Macpherson & Anor v Macpherson

[1991] HCATrans 67

A ~, AUST!t.A.LIA, 1.r

-~» ... ~ .... ~

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Melbourne No MS0 of 1990

B e t w e e n -

PETER ALEXANDER GORDON
MACPHERSON and RUTH ANNE

MACPHERSON

Appliants

and

JOHN MALCOLM CAMPBELL MACPHERSON and LEONIE MACPHERSON

Respondents

Application for special

leave to appeal

BRENNAN J
DAWSON J

Macpherson 1 8/3/91

McHUGH J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 8 MARCH 1991, AT 12.38 PM

Copyright in the High Court of Australia

MR B.J. SHAW, QC: If the Court pleases, I appear with my

learned friend, MR P.W. ALMOND, for the applicant.

(instructed by Messrs Hargraves)

MR P.G. NASH, QC: If the Court pleases, I appear with my

learned friend, MR P.D. ELLIOTT, for the

respondents. (instructed by T.C. Naughtin & Co).

MR SHAW:  Might I hand up to the Court some copies of a

report that I am going to refer to? It is

Muschinski v Dodds.

If the Court pleases, this case arose, in substance, out of a dispute between two brothers

about some farming land. It arose in circumstances

in which their father had owned some land which he

farmed and, on his death, he left it to his widow

for life and divided between his four children of

whom the two brothers were two by way of remainder.

The two brothers thereafter conducted farming

activities on the farm and entered into partnership

later, including their wives.

In the course of their activities, land was

purchased in the name of, at first, the elder

brother and, later, the younger brother, in

circumstances in which, in our submission, the

facts show that contributions to the purchase price

in substance came equally from them and in

circumstances in which it was clear that it was

intended that at the end of the activities of the
partnership each of them would be entitled to an

equal amount of land. But, in fact, before that

happened the partnership was brought to an end by

reason of disagreements between the brothers and

the question arose about entitlement to the land,
some of which stood in the name of the elder

brother and some of which stood in the name of the

younger brother.

At first instance, it was held that the land

was held on trust equally between the two brothers.	In-fact, the wives were brought into it but I think
they may be left to one side for the moment. And
the basis upon which His Honour held that at first instance appears at page 15 and the following of the application book. At page 15, His Honour the
trial judge held that there was an implied trust. That is set out at the bottom of that page, and
there is a reference to a number of cases. And at
the top of the next page His Honour says, at
line 4, that he finds:

that there was a common intention and

understanding as to their equal beneficial

interest in the three properties.

Macpherson 2 8/3/91

DAWSON J:  I must say, Mr Shaw, I find the dismissal in

about one line the contention that this was

partnership property curious. Of course, if it

were partnership property, there would be no need

to find trusts or equities.

MR SHAW:	Indeed, Your Honour.
DAWSON J:	Why does not everything point to it being

partnership property?

MR SHAW:  In our submission, it does, indeed. The way in

which the parties behaved indicate, in our

submission, very strongly that - - -

DAWSON J: Except for $2000, the partnership paid - and in

so far as payment was made, paid for - - -

MR SHAW:  The partnership or the estate, as it were?

DAWSON J: Yes.

MR SHAW:  Yes.

DAWSON J:  They were brothers; they were carrying on

business; there is evidence that it was their

intention to - - -

MR SHAW:  - - - and plainly intended to act equally as

between them. There seems to be no dispute about

that, although there is a dispute about the

consequences of what follows now.

DAWSON J:	What principle of partnership law would indicate that it was not partnership property?
MR SHAW:	In our submission, when one applies the case that

has been referred to, Harvey v Harvey, it indicates

that in fact it was partnership property.

DAWSON J: There is a later case of Kelly v Kelly too which

deals with the question.

MR SHAW:  Indeed, Your Honour. But even accepting what

His Honour said about that, it is submitted that it

is clear that something has gone seriously wrong

because if one looks at the bottom of that page one

sees that His Honour then went on to hold that

there was a constructive trust even if there was

not a common intention and understanding, and that

appears at line 18:

Even if this was not a case of a trust

based on a common intention and understanding,

as I have found it to be, it would

nevertheless be a clear case of a constructive

Macpherson 3 8/3/91

trust of the kind described by Deane Jin

Muschinski v Dodds.

BRENNAN J: Now, what are you contending for: partnership

property; implied trust; constructive trust?

MR SHAW:	Your Honour, we say that
DAWSON J:	One or other of those.
MR SHAW:	Yes, Your Honour, but I was going first to

constructive trust because we can, in our

submission, demonstrate fairly simply a clear error

in what the Full Court did about this without going

to the other matters.

McHUGH J:  The Full Court seems to have overturned the trial

judge's finding of fact that there was a common

intention and understanding.

MR SHAW:	Yes, it does.
McHUGH J:	Was the Full Court justified, on the authorities,

in reversing that finding of fact by the trial

judge?

MR SHAW:  In our submission, the Full Court was not, in view

of the fact that really His Honour's findings

depended on who he believed and how he had treated
what they had said and he plainly preferred the

view of the younger brother and not the elder brother. But what the Full Court did was, in effect, say that what the younger brother had said

about that was not to be accepted.

BRENNAN J: Perhaps you could develop that at a quarter past

two, Mr Shaw.

MR SHAW: If Your Honour pleases.

AT 12.45 PM-LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.18 PM:

BRENNAN J: Yes, Mr Shaw?

MR SHAW: If the Court pleases, I had just referred the

Court to what the trial judge did and I was

pointing out that at page 16, line 18, His Honour

decided that:

Macpherson 4 8/3/91

Even if this was not a case of a trust

based on a common intention and

understanding -

as he had already found it to be -

it would nevertheless be a clear case of a

constructive trust of the kind described by

Deane J. in Muschinski v Dodds.

BRENNAN J:  What findings of fact are there with respect to

the acquisition of the several properties?

MR SHAW:  Your Honour, there are these findings of fact.

The initial two were bought in the name of the

elder brother, John. Kagoola, the way the purchase

price was paid for, is set out at the bottom of

page 4 and it will be seen that a large proportion

came from the estate and His Honour went on to

accept evidence by Peter at page 5 about line 10

that the fact that it was put into John's name

would not go against Peter.

BRENNAN J:  Now, dealing first with the purchase price of

Kagoola: John put in $2000; the estate put in

$24,000. Is that right? It may not be. The

estate and Mrs Macpherson.

MR SHAW:  The estate and Mrs Macpherson put in $24,000.

There was a mortgage and then - - -

BRENNAN J:	Was that $24,000 ever paid by anybody?
MR SHAW:	I think not, Your Honour.
BRENNAN J:	Was it a gift?
MR SHAW:	Your Honour, what happened was, the estate was not

really treated separately from the partnership

except every now and again. Although

Mrs Macpherson had a life interest and - - -

BRENNAN J: --There was no partnership at that time, was

there? The first partnership began in 1969. This

is 1966.

MR SHAW:  Yes, but if one goes over to page 7 one sees at

line 12 that the trial judge accepted:

Peter's evidence that probably as a result of what was said ..... at the solicitor's office

and in the light of the family discussions,

the way the property was funded and later

treated by the partnership there was an

understanding between Peter and John that

Peter would have an equal beneficial interest

in -

Macpherson 8/3/91

that partnership. And Your Honours will see, at

the bottom of page 4, at line 24, that the interest
payments, except for the first three, were paid by
the partnership after the formal partnership was

entered into.

Then, Your Honours, again, in relation to -

going over to Bundawonga which was the property

which had been owned by the estate and which was

sold at a fixed valuation into John's name, at page

9, line 15, the trial judge accepted Peter's

evidence:

that John assured Peter at the time that

although Kagoola was in his name they were in
it together and also that putting Bundawonga
in John's name would not go against Peter in

the future.

It was transferred at the fixed valuation of

$36,000-odd, at line 22, and:

The partnership paid the $225 deposit and the

balance was secured by an unregistered

mortgage -

and there was not any interest. And that was

simply not paid because if one goes over to

page 10, line 12:

The deposit on Bundawonga, which was the only money which changed hands, was not repaid by

John to the partnership and -

he goes on to point out that:

Peter paid $2000 to match John's contribution

to Kagoola - - -

BRENNAN J:  Was the $36,000 ever paid to the estate?

MR SHAW:  I think not, no, Your Honour. Does Your Honour

want me to go on to the third property?

BRENNAN J: Yes, please, yes.

MR SHAW:  That was the one that was purchased in the name of

Peter and His Honour deals with that at page 10.

It was purchased in Peter's name.	The price is set
out.	The deposit:

was paid by the partnership and a further sum
of about $18,000 was also paid by the

partnership.

And when the property was refinanced:

Macpherson 6 8/3/91

repayments both of interest and principal were

made by the partnership.

And there were discussions, set out at page 11,

line 11:

Speaking about discussions between them

in respect of the purchase of Tallandoon and future land generally, Peter said, "That any future land was to be put into my name until

we become of equal value at some time way down

the track". Later, presumably referring to

the placing of Tallandoon in his name, Peter

said, "And this started the evening up

process".

Now, it is submitted, if the Court pleases, that in those circumstances one had an arrangement

which involved - and I am leaving aside the

partnership property point and the common intention

point for the moment, assuming those to have been

decided against us - an arrangement which looked

to, at the end of the partnership, an equality in

land holdings between the brothers. That outcome

was prevented by the termination of the partnership

because of disagreements between the brothers and

the question arises, on those assumptions, "What

consequence follows?"

In our submission, if one looks at Muschinski

v Dodds, one finds out, in the judgment of

Mr Justice Deane, a judgment in which His Honour

the Chief Justice agreed and a judgment which seems

to have been adopted by all members of the Court in lines from the bottom, His Honour says, of a

constructive trust, that:

It differs from those other forms of trust,

however, in that it arises regardless of

intention.

And he repeats that at the top of page 614 at the	end of the paragraph that starts on page 613. At
page 615, at the bottom of the page, he says that
although there is no place for a constructive trust
which depends merely on notions of fairness,
notions of fairness - and this appears at page 616
and also at page 621, at the end of the long
paragraph on 616, His Honour says:

That is not to say that general notions of

fairness and justice have become irrelevant to

the content and application of equity. They remain relevant to the traditional equitable notion of unconscionable conduct which

persists as an operative component of some

Macpherson 8/3/91

fundamental rules or principles of modern

equity.

And words like that, similar words, are to be found

at the top of page 621, five lines from the top.

At page 618, His Honour points out that in

some circumstances:

common law and equity recognize that, where -

an arrangement -

fails without attributable blame, it will

often be inappropriate -

in some circumstances simply to draw the line and

leave liabilities where they appear to fall on

their face. And at page 621, the first complete

paragraph, His Honour says that:

If the venture between Mrs Muschinski and

Mr Dodds had been merely a commercial one -

it would be clear that the conduct in question

which was Mr Dodds' conduct in trying to claim what he was apparently entitled to on his face, namely a

half ben~ficial interest in the property, despite

the fact that most of the moneys in relation to it

had been paid by Mrs Muschinski, would clearly be

unconscionable.

DAWSON J: Well now, can I stop you there. You have got to

find an equity. That is what His Honour is saying,

is it not? Fairness is not the basis. What was

the equity here? I mean in Muschinski v Dodds?

MR SHAW: The equity in Muschinski v Dodds: well, I think

Your Honour has already decided that there was not

one. What Their Honours, with whom Your Honour did not agree in that case, were deciding was, it is

s~bmitted, that because Mrs Muschinski had

contributed the vast proportion of the moneys which

were involved in the purchase of the land and
because that had been contributed only on the basis

that an arrangement had been made between her and

Mr Dodds which involved Mr Dodds, as it were,

evening the score by going on and building a house

on the land and -

DAWSON J: Well, you go to the facts, but is that saying

anything more than unfairness which His Honour

discards? Or if you would like to call it

"unconscionability", you can call it that. Is

there any other identifiable equity?

Macpherson	8/3/91
MR SHAW:	The answer to that is, in our submission, "No",

Your Honour, but what His Honour was saying was, as

we take it, at some point unfairness passes from

mere unfairness to an unfairness so plain that one

can call it unconscionable.

DAWSON J:  And unconscionability gives rise to an equity?

MR SHAW:  Yes. I know that one has been told one cannot

call somebody who is very negligent "grossly

negligent" because that does not add anything to

the description but one does seem to have some sort

of notion of that kind here.

BRENNAN J: But is it not a case of, the way in which His

Honour approached it, of saying, "Here is money

outlaid on a footing that will only be fulfilled in

the fullness of time by both parties making what is

an equal contribution"?

MR SHAW:  Yes.

BRENNAN J: "And if events frustrate that fullness of time

from passing, then the arrangement must be somehow

undone in a way which will not disappoint the

interest of those who outlaid the money"?

MR SHAW:	Yes.
BRENNAN J:	What do you say here?
MR SHAW:	We say we have exactly that situation here.

Perhaps before I go on to that, if I might just

finish the reference to Muschinski v Dodds. At

page 623 His Honour, at about line 6 or so, says

that in some circumstances a constructive trust

would produce a result which led to a return which
was based not merely on contributions but going to

sharing any surplus in proportion to the
contributions as opposed to the proportions

represented by the equitable ownership but he

thought that that was not a case of that kind in

tliat case.

What we say here, Your Honour, is this, that

the land was bought and paid for in the way it was

paid for and dealt with in the way it was dealt

with - I mean, used in the partnership and so on -

on the basis that in the end, as between the two

brothers, there would be an equality in land

ownership. In fact, because the partnership broke

up, that expectation was disappointed and one has,

in those circumstances, to do precisely what

Your Honour described as what His Honour

Mr Justice Deane said should occur in Muschinski v

Dodds, undo what had happened in a way which is

Macpherson 9 8/3/91

fair to the expectations of those who were

involved.

BRENNAN J:  But if one applies that here, one way in which

the transaction is susceptible to analysis is this,

is it not: the arrangement is that out of the

partnership funds there will be applied moneys for
the purpose of acquiring, for the respective

partners, pieces of property which, at the end of

the day, will be of equal value? It has been
fulfilled, so far as the first two pieces of

property are concerned, and indeed so far as the

third piece of property is concerned, and I suppose

you can add the superphosphate business in too, if

you wish. Why should the equity, if there be an

equity, be satisfied by declaring a trust with
respect to the properties that were required
instead of a charge upon partnership funds to the

extent of the imbalance?

MR SHAW:  Simply because, Your Honour, the properties which

were purchased in that expectation had obviously

been purchased one by one and when the thing came

to an end equality had not been produced, just as

in Muschinski v Dodds. In our submission, when one
looks at what the Full Court did with that, if one

looks first of all at what Mr Justice O'Bryan said,

one finds that he did not have to consider the

question because at page 49 he says that the

necessary elements in a constructive trust involve

a common intention. At the second line, he says:

That these elements are necessary

elements of a constructive trust -

and if one goes back to the page before, page 48,

one of those elements is:

a common intention -

at line 28.	So that he having found as he did
find, there was no common intention, the question

of·constructive trust did not further arise,

despite the fact that immediately after his

statement "that those elements are necessary
elements of a constructive trust", at line 6, he

says:

It should also be remembered that in

Muschinski v Dodds, Mr Justice Deane observed:

And then he quotes a passage from 614 which says,

in terms, in lines 3 and 4 of the quotation, that

in fact you do not need a common intention.	And if
one goes to what -

Macpherson 10 8/3/91

BRENNAN J: Well, it is not a common intention as to the

interest which is to be held in the asset acquired perhaps, but it is a common intention with respect

to the relationship of the parties. That is what

Justice Deane is saying, is it not?

MR SHAW:	Yes, I think that is right, yes, Your Honour.
BRENNAN J:	As to the result of it all?

MR SHAW:  Yes. And at page 41, in the majority judgment,

the pages before have been devoted to, as it were,

a property-by-property analysis of the various

dealings, following what had been said at page 27

about the finding of an implied trust and

Their Honours come to the conclusion that there is not the necessary common intention and then they deal with the question of constructive trust, as we

understand it, in the passage commencing on

page 41, line 18 and running over to page 42,

line 18, and what Their Honours say about it is

this:

Nor do we see in Peter's conduct in

working on "Kagoola" and "Bundawonga" and so

assisting, both before and after the formal

partnership agreements, to generate income to

pay interest and the like payments, and equity

arising, which would render it unjust to deny

Peter a beneficial interest in those

properties. We would not infer any resultant

trust. Peter, as a member of the family,

whose time was yet to come, when things would

be "evened up", simply continued to work and

to live at home, in the expectation that in

the future "we were going to square up

somewhere along the line".

The payment or interest on the mortgage

to Hoystead was made by the partnership. But

this was, we would think, considered by the

first, the time of the youngest in the family	family to be the norm. The oldest son came
was yet to arrive - as it eventually did on the purchase of "Tallandoon".

When brothers in a farming family work

together in partnership as part of a family,

it is not something which in our opinion gives

rise to implication that using the moneys

produced from the profits of the partnership

to pay for land being purchased and used by

the partnership (but registered in the name of
the elder brother), gives rise to a

constructive, resulting or implied trust in

favour of the younger brother. Something much

more is needed, and we do not see it here.

Macpherson 11 8/3/91

And that seems to be all they say about that subject. But it is not to be thought that in that

middle paragraph at the top of page 42, they are

saying that the purchase of Tallandoon produced

equality, because it is quite plain from what

Their Honours say at page 35, lines 13, 14 and 15, which is a quotation from Peter's evidence about

the purchase of Tallandoon and at page 36, lines 8 and the following in the lines that are underlined, claim that Their Honours did not think that the

purchase of Tallandoon produced equality and indeed

it is quite plain that it did not. So that what

Their Honours were saying is, in one sense, perhaps unobjectionable, in fact, the last part of the

passage that I read to the Court, commencing at
line 9 on page 42, except for the last sentence,

but in our submission, there clearly was something

extra here, namely the intention to produce

equality, which was disappointed by the event.

So that, in our submission, one can see,

looking at the judgments, that this question has

simply not been property addressed by the court

below and that, when it is properly addressed, a

proper analysis of the facts gives rise to a
conclusion in favour of our client.

If I might then pass to the partnership property point. Their Honours in the Full Court,

at page 43, deal with that question, commencing at

line 3. They state agreement with the trial judge
and it is true that the trial judge expresses that

conclusion, but His Honour really gives no

explanation of why he comes to that conclusion.

That is at page 15, lines 13, 14 and 15, and

Their Honours go on to say:

The partnership used the properties to

produce partnership income, but 'the mere fact

that an asset is so used does not make it

partnership property.

It is essentially dependent on the

agreement of the partners whether or not land used by the partners for partnership purposes

is brought into the partnership.

There was not, we believe, any such

agreement in the present case.

In our submission, that approach differs from the approach of this Court in Carter v Renouf,

111 CLR 140, and I refer to a passage at page 163

where in the joint judgment of all the members of the Court, Their Honours said, after referring to the terms of section 23 of the Partnership Act of

Macpherson 12 8/3/91

Queensland, which is in term similar to the terms

of the relevant section in Victoria:

Accordingly the question whether or not

property acquired during the partnership in
the name of one only of the partners was
acquired as partnership property, and

therefore upon trust for the partnership, is

simply a question whether or not the

acquisition was in fact an acquisition on

account of the firm or for the purposes and in

the course of the partnership business. In

most cases the answer depends upon the proper

inference to be drawn from the manner and

circumstances of the acquisition. A common

case is that in which property is bought with

partnership money.

Then they say that is:

not conclusive.

And then, omitting some sentences, they say:

But where there is no proof that the partners

had any common intention inconsistent with

that which the unexplained employment of

partnership moneys suggests, the conclusion

must be that the purchase was on account of

the firm and that therefore the purchasing

partner is a trustee of the property for the

firm.

DAWSON J: Here you had partnership moneys being used; the

property being used; the property being used as

security for further loans to - - -

MR SHAW:  Yes, as securities, all of them for all the money,

yes.

DAWSON J: Yes.

MR SHAW:  Yes, indeed, indeed one did.

DAWSON J: In every conceivable way

MR SHAW: Well, except for the fact that there is no express

agreement, yes.

DAWSON J: Yes.

BRENNAN J: Well, you could not quite say that about

Kagoola, could you?

MR SHAW:  Well that was purchased before the first of the

partnership - - -

Macpherson 13 8/3/91

BRENNAN J: Yes.

MR SHAW:  - - - but Your Honour will see, if I take

Your Honour back to the page I referred Your Honour

to before, it is at page - - -

DAWSON J:  When you say, first of the partnership

agreements, you mean - - -

MR SHAW:  Yes, that is what - - -

DAWSON J: There may have been a partnership before that.

MR SHAW:  Yes, there may have been a partnership - a formal

partnership, but the - - -

BRENNAN J:  Do you say that there is a partnership at the

time of purchasing?

MR SHAW:	We would say earlier than that, yes, Your Honour.
BRENNAN J:	And at the time of the purchase of Kagoola?
MR SHAW:	Yes, Your Honour, although that was rejected.
BRENNAN J:	The time that Peter was still at school or had

just left school?

MR SHAW:  He was 16, I think, Your Honour, but whether or

not there was then a partnership, Your Honour will

see that, at the bottom of page 4 and at the top of

page 5, the interest payments were paid by the
partnership as soon as there was any formal
partnership agreement, and when there was a

re-financing, the security was over Bundawonga and

Tallandoon as well as Kagoola.

BRENNAN J:  Oh yes, but that raises different problems, does

it not? I mean, if the beneficial interest was

vested on the acquisition of Kagoola in John, did

anything happen to divest it?

MR SHAW: Well, Your Honour, for present purposes, the

question is, was it brought into partnership

property, rather than, was there a trust created?

But if one is looking - - -

BRENNAN J: But if it was brought into partnership property,

that is a different question, is it not?

MR SHAW: It is a different question, yes, Your Honour.

BRENNAN J: Well now, is there anything to suggest that John

brought that into the partnership?

MR SHAW: Certainly there are, Your Honour. There is the

way it was dealt with in relation to the payment of

Macpherson 14 8/3/91

interest; the way security was given and the way it was dealt with in the document that was drawn up in

relation to the adoption. There are a whole series

of matters, but - - -

DAWSON J: In fact in relation to that, John paid $2000.

Later on, Peter paid $2000 into partnership funds

to even that payment out. The rest of the money,

$24,000, was provided by the estate.

MR SHAW:	Yes.
DAWSON J:	And they worked it.
MR SHAW:	They did, indeed, Your Honour.
DAWSON J:	In partnership and it was used as security for the purchase of Tallandoon.
MR SHAW:	It was, indeed, Your Honour. The only extensive

examination of this partnership property question

occurred in the judgment of Mr Justice O'Bryan.

That is at page 57 and the following pages where,

in our submission, His Honour, despite his

extensive examination of the question, really gives

no satisfactory explanation of why this property,

which was used in the partnership in this way,

should not have become partnership property.	So
that, in our submission, there is an erroneous

application of the law in relation to partnership
property in the judgment of the majority and indeed

of the judgment of the - - -

DAWSON J: All the properties were entered in the

partnership books of account, but no property was

shown as a partnership asset in the partnership

books. What does that mean?

MR SHAW:  Your Honour, I am not quite sure which Your Honour

is referring to.

DAWSON J:  On page 58. I am sorry

receipts and payments in relation to all the

properties -

Yes, still the question arises.

MR SHAW:  In any case we submit that the terms of sections

23 and 21, and in the course of dealing with the
property raises a strong case that this was

partnership property.

The last of the matters, is a matter that

Your Honour Justice McHugh referred to this

morning, namely the overturning by the Full Court

on appeal of the trial judge's finding that there

Macpherson 15 8/3/91

was, in fact, common intention about ownership of

the property, and if I might take the - - -?

DAWSON J: Just before you go to that - I am sorry to

interrupt you, Mr Shaw - what can you do about the

trial judge's findings in relation to the

properties and the partnership? I mean, is it a

matter of inference which an appeal court can

decide for itself, or is it - - -?

MR SHAW: Well, it is, it is submitted, a matter of

inference. Absence agreement or absence some

expression of intention about how the property is

to be dealt with, one simply has to make an
inference from the surrounding circumstances,
taking into account the various presumptions which

are indicated in the Partnership Act.

BRENNAN J:  But the problems here, if one looks at that

passage on page 58 that Justice Dawson referred to,

is if one sees in the partnership books that there

was an entry of $10,000 paid in respect of the

acquisition of Bundawonga, to take an example, or

Kagoola, to be more accurate, or to pay off the mortgage of Kagoola, if one then finds that that

was debited to John's capital account, one comes to

a very different conclusion from the proposition

that one would come to if it is not debited to

John's capital account. And we do not know whether it was debited to John's capital account, and if we

are going to go into this, then the Court will have

to examine for itself the books of the partnership.

MR SHAW:  Your Honour, it is certainly true that the

findings of the trial judge are, in some respects,

not as full as they might be, but it is submitted

that when one looks at the findings which
His Honour made, if it is clear that on those

findings the conclusion that the property was not partnership property currently supported, then it

the Full Court after him should have come to that	is submitted that it is plain that neither he nor
conclusion and the alternatives: either this Court
would have to examine the question itself or it would have to remit the matter.

BRENNAN J:	The difficulty I see in this is that the findings of fact are so sparse that the drawing of
any inference is going to be a matter of
considerable difficulty without re-examination of the primary source and the determination of whether
there was such a common aspiration as to attract
the operation of Muschinski v Dodds is going to be equally uncertain unless one knows what the primary
facts are.  I am not saying the proposition which
you are submitting is one which is attended with
patent error. What I am saying is that to apply

Macpherson 16 8/3/91

those propositions to the facts of the case, there

is a lot more work to be done.

MR SHAW: Well, Your Honour, I suppose one simply has to, as

it were, take it in stages. One could ask oneself,

"On the basis of those findings as they stand, do they support the conclusion which is come to or a

different conclusion?", and it is submitted that -

take for example, the Muschinski v Dodds' question,

one can, on the material which is there, come to

the conclusion which we urge in the way that we put

it to the Court before. Now, Your Honour, it may

be that there were more facts in the evidence below

which might affect that conclusion one way or the

other, and it may be that some of those facts are,

as it were, indisputable in the sense that it is a

document or something of some kind, or they may

depend on the credibility of witnesses but, in our

submission, if it is clear that the decision as it

stands is attended with error, then one should not

refrain from dealing with it in an appropriate way,

simply because it is difficult.

BRENNAN J: It is not a question of refraining from dealing

with it. It is a question of whether special leave

should be granted to entertain it.

MR SHAW:  Yes, Your Honour, but, in our submission, if we

can show that the application of the law to the

facts, which have been found, is a misapplication -

say that it was - if one confines oneself simply to

what is there and found, and one says, "Well,

looking at those facts" - say one decided it was

an appropriate case for Muschinski v Dodds to be

applied one would simply say, "Well, the judgments

below disclose error", and it may be, Your Honour,

that they simply are all the facts and if they are

all the facts, then that is the answer. If

somebody wants to say, well, in fact, they were not

all the facts, there was more material, then that

would have to be placed before the Court in a

convenient way, and that would be easy enough to

do, it is submitted.

What is being submitted to the Court is, if we

can show a point which - assuming the judgments

disclose all there is that is relevant, is a point

worthy of special leave, the fact that it may be

that hereafter somebody may wish to add to the

facts which appear in the judgments and say, "Well,

that affects the conclusion one way or another", is

a matter which can be dealt with if it ever arises.

It may never do so, and if it does, then the

problem will have to be dealt with, depending on

what the fact is, but one simply cannot, it is

submitted, speculate about that because it may be a

problem which never arises.

Macpherson 17 8/3/91

DAWSON J: But that really means, then you are asking this

Court simply to do the job which should have been

done by the court below, and there is nothing of

very special importance in that, is there?

MR SHAW:  No, I am not, Your Honour. What I am saying is

these judgments disclose, we would submit, error

and in that sense I am saying to this Court it

should do what the court below should have done in

the sense that it should correct that error, which

we demonstrate, so we would say, and all I was

doing was meeting a point which the presiding judge

had put to me. What His Honour was saying to me,

as I understood it was, "Look, there may be more

facts, which - - -"

DAWSON J: Yes, I know that and that is what led me to make

the remark. You then do the job that the court

should have done, but where is there anything of

special importance in undertaking that exercise?

MR SHAW:  In undertaking - there is not in undertaking that

exercise.

DAWSON J:	What do you say special leave should be granted?
MR SHAW:	Because there is an error, we would submit, on the

facts, as found, and the application of the law to

those facts.

BRENNAN J: Could you show me, perhaps again - I may have

missed it - where there is a relevant finding of

fact which would support a Muschinski v Dodds'
remedy in relation to the acquisition of Kagoola,

and by that I mean, as I understand you to mean,

that at the time of the acquisition of Kagoola it

was the common expectation of both parties that

there will be an equal holding between them of land

in the event of their putting the land in the name

of one of them at that time?

MR SHAW:  Page 7, Your Honour. It is at line 12 and the

following lines.

BRENNAN J: Well now, if one goes to about line 15 where the

understanding is stated:

the way the property was funded and later
treated by the partnership there was an

understanding between -

in other words, is not the understanding one which

was derived from the later history, rather than

from anything that was contemporaneous with the

acquisition?

Macpherson 18 8/3/91

MR SHAW: Well, as I understood that passage, what

His Honour was referring to was His Honour's

apprehension of the results of later events which

he took to throw a light on the earlier events.

BRENNAN J: Well, I must say I read it as though what

His Honour is saying is, "In the light of all the events, starting with what happened in the

solicitor's office and ending with the total

history of the matter, there was an understanding

between Peter and John that Peter would have an

equal beneficial interest in Kagoola".

MR SHAW: Well, there is another passage, Your Honour, at

page 5 which, at line 5 -

BRENNAN J: That does not take you as far as you need to go,

does it?

MR SHAW: Well:

Peter said he understood that although he

would not be on title he would be half owner

of it.

BRENNAN J: Well, that was his understanding.

MR SHAW:	Yes.
BRENNAN J:	You need to establish a joint understanding.

MR SHAW: Well, that is true but, Your Honour, that

understanding arises from the discussion in the

solicitor's office at which John was present and

their mother, where John said, according to Peter: the property could not be divided in half, so

it was less complicated to put it in John's

name and that would not "go against me".

That is Peter.

BRENNAN J: ·And then there is the explanation at line 18

to 20.

MR SHAW: That is certainly so, Your Honour, but there are,

Your Honour, special difficulties about Kagoola, it

being the first one and because of the possibility

that what happened in relation to Kagoola happened

before a partnership was entered into, but that

difficulty certainly does not arise in relation to

Bundawonga and - - -

BRENNAN J: But if it does not arise with regard to

Bundawonga, the question then is, is there any

inequality, if one takes into account Bundawonga,

Macpherson 19 8/3/91

on the one hand, and Tallandoon and the

superphosphate business on the other?

MR SHAW: Well, it is submitted, Your Honour, that first of

all - it is true that if Kagoola were to be left

out of account, that question would have to be

answered, but the question would depend on how the

value stood and it is clear enough that Bundawonga

was sold at a valuation which did not take into

account any of the improvements which had been

effected by John or Peter or at their mother's

expense, and it is clear that that was indeed a

very valuable property.

The other matter is the matter that

Your Honour Justice McHugh referred to this

morning, namely the way in which the Full Court

dealt with the judge's findings of fact. The

findings of fact in relation to Kagoola are in fact

the findings that I have just referred to, at pages

7 and 5, where it is clear that His Honour found an

understanding and at page 9, His Honour makes a

similar kind of finding in relation to Bundawonga

at line 14 and the following lines. It is

submitted - and this is really going to the

question of common intention - that the trial

judge, having made those findings, it really was

not open to the Appeal Court to, as it were, say,

"Well, in our view, those understandings did not

exist, since it is plain that the view the trial
judge took of what had occurred depended, to a
large extent, on his view of the reliability as

witnesses of John and Peter".

So that, in our submission, in respect of each

of the points, it is at least arguable that the

Full Court was wrong and it is plain, it is

submitted, that the sort of problem which arises in

this case is the sort of problem which arises, not

uncommonly, especially in rural areas, but no doubt

even in urban areas, where there are family

businesses, and as Their Honours Mr Justice Murphy

arid Mr Justice McDonald say, at page 21, line 14:

Family disputes such as this concerning

farming land are well known to this Court.

Indeed that is obvious and it is submitted that it is an important matter that such disputes should be

resolved in a way which is consistent with the law

and which brings about just results in the many

cases that do arise, and it is submitted that this

is a case in which it is possible to deal with a

matter of general importance in a way which can

provide guidance to the future so far as the

country is concerned. It is accordingly submitted

that the matters which arise, although they do

Macpherson 20 8/3/91

arise in relation to, in some respects at least,

particular facts, do raise questions of general

importance and it is submitted that special leave

should be granted. If the Court pleases.

BRENNAN J: Yes, Mr Nash.

MR NASH:  If the Court pleases, if I could first deal with a

matter which was raised by Your Honour the

presiding judge. The situation is that in the

original statement of claim there was a claim for a

charge over the land in respect of partnership

moneys or moneys of the plaintiffs which had been

expended on the two properties, Kagoola and

Bundawonga. That was abandoned at trial, perhaps

for tactical reasons. It certainly meant that it was an all or nothing situation, but that was the case. There was a claim for a charge and the

applicants in this application opted to abandon it.

The second point, really comes from the

question raised by Your Honour Mr Justice McHugh in
relation to how did the Full Court find its way to

overturn the findings of fact of the trial judge.

The proceedings took place, as appears from the

judgment of the majority at page 29 and 40, and

from the reasons of Mr Justice O'Bryan at page 53,

on the basis that the trial judge had accepted the

evidence of the plaintiffs below and on the basis

that that evidence was correct. The analysis - and

what was put before the Full Court, and if I may

place before the Court at this stage, not with the
intention of taking the Court through the documents

but for the purpose of indicating what happened

below and also what will have to happen in this

Court or on reference, if the application is granted - what happened was that the respondents

prepared an analysis of primary findings and

inferences and then set out underneath those the

relevant evidence of the applicants, not the

evidence of the respondents, except where the

r~spondents' evidence was uncontradicted, and the

argument before the Full Court proceeded on that

basis.

We would not wish to be held, if leave is granted, to conceding that some of the matters

stated there as primary findings are not in fact

inferential findings.

BRENNAN J:	Whose document is this, Mr Nash?
MR NASH:	It was our document before the Full Court and it

is an attempt to answer, in one sense, the question

raised by Mr Justice McHugh as to what did the

Full Court think they were doing in overriding the trial judge's findings and secondly, ·an attempt to

Macpherson 21 8/3/91

indicate, as we submit, that if issues of law are

raised in this case, which are of general

importance, this is not an appropriate vehicle.

Those are matters that arise, effectively,

ex arguendo.

Our basic propositions are four: that the Full Court applied the appropriate principles;

secondly, that the principles were properly applied
to the ultimate facts, as found by the Full Court;

thirdly, there is no issue of principle raised by

the reasoning of the Full Court which needs to be

clarified by this Court; and fourthly, if a matter

of principle does arise in this case, where the issues relate basically to the inferences drawn from the primary facts found and the evidence

given, this is not an appropriate vehicle for the

re-examination of those principles.

It is not our proposal, subject to matters

which may be raised by the Court, to attempt to

argue the merits of the case, but it must be

pointed out that the ground set out in the draft
notice of appeal relate to the minutiae of the
facts in the present case and they rebut the
proposition that the case provides an appropriate

opportunity to determine the general principles in

a commercial setting.

BRENNAN J:  Mr Nash, can I just take you back to this

document, I am afraid I am not following it at all.

After each property there is a list of primary findings followed by an inference.

MR NASH:  Yes, Your Honour. In the Full Court, we said,

"This is what the trial judge has done; this is the

evidence on which he relied to reach those

conclusions; this is the best evidence in the sense

that this is the plaintiff's evidence before the

trial judge and what has to be tested is whether,

in the light of that evidence" - and there is other

evidence as well, if the Court pleases, but that

document was prepared for the use of the

Full court - "the trial judges' inferences or even his primary findings of fact, could be justified."

BRENNAN J: This was put forward to demonstrate that the

evidence that was cited here was insufficient to

support those findings and inferences?

MR NASH:  Or supported a contrary inference, yes,

Your Honour, and it is our submission, in view of

the nature of the appeal below and in view of the nature of the very grounds in the draft notice of appeal, this Court will find itself, in this case,

engaged in the exercise which the Full Court

engaged in. I raised it for two points; one, in

Macpherson 22 8/3/91

relation to the question of how did the Full Court

do it and what about questions of credibility and

secondly, in the context of, is this an appropriate
vehicle.

In the affidavit material in support, one of the arguments put forward for this being a case in

which special leave should be granted, is that the

principle in Muschinski v Dodds has to be decided

in a family commercial setting. Now, in our

submission, that - except that the brothers in this

case were not sleeping with each other, except in

the metaphorical sense - the situation is, in many

ways, analogous to Muschinski v Dodds. You have a

family relationship and you have a commercial

relationship living side by side, but this is not a

general commercial situation; it is not an
appropriate case in which to re-examine the arm's

length transactions which were covered in the

Hospital Products case. There is, in the

commercial setting, a considerable amount of

authority, not on constructive trusts, but on what

constitutes unconscionable conduct. We refer to

Legione v Hateley, Stern v McArthur; Walton Stores.

This case does not raise any new questions of

principle. If leave is granted, if this Court
brings down a decision, the decision will, when one
looks at the grounds of appeal, turn very much on

whether certain inferences should have been or should not have been drawn. It is a case that

turns on its own minutiae.

More importantly, perhaps, the picture painted

by our learned friend is of injustice. A brother

of 23 buys a property with money supplied by his

mother from the estate, or perhaps not from the

estate. One of the matters that was before the

on the respondents there to deal with that question

Full Court, which was not ruled upon by the

- it was an application to lead fresh evidence as

tq the source of the moneys which purchased

Kagoola. That application would, of course, be

renewed. I say that, with respect, not in

terrorem, but merely to illustrate the problems

which this case presents in its present form.

In relation to the question that troubled

Your Honour Mr Justice Dawson so much, namely the

question of partnership and partnership property,

we say that the ultimate question, irrespective of anything else, is intention. Certainly, there are

presumptions and those presumptions will apply in

the absence of an intention to the contrary, but
there are many matters in the facts which reveal a

contrary intention. We refer in particular to the

specific statement that is cited in the appeal book

Macpherson 23 8/3/91

by Peter about "evening up". If the property was

intended to be partnership property, then there is

no meaning in Tallandoon being put in his name as

part of the "evening up" process.

There are other matters, but we wish

specifically to avoid going into the merits of the

case at this stage. Also, in relation to the
question of unconscionability, we would merely draw

attention to the fact that if the deal was that the

two brothers at the end of the day would both have
properties, one property for one, then another

property, then another, what happened in fact was

that Kagoola was purchased; Bundawonga was

purchased; Tallandoon was purchased. During the

partnership, prior to its termination, and prior to any argument between the brothers, it was agreed to

purchase the superphosphate business. An argument

broke out as to who was to manage the books of the
superphosphate business and Peter, the applicant

here, opted out of the partnership and purchased the

superphosphate business in his own name. If one is

to treat Muschinsky v Dodds, for example, as arising

out of the frustration of a common intention and

that being sufficient to create some sort of equity,
there was here no frustration of the common

intention. In fact, the common intention of having

two properties each; four properties each; six

properties each; an equality of properties had been

achieved and we would ask the Court not to, in

relation to that matter, fall into the trap of

looking at the value of the properties as they now

are, but rather to look at the value of the

properties as they were at the time of purchase.

So far as the funding is concerned and the

payment by the partnership for properties or the
payment or the use of money to which Peter had an

interest in the purchase of the properties, we draw

attention to the fact that the basic price came

from Mrs MacPherson, either being her own money or
estate money.	The trial judge found it to be
estate money.	The application to lead additional

evidence was refused but the majority judgment

refers to it as being "estate" money. I do not ask

the Court to draw any inference from that; I merely

ask the Court not to draw an inference from the

fact that in view of the decision, leave to lead

the additional evidence was not granted and no

ruling was made on that.

Thereafter the partnership used the land; it

paid no rent for the land and it paid the interest

on Kagoola. When one analyses the document

prepared by the applicants for use before the Full

Court, that document does not reveal any payment of

capital. What happened was there was a swapping of

Macpherson 24 8/3/91

mortgages and all of the parties' properties became charged with all of their debts in respect of those

three properties.

It is not without significance that the books of the partnership show as land, at one stage, the sum of $20,000, being the amount then owing to the partnership, directly lent by the partnership, in

respect of the purchase of Tallandoon, which figure

subsequently goes up to $30,000 by reason of the

fact that another $10,000 has been spent on

buildings on the property. That of itself, in our

submission, is significant, both in terms of the

partnership question that concerned

Your Honour Mr Justice Dawson and, if I read it

correctly, Your Honour Mr Justice McHugh, to a

large extent. But in relation to what was the

common intention, we say that the Full Court was

right in the inferences it drew; that it was

entitled to draw those inferences; that it did not

go behind the trial judge's findings in relation to

credibility and that no question of general

principle arises in this case. Even if there were

a misapplication of principle, this case, because of the form of the grounds and the necessary form of the grounds, would not give an opportunity to

solve the problem.

Finally, it is not an appropriate vehicle for solving the problem anyway because of the very

nature of the hearing in the Full Court.	If the
Court pleases.

BRENNAN J:  Thank you, Mr Nash. Mr Shaw.

MR SHAW:  I do not wish to say anything, if the Court

pleases.

BRENNAN J:  The Court will adjourn briefly to decide which

course it should take.

AT 3.25PM SHORT ADJOURNMENT

UPON RESUMING AT 3.28 PM:

BRENNAN J:  The application of Muschinski v Dodds,

160 CLR 583, and the alternative grounds for relief

relied on by the applicant, call for a precise

analysis of the facts relating to the purchase of

each property; the sources of the funds employed;

the intention of the parties as to the beneficial

Macpherson 25 8/3/91

interest to be held and as to the ultimate

objective of the relationship between the brothers

and later, the partners, as to the acquisition and

division of property between or among them; the

application of partnership funds and the general

circumstances of the case.

The findings of fact made in the courts below

are meagre and the proposed grounds of appeal
emphasize the importance to the appellants' case of

the attack which they intend to mount on the

findings made. The applicants have not satisfied

us that the issues of law which they seek to raise

will be reached without a detailed further

consideration of the facts. The case is not

therefore a suitable vehicle to raise those issues

and it is not therefore a case in which special

leave should be granted. Accordingly, special

leave will be refused.

MR SHAW: If the Court pleases.

MR NASH:  I would ask for costs, if the Court pleases.

BRENNAN J:  Mr Shaw. With costs.

AT 3.30 PM THE MATTER WAS ADJOURNED SINE DIE

Macpherson 26 8/3/91