Vignogna v Vignogna
[2011] VCC 1220
•27 June 2011
| IN THE COUNTY COURT OF VICTORIA | Revised |
Not Restricted
AT MELBOURNE
CIVIL DIVISION
COMMERCIAL LIST
GENERAL DIVISION
Case No. CI-10-03193
| JESSICA ANNE VIGNOGNA | Plaintiff |
| v | |
| ANTHONY JAMES VIGNOGNA | First Defendant |
| and | |
| DANIEL JOHN VIGNOGNA | Second Defendant |
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| JUDGE: | HIS HONOUR JUDGE SHELTON |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 7 - 11 March 2011 |
| DATE OF JUDGMENT: | 27 June 2011 |
| CASE MAY BE CITED AS: | Vignogna v Vignogna |
| MEDIUM NEUTRAL CITATION: | [2011] VCC 1220 |
REASONS FOR JUDGMENT
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Catchwords: Determination of preliminary questions pursuant to Rule 47.04 of the County Court Civil Procedure Rules 2008 – is there a partnership? – Sections 5 and 6 of Partnership Act 1958.
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P Montgomery | Aitken Partners |
| For the Defendants | In person | |
| HIS HONOUR: |
1 This is a sad case. It concerns a partnership dispute in which the plaintiff is suing her two brothers. In addition, their mother has an intervention order against both defendants.
2 In her Statement of Claim, the plaintiff pleads that from on or about 1 December 2008, she and the defendants commenced to carry on in partnership the business of Digital Security Systems (“DSS”). Its business was the sale and installation of home and commercial alarms, subsequent monitoring services for such alarms and CCT cameras (“the business”). The plaintiff claims that the defendants were in partnership in DSS with her and are therefore liable with her for the debts of DSS. She further alleges that the defendants, from about September 2009, were carrying on a similar business to DSS under the name Digital Security Monitoring (“DSM”), using the partnership assets and resources of DSS to conduct this business, with some of DSS’ customers as DSM’ customers, and competing with DSS. The defendants deny that they were in partnership with the plaintiff and assert that DSM is a different type of business to DSS and that there is no conflict between the two businesses.
3 On 9 February 2011, his Honour Judge Anderson, pursuant to Rule 47.04 of the County Court Civil Procedure Rules 2008, ordered that the following questions be determined as preliminary questions:
“a Whether the parties carried on a partnership under the name
Digital Security Systems from about mid-December 2008;b What were the terms of any such partnership; c
Was any partnership business conducted anytime after December 2008 at 21 Dickson Street, Sunshine or 51 Strezlecki Avenue, Sunshine West;
d Was the partnership terminated in or about late March or early
April 2010;e
Have the defendants conducted or been involved in a business known as Digital Security Monitoring since 14 September 2009 at 21 Dickson Street, Sunshine or 51 Strezlecki Avenue, Sunshine West or elsewhere with Ms Daniela Maria Mengato or any other person.”
Background
4 The parties’ father, Giovanni Vignogna (“the father”), is now aged fifty-eight. He and his wife, Katrina (“Katrina”), from whom he separated in 1991 and from whom he is now divorced, had three children, the second defendant, born in 1978, the plaintiff, born in 1981 and the first defendant, born in 1983. It is not in issue that the father was operating a security business from the early 1980s and in 1982, registered the business name “Digital Security Systems” with himself as the sole proprietor. For several years prior to 2005, the second defendant had been working for his father in DSS. They had a dispute then over the second defendant’s remuneration. The second defendant ceased working for his father and from then there was a very strained relationship between both defendants and their father. So deep was their rift that the defendants refused to attend the father’s mother’s funeral in 2006 despite entreaties to them to do so.
5 On 2 October 2008, the father had a heart attack, which hospitalised him for nine weeks. Part of the time he was in a coma. The plaintiff was appointed by the Victorian Civil and Administrative Tribunal as administrator of his financial affairs. The father states that when he came out of the coma he was advised by treating doctors to retire from DSS. Neither defendant visited him in hospital. Despite this, the father stated that he told the plaintiff while in hospital that he had always intended to leave the business to his three children in equal shares to be determined by them, and asked her to discuss this proposal with the defendants. He did not himself discuss this proposal with the defendants. He stated that the plaintiff told him that she discussed this proposal with the two defendants and they had agreed that the three of them would operate the business together in partnership.
6 The plaintiff stated that when she contacted the defendants seeking their help to run the business while the father was hospitalised, they told her that they would only do so if they were partners in the business. She stated that they would take a salary from the business after a year or so, but that as she would only be doing fairly minimal work she would not be seeking a salary. She stated that during 2009 the first defendant, who was a good salesman, successfully built up the business.
7 The first defendant stated that he was never in partnership with the plaintiff, and at all times was only helping her out.
8 The second defendant, too, stated that he was only assisting the plaintiff in the business and that, somewhat reluctantly. He too stated that he was never in partnership with the plaintiff.
9 The father stated that he envisaged that the plaintiff would be the bookkeeper and administrator on a part-time basis since she was working as a law clerk, that the first defendant would be the salesman, and that the second defendant would be the installer, given his past experience. Telephone rebates, which were considerable, were still to be paid to him. The business was to continue to be carried on from premises at 21 Dickson Street, Sunshine, a property which he leased. Lease payments were to be made from the business. The father stated that in December 2008, he signed the appropriate form transferring the business name to the plaintiff. He would have been happy to transfer the business name to the plaintiff and the defendants except that he was told by the plaintiff that his sons did not want their names registered as proprietors of the business. The father stated that he understood this was because the defendants had some involvement with the police in the past. The plaintiff, too, stated that her brothers did not want their names registered as proprietors of the business on account of their prior involvement with the police. The defendants stated that their involvement with the police in the past was minimal.
10 Unfortunately, nothing was reduced to writing with respect to the alleged partnership between the plaintiff and the defendants.
11 The father stated that during 2009 he used to spend about ten hours a week at 21 Dickson Street assisting in the business. He did not receive any remuneration but, as mentioned, received telephone rebates.
12 In January 2010, the defendants caused the payment of telephone rebates to the father to cease. The father stated that he pressured the defendants by threatening them that they would have to vacate the premises if they did not pay the rebate. In response, the defendants, in early February 2010, transferred the business overnight from 21 Dickson Street to 51 Strezlecki Avenue, Sunshine West, a property owned by Katrina and the first defendant. To further complicate matters, the father stated that the equipment moved to 51 Strezlecki Avenue belonged to him.
13 The father stated that at the time of his heart attack on 2 October 2008, DSS was carrying out monitoring services for approximately three hundred and twenty customers. A computer printout from that time shows that DSS had 10,376 present and past customers.
14 The father stated that in the past four months he had made twenty or thirty telephone calls to DSM, which had been answered by Daniela Mengato, the second defendant’s estranged wife. He expressed the view that the business was of a technical nature and that Mengato could not operate it upon her own and that it needed someone like Daniel and Anthony, who were experienced in the technical side of the business.
Discussion
15 The first four of the five preliminary questions I am required to answer are concerned with whether there was a partnership carried on under the name DSS. Section 5(1) of the Partnership Act 1958 defines “partnership” as:
“The relation which exists between persons carrying on a business in
common with a view of profit … .”
I also note the provisions of s.6 of that Act.
16 In the absence of a written partnership agreement or similar document, however basic, it is necessary to consider what was said and done by those involved with the alleged partnership and then determine whether the plaintiff has satisfied me, on the balance of probabilities, that a partnership existed between the plaintiff and the defendants, which carried on the business under the name DSS.
17 I turn to consider credit issues. The first defendant conceded that he allowed Joseph Jukic, who described himself as a security consultant with DSS, to send a letter to FoodWorks, Ascot Vale, dated 22 March 2010 which stated that DSS was monitoring “over 4000 commercial and residential premises Australia-wide”, which he knew to be untrue.
18 So far as the second defendant is concerned, the plaintiff produced an undated letter signed by the second defendant which it appears was forwarded to DSS’ customers in about March or April of 2010. The plaintiff stated that this notice accompanied many cheques forwarded to DSS in payment of accounts. The notice was on DSS’ letterhead and indicated that DSS had changed its bank account details. The account name was given as Digital Security and a BSB and account number were given. It also notified a change of address to 51 Strezlecki Avenue.
19 The Commonwealth Bank of Australia records show that the new account was in fact not in the name just of Digital Security but of Daniela Maria Mengato, trading as Digital Security Monitoring. She registered this business name in her name on 14 September 2009. Mengato was the wife of the second defendant from whom he subsequently separated.
20 The second defendant stated that his signature had been electronically transposed onto the notice without his knowledge. I cannot accept this explanation given that the effect of the notice was to divert funds from DSS to DSM. This explanation and behaviour of the second defendant causes me to doubt his credibility as a witness.
21 Further, the second defendant conceded that in February 2006 he pleaded guilty at Sunshine Magistrates’ Court to a charge of shop theft. He was discharged without conviction on a twelve-month good-behaviour bond.
22 The plaintiff struck me as a witness who was endeavouring to tell the truth and, in my view, she was not shaken in cross-examination.
23 In general, where there is a conflict, I prefer the evidence of the plaintiff to that of the defendants.
24 I am satisfied in all the circumstances that there was a partnership between the plaintiff and the defendants carried on under the DSS name from about mid-December 2008 until about late March or early April 2010. In reaching this conclusion, I rely on the following matters:
(i)
Both defendants conceded that from late 2008 until March 2010, they worked long hours for DSS without receiving any remuneration. There is no evidence that they sought to be paid a salary. This is hardly the conduct of an employee, particularly given that the second defendant stated that his brother’s and his relationship with the plaintiff was not particularly close. I also note that two employees of the company, Joseph Jukic and Jason Tesopoulos, were paid salaries;
(ii)
The second defendant agreed that the defendants personally paid debts of DSS throughout 2009. For example, the defendants paid Central Security Distribution the sum of $21,000. The second defendant stated they did so “because I had a personal relationship with these people, and I cannot tell people to their face that I am not going to pay them for parts supplied to my sister”. Such an action is not that of an employee, however. Further, he had not previously been a proprietor of DSS. In addition, there was evidence before me that the first defendant and his girlfriend used their credit cards to pay company debts and that the second defendant’s wife paid debts of the business;
(iii)
The defendants’ mother, Katrina, who did some monitoring work for DSS during 2009, stated in evidence that from her observations, the defendants were the owners of DSS, not just employees;
(iv)
The plaintiff stated that she was unaware that the defendants had moved the DSS business overnight from 21 Dickson Street to 51 Strezlecki Avenue until the defendants told her. Again, this is consistent with the defendants being proprietors of the business rather than just employees;
(v)
The plaintiff stated that she was never provided with a key to 51 Strezlecki Avenue. The defendants stated that she had unlimited access to 51 Strezlecki Avenue. For reasons indicated above, I prefer the plaintiff’s evidence to that of the defendants;
(vi)
The plaintiff stated that on occasions, customers paid in cash and that the defendants would appropriate these monies themselves without forwarding them to her for payment into the DSS bank account. The first defendant disagreed with this. I prefer the evidence of the plaintiff on this issue.
(vii)
The instruction to customers of DSS to make payment to a different bank account is that of a proprietor rather than an employee;
(viii)
By an application dated 18 March 2009, the father transferred the landlines at 21 Dickson Street from DSS to the first plaintiff and Katrina, trading as Vigz Brothers Industries;
(ix)
Mortgage payments for the property at 44 Mayne Street, Sunshine, owned by the first defendant, were paid throughout 2009 by DSS;
(x)
Renovations at 51 Dickson Street were arranged by the defendants. They stated that they assisted the workmen on the site. They also paid the workmen personally and then sought reimbursement from the plaintiff. The plaintiff stated that it was the defendants who decided to carry out the renovations. The plaintiff stated that on 6 July 2009, she withdrew $25,000 from the DSS account and paid it to the first defendant’s girlfriend to reimburse her for moneys spent on the renovation works;
(xi)
The plaintiff stated that the defendants would contact her daily, sometimes up to ten times a day, enquiring as to the balance of the DSS bank account;
(xii)
The defendants instructed the plaintiff not to pay the father’s mobile phone account from DSS funds;
(xiii)
In about mid-2010, when the relationship between the plaintiff and the defendants had completely broken down and DSS had really ceased operating, the second defendant stated that he performed between six and eight installations where a deposit had been paid to DSS. The second defendant stated that he and the first defendant purchased supplies so that these installations could be completed;
(xiv)
The second defendant stated that he used a van owned by his wife in the DSS business during 2009.
All these matters indicate, in my view, that the defendants were not just employees of DSS and were not just assisting the plaintiff, but rather that they were partners in the business of DSS with her.
25 There are some factors which suggest that perhaps there was not a partnership between the plaintiff and the defendants:
(i)
The business name, DSS, was registered in the sole name of the plaintiff. As mentioned, the plaintiff and the father stated that the defendants did not wish the business to be registered in their names. In any event, the formality of registration of the business name is not so important, in my view, as what occurred in the day-to-day operation of the DSS business;
(ii)
Given the bitter relationship between the father and the defendants, it was quite surprising that the father wished to give the defendants a share in the DSS business, particularly since there is no evidence of a reconciliation between the plaintiff and the defendants;
(iii)
As mentioned, there was a poor relationship between the plaintiff and the defendants, and the second defendant stated that he was barely talking to the plaintiff at the time the father was in hospital.
(iv)
The plaintiff was a sole signatory on the DSS bank account. This can be readily explained by the fact that the plaintiff was the sole proprietor of the business named DSS;
(v)
A Security Services Unit Checklist Business Registration application dated 1 October 2009 signed by the plaintiff states that she is the sole proprietor of the trading name DSS and that she is a sole trader. The plaintiff stated that the application was filled out by the second defendant and, again, is consistent with her being the sole registered proprietor of the business name DSS;
(vi)
The second defendant produced a letter on DSS’ letterhead dated 20 February 2009 and signed by the father. It is addressed to “Dear Valued Customer” and states:
“As many of you know by now I have been in hospital for a very serious health problem. Whilst I was in recovery I transferred ownership of Digital Security Systems to my daughter Jessica. It has been with her help that you have been still receiving the service you would expect.
Jessica has taken over the family business and I would expect her to provide you with the level of security that I provided you with over all these years ... this 30-year-old family business can continue under my daughter for many years to come.”
The plaintiff stated that she had never seen this letter before it was produced to her under cross-examination. The second defendant had stated that he found this circular letter with some papers under the house at 44 Mayne Street. The father stated “I don’t believe that I actually did this letter at all because I had no way of actually seeing a computer screen”. There was no evidence before me that this circular letter had been received by any customers of DSS.
All these matters need to be looked at in the context of the defendants’ close involvement in the day-to-day operation of the DSS business.
26 Taking all of the above matters into account, I am satisfied that the parties did carry on a partnership under the name DSS from about mid-December 2008.
27 Turning to question (b), as to the terms of the partnership, Mr Montgomery submitted that there had been no agreement as to the respective shares of the three partners in DSS and that this was to be determined when they saw how the business prospered. The plaintiff was to do administration and bookwork of the business, the first defendant sales and the second defendant installation and technical aspects of the business. The plaintiff’s share in the partnership would be less than that of the two defendants. The income of the business was to be paid into the DSS account with the Commonwealth Bank of Australia and the plaintiff was to pay the debts of the DSS business from that account. The defendants were to be reimbursed monies they expended on behalf of DSS. DSS was to allow the father to continue receiving telephone rebates and to pay his mobile telephone account. The plaintiff accepted that DSS was to continue to make mortgage payments on 44 Mayne Street, owned by the first defendant. The business was to be conducted at 21 Dickson Street and the business was to pay the rent on this property and subsequently, the business was conducted from 51 Strezlecki Avenue.
28 There was really no issue before me that if there were a partnership between the plaintiff and the defendants, that the above were terms of the partnership.
29 As to Question (c), there was no issue that the DSM business was conducted after December 2008 at 21 Dickson Street, Sunshine until early January 2010 when it was transferred to 51 Strezlecki Avenue, Sunshine West, where it was conducted until about March 2010.
30 As to Question (d), it appears clear that the partnership was terminated in about late March or early April 2010. Firstly, neither the plaintiff nor the defendants nor DSS had the requisite security licence to continue working in the business. It seems there was some confusion about the lodging of an application for licences. At about this time the police were investigating the fact that DSS was operating without appropriate licences, and charges were laid. Secondly, at about this time the plaintiff and the defendants were in dispute in relation to the parlous financial state of DSS. The plaintiff stated, and I accept her evidence, that in late March 2010, she was excluded from 51 Strezlecki Avenue. The first defendant disputed this. Thirdly, it was about then that the second defendant had directed customers to make payments to the DSM account over which the plaintiff had no control.
31 As to Question (e), I note the evidence of the father that Daniela Mengato would not have been able to carry on the business of DSM on her own on account of its technical nature. I also note the evidence of the father that in the four-month period to early March 2011 he made twenty to thirty telephone calls to DSM and those calls were answered by Daniela Mengato. The second defendant stated that between May and August of 2010 he was invoicing DSS work in the name of DSM. The plaintiff stated that many of the customers of DSM, as indicated by payments into its bank account, had been customers of DSS. As mentioned, the DSM CBA account was in the name of Mengato, and DSS customers were instructed to make payments into this account by Mengato’s husband, the second defendant. On 11 July 2010, the second defendant forwarded an email to Keith Rider of Technical Solutions International, a supplier to the business:
“The invoices provided to me need to be changed into the name Digital
Security Monitoring. Could you please arrange this ASAP.”
32 I conclude that the defendants have conducted or been involved in the business known as DSM. DSM was registered as a business name on 14 September 2009 in the name of Daniela Mengato. In the circumstances, I think it appropriate to conclude that this occurred with the full support and involvement of the defendants. There is no evidence before me that this business was conducted at 21 Dickson Street, Sunshine. The notice to customers of DSS advising of the change of bank account details states that the business was being carried on at 51 Strezlecki Avenue, Sunshine West. It is reasonable, in my view, to conclude that the DSM business was carried on from this address. I note that a search of DSM conducted at Australian Securities & Investments Commission on 7 February 2011 shows the registered address of the business as 21 Dickson Street, Sunshine, which is obviously incorrect, and Mengato’s address as 2 Gretal Court, Taylors Lakes. It is possible that the DSM business was also carried on at this address but presently there is insufficient evidence for me to so conclude.
Summary
33 I give the following answers to the preliminary questions:
(1) Yes. (2) See paragraph 27. (3) Yes. (4) Yes. (5) Yes, with Daniela Maria Mengato at 51 Strezlecki Avenue, Sunshine
West and possibly at 2 Gretal Court, Taylors Lakes.34 I will hear from the parties as to what further orders are required for the future conduct of this matter. In that context, I note that the plaintiff entered judgment in default of defence against Mengato on 5 May 2011, and she has applied to set this judgment aside.
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