Atwell v Roberts [No 3] - [2009] WASC 96

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: MALCOLM WALTER ATWELL and IAN GEORGE ATWELL as trustees of the Estate of WALTER CHARLES ATWELL on behalf of all other partners in the Atwell Family Agency other than the first defendants -v- ROBERTS [No 3] [2009] WASC 96

CORAM: EM HEENAN J

HEARD: 5, 10-13 FEBRUARY 2009

DELIVERED : 17 APRIL 2009

FILE NO/S: CIV 1832 of 2004

BETWEEN: MALCOLM WALTER ATWELL and IAN GEORGE ATWELL as trustees of the Estate of WALTER CHARLES ATWELL on behalf of all other partners in the Atwell Family Agency other than the first defendants
Plaintiffs
AND
LEIGH ROBERTS
NOEL HENRY ATWELL
AUDREY ATWELL
First Defendants
LEIGH ROBERTS as trustee for the Estate of KEITH GILBERT ROBERTS
LEIGH ROBERTS as the trustee of the Estate of HILDA DORCUS ROBERTS
LEIGH ROBERTS as the trustee of the Estate of ADA ETHEL ATWELL
LEIGH ROBERTS as trustee for the Hamersley Trust
JOHN CHARLES STACY as trustee of the Estate of EDNA PHOEBE PATERSON
EVELYN DIANE BROADLEY as trustee of the Estate of GLADYS JANET ADDISON BROADLEY
MAURICE EUGENE FRICHOT as trustee of the Estate of DOROTHY MAY BECKETT
GARY JOHN ATWELL
Second Defendants
BRIAN HUCK
KINGSLEY JAMES ADAM
JULIE PARR
NORMA HULL
TREVOR TAPPER
ROSEMARY SPURGE
KENNETH ATWELL
ADAM RODERIC ADAM
Third Defendants

Catchwords:

Partnership - Dissolution - Rights of pre-emption - Negative covenants - Successive partnerships - Alleged breach of pre-emption rights - Admission of subsequent partners - Approval of accounts and distribution of profits - Effect of formation and succession of new partnerships

Equitable relief - Rescission - Specific performance - Injunctions, inquiries or accounts

Deeds - Imperfect execution of partnership deed - Benefits taken under deed

Limitation periods - Whether a specialty or a contract not under seal - Limitation Act 1938 (WA) s 38 - Action on a specialty for debt or covenant

Partnerships - Twenty person rule - Whether joint executors or trustees of a former interest are to count as one or several 'partners' - Effect of transgressing twenty person rule - One of several joint trustees holding partnership interest for the benefit of all trustees
Partnerships - Management committee, remuneration - Undisclosed benefits - Whether partners accountable - Ratification
Equitable defences - Laches - Delay - Acquiescence - Estoppel - Waiver - Application of statutory limitation period by analogy

Legislation:

Partnership Act 1895 (WA)
Property Law Act 1969 (WA)
Trustees Act 1962 (WA)

Result:

Questions answered
(a) 1976 Partnership Agreement applies
(b) None of the six impugned transactions should be set aside
(c) Membership of the various partnerships never offended the 20 partner limit
(d) No applicable limitation period either express or by analogy
Declarations to give effect to answers

Category: A

Representation:

Counsel:

Plaintiffs:     Mr D H Solomon
First Defendants            :     Mr M L Bennett and Mr M P Bruce
Second Defendants        :     Mr M L Bennett and Mr M P Bruce
Third Defendants           :     No appearance

Solicitors:

Plaintiffs:     Solomon Brothers
First Defendants            :     Lavan Legal
Second Defendants        :     Lavan Legal
Third Defendants           :     Lavan Legal

Case(s) referred to in judgment(s):

Adam v Newbigging & Townend (1888) 13 App Cas 308
AMEV‑UDC Finance Ltd v Austin (1986) 162 CLR 170
Austin v Boys (1857) Beav 598; 53 ER 488
Ballas v Theophilos (1957) 98 CLR 193
Brown v Fletcher (1884) 5 LR (NSW) 393
Byrne v Reid [1902] 2 Ch 735
Cameron v Murdoch (1986) 63 ALR 575; 60 ALJR 280
Canny Gabriel Jackson Advertising v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321
Chang v Registrar of Titles (1976) 137 CLR 177
Chipper v Octra Nominees Pty Ltd [2006] FCA 1633
Commissioner of State Taxation (WA) v Pollock (1993) 11 WAR 64
CPT Custodian Pty Ltd v Commissioner of State Revenue [2005] HCA 53; (2005) 224 CLR 98
Dalton v Fitzgerald [1897] 2 Ch 86
Don King Productions Inc v Warren [2000] Ch 291
Duke Group Ltd v Pilmer (1998) 144 FLR 1
Elders Trustee & Executor Ltd v Federal Commissioner of Taxation (1961) 104 CLR 12
Federal Commissioner of Taxation v Everett (1980) 143 CLR 440
Fox v Clifton (1830) 6 Bing 776; (1830) 130 ER 1479
Gebauer Nominees Pty Ltd v Cole (No 2) [2008] WASCA 41
Hagan v Waterhouse (1992) 34 NSWLR 308
Heid v Reliance Finance Corp Pty Ltd (1983) 154 CLR 326
Hocking v Western Australian Bank (1909) 9 CLR 738
Holme v Hammond (1872) LR 7 Exch 218
Hunter v Hunter [1936] AC 222
Jefferys v Smith (1827) 3 Russ 158
Kawasaki (Australia) Pty Ltd v ARC Strang Pty Ltd (2008) 247 ALR 333
Kern Corporation Ltd v Walter Reid Trading Pty Ltd (1987) 163 CLR 164
Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265
Lovegrove v Nelson (1834) 3 My & K 1; 40 ER 1
Luke v South Kensington Hotel Company (1879) 11 Ch D 121
Lyle & Scott Ltd v Scott's Trustees [1959] AC 763
Lysaght v Edwards (1876) 2 Ch D 499
Mailer v Clayton (1898) 1 WALR 3
Manchester Ship Canal Co v Manchester Racecourse Co [1901] 2 Ch 37
Master Education Services Pty Ltd v Ketchell (2008) 249 ALR 44; (2008) 82 ALJR 1322
McLauchlan v Prince [2001] WASC 43
Monarch Petroleum NL v Citco Australia Petroleum Ltd [1986] WAR 310
Muir v City of Glasgow Bank & Liquidators (1879) 4 App Cas 337
Norman v Federal Commissioner of Taxation (1963) 109 CLR 9
Octra Nominees Pty Ltd v Chipper [2007] FCAFC 92
Pham v Doan [2005] NSWSC 601; (2005) 63 NSWLR 370
Pritchard v Briggs [1980] Ch 338; [1980] 1 All ER 294
Re Riverton Sheep Dip Co [1943] SASR 344
Re Southside Plaza Merchants' Association [1965] NSWR 1454
Redgrave v Hurd (1881) 20 Ch D 1
Rosebridge Nominees Pty Ltd v Commonwealth Bank of Australia [2008] WASCA 107
Rushton (Qld) Pty Ltd v Rushton (NSW) Pty Ltd [2003] 1 Qd R 320
Safeguard Industrial Investments Ltd v National Westminster Bank [1981] 1 WLR 286
Secure Parking (WA) Pty Ltd v Wilson [2008] WASCA 268
SJ Mackie Pty Ltd v Dalziell Medical Practice Pty Ltd [1989] 2 Qd R 87
Sky v Body (1970) 92 WN (NSW) 934
Smith v Anderson (1880) 15 Ch D 247
Spence v Crawford [1939] 3 All ER 271
State Government Insurance Commission v Teal [1990] 2 WAR 105
Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; (2009) 253 ALR 1
Tanwar Enterprises Pty Ltd v Cauchi [2003] HCA 57; (2003) 217 CLR 315
Tennent v City of Glasgow Bank (1879) 4 App Cas 615
Tisdale v Ballanday Pty Ltd [2006] NSWSC 909
Waller v Gipps (1885) 6 LR(NSW) Eq 123
Watson v Federal Commissioner of Taxation (1982) 61 FLR 268
Williams v Commissioner of Inland Revenue (NZ) [1965] NZLR 395
Yango Pastoral Company Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410
Ybasco v Dakas & Dakas (1948) 51 WALR 22
Young v Murphy [1996] 1 VR 279
Young v Queensland Trustees Ltd (1956) 99 CLR 560

EM HEENAN J:

Introduction

For very many years, members of the Atwell family have owned the land and buildings known as the Atwell Arcade, which runs between High Street and Cantonment Street in the heart of the Fremantle business district. The arcade comprises a number of retail shops and similar premises. From 1964 or earlier the land and buildings have been owned by members of the family partnership whose business it was to manage and let the various premises for profit. At all times the partnership has been known by the name 'Atwell Family Agency' although the membership, and hence the partnerships, have changed many times over the years due to the deaths or retirements of individual partners and their replacement by other members of the families of present or former partners.
The partnership lands on which the arcade stands are registered in the names of the three members of the partnership who have been appointed to the management committee of the firm. These partners hold that property on trust for the benefit of the other current partners. The regular routine management of the affairs of the partnership is conducted by a management committee, or managers or accountants employed by the management committee for that purpose. Regular annual general meetings of the partnership have been held over the years and occasionally, as required, special general meetings have also been held. All partners may attend and vote at these meetings. It is at these annual general meetings that, typically, the accounts for the preceding year's operations are presented and approved and the recommendations of the management committee for distribution of profits from the year's trading are considered and, usually, approved.
Because of deaths and retirements of members of the firm, and their replacement by other family members as described, the number of partners in the firm has varied over the years. However, for most of the time the persons treated as partners have been about 18 or 19 and sometimes 20 in number. The firm has been at pains to avoid its numbers ever exceeding 20 because of the limitation of members of a partnership to that maximum provided by s 11 of the Partnership Act 1895 (WA). However, there is an issue in this case as to whether or not that objective has been successfully achieved because there are examples where, on the death of a partner, two or more executors or trustees have been appointed, giving rise to a question of whether each of those trustees became a partner in the firm and, if so, with what effect.
However, the major issues concern allegations by the plaintiffs that on the deaths or retirements of six former partners during the period between 1983 and 2001, new partners were wrongly admitted to the firm in breach of terms in the partnership agreement which provided that, in such eventualities, a process should be followed which would have given other partners the opportunity to exercise pre‑emptive rights to acquire the share of the deceased or retiring partner in the firm rather than permit the transfer of that deceased's or retiring partner's share to others who subsequently became admitted to the firm as new partners or, in some cases, where the acquirer was already a member, his or her share of the partnership then increased.
It will be necessary to examine in detail the provisions of the partnership agreement dealing with the treatment of a deceased's or retiring member's share and how that could be dealt with in different eventualities. Those provisions are quite complex and, as this trial demonstrated, do not directly deal with all the eventualities which might arise in such a situation. For the present, it is enough to refer to those provisions compendiously as the 'Pre‑emptive Rights Provisions'.
Because the plaintiffs contend that these Pre-emptive Rights Provisions were not followed, or not fully followed, on each of the six occasions from 1983 to 2001 which have been identified in the pleadings, they also contend that the persons who were newly admitted to the firm after such changes, or the existing persons whose shares in the partnership were increased because of those changes, were not validly admitted as members or did not have their share in the partnership validly increased, as the case may be. As a consequence, the plaintiffs contend that a variety of relief comprising declarations, injunctions and orders in the nature of specific performance, together with other ancillary relief, should be granted, in effect, to recommit to resolution, in accordance with the requirements of the Pre-emptive Rights Provisions, the disposition of the shares in the partnership of each of those six former members in a way which would offer, to the members of the partnerships at the relevant times, the right to avail of the opportunity to acquire the shares of the deceased or retiring members in accordance with the pre-emptive rights provisions.
That such relief, if it were to be granted, would cause difficulty in determining the rights of the persons concerned or affected by such orders can readily be imagined. However, the plaintiffs submit that the difficulties and disruption which would be involved in vindicating the entitlements which they claim to have at law or in equity are no reason to deny relief and that a detailed regime of taking accounts, rescinding arrangements whereby persons became members of the firm or increased their shares, together with appropriate orders for repayment, with or without interest and with or without indemnities, is just the kind of relief that has been granted in equity in partnership and similar disputes over the centuries.
The six impugned transactions where there have been changes in the membership or shares held by existing partners in the firm between 1983 and 2001 are by no means all the changes in the membership of the partnerships. The evidence establishes, and it is agreed, that over the period from 16 December 1964 until the commencement of the trial of this action in February 2009 there has been a succession of 36 distinct partnerships in the sense that on the death or retirement of any existing member that particular firm is dissolved and is replaced by a new firm with or without the introduction of a new member or members. The same result occurs whenever a new member becomes a partner even if all former members continue with him or her in the new partnership so established.
So numerous are these changes and so particular are the details of the changes that it is impractical to attempt to summarise them here. Fortunately, the parties have agreed upon a document, entitled Chronology Of Successive Partnerships Trading As The Atwell Family Agency dated 13 February 2009, which lists and traces all the successive partnerships and details the particular alterations in them. This document is preceded by similar details of what are referred to as the initial arrangements between older members of the family which existed from time to time between November 1945 and December 1964. These are only of historical interest but are included in the chronology for the sake of completeness. That chronology, accepted in these proceedings as exhibit 94, forms the First Schedule to these reasons.
Further, the issues over whether or not the persons who were introduced as partners to the firm after each of the six challenged transactions from 1983 to 2001, were eligible to be admitted, or to have their shares in the firm increased, and the details of their family relationships which condition such eligibility, depend upon an understanding of the family relationships within the larger Atwell dynasty. Precise explanations of all the relationships would be very lengthy and intricate but, again, this is unnecessary because the parties have agreed upon the details of a family tree which show all the material relationships. This is exhibit 65 and forms the Second Schedule to these reasons. It is important to realise that this family tree is not entirely comprehensive. Certain members of different generations of the family have not been included because none of the parties suggests that the eligibility or otherwise of persons who at any time have been admitted to the partnership depends upon establishing descent through those individuals who have been omitted. Accordingly, this family tree is accepted as adequate for the purposes of these proceedings notwithstanding that it does not show all the lineal descendants of Mr and Mrs Henry Atwell who were, respectively, the family patriach and matriarch.
The next main controversy in this litigation is over allegations made by the plaintiffs that from about 1974 unauthorised remuneration was paid to the various members of the management committee from time to time and that these payments were not disclosed, and therefore not approved, at any of the general meetings of the firm when the annual accounts were tabled and adopted. Consequently, the plaintiffs seek accounts of all the unauthorised moneys said to have been paid to each of the members of the management committee from time to time; an order for the repayment of the moneys with interest, either simple interest or compound interest; and orders for distribution of the moneys so recovered to the various members of the partnerships affected according to their individual proper shares. It is unnecessary to say anything more about this aspect of the case, which I shall refer to as the 'unauthorised remuneration issue' because, for reasons which will soon appear, it was not tried before me at this hearing.

The parties

The two plaintiffs, Malcolm Walter Atwell and Ian George Atwell, are the two surviving trustees of the estate of their late father, Walter Charles Atwell, who died on 17 March 1975. Their late mother, Elsie F Atwell, the widow of Walter Charles Atwell, was during her lifetime another co‑trustee of her husband's estate and the sole life tenant entitled to the income of his estate. After his death she was the recipient of his estate's share in the profits of the Atwell Family Agency. Mrs Elsie F Atwell died on 9 November 1998 and her two sons, as already mentioned, are the continuing trustees of their father's estate. As trustees they contend that they are partners, or that the estate is a partner and has been a partner in each of the successive partnerships of the family firm from March 1975 to date. The defendants, however, contend that the plaintiffs are not, and never have been, partners.
The plaintiffs have also brought these proceedings claiming to be representatives of all present and former partners in the Atwell Family Agency other than the first defendants, asserting that they are entitled to do so under R.S.C. O 18 r 12. The defendants challenge this assertion but are met with a response by the plaintiffs that the defendants took no steps to challenge the assertion of the representative nature of the proceedings and, if there is any defect in the plaintiffs' role as representatives, it is, at the most, an irregularity which has been waived by the advance of this litigation through its many early stages until now.
It is most unsatisfactory that this controversy over the representative nature of the plaintiffs' claims has not been raised and resolved before this trial. Because of that neglect there is much to be said, from the standpoint of practical convenience and efficiency, for treating this as being entirely a procedural matter and to let the consequences lie where they fall. However, as the trial proceeded evidence emerged to establish that at least seven other members of the current partnership, not including the first and second defendants, had been informed of the institution of similar prior proceedings by the plaintiffs, and of the assertion by the plaintiffs that they claimed to represent all present or former members of the partnerships, including them. Such notice had not been given to those members by the plaintiffs nor had they been served with these proceedings or consented to the plaintiffs' claim to represent them. Each of those seven wrote to the secretary of the management committee, in varying terms of strong emphasis, advising that they did not approve of the plaintiffs' claiming to represent them, that they did not support the claims being advanced by the plaintiffs, and that they deplored the fact that litigation had been commenced. It seems that no notice of any kind of these present proceedings, let alone the representative character asserted by the plaintiffs, had before this trial been given to former members of previous partnerships or to their executors or personal representatives. When this matter was raised I was informed by counsel for the management committee that many of the members of former family firms from 1983 to date were dead and that difficulties were expected in communicating with their current representatives because, in most cases, their estates had been fully administered.
In the event I made orders that the solicitors for the parties should formally notify all the known members of the current partnership of the Atwell Family Agency and give them notice, in a form approved by the court, of the nature and potential effect of these proceedings and that the plaintiffs sought to bring these proceedings as representatives on their behalf. The form of notice approved called upon the recipients, within a limited time, to inform the solicitors for the existing parties or the court if they had any, and if so what, objections to the plaintiffs continuing to act as representative plaintiffs on their behalf. Similar directions were given and a suitable notice settled, with respect to members or representatives of earlier partnerships. I set a directions hearing for 5 March 2009 to deal with the responses to those notices with a view to confirming, or modifying, as may be required, the representative character of the plaintiffs which they have asserted.

The first defendants

The named first defendants, Mr Leigh Roberts, Mr Noel Henry Atwell and Mrs Audrey Atwell, are presently the members of the management committee of the firm having been so appointed in October 1989, October 1995 and July 2003 respectively. Accordingly, each is a defendant to the claim for unauthorised remuneration as well as being a defendant as a current partner. However, the plaintiffs have pleaded that there are also two other former members of the management committee, namely Mr H R Atwell from 16 December 1964 to about September 1975 and Mr K G Roberts from 16 December 1964 to March 2003. There is no claim for relief in respect of alleged unauthorised remuneration against Mr H R Atwell. However, there is a claim made against the estate of the late K G Roberts for an account of his share in the alleged committee unauthorised remuneration ‑ see statement of claim prayer for relief par I and par J. Again, however because the trial of the unauthorised remuneration issue did not proceed before me on this occasion, it is not necessary to pursue the significance of this.

The second defendants

The second defendants, in their various capacities as trustees of the estates of deceased members of the family who were former partners; in one case as the trustee of an inter vivos trust; and in one other instance as a current continuing partner in the firm, are sued because it is asserted that each of them, or each of the interests which they represent, disposed of or acquired a share or shares in the partnership otherwise than in accordance with the Pre-emptive Rights Provisions giving rise to the transactions which are alleged to be invalid or which the plaintiffs contend should be set aside. The plaintiffs contend that, on behalf of the original unit holders, these defendants should have those transactions rescinded and be ordered to issue appropriate disposal notices for the shares in the partnership which were wrongly and invalidly transferred.

The third defendants

The third defendants are the late entrants to this litigation. They were joined by an order which I made on 5 March 2009 as a sequel to the orders which I made during the course of the hearing requiring notice to be given to those members of the current partnership of the Atwell Family Agency whom the plaintiffs claim to represent in their capacities as representative plaintiffs pursuant to the RSC 1971 O 18 r 12.
At the directions hearing on 5 March 2009 it emerged that each of the third defendants objected to the plaintiffs purporting to represent them and either wished to take no part in the proceedings or to have an opportunity to do so without consequences as to costs. I therefore joined these eight defendants as one additional set of third defendants, directed that they be given notice of the amended proceedings and of the order joining them and be given an opportunity to appear and be represented but that any appearance or representation, other than by one of them on behalf of the others, would be at their own risk as to costs. The proceedings were further adjourned to allow a period of 28 days to elapse within which any of the third defendants could appear and be represented and apply to make further submissions. That period has passed and none has sought to make submissions.
The consequence, therefore is, that the plaintiffs are no longer representatives of any of the third defendants but are regarded as representing other members of the existing firm who have not been joined in these proceedings.
This leaves the question of whether or not the plaintiffs represent all other members of former partnerships of this firm including the representatives of deceased former partners. That question was left over for further investigation in the course of this trial but, because of the difficulty of tracing the representatives of former deceased partners, it has not been possible to ascertain who, if any, are the living representatives of those interests. Accordingly on 5 March 2009 when I joined the third defendants, the question of the plaintiffs' claims to represent these other former members of past partnerships was left open to be addressed and resolved later if should it prove necessary.

The 1976 partnership agreement

There are three partnership agreements in evidence. The first is a deed dated 16 December 1964 (exhibit 1), the second a deed dated 15 October 1965 (exhibit 2) and the third is described as an indenture made 25 March 1976 (exhibit 3). There is an issue over whether or not this 1976 agreement was validly executed as a deed by all the original partners or has been validly executed as a deed by subsequent partners and, if not, what is the effect of this. However, the parties are agreed, and I accept, that the status of that document, whether a deed, imperfectly executed or otherwise, or an agreement not operating as a deed, relates only to limitation issues. They can be put aside for the time being. It is common ground that the terms of the 1976 agreement (exhibit 3) effectively replaced the two earlier agreements. It is upon the terms of this agreement that the plaintiffs rely.
Many of the controversies in this litigation and the problems which have arisen can be seen to have their genesis in the language adopted, no doubt deliberately, by the original parties to the 1976 agreement. The essential problem involves an underlying fallacy that the firm, 'Atwell Family Agency', is a continuing entity which survives, unaffected as to identity, by the deaths or retirements of members.
The reason why this is a fallacy is quite fundamental. The point was addressed by the McPherson JA in Rushton (Qld) Pty Ltd v Rushton (NSW) Pty Ltd [2002] QCA 210; [2003] 1 Qd R 320, 323 as follows:
It is an axiom of partnership law that any change in the membership of a partnership occurring, whether by reason of the retirement, expulsion, death or otherwise of a partner, has the consequence of dissolving the partnership: S J Mackie Pty Ltd v Dalziell Medical Practice Pty Ltd [1989] 2 Qd R 87, 90‑91. After dissolution, the next step is to wind up the affairs of the partnership by realising the assets and paying the debts and liabilities of the firm before distributing the surplus, if any, among the partners according to their rights and interests. See Partnership Act 1891 (Qld), s 42; Partnership Act 1892 (NSW), s 39. Winding up in that way may be avoided if the parties agree on a sale to one or more of the remaining partners of the shares of the outgoing partner, or if there is a provision in the partnership agreement to that effect. This is sometimes described as a technical or notional dissolution, which is something of a misnomer because it is not the dissolution but, at most, the winding up that is notional. The partnership or firm itself is dissolved as soon as there is a change in membership, but the assets and, as between the partners, responsibility for the liabilities of the partnership are taken over by the remaining partners.
The interests of each of the partners in this partnership from time to time are described as 'units'. The terms and conditions upon which the parties agree to be bound are contained in 'the schedule' which in turn is referred to as 'the rules of the partnership'. By rule 2 each partner is deemed to hold units in the partnership, and an entry made in the partnership books with the approval of the management committee of a transfer of units is treated as being effective to transfer those units to another, or to a new, partner. As at 1976 there were 142,884 units established in the partnership and different members of the firm held different, sometimes widely different, numbers of units.
By cl 2 and 3 of the 1976 partnership agreement provision was made to attempt to establish continuity of the firm as follows:
2: The provisions of this deed shall be deemed to have come into force on the first day of July one thousand nine hundred and seventy five and the partnership shall continue until determined by a majority vote of the partners taken in accordance with the rules.
3. The death or bankruptcy or other disability of any partner shall not determine the partnership as between the remaining partners.
The minutes of the annual general meetings of the firms, the correspondence from the management committee and the notices which were given when a partner died or retired and steps were being made to 'offer' his or her units to other members or to admit a new partner clearly indicate that all concerned treated the partnership as having many of the characteristics of a limited liability company. Some of these usages were quite innocuous, such as referring to the committee of management as the 'Board'. There is frequent reference to the annual distributions on account of profits as the payment of 'dividends' for each unit held. Reference to the share of any one partner in the partnership property as determining his or her entitlement to a share in the profits, by the term 'units', is clearly analogous to the concept of a 'share' in a limited liability company. The detailed provisions, yet to be more closely examined, relating to the transfer or sale of units in the event of the death or retirement of a partner, including the transfer or sale to another member of the family who would then become a partner introduce the further fallacy of the transmissibility of the share of the deceased partner, and the preservation of the identity of the firm with a new member.
What these provisions overlook is that: (a) a partnership is established by persons who have entered into partnership with one another to carry on business in common with a view of profit (Partnership Act s 7(1)); (b) that the share of a partner in the partnership property at any time is the proportion of the then existing partnership assets to which he or she would be entitled if the whole were realised and converted into money, after all the then existing debts and liabilities of the firm have been discharged (s 33); (c) that the mutual rights and duties of the partners, whether ascertained by agreement or defined by the Act, may be varied by the consent of all the partners, and such consent may be either express or inferred from a course of dealing (s 29); (d) that where no fixed term has been agreed upon for the duration of the partnership, any partner may determine the partnership at any time on giving notice in writing of his intention so to do to all the other partners (s 37); (e) that subject to any agreement between the partners, the partnership is dissolved, if entered into for an undefined time, by any partner giving notice in writing to the other or others of his intention to dissolve the partnership (s 43(c)); and (f) subject to any agreement between the partners every partnership is also dissolved by the death or bankruptcy of any partner and such dissolution shall take effect from the date of the death or bankruptcy (s 44).
The effect of cl 3 in the 1976 agreement was to constitute an agreement between the partners for the time being that the death or bankruptcy of a partner would not determine the partnership as between the remaining partners but it nevertheless would, and did, terminate the partnership with that deceased or retiring member, so converting his or her share in the partnership to a monetary entitlement calculated in accordance with s 33 - see also Canny Gabriel Jackson Advertising v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321, and Federal Commissioner of Taxation v Everett (1980) 143 CLR 440, 446 ‑ 447. The 1976 partnership agreement does not prevent an existing partner seeking a dissolution of the partnership by the court on any one or more of the grounds available under s 46 of the Act.
While, because of cl 3 and cl 1 which provides:
1.The parties agree that upon the terms and conditions of these presents and upon the terms and conditions set out in the Schedule called 'the rules of the partnership' they will carry on the business of property owners under the style of 'ATWELL FAMILY AGENCY' in partnership between themselves and any other persons who may be admitted to partnership in the manner provided in this deed
the surviving or continuing partners for the time being, after the death or retirement of one or more of their former members, remain obliged to carry on the partnership together and to admit to their firm persons entitled to admission as prescribed by the Pre‑emptive Rights Provisions, the formation of any new and succeeding partnership still requires the unanimous consent and mutual acceptance of each of the members of the newly formed partnership. Any new partnership is a different association of members.
It is by no means uncommon to find in the terms of a partnership agreement provisions enabling the partnership business to continue, without a formal winding up, in the event of the death or retirement of any partner. Nor is it at all uncommon to find provisions entitling an existing partner or his or her executors to introduce into the partnership, in the event of death or retirement or otherwise, a close family member such as son or daughter. Nor is it uncommon to find provisions similar to those existing in this partnership agreement, which provide for the calculation or determination, by valuation or otherwise, of the value of the share of a deceased or retiring member's share in the partnership, without resorting to a general winding up. They often provide for the payment of the value of such a share to the deceased partner's estate or to the retiring partner or as may be directed, and allow the remaining partners, and any new partners, to continue to carry on the business of the former partnership without further liability to the retiring partner or the representatives of the deceased partner. Indeed, in many commercial partnerships such provisions are essential to allow continuity and the preservation of valuable assets such as goodwill and work in progress.
Nevertheless, these provisions cannot be effective to exclude the basic principle that any change in the membership of a firm destroys the existing partnership. This very issue was addressed by the Full Court of the Supreme Court of Queensland in SJ Mackie Pty Ltd v Dalziell Medical Practice Pty Ltd [1989] 2 Qd R 87. Like the present, that was a case where a partnership referred to the share of the partners as being 'units' and provided that the transfer of a unit did not dissolve the partnership. Of those notions McPherson J, with whom Macrossan and Shepherdson JJ agreed, said:
Implicit in the description 'unit' partnership, is the notion that a partnership like this enjoys a corporate or at least a quasi-corporate existence apart from the members who comprise it. That is, of course, quite foreign to the conception of partnerships as understood by English law, which regards any change in membership as destroying the identity of the firm. See Lindley On Partnership, 15^thed, 34, 50 and 543. Hence it is that under our law the transfer of a share to a non‑partner inevitably breaks the continuity of the firm, thus constituting a new firm or partnership of those members of the former partnership who remain, together with the newcomer.
And then later, again at page 19:
Once this principle is grasped, or rather recalled to mind, it is impossible to give literal effect to a provision like cl 8 of the deed (exhibit 3) in this case that the partnership is a continuing partnership not dissolved by transfer of a unit or other interest in the partnership. At least that is so if what is meant by that clause is that the introduction, whether by addition or substitution, of a new partner effects no dissolution of the existing partnership. If less than that is meant, then it is of no assistance to the appellants' submission in this case. It makes no difference to that conclusion that the partnership agreement here chooses to speak of a 'unit' rather than a share; for a unit is nothing more nor less than the partners' share, or a particle of it, called by another name. Clause 7.2 therefore adds nothing to general principles of a partnership at law in providing, as it does, that no transfer of any unit in the partnership is effective unless the transferee agrees to be bound as a partner of the partnership by the terms of the agreement. Except in a limited sense as mortgagee or as the assignee of the benefit of a share (see Federal Commissioner of Taxation v Everett (1980) 143 CLR 440, 448 ‑ 449), a person cannot acquire a unit or share in a partnership except by becoming a partner; and, if he becomes a partner, he is necessarily bound by the terms, whatever they may be, of the partnership agreement.
In dealing with an issue which also arises in the present case, McPherson J went on to say at 91:
It was nonetheless submitted that it was possible for existing partnership members by their agreement inter se to impose express formal restrictions upon the admission of further individuals to their ranks. So they can; and if they insist upon strict adherence to that formality, the newcomer will never be admitted to their ranks as partner. But that is because, by requiring strict compliance with that formality, they reject him as a partner or, what is the same thing, they refuse to dissolve their existing partnership and form a new partnership of which he is a member. Conversely, however, if they do agree to accept him as a partner, the fact that the requisite formality has not been complied with becomes irrelevant. The newcomer is ex hypothesi not a party to the partnership agreement by which the relevant restriction is imposed, and so is himself not bound by it. The original partners, who are bound by it, may by common consent or acquiescence choose to ignore it. Who, if they do so, is in a position to complain that a term of the original partnership agreement has been disregarded, waived, or set aside? And if both or all agree to disregard it, the result that follows is a new partnership comprising the original partners and the incoming partner now accepted as a member.

Pleadings

In the defence filed on behalf of the first and second defendants, as it stood shortly before the trial, there were many detailed pleas relied upon. For reasons which will appear soon it is sufficient now to condense these by identifying the main lines of defence asserted. They are:
(a)that the original partnership agreement of 1976 and rules were only binding on the parties to that instrument and that it ceased to have effect once that original partnership had been dissolved by the first change in partnership or, alternatively, by the first subsequent change in partnership inconsistent with its terms, because the new partners, in each successive partnership, were entitled to waive, adopt or vary any requirement regarding the transfer of units in the partnership and did so;
(b)that each of the new partnerships following upon each of the challenged transactions, accepted and approved the transfer of units to the defendants ‑ reflected in annual reports, meetings and minutes ‑ and the fact that dividends (distributions of profits) had been paid and shared between the members;
(c)for particular reasons specific to the individual named second defendants (eg waiver, consent, etc) a disposal notice for the transfer of the particular units was not required;
(d)a six‑year period of limitation applies under the Limitation Act 1935 s 38 and is a defence to the claims advanced in relation to transfer of units occurring in 1983, 1985 and 1986;
(e)that the defences of estoppel, laches and acquiescence arise in relation to each of the impugned transactions.
Other defences were raised in relation to the claim for account for the alleged unauthorised remuneration to management committee members but it is not necessary to deal with them now.

Applications for amendments

Very shortly before the trial the defendants sought leave to amend their defence and to introduce another defence with much more elaborate detail in support of these defences and, more particularly, in support of the defences of laches, acquiescence, waiver and estoppel. These changes were apparently in response to the plaintiffs' earlier reply which alleged that there could not be any successful equitable defence of the nature relied upon without proof that the party or parties estopped, acquiescing, delaying or waiving the irregularity or non‑conformity with the pre-emptive rights provisions had actual knowledge of the irregularity or non‑observance and asserting that the plaintiffs and those whom they sought to represent had not had knowledge, or comprehending knowledge, of the various acts of non‑compliance. The plaintiffs also applied for leave to amend their reply in a number of material respects and this led to the defendants seeking leave to file a rejoinder to the amended reply.
Counsel for the plaintiffs opposed the amendments sought to the defence on the grounds that they were so extensive that, if granted, they would require extensive further inquiries, new statements from witnesses, possibly from further witnesses and that it would be impossible to proceed with the trial as listed. He sought an order that the defendants should immediately pay a large amount for costs thrown away if the amendments were to be granted and the trial adjourned. He nevertheless pressed for amendments to the reply as sought. Counsel for the defendants maintained that the amendments to the defence sought, and the proposed rejoinder were essential and that the justice of the case required that leave be given even if the trial were to be adjourned but, in that instance, all questions of costs should be reserved for further consideration.
This was a most unsatisfactory development to occur so late in a case of this magnitude which has been the subject of much earlier interlocutory management. However, none of the parties desired to proceed with the pleadings as they stood and I was satisfied that if the amendments to the defence sought were to be granted that the plaintiffs could not be expected to proceed with the trial immediately.

Separate issues stated at trial

I therefore explored with counsel the possibility that I should order that the trial proceed but on limited and specified issues which should be capable of determination regardless of the amendments being sought and which might have the potential either to determine the action or to determine significant issues which would then facilitate the resolution of remaining issues either by agreement or by eventual trial on a much more limited basis. I suggested that the parties should attempt to formulate issues for resolution dealing with the following points which could then be tried without the need to address or take evidence on the many fact laden new issues or varied issues arising from the proposed amendments. The points were:
(a)whether the 1976 partnership agreement, and in particular its regime for pre‑emptive rights for the acquisition of the units of a deceased or retiring partner, continued to apply after 1976 and especially in relation to the six changes in the partnership occurring between 1983 and 2001 which were challenged by the plaintiffs;
(b)whether the plaintiffs, or the interests which they purported to represent, were entitled to challenge the alleged non‑compliance with the Pre‑emptive Rights Provisions in relation to each, or any, of the six challenged transactions when, as was apparent, the interests which they represented were partners or a partner in each of the newly formed partnerships established after each of the six transactions;
(c)whether at any material time there had been a breach of the 20‑person rule in relation to the membership of the Atwell Family Agency and, if so, whether this affected the situation;
(d)whether there was any statutory limitation period available as a defence to any of the plaintiffs' claims, and if so whether this was 20 years under the Limitation Act s 38(1)(e)(i) or six years under s 38(1)(c)(v); or whether either such limitation period should be applied by way of analogy as a defence to the plaintiffs' claims.
Counsel for the parties considered there was potential for a statement of agreed issues along these lines to be prepared and that the trial and determination of them would have the prospect of resolving large areas of dispute and, having regard to the circumstances, the parties should proceed to use the time set aside by the court to hear and determine such issues. Counsel sought an adjournment to negotiate over the exact terms of the proposed questions and to revise the documentary and other evidence which would then be necessary to be adduced for the trial of those issues. I acceded to the request for an adjournment, adjourned the continuation of the trial until the afternoon of 5 February 2009 for further directions. When the matter was called on again counsel announced that they were largely agreed on the issues to be determined and sought a further adjournment until the morning of Monday, 9 February 2009 to rearrange the statements and other documentary evidence required in light of these changes. I acceded to that request and the trial of the specified issues commenced on that day.
The principal effect of this arrangement was that all defences involving discretionary considerations, such as whether or not equitable remedies which might be available should be granted in the exercise of discretion, and defences involving a requirement to undertake a close examination of the facts, particularly facts sought to be introduced by the amended pleadings including, but not necessarily limited to laches, waiver, acquiescence, ratification or estoppel, should be excluded from consideration. I gave leave to the defendants to amend the defence as sought; leave to the plaintiffs to amend their reply as sought; and leave to the defendants to file a rejoinder but without prejudice to the right of any of the parties to apply to strike out portion of the proposed amended pleadings or the rejoinder by application on notice to be determined in chambers if required. I reserved all questions of costs, or costs thrown away, by reason of the amendments to the various pleadings and also adjourned all issues of costs arising from the adjournment of the trial generally.
By this process the terms which the parties agreed and which I ordered should be stated for trial as separate issues are:
1.Did the pre‑emptive rights in the 1976 Partnership Deed (the pre‑emptive rights) cease to bind all succeeding Atwell Family Agency partnerships after and by reason of the dissolution which occurred upon:
(i)the transfer of the units by the trustee of the estate of Harold Atwell Adam to Mavis Victoria Adam in 1977;
(ii)the death of Evelyn Rose Adam between 1978 ‑ 1980;
(iiithe death of Ada Ethel Atwell on 24 March 1983; or
(iv)any subsequent or other dissolution event
and, if so, which?
2.If the answer to question 1 is 'no', ‑
2.1(a) did the terms of the pre‑emptive rights provisions contained in the 1976 Deed require that the transfers of the units to Keith Gilbert Roberts in his capacity as trustee of the Hamersley Trust pleaded in pars 14, 16 and 23 of the statement of claim require compliance with those pre‑emptive rights?
(b)did any of the disposals complained of in pars 14, 16, 18, 20, 23 and 24 of the statement of claim failed to strictly comply with the pre‑emptive rights provisions in the terms contained in the 1976 Deed and, if so, which?
2.2If the answer to question 2.1 is 'yes', with respect to each disposal in connection with which the answer is 'yes':
2.2.1(a) Did Malcolm Walter Atwell and Ian George Atwell as trustees of the estate of Walter Charles Atwell deceased (M & I Atwell) become a partner or partners by the 1976 Deed jointly with Elsie Frances Atwell and, if so, did they continue to be a partner or partners of all successive partnerships?
(b)can M & I Atwell complain?
2.2.2If the answer to question 2.2.1 is 'yes', with respect to each disposal in connection with which M & I Atwell were a partner or person and entitled to complain:
(a)Is the claim of M & I Atwell a claim solely for breach of contract and, if so, what are the implications for limitation periods applying under the Limitation Act 1935 (WA) (the Act) or by analogy?
(b)Is there a fiduciary relationship which may apply to extend the six‑year or 20‑year limitation period?
(c)Was each subsequent partnership after the 1976 Deed constituted by a deed or by agreement and, if by agreement, is the plaintiffs' claim within s 38(1)(e)(i) of the Act?
(d)Is there a limitation period applying by the Act or by analogy and, if so:
(i)is it six years or 20 years?
(ii)is there a fiduciary relationship which may apply to extend the six‑year or 20‑year limitation period?
3.1Do joint trustees of a trust estate count as one member of a partnership for the purposes of s 11 of the Partnership Act 1895 (WA) and s 115 of the Corporations Act 2001 and its predecessors or is each joint trustee a separate member for those purposes?
3.2If the answer to question 3.1 is that each joint trustee is a member for those purposes, what is the legal affect on the enforceability of the 1976 Deed and subsequent partnerships?

Pre‑emptive rights provisions of the 1976 partnership agreement.

These pre‑emptive rights provisions must, of course, be seen in the context of the 1976 partnership agreement as a whole. For reasons already described and as set out in cl 1, cl 2 and cl 3 of the Atwell Family Agency the business was to be conducted in partnership between the original partners and any other partners who might be admitted to partnership in the manner provided. It was to continue for an indefinite period until determined by majority vote of partners taken in accordance with the rules, and the death, bankruptcy or other disability of any partner should not determine the partnership as between the remaining partners.
Clause 4 which identifies the persons who, in certain eventualities, shall become partners provides some initial challenge to ease of construction simply because of its formatting. However, grammatical considerations and the precedent provided by cl 4 of the earlier partnership agreement of 1964 (exhibit 1) leave me in no doubt that it should be construed as if it were set out in the following format:
4.Any of the following persons that is to say:
(a)the legal personal representative of a deceased partner; and
(b)any new trustee of the estate of a deceased partner or of any settlement made by a partner;
(c)any transferees of units in whose names units are entered in accordance with the Rules of the Partnership and who signed their names at the foot of the Rules as persons bound by the Rules
shall be deemed to have become partners subject to the Rules (as they are from time to time in force) of the partnership with the other persons who are then partners and accordingly to be entitled to a share in the assets and as between the partners to be liable to bear a share of the losses of the partnership proportionable to the number of units from time to time entered in their name.
The scheme for pre‑emptive rights is taken further by the Rules themselves of which the following portions are material:
Interpretation
1. …
'Partner' includes any of the parties to this Deed and also any person who upon transmission after the death of any partner or transfer of units in any way permitted by the Rules is entered in the books as the holder of one or more units and who signs his name on the foot of this Schedule as a person intending to become bound by the Rules and 'partners' means the partners for the time being.
…
Part II.Units in the Partnership
(2)(1)Each partner shall be deemed to hold units in the partnership.
(2)An entry made in the books with the approval of the Committee of the transfer of units (if the transfer is not contrary to the Rules) shall be effective without any instrument in writing as evidence of the right to the units so entered but the Committee shall require authority in writing from the persons concerned before an entry is made of a transfer.
(3)Units may be held by any company as a partner
…
Part III Acquisition and disposal of units
4.Without the prior giving of a disposal notice in accordance with Rule 6 and the observance of the requirements of the Rules consequent upon the giving of the notice a partner may acquire units from any other partner at such a price as they shall mutually agree.
5.Without the prior giving of a disposal notice in accordance with Rule 6 or the observance of any requirement of the Rules consequent upon the giving of such a notice:
(a)units standing in the name of a deceased partner may be entered in the names of his legal personal representatives upon their signing their names at the foot of this Schedule as persons bound by the Rules; and
(b)units standing in the names of the legal personal representatives or trustees of the estate of any deceased partner or the trustees of any settlement made by a partner may be entered in the names of new trustees for the time being upon the legal personal representatives or new trustees signing their names at the foot of this Schedule as persons bound by the Rules; and
(c)units standing in the name of a partner may be transferred to his spouse brother or sister or to a child of such partner or in the event of there being no child then surviving such partner to a grandchild of such partner.
6.(1) Except where disposal is permitted without the prior giving of a disposal notice or the observance of any requirements of the Rules consequent upon the giving of such a notice a partner (called 'the disposer') proposing to dispose of all or any of his units shall give notice in writing (called the 'disposal notice') to the Committee that he desires to dispose of the units named in the notice.
(2)The notice shall specify the sum the disposer fixes as the sale price of the units and shall constitute the Committee his agent for the sale of the units to other partners at the price so fixed.
7.Upon receiving a disposal notice the Committee shall inform all partners of the numbers of units available and of the sale price fixed by the disposer. Any partner who desires to purchase any of the units may within 14 days after the Committee informs him of the proposed sale give notice to the Committee of the number he desires to purchase. If two or more partners give notice of their desire to purchase the units should be allocated to them rateably according to their existing holdings so that no purchaser shall receive more than he desires to purchase and entries accordingly shall be made in the books as soon as the purchase money is paid.
8.If the Committee do not within twenty‑eight days after being served with the disposal notice effect a sale of all the units named in it the following procedure shall apply:
(a)The Committee shall obtain a valuation of such units from the accountant or accountants for the time being of the partnership and supply a copy thereof to the disposer;
(b)If the disposer does not within 7 days of the receipt of such valuation give notice to the Committee that he does not accept such valuation the sale price of the units shall be as fixed by such valuation;
(c)If the disposer gives notice in accordance with the last preceding paragraph that he does not accept such valuation the Committee shall thereupon obtain a further valuation of such units from a person appointed by the President of the Real Estate Institute of Western Australia and in such a case the sale price of the units shall be as fixed by such further valuation;
(d)The costs of any such further valuations aforesaid shall be borne by the disposer;
(e)If the Committee does not within twenty‑eight days after the price of the units has been fixed under the provisions of sub‑paragraphs (b) or (c) of this paragraph effect a sale of all the units named in the disposal notice the disposer shall be at liberty to sell the units remaining unsold to any person not being a partner at any price not being less than the valuation price fixed as aforesaid but no sale to any person not being a partner shall be permitted at a lesser price than fixed as aforesaid unless and until the Committee has been advised by the disposer that he is willing to sell at such lesser price and the Committee has given notice to all the partners of such lesser price and no partner within fourteen days after such notice is given gives notice of his desire to purchase at such lesser price in which last event such units shall be sold to such partner or partners in accordance with the Provisions of Article 7;
9.Before any units are entered in the books as belonging to a person not already a partner he shall sign his name at the foot of this Schedule in token of his agreeing to be bound by the Rules;
10.No sale or transfer of units may be permitted at any time if the effect of such sale or transfer is to increase the number of partners in the partnership beyond twenty.
The Rules then go on to provide for a general meeting of the firm to be held at least annually, for the Committee or any two partners to convene an extraordinary general meeting; for the establishment of the Committee of Management and for the firm accounts. By Rules 29 and 30 an annual profit and loss account, balance sheet and report of the manager as to the state of affairs of the partnership, together with the amounts of the proposed distributions of profits are to be supplied to each partner.
Finally, by Rule 35 there is provision for the alteration of the Rules of the firm as follows:
35.Any of the Rules may be altered from time to time by resolution in general meeting for which the partners holding three‑fifths of the units vote and thereafter as so altered the Rules shall continue to have effect as between and to bind all the partners.

The six impugned transactions

As noted there are six purported transfers of units which are challenged by the plaintiffs on the grounds that the formalities required by the pre‑emptive rights provisions were not followed, or fully followed, leading to the consequence that each of the transfers of units is invalid. These are:
1.The purported transfer of 23,220 units from the estate of Ada Ethel Atwell to the Hamersley Trust in 1983 (Ada Atwell transfer). Ada Ethel Atwell died on 24 March 1983 and this was a transfer consequent upon her death. It was treated as effecting the change from partnership 13 to partnership 14 in the chronology of successive partnerships set out in First Schedule.
2.The purported transfer of 4,267 units from Edna Phoebe Patterson to Noel Atwell on or around 14 February 1985 (the Edna Patterson transfer). This was treated as effecting the change from partnership number 15 to partnership number 16 in the First Schedule. It purported to transfer the units from Mrs Patterson to her nephew Noel Atwell. It was approved by the management committee on 6 March 1985 (exhibit 14).
3.The purported transfer by Gladys Addison Broadley of 2,630 units to Noel Atwell and 1,500 units to the seventh‑second‑named second defendant (Gary Atwell) on or around 31 March 1985 (the Gladys Broadley transfers). The transfer of units by Mrs Broadley to Noel Atwell was a transfer to her cousin. The second transfer of units to Gary Atwell was also a transfer by her to another cousin. By this date Noel Atwell was already recorded as a partner of the firm. Mrs Broadley's transfer of units to him was approved by the management committee and confirmed at a meeting on 5 September 1985 (exhibit 17(a)). Her second transfer of units to Gary John Atwell was also approved by the management committee and both transfers were approved again at the meeting on 5 September 1985 (exhibit 17(a)). These transactions were treated as effecting the change from partnership No 16 to partnership No 17 listed in the First Schedule.
4.The purported transfer of 23,100 units from Hilda Dorcus Roberts to the Hamersley Trust in 1986 (the Hilda Roberts transfer). Hilda Dorcus Roberts died on 5 January 1986. Her death dissolved partnership No 18 listed in the First Schedule following which those 23,100 units were registered in the name of her son, Keith Gilbert Roberts, as trustee of his mother's estate (see First Schedule partnership 19 ‑ unit‑holding 9.3). Subsequently, on or about 17 March 1986, those units were transferred from the estate of Hilda Dorcus Roberts to her son, Keith Gilbert Roberts, as trustee of the Hamersley Trust and the transfer was approved by the management committee (exhibit 24). The Hamersley Trust was constituted by deed of settlement dated 18 December 1972 between Hilda Dorcus Roberts as settlor and her husband Keith Gilbert Roberts as the trustee (exhibit 6A) as later varied by a deed of variation dated 15 December 1988 (exhibit 6B). The point made by the plaintiffs is that under the terms of this Deed cl 6(n), (exhibit 6A) and cl 1 and cl 7 of the deed of variation (exhibit 6B), there is a wide power of variation which would permit the trustee to vary the terms of the trust to include other beneficiaries or classes of beneficiaries so that in December 1988 this power of variation was exercised to include as a potential beneficiary the Sonoma Trust, itself created by deed of 14 December 1988 (exhibit 31). The effect of this power of variation, and its later exercise meant, so it was submitted, that the beneficial title to or the benefit of units in the firm could be transferred to interests outside the limits of the narrow family circle contemplated by Rule 5(c) of the 1976 agreement. This transfer of 23,100 units originally held by Hilda Dorcus Roberts, and then for a short period by her executor and trustee, to the Hamersley Trust was treated as effecting the change from partnership 19 to partnership 20 listed in First Schedule.
5.The purported transfer of 2,135 units from the estate of Dorothy May Beckett to the Hamersley Trust on or around 30 June 1986 (the Dorothy Beckett transfer). Dorothy May Beckett died on 9 October 1985 (exhibit 26). Probate of her will was granted to her sole executor and trustee, a solicitor Mr M E Frichot, on 18 November 1985. By that will she had bequeathed all her interests in the Atwell Family Agency to her trustee to be held on trust for her two daughters, Rosemary June Spurge and Roberta Joan Cowley ‑ the latter then living in the United States of America ‑ in equal shares as tenants in common absolutely. On 30 June 1986 the management committee approved the transfer of 2,135 units from the estate of Mrs Beckett to Rosemary Spurge and also approved the transfer of a further 2,135 units from her estate to the Hamersley Trust (exhibit 20). That was treated as effecting the change from partnership No 19 to partnership No 20 listed in the First Schedule. The objection taken by the plaintiffs is that the transfer of the second parcel of 2,135 to the Hamersley Trust constituted a transfer outside, or potentially outside, the limited circle of interests permitted by Rule 5 of the 1976 agreement.
6.The purported transfer of the units the subject of the Ada Atwell Transfer, the Hilda Roberts transfer and the Dorothy Beckett transfer from the Hamersley Trust to Leigh Roberts as trustee for K Roberts, M Lister and the Sonoma Trust in 2001 (the Hamersley Trust transfer). This was an inter vivos transfer of units on or about 15 June 2001 by Keith Gilbert Roberts, the son of Hilda Dorcus Roberts who died on 5 January 1986 (exhibit 23). Keith Gilbert Roberts himself died on 27 February 2003 but these transfers were effected before then. The subject matter of the transfers were units which Mr K G Roberts then held as trustee of the Hamersley Trust, having come to him as trustee respectively from Ada Atwell in 1983 (challenged transaction number 1), from Hilda Dorcus Roberts in 1986 (challenged transaction number 4) and from the estate of Dorothy Beckett in 1986 (challenged transaction number 5). It was treated as effecting the change from partnership number 29 to partnership No 30 listed in First Schedule. The transfers of the beneficial interest effected by this declaration of trust were to Kenneth Keith Roberts and to Margaret Lister, respectively son and daughter of K G Roberts, and to the Sonoma Trust of which another son of K G Roberts, Leigh O Roberts, was trustee and under which his children were the primary but not the exclusive beneficiaries (exhibit 31). Again the point of objection is that this is a transfer of units which were not properly transferred originally and, insofar as it was transferred to beneficiaries of the Sonoma Trust, it was a transfer or a potential transfer of interests outside the circle of family permitted by cl 5 of the 1976 Agreement.

The plaintiffs refer to the changes in the Atwell Family Agency occurring whenever a member of the firm died or retired as resulting in a number of 'technical' or 'notional' dissolutions of the firm, no doubt due to the provisions of cl 2 of the 1976 agreement which provide that such events should not dissolve the partnership between the remaining members. Such provisions may allow for the partnership to continue with its remaining members although with an obligation to account to the personal representatives of the deceased member, or to the retiring member, for the value of his or her share in the partnership at the date of death or retirement. However, there is still a change in nature, membership and identity of the firm immediately upon the death or retirement of the former member so that the 'continuing partnership' is a new partnership. Even more so, the subsequent admission of another person or persons in the place of the deceased or retiring partner will create another different partnership again. Any change in the membership of the partnership occurring whether by retirement, expulsion, death or otherwise has the consequence of dissolving the partnership: Rushton (Qld) Pty Ltd v Rushton (NSW) Pty Ltd [2003] 1 Qd R 320 per McPherson JA [9] and [323]..
The plaintiffs also submit that the only material asset of the partnership is the real property comprised by Atwell Arcade and that the only business of the partnership is leasing retail space in that arcade. This is enough to show that the firm has more assets than the mere realty because, of necessity, where parts of the arcade are leased, its interest in the freehold is converted to the reversion subject to the leases, and the benefits of the leases and any tenancy agreements resulting in the payment of rents or other remuneration are valuable choses in action. Presumably, the firm also has liabilities if only for rates, taxes and some degree of maintenance of the properties so that, as with any other firm, the interest of the partners at any one time is their aliquot share in the surplus of assets over liabilities at the time when assessment is required. This value may alter significantly according to the state of borrowings or other liabilities at any one time. This is enough to demonstrate that, notwithstanding that the principal asset of the firm may be the interest in the realty, the measure and value of the interests of the partners in the firm at any one time will also depend on many other factors and may well fluctuate.

Partnership Interest

Another way in which the false analogy between this family partnership structure and a company has caused an erroneous approach to the plaintiffs' asserted claims lies in its tendency to treat the 'units' in the partnership as identifiable and continuing items of property which are, essentially, the same in each changing partnership. Nowhere is this more apparent than in the plaintiffs' claims to have the impugned transactions set aside and those 'units' which were the subject of each of those transactions recommitted for disposal in accordance with the Pre-emptive Rights Provisions. An indispensable premise to that claim is the concept that those units are still in existence, can be removed from the persons to whom they were wrongfully transferred, and can then be disposed of afresh to those who were duly entitled to them or to their successors, notwithstanding that there have been many changes and many new partnerships from 1983 until the present ‑ no less than 20 as recorded in the First Schedule.
This is wrong because the right of any one partner in the firm of which he or she is currently a member is the right to carry on business together with the specific co‑partners with a view to profit and to share the profits of the business of the firm in accordance with the terms of the agreement. The property of the firm, whether it be held on trust or by co‑ownership between some or all of the partners, is available for the use of the partnership business. Although each partner has a special equitable interest of a unique kind in the partnership property, that interest cannot be appropriated to the individual partner's use to the exclusion of the firm so long as the partnership subsists. Where a partnership, or some members of the firm on behalf of the partnership or as trustees, hold real property for the partnership, the interests of the partners in all items of real property are in the nature of personality ‑ Partnership Act s 22. It is always the case that the measure of a partner's interest in the assets of the firm is that partner's aliquot share of the net surplus, if any, of all the assets of the firm over its liabilities and the cost of their realisation as in a winding up. That is why the nature of the retired partner's share or the share of a deceased partner in the assets of a firm is in the nature of debt rather than any real interest ‑ Partnership Act s 55 and s 56 and Cameron v Murdoch (1986) 63 ALR 575; 60 ALJR 280.
It is not difficult to see why this is so because the mutual agreement between partners is to carry on business together with each other with a view to profit. Partners do not agree to carry on business with some other or others after they have retired from the partnership or when they have died. A partnership including new members who have replaced some or all of the members of an earlier firm which has carried on a similar business is a different firm. A share in one such partnership is not the same as a share in a second, third or other succeeding partnership. There is not, and there cannot be, a series of successions to the same interest or share because that interest or share inevitably changes whenever a new partnership is formed.
Accordingly, the 'units' disposed of by the estate of Ada Ethel Atwell were not of the same kind as those disposed of by Keith George Roberts or Hilda Dorcas Roberts or by any of the other disponors. More importantly, because new partnerships into which the recipients of each of those sets of units were admitted have themselves ceased to exist by subsequent deaths and other retirements, there is no possibility of any person becoming entitled to be admitted to any of the new partnerships which was formed immediately after each of the six impugned transactions. Those partnerships have themselves been dissolved and a series of new and different partnerships has successively replaced them.
This is but another way of illustrating how the rights of pre‑emption and the existence of any legal remedies which might compel the surviving members of a partnership, after the death or retirement of a member, to admit a successor who is desirous and qualified for admission, can only be referable to the single occasion when the question is who are to be the members of the newly formed partnership. Once that has been resolved, whether in accordance with the terms of the 1976 agreement or otherwise by the consent of the members of the new firm, that is the end of the issue. At the latest by the date of formation of the next succeeding partnership, there is no longer a firm in existence to which any such right applied.
This reality can be overlooked if the significance of units in the partnership and their meaning is treated, because of practical or commercial reasons, as conferring an interest in valuable freehold properties which are owned by the Atwell Family Agency, and which generate the source of the firm's profits. The continuity of that real property and the ability of its ownership to be transferred, not just from trustees to new trustees, but to third persons if the partnership were ever to be wound up, distracts attention from the facts that the units do not give anything other than a partner's interest, of the special kind described, in any of that property or endure beyond the life of the instant partnership.
This makes it timely to consider exactly what in point of law occurs on any occasion when a partner of the Atwell Family Agency dies or retires and procedures are then followed, whether or not in strict conformity with the 1976 partnership agreement, to 'transfer' his or her units, resulting in the admission of a new partner or partners to the succeeding firm or in the increase in the unit holdings of some of the partners of the former firm who have continued in the new and succeeding partnership. The executor of the deceased partner, or the retiring partner on leaving the partnership, has a right to realise the value of the share in the partnership previously held. In the case of a solvent partnership, and even in many insolvent partnerships, that share will have a value which can be quantified. In a case of a winding up the amount of the value of the share would both be identified and satisfied by payment from the net surplus of assets after realisation. However, if there is not to be a full winding up resulting in the sale of the assets then the entitlement of the deceased partner's representatives or the retired partner will have to be satisfied in a different manner. It may be that the deceased's partner's executor does not wish to become a member of the firm, and there may not be a spouse, son, daughter or grandchild of the deceased or retired partner who wishes to join the firm either. There may be many good reasons for this, because of differences in interest, other career choices and a not unreasonable aversion to sharing the responsibilities and liabilities of those persons who wish to continue the business of the firm. In any such case that value of that deceased or retired partner's share will need to be paid out and, if the value can be quantified by agreement or valuation, money will need to be found to make the payment. Normally, that could be expected to come from the continuing partners or, by what amounts to the same thing, by money borrowed or capital introduced on their behalf to defray that obligation. Were that to occur, the procedure followed will be an alternative to a formal winding up so there will be a great incentive for the former partners, who wish to continue in a new firm, to have their liability discharged in a way which does not produce a full winding up. The real point, however, is that the liability to the retired partner or to the executor of the deceased partner for payment out to him or to her of the value of the share of the departed partner is an obligation of all the surviving partners of the former firm.
There can also, obviously, be many situations in which the deceased or retired partner can be expected to be replaced by the executor or a close member of the family becoming admitted to the partnership, by the consent of all the other partners, and by being accorded a share in the new partnership equal to the share which his or her forebear had in the firm which had just been dissolved. In such a case, predicated upon the willingness of an eligible successor to join a newly created continuing firm and to hold the same number of units as the person whom he or she replaced, this partnership agreement assumes that there will be no payment made by the firm for the value of the share of the deceased or retired partner. In practical terms, the willing admission of the new partner with a number of units in numerical terms equal to the units held by the departing partner in the former firm is treated as the discharge of the liability of the other members of that earlier firm in exchange for the admission of the new partner into the new firm. Of course, this cannot occur without the consent of the surviving members of the former firm but their consent is apparent from the acceptance of the newcomer into their midst as a partner in the new firm to the same degree as the departing partner held in the old firm. Equally, this cannot happen without the consent of the incoming partner whose consent is apparent by his agreement to join the newly formed firm. In the case of a retired partner this cannot happen without his or her consent because, otherwise, the debt due to him or to her for the value of his or her share in the partnership would not be discharged. Similarly, in the case of a deceased partner it could not happen without the consent of the executor who, whether he agrees to become a partner in the newly created firm, either temporarily during the course of administration or in the longer term, or whether he agrees to some beneficiary appointed by the deceased who is eligible under the terms of the 1976 agreement to be admitted as a partner and who becomes a partner, either eventuality demonstrates the consents of the executor and of those entitled to take a position in the new partnership in exchange for payment of the value of the share in the former firm due to the deceased member.
Again, if an executor, beneficiary, spouse, child or grandchild of a former partner does not wish to take a position in the succeeding new firm, the disposal notice procedure can be followed and then those 'units' may be 'purchased' by members of the former firm at an agreed price or valuation or, failing that, purchased by third persons at valuation. Whenever that occurs the person issuing the disposal notice and accepting payment from another partner, an eligible new partner or a third person at the agreed or valued amount of those units can only be regarded as accepting such a payment in discharge of his or her entitlement to payment for the value of the share of the deceased or retired partner in the old firm. Equally, whenever this occurs the continuing members of the old firm, who become members of the succeeding firm, must be regarded as consenting to this procedure by their agreement to allow the 'purchaser' to become a partner in the new firm or to increase his or her share in the new firm.
Obviously, the desire for continuity and stability in the operation of the family firm despite changes of membership will constitute a powerful incentive for observance of these procedures by all concerned but these are not the only ways in which such transitions may occur. I have already alluded to the prospect that a retired partner, or the representatives of a deceased partner, may not wish to follow this procedure and instead demand payment of the value of the share in the former partnership and, if this cannot be agreed, seek a winding up order to realise the value of that share. The members of the former firm may not desire to continue business in a new partnership and may themselves decide upon a winding up. Or, what is very similar, some or all of them may not agree to the introduction as a partner of the person who, by the application of the Pre‑emptive Rights Provisions, has become entitled to 'purchase' the 'units'. Their refusal to agree to such a person becoming a partner in a newly created firm may constitute a breach of the terms of the 1976 agreement, to which they had bound themselves. But the law will not force people into a partnership with others if they are unwilling to give the consent necessary to the relationship of mutual trust and confidence. In such an eventuality the result may be to compel a winding up of the partnership and to treat the person who had a contractual right to be admitted to the partnership but who was refused admission to participate in the proceeds of the winding up ‑ as is demonstrated by Byrne v Reid [1902] 2 Ch 735; Lovegrove v Nelson (1834) 3 My & K 1; 40 ER 1; Fox v Clifton (1830) 6 Bing 776; (1830) 130 ER 1479 and Lindley & Banks on Partnership (18^th ed) 543.
Whichever of these procedures, or any combination of them, may be followed when an alteration of the membership of the Atwell Family Agency firm occurred, the result is the same. Where there is not a general winding up of the assets, the effect is that the incoming partner takes the units of the deceased or retired partner, or has his units increased, and whether this occurred by way of payment or exchange, the entitlement to payment of the value of the share of the deceased or retired partner is thereby satisfied with the consent of all concerned.
Once the change has taken place and the new partner admitted to the new firm or the shares of the acquiring partner in the replacement firm correspondingly increased, the share of the deceased or retired partner disappears and the entitlement to payment for its value has been discharged. To say that the 'units' continued in existence is obviously unsupportable. When it is realised that, in the context of this partnership, the term 'units' is only a synonym for 'share', those 'units' too disappear.

Compliance with pre‑emptive rights provisions

An initial question was raised over whether or not strict, in contrast to substantial, compliance with the pre‑emptive rights provisions in the 1976 partnership agreement was essential. The plaintiffs submitted that strict compliance was essential because only then would the pre‑emptive rights of those entitled to apply for units, available for disposition, be protected. They submitted that to apply a notion of substantial compliance rather than strict compliance would create more uncertainty than strict compliance: Hunter Resources Ltd v Melville (1998) 164 CLR 234, 252 per Dawson J and 245 per Wilson J.
Counsel submitted that the continuing partners are bound to accept a new partner if the pre‑emptive rights provisions are complied with: Lindley & Banks on Partnership [10] - [254], 272 - 273; Lovegrove v Nelson (1834) 3 My & K 1, 2 (Lord Brougham LC); Byrne v Reid [1902] 2 Ch 735, 740 and 742 ‑ 743. Consequently, it was submitted that the remaining partners, who might, depending upon the circumstances, be entitled to exercise the pre‑emptive rights were each in a position analogous to the grantee of an option, and for that matter a grantor ‑ namely that they were entitled to know with certainty whether or not they were bound to accept a new partner: Lewes Nominees Pty Ltd v Strang (1983) 49 ALR 328; 57 ALJR 823, 824.
There are limits to the application of these analogies because, as already observed, the so‑called 'units' are no more than the share of the deceased or former member's share in the net assets of the partnership and, although the former partners are parties to the contract which created this obligation, the person who might stand to be admitted to the fresh partnership, newly formed, in many cases would not be (the exception being if that person was a member of the former partnership). Furthermore, the admission of the new member to the freshly formed partnership is by the unanimous decision of each of the former partners who, if they choose to do so, accept the newcomer and agree to be partners with him or her. While the former members might be compellable to act in accordance with the terms of the partnership agreement when it comes to identifying a partner eligible for admission, the admission of that new partner is still a voluntary act requiring unanimous consent. It could be prevented or frustrated, for example, if the continuing partnership (less the new member) resolved upon dissolution, or if one or more of those partners successfully were to give a notice of dissolution under s 43, or if there were a dissolution by the court under s 46 or for any other reason. Furthermore, as Rule 35 provides, any of the rules of the partnership agreement might be altered from time to time by a 3/5ths majority of units voted at a general meeting or, by what amounts to the same thing, by the unanimous consent of the partners to admit or refuse a new candidate for the status of partner, regardless of his or her eligibility under the terms of the agreement - SJ Mackie Pty Ltd v Dalziell Medical Practice Pty Ltd [1989] 2 Qd R 87, 91.
Accordingly, the question of whether or not strict compliance with the terms of the pre‑emptive rights provisions in the 1976 partnership agreement is required or not is a question for decision by the partners of the firm whenever an occasion arises for their potential use. The partners may indeed insist upon strict compliance or they may relax that requirement, make decisions and admit or refuse to admit a new partner or partners without strict compliance as they choose. If the result is that a decision is made to accept, as a member of a newly formed partnership, a candidate who may not be eligible under the terms of cl 4 or any of Rules 4, 5 and 8 or without full compliance with the disposal notice and/or valuation procedure, the unanimous acceptance of that person into the newly formed partnership would nevertheless be entirely sufficient to constitute the fresh partnership and to demonstrate that, on that particular occasion, the partners otherwise entitled to do so did not insist upon strict compliance with the pre‑emptive rights provisions.

I have been pressed with authority that for the estate to be bound all of the three joint trustees should have executed the document and that one trustee did not have the authority to bind the estate. However, the course of events from 1976 until the death of Mrs Elsie Atwell in 1998, followed by transmission of the interest of the estate of W C Atwell to the surviving trustees from then on, can lead to no other conclusion but that all the trustees had agreed to the action of Mrs Elsie Atwell in executing the 1976 agreement on behalf of the estate and in continuing to treat the interest of the estate as one single interest, the proceeds of which were to be shared or distributed in accordance with the will of the deceased. For this reason, therefore, I consider that Mrs Elsie Atwell should be treated as the single nominee of the estate as member of the Atwell Family Agency from 1976 until her death, and to have had the authority of her co‑trustees to be, as it were, a trustee for the trustees of the estate interest. There is nothing to suggest that at any time the estate interest was dealt with otherwise than in accordance with the will of the deceased.
On the few other occasions where there were other multiple trustees or administrators holding a single interest in the firm a similar procedure was adopted. That being the case, I am not satisfied that there was any occasion when the members of the Atwell Family Agency exceeded the maximum number of 20. I realise that this means, on certain occasions, as in the case of Mrs Elsie Atwell, that the interest which she held in the firm was held on account for others to whom she had obligations as trustee, but that does not make the others partners for the purposes of the 20 person rule or at all.

Was the 1976 agreement a deed and, if so, did it remain a deed?

Consistently with the view which I have reached that it was Mrs Elsie F Atwell who was the sole representative of the estate of W C Atwell admitted to the family partnerships after her husband's death, I reach the conclusion that the fact that Malcolm Atwell's and Ian Atwell's signatures on that deed were affixed later and not attested does not detract from the execution of the agreement as a deed by Mrs Atwell on behalf of the estate. In other words, it is the deed to which she, but to which neither of her sons, is a party. The evidence established that the sons' signatures were appended later and were evidently the product of an arrangement by their mother, who did not fully comprehend the necessities or formalities, but those additions do not alter the position that she executed the agreement as a deed.
The appearances also are that the agreement was also executed as a deed by each of the original parties, although a number of succeeding members did not execute the document formally as a deed and, in some particular instances, not at all. Nevertheless, I consider that by binding themselves to the terms of that agreement, subject to occasional departure by mutual agreement, and taking benefits in the form of distributions of profits, all members of the partnership from time to time should be taken as being bound by the document as if it were a deed (see authorities mentioned earlier).
The 1976 partnership agreement did not contain, and there is no evidence to suggest that there otherwise existed, any provision granting the surviving partners of this firm the right to purchase the share of a deceased partner, or for that matter the continuing partners to purchase the share of a retiring partner. It is not uncommon for such an option to be contained in a partnership agreement and an example is provided in Ballas v Theophilos (1957) 98 CLR 193. The point at issue in that case was whether or not an option for a surviving partner to purchase the share of the deceased partner's interest in the partnership which contain no specific provision as to the time within which it should be exercised must be exercised within a reasonable time and, if so, whether in that case it had been so exercised. In deciding that the attempt to exercise the option was made too late, both Dixon CJ at 197 and Williams and McTiernan JJ held that it was too long delayed. As Dixon CJ said at 197, the optionee must act with the promptness which is required where there is an opportunity to acquire an asset the value of which is affected by the changed conditions which time and the vicissitudes of business bring.
The issues listed for determination before me do not require or permit any finding as to when these contractual rights of pre‑emption could be exercised but, as I have already observed, it is apparent that if they are to be exercised at all they must be exercised before the identified subject matter passed into the hands of third parties without notice of the alleged irregularity or, at the latest, while the same subject matter remained in existence and capable of restoration if the circumstances so warranted.

Limitation - a specialty involving an action for debt or covenant

The 20‑year limitation period prescribed by s 38(1)(e)(i) of the Limitation Act 1935 applies only to an action of covenant or debt. The history of s 38(1)(e)(i) and the nature of actions upon a bond or other specialty were examined closely by Commissioner D R Williams QC in State Government Insurance Commission v Teal (1990) 2 WAR 105 where at 114 the learned commissioner traced the historical antecedents of those legislative provisions before concluding that an action based under s 7(5) of the Motor Vehicle (Third Party Insurance) Act was an action based upon an Act to which the longer 20‑year limitation period applied. To the same effect is the decision of Pidgeon J in Commissioner of State Taxation (WA) v Pollock (1993) 11 WAR 64, 68.
This special limitation period is not applicable to all actions based on a deed or specialty but, rather, to an action of covenant or debt upon such a specialty. An action of covenant or debt is a special common law claim: AMEV‑UDC Finance Ltd v Austin (1986) 162 CLR 170, 190 , per Mason and Wilson JJ at 190. An action in covenant was the form of action sought to remedy the breach of an agreement, other than for payment of money, contained in a deed. The claim was for damages for the non‑fulfilment of the covenant (see Halsbury's Laws of England, 4^th ed, vol 37 [92]) and it was an action at common law (see F W Maitland's 'The Court Baron' (Selden Society) vol 4, 115) whereas an action in debt was an action for the recovery of a liquidated sum then due and payable ‑ see Young v Queensland Trustees Ltd (1956) 99 CLR 560, 567 and was also a common law count.
None of the causes of action advanced by the plaintiffs in these proceedings is an action in debt or covenant and, accordingly, the 20‑year limitation period prescribed by s 38(1)(e)(i) of the 1935 Limitation Act does not apply. Furthermore, the plaintiffs submit, and I accept, that there is no analogous statutory limitation period for the causes of action relied upon which could or should be applied in the equitable jurisdiction. For a comprehensive examination of when and how a limitation period may be applied by analogy notwithstanding that no statute prescribes a time bar, see Owen J in The Bell Group Ltd [2008] WASC 239, [9267] ‑ [9293]. It follows that if otherwise the plaintiffs were entitled to make out claims for injunctions, orders in the nature of specific performance and/or rescission with or without accompanying accounts, there is no statutory or analogous limitation period in their way. However, this leaves open the discretionary defence of laches which might be invoked to refuse an entitlement to any remedy, but this issue is not before me on the matters ordered to be tried, although it may arise if it ever becomes necessary to try the other issues raised on the amended pleadings.
The defendants' position is that because the original 1976 agreement was not executed by all the parties with the formalities of a deed, it takes effect only as a simple contract, or at least only affects those interests who subscribed to it otherwise than as a deed as a normal contract with a six‑year limitation period. The alleged shortcomings in the execution of the document as a deed are said to be the absence of a witness when the 1976 agreement was executed by Mr Malcolm Atwell and Ian Atwell as co‑trustees with their mother Elsie Atwell on behalf of the estate of W C Atwell, deceased, and (in a number of other instances) where the subscribing partner's signature was not witnessed.
Witnessing of a deed was not essential for formal execution at common law but it is under s (9) of the Property Law Act. I have already listed a number of instances in which up to 10 new partners, over a period from 1976 to 2007, were admitted as partners without apparent execution or even subscription of the 1976 agreement. Again without descending to absolute precision, the probabilities are that in several instances the 1976 agreement was not validly executed as a deed by some of the succession of members of the firms. That then provokes a submission by the plaintiffs that, notwithstanding absence of due execution, those parties have taken the benefit of the deed and are therefore bound as if the instrument were a deed, notwithstanding the absence of due execution ‑ see Halsbury's Laws of England (4^thed, reissue) vol 13 [63] and particularly Dalton v Fitzgerald [1897] 2 Ch 86. As was observed by Kennedy J in Monarch Petroleum NL v Citco Australia Petroleum Ltd [1986] WAR 310, 359:
It is abundantly clear that a party who knowingly takes the benefit of a deed is bound by it, although he has not executed it ‑ Lady Naas v Westminster Bank Ltd [1940] AC 366, 373, 406.
It is not entirely clear whether this means that the party who did not execute the deed but who took the benefit pursuant to it, is bound by the deed in exactly the same way as if he had executed it ‑ for example, with respect to any relevant limitation period. That was not addressed in Lady Naas v Westminster Bank Ltd but Lord Wright in that case observed at 406 that:
It is true that if she did not execute she was only bound as a promissory, not as a covenantor.
which appears to involve a latent implication that the binding nature of the obligation is as a contract but not as a covenant. However, no argument upon, nor reference to, any such distinction was raised in submissions and it is, perhaps, undesirable to reach any view on this aspect.
In support of that submission the plaintiffs contend that each of the incoming partners who became a member in accordance with the terms of the 1976 agreement accepted the benefits of the partnership by sharing in the annual distributions of profits and, therefore, are bound by its terms as a deed as fully as they would have been had they formally executed the instrument as a deed.
There are, however, two reasons why I consider it is unnecessary to attempt to resolve this particular question and, due to its intricacy and the lack of full argument, I think I should on this occasion avoid the temptation to attempt such a resolution. The first point is the plaintiffs themselves submit that even if it were a deed, the 20‑year limitation period would not apply because the plaintiffs' claims are not actions in debt or covenant and, because the relief sought is entirely equitable in nature no statutory limitation period applies or should be adopted by analogy. The second consideration is that my conclusion that, in the events which have happened, the admission of the new partners has meant that all the former partners, including any complaining about lack of observance of the Pre-emptive Rights Provisions, must necessarily be regarded as having consented to the admission of the new partners so that there are no grounds for contending that there had been a breach of the agreed terms of the partnership as applied to the particular transaction nor any basis upon which any relief can or should be granted. That being so, there is no need for me to address the limitation questions further.

Consequences of ineligible partners being admitted as members of the firm or firms by mistake or by ignorance of some admitting partners of the ineligibility

This issue arises because the formation of successive partnerships, including each partnership following the admission or enlargement of the interests of individual partners following each of the six impugned transactions, can only mean that the admission of each of those partners, or the enlargement of the interests of a continuing partner following such a transaction, occurred with the consent of the other partners of that firm. Indeed, the continuation of each such partnership with the newly admitted partner or the partner with the enlarged interest, and the sharing of profits during the period of each such firm, can only connote the consent of each of the partners of that firm to carry on business together with each other in partnership with the mutual trust, confidence and acceptance of each other. But, submit the plaintiffs, what if such consent were given by some or all of the partners in ignorance of the ineligibility of the incoming partner or of the ineligibility of the existing partner to enlarge his or her interest in the manner effected? Or, what is similar, what if the admission of such a partner or the enlargement of the interests of another such partner occurred as a result of a mistake by an individual partner about the eligibility of that person?
The first thing to be said about this line of submissions is that there cannot at any stage have been any mistake by the other partners about the identity of the incoming partner or of the partner whose interest became enlarged. All were mentioned by name, all were members of the larger family and the introduction and appearance of the new member or the member with the enlarged interest were disclosed at each AGM and in the reports and accounts which were sent to partners in advance of each AGM which proposed the recommended distribution of profits for the particular accounting period.
A second observation is that there is no allegation of fraud against the person or persons who became admitted as new partners or whose interests in the firm became enlarged, nor is there any allegation of fraud against the members of the managing committee who processed and recorded the introduction of the new member or the increase in the interest of an existing member, nor against anyone else. Such a right of rescission of a contract resulting in a person induced by fraud or misrepresentation to join the partnership is apparent from Redgrave v Hurd (1881) 20 Ch D 1 and Adam v Newbigging & Townend (1888) 13 App Cas 308, per Lord Halsbury, 314 ‑ 316, per Lord Watson, 320 ‑ 322, and per Lord Herschell, 329, and is recognised by s 54 of the Partnership Act.
Thirdly, there is no allegation of any innocent misrepresentation against any of those parties either. It is clear that even if there had been some innocent misrepresentation the agreement which led to each such new partner becoming a member of the firm, or an existing partner whose interest is to be enlarged, has, by the very process of an admission or enlargement, been fully executed, so creating significant difficulties in the way of any claim to rescind that agreement on the grounds of innocent misrepresentation. Here rescission is only available in equity, the court will be less ready to dismantle the transaction: Spence v Crawford [1939] 3 All ER 271, 288, Lord Wright and Redgrave v Hurd (1881) 20 ChD 1. In such a case rescission would only be available if the party so entitled had not affirmed the transaction and if at least substantial restitution to the position which would have obtained had the transaction not been effected were possible.
There are cases where rescission of a contract to enter into a partnership has been granted, long after the contract was performed and even in circumstances where it was impossible for there to be a full restitution by the deceived party as, for example, Adam v Newbigging (1888) 13 AC 30 HL. However, upon examination of the reasons given by their Lordships in that case it is apparent that the inability to give restitution was not due to any affirmation of the contract by the deceived partner but that the claim for restitution itself was untenable because no significant value had been obtained by the interest which the claimant acquired in the partnership due to its imminent insolvency. That being the case, the decision does not stand for the proposition involved in the plaintiffs' argument, namely, that after deriving substantial benefits in the way of profits from these partnerships, and without being able to restore the former interest to the disponors who are alleged to have disregarded the pre‑emptive rights provisions, it is either unnecessary to be able to give restitution or that, with some adjustments, substantial restitution could be given. That intervention of the rights of innocent third parties may disentitle a claimant to rescission because of inability to achieve restitution, or where no form of restitution is possible because the nature of the interest acquired has changed, is apparent from another decision of the House of Lords in Tennent v City of Glasgow Bank (1879) 4 App Cas 615.
In this case, the indications of affirmation by participating in the business of the new partnership and sharing profits are very strong but, even more formidable, is the absence of the prospects of any substantial restitution. The restoration of the parties to the position which would have obtained but for the voidable transaction in the present setting could only ever have occurred before there were any further changes in the partnership such as, for example, the formation of a succeeding partnership by the death or retirement of an existing member or the introduction of another new member. This is because a rescission of the admission of the new partner consequent upon any of the impugned transactions must, of necessity, involve the offering of an opportunity to acquire those units to members of the firm which existed before the new entrant was admitted. The same goes for rescission of the acquisition of further units by a continuing partner. The effect of the pre‑emption rights is to confer, only upon those persons, the opportunity to acquire at the agreed or determined price the units of the former member who had died or retired. Once the membership of the partnership has changed by the admission of other members, as a result of subsequent alterations, deaths or retirements or sales or transfers of units between existing partners, there is no longer the same firm nor are the same persons entitled to the benefit of the conditional pre‑emptive rights.
The evidence is clear beyond any contest that there have been changes in the membership of the firm and the introduction of new partners, or alteration in the extent of the interest of other partners, which have occurred since each of the impugned transactions, the latest of which was in 2001. See the changes which have led to the formation of partnerships 31 to 36 listed in exhibit 94, the chronology of successive partnerships, which is the First Schedule to these reasons. In practical terms this means that even were a claim for rescission based on innocent misrepresentation to have been raised in these pleadings, or even if it were capable of being accommodated on the existing pleadings, it could not lead to the remedy of rescission being granted in respect of any of the six impugned transactions.
Accordingly, while the plaintiffs' submissions that a person who enters into a partnership induced by fraud or misrepresentation is entitled to rescind on general equitable principles, the position still is that there are no prospects for rescission on those grounds in the present case. It is now simply impossible for the parties who might, if the situation had been as alleged by the plaintiffs, have had an opportunity to exercise the pre‑emptive rights to acquire or enlarge their interests in former partnerships to do so now because each of those former partnerships has been determined and dissolved by the formation of successive partnerships.

Do Malcolm Atwell or Ian Atwell have the standing to complain?

The defendants submit that it is not competent for Mr Malcolm Atwell or his brother, Mr Ian Atwell, to challenge the results of the admissions of new partners to the six impugned partnerships because neither was a member of the firm at the time of any of those transactions. The foregoing analysis confirms that neither was a member of any of those partnerships. Nevertheless, the plaintiffs assert that they have a right to sue because they are executors and trustees of the estate of their mother, Elsie F Atwell, who was a member of the partnership at those times. I should also examine the issue from the point of view that they were co‑trustees with Elsie F Atwell of the estate of W C Atwell, whom she represented, during the times that she was a member of the various firms.
Taking the second point first, it seems to me that in her role as partner of the Atwell Family Agency from 1975 until her death, Mrs Elsie F Atwell was known to represent, and was accepted as representing, the estate of her late husband. It must also have been known in such a family that there were other co‑trustees who, for reasons already canvassed, did not become and were not accepted as partners of the firm. Nevertheless, it seems that the choice of the representative of the estate of W C Atwell as a member of the partnership was very largely a matter of decision by those three trustees so that if, for any reason, Mrs Atwell had become incapacitated and could not continue, one of her sons could have taken over as representative of the estate, under rules 5(b) and 9 of the 1976 agreement.
On the death of one of the three joint trustees of the estate of W C Atwell, the surviving trustees continued the administration and were entitled to enforce and assert all rights of the estate. Even if the point had been reached where one or other of the sons was entitled to be named as a partner as the single representative of the estate in the place of his mother, but this was not done because the formalities were not carried out, that son would nevertheless be entitled, in equity, to enforce those rights and, if necessary, to compel the observance of the formalities for the execution of all documents to render himself a member of the firm so as to achieve the rights at law that membership entailed. If there was an entitlement to an assignment in equity of an equitable chose in action, then the assignee could sue in his own name ‑ Williams v Commissioner of Inland Revenue (NZ) [1965] NZLR 395, 398 and Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 ‑ see generally Starke 'Assignment of Choses In Action In Australia' Butterworths 1972, 13 ‑ 18. I therefore proceed on the footing that, subject to achieving compliance with any necessary formalities, the observance of which this court as a court of equity could compel, Malcolm Atwell and Ian Atwell are entitled to represent and vindicate rights associated with the partnership of which any representative of the estate of W C Atwell was, from time to time, a member. Even if they were entirely new trustees of their father's estate, they would have such standing: Young v Murphy [1996] 1 VR 279.
The plaintiffs also contend that they are entitled to sue by virtue of their status as executors and trustees of the estate of their late mother. To this the defendants respond by submitting that the plaintiffs do not purport, at least nominally, to sue in their capacities as trustees of their mother's estate. Certainly their names in that specific capacity do not appear as plaintiffs yet they do purport to sue on behalf of all other partners in the Atwell Family Agency and that is sufficient to cloak them in the mantle of trustees of their mother's estate. Even if it were not, the fact is that they are the persons suing and their rights as trustees are not dissociated or separate from their rights as individuals. It seems to me that I should proceed on the footing that they are entitled to vindicate in their own names, whether as identified as, or representative of, a particular trust estate or not, all the rights which they have in any capacity which are vested in their own persons and this is what they are purporting to do. Accordingly, I am satisfied that each of Mr Malcolm Atwell and Mr Ian Atwell has the standing to sue as they are purporting to do in these proceedings.
Having reached these conclusions upon the issues raised by the parties, it is now necessary to address specifically the three questions, each with subsidiary questions, ordered to be tried. In view of the conclusions which I have reached, it is neither possible nor appropriate to answer every question or subsidiary question specifically. Rather, I consider I should take the course of answering the substance of each question raised, so far as possible or necessary, having regard to the submissions made by the parties and the implications for the questions of the findings which I have made. Because some of the answers which I propose to give are addressed to such matters of substance rather than to the particular format of some of the questions, it would be possible, if there should be any issue about the form of orders to be made by the court, for the resolution of these questions to take the form of declarations of right which apply in the light of the findings of both fact and law which I have reached. However, whether the orders be made in the form of answers to questions, which, in some instances, are slightly at variance with the questions posed, or whether they be treated as declarations of right seems to me to be no more than a procedural matter but I shall allow counsel an opportunity to make submissions, if they so desire, as to the form in which the orders of the court should be pronounced.

Answers to questions posed for trial

1.No.
2(a)Neither Malcolm Walter Atwell nor Ian George Atwell was a member of any of the successive firms known as the Atwell Family Agency until 10 November 1998, when they became recorded jointly as a single member of a partnership as the two surviving trustees for the estate of Walter Charles Atwell (see partnership 28 in the First Schedule). They continue jointly as one single member of the current partnership in that capacity.
2(b)Alex Atwell died on 6 March 1997 and from 7 March 1997 his administrators, David Henry Atwell, Malcolm Walter Atwell and Bradley John Atwell, were registered in their capacity as joint administrators as a single member of the partnership.
2(c)David Henry Atwell died in late 2007 and from the date of his death Malcolm Walter Atwell and Bradley John Atwell, as the surviving joint administrators of the estate of Alex Atwell, continued, in their joint capacity, as one single member of the partnership. They continue in that capacity as a single partner of the current firm. However, in the absence of the joinder of his co‑administrator, Bradley John Atwell, the plaintiff Malcolm Walter Atwell is unable to represent, and does not represent in these proceedings, the estate of Alex Atwell (dec'd).
2(d)In their capacities as the surviving trustees of the estate of W C Atwell (dec'd), and as trustees of the estate of Elsie F Atwell (dec'd), Malcolm Walter Atwell and Ian George Atwell have the standing to bring this action and to seek the relief claimed in respect of any or all of the six transactions referred to in the statement of claim which they allege were invalid or which they contend should be set aside for want of compliance with the pre‑emptive rights provisions contained in the 1976 partnership agreement.
2(e)In respect of each of the disposals challenged by the plaintiffs the claims are based on alleged breaches of contract insofar as they concern claims against the disponors of the units which were transferred, coupled with claims for recission, declarations of priority and incidental relief. So far as the claims are based against the acquirers of the units, they are not claims for breach of contract but for rescission of the contracts between the acquirers, and the disponors of those units, coupled with claims for declarations of priority of equitable interests, and incidental relief.
2(f)No limitation period directly applies to the claims against the acquirers of the units, nor is there any statutory limitation period which might, by analogy in the exercise of discretion, be applied against those claims in equity.
2(g)Accordingly, s 38(1)(c)(v) of the Limitation Act 1935 does not apply to the plaintiffs' claims against the second defendants.
2(h)The limitation period applying to claims by the plaintiffs against the disponors of the units which are subject to each of the six impugned transactions has not been separately addressed or identified in this action so far or in any of the issues ordered to be tried. For that reason, it is undesirable, as well as unnecessary, to attempt to determine whether there is any such statutory limitation period and, if so, what it is.
2(i)It is unnecessary to decide whether or not the 1976 partnership agreement was duly executed as a deed by all the original parties, or whether the members of succeeding partnerships of the firm, the Atwell Family Agency, who did not duly execute that agreement as a deed are nevertheless bound as if each had so duly executed it. Were the 1976 partnership agreement to be treated as a deed binding all members of successive partnerships known by the name Atwell Family Agency, the effect would be to establish a 20‑year limitation period under s 38(1)(e)(i) of the Limitation Act 1935 as the period applying to actions for debt or covenant. None of the relief sought by the plaintiffs in these proceedings is available upon an action in debt or covenant.
3.1The answer to this question depends upon how the partnership treated trustees of a trust estate, whether the estate of a deceased member, or of interests derived under an inter vivos deed of settlement. It is possible for such trustees, if each consents and all other members of the partnership in question also consent, for them each to be admitted as a member of a partnership and so to be partners. In the case of the successive partnerships of the Atwell Family Agency, however, the evidence establishes that the members of the various partnerships deliberately treated the interests of a deceased estate of a former partner or of the trust estate held by an existing partner under a deed of settlement, as a single interest constituting only one member of the partnership. In cases where there were joint trustees for such a trust estate the method of dealing with the participation of that estate in the partnerships varied over time. In some instances, notably in the case of the estate of W C Atwell (dec'd), the practice followed until the death of Mrs Elsie F Atwell in 1998 was to allow only one of several co‑trustees of the estate to become a partner in the firm so representing the estate. In other instances, notably with regard to the estate of Alex Atwell, the practice adopted was to record three joint administrators of that joint estate as a single entity representing that estate as a partner. Despite this variation in practice on these and some other occasions the successive partnerships only ever treated such trust estate interests as a single interest. Where joint trustees were registered as the representatives of the estate, they were only ever treated as being a single member of the partnership in question in their joint capacities.
3.2This question does not now arise.

The answers given to question 2 mean that the plaintiffs' claims for relief arising out of the impugned transactions must necessarily fail. The answers given could lead to that part of the plaintiffs' claims being dismissed if a motion in that respect were made on behalf of the defendants. That leaves the claims for compensation for alleged unauthorised commissions paid to the management committee which have not been dealt with at all. I will hear submissions from the parties as to how that remaining issue should be dealt with but it would seem appropriate to give directions to allow a trial of that issue to be conducted in the event that those claims are still to be pursued.