Fletcher Nominees Pty Ltd v SGMC Pty Ltd
[2004] WASC 279
FLETCHER NOMINEES PTY LTD & ANOR -v- SGMC PTY LTD & ANOR [2004] WASC 279
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2004] WASC 279 | |
| Case No: | CIV:1399/2002 | 2-4, 20, 24 & 26 AUGUST, 16 DECEMBER 2004 | |
| Coram: | MASTER SANDERSON | 22/12/04 | |
| 21 | Judgment Part: | 1 of 1 | |
| Result: | Accounts taken | ||
| B | |||
| PDF Version |
| Parties: | FLETCHER NOMINEES PTY LTD (ACN 008 785 788) PAUL RODNEY FLETCHER SGMC PTY LTD (ACN 086 119 922) GARRY RAYMOND STROTHER |
Catchwords: | Partnership Taking of accounts Turns on own facts |
Legislation: | Partnership Act 1895, s 57 |
Case References: | Nil Nil |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- PAUL RODNEY FLETCHER
Plaintiffs
AND
SGMC PTY LTD (ACN 086 119 922)
GARRY RAYMOND STROTHER
Defendants
Catchwords:
Partnership - Taking of accounts - Turns on own facts
Legislation:
Partnership Act 1895, s 57
Result:
Accounts taken
(Page 2)
Category: B
Representation:
Counsel:
Plaintiffs : Mr G E Taylor
Defendants : Ms J Pinnington
Solicitors:
Plaintiffs : Taylor Smart
Defendants : Lawton Gillon
Case(s) referred to in judgment(s):
Nil
Case(s) also cited:
Nil
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1 MASTER SANDERSON: Since the discovery of gold in Western Australia almost 110 years ago, many have made their fortune prospecting for and mining the precious metal. Gold mining operations are not exclusively the province of large corporations. Frequently, individuals or small partnerships undertake mining operations. Many do so profitably. But not always. Mining operations can and frequently do go bad. When they do, it causes loss to all concerned. The Secret Creek Gold Mine, the subject of this action, was one gold mining venture that was not profitable. The aim of this action is to work out how the partners in the mine are to share their losses.
2 Ostensibly, this action is a taking of accounts. In fact that is not the way that the matter proceeded. It is agreed by all parties that the plaintiffs and the defendants were in partnership. But the parties are not agreed as to the terms of that partnership. In particular, they are not agreed about how any losses incurred by the partnership during its operation should be shared between the partners. That then is the first issue to be determined. Once that issue is determined, there are a number of specific items which are in dispute. It is not the amount of those items which is in question. It is rather a matter of how the items are to be treated in the winding-up of the partnership.
3 The hearing as it proceeded was something of a moveable feast. That is not intended to be a criticism of counsel. Quite the reverse. Throughout the course of the hearing counsel continued to negotiate with a view to limiting the number of particular items that were in dispute. This ongoing negotiation met with a good measure of success. The result was a significant narrowing of the issues I am left to determine.
Terms of the partnership
4 This matter proceeded by way of pleadings. The plaintiffs filed a substituted statement of claim on 15 May 2002. Before going to the provisions of that statement of claim, I should sketch in some background facts. For some years prior to 1998, the second-named defendant (who I will refer to as Garry Strother) had, in association with a third party, been running the Secret Creek Gold Mine. The gold mine was located on three mining leases owned by one Arnold James Ramirez ("Ramirez"). The mining operation had not been a success. It had soaked up a good deal of capital for minimal return. By the end of 1998, Garry Strother's associate was financially exhausted. He wanted to extricate himself from the mine. Ramirez, who was selling the tenements to Garry Strother and his associate on a time payment plan, had not been paid a number of
(Page 4)
- instalments of the purchase price and he was threatening to take back possession of the tenements. Garry Strother was in some difficulty. Someone - perhaps Ramirez, suggested he talk to the second-named plaintiff (who I will refer to as Rod Fletcher).
5 Rod Fletcher had been involved with gold mining over many years. He had met with a good deal of success. Everyone agreed that he had a wealth of knowledge and a keen understanding of what was required to make a gold mining operation profitable. He and Garry Strother held a number of meetings. They discussed the Secret Creek Gold Mine and its operation. Eventually, Rod Fletcher agreed with Garry Strother that he (Rod Fletcher) would take an interest in the gold mine. Originally Rod Fletcher was thinking in terms of a joint venture agreement. But all parties are agreed that the arrangement which was eventually entered into was a partnership. On 16 March 1999 a sale agreement was entered into between Ramirez and the plaintiffs and the defendants. This agreement had the effect of transferring the tenements on which the gold mine was located to the plaintiffs and the defendants, subject to payments being made to Ramirez. All parties agreed that as at the date of the sale agreement, there was a partnership in existence between the plaintiffs and the defendants. What they disagree about is the terms of the partnership.
6 In fact, whatever the terms of the partnership may have been, is largely irrelevant for the purposes of these proceedings. Really, all that is of interest is the terms of the agreement relating to the way in which any losses sustained by the partnership were to be distributed on winding-up. It is also clear that the partners never discussed this particular issue. Not surprisingly, they all expected that the venture would be profitable. That means, of course, that the way in which the losses are to be distributed and winding-up is dependant upon terms which can be implied in the partnership either as a consequence of the terms expressly agreed by the partners, or by operation of law under the Partnership Act.
7 I should pause at this point to say that during the course of this hearing, much evidence in cross-examination was directed at meetings which took place between Rod Fletcher, Garry Strother and others associated with these two men, prior to the signing of the sale agreement in March 1999. In the end, much of this evidence is irrelevant. But the fact of its irrelevance emerged only towards the end of the hearing. I will explain why that is so later in these reasons. But the fact of the irrelevance of the evidence is why I have not dealt with it in detail. There is simply no point in doing so.
(Page 5)
8 Returning then to the plaintiff's statement of claim, par 1 and 2 identify the parties. Paragraph 3 is then in the following form:
"3. By an agreement made between the Plaintiffs and the Defendants in about March 1999 it was agreed as follows:
3.1 Fletcher Nominees Pty Ltd and SGMC Pty Ltd would enter into an agreement with Arnold James Ramirez for the sale by Mr Rameriz to Fletcher Nominees Pty Ltd and SGMC Pty Ltd of three gold mining leases (M08/11, M08/12 and M08/27) and mining equipment, for a price of $561,000 payable by instalments of $11,700 each month, whereby title to the Gold Mining Leases and the equipment would transfer to Fletcher Nominees Pty Ltd and SGMC Pty Ltd upon completion of the instalments.
3.2 Rod Fletcher and Garry Raymond Strother would guarantee to Mr Ramirez the performance by Fletcher Nominees Pty Ltd and SGMC Pty Ltd of their obligations to Mr Ramirez.
3.3 That in partnership together, Fletcher Nominees Pty Ltd and SGMC Pty Ltd would hold the interest in the gold mining leases and the equipment and would take possession thereof and would conduct mining and exploration operations.
3.4 That the interest in the gold mining leases and the equipment would form part of the assets of the partnership.
3.5 That capital of the partnership would be provided as follows, namely that Fletcher Nominees Pty Ltd would provide $50,000 to the partnership ('the Extra $50,000') and Fletcher Nominees Pty Ltd and SGMC Pty Ltd would otherwise provide the capital equally to the partnership which it needed from time to time.
3.6 That Mr Fletcher would provide Fletcher Nominees Pty Ltd with the capital to enable it to
(Page 6)
- fund its half share of the ongoing partnership business and that Mr Strother would provide SGMC Pty Ltd with the capital to enable it to fund its half share of the ongoing partnership business.
- 3.7 That profits of the partnership would be shared equally between Fletcher Nominees Pty Ltd and SGMC Pty Ltd.
3.8 That losses of the partnership would be borne as to the first $50,000 by Fletcher Nominees Pty Ltd and otherwise equally by Fletcher Nominees Pty Ltd and SGMC Pty Ltd.
PARTICULARS OF THE AGREEMENT
- a) The agreement was verbal and was made in discussions between Mr Fletcher and Mr Strother in late 1998 and early 1999.
b) In those discussions each of the matters set out in sub-clauses 3.1 to 3.7 was expressly agreed.
c) The agreement is also partly evidenced in writing, being a Sale Agreement ('the Sale Agreement') dated 16th March 1999 entered into by Mr Ramirez and the Plaintiffs and the Defendants and a Security over Gold Agreement ('the Security Agreement') granted by Mr Ramirez and Fletcher Nominees Pty Ltd and SGMC Pty Ltd on or about the same date."
9 Two important points can be drawn from this paragraph of the statement of claim. First, it is said that the partnership came into existence in March 1999. In fact, given par (c) of the Particulars of the Agreement, it would appear that the plaintiffs say that the partnership came into existence prior to 16 March 1999. It is nowhere pleaded that the partnership was varied at any time. Secondly, it is said that par 3.1 to 3.7 were "expressly agreed": see Particulars of Agreement (b). It is not said how par 3.8 became a term of the partnership. However, it is reasonable to assume that it did not arise by express agreement. Be that as it may, it is said by the plaintiffs that the $50,000 contributed by Fletcher Nominees Pty Ltd, and which is referred to in par 3.5, was to be lost in the
(Page 7)
- event that the partnership sustained losses. It is, I think, fair to say that it is not entirely clear what is meant by par 3.8.
10 During the course of the trial the defendants were given leave to amend their defence. It is the defence of the first-named defendant which his relevant. Paragraphs 2, 4 and 5 deal with the terms of the Partnership Agreement. They read as follows (the marking up has been omitted):
"2. The First Defendant refers to paragraph 3:
2.1 Paragraph 3.1 is admitted and the First Defendant says further that the purchase price of the mining leases and mining equipment was $500,000.00 and a further $61,000.00 was payable by way of interest.
2.2 Paragraphs 3.2, 3.3 and 3.4 are admitted.
2.3 Paragraph 3.5 is denied. The First Defendant states that the capital of the partnership consisted of an initial contribution made by the Second Defendant of $230,000.00 and by a payment to be made by the Second Plaintiff of $50,000.00. Any further capital required was to be contributed by either partner by agreement.
2.4 Paragraph 3.6 is denied. The First Defendant states that it was agreed that after the initial payment of $50,000.00 by the Second Plaintiff as referred to paragraph 2.3, the operation would be funded from profits made from gold mined at the tenements.
2.5 With respect to paragraph 3.7 it was agreed that the profits of the partnership should be shared equally between the First Plaintiff and the First Defendant, but after repayment of $230,000.00 had been made to the First Defendant and repayment of $50,000.00 had been made to the First Plaintiff.
2.6 With respect to paragraph 3.8 there was an implied agreement that losses of the partnership
(Page 8)
- would be shared equally between the First Plaintiff and the First Defendant.
- Particulars of the Agreement
(a) The First Defendant admits that the agreement was verbal and was made in discussions between Mr Fletcher and Mr Strother in late 1998 and early 1999.
(b) The First Defendant states that in those discussions each of the matters set out in subclauses 2.1, 2.3, 2.4, and 2.5 were expressly agreed.
(c) The First Defendant admits that agreement is also partly evidenced in writing, being a Sale Agreement ('the Sale Agreement') dated 16 March 1999 entered into by Mr Ramirez and the Plaintiffs and the Defendants, a Security over Gold Agreement ('the Security Agreement') granted by Mr Ramirez and Fletcher Nominees Pty Ltd and SGMC Pty Ltd on or about the same date, and says that further the Agreement is evidenced by a Draft Partnership Agreement, undated and unsigned, drawn pursuant to the Plaintiffs' and the Defendants instructions.
- 3. …
4. The First Defendant states that it was further verbally agreed between the Plaintiffs and the Defendants and Arnold James Ramirez that the purchase price of the gold mining leases and equipment was to be reduced to take into account the payments of the second named Defendant and his previous partner, David William McKenner, and by reason of the partnership's financial benefit of the reduced price:
4.1 the First Defendant would be entitled to an additional profit share beyond its half share of up to an amount of $230,000.00 ('The additional entitlement'.)
(Page 9)
- 4.2 In the even that 80% of the value of the assets of the partnership were sold or the partnership was dissolved, the additional entitlement of the First Defendant would be paid immediately to the First Defendant than as if it were an additional capital entitlement of SGMC provided that notwithstanding the amount of the additional entitlement remaining unpaid, SGMC would not be entitled to receive a greater sum than that sum that is equal to 20% of the net asset value of the partnership at the time of sale or dissolution.
- 5. As to paragraph 3.8, the prospect of the partnership bearing a loss was never contemplated and the consequence of there being a loss never agreed. The second named Plaintiff represented to the Defendants that after an initial contribution was made to the partnership, it would be self funding."
11 Again, a number of points can be made about this defence. First, it does not deal with the allegation in par 3 of the statement of claim that the partnership agreement was made in or about March 1999. However, it would appear from par (a) of the Particulars to the Agreement to par 2 that the defendants accept that the partnership agreement was reached prior to 16 March 1999 when the sale agreement was entered into. That also seems to emerge from particular (c) to the same paragraph. If the agreement is "partly evidenced in writing" by the sale agreement, that suggests that the partnership pre-dated the sale agreement. So there would appear not to be a dispute between the parties on this question. Secondly, the term of the partnership pleaded in par 4.2 is somewhat complex. As I will discuss below, when a draft partnership agreement was produced some time after 16 March 1999, it contained a clause largely in terms pleaded in par 4.2. But it is not pleaded by the defendants that the partnership agreement entered into prior to 16 March 1999 was subsequently varied by further agreement. It is the defendants' case that the agreement reached contained the pleaded term. That being so, on the defendants' case the term must have been orally agreed between the parties prior to 16 March 1999.
12 For the purposes of this case, the real issue between the parties is whether or not the partnership agreement between them did include a term as pleaded in par 4.2 of the defence. I am satisfied that it did not. In my view, the evidence taken as a whole makes it clear that the parties, fired
(Page 10)
- by a spirit of optimism, never contemplated the prospect of the partnership making losses. That being so, they never reached an agreement as to how losses should be treated, let alone an agreement which contained a clause as complex and as detailed as that found in par 4.2 of the first defendant's defence.
13 There was a hot contest between the parties as to whether or not there was a term of the partnership as pleaded in par 4.1 of the first defendant's defence. That dispute arose in this way. Prior to Rod Fletcher becoming involved in the Secret Creek Gold Mine, Garry Strother and his associate were purchasing the tenements from Ramirez. Between them, they had paid Ramirez an amount of $230,000. When the partnership was established, Garry Strother brought to it certain rights with respect to the tenements. When the partners agreed in the sale agreement to pay Ramirez $561,000, they were in fact paying him what was still outstanding under the agreement between Ramirez on the one part and Garry Strother and his associate on the other. It was the defendants' position at trial that this $230,000 was to be recovered by Garry Strother, either out of profits during the time that the mine was operating, or from capital when the partnership came to an end.
14 It may or may not be the case that there was an agreement as pleaded in par 4.1 of the first defendant's defence. I do not need to decide that question. The mine never made any profits, so it is irrelevant whether an agreement one way or the other was reached. But whatever discussions took place prior to 16 March 1999, irrespective of whether a term as pleaded in par 4.1 was discussed and agreed, I am satisfied that there was nothing in the evidence which could lead to the conclusion that a term as pleaded in par 4.2 was agreed.
15 It was the defendants' case that the partnership agreement between the parties was "evidenced" by a draft partnership agreement ("DPA"). It is common ground that the DPA was never signed by the parties. It is also not said by the second defendant that the DPA varied the terms of the partnership. It necessarily follows that if the DPA has any relevance, it is because it reflects the terms of the agreement already reached between Rod Fletcher and Garry Strother.
16 The circumstances that gave rise to the DPA can be summarised in this way. Mr Alexander Peter Granich ("Mr Granich") had for some time been the solicitor for Garry Strother. He was involved in the drafting of the sale agreement and he attended when it was signed. Prior to the signing of the sale agreement, neither Rod Fletcher nor Garry Strother had
(Page 11)
- discussed with Mr Granich the terms of their partnership. However, they did resolve once the sale agreement was signed, to meet with Mr Granich with a view to a written partnership agreement being drawn up.
17 A meeting between Mr Granich, Rod Fletcher and Garry Strother took place on 17 March 1999. Mr Granich's recollection of what actually took place at that meeting was very hazy. He made some notes of the meeting which were admitted into evidence, but the notes are somewhat cryptic and really do not give any idea of what was discussed. Mr Granich's time records do show that the meeting was lengthy. There is no reference to the $230,000 and any amount being paid to Garry Strother either out of profits from the mine or upon winding up of the partnership. There is a reference to "equal contribution capital" but what that might mean is unclear.
18 There was a further meeting on 23 March 1999. Again, Mr Granich's notes are cryptic, but they read in part: "After Tenements are paid and title transferred $230,000 - Garry personally … $100,000 but not more than 20% profit or otherwise on sale as proceeds of mines".
19 Subsequent to this meeting there was some correspondence between Mr Granich and Garry Strother's accountant. Clearly Mr Granich was concerned that if Garry Strother received $230,000, this was seen as capital, not income. But nothing in this correspondence could lead to the conclusion that prior to 16 March 1999, the parties had included in their agreement a term as pleaded in par 4.2 of the first defendant's defence.
20 In my view, the agreement between Rod Fletcher and Garry Strother was that this was an equal partnership. True it is that they did not contribute equally to the capital of the partnership in the sense that each put in the same amount of money. But in my view it is clear that the agreement was that Rod Fletcher should contribute $50,000 by way of capital to the partnership and Garry Strother would bring in his interest in the tenements. For the purposes of the partnership, that would be regarded as an equal contribution. When the partnership produced profits, the profits would be shared equally.
Entitlement on dissolution of the partnership
21 As I have indicated, the totality of the evidence is to the effect that the parties did not reach any agreement as to what should happen on dissolution of the partnership. That being so, the provisions of the Partnership Act 1895 operate. Section 57 of the partnership is relevant. It is in the following terms:
(Page 12)
- "57. Rule for distribution of assets on final settlement of accounts
In settling accounts between the partners after a dissolution of partnership, the following rules shall, subject to any agreement, be observed:
(a) Losses, including losses and deficiencies of capital shall be paid first out of profits, next out of capital, and lastly, if necessary, by the partners individually in the proportion in which they were entitled to share profits.
(b) The assets of the firm, including the sums, if any, contributed by the partners to make up losses or deficiencies of capital, shall be applied in the following manner and order:
(1) In paying the debts and liabilities of the firm to persons who are not partners therein.
(2) In paying to each partner rateably what is due from the firm to him for advances as distinguished from capital.
(3) In paying to each partner rateably what is due from the firm to him in respect of capital.
(4) The ultimate residue, if any, shall be divided among the partners in the proportion in which profits are divisible."
(Page 13)
- Doubtless there will need to be an adjustment between Rod Fletcher and Garry Strother, so that each bears an equal share of the losses. They were entitled to share the profits equally and so under s 57(a), they must bear the losses equally.
23 Once that calculation is made, then the assets of the firm will be sold. The first call upon the corpus realised on sale of the assets are payment of debts and liabilities. Then each partner will be entitled equally to have credited to him what he has paid out to cover the losses under s 57(1). Then, as I have determined that there was an equal contribution of capital, each of the parties would be entitled to repayment of, say, $50,000. Then any rest and residue would be divided equally among them. In reality, there is only a two-stage process involved. Once the assets of the partnership are realised, the debts and liabilities, if any remain outstanding, are to be paid. Then what is left is to be divided equally between Rod Fletcher and Garry Strother.
Disputed items
24 Some time after the conclusion of conclusion of the hearing, counsel for the plaintiffs produced a document entitled "Amended List of Disputed Items" as at 15 September 2004. Subsequent to receiving this list, I was advised that a further five items had been agreed. The list itself has a number of subheadings and for ease of reference for the parties, I will adopt these subheadings.
1. Expense claims which have been made by the Defendants but which are not accepted by the Plaintiffs and which have not been accepted into the Financial Statements
1.1.3 17 June 1999, Denis Diesel - Generator Repairs
1.1.5 27 July 1999, Transfer to Secret Creek CBA A/c
26 This related to an amount of $10,005. Garry Strother was able to confirm that his bank account was debited with an amount of $10,005 and
(Page 14)
- that the Secret Creek account was credited with an amount of $10,000. Strangely, there is a three-day hiatus - the money appears to have been credited to Secret Creek before it was debited to Garry Strother. Whatever may be the explanation for that time gap, there can be no doubt that the payment was made by Garry Strother. The money was then used for the running of the gold mine. He is entitled to be reimbursed for that amount. $10,005 should be credited to Garry Strother's account.
1.1.6 8 January 2002, Satellite Phone A/c
1.3 Other expenses claims of the Defendants:
1.3.2 1 October 1999, Ashburton Shire Rates
1.3.3 21 October 1999, Dept of Minerals and Energy
(Page 15)
- and his associate under the previous agreement with Ramirez. That being so, I am not satisfied that any of these three claims are payable by the partnership. In my view, they are debts incurred by Garry Strother in his personal capacity.
1.3.7 15 October 2001, Haulex
4.1 Oil and fuel on hand takeover
30 It is common ground between the parties that as at the date the partnership took over the mine, there was on hand a quantity of oil and fuel. Garry Strother says in his affidavit of 19 August 2003 (par 35) that he dipped the tanks and calculated that there was approximately 4500 litres of fuel on site. He put the value of this fuel at $3600. He was assisted in this task by John Strange. It also seems clear that Rod Fletcher dipped the tanks. On the evidence, there is no real contest between the parties as to the amount of fuel on site and its value.
31 What is in issue is whether or not this fuel is for the account of the partnership. I am satisfied that it is. There seems little doubt that the agreement between the parties was not reduced to specifics so that consumables such as this fuel was dealt with by agreement. I also accept that insofar as there was an agreement, it was to the effect that the partnership would take over the site. But with respect to an item such as this, it would seem to me that it stands apart from infrastructure which was taken over by the partnership and which was brought into the partnership by Garry Strother. In my view the fuel should be for the account of the partnership.
(Page 16)
- 4.2 Tools and welder
32 These items are dealt with in par 34 of Garry Strother's affidavit of 19 August 2003. His evidence is to the effect that as at the date of handover, certain tools which were his property were on site. Once again there is no real argument as to the value of the tools. The question is whether they were brought into the partnership as part of the agreement between the partners. On balance, I am satisfied that they were brought in by Garry Strother and could not be regarded as part of the partnership property contributed by him. I am satisfied that the amount claimed for the tools and welder are for the account of the partnership.
4.3 Wages Aaron Strother
33 Aaron Strother is the son of Garry Strother. There is no dispute that he was employed on the minesite between 12 April 1999 and 16 May 1999 (see par 36 of Garry Strother's affidavit of 19 August 2003). There appears not to have been a firm agreement as to how much Aaron should be paid. He is claiming $500 per day. By any measure, that is not an unreasonable amount, particularly when the evidence shows he was working seven days per week. He was paid an amount of $500 by Rod Fletcher. He now claims $12,000 from the partnership. This amount remains unpaid.
34 Once again, the amount of the claim is not really a matter in dispute. What is said by Rod Fletcher is that it was not part of the agreement that relatives working for the partnership should be paid. Or perhaps put in the way that it was advanced by the plaintiffs, if one relative was to be paid then all relatives were to be paid. As there is a dispute as to the entitlement of relatives of Rod Fletcher, the amount claimed by Aaron Strother is in dispute.
35 In my view, it is clear that Aaron was employed by the partnership and worked diligently to advance its interests. So far as Aaron is concerned, the fact that he is Garry Strother's son is of no consequence. He is entitled to be paid and the amount he is claiming is a debt of the partnership.
Wages Greg Conrick
36 Mr Conrick was an employee of the partnership. When he ceased working he was paid $2275 by Garry Strother. He may have been paid in cash or he may have been paid by cheque. Either way, I am satisfied that he was paid by Garry Strother. The $2275 is then a debt of the partnership.
(Page 17)
- 4.5 Semi-trailer Leinster to mine
37 Garry Strother deals with this claim in par 39 of his affidavit of 19 August 2003. He says that he made a number of trips between Perth and his farm and the minesite. In all, he calculates that he covered some 7425 kilometres. The truck comprised a Kenworth prime mover and was a semi-trailer vehicle. It was Garry Strother's property and was used in his farming enterprises. At no time was it part of the equipment on the minesite. Garry Strother has calculated a rate per kilometre for use of the truck and that rate was $1.64 per kilometre. It was acknowledged that this rate was more than it would have cost to run the truck. Nonetheless, it was said to be a reasonable rate.
38 I am satisfied that this claim is properly regarded as a debt of the partnership. The use of this truck avoided the partnership incurring the cost of using an independent carrier. But it was using an asset belonging to Garry Strother and not an asset of the partnership. Accordingly, the amount claimed should be regarded as a partnership debt.
4.6 Transport WA 500 loader to Perth
39 During the mining operations the partnership used a WA 500 Kohmatsu loader. It is common ground between the parties that the Kohmatsu belonged to Garry Strother's farming business. He had loaned it to the mine for minesite use. He says that when the partnership was dissolved, he had no alternative but to return the loader to the farm. He now claims reimbursement from the partnership for the costs of that transportation.
40 This claim is not dissimilar to the claim in 1.3.7 for transport of the Euclid. I am satisfied that this claim is properly made and that the amount is reasonable. This sum is for the account of the partnership.
7.1 Cheque 4366 Mine Loan
41 It is common ground between the parties that Garry Strother made payment to the firm Smith Broughton & Sons for the purchase of drills, extension cords and other equipment which was used in the mine. The question was whether this payment was a payment on behalf of the partnership or should be regarded as part of Garry Strother's contribution to the partnership. I am satisfied that the amount paid was paid for and on behalf of the partnership and Garry Strother is entitled to reimbursement for this amount.
Cheque 4417 business trip Perth, airfare
(Page 18)
42 I will have more to say about travel claims generally below. However, this claim does seem to stand apart. It was Garry Strother's evidence that in August 1999 a dump truck had broken down and he had to get to Perth to source spare parts. He flew to Perth and then drove back to the minesite. Clearly he was undertaking the trip on behalf of the partnership. I am satisfied that this airfare is for the account of the partnership.
7.7 Cheque 4813 Ashburton Shire Rates
43 There is no dispute that on 7 December 1999 Garry Strother paid an amount of $41,609.17 to the Ashburton Shire with respect to the rates for the tenements. There was remarkably little evidence led in relation to this claim. As I understand the dispute between the parties, it is said that the rates paid by Garry Strother were for a period prior to the commencement of the partnership. This issue is covered by the sale agreement between Arnold Ramirez and the partnership. A copy of that agreement appears as "GRS7" to the affidavit of Garry Strother, sworn 19 August 2003. Clause 3.1 is headed "Unpaid Shire Rates". It is in the following terms:
"The purchasers must pay all Unpaid Shire Rates directly to the Ashburton Shire Council strictly in accordance with the payment plan previously agreed by Strother and the Ashburton Shire Council or otherwise to the satisfaction of the Council. The payment plan may not be changed without the vendor's prior written consent (not to be unreasonably withheld)."
44 That clause would seem to embody the agreement between the partners. In cross-examination the clause was put to Rod Fletcher. He agreed as to its effect: see Transcript page 100. That then would appear to be the end of the matter. The amount claimed is for the account of the partnership.
9.2 Paul and Pauline Williams Loan
45 Some of the claims covered by this item have been accepted by the defendant, some have been withdrawn and two are in dispute. The two items that are in dispute are the cost of off-road tyres fitted to Paul Williams' vehicle to enable him and his wife to travel to the mine. I am not satisfied that this item is for the partnership account. It may be that the Williams' vehicle did require new tyres before undertaking travel to the mine. However, I am not satisfied that they so directly relate to the interests of the partnership as to be for the partnership account.
(Page 19)
46 The other item in dispute relates to two dongas. (A "donga" is a transportable unit used for accommodation). It is common ground that Paul Williams transported two dongas to the minesite. He claims $7000 for one and $2000 for the other. The evidence established that there was no agreement reached between the parties as to the need for these dongas and how much would be paid for them. In the course of his evidence, Mr Williams said that he had gifted the dongas to the partnership: Transcript page 226 - 227. That being the case, there can be not claim for the dongas.
9.13 Lister generator $3500
47 Rod Fletcher confirmed in his evidence that Mr Williams had taken the Lister generator. Apparently a generator was to be taken to Perth for repairs and Mr Williams took the wrong one. Mr Williams confirmed in his evidence that he still has the Lister generator: see Transcript page 223. The generator is clearly the property of the partnership and it must either be sold with the proceeds credited to the partnership account, or Rod Fletcher will have to account to the partnership for its cost.
Load of scrap
48 Garry Strother gave evidence that he carted a load of scrap metal from the tenements to Mr Williams' place of business. He estimated the value of the scrap at $1500. Rod Fletcher in his evidence confirmed that if the scrap had not been paid for, then the value of the scrap was due and owing to the partnership. There was no dispute about the amount. In my view this scrap is an asset of the partnership. Once again the amount in question ought be recovered for the benefit of the partnership or the amount should be regarded as a debt owed by Rod Fletcher to the partnership.
10.14 M Bizzaca accounting invoice
49 Prior to the commencement of the partnership, Mr Bizzaca was the accountant for Rod Fletcher. Prior to the formation of the partnership and during the time that he was operating, he undertook work for and on behalf of the partnership. He rendered an account in an amount of $9061.80. A copy of that account dated 5 December 2000 appears as exhibit 27. As I understand the position, the defendants do not dispute that Mr Bizzaca undertook work on behalf of the partnership. Mr Bizzaca gave evidence and his account was not challenged. In my view, Mr Bizzaca's account is the responsibility of the partnership.
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- 11.4 Email to Ashburton Shire - Shire of Ashburton (Assessment Numbers 34162 and 34153)
50 This amount is clearly in relation to the tenements and is for the account of the partnership. It is characterised by the plaintiffs as recent expenditure on their part in relation to the tenements. In my view, that is precisely what it is and it is for the account of the partnership.
Licence renewals for ACCO truck
51 It is common ground between the parties that this truck is in the possession and under the control of either Mr Fletcher or Mr Williams since the termination of the partnership. Although the evidence is not entirely clear it would appear that the ACCO truck is presently being used by Mr Fletcher. In the circumstances the licence renewal is not for the account of the partnership but is Rod Fletcher's responsibility.
Telstra invoice
52 The evidence in relation to this amount is somewhat unclear. I am satisfied that it relates to the partnership and is properly for the partnership account.
Time claims and travel expenses claims
53 It is common ground between the parties that there was an agreement reached between Rod Fletcher and Garry Strother that no charge would be made for time worked at the tenements or travel to and from the tenements by any member of the partnership until a profit was being made from the tenements and the partnership could afford such expenditure. I have already noted that I am satisfied that a claim by Aaron Strother was properly made. He was actually engaged by the partnership. Claims were also made by Paul Williams, Pauline Williams and Kelvin Cooper. Pauline Williams is the daughter of Rod Fletcher and Paul Williams and Kelvin Cooper are his sons-in--law.
54 There can be no doubt that all three of these individuals contributed to an extent to work undertaken on the partnership. However, they did not do so on a full time basis. It was a rather more ad hoc arrangement, which allowed for any one of the three to work on the tenements when they were visiting Rod Fletcher. It was an entirely different arrangement from the full-time dedicated employment undertaken by Aaron. In my view there is no basis upon which these three claims can be sustained. I accept that at face value there would appear to be an anomaly in reaching this conclusion while at the same time allowing a claim by Aaron Strother. But the differences in the way that the works were undertaken are so
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- significant that, in my view, it is not appropriate to allow the claims by Paul Williams, Pauline Williams and Kelvin Cooper, while allowing the claim by Aaron Strother.
55 Insofar as time and travel expense claims are made either by Rod Fletcher or Garry Strother (and it is by no means clear that such claims are maintained), it would seem to me that they are not for the account of the partnership. I am satisfied that there was a clear agreement and none of these parties has a claim against the partnership.
Conclusion
56 As I mentioned at the outset of these reasons, it was agreed that the final accounting in dollar terms would await determination of particular matters. All matters in dispute have now been resolved and it is for the parties to bring forward a final set of settled accounts.
57 I will hear submissions as to costs.
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