Cibalevski, Robert v Ristevski, Saso
[2009] VCC 1270
•16 October 2009
| IN THE COUNTY COURT OF VICTORIA | Unrevised |
Not Restricted
AT MELBOURNE
CIVIL DIVISION
EXPEDITED CASES DIVISION
Case No. CI-09-00883
| ROBERT CIBALEVSKI | Plaintiff |
| v | |
| SASO RISTEVSKI | Defendant |
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| JUDGE: | HER HONOUR JUDGE KENNEDY |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 14-17 September 2009; 5 October 2009 |
| DATE OF JUDGMENT: | 16 October 2009 |
| CASE MAY BE CITED AS: | Cibalevski, Robert v Ristevski, Saso |
| MEDIUM NEUTRAL CITATION: | [2009] VCC 1270 |
REASONS FOR JUDGMENT
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Catchwords: Partnership dispute: whether release given by one partner executed under duress; whether entitlement to damages for false imprisonment/assault; appropriate remedy; whether counterclaim for theft / extra hours worked sustained
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S.W. Stuckey | Novatsis & Alexander Lawyers |
| For the Defendant | Mr J.L. Evans | Williams Winter Solicitors |
| HER HONOUR: |
1 Mr Cibalevski and Mr Ristevski are both passionate about fish. Mr Cibalevski has been interested in tropical fish for some 25 years. Mr Ristevski has similarly been interested in fish for some 28 years; his interest being in “larger and more aggressive fish.”
2 In December 2007 Mr Cibalevski and Mr Ristevski each contributed $60,000 and used those funds to purchase an aquarium business and thereafter carried on that business in partnership.
3 Mr Cibalevski accuses Mr Ristevski of forcing him to execute a “release document” on 2 December 2008 wherein he surrendered any claim to any proceeds or profits of that business. A copy of the release document is attached at Annexure A.
4 Mr Cibalevski says that he executed the release document under duress and claims equitable compensation for his wrongful exclusion from the partnership business from 2 December 2008 in an amount of $40,388 for lost profit and $56,009 for lost value of the business. He also claims damages for false imprisonment and/or assault.
5 Mr Ristevski denies that any duress was applied to Mr Cibalevski and further says that Mr Cibalevski has not substantiated his claims for damages which are not maintainable pursuant to the Partnership Act 1958.
6 Mr Ristevski further says that he has claims against Mr Cibalevski for breach of the partnership agreement by reason of Mr Cibalevski’s failure to work the three and a half days per week he says was agreed and a breach of Mr Cibalevski’s fiduciary duties by reason of Mr Cibalevski’s theft of fish.
7 Accordingly the issues in the case are:
(a) whether the release was affected by duress; (b)
whether Mr Cibalevski is entitled to damages for false imprisonment and/or assault;
(c)
whether Mr Cibalevski is entitled to damages for lost profit and lost value of the business; and
(d)
whether Mr Ristevski has sustained his claims that Mr Cibalevski has breached the partnership agreement and/ or his fiduciary duties.
Background
8 The parties entered into a partnership in December 2007 when they acquired the business known as “Lalor Aquarium and Pet Supplies” at 16 May Road, Lalor. The partnership was conducted on the basis that all profits were to be distributed equally.
9 The books of the partnership suggest that the business operated profitably although neither partner appears to have been paid a salary. Nevertheless, Mr Ristevski claims that he was increasingly concerned that Mr Cibalevski was stealing from the partnership and also working less than was agreed.
10 On 2 December 2008 he requested Mr Cibalevski to execute the release document. The precise circumstances in which this document was executed are in dispute. However, it is not disputed that it was a largely “one-sided” document wherein Mr Cibalevski renounced any claims relating to the business.
11 An issue raised with Counsel was whether, regardless of duress, the release was bad for a lack of consideration. However, Counsel for Mr Ristevski suggests that there was consideration in the giving up of claims based on extra hours worked and theft.
12 A concern throughout the case was the appropriate remedy sought. The court requested Counsel for Mr Cibalevski to prepare a draft form of order which was provided on 14 September.
13 The draft provided sought orders that:
(a) the partnership was dissolved on 2 December 2008;
(b) the affairs of the partnership be wound up;
(c) for the purposes of the winding up of the partnership, all necessary
accounts and enquiries be taken and made;(d) for all or any of the purposes aforesaid, all such necessary and
consequential accounts, enquiries, directions and orders.14 The draft then provided for two “alternatives.” Alternative one sought equitable compensation for wrongful exclusion in an amount of $40,388 for lost profit and $56,009 for lost value of the business. Alternative two sought that the defendant “account to the Plaintiff for all benefits derived by him from the partnership property” and that once all accounts were taken the defendant pay to the plaintiff the amounts owing to the plaintiff.
15 No relief was sought in relation to any profits made prior to 2 December 2008 consistent with the approach of both Counsel that the issue of pre-2 December profits was not in dispute.
16 The draft order further sought damages for false imprisonment and trespass in the range of $20,000 to $50,000 together with costs and interest.
17 Consistent with the way the orders were framed both Counsel took the view that it was appropriate for Mr Cibalevski to choose between the alternatives prior to the taking of submissions. Accordingly, orders were made for Mr Ristevski to be provided with notice of such an election prior to the filing of submissions and by Notice of Election of 21 September the plaintiff purported to “elect” to claim damages for Alternative 1.
18 At the commencement of closing submission on 5 October, Mr Cibalevski provided a further form of draft order claiming orders for dissolution and winding up (with any assets of value to be sold) together with the claim for equitable compensation for damages. Damages for false imprisonment and trespass were also sought in the amount of $20,000 together with costs and interest.
19 In both written and oral closing submissions, however, Counsel for Mr Cibalevski confirmed that if his claim for equitable compensation for damages for asset destruction was not made out, he wished to maintain that claim through the taking of an account. He also made clear that Mr Cibalevski sought interest at the rate of seven per cent per annum on the amount of his share pursuant to s.46 of the Partnership Act in the event he was not entitled to his “lost profit” damages remedy.
20 In my view Mr Cibalevski was entitled to claim these further “fall-back” alternatives notwithstanding the earlier “election” to abandon a claim for an account of “benefits” or profits. This appeared to be accepted by Counsel for Mr Ristevski who submitted that there was no requirement to make an election at all.
21 More specifically, I do not regard the plaintiff’s “election” as excluding his entitlement to interest at seven per cent pursuant to s.46 of the Partnership Act, nor as excluding his entitlement to half of the net value of the assets assessed as at the date of dissolution (which entitlements I have found to exist).
Witnesses
22 Mr Cibalevski and his wife were called. There were unsatisfactory aspects of Mr Cibalevski’s evidence, some of which will be referred to below. For example, his suggestion that he never tried to sell fish from his home was inconsistent with the evidence of a customer, Mr Morus, that Mr Cibalevski offered to sell him fish from his house after hours. Mrs Cibalevski also conceded that Mr Cibalevski had sold fish from home though “not often really.”
23 Nevertheless, notwithstanding some concerns with his evidence, it was generally cohesive, particularly as to the significant events of 2 December 2008. I am therefore satisfied that his evidence may be generally relied upon.
24 Mrs Cibalevski’s evidence was otherwise of little significance although she confirmed that her husband was “shocked and depressed” when he arrived home on 2 December 2008.
25 Mr Ristevski also gave evidence. He conceded that he did not have a good memory. His evidence was also vague on significant matters. For example, he was unable to identify with precision the fish and other goods he alleged were stolen by Mr Cibalevski. As referred to below, his evidence that he had reached an earlier agreement with Mr Cibalevski in November 2008 wherein Mr Cibalevski would abandon his interests was also improbable.
26 Mr Ristevski had also lost documents such as the original of the release and a “black book” used for recording transactions of the business (which he claimed disappeared on 2 December 2008). Mr Ristevski also said that he had conducted a stocktake which he recorded on a loose leaf of paper. However, he claimed that he no longer had this paper because he “ripped it up and threw it in a bin because I just cracked it.” The reference to “cracking it” corresponded with my own observation of Mr Ristevski that he was a somewhat emotional man who was not always able to give rational probative evidence.
27 Overall then I am unable to be confident that Mr Ristevski’s account of events and issues is accurate and substantially reliable. To the extent his evidence differs from that of Mr Cibalevski I generally prefer Mr Cibalevski’s evidence. However, I have considered the evidence of both men in the context of all the other objective evidence in this case and insofar as it relates to particular issues.
28 Mr Ristevski also called a number of other witnesses. In terms of the crucial events of 2 December, the relevant witnesses were Mr Foulidis and Mr Turner, whose evidence will be referred to below.
29 Three other witnesses were called in relation to the allegations that Mr Cibalevski was stealing from the business: Mr Morus (a customer); and two nephews of Mr Ristevski who worked in the business: Mr Voljevski and Mr Trajceski. Their evidence will also be referred to below.
Whether release executed under duress
Evidence of Mr Cibalevski
30 In relation to the events of 2 December, Mr Cibalevski’s evidence was that Mr Ristevski came to fix a printer at his request. He then went outside for a smoke and subsequently came back into the shop with his friends “Nick” and “Paul” after 5:00p.m. and closed the door behind them.
31 It is common ground that “Nick” was Nicholas Foulidis who was called as a witness in the case. Mr Foulidis had a background in security and as a brickies’ labourer. He was a visibly strong and powerful man. “Paul” was Paul Turner who was also called as a witness and presented as physically able. He also had a background in security. Both men were friends of Mr Ristevski though they had met Mr Cibalevski through the aquarium business.
32 Mr Ristevski then engaged in a conversation with Mr Cibalevski wherein he accused Mr Cibalevski of stealing things and claimed that he (Mr Ristevski) was doing an extra day of work. Mr Ristevski then said “You’re going to sell your part, you have got no choice in this.”
33 Mr Ristevski then walked off to where his friends were and came back with the release document. Mr Cibalevski had never seen this document before, nor had he ever had any discussions about transferring his interest to Mr Ristevski. He read through the first sentence or two and said that he was “not signing anything.” Mr Ristevski said “you have to sign it, you have got no choice or you won’t be getting out of here alive”. He was very angry and upset by this point.
34 Mr Cibalevski thought about his family and that to get out of this “alive” he just had to scribble something on the paper. He thought he would “probably get killed” if he did not sign. He signed but denied that the handwritten changes were in his handwriting and said that his signature was not his “usual” signature. He was then escorted outside and claimed that Nick said “don’t worry, you will get your $75,000.”
Evidence of Mr Ristevski
35 Mr Ristevski said that he arrived at the shop on 2 December around 5:00p.m. to fix the printer and then went outside for a smoke. That Nick Foulidis then “turned up” as he had asked him to be a witness to a document. Further that he had originally made this arrangement with Paul Turner but Paul said he was not sure he could make it so therefore he had asked Nick to come. In the result both Nick and Paul arrived and were talking outside.
36 Mr Ristevski then said they went into the shop and Paul and Nick stayed at the front of the shop. That he then explained to Mr Cibalevski the goods he had been taking and the extra days worked and that he knew he was taking stuff home. In response, Mr Ciblevski said words to the effect of “yes, sometimes I take a little bit of this and that” and that “I didn’t know it was that many days you worked extra.” Mr Cibalevski then said he had a “release.” At this point Nick and Paul were still at the front of the shop about 10 to 12 metres away.
37 Mr Ristevski then went and got the release document which he had in the car. He said “This is what I’ve drawn up; Read it, see what you think.” He said there was a lot of stuff gone missing and “we’ve got to sort something out. I’m going to go to the police.” Mr Cibalevski then looked at the document and made some amendments and Paul witnessed the document. Mr Cibalevski then signed the document and they shook hands. He said “whatever is left here is yours and what I’ve got at home is mine.” He then left. Nick had also left by this stage as he had only stayed “about five minutes.”
Mr Ristevski’s submissions
38 Mr Ristevski suggested that there were a number of reasons that I should prefer his evidence as to the events of 2 December. In particular, he relied on the following:
(a)
that Mr Cibalevski’s version was that at the shop on 2 December 2008 Mr Ristevski was initially said to be “happy smiling” but that when he confronted Mr Cibalevski he looked “upset or nervous or flustered”. This change was said to be inconsistent with Mr Ristevski planning to stand over Mr Cibalevski.
(b)
that Mr Cibalevski’s evidence that Nick said “don’t worry you will get your $75,000” was not credible and was inconsistent with the terms of the release;
(c)
that I should find that Mr Cibalevski did make the handwritten alterations to the release which is inconsistent with his evidence that he did not read the document and just scribbled his signature;
(d)
that Mr Cibalevski’s evidence that his signature was not his “usual” signature was unsatisfactory;
(e)
that Mr Cibalevski’s actions subsequent to execution were equivocal and explicable by reference to his desire to avoid admitting his thefts to his wife. More particularly that he left attending the Mill Park Police Station until 8:52p.m. on 2 December (about an hour and a half after he left the shop) and further that he obtained a prescription for Valium which he did not have filled.
39 However:
(a)
the change in the mood alleged by Mr Cibalevski is not inconsistent with a plan to seek the release by “standing over him.” It is probable that Mr Ristevski would only become visibly upset when it came time to actually make his allegations;
(b)
I accept that there appeared nothing in the evidence to support the probability that Nick Foulidis was going to buy Mr Cibalevski’s share. Further, that there was no mention of this evidence in correspondence by the solicitors. However a reference is made to a request for Mr Cibalevski to sell his share “to Nick” in Mr Cibalevski’s statutory declaration made at the police station on 3 December. I also do not regard this aspect as a central part of the plaintiff’s evidence such that it would necessarily be raised in correspondence;
(c)
Mr Cibalevski certainly denied making the initialled changes though both Mr Ristevski and Mr Turner have suggested that he did do so. This latter evidence appears more probable as, given the nature of the handwritten changes, it is more likely that Mr Cibalevski would suggest they be made. However, even if this is so, the initialling itself is consistent with a situation of duress wherein a person without control attempts to exercise control over a less significant matter;
(d)
It is true that Mr Cibalevski appeared to sign an assignment to lease in a similar way to the way he signed the release. When this was put to him he suggested that he signed this way if he was “under duress” or only had a “quick time to sign something, I just scribble.” I further accept the submissions of Mr Ristevski that there was some prevarication in the way this evidence was given. However, the question of duress needs to be considered in the light of all the evidence;
(e)
In relation to the reporting to the police, the delay of an hour and a half is in my view insignificant. What is more significant is that shortly after the events of 2 December, at 8:52p.m. (that very night) Mr Cibalevski presented at the Mill Park police station and complained of being “forced to sign document” to release him from the business. Nor is it significant that the prescription for Valium was not filled. The explanation of Mr Cibalevski was that he preferred to avoid such medication and take “natural” remedies which explanation appeared credible and which I accept. His actions in seeking medical assistance on 3 December were consistent with his version of events.
40 Overall, many of the factors identified by Mr Ristevski are equivocal. Some, such as the reporting to police, support Mr Cibalevski’s version of events.
41 Another factor which may tend to support Mr Ristevski’s version was that it seems improbable that the issue of stealing came “out of the blue” as was the tenor of Mr Cibalevski’s evidence. Mr Ristevski’s evidence was that he had raised concerns as to the way the partnership was running well before December 2008. This was also consistent with the evidence of Mr Voljevski that he had raised concerns with Mr Ristevski as to Mr Cibalevski taking things prior to December 2008.
42 Nevertheless, even if this is so, there appears no reason why Mr Cibalevski would suddenly agree to sign such a one-sided release and freely adopt the “mea culpa” attitude as is alleged.
43 Under cross-examination, Mr Ristevski sought to proffer some explanation for Mr Cibalevki’s generous behaviour by alleging that an agreement wherein Mr Cibalevski agreed to give up all interest in the partnership had already been reached between Mr Cibalevski and himself in November 2008. Further, that he had suggested that a solicitor document this agreement to terminate the partnership. Mr Cibalevski had allegedly said that this was a good idea and Mr Ristevski should go and attend to it.
44 Such an agreement was not pleaded and never put to Mr Cibalevski. It also makes no sense on Mr Cibalevski’s own version of events. Thus, if an agreement had been reached as alleged, there would seem no need for Mr Ristevski to go through all of his accusations again on 2 December 2008. However, all the evidence suggested that this is precisely what occurred.
45 I therefore reject Mr Ristevski’s suggestion that an earlier agreement had been formed. Moreover, although I accept that he had raised Mr Cibalevski’s behaviour prior to 2 December, his evidence was generally that this had not been taken seriously and that Mr Cibalevski would just “walk off.” In these circumstances it is highly unlikely that Mr Cibalevski would suddenly capitulate without the application of significant pressure.
46 There are also a number of other circumstances which are suggestive of the making of a threat. Those factors are as follows:
(a)
that the terms of the release itself are “one sided” with no benefit at all to Mr Cibalevski;
(b)
that the circumstances in which the release were signed suggest it was more probable than not that the document was executed under significant pressure. Those circumstances, which are largely undisputed, include the following:
•
that Mr Cibalevski was present in a shop in the late afternoon outside business hours with Mr Paul Turner and (for some period) Mr Nick Foulidis, both gentlemen being requested to be there by Mr Ristevski;
•
that both Mr Turner and Mr Foulidis were visibly physically powerful men with a background in security;
•
that there was no reason for both Mr Turner and Mr Foulidis to be present standing by the front door “waiting to see what would happen” (according to Mr Turner). Mr Ristevski claimed Mr Foulidis was asked to be present as a witness as Mr Turner was unsure if he was available. However, Mr Foulidis had no recollection of any communications that led him to attend the shop;
•
that the evidence of Mr Ristevski was that Mr Cibalevski was presented with the release “on the spot” with Mr Turner and Mr Foulidis remaining at the front of the shop. There was no suggestion that Mr Cibalevski had been shown the document before, nor that he was given an invitation to take the document away to consider it and seek legal advice;
•
that while Mr Ristevski’s witnesses generally tried to down play the heated nature of the circumstances (Mr Foulidis suggesting it was “reasonably civil”), under cross–examination Mr Foulidis conceded that Mr Cibalevski “was crying like some girl…he was all going in hysterics, because he’d been caught”; and
•
that the execution took place in circumstances where Mr Cibalevski was being accused of theft of both fish and money and of working fewer days than he was obliged to, all of which was likely to be highly confronting.
47 However, Mr Ristevski suggests that the evidence of Mr Foulidis and Mr Turner was corroborative of Mr Ristevski’s claims.
48 In terms of Mr Foulidis his evidence was limited since he claimed that he left prior to execution. He also “didn’t want to really hear” and “didn’t hear 100 per cent from A to Z what the whole situation was.” As mentioned above, some of his evidence also suggested that Mr Cibalevski was under significant pressure and I do not accept Mr Ristevski’s submissions that the “crying” was explicable by his reaction to the theft allegations. There was no suggestion by Mr Ristevski that Mr Cibalevski was so emotional on other occasions when the subject of theft was raised. Contrary to the tenor of Mr Ristevski’s evidence, Mr Foulidis also said that Mr Cibalevski was “denying everything” which tends to confirm the that he only signed when a threat was made.
49 Mr Turner’s evidence was generally supportive of Mr Ristevski’s account though he was also standing at some distance away at the front of the shop until he was called over to witness the release. He also confirmed that there were words spoken in Macedonian which he did not understand. Nevertheless he confirmed that Mr Cibalevski made the initialled changes, agreed to sign the paper; shook hands and said “what I take, what I’ve taken, I’ll keep and you can keep what’s in the business.” He suggested there was “no swearing, no threats, it was just two blokes disagreeing and talking about it.”
50 However, there was a significant difficulty in accepting Mr Turner’s evidence. On 22 December 2008 he unilaterally determined to provide a statutory declaration to the police wherein he stated that Mr Cibalevski signed the release “of his own free will” and that at “no time was there any threats of violence of any kind.” His evidence was that he chose to do this himself without request. This highly defensive behaviour was inconsistent with a witnessing of a regular transaction. Rather, as suggested to Mr Turner under cross-examination, his conduct shows that he was aware that, from the circumstances of that night, it was likely that Mr Cibalevski would seek to avoid the release once he was out of the shop and away from Mr Ristevski and his friends. In the absence of any adequate explanation for his conduct Mr Turner’s denial of this proposition was not credible.
51 Taking into account then all the circumstances above as well as my general preference for the evidence of Mr Cibalevski, I accept the evidence of Mr Cibalevski as to the events of 2 December and reject the evidence of Mr Ristevski (and Mr Turner and Mr Foulidis) to the extent there is conflict. More specifically, I accept Mr Cibalevski’s evidence that he was told to sign the release or “he would not be getting out of there alive.”
52 I have taken into account the seriousness of the allegation made by Mr Cibalevski.[1] However, in my view there is cogent evidence to establish duress in this case being the clear evidence of Mr Cibalevski together with the objective circumstances.
[1] Briginshaw v Briginshaw (1938) 60 CLR 336
53 It was fairly conceded by Mr Ristevski that if the Court found that Mr Ristevski told Mr Cibalevski words to the effect that if he did not sign the release he would not get out of the shop alive, duress would be established.
54 I have made such a finding. In these circumstances, “illegitimate pressure” was applied which consisted of an unlawful threat.[2]
[2] Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40 at 46
55 I am further satisfied that this pressure contributed to the entry into the release which Mr Cibalevski would not have signed absent such threat. His evidence was that he signed the document “to get out of this alive.” In any event, once such illegitimate pressure is established the onus lies on Mr Ristevski to show that that pressure made no contribution to Mr Cibalevski entering into the release.[3] No such evidence was led in this case; rather, as indicated already, duress was conceded if the threat was established.
[3] Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40 at 46
56 It follows that the release was affected by duress.
57 I am also satisfied that Mr Ristevski has breached his fiduciary duty to his partner by making the threat he made.
58 It follows that it is unnecessary to consider the question of consideration.
59 I do however accept that the events of 2 December 2008 operated to dissolve the partnership which was determinable at will. Both parties accepted this position.
False Imprisonment/Assault
60 The claim for false imprisonment is not sustained. There was no actual restraint on Mr Cibalevski,[4] and no-one appears to have prevented Mr Cibalevski from leaving the shop or blocked the exits to it.
[4] John G. Fleming, ‘The Law of Torts’, 9th Edition, at 33
61 Counsel for Mr Ristevski however fairly conceded that if the Court found that Mr Ristevski told Mr Cibalevski words to the effect that if he did not sign the release he would not get out of the shop alive this would constitute tortious assault. I am satisfied that this is the case since by his words and conduct Mr Ristevski has intentionally created in Mr Cibalevski an apprehension of imminent harm.[5] Moreover Mr Cibalevski’s reasonably believed that the threat would be carried out and signed “to get out alive.”
[5] Ibid, at 31
62 No claim is made for pecuniary loss. However, Mr Cibalevski sought general damages of $20,000. Mr Ristevski suggested the amount should not exceed $10,000.
63 In my view the amount should exceed $10,000 given the injury to the feelings of Mr Cibalevski and the loss to his dignity of being surrounded by three large men and being pressured to the point where he “cried like a girl.”
64 However, Mr Cibalevski called no medical evidence as to the effects of the assault on him. He obtained, but did not fill, a prescription for valium. He was also able to sleep after 3 December although he remained stressed and upset.
65 In all the circumstances an appropriate amount for general damages is $15,000.
Damages for Alleged destruction of the business
66 Mr Cibalevski suggests that as at 2 December 2008 the business was worth at least $112,000. He relies on the following:
(a) a general ledger from the Saso Ristevski Family Trust wherein an amount of $56,009 is credited in respect of an entry of 2 December 2008 which is described as “took over 50 per cent old business”. This was said to be an admission by Mr Ristevski as to the value of the business at this time;
(b) that the parties paid $117,505.40 for the business on 13 December 2007;
(c) that the business had earned approximately $100,000 profit per annum, as substantiated by the books of account for the period December 2007 to December 2008.
67 Mr Cibalevski claims that this value has been subsequently destroyed. He relies on the profit and loss statement of the Saso Ristevski Family Trust which recorded a loss of $12,748 for the period 1 July 2008 through to 30 June 2009. He also relies on an exclusive sale authority given to Klemms Business Brokers to sell the business at an asking price of “$15,000 or best offer” and providing for an estimated commission of $10,000 if the business is sold at a price of $15,000 or any other purchase price.
68 Mr Cibalevski has not made out his claim since the evidence does not enable a determination of the value of the assets of this business on 2 December 2008.
69 No questions were asked of Mr Ristevski regarding the records of the Saso Ristevski Family Trust Ledger and it is unclear precisely what the balance sheet in evidence relates to (including whether it pertains to half or the whole of the assets of the business). In any case, the ledger provides minimal evidence of the actual value of the business assets and at best records a “take on value” for accounting purposes. The court was not even provided with a precise statement of what the assets of the business were in terms of plant and equipment, stock and goodwill. The only reference to such items appears to be a general ledger 1/7/08-30/6/09 of the Saso Ristevski Family Trust which suggests that as at 2 December 2008 stock was given a value of $25,000; goodwill of $9,350 and plant and equipment $21,659.00. The court was provided with no explanation as to how these figures were derived.
70 The price paid for the business is of little assistance. The uncontested evidence of Mr Ristevski was that a lot of aquariums had closed down and that they had “paid too much” for the business.
71 Moreover, the making of profits in the first year also says little of the precise value of the business including goodwill as at 2 December. Although profits appear to have been made this was only achieved by reason of the unpaid labour of the partners. Any proper estimate of the value of the business would need to reflect that neither partner appears to have been paid an identifiable wage.
72 Accordingly Mr Cibalevski has not established the value of the business at 2 December, 2008 even if a “robust” approach is taken as urged by Mr Cibalevski.[6]
[6] Citing Fry & Ors v Oddy [1999] 1 VR 557 at 570
73 Given I am unable to determine the value of the business it also follows that Mr Cibalevski has not demonstrated that any such value has been “destroyed” by the actions of Mr Ristevski in “wrongfully excluding” Mr Cibalevski.
74 Moreover, it is unclear that the present value of the business is zero, notwithstanding the exclusive authority business and the alleged loss suffered by the business. The exclusive authority merely indicates what amount Mr Ristevski is prepared to accept. The lack of profitability tells the Court nothing as to the value of the goodwill, plant and equipment and stock. It is also unclear as to what assets and property belong to the original partnership given the exclusion of some 10 months.
75 It follows that I am unprepared to grant an award of damages as Mr Cibalevski has not demonstrated that the assets of the business have been destroyed.
76 Mr Ristevski also submitted that the damages sought would be contrary to the provisions of the Partnership Act which make provision for the rights of the partners as to the application of partnership property.
77 It is unnecessary to consider this submission given the state of the evidence. However, the Partnership Act makes provision for this case since an appropriate value, net of liabilities, may be determined on the taking of an account. As fairly conceded by Counsel for Mr Ristevski, Mr Cibalevski would then be entitled to an order that Mr Ristevski pay half of that value of the partnership so determined to Mr Cibalevski. Pursuant to s.47, the amount due in respect of the outgoing partner’s share is treated as a debt accruing at the date of the dissolution of the partnership.
78 The taking of an account as at 2 December 2008 thereby ensures that any subsequent “destruction” by Mr Ristevski is not visited on Mr Cibalevski in any event.
79 Mr Cibalevski indicated that he wanted the business to be sold and the partnership wound up. This was ultimately agreed to by Mr Ristevski although he highlighted that the current business may be different to that which existed on 2 December. Pursuant to s.43 Mr Cibalevski is entitled to have the property of the partnership applied in payment of the debts and liabilities of the partnership and to have the surplus assets applied in payment of what may be due to him and for that purpose he may apply for a winding up.
80 Accordingly, there will be an order for winding up which recognises that the parties have agreed that the property of the partnership is to be sold. If any amount due by Mr Ristevski is not paid, then such proceeds should be utilised to meet his obligations after allowance for the liabilities of the partnership. If Mr Ristevski makes the requisite payment, he may retain any proceeds of sale.
81 Given the expenses associated with this litigation to date, the parties should endeavour to agree on a value of the partnership as at 2 December 2008. I also accept the submissions of Mr Ristevski that any appropriate valuation should also take into account an amount for goodwill.
82 If the parties are unable to agree then the taking of an account will be necessary to enable an appropriate valuation of the assets and liabilities of the business on the date of dissolution, 2 December 2008.
Damages for Alleged Loss of profits
83 Mr Cibalevski seeks $40,388 for loss of profits. He bases this on the business books which gave a profit over 11 months of $94,499, which equated to $103,090 per annum. Based on the days Mr Cibalevski was excluded of 286 and the profit of $282 per day, this gave an alleged lost profit figure of $80,777 of which one half share was $40,388.
84 The claim is based on Mr Ristevski’s wrongful conduct in breach of his fiduciary obligations in excluding Mr Cibalevski from the business which was said to cause the loss of profits which would otherwise have accrued to the business. This notwithstanding that the damages claimed represent expectation or loss of bargain loss which would be based on a breach of contract claim.
85 Even presuming loss of bargain damages are appropriate, the claim makes no allowance for the fact that in order to continue to earn the alleged “profit” Mr Cibalevski would have had to continue to work in the business three and a half days a week. Nor can it necessarily be assumed that the profits claimed would have been made if Mr Cibalevski had not been “excluded.”
86 In any event, the claim based on “exclusion” is misconceived. Given the partnership was dissolved on 2 December 2008, there could be no “exclusion” from a partnership which did not exist.
87 I accept that Mr Ristevski should pay some compensation insofar as he employed partnership property to the exclusion of Mr Cibalevski. However, as submitted by Mr Ristevski, s.46 provides specifically provides for the compensation which should be granted in this case.
88 Subject to section 4, the purposes and effect of the Partnership Act is to “largely” codify the law of partnership[7]. The word “largely” is used because section 4 of the Act states that the rules of equity and of common law applicable to partnership shall continue in force except so far as they are inconsistent with the express provisions of the Act.
[7] Cameron & Ors v Murdoch & Ors (1986) 63 ALR 575 at 586 approved in Fry & Ors v Oddy [1999] 1 VR 557 at 575
89 On a natural reading of section 46, it exhaustively deals with and provides for the consequences which should flow where a partner wrongfully makes use of the property of the other partner after dissolution. Where there are profits the remaining partner should not be allowed to profit by the wrong and where there are no profits there should be compensation. Consequently the outgoing partner has the right to claim at his/ her option either for such share of profits attributed to the use of his/ her share or compensation, being interest at the rate of seven per cent per annum on the amount of the outgoing partner’s share of the partnership assets. In these circumstances, there are no omissions remaining for the rules of equity and the common law to fill.
90 Such an approach is consistent with the views of Long Innes J in Powell v Powell [8] who said that the equivalent provision in New South Wales (s.42) made no alteration to the existing law. Further that the provision was only operable in circumstances where the continuing partner carried on the business “wrongfully” without authority. This is precisely the case on the present facts.
[8] Powell v Powell & Anor (1932) 32 SR (NSW) 407 at 419-420
91 As indicated already, Mr Cibalevski sought interest at the rate of seven per cent pursuant to s.46 in the event he was not entitled to his damages remedy. I am satisfied that Mr Cibalevski is entitled to claim interest at the rate of seven per cent per annum on the amount of his share of the partnership assets pursuant to s.46.
92 Again, if the parties are unable to agree on this figure, an accounting will be necessary to value this claim.
Mr Ristevski’s claims
Theft
93 There were concerns raised on the evidence about Mr Cibalevski’s conduct, particularly by the evidence of a customer, Mr Morus. For example, Mr Morus observed that Mr Cibalevski put money paid by him directly into his wallet without putting it through the register or filling out the sale in the book used to record purchases.
94 However, although the evidence raised general concerns as to Mr Cibalevski’s behaviour, it did not establish any specific instances of theft of particular stock or amounts of money.
95 In the light of this evidence, Counsel for Mr Ristevski fairly claimed that the greatest the loss provided for on the evidence was $400 in alleged theft of stolen fish. This evidence was largely based on that of Mr Ristevski.
96 The evidence of Mr Ristevski was unsatisfactory. Although he clearly believed things were being stolen the basis for this belief appeared to turn on a document dated well after the events in January this year. Under cross- examination he alleged that Mr Cibalevski took stuff “because my nephews saw him take stuff home.” He alleged Mr Cibalevski also took money because his nephew saw him and customers observed the same thing.
97 However, the evidence did not substantiate the claim that specific fish were stolen. Rather, the statements of each of Mr Volcevski and Mr Trajceski were general statements as to requests being made for them to “bag” unspecified fish for Mr Cibalevski to take home. It will also be recalled that the stocktake which might have shed light on these matters was destroyed by Mr Ristevski.
98 An exception to this was that Mr Volcevski gave evidence that he could specifically recall being asked to “bag” a clown trigger fish by Mr Cibalevski.
99 Mr Cibalevski’s evidence in relation to the clown trigger fish was that the clown trigger fish had been returned by a customer because it was aggressive and killing other fish. Further that Mr Ristevski agreed that Mr Cibalevski should take it home as no-one wanted it. The fish subsequently died.
100 I am not prepared to reject this explanation as to the clown trigger fish which appeared plausible and went beyond a mere denial.
101 The evidence is insufficiently clear and precise particularly when regard is given to the seriousness of the allegation.[9]
[9] Briginshaw v Briginshaw (1938) 60 CLR 336
102 The evidence does not establish that Mr Cibalevski has breached his fiduciary duties by thieving as alleged.
Extra Hours worked
103 In order to consider this claim it is necessary to determine what was the agreement re hours of work; whether it was breached; and the appropriate relief.
terms of agreement
104 The evidence of Mr Ristevski was that the agreement between Mr Cibalevski and himself was that they would each work three and a half days per week. Given the business traded seven days a week, it was possible to fit this around Mr Cibalevski’s shifts (who worked for two days; then had 24 hours off; then worked two days nightshift) and Mr Ristevski’s other work in the security industry.
105 The evidence of Mr Cibalevski was that the agreement between Mr Ristevski and himself was that they would each work three and a half days a week. He further maintained that he worked three and a half days a week although he did at some point refer to an “eight day cycle.”
106 Consistent with the intention that the partners were to share equally in the business, I accept Mr Ristevski’s contention that an agreement was made that the partners would work three and a half days a week.
breach
107 Mr Ristevski alleged that he had worked 104 days more than his partner. He claimed this on the basis of the handwriting on the books and based it on a presumption that he worked on the days he completed entries.
108 In closing submissions, however, his Counsel fairly conceded that this was an overstatement and sought to rely on his own assessment of the handwriting in the books to come to a figure of 49 extra days.
109 Mr Cibalevski denied the allegation that greater hours were worked by Mr Ristevski. He also gave evidence that there were days when he “covered” for Mr Ristevski since his mother became seriously ill during this time and there were days when Mr Ristevski needed to take her to hospital and other medical appointments.
110 Mr Ristevski’s approach appeared to be based on a number of assumptions including:
(a)
the alleged familiarity of Mr Ristevski and/ or his Counsel with the handwriting of the partners;
(b)
that whenever the handwriting suggested that Mr Ristevski worked it was presumed (unless a formal handover was recorded) that he in fact worked until closing time. This was said to be consistent with the evidence that there was only one weekly handover.
111 The evidence is inadequate to support any breach which cannot be based on an inexpert assessment of handwriting in the absence of probative records to properly record the hours worked by each partner.
112 Moreover the evidence as to the handover was less than clear and Mr Ristevski agreed that he had no specific evidence of what times he worked on handover days. Although Mr Cibalevski did at one point suggest that there was only one weekly handover, the tenor of Mr Ristevski’s evidence was that there were handovers more frequently. For example, he claimed that there was a handover on 25 November notwithstanding there appears to be no notation of one. There also appeared to be handovers where Mr Ristevski replaced Mr Cibalevski and others at which Mr Cibalevski replaced Mr Ristevski. In such circumstances a partner may have been filling in the books in his handwriting (and thereby given credit for the whole day on Mr Ristevski’s approach) in circumstances where that partner had not in fact worked the whole day.
113 The assessment above is also inconsistent with Mr Ristevski’s own evidence since it appears to assume that Mr Cibalevski was at work from 1 November in a period within four to six weeks after the birth of his son (on 26 October) notwithstanding his specific evidence that Mr Cibalevski did not work during this time.
114 The paucity of the evidence is underlined by the fact that Mr Ristevski was vague as to what he was precisely asking for; suggesting that he didn’t nominate an amount at one point but later alleging that he asked for a “hundred, two hundred bucks a day.”
115 Although I accept that Mr Ristevski believed he was working longer hours, the records before me do not substantiate a breach of the agreement to work equal hours.
116 In these circumstances it is unnecessary to consider the submissions of the parties as to remedy.
117 Given my findings above the question of hours and/ or alleged thefts should not form part of any future accounting process.
118 It is also inappropriate that any future accounting provide an opportunity for further allegations of breaches of the partnership agreement or any partner’s fiduciary duties. Rather any accounting should be narrow in compass designed to elicit the true value of the partnership as at 2 December 2008.
Conclusion
119 The following orders are appropriate:
1. Declare that:
a) a partnership existed between the plaintiff and the defendant whereby they agreed to conduct the business known as “Lalor Aquarium and Pet Supplies” from December 2007; b) the plaintiff and the defendant were interested in the assets and the profits of the partnership and liable for the losses of the partnership in equal shares; and c) the partnership between the plaintiff and the defendant was dissolved on 2 December 2008. 2. Order that:
a)
the plaintiff is entitled to an amount equal to half the value of the partnership assets net of any liabilities of the partnership assessed as at 2 December 2008 which amount shall be paid to him by the defendant;
b)
the plaintiff is entitled to a payment equal to seven per cent per annum on the amount of his share of the partnership assets assessed as at 2 December 2008 pursuant to section 46 of the Partnership Act 1958 which amount shall be paid to him by the defendant; and
c) the defendant’s counterclaim is dismissed.
3. The parties should attempt to agree on the values referred to in paragraph 2 (a) and (b) above and provide an appropriate order to finally dispose of this proceeding. In default of agreement, the plaintiff may apply, on reasonable notice, to the associate to Her Honour Judge Kennedy for the matter to be listed for directions in relation to the taking of an account and inquiry as to the assets and liabilities of the partnership as at 2 December 2008 in the light of these reasons. In such circumstances, the plaintiff should provide a detailed draft form of order.
4. That the affairs of the partnership be wound up. To this end, the parties have indicated that they wish a sale to occur. Unless otherwise agreed, if there are remaining assets of the partnership which have not already been disposed of, such assets are to be sold. Further, and unless otherwise agreed, any proceeds of sale are to be paid into Court to the credit of this proceeding. After discharge of any partnership liabilities, and if any payment due by the defendant under paragraph 2(a) and (b) has not been made, the proceeds are to be utilised to satisfy such payment. Any proceeds which remain may be released to the defendant on application on reasonable notice. If there is any other dispute which arises from the sale, either party may apply to the associate to Her Honour Judge Kennedy for orders to deal with such dispute including orders for the appointment of a receiver.
5. The plaintiff is entitled to general damages for assault in an amount of $15,000.
6. Liberty to apply.
120 I will hear from the parties on the question of costs. As there remains uncertainty as to the ultimate outcome, it may be appropriate for the question of costs to be reserved pending the final disposition of this proceeding.
ANNEXURE A
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