Citation

2008 Scot (D) 5/8

Alternative Citations

[2008] HCJAC 44

Hearing Date

25 July 2008

Court

Appeal Court, High Court of Justiciary

Judge

Lord Eassie, Lord Wheatley and Lady Paton

Representation

Brodie (instructed by Levy & McRae, Glasgow) for the first petitioner.Stacey QC and Balfour (instructed by HBM Sayers, Glasgow) for the second petitioner.Duguid QC and G Anderson (instructed by The Anderson Partnership) for the third petitioner.Bain QC, AD and Gill (instructed by Crown Agent) for the respondent.

Abstract

Criminal procedure – Indictment – A dissolved partnership did not have any continuing legal personality following dissolution and accordingly an indictment brought by the Crown against a dissolved partnership was incompetent.

Catchwords

Criminal procedure – Indictment – Competency – Crown bringing indictment against dissolved partnership – Former partners presenting petition to nobile officium of High Court challenging competency of indictment – Whether dissolved partnership having any continuing legal personality following dissolution – Whether indictment competent – Partnership Act 1890, ss 5, 38 – Health and Safety at Work etc Act 1974, s 36 – Criminal Procedure (Scotland) Act 1995, s 66.

Summary

Section 5 of the Partnership Act 1890 provides: 'Every partner is an agent of the firm and his other partners for the purpose of the business of the partnership; and the acts of every partner who does any act for carrying on in the usual way business of the kind carried on by the firm of which he is a member bind the firm and his partners, unless the partner so acting has in fact no authority to act for the firm in the particular matter, and the person with whom he is dealing either knows that he has no authority, or does not know or believe him to be a partner.'

Section 38 of the 1890 Act, so far as material, provides: 'After the dissolution of a partnership the authority of each partner to bind the firm, and the other rights and obligations of the partners, continue notwithstanding the dissolution so far as may be necessary to wind up the affairs of the partnership, and to complete transactions begun but unfinished at the time of the dissolution, but not otherwise.'

The first and second petitioners were husband and wife, and the third petitioner was their son. They formerly carried on business in partnership under the firm name of Rosepark Care Home (or Rosepark Nursing Home). The firm formerly owned and operated a care home under that name in Uddingston. On 31 January 2004 there was a fire at the home and fourteen residents died and four others were injured. The firm was dissolved, apparently by agreement among the partners, on 28 February 2005. In December 2005 the petitioners appeared at Hamilton Sheriff Court to answer a petition charging them with contraventions of the Health and Safety at Work etc Act 1974. In August 2006 an indictment was served on them charging them with contravening duties placed on employers by the 1974 Act and related statutory provisions. The indictment contained averments that the petitioners were at the material times partners in the firm and were employers in terms of the 1974 Act. At a preliminary hearing in February 2007 Lord Hardie dismissed the indictment on the ground that the employer of those working at the home was at the material time the firm; that the firm was a separate legal person from the partners; and that accordingly the petitioners were not employers in terms of the 1974 Act. The respondent appealed against that decision, but subsequently abandoned the appeal. Thereafter, a fresh indictment, brought by the respondent against 'Rosepark Care Home also known as Rosepark Nursing Home, a now dissolved firm', was served on the petitioners. The indictment contained seventeen charges against the firm of contravention of a statutory provision. All the charges proceeded on an averment that the firm was at the material time an employer in terms of the 1974 Act. Charge 1, for example, libelled that the dissolved firm, being an employer in terms of the 1974 Act, inter alia failed to implement and maintain an adequate and effective system or strategy for fire safety at the home. The petitioners each presented a petition to the nobile officium of the High Court of Justiciary raising the same issue relating to the competency of the indictment. The petitioners' contention was that the firm was a legal person which ceased to exist when it was dissolved on 28 February 2005 and it could not thereafter be indicted. The indictment was therefore incompetent. The respondent's contention was that a partnership continued to exist after dissolution for the limited purpose of winding up its affairs and settling its outstanding liabilities; that the former partners continued to have authority to act on the firm's behalf for that limited purpose; and that the indictment against the firm was such an outstanding liability. It was therefore competent.

For the petitioners it was submitted that the Crown had purported to indict the dissolved firm. None of the former partners was indicted. On dissolution of a firm, the firm (and its separate legal persona) ceased to exist. If the firm had a continued existence after dissolution, there would be no need for s 38 of the Partnership Act 1890, because the partners' powers under s 5 to bind the firm would continue to exist. It was because the firm ceased to exist as a separate legal person on dissolution that the specific provision in s 38 giving the partners of the dissolved firm certain limited continuing powers was necessary. If, contrary to that submission, the firm had some continuing existence after dissolution, it was for the limited purpose of winding up and did not lay the dissolved firm open to criminal prosecution for an offence allegedly committed by the firm before dissolution. Thus, on either view of the question of the dissolved firm's continued existence, there was no basis for prosecution of the dissolved firm.

Statute required that a copy of an indictment be served on the accused, and that, if that requirement were not obtempered, the whole proceedings were incompetent. The relevant current statutory provision was s 66(4) of the Criminal Procedure (Scotland) Act 1995. If the firm, after dissolution, no longer existed as a separate legal person, there was no accused, and that requirement accordingly could not be complied with. Equally, if the firm subsisted only for the limited purpose of winding up, that did not include criminal prosecution, and again the statutory requirement could not be complied with. Citation of the former partners without calling them as accused, the procedure that had been adopted by the respondent, did not comply with s 66(4). Recourse to the nobile officium of the court was necessary to afford the petitioners a remedy, as they were not parties to the indictment proceedings and therefore not entitled to present a preliminary plea to the competency of the indictment against the dissolved firm. The Advocate depute advanced two alternative bases for the contention that the indictment was competent. The primary contention was that notwithstanding the dissolution of the firm, it continued and as a separate persona for certain purposes. After dissolution, the rights and obligations of the partners continued so far as necessary for the purpose of winding up the firm's affairs. As part of the winding up, the partners could be involved in defending criminal proceedings in respect of an offence committed by the firm before dissolution. The alternative contention was that, if the firm was wholly extinguished on dissolution, that did not reflect practical reality. Dissolution did not discharge the firm's pre-existing liabilities. The continued rights and obligations of the partners after dissolution meant that, criminal liability having been incurred before dissolution, it was proper to indict the dissolved firm. The only way to do so was to cite the former partners in a representative capacity, for the purpose of completing that aspect of the winding up of the firm's affairs. The language of s 38 supported the contention that the firm continued to subsist after dissolution. The argument for the petitioners implied that the prosecution of a partnership could be brought to a halt at any moment by a decision of the partners to dissolve the partnership. Policy issues favoured developing the common law theory of a continuing legal personality to enable the prosecution of a dissolved partnership.

The court ruled:

The dissolved partnership did not have any continuing legal personality following dissolution and accordingly the indictment to which the petitions were directed was incompetent.

Under the terms of the indictment the only accused was the dissolved firm. The petitioners were not parties to the indictment. It was unquestionable that in Scotland a partnership had its own separate legal personality independent of the partners. The longstanding common law rule to that effect was restated in s 4(2) of the 1890 Act. Whether that separate persona ceased to exist on the occurrence of an act or event dissolving the partnership was the principal issue dividing the parties. The indicia of separate legal personality continuing after dissolution were absent in the pre-1890 Act cases to which to which the court was referred, and the cases were entirely consistent with the statement in Clark on Partnership that on dissolution the persona of the partnership was lost. The use of the phrase 'authority to bind the firm' in s 38 of the 1890 Act did not carry the necessary implication that the separate persona continued notwithstanding dissolution. The text could be read as referring to the collectivity of persons formerly in the relationship which constituted partnership. Further, if the firm's persona continued after dissolution, it was not easy to see why it was necessary to enact s 38 in addition to s 5. Of the post-1890 Act authorities Dickson v The National Bank of Scotland was concerned only with the application of s 38 and not at all with the juristic persona of a partnership or its duration. In Inland Revenue Commissioners v Graham's Trustees however, the issue was decided by reference to the separate juristic persona of the partnership which it was clearly held did not survive the dissolution. The Advocate depute's suggestion that after the dissolution of a partnership some limited form of personality might exist had no validity. Such a notion was not readily understandable in juridical terms and had no support in any of the authorities to which the court was referred. In principle, there was either a person or there was not a person. Personality, whether natural or juristic, was not created or extinguished in slices or instalments. The court was very conscious of the undesirability of prosecution of the commission by a partnership of a criminal offence being frustrated by the partnership's ability to dissolve itself, or by its susceptibility to dissolution by other events, particularly if by dissolution the partners were also to be exonerated. However, in the case of most common law crimes and many statutory offences the individual partner responsible for the act or omission would be readily identifiable and could be prosecuted in his personal capacity. In the instant case there was s 36 of the 1974 Act which created individual responsibility for an offence committed by the employer. Finally, there might be other forms in which an indictment might be brought against the partners of a dissolved partnership in their capacity as former partners.

Douglas, Heron & Co v Hair (1778) M 14605, Gordon v Douglas, Heron & Co (1795) 3 Paton's App 428, Muir v Collett (1862) 24 D 1118, Nicoll v Reid (1877) 5 R 137, Walker v McKnights (1886) 13 R 599, Dickson v National Bank of Scotland 1917 SC (HL) 50, (1917) 54 SLR 449 and Inland Revenue v Graham's Trustees 1971 SC (HL) 1, 1971 SLT 46 considered.

Gordon McBain MA, Solicitor

Published Date

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