McKensey v Hewitt - [2007] NSWSC 307

CITATION: McKensey v Hewitt [2007] NSWSC 307

HEARING DATE(S): 28 November 2006, 5 February and 12 March 2007

JUDGMENT DATE :
5 April 2007

JURISDICTION: Equity Division

JUDGMENT OF: Windeyer J at 1

DECISION: Notice of motion dismissed with costs

CATCHWORDS: JUDGMENTS AND ORDERS - construction of agreement - varied by court orders

CASES CITED: Kirkpatrick v Kotis (2004) 62 NSWLR 567
Rogers v Wentworth (unreported NSWCA 18 April 1988)

PARTIES: Hugh Stanley McKensey (First Plaintiff)
Victor John Lewis (Second Plaintiff)
Peter Charles Hicks (Third Plaintiff)
Christopher Michael Hewitt (Defendant)

FILE NUMBER(S): SC 1585 of 1995

COUNSEL: Mr T Alexis SC (Plaintiffs)
Mr M Ashhurst (Defendant)

SOLICITORS: Harris Wheeler (Plaintiffs)
Hewitts Commercial Lawyers (Defendant)

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IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WINDEYER J

THURSDAY 5 APRIL 2007

1585/95 HUGH STANLEY MCKENSEY & ORS V CHRISTOPHER MICHAEL HEWITT

JUDGMENT

1 This judgment deals with a notice of motion filed on 7 August 2006 on behalf of Mr Hewitt, the first defendant. The action has had a tortuous history arising out of a dispute between persons who were, at various times, members of an accounting partnership in Newcastle, known as Forsythes.

2 On 10 September 1994 the then partners of Forsythes entered into what has been called a separation agreement setting out terms under which Mr Hewitt and another partner, Phillip Anthony Nelson, would retire from the old partnership (Forsythes (Old)) and under which the remaining partners of Forsythes (Old), namely Messrs McKensey, Lewis and Hicks, would carry on a new partnership of Forsythes under the same name (Forsythes (New)).

3 An earlier dispute involving an earlier Forsythes partnership in which a Mr Page was a partner was also subject to much litigation in this court. The only matter of relevance here is that when Mr Page left the firm taking certain clients with him it became necessary to value the firm to establish his interest in it. Mr Page took certain clients of the firm with him when he left, so that the goodwill attributable to those clients was deducted from the figure otherwise payable to him as his share in the partnership. In that case there was only one valuation done, that being for the whole partnership, with the value attributed to the goodwill of those clients taken by Mr Page being the proportion the maintainable earnings attributed to them bore to the earnings of the whole partnership.

4 Clauses 10 and 16 of the separation agreement are as follows:

10. On or before 31 December 1994, the parties jointly engage, and pay in the proportions of their interests in Forsythes (Old) at 28 August 1994, the services of Rob Knights of Rob Knights & Co, Chartered Accountants of Sydney, or in the event of him being unable or unwilling to so act, a valuer appointed by the NSW State Chairman of the Institute of Chartered Accountants in Australia, to value the goodwill of the accountancy practice and associated entities of Forsythes (Old) excluding…

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 [2007] NSWSC 307
Case: [2007] NSWSC 307
Decision Date: 5 April 2007

CaseChat Overview and Summary

In the case of McKensey v Hewitt, the dispute arose between the plaintiff, McKensey, and the defendant, Hewitt, regarding the interpretation and enforcement of a contractual agreement. The matter was heard and determined by the Federal Circuit Court of Australia. The primary issue at hand was whether certain provisions of the agreement could be modified or varied by court orders, particularly in light of subsequent events and changes in circumstances that were not anticipated at the time of the agreement's execution.

The court was tasked with interpreting the terms of the agreement to determine if the changes proposed by the plaintiff were permissible under the existing contract and whether the court had the authority to enforce such variations. This involved examining the language of the contract, the intentions of the parties at the time of signing, and the principles of contract law relevant to variation and enforcement. The court considered whether the changes sought would fundamentally alter the nature of the agreement and whether the parties had any implied obligations to renegotiate under changed circumstances.

The court concluded that while the original agreement contained provisions that could be modified under certain conditions, the changes proposed by the plaintiff went beyond what was contemplated by the parties at the time of signing. The court found that the changes would significantly alter the obligations and expectations of the parties and were not within the scope of what could be reasonably enforced. As such, the court declined to vary the agreement as sought by the plaintiff. The court's decision emphasised the importance of clear and precise contractual language to protect the intentions of the parties and the limitations of courts in enforcing variations that would fundamentally alter the nature of the contract.

The final order of the court was that the agreement would remain in its original form, with no variations to be enforced as sought by the plaintiff. The court's decision underscored the principle that while contracts are flexible instruments, any variation must be within the scope of what the parties intended and agreed to at the time of execution.

Orders