GIUMELLI v Rosa GIUMELLI as Executrix of the Estate of Giovanni GIUMELLI (Dec)

[2000] WASC 90

GIUMELLI -v- ROSA GIUMELLI as Executrix of the Estate of GIOVANNI GIUMELLI (DEC) & ORS [2000] WASC 90

Jurisdiction:	SUPREME COURT OF WESTERN AUSTRALIA	Citation No:	[2000] WASC 90
Case No:	CIV:1517/1986	Heard:	30 MARCH 2000
Coram:	MASTER BREDMEYER	Delivered:	7/04/00
No of pages:	10	Judgment Part:	1 of 1
Result:	Application allowed
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Parties:	ROBERT JOHN GIUMELLI ROSA GIUMELLI as Executrix of the Estate of GIOVANNI GIUMELLI (DEC) ROSA GIUMELLI STEVEN GIUMELLI TONY GIUMELLI
Catchwords:	Practice and procedure Partnership Partnership dissolved in relation to one partner but continued on by other partners Retiring partner's share of profits Retiring partner's election and change of election
Legislation:	Interpretation Act 1984 (WA) Partnership Act 1895 (WA), s 50, s 55(1) Rules of the Supreme Court, O 60 r 1(1)(a)(iv)
Case References:	Barclays Bank Trust Co Ltd v Bluff [1981] 3 All ER 252 Cameron v Murdoch [1983] WAR 321 Chandroutie v Gajadhar [1987] 1 AC 147 (PC) Commonwealth of Australia v Verwayen (1990) 170 CLR 394 Immer (No 145) Pty Ltd v The Uniting Church in Australia Property Trust (NSW) (1993) 67 ALJR 537 In Re Daley, Ex parte The Official Assignee (1990) 19 NZLR 379 Ketteman v Hansel Properties [1987] AC 189 Mercantile Mutual Insurance (Australia) Ltd v Freshmark Ltd (1993) ANZ Insurance Cases 61-184 National Australia Bank Ltd v Kimouris, unreported; SCt of NSW (Smart J); BC 9603370; 25 January 1996 Sargent v ASL Developments Ltd (1974) 131 CLR 634 Cameron v Murdoch (1986) 63 ALR 575 (PC) Commissioner for Superannuation v Boardman [1994] 123 ALR 239 Marinelli v Jankovic [1983] WAR 287 Oddy v Fry & Ors [1998] VR 1

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION : GIUMELLI -v- ROSA GIUMELLI as Executrix of the Estate of GIOVANNI GIUMELLI (DEC) & ORS [2000] WASC 90 CORAM : MASTER BREDMEYER HEARD : 30 MARCH 2000 DELIVERED : 7 APRIL 2000 FILE NO/S : CIV 1517 of 1986 BETWEEN : ROBERT JOHN GIUMELLI

Plaintiff

AND

ROSA GIUMELLI as Executrix of the Estate of GIOVANNI GIUMELLI (DEC)
ROSA GIUMELLI
First Defendants

STEVEN GIUMELLI
Second Defendant

TONY GIUMELLI
Third Defendant

Catchwords:

Practice and procedure - Partnership - Partnership dissolved in relation to one partner but continued on by other partners - Retiring partner's share of profits - Retiring partner's election and change of election

(Page 2)

Legislation:

Interpretation Act 1984 (WA)

Partnership Act 1895 (WA), s 50, s 55(1)
Rules of the Supreme Court, O 60 r 1(1)(a)(iv)

Result:

Application allowed

Representation:

Counsel:

Plaintiff : Mr R A C Cullen
First Defendants : Mr G D Crocket
Second Defendant : Mr G R Dean
Third Defendant : Mr B H Taylor

Solicitors:

Plaintiff : Dwyer Durack
First Defendants : G D Crocket & Co
Second Defendant : G Dean & Associates
Third Defendant : Talbot & Olivier

Case(s) referred to in judgment(s):

Barclays Bank Trust Co Ltd v Bluff [1981] 3 All ER 252
Cameron v Murdoch [1983] WAR 321
Chandroutie v Gajadhar [1987] 1 AC 147 (PC)
Commonwealth of Australia v Verwayen (1990) 170 CLR 394
Immer (No 145) Pty Ltd v The Uniting Church in Australia Property Trust (NSW) (1993) 67 ALJR 537
In Re Daley, Ex parte The Official Assignee (1990) 19 NZLR 379
Ketteman v Hansel Properties [1987] AC 189
Mercantile Mutual Insurance (Australia) Ltd v Freshmark Ltd (1993) ANZ Insurance Cases 61-184
National Australia Bank Ltd v Kimouris, unreported; SCt of NSW (Smart J); BC 9603370; 25 January 1996
Sargent v ASL Developments Ltd (1974) 131 CLR 634



(Page 3)

Case(s) also cited:

Cameron v Murdoch (1986) 63 ALR 575 (PC)
Commissioner for Superannuation v Boardman [1994] 123 ALR 239
Marinelli v Jankovic [1983] WAR 287
Oddy v Fry & Ors [1998] VR 1

(Page 4)

1 MASTER BREDMEYER: This is an application by the plaintiff for an order as per par 2 of the plaintiff's minute of proposed orders:

"2. An order that for the purposes of the taking of the accounts, the plaintiff elect under section 55(1) of the Partnership Act to take interest at the rate of 6 per cent per annum on the amount of his share of the partnership assets rather than to take an account of the profits derived from the use of the partnership assets, from 14 May 1986."

2 The substance of the application is that the plaintiff wants the court to recognise that he has now elected to take interest on his share of the partnership assets at 6 per cent from 14 May 1986, which is the date of dissolution, until the date of the court order. I quote s 55 of the Partnership Act omitting subs (2) which is not relevant to this application.

"55(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 settlements 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) …

(3) In determining how far the profits made since the dissolution are attributable to the outgoing partner's capital, the Court shall have regard to the nature of the business, the amount of capital from time to time employed in it, the skill and industry of each partner taking part in it, and the conduct of the parties generally. And the Court may allow to any such continuing partners such remuneration as to the Court seems meet for carrying on the partnership business."

3 By way of background the plaintiff was a partner with family members in an orchard business. The plaintiff had a one-quarter share in

(Page 5)

that partnership. He was, in effect, expelled from that partnership. In 1990, Pidgeon J determined, as a preliminary matter, that the partnership had been dissolved on 14 May 1986, which was the date of service of the writ. In 1991 the plaintiff got a summary judgment against the other partners from me in the sum of $55,106, together with interest, from 14 May 1986 until judgment in part satisfaction of his interest in the partnership. That money was for undistributed profits.

4 The partnership continued on after dissolution and so remains unliquidated. The plaintiff is entitled to a share of capital on dissolution under s 50 of the Partnership Act and is entitled to a share of profits under s 55(1). Section 55(1) gives the plaintiff an option. He needs to choose whether he wants a share of the profits of the partnership since its dissolution in 1986, calculated in accordance with the principles set out in s 55, or whether he wants to take interest on his share of the partnership assets at the rate of 6 per cent per annum. The plaintiff made no election in the original statement of claim or in the amended statement of claim of 12 June 1989 prepared by Mr M J McCusker QC. That amended statement of claim claims 10 prayers for relief, the relevant ones for this application being as follows:

"6. An order that the partnership between the plaintiff and the first and second defendants be wound up.

7. For the purposes aforesaid an order that all necessary accounts and enquiries be taken and made."

5 That pleading has not been amended, but thereafter by a series of court orders and affidavits, the plaintiff has chosen the share of profits option given by s 55. Master White made consent orders on 27 August 1990 and order 1 reads:

"1. Within 28 days after the date of this order the defendants to file the following accounts:

(a) an account of all the credits, property and effects of the partnership as at 14 May 1986;

(b) an account of all the debts and liabilities of the partnership as at 14 May 1986;

(c) an account of the profits of the partnership from 1 July 1985 to 14 May 1986; and

(Page 6)

(d) an account of the profits derived from the use of the partnership assets from 14 May 1986 to date,

and do verify the accounts by affidavit."

6 Pursuant to that order, the defendants' accountant, Mr J E M Gelle, produced some accounts attached to an affidavit of 14 November 1990. He provided accounts for the partnership made up to 14 May 1986, but failed to comply with par 1(d) of the order in that he failed to supply later accounts. His explanation for this in par 4 of his affidavit was that he considered the outgoing partner's share of the profits should be calculated at 6 per cent per annum from 14 May 1986 to date, on the amount of his share of the partnership assets as at 14 May 1986 in accordance with s 55(1) of the Act. This was contested by the plaintiff, and rightly so, as the option given by s 55 is given to the plaintiff. The plaintiff in a notice of objection to the accounts lodged of 12 November 1991 made this point. He wanted an account of profits derived from the use of his partnership assets from 14 May 1986 to date. Orders made by Acting Master Hawkins on 31 January 1992, at the plaintiff's request, required the defendant to produce to the plaintiff's solicitors financial statements for the partnership for the financial years ending 30 June 1986, 1987, 1988, 1989, 1990 and 1991. This was done but the balance sheets and other documents were omitted. The plaintiff filed an affidavit of Mr Wyllie sworn 17 May 1993, an accountant, setting out his calculations of the plaintiff's share of the profits based on his review of the accounts produced by the defendants.

7 It is clear from these and other papers on file that the plaintiff has hitherto chosen to ask for a share of the profits but now wants to change his mind and ask for interest at 6 per cent per annum on his share of the partnership assets as at 14 May 1986. The first and second defendants (whom I will refer to as the defendants, for convenience, as the third defendant took no active part in this argument) object to this change of course by the plaintiff. They say that this is not a simple interlocutory matter within the discretion of the Master. The election is the foundation of the plaintiff's entire claim which, when made, creates rights and obligations. They say the plaintiff's application is misconceived. They say it can be tested by analogy with an application by a plaintiff having elected to accept a repudiation of a contract and sue for damages, then, some years later, applies to change his election and continue the proceedings on the basis that the contract is on foot. They say that this change of election involves the construction of s 55(1) of the Partnership Act, and, as such, is outside the jurisdiction of a Master to decide by

(Page 7)

O 60 r 1(1)(a)(iv) of the Rules of the Supreme Court. They say that if the plaintiff wishes to proceed with his attempt to change his election he should file an affidavit setting out why he wants to change his election and should file a summons seeking a trial of a preliminary issue on whether he should be allowed to change his election and that trial would involve the cross-examination of the plaintiff. If those submissions are not accepted, the defendants say that the two courses open to the plaintiff under s 55(1) are mutually exclusive. The plaintiff must choose between them in fairness to the other parties. The choice of one involves the extinction of the other, and that the plaintiff, having made his election to seek an account of profits, is bound by that election and cannot now change his position. By that election the plaintiff has waived his alternative right and is estopped from changing his position. The issue is not one which can properly be dealt with in an interlocutory matter before a Master. The defendants would like to be able to fully address issues of waiver, estoppel and prejudice as they depend on the court making findings of fact and the relevant evidence is not yet before the court. The defendants rely mainly on Mercantile Mutual Insurance (Australia) Ltd v Freshmark Ltd (1993) ANZ Insurance Cases 61-184 at 78,060 (referring to Immer (No 145) Pty Ltd v The Uniting Church in Australia Property Trust(NSW) (1993) 67 ALJR 537) and 78,064 (referring to Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 641). They also rely on National Australia Bank Ltd v Kimouris, unreported; SCt of NSW (Smart J); BC 9603370; 25 January 1996 at 8 and 9, and In Re Daley, Ex parte The Official Assignee (1990) 19 NZLR 379.

8 I consider all these submissions are misconceived. There is no authority directly in point. The analogy drawn with contract is not apt. There, the election is an element of the cause of action. It needs to be pleaded. It needs to have taken place prior to the issue of writ or on the issue of the writ. Here, there is no doubt that the partnership has been dissolved as at 14 May 1986. The question here is which statutory remedy should the plaintiff seek. I consider it does not require an amendment to the pleading and the plaintiff could, at any time prior to trial, change his mind subject to adequate notice to the defendants so that they can prepare for trial, and subject to an order possibly as to costs thrown away. In this case, because the plaintiff has hitherto chosen to go for a share of profits, the defendants have had to prepare partnership accounts from 14 May 1986 onwards. This, presumably, has been no hardship, as the partnership has continued and the accounts have been necessary for taxation and other purposes anyway. If the defendants have incurred costs thrown away by complying with those procedural orders,

(Page 8)

then that is a matter which could be taken into account in a suitable costs order. The initial accounts prepared by Gelle to 14 May 1986 not only gave the net profit of the partnership for that year, but also valued the assets and liabilities of the partnership. Those accounts are necessary in any event because another part of this case is that the plaintiff is seeking, and is prima facie entitled to, a share of the assets of the partnership on dissolution under s 50 of the Partnership Act and the net value of the assets as at the date of dissolution is relevant to that exercise. Under s 50 he is entitled to his payment for his share of the net assets as at 14 May 1986, plus an upgrade for the increase in capital value of his share at the date of making the order: see Barclays Bank Trust Co Ltd v Bluff [1981] 3 All ER 252, Chandroutie v Gajadhar [1987] 1 AC 147 (PC), referred to in "Halsbury's Laws of Australia" vol 19, par 305 - 650, footnote 5, and Cameron v Murdoch [1983] WAR 321.

9 This application does not involve an interpretation of s 55(1) of the Partnership Act. It is a simple procedural application akin to amending a pleading which can be done at any time, provided it is done without unfairness to the defendant and with an order for costs thrown away, if any, to the defendants: Ketteman v Hansel Properties [1987] AC 189. I have read the cases cited to me by the defendants. None of them are on s 55 of the Partnership Act or on any equivalent section. They rely for various statements of the law on estoppel and waiver on the Commonwealth of Australia v Verwayen (1990) 170 CLR 394. That case is far removed from this one. In that case the plaintiff was injured in a collision of naval vessels in 1964. The Commonwealth made statements in relation to claims arising out of the collision that it would not contest liability and would not plead a limitations defence. The plaintiff sued for negligence in 1984. In 1986 the Commonwealth obtained leave to amend its defence to deny liability and to rely on the Limitation of Actions Act. Five of the Judges of the High Court held that the Commonwealth could not do that, in the case of three of them because it was estopped from so doing. The equity raised by the Commonwealth's conduct being such as could only be accounted for by holding it to the assumed state of affairs. Two of the Judges said it was because the Commonwealth had waived its right to rely on either defence. Clearly estoppel was made out. The plaintiff had relied upon the Commonwealth's statements, relied upon an assumption as to the present, past or future state of affairs which the Commonwealth had induced him to hold, and then he suffered a detriment in reliance on that assumption as a result of the denial of its correctness.

10 On waiver Toohey J, at 473, said that the Commonwealth had unequivocally renounced its right to contest liability and to uphold a

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limitations plea, and on that basis the plaintiff pursued his action for damages right through to the listing of the action for an assessment of damages. To uphold a limitations plea in those circumstances would be to permit the Commonwealth to rely on a defence which it had unequivocally renounced. To allow the defendant to change its mind would cause great injustice to the plaintiff.

11 In the present case I consider that the plaintiff has not unequivocally renounced his right to a claim for interest on his share of the assets. He has hitherto asked for a share of the profits but now wants interest instead. I consider his election is not immutable and can be changed without injustice to the defendants. The defendants have not acted to their detriment in reliance on that election. They have not, for example, paid the plaintiff a share of the profits earned since 1986. I heard this application at a special appointment but no affidavit evidence has been put before me as to the injustice suffered by the defendants due to the plaintiff's change of tact. The change in the statutory relief sought is a minor procedural matter which can, and should, readily be allowed without injustice to the defendants.

12 It is of interest that s 55(1) is headed "Right of outgoing partner in certain cases to share profits made after dissolution". I know that by s 32 of the Interpretation Act 1984 (WA) a marginal note or heading is not to be regarded as part of the written law. Nevertheless, I consider this heading is important. It refers to a share of the profits made after dissolution. Those words are wide enough to cover both choices given by subs (1). The first choice is a share of the actual profits made subject to deductions and allowances made for various matters set out in subs (3). The other option of interest at 6 per cent per annum on the retiring partner's share of the partnership assets, is, in effect, a deemed share of profits. This is a simplified way of calculating the deemed benefit which the continuing partners got from the retention of the retiring partner's capital in the partnership. Test it this way. If the continuing partners had paid the plaintiff his net share of the partnership assets on dissolution in 1986, and if the partnership did not have the share capital necessary to pay him out, they would have had to borrow it. Interest rates were much higher than 6 per cent in the late 1980s and early 1990s. This interest rate in s 55(1) has remained at 6 per cent since 1895. The failure of the legilsation to increase the interest in those years benefits the defendants. I note that interest on judgment debts fixed by the Treasurer under s 142 of the Supreme Court Act 1935 (WA) was

(Page 10)

3.1.86 - 3.12.87	14%
4.12.87 - 13.4.89	13%
14.4.89 - 27.6.91	14%
28.6.91 - 18.5.92	12%
19.5.92 - 30.7.92	8.5%
31.7.92 - 12.9.97	8%
13.9.97 ----------	6%

13 The application will be granted.