L and H Group v White
[2017] VSC 188
•26 April 2017
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
JUDICIAL REVIEW AND APPEALS LIST
S CI 2016 01841
| L & H GROUP (a Limited Partnership) | Plaintiff |
| v | |
| CLYDE PETER WHITE and DAVID CHARLES QUIN in their capacity as Trustees of the Bankrupt Estate of Mr John Stanley Young | Defendants |
---
JUDGE: | DALY AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 12 December 2016 |
DATE OF JUDGMENT: | 26 April 2017 |
CASE MAY BE CITED AS: | L & H Group v White and anor |
MEDIUM NEUTRAL CITATION: | [2017] VSC 188 |
---
PARTNERSHIP – Appeal from decision of a Magistrate pursuant to s 109 of the Magistrates’ Court Act 1989 (Vic) – Company director provided a guarantee of debts owing by the company to a limited partnership – Composition of partnership in contractual documentation different from the partnership bringing the proceeding – Whether limited partnership properly sued the guarantor in the firm name – Partnership Act 1958 (Vic) Part 3 – Whether certificates under s 58 of Partnership Act conclusive evidence of the limited partnership and its members.
CIVIL PROCEDURE – Whether guarantor made admissions as to the plaintiff’s status as a party to an agreement – Whether learned Magistrate erred in finding that the plaintiff had no standing to sue on that agreement – Whether learned Magistrate erred in failing to stay proceeding to enable plaintiff to join parties – Spotless Pty Ltd v NCON Australia Pty Ltd [2012] VSCA 271 referred to.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D G Robertson QC with Mr M T Lapirow | Davies Moloney |
| No appearance for the Defendants | ||
| Amicus Curiae | J Kenny | Kalus Kenny Intelex |
TABLE OF CONTENTS
Factual Background........................................................................................................................... 1
Bankruptcy Orders............................................................................................................................. 2
The Decision Below........................................................................................................................... 2
Orders of Lansdowne AsJ................................................................................................................. 6
Notice of Appeal................................................................................................................................. 6
The Hearing Below............................................................................................................................ 8
Submissions of L & H Group upon appeal................................................................................ 10
Letter from Kalus Kenny Intelex................................................................................................... 13
Consideration.................................................................................................................................... 16
HER HONOUR:
The appellant in this proceeding (‘L & H Group’) has appealed to this Court under s 109 of the Magistrates’ Court Act 1989 (Vic) (‘Magistrates’ Court Act’) a decision made by the Magistrates’ Court on 26 February 2016. For the reasons which follow, the decision of the learned Magistrate should be quashed and the orders sought by L & H Group substituted for those made below.
Factual Background
Railway Works Products and Services Pty Ltd (‘Railway Works’) is the trustee for Railway Unit Trust (together, ‘the company’). Mr John Young was the director of the company.
L & H Group entered into an agreement with the company on or about 8 April 2014 (‘agreement’), which required L & H Group to provide electrical goods to the company. Pursuant to the agreement, L & H Group offered to provide credit to the company. The agreement was premised upon Mr Young giving a guarantee over the debts of the company pursuant to the agreement (‘guarantee’), which he did. The guarantee included a term whereby Mr Young provided L & H Group with a charge over his property to secure his indebtedness under the guarantee.
L & H Group says that the company is indebted to it in the amount of $64,429.95. A written demand for payment was made to Mr Young on 1 December 2014. Mr Young failed to pay, and on 8 January 2015, L & H Group issued a proceeding in the Magistrates’ Court at Melbourne.
There was ultimately no dispute that the guarantee given by Mr Young was valid. However, the learned Magistrate found that L & H Group had no standing to bring the action, for reasons discussed more fully below.
Bankruptcy Orders
The matter was heard before the learned Magistrate on 20 November 2015, with orders being made and reasons provided on 26 February 2016. In the intervening period (namely, on 2 February 2016), Mr Young was declared bankrupt. Orders were made by a registrar of the Federal Circuit Court sequestering Mr Young’s estate, with the act of bankruptcy having occurred on 2 November 2015. The defendants in this proceeding (‘trustees’) did not appear to defend this appeal.
As Mr Young is now bankrupt, the commercial significance of this appeal concerns whether Mr Young, by reason of the agreement and the guarantee, has provided L & H Group with a charge over real property owned by him. An application by L & H Group to the Court of Appeal seeking leave to appeal orders made by Rush J removing a caveat lodged by L & H Group over a property said to be beneficially owned by Mr Young has been in abeyance pending the outcome of this appeal. The outcome of this appeal will affect whether L & H Group is a secured creditor, or an unsecured creditor of Mr Young.
The Decision Below
The validity of the guarantee and the quantum of the claim were ultimately not in question in the proceeding below. Rather, the learned Magistrate noted that there was only one issue remaining in dispute before him: whether L & H Group had standing to bring the proceeding. L & H Group had pleaded in paragraph 1 of its statement of claim, as follows:
The plaintiff is a limited partnership registered pursuant to the Partnership (Limited Partnerships) Act 1992 and is capable of suing or being sued.
Mr Young did not admit this allegation in his defence. In support of this allegation at trial, L & H Group tendered into evidence two certificates issued under s 58 of the Partnership Act 1958 (Vic) (‘Partnership Act’). The first of the certificates is titled, ‘Certificate of Registration of a Limited Partnership’.[1] It certifies that ‘L&H Group’ was registered as a limited partnership pursuant to the Partnership (Limited Partnerships) Act 1992 (Vic) on 30 August 2000. The second certificate is titled ‘Certificate of Composition of a Limited Partnership’.[2] This certificate states that L & H Group was composed, as at 12 March 2013, of Lawrence & Hanson Group Pty Ltd (‘Lawrence & Hanson’) as general partner and Sonepar Asia Pacific Limited (‘Sonepar’) as limited partner.
[1]Exhibit ‘CFM-12’ to the affidavit of Colman Francis Moloney sworn 6 September 2016.
[2]Exhibit ‘CFM-13’ to the affidavit of Colman Francis Moloney (6 September 2016).
However, the guarantee upon which L & H Group sues does not refer to Sonepar: it states that the seller is L & H Group, a limited partnership carried on by Lawrence & Hanson and an entity named ‘Carlow S.A.S.’. Due to the difference in the named entities said to constitute the partnership in the certificates referred to above (‘s 58 certificates’) from the entities referred to in the agreement and the guarantee, the learned Magistrate queried whether there was a partnership with legal status, capable of suing upon the agreement and the guarantee.
At the hearing below, after hearing evidence and submissions, the learned Magistrate rejected all of Mr Young’s defences. However, when the solicitor for Mr Young identified the difference between the partners referred to in the s 58 certificates and the partners referred to in the agreement and the guarantee, the learned Magistrate expressed concerns about whether L & H Group had standing to sue under the agreement and the guarantee. He heard further argument on the matter, and directed the parties to file and serve written submissions on the question.
His Honour said, in his reasons delivered on 26 February 2016, that, ‘[c]ritically in my opinion, a limited partnership only acquires legal personality in accordance with s.52 of the Partnership Act. Section 52 provides as follows:
How formed
A limited partnership is formed on the registration of the partnership under this Part as a limited partnership.
Section 52 is found within Part 3 of the Partnership Act. Part 3 was introduced by the Partnership (Limited Partnerships) Act 1992 (Vic). Within Part 3, s 50 requires that there be at least one general and one limited partner in a partnership. Division 3 of Part 3 sets out the registration process. An application stating basic information about the partnership must be signed by each partner and lodged with the Director[3] (s 54). The Director must register a partnership if the application under s 54 is validly made (s 55), subject to some exclusions which are not relevant here. The register of partnerships is maintained by the Director under s 57.
[3]‘Director’ is defined as the ‘Director within the meaning of the Fair Trading Act 1999 (Vic).’
Section 56 allows for changes in the registered particulars of a limited partnership. That provision requires a statement of the changes to be provided to the Director within seven days of the change occurring.
Significantly for the contentions of L & H Group, both in the hearing below and upon the hearing of the appeal, s 58 provides for conclusive evidence of partnership particulars by the issuance of a certificate by the Director. Sections 61 and 62 allow for changes in the liability and status of a partner. Section 69 allows a limited partner to assign his or her rights to another, with the consent of the general partner(s).
The learned Magistrate referred to the provisions of the Partnership Act set out above, as well as the following rule of the Magistrates’ Court General Civil Procedure Rules 2010 (Vic) (‘Magistrates’ Court Rules’):
17.01 Partners
(1)If 2 or more persons carry on business as partners within Victoria, a proceeding may be commenced by or against them in the name of the firm (if any) of which they were partners when the cause of action accrued.
(2) Paragraph (1) applies if partners sue or are sued by—
(a)any partner of the same firm;
(b) partners of another firm, and any partner of the one firm is a partner of the other.
Having considered these provisions, the learned Magistrate reached the following conclusion:[4]
It is clear that change in the identity of the partners, the status of the partners and the liability of the partners general and limited in a limited partnership, can be achieved through notice and registration.
The problem for [L & H Group] is that at all relevant times there were only ever two parties in this partnership, at least according to the evidence. There is no evidence that Sonepar Asia Pacific Limited assigned its partnership rights and obligations to Carlo[w] SAS or that there was any change given by proper notice to the authorities in respect of Carlo[w] SAS.
If Sonepar SAS (sic) ceased to be a partner with Lawrence & Hanson Group Pty Ltd, then until such time as another entity entered into partnership with that company there was no partnership at all. The partnership which entered into the agreement to sell services to the principal debtor and which obtained the guarantee from the defendant is not an entity whose existence is supported by any certificate of registration as provided for under the Act. It is common ground that there is no evidence of assignment.
The defendant’s position therefore is that [L & H Group] cannot establish that at the time the action was commenced [L & H Group] had the legal personality to give it standing to sue. Proof of the existence and composition of a limited partnership can be demonstrated only through a certificate provided through the relevant provisions of the Act.
While therefore [L & H Group] is right in its submissions that as a general proposition, partners may change and the legal personality of the partnership or firm may continue, it is fundamental that a partnership must comprise at least two persons, natural or corporate. The provisions of the Act make it clear that any limited partnership can only exist upon registration in accordance with the Act. The defendant is clearly correct in its submission that there is no evidence that there was any change of partners after 12 March 2013 complying with the relevant provisions of the Act or any evidence of assignment of a limited partnership.
[4]At paragraphs 19 to 23 of the reasons.
The learned Magistrate found that, in the absence of compliance with Part 3 of the Partnership Act, L & H Group lacked standing:[5]
If there had been proper compliance with the Act in this respect [that is, registration of change of partners or assignment of interests] it would, I would suggest, be a simple matter for [L & H Group] to obtain a certificate of the registration of the partnership which now seeks to maintain the action given the very detailed and express provisions of the Act.
In the absence of such proof, [L & H Group] as currently styled, has not established that it has standing to maintain the action and the complaint must therefore be dismissed.
[5]At paragraphs 24 to 25 of the reasons.
Orders of Lansdowne AsJ
This proceeding was filed by L & H Group with this Court on 16 May 2016, along with a summons seeking leave to appeal pursuant to s 109 of the Magistrates’ Court Act.
Section 109(2) of the Magistrates’ Court Act requires an appeal to this Court to be brought within thirty days of the learned Magistrate’s order. Section 109(4) provides that an appeal brought after that time is ‘deemed to be an application for leave to appeal’. Such leave may be granted under s 109(5) if this Court:
(a) is of the opinion that the failure to institute the appeal within the period referred to in subsection (2)(a) was due to exceptional circumstances; and
(b)is satisfied that the case of any other party to the appeal would not be materially prejudiced because of the delay.
The summons was filed outside the thirty day time limit because it was necessary for L & H Group to obtain leave to proceed against the trustees, which was granted by the Federal Circuit Court on 19 April 2016.
On 16 June 2016, Lansdowne AsJ determined the application for leave to appeal under s 109 in favour of L & H Group. Her Honour was satisfied that the application was made after the expiry of the thirty day limit because of the timing of the bankruptcy order, which was an exceptional circumstance. There was said to be no prejudice to the trustees, on the basis that the trustees were notified of the application, stated that they neither consented nor objected to the appeal, and did not appear her Honour.
Notice of Appeal
The orders made by Lansdowne AsJ on 16 June 2016 granted leave to appeal on certain questions of law set out in the draft notice of appeal dated 16 May 2016. These questions may be summarised as follows:
(a) whether L & H Group sufficiently proved its status as a limited partnership by tendering the s 58 certificates;
(b) whether, having regard to that evidence, the admissions of Mr Young in his defence, and the absence of any other live issue in the proceeding, judgment ought to have been given in favour of L & H Group; and
(c) alternatively, whether the learned Magistrate ought to have stayed the proceeding to permit the joinder of the appropriate parties, in the event that his Honour’s findings as to the partnership were otherwise correct.
L & H Group’s grounds of appeal contend that the learned Magistrate erred by:
(a) failing to accept L & H Group’s status as a limited partnership in light of the conclusive nature of certificates under s 58 of the Partnership Act;
(b) allowing Mr Young to contend, in effect after the close of evidence, that L & H Group was not the seller referred to in the agreement, when this allegation was not pleaded in his defence was raised after the close of evidence, and was inconsistent with the admissions in his defence;
(c) failing to act on the admissions in Mr Young’s defence that L & H Group was party to the supply agreement and supplied the goods to the company;
(d) mistakenly implying (in paragraph 24 of the reasons) that Lawrence & Hanson and Carlow SAS sought to maintain the action, when L & H Group’s submissions explicitly asserted that L & H Group consisted of Lawrence & Hanson and Sonepar; and
(e) alternatively, if the learned Magistrate’s reasoning was correct, the learned Magistrate erred in dismissing the proceeding and failing to give L & H Group an opportunity to join appropriate parties pursuant to order 9 of the Magistrates’ Court Rules.
L & H Group’s proposed minutes of order provide, first, that the appeal be allowed, and the orders of the learned Magistrate be set aside. L & H Group does not seek orders remitting the dispute to the Magistrates’ Court, but rather orders in lieu of those made by the learned Magistrate are proposed, declaring Mr Young to be indebted to L & H Group in the sum of $67,055.20, together with statutory interest. L & H Group also seeks the costs of the proceeding below, and the grant of an indemnity certificate in respect of its costs in the appeal to this Court pursuant to s 7 of the Appeal Costs Act 1998 (Vic).
The Hearing Below
Before turning to the questions on appeal here, it is necessary to recount in some detail what occurred at the hearing before the learned Magistrate. Unfortunately, there are frequent gaps in the transcript of the hearing below, which have been addressed in part by a reconstruction of the transcript of the hearing by L & H Group’s solicitor.[6]
[6]See exhibit ‘CFM-8’ to the affidavit of Colman Francis Maloney sworn 12 July 2016.
At the hearing, Mr Young’s solicitor began by contending that the guarantee document contained a charge which was ‘hidden’, the effect being that Mr Young did not realise the effect of the document. Mr Young gave evidence from the witness box that he understood it to be a guarantee only (that is, it did not contain a charge over his property). The learned Magistrate found that the document was clear, that Mr Young was capable of understanding the document, and that he was bound by the terms of the guarantee.
It was also submitted on behalf of Mr Young that the agreement was, in fact, no guarantee at all, in that there was no promise by Mr Young in the required form. The learned Magistrate found that the document did, in fact, constitute a guarantee.
Moving to the issues relevant in this appeal, Mr Young’s solicitor submitted that L & H Group had to prove that it was capable of suing and being sued in its own name. Counsel for L & H Group tendered the s 58 certificates and referred to Part 5 of the Partnership Act, which counsel submitted authorised the general partner (namely, Lawrence & Hanson) to take action in the name of the partnership.
Mr Young’s solicitor argued that the entities which entered into the agreement and the guarantee in April 2014 were not those listed on the s 58 certificates. There was nothing in the Partnership Act, he submitted, which indicated that the partnership continued to exist when the identity of the partners changed. The s 58 certificates did not establish that Lawrence & Hanson and Sonepar ever properly entered into a partnership.
The parties made further written submissions at the invitation of the learned Magistrate.[7] L & H Group’s submissions noted that r 13.02 of the Magistrates’ CourtRules prohibited Mr Young from relying upon what L & H Group referred to as a ‘hidden’ defence, being a defence which is not made clear in the pleadings. That rule required Mr Young to specify in his defence why the action was not maintainable, which he had not done. L & H Group submitted that the defence therefore ought not have been entertained.
[7]These submissions concerned, as stated in the first paragraph of L & H Group’s submissions, legal status of L & H Group for the purposes of: (a) being able to enter into contractual relationships; (b) being able to commence proceedings in the Court for contractual relief; and (c) whether any change made to the pleaded partnership would have an impact on the liability of the remaining defendant to the claims.
In its written submissions, L & H Group also pointed to admissions made by Mr Young in his defence which, according to L & H Group, impliedly recognised L & H Group as the relevant party to the agreement and the guarantee. L & H Group also noted that the application to the Court was brought in the name of the partnership, not in the name of the individual partners.
L & H Group pointed to three characteristics of the statutory scheme establishing and regulating limited partnerships: first, a limited partner has limited liability and no power to control the conduct of the business. Secondly, a limited partnership continues as an entity even when there is a change, addition or substitution of a partner. Thirdly, a s 58 certificate is conclusive evidence of the formation and composition of a partnership. Further, L & H Group relied upon s 78 of the Partnership Act, which provides that the particulars as to the existence and the membership of a limited partnership on the register maintained pursuant to the Partnership Act is ‘sufficient notice of the fact or of the effect of the notice to all persons who deal with the partnership’.
In response, the solicitor for Mr Young submitted, in summary, that L & H Group was unable to point to any provision in the Partnership Act which provided for the continuation of the partnership entity after a change in partners. The partners listed on the s 58 certificates were not those referred to as constituting the seller in the agreement. When there is a change of partners, there is a new partnership entity. There was no evidence led of the change of partners or L & H Group’s ability to sue on the guarantee, which was executed by a partnership constituted by entities other than the entities referred to in the s 58 certificates.
In reply, L & H Group repeated its submissions that the partnership continues in existence upon a change in the partnership, pursuant to the Partnership Act, and ceases only in accordance with the Partnership Act.
Submissions of L & H Group upon appeal
In this Court, L & H Group’s argument boils down to three propositions. First, that the s 58 certificates prove the matter which was not admitted by paragraph 1 of the defence, being the legal existence and capacity of L & H Group. Secondly, the status of L & H Group as a party to the guarantee was admitted, by implication, by the terms of Mr Young’s defence, in particular, the admissions in paragraphs 2, 3, 4 and 5 of the defence. Thirdly, if in fact the learned Magistrate’s reasoning was correct, the proper outcome was for the learned Magistrate to provide L & H Group with an opportunity to join further parties, not to dismiss the proceeding.
As noted above, Mr Young did not admit the legal status of the plaintiff as alleged in paragraph 1 of L & H Group’s statement of claim. This put in issue the question of the legal capacity of L & H Group – its existence as a limited partnership capable of suing in its own name.
L & H Group says that any such question was resolved by the s 58 certificates tendered in evidence at the hearing below. It was said that these certificates ‘proved that limited partnership, L & H Group, L & H Group in the Magistrates’ Court and the present appellant, was registered as a limited partnership under the Act’.[8] To the extent that Mr Young wished to test the issue of the identity of the partners, that could have been done by making a formal request under Order 17 of the Magistrates’ Court Rules, which was not done.
[8]Paragraph 11 of L & H Group’s written submissions dated 9 August 2016.
The reasoning of the learned Magistrate is said by L & H Group to have been based on the erroneous assumption that L & H Group was required to prove a change in the composition of the partnership. L & H Group says that this is not the case, for two reasons. First, L & H Group relied upon, and was entitled to rely upon the admissions made by Mr Young in his defence, as referred to above. Second, L & H Group’s case in the Magistrates’ Court always proceeded on the basis that the partnership was comprised of Lawrence & Hanson and Sonepar.
L & H Group submitted that paragraph 20 of the learned Magistrate’s reasons found that it was these two entities – Lawrence & Hanson and Sonepar – which comprised the partnership, and that this finding should have been the end of the matter. This finding was consistent with L & H Group’s case. No question of assignment arose for consideration. The misdescription of the partnership entities in the agreement and the guarantee is beside the point, and the ABN was the same in the pleadings and the contractual documents.
L & H Group submits that it was therefore not open to the learned Magistrate to make the following finding in paragraph 21 of his Honour’s reasons:
The partnership which entered into the agreement to sell services to the principal debtor and which obtained the guarantee from the defendant is not an entity whose existence is supported by any certificate of registration as provided for under the Act.
During the course of the hearing of the appeal, the primary contention of L & H Group was that Mr Young’s liability to L & H Group under the agreement and the guarantee was admitted by Mr Young in his defence. In this respect, L & H Group submitted that Mr Young admitted the following facts in his defence:
(a) L & H Group entered into the agreement;
(b) L & H Group supplied the company with goods on credit;
(c) L & H Group made a demand to Mr Young for payment under the guarantee; and
(d) Mr Young signed the agreement on behalf of the company and executed the guarantee.
L & H Group says that the effect of these admissions was that the ‘position of the Appellant (L & H Group) as seller (and hence the entity entitled to the benefit of the guarantee) had been admitted’.[9] L & H Group was therefore both capable of suing in its own name, and was admitted by Mr Young to be the relevant partnership under the agreement.
[9]Paragraph 9 of L & H Group’s written submissions dated 9 August 2016.
Senior counsel for L & H Group submitted:[10]
[10]T29.
As the magistrate identified, the evidence showed that there was only ever the partnership which had been identified and the point which we make is that that was the partnership which it was admitted [by Mr Young] had done what was alleged in the material [pleadings];
and further, that:
So again there we rely on the fact that the admissions bound the magistrate to – and the parties to the proposition that it was the limited partnership consisting of the two entities which, as the learned magistrate recognised, were the only persons who have ever been partners in this, according to the evidence to the proposition, so there’s an admission that it is the partnership of Lawrence & Hanson Group Pty Ltd and Asia Pacific Sonepar, which was the limited partnership.
and later that, if Mr Young had denied that he had entered into an agreement with L & H Group:
Then an appropriate reply could have been framed and evidence could have been called addressing either some sort of rectification defence, if that was appropriate, or some other sort of argument as to the way in which commercial documents that should be interpreted in these sort of circumstances, the factual matrix surrounding the entry into the application for credit, who in fact supplied the goods, who in fact supplied the document, matters of that kind would have been in issue then, but they weren’t and that, we say, is the end of it.
Senior counsel for L & H Group also referred to rr 9.03 and 9.05 of the Magistrates’ Court Rules. Those rules prevent an application being defeated by reason of the misjoinder or non-joinder of a party. Such an irregularity ought to have been cured by a stay of the proceeding to allow joinder of the proper party or parties. This submission was made in the alternative, in the event that the learned Magistrate’s reasoning concerning the standing of L & H Group was found to be correct.
Letter from Kalus Kenny Intelex
Neither Mr Young nor the trustees appeared at the hearing of the appeal. Nevertheless, a letter from Mr Young’s solicitors to L & H Group’s solicitors (dated 7 March 2016) was provided to the Court by the former solicitors for Mr Young, Kalus Kenny Interlex, shortly prior to the hearing of the appeal. This letter was in response to a letter from L & H Group’s solicitors dated 4 March 2016, which stated that the basis of the learned Magistrate’s decision was not pleaded by Mr Young ‘in any way’, and is reproduced below.
I refer to your letter dated 4 March, 2016.
Your letter incorrectly asserts that the issue on which my client was successful was not pleaded by him in any way.
I note as follows:
1.My client’s defence did not admit the matters alleged in paragraph 1 of the statement of claim. The non-admission of the facts alleged put the matter in issue and required your client to prove its capacity to sue.
2.You were present during the hearing instructing Mr Lapirow of Counsel. You will recall that at the commencement of the hearing I informed the Court that my client was not contesting the quantum of the debt claimed, but that it was still for your client to prove its capacity to sue.
3.Your client then conducted the hearing on the basis that it had to prove its capacity to sue. Mr Lapirow tendered the 2 certificates as evidence on that issue.
4.It follows that your client accepted that it was required to do so by reason of the non-admission contained in paragraph 1 of the defence, and/or due to the matter being raised by me with the Court on that issue at the commencement of the hearing.
5.When the 2 certificates were tendered by Mr Lapirow, I immediately interrupted and rose to say that the partners disclosed by the certificates were not the partners defined as the ’Seller’ in the credit application and guarantee.
6.Mr Lapirow then made submissions to the Court about the law in respect to that very matter.
7.By doing so, Mr Lapirow accepted that issue was relevant and was an issue in the proceeding.
8.When the Magistrates asked for written submissions on the point, Mr Lapirow on behalf of your client, agreed and subsequently filed written submissions on the point, further acquiescing to the issue being in the ring.
9.Even if the issue was not pleaded, (which in fact it was) the case was conducted on the basis of both parties accepting that the issue, namely the capacity of the plaintiff to sue, was relevant to the determination of the case. We refer to you in that regard to the observations of Mason CJ and Gaudron J in Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 at 286 and 287.
Accordingly, the assertion that ‘there is an element of surprise in this decision because the matter on which Mr Young was successful was never pleaded by him in any way’, is not correct.
Accordingly, Mr Young’s solicitor, in the letter above, asserted that, even if the issue did not arise on the pleadings (which he said it did), the case was conducted on the basis that the question was relevant in determining the dispute. In this respect, Mr Young’s solicitor pointed to the following passage of Mason CJ and Gaudron J in Banque Commerciale SA, en Liquidation v Akhil Holdings Limited (‘Akhil Holdings’):
The function of pleadings is to state with sufficient clarity the case that must be met…. In this way, pleadings serve to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision. The rule that, in general, relief is confined to that available on the pleadings secures a party's right to this basic requirement of procedural fairness. Accordingly, the circumstances in which a case may be decided on a basis different from that disclosed by the pleadings are limited to those in which the parties have deliberately chosen some different basis for the determination of their respective rights and liabilities.
Ordinarily, the question whether the parties have chosen some issue different from that disclosed in the pleadings as the basis for the determination of their respective rights and liabilities is to be answered by inference from the way in which the trial was conducted. It may be that, in a clear case, mere acquiescence by one party in a course adopted by the other will be sufficient to ground such an inference.[11]
[11]Ibid 286–7 (citations omitted).
While the trustees did not appear in this matter, Mr Young’s solicitor, (Mr Kenny) was present at the hearing before me and sought leave to make some submissions as amicus curiae. I granted that leave.
Mr Kenny reiterated the effect of the joint judgment in Akhil Holdings, referred to above, and that the question of capacity was in issue by reason of the non-admission in paragraph 1 of the defence. More specific pleadings were not possible in this case, it was said, because of L & H Group’s own failure to make discovery of the s 58 certificates prior to trial.
Mr Kenny submitted that the issue of the proper constitution of the partnership could not have taken counsel for L & H Group by surprise, because he tendered the s 58 certificates. No objection was taken before the learned Magistrate that the issue was not pleaded, and no application was made for the joinder of any party. The learned Magistrate requested written submissions because the issue could not be resolved at the hearing. It should have been obvious at that stage that the plaintiff had a problem.
Senior Counsel for L & H Group noted in response to this submission[12] that Akhil Holdings is, in fact, helpful to its own case because the Court emphasises the importance of pleadings.
[12]Albeit that his primary submission was that I should not take this letter into account.
Mr Kenny also noted that, to the extent the matters before the learned Magistrate could have been resolved by joinder of further parties, no such application for joinder was ever made by L & H Group.
Consideration
Appeals under s 109 of the Magistrates’ Court Act may only be brought upon a question of law. L & H Group’s submissions, and the orders made on 16 June 2016 granting leave to appeal out of time, seem to presume that the questions summarised in paragraph 23 above are in fact questions of law. The first question, being the proper construction and effect of the terms of s 58 of the Partnership Act, is, in my view, a question of law, although a respectable argument could be mounted that the learned Magistrate, in finding that the party which brought the proceeding was not the party to the agreement, was making a finding of fact which could only be impeached if it was ‘irrational, illogical, or unreasonable’.[13] However, I will give L & H Group the benefit of the doubt here, given that ‘conclusive evidence’ provisions such as s 58 of the Partnership Act have an important role to play in commercial affairs and the administration of justice.
[13]See Minister for Immigration and Citizenship v SZMDS (2010) 240 CLR 611, and Minister for Immigration and Citizenship v Li (2013) 297 ALR 225.
As for the other two questions, being L & H Group’s contention that Mr Young had made, and ought to have been bound by the admissions in his defence, and the alternative contention, that the learned Magistrate should have dismissed the proceeding, but rather should have stayed or adjourned the proceeding, properly analysed, these are really matters of practice and procedure. Accordingly, the only question of law which arises is whether the learned Magistrate failed to afford L & H Group procedural fairness, having in the forefront of my mind the well‑established principle that appellate courts are slow to interfere with an exercise of discretion in the absence of demonstrable error.[14]
[14]House v R (1936) 55 CLR 499.
Taking first the question of whether the learned Magistrate erred in considering the question of the standing of L & H Group to sue, two issues arise: first, whether L & H Group is correct in asserting that Mr Young’s defence, notwithstanding the non‑admission in paragraph 1 of Mr Young’s defence, impliedly admitted liability to L & H Group under the agreement and the guarantee, and secondly, if that was the case, would that have led to a different outcome.
I do not agree with the submissions advanced on the part of L & H Group that in admitting the allegations made by L & H Group to the effect that:
(a) L & H Group entered into an agreement;
(b) the terms of the agreement;
(c) that he signed the guarantee; and
(d) that L & H Group supplied goods to the company,
Mr Young must be taken to have admitted that L & H Group is a limited partnership within the terms of part 3 of the Partnership Act, and had standing to bring a proceeding against him to enforce the terms of the agreement and the guarantee.
The Magistrates’ Court is indeed a court of pleadings, and the Magistrates’ Court Rules[15] do impose an express obligation upon parties to articulate and particularise the grounds for any defences or non‑admissions. However, pleadings are not to read as if they are statutes. In the current case, it is tolerably clear that in his amended defence, Mr Young was putting L & H Group to its proofs on the question of its standing to sue, but subject to those proofs being made out, which one would reasonably anticipate would occur, he admitted certain factual matters concerning the existence and terms of the agreement, the execution of documents by him, and the performance of the agreement. As it happened, the evidence led by L & H Group to prove the allegations in paragraph 1 of its statement of claim was seized upon by the solicitor for the plaintiff as a basis for submitting that L & H Group did not have standing to sue, after the learned Magistrate made it clear that none of the other defences would succeed.
[15]Rules 13.02(4) and (5).
It was not put to the learned Magistrate during the course of the hearing that Mr Young had, in effect, admitted the standing of L & H Group to sue, although this assertion did make its way into L & H Group’s written submissions, provided after the hearing at the request of the learned Magistrate. But even if L & H Group’s contentions were correct, given that the learned Magistrate was clearly troubled by the question, it is hard to see how the process and the result would have differed. If admissions had in fact been made, Mr Young could have applied for leave to withdraw them, and to amend his defence, and in all likelihood, leave would have been granted. Such an exercise of discretion on the part of the learned Magistrate would have been close to unimpeachable. The fact that the process above was in effect truncated by the learned Magistrate does not really alter the position: the manner in which the trial was conducted again is ultimately a question of his discretion. L & H Group in its submissions certainly protested that Mr Young should not have been allowed to pursue the matter, but L & H Group had, and took, the opportunity to provide reasonably comprehensive submissions upon the issue. It did not seek the opportunity to lead further evidence on the point. It could be said that, while it did so under protest, L & H Group acquiesced in the trial proceeding as it did.
The latter point is also relevant to the alternative contention advanced upon behalf of L & H Group upon the appeal, being that, rather than the learned Magistrate dismissing the proceeding, he should have adjourned the matter to enable L & H Group to join further parties. L & H Group relied upon the terms of clause 9.05 of the Magistrates’ Court Rules, which provides that:
A proceeding must not be defeated by reason of the misjoinder or non-joinder of any party or person, and the Court may determine all questions in the proceeding so far as they effect the rights and interests of the parties.
There is no evidence of any application by L & H Group to adjourn the trial, or more accurately in the circumstances, to apply to re‑open its case. Accordingly, what L & H Group is contending in this appeal is that the learned Magistrate erred in law by failing to invite L & H Group to re‑open its case to remedy the deficiencies in its case. I doubt that is what r 9.05 is intended to facilitate or achieve, and the commentary upon the effect of the rule in Williams – Civil Procedure does not assist on this issue, but in any event, if the learned Magistrate had in fact done so on his own initiative, he may well have fallen foul of his obligation to be fair and impartial.
In Spotless Pty Ltd v NCON Australia Pty Ltd,[16] (‘Spotless’) the Court of Appeal found that a trial judge who, after the reservation of judgment, sent a memorandum to the parties stating that he proposed to reconvene the hearing to hear submissions on whether or not the plaintiff wished to apply to re‑open its case to rectify deficiencies in its evidence concerning loss and damage, was in error. The Court of Appeal referred to authorities to the effect that a party ought only be permitted to re-open its case in relatively limited circumstances, and said further, concerning the role of the trial judge in inviting a party to apply to re-open its case:
The memorandum also had, unfortunately, another consequence which his Honour could not have intended. It moved the judge uncomfortably close to the line, not to be crossed, which divides the Bench from the Bar table. An invitation, entirely unsolicited, issued to one party alone (in this instance, only the respondent could make submissions about whether or not it wished to reopen the question of its damages) and after each party has closed its case, inevitably appears to place the judge in the same general territory as one of the parties, while the other party is forced to occupy difficult ground. Since the other party could not respond to the question asked of the sole invitee, it would be forced to argue that, no matter what the invitee might want, the invitation should be withdrawn. Such an argument would not be as between party and party, but as between party and judge.
[16][2012] VSCA 271.
Accordingly, in circumstances where it is difficult to construe rule 9.05 in the manner contended for by L & H Group, and in the absence of any application by L & H Group to re-open its case and/or to join further parties, the learned Magistrate was not in error in dismissing the proceeding, rather than staying or adjourning the proceeding to enable L & H Group to in effect fix up its claim. Indeed, if he had done so, he may well have fallen into the trap referred to by the Court of Appeal in Spotless.
That leaves the question of whether the learned Magistrate erred in failing to accept the s 58 certificates as conclusive evidence of the existence and composition of the partnership at the relevant times: the relevant times being the making of the agreement, the making of the demand and the issuance of the proceeding, and the trial of the proceeding.
Section 58 of the Partnership Act provides as follows:
58 Certificates of registration etc.
(1)The Director, at the time of registering a limited partnership or of recording a change in the composition of a limited partnership, must issue to the general partners a certificate as to the formation and composition at that time of the limited partnership.
(2)The Director may, on application, issue to the applicant a certificate as to the formation and composition of a limited partnership or as to any other particulars recorded in the Register.
(3)A certificate under this section is to be in such form as the Director thinks fit.
(4)A certificate under this section—
(a)as to the formation of a limited partnership, is conclusive evidence that the limited partnership was formed on the date of registration referred to in the certificate; and
(b)as to the composition of a limited partnership, is (unless the contrary is established) conclusive evidence that the partnership consisted at the relevant time of the general partners and limited partners named in the certificate; and
(c)as to any other particular of a limited partnership recorded in the Register, is (unless the contrary is established) conclusive evidence of that particular.
At the trial, L & H Group tendered two certificates issued by the Commissioner for Corporate Affairs on 12 March 2013. The first s 58 certificate certified that:
L & H Group was on 30 August 2000 registered as a Limited Partnership pursuant to and subject to the Partnerships (Limited Partnerships) Act 1992.
The second s 58 certificate certified that (omitting headings):
As at 12 March 2013 the composition of the Limited Partnership known as L & H Group registered under the Partnerships (Limited Partnerships) Act 1992 was as follows:
Lawrence & Hanson Group Pty Ltd – General
Sonepar Asia Pacific Limited - Limited
Upon production of the s 58 certificates, what exercised the solicitor for Mr Young and troubled the learned Magistrate was that the composition of the partnership as referred to in the s 58 certificates differed from the description of the partnership in the agreement and the guarantee. The question is, given that this difference raised some doubts about the identity of the partners of L & H Group at the relevant time, were these doubts sufficient to displace the presumption in s 58(4) of the Partnership Act?
This is where I consider the learned Magistrate fell into error. Part 3 of the Partnership Act does indeed govern, among other things, the formation and composition of limited partnerships, the registration of limited partnerships, the liability and functions of general and limited partners, and the means by which partners may be dissolved, and the manner by which changes in the membership of limited partnerships be effected. Apparently, there has not been any direct judicial consideration of the provisions and framework of part 3 of the Partnership Act, and this is not the occasion to undertake that exercise. Rather, the issue here is whether the learned Magistrate erred in his construction of s 58(4) of the Partnership Act, by impliedly finding that, if there is some evidence before a court which suggests that the information in a certificate is not accurate, however slim, the onus falls upon the party seeking to rely upon the s 58 certificate to prove the accuracy of the matters in the certificate. Having regard to the plain language of s 58(4) of the Partnership Act, and the deeming provision in s 78 of the Partnership Act, that cannot be correct: the reference to ‘unless the contrary is established’ requires, in my view, that the onus instead lies upon the party seeking to prove that the information in the certificate is not correct. Such a conclusion is supported by the existence of rule 17.02, which provides a mechanism by which another party in litigation can require a firm of partners to disclose the names of partners. It seems to me that, if Mr Young sought to press his submissions that the plaintiff in the proceeding was a different partnership than the partnership that was the party to the agreement and the guarantee, he would have had to apply for an adjournment, seek discovery from L & H Group, and lead evidence to establish the true identity of the partners of the partnership, and, further, if there was a change in the composition of the group partnership, establish that this disentitled L & H Group from the relief it sought in the proceeding.
That did not occur in the current case. In his reasons, the learned Magistrate seemed to assume that, once a doubt had been raised, it was incumbent upon L & H Group to prove that the information in the s 58 certificates was correct, and that the limited partnership bringing the proceeding was the same limited partnership which was a party to the agreement and the guarantee. Furthermore, the learned Magistrate seemed to assume that there must have been a change in the entities constituting the limited partnership between the issue of the certificates and the execution of the agreement and the guarantee, and again, it was incumbent upon L & H Group to prove that any change in the composition of the limited partnership was effected in accordance with part 3 of the Partnership Act. Again, this is not the proper construction and application of s 58 of the Partnership Act.
Accordingly, I will allow the appeal. I agree, given Mr Young’s bankruptcy, there is no utility in remitting the proceeding to the Magistrates’ Court, and I will make orders in the terms sought by senior counsel for L & H Group, including an order under s 7 of the Appeal Costs Act.
4
0