Faulkner v Thomas
[2000] TASSC 159
•16 November 2000
[2000] TASSC 159
CITATION: Faulkner v Thomas [2000] TASSC 159
PARTIES: FAULKNER, Lynn
v
THOMAS, Karl Louis
TITLE OF COURT: SUPREME COURT OF TASMANIA
JURISDICTION: ORIGINAL
FILE NO/S: M21/1998
DELIVERED ON: 16 November 2000
DELIVERED AT: Launceston
HEARING DATES: 21 July 2000
28 July, 31 August 2000 (Written submissions)
JUDGMENT OF: Underwood J
CATCHWORDS:
Contracts - General contractual principles - Offer and acceptance - Matters giving rise to a binding contract - Vagueness and uncertainty - Certainty as to price - Contract void for uncertainty because no price for goodwill specified.
Hall v Busst (1960) 104 CLR 206, applied.
Van Der Waal v Goodenough [1983] 1 NSWLR 81, followed.
Aust Dig Contracts [9]
Contracts - General contractual principles - Offer and acceptance - Matters giving rise to a binding contract - Vagueness and uncertainty - Severability - No clear intention to sever uncertain clause.
Brew v Whitlock (No2) [1967] VR 803, followed.
Aust Dig Contracts [5]
Partnership - Dissolution and winding up - Effect on dissolution - Partner carried on business of the firm with its capital and assets - Ongoing partner entitled to interest on share of the assets.
Partnership Act1891 (Tas), s47.
Aust Dig Partnership [36]
REPRESENTATION:
Counsel:
Applicant: S B McElwaine
Respondent: K J Stanton
Solicitors:
Applicant: S B McElwaine
Respondent: Shields Heritage
Judgment Number: [2000] TASSC 159
Number of Paragraphs: 47
Serial No 159/2000
File No M21/1998
LYNN FAULKNER v KARL LOUIS THOMAS
REASONS FOR JUDGMENT UNDERWOOD J
16 November 2000
The parties to this litigation are physiotherapists. They used to carry on business in partnership with each other. The business was conducted at George Town and Launceston. The affairs of the partnership were governed by two partnership agreements. The earliest in time, dated 5 October 1994, relates to the business that was carried on at George Town and the other, dated 2 March 1987, relates to the business that was carried on at Launceston. On 30 December 1992, the applicant gave the respondent notice of his intention to retire from the Launceston partnership on 30 June 1993. On 31 March 1993, the applicant gave the respondent notice of his intention to retire from the George Town partnership on 30 June 1993.
This litigation only concerns the partnership carried on at George Town and hereafter I shall simply refer to it as "the partnership".
The respondent assumed possession of all the partnership assets in May 1993 and has since used them to earn income as a physiotherapist. Although the terms of the partnership were reduced to writing, and although there is a term which provides a mechanism for fixing the value of the retiring partner's shares of the partnership, the parties were unable to fix that value for many years. This was due, in part, to an omission from the relevant clause in the partnership agreement and, in part, due to the parties' general inability to reach agreement about anything.
Litigation concerning both partnerships was instituted in this Court by an originating application dated 5 May 1998. In the course of that litigation, an order was made by Crawford J on 7 June 1999. The order provided (inter alia) that the questions in the originating application concerning the practice at George Town be tried and determined separately from the questions concerning the practice at Launceston. Paragraphs 2 and 3 of the order provided:
"It be declared that the respondent by his notice in writing dated 28 May 1993 elected to purchase the applicant's share in the capital and assets of the partnership formerly carried on between the applicant and the respondent in accordance with the agreement in writing dated 5 October 1984 (the partnership agreement)
"It is declared that the amount payable by the respondent to the applicant for the good will (exclusive of interest, if any) is $13,799 which is the amount determined under clause 12 of the partnership if the figure of $12,000 is inserted in the blank space in that clause.
The order also contained the following paragraphs:
"6 THAT the following issues arising out of paragraphs 6 to 11 of the originating application be set down for hearing:
(a) Whether the respondent must pay interest to the applicant in respect of the amount of $13,799 payable for good will and/or any further amount payable in respect of plant and equipment;
(b) If the respondent must pay interest to the applicant, then for what period or periods must that interest be paid;
(c) If the respondent must pay interest to the applicant, then upon what basis is that interest to be paid;"
The parties were agreed that the above three issues should be tried separately from the remainder of the issues concerning the partnership and which are set out in the originating application. I was told by counsel that once those issues had been resolved, it was likely that all the remaining issues between the parties could be settled.
It was an agreed fact that the capital sum referred to in the order of Crawford J was paid on 8 July 1999 and interest was claimed from 28 May 1993 until the date of payment, a period of just over six years.
The partnership agreement contained no provision for the payment of interest but, in essence, Mr McElwaine's submission was that the parties had so departed from the terms of that agreement that equity required the payment of interest on the capital sum of $13,799 for the six year period.
It is appropriate to set out here the relevant terms of the partnership agreement. Clause 12 provides that in the event of either partner dying during the continuance of the partnership, the survivor shall have the option of purchasing the share of the deceased partner in the capital assets of the business on the terms set out in the paragraph. Those terms are as follows:
"(a) The purchase price shall be a sum equal to the amount at which the said share of the deceased partner shall be valued as at the date of his death by a valuer to be agreed upon by the surviving partner and the personal representatives of the deceased partner and in the event that the surviving partner and the personal representatives of the deceased partner shall be unable to agree upon a valuer then by two valuers one appointed by the surviving partner and one by the personal representatives of the deceased partner which said two valuers shall before commencing their valuation appoint an umpire provided however that in the determination of such share the following shall apply:
(i)The value of the deceased partner's share in all plant and equipment shall be the sum of One thousand five hundred dollars plus a sum equal to one half of the value of such plant and equipment as shall be acquired by the partnership after the date of the commencement of this partnership and such value shall be determined as hereinbefore provided.
(ii)The value of the deceased partner's share in the goodwill of the partnership shall be a sum equal to one half of a sum which bears the same proportion to the gross fees charged by the partnership during the twelve months prior to the death of the deceased partner as the sum of $ bears to the gross fees charged by the practice acquired by the partnership on the date of the commencement of the partnership during the twelve months ending on the Thirteenth day of August One thousand nine hundred and eighty four.
(b) The purchase money shall be paid in cash immediately upon the determination thereof."
Clause 14 of the partnership agreement confers the right on either partner to retire during the continuance of the partnership upon giving three months' prior notice of his intention to do so. The clause goes on to provide:
"… and in the event that either partner shall retire the remaining partner shall have the option to be exercised by notice in writing given to the retiring partner at any time during the said period of three calendar months but in any event not later than one calendar month before the expiration of the said period of three calendar months of purchasing the share and interest of the retiring partner of and in the capital and assets of the partnership at a price to be determined as provided by Clause 12 hereof and such purchase price shall be paid immediately upon the determination thereof."
By letter dated 28 May 1993, the respondent exercised his option to purchase the applicant's "share and interest in the capital and assets" of the partnership. As mentioned, because there was an omission from cl 12(a)(ii) of the partnership agreement, the parties were unable to calculate the purchase price of the goodwill of the partnership. This omission was the source of much dispute between the parties until the order of Crawford J was made in June 1999.
Mr Stanton, counsel for the respondent, pointed out the partnership deed, cl 14, provides that the purchase price for the capital and assets of the retiring partner's share in the partnership is not payable until it has been determined. He submitted that such price either was not determined until the order of Crawford J was made or, preferably, it still has not been determined, for the goodwill was but one of the assets of the partnership and the mechanism provided by cl 12 to fix the price of the other assets had not yet been set in motion.
The provisions of cl 12(a)(ii) purport to fix the value of the goodwill by reference to the gross fees charged by the practice which was acquired by the partnership. The evidence established that the partnership acquired an established physiotherapy practice which was then being conducted by one Louise Miller. Annexed to an affidavit of the respondent, is a note in Mrs Miller's handwriting. According to the affidavit, the note was given to the respondent at the time negotiations were afoot for the applicant and the respondent to purchase Mrs Miller's practice. The note lists various items of plant and equipment and sets out the claimed value of each piece. The note refers to "Goodwill - $8,000". By his affidavit sworn 11 October 1999, par3, the respondent refers to this note and Mrs Miller's profit and loss statement for the year ended 30 June 1983 and deposes:
"Those documents are consistent with my recollection that when we purchased the practice the value of the goodwill was considered to be $8,000.00. However as the purchase price for all the assets of the business was agreed to be $15,000.00 including plant and equipment and the plant and equipment had been written down to approximately $3,000.00 Louise Miller asked us to agree to attribute $12,000.00 to the goodwill for her accounting purposes and purchase the plant and equipment for $3,000.00."
In his cross-examination, the applicant agreed that the foregoing extract from the respondent's affidavit was correct.
In the light of that concession, one might be forgiven for wondering why the parties could not have immediately agreed that the figure missing from cl 12(a)(ii) was $12,000. According to his oral evidence, the respondent maintained that the figure missing from cl 12(a)(ii) was $8,000 and not $12,000. Further, in addition to the parties being at loggerheads over the dissolution of the other partnership, the applicant claimed that the respondent told him that he would only agree to the insertion of the figure of $12,000 upon condition the applicant gave him a restraint of trade covenant, restraining him from practising physiotherapy in the George Town area for a number of years. The applicant said that he was unwilling to give such a covenant as he wanted to continue working for employees of Comalco and Temco. The partnership deed contains no restraint of trade clause at all. As events turned out, the applicant started up a new physiotherapy practice in Riverside about 12 months after he gave notice of dissolution of the partnership.
On his part, the respondent claimed that he was always willing to pay for the goodwill of the George Town practice but, as I have said, upon the basis that the figure to be inserted into the partnership deed was $8,000 and not $12,000. The respondent claimed that he was willing to pay more in order to get a restraint of trade covenant from the applicant. He said that he was willing to pay an amount calculated in accordance with the insertion of $12,000 in cl 12(a)(ii), but only if the applicant signed a restraint of trade covenant.
In addition to the foregoing, it was the respondent's case that on 9 May 1993, at a meeting in the office of the partnership's accountant, Mr Loone, the applicant agreed to give him the requested restraint of trade covenant. The applicant denied that there had ever been any such agreement.
Mr Loone gave evidence by way of affidavit and was cross-examined upon its contents. I accept his evidence in its entirety. I find in accordance with it that there was a meeting in Mr Loone's office on 9 May 1993. This was about six weeks after the applicant had given the respondent notice of his intention to retire from the partnership and a little less than three weeks before the respondent exercised his option to purchase the assets of the partnership.
Mr Loone made notes in preparation for the meeting. They are annexed to his affidavit. Those notes contain a reference to "restrictive covenant to be agreed". Mr Loone also made notes at the meeting. These notes are a little hard to decipher, but appear to contain no reference to a restraint of trade clause or "restrictive" covenant. By his affidavit, par3, Mr Loone deposed:
"So far as the George Town partnership is concerned those notes are consistent with my recollection that there were discussions between the parties about whether Mr Faulkner would give a restrictive covenant to Mr Thomas in return for payment of his interest in the George Town practice. At that meeting that was not agreed to by Mr Faulkner. It was, rather, simply discussed in the meeting and consistently with my notes it was a matter which was 'to be agreed'."
Mr Loone amplified the contents of that paragraph in his oral evidence when he said that "the sticking point" between the parties was the restrictive covenant. He said that his recollection was "at that meeting there really wasn't a dispute about the quantum of the goodwill or the method of calculating it". Mr Loone said that the real dispute, so far as he saw it at that meeting, was the applicant's refusal to enter into a restraint of trade covenant. I accept all that evidence.
The respondent's case is that the applicant agreed to give him a restraint of trade covenant in Mr Loone's office, but not within Mr Loone's hearing. The circumstances are set out in the respondent's affidavit, sworn 11 October 1999, pars9 - 14 inclusive:
"9 At the meeting on 9 May, 1993, there was discussion about many matters related to the dissolution of the Launceston partnership and the George Town partnership.
10 There was a lot of discussion about a restrictive covenant. It was a sticking point. In the end Rodney Loone suggested that we not waste more time discussing it and move onto other matters. We then moved onto a discussion about plant and equipment. This was at the time we were talking about the George Town partnership.
11 Mr Loone then took a telephone call. However he did not leave the room. While Mr Loone was speaking on the telephone I turned to Faulkner and spoke to him. I do not now recall the precise words I used but to the best of my recollection I used words to the effect, 'look Lynn, will you agree to a restrictive covenant on George Town'.
12 I may have used the words 'do you' in place of the words 'will you' referred to above.
13 In response to that question Faulkner said 'yes'.
14 When Mr Loone finished the telephone call we went on continuing discussing the plant and equipment. Neither Faulkner nor myself confirmed that conversation with Loone. Based on that discussion I considered Faulkner had agreed to provide a restrictive covenant in respect of the George Town practice."
I do not accept that account. It is inherently unlikely that both parties simply failed to mention to Mr Loone that they had resolved what Mr Loone and the parties agreed had been the "sticking point" at that meeting. Mr Loone, not surprisingly, said that he had no recollection of taking a telephone call when the parties were in his office on 9 May 1993, but said it was not his practice to take telephone calls whilst he was seeing clients.
Further, the conduct of the parties, in particular that of the respondent, after 9 May 1993, is inconsistent with an agreement having been reached, as claimed by the respondent.
In his letter dated 28 May 1993, written a little less than three weeks after the meeting in Mr Loone's office, the respondent exercised his option to purchase the applicant's share of the assets of the partnership without reference to the agreement he says that the applicant made to give him a restraint of trade covenant. Given that the parties were at that time on acrimonious terms, this omission is inconsistent with the agreement having been reached.
Shortly after the respondent exercised his option to purchase the applicant's share of the assets of the partnership, the respondent sent the applicant a deed of dissolution of partnership, drawn up by the former's solicitor. Clause 9 of this deed was a three year, ten kilometre radius, restraint of trade covenant. The applicant's response to this deed was a letter from him to the respondent dated 4 June 1993. It provided, in part:
"Clause 9 - I note that our partnership agreement does not provide for any such requirement upon dissolution. I, therefore, believe that a restrictive covenant is inappropriate."
The respondent replied by letter dated 29 June 1993. This letter contained an offer to settle the dispute over the Launceston partnership and included a requirement that the applicant sign the deed of dissolution of the [George Town] partnership that had earlier been sent to him. The letter concluded:
"The various parts of this offer and the conditions thereto are not severable."
This letter made no reference to the agreement that its author claimed he and the applicant had entered into in Mr Loone's office nearly two months earlier.
The applicant's response was a short hand written note dated 15 August 1993 which provided:
"I am happy to consider providing a restrictive covenant if & when a potential purchaser of the practice (or my share of the practice) requires such a covenant."
The respondent wrote back on 18 August:
"1 Restrictive Covenant.
Could you please definitely state whether you will or will not provide a restrictive covenant for the sale of The Physiotherapy & Sports Injuries practice. If you do not provide a definite answer I assume that you will not provide a restrictive covenant."
It seems highly unlikely that the respondent would have written such a letter without referring to the agreement that he claims he and the applicant entered into in Mr Loone's office had there been such an agreement.
There followed some correspondence between the parties with respect to the appointment of valuers, as is contemplated by the partnership deed, cl 12. This was followed by inconclusive correspondence with respect to the appointment of an umpire, as is also provided by cl 12.
On 1 September 1994, the respondent's solicitors wrote to the applicant's solicitors. For the first time, there is a reference to the agreement that the respondent claims the applicant entered into in Mr Loone's office. The letter provides in this respect:
"1 george town goodwill
Our client remains willing to pay your client the sum of $12,000.00 for the George Town goodwill provided that your client honours the Agreement made in the presence of Rodney Loone that your client would give a three year restraint of trade, that three year period to run from the date on which your client retired from the George Town practice. The restraint of trade will not prevent your client working at the hospital. Our client would be able to pay this amount for goodwill on thirty days notice."
The applicant's solicitor's response was (inter alia) to deny that there was any agreement as asserted by the respondent's solicitor. There the matter rested in the sense that no agreement was reached to solve the dispute until the order of Crawford J dated 7 June 1999. During the intervening period, the respondent had the use of the assets of the partnership without any payment therefor. In these circumstances, the applicant claims to be entitled to interest on the sum of $13,799 since 28 May 1993 until payment of that sum was made on 8 July 1999.
The first step is to analyse the relationship between the parties as at 28 May 1993 when the respondent elected to purchase the applicant's interest in the assets and capital of the partnership. Was a binding contract entered into and was a vendor and purchaser relationship created? I think not. The relevant material is :
· the partnership agreement, cl 14;
· the partnership agreement, cl 12; and
· the respondent's letter dated 28 May 1993 exercising the option.
In the event of death of one of the partners, cl 12 sets up a fairly elaborate mechanism for the determination of the purchase price of the assets and goodwill of the deceased partner. The price is to be fixed by a valuer. Provision is made in the event of the parties being unable to reach agreement on the appointment of a valuer. The clause then sets out two rules for the valuation of the assets of the deceased partner. The first rule relates to the plant and equipment and the second rule relates to the goodwill. Clause 14 merely applies the mechanism created by cl 12 in the event of dissolution by notice and the exercise of an option to purchase the retiring partner's share of the assets and capital of the partnership. The problem is that the rule imposed upon the valuers for the ascertainment of the value of the goodwill is completely meaningless by virtue of the omission of a dollar figure from cl 12(a)(ii). In my view, the uncertainty created by this omission rendered the whole contract, purportedly created by the election made on 28 May 1993, void for uncertainty. The rule that has to be applied for the ascertainment of the value of the goodwill is incomplete in just the same way as if a contract specified that "the purchase price of the goods sold is $_____". It is not for the Court to supply the omission upon some notions of general fairness. See Hall v Busst (1960) 104 CLR 206; Van Der Waal v Goodenough [1983] 1 NSWLR 81.
Can the uncertain part be severed from the other parts? Whether or not an uncertain provision in a contract can be excised so as to save the whole contract from invalidity depends upon the intention of the parties as ascertained from the contract considered as a whole. The relevant authorities were analysed by the Full Court of Victoria in Brew v Whitlock (No 2) [1967] VR 803 at 806 - 808, approved on appeal sub nom Whitlock v Brew (1968) 118 CLR 445 especially at 461 - 462. The Victorian Full Court said at 807 - 808:
"These authorities on severability in cases concerning uncertainty in a part of a contract point to the test as being the intention of the parties as to whether the operation of the contract apart from the impugned part was to be conditional on the efficacy of that part, or whether it was to take effect notwithstanding the failure of that part. That intention is to be ascertained from the construction of the contract as a whole. The process of construction will have regard to such considerations as the independence in form of the impugned part, any interdependence of that part in form or operation with the rest, the effect that severance would have on the operation or meaning of what is left, the nature of the subject-matter dealt with in the part and its relative importance in the setting of the whole bargain, whether the impugned part is one of several promises supported by different considerations or by a common consideration, or whether it is part of a single consideration supporting a promise or promises or whether it is one of several considerations, and, if so, whether it is a material or important part of the total consideration or merely subordinate."
Although a clear intention can be ascertained to sever cls 12 and 14 from the partnership agreement so that it can work during the subsistence of the partnership, no such clear intention is apparent to sever cl 12(a)(ii) from the balance of cls 12 and 14. Indeed, the reverse intention is made out. The option to purchase relates to the "capital and assets" as a single unit. The purchase price is to be fixed by a valuer or valuers and an umpire upon the application of two rules, one of which is set out in cl 12(a)(ii). The wording of cls 12 and 14 do not contemplate that the goodwill might be the subject of the option to purchase separate from the other assets and capital of the partnership. The goodwill and the assets are a single package in the agreement. Had there been an intention that an election could be made to purchase either the goodwill or the other assets, the agreement would have so provided.
Accordingly, I reach the conclusion that as at 28 May 1993 no binding contract was entered into and no relationship of vendor and purchaser came into existence. Mr McElwaine's submissions that the applicant is entitled to interest upon the basis that he was an unpaid vendor fail in the absence of a binding agreement to sell. Birch v Joy (1852) 3 HLC 565 at 590 - 591: 10 ER 222 at 232 is early authority for the proposition that a court of equity will give relief to an unpaid vendor, but only in a case where equity would have enforced the contract in good conscience, ie, by a decree of specific performance at the suit of the applicant. See also Sainsbury v Jones (1839) 5 My & Cr 1: 41 ER 272; Casson v Roberts (1862) 31 Beav 613: 54 ER 1277; Capital Finance Co Ltd v Stokes [1969] 1 Ch 261 at 278.
What, if any, is the effect of the order of Crawford J on this state of affairs? The relevant orders are:
"It be declared that the respondent by his notice in writing dated 28 May 1993 elected to purchase the applicant's share in the capital and assets of the partnership formerly carried on between the applicant and the respondent in accordance with the agreement in writing dated 5 October 1984 (the partnership agreement).
It is declared that the amount payable by the respondent to the applicant for good will (exclusive of interest, if any) is $13,799 which is the amount determined under clause 12 of the partnership if the figure of $12,000 is inserted in the blank space in that clause."
They were made by the consent of the parties upon a pre-trial conference. It does not appear from the Court record that any submissions or evidence was proffered to support their making. The originating application relevantly applies for the following orders:
· "That the respondent be required to account to the applicant, at such time and in such manner as this Honourable Court may direct, in respect of his acquisition of the applicant's interest in the partnership business formerly carried on between the applicant and the respondent pursuant to the provisions of an agreement in writing dated 5 October 1984;
· That the applicant's interest in such partnership be valued or realised either in accordance with the provisions of such partnership agreement or alternatively pursuant to the provisions of the Partnership Act 1891;
· That the respondent be required to pay to the applicant for his interest in the net assets of the former partnership business and that such sum be paid by the respondent to the applicant together with interest calculated from the date on which the respondent succeeded to the applicant's share in such partnership;
· That it be declared that the respondent is a constructive trustee for the applicant in respect of the applicant's former share in such partnership and for orders that the respondent account to the applicant in respect of such share."
The declaratory orders were not orders rectifying the partnership agreement, cl 12(a)(ii). The first declaration is no more than a statement of an uncontested fact viz, that the respondent elected to purchase the applicant's share of the assets and capital of the partnership. It is not a declaration that any binding contract came into force upon the making of that election. Further, the second declaration does not do more than state an amount "payable by the respondent to the applicant for goodwill". Although there are added the words "which is the amount determined under clause 12 of the partnership agreement if the figure of $12,000 is inserted in the blank space in that clause", those words are otiose in that they amount to no more than an explanation for the basis upon which the sum of $13,799 was calculated. Neither of these declarations has the effect of creating an enforceable agreement consequent upon the exercise of an election on 28 May 1993.
It is difficult to see what are the effects of the declarations in that there is no judgment that the respondent pay the applicant $13,799. Pursuant to the provision of the Rules of Court 1965, O63, r1 the Court was empowered to determine "any question of construction arising under [a written] instrument" and to make "a declaration of the rights of a person interested". However, it seems to me, with respect, that neither of the above declarations purport to determine any question of construction or declare the rights under the partnership agreement. It has been said that the Court should be slow to make declaratory orders (Hanson v Radcliffe Urban District Council [1922] 2 Ch 490) especially when the declaration does not declare rights of an interested person. Be this as it may, in end result, I conclude that the orders of 7 June 1999 create no rights arising out of cls 12 and 14 of the partnership agreement.
The partnership agreement, cl 13, rather curiously provides:
"If the surviving partner shall not exercise the option of purchasing the share and interest of the deceased partner or if the partnership shall be determined or expire during the joint lives of the partners the partnership shall be wound up and the assets distributed as provided by the Partnership Act 1891 but each partner shall be entitled to bid at any sale of such assets by public auction."
There is no reference to the exercise of the option to purchase conferred by cl 14 upon the remaining partner in the event of a retirement, but it is appropriate to read cl 13 as subject to the option conferred by cl 14 not being exercised. Upon the evidence put before me on this application, limited as it is, to the three matters set out in par5 of these reasons for judgment, it appears as though the appropriate course following dissolution was to wind up the partnership in accordance with the provisions of the Act. It might follow that an account should have been be taken to resolve disputes. However, none of that is not presently before me.
Mr McElwaine submitted in the alternative, that if "the determination of the price for the acquisition of the goodwill of Mr Faulkner could never have been the subject of proceedings for specific performance," the applicant is entitled to recover interest upon the basis of unjust enrichment. I reject this basis for recovery of interest. His submission was that the respondent had been unjustly enriched by being in possession of the capital and assets of the partnership without paying for the applicant's interest in them. For the reasons expressed by Zeeman J in Christiani & Nielsen Pty Ltd v Goliath Portland Cement Co Ltd (1993) 2 Tas R 122 at 169 et seq, unjust enrichment does not exist in Australia as an independent cause of action. This proposition was recently affirmed in The Commonwealth of Australia v SCI Operations Pty Ltd (1998) 192 CLR 285. It is not sufficient for the plaintiff to establish that the defendant's retention of the enrichment is unjust by reference to vague, subjective notions of "fairness'' or "justice''. See Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221; David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353. The plaintiff must establish a specific ground of recovery such as mistake, duress, or total failure of consideration.
Thus, it seems to me that the position is that the respondent has been in possession of the assets and capital of the partnership without having duly exercised an option to purchase those assets and capital; "duly" in the sense of creating a binding agreement to purchase. If the respondent has used those assets and that capital to carry on the business of the partnership, he has done so without the final settlement of the accounts of the partnership and the provisions of the Partnership Act 1891, s47 become relevant:
"(1) Where any member of a firm has died or otherwise ceased to be a partner, and the surviving or continuing partners carry on the business of the firm with its capital or assets without any final settlement of accounts as between the firm and the outgoing partner or his estate, then, in the absence of any agreement to the contrary, the outgoing partner or his estate is entitled at the option of himself or his representatives to such share of the profits made since the dissolution as the Court may find to be attributable to the use of his share of the partnership assets, or to interest at the rate of six per cent per annum on the amount of his share of the partnership assets.
(2) Provided that where by the partnership contract an option is given to surviving or continuing partners to purchase the interest of a deceased or outgoing partner, and that option is duly exercised, the estate of the deceased partner, or the outgoing partner or his estate, as the case may be, is not entitled to any further or other share of profits; but if any partner assuming to act in exercise of the option does not in all material respects comply with the terms thereof, he is liable to account under the foregoing provisions of this section."
The evidence did not properly address the issue of the period of time during which the respondent used the partnership assets and capital to earn income. There was evidence that he was using them in 1996 but beyond that, I am unable to make any finding of fact. I would add that it seems to me undesirable that this litigation should be resolved piecemeal by the making of declarations. The three questions before the Court by reason of the order of 7 June 1999 are said to arise out of the issues raised by pars6 - 11 of the originating application, but I doubt if they do properly arise out of those paragraphs. Although the Court always has a discretion to refuse to make a declaratory order or judgment, having regard to the time invested in arguing the matter, I am prepared to make a declaration in accordance with the foregoing reasons that I hope will enable the parties to resolve all disputes between them.
It is ordered that there be a declaration that the applicant is entitled to recover interest from the respondent in accordance with the provisions of the Partnership Act, s47(1).
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