Edwards v Mercer
[2012] WADC 176
•20 DECEMBER 2012
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: EDWARDS -v- MERCER [2012] WADC 176
CORAM: MCCANN DCJ
HEARD: 20-24 & 30 AUGUST 2012
DELIVERED : 20 DECEMBER 2012
FILE NO/S: CIV 1368 of 2011
BETWEEN: GREGORY MATTHEW EDWARDS
Plaintiff
AND
CHONTALL MERCER
Defendant
Catchwords:
Loan and partnership agreements - Intention to create legal relations - Turns on own facts
Dissolution of partnership - Recovery by one partner of capital - Unsettled accounts - Accounts must be settled save for collateral indemnity of plaintiff by the defendant
Legislation:
Evidence Act 1906 s 79C
Partnership Act 1895 s 7(1), s 7(2), s 33, s 43, s 50, s 57
Supreme Court Act 1935 s 32
Result:
Order for dissolution of partnership
Judgment for the plaintiff for a sum to be determined on taking of accounts
Representation:
Counsel:
Plaintiff: Mr B P Wheatley
Defendant: Mr W G Spyker
Solicitors:
Plaintiff: Mossensons
Defendant: Cornerstone Legal
Case(s) referred to in judgment(s):
Australian Woollen Mills Pty Ltd v Commonwealth (1954) 92 CLR 424
BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337
Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95
Fazio v Fazio [2012] WASCA 72
Fox v Percy [2003] HCA 22; (2003) 197 ALR 201
Friend v Brooker [2009] HCA 21; (2009) 239 CLR 129
Ideas Plus Investments Ltd v National Australia Bank Ltd [2006] WASCA 215
Kilgariff v Morris (1955) 91 CLR 524
Legione v Hateley (1983) 152 CLR 406
Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221
Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 517
Waltons Stores (Interstate) v Maher (1988) 164 CLR 387
MCCANN DCJ:
Introduction and factual background
In this matter the plaintiff claims moneys alleged to be due and owing to him by the defendant in respect of various advances which he made over a number of years commencing in 2005. He alleges that most of the moneys are due and payable in respect of a partnership between them.
I commence by making findings of uncontested fact or in relation to relatively straightforward contested issues of fact. (All findings in relation to disputed facts are made on the balance of probabilities.) For reasons set out in detail later in these reasons, I have mostly preferred the plaintiff's versions of events where they differ from those of the defendant.
The defendant was born on 21 November 1974. The plaintiff is her adoptive father. They have enjoyed a healthy father and daughter relationship since approximately 1987 when the plaintiff began a relationship with the defendant's mother (Ms Mary‑Ellen Passmore‑Edwards). He married Ms Passmore-Edwards on 21 October 1989 and legally adopted the defendant on 17 November 1992. He has been employed as a senior engineering draughtsman at all material times.
Ms Passmore‑Edwards and the defendant are of Aboriginal ethnicity and identify with traditional Aboriginal culture. Their family and cultural values include generosity, reciprocity and sharing. The plaintiff readily accommodated these values.
In 2003 the plaintiff and Ms Passmore‑Edwards resided in a house which he owned in Kewdale. She was not employed, but had previously worked as a beautician. The defendant had a varied employment history and had attended Curtin University for a period. She lived with her partner Paul (who she married on 19 November 2004) together with his two children and her own pair from a previous relationship. This remains the case and she is currently employed as a customer manager.
On 8 March 2003, the defendant and Ms Passmore‑Edwards commenced operating a beauty salon known as 'Nurtured Elegance' in partnership from a specially fitted‑out area of the Kewdale house. The plaintiff provided his own labour and start‑up capital in the sum of $20,250 for renovations, equipment, products and training for the defendant and Ms Passmore‑Edwards. They agreed to repay the $20,250 once the business could afford it. They have not done so and there is no claim in respect of that debt in these proceedings.
For all practical purposes the defendant operated 'Nurtured Elegance' alone from November 2003 when the business moved to a small shop on Old Perth Road, Bassendean and was expanded to include a wider range of products and services.
According to Nurtured Elegance's accounts for the financial year ended 30 June 2005, the business had a turnover of only $54,220 and made a profit of $8,087, all of which was paid to the defendant in cash or by payment of personal expenses such as her phone bills, her motor vehicle running expenses and loan repayments (for her vehicle and computer).
In late 2005 the defendant approached the plaintiff for financial support for Nurtured Elegance and he agreed to give her a credit card for that purpose. On 8 December 2005 he obtained a Virgin Money Australia Pty Ltd credit card (operated by Westpac Bank) with a credit limit of $10,000. He gave a secondary card to the defendant to use in her sole discretion. All of the statements were sent to the plaintiff but the defendant had electronic access to them from her computer.
There is an issue in these proceedings as to whether the defendant is indebted to the plaintiff for the debts which she incurred on the Virgin credit card.
The defendant used the Virgin credit card to obtain cash advances for herself and to acquire goods and services for Nurtured Elegance and herself. One of the first things she bought was an outdoor furniture setting which she gave to the plaintiff and Ms Passmore‑Edwards. The outstanding balance reached the $10,000 limit or thereabouts by early February 2006. Commencing on 25 January 2006 the defendant made small electronic repayments from Nurtured Elegance's bank account, but these were only sufficient to keep the credit card in good‑standing and did not substantially reduce the amount owed.
A cash repayment of $150 was also made (probably at a Westpac branch) on 3 February 2006. The defendant denied making that payment but I find that she did (see [142] below).
In February 2006 the defendant moved Nurtured Elegance to larger premises nearby on Old Perth Road, Bassendean.
Ms Passmore‑Edwards retired as a partner of Nurtured Elegance on 20 March 2006 and the defendant continued to trade as a sole proprietor. She changed the business name to 'In Body Beauty' (IBB) on 28 March 2006. At the time the business was barely breaking even.
The defendant approached the plaintiff and requested him to increase the credit limit of the Virgin credit card, which he did, to $30,000 effective early April 2006. There is an issue between the parties as to the terms upon which he agreed to do so.
The defendant continued to use the Virgin credit card exactly as she had done before, namely to meet personal and business expenses and by making occasional repayments. The repayments included cash sums of $420 and $400 (which were probably made at a Westpac branch and I find accordingly: see [142] below) on 11 and 12 May 2006 respectively.
As at 2 August 2006 the defendant had made repayments on the Virgin credit card totalling $3,537.80. Virgin Money suspended the facility on 19 September 2006 on the ground that a minimum repayment of $597 that was due on 7 September 2006 had not been made. The outstanding balance ($30,260.11) also exceeded the credit limit at that time. The defendant learnt of the suspension when a transaction was declined.
Meanwhile, the defendant was considering expanding IBB and relocating to a better location in either Belmont or Ellenbrook. With the assistance of her Aunty Tina she began preparing a detailed business plan (exhibit P7) in August 2006. The plaintiff prepared a hypothetical cashflow or monthly profit and loss which he emailed to the defendant on 23 August 2006 (exhibit P8). He also investigated the suitability of the Belmont location, for which fit‑out quotes were obtained in the range of $104,000 to $180,000.
The defendant requested the plaintiff to finance IBB's expansion. He discussed the proposal with his financial advisors including his financial planner, Mr Steven Beattie, and his accountant, Mr Russell Woollett of Woollett & Partners. He and the defendant met Mr Beattie on 23 October 2006 and Mr Woollett on 20 November 2006. There is no dispute that during the latter meeting the plaintiff and defendant agreed to enter into a partnership to operate the expanded IBB on the basis that the plaintiff would provide all necessary finance. They and their spouses went out to dinner to celebrate the next evening (21 November, which coincided with the defendant's birthday). There is an issue as to the terms of the partnership agreement.
Between 5 October and 2 November 2006 the plaintiff made repayments on the Virgin credit card at the defendant's request totalling $2,203. He also paid the rent for the salon ($3,010) on 26 October 2006 (exhibit P15).
On 21 November 2006, the plaintiff took out a line of credit facility with Westpac bank (known as the 'Westpac equity loan') which was secured by a mortgage over his home in Kewdale. This facility had a credit limit of $80,000 against which advances and interest were debited (the plaintiff: ts 162).
On 22 November, the defendant purchased a marketing kit (paid for by the plaintiff from the Westpac equity loan: exhibit P17). She subsequently marketed and advertised IBB by a variety of means.
On 24 November 2006, the plaintiff reduced the Virgin credit card balance by $30,000 with funds from the Westpac equity loan and reduced the credit limit to $8,000 (effective 29 November 2006). There is an issue as to the basis on which he did so.
The defendant continued to use the Virgin credit card at her sole discretion for personal purposes. She made repayments totalling $2,570.98 from the salon bank account between 19 December 2006 and 22 May 2007 when the amount owing was approaching the $8,000 limit. From then until 28 November 2008 the plaintiff made repayments totalling $2,841 at the defendant's request.
The parties decided to procure an Omnilux treatment machine. To that end, on 28 November 2006 the plaintiff entered into two leases (for the separate components) with Iden Leasing and Enterprise Finance Solutions. The initial monthly payment was $1,666.30 and thereafter they were $1,216.30 for 59 months (exhibit P20).
The parties decided against moving IBB to Belmont and resolved to refurbish and expand the Bassendean facilities, which occurred in late February 2007. The cost was $16,632.50, which the plaintiff paid from the Westpac equity loan account.
On 9 January 2007 the plaintiff and the defendant registered the business name 'In Body Beauty Escape' (IBE) as joint proprietors. They reopened the salon under that name when the renovations were complete.
The plaintiff made regular payments to the firm or on its behalf from the Westpac equity loan account.
The plaintiff, the defendant and Mr Beattie had a meeting in his office on 27 February 2007 because the credit limit on the Westpac equity loan ($80,000) was expected to be reached before IBE began to break even. The meeting discussed 'ways of financial management, ways of increasing the business through advertising, promotions' and extending the 'equity loan to cover the gap to break even' (the plaintiff: ts 143). Mr Beattie suggested that they prepare a cash flow for IBE which the plaintiff did. He emailed one to the defendant on 28 February 2007 (exhibit P26). Amongst other things, the spreadsheet provided for 'wages' and 'commission', including $22,000 per annum for the defendant. The plaintiff emailed a similar document (exhibit P28) to the defendant on 20 March 2007 which also included a separate line item for 'Loan Balance (7.24%)' which commenced in January at $60,573 and increased to $105,301 by June 2007. The cost of the shop fit‑out expenses was included also ($35,132).
On 12 March 2007 the plaintiff and the defendant replaced IBB's bookkeeper (a salon customer known as 'Diana') with Mr Charles Klvana, who was recommended by Mr Woollett. There is a collateral evidentiary issue as to the duration and extent of Diana's role, but I find that she alone was responsible for IBB's books until Mr Klvana took over (see [145] below). Mr Klvana spent a considerable amount of time at IBE's expense tidying up Diana's work, arranging for the payment of some pressing creditors (of which the defendant appeared to be ignorant) and making verbal and written recommendations (see exhibits P27, 31, 32, 34, 35 and 36 for example). Amongst other things, he ascertained that the partnership was still using IBB's bank account. He and Mr Woollett recommended against this and, as a result, on 26 March 2010 the plaintiff and the defendant jointly opened an account for IBE at the Bassendean branch of the Commonwealth Bank.
For accounting reasons (relating to GST I find), and once again on Mr Woolley's advice, the plaintiff and the defendant agreed at this time that the partnership accounts and those of IBB (ie, the defendant's sole‑trader accounts) would assume that the partnership commenced trading as IBE on 1 April.
Thereafter, the defendant continued to manage IBE and work as a therapist six days per week as she had for IBB. The trading hours were from 9.00 am until 5.00 pm, but she began and finished work outside those hours. She received regular payments from the business (as she had done from IBB) in cash, by electronic transfer into her personal account and by payment of the same expenses as before (ie, for her motor vehicle and telephone expenses and her computer loan repayments).
The business continued to operate at a loss and the plaintiff continued to fund it. On 24 April 2007 he increased the credit limit of the Westpac equity loan to $125,000.
In April 2007 the plaintiff and the defendant acquired a 'Dermabrasion' treatment machine on lease from Capital Finance. The monthly payments were $409.33 for 60 months (exhibit P33).
In May 2007 the defendant attended beauty marketing conferences in Melbourne and Brisbane at IBE's expense. At about this time she conceived of an on‑line business opportunity called 'Salon Genie'. She, the plaintiff and their wider family were very enthusiastic about this idea.
On 21 May Mr Klvana wrote to the plaintiff and defendant enclosing IBB's accounts for the March 2007 quarter (exhibit P34). Based on Mr Klvana's evidence (ts 354), exhibits such as P40 and 42 and the inherent logic of the matter, I find that most of the information on which these accounts were based was furnished by the defendant. They showed that IBB's gross income for the quarter was $20,167.73 which produced a trading profit of $3,440.77. Expenses totalled $34,651.40, producing an overall operating loss of $31,210.63. The balance sheet included an item described as 'Loan G. Edwards' under the heading 'Long Term Liabilities', the balance of which was shown as $56,633.43 at the beginning of the quarter and $83,290.56 at the end. The proprietor's equity included an item described as 'Owner Drawings C. Mercer' which increased over the quarter from $37,729.14 to $39,073.50. Based on Mr Klvana's evidence, I am satisfied that these 'Drawings' represented his calculation of cash and other perquisites (such as motor vehicle, telephone and computer expenses) drawn by the defendant from IBB.
By 27 June 2007 IBE was still trading at a loss and the plaintiff owed $123,239.87 on the Westpac equity loan. The defendant was continuing to be paid cash (both on and off the books) and her usual perquisites. The off‑the‑book cash receipts occurred with the plaintiff's approval (ts 158, 163).
In or about August 2007 the plaintiff and the defendant agreed that the defendant would reduce her hours in the salon to two days per week to enable her to concentrate on the development of 'Salon Genie', which she proceeded to do. They also agreed that she would no longer receive any cash remuneration but would continue to have her usual perquisites paid by IBE. The partnership also spent $6,022 obtaining professional web‑design advice and establishing a family trust to run the business. The defendant and her husband were the trustees. The 'Salon Genie' enterprise did not ultimately come to fruition.
Mr Klvana provided the defendant with the final 2007 accounts for IBB and IBE (exhibit P44) in about mid‑to‑late August 2007 and went through them with her thoroughly at the salon. He now has no independent recollection of having done so, but I am satisfied that he did for the following reasons. First, he emailed the plaintiff on 14 August (exhibit P42) saying that he would do so. Second, in an email to the plaintiff dated 19 September 2007 (exhibit P44), he said that he had provided copies of the accounts to the defendant approximately one month prior. Third, his practice was to meet the defendant when he needed to collect information or provide her with the same. It is improbable that he prepared the accounts and took steps to meet her to go through them, and confirmed having done so in writing a month later, if such did not occur. Fourth, both the defendant and Mr Klvana gave evidence about an occasion on which something like this occurred at the salon.
IBB's balance sheet showed negative equity of $77,170.00 and unfunded drawings by the defendant (ie, a negative amount) in the sum of $38,310.36. Liabilities included 'Loan G. Edwards' of $83,829.18.
IBE's accounts (effectively for the June 2007 quarter) recorded payments to the defendant, or for her benefit, of $8,322.16 and an operating loss of $43,733.21. The balance sheet referred to drawings to the defendant of $8,322.16, a long term liability to 'G.Edwards' of $35,369.71 and a debt owed to 'Salon Genie' in the sum of $500.
In or about late August 2007 Mr Klvana's retainer was terminated in order to reduce IBE's overheads, but he continued to deal with the parties in an ad hoc way. His August 2007 invoice (exhibit P41) went unpaid for some time. The plaintiff took over the bookkeeping using an Excel spreadsheet.
On or about 5 September 2007 the plaintiff took out a Citibank credit card with the defendant's acquiescence. (The plaintiff's chronology incorrectly states that this occurred on 8 November 2007 - compare exhibit P47.) The credit limit was $25,000. The plaintiff solely held this card and used it to fund IBE and to pay some of the costs associated with Salon Genie ($4,000). By May 2008 the balance due stood at $27,258.56. There is an issue as to the basis and terms on which the parties made this arrangement.
On 22 October 2007, the plaintiff and the defendant met with Mr Woollett to discuss IBE's liquidity and the Salon Genie proposal and its funding. Basically, nothing was resolved and IBE continued as before.
In early December 2007 the plaintiff initiated negotiations with the defendant with a view to them entering into a formal agreement as to the proprietorship of Salon Genie and the repayment of the money which he believed was owed to him personally by the defendant, including in respect of the Virgin credit card, Nurtured Elegance, IBB, IBE and Salon Genie (a total of $181,764 as at 3 December: see exhibit 46). These negotiations came to nothing.
Woollett & Partners prepared IBE's 2007 accounts and a partnership tax return (exhibit P37) on 25 January 2008, based upon Mr Klvana's books. These accounts differed slightly from Mr Klvana's where Woollett & Partners' accounting treatment differed from his. According to exhibit P37, IBE made a trading loss in 2007 of $5,183.95 which became a pre‑tax loss of $20,764.04 after taking all expenses into account. A section entitled 'Partners' Profit Distribution Summary', which was effectively their capital or equity accounts, showed that the defendant had made capital contributions of $10,567.10 (ie, the value of the plant, stock and equipment contributed by her) and received drawings of $92,246.24, whilst the plaintiff contributed $119,198.89. The 'Proprietors' Funds' showed the defendant in debit in the sum of $81,679.14 (ie, $92,246.24 less $10,567.10) and the plaintiff in credit in the sum of $119,198.89.
Mr Woollett accepted in his evidence (ts 414 – 415) that these accounts (and those for 2008 and 2009, ie, exhibits P54 and 75) were based on an erroneous treatment of certain items and he issued amended versions shortly before the trial (ie, exhibits P37.1, 54.1 and 75.1). For instance, the original accounts debited the defendant's capital account with the plaintiff's capital contributions. (I would add, for completeness, that they also wrongly treated the defendant's wages as drawings on future profit).
On 19 February 2008 the plaintiff and the defendant appointed an agent to sell the salon for $65,000 as a going concern (it was still operating at a loss).
In April 2008, the defendant, her husband and their children went to Port Hedland for a week's holiday, which became two weeks. Whilst there the defendant's husband was offered employment in Port Hedland so the family stayed. Subsequently the defendant obtained employment in a beauty salon (ts 504) and later as a truck driver (ts 586). Ms Passmore‑Edwards provided some management support for IBE to cover for the defendant's absence.
In April 2008 the plaintiff increased the credit limit on the Westpac equity loan to $195,000 and repaid certain expenses which he had paid for IBE from other personal sources.
On or about 3 June 2008, and with the defendant's acquiescence, the plaintiff obtained a credit card from Macquarie Bank which was offering six months interest‑free on credit card transfers. The limit was $15,000 which he used to reduce the balance on the Citibank credit card by $14,500, leaving a balance (on the latter) of $11,214.96. The basis on which the parties made these arrangements is in issue.
In June 2008 the plaintiff and defendant entered into a contract to sell IBE. The defendant returned to Perth to assist the purchasers during the settling‑in period and then returned to Port Hedland. The purchasers withdrew from the contract soon afterwards.
On 5 July 2008 the plaintiff and defendant entered into another contract to sell IBE (without the Omnilux and Dermabrasion machines) for $28,250. Settlement took place on 31 July 2008. After payment of sale and incidental expenses the net proceeds of the sale ($13,773.51), were disbursed in payment of IBE's trade creditors (exhibit P34).
On 10 August 2008 the plaintiff was transferred to the Philippines in his employment and went to live with Ms Passmore‑Edwards in Manila.
On 19 December 2008, and with the defendant's acquiescence, the plaintiff obtained a personal loan from Westpac for $31,607 (plus fees). He used the money to pay out the outstanding balances on the Virgin, Citibank and Macquarie credit cards ($7,079.96, $11,131.01 and $13,396.03 respectively). To this point the plaintiff had made all of the repayments in respect of these cards ($6,661.00) save for a single payment which the defendant made on the Citibank card ($320) on 1 April 2008. The monthly repayments for the personal loan were $747.89 over five years. There is an issue as to the basis upon which this transaction took place.
In March 2009 the defendant purchased a house in Port Hedland with a loan from her bank (ts 610; exhibit P67). From in or about September 2009 she rented this property out and returned with her family to live in Perth (ts 203 and exhibit P73). According to Woollett and Partners' work in progress ledger (exhibit P107), she had a telephone conversation on 12 November 2009 with an employee of Woollett & Partners (Peter Rutter I find: see ts 380) in which she said that the rent for the Port Hedland property exceeded the mortgage repayments by $32,000 per annum. I received this ledger into evidence pursuant to s 79C of the Evidence Act 1906 as a business record of Woollett and Partners because the defendant accepted in evidence that she had spoken to Mr Rutter on 12 November 2009 (ts 622 – 623).
In April 2009 the plaintiff returned to Perth on two weeks' leave. He sent the Omnilux and Dermabrasion machines to the plaintiff in Port Hedland with a view to her finding employment for them.
On 22 April 2009 Woollett & Partners prepared the partnership accounts and tax return for the 2008 financial year (exhibit P54) based upon the bookkeeping of Mr Klvana and the plaintiff. The accounts disclosed a loss for 2008 of $31,717.01. The tax return disclosed a loss of $28,482 and an 'expense reconciliation adjustment' of $3,235. The 'Proprietors' Funds' totalled $13,175.57 comprising the plaintiff's credit balance of $113,371.30 and the defendant's debit balance of $100,195.73.
On 17 July 2009 the plaintiff returned from Manila to live in Perth permanently.
By late 2009 the plaintiff was insolvent. He and Ms Passmore‑Edwards had separated and his outgoings (including rent) exceeded his income by approximately $3,500 per month. He liquidated some units which he held in an MLC Investment Fund on 1 December 2009 and used the proceeds to pay out the residuals and fees on the Omnilux and Dermabrasion leases ($45,868.60 combined: see exhibit P79). In total the plaintiff paid $52,189.17 and $17,413.93 in respect of the Omnilux and Dermabrasion leases respectively.
On 2 July 2010 Woollett & Partners prepared the 2009 partnership accounts (exhibit P75). These disclosed a net loss of $19,856, but after income and expense reconciliation adjustments the tax loss was $20,898. The 'Proprietors' Funds' stood at a credit of $110,124 for the plaintiff and a debit of $110,124 for the defendant.
There is no direct evidence that the defendant received the 2007, 2008 or 2009 partnership accounts prepared by Woollett & Partners. Indeed, Mr Woollett testified that on the express instructions of the plaintiff he did not provide the 2009 accounts to her (ts 415). However, Mr Woollett and the defendant both gave evidence (ts 380 – 301 and 626) that she was actively seeking copies of the 2007 accounts in early 2008 when the sale of IBE was under consideration. Those accounts (exhibit P37) were signed off by Woollett & Partners on 25 January 2008 and the selling agent was appointed on 19 February. Furthermore, the defendant provided her lawyers with copies of the 2008 and 2009 accounts in or about July 2010 and gave instructions about them (see [67] below). I am satisfied that she received copies of the 2007 and 2008 IBE accounts as and when they were prepared by Woollett & Partners, and received the 2009 accounts from an unknown source prior to July 2010.
I accept the defendant's evidence that to some extent she had difficulty understanding the accounts, which would not be unusual for a lay‑person. However, they transparently disclosed a number of matters including that IBE was making significant losses, and she could not have been unaware that the solvency of IBE depended at all material times on the plaintiff's continued financial support of the firm. However, I am not satisfied that the defendant agreed or settled these accounts in a strict, legal sense.
On 13 December 2010 the plaintiff sold his Kewdale house and used the proceeds to pay out some debts, including the Westpac equity loan (including accrued interest).
Beginning on 18 March 2008 and until mid‑2011 the plaintiff communicated with the defendant (sometimes in quite desperate terms) seeking help with his worsening liquidity problem (exhibits P50, P57, P60 – 69, P73 – 74, P76, P85 and P96). The plaintiff made it abundantly clear that he regarded the defendant to be liable to reimburse him or, at least, contribute to the firm's debts. At various times she gave solemn undertakings to help, but for all practical purposes she did virtually nothing. For instance, in May 2009 she offered to make payments from the rental proceeds of her Port Hedland property once they commenced (exhibit P73 and ts 203 – 204), but she never made one.
In April 2009 the plaintiff resumed negotiations with the defendant in relation to a deed of acknowledgement of debt (exhibit P70). He claimed in respect of all of the funding which he had provided to, or for, Nurtured Elegance, IBB and IBE. She queried certain items but did not repudiate the notion that she owed the plaintiff some money. For instance, she refused to pay more than one half of the $20,250 that he claimed in respect of Nurtured Elegance, to which he agreed (ts 202). She also insisted that any financial settlement be strictly between her and the plaintiff and she would decline to sign anything (such as the deed of acknowledgement of debt) to the extent that it would benefit her mother, who was pursuing a matrimonial property settlement with the plaintiff (ts 212). This was a deal‑breaker and ultimately nothing came of these negotiations either.
The plaintiff's lawyers, Paterson & Dowding, wrote to the defendant on 29 October 2009 (exhibit P77) claiming a debt of $304,433 (less any value in IBE's unsold equipment). The defendant instructed lawyers, Clement & Co, who wrote to Paterson & Dowding and Ms Passmore‑Edwards' lawyers on 15 July 2010 (exhibit P82) enclosing the 2008 and 2009 partnership accounts (exhibits P54 and P75) and denying any indebtedness. They contended that 'at worst the position is that on a partnership action Mr Greg Edwards may … be entitled to a payment from his co-proprietor to equalise their partnership capital accounts' but the same had been 'waived' by the plaintiff. The letter continued to say that 'the partnership accounts appear to be the only independent record of the partners' funds in the partnership and it is hard to imagine Mr Greg Edwards can prove anything other than $110,124.00 debt'.
The plaintiff sold the Dermabrasion machine on 24 January 2011 for $2,500 and the Omnilux machine on 5 May 2012 for $9,000. The sum of $11,500 must be accounted for by him.
These proceedings were commenced on 27 April 2011.
The plaintiff paid out the Westpac personal loan on 27 April 2012. Inclusive of principal and interest he repaid a total of $41,110.37 over the term of this loan. The defendant paid $1,488 on 16 February and 22 April 2009.
The pleadings
The pleadings were somewhat misconceived when the trial commenced because the statement of claim partly relied upon the unsettled partnership accounts to support what was, in effect, a claim in debt for one half of the partnership's losses. This was unmaintainable at law in the absence of a collateral agreement between the parties (see [165] below), but the objection was not explicitly pleaded in the defence.
At the conclusion of the evidence both parties sought and obtained leave to amend their pleadings to deal with these matters. In particular, the plaintiff was given leave to amend his prayer for relief to seek orders relating to the dissolution of the partnership and for the taking of accounts to the extent that the same is found to be necessary.
The plaintiff claims that the defendant is indebted to him, or otherwise liable to account to him, pursuant to the following alleged agreements and/or causes of action:
(i)Four agreements relating to the Virgin credit card. First, an agreement allegedly entered into in or about December 2005 and reiterated in or about October 2006 whereby the defendant promised to make all of the repayments. Second, an agreement allegedly entered into in or about November 2006 whereby the defendant promised to repay to the plaintiff the funds that he drew from the Westpac equity loan to pay out the Virgin credit card (ie, $30,000). Third, an agreement allegedly entered into in or about November 2006 whereby the defendant promised to make all of the repayments in respect of the scaled down version of the Virgin credit card facility (with a limit of $8,000). Fourth, an agreement entered into in or about June 2007 when, at the defendant's request, he took over the making of repayments on the Virgin credit card in consideration of her promise to repay him
(ii)The partnership agreement and alleged loans connected with the funding of the partnership.
(iii)Agreements allegedly entered into in or about November 2007 and June 2008 whereby the defendant promised to make all repayments on the Citibank credit card and the Macquarie credit card respectively.
(iv)An alleged agreement entered into in or about December 2008 whereby the defendant promised to make all repayments on the Westpac personal loan.
(v)Interest pursuant to s 32 of the Supreme Court Act 1935.
Further, or alternatively, the plaintiff pleads that the defendant is liable to him in respect of all payments from the Westpac equity loan to IBB or IBE as moneys had and received at the defendant's request for her use or benefit.
Further, or alternatively, the plaintiff contends that the defendant is liable to make contribution in respect of the losses of the partnership and expenses which he paid on behalf of the firm.
The statement of claim pleads various liquidated amounts which the plaintiff alleges he is owed. In the light of my ultimate findings it is not necessary for me to condescend to that level of particularity at this point.
In her defence the defendant does not dispute that the plaintiff provided her with significant funding for business and personal purposes and does not dispute that most of the funds have not been repaid, but she denies that she ever agreed to personally repay or otherwise indemnify him.
As to the Virgin credit card, and other advances relating to IBB, she pleads that the financial dealings came about in a context of family love and affection and that any advances and/or agreements relating to the same are not legally enforceable because the parties did not intend to create legal relations with one another. In written submissions Mr Spyker extended this contention (without objection) to all of the agreements pleaded by the plaintiff, but then resiled from it in oral submissions.
The defendant admits that the partnership agreement came into being on 20 November 2006 for the purpose of operating IBE. She pleads that there were express or implied terms as follows:
(i)The plaintiff would fund the firm's expenses including payments for the defendant's personal use;
(ii)She would work for the firm on a full‑time basis at nil salary;
(iii)The firm would endeavour to repay the plaintiff from its bank account as and when funds were available therein;
(iv)In the event that such funds were not available and the business was not profitable, neither party would have a claim against the other with respect to their contribution to the business. (The defendant contends that insofar as the parties expressly agreed this term, they did so orally in or about late 2006).
The defendant further pleads that the partnership accounts represent the plaintiff's subjective and legally unenforceable construction of their affairs. She contends that they fail to properly recognise the monetary value of her contribution to the assets and operation of IBE and, further, that they include alleged debts and entries which are irrelevant to IBE.
The defendant denies that she ever acknowledged any legally enforceable indebtedness to the plaintiff, whether in the accounts or otherwise. She contends that she 'has always felt a moral responsibility towards her father's failed investment' in her business and 'has endeavoured to contribute as much as possible towards it' (defendant's submissions dated 17 August 2012, par 31).
By his reply the plaintiff contends that the defendant is estopped by her promises to repay and/or by her conduct from denying liability to reimburse him for moneys which he advanced to her or on her behalf or to the firm. In this respect he pleads that, in effect, the defendant was aware by various means that he was advancing money to her or the firm in reliance on an assumption which she induced to the effect that she accepted the accuracy of various financial records which disclosed the indebtedness to him.
The evidence on the remaining issues
The plaintiff testified (ts 107 –108) that the defendant told him in December 2005 that she could not manage Nurtured Elegance's finances. She was having 'trouble with a couple of bills and stuff'. He agreed to help and provided her with the Virgin credit card so she would 'have freedom to do expenditure on the salon costs herself'. She 'promised to make repayments on the card' and told him that she would treat the card 'as her own' (ts 108).
The plaintiff testified that the defendant telephoned him when the Virgin credit card was suspended (in October 2006) and requested him to make some repayments (which he did – see [20] above), saying that she would pay him back one way or another when she could (ts 111 and 116).
The plaintiff testified that the defendant told him when she approached him to finance the expansion of her business in mid‑2006 that she would be unable to get a business loan because she had no assets (ts 110).
He testified that at the meeting with Mr Beattie on 23 October 2006 he, Mr Beattie and the defendant discussed 'starting up a business, determining advertising, marketing, what financial structure we proposed to use in the business, loans for funding a business'. He testified that 'a partnership was mentioned '… and that Mr Beattie mentioned that there would be '50:50 profit and loss to the … or equal to both partners' (ts 126). There was some discussion about what would happen if the business failed and that 'payment would come from the partnership … so it would have been left over from the partnership' (ts 126).
The plaintiff testified (ts 127) that he was reluctant to expose himself to the higher rent and a five year lease on the Belmont premises (which he had discussed with Mr Beattie). Therefore he and the defendant 'decided to go into the small scale version and just use the Bassendean shop and break that up into five rooms to produce more income for the salon'.
The plaintiff testified (ts 129) that he spoke with Mr Woollett by telephone about his proposed investment in IBB on a couple of occasions prior to the meeting on 20 November 2006. Mr Woollett advised him that a partnership would be an advantageous vehicle because it would enable him to obtain a tax deduction for his interest liability on the Westpac equity loan which would not be possible if he simply lent the money interest‑free to the defendant. Further, a partnership would provide him with the security of an interest in the business itself.
The plaintiff testified (ts 129) that the discussion at the meeting on 20 November 2006 was 'around management of a partnership'. There was also discussion about 'the transfer of the debt across' and 'rolling over the prior debt into the partnership' in that 'any debts from … [the defendant's] sole trading business would be added to the partnership as a negative contribution' (ts 130).
He testified that Mr Woollett said that the 'partnership will be a 50/50 profit and loss; profit and loss will be shared equally'. The plaintiff queried why the profit should be shared equally when he was providing all of the funding. Mr Woollett replied that the plaintiff was 'effectively funding the defendant's share of the capital contributions' (ts 129). Mr Woollett said that 'any profit and loss from the partnership would be split 50/50 and added to the personal incomes of each of us' (ts 130: emphasis added).
The plaintiff testified that there was also discussion at this meeting about the defendant receiving drawings for managing the salon (ts 130). It was 'agreed that [she] would take drawings of $200 a week' plus the partnership would pay for her car loan ($717 a month), her mobile telephone expenses, her fuel and her personal loan with GE finance for her computer. It was also agreed, he said, that the defendant would be entitled 'to get cash in hand' payments (ts 158). The plaintiff was unsure in his evidence of the difference between wages and partners' drawings but it was his belief that the discussion was about allowances and payments for the defendant to keep (ts 157 – 159).
The plaintiff testified that he had 'quite a number, or at least one or two, discussions' with the defendant in November 2006 about IBB's debt to him and the value of IBB's business being 'absorbed into the partnership'. One such occasion was in the Bassendean salon. He told the defendant that he had spoken to Mr Woollett who had told him that IBB's stock value 'would be put into the partnership as a positive and the debt owed [by the defendant to the plaintiff] will be put in as a negative contribution' (ts 128). The defendant made no comment or objection. He testified that at the time the actual figures were not known (ts 152 – 153).
The plaintiff testified (ts 128 and 131) that the defendant suggested that the Virgin credit card be paid out from the Westpac equity loan, to which he agreed, but there was 'no discussion whatsoever' about her being relieved of responsibility for repayments (ts 128 – 129). He testified (ts 131) that the defendant also requested him not to close the Virgin credit card because she 'wanted to use it for her own personal use' with a limit of $8,000. He 'wasn't too happy about what she said' but she 'promised to treat it as her own and make all the repayments'. He 'believed her' and therefore agreed to it. He testified (ts 164) that from July 2007 he took over the repayments at the defendant's request because she could not afford them and she said that she would repay him 'when she could'.
The plaintiff testified that the Citibank credit card was obtained because he was close to exhausting his sources of funding, namely the Westpac equity loan and a re‑draw facility which was available under his home loan. He testified (ts 177) that he and the defendant had a discussion and agreed that the credit card 'was the best idea as an interim means to fund [IBE] and also fund the initial start of Salon Genie' pending him obtaining an 'increase on the equity loan [to] … pay out the credit card'. His evidence was a little contradictory as to whether there was an agreement that the defendant could use the Citibank credit card for personal expenses, but I am satisfied that he settled on the position that the card was 'just for Salon Genie and IBE'. He also testified that the defendant 'agreed to help with the repayments' (s 179; emphasis added).
The plaintiff testified (ts 175 – 176) that he, the defendant and her husband Paul had a meeting with Mr Beattie in November 2007 to discuss the Salon Genie proposal and IBE's cashflow proposal. Mr Beattie suggested that IBE be sold as a going concern if turnover did not improve within two months.
The plaintiff testified that in or about mid‑May 2008 he learnt that Macquarie Bank was offering interest‑free terms for credit card transfers. He telephoned the defendant in Port Hedland and suggested 'putting some of the amount [owed on the Citibank credit card] into Macquarie and she … agreed with that' (ts 186 – 187). I gather that there was no discussion about who would make the repayments.
The plaintiff testified that in November 2008 he was concerned about the high charges on the various credit cards (ie, Virgin, Citibank and Macquarie Bank). He testified (ts 193 – 194) that he spoke to the defendant by telephone from Manila and she agreed that the interest rates were high. She also 'agreed to get a personal loan herself … to pay them herself'. She telephoned him about two or three weeks later and said that she couldn't get a loan because of her bad credit rating, so they agreed that he would apply for the personal loan and 'she said she would make the repayments', which she confirmed by emails (exhibits P62 – 64). He then took out the Westpac personal loan.
The plaintiff testified (ts 197) that in January 2009 the defendant telephoned him and said that she could not make the first repayment on the Westpac personal loan because of her Christmas expenses but 'promised to make … the next payments'. So, he made that repayment. The defendant made the February repayment but telephoned him in March 2009 to tell him that she could not make the third because she was not due to be paid until after it fell due (ts 197). She promised to make the fourth payment (which was due on 22 April) if he paid the March instalment, which he did. The defendant made the April repayment but none thereafter. When he questioned her she said that she was 'having difficulty with finances'. He 'gave up … trying to keep pressuring her to make payments' and made them all himself from then on (ts 201).
The plaintiff denied any agreement between he and the defendant to the effect that no party would make a claim on the other on termination of the partnership (ts 229).
In both examination‑in‑chief and cross‑examination (see, in particular, ts 269) the plaintiff testified that he expected the partnership to make a profit and that his 'loan' would be repaid out of profits. He appeared to acknowledge in cross‑examination that there was no discussion between he and the defendant, or in her presence, about what would happen if the business made losses (see for example, ts 269 and 288). However, in re‑examination he said (ts 324) that the subject of losses was 'sort of briefly discussed' at the 20 November 2006 meeting with Mr Woollett who said 'that we … both share profit and loss; that any losses are shared equally'. He testified (ts 325) that the defendant 'passed no comment about it' at that time. He said that this was also mentioned in the meeting with Mr Beattie in October.
Mr Beattie testified as follows about the 23 October 2006 meeting (ts 331 – 332; emphasis added):
At the meeting Greg informed me that he was going into a business venture with Chontall, that he had been supporting her business activities in the past and they wanted to engage in a new business venture to open a beauty salon. At the meeting Greg and Chontall discussed what their plans were for the salon and how they planned to grow and develop the business and I asked them what roles would be played in the business. Greg mentioned to me that Chontall would run and manage the business on a day to day basis and that he would provide the funding for the business. I then asked Greg how the funding would be raised and he said he was going to take a loan out and that the business revenue would then meet the repayments on that loan. I also then asked the question that had they considered that many small businesses tend to fail in their early stages of life and how that loan would be repaid in the event that the business were to fail. Greg mentioned that they were both partners in the business, that, along with sharing equally in the profits in the business, they would share in the losses and therefore they both would repay that loan. Chontall agreed with that but she was very, very positive obviously about the future of the business and its prospects, and she was confident of that.
Mr Beattie also testified that he was informed that the plaintiff and defendant ('predominantly' the latter) had been working on a business plan and 'that it was advanced' (ts 332).
As to the meeting on 27 February 2007, Mr Beattie testified that the plaintiff was concerned about the financial state of the business and its poor cash flow. He recommended that the plaintiff and defendant 'engage with their accountant' and also utilise a bookkeeper to help in the day‑to‑day management of the business. The defendant 'was confident that the business was developing well and that she was actively engaged in promoting the business and marketing the business and was confident that the business had a sound future' (ts 333).
Mr Beattie testified that he had no recollection or record of a meeting with the parties in November 2007.
In cross‑examination Mr Beattie firmly reiterated his evidence‑in‑chief. He said that the only discussion in the October 2006 meeting about financing pertained to the plaintiff providing a loan. He reiterated that he was told in this meeting that the parties were forming a partnership. He was asked if any mention was made of the defendant repaying any loans and said (ts 338; emphasis added):
The only comment that I recollect that was made was that if the loan was not repaid because the business failed, that they would share in the losses and that they would both repay the loan.
He also recalled that the plan was to use the revenue of the business to repay the loan (ts 339).
Mr Beattie gave his evidence in a careful, prudent and clear manner. He was very professional in appearance and confident about what he personally did or did not say in the meetings. Although his evidence was clarified in some respects in cross‑examination, it was not challenged.
Mr Woollett testified about a telephone conversation with the plaintiff in late 2006 about a partnership agreement. The plaintiff 'wanted to discuss restructuring [the defendant's] business in the way that he can quarantine money he's loaned … and to protect future loans he was putting into that business, in addition to obtaining additional tax benefits, if there were any' (ts 375).
Mr Woollett testified that he had two meetings of about an hour each with the parties. He could not recollect the 'word for word conversation'. As to the meeting on 20 November 2006 (ts 376):
I explained to both parties that a partnership structure involves joint and settle [sic: several] liability for the business debts or profits and/or losses would be split on a 50/50 basis and that was pretty much it, just the legalities of it with regard to ABNs, GST, the usual tax stuff …
We did discuss – Ms Mercer asked me about the value of the business, bringing her existing assets, being stock and plant and equipment and goodwill. We recognised that – as I advised Ms Mercer, we recognised the stock values and plant and equipment as per her current balance sheet from her bookkeeper. Regards to goodwill, as the business was making consistent losses, from their conversation it appeared that … the goodwill would be negligible so it was ignored for the purpose.
Mr Woollett testified that there were some questions and discussions about cash flow and business development and that his explanation about the nature of a partnership was 'quite clear'. He believed that both parties understood what he had said.
As far as he was aware, there was no discussion during this meeting about the defendant being personally liable for the repayment of the Westpac equity loan (ts 408). There was some discussion about the defendant being paid a partner's salary once 'the business turned a profit' and that such salary would be in addition to her profit share (ts 408).
Mr Woollett testified that his firm lodged an application for a partnership ABN on 20 November 2006 and accepted (ts 444) that this must have been immediately after the meeting.
He testified that the meeting on 22 October 2007 addressed IBE's cash flow problems and strategies to overcome it. This included whether the plaintiff would 'inject more capital … and what chances there were of making a profit out of the business if he did so' (ts 379). They also 'discussed a new website venture that Ms Mercer was investigating, launching and how they would go about setting up that structure and potential gains and marketing of that business'.
In cross‑examination Mr Woollett confirmed that the discussion on 20 November 2006 included the splitting of profits on a 50/50 basis. He rejected the proposition that there was no discussion about repayment of capital, and reiterated that there was discussion about capital being repaid 'only from future profits' (ts 445). He could not recall any discussion as to what would occur if there were no future profits.
Mr Woollett is an experienced accountant who impressed me as honest, co‑operative and sincere. However, he was not overly sure of himself in relation to some of the details of his evidence, which I think he would readily accept, and conceded that his original partnership accounts were not correct in relevant areas. He also corrected his evidence about the tax deductibility to the plaintiff of the interest debited to the Westpac equity loan. Initially he said that it was not tax deductible (notwithstanding that it had been claimed as such in the plaintiff's tax returns) but changed his mind after thinking about the matter overnight (ts 416 – 417 and 439).
Nevertheless, his evidence was basically unchallenged in cross‑examination.
Mr Klvana testified as to the matters referred to at [30] – [31] and [36], [39] and [42] above. He was not strongly challenged in cross‑examination. His qualifications as a bookkeeper were unchallenged and it is clearly evident from his work that he was (and remains) extremely knowledgeable and proficient (see exhibits P27 and 32 for example). Mr Woollett has a very high opinion of him (ts 378). Overall, I formed the impression that he is professional, accurate, literate and articulate. Also, he was in the habit of confirming his dealings in writing, either by letter, email or invoice which greatly added to the reliability of his evidence.
Overall, I have every confidence in Mr Klvana's reliability as a bookkeeper and a witness. As such, his entries in the accounts of IBB and IBE may be taken to be reliable (and they were not seriously challenged) and his evidence of his communications and dealings with the parties may be taken to be credible and reliable.
Turning to the defendant's evidence, and commencing with the Virgin credit card, she testified (ts 485) that she sought financial support from her father because she was 'finding it … hard to pay' the business overheads. She said:
I was just so thankful that dad was helping me out that I had said to him that I will pay it back once the business is making money.
He agreed with this and she said 'Are you sure?' He replied 'Yes' (ts 486). In cross-examination she denied that the credit card was given to her specifically for use in IBB, but she did accept that the plaintiff told her that it was to help with the business. She also agreed that she told him that she would treat the card as her own and would 'make the repayments if the business can' (ts 518). She said that she was on a sole‑parent pension at the time and there was no way that she could make the repayments if the business could not do so, ie, 'the business was going to pay for it' (ts 518, 520, 522, 530). She testified that she did not know the credit limit when she first received the card and did not know the new limit after it was increased.
She testified (ts 489) that in the first meeting with Mr Beattie they:
'talked about how if dad came and put money into the business how it would like, what would have to happen if we moved over to Belmont in a sense, you know, put up walls and plumbing and all that sort of stuff'.
As to the meeting with Mr Woollett on 20 November 2006, she testified (ts 490) that 'dad and Russell discussed about putting money into the business to make the renovations, buying new product, increasing the treatments and what would be involved in that', and she simply answered any questions that they had about the technical aspects of the business. As for the business structure (ts 490 – 491):
There was talk about it becoming a partnership and I'd only been a sole trader for about six months and I was like, 'So can we just change it over from sole trader to partnership' and they explained to me that they could. And then I just assumed that dad would be my partner…
The defendant testified (ts 491) that any profits would 'pay back the money that dad put in'. She denied that there was any discussion about her being paid a wage.
She testified about a telephone discussion with her father about the Virgin credit card which she said occurred after the renovations to the Bassendean shop had been completed. She asked her father whether they were going to continue to have a credit card, whereupon he said: 'Well I can leave you with a credit card with a limit on it', whereupon she asked for 'about $8,000' (ts 492). She said there was no discussions at that point about repayment and as far as she was concerned the previous arrangements continued to apply, that is to say, she assumed that the business would make the credit card payments if it could.
In cross‑examination she accepted (ts 583 – 584) that Mr Woollett explained the concept of a partnership in the meeting of 20 November 2006 and 'probably' explained that partners are obliged to share profits and losses equally.
She was quite vague about the Citibank credit card in evidence‑in‑chief (ts 495) and cross-examination (ts 603 – 604). Basically, she testified that in 2007 she had no knowledge of where the plaintiff obtained his money, but she was aware that he had obtained a Citibank credit card and supposed that he did so because she had asked him for money to help fund the Salon Genie proposal. She denied having had any discussion with him about repaying the card.
The defendant testified (ts 607) that she did not know anything about the Westpac personal loan and said that she simply 'put money' (ie, made repayments) where her father asked her to put it (ts 608).
Findings on the credibility of the plaintiff and defendant
The assessment of the credibility of witnesses is a multi‑factorial task. Appearance or demeanour are relevant but there are 'dangers of too readily drawing conclusions about truthfulness and reliability solely or mainly' from such considerations. Judges are encouraged 'to limit their reliance on the appearances of witnesses and to reason to their conclusion, as far as possible, on the basis of contemporary materials, objectively established facts and the apparent logic of events' (Fox v Percy [2003] HCA 22; (2003) 197 ALR 201, Gleeson CJ, Gummow, Kirby JJ [30] ‑ [31]).
Based on my observations of him, and after reflecting about his evidence, I have concluded that the plaintiff is an intelligent and prudent person, who is also humble and guileless. I also find that he is an extremely loving, generous and trusting person.
Whilst he had limited commercial sophistication, he was not careless about financial matters. He was able to draft and maintain simple accounts and cash flows and to operate spreadsheets and the like.
He also made concessions. For example he conceded that the Nurtured Elegance loan was basically a gift or family arrangement (ts 124, 249). Further, he was co-operative and did not prevaricate, temporise or argue in his evidence.
There were occasional inconsistencies between his evidence and other evidence. For example, he testified that he and the plaintiff met with Mr Beattie in November 2007. I accept Mr Beattie's evidence to the contrary which necessarily predicates that the plaintiff's recollection is flawed. This episode illustrates his occasional tendency to reconstruct and/or conflate events. (I suspect that he conflated the meeting with Mr Woollett in October 2007 with a non‑existent meeting with Mr Beattie).
He frequently (ts 116 and 301 for example) said that something 'would have' occurred (as did the defendant for that matter). In other words his evidence was sometimes conclusionary and lacked circumstantial detail (eg, ts 140 – 141). I sensed doubt in his voice on those occasions, as if he was himself searching for the answer (ie, the facts). This was an honest trait, but it self‑evidently undermines his reliability to some extent.
In my opinion the plaintiff's evidence was mostly credible because it was generally consistent with objective, contemporary facts or contemporaneously produced records or correspondence.
I formed a significantly less favourable opinion of the defendant's credibility.
At times she presented in her evidence as naïve and vague, innocent and resigned, almost to the point of surreality. For instance, she seemed to believe that a business such as IBB or IBE was a separate legal entity to its proprietor, so that it was the business that was duty-bound to pay creditors and not her or the partners (as the case may be). To illustrate, when the partnership superseded her as proprietor of the salon she just assumed (in the absence of any discussion with her father) that it also superseded her as liable to repay the Virgin credit card (see 122] above).
For similar reasons I am not satisfied that the defendant is liable to the plaintiff pursuant to the doctrine of monies had and received. The rights and obligations of the parties fall to be determined entirely pursuant to the terms of the agreements between them and the legal enforceability of the same.
In the light of these findings, I am satisfied that it is appropriate to order that, once the plaintiff has made his elections in relation to the Westpac personal loan debt and the Dermabrasion lease, there be a taking of accounts between the parties on the basis that:
(i)Pursuant to the partnership agreement and/or s 57(2) and s 57(3) of the Partnership Act, the parties are obliged to contribute sufficient capital to make good the overall loss on an equal basis, with the same to be disbursed to repay the parties' capital contributions to the firm.
(ii)Overall, this purely accounting exercise will produce a net figure payable by the defendant to the plaintiff for which he will be entitled to judgment.
The defendant contends that the proper taking of the partnership accounts should recognise the value of her labour contribution to the business of the firm. That argument must fail because it is inconsistent with the express term of the partnership agreement that she was entitled to be paid a wage by the firm (which was fulfilled).
Conclusion
The plaintiff is entitled to orders for dissolution of the partnership and judgment for a sum to be determined. I will hear the parties, but for now I propose to make orders that:
1.The partnership was dissolved on 31 July 2008.
2.The parties confer with a view to production of settled accounts in accordance with these reasons. It is to be expected that the parties will approach that exercise co‑operatively within the tenor of these reasons.
3.The parties have liberty to apply as and from 11 February 2013 for orders relating to the taking of the accounts by the court or for judgment based on the accounts and the plaintiff's elections regarding the Westpac personal loan debt and the Dermabrasion lease.
4.The parties have liberty to apply in respect of interest on the judgment sum(s) and in relation to costs.