Randall v Beckett
[2004] WADC 130
•25 JUNE 2004
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: RANDALL -v- BECKETT [2004] WADC 130
CORAM: WILLIAMS DCJ
HEARD: 30 SEPTEMBER 2003, 1 & 2 OCTOBER 2003 AND 6 & 7 APRIL 2004
DELIVERED : 25 JUNE 2004
FILE NO/S: CIV 441 of 2001
BETWEEN: KERRY RON RANDALL
Plaintiff
AND
GEORGE WILLIAM BECKETT
Defendant
Catchwords:
Partnership - Dissolution - Action by and against partners
Legislation:
Nil
Result:
Plaintiff entitled to judgment in the sum of $2,537
Defendant entitled to judgment in the sum of $18,004.28
Representation:
Counsel:
Plaintiff: Mr H O Moser
Defendant: Mr T J Kavenagh
Solicitors:
Plaintiff: Colin Garber & Associates
Defendant: Corsers
Case(s) referred to in judgment(s):
Nil
Case(s) also cited:
Nil
WILLIAMS DCJ:
Introduction
This is a partnership dispute between the plaintiff and the defendant.
The parties were in partnership trading under the style and name of "Kanowna Homes" from on or about 25 January 1994 to either on or about 19 April 1995 or 30 June 1995. There is a dispute between the parties as to when the partnership was dissolved and that issue will need to be determined.
The partnership operated in Kalgoorlie and the object of the partnership was to undertake building development works for profit. The plaintiff was a registered builder and it was agreed that he would use his skills as a builder and that the partnership would be able to use the plaintiff's Builder's Registration Ticket for that purpose. The profits and losses of the partnership were to be shared equally.
The plaintiff would also make available to the partnership capital, tools, construction and administrative equipment owned by him.
The date of termination of the partnership
The plaintiff says that the partnership terminated on 19 April 1995.
The defendant says that he and the plaintiff were in partnership until 30 June 1995.
In my view the evidence is overwhelmingly in favour of a termination of the partnership on 30 June 1995. My reasons for saying that are as follows:
(a)The plaintiff's original amended statement of claim dated 24 April 2001 alleged that the partnership terminated on 31 July 1995. It was only on 28 April 2003 when the plaintiff faced the defendant's counterclaim that date changed to 19 April 1995. The date of 31 July 1995 requires some explanation. The accounts were prepared by Mrs Leighton, a chartered accountant of Kalgoorlie. Her evidence was that she prepared the accounts to 30 June 1995 [Exhibit 28(2)] and they are dated on that date. However the computer only allowed her to print at the end of each month so that is why the final accounts are showing as 31 July 1995 and not 1 July on Exhibit 28(3).
(b)The plaintiff gave evidence at the Local Court trial that the partnership ended for accounting purposes on 30 June 1995 Exhibit 69 at p 103.
(c)The plaintiff also wrote a letter to a creditor of the partnership on 2 July 1995, "Dulux", advising that the partnership ceased to trade on 30 June 1995 Exhibit 28(17).
(d)The evidence of Mrs Leighton, whose evidence I accept in full, was that the plaintiff asked her to prepare accounts of the partnership up 30 June 1995.
In my view the plaintiff has changed his position on this to say that the partnership ended on 19 April 1995. That date has been chosen because on that date the plaintiff provided a quote to Australia Post Exhibit 28(13). The defendant says that the partnership terminated after that date and the plaintiff is required to account to the partnership for the profit made on that job between 19 April 1995 and 30 June 1995
It is therefore my finding that the partnership terminated on 30 June 1995.
Paragraph 3 - Statement of claim
In par 3 of the statement of claim the plaintiff alleges that the defendant drew funds from the partnership for his personal use and paid personal expenses from the funds of the partnership. Initially that was claimed in the sum of $31,062.45 but at trial it was reduced to a claim for airfares paid for the defendant in the sum of $1,535 and materials paid for by the partnership for use of the defendant in the sum of $4,185. I shall deal with each of those in turn.
Paragraph 3(c) – Airfares paid for defendant - $1,535
This is a claim for airfares paid by the partnership which the plaintiff says was for the personal use of the defendant.
The plaintiff's case was that the defendant's payments from the partnership funds to pay for the airfares to travel to Perth and return were not the subject of any prior agreement as to how that was to be treated and it had nothing to do with the partnership. However he accepted that the defendant may have conducted business in Perth on the occasions that he went. He also accepted that he the plaintiff, may have gone on one occasion. He also accepted that in April 1994 it was possible that the partnership owed money to John's Building Supplies and in fact paid $10,000 on 28 April and $5,000 on 9 May 1994.
The defendant's evidence was he could not remember every occasion in which he went to Perth but he went to Perth on business and accepted that there was a degree of personal use. The plaintiff also had the opportunity to travel to Perth and travelled on at least two occasions where his airfares were paid by the partnership (Exhibit 29, cheque butts 142 and 133).
The defendant specifically remembered two occasions, and may be three, when he went to Perth to deal with the proprietor of John's Building Supplies who was pushing the partnership for money. The defendant accepted that his wife was residing in Perth at that time and he saw her on the occasions that he came to Perth.
The fact that both of them travelled at the expense of the partnership suggests that they both knew each was travelling and authorised the same. No claim is made by the defendant against the plaintiff for the plaintiff's trips.
For this reason I prefer the evidence of the defendant and this part of the claim is dismissed.
Paragraph 3(e) - Materials paid for by the partnership for use by the defendant - $4,185
This claim relates to a number of items.
These matters relate to a building contract which the partnership was carrying out at 110 Burke Street, Kalgoorlie. It was the plaintiff's evidence that these items were not part of the contract to build the house.
I will deal with these as follows:
Light fittings - $227
This matter was admitted by the defendant and I allow this sum.
Concrete - $640
Exhibit 24 shows the cheque butt number 0580 was in the plaintiff's handwriting and that it was for the driveway at 110 Burke Street.
The plaintiff was shown Exhibit 70, the site plans for Burke Street, and accepted that the plans show a reference to shire requirements indicating that there was a requirement to put in a crossover. I disallow this sum.
Shower screen and replacement solar glass panel - $600
According to the defendant these matters were broken and were a replacement and it was a requirement of the partnership to pay for the replacements. I do not allow this item.
Water and sewerage rates – 110 Burke Street development - $701.30
The defendant's evidence is this is what the partnership was obliged to do under the building contract and the butt refers to sewerage rates plus sewerage connection. That appears to me to be related to the building contract and I disallow that sum.
Gardener's shed – Cash cheque to Craig Hartley $250
This is admitted by the defendant and I allow this sum.
Boundary fencing with materials - $1,767
This is admitted by the defendant and I allow this sum.
Counsel for the defendant in his closing submissions said that the admissions made by the defendant in relation to the light fittings, the gardener's shed and the boundary fencing were not admissions of liability but admissions that those items were installed at 110 Burke Street and paid for by the partnership. I do not accept this submission. Neither do I accept the submission that they are only recoverable by the partnership against the proprietor. If these were not a liability of the partnership then the defendant should never have used those funds to pay those accounts.
Paragraph 4 – Statement of claim
The plaintiff alleges that he allowed the use of his equipment without being paid therefore and made payments on behalf of the partnership without being reimbursed. I deal with each of those matters in turn.
Paragraph 4(a) – Payments made on behalf of the partnership - $13,242
This claim was originally in the sum of $13,242. At the commencement of the trial this claim was reduced to $10,382 and on the second day of the trial reduced further to $8,995.
Counsel for the plaintiff conceded that there was no supporting documentation relating to these payments. As I pointed out to counsel for the plaintiff during the trial if there was no documentation how did the plaintiff come up with the amount.
These are payments allegedly made by the plaintiff on behalf of the partnership and must have been made from his own funds. There is absolutely no record of these payments. There was some argument between the parties as to what happened to all the books of the partnership but the plaintiff here is talking about his own books and records.
I can only conclude that these amounts were simply made up by the plaintiff and this part of his claim is dismissed.
Paragraph 4(c) - Accountancy fees paid by plaintiff for partnership - $1,390
The plaintiff's evidence is that he drew a cheque for $940 to Mrs Leighton, the accountant, Exhibit 42. Mrs Leighton has confirmed that her records reveal that this was paid in relation a partnership debt to her. The defendant now admits that he is liable to reimburse the plaintiff for one-half of this debt. So before apportionment I allow the sum $940.
The plaintiff's evidence is that he drew a cheque for $450 to the accountant Exhibit 43. Cheque butt number 657605 does not reveal who the payee was and the plaintiff's evidence is that it was "from memory payable to the accountant". The accountant has given evidence that she has specifically searched her records for a payment of $450 and that revealed that there is no such payment of $450 in relation to a partnership debt. Later in evidence she accepted that if she had said in the Local Court that she had received that sum that was probably the case. I found Mrs Leighton to be a very exacting witness and I accept her evidence that she specifically searched her records and was not able to find this payment. This claim is disallowed.
Paragraph 4(d) – Interest on overdraft paid by the plaintiff $1,750
The plaintiff has established payments of $250 and $1,000 Exhibits 67 and 68. The defendant now admits that he is liable to reimburse the plaintiff for one-half of this debt.
As to the balance of $500 the plaintiff gave evidence that he does not have a record of the payment and no documentation. That part of the claim is therefore disallowed.
Paragraph 4(e) – Expenditure, plant and equipment paid for by the plaintiff - $6,000
This is a claim for $6,000 being for a table saw. The plaintiff's evidence is that he purchased a table saw for the partnership using his own funds. He produced a document which appeared to be a cheque butt to evidence payment Exhibit 44 but he could not recall when the payment was made. The cheque butt is not clear and in my view does not confirm what the plaintiff has said.
The defendant produced an invoice for a table saw which was directed to him Exhibit 71. It is dated 12 January 1993. It is more probable that this occurred in January 1994. The plaintiff accepted that this was before the commencement of the partnership. He was unable to explain why the invoice is in Mr Beckett's name.
The defendant gave evidence that the table saw was never part of the business or the partnership but of a different partnership. He produced a copy of the Business Names Registration for this partnership which showed that the business name had been registered on 21 February 1994 Exhibit 75.
This is a very strange transaction. The plaintiff's evidence is that he paid out the $6,000 and made the purchase and yet for some reason or another the receipt is in the name of the defendant. The plaintiff is unable to explain this. Although the defendant was cross-examined on the basis that the table saw was sold to one Crispin the evidence of Mrs Leighton was that the table saw was sold into the partnership for a sum of $3,000 and that was an asset of the partnership at the time of dissolution of the partnership.
I found all of this evidence quite irreconcilable. The plaintiff is not telling the truth in relation to this aspect and I disallow this claim.
Paragraph 4(f) – Subcontract payments made on behalf of the partnership - $7,000
The plaintiff's evidence is that this claim relates to two payments made by him to subcontractors "R & K Bricklayers" for work done at a job for Diamond Industrial Tools. The plaintiff agreed in cross-examination that there were only 3,432 bricks delivered to that job and the bricklaying could not possibly have cost $7,000. It was put to him that the partnership had paid $1,700 less tax on 20 October 1994 Exhibit 73. The cheque butt is in the plaintiff's own handwriting. The sequence of cheques in Exhibit 44 would appear to show that the payments of $7,000 had been made in January 1994. This was before the partnership came into existence and before the work was done by the bricklayers for the job on which the plaintiff says the work was done.
This claim is disallowed.
Paragraph 4(h) – Partnership creditors paid by the plaintiff - $15,398.32
The particulars in relation to these claims show that the cheques were drawn on the bank account of Karasam Constructions Pty Ltd. The plaintiff produced no documentary evidence to establish that the payments were made by that company on behalf of the plaintiff. The only evidence is the verbal evidence of the plaintiff that it was an internal arrangement being a drawing on shareholders' funds. No cheque butts were produced by the plaintiff.
The particulars also state that these payments commenced on 31 May 1995. On the plaintiff's evidence this is after the dissolution of the partnership. By this stage the plaintiff, or more particularly his company Karasam Constructions Pty Ltd, was carrying on business as a builder. The evidence established that the plaintiff carried out at least two jobs at about this time, one for Australia Post and one for Mrs Leighton.
In my view there is insufficient evidence to allow the plaintiff to recover these amounts in these proceedings. The fact that the cheque butts were never produced cast serious doubt on the verbal evidence that these payments were made in relation to the partnership debts. I do not allow anything under this heading.
Paragraph 4(i) – Hire three tonne tip truck – 76 weeks at $60 per week minus $960 paid - $3,600
This part of the claim originally started off as a claim for $17,280 (see writ and endorsement of claim) Exhibit 76. Again that was amended at trial to its present claim.
The plaintiff's evidence in relation to this was that he provided a vehicle on the basis that he would be remunerated. There was however no agreement about the level of recompense. The plaintiff says that he chose the figure of $60 per week (after previously choosing a figure of $240 per week) because it was a reasonable sum because he had been paid at that rate when he was paid the $960. What he did not state was that the $960 was a payment made by him on the partnership to himself. That is obviously a rate chosen by him.
In cross-examination he acknowledged that he was not even the owner of the tip truck. At the relevant time that was registered in his wife's name and she is now deceased.
The defendant denies that there was any agreement that the partnership would pay a hire fee for the tip truck. The defendant's evidence was that he owned a utility, a tipper and a backhoe and that they were all used in the partnership from time to time. He did not receive any rental for that. The $960 was a cheque that the plaintiff had written out for himself and that he, the defendant, never agreed to pay for the hire of his tip truck.
I prefer the evidence of the defendant with respect to this matter and this claim is disallowed.
Findings on plaintiff's claim
It follows from an original claim of $69,914.46 reduced at the time of trial to $35,939.19, I have allowed the plaintiff's claim as follows:
Paragraph 3(e) – Light fittings $ 227
Paragraph 3(e) – Concrete $ 640
Paragraph 3(e) – Gardener's shed $ 250
Paragraph 3(e) – Boundary fencing material $1,767
Paragraph 4(c) – Accountancy fees for the $ 940partnership
Paragraph 4(d) – Interest on overdraft for the $1,250
partnership
Total: $5,074
The plaintiff claims to be entitled to half of that sum and I find that the plaintiff is entitled to judgment on the claim against the defendant in the sum of $2,537.
Defendant's counterclaim – background
The defendant's counterclaim was originally the subject of Local Court proceedings taken out by the defendant against the plaintiff in the Local Court in Kalgoorlie. The defendant was successful in the Local Court but the judgment was appealed and overturned on appeal to a Judge (not myself) of the District Court of Western Australia.
The matter was remitted to the Local Court in Kalgoorlie for hearing before a different Magistrate.
At that time these proceedings had already been commenced by the plaintiff claiming the sum of $69,914.46 which was beyond the jurisdiction of the Local Court. For those reasons the parties agreed to transfer the Local Court proceedings to the District Court and that became the defendant's counterclaim.
Paragraphs 7 to 12 - The counterclaim for the unliquidated balance of the partnership account - $8,977
The evidence in relation to this came from Mrs Leighton, a chartered accountant. Mrs Leighton was a superb witness in my view and knew precisely what she was talking about.
Mrs Leighton's evidence was that she had known the plaintiff for 16 years and the defendant for 10 years. It was the plaintiff who approached her to do the accounts for the partnership. She prepared the accounts for the year ended 30 June 1994 Exhibit 28(1) and they were delivered to the partners. The plaintiff also asked her to prepare the accounts for the year ended 30 June 1995 Exhibit 28(2). Mrs Leighton confirmed those accounts and stated that they had been prepared on information provided by the plaintiff which would have consisted of deposit books, bank statements and cheque books and any other information that was provided at that time. Those instructions were from the plaintiff. Her evidence was that both the partners accepted those accounts.
Subsequently the defendant asked her to prepare final accounts. Although the accounts are dated 31 July 1995 they are actually the accounts as at 30 June 1995. The final accounts are Exhibit 38(3). The computer only allows her to print as at the end of each month so that is why they are showing as at 31 July 1995 but her understanding was that there was no trading between 30 June and 31 July 1995.
It was Mrs Leighton's evidence that as at 30 June there was some plant and equipment which had been depreciated. There was a bank overdraft and there were some PPS tax credits. These PPS tax credits were distributed half each to the partners and would have been claimed on their individual tax returns as at the end of June 1995. The defendant told her that he paid out the bank overdraft account and that the plaintiff took the plant and equipment at its written down value and that was the basis that she prepared the final set of accounts.
It was also Mrs Leighton's evidence that during the second half of 1995 she engaged the plaintiff through his company Karasam Constructions Pty Ltd to do work on her premises at 77 Maritana Street, Kalgoorlie. Her office was in that building where the plaintiff was working and she saw him from time to time in the second half of 1995.
The respective balance of the current accounts as at 30 June 1995 Exhibit 28(1) shows the plaintiff at $712 and the defendant at $3,585.
The defendant's evidence is that when the partnership ended the plaintiff took with him certain partnership assets which were held in the partnership account at a written down value of $5,882. The defendant's evidence was also that he paid the partnership's bankers, the National Bank of Australia, the sum of $9,198 in repayment of the partnership's bank account. In my view it goes further to the defendant's credit in this action that he paid out the overdraft and not the plaintiff. Mrs Leighton also gave evidence that as at 30 June 1995 the partnership had a current asset, namely a PPS tax item in the sum of $7,613.
It was Mrs Leighton's evidence that the proper accounting treatment of the matters set out above led to the respective balance of the defendant's and the plaintiff's current accounts to be as follows:
The plaintiff minus $8,997;
The defendant $8,997.
Mrs Leighton was cross-examined as to the accuracy of the accounts for the year ended 30 June 1995. However in my view they have been accepted by the plaintiff. He was the person who gave the documents to Mrs Leighton and the accounts were prepared on his instructions. Nowhere is it said that he objected to the accounts or did not agree with them and Mrs Leighton's evidence is that he agreed with the accounts. In my view it is too late for the plaintiff to go behind the accounts for the year ended 30 June 1995.
Miraculously on the fifth and final day of trial and after this dispute had been firstly through the Local Court and on appeal in this Court the plaintiff produced a depreciation schedule. I had been told for the previous four days that there was no depreciation schedule in existence. Mrs Leighton was asked questions in cross-examination about the depreciation schedule. I was never shown a copy of that depreciation schedule and it was never tendered in evidence. However the cross-examination of Mrs Leighton tends to indicate that on the depreciation schedule was a wood-working machine. Mrs Leighton stated that she was advised that its original cost was $3,000 and as at 30 June 1995 its written down value was $2,278.
The evidence led by the plaintiff in this matter was that the wood working machine was purchased for a sum of $6,000. Furthermore the evidence of the plaintiff was that it was disposed of by way of what he called "a contra". No explanation was given of what he meant by this. I have already made a finding that the wood-working saw was never an asset of the partnership and that was on the basis of the evidence that I have previously heard. The plaintiff seeks to re-open the accounts for the taking of an account in respect to this matter. In my view it is far too late for this to occur. We are talking about a partnership that wound up on 30 June 1995. No explanation has been given by the plaintiff as to how it came to be in the books at a cost of $3,000. No satisfactory explanation is given by him as to the manner in which it was sold. I do not propose to re-open this aspect for the taking of accounts. In my view the plaintiff has accepted Mrs Leighton's accounts and is stuck with them.
Mrs Leighton said specifically that the final accounts were presented to the partners with a full set of accounts, including the depreciation schedule, at the time and that this was the first time that she had heard that the assets listed in that schedule were incorrect. They were given to them nine years ago with a copy of the accounts. I accept Mrs Leighton's evidence completely with respect to this aspect.
Questions were put to Mrs Leighton on the basis that the panel van which was in the depreciation schedule was registered in the name of the plaintiff's son and that that also requires a taking of accounts and adjustment.
What I have said previously in my view still stands. These accounts were accepted by the plaintiff and he is stuck with them.
On the basis of these findings the defendant is entitled to the sum of $8,977 in the counterclaim for the unliquidated balance of the partnership accounts.
Paragraph 13 – Payments made to creditors by the defendant - $18,554.57
This claim relates to payments made by the defendant on behalf of the partnership to the partnership's creditors after the accounts were prepared. The defendant's evidence was that he was left to deal with the creditors of the partnership. Indeed that is what the plaintiff was telling the creditors – see Exhibit 28(17).
On the second day of the trial counsel for the plaintiff conceded that the payments made by the defendant had been made but questioned whether the payments related to the partnership. On the fourth day of the trial counsel for the plaintiff conceded that other than the payment to the horse trainer of the sum of $500 all other payments were made on behalf of the partnership.
The plaintiff and defendant had an arrangement in respect to a horse but in my view it is not an asset of the partnership and I do not allow that sum of $500.
Paragraphs 14 to 19 – The Australia Post job
This claim relates to the Australia Post job. The defendant's prayer for relief claims an order that the plaintiff account to the partnership for any moneys received by the plaintiff in respect of the Australia Post agreement.
I have already made a finding that the partnership existed until 30 June 1995. The invoice dated 29 June 1995 Exhibit 28(16) signed by the plaintiff and under the name of Kanowna Homes lead to the conclusion that any profits from the carrying out of the Australia Post job should belong to the partnership and that the plaintiff should account to the partnership for any profits made from that job.
It follows that there should be an order that the plaintiff account to the partnership for any moneys received by the plaintiff in respect of the Australia Post job.
In my view the defendant is entitled to judgment on the counterclaim as follows:
Paragraphs 7 to 12 $ 8,977.00
Paragraph 13 - $18,554.57 - Less
$500 = $18,054.57. The plaintiffclaims one-half of that sum namely $ 9,027.28
$18,004.28
The defendant is also entitled to an order that the plaintiff account to the partnership for any moneys received by the plaintiff in respect of the Australia Post job.
Both parties claim interest on the various amounts to which they are entitled and costs and I will hear counsel for the parties as to the orders that should be made in that respect.
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