Palermo v Palermo - [2015] WASCA 49

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: PALERMO -v- PALERMO [2015] WASCA 49

CORAM: BUSS JA
NEWNES JA
MAZZA JA

HEARD: 23 & 24 OCTOBER 2014

DELIVERED : 13 MARCH 2015

FILE NO/S: CACV 10 of 2014

BETWEEN: ANTHONY PALERMO
Appellant
AND
JOHN PALERMO
Respondent

ON APPEAL FROM:
Jurisdiction              :  SUPREME COURT OF WESTERN AUSTRALIA
Coram  :McKECHNIE J
Citation  :PALERMO -v- PALERMO [No 2] [2014] WASC 6
File No  :CIV 2544 of 2013

Catchwords:

Contract - Various businesses operated by brothers through network of companies and trusts - Whether businesses operated in partnership - Whether inferred agreement that brothers share overall net wealth produced by all entities - Whether inferred agreement precluded as matter of law by company and trust structure

Legislation:

Nil

Result:

Appeal allowed
Decision of the primary judge set aside
Order for a new trial

Category: B

Representation:

Counsel:

Appellant: Mr C G Colvin SC & Mr N J Landis
Respondent: Mr M D Howard SC & Mr H H Jackson

Solicitors:

Appellant: Rockwell Olivier
Respondent: Gaden Lawyers (WA)

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

Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153
Brooker v Friend & Brooker Pty Ltd [2006] NSWCA 385
Crossman v Taylor (No 3) [2001] FCA 734
Ebrahimi v Westbourne Galleries Ltd (1973) AC 360
Fox v Percy [2003] HCA 22; (2003) 214 CLR 118
Friend v Brooker [2009] HCA 21; (2009) 239 CLR 129
Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41
Integrated Computer Services Pty Ltd v Digital Equipment Corporation (Aust) Pty Ltd (1988) 5 BPR 11
Meates v Attorney-General [1983] NZLR 308
Morgan v 45 Flers Avenue Pty Ltd (1986) 5 ACLC 222
Nassar v Innovative Precasters Group Pty Ltd [2009] NSWSC 342
Nominal Defendant v Saleh [2011] NSWCA 16
Palermo v Palermo [2013] WASC 412
Palermo v Palermo [No 2] [2014] WASC 6
Pilmer v Duke Group Ltd (2001) 207 CLR 165
Seymour v Australian Broadcasting Commission (1977) 19 NSWLR 219
Vogt v Legal Practitioners Complaints Committee [2009] WASCA 202
Vroon BV v Foster's Brewing Group Ltd [1994] 2 VR 32

BUSS JA: I agree with Newnes JA.
NEWNES JA: This appeal arises out of business activities in which the appellant and the respondent, who are brothers, were involved over a period of some 35 years. Those business activities involved property development, share dealing, corporate consulting, farming and an accounting practice. They led to the creation of a complex and extensive network of companies and trusts, commonly referred to in the litigation as the 'Palermo group' or the 'group entities'. After the appellant and the respondent fell out in 2011, a dispute arose as to the basis upon which the various businesses had been undertaken.
The appellant contended that it was to be inferred from their conduct over the years that there was an agreement between them that the businesses were to be conducted on the basis that the appellant and the respondent would share equally in the overall after-tax profit. The respondent denied that was the case and sought declarations to the effect that they were not partners in the businesses.
McKechnie J found that the appellant and the respondent were not partners and made the declarations sought by the respondent. His Honour dismissed the appellant's claim, concluding that such an agreement was precluded as a matter of law by the corporate and trust structures the parties had established to operate the businesses.
The appellant says that his Honour was in error in finding that the alleged inferred agreement was inconsistent with the corporate and trust structure and that in dismissing the appellant's claim his Honour failed to have regard to substantial evidence which supported the existence of that agreement.
It was common ground that if the appeal were upheld there would have to be a new trial.

Introduction

In light of the period of time and the range of activities involved, it is helpful to start with a broad overview.
After leaving school, the respondent, who is the elder brother by a little over two years, initially worked at the Commonwealth Bank before leaving to join the Auditor-General's department. At that time he commenced studying for accountancy qualifications and became a member of the Australian Society of Accountants in 1979.

The appellant also worked at the Commonwealth Bank after leaving school, at the same time studying for a builder's registration qualification. He obtained that qualification in about 1980. At about the same time he also obtained a real estate agent's licence and a settlement agent's licence.
Their business activities, however, had commenced somewhat earlier. In about 1973 or 1974, the appellant and the respondent bought a property in Scarborough, which they subsequently sold at a profit. That led them to purchase other properties, which they also sold at a profit. In each instance, the profit was shared equally between them.
In 1976, Palermo Holdings Pty Ltd was incorporated to carry on the property development business. In August 1984, it changed its name to Tomar Holdings Pty Ltd. As Palermo Holdings was generally referred to below as Tomar, I will do likewise. The appellant and the respondent were the directors and shareholders of Tomar, which was appointed trustee of the Palermo Unit Trust. It was also appointed trustee of the respective family trusts of the parties, the A Palermo Family Trust and the J Palermo Family Trust, which held the units in the Palermo Unit Trust in equal shares. It is common ground that all of the business activities of Tomar have been undertaken in its capacity as trustee of the Palermo Unit Trust. In 1982, PAJ Investments Pty Ltd became the trustee of the two family trusts in place of Tomar.
The property development business involved acquiring properties, developing them by constructing home units and then selling the completed home units.
After the incorporation of Tomar the profits of the property development business were distributed through the Palermo Unit Trust to the A Palermo Family Trust and the J Palermo Family Trust in equal shares.
In 1995, the property development activities of Tomar ceased and thereafter properties acquired for the purposes of the property development business were purchased by various companies as trustees of discretionary trusts. The beneficiaries of those discretionary trusts, either directly or through corporate vehicles, were the appellant and the respondent, and members of their respective families.
In the meantime, in about 1980, the respondent had commenced an accounting practice under the name J Palermo & Co, and Tomar became the service entity for the practice. The accounting practice assumed considerable significance in the proceedings.
There was a dispute between the parties as to when the appellant commenced working in the accounting practice. The appellant said he was performing some contract work for it from its inception, which he says was in or about 1978, and that, in March 1980, at the respondent's insistence, he paid the respondent the sum of $8,000 for a half interest in the practice. The appellant said he made the payment reluctantly because he considered that he already had a half interest in the practice. The appellant said that the accounting practice was carried on for their joint benefit, as demonstrated by the service fees charged to the practice by the service entity (initially Tomar and then Empal Pty Ltd and finally JDP Admin Pty Ltd) and by adjustments made to equalise their drawings from the practice income recorded in general ledgers of the practice and a scrapbook (exhibit A at the trial).
The respondent put the appellant's involvement at a later time and on a quite different basis. The respondent said that by the early 1980s he was concentrating on his accounting practice while the appellant ran the property development business. According to the respondent, in the mid‑1980s the appellant did not wish to continue with construction work and wanted to concentrate on property dealings, something which would not keep him engaged full‑time. The respondent therefore employed the appellant as practice manager of the accounting practice on a salary. In time, the appellant (who was not a qualified accountant) also became engaged in fee‑earning, but non‑accounting, activities of the practice. The respondent denied that the appellant paid $8,000, or any amount, for an interest in the accounting practice. The respondent maintained that the accounting practice was his alone, and the appellant was simply the practice manager and was never entitled to a share of the profits of the practice. The respondent said the scrapbook simply recorded cash drawings which in the appellant's case were to be reconciled against his earnings as practice manager and as a fee‑earner in the practice.
In 2000, Tomar ceased to be the service entity for the accounting practice of J Palermo & Co and was replaced by Empal, as trustee of the Empal Trust. The directors of Empal were the appellant and the respondent's son, also named John. Empal also provided secretarial services to public companies in which the respondent was involved.
On 4 April 2000, JP Corporate Pty Ltd was established to take over the corporate consulting work that had previously been undertaken as part of the accounting practice of J Palermo & Co. The respondent was the sole director and shareholder of JP Corporate. He contended that it always operated solely for his benefit. The appellant, however, maintained that JP Corporate operated for their joint benefit as evidenced by the managerial and service fees paid by JP Corporate to other group entities, initially Tomar, subsequently Empal and then JDP Admin. The respondent said that no such services were provided and he was unaware of the payment of such fees to those entities.
Again in 2000, Monarch Corporation Pty Ltd and a number of other companies were incorporated for the purpose of share‑trading. There was a dispute between the parties as to by whom and for whose benefit, as between the appellant and the respondent, those share‑trading activities were undertaken. The appellant said that the funds for share‑trading were provided by Tomar and the share‑trading was carried out principally by the respondent for the ultimate benefit of them both. The respondent denied that.
In 2005, part of the accounting practice of J Palermo & Co was sold to a new firm consisting of the respondent and a Duncan Melbin. At about that time, JDP Admin became the service entity for the practice, replacing Empal. Mr Melbin left the practice some months later. In early 2006, part of the practice was sold to Melsom Robson and, on 1 July 2006, the balance of the practice was sold to the respondent's son, John, and an employee of the practice, Davina Ruland. John Palermo (Jnr) and Ms Ruland thereafter practised under the name 'Palermo Chartered Accountants'.
There was a dispute between the parties as to the appellant's involvement in those sales and the way in which the proceeds of sale were dealt with. The appellant said that the sales were the result of a joint decision and the proceeds of sale were paid into Tomar with the object that they would be shared equally between the appellant and the respondent. The respondent, on the other hand, contended that the appellant's role was simply as practice manager and that he (the respondent) agreed to the funds being paid to Tomar on the basis that they be credited to his loan account.
Also in issue in the proceedings were farming activities conducted under the name of Palermo Farms. In 1992, one of the group entities, CMT Pty Ltd, as trustee of the MM Trust, purchased various farming properties in Pinjarra which it then leased to the respondent. A farming business was conducted on the properties in the respondent's name and rent was paid to CMT. The appellant contended that the farming business was carried on for their joint benefit as a means of reducing the taxation payable by the respondent on his income from the accounting practice, thereby reducing the tax burden on the overall income they shared. The respondent denied that was the case and said the farming business was always his own personal business. In 2010, the farming operations ceased to be carried on in the respondent's name and another group entity, Red Lancer Pty Ltd, as trustee of the Red Trust, undertook the farming operations.
In support of his contention of an agreement to share the overall after‑tax income from the businesses, the appellant also pointed to superannuation contributions to the Tomar Superannuation Fund which he said were made equally for the appellant and his wife on the one hand, and for the respondent and his wife on the other, although the group entities which made the contributions varied from time to time. The respondent did not deal with this in his evidence.
In 2011, the relationship between the appellant and the respondent broke down. That has led to a number of disputes between them concerning the control, management and financial affairs of the various companies in the group. At the heart of much of the controversy is a fundamental difference over the nature of the commercial relationship between them.
It is the appellant's position that there was always an agreement between them, to be inferred from the history of their dealings over the years in relation to the accounting practice, the property development business, the corporate consulting business, the share‑trading business, and the farming operation, that they would conduct their commercial affairs in their joint interests with the object of generating after‑tax wealth which they would share equally. That agreement, the appellant says, gave rise to either a partnership between them in respect of the shareholdings that gave control of the companies and trusts, or alternatively a relationship which gave rise to fiduciary obligations owed by each of them to the other in respect of the management and control of the companies and the exercise of their rights as shareholders. The latter agreement has been conveniently described as an 'overarching agreement', that is to say, an agreement overarching the corporate and trust structure the parties established, and I will adopt that description.
At trial, the appellant sought to establish by reference, in particular, to a plethora of company records and financial documents (including the scrapbook which ultimately became exhibit A at the trial) that those various business enterprises had always been undertaken in their joint interest.
The respondent denied there was any such partnership or relationship, and said that their past dealings did not reflect any agreement of the nature alleged by the appellant. Accordingly, their respective rights and entitlements in relation to the companies in the Palermo group and the exercise of their rights as shareholders were not confined by any obligations of the nature alleged.

The litigation

The effective catalyst for the litigation appears to have been a letter written by the appellant's solicitors to the respondent's solicitors on 23 April 2013. Suffice it to say that in the letter the appellant's solicitors alleged that in their commercial activities the parties were partners. That relationship, it was said, 'exists outside and beyond the companies through which the Businesses were, and are, conducted'.
In a letter dated 14 May 2013, the respondent, by his solicitors, conceded that a partnership existed from about 1972‑1973 to 1976 in relation to the development and acquisition of certain properties, but denied that any partnership had existed after the incorporation of Tomar in 1976.
On 11 October 2013, proceedings were commenced by the respondent by a notice of originating motion. The respondent sought:
A declaration that [the appellant and the respondent] have not operated in a partnership whether as described in the letter dated 23 April 2013 … [or] otherwise save for certain acquisition of properties undertaken in their own names up to and about 1976.
The respondent subsequently sought additional declarations as follows:
A declaration that there was not a partnership between [the appellant and the respondent] over any part of the accounting practice conducted as 'John Palermo trading as J Palermo & Co', or under any other name or, alternatively, that there was no such partnership since April 2000, or in the further alternative since August 2006.
A declaration that there was not a partnership between [the appellant and the respondent] over the business which was the provision of corporate consulting services performed by the [respondent], or alternatively there was no such partnership since April 2000, when such business began to be conducted by JP Corporate Pty Ltd, or in the further alternative since May 2011.
The appellant in turn sought a declaration, relevantly, as follows:
There was an ongoing contractual relationship between [the appellant and the respondent] from before 1976 in terms which amounted to a partnership or relationship giving rise to fiduciary obligations.
The alleged inferred terms of that contract are as follows:
…
They were to conduct the group entities (whether together or by one of them):
(a)with the aim of generating wealth for both of them to be shared equally;
(b)on the basis that the group entities bank borrowings would be obtained through Tomar Holdings Pty Ltd;
(c)on the basis that the group entities would provide the income to service the group entity bank borrowings;
(d)on the basis that distributions of income and profit are made, on a tax effective basis:
(i)across the group entities
(ii)to each of them; and
(iii)their families;
(e)with [the appellant] to primarily operate:
(i)the property development business;
(ii)the accounting practice from … about 1992 to 2006;
(iii)the corporate secretarial services business with [the respondent];
(iv)the farming business;
(v)the property holding business;
(vi)the settlements agency business;
(vii)the building business;
(f)with [the respondent] to primarily operate:
(i)the corporate consulting business;
(ii)the share trading business;
(iii)the corporate secretarial business with [the appellant];
(iv)the accounting practice to about 1992;
(g)on the basis that income to [the respondent] personally from the group entities and public companies was to be sufficient to qualify him as a sophisticated investor for the purposes of the Corporations Act so that he could take up share placements for the group entities;
(h)on the basis of consultation about important matters and decisions affecting their joint interests;
(i)consistent with the duties owed by a fiduciary, being the:
(i)duty to act honestly in the best interests of them jointly;
(ii)duty to avoid a conflict of interest between their own interests and joint interests; and
(iii)duty not to use their position (as a director, appointor, guardian, shareholder or personal trustee) to:
A.gain a personal benefit: or
B.dishonestly confer a benefit on another or others.
As to the sharing of wealth, they would share equally in the after tax wealth (or liabilities) generated by the group entities.
As to how each of the group entities were to operate:
(a)(i) either or both of them were to be directors (or their nominee);
(ii)only one of them was to be a director in circumstances in which they wanted to:
A.quarantine liability from the other; or
B.avoid disclosure problems for [the respondent] in his capacity as board members of various public companies,
with the director or directors to act consistently with the terms described above;
(b)one of them (or a nominee of them) was to be the appointor, guardian or default appointor or default guardian with the appointor or guardian to act consistently with the terms described above.

The proceedings were programmed for hearing on an urgent basis as the respondent was seriously ill and at that time was understood to have only months to live. On 31 October 2013, orders were made that the appellant file and serve any affidavit in opposition to the respondent's application and that the respondent file and serve any affidavits in reply by 2 December 2013. Those orders were based on the trial commencing on either 9 December or 16 December 2013. On 5 November 2013, the trial was set down to commence on 16 December 2013.
On 13 November 2013, the appellant applied to have the trial dates vacated on the ground that he had insufficient time to prepare his case for trial. On 14 November 2013, that application was refused by the primary judge who considered that the appellant's difficulties could be alleviated by permitting him to rely at trial on, among others, an affidavit, dated 20 September 2013, in other proceedings, CIV 2110 of 2013 (that affidavit was referred to by the parties as the '2110 affidavit'). His Honour ordered that the appellant have leave to rely on that affidavit, that the appellant file and serve any other affidavit in opposition to the originating summons by 10 December 2013, and that the respondent file and serve any affidavit in reply by 13 December 2013. All deponents were required to be available for cross‑examination: Palermo v Palermo [2013] WASC 412.
The 2110 affidavit was a very lengthy document. The text of the affidavit itself ran to 758 paragraphs and there were 103 attachments, in all totalling 7,175 pages. As it turned out the appellant did not rely on the 2110 affidavit. On 11 December 2013, the appellant filed a fresh affidavit which incorporated much, but not all, of the material contained in the 2110 affidavit and also included further material not contained in the 2110 affidavit. The appellant's fresh affidavit ran to 327 pages and the attachments took up 8,884 pages, consisting principally of financial documents and tax returns of various corporate entities. The respondent's affidavit in reply, dated 13 December 2013, was 40 pages long and the attachments took up 105 pages. The appellant then filed a responsive affidavit, dated 16 December 2013, which was seven pages long and the attachments ran to 236 pages. Several relatively short affidavits of other witnesses were also filed. To complete the picture of the extent of the affidavit evidence I should mention that the affidavit which the respondent filed with the notice of originating motion was 42 pages long and the attachments took up 1007 pages.
In other words, the affidavits of the parties alone which were admitted into evidence at trial ran to a total of 416 pages and the attachments to those affidavits to 9,332 pages. As I will come to, much of the appellant's case turned on the contents of the financial documents of various group entities which were attached to the affidavits.
I should also observe that the organisation of the contents of each of the affidavits appears to reflect the speed with which they were obviously prepared, being neither particularly easy to follow nor particularly easy to draw together into a comprehensible narrative of the salient events.
I note too in passing that one of the complaints of the respondent on the appeal was that he had been disadvantaged at trial in responding to certain aspects of the appellant's case because it was not until 14 December 2013 that his solicitors were informed that the appellant would not be relying on the 2110 affidavit and at short notice the respondent had to deal with the appellant's somewhat different affidavit of 11 December 2013. As some of the respondent's affidavit of 13 December 2013 had been prepared by reference to the contents of the appellant's 2110 affidavit, at trial the primary judge was provided with a table showing the comparable paragraphs in the appellant's affidavit of 11 December 2013, to the extent there were comparable paragraphs.
The matter ultimately came on for hearing before the primary judge on 17 December 2013, the commencement having been delayed by a day to permit what turned out to be an unsuccessful mediation. The hearing occupied five days. At the conclusion of the hearing, his Honour delivered an oral judgment. He found in favour of the respondent and made declarations to the effect of those sought by the respondent; that is, in substance, that the appellant and the respondent had not operated any of the businesses in partnership. The appellant's claim was dismissed. His Honour delivered short ex tempore reasons and said he would deliver written reasons for decision later. The written reasons were delivered on 15 January 2014: Palermo v Palermo [No 2] [2014] WASC 6.
Before turning to the evidence, I should comment briefly on the way in which the proceedings were conducted below.
The parties elected to proceed to trial without pleadings or anything in the nature of pleadings. No doubt that was done because it was believed it would assist in avoiding delay in getting to trial. In my respectful opinion, however, it was a mistake. It was not a course that should have been followed in this case or, indeed, that should be followed in any case where there are significant factual matters in issue. In a case of any complexity, pleadings cannot be dispensed with without a real risk that the case will run off the rails. What is necessary in the way of pleadings will obviously depend upon the nature of the case. But it is essential that the critical issues of fact and law in dispute are identified with precision, and that the metes and bounds of the relevant evidence are clearly established. That is especially important in cases where, as here, the evidentiary material is substantial and the available trial time relatively short. In my view, it was evident on the appeal that the trial suffered from a lack of the focus which pleadings would have provided.
Pleadings may also have focussed attention on the scope of the appropriate relief. As it was, the declarations sought by the appellant were so wide in their terms that their ultimate utility in resolving the disputes between the parties in relation to the various businesses would seem to be somewhat problematic.
Regrettably, on the view I have reached the endeavours of the parties to achieve a speedy resolution of the dispute have come undone. I consider the appeal must be allowed and a new trial ordered. I have reached that view for the following reasons.

The evidence at trial

The appellant's evidence

It is unnecessary for the purpose of this appeal to canvass the appellant's evidence in great detail and we were not asked by either side to do so. It is sufficient to focus on some of the more significant areas of the evidence upon which the appellant based his contention that the overarching agreement was to be inferred.
The appellant's fundamental contention as to the overall operation of the various businesses was stated in his affidavit of 11 December 2013, as follows (unless otherwise indicated, the paragraph references below are to the paragraphs in his affidavit):
203.Since in or about the late 1970's:
203.1.all income and profits (except for differentials in the super fund) were pooled (in the sense that the combined income and profits of the group entities were treated by [the respondent] and [the appellant] as our overall income and profits) and then distributed in a way that was most tax effective for our combined activities;
203.2tax for all of the group entities, [the respondent] and his family and [the appellant] and [his] family has been paid jointly through Tomar (by way of loans) or the accounting practice (by way of debiting the drawings account of the accounting practice); and
203.3.the distribution of income and profits to group entities and [the respondent] and his family and [the appellant] and [his] family were not physically made so those group entities and individuals who were distributed income and profits are recorded as having loan accounts with the entity.
204.Most drawings of a private nature (for instance the living expenses of [the respondent] and his family and [the appellant] and [his] family) were generally taken from the accounting practice joint account. Private adjustments were made by [the respondent] and [the appellant] on an ongoing basis to ensure the drawings were equal. For example, if one of [the respondent] or [the appellant] overdrew a certain amount, the other would simply draw the difference. Evidence of that arrangement can be seen by the yearly drawings and reconciliation summaries (discussed below).
The appellant later described the distribution of the overall profits of the group entities as follows:
Each year [the respondent] and I determined how to distribute the overall profits of the group entities and discussed how to minimise the overall tax payable and, in later years, to ensure [the respondent] was kept above the income threshold for a sophisticated investor.
I created worksheets to assist with the calculations.
The worksheets that I prepared identified the income and profits that were required to be distributed.
Based upon the worksheets prepared, [the respondent] and I discussed how to distribute the overall profits at meetings between us each year at the office between Christmas and New Year and in the days after.
The worksheets were updated to incorporate the determinations made by [the respondent] and I [sic] as to how to distribute the overall profits of the group entities.
I still have copies of the worksheets for the 2002 to 2004, 2006, 2008 and 2010 financial years. Attached hereto and marked AP101 are copies of these worksheets.
These worksheets tracked the flow of distributions.
[The respondent's] income had to flow in a particular way, so that it would not be inconsistent with what he had disclosed to the market in relation to the public companies he was involved in.
[The respondent] and I could not distribute certain income (such as corporate secretarial fees earned from public companies which [the respondent] was involved in) to entities that involved [the respondent].
No-one was benefiting more than the other. [The respondent] and I (and John Jnr [the respondent's son] for a number of years) would discuss how to distribute income and make the adjustments so that [the respondent] and I each received income in equal parts [269] ‑ [278].
The appellant said that all borrowing to fund their businesses was undertaken through Tomar as trustee for the Palermo Unit Trust. Tomar then lent money to other group entities, with a mark‑up on the rate of interest charged by the lender from which Tomar had obtained the funds.
The appellant said that both he and the respondent had authority to deal with all of the group accounts, even if only one of them was the sole director of the group company concerned. The appellant said they discussed significant decisions to be made concerning any of the group entities, regardless of which of them was a director of the entity concerned or held shares in it.
According to the appellant, the taxable income that was received by group entities was dealt with largely by distributions through various trusts and allocation of expenses in a way that ensured that across the group entities and the parties' respective families, the most effective tax result was achieved.
The income or profits of group entities were usually distributed in the following order:
(1)to individuals who were part of their extended family who were on a tax rate equal to or lower than the rate for group companies (usually through the family trusts);
(2)then to group entities that had available tax losses;
(3)and then to companies in the group, which would be liable for tax at the corporate rate.
The appellant said that Tomar received income from various sources, the main sources being:
•Property development and property related activities;
•Fees for corporate secretarial services charged to the accounting practice to 2001;
•Fees for providing managerial services to public companies in which the respondent was involved;
•Charging third parties for corporate secretarial and managerial services;
•Interest on term deposits.
This income was distributed to their respective family trusts in equal shares.
The appellant described in considerable detail what he said was the flow of funds from Tomar to other group entities. It is convenient to take three of the years referred to by the appellant in his evidence. The appellant's evidence in respect of other years follows a similar pattern, although the amounts involved vary.
The appellant says that:
(a)in the financial year ended 30 June 2002, Tomar made a net profit of $275,896, which (as trustee of the Palermo Unit Trust) it distributed equally to the two family trusts. That profit came from income which included $474,552 in fees for secretarial services provided to the accounting practice and $231,192 in fees for providing managerial services to public companies. The appellant then described in some detail the cascade of the distributions from the respective family trusts to other entities.
(b)in the financial year ended 30 June 2004, Tomar made a net profit of $320,532, which it distributed equally to the two family trusts. That profit came from income which included $913,771 in fees for secretarial services provided to the accounting practice and $56,314 in fees for providing managerial services to public companies. The appellant again described in some detail the cascade of the distributions from the family trusts to other entities.
(c)in the financial year ended 30 June 2007, Tomar made a net profit of $14,660, which it distributed equally to the two family trusts. That profit came from income which included $86,000 in fees for secretarial services provided to the accounting practice and $88,497 in fees for providing managerial services to public companies. The appellant again described in some detail the cascade of the distributions from the family trusts to other entities.
The appellant then dealt with the principal business activities of the Palermo group.

The accounting practice of J Palermo & Co

The appellant said that he joined the accounting practice of J Palermo & Co in or about 1976 and bought into the practice in or about 1980. He said that he ran the accounting practice from approximately 1992 to 2006 and the respondent managed the involvement of the group entities in share trading and with public companies. The appellant said he was involved in all of the managerial decision-making relating to the sale of parts of the accounting practice and ultimately the sale of the whole practice. He rejected a statement in the respondent's affidavit that his involvement was simply as an employee of the practice.
The appellant said that, on or about 1 July 2005, he and the respondent sold a third of the practice to a Mr Melbin for the sum of $470,000. The appellant said he negotiated the sale and prepared most of the documents. The proceeds of sale were paid into the accounting practice, which then paid them to Tomar so that the proceeds were shared between the appellant and the respondent. Toward the end of 2005, Mr Melbin left the practice, taking with him the equivalent in clients to the amount he had paid.
The appellant said that, in about February 2006, he and the respondent sold part of the practice to Melsom Robson for the sum of $280,000, with $220,000 to be paid on 11 March 2006 and the balance over 12 months. The proceeds of $220,000 were deposited in the accounting practice account and, on about 1 March 2006, the appellant withdrew that amount for his personal use and later made an adjustment with the respondent. The appellant annexed to his affidavit, among other things, copies of the bank statements for that period and an excerpt from the general ledger of the accounting practice.
According to the appellant, he and the respondent agreed in the middle of 2006 to sell the balance of the accounting practice to the respondent's son, John, and a long-standing employee of the practice, Ms Ruland, for the sum of $600,000. He says he was fully involved in the negotiations and the preparation of the contracts. The appellant said that John has not paid his half share of the purchase price but that the funds received from Ms Ruland were paid to the accounting practice and then paid into Tomar. He says that, in October 2007, John promised to pay his share within 12 months. However, in about March 2011 the respondent said to him for the first time that the accounting practice was his (the respondent's) and that John would not be paying anything to acquire it.
The appellant dealt in some detail with the manner in which he said the profits of the accounting practice were distributed. The appellant said that the accounting practice was always operated in the respondent's name, although he (the appellant) had purchased a half-interest in it in 1980. As the practice was operated in the respondent's name, the profit from it each year was income to the respondent personally. In order to ensure that they shared equally in those profits:
(a)from 1980:
•the respondent was not paid any of the profits;
•both of them paid the tax assessed on the respondent's income in equal shares;
•money received in the accounting practice was dealt with in one of three ways, namely: drawn by both of them and shared equally; paid to Tomar as a loan from both of them with any excess funds invested in term deposits in joint names; or used to buy shares in joint names;
•adjustments for differences in drawings were made in the scrapbook or in some other way.
(b)from 1988, the parties established formal drawings accounts within the accounting practice for each of them and a joint account, each account having a coded number. According to the appellant, the formal drawings accounts within the practice were operated on the basis that:
1.all personal drawings by either party were coded to their respective drawings account and were theirs to keep;
2.if either drew more than the other over a period the difference would be reconciled and a written notation made in the scrapbook, with the difference being carried forward;
3.all drawings of a joint nature were put to the joint drawings account.
The appellant said that, from 1980 to 2011, both parties drew from the accounting practice for any day to day expenses they incurred [841]. According to the appellant, he and the respondent were paid a wage by various group entities but for the most part they did not actually receive these wages or the wages were re‑banked into Tomar's account (or one of the other 'group entities' accounts) or they were paid to Tomar as secretarial fees. The appellant said, however, that he did receive some of the wages in the early years and those were taken into account in ensuring an equal distribution of all of the money retained by each of them [839] ‑ [840].
The appellant's evidence in relation to the scrapbook was as follows. In about 1976 or 1977, he and the respondent commenced using a scrapbook to make adjustments between them for differences in drawings they had taken from the accounting practice. The drawings were to be equalised or the balance carried forward. The accounting practice account was generally the account that the parties used to pay most of their personal and living expenses. The appellant said they would try to draw equally but if drawings were unequal they would be adjusted at some point in the future. Adjustments were made in consideration of all monies received or expenses incurred by either of them, and the appellant describes adjustments in the scrapbook in respect of child endowment, disbursements incurred in relation to a building constructed for the respondent's wife, entertainment, and in lieu of rental on a property owned by a group entity and occupied for a period by the appellant and his family.

The appellant said that, from 1992, he and the respondent started using a more systemised approach to the drawings accounts of the practice. If either needed funds, a cheque was drawn to that person on the practice account and the amount was coded to their drawing account. If both needed funds, a cheque was drawn to cash, the cheque was cashed and the cash split equally between them. The amounts would later be coded to their respective drawings accounts. They continued to use the scrapbook but it was reconciled using these accounts. The appellant said there are notations in the handwriting of both of them in the general ledger recording drawings of each and of joint drawings.
In his affidavit, the appellant set out a summary of what he said were drawings from the practice for each year between 1982 and 2011. (He said that he could not locate any relevant records prior to 1982). The appellant said that, for a number of those years, the figures for their individual and joint drawings are written in the general ledger of the practice in the handwriting of one or other of them. To the extent the figures may be different, they take into account other adjustments the parties made after the general ledger for that year was finalised.
In argument on the appeal we were taken, by way of example, through the affidavit evidence of the appellant in respect of three financial years, the years ended 30 June 1982; 30 June 1999; and 30 June 2002. Having considered the appellant's evidence in respect of the other years, those examples seem to me reasonably representative of the entries over the whole period and will suffice for present purposes.
The appellant said that, in the financial year ended 30 June 1982, the accounting practice made a profit of $10,076, as set out in the financial report of the practice, a copy of which he attached to his affidavit. He said he drew a total of $11,450 from the joint account of the practice, the respondent drew $9,548 and the respondent's wife drew $3,263 (a total of $12,811 on the respondent's side). A copy of the trial balance of the practice setting out those figures is attached. The appellant said he also drew some income from three other entities, making his total drawings from the joint account an amount of $14,936. The respondent had other drawings of $750, so that the respondent's total drawings from the joint account were an amount of $13,561, or $1,375 less than the appellant's. Attached to the appellant's affidavit is a note, which he said is in the respondent's handwriting (a point not contested by the respondent at trial), setting out their respective drawings and containing the words '[a]djusted in scrapbook'. The appellant said that at the end of the year an adjustment was made in the respondent's favour so that their drawings were equal. He attached a copy of a page from the scrapbook, which refers to an adjustment of $1,375 in the respondent's favour with the annotation 'from drawings in all accounts'. In cross‑examination at trial, the respondent identified his initials in a number of places on that page of the scrapbook (ts 99 ‑ 107, 109 ‑ 120).
The appellant said that, in the financial year ended 30 June 1999, the accounting practice made a profit of $390,104. He drew the sum of $46,605 from his coded account, $25,353 was drawn from the respondent's coded account, and $230,471 was drawn from the joint account, as reflected in an attached copy of a page from the general ledger of the practice. The appellant then referred to entries in the scrapbook which are consistent with an adjustment being made to equalise the amount received by each. The respondent has initialled the final adjustment entry.
The appellant's affidavit evidence in respect of the financial year ended 30 June 2002 followed a similar form. The appellant said that in that year the accounting practice made a profit of $338,771. He drew the sum of $77,884 from his coded account, $75,209 was drawn from the respondent's coded account, and $569,022 was drawn from the joint account, as reflected in an attached copy of a page from the general ledger of the practice. Again, the appellant then referred to entries in the scrapbook which (subject to what appears to be a minor arithmetical error) appear to be consistent with an adjustment being made to equalise the amount received by each of the appellant and the respondent. The respondent's handwriting appears on that page of the scrapbook.
The appellant's evidence in his affidavit in respect of each of the other financial years between 1982 and 2010 is of a similar nature, except that in respect of the financial years 1983 to 1988, 1990, and 2000 the appellant said he could not locate the record of the adjustment. He said the record may have been destroyed, or he and the respondent may not have made a record of it.
The appellant was cross‑examined about the scrapbook (ts 218 ‑ 219), the cross-examination being primarily directed to establishing that the entries in the scrapbook related simply to day to day drawings of cash, a proposition which the appellant rejected, maintaining that it recorded cash from drawings and adjustments.
The appellant also said that substantial fees were rendered to the accounting practice by entities not in the sole control of the respondent. The two examples referred to by the appellant on the appeal will suffice. Other years follow a similar pattern, although the amounts involved vary.
According to the profit and loss statement of the accounting practice for the financial year ended 30 June 2005, it rendered fees of $1,538,165.98 and made a net profit of $341,811.64. It paid fees for secretarial services of $462,215.72 to 'T', that is, Tomar, and of $620,657.30 to 'E', that is, Empal. It will be recalled that the directors of Tomar were the appellant and the respondent. The appellant was the sole director and shareholder of Empal.
In the financial year ended 30 June 2006, the accounting practice rendered fees of $1,378,688.29 and made a net profit of $409,987.93. It paid fees for secretarial services of $98,815.04 to Tomar, $53,208 to Empal, and $682,897.80 to JDP Admin (which on the respondent's evidence became the service entity in that year). The appellant was the sole director of JDP Admin.
I note in passing that according to the respondent 'the service entity generated considerable profits'.
According to the appellant, JDP Admin continued to provide consultancy services to the accounting practice after it was acquired by the respondent's son and Ms Ruland in 2006 and there are proceedings in the District Court by JDP Admin for unpaid fees (a matter to which the primary judge referred).
The appellant also gave evidence that in the 2004 financial year a debt of $88,810 owed to the accounting practice by a public company, Advantage Communications Ltd, was assigned to Monarch Corporation Pty Ltd, a company of which the appellant was the sole director. The appellant said that he was unaware of any proposal to assign the debt until asked by the respondent to sign a deed of assignment.

Share‑trading

The appellant dealt in some considerable detail with share‑trading by entities in the group in support of his contention that the overarching agreement was to be inferred. The appellant said that, in or about 2000, Monarch Corporation Pty Ltd, Dolphin Technology Pty Ltd, Seablue Investments Pty Ltd and Primelane Pty Ltd were incorporated so that the appellant and the respondent could separately receive share issues and placements by, or provide loans to, public companies that the respondent was involved in without the interests of the appellant and the respondent being aggregated as related parties. Funds to purchase shares or to make loans were generally provided, either directly or indirectly, by Tomar. The appellant said that although in some of the entities either he or the respondent was the sole shareholder and director, both were concerned in the management of all of the entities. According to the appellant, the respondent did most of the share-trading for all of the entities despite the fact that in some of the entities the respondent was neither a shareholder nor a director. The profit from the entities was distributed in the most tax effective way.
The appellant gave more detailed evidence in relation to the activities of Monarch, which was the trustee of the Monarch Trust. The appellant was the sole director of the company and his immediate family were the only beneficiaries of the Monarch Trust. According to the appellant, the respondent made the decisions on share‑trading undertaken on behalf of Monarch and the appellant signed any necessary documents. He said that the respondent also arranged a substantial amount of share trades between third parties and Monarch and other group entities, many at a large discount to market. The appellant said he effected very little of the share trading. In addition, the appellant said, Monarch made substantial unsecured loans by way of working capital to public companies on which the respondent held positions, on the basis that the appellant and the respondent would benefit from the increase in the share price in the long term.
In his affidavit, the appellant set out, year by year between 2002 and 2011, transactions that he said had been entered into by Monarch. By way of example, we were directed by senior counsel for the appellant to the appellant's evidence in relation to transactions in 2006 involving Gladiator Resources Ltd, which owed a total of some $65,000 to JP Corporate, Empal and JDP Admin. The appellant said the debts were consolidated and Monarch took a placement of 1,300,000 Gladiator shares in exchange for the consolidated debt. Documents attached to the appellant's affidavit summarising those transaction are said to have been prepared by the respondent. In the 2004 financial year, a debt of $55,000 owed by Advantage Telecommunications to JP Corporate was assigned to Monarch. According to the appellant, he was unaware of any proposal to assign the debt until asked by the respondent to sign a deed of assignment. The appellant said that many debt conversions took place between Monarch and other group entities on the one hand and public companies in which the respondent was involved on the other.

Corporate consulting

The appellant again dealt in some detail with what he said were arrangements in respect of corporate consulting and secretarial services which reflected the overarching agreement.
The appellant said that, from about 1982, the accounting practice, primarily through the respondent, began performing corporate consulting work for public companies and Tomar began providing corporate secretarial services to those public companies. The accounting practice and Tomar charged the public companies for these services. In about 2001, Empal took over the provision of corporate secretarial services from Tomar, and in about 2005, JDP Admin took over from Empal.
According to the appellant, in about 2000 the respondent suggested that a company be set up to undertake the corporate consulting work to avoid exposing the accounting practice and the appellant to liability for it. They incorporated JP Corporate on 4 April 2000 for that purpose. The respondent was its sole director and shareholder, although the appellant said he was still involved in JP Corporate.
(I should interpose that earlier in his affidavit the appellant had said that JP Corporate was established to prevent Tomar being exposed to any liability arising out of investigations into the alleged receipt of stolen money by Advantage Telecommunications, of which the respondent was a director.)
The appellant said the corporate consulting fees, like all of the income generated by the group entities, were split equally between the appellant and the respondent through the group entities. From the income JP Corporate received from corporate consulting, it paid Tomar (later Empal and then JDP Admin) for managerial and secretarial services [1603].
The appellant said that, until about 2008 or 2009, the income which Tomar, Empal and JDP Admin received in that way was distributed to the trusts of group entities controlled by the appellant so that the respondent did not have to disclose it under the Australian Stock Exchange listing rules. After about 2008 or 2009, the appellant and respondent, having lost their controlling interests in the public companies due to share dilution, began distributing the income to entities in which they both had an interest. The tax payable on the income by the recipient entity was generally paid out of the joint account in the accounting practice or by loans from Tomar.
According to the appellant, the income from the service entities was distributed in different years to different group entities, in a manner calculated to minimise the taxation payable on it. Each year he and the respondent would use worksheets to determine how best to distribute the various profits and losses amongst the group entities. He attached to his affidavit copies of the worksheets for 2006 and 2010, and said the rest appeared to have been lost or destroyed.
In his affidavit, the appellant set out, year by year for the period 2001 to 2010, what he said was the way in which fees for corporate consulting were dealt with. A similar process appears to have been followed in each year. Some examples will suffice to demonstrate the effect of that evidence.
The appellant said that, in 2001, JP Corporate earned about $196,105 in corporate consulting fees. It paid Tomar about $136,142 for managerial and secretarial services. It also paid the respondent $30,000 in wages (which the appellant said the respondent did not receive in cash) and $30,000 in superannuation. The appellant referred to an annual trial balance of JP Corporate attached to his affidavit which reflected those figures and showed that after some other expenses, JP Corporate made a loss of $768.22 in that year.
The appellant's evidence for the financial year ended 30 June 2002 was as follows. In that year, JP Corporate had an income of $260,218.96 in corporate consulting fees and made a profit of $2,137.25, as appeared from its financial report. It paid Tomar $66,678 and Empal $70,000 for secretarial and managerial services. In the same year, Empal also received $482,327.28 in secretarial fees from the accounting practice. Empal's net profit was $198,302. It distributed $185,000 to the Monarch Trust and $13,302 to the appellant's wife, Maria Palermo. The Monarch Trust was solely for the benefit of the appellant.
In 2004, the appellant said, JP Corporate earned $204,997 in corporate consulting fees. It paid Tomar and Empal a total of $145,223 for managerial and secretarial services. It also paid the respondent $20,000 in wages (which the appellant said the respondent did not receive in cash) and $3,525 in superannuation. Those figures were contained in the financial report of JP Corporate for the financial year ended 30 June 2004, which was attached to his affidavit. The financial report showed that after other expenses, JP Corporate made a profit of $2,523.79 in that year. The appellant also said that in that year Empal received a total of about $668,258 in secretarial fees, including those received from JP Corporate, and $288,304 in secretarial fees from the accounting practice. Empal's net profit was about $148,326, of which it distributed $118,326 to the Monarch Trust and $30,000 to the JJP Trust. The appellant attached to his affidavit copies of Empal's trial balance and tax return reflecting those figures.
For the financial year ended 30 June 2010, the appellant's evidence was that JP Corporate's income was $1,109,729.73 and that it made a profit of $23,749.37, as appeared from its financial report. It paid secretarial fees of $499,493 to JDP Admin. In that year, JDP Admin had a total income of $694,943.10 (including the amount received from JP Corporate) and it made a profit of $183,495.94. It distributed the sum of $183,495.94 to Empal, as appeared from Empal's financial report. Empal's profit was $183,165.99. Empal distributed that amount to the Riverside Trust, a trust for the benefit of the appellant and the respondent.

Palermo farms

The appellant described farming activities in which he said he was involved with the respondent. The appellant's evidence was that the properties on which the farming operations are conducted were purchased by a group entity, CMT (as trustee of the MM Trust). He said that he and the respondent were the directors and shareholders of CMT. The appellant said the cost of the land was met from joint assets and bank loans. He said that both he and the respondent provided bank guarantees for bank loans.
According to the appellant, at the time the first property was acquired by CMT he agreed with the respondent that the farming operations should be conducted in the respondent's name so the respondent could offset the losses against his taxable income (presumably a reference to his income from the accounting practice) in order to reduce their overall tax. The appellant said, however, that he handled all matters to do with the farm and ran the management of the farm. He said the respondent rarely went to the farm, sometimes not doing so for periods of up to six months.
The appellant said that in 2007, due to changes in the tax laws, Red Lancer, as trustee for the Red Trust, replaced the appellant as the operator of the farm and thereafter it paid rent to CMT and other group entities to operate the farm. That ceased in 2010 when the appellant refused to co-sign cheques.

Superannuation

The appellant said that superannuation contributions were made to the Tomar Superannuation Fund on behalf of the respondent, the respondent's wife Lida, the appellant, and the appellant's wife Maria. The appellant's evidence (which was not contested) was that the source of the contributions varied between entities in the group, but that all of the contributions were equal regardless of their source.
He referred by way of example to the financial year ended 30 June 2007, in which employer contributions of $105,000 were made on behalf of each of the respondent, Lida, the appellant, and Maria. The contribution for the respondent came from Pelican Pty Ltd and JP Corporate; for Lida from Tomar; for the appellant from Red Lancer, Tomar and JDP Admin; and for Maria from Tomar and JDP Admin. There were also member contributions of $138,000 on behalf of each of them, paid out of the accounting practice and coded to the joint drawings account.
The appellant said the same occurred in 2008 where employer contributions of (or about) $100,000 were made for each person but on that occasion the contribution for the appellant was made by JP Corporate and Red Lancer and for Lida it was made by JDP Admin. The appellant noted that neither Lida nor Maria was a director of JDP Admin or a unit holder in the JDP Admin Trust.

The respondent's evidence

As mentioned previously, the respondent swore two affidavits in the proceedings, one dated 10 October 2013 and the other dated 13 December 2013.
In his affidavit of 10 October 2013, the respondent described the start of the property development business in the early 1970s, in which they had bought and sold properties at a profit, the profit being shared equally. He said that he incorporated Tomar, as trustee of the Palermo Unit Trust, as a vehicle they could use to conduct the business rather than conduct it in their own names. He said that over the next few years they both worked in the business and the profits were distributed equally to the unit holders of the Palermo Unit Trust.
According to the respondent, by the early 1980s the appellant was running the property development business and the respondent was concentrating on the accounting practice, which he had commenced in 1980. The respondent said that in the mid 1980s the appellant told him he (the appellant) did not want to continue in building and construction but wanted to concentrate on property dealing. As that would not keep the appellant engaged full‑time, the respondent employed the appellant as the practice manager of the accounting practice, on a salary paid by Tomar as the service entity of the practice.

The respondent said that, in about 1995, the appellant suggested that they cease to conduct their property development business in Tomar and instead conduct it in separate entities as trustees of discretionary trusts. According to the respondent, they agreed that the profits of the discretionary trusts would be dealt with in the following way:
(a)where there were corporate entities of which they were each shareholders, the profits could be distributed to those entities where they had tax losses;
(b)the profits could be distributed to Tomar; or
(c)where they agreed to distribute the profits to a company which one only of them controlled, an equivalent amount would be distributed to the other.
Thereafter a number of properties for the property development business were acquired by different companies and the respondent said he believed all distributions were done in that manner.
The respondent said that he had never said to the appellant, or heard the appellant say, that all of the enterprises they are involved in are in a partnership or a joint enterprise on an equal basis. He said the appellant had never paid anything to acquire an interest in the accounting practice.
The respondent said that he caused JP Corporate to be incorporated to undertake his corporate consulting work as he was becoming increasingly involved in that work and the accounting practice itself had a number of qualified accountants dealing with the day to day work. He said he did not discuss it with the appellant.
According to the respondent, from about 1996 he spoke to the appellant regarding succession planning but they were unable to sort it out. The respondent said that in about 2007, after discussions with the appellant, he caused Control Centre Pty Ltd to be incorporated to be the appointor of all new discretionary trusts in which they were both involved. He said he and the appellant had discussions about using Control Centre as the appointor for all of the trusts in which they were involved. They subsequently had a meeting with a solicitor to obtain advice as to the tax consequences of changing the appointor of the trusts. At that meeting they discussed the preparation of an agreement to govern the relationship between them in relation to their ongoing business affairs. The solicitor suggested that a shareholders' agreement for Control Centre be prepared and he was instructed to prepare such an agreement. A draft was subsequently sent to the respondent who provided a copy to the appellant. He said the appellant scribbled over it and requested certain changes. It is common ground that the agreement was never executed.
In the respondent's second affidavit, the affidavit of 13 December 2013, he described as 'untrue' the statement in the appellant's affidavit that since about the 1970s all income and profits of the group entities had been pooled and distributed in a way most tax effective for the parties' combined activities.
The respondent said that, in or about 1985, he began using Tomar as a service entity for his accounting practice. That remained the case until about 2000 when Empal was incorporated and became the service entity. The respondent said that after he sold a portion of the accounting practice to Melbin, JDP Admin became the service entity to the accounting practice. The service entity 'generated considerable profits'.
According to the respondent, when Tomar was the service entity its profits funded the property development business. With the incorporation of Empal and the use of separate corporate entities for the property development business it was necessary to determine how those entities should be funded. The respondent said that, at about the time Empal was incorporated in 2000 to become the service entity for the accounting practice, he and the appellant agreed that the profit earned by Empal should be distributed to Tomar which would then fund the property development business. The discussion was limited to the property development entities and did not extend to the accounting practice, the farm, JP Corporate, or the share trading entities.
The respondent said that Tomar became, in effect, the 'parent' entity of the other property development entities in the sense that it became the means by which property acquisitions could be funded. But he said there were exceptions to the general principle that the service entities' profits would be distributed to Tomar. They were, first, where a jointly owned property development company had eligible tax losses, some of the service entities' profits could be distributed to it to take advantage of those losses; and, secondly, if there was such a company owned by only one or other of them, any service entity profits distributed to it would be matched by an equal distribution to an entity owned by the other. It was also agreed that if another group entity made a profit, the profit could be distributed through the entity's trust to Tomar or used to absorb tax losses of another entity in the group, as in the two exceptions.
According to the respondent, the appellant carried out the distributions of the profits of Tomar and the other group entities. The respondent said that he had asked on many occasions since 2003 for financial statements which explained the distributions between the different entities but had not received them. He said that for many years he had presumed that distributions were being made in accordance with his agreement with the appellant but since the falling out with the appellant he had become aware that it is not the case. He mentioned, by way of example, the references in the appellant's affidavit to the 'flow of funds' by way of distributions by Tomar to the family trusts in 2002, 2004 and 2007 (see [55] above) and said he did not understand what was meant by the 'secretarial services' Tomar was said to have provided to the accounting practice or what services Tomar could in fact have provided as it was no longer then the service entity for the accounting practice.
The respondent said it was his recollection that prior to 2000 the only access the appellant had to Tomar for funds for his personal use was through his salary and the distribution of trust funds. The respondent said that, in the mid 1980s, shortly after the appellant started working in the accounting practice, the appellant had complained that he was not earning enough to live on. He rejected the respondent's suggestion of a salary increase. At the time, the appellant was being paid a salary for management of the practice and, as a fee earner, he was also paid a salary equal to one third of his billed time. The latter salary was not paid on a regular basis throughout the year. The matter was resolved by allowing him to take money from the practice's general account, on the basis that at the end of the financial year the money he had drawn from the general account would be reconciled against his earnings from his billings. For several years they undertook that annual reconciliation and on several occasions the appellant's drawings exceeded his billings. The appellant then paid the difference direct to the respondent or credited his loan account in Tomar. The respondent said that from about the mid 1990s the annual reconciliation ceased because he was often away and also because the appellant failed to provide his annual billings to the respondent.
The respondent said that, in addition to that arrangement, there was an accepted practice between them that should it be necessary for any reason for one of them to withdraw money from the Tomar account (or after 2000 from one of the other group entities) such drawings were to be reflected as a loan by Tomar to that person. Until about 2000, the balance of the Tomar loan accounts to each of them was reviewed by them both but that practice ceased at about that time.
In relation to the scrapbook, the respondent said that the scrapbook was used to record all drawings from Tomar, the accounting practice's general account and other group entities. All drawings by the appellant from the accounting practice's general account were to be reconciled against his earnings, and drawings from Tomar and other entities were to be reflected in the Tomar loan accounts.
The respondent said that he established JP Corporate to provide high level strategic corporate advice to public companies. The accounting practice was to continue to provide basic administrative and secretarial services to those companies. At all times he has been the only employee of JP Corporate, by which he was paid a salary. He said that the services provided by Empal and JDP Admin to JP Corporate were minor and there has never been any reason for either to charge JP Corporate anything more than a few thousand dollars per year. He said he was unaware of the charges for 'secretarial services' referred to by the appellant and would not have approved them if he had known about them, as no services of the nature claimed were ever provided.
From mid‑2006, the respondent said, it was agreed that JDP Admin would cover expenses incurred by the respondent in carrying out work for JP Corporate and JDP Admin would then invoice JP Corporate for the same amount. As there was no mark-up, that should have been revenue neutral and in no one year would the expenses have exceeded $50,000. JDP Admin also provided JP Corporate with bookkeeping but the annual amount involved would not have exceeded $5,000.
The respondent's affidavit evidence as to the farming operation was again very different to the appellant's evidence. He had set out in his affidavit of 10 October 2013 how he said the farming operation came into being. In that affidavit, he said that, in 1992, he had caused CMT, as trustee of the MM Trust, to purchase a property in Pinjarra for the sum of $480,000. The shareholders and directors of CMT were the appellant and the respondent. The respondent said that he provided a personal guarantee for the loan to purchase the property. He then leased the property from CMT and conducted farming on it. He subsequently caused CMT to acquire further, surrounding properties, in each case providing a personal guarantee for the borrowing by CMT of funds for the purchase. He said that from time to time he asked the appellant to liaise with the farm manager and the appellant was paid for doing so. The respondent described the appellant's direct involvement in the farming operation as 'minimal'. The respondent said that in 2010, for income tax reasons, he decided no longer to be personally involved in the farming business and incorporated Red Lancer, which has since conducted it.
In his affidavit of 13 December 2014, the respondent said that the farm's operation, and its profits and losses, were always his alone. The losses were used to reduce his personal income tax, and the profits and losses were never part of a distribution of funds. The respondent said that he paid all the costs of the farming operation, including any wages of the appellant for work done in connection with it. The respondent said that some of the profits of the accounting practice were spent on expenses associated with the farm, as both belonged to him.
In relation to the sale of the accounting practice, the respondent said that he alone made the decision to sell part of the accounting practice to Mr Melbin. He said that the appellant was opposed to the sale and tried to persuade him against it. According to the respondent, the appellant's only involvement in the sale was as practice manager. In relation to the proceeds of sale, the respondent said that the appellant told him Tomar needed funds and asked him to pay that money into Tomar. He agreed to do so on the basis that the funds would be credited to his loan account in Tomar. The respondent said that despite requests made of the appellant he has been unable to ascertain whether that was in fact done.
The respondent also said that he negotiated the sale to Ms Ruland and his son, and did so on the basis that no payment would be made by his son to acquire a half interest in the practice. He said he told the appellant that at the time, who said he would have done the same thing.
The respondent's affidavit evidence in relation to share trading was brief. He said in his affidavit of 13 December 2013, as follows:
I do not propose to respond to the allegations made by [the appellant] in his affidavit … concerning share trading other than to say that I do not accept that there is an overarching partnership in that regard.
Rather, some corporate entities and their associated trusts were for the benefit of both [the appellant] and I [sic] while some were solely for the benefit of [the appellant] and some for my sole benefit [265] ‑ [266].
In cross‑examination, the respondent said that he had not conducted share trading through Monarch. He said he had made recommendations but the share trading was undertaken by the appellant (ts 92).
In his affidavits, the respondent did not deal with the appellant's evidence in relation to superannuation payments and the question of those payments was not the subject of cross‑examination on either side.

Other evidence

Affidavits of the respondent's son, John; the appellant's wife; Ms Ruland; and three witnesses as to the appellant's involvement in the farm, were also received in evidence. It is unnecessary to refer to those.
Against that background it is convenient to turn to the reasons for decision of the primary judge.

The reasons for decision

The primary judge dealt at the outset with the credibility of the appellant and the respondent. His Honour observed that the respondent's evidence was largely uncontroversial, the key controversies relating to conversations which had occurred many years previously and in respect of which his Honour said he would have been cautious in accepting oral evidence about key matters without assistance from contemporaneous documents [11].
However, his Honour considered the appellant to be an unsatisfactory witness whose evidence on crucial points he would not accept without some form of confirmation [13]. He gave several reasons for that finding. They were as follows. First, the appellant had an overt antipathy to the respondent. Secondly, in cross‑examination there had been on the appellant's part a pedantry which his Honour concluded went beyond a personal characteristic and amounted to deliberate obstruction calculated to divert the questioner, and, where that failed, evasion and obfuscation. His Honour set out some extracts from the transcript which he said illustrated that. Thirdly, his Honour considered that some of the answers the appellant gave when inconsistencies between his oral evidence and his affidavit were put to him were simply not believable [14] ‑ [34].
His Honour concluded that where there was a conflict between the evidence of the appellant and the respondent he preferred the evidence of the respondent [35]. He noted, however, that the bulk of the appellant's evidence was not in material contest [36], and that a lot of the evidence in controversy did not advance either party's overall contention [38].
Turning to the substantive issues, the primary judge accepted that the appellant's evidence showed an arrangement over 30 years by which the appellant and the respondent worked together to expand their wealth. His Honour said (at [55] ‑ [56]):
The intention of the [appellant and the respondent] is crucial. Their intention to work together to create wealth for themselves and their families can be accepted. However, the vehicle by which the wealth was to be created and distributed is all important. From 1976 it was not by partnership. The methods used were the antithesis of a partnership. The brothers gave up partnership for directorship. Thereafter their arrangement was governed through the legal structures they had created, not through any overarching contract or relationship as asserted by the [appellant].
This was a deliberate decision. There is no acceptable evidence that [the appellant and the respondent] ever assumed joint liability for all debts and obligations of a partnership after 1976. On the contrary, one of the main purposes for commencing Tomar Pty Ltd and trading thereafter was to limit personal liability.
Having discussed the characteristics of a partnership and the change which occurs when partners adopt a corporate vehicle to conduct the former partnership business, the primary judge said there were a series of cases that established that there is no continuing contractual relationship between the partners. His Honour set out (at [71]) the following passage from the judgment of Lord Wilberforce in Ebrahimi v Westbourne Galleries Ltd (1973) AC 360:
It is these, and analogous, factors which may bring into play the just and equitable clause, and they do so directly, through the force of the words themselves. To refer, as so many of the cases do, to 'quasi-partnerships' or 'in substance partnerships' may be convenient but may also be confusing. It may be convenient because it is the law of partnership which has developed the conceptions of probity, good faith and mutual confidence, and the remedies where these are absent, which become relevant once such factors as I have mentioned are found to exist: the words 'just and equitable' sum these up in the law of partnership itself. And in many, but not necessarily all, cases there has been a pre-existing partnership the obligations of which it is reasonable to suppose continue to underlie the new company structure. But the expressions may be confusing if they obscure, or deny, the fact that the parties (possibly former partners) are now co-members in a company, who have accepted, in law, new obligations. A company, however small, however domestic, is a company not a partnership or even a quasi-partnership and it is through the just and equitable clause that obligations, common to partnership relations, may come in (379 ‑ 380).
His Honour described as apposite the following passage from the judgment of Young J in Morgan v 45 Flers Avenue Pty Ltd (1986) 5 ACLC 222:
Unfortunately it very often happens in cases in this Court that a person has arranged his affairs for commercial or fiscal reasons employing a particular structure, which with respect to creditors and the Government he expects to be recognised as no sham but when it comes to a dispute with his former wife or former business associates it is not in his interest to maintain the structure and he pleads before this Court that one must not look at the structure at all but rather at the 'realistic' or 'practical' effect of what has happened… So long as the law permits people to erect structures which have meaningful legal consequences then if a person elects to erect such a structure he must take the consequences of such erection for better for worse, for richer or poorer, in commercial sickness or commercial health (224 ‑ 225).
The following passage from the judgment of the plurality in Friend v Brooker [2009] HCA 21; (2009) 239 CLR 129, was also relied upon by his Honour (at [73]):
The appellant also submits that equity does not impose fiduciary duties between the parties to a deliberate commercial decision to adopt a commercial structure in which they would owe duties, but to the corporation and as directors. Why, it is asked, should equity intervene in such a fashion when the Company, by which Mr Brooker and Mr Friend carried on the business, failed and, in the result, their personal losses will not be in equal amounts? That submission is to be accepted [86].
The primary judge concluded that those authorities indicated there was 'no scope at law' for the inferred contract alleged by the appellant [74].
His Honour went on to say that the same point was clearly made in Brooker v Friend & Brooker Pty Ltd [2006] NSWCA 385; Nassar v Innovative Precasters Group Pty Ltd [2009] NSWSC 342 and Crossman v Taylor (No 3) [2001] FCA 734. His Honour set out (at [85]), among others, the following passage from Crossman:
The parties chose to conduct their venture through a company and discretionary trust and not through another legal structure such as a partnership. Had they conducted the venture through a partnership they would have owed fiduciary duties to each other. In electing to operate through a company they undertook fiduciary duties to the company but not, on the face of it, fiduciary duties to each other.
It is true that the second defendant was a two-person company and that the genesis of the arrangement was very similar to what one would find in the case of a two‑person partnership. It is also true that the categories of fiduciary relationships are not closed: Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 ('Hospital Products'). However, those matters having been said, there is nothing by way of an express statement or clear conduct to indicate that the parties intended to create legal obligations over and above the obligations which attended the legal structure they adopted after taking accounting advice [301] ‑ [302].

It is, I think, readily apparent that the assistance the primary judge received in enabling him to understand this area of the evidence, and indeed much of the evidence on both sides, was a good deal less than ideal, no doubt as a result of the great time constraints to which both parties were subject. However, in his affidavit evidence the appellant explained the entries in the scrapbook on which he relied by reference to the general ledgers. Had his Honour been unable to understand the evidence it is to be expected that that would have been raised by his Honour at the time. His Honour should, with respect, have dealt with the significance of the scrapbook in his reasons. In fact, his Honour did not refer to the scrapbook at all in his reasons, beyond the brief reference which I have set out above.
I should note too that that no complaint was made by the respondent at trial that the interaction between the general ledgers, the drawings accounts and the scrapbook had not been sufficiently explained by the appellant or that the respondent had not been cross‑examined on them. No objection was taken to the admission of this part of the appellant's evidence (appeal ts 147). I did not understand it to be contended by the respondent on the appeal that the primary judge should not have received that evidence.
I should also observe more generally that the extent of the cross-examination on both sides was very limited and both sides did not cross-examine on a number of material areas of factual controversy, some of which have been referred to above. The absence of cross‑examination on many contentious issues was, no doubt, due to the severe time constraints. The major areas of factual contest were, however, sufficiently clear from the affidavits of the parties and in the unusual circumstances of this case I do not consider that in the absence of cross‑examination on a particular point it was to be assumed that the evidence of the witness on that issue was accepted: see Seymour v Australian Broadcasting Commission(1977) 19 NSWLR 219, 236; Nominal Defendant v Saleh [2011] NSWCA 16 [140].
In my opinion, in order properly to determine the appellant's case it was necessary for the primary judge to grapple with the evidence in relation to the scrapbook and the other evidence in relation to the way in which the income and profits of the accounting practice were dealt with. I do not underestimate the difficulties involved in doing so given the way in which the case was conducted on both sides. But it was essential for his Honour to come to grips with that evidence. He did not do so, no doubt because he considered it unnecessary in light of his conclusion on the law.
It was also submitted by the appellant that the primary judge failed to consider relevant evidence in relation to the service entities of the accounting practice, Palermo Farms and JP Corporate respectively. On the respondent's evidence, the service entities derived 'considerable profits' from providing services to the accounting practice. It was submitted that it was consistent with the appellant's case that the service entities were being operated in a way which took substantial income out of the accounting practice, Palermo Farms and JP Corporate, and distributed it to the appellant and the respondent equally, and inconsistent with the respondent's contention that the accounting practice, Palermo Farms and JP Corporate were operated for his benefit alone.
There were clear conflicts between the evidence of the appellant and the respondent as to the structure, operation and purpose of the service entities, none of which were resolved by the primary judge. The evidence in relation to the service entities was not referred to in the reasons of the primary judge and, it would seem, was not considered by his Honour. Again, that no doubt is because his Honour concluded it was unnecessary to do so in light of his finding on what he regarded as the determinative legal issue.
The primary judge considered that the sale of part of the accounting practice to Mr Melbin in July 2005 and subsequently the sale of the whole of the balance of the practice in 2006 to the respondent's son and Ms Ruland, was decisive against there being a partnership between the appellant and the respondent in the accounting practice [94]. I should mention that His Honour did not explain why he thought that was so.
In any event, that, with respect, was not the relevant question in respect of the appellant's case. Indeed, in his closing submissions at trial counsel for the appellant had disavowed any contention that the appellant was a partner in the accounting practice itself. The question was whether from the conduct of the parties over the years there was to be inferred an overarching agreement of the nature alleged by the appellant.
Both parties gave evidence about the sales. There was a clear conflict in the evidence, relevantly, as to how the proceeds of sale were dealt with. To reiterate its substance, the appellant said that the proceeds of the sale to Mr Melbin were paid into the accounting practice, which then paid it to Tomar so that the proceeds were shared between them. Similarly, in relation to the sale to the respondent's son and Ms Ruland, the appellant said the funds received from Ms Ruland (the respondent's son having failed to pay his share) were paid to the accounting practice and then paid to Tomar.
The respondent's evidence, on the other hand, was that the proceeds of sale were not to be shared between them but that the appellant asked him to pay the funds into Tomar as Tomar needed funds and that he agreed to do so on the basis that the funds would be credited to his loan account in Tomar. He said he had been unable to check whether that had in fact been done.
That evidence was not referred to by the primary judge and no findings were made which resolved the conflict. It was, however, evidence which was relevant to the question whether there was the overarching agreement contended for by the appellant.
The primary judge's finding that the appellant's pleadings in District Court proceedings between JDP Admin as plaintiff and Palermo Group Pty Ltd, John (Jnr) and Ms Ruland as defendants, were 'completely contrary to any notion of a partnership between the appellant and the respondent in the accounting practice for the period of about 1980 and 2006' [105], was once again directed to the question whether the appellant and the respondent were partners in the accounting practice itself. It was not directed to the question of the overarching agreement raised on the appellant's case.
The primary judge's discussion of the evidence in relation to the affairs of JP Corporate was very brief. No reference was made to the appellant's extensive evidence as to the way in which the earnings of JP Corporate were dealt with over the years. His Honour simply referred to the respondent's evidence that he caused JP Corporate to be incorporated in or about 2000 to take over his corporate consulting activities and to the evidence of Dean Palermo, the appellant's son, that, among other things, funds were passed by JP Corporate to JDP Admin until October 2011 [110]. And, as mentioned previously, his Honour then concluded as follows:
Moneys from JP Corporate were distributed by [the respondent and the appellant] to other corporations and trusts. [The appellant] lacked the specific knowledge to earn income on behalf of JP Corporate. It was a business run entirely by [the respondent]. It was a one director, one shareholder company. There is no basis on the evidence for the existence of a relationship as asserted by [the appellant] [111].
The finding that the appellant lacked the knowledge to earn income on behalf of JP Corporate and that its business was run entirely by the respondent is not, however, inconsistent with the appellant's case of an overarching agreement. Indeed, the finding that moneys earned by JP Corporate were distributed to other entities and trusts, not only by the respondent but also by the appellant, itself calls for some explanation. That was not a matter to which his Honour adverted.
The primary judge again dealt with Palermo Farms very briefly in his reasons. He found that the appellant was not a partner in the farm and that he simply acted as the respondent's manager [114]. His Honour concluded that no partnership had existed because:
[a]ll the losses from the part of the farming enterprise not undertaken by a company were borne entirely by [the respondent]. This is decisive against the existence of a partnership. The motive, said by [the appellant] to be reduction of [the respondent's] income tax burden, is immaterial [113].
While the finding that the losses from the business were borne by the respondent may be inconsistent with a partnership between the appellant and the respondent in the farming business itself, it is not necessarily inconsistent with the appellant's case that that had been done in order to reduce the overall liability for tax on income which was ultimately to be shared equally.
There were, as submitted by the appellant, at least two other features of the farming operation which were relevant to a proper determination of the appellant's case but which were not considered by the primary judge. First, the land upon which the farming operation was conducted was owned by CMT as trustee of the MM Trust, the beneficiaries of which were the appellant and the respondent and their respective families. That was a structure which on its face would appear to be consistent with the appellant's case. Secondly, in 2007 the farming operation was taken over by Red Lancer as trustee for the Red Trust. The directors and shareholders of Red Lancer were the appellant and the respondent. The respondent's explanation that he decided to give up the farming operation in his own name because of 'income tax implications' was not examined by the primary judge although, as the appellant submitted, that did not explain why a business said to be conducted solely for the respondent's benefit came to be jointly owned without apparently any consideration passing to the respondent.
Senior counsel for the appellant also submitted, in effect, that the draft shareholder's agreement for Control Centre was, as had been contended by the appellant at trial (trial ts 331), further significant evidence consistent with the appellant's case. That too had not been referred to by the primary judge. The draft shareholder's agreement was put into evidence by the respondent. Counsel referred to the '[o]bjective' at par 2 of the agreement, which was in the following terms:
The objective of the Company is to exercise the power as the Appointor or Guardian of any Trust in the interests of the beneficiaries of the Trust in good faith, so that the families and descendants of [the respondent and the appellant], and their Associates where applicable, may together have the benefit of the Trusts in appropriate proportions, it being intended that the families of [the respondent] and their Associates on the one hand and of [the appellant] and their Associates on the other hand should share those benefits in equal proportions.
Although the shareholder agreement was never executed, it was not suggested that that objective did not reflect the parties' instructions and therefore their arrangements.
Senior counsel for the appellant further pointed out that the primary judge had not dealt with the appellant's evidence in relation to superannuation contributions made to the Tomar Superannuation Fund on behalf of the respondent, the respondent's wife Lida, the appellant, and the appellant's wife Maria. At trial, it had been submitted on behalf of the appellant that the evidence of those contributions was consistent with the overarching agreement (ts 329). No reason had been given by the respondent why, for instance, JP Corporate, a company which he said operated solely for his benefit, should pay superannuation contributions for the appellant's benefit or why the respondent should not receive a contribution equal to that made for the appellant's benefit from Tomar and JDP Admin, companies which the respondent accepted operated for their joint benefit. Similarly, there was no explanation for the benefits paid to others from the accounting practice if the practice was operated solely for the respondent's benefit. The evidence as to the superannuation payments was again, it was submitted, evidence which on its face supported the appellant's claim but which had not been adverted to by the primary judge.
It was submitted by the respondent that the appellant's case that the superannuation payments were consistent with an overarching agreement of the nature alleged should be treated with caution as the appellant's evidence was limited to three financial years, beyond which there was simply a general assertion as to what 'generally happened', and it is not apparent whether JDP Admin recovered the contributions it made from another entity or entities. Those, however, are matters for trial.
It was also pointed out on behalf of the appellant that the primary judge had not dealt with the appellant's evidence in relation to share‑trading, evidence which it was submitted was consistent with the overarching agreement. On that issue the respondent's counsel acknowledged that the respondent's evidence at trial was 'limited', but submitted that that must be viewed against the background of the large amount of new material the respondent had to deal with in the appellant's affidavit of 11 December 2013 and the difficulties caused by the late notice that the appellant was not relying on the 2110 affidavit. That does not seem to me to be any answer.
I would uphold this ground of appeal. Notwithstanding the terms of the ground of appeal, in truth this is not a case of inadequate reasons but rather a case of a failure on the part of the primary judge to consider the substantive merits of the appellant's claim and to make the necessary findings of fact and law. The ground was developed on that basis at the hearing of the appeal. It is evident from his Honour's reasons that, having found (erroneously as it turns out) that any partnership or agreement of the nature alleged by the appellant was precluded as a matter of law, he concluded it was unnecessary to consider the substantive merits of the appellant's claim. To the extent his Honour turned his mind to the evidence before him he did so solely for the purpose of determining whether the respondent was entitled to the declarations it sought; that is, whether the appellant and the respondent had conducted any of the various businesses in partnership. The findings of fact that the primary judge did make were not directed to the case the appellant advanced and, in my opinion, are not determinative of that case. In my view, the conclusion his Honour reached that the appellant had not made out his case was not the only conclusion open on the evidence before him. For the reason I have mentioned, the evidence in relation to that case remained very largely unexplored.
It follows that the appeal should be allowed and the orders made by the primary judge set aside. For reasons I will come to, I consider there will have to be a new trial.

Ground 3

It will be recalled that the primary judge found the appellant was an unsatisfactory witness whose evidence on 'crucial points' his Honour would not be prepared to accept without some form of confirmation [13]. His Honour concluded that where there was a conflict between the evidence of the respondent and the appellant on a particular issue, his Honour preferred the evidence of the respondent over that of the appellant [35].
It was submitted on behalf of the appellant that the primary judge's findings as to credibility were unsafe because they had been made without considering whether the documentary evidence supported the appellant's evidence.
I accept that his Honour did not consider whether the documentary evidence supported the appellant's evidence in the context of the appellant's case relating to the alleged overarching agreement. However, in view of the conclusions I have already reached, it is unnecessary to determine this ground. I would observe, however, that the issue of credibility appears to have played little part in the result. That is perhaps not surprising in circumstances where much of the appellant's case relied on financial and other documents, and his Honour concluded that the bulk of the evidence given by the appellant was not in material contest [36], and that 'a lot of the evidence in controversy [did] not advance either party's overall contentions' [38]. In fact, his Honour does not appear to have determined any conflict in the evidence on the ground of credibility, apart from the conflict in relation to the payment by the appellant of $8,000 for an interest in the accounting practice, an issue which I have referred to previously and which is not material to the outcome of the appeal.

Additional evidence

The respondent applied on the appeal for leave to refer to the 2110 affidavit, which did not go into evidence at trial. In submissions in support of the application, the respondent argued that otherwise this court would be at a disadvantage in evaluating the 'feeling' of the case as run below (referring to Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 [23]), in circumstances where the feeling of the case, and the context in which the trial took place, were important in assessing whether the primary judge sufficiently grappled with the appellant's case. In particular, it was submitted, it was necessary to understand that some of the appellant's case, such as:
•evidence of the link between the general ledgers, the drawings accounts and the scrapbook;
•evidence on a year by year basis of that link; and
•evidence in relation to superannuation and the assignment of debts to Monarch,
was first revealed by the appellant's affidavit of 11 December 2013. Due to late notice that the appellant would not rely on the 2110 affidavit, the respondent's affidavit of 13 December 2013 had been prepared substantially in response to the 2110 affidavit and therefore did not deal with those matters. Nor were those matters adequately explained by the appellant's counsel at trial. The evidence at trial, and the approach the primary judge took to it, had to be understood in that context.
I am not persuaded that the interests of justice require that the respondent have leave to rely on the 2110 affidavit on the appeal. I am not satisfied that the 'feeling' of the case cannot sufficiently be evaluated on the basis of the transcript of the trial, the exhibits and the other documents before this court. Moreover, there is nothing to indicate that the way in which the evidence was dealt with at trial caused the primary judge any real difficulties in grappling with the appellant's case. If any such difficulties had occurred it is to be expected they would be referred to in his Honour's reasons. There is nothing of that nature in his Honour's reasons. Rather, as I have said, it is apparent that having concluded that the appellant's claim was precluded as a matter of law by the corporate and trust structure adopted, his Honour did not consider it necessary to have regard to the evidence said to support it.
I would add that to the extent the respondent seeks to refer to the 2110 affidavit for the purpose of enabling him to explain gaps or deficiencies in his case at trial, leave must be refused. There is, I think understandably, no notice of contention or cross-appeal to which such explanations would be relevant. At trial, no objection was taken by the respondent to the appellant's affidavit of 11 December 2013 being admitted into evidence and no request was made by the respondent for an adjournment or for more time to respond to it. Given the urgency at the time, it can readily be appreciated why the respondent chose to proceed notwithstanding any difficulties involved. But having taken that course, it is difficult to see how the respondent could now complain about it.

In my view, nothing advanced by the respondent in support of the application provides a basis upon which it would be appropriate to grant leave to refer to the 2110 affidavit on the appeal. I would accordingly refuse leave.

Orders

It was common ground that if the appeal were to be upheld the matter should be remitted for a new trial before a different judge. With great reluctance, I have come to the view that no other course is open. This is not a case where the relevant facts are incontrovertibly established: cf Fox v Percy. There are no findings at all by the primary judge in respect of the principal factual issues on the appellant's case and the evidentiary material is voluminous. Moreover, the necessary process of fact‑finding will require findings as to credibility to be made. That is not a task this court can undertake. In the absence of relevant findings of fact, this Court is not in a position to substitute its own view.
In the circumstances, there will have to be a new trial. Accordingly, I would set aside the orders made by the primary judge and order a new trial before a different judge.

Conclusion

I would:
(1)allow the appeal;
(2)set aside the orders made by the primary judge;
(3)order a new trial before a different judge; and

(4)refuse leave to refer to the 2110 affidavit.

MAZZA JA: I agree with Newnes JA.