1961 Present: T. S. Fernando, J., and Sinnetamby, J.

C. S. RATNAM, Appellant, and K. M. PERERA, Respondent

S. C. 67 of 1959-D. C. Kurunegala, 11,433

    Partnership-Dissolution-Action for accounts-Procedure-Civil Procedure Code s. 508.

    Contracts-Interpretation-Emphasis on substance and not on form-Principal and agent-" Commission ".

    In an action instituted by a partner against his co-partner asking for accounts of the partnership which has been dissolved, and for a distribution of the profits and assets, the proper course for the Court to adopt is first to decide whether it should call upon the defendant to file an account and for what period and only thereafter, after giving the plaintiff an opportunity to falsify and surcharge, proceed to determine what amounts are due either to the plaintiff or to the defendant, as the case may be.

    In construing a contract the Court will look at what the contract really is and not at what the parties say it is. What the Court has to consider is not the mere name given to it but the substance of the transaction and decide what it would in truth and in fact amount to on a consideration of all the facts relating to it.

    Plaintiff and defendant entered into a partnership agreement under the terms of which they agreed to become the " Agents " of The Shell Co. of Ceylon Ltd. at Kurunegala and other places. In a subsequent contract between the Shell Co. and the partnership the firm was referred to as the " agent " and the Shell Co. as the " company ". Although the contract stated that the " agent " should serve the company for the purpose of, among other things, " selling, storing and distributing the company's products entrusted to its charge ", it expressly excluded the company from liability to third parties in respect of the partnership's acts, contracts with customers, etc. There were also other terms which offended against the principles governing the law of agency.

    Petrol, kerosene and diesoline were consigned to the " agents " to be kept in the installation and issued to customers at prices fixed by the company, and the firm was paid a " commission " or a rebate at a fixed rate in respect of actual sales. In the case of other Shell products, such as lubricating oils, greases, etc., the firm had to pay in advance for them when taking delivery, at certain specified rates, subject to the condition that they should be sold by the firm at rates not above a certain fixed ceiling price and that the services should be paid for by the difference in price between the rate at which it was purchased from the company and the price at which it was sold to the public. It was argued in the present case that the partnership profits related only to the commission in respect of those products which remained the property of the company and were entrusted to the firm for sale on behalf of the company and not to profits realised by the resale of articles purchased outright from the company which on delivery became the property of the agent. It was contended on behalf of the defendant that the profits from the lubricating oil, greases, etc., were solely his, earned by him independently of the partnership and were not included in the partnership agreement.

    Held, that the word " agent " in the contract between the company and the firm was used in a commercial and not in the legal sense. Although in the case of the lubricating oils, greases, etc., the arrangement was described as a sale to the agent and a resale by the agent, it differed very little, in actual practice, from the arrangement in regard to the petrol, kerosine and diesoline, except that in the case of the latter the amount of profit was fixed whilst in the former, it depended on the price at which the agent resold it, subject to the restricted maximum price. Accordingly, the profits derived from the lubricating oils, greases, etc., were accountable