Commissioner of State Revenue v Rojoda Pty Ltd

[2019] HCATrans 103

[2019] HCATrans 103

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Perth   No P1 of 2019

B e t w e e n -

COMMISSIONER OF STATE REVENUE

Applicant

and

ROJODA PTY LTD

Respondent

Application for special leave to appeal

NETTLE J
EDELMAN J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 17 MAY 2019, AT 11.50 AM

Copyright in the High Court of Australia

MR J.A. THOMSON, SC, Solicitor‑General for the State of Western Australia:   May it please the Court, I appear with MS L.J. DIAS on behalf of the applicant.  (instructed by State Solicitor’s Office (WA))

MR C.L. ZELESTIS, QC:   May it please your Honours, with my learned friend MR S.K. GRIMLEY and I appear for the respondent.  (instructed by Ernst & Young Law Pty Ltd)

NETTLE J:   Yes, Mr Thomson.

MR THOMSON:   May I commence by taking the Court to what was said by President Buss and Justice Beech at paragraph 23 of their judgment in the Court of Appeal, which is on page 85 of the application book. 

NETTLE J:   Yes. 

MR THOMSON:   At this point, their Honours were dealing with the nature of the equitable interest which former partners had in partnership land, following the dissolution of two partnerships, but prior to the execution of certain deeds known as the 2013 Deeds.  Their comments at paragraph 23 were made in the circumstances where there were sufficient current assets to pay out partnership liabilities, although no decision had been made to use the assets in that way.  Starting in the fourth line they say: 

in this case, immediately before the 2013 Deeds were executed, each partner had ‑

and I emphasise these words: 

a specific and fixed beneficial or equitable interest in the relevant Partnership Properties, commensurate with the partner’s share in the Partnership, on the basis that the surplus assets after payment or discharge of debts and other liabilities were sufficiently ascertained and provided for out of cash and other current assets that the relevant Partnership Properties should be treated as part of the surplus assets of the Partnership after payment or discharge of Partnership debts and other liabilities. 

They also rejected the second proposition which is stated at paragraph 34 of the judgment at page 88 of the application book.  They rejected the proposition therefore that the 2013 Deeds:

created new trusts in relation to the Partnership Properties conferring a proprietary equitable interest in the properties that had not previously been held by the partners or their representatives –

Justice Murphy was to the same effect.  If you go to page 125 of the application book, paragraph 139 and if you start at the seventh line down I think it is, Justice Murphy says: 

From the commencement of the general dissolution up to the point of the execution of the 2013 Deeds, Maria thereby held the Properties on trust in the ordinary sense of that word, and, moreover –

and I emphasise these words again: 

on trust of a kind which might aptly be described for present purposes as a bare trust.  That being the case, Maria did not, in my view, have a beneficial interest in the Properties commensurate with the beneficial interest which, on the case advanced by the Commissioner and accepted by the Tribunal, was brought into existence by cl 3 of the 2013 Deeds. 

In effect, each member of the Court of Appeal accepted the proposition that upon dissolution of a partnership, former partners immediately have a vested beneficial interest in partnership land which is the same as the interest of a beneficiary under a bare trust so long as the current assets of the partnership are sufficient to pay all of the partnership liabilities. 

As a result, each member of the Court of Appeal considered that in the circumstances of this particular case the 2013 Deeds simply confirmed pre‑existing trusts which had already arisen by law when they declared that the former partners had a beneficial interest in partnership land as beneficiaries under a bare trust. 

The Commissioner has four points that it makes, or that he makes – she makes, I apologise.  First, in the written submissions of the respondent, the respondent never explicitly supports the proposition which is critical to the Court of Appeal’s reasoning, that is, the respondent never says that it was correct for the court to state that the trust which existed prior to the execution of the 2013 Deeds, were trusts of the ordinary kind, which might be described as a bare trust, giving the beneficiaries a specific and fixed beneficial interest in the relevant partnership properties. 

The closest that their written submissions come to this is that they say there is no impediment to recognising that the beneficiaries of the trust, which existed prior to the 2013 Deeds, had a complete equitable interest – that is at paragraph ‑ ‑ ‑ 

EDELMAN J:   Will you ‑ I mean, you need to go a bit further than this anyway, do you not?  I mean, you need to establish not merely that there was no trust or equitable interest prior to the partnership being wound up, but also that the declarations of trust by Maria fell within section 11(c) – or necessarily fell within section 11(c) because they were not confirming any additional trust, but did not attract the reduction in section 78.

MR THOMSON:   That is right.  We do have to deal with that, although the question of section 78 was not something that was critical to the Court of Appeal’s decision, because the Court of Appeal decided it upon the basis of a principle which said that there was a specific and fixed interest that arose at the time when the general dissolution commenced. 

EDELMAN J:   Well, you just say that is contrary to Henschke. 

MR THOMSON:   We say it is contrary to Henschke.  We also say it is contrary to legal principle and two particular respects and we say it is not supported by the Cameron v Murdoch exception.  And even if it was something that might be possibly supported by it, it is a matter that should be declared in the public interest by the High Court as an exception to Henschke even though in Cameron v Murdoch the Privy Council did not specifically address it or state the relevant principle about having a specific and fixed vested beneficial interest in the land. 

So those are the particular points about the principle that the Court of Appeal has stated, but, as a matter of legal reasoning, we say that it is wrong in two respects, and this is a principle that now stands in the public record and will continue to stand whatever the result of section 78 might be, because the court has based its decision upon this principle. 

So we say, when we come to the question of section 78 or the proper construction of the deeds, that if there is an answer that can be made as a point of contention, that is not a reason why special leave ought not to be granted because the primary and critical question is whether the principle that has now been enunciated actually represents the law.  So we say that is what the point of public interest is, and we adopt what Justice Heydon said in the Gordian Runoff Case.

EDELMAN J:   Why does not section 78 apply?

MR THOMSON:   Because section 78 only applies to a transfer of a pre‑existing interest, not the creation of a new interest, and it is ‑ ‑ ‑ 

EDELMAN J:   As a matter of strict equity, the creation of a trust might not transfer any rights, but is that consistent with the purpose of section 78? 

MR THOMSON:   So, section 78 is dealing with a situation where there is partnership property which is returned to the individual partners.  This is a situation where more than that has occurred.  There has been a distribution – sorry, there was been a transformation of the nature of the property and they have now become bare trustees under a trust, whereas it is not the same as if the partners previously held the land as joint tenants and then they were then holding the land as joint tenants or tenants in common, but not for the purposes of the partnership. 

So, what section 78 is designed to do is to deal with the situation where there is a dissolution of the partnership and the idea is that the property is no longer to be applied for partnership purposes.  This is quite a way beyond that because what has happened is that they created new rights to dictate how this land is held, clearly it is not held for partnership purposes, but the new rights go beyond that to create the bare trusts. 

We say that it raises the fundamental point in DKLR, that it is not the case that at every point in time, parallel, legal and equitable estates exist in land and that all that is happening is you are redividing them.  And, in fact, that is a fundamental problem we say with the way that the respondent has put its case.  If you look at paragraph 20 of their submissions at page 177 of the application book, the way they put it, in the third line, is to say: 

the cases considered by the Court of Appeal demonstrate there is no obstacle to the ascertainment and recognition of specific equitable interests in the other assets ‑

That is actually not what the High Court said when it approved Livingston and the comments of Viscount Radcliffe.  In Henschke, it says you only call into existence equitable proprietary rights when it is necessary.  You do not say they exist unless there is an obstacle to it. 

So, we say that fundamentally refers to the proposition that applies in respect to the statement of the principle.  By the by, they also say in the statement of the principle they adopt, that where current assets exceed current liabilities, that is how the principle operates.  The Court of Appeal actually said “all liabilities”. 

So, we say that it is one aspect of the problem in respect of the statement of the principle in terms of legal reasoning.  We say that there is another aspect to the problem, and that what it does is it involves the recognition of equity developing an enforcement of a position regarding the use of the current assets to pay the liabilities, which is contrary to the legal and statutory position because the legal and statutory position is that you simply have an interest in the surplus after the payment of liabilities after the assets have been sold. 

What the Court of Appeal has done, and what is the basis of this case, seems to be that the Court of Appeal says there was a practical certainty, or there was a – the only reasonable course open was to use the current assets to pay the liabilities and equity would generate, therefore, an equitable proprietary interest equivalent to the interest of the beneficiary under a bare trust. 

So, we say that there are problems with the reasoning of the principle stated by the Court of Appeal, that it is at best an exception to what was said by the High Court in Henschke; that is the way that President Buss and Justice Beech regarded it.  They said the unqualified statements in Henschke and even Hendry, back 50 years, were not directed to this issue, and if there is such an exception it ought to be determined by the High Court. 

We also say that the way in which the respondent has now put its case is different from the way that the Court of Appeal accepted the relevant proposition.  They do not squarely support what the Court of Appeal has done.  So that in those circumstances, there is a significant problem with the principle that the Court of Appeal has adopted.  It is not simply a matter of application of principle, it is a principle, because – and I have taken your Honours to the relevant passages and they have, themselves ‑ at least President Buss and Justice Beech have identified it as being an exception to Henschke. 

In respect of section 78, we understand that there might be an issue about the proper construction of section 78.  We have provided an answer to it.  It is actually a contention point.  We think that the answer is a good answer.  It was accepted by the Tribunal below and the proper construction of section 78 in and of itself may well be a matter of public interest in addition to the principle and the correctness of it that was accepted by the Court of Appeal. 

Can I make one other point and it is this.  What now seems to be advanced by the respondent is that there is one type of trust that existed but it was varied or altered at the time that the deeds were executed and recognition of the existence of some type of equitable interest prior to the execution of the deeds helps inform that what the deeds did is to confirm the existence of a specific invested equitable interest. 

We say that the problem with that is that the character and the nature of the beneficial interest is entirely different.  It goes from being a fluctuating and non‑specific interest in respect of the entirety of the assets or the surplus from the assets after their sale to becoming a specific and fixed beneficial interest which is equivalent to the interest of a beneficiary under a bare trust. 

So, the character has changed so that, in fact, it is a new trust but even if it is only a varied or altered trust, they do not bring themselves within the qualifications to – as an exemption to duty.  They have not demonstrated that they do.  They would have to go to some new exemptions to see whether that applies.  Again, it is a contention point. 

So, in substance, those are the reasons why we seek special leave in this case.  May I deal with any of the particular matters that are raised by my friends in reply. 

NETTLE J:   Thank you, Mr Thomson.  Yes, Mr Zelestis. 

MR ZELESTIS:   May it please your Honours.  Your Honours, we need to begin by recognising that this is a dispute about the assessment of duty.  The duty was imposed on what was said to be declarations of trust arising from clause 3.  It is important, in our respectful submission, to understand the reference to, in clause 3, which can be found on page 99 in Justice Murphy’s judgment.  The reference to: 

Maria …, as the trustee holding the titles ‑

It is very important to understand what Maria’s capacity was, not only for understanding the operation of the deed and the provisions of the Duties Act, but also to understand the answer to my learned friend’s point about Henschke. 

Now, the Court of Appeal found that there were pre‑existing trusts.  Until the reply submissions of the Commissioner, the Commissioner had resisted the notion that before or upon the death of Anthony, there were any trusts in the true sense.  The Commissioner now accepts, in the last paragraph of his reply, that there were trusts of the properties in the true sense, but suggests that there were no beneficial interests in the true sense, which is a curious, with respect, concept that the trust is relevantly true but the beneficial interests are not there. 

Can I state the point that I want to make, your Honours, and then take your Honours through the steps that get there.  The point that I want to get to is this.  After Anthony’s death and particularly after Maria took title to all of the properties in both partnerships by survivorship, she held the properties on constructive trusts arising by operation of law for all of the partners.  These were not express trusts which she created as a matter of expression of intention.  They were imposed by law. 

EDELMAN J:   Why in that respect would she have been in any different position legally from, say, the executor of an unadministered estate? 

MR ZELESTIS:   For this reason, your Honour, that the – as against – as between her as constructive trustee and the beneficiaries, the entirety of the beneficial interest in the properties indivisibly resides with the partners and then upon – we are speaking about death, so partners and their successors. 

The effect of the legal principle – there are two – there is a statute and there is potentially a fourth ground or source for the trust that I will describe ‑ is to impose obligations on the holder of legal title.  And so, the cases, and my learned friend’s submission focus on the individual interests of the partner but the true starting point is the interests of the partners together.

EDELMAN J:   Is that then to say that this difficult notion throughout the law of the partnership property is, in effect, a constructive trust where the partnership ‑ that legal title to the partnership property is not held by all of the partners, so legal title to land, for example, might be held by one of the partners?

MR ZELESTIS:   Yes.  That is held upon a constructive trust for the others.  But the significance of it is this, your Honours, that the trustee, in that capacity, retains no power over the land.  The constraint upon the ascertainment and recognition of individual interests arises from the relationship between the beneficiaries as partners. 

Now, that relationship can be altered by agreement.  It can be altered by agreement inferred from conduct.  That relationship is an entirely separate thing from the trustee’s position.  The partners, as such, need no consent from the trustee in order to decide, in the solvent circumstance following dissolution, to retain properties and not sell them as part of the winding‑up.  They make that decision as partners.  There is nothing that the trustee has any power that she can exercise with respect to the land. 

Then one needs to understand the way in which equity – the doctrine of recognition and enforcement of entitlements to property.  That is the equitable doctrine we are concerned with here.  That doctrine is engaged because, in this case, Maria and Anthony held all of the lands as joint tenants.  In equity, it is undisputed ‑ my learned friend put it below.  It is in their submissions below before the Tribunal that, in equity, that is a tenancy in common, so that when there is a death and the surviving legal owner takes title by survivorship, there is a constructive trust.  We need not be concerned in this case with whether the trust arose earlier or not.  It certainly arises upon the legal title being taken by the survivor.  That is one source of the trust. 

A second source of the trust, which only applies in the SICP partnership where there are two partners holding all of the land for five ‑ in the other there were two partners holding for each other ‑ is that – and a constructive trust is imposed as soon as the land is acquired.  That is the decision in Carter Bros v Renouf. 

Now, I just digress a little bit because on the same page in Carter Bros v Renouf there is another decision about the equivalent of section 31 of our Partnership Act, section 30(1) is at page 30 in the book.  It is the provision which says that:

All property and rights and interests in property originally brought into the partnership stock, or acquired . . . [is] partnership property, and must be held and applied by the partners exclusively for the purposes of the partnership ‑

The top half of the page in Carter Bros ‑ I will give your Honours the page number in a moment – the High Court – this honourable Court said that in effect this was speaking of beneficial interests and creative trust.  I am putting that to one side because that may be controversial in light of Henschke examining the nature of the beneficial interest more carefully.

But in the second part, the decision was about one partner having bought a life insurance policy with partnership funds, and the question was whether that was partnership property, and it was held that it was and it was held that it was upon a constructive trust.  The references to Underhill and Lindley which are stated there are references to constructive trusts. 

EDELMAN J:   Is that the basis upon which the Court of Appeal, or at least to President Buss and Justice Beech, found that there was a constructive trust? 

MR ZELESTIS:   Well, they both refer to Carter Bros v Renouf at page 163, your Honours, but they do not tell us which of the two trusts they are relying upon.  There is a third source for both cases and that is section 30(2) which, in a sense, is a statutory recognition.  It goes a little bit further, but it is a statutory following adoption of the equitable principle.  It covers the position where tenants – sorry, partners, holders, joint tenants and the land reaches one, the title does, but it is to be held for all. 

So, coming back to the starting point.  In our submission, the true starting point is that as between Maria, when she took by survivorship and all of the other partners, the partners together held the entire beneficial interest in the land indivisibly.  They were entitled to it in possession.  They were entitled to enjoy its fruits ‑ its rents and profits.  That is the classic test of beneficial ownership.  And, as between themselves, they could determine what scope of winding‑up would occur.  They needed no consent from Maria.  There were two sources of obligation to apply to the property in a winding‑up.  One was the terms of each of the two partnership agreements which were set out in Justice Murphy’s reasons, and the other is the Act.  The Act imposes obligations. 

The obligations imposed by the Act are subject to agreement.  It is not a statute which imposes obligations and leaves it at that.  And so, in our submission, the nature of the obligations were either contractual or, at least in the nature of contractual, because although emanating from a statute, they were amenable to being completely discharged or modified by agreement. 

So once one appreciates that is the starting point, then we have the properties not being sold for 33 months after the death of Anthony, in the setting of a family – two family partnership, husband, wife, three children and one just husband and wife and the other.  The businesses are investment properties and, as I say, 33 months after – it is an agreed fact that the properties were not sold in accordance with the winding‑up requirements.  The properties are still retained. 

We say that the inference that arises, if you read carefully through the recitals and just look at the facts, is that the former partners and their successors resolved to retain the lands.  It is hardly surprising, given the nature of the family partnership and the nature of the business of investment properties that they would keep them.  And, if they decided to keep them, then we get to section 78 because no matter how they expressed that desire, it is an agreement to share them in specie. 

Now, when you come then to clause 3, one sees that when Maria says she confirms holding the titles, she is not exercising any power of her own over the land.  She has not retained any power to make any decision.  She is, in a sense, doing what she has been told by the former partners and their successors.  If the former partners and their successors had sat down the day before they signed the deed and said, in explicit terms, let us agree to all take our separate interests – our interests as separate interests, section 78 would apply.  That is not in dispute.

And so the question is, did Maria give them something special or did they, by inferred agreement ‑ it is not expressed as such in the deed, but it is either, in our respectful submission, evidenced in it or embodied in it ‑ did they, themselves, make the decision.  Well, the answer is obvious because only they had the power to make the decision.  Now, can I come then to Henschke ‑ ‑ ‑

EDELMAN J:   So that then would be to treat section 78(1) as being activated not by a transfer as such of the property but by the declaration of a trust to give effect to an intended transfer?

MR ZELESTIS:   No, it is, with respect – it is by the inferred agreement which gave rise to the – we do not say – we submit it is not a declaration at all, because in order for it to be a declaration, there has to be some power in the declarant to do something.  The clause is deliberately expressed as confirming a position.  That is consistent with the notion that she is, in a sense, acknowledging what she has been told is the arrangement achieved by those who have the power to make the arrangement. 

EDELMAN J:   There has not been a transfer though, strictly, as such. 

MR ZELESTIS:   No, but there does not need to be for 78, 78 applies where there is an agreement or a transfer. 

EDELMAN J:   I see. 

MR ZELESTIS:   Can I then explain the relevance of all of this to my learned friend’s point about paragraph 25 in Henschke, and the quote there from Viscount Radcliffe in Livingston, which is to the effect that:

Equity in fact calls into existence and protects equitable rights and interests in property only where their recognition has been found to be required in order to give effect to its doctrines. 

There are two steps one needs to bear in mind in a partnership context.  There is the ability to ascertain a specific interest and then the question of whether equity would recognise it.  So one sees in that very same paragraph 25 that the concept of ascertainment is used in the middle of the paragraph by their Honours and then the question of recognition is stated by Viscount Radcliffe. 

The point of the trust here is that in the present context ‑ given the sources of trust I have already described, there are at least three if not a fourth ‑ equity had already intervened and its intervention was all the stronger upon dissolution and upon Maria taking by survivorship.  Equity had already intervened to protect and recognise the interests of the partners themselves as against Maria.  They had the entire beneficial interest, albeit indivisibly, in the properties. 

So, it is in that context that one asks the question, what stands in the way of the ascertainment of a specific interest.  It may be said I have overstepped the mark there, that I should go back to the question of the test stated by their Honours in Henschke about completion: 

can be ascertained finally only upon completion of the liquidation ‑

That is in the middle of paragraph 25.  In our submission, that is dealing with the ordinary case.  It is dealing with the general circumstance.  Henschke itself acknowledges that there are other circumstances where there is no complete winding‑up.  That is acknowledged in the quote in paragraph 11 and it certainly is the case in one of the cases footnoted in paragraph 14, McGowan, where Justice McPherson notes the possibility of partners or former partners reaching other arrangements. 

So, just to go back to paragraph 25, the obvious case that paragraph 25 is not dealing with is that in a solvent partnership, even though there is an agreement under partnership articles to sell and distributing cash – and even though the Act says that, the partners can sit down and implicitly or explicitly agree to keep some of their properties – some of their partnership properties.  They do not have to go ahead and wind up. 

Now, one cannot read, with respect, paragraph 25 as saying, no, no, no, you have to wind up.  Of course, you do not.  The whole of these obligations are subject to the ability to agree otherwise.  If you retain and distribute that is tantamount to an agreement.  You can infer the agreement from the conduct.  Once one sees that, one sees that if the assets exceed the liabilities ‑ if the current assets exceed the liabilities ‑ I should digress to say that my learned friend has drawn attention to an unfortunate error in our submissions, where in paragraphs 20 and 26 we should not have said “current liabilities”, we should have said “liabilities”.  We were not trying to reinterpret the Court of Appeal’s decision, we just made a slip. 

Once assets do not need to be sold to discharge liabilities, there is no impediment to the ascertainment of specific interests.  The impediment to the ascertainment of specific interests arises from two features of a partnership.  One is to apply the assets for partnership purposes including discharging liabilities and the other is to sell up in a full winding‑up and distributing cash. 

When assets are not necessary for the first, and as their Honours in the Court of Appeal said, you would not get an order as between partners in a dispute requiring some valuable asset to be sold if the liabilities could be met out of cash or similar, then there is no obstacle to the ascertainment of the interest.  If there is no obstacle to the ascertainment, there is no obstacle to recognition.  But in this case, all the more so, because equity has already intervened, is already a trust in the true sense, with the partners together holding the full beneficial interest in the true sense, albeit with indivisible – their interest are indivisible until ‑ ‑ ‑ 

EDELMAN J:   The short point is if you are right about that, then 11(1)(c) never bites. 

MR ZELESTIS:   Never bites on the trust. 

EDELMAN J:   Yes. 

MR ZELESTIS:   But my learned friend has to go further because my learned friend has to invest Maria with some capacity to make a declaration, and my learned friend’s attempt at that in the end is to say that it was with the consent of the former partners and their successors, and that is put at paragraph 16 of the reply submissions.  But that is going three‑quarters of the way to our point because by saying it is with their consent there is an implicit acknowledgement that some assent from them was required. 

We say that technically speaking, the notion of consent is wrong because it still assumes the existence of a power, the exercise of which is being consented to, when here, what is missing is any power on Maria’s part to affect the nature of the partnership interests held individually by the partners in the land, which together they held the beneficial interests in completely.  Now, can I say something else about section 78.  Section 78 can be found most conveniently perhaps in the ‑ ‑ ‑ 

EDELMAN J:   Just before you do, do I understand your submission really to be that the power that Maria would otherwise have had to declare a trust where she holds legal title does not exist because of the constraints that are imposed upon her as a partner ‑ ‑ ‑

MR ZELESTIS:   That is right.  It is because she has held legal title as joint tenant.

EDELMAN J:   Yes. 

MR ZELESTIS:   In the other case ‑ ‑ ‑

EDELMAN J:   So that means that a purported declaration of trust is no declaration of trust at all. 

MR ZELESTIS:   Well, you first of all have to get to the notion that what she did was a declaration - it is not expressed in that term.  One then has to attribute the meaning to declaration in the relevant section.  But that requires the person who is making the declaration to have some power over the land which is causing someone else to obtain some interest.  There has to be some dispositive element to it. 

The point I wanted to make about section 78, your Honours, which is at page 28 in the book, is this.  If one thinks about it for a moment ‑ subsection (1) talks about a person retiring or that occurring by dissolution and then it speaks about property interest being transferred.  The section to be applied, speaking individually but also singular equals the plural or takes into account the plural, and so it applies also when there is a dissolution, in a sense every partner retires and the properties then are all transferred to all of them and the duty is reduced to nil. 

The point about it is this, though.  Section 78 is designed to address the circumstance that the partners decide to retain, not sell, property during a winding‑up.  If they go ahead and sell and they get distributed their cash, there is no dutiable transaction.  Section 78 is quite perceptive.  It recognises the practical reality that in many cases there will not be a complete winding‑up and the partners will divide up the remaining property and keep it in their respective partnership shares and it gives relief in that circumstance. 

That, in itself, is the recognition of what we say happens commonly and that Henschke cannot be read, with respect, in paragraph 25, as laying down a rule which does not accommodate that circumstance.  There are other circumstances, of course, that can occur in the course of a winding‑up. 

My learned friend has not orally addressed this point but just to be clear about it ‑ as I have understood my learned friend’s submissions throughout - it has been that it is possible for a partner to pass an interest in the solvent partnership upon dissolution, and that appears at page 34 in the Tribunal decision in a long paragraph numbered 57 which begins on page 32, which summarises the Commissioner’s submissions. 

So one sees there the proposition a partner can pass his or her beneficial interest where the partnership is dissolved, not wound up, assets do not have to be sold to pay partnership debts.  No reference to Cameron, but there is a reference to several cases ‑ Ringthane was a disposition of an interest in partnership chattels, not the chose of the partnership share but an interest in the chattels and because it was so held it came within an exemption from duty in the third schedule of the old Stamp Act. 

But the point is that if a partner can pass his share by will that is because equity has ascertained and recognised the specific interest in the deceased partner.  But the necessary corollary of that is that all the other partners who are still living, no longer in partnership because of the death of one – but all the others must also have a specific interest as well.  The event which enables ascertainment and recognition is not personal to the deceased.  It applies to all of the partners. 

Now, my learned friend seems to accept that and the real point of his submissions appears to be but there was not a complete winding‑up.  Our

answer to that is, with respect, there did not need to be here because one can infer that the parties have agreed to take in specie rather than to sell. 

Can I just finish briefly by saying something further to your Honours about the recitals to the deeds which appear in Justice Murphy’s decision.  It is best to go to the SIC ones at page 96 because the AMS ones are the same but shorter because as the son John was not a partner they did not need to deal with his death. 

NETTLE J:   I see you are getting very close to time if not out of it, Mr Zelestis. 

MR ZELESTIS:   Yes.  Sorry, your Honours.  Can I just make this point ‑ that both in the recitals and in clause 1 on page 98, what the parties did was step through a process of acknowledging that Maria was already a trustee and of expressing a desire to transmit interests and the transmission is then expressed in 1(d).

The transmission of the interests of deceased partners in specific shares is itself a reflection of there having been some implicit prior arrangement for the properties to be retained not sold.  It is only following the transmissions – they are not transmissions of cash; the executors and the administrators are transmitting specific interest - it is only following the transmittals that Maria, in paragraph 3 says, as the trustee holding the titles, confirms that following the transmissions that she holds.  May it please your Honours. 

NETTLE J:   Thank you.  Mr Thomson, anything in reply? 

MR THOMSON:   A number of short points.  First, Frank has not in any way, shape or form adopted the reasoning of the Court of Appeal.  He has not said that there is an exception based on Cameron.  He has advanced an entirely new analysis and for that reason you may infer that he accepts that the Court of Appeal is unsupportable and, therefore, the principle ought to be addressed by the High Court – that is the principle that the Court of Appeal has stated. 

In relation to the point that he has just made that there is an implicit prior arrangement, he was not present in the Court of Appeal, but the Court of Appeal did not allow argument on a ground to that effect.  You will see that the amendment that was allowed in the notice of contention – sorry, in the amended application, is simply that – I will just take your Honours to it – it is page 65 of the application book. 

This is a point that was not decided by the Court of Appeal but they gave leave to allow this amendment and our notice of contention in respect of it.  But it was only leave in one very particular respect: 

if (contrary to the foregoing) the former partners and their successors did not obtain fixed equitable interests in the properties on dissolution by operation of law, the 2013 Deeds – by clause 1(d) –

and only by clause 1(d).  Not by reason of any prior or implicit prior arrangement – because the Commissioner could have gone off and sought information about that if that had ever been advanced before this point in the case: 

constitute or evidence an agreement whereby the former partners and their successors provided for conversion of their partnership interests into fixed equitable interests in the properties. 

If you look at clause 1(d), that is not a statement of any agreement.  If you go to, for example, page 98 of the application book in Justice Murphy’s judgment in the SICP deed, it simply says at the bottom of page 98: 

On dissolution of the [SIC] Partnership, the [SIC Partnership] Properties and other assets that were previously held by the [SIC] Partnership were beneficially owned ‑ 

as set out there.  There is indeed an implicit assumption about what had happened as a matter of law.  We say that it is incorrect but it is not a basis for saying that there was a preceding implicit agreement or arrangement, as my friend has said to you expressly, and that is not a finding of any fact that was ever made.  So, there should be no ability for him to raise that argument at this point in time.  In fact, you will see at paragraph 16 of the reasons of the court on page 83, they set out what the agreed facts were and say, after footnote 18: 

There is no agreed fact, and no evidence, as to whether, by 1 December 2013 when the 2013 Deeds were executed, the liabilities of the Partnerships had been discharged.  We proceed on the basis that he position remained as it was at the relevant date of dissolution, namely that the liabilities of each Partnership had not been discharged, but the value of the cash or other current assets exceeded the amount of the liabilities. 

There had been no agreement that there would be a division of assets because of these findings of fact.  So, my friend cannot make that point.  Insofar as he raises matters about section 78 as I said, as the principle of the

Court of Appeal stands, we have made our argument about that and it is probably a point of public interest as well. 

NETTLE J:   There will be a grant of special leave.  Finish within a day, gentlemen? 

MR THOMSON:  Yes. 

MR ZELESTIS:   Yes. 

NETTLE J:   I note the estimate is one day.   No doubt those who instruct you will liaise with the Registrar for the steps to be taken.  Thank you. 

The Court will now adjourn to 10.00 am on Wednesday, 12 June in Canberra.

AT 12.35 PM THE MATTER WAS CONCLUDED