Nelson v Moorcraft - [2012] WADC 170

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: ALBANY

CITATION: NELSON -v- MOORCRAFT [2012] WADC 170

CORAM: WAGER DCJ

HEARD: 23 - 25 OCTOBER 2012

DELIVERED : 11 DECEMBER 2012

FILE NO/S: ALB CIV 3 of 2011

BETWEEN: PETER STANLEY NELSON
Plaintiff
AND
PETER MOORCRAFT
Defendant

Catchwords:

Partnership and land ownership agreements - Whether defendant entered agreements as a result of undue influence - Whether land agreement void for uncertainty - Whether land agreement frustrated by dissolution of partnership - Turns on own facts

Legislation:

District Court Act 1969
Rules of the Supreme Court 1971

Result:

Plaintiff's claim dismissed
Defendant's counterclaim successful
Parties entitled to a declaration that the partnership be dissolved
Declaration that the ownership agreement is void having been frustrated

Representation:

Counsel:

Plaintiff: In person
Defendant: Mr H Sklarz

Solicitors:

Plaintiff: Not applicable
Defendant: H Sklarz

Case(s) referred to in judgment(s):

Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd [2000] WASCA 27
Anderson v McPherson [No 2] [2012] WASC 19
Cachia v Hanes (1994) 179 CLR 403
City of Subiaco v Heytesbury Properties Pty Ltd [2001] WASCA 140
Scanlan's New Neon Ltd v Toohey's Ltd (1943) 67 CLR 169

WAGER DCJ: Mr Nelson and Mr Moorcraft befriended each other in 2008. At the time neither was in full‑time employment and both were in receipt of disability support pensions. Mr Nelson received his pension because he suffered from stress and physical health issues and Mr Moorcraft received his pension because he suffered from depression. Both men have lived full lives. Mr Nelson had been a senior art teacher at TAFE, had created an award‑winning house in the 1980s and was an accomplished artist who also taught rock and roll dancing. Mr Moorcraft had been a fashion retailer. He was a popular musician and he hosted a radio programme.
Mr Moorcraft owned a large Tudor‑style house just out of Albany that was situated on a 10‑acre block. He lived alone, having separated from his de facto partner. Mr Nelson lived in Albany. Mr Nelson was no longer employed as an art teacher at TAFE but he had dreams of creating his own school of art. Soon after becoming friends Mr Nelson approached Mr Moorcraft about converting the Tudor home into a bed and breakfast called Moorcraft House that the two would run in partnership, sharing the costs and profits of the business. Mr Nelson also proposed building an art studio on Mr Moorcraft's property. Mr Nelson proposed that he would have exclusive use of the art studio but he envisaged that his students would go to the bed and breakfast for morning tea and that students and tourists would be encouraged to stay at the bed and breakfast because of the added bonus of the art studio and on‑site tuition. It was agreed that Mr Nelson would pay for the construction of the art studio and would purchase a one‑quarter share in the Moorcraft House 10‑acre property in return for the payment of an agreed sum.
Two deeds, being a partnership agreement deed and an ownership agreement deed were prepared and signed by Mr Moorcraft and Mr Nelson on 3 September 2009. Moorcraft House was renovated, bed and breakfast furniture and fittings were purchased, mainly from auctions and second‑hand shops and two bedrooms were prepared for guests. Mr Nelson paid $40,000 to Mr Moorcraft and paid the costs associated with the part construction of the art studio that was partially built in very close proximity to the house.
In late 2010 the relationship between the two men broke down. They could no longer work together and they had different views about the future of the bed and breakfast and the art studio and of their contractual obligations. Mr Moorcraft sought unsuccessfully to refinance Moorcraft House and made it clear that he no longer wanted Mr Nelson to be on the property. Mr Nelson resisted the application to refinance. Their working relationship became untenable and on 15 November 2010, Mr Moorcraft wrote to Mr Nelson stating that the partnership was dissolved.

The pleadings

Mr Nelson claims that the two agreements were breached by Mr Moorcraft and he seeks damages resulting from the breaches. Mr Nelson is self‑represented. His pleadings are lengthy and provide significant factual detail of his relationship with and his opinion of Mr Moorcraft. Relevantly the substituted statement of claim dated 11 April 2012 states:
9.The Claim
The alleged breach by Moorcraft of the two interrelated contracts.
…
18.Remedy/Resolution
18.1Moorcraft to pay Nelson damages associated with Moorcraft's breach to both contracts.
…
84Damages
84.The damages cost is provided in 'Claim for Damages' documentation submitted separately to the Court. Not limited to Liquid Damages.
85.Moorcraft by ignoring his Contractual obligations has caused Nelson losses and damages Nelson is seeking:
a)Liquidated damages
b)Un Liquidated damages
c)Unjustified enrichment damages
d)Compensation damages
e)Consideration damages
f)All legal costs
g)Legal costs for Nelsons time spent on litigation
h)Damages for other costs still to be paid
i)Nelson is also claiming Tort
Nelson is claiming: Moorcraft should pay:
86.Deposit paid to Moorcraft at execution of deeds – plus interest.
87.Art Studio
87.1Current REBUILD value of Art Workshop to condition when build halted by Moorcraft.
87.2Plus 10% New REBUILD additional work to new property and out of pocket expenses
Or
87.2Nelsons Full Labour and Material value of Art Studio – plus interest.
87.3Plus 10% out of pocket Costs – plus interest.
WHICH EVER IS THE GREATER
88.Nelsons damages due to Devaluation of Art Studio because Moorcraft stopped Nelson working on the Studio, just prior to completion.
89.Nelson compensation for not being able to utilise Art Studio since eviction as per agreement.
90.Nelson for replacement and repair Damage to Equipment, Materials and Stock in Studio.
91.Bed and Breakfast Partnership
91.1All Nelsons financial input to Partnership Bed and Breakfast – plus interest.
91.2All Nelsons wages input to Partnership Bed and Breakfast – plus interest.
91.3Nelson for Loss of Partnership profit for ongoing Bed and Breakfast business, or
91.4Instead of profit loss, will accept $150pw rent, this includes: (plus compounding interest)
a.Rent in relation to Moorcraft denying Nelsons usage of residence since eviction.
b.Hire of Furniture, Equipment, Materials and Stock for the Bed and Breakfast, paid for by Nelson and which Moorcraft has possession of.
91.5Wages by others i.e. bookkeeping, plus interest
92.Investment
92.1All Nelsons financial input to Property Improvement (Investment) – plus interest.
92.2All Nelsons wages input to Property Improvement (Investment) – plus interest.
OR
92.3Nelson 25% of Valuation increase, this based on Capital Improvements to Property
WHICH EVER IS THE GREATER
93.Interest
All Interest on damages to be at Moorcraft and Nelsons Equity Loan Rate.
94.Legal
94.1All Legal costs from initiation of concept, to present – plus interest.
94.2Nelson for all Personal work done, and work done by others pursuant to both contracts and the litigation Process – plus interest.
95.Future Business
95.1Nelson compensation for the Loss of the future business, should the agreements not have been breached. I.e. Studio (four areas of business), and the Bed, and Breakfast Partnership (set up by Nelson and ready to go).
96.General
96.1Compensation to Nelson for other losses. Costs that cannot be receipted, or where receipts have been lost. These are very difficulty to quantify. Suggest 10% - plus interest.
96.2Compensation for loss due to related stress due to litigation process.
96.3Compensation for Loss of 5 years of Nelsons quality working life up to retirement age.
96.4MOR costs (subject to appeal) Moorcraft's and Nelsons applications – plus interest.
96.5UNSPECIFIED damages still to come.
97.Stress related Claim PARTICULARS OF NELSONS SYMPTOMS
Nelsons employment, social and household activities have been significantly restricted because of the Moorcraft's actions since September 2010.
(a)Extreme anxiety attack – hospitalised overnight. Symptoms Sledge Hammer effect to sternum etc
(b)Erratic blood pressure – blood pressure medication. Nelson warned candidate for Stroke
(c)Headaches
(d)Lack of co‑ordination
(e)Pain to the neck
(f)Pain to all joints
(g)Lethargy
(h)Dysfunction and disorientation
(a)Nelson has suffered severe stress related disorder in the past, and was well on the way to full recovery. This has seen a setback and Nelson will possibly suffer in the future because of Moorcraft's actions.
(b)Nelson pain to the shoulders and back
98.Special Damages
Nelson claims the cost of past and ongoing medical treatment, travelling, physiotherapy and medication. Details in relation to amounts outstanding in this matter are obtainable from the said practitioners.
Full particulars will be given prior to trial.
99.Loss of earnings from February to the present day
100.Nelson claims:
(a)Damages as above.
(b)Interest pursuant to section 32 of the Supreme Court Act 1935 as amended from the date of the Defendant's adverse actions to the date of judgment upon the whole of the damages awarded other than for future losses and detriments.
Mr Nelson's particulars of damages dated 15 October 2012 provide details of many sums claimed, some of which are consistent with paragraphs 84 – 99 of the statement of claim. Many are irrelevant or remote. As a litigant in person Mr Nelson cannot claim costs for the time spent in preparing or conducting his case: Cachia v Hanes (1994) 179 CLR 403.
The final total sum claimed is '$797,527.02 and $ unspecified', however Mr Nelson has verbally reduced the sum to $749,000 in order to comply with the jurisdictional limit.
Mr Moorcraft denies liability. In his amended defence and counterclaim dated 13 August 2012 he pleads that the owners' agreement in respect of Mr Nelson's purchase of a one‑quarter share was procured by Mr Nelson's undue influence over him. He also pleads that the owner's agreement has been frustrated by the failure of the partnership agreement. Alternatively, he claims that the owners' agreement is void for want of consideration. Mr Moorcraft, by way of counterclaim, seeks the following orders:
(a)A declaration that the partnership agreement is dissolved as and from 15 November 2010;
(b)An order that there be a general accounting of the partnership assets;
(c)Declaration that the owners' agreement is void;
(d)Costs;
(e)Plaintiff's claim be dismissed.

Jurisdiction

A preliminary issue arose because Mr Nelson acknowledged that a one‑quarter share of Moorcraft House has never been transferred to him nor had he paid Mr Moorcraft the sum of $85,000 referred to in both deeds of agreement. Mr Nelson asserts that his interest in Moorcraft House is evidenced by caveat L68240 registered over the certificate of title for Moorcraft House. The caveat is dated 3 September 2009 and states:
ESTATE OR INTEREST BEING CLAIMED
Claims an equitable estate or interest as holder of the right to acquire a one undivided quarter share of the land from the registered proprietor.
The CAVEATOR claims an estate or interest as specified herein of the estate or interest of the abovenamed REGISTERED PROPRIETOR in the land above described BY VIRTUE OF:
A Co‑Ownership Agreement dated the 3^rd day of September 2009 made between the Registered Proprietor as second Co‑Owner and the Caveator as First Co‑Owner and the statutory declaration of the Caveator annexed hereto.
Accordingly Mr Nelson's claim is for an equitable interest in Moorcraft House. Mr Nelson's claim also relates to issues arising in respect of partnership given that he and Mr Moorcraft entered into a partnership agreement for Moorcraft House.
I am satisfied that the District Court has jurisdiction to deal with the issues that arise in this case because the court has all the powers and authorities of the Supreme Court in disposing of a matter (s 50(1)(b), s 53 and s 55 of the District Court Act 2005).
Further s 27(7) of the Supreme Court Act provides:
…
7.The Court, in the exercise of the jurisdiction vested in it by this Act, in every cause or matter pending before it, shall have power to grant, and shall grant, either absolutely or on such reasonable terms and conditions as shall seem just, all such remedies whatsoever as any of the parties thereto may appear to be entitled to in respect of any and every legal or equitable claim properly brought forward by them in such cause or matter; so that, as far as possible, all matters so in controversy between the parties may be completely and finally determined, and all multiplicity of legal proceedings concerning any of such matters avoided.

The issues

The issues to be determined are:
1.Did Mr Moorcraft enter into the agreements as a result of undue influence?
2.Is either or both agreement void for lack of consideration?
3.What are the terms of the deed of partnership agreement for Moorcraft House and what are the terms of the deed of ownership agreement for 141 Robinson Road, Albany Western Australia?
4.Are the two deeds so inextricably linked that each cannot stand alone?
5.Has there been dissolution of the partnership?
6.Has the dissolution of the partnership frustrated the deed of ownership agreement?

The evidence

Mr Moorcraft has suffered from depression that, at times, has been debilitating. Mr Rudnyckyj, a friend and band member who played with Mr Moorcraft in the band the Lady and the Tramp, gave evidence that Mr Moorcraft was in deep depression in 2004 to 2005. Ms Alexander who was the vocalist for the band and who was a close friend of Mr Moorcraft described Mr Moorcraft's level of depression in 2007 as being significant. She described that in 2007 he was living at an address in Hardy Road, Albany and working as a cleaner at Albany Central, work that he found demeaning. She described how his mood changed and he became excited about his return to 141 Robinson Road, Albany (Moorcraft House), a home that held happy memories for him from his time with his de facto partner and a home that, unlike the Hardy Road address, was big enough for him to hold music sessions and to house his piano.
At this time Ms Alexander had very regular contact with Mr Moorcraft because the band met at least twice a week and their friendship continued. Ms Alexander spoke to Mr Moorcraft in late 2007 about employment options that he could undertake from 141 Robinson Road, such as using the home as a wedding function centre or as a bed and breakfast. I accept Ms Alexander's evidence and I therefore accept that Mr Moorcraft had already started to consider options of running a business from Moorcraft House prior to his discussions with Mr Nelson in 2008.
Mr Nelson's position as an art lecturer at TAFE had ended well before he met Mr Moorcraft. He was keen to set up an art studio in Albany because he considered that there were limited options for art students in Albany. His curriculum vitae confirms that he had significant teaching experience and has skills as a painter and ceramicist. He was keen to open his own studio in order to run art classes however he did not have land of his own on which to build an art studio nor could he interest others in his proposal.
Not long after Mr Nelson and Mr Moorcraft met, Mr Nelson suggested that the two go into a partnership to run a bed and breakfast at Moorcraft House. Mr Nelson also suggested that he build and run an art studio on the property and that he purchase a one‑quarter share of Mr Moorcraft's property to secure his interest in the bed and breakfast and the art studio.
Mr Nelson approached a lawyer on behalf of both men in order to have agreements that reflected their intentions prepared, however, due to disputes with the solicitor, the agreements took 15 months to prepare. Accordingly, although Mr Nelson and Mr Moorcraft discussed the terms and conditions for Moorcraft House in about April 2008, the agreement deeds were not signed until 3 September 2009.
Prior to signing the agreement, Mr Moorcraft and Mr Nelson had already started to prepare Moorcraft House as a bed and breakfast.

Mr Moorcraft's psychiatric state

Mr Moorcraft gave evidence that he suffered from depression and that his symptoms in 2008 and 2009 were severe. He said that at the time he was in 'cuckoo land', unaware of any discussions or arrangements made by Mr Nelson in relation to Moorcraft House, the art studio and the ownership of 141 Robinson Road, Albany.
Mr Rudnyckyj and Ms Alexander both gave evidence about Mr Moorcraft's state at this time. Mr Rudnyckyj described Mr Moorcraft as still being depressed when discussions in relation to the bed and breakfast and the art studio commenced. He stated that Mr Moorcraft was depressed for the whole of the time however when Mr Moorcraft was involved in music he was happy and smiling. Despite having a happy face however he still presented with a depressed demeanour. Mr Rudnyckyj accepted that throughout this period Mr Moorcraft had continued to host a radio show competently and that he would play music and talk and operate appropriately. Mr Rudnyckyj stated that he would assist Mr Moorcraft with the programme and that Mr Moorcraft would shut off and walk away as soon as the session was over.
In contrast to Mr Rudnyckyj's assessment, Ms Alexander said that although Mr Moorcraft was very ill in 2006 and 2007, she noticed a change in his demeanour and mood once he became excited at the prospect of setting up his own business at Moorcraft House. He had previously been a successful businessman, running a retail shop called 'Spiders' and he had been a sales person for GE Finance. In her assessment, the discussions Mr Moorcraft had with Mr Nelson and the plans he made for the future partnership had a positive influence on Mr Moorcraft's mood. She described his condition as being better in 2008 and 2009 than it had been in 2006 and 2007.
Mr Barry Critchison who was Mr Moorcraft's psychologist in 2007 and who has continued as Mr Moorcraft's psychologist until the present time said that in 2008 Mr Moorcraft advised him that Mr Nelson wanted a letter stating that Mr Moorcraft was of sound mind so that the two could pursue a business interest together. Given that Mr Moorcraft was his client, Mr Critchison arranged for Mr Moorcraft to ask Mr Nelson to attend an appointment with him when Mr Moorcraft was present. As a result of the discussions at the appointment and of Mr Critchison's assessment of Mr Moorcraft, Mr Critchison wrote a letter dated 2 July 2008 setting out his understanding of the agreement between Mr Moorcraft and Mr Nelson and commenting on Mr Moorcraft's psychological state as he observed it to be in July 2008. The letter dated 2 July 2008 (exhibit 9) states:
Regarding Peter Moorcraft, 141 Robinson Road, Albany
I have known Peter for about six months as a client and as someone who has done volunteer work with Regional Counselling. He has issues of grief and loss from a past broken relationship that caused anxiety and depressed mood. However, in respect to the proposed partnership with Peter S Nelson, 5/54 Robinson Street, I believe he is of sound mind and is aware of the implications and the ramifications of the proposed partnership and is in favour of going ahead with the joint project.
This involved selling his Hardy Road property and using the proceeds, together with an injection of funds from Peter Nelson, to pay off the mortgage on his Robinson Road property so that he can sell a share of that property to Peter Nelson.
An art studio would also be built on the property for Peter Nelson to use and about half of the house would be used as a Bed and Breakfast business that Peter Nelson would manage but Peter Moorcraft could work in if he wished.
After speaking to Peter Moorcraft in June 2008 about this proposal, I believe he is entering into it with full knowledge and is of sound mind.
Barry Critchison
Registered Psychologist

In cross‑examination Mr Critchison confirmed that he had not seen Mr Moorcraft as a patient from 17 March 2008 until 2011, however he had had contact with him during 2008 because Mr Moorcraft was performing voluntary work as a receptionist in Mr Critchison's building. Mr Critchison stated that in his view Mr Moorcraft was psychologically better when he was making plans with Mr Nelson than he had been before. He believed Mr Moorcraft to be of sound mind in July 2008 however he noted that a diagnosis can change within two months of an assessment being made.
In Mr Critchison's view Mr Moorcraft's condition was better once the agreement had taken place and after he had been working for a period. However later when conflict started between Mr Nelson and Mr Moorcraft, Mr Critchison considered that Mr Moorcraft's depression started again and his condition deteriorated. The deterioration was the subject of Mr Critchison's letter dated 5 August 2011.
For the reasons that I have outlined I accept that although Mr Moorcraft suffered and continues to suffer from depression his level of functioning improved in 2008 as a result of going back to Moorcraft House, his return to playing live music at his house in the band, The Lady and the Tramp, his increased social contact through regular musical rehearsals and his dealings with Mr Nelson including his involvement in planning the bed and breakfast partnership.
Mr Nelson prepared the projections, the drawings and notes for agreement in relation to Moorcraft House and the art studio. Mr Nelson approached the relevant agencies and departments in order to obtain approval for the bed and breakfast and the art studio. Where necessary, Mr Moorcraft signed the documentation. I accept the assessment of Mr Critchison that is supported by the evidence of Ms Alexander that at the time when Mr Nelson and Mr Moorcraft were discussing the terms of their agreement, Mr Moorcraft was of sound mind and was actively involved in planning for the future business ventures.

Did Mr Nelson exert undue influence over Mr Moorcraft in order to have him sign the partnership agreement deed and the ownership agreement deed

Mr Moorcraft claims that he only entered into the two agreements as a result of undue influence exerted by Mr Nelson.
The deeds of agreement were not signed until 3 September 2009. Although there is no medical or psychological evidence of Mr Moorcraft's level of functioning in 2009 I find that he continued to have some control over his level of depression and was actively involved in the formulation of the partnership agreement and the ownership agreement because:
1.The band The Lady and the Tramp did not break up until 2010 and accordingly Mr Moorcraft continued to have social contact. Photographs exhibits 89 and 89A were taken of Mr Moorcraft being actively involved in the band and appearing happy in 2010. I accept Ms Alexander's evidence that although Mr Moorcraft's health would fluctuate his condition appeared more stable when he was part of the band and engaging in rehearsals at Moorcraft House.
2.Mr Moorcraft agreed that he and Mr Nelson both purchased items for the bed and breakfast. Exhibit 17 is an inventory of items purchased by Mr Moorcraft or Mr Nelson or both from retail outlets, second‑hand shops or auction houses. Mr Moorcraft accepts that the purchases were made and that he took part in this process. He does not challenge the dates that, where listed, commence on 29 January 2009 and continued through until 18 November 2009.
3.Although Mr Nelson provided preliminary materials to the solicitor who drafted both deeds both Mr Moorcraft and Mr Nelson attended appointments with the solicitor during the course of the agreements being prepared. Mr Moorcraft recalls attending approximately two appointments.
4.Mr Nelson drafted preliminary documents and prepared plans however I accept that this was because he had some computer skills and he enjoyed the process.
5.Mr Moorcraft asserted that the consideration relevant to the agreements was so low that it provided evidence that he would not have signed either agreement unless he was mentally incapable at the time. The Moorcraft House property was valued at $700,000 in the ownership agreement deed (sch item 2). Mr Moorcraft's contribution in order to secure one undivided fourth share of the property was equal to $175,000 being one‑quarter of $700,000. A valuation obtained by Mr Moorcraft from Mr Grant Solomon experienced property valuer, licensed valuer and a partner of Optean dated 5 October 2011 valued the property at $880,000 (exhibit 92B). This included the sum of $25,000 for the increase in value assessed in respect of the partly built art studio. Accordingly a value of $855,000 applied one year after the parties signed the two deed agreements. Both Mr Moorcraft and Mr Nelson accepted in evidence that the housing market had been subject to fluctuation from 2008. There is no evidence that $700,000 is inconsistent with the market value for the Moorcraft House property in September 2009.

The law

In Anderson v McPherson [No 2] [2012] WASC 19 [240] ‑ [242], [247] ‑ [248] Edleman J summarised the law in relation to undue influence:
240.It has been observed that undue influence 'is a much-used phrase, but its precise nature remains a matter for dispute. Some authorities tend to treat the doctrine as being concerned with 'excessively impaired consent', but others treat it as involving the improper abuse or exploitation of those whose consent has been impaired': Sexton v Titiro Trustee Company Ltd [2008] NZHC 715 [56] (Heath J).
241 The latter view is prevalent in authorities which describe undue influence as involving 'a connotation of impropriety': Royal Bank of Scotland Plc v Etridge (No 2) [2002] 2 AC 773, 800 [32] (Lord Nicholls); compare Hammond v Osborn [2002] EWCA Civ 885 [32] (Sir Martin Nourse).
242On the other hand, Australian authorities have generally focused upon the 'impairment of the judgment of the weaker party ... [as] the critical element' in a claim for undue influence: Bridgewater v Leahy [1998] HCA 66; (1998) 194 CLR 457, 478 [75] (Gaudron, Gummow & Kirby JJ quoting from Sir Anthony Mason); see also Christodoulou v Christodoulou [2009] VSC 583 [74] (Kaye J); Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447, 474 (Deane J).
…
247 The party seeking to set aside a transaction for undue influence must prove (by evidence or by presumption) a relationship going beyond mere confidence and influence. It must be a relationship involving dominion and ascendancy by one person over the will of the other, and correlative dependence by the other: Brown v The NSW Trustee & Guardian [2011] NSWSC 1203 [46] (Brereton J); Goldie v Getley [No 3] [2011] WASC 132 [140] (Simmonds J); Union Fidelity Trustee Co of Australia Ltd v Gibson [1971] VR 573, 575 - 579 (Gillard J); Johnson v Buttress [1936] HCA 41; (1936) 56 CLR 113, 119 (Latham CJ).
248 In cases where a person seeks to prove by evidence the existence of undue influence, the required dominance has been described as a position 'in which it could fairly be said that the plaintiff's mind was in effect a mere channel through which the will of the defendant operated': Tufton v Sperni [1952] 2 TLR 516, 530 (Jenkins LJ), 532 (Morris LJ); Bank of Credit & Commerce International SA v Aboody [1990] 1 QB 923, 969 (Slade, Balcombe & Woolf LJJ).
I find that although Mr Nelson's enthusiasm for the partnership and ownership agreement may have been stronger than that of Mr Moorcraft I am not satisfied that Mr Moorcraft failed to comprehend the business discussions that took place in 2008 and 2009 nor that he misunderstood the general thrust of the agreements signed on 3 September 2009.
I am not satisfied that Mr Nelson established a relationship of dominion and ascendancy over Mr Moorcraft that is necessary for proof of undue influence. Accordingly I reject that Mr Nelson exerted undue influence over Mr Moorcraft in order to make him enter into the partnership agreement deed and the ownership agreement deed.

Are the partnership agreement deed and/or the ownership agreement deed void for lack of consideration

For the reasons outlined there is no evidence that $175,000 being one‑quarter of $700,000 is inconsistent with market value for Moorcraft House in 2009.
Although neither document is sealed both agreements are deeds (s 9 and s 12 Property Law Act 1969 (WA)).
It is a condition of the land ownership agreement deed that the parties enter into a partnership deed. Both agreements relate to the formation of a commercial relationship between the two parties. The precise nature of the agreement and the repercussions of the agreement are the matters in issue.

The partnership agreement deed and the ownership agreement deed

Both agreements were signed on 3 September 2009 by Mr Nelson and Mr Moorcraft. Mr Thompson, the solicitor who drafted both agreements, witnessed the signatures of both parties on both documents. Neither party received independent legal advice.
The ownership agreement was conditional upon the parties entering into and forming the partnership of 'Moorcraft House' by way of execution of the Partnership Agreement for 'Moorcraft House' to be undertaken contemporaneously with the execution of the ownership agreement.
The partnership agreement relevantly sets out:
THIS AGREEMENT is made the 3^rd day of September 2009
BETWEEN:
PETER STANLEY NELSON of 141 Robinson Road, Albany, Western Australia
AND:
PETER MOORCRAFT of 141 Robinson Road, Albany, Western Australia (the Partners')
INTRODUCTION AND STATEMENT OF INTENT
A.The Partners have decided to enter into a partnership for the purpose of carrying on business as a bed and breakfast and an art studio.
B.The Partners intend by this document to record in writing the terms and conditions upon which they have agreed to become partners.
1.THIS DEED WITNESSES AN AGREEMENT AS FOLLOWS:
…
2.DEFINITIONS USED IN THIS DEED
2.1In this deed unless the context otherwise requires, the following words and expressions shall have the following meanings:
(1)'Commencement Date' means the date specified in Item 2 of the Schedule;
(2)'Financial Year' means a twelve (12) month period commencing 1 July and ending 30 June;
…
(4)'Initial Capital' means the initial capital of the Partnership as contributed or to be contributed by the Partners as specified in Item 4 of the Schedule;
(5)'Managing Partner' means the person or persons referred to in Clause 11 and as specified in Item 6 of the Schedule;
…
(8)'Partnership' means the legal relationship existing between the Partners as from the Commencement Date;
(9)'Partnership Business' means the business undertaking to be pursued by the Partnership in the Introduction and as specified in Item 1 of the Schedule;
…
(15)'Special Conditions' means the special conditions which the Partners have expressly agreed shall apply to this Partnership as referred to in Clause 26 and as set out in Item 10 of the Schedule.
3.THE PARTNERSHIP
3.1The Partners hereby declare and acknowledge that they have agreed to become and remain Partners upon the terms and conditions as contained in this Agreement and that the Partnership Act 1985 (Western Australia) shall be deemed to be varied by the terms and conditions as set out herein.
3.2The Partnership shall commence the Partnership Business specified in Item 1 of the Schedule as from the Commencement Date specified in Item 2 of the Schedule and the Partnership shall thereafter indefinitely continue until determined in the manner as set out in this deed or otherwise in accordance with the provisions of the Partnership Act of WA.
3.3As to the duration of the partnership the Partners hereby mutually covenant and agree that death or bankruptcy of any Partner will not of itself dissolve the Partnership.
4.PARTNERSHIP BUSINESS
4.1The Partners hereby agree to join together as partners for the purpose of conducting the Partnership Business and such other business as the Partners may from time to time in writing unanimously agree to undertake and pursue.
4.2The Partnership Business shall be carried on and from the place or places specified in Item 3 of the Schedule or such other place or places as may be mutually agreed upon from time to time.
4.3the Partnership shall operate under the Business Name specified in Item 4 of the Schedule.
4.4If the Partnership Business Name is or at any time is required to be registered by law, the registration shall be effected and renewed in the names jointly of all Partners.
…
6.INITIAL CAPITAL OF THE PARTNERSHIP
6.1The capital of the partnership shall belong to the Partners in the same proportion in which the initial capital is contributed by the Partners.
6.2The Initial Capital of the Partnership is to be contributed by the Partners in the proportions specified in Item 5 of the Schedule.
6.3The capital of the Partnership shall also consist of any property which is purchased or acquired on account of the Partnership and any further sum or sums which are required to develop and carry on the Partnership Business to the advantage of the Partnership as may be agreed by the Partners.
6.4All additional capital shall be contributed by the Partners in proportion to their respective shares in the Initial Capital of the Partnership and shall be credited to the respective capital account of the partners in the Partnership Financial Statements.
7.PROFITS AND LOSSES
7.1The Net Profit of the Partnership Business shall belong and be distributed to the Partners in proportion to the initial capital contributed.
7.2The Net Profits of the Partnership shall be credited to each of the Partners and shall (to the extent that there may be available for division) when conveniently divided in cash between the partners in equal proportions as soon as the end of each financial year is completed following the completion of the general account of the Partnership.
7.3The Partners may make such drawings from time to time against anticipated Net Profits as may be mutually agreed.
7.4If any Partner shall, after the general account shall have been taken and settled, permit his share of the profits available for distribution to remain undrawn, then such share shall be a debt from the Partnership to the Partners entitled thereto, but shall not carry interest, unless otherwise mutually agreed by the Partners.
7.5Any undrawn profits together with interest (if any) due in respect thereof shall be paid by the Partnership and received by the Partner entitled thereto within one (1) month of the Partner entitled thereto giving to each of the other Partners a written notice requiring payment by the Partnership or the other Partners giving to the Partner entitled thereto a written notice signifying the Partnership's intention of making payment of all or any part of the undrawn profits.
7.6The losses of the Partnership shall be borne by the Partners in proportion to their respective shares in the profits of the Partnership.
…
10.FINANCIAL STATEMENTS
10.1The Partnership shall maintain the Partnership Financial Statements in which shall be recorded particulars of all moneys, goods, and effects and other assets belonging to or owing to or by the Partnership or paid, received, sold or purchased in the course of the Partnership Business and all other transactions, matters and things relating to the business as are usually entered in books of accounts kept by persons engaged in business of a similar nature.
…
16.PROCEDURE ON DISSOLUTION
16.1In the event of the determination of the Partnership by mutual agreement or under any circumstances not provided for in this Agreement a full and general account shall be taken of the assets, credits and liabilities of the Partnership and of the transactions and dealings thereof by the Accountant acting for the Partnership to be prepared with all convenient speed, such assets and credits shall be sold and the proceeds realised and applied as follows, namely:
(1)first in paying and discharging such debts and liabilities and the expenses of and incidental to the premises and the winding up of the Partnership affairs;
(2)secondly, in making any necessary adjustments between the Partners so as to bring their current accounts, loan accounts and capital accounts to a proper level;
(3)thirdly, the balance (if any) of such proceeds shall be divided between the Partners in their respective shares.
16.2In addition, the Partners shall each respectively execute, do or concur in all necessary or proper instruments, acts, matters and things necessary or expedient for effecting or facilitating the sale, realisation and getting in of the Partnership assets and credits and the due application and division of the proceeds thereof and for their mutual release, indemnity or otherwise.
…
23.EXECUTION OF DOCUMENTS
23.1Each of the Parties covenants and agrees that they shall promptly execute and deliver all such instruments and do all such further acts and things as shall be necessary or desirable in order to implement and give full effect to the provisions and purposes of this deed and their Agreement.
…
25.ENTIRE AGREEMENT
25.1Notwithstanding anything said or written prior to the execution hereof this deed embodies the entire understanding of the parties and constitutes the entire terms agreed upon between them and supersedes and replaces entirely and prior written or verbal agreement between the parties and the parties agree that no other covenants, warranties or agreement shall apply to the transaction or transactions included in this deed by reason of any promise or oral statement, representation, warranty, covenant or undertaking made or given by any party hereto, at or prior to the execution of this deed.
26.SPECIAL CONDITIONS
26.1The Special Conditions set out in Item 10 of the Schedule hereto (if any) shall be incorporated within and shall form part of this Deed to the same extent as if set out herein.
26.2To the extent that there may be any inconsistency between a Special Condition and the terms of this Deed, then the Special Conditions shall prevail and take priority.
SCHEDULE
Item 1:Partnership Business
Bed and Breakfast
Item 2:Date of Commencement of the Partnership
The date of execution of this Agreement as appears at the top of Page 1.
Item 3:Principal Place of Business of the Partnership
141 Robinson Road, Albany, Western Australia ('the Business Premises).
Item 4:Partnership Name
'Moorcraft House'.
Item 5:Initial Capital Contribution of the Partners
PETER STANLEY NELSON
The sum of $90,000.00 payable immediately to be allocated as follows:
(1)$40,000 as working capital to reduce the debt on the Business Premises; and
(2)$50,000 to be utilised in the construction of an art studio at the Business Premises
The sum of $85,000.00 as working capital to be called upon as and when required plus interest on such sum accruing until the date of contribution at the rate of the annual percentage increase in the CPI as determined from time to time plus two percent (2%).
Item 6:Managing Partner
As from the Date of Commencement of the Partnership, PETER STANLEY NELSON and on his death or retirement PETER MOORCRAFT or otherwise as the Partners may unanimously decide in writing from time to time.
Item 7:Percentage Rate of Interest
The rate charged from time to time by the Partnership Banker (as referred to in Item 8 of this Schedule) on unsecured business overdrafts not exceeding one hundred thousand dollars ($100,000).
Item 8:Partnership Bankers
As determined by the Partners from time to time.
Item 9:Partner's Trust Details
Not applicable
Item 10:Special Conditions
1.Transfer of interest in the Business Premises
1.1In consideration of PETER STANLEY NELSON making the capital contribution referred to in Item 5 of the Schedule pursuant to Clause 6 of this Agreement, PETER MOORCRAFT will do all that is necessary to transfer an undivided one quarter share of the Business Premises to PETER STANLEY NELSON.
2.Security for transfer of share in the Business Premises
2.1As security for the ultimate transfer of a part share in the Business Premises to PETER STANLEY NELSON, PETER MOORCRAFT hereby grants to PETER STANLEY NELSON the right to lodge a subject to claim caveat against the title to the Business Premises.
3.Limitation on using Business Premises as Security
3.1It is acknowledged and agreed that in relation to the draw down facility currently attached to the Business Premises, PETER MOORCRAFT will not extend the draw down on such facility beyond $500,000.00.
EXECUTED AS A DEED.
Signed by the said
[Signature]
PETER STANLEY NELSON
in the presence of:
[Witness (Signature)]
Full nameJARROD ROBERT THOMPSON
AddressLevel 1 The Middleton Centre
Occupation184 Aberdeen Street
AlbanyWA 6330
Legal Practitioner
Signed by the said
[Signature]
PETER MOORCRAFT
in the presence of:
[Witness (Signature)]
Full nameJARROD ROBERT THOMPSON
AddressLevel 1 The Middleton Centre
Occupation184 Aberdeen Street
AlbanyWA 6330
Legal Practitioner

Accordingly Mr Nelson and Mr Moorcraft entered into a partnership to carry on business as a bed and breakfast and an art studio, the partnership business being a bed and breakfast facility and the principle place of business being 141 Robinson Road, Albany, Western Australia.
Mr Moorcraft was required to provide the sum of $175,000 by way of utilisation of 50% of the business premises. The valuation for 141 Robinson Road, Albany, Western Australia was stated as being $700,000. $175,000 reflected an agreement that 25% of the principle place of business was to be utilised.
Mr Nelson was required to pay $40,000 immediately as working capital to reduce the debt on the business premises and $50,000 to be utilised in the construction of an art studio at the business premises. The remaining sum of $85,000 that brought Mr Nelson's contribution to equal that of Mr Moorcraft's contribution of working capital was to be called upon as and when required plus interest.

The ownership agreement deed

The ownership agreement deed relevantly states:
THIS DEED is made the 3^rd day of SEPTEMBER 2009
BETWEEN:
PETER STANLEY NELSON of 141 Robinson Road, Albany, Western Australia
('First Co-Owner')
AND
PETER MOORCRAFT of 141 Robinson Road, Albany, Western Australia
('Second Co‑Owner')
INTRODUCTION AND STATEMENT OF INTENT:
A.The Second Co-Owner is the owner of the Property specified in Item 1 of the Schedule which has a current value of the amount specified in Item 2 of the Schedule.
B.The Co‑Owners have agreed to own the Property as tenants in common in the shares specified in Item 3 of the Schedule.
C.To effect the ownership of the Property referred to in B above, the Second Co‑Owner has agreed to transfer to the First Co‑Owner a 25% share in the Property for the consideration specified in Item 4 of the Schedule ('the First Co-Owner's Financial Contribution').
D.Settlement of the transfer of the Property into co‑ownership will take place on the date as specified in Item 5 of the Schedule. The Co‑Owners will be entitled to possession and the benefit of ownership of the Property in common as from settlement.
E.The Co‑Owners have agreed to record the terms of the conveyance of a 25% share in the property from the Second Co‑Owner to the First Co‑Owner, the management, maintenance and future sale of the Property in the form of this deed.
THIS DEED NOW WITNESSES AS FOLLOWS:
…
2.DEFINITIONS
…
2.1(10)'Settlement Date' means the date specified in Item 5 of the Schedule;
2.1(11)'Special Conditions' means the special conditions which the parties have expressly agreed shall apply to this agreement as referred to in Clause 14 and as specified in Item 7 of the Schedule.
3.OWNERSHIP OF THE PROPERTY
3.1The Co‑Owners hereby declare that as from the Settlement Date they will own the Property as tenants in common in the shares specified in Item 3 of the Schedule.
3.2The First Co‑Owner's Capital Finance Contribution payable to the Second Co‑Owner as consideration for the Second Co‑Owner conveying a 25% share in the Property to the First Co‑Owner is the sum specified in Item 4 of the Schedule and is payable in accordance with the terms of that Item 4.
3.3In the event that the Second Co‑Owner is unable to convey a 25% interest in the Property to the First Co‑Owner by reason of the Property being encumbered by a mortgage under which the Second Co‑Owner is a Mortgagor, then the First Co‑Owner will only pay the First Co‑Owner's Financial Contribution to the Second Co‑Owner in consideration of the Second Co‑Owner granting the First Co‑Owner's interests under this Clause. The Second Co‑Owner hereby confirms the granting of that right as evidenced by the Second Co‑Owner's execution of the Agreement.
3.4The Second Co‑Owner herby expressly acknowledges and agrees that in relation to the draw‑down facility currently attached to the Property this facility will not be extended beyond the current $500,000 limit. The Second Co‑Owner further acknowledges and agrees that he will not further encumber the Property by way of a new mortgage or utilizing a re‑draw facility of the current mortgage.
3.5The Second Co‑Owner will provide full disclosure to the First Co‑Owner of all financial and lending matters pertaining to the Property as requested by the First Co‑Owner from time to time.
3.6When the Second Co‑Owner is in a position to convey the 25% share in the Property to the First Co‑Owner as contemplated by Clause 3.2, the Second Co‑Owner will notify the First Co‑Owner accordingly, and the Co‑Owners will enter into and execute an Offer and Acceptance to effect such conveyance and the Co‑Owners will be jointly liable for any duty assessed on the Offer and Acceptance.
4.EXPENSES, OUTGOINGS AND INCOME
4.1The Co‑Owners covenant and agree with each other that they will in their respective shares:
(1)bear and be responsible for:
(a)all insurance premiums for the insurance of the Property to its full insurable value; and
(b)all sums necessarily incurred in keeping and maintaining the property in good and habitable order and repair.
4.2All rates, taxes and other assessments and outgoings of every kind charged or imposed upon the Property shall be the responsibility of the partnership of 'Moorcraft House' operated by the Co‑Owners.
5.OBLIGATIONS OF THE CO‑OWNERS
5.1The Co‑Owners shall:
(1)use their best endeavours to ensure that their obligations under the terms of this agreement are promptly and efficiently performed; and
(2)comply with all of the terms and conditions of any insurance policies applicable to the Property.
6.INTEREST ON OVERDUE MONEYS
6.1In the event that any Party (the 'Defaulting Party') fails to pay all or any of the Expenses and Outgoings, the other Parties (the 'Non‑Defaulting Parties') may (in their absolute discretion) pay all or any of the Expenses and Outgoings on behalf of the Defaulting Party and recover the sum or sums so paid from the Defaulting Party, together with interest at the Rate from the date of payment by the Non‑Defaulting Party to the date of reimbursement by the Defaulting Parties.
…
14.MISCELLANEOUS
…
14.5Waiver
(1)No Party to this deed shall be taken to have waived any breach of this deed by any Party unless such waiver shall be in writing and signed by the Party granting the waiver.
(2)Any such waiver shall only apply to the breach specified therein and shall not constitute a general waiver unless it is expressly defined as a general waiver.
…
15.SPECIAL CONDITIONS
15.1The Special Conditions (if any) set out at Item 11 of the Schedule shall apply to this Agreement to the same extent as if set out herein.
15.2To the extent that there may be any inconsistency between a Special Condition and the other terms of this Agreement then the Special Conditions shall prevail and have priority.
SCHEDULE

Item 1:	Partnership Business
Bed and Breakfast Facility
Item 2:	Date of Commencement of the Partnership
The date of execution of this Agreement as appears at the top of Page 1.
Item 3:	Principal Place of Business of the Partnership
141 Robinson Road, Albany, Western Australia ('the Business Premises').
Item 4:	Partnership Name
'Moorecraft House'.
Item 5:	Initial Capital Contribution of the Partners
PETER STANLEY NELSON
The sum of $90,000.00 payable immediately to be allocated as follows:
(1) $40,000.00 as working capital to reduce the debt on the Business Premises; and (2) $50,000.00 to be utilised in the construction of an art studio at the Business Premises The sum of $85,000.00 as working capital to be called upon as and when required plus interest on such sum accruing until the date of contribution at the rate of the annual percentage increase in the CPI as determined from time to time plus two percent (2%) PETER MOORCRAFT The sum of $175,000.00 to be provided by way of the utilisation of fifty percent (50%) of the Business Premises.
Item 6:	Managing Partner
As from the Date of Commencement of the Partnership, PETER STANLEY NELSON and on his death or retirement PETER MOORECRAFT or otherwise as the Partners may unanimously decide in writing from time to time.
Item 7:	Percentage Rate of Interest
The rate charged from time to time by the partnership banker (as referred to in Item 8 of this Schedule) on unsecured business overdrafts not exceeding one hundred thousand dollars ($100,000.00).
Item 8:	Partnership Bankers
As determined by the Partners from time to time
Item 9:	Partner's Trust Details
Not applicable
Item 10:	Special Conditions
1. Transfer of interest in the Business Premises 1.1 In consideration of PETER STANLEY NELSON making the capital contribution referred to in Item 5 of the Schedule pursuant to Clause 6 of this Agreement, PETER MOORCRAFT will do all that is necessary to transfer an undivided one quarter share of the Business Premises to PETER STANLEY NELSON.
2. Security for transfer of share in the Business Premises 2.1 As security for the ultimate transfer of a part share in the Business Premises to PETER STANLEY NELSON, PETER MOORCRAFT hereby grants to PETER STANLEY NELSON the right to lodge a subject to claim caveat against the title to the Business Premises.
3. Limitation on using Business Premises as Security 3.1 It is acknowledged and agreed that in relation to the draw down facility currently attached to the Business Premises, PETER MOORCRAFT will not extend the draw down on such facility beyond $500,000.00 EXECUTED AS A DEED. Signed by the said [Signature] PETER STANLEY NELSON in the presence of: [Witness (Signature)] Full name JARROD ROBERT THOMPSON Address Level 1 The Middleton Centre Occupation 184 Aberdeen Street Albany WA 6330 Legal Practitioner Signed by the said [Signature] PETER MOORCRAFT in the presence of: [Witness (Signature)] Full name JARROD ROBERT THOMPSON Address Level 1 The Middleton Centre Occupation 184 Aberdeen Street Albany WA 6330 Legal Practitioner

The property relevant to the ownership agreement is all of the land and improvements at 141 Robinson Road, Albany. Mr Nelson was to receive a one quarter undivided share as tenant in common in consideration of him making a financial contribution of $175,000, being a quarter of the value of the property. Mr Nelson was to make payment by paying $40,000 to Mr Moorcraft on 3 September 2009 and retain $50,000 to be applied towards the cost of construction of the art studio to be erected on the property. $85,000 was to be paid to Mr Moorcraft upon the effecting of the conveyance of a 25% share in the property from Mr Moorcraft to Mr Nelson (item 4 of the Schedule). However in the event that Mr Moorcraft was unable to convey a 25% interest to Mr Nelson, then Mr Nelson was entitled to lodge a caveat over the property declaring his interest (cl 3.3).
Mr Moorcraft agreed not to exceed the sum of $500,000 borrowed against the property and not to further encumber the property (cl 3.4). When Mr Moorcraft was in a position to convey the 25% share to Mr Nelson, both he and Mr Nelson were required to execute an offer and acceptance to effect the conveyance (cl 3.6).
Although the co‑owners were obliged to use their best endeavours to ensure that their obligations under the agreement were promptly and effectively performed, no time limit for performance was set. The settlement date however was defined as 3 September 2009 (cl 5.1(1), item 5).
When the parties signed the agreement on 3 September 2009, the whole of the property at 141 Robinson Road, Albany was the subject of a mortgage in favour of Perpetual Limited that had been registered on 28 August 2007 (Certificate of Title, vol 2112 folio 198). Accordingly, a one quarter share of the property could not have been transferred to Mr Nelson on the settlement date because the conveyance required the one quarter share to be unencumbered. There was no suggestion in the ownership agreement that the title would be unencumbered on 3 September 2009 or at any time in the future.
The ownership agreement is subject to special conditions (cl 15, item 11). To the extent that there may be an inconsistency between the special conditions and the other terms of the agreement, the special conditions prevail and have priority (15.2). The special conditions are that Mr Nelson shall have the sole use and occupancy of the Art Studio (item 7.1(1)) but both parties shall have equal rights of access to the grounds of the property and occupation of the property (item 7.1(2)). Mr Nelson was to have exclusive use and possession and occupation of 50% of the residence including but not limited to the two upstairs bedrooms to the right of the residence, including the bathroom and landing in common with a right of access to the entrance, dining room and kitchen facilities. Mr Moorcraft was to have exclusive use, possession and right of occupation to the other 50% of the estate including but not limited to the master bedroom, bathroom and spare room.
The agreement was conditional upon three conditions:
3.1(1)The trust and accuracy of the medical reports furnished by the second co‑owner to the first co‑owner;
3.1(2)The Parties entering into and forming the partnership of 'Moorcraft House' by way of execution of the Partnership Agreement for 'Moorcraft House' to be undertaken contemporaneously with the execution of this document; and
3.1(3)The Parties being satisfied as to the comprehension of this agreement and any related documentation of the each of the (sic) first co‑owner and second co‑owner.
The meaning of condition 3.1(1) is not clear. Does the condition refer to the trust and accuracy of doctors who provide medical reports or to the trust and accuracy placed in the reports by the parties or by one of the parties? In any event, no medical reports were furnished by Mr Moorcraft to Mr Nelson in September 2009.
Fourteen months prior to the signing of the agreement, a letter addressed 'To Whom It May Concern' dated 26 June 2008 was provided to Mr Moorcraft by Dr Darcy Smith. The letter states:
At examination today I assessed Mr Peter Moorcraft, aged 62 years, to be in a fit frame of mind to make decisions generally.
Dr Smith did not give evidence in the proceedings.
There is no evidence of Mr Moorcraft being examined by any other doctors or of further medical reports being obtained prior to the execution of the ownership agreement deed.
The letter from Mr Barry Critchison, Registered Psychologist, dated 2 July 2008 (exhibit 9) was also obtained. This is not a medical report because it is not provided by a medical practitioner. There is no evidence that either Mr Critchison or Dr Smith provided any reports in relation to Mr Moorcraft after July 2008 but before 3 September 2009.
Clause 3.1(3) states that the ownership agreement deed is conditional upon the parties being satisfied as to the comprehension of this agreement and any related documentation of the [sic] each of the first co‑owner and second co‑owner.
The meaning of this clause is also unclear. What other related documentation is being referred to and how is it that the parties are to express satisfaction as to the comprehension of the agreement or of any related documents?
The ownership agreement deed defines the settlement date as the date of execution of the agreement being 3 September 2009 however conveyance could not occur on that date because the property was encumbered. The ownership agreement does not place any obligation on Mr Moorcraft to lift the encumbrance from the property in order to enable a one quarter share to be transferred to Mr Nelson. Accordingly the conveyance need not have occurred unless and until the mortgage was lifted from the property at 141 Robinson Road, Albany.
The deed of ownership agreement is very confusing and the meaning of cl 3.1(1) and cl 3.1(3) is unclear. I need to consider whether the ambiguity affects the parties' intention to enter into a contract together.
In Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd [2000] WASCA 27 Ipp J summarised the general principles applicable to contract, uncertainty and incompleteness. These principles are relevant to the present case. Ipp J said [28]:
Once the court has determined that the requisite intention is present, it is then necessary to go on to consider whether the contract is so incomplete or uncertain as to be void. The following statement by Sugerman J, approved by Menzies J in Thorby v Goldberg (1964) 112 CLR 597 at 607 is often cited in this connection:
It is a first principle of the law of contracts that there can be no binding and enforceable obligation unless the terms of the bargain, or at least it essential and critical terms, have been agreed upon. So, there is no concluded contract where an essential or critical term is expressly left to be settled by future agreement of the parties. Again, there is no binding contract where the language used is so obscure and incapable of any precise or definite meaning that the court is unable to attribute to the parties any particular contractual intentions.
I find that although the language in cl 3.1(1) and cl 3.1(2) is ambiguous that given my findings in [20] ‑ [27] both parties understood the contractual intention of the agreements and were of sound mind at the time of signing. The parties intended to enter into a partnership agreement in respect of the bed and breakfast facility and the art studio at Moorcraft House and to ensure that Mr Nelson's interest in the partnership was secured by transferring a one‑quarter share of the property at 141 Robinson Road, Albany to him in consideration of him paying a total sum of $175,000 towards the venture.

Has the partnership been dissolved?

After entering into the two deeds Mr Nelson made enquiries and arrangements to ensure that the bed and breakfast facility would comply with counsel requirements. Mr Nelson also ensured that a builder was registered for the construction of the art studio although Mr Nelson intended to supervise most of the construction himself.
Although Mr Nelson experienced problems with construction the partnership continued without significant problems until late 2010. At that time Mr Moorcraft who had spent a period of time in the United Kingdom, returned to Moorcraft House intending to attempt to re‑finance the property in order to try and lower the interest rate on the mortgage. Mr Moorcraft sought to have Mr Nelson lift the registered caveat over the property so that the mortgage that had been registered in 2007 could be discharged and a new mortgage could be registered. Mr Moorcraft repeatedly requested that Mr Nelson sign documentation to enable refinancing and eventually Mr Nelson swore a statutory declaration to that effect (exhibit 63A) however this did not occur until 4 November 2011. By this time the finance that Mr Moorcraft was seeking was no longer available.
Mr Nelson had also attempted to have Mr Moorcraft sign a statutory declaration in an attempt to secure Mr Nelson's position. Mr Moorcraft refused to sign the statutory declaration document (exhibit 63B). Mr Nelson asserts that Mr Moorcraft breached the partnership agreement deed because Mr Moorcraft then extended the draw‑down facility to a sum beyond $500,000 however the Macquarie Mortgages Pty Ltd documentation in the sole name of Peter Moorcraft for the relevant period of early November 2010 (exhibit 99) shows that in November 2010 the balance of the facility that had a limit of $745,000 was approximately $245,000. A final balance of $508,133.32 is recorded in respect of the whole month of November 2010. I am not satisfied that Mr Moorcraft exceeded the limit set in the partnership agreement in early November 2011.

Mr Nelson also asserts that Mr Moorcraft failed to adequately insure the premises consistent with his obligation under the partnership agreement deed however I have not received evidence that satisfies me on the balance of probabilities that this is the case.
As a result of the financial disputes and other arguments about access to the premises, electrical services and personal debts the relationship between the two men became untenable. Mr Nelson wrote to Mr Moorcraft on 9 November 2010 referring to an untenable working relationship. Mr Moorcraft responded in kind to Mr Nelson by letter dated 10 November 2010 and Mr Nelson replied on 11 November 2010 (exhibits 66 ‑ 69). Finally on 15 November 2010 Mr Moorcraft wrote to Mr Nelson in the following terms:
To the attention of:- Peter S Nelson
I hereby give you notice that the partnership between Peter Moorcraft and yourself is dissolved as from today Monday 15^th November 2010.
I am instructing the accountant that I have never used before to draw up accounts.
You are in breach of our agreement and that you have only made one payment of $40,000.
Yours sincerely,
Peter Moorcraft
November 15^th 2010
(Exhibit 76)
Mr Nelson responded by placing a notice in the Albany Advertiser newspaper on 16 November 2010 that stated:
Peter Nelson gives notice today that he is no longer involved in the establishment or future running of B&B Moorcraft House Accom and gives notice that he is not responsible for any debts incurred after 15 November 2010 in relation to this partnership (exhibit 88).
The relationship between the two men had broken down by 15 November 2010. I find that both partners intended to dissolve the partnership on that date. 15 November 2010 is the date of dissolution. Mr Nelson claims for additional sums in relation to the art studio and for loss of partnership profit however the partnership ceased to exist after 15 November 2010. the claims have no merit.

Are the deeds so inextricably linked that each cannot stand alone?

Although the parties entered into two agreements on 3 September 2009 both agreements relate to 141 Robinson Road, Albany. The statement of intent of the partnership agreement is that the partners have decided to enter into a partnership for the purpose of carrying on business as a bed and breakfast and an art studio. The partnership business is described as being a bed and breakfast facility being Moorcraft House.
The initial contribution of the parties required Mr Nelson to pay $40,000 as working capital to reduce the debt on the business premises which was a debt for which Mr Moorcraft was solely responsible. Exhibit 16 is the receipt dated 22 September 2009 confirming that Mr Nelson paid this sum to Mr Moorcraft.
Mr Nelson was required to provide $50,000 to be utilised in the construction of an art studio at the business premises. Mr Nelson has given evidence in relation to the contribution that he has made to the part construction of the art studio and asserted that that contribution well exceeded $50,000. In evidence Mr Moorcraft does not strongly dispute that a sum of $50,000 was spent by Mr Nelson in the part construction of the art studio. The terms of the partnership agreement required a $50,000 contribution and I am satisfied on the balance of probabilities that Mr Nelson made at least this contribution.
Mr Nelson was also required to provide the sum of $85,000 as working capital to be called upon as and when required plus interest on the sum. This sum was never called upon because working capital was not required for the partnership. Mr Moorcraft was to provide utilisation of 50% of the business premises being 141 Robinson Road, Albany valued at $175,000.
The partnership agreement was subject to special conditions that in consideration of Mr Nelson making the capital contribution Mr Moorcraft would do all that was necessary to transfer an undivided one‑quarter share of the business premises to Mr Nelson. Mr Moorcraft granted Mr Nelson the right to lodge a caveat against the title of 141 Robinson Road, Albany as security for the ultimate transfer.
Mr Moorcraft agreed not to extend the draw‑down facility attached to the business premises beyond $500,000.
The ownership agreement also related to 141 Robinson Road, Albany. The agreement was conditional upon the partners entering into and forming the partnership of Moorcraft House by way of execution of a partnership agreement contemporaneously with the execution of the ownership agreement.
In order to have a one undivided quarter share free of encumbrances transferred by Mr Moorcraft to Mr Nelson, Mr Nelson was required to pay $40,000 (this being the sum that was identified in receipt exhibit 16). Mr Nelson was to retain $50,000 to apply towards the construction of the art studio to be erected on the property. I accept that at least $50,000 was expended by Mr Nelson in part construction and therefore he has complied with this requirement. Mr Nelson gave evidence that he carried out work as an owner/builder and supervised construction. He was not paid for his work but he submitted that it could be calculated on an hourly basis to a cost of construction greater than $50,000. I consider that Mr Nelson's labour and supervision was offered to the partnership in order to ensure that the bed and breakfast venture would proceed. The partnership agreement referred to the sum of $50,000 being retained. This is the relevant sum contributed by Mr Nelson to the agreement.
Mr Nelson was also required to pay the sum of $85,000 upon Mr Moorcraft affecting a conveyance of a one‑quarter share of the property to Mr Nelson. The conveyance never occurred and Mr Nelson has never paid Mr Moorcraft the sum of $85,000.

Has the dissolution of the partnership agreement deed frustrated the land ownership agreement deed?

When the partnership dissolved on 15 November 2010 the relationship between the former partners was untenable. Each had sent hostile letters to the other, Mr Moorcraft had made it clear that he did not want Mr Nelson on the premises and protracted legal proceedings commenced. The contact between the two and the demeanour of Mr Nelson and Mr Moorcraft during the course of trial reinforces that they cannot have a future working relationship together nor are they in a position to share premises.
The object of the land agreement was to ensure that the parties secured their business premises for the partnership in relation to the bed and breakfast and the art studio. Although Mr Nelson was to have the sole use of the studio and receive the profit from the studio the purpose of the art studio was to compliment and enhance the business of the bed and breakfast facility. Although 141 Robinson Road, Albany is a 10 acre lot the art studio was built within metres of the residence. Mr Solomon, property valuer, confirmed that that studio covers an area of approximately 300 m. It is very large in relation to the house. Having viewed the premises during the course of the trial I find that the partially built studio is so close to the proposed bed and breakfast facility that it would be impossible for it to operate independently of the bed and breakfast facility.
Pursuant to the land ownership agreement deed Mr Nelson was to have exclusive use and occupancy including but not limited to two upstairs bedrooms and a bathroom, a landing in common with Mr Moorcraft's area, the entrance day room and the kitchen facility at Moorcraft House.
Given the dissolution of the partnership it would be impossible for Mr Nelson and Mr Moorcraft to share the same premises or to attempt to share operations of any business at 141 Robinson Road, Albany.
In light of the dissolution of the partnership it has been submitted on Mr Moorcraft's behalf that the land ownership deed agreement is frustrated as a result of the failure of the partnership.

The law

In the City of Subiaco v Heytesbury Properties Pty Ltd [2001] WASCA 140 Ipp J set out a brief summary of the principles relating to frustration of contracts [66] ‑ [67]:
The law relating to frustration of contracts was discussed by Stephen J in Brisbane City Council v Group Projects Pty Ltd (1979) 145 CLR 143 at 162 - 163 in the following terms:
'It is no doubt true, as critics complain, that the various expositions of the true basis of the doctrine of frustration leave imprecise its actual operation when applied to the facts of particular cases. How dramatic must be the impact of an allegedly frustrating event? To what degree or extent must such an event overturn expectations, or affect the foundation upon which the parties have contracted, or, again, how unjust and unreasonable a result must flow or how radically different from that originally undertaken must a contract become (to use the language of some of the various expositions), before it is to be regarded as frustrated? The cases provide little more than single instances of solutions to these questions. These differences of application of the doctrine of frustration were keenly appreciated by both Latham CJ and by Williams J in their consideration of the doctrine in Scanlan's New Neon Ltd v Toohey's Ltd (1943) 67 CLR 169. They are, perhaps, inevitable in questions of degree arising when a broad principle must be applied to infinitely variable factual situations.'
In Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 357, Mason J, in effect, adopted these remarks, saying:
'I agree with Stephen J's acceptance [in Brisbane City Council v Group Projects Pty Ltd] of the approach adopted by Lord Reid and Lord Radcliffe in Davis Contractors [1956] AC 696. Lord Reid said that the task of the court is to determine "on the true construction of the terms which are in the contract read in light of the nature of the contract and of the surrounding circumstances", "whether the contract which they did make is … wide enough to apply to the new situation: if it is not, then it is at an end" (at 720 ‑ 721). Later he described frustration as "the termination of the contract by operation of law on the emergence of a fundamentally different situation" (at 723).
Lord Radcliffe (at 729) said: "… frustration occurs whenever the law recognises that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract … . It was not this that I promised to do."
His Lordship, noting that special importance attaches to an unexpected event, observed "There must be as well such a change in the significance of the obligation that the thing undertaken would, if performed, be a different thing from that contracted for".'
I must therefore consider whether in the present case the contractual obligation in relation to the land ownership agreement had become incapable of being performed because the circumstances in which performance would be called for would render the agreement radically different from that which the parties contracted for.
I find that it was a condition of the land ownership agreement that the parties enter into the partnership agreement. The land ownership agreement was only entered into on the understanding by the parties that the land ownership agreement would support the partnership in relation to the art studio and the bed and breakfast facility. Given the dissolution of the partnership and the ongoing hostility between the parties if the land agreement was to proceed it would be something radically different from that which was undertaken by the contract.
I also need to consider whether the default of either party has led to the contractual obligation becoming incapable of being performed. The issue of default was considered by the High Court in Scanlan's New Neon Ltd v Toohey's Ltd (1943) 67 CLR 169 in relation to contracts that were argued to be frustrated as a result of measures that had been imposed during wartime. Although the issues were determined 70 years ago the issues addressed are relevant to the matters raised in this case. In that case McTiernan J addressed the issue of default as follows [81] ‑ [85]:
The doctrine in its modern form was first stated in Taylor v Caldwell [81]. The principle which the court applied in that case was stated by Blackburn J in these words: 'Where, from the nature of the contract, it appears that the parties must from the beginning have known that it could not be fulfilled unless when the time for the fulfilment of the contract arrived some particular specified thing continued to exist, so that, when entering into the contract, they must have contemplated such continuing existence as the foundation of what was to be done; there, in the absence of any express or implied warranty that the thing shall exist, the contract is not to be construed as a positive contract, but as subject to an implied condition that the parties shall be excused in case, before breach, performance becomes impossible from the perishing of the thing without the default of the contractor.' [82]. Blackburn J amended this statement in Appleby v Myers [83] by substituting for the words 'without default of the contractor' the words 'without fault upon either side': see the Joseph Constantine Steamship Line Case [84]. It is to be noted that the implied condition is that 'the parties' shall be excused. In applying this principle to the circumstances of that case Blackburn J said: 'In the present case, looking at the whole contract, we find that the parties contracted on the basis of the continued existence of the Music Hall at the time when the concerts were to be given; that being essential to their performance. We think, therefore, that the Music Hall having ceased to exist, without fault of either party, both parties are excused, the plaintiffs from taking the Gardens and paying the money, the defendants from performing their promise to give the use of the Hall and Gardens and other things' [85].
I accept that in the present case the words 'without fault upon either side' could be substituted for 'without default upon either side'. The partnership relationship became untenable because both parties could no longer communicate with the other. They could not share premises and the partnership could not function however neither party was in breach of the partnership agreement prior to its dissolution on 15 November 2010. I find that neither party was in default.
The dissolution of the partnership made it impossible for the land ownership agreement to proceed and accordingly the land ownership agreement was frustrated. Termination of the land agreement is prospective from the date of frustration being the date of dissolution 15 November 2010. Mr Nelson has not proven that there was any breach of the land ownership agreement prior to 15 November 2010.

Procedure on dissolution

Clause 16 of the partnership agreement sets out the procedure to be followed on dissolution:
16.PROCEDURE ON DISSOLUTION
16.1In the event of the determination of a Partnership by mutual agreement or under any circumstances not provided for in this Agreement a full and general account shall be taken of the assets, credits and liabilities of the Partnership and of the transactions and dealings therefore by the Accountant acting for the Partnership to be prepared with all convenient speed, such assets and credits shall be sold and the proceeds realised and applied as follows, namely:
(1)first in paying and discharging such debts and liabilities and the expenses of and incidental to the premises and the winding up of the Partnership affairs;
(2)secondly, in making any necessary adjustments between the Partners so as to bring their current accounts, loan accounts and capital accounts to a proper level;
(3)thirdly, the balance (if any) of such proceeds shall be divided between the Partners in their respective shares.
16.2In addition, the Partners shall each respectively execute, do or concur in all necessary or proper instruments, acts, matters an things necessary or expedient for effecting or facilitating the sale, realisation and getting in of the Partnership assets and credits and the due application and division of the proceeds thereof and for their mutual release, indemnity or otherwise.
Although the partnership was dissolved on 15 November 2010 a full and general account of the partnership's assets and liabilities has not been taken.
I note the major assets and liabilities of the partnership are as follows:
$40,000 (paid by Mr Nelson)
$50,000 (paid by Mr Nelson)
$85,000 (executory - to be paid by Mr Nelson)
$175,000 (executory - to be paid by Mr Moorcraft)
Once Mr Nelson has paid $85,000 and Mr Moorcraft had paid $175,000 into the partnership the principal assets of the partnership will total $350,000.
I have not referred to any additional assets, credits and liabilities of the partnership. These are nominal amounts but are to be the subject of a full and general account. The balance is to be divided between the parties.
There is no evidence of any significant debt or liability. The mortgage debt in respect of Moorcraft House is Mr Moorcraft's sole responsibility. Any debts accruing after 15 November 2010 should not be the subject of account because Mr Moorcraft has continued to live at the premises and enjoy Moorcraft House after dissolution.
Once the proceeds have been realised and applied the caveat against the title of the property at 141 Robinson Road, Albany is to be removed, the cost of removal to be shared equally between the parties.
For the reasons that I have outlined I do not find that Mr Moorcraft was in breach of either contract nor has Mr Nelson satisfied me on the balance of probabilities of any tortious claim. I dismiss Mr Nelson's claim.
I make the following orders:
1.The plaintiff's claim is dismissed.
2.The partnership agreement was dissolved on 15 November 2010.
3.The parties are entitled to 50% of such sum as may be found due on the taking of account.
4.The ownership agreement is void having been frustrated by the termination of the partnership agreement on 15 November 2010.
5.The caveat against the title of the property at 141 Robinson Road, Albany is to be removed following the taking of account the costs to be shared equally by the parties.
Given that Mr Nelson is self represented I will hear from the parties before making any orders as to costs.

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: NELSON -v- MOORCRAFT [2012] WADC 170 (S)

CORAM: WAGER DCJ

HEARD: 23 - 25 OCTOBER 2012, 19 DECEMBER 2012 & 5 FEBRUARY 2013

DELIVERED : 11 DECEMBER 2012

SUPPLEMENTARY
DECISION :13 FEBRUARY 2013

FILE NO/S: ALB CIV 3 of 2011

BETWEEN: PETER STANLEY NELSON
Plaintiff
AND
PETER MOORCRAFT
Defendant

Catchwords:

Costs - General rule that successful party entitled to costs - Whether departure from general rule warranted

Legislation:

Nil

Result:

Costs awarded to defendant

Representation:

Counsel:

Plaintiff: Mr P Kyle
Defendant: Mr H Sklarz

Solicitors:

Plaintiff: Haynes Robinson
Defendant: H Sklarz

Case(s) referred to in judgment(s):

Abreu v Thomas Peacock & Sons Pty Ltd [No 3] [2012] WADC 31 (S)
Alsanto Nominees Pty Ltd v Bowen [2009] WADC 130 (S)
Amaca Pty Ltd (formerly James Hardie & Co Pty Ltd) v Hannell [2007] WASCA 158 (S)
Cretazzo v Lombardi (1975) 13 SASR 4
Nelson v Moorcraft [2012] WADC 170
Wallace v Shorescape Holdings Pty Ltd [2010] WADC 114 (S)

WAGER DCJ: On 11 December 2012 I delivered judgment in this matter. My findings are set out in full in Nelson v Moorcraft [2012] WADC 170 and will not be dealt with here.
On 19 December 2012 I made orders arising from the judgment and considered written and oral submissions made on behalf of the defendant and oral submissions made on behalf of the plaintiff in relation to a number of matters including the issue of costs. The issue of costs was reserved. I heard further oral submissions on 5 February 2013.

Although the plaintiff had represented himself at trial Mr Kyle appeared as counsel for the plaintiff on 19 December 2012 and 5 February 2013. However a memorandum of appearance had not been filed. I advised that I would provide a written decision in relation to the issue of costs once a memorandum of appearance had been filed on the plaintiff's behalf. A notice of appointment of solicitor was filed by Haynes Robinson on 6 February 2013.
The trial related to two agreements that had been entered into by the parties; one in relation to the ownership of land and one being a partnership agreement. The plaintiff claimed that the two agreements were breached by the defendant and sought damages resulting from the breaches. The defendant denied liability and counterclaimed that the partnership agreement had been dissolved and the ownership of land agreement was void. I dismissed the plaintiff's claim. The defendant's counterclaim was successful in that I determined that the partnership was dissolved and that the ownership of land agreement was void because the agreement had been frustrated. My findings differed from the counterclaim pleaded because the defendant had argued that the ownership of land agreement was void for lack of consideration.
Orders made in respect of the judgment on 19 December 2012 included:
5.The parties are each entitled to 50% of such sum as may be found due on the taking of accounts of the partnership assets and liabilities.
6.In the event that the parties do not mutually agree to the partnership accounts by the close of business on Friday 25 January 2013 then:
(a)the defendant is to obtain the original appointment of a chartered accountant, as nominated by the President of the Institute of Chartered Accountants in Australia, for the purpose of conducting the partnership accounts,
(b)the parties are to equally bear and pay the costs of the chartered accountant;
(c)the parties are to be bound by and comply with the decision of the chartered accountant.

The defendant's submissions

The defendant submits that the general rule that the successful party to the action will recover his costs applies and the plaintiff should pay the defendant's costs to be taxed if not agreed. He submits that although the defendant did not succeed on all matters pleaded in his defence the onus was on the plaintiff to prove the claim that he brought to the standard of balance of probabilities. The issues raised in the defence that were not successful were not distinct and severable nor did the matters increase the length of the trial.
The defendant advises that the defendant had invited the plaintiff to carry out an accounting of the partnership assets and liabilities in 2010 however the plaintiff had chosen not to do so and had proceeded with his claim. The defendant was self‑represented until August 2012. Once counsel started to act for the defendant an amended defence and counterclaim was filed which substantially changed the nature of the matters pleaded by the defendant however the plaintiff was still given sufficient time to have an opportunity to mediate or to attempt to settle the matter prior to the listed trial dates proceeding in October 2012 had he chosen to follow this course.
Counsel for the defendant Mr Sklarz narrowed the issues at trial and attempted to assist the court to keep the trial on track. Given the quantity of materials filed by the plaintiff and the width of the matters pleaded by the plaintiff Mr Sklarz' assistance and pragmatic approach to the issues to be determined at trial enabled the trial to be completed in the listed period of three days.
The defendant submits that both parties led evidence to challenge credibility of the other party. The majority of the evidence relevant to the defendant's pleadings on unsuccessful issues was also relevant to issues of credibility and therefore no significant additional periods of court time were taken up by the defendant.

The plaintiff's submissions

The plaintiff submits that the defendant unsuccessfully pleaded issues including:
1.the claim that the defendant's psychiatric state at the time of entering into the agreements precluded the defendant from understanding the nature of the agreements;
2.that the plaintiff had exerted undue influence over the defendant in order to have him sign the agreements;
3.that the agreements were void for lack of consideration; and
4.that the court may not have had jurisdiction to deal with the plaintiff's claim.
The plaintiff argues that the unsuccessful issues took up at least half of the trial and accordingly the parties should each bear their own costs or alternatively an order apportioning costs would be appropriate.

The law

The court has a general discretion in respect of costs however the court will generally order that the successful party to any action or matter shall recover his costs (O 66 r 1(1)) Rules of the Supreme Court 1971.
If however the court is of the opinion that the conduct of the party has resulted in costs being unnecessarily or unreasonably incurred then the court may deprive the party of his costs, wholly or in part, or may order him to pay the costs of the unsuccessful party, either wholly or in part (O 66 r 1(2)).
Order 66 r 1(3) provides:
Where a party though generally successful in an action has, by the introduction of some issue or issues on which he has failed, increase the costs the court may order such party to pay the costs of such issue or issues.
Courts are generally reluctant to apportion costs on the basis of success or failure on issues that arise during the course of the trial: Cretazzo v Lombardi (1975) 13 SASR 4.
In Amaca Pty Ltd (formerly James Hardie & Co Pty Ltd) v Hannell [2007] WASCA 158 (S) [7] the Court of Appeal said:
[T]he power to adjust an order for costs by reference to particular issues upon which the generally successful party has failed, is properly exercised only where there are discreet and severable issues upon which the generally successful party has failed, and which have added to the costs of the proceedings in a significant and readily discernible way. In a case in which the generally successful party has failed on only a minor issue which did not add materially to the cost of the conduct of proceedings it would not ordinarily be appropriate to depart from the general rule, unless the conduct of the generally successful party in relation to that issue had been unreasonable. In the event of unreasonableness, different considerations may apply.
Staude DCJ set out the principles applicable to the application of O 66 r 1(3) in Alsanto Nominees Pty Ltd v Bowen [2009] WADC 130(S). His Honour stated at [6] ‑ [8]:
In McConnell v Nationwide News Pty Ltd; Prue v Nationwide NewsPty Ltd (Unreported, WASC, Library No 920670, 10 December 1992) Owen J stated:
'Order 66 r 1(3) only applies where the failed issue has increased the costs. The term 'issue' does not mean a precise issue in the technical pleading sense, but any disputed question of fact or issue of law, and a party will not be awarded costs merely because of his success on particular issues: Cretazzo v Lombardi (1975) 13 SASR 4 at 12, 16.
Because of court delays and the high cost of litigation, courts should always exercise the discretion to award the costs of issues on which parties fail in such a way that they will come to realise they will not necessarily recover the whole of their costs of raising a discrete issue, and therefore carefully consider what matters they will raise: Commission of Australian Federal Police v Razzi (1991) 101 ALR 425 at 430.'
In Townsend v Collova [2005] WASC 4 (S) Le Miere J found that for the purposes of O 66 r 1(3)
'an issue is introduced where a defendant denies a fact asserted by the plaintiff and leads evidence to support the defendant's contention in relation to that fact.'
The applicable principle was enunciated by the Court of Appeal in Amaca Pty Ltd v Hannell [2007] WASCA 158 (S) [7] - [8]:
'The power to depart from the general rule to the effect that costs follow the event and to instead adjust the costs order to be made by reference to the failure of the generally successful party on specific and particular issues within the litigation is recognised by practice, authority and the express provisions of O 66 r 1(3). However, its application depends upon the identification of discrete and severable issues, the litigation of which has increased the costs of conducting the proceedings. Established practice in this state, and the authorities, suggest that the exercise of this power should be approached broadly, and as a matter of impression, and without an attempt at "mathematical precision" which is likely to prove illusory – see, for example, J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (Western Australian Branch) [No 2] (1993) 46 RR 301.
Accordingly, the power to adjust an order for costs by reference to particular issues upon which the generally successful party has failed, is properly exercised only where there are discrete and severable issues upon which the generally successful party has failed, and which have added to the costs of the proceedings in a significant and readily discernable way. In a case in which the generally successful party has failed on only a minor issue, which did not add materially to the cost of the conduct of the proceedings, it would not ordinarily be appropriate to depart from the general rule, unless the conduct of the generally successful party in relation to that issue had been unreasonable. In the event of unreasonableness, different considerations may apply.'
His Honour also noted at [12] and [13]:
Neither O 66 r 1(3) nor the cases require the court to be satisfied that the conduct of the generally successful party be unreasonable or inappropriate. As appears from the dicta in Amaca at [8], unreasonableness is a consideration where the successful party fails on a minor issue which does not significantly add to the costs of the proceedings.
In Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No 2) [2000] FCA 602 [54], cited by Newnes J in Mickelberg v The State ofWestern Australia [2007] WASC 140 (S) [36], Goldberg J put it this way:
'A court should not be too ready to disallow costs simply because a party has failed upon an issue unless it is a quite separate and distinct issue from the issues in respect of which it succeeded or unless there be an element of unreasonableness or inappropriate conduct in relation to that issue. (citation omitted)'
The relevant principles were also applied in this court in Abreu v Thomas Peacock & Sons Pty Ltd [No 3] [2012] WADC 31 (S) [13] ‑ [17] and Wallace v Shorescape Holdings Pty Ltd [2010] WADC 114 (S) [3] ‑ [8].

Evidence at trial

The plaintiff called evidence on the first two days of trial (23 and 24 October 2012). On the final day of trial (25 October 2012) the defendant called evidence. On 25 October 2012 following Mr Moorcraft's evidence Mr Rudnyckyj, a former project officer, gave brief evidence in relation to the defendant's character. Ms Taylor, a former partner of Mr Nelson, gave evidence in respect of Mr Nelson's character however I advised the parties that I gave very little weight to her evidence in light of the demise of her relationship with Mr Nelson. Mr Solomon, licensed valuer, gave evidence of the value of the structure partially erected on the property and of the property in question.
The defendant was the successful party. The issues raised in defence were directly linked to the plaintiff's pleadings and were likely to arise from the plaintiff's case. The defendant did not act in such way that costs were unnecessarily or unreasonably incurred.
I am satisfied that the defendant should have the costs of the trial. I order that the plaintiff pay the defendant's costs of the trial heard 23 ‑ 25 October 2012 in any event.

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: NELSON -v- MOORCRAFT [2012] WADC 170 (S2)

CORAM: WAGER DCJ

HEARD: ON THE PAPERS

DELIVERED : 11 DECEMBER 2012

SUPPLEMENTARY
DECISION :2 MAY 2014

FILE NO/S: ALB CIV 3 of 2011

BETWEEN: PETER STANLEY NELSON
Plaintiff
AND
PETER MOORCRAFT
Defendant

Catchwords:

Costs - Clarification of terms of cost order

Legislation:

Nil

Result:

Costs of the action awarded to the defendant

Representation:

Counsel:

Plaintiff: No appearance
Defendant: No appearance

Solicitors:

Plaintiff: Not applicable
Defendant: H Sklarz

Case(s) referred to in judgment(s):

Nelson v Moorcraft [2012] WADC 170 (S)

WAGER DCJ: On 13 February 2013 I delivered a supplementary decision in respect of the judgment in this matter: Nelson v Moorcraft [2012] WADC 170 (S).
I ordered that costs be awarded to the defendant however the terms of the orders to be extracted remain unsettled.
By letters dated 9 September 2013, 25 September 2013 and 28 April 2014 Mr Sklarz has sought to clarify that the order made related to the costs of the action and was not an order restricted to the costs of the trial.
Although self‑represented at trial the plaintiff, Mr Nelson, was represented by Haynes Robinson Lawyers in respect of the application for costs. By a letter dated 23 January 2013 to the defendant, Haynes Robinson specifically referred to the plaintiff's pending application to the trial judge as being an application 'to reserve the costs of the action' pending the determination of the appeal.
On 5 February 2013 Mr Kyle appeared on the plaintiff's behalf in respect of the issue of costs and made submissions consistent with an application relating to the costs of the action. Mr Kyle referred to the background of the action prior to trial (ts 38), and sought to present an argument based upon a full knowledge of the circumstances of the trial including the background (ts 39 and ts 44).
At the commencement of trial on 23 October 2012 counsel for the defendant referred to the preparation of the matter for trial in the context of taking instructions and dealing with pre‑trial matters. This was relevant because it followed on from a background of limited agreement and cooperation when both parties had been self‑represented. The defendant's application has always been that the costs of the action were sought.
If the order made on 13 February 2013 requires clarification then I confirm that the order made is that the costs of the action were awarded to the defendant.