Marshall v Shepherd

[2007] NSWSC 9

CITATION:	Marshall v Shepherd [2007] NSWSC 9 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	30/10/06, 31/10/06, 01/11/06
JUDGMENT DATE :	29 January 2007
JURISDICTION:	Equity Division
JUDGMENT OF:	Barrett J
DECISION:	Short minutes to be brought in
CATCHWORDS:	PARTNERSHIP - dissolution - delineation of partnership property - whether certain debts payable out of partnership property - no matter of principle
PARTIES:	Julie Gail Marshall - Plaintiff Graydon Aubrey Shepherd - Defendant
FILE NUMBER(S):	SC 5792/04
COUNSEL:	Mr S.Y. Reuben - Plaintiff Defendant in person
SOLICITORS:	Walters - Plaintiff Defendant in person

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BARRETT J

MONDAY, 29 JANUARY 2007

5792/04 JULIE GAIL MARSHALL v GRAYDON AUBREY SHEPHERD

JUDGMENT

1 These proceedings concern the consequences of dissolution of a partnership that carried on a macadamia nut plantation business on land at McLeans Ridges near Alstonville. The only partners, at the time of dissolution of the partnership in 2004, were the plaintiff and the defendant. The plaintiff’s husband had been a partner until his death on 23 October 2000, at which time the parties accepted that his interest accrued to the plaintiff. She was the sole executor named in his will probate of which was in due course granted to her. The plaintiff and her husband together had a 50% partnership interest. After his death, she alone had a 50% interest. The defendant was the other 50% partner.

2 By a deed dated 19 April 2004, the two then partners agreed upon certain financial matters arising from the dissolution. The deed made provision for the sale of the farm on which the plantation was conducted and for the application of the net sale proceeds. It was agreed that part of those moneys would be held in an interest bearing account pending resolution of the dispute which existed between the plaintiff and the defendant.

3 The pleadings show that there is no dispute that the partnership has been dissolved and no opposition to the winding up of the partnership business under the direction of the court. Beyond that, the defendant does not admit the plaintiff’s entitlement to the following principal relief sought by her:

(a) a declaration to the effect that the defendant is estopped from requiring that a sum of $500,000 be regarded as an asset of the partnership, that being a sum the plaintiff says was agreed to be the value of a part of the plantation land that was to be regarded as not forming part of the partnership property;
(b) an order that the proceeds of the sale of the plantation land be applied in paying the following before being divided between the parties:
(i) $61,500 to Actrate Pty Limited and the plaintiff (with no division as between the two) in respect of a loan;
(ii) $3,670.60 to the estate of I G Marshall for an amount due;
(iii) the proceeds of the sale of the 2004 macadamia crop to be paid to the plaintiff and the defendant in equal shares;
(iv) $500,000 to the plaintiff being the agreed value of the excluded part of the plantation property.

4 The excluded part of the plantation land, as I have called it, was the house occupied by the plaintiff, her husband and their family, together with the adjacent swimming pool.

5 The statement of claim makes necessary inquiry on three separate fronts: first, in relation to the house and pool; second, in relation to the Actrate loan; and, third, in relation to the wages entitlement of the plaintiff’s husband.

6 I should begin by referring to the deed dated 19 April 2004. The parties to it are, as I have said, the plaintiff and the defendant. After reciting the existence of the partnership and its dissolution, the deed made provision for the sale of the plantation property to named purchasers upon specified terms and for the application of sale proceeds. It was provided that a sum of $570,000 would be applied by payment of $200,000 to the defendant and investment of the remaining $370,000 in an interest bearing deposit in the names of the plaintiff and the defendant. The deed then provided:

“The balance is not to be released to Shepherd or Marshall otherwise than by mediation … Thereafter the balance shall be divided equally between Shepherd and Marshall.”

7 There was also a statement that the mediation “is to be conducted in accordance with mediation Protocols as set out by Brian Grant”. The deed further provided:

“4. Shepherd and Marshall agree that there remains a dispute as to:

(a) Marshall’s entitlement to an amount of Five Hundred Thousand Dollars ($500,000.00) from the proceeds of sale of the Land for the house erected upon the Land; and
(b) the repayment of loans by the Partnership including a loan to a Company styled Actrate Pty Limited in which Marshall has an interest.

(c) There is to be full disclosure of historic account records.

It is agreed that these are the only issues in dispute and that the parties should attend mediation before a qualified Mediator in an endeavour to resolve the issues without the need to resort to litigation. In the absence of any agreement in writing to the contrary, the mediation shall take place in Lismore, New South Wales as soon as possible but in any event, within forty-two (42) days from the date hereof. If the parties are unable to agree upon a Mediator approved by the Supreme Court of New South Wales then the Vendors’ Agent shall nominate a Mediator as aforesaid and his nomination shall be final and binding.
5. Shepherd and Marshall agree that the proceeds of sale of the current year’s macadamia crop growing on the Land to which they are entitled under the Contract shall be divided equally between them after payment of the fees of the Mediator appointed under Clause 4 hereof.
6. In the event that the parties are obliged under the terms of the Mortgage annexed to the Contract to repay to the Purchasers the Advance and/or the Deposit (as defined in the Mortgage) then Shepherd and Marshall covenant to do so in equal shares within the relevant time fixed under Clause 1(b) of the Mortgage.”

8 No mediation has ever occurred as contemplated by the deed. There is no suggestion that the lack of mediation has entailed any breach of contract or other wrong by either party. That being so, I proceed on the basis that the retained sum is to be divided according to the parties’ legal entitlements. To determine those entitlements, I must go back to the inception of the partnership.

9 Before about October 1990, the plantation business was carried on in partnership by the plaintiff, her husband and one Madigan. The plaintiff and her husband together had a 50% partnership interest and Madigan had a 50% partnership interest. The title to the property was held as to a one-half undivided share by the plaintiff and her husband as joint tenants and as to a one-half undivided share by Madigan. By transfer dated 9 November 1990, Madigan transferred his undivided share to the defendant. It is common ground that the partnership among the plaintiff, her husband and the defendant commenced shortly before the execution of the transfer of 9 March 1990. Although the transfer by Madigan to the defendant was expressed to be for a consideration of $450,000, it is common ground that the defendant made no payment to Madigan for the property; also that he made no payment to the plaintiff and her husband (nor they to him) upon formation of the partnership. The defendant did, however, become jointly and severally liable with the plaintiff and her husband for substantial indebtedness of the partnership to Westpac Banking Corporation secured by mortgage of the farm property.

10 The house and pool on the property were in existence when the partnership was formed. The plaintiff gave evidence of her husband having said the following words to the defendant shortly before the defendant came in as a partner:

“The July 1990 Hoolihan valuation has valued the property, including the house and pool, at $900,000. It cost us $425,000 to build the house, so that leaves $475,000 as the value of the rest of the land which is what we need the new mortgage to cover. That means that your contribution would be half of the new mortgage. Does that sound ok to you?”

11 The plaintiff says that the defendant agreed with this. The defendant, however, denies that any such conversation occurred.

12 On 17 November 1992, that is, about two years after the commencement of the partnership, there was a meeting attended by the plaintiff and the defendant. The meeting was held at the office of Thomas Noble & Russell, accountants, at Lismore. The plaintiff’s husband had been there earlier but had to leave. Mr Morrow and Ms Kennedy of that firm were also present at the meeting. Minutes were taken and are in evidence. Those minutes purport to record the “reality of” the transaction under which the defendant became a partner in place of Madigan:

“It was pointed out to Graydon and Julie that the original contract re the purchase by Graydon of his share of the Karama Estate property was for one half of the property (total valuation $900,000). This contract included purchase of the house.
Graydon stated that it was not his intention to acquire a share in the house and the house’s reasonable curtilage, but that was to remain the Marshalls asset.
The reality of the transaction was that Graydon was to acquire a half interest in the land, plant and macadamia trees by assuming ½ of the debt due to Westpac, i.e. ½ of $475,000. The land, trees and plant had a value at the time of $475,000 while the house, pool and reasonable curtilage had a value of $425,000.
This was agreed to by Julie and Graydon. Peter Morrow was requested to write to solicitor Frank Nolan of Watkins, Topsell and Nolan to have an agreement drawn up to clarify this situation.
Graydon stated that should the property be sold, a valuation would need to be made to ascertain the then market value of the house and curtilage.”

13 It is the plaintiff’s evidence that, at the end of the meeting, either she or the defendant asked Mr Morrow to instruct Mr Nolan, solicitor, to “draw up a partnership deed to clarify the agreement between the parties that the house, curtilage and swimming pool are the separate assets of the Marshalls and are not part of the partnership assets”. No such document was ever prepared.

14 On 11 February 1997, there was another meeting at the accountants’ office. The plaintiff, her husband and the defendant were present and Mr Morrow and Ms Kennedy were in attendance. The minutes describe the meeting as “meeting of partners of Karama Estates”. The matter of preparation of a partnership agreement was again discussed. The minutes record the following:

“Concern was raised by G. Shepherd as to what would happen to each partners investment in the farm upon their death. He was advised that in the absence of any other documentation that this issue would be largely addressed by the terms of each partner’s will. This however could create a problem that in the event of the death of a partner that the remaining partner may have to deal with a third party who they had no intention of entering into a business relationship with. To this end it was strongly recommended that the partners seek advice from a solicitor in this matter and consider the preparation of a partnership agreement clarifying some of the concerns raised from the discussions.
During the course of the discussions on the preparation of a partnership agreement the issue of Graydon’s interest in the Marshall’s home was discussed. Graydon acknowledged that he did not have an interest in the Marshall’s house and reasonable curtilage surrounding the house. However concern was raised as to what represented reasonable curtilage and how any consideration on sale of the property would be dissected between the house and farm. Graydon was advised that any dissection of the consideration on sale would need to be undertaken by an independent valuer to ensure a fair split. In addition the partners need to consider incorporating the above matters in a partnership agreement.
It was resolved that Julie Marshall approach Frank Nolan to draft a partnership agreement. The partners also resolved to further consider the issue as to what represents reasonable curtilage to the house. The partners recognised the importance of this matter in the future to enable an adequate valuation of the house to be undertaken.”

15 It is the plaintiff’s evidence that she did then approach Mr Nolan about preparing a partnership agreement but that, for reasons she cannot recall, the agreement was never completed. She has, however, put into evidence an incomplete draft prepared by Mr Nolan. It contains recitals as follows:

“C. By Deed dated 2 October 1990 the Marshall-Madigan partnership was dissolved and by Agreement for the Sale of Land Graydon purchased a half (1/2) interest in the land as tenant in common together with a half (1/2) interest in the plant and equipment, improvements, fittings and fixtures, stock and machinery and at all times acknowledged that the house referred to in Recital B was constructed and financed by Marshall for their exclusive use and was deemed not to be included in the purchase, which was only for the rural land and rural improvements (‘farmlands’).
D. The parties agree that as at October 1990 Marshall’s house had a deemed value of $550,000.00 and the total farmland, of which Shepherd was acquiring a half interest, was valued for the purposes of the Marshall-Shepherd partnership at $450,000.”

16 Towards the end of 1997, the partners reached a consensus that they should go their separate ways. Discussions on separation and partnership dissolution ensued over a considerable period. There was talk of obtaining valuations. The solicitor Mr Nolan was asked to assist in working out separation arrangements. Mr Nolan prepared an agenda for discussions among the parties. The agenda was prepared on 27 January 1999. A meeting of the partners took place the following day, 28 January 1999. Typewritten minutes were prepared by the plaintiff. They read in part as follows:

“G. Shepherd has agreed that he has no interest in the farm house – that is totally and solely owned by I & J Marshall. It has been agreed between the parties that for all future negotiations including sale of property or partnership dissolution that the house and pool be fixed at a value of $500,000 (no curtilage to come into it). It is agreed that should G. Shepherd choose to build a house on the property in the future, it is to be valued at cost price at a value no more than $500,000, based on the same principle.”

17 The plaintiff’s contemporaneous hand written notes are also in evidence. They are consistent with the typed version. The plaintiff testified that the minutes accurately record the effect of words spoken by the defendant at the meeting.

18 On 14 January 2000, the plaintiff and her husband wrote to the defendant proposing sale of the plantation property. The letter read in part as follows:

“If we could get above $1.6 million, we would do very well at present market prices. As discussed before, you would be paid half share of the farm price after the price of the house is deducted $500,000) and all loans and expenses are paid out.
We are not interested in attempting to subdivide the property as it would be costly, doomed to failure due to water catchment laws (7C land) and would de-value the property.”

19 The defendant did not agree to this proposal. He endorsed on a copy of the letter on 20 January 2000:

“Julie
Yes. Please dissolve our partnership but we want 50% split subdivision not a sale thank you.”

20 The plaintiff’s understanding of the defendant’s preference, thus expressed, was that there should be a subdivision of the plantation property into two lots of equal area, with the plaintiff and her husband receiving the lot containing the house and pool and the defendant receiving the other lot consisting of farm land only.

21 On 22 February 2000, the plaintiff’s husband wrote to the defendant giving reasons why subdivision of the land was not feasible “either financially or physically”. He then outlined three possibilities: first, sale of the farm outright; second, the defendant to buy the share of the plaintiff and her husband “(including house)”; third, the plaintiff and her husband buy the defendant’s share “(excluding house)” which “at this stage, is financially impossible for us to do”.

22 The defendant did not reply to this letter and, in March 2000, the plaintiff and her husband instructed Johnsons, solicitors, to act. That firm wrote to the defendant on 30 March 2000 stating that the property was to be sold and was being advertised and:

“From the net proceeds of sale after the deduction of payments for creditors, legal and accounting costs, our clients are to receive $500,000.00 for the house and swimming pool and the remainder is to be split 50/50 between our clients and yourself (subject to adjustments in our clients favour taking into account monies paid in to the partnership by our clients and not reciprocated by you).”

23 Thereafter, following her husband’s death, the plaintiff again consulted Mr Nolan, solicitor. On 11 September 2001, he wrote a letter to the defendant noting that there had been no claim by the defendant upon the deceased husband’s estate and that a notice of death had been lodged with the Land Titles Office and the plaintiff alone had become the proprietor of a one-half undivided interest in the plantation property. The letter continued:

“We are instructed by the Executor that the farm property remains under a general For Sale listing with real estate agents in the area and that as soon as a genuine and acceptable offer to purchase the farm is received unless there is an immediate and unconditional offer to purchase the widows interest in the farm yourself for 50% of the offer price plus the agreed $500,000.00 for the Marshall residence on the land, the firm Walters Solicitors of Lismore have instructions to apply to the Court for the appointment of Trustees for the sale of the farm property.”

24 An offer for the purchase of the property was received in May 2003. Thereafter, on 13 May 2003, Walters, solicitors, wrote on the plaintiff’s behalf to the defendant informing the defendant of the offer and of the plaintiff’s view that it should be accepted. The letter continued:

“If accepted, we are instructed that the net proceeds of sale are to be distributed as follows:
1. In payment of legal costs and disbursements associated with the sale;
2. In payment of the amount due to Westpac Banking Corporation and secured by Mortgage Z355297 over the land;
3. In payment of loans made by partners or companies associated with partners as detailed in the financial statements of the partnership;
4. In payment to our client of the sum of $500,000.00 representing the agreed value of the dwelling erected by our client upon the land;
5. The balance of the proceeds of sale to be divided equally between yourself and our client.”

25 The defendant replied to this letter saying that it was “too early” to sell as “the balance sheet has a number of errors which have yet to be addressed”.

26 Another prospective buyer made a higher offer in August 2003. Walters, solicitors, wrote to the defendant informing him of the plaintiff’s view that the offer should be accepted and seeking the defendant’s concurrence. The defendant wrote to Mr Pagotto of Walters on 20 November 2003. His letter, so far as relevant, reads:

“Tony the house value was 14 years ago and It needs to be valued separately. It was also agreed that I would be paid the same as Ian sometime in the future. This is well documented by Peter Morrow.

Depreciation of a house plus a valuation should always be part of any sale. Please arrange for separate valuations or if not get my half of the trees valued. I only want to sell my trees for what they are worth and the house is not part of my sale. I could set the farm up as a PTY Ltd company and we could sell Julies Shares for what she thinks they are worth. Please understand that I was also to receive curtalage [sic] the same as the marshal’s [sic] and I was going to build my house on the other side of the lake but up the hill a bit between some trees. Ian took me to the spot many times when he was alive.”

27 Mr Pagotto said in his response on the same day:

“We refer to your Emails of 6.06pm yesterday and 8.36am today.
Despite those Emails the contents of our first Email of yesterday stands.
If our client were to agree to a valuation to determine the house value, would you accept the decision of the Valuer as final and binding on both parties: Our client is not interested in exploring the matter further unless we receive an affirmative response from you.
The Company proposal is not an option. The only options are as set out in our Email of 03.11.03.”

28 The defendant’s response was:

“Tony I can’t see why not. I may still wish to contact my own valuer as well.”

29 Thereafter, the deed of 19 April 2004, already mentioned, was entered into.

30 The matters to which I have so far referred emerge from the evidence of the plaintiff. I turn next to the evidence of Mr Morrow, the accountant. He says that he, with the assistance of Ms Kennedy, prepared annual accounts of the partnership each year from the year ended 30 June 1991 to the year ended 30 June 2004. The accounts were prepared on the basis of instructions (which came from the plaintiff) that the house and swimming pool were the separate assets of the plaintiff and her husband and not part of the partnership property. He accordingly prepared the first set of accounts on a basis which involved inclusion of the plantation property at its value less $425,000 which was “the nominated value of the house”.

31 Mr Morrow gave evidence of having attended the meeting of 17 November 1992. The minutes to which I have already referred accurately reflect Mr Morrow’s recollection of the meeting. He recalls that the defendant said words to the following effect:

“It was not my intention to acquire a share in the house and house’s reasonable curtilage. That was to remain the Marshall’s asset.”

32 Mr Morrow also said that the minutes of the meeting of 11 February 1997 accurately reflect his recollection of events at the meeting. He recalls the defendant having spoken words to the following effect at the meeting:

“I do not have interest in the Marshall house and the reasonable curtilage surrounding the house. However, I am concerned that if the property is sold as to what will represent reasonable curtilage and how any consideration on the sale of the property is to be dissected between the house and farm.”

33 Mr Morrow’s statements and recollections of relevant matters are confirmed by his assistant, Ms Kennedy. She further says that she is not aware of the defendant having asserted an interest in the house and pool before the advent of these proceedings.

34 I refer also to the evidence of the solicitor, Mr Nolan. He is able to cast light on the prior arrangements with Mr Madigan. Those arrangements were to the effect that the house was “owned” by the plaintiff and her husband, they have paid for its construction; also that “the farming partnership reflects the land and buildings and trees before allowance for the residence of Ian and Julie at a cost of $347,000”. The accountant, at that time, Mr Weidenhofer, ascribed both value of $347,000 to the house site and $550,000 to the balance of the plantation property. Mr Weidenhofer has given evidence of instructions from the plaintiff, her husband and Mr Madigan that the house did not form part of the partnership property.

35 The defendant’s position is that he acquired an undivided one-half share in the total property from Mr Madigan and that that is, in effect, the end of the matter. On the view he takes, any agreement there may have been for excision or exclusion of the house and pool from partnership property is beside the point: his interest as one of two tenants in common prevails. The defendant nevertheless gave evidence about the supposed agreement.

36 As I have already noted (see paragraph [11] above), the defendant denies the conversation the plaintiff says she overheard between her husband and the defendant regarding the exclusion of the house. As to the alleged conversations reflected in the minutes of the meeting of 17 November 1992, the defendant says that he only said words to this effect:

“I agree to the Marshalls keeping the house in their name only if the property/partnership agreed to build me a house on the other side of the property to the same value.”

37 The defendant says that this was agreed to by the plaintiff and her husband and that a particular site was chosen for the purpose.

38 Regarding the meeting of 11 February 1997, the defendant says in his affidavit that he does not recall signing the minutes and “only agreed on the condition that my house was built on a similar sized curtilage on the other side of the farm”.

39 In relation to the meeting of 28 January 1999, the defendant says in his affidavit that the minutes were not accepted or signed by him and denies having spoken the words attributed to him. The original minutes were produced to him. They bear signatures which appear to be those of the plaintiff, her husband and the defendant. Confronted with these, the defendant made some extraordinary statements. He first said he had signed under duress. He then questioned whether he had signed at all. He ended up saying:

“I am not going to say I signed them but I am going to say it would appear I signed them because I have no reason to doubt that I would have signed those.”

40 The defendant also said that there was only ever “discussion” on the relevant matters at the meeting, not “agreement”. That is simply not so, given the express words of the minutes which all three partners signed. There can be no doubt that, as they purport to do, the minutes of 28 January 1999 embody an agreement reached on that occasion by the three partners.

41 The substance of the position taken by the defendant is, in effect, that he agreed to the exclusion of the house and pool from partnership property only, in his words, “on the condition that my home was built on a similar sized curtilage on the other side of the farm”. In support of this view of matters, the defendant put into evidence a letter dated 13 February 1992 from the plaintiff’s husband to him. He confirms that he accepted the position in the letter. The letter is as follows:

“As per our telephone conversation today we jointly agree that
A. Ian & Julie Marshall separately own the dwelling on the property by way of a special clause. The dwelling includes house & pool only. All other sheds – nurseries etc are jointly owned by Shepherd & Marshall. (Includes all machinery, tractors, implements.)
B. That when the existing loan (today $360,000) is finally paid, that a separate residence be built for Graydon from funds provided by profits from PAS NSW P/L which is jointly owned 50/50 by Marshall and Shepherd. The residence should be adequate size and quality for the Shepherd family and to be determined along the lines of the existing residence.”

42 This letter contemplates an immediate and pre-existing position in relation to the existing house and a future eventuality in relation to a second and non-existent house. The position with respect to the existing house is that “Ian & Julie Marshall separately own it”. That is entirely consistent with the plaintiff’s contention that it was never partnership property. The position with respect to the non-existent house was that it would be built upon a future eventuality (that is, “when the existing loan … is finally paid”), that the money for its construction would come from a particular source outside the partnership (“funds provided by profits from PAS NSW P/L which is jointly owned 50/50 by Marshall and Shepherd”). The effect of the agreement evidenced by the letter, putting upon it the construction most favourable to the defendant, is that, if and when a second house as described was built and paid for from that source, that house would be excluded from the partnership property in the same way as the existing house was already excluded. It may well have been an implied term that the second house would not be built unless and until the particularly named company had generated profits sufficient to fund the construction – in other words, if the company were not profitable to the requisite extent, the house would not be built.

43 The letter of 13 February 1992 bears out, to a certain extent, the defendant’s contention as advanced in his affidavit, that is, that he agreed to the plaintiff and her husband “keeping” the existing house (so that it was excluded from partnership property) on the basis that a similar house would be built for him and likewise excluded. But the letter is inconsistent with the version contended for by the defendant in two respects. First, his version does not include the condition as to time (“when the existing loan … is finally paid”). Second, his version is to the effect that the partnership was to build his house, whereas the letter makes it perfectly clear that the funds were to come from a wholly external source, albeit a company that the parties owned.

44 The arrangement evidenced by the letter is consistent with the contention of the plaintiff that there was an immediately operative exclusion of the existing house forming partnership property. That exclusion was not qualified by the accompanying agreement regarding the future construction of a house for the defendant. I am not able to say whether the occasion for performance of that agreement ever arose. Nor is that question or the question of any breach of that agreement one that is relevant to the determination of these present proceedings. I merely observe, in those connections, that there is reference in a letter of 9 January 1999 from the plaintiff to the defendant to “closing down PAS (NSW)” and that there was reference in oral evidence to the signing of documents on 28 January 1999 to have that company wound up.

45 The letter of 13 February 1992 is not the only source of reference to the building of a house for occupation by the defendant. The matter is also mentioned in the minutes of the meeting of 28 January 1999 (see paragraph [16] above). The agreement reached on that occasion must be taken to have superseded or modified the agreement evidenced by the letter of 13 February 1992. The company PAS (NSW) referred to in that letter had gone out of business and action to wind it up began on 28 January 1999. The arrangement with respect to a second house in the letter thereby became impossible to realise since the nominated source of finance for the construction of the second house no longer existed. The minutes of the 28 January 1999 meeting show, however, that there was by then an agreement to the effect that the defendant could, if he chose to do so, build a house on the property and that, if he did so, it too would be excluded from the partnership property and, “for all future negotiations including sale of property or partnership dissolution that the house … be fixed at a value of” the cost price or $500,000, whichever was the smaller. The matter of the sum to be ascribed to any such new house, as I have expressed it, comes from the words “valued at cost price at a value no more than $500,000, based on the same principle” appearing in the minutes.

46 The agreement evidenced by the minutes of 28 January 1999, unlike that contained in the letter of 13 February 1992, does not say how the construction of any second house was to be financed. But the reference to the defendant choosing to build a house clearly implies that he would bear the cost. He eventually accepted this in cross-examination after a belated attempt at suggesting that the partnership itself would fund the construction – something that was inconsistent with earlier answers given by him.

47 As with the arrangement reflected by the letter of 13 February 1992, the partners at their 28 January 1999 meeting accepted and endorsed a particular position regarding the existing house built and occupied by the plaintiff and her husband and acknowledged the right of the defendant, as it were, to appropriate to himself in the future a piece of the partnership land by building a house on it by means of funds provided by him. Again, the two matters were separate, in the sense that the agreed position in relation to the existing house prevailed whether or not the defendant actually exercised the right to build a house for himself.

48 The plaintiff has, on the evidence before me, succeeded in showing that it was always a term of the partnership agreement that the house and pool built by the plaintiff and her husband and erected on the plantation property before commencement of the partnership did not form part of the partnership property. Whether that leads on to the further conclusion that the plaintiff should have a fixed sum of $500,000 out of the proceeds of the plantation property is a separate question to which I now turn.

49 The answer to that question also comes from the minutes of the meeting of 28 January 1999 which, as I have noted, are signed by all three partners and embody an agreement among them. As far as the existing house (as distinct from the possible future house) is concerned, it was agreed that “for all future negotiations including sale of property or partnership dissolution … the house and pool be fixed at a value of $500,000 (no curtilage to come into it)”.

50 I am satisfied that, in light of this agreement – on the strength of which each of the plaintiff and the plaintiff’s husband must be regarded as having conducted themselves in relation to all relevant matters after 28 January 1999 – the defendant could not deny the right of the plaintiff and her husband (and cannot now deny the right of the plaintiff) to receive $500,000 out of the proceeds of the sale of the plantation property before the striking of a balance of sale proceeds belonging and attributable to the partnership.

51 I next address the matter of the debt to Actrate Pty Limited. In the period beginning March 1998, the partnership came under particular financial pressure. The plaintiff sought an increase in the overdraft limit but the bank would not agree without the defendant’s signature. The plaintiff wrote to him by fax on 5 March 1998 discussing the financial position in some detail and outlining options. There had been no reply by 8 March 1998. The plaintiff sent a follow-up fax. There was a telephone conversation between them on 9 March 1998 after which the defendant sent the plaintiff a fax referring to the need to sell the farm. He mentioned the suggested increase in the overdraft limit but said he would not agree unless given a particular assurance. The plaintiff said in response that the overdraft limit had already been exceeded and the bank would freeze the account unless the defendant signed papers or there was a deposit of funds to bring the account back into order. On 7 April 1998, the plaintiff wrote to the defendant in detail about the financial position. There was no reply. She sent two follow-up faxes. In the second, dated 27 April 1998, she pointed out that the partnership was over its overdraft limit and “funds need to be put in asap; please advise”. The defendant’s unhelpful response came in a telephone conversation that took place when the plaintiff called him on 30 April 1998. The plaintiff’s contemporaneous note is as follows:

“Rang Graydon 30/4/98 10-00am
Asked him what was happening as we had received no replies to our faxes to him. He said he couldn’t talk now as people were in his office. (He sounded as though he was going to burst into tears).
He said he was tired of all the hasseling & the disagreements between us.
He said as far as he was concerned he never went into the farm for the money. He looked at it as his retirement fund so he could retire & go and be a missionary.
As far as he was concerned, he said, we can take the lot. He doesn’t want anything more to do with it. He can’t take the hassles. He then hung up.
JGM.”

52 In June 1998, the partnership came under more financial pressure Mr G.A. Andrews, the plaintiff’s father, had lent money to the partnership. On 15 June 1998, he gave notice calling up the loan. The balance outstanding was about $42,000. The plaintiff informed the defendant of this on 20 July 1998 and referred to two possibilities. The first was to increase the bank borrowing. The second was:

“Borrow the money from the private company, Actrate Pty Ltd, at an interest rate of 8%, no establishment fees. (We borrowed $10,000 to pay back dad in June from this company.)”

53 The last part of this quote refers to an agreement of 1 May 1998 made between Actrate and the partnership setting out the terms on which funds might be borrowed.

54 The plaintiff says in her affidavit:

“During the period 1 May 1998 – 3 September 1998 the partnership borrowed from Actrate the following sums on the following dates appearing hereunder:

1 May 1998	$ 6,000
8 May 1998	$ 6,000
19 May 1998	$ 4,000
26 May 1998	$ 1,000
2 June 1998	$ 4,000
15 June 1998	$ 4,500
19 June 1998	$15,000
31 July 1998	$12,000
21 August 1998	$ 5,000
3 September 1998	$10,000
Total:	$67,500

These borrowings are recorded in the financial statements, accounting records and bank statements for the partnership for the relevant period, exhibited to the affidavit of Peter Morrow.”

55 The plaintiff further gave evidence that the partnership paid off the Actrate loan by annual instalments. There were taxation reasons for this. They are explained in Mr Morrow’s affidavit. But, because the partnership lacked ready funds to pay the instalments, the plaintiff (and her husband while he was alive) advanced to the partnership most of the moneys to enable it to pay them. Only $6,000 paid on or about 8 February 1999 was not funded out of an advance by the plaintiff or her husband (or both). Over time, the balance owing by the partnership to Actrate decreased and the balance owing by the partnership to the plaintiff and her husband increased by means of the processes I have described, so that, by 30 June 2005, nothing was owed to Actrate and $61,500 was owed to the plaintiff, so far as principal is concerned.

56 All these matters are the subject of detailed evidence not only of the plaintiff but also of the accountant, Mr Morrow, supported by evidence of contemporaneous accounting records, bank statements and partnership balance sheets. The defendant in his defence, put the plaintiff to proof of the matters alleged regarding the Actrate loan and its replacement by loans by the plaintiff and her husband. The evidence to which I have referred – particularly that in Mr Morrow’s affidavit and the detailed exhibits to it - supply that proof. I do not intend to go into details. The affidavits and exhibits contain material that speaks for itself and is not contradicted. The most the defendant ever did was to challenge the plaintiff in cross-examination as to whether the Actrate loan proceeds had been applied as she said they were and why he had not been told earlier that Actrate was a company owned by the plaintiff and her husband. The cross-examination in those respects did not elicit anything in any way calling into question the evidence adduced in the plaintiff’s case.

57 The plaintiff has accordingly made out an entitlement to the aspect of order (b) at paragraph [3] above contemplated by paragraph (i), but on the footing that the sum of $61,500 is attributable to the plaintiff (it is not necessary for me to attempt to assess how much is attributable to the plaintiff personally and how much is attributable to the plaintiff as executrix of the will of her late husband).

58 The matter relevant to paragraph (ii) of order (b) at paragraph [3] above concerning the plaintiff’s husband’s wages may be dealt with briefly. Again, the defendant merely puts the plaintiff to proof without expressly contradicting her assertions.

59 There is in evidence a document headed “Wages Agreement”. It was signed by the plaintiff, her husband and the defendant on or about 9 February 1997. Under a heading “Wages to be paid to for [sic] work on Karama” appear three columns, each for a particular person. One column relates to the plaintiff’s husband “I Marshall”. It shows amounts for wages, on an annual basis, from 1991 to 1996 and amounts actually paid, leaving a shortfall in payment of $67,846 for those earlier years as a whole. The document goes on to say that these arrears are to be paid by the partnership “as and when funds from the sale of nuts become available”. The document also says:

“Wages payable to I. Marshall are to be fixed at $48,000 per year to the year 2000, when they will be renegotiated.”

60 The annual sum of $48,000 for Mr Marshall was expressly approved at the partners meeting of 11 February 1997 to which reference has already been made. This is made clear by the minutes. Again, the defendant sought to question the accuracy of the record. He also suggested in cross-examination that he signed the wages agreement “under duress”. The evidence shows no basis whatsoever for either of these assertions.

61 The plaintiff accepts that her husband later gave up any claim to wages under this agreement beyond $48,000 for the 1997 financial year and $22,500 for the 1998 financial year. The plaintiff contends that payments were made to her husband (or to her as his executrix) over the period from 1997 to 2004 as set out in paragraph 32 of the statement of claim so as to have a balance of $3,670.60 outstanding.

62 As well as the matter involving the loan, I again have the benefit of evidence of the accountant, Mr Morrow, on the wages question. His affidavit refers to relevant matters extracted from the records of the partnership and confirms that the residual amount owing to Mr Marshall’s estate is $3,670.60. There is no reason why I should not accept this.

63 The plaintiff is therefore entitled to the part of order (b) at paragraph [3] above referred to in sub-paragraph (ii).

64 I have already dealt at length with the part of order (b) referred to in sub-paragraph (iv). As to sub-paragraph (iii), I did not understand there to be any dispute.

65 I have referred at paragraph [3] to the main items of relief the plaintiff seeks. There are others. I deal with them now briefly.

66 The plaintiff claims a declaration that the partnership was dissolved on 19 April 2004 or some other date. Having regard to the terms of the deed of 19 April 2004, there should be a declaration that the partnership was dissolved on that date.

67 The plaintiff also seeks an order that the partnership business be wound up under the direction of the court. For the moment, I prefer not to make that order, particularly as appointment of a receiver is not sought. If the parties continue, despite this judgment, to have difficulties in giving effect to s.39 of the Partnership Act 1892 in consequence of the dissolution, application may be made in these proceedings. I shall reserve liberty in that respect.

68 The plaintiff claims an order that she is entitled to interest on the amount of $61,500 in respect of the Actrate loan, the amount of $3,670.60 for her late husband’s wages, the $500,000 referable to the house and land and her half of the balance of the proceeds of the sale of the plantation property. On the footing that all those amounts should have been paid promptly after dissolution and the defendant has not shown any reason to the contrary, each should bear simple interest at court rates from the day which is 90 days after the date of dissolution, 19 April 2004.

69 There is a claim by the plaintiff for a costs order. In view of the outcome, there should be an order that the defendant pay the plaintiff’s costs.

70 Finally, the plaintiff seeks an order as to the disposition of funds in a particular trust bank account. That is a matter of mechanics.

71 The desirable course is that the plaintiff file short minutes of orders to give effect to this judgment. I direct that short minutes be filed by delivery to my Associate within fourteen days and that, on the day of such delivery, a copy be transmitted by the plaintiff’s solicitors to the defendant by email at “[email protected]”. Any submissions the defendant wishes to make on the form of orders proposed in the short minutes must reach the plaintiff’s solicitors (at the email address shown in their email to the defendant) and my Associate (at “[email protected]”) within a further fourteen days.

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29/01/2007 - Typo - Paragraph(s) 71