McIntyre v Freshwater Creek Pty Ltd
[2000] TASSC 21
•22 March 2000
[2000] TASSC 21
CITATION: McIntyre v Freshwater Creek Pty Ltd [2000] TASSC 21
PARTIES: McINTYRE, Robert David
v
FRESHWATER CREEK PTY LTD
TITLE OF COURT: SUPREME COURT OF TASMANIA (FULL COURT)
JURISDICTION: APPELLATE
FILE NO/S: FCA 106/1998
DELIVERED ON: 22 March 2000
DELIVERED AT: Hobart
HEARING DATE: 2 November 1999
JUDGMENT OF: Cox CJ, Crawford J, Slicer J
CATCHWORDS:
Partnership - Dissolution and winding up - Other matters - Order retrospectively dissolving partnership from particular date - Order that continuing partner purchase outgoing partner's share - Partnership agreement providing for interest on unpaid purchase money - Whether outgoing partner entitled to interest in accordance with agreement - Determination on the basis of equitable principles - Whether strict compliance with agreement unconscionable.
Aust Dig Partnership [37]
REPRESENTATION:
Counsel:
Appellant: M J Brett
Respondent: S B McElwaine
Solicitors:
Appellant: Michael Brett
Respondent: Shaun McElwaine
Judgment Number: [2000] TASSC 21
Number of paragraphs: 41
Serial No 21/2000
File No FCA 106/1998
ROBERT DAVID McINTYRE v FRESHWATER CREEK PTY LTD
REASONS FOR JUDGMENT FULL COURT
COX CJ
CRAWFORD J
SLICER J
22 March 2000
Orders of the Court:
Appeal dismissed
Serial No 21/2000
File No FCA 106/1998
ROBERT DAVID McINTYRE v FRESHWATER CREEK PTY LTD
REASONS FOR JUDGMENT FULL COURT
COX CJ
22 March 2000
The facts and documentation in this appeal are set out in the Reasons for Judgment of Slicer J, which I have had the advantage of reading and with which I agree. I do not accordingly need to refer to them in detail and merely wish to add a few comments.
Under the Deed of Partnership, a breach by one partner entitled the other to purchase the interest of the partner in default (cl 13). It was the appellant's breach which triggered the exercise of the respondent's option to purchase his share. In effect (because a party in breach was equated for that purpose to a partner who had died), the respondent was entitled to succeed to the appellant's share on 16 October 1989 whereupon the appellant was entitled to be paid his share in the capital and property of the partnership as at 30 June 1989, by way of four equal half-yearly instalments, the first to be paid within six months of 16 October 1989 and the reducing balance was to bear interest at the rate of 12 per cent (cl 16). In addition, the appellant was entitled to an allowance at the rate of 12 per cent per annum on his interest in the capital and property of the partnership from 30 June 1989 to 16 October 1989, less any drawings (cl 15(b)). Clause 16 also obliged the respondent to secure the payment of the instalments and interest by a bond or covenant and to provide an indemnity.
The parties did not act in accordance with the relevant clauses in the deed. The respondent sought a dissolution by the Court and by consent of the parties, orders were made that the partnership business be wound up, that Mr A R Crawford be appointed receiver and manager without security with various powers and a direction to realise the assets, that an account be taken, and that the present respondent purchase the appellant's share in the partnership business, including the abalone licence "in accordance with clauses 13 and 15 of the Deed of Partnership". In the meantime, the appellant had remained in possession of the most significant asset of the partnership from 16 October 1989 and he retained it until late November 1990, continuing to take abalone pursuant to the licence and to derive income from that activity. The split of proceeds between the partners was varied from that in the deed by agreement between the appellant and the receiver. On 20 November 1990, an order was made that the appellant execute documents surrendering the licence and enabling its transfer to the respondent or a nominee. Between 16 October 1989 and 20 November 1990, the appellant was paid $202,127.27 in partnership income which was, by consent, treated as a repayment of capital. In addition, he received a further capital payment of $237,105 on or about 28 November 1990. A balance of $62,066.41 remained in Court pending finalisation of the proceedings.
The appellant was paid the allowance of 12 per cent on his interest in the capital of the partnership from 30 June 1989 to 16 October 1989. During the time he conducted the diving operations pursuant to the licence, that is, from the last date to 30 November 1990, he received $202,127.27 in income. At the hearing before Wright J, from whose decision in respect of interest under cl 16 this appeal arises, an adjustment was made in respect of the income received by the appellant in this period, it being determined that the appellant, instead of retaining that income, should be allowed a sum of $86,564.43 as fair remuneration for his labour in diving for and landing the catches.
The position therefore is that the appellant received an accelerated payment of his share in the capital and fair remuneration for his labour during the period when he deprived the respondent of the principal income-producing asset of the partnership. The sums which have been awarded to him have been assessed by the Court on equitable principles and it is quite inappropriate that he now insist that interest should be paid as contemplated by cl 16. In the events which have happened, namely the accelerated payment of his share of capital and the deprivation of the respondent of its right to exploit the diving licence and to potentially derive a greater profit from it than that achieved by the appellant, the factual matrix on which cl 16 was postulated is no longer in existence and it would be unconscionable to award him interest on top of the allowances that have already been made. In my opinion the learned judge at first instance has not been shown to be in error. I would dismiss the appeal.
File No FCA 106/1998
ROBERT DAVID McINTYRE v FRESHWATER CREEK PTY LTD
REASONS FOR JUDGMENT FULL COURT
CRAWFORD J
22 March 2000
On 16 October 1989, the respondent served on the appellant a notice in which it was asserted that the appellant had breached cl 11(a) of their deed of partnership by failing to diligently attend to the business of the partnership and that he had committed certain acts, which were particularised and which it was asserted constituted grounds for dissolution of the partnership by the Court. Upon that basis, the respondent purported to determine the partnership under cl 13 of the deed and to exercise the option provided for in it. The clause stated that if either partner (inter alia) breached cl 11 or did any act which would be a ground for the dissolution of the partnership by the Court, then the other partner might, "within three calendar months after becoming aware thereof by notice in writing determine the partnership and in that case he shall have the option … of purchasing the share of the other in the capital and assets of the business upon the like terms as are set forth in Clause 15 hereof in relation to the purchase by a surviving partner of the share of the deceased partner".
The parties were in dispute and remained so for some time. The appellant refused to acknowledge that the partnership had been dissolved and that the respondent was entitled to his share in it. He continued harvesting abalone pursuant to the licence, which was a partnership asset, and to derive income from that activity. However, on 19 July 1990 Green CJ made orders with the consent of the parties. It was firstly declared by consent that the partnership between them was dissolved as from 16 October 1989. That was the date upon which the respondent served the notice upon the appellant. By consent it was ordered that the partnership business be wound up and a receiver and manager was appointed with power to carry on the business, to employ such persons to manage it on such salary as the receiver and manager considered appropriate and to realise the assets of the partnership. It was also ordered by consent that the respondent purchase the appellant's share in the partnership business and its property and goodwill, including the appellant's share in the relevant abalone licence, and that the purchase be "in accordance with the provisions of Clauses 13 and 15 of the deed of partnership".
I have already referred to cl 13. Clause 15 was drafted in terms which provided what should happen if a partner died during the currency of the partnership. In such event, it provided as follows:
"The surviving partner shall unless otherwise agreed as from the date of such death succeed to the share of the deceased partner in the partnership business and the property and goodwill thereof and shall undertake all the debts liabilities and obligations of the partnership and pay to the representatives of the deceased partner as the price of such share:
a)His share in the capital and property of the partnership such share if he shall die before the day hereinbefore appointed for taking the first annual account to be the amount of capital brought in by him and if he dies on or after that day to be his share in such capital and property as ascertained by the account taken on the annual account day on or next after which he shall have died (hereinafter called 'the last annual account day') or as the same shall be ascertained on the taking of such account by the parties interested.
b)In lieu of current profits an allowance at the rate of Twelve dollars per centum per annum on his said share in the capital and property of the partnership from the last annual account day or from the commencement of the partnership as the same may be to the date of such death less any sums drawn out by him during that period on account of current profits."
It is common ground that the expression "the date of such death" should be read as referring, in the circumstances of this case, to 16 October 1989, and that the date on which the account was to be taken ("the last annual account day"), to determine the value of his share, for the purpose of ascertaining the purchase price, was 30 June 1989.
Therefore in the events that occurred, the effect of the consent order was that cl 15 was to be read in the following way, that is to say, that the respondent was to retrospectively succeed to the appellant's share in the partnership business and its property and goodwill from 16 October 1989 and the respondent was to pay to the appellant as the price of such share its value as ascertained by the account which was taken on 30 June 1989. In lieu of current profits (which must be taken to be a reference to profits after 30 June 1989), he was to be entitled to an allowance calculated on his share as so valued at the rate of 12 per cent per annum from 30 June 1989 to 16 October 1989 less any sums drawn out by him during that period on account of current profits.
Clause 16 made provision for the time and manner of payments under cl 15 in these terms:
"The amount (if any) payable under the last preceding Clause hereof as an allowance in lieu of current profits to the representatives of the deceased partner shall be paid to them within Three months after his death less the amount (if any) drawn out by the deceased partner in anticipation of such current profits and the sum payable under the came Clause to the representatives of a deceased partner as his share in the capital and property of the partnership after deducting the amount (if any) by which his drawings on account of current profits shall exceed the amount of such allowance shall be paid by Four equal half yearly instalments (the first of which shall be paid to the expiration of six months from such death) together with interest on the amount for the time being remaining unpaid at the rate of Twelve dollars ($12:00) per centum per annum from such death or from the date appointed for the last preceding payment of an instalment and interest as the case may be. Payment of such instalments and interest shall be secured by the bond or convenant of the surviving partner who by the same or a separate bond or covenant shall indemnify the representatives and estate of the deceased partner from the debts and liabilities of the partnership and upon such security and indemnity being given the representatives of the deceased partner shall execute and do all acts matters and things necessary or proper for vesting the share of such partner in the surviving partner and enabling him to recover and get in the outstanding assets of the partnership."
In the events which occurred, the effect of cl 16, if it applied, was as follows. The amount (if any) payable to the appellant under cl 15(b) in lieu of profits to 16 October 1989 was to be paid by 16 January 1990, after first deducting the amount already drawn by the appellant in anticipation of those profits. If any amount so calculated was payable, then it would have been impossible to comply with cl 16 in that regard because the order of the Chief Justice was not made until 19 July 1990. A further effect of cl 16, if it applied, was that the price of the appellant's share in the capital and property of the partnership ascertained in accordance with cl 15(a), after deducting from it the amount (if any) by which his drawings on account of current profits exceeded what he was entitled to in that regard, was to be paid by four equal half yearly instalments, the first of which was to be paid by 16 April 1990 (again, prior to the date of the order), and in addition there was to be paid interest on the amount for the time being remaining unpaid at the rate of 12 per cent per annum from 16 October 1989 or from the date appointed for the payment of an instalment and interest as the case might be. An effect of cl 16, if it applied, was also to require that the respondent would secure payment of the instalments and interest by a bond or covenant and that the respondent, by the same or a separate bond or covenant, would indemnify the appellant from the debts and liabilities of the partnership. Upon such security and indemnity being given, the appellant would be required to execute and do all acts, matters and things necessary or proper for vesting his share in the partnership in the respondent and enabling it to recover and get in the outstanding assets of the partnership.
The respondent had not in fact succeeded to the appellant's share in the partnership on 16 October 1989. The appellant had retained control of the major partnership asset, the licence, and continued to harvest abalone and gain income as a result. That situation continued. The parties remained in conflict and could not reach agreement as to settlement figures. However, upon an application by the respondent, it was ordered (inter alia) on 20 November 1990, that within 24 hours the appellant execute an Abalone Entitlement Surrender and Issue Form in respect of the partnership's abalone licence, and deliver it to the Launceston District Registrar of the Court, and that upon payment into court by the respondent of $293,173.66, the District Registrar was to deliver the executed form to the respondent and, if necessary, attend at the office of the Director of Sea Fisheries to effect the surrender of the appellant's abalone entitlement and the issue of a new licence to the respondent's nominee. Upon that surrender and issue, the District Registrar was to pay to the appellant, out of the money in court, $231,107.25 and the balance of $62,066.41 was to remain in court pending finalisation of proceedings. As a result, the respondent was able to effectively succeed to the assets of the partnership which event, according to cl 15 and as a result of the order of 19 July 1990, should have taken place on 16 October 1989. Between that date and 29 November 1990, the respondent had been prevented from carrying on the business on its own account. On 29 November, the District Registrar executed the documents necessary to effect the transfer of the licence to the respondent and the sum of $231,107.25 was paid out of court to the appellant.
It was eventually determined that the price payable to the appellant for his share in the partnership was $406,901.92. If cl 16 had been strictly applied, he would have been entitled to payment by four half yearly instalments of $101,725.48 each on 16 April 1990, 16 October 1990, 16 April 1991 and 16 October 1991. But strict compliance with cl 16 did not take place in a number of respects. One was that between 16 October 1989 and 20 November 1990, the appellant received income from the business to which he was not entitled in the total sum of $202,127.27 (it was subsequently determined that he was entitled to fair remuneration for his services during that period in the sum of $86,564.43) and he was paid out of the money in court for capital a further $231,107.25 or thereabouts on 29 November 1990. Receipt by him of payments of capital was therefore substantially accelerated.
I agree with the other members of the Court that the entitlement of the appellant fell to be determined upon the basis of equitable principles and that it would be unconscionable to grant what he seeks. He prevented the respondent from enjoying the operation of the business on its own account for a period exceeding 13 months, throughout which he derived income to which he was not entitled, and he received a substantially accelerated payment of his capital entitlement. His counsel conceded at the hearing of the appeal that because, on 29 October 1990, the respondent tendered to the appellant sufficient money to pay all of his capital entitlement, he could not properly claim an entitlement to interest thereafter in any event. I am not persuaded that the learned primary judge was in error concerning his lack of entitlement for the period between 16 October 1989 and that date and I would dismiss the appeal.
File No FCA 106/1998
ROBERT DAVID McINTYRE v FRESHWATER CREEK PTY LTD
REASONS FOR JUDGMENT FULL COURT
SLICER J
22 March 2000
The appeal involving mixed questions of law and equity arises from the claimed failure of the learned primary judge to grant a remedy provided by the terms of an agreement in circumstances where other equitable remedies had been granted. The particular issue requiring resolution came before the learned primary judge after a long history of pre-trial and consent orders which involved other terms of the contractual relationship between the parties. The matter came before the learned primary judge on the basis that there remained a short and discrete matter requiring resolution. Despite remonstrance by the learned primary judge that the 437 pages of material placed before him "was devoid of any indication" of the issues to be determined, and served to obscure, rather than elucidate, the controversy, the parties persuaded him to continue with the hearing. His Honour was ill-served by the exercise, given that certain orders were made by consent, some issues were agreed in general terms, and the remaining issue required analysis constrained by both previous and contemporaneous consent orders.
The parties had entered into a partnership agreement relating to the harvesting and sale of abalone. In October 1989, the respondent served notice terminating the partnership and exercising an option to purchase the appellant's interest in the partnership. The option was:
"… (to be exercised at the time of giving such notice) of purchasing the share of the other in the capital and assets of the business upon the like terms as are set forth in Clause 15 hereof in relation to the purchase by a surviving partner of the share of the deceased partner."
The agreement, cl 15, provided that in the event of the respondent being placed into liquidation, it would be treated as a deceased partner and in the event that the appellant was given notice, the determination of his interest was to be assessed as if he should:
"… die during the continuance of the partnership the surviving partner shall unless otherwise agreed as from the date of such death succeed to the share of the deceased partner in the partnership business and the property and goodwill thereof and shall undertake all the debts liabilities and obligations of the partnership and pay to the representatives of the deceased partner as the price of such share:
a) His share in the capital and property of the partnership such share if he shall die before the day hereinbefore appointed for taking the first annual account to be the amount of capital brought in by him and if he dies on or after that day to be his share in such capital and property as ascertained by the account taken on the annual account day on or next after which he shall have died (hereinafter called 'the last annual account day') or as the same shall be ascertained on the taking of such account by the parties interested.
b) In lieu of current profits an allowance at the rate of Twelve dollars per centum per annum on his said share in the capital and property of the partnership from the last annual account day or from the commencement of the partnership as the same maybe to the date of such death less any sums drawn out by him during that period on account of current profits."
The date of notice was 16 October 1989 and the agreed date of account was 30 June 1989. The parties could not agree the proprietary of the termination or the terms of the option. They remained in dispute and the appellant continued to harvest abalone until 29 November 1990 and to pay a percentage of the proceeds to the respondent, but did not transfer his licence until that date. The relevant terms of the agreement relating to the time and method of payment upon an exercise of option and any assignment were:
"16 The amount (if any) payable under the last preceding Clause hereof as an allowance in lieu of current profits to the representatives of the deceased partner shall be paid to them within Three months after his death less the amount (if any) drawn out by the deceased partner in anticipation of such current profits and the sum payable under the same Clause to the representatives of a deceased partner as his share in the capital and property of the partnership after deducting the amount (if any) by which his drawings on account of current profits shall exceed the amount of such allowance shall be paid by Four equal half yearly instalments (the first of which shall be paid to the expiration of six months from such death) together with interest on the amount for the time being remaining unpaid at the rate of Twelve dollars ($12:00) per centum per annum from such death or from the date appointed for the last preceding payment of an instalment and interest as the case may be."
Concurrent with the service of the notice, the respondent commenced proceedings, seeking:
(1)a declaration that the partnership had been dissolved;
(2)orders appointing a receiver/manager and the winding up of the partnership;
(3)an order that the respondent sell his share in the partnership, including the abalone licence, to the respondent, in accordance with the agreement, cl 13, and restraining him from dealing with such licence;
(4)an account of the financial affairs of the partnership.
On 19 July 1990, orders of this Court were made by consent which included:
"1that the partnership business be wound up.
…
6that the applicant purchase the respondent's share in the partnership business and the property and goodwill thereof and in particular the respondent's share in abalone licence bearing entitlement number 60, in accordance with the provisions of Clauses 13 and 15 of the deed of partnership dated 15 August 1986 and in that regard the Applicant may nominate a person to hold the licence, or any licence issued in place or substitution thereof as trustee for the applicant."
The receiver/manager permitted the appellant to continue to operate the licence and harvest abalone although the percentage of the sale price of the catch was varied.
The parties remained unable to agree the appropriate settlement figure and, following further negotiations, further orders were made, which while:
"… noting that these Orders are without prejudice to the respective rights of the Applicant and of the Respondent to make application to the Court to enforce and/or challenge the accounts of the Receiver and Manager as annexed to the Affidavit of [the receiver/manager] …"
relevantly included:
"(1)that the Respondent within twenty four (24) hours of the making of this Order execute an Abalone Entitlement Surrender and Issue Form (in such form is as [sic] acceptable to the Director of Sea Fisheries and the Applicant) in respect of Abalone Licence (bearing Entitlement number 60) currently issued to the Respondent and deliver the same to the District Registrar of the Supreme Court at Launceston.
…
(3)that upon payment by the Applicant to the District Registrar of the Supreme Court at Launceston of the sum of $293,173.66, by two bank cheques one in the sum of $231,107.25 to be dealt with as hereinafter appears and the other in the sum of $62,066.41 which cheque is to be paid into Court pending further order, the District Registrar shall deliver to the Applicant or his solicitors the executed form referred to in paragraph 1 of this Order together with the quota books referred to in paragraph 2 of this Order and if necessary that the District Registrar attend at the office of the Director of Sea Fisheries to effect a surrender of the Respondent's abalone entitlement and the issue of a new licence to the nominee of the Applicant.
…
(5)that upon surrender of the Respondent's licence and issue of a new licence to a nominee of the Applicant the District Registrar of the Supreme Court at Launceston account to the Respondent in respect of the sum of $231,107.25 hereinbefore referred to."
The intent of the parties when they requested the notation is unclear. Presumably, each reserved the right to challenge the calculations which had determined the amount of $293,173 as being the appropriate settlement figure. As such, the reservation can be seen as one limited to accuracy or calculation, rather than one permitting further challenge to substantive entitlement. That approach would render the subsequent issues subject to a claim of res judicata or issue estoppel. The orders required the transfer of the licence and the payment of a sum of money based on calculations made by the receiver/manager. However, no such point directly arises. But the form and making of the orders has relevance to the basis on which the Court was subsequently required to determine the respective rights of the parties. The process of compromise and the making of consent orders, either interlocutory or final, as to portion of the original application, transformed issues based on law into ones of competing equities.
Following the orders made on 20 November 1990, the proceedings continued on "a tortuous and desultory course". On 3 November 1994, the respondent made an interlocutory application, seeking orders:
"1 That the price to be paid by the Applicant to the Respondent for the sale of the partnership business purchased by the Applicant pursuant to Order 6 of the Orders made by the Honourable Chief Justice on the 19th July 1990, be ascertained.
2 That such price be determined in accordance with Clause 15 of the Deed of Partnership referred to in Order 1 of the said Order and that appropriate directions be given for that determination.
3 Further or in the alternative to 2 hereof that this Honourable Court determine the price to be paid and that appropriate directions be given as to the manner of the determination.
4 That in the meantime the sum of $62,066.41 paid into Court by the Applicant together with any interest thereon be paid to the Respondent in partial discharge of the purchase price."
In response to that application, a procedural order was made by the Court on 7 February 1995 whereby:
"1 that any issue between the parties as to the appropriate date for:
a)valuation of the assets of the partnership, and
b)taking the partnership accounts, and
c)the date of which the applicant was entitled to the partnership assets, be tried as a preliminary issue in this matter.
2 that there be discovery on oath by each party on or before 7 March 1995.
3 that such trial be on Affidavit and any such Affidavit to be relied upon be ruled and served on or before 7th April 1995
4 that there be liberty to each party to apply
5 that Costs of this application to be costs in the cause."
It was the interlocutory application dated 3 November 1994 which the learned primary judge was required to determine, in accordance with the procedural order, at the hearing on 30 April 1998.
At the hearing, learned counsel for the appellant advised the Court that the issues sought to be determined were:
"… the appropriate date for the valuation of the assets of the partnership … The appropriate date for taking the accounts … thirdly the date on which the applicant was entitled to the assets of that partnership."
In answer to a question by his Honour:
"I thought you were dealing with 7, and 7 is essentially in the terms of 7 of the application"
learned counsel advised:
"… my submission will be in due course that an inquiry and an account for the purposes of clause 7 needs to deal with the conduct of that partner, the respondent, my client, right down to the date he ceased dealing with the licence, ceased fishing the licence. Because right down to that time, he was dealing with property of the partnership and that sort of account wouldn't be brought out by an ordinary annual account which might be envisaged for the purposes of o6 [sic]."
Learned counsel then proceeded with his opening, returning to the issues in the following terms:
"The applicant is entitled to succeed to the assets of the partnership from 16 October 1989. … Secondly that the partnership accounts and the necessary valuation to determine the price of that succession is the 30 June 1989. And thirdly the date for the taking of the partnership accounts relating to the partners' dealings with the assets of the partnership after dissolution be down to 29 November 1990."
Having stated the issues and advising the court that resolution of a particular matter could be disposed of in five minutes, learned counsel traversed the issues which are the subject of appeal, although they were not raised by the orders made on 7 February 1995. They can be summarised as:
(1)What allowance should be made to the respondent for his work, labour and expenses in continuing with the licensed operations up until 29 November 1990?
(2)The amount of interest payable on amounts due from 30 June 1989 to the date of trial.
Learned counsel then advised the court that the first issue (the particular matter referred to above) was capable of agreement and that:
"… the other two could be the subject of directions by your Honour under Order 35, Rule 4 of the Rules at the conclusion of these proceedings today without the need for any extra evidence or argument or without the need for any other procedural steps and certainly without the need to impose on your Honour any greater burden than already exists.'
It has been necessary to outline the course of proceedings in order to determine what questions were required to be answered, the nature of the issues and the jurisdictional basis on which the remedies were being sought. The way in which the issues were put to the Court was unsatisfactory and, as the respondent's counsel understandably said:
"… I am somewhat surprised by the way my learned friend has framed what he thinks is before the court today."
There followed a discussion between counsel and the learned primary judge as to the terms of an order made by a different judge on 25 February 1998 at a pre-trial conference which provided for the resolution of different issues. Following an adjournment, counsel advised the court that certain matters had been agreed, including the procedure for the continuation of the hearing A number of agreed facts were put to the court in order to facilitate the determination of the issues. Evidence was then called and the hearing proceeded. The issues, which are the subject of this appeal, were not articulated until the closing addresses.
The case contended for by the appellant was that:
(1)the appellant was a party to a contract, the terms of which entitled him to a particular sum of money;
(2)the terms of that agreement provided a means of calculation which was not followed by the learned primary judge;
(3)the terms of the agreement provided for the payment of an allowance in relation to the period between the date of notice and the date of notional death and interest thereafter;
(4)upon answer being given to the appropriate calculations, the appellant was entitled to his legal remedy;
(5)there was no basis on which moneys retained by the appellant for work conducted subsequent to the date of notice could be reduced by regard to other matters.
Although the appellant claims that the remedy sought was both legal and equitable in nature, the basis of the remedy sought (as argued on the appeal) remained legal in nature. This is despite the basis advanced by learned counsel in his opening statement at the hearing before the learned primary judge that:
"… I would submit to your Honour, in due course, in a proper time … namely, a just allowance taking into account not only expenses but work and labour almost quantum meruit as it were …"
The reality was that the issues placed before the court were those of competing equities, rather than issues limited to the interpretation of the terms of the contract. A number of issues had already been determined by consent orders, there had been retention of a licence (justifiably or not), non-observance of provisions as to time (avoidable or not), and the like. The issues had been framed as an appeal to equitable principles and the decision of the learned primary judge reflected that basis.
The grounds of appeal state:
"upon the following grounds:
1 That in finding that the Appellant is not entitled to interest on any sum due between 1st July 1989 and 29th November 1990 His Honour erred by failing to determine that the Appellant is entitled to an allowance on his share of the capital and property of the partnership between 16th October 1989 and 29th November 1990 calculated in accordance with Clause 15(b) of the Partnership Deed, and further or in the alternative; that the Appellant is entitled to interest calculated in accordance with Clause 16 of the Partnership Deed.
2 His Honour erred in finding that the Appellant's entitlement to an allowance under Clause 15(b) of the Partnership Deed, and further, interest pursuant to Clause 16 of the Partnership Deed was dependant upon the Appellant having first succeeded to the share of the Appellant in the partnership business and the property of the partnership.
3 His Honour erred in finding that the Respondent had not succeeded to the share of Appellant in the capital and property of the partnership, within the meaning of Clause 15 of the Partnership Deed, until the 29th November, 1990.
4 His Honour erred in finding that the Appellant had not performed the obligations imposed upon him by the Partnership Deed entitling him to interest.
5 His Honour erred in finding that it was unconscionable to permit the Appellant to claim interest in respect of the period between 16 October 1989 and 2 November, 1990
6 His Honour erred in finding that the Respondent was entitled to the income of the partnership in the period 16th October 1989 to 29th November 1990 but had not thereby succeeded to the assets and property of the partnership.
7 That his Honour erred in failing to find that:
(a)the obligations of the Appellant to take steps to vest his share of the partnership in the Respondent was governed entirely by the provisions of Clause 16 of the Partnership Deed and further,
(b)that such obligations only arose upon the performance by the Respondent of its obligations under that clause ie provision of security and an indemnity,
(c)that the Respondent had failed to comply with its obligations or any of them under that clause either prior to 29th November 1990 or at all,
(d)that therefore the Appellant was not at anytime prior to the 29th November 1990 under an obligation to take any step to vest his share of the partnership property in the applicant Respondent, including by way of transfer of the fishing licence
8 His Honour erred in finding that the Appellant was not entitled to retain his share of income of the partnership in the period between 1st July 1989 and 16th October 1989 which exceeded the allowance at the rate of $12.00 per centum per annum.
9 His Honour erred in failing to find that in the period 1st July 1989 to 16th October 1989 the Appellant was not entitled to retain the income of the partnership in fact retained by him after accounting to the Respondent the Respondent's share of income pursuant to Clause 7 of the Partnership Deed."
Grounds 8 and 9 were abandoned at the commencement of the hearing of the appeal.
The learned primary judge identified the issues of contractual entitlement and interest and allowed the respondent's claim for entitlement on the basis of an agreed fact:
"That if the respondent establishes an entitlement to fair remuneration for working the abalone licence between 1 July 1989 and 29 November 1990, then the percentage agreed is 331/3 per cent of the gross landed value of the catch landed during the period."
and the appellant can make no complaint as to that finding. His Honour rejected the claim for allowance and interest for the same period. He did so on two bases:
(1)The appellant had retained the licence and, accordingly, the respondent was unable to "succeed" to it, as provided by the agreement, until 20 November 1990. The conduct of the appellant in withholding transfer was in breach of his own obligations under the contract.
(2)It was unconscionable to permit the appellant to receive the allowance and interest when the respondent did not have the benefit of the asset to which it was entitled from 16 October 1989. The order of the court made on 19 July 1990 appointing a receiver/manager did not vest the asset in the respondent.
The effect of those findings was that the income received by the appellant during the period 16 October 1989 until 20 November 1990 was deducted from his entitlement and replaced with an assessment of a fair remuneration for the same period. The appellant received his entitlement calculated at 12% for the period 1 July 1989 until 16 October 1989. The calculations based on the primary findings of the learned primary judge are:
Capital entitlement (30 June 1989) $406,901.92 Deduct income received 16 October 1989 - 20 November 1990 $202,127.27 Deduct exploratory licence income ($9,239.41) Deduct amount retained in excess of 12% entitlement 1 July 1989 - 16 October 1989 ($46,425.59)
Add fair remuneration to respondent for period 16 October 1989 to 20 November 1990 $86,564.43
Dr
($1,430.92)
The agreement provided that a breach by one partner entitled the other to purchase the interest of the other. A partner might resist purchase by denying the existence of cause, in which case the agreement remains relevant until resolution. In this case, there was an eventual order of purchase. The partnership was not, however, determined in accordance with the terms of the agreement. Notice was given and proceedings seeking a declaration were commenced concurrently. The appellant resisted both the proceedings and the effect of the notice. The order for purchase was made by the court on 19 July 1990, the same date as the appointment of the receiver/manager. The appellant, with the consent of the receiver/manager, remained the licence holder of a significant partnership asset and continued to operate as a fisherman of abalone until 29 November 1990. He received 60 per cent of the income derived from the asset during that period, a sum greater than the entitlement provided for by the agreement, cl 16. The sum received, $202,127.27, was treated as a repayment of capital. He did not request the respondent to provide a bond or covenant as provided for by the agreement, cl 16. In effect, he received an accelerated payment in lieu of the instalment payments provided for in the deed. The disposition was effected by Court order, rather than by adherence to the terms of the agreement. The appointment of the receiver/manager altered the relationship between the appellant and respondent.
The order of dissolution of the partnership likewise altered the nature of the relationship between the parties. The respective rights of the parties were subsumed by both the order and the appointment. The respondent (or a person designated by it) did not obtain the licence and the appellant was able to continue with fishing, subject to the control of the receiver/manager. That was a different position than that provided for by the agreement, cls 15 and 16, whereby the respondent would have been entitled to complete ownership and control over the licence as and from the relevant date, subject to payment for the appellant's interest.
The position of the parties at the time the proceedings came before the learned primary judge had fundamentally altered. He was asked to resolve the dispute according to the respective equities of the parties. He was required to pay regard to the terms of the agreement as a significant matter in the assessment of those equities. He could not, however, apply a strict interpretation of legal right in one respect only to the detriment of the equitable rights of the other. By the time of the hearing, other matters had been compromised, orders made and varying adjustment had to the respective interests of the parties.
The learned primary judge was not required to deal with the matters in the manner claimed in the notice of appeal.
In my opinion, the appeal ought be dismissed.
0
0
0