Pham v Doan - [2005] NSWSC 201

No judgment structure available for this case.

CITATION:
Pham v Doan [2005] NSWSC 201

HEARING DATE(S): 13/07/04, 14/07/04, 15/07/04, 16/07/04, 28/07/04, 16/11/04, 18/11/04, 22/11/04, 23/11/04, 24/11/04
Written submissions: 06/12/04, 15/12/04

JUDGMENT DATE :

16 March 2005

JURISDICTION:
Equity Division

JUDGMENT OF:
Barrett J

DECISION:
Partnership shown to have been formed. Formation of partnership illegal by statute. Proceedings to be re-listed for further submissions.

CATCHWORDS:
PARTNERSHIP - generally - whether partnership formed - CONTRACTS - illegal and void contracts - whether partnership in "business of a pharmacist" between pharmacist and non-pharmacist prohibited by Pharmacy Act 1964 - whether composite business should be viewed as made up of core elements central to "business of a pharmacist" and other elements - effect of statutory prohibition on formation of partnership

LEGISLATION CITED:
Partnership Act 1892, s.1
Pharmacy Act 1964, ss.3, 25

CASES CITED:
Archbolds (Freightage) Ltd v Spanglett Ltd [1961] 1 QB 374
Chappuis v Filo (1990) 19 NSWLR 490
Fitzgerald v F J Leonhardt Pty Ltd (1997) 189 CLR 215
Nelson v Nelson (1995) 184 CLR 538
Royal Bank of Canada v Inland Revenue Commissioners [1972] Ch 665
St John Shipping Corporation v Joseph Rank Ltd [1957] 1 QB 267
Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410
Ybasco v Daka [1948] 51 WALR 22

PARTIES:
Stephen Pham - Plaintiff
Peter Doan - Defendant

FILE NUMBER(S):
SC 2753/03

COUNSEL:
Mr G.P. McNally - Plaintiff
Mr P.B. Walsh - Defendant

SOLICITORS:
Matthews Dooley & Gibson - Plaintiff
Champion Legal - Defendant

LOWER COURT JURISDICTION:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BARRETT J

WEDNESDAY, 16 MARCH 2005

2753/03 - STEPHEN PHAM v PETER DOAN

JUDGMENT

Background

1 These proceedings arise from disputes between Stephen Pham (“the plaintiff”) and Peter Doan (“the defendant”) about certain pharmacy businesses. The plaintiff was born in 1975 and the defendant in 1955. Both were born in Vietnam and are now resident in Australia. The plaintiff came to Australia as a child with his parents. The defendant was an adult when he arrived in Australia. Shortly after his arrival, the defendant came to know the plaintiff’s parents and their children. He married one of the plaintiff’s sisters (Thanh) in 1983. A close relationship developed between the defendant and the plaintiff’s family.

2 The plaintiff attended the University of Sydney after finishing school. He graduated with a degree in pharmacy and in 1997 became qualified to practise as a pharmacist in New South Wales. As will be seen, the plaintiff in due course became the registered pharmacist at a pharmacy known as Grant’s Pharmacy located at 8 Blenheim Road, North Ryde. A post office agency business was operated in conjunction with (and within) Grant’s Pharmacy. The freehold of the premises was later acquired. The plaintiff’s younger brother, David, in due course also became a qualified pharmacist. Thereafter, a second pharmacy business was acquired. That business operates in premises at South Windsor.

The claims and issues

3 The parties’ dispute concerns ownership of the two pharmacy businesses (and the associated post office agency) and the North Ryde freehold. By his statement of claim, the plaintiff claims various relief predicated on the proposition that he is the sole owner of the Grant’s Pharmacy business, the post office agency business and the North Ryde property. By his defence and a cross claim, the defendant maintains that both the business of Grant’s Pharmacy and the pharmacy business at South Windsor (as well as the post office agency within the pharmacy premises) were conducted by the plaintiff and the defendant in partnership until the partnership was dissolved in or about November 2002. He claims declarations to that effect, together with orders for the winding up of the partnership and the taking of accounts. Further, or in the alternative, the defendant seeks an order that he have an equitable charge over the assets of the Grant’s Pharmacy business, the associated post office agency, the South Windsor pharmacy business and the North Ryde property.

4 It appears to be common ground that if there ever was a partnership, it was dissolved in November 2002 when the parties had a major disagreement and, in effect, decided that, as they could not resolve matters by agreement, there would have to be litigation.

5 Issues for trial were filed by both parties. They are in similar form. I am content to adopt the statement of issues put forward by the defendant.

“1. Does the Defendant hold the property 8 Blenheim Road, North Ryde:

a. On trust for a partnership comprising the Defendant and the Plaintiff;

b. For his own benefit; or

c. On trust for the Plaintiff?

2. Does the Defendant hold the licence for the post office agency conducted at Grant’s Pharmacy:

a. On trust for a partnership comprising the Defendant and the Plaintiff;

b. For his own benefit; or

c. On trust for the Plaintiff?

a. the pharmacy business known as Grant’s Pharmacy; and/or

b. the pharmacy business known as the South Windsor Pharmacy

conducted by a partnership comprising the Defendant and the Plaintiff?

4. If there was a partnership between the Defendant and the Plaintiff, what were its terms?

Pharmacy Act

6 This formulation does not extend to the defendant’s claim for an order that he have an equitable charge. That claim was added by amendment of the cross claim on the second day of the trial. This was because the defendant’s claim as to the existence of a partnership might be defeated by s.25 of the Pharmacy Act 1964. That section is as follows:

“ Persons other than pharmacists not to have interest in pharmacists’ businesses
(1) A person (not being a pharmacist), a corporation or a body of persons unincorporated shall not carry on, as owner or otherwise, the business of a pharmacist in a pharmacy or otherwise have a pecuniary interest, direct or indirect, in the business of a pharmacist carried on in a pharmacy.

(1A) Subsection (1) does not prevent a body of persons unincorporated, being a partnership consisting only of pharmacists and formed for the purpose of carrying on, as owner or otherwise, the business of a pharmacist in a pharmacy or for the purpose of otherwise having a pecuniary interest, direct or indirect, in such a business carried on in a pharmacy, from so carrying on, or otherwise having such a pecuniary interest in, such a business.

(3) Any person or corporation who or which contravenes any provision of this section shall be guilty of an offence against this Act.

(4) If any unincorporated association contravenes any provision of this section the members of the board of management or other controlling authority thereof shall be severally guilty of an offence against this Act.

This subsection shall extend to and in respect of any person, corporation or body of persons unincorporated who or which has so entered into possession before the commencement of this Act but in the case only of a person the period of three months referred to in this subsection shall commence to run upon the date of such commencement.

this section shall not operate to prevent the person from carrying on subject to section 27 that business during the period of three months next following the day on which the person’s name was so removed or the person’s suspension took effect.

Undisputed facts

7 After qualifying as a pharmacist in 1997, the plaintiff worked for three years as an employee at a pharmacy in Cabramatta. Mr George Ioannidis, an accountant in private practice, prepared the plaintiff’s tax returns while he was so employed. Mr Ioannidis was (and had been for some years) the accountant for the defendant who, with his wife Thanh, operated a garment manufacturing business through a company, Doan Pham Fashion Pty Ltd. The defendant introduced the plaintiff to Mr Ioannidis. There was, within the family, an expectation or desire that the plaintiff would practise as a pharmacist otherwise than as an employee. Mr Ioannidis had another client who was the proprietor of Grant’s Pharmacy (and the associated post office agency). It was through Mr Ioannidis that the plaintiff and the defendant became aware in late 1999 that the Grant’s Pharmacy business and the post office agency were for sale.

8 It is not disputed that plans to purchase the businesses were pursued by the plaintiff and the defendant together. The plaintiff was only 24 or 25 years old and had no commercial experience. The defendant was in his mid forties and operated a garment manufacturing business in the course of which he had acquired some commercial experience.

9 The Grant’s Pharmacy business and the post office agency were purchased in January 2000. The whole of the purchase price of $980,000 was financed by a loan made to the plaintiff by the ANZ Bank against a guarantee provided by the pharmaceutical company, F H Faulding, under arrangements typically made by it to assist pharmacists in acquiring businesses. The ANZ loan was also supported by a guarantee given by the defendant’s company Doan Pham Fashion Pty Ltd and a mortgage of the home owned by the defendant and his wife.

10 The plaintiff was the purchaser of the pharmacy business. The defendant became registered with Australia Post as the licensee of the post office agency. The plaintiff’s sister Melissa undertook training with Australia Post and was employed in the post office business. The name “Grant’s Pharmacy” was registered under the Business Names Act 1962 with both the plaintiff and the defendant recorded as persons carrying on the business.

11 Soon after the purchase of the business was completed, the parties became aware that the premises at 8 Blenheim Road, North Ryde housing Grant’s Pharmacy were for sale. The plaintiff and the defendant discussed the possibility of purchasing the property. Contracts for the purchase of the property were exchanged in May 2000. The purchase price was $396,000. The whole of this was borrowed from the National Australia Bank against the security of the property itself and a mortgage over a house owned by the plaintiff’s sister Melissa and brother Andrew. The initial deposit of $39,600 was provided out of the Grant’s Pharmacy bank account. The purchaser under the contract was the defendant alone. Completion took place on 19 June 2000.

12 In early February 2001, the pharmacy business at South Windsor was purchased. The purchase was made in anticipation of the plaintiff’s brother, David, obtaining his pharmacy qualification and with a view to David’s working at South Windsor. While studying, David had worked part-time at Grant’s Pharmacy. As in the case of Grant’s Pharmacy, the plaintiff alone was the purchaser of the South Windsor business. The whole of the purchase moneys were provided by API (Australian Pharmaceutical Industries) against a bill of sale over the assets of Grant’s Pharmacy and a mortgage of the home owned by the plaintiff, his brother Andrew and their parents. The purchase was completed on 16 March 2001. The amount paid on settlement was $1,257,067.32. The business name “South Windsor Pharmacy” was subsequently registered in the names of the plaintiff and the defendant. In mid 2001, David, having become a qualified pharmacist, commenced working at the South Windsor Pharmacy.

13 In mid 2002, the property next door to the South Windsor pharmacy became available for sale. On 15 July 2002, the defendant and his wife Thanh (the plaintiff’s sister) entered into a contract to purchase that property for $435,000. The necessary funds were provided by the National Australia Bank upon the security of a mortgage of the property itself, a second mortgage of the North Ryde property of which the defendant was registered proprietor and a further mortgage of the property owned by the plaintiff’s sister Melissa and brother Andrew. The South Windsor property was sold at a substantial loss in March 2003.

Questions of initiative

14 There are substantial differences between the plaintiff and the defendant as to who took the initiative towards the various acquisitions. In relation to Grant’s Pharmacy, for example, the plaintiff says that Mr Ioannidis informed him, the plaintiff, of its being for sale. The defendant says that the information from Mr Ioannidis was given to him.

15 There are similarly competing claims in relation to the North Ryde property. The plaintiff says that he became aware of its availability for sale direct from the owner, Mr Grant, who, as a former owner of the business, sometimes called in to see staff. The defendant, on the other hand, says that he was informed of the property’s availability by Mr Lenguyen from whom the Grant’s Pharmacy business had been acquired and that he then telephoned Mr Grant.

16 In relation to the South Windsor pharmacy, it is the plaintiff’s evidence that he contacted business brokers who specialise in pharmacies and became aware that the South Windsor business was for sale. The defendant says, by contrast, that he contacted an agent or broker after seeing an advertisement for a pharmacy at Crows Nest and was informed of the availability of the South Windsor pharmacy.

17 I do not need to resolve these particular controversies. But they serve to emphasise an important feature of this case, namely, that each party seeks to present himself as having played a leading role in relevant decision making and negotiation. I am satisfied, however, that the plaintiff played a less prominent role than he seeks to present and that the defendant played an active role. There are three reasons for this.

18 In the first place, the plaintiff was, on his own admission, someone with no commercial experience, whereas the defendant had been in business for a number of years. There can be no doubt, to my mind, that the initial acquisition was discussed at family gatherings at which the plaintiff, the defendant and the plaintiff’s parents (among others) were present; and that the plaintiff was encouraged by his parents to take advice from the defendant on the matter. Both the plaintiff and the plaintiff’s father sought to downplay the part the defendant played but the defendant’s position as a family member with commercial experience who had been of continuing assistance makes it likely that he was influential.

19 Secondly, the plaintiff was at pains to emphasise that, after the purchase of Grant’s Pharmacy, he was tied to the premises from 9 am to 6 pm daily without any opportunity to leave even for a short time. For reasons to which I shall come, it suited him to paint that picture and, while it is not a picture I accept, it is clear that his priority was to work hard in the Grant’s Pharmacy business, to build it up and to make it successful. He was, on his own account, content to let the defendant look after administrative and financial matters. The defendant, by that time, had a vision of a large family business. At a later stage, he caused to be registered a company called “Doan Pham Health Centre Pty Ltd”. His plan for the property adjoining the South Windsor pharmacy was to redevelop it as a medical centre and there is evidence that he pursued that plan with an architect and the local council. These plans and initiatives of the defendant (to which the plaintiff and other family members were not necessarily privy), coupled with the plaintiff’s commitment to working hard at Grant’s Pharmacy for long hours, make it likely that it was the defendant who had both the time and the inclination to search out further commercial possibilities. I emphasise that the plaintiff says that he was never made aware of the defendant’s wider plans.

20 Thirdly, there is some support for the defendant’s version of matters in the documentary evidence. Such correspondence and documentation as there is in relation to the purchase of Grant’s Pharmacy is in the name of the plaintiff who, of course, was the purchaser on the record and a registered pharmacist. The documents relevant to the purchase of the North Ryde property show involvement by the defendant only – which is not surprising since he was the purchaser on the record. In relation to the purchase of the South Windsor pharmacy, however, where the plaintiff was the purchaser on the record, API (the financier), the solicitors acting on the purchase and Mr Ioannidis all corresponded with the defendant who was given a power of attorney by the plaintiff to sign the contract.

The family context

21 The plaintiff acknowledges the important role played by the defendant within the family. I quote from his affidavit of 8 July 2003:

“After the marriage [of the defendant and Thanh], the Defendant became a close family member and spent a lot of time at our home. The Defendant had worked for a few years in Australia and his English was better than the English of anyone in my family. Accordingly, he helped my parents and siblings with legal matters, completing forms and other paper work. Because Thanh was the oldest sibling, and Peter was older than any of my siblings and had lived in Australia before us, he adopted an important role in the family. He would assist family members with interpreting English and he was like an Advisor to the family in relation to legal matters and Australian practices and procedures. The Defendant does not have any family of his own in Australia.”

22 The defendant was trusted and, in a sense, looked up to by family members. He says that he took a keen interest in the plaintiff’s education and paid a university fee at the time he began his pharmacy studies. I have no doubt that this is so. The defendant deposes in his affidavit of 17 September 2003 as follows:

“The Plaintiff graduated from University with a Pharmacy degree in or about 1995. At the Plaintiff’s graduation I said to him words to the effect:

You have now graduated and will soon be a qualified pharmacist. Your brother David is also studying to be a pharmacist. My son, James, also wants to be a pharmacist. I want to buy a pharmacy that you can work at and one day we can be in partnership together. I want to ultimately buy a number of pharmacies and then David and my son can work at them when they become pharmacists, and maybe one day have a chain of pharmacies for the family. There will be jobs and security for the whole family.’

The Plaintiff said:

‘OK, it will be good to build a family business.’

After the plaintiff graduated and was doing his practical experience I had a number of conversations with him and said words to the effect:

‘After you become a registered pharmacist and get some experience I will become a partner with you to build up the family business for everyone.’

The plaintiff said words to the effect:

OK

23 The plaintiff says that no such conversations took place and that, in any event, the defendant’s son was only about ten years old at the time.

24 There is evidence from both the plaintiff and other members of his family (specifically, his brother David, his sister Melissa and his father) to the effect that the defendant actively encouraged the plaintiff to think about purchasing a pharmacy of his own and was generous in offering moral support. None of them, however, recounts any expectation or arrangement that the defendant would be a partner in any such business or have any financial interest in it. The defendant’s wife, Thanh, however, gave evidence consistent with that of the defendant.

25 This highlights a particular difficulty with this case. The evidence of the plaintiff’s father, Melissa and David, to the extent that it deals with matters about which the plaintiff gave evidence, is, in all material respects consistent with the plaintiff’s evidence. I am bound to say, however, that the evidence of the father was unsatisfactory because of a strong tendency to be non-responsive, with many questions being answered simply to the effect that whatever the plaintiff did was the plaintiff’s business alone, a line quite inconsistent with the thrust of the evidence from the other family members that matters of business were discussed by the family. Just as the family witnesses on the plaintiff’s side supported his version of events, so the evidence of Thanh (wife of the defendant and sister of the plaintiff) is generally consistent with evidence given by the defendant. Yet the evidence of the plaintiff and the evidence of the defendant conflict in virtually all important areas. Because the conflicting evidence of these family members does very little to assist in the resolution of the factual differences, it is necessary to concentrate on contemporary documents and the evidence of non-family witnesses.

Documentary evidence relevant to acquisitions

26 The Grant’s Pharmacy business was purchased for $980,000, all of which was provided by way of loan by the ANZ Bank. The plaintiff alone was the borrower. F H Faulding guaranteed repayment of the loan. A deed made on 20 January 2000 among the plaintiff, two Faulding companies and Doan Pham Fashion Pty Ltd (the defendant’s company) recited that the plaintiff proposed to carry on the business of a retail pharmacist at the Grant’s Pharmacy address and that the plaintiff and Doan Pham Fashion Pty Ltd had requested Faulding to guarantee repayment of the ANZ loan. The deed contained a covenant by the plaintiff alone “to conduct business in a competent and professional manner” and a covenant not to sell or agree to sell the business without first offering it to Faulding. The plaintiff also covenanted to give (or to procure to be given) certain specific securities, including “Registered second mortgage and property known as 3 Marina Crescent Cecil Hills”, that being the home of the defendant and his wife. Doan Pham Fashion Pty Ltd covenanted to guarantee due and punctual performance by the plaintiff.

27 The following day, 21 January 2000, solicitors purportedly acting for the defendant and his wife wrote to Westpac Banking Corporation seeking that bank’s consent to the creation of a second mortgage over their home. After referring to the existing mortgage to the bank, the solicitors said:

“Our clients are providing a guarantee to Mr. Steven Pham the brother of Thanh Thi Doan to secure a loan for a pharmacy shop known as Grants Pharmacy. Our clients have executed a 2nd mortgage over the above property in favour of F H Faulding & Co Ltd and Faulding Healthcare Pty Ltd. A copy of the mortgage is enclosed for your information.”

28 On the basis of these and other documents, it is clear that the defendant was content for the plaintiff to appear to be the sole beneficial purchaser of the Grant’s Pharmacy business and that, so far as Faulding was concerned, he made no attempt to say that the business was to be carried on by the plaintiff and the defendant in partnership. Indeed, there was a very strong reason for the defendant to allow matters to proceed in that way. He was aware (as was the plaintiff) of the prohibition imposed by s.25 of the Pharmacy Act. He knew (as did the plaintiff) that it was unlawful for a person not being a registered pharmacist to have a financial interest in a pharmacy business (except as expressly permitted by that section) and that a partnership could lawfully carry on a pharmacy business only if all the partners were registered pharmacists – although the defendant did say in cross-examination that he thought these restrictions only applied at the time of purchase and that partnership was permissible if arranged in such a way that it did not involve “stamp my name in the pharmacy”.

29 The reason why the defendant caused his company to support the Faulding financing arrangement and, with his wife, made the home available as security is not immediately clear. The defendant regarded that as an action consistent with his position as a partner with the plaintiff. The plaintiff, for his part, saw it as consistent with mutual assistance within the family. The plaintiff says that it was his wish that the house already owned by himself, his parents and his brother Andrew should be used as security. The plaintiff’s father says he had the same wish. The plaintiff testified that the defendant had said that it would be “too messy” to give security over a property owned by four persons as tenants in common and that this was the reason why the home of himself and his wife should be used as security. The plaintiff also says that he had no hesitation in accepting this offer. The cross-examination of the plaintiff’s father contains the following passage:

“Q. But did you ask Mr Doan why Mr Doan was putting up his house as security for Stephen's business?
A. Yes I did.

Q. And he told you that the reason he was doing that was because he and Stephen were going to be in business together as partners?
A. No.

Q. What do you say his answer was?
A. I remember Peter told me that ‘you are my parents’, or Stephen, ‘whatever you need and whatever I can do for you I will help you. I will try my best’ and I trust him. I believe what he said so I don't think that one day he will claim for his interest in that.

30 In the particular family context, I do not think that acceptance by the plaintiff of the defendant’s offer to make available as security the home owned by the defendant and his wife is necessarily to be regarded as any form of acknowledgment by the plaintiff that the defendant was to be a partner in the Grant’s Pharmacy business. One need only look at the security given in connection with the other acquisitions. Security for borrowings to purchase the North Ryde property included a mortgage of the property owned by the plaintiff’s sister Melissa and brother Andrew. That property was also used as security in connection with the purchase of the property adjoining the South Windsor pharmacy. When the South Windsor pharmacy business itself was purchased, the home owned by the plaintiff, Andrew and their parents was used as security. No one suggests that Andrew, Melissa and the parents thereby became partners in the pharmacy operations. Rather, there was a clear pattern and practice of mutual support among family members. Use of the home owned by the plaintiff’s eldest sister and her husband (the defendant) as security in connection with the acquisition of the Grant’s Pharmacy business should be seen as attributable to that alone.

31 There is little documentary evidence about the purchase of the North Ryde property apart from a copy of the contract and evidence that the initial deposit was provided out of the Grant’s Pharmacy Account. The plaintiff explained in cross-examination why the defendant alone was the purchaser of the North Ryde property:

“Q. You knew that contracts were exchanged in May 2000 for the purchase of Blenheim Road?
A. That's right.

Q. And you knew, prior to exchange of contracts, that Mr Doan was shown as the purchaser on the contract?
A. Yes.

Q. And you were content with that?
A. Yes. He told me that I could not get finance and he said that he will put it on his name and the business, which belonged to me, will pay the deposit and all the repayments plus costs and also entrust the building to me for that reason and therefore I did not disagree.

Q. Your understanding was that ownership of the property was going to be treated in the same way as ownership of the business that operated there?
A. No. I didn't.

32 The defendant, on the other hand, says that the plaintiff did not want to buy the North Ryde property and that the idea that he (the defendant) should buy it was approved by the plaintiff and other family members. The defendant also says that it was the plaintiff’s father who said that Melissa and Andrew should provide a mortgage in connection with the purchase. Further, the defendant deposes that he said to the father:

“I want to put the property in my name. The pharmacy is in Steven’s name so I think this should be in my name”

“That’s okay”.

33 The father’s account is different:

“Q. Do you know that your daughter Melissa and your son Andrew put up security to get the loan from the bank?
A. No.

Q. That's not something you ever discussed with them, is that your evidence?
A. I didn't.

Q. Did you have any discussions with Mr Doan about whose name the property would be registered in after it was purchased?
A. No.

Q. None at all?
A. No.

Q. Do you say before the purchase you just had no idea who was going to be the registered owner of the building?
A. I think that if Stephen want to buy the building and he should be registered as the owner of the building.

Q. But your evidence now is that no-one told you what was going to happen about registration. Instead, you just imagined in your own mind what was going to happen?
A. My simple thinking is that if Stephen want to buy the building he should be the owner of the building.

Q. And you have nothing more to say about anyone telling you who was going to own the building?
A. As I said, Stephen should be the owner but later on Peter Doan discussed with me that about the ownership of the building, if under the name of Stephen, and if Stephen got a loan and if later on he worry much about the building was put under Stephen name.

Q. Mr Doan in fact said to you that he was going to put the property in his name, didn't he?
A. That idea that come from Peter. He tell me that the building was under his name as owner because if Stephen is the owner and they worry one day when anything happen and ownership the property should be divided between Stephen and his girlfriend.

Q. Did he tell you that before or after the building was purchased?
A. He told me that during the progress under negotiate to buy the building.

Q. He told you before or did he tell you after. That's what I want to know. Before or after the purchase was completed?
A. Before the building was bought.

Q. And he told you that it was going in his name because the pharmacy was in Stephen's name, didn't he?
A. No, it's not correct.

Q. When Mr Doan told you that the building that was going to be in Mr Doan's name, what did you say to him?
A. I don't remember what did I say to Peter Doan after hearing that.

34 The arrangements for the purchase of the South Windsor pharmacy appear in part from certain documents exhibited to the defendant’s first affidavit. It is clear that the defendant had carriage of dealings with the financier, API, even though the plaintiff was the purchaser. It was the defendant who prepared and submitted a statement of the plaintiff’s financial position. A letter from the solicitor who acted on the purchase, although headed “Re: Pham Purchase from Shah”, is addressed to the defendant and begins, “Thank you for nominating me as your solicitor in this matter”. Chemworld wrote to the defendant at the time about signage for the premises.

35 I refer next to tax returns. A number of draft tax returns for the years 2000, 2001 and 2002 are in evidence. Among them are returns for a partnership described as “Peter Doan and Stephen Pham”. A tax file number (TFN) for such a partnership was issued by the Australian Taxation Office. Notification of it, dated 28 July 2000, was sent to the plaintiff and the defendant, care of Mr Ioannidis’ firm, from which it may be inferred that the relevant application was made by that firm. There is also evidence of the issue of an Australian business number (ABN) in October 2000 to “Peter Doan & Steven Pham”, care of the same firm. The relevant business entity is described as “Family Partnership”. There is evidence that Mr Ioannidis lodged business activity statements in relation to this TFN and ABN referring to the relevant taxpayer as “Peter Doan and Steven Pham, T/as Grant’s Pharmacy”. One of the draft partnership tax returns (that for 2002) is endorsed, apparently in Mr Ioannidis’ hand, “Not lodged waiting for litigation outcome”.

36 The tax documents to which I have referred represent the strongest contemporary documentary evidence of the existence of a partnership between the plaintiff and the defendant. All are attributable to the work of Mr Ioannidis and, no doubt, to instructions and information he was given. It is therefore convenient to review Mr Ioannidis’ evidence at this point.

Mr Ioannidis’ evidence

37 Mr Ioannidis is a key witness. He is not a member of the family. He swore three affidavits. The second (sworn on 16 July 2004) was a revision and amplification of the first. Reliance is placed by the defendant mainly on this second affidavit which was sworn when the proceedings were well advanced. I allowed this course (and a re-opening of cross-examination of some of the plaintiff’s witnesses) because it became clear that Mr Ioannidis’ earlier affidavits had not concentrated on matters highly material to the case about which he was able to give evidence of value.

38 In his second affidavit, Mr Ioannidis recounts having met with both the plaintiff and the defendant at his office on a number of occasions before the purchase of Grant’s Pharmacy. He refers back to the following passage in his second affidavit:

“10. Prior to the purchase of Grant’s Pharmacy, Stephen Pham and Peter Doan came together to see me about the purchase of the business. During that meeting, Stephen said words to the effect of:

Peter and I want to buy a pharmacy as a family. Peter is going to be my partner.’

I said words to the effect of:

How are you going to finance it and who’s [sic] name will it be in?’

Stephen said words to the effect of:

It’s a family business. I will be the pharmacist. Peter will be my partner and he will give the securities and deposits. I want everything to be equal.’

I then said words to the effect of:

‘Stephen, as you know the Pharmacy Board has certain restrictions as to who you can be partners with. You will need to speak with your solicitors and the bank.’

Stephen said words to the effect of:

Yes. I will do that with Peter.’

39 The second affidavit also contains a passage as follows:

“13. I met with Stephen separately on another occasion prior to the purchase, at my office. Stephen said words to the effect of:

I have discussed the purchase with my family and with Peter, and we are going to have a look at the books of Grant’s pharmacy.’

I said words to the effect of:

Have you discussed and finalized what will be the structure of the pharmacy, do you want a partnership, trust or whatever. It is very important for you to clarify all of this.’

Stephen said words to the effect of:

‘We are going to go half/half and we will talk to the solicitors for all of the documentation.’

I said words to the effect of:

‘When you say half/half, does that mean capital and profit sharing?’

Stephen said words to the effect of:

‘Everything is half/half. Although Peter is putting in the capital and the securities, we are sharing everything half/half.’

40 Mr Ioannidis annexed to his third affidavit an account dated 29 October 2000 for services rendered, addressed to “Grant’s Pharmacy” and including an item “P’ship Agreement – Confrance [sic] and Consulting”.

41 Following his initial consultations with the plaintiff and the defendant, Mr Ioannidis referred them to Mr Brkljac, an accountant employed in his practice. He says that he (Mr Ioannidis) “met with Stephen and Peter, both together and separately on a number of occasions”. Regarding the plaintiff, Mr Ioannidis deposed:

“6. At various times when Stephen wanted to meet with me he would either make an appointment or attend upon my office unannounced. On the occasions when he would make an appointment, he would call either myself or one of my staff to make the appointment. Stephen made it clear to me that it was difficult for him to attend my office, and that arrangements needed to be made when he did so. He said to me on a number of occasions words to the effect of:

I can’t make it any time you want. I need to make arrangements for either a locum or for David to relieve me at the pharmacy. Can I meet you outside hours?’

7. Stephen arranged to meet me either on his way to work in the morning or on his way home from work in the evening. On several occasions he asked to meet with me outside work hours, but I did not agree.”

42 Mr Ioannidis also refers to an aspect of the preparation of tax returns for the year ended 30 June 2001:

“10. On or about March or April 2002, Mico was preparing the partnership tax returns for the 2001 financial year. He approached me for advice as to how we should claim the interest paid in respect of the Fauldings ANZ loan and the National Australia Bank loan. I was aware, on the documents provided to our office by Stephen and Peter, that the Fauldings ANZ loan was in the name of Stephen Pham, whilst the National Australia Bank loan was in the name of Peter Doan. As the loans were for different amounts, the interest that could be claimed as a tax deduction was different for each. Following Mico’s approach to me, I spoke with Stephen on Several occasions regarding preparation of the tax returns and the anticipated tax refund. I crave leave to refer to my earlier affidavit of 16 July 2004, where at paragraphs 29 and 30 I recount those conversations. I then instructed Mico to finalise the tax returns.”

43 The conversations thus referred to are:

“29. Once this information had been put into the computer, there was a partnership profit. There was a question as to where the interest would be claimed in relation to the ANZ loan in Stephen’s name, and the loan for the North Ryde building which was in his name. I telephoned Stephen and said words to the effect of:

There is a partnership profit. We have to discuss how the bank interest is dealt with. I suggest we prepare the partnership return on the trading, then you claim the interest in your personal tax return relating to the pharmacy, the interest relating to the building can then be claimed on Peter’s.’

Stephen said:

Do what you think is right, as long as it’s equal.’

30. When the returns were ready to be signed, I telephoned both Peter and Stephen separately. I said to Stephen words to the effect of:

You need to come in and sign your tax returns. The partnership returns and the individual returns are ready.’

Stephen said words to the effect of:

I am very busy. Can you get Peter to bring the documents for me to sign.’

I said:

‘Are you sure you want to do that?’

He said:

‘Just give everything to Peter, I will go through them, sign them and then bring them back.’

44 I quote from Mr Ioannidis’ third affidavit:

“19. ... I instructed my employee Mico to prepare the Partnership Financial Accounts for the year ended 30 June 2001 from the information provided by Stephen and Peter. Whilst I did not prepare the Accounts myself, they were done under my supervision.

20. … From the outset I was not provided with complete financial details of the partnership. I was able to identify which partner had made certain drawings and contributions, however not all of them. A ‘bucket account’ was used to record all capital contributions and drawings of the partners where identification of the partners on the source documents was not possible. Where drawings occurred and the partners were identifiable, I recorded them on the ledger as a sub-account within the capital “bucket account”. Detailed information could not be provided by either Stephen or Peter. Had it been provided, it would have been my preference to maintain the records in the manner Sam states is ‘normal accounting practice’. I briefed Sam on this matter during our first meeting at my office on 19 May 2003.

21. … Our office prepared balance sheets, profit and loss statements for the partnership, personal tax returns for Stephen and Peter and tax returns for the partnership. We complied with the Australian Taxation Office’s rules as to the lodgement of tax returns, but in the absence of the specific information in the capital accounts and drawings noted above in paragraph 20, we did not produce specific notes, accounting policies or full accounting reports.

22. … Both Stephen and Peter had access to the accounting documentation, both were provided with multiple copies of those documents, and both confirmed with me that they had received those documents. Both were provided with three copies of the trial balance and ledger, which includes a profit and loss and balance sheet. There were also three copies of the partnership tax return made, one for each partner and one for our office. I recall that once the accounts were completed I spoke with Stephen via the telephone. I said words to the effect of:

‘When are you signing and returning the tax returns to us?’

He said words to the effect of:

‘I’m very busy, but I will look at them, sign them and return them with Peter.’

It is only necessary for one partner to sign the tax returns. Usually the partner who is responsible for the accounting matters of the partnership signs the tax returns.”

45 The parts shown as omitted from this account refer to an affidavit of Mr Carmeci, an accountant, who gave evidence for the plaintiff. His evidence went to the quality and reliability of accounting work done by Mr Ioannidis but, because he did not become involved until after the dispute had emerged in 2002, it is of no assistance in relation to the question of the existence of a partnership.

46 Mr Ioannidis gave evidence in his second affidavit about conversations concerning the proposed purchase of the North Ryde property:

“15. Sometime after the last conversation [a conversation about the availability of the property], Peter Doan approached me in the office and said words to the effect;

We want to buy the Grant’s building the owner wants $400,000.’

I said to Peter:

How will you finance it?’

Peter said:

‘We will borrow the money from the bank.’

‘Peter tells me you want to buy the building.’

‘I have no money’.

‘Peter is prepared to get a loan either via the pharmacy or in his own name which ever way the bank will approve it. As long as one of you or both get it your goodwill will be safe.”

‘Both of you need to talk to the bank and see what we need to be done.’

OK

16. Shortly afterwards, I said the same thing to Peter and Stephen in a joint meeting. I said words to the effect:

‘the partnership will pay rent to Peter Doan and get the tax deduction for the rent paid. Peter will show it as income in his tax return and claim the interest on the building on his return. You both need to do an agreement showing your respective equities in the building in the loans including the pharmacy loan.

Peter said:

‘Yes that’s fine.’

Stephen said:

‘That’s fine as long as we get the tax deduction.’

47 Regarding the acquisition of the South Windsor pharmacy, Mr Ioannidis said in his second affidavit:

“22. Peter mentioned to me that he and Stephen were thinking of buying another pharmacy at South Windsor. At a Christmas party at Spot Lounge in Fairfield, I had a conversation with Stephen, Peter, David and Gary Mangan, the Manager of the National Australia Bank. I said words to the effect of:

‘How are we going to set up the new pharmacy?’

Peter said words to the effect of:

‘We are going to get another loan.’

I said words to the effect of:

‘When are you looking at settling the purchase and moving in?’

Peter said words to the effect of:

‘Towards February.’

I said words to the effect of:

‘Is David going to be a partner?’

Peter said words to the effect of:

‘No he is going to be an employee and a licensee.’

23. At the Christmas party, I also said to Stephen words to the effect of:

‘How are things going with the pharmacy?’

Stephen said words to the effect of:

‘Everything is going fine. Peter is looking after all of the administrative, promotional and marketing, and we’re doing the pharmacy side of things.’

I said words to the effect of:

‘That’s fine, we need to look at the accounts so we can finalise the business partnership returns and the individual tax returns for you and Peter.’

Stephen said words to the effect of:

‘I will organize it with Peter and we will get the paperwork together and Peter will come and see you.’

24. In or about either late December 2000 or early January 2001, I met with Peter and Stephen at my office and spoke with them about the purchase of the South Windsor pharmacy. I said words to the effect of:

‘As you know, the financial accounts I have are only draft, they are not final. The other issue we have is do we need a new tax file number, and how the purchase is going to work. What structure are we going to use? Do you want me to set up a new partnership or a new company that includes the three of you?’

Peter said words to the effect of:

‘It will be the same as Grant’s.’

I said words to the effect of:

‘Does that mean it is going to be another partnership? Is David going to be a partner?’

Peter said words to the effect of:

‘No.’

Stephen said words to the effect of:

‘Peter and I will be the partners and David will be the employee and licensee.’

I said words to the effect of:

‘If it’s the same as Grant’s, then we don’t need a new Tax File Number.’

48 The plaintiff denies that this conversation took place, although he does not dispute that he and Mr Ioannidis were both at the Christmas party.

49 Mr Ioannidis was cross-examined about the conversation he had with the plaintiff and the defendant soon after informing them of the availability of Grant’s Pharmacy. He said that, despite having no other pharmacist as a client, he was aware of restrictions upon who could have a financial interest in a pharmacy. The cross-examination continued:

“Q. You knew, didn't you, that he [the defendant] could haven't [scil: couldn’t have] an interest in that pharmacy?
A. That's right. That's why I advised them to go and see a solicitor about the legal structure they wanted, and I gave them another alternative in terms of a company with a service trust, but I left it to them to go to a solicitor to get advice as to what's the best thing for them in that area.

Q. So you knew that a partner in business had a financial interest in that business?
A. That's right, of course.

Q. So you knew when you were speaking to Peter Doan about setting up or purchasing the pharmacy that Peter couldn't be a partner in owning the pharmacy. You knew that, didn't you?
A. That's right. I conveyed that to Peter and to Stephen at the time and I referred them to get legal advice as to - and they insisted, actually--

Q. Just a minute. You say you told them they should get legal advice?
A. That's right.

Q. So at all times you were aware that Peter couldn't have an interest in the pharmacy, a financial interest in the pharmacy?
A. Well, through a partnership, yes.

Q. Yet what you ended up doing was completing partnership tax returns for that very pharmacy that included both Stephen and Peter as partners?
A. That's right, because after they both conveyed to me that they insisted on the partnership and when we applied for a tax file number for the partnership that was approximately about 5 June 2000, which was, well, about five months after the commencement of the business, and to that date they assured me that they were talking to a solicitor and they brought a copy of an application for a business named application which was signed by Peter Doan and Stephen Pham.

50 Mr Ioannidis was challenged on his statement that both the plaintiff and the defendant had attended together at his office before the purchase of Grant’s Pharmacy:

“Q. I know you say that, but you are aware Stephen Pham says he did not attend at your office on those occasions. You are aware of that?
A. Well, I became aware of it, yes.

Q. So you say you had had a meeting with them where you had said, effectively, to Peter: You can't be a partner in this business, go and get legal advice, and you say that they came back to you and said: We have got legal advice, go ahead?
A. Well, they said they were going to get legal advice and they also said they insisted on the partnership.

HIS HONOUR: Q. What was the first part of that?
A. They are getting legal advice through their solicitor that they can have a partnership. I am not a solicitor, therefore I didn't argue the point. I insisted they get it.

Q. From your own knowledge at that stage you were of the view that Peter couldn't have an interest by way of any partnership that involved a pharmacy. You knew that yourself?
A. Well, at equity, you mean?

Q. A financial interest in the partnership, you knew that he couldn't have that, didn't you?
A. Well, under the pharmacy law, yes.

Q. You were aware it was illegal for him to have such a financial interest?
A. That's why I referred him to a solicitor, both parties, actually.

Q. And you are still of that view, aren't you, that it is illegal for a non-pharmacist to have a financial interest in a pharmacy?
A. Yes, of course.

Q. And you have always had that view since talking to Peter about this transaction in 1999, haven't you?
A. Yes.

51 Mr Ioannidis was then asked why, in that state of knowledge, he had prepared a partnership tax return. His answer was:

“A. Okay. The tax return for the year 2000 from memory was being lodged about, I think it was August 2000. The application for the actual tax file number for the partnership was made about 5 June 2000, which then the ABN was coming into effect from 1 July and GST as well. So from the date when the business commenced up to that date, that's the period which they had to go and get legal advice, and then they assured me that's what they are doing and the partnership agreement is in draft and they brought me a copy of the business name application that shows the two names and the two signatures, and we had taken that on face value.”

“Q. You say that they both told you they had got legal advice; that was your evidence?
A. Jointly and severally they were getting the legal advice because I insisted on a number of occasions about an agreement or whatever structure from a solicitor.

Q. Was that primarily because you were extremely concerned that Peter as a non-pharmacist couldn't have a financial interest in the pharmacy?
A. Well, yes. You can say that, yes.

52 Mr Ioannidis then again confirmed that the relevant conversations had been with both the plaintiff and the defendant. He said that they told him that a partnership agreement had been, or was being, prepared. There were then a question and answer as follows:

53 The question of when the relevant conversations occurred was then addressed:

“Q. This talk about partnership, that occurred after they had purchased the business, didn't it?
A. No, it occurred before. We had a number of meetings. The first time Peter conveyed to me in the earlier paragraph where I refer to it as the family, it's going to be a family business, then I advised them that I need to talk to Stephen because Stephen will be the registered pharmacist, and then Stephen came to my office. I discussed the matter with him and he is the one, Stephen is the one who said to me, "I am going into business with Peter and Peter is going to be my partner". Then I explained to Stephen on a number of occasions what it means to be a partner, that you have got capital, profit sharing, the fact that it might be illegal because Peter is not registered, I raised all those questions.

Q. So you said to him, ‘Look, I have got a real concern’?
A. I did, yes, on a number of occasions.

Q. Listen to the question. On a number of occasions you said to have Stephen, ‘Stephen, I am quite concerned that any partnership would be illegal’?
A. Well, I said it would be in breach of the Pharmacy Board requirements, and that's--

Q. Did you say to him something like, ‘If you are in breach of the Pharmacy Board they might strike you off’, or something like that?
A. Something to that effect, yes, of course.

54 This matter was dealt with again at the end of Mr Ioannidis’ cross-examination:

“Q. I want to understand this finally. You say on numerous occasions you told both Stephen and Peter that for them to enter a partnership together would be illegal. That's your answer?
A. Well, I was said it was in breach of the Pharmacy Board.

Q. And you told Stephen, you say, that that's a serious matter?
A. Yes.

Q. And you say both Stephen and Peter told you that they had been to see a solicitor. That's what you say?
A. Yes. They say they are consulting a solicitor and it is in progress.

HIS HONOUR: Q. They both said that?
A. Yes, sir.

McNALLY: Q. And that they instructed you, they both instructed you, to start preparing partnership returns?
A. Well, it wasn't partnership returns initially. It was on 5 June, from memory, 2000. There was the application for a tax file number for the partnership. The actual returns were prepared sometime in November 2000.

Q. I see. I understand that. But what you are saying is that they told you they had seen a solicitor, the partnership was in progress, the documents were getting drawn up?
A. Yes.

Q. And to go ahead?
A. And they produced a business registration, from what I recall.

Q. And that was flying in the face of the advice that you gave them that it would be in breach of the Pharmacy Board to do that?
A. Well, yes.

55 Mr Ioannidis was also cross-examined about his affidavit evidence concerning conversations relevant to the purchase of the property at North Ryde:

“… Do you recall a conversation with Peter in respect of the purchase of the pharmacy building at some stage?
A. That's right, yeah. That was I think a few months down the track after the acquisition of the actual practice.

Q. Now, that was purchased in Peter's name?
A. That's right.

Q. Was that always going to be purchased in Peter's name?
A. No. The idea was to purchase it in joint names but there was a problem there with the securities again because--

Q. Who told you that? Was it Peter?
A. No, because I asked Stephen whether he is going to be a part of that and he said he didn't have the money, he didn't have the securities. So it was only a matter, the strategy there, it doesn't mattress whose name it was going to be in, it was just to secure the buildings so they can secure the goodwill of the business. That was the whole objective.

Q. I want to explore that conversation. You say Stephen said he wasn't going to be in it because had he no money and no security. You know as an accountant that the fact that Stephen had no money or security wouldn't have stopped his name going on the title?
A. You are right but at the time he didn't show any interest on the building, that is the whole thing. That is the conversations I had with Stephen and the conversations I had with Peter.

Q. But this was the building from which the partnership business was operating?
A. Precisely, yes, which was on lease.

Q. And the building then would have been partnership property to your understanding?
A. I believe so, yes.

56 Regarding his evidence about loan payments and rent, Mr Ioannidis was cross-examined as follows:

“Q. And so the amount that's shown in Peter's tax return as the amount of interest that he paid on the premises would equal the amount of rent that he received for the premises; is that right?
A. Yes. I can't recall the exact tax return details at the moment because I haven't got it in front of me, and I am not sure whether at the end we just claimed the interest or not through mutual arrangement.

Q. It follows though, doesn't it, that if what you are saying is true, what you suggested the parties do is that the amount of interest that was being paid for Peter's loan by the partnership be classified as rent?

A. Yes.

Q. And then Peter would offset from that rent received in his tax return the interest payments that the partnership made?
A. Yes, I think that's right.

Q. In reality there was no rent paid to Peter by the partnership, was there?
A. But--

Q. Just listen to the question. In reality there was no rent paid by the partnership to Peter for occupation of that building, was there?
A. No, but--

Q. Thank you. And in reality Peter did not pay any interest in respect of the payments, did he?
A. Well, he did pay the interest because the loan account was in his name.

57 It is part of the plaintiff’s case that he was unable to leave the pharmacy during opening hours and for that reason could not have attended (and did not attend) meetings at Mr Ioannidis’ office as suggested by the defendant and Mr Ioannidis. I quote from the cross-examination of Mr Ioannidis on that:

“Q. You have said in your affidavit, haven't you, that Stephen would often just pop in to either sign documents or talk about matters without an appointment?
A. That's right.

Q. It was the case, wasn't it, that you were aware that Stephen was extremely busy in his pharmacy at all times?
A. That's true.

Q. In the early stages you were acutely aware that you were to deal with Peter in respect of business matters and not Stephen?
A. Yes.

Q. And you know as a fact, don't you, that Stephen didn't have the time to come to meet you at your office?
A. Yes.

58 The cross-examination returned to the North Ryde premises at a later stage:

“Q. Was it your view that at the time that there was a proposal to purchase the property at North Ryde that that would be very good for the partnership business?
A. Yes, sir.

Q. Was that because in your view the purchase of the premises from which the business was conducted would secure the carrying on of business from those premises into the indefinite future?
A. Yes.

Q. And was it also your view that one of the concerns that small businesses have, such as a pharmacy like this, is to ensure that they have premises from which to conduct their business?
A. Yes.

Q. Because a certain amount of goodwill builds up in respect of premises, even though they are rented premises, for a business such as a pharmacy?
A. Yes.

Q. And to your knowledge any pharmacist would appreciate that it would be advantageous if he could obtain the title to or his business could obtain the title to the premises from which he was conducting the business on a leased basis?
A. True.

Q. Do you say at any stage that Stephen said to you when the proposal was being discussed to purchase the building that he just simply wasn't interested?
A. Well, that's the truth. Stephen was not interested in the purchase. He didn't care. The understanding I had and the discussions I had with him, he didn't care whether they purchased that building or not, and I was trying to explain to him the importance of the goodwill.

Q. See, you were aware that Peter had worked in a pharmacy for about three years before he had purchased Grant's Pharmacy?
A. Not that I can recall, no.

Q. But you did his tax returns, didn't you?
A. Well, yes, but I can't recall offhand unless I look at his file whether he worked in a pharmacy or not.

Q. Are you saying that despite what we have just discussed, that is, that it is very advantageous to secure the premises for a small business such as a pharmacy, that Stephen, who was at least on your evidence a 50% partner and the registered pharmacist, just wasn't interested?
A. Well--

Q. That's what you say, isn't it?
A. Yes. He was focused more on the business than the actual building.

Q. And of course if in due course the lease wasn't renewed then the business might well disappear?
A. Well, it's possible, yes.

Q. I want to suggest to you that at no stage did Stephen ever say to you that he wasn't interested in the premises at all?
A. He did say it in the initial stages.

Q. Did that change, did it? You have mentioned the initial stages. Did that change?
A. When he saw the building can be purchased and Peter can make the arrangements through the bank and he didn't argue about it not to purchase it, but he didn't see it as a primary - what's the word I would be looking for - his primary focus was on the actual pharmacy, and if that came along it would have been fine.

59 Mr Ioannidis was then taken to various diary notes of his. There was an entry on 19 September 2000 for “Stephen Pham” at 3.30 pm. There was an entry for 5.15 pm on the previous day for “Stephen” which Mr Ioannidis said related to the plaintiff because, while he had another client called “Stephen” (the owner of a restaurant in Burwood), that client always visited the office in the morning rather than the afternoon. There was also a client in an electronics business called “Steve”, not “Stephen”.

60 Regarding the acquisition of the South Windsor pharmacy, Mr Ioannidis said in cross-examination that the matter had been raised with him by the defendant who spoke of himself and the plaintiff wishing to buy it. The cross-examiner pointed out that this was inconsistent with what was said in his affidavit:

“Q. In the first sentence in paragraph 20 you were casting your mind to what Peter said in respect of the second pharmacy?
A. Yes.

Q. And you swore to the fact that Peter said that David wanted to buy a second pharmacy?
A. That's right, yes.

Q. So which is correct, this affidavit or the evidence you have just given?
A. Okay. Peter told me that David wanted to buy the second pharmacy, that's true, right, but he also told me that David was not a registered pharmacist, therefore he couldn't buy the pharmacy at that point of time and Stephen and Peter were going to buy it together until down the track and make some arrangements with David.

Q. If that's the case, when I asked you the question did Peter say that David wanted to buy the second pharmacy, when I asked that question a few moments ago why did you say no?
A. Well, what Peter said - what I put here is correct, but David was not in a position to buy the pharmacy because he wasn't licensed. That's what you are referring to.

Q. So what you told me a few moments ago was incorrect; is that right?
A. No, it's correct.

Q. But don't you see that there is a contradiction between your affidavit which says ‘Peter told me that David wants to buy a second pharmacy’ and your answer to me that, no, Peter did not say that David wanted to buy a second pharmacy. Don't you see that there is a contradiction there?
A. Yes.

61 Mr Ioannidis referred later in his cross-examination to discussions at his office about the South Windsor purchase:

“Q. You can return that bundle of documents. So do you recall whether you met with Stephen and Peter to discuss the proposed purchase of the South Windsor Pharmacy?
A. Yes, at my office, yes.

Q. When was that?
A. That was after the Christmas party I believe.

Q. What day was that, do you recall?
A. Not the exact date but it would have been early in the piece.

Q. Might it have been 28 January 2000?
A. It's possible, yes.

Q. And might it have been that it was just Peter Doan that attended?
A. No, I distinctly remember that it was Peter and Stephen.

Q. So you did not ask for Stephen Pham to come in particularly at that time, did you?
A. Yes. The reason I asked them to come in for that meeting was to see whether, I had the same question, is David going to be the partner or not, just to clarify that. And if David was not going to be a partner or if, if David was to be a partner we had to apply for a new tax number, an ABN and set up a new company or partner and he said no, David is not going to be a partner and Stephen didn't object to that.

Q. You specifically wanted them both to come in on 28 January?
A. Yes, in relation to whether we get a new tax file number or not, yes.

62 Mr Ioannidis looked at his 2001 diary but found no entry of an appointment for the plaintiff and the defendant in January 2001. It was put to him that he referred to purchase by the plaintiff and the defendant just because that would avoid the need for a new tax file number and GST registration. He denied that and said that this was the joint instruction from the plaintiff and the defendant; and that the assertion by the plaintiff that he alone was to be the purchaser was incorrect. He was asked whether, at that stage, he had asked both the plaintiff and the defendant, both together and separately, whether the solicitor had yet drawn up a partnership agreement and that the plaintiff replied, “It’s with the solicitors, the solicitor is taking care of it”.

63 Regarding the preparation of partnership tax returns, Mr Ioannidis said that he acted with the knowledge and assent to both parties. I quote from the cross-examination:

“Q. Do you say that Stephen signed partnership returns?
A. Well, I haven't got the partnership returns in front of me, but I can't recall, I think Peter signed partnership returns.

Q. You never bothered to check to see whether Stephen had signed the partnership returns?
A. Well, do you want me to go through the process of what happened between them?

Q. I am asking you whether you ever bothered to check?
A. Yes. I rang Stephen. When the returns were ready I rang him and asked him to come in and sign them and he said, ‘I am too busy, give them to Peter.’ I said, ‘Are you sure you want to do that?’ He said, ‘Yes.’ Then I rang up Peter, we made arrangements, Peter came in after a while, picked up the returns on Stephen's instruction, took them back to Stephen. That would have been, say, a week later I rang Stephen up, I would have asked specifically, ‘Have you got the returns?’ He said, ‘Yes’.

Q. You say you would have asked?
A. Well, words to that effect, ‘would you have the returns’, ‘have you got the returns’, ‘have you received the returns’, that's the wording I would have used. He said he was busy, he will look at them when he gets a bit of time. There would have been some lag in time there between the time we looked at them and he signed them. Now, when we received the returns being signed, right, okay, I telephoned Stephen and I asked him, I said to him basically we are going to lodge the returns. Now, we noticed that his personal return was not returned with the partnership return.

Q. So that's a conversation where you are referring to the partnership tax return and his own individual return?
A. That's right, yes.

Q. Can you point out where in your affidavit you refer to that conversation?
A. It is in the section where Peter came and picked up the returns. I think that's in my other affidavit on the 18th, is it?

Q. Take your time because I would like you to tell me where it is.
A. No, it's not in there in detail.

Q. The conversation that you have just given is one where you say you drew to Stephen's attention the fact that there was an individual tax return and a partnership tax return and that he had only returned one. That's what you say, isn't it?
A. In the--

Q. Just a minute. That's what you say?
A. That's right. We received the partnership return and then he advised me that he was, because he had some other claims, I think from memory additional personal claims, he wanted to make sure that we claimed everything there and he sent in his return later on. I have got the dates, because his return was lodged well after because he didn't give us certain other information.

Q. That's a conversation where, if it had occurred as you say, you were specifically drawing to Stephen's attention the fact that there were two separate tax returns, that is, his own individual tax return and the partnership tax return?
A. Yes.

Q. You know, at least by the time you swore this affidavit on 16 July 2004, that the existence of a partnership and any conversation that you had in respect of that with Stephen was important to put in the affidavit in as much detail as possible. You knew that?
A. I did mention in the affidavits in relation to the picking up of the returns, Stephen's instructions and what Peter has done to deliver the returns.

Q. Are you saying you didn't mention that Peter delivered the returns in your affidavit?
A. Well, I think I did.

Q. You thought it was important enough to put in in paragraph 28 that Peter subsequently delivered the documentation?
A. Yes.

Q. But of course you haven't referred to in this affidavit which was your second affidavit that conversation that you have just told us about, have you?
A. Okay, I see what you are saying, yes.

“MCNALLY: Q. You say that Peter signed a partnership tax return?
A. What I believed, yes.

Q. And Stephen signed a partnership tax return?
A. I ran Stephen up, he went through the tax return. He was happy with the tax return. On the telephone conversation he didn't tell me whether he signed it or not, right? He said ‘I will sign it and I will return it with Peter.’

Q. So he said to you ‘I will sign’?
A. Yes.

Q. ‘The partnership tax return’?
A. Yes.

Q. ‘And I will return it through Peter’?
A. Yes. Well, he didn't say specifically a partnership. He said ‘I will sign the returns, I will go through it with Peter. I will sign the returns and send them back to you.’

Q. There was no suggestion that he was arranging for someone else to sign his signature on any of those partnership returns, was there?
A. I'm not aware of that, sir.

Q. There was no reason that you could think of why someone should sign his signature on a partnership return rather than he signing his signature?
A. No.

Q. You can't think of any reason, can you?
A. Can you repeat that?

Q. There is no reason you can think of as to why Stephen might get someone else to sign his signature on a partnership tax return rather than signing it himself?
A. No, but in this case--

Q. Thank you. Thank you?
A. Sorry.

Q. But a partner, of course?
A. Yes.

Q. Can sign his own name?
A. Yes.

Q. On a partnership tax return which can then be lodged on behalf of the partnership?
A. Precisely, yes.

Q. But your experience in accounting would suggest that a partner is not entitled to sign someone else's signature on a partnership document, is he?
A. No, not on the partnership, no. His signature with his name, as long as he is a partner.

HIS HONOUR: Q. Remind me of this, I was a partner in a partnership for a long time but I can't remember. Each partner, every partner doesn't sign the tax return do they? Or do they?
A. No, they can if they wish to but it is usual in practice, one of the partners.

Q. One would sign?
A. The actual partnership tax return.

64 Mr Ioannidis also gave evidence about events and meetings after the emergence of disagreements between the parties in about November 2002. He said that the plaintiff and his brother David said on one occasion words to the effect, “We don’t want Peter as a partner in the business”. It was put to him in cross-examination that this was never said and that what he was told was that the defendant had never been a partner in the business. Mr Ioannidis denied this.

65 Generally speaking, the evidence of the defendant supports the account given by Mr Ioannidis. In the particular ways I have mentioned and more generally, the plaintiff disputes Mr Ioannidis’ account.

Mr Ioannidis’ credibility

66 Mr Ioannidis’ credibility was challenged in cross-examination. He agreed that he was on friendly terms with the defendant whom he had first come to know in the course of his professional practice in the early 1990’s. He had been on several occasions to social functions at the defendant’s home and they had also been together at other social gatherings. He said that they became “regular social acquaintances”. Mr Ioannidis is involved in the Amway business and had introduced the defendant to it in a role that involved commissions for Mr Ioannidis on sales made by the defendant. Mr Ioannidis was also instrumental in introducing the defendant to an investment proposal involving subdivision of land in a country town. The defendant invested in the project but has so far received no return and has been out of pocket for some years. When the defendant became short of funds, he approached Mr Ioannidis to see whether he could retrieve some money from the property investment but this was not possible.

67 It was submitted on behalf of the plaintiff that these factors make it dangerous to accept Mr Ioannidis’ evidence in favour of the defendant. Reference is also made to what might be regarded as unsatisfactory aspects of Mr Ioannidis’ evidence, including references in cross-examination to important matters not included in his affidavits and his inability to deal satisfactorily with the point that he had, in effect, accepted and acted on the proposition that a partnership existed while at the same time knowing that the Pharmacy Act precluded such a partnership; a matter that he was apparently content not to inquire further into after being given some general and unspecific understanding that an unidentified solicitor was looking at it or had looked at it.

68 Mr Ioannidis’ evidence was unsatisfactory in the sense that, on occasions, it exhibited lack of clear thinking. This was not helped by his attempting to give answers before questions had been completed. On the whole, however, I find no reason to disbelieve Mr Ioannidis and I do not think that the matters concerning social contacts, the Amway business and the real estate investment to which Mr Ioannidis introduced the defendant should cause me to have any material reservation about his evidence.

The plaintiff’s visits to Mr Ioannidis’ office

69 A particular matter on which evidence of witnesses other than family members is of assistance is the question of the plaintiff’s visits to Mr Ioannidis’ office.

70 The plaintiff’s evidence is that he only went to Mr Ioannidis’ office once – on an occasion after the disagreement in 2002 when the parties were exploring the possibility of resolving their differences. The conflict between the evidence of the plaintiff and the evidence of Mr Ioannidis on this matter emerges from the following passage in the plaintiff’s cross-examination:

“Q. I think you have recently had the opportunity to read an affidavit of George Ioannidis sworn 18 November 2004?
A. Yes.

Q. I have just provided you with a copy of that. In that affidavit, could I take you to paragraph 6, page 2. Do you see there that Mr Ioannidis says, ‘At various times, when Steven wanted to meet with me, he would either make an appointment or attend upon my office unannounced’. Did you ever attend upon Mr Ioannidis' office unannounced?

A. Never.

71 Evidence on this matter was given by two employees of Mr Ioannidis – the accountant Mr Brkljac previously mentioned and an accounts clerk, Ms Tadros. Mr Brkljac said in his affidavit that he recalled seeing the plaintiff in the office of Ioannidis & Associates on at least five occasions in 2000, 2001 and 2002, that on at least three occasions he attended with the defendant and that on at least two occasions the plaintiff attended alone. Mr Brkljac was challenged in cross-examination as to the quality of his recollections after such a passage of time. He agreed that he could not be precise about dates but said he was “sure” that the plaintiff had been at the office in 2001 and at the beginning of 2002. He knew that one visit was before a telephone conversation in late 2001 because a chair was taken from his office for a meeting the plaintiff attended.

72 Ms Tadros deposed that, in the period 2000 and 2002, she had seen the plaintiff in the office on at least six or seven occasions when he was either seeing Mr Ioannidis or leaving or collecting documents. She said that on some occasions he was alone and on others he attended with the defendant. In cross-examination she agreed that she had no recollection of the number of times she saw the plaintiff or of the dates. But she maintained her assertion that the dates on which she saw him in 2002 were in the middle of the year rather than towards the end.

73 The plaintiff’s evidence is, as I have said, that he visited the office only once and that this was towards the end of 2002 after the dispute between the parties had developed. He made much of the fact that his duties at Grant’s Pharmacy meant that he, as the only registered pharmacist, had to be there while the shop was open, so that he could not leave during normal business hours unless he arranged a locum. It was conceded that the wages records of the business did not disclose the employment of a locum at any relevant time.

74 The plaintiff sought to confirm this by calling evidence from pharmacy employees who said the plaintiff was always present when the shop was open. But the defendant points to wages records which call this evidence into question. In particular, Ms Carmeci gave evidence that she worked four days per week in the period including September 2000 and that the plaintiff was not absent on any of Monday 18, Tuesday 19, Friday 29 September 2000, whereas the wages records show that, in the period in question, she worked only three days a week (Monday, Wednesday and Thursday), with the result that she cannot speak for Tuesday 19 or Friday 29 September 2000. Similar evidence given by Ms Gourias does not take account of the fact that, according to the wages records, she did not work on 18 or 29 September 2000 and worked only 5.5 hours on 19 September 2000. Ms Calvert’s evidence to similar effect is countered by wages records showing that she did not work on 29 September 2000, worked six hours on 18 September 2000 and worked only three hours on 19 September 2000. Ms Warncken’s similar evidence must be viewed in the light of wages records showing that she did not work on 18 and 19 September 2000 and worked eight hours on 29 September 2000. Particularly in relation to 19 September 2000 (when Ms Gourias worked for 5.5 hours and Ms Calvert worked for three hours), it is quite possible that the plaintiff left the shop during business hours without any of the employees knowing.

75 On the basis of the evidence I have reviewed under this heading, I conclude that, on the balance of probabilities, the plaintiff did visit Mr Ioannidis’ office on one or more occasions before the latter part of 2002 and that Mr Ioannidis’ account of the plaintiff’s dealings with Mr Ioannidis is to be preferred to that of the plaintiff.

Mr Vu’s evidence

76 The last of the non-family witnesses to be mentioned is Mr Vu. He met the defendant and his wife in 1988 when he was seventeen years old. A year later, he went to live with them because of family problems. He also got to know the plaintiff and his family and developed a great deal of respect for the plaintiff’s father who, upon Mr Vu’s marriage in 2000, acted in the place of his own father who had died in the Vietnam war. Mr Vu attended a number of the family gatherings and celebrations. He refers in his affidavit to a dinner at the defendant’s house at Christmas 2001 at which “most of the family” was present, including the plaintiff, his parents, his sister Melissa and brothers David and Andrew, the defendant and the defendant’s wife. According to Mr Vu, the plaintiff’s father said to the defendant on that occasion words in Vietnamese meaning literally, “Eat together – split equal”. He was challenged on this in cross-examination but confirmed having heard those words spoken; also that the plaintiff’s father had on other family occasions said to the defendant things like:

“We build something together and help your brother to succeed in business and we split together.”

77 Mr Vu accepted in cross-examination that he was on good terms and friendly with the defendant but said that he occupied an identical position in relation to the plaintiff and his family. He accepted also that the defendant had got him involved in the Amway business but denied that he had agreed to give evidence for the specific purpose of helping the defendant.

78 The plaintiff’s father said that there was no dinner at the defendant’s home on Christmas Day 2001. That may well be so: I did not understand Mr Vu, when he said, “At Christmas in 2001, a dinner was held at Peter’s house”, to be necessarily referring to a dinner on 25 December 2001, as distinct from some other day in the Christmas period. The plaintiff’s father also denied having spoken to the defendant in Mr Vu’s presence the Vietnamese words meaning “Eat together – split equal”. It must be said, however, that the father’s evidence was generally unhelpful in the way I have already mentioned.

Conclusions on existence of partnership

79 For reasons I have stated, the evidence of all family members presents problems and cannot safely be relied upon. The parties’ controversy needs to be approached principally by reference to the contemporary documentary evidence and the evidence of non-family witnesses, being Mr Ioannidis, the two other persons from his office, the pharmacy employees and Mr Vu.

80 I am satisfied that that evidence supports the case sought to be made by the defendant, namely, that he and the plaintiff intended to (and did) become partners at the time of the purchase of the Grant’s Pharmacy business and the post office agency operated within the pharmacy premises and that that partnership continued up to November 2002 and extended to the acquisition of the North Ryde premises in which Grant’s Pharmacy operated and the acquisition of the South Windsor pharmacy operations. I am not satisfied, however, that the acquisition of the adjoining premises at South Windsor (a venture undertaken by the defendant and his wife) was within the scope of the partnership business which was, of its nature, a pharmacy business which did not extend to property dealing or property development proposals unrelated to pharmacy operations.

81 These conclusions with respect to Grant’s pharmacy, the post office agency, the North Ryde property and the South Windsor pharmacy are warranted mainly by the evidence of Mr Ioannidis and the evidence and findings as to attendances by the plaintiff at Mr Ioannidis’ office, allied with the tax returns and other documents Mr Ioannidis prepared. Those elements of the evidence are consistent with the role played by the defendant, together with the plaintiff, in the various acquisitions, as it emerges from the contemporary documents and the uncontroversial matters. I am satisfied that, despite the plaintiff’s denials, he did attend Mr Ioannidis’ office and otherwise communicated with Mr Ioannidis as Mr Ioannidis testified; and that Mr Ioannidis’ treatment of matters on the basis of the existence of a partnership between the plaintiff and the defendant had its source in instructions to that effect given by both the plaintiff and the defendant. This conclusion is strengthened, although not substantially, by the evidence of Mr Vu of a general view within the family (at least before the differences of late 2002) of equal sharing.

Impact of the Pharmacy Act

82 Partnership is, of course, the relationship that subsists between persons carrying on a business in common with a view of profit. This is the definition in s.1 of the Partnership Act 1892. Implicit in my finding as to the existence of a partnership between the plaintiff and the defendant, therefore, is a finding that they carried on the relevant business in common, that each was a party to the carrying on of the business and that each had a financial interest in it. The business was, in my view, a single business centred initially upon Grant’s Pharmacy and the post office agency which, over time, expanded to include ownership of the North Ryde property and ownership of the pharmacy operations in the leased premises at South Windsor.

83 Against that background, I return to s.25 of the Pharmacy Act 1964. Section 25(1) imposes a prohibition upon, among others, “[a] person (not being a pharmacist)” and “a body of persons unincorporated”. There can be no doubt that a partnership, as such, is within the latter description: so much is recognised by s.25(1A) which creates an exception for “a body of persons unincorporated, being a partnership consisting only of pharmacists” and of a particular description. The prohibition created by s.25(1) is a prohibition upon two things. The first is described by the words “shall not carry on, as owner or otherwise, the business of a pharmacist in a pharmacy”. The second is described by the words “otherwise have a pecuniary interest, direct or indirect, in the business of a pharmacist carried on in a pharmacy”.

84 In light of my findings, two contraventions of s.25(1) have been committed. First, the “body of persons unincorporated” consisting of the plaintiff and the defendant has contravened the section by carrying on the partnership business. Second, the defendant has, with the knowledge and assistance of the plaintiff, contravened by having, as a partner, an interest in the partnership business.

85 It is submitted on behalf of the plaintiff that if, as I have found, a partnership exists between him and the defendant, the circumstance that the relationship of partnership is contractual in nature means that the contract of partnership is illegal as formed and therefore void. The defendant says that the statute does not show an intention to prohibit partnerships of which persons other than pharmacists are members in such a way as to preclude legal recognition of such partnerships and the rights and obligations arising from them; and that the consequence of contravention is no more than the commission of the offence created by s.25(3) or s.25(4).

86 The submissions refer to the three landmark decisions of the High Court concerning the effects of statutory illegality on contracts: Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410, Nelson v Nelson (1995) 184 CLR 538 and Fitzgerald v F J Leonhardt Pty Ltd (1997) 189 CLR 215. In the first of these cases, Gibbs ACJ said (at p.413):

“There are four main ways in which the enforceability of a contract may be affected by a statutory provision which renders particular conduct unlawful: (1) The contract may be to do something which the statute forbids; (2) The contract may be one which the statute expressly or impliedly prohibits; (3) The contract, although lawful on its face, may be made in order to effect a purpose which the statute renders unlawful; or (4) The contract, although lawful according to its own terms, may be performed in a manner which the statute prohibits."

87 In determining whether a contract offending against a particular statutory provision declaring something to be unlawful comes within one of these classifications, the task of the court is to have regard to “the true effect and meaning of the statute” (St John Shipping Corporation v Joseph Rank Ltd [1957] 1 QB 267 at 286) and to “the language used and the scope and purpose of the statute” (Archbolds (Freightage) Ltd v Spanglett Ltd [1961] 1 QB 374 at p.390).

88 In undertaking that task, I begin with a brief account of the origins and history of s.25. Provisions restricting ownership and operation of pharmacies in New South Wales were first enacted by the Pharmacy (Amendment) Act 1940 which amended the Pharmacy Act 1897 by inserting a new s.18A. Sub-section (1) of that section was as follows:

“Except as provided in subsection two of this section, no company, and no association of persons incorporated or unincorporated, not being a partnership shall carry on the business of a pharmacist in an open shop.”

89 Section 18A(2) went on to exempt companies and associations that were already engaged in the relevant activity, provided that they conformed to certain conditions in so doing. Sections 18A(3) and (4) created offences for contravention. The Act of 1940 did not seek to preclude partnerships between pharmacists and non-pharmacists. That legislative step was taken when the Pharmacy Act 1964 was enacted. The minister’s second reading speech on the Bill for that Act said in part (Legislative Assembly Hansard, 4 September 1963, p.4756):

“I also pointed out that intending pharmacists are at present required to undertake a three year, full time, degree course in pharmacy at the University of Sydney, and to serve as an assistant for a period of not less than twelve months in the business of a registered pharmacist, before becoming entitled to registration as a pharmacist. These requirements are claimed to have considerably enhanced the status of pharmacists and the Government has agreed to take action under this bill to assist them in confining the conduct of pharmacies to registered pharmacists and also to enable them to become the owners of their own individual businesses.”

90 It is thus clear that s.25(1) is a measure about ownership of pharmacies and that the public purpose it was intended to serve is the purpose of ensuring that individual pharmacists are the only persons involved financially in the operation of pharmacies so that non-pharmacists (including companies) should not enjoy the financial benefits of pharmacy operations. Whether these objectives are compatible with the community expectations today is beside the point. Section 25 was amended in 1966, 1969, 1970, 1971, 1974 and 1989. In subsequent years, other provisions of the Act were affected by fifteen amending Acts. Yet s.25 and its basic principles remain in force. It must be presumed that the legislative purpose continues.

91 The matters to which I have referred distinguish this particular legislative provision from those which aim to preclude profit-sharing or partnership in fields of activity in which direct protection of the public from risks to personal welfare is the predominant consideration. The fields of medical practice, dental practice and legal practice are the most obvious examples. The present context is one in which protection of the economic interests of a particular trade, profession or calling is treated as an aspect of the public interest and represents the reason for the preclusive legislation. The public policy is to be understood accordingly.

92 The statutory prohibition is upon the carrying on of pharmacy businesses by non-pharmacists and upon the holding of pecuniary interests in pharmacy businesses by non-pharmacists. The carrying on of a pharmacy business by a partnership (or, as the Act puts it, “a body of persons unincorporated”) which includes a non-pharmacist is prohibited. It must follow that the formation of a partnership which is to carry on a pharmacy business and in which a non-pharmacist has a pecuniary interest by reason of being a member of the partnership is something that the Act aims to prevent. The creation of such a partnership is contrary to the perceived public interest in the protection of the economic welfare of pharmacists.

93 Section 25(1) of the Pharmacy Act was considered by the Court of Appeal in Chappuis v Filo (1990) 19 NSWLR 490. Only one member of the court (Kirby P) had occasion to express an opinion about the effect of the section on a contract. His Honour said (at p.502):

94 The central question in Chappuisv Filo was whether a contravention of s.25(1) occurred where a pharmacist conducting a business consisting, in the usual way, of the dispensing and sale of prescription medicines and the sale of non-prescription items, toiletries, photography requisites and the like entered into two contracts for sale – one being a contract to sell to another pharmacist the segment involving dispensing and sale of prescription medicines and the other being a contract to sell to that other pharmacist and a non-pharmacist together the other segment of the business. The majority (Priestley JA and Handley JA) held that there was no contravention. Kirby P was of the opposite opinion. According to submissions made on behalf of the present defendant, that aspect of Chappuis v Filo warrants a conclusion in this case that if, as I have found, there is illegality by reason of contravention of s.25(1), its effects are confined to the part of the present parties’ operations that involves the pharmacy businesses narrowly viewed, so that the illegality does not strike at anything to do with the North Ryde property and the post office agency conducted in the Grant’s Pharmacy premises within that property.

95 I do not think that this is so. A finding that s.25(1) does not apply if matters are so structured that the sale of non-prescription items, toiletries and other merchandise is treated as a separate business and, in that form, is subjected to a contract under which a non-pharmacist attains a pecuniary interest says nothing about the application of s.25(1) to a case where there is, in fact, no separation made by the parties and the contract under which the pecuniary interest arises is one relating to a business which involves the dispensing and sale of prescription medicines in retail premises at two locations, the sale of other commodities (including post office services and goods generally sold in chemists’ shops in addition to prescription medicines) in those premises and the ownership of the freehold housing one of the shops. The undivided and unallocated collection of assets as a whole (including goodwill), together with the attendant liabilities, must be taken to represent the relevant “business”.

96 Section 3 of the Pharmacy Act defines “business of a pharmacist” as follows:

Business of a pharmacist

97 The definition refers to the essential features that make a particular business a “business of a pharmacist”. But as Megarry J observed in Royal Bank of Canada v Inland Revenue Commissioners [1972] Ch 665, “a statement of the essentials of a business does not seem to me, without more, to be exhaustive of all that is ordinary in that business”. That was said in the context of a discussion of the meaning of “banking business”, the essential features of which are generally said to be the taking of deposits and the making of loans in circumstances having a public element, including, on some views, the payment and collection of cheques. An entity that engages in those activities is said to carry on banking business. But such an entity also employs staff, leases and owns premises, engages in advertising, discounts bills, offers safe custody facilities and does other things. Because of those additions, its business does not cease to be a banking business.

98 The position is the same here. The business centred upon Grant’s Pharmacy and the South Windsor pharmacy was a single business in relation to which no attempt at subdivision or dissection was made. It had elements beyond the core elements that made it the “business of a pharmacist” but those additional elements did not somehow cause it to cease being the “business of a pharmacist”.

99 I am accordingly of the opinion that the contractual consequences of the operation of s.25(1), in relation to the parties’ partnership, must be as described by Kirby P and that this must be so with respect to the whole of the subject matter of their partnership.

100 Chappuisv Filo involved a contract for sale and purchase rather than a partnership agreement. A case that shows the working out of the same principles of statutory illegality in relation to the formation of partnership is Ybasco v Daka [1948] 51 WALR 22. The plaintiff there sought a declaration that he was a partner with the defendants in a pearling business carried on at Broome. The Pearling Act 1912 contained provisions intended to preclude persons other than British subjects from various forms of participation in the pearling industry. Section 33 was to the effect that if an alien not qualified to hold a ship licence held a share or interest in a pearly ship or in the results or proceeds of any pearling in which the ship was used, the ship might be forfeited. An offence was also created. Walker J said of the plaintiff’s claim (at p.27):

“Obviously, in my opinion, when Parliament passed the Pearling Act, 1912-1935, it intended that, as a matter of public policy, aliens should be absolutely excluded from engaging in the pearling industry except as divers, divers tenders, or pearl dealers. When, therefore, the plaintiff asks the Court to make in his favour a declaratory judgment that during the 1947 pearling season he was a partner with the defendants, and as such had an interest in the pearling ship and in the proceeds of its pearling operations, he asks the Court to declare to be valid a transaction in which he was implicated, but which Parliament intended should, as a matter of public policy, be unlawful.”

“In the light of the obvious fact that the transaction in which the plaintiff alleges he engaged with the defendants was, insofar as the plaintiff contends it was subsisting during the 1947 pearling season, directly in conflict with the public policy which the Pearling Act is intended to protect, and by reason of the fact did (if such transaction did exist) bring the plaintiff within the ambit of the provisions of section 33 of the said Act, and in view of the principles laid down in the authorities to which I have referred, it is in my opinion certain that the said transaction, and the alleged agreement in relation to such transaction, are illegal, and I have no alternative but to decide accordingly.

The objection taken on behalf of the defendants, therefore, succeeds, and the defendants are entitled to a judgment.”

101 In my opinion, the correct outcome in the present case is to the same effect, namely, that the defendant, although having established on the evidence the existence of the partnership, cannot be afforded the assistance of the court by way of vindication of the rights thereby found to have accrued to him. The court will not enforce, give effect to or otherwise recognise those rights.

Conclusion

102 I return to the issues for trial set out in paragraph [5] above. Were it not for the impact of the Pharmacy Act, questions 1 to 3 would be answered:

Question 1: On trust for a partnership comprising the defendant and the plaintiff.

Question 2: On trust for a partnership comprising the defendant and the plaintiff.

103 But because of the impact of the Pharmacy Act upon the parties’ agreement to form the relevant partnership (which, as I have said, is a partnership extending to and embracing the Grant’s Pharmacy business, the North Ryde premises in which it is conducted, the associated and conjoined post office agency in the premises and the pharmacy business at South Windsor), the court will not grant any relief which recognises or flows in any way from the existence of that partnership.

104 Having reached this point, I will arrange for the proceedings to be listed for further submissions as to the orders that should be made, including as to costs, in the light of my findings.

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Citations

Pham v Doan [2005] NSWSC 201

Most Recent Citation

Environment Protection Authority v S J Perry [2004] NSWLEC 715

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Marks v GIO Australia Holdings Ltd [1998] HCA 69

Morris v Woollahra Municipal Council [1966] HCA 65

Nelson and Anor v Nelson and Ors [1995] HCATrans 117

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CITATION:	Pham v Doan [2005] NSWSC 201
HEARING DATE(S):	13/07/04, 14/07/04, 15/07/04, 16/07/04, 28/07/04, 16/11/04, 18/11/04, 22/11/04, 23/11/04, 24/11/04 Written submissions: 06/12/04, 15/12/04
JUDGMENT DATE :	16 March 2005
JURISDICTION:	Equity Division
JUDGMENT OF:	Barrett J
DECISION:	Partnership shown to have been formed. Formation of partnership illegal by statute. Proceedings to be re-listed for further submissions.

CATCHWORDS:	PARTNERSHIP - generally - whether partnership formed - CONTRACTS - illegal and void contracts - whether partnership in "business of a pharmacist" between pharmacist and non-pharmacist prohibited by Pharmacy Act 1964 - whether composite business should be viewed as made up of core elements central to "business of a pharmacist" and other elements - effect of statutory prohibition on formation of partnership
LEGISLATION CITED:	Partnership Act 1892, s.1 Pharmacy Act 1964, ss.3, 25
CASES CITED:	Archbolds (Freightage) Ltd v Spanglett Ltd [1961] 1 QB 374 Chappuis v Filo (1990) 19 NSWLR 490 Fitzgerald v F J Leonhardt Pty Ltd (1997) 189 CLR 215 Nelson v Nelson (1995) 184 CLR 538 Royal Bank of Canada v Inland Revenue Commissioners [1972] Ch 665 St John Shipping Corporation v Joseph Rank Ltd [1957] 1 QB 267 Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410 Ybasco v Daka [1948] 51 WALR 22
PARTIES:	Stephen Pham - Plaintiff Peter Doan - Defendant
FILE NUMBER(S):	SC 2753/03
COUNSEL:	Mr G.P. McNally - Plaintiff Mr P.B. Walsh - Defendant
SOLICITORS:	Matthews Dooley & Gibson - Plaintiff Champion Legal - Defendant