Sheehan v Zaszlos

[1994] QCA 145

IN THE COURT OF APPEAL	[1994] QCA 145
SUPREME COURT OF QUEENSLAND	Appeal No. 130 of 1993
Brisbane
Before	Macrossan C.J. Davies J.A. Pincus J.A.

[Sheehan v. Zaszlos]

BETWEEN:

DONALD JOHN SHEEHAN and

KATHLEEN ANNE SHEEHAN

(Plaintiffs) Appellants

AND:

ALEX ZASZLOS and LOLITA ZASZLOS

(Defendants) Respondents

REASONS FOR JUDGMENT - THE COURT

Judgment delivered 13/05/1994

This is an appeal from a refusal to declare that the parties to the action were partners. The sole question in this appeal is whether a partnership agreement came into existence between the parties. If it did, it is common ground that the appellants are entitled to judgment for $32,227.53 and costs, this being a one-half share of the net profit from a venture said to have been the subject of the partnership.

Whether there was an agreement for a partnership between the parties depends on the correct inferences to be drawn from the evidence of the male appellant, the evidence of Wayne Robert Jones, an officer of Esanda Finance, and some other evidence of conduct by the male appellant and the male respondent. It was conceded by the respondent before this Court that, the learned trial judge having accepted the appellant's version of events in preference to that of the respondent, the respondent's evidence may be disregarded.

Counsel for the respondent did not question his Honour's findings in this respect.

Notwithstanding his acceptance of the evidence of the male appellant, the learned trial judge dismissed the appellants' claim for a declaration that a partnership agreement existed between the parties because his Honour said that the proper inference from this evidence was that it was the intention of the parties that there should not be any binding partnership agreement between them unless and until a written agreement was completed. There being no such written agreement, his Honour concluded that no final agreement was reached and dismissed the appellants' claim for a declaration that such an agreement existed.

It appears from his reasons for judgment that the learned trial judge reached his conclusion primarily the basis of a short passage in the appellant's evidence. That passage is in the following terms:

"What did you discuss on that occasion?-- We discussed that we would have to have something in writing between us. Alec's agreed to all of that.

Was that discussed again?-- Yes, it was discussed numerous times.

Why was the writing discussed?-- Well, we needed some agreement that in the event of one partner being deceased, either one of us could for that matter, that we needed something in writing.

Had you already discussed that?-- Yes. That was discussed the first day that our agreement was started.

When you say your agreement was started, in terms of writing when you discussed these things with Mr Zaszlos, what part did writing play in your discussions?-- Well, it was part of our agreement as far as I was concerned.

What do you mean 'part of our agreement'?-- Well, I just wouldn't go into any form of agreement without something in writing. Even though we agreed to go ahead and build a building, it was always discussed it would be in writing, our partnership.

Well, when you say that it would be in writing, what agreement had you reached by that stage?-- The agreement we reached? Well, when we first discussed it under the pandanus tree in Elkhorn Avenue I sat and talked with Alec about it and I said the pitfalls of partnership deals and there was sometimes a problem with language with Alec but on rare occasions and I said that, you know, when you start to bring women into these things - I mightn't shouldn't be saying this sort of thing, I suppose - but all these things can cause a problem and somebody starts to argue. So our agreement then was we would put this to writing in due course.

Now, at a later point in time did the question of writing come up again?-- It was discussed a number of times.

Well, did writing come about?-- Yes, it eventually did, yes. We went ahead and got the building underway and then I suggested to Alec that we get a contract drawn up as we mentioned before and I suggested I get my solicitor to do it. He agreed to that and in due course I got a solicitor------

Before that stage, Mr Sheehan, did you and he discuss whether you should or shouldn't together do something about the agreement?-- We always said that there was to be an agreement. That was always part of our discussions.

HIS HONOUR: You mean a written agreement?-- Yes.

MR SAMIOS: If I could just draw your attention to an occasion, Mr Sheehan. You said that there was discussions. If there was never any agreement entered into in writing, Mr Sheehan, what was the position with what you had discussed with Mr - between you and Mr Zaszlos before that point?--

We were in a partnership agreement to build a building at 3 Hibiscus Haven, Burleigh Heads, and other work as well. We'd already discussed other work down the track. We'd already been involved in getting started on quotes on three other buildings.

Well, if an agreement in writing was never produced did you still have an agreement?-- Of course.

And what agreement did you have without the writing?-- The agreement was that we were going to go in a partnership deal 50-50, half share of the profits and losses of course."

His Honour thought that the evidence in this passage was inconsistent. In particular, his Honour thought that the passage in which the appellant said that he would not go into any form of partnership agreement without something in writing was inconsistent with the passage in which he said that even without a written agreement there was a partnership arrangement in which the partners would share equally in profits or losses. We do not share his Honour's view that there is any inconsistency in the passage which we have set out.

The first of the statements to which his Honour referred must be read in the context of the balance of the answer to the question to which it responded and of the appellant's evidence as a whole. In the first place, the statement was not a statement of what was said by the appellant to the respondent, but merely of his subjective view. Secondly, and more importantly, when read with the following sentence, it is not a statement that the appellant would not make an agreement without there first being something in writing, but rather that he would no go into an agreement without there being something in writing at some stage. The following sentence makes is clear that he and the respondent agreed to go ahead to build the building but that a partnership agreement would later be drawn up. His answer to the following question, "So our agreement then was we would put this in writing in due course", confirms this.

The whole tenor of the passage quoted is that there was then an agreement between the parties to build in partnership a building on the respondent's land but that a partnership agreement would later be drawn up to formalise their relationship for that and future ventures.

The terms of the agreement between the parties were stated in some detail in earlier evidence of the appellant. It is not necessary for us to set those out here for it was conceded by counsel for the respondent that there was no essential term which was not agreed to.

The appellants' evidence is supported by evidence of the conduct of the parties after the date upon which the appellant said the agreement was made, which is more consistent than not with the existence of an agreement such as that which the appellant asserted. The parties opened a joint bank account into which each paid the sum of $100.

Although the male appellant paid to a draftsman the cost of drawing the plan for the building to be built and paid the Council's fees, the male respondent paid the male appellant $706.50 being one-half of that sum. A joint application for finance was made to and granted by Esanda Finance. The respondent later told Mr Jones that he "no longer wanted Don Sheehan in the deal and he required the borrowings to be done in his wife's and his name only". The appellant and his son, as well as the respondent, performed work in the site. Once his Honour had rejected, as he did, the respondent's evidence that the appellant went on to the site as an employee only, it is difficult otherwise than by reference to such an agreement to explain why he and his son were there working on the site with the respondent. All of this evidence, as we have said, is more consistent than not with the existence of a partnership agreement.

We cannot therefore agree with his Honour's conclusion that what took place comes within the third class of case referred to in Masters v. Cameron (1954) 91 C.L.R. 353 at 360, namely one in which the intention of the parties is not to make a concluded bargain at all unless and until they execute a formal contract. On the contrary, we think that the case comes within the first class of case discussed in Masters, namely one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect.

The respondent sought to call in aid of his Honour's conclusion a line of New Zealand cases which appear to hold that in commercial contracts or contracts for the sale and purchase of land for commercial purposes, where the parties contemplate the execution of a formal contract, the "natural inference" is that the parties are not to be bound until at least the contract has been formally executed on each side: Carruthers v. Whitaker (1975) 2 N.S.W.L.R. 667; Concord Enterprises v. Anthony Motors (Hutt) Ltd (1981) 2 N.Z.L.R. 384; Shell Oil v. Wordcom Investments (1992) 1 N.Z.L.R. 129.

No doubt where parties intend to contract in accordance with a common practice it may be readily inferred that they did not contemplate the coming into existence of a binding contract except in accordance with that practice. See Eccles v. Bryant (1948) 1 Ch. 93; Bridle Estates Pty Ltd v. Myer Realty Pty Ltd (1977) 51 A.L.J.R. 743; Sindel v. Georgiou (1984) 58 A.L.J.R. 515. But in the absence of such common practice we think that any such "natural inference" is inconsistent with the view expressed in Masters that the question in which of the three classes there identified a case will fall "depends on the intention disclosed by the language the parties have employed" (at 362); to which we would add "or inferred from their conduct".

For the reasons which we have given, the appeal should be allowed. The appellants should have judgment for $32,227.53 and costs and should have the costs of this appeal.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND	Appeal No. 130 of 1993
Brisbane [Sheehan v. Zaszlos]
BETWEEN:

DONALD JOHN SHEEHAN and

KATHLEEN ANNE SHEEHAN

(Plaintiffs) Appellants

AND:

ALEX ZASZLOS and LOLITA ZASZLOS

(Defendants) Respondents

____________________________________________________________

_____

MACROSSAN C.J.

DAVIES J.A. PINCUS J.A.

____________________________________________________________

_____

Judgment delivered 13/05/1994

REASONS FOR JUDGMENT - THE COURT
____________________________________________________________

_____

APPEAL ALLOWED. JUDGMENT FOR THE APPELLANTS IN THE SUM OF
$32,227.53 AND COSTS, WITH COSTS OF THE APPEAL.
____________________________________________________________
_____

CATCHWORDS: PARTNERSHIP - AGREEMENT FOR PARTNERSHIP - whether parties intended to be immediately bound by terms agreed in oral negotiations to be stated subsequently in written agreement - Masters v. Cameron - whether in absence of common practice inference of intention to be bound only upon execution of formal agreement may be inferred from the nature of the agreement.

Counsel:	N. Samios for the Appellants
Advocate:	W.T. McMillan for the Respondents

Solicitors: Conroy & Associates t/a for McDonald & Co.

for the Appellants
Lees Marshall & Warnick t/a for Garrick & Co.
for the Respondents

Date(s) of Hearing:17 February 1994