Graziano v Graziano - [2009] SADC 132

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
GRAZIANO v GRAZIANO
[2009] SADC 132
Judgment of His Honour Judge Muecke
4 December 2009
INSURANCE - GENERAL - POLICIES OF INSURANCE
CONTRACTS - PARTICULAR PARTIES - PARTNERS
Dispute between two brothers arising from a partnership between them - Issue as to whom or what is entitled to the proceeds of an insurance claim - Whether the two brothers reached a binding agreement in September 1999 regarding the termination of the partnership and the terms by which it would cease, including a term as to the proceeds of the insurance claim.
Held: The "partnership" is entitled to the proceeds of the insurance claim - A binding contract was concluded in September 1999.

GRAZIANO v GRAZIANO
[2009] SADC 132
Background and the early years
The insurance arrangements change in 1990 and later
The insurance claim and the two brothers’ contentions
The business to the end of 1998
Bruno leaves Pooraka in November 1998 and makes an insurance claim
Antonio’s X-Lotto win
Corporatising the business
Events between March and September 1999
After the two brothers meet in September 1999
The two brothers as witnesses
Insurance – the brothers’ evidence
Whether there was an agreement in 1999 – the brothers’ evidence
The Plaintiff’s Claim
The Defendant’s Counterclaim
Background and the early years

The parties to this action are brothers. I shall refer to the plaintiff as Bruno Graziano and to the defendant as Antonio Graziano. He was sometimes referred to in the evidence as Tony.
Bruno Graziano is the younger of the two brothers. They both have an older brother. Their parents used to run a property at Bowhill which is just out of Murray Bridge. The three brothers were involved in that business in partnership with each other and with their parents. There was no formal partnership agreement between what were essentially five partners, the three brothers and their parents. The three brothers took drawings from the partnership from time to time during the year for their private expenses. The accountant for the partnership was Mr Rodney Bartholomaeus of Rowe McGee, Accountants. The partnership financial statements were prepared by Mr Bartholomaeus and individual income tax returns were prepared for each of the partners reflecting their drawings and any share of any profits. Every member of the partnership worked hard. There was little time and not a lot of money for extravagant spending and socialising. The three brothers and their parents lived frugally off the income from the property.
At some time before late 1987 Bruno Graziano and Antonio Graziano established a partnership between each other at Sunnyside, which was also near Murray Bridge. That was a market garden business on land in respect of which there were water licences. The three brothers also ran a hotel at Birdwood together.
The eldest of the three brothers was the first to leave the family property and business at Bowhill. At some time before about mid 1987 Bruno Graziano and Antonio Graziano independently decided that they would also leave their parents’ property at Bowhill.
Bruno Graziano and Antonio Graziano were equal partners in the Sunnyside business. The three brothers were equal partners in the hotel at Birdwood. Bruno Graziano told me in evidence at the trial that the business of he and his brother Antonio at Sunnyside was sold together with the land. He said there was a profit on that sale which was divided evenly between the two younger brothers. He told me that his brother Antonio organised that sale. He also told me that there was a profit on the sale of the hotel although that sale was not effected until after he and Antonio Graziano had established a new venture which I have not yet mentioned. He told me that the three brothers shared equally in the profit of the sale of the hotel. There were no formal partnership agreements prepared and signed in respect of either the business of Bruno and Antonio Graziano at Sunnyside or for the hotel business that involved the three brothers. All members of the Graziano family were hard workers. Most of their time was spent working the land and other businesses in which they were involved together.
After Bruno Graziano and Antonio Graziano left their parents property at Bowhill, Bruno Graziano came to Adelaide and took up residence at a property he owned at Brighton. Antonio Graziano was living with his wife Filomenia in a house at Athelstone. Bruno Graziano was unmarried and has never married.
Bruno Graziano left school at 16 years of age and worked on his parents’ farm at Bowhill. He did not have an astute business mind. He drew what limited funds he needed from week to week from the various partnerships. His principal contribution to all was in what he could offer by his physical labours. His contribution in that way was considerable.
Antonio Graziano was not much better “educated” than his brother Bruno. He did, however, had a greater business acumen than his younger brother. I do not mean by that that he had a sophisticated understanding of all matters relating to the operation of a business and of all matters relating to finance, particularly in using corporate entities for the conducting of business. He would learn more by experience when he and Bruno Graziano commenced their new venture together in late 1987/early 1988. I find that at that time and later Antonio Graziano had a much greater understanding than his younger brother as to matters of business and finance. He did, however, rely significantly on Mr Bartholomaeus as to those matters. Whilst his knowledge and understanding of those matters was greater than his younger brother it was never a sophisticated understanding and was learnt by him more by his greater experience than Bruno in dealing with and being responsible for matters of administration and finance in the business they had previously conducted together and would from early 1988. He relied significantly on Mr Bartholomaeus for matters relating to accounting and finance, and also from other professionals such as those from whom advice was sought regarding matters such as insurance that was sought and obtained in association with the new business venture of he and his younger brother Bruno.
Like the rest of their family both Bruno Graziano and Antonio Graziano were men who would not sit back and let business interests bring in money or by employing others to do the work. After both of them left their parents’ business and ceased their own business at Sunnyside, it was not long before both wondered what they were going to do next. By then, in late 1987, the two brothers had worked together for many years. Antonio Graziano described that the two brothers “worked together fine”. He said they “never lived in each other’s pockets but we worked together and we worked well together”. He described them having a good relationship. It was, however, a working relationship, not a social one.
Antonio Graziano told me that he came to Adelaide in October 1986 and he was not working. He had promised his wife that he was going to do nothing for six months. That did not happen. After the first couple of weeks in Adelaide he wandered off to the markets. He was referring to the food markets. He did that to see what everybody was doing. He said that he and Bruno also took a small trip overseas “to sort of see what people did over there, food value adding”. He said they were away for 3 to 4 weeks. They went to Parma in Italy and then to Holland and Germany. They went back to Italy and spent a couple of days in the village where their parents had come from. Antonio Graziano told me that it was always on his mind to “value add, get into value adding onions and potatoes”.
Antonio Graziano said that he used to go to the East End markets when it was planned to move those markets to Pooraka. He tried to get a shed in the Pooraka markets for wholesaling and distributing, or for whatever he was able to do. He was unable to do that, so he found a property on the outskirts of Pooraka close by. The property was very run down. The sheds on it were falling apart. There was a building containing a couple of offices. Antonio Graziano contacted the agent for the property which was owned by a deceased estate. In December 1987 he signed a contract to purchase the land. He signed the contract as purchaser in the name of “Antonio Graziano or nominees”.
Antonio Graziano then contacted his brother Bruno. He told him about the land and they discussed the possibility of trying to establish a business on it. He told his brother of his hope that the two of them could use the property as a base from which they could operate a wholesaling business and to get into processing, storing produce, packing produce and delivering it.
Bruno Graziano told his brother that he was interested.
Antonio Graziano contacted Mr Bartholomaeus and asked him how the two brothers could buy the property. Mr Bartholomaeus suggested a company. Antonio Graziano told me that Mr Bartholomaeus “picked a shelf company from the shelf, you know, like they normally do, and that’s what we did”. The company was Quintile Pty Ltd. He said that the new venture and the purchase of the land was something he did 50/50 with his brother Bruno. He said he thought he had 50% of the shares of Quintile Pty Ltd. He did not, at trial, remember if his wife had come “into this on Quintile”.
Antonio Graziano told me that the purchase price of the land was around $750,000.00. He and his brother did not have that sum so they needed finance. He went to see the manager of a bank that earlier Graziano businesses had had. That was the Commonwealth Bank. That bank manager would not finance the two brothers because in order to get money from the bank the two brothers “had to prove, we had to have cash flows, budgets and we had to prove that we were going to be able to pay the loan off”. They could not do that because they had not been in partnership together in that sort of business before. Antonio Graziano thought that if the Commonwealth Bank, with whom the family had been dealing for years, would not give them finance no-one else would. He then spoke to the vendors and he obtained some vendor finance. Once that was obtained the Commonwealth Bank agreed to provide some finance to the two brothers, but required some security for it. The vendors also required security. The security provided was the Pooraka land, a house and land owned by Antonio Graziano and his wife, and a property owned by Bruno Graziano. Bruno Graziano also gave security over an investment he had in the sum of $150,000.00.
In this way the funds were raised by the two brothers to purchase the Pooraka land and commence their joint venture.
It is convenient to note here that in 1990 the vendor finance provided to the two brothers was paid out and was replaced by finance provided by the Commonwealth Bank. By that time the brothers had established their business such that they could satisfy the Commonwealth Bank that the bank could safely provide sufficient finance to them. The vendors’ mortgages were discharged and replaced with mortgages to the Commonwealth Bank. The brothers gave the same security to the bank as they had previously given to the vendors and the bank for the monies that were required to buy the Pooraka property.
Bruno Graziano gave evidence at the trial that he did not then know how companies worked and he was not sure whether he put any money in to effect the purchase of the Pooraka property. He said that at that time he did not have a bank account. He said that the Commonwealth Bank took security over his unit at Brighton and over an investment he had of $150,000. He said that he thought he was a director of Quintile Pty Ltd and was half owner of that company. He said that whilst he is now familiar with how companies work he was not then. When asked whether he knew what being a director meant he replied: “Only for like a director would be like an owner of the land. That’s what I always had in mind; a director is an owner, and that was it, you know”. He thought that being a director meant that he was a half owner. He said that was how things were before. He said he understood that the other half interest was his brother Tony’s. I shall deal later with Bruno Graziano’s understanding of business and commercial matters but suffice to say that from his own evidence Bruno Graziano was aware, in late 1987, that the Pooraka land was purchased in the name of Quintile, that Quintile was a company, that he was a director of that company and that he and his brother Antonio each had a half interest in the Pooraka property.
Antonio Graziano said in evidence that the security documents relating to the purchase of the Pooraka property by Quintile Pty Ltd were witnessed by a solicitor. He said that there was the solicitor, himself, his wife and his brother Bruno present when the documents were signed. The security given also involved land at Murray Bridge that was the Sunnyside farm land owned by Bruno and Antonio Graziano and Antonio’s wife Filomenia. I am satisfied and find that Bruno Graziano understood from the very beginning that finance was obtained by himself and his brother and his brother’s wife, and that various properties owned by them were used as security for the loan for the monies to effect the purchase of the Pooraka property, and also when the financial arrangements were negotiated to payout the vendor in 1990. He may not have been completely aware of each of the finer details of that financing but he knew that his brother, his brother’s wife and himself were putting up property owned by them as security for raising finance when the Pooraka property was first purchased and when it was refinanced in 1990.
Antonio Graziano told me that in January 1998, after the Pooraka property was purchased and prior to the purchase being completed, he and his brother Bruno discussed what they were going to do. He said that neither of them knew exactly what was going to happen but they were going to head in the direction of the wholesaling, processing, and transportation of produce. He said it was a matter of them seeing how things went and to do their best to make it successful. He said that he and his brother spoke about the fact that their business arrangements with each other would be “nothing too fancy, just a partnership like we did on the farm”. He said that they agreed that they would have equal shares “50/50”. He said that “50/50 is the split and then I split with my wife for tax purposes. Identical what we did on the farm, on that basis”. He said that in the Bowhill partnership he shared his share with his wife when they married.
The two brothers started work to try and fulfil their hopes for a successful business. Antonio Graziano told me that early in the venture he and his brother recognised that they had an overdraft from the Commonwealth Bank and they had both provided security over various properties in which they had an interest. Antonio Graziano was asked whether those events or circumstances caused him to think about risks associated with the venture. He answered: “In the early part – I mean after we have established the business it sort of hit us, we incurred debt and were a bit worried so we decided to see what we could do about insurance, you know, life insurance”. He said that he and his brother spoke about that. They discussed that they had exposed themselves “to the max and we need to possibly find out what everybody else does to make sure that our families are covered or our next of kins are not burdened with the debt”. He said that he and his brother spoke about that and then he, Antonio Graziano, spoke to a number of people and ultimately spoke to a man from MGA Insurance Brokers that “did our family insurance for many, many years”. Antonio Graziano said that he and his brother had “put the property with him”. That person was not able to assist with the sort of insurance that they were thinking about.
Antonio Graziano said he then dealt with a gentleman from Murray Bridge by the name of Geoff Parker from SGIC. That person had previously asked if he could take over the insurance on the farm from MGA, but they were loyal to MGA and stayed with them.
Antonio Graziano said that after contacting Mr Parker, Mr Parker came to the Pooraka property. That would have been in the first couple of months of the operation of the partnership. He said that Mr Parker, himself and his brother Bruno were present. Antonio Graziano said that they were given some advice by Mr Parker. He said that Mr Parker told them that they need to cover the debt. He thought the initial proposal that Mr Parker made was trying to cover how much the debt was and “it was $500,000 each for disablement and death”. He said Mr Parker went on about his life belonging to Bruno and Bruno’s life “went to there but at the end of the day it was to cover the debt if anything, to cover the partnership if things went wrong, you know, so the next of kin my family and Bruno’s, in his case the parents, don’t get burdened with the debt”. He said that he understood the recommendation was for the policy to cover the partnership debt that they had incurred. He said that he and his brother Bruno agreed that they had no option but to take on the policy. It was subject, however, to them both having a medical examination.
Antonio Graziano’s evidence was that Mr Parker filled out two application forms in the presence of the two brothers. They are in Exhibit P86, pages 1-4. They are both dated 3 March 1988 and appear to be signed by both brothers. They purport to be applications for life insurance to SGIC. On one application the life to be insured is Bruno Graziano and under “DETAILS OF POLICY OWNER” on that application the name Antonio Graziano appears. He is said to be “brother and business partner” of the life to be insured. The amount of cover is $500,000. On the other application the life to be insured is Antonio Graziano. The “DETAILS OF POLICY OWNER” is stated to be Bruno Graziano, “brother and business partner” to the life to be insured. The amount of cover is $500,000. The monthly premium for the “insurance” for the life of Bruno Graziano is about $4.00 less than the monthly premium for the “insurance” for the life of Antonio Graziano.
Also contained in Exhibit P86, at pages 5 and 6, are two Special Questionnaires for Financial Information. The questionnaires are stated “To be completed by the Proposer and countersigned by the Life who is to be Assured”. Both refer to proposals dated 3-3-88, one on the life of Bruno Graziano and the other on the life of Antonio Graziano. Both questionnaires contain the same information as to the Life Assured’s total Annual Income in each of the previous two years (being 1986 and 1987). The sums of $80,000 are in each questionnaire for both Life Assured’s for both years. One questionnaire purports to be signed by Bruno Graziano as “Life to be Assured” and by Antonio Graziano as “Proposer”. The other is signed by Antonio Graziano as the “Life to be Assured” and by Bruno Graziano as “Proposer”. The date on both documents is unclear. It is either Friday 25^th of some month in 1988 or the 25^th of February of 1988. They are both signed by Graham Lawrence as “witness”, a young man Antonio Graziano said used to work with he and his brother. In answer to a question “What is the purpose of the proposed cover?”, there is written on both questionnaires, “ESTATE PROTECTION”. Antonio Graziano told me that he filled in both questionnaires, except for the signatures.

Each of the applications for life insurance is marked for the premiums on them to be paid “Yearly”. The annual premium that is on the application on Bruno Graziano’s life to be insured (with police owner Antonio) is the sum of $1,218.25. The annual premium on the application on Antonio Graziano’s life to be insured is the sum of $1,260.05. Page 7 of Exhibit P86 is a copy of a cheque stub written by Antonio Graziano to SGIC said to be for “PARTNERSHIP INSURANCE”. It is written in the sum of $2,478.30. This is the sum of the two annual premiums for the two policies.
The two policies were issued by SGIC on 8 April 1988. They seem to have been accepted at normal rates the day before, 7 April 1988.
Antonio Graziano identified pages 10 and 11 of Exhibit P86 as the schedules to the two policies issued by SGIC. They were each to commence on 10 March 1988. One was in respect of Bruno Graziano as the “policy owner” where the “insured” was Antonio Graziano. The other was in respect of Antonio Graziano as the “policy owner” where the “insured” was Bruno Graziano. The policy owned by Antonio, over the insured Bruno, noted that the sum insured for Bruno’s life was $500,000 and the sum insured for Bruno’s total and permanent disablement was $500,000. The policy owned by Bruno, over the insured Antonio, noted that the sum insured for Antonio’s life was $500,000 and the sum insured for Antonio’s total and permanent incapacity was $500,000.
By letters dated 13 and 15 April 1988 addressed to both Antonio Graziano and Bruno Graziano at 1200 Main North Road, Pooraka (the Pooraka business premises) SGIC sent a policy to Antonio Graziano and Bruno Graziano. The policy that was sent to Antonio Graziano was the one he owned on the life insured of his brother Bruno, and the one sent to Bruno Graziano was the one he owned on the life insured of his brother Antonio.
Antonio Graziano’s evidence was that he understood that the two schedules to which I have just referred constituted the “vice versa policies” that reflected the advice that they had received from Mr Parker. He said they were the two policies that he and his brother Bruno had agreed to obtain in light of having taken on the debts and other matters relating to the partnership.
Antonio Graziano said that subsequent to the first premium, premiums were paid on those policies by cheques drawn on the partnership. He said that after that Mr Mel Scholfield, who was in the in-house accountant for the partnership, looked after those sorts of matters. Mel Scholfield would record all expenses such as insurance and he and Rod Bartholomaeus would consult in the preparation of the accounts for the partnership and how expenses might be dealt with within the partnership and its accounts. He said that he was focussing on trading, trying to make ends meet, while his brother was focussing on working, loading and unloading and doing his best outside the office. He said that Mel Scholfield was in charge of accounts and he was holding that part of the business together. He said that he understood that the premiums for insurance was an expense that Mel Scholfield put into the cash book of the partnership and he, Antonio Graziano, did not speak to Mr Bartholomaeus at any stage about the recording of insurance expenses in the cash book.
The insurance arrangements change in 1990 and later
Antonio Graziano said that in 1990 there was some variation to the insurance policies.
Antonio Graziano told me that in early 1990 a tenant was found for part of the Pooraka property. The tenant wanted a shed built on that part of the property which was not being used by he and his brother. There was an application to the bank for extra finance when a lease was signed. Further monies were borrowed from the bank to build a shed that the tenant wanted. Antonio Graziano said that with the extra borrowings they needed to upgrade their insurance on the same basis as before. That is, that if anything went wrong there was insurance cover for their financial exposure.
Antonio Graziano said that because of this there was a further application for insurance cover. That was also done by Mr Parker. Exhibit D11 is an Application for Life Insurance to SGIC in a similar form to those that Antonio Graziano said were signed by both he and his brother Bruno in 1988. There was this time, however, only one application. That application has had filled out two lives to be insured, the first life was Antonio Graziano and the second life was Bruno Graziano. Details of Policy Owner are not completed. The application is dated 12 March 1990 and appears to be signed by Antonio and Bruno Graziano. On the signing page there is no signature next to “Signature of Policy Owner (if not one of the above lives to be insured)”.
There are similar questionnaires for the application dated 12 March 1990 as were completed in 1988. They are individually completed in respect of the life of Bruno Graziano and separately in respect of the life of Antonio Graziano. One appears to be signed by Bruno Graziano as the life to be assured and the other by Antonio Graziano as the life to be assured. These two questionnaires are dated 12 March 1990, they are both said to be for the purpose of “Partnership Protection” and they both identify that the current amount of insurance on the assured’s life was $500,000. Someone has written on both documents “(to be replaced)” adjacent to that. These questionnaires are at pages 37 and 38 of Exhibit P86. On the application itself (Exhibit D11) there is written in handwriting in respect of both the first life and the second life (being Antonio Graziano and Bruno Graziano respectively) “L/cover” (which I infer to be life cover) of $1,250,000 and “disablement” of $500,000. Both the “Death and Disablement” (for each life) boxes are ticked and an annual premium in the sum of $4,535.00 is written on the application form. (There is another figure of $5,369.63 written on Exhibit D11 but I do not know what that relates to.)
Antonio Graziano said that when the application made in March 1990 was accepted there were three policies. The initial policies that he and his brother Bruno had insuring each others lives and then this additional policy in 1990.
It seems that SGIC issued an insurance schedule dated 10 May 1990. That appears at page 21 of Exhibit P86. It is also Exhibit D15.
Pages 19 to 22 of Exhibit P86 and Exhibit D15 appear identical. The front page of the policy in each case has the words “Term Life Insurance Policy”. Under “PRIVILEGES, CONDITIONS AND DEFINITIONS” Death Benefit is defined as the sum insured for term life being payable on the event of the death of the Insured, and Disablement Benefit is defined as the sum insured for disablement being payable in the event of the Total and Permanent Disablement (as defined in the policy) of the Insured. Total and Permanent Disablement is defined. The schedule (page 21 of Exhibit P86) indicates that the policy commences on 10 March 1990, the police owners are Bruno Graziano and Antonio Graziano, both of 1201 Main North Road, Pooraka, and the insured is referred to as “002 BRUNO GRAZIANO and 001 ANTONIO GRAZIANO”. The sum insured for the Insured 001 is $750,000 and the premium is $1,584.00. That plan is described as “YRT LIFE”. The sum insured for the Insured 002 is $750,000 and the premium is $1,534.50. That plan is also described as “YRT LIFE”. The premium in respect of Bruno Graziano’s life is slightly lower than the premium in respect of Antonio’s life.
It is not absolutely clear to me how to rationalise that schedule with the application made to SGIC by the two brothers dated 12 March 1990. The premium payable on the application and the premium actually paid subsequently was more consistent with the application than the schedule. The application envisaged an increase of life cover in respect of both brothers by the sum of $750,000. That sum insured would be in addition to the existing life cover for $500,000, and would therefore total $1,250,000. Disablement cover in respect of both brothers would remain in the sum of $500,000, which it had been since 1988. That is also not easily rationalised with the words “(to be replaced)” on the questionnaires both brothers apparently signed and dated 12 March 1990. It becomes clear later when Renewal Notices are considered. Pages 73, 74 and 75 of Exhibit P86 are three renewal notices dated 10 March 1996. They are for the three then existing policies. They were the two taken out in 1988 and the third which was added in 1990. They indicate, and I find, that there were then three policies. The two 1988 ones continued to apply in their terms. The third one, added in 1990, increased life cover for each Life Insured by $750,000 to the then existing life cover of $500,000.
Antonio Graziano’s evidence was that by early 1996 the premiums for the insurance cover had become too expensive. He telephoned Mr Parker to see what else could be done. Antonio Graziano put it this way: “I rang up Parker to see what else we can do, whether we can change it around because we really couldn’t afford it. We weren’t travelling very flash and he come up – he didn’t want to lose, I suppose, his commission so he was straight – he was down there like a shot and he come up with the conclusion of putting all three policies into one to save on fees”.
By letter dated 8 March 1996 Geoff Parker of SGIC wrote to Antonio Graziano. The letter is at page 57 of Exhibit P86. Mr Parker thanked Antonio Graziano for his enquiry “yesterday regarding the renewal of your Life insurance policies”. He advised that a saving of $1599.55 could be achieved if the existing cover from the three policies that then existed was transferred to one new policy. He advised that “by limiting the cover to the same as what you had before” SGIC could transfer to the new policy without personal details being completed. Mr Parker wrote: “Will you both please sign the enclosed proposal where indicated and return in the attached Reply Paid envelope with your cheque for $6423.45”. Mr Parker then advised as to SGIC’s non-smoker’s rates and advised that he was going on holidays and any queries about the change should be directed to Teresa Holding. He advised that she was aware of the circumstances. She apparently was aware by a memo handwritten by Mr Parker to her and dated 8 March 1996. That is at page 72 of Exhibit P86. He advised Ms Holding that the Graziano brothers had had a much cheaper quote than the $8023 that SGIC wanted for their three existing policies. He advised that Antonio Graziano had agreed to renew with SGIC at the new premium of $6423.45. He attached a copy of his letter to Antonio Graziano dated 8 March 1996 to the file note.
Exhibit P86 contains a copy of the application which Mr Parker had asked in his letter dated 8 March 1996 to be returned to him when completed. That application is at pages 76-80 of Exhibit P86. The application appears to be signed by Antonio Graziano and Bruno Graziano as “First Life to be Insured” and “Second Life to be Insured” respectively. No signatures appear under “Signature of Policy Owner (if not one of the lives to be insured)”. There is written on the last page that the policy replaces three earlier policies. There are the two 1988 policies and the one 1990 policy. At page 76 there appears an endorsement in handwriting: “Jeff, Receipted $6,423.45 on 19/3/96 Tracy”.
Exhibit D20 is a letter dated 24 May 2002 addressed to Bruno Graziano at 1201 Main North Road, Pooraka. It is from Colonial. It refers to a “Term Life Plan 60125477 on the Life of Bruno Graziano & Antonio Graziano”. The letter thanks Bruno Graziano for sending the Statutory Declaration required for a replacement policy document. The replacement document was enclosed with the letter of 24 May 2002. Colonial asked Bruno Graziano to return the original document, if it is ever found, to Colonial for cancellation. The replacement policy referred to the policy document issued by Colonial Mutual Life Assurance Society Limited, the life company responsible to meet the liabilities under Policy No. 60125477 dated 19 March 1996. The replacement document was said to replace the original policy document “in consequence of its loss or destruction”. It was stated to be “as nearly as can be ascertained, a copy of the original policy document including every endorsement thereon”. The policy document contained a schedule. That indicates that the policy commenced on 19 March 1996. The Schedule then contains the following endorsement.
Policy owner:
Antonio Graziano

Bruno Graziano
Addressee:
Messrs A & B Graziano

  1201 Main North Rd

Pooraka


5096
Insured:
001 Bruno Graziano             Date of Birth:      14/11/57


002 Antonio Graziano  15/04/56
Benefit Details

Insured Sum Insured Premium Expiry Date Plan

001 $1,250,000 $2,475.00 04/11/2037 TERMLIFE

001 $500,000 $610.50 04/11/2017 T&PD

002 $1,250,00 $2,623.50 15/04/2036 TERMLIFE

002 $500,00 $686.40 15/04/2016 T&PD

I find that this was the Schedule to the policy on which a claim was made and paid by the insurer years later.
The Schedule indicates that in respect of Bruno Graziano (being Insured 001), his life was insured for the sum of $1,250,000 and for total and permanent disability in the sum of $500,000. In respect of Antonio Graziano (being Insured 002) there was identical cover. That means that together the two insured persons had life cover in a total sum of $2,500,000 and total and permanent disability cover in the total sum of $1,000,000. The total cover overall was $3,500,000.
Renewal Notices had obviously been received addressed to Messrs A & B Graziano of Main North Road Pooraka (in respect of two notices) and to Mr A Graziano (in respect of one notice) for the previous three policies. Those renewal notices were issued on 14 February 1996 and are at pages 73, 74 and 75 of Exhibit P86. I have already referred to these Renewal Notices. The renewal at page 73 refers to the two life insured persons being Antonio and Bruno Graziano. It refers to life cover in the same sum insured of $750,000. Page 74 is in respect of Antonio Graziano only. The sum insured for a life cover if $500,000 and cover for disablement is in the sum of $500,000. Page 75 is in respect of Bruno Graziano only. The same cover for the same sums as for Antonio Graziano (page 74) is referred to.
The total premium said to be due is $8,023. That is the same sum to which Mr Parker refers in his handwritten note to Teresa Holding (page 72 of Exhibit P86). It is also the sum of the two sums referred to by Mr Parker in his letter to Antonio Graziano dated 8 March 1996 (page 57 of Exhibit P86), one being the saving to be achieved, the other being the new reduced premium payable. The total sum insured on the three renewal notices is $3,500,000, the same figure as on the new single policy. The totals for the insured Bruno Graziano in respect of both life and total and permanent disablement that previously existed is the same in the new policy, and the totals for the insured Antonio Graziano in respect of both life and total and permanent disablement is the same as in the new single policy. The new single policy that commenced on 19 March 1996 reproduced exactly the lives insured, the type of cover and the sums insured as the three policies that existed prior to 19 March 1996.
The insurance claim and the two brothers’ contentions
A claim was made on the policy in March 1999. It was ultimately paid by the insurer in February 2001 in respect of alleged total and permanent disablement of Bruno Graziano. Bruno Graziano filled out the application for that claim although Antonio Graziano played some part in that application. Sums of $508,500 and $6,923.30 (for premiums) were ultimately paid by the insurer (page 267 of Exhibit P86).
These monies are currently in a bank account in the names of Bruno and Antonio Graziano. Neither brother can deal with those monies without the signature of the other.
In this action Bruno Graziano claims that he solely is entitled to the whole of those proceeds of that claim. Antonio Graziano claims that Bruno Graziano is not entitled solely to the proceeds of that claim. Antonio Graziano’s primary claim is that the partnership conducted by the two brothers, either represented by the partnership itself or by the companies operating as the partnership, is the beneficial owner of the proceeds of the claim made under the policy that commenced on 19 March 1996. Alternatively, Antonio Graziano claims that he, Antonio Graziano, is entitled to all proceeds of that claim.
However, Antonio Graziano’s counterclaim alleges that in September 1999 he and his brother Bruno reached an agreement whereby all his brother Bruno’s interest in the partnership/companies under which he and Bruno had operated for nearly twelve years would be transferred to Antonio Graziano with certain consideration. Included was that Antonio Graziano would release to his brother Bruno all monies paid by the insurer as a result of a claim made under the policy of 19 March 1996, and that he would make no claim on any of those monies. Bruno Graziano denies any such agreement was reached.
What I have just referred to is the essence of the dispute between the two brothers at trial. What I must determine is whether Bruno Graziano is entitled to all the proceeds of the insurance monies by virtue of the insurance policy, on a proper construction of that policy. Secondly, I must determine whether the brothers reached an agreement in September 1999 by which their “partnership” came to an end upon certain terms, including a term that Bruno Graziano would take (regardless of whether or not he had an entitlement to do so) all the proceeds of the insurance claim.
The business to the end of 1998
Antonio Graziano said that during the early years of the business with his brother Bruno they each used to draw money for day to day living. The arrangement they had was very similar to that which existed on the farm. Whatever each of them needed, they took. They tried not to take too much because in later years the business wasn’t going that well so they took just enough to get by. He would take a little bit more than Bruno because he had a family and Bruno was single on his own. He said Bruno spent his money on cars and he, Antonio, spent it on the children. Each of them would go to Mel Scholfield and ask him for some cash. Mel Scholfield would cash a cheque and enter up the amount taken by each of the brothers “against his personal column”. He said that whatever each of the brothers needed, they took. He said: “We didn’t abuse it. It worked well.”
Antonio Graziano said that up until 1994-1995 all aspects of the business were going well. That included packing, wholesaling, distributing, transporting and processing. He said that “things were starting to turn a little bit” at around 1994/1995. The farmers with whom the partnership was dealing were going directly to the supermarkets who wanted a direct relationship with growers. He said that “the middle man was fading and we weren’t able to buy direct off the farmers any more”. The farmers were going straight to the supermarkets and to the bigger wholesalers. He said that as a result of that they looked more to transport as part of their business. They had from the start of the business done some transport work with two trucks they had previously had on the farm. They were doing deliveries with those trucks locally. Then they did some transport for the closer markets such as Melbourne and Sydney. They had increased the number of trucks from 1988 to 1993/1994 to about five or six trucks and they were doing a small amount of transport work to North Queensland. They had concentrated on the niche markets of Townsville and Cairns. That was quite successful. He said that the partnership went from wholesaling and packing more to loading and maintenance of transport vehicles.

Antonio Graziano said his work was similar to what it had always been. He had been involved in administration, the obtaining of work, dealing with clients, and expanding the business into transport when that happened. He said that his brother Bruno’s role changed in the same way. He was more involved in truck loading and maintenance than in wholesaling and packing of produce. The division of labour and responsibility remained as it always had been. He was responsible for the commercial side of the business, including the administrative side, and Bruno Graziano’s role was in the yard and sheds moving from wholesaling and packing to loading of trucks for longer transport haulage and to maintenance of trucks. Their respective roles were similar as they had always been, there was just more for both of them to do. As the wholesaling produce business started to “fizzle away” the business was not able to do the bigger customers, just the niche ones. The business “used their additional trucks to move mainly our own goods, that was the idea of it, to service our customers, and that’s why we increased our business”.
By about 1994 the business had about 20 employees. The business was still involved in packing lots of things and they “went into a venture with apricots with Bottril, apricots and apples, we were doing onions for Spring Gully, pickles for interstate companies … in Melbourne. It went on and on.” At that time Mel Scholfield was the only employee working in the administration side of things. He had no office assistants and Antonio Graziano did not have a secretary. The rest of the employees were truck drivers and all the people that worked in the shed.
Antonio Graziano said that the business suddenly lost that part of the business that was involved in processing and packaging onions. Then the farmers were getting more professional and were putting in their own packing plants and doing everything on site. So all parts of the initial business were “slipping”, the wholesaling part of the business, the packing part of the business and the value-adding part of the business. Antonio Graziano said there was, however, room for expansion of the transport side of the business.
Antonio Graziano was asked whether his brother Bruno knew what was happening and “how the business was travelling”. He answered: “We worked together every day. Of course he knew what was going on”. He described how his brother Bruno’s role in the yard had altered. He knew his brother knew that his own work was changing from processing and packing to maintenance and loading of trucks. That had changed over a relatively short period. He said it had changed “very rapidly”. He said that he discussed matters with his brother Bruno. They spoke on a regular basis that they were losing clients, and that they had got caught by the taxation department which had involved labour on their onions. Immediately they were not able to peel onions anymore, and were not able to buy onions in bulk anymore. He said his brother would have known that trucks were being purchased to keep their turnover going. He said that he even took a small trip overseas to buy an onion machine and left his brother Bruno and Mel Scholfield behind in charge of looking after everything while he was away. He thought that trip was in 1995. He said that he discussed with his brother buying other trucks. The purchase of additional trucks had to be financed through the Commonwealth Bank. When the Commonwealth Bank wouldn’t give him any more money they went to other financiers who provided funds although the interest rate was a little bit higher. Antonio Graziano identified a number of finance agreements which were entered into for the purchase of additional vehicles. He said he would organise the finance but would discuss the need for a new vehicle and the financing of it with his brother Bruno. He identified what he said was his brother’s signature on finance agreements for the purchase of trucks and other plant and equipment.
I have earlier referred to Antonio Graziano’s evidence that in early 1996 the partnership was not “travelling very flash”. He said that when he spoke to Mr Parker he told him that they couldn’t afford the insurance premiums.
Bruno Graziano’s tax returns for a number of financial years are contained in Exhibit D25. His personal income tax return for the 1995-1996 financial year appears to contain his signature on a number of pages of the return. It is also apparently signed by his tax agent Rowe McGee, and is dated 21 August 1996. It indicates that there was a nett non-primary production distribution to Bruno Graziano of a loss of $131,248. That loss figure included a loss of $125,518 in respect of Hard Produce Services, the name under which the brother’s partnership operated. I return to the topic of what Bruno Graziano knew of the financial state of the business later, but I refer to that now because the distribution of that loss to one partner would indicate that the business was not, by that financial year, operating profitably. That is relevant to what happened later in a number of ways. It is a matter which may be relevant to why Bruno Graziano sought advise from a solicitor in early 1998 regarding the business of the partnership and the discussions that immediately followed that.
In April 1997, at the instigation of Antonio Graziano, the business’ financial commitment to the Commonwealth Bank was rationalised and increased. Exhibit D41 evidences the new facility. An Application for Accommodation was made to the Commonwealth Bank for the total bank facility. That is Exhibit D42, which is dated 4 April 1997. The names of the applicants were identified as Antonio Graziano, Filomenia Graziano and Bruno Graziano trading as Hard Produce Services. Page 4 of the application is apparently signed by Antonio and Filomenia Graziano and Bruno Graziano. There was a request and authorisation apparently signed by the same three people and dated 11 April 1997 (Exhibit D43). A similar request and authorisation was signed by the same three people and dated 22 December 1997 (Exhibit D44).
By December 1997 the Commonwealth Bank had spoken to Antonio Graziano. Antonio Graziano said that he had a good relationship with his bank but by December 1997 they were asking a number of questions about the financial position of the partnership and the companies. They had reviewed the financial statements of the business and they had a number of questions about them. The topic of profitability or otherwise of the business was raised with him many times by the bank. Whilst the bank was, in December 1997, prepared to accommodate the same borrowings as had existed early that year they indicated that they were not prepared to give the business additional money because the business was not meeting the trading budget it had given them.
Antonio Graziano said that from the time their transport business expanded it expanded fairly quickly. At the beginning it was very rewarding, and it appeared that “the money was okay”. He said the profits were deteriorating a little bit but then every time you purchased a truck you had to pay registration and there was an additional expense up front. He said that there was a huge expense at the beginning and “then of course you don’t get paid for 30 to 60 days after you’ve done the work so that fuel, wages, and all of them, are all ongoing expenses”, and that meant cash flow (“if that’s the right word”) was declining. Notwithstanding these matters the transport business was expanding and successful. He said that then the cyclone hit in far north Queensland, which dramatically affected their ability to transport bananas on the return trip from north Queensland. He said they were still maintaining their service up to north Queensland but they lost the cream out of their business, which was the return trips. They would be able to do trips up fully loaded but they would have to come back empty. They still maintained their turn-over but the profits weren’t there because “the bananas got blown over and we had to maintain the work otherwise we would close up overnight so you still keep the wheels turning, since then we have had three cyclones, we still do the same – well, we don’t run north Queensland anymore”. Antonio Graziano also explained that with the downturn in the north Queensland business they tried to increase their business running to Perth. They were at that time only “half established in Perth” but they tried to increase that business. He said that the operations manager they established in Perth was not successful. He said: “our costings weren’t done right”. He said that instead of making money they were losing money. The trucks were very busy on the surface but “behind the scenes we were slipping”. He said the Perth operations manager left in December 1998. The operations manager there had started to put the “hard word” on Antonio Graziano and he walked out in December of 1998.
Antonio Graziano said that in the period up until 1998 there was no issue or disagreement between himself or his brother relating to any aspect of the business. Whilst he would discuss with his brother Bruno the purchase of another vehicle and the financing of it, he would not discuss the figures with him. He said that his brother Bruno had faith in what he was doing and he had faith in what his brother was doing. Expanding the transport part of the business was something “we had to do”. “We had no more processing, no more packing, no more wholesaling. That was diddling away and we would be taken up by transport”. The transport part of the business, and the expansion of it, was done on finance.
In 1996 Bruno Graziano was first diagnosed with a back problem. Bruno Graziano told me that that gradually got worse until in March 1998 he was rushed to hospital. He had an operation whereby they “fused my vertebra”. He said that the operation on 3 March 1998 relieved some of his pain but it continued and worsened. He said nothing could be done. He told me that after the operation he continued to work full-time in the business of his brother and himself. He said he went straight back to work after taking a week off. He said he did that although he was not supposed to. He got quite a number of medical certificates but ignored them and went to work. He said he did what he could at work.
Bruno leaves Pooraka in November 1998 and makes an insurance claim
An Application for Total And Permanent Disablement Benefit was completed “by or on behalf of the disabled person” and signed 18 May 1999. It is Exhibit D9. It is apparently signed by Bruno Graziano. It is apparently completed in handwriting by Bruno Graziano. It is the application for benefit under the subject policy. What appears to be the signature of Bruno Graziano is adjacent to the “Signature of Life Insured” and under a declaration declaring “that the answers to the above questions are true and correct”. A question: “Have you as a direct result of this disability been incapable of following your normal occupation” was a tick adjacent to “Yes”. This question is then asked: “If yes, please provide the period(s) of disability”. The form is completed to indicate “from 4/3/98 – 31/8/98, from 13/10/98 – DATE”. It is not clear how the person filling in the form answered the question: “Have you been able to work in any capacity since you were disabled?”. A tick is more adjacent to the word “NO” in a similar way to other questions which have been answered “No”. Bruno Graziano swore an affidavit to the effect that he was incapable of following his normal occupation after 13 October 1998. In other parts of the document it appears that the person who completed it indicated that he had tried light jobs but had difficulty turning his head because of pain in the neck and spine. He had “been supervising. My body and legs aching with pain. Because of standing. After the end of Aug 1998 I started light duties”. To the question: “What date did you cease ALL Work?”, is written “13/10/98”.
Bruno Graziano said in evidence that he had not worked at the business at Pooraka since 20 November 1998. That was when a fight occurred at the Pooraka business premises. There were various versions of this fight. Bruno Graziano said in evidence that the fight was not why he left the business premises, never to return to work there. He said he left because of his health. He said it was that bad that the doctors told him to stop working and he didn’t listen and continued “sort of going to work” until the day of the fight. He never returned after that day.
Antonio’s X-Lotto win
Mel Scholfield would prepare whatever accounting figures were necessary so that Mr Bartholomaeus could prepare the annual accounts for the partnership Hard Produce Services. Antonio Graziano said he played no role in the preparation of the partnership accounts. He said there was no set routine for the accounts to be looked at and for them to be signed and lodged. He said he would go through them after their preparation and have a bit of a look to see how they “were travelling”. He would see that between 1996 and 1997 produce went down, but they knew that. They knew they were losing sales. They also knew that their cartage had gone up. He said that he would “look at the bottom line and you know there was something that had to be improved on, the margins had to go up to get a better figure”. With reference to the 1996-1997 accounts I understood Antonio Graziano to say that Mr Bartholomaeus might have run through that very quickly with him, discussed the bottom line, discussed the turnover and may have discussed their margins. Antonio Graziano said that the profit and loss statement of the business for the year ending 30 June 1997 evidenced a substantial decrease in profit. That reflected the increasing expenses with a decrease in profitability. For the financial year ended 30 June 1998 Antonio Graziano said that the financial statements indicated a loss for the year of some $86,000. That again reflected a reduction in profits and an increase in expenses and by then, in 1998, the business was heavily involved in Perth.
On about 12 February 1998 Antonio Graziano won X-Lotto. He won several millions of dollars. He told his wife and he discussed it with his accountant and the bank manager. He and his wife decided to keep the win quiet so that their lives would not change. He did not want to be treated any differently than before and he wanted it kept quiet for privacy reasons and for the safety of his children. Having discussed it with Mr Bartholomaeus a company was established and the money was put into a family trust. The money was put in an entity which became what I shall refer to as ABC Lending. Shortly after the win Antonio Graziano caused ABC Lending to advance millions of dollars to the Hard Produce Services business. Antonio Graziano did not tell his partner Bruno that he had won X-Lotto, nor did he tell him that he had caused some of his winnings to be advanced to the business. He did not tell his brother either of these things until September 1999, a year and a half later. That he did not do so ultimately became a matter of great significance to Bruno Graziano. Even by the time of the trial Bruno Graziano maintained that his older brother had lied about winning X-Lotto to cover up the fact that he had defrauded the business losing all Bruno Graziano’s investment in the business, both in money and in time and effort. Bruno Graziano did not accept at trial that his older brother had won X‑Lotto. He still did not do so when shown what appeared to be a genuine bank statement from the Commonwealth Bank showing a deposit from SA Lotteries on 27 February 1998 for several millions of dollars. That deposit was made apparently into a bank account in the name of A & F Proprietors Pty Ltd in trust for the A & F Family Trust which he was told was his brother Antonio’s and his sister-in-law Filomenia’s family trust. As indicated Bruno Graziano said at the trial that he believed his brother had defrauded the partnership and that was the explanation for it parlous financial state. I am satisfied and find that he believed that because he said so in his evidence and in documents he authored. I discount a passage of his evidence when being cross-examined (page 466) when he seems to say that it was not his opinion that his brother was “ripping off the business”. That evidence is contrary to all his other evidence and statements on that topic. Whether Bruno Graziano believed that in September 1999 is something to which I return later.
Antonio Graziano said that the first thing he did after his X-Lotto win was to transfer some money over to the business. He said the bank wasn’t going to give them any more money and they needed money to pay the bills. He caused ABC Lending to make a number of advances to the Hard Produce Services business. In the calendar year 1998 advances were made in four separate months. The first was in February, then May, then September, then December. The total amount advanced to the business in 1998 was $6.5 million. He said that he didn’t tell his brother Bruno for privacy reasons, and because he wasn’t really involved in the financial side of the business. Antonio Graziano was asked to say approximately how much was advanced by ABC Lending in 1998. He answered in this way:
AIn 1998 there were four amounts, the first one was 250,000, then I stood back and tried to work out where all our – where all our problems were, and it was with the repayment of the vehicles, the finances, the monthly repayments were huge and we were failing to meet them, and Packer was one that was really hounding us about the finance and everything else so that was one. The second lot was Treniggan, which was Packer, and I had intentions – we had intentions of buying more trucks to try and build the business up, and then I think there was another 500,000 or 600,000 that went into the partnership for working capital to pay bills.
QDuring 1998 were two further sums advanced.
AYes.
QCan you tell his Honour the next amount that was –
AThere was another three million in September, the second round of the big money that I tried to reduce those repayments and I think there might have been some further trucks to try and improve the business and another 500 or 600,000 to try and improve the business again.
QAnd then there was a fourth amount in 1998.
AYes, that was just before Christmas time, there was a few people hounding us to get on top of us and I put another 250,000 in to pay bills and working capital.
QIn total about six and a half million.
AIn 1998, yes.
Antonio Graziano explained further his reasons for not telling his brother Bruno about these advances. He said there were several reasons. He went on:
A… One of them was, you know, he wasn’t really interested in the financials, that was my decision, that was my part of the business. Whether I got the money from the Commonwealth Bank or refinanced or borrowed money from different banks; he really wasn’t involved with that, that was my area. The second part was that I didn’t want to explain to him about ABC because that would have – I didn’t need his signatures to sign money over to the – you know, I didn’t need him to put money across, I didn’t need his advice, or not advice, I didn’t need his help to do that.
QSo you took the decision that the third and agreed payments on the various items of plant and equipment would reduce.
AYes.
Antonio Graziano was asked to explain the situation with the partnership’s creditors as at February/March 1998. He answered in this way:
AFebruary 1998, all the people were hounding us for money, we had sort of tight bills and due bills, all sorts of bills and we needed money to pay them. The bank wouldn’t – you know, whatever advances we got from the bank wasn’t enough and the bank were taking repayments back on their – after their overdraft they were taking $25,000 back every quarter in principal to reduce our bill and there was nothing else I could do. We were in financial hardship.
QSo with a view to alleviating that financial trouble you caused ABC to lend money to the partnership.
ACorrect.
QWere the loans from ABC that you told his Honour about during 1998 recorded in any documents.
AMany.
QDid you have a formal loan agreement.
ANo.
QCan you tell his Honour what, if any, interest rate was applicable to be advanced.
AYes. There was a loan and it was 8%.
QCan you tell his Honour whether that was more or less than the interest rate charged by the Commonwealth Bank on the overdraft.
AA lot less.
QCan you tell his Honour whether that interest rate was more or less than the effective cost of the hire purchase arrangements.
ALess than the hire purchase agreements.
Corporatising the business

Antonio Graziano said that he and his brother discussed the financial difficulties of the business many times. At one stage Antonio Graziano asked his brother if the $150,000 he had on term deposit could be used for short term finance. His brother refused to do that, and the bank would not have allowed that to happen anyway.
Antonio Graziano also said that he and his brother spoke from time to time, “when we weren’t travelling so well” about restructuring the business to change it over to a company “to safeguard our assets”. He said that it was explained to them by Mr Bartholomaeus that when people put things into companies, if things go wrong then they’re not responsible, the companies take full responsibility. It was explained to them by Mr Bartholomaeus that where there was a company there was a limit on liabilities, as distinct from conducting business personally in a partnership. Antonio Graziano said that this came up as early as August 1996. Mr Bartholomaeus’ letter to both he and his brother Bruno dated 16 August 1996 referred to that. That is Exhibit D63. In that letter Mr Bartholomaeus referred to previous conversations “regarding the Transfer of Hard Produce Services to a Company or a Unit Trust. … The liability of the partners to creditors and other claims such as accidents caused by driver negligence must be considerable taking into account the number of trucks you are operating. I would like to pursue this further in the near future”. There was already at that time a company in existence called HPS International Pty Ltd. That had traded briefly but was not trading in early 1997. The two brothers were the shareholders of that company and were also the directors.
Antonio Graziano said that the concept of corporatising the Hard Produce Services business was picked up again in early 1998. Advice was obtained by the business from an accounting and advising firm called Camerons in Victoria. He said he and his brother Bruno met with Mr Clements from that business in early 1998. The discussion concerned a restructuring of the brothers’ partnership business. He said that there was a discussion about conducting the business through a company rather than via a partnership. Exhibit D108 is a document said to be prepared in this respect. He said that following that meeting Mr Clements’ firm Camerons was not retained by the partnership.
Antonio Graziano said that as they purchased new trucks and trailers in the early part of 1998, instead of putting them in the partnership name they were put into the name of HPS International Pty Ltd (“HPS International”). That was advice that they were given both by Camerons and by Mr Bartholomaeus. HPS International was to be the holding company for vehicles and plant and equipment that had hitherto been owned by the business. The advice was also that there be another company established that would operate the business. That was how HPS Transport Pty Ltd (“HPS Transport”) was established in about May 1998. The two brothers were the shareholders of that company but Bruno Graziano was not a director. Antonio Graziano said that his brother did not wish to be a director “so he didn’t have to sign papers and be involved in the paperwork, which he didn’t like doing”.
Antonio Graziano said that he worked out the costs involved in transferring equipment from the partnership to HPS International. He worked out that the stamp duty rate was such that it would be something of the order of $250,000 or $280,000 just in government stamp duty to transfer plant and equipment from the partnership to HPS International. He said “it was too far fetched to go and find two or three hundred thousand dollars …, for no real reason at all, because as time went on, I sort of learnt, didn’t matter – well, it didn’t matter what you did, you are still liable for your responsibilities, you know, whether you are a director or – there’s really no safeguard. So really I wasn’t in a real hurry to sort of do anything, give away two or three hundred thousand dollars for the hell of it”.
I have already referred to the fight at the business premises at Pooraka on 20 November 1998. After that fight Bruno Graziano never returned to the Pooraka business premises. Antonio Graziano said that after a brief conversation he had with his brother in the days immediately following the fight and his brother leaving the Pooraka premises, he had no further contact with him for the following few months.
Events between March and September 1999
I now refer to the events that occurred between 25 March 1999 and September 1999. In the account that follows I refer as little as possible to the evidence of Bruno and Antonio Graziano. I concentrate on the documentary evidence and the evidence of Jacob van Dissel and Rod Bartholomaeus. I shall deal with the evidence of Bruno and Antonio Graziano later.
On 25 March 1999 Bruno Graziano consulted a solicitor Jacob van Dissel. Mr van Dissel was known to the family. He had done some work previously for members of them. Mr van Dissel kept a file note of that first consultation. The note indicated it lasted half an hour. Mr van Dissel said that his notes were very brief so he didn’t have any record of the conversation he had with Bruno Graziano. He said that Bruno Graziano had a number of issues. One issue was that he thought his brother was taking money from the partnership. The other was that Bruno wanted to get out of the partnership. He was concerned that he wasn’t getting the drawings to which he was entitled or that he wasn’t getting his regular cheque. There was a concern that the money flow was not as regular as he would have liked it. He mentioned that he wasn’t working in the business at the time. He said he was unfit to work and for that reason he wasn’t working.
Mr van Dissel said that after his consultation with Bruno Graziano he had a conference with Antonio Graziano. That was on 30 March 1999 and lasted for one hour. He didn’t mention anything about Bruno’s allegations of dishonesty. He said he confined himself to the topics he considered more important, which was that Bruno wanted to get out of the business. Bruno wanted to sell his fair share of the business to Tony, and Bruno wanted some money which he believed Tony wasn’t giving him.
Mr van Dissel said that he attended upon Bruno Graziano on 7 April 1999 for one and half hours. The brief note (Exhibit D92) reads “Bruno wants to dissolve everything – will let him know formally after B has seen me again”.
By letter dated 20 April 1999 (Exhibit D60) Mr van Dissel wrote to Bruno Graziano. Part of that letter is in evidence and contains the following:
We have spoken to your brother as well as the accountant for the partnership, who suggests that we arrange a meeting with yourself, your brother and himself so that the possible terms of a dissolution of partnership can be discussed. … We enclose herewith our account for your attention.
On 29 April 1999 Mr van Dissel wrote to Bruno Graziano confirming that a meeting with Tony Graziano and the accountant would take place at the accountant’s office on 4 May 1999, at 2pm (Exhibit D47).
A meeting was held at Mr Bartholomaeus’ office on 4 May 1999. Mr Bartholomaeus, Mr van Dissel and the two Graziano brothers were present. Mr van Dissel’s file note of that meeting is Exhibit D94. He said he could remember other things that happened. He said: “The meeting was along the lines Bruno wanted out, Tony was happy to buy him out, and I said, ‘before we can go up that path, we need to know what the whole show is worth’”. He said there was a discussion about a valuation previously being done by Mason Strange Gray. Mr van Dissel said that he would be happy with them doing the valuation. Mr van Dissel said he discussed a timetable because his client wanted to get out pretty quickly. He suggested two weeks for the valuation but later suggested three weeks would be more appropriate. He then said that there would be two weeks for Tony to decide and two weeks to settle. He said that the next meeting was set on that timetable. It was agreed that it would occur on 8 June 1999. Mr van Dissel said that the meeting finished more along the lines of “Let’s get the figures. Let’s look at them and let’s keep the pressure on it to keep things moving”.
Mr Bartholomaeus gave evidence that he could not recall a lot regarding the meeting in May 1999 except that his file indicated that the meeting would not have achieved a lot because there were no financial accounts to refer to. He said: “All I can recall is that Mr Bruno Graziano was considering selling his interest in the business and that Mr Jacob van Dissel was representing him in this regard”. He said that he thought the main thing that was decided at the meting was that there would be a further meeting when financial accounts were prepared to 30 April. He was instructed to prepare those accounts. He said there was discussion at that meeting that the purpose of preparing the accounts to 30 April 1999 was “in relation to Mr Bruno Graziano selling his interest in the business”.
Mr Bartholomaeus said that subsequent to that meeting he prepared some financial accounts to 30 April 1999. He said that Exhibits D62 and D62A were prepared to 30 April 1999 by him. He identified Exhibits D48E and D48F as handwritten documents prepared by him on instructions of Antonio Graziano. He said they were done for the purposes of interpreting the accounts and to extract the drawings of each of the partners and the capital introduced by each of them over the period of the business from 1988 to 1999. Mr Bartholomaeus explained in his evidence the three different columns that appear on Exhibit D48E.
Mr van Dissel said that there was a meeting on 8 June 1999. The same people were at the meeting. He made a note of that meeting. He had further recollections of it than what is contained in the note. He said it was a relatively long meeting. It was one hour. He said Mr Bartholomaeus gave them a copy of the paperwork. They appeared to be in Mr Bartholomaeus’ handwriting. He said that Exhibit D48E (ignoring the first page) was the sort of thing he saw. He recalled that there was an excess of liabilities over assets of the sort of magnitude of $1.6 million. He said he recalled seeing a valuation which had some other figures handwritten on it. That document was similar to Exhibit D48D.
Mr van Dissel said that he was told, he thought by Mr Bartholomaeus at that meeting, that the Grazianos were in the process of turning the partnership into a company and that that would happen on 1 July 1999. Having been told that, and when he was looking at the handwritten financials, he said: “Well, this thing is thoroughly broke. You’re trading insolvently. You’re about to go into a company trading insolvently. You’ve got massive liabilities. This is crazy. You’ve got to stop it”. He said that Antonio Graziano then got aggravated and showed the bold black figures that he had put on the valuation and said that the valuer had got it all wrong. He said: “The place is worth a lot more than what it appears on Rod’s paperwork.”. Mr van Dissel had then said that Antonio Graziano’s figures were “over the top” and that the business was broke. Antonio Graziano said that he wanted to take it over and was prepared to take Bruno Graziano’s share “with a bit of money on top”. Mr van Dissel had said that if Antonio Graziano was mad enough to do that, “you, Bruno, would be mad not to take it”. He said he was not sure he used those words but that would have been the line of his conversation. Mr van Dissel said that Antonio Graziano became very unhappy and then Mr van Dissel told Bruno that he should take whatever was offering. He said that Bruno Graziano just sat there taking it in and he thought Mr Bartholomaeus looked a bit embarrassed that they were planning to convert the business into a company when “clearly it is not what an accountant should be telling his client”. Mr van Dissel said that he was informed at this meeting of the plan to corporatise the business. I am satisfied and find that that was said at this meeting.
Mr van Dissel said that the meeting fizzled out and his notes said that they would get back to them. He said “I’d been hit with a bombshell and Bruno had been too, he though this was a business going somewhere but we knew there were problems, but to see it was $1.6 million in the red took us all by surprise and I arranged to meet with Bruno to discuss it”. He finished the meeting with “we’ll look at it and we’ll get back to” you.
Mr van Dissel said the meeting broke up and he organised to meet subsequently with Bruno and Tony. He wanted to talk to his client first of all and then again with Tony.
Mr van Dissel said he remembered this meeting quite vividly.
Mr Bartholomaeus gave evidence that he attended at this meeting at his offices in June 1999. He said that the handwritten statements he had prepared were presented to the meeting. He said: “The meeting was obviously shocked by the results for the 10 months to 30 April because it was a loss incurred in Hard Produce Services of over a million dollars and a lot of discussion would have been as to why that loss first of all perhaps and, secondly, of the insolvency of the business”. He continued: “nobody could say why there was such a loss except looking at my figures to 30 April for Hard Produce Services I noted on there that certain major expenses had increased dramatically, namely motor vehicles expenses and fuel and things like that as a percentage of income and I can’t recall it but obviously that was put there for a reason that would have been discussed”.
Mr Bartholomaeus said he thought Antonio Graziano “was amazed at the loss and could not really given any explanation as to why it was so large”. Mr Bartholomaeus could not recall exactly what he would have said, but he must have said something along the lines of “You can see in the figures as to why the costs have increased”.
Mr Bartholomaeus said that Mr van Dissel said something along the lines that “the business is insolvent and should cease to trade”. He said he had no recollection of anybody leaving the meeting and not coming back. He said that he thought the meeting came to “a confused ending and nobody got anywhere”.
Mr van Dissel’s evidence was that he met with Bruno Graziano at his office the day after the meeting on 8 June 1999. Exhibit D95 is Mr van Dissel’s brief file note of that meeting. The meeting lasted an hour.
Mr van Dissel said that at this meeting he and Bruno Graziano discussed the figures and Bruno Graziano referred to his brother cheating him. He would have said to Bruno that there was no evidence that Antonio Graziano had “ripped the business off” and the only way that they could work through it was to put in an auditor to do a forensic assessment. They also discussed putting a receiver of some description in the business. He said that he and his client were going to have a meeting with Antonio Graziano straight afterwards because he had a note “meeting adjourned for meeting at 12.30 with Tony”.
Mr van Dissel referred to the meeting which ensued with Antonio Graziano but he had only a very vague memory of what happened, without any reference to his notes. Having refreshed his memory from his note (Exhibit D96) Mr van Dissel said that they had discussed the drawings by the partners over ten years and his note refers to drawings of $500,000 and $650,000. He said there was a discussion as to why things were as bad as they now appeared. He said Antonio Graziano was saying they had a major natural disaster which had affected their trade in carrying bananas back to South Australia. There was reference to Antonio Graziano saying he was prepared to take the whole lot over and was referring to “Bruno’s security unit plus $150,000 deposit”. That was referring to Bruno Graziano’s home unit at Brighton and a fixed deposit of $150,000 both of which had a charge over them. There was a further note that Antonio had drawn $33,622 more than Bruno so there was some adjustment to be made on the drawings. He remembered Tony saying that the Partnership had been paying Bruno’s car payments and that they would have to be adjusted and then there was a final note “Insurance money goes to Bruno”.
Mr van Dissel explained that the issue of Bruno Graziano making an insurance claim was already a live issue although he had nothing in his notes prior to then to indicate that he had talked about it much other than in an earlier phone call. That was a note for 9 April 1999 where there was a conversation between himself and Antonio Graziano. He had made a note “Tony owns Bruno’s and Bruno owns Tony’s or something and an explanation mark and a question mark next to that”. Mr van Dissel said that the three of them had obviously discussed the insurance claim and Tony had said “well look it doesn’t matter which way it goes as far as I’m concerned if you get out of the business whoever owns the insurance policy you’ll get as part of the sort of going away package”.
Mr van Dissel said further that Antonio Graziano was saying that he would get rid of the securities for Bruno, and that there would be an adjustment of the loan account situation, and that Bruno can have the money from the insurance if and when it comes through.
Mr van Dissel said that that meeting concluded on the basis that they would all go away and think about it. Mr van Dissel identified Exhibit D48F which he said was consistent with the drawings figure of $33,625.
Mr van Dissel said that he received a fax from HPS Transport on 11 June 1999 together with a list of drawings. That is Exhibit D49A, which contains a copy of Exhibit D49. Mr van Dissel said that this was an offer that was faxed to him by Antonio Graziano on 11 June 1999.
Mr van Dissel said he next met with Bruno Graziano on 15 June 1999. His file note (Exhibit D98) indicates that the meeting was for an hour and a half. Mr van Dissel said that they already had the valuations and the handwritten sheet which showed a deficiency of $1.6 million or thereabouts. He believed they had also received other papers but he couldn’t identify them specifically. Bruno Graziano had gone away to look at those and he discussed them with him in the context of the offer that Antonio Graziano was making. That was the offer he received on 11 June 1999 (Exhibits D49 and D49A). Bruno Graziano mentioned some plant that was not on the valuation and that there was some containers with some bits and pieces in them that Bruno told him were worth between $100,000 and $200,000. He noticed that ABC “something or other” was one financier who had a lot of trucks on finance. He discussed that with Bruno Graziano but they didn’t come to any conclusions. They also discussed Antonio’s car payments.
Mr van Dissel said that they again discussed Bruno’s concern that his brother was cheating him, taking money out of the business or whatever. He had suggested to him some other areas of investigation they could pursue to ascertain whether that had happened. He said that Bruno mentioned that his brother had recently bought a holiday house at Aldinga and they were looking for assets that he might have been able to purchase those with. There was also a motor vehicle.
Mr van Dissel said that he received a letter from Antonio Graziano dated 17 June 1999 withdrawing the proposal that was submitted by him the previous week (Exhibits D49 and D49A). Antonio Graziano advised that it had been recently discovered that payments made to some of their subcontractors may have been treated incorrectly. He wrote that HPS was “currently seeking further clarification of this issue”. (Exhibit D50)
By letter dated 21 June 1999 Antonio Graziano wrote again to Mr van Dissel (Exhibit D51). He advised him of certain decisions that had been made. He advised that as of the date of the letter Hard Produce Services would cease trading on 30 June 1999. He advised that as of 1 July 1999 “we will begin trading as HPS Transport Pty Ltd, a decision which was made by Bruno and myself over twelve months ago”. He wrote that “no personal withdrawing from the new bank account will be permitted by Bruno or myself”. He demanded a salary/payment for his management of the business since November 1998, which would continue “until any decisions are made by Bruno in relation to which way he wishes matters to proceed”. He advised that “Bruno’s ownership has not changed, he is still a 50% shareholder in the business listed below”. He listed “Hard Produce Services, Quintile Pty Ltd, HPS International Pty Ltd, and HPS Transport Pty Ltd”.

I am satisfied and find, however, that whilst Bruno Graziano paid his turn using his personal funds, Antonio Graziano paid his turn, at least directly, by using the account of HPS Transport after 1 July 1999. The fact that he did that related to what he told me was his belief that from early September 1999 he had an agreement with his brother whereby he would become the sole owner of all shares of HPS Transport pursuant to the agreement with his brother. I am unable to make a finding as to how HPS Transport accounted for these payments and whether they were allocated to Antonio Graziano’s personal drawings.
By letter dated 30 March 2000 addressed to Antonio Graziano, Colonial, in respect of the policy 60125477, advised the following:
Further to our telephone conversation of today concerning the above insurance contract.
I wish to confirm that the policy is structured in the following manner;
Policy Ownership – Joint             Mr Bruno Graziano
Mr Antonio Graziano
Lives Insured – 2  Mr Bruno Graziano
Mr Antonio Graziano
Insurance
- Bruno Graziano  Life       $1,309,668.00
TPD      $ 523,866.00
- Antonio Graziano  Life       $1,309,668.00
TPD      $ 523,866.00
Payments on the policy are currently made on a Quarterly basis at the current premium is $2,937.60. per quarter.
That document indicates at least two things. The first is that the total permanent disablement cover for both Bruno and Antonio Graziano was at that time $523,866. Secondly, the letter indicates that payments on the policy were then currently made on a quarterly basis at $2,937.60 per quarter.
The application made in May 1999 was finally accepted by Colonial, on policy 60125477. I find that this is the identical policy issued by SGIC on 27 March 1996 with number 60125-4771. That the application was accepted is referred to at page 267 of Exhibit P86. This is a letter dated 14 February 2001 sent by Colonial to Bruno Graziano at the address of his unit at Brighton. It was stated to relate to “Life Insured: Bruno Graziano”. The letter states, inter alia:
You will be pleased to hear that your policy (60125477) is providing you with the protection you intended.
We wish to advise an amount of $508,500 and $6,923.30 (for premiums) has been directly credited to your nominated joint bank account, representing payment of the Total and Permanent Disablement Claim benefit of your policy.
In accordance with the Terms of the Policy, the Life Insurance Portion on Mr B Graziano is to be reduced by the amount of Total and Permanent Disablement payment.
It is not relevant for present purposes, but the policy that was then in existence, that is in 2001, was ultimately cancelled or lapsed.
What is the effect of these findings on a proper construction of the relevant insurance policy? In other words, who or what is entitled to the insurance monies that are currently in a joint bank account of Bruno Graziano and Antonio Graziano? Those monies are $508,500, plus $6,923.30 (for premiums). That later amount is about one year’s (or four quarters) premium. Although I cannot completely rationalise that figure to the period subsequent to the application for benefit which was dated 18 May 1999, I infer that the insurer refunded premiums that related to Total and Permanent Disability for Bruno Graziano for the period subsequent to the claim being made and it being accepted and paid.
The plaintiff submitted that I should have regard to who paid the premiums under the policy issued on 27 March 1996 subsequent to the claim being made on it on 18 May 1999. It was submitted that as Bruno Graziano paid at least some of those premiums and that “the partnership” paid at least some of them that is an indicator not only that Bruno Graziano is entitled to the proceeds of the claim but also that Antonio Graziano is not himself personally entitled to any of the proceeds of the claim. In my view who paid the premiums after the claim was made is not relevant to the question as to whom or what is entitled to the proceeds of the insurance claim. Although events subsequent to the writing of an insurance policy can, in some circumstances, assist the proper construction of the policy, events subsequent to an event which gives rise to a claim under the policy and subsequent to a claim made under the policy cannot assist to construe the policy. Such events are certainly of no assistance in light of my finding that payments after May 1999 were paid under an arrangement between Antonio Graziano and Bruno Graziano’s then solicitor Mr van Dissel, with the knowledge of Bruno Graziano. That was at a time when there were questions as to who was entitled to any insurance payment. Furthermore, who made payments under the policy after the claim was made will depend upon my findings as to whether or not there was an agreement reached between the two brothers in September 1999, and will also depend on what accounting treatment was given in the accounts of HPS Transport after it made payments according to the agreed “turn-about” method for the continuing premium payment after the claim was made. Whilst it seems clear that HPS Transport made payments for Antonio Graziano’s “turn-about”, I do not know what accounting treatment those payments were accorded and whether or not they were allocated to Antonio Graziano’s personal drawings.
I am satisfied and find that during the periods between 27 March 1996 and November 1998 (when Bruno Graziano became totally and permanently disabled) and between November 1998 and May 1999 (when the application for benefits was made) the two brothers made the premium payments in equal shares, and that they were made equally by them out of their own personal funds by virtue of the external accountant and the in‑house accountant attributing those equal payments to the personal drawings of each of the brothers. I am satisfied and find, however, that that was done without the knowledge of either brother. I cannot make a finding as to why that was done in those periods, and why the practice changed after the single policy commenced on 19 March 1996 from how premiums were treated prior to that date. At least on 27 March 1996 the premium could have been allocated to each partner separately and differently because different figures are identified on the schedule to the policy which was issued on 27 March 1996. It may have been that after that there was one renewal notice with one sum on it which was not apportioned according to the different insureds under the policy. It is possible that the in-house accountant to the partnership then found it necessary to simply divide the premium in half. Whatever the reason, I am satisfied and find that that is what he did.
I have already referred to and made findings as to what each of the partners understood the insurances that were arranged for them in 1988 were to protect. I am satisfied and find that their common understanding was that each held insurance over the other, and that in some way that was to protect the borrowings of the partnership and the liability that may fall to them if the other partner died or became permanently disabled, where both partners were integral working parts of the partnership.
I am satisfied and find that each brother understood in March 1988 that the policy that he owned related to the life and disablement of his brother. There is no doubt in my mind that the two policies that commenced on 10 March 1998 were “vice versa”, and that each partner understood that and understood how they worked. I am so satisfied because that is what I find the policies were, and I find that they were explained in that way to both partners by Mr Parker from SGIC. The documents completed and signed by each partner are consistent with that, as are the annual renewal notices. When I say that the documents are consistent with my finding as to the policies in 1988 being “vice versa” I mean that the documents were all printed, prepared and completed on the basis that each brother owned a policy on the life of the other brother.
I am satisfied and find that in 1990 and 1996 the insurance arrangements were first varied (in 1990), and ultimately replaced with one (in 1996), but I am satisfied and find that both brothers understood that nothing had changed from what the original position was in 1988. That is, both brothers knew and understood that nothing had changed in that whilst they had increased their insurance cover, they were each protected on the life of the other. I am satisfied and find that the subsequent policies, and in particular the policy that was written on 27 March 1996, was a composite “vice versa” policy whereby Antonio Graziano was the owner of that part of the policy that related to Bruno Graziano’s life and disablement, and that Bruno Graziano was the policy owner of that part of the policy that related to Antonio Graziano’s life and disablement. I am so satisfied because of how the policies developed and evolved from 1988 to 1996. I am satisfied and find that it was convenient to SGIC to issue one policy when the two brothers sought to increase their cover (in respect of each other’s life) in 1990, and it was convenient to SGIC to replace the three policies with one in 1996. But I am satisfied and find that that happened without changing in any way the arrangements by which each partner owned a policy on the life and disablement of the other brother. I am satisfied and find that no-one (neither SGIC nor the two brothers) intended any change to the insurance arrangements that existed immediately before March 1996, except for the amount of the premium, to those that operated after March 1996.
In early March 1996 there then existed three policies, including the two policies which I find are obviously “vice versa” policies written in March 1988. Those two policies were still extant and operating in February 1996. If the three policies that then existed had not been replaced by one policy (to what I find to be in precisely the same terms and with precisely the same intention as then existed), but only the premiums had been reduced, then it would have necessarily been policy No. 60015-5869 under which the application for benefit would have had to have been made. It was only to that policy in respect to which Bruno Graziano’s total and permanent disablement would have responded. It was that policy which Antonio Graziano solely owned. The 1990 policy provided no cover at all for total and permanent disablement.
This is why I consider that the sum ultimately paid by Colonial, being of the order of $500,000, is important. That was the limit of the sum insured on Bruno Graziano’s total and permanent disablement under the March 1996 policy and the 1988 policy which was owned by Antonio Graziano solely.
I am satisfied and find that when the three policies were amalgamated and replaced by one the order of policy owners and the order of insureds were not accidental. They became, and were intended to become, an integral part of the policy because it was the intention to preserve the “vice versa” nature of the policies that had existed hitherto.
What I have set out as to the background to the March 1996 police is, in my view, entirely consistent with, and creates no tension with, how I would construe that police and its schedule on its face. As a matter of pure construction, I would find that the policy was one which provided cover to each of the policy owners against the death or permanent disablement of the other brother (the insured).
Accordingly, I find that on its proper construction the policy issued on 27 March 1996 commencing 19 March 1996 is a composite policy whereby the benefits for the total and permanent disablement of Bruno Graziano is owned by Antonio Graziano.
The next question is whether Antonio Graziano owns the proceeds of the payment under the total and permanent disablement policy in respect of Bruno Graziano for himself alone or for the benefit of the partnership.
I am satisfied and find that from the outset in March 1988 it was the intention of the partners that in some way the insurance they had sought and obtained in March 1988 was to protect the partnership upon which they had just embarked. I do not think that either of the brothers had a clear idea as to how the policy was to do that other than each of them had a policy over the life and disablement of the other, and in some way that would protect the partnership’s borrowings and the family or next of kin of the individual partners. As at March 1988 each of the sums insured for death and disablement would have protected all borrowings of the partnership and in that way the partnership could continue if one partner died or became disabled by paying out the debt of the partnership and thereby protecting the partnership and relieving the family or next of kin of the disabled or dead partner from a joint and several liability in respect of those borrowings and protect the property and assets given as security for those borrowings. The sums insured for each of the partners for each of their total and permanent disablement never changed from March 1988 to March 1996, and thereafter. Those sums were originally $500,000 each and continued to be $500,000 each until March 1996 and beyond until they each became $523,866 by March 2000. That is the part of the insurance cover that responded to the application for benefit, and the only part. It is likely, although I cannot say with certainty on the evidence, that the ultimate sum paid was the extent of the ultimate cover. At the time of the application under the said policy, however, the debts of the partnership (at May 1999) were well in excess of $500,000, although by July 1999 the partnership had been incorporated and HPS no longer existed as a partnership business.
I have already made findings as to what Bruno Graziano’s belief and understanding was in respect of the insurance policies in 1988, and then in 1996. I am satisfied and find that that continued to be his understanding at least to the time he filled in the application for benefit and sent it to SGIC in May 1999. I think that he has probably convinced himself at some time since then that his understanding and belief was wrong and that he now has a different understanding and belief which he probably now fervently holds. That is somewhat understandable in the circumstances that have obtained since November 1988 when he left the Pooraka business never to return. It is perhaps understandable that he now believes that he is entitled to the insurance monies because he is the one that is totally and permanently disabled. I do not accept, however, that he has always held the view that he owned his own policy in relation to his own life and disablement and his brother Antonio owned his policy in relation to his life and disablement. I am satisfied and find that Bruno Graziano has convinced himself at some stage since November 1988 that what he now believes to be the case has always been the case. I am satisfied and find not only that he has not always held the view he holds now, but that his current view of the subject policy is wrong in law.
I have, concluded, however that the intention of the brothers has always been that in some way the insurances they obtained from SGIC over the years were to protect the partnership and, through the partnership, each one of them for the death and disablement of the other. I have therefore concluded that Antonio Graziano holds the monies paid by Colonial as a result of the insurance application on trust for benefit of the partnership. The proceeds of the claim are therefore a partnership asset, and are the property of HPS Transport.
The Defendant’s Counterclaim
I have concluded that in early September 1999 Antonio and Bruno Graziano entered into a complete and enforceable contract that provided, inter alia, for the sale by Bruno Graziano to Antonio Graziano of all Bruno’s interests in the HPS partnership and his shares in three related companies. I have concluded that the evidence that supports such a conclusion is extensive, it is compelling and it is irresistible. If I take into consideration my further finding that Bruno Graziano’s evidence on this topic was both incredible and unreliable the conclusion that I have reached is inevitable.
There is no doubt that Bruno Graziano left the Pooraka premises in November 1998. I find that he made no contact with his brother for several months until Antonio Graziano was contacted by Mr van Dissel, who was then acting for Bruno Graziano. I am convinced that the evidence Mr van Dissel and Mr Bartholomaeus gave at the trial was both credible and reliable. Neither man had anything to gain by telling other than the reliable truth during their evidence. Whilst it may have been unwise for Mr van Dissel to take the role he did take after Bruno Graziano terminated his professional services, what he did and the evidence about what he did after June 1999 in no way affected my conclusion that his evidence about why Bruno Graziano sought his professional advice, what he did whilst he was acting for Bruno Graziano, and his evidence about those two matters and other matters was credible and reliable. It is also true that Mr van Dissel made less than perfect notes of his attendances on Bruno Graziano and of the two meetings between he, Mr Bartholomaeus and the two brothers at the offices of Rowe McGee. But I am satisfied that he made sufficient notes to jog his accurate memory of the events about which he gave evidence, and as to the circumstances of his acting for Bruno Graziano. There were contemporaneous documents such as correspondence and Mr van Dissel’s billing notes that gave some support to the oral evidence that Mr van Dissel gave from his memory.
There is no doubt in my mind that Bruno Graziano engaged Mr van Dissel in early 1999 to assist him to exit from the partnership that had hitherto and then existed with his brother Antonio. I am satisfied and find that Bruno Graziano had then determined that he did not intend to, nor would he return to work in the partnership in the future. I am satisfied and find that he probably thought at the time he first consulted Mr van Dissel that there was some equity in the partnership which would be due to him in money upon him selling his share in the group to his older brother and exiting the partnership. I am satisfied and find that he engaged Mr van Dissel to act for him in obtaining the best financial result for him exiting the partnership which, so far as he was concerned and so far as his involvement was concerned, was over. I reject Bruno Graziano’s evidence that he consulted Mr van Dissel to find out something about the financials of the partnership and his evidence that he did not consult Mr van Dissel because he wanted to end his involvement in the partnership. I am satisfied and find that Bruno Graziano was untruthful in his evidence at trial when he told me what his reason was for him consulting Mr van Dissel. I do not think that he could have convinced himself that that was the true position.
I make similar findings in respect of Bruno Graziano’s evidence as to what happened at the two meetings at the offices of Rowe McGee in the first half of 1999. I reject his evidence to the effect that there was no discussion about or reference to the fact that the purpose of both meetings was to consider and agree upon the basis on which Bruno Graziano left the business and the partnership group. I accept that Bruno Graziano did little of the talking at the meeting and that he left that to Mr van Dissel, but I cannot accept that Bruno Graziano had a quite different understanding as to why the meetings were being held from the other three people who attended at them, including his own solicitor. I am satisfied and find that the evidence of those other three as to what was said at both meetings, and the purpose for which it was said, was true and accurate. I find that the purpose of both meetings was to find out the financial position of the partnership group so that a payment to Bruno Graziano could be determined and agreed upon to effect his exit from the partnership group. That ultimately did not occur at the meetings because Mr van Dissel interpreted the financials that he was given as showing, probably correctly from his point of view, that the business group was trading whilst it was insolvent. When he said that at the second meeting and had told Antonio Graziano that he should stop trading because of the insolvency of the group, and when Antonio Graziano said that he wanted to continue trading, the second meeting came to nothing and ended. Of course, unbeknown to Mr van Dissel and Bruno Graziano, Antonio Graziano had used his X-Lotto winnings to support the business group, and that he was in a position to continue to do so.

I am satisfied and find that the evidence of Mr van Dissel is reliable as to what happened at the first meeting. I am satisfied and find that by what happened at that meeting it was clear to everyone that some documentation as to the then financial position and the value of the partnership group needed to be prepared before discussions could seriously proceed on Antonio Graziano buying out Bruno Graziano’s share in the partnership group, and for how much.
I am satisfied and find that every person at the second meeting had a copy of the handwritten consolidated accounts prepared by Mr Bartholomaeus to 30 April 1999 (Exhibit D48E, page 2) which showed a significant excess of liabilities over assets. It showed that on any version of the valuation of land and buildings and plant and equipment. That excess on book values and at the valuer’s valuations was of the order of $1.5m.
What happened after the June 1999 meeting at Rowe McGee is largely evidenced by the correspondence that was exchanged between Antonio Graziano, Mr van Dissel, Mr Hardy (when he took over as Bruno Graziano’s solicitor from Mr van Dissel) and Mr Bartholomaeus. I find that Antonio Graziano made a written offer to his brother via Mr van Dissel. That is Exhibit D49. He later withdrew that offer when he discovered that he might be liable for a significant sum if certain things happened. This is exhibit D50. I find that he later renewed his offer.
I am satisfied and find that after some weeks Antonio Graziano telephoned his brother and sought a meeting with him to sort things out. His brother agreed to that meeting and it occurred at the Pooraka premises after hours one Saturday evening in early September 1999.
I have already referred to the evidence of the two brothers as to what happened at that meeting. They were the only ones present. Although Bruno Graziano had some memory of things that occurred at that meeting that was the same as, or similar to, his brother’s memory of what was said and what happened, I have come firmly to the conclusion that where their evidence differs as to what was said Antonio Graziano’s evidence is the more credible and reliable evidence compared to that of his brother. In particular, I do not believe Bruno Graziano’s evidence that was to the effect that no agreement was reached between he and his brother to effect his exit from the partnership group. I find that the meeting lasted far longer than Bruno Graziano told me and that Antonio Graziano’s evidence is to be preferred on that aspect. I also prefer Antonio Graziano’s evidence to the effect that it was a good meeting and not an unfriendly one. I am satisfied that neither brother became angry with the other. The evidence of both as to Bruno Graziano volunteering that he had helped himself to $10,000 from the business earlier in the year without Antonio’s knowledge is evidence that is more consistent with the fact that, at last, the two brothers were prepared to speak calmly, openly and truthfully to each other about their partnership business, their personal relationship with each other, and about matters relating to their family. I am satisfied and find that Antonio Graziano was for the first time prepared to tell his brother about his lottery win (which I find he did win) and how he had kept the business going by putting into it millions of dollars from those winnings, and how ABC Lending was the vehicle for his doing that. I find that he was not prepared, even then, to tell his younger brother how much he had won, but he was prepared to speak openly about other matters which he had not told his brother to that point.
I am satisfied and find that Antonio Graziano had a file of papers with him during the course of that meeting. I am satisfied and find that the two brothers started from the terms that had been offered by Antonio Graziano in early June 1999 by the note he faxed to Mr van Dissel (Exhibit D49).
I am satisfied and find that for the first time Antonio Graziano thought during this meeting of a means by which he could ensure that his younger brother received some money for exiting the business group. I am satisfied and find that during the course of the meeting he made the notes that appear on the back of Exhibits D128 and D128A, and that he made those notes at the meeting in front of his brother. Bruno Graziano’s evidence was that his brother was writing or scribbling something on the back of a document, although he referred to it being a Commonwealth Bank document. He also said it was dated 21 September 1999. I believe him when he said that he saw his brother noting something on the back of a document, but I do not believe him when he said it was a Commonwealth Bank document dated 21 September 1999. I consider that he made up that evidence, maybe because he thought at that time that the document could not be found.
I am satisfied and find that Antonio Graziano had, by the time of this meeting with his brother in early September, received draft consolidated accounts from Mr Bartholomaeus to 30 June 1999. Antonio Graziano said in evidence that he thought he had received them. He maintained that even when it was put to him in cross-examination that he had not, and even when it was put to him in cross-examination that his evidence that he had them at the September 1999 meeting was untrue to his knowledge. I find that Mr Bartholomaeus had given such accounts to Antonio Graziano in August 1999. The way that Antonio Graziano’s jottings on the reverse side of the two exhibits (D128 and D128A) came to light during the trial in no way adversely affected my view of Antonio Graziano’s credibility and reliability. There were two issues remaining at the end of Antonio Graziano’s evidence. First, whether or not he had any draft accounts to 30 June 1999 at the September meeting with his brother and, secondly, whether he made jottings on the back of documents that were at that meeting. I am satisfied and find that both of these issues were ultimately resolved in a way that supported and enhanced Antonio Graziano’s credibility and reliability rather than diminish either.
I am satisfied and find that by the time this meeting concluded an agreement had been reached, and the terms of that agreement had been identified and agreed as between the two brothers, and that both brothers had a common understanding as to those terms. Those terms were a combination of the original letter of offer made by Antonio Graziano in June 1999, plus a cash payment to Bruno Graziano in the sum of $200,000. True it was that Antonio Graziano forgot the sum of $10,000 but I am satisfied that Bruno Graziano also forgot that. I am satisfied that a concluded and enforceable agreement was reached between the brothers by the end of that September 1999 meeting notwithstanding that.
I am satisfied and find that the meeting ended by Antonio Graziano indicating that he would get documents prepared to reflect what they had agreed for signing by both he and his brother Bruno. I am satisfied and find that Bruno agreed to that course.
I am satisfied and find that after the meeting Antonio Graziano immediately acted to put into effect some of the agreed terms.
I am also satisfied and find that there was a further meeting about a week later on the next Saturday night after the first meeting. That was a much shorter meeting than the first. I am satisfied and find that the principal matter discussed was whether Antonio Graziano would immediately write a cheque to Bruno Graziano in the sum of $200,000 so that he, Bruno, might effect the purchase of a property that he was considering buying. I am satisfied and find that Antonio Graziano indicated that he would not do so until the paperwork was finished and signed, but he would take some action. I am satisfied and find that neither brother considered that that in any way affected the terms they had agreed on the week before.
I am satisfied and find that Antonio Graziano took immediate action to pay out Bruno Graziano’s car and started the process to ensure that “charges” over Bruno Graziano’s land and property at Brighton and his $150,000 deposit could be discharged. He did that by causing ABC Lending to pay $3million to the Commonwealth Bank so that those securities would be released consistent with some of the terms of the agreement they had reached. I find that that was done by Antonio Graziano in part performance of the agreement the two brothers had concluded. I reject Bruno Graziano’s evidence that he arranged for the bank to release his securities.
I am satisfied and find that by the conclusion of the first September meeting and the second September meeting between Antonio and Bruno Graziano the two brothers had agreed on the terms by which Bruno would exit the partnership group and that the only remaining thing to do was for those terms to be committed to writing for the signature of them both.
It is difficult to say what happened in Bruno Graziano’s mind after the September 1999 meetings such that by December of that year he told his brother in a telephone conversation that there was no agreement. I am satisfied that that telephone conversation occurred in December 1999 and I am not troubled by the fact that the defendant’s case was Opened on the basis that that telephone conversation occurred in October 1999. There is no doubt in my mind that Bruno Graziano told his brother that there was no agreement. I just do not know, and cannot find, why it was that he told him that. I am satisfied and find that at that time Bruno Graziano knew that an agreement had been reached between him and his brother. It may be that after ruminating about the matter he convinced himself that as a person who had been a partner with his brother for many years he was entitled to know how much money his brother had won on X-Lotto. Maybe someone told him that if he could find out that his brother had won more than his brother had told him that he had put into the business he could then, but only then, be satisfied that his brother had not defrauded him and that the parlous financial situation that the partnership group appeared to be in in the middle of 1999 was explicable by normal commercial difficulties and setbacks. Whatever the reason may have been, Bruno Graziano satisfied himself at the end of 1999 that his brother had cheated him. He still seems to hold that view.
I am satisfied and find that Antonio Graziano never cheated his brother Bruno. I am satisfied and find that Antonio Graziano was attempting between June 1999 until they reached an agreement in September 1999, to allow Bruno Graziano to exit the partnership group in a way that would relieve him of all debt, release all the security that he had given to the bank, and give him in addition a significant sum of money. I am satisfied and find that what Antonio Graziano offered his brother Bruno to exit the partnership group, and what his brother accepted, reflected a financial position of the partnership group in a far more favourable light than it actually was. In other words, on the evidence before me and which I accept, the agreement that was reached between the two brothers significantly favoured Bruno Graziano, if one was attempting to reflect half the value of the partnership group. I am satisfied and find that what the brothers agreed to was to Bruno Graziano’s significant advantage, if compared to that which he would have been entitled if the partnership group had been properly valued. If the group had been liquidated Bruno Graziano would have likely received nothing, other than significant debt.
I find that the defendant succeeds on his counter-claim. I would make the orders sought by him in his counter-claim.
I shall, however, allow the parties to speak to what orders should flow from these reasons, including questions of costs.

Insured	Sum Insured	Premium	Expiry Date	Plan
001	$1,250,000	$2,475.00	04/11/2037	TERMLIFE
001	$500,000	$610.50	04/11/2017	T&PD
002	$1,250,00	$2,623.50	15/04/2036	TERMLIFE
002	$500,00	$686.40	15/04/2016	T&PD