Parker v Muir Family Investments - [2001] NSWSC 673

No judgment structure available for this case.

CITATION: Parker v Muir Family Investments [2001] NSWSC 673

CURRENT JURISDICTION: Equity Division

FILE NUMBER(S): SC 3293/00

HEARING DATE(S): 18, 19, 20, 23 and 24 July 2001

JUDGMENT DATE:
9 August 2001

PARTIES :

Morgan Ross Parker (First Plaintiff)
SSOR Pty Ltd (Second Plaintiff)
Muir Family Investments Pty Ltd (First Defendant)
Thomas Robert Holden Muir (Second Defendant)
Atalya Pty Limited (Third Defendant)
Carl Oscar Peterson (Fourth Defendant)
Piaster Pty Limited (as Trustee for the Bensan Discretionary Trust) (Fifth Defendant)
Jonathan Alfred Grey Trollip (Sixth Defendant)
Meridian International Capital Ltd (Seventh Defendant)
Kingston Factors Pty Limited (Eighth Defendant)

JUDGMENT OF: Windeyer J at 1

COUNSEL : R. McDougall QC with him Mr R V Gray (Plaintiffs)
S G Finch SC with him Mr S Burley (Defendants)

SOLICITORS: Frank G Kalyk (Plaintiffs)
Kemp Strang (Defendants)

CATCHWORDS: PARTNERSHIP - retirement of partner - partnership agreement provided for dissolution if partner gave three months' notice and for division of assets on dissolution - construction of "assets" - whether referred to "book assets" or included value of goodwill and net present value of contractual rights - PARTNERSHIP - partnership agreement - whether agreement should be rectified to exclude goodwill and net present value of contractual rights from assets to be distributed on retirement of partner and dissolution - PARTNERSHIP - whether partner estopped from relying on partnership agreement because partnership was not conduct on that basis - ESTOPPEL - estoppel by convention - whether conduct of partnership and conversations between partners estopped a retiring partner from relying on the partnership agreement

LEGISLATION CITED: Partnership Act 1892 s20(1), s39, s42(1)

CASES CITED: Coghlan v S H Lock (Aust) Ltd (1985) 6 NSWLR 158
Elsea Holdings Ltd v Butts (1986) 4 NSWLR 175
Grundt & Ors v Great Boulder Pty Gold Mines Limited (1937) 59 CLR 641
Lindley & Banks on Partnership 17th edition p745

DECISION: Paragraphs 36 and 37

16

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WINDEYER J

THURSDAY 9 AUGUST 2001

3293/00 MORGAN ROSS PARKER & ANOR V MUIR FAMILY INVESTMENTS PTY LTD & ORS

General

1 This action arises out of a dissolution of partnership. The questions to be determined at this stage of the claim are:

(1) What is the proper construction of the partnership agreement?

(2) If that construction is not the one contended for by the defendant partners, should the agreement be rectified?

Facts and issues

2 The first plaintiff, Mr Parker, is the director and controller of SSOR Pty Ltd (SSOR), the second plaintiff. The second, fourth and sixth defendants, namely Messrs Muir, Peterson and Trollip, are respectively the directors and controllers of the first, third and fifth defendants, Muir Family Investments Pty Ltd (MFI), Atalya Pty Limited (Atalya) and Piaster Pty Limited (Piaster). These four companies carried on business in partnership as the Meridian partnership through a corporate vehicle, Meridian International Capital Limited (Meridian), which acted as nominee for the partners. Meridian is the seventh defendant. The eighth defendant, Kingston Factors Pty Limited (Kingston), is a company whose shares are held by Meridian as trustee for the partnership.

3 The partnership agreement is dated 1 July 1999. Its terms, apart from the execution details, are as follows:

BY THIS PARTNERSHIP AGREEMENT

MERIDIAN INTERNATIONAL CAPITAL LIMITED

agree as follows

1. The Partners will carry on business together effective on and from 1 July, 1999 in partnership as partners in accordance with their Partnership Interests (as defined and set out in column 2 of the schedule) under the name "Meridian International Capital Partnership".

2. The business of the partnership includes financial consulting and transaction packaging and management and is being conducted by, through and in the name of Meridian International Capital Limited as nominee for the Partners and not as an agent or as a partner of or for the Partners of the partnership.

3. The Partners have each contributed to the partnership as equity the amounts set out in column 3 of the schedule, being in accordance with their Partnership Interests, and shall contribute in accordance with their Partnership Interests to any loan funds or capital requirements of the partnership or as otherwise agreed by the Partners from time to time.

4. All expenses incurred by or for the Partnership and all income and profits shall be shared by the Partners in their Partnership Interests.

5. The accounts of the partnership shall be kept by a qualified accountant mutually agreed by the Partners who shall prepare after 30 June in each year a profit and loss account of the trading of the partnership during the year expired 30 June, a balance sheet showing assets and liabilities as at 30 June, and the required taxation return of the Partnership as at 30 June.

6. The Partnership may be dissolved by any Partner at any time by three months prior notice in writing given to the other Partners. In the event of a dissolution from whatever cause each Partner is entitled to the whole of its share of the capital of the partnership and after payment to each Partner of that amount in full the assets of the partnership shall be divided among the Partners in accordance with their Partnership Interests.

7. Admission of any new partners (including the terms of such admission) and the hiring and dismissal of staff, the lending or borrowing of money, the investing of the partnership's surplus funds from time to time or the giving of any security or settlement of claims in relation to the partnership shall be as mutually agreed by the Partners from time to time.

8. Each Partner is entitled, by notice to the other parties, to nominate and appoint a person to represent it respectively in every way as a partner in the partnership and any decision by the Partner's nominee shall bind that partner and shall be acted on by the other Partners.

Schedule

(1) (2) (3)
Name of Partner Partnership Amount
Interest Contributed
Atalya Pty Limited
ACN 003505986 37.6% 121,845 55
Shellcove Road
Neutral Bay NSW 2089

Muir Family
Investments Pty Limited 20.8% 67,404
ACN 088 234 119
14 Northcote Road
Lindfield NSW 2070

Piaster Pty Limited
(as trustee for the Bensam 20.8% 67,404
Discretionary Trust)
ACN 055 779 970
12 Village High Road
Vaucluse NSW 2030

4 On 31 March 2000, SSOR gave notice of intention to leave the partnership on 30 June 2000 pursuant to clause 6 of the partnership agreement. It was contended by the defendant partners that this effected a dissolution. SSOR originally rejected this contention, but by the time the matter came on for hearing before me, and probably some time before that, all parties accepted that to be the position. Accordingly, at the commencement of the hearing, I made a declaration that the partnership was dissolved on 30 June 2000. Notwithstanding the agreed dissolution, the partnership business has in fact been carried on by the three defendant partners in the same premises under the same name but pursuant to a new partnership agreement.

5 The real question in this action is the sum to which SSOR is entitled as a consequence of the dissolution. This turns on three issues: first, the proper construction of clause 6 of the partnership agreement; second, whether that construction represents the true agreement of the parties, and if not whether the partnership agreement should be rectified; and thirdly, whether the partnership was conducted on the basis of an understanding between the partners that upon dissolution there would be no entitlement to share in any assets of the partnership other than those assets shown on the partnership balance sheet, so that the plaintiff is estopped from contending otherwise on the basis of conventional estoppel.

6 It is accepted that the partnership had some goodwill, although there is disagreement as to its value. It is also accepted that the partnership through Meridian had contractual entitlements to future streams of income which have a value. It will be necessary to say something further about the second matter, partly as great deal of evidence was directed towards it. If the plaintiff succeeds on the questions I have set out the question of valuation will be determined later, as during the hearing I made an order by consent that the question of the value of SSOR's interest in the partnership assets be referred to a referee after the judgment on all other issues had been given.

Background facts

7 The business of Meridian is the putting together or arranging leveraged leases. According to the evidence such leases can be turned to the advantage of lessor and lessee by enabling the maximum advantage to be obtained from depreciation allowances for taxation purposes. It may be to the advantage of an operating company to lease large scale equipment rather than to own it. The owner/lessor will obtain the benefit of any depreciation allowance, but some of that benefit can flow through to the lessee through reduced rental payments, while the lessor owner/financier still obtains a greater return it would have had the depreciation allowance not been available. In the middle of this stands the arranger who brings the parties together, and who in the case of Meridian obtains what might be thought to be an extraordinarily large fee for its part in the transaction. Nevertheless, considerable work is required on the part of the arranger to bring any of these very large transactions to fruition.

8 The fees which go the arranger are often divided into three categories: the first of these is a success fee or arranger's fee or adviser's fee; the second is an ongoing advisory fee or deferred arranger's fee; the third is a management fee. The first component is usually payable upon the draw down of the funds or in stages when the draw downs are in stages. The second, if payable, may be payable over part of the term of the lease. The management fees may be payable over the whole term.

9 The business seems to have commenced in 1991 as a partnership between a company, Michi Pty Limited, controlled by a Mr Lewis, and Atalya, controlled by Peterson. They were equal partners under a partnership agreement dated 25 March 1991. By a memorandum of understanding dated 8 December 1992, Messrs Muir and Parker, as contractors rather than employees, became entitled to such shares in profits of the partnership as was decided by the partners in advance for a particular year or a particular term. By a further memorandum, dated 17 June 1994, Mr Trollip and Mr Swain became entitled to similar consideration. The terms of the partnership agreement of 25 March 1991 were essentially the same as those of the agreement of 1 July 1999, which I have set out. In particular clauses 5 and 6 were the same, apart from showing each partner as entitled to 50% of the capital.

10 Mr Lewis or his company retired from the Meridian partnership on 30 June 1999. By that time it seems that rather than conduct his part of the partnership through Michi Pty Limited, he was doing so through a company, Lewis and Associates Consulting Pty Limited (Lewis Consulting), but nothing turns on that. A sale/purchase agreement was entered into between Lewis Consulting and the companies of Messrs Parker, Peterson, Muir and Trollip on 30 June 1999 under which:

(a) Lewis Consulting sold its 50% interest in the partnership business as to 16.67% to each of MFI and SSOR and as to 16.66% to Piaster; and

(b) Atalya sold down part of its interest as to 4.13% to each of MFI and SSOR and as to 4.4% to Piaster.

11 The sale and purchase agreement included the following terms:

Definitions

(c) "LC Partnership Interest" means the 50% undivided ownership interest of Lewis Consulting in the assets of the Meridian Partnership.

(d) "LC Partnership Interest Purchase Price" means A$163,052.04 (being the book value as at the Effective Date of the LC Partnership Interest in the net assets of the Meridian Partnership).

(g) "Relevant Atalya Partnership Interest" means a 12.4% undivided ownership interest of Atalya in the net assets of the Meridian Partnership.

(h) "Relevant Atalya Partnership Interest Purchase Price" means $39,740.57 (being the book value as at the Effective Date of the Relevant Atalya Partnership Interest in the net assets of the Meridian Partnership).

(j) "Relevant Transactions" mean the Cadia Hill/Newcrest Leveraged Lease financing, arranged by Meridian in March 1998, and the Bayswater Leveraged Lease financing, arranged by Meridian in September 1995.

Sales of LC Partnership Interest

(a) On the Effective Date, Lewis Consulting will sell, and the Purchasers will purchase, the LC Partnership Interest for the LC Partnership Interest Purchase Price.

Sale of Relevant Atalya Partnership Interest

(a) On the Effective Date, Atalya will sell, and the Purchasers will purchase, the Relevant Atalya Partnership Interest for the Relevant Atalya Partnership Interest Purchase Price.

Position after Effective Date

(a) After the Effective Date, Lewis Consulting will have no right, title or interest in and to the Meridian Partnership, whether with respect to matters occurring before, on or after the Effective Date, other than:-

(i) Lewis Consulting will be entitled to receive 29.97% of the net arranger's fee (after deducting all third party transaction expenses subsequently incurred and excluding any on-going management fees) paid to Meridian after the Effective Date under the Relevant Transactions, which amounts must be paid by the Meridian Partnership to Lewis Consulting promptly after receipt thereof; and

(ii) pursuant to a consultancy service arrangement as separately agreed between Lewis consulting and the Meridian Partnership.

12 In addition to this there was a consulting agreement which provided certain additional benefits to Mr Lewis or his company, including a consulting fee $50,000 for one year payable by quarterly instalments of $12,500 and certain other benefits, such as office space and the like.

13 The purchase price paid by the incoming partners for the interest of Lewis Consulting and of Atalya was based on the net assets of the partnership shown on the partnership balance sheet at the relevant date. It is not certain whether that document had been produced by then but at least the net assets were known. There was dispute as to whether or not the accounts were prepared on a cash or accrual basis. It is not necessary to determine that at this stage. It appears to have varied from time to time, but from the evidence it seems that all the expenses were accounted for on a cash basis on the basis of bills received, but that some income may have been accrued or even deferred. What is certain is that the price paid for the two interests did not include any amounts for goodwill or for the value of future income payable under concluded transaction agreements, nor had any such assets been included on balance sheets of the partnership between Atalya and Lewis Consulting.

14 Parker had not seen the earlier partnership agreement. He was, however, aware that he was paying a price fixed on the basis of the balance sheet assets which made no allowance for goodwill or future income. He thought that he was lucky to purchase on that basis. He had been present during conversations before and after Lewis retired when there was general discussion among those entitled to share in the profits with someone saying "There is no goodwill in the Meridian business" or "There is no goodwill attaching to the Meridian business, the goodwill attaches to each of us". Mr Lewis took the view that whatever goodwill he had brought to the business would be lost when he left the business. Peterson discussed Lewis's interest with Muir, Trollip and Parker prior to 30 June 1999 saying:

As Neil wishes to leave, it will be necessary to acquire his 50% interest in the current business. As you know the arrangement with Neil is that the value of his 50% partnership interest is based on the net assets of the partnership with no consideration required for goodwill or ongoing management fees. I propose that each of your entities acquire one-third of Neil's interest. I will also sell you a portion of my interest so that the new partnership interest will be that each of you will have approximately 20% of the business and I will retain approximately 37% of the business.

15 On 25 July 2000, Muir sent to Parker accounts he had prepared for Meridian for the year ended 30 June 2000, prepared in accordance with past practice for the earlier partnership. These showed that the share of SSOR for undistributed profits amounted to $333,670 which when added to the opening balance of its capital account of $67,403 resulted the total interest of SSOR in the partnership as disclosed by the balance sheet as being $401,073. Parker has not agreed to being paid out on that basis, although I should say that the income was shown to include income from a particular transaction received after 30 June 2000, payable, as I understood it, for fees earned prior to that date. The $333,670 has been paid to SSOR as its share of income for the year in question.

16 Parker was involved in a break up of his marriage during the period of the partnership. On 3 November 1999, he signed a Form 17 statement for the Family Court, setting out his income and outgoings and assets and liabilities. This showed his interest in SSOR to be worth $210,072. This was represented, for the most part, by the interest of SSOR in Meridian, shown to have a value of $45,858, and an amount in a cash management account of $132,364. His explanation of the former figure was incomprehensible. Perhaps more importantly Parker did not disclose that a very large sum, which turned out to $1,248,000, was shortly to be received his share of as part of a success fee for a transaction known as the Port Kembla Copper Lease. The other partners received their shares of this fee on 9 December 2000, but Parker asked for his to be deferred, to avoid disclosing it to the Family Court or to his wife. He admitted that he did this purposefully and he was prepared to mislead the Family Court. This also had the effect of misleading the accountant engaged by his wife to investigate his financial position.

17 At about the same time as this, Parker requested Mr Muir to prepare a letter for his solicitor as to his interest in the partnership. According to Muir he asked for a letter stating that he had no entitlement to anything in the business which Muir refused to give, saying that he would provide a "letter which sets out the common understanding and arrangements between the parties which would be correct in fact". Parker's version is a little different, but he accepts he asked for a letter saying that he had no entitlement to goodwill. I accept the evidence of Muir on this. I thought he was generally reliable. Parker was not a satisfactory witness and his credit was undermined by cross-examination.

18 The letter of 8 November, 1999 does not reflect any credit on any of those who were involved in its production, namely Messrs Parker, Muir and Trollip. It was couched in terms which I consider were intended to mislead. A paragraph bearing the number 4 upon which most reliance was placed was as follows:

4. The agreement and understanding between the existing partners of Meridian is such that a partner is not entitled to any amount for goodwill nor is entitled to share in any future income derived by Meridian upon retirement, resignation or removal of that partner. Evidence of this can be derived from the recent retirement of one of Meridian's senior partners who sold his interest in Meridian to the other partners for the book value of the net assets. This value essentially comprised the written down book value of office furniture and computers.

19 This was untrue as Lewis or his company obtained benefits from the consulting agreement and the two transactions referred to as the sale/purchase agreement. Parker in fact told his solicitor not to use the letter in negotiations with the other side and she did not provide it to them. He told her that there were mistakes in it. She apparently obtained a copy of it just before the meeting with the wife's investigating accountant, but she took no notice of it.

20 It is necessary to give some short attention to the large amount of evidence which is really relevant only the question of valuation of the partnership business but nevertheless had some little bearing on the matters which I am deciding. Parker said that the fees which were invariably paid to Meridian on draw down were nothing more or less than a success fee. He said that they were called advisory fees to enable the lessor company to obtain a tax deduction in respect of those fees. Mr Muir had no doubt they were a success fee and I do not think that Mr Trollip had any doubt either. Mr Peterson, on the other hand, persisted with stating that they were fees truly paid for advice, even though he accepted that they would be paid if no advice was given and, I think, in the long run he conceded that the quantum had no relevance whatsoever to the amount of advice given, if any were given. There is no doubt in my mind that the up front fee was a success fee. That does not in any way indicate that Meridian did not do a considerable amount of work as an arranger of the transaction. What it does show is that Meridian was very well paid for whatever work it did. So far as continuing advisory fees or deferred arrangers fees or the like are concerned, it is not possible to come to any firm conclusion as there is no complete evidence as to what work was done to earn those fees. Mr Peterson insisted that they were for ongoing advisory work. Mr Parker that the fees were really success fees paid over a period because they could not be, in his terms, extracted at the time of draw down but could be obtained over a time. Whatever the position, it is accepted that there was a considerable profit element in those fees, assuming that some advice was given.

21 So far as the management fees were concerned, once again, the only useful evidence is that of Mr Muir who said that for one particular transaction he considered that annual management fees of $12,5000 would be proper for the work done and he considered that there was a considerable profit in the fees obtained. Insofar as the evidence of Mr Peterson was adduced to endeavour to show that there was really no asset value in these continuing fees because the work which would have to be done to earn them would make them valueless, that evidence should be completely discounted. In the Port Kembla Copper transaction Mr Peterson instructed an employee of Meridian to alter the figures so that what were intended to be deferred arranger's fees were transferred into the column for management fees. These very large amounts were then payable over the same period as the deferred arranger's fee and then suddenly the management fees were reduced to what was in fact the proper amount. The purpose of this alteration was to deprive the co-arranger of its proper share of the deferred arranger's fee. Whatever Mr Peterson said, there was no other purpose in this. He did not tell the co-arranger bank about this alteration when it was done, although he said in evidence that he had told them since, but after these proceedings commenced and I am satisfied that he did so because it was apparent the true position was likely to be disclosed in these proceedings. To suggest that there was no value in the entitlement to these fees, whether they be called deferred adviser's fees, deferred arranger's fees, on-going advisory fees or management fees, flies in the face of reality. I should say that neither Mr Muir nor Mr Trollip suggested otherwise. If there were any further evidence needed as to the true nature of these entitlements, it is provided by the documents themselves, which, in general, provided that if the lessee defaulted and the lease was terminated then any unpaid amount of future advisory fees or management fees due would immediately become payable.

Construction

22 The words of clause 6 of the partnership agreement are perfectly clear. The argument of the defendants is that clause 6 must be related to clause 5 so that the assets referred to in clause 6 must be the same as the assets shown on the balance sheet which are referred to in clause 5. I do not think that is correct. Apart from the fact that partnership accounts are often prepared without showing figures for goodwill, or other matters not necessary for taxation purposes, there is no reason why clause 6 should not be construed so as to give effect to its perfectly clear meaning. Apart from anything else were that not done, and instead one was to adopt the construction put forward by the defendants, there would be partnership assets left in limbo on dissolution. That would, of course, be a ridiculous result and would be contrary to s20(1) of the Partnership Act 1892. It is of some significance to bear in mind that it is the defendant partners who, from the start, have contended that the partnership was dissolved as at 30 June 2000. While, in one breath, they argue that a sensible construction of the partnership agreement is not one which will result in SSOR obtaining a return of about 7,000% on its investment, if its figures are correct as to value, they feel able to say at the same time, that they are entitled to such a return themselves and to take for themselves the share of Parker. The words are perfectly clear and there is no ambiguity in them. If, upon dissolution, a receiver had been appointed to the partnership assets, then after the sale and getting in of the assets, and the payment of the liabilities, the receiver would have been required to distribute the assets to the partners in accordance with their shares in the partnership assets (Partnership Act s39). He would not have been authorised or entitled in some way not to distribute all of the assets. It was pressed upon me that I should have regard to the commercial matrix of facts in which the partnership agreement was entered into. Those are said to include the purchase price paid under the sale and purchase agreement; and the fact that Parker knew that no payment was being made for goodwill. I cannot see that any of this can alter the clear meaning of the words when any other construction is patently absurd, having regard to the terms of the clause as to dissolution. I find the words mean what they say. I should add, if it be relevant, that while it is perfectly clear from the sale and purchase agreement how the purchase price was calculated, it is also perfectly clear that what was purchased were the relevant interests in the net assets of the partnership and there is no reason to suggest, and in fact the contrary is clearly stated, that Lewis Consulting retained any interest in the partnership business and neither did Atalya Pty Limited retain any interest in the share which it disposed of in the partnership assets.

Rectification

23 By their cross-claim the defendant partners claim rectification, seeking an order as follows:

2. Insofar as the partnership on its proper construction does not have the meaning set forth in paragraph 18(c) above and order rectifying it accordingly.

24 In paragraph 18(c) of the defence the defendants:

say that on the proper construction of clause 6 of the partnership agreement the "assets of the partnership" do no include goodwill or prospective income which may be earned or received after the date of dissolution.

that

(being the net assets of the Partnership as disclosed in the accounts prepared in accordance with clause 5)

In the event of a dissolution for any other cause, the terms of the dissolution shall be governed by the Partnership Act, 1892

Estoppel

25 This claim as pleaded by the defendants is set out in paragraph 18(d) to (g) of the defendants' points of defence as follows:

18. The defendants:

…

(c) say that on the proper construction of Clause 6 of the Partnership Agreement the "assets of the partnership" does not include goodwill or prospective income which may be earned or received after the date of dissolution;

Particulars

Sale/Purchase Agreement being Annexure D to the Affidavit of Carl Oscar Peterson sworn 22 August 2000.

(e) say that immediately prior to. at the time of entry into of the Sale/Purchase Agreement and the Partnership Agreement and at all material times thereafter it was the continuing common intention of the parties. an assumption common to them and an assumption held by the defendants to the knowledge of the Plaintiffs that "assets of the partnership" in Clause 6 of the partnership Agreement was to be construed and given operation as set out in sub- Paragraph ( c) above:

(ii) entered into the Sale/Purchase Agreement on its terms. and

(iii) completed the Sale/Purchase Agreement on its terms; and

26 The main evidence relied upon by the defendants on this question is the following: (a) the conversations prior to 1 July 1999; (b) the letter of 8 November 1999 to Parker's solicitor; (c) the Family Court financial statement; (d) the statement of assets of Parker in an application to Westpac Banking Corporation in January 2000; (e) the untenable construction Parker sought to place on clause 6 of the agreement; and (f) the terms of the sale/purchase agreement.

27 The conversations do no more than express views as to whether or not there was goodwill. They do not express any assumption of fact that the assets on dissolution were not to be taken to include goodwill if there were any. I do not accept that Parker, by his presence at those conversations, assented to that position, namely that on a dissolution the assets of a partner did not include goodwill. As I have said that produces a ridiculous result. Furthermore, 18(f)(i) could only apply to Peterson as Muir and Trollip received the same advantages as did Parker.

28 The letter and the statements of assets are said by the defendants to evidence the fact that the parties conducted themselves upon a common but mistaken assumption as to the terms of their agreement. So far as Parker is concerned, his lack of credit does not really assist the defendants in this assertion. Parker accepted, so far as the court document was concerned, that it was misleading and purposefully so. The other parties, of course, were not concerned with it. The letter was not used and Parker told his solicitor that it was incorrect. It was misleading and I find intentionally so on the part of Messrs Muir and Trollip as well as Parker. Parker was, at this stage, doing his best to make his assets seem as small as possible and his partners were aware of this. So far as the statement of assets to the bank was concerned, Parker said that he was not particularly worried about this because there was sufficient equity for whatever he wished to achieve and the figure put in for SSOR was really the value of the capital which he introduced into the partnership business. For obvious reasons he was unlikely to be giving the bank a figure at great variance with the figures on which he had arranged an financial settlement with his former wife. There was no evidence of conduct of Peterson or his company during the existence of the partnership supporting the common intention put forward.

29 The requirements for an estoppel of the type set up here are most simply encapsulated in the following passage from the judgment of Dixon J in Grundt & Ors v Great Boulder Pty Gold Mines Limited (1937) 59 CLR 641 at page 674:

in pais

Coghlan v S H Lock (Aust) Ltd

Elsea Holdings Ltd v Butts

Coghlan

30 I should probably add that while the defendants pointed out that on the figures which Parker put forward SSOR would be receiving a return on about 7,000% on its investment, it is by no means clear that the valuation of the partnership business put forward by the plaintiffs will be held to be the proper valuation. All that is accepted by the defendants is that there is some value in the goodwill and contractual rights.

Relief

31 It has already been agreed and ordered that the question of valuation be referred to a referee. The referee will of course determine, among other things, the value of the goodwill of the partnership, taking into account the fact that any of the partner companies and their controllers are free to work on their own account, and will of course take into account the contractual rights to receive future income and the degree of certainty or otherwise of those income streams being maintained.

32 As this is a case where the defendant partners have in essence appropriated to themselves the partnership business on dissolution, the appropriate order is that they pay to SSOR the value of the interest of SSOR in the partnership assets as at 30 June 2000, but taking into account distributions of income of $333,670 made to the partners after that date for income earned up to that date.

33 As the defendant partners have carried on the business of the firm with its capital and assets, on any final settling of accounts it would appear that, pursuant to s42(1) of the Partnership Act, SSOR is entitled either to share in the profits after the dissolution attributable to the share of SSOR of the partnership assets or to interest pursuant to that section. In making that election SSOR will no doubt bear in mind the statement of Lord Lindley which appears at p745 of the 17th edition of Lindley & Banks on Partnership as follows:

Judgments for an account of profits after dissolution are fearfully oppressive; and the writer is not aware of any instance in which such a judgment has been worked out and has resulted beneficially to the person in whose favour it was made.

Orders sought

34 SSOR seeks the following orders by further amended summons:

the Partnership

(a) the beneficial interest in all the contractual rights of the Seventh Defendant to receivables (including all fees characterised as "management", "advisory" or "restructuring" fees due) to the Seventh Defendant arising in relation to the lease transactions arranged (in whole or in part) by the Seventh Defendant;

(b) the beneficial interest in all profit earned by the Eighth Defendant in respect of the lease transactions arranged (in whole or in part) by the Seventh Defendant;

6E An order that it be referred to some fit and proper person to enquire into and report upon the value upon dissolution as at 30 June 2000 of the assets of the Partnership and of the Second Plaintiff's interest therein.

6F An order that the Defendants within some time to be fixed by the Court pay to the Second Plaintiff the value of its interest in the Partnership Assets.

35 So far as the declaration sought is concerned, as I have said in the judgment the assets of the partnership include the contractual rights, there may be no need for any declaration. Goodwill is also an asset but is not mentioned in paragraph 6A.

36 The plaintiff, or at least the second plaintiff, has succeeded in its claims. It should therefore be entitled to its costs as against the first, third and fifth defendants up to this stage. The costs of the taking of accounts and ascertaining the value of the interest of SSOR should be determined separately after the reference has been concluded. So far as 6F is concerned the orders should be against the partner defendants only.

37 After SSOR has made the appropriate election the parties should bring in short minutes to give effect to these reasons. I will stand the matter over for a short time for that to be done.

**********

Last Modified: 09/11/2001

Actions

Download as PDF Download as Word Document

Citations

Parker v Muir Family Investments [2001] NSWSC 673

Cases Citing This Decision

0

Cases Cited

2

Statutory Material Cited

1

Giumelli v Giumelli [1999] HCA 10

Trident General Insurance Co Ltd v McNiece Bros Pty Ltd [1988] HCA 44

CITATION:	Parker v Muir Family Investments [2001] NSWSC 673
CURRENT JURISDICTION:	Equity Division
FILE NUMBER(S):	SC 3293/00
HEARING DATE(S):	18, 19, 20, 23 and 24 July 2001
JUDGMENT DATE:	9 August 2001
PARTIES :	Morgan Ross Parker (First Plaintiff) SSOR Pty Ltd (Second Plaintiff) Muir Family Investments Pty Ltd (First Defendant) Thomas Robert Holden Muir (Second Defendant) Atalya Pty Limited (Third Defendant) Carl Oscar Peterson (Fourth Defendant) Piaster Pty Limited (as Trustee for the Bensan Discretionary Trust) (Fifth Defendant) Jonathan Alfred Grey Trollip (Sixth Defendant) Meridian International Capital Ltd (Seventh Defendant) Kingston Factors Pty Limited (Eighth Defendant)
JUDGMENT OF:	Windeyer J at 1

COUNSEL :	R. McDougall QC with him Mr R V Gray (Plaintiffs) S G Finch SC with him Mr S Burley (Defendants)
SOLICITORS:	Frank G Kalyk (Plaintiffs) Kemp Strang (Defendants)
CATCHWORDS:	PARTNERSHIP - retirement of partner - partnership agreement provided for dissolution if partner gave three months' notice and for division of assets on dissolution - construction of "assets" - whether referred to "book assets" or included value of goodwill and net present value of contractual rights - PARTNERSHIP - partnership agreement - whether agreement should be rectified to exclude goodwill and net present value of contractual rights from assets to be distributed on retirement of partner and dissolution - PARTNERSHIP - whether partner estopped from relying on partnership agreement because partnership was not conduct on that basis - ESTOPPEL - estoppel by convention - whether conduct of partnership and conversations between partners estopped a retiring partner from relying on the partnership agreement
LEGISLATION CITED:	Partnership Act 1892 s20(1), s39, s42(1)
CASES CITED:	Coghlan v S H Lock (Aust) Ltd (1985) 6 NSWLR 158 Elsea Holdings Ltd v Butts (1986) 4 NSWLR 175 Grundt & Ors v Great Boulder Pty Gold Mines Limited (1937) 59 CLR 641 Lindley & Banks on Partnership 17th edition p745
DECISION:	Paragraphs 36 and 37