Lising Nominees Pty Ltd v Monkton Pty Limited
[2017] ACTSC 336
•10 November 2017
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Lising Nominees Pty Ltd v Monkton Pty Limited |
Citation: | [2017] ACTSC 336 |
Hearing Date: | 11 October 2017 |
DecisionDate: | 10 November 2017 |
Before: | McWilliam AsJ |
Decision: | The counterclaim is dismissed. |
Catchwords: | PARTNERSHIP – whether partnership agreement breached – where no breach of fiduciary duty established PROPERTY – where parties were co-owners of a property – no breach of any obligation established |
Legislation Cited: | Civil Law (Property) Act 2006 (ACT) s 245 Court Procedures Act 2004 (ACT) s 63 Court Procedures Rules 2004 (ACT) r 769 |
Cases Cited: | Breen v Williams (1996) 186 CLR 71 Eric Preston Pty Ltd v Euroz Securities Ltd [2010] FCA 97; 77 ACSR 135 Glazier Holdings Pty Ltd v Australian Mens Health Pty Ltd (Unreported, Supreme Court of New South Wales, Young J, 30 March 1998 |
Parties: | Lising Nominees Pty Ltd (ACN 102 366 165) (Plaintiff) Monkton Pty Limited (ACN 008 583 266) (Defendant) |
Representation: | Counsel R Arthur (Plaintiff) P Johannessen (Defendant) |
| Solicitors Macphillamy’s Lawyers (Plaintiff) Johannessen Legal & Migration (Defendant) | |
File Number: | SC 219 of 2017 |
This case is about the consequences of dissolving a partnership between two corporate entities (the plaintiff and the defendant), and a separate dispute as to the conduct of the parties in relation to the lease of a particular commercial unit jointly owned by the parties (but not necessarily in partnership), known as Unit 1, McKay Gardens, Turner (Property).
The partnership between the plaintiff and the defendant was established by a deed dated 20 December 2002 (Partnership Agreement), which was in evidence before the Court.
The creation of the partnership followed the purchase of the Property by Dr Stephen Lising (the sole director and shareholder of the plaintiff) and Dr Raymond Swanson (a director and shareholder of the defendant) as tenants in common in equal shares. The purchase of the Property was subject to an existing tenancy of Dr Stephen Lising Pty Limited (ACN 087 752 592) (tenant), a separate entity of which Dr Lising was the sole director and shareholder. The tenant vacated the Property in January 2016 and thereafter the Property has remained vacant.
Over the period of 2002 to 2017, the relationship between the parties (and indeed the directors of the parties) deteriorated, to the point where they have agreed to dissolve the partnership.
The outstanding issues for determination by the Court
There were three processes before the Court for hearing on 11 October 2017. Two were resolved at the hearing, but it is necessary to have some understanding of what was before the Court for determination and how those issues have been resolved.
Amended originating application
The first was the amended originating application filed 28 August 2017 (Application). It sought orders for the dissolution of the partnership, the winding up of the affairs of the partnership, the taking of accounts, the appointment of a receiver (either the director of the plaintiff or such other person as the Court considered appropriate), that the same person also be appointed as trustee for sale of the Property, and costs on a solicitor/client basis.
The Application was resolved during the hearing and the parties were invited to submit proposed orders reflecting the consensus position reached. The substance of the agreement was to appoint an independent receiver, with consequential powers to wind up the affairs of the partnership and in addition, for the receiver to act as referee in the taking of accounts of the partnership.
I was satisfied that it was appropriate to appoint a receiver in accordance with s 63 of the Court Procedures Act 2004 (ACT), having received at the hearing from Mr Frank Lo Pilato and Mr Jonathon Colbran, chartered accountants and registered liquidators, their written consent to be appointed by the Court to act jointly and severally as receiver for the purpose of the winding up of the partnership, and to act as trustee for the purpose of sale of the Property.
I dispensed with the requirement for security to be filed with the Court under r 769 of the Rules because Mr Lo Pilato and Mr Colbran are each a registered liquidator: see Glazier Holdings Pty Ltd v Australian Mens Health Pty Ltd (Unreported, Supreme Court of New South Wales, Young J, 30 March 1998).
Critically for the resolution of the remaining issues before the Court, the parties also agreed that the Property was not an asset of the partnership.
As a consequence, the parties agreed at the hearing that:
(a)The receiver would separately act as trustee for sale of the Property;
(b)The trustee for sale could (at least in the first instance) exercise discretion as to the appropriate method and conditions of sale, having regard to the market at the time the Property is sold;
(c)Either party could bid at any auction of the Property; and
(d)If one of the parties did bid at the sale of the Property, then they could do so without the necessity to pay a deposit, which relieved the Court from making any order to the same effect under s 245(1) of the Civil Law (Property) Act 2006 (ACT).
Application to join the tenant to the proceedings
The second process was an application in proceeding lodged by the defendant on 26 September 2017, which sought to join the former tenant of the Property as a party to the proceedings.
In light of the resolution by consent of the Application and the ability of the appointed receiver to gather in any outstanding debts owed by the tenant if appropriate, the defendant withdrew the application, with no order as to costs being made.
Defendant’s counterclaim
The third process was the defendant’s counterclaim, filed with the defence on 26 September 2017. It is the only dispute that remains to be determined. There are five separate allegations which are dealt with in turn below.
First, the defendant (cross-claimant) alleges the plaintiff (cross-defendant) wilfully and persistently committed breaches of the Partnership Agreement (Allegation 1).
Allegation 1 is particularised in two ways:
(a)Breach of clause 10 of the Partnership Agreement, in that the plaintiff failed to pay contributions to partnership expenses and outgoings since January 2016.
(b)Breach of clause 14 of the Partnership Agreement, in that in March and April of 2005 and during its management of the Property, the plaintiff expended partnership funds without a unanimous decision of the partnership for repairs and sundries for the Property, for the benefit of the tenant, ergo for the benefit of himself.
The second allegation is that the plaintiff wilfully and persistently acted contrary to the best interests of the partnership (Allegation 2).
Allegation 2 is particularised by allegations about failing (from 2014) to cause the tenant to either enter into a new lease or to vacate, withholding consent for entry into a lease as a tenant, or to discuss the terms of any lease, and failing to ensure the tenant paid all outgoings owing to the partnership, which are said to have amounted to over $60,000 over the course of the tenancy.
The third allegation is that the plaintiff procured an unjust advantage for the tenant, which placed an unnecessary financial burden on, and caused loss to, the defendant (Allegation 3).
Allegation 3 is particularised as the plaintiff being in a position of a conflict of interest by reason of being the director of both the co-owner plaintiff and the tenant. The defendant further alleges an abuse of ‘his role’ to prevent the operation of the partnership, by withholding consent to any and all proposed leases, decisions, accounting and reporting.
The defendant claims the plaintiff profited from below market rent and unpaid outgoings for several years. This is further particularised as the plaintiff owing interest for late rent payments to the partnership as lessor for over five years between 2010 and 2016 without paying penalty interest as required under the lease of 20% per annum.
The fourth allegation is that the plaintiff wilfully and persistently sought to evade its financial liabilities for the Property, placing unnecessary financial burden on the defendant and placing the Property at risk (Allegation 4).
The particulars are of a similar kind to those in respect of the third allegation, being again directed to dealings with the Property. The defendant alleges a failure to pay statutory charges and body corporate levies, that the plaintiff left the Property in a state of disrepair, failed to pay the increased outgoings for 2003 to 2014 in full, failed to pay the outgoings from 2015 to date, disagreed with the amount of rent, and used ‘various tactics’ (described as creating disputes, delay, negotiating new terms, and refusing to meet with the defendant to resolve issues).
The fifth and final allegation is that the plaintiff wilfully and persistently was derelict in its duty as part-owner of the Property, as partner in the partnership and as lessee of the Property, causing significant financial loss to the partnership and to the defendant (Allegation 5).
Allegation 5 is particularised as a failure to communicate with the other partners and co-owners in good faith, if at all, ignoring offers to purchase or dissolve the partnership, requesting a breakdown of dues payable with the Property and the partnership, and then rejecting the information when it was provided.
The counterclaim then pleads under Allegation 5:
As a result of his actions the Partnership suffered a considerable loss of income over the 15 year period that he occupied the Property. His refusal to agree to the listing of the Property has also resulted in loss of potential income of around $160,000.00 in rents over the past 2 years.
The defendant initially sought various orders in response to the Application. As a result of the consent position reached, the only outstanding relief claimed is for damages on the counter-claim in the amount of $160,000 for lost earnings, and a further amount of $50,000 for ‘the dereliction in duties’ by the plaintiff.
Consideration
As will be seen from the reasons that follow, none of the allegations in the counterclaim are ultimately made out because of the way the case has been pleaded, the agreed fact that the Property was not a partnership asset, the lack of a causal link to any loss pleaded and assuming that there was a causal link, the insufficiency of evidence to substantiate the loss claimed.
Each of those various reasons is developed below by reference to the specific allegations, which overlap.
Allegation 1 – alleged breach of the Partnership Agreement
In resolving the first allegation, it is necessary to consider what the relevant clauses of the Partnership Agreement obliged the plaintiff to do, whether the plaintiff breached those obligations and if so, what losses followed, or to put it another way, what benefit the defendant would have received if the Partnership Agreement had been carried out according to its terms.
Clause 10 of the Partnership Agreement states:
Outgoings
All expenses and outgoings of the Partnership shall be payable:
(a)first, out of the profits of the Partnership;
(b)second, out of the capital of the Partnership; and
(c)third, in the event of any deficiency, by the Partners in the proportion in which they are entitled to share in the profits of the Partnership.
‘Partners’ in the Partnership Agreement is defined as the plaintiff and defendant in trustee capacities.
The plaintiff was thus obliged to contribute to the outgoings of the partnership, but only in respect of the expenses ‘of the partnership’, and only in the event of any deficiency in profits.
If the allegation is that the plaintiff failed to pay outgoings in relation to the Property, any such outgoings were not outgoings ‘of the partnership’ because the parties have agreed the Property was not an asset of the partnership (and it was not pleaded or submitted that the asset was otherwise held on trust for the partnership).
If the allegation is that the plaintiff failed to pay other outgoings of the partnership unrelated to the Property, there was no evidence what those outgoings were, or that the outgoings were unable to be paid from profits or capital of the partnership such as to enliven any obligation of the plaintiff pursuant to clause 10.
The issue is now moot in any event, because the parties have agreed to the taking of accounts as part of the resolution of the Application. If the plaintiff is found to owe money for outgoings properly ‘of the partnership’, that may form part of the taking of accounts.
Turning to the alleged breach of clause 14 of the Partnership Agreement, the relevant part of the clause states:
Unanimous decisions
Subject to any express provision in this document to the contrary, the conduct of the Partnership Business and affairs of the Partnership shall be determined by unanimous decision of the Partners after due consultation …
It is not clear whether this aspect of the counter-claim was ultimately pressed, as neither party separately addressed the allegation, including the proper construction of clause 14. Assuming it is still pressed, the above words do not necessarily support the defendant’s contention that every specific expense must be the product of consultation and a unanimous decision. The partnership may unanimously decide, for example, that the affairs of the partnership be conducted by one partner taking responsibility for the management of assets, which would impliedly carry with it the discretion to make the decisions in relation to those assets without further consultation.
However, even if clause 14 is construed in the defendant’s favour, so that there was an obligation for the plaintiff to consult and arrive at a unanimous decision before spending money in 2005 (regardless of how it was spent), the evidence is insufficient to permit the Court to find that there was any breach.
The conduct the subject of complaint was the plaintiff’s alleged spending of partnership moneys on the Property in March and April 2005. The limited material before the Court does not establish that the plaintiff spent money in the manner alleged, and further, that such a decision was not the subject of consultation or unanimous decision at the time.
As no breach of either clause has been found, Allegation 1 has not been made out.
Allegation 2 – the ‘best interests’ of the partnership
The complete answer to Allegation 2, as particularised, is that on the agreed facts, the partnership had no interest in the Property. Specifically, the partnership had no entitlement to negotiate the terms of any lease, nor did the partnership suffer any loss from the non-payment of rent or outgoings by the tenant.
Accordingly, even if there were evidence of the plaintiff refusing to negotiate with regard to the leasing arrangements of the Property or failing to pursue unpaid outgoings of the tenant, such conduct was not in breach of any obligation to act in the ‘best interests’ of the partnership.
For completeness, the pleading did not allege that the plaintiff had a duty as co-owner, fiduciary or otherwise, to act in the best interests of any other entity (including the defendant). Even if that was the allegation intended (and without the benefit of any submissions on the point) the mere fact that the plaintiff was a co-owner would not appear to give rise to any fiduciary relationship or ‘duty’ to act in the best interests of another, having regard to the authorities as to when a fiduciary duty might arise, such as Breen v Williams (1996) 186 CLR 71 at 113; and Eric Preston Pty Ltd v Euroz Securities Ltd [2010] FCA 97; 77 ACSR 135 at [429]-[430], affirmed on appeal in Eric Preston Pty Ltd v Euroz Securities [2011] FCAFC 11; 274 ALR 705.
Allegation 3 – ‘unjust advantage’ to the tenant
Allegation 3 fails for the same reasons. Dealing first with the pleading, it does not specify the legal obligation or duty that founds a cause of action against the plaintiff, based on an ‘unjust advantage’ to the tenant.
The flaw in Allegation 3 is that it fails to distinguish between the plaintiff, Dr Lising and the tenant. The mere fact that the plaintiff and the tenant had the same director and shareholder does not of itself give rise to any cause of action.
There are no proceedings brought against Dr Lising or the tenant. If the tenant failed to pay rent or penalty interest or the increase in outgoings to the co-owners, or any other requirement of the lease (which was in evidence), the defendant may separately pursue that matter against the tenant in proceedings for breach of the lease. It does not arise between the parties in these proceedings.
The next part of the alleged ‘unjust advantage’ is that the plaintiff allowed the tenant to pay ‘below market rent’. That cannot have prevented the operation of the partnership (however the obligation arises), as the parties agreed the partnership had no interest in the Property.
As a co-owner, and as found in relation to Allegation 2, the source of the plaintiff’s legal obligation to ensure the tenant paid ‘market rent’ is missing from the pleading and I have not been able to discern from the authorities any clear duty on a co-owner to that effect.
In any event, the evidence does not establish that the plaintiff made any profit from the tenant paying ‘below market rent’, as alleged in the counterclaim. Again, there appears to have been confusion between the profits of the plaintiff and those of the tenant, based on Dr Lising’s involvement in each.
Of course, each of these reasons has assumed in the defendant’s favour on this aspect of the argument that the rent charged to the tenant was established to be ‘below market rent’. It is unnecessary to consider whether that assumption has been established as a fact on the evidence.
As to the alleged non-payment of outgoings, the only source of the obligation now arises not by virtue of the partnership, but by the plaintiff being a co-owner. Again, no particular duty or obligation as co-owner was pleaded.
This is fundamental, because a failure to properly plead the obligation deprives the plaintiff of the opportunity of joining issue on it, or leading evidence to meet the case. The Court is left without an understanding of what the obligation was, how it is said to arise, what outgoings were meant to be paid, what the plaintiff actually paid (if anything) and the plaintiff’s explanation for any shortfall, supported by evidence.
For example, assume in the defendant’s favour that the plaintiff was jointly and severally liable for all the outgoings on the Property (but not any increase) by reason of being a co-owner. That appears to have been the intention, given the evidence of a Memorandum of Understanding between the parties to that effect, signed on 19 September 2002 shortly before the purchase of the Property.
Assume also that the plaintiff then did not pay half of those outgoings. There may well have been a reason why that was so, such as the plaintiff contributing substantially to the initial improvements or fit-out of the Property (a matter to which reference is made in a letter dated 23 September 2002 from the legal advice given to Dr Swanson and Dr Lising, which formed part of Exhibit 5). There may have been other reasons. The Court cannot speculate on what might have been the defendant’s real grievance if properly pleaded and whether there would have been any answer to it. As pleaded, Allegation 3 is without foundation.
Allegation 4 – the alleged wilful and persistent evasion of financial liabilities
The same difficulties arise in relation to Allegation 4, dealt with below by separation into four different complaints:
(a)Failure to pay statutory charges and body corporate levies;
(b)Leaving the Property in a state of disrepair;
(c)Failure to pay outgoings (either increased outgoings or at all); and
(d)The use of ‘tactics’ creating ongoing disputes and delays and refusing to meet the defendant to resolve outstanding issues.
Again, the pleading and submissions lacked detail as to how the plaintiff’s liability to pay statutory charges and body corporate levies arose, or what the amounts were. By reference to the first schedule and third schedule of the lease in evidence, it appears that while the co-owners remained liable for body corporate levies and statutory charges, the tenant was liable to pay the increase in those two outgoings.
Putting the lack of a pleaded legal basis for the allegation to one side, there is also insufficient evidence to establish that the plaintiff sought to evade its financial liabilities. I accept there was strident disagreement between the parties, and the defendant may also have been faced with a difficult co-owner. However, as counsel for the plaintiff argued, the plaintiff being viewed as difficult or obstinate in dealings with the defendant is not sufficient to establish a cause of action sounding in the relief claimed.
Where the defendant has not demonstrated an evasion by the plaintiff of its financial liabilities, there is no need to consider whether such evasion was wilful or persistent, or how intention or repetition of the conduct might bear upon any cause of action.
The next part of the allegation is that the plaintiff left the Property in a state of disrepair. Again, the plaintiff is a different legal person to the tenant. Such an allegation ought clearly be directed to the tenant under breach of the terms of its lease. The plaintiff as co-owner does not assume legal responsibility for the conduct of a tenant merely because the two corporate entities share a director or sole shareholder.
The plaintiff’s alleged failure to pay increased outgoings over the years 2003 to 2014 in full, and failure to pay the outgoings from 2015 to date, has been dealt with in the context of the previous allegations above and the same reasoning applies. The complaint fails for lack of a pleaded duty or obligation on the part of the plaintiff that was breached, with evidence supporting that breach.
Indeed, the evidence as to who was liable to pay the increased outgoings points to the tenant, not the plaintiff. Clause 2.7 of the lease, combined with the first schedule to the lease, provides that the proportion of outgoings recoverable from the tenant was ‘NIL’. Item 10 of the first schedule states that the tenant was responsible for 100% of the ‘Increase in Outgoings’ (noting that the lease was entered into on 9 December 1999). It is arguable, although I do not find it necessary to determine, that the financial liability that the defendant contends the plaintiff sought to evade was misdirected.
However, the parties did not conduct the case by reference to questions of construction of the lease and I can see from the evidence that the above reading of the terms of the lease differs from legal advice apparently received and relied on by the defendant, and communicated to the tenant on 8 April 2014.
The brief discussion of the evidence is merely to highlight why pleading the source of the obligation is a matter of substance for the present case and not a technical pleading point – if the source of the obligation on the plaintiff was the terms of the lease, and those terms were misunderstood, then the plaintiff was not evading its obligations to pay increased outgoings.
The remaining parts of this allegation are that the plaintiff disagreed with the amount of rent, and used ‘various tactics’, such as creating disputes, delay, negotiating new terms, and refusing to meet with the defendant to resolve issues.
It is clear that the defendant was unable to work with the plaintiff as its co-owner and the Property is now being sold to separate those interests.
Again however, the pleading and evidence fall short of what might have been required to establish some default on the part of the plaintiff, such as to give rise to a liability to pay $160,000 in lost earnings to the defendant.
This can be seen from a letter dated 18 December 2015 (Exhibit 2 in the proceedings), where the plaintiff gave the defendant a number of options for resolving what appeared to be an impasse between the parties. The options included negotiating a sale to the defendant of the plaintiff’s interest in the Property for $350,000 subject to terms. Alternatively, the plaintiff informed the defendant of a potential tenant who was interested in leasing the Property in its current state, as well as purchasing the plaintiff’s interest in the Property at ‘$25,000 above market value.’
The defendant confirmed during the hearing that nothing was done to follow up that potential leasing opportunity.
The letter then states:
If you are not prepared to follow the abovementioned options you are again invited to enter into a Deed of Partnership Dissolution or Lising Nominees Pty Limited will make an application to the Supreme Court for the orders in my 9 December 2015 letter.
…
[the plaintiff] does not authorise the use of funds to change the locks, engage a real estate agent, clean the [Property] or make alterations to the existing fitout within the [Property]. A prospective tenant has already indicated its intention to the lease the [Property] as is.
The true position appears to be that the defendant was hoping to buy out the plaintiff’s interest in the Property at a price that suited it, and that any lease negotiations with third parties were delayed pending resolution of the Property’s ownership.
Further, the plaintiff did not wish to spend any more money on the Property given that it was selling its interest and there was a willing lessee. The defendant on the other hand wished to undertake repairs and engage an agent.
It is not enough that the defendant has been frustrated, even on an ongoing basis, in trying to deal with the plaintiff. The plaintiff’s liability for any lost income in respect of the Property over the last two years can only arise if some breach or default is established, which caused the loss. Here, what the defendant viewed as ‘tactics’, such as delay or refusing to negotiate may, from the plaintiff’s perspective, be simply a refusal to pay or agree with the defendant for a legitimate reason.
The parties took different views about the liability for outgoings, different views about whether to fix up the Property before renting it versus renting the Property in its current state to an already identified willing tenant, different views about the means of selling the plaintiff’s interest in the Property and different views about the price to be paid. The in-fighting or continuing impasse between the co-owners means that the asset has in all likelihood not earned as much as it could have over the years, but mere proof that the plaintiff failed to agree with the defendant causing delay, even if it were a ‘tactic’, does not does not sound in a cause of action against the plaintiff for the loss, particularly in light of the letter set out above.
For these reasons, Allegation 4 must fail.
Allegation 5 – the alleged ‘dereliction of duties’
The same reasoning applies to the different aspects of Allegation 5. Here, there was a duty pleaded against the plaintiff as part-owner in the Property, as partner in the partnership and as lessee of the Property. However, the pleading is again silent on the nature or content of the duty pleaded.
As the plaintiff was not the lessee of the Property, that pleaded duty may be put to one side.
The particulars of dereliction have been grouped for consideration as follows:
(a)Failure to communicate with the other partners and co-owners in good faith, if at all;
(b)Ignoring offers to purchase or dissolve the partnership; and
(c)Requesting a breakdown of dues payable with respect of the Property and the partnership, and then rejecting the information when it was provided.
As to the first group of particulars, while the plaintiff may have held fiduciary duties in relation to the partnership, it is unclear how a mere failure to agree or refusal to communicate gives rise to any cause of action for which the plaintiff is liable, recalling in particular that if the Property is not an asset of, or held on trust for, the partnership, then any communications about it are not in connection to any duty owed to the partnership. Further, the pleading does not sufficiently articulate how a duty as a co-owner to communicate in good faith might arise.
The evidence does not establish that any pleaded duty has been breached. Rather, the correspondence indicates both communications from the plaintiff and a divergence of views between the co-owners, as discussed above in relation to Allegation 4.
Finally, even if the Court accepted both a duty and a failure to communicate (or agree) on the part of the plaintiff, such conduct did not cause any loss, let alone in a quantum of $160,000, in circumstances where the defendant did not take steps to secure the willing tenant proffered by the plaintiff.
As to the second group of particulars, that the plaintiff ignored offers to purchase or dissolve the partnership, this has been dealt with in relation to Allegation 4. The plaintiff itself made offers to sell its interest and to dissolve the partnership. It is unsurprising that the plaintiff was not willing to sell its interest in the Property to the defendant when it knew there were competing buyers willing to pay more than what the defendant had offered. There is no substance in a complaint that offers were ignored.
Nor does a complaint about the rejection of the breakdown of dues payable concerning the Property and the partnership sound in any cause of action. Dues of the partnership will be dealt with as part of the agreed taking of accounts, so that there is currently no loss suffered by the defendant.
As to dues payable as co-owner, the allegation fails for lack of evidence, such as the amounts that are said to be payable, by whom, how they remained unpaid and what loss was caused. The evidence does not descend to the necessary detail, and what little I have been able to discern from the terms of the lease and the correspondence between the parties suggests to me that the defendant’s understanding of the dues payable in respect of the Property may have been wrong (for example, with regard to calculation of the liability for outgoings).
In any event, the accounting exercise undertaken by one of the directors of the defendant, Ms Swanson, was based on a different assumption to that ultimately made at the hearing (being the treatment of the Property as an asset of the partnership or as an asset held on trust for the partnership). In those circumstances, the defendant has not established that rejecting the breakdown of dues payable was a dereliction of any duty.
Finally, and in complete answer to this allegation insofar as it relates to loss separately suffered by reason of a dereliction of duty, the defendant was unable to support the figure claimed of $50,000 by reference to any evidence before the Court. It transpired the loss was not based on unpaid dues. Rather, it was based on an estimate of extra time spent by one of the directors of the defendant in attempting to manage the affairs of the partnership or the Property or both. There was no basis upon which such relief could be granted. The question of the authorisation to pay the director for the services rendered was plainly a matter of dispute between the parties. In the letter of 18 December 2015 referred to above (Exhibit 2), the plaintiff states:
I draw your attention to the $18,825.63 your wife has unlawfully taken from the Swanson Lising Partnership’s bank account, without authorisation, in contravention to the Partnership Deed. There is no legal basis on which your wife can act as a “Managing Partner” of the Partnership and I advise you seek proper legal advice regarding her past and proposed future actions.
In circumstances where the issue is in dispute and the defendant has not pleaded, or sought to establish any legal basis for payment of the extra time (such as an employment contract or quantum meruit claim), let alone any evidence of the applicable rate of pay, or even that such wages were paid by or charged to the defendant, so that it is the defendant as opposed to the individual who has incurred a loss, the allegation is not substantiated.
Costs
The defendant has not succeeded in establishing any part of the counterclaim and ordinarily I would have ordered that costs ought follow the event. However, the counterclaim was heard as part of the more substantive Application that was only resolved effectively through compromise by each party at the hearing. By consent, there are no orders as to the costs of that Application.
While there may have been some discrete aspects of the counterclaim that were separate from the submissions or evidence dealing with the Application, having heard the proceedings together and reviewed the evidence, there is nothing that in the exercise of the Court’s discretion is clearly severable from the overall proceedings such as to warrant the costs of the counterclaim to be treated separately from the Application.
Accordingly, I will make no order as to costs.
Orders
The Court makes the following orders:
1. The counterclaim is dismissed.
| I certify that the preceding ninety-one [91] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Associate Justice McWilliam. Associate: Date: |
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Amendments
13 November 2017 At Case Title replace “Mockton Pty Limited” with “Monkton Pty Limited”
At Parties replace “Mockton Pty Limited (ACN 008 583 266)” with “Monkton Pty Limited (ACN 008 583 266)”
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