QUESTION OF GOODWILL

New Zealand Times, Volume LIII, Issue 12607, 18 November 1926, Page 8

QUESTION OF GOODWILL

LAND AGENTS’PARTNERSHIP PAYMENT OF £SOO QUESTIONED JUDGMENT OF CHIEF JUSTICE A point which the Chief Justice (Hon C. P. Skerrett) was asked to determine in the Supreme Court recently, was the definition of what was a premium upon entering a partnership. He was asked to decide whether £SOO, which was paid by John Stanley B. Bruges, of Wellington, to Neil Gow, also of Wellington, was a premium within the meaning of the Partnership Act, 1908, and whether he should refer an award, made in consequence, back to the umpire for reconsideration. Gow carried on the business of a land agent, estate, insurance and general agent at Wellington. On June 7th, 1924, he admitted Mr Bruges as a half-partner in consideration of the sum of £SOO paid to him for his own use on the entering into the partnership articles. WHAT HE PAID FOR "What is the sum of £SOO to bo paid for?” asked bis Honour, in his

judgment delivered yesterday. ‘‘From the reasons given by the learned umpire, 1 gather that he interpreted the agreement to mean that the £SOO was paid for the acquisition by Bruges of a half-stare of the goodwill of the business, theretofore carried on by Mr Gow; and Mr Bruges had therefore got what he had paid for. In my opinion neither the language of the articles nor the substance of the transaction justifies that conclusion. The words used do not imply a purchase by Mr Bruges oF a share in the goodwill of the business. Nothing of the kind is expressed or contemplated. “What is expressed, and that is contemplated, is that Mr Bruges should pay £SOO to Mr Gow so that a partnership, of which he was to be a member, should take over the existing business and goodwill of Mr Gow. This is the precise operation of the agreement. The goodwill of the business, for what it was worth, became an asset of the partnership and on the dissolution of partnership, apart from any special provision which the articles might contain, would require to be sold as a partnership asset. “It is doubtful whether the business, being in the nature of a professional business and its returns being dependent on the trust and confidence in th.e person or persons for the time being carry ring on the business, can be said to have possessed an actual goodwill, or at any rate a goodwill of any pecuniary value. Its value (if any) could only be obtained by means of the continuance of the partnership. The sum therefore paid for the goodwill was in substance and effect a premium paid on entering into the partnership. NOT SALEABLE "It is clear that the goodwill of tho partnership business is of no value and is not saleable. “The result therefore is that I determine that the sum of £SOO paid by Mr Bruges to Mr Gow on entering into partnership was a premium within section 43 of the Partnership Act; and therefore, as was agreed, I set aside the umpire’s award and refer the matter back to him to determine in the exercise of his discretion what order should be made as to the repayment of the premium or such part thereof as he thinks fit. The matter of quantum is entirely one for the umpire. Mr Gow must pay to Mr Bruges the sum of £7 7s and disbursements as the costs of the action to set aside the award.” His Honour added that appeal could be made if tho partner did not agree with his opinion, as there were no established authorities upon tho points decided.