P & R Electrical Wholesalers Pty Ltd v Mainco Pty Ltd & Ors - [2005] SADC 136

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
P & R ELECTRICAL WHOLESALERS PTY LTD v MAINCO PTY LTD & ORS
Judgment of Her Honour Judge Kelly
11 October 2005
PARTNERSHIP - ACTIONS BY AND AGAINST PARTNERS
Plaintiff's claim based on alleged breach of dissolution agreement. Validity of agreement challenged. Agreement allegedly induced by duress, misrepresentation and unconscionable conduct on part of plaintiff and third parties. Breach of fiduciary relationship. Defence and counter-claim by defendants based on unresolved partnership disputes. Held, dissolution agreement valid and enforceable. Judgment for the Plaintiff. Counter-claim and third party notices dismissed.
Trade Practices Act (Commonwealth) 1974; Fair Trading Act 1987, referred to.
Magnacrete Ltd v Douglas-Hill (1988) 49 SASR 567, applied.
Micarone & Ors v Perpetual Trustees Australia (1999) SASR 1; Commonwealth Bank of Australia v Amadio & Anor (1982) 151 CLR 447; Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563, considered.

P & R ELECTRICAL WHOLESALERS PTY LTD v MAINCO PTY LTD & ORS
[2005] SADC 136

The plaintiff seeks judgment in the sum of twenty nine thousand dollars ($29,000.00) plus interest and fees under a written agreement (dated 18 December 1997) between the plaintiff and the first, second and third defendants. In the alternative, if the agreement of 18 December 1997 is void or unenforceable by the plaintiff, then the plaintiff claims the sum of three hundred and thirty six thousand nine hundred and fifty dollars ($336,950.00) from the first defendant, which it claims is owed pursuant to the terms of a partnership agreement between the plaintiff and the first defendant entered into in July of 1990.
The pleadings in this matter became very complicated and it is necessary to clarify at the outset that Mr Robertson appeared for the plaintiff, each of the first, second, third and fourth third party defendants.
Mr Hercules Tsakalidis the second defendant appeared in person. When clarification was sought as to who was representing the first defendant and the third defendant the second defendant provided an authority from the company and Mrs Tsakalidis. Accordingly I considered that Mr Tsakalidis should have leave to appear in person for both the first defendant and the third defendant.
Background to the Plaintiffs’ claims:
The plaintiffs’ claim was originally issued in the Magistrates Court on 23 October 2000. In order to understand the various claims and counter claims made by the parties in this action it is necessary to set out some of the history of this litigation.
The plaintiff claims that both the plaintiff and the first defendant operated a partnership which commenced in about July of 1990 trading under the name “Waterfall Terrace Apartments”.
The plaintiff then asserted that on 18 December 1997 the parties entered into an agreement to dissolve the partnership on the terms set out in a document (“the Dissolution Agreement” (exhibit P1 tab 5)).
At the date of dissolution there was a partnership debt to the National Australia Bank in the sum of fifty eight thousand dollars ($58,000.00), the plaintiff claims this debt was to be met equally by the plaintiff and the first defendant.
In June of 2000 the plaintiff discharged the liability of the first defendant to the National Australia Bank. Hence the plaintiff’s claim for contribution from the first, second and third defendants for half of the debt, namely the sum of twenty nine thousand dollars ($29,000.00).
The defendants filed a defence and counter-claim on 14 November 2000, asserting that the agreement of 18 December 1997 was signed under duress. The first defendant Mainco Pty Ltd counter-claimed the sum of thirty thousand dollars ($30,000.00).
The action was transferred to the District Court on 12 December 2000. Since that time the plaintiff’s original simple claim has developed into a much more complicated dispute.
There were a number of interlocutory proceedings and applications by one party or another in the District Court as a result of which amended statements of claim and amended defences and counter-claims were issued. Finally, given the nature of the pleadings as a result of these amended claims, third party notices were issued joining as third party defendants the two current directors of the plaintiff namely Nicholas Robert Pappas (third, third party defendant) and John Rhigas (fourth, third party defendant) as well as the original directors of the plaintiff namely George Nicholas Pappas (first, third party defendant) and George Rhigas (second, third party defendant).
In response to the original defence filed by the defendants a further amended statement of claim was filed on 27 June 2001. In that statement of claim the plaintiff raised the alternative claim, in effect, that if the dissolution agreement of December 1997 was to be set aside then the defendants would be liable to the plaintiff in respect of losses incurred by the partnership over the relevant years prior to 1997 which losses were said to be in excess of nine hundred thousand dollars ($900,000.00).
Consequent on that amended statement of claim the defendants filed an amended defence and counter-claim on 6 November 2001. That document set out a substantially different basis for the defence and raised a whole series of new allegations with regard to the sharing of losses while the partnership was not making a profit. The defendants alleged that the plaintiff would bear all losses on that contingent basis.
Consequent on that amended defence and counter-claim, and after much interlocutory activity the plaintiff filed a second further amended claim on 12 August 2003. It is on the basis of that pleading that the plaintiff proceeded to trial in this Court.
In that second further amended claim the plaintiff asserted that the plaintiff and the first defendant operated the business known as “Waterfall Terrace Apartments” pursuant to a partnership agreement dated 19 July 1990. The business involved the acquisition and strata title of an apartment block at Burnside.
The partnership agreement according to the claim was dissolved by agreement in writing dated 18 December 1997. It was a term of the partnership dissolution agreement that the debt referred to as the partnership debt due to the National Australia Bank (‘NAB”) in the name of the partnership would be met equally by the plaintiff and the first defendant.
The dissolution agreement also provided that each of the defendants would indemnify the plaintiff in respect of any call made by the NAB on the plaintiff to satisfy the debt. That debt, at the time of the dissolution agreement, was allegedly fifty eight thousand dollars ($58,000.00).
On 25 December 1997 the NAB refinanced the debt at the request of the plaintiff and the first defendant as a fixed rate short term interest only loan in the name of the plaintiff and the first defendant. Over the next eighteen months interest accrued which was paid by the plaintiff.
The plaintiff goes on to allege that in April of 1999 the NAB debt was restructured again by reduction of the debt to twenty nine thousand dollars ($29,000.00) and the establishment of a second account in the same amount (being the remaining 50%). On 1 September 1999 the plaintiff paid out the amount remaining in the first account.
A third account was established in the name of the plaintiff in the sum of twenty nine thousand dollars ($29,000.00). Presumably that was done to identify the amount owed by the first defendant and to isolate the liability of the first defendant as alleged by the plaintiff. The plaintiff continued to serve the NAB debt as pleaded in paragraph 13. The plaintiff claims from the first defendant the principal, interest and fees incurred on that account since about April 1999. The total amount according to the statement of claim at the date of filing the statement of claim was forty seven thousand three hundred and thirty nine dollars and fifty eight cents ($47,339.58).
The alternative claim by the plaintiff is set out in paragraph 18 on the basis that the dissolution of the partnership deed is unenforceable. It is obvious that the alternative claim, which is based on the plaintiff’s claims about the nature and terms of the partnership agreement which operated between the plaintiff and the first defendant between July 1990 and December 1997, is the plaintiff’s response to the possibility that the dissolution agreement may be void and/or unenforceable.
In essence, the plaintiff claims the first defendant’s contribution for the partnership losses during the period when the plaintiff alleges that both the plaintiff and the first defendant were jointly liable for partnership losses.
As a consequence of the plaintiff’s amended further claim on 12 August 2003, the defendants filed a second further amended defence and counter-claim on 14 May 2004. It is that pleading which is the basis of the dispute in this trial. The second further amended defence and counter-claim is some 22 pages in length.
The defendants admit the partnership agreement of July 1990.
The defendants asserted that the partnership agreement expressly provided that the plaintiff would bear all losses until the partnership made a profit.
There are a number of other issues raised in the further amended defence and counter-claim generally as follows.
At paragraph 2.5 the defendants raise allegations against George Pappas and George Rhigas as agents for the plaintiff. The defendants assert that the plaintiff agreed with Hercules Tsakalidis (the second defendant) that the plaintiff would be responsible for the financing of all partnership losses including the NAB liability.
According to the defence this agreement was in or about July of 1990. The defence does not assert specifically whether the oral agreement was prior to, or subsequent to the signing of the partnership agreement on 19 July 1990. It appears that this oral agreement is different from the written terms of the partnership agreement and the question therefore of whether the oral agreement was made prior to the entering into the written agreement, or subsequent to that agreement is quite important. If the oral agreement was prior to the written agreement then it would seem that the terms of the written partnership agreement would prevail over any oral agreement prior to that. If it was made subsequent to the signing of the written partnership agreement it would have to have been made by mutual agreement pursuant to the terms of the written partnership agreement itself in clause 18. If that is correct, it was an odd partnership arrangement.
The defendants allege that the express written and oral terms of the partnership were from time to time varied by mutual agreement between George Pappas and George Rhigas for the plaintiff on the one hand, and Hercules Tsakalidis (the second defendant) on behalf of the first defendant on the other part.
The defendants allege that one of the variations was that from in or about mid 1995, the plaintiff would sell off the balance of unsold units at whatever price the market could generate in order to wind up the partnership at the earliest possible time, in exchange for which, the plaintiff agreed to be solely responsible for the full extent of any shortfall between the proceeds of sales, and the partnership liability to the NAB both then and at the dissolution of the partnership.
Once again that would be an odd arrangement, if as the defendants allege, the agreement from its inception was that the plaintiff would bear all losses incurred by the partnership unless and until the partnership ever made a profit.
The defendants specifically plead that the dissolution agreement was entered into under duress. Paragraph 3 of the defence deals with the specific facts on which the defendants rely to establish duress. Although it is a convoluted pleading, it seems to turn on the alleged knowledge of both the plaintiff and the defendants by the counter-claim of certain information, in relation to the first and second defendants affairs at the time of entering into the dissolution agreement.
The defendants further allege that each of the plaintiff and the defendants stood in a fiduciary relationship, in particular, in that the plaintiff and the first defendant were partners in the partnership and, because the second and third defendants were directors of and shareholders of the first defendant. In essence, the same facts relied on to establish duress are relied on in paragraph 4 of the defence to establish the breach of fiduciary relationship.
The defendants plead that as a result of the duress and presumably the other matters raised in paragraph 3 of the defence, the requirement that the defendants enter into the dissolution agreement was unconscionable both in equity and contrary to the Trade Practices Act 1974 and the Fair Trading Act 1987. A further allegation is made that the conduct engaged in by the plaintiff in requiring execution of the dissolution agreement was both misleading or deceptive within the meaning of s52 of the Trade Practices Act 1974 (Commonwealth) and s56 of the Fair Trading Act 1987 (SA).
The balance of the defence and counter-claim raises other issues and alleged breaches of the partnership agreement by the plaintiff and the defendants by the third party claim. They relate to allegations that the plaintiff contributed to the losses sustained by the partnership as a result of various failures to prosecute appeals from the planning tribunal in relation to the refusal to allow the strata titling of the 26 units, selling the units at a time when the market was depressed against the express wishes of the defendants, and changing designs and other things within the units which affected their marketability and value generally.
The counter-claim raised a number of new issues. The defendants claim that it was in February of 2002 that the defendants first became aware of the fact that, funds raised on the basis of additional security provided by the second and third defendants in the form of the NAB mortgage over their home, were used to advance the plaintiff’s own business and not the partnership business.
The defendants allege that in making the representations back in 1992 when the security was given the plaintiff had made false and misleading representations as to the purpose for which that security was required.
The defendants allege that in relying on that misrepresentation they executed the mortgage which ultimately rendered them liable for the NAB debt contrary to the terms of the partnership as varied between them orally.
It is further alleged that this misrepresentation also involved the breach of fiduciary relationship between the plaintiff and the defendants and, the defendants by counter-claim.
The balance of the counter-claim goes on to assert moneys due and payable to the defendants, pursuant to the defendants contractual entitlements from the partnership for work done by the second defendant, and, other issues which arose at the time of the formation of the original partnership agreement.
Many of the issues raised by the defendants in the amended defence and counter claim raise complicated and long standing partnership issues. They are issues which were raised for the first time by the defendants in the pleadings after the commencement of this action in October 2000.
The defendants claim to have become aware of one of the misrepresentations material to the duress argument only on 20 February 2002 in a conversation between Hercules Tsakalidis (the second defendant) and George Rhigas who, allegedly made an admission during that conversation, on behalf of the plaintiff, that in fact the extra funds raised by the plaintiff as a result of the NAB mortgage security given by the second and third defendants over their property, was for the plaintiff’s own purposes and not for the purpose of the partnership.
I repeat that although the matter became complicated by the course the pleadings took, particularly in relation to the issuing of the third party proceedings the issues at trial boiled down to allegations made by the defendants of conduct which in the defendants submission was unconscionable and amounted to duress with the result that the dissolution agreement signed on the 19^th December 1997 was void and unenforceable. That is a summary of the background of the pleadings and I turn now to the evidence which was led at the trial.
Evidence at Trial:
In support of its claim the plaintiff relied wholly on documentary evidence contained within two booklets (exhibits P1 and P2).
The defendants presented their case partly by the presentation of documentary evidence and partly by oral evidence. By consent the Court received in effect two statements (exhibits D1 and D7) from the second defendant (who appeared on behalf of all defendants at the trial).. Those statements were supplemented by oral evidence from the second defendant and he was cross examined.
The second defendant also called the four third-party defendants. The evidence elicited from the second, third and fourth third-party defendants, that is George Rhigas, Nicholas Pappas and John Rhigas was for all practical purposes not of any use in determining the factual issues raised on the pleadings.
I make the general comment that many of the factual issues raised by the defendants as to the terms of the partnership agreement and in particular, any variations which might have been mutually agreed orally from time to time, were never put to the witnesses and there is simply no evidence of them from any other source. That is so, even with regard to the most crucial of the partnership issues which was whether the plaintiff had indeed agreed to bear all of the losses of the partnership as repeatedly alleged by the second defendant. There is simply insufficient evidence on which to make any factual finding on many of these issues, however, upon the view that I have taken of the issues in this matter, it is not necessary to explore any of those outstanding partnership matters further.
I have concluded that there is essentially one preliminary issue to be decided and that is, the question whether on 18 December 1997 the plaintiff and the defendants with full knowledge of the various issues between them did enter into an agreement in which they sought to finally resolve all those issues between them.
The next question is whether that agreement was entered into as alleged by the defendant as a consequence of duress and/or misleading and deceptive conduct on the part of the plaintiff and the defendants by third party claim.
If I were to conclude that the deed of dissolution was entered into by the parties with full knowledge of the outstanding issues between them, and at arms length, and with the intention of finally resolving these issues, and if I conclude that there was no duress or misleading or deceptive conduct inducing the defendants to sign the agreement, then that finding really obviates the necessity to explore the partnership agreement and its terms and suggested variations and consequential issues.
On the other hand, if I were to conclude that the deed of dissolution was not entered into validly or for other reasons is not enforceable then it will be necessary to revisit those outstanding issues. Some of those issues as I said involve the question what the terms of the partnership agreement were, whether they were contained within the written partnership agreement and/or whether they were varied at any stage, and if so, when and in what terms, who contributed what assets to the partnership and who paid what and finally, whether the initial loss period as defined in the partnership agreement was in fact the period of 12 months as alleged by the plaintiff, or for the whole of the partnership agreement until and unless the partnership made a profit as alleged by the defendants

I turn now to the issue of whether the agreement of dissolution on 18 December 1997 is valid and enforceable as alleged by the plaintiff.
There is in fact no dispute that there was a partnership in existence between the plaintiff and the first defendant from 19 July 1990.
It is on that footing that the deed of dissolution (exhibit P1 tab 5) was signed.
The first thing to note about that agreement is that it was signed by the parties, dated 18 December 1997 and it has been stamped. On its face the document contains an agreement representing the minds of the parties.
The defendants have contended that the agreement is not enforceable for three reasons, first that it was entered into under duress, second that it was procured unconscionably, and third that it is the consequence of a breach of fiduciary duty.
I remind myself that the onus of proving that the agreement is not enforceable is upon the defendants who must establish this on the balance of probabilities.
The facts surrounding the execution of this agreement are as follows. Some time in 1997 there were discussions between the parties as to the discharge of the mortgages held as security by the NAB for the partnership debt.
There is some dispute between the plaintiff and the defendant as to who initiated discussions as to the termination of the partnership. The first defendant claimed that the proposal came first from the plaintiff or his solicitor Mr Patsouris. The plaintiff claims that the first approach came from the first defendant who wished to have the mortgage in relation to his Toorak Gardens home discharged. Nothing turns on who initiated the discussions because it is not in dispute that there were extensive discussions between the parties, and at least some of these occurred prior to a meeting on 24 November 1997 at the offices of the plaintiff’s solicitor Messrs. Harry Patsouris & Associates.
The notes of Mr Patsouris of that meeting of 24 November 1997 were tendered by consent (exhibit D7 pp99-105) and Mr Patsouris explained so far as he was able to recall the context of some of his notes. What they do reveal is that there were extensive discussions even on that day as to the method by which the parties would resolve their differences.
On 5 December 1997 the first defendant sent a draft agreement typed by his wife to the office of Patsouris & Associates. (exhibit P3) The accompanied handwritten note dated 4 December 1997 referred to an agreement between P & R Electrical Wholesalers Pty Ltd and Mainco Pty Ltd and comments namely “Draft agreement please prepare documents asp”. That fax was signed by the second defendant.
Some time after that Mr Patsouris sent what has been referred to as the first draft of the agreement (exhibit D7 p84). The second defendant made various changes to that document, evident on the face of the document itself and sent it back to Mr Patsouris.
There followed a second draft of the agreement (exhibit D7 p90). The second draft substantially adopted corrections made by the second defendant to the first draft. There must have been further discussions about that document because the final agreement (exhibit P1 tab 5) is substantially in the form of the second draft (exhibit D7 p90) but with some minor amendments.
The final agreement which was signed by the parties also contains two deletions at paragraphs 10 and 11 of that document. Those deletions were at the instigation of the defendants. It can be seen that the deletion of those clauses was to the benefit of the defendants and not the plaintiff. The second defendant said that he and his wife executed the document and had the company seal placed on it and initialled their amendments before returning it to the offices of Patsouris & Associates.
On Christmas Eve of 1997 the first defendant paid thirty thousand dollars ($30,000) to the National Australia Bank in exchange for which the bank then discharged the second mortgage.
That seems to be the undisputed history behind the signing of the dissolution agreement of 18 December 1997. It is against that background that the first defendant now claims that the agreement was procured under duress and or in the alternative by conduct which was unconscionable. The defendants contend that the duress which caused them to enter into the deed of dissolution was duress by reason of the economic pressure they were under at that time to settle on a property which they had purchased in Victoria for a price in excess of $1.24 million.
The comments of Perry J in the case of Magnacrete Ltd v Douglas-Hill (1988) 48 SASR 567 are applicable to the facts of this case. He said at p.593
“If the defendants felt they had no alternative but to enter into the contracts in question with the plaintiff, this was a product of wider economic circumstances largely of their own making which were not produced by any conduct on the part of the plaintiff.
Pressure by a third party acting independently of the contracting parties cannot constitute duress so as to provide a ground for avoidance; see Smith v William Charlick Ltd per Issacs J (at 56):
“In Rolle’s Abridgement (p688) it is stated that duress by a stranger by procurement of the party who is to have the benefit is good cause of avoidance. It is clear that duress created by persons or circumstances unconnected with the party to a contract is no cause for impeaching the bargain with him”
The particulars relied on in support of the allegation of duress are contained in paragraph 3 of the defendants’ defence. Insofar as I can understand it, the defendants are alleging that there were a number of facts which the plaintiff knew or ought to have known at the time of entering into the deed of dissolution, as a result of which the requirement that the defendants enter into that deed before the discharge of the NAB mortgage would be permitted, was unconscionable.
The difficulty which is faced by the defendants is that although George Pappas, George Rhigas, John Rhigas and Nicholas Pappas were called by the first defendant none of the matters contained within paragraph 3 of the defence were ever put to those witnesses. Indeed, when Mr George Pappas was questioned by the second defendant on some of these topics he denied being aware of the state of the first defendant’s assets either at the time of entering into the partnership or subsequently and none of the other matters were put to him. I accept Mr Pappas’ evidence. In my view he was an honest witness doing his best to recall events which occurred many years ago. Where his evidence conflicts with the second defendant’s evidence, I accept Mr Pappas’ evidence and reject the second defendant’s evidence.
The second defendant in his evidence agreed that he had not revealed the extent of his indebtedness in relation to the purchase of the Victorian property as he did not want anyone to know all of his family and financial affairs and in particular the fact that he had to borrow and give security in relation to some of his own family’s properties. In addition, the second defendant conceded that he had entered into the contract for sale of his property at Toorak Gardens before he ever approached the NAB about the discharge of the mortgage
The facts pleaded in paragraph 3.2 of the defence have not been proved to have been known by either George Rhigas or George Pappas. Even if those facts were known to Mr Pappas and Mr Rhigas it is difficult to see how they could be relied on as a basis for a claim for duress.
In relation to the allegations contained in paragraph 3.4 of the defence, I find that the defendants have not proved the existence of the agreements referred to in paragraphs 2.5 and 2.6 of the defence. Those agreements were the agreements allegedly entered into in oral conversations between the parties in or about July of 1990 and in mid-1995 when there was a further agreement allegedly that the plaintiff would be responsible for the full extent of any short fall between the proceeds of the sale of the units and the partnerships liability to the NAB. There is no evidence of such conversations occurring at any time and I am unable to accept the second defendant’s assertions that they did. Indeed, the defendant’s evidence that conversations as alleged in paragraphs 2.5 and 2.6 of the Defence occurred was, itself, vague and lacking in specifics as to time, place, who was present and what the precise conversation was.
The suggestion that the mortgage executed by the second and third defendants in favour of the NAB over the Toorak Gardens property in 1992 was for the benefit of the plaintiff on borrowings that were not related to the partnership, was specifically denied by Mr George Pappas in evidence. Whilst conceding that the mortgages given by the plaintiff in relation to the partnership included borrowings unrelated to the partnership Mr Pappas made it clear that the mortgage given in relation to his property was to secure the borrowings for the purpose of the partnership as well.
As to the remaining matters asserted in paragraph 3.4 insofar as they are relied on as establishing duress the matters raised in paragraphs 3.4.7, 3.4.9 and 3.4.10 are simply not matters which the defendant has proved were in the knowledge of the plaintiff or any of the witnesses George Pappas, George Rhigas, John Rhigas and Nicholas Pappas.
There is an allegation in paragraph 3.5 that the knowledge of the two directors, George Pappas and George Rhigas, and the knowledge of the solicitors to the plaintiff was the knowledge of the plaintiff, and vice versa.
There is no doubt that in various circumstances the knowledge of directors of a company will be sheeted home to the company: see for example s84 of the Trade Practices Act and the High Court in Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 where the Court said:
“Their (meaning the directors) knowledge was the knowledge of Eurolynx, for they were the persons who were responsible for the initial negotiations and who set the scene in which the representations had been made ..... A division of function among officers of a corporation for different aspects of the one transaction does not relieve the corporation from responsibility determined by reference to the knowledge possessed by each of them.”
However, on the facts as I find them to be, even if the knowledge of one director as to the existence of the mortgage over the defendant’s Toorak property was by virtue of that principle deemed to be knowledge of the company and of each other, then it is not knowledge which of itself is relevant to the issue of duress. There is no evidence that either George Pappas or George Rhigas or indeed the solicitors for the plaintiff had any knowledge of the difficulties faced by the second defendant in completing the purchase of the Victorian property or indeed that they were even aware of the fact that the second and third defendants had signed a contract for the purchase of a property in Victoria at the time when the negotiations in relation to the dissolution of the partnership were commenced.
The defendant alleged that the delays in the release of the NAB mortgage on the Toorak Gardens property caused the defendants to default in their settlement of the Victorian property resulting in penalties of seven thousand dollars. There is simply no evidence of this before me. Even if true, the relevance of this fact to the issues at trial has not been established.
The allegations of duress really boil down to an allegation that the insistence on the payment of thirty thousand dollars ($30,000.00) by the defendants in reduction of the partnership debt to the NAB and the refusal to allow the discharge of the second mortgage over the defendants Toorak Gardens property until this was paid was the unconscionable conduct or was the conduct itself which constituted the duress.
There is nothing in the evidence about the dealings between the parties in the weeks leading up to the execution of the dissolution agreement on 18 December 1997 which leads to any other conclusion than that the signing of the agreement on 18 December 1997 was a voluntary decision on the part of the second and third defendants after a reasonably protracted period of negotiation during which there were amendments and deletions made from a number of drafts at the instigation and request of the second and third defendants. For the reasons I have already given there is no evidence that either the plaintiff or any of its directors or George Pappas or George Rhigas had any knowledge of the financial circumstances in which the second and third defendants then found themselves. Even if there had been evidence of these matters, again, their relevance to the issue of duress has not been established.
The defendants alleged that the conduct of the plaintiff and the third parties constituted unconscionable conduct. The principles in this area of the law appear to be reasonably well settled. In Magnacrete Limited v Douglas-Hill (supra) Perry J at p593 said:
“The principles governing this branch of the law are summarised in the following passage in the judgment of Deane J in Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 474:
”The equitable principles relating to relief against unconscionable dealing and the principles relating to undue influence are closely related. The two doctrines are, however, distinct. Undue influence, like common law duress, looks to the quality of the consent or assent of the weaker party: see Union Bank of Australia Ltd v Whielaw (1906) VLR 711 at 720; Watkins v Coombes (1922) 30 CLR 180 at 193-194; Morrison v Coast Finance Ltd (1965) 55 DLR (2D) 710 at 713. Unconscionable dealing looks to the conduct of the stronger party in attempting to enforce, or retain the benefit of, a dealing with a person under a special disability in circumstances where it is not consistent with equity or good conscience that he should do so. The adverse circumstances which may constitute a special disability for the purposes of the principles relating to relief against unconscionable dealing may take a wide variety of forms and are not susceptible to being comprehensively catalogued. In Blomley v Ryan (1956) 99 CLR 362 at 405, Fullagar J listed some examples of such disability: ‘poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary’. As Fullagar J remarked, the common characteristic of such adverse circumstances ‘seems to be that they have the effect of placing one party at a serious disadvantage via-a-vis the other’.
In most cases where equity courts have granted relief against unconscionable dealing, there has been an inadequacy of consideration moving from the stronger party. It is not, however, essential that that should be so: see Bloomley v Ryan (1956) 99 CLR 362 at 405; Harrison v National Bank of Australasia Ltd (1928) 23 Tas LR 1; but of Lloyds Bank v Bundy [1975] QB 326 at 337 and Cresswell v Potter [1978] 1 WLR 255 at 257. notwithstanding that adequate consideration may have moved from the stronger party, a transaction may be unfair, unreasonable and unjust from the view point of the party under the disability.”
Applying those principles to the facts which I find, there is no evidence that either the second or third defendant were under any special disability which was known or should have been known to any of the parties or which was used to place the second and third defendant under undue pressure such as to constitute unconscionable conduct either at law or in equity .
On the contrary I find that the dissolution agreement was entered into by the parties at arms length after extensive negotiation and discussion, and that at the time when the agreement was entered into the parties intended to do what the agreement says on its face, namely, they intended to determine the outstanding issues between them and make provision for the payment of a final partnership debt to the NAB.
The guarantee and indemnity (exhibit P1 tab 7) signed on 19 December 1997, one day after the dissolution agreement was signed, is consistent with the dissolution agreement signed the day before. No suggestion has been made that this document was signed under duress. It was witnessed by the bank manager and the document itself contains an acknowledgement within, that the signatories have had their attention drawn to the fact that they should obtain legal and financial advice before signing, and that they have voluntarily signed it.
I am satisfied that the second and third defendants had a proper understanding of the true nature and extent of the deed of dissolution.
On the second defendant’s own evidence he had known George Pappas since 1967, at a time when Mr Pappas Senior was a sub-contractor working in the building industry and the second defendant was supervising a project involving the Greek Orthodox Church in Franklin Street. The second defendant had been involved as an architect in a number of previous partnerships and development projects in and around Adelaide. He referred to some of them in his evidence (Exhibit D1) and in his oral evidence at court. The dissolution agreement was signed after extensive discussions and negotiation and the amendments and deletions referred to already. The second defendant is a man well versed in business transactions of this type. If he had not understood any of the terms in the agreement that he signed he had the resources to get assistance in having it explained it to him and the third defendant.
The fact that, at that time, the second and third defendants had an urgent and compelling reason to obtain the discharge of the second mortgage over their property from the NAB does not establish that the agreement was entered into under duress of the kind proscribed by law. Moreover there is no evidence that either of the defendants communicated that fact to any of the plaintiffs or the third parties.
I deal finally with the claim in relation to the breach of the fiduciary relationship. It is, as Mr Robertson pointed out in submissions, trite law that each of the partners stood in a fiduciary relationship to the other; that is, that P & R Electrical Wholesalers Pty Ltd and Mainco Pty Ltd were fiduciaries each in relation to the other. The Defence does not allege any breach of this relationship, nor is any breach established by the evidence. The defendants rely on the asserted knowledge of the plaintiff as to the defendants’ contractual obligations in respect of both the Geelong and Toorak Gardens properties against which the defendants assert that the plaintiff refused to allow the discharge of the NAB mortgage unless the sum of thirty thousand dollars ($30,000) was paid. I find there is no evidence that either George Pappas or George Rhigas or any officer of the plaintiff was aware either of the Victorian contract or the sale of the Toorak Gardens property home at the time when the dissolution agreement was entered into. Moreover the dissolution agreement in its terms was to divide equally between the parties the outstanding partnership debt of some sixty thousand dollars ($60,000.00). Against the background of all of the losses sustained by the plaintiff to that date, this division was distinctly advantageous to the defendant in any event.
For these reasons I do not intend to deal any further with the allegations in relation to the breach of fiduciary relationship as I find there is no factual or legal basis to support it.
The second defendant formed a belief, in his own mind, that the plaintiff would not sue for breach of contract should the defendants not honour their obligations under the dissolution agreement. I have formed the conclusion that the second defendant held this belief because of his longstanding friendship with George Pappas in particular, and George Rhigas. In the end, I have concluded that, notwithstanding the convoluted nature of the pleadings, the defendants’ do not have any defence to the plaintiff’s claim.

In the light of my conclusions on the evidence it is not necessary to deal with the plaintiff’s alternative claim.
In the light of my conclusion that the dissolution agreement is valid and enforceable it is not necessary to consider any of the defendants claims based on any outstanding and unresolved partnership issues.
For these reasons the plaintiff is entitled to have judgment entered in its favour.
I therefore order that:-
1The plaintiff have judgment in the sum of forty seven thousand three hundred and thirty nine dollars and fifty-eight cents ($47,339.58).
2The counter-claim by the defendants is dismissed.
3The third party claim against the four third parties is also dismissed.
I will hear the parties on the issue of interest and costs.