McKensey v Hewitt - [1999] NSWCA 426

CITATION: McKensey v Hewitt [1999] NSWCA 426

FILE NUMBER(S): CA 40845/97

HEARING DATE(S): Thursday 26 August 1999

JUDGMENT DATE:
3 December 1999

PARTIES :

Appellant: Hugh Stanley McKensey
2nd Appallant: Victor John Lewis
3rd Apellant: Peter Charles Hicks
Respondent: Christopher Michael Hewitt
2nd Respondent:Phillip Anthony Nelson

JUDGMENT OF: Meagher JA at 1; Giles JA at 14; Fitzgerald JA at 46

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S) : 1585/95

LOWER COURT JUDICIAL OFFICER: Einstein J

COUNSEL: Appellant- Mr W H Nicholas QC & Mr T A Alexis
Respondent- Mr M Ashurst

SOLICITORS: Appellant- Harris Wheeler (Newcastle)
Respondent- Hansens (Newcastle)

CATCHWORDS: Partnerships; Duty of good faith and disclosure; Breach of fiduciary duty; Breach of duty not made out

CASES CITED:
Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429
Port Jackson Stevedoring Pty Ltd v Salmond and Spraggon (Aust) Pty Ltd(1978) 139 CLR231
Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310
Codelfa Construction Pty Ltd v Stae Rail Authority of New South Wales (1982)149 CLR337 at 352

DECISION: 1.Appeal allowed in part; 2.Set aside the declarations and orders in paras 5,6,7,8,9,10,11,and12 of the declarations and orders made by Einstein J on 11 November 1997.; 3.Set aside in para 15(b) of the declaration and orders made by Einstein J on November 1997 and in lieu thereof order that the cross-claiments pay the cross- defendants costs of the second cross-claim.; 4.Make no order as to the costs of the appeal.

IN THE SUPREME COURT
OF NEW SOUTH WALES
SYDNEY REGISTRY
COURT OF APPEAL
CA No. 40845 of 1997
ED No.1585 of 01995
MEAGHER JA
FITZGERALD JA
GILES JA
FRIDAY 3 DECEMBER 1999

Hugh Stanley McKENSEY & 2 ORS V Christopher Michael HEWITT & ANOR

PARTNERSHIPS-DUTY OF GOOD FAITH AND DISCLOSURE-BREACH OF FIDUCIARY DUTY-EQUITABLE COMPENSATION-BREACH OF DUTY NOT MADE OUT
Facts: The appellants were employees of Deloitte Haskins & Sells (“DH&S”) in Newcastle, which in October 1987 decided to cease operations in the Newcastle area. The appellants agreed to take over the business of DH&S and formed a new partnership called Forsythes Chartered Accountants (“Forsythes”).
A transition agreement called the “Deloitte’s Retirement Agreement” was drawn up. The purpose of this document was to facilitate such things as the transfer of clientele, business equipment and technical material to the new partnership. Clause 14 detailed an annual payment of $30,000 for ten years to be made by all Forsythes partners to DH&S in consideration for clientele and referred work.
The respondents became partners in the new business and made contributions to the DH&S payments during 1988, 1989 and 1990. In September 1994 the respondents endeavoured to retire from Forsythes and dissolve the partnership. The Deloitte’s agreement provided mechanisms for doing so. The respondents argued they were unable to comply with these provisions as the appellants had failed to disclose to them the terms of the retirement agreement, and the true nature of the $30,000 per annum liability…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading McKensey v Hewitt

Details

AGLC: McKensey v Hewitt [1999] NSWCA 426
Case: [1999] NSWCA 426
Decision Date: 3 December 1999

CaseChat Overview and Summary

The appeal in *McKensey v Hewitt* concerned a dispute between partners. The primary issue was whether one partner, Mr. Hewitt, had breached his fiduciary duties to the other partner, Mr. McKensey, by failing to disclose certain information and acting in bad faith. The case was heard in the Court of Appeal of New South Wales.

The Court of Appeal was required to determine whether Mr. Hewitt had breached his duty of good faith and disclosure to Mr. McKensey, and whether this constituted a breach of fiduciary duty. The court also had to consider the appropriate orders to be made in light of its findings.

The Court of Appeal found that the evidence did not support a finding that Mr. Hewitt had breached his fiduciary duty to Mr. McKensey. The court reasoned that the duty of good faith and disclosure owed between partners did not extend to requiring disclosure of information that was not relevant to the partnership's business or that was already in the public domain. Consequently, the court allowed the appeal in part, setting aside certain declarations and orders made by the primary judge concerning the alleged breaches. The court also made specific orders regarding the costs of the second cross-claim and made no order as to the costs of the appeal.

Orders

Orders of the court

1.Appeal allowed in part; 2.Set aside the declarations and orders in paras 5,6,7,8,9,10,11,and12 of the declarations and orders made by Einstein J on 11 November 1997.; 3.Set aside in para 15(b) of the declaration and orders made by Einstein J on November 1997 and in lieu thereof order that the cross-claiments pay the cross- defendants costs of the second cross-claim.; 4.Make no order as to the costs of the appeal.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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CITATION:	McKensey v Hewitt [1999] NSWCA 426
FILE NUMBER(S):	CA 40845/97
HEARING DATE(S):	Thursday 26 August 1999
JUDGMENT DATE:	3 December 1999
PARTIES :	Appellant: Hugh Stanley McKensey 2nd Appallant: Victor John Lewis 3rd Apellant: Peter Charles Hicks Respondent: Christopher Michael Hewitt 2nd Respondent:Phillip Anthony Nelson
JUDGMENT OF:	Meagher JA at 1; Giles JA at 14; Fitzgerald JA at 46

LOWER COURT JURISDICTION:	Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S) :	1585/95
LOWER COURT JUDICIAL OFFICER:	Einstein J

COUNSEL:	Appellant- Mr W H Nicholas QC & Mr T A Alexis Respondent- Mr M Ashurst
SOLICITORS:	Appellant- Harris Wheeler (Newcastle) Respondent- Hansens (Newcastle)
CATCHWORDS:	Partnerships; Duty of good faith and disclosure; Breach of fiduciary duty; Breach of duty not made out
CASES CITED:	Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 Port Jackson Stevedoring Pty Ltd v Salmond and Spraggon (Aust) Pty Ltd(1978) 139 CLR231 Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 Codelfa Construction Pty Ltd v Stae Rail Authority of New South Wales (1982)149 CLR337 at 352
DECISION:	1.Appeal allowed in part; 2.Set aside the declarations and orders in paras 5,6,7,8,9,10,11,and12 of the declarations and orders made by Einstein J on 11 November 1997.; 3.Set aside in para 15(b) of the declaration and orders made by Einstein J on November 1997 and in lieu thereof order that the cross-claiments pay the cross- defendants costs of the second cross-claim.; 4.Make no order as to the costs of the appeal.