Robson v Brown
[2007] WADC 120
•31 JULY 2007
ROBSON -v- BROWN [2007] WADC 120
| DISTRICT COURT OF WESTERN AUSTRALIA | Citation No: | [2007] WADC 120 | |
| Case No: | CIV:1869/2000 | 21 & 22 MARCH 2006, 27 APRIL 2007 | |
| Coram: | SLEIGHT DCJ | 31/07/07 | |
| PERTH | |||
| 27 | Judgment Part: | 1 of 1 | |
| Result: | Plaintiff's claim for payment of $110,000 dismissed, order for dissolution of partnership | ||
| PDF Version |
| Parties: | KEVIN OWEN ROBSON RODNEY BROWN |
Catchwords: | Partnership between plaintiff and defendant Whether partnership terminated Rights on termination Whether agreement that defendant pay $110,000 for plaintiff's share of partnership Order for dissolution of partnership retrospectively |
Legislation: | Partnership Act 1895 |
Case References: | Cutts v Holland (1995) Tas SR 69 |
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
RODNEY BROWN
Defendant
Catchwords:
Partnership between plaintiff and defendant - Whether partnership terminated - Rights on termination - Whether agreement that defendant pay $110,000 for plaintiff's share of partnership - Order for dissolution of partnership retrospectively
Legislation:
Partnership Act 1895
Result:
Plaintiff's claim for payment of $110,000 dismissed, order for dissolution of partnership
(Page 2)
Representation:
Counsel:
Plaintiff : Mr A J Lloyd
Defendant : Mr D C Leask
Solicitors:
Plaintiff : Anthony James Lloyd
Defendant : Leask & Co
Case(s) referred to in judgment(s):
Cutts v Holland (1965) Tas SR 69
(Page 3)
1 SLEIGHT DCJ: The dispute between the plaintiff ("Mr Robson") and the defendant ("Mr Brown") arises from a partnership to conduct a business in Bali providing parasailing and other water sport activities to tourists.
2 The partnership was formed in about July – September 1995 as a result of Mr Brown seeking to attract an investor to establish the business. At that time Mr Brown was the owner of one boat located in Bali, the "Melissa B". It was proposed to purchase a second boat which would be suitable for towing a parasail across water.
3 Mr Robson agreed to invest and become a partner of the proposed business. He invested the sum of $110,000. A second boat was purchased (Melissa BII).
4 Subsequently, the relationship between Mr Brown and Mr Robson deteriorated and the partnership ceased to operate. Mr Robson seeks by this action, return of the $110,000 he invested in the business.
The pleadings
5 The plaintiff pleads by an amended statement of claim as follows:
"1. The plaintiff paid to the defendant the sum of $110,000 in instalments in the period July to September 1995, particulars whereof have been rendered, to assist in the development of the defendants boating business in Bali the said sum being initially by way of a partnership contribution but subsequently agreed by the parties to constitute a debt owing by the defendant to the plaintiff.
2. The plaintiff has demanded repayment in writing in June 1996, November 1998 and July 2000.
3. The defendant acknowledged the debt and that the amount of $110,000 is due and owing to the plaintiff on 16 February 1999 but has failed and refused to make any repayment.
AND THE PLAINTIFF CLAIMS the sum of $110,000 together with interest thereon from 17 July 2000 pursuant to section 32 of the Supreme Court Act and Costs."
(Page 4)
6 In the defence filed the defendant denies there was an agreement to pay the plaintiff $110,000 and says the amount paid by the plaintiff was a capital contribution to the partnership.
7 The defendant also pleads a breach of the partnership by the plaintiff but does not seek any relief as a result of such a breach.
8 In a reply the plaintiff seeks an alternative remedy of an order by the court for dissolution of the partnership, an account to be taken and repayment of the plaintiff's contribution to the partnership.
9 The defendant has not responded to the reply of the plaintiff. However, counsel for the defendant has stated that the defendant is of the view that the partnership can be wound up under the provisions of the Partnership Act and no orders are required.
10 As a matter of general principle a new cause of action should not be pleaded in a reply but be included in an amended statement of claim (see Seaman, Civil Procedure Western Australia par 20.5.1).
11 The plaintiff by seeking in the reply orders of account, dissolution of partnership and other incidental orders is pleading a new cause of action for dissolution of the partnership pursuant to the Partnership Act (rather than a claim based upon a simple debt).
12 It is clear that the District Court has jurisdiction under the Partnership Act and has all the powers and authorities of the Supreme Court in dispensing of a matter (see s 50(1)(b), s 53 and s 55 of the District Court Act).
13 Section 24(7) of the Supreme Court Act provides as follows:
"…
(7) The Court, in the exercise of the jurisdiction vested in it by this Act, in every cause or matter pending before it, shall have power to grant, and shall grant, either absolutely or on such reasonable terms and conditions as shall seem just, all such remedies whatsoever as any of the parties thereto may appear to be entitled to in respect of any and every legal or equitable claim properly brought forward by them in such cause or matter; so that, as far as possible, all matters so in controversy between the parties may be completely and finally determined, and
- all multiplicity of legal proceedings concerning any of such matters avoided"
14 At the commencement of the trial I raised with counsel the question of relief being sought in the reply rather than in the statement of claim, but the defendant did not pursue the issue and seek that the relief sought in the reply be struck out. Further, the defendant did not dispute that if I found that the plaintiff was not entitled to the $110,000.00 by way of a debt, I should then consider whether it was appropriate to make an order dissolving the partnership. The defendant's position was that he did not oppose any such order although he argued that such an order was not necessary.
15 In the circumstances, I conclude that I should consider the alternative claim made by the plaintiff in the reply, notwithstanding that technically that it should have been pleaded in the statement of claim.
The plaintiff's evidence
16 The plaintiff, Mr Robson, gave evidence in support of his claim and also called one further witness, Mr Graham Peter Sertorio.
17 The plaintiff's evidence was that he answered an advertisement to buy into a business in Bali. The advertisement included the words "investment guaranteed".
18 He met with Mr Brown and was offered a half share in a water sport business in Bali, called Panti Bali Water Sports.
19 At the time Mr Brown was operating a tourist boat, Melissa B, in Bali and wished to expand the operation by purchasing a second boat. Melissa B was to offer water rides using boom-netting (the boat had booms protruding from each side of the boat supporting a netting in which people were seated and were dragged through the water). The second boat was to be purchased to be used primarily for parasailing.
20 At the first meeting Mr Brown made some projections of the anticipated profit of the business.
21 Mr Robson stated that he agreed to invest in the business by paying $110,000. An initial sum of $35,000 was paid by Mr Robson to Mr Brown. The balance of Mr Robson's contribution was to go towards the construction of the second boat and other expenses.
(Page 6)
22 The partnership was entered into at the meeting by way of a verbal agreement. No formal written partnership agreement was entered into. Further, there was no partnership accountants appointed and no agreement to open a partnership bank account.
23 Mr Robson stated that it was agreed that the business would be operated on a day to day basis by Mr Brown located in Bali. Mr Robson would essentially be a silent partner located in Perth, who would visit Bali from time to time to enquire as to the progress of the business. No formal arrangements were entered into concerning the obligation of Mr Brown to report to Mr Robson.
24 Mr Robson paid Mr Brown the initial sum of $35,000 by bank cheque. They then went to a firm Custom Craft and ordered a parasailing boat. Mr Robson paid a deposit on the boat. He could not recall the amount.
25 Mr Robson also arranged various progress payments to Custom Craft on the boat being constructed.
26 When the boat was completed the boat was transported to Dampier. Again, Mr Robson paid the costs of the transporting as a part of his contribution to the partnership.
27 All the amounts paid by Mr Robson towards the construction and delivery of the boat formed a part of the $110,000 he was to contribute to the business.
28 On 25 July 1995 Mr Robson flew to Bali. Whilst in Bali he inspected Melissa B. The boat required work to be done on it as there was a problem with the propeller. Whilst the boat was being repaired the hull was also scraped and cleaned.
29 Mr Robson returned to Perth on 4 August 1995.
30 Mr Brown had indicated that further capital investment in the business was required and he had met a Mr Sertorio who had expressed an interest in investing in the business.
31 Mr Brown flew from Bali back to Perth and negotiations took place between Mr Brown and Mr Sertorio. Mr Brown then returned to Dampier. Mr Brown informed Mr Robson that Mr Sertorio was willing to invest $10,000 in the business. This was initially to be by way of a loan and if, after further inspection of the business, Mr Sertorio wished to
(Page 7)
- invest as a partner then the $10,000 would be treated as a payment of capital.
32 Mr Robson met with Mr Sertorio and signed an acknowledgement of debt of $10,000 on behalf of the partnership.
33 After the new parasailing boat (known as Melissa BII) had been transported to Dampier, Mr Robson travelled to Dampier and met up with Mr Brown. Mr Brown's proposal was to load up Melissa BII with fuel and equipment and then under the boat's own power, travel to Bali. Mr Robson had some concerns about the proposal but accepted Mr Brown's greater experience with vessels.
34 Mr Robson said that the police were against the boat travelling to Bali under its own power as the police did not believe it had sufficient fuel to reach Bali.
35 Mr Robson and Mr Brown departed from Dampier on 2 September 1995 against the advice from the police but soon ascertained that they had insufficient fuel. Mr Robson said that in calculating the amount of fuel, Mr Brown had not taken into account the extra weight of carrying the fuel. In order to reach Bali they arranged a tow from a passing salt tanker.
36 On arrival in Bali the relationship between Mr Robson and Mr Brown deteriorated. Mr Robson denied suggestions that he had been drinking excessively and touting business whilst intoxicated. He stated, if anything it was Mr Brown who was drinking heavily and touting business whilst intoxicated. Further, he described an incident where he and Mr Brown went to Lombok Island to recover a damaged yacht and argued after Mr Robson suggested Mr Brown take advice from the owner of the yacht concerning navigation of the vessel through sand bars.
37 Mr Robson said that he had discussions with Mr Sertorio with a view to Mr Sertorio purchasing Mr Robson's share of the business for $110,000.
38 Mr Sertorio thought that $110,000 was too much. He offered less than this.
39 On 22 September 1995, Mr Robson left Bali and returned to Perth.
40 On returning to Perth he observed an advertisement seeking a further partner in the business.
(Page 8)
41 Mr Robson stated that for some months he did not hear any word from Mr Brown. He tried to call him at various places in Bali.
42 On 11 June 1996 Mr Robson wrote to Mr Brown a letter. Mr Robson stated that he gave this letter to a Mr Bolt who was a friend of Mr Brown, and asked Mr Bolt to deliver the letter to Mr Brown in Bali. According to the evidence of Mr Robson, Mr Bolt had indicated that he knew where Mr Brown could be located.
43 The letter stated as follows:
"Dear Rod:
Hi! I hope you are well and things are going well for you and our operation in Bali. I am writing this letter in order to make contact with you since it has been so long since I last had any word. I also wish to make our business arrangements more secure.
As we both know it was my financial input that allowed the parasailing boat to be built and the business to become operational. I have receipts to verify this money and the $35,000 paid into your account in Perth. I am concerned that it has been 12 months and I have not received any returns for my investment or any correspondence from you regarding our venture and its success or otherwise. My understanding of our agreement as per your newspaper advertisement was that with the money I have invested I hold a half-share in the business and therefore I feel keen to learn some report from you regarding what has been happening and how things are going.
After our difficult trip to Lombok you stated that we couldn't work together. Therefore I feel a true partnership between us is unworkable and hence I now consider the $110,000 which I have invested a loan ($20,000 of which is a bank loan borrowed at high interest). I see the boats as collateral for this loan. Your advertisement stated 'Investment Guaranteed' but the lack of communication from you leaves me concerned about the security of my money. (my emphasis)
Your acknowledgement of this letter and its contents would help to maintain working relations between us. If I do not hear from you in writing within 30 days and begin to receive something in return I feel I have no other option but to take
(Page 9)
- legal action to protect my investment. Of course I would much prefer to see the venture succeed and to start enjoying some regular returns as was guaranteed in your advertisement that attracted my attention. I wish the best for you and our mutual interest.
I hope you appreciate my concerns and understand that I have a right as a half-share owner to expect to be informed and I do not think it's wise to let things go as they have been.
Looking forward to hearing from you within the month and trust that we can come to a reasonable arrangement.
Sincerely,
Kevin Robson"
44 Mr Robson stated that he did not receive any written response to the letter. However, he eventually received a telephone call from Mr Brown about three to four weeks later. Mr Robson's evidence was that Mr Brown stated that everything was falling into place and that Mr Robson would get some funds back shortly.
45 However, Mr Robson did not receive any funds.
46 He subsequently heard that Mr Brown had left Bali with the vessels and was heading back to Karratha.
47 Mr Robson sent a further letter to Mr Brown dated 18 November 1998 which stated as follows:
"Dear Rod,
Once again! Here I am writing to make contact again, two and half years since last time, for your interest copy enclosed. Over that time have only spoken twice, when I've rang you…What's Happening?
I've held off taking legal action because I always thought you would do the right thing by me – apparently not.
Well as you know you owe me $110,000 and cost me a lot more some of which I'm still paying for now, three and half years later. Well as things stand now – unless I receive some sort of
(Page 10)
- repayment and hear from you before the 10th December 1998, it will be legal action.
Hoping to hear from you soon Rod.
Yours faithfully
Kevin Robson"
48 Mr Robson stated that he did not receive any immediate reply to this letter. Accordingly, he arranged a person to make investigations on his behalf as to the whereabouts of the boats and what was happening.
49 Mr Robson said he subsequently received a telephone call from Mr Brown on 16 February 1999 and that he made a note of the conversation almost immediately after the telephone conversation was terminated.
50 Based upon his notes, Mr Robson gave evidence that the conversation with Mr Brown was as follows:
"Mr Brown said to me 'I have just spoken to your friend Marty and if you take legal action you will get nothing – if you wait until July I will pay you'. I asked him 'how much and why hadn't I heard from you'. Mr Brown replied 'I've been away I only use Dampier for my mail. I don't live here anymore. Things are coming together and I'll be able to pay you the lot – hopefully, hopefully. I've been working my butt off but I've had other debts to pay regrettably you, since you were a partner is last on my list even though it's the biggest amount. But if you take legal action, I'll get affidavits from Bali saying your partnership was brought out over there and you were paid out in full and I'll spend the money – it will be your money cause it will come off your debt to get the best solicitors to contact Mardi if you take legal action you'll get nothing. You'll be hearing from'."
51 Mr Robson stated that he heard no further word from Mr Brown and he then contacted his solicitors who subsequently commenced this action. The action was commenced on 17 July 2000.
52 Under cross-examination the plaintiff admitted that under the original agreement the business was to be run by Mr Brown, and he was to be a silent partner.
(Page 11)
53 He agreed that the payment of $110,000 was made by him with no agreement that the money was to be treated as a debt. It was an investment in the partnership.
54 Mr Robson stated that he believed that the partnership had come to an end and that the letter of 11 June 1996 was sent with the intention of finalising the partnership.
55 At the time Mr Robson sent the letter of 11 June 1996, he had not received any legal advice. He felt that he was entitled to reimbursement of the full amount of his investments. He agreed that at that point of time there was no agreement with Mr Brown that he should be repaid the $110,000. It was Mr Robson's assumption that he was entitled to this.
56 Mr Robson agreed that when Mr Brown telephoned him, Mr Robson assumed he had received the letter of 11 June 1996. However, there was nothing in the telephone conversation to confirm that this was so. The terms of the letter were not discussed. He admitted that there was no discussion of the amount of $110,000.
57 Mr Robson could not recall a telephone conversation with Mr Brown in October 1996. He could not recall being told that the Melissa BII had been lost at sea whilst being towed from Bali. He conceded that he later found out that Melissa BII had been lost. Initially he thought that it was possibly in the Montebello Islands.
58 He did not recall Mr Brown telephoning him and saying that the Melissa BII had been recovered and had been towed to Lombok.
59 Mr Robson stated that he regarded that Mr Brown owed him the $110,000 once the partnership had ended. He believed this because in the advertisement that he had initially responded to, the words "investment guaranteed" were contained in the advertisement.
60 He accepted that in the telephone conversation with Mr Brown on 16 February 1999, Mr Brown had not at any stage acknowledged that the amount owed to Mr Robson was $110,000.
61 Mr Robson admitted that he had not previously involved in any partnerships.
62 Mr Graham Peter Sertorio also gave evidence on behalf of the plaintiff. He confirmed in his evidence that he had a conversation with Mr Brown in about July 1995 at a social gathering which led him to
(Page 12)
- express some interest in investing in the business. He indicated to Mr Brown that before he would be prepared to invest in the business, he would need to go to Bali to inspect the business assets.
63 Mr Sertorio was given some projections from Mr Brown as to the income that might be earned from the use of two boats.
64 He was informed that the business needed some additional funds to get a new boat to Bali. He agreed to lend the business $10,000.
65 He then went to Bali and met there Mr Robson and Mr Brown. He formed the opinion immediately that they were not getting along.
66 Mr Sertorio remained in Bali for three to three and a half weeks. During this time work was done on Melissa B.
67 He understood that if he entered the business then he would be a third partner. He also understood that the business would be run on a day to day basis by Mr Brown, and he and Mr Robson would be silent partners.
68 He said that he had a further meeting with Mr Brown in October 1996. A discussion took place about Mr Sertorio buying Mr Robson's share in the business. He says he was provided with a list of assets at that stage which suggested that the value of half the business was approximately $120,000. Mr Brown indicated that Mr Robson might be prepared to accept $80,000.
69 Mr Sertorio said that he was not interested in going ahead with the purchase of a share of the business.
70 Under cross-examination he stated that the $10,000 he lent to the business was collected by Mr Robson. Also Mr Robson signed an acknowledgement of debt on behalf of the partnership.
71 He said that the existence of the acknowledgement of debt document came about following a meeting between Mr Brown, Mr Robson and Mr Sertorio where Mr Sertorio indicated he would require a written acknowledgement of debt document to be signed prior to providing a loan of $10,000.
72 He did not recall ever discussing with Mr Robson a proposal to purchase Mr Robson's interest in the partnership.
(Page 13)
Defendant's evidence
73 The defendant gave evidence of his personal background. He stated that he had spent most of his life working as a "seafarer".
74 He holds a Master's certificate.
75 In about 1993 whilst Mr Brown was in Bali, he reached the conclusion that there was an opportunity to conduct a parasailing business in Bali, using a boat. Up to that point of time, parasailing businesses conducted in Bali were operated from the beach only, which was prohibited in Australia due to the danger of a para-sailor hitting trees and buildings on returning to the beach.
76 Mr Brown met a Ms Lena Kasim, who introduced him to members of the Indonesian army who were responsible for conducting businesses on Kuta Beach. Mr Brown intended that he would establish a parasailing business from Kuta Beach.
77 A kiosk site was selected and arrangements made with the Indonesian army for the business to be established. A fee had to be paid to the Indonesian army for its permission.
78 Mr Brown said he returned to Broome and wound up his fishing business. He sold all of his Australian assets and moved to Bali permanently.
79 At the time he owned a 30 foot Shark Cat vessel, Melissa B, and he was able to convert this to a parasailing vehicle.
80 He stated that on his return to Bali he found that there was a presidential decree that no water sports were to be conducted in Kuta Beach. Any water sport activities were to be conducted from a yacht. Mr Brown stated that he obtained a permit to operate from a different location, Jimbaran Bay in Bali.
81 He entered into a contract with Ms Lena Kasim to operate the business under a marine licence owned by her. She was to receive 7.5 per cent of the net income of the business. A written contract was entered into dated 2 February 1995. The agreement was for five years with an option for a further five years.
82 Mr Brown commenced to operate the parasailing business using Melissa B. However, he soon discovered that the motor was not powerful enough. He formed the view that the business had potential. However, he
(Page 14)
- decided that he should take in a partner to attract investment so as to acquire a more suitable boat for parasailing.
83 He returned to Australia and he placed an advertisement in The West Australian newspaper. He received a few enquiries and eventually received a call from Mr Robson.
84 A meeting was held at Mr Brown's ex-wife's place which was attended by Mr Brown, Mr Robson, Mr Brown's ex-wife and a female companion of Mr Robson. He stated that Mr Robson indicated that he had just returned from a holiday in Bali and was keen to be involved in a business there. Mr Brown said there were a number of meetings over a period of days or weeks.
85 He said that they decided to enter into a partnership, to acquire a new boat and make "a million dollars".
86 It was proposed that Mr Brown would be the managing partner of the business in Bali. Mr Robson was to be an equal partner but a silent partner. Mr Brown stated that it was proposed that Mr Robson would come to Bali about every six months and go through the books and there would be a dividing-up of the profits. It was agreed that they would divide the profits 50/50.
87 He stated that the $110,000 paid by Mr Robson was to be paid as follows: $35,000 to Mr Brown of which $10,000 he would use to pay import tax on the boat being taken to Bali. The balance of the $110,000 (being $75,000) was to be used to acquire a second boat and to cover other expenses.
88 Mr Brown said that arrangements were made for the construction and fitting out of a new boat (Melissa BII). He then returned to Bali but returned to Australia when the boat was ready to be delivered.
89 He stated that at about this time he met Mr Sertorio at a barbeque. Extra funds were needed at that stage in order to complete the setting up of the business. An agreement was entered into whereby Mr Sertorio agreed to lend the business $10,000.
90 Melissa BII was collected and freighted to Dampier. From Dampier the boat was then sailed to Bali by Mr Brown and Mr Robson.
91 Mr Brown gave evidence as to the preparation for the journey to Bali. Sea trials were conducted with drums being filled with water to
(Page 15)
- simulate the weight of carrying the necessary fuel to get to Bali. He stated that the police did not think that it was wise to travel to Bali, but they did not forbid him from doing so. He stated that he departed about 8 pm one evening when the tide was suitable. He had been receiving regular weather reports and believed that there was going to be flat seas, to enable the journey to be completed safely. However, on the first day of the journey they experienced big swells which meant that they did not make as much progress as anticipated. He became concerned that they would run out of fuel and so he arranged a tow from a salt tanker.
92 On arrival in Bali they had to find a suitable area to operate from on a permanent basis. They decided upon Nusa Dua.
93 Mr Brown stated that whilst Mr Robson was in Bali they were requested to tow a boat which had run aground at Lombok. The owner of the boat was an American who started giving advice to Mr Brown as to the dangers of the location of various reefs. Mr Robson had suggested that Mr Brown take the American on the boat to assist with ensuring they made a safe passage back to Bali. Mr Brown stated that he was offended by the suggestion that he needed assistance. He held a Master's Certificate No 4, and had all the relevant charts. He stated that he verbally clashed with Mr Robson and this led to a deterioration in their relationship.
94 Mr Brown stated that most days they would have a drink after work but he would often leave Mr Robson to continue drinking as Mr Brown needed to go to work the next day.
95 He stated that on many occasions Mr Robson became intoxicated, and on one occasion was touting business from tourists. Mr Brown said that he spoke to Mr Robson when Mr Robson was sober warning him that he could not tout for business as he did not hold any visas and that the Indonesians were very sensitive to foreigners engaging in any business activities in Bali.
96 Mr Brown stated that about 10 days after the Lombok incident he became aware that Mr Robson had left Bali. He stated that there had been no discussion concerning altering the partnership arrangements before Mr Robson's departure.
97 Mr Brown stated that after Mr Robson had left Bali, he spoke to Mr Sertorio in a bar in Bali. Mr Sertorio enquired "what would you do if someone said they had purchased Mr Robson's business". Mr Brown said that he indicated to Mr Sertorio that he did not want him in the business.
(Page 16)
98 Mr Brown stated that although he had originally sought investment from Mr Sertorio, he had formed the view that he did not wish to have Mr Sertorio involved in the business.
99 Mr Brown stated that on 29 October 1995 he returned to Perth and met with Mr Robson at the Inglewood Hotel. The meeting was a short meeting, was not productive and Mr Brown left.
100 He stated that he did not have any further contact with Mr Robson until October 1996.
101 Mr Brown said that between September 1995 and October 1996 he devoted his time to establishing the business. He obtained the necessary licences and started operating at the end of October to November 1995. He said that the business initially was very slow. He found that they were poorly located at the end of the beach.
102 He said that in about October 1996 the engine of Melissa BII was sabotaged with the fuel cylinders being filled with water. He suspected this was done by Indonesian water sport companies who were competitors. At the time he did not have any money. Without any money he could not survive in Bali. Up to then he had been borrowing and paying back money on a regular basis. The business had good days but there were also a lot of bad days.
103 He decided to use Melissa B to tow Melissa BII back to Australia and have the boat repaired in Australia.
104 Before leaving Bali, he had received satisfactory weather reports. However, after he left Bali the weather turned bad and he was fighting against high seas. He became extremely exhausted and put the boat into automatic pilot. He woke up at 3 am in the morning to find that the tow had snapped and Melissa BII had disappeared. He searched for the vehicle but was unable to locate it. At this stage his fuel situation with Melissa B became critical. He radioed for assistance and was eventually towed back to Dampier.
105 He was confident that Melissa II would be picked up by Indonesian fishermen as there were plenty of other boats in the area at the time. He contacted an associate in Bali, Mr Haryo Sugito and asked him to make enquiries. He later learned from Mr Haryo Sugito that the boat had been recovered and taken to the eastside of Lombok.
(Page 17)
106 He received a number of faxes from Mr Sugito who indicated that the fishermen who had recovered the boat wanted 15,000,000 rupia for return of the boat. Eventually this was negotiated down to 6,000,000 rupia which was equivalent to A$6,300.
107 Mr Brown said that he could not afford this amount.
108 He stated that he contacted Mr Robson when he first found that the boat had been found. He told Mr Robson that he needed money to collect the boat and that he required $5,000. Mr Robson indicated that he was not interested in contributing any further money.
109 He recalled having a further telephone conversation with Mr Robson when he enquired as to the wellbeing of a friend called Eric. Mr Robson indicated that he had been killed in a car accident.
110 Mr Brown said that he did not receive any further contact from Mr Robson for some time. He then received a letter in an envelope. The letter was dated 18 November 1998 and also had enclosed with it a copy of an earlier letter dated 11 June 1996.
111 Mr Brown stated that both of these letters were received by him after Melissa BII had been found. It was after 1998 as the second letter was dated 18 November 1998.
112 He could not recall how he responded to the letters.
113 He stated that he never agreed that the $110,000 be treated as a loan.
114 He did not recall telephoning Mr Robson on 16 February 1999. He did not recall saying any of the things that Mr Robson had recorded in a note of a telephone conversation on 16 February 1999.
115 The last telephone conversation he recalled was the telephone conversation which concerned Mr Robson's friend Eric, and that conversation was a congenial conversation.
116 He stated that the boats were not insured.
117 Under cross-examination, he stated that the boat Melissa BII had been registered in his name alone and on the advice of his accountant had been transferred after this action had been commenced by Mr Robson into the name of Mr Brown's family trust.
(Page 18)
118 Mr Brown stated that in his view it did not matter what name the boat was registered in. The transfer of the registration to his family trust was done by him simply on the advice of his accountant. He presumed there was some form of tax advantage.
119 He stated that the boat Melissa BII was not recovered until 2004, and by that time had been stripped down to just a hull.
120 He stated that Melissa BII is currently dry docked on a trailer and Melissa B is anchored in water. He said he had paid for substantial refitting of Melissa B himself.
121 He stated that prior to seeking a partner, the business he was operating in Bali had not made a profit but there were indications that once fully established it would be profitable. Just before coming to Perth to seek a partner, he was operating in prime tourist season and during this period, the income exceeded his expenses. He felt he was getting the word out around the hotels about the business and that tourists were becoming interested in his operation.
122 Mr Brown admitted that when Mr Robson entered the partnership, Mr Brown had considerable debts to people in Perth. He owed the sum of $40,000.
123 He admitted that he advertised for a partner, and in the advertisement used the words "investment guaranteed". He stated that he used this expression to mean that the money would be invested in the business. He stated that there were many instances of businesses being set up in Bali where investors were attracted and then the investors' money was used for purposes other than the business. He was not intending to convey the impression that he was providing a guarantee that the money would be returned on the investment.
124 Mr Brown stated that it was made clear to Mr Robson that the initial $35,000 was to be paid to Mr Brown and that the balance was to be used to acquire the second boat.
125 Mr Brown stated that he did not inform Mr Robson that he owed money to a number of debtors as this was a personal matter.
126 Mr Brown stated that it was understood that Mr Robson would come to Bali about every six months (the business would pay his expenses) and he would be given an opportunity to inspect the books and any profit divided equally.
(Page 19)
127 Mr Brown stated that after the creation of the partnership there was no profit earned. The business proved to be a great disappointment, and expenditure generally exceeded income.
128 He denied that there was any serious talk with Mr Sertorio about Mr Sertorio investing in the business.
129 He stated that when Mr Robson left Bali after the argument at Lombok, Mr Brown still believed that they could work through their differences.
130 He stated that when he went to the Inglewood Hotel on 29 October 1995 he went to meet with Mr Robson as he wanted to know what was happening with the partnership. However, he said the discussion did not proceed as Mr Robson's attitude was unfriendly. Mr Brown stated that he could not recall exactly what was discussed.
131 He stated that his understanding of the partnership was that Mr Robson had an entitlement to 50 per cent of the profits and was entitled to 50 per cent of the assets of the business.
132 He denied knowing that Mr Robson wanted to rid himself of the business interest prior to receipt of the letter of 28 November 1998. As far as he was aware, Mr Robson wished to continue with the partnership.
133 He admitted that he had not communicated to Mr Robson all of the difficulties he had experienced in running the business. Nor had he discussed with Mr Robson the decision to leave Bali and to tow the Melissa BII back to Australia. Mr Brown claimed that he did not have the telephone number of Mr Robson.
134 He conceded that he had left some of the business books behind in Bali and had thrown away most of the books brought back with him.
135 He stated that the decision to leave Bali was necessary because it was not practicable to arrange repair of Melissa BII in Bali. He had made some enquiries about bringing a mechanic from Australia to Bali, but this would have been too expensive and he did not have any funds. Also he did not trust the local Balinese fitters in carrying out the repair work.
136 He refuted the suggestion put to him that he accepted that Mr Robson was no longer a partner and that is why he did not consult Mr Robson about his difficulties in Bali.
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137 He did not concede that it was reckless of him to leave Bali towing Melissa BII. He did not agree that his decision to leave Bali was indicative of the fact that he treated the boats as his own and that Mr Robson had already left the partnership.
138 Mr Brown stated that he did not contact Mr Robson immediately he returned to Australia on the occasion he lost Melissa BII in tow as he was exhausted and stressed out by his experience of losing Melissa BII.
139 He disputed that he owed $110,000 to Mr Robson. The only money he owed him was that amount which would be due on winding up the partnership.
140 He denied that he had formed the view that the partnership was ended when Mr Robson left Bali and that he had made attempts to sell Mr Robson's half share to Mr Sertorio.
141 A Mr Bolt was called by the defendant and his evidence was that although he would have been willing to pass correspondence from Mr Robson to Mr Brown, he did not recall if he was given a letter dated 11 June 1996 to deliver to Mr Brown, and whether he delivered any such letter. However he was in Perth in June 1996 and met with Mr Robson. However, his passport showed that he had left Australia on 9 June 1996 before the date of the letter.
Findings
142 I find that both Mr Robson and Mr Brown were naïve business operators with neither having any experience in operating a business in partnership.
143 Neither of them had any understanding of the law relating to the operation of partnerships and, in particular, to the provisions of the Partnership Act concerning entitlements on the dissolution of the partnership.
144 I find Mr Brown is somewhat of a "gung-ho" character who had an inflated opinion of his own seafaring ability and his knowledge of Bali. There is ample evidence of his "gung-ho" attitude from the misadventures in travelling between Bali and Australia in the boats owned by the business. The initial trip to Bali on Melissa BII was undertaken without sufficient fuel and led to the vehicle having to be towed by a salt tanker. When the Melissa BII was being towed back to Australia, this was done by himself, and led to Melissa BII being lost.
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145 Further, I am satisfied that Mr Brown is not an entirely reliable witness. He frequently was unable to recall critical conversations. He stated he did not recall a conversation with Mr Robson on 16 February 1998. I find this conversation took place and the substance of it was as recorded by Mr Robson. The content of this conversation again reveals the "gung-ho" attitude of Mr Brown who, by the nature of his personality, sought to dominate Mr Robson.
146 Mr Robson gave evidence that he suffered from post traumatic stress disorder following service in Vietnam during the Vietnam War. I am satisfied that he was a less outgoing personality and was easily influenced in the initial stages by Mr Brown.
147 These findings as to the experience and personalities of the parties is relevant, in my view, to understanding the nature of their relationship as partners and the agreement they entered into.
148 I find that prior to the partnership, Mr Brown had operated a business in Bali for a period of about nine months using Melissa B.
149 The business had not been profitable over this period except for a short period immediately prior to him travelling to Australia in September 1995 when he had experienced a surge of business which he believed indicated the business had potential.
150 Prior to the formation of the partnership Mr Brown had been operating the business using Melissa B. He formed the view that the boat was not powerful enough to operate a parasailing business and that he should acquire a new boat more powerful. To do this he needed to attract capital. He decided the best way to do this was to attract a partner.
151 The business proposed would include the Melissa B which would provide rides in a boom-net and a new boat (Melissa BII) which was to provide parasailing.
152 I am satisfied that Mr Brown believed that the proposed business would have an advantage over local operators who operated from the beaches. Operating from the beach created a danger to customers because para-sailors returning to the beach might collide with objects on the beach.
153 I am satisfied Mr Brown was genuinely optimistic about the prospects of the business. However, he had not prepared a business plan and was over-confident in his understanding of operating a business in
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- Bali. He also ignored the fact that over the period he had been operating the business, he had failed to make any profit.
154 The advertisement placed in the newspaper in Australia reflected Mr Brown's undue optimism and gung-ho attitude. I am satisfied that the expression "investment guaranteed" was meant to convey that the business would be successful and was a reliable investment.
155 I do not accept the evidence of Mr Brown that it was meant to convey that all of the money would be injected into the business. This in fact was not the agreement reached with Mr Brown and Mr Robson as a portion of the initial $35,000 was to go to Mr Brown.
156 Further, I do not accept that it was meant that Mr Brown was providing a personal guarantee of return of the money invested. I am satisfied Mr Robson knew that the business was a new business expanding with the operation of a new boat. I conclude that he was not really interested in the past performance of the business. He did not seek any books to prove past profitability. He made his judgment that the business would be profitable based upon calculations Mr Brown presented of potential earnings. These calculations were unsupported by any past performance figures or any other documentation.
157 The partnership was established without a formal written agreement.
158 I find that the terms of the oral agreement were that –
(a) Mr Robson would pay $110,000;
(b) This money would be allocated as follows:
(i) $35,000 to Mr Brown. He was to use $10,000 to cover import tax on a new boat. The balance was to be retained by him.
(ii) The balance was to be paid for the purchase of Melissa BII and cover the expenses of the business.
(c) By investing in the business Mr Robson acquired –
(i) A 50 per cent share in all assets of the business;
(ii) A right to participate equally in the profit and loss of the business.
(d) The business was to be conducted in Bali by Mr Brown. Mr Robson was to be a silent partner and was to visit Bali about once every six months (at the partnership's expense).
- On such visits he was to inspect the books and there was to be a dividing of any profit.
159 I find that naively there was no agreement as to the form of bookwork, the use of an accountant, the formalisation of the partnership by written agreement, and insurance arrangements on the main assets of the business (the two boats). Further, there was no understanding reached as to the frequency or mode of communications whilst Mr Brown was in Bali and Mr Robson was in Australia.
160 I am satisfied that Mr Robson, influenced by Mr Brown's optimism, blindly agreed to invest in the business without taking proper precautions.
161 The precarious nature of the venture is somewhat demonstrated by the fact that an approach was made to Mr Sertorio before Mr Robson travelled to Bali because the business was already short of funds and needed additional capital in order to complete the transfer of the new boat to Bali.
162 I find that almost immediately the partnership was formed there was tension between the parties.
163 I find that by 4 August 1995 when Mr Robson returned to Perth after participating in the delivery of Melissa BII to Bali, the parties were barely on talking terms, but neither party had indicated he wanted the partnership terminated.
164 I find that by June 1996, Mr Robson was sufficiently concerned about the partnership to write the letter dated 11 June 1996.
165 I find that at the time when Mr Robson wrote the letter dated 11 June 1996, he had not received any progress report from Mr Brown, nor any funds and decided he wanted to terminate the partnership. He took the view that on termination of the partnership he was entitled to the return of the $110,000 he had invested. However, I find that there was no entitlement at that stage by Mr Robson to demand payment of the $110,000, even if the partnership had been terminated. It is not the pleaded case of Mr Robson that he was entitled to $110,000 as a result of the form of the advertisement contained in the newspaper with the words "investment guaranteed".
166 I am satisfied the letter dated 11 June 1996 was received by Mr Brown within 3 to 4 weeks of the date of the letter (that is by about 1 July 1996). I reach this conclusion because I accept the evidence of Mr Robson that Mr Brown telephoned him three to four weeks later and
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- stated something to the effect that Mr Robson could expect some return on his money soon. I believe that given the lack of communication between the parties, this telephone call is too coincidental to the alleged sending of the letter not to be in response to the letter. I am satisfied that Mr Bolt was the person who conveyed the letter to Mr Brown and conclude that Mr Bolt was given the letter shortly before he left Perth on 9 June 1996 but the letter was incorrectly dated 11 June 1996.
167 I find that the letter dated 11 June 1996 by its terms terminated the partnership. The letter clearly states that "a true partnership is unworkable and hence I now consider the $110,000 which I invested a loan".
168 The evidence of Mr Robson was that he intended this letter to terminate the partnership. I am satisfied that by its terms, it was sufficiently clear that Mr Robson considered the partnership at an end and no longer wished to continue with the venture.
169 I find that the conduct of Mr Brown after this date was consistent with both parties treating the partnership at an end.
170 I find that in October 1996 due to Melissa BII being sabotaged, Mr Brown decided to tow Melissa BII back to Australia to have it refitted. I find that as a result of the reckless attitude of Mr Brown, Melissa BII was lost at sea. I find that the decision to tow Melissa BII back to Australia was made by Mr Brown alone, without consulting with Mr Robson, because Mr Brown accepted the partnership was at an end and the partnership interest of Mr Robson had been converted to a debt.
171 I do not accept Mr Brown's evidence that he telephoned Mr Robson after Melissa BII had been located, and asked him for an additional contribution to have Melissa BII released. Mr Robson denied such conversation. I conclude that if Mr Brown had asked for more funds Mr Robson would have recalled this conversation.
172 I find that in or about late 1998, Mr Brown received a letter from Mr Robson dated 18 November 1998 which also enclosed a copy of the earlier letter from Mr Robson dated 11 June 1996.
173 In the letter of 18 November 1998, Mr Robson purported to demand payment of the $110,000. I find that Mr Robson had naively assumed that he was entitled to convert his interest in the partnership to a demand of repayment of his initial investment of $110,000.
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174 I find that Mr Brown telephoned Mr Robson on 16 February 1999 and the conversation was substantially as recorded by Mr Robson. I find that in this telephone conversation Mr Brown in effect acknowledged that the partnership was at an end and that he owed money to Mr Robson. However, I find that there was no agreement nor acknowledgment as to the amount owed by Mr Brown to Mr Robson on the winding up of the partnership.
175 I find that sometime after commencement of this action Mr Brown further acknowledged that the partnership was at an end by transferring the Melissa BII into the name of his family trust. He was accordingly treating the asset of the partnership as if it had belonged to him alone. Although he claimed to be acting on the advice of his accountant, I find that he must have understood that the transfer of the vessel into the name of his family trust was for his own taxation benefit and he was treating the asset as belonging to him.
Provisions of the partnership
176 The rights of the parties need to be considered in light of the provisions of the Partnership Act 1895.
177 The relevant provisions of the Partnership Act are s 33, s 37, s 43 and s 46(g). These sections provide as follows:
"33. Meaning of 'partner's share'
The share of a partner in the partnership property at any time is the proportion of the then existing partnership assets to which he would be entitled if the whole were realised and converted into money, and after all the then existing debts and liabilities of the firm had been discharged.
…
37. Retirement from partnership at will
(1) Where no fixed term has been agreed upon for the duration of the partnership, any partner may determine the partnership at any time on giving notice in writing of his intention so to do to all the other partners.
- (2) Where the partnership has originally been constituted by a deed, a notice in writing, signed by the partner giving it, shall be sufficient for this purpose.
- …
43. Dissolution by expiration of notice
Subject to any agreement between the partners, a partnership is dissolved -
(a) if entered into for a fixed term, by the expiration of that term;
(b) if entered into for a single adventure or undertaking, by the termination of that adventure or undertaking;
(c) if entered into for an undefined time, by any partner giving notice in writing to the other or others of his intention to dissolve the partnership.
In the last mentioned case the partnership is dissolved as from the date mentioned in the notice as the date of dissolution, or, if no date is so mentioned, as from the date of the communication of the notice.
- 46 On application by a partner the Court may decree a dissolution of the partnership in any of the following cases:
…
(g) whenever in any case whatever circumstances have arisen which, in the opinion of the court, render it just and equitable that the partnership be dissolved."
178 I conclude that at no time was there an agreement between Mr Robson and Mr Brown that Mr Robson's interest in the partnership was to be converted to a debt owed by Mr Brown to Mr Robson in the sum of $110,000.
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179 I find that either the partnership was terminated by the letter of 11 June 1996 which was received on or about 1 July 1996. Alternatively, if the partnership was not terminated by this letter, then an order ought to be made retrospectively pursuant to s 46(g) of the Partnership Act that the partnership be dissolved and that this dissolution of partnership be retrospective as from 1 July 1996. The power to make a retrospective order was recognised in the decision of Cutts v Holland (1965) Tas SR 69
180 Accordingly, I dismiss the plaintiff's claim for the sum of $110,000 but will make an order retrospectively dissolving the partnership as at 1 July 1996. I will hear counsel as to what further orders are required to put in effect the dissolution. These orders should include an account by Mr Brown as to the value of the partnership assets as at 1 July 1996 held by him. This may equate to $110,000 given that at the time Melissa BII was fully operational but this cannot be ascertained until a proper account is taken or the value of the assets as at that date are agreed between the parties.
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