Kelly v Kelly

[1989] HCATrans 191

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Adelaide No Al2 of 1989

B e t w e e n -

MARGARET WENZ KELLY

Applicant

and

PETER TERRENCE KELLY

Respondent

Application for special

leave to appeal

MASON CJ DAWSON J GAUDRON J

Kelly

TRANSCRIPT OF PROCEEDINGS

AT ADELAIDE ON WEDNESDAY, 23 AUGUST 1989, AT 2.38 PM

Copyright in the High Court of Australia

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MR H.C. WILLIAMS, QC:  May it please the Court, I appear with

MR M.A.W. BIRCHALL for the applicant. (instructed

by Brown Aston & Hamilton)

MR R.D. LAWSON, QC:  May it please the Court, I appear with

my learned friend MR H.J.F. TRELOAR for the

respondent. (instructed by Mollison Litchfield)

MASON CJ: Yes, Mr Lawson.

MR WILLIAMS: If the Court pleases - - -

M..ASON CJ:  Mr Williams, I do not want to interrupt you, but

it did seem to us it might be more appropriate if
we heard from the respondent in the first instance

in this matter.

MR WILLIAMS: If the Court pleases.

MR LAWSON:  If the Court please, the one question sought to be

onus by requiring the plaintiff to

agitated in the grounds of appeal, is that the reversed the

prove an implied agreement that the fishing licence

with the abalone permit became a partnership asset.

It is suggested that the Full Court should have

applied section 21 of the PARTNERSHIP ACT.

MASON CJ: Well, there seems to be something to be said for

that point of view, does there not?

MR LAWSON:  In my submission, no. The learned Chief Justice

mentione~ on two occasions in the judgment, that

there was no legal presumption in relation to this

matter whereas, of course, section 21 does give

rise to a presumption.

MASON CJ: Yes.

MR LAWSON:  If I could take the Court to the bottom of page 37

of His Honour's reasons, at about line 19:

Whether the property of a pcrtner becomes

partnership property depends on the agreement

between the parties -

His Honour refers to O'BRIEN V KOMESAROFF.	At
line 25:

There is a presumption of law, albeit a

rebuttable presumption, contained in section 21

of the PARTNERSHIP ACT with respect to preperty

bought with money belonging to the firm and

the authorities contain principles which provide
useful guidance to courts in determining what
the parties must be taken to have agreed in

other commonly occurring situations.

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Where the learned Chief Justice goes on to say

in this particular case there are no legal presumptions,

he is not suggesting that there is no presumption in
section 21 of the PARTNERSHIP ACT where, clearly,
there is a presumption tha~ unless the contrary
appears, property bought with money belonging to

the partnership is property bought on account of

the firm. What His Honour is saying:

There is a presumption ..... in section 21 -

but in relation to other cases -

the authorities contain principles which

provide useful guidance to courts in

determining what the parties must be taken

to have agreed.

Where His Honour says:

I suppose that it was these presumptions and

principles which Menzies J. had in mind

when he stated in HARVEY V HARVEY supra at 553

that in the absence of express agreement "the

problem can, I think, only be determined by

the application of general principles".

Now, the reason why the court did not address

section 21 in this context, if the Court pleases,

was that it was not suggested that the respondent's

fishing licence with the abalone permit had been

bought with partnership funds. The licence and

the permit had been initially acquired, or obtained,

before the partnership was established and, in my

submission, obtained by reason of the personal

qualifications and attributes of the applicant -

not by reason of the payment of the fee.

MASON CJ:  What about the authority?

MR LAWSON:_ The authority is something, Your Honour, that is

attached to the fishing licence and, again, was

something that could only be obtained by reference

to the qualifications and attributes of the person

who held the fishing licence. He, alone, could

exercise the right to fish; he could not delegate

to anyone else; it was he who had to subject himself

to the medical examination.

MASON CJ:  But does that mean it could not become partnership

property?

MR LAWSON:  At the time, Your Honour, when the partnership

was formed, it could not become partnership property.

Subsequently, the legislative regime changed and

abalone permits had a de facto transfer value; they

could be surrendered for value. But, at the time

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the partnership was formed and at the time it was

suggested the permit went into the partnership, the

regime did not permit that. That was discussed by

the learned primary trial judge in quite some detail.

MASON CJ:  But at the relevant time, in relation to the

authority, the authority was capable of transfer, was

it not?

MR LAWSON:  It was capable of surrender for value to someone who would take it out.

MASON CJ: There was no suggestion, was there, that it would be

inconsistent with legislative provision or policy

for the individual to hold the authority on trust for, or

for the benefit of the partnership?

MR LAWSON:  No, Your Honour, other than this: it was not a

species of property which - I will put it another

way. ~iven that it was capable of being held for

the benefit of a partnership, the court held - and

that is what the Full Court held - that the parties

had not, in fact, intended to devote it to the

partnership. Now, it is suggested that by reason

of section 21 - this is the only ground sought to be

agitated - when the partnership paid the annual

renewal fees it was acquiring the asset.

Now, in my submission, that could not be so.

The partnership was merely paying the annual outgoing;

it was not acquiring any capital asset. There were

quite a number of factors which the Full Court took
into account to indicate that, in this particular
case, these partners had not devoted this particular

licence to the partnership.

MASON CJ: Is the authority granted annually, for one year at

a time?

MR LAWSON:  Yes, it is, if Your Honour pleases. It is granted

annually but, in effect, it is renewed. There are

cl- limited number of authorities - only six, in

existence and the holder of a permit, and later an

authority, is entitled each year to renew and to

obtain another one.

MASON CJ:  And the annual fee is a payment for the privilege,

is it?

MR LAWSON: It is.

MASON CJ:  But the authority confers - - -

MR LAWSON: It is - - -

MASON CJ:  - - - and the partnership paid for that?

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MR LAWSON:	The partnership paid for that;	It paid, in my

submission, a fee by way of annual outgoing rather

than a capital payment in each year for the

acquisition of an asset of only one year's duration.

MASON CJ: Leaving aside the precise terms of section 21:

section 21 contains the word "bought" and the word

"bought" may be inappropriate to signify what

occurred in relation to this particular authority,

would there not be a general principle that, if

partnership funds were paid for an annual licence

that there was a prima facie presumption that that

annual licence was partnership property?

MR LAWSON:	In my submission, it depends upon the nature of the licence. If, for example, it was a licence to
quarry or to exploit some resource which could be
exploited by a partnership, it might be suggested
that that would become a partnership property.
MASON CJ:	But is this not a privilege to exploit a resource,

an abalone fishery?

MR LAWSON:  It is something that is peculiar to the individual

who holds it. It can only be exploited by that

individual; it is granted to the individual by
reason of the attributes that he, himself, has and

the qualifications.

DAWSON J:  But when there was a change in the regulations it

was a transferable asset in a sense, was it not?

MR LAWSON:  It was something that he could surrender to

another but no one else could exploit it: he could

not employ others to do it - - -

DAWSON J: No., but it was property;. it was found to be

property.

MR LAWSON: It was a valuable right, yes.

DAWSON J: _~ell me, when it was first acquired it was not,

~€rhaps, property, is that right - when the authority

was first acquired? Was anything paid for it at

that time?

MR LAWSON: Well, only the initial fee to obtain a licence.

DAWSON J:  Fee for the yea:r: Th~n when, th~ reg1.,11a_t:ions

changed it became a very valuable thing but because,
in a sense it was transferabl~ but no further amount

was paid.

MR LAWSON:  Each year - - -

DAWSON J: Yes, I appreciate that but - - -

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MR LAWSON:  No, but, there was no process, for example, of

tender for the licences; it was quite different to
the rock lobster permit which this partnership did

own and which had acquired for very substantial

consideration.

DAWSON J:  But there was a change in the regulations which

meant that the abalone authority became assimilated

to the rock lobster authority, was there not?

MR LAWSON:  More assimilate~ but not directly.

DAWSON J: It then meant that he could agree to surrender it

for consideration given by someone else who would

then take it up.

MR LAWSON:	He could, Your Honour.
DAWSON J:	So, he then acquired, by paying nothing, a very

valuable right upon the change of those - or someone

did - upon the change in the regulations, is that

right?

MR LAWSON:  He acquired that by reason of the fact that he, himself, had always held a fishing licence with a permit.

DAWSON J: Whoever held it. acquired a windfall at that point,

is that right?

MR LAWSON:  Well, yes. What he had before went up in value.

DAWSON J: Yes, that is all I wanted to know.

MR LAWSON:	The partnership - the number of factors - - -
DAWSON J:	And the partnership had been paying the annual

fee before that.

MR LAWSON:  Yes. The partnership always paid the annual fee

but, in my submission, the mere -

DAWSON J: That was all there was to pay in relation to an

abalone authority up to the point of the change in the

regulations.

MR LAWSON: That was, if Your Honour pleases. But, just as a

solicitor's right to practise his profession is,

certainly in this State, subject to an annual licence

fee - usually paid by a partnership; just as a
driver's licence is something issued to an

individual and may be paid by a firm or a partnership,

it does not, in my submission, suggest that the

permit itself - a personal permit of that kind,
notwithstanding that it has value, gives the right

to earn a livelihood, becomes partnership property.

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There were three questions addressed to the

Full Court which were urged as giving rise to the implication that this licence and authority had

become partnership property. They were dealt with

by the learned Chief Justice at page 39 line 18.

They were the fact that an annual fee was paid, at

line 22; the fact that the small aluminium boat from

which the respondent fished was the partnership
property and, secondly, the fact that another licence

for rock lobster was a partnership asset because it

had been acquired out of partnership funds.	Each
was addressed.

DAWSON J: :!:f I can interrupt you there. The only reason the abalone licence

-was not acquired out of partnership funds, you nay assurre, -was

because you did not need to pay anything for it

originally, except the annual fee.

MR LAWSON:  You could not acquire it by any means other than

by exhibiting certain personal qualities.

DAWSON J: Yes, all right.

MR LAWSON:  It was said at line 4 on page 40 that:

the respondent had previously used his

abalone permit for the benefit of the

partnership and it was to be expected that he

would use the authority in the same way.

This was upon the change of the legislative regime.

As he proposed to exercise his rights for the benefit of the partnership, the fact that the

authority was obtained in respect of a

partnership boat and that the fee was paid by
the partnership is entirely consistent with

the respondent's retention of the beneficial

interest in the authority as his separate

property.

Jn my submission, that proposition is correct and

where His Honour said, at line 22:

There being no express agreement with respect

to the respondent's fishing licence and abalone
authority and no legal presumption applicable to

the situation, I consider that the Court should

imply an agreement between the parties that

the respondent's licence and authority be

partnership property only if circumstances

compel that conclusion.

GAUDRON J: Well, that is the real question, is it not?

MR LAWSON:  Yes, but it is certainly not the legal question

that is identified in the notice of appeal, with the

greatest respect, and there is no legal -

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Kelly
GAUDRON J: Well, it may be wider than it, but it comprehends

the issue raised.

MR LAWSON: Well, what is suggested in the notice of appeal,

in the grounds of appeal, is that where His Honour

said, "there was no legal presumption" he overlooked

the fact that section 21 does contain a legal

presumption. He had not overlooked section 21

because it had not been suggested. In my submission,

it was not the case that the mere payment of the

annual fee was the acquisition of any asset by the

partnership. I am reminded I should have

answered Your Honour the Chief Justice's question

slightly differently before.. What happens each year

is a renewal of a licence, under the regulation; it
is not the grant of a new licence. Each year the

licence is renewed ll is not merely a question of

one being entitled by reason of having held a

licence to apply for a new one, one's licence is

renewed.

In this case, if the Court pleases, the

partnership agreement specifically •

provided - this appears from page 4 of the appeal

book at line 20:

"that the capital of the partnership shall consist

of such stock, plant, cash and other assets
as either partner with the consent of the
other shall from time to time contribute for

capital purposes". It stated that "all such

stock, plant, cash and other assets shall be
credited in the books of account of the
partnership to the capital account of the

partners or partner providing the same".

In this particular case, the value of the authority

was never credited to the accounts; the authority
and its value was not brought into the partnership.

It should not lightly be suggested, in my submission,

that a man's right to ply his trade should be

g.e.voted to a partnership enter::,rise without him
d~recting his mind to it and	thout him being

credited for the value of it. That was a factor

which the Full Court took into account and there

were a number of other factors.

In my submission, the suggested error of a

failure to apply correctly a legal presumption in

the notice of appeal does not give rise to any

special leave point. I will not mention the other

factors, some of which relate to the legislative

regime and many of which relate to correspondence

between the parties and evidence which gave rise to

the implication that, in this particular case, these

particular parties had not devoted this particular

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authority to the partnership. When I say "devoted",

had not, as it were, corrnnitted it to the partnership.

They are all matters of fact, all found by both the

trial judge and by the Full Court, and should not be

the subject of special leave. If the Court pleases.

MASON CJ:  Thank you, Mr Lawson. The Court need not trouble

you Mr Williams, there will be a grant of special

leave to appeal in this case.

AT 2.58 PM THE MATTER WAS ADJOURNED SINE DIE

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