be the rule established by the decision of that tribunal is binding not only on all inferior tribunals in this country, but even on that House itself when sitting judicially. In Kilshaw v. Jukes (3 Best & S. 847; s. c. 32 Law J. Rep. (N.S.) Q.B. 217) there was a difference of opinion in the Court of Queen's Bench as to the effect of the decision of Cox v. Hickman (8 H.L. Cas. 268; s. c. 30 Law J. Rep. (N.s.) C.P. 125); Wightman, J. expressing an opinion that the circumstances of that case were so peculiar that the decision was hardly applicable to any other, whilst my Brother Mellor and I thought that the decision of the House of Lords was of general application. This case was referred to in the argument in the Court below, but does not seem to have been much considered in any of the judgments. It seems, however, so far as we can collect from the reasons given by the different Judges below, that they rather agreed with Wightman, J. than with the majority of the Court of Queen's Bench.

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The first point, therefore, to be determined in the present case is what really was the effect of the decision of the House of Lords in Cox v. Hickman (8 H.L. Cas. 268; s. c. 30 Law J. Rep. (N.s.) C.P. 125)? Prior to that decision the dictum of De Grey, C.J., in Grace v. Smith (2 W. Black, 998), that every man who has a share of the profits of a trade ought also to bear a share of the loss," had been adopted as the ground of the judgment in Waugh v. Carver (2 H. Black. 235), where it was laid down that he who takes a moiety of all profits indefinitely shall, by operation of law, be made liable to losses if losses arise, upon the principle that by taking a part of the profits he takes from the creditors a part of that fund which is the proper security to them for the payment of their debts." This decision had never been overruled. The reasoning on which it proceeds seems to have been generally acquiesced in at the time, and when more recently it was disputed, it was a common opinion, in which I for one participated, that the doctrine had become so inveterately part of the law of England, that it would require legislation to reverse it. In Cox v. Hickman (8 H.L. Cas. 268; s. c. 30 Law J. Rep. (N.s.) C.P. 125) the creditors of a trader had agreed that their debtor's trade should be carried on for the purpose of paying them their debts out of the profits; and the composition-deed, to which they were parties, secured to them a property in the profits. The rule laid down in Waugh v. Carver (2 H. Black. 235), if logically followed out, led to the conclusion that all the creditors who assented to this deed, and by so doing agreed to take the profits, were individually liable as partners; but when it was sought to apply the rule to such an extreme case it was questioned whether the rule itself was really established. There was a very great difference of opinion amongst the Judges who decided the case in its various stages below, and also amongst those consulted in the House of Lords. In the result, the House of Lords (consisting of Lord Campbell, Chancellor, Lords Brougham, Cranworth, Wensleydale and Chelmsford,) unanimously decided that the creditors were not partners.

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The judgments of Lord Cranworth and Lord Wensleydale bear internal evidence of having been written. Lord Campbell and Lords Brougham and Chelmsford said a few words expressing their concurrence. It is, therefore, in the written judgments, and more especially in the elaborate judgment of Lord Cranworth, that we must look for the ratio decidendi. Now, we find Lord Cranworth says, It was argued that as they would be interested in the profits therefore they would be partners. But this is a fallacy. It is often said that the test, or one of the tests, whether a person not ostensibly a partner, is nevertheless in contemplation of law a partner, is, whether he is entitled to participate in the profits. This, no doubt, is in general a sufficiently accurate test, for a right to participate in profits affords cogent, often. conclusive, evidence that the trade in which the profits have been made was carried on in part for or on behalf of the person setting up such a claim. But the real ground of the liability is, that the trade has been carried on by persons acting on his behalf. When that is the case he is liable to the trade E. R. A. [1866]-VOL. 2

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obligations, and entitled to its profits, or to a share of them. It is not strictly correct to say that his right to share in the profits makes him liable to the debts of the trade. The correct mode of stating the proposition is to say, that the same thing which entitles him to the one makes him liable to the other, namely, the fact that the trade has been carried on on his behalf, that is to say, that he stood in the relation of principal towards the persons acting ostensibly as the traders by whom the liabilities have been incurred, and under whose management the profits have been made. Taking this to be the ground of liability as a partner, it seems to me to follow that the mere concurrence of creditors in an arrangement under which they permit their debtor, or trustee for their debtor to continue his trade, applying the profits in discharge of their demands, does not make them partners with their debtor or the trustees. The debtor is still the person solely interested in the profits, save only that he has mortgaged them to his creditors. He receives the benefits of the profits as they accrue, though he has precluded himself from applying them to any other purpose than the discharge of his debts. The trade is not carried on by or on account of the creditors; though their consent is necessary in such a case, for without it all the property might be seized by them in execution. But the trade still remains the trade of the debtor or his trustees; the debtor or the trustees are the persons by or on behalf of whom it is carried on." He afterwards adds, "The authorities cited in argument did not throw much light upon the subject. I can find no case in which a person has been made liable as a dormant or sleeping partner, where the trade might not fairly be said to have been carried on for him, together with those ostensibly conducting it, and when, therefore, he would stand in the position of principal towards the ostensible members of the firm as his agents.

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And Lord Wensleydale says, A man who allows another to carry on trade, whether in his own name or not, to buy and sell, and to pay over all the profits to him, is undoubtedly the principal, and the person so employed is the agent; and the principal is liable for the agent's contracts in the course of his employment. So if two or more agree that they should carry on a trade and share the profits of it, each is a principal and each is an agent for the other, and each is bound by the other's contract in carrying on the trade, as much as a single principal would be by the act of an agent who was to give the whole of the profits to his employer. Hence it becomes a test of the liability of one for the contract of another, that he is to receive the whole or a part of the profits arising from that contract, by virtue of the agreement made at the time of the employment. I believe this is the true principle of partnership. liability. Perhaps the maxim that he who partakes the advantage ought to bear the loss, often stated in the earlier cases on this subject, is only the consequence, not the cause, why a man is made liable as a partner. Can we then collect from the trust deed that each of the subscribing creditors is a partner with the trustees, and by the mere signature of the deed constitutes them his agents for carrying on the business on the account of himself and the rest of the creditors? I think not." And he afterwards gives us the reason of his decision, that in the particular case there was not 'such a participation of profits as to constitute the relation of principal and agent between the creditors (the defendants) and the trustees," who actually made. the contract sued on.

I think that the ratio decidendi is, that the proposition laid down in Waugh v. Carver (2 H. Black. 235), viz., that a participation in the profits of a business does of itself, by operation of law, constitute a partnership, is not a correct statement of the law of England, but that the true question is, as stated by Lord Cranworth, whether the trade is carried on on behalf of the person sought to be charged as a partner, the participation in the profits being a most important element in determining that question, but not being in itself decisive; the test being, in the language of Lord Wensleydale, whether it is such a participation of profits as to constitute the relation of

principal and agent between the person taking the profits and those actually carrying on the business. I do not think it is proper for us to inquire, whether this rule of law is more or less expedient than the rule laid down in Waugh v. Carver (2 H. Black. 235). That is a question for the legislature, who may alter the law as to them seems right. We have only to administer it, and to proceed to apply what we consider to be the judgment of the House of Lords to the facts in the present case. The case contains a power to draw inferences of fact, and therefore it is open to the plaintiff to contend that we should draw the inference, that the transactions stated in the case were not really what they appear to be. I shall afterwards deal with the question how far I think such inferences ought to be drawn; at present I shall consider the case on the supposition that the various transactions between the parties really were what they purport to be.

It appears, then, that in March, 1857, the son of the defendant entered into a written agreement with Mr. Fenn, an underwriter, which is set out in the case. By this agreement the son was to be an underwriter, but the management of the business was to be confided to Fenn, who, in consideration of a salary of 300l. a year, was to act for the son. On the same day on which this agreement was made, the defendant authorized Mr. Fenn to state to the committee of Lloyd's that he, the defendant, had placed at Mr. Fenn's disposal 5,000l., and intended to give his son further aid if needed. In November, 1858, it was resolved to extend the business carried on by Fenn, in the name of the son, and by an agreement between them Fenn's salary was raised to 3501. On the 1st of January, 1859, the son signed a letter addressed to the defendant, which is set out in the case. By it, in consideration of the defendant's guaranteeing the son to the extent of 5,000l. in his business of underwriter, until by such business he should acquire the clear sum of 5,000l., the son promised to pay during their joint lives an annuity of 500l. a year, to be increased in case one-fourth of the son's average annual net profits during the first three years should exceed 500l., to a sum equal to one-fourth of such net average annual profits. This arrangement, as worded, would not increase the annuity unless the son's average net profits during the first three years exceeded 2,000l. a year, so that it would seem the parties contemplated carrying on a business much more extensive than was justified by a capital of 5,000l., and it is not very surprising to find, that before the three years' end the son was a bankrupt. It was expressly stipulated in the letter, that the defendant should not be a partner with his son in his business. This last stipulation is binding between them, but does not affect third parties; and consequently, the first question we have to determine is, whether this agreement did constitute a partnership as to third parties. And I think that, assuming it to represent the real transaction, it did not constitute a partnership. It is not an arrangement by which the defendant agrees to carry on the trade in the name of his son, nor even one in which he stipulates for a portion of the profits of that trade; but it is a purchase of an annuity, secured only by the personal promise of the son; the consideration being, that the defendant binds himself to make advances to the son, to the extent of 5,000l., when required in the business.

In August, 1859, the son married, and prior to his marriage he executed a deed of settlement, which is made part of this case. This deed was between the son of the first part, the intended wife of the second part, and two trustees (of whom the defendant was one) of the third part. It recites the agreements between the son and Fenn, for carrying on the son's business under the management of Fenn, and also the agreements between the son and the defendant, by which the son bound himself to pay the defendant an annuity, and an agreement in contemplation of the marriage, by which the son engaged to convey some railway shares and other property, and also all the proceeds of his underwriting business, to trustees on certain trusts; and then the son does, by the deed, assign over to the trustees (one of whom is the defendant) all monies, the proceeds of the underwriting business, then in the hands of Fenn, or any other person who might be substituted as manager of the son's business,

was to cease.

or thereafter so to be, and gave them a power of attorney to recover such monies from the manager. And then the indenture declares the trusts on which the monies are to be held: these are, in the first place, to pay the annuity to the defendant; next to pay the son an allowance of 500l. a year, to be increased if the business prospered, to 750l.; then to accumulate the surplus until it amounted to 8,500l. and so remained for two years without reduction, when the engagement to pay over the future proceeds of the business to the trustees There is a proviso, that at any time during the continuance of the engagement the trustees were, upon the request of the son, or his manager for the time being, to raise out of the property assigned by the son and the accumulated fund, any sum required to meet emergencies occurring in the underwriting business. The ultimate trusts of the accumulated fund, when it should have remained two years without reduction at the sum of 8,500l., were to repay any advances made by the defendant under his guarantie, and, subject thereto, for the benefit of the wife and children.

Such a settlement as this would be very inconvenient in most trades, but when the peculiar nature of an underwriting business, as carried on at Lloyd's, is borne in mind, it seems a prudent enough arrangement. The course of business was stated in Xenos v. Wickham (14 Com. B. Rep. (N.s.) 460; s. c. 33 Law J. Rep. (N.s.) C.P. 104), and we were informed during the course of the argument that it was stated accurately. The premiums are received by the broker, and out of those, losses and returns of premium are paid by him, the balance being paid over to the underwriter at stated intervals. So long, therefore, as the losses do not exceed the ordinary and expected average, the underwriter only receives money. But if the losses exceed the average, so that the whole premiums in the hands of the broker are absorbed by these losses, the underwriter has to find the funds to meet the excess, and it is to be anticipated, that at irregular intervals such extraordinary losses will occur. The underwriter, therefore, ought not to spend the annual proceeds of his trade, as if they were clear gain, but should keep a considerable reserve fund. Now, if by a settlement, an underwriter binds himself to his trustees to limit his personal expenditure, and to put the residue of the proceeds of the trade in their hands as a reserve fund, to meet the emergencies of his trade, and, subject to meeting those emergencies, to form a fund for the benefit of his family, he does not bind himself to do that which a prudent man ought to do of his own accord. It is true that by entering into this agreement, the trustees do take the profits of the trade; and whilst Waugh v. Carver (2 H. Black. 235), was considered as unqualified law, it would have been difficult to say, that they did not thereby, by operation of law, make themselves partners in the trade and personally responsible, though it may be observed, that they do not by this arrangement withdraw the profits from the reach of the creditors, but rather secure that the trader should not spend them, and that they should remain as a fund to meet emergencies. But when we find the object of their taking the profits of the trade is to keep them as a reserve fund to meet the emergencies of the business, I think it becomes clear, that though they take the profits, they do not cause the business to be carried on for them; that the participation is not such as to constitute the relation of principal and surety between the trustees of the settlement and the underwriter; and that, according to Cox v. Hickman (8 H. L. Cas. 268; s. c. 30 Law J. Rep. (N.s.) C.P. 104), is the true question. I think, therefore, that such a settlement does not of itself make the trustees partners in the business.

In the present case, the first trust was to pay the defendant his annuity, and it was argued that, though his co-trustee, Mr. Donnison, might not be a partner or a principal in the underwriting business of the son, yet that the defendant, being not only a trustee, but also beneficially interested in the profits when received by him, and his co-trustee, was a partner. But if the previous arrangement between the defendant and his son was really what it purported to be, and the defendant really was an annuity creditor of his son,

this arrangement goes no further than that did in Cox v. Hickman (8 H.L. Cas. 268; s. c. 30 Law J. Rep. (N.S.) C.P. 104). There is only one creditor instead of many, but in every other respect the words of Lord Cranworth, already cited, are strictly applicable: "The debtor" (in this case the son)" is still the person solely interested in the profits, save only that he has transferred them (or in this case a part of them) to his creditor, the defendant. The son receives the benefit of the profits as they accrue, though he has precluded himself from applying this portion of them to any other purpose than the payment of this annuity, for which he was already liable. The trade is not carried on by or on account of the annuitant creditor. I think therefore, that assuming that the transactions were what they really purport to be, the defendant was not liable as a partner in the business carried on in his son's name.

We have now to consider whether, in the exercise of the power to draw reasonable inferences of fact, we ought to draw the inference that in reality the transactions were not such as they purport to be, but that they were a cloak for a scheme, by which the defendant really carried on the business for himself. This seems to have been the view of the matter taken by Mr. Justice Byles in the Court below, and to have to some extent influenced the judgment of the Lord Chief Justice Erle. And I think that there was evidence, which, had the case gone to the jury, must have been submitted to them in support of this view of the matter. The son was not intrusted with the management of his own business, which was confided entirely to Fenn; and the 5,000l., which the defendant had stated was placed at Fenn's disposal, was kept in the hands of the defendant; and the arrangement by which the father was to receive an annuity of 500l. a year, is based on what seems to me a very exaggerated estimate of the probable profits of the business; and all this is evidence tending to shew that the original intention was that the business should be the father's, carried on for him and under his control. But these facts are also quite consistent with the supposition that there was a distrust of the son's steadiness and experience, and that therefore, though he was started in business on his own account, it was judged prudent to prevent his having for a time the full control of his business and his funds. And on the point which presses more strongly against the defendant, namely, the taking what seems to me so large a return for his advances to the business, we are left in ignorance as to what are the usual rates of interest allowed for money employed in the business of an underwriter, or what profits might honestly be expected to arise from the business. On these points, a jury would themselves probably have had some personal knowledge-we have none. They would also have had the benefit of hearing the evidence of the two Sharps and of Fenn, who might have been examined and cross-examined, and, no doubt, would have been so had the case gone to the jury. It was urged, by Mr. Lush, on the argument before us, that when the parties, instead of going to a jury, agree that the facts shall be stated for the Court, they do impliedly admit that there is no fraud or deceit in the matter, and that the power reserved to the Court to draw inferences of fact should be understood as qualified by that implied admission. There is much force in this argument, and without going so far as to say that the Court should never draw an inference of fact, that transactions stated in a special case were a colour and a cloak to conceal something really different, I certainly think that no such inference should be drawn unless it is very clearly made out. In the present case, I think we are not justified in drawing any such inference. For these reasons, I think that the judgment should be reversed.

The Lord Chief Baron requests me to say that he concurs in this judgment, and it is to be considered as his as well as mine.

CHANNELL, B.-The question for our decision in this case is, whether the defendant is liable on a policy of insurance. The policy was not subscribed by him or in his name, and the defendant can only be liable upon it on the ground that the policy was subscribed by some person acting as his agent by authority, either express or to be implied from the defendant's conduct. If it