Plummer v Thomas

[2002] NSWSC 1185

CITATION:	Plummer v Thomas [2002] NSWSC 1185
CURRENT JURISDICTION:	Equity
FILE NUMBER(S):	SC 4825/98
HEARING DATE(S):	9 December 2002
JUDGMENT DATE:	13 December 2002
PARTIES :	Julie Gail Plummer (Plaintiff/Cross Defendant) Dale Ernest Thomas (Defendant/Cross Claimant)
JUDGMENT OF:	Campbell J

COUNSEL :	A J Bulley (Plaintiff/Cross Defendant) K F Morrissey (Defendant/Cross Claimant)
SOLICITORS:	Unrepresented (Plaintiff/Cross Defendant) Baker & Borthwick (Defendant/Cross Claimant)
CATCHWORDS:	PARTNERSHIP - carrying on a business in common - decision whether a particular factual situation amounted to a partnership
LEGISLATION CITED:	Partnership Act 1892
CASES CITED:	Canny Gabriel Castle Jackson Advertising Pty Limited v Volume Sales (Finance) Pty Limited (1974) 131 CLR 321
DECISION:	No partnership existed

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
EQUITY LIST

CAMPBELL J

13 DECEMBER 2002

4825/98 JULIE GAIL PLUMMER v DALE ERNEST THOMAS

JUDGMENT

HIS HONOUR:

Nature of These Proceedings

1 The Plaintiff alleges that she entered a partnership agreement with the defendant, verbally, on or about 14 December 1996, relating to a business for the manufacture and sale of ceramics, and the sale of other craft-related items. She claims a declaration that the plaintiff and the defendant were in partnership in the business known as the “Wallamba Workshop” on or after 14 December 1996, a declaration that the partnership was dissolved on or about 14 July 1997, an order that the partnership business be wound up under the direction of the Court, an order for the appointment of a receiver and manager, and consequential orders for the delivery of assets to the receiver and manager, and for a reference to the Master for a taking of accounts.

2 The defendant denies that any partnership was ever entered between himself and the plaintiff. He also submits that, as a matter of discretion, if the court were to find that a partnership had existed, it would be inappropriate to appoint a receiver and manager of the partnership.

Background to the Opening of the Wallamba Workshop

3 Starting in 1983, the plaintiff completed various courses relating to ceramics. In about 1987 she purchased a large number of ceramic moulds, kilns, shop fittings, shelving, compressors, paints, decals, glazes and other equipment relating to ceramics. With that equipment, she and a friend set up a ceramics studio in Sydney, which operated until the beginning of 1992. The equipment was then put into storage.

4 In 1993, the plaintiff took up permanent residence at Nabiac, a town a little to the south of Taree. She met, and became friendly with, the defendant, who had rural properties in the area. There was some discussion between them at that time about the possibility of setting up a studio. The defendant had four adult children, and there was some discussion about the possibility of them working in the studio. However, at that time nothing came of those discussions.

5 Around 1994, the plaintiff had her equipment relating to ceramics transported from Sydney to Nabiac. She set up some of the equipment in a large shed in Elliotts Road Nabiac, and started to make some plaster and ceramic goods. Around mid 1994 the plaintiff injured her back, which required her to have major surgery. It took her about 18 months to recover from that injury and its aftermath. At the end of 1996 the topic arose again between the plaintiff and the defendant of the possibility of establishing a studio.

Discussions Between Plaintiff and Defendant in Late 1996

6 The plaintiff’s account is that towards the end of 1996 she noticed that a shop in Nabiac had become vacant. She said to the defendant, while having dinner with him:

PLUMMER: “Langdon’s shop at Nabiac is vacant. I think it would make a good studio. I’d like to set it up as an Arts and Craft studio. I could have lead light and pottery classes. I could teach craft from the shop, as well as sell products from local people on consignment.”
THOMAS: “That sounds like a good idea. Find out more about the rent and the lease, and let me know what you find out.”

7 She says that she obtained approval from the real estate agent to set up a crafts and ceramics studio, and had a further discussion over dinner with the defendant. Her evidence is:

PLUMMER: “I’ve been back to the Real Estate, and had a look at the shop.
The owners have okayed us setting up a studio there”.
We discussed selling greenware, holding classes in the studio, having a potter there, and pit firing, and selling local goods on consignment. We also discussed doing finished products, and selling them in Sydney as I still had a number of contacts in Sydney. We discussed members of Dale’s family working in the studio along with myself. We agreed that Luke would do the pouring, Penny would help with the classes, and Natalie would work in the studio helping me. Words to the effect were said:
THOMAS: “I’ll organise the lease, and the bond, and the phone. I’ll organise the public liability insurance. I’ll talk to my insurance broker. I’ll put in the money we need to start it up.”
PLUMMER: “I’ll put my equipment into the studio, and my time. I can teach the classes, and make some products to sell. I’ve got three kilns. Two of my kilns need to be rewired.”
THOMAS: “That’s okay. We can get them rewired. What ever money I put into setting up the studio, I’ll get paid back from the business.”
PLUMMER: “Well my equipment is worth about $85,000.00. All the profit will be used to pay back my $85,000.00 and then to pay back the money you put in and you should put in the same as I do and when we have both been paid back we will split the profit 50/50”
THOMAS: “You will get paid back from the business too. After my debt has been paid back, and your debt, the profits will be split 50/50.”

8 The defendant’s account is that, after he had sold one of his rural properties he had a discussion with the plaintiff as follows:

THOMAS: “Now that I have sold Neranie I would like to set up a business for the kids.”
PLUMMER: “What about a ceramics business? It would be something good for the kids to do. I could help you set it up. You know about my interest in ceramics and that I have had a ceramics business. I still have my equipment which the kids could use. I could teach ceramics classes. What do you think?”
THOMAS: “Only if that is ok with my kids. It’s going to be their business eventually. I’m just going to put in the money to start it.”

9 He says that, after discussing the proposal with his children, he had a further conversation with the plaintiff, as follows:

THOMAS: “I’ve spoken to the kids. I’m going to set up a shop selling craft and pottery. The business will be called Wallamba Workshop. You can be involved in the ceramics part of the business.”
PLUMMER: “I’ll use my equipment to make ceramics for sale and do ceramics teaching. I don’t want to be a partner or sign my name on any documents because I owe the government $25,000.00 for unpaid tax over my last business, with Nola Eliason. I was in partnership with her and as a result have a tax debt of $25,000.00. I don’t want anything in my name or to own anything other than equipment I’m bringing in.”
THOMAS: “my plan is to set up the business for my kids. I’m going to be the proprietor and the business will have to pay me back what I spend setting it up. After that, if there is any profit made it can be shared with the kids involved and you.”

Preparations for Opening the Business

10 On 13 December 1996 the defendant, as sole lessee, signed a lease for a shop in Nabiac. The lease was for a term of one year, commencing on 20 January 1997, with an option of renewal for a further three years. The premises were required to be used only as “pottery and craft sales”. There was provision for the tenant to occupy the premises prior to the commencement of the lease period, on payment of a rental bond. The defendant paid a rental bond of $560. He arranged for public liability insurance. He paid for expenses involved in fitting out the shop. This included paying for carpet, paint, latticework, awnings, electrical fittings, signage and cabinets. He paid these amounts by cheques drawn on his personal cheque account. His sons Luke and Jacob, and son-in-law Anthony Holtmeulen provided some labour to fit out the shop. Some friends of the plaintiff also assisted in fitting out the shop. The defendant paid for the connection of telephone and power service to the shop, and paid for an electrician to rewire and repair one of the kilns which the plaintiff owned. The plaintiff’s equipment and other goods were installed in the premises.

11 On 5 February 1997 the business name “Wallamba Workshop” was registered. The proprietor of the business name was shown, on the Certificate of Registration, as being the defendant. The plaintiff explains these events by evidence that:

“Prior to finalising the lease and getting the business name words to the effect were said:
[PLAINTIFF]: “I owe some money to the tax office.
[DEFENDANT]: “Well I’ll put the lease and register the business name in my name only.”

12 The studio opened for business in the first week of February 1997. Jodie Reeve was employed to work in the studio for the first three weeks. Her wages were paid to her by a weekly personal cheque drawn on the defendant’s cheque account, which she would cash at the Nabiac Takeaway. After three weeks, she was replaced by Julieanne Nelson, who was the girlfriend of the defendant’s son Luke. The decision to replace Ms Reeve was one which the defendant made, notwithstanding opposition from the plaintiff. The defendant made that decision after having made enquiries from the Commonwealth Employment Service about the availability of CES wage subsidies for employees of the business. The plaintiff complained to the defendant about how Ms Nelson carried out her work, and asked him to sack her. At first, the defendant refused to sack Ms Nelson, but later Ms Nelson terminated her own employment there, and the defendant then employed first Troy Isaacs (who appears to have no connection with either the plaintiff or the defendant), and next the defendant’s son-in-law Anthony Holtmeulen.

13 In early February 1997 the defendant arranged for a bank account to be opened for the business with the Colonial State Bank. Statements for that account were addressed to “The Proprietor, Wallamba Workshop, Lot 1 Failford Road Failford NSW 2430”. This address was the address of a rural property which the defendant owned.

14 In about February 1997 the defendant told the plaintiff about the overdraft account he had arranged with the State Bank. He told her, “I want the business managed properly and all accounts and records to be kept properly and to go through the accountants. I don’t want any problems.” He then arranged for Robin Langfield, an employee of his accountants, to attend the shop to meet Natalie Thomas and the plaintiff and to discuss with them the subject of how to manage accounts and records for the workshop.

15 In March or April of 1997 the defendant opened a second overdraft account for the business, this time with the ANZ Bank at Forster. He arranged for his son Luke, his daughter Natalie, and the plaintiff to be signatories to the cheque facility attached to that account. The statements for that account were sent addressed to “The Proprietor, Wallamba Workshop” at the address of the studio. The account was maintained in the name of “Wallamba Workshop, Dale Ernest Thomas Trading As”.

Purchase of Moulds from Mary Hayden

16 A topic to which the parties devoted considerable attention in the running of this litigation, notwithstanding its peripheral relevance to the issues, concerned the circumstances in which some ceramic moulds were purchased from Mary Hayden. The plaintiff came to hear that Mary Hayden, an acquaintance of hers from Sydney, was offering to sell all her ceramic moulds for $2,500. The plaintiff suggested to the defendant that those moulds should be acquired for the business. It is common ground that on 4 February and 5 February 1997 the plaintiff and Luke Thomas drove to Sydney, on two separate occasions, and collected the moulds which Ms Hayden had for sale. The plaintiff handed over $2,500 in cash, and received a receipt from Irene Hayden, a relative of Mary Hayden.

17 The plaintiff asserts that she had some money, around $700, which she was prepared to use to buy the moulds, and asked the defendant for the rest. She says that the defendant was not willing to provide the money, and hence she borrowed $1,800 from a friend, Terrence Thompson, and bought the extra moulds.

18 The defendant’s evidence is that on 4 February 1997 he wrote a personal cheque payable to cash for $2,500, and gave it to the plaintiff. The evidence includes a cheque butt dated 4 February 1997, from the defendant’s cheque book, with the narration “cash workshop”, in the amount of $2,500.

19 There is no bank in Nabiac, so the Nabiac Takeaway cashes cheques for people who the proprietors know. Mrs Lorraine Wardle was one of the proprietors of the Nabiac Takeaway in February 1997. She remembers that about that time she received a cheque drawn by the defendant in the amount of $2,500, and cashed it. She could not recall the person who gave the cheque to her, and had a hazy suspicion that there might have been two people involved in cashing the cheque. This was by far the largest cheque that she had cashed for the defendant – previous cheques she had cashed for him would be at most $300.

20 In cross-examination the plaintiff agreed that she went to Nabiac Takeaway with Luke Thomas when the defendant’s cheque for $2,500 was cashed. However, she says that, “That was not the money that I used for the moulds. Dale Thomas had that money and gave Luke $150 to go to Sydney.”

21 Terrence Thompson has filed an affidavit, on which he was not cross-examined, where he deposes to discussing with the plaintiff, at her daughter’s wedding on 25 January 1997, an opportunity which the plaintiff had to purchase a quantity of ceramic moulds at a very cheap price. He says he offered to assist with the price, and that on Sunday, 2 February he gave the plaintiff $1,800 in cash to assist her in purchasing the moulds. He told her that the loan would be for a short time only and he wanted it paid back as soon as possible.

22 Natalie Thomas gives evidence (on which she was not cross-examined) that she had a conversation with the plaintiff in January 1997 in which the plaintiff said:

“I bought the moulds from Mary Hayden in Sydney. Dale paid $2,500 for them. It was a good buy.”

23 Natalie Thomas also deposes to having had a conversation with her father about the same time, where he said, “I have given Tilly $2,500 to go to Sydney with Luke and buy ceramic moulds for the business.” (“Tilly” is a name which the Thomas’ used for the plaintiff.)

24 The plaintiff denies this conversation.

25 Luke Thomas gives evidence (on which he was not cross-examined) as follows:

“In about January 1997 my father asked me to travel to Sydney with the Plaintiff to purchase and collect moulds and equipment for the business. My father said words to me to the following effect:
“I’ve given Tilly $2,500.00 to buy the moulds and equipment for the business. Please take the Landcruiser and trailer and go with her to pick it up.”
The following day I did as my father requested, travelling to Sydney with the Plaintiff. During the drive to Sydney, the Plaintiff and I had a conversation. She said to me:
“Your dad is buying the moulds for the business.”

26 The plaintiff denies that conversation also.

27 Deborah Hall gave evidence (on which she was not cross-examined) as follows:

7. “I was present on or about October 1997 when Julie Plummer received a telephone call. After the call Julie Plummer said words to the effect “That was Bryan Baker the Solicitor. He told me that the $2,500.00 cheque had been traced to Nabiac Takeaway where Lorraine had cashed it for me”. I said words to the effect, “I thought you bought the moulds with your own money”. Julie Plummer then said words to the effect “Dale gave me a cash cheque for $2,500.00, and I organised with Lorraine to cash it at the takeaway so I could then pay cash and get a receipt in my name. If I used Dale’s cheque I would not be able to claim the moulds”. I then said “There’s not much you can do now”. Julie Plummer said words to the effect “He’s got me, they know I cashed it at Nabiac, I’m fucked. I don’t know what to do” . She looked worried and upset. I then said words to the effect “Are they the moulds that are at Wallamba that you said are yours?” She said words to the effect “ Yes. I told the Haydens that the moulds were to be my property; that’s how I got the receipt in my name. Mary had no idea I was supposed to buy them for Dale or that the money came from him. That’s why she sold them to me for the price she did”.
8. On or about November 1997 I was present and overheard Julie Plummer on the telephone. I heard her repeat details of the conversation she had told me in paragraph 7 above. I walked away. When she got off the phone she was smiling and said words to the effect “Terry is going to help me. He told me to say he gave me the money. I’ll say Dale said he wanted the cash for the farm or drugs, that’ll fuck him. Who will believe Dale over me and Terry? Terry is a business man. I’ll tell Kimberley, (her daughter), and Kim will say she was present. Kim would lie for Mum”. I am aware that ‘Terry’ is Mr Terry Thompson, the owner/manager of Blinkey’s Ice Creamery in Taree.
9. I was present on another occasion about this period of time, when Julie Plummer took another phone call. When she hung up the phone, she looked worried. She said words to the effect “Bryan Baker said if he finds there is any fraud, he’ll get to the bottom of it and someone will be in big trouble” . Julie looked stressed and asked me to make her a cup of tea, which I did. She then made a telephone call. I heard her say words to the effect “Have you heard from Dale, because Bryan Baker just rang me” . After the call Julie Plummer said to me “Lorraine has heard from Dale. He contacted her yesterday about the cheque, but Lorraine was more worried about her husband Ken finding out she cashed such a large amount” .
10. After she got off the phone from Lorraine, Julie Plummer made another telephone call. When she got off the phone she looked happier. She said words to the effect “I’m so lucky to have a friend like Terry, he told me to stick with it, he’ll back me all the way, take the bastard for all he has, he’s sure I’ll win. If I don’t get any moulds or money out of Dale Thomas, I’ll go all the way until he’s broke. He’ll have to spend it all on his solicitor, he won’t have a cent by the time I’m finished with him”. I then relayed these conversations to Mr Bill Atkinson, who was my landlord at the time. Mr Atkinson is the cousin of Dale Thomas.”
12. The day after these conversations took place, I saw Terry Thompson come to visit Julie Plummer at the K Collection Workshop. They went into the office and I heard the door being locked. They were in there for about an hour. After Terry Thompson left, Julie said to me “I don’t want the moulds from Mary Hayden anymore, although I feel I deserve them as I organised the purchase of them for Dale. Instead, I’m going to take Dale to court for $85,000.00” . I can buy more moulds and equipment if I get $85,000.00 from Dale. Terry is behind me all the way, he was the one who told me to take the bastard for all he’s got. I’ll take Dale to court for new replacement value of the kilns and all the moulds and equipment”. ”

28 The plaintiff has not denied any part of the evidence of Deborah Hall.

29 In February 1997 the plaintiff was receiving a disability pension. She had been receiving that pension since some time in 1995 or 1996. The amount of that pension would decrease if she were to receive income. She had a debt to the Taxation Department of $35,000. She had told the defendant that her debt to the Taxation Department was $35,000 (and in this respect the evidence of the defendant, which I have set out in paragraph 9 above, is incorrect). She had had some discussions with an officer of the Taxation Department about repaying that debt. She gave evidence:

“Q. Did you ever pay back the money to the Tax Office, the 35,000?
A. No. But the plan was to do that.

HIS HONOUR: Q. Was any part of it paid back?
A. No. They did say to me that, like - well, I wasn't working and I didn't have that much money, you know, to pay them back so I was sort of in a catch-22 situation.”

30 In my view it is more probable that it was the money of the defendant which was used to purchase the moulds from Mary Hayden. When Mr Thompson has not been cross-examined, and there is nothing inherently improbable in his evidence, it must be accepted. However, Mr Thompson provided his loan to the plaintiff before the day when the defendant wrote, and Luke and the plaintiff cashed, the defendant’s cheque for $2,500. Particularly when the plaintiff’s financial resources were slight, and Mr Thompson had provided his loan on the basis that it was a very short term loan, it seems to me more probable that the plaintiff would use the money provided by the defendant to purchase the moulds.

At the Workshop

31 After the Workshop opened in February 1997, ceramic products were made and finished, the plaintiff taught classes, and served customers. There was usually another person employed there – first Jodie Reeve, then Julieanne Nelson, then Troy Isaacs, then Anthony Holtmeulen. Natalie Thomas worked in the shop part-time until around Easter 1997, after which she worked there full-time, including some weekend work. Luke and Jacob Thomas also did some work in the shop, but nothing like full-time. The plaintiff was not paid a wage.

Circumstances of Termination of the Plaintiff’s Involvement in Wallamba Workshop

32 In July 1997 the plaintiff and the defendant had a disagreement about whether a particular business venture, involving the manufacture of terracotta products, should go ahead. The defendant was insistent that the manufacture of the terracotta products not go ahead until his accountant had had the opportunity to see a contract relating to the proposal, but the plaintiff would not make a copy of the contract available. The defendant’s daughter Natalie told the plaintiff to pack up her things and get out of the workshop. Over the next few days the plaintiff was able to remove some, but not all, of the items which she had brought into the Workshop. She was helped by various friends, who took away several carloads of goods. Later, she also arranged for a truck to be available to take away some of her moulds.

33 On 21 July 1997 the plaintiff’s solicitor wrote to the defendant’s solicitor as follows:

“We confirm our telephone conversation with you today wherein you advised that your client has rejected our client’s offer.
We confirm that your client’s contribution towards the business was cash only and that all materials, equipment, moulds, kilns and completed items at the commencement of the joint venture belonged to our client.
Please inform your client that Ms Plummer will attend at the premises tomorrow morning to begin to collect her belongings.”

34 On 22 July 1997 Jodie Reeve went, at the defendant’s request, to the workshop. Ms Reeve gives evidence:

“I then commenced to sort out the moulds in accordance with the instructions given to me by Natalie Thomas. Those instructions were to sort the recently purchased moulds from Sydney [and] Julie’s original moulds. I was asked to sort to [through?] the moulds because I was able to distinguish between the original moulds bought in by Julie and the newer moulds purchased from Mary Hayden. I then sorted the moulds.”

35 While Ms Reeve did not finish the task of sorting the moulds, I infer that one or more of the Thomases tried to finish the task of sorting them into ones purchased from Mary Hayden, and ones which the plaintiff had brought into the premises.

36 On 23 July 1997 the plaintiff’s solicitors wrote to the defendant’s solicitors as follows:

“We refer to previous correspondence herein.
We note that our client was to commence collecting items belonging to her from the Wallamba Workshop yesterday, Tuesday, 22nd July. As you are aware your clients would not allow her to remove same.
We now seek return of the following items without further delay.
Backroom of Shop:
1 Skutt Kiln, kiln furnishings and shelving
Wooden rack for kiln
Mold Listing Book (Black Folder)
2 White Chairs
Coolroom:
1 small Kiln
3 rubbers for latex moulds
Backsheds:
All ceramic and terracotta moulds
1 small air compressor
Shelving both wooden and metal
1 Turning Lathe
1 Large wooden Toolbox
1 Large wooden Teachest
1 Rocking Chair
1 Roll of non-slip table covering
6 Baskets and dried flowers
Our client instructs that Greenware and Bisque Greenware to the value of approximately $7,000 and $5,000 of finished product was completed by her during the joint venture. This remains in the Workshop and she is seeking 50% of both Greenware and finished product.
We are also instructed that at least 40 of our clients’ valuable moulds have been broken by your clients since the commencement of the joint venture.
Please make arrangements for our client to collect her possessions from the Workshop tomorrow, 24th July.
In the event that the items are not available to our client our instructions are to commence Court proceedings for the return of same.
We await your reply.”

37 On 1 August 1997 the defendant’s solicitors wrote to the plaintiff’s solicitors as follows:

We refer to your letter of 23rd ult, and have been instructed by our client that he will agree to return those chattels set out in your letter under reference, with the exception of:
1. Back room of shop – 1 skutt kiln, kiln furnishing and shelving;
2. Back sheds – all ceramic and terra-cotta molds, 6 baskets and dried flowers.
Your client may collect these items which are not in dispute in the back yard of the premises at the corner of Clarkson and Nabiac Streets, Nabiac by appointment.
Our client also rejects the unilateral value of $7,000.00 and $5,000.00 respectively of greenware and bisque greenware claimed by your client.
Further, we also enclose a list of items which our client alleges were taken from the shop by your client. ....”

38 In the result, the defendant has retained all of the moulds which were purchased from Mary Hayden. The plaintiff asserts that the defendant has also retained some other moulds, but it is not necessary for me to decide, for the purposes of this case, whether her contention in that respect is correct.

39 On 12 August 1997 the plaintiff began proceedings in the Local Court at Taree against the defendant, Natalie Thomas and Luke Thomas. She claimed $39,000 for “goods of the plaintiff held by the defendants since 14th July 1997”. Those proceedings have not yet come on for hearing.

40 The defendant continued to operate the Wallamba Workshop after the plaintiff’s departure, but closed it at the end of 1997. Financial accounts were prepared for the business by the defendant’s accountant. Those accounts show that for the year ended 30 June 1997 a net loss of $8,821.71 was made, while for the year ended 30 June 1998 a further net loss of $11,738.31 was made.

Was There a Partnership?

41 The Partnership Act 1892, ss 1-2 provides:

“1. Definition of partnership
(1) Partnership is the relation which exists between persons carrying on a business in common with a view of profit.
2. Rules for determining existence of partnership
In determining whether a partnership does or does not exist, regard shall be had to the following rules:
(3) The receipt by a person of a share of the profits of a business is prima facie evidence that the person is a partner in the business, but the receipt of such a share, or of a payment contingent on, or varying with the profits of a business does not of itself make the person a partner in the business; and in particular:
(a) …

(b) A contract for the remuneration of a servant or agent of a person engaged in a business by a share of the profits of the business does not of itself make the servant or agent a partner in the business or liable as such:”

42 It is common ground that the plaintiff and the defendant were involved in the Wallamba Workshop in the expectation that it would make profits, and that, when those profits were made, the plaintiff would have a share of the profits. The question for decision in the present case is whether, in being involved in the Wallamba Workshop, the plaintiff and the defendant were “carrying on a business in common”.

43 I am unable to accept the plaintiff’s account of the conversations which preceded her involvement in the Wallamba Workshop. Mr Morrissey, counsel for the defendant, submitted that the plaintiff’s evidence that the defendant simply accepted the plaintiff’s claim that her equipment was worth about $85,000, and that the first use to which any profits of the business would be put would be in paying the plaintiff that $85,000, is incredible. I agree. As well, in cross-examination the plaintiff accepted that she was giving the business the use of her equipment, not transferring it to Mr Thomas, or anyone else, and that she remained the owner of the equipment.

44 I accept the defendant’s evidence about those conversations, including that the plaintiff said, “I don’t want to be a partner or sign my name on any documents”. The defendant presented in the witness box as a blunt, straightforward man. Nothing in the defendant’s cross-examination gave occasion to disbelieve him. Further, the objective facts about how the lease, the bond, the business name registration, and the bank accounts were all in the name of the defendant support his evidence. I would also infer that the public liability insurance was taken out in his name.

45 While the plaintiff had skills concerning ceramics which the defendant and his children did not have, and while she had some responsibilities concerning the operation of the workshop, important managerial decisions (such as over who would be the employees, the identity of the accountant for the business, and the type of financial records which should be maintained) remained with the defendant. All expenses of the business were met by the defendant, including the expenses for purchase of the moulds from Mary Hayden.

46 The undisputed fact, that the plaintiff told the defendant about her debt to the taxation office, has relevance in two ways. One is that it provides a reason why the plaintiff was unwilling to embark again on the enterprise of being a business proprietor, with its inevitable risk of loss. The other is that it provides a reason why the defendant would have some reservations about entering a partnership with her.

47 That the plaintiff was receiving a disability pension is also consistent with her choosing to enter the arrangement that the defendant describes. It is true that under that arrangement, if the business were to make profits, her pension would reduce in the same way as if she were a partner, but if the business were to not make profits, she would not be at risk of loss.

48 There is room for argument about whether Rule 3 of the rules for determining the existence of partnership contained in section 2 of the Partnership Act 1892 applies to a situation where there has been an agreement that a person would receive a share of profits, but no actual profits have been received. It is not necessary to resolve that argument, because any prima facie evidence of partnership which might arise from the agreement to share profits is rebutted by the express statement of the plaintiff that she did not want to be a partner, and the other evidence about how the business was carried on, to which I have already referred.

49 The plaintiff relied on Canny Gabriel Castle Jackson Advertising Pty Limited v Volume Sales (Finance) Pty Limited (1974) 131 CLR 321. That case held that a partnership existed concerning a single venture, involving public performances by two singers. There, the parties had entered a written agreement. By clause 6 of that agreement, each party covenanted that it had not received any notice of impending liquidation or official management and that there were no outstanding judgments or orders against either of them. The factors which the High Court relied upon as giving rise to a partnership were (at 326-327):

“1. The parties became joint venturers in a commercial enterprise with a view to profit.
2. Profits were to be shared: see Partnership Act, 1892 , as amended (NSW), s.2(iii).
3. The policy of the joint venture was a matter for joint agreement and it was provided that differences relating to the affairs of the joint venture should be settled by arbitration: see cll 7 and 9.
4. An assignment of a half interest in the contracts for the appearances of Cilla Black and Elton John was attempted, although, we would have thought, unsuccessfully.
5. The parties were concerned with the financial stability of one another in a way which is common with partners: cl.6”

50 In the present case, there is no analogue of the third, fourth and fifth of the factors upon which the High Court placed reliance in Canny Gabriel.

51 I also place some reliance upon the terms of the letters written by the plaintiff’s solicitors immediately after her exclusion from the Workshop. Those letters nowhere assert that there was a partnership. Further, they are inconsistent with the plaintiff having contributed her equipment as a capital contribution to any partnership. Likewise, the claim made in the Local Court proceedings in Taree is inconsistent with the plaintiff having contributed her equipment as a capital contribution to any partnership. The plaintiff did not claim that a partnership existed until these present proceedings were begun in November 1998.

52 Counsel for the plaintiff submitted that no significant weight should be placed on the terms of those letters, or of the claim in the Local Court proceedings, because they are likely to represent the view that the plaintiff’s then solicitors had, and that deeper probing by the plaintiff’s later legal advisers has revealed a different situation. I do not accept this submission. There is no complexity or depth involved in the plaintiff’s claim that she is a partner; it seems to me likely that her then solicitors wrote correspondence which reflected the instructions which the plaintiff gave them about the facts of the matter.

53 As well, there is no evidence from which one could reach the conclusion that the plaintiff was undertaking any obligation to share in the losses which the business might make. Sharing in losses is an integral part of two people carrying on business in common.

54 I conclude that there was no partnership between the plaintiff and the defendant. For that reason the plaintiff’s claim must be dismissed.

55 There are some additional matters which I should mention, which might have borne upon any discretionary decision which needed to be made about whether a receiver should be appointed, and an enquiry ordered, in the event that I had been of the view that there had been a partnership. The moulds which had been used in the business are now located on a rural property owned by Michael Brown, a former de facto partner of Natalie Thomas. The plaintiff’s cross-examination included the following:

“Q. Mr Thomas has on a number of occasions offered for you to take those moulds back from Mr Brown, hasn't he?
A. Yes.

Q. You have chosen not to?
A. Well, I don't really know what - well, yes, I've chosen not to.”

56 As well, the plaintiff did not put forward the consent of anyone to be a receiver and manager. She did not proffer any undertaking to ensure that a receiver and manager was paid, in the event that the assets of any partnership proved insufficiently valuable to be able to meet the expenses of the receivership. In light of the conclusion I have come to, however, it is not necessary to form a view about how these matters would affect the decision whether or not to appoint a receiver of the partnership, if I had found that there had been a partnership.

57 The defendant filed a Cross-Claim, but in the course of argument the defendant’s counsel accepted that it was unsustainable. While the plaintiff had drawn a defence to that Cross-Claim, the Defence to the Cross-Claim was not served, and was filed in court in the course of the hearing. The proportion of the hearing time devoted to the Cross-Claim was insignificant.

1. Proceedings dismissed.

2. Cross-Claim dismissed.

3. Plaintiff to pay costs of defendant, except costs of drawing filing and serving the Cross-Claim.

4. Defendant to pay costs of plaintiff of drawing defence to Cross-Claim.

5. Costs payable under orders 3 and 4 to be set off against each other.

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Last Modified: 01/06/2003