Nelson v Moorcraft - [2014] WASCA 212

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: NELSON -v- MOORCRAFT [2014] WASCA 212

CORAM: BUSS JA
NEWNES JA
MURPHY JA

HEARD: 16 APRIL 2014

DELIVERED : 14 NOVEMBER 2014

FILE NO/S: CACV 7 of 2013

BETWEEN: PETER STANLEY NELSON
Appellant
AND
PETER MOORCRAFT
Respondent

ON APPEAL FROM:
Jurisdiction              :  DISTRICT COURT OF WESTERN AUSTRALIA
Coram  :WAGER DCJ
Citation  :NELSON -v- MOORCRAFT [2012] WADC 170
File No  :CIV ALB 3 of 2011

Catchwords:

Partnership - Dissolution - Fixed term - Undefined time - Construction of s 37(1) of the Partnership Act 1895 (WA) - Construction of s 43(c) of the Partnership Act

Contract - Real property - Land ownership deed - Frustration - Equitable interest - Equitable lien

Legislation:

Partnership Act 1895 (WA), s 37(1), s 43(c)

Result:

Application filed 26 August 2013 dismissed
Application filed 8 July 2014 dismissed
Appeal allowed
Paragraphs 1, 2, 6, 7, 8 and 9 of the trial judge's orders made on 19 December 2012 set aside
Part of the District Court action remitted to the trial judge for resolution in accordance with this court's reasons

Category: A

Representation:

Counsel:

Appellant: Mr P A Kyle
Respondent: Mr H Sklarz

Solicitors:

Appellant: Kyle & Co
Respondent: Henry Sklarz

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

Abbott v Abbott [1936] 3 All ER 823
Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99
Borambil Pty Ltd v O'Carroll [1972] 2 NSWLR 302
Borambil Pty Ltd v O'Carroll [1974] 1 NSWLR 1
Brisbane City Council v Group Projects Pty Ltd [1979] HCA 54; (1979) 145 CLR 143
Burgess v Wheate (1759) 1 Eden 177; 28 ER 652
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337
Commissioner of State Taxation (SA) v Cyril Henschke Pty Ltd [2010] HCA 43; (2010) 242 CLR 508
Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696
EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2010] WASCA 78; (2010) 41 WAR 23
Fazio v Fazio [2012] WASCA 72
Fullers' Theatres Ltd v Musgrove [1923] HCA 12; (1923) 31 CLR 524
Hadlee v Commissioner of Inland Revenue (NZ) [1989] 2 NZLR 447
Hewett v Court [1983] HCA 7; (1983) 149 CLR 639
Hurst v Bryk [2002] 1 AC 185
International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3; (2008) 234 CLR 151
Lee‑Parker v Izzet [1971] 1 WLR 1688
Maillie v Swanney 2000 SLT 464
Maslen v Perpetual Executors Trustees & Agency Co (WA) Ltd [1950] HCA 55; (1950) 82 CLR 101
McGowan v Commissioner of Stamp Duties [2001] QCA 236; [2002] 2 Qd R 499
Morris v Morris [1982] 1 NSWLR 61
Moss v Elphick [1910] 1 KB 846
Nelson v Moorcraft [2012] WADC 170 (S)
Nelson v Moorcraft [2012] WADC 170 (S2)
Nullagine Investments Pty Ltd v Western Australian Club Inc [1993] HCA 45; (1993) 177 CLR 635
oOh! Media Roadside Pty Ltd (formerly Power Panels Pty Ltd) v Diamond Wheels Pty Ltd [2011] VSCA 116; (2011) 32 VR 255
Raulfs v Fishy Bite Pty Ltd [2012] NSWCA 135
Rushton (Qld) Pty Ltd v Rushton (NSW) Pty Ltd [2002] QCA 210; [2003] 1 Qd R 320
Sharah v Healey [1982] 2 NSWLR 223
SJ Mackie Pty Ltd v Dalziell Medical Practice Pty Ltd [1989] 2 Qd R 87
Smith v Chadwick (1882) 20 Ch D 27
Tanwar Enterprises Pty Limited v Cauchi [2003] HCA 57; (2003) 217 CLR 315
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
Toohey v Gunther (1928) 41 CLR 181
Walters v Bingham [1988] 1 FTLR 260
Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; (2011) 86 ALJR 1
Wythes v Lee (1855) 3 Drew 396; 61 ER 954

Table of Contents

BUSS JA.................................................................................................................................... 5
The background circumstances
Mr Nelson's statement of claim
Mr Moorcraft's defence
The provisions of the Partnership Deed
The provisions of the Land Ownership Deed
Overview of the trial judge's reasons
The trial judge's orders
The grounds of appeal

Mr Nelson's orders wanted
The real issues in the appeal
First issue: what is the proper construction of the relevant provisions of the Partnership Deed and the Land Ownership Deed?
Second issue: was the trial judge in error in finding, in effect, that the partnership was dissolved by mutual agreement on 15 November 2010?
Third issue: was her Honour in error in finding, in effect, that on 15 November 2010 the Land Ownership Deed was discharged by frustration?
Fourth issue: was her Honour in error in failing to find that, upon execution of the Land Ownership Deed, Mr Nelson acquired an undivided one‑fourth share in the Property and that Mr Nelson remained entitled to that interest even if the Land Ownership Deed was discharged by frustration?
Fifth issue: was her Honour in error in failing to find that Mr Moorcraft breached the Land Ownership Deed when, by his letters dated 10 November 2010 and 15 November 2010, he 'effectively evicted' Mr Nelson from the Property and, also, in failing to find that Mr Moorcraft was liable to Mr Nelson in damages for the breach?
Sixth issue: if this court allows the appeal, what orders should be made?
Mr Nelson's application in the appeal filed 26 August 2013
Mr Nelson's application in the appeal filed 8 July 2014

Mr Nelson's appeal in relation to costs (CACV 81 of 2014) and his application dated 17 July 2014 in that appeal
How are the other disputes between the parties to be resolved?

NEWNES JA...........................................................................................................................55
MURPHY JA..........................................................................................................................56

Introduction
The construction of the instruments
Grounds of appeal

Disposition

Grounds 1 and 2
Ground 3
Ground 4
Grounds 5 and 6
Grounds 7 and 8

Proposed orders
Other matters

BUSS JA: The appellant (Mr Nelson) appeals to this court from a judgment of Wager DCJ entered after a trial on 23, 24 and 25 October 2012 in the District Court at Albany.
The litigation concerned the proper construction of a deed dated 3 September 2009 (the Partnership Deed) and another deed also dated 3 September 2009 (the Land Ownership Deed), each of which was made between Mr Nelson and the respondent (Mr Moorcraft), and the application of the deeds, properly construed, to various facts as found by her Honour.
The trial judge dismissed Mr Nelson's claim and allowed Mr Moorcraft's counterclaim.

The background circumstances

The following recitation of the background circumstances is taken from her Honour's reasons for decision. See Nelson v Moorcraft [2012] WADC 170.
In 2008 Mr Nelson and Mr Moorcraft became friends. At the time neither of them was in full‑time employment. Each was in receipt of a disability support pension. Mr Nelson suffered from stress and physical health issues. Mr Moorcraft suffered from depression. Mr Nelson had been a senior art teacher at TAFE. Mr Moorcraft had been a fashion retailer.
Mr Moorcraft owned a large Tudor‑style house in Albany. It was on a 10‑acre block. The address was 141 Robinson Road, Albany. Mr Moorcraft lived alone. In these reasons I will refer to the land and fixed improvements at 141 Robinson Road as 'the Property'.
Mr Nelson also lived in Albany. He was no longer employed as an art teacher but wanted to create his own art school.
Soon after becoming friends, Mr Nelson approached Mr Moorcraft about converting the Tudor-style house into a bed and breakfast facility to be called Moorcraft House. Mr Nelson's idea was that they would operate the business in partnership. He also proposed building an art studio on the Property. Mr Nelson envisaged that he would have exclusive use of the art studio and his students would attend the bed and breakfast facility for morning tea. He also envisaged that students and tourists would be encouraged to stay in the bed and breakfast accommodation and take advantage of the art studio and on‑site tuition.
Mr Nelson and Mr Moorcraft agreed that Mr Nelson would pay for the construction of the art studio and would purchase an undivided one‑fourth share in the Property from Mr Moorcraft in return for the payment of an agreed sum.
On 3 September 2009, Mr Nelson and Mr Moorcraft executed the Partnership Deed and the Land Ownership Deed.
The large Tudor‑style house was then renovated, bed and breakfast furniture and fittings were purchased and two bedrooms were prepared for guests.
Mr Nelson paid $40,000 to Mr Moorcraft. Mr Nelson also paid the costs associated with the partial construction of an art studio, in very close proximity to the house, on the Property.
In late 2010 the relationship between Mr Nelson and Mr Moorcraft broke down irretrievably. They could no longer work together and they had different views about the future of the bed and breakfast facility, the partially constructed art studio and their obligations under the deeds.
By letter dated 15 November 2010, Mr Moorcraft informed Mr Nelson that the partnership between them was dissolved.

Mr Nelson's statement of claim

Mr Nelson was self‑represented in the District Court proceedings.
His substituted statement of claim alleged that Mr Moorcraft had breached the Partnership Deed and the Land Ownership Deed.
As to the Partnership Deed, Mr Nelson pleaded:
Moorcraft, contrary to signed agreement, has:
16.1Failed to limit Drawdown facility to $500,000. Prior to dissolving Partnership.
16.2Evicted Nelson from Moorcraft House, Prior to dissolving Partnership.
16.3Taken possession all of Nelsons financial contribution to Partnership.
16.4Evicted Nelson without returning any of Nelsons Partnership owned items.
16.5Used Nelsons Partnership items for his own benefit after dissolving Partnership.
16.6Evicted Nelson without returning his Personally owned items loaned to Partnership.
16.7Used Nelsons Personal items for his own benefit after dissolving Partnership.
16.8Failed to provide Nelson with an undivided one-quarter share of the (business premises) Property upon dissolving Partnership.
16.9Continued with 'Moorcraft House' Bed and Breakfast facility for his own benefit since dissolving Partnership.
16.10Taken possession of Nelsons financial contribution to Bed and Breakfast Residential improvements.
16.11Failed to pay $1500 for arbitration, and was non‑compliant in that Arbitration is a requirement of the Agreement. (original emphasis)
As to the Land Ownership Deed, Mr Nelson pleaded:
Moorcraft, contrary to signed agreement, has:
14.1Refused to recognize Nelson as a 25% Co-Owner/Tenant in Common, by evicting Nelson from residence and denying access to Property.
14.2Denied Nelsons exclusive use of and access to Art Studio.
14.3Taken possession of Nelsons Art Studio for Moorcraft's own use.
14.4Failed to limit drawdown facility to $500,000.
14.5Failed to finalise this agreement.
14.6Further encumbered property by re‑structuring mortgage and drawdown facility.
14.7Refused full disclosure of all relevant financial and lending matters.
14.8Failed to pay a debt owed within a reasonable period and free of coercion.
14.9Failed to provide documentation, when asked, of insurance over the property.
14.10Failed in implementation of conveyance.
14.11Taken possession of Nelsons Investment/financial contribution to Residence and land improvements.
It is unnecessary to set out any of the other allegations made by Mr Nelson in the substituted statement of claim.
He claimed damages, 'compensation for loss' and interest on damages.

Mr Moorcraft's defence

Mr Moorcraft was represented by counsel and solicitors in the District Court proceedings.
In his amended defence he denied having breached the Partnership Deed or the Land Ownership Deed as alleged by Mr Nelson.
Mr Moorcraft pleaded, amongst other things, that:
(a)By his letter dated 15 November 2010, Mr Moorcraft dissolved the partnership established under the Partnership Deed.
(b)The Land Ownership Deed had been discharged by frustration.
(c)The execution of the Land Ownership Deed was procured 'by undue influence of [Mr Nelson] over [Mr Moorcraft]'.
(d)Alternatively, the Land Ownership Deed was void 'for want of consideration'.
Mr Moorcraft counterclaimed, amongst other things:
(a)a declaration that the Partnership Deed 'is dissolved as and from 15 November 2010'; and
(b)a declaration that the Land Ownership Deed 'is void'.

The provisions of the Partnership Deed

The Partnership Deed contained the following recitals:
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.
Clause 1.3 stated that the recitals 'shall be incorporated in and shall form part of this deed'.
Clause 2.1 contained definitions, relevantly, as follows:
(a)'Commencement Date' means 'the date specified in Item 2 of the Schedule';
(b)'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';
(c)'Partnership' means 'the legal relationship existing between the Partners as from the Commencement Date';
(d)'Partnership Business' means 'the business undertaking to be pursued by the Partnership … and as specified in Item 1 of the Schedule'; and
(e)'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'.
By cl 3.1, the parties declared and acknowledged that they had 'agreed to become and remain Partners upon the terms and conditions [of the deed] and that the Partnership Act 1895 (WA) shall be deemed to be varied by the terms and conditions [of the deed]'.
Clause 3.2 provided:
The 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.
Clause 3.3 stated:
As 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.
By cl 4.2, the parties agreed that the Partnership Business would be carried on at the place specified in Item 3 of the Schedule or at 'such other place or places as may be mutually agreed upon from time to time'.
Clause 6 dealt with the capital of the Partnership, and provided:
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.
6.5Partners shall only be required to make further contributions to the Initial Capital of the Partnership by the prior unanimous resolution of the Partners on each occasion.
Clause 13 made provision for a partner to require the other partner to retire from the Partnership if the other partner was in default, as follows:
13.1If any Partner or Partners shall:
(1)commit a breach of any stipulation, agreement or covenant herein contained; or
(2)commit any act of bankruptcy or become bankrupt or insolvent or call any meeting of creditors or enter into any composition with his creditors;
(3)become physically or mentally unfit to attend to the Partnership Business;
(4)commit a criminal offence of which the Partner is convicted; or
(5)do or suffer any act or become subject to any incapacity which would be a ground for dissolution by the Court,
then the other Partners or a majority of the Partners, may within three (3) months after becoming aware of such matter by written notice require the Partner or Partners in breach to retire from the Partnership.
13.2Any Partner or Partners receiving a notice as specified in Clause 13.1 hereof shall be deemed to have retired from the Partnership on the date being twenty eight (28) days from the date of receipt of that notice.
Clause 14.1 was concerned with the voluntary retirement of a partner from the Partnership upon giving one month's prior written notice to the other partner. It provided:
(1)Any Partner may retire from the Partnership upon giving one (1) month's prior written notice to the other Partners and the Partner giving such notice shall be deemed to have retired from the Partnership upon the expiration of that period of notice.
(2)If during the continuance of the Partnership any Partners shall die then the provisions of this clause shall apply as if the deceased Partner gave notice of his intention to retire on the date of his death such that he will be deemed to have retired from the Partnership upon the expiration of one (1) month from the date of this death, and any reference to a 'Retiring Partner' shall wheresoever relevant include a reference to a deceased Partner.
By cl 16.1, upon the termination of the Partnership by mutual agreement or under any circumstances not provided for in the deed, 'a full and general account shall be taken of the assets, credits and liabilities of the Partnership and of the transactions and dealings thereof'.
Clause 26 set out the 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.
The Schedule reads:
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
'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%).
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 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 ($100,000.00).
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
1.1In 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.

The provisions of the Land Ownership Deed

In the Land Ownership Deed Mr Nelson was described as the 'First Co‑Owner' and Mr Moorcraft as the 'Second Co‑Owner'. They were together described as the 'Co‑Owners'.
The recitals in the Land Ownership Deed stated:
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.
Clause 2.1 contained definitions, relevantly, as follows:
(a)'Property' means 'the property the subject of this [Deed], the details of which are set out in Item 1 of the Schedule';
(b)'Rate' means 'the rate of interest specified in Item 6 of the Schedule';
(c)'Settlement Date' means 'the date specified in Item 5 of the Schedule'; and
(d)'Special Conditions' means 'the special conditions which the Parties have expressly agreed shall apply to this [Deed] as referred to in Clause 14 [sic: Clause 15] and as specified in Item 7 of the Schedule'.
Clause 3 dealt with the ownership of the Property, and provided:
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 … Financial 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 a right to lodge a caveat over the title to the Property protecting 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 [this Deed].
3.4The Second Co-Owner hereby 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 $500,000.00 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.
Clause 4 made provision with respect to 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.
By cl 5.1(1), the parties promised to use their best endeavours to ensure that their obligations under the deed were 'promptly and efficiently performed'.
By cl 7, it was agreed that if either party decided to sell his interest in the Property, that party would give written notice (the sale notice) to the other party of his intention to sell. The sale notice would specify the sale price and the terms and conditions for and upon which the selling party intended to sell his interest. The other party would have the first option to purchase the selling party's interest in the Property within the period, and on the terms and conditions, specified in the sale notice and otherwise as set out in cl 7.
Clause 9 was concerned with the management of the Property, and provided:
9.1The Co‑Owners shall have joint control of the policy and management of the Property.
9.2The Co‑Owners may meet together for dispatch of business adjourn and otherwise regulate their meetings as they think fit.
9.3Either Co‑Owner may summon a meeting of Co‑Owners upon giving not less than forty eight (48) hours written notice to the other Co‑Owners.
9.4The quorum necessary for a meeting of Co‑Owners to transact and discuss any matter in relation to the Property shall be two (2).
By cl 11, it was agreed that in the event of:
(a)the death;
(b)permanent incapacity (by injury, illness or mental infirmity);
(c)criminal conviction; or
(d)bankruptcy,
of either of the parties, then the other party shall be entitled to exercise an option to purchase the share of the Property owned by the party affected by any of those events in accordance with the mechanism set out in cl 7 for the purchase of a selling party's interest in the Property.
By cl 13, the parties stipulated that the deed did not constitute a partnership between them:
Nothing in this [Deed] shall be construed to constitute any party a partner, agent or representative of any other party, or to create a partnership at law for any purpose whatsoever and, except as otherwise expressly provided in this deed, nothing in this deed is intended to authorise or permit the sharing of profits, the pledging of credit by any party on behalf of any other party or the creation of any liability in any party by the act or omission of any other party.
Clause 15 set out the special conditions:
15.1The Special Conditions (if any) set out at Item 11 [sic: Item 7] of the Schedule shall apply to this [Deed] 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 [Deed] then the Special Conditions shall prevail and have priority.
The Schedule reads:
Item 1:The Property
All the land and improvements erected thereon situated at and known as 141 Robinson Road, Albany …
Item 2:Value of the Property
Seven hundred thousand dollars ($700,000.00)
Item 3:Shares as to the Tenancy in Common
As to the First Co‑Owner - One undivided fourth share
As to the Second Co‑Owner - Three undivided fourth shares
Item 4:The First Co‑Owner's Financial Contribution
The sum of one hundred and seventy five thousand dollars ($175,000.00) payable as follows:
(1)The sum of ninety thousand dollars ($90,000.00) to be paid by the First Co‑Owner upon execution of this [Deed] allocated as to the sum of forty thousand dollars ($40,000.00) in cash and the sum of fifty thousand dollars ($50,000.00) to be retained by the First Co‑Owner and to be applied towards the costs of the construction of the Art Studio to be erected upon the Property; and
(2)The balance of the sum of eighty five thousand dollars ($85,000.00) to be paid to the Second Co‑Owner upon the effecting of the conveyance of a 25% share in the Property from the Second Co‑Owner to the First Co‑Owner.
Item 5:The Settlement Date
The date of execution of this [Deed].
Item 6:Rate of Interest on overdue moneys
The rate being five per cent (5%) above that payable to the Mortgagee (as may vary from time to time) according to the terms of the Mortgage
Item 7:Special Conditions
1. Art Studio
1.1The First Co‑Owner shall have the sole use and occupancy of the Art Studio to be constructed upon the Property.
1.2The First Co‑Owner and the Second Co‑Owner shall have equal rights of access and occupation of and to the grounds of the Property.
2.Occupation of the Residence located on the Property
2.1The First Co‑Owner and the Co‑Owner's [sic: Co‑Owners'] partnership of 'Moorcraft House' shall have the exclusive use and possession and occupation of 50% of the residence erected upon the Property including, but not limited to, access 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 facility.
2.2The Second Co‑Owner shall have the exclusive use, possession and right of occupation to the other 50% of the residence erected upon the Property including, but not limited to, the master bedroom/bathroom and spare room.
3.Conditional Agreement
3.1This [Deed] is conditional upon:
(1)The trust and accuracy of the medical reports furnished by the Second Co‑Owner to the First Co‑Owner;
(2)The Parties entering into and forming the partnership of 'Moorcraft House' by way of execution of the Partnership [Deed] for 'Moorcraft House' to be undertaken contemporaneously with the execution of this document; and
(3)The Parties being satisfied as to the comprehension of this [Deed] and any related documentation of the [sic] each of the First Co‑Owner and Second Co‑Owner.

Overview of the trial judge's reasons

The trial judge was not satisfied that at the material time Mr Nelson had established 'a relationship of dominion and ascendancy' over Mr Moorcraft [32]. She rejected Mr Moorcraft's contention that Mr Nelson had exerted undue influence over him 'in order to make him enter into' the Partnership Deed and the Land Ownership Deed [32].
By letter dated 9 November 2010, Mr Nelson told Mr Moorcraft that Mr Moorcraft's behaviour was creating 'an untenable working environment'.
Mr Moorcraft responded by letter dated 10 November 2010:
Further to our conversations on Tuesday 9^th November 2010, and in response to your request, I am confirming by writing that we amicably and fairly terminate any arrangements that we have to be in business together, because as you stated, 'We have an untenable working environment'.
…
It is, and has been my intention that upon the sale of my property of 31 Hardie Road Spencer Park, I fully reimburse you for your expenditure up to this date, including all legitimate expenses incurred by you in the building of the 'Art Studio', built on the property at 141 Robinson Road Albany WA. Reimbursement of expenditure including all legitimate expenses incurred by you, is dependent on you providing me with all genuine receipts to validate that expenditure.
As of this date I respectfully request that you no longer enter my property or land at 141 Robinson Road, and that you desist from incurring additional expenses related to the 'Art Studio'. I will not be responsible for further debts brought upon yourself.
It would be appreciated that you return the key to my home 141 Robinson Road immediately. I will ensure that any mail addressed to you and posted to this address will be redirected to you.
Collection of your tools and materials can be amicably arranged at a time convenient to both of us.
On 11 November 2010, Mr Nelson delivered another letter to Mr Moorcraft. In this letter he made numerous allegations against Mr Moorcraft and blamed him for the 'untenable working environment'.
Her Honour set out in her reasons the text of Mr Moorcraft's letter dated 15 November 2010 to Mr Nelson [64]:
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 15th November 2010.
I am instructing an accountant that I have never used before to draw up accounts.
You are in breach of our agreement in that you have only made one payment of $40,000.00.
Yours sincerely,
Peter Moorcraft
November 15th 2010
The trial judge then noted that Mr Nelson responded to the letter dated 15 November 2010 by placing the following notice in the Albany Advertiser newspaper on 16 November 2010 [65]:
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.
Her Honour, in the course of considering whether the partnership had been dissolved, dealt with two of Mr Nelson's allegations that Mr Moorcraft had breached the Partnership Deed. The alleged breaches were, first, that Mr Moorcraft had 'extended the draw‑down facility to a sum beyond $500,000' [62] and, secondly, that Mr Moorcraft had failed 'to adequately insure the premises' [63]. Her Honour said she was 'not satisfied that Mr Moorcraft exceeded the limit set in the [Partnership Deed]' [62] and she had 'not received evidence that satisfie[d] [her] on the balance of probabilities' that Mr Moorcraft had breached his obligation adequately to insure the premises [63].
The trial judge found that, as at 15 November 2010, the relationship between Mr Nelson and Mr Moorcraft had 'broken down'; both of them 'intended to dissolve the partnership on that date'; the partnership was dissolved on 15 November 2010; and the partnership 'ceased to exist after 15 November 2010' [66].
Her Honour also found:
(a)Mr Nelson had paid $40,000 to Mr Moorcraft 'as working capital to reduce the debt on the business premises which was a debt for which Mr Moorcraft was solely responsible', and this payment was confirmed by a receipt dated 22 September 2009 [68];
(b)Mr Nelson had expended at least $50,000 'in the part construction of the art studio' [69];
(c)the sum of $85,000 that Mr Nelson was required to provide 'as working capital to be called upon as and when required', plus interest on that amount, 'was never called upon because working capital was not required for the partnership' [70]; and
(d)Mr Nelson was 'also required to pay the sum of $85,000 upon Mr Moorcraft affecting [sic] a conveyance of a one‑quarter share of the property to Mr Nelson', but '[this] conveyance never occurred and Mr Nelson has never paid Mr Moorcraft the sum of $85,000' [75].
The trial judge made the following observations about the Land Ownership Deed in the context of her finding that the partnership was dissolved on 15 November 2010:
The object of the [Land Ownership Deed] 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 [sic] 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 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 [77] ‑ [79].
Her Honour then found in effect that, as a result of the dissolution of the partnership, the Land Ownership Deed had been discharged by frustration:
I must therefore consider whether in the present case the contractual obligation in relation to the [Land Ownership Deed] 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 Deed] that the parties enter into the [Partnership Deed]. The [Land Ownership Deed] was only entered into on the understanding by the parties that the [Land Ownership Deed] 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 Ownership Deed] was to proceed it would be something radically different from that which was undertaken by the [deed].
I also need to consider whether the default of either party has led to the contractual obligation becoming incapable of being performed …
… 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 Deed] 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 Deed] to proceed and accordingly the [Land Ownership Deed] was frustrated. Termination of the [Land Ownership Deed] 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 Deed] prior to 15 November 2010 [82] ‑ [86].
So, the trial judge found in effect that:
(a)neither Mr Nelson nor Mr Moorcraft had breached the Partnership Deed prior to the dissolution of the partnership by mutual agreement on 15 November 2010 [85];
(b)the Land Ownership Deed had been discharged by frustration on 15 November 2010 because:
(i)the Land Ownership Deed was entered into 'on the understanding by the parties that the [deed] would support the partnership in relation to the art studio and the bed and breakfast facility' [83]; and
(ii)if the Land Ownership Deed was 'to proceed it would be something radically different from that which was undertaken by the [deed]' because the partnership had been dissolved and there was ongoing hostility between the parties [83]; and
(c)Mr Nelson had not proven that Mr Moorcraft had breached the Land Ownership Deed prior to the deed being discharged by frustration [86].
Her Honour did not consider whether Mr Moorcraft had breached the Land Ownership Deed on or after 15 November 2010, as alleged by Mr Nelson in par 14 of his substituted statement of claim, because her Honour had found, in effect, that on 15 November 2010 each of them was discharged from further performance of the deed.

The trial judge's orders

On 19 December 2012, the trial judge made, relevantly, the following orders pursuant to her reasons for decision:
1.[Mr Nelson's] Claim be Dismissed.
2.[Mr Moorcraft's] Counterclaim be allowed.
3.The Court Declares that the Partnership [Deed] dated 3 September 2009 was dissolved on 15 November 2010.
4.The parties [are] each entitled to 50% of the sum as may be found due on taking of accounts of the Partnership assets and liabilities.
5.In the event that the parties do not mutually agree to the Partnership accounts by close of business on Friday 25 January 2013, then: ‑
a.[Mr Moorcraft] is to obtain the written 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 the costs of the Chartered Accountant.
c.The parties are to be bound by and comply with the decision of the Chartered Accountant.
6.Upon [Mr Moorcraft's] compliance with the Chartered Accountant's determination of the accounts, [Mr Nelson] will within ten (10) days thereof remove and do all that is necessary to remove the Caveat #L68240C, registered against [Mr Moorcraft's] property, comprising Certificate of Title Volume 2112 Folio 198, more commonly known as 141 Robinson Road, Albany. The reasonable costs of the removal of the said Caveat to be borne equally by the parties.
7.The Court declares that the [Land Ownership Deed] dated 3 September 2009 is void.
8.There be liberty for either party to apply to this Honourable Court in respect of the removal of the said Caveat.
9.Costs in this matter are reserved and to be determined on Tuesday 05 February 2013 at 0915am.

The grounds of appeal

Mr Nelson relies on eight grounds of appeal.
They read:
1.The Learned Trial Judge erred in fact and in law in finding that the dissolution of the partnership between the [parties] made it impossible for the Land Ownership Deed between the parties to proceed and accordingly the Land Ownership Deed was frustrated.
2.The Learned Trial Judge should have found that a dissolution of the Partnership did not frustrate the Land Ownership Deed because it did not render the contractual obligations under the Land Ownership Deed incapable of being performed or cause the arrangement between the parties the subject of the Deed to be radically different from that which the parties agreed.
3.The Learned Trial Judge should have found that the dissolution of the partnership was caused by the actions of [Mr Moorcraft] and therefore could not, in law, result in the frustration of the Land Ownership Deed.
4.The Learned Trial judge erred in law in ignoring the fact that, upon execution of the Land Ownership Deed, [Mr Nelson] became entitled to a 25% share in the property the subject of the Deed, and should have found that [Mr Nelson] remained entitled to his equitable interest in the property even if the Deed was frustrated.
5.The Learned Trial Judge erred in fact in finding that [Mr Nelson] intended to dissolve the partnership between him and [Mr Moorcraft] and that the partnership was dissolved by mutual agreement.
6.The Learned Trial Judge should have found that [Mr Nelson] did not agree to the dissolution of the partnership and that [Mr Moorcraft] dissolved the partnership unilaterally.
7.The Learned Trial Judge erred in fact and law in finding that [Mr Moorcraft] was not in breach of the Land Ownership Deed.
8.The Learned Trial Judge should have found that in breach of the Land Ownership Deed [Mr Moorcraft] effectively evicted [Mr Nelson] from the property the subject of the Deed by his letters to [Mr Nelson] dated 10 November 2010 and 15 November 2010 and was liable to [Mr Nelson] for damages for the breach.
Grounds 1, 2 and 3 challenge her Honour's finding, in effect, that the Land Ownership Deed was discharged by frustration. Ground 4 alleges, in effect, that her Honour erred in failing to find that, upon execution of the Land Ownership Deed, Mr Nelson became entitled to an undivided one‑fourth share in the Property and that Mr Nelson remained entitled to that interest even if the Land Ownership Deed was discharged by frustration. Ground 5 attacks her Honour's finding, in effect, that the partnership was dissolved by mutual agreement. Ground 6 alleges that her Honour should have found that Mr Moorcraft dissolved the partnership unilaterally. Grounds 7 and 8 assert that her Honour erred in failing to find that Mr Moorcraft, by his letters dated 10 November 2010 and 15 November 2010, had breached the Land Ownership Deed by 'effectively evict[ing]' Mr Nelson from the Property and in failing to find that Mr Moorcraft was liable in damages for the breach.

Mr Nelson's orders wanted

The orders wanted, as set out in Mr Nelson's appellant's case, are these:
1)The Orders and Declarations of the District Court dated 19 December 2012 be set aside.
2)The Court declares that [Mr Nelson] is entitled to a 25% share in the property known as 141 Robinson Road, Albany, described in Item 1 of the Schedule of the Land Ownership Deed between [Mr Nelson] and [Mr Moorcraft] dated 3 September 2009, free of encumbrances, subject to the terms of the Deed.
3)[Mr Moorcraft] pay [Mr Nelson] damages for breach of the Land Ownership Deed to be assessed by the District Court.
4)[Mr Moorcraft] pay [Mr Nelson's] costs of the action and of the appeal.
5)There be liberty for [Mr Nelson] to apply for further orders in respect of [Mr Nelson's] entitlement pursuant to the Declaration in Paragraph 2 hereof.

The real issues in the appeal

The real issues in the appeal were distilled during the hearing of the appeal. They are as follows.
First, what is the proper construction of the relevant provisions of the Partnership Deed and the Land Ownership Deed?
Secondly, was the trial judge in error in finding, in effect, that the partnership was dissolved by mutual agreement on 15 November 2010?
Thirdly, was her Honour in error in finding, in effect, that on 15 November 2010 the Land Ownership Deed was discharged by frustration?
Fourthly, was her Honour in error in failing to find that, upon execution of the Land Ownership Deed, Mr Nelson acquired an undivided one‑fourth share in the Property and that Mr Nelson remained entitled to that interest even if the Land Ownership Deed was discharged by frustration?
Fifthly, was her Honour in error in failing to find that Mr Moorcraft breached the Land Ownership Deed when, by his letters dated 10 November 2010 and 15 November 2010, he 'effectively evicted' Mr Nelson from the Property and, also, in failing to find that Mr Moorcraft was liable to Mr Nelson in damages for the breach?
Sixthly, if this court allows the appeal, what orders should be made?
I will consider each of these issues in turn.

First issue: what is the proper construction of the relevant provisions of the Partnership Deed and the Land Ownership Deed?

The construction of a written agreement involves ascertaining what a reasonable person would have understood the parties to the agreement to mean. Consideration should ordinarily be given not only to the language of the agreement, but also to the apparent purpose and object of any transaction created by or evidenced in the agreement. See Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 [40] (Gleeson CJ, Gummow, Hayne, Callinan & Heydon JJ); International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3; (2008) 234 CLR 151 [8] (Gleeson CJ), [53] (Gummow, Hayne, Heydon, Crennan & Kiefel JJ).
The words of a clause in a written agreement are to be given the most appropriate meaning which they can legitimately bear. A court must have regard to all of the provisions of the agreement with a view to achieving harmony among them. See Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99, 109 ‑ 110 (Gibbs J). These propositions are applicable to instruments generally, subject to any particular rules of construction which have been developed in relation to a particular kind of provision or instrument.
In the present case, it was not suggested by either of the parties that, in construing the express terms of the Partnership Deed and the Land Ownership Deed, consideration should be given to the surrounding circumstances, known to the parties, when the agreements were made. It is therefore unnecessary to analyse the emphatic observations of Gummow, Heydon and Bell JJ in Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; (2011) 86 ALJR 1 [2] ‑ [5].
Where a commercial transaction is implemented by several contracts or documents, all of the contracts or documents may be read together for the purpose of ascertaining their proper construction and legal effect, at least where the contracts or documents are executed contemporaneously or within a short period. See Smith v Chadwick (1882) 20 Ch D 27, 62 (Jessel MR) and, on appeal, (1884) 9 App Cas 187; EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2010] WASCA 78; (2010) 41 WAR 23 [104] (Buss JA, Owen & Newnes JJA agreeing). See also the discussion in Lewison, The Interpretation of Contracts, 4th ed, par 3.03.
In the present case, the Partnership Deed and the Land Ownership Deed must be read together for the purpose of ascertaining their proper construction and legal effect and the rights and obligations of the parties. The deeds were executed contemporaneously. The parties to each deed comprised Mr Nelson and Mr Moorcraft. The Land Ownership Deed and Item 10 of the Schedule to the Partnership Deed contained provisions with respect to the acquisition by Mr Nelson from Mr Moorcraft of an undivided one‑fourth share in the Property. Both deeds made provision for the payment or application by Mr Nelson of $175,000 in total on certain terms and conditions. The Land Ownership Deed contained several references to the partnership. See cl 4.2 and Item 7 of the Schedule. Most of the specific aspects of the transaction between Mr Nelson and Mr Moorcraft were embodied in the Schedules to the deeds.
When the Partnership Deed and the Land Ownership Deed are read and construed together it is apparent that the principal features of the transaction between Mr Nelson and Mr Moorcraft included, relevantly, the following:
(a)Mr Nelson and Mr Moorcraft formed a partnership known as 'Moorcraft House'.
(b)The Partnership Business was a bed and breakfast facility. Despite the reference in recital A of the Partnership Deed to the parties having decided to carry on business as 'a bed and breakfast and an art studio', the correct view, on a proper construction of the deeds as a whole, is that the partnership business did not include any activity to be undertaken in or from the proposed art studio. Item 1 of the Schedule to the Partnership Deed described the Partnership Business as 'Bed and Breakfast Facility'. Item 7 par 1.1 of the Schedule to the Land Ownership Deed stated that Mr Nelson 'shall have the sole use and occupancy of the Art Studio to be constructed upon the Property'. That provision is inconsistent with the art studio being part of the partnership property or part of the Partnership Business. By contrast, Item 7 par 2.1 of the Schedule to the Land Ownership Deed stated that Mr Nelson and the 'partnership of "Moorcraft House" shall have the exclusive use and possession and occupation of 50% of the residence erected upon the Property including, but not limited to, access 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 facility'.
(c)The rights of the partnership in relation to the Property were confined to the rights described in Item 7 par 2.1 of the Schedule to the Land Ownership Deed.
(d)Mr Nelson had 'the sole use and occupancy of the Art Studio to be constructed upon the Property'. See Item 7 par 1.1 of the Schedule to the Land Ownership Deed.
(e)Mr Nelson and Mr Moorcraft had 'equal rights of access and occupation of and to the grounds of the Property'. See Item 7 par 1.2 of the Schedule to the Land Ownership Deed.
(f)As I have mentioned, Mr Nelson (and the partnership) had 'the exclusive use and possession and occupation of 50% of the residence erected upon the Property including, but not limited to, access 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 facility'. See Item 7 par 2.1 of the Schedule to the Land Ownership Deed.
(g)Mr Moorcraft had 'the exclusive use, possession and right of occupation to the other 50% of the residence erected upon the Property including, but not limited to, the master bedroom/bathroom and spare room'. See Item 7 par 2.2 of the Schedule to the Land Ownership Deed.
(h)Each of Item 5 of the Schedule to the Partnership Deed and Item 4 of the Schedule to the Land Ownership Deed imposed on Mr Nelson an obligation to pay or apply a total of $175,000 on certain terms and conditions. Mr Nelson's obligation was to pay or apply a total of $175,000 and not a total of $350,000. On a proper construction of the deeds as a whole:
(i)$40,000 was payable by Mr Nelson to Mr Moorcraft upon execution of the deeds and was to be applied in reduction of the amount owing by Mr Moorcraft under the mortgage registered against the Property;
(ii)$50,000 was to be applied by Mr Nelson towards the costs of the construction of the art studio on the Property;
(iii)$85,000 was payable either by Mr Nelson contributing the whole or part of that amount as working capital of the partnership, if called upon by the partners, or, subject to cl 3.3 of the Land Ownership Deed relating to the mortgage on the Property, by Mr Nelson paying the whole or part of that amount to Mr Moorcraft 'upon the effecting of the conveyance of [an undivided one‑fourth share] in the Property from [Mr Moorcraft] to [Mr Nelson]': Item 4 of the Schedule to the Land Ownership Deed; and
(iv)if the whole or any part of the $85,000 was not paid by Mr Nelson to Mr Moorcraft on the date of execution of the deeds (that is, 3 September 2009), Mr Nelson was to pay interest on the amount for the time being outstanding 'at the rate of the annual percentage increase in the CPI as determined from time to time' plus 2%: Item 5 of the Schedule to the Partnership Deed.
(i)The two alternatives in relation to payment of the $85,000 are set out in Item 5 of the Schedule to the Partnership Deed (in the case of a contribution to the working capital of the partnership) and Item 4 of the Schedule to the Land Ownership Deed (in the case of a payment to Mr Moorcraft).
(j)When Item 5 of the Schedule to the Partnership Deed, Item 4 of the Schedule to the Land Ownership Deed and cl 3 of the Land Ownership Deed are read and construed together, and in the context of the deeds as a whole, it is apparent that on and from the 'Settlement Date' (as defined in the Land Ownership Deed, being the date of execution of that deed, namely 3 September 2009) Mr Nelson had a contractual right and obligation to acquire an undivided one‑fourth share in the Property, upon and subject to the provisions of the Land Ownership Deed and subject, in particular, to:
(i)Mr Nelson paying $40,000 to Mr Moorcraft upon execution of the deeds;
(ii)Mr Nelson applying $50,000 towards the costs of the construction of the art studio on the Property; and
(iii)Mr Nelson paying $85,000 and interest on that amount as set out at [81(h)(iii) and (iv)] above.
(k)Mr Nelson was not entitled in equity to an undivided one‑fourth share in the Property, and (subject to cl 3.3 of the Land Ownership Deed relating to the mortgage on the Property) he was not entitled to a transfer of an undivided one‑fourth share in the Property under the Transfer of Land Act 1893 (WA), until the total of $175,000, and interest on the $85,000 component of that total amount, was paid or applied. Although cl 3.1 of the Land Ownership Deed declared that 'as from the Settlement Date' (that is, 3 September 2009) Mr Nelson and Mr Moorcraft 'will own the Property as tenants in common', with Mr Nelson holding an undivided one‑fourth share and Mr Moorcraft holding an undivided three‑fourths share, the better view, on a proper construction of the deeds as a whole, is that Mr Nelson would not become beneficially entitled to his undivided one‑fourth share in the Property until he had discharged his obligation to pay or apply the $175,000 and interest. In my opinion, the declaration in cl 3.1 reflected the agreement or intention of the parties, as at the Settlement Date, that they would own the Property (in the future) as tenants in common in the specified shares upon and subject to the provisions of the Land Ownership Deed.
(l)The provisions of the Land Ownership Deed were to survive the acquisition by Mr Nelson in equity of an undivided one‑fourth share in the Property, and the transfer to Mr Nelson of an undivided one‑fourth share in the Property, to the extent that those provisions were capable of being observed or performed after completion of the acquisition or the transfer. The provisions that would survive included, for example, cl 4.1, in relation to expenses, outgoings and income.
(m)Mr Nelson and Mr Moorcraft were entitled to possession of various parts of the Property, on and from the 'Settlement Date' (that is, 3 September 2009), in accordance with the provisions set out in Item 7 pars 1 and 2 of the Schedule to the Land Ownership Deed.
As I have mentioned, the trial judge found that:
(a)Mr Nelson had paid $40,000 to Mr Moorcraft, the payment being confirmed by a receipt dated 22 September 2009, and the $40,000 had been applied in reduction of the amount owing by Mr Moorcraft under the mortgage registered against the Property [68];
(b)Mr Nelson had expended at least $50,000 towards the costs of the construction of the art studio [69];
(c)the $85,000 had not been called upon as working capital for the partnership [70];
(d)the $85,000 had not been paid by Mr Nelson to Mr Moorcraft [75]; and
(e)Mr Moorcraft had not transferred to Mr Nelson an undivided one‑fourth share in the Property [75].
Mr Nelson lodged a caveat against the title to the Property which gave notice of his claim under the Land Ownership Deed [9].

Second issue: was the trial judge in error in finding, in effect, that the partnership was dissolved by mutual agreement on 15 November 2010?

A partnership has no legal personality distinct from that of the individual partners. See SJ Mackie Pty Ltd v Dalziell Medical Practice Pty Ltd [1989] 2 Qd R 87, 90 (McPherson J, Macrossan & Shepherdson JJ agreeing); Commissioner of State Taxation (SA) v Cyril Henschke Pty Ltd [2010] HCA 43; (2010) 242 CLR 508 [10] (French CJ, Gummow, Hayne, Heydon & Kiefel JJ).
It is a fundamental principle of the law of partnership that any change in the membership of the partnership, whether occurring as a result of the retirement, expulsion, death or otherwise of a partner, effects a dissolution of the partnership. See Hadlee v Commissioner of Inland Revenue (NZ) [1989] 2 NZLR 447, 455 (Eichelbaum CJ); SJ Mackie (90 ‑ 91); McGowan v Commissioner of Stamp Duties [2001] QCA 236; [2002] 2 Qd R 499 [15] (McPherson JA, Helman J agreeing); Rushton (Qld) Pty Ltd v Rushton (NSW) Pty Ltd [2002] QCA 210; [2003] 1 Qd R 320 [9] (McPherson JA, McMurdo P & Wilson J agreeing); Cyril Henschke [11] ‑ [12].

In Hadlee, Eichelbaum CJ explained:
In law the retirement of a partner, or the admission of a new partner, constitutes the dissolution of the old partnership and the formation of a new one. Here, upon the happening of such events there were no overt signs of dissolution; the partnership's financial structure and arrangements were such that none was required but that does not alter the underlying legal significance of any retirement or new admission (Income Tax Commissioners (City of London) v Gibbs [1942] AC 402, particularly at 414 per Viscount Simon LC; at 429, 430 per Lord Wright; at 432 per Lord Porter; Brace v Calder [1895] 2 QB 253 at 258 per Lord Esher MR; at 261 per Lopes LJ; at 263 per Rigby LJ; Lindley on the Law of Partnership, 15th ed (1984), pp 543, 983) (455).
This passage was cited with apparent approval by French CJ, Gummow, Hayne, Heydon and Kiefel JJ in Cyril Henschke [11].
Section 50 of the Partnership Act 1895 (WA) (the Act) provides, in essence, that on the dissolution of a partnership the property of the partnership must be applied in payment of the firm's debts and liabilities, and after such payment any surplus assets are to be applied in payment of what may be due to the partners respectively, after deducting what may be due from them as partners to the firm. However, as McPherson JA noted in Rushton:
Winding up in that way may be avoided if the parties agree on a sale to one or more of the remaining partners of the shares of the outgoing partner, or if there is a provision in the partnership agreement to that effect. This is sometimes described as a technical or notional dissolution, which is something of a misnomer because it is not the dissolution but, at most, the winding up that is notional. The partnership or firm itself is dissolved as soon as there is a change in membership, but the assets and, as between the partners, responsibility for the liabilities of the partnership are taken over by the remaining partners [9]. (emphasis added)
The Act contains a number of provisions dealing with the retirement of a partner and the dissolution of a partnership, including, relevantly, s 37 and s 43.
Section 37 states:
(1)Where no fixed term has been agreed upon for the duration of the partnership, any partner may determine the partnership at any time on giving notice in writing of his intention so to do to all the other partners.
(2)Where the partnership has originally been constituted by a deed, a notice in writing, signed by the partner giving it, shall be sufficient for this purpose.
By s 43:
Subject to any agreement between the partners, a partnership is dissolved ‑
(a)if entered into for a fixed term, by the expiration of that term;
(b)if entered into for a single adventure or undertaking, by the termination of that adventure or undertaking;
(c)if entered into for an undefined time, by any partner giving notice in writing to the other or others of his intention to dissolve the partnership.
In the last mentioned case the partnership is dissolved as from the date mentioned in the notice as the date of dissolution, or, if no date is so mentioned, as from the date of the communication of the notice.
Section 37(1) provides for the termination of a partnership by written notice where 'no fixed term has been agreed upon for the duration of the partnership'. Section 43(c) provides that, subject to any agreement between the partners, a partnership is dissolved, 'if entered into for an undefined time', by any partner giving written notice to the other or others of his intention to dissolve the partnership. Neither s 37(1) nor s 43(c) refers to a 'partnership at will'.
The difference in the text between the United Kingdom provisions that are comparable to s 37(1) and s 43(c) (being s 26(1) and s 32(c) respectively of the Partnership Act 1890 (UK)) is discussed in Lindley & Banks on Partnership, (19^th ed, 2010), [9-02] ‑ [9-06]. See also Fazio v Fazio [2012] WASCA 72 [63] (Murphy JA, Newnes JA agreeing).
In Moss v Elphick [1910] 1 KB 846, the Court of Appeal considered the comparable United Kingdom provisions in the context of a partnership agreement entered into between two people which provided in cl 4 that the partnership should be terminated 'by mutual arrangement only'.
It was held that a partnership which was to continue until terminated 'by mutual arrangement only' was not a partnership where no fixed term had been agreed upon for the duration of the partnership within the United Kingdom equivalent of s 37(1). Also, it was held that a partnership which was to continue until terminated 'by mutual arrangement only' was for a defined time, even though it was for an indefinite period, and therefore the United Kingdom equivalent of s 43(c) did not apply.
Vaughan Williams LJ was not persuaded by the plaintiff's argument that 'it was the intention of the Act that persons becoming partners should not be able, if they wished, to provide in the agreement of partnership that the partnership should not be at will, but should be determinable only by mutual agreement' (847). His Lordship added that 'it is impossible to come to the conclusion that it was intended by [the comparable United Kingdom provisions] to forbid persons entering into partnerships from making such a stipulation as that contained in clause 4 of the agreement in the present case', namely that the partnership could only be determined by mutual consent (848).
Fletcher Moulton LJ noted the plaintiff's argument that the words 'where no fixed term has been agreed upon for the duration of the partnership, any partner may determine the partnership at any time by giving notice of his intention so to do to all the other partners', within the United Kingdom equivalent of s 37(1), refer to all cases in which 'a definite period of time has not been fixed by the agreement of partnership for the duration of the partnership' (848 ‑ 849). His Lordship rejected the argument and said that, in his view, the provision 'refers only to cases where the partnership is silent as to the duration of the partnership; that it is not meant to nullify any provision which the parties have chosen to make as to the duration of the partnership, but only to take effect where they have made no such provision at all' (849). His Lordship held that cl 4 was 'a specific provision as to the duration of the partnership' and that the partnership was therefore for 'a fixed, i.e., defined, term', and consequently the United Kingdom equivalent of s 37(1) did not apply (849). This provision was not intended 'to limit freedom of contract with regard to the duration of a partnership, but was meant only to apply to cases where the parties have made no provision as to its duration in their agreement' (849).
Farwell LJ was of the opinion that the United Kingdom equivalent of s 37(1) applied to partnerships at will only (849). His Lordship referred approvingly to the statement in Lindley on Partnership, 7^th ed, page 142 that 'the result of a contract of partnership is a partnership at will, unless some agreement to the contrary can be proved' (849). In the case before the Court of Appeal it was impossible to say that the partnership was 'at will' because that expression means that the partnership is determinable at the will of either of the parties (849 ‑ 850). By contrast, cl 4 of the agreement in question expressly provided that the partnership shall be determined only by the mutual consent of both parties (850). His Lordship therefore held that the relevant partnership was not a partnership where no fixed term had been agreed upon for the duration of the partnership (850). The effect of cl 4 was that the partnership was to endure for the joint lives of the partners (850).
In Abbott v Abbott [1936] 3 All ER 823, a partnership agreement between a father and his five sons provided:
(a)in cl 2, that '[t]he partnership shall commence as from 11 October 1923 [and] [t]he death or retirement of any partner shall not terminate the partnership'; and
(b)in cl 10, that '[i]f any partner shall ... do or suffer any act which would be a ground for the dissolution of the partnership by the court then he shall be considered as having retired'.
One of the sons claimed that, as no term had been fixed for the duration of the partnership, it was a partnership at will. He gave notice of dissolution and brought an action for a declaration that the partnership had been dissolved.
Clauson J held that, upon the proper construction of the agreement, the partnership could not be determined by one partner, although he could determine the partnership as between himself and the other partners. Also, his Lordship held that the partnership was not a partnership at will, but one to continue, unless dissolved by the court or some other event, so long as two of the partners were still living and had not retired. The partnership was therefore a partnership for a defined time.
In Walters v Bingham [1988] 1 FTLR 260, Sir Nicolas Browne‑Wilkinson V-C found that partners had agreed, by an oral agreement, to carry on their partnership on the basis of a draft partnership deed for an indefinite period until a new permanent partnership deed was executed. His Lordship said the partnership, expressed to last until the new permanent deed was executed, was for a 'fixed term' and not for an 'undefined time' (266). His Lordship pointed out that an indefinite period is not necessarily an undefined period (266). Accordingly, the partnership in question could not be determined or dissolved by one partner giving written notice to the others under the United Kingdom equivalent of s 37(1) or s 43(c).
In Maillie v Swanney 2000 SLT 464 (OH), Lord Penrose construed a partnership agreement between solicitors. Clause 1 of the agreement, as amended, stated that the partnership would subsist until 30 April 1998 and from year to year thereafter and, 'subject to the provisions herein contained the Partnership shall continue in terms of the said [agreement]'. Clause 14 provided for termination of the partnership at any time by mutual agreement. Clause 15 provided that, upon the occurrence of certain events affecting a partner, the remaining partners had the option of discontinuing the business. It was held that the agreement defined the initial period of the partnership and thereafter the period during which it would continue subject to the exercise of the powers in cl 14 and cl 15. An individual partner was prevented from terminating the partnership without the agreement of the others.
Although it was unnecessary to reach a concluded view on the scope and application of the United Kingdom equivalent of s 37(1), Lord Penrose made the following observations about the United Kingdom equivalents of s 37(1) and s 43(c) and their interaction:
Section [37(1)] applies where 'no fixed term has been agreed upon for the duration of the partnership'. Section [43(a)] applies where the partnership was 'entered into for a fixed term' and that term has expired. One would incline to the view that the use of the expression 'fixed term' in these two provisions was significant. One might incline to think of the provisions as counterparts one of the other. Where there is not a 'fixed term', any partner may 'determine' the partnership under s [37(1)]. Where there is a 'fixed term', the expiry of that term dissolves the firm, subject to agreement, without notice. The same notion of 'fixed term' appears to be common to the two provisions. In any event, it would appear to be clear that when s [43(c)] uses the expression 'entered into for an undefined term', there has been a deliberate selection of a different criterion for dissolution than that identified by reference to a 'fixed term' (468 ‑ 469).
In Borambil Pty Ltd v O'Carroll [1972] 2 NSWLR 302, Jacobs JA (Holmes & Moffitt JJA agreeing) applied the reasoning of the Court of Appeal in Moss in relation to the expression 'fixed term' to a lease for life of land. In October 1970, the appellant leased land to the respondent 'for the term of [the respondent's] lifetime years' computed from 18 March 1952. Jacobs JA held that the lease was a lease 'for a fixed term' within s 17B of the Landlord and Tenant (Amendment) Act 1948 (NSW). His Honour said:
In my opinion the reasoning of the English Court of Appeal in Moss v Elphick ([1910] 1 KB 846), in respect of certain sections of the PartnershipAct, 1890, can well be applied in the present context. It was there held that where partners had agreed in effect to remain partners for life, unless they came to some other mutual arrangement, there was a fixed term of the partnership. Therefore [the United Kingdom equivalent of s 37(1) of the Act] did not apply as it provided that where no fixed term has been agreed upon for the duration of the partnership any partner may determine the partnership at any time on giving notice. The Court declined to give the words 'fixed term' in the section the meaning of a period of time fixed by reference to the calendar. Farwell LJ, at p 850, said: 'I am of opinion that this case does not come within s 26, sub‑s 1, as being a case in which no fixed term has been agreed upon for the duration of the partnership. The effect of the agreement is that the partnership is to endure for the joint lives of the partners.' In the context of the present case it seems to me that this reasoning makes good sense (308).
An appeal to the Privy Council in Borambil was dismissed. See Borambil Pty Ltd v O'Carroll [1974] 1 NSWLR 1.
In Sharah v Healey [1982] 2 NSWLR 223, a partnership agreement between solicitors provided, in cl 1, that the partnership 'shall continue until determined as hereinafter provided'. Clause 10 provided, relevantly, that if any partner committed 'any breach of the provisions of clauses 8 and 9 of this deed' then the other partners may within a specified period determine the partnership by written notice. On 7 July 1982, the defendant (who was a partner) informed the plaintiffs (who were the other partners) that he regarded the partnership as at an end and handed them written notices purporting to dissolve the partnership as at that date. On 22 July 1982, the plaintiffs gave written notice to the defendant purporting to determine the partnership under cl 10 for breaches of cl 8(a) and cl 8(d). McLelland J held that the partnership agreement (in particular, by cl 1 read with cl 10) excluded any right of determination or dissolution under the New South Wales equivalents of s 37(1) and s 43(c):
It was argued for the defendant that the partnership was terminable at will and was effectively terminated by the defendant on 7th July, 1982. Even if this were so, it would not in my opinion advance the defendant's position very far, but I am of the view that the partnership was not terminable at will. Clause 1 of the partnership agreement provided: 'The partnership shall continue until determined as hereinafter provided.'
The only provision for determination thereinafter contained (except by death) was cl 10 already referred to. This I think is sufficient to exclude any right of determination or dissolution under the Partnership Act, 1892, s 26 or s 32, according to the construction of those provisions established by Moss v Elphick [1910] 1 KB 846. It was submitted that cl 10, read with cl 11 to which it refers, is void for uncertainty, but although there are some defects of draftsmanship I am unable to accept that the provision is ineffective.
On the evidence presently before me the defendant was clearly in breach of cll 8(a) and 8(d) of the agreement (cf Floydd v Cheney [1970] Ch 602, at p 608), and I think that I should proceed on the basis that the plaintiffs' notice of 22nd July, 1982, was valid and effective (225).
In the present case:
(a)By cl 3.2 of the Partnership Deed, Mr Nelson and Mr Moorcraft agreed that the partnership would commence on the 'Commencement Date' (that is, 3 September 2009) and would 'thereafter indefinitely continue until determined in the manner as set out in this deed or otherwise in accordance with [the Act]'.
(b)By cl 3.1, Mr Nelson and Mr Moorcraft agreed that they would be partners upon the terms and conditions contained in the Partnership Deed and that the Act 'shall be deemed to be varied by the terms and conditions' of the deed.
(c)Clause 13 made provision for a partner to require the other partner to retire from the partnership if the other partner was in default as specified in cl 13.1.
(d)Clause 14.1 made provision for a partner to retire voluntarily from the partnership upon giving one month's prior written notice to the other partner.
In my opinion, one partner was not entitled unilaterally to determine or dissolve the partnership by giving written notice to the other partner under s 37(1) or s 43(c) of the Act. My reasons are as follows.
Mr Nelson and Mr Moorcraft agreed, in cl 3.2, to carry on their partnership for an indefinite period.
Nevertheless, the partnership was for a 'fixed term', within s 37(1), and was not for an 'undefined time', within s 43(c). The partnership was not terminable at will.
The partnership was for a 'fixed term' in that it was agreed the partnership would commence on 3 September 2009 and would continue until determined in the manner set out in the deed or otherwise in accordance with the Act. That is, the parties agreed, in effect, that the partnership was to continue until either party retired voluntarily from the partnership by giving one month's prior written notice to the other party in accordance with cl 14.1, unless the partnership was terminated or dissolved earlier under cl 13 (as a result of a party being in default), or by mutual agreement, or pursuant to a provision of the Act that was not inconsistent with the terms and conditions of the deed.
The partnership was not for an 'undefined time' in that it was agreed that the partnership would continue until determined in the manner set out in the deed or otherwise in accordance with the Act. This indefinite period was for a defined time.
A partnership for a fixed term may be terminated or dissolved by mutual agreement. The formation of the mutual agreement constitutes a variation of the prior agreement as to the duration of the partnership. See Maslen v Perpetual Executors Trustees & Agency Co (WA) Ltd [1950] HCA 55; (1950) 82 CLR 101, 112 (Latham CJ); Hurst v Bryk [2002] 1 AC 185, 195 (Lord Millett, Lord Browne‑Wilkinson, Lord Nicholls of Birkenhead, Lord Hope of Craighead and Lord Clyde agreeing); Fazio [62].
In the present case, Mr Moorcraft, by his letter dated 15 November 2010, purported to dissolve the partnership as from that date. The letter was not a notice of retirement under cl 14.1.
Mr Nelson responded to Mr Moorcraft's letter dated 15 November 2010 by placing the notice in the Albany Advertiser newspaper on 16 November 2010. Mr Nelson gave notice that he was 'no longer involved in the establishment or future running' of the partnership business and he was not responsible for any debts incurred after 15 November 2010 in relation to the partnership business.
The legal effect of the letter and the notice depends upon the proper construction of those documents, on an objective basis and in the context of Mr Nelson's and Mr Moorcraft's relevant conduct and dealings, and not upon their subjective intention. See Toll [40]; International Air Transport [53].
The trial judge found that:
(a)as at 15 November 2010, the relationship between Mr Nelson and Mr Moorcraft had 'broken down' [66];
(b)the partnership was dissolved on 15 November 2010 [66];
(c)the partnership 'ceased to exist after 15 November 2010' [66]; and
(d)neither Mr Nelson nor Mr Moorcraft had breached the Partnership Deed prior to the dissolution of the partnership on 15 November 2010 [85].
Mr Nelson has not sought to impugn any of the findings I have set out at [117] above. His challenge in the grounds of appeal is confined, relevantly, to her Honour's failure to find that 'the dissolution of the partnership was caused by the actions of [Mr Moorcraft]' and her Honour's finding that Mr Nelson 'intended to dissolve the partnership on [15 November 2010]' [66]. Mr Nelson asserts, in substance and in the context of attacking her Honour's conclusion that the Land Ownership Deed was discharged by frustration, that her Honour was in error in finding in effect that the partnership was dissolved, by mutual agreement, on 15 November 2010.

Provision was also made for the transfer by Mr Moorcraft of a 25% interest in the Robinson Road property. In this regard the following observations may be made.
First, Mr Moorcraft was the 'owner' of the Robinson Road property and the parties had 'agreed to own' the property as tenants in common with one undivided fourth share being owned by Mr Nelson and three undivided fourth shares held by Mr Moorcraft (LD recitals A and B, cl 1.4, schedule item 3).
Secondly, the parties agreed that the LD recorded the terms on which there would be a 'conveyance' of a 25% interest in the property from Mr Moorcraft to Mr Nelson (recital E, LD cl 1.4, cl 3.2). In this regard, it is also to be noted that LD cl 3.2, cl 3.3, cl 3.6 and item 4(2) schedule, all deal with the conveyance of an interest in the property.
Thirdly, the parties agreed that in order to give 'effect' to the parties owning the property as tenants in common (LD recital C, cl 1.4, cl 4.1) Mr Moorcraft would 'transfer' a 25% interest in the property to Mr Nelson for the 'consideration' (or as it was described, Mr Nelson's 'Financial Contribution') of $175,000 (LD recital C, cl 1.4, cl 3.2, item 4 schedule). This is consistent with the term referred to earlier (par (g) of [199] above) to the effect that the parties agreed that the 'making' of the contribution of $175,000 by Mr Nelson was the consideration for the transfer to him of the 25% interest in the property. It was not simply 'agreeing to make' the capital contribution which gave rise to Mr Nelson's right to the transfer of a 25% interest in the property.
Thus, the overall effect of the agreement evidenced by the instruments in this regard was that Mr Moorcraft agreed to transfer a 25% interest in the property in consideration for Mr Nelson:
(a)paying Mr Moorcraft, to or at his direction, the sum of $40,000 immediately;
(b)paying $50,000 to construct an art studio on the property; and
(c)paying $85,000 to the partnership as working capital or, if not required by the partnership, paying to Mr Moorcraft that amount (or such lesser amount as may be owing to the extent that payments had already been made towards working capital) at settlement.
It appears that the parties intended that settlement would not occur until the mortgage on the property was discharged or the mortgagee otherwise consented.
Pending transfer by Mr Moorcraft of the legal title to a 25% interest in the Robinson Road property to Mr Nelson, Mr Nelson could lodge a 'subject to claim' caveat to protect his interest, under the agreements (PD item 10 schedule; LD cl 3.3). The caveatable interest was not, as at 3 September 2009, full beneficial ownership of an undivided one‑fourth share in the property. Rather, Mr Nelson had at that point an equitable interest commensurate with Mr Nelson's right to obtain specific performance: Tanwar Enterprises Pty Limited v Cauchi [2003] HCA 57; (2003) 217 CLR 315 [53]. He would also have a lien over the property to secure the repayment to him of any part of the purchase price which may become repayable to him upon default by Mr Moorcraft in the performance of the contract: Hewett v Court (1983) 149 CLR 639, 664.
LD cl 3.1, on which the appellant placed considerable reliance, does not alter the above conclusions. In cl 3.1 the parties said that they 'hereby declare' that as from the 'Settlement Date' (defined in effect as 3 September 2009) they 'will own' the property as tenants in common. This was not a unilateral declaration of trust by Mr Moorcraft and cl 3.1 must be read in context. Insofar as this may be a reference to legal ownership, it is consistent with the stated intention that a 'settlement of the transfer will take place on the [Settlement Date]' (LD recital D, cl 1.4). However, the parties evidently recognised that a transfer of the legal ownership may not occur on the 'Settlement Date', and made provision against that eventuality. Having regard to the scheme of the agreement constituted by the PD and the LD as a whole, cl 3.1 of the LD cannot be read as creating immediately an equitable co‑ownership by way of tenancy in common between Mr Moorcraft and Mr Nelson, given that Mr Nelson's right to acquire a 25% interest in the property was dependant, amongst other things, upon his payment of the sum of $175,000.
It was also agreed that:
(a)the Robinson Road property had a value of $700,000 as at 3 September 2009;
(b)Mr Moorcraft would not extend the encumbrance on the Robinson Road property by increasing his bank facility beyond the existing $500,000 limit (PD item 10 schedule cl 3.1 and LD cl 3.4) and would provide full disclosure to Mr Nelson of all lending matters pertaining to the property (PD cl 3.5).
Thus it appears that the parties recognised that the property was worth $700,000 on 3 September 2009 and that a quarter interest would be worth $175,000. It also appears that by restricting Mr Moorcraft's ability to further encumber the property by additional secured borrowing, the parties intended that any capital growth in the property between 3 September 2009 and the date of the transfer of a 25% interest to Mr Nelson would be shared in proportions three‑quarters (as to Mr Moorcraft) and one‑quarter (as to Mr Nelson).
The term requiring payment of interest in relation to any outstanding amount up to $175,000 from 3 September 2009 to the date of transfer of the 25% interest (see par (i) in [199] above), was also presumably intended to put Mr Moorcraft, in effect, in the financial position he would have been in had the $175,000 been paid on 3 September 2009 and the transfer registered on that day.
A number of observations may be made about the way the parties apparently envisaged their agreement would operate in terms of the occupation of the Robinson Road property. It appears that the parties intended the following. The Robinson Road property would, until further agreement, be the business premises for their partnership, and the 'bed and breakfast' activity would be carried out in an area comprising 50% of the residence situate on the property, 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 facility (LD item 7 schedule, cl 2.1; PD item 5 schedule). The same area of the residence would be the area that Mr Nelson would have 'exclusive' use and possession of, together with the partnership (LD item 7 schedule, cl 2.1). For his part, Mr Moorcraft would have 'exclusive' 'use' and 'possession' and use of the other 50% of the residence situate on the property, including, but not limited to, the master bedroom/bathroom and spare room (LD item 7 schedule, cl 2.2). The parties would have equal rights of access to the grounds of the property (LD item 7 schedule, cl 1.2). Mr Nelson would, however, have the sole use and occupancy of the art studio to be constructed on the property (LD item 7 schedule, cl 1.1).
These terms may be seen as contractual licences granted by Mr Moorcraft up until the time that Mr Nelson acquired a 25% interest in the property. Co‑ownership, once acquired, would give each party the right to possess and occupy the whole of the property in common with the others: Nullagine Investments Pty Ltd v Western Australian Club Inc [1993] HCA 45; (1993) 177 CLR 635, 643 ‑ 644. Questions might arise as to how these provisions would operate once Mr Nelson acquired a legal or equitable tenancy in common (see, eg, Butt, Land Law (6th ed), par 1449), but it is unnecessary to address such matters for the disposition of this appeal.
It is to be noted that the court would not compel the performance in specie of the partnership agreement: Renowden v Hurley [1951] VLR 2; (1951) VLR 13, 20 ‑ 22; Meagher RP, Heydon JD and Leeming MJ, Meagher, Gummow & Lehane's Equity: Doctrines & Remedies (4th ed, 2002) [20‑60].

Grounds of appeal

The appellant's grounds of appeal were as follows:
1.The learned trial judge erred in fact and in law in finding that the dissolution of the partnership between the appellant and the respondent made it impossible for the [LD] between the parties to proceed and accordingly the [LD] was frustrated.
2.The learned trial judge should have found that a dissolution of the partnership did not frustrate the [LD] because it did not render the contractual obligations under the [LD] incapable of being performed or caused the arrangement between the parties the subject of the [LD] to be radically different from that which the parties agreed.
3.The learned trial should have found that the dissolution of the partnership was caused by the actions of the respondent and therefore could not, in law, result in the frustration of the [LD].
4.The learned trial judge erred in law in ignoring the fact that, upon execution of the [LD], the appellant became entitled to a 25% share in the property the subject of the deed, and should have found that the appellant remained entitled to his equitable interest in the property even if the deed was frustrated.
5.The learned trial judge erred in fact in finding that the appellant intended to dissolve the partnership between him and the respondent and that the partnership was dissolved by mutual agreement.
6.The learned trial judge should have found that the appellant did not agree to the dissolution of the partnership and that the respondent dissolved the partnership unilaterally.
7.The learned trial judge erred in fact and law in finding that the respondent was not in breach of the [LD].
8.The learned trial judge should have found that in breach of the [LD] the respondent effectively evicted the appellant from the property the subject of the deed by his letters to the appellant dated 10 November 2010 and 15 November 2010 and was liable to the appellant for damages for the breach.

Disposition

Grounds 1 and 2

Grounds 1 and 2 (and 3) proceed on the basis that the judge found that the partnership had terminated on 15 November 2010. That finding [66] is unchallenged. Whilst Mr Nelson's evidence at trial was that the partnership had ended on 10 November 2010 and not 15 November 2010, the difference is immaterial for present purposes (trial ts 157 ‑ 158, 170).
Her Honour's finding as to the termination of the partnership is to be read in the context that her Honour also found that Mr Nelson had paid the initial capital contribution of $40,000 and contributed $50,000 to the construction of an art studio on the property [68] ‑ [69]. He had not paid the other $85,000, nor any interest on that sum [70].
However, the termination of the partnership itself would not terminate the rights which Mr Nelson had to purchase a 25% interest in the Robinson Road property. As explained earlier, in broad terms the effect of the parties' agreement was that if Mr Nelson paid the final sum of $85,000 by way of working capital as and when required by the partnership, the payment would discharge pro tanto the amount payable by Mr Nelson to purchase a 25% interest in the property.
Even if the partnership were terminated before that amount was required as working capital, it would not affect Mr Nelson's rights (and obligations) to purchase the 25% interest in the property. All it would mean is that the remaining $85,000 would be payable directly to Mr Moorcraft, and the obligation to make the payment to Mr Moorcraft would not be satisfied by the payment of such money into the partnership by way of working capital.
Accordingly, even if the partnership agreement were terminated, it would not result in the termination of the agreement to transfer the interest in land to Mr Nelson.
Grounds 1 and 2 should be upheld.

Ground 3

The dissolution of a partnership was discussed in Fazio v Fazio [2012] WASCA 72 [59] ‑ [76]. There it was said, amongst other things:
A partnership may be 'dissolved' in the sense of terminated or determined - as opposed to 'dissolved' in the other sense in which it is sometimes used to connote the winding-up of the business - in a variety of ways. (As to dissolution in the sense of termination, see, eg, Lindley and Banks on Partnership (19th ed, 2010) [24-01]; Geraghty v Minter [1979] HCA 42; (1979) 142 CLR 177, 180 ‑ 181, 181 ‑ 182, 190 ‑ 192.) Dissolution in the sense of termination can include, for example, subject to any agreement to the contrary, dissolution by the death or bankruptcy of a partner (s 44 of the Partnership Act), or where the partnership was for a fixed term or a single venture and the fixed period has expired or the single venture has terminated (s 43(a) and (b)).
A partnership may also be determined by curial decree in a variety of specified circumstances, including where an order is made on a 'just and equitable' ground: s 46.
A partnership is also dissolved by the happening of an event which makes it unlawful to carry on the business: s 45.
A partnership (whether for a fixed term or at will) may be determined by mutual agreement: Maslen v Perpetual Executor Trustees (112); Lindley and Banks on Partnership [24‑04].
The statute provides that in the case of a partnership for a fixed term, a partner may not retire except, in effect, by the consent or agreement of the other partners: s 36. The statute also provides that for a partnership where no fixed term is agreed, a partner may, unilaterally, determine the partnership by giving written notice to the other partners: s 37(1). Such written notice does not have to be given under seal, even where the original partnership agreement was constituted by a deed: s 37(2). Unless the partners otherwise agree, the partnership is dissolved on the date specified in the notice or, if no date is specified, as from the date of the communication of the notice: subs (c) and the concluding words of s 43. (Note also the overlap between s 37 and s 43 generally, which is discussed in relation to the broadly equivalent English provisions (s 26 and s 32) in Lindley and Banks on Partnership [9‑01] ‑ [9‑03], and where the learned authors observe, in effect, that both sections (and not just s 43), will take effect subject to any agreement between the partners to the contrary - see also Moss v Elphick [1910] 1 KB 846).
A retirement of a partner, mutually agreed or unilaterally effective, has the consequence of dissolving the partnership: Commissioner of State Taxation v Cyril Henschke Pty Ltd [11].
Where a partner retires by mutual agreement on terms that the remaining partners will continue in partnership and take on the assets and liabilities of the old firm, without a break in the continuity of the business, the dissolution of the firm effected by the retirement of the partner is in the nature of what is often called a 'technical dissolution', or a 'notional dissolution' and the 'continuing' partners are, in point of law, operating a new partnership: see Commissioner of State Taxation v Cyril Henschke Pty Ltd [11] - [12], [19], [24] - [29]; Lindley and Banks on Partnership [19-09], [24-01] - [24-04]; Rushton (Qld) Pty Ltd v Rushton (NSW) Pty Ltd [2003] QCA 210; (2003) 1 Qd R 320 [9]. As McPherson JA observed, however, in Rushton v Rushton [9], the reference to a 'technical' or 'notional' dissolution is somewhat of a misnomer, because it is not the dissolution itself, but the winding-up which is notional. Where there is a binding agreement involving a 'technical dissolution' of the former partnership, with consideration being given for the retiring partner's chose in action, the former partner's chose in action is extinguished by accord and satisfaction: Commissioner of State Taxation v Cyril Henschke Pty Ltd [19], [28].
…
Where there is a retirement by agreement, the agreement may be formal (eg, as reflected in the formal instrument in Commissioner of State Taxation v Cyril Henschke Pty Ltd), or informal, including partly or wholly oral, or partly or wholly inferred. Sobell v Boston (1975) 1 WLR 1587 appears to be an example of an oral agreement, which had been executed (see Goff J, as his Lordship then was, at 1588 - 1590) where, although it is not clear, the court arguably inferred or implied a term of the agreement as to how the retiring partner's interest was agreed to be dealt with - see Truong v Lam [2009] WASCA 217 [27]. Insofar as the term was inferred or implied, it appears to have been aided by the circumstance that the agreement had been executed, and was not merely executory (1590 ‑ 1591). On the implications of terms in executed contracts, see the authorities collected in Lewison K and Hughes B, The Interpretation of Contracts in Australia (2012) [6.19].
As to inferred or at least partly inferred agreements respecting dissolution on the departure of a partner, see, for example, Jorgensen v Boyce (1896) 22 VLR 408; Palmer v Moore [1900] AC 293, and in the court below - Moore v Morgan (1900) 21 LR (NSW) Eq 158; Fitzgerald v Masters [1956] HCA 53; (1956) 95 CLR 420, 431, 439 - 440; Cutts v Holland [1965] TAS SR 69, 71 - 72; Thompson v De Lissa (Unreported, NSWSC, Powell J, 16 February 1990), 52; Lukin v Lovrinov (Unreported, SASC, Perry J, 9 April 1998), 22.
Mr Moorcraft's letter of 15 November 2010 effectively stated that he was giving notice that the partnership was being 'dissolved' from that day.
In response to Mr Moorcraft's letter, on 16 November 2010 Mr Nelson placed a notice in the local newspaper which, as the judge recorded, 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 [65].
Mr Nelson thereby effectively accepted that the partnership was dissolved in the sense of terminated with effect from 16 November 2010, even though under the terms of the PD, a partner could only retire from the partnership on giving one month's notice.
I would uphold ground 3 to the extent that it asserts that dissolution of the partnership did not result in frustration of the LD.

Ground 4

Ground 4 should be dismissed. For the reasons given earlier, it is not correct to contend that upon the execution of the LD, Mr Nelson became beneficially entitled to a 25% interest in the Robinson Road property.

Grounds 5 and 6

These grounds should be dismissed. The judge was correct to infer that, objectively, Mr Nelson evinced an intention to dissolve, and had agreed to the dissolution of, the partnership by virtue of his notice dated 16 November 2010 (cf Lindley and Banks on Partnership (18th ed) [10‑136]). The appellant's submissions that this was only a 'notice to outsiders' (written submissions par 4.3) and not evidence of an intention to terminate the partnership, cannot be accepted. That notice could only be understood, in the circumstances, as Mr Nelson accepting that the partnership had been dissolved in the sense of terminated as from 15 November 2010.
Although it is unnecessary to go further, the correctness of her Honour's finding in this regard is also confirmed by her Honour's finding that in 2010 the relationship between the two parties had broken down; that they could no longer work together; that they had different views about the bed and breakfast and art studio facilities; that Mr Moorcraft had unsuccessfully sought to refinance the property; and that Mr Nelson resisted Mr Moorcraft's application to refinance [4]. It is also confirmed by Mr Nelson's evidence to the effect that he considered the partnership was 'for all intents and purposes' at an end by 10 November 2010 given that the working relationship had by then become untenable (ts 150, 154 ‑ 159).
Even if it were thought that Mr Moorcraft had repudiated the agreement between the parties (cf Fazio [76], [412]), any consequent termination by Mr Nelson would depend upon him accepting the repudiation. Accordingly, even in that regard it could not be said that the partnership was terminated 'unilaterally'.

Further, and in any event, there was no power unilaterally to determine the partnership except by retirement on one month's written notice, for the reasons given by Buss JA at [88] ‑ [112] of his reasons.

Grounds 7 and 8

The appellant contends, in effect, that Mr Moorcraft was in breach of the LD by his letters dated 10 and 15 November 2010 by 'effectively evicting [Mr Nelson] from the property' (appellant's written submissions par 5).
I agree with what Buss JA has written in relation to these matters concerning the 'fifth issue' (as his Honour described it) at [159] ‑ [167] of his reasons.

Proposed orders

I would allow the appeal with respect to grounds 1, 2 and 3 to the extent indicated. I also agree with Buss JA that pars 1, 2, 6, 7, 8 and 9 of the primary judge's orders dated 19 December 2010 should be set aside.
I agree with Buss JA in relation to Mr Nelson's application filed 8 July 2014, his appeal in relation to costs, and his application dated 17 July 2014 in that appeal.

Other matters

This was a case where the parties, in effect, treated each other as having supplied an equal amount of capital to the partnership so that each would be treated as having a 50% share in the partnership. Relevantly, the sums payable by Mr Nelson were all sums payable to or for the benefit of Mr Moorcraft, and were not, in truth, contributions to the capital of the partnership. Her Honour made detailed orders for the appointment of accountants with respect to the taking of accounts upon the dissolution of the partnership as from 15 November 2010. No doubt, the making of such an order was open to her Honour, however, its practical utility might be doubted in this case, particularly when regard is had to the likely costs involved. The assets of the partnership, at least on the materials available to this court, would not appear, at least prima facie, to be of any great value. It might be thought that it is highly unlikely that the partnership business had any goodwill (cf s 51 of the Partnership Act), and that the other assets of the partnership were presumably goods and chattels such as kitchen equipment, bedding, etc. It might be thought that it would be in the parties' interest to seek to mediate any competing claims in that regard, rather than go through the process of a formal account.
I also agree with Buss JA's observations under the heading 'How are the other disputes between the parties to be resolved?'. Thus, for example, if and insofar as there were any other equitable claims in relation to the property, eg, a purchaser's lien in the event of alleged default, or any other secured restitutionary claim that might arise in certain circumstances even absent default (see, eg, Raulfs v Fishy Bite Pty Ltd [2012] NSWCA 135 [70], [83]; Morris v Morris [1982] 1 NSWLR 61), they would appropriately be brought in the Supreme Court. I would also note, however, that Mr Nelson has never claimed specific performance and has to date, sought damages in the District Court for breach of the LD (cf Fullers' Theatres Ltd v Musgrove [1923] HCA 12; (1923) 31 CLR 524, 546).

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: NELSON -v- MOORCRAFT [2014] WASCA 212 (S)

CORAM: BUSS JA
NEWNES JA
MURPHY JA

HEARD: ON THE PAPERS

DELIVERED : 28 JANUARY 2015

FILE NO/S: CACV 7 of 2013

BETWEEN: PETER STANLEY NELSON
Appellant
AND
PETER MOORCRAFT
Respondent

ON APPEAL FROM:
Jurisdiction              :  DISTRICT COURT OF WESTERN AUSTRALIA
Coram  :WAGER DCJ
Citation  :NELSON -v- MOORCRAFT [2012] WADC 170
File No  :CIV ALB 3 of 2011

Catchwords:

Practice and procedure - Costs - Costs orders on appeal and at first instance - Application by the respondent under the Suitors' Fund Act 1964 (WA)

Legislation:

Rules of the Supreme Court 1971 (WA), O 66 r 1(1), O 66 r 10(2)
Suitors' Fund Act 1964 (WA), s 10, s 11
Supreme Court (Court of Appeal) Rules 2005 (WA), r 5(1)
Supreme Court Act 1935 (WA), s 37(1)

Result:

Costs orders made
Application under Suitors' Fund Act dismissed

Category: B

Representation:

Counsel:

Appellant: No appearance
Respondent: No appearance

Solicitors:

Appellant: In person
Respondent: Henry Sklarz

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

Barr v Farrell [2013] WASCA 211
Corruption and Crime Commission of Western Australia v Allen [2012] WASCA 242 (S)
Jones v Dalcon Construction Pty Ltd [2006] WASCA 205 (S)
Nelson v Moorcraft [2012] WADC 170 (S)
Nelson v Moorcraft [2012] WADC 170 (S2)
Nelson v Moorcraft [2014] WASCA 212
Richards v Faulls Pty Ltd [1971] WAR 129

JUDGMENT OF THE COURT: On 14 November 2014, this court made the following orders in the appeal between the appellant (Mr Nelson) and the respondent (Mr Moorcraft):
1.The application filed 26 August 2013 is dismissed.
2.The application filed 8 July 2014 is dismissed.
3.Appeal allowed.
4.Paragraphs 1, 2, 6, 7, 8 and 9 of the trial judge's orders made on 19 December 2012 are set aside.
5.Mr Nelson's claim that Mr Moorcraft breached the Land Ownership Deed when, by his letters dated 10 November 2010 and 15 November 2010, he 'effectively evicted' Mr Nelson from the property at 141 Robinson Road, Albany, including his claim in damages for the alleged breach, is remitted to the trial judge for resolution in accordance with this court's reasons.
6.By 4.00 pm on 3 December 2014, Mr Nelson is to file and serve written submissions in relation to the costs of the appeal and the costs of the proceedings in the District Court action.
7.By 4.00 pm on 11 December 2014, Mr Moorcraft is to file and serve written submissions in relation to the costs of the appeal and the costs of the proceedings in the District Court action.
8.This court will decide upon and make orders in relation to the costs of the appeal and the costs of the proceedings in the District Court action on the basis of the written submissions that are filed and served by the parties.
Those orders reflected the court's reasons in Nelson v Moorcraft [2014] WASCA 212.
Subsequently, the parties filed written submissions in relation to the costs of the appeal and the costs of the proceedings in the District Court action.
On 2 May 2014, the trial judge ordered Mr Nelson to pay Mr Moorcraft's costs of the District Court action. See Nelson v Moorcraft [2012] WADC 170 (S2). See also Nelson v Moorcraft [2012] WADC 170 (S).
Section 37(1) of the Supreme Court Act 1935 (WA) confers a broad discretion on the court in relation to costs with full power to determine, relevantly, by whom and to what extent such costs are to be paid. This discretionary power enables the court to make orders with respect to the allowance of costs generally. See also O 66 r 1(1) of the Rules of theSupreme Court1971 (WA), which should be read together with s 37(1) of the Act.
By O 66 r 10(2) of the Rules of the Supreme Court, relevantly, in the case of an appeal, the costs of the proceedings giving rise to the appeal, as well as the costs of the appeal and of the proceedings connected with it, may be dealt with by the court hearing the appeal.
Rule 5(1) of the Supreme Court (Court of Appeal) Rules 2005 (WA) provides that the Court of Appeal Rules must be read with the Rules of the Supreme Court.
Mr Nelson had substantial success in the appeal. However:
(a)Mr Nelson was not successful on some of the issues in the appeal; and
(b)his applications filed 26 August 2013 and 8 July 2014 were dismissed.
If the District Court action had been tried and determined in accordance with this court's reasons, Mr Nelson would have had substantial success in the District Court trial.
It is unnecessary to reproduce the various arguments and contentions in the written submissions filed by the parties in relation to costs. It is sufficient to note that Mr Moorcraft has applied for an indemnity certificate under s 10 of the Suitors' Fund Act 1964 (WA). See also s 11 of that Act.
After taking into account the successes and failures of each of the parties on particular issues in the appeal; the court's reasons for decision in the appeal; the successes and failures which each of the parties should have had on particular issues at the District Court trial if the District Court action had been tried and determined in accordance with this court's reasons; the fact that, pursuant to par 5 of this court's orders made on 14 November 2014, part of Mr Nelson's claim in the District Court action was remitted to the trial judge for resolution in accordance with this court's reasons; and the submissions of the parties on the orders that should now be made, justice would be done as between the parties if:
(a)the trial judge's order as to the costs of the District Court action were to be set aside;
(b)Mr Moorcraft were to be ordered to pay 70% of Mr Nelson's costs of the District Court action, including the costs of the counterclaim and any reserved costs, to be taxed if not agreed; and
(c)Mr Moorcraft were to be ordered to pay 70% of Mr Nelson's costs of the appeal, including any reserved costs, to be taxed if not agreed.
These orders are preferable to this court endeavouring to make individual orders by reference to particular issues or events at the District Court trial or in the appeal.
As to Mr Moorcraft's application under s 10 of the Suitors' Fund Act, this court has an unfettered discretion under s 10 but the discretion must be exercised judicially. The discretion is a discretion to grant, rather than a discretion to refuse, an indemnity certificate. The respondent must establish that there is an appropriate basis for the exercise of the court's discretion in his or her favour. The mere fact that the respondent succeeded at first instance, but lost on appeal on a question of law, is insufficient. See Richards v Faulls Pty Ltd [1971] WAR 129, 137 ‑ 139; Jones v Dalcon Construction Pty Ltd [2006] WASCA 205 (S) [5]. A relevant consideration is whether (and, if so, to what extent) the question of law was of general importance or application or whether the question of law merely arose from the particular facts of the case. See Corruption and Crime Commission of Western Australia v Allen [2012] WASCA 242 (S) [3]; Barr v Farrell [2013] WASCA 211 [13].
Mr Moorcraft has not shown an appropriate basis for the exercise in his favour of the discretion under s 10. The questions of law on which Mr Nelson succeeded and Mr Moorcraft failed were not of general importance or application. They arose from the unusual facts and circumstances of the case. Mr Moorcraft's application should be dismissed.
Accordingly, the court will make orders as follows:
(1)The trial judge's order as to the costs of the District Court action is set aside.
(2)Mr Moorcraft is to pay 70% of Mr Nelson's costs of the District Court action, including the costs of the counterclaim and any reserved costs, to be taxed if not agreed.
(3)Mr Moorcraft is to pay 70% of Mr Nelson's costs of the appeal, including any reserved costs, to be taxed if not agreed.
(4)Mr Moorcraft's application under s 10 of the Suitors' Fund Act is dismissed.