firm would be employed as advocates for the petitioning creditors and for the first partner in his capacity of trustee.

The first partner, after the second partner had joined the Army, found himself single-handed and carried on as trustee of the bankrupt's estate and also acted as advocate employed in the bankruptcy. The second partner claimed that the remuneration earned by the first partner as trustee should be divided on the partnership basis. The arbitrator awarded the second partner a sum equal to onethird of the first partner's net earnings as trustee in the bankruptcy after allowing for all his expenses therein and both partners were dissatisfied in some respects with the terms of the award and each applied to the High Court of Tanganyika for the award to be remitted to the arbitrator with a declaration as prayed on certain issues. Both applications were refused by the High Court. Both first and second partners appealed to the E. A. C. A. against the High Court Order.

Section 81 (5) Bankruptcy Ordinance (Cap. 25) provides: -

"A trustee shall not, under any circumstances whatever, make any arrangement for or accept from the bankrupt, or any advocate, auctioneer. or any other person that may be employed about a bankruptcy, any gift. remuneration, or pecuniary or other consideration or benefit whatever beyond the remuneration fixed by the creditors and payable out of the estate, nor shall he make any arrangement for giving up, or give up, any part of his remuneration either as receiver, manager, or trustee, to the bankrupt or any advocate, or other person that may be employed about the bankruptcy."

The first partner contended that this section precluded the partners from sharing in the trustee's remuneration whether by way of compensation or not.

The second partner contended first that the above ground of appeal was tantamount to saying that there was an error of law on the face of the award-the Arbitration Ordinance (Cap. 5, section 14) followed closely the English Arbitration Act, 1889, section 10, and English law applied—and that there was no such error of law on the face of the award—and that the appeals by both partners should be dismissed.

In the alternative the second partner claimed that the division of the trustee's remuneration between the partners was not in breach of section 81 (5) of the

Bankruptcy Ordinance. Further, it was argued that the first partner had committed a breach of the partnership agreement by accepting the appointment as trustee for his private benefit and was consequently disentitled by the said agreement to any share of the profits from the said firm during the continuance of the breach.

Held (21-9-51).—The Arbitrator's Award clearly did not state any legal proposition but merely referred to the law and deliberately refrained from attempting to state it.

There being no error of law on the face of it, the award should stand.

Appeal dismissed.

Cases cited: Hodgkinson v. Fernie, (1857) 3 C. B. (N. S.) 189; Bhara & Co. v. Jivraj<br>Baloo Spinning & Weaving Co. (47 I. L. R. (Bombay) 578; Ujagar Singh v. H. A. Murray<br>17 E. A. C. A. 8 (Civil Appeal No. 27 of 1949); Hari Singh chants, 18 E. A. C. A. p. 50 (Civil Appeal No. 53 of 1950).

O'Donovan for appellant, second partner.

Morrison for respondent, first partner.

JUDGMENT (LOCKHART-SMITH, Ag. Vice-President).—These two appeals are preferred against an Order made by the learned Chief Justice of Tanganyika and, by consent, they have been taken together.

The appellant in Civil Appeal No. 6 of 1951 is Mr. Alexander Morrison, and the respondent is Mr. G. G. T. Ainslie. Conversely, the appellant in Civil Appeal No. 5 of 1951 is Mr. G. G. T. Ainslie, and the respondent is Mr. Alexander Morrison.

The parties were, until the 31st August, 1946, partners in a firm of advocates, and it will be convenient hereafter in this judgment to refer to Mr. Morrison as "the first partner" and to Mr. Ainslie as "the second partner". During the partnership, the first partner was stationed in Dar es Salaam, and the second partner, until he joined the Army, was in Tanga.

Disputes and differences having arisen between the first partner and the second partner touching some of the matters relating to the partnership, they entered into an agreement to refer the same to the award and final arbitration of a single arbitrator.

The arbitrator duly made his award but, as both the first and second partners were dissatisfied in some respects with its terms, each applied to the High Court of Tanganyika for the award to be remitted to the arbitrator with a declaration as prayed on certain issues.

Graham Paul, C. J., thereupon made the Order above referred to refusing both applications, and it is against this Order that both the first and second partners now appeal to this Court.

The facts relevant to these appeals are that in 1939 the first partner was appointed trustee in the bankruptcy of one Hasmani at a remuneration fixed by resolution of the creditors to be at the same rate as the fees payable to the Official Receiver under the Bankruptcy Ordinance (now Cap. 25) and Rulesi.e. on a percentage basis. The trusteeship was a heavy task, amounting to a fulltime, or almost full-time, appointment. The first partner informed the second partner of the appointment, but, as the arbitrator found, did not inform the second partner that the firm would be employed as advocates for the petitioning creditors and for the first partner in his capacity of trustee.

In fact, the firm were so employed, and the second partner maintains that had he been informed of this arrangement, he would have objected to it. The first partner originally had the intention of confining himself to his work as trustee in

relation to the bankruptcy and of leaving it to other members of the firm to act as advocates on his behalf and on behalf of the petitioning creditors. After the outbreak of war, however, when the second partner had joined the Army, he found himself single-handed, and not only carried on as trustee of the bankrupt's estate, but also acted as the advocate employed in the bankruptcy.

The second partner understood that the trusteeship was being undertaken by the first partner on behalf of the partnership, and claims that the remuneration earned by the first partner as trustee should be divided on that basis. He maintains that he never contemplated that the first partner would be acting as advocate for himself as trustee. The first partner maintains that the understanding was that he should retain all his remuneration as trustee and claims that he was and is entitled to do so.

On this issue, the arbitrator found as follows: $-$

"I award that the respondent, Mr. Ainslie (the second partner), is entitled to payment from the claimant (the first partner) of a sum equivalent to onethird of his net earnings as trustee in the Hasmani bankruptcy, after allowing for all his expenses therein (including any payments made to the firm for the use of office or staff) and the production by the claimant of all such accounts as may be necessary for the purpose of arriving at that sum."

The learned Chief Justice having declined to interfere with this finding, the first partner now asks that the Chief Justice's Order should be reversed, with the consequence that an order should be made in the terms applied for to the High Court, namely that the issue should be remitted to the arbitrator with a declaration that the second partner is not entitled to any payment in respect of the first partner's remuneration as trustee in bankruptcy of H. D. Hasmani.

The first partner relies on the following ground of appeal: —

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"The learned Chief Justice erred in failing to hold that section 81 subsection (5) of the Bankruptcy Ordinance did preclude the appellant's (the first partner's) partners from sharing in his remuneration as trustee whether by way of compensation or not."

Section 81 (5) of the Bankruptcy Ordinance (Cap. 25) reproduces almost verbatim section 82 (5) of the Bankruptcy Act, 1914, and reads as follows: $-$

""A trustee shall not, under any circumstances whatever, make any arrangement for or accept from the bankrupt, or any advocate, auctioneer, or any other person that may be employed about a bankruptcy, any gift, remuneration, or pecuniary or other consideration or benefit whatever beyond the remuneration fixed by the creditors and payable out of the estate, nor shall he make any arrangement for giving up, or give up, any part of his remuneration, either as receiver, manager, or trustee, to the bankrupt or any advocate, or other person that may be employed about the bankruptcy."

$\cdot\quad\cdots$ Mr. O'Donovan, for the second partner, submits that the first partner's ground of appeal is tantamount to saying that there is an error of law on the face of the award. This is one of the grounds on which, in England, the Court may remit an award to an arbitrator. The Arbitration Ordinance (Cap. 5) is based on the English Arbitration Act, 1889, and, in particular, section 14 of the Ordinance, which deals with the power of the Court to remit an award, follows very closely section 10 of the English Act. English law should, therefore, Mr. O'Donovan contends, govern the present appeals, and there being, in his submission, no error in law on the face of the award, both the first partner's and the second partner's appeals be dismissed. $\mathcal{L}$ $\mathcal{O}(\mathcal{A}^{\otimes n})\cong \mathcal{O}(\mathcal{A}^{\otimes n})$ 计图 化自由定

in the event of this submission not being accepted, then, Mr. O'Donovan maintains, the arrangement which the second partner believed to have been made -namely, that the first partner's remuneration as trustee was to be divisible between the partners, and that the firm would not be employed as advocates in the bankruptcy—was not in breach of section 81 (5) of the Bankruptcy Ordinance.

In the like event, Mr. O'Donovan also relies on the second partner's third ground of appeal which reads: -

"The learned Chief Justice erred in failing to hold that the respondent (the first partner) committed a breach of paragraph 3 of the partnership agreement by accepting an appointment as trustee for his private benefit and is consequently disentitled by paragraph 4 of the said agreement to any share of the profits from the said firm during the continuance of the said breach." In *Hodgkinson v. Fernie* (1857), 3 C. B. (N. S.) 189 at 202, Williams, J., said: —

"The law has for many years been settled, and so remains to this day, that, where a cause or matters in difference are referred to an arbitrator. whether a lawyer or a layman, he is constituted the sole and final judge of all questions both of law and fact."

In dealing with the exceptions to this rule, the learned Judge referred to "one other, which, though it is to be regretted, is now, I think, firmly established, viz. where the question of law necessarily arises on the face of the award, or upon some paper accompanying and forming part of the award. Though the propriety of this latter may very well be doubted, I think it may be considered as established."

The regret expressed by Williams, J., was due, no doubt, to the consideration that when parties have voluntarily agreed to submit their disputes to the final award of an arbitrator, they ought to be bound by the latter's decision. Otherwise, as in the present instance, the result is the prolongation of litigation. The regret has, as Lord Dunedin said in delivering the judgment of their Lordships of the Judicial Committee in Champsey Bhara and Co. v. Jivraj Baloo Spinning and Weaving Co. (47 I. L. R. (Bombay) 578 at 586), "been repeated by more than one learned Judge, and it is certainly not to be desired that the exception should be in any way extended".

In the latter case their Lordships defined an error of law on the face of the award in the following terms: $-$

"An error of law on the face of the award means, in their Lordships" view, that you can find in the award or a document actually incorporated thereto, as for instance a note appended by the arbitrator stating the reasons for his judgment, some legal proposition which is the basis of the award and which you can then say is erroneous."

It does not matter that it may be inferred from the award that the arbitrator must have taken a mistaken view of the law. Before the Court can remit his award to him, it must be shown that has "tied (himself) down to some special legal proposition which then, when examined, appears to be unsound". (Champsey Bhara's case supra).

In Civil Appeal No. 53 of 1950 of this Court (not yet reported) an arbitrator had made an award upon matters in dispute arising out of a building contract. The award was capable of the construction that the arbitrator was under the impression that when a contract is an entire one for a lump sum and the party liable to complete the contract works for that sum fails to do so, he is nevertheless entitled in law to payment for so much of the work as has actually been $\mathcal{A} \neq \mathcal{A} \cup \mathcal{A} \cup \mathcal{A}$ during mat $done.$ $\mathcal{L} = \mathcal{L}$

This was an erroneous view of the law, as this Court has held in Civil Appeals Nos. 27 of 1949 and 36 of 1950 (also not yet reported) but in as much as the arbitrator did not positively misstate the law or "tie himself down to some special legal proposition", this Court declined to remit the award to him.

The arbitrator's actual award on this issue as quoted above clearly does not state any legal proposition. The reasons he has appended thereto are as follows:-

"Having regard to articles 3 and 4 of exhibit M1 (i.e. the partnership agreement) the letters written by Mr. Morrison to Mr. Atkinson and Mr. Ainslie at the time of his appointment to the trusteeship, and the usual practice of lawyers in partnership, I have no hesitation in finding an implied agreement at that time (with those two partners at any rate, and whatever alternative Mr. Morrison may have had in mind) that his remuneration as trustee should be treated as a profit of the firm and shared with his partners accordingly.

It may be that such an agreement was illegal by reason of section $81$ (5) of the Bankruptcy Ordinance, and the fact that the firm was employed as advocates for the petitioning creditors and for the trustee, though Mr. Ainslie was not aware of that fact; and it may be that such an agreement is consequently void (under the Indian Contract Act) and that I am therefore unable to make any award by way of enforcing it.

Nevertheless, if that be so, I think that Mr. Ainslie is still entitled to compensation, on the ground that his consent to Mr. Morrison accepting the appointment was procured by a misunderstanding for which Mr. Morrison was to blame; and it seems to me that this compensation must be assessed by reference to the value of the time which Mr. Morrison spent on the trusteeship without profit to the firm, and that the only possible measure of such value is what he was able to earn during that time. In saying this, I appreciate that much of the time so spent must have been overtime; but so is much of the time spent by any successful and self-respecting lawyer (at any rate in East Africa) on the business of his firm.

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Therefore, whichever way the law may run, I think that Mr. Morrison should pay to Mr. Ainslie a sum equivalent to one-third of the net amount earned by him as trustee, after allowing for all expenses (including sums paid to the firm for the use of their offices and staff), with all accounts necessary for that purpose. If I am right in this, similar considerations must also apply to the late Mr. Atkinson's estate, but that is no concern of mine in this arbitration.

On the foregoing basis, there is no question of Mr. Morrison not being entitled to his full share of all fees earned by the firm in or about the bankruptcy. If section 81 (5) applies to this case, any share of such fees paid to him must have been illegally paid, and therefore irrecoverable. If it does not apply, the implied arrangement on which I am working would not have contemplated depriving Mr. Morrison of his share of any fees earned by the firm."

Do these reasons contain an error of law on their face? In my opinion, they do not. The arbitrator has referred to the law, but he has deliberately refrained from attempting to state it. A "proposition" is "a statement, assertion" (see the Concise Oxford Dictionary). The arbitrator has certainly not "tied himself down to some legal proposition which, when examined, appears to be unsound".

He has found that the second partner's consent to the acceptance by the first partner of the trusteeship in bankruptcy was produced by a misunderstanding for which the first partner was to blame, by which I understand the arbitrator to have meant that the second partner never appreciated that the first partner intended that the trustees remuneration would be retained by himself, or that the firm might or would act as advocates in the bankruptcy.

For this reason, the arbitrator has found that the second partner is entitled to some compensation, and has assessed such compensation by reference to the value of the time which the first partner spent on his work as trustee without profit to the firm. The arbitrator has found further that the measure of such value must be the amount earned by the first partner by way of remuneration as trustee in the bankruptcy. On this basis, he has awarded that the first partner should pay to the second partner a sum equivalent to one-third of the net amount earned by the first partner as trustee.

I can see nothing in this reasoning which amounts to an error of law on the face of the award, and, in my opinion, the award should stand.

I would dismiss both appeals.

SIR NEWNHAM WORLEY, Ag. President.—I concur with the judgment read by the Acting Vice-President and have nothing to add. I agree that both appeals should be dismissed.

SINCLAIR, Ag. C. J. (Tanganyika).—I concur.