Murray v Lesicar - [2016] SASC 71

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
MURRAY & ORS v LESICAR & ORS
[2016] SASC 71
Reasons of Judge Dart a Master of the Supreme Court
25 May 2016
PARTNERSHIP - PARTNERSHIP PROPERTY - IN GENERAL AND WHAT CONSTITUTES PARTNERSHIP PROPERTY
Taking of accounts - one partner has possession of the server used by the partnership - the server has stored on it all emails of the partnership - whether the email record forms part of the partnership books - access by a partner to partnership books.
Held:
1. Email record on server is part of the partnership books.
2. A partner has an entitlement to access the partnership books.
Partnership Act 1891 s 24, referred to.
Chan v Zacharia (1984) 154 CLR 178; Hospital Products Limited v United States Surgical Corporation & Ors (1984) 156 CLR 41; O'Brien & Ors v Komesaroff (1982) 150 CLR 310, considered.

MURRAY & ORS v LESICAR & ORS
[2016] SASC 71

By application FDN111 the first plaintiff seeks orders in respect of what he says are records of a partnership of which he was a member.
The partnership was dissolved by an order of the Court in September 2013. The action is now predominantly dealing with the finalisation of the account of the partnership. The Court has received written and oral evidence in respect of the account.
After evidence was taken, the first defendant made application to re-open in respect to two issues that arise on the taking of the account. In the result, permission was given in respect to one issue only. That issue relates to the payment of entertainment expenses during the conduct of the partnership.
The application to re-open was granted because the first defendant was able to produce emails from the partnership records which touched on the topic. The partnership had an email address. The physical location of the server was in Adelaide, however the partnership conducted business in both Adelaide and Melbourne. Both offices used the same email address.
The server which was utilised by the partnership is still located in Adelaide. It is now used by the first defendant in the conduct of a new partnership. Since the commencement of these proceedings the defendants have had access to the records on the server, whilst the access of the plaintiffs has been much more limited.
The first defendant undertook a search of the partnership email database for the purpose of locating the emails he relied upon to re-open. The first plaintiff desires to undertake the same search of the database. The defendants have produced what they say are the relevant emails from the server and provided those to the plaintiffs electronically. There are apparently some 100,000 emails that have been provided.
This dispute is in relation to the entitlement of the first plaintiff to have unrestricted access to the email database maintained on the server and undertake his own search. The way it is put is that, as a partner, the first plaintiff should be entitled to the same access to the server as the first defendant.
In determining this dispute, it is necessary to put the matter into context. The first plaintiff and first defendant were in partnership. That means they were, in respect of each other, fiduciaries. In relation to a partnership that has been dissolved, the fiduciary relationship continues during the course of the winding up of the partnership.[1] The taking of an account is part of the winding up of the partnership.
[1] Chan v Zacharia (1984) 154 CLR 178.
In Hospital Products Limited v United States Surgical Corporation & Ors[2] Mason J was considering the nature of fiduciary relationships. He said:[3]
The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position. The expressions "for", "on behalf of', and "in the interests of” signify that the fiduciary acts in a "representative" character in the exercise of his responsibility.
[2] (1984) 156 CLR 41.
[3] Hospital Products Limited v United States Surgical Corporation & Ors (1984) 156 CLR 41 at 96.
The Court here is engaged in the exercise of taking an account. The partners still owe each other fiduciary duties in respect of the taking of the account. In the circumstances, it is not appropriate that the first defendant, as a partner for present purposes of the first plaintiff, opposes the first plaintiff having access to the same records of the partnership that he accessed for the purposes of obtaining material to make the application to re-open. In opposing the access of the first plaintiff, the first defendant is acting in an adversarial way and not in the interests of the first plaintiff. A fiduciary should not so act.
Nonetheless, it is still necessary for the Court to establish a proper basis on which the first plaintiff has an entitlement to undertake an inspection of the server.
The orders sought in the application in paragraph 2 are as follows:
Within 7 days, the first defendant produce to the first plaintiff in searchable electronic form all emails sent from or received at any email address using the “lmtip.com.au” domain name between 23 January 2012 and 30 September 2013 which are in his possession, custody or power. For the avoidance of doubt, such production is to include all such emails regardless of any claim that they are:
2.1.    private;
2.2.    confidential;
2.3.    relevant to the current affairs of LMA or any third party connected to LMA; and
2.4.    not relevant to the affairs of LMT.
Paragraph 3 of the application sought other records. Orders have been made by consent in respect of paragraphs 3.1 and 3.2 of the application. The parties are to have further discussions about paragraphs 3.3 and 3.4 and hope to agree a regime in respect of the documents sought in those paragraphs.
The first plaintiff seeks documents on four separate bases. They are:[4]
31.1.the emails sought, and the databases and hardware upon which they are stored, are the property of LMT and Dr Lesicar is not entitled to deny Mr Murray access to partnership property;
31.2.the emails sought are partnership records and Mr Murray has a statutory entitlement to access partnership records;
31.3.Mr Murray has a statutory right to participate in the management of LMT, and that right has been breached by Dr Lesicar since June 2013 when he unilaterally removed Mr Murray’s access to the emails (noting that the partnership was not dissolved until September 2013); and
31.4.Dr Lesicar has a statutory duty to account to Mr Murray and to provide full information to Mr Murray, and Mr Murray seeks to enforce that duty by his own review of the emails sought.
[4] First plaintiff’s Outline of Argument filed 13 April 2016, FDN118.
The defendants resist the application on the basis the first plaintiff is not entitled to private and personal emails of the defendants or other staff simply because they were transmitted through the partnership email system. They say that such records are not the property of the partnership; and that many of the emails do not fall within the description of partnership books.
It is not in dispute that a partner has no interest in any particular partnership asset.[5] However, attempting to work out whether emails are partnership property and, if so, what access should be permitted, is unnecessarily complex.
[5] O’Brien & Ors v Komesaroff (1982) 150 CLR 310 at 322.
In my opinion, the simplest way to resolve this issue is to determine whether the email database is part of the partnership books.
Section 24 of the Partnership Act 1891 provides as follows:
24—Rules as to interests and duties of partners other than partners in incorporated limited partnership subject to special agreement
(1)The interests of partners in the partnership property and their rights and duties in relation to the partnership will be determined, subject to any agreement, express or implied, between the partners, by the following rules:
…
(i)the partnership books are to be kept at the place of business of the partnership (or the principal place, if there is more than one), and every partner may, when the partner thinks fit, have access to and inspect and copy any of them.
There is no suggestion of any agreement which would affect the statutory entitlement of a partner to look at the partnership books. The term “partnership books” is not defined in the legislation.
The term “partnership books” should be regarded as a term that has evolved since the Act was passed in 1891. No doubt at that time partnership books were physical books maintained with handwritten entries. Nowadays the records of a business are most likely to be created, communicated and stored electronically. The definition of partnership books is wide enough to include such electronic records. The email database on the server forms part of the partnership books.
It should be noted that access to partnership books is a decision for the partner who wishes to have access. It is for that partner to make a decision to access the records and determine when it is convenient to him to do so. The provision should not be read down.
The first objection of the defendants is that there are emails on the server that may be subject to legal professional privilege. No issue arises in respect of legal professional privilege. The first plaintiff properly concedes he is not entitled to such records. There may be an issue about what is subject to legal professional privilege. As between partners, there can be no issue of legal professional privilege arising in respect of the affairs of the partnership itself.
The next objection of the first defendant is that the email database on the server contains private emails of staff. It is said that such emails do not form part of the partnership books. It is also said that staff are entitled to privacy in respect of those communications.
I am not able to accept that proposition for two reasons. The email database was created and maintained for the use of the business of the partnership. The records stored on it form part of the partnership books. A staff member who accesses the partnership’s email system and uses it for private purposes cannot expect to then pursue a claim for confidentiality in respect of such communications. No claim for confidentiality was made in respect of the first defendant searching the server. The claim now made is a partisan one to attempt to deny the first plaintiff access to the system.
The second issue is this. It cannot be because of intermingling of private and partnership emails on the server that the first plaintiff is denied access to inspect the partnership books. That is the tail wagging the dog. The first plaintiff has a statutory entitlement to look at the partnership books. If entries have been made in the partnership books which are not related to the affairs of the partnership, so be it, but that cannot be a barrier to access.
The first plaintiff is entitled to the orders sought in paragraph 2 of the application. I will hear the parties as to the form of the orders.