Paroz v Paroz
[2010] QSC 203
•11 June 2010
SUPREME COURT OF QUEENSLAND
CITATION:
Paroz & Ors v Paroz [2010] QSC 203
PARTIES:
IAN LESLIE PAROZ
(first defendant/first applicant)
JENNIFER MARGARET PAROZ
(second defendant/second applicant)
LEWIS MARTIN PAROZ
(third defendant/third applicant)
KAREN ANN PAROZ
(fourth defendant/fourth applicant)
v
LESLIE ROLAND PAROZ
(plaintiff/respondent)FILE NO/S:
BS 9656/04
DIVISION:
Trial Division
PROCEEDING:
Application
ORIGINATING COURT:
Supreme Court at Brisbane
DELIVERED ON:
11 June 2010
DELIVERED AT:
Brisbane
HEARING DATE:
2 June 2010
JUDGE:
Peter Lyons J
ORDER:
Injunction granted with costs
CATCHWORDS:
EQUITY – EQUITABLE REMEDIES – INJUNCTIONS – INJUNCTIONS FOR PARTICULAR PURPOSES – TO RESTRAIN UNAUTHORISED ACTS – where the plaintiff and defendants were parties to partnership agreements relating to a number of farms – where defendants submit that the plaintiff’s use of the farms is in breach of his obligation as a partner, notwithstanding the dissolution of the partnerships – whether the defendants are entitled to an injunction to prevent the plaintiff from using the farms
REAL PROPERTY – TORRENS TITLE – JOINT TENANCY AND TENANCY IN COMMON – GENERALLY – where the plaintiff used co-owned farming land for his own benefit – where the defendants allege that the conduct of the plaintiff is an infringement of the rights of the first and third defendants, as co-owners – whether the plaintiff’s conduct is in fact an infringement of the rights of the first and third defendants as co-owners – whether there has been constructive ouster of the first and third defendants from the farms
Biviano v Natoli (1998) 43 NSWLR 695, applied
Chan v Zacharia (1984) 154 CLR 178, cited
Chieco v Evans (1990) BC 900 2356, applied
Dean v MacDowell (1878) 8 Ch D 345, citedMcKay v McKay [2008] NSWSC 177, cited
COUNSEL:
A P Collins for the defendants/applicants
N H Ferrett for the plaintiff/respondentSOLICITORS:
Ernst & Young Law for the defendants/applicants
HopgoodGanim Lawyers for the plaintiff/respondent
For many years, the parties carried on farming activities in the vicinity of Laidley and Mutdapilly. As will be explained, there are two relevant partnership agreements. It is common ground that the two partnerships were dissolved some time ago. The defendants seek injunctions restraining the plaintiff from carrying on farming activities on the remaining farms, either on the basis that he is in breach of his obligations as a partner, during the period when the partnerships are being wound up; or alternatively, because he is in breach of his obligations as a co-owner.
Background
The farms near Laidley are referred to as the Berne farm, Jimmy Stone’s farm and Klibbie’s farm (together the home farms); and Plainland Road. The farms at Mutdapilly are McLean’s farm and Berry’s farm (together, Mutdapilly). Other farms on which farming activities were conducted by the parties have been sold, and are not relevant for the present application.
It seems to be common ground that the plaintiff, the first defendant and the third defendant (who are brothers) are the registered proprietors of Plainland Road as joint tenants; and that they are the registered proprietors of the other farms as tenants in common in equal shares. In 1981, the three brothers entered into a deed for a partnership between them (the Land Partnership). Clause 2 of the Land Partnership Deed provided, “The partnership business shall be that of graziers and farmers and shall be carried on at partnership lands or upon such other lands as may from time to time be acquired by the partners for the partnership purposes”. Clause 5 of that deed provided that the partnership should, during the continuance of the partnership “have the use of the said farm lands” and made provision for farming and farming activities, and the performance of other obligations.
Clause 6 was in the following terms:
“6. TERMINATION. On the termination of the partnership for any reason whatsoever the partnership shall hand back to Ian Leslie Paroz, Leslie Roland Paroz and Lewis Martin Paroz the said partnership lands, fixed improvements and farming plant owned by the Partnership in such good repair order and condition as shall be in accordance with the agreements herein contained.”
Clause 12 of the deed dealt with breach, and provided that in the case of a breach, the other partners might by notice in writing determine the partnership, and in that case, the partners giving the notice were given the option of purchasing the share of the defaulting partner on terms specified in the partnership agreement. Clause 13 provided for the resignation of a partner. The resigning partner was given the power to “terminate the partnership” by giving to the other partners notice of his intention to do so, in which event the other partners were given the option of purchasing the resigning partner’s share of the partnership. Clause 14 dealt with the death of a partner, in which case, the survivors were given the option of purchasing the deceased partner’s share of the partnership. Clause 16 provided that if an option to purchase a share in any of these circumstances was not exercised, the partnership was to be wound up, and the liabilities of the parties determined and the assets distributed, as provided by law.
At about the same time, the parties also entered into another deed regulating a partnership between them (the Farming Partnership). The second and fourth defendants are respectively the wives of the first and third defendants; and were members of the farming partnership. The plaintiff (who did not marry) had a one-third interest in this partnership, and the defendants each had a one-sixth interest in this partnership.
The recitals to the Farming Partnership Deed referred to farms owned by the three brothers, as well as to the ownership by the three brothers of certain fixed improvements, farming plant and livestock. The recitals also recorded the intentions of the parties to enter into a partnership for the purpose of working the nominated farmlands. Clause 2 was in similar terms to cl 2 of land partnership, although it included a reference to the farms mentioned in the recitals. Clause 6 was in similar terms to cl 6 of the land partnership deed, although a reference to livestock was included. The farming partnership deed included clauses dealing with breach, resignation, the death of a partner, the option to purchase the share of a partner who was not continuing in the partnership, and the consequences of the failure to exercise that option, similar in terms to those in the land partnership.
Although the three brothers came to own some of the farms subsequently, the parties have proceeded on the basis that the partnership deeds extended to them.
The first and second defendants reside at Plainland Road. The third and fourth defendants constructed a house in 1984 on Berry’s farm, where they continue to reside. The plaintiff resides on one of the home farms. Mrs Olive Paros, the mother of the three brothers, resides on one of the home farms, having been granted a right to do so.
Early in 2003, difficulties emerged in the partnerships. They resulted in protracted negotiations, which were unsuccessful. The plaintiff commenced proceedings in November 2004, ultimately claiming a constructive trust, and an order for equitable compensation, on the ground of alleged unconscionable conduct by the defendants. A trial in respect of those claims took place last year, and was decided adversely to the plaintiff. It is the subject of a pending appeal.
In December 2006, receivers were appointed to the farming partnership. They conducted a sale in March 2007. The plaintiff purchased virtually all of the cattle sold at this sale, and immediately returned them to the farms. He has continued to conduct farming operations on the farms since that time for his own benefit, and contrary to the wishes of the defendants.
On 7 April 2010, the defendants sought and were granted interlocutory injunctions to restrain the plaintiff from carrying out activities related to planting crops at Mutdapilly. Interlocutory injunctions were granted on that day. However, shortly thereafter, and in breach of the injunctions, the plaintiff slashed grasslands on the Mutdapilly properties, and subsequently planted crops on much of the slashed land. The evidence records these activities continuing to be carried out as recently as the week commencing 25 May 2010. The first defendant gave oral evidence that of 262 acres of land at Mutdapilly, he estimated that some 200 acres has been slashed, and that planting had occurred on about 120 acres. None of this evidence has been challenged in these proceedings. Indeed, after the hearing, a finding of contempt of the order of 7 April 2010 was made against the plaintiff.
There has also been evidence that on one occasion, when the defendants went to visit their mother at Berne farm, the plaintiff parked his vehicle in the entry way, so as to obstruct them from entering. On another occasion, he came to the house where the first and second defendants reside, and banged on the door with such force as to make holes in it. The effect of the evidence of the defendants is that the plaintiff has made them feel unwelcome on at least some of the land.
It is clear that the plaintiff has been conducting grazing activities on the farms, at least to their capacity, and it would seem beyond their capacity. The first defendant gave evidence that Plainland Road has a capacity to carry approximately 15 head of cattle. However, the plaintiff has depastured approximately 20 head of cattle on it, though some are young. The first defendant also gave evidence that some of the cattle have escaped from this farm, and are grazing on a neighbour’s property. He also gave evidence that the home farms have a maximum carrying capacity of 45 breeders, together with progeny, but could not give a number of cattle on the properties at the time of his most recent affidavit (sworn on 1 June 2010). The grazing area at Mutdapilly has a maximum carrying capacity of 20 steers, but the plaintiff has depastured 160 head of cattle on this property (including in the cultivation area).
The contentions
The defendants primarily submitted that the plaintiff’s use of the farms is in breach of his obligation as a partner, notwithstanding the dissolution of the partnerships. Reliance is placed on a passage from Dean v MacDowell[1] to the effect that a partner must not use partnership assets for his own benefit; nor must he carry on a business similar to the business of the partnership, otherwise than for the benefit of the partnership; and another from Chan v Zacharia[2] to the effect that, while a partnership is being wound up, each partner remains under a fiduciary obligation to cooperate in and act consistently with the agreed procedure for the realisation, application and distribution of partnership property; as well as on a proposition from Lindley & Banks on Partnership[3] that each partner can insist that no further business is transacted or acts done, otherwise then with a view to the winding up of the partnership.
[1](1878) 8 Ch D 345, 350-351.
[2](1984) 154 CLR 178, 197.
[3]18th ed at p 741.
The submissions on behalf of the plaintiff do not controvert these propositions. Rather, it was submitted that cl 6 of each partnership agreement took effect on dissolution; and although the clause required the partnership to “hand back” the farms to the three brothers, since they were in fact the registered proprietors of the farms, no action was required, so that the clause took effect immediately. It was then submitted that the plaintiff had done no more than exercise his right as a co‑owner to occupy and use the farms.
In response, the construction of cl 6 was controverted by the defendants, who also submitted that the conduct of the plaintiff exceeded his rights as a co-owner, and amounted to what is described in this area of the law as “ouster”.
It is convenient to commence with the construction of cl 6.
Clause 6 of partnership agreements
The plaintiff relied on the reference to “termination” in this clause; and further submitted that the clause had little utility if a different construction were given to it.
It is necessary to consider the clause in the context of each of the deeds. Other provisions of each deed have been previously noted. For the plaintiff, it is submitted that in those clauses, reference is made to the termination of the partnership where it is clearly intended to refer to its dissolution. For the defendants, it is submitted that the construction for which the plaintiff contends is in conflict with clauses 12, 13, and 14.
It is clear that each deed envisaged the possibility that each partnership might continue (at least in a reconstituted form), though one of the three brothers might cease to be a partner by reason of any of the events mentioned in clauses 12, 13 and 14, and the exercise of the option then conferred on the other partners. Clause 12, in the event of a breach by one partner, gives the other partners the power by notice to “determine the partnership”; and cl 13 enables a partner who wishes to retire to “terminate the partnership”; yet in each case the deed makes provision for some of the partners to purchase a share of the other, no doubt with a view to continuing the partnership business. The nature of the business is such that it could not, however, be continued, if on termination by any of the events mentioned in clauses 12, 13 or 14, the farms and other assets were to be “handed back” to the three brothers.
Apart from that consideration, it is by no means clear that cl 6 would have no utility if it were to take effect at the conclusion of the winding up, rather than on dissolution. By virtue of s 42 of the Partnership Act 1891 (Qld), on dissolution of a partnership, partnership property is to be applied in payment of debts and liabilities, and the surplus is to be applied in payment of what may be due to the partners respectively. It seems to me that in that context, cl 6 would serve the purpose of requiring the partners to preserve the lands; and if necessary, to enable that to be achieved, to contribute capital to meet any liabilities. It therefore seems to me to be incorrect to submit that the clause is without purpose, if the “termination” referred to is that which occurs when the affairs of the partnership are finalised on the conclusion of a winding up.
On behalf of the plaintiff, it was submitted that a purpose of the clause was to ensure that the lands reverted to the three brothers on dissolution, so as to protect them from creditors of the partnerships. It seems to me that that is an intention I should not lightly attribute to those responsible for the deeds; nor is it one easily drawn from the terms of the deeds, or the surrounding circumstances known by the parties. Indeed, a clear circumstance of termination is one of the events referred to in clauses 12, 13 and 14, and the subsequent decision by the parties entitled to do so, not to exercise the option to purchase the share of the other partner. Yet in those circumstances, cl 16 provides for a conventional winding up, including the distribution of the assets “as provided by law”. That seems to me to be quite inconsistent with the suggested intention.
Finally, the construction for which the plaintiff contends presents other problems. On dissolution, it is inevitable that a winding up must occur. It is not unlikely that at that time, the partnership would have a substantial number of cattle depastured on the farms, and may have carried out some cropping activities, the benefit of which might not be available for some period of time. The farming partnership included two people who would have no rights over the farms, once they reverted to the three brothers. It would be highly inconvenient, and potentially unfair, to provide for the immediate reversion of the land to the three brothers on dissolution of the partnerships, rather than when they were wound up. This consideration, it seems to me, provides an additional reason for thinking that, objectively speaking, the construction for which the plaintiff contends is not that which the parties intended when they entered into the deeds.
In my view, cl 6 of each of the deeds was intended to take effect when the affairs of the relevant partnership were wound up. It follows that the obligations of the parties regulating the use of the farms are those which flow from the fact that they are partners in partnerships which have been dissolved. Bearing in mind the position adopted on behalf of the plaintiff, it follows that the plaintiff is acting in breach of those obligations, and the defendants are entitled to an injunction preventing him from doing so.
Co-owners and ouster
In the event that the conclusion which I have reached proves to be incorrect, I propose to consider the alternative case mounted on behalf of the applicants. It is that the conduct of the plaintiff is an infringement of the rights of the first and third defendants, as co-owners.
As a co-owner, the plaintiff has a right to possession of the farms, including a right to use them. Should one co-owner be in possession of the property, and derive profit from it, under the general law that is not sufficient to entitle the other co‑owners to an account of the profits. Issues about the extent of the rights of co‑owners have typically arisen in relation to a claim for compensation by some for the use of the property by one; and in the context of a claim for title by adverse possession. In respect of the former context, it has been said[4]:-
“A co-owner is not liable for compensation merely because he is in occupation of lands in excess of his share. As each co-owner is entitled to possess every bit of the common property, it is idle to say that he must recompense his other co-sharers for the excess land. A co-owner in joint possession of any property is not restricted to the enjoyment according to his share. Nor is the enjoyment of benefit in excess of his share per se actionable. But if a co‑owner prevents the other co-owners from deriving benefit or takes possession of it exclusively in spite of protests by the other co-owners, his possession becomes wrongful. The liability for compensation arises only when his position becomes wrongful or adverse and it does not depend upon the quantity of land possessed.”
[4]Malik, Mitra’s Co-ownership and Partition (7th Ed) p 120.
However, the right of any co-owner is subject to the rights of the other co-owners. Thus the wrongful exclusion of fellow co-owners from exercising their own right of occupation (referred to as “ouster”) forms the basis for an action against the excluding party[5].
[5]Butt, Land Law (6th ed) p 239.
More recently, there has been a recognition that ouster and exclusion may be constructive[6]. In Biviano v Natoli[7] Beazley JA (with whom Stein JA agreed) said:
“The true nature of ouster is that it constitutes a trespass by one co‑tenant of another co-tenant’s rights in respect of the property. ‘An express denial of the title and right to possession of fellow tenants, brought home to the latter openly and unequivocally’ would clearly amount to an ouster.” (authorities omitted)
[6]Chieco v Evans (1990) BC 900 2356 at 6.
[7](1998) 43 NSWLR 695, 700-701.
More recently, in the context of matrimonial and similar de facto relationships, it has been held that, if it becomes no longer reasonable or practicably sensible to expect the partners to co-occupy the one property, the one who remains in possession may be taken to do so to the exclusion of the other, resulting in a liability to pay an occupation fee[8].
[8]McKay v McKay [2008] NSWSC 177 at [51]; approved in Callow v Rupchuv [2009] NSWCA 148 at [59].
The conduct which seems to underline the doctrine of constructive ouster is conduct by the party in occupation which manifests a denial of the rights of the other co‑owners.
Moreover, a co-owner who does an act which changes the character of the land, such as the planting of a grove, without the consent of the other co-owners, acts in breach of the rights of the other co-owners[9].
[9]Mitra at p 114.
In the present case, the evidence establishes that the plaintiff has depastured cattle on the property at, or in excess of, its carrying capacity. There has been no suggestion that the evidence reflects conduct which is uncharacteristic and temporary in nature. When the receivers sold the cattle depastured on the farms in 2007, the plaintiff purchased virtually all of them, and returned them to the farms, without the consent of the other co-owners; and appears to have conducted full‑scale grazing activities on the properties since that time. Indeed, the evidence indicates that some of the grazing activities extend onto other properties. It seems to me that grazing activities to this extent deny the other co-owners the opportunity to exercise their right to graze cattle on the farms. While they have generally not been denied the right physically to enter upon any part of the farmlands, at least so far as the substantial grazing areas on the farms are concerned, they have in a practical sense been denied possession of those lands for the purposes for which one would ordinarily possess grazing lands.
In my view, additional support for the conclusion that there has been constructive exclusion of the first and third defendants from these areas of the farms is derived from the character of the plaintiff’s possession of these areas. The character of his possession of these lands is shown by his response to the interlocutory injunction. It demonstrates a refusal to recognise the rights of others in respect of the lands. Although the plaintiff’s violent conduct at the home of the first and second defendant, and his blocking of the entry to the farm where Mrs Olive Paroz lives, are isolated instances, they seem to me to demonstrate a belligerent and aggressive attitude, which extends to an implicit assertion that his rights in respect of the farms prevail over those of the other co-owners.
On the plaintiff’s behalf, it was pointed out that, as a result of legal advice obtained, apparently in late 2006, the defendants have not sought to carry out farming activities on the lands; and that because they have not sought to assert their rights, there has been no act preventing them from doing so, and accordingly no exclusion of them from the farms. The corollary of that proposition is that, at a time when litigation had been commenced between family members, the defendants could not be said to be asserting their rights unless they engaged in conduct which may well have been regarded by the plaintiff as inflammatory. It seems to me that this is an unduly narrow view of what is required to demonstrate exclusion by one co-owner of the others. It should be noted that the defendants have in their pleadings in the principal action asserted that the plaintiff has acted in breach of their rights in respect of the land. Thus in their defence of 13 June 2008[10] they allege that the plaintiff used the farms for his own benefit to the exclusion of the defendants. In their defence of 22 October 2008 they make similar allegations, and an allegation that the plaintiff has used partnership assets to conduct his own activities, as a matter in respect of which they are entitled to an account. Their defence of 12 March 2009 is to similar effect, as is their defence of 11 June 2009. Their defence of 2 November 2009 put the allegations a little more clearly, including allegations that from 2007 onwards the plaintiff depastured his cattle on the farms, and used the farms to grow crops for his benefit alone, to the exclusion of the defendants from 2007 onwards. It seems to me that their conduct could not be characterised as showing no wish to exercise their rights in respect of the land. Rather, his use of partnership assets, including the farms “for his own benefit to the exclusion of the partnership”[11], amounts to an assertion, in my view, that the plaintiff’s conduct was in breach of the rights of the defendants in respect of the land. The actions of the defendants in seeking interlocutory injunctive relief is consistent with this view.
[10]At para 2, 4(k) and 13(a).
[11]Defence of 2 November 2009, para 39(b).
The recent actions of the plaintiff in slashing land which was at that time grassland, for the purpose of ploughing it; and subsequently ploughing a substantial area of it, without the consent of the defendants, and in contravention of the interlocutory injunction granted on their application, in my view is also conduct inconsistent with their rights. It occurred at a time when the defendants wished the dealings between them brought to an end. They sought the interlocutory injunction in part to enable this to occur.
It follows that I consider the conduct of the plaintiff in relation to the farms to be conduct which is inconsistent with the rights of the first and third defendants as co‑owners. If it were necessary to give relief on this basis, consideration would have to be given to the fact that the plaintiff remains a co-owner of the farms.
Conclusion
In my view the plaintiff has acted, and notwithstanding the existence of an interlocutory injunction intended to prevent him (at least in part) from doing so, has continued to act, in a manner inconsistent with the rights of the defendants in relation to the farms. Further orders should be made to restrain him from doing so. I shall hear submissions about the form which those orders should take.
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