Johnson v Kostos No. Scciv-02-500 - [2003] SASC 19

JOHNSON v KOSTOS
[2003] SASC 19
Civil

MULLIGHAN J The plaintiff claims that she and the defendant carried on the business known as “Books 4 Less - Glenelg” from 1^st October 2000 until 16^th January 2002 when the partnership was dissolved. She seeks various orders, including that there be an inquiry as to the assets and liabilities of the partnership as at the date of dissolution and the whereabouts of the assets and an account of all of the dealings and transactions of the partnership, including as between the partners.
There is no dispute that the business was conducted by a partnership during this period, that it was dissolved on 16^th January 2002 and that there should be an account of inquiry as sought. The only matter in dispute is that the plaintiff was a member of the partnership. The defendant alleges that she was in partnership with the plaintiff’s husband, not the plaintiff.
At all material times the plaintiff was employed on a full time basis by a brewery as an area manager in sales and marketing. She has been married to Mr Johnson for a little over 14 years. At that time he was the managing director of Johnson Fabrics House Pty Ltd which carried on a business of selling fabrics known as Johnson’s Fabrics. At one stage it operated 12 shops in South Australia. During the 1990’s the business had financial problems and the company went into liquidation during 1999. Mr Johnson had personally guaranteed some of the liabilities of the company. Eventually he was pursued by some creditors and became bankrupt in September 2002. He did not have what were described as personal debts, meaning debts not associated with Johnson’s Fabrics.
Mr Johnson had known Mr Savvas, who is the father of the defendant, for about 13 years. During the mid 1990’s Mr Savvas commenced to operate a retail book business. He and Mr Johnson had discussions from time to time about matters of business and eventually in July or August 1999 about opening a retail book business in Queensland. Mr Savvas proposed that this business be operated for a short period to take advantage of the Christmas trade.
He asked Mr Johnson to be involved. At that time Mr Johnson was without income following the closure of Johnson’s Fabrics and had debts due to guarantees which he had given with respect to liabilities of the company.
There were further discussions between Mr Johnson and Mr Savvas and eventually they agreed that Mr Johnson would work in the new business in Queensland as an equal partner with Mr Savvas and a woman whom he knew as Voula. It is necessary for present purposes to mention only a few matters about the business in Queensland. It operated from one shop in Brisbane. The three partners all worked in the business and drew a wage of $500 per week. Mr Johnson and Voula worked long hours in the shop. Another shop was opened at Logan…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2003] SASC 19
Decision Date: 7 February 2003

CaseChat Overview and Summary

In the matter of Johnson v Kostos, the plaintiff sought an account and inquiry into the assets and liabilities of the partnership known as Books 4 Less - Glenelg, as well as the whereabouts of the assets and an account of all dealings and transactions of the partnership. The defendant contested the plaintiff's membership in the partnership, claiming that the partnership was between her and the plaintiff's husband instead. The court found that there was a partnership between the plaintiff and the defendant, and that the plaintiff was a legitimate partner in the business.

The court's decision was based on a number of factors, including the plaintiff and defendant's joint registration of the business name, their joint participation in obtaining a bank account and credit card facility for the business, and their joint registration with the Australian Taxation Office and other government agencies. Additionally, the plaintiff's husband had testified that the plaintiff had agreed to enter into the partnership in order to protect her husband's interests from his potential creditors. The court also found that the defendant had agreed to the plaintiff's participation in the partnership, and that there was no credible evidence to the contrary.

The court rejected the defendant's arguments that there was no intention on the part of the plaintiff and the defendant to enter into partnership, that the defendant had only acquiesced in the appearance of the partnership being between the plaintiff and the defendant, and that there was no evidence of a contract between the plaintiff and the defendant. The court found that the plaintiff had contributed capital to the partnership by acquiring Mr Savvas' interest, and that the registration of the business name was evidence that the plaintiff and the defendant carried on business in partnership.

Ultimately, the court found that the plaintiff and the defendant were the partners in the partnership which conducted the business of Books 4 Less - Glenelg, and entered judgment in favour of the plaintiff. The court ordered an account and inquiry into the assets and liabilities of the partnership, as well as the whereabouts of the assets and an account of all dealings and transactions of the partnership.

Orders