tion 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. 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 4th paragraph of 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 3001. 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 350l. On the 1st of January, 1859, the son signed a letter addressed to the Defendant, which is set out in paragraph 11 of the case. By it, in consideration of the Defendant's guaranteeing the son to the extent of 5,0007. in his business of an underwriter, until by such business he should acquire the clear sum of 5,000l., the son promised to pay during

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their joint lives an annuity of 5007. a-year, to be increased in case one-fourth of the son's average annual net profits during the first three years should exceed 5007., 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,COOL., 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 5,000/. 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, 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 remain for two years without reduction, when the engagement to pay over the future proceeds of the business to the trustees was to cease. 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 underwiting 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 guarantee, 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. Wickman (a), 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 under(a) 14 C. B., N. S. 435, 460.

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writer 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 ex-
ceed 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 reserved fund
to meet the emergencies of his trade, and, subject to meet-
ing those emergencies, to form a fund for the benefit of his
family, he does but 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 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 shall not spend them, and
that they shall remain as a fund to meet emergencies.
But when we find that the object of their taking the profits
of the trade is to keep them as a reserved 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 participa-
tion is not such as to constitute the relation of principal
and agent between the trustees of the settlement and the
underwriter; and that, according to Cox v. Hickman, 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 the Defendant

pay

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-trustees, 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 farther than did that in Cox v. Hickman. There is only one creditor instead of many, but in every other respect the words of Lord Cranworth (a), 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 mortgaged them to his creditors" (or in this case transferred 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 really what they 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 Byles, J., in the Court below, and to have to some extent influenced the judgment of C. J. Erle, and I think that there was evidence which, had the case gone to the jury, must have been submitted to them in sup(a) 8 H. L. C. 306-7.

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