O'Donoghue v Holdcroft

IN THE SUPREME COURT
OF QUEENSLAND  Writ No. 59 of 1995
CAIRNS
[O'Donoghue v Holdcroft]
BETWEEN:                PETER JAMES O'DONOGHUE
  Plaintiff
AND:  PHILLIP HOLDCROFT
  Defendant
  REASONS FOR JUDGMENT
  BEFORE THE HONOURABLE JUSTICE JONES
  DELIVERED THE 30^th DAY OF APRIL, 1999

The plaintiff and the defendant went into a partnership in or about April or May 1987 for the purpose of beef cattle production. At that time, each of them owned rural properties and had previously raised small numbers of cattle. The plaintiff had an interest in property of some 223 acres at Julatten. The defendant had a lucerne growing/grazing property of 160 acres at Middle Creek via Mareeba. They were related by marriage, the defendant being married to the plaintiff's sister. They had known each other for some 27 years.
The circumstances that prompted the parties to enter into partnership was the prospect of obtaining a sub-lease of a grazing property of some 40,000 acres known as Wooroora which was located west of Ravenshoe. The sub-lessor was the Killaroo Pastoral Company Pty.Ltd. ("Killaroo") the principal of which was Dr. Ramsay.
This property was quite run down at that time but the sub-lease could be obtained on favourable terms - nil rent for the first year; $12,000.00 for the second year; $18,000.00 for the third year; and $22,000.00 for each succeeding year. The instrument of sub-lease (ex. 2) which was not formally signed until 14 September, 1988 provided for a term of 5 years to commence on 1 July, 1987. The parties in fact took possession of the property prior to that commencement date. The actual date of possession is disputed between them but nothing turns on that issue.
Having taken possession of Wooroora, the parties then set about repairing fences and introducing breeding cattle to establish the partnership herd. At the time of going into possession, there were cattle already pastured on agistment there and this arrangement continued for a short time thereafter.
The partnership cattle were brought onto the property but the numbers of cattle and their ownership is one of the points in issue.
The roles played by each of the partners in the partnership were quite different. The plaintiff’s role was to work on the property - to repair fences, to care for the cattle and to effect improvements. The defendant’s role was primarily to look after the financial management of the business - to establish the partnership accounts with the National Australia Bank (“NAB”) and with Elders Limited (“Elders”), to arrange borrowing and to attend to the purchase and sale of stock. The plaintiff lived and worked fulltime on the Wooroora property until February, 1989.
There is no doubt that the defendant was the controller of the partnership finances and records of account. The postal address of the partnership was always that of Mr. Holdcroft personally. The negotiations with financial institutions and the accountants appear to have been carried out almost exclusively by the defendant.
The defendant continued to live on his property at Middle Creek but it appears he continued to be involved in the activities of that property by also working at Wooroora for 2 - 4 days per week.
The working relationship between the plaintiff and the defendant ceased at the end of January, 1989. The plaintiff on that date left Wooroora returning sometime later simply to collect his personal effects. In September, 1988 the defendant moved onto Wooroora with his family following the sale of his Middle Creek property. The relationship as partners was at an end, save for its winding up, by the beginning of February, 1989. This was not the result of any formal notice but rather an understanding between the partners as they “both knew it was finished, [they] just couldn’t get on” (48/45). The plaintiff’s note to the defendant on 15 February, 1990 (ex.8) confirms the termination.
The parties obviously had some discussion about how the winding up should be undertaken though no evidence of any such discussion was led before me. The terms of exhibits 9 and 10 inevitably lead to that conclusion. It is surprising therefore that the partnership records - particularly the partnership diary recording cattle numbers - are not available when it is clear that there was a dispute between the plaintiff and the defendant on this very issue. It is surprising also that there were no discussions between the partners when it is clear that the partnership activity broke down.
A perusal of the Elders account shows that the wash-up of the Chillagoe joint venture (discussed hereafter) continued through the month of February and that in the month of March, activities which could not be said to be partnership activities, were undertaken. For this reason it seems to me, the most appropriate date on which to assess the parties’ respective entitlements and obligations is 28 February, 1989. Such an assessment would include making some apportionment in respect of continuing obligations.
The defendant used the partnership account at Elders and at NAB to acquire more cattle and to finance the acquisition of a butcher shop in partnership with Mr. Darryl McLaren. It is now conceded by the defendant that the butcher shop venture was not part of the partnership business. Nor, in my view, should the acquisition of cattle or other assets be so regarded after 28 February, 1989.
The plaintiff’s action, as presently framed, seeks the payment to him of a specified sum of money as his entitlement on distribution of partnership assets and, in the alternative, the taking of partnership accounts. The defendant by counterclaim seeks certain declarations which in themselves depend on the taking of partnership accounts. I do not regard the earlier formulation of the plaintiff’s claim as in any way reflecting upon his credibility in relation to the present claims.
On 5 September, 1996 Justice Cullinane made by consent an interlocutory order that an independent accountant, Mr. Gerald Mier of KPMG, Chartered Accountants, be appointed to take an account of partnership dealings between the parties for the period from 1 April, 1987 to 31 May, 1989. In selecting this latter date neither of the parties, nor Justice Cullinane, were offering a concluded view that this was the date upon which the partnership was terminated. Rather, it seemed to be a date by which, it could be safely said, the partnership activity had ceased save for its winding up. Certainly by this date it is clear that the defendant was dealing with the partnership accounts and its assets as though they were his own. The plaintiff was aware of this and took no steps to prevent it. The plaintiff, by his pleading, demands that he be paid his share of the partnership assets as at April, 1989. The parties agreed that no injustice would be done and perhaps some justice would be gained by having the accounts prepared to 30 June, 1989 so long as only true partnership activities were taken into account.
The defendant continued to occupy Wooroora pursuant to the sub-lease until its expiration on 30 June, 1992. He paid rent from his own resources and used the land from early 1989 for his exclusive benefit. The parties have proceeded on the footing that the benefits and obligations to the partnership in respect of the sub-lease cancel each other out. This is not a matter that needs to be taken into account in assessing the value of the partnership assets.
Mr. Mier was unable to complete the preparation of the accounts because the parties do not accept that the annual financial statements, prepared by the partnership accountants, Dewsbury’s, are based on accurate or complete information. Nor do they agree as to what is the correct information. They contend further that the accounts prepared by Mr. Mier for the years ending 30 June, 1987 and 30 June, 1988 (which are essentially based on Dewsbury’s figures) are not accurate.
Mr. Mier has been unable to resolve these differences between the parties and now seeks from the court rulings on certain issues to allow his completion of the task of preparing accounts for the court.
The issues arise in three areas, namely:-
1.The partners’ respective contributions to the partnership.
2.The date upon which the partnership should be deemed to have ceased, and its value at that date.
3.The identification of transactions after the cessation which formed part of the partnership business.
The plaintiff alleges that the partnership was to be a 50/50 partnership, both by way of contribution and share of profit. The plaintiff’s understanding was that neither partner would, after the commencement of the partnership, own cattle in his own right and that all cattle formerly owned by Holdcroft and bearing the PH2 brand would become the partnership property. The brand name was to be transferred to the partnership. The transfer of the brand to the partnership was also a condition of the stock mortgage entered into between the partners and Elders. In fact, the brand was never transferred from the Holdcroft name.
The plaintiff alleges that he made cash contributions to the partnership as follows:-
18 May, 1987             $14,000 for purchase of a half share of cattle owned by Holdcrofts
29 June, 1987             $20,000 paid to the Wooroora account for purchase of cattle
1 July, 1988                $12,000 paid to Elders for rent of Wooroora property
The plaintiff alleges that the initial contribution of each partner was equal insofar as his cash contribution was for the purchase of a half interest in whatever was the initial herd moved from Holdcroft’s property to Wooroora.
The defendant’s case is that the plaintiff made no initial contribution either by cash or cattle to the partnership. The defendant alleges that the $14,000, undoubtedly paid to him on 18 May, 1987, was the payment for 60 steers sold by him approximately 1 month earlier and further that this transaction was unrelated to partnership matters. The defendant agrees that the plaintiff’s other cash contributions were made to the partnership.
The defendant claims that his initial contribution to the partnership was 560 head of cattle which were depastured on his property at Middle Creek and on some neighbouring properties owned by Mr. Feltran and a Mr. Whitehead. These cattle, he alleges, had been depasturing on these properties since 1986 and that they were reject cattle removed to his property when he ceased to occupy the grazing property Reigate Station, Croydon.
Ultimately, my decision requires the resolution of the question of credibility. In the circumstances here neither witness is completely supported by documentary evidence of a reliable nature. Some documents e.g., the cattle returns accompanying income tax returns conflict with other tallies and with records of sales and purchases evidenced in the accounts of Elders, and NAB. There is conflict also with journal entries made by the partnership accountants, Dewsbury’s, which were made on the instructions of the defendant alone.
The plaintiff is not well versed in accounting practices and requirements. But I have no doubt that he is most competent in the working of cattle and in assessing the value of livestock.
The defendant whilst also competent in the working of cattle and assessing the value of livestock was also a businessman of some experience. He was well equipped to deal with cattle and property, to organise finance and to interact with bankers, accountants and stock and station-agents. It was his initiative that secured the lease over Wooroora and later secured the purchase of livestock from Chillagoe Station (“the Chillagoe deal”). This transaction appears to have been the source of conflict between the partners and it serves to illustrate the relative influence of each partner in the business. The defendant, through his contacts at Elders, learnt of an opportunity to acquire a herd of cattle at Chillagoe Station. The defendant and his friend, Darryl McLaren, decided to purchase the herd for $100,000. The cattle had to be mustered within a short time and delivered to sale yards. The defendant clearly intended that this would be a joint venture between Mr. McLaren and himself personally, and not a partnership activity. There is scant evidence of any discussion between himself and the plaintiff about this venture. The plaintiff assumed that the defendant, consistent with usual practice, made the arrangements on behalf of the partnership. Ex.6 indicates also that Elders believed the participation in the venture was a partnership activity. It was only when the matter came to trial that the defendant finally conceded that the Chillagoe venture was a partnership activity, though it seems he did so with some reluctance. Dealing with the termination of the partnership, the following appears from the cross-examination of the defendant.
“It [the termination] had to do with Chillagoe? -- Yes. We went to Chillagoe, we employed a head stockman, I run the finance part of it, Darryl McLaren run the camp and Peter couldn’t take orders from the head stockman. All I said to Peter - Peter was drinking that day - I said, “Peter, if you don’t like it, go home”. That’s all the words I had with him.

He thought he was in partnership with you, didn’t he? -- No, not on Chillagoe he didn’t.” [1]
[1]Transcript 213/30-40

Further in cross-examination the following exchange occurred:-
“MR. DARVALL: Mr. Holdcroft, in terms of any partnership that existed between you and Peter O’Donaghue ----?--Mmm.

------it was basically finished at the end of January of ‘89. That’s right isn’t it? -- Not really, no.

Well ----?-- Well, there was nothing settled, there was nothing settled, right?

I know? -- He didn’t come back. He just rang me and made demands on me and I carried on as the partnership. I couldn’t do anything else. Elders started putting pressure on me, it had nothing to do with me. And as far as I’m concerned, if he wants the Chillagoe deal, so he should have the butcher shop deal and I went in that Chillagoe deal on me own bat and made money

HIS HONOUR: I take it you won’t be contending for that, Mr. Toy?
MR. TOY: No, Your Honour.” [2]

The defendant used the partnership accounts and the partnership arrangements with Elders to finance the Chillagoe deal. He drew $50,000 from the partnership account on 9 December, 1998 (ex. 23 at p.244).
[2]218/14-219/1

It is appropriate at this time to state the nature of the obligations of a partner, one to the other. In Birtchnell -v- Equity Trustees, Executors and Agency Company Ltd [3] Dixon J said (at 407/8):-
“The relation between partners is, of course, fiduciary. Indeed, it has been said that a stronger case of fiduciary relationship cannot be conceived in that which exists between partners. ‘Their mutual confidence is the life blood of the concern. It is because they trust one another that they are partners in the first instance; it is because they continue to trust one another that the business goes on.’” (per Bacon VC in Helmore -v- Smith (1886) 35 ChD 436 at 444).

The relation is based, in some degree, upon a mutual confidence that the partners will engage in some particular kind of activity or transaction for the joint advantage only. In some degree it arises from the very fact that they are associated for such a common end and are agents for one another in its accomplishment. Lord Blackburn found in this consideration alone sufficient reason for the fiduciary character of the partnership relation. (Cassels -v- Stuart) (1881) (App Cas at 79).”

[3](1929) 42 CLR 384

One matter which exemplifies the fiduciary relationship between the parties is the obligation to render true accounts and full information of all things affecting the partnership to each other. In “The Law of Partnership in Australia and New Zealand” Higgins and Fletcher (7 Ed) note at pp.120-121 as follows:-
“In pursuance of this right to full disclosure of accounts, any partner is entitled to have partnership accounts taken, if necessary by the Court. In Wilson -v- Carmichael[4], it was held that this right continues until an end is put to it by release, by settled accounts or by such lapse of such time as may induce the Court to refuse to interfere. Where accounts are improperly destroyed, the worst will be presumed against the partner who destroyed them[5]. It is submitted that the same principle will apply where active partners fail to keep accounts and cannot, therefore, produce them to the dormant partners.

The duty to provide full information countenances not only disclosure of partnership opportunities while the partnership is in being but special knowledge about the condition of the partnership when dissolution is contemplated, especially where the knowledgeable partner is proposing to buy out another’s interest.”

[4](1904) 2 CLR 190/195 per Griffith CJ

[5]Gray -v- Haigh (1854) 52 ER 587

The defendant, when written to by the plaintiff on 15 February, 1990 (ex.8) and 10 July, 1990 (ex.9), did not respond. Finally, the plaintiff wrote to his sister, the defendant’s wife on 24 July, 1990 (ex.10).
It is surprising that when the defendant did not accept the validity of the plaintiff’s demand to share the cattle, he did not then ensure that such partnership records which were in his possession were preserved for the accounting that inevitably had to be done. It is surprising also that at the time when the liability to Elders had to be recast from a partnership debt to his personal debt, that a final account was not in fact undertaken. The responsibility for taking such steps, in my view, was part of the defendant’s role in the partnership. In the end result the defendant’s evidence has to be looked at in the light of this failure of partnership obligation.
Both parties agreed that the agistment of cattle owned by Mr. Lyons was delivered to the plaintiff’s Julatten property. This was accepted as a partnership activity. The delivery of the Lyons’ cattle on or about 15 April, 1987 was evidenced by the tendering of the permit to travel stock (ex. 3). The issue of whether the $14,000 was the plaintiff’s contribution to the partnership or payment to the defendant for 60 steers is an issue that turns principally on the question of credibility.
I do not accept that the defendant delivered to the plaintiff the 60 head of steers. The plaintiff’s taxation returns disclose that he had sold all his own cattle in the financial year to 30 June, 1987. The preparation of that return, a copy of which (ex.11) is undated, would undoubtedly have been prepared well after the commencement of the partnership. It discloses that in that financial year the opening stock held by the plaintiff was 72, purchases throughout the year of 63 head and the total herd of 135 head had been disposed of during the year. The 63 head of cattle purchased in that year was identified as cattle other than steers, the subject of this dispute. I accept that he did so to avoid confusion which might arise if partnership cattle were moved onto his property. There was no good reason shown for the plaintiff to purchase cattle in his own right for the Julatten property at a time when he was committed to the partnership venture and knew he would be living at Wooroora.
In the year ended 30 June, 1987 the plaintiff was also involved in a joint cattle producing venture with his brother, Andrew. The returns for that joint venture disclose that in that financial year the joint venture purchased 61 cattle at a cost of $11,150. It is clear that this was not a reference to the purchase from the defendant. The return also shows that these cattle were sold during the currency of that year. Consequently, I accept the plaintiff’s evidence, supported by Andrew O’Donoghue, that there was no stock on Julatten apart from agistment cattle at the end of the 1987 financial year.

The defendant was unable to produce any documentary evidence to support his allegation about this sale. He was questioned specifically about whether he retained a copy of the travel permit and he replied “he did not” for the reason that the transaction was too long ago. The defendant’s financial statements for that financial year show that he and his wife sold 220 head during the course of that year (ex.22 p.73). No records were produced to show when these sales occurred or the means by which they occurred. Given that the alleged sale of 60 steers constituted more than a quarter of the sales for the year, there was at least a prospect that this transaction could have been identified by a process of elimination with other sales.
The only support for the defendant’s oral evidence is the recollections of Mr. Courte, who recalled delivering the 60 steers to the Julatten property. In his recollection he differs in some details to the defendant’s recollections as to how the delivery was made. Like the defendant he could not identify the date or dates on which he made the alleged delivery. Further to that I must take into account that, in any event, the recollections of both the defendant and Mr. Courte after such a length of time might be borne of discussions between them. Mr. Courte and the defendant have a long association in cooperative work habits. He was neighbour to the defendant when the defendant first arrived at Middle Creek. Over time Mr. Courte assisted on the defendant’s property and the defendant assisted him in the selection of cattle. After the defendant moved to Wooroora, Mr. Courte went to live there for approximately 8-9 months. Thereafter he moved to Wattlevale Station when it was acquired by the defendant. He continues to live at Wattlevale and he now assists the defendant in working that property.
In circumstances where there is no independent support for the recollections of the defendant and Mr. Courte and no records, I accept as more reliable the evidence of the plaintiff and Mr. Andrew O’Donoghue. The plaintiff was quite spontaneous in his response to the suggested delivery in cross-examination where the following exchange occurred:-
“O.K. Now, can I take you back to Julatten just for a moment? I suggest to you that in fact Mr. Keith Courte delivered to Julatten the 60 head of young steers which you had purchased and that he did that before Holdcroft’s herd was taken to Wooroora? -- Has he got a date on that?

I am not sure of the date but I can ask my instructing solicitor. March or April 1987? -- And Keith Courte took them by himself?

Keith Courte took them there in Mr. Holdcroft’s truck and delivered them to Julatten? -- And no-one has ever seen them since?

Well, do you deny that happened? You deny ----? -- I don’t know the cattle you’re talking about, I don’t know what’s going on. I’ve always denied it, I don’t ----

Alright. I have to put these matters to you to give you an opportunity, right? I’m suggesting to you that Mr. Keith Courte delivered the 60 head of cattle, which Mr. Holdcroft said he had sold to you, to Julatten in March/April ‘87?-- Yeah, I’m saying they were never delivered there.” [6]

I accept that the plaintiff has given a truthful account on this issue.
[6]Transcript 67/30-55

Having found that there was no sale by the defendant to the plaintiff of the 60 steers, I accept that the $14,000 paid by the plaintiff to the defendant was indeed a contribution to the partnership. I accept that this was payment for a half interest in the defendant’s then herd which was to become the opening cattle numbers for the partnership.
The task then is to identify the composition of the herd by number and cattle type. Again the defendant was unable to produce any documentary evidence of the makeup of his herd at that time.
The plaintiff’s estimate that the herd consisted of approximately 60 head of cattle was intended to be no more than an estimate. No count was ever taken by the plaintiff. From his point of view he simply responded to the defendant’s request that he pay $14,000 for half interest in the herd then depastured at the Middle Creek property.
Much was said about the value of the herd. If, indeed, it consisted of only 60 head the average price per beast was $466.00 which would be a high price for mainly breeding stock. This amount compared with the book value of $117 per head described to the cattle in the PG & LH Holdcroft financial returns for the year ending 30 June, 1987 (ex. 22 p.73).
I should note that beyond the fact that the partnership agreement was to the effect that there would be equal contribution and equal share of profit by the partners, the dealings were not really conducted at arm’s length. The parties were related and at the time of going into partnership appeared to have been on friendly terms. I accept that the plaintiff did visit the Middle Creek property of the defendant and his wife from time to time and on occasion gave assistance in the working of the property. From this fact the plaintiff would have a general idea of the cattle numbers under the defendant’s control and the carrying capacity of Middle Creek. At the same time I expect the defendant had some knowledge of the plaintiff’s capacity to raise money and had no hesitation calling upon him to contribute by the end of June, 1987 a further sum of $20,000 for the purchase of cattle and again on 1 July, 1988 to pay $12,000 for the next year’s rent. Neither of these last two monetary contributions by the plaintiff appear to have been matched by the defendant at the time they were made. Consequently I take the view that at the time when the partnership was formed there was no intention of precisely measuring the value of the cattle which constituted the initial herd in money terms in order to determine the dollar value of contribution made by the defendant. Rather I find that the defendant accepted the $14,000 for his half interest in the herd which became the opening herd of the partnership.
Middle Creek was a combined grazing and lucerne producing property. Some 70 acres were given over to lucerne and seed production. The defendant was actually involved in this undertaking. The balance of the land of 98 acres and the 80 acre water reserve would not support a large herd for an extended time. Consequently I would expect that herd numbers varying between 150 - 200 beasts as what would be expected on this type of property. The stock figures set out in the financial returns (ex. 22 p.73) support this understanding of the cattle producing activity.
Also the financial accounts disclose that in the year ending June, 1987 proceeds from cattle sales were $70,718.00. The natural increase was shown as 10 which does not indicate that the herd was kept primarily for breeding. The mix of cattle one would expect to find in the type of country at Middle Creek is different to that expected in the area where Wooroora was located, as the latter was suitable only for a breeding herd.
I reject the defendant’s claim that the herd he transferred from Middle Creek to Wooroora numbered 560 head. Save for the letter from Elders of 17 July, 1987 (ex. 7), again there is no documentary evidence to support his having this number of cattle. There are no travel permits for the transportation of these cattle, no record of them having been in his possession and, in fact, the presence of such numbers of cattle is contrary to the disclosure in the defendant’s 1986/87 tax return. The closing stock number provided in this return is 195 head at a book value of $117.53 - a total of $22,918.35. (Ex. 22 p.73)
I regard the letter from Elders as not indicating that 560 head of cattle were counted at the time of its being written. The stock mortgage which was required to support the overdraft facility was in fact not executed until 5 January, 1988 by which time there would have been approximately that number of cattle. The opening herd had been built upon through natural increase and through purchases of new stock to 5 January, 1988 totalling 331 head.
The defendant gave evidence that a physical count of cattle was undertaken by Mr. Magoffin and Mr. Dickenson of Elders but neither were called. Nor were either of the neighbours on whose property some of this herd was alleged to have been depastured. No cogent explanation is given why these people were not called to give evidence on an issue which was so central to the defendant’s contentions.
The approach adopted by the defendant was to apply notional calving rates to assumed herd numbers in an effort to establish the original cattle numbers and the likelihood of the stock numbers set out in the Elders projection of future cash flow (ex.7). I do not accept that the defendant has correctly described the cattle purchased. For example, he described 21 head purchased on 5 November 1987 as “maiden heifers” (152/55) when the Elders records (Ex. 21 doc. 5) shows them as “cows”. The approach adopted is not at all compelling unless the closing cattle numbers, herd mix and accepted calving rates are agreed. There was no such consensus in this case. Nor indeed is the defendant’s explanation of the presence of such a large herd at Middle Creek convincing. The defendant gave evidence that the sale of his interest in Reigate Station was in exchange for 300 head of cattle. When cattle in excess of this number were mustered he acquired the balance numbers which in evidence were called “reject cattle”. This occurred in 1985. It is unlikely, in my view, that the defendant would have held such cattle for the 2 year period to the commencement of the partnership. He certainly could not do so on his Middle Creek property and it is unlikely that any informal arrangements with neighbours would go on for such a time. If so, the evidence ought to have been called and perhaps an explanation given for the high level of sales in 1986/87. Also Mr. Courte’s evidence paints a contrary picture - of the defendant initially being involved in “only lucerne” and then building up a herd (137/25-30).
The suggestion that the defendant contributed 560 head of cattle whilst seeking only a $14,000 contribution from the plaintiff is so contrary to the notion of equal contribution that it is bound to be scrutinised closely. There is no record, independent or otherwise, of the transaction nor of the existence of such numbers or their transportation to Wooroora. In the absence of any demand on the plaintiff for greater financial contribution the suggestion that such cattle numbers were transferred by the defendant would make a mockery of the agreed intention to make an equal contribution. There was no such demand on the plaintiff.
Whilst it is not possible to be precise about the number of cattle contributed by the defendant I feel I should be guided by two documents. Firstly, the financial statements accompanying the initial tax return. This return was signed by the parties on 6 September, 1988 and appears to have been prepared probably at the same time as the financial statements for the year ending June, 1988. Bearing in mind that the instructions given to the accountants for both sets of documents were given exclusively by the defendant, he must take responsibility for any inaccuracy in those amounts. From these I note that the average cost per head acquired on behalf of the partnership at sales to 30 June, 1988 was $144.41 (ex.1 annexure 2).
The second document is a journal entry made by Dewsbury’s associated with the cattle purchases for the 1986/87 financial statements (ex.21 doc 29) which notes -
“Include: 50 purchases via Elders account prior to 30.6.87 but not taken into account in 1986/87

: 175 transferred from Philip and Lenora”

This entry was made subsequent to October 1989 and the sale of Middle Creek and therefore was made at a time when the defendant would have been conscious of the need to finalise the partnership accounts. The book value ascribed by him to those cattle is $20,568.

The cattle purchases shown in the 1986/87 return is incorrect. It shows 124 head which relates to purchases made by the partnership on 23 June and 1 July, 1987 but ignores other purchases and sales identified in the older statements. Nor is the return correct in respect of the capital contributions made by each of the partners. The financial returns for the 1987/88 year continue the errors identified in respect of the earlier account.
In the course of the hearing, the plaintiff’s counsel indicated a preparedness to accept that the number of cattle delivered by the defendant was 175 head (116/20). Whilst this is somewhat higher than the estimate made by the plaintiff in his evidence, it seems to me to be the count most likely to be accurate. Not all the cattle contributed by the defendant were transported to Wooroora. The steers remained at Middle Creek for later sale. Further, the plaintiff’s estimate may not have taken into account cattle depastured on the water reserve or in a neighbour’s property.
In the end result I find that the contribution of cattle made by the defendant at the commencement of the partnership was 175 head which had a book value of $20,568. If those cattle were similar to the type of stock subsequently purchased it is reasonable to apply that average market value of $144.41 per head i.e. a total of $25,271.75. Even if the value of the herd contributed was higher than this amount it is unlikely to be a great deal higher than $28,000. It seems to me that the plaintiff’s cash contribution of $14,000 was based on a reasonable estimate of the value of the defendant’s herd and it therefore constituted, as between family members, an attempt at achieving equality of contribution.
As to the cattle numbers at the time when the partnership activity ceased, the record to which I give most credence is the plaintiff’s diary note of 4 December, 1988. This was a contemporaneous record made when there was no indication of disputation and no purpose other than accurately recording cattle numbers according to the musters done over a 2 month long period. The herd mix then recorded was -
705      Breeding cows
300-400          Calves
22     Bulls
80     Heifers
167      Steers & Spays
Total    1274-1374      head
Such a total is similar to the 1,347 cattle number adopted in the cash projection document prepared by Elders (ex.7) in January, 1989.
During the month of January, 1989 the activity of the partners was centred on the Chillagoe joint venture. The only record of cattle movement between that muster and 28 February was the sale of one beast for the sum of $225. The plaintiff was cross-examined about the value of various classifications within this herd but I do not regard the outcome of the cross-examination as being sufficiently reliable for me to form any estimate of value. Rather it seems to me to be a matter of expert opinion unless the parties themselves are able to agree.
I am informed that the parties have reached agreement in relation to the disposition of assets other than cattle and I assume that the terms of that agreement will be passed onto those responsible for the preparation of the final accounts. Accordingly, I make no finding in respect of those items.

Because of the findings made above, the partnership annual accounts will have to be redrawn. I do not believe it necessary therefore to comment on Mr Mier’s accounting approach about which he was cross-examined. Nor in the circumstances need I comment on the document prepared by Mr Davies-Griffith (Ex. 20) which relies upon the earlier accounts.
In summary then the findings I make on the issues raised are:-
1.By his payment of $14,000 to the defendant, the plaintiff made an equal contribution to the initial herd of the partnership. The $8,000 from that said amount paid by the defendant to the partnership account is a further contribution to capital by him as is the payment of $20,000 by the plaintiff a further capital contribution by him. From this finding, it follows that the entry in the Capital Contribution Summary (Ex. 1 Annexure 4):-
"HOLDCROFT Transfer of Cattle $20,568"
should be deleted.
2.The partnership ceased on 28 February, 1989. Thereafter all transactions, whether made in the partnership name or not, should not be regarded as partnership activity save for any steps necessarily involved in the winding up of the affairs of the partnership.
3.The composition of the partnership herd as at 28 February, 1989 is as I have found in paragraph 53 hereof. Unless the parties reach agreement as to the notional value of such a herd by 1 June, 1999, I direct that Mr Mier, for the purpose of taking the accounts of the partnership at his discretion, obtain and rely upon expert opinion as to the likely value of such a herd as at 28 February, 1989.
I direct that partnership accounts now be prepared having regard to the
findings made above.
I give liberty to apply to the accountant and to the parties in respect of any further queries relating to the preparation of these accounts.
Costs of and incidental to this determination will be costs in the cause.

[1999] QSC 98

30 April 1999