| JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA LOCATION : PERTH CITATION : MINE MAINTENANCE MANAGEMENT PTY LTD -v- RAMSAY [2005] WADC 71 CORAM : MARTINO DCJ HEARD : 21 & 22 FEBRUARY 2005 DELIVERED : 22 APRIL 2005 FILE NO/S : CIV 361 of 2004 BETWEEN : MINE MAINTENANCE MANAGEMENT PTY LTD (ACN 056 552 973) Plaintiff
AND
PHILIP GILBERT RAMSAY
Defendant
Catchwords: Partnership - Joint venture - Advance to one partner - Liability for losses
Legislation: Partnership Act 1895 s 7, s 34(1), s 34(2)
Result: Account of losses to be taken
Judgment for defendant on counterclaim
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Representation:
Counsel:
Plaintiff : Mr M F Holler
Defendant : Mr H O Moser
Solicitors:
Plaintiff : Mark Holler & Co Lawyers
Defendant : Christopher J Cook
Case(s) referred to in judgment(s):
Canny Gabriel Jackson Advertising v Volume Sales (Finance) (1974) 131 CLR 321
Wiltshire v Kuenzli (1945) 63 WN (NSW) 47
Case(s) also cited:
Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337
Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500
L G Thorne & Co Pty Ltd v Thomas Borthwick & Sons (Australasia) Ltd (1955) 56 SR (NSW) 81
Playfair Development Corporation Pty Ltd v Ryan [1969] 2 NSWR 661
Re Meade; Ex parte Humber v Palmer [1951] Ch 774
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1 MARTINO DCJ: This action arises out of an agreement between Jonathon Paul Edwards, the sole director of the plaintiff, Mine Maintenance Management Pty Ltd, and his cousin the defendant, Philip Gilbert Ramsay, to crop farm together. The dispute occurred in the second year that the two cousins had crop farmed together. In each year Mr Edwards arranged for his solicitors to prepare a form of written agreement but neither was executed by Mr Ramsay. A major problem in this case, and the ultimate cause of the dispute, is that because the two men were cousins who had known each other for many years much was left unsaid in their discussions, each assuming that the other had the same understanding of their arrangements as he did.
The pleadings 2 When the trial commenced Mine Maintenance claimed in its statement of claim the sum of $38,000 plus interest as money lent by Mine Maintenance to the defendant. By his defence and counterclaim Mr Ramsay admitted the loan, although not that it was interest bearing, and contended that subsequent to the loan but before repayment was demanded Mine Maintenance and Mr Ramsay agreed at the home of Mr Edwards in March or April 2002 in a conversation between Mr Edwards and Mr Ramsay that the sum of $38,000 was to be treated as an advance on money to be paid by Mine Maintenance to Mr Ramsay to crop land pursuant to an agreement that: (a) Mine Maintenance would lease land and Mr Ramsay would provide 350 hectares of land owned by Talyat Pty Ltd; (b) Mine Maintenance would pay all costs including the provision of Mr Ramsay's labour and machinery in the sum of $90,000 plus GST; and (c) the sum of $38,000 was agreed to be an advance towards the sum to be paid to Mr Ramsay for his labour and machinery. 3 Mr Ramsay counterclaimed the sum of $61,000 plus interest as money due for his labour and machinery pursuant to that agreement. 4 By a pleading it called a defence to counterclaim and rejoinder Mine Maintenance denied the agreement alleged by Mr Ramsay and contended that there was an agreement between Mine Maintenance and Mr Ramsay by which they agreed to crop land in partnership for the 2002/2003 season on the following material terms:
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1. Mine Maintenance would provide freehold land in order to secure a finance facility and Mr Ramsay would provide some land, labour and machinery; 2. profit would be shared equally after the first $90,000 of profit was distributed to the defendant; and 3. any losses would be shared equally. 5 By the rejoinder Mine Maintenance purported to claim from Mr Ramsay $93,048.50 plus interest as one half of the loss suffered by the partnership. 6 At the commencement of the trial I raised with counsel the procedural irregularity that Mine Maintenance was claiming relief not claimed in its statement of claim. Immediately after submissions on that matter counsel for Mr Ramsay informed me that Mr Ramsay wished to amend his defence to delete the allegation that the agreement to crop farm was subsequent to the loan of $38,000. I stood the matter down to allow the parties to regularise the pleadings. 7 When the matter was called on again later in the day minutes of substituted pleadings were tendered and by consent I ordered that those minutes stand as the substituted pleadings. By the substituted statement of claim Mine Maintenance pleaded that there was an agreement between Mine Maintenance and Mr Ramsay by which they agreed to crop land in partnership for the 2002/2003 season on the terms that Mine Maintenance had pleaded in its rejoinder and also pleaded that it lent $38,000 to Mr Ramsay. Mine Maintenance claimed from Mr Ramsay $93,048.50 plus interest as one half of the loss suffered by the partnership plus $38,000 plus interest as money lent by it to Mr Ramsay. 8 By his substituted defence and counterclaim Mr Ramsay admitted that he and Mine Maintenance had agreed to crop farm land but pleaded that the terms of the agreement were: 1. Mine Maintenance would lease land at its cost and Mr Ramsay would provide 350 hectares of land owned by Talyat Pty Ltd; 2. Mr Ramsay would provide labour, machinery, plant and other equipment to effect spraying, cropping and seeding on the land and the defendant's land at a cost fixed at $90,000 plus GST, a total of $99,000;
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3. Mine Maintenance would pay all costs incurred to carry out the agreement, including the payment of $99,000 to Mr Ramsay; and 4. Mine Maintenance would pay to Mr Ramsay the sum of $38,000 as an advance towards the payment of $99,000 in or about April 2002 with the balance being payable after harvest in or about January or February 2003. 9 Mr Ramsay counterclaimed the sum of $61,000 plus interest as money due for his labour and machinery pursuant to that agreement.
The parties 10 Mr Edwards is a mechanical engineer who specialises in the offshore oil service industry. Mr Ramsay is a farmer at Borden and has been a farmer all his adult life. He farms a 3,200 hectare farm called Talyat farm, which is owned by Talyat Pty Ltd, a company of which he is the sole director. Mr Edwards visited Talyat farm when he and Mr Ramsay were children. At that time Mr Ramsay's father farmed Talyat farm. Mr Edwards has no experience in crop farming.
The first year of crop farming together 11 The dispute between the parties arose out of the second year in which they crop farmed together. Evidence as to what had occurred in the first year was led by both parties without objection as part of the background. 12 In early 2001 Mr Edwards visited Mr Ramsay at Talyat farm. At that time Mr Ramsay had recently completed a financial settlement with his former wife and had suffered bad seasons so he was "cash strapped". He told Mr Edwards that he was cash strapped. Mr Edwards told Mr Ramsay that he was interested in farming. They discussed the possibility of crop farming together. They agreed that Mr Ramsay would look for suitable land to lease for this purpose. Mr Ramsay found land owned by members of the Deering family near to his farm available for lease. On 5 April 2001 he sent a facsimile to Mr Edwards in which he informed Mr Edwards of the land available for lease. 13 Mr Ramsay and Mr Edwards agreed to crop farm that land. On 24 April 2001 Mr Ramsay sent to Mr Edwards a facsimile in the following terms:
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Philip do the cropping and harvesting John provide the money and if has time come and help. We follow budget as close as we can If we need to get harvesting contractors it be a joint decision and if we do it comes out of Philips share. All freight be included eg fertilizer cartage Jon pay lease We share profits We get crop regularly inspected by agronomist to check there wellbeing We use Davis Rees as our advisor We use Jons company Mine Maintenance Management Pty Ltd. Things to do Register company as a wheat grower and get delivery discs Look into contract for wheat Philip source wheat We crop at optimum time and well If we both agree we change things to suit our selves Phillip Ramsay Jon Edwards"
14 The evidence of Mr Ramsay as to his discussions with Mr Edwards prior to the facsimile was illustrative as to the nature of the discussions they had prior to this dispute arising: "I think it was a series of talks that eventually came to some consensus that we both agreed. It wasn't in one particular meeting, it was over a period of time and it involved faxes, it involved phone calls, involved talking and in the meantime we had the land and we were starting to do the work anyway." [T 110]
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15 Mine Maintenance leased the land owned by members of the Deering family for one year with an option for a second year. It is Mr Ramsay's view that it is good farming practice to lease land for as long as possible and his evidence was that he informed Mr Edwards that he should lease the land for two or three years. Mr Edwards did not recall such a discussion. I am satisfied from my observations of the witnesses and from the whole of their evidence that Mr Ramsay would have liked the lease to be longer but that he did not tell Mr Edwards that.
16 Mr Edwards instructed his solicitors to prepare a share farming agreement. The draft share farming agreement prepared by Mr Edwards' solicitors was a detailed document which provided for much more than Mr Ramsay's facsimile of 24 April 2001. It included the following clauses: "12 PAYMENT TO CONTRACTOR FOR SERVICES 12.1 Payment to Contractor Subject to sub-clause 12.2, the Lease-holder shall, by no later than 31 December 2001, pay the Contractor the following amounts for services rendered in respect of Farming the Land: (a) $60,000.00; and (b) 50% of the NETT profit from the sale of the Crop, PROVIDED THAT the Lease-holder's liability for the Finance Facility has been fully satisfied. 12.2 Payment in Event Finance Facility Not Paid Out Or Loss In the event that the Lease-holder's liability for the Finance Facility is not satisfied by the sale of the Crop, the Contractor shall forgo all right to payment for services rendered under this Agreement. If, however, the Finance Facility is satisfied by the sale of the Crop, but the funds remaining are not sufficient to pay the Contractor the sum specified under sub-clause 9.2(a), then the Contractor shall receive for its services the
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balance of any funds remaining as full and proper payment. 18.1 Relationship of Parties Nothing in this Agreement must be construed as constituting any partnership, joint venture, or agency relationship between the Contractor and the Lease-holder. No representations or warranties given or made by the Contractor and no contract or agreement purported to be entered by the Contractor for or on behalf of the Lease-holder should be taken to be to have been made by or to be binding on the Lease-holder." 17 Mr Edwards approved of the draft agreement. He sent it to Mr Ramsay. He did not receive any response from Mr Ramsay and on 10 May 2001 he sent to Mr Ramsay a facsimile in which he asked if Mr Ramsey had any concerns about the draft agreement or wished to make any changes and asked Mr Ramsay to telephone him. 18 After that facsimile Mr Edwards had a telephone conversation with Mr Ramsay. Mr Edwards' evidence was that in that telephone conversation Mr Ramsay raised some concerns about the requirement for farm breaks and the farm advisers in the draft. The finalisation of the written agreement went no further: 19 Mr Edwards' evidence was: "I was busy with my own business. I considered Philip a career farmer and didn't find myself in a position to follow up. I had no reason to believe that there was any problem with the agreement, other than the firebreaks and the comments about the farm advisers, so I left it at that." [T 29] 20 Mr Ramsay's evidence was that Mr Edwards brought the draft agreement to his farm after he had commenced seeding and asked him to read it and take it to his lawyer. Mr Ramsay did not get around to reading it at that time and did not take it to a lawyer. He read it after the dispute arose. His evidence was that in his view it did not reflect their agreement because he had not agreed that he would not be paid for the services rendered by him if there were insufficient funds after payment of Mine Maintenance's liability for the finance facility as is provided in cl 12.2 of the draft. I am satisfied that Mr Ramsay did look at the draft in 2001, did
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have a conversation with Mr Edwards about it, but that he did not read it closely and did not understand all its contents. 21 Mr Edwards and Mr Ramsay agreed in their evidence that the sum of $60,000 was to be paid to Mr Ramsay for him to use his machinery to farm the leased land. Mr Ramsay's evidence was that he charged half the commercial rate because he thought that fair as he was to receive a share of the profit from the crop. 22 Mr Edwards' evidence was that he did not know that the sum of $60,000 was half the commercial rate. I find that Mr Ramsay honestly believed that $60,000 was significantly less than the commercial rate but that he did not tell Mr Edwards that it was half the commercial rate and that Mr Edwards did not know that it was less than the commercial rate. 23 On the issue of the payment to Mr Ramsay once again it is clear that there was no detailed discussion between Mr Edwards and Mr Ramsay. Mr Edwards' evidence was: "As long as the liability of the finance facility was fully satisfied and that was essentially what we - I understood to be the agreement was that when the finance was paid out, would calculate the profit. Philip would take the first $60,000 and then what was left we'd share fifty-fifty." [T 25] 24 Mr Ramsay's evidence was that he "was under the impression" [T 112] that he was going to be paid $60,000 for his work and that it is the practice for contractors who do work on farms to get paid once they render a bill. 25 The income received from this first year of farming was sufficient for Mr Ramsay to be paid the sum of $60,000 but there was no other payment made to Mine Maintenance or Mr Ramsay that year. The profit for that year was subsequently determined to be $1,106.
The second year of crop farming together 26 In February 2002 Mr Ramsay and Mr Edwards met at Mr Edwards' home. Mr Edwards had little memory of this meeting. 27 On 28 February 2002 Mr Ramsay sent a handwritten memorandum to Mr Edwards setting out proposals for crop farming that year. On 5 March 2002 he met Mr Edwards at Mr Edwards' home. They discussed the proposal as Mr Edwards' wife Jane Law prepared
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lunch. The home has an open dining and kitchen area and Ms Law could hear what they were discussing. She did not take part in the discussions. 28 At either the meeting in February or the meeting in March Mr Ramsay had with him hand written notes he had prepared and a spreadsheet containing a cash flow budget. In those notes and budget Mr Ramsay proposed that they farm 280 hectares of canola, 840 hectares of wheat and 160 hectares of oats. He and Mr Edwards discussed the notes. Mr Ramsay's evidence was that Mr Edwards wanted to farm more canola. Mr Ramsay also gave evidence that he told Mr Edwards that canola was a high risk crop, that Mr Ramsay could not take a risk on canola for one season, that canola was a good crop for crop farming for more than one season because it was good for cleaning the land of weeds and that the only way that he could become involved in farming more canola was if their arrangement was for two to three years so that they could farm cereal after the canola crop. Mr Edwards' evidence was that he and Mr Ramsay agreed on what they would farm. I accept that Mr Edwards and Mr Ramsay agreed on what they would farm. I also accept that Mr Ramsay was reluctant to farm so much canola, but I do not accept that he said he could not take a risk on canola, nor that the only way he could become involved in canola was if their arrangement was for two or three years. None of the discussions between the two men had that level of clarity or detail. 29 Mr Edwards' evidence was that he was not particularly enthusiastic about crop farming for a second year, but that he did agree to do so at that meeting. His evidence was that at the meeting they agreed that the same arrangement for the previous year would apply, but that the payment to Mr Ramsay would increase to $90,000 and Mr Ramsay agreed to cover half the losses. The payment to Mr Ramsay was increased from the payment of $60,000 for the previous year because the amount of land being farmed has increased, with 350 hectares of land owned by Talyat Pty Ltd being farmed by Mine Maintenance and Mr Ramsay in addition to land leased from the Deering family. The spreadsheet provided for a payment for "Contract & Hire" of $90,000. In that form it appears to be a reference to an expense rather than a profit share. Mr Edwards' evidence was that the payment of $90,000 to Mr Ramsay was a share of the profits. 30 Mr Edwards' evidence confirms that they did not discuss matters in detail and that he assumed that he and Mr Ramsay were agreeing on items. For example part of his evidence-in-chief as to what he and Mr Ramsay agreed as to the payment of $90,000 for farming to Mr Ramsay was:
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"The same arrangement from the previous year prevailed. The finance facility would be used to cover up the outgoings. Once the finance facility was satisfied Philip's distribution of $90,000 be made and then what was left after that we would split fifty-fifty. Do you remember what Philip said about that or what you said to Philip and his reply?---At that time the same arrangement as the previous year was discussed. Yes. What I'm driving at is do you actually remember the words or the substance of the words that you used and what Philip said, if anything, in response to that? You have told us the same arrangement prevailed but that's not telling us what you said and what Philip said?---I can't remember any comments at that time. Are you saying Philip didn't say anything about that or ?---About the --- About sharing the profit after the $90,000 was made, of the finance facility being paid out?---I don't remember him saying anything, no." [T 35]
31 Mr Ramsay's evidence on this issue also shows that there was no detailed discussion. When giving evidence-in-chief as to provision in the spreadsheet for a payment for "Contract & Hire" of $90,000 his evidence was: "How did you get to the 90,000?---It was 1500 hectares, $120 a hectare. Half of that was 90,000, the same as the year before. The same cost per hectare?---Yes. Who was going to do the contracting?---Myself. Why did you put that contracting expense into the cost of the exercise?--Because it was a cost. Did you have any specific discussion of when that contracting was going to be paid?---At the end. I just assumed from the year before that I'd be paid at the end of the job." [T 116]
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32 Mr Edwards' evidence was that he was not happy about the amount of money Mine Maintenance would need to borrow for the share farming to take place and that Mr Ramsay said to him "if it all goes pear-shaped he would cover half the loss. I said okay." [T 33]
33 During the meeting in March 2002 Mr Ramsay informed Mr Edwards that he needed to make a payment to his bank of $38,000. Mr Edwards' evidence was that Mr Ramsay told him that he needed to make a payment to his bank and that he needed either to get the money out of the joint venture account or he needed to borrow $38,000 from Mr Edwards. Mr Edwards' evidence was that he would arrange to have the share farming agreement provide that the profit share of $90,000 to be made to Mr Ramsay was split into $38,000 and $52,000. After that meeting Mr Edwards sent a facsimile to Mr Ramsay on 19 March 2002. In the facsimile Mr Edwards wrote: "Tuesday 19th March Hi – I hope things are going well. I never did get a fax from you so I thought I would send a brief follow up note from our planning meeting in Perth. I guess you detected I was not overly happy at the end of it. Here are the things that made me feel this way: … 2) The 02/03 season is turning out with the joint venture needing over a $300,000 finance facility. I was planning on $200,000. I haven't really had much time to consider the impact this has on my other activities or if I really want to secure this level of borrowing on a higher risk crop. I've agreed to find the extra 100k but I'm not over the moon about it and you will need to make sure we don't over spend and aim at the larger cost areas to try to come in under budget. 3) The joint venture has been leaned on for the $38,000 you need for PIBA. I don't want your needs putting pressure on this arrangement. The project has only just made it past breakeven and as you know, the final income wont be in til next year. The $38,000 advance you have requested adds to the peak borrowing requirement from day one. My preference is to get our JV revenues in first before spending it. The JV will make the advance on
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next years work to help you out, but I will be insisting on seeing the colour and quantities of revenues this season before further cash goes out. We will go-ahead with this year as planned it but I want to impose a few things: 1) Share farming agreement is to be executed (draft is being prepared) 2) Quotes, agreements or arrangement which involve the joint venture to be detailed on a fax, agreed and signed off by me before proceeding. 3) All invoices to be submitted on proper Tax invoices with ABN. 4) No expectation or commitment to a third year until the current season is closed out and profit or loss determined. 5) Proper records to be kept – spraying, fuel use, seeding harvesting ... Regards, Cousin Jono" 34 Mr Ramsay did not reply to that facsimile. On 3 April 2002 Mine Maintenance provided to Mr Ramsay a cheque in the sum of $38,000 payable to Mr Ramsay's bank. 35 Ms Law's evidence of this meeting was that she did not hear all that took place but she recalled she did hear Mr Ramsay say that if the canola crop failed he would cover half Mr Edwards' loss. 36 Mr Ramsay denied that he agreed to cover half the loss. His evidence was that he could recall that at either the February meeting or the March meeting he told Mr Edwards that canola is a very risky crop and that Mr Edwards' response was "I'm a speculator, high risk, high gain." [T 119] Mr Edwards agreed the phrase "high risk, high gain" is a phrase he uses.
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37 Mr Ramsay's evidence was that at some time after the meeting Mr Edwards directed him to use Michael Deering to assist him with the farming the land because Mr Edwards had agreed with Mr Deering that in return Mr Ramsay would sew seeds for Mr Deering. Mr Ramsay was not happy with this arrangement but agreed to do so. Mr Edwards denied giving that instruction to Mr Ramsay. His evidence was that the arrangement was made between Mr Ramsay and Mr Deering and that Mr Edwards was not party to it. I do not regard this as relevant to the issues in this case. In case it is relevant, my conclusion is that like all matters there was no clear discussion between Mr Edwards and Mr Ramsay on this issue. Mr Edwards did not give an instruction to Mr Ramsay to use Mr Deering but they did have some discussion about it. Mr Ramsay understood Mr Edwards to want Mr Ramsay to use Mr Deering. Mr Ramsay would have preferred not to but did not say anything to Mr Edwards.
38 In cross-examination Mr Ramsay agreed that he and Mr Edwards were cropping together and that Mr Ramsay hoped that they would make a profit out of doing that. Mr Ramsay also agreed in cross-examination that he did not render an invoice for the $52,000, being the balance of $90,000 for contracting less the payment to him of $38,000, until after he had been served with the writ in this action in which Mine Maintenance claimed the sum of $38,000 as moneys lent to Mr Ramsay. He also agreed that he had not communicated to Mr Edwards that he was entitled to include his expenses in the crop farming accounts and that he had not discovered any documentation to support his claim. When counsel for Mine Maintenance suggested that his claim was a figure he had pulled out of the air that morning Mr Ramsay replied: "No, I'd have a pretty close rough idea, yes." [T 128]
39 After the meeting in March 2002 Mr Edwards arranged for his solicitors to prepare a share farming agreement for that year. That document provided that agreement was between Mine Maintenance as lease-holder and Mr Ramsay and Talyat Pty Ltd as share farmer. It also provided:
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(b) the Lease-holder's liability for the Finance Facility being fully satisfied by the sale of the Crop from the Land and the sale of canola from the Share Farmer's farm at Blacks Farm and Home Farm in Borden,
the Lease-holder shall make the following distributions in respect to profit of the venture:
(a) THIRTY EIGHT THOUSAND DOLLARS ($38,000,00); and (b) FIFTY TWO THOUSAND DOLLARS ($52,000.00); and (c) 50% of the Net Profit from the sale of the Crop.
11.2 Payment in Event Finance Facility Not Paid Out Or Loss In the event that the Lease-holder's liability for the Finance Facility is not satisfied by the sale of the Crop, the Share Farmer shall forgo all right to the Share Farmer's profit distribution under this Agreement. If, however, the Finance Facility is satisfied by the sale of the Crop, but the funds remaining are not sufficient to pay the Share Farmer's profit distribution, then the Share Farmer shall receive the balance of any funds remaining as full and proper payment." and: "17 GENERAL PROVISIONS 17.1 Relationship of Parties Nothing in this Agreement must be construed as constituting any partnership, joint venture or agency relationship between the Share Farmer and the Lease-holder. No representations or warranties given or made by the Share Farmer and no contract or agreement purported to be entered by the Share Farmer for or on behalf of the Lease-holder should be taken to be to have been made by or to be binding on the Lease-holder."
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40 In April or May 2002 Mr Edwards took that document to Mr Ramsay's farm. Mine Maintenance had executed it. He told Mr Ramsay to read it and let him know if he had any problems with it. Mr Ramsay did not discuss the document with Mr Edwards or return it to him and Mr Edwards did not follow Mr Ramsay up.
41 By July 2002 the expenditure on crop farming had been greater than Mr Edwards and Mr Ramsay had anticipated. On 10 July 2002 Mr Ramsay sent a handwritten facsimile to Mr Edwards. In that facsimile Mr Ramsay wrote: "I thought how the JV worked was you borrowed the money for the JV from your bank in the form of an overdraft which then the JV serviced including all costs etc, basically all you did was guarantee the money for the overdraft, the JV was to be self sufficient….I know you loaned me $38,000 I am grateful as it helped me out of a sticky spot…Having farmed in my own right for 25 yrs, now I find having a partner for some of the operation, he coming from a different industry, having different perceptions and expectations has given me a different insight…" 42 On 18 January 2003 Mr Edwards wrote to Mr Ramsay about the financial performance of their crop farming project. He wrote: 43 On 4 February 2003 Mr Edwards and Mr Ramsay met at a café in Perth to discuss the project. Mr Edwards had arranged the meeting and produced at it a four page bundle of documents. The first page was a memorandum he had prepared in the following terms:
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44 The second page of the bundle was a letter from Mr Edwards' bank dated 4 February 2003 informing Mr Edwards that the bank required Mine Maintenance's farm overdraft account to be reduced, the third page was Mr Edwards' memorandum to Mr Ramsay dated 18 January 2003 and the fourth page an account from Mr Michael Deering dated 8 January 2003 for the balance of the lease payments of $38,500.
45 Mr Edwards wrote on the first page of the bundle: "Discussed at meeting…'Agreed to cover 1/2 loss'…" 46 Mr Edwards' evidence was that he made that note on the day of the meeting and that at the meeting he talked to Mr Ramsay "about the commitment he made to cover the loss and Philip said he wasn't going to shy from his responsibility, he will cover half the loss." [T 43] Mr Ramsay's evidence was that at the meeting Mr Edwards said that Mr Ramsay had said that he would cover half the cost and that Mr Ramsay said very little. I accept Mr Ramsay's evidence as to this meeting. It is more consistent with the way I have concluded Mr Ramsay and Mr Edwards communicated. 47 Later that day Mr Edwards went to his solicitors Summer Partners and arranged for a deed of acknowledgment of debt to be prepared. That document provided for Mr Ramsay and Talyat Pty Ltd to acknowledge that they owed Mine Maintenance $126,000 "being half the farming loss incurred by" Mine Maintenance. Mr Edwards arranged for that deed to be couriered to Mr Ramsay. It was not executed. Mr Edwards' evidence was that the sum of $126,000 was his estimate at the time of half the loss incurred on the joint venture but that after reviewing the accounts he now assessed one half of the loss as being the sum Mine Maintenance claimed in this action. 48 On 3 March 2003 Mr Ramsay wrote to Mr Edwards. In that letter he wrote: "…Listening to you telling me what you expected of me it was about …as one sided as most of the bullets you fired during the year. For starters I did offer to try and help cover any loss. I also remember you saying 'don't worry about that' although it was probably for your audience of Janes benefit and not mine….I feel dark that all the hours of work I put in I am not going to get paid when every one else is and I haven’t made up my mind whether that is fair or not considering the damage
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done to my machinery from a worker I didn’t even want Big lesson…." 49 Mr Edwards denied that he told Mr Ramsay not to worry about covering any loss. 50 In May 2003 Mine Maintenance lodged caveats over land owned by Talyat Pty Ltd. In support of the caveats Mr Edwards made a statutory declaration on 20 May 2003 declaring that Mine Maintenance held an equitable charge over Talyat Pty Ltd's land because Talyat Pty Ltd was indebted to Mine Maintenance for farming losses pursuant to an oral share farming agreement between Mine Maintenance and Talyat Pty Ltd. When Talyat Pty Ltd demanded that the caveat be withdrawn Mine Maintenance did so. In evidence Mr Edwards acknowledged that Talyat Pty Ltd was not indebted to Mine Maintenance. 51 On 29 July 2003 Mr Edwards wrote to his accountants and to Mr Ramsay's accountants. He had discovered that his accountants had arranged for Mr Ramsay's accountants to send a tax invoice for $38,000 from Talyat Farming Co to Mine Maintenance for contract seeding and harvesting. Mr Edwards wrote that the tax invoice should not have been sent and that the payment of $38,000 was a loan from Mine Maintenance. 52 In July 2004 Mr Edwards' accountant prepared an unaudited operating statement for the 2002/2003 season showing a loss of $186,097. Those accounts do not include any expenses incurred by Mr Ramsay. In his evidence Mr Ramsay estimated that his costs were $30,000.
Findings as to agreements reached by Mr Edwards and Mr Ramsay 53 It is clear from the evidence of both Mr Edwards and Mr Ramsay that they did not discuss matters in detail, but that each assumed, wrongly at times, that the other understood matters as he did. This communication breakdown occurred because they are cousins who had known each other for many years and so assumed that they understood each other well, but because Mr Ramsay had a great deal of farming experience but Mr Edwards did not their assumption of a common understanding was misplaced. 54 While I accept that there was some discussion in early 2002 about Mr Ramsay covering half the losses I do not accept the evidence of Mr Edwards and Ms Law that Mr Ramsay agreed to cover half the loss. In my view that evidence arises out of a reconstruction of what occurred following the dispute with Mr Ramsay. There are two reasons why I do
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not accept the evidence. The first is that it is inconsistent with the discussions between Mr Edwards and Mr Ramsay, which lacked such detail. The second reason is the fact that there is no reference to any such agreement in the form of written agreement that Mr Edwards arranged for his solicitors to prepare after the March meeting. In my view if there had been any such agreement Mr Edwards would have made sure that it was included in that document, particularly before Mine Maintenance executed it. 55 I find that Mr Edwards and Mr Ramsay did not agree that the payment of $90,000 to Mr Ramsay for farming the land was to be a first share of profit. Although that does appear in the agreement prepared by Mr Edwards' solicitors I conclude from the evidence of Mr Edwards and Mr Ramsay that I have summarised and quoted earlier in these reasons that they did not go into that detail. They agreed that there would be a payment to Mr Ramsay of $90,000, but did not specify that it would come out of profit. They did not agree that the payment GST was to be paid to Mr Ramsay in addition to that payment of $90,000. I note that Mr Ramsay did not render an account until after he had been served with the writ but in my view that does not detract from this conclusion. Until the dispute arose the nature of the relationship between Mr Edwards and Mr Ramsay was one of informality. 56 Mine Maintenance agreed to advance to Mr Ramsay $38,000 as an advance on that sum of $90,000. There was no agreement that interest would be paid on that advance. 57 I find that there was no agreement that any costs or expenses incurred by Mr Ramsay above the payment of $90,000 would be a cost of their crop farming enterprise. The agreement reached between Mine Maintenance, through Mr Edwards, and Mr Ramsay was that they would crop farm together, that Mine Maintenance would obtain finance for the project, that the costs of the project would include the costs of finance, the costs of leasing the Deering land, a payment of $90,000 to Mr Ramsay for farming the land and other costs properly incurred in the enterprise and that they would share the profits equally. The payment of $90,000 to Mr Ramsay was to cover all his costs of farming the land, including preparing the land and applying fertiliser, sewing seeds and cropping the land. They did not discuss how the losses would be shared. They did not agree that their arrangement was to be called a partnership and they also did not agree that they were not in partnership.
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58 The agreement that had been reached before the crop farming commenced were not varied by subsequent communications between Mr Edwards and Mr Ramsay.
Consequences of these findings of fact 59 In my view it follows from these findings of fact that although they did not call their enterprise a partnership it was a partnership because Mine Maintenance and Mr Ramsay were in a business enterprise with a view to profit: s 7 of the Partnership Act 1895. The fact that Mr Edwards arranged for his solicitors to prepare a written form of agreement which provided that nothing in the agreement was to be construed as constituting a partnership does not alter that conclusion, the relationship between the parties was in fact a partnership, no matter what name they gave to it: Canny Gabriel Jackson Advertising v Volume Sales (Finance) (1974) 131 CLR 321, Wiltshire v Kuenzli (1945) 63 WN (NSW) 47. 60 Mine Maintenance and Mr Ramsay therefore must share equally the losses of the partnership: s 34(1) Partnership Act 1895. Mr Ramsay is not entitled to be paid for expenses incurred in farming the land over and above the sum of $90,000 because the partners agreed otherwise: s 34(2) Partnership Act 1895. 61 Mr Ramsay is entitled to be paid by the partnership the sum of $52,000 being the balance of the sum of $90,000 for farming the land less the advance of $38,000. Mine Maintenance is not entitled to be repaid the sum of $38,000. 62 The unaudited accounts prepared by Mine Maintenance's accountants are inadequate to determine the losses to be shared. The accountant who prepared them was not called to give evidence. In their closing addresses counsel agreed that if partnership losses needed to be determined an account would need to be taken before a Registrar. It may be that the parties will be able to agree upon the losses after their accountants have had the opportunity to consider the accounts and for that reason there should be a pre-trial conference before an account is taken. 63 The orders that I propose are as follows. However I will hear from counsel before making any orders:
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3. There be judgment for the defendant in the sum of $52,000 plus interest at the rate of six per cent per annum from 1 March 2003. 4. Execution on that judgment be stayed until after the account is determined by the Registrar. 5. Before the account is taken there be a pre-trial conference. 6. The plaintiff do within seven days apply for a pre-trial conference date. 7. If the action is not settled at a pre-trial conference the plaintiff do within 14 days thereafter file an account of the losses incurred by the partnership between the plaintiff and the defendant for the 2002/2003 year with all necessary vouchers and verify that account by affidavit. 8. There be judgment in accordance with the account determined by the Registrar plus interest on the total due in accordance with that account from 1 March 2003 until judgment at the rate of six per cent per annum. 9. There be liberty to apply for any directions or orders that may be needed to take the account or after the account has been taken, that liberty to expire 14 days after the account has been taken. 10. The defendant do pay the plaintiff's costs of the claim and the plaintiff do pay the defendant's costs of the counterclaim to be taxed.
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