Degiorgio v Dunn

[2004] NSWSC 767

CITATION:	Degiorgio v Dunn [2004] NSWSC 767
HEARING DATE(S):	28/06/04, 29/06/04 Reserved 20/07/04 after written submissions received
JUDGMENT DATE:	26 August 2004
JURISDICTION:	Equity Division
JUDGMENT OF:	Barrett J
DECISION:	Application for declarations as to existence of partnership and consequential orders dismissed
CATCHWORDS:	PARTNERSHIP - generally - whether partnership exists - whether business carried on in common - no question of principle
LEGISLATION CITED:	Partnership Act 1892, ss.1, 2
CASES CITED:	The Duke Group Ltd v Pilmer (1999) 73 SASR 64
PARTIES :	John Degiorgio - Plaintiff Greg Dunn - Defendant
FILE NUMBER(S):	SC 5916/02
COUNSEL:	Mr A R Jungwirth - Plaintiff Mr S W Cairns - Defendant
SOLICITORS:	Stephen Teece- Plaintiff Peter Merity - Defendant

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BARRETT J

THURSDAY, 26 AUGUST 2004

5916/02 – JOHN DEGIORGIO v GREG DUNN

JUDGMENT

Introduction

1 AC/DC was a rock music band enjoying significant popularity in Australia in the 1970’s and 1980’s. The fact that AC/DC and the music it played developed and retained a substantial following meant that, after AC/DC had ceased performing, there were opportunities for others to provide entertainment by presenting the same musical items in the way in which AC/DC had presented them. A group thus emulating another band is known as a “tribute band”.

2 The plaintiff and the defendant are musicians. The plaintiff is a guitarist. The defendant plays drums. In the period 1995 to 1999, they were both members of a band known as “Dirty Deeds The Band” which was a tribute band emulating AC/DC. The plaintiff portrayed Angus Young, one of the AC/DC band members. Dirty Deeds The Band (which I shall call “the first band”) performed at venues in various parts of Sydney, principally hotels and clubs in the western parts of the metropolitan area. It is accepted by the parties that the four members of the first band – the plaintiff, the defendant, Jeff Ervin and Curtis Bryant – were members of a partnership the business of which consisted of staging band performances in which the four of them participated. Some frictions developed among certain members and it is accepted that the performing group was disbanded in or about December 1999. There remains a question whether there was a dissolution of the partnership as between the plaintiff and the defendant. This question forms the basis of the secondary case the plaintiff seeks to make. I shall return to it in due course.

3 Shortly after the first band disbanded, the defendant took steps to put together another group to perform AC/DC music. The plaintiff was approached by the defendant for this purpose and became one member of a new band. At about this time, the defendant alone registered the name “Dirty Deeds AC/DC Tribute Show” under the Business Names Act. He was the only person described as “person carrying on the business”. All activities of this “second band”, as I shall call it, were conducted under this name. The primary case the plaintiff advances is that, upon the formation of the second band, the plaintiff and the defendant entered into a new partnership of which they were the only members and that, as partners, they carried on the business of the second band.

The primary case

4 By his amended statement of claim, the plaintiff claims, as principal relief, a declaration that he and the defendant commenced trading as a partnership in or about January 2000, a declaration that the plaintiff and the defendant traded in partnership in the business known as “Dirty Deeds AC DC Tribute Show” from about January 2000 and a declaration that the registered business name “Dirty Deeds AC DC Tribute Show” is an asset of the partnership.

5 To succeed in these claims, the plaintiff must discharge the onus of showing that there has been, since about January 2000, a relationship between himself and the defendant within the description in s.1(1) of the Partnership Act 1892:

“Partnership is the relation which exists between persons carrying on a business in common with a view of profit”;

Relevant to that task are the matters set out in s.2 of the Act:


“ 2 Rules for determining existence of partnership

In determining whether a partnership does or does not exist, regard shall be had to the following rules:

(1) Joint tenancy, tenancy in common, joint property, or part ownership does not of itself create a partnership as to anything so held or owned, whether the tenants or owners do or do not share any profits made by the use thereof.

(2) The sharing of gross returns does not of itself create a partnership, whether the persons sharing such returns have or have not a joint or common right or interest in any property from which or from the use of which the returns are derived.

(3) The receipt by a person of a share of the profits of a business is prima facie evidence that the person is a partner in the business, but the receipt of such a share, or of a payment contingent on, or varying with the profits of a business does not of itself make the person a partner in the business; and in particular:

(a) The receipt by a person of a debt or other liquidated demand by instalments or otherwise out of the accruing profits of a business does not of itself make the person a partner in the business or liable as such:
(b) A contract for the remuneration of a servant or agent of a person engaged in a business by a share of the profits of the business does not of itself make the servant or agent a partner in the business or liable as such:
(c) A person being the widow, widower or child of a deceased partner, and receiving by way of annuity a portion of the profits made in the business in which the deceased person was a partner, is not by reason only of such receipt a partner in the business or liable as such:
(d) The advance of money by way of loan to a person engaged or about to engage in any business on a contract with that person, that the lender shall receive a rate of interest varying with the profits, or shall receive a share of the profits arising from carrying on the business, does not of itself make the lender a partner with the person or persons carrying on the business or liable as such: Provided that the contract is in writing and signed by or on behalf of all the parties thereto:
(e) A person receiving by way of annuity or otherwise a portion of the profits of a business in consideration of the sale by the person of the goodwill of the business is not by reason only of such receipt a partner in the business or liable as such.”

6 A business was undoubtedly carried on by the operation of the second band. That business was obviously carried on “with a view to profit”. The central question to be answered by reference to the evidence is whether the business was carried on “in common”. An explanation of the meaning and significance of the words “carrying on a business in common” is found in paragraphs 952 to 956 of the joint judgment of Doyle CJ, Duggan J and Bleby J in The Duke Group Ltd v Pilmer (1999) 73 SASR 64:

“In order to meet this criterion, it is not necessary that each of the alleged partners should take an active part in the direction and management of the firm. The business may well be carried on by or on behalf of the partners by someone else. The person carrying on the business must be doing so as agent for all the other persons who are said to be partners. Lord Wensleydale stressed the need for an agency relationship in Cox v Hickman (1860) 8 HL Cas 268; at 312–3; 11 ER 431; at 449:
‘A man who allows another to carry on trade, whether in his own name or not, to buy and sell, and to pay over all the profits to him, is undoubtedly the principal, and the person so employed is the agent, and the principal is liable for the agent’s contracts in the course of his employment. So if two or more agree that they should carry on a trade, and share the profits of it, each is a principal, and each is an agent for the other, and each is bound by the other’s contract in carrying on the trade, as much as a single principal would be by the act of an agent, who was to give the whole of the profits to his employer. Hence it becomes a test of the liability of one for the contract of another, that he is to receive the whole or a part of the profits arising from that contract by virtue of the agreement made at the time of the employment. I believe this is the true principle of partnership liability.’
Likewise, Griffith CJ said in Lang v James Morrison & Co Ltd (1911) 13 CLR 1; at 11:
‘Now in order to establish that there was a partnership it is necessary to prove that JW McFarland carried on the business of Thomas McFarland & Co on behalf of himself, Lang and Keates, in this sense, that he was their agent in what he did under the contract with the plaintiffs — not that they would get the benefit, but that he was their agent.’
However, more than mere agency is required. There must be mutuality of rights and obligations. James LJ said in Smith v Anderson (1880) 15 Ch D 247; at 275:
‘Persons who have no mutual rights and obligations do not, according to my view, constitute an association because they happen to have a common interest or several interests in something which is to be divided between them.’
Those requirements of agency and mutuality are reflected in ss 5 and 6 of the Partnership Act as being the consequences of entering into a partnership. They read:
‘5. Every partner is an agent of the firm and of the other partners for the purpose of the business of the partnership; and the acts of every partner who does any act for carrying on in the usual way business of the kind carried on by the firm of which the partner is a member bind the firm and the other partners, unless the partner so acting has in fact no authority to act for the firm in the particular matter, and the person with whom the partner is dealing either knows that the partner has no authority, or does not know or believe the partner to be a partner.
6. (1) An act or instrument relating to the business of the firm and done or executed in the firm-name, or in any other manner showing an intention to bind the firm, by any person authorised, whether a partner or not, is binding on the firm and all the partners.’
(2) …’
Unless there is that mutuality, however, there can be no partnership.”

January 2000 meeting

7 The plaintiff gave evidence that, in mid January 2000, after the first band had separated, the defendant telephoned him and suggested:

“Would you like to restart ‘Dirty Deeds’, with just you and me? Let’s continue where we left off. We can make a lot of money with this band.”

8 The plaintiff says that, after he had signified general agreement with this proposal, the plaintiff and the defendant made arrangements to meet later the same day to discuss it further. The meeting was held in the garage of the defendant’s home at Fairfield. No one else was present. Findings in relation to the conversation at that meeting are pivotal to the case. It is pertinent to set out in full what the plaintiff deposed to his affidavit as the content of that conversation:

“The defendant said:
I want you back in the band as lead guitarist.
I said:
“Yes, Greg, but I won’t play with Curt or Jeff in the band.
The defendant said:
Don’t worry, I have bought them out of the band and they don’t own a share of the name ‘Dirty Deeds’ any more. We can employ some other guys as band members. Curt and Jeff signed out of the business name registration of Dirty Deeds.
I said:
So it will be ‘Dirty Deeds The Band’ under your name and my name only. I will never play again if Curt and Jeff come back into the band.
The defendant said:
That suits me fine.
I said:
This is really important to me. The band broke up because of those guys and outside influences and I don’t want to go through that again.
The defendant said:
I showed them our road case with all our gear, and said it was worth about $2,000 all up. They accepted $500 each to leave the band. If you want to I’ll give you $500 and we can call it quits. But I am offering you to be equal partners in ‘Dirty Deeds’ when you and I start up the band again.
I said:
Good, I agree.
The defendant said:
I will do the management and organise merchandise and publicity. We’ll pay a wage to Vince and whoever else we get as rhythm guitarist and bass player. What’s left over goes into the kitty for publicity and merchandise. You and I will own the band 50-50 and we will split all profits and money from merchandise 50-50.
I said:
That sounds fair to me. I accept.
The defendant said:
Our agent will be Craig Thompson now, not Sphere. Craig’s left Sphere and started his own business.
I said:
Okay.
The defendant said:
I want to start performing in February.
I said:
I can’t start right away. I am going overseas on 21 January but will be back in April. We can get things started then.”

9 The defendant does not deny that such a meeting took place. Nor does he deny that he proposed a partnership to the plaintiff. It is the context of that proposal and the subsequent events on which the parties differ. As the extract above indicates, the plaintiff says that he accepted the offer. The defendant says that the offer was not accepted by the plaintiff, who cited financial considerations for his decision. The defendant deposed to the conversation at the meeting in these terms:

“At the meeting John had relayed that he was adamant that he never wanted to play in a band with Curt and Jeff. I said to him words to the effect: ‘That’s fine. Are you interested in being my partner in Dirty Deed AC/DC Tribute Show. There would be an upfront cost to get the band up and running plus you won’t be able to take a wage for about six (6) months that would include having money for a float to cover expenses such as wages, PA’s, advertising etc.’ John replied to me with words to the effect: ‘No. I want to get paid from the start. I want $150.00 per show because I’m going overseas for a couple of months to Canada and when I get back I won’t have any money. So I would need to get paid as soon as possible.’ I then said to John words to the effect: ‘That’s fine. Listen, I have also given both Jeff and Curt $500.00 each being their share of the lights we had bought as Dirty Deeds the Band. Here’s your $500.00 share.’ I then proceeded to hand to John the $500.00 share. John said to me words to the effect: ‘This will go towards my trip’. “

10 Against the background of these competing versions, I consider the other evidence.

Other evidence

11 The first and perhaps most telling element of the other evidence concerns the manner in which the plaintiff was remunerated for his performances in the second band. The defendant produced a number of invoices submitted by the plaintiff for particular performances. Each claimed a sum of $150. The defendant also produced remittance advices evidencing the corresponding payments of $150 per performance. The invoices begin in July 2000, and clearly state in the heading that the payment was claimed from “Dirty Deeds The AC/DC Tribute Show”.

12 The starting date of these payments (some six months after the alleged agreement reached in the garage) is consistent with the defendant’s stipulation that as partners neither of them would be able to be remunerated for the first six months. However, the nature of the payments tells against the existence of any partnership. The procedure under which the plaintiff claimed a fixed payment per performance as a “performance fee” is indicative of the plaintiff’s being merely an employee or independent contractor.

13 There is no evidence of the plaintiff declaring any income from the supposed partnership in his income tax returns. For the financial year ended 30 June 2000, both the plaintiff and the defendant returned business income and claimed related deductions described as referable to “Dirty Deeds”. There is in neither tax return reference to a partnership. Each taxpayer appears to have represented himself as the proprietor or operator of the business and to have given his own home address as the business address. In the plaintiff’s return of income for the year to 30 June 2001, there are no similar items. Rather, there is reference to an income item described merely as “professional fees” and to a single deduction, being for depreciation in respect of “equipment”. For the same year, by contrast, the defendant continued to return income and claim deductions on the previous basis, with deductions listed for items such as agents’ fees, PA systems, equipment hire and support bands. Significantly, one of the deductions identified in the defendant’s return is “musician fees” of $18,040. In the same year, the plaintiff, one of several band members, returned as income “professional fees” of $6,550. The entries in both the 2001 returns tell against the plaintiff’s having carried on a business in partnership in the same way as indicated in his earlier return. They point to the defendant’s having carried on such a business and having paid fees to musicians including the plaintiff.

14 The plaintiff’s actions at and after the time at which the new partnership is said to have been formed are inconsistent with the existence of any partnership. He conceded during cross-examination that soon after the supposed partnership was formed he went to Canada and remained there for 17 months. While in Canada he showed no interest in the second band. There was thus a period of 17 months during which the plaintiff did not involve himself in any way in the business he now maintains was, from January 2000, carried on by the defendant and him in common.

15 There is in evidence a transcript of conversations over the internet between the plaintiff and Claudio Velentini, a photographer who took promotional pictures for the first and second bands. In those conversations, the plaintiff said that he had had trouble contacting the defendant, but admitted that he had not tried to telephone because it was too expensive. To my mind, these efforts do not amount to much, falling far short of what one would have expected of a partner.

16 Also inconsistent with the existence of any partnership is the fact that while in Canada, and upon his return, the plaintiff approached performers in the second band and attempted to persuade them to join him in a new band called “High Voltage” which was also to be an AC/DC tribute band. Vince Pascoli, a singer with the second band, gave evidence that the plaintiff approached him for this purpose. The plaintiff did not deny this and in fact annexed to his affidavit of 11 August 2003 email correspondence with Anne-Marie Pascoli, Vince’s daughter, in which she wrote on 3 June 2002:

“Dad has asked me to mail you and find out what you are going to be doing about this new AC/DC Band thing. He wants to know if you’re still interested and if so, whats going on?!?!?”

17 Another performer, Craig Vine, also gave evidence of having been approached by the plaintiff to perform in “High Voltage”.

18 Again, these are not actions consistent with partnership. In fact, the soliciting of employees of or contractors to the supposed partnership business with a view to their forming a new band in competition would have constituted what would have been an obvious breach of the fiduciary duty owed by a partner.

19 The defendant gave evidence that he never paid payroll tax or workers compensation insurance in respect of persons performing in the second band. This, it may be contended, suggests that the plaintiff and the defendant were partners since, if the plaintiff had been an employee, these matters would have been addressed. This argument is not sustainable. Even if there was a partnership between the plaintiff and defendant, the other performers in the second band were not partners. There is also evidence that the defendant requested the other performers to obtain an ABN so that they could be paid as independent contractors. The plaintiff’s own tax records show that his fees were paid to the business “John Degiorgio” consistent with this practice. Payroll tax and workers compensation insurance considerations do not arise in relation to independent contractors. Lack of payroll tax and workers compensation insurance payments therefore do not point positively to partnership.

20 Another matter to consider is the allegation by the plaintiff’s father, Alfred Degiorgio, that the defendant had admitted that he and the plaintiff owned the band together. In his affidavit the father says:

“On one occasion in 2001 when I attended a Dirty Deeds gig, the Defendant said to me words to the effect:
‘John and I own this band.’ “

21 During cross-examination, Alfred Degiorgio stated that the defendant had said this to him on numerous occasions. He was unable to give a satisfactory reason why those other occasions were not deposed to in any of his affidavits, despite acknowledging that he was aware of the importance of the issue to his son’s case. This casts doubt over his evidence.

22 I turn next to the plaintiff’s activities while in Canada. His evidence was that he practiced with a group of Canadians who wanted to start their own AC/DC tribute band. He denied that he ever performed before an audience with that group. Against this version of events stand two matters. First, there is the evidence given by the plaintiff’s mother:

“Q. Did he [the plaintiff] tell you anything about performing while he was in Canada?
A. Yes.

Q. What did he say?
A. He said, ‘mum, I'm just doing a gig’.

Q. Did he tell you whether or not he was wearing the costume?
A. No.

Q. When he said, ‘Mum, I'm doing a gig’, did he say any more about that?
A. No.

Q. You have been to a number of their performances, haven't you?
A. Many times.

Q. If it is said to you, ‘Mum, we are doing a gig’, you don't understand that to be a rehearsal, do you?
A. Of course not; it's a gig, it's a show.

Q. To your recollection your son did at least one show while he was in Canada?
A. To my knowledge, yes.”

23 The second matter concerns two photographs that were said to be of the plaintiff playing in the Canadian band at a live performance. Mr Ervin, a performer in the first band, gave evidence that these photographs were sent to him by the plaintiff from Canada via email. He said that the plaintiff said, “Here are some photos of me in a band when I was playing in Canada”. He also said that the setting in the photographs was consistent with a live performance at a venue, rather than a rehearsal.

24 The photographs show the plaintiff playing guitar on a stage with other performers with full lighting and other items one would associate with performance as distinct from rehearsal or merely practice. One photograph also shows two people in front of the band on what appears to be a dance floor. They appear to be dancing. This evidence shows that the plaintiff did perform before an audience, and I accept Mr Ervin’s evidence that the plaintiff told him the photos were taken in Canada.

25 These two matters directly contradict the plaintiff’s statements that he never performed before an audience in Canada. Whether he did so has a significant bearing upon the issues in the case. It is a breach of the fiduciary duty owed by a partner to become involved in a business competing with the partnership business. Perhaps the distance between Australia and Canada would reduce the significance of such competing behaviour. But the fact remains that someone who believed himself to be a partner in a particular field of activity would not normally engage in that activity outside the confines of the partnership.

Assessment

26 The only elements of the evidence in any way supportive of the plaintiff’s primary case that a partnership between himself and the defendant was formed in or about January 2000 is his own version of the conversation in the garage and his father’s evidence of what the defendant supposedly said at a later time. The first element is contradicted by the defendant’s evidence about the conversation. The second element is unreliable for reasons I have stated.

27 Against the evidence just mentioned stands a body of evidence at odds with any conclusion that a partnership was formed in or about January 2000. The receipts the plaintiff sought and obtained for playing with the second band were labelled by both parties as merely “fees”. The plaintiff, having returned business income for tax purposes while the first band was in operation, changed to returning “professional fees” after the second band commenced. This is at odds with the notion that any partnership subsisted. The defendant, on the other hand, returned business income and claimed business deductions throughout. The plaintiff’s actions in going to Canada soon after the second band began operations, remaining there for 17 months and playing in another band in at least one staged performance (or gig) in Canada is not consistent with a commitment of the kind a partner should have. The same is true of his actions in trying to recruit musicians to join a new band he was attempting to establish after he returned to Australia.

28 The above extract from the joint judgment in The Duke Group Ltd v Pilmer (1999) 73 SASC 64 emphasises the central role of mutual agency in partnership, with mutuality of rights and obligations. Those elements were, in my opinion, conspicuously absent from the relationship between the plaintiff and the defendant after the garage conversation in or about January 2000. The plaintiff obviously did not regard himself as pursuing an enterprise in common with the defendant when he went to Canada, remained away from the activities of the second band for 17 months, performed with a Canadian group and, on his return to Sydney, made moves towards establishing a new band. He did not accept the constraints that go with partnership and cannot be regarded as having had any genuine expectation of the benefits of partnership. Likewise with payment: the fixed “fee” of $150 he charged and received for each performance with the second band before he went to Canada do not reflect the aspect of partnership mutuality that sees rewards fluctuate with the fortunes of the business.

29 In summary, the plaintiff has clearly failed to establish the essential elements of his primary case based on the alleged formation of a partnership in or about January 2000. The same conclusion applies to his secondary case which relies on the proposition that, after the first band separated, the plaintiff and the defendant remained as residual partners in the first partnership. The course of events after January 2000 to which reference has already been made is as strongly against a finding of any form of continuation of the first partnership as between the plaintiff and the defendant as it is against a finding of the existence of the second partnership.

30 I refer finally to the heavy emphasis placed by the plaintiff on the fact that the defendant did not at the time disclose to him that the new business was to be registered under the Business Names Act under the defendant’s name only. Given my findings, that was not objectionable or remarkable. There being no partnership, the defendant was free to seek the registration of any business name he wished. The fact that it resembled the name of the first band is irrelevant. The defendant produced search material showing that there are at least 20 business names registered in various parts of Australia which include the words “Dirty Deeds”. At least five of these are registered in New South Wales. The defendant also points out that the original band name “Dirty Deeds The Band” is no longer registered and is therefore presumably available to the plaintiff or anyone else.

Conclusion

31 The plaintiff’s claims in the amended statement of claim are dismissed in their entirety.

32 The defendant is entitled to an order for costs. Submissions made on the defendant’s behalf foreshadow an application for a special costs order if, as has happened, the plaintiff’s claims are unsuccessful. Such an application, if it is to be pursued, should pay attention to the findings in these reasons. I direct that written submissions on costs be filed by the defendant by delivery to my Associate within fourteen days and that any written submissions of the plaintiff in reply be filed in the same manner within a further fourteen days.

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Last Modified: 08/27/2004