if the partnership be formed for carrying out a contract which is unfinished when the partnership is dissolved, the Court may leave the partners to complete the contract, and postpone the ultimate account until its completion (M'Clean v. Kennard, 1874, L. R. 9 Ch. 336).

(e) Accounts on Dissolution.-On a dissolution proper accounts must be taken of the partnership dealings and transactions, with a view to showing the position of the firm to outside creditors, and of the partners towards one another.

An account may be had by one partner or his executors or administrators against his copartners or their executors or administrators, and by the trustees of a bankrupt partner against the solvent partner or his executors or administrators (Lindley on Partnership, p. 535). The assignee of a partner's share is also entitled to an account as from the date of dissolution (Part. Act, 1890, s. 31 (2)).

In taking the account attention must be paid not only to the terms of the partnership articles, but also to the manner in which they have been acted on by the partners (Part. Act, 1890, s. 19; ante, p. 433; Coventry v. Barclay, 1864, 3 De G., J. & S. 320; 46 E. R. 659; Ex parte Barber, 1870, L. R. 5 Ch. 687). But it must not be forgotten that where there is an express agreement or a recognised practice amongst the partners with reference to the taking of accounts, it not unfrequently happens that this is only applicable to the accounts to be taken during the continuance of the partnership, and not to the accounts to be taken on the final dissolution of the firm, or on the retirement of one of the partners (Steuart v. Gladstone, 1878, 10 Ch. D. 626; Watney v. Wells, 1867, L. R. 2 Ch. 250; Wood v. Scoles, 1866, L. R. 1 Ch. 369; Blisset v. Daniel, 1853, 10 Hare, p. 517; 68 E. R. 1022; Wade v. Jenkins, 1860, 2 Gif. 509; 66 E. R. 214).

The account will begin from the commencement of the partnership unless an account has been settled between the partners, in which case the last settled account will be the point of departure (see article ACCOUNT SETTLED). In taking accounts under an ordinary judgment, settled accounts are never disturbed unless specially directed so to be (see Holgate v. Shutt, 1884, 28 Ch. D. 111; Newen v. Wetten, 1862, 31 Beav. 315; 54 E. R. 1160). If the partners have had mutual dealings preparatory to the commencement of their partnership, these dealings must be included in the general account (Cruikshank v. M'Vicar, 1844, 8 Beav. 116; 50 E. R. 42; 68 R. R. 29).

The account will be taken down to the date of dissolution; but if there is a general dissolution and winding-up, it will be kept open to include all transactions incidental to the winding-up.

In certain cases, now to be considered, an outgoing or deceased partner is entitled to an account of profits made since his retirement or death.

If a partner agrees that on his death or retirement his capital shall be left as a loan in the business at interest, he or his estate will be entitled to his capital and interest, and nothing more. In case of bankruptcy, see Collins v. Barker, [1893] 1 Ch. 578.

If the executors or trustees of a deceased partner lend his capital to his former partners, who are not executors or trustees, at interest, the obligation of the former partners, whether the money was lent to them properly or in breach of trust, and in the latter case whether they had or had not notice of such breach, is limited to the repayment of the loan, with the interest agreed upon (Chambers v. Howell, 1847, 11 Beav. 6; 50

E. R. 718; Parker v. Bloxam, 1855, 20 Beav. 295; 52 R. R. 616; Stroud v. Gwyer, 1860, 22 Beav. 130; cp. Flockton v. Bunning, 1864, L. R. 8 Ch. 323, note).

If the surviving or continuing partners have by the partnership agreement an option to purchase the interest of the deceased or outgoing partner, and exercise the option and comply with the terms thereof in all material respects, their liability will be that imposed. upon them by the agreement, and they will not be liable to account for subsequent profits, even though one or more of the partners is an executor or trustee of the deceased partner (Part. Act, 1890, s. 42 (2); Vyse v. Foster, 1874, L. R. 7 H. L. 318).

If, after the death or retirement of a partner, the surviving or continuing partners carry on the business of the firm with its capital. or assets without any final settlement of accounts between the firm and the outgoing partner or his estate, then, in the absence of any agreement to the contrary, the outgoing partner or his estate is entitled, at the option (see Vyse v. Foster, 1874, L. R. 7 H. L., at p. 336) of himself or his representatives, either to such share (if any, see Wedderburn v. Wedderburn, 1855, 22 Beav. 84; 52 E. R. 1039; Simpson v. Chapman, 1853, 4 De G., M. & G. 154; 43 E. R. 466) of the profits made since the dissolution as the Court may find to be attributable to the use of his share in the partnership assets (see Willett v. Blandford, 1841, 1 Hare, p. 272; 66 E. R. 1027; 58 R. R. 61; Yates v. Finn, 1880, 13 Ch. D. 843), or to interest at the rate of 5 per cent. per annum on the amount of his share of the partnership assets (Part. Act, 1890, s. 42 (1); and before the Act, see in case of bankruptcy, Crawshay v. Collins, 1862, 2 Russ. 325; 38 E. R. 358; 26 R. R. 83; of death, Yates v. Finn, 1880, 13 Ch. D. 383; Brown v. De Tastet, 1821, Jac. 284; 37 E. R. 857; 23 R. R. 59; of lunacy, Mellersh v. Keen, 1859, 27 Beav. 236; 54 E. R. 440; of dissolution, Parsons v. Hayward, 1862, 4 De G., F. & J. 474; 45 E. R. 1267; Turner v. Major, 1862, 3 Gif. 442; 66 E. R. 483; Featherstonhaugh v. Fenwick, 1810, 17 Ves. Jun. 298; 34 E. R. 1187; 11 R. R. 77).

The outgoing partner or his representatives have the like option if the surviving or continuing partners, having by the partnership agreement an option to purchase the interest of the deceased or outgoing partner, assume to exercise such option, but do not in all material respects comply with the terms thereof (Part. Act, 1890, s. 42 (2); Willett v. Blandford, 1841, 1 Hare, 253; 66 E. R. 1027; 58 R. R. 61).

Apart from the liability under sec. 42 of the Partnership Act, 1890, if a trustee or executor enters into partnership with the former partners of his testator, or with other persons, and wrongfully employs the testator's estate in the business as part of its capital, all the partners in such business, if they have notice (Travis v. Milne, 1851, 9 Hare, 141; 68 E. R. 449) of the breach of trust (but not otherwise, see Part. Act, 1890, s. 13; ante, p. 426), will be jointly and severally liable to account for the profits attributable to the use of such estate to the persons interested therein, or, at the option of such persons, to pay them interest thereon at the rate of 5 per cent. per annum (Flockton v. Bunning, 1864, L. R. 8 Ch. 323, note; Townend v. Townend, 1859, 1 Gif. 201; 65 E. R. 885, where money was retained in the business beyond the authorised time; Heathcote v. Hulme, 1819, 1 Jac. & W. 122; 37 E. R. 322; 20 R. R. 248; Vyse v. Foster, 1874, L. R. 7 H. L. 336; see, too, Docker v. Somes, 1833, 2 Myl. & K. 655; 39 E. R. 1095; 39 R. R. 317). If in such a case the other partners have no notice that such employment is a breach.

of trust, the trustee or executor in the firm cannot be charged with a greater share of such profits than he himself has received (Vyse v. Foster, 1874, L. R. 8 Ch. 309, and L. R. 7 H. L. 334; Macdonald v. Richardson, 1857, 1 Gif. 81; 65 E. R. 833; Jones v. Foxall, 1852, 15 Beav. 395; 51 E. R. 588). If there be another trustee or executor, who is not in the firm, such trustee or executor will be under no liability to account for any share of such profits (Vyse v. Foster, ubi supra).

In these cases if a share of profits is claimed, and profits have been made (In re Aldridge, [1894] 2 Ch. 97), the continuing or surviving partners, unless they be executors or trustees (Burden v. Burden, 1813, 1 Ves. & Bea. 170; 35 E. R. 67; 12 R. R. 210; Stocken v. Dawson, 1843, 6 Beav. 371; 49 E. R. 869; 63 R. R. 116), are entitled to some compensation for their trouble in managing the business (Brown v. De Tastet, 1821, Jac. 284, 37 E. R. 858; 23 R. R. 59; Featherstonhaugh v. Turner, 1858, 25 Beav. 382; 53 E. R. 683; Mellersh v. Keen, 1859, 27 Beav. 242; 54 E. R. 440).

If infants be interested in the estate, the Court may direct an inquiry to ascertain whether it will be more beneficial to them to claim a share of profits or interest (Heathcote v. Hulme, 1819, 1 Jac. & W. 122; 37 E. R. 322; 20 R. R. 248, and Burden v. Burden, there cited).

When interest is claimed, a partner who is also a trustee may in some cases be charged qua trustee with compound interest (see Jones v. Foxall, 1852, 15 Beav. 388; 51 E. R. 588; Williams v. Powell, ibid. 461; per Lord Selborne in Vyse v. Foster, 1874, L. R. 7 H. L. 346).

The proper persons to bring an action to recover what is due from the surviving partners to the estate of a deceased partner are his executors; but if they stand in such a position with regard to the surviving partners that they cannot fairly prosecute the rights of the persons interested in such estate, the persons so interested may sue (Law v. Law, 1845, Col. C. C. 41, and 11 Jur. 463; Travis v. Milne, 1851, 9 Hare, 141; 68 E. R. 449; Stainton v. The Carron Co., 1853, 18 Beav. 146; 52 E. R. 58; Benningfield v. Baxter, 1887, L. R. 12 App. Cas. pp. 178, 179).

If the surviving partners and the executors are different persons, and they have come to an account respecting the partnership affairs, and have settled such account as final, or if the executors have sold the deceased partner's share to the surviving partner, such account or sale will be binding between the surviving partners and the persons interested in the estate of the deceased partner, and cannot be impeached except on the ground of fraud (Davies v. Davies, 1837, 2 Keen, 534; 48 E. R. 733; Chambers v. Howell, 1847, 11 Beav. 46; 50 E. R. 718; Smith v. Everett, 1859, 27 Beav. 446; 54 E. R. 175; Trustee Act, 1893, s. 21). But if the executors are themselves the surviving partners, or some of them, it becomes exceedingly difficult to come to any arrangement which will be binding on the persons interested in the estate of the deceased partner; arrangements come to under such circumstances have been set aside after many years (Wedderburn v. Wedderburn, 1836, 2 Keen, 722; 48 E. R. 1159; 4 Myl. & Cr. 41; 41 E. R. 16; 48 R. R. 7; Cooke v. Collingridge, 1822, Jac. 607; 37 E. R. 979; 23 R. R. 155 and 767; 27 Beav. 456; 54 E. R. 180; 63 R. R. 116; Stocken v. Dawson, 1845, 6 Beav. 371; 49 E. R. 869; Benningfield v. Baxter, 1887, L. R. 12 App. Cas. 167). If one of the executors is not a partner the difficulty is not so great, as one executor has power to settle a claim by his co-executor against their testator's estate (Re Houghton, Hawley v. Blake, [1904] 1 Ch. 622).

Subject to any agreement between the partners, the amount due from the surviving or continuing partners to an outgoing partner or the representatives of a deceased partner in respect of the outgoing or deceased partner's share, is a debt accruing at the date of the dissolution or death (Part. Act, 1880, s. 43), and the Statutes of Limitations will apply accordingly (Knox v. Gye, 1871, L. R. 5 H. L. 656; Noyes v. Crawley, 1878, 10 Ch. D. 31; Betjemann v. Betjemann, [1895] 2 Ch. 474).

(f) Distribution of Assets on Final Settlement of Accounts.-By the 44th section of the Partnership Act, 1890, which is in accordance with the previous law (see Binney v. Mutrie, 1886, 12 App. Cas. 160; Crawshay v. Collins, 1826, 2 Russ. 347; 38 E. R. 358; 26 R. R. 83), it is enacted that

In settling accounts between the partners after a dissolution of partnership, the following rules shall, subject to any agreement, be observed:

(a) Losses, including losses or deficiencies of capital, shall be paid first out of profits, next out of capital, and lastly, if necessary, by the partners individually in the proportion in which they were entitled to share profits (see ante, p. 437, and where one partner is unable to contribute his share, Garner v. Murray, [1904] 1 Ch. 57);

(b) The assets of the firm, including the sums, if any, contributed by the partners to make up losses or deficiencies of capital, shall be applied in the following manner and order :

(1) In paying the debts and liabilities of the firm to persons who are not partners therein;

(2) In paying to each partner rateably what is due from the firm to him for advances, as distinguished from capital;

(3) In paying to each partner rateably what is due from the firm to him in respect of capital;

(4) The ultimate residue, if any, shall be divided among the partners in the proportion in which profits are divisible (ante, p. 437).

When the partnership is being wound up by the Court, the costs of the action are payable out of the assets after payment thereout of what is due from the firm to the partners in respect of advances or capital, and if the assets are insufficient, the costs must be borne by the partners in the proportion in which profits are divisible (Ross v. White, [1894] 3 Ch. 326; Potter v. Jackson, 1880, 13 Ch. D. 845; Hamer v. Giles, 1879, 11 Ch. D. 942; Austin v. Jackson, 1878, ibid. 942, note). Before any partner can take his costs out of the assets he must make good what is due to the assets ([1894] 3 Ch. 336). But a partner who has been appointed receiver by the Court is entitled to be paid his remuneration and costs as receiver out of moneys in his hands as receiver, although as a partner he is indebted to the firm and is unable to pay what he owes (Davy v. Scarth, [1906] 1 Ch. 55).

These rules, so far as they relate to the rights of the partners inter se, are only applicable subject to any agreement between the partners; and if they agree that any surplus after payment of debts shall be divided between the partners in proportion to their interests therein, or to their capitals, effect will be given to such agreement; and if such surplus is insufficient to repay to each partner what is due to him from the firm, those who bring in most capital will lose most (Wood v. Scoles, 1866, L. R. 1 Ch. 369; see, too, Eclipse Gold Mining Co., 1874, L. R. 17 Eq.

It must not be forgotten that the mode in which profits are to be

ascertained and divided during the partnership may differ from that in which they are to be ascertained and divided on a final settlement of accounts (Wood v. Scoles, supra; Bridgewater Navigation Co., 1888, 39 Ch. D. 1, and sub nom. Birch v. Cropper, 1889, L. R. 14 App. Cas. 525; see further, [1891] 2 Ch. 317).

5. ADMINISTRATION OF THE ESTATE OF A DECEASED PARTNER.

The surviving partners are creditors against the estate of a deceased partner for what may be due to them from the deceased partner on the taking of the partnership accounts (Part. Act, 1890, s. 43). They may sue the legal personal representatives of the deceased partner either for a judgment for a partnership account, and for payment of what is due on that account, and, if assets are not admitted, for the administration of his estate (3 Seton, Judgments and Orders, 1812, 5th ed.), or, if creditors, for a common administration judgment.

In an administration action brought by a separate creditor of the deceased partner, or by a person interested in his estate, against his legal personal representatives, an inquiry may be directed as to what is due to the estate of the deceased in respect of his share in the partnership (Macdonald v. Richardson, 1858, 1 Gif. p. 90), but in such an action no judgment can be given against the surviving partners for payment of what is due on that account; in the absence of special circumstances, the only persons who can take proceedings against the surviving partners to obtain such payment are the legal personal representatives of the deceased partner (see ante, p. 453). If the surviving partners seek to obtain, in such an administration action, payment of a balance due to them on the partnership accounts, these accounts must be taken (Paynter v. Houston, 1817, 3 Mer. 127; 36 E. R. 114; Wolley v. Gordon, 1829, Taml. 11; 48 E. R. 6; 31 R. R. 58).

The creditors of the firm of which the deceased partner was a member may also bring an action for the administration of his estate, but they are not entitled to be paid out of his separate estate until all his separate creditors have been satisfied (for the form of judgment in such cases, see Hills v. M'Rae, 1851, 9 Hare, 297; 68 E. R. 516; 3 Seton, 6th ed., p. 2191; and as to their rights against the surviving partners, see ante, p. 427).

For the cases in which creditors can claim against the estate of a deceased partner for debts incurred after his death, see ante, p. 429.

The rules in bankruptcy-that in the first instance the debts of the firm are to be paid out of the assets of the firm, and the separate debts of each partner out of his separate estate (Bank. Act, 1883, s. 40; Ridgway v. Clare, 1854, 19 Beav. 111; 52 E. R. 291; Lodge v. Pritchard, 1863, 1 De G., J. & S. 610; 46 E. R. 242), and that a partner may not prove against the separate estate of his copartner whilst the joint debts are unpaid (Lacey v. Hill, 1872, L. R. 8 Ch. 441; see, too, Ex parte Head, [1894] 1 Q. B. 638) have been adopted in administering the insolvent estate of a deceased partner (Jud. Act, 1875, s. 10).

For the position of persons, who have advanced money to anyone engaged in business on a contract that the lender shall receive a rate of interest varying with the profits or a share of the profits of the business, or who have sold the goodwill of a business for a portion of the profits, in the event of the borrower, or purchaser of the goodwill, dying insolvent, see ante, p. 414.