Wolff, B.S. v Donovan, D
[1991] FCA 290
•30 MAY 1991
Re: BERNARD SIMON WOLFF
And: DONALD DONOVAN
No. G13 of 1991
FED No. 290
Bankruptcy
29 FCR 480
COURT
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Davies(1), Lee(2) and Hill(2) JJ.
CATCHWORDS
Bankruptcy - bankruptcy notice based on default judgment - debts incurred by partner in a partnership where debtor only "silent partner" - whether partnership in existence at time debts incurred - whether trial judge determined preliminary question of whether the present was an appropriate case to investigate whether true debt existed or determined the question whether bankruptcy notice based on true debt - no formal request for trial judge to decide preliminary question of existence of judgment debt - whether failure to call full evidence can ground an appeal - circumstances in which court will go behind judgment debt - onus of proving existence of debt - whether creditor required to prove existence of entire debt upon which judgment founded.
Partnership Acts 1891-1965 (Qld.) s.8
HEARING
BRISBANE
#DATE 30:5:1991
Counsel and Solicitors Mr M. Eliadis instructed by
for Appellant: H. Drakos and Co.
Counsel and Solicitors Mr G. Gibson QC and Mr P. Eastion
for Respondent: instructed by Anderson and Bone
ORDER
The appeal be dismissed.
The appellant pay the respondent's costs of the appeal.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
JUDGE1
I have had an opportunity to read the reasons for judgment prepared by my brothers Lee and Hill JJ. I agree with them but would add a few words of my own.
It is clear that, in an appropriate case, a bankruptcy court both may and should go behind a judgment to ascertain that the debt relied upon is a good debt, a debt due in truth and reality. The issue has been discussed by the High Court of Australia in Corney v. Brien (1951) 84 CLR 343, Ross-Ireland v. Tour Finance Limited (1965) 39 ALJR 49 and Wren v. Mahony (1972) 126 CLR 212. The principle has been applied in many judgments of this Court, including by Full Courts in Olivieri v. Stafford (1989) 91 ALR 91 and Ahern v. Deputy Commissioner of Taxation (Qld) (1987) 76 ALR 137. Views in which I joined were set out in Ahern's case at 147-8. At 148, the Court stated the general principle as follows:-
"These cases rest on the broad principle that before a person can be made bankrupt the court must be satisfied that the debt on which the petitioning creditor relies is due by the debtor and that if any genuine dispute exists as to the liability of the debtor to the petitioning creditor it ought to be investigated before he is made bankrupt. Bankruptcy is not mere inter partes litigation. It involves change of status and has quasi penal consequences."
In the present case, the petition relied upon a judgment obtained by default. The bankruptcy court will go behind such a judgment debt provided that a ground for questioning the truth and reality of the debt has been raised. In the present case, the unusual circumstance that the debtor, Mr B.S. Wolff, was said to be liable as a "silent partner", a situation which he wished to dispute, was a sufficient ground for looking into the reality of the debt.
However, in his approach to this present case, counsel for Mr Wolff seems to have placed undue emphasis upon the remarks of Fullagar J. in Corney v. Brien, where his Honour said at 358:-
"The question whether the judgment is to be reopened or `gone behind' at all will, of course, often involve some preliminary investigation of the merits of the attack on the judgment. But, when once the court decides that it will `go behind' the judgment, the cases which I have cited show, in my opinion, that the whole matter is open. When once it is considered proper to `reopen', the only question will be whether there was, in fact and in law, a debt which could legally found the judgment - whether there was in `Truth and Reality' an obligation not of record before there was an obligation of record. If the case should be one of those rare cases (I have not actually found one in the Reports since 1888, when Fry L.J. said that he knew of none) where it is legitimate to `go behind' a judgment entered after trial in court, there would be, I think, no alternative but to re-try the whole case. The matter to be decided is the existence or non-existence of a debt antecedent to the judgment. It has been said on several occasions that the judgment is prima-facie evidence of the antecedent debt. But, when once the inquiry is undertaken, I think that the ultimate burden of proof rests on the person claiming to be a creditor. As Lord Esher M.R. said In re Fraser; Ex parte Central Bank of London (1892) 2 QB 633 at pp 636, 637: `The existence of the judgment is no doubt prima facie evidence of the existence of a debt; but still the Court of Bankruptcy is entitled to inquire whether there really is a debt due to the petitioning creditor'."
Read in their context, his Honour's remarks are correct and helpful. But they do not mean that, in every case in which the debtor casts doubt upon the judgment debt or some aspect thereof, a court of bankruptcy will determine again the whole of the creditor's claim. If the totality of the matter ought to be considered de novo, the bankruptcy court will often adjourn its proceedings to enable that course to be undertaken in the court in which the original proceedings were instituted or to allow an appeal to be instituted in an appropriate court from the judgment in question. See e.g. Ahern's case. In bankruptcy proceedings, it is more common that the debtor will raise an issue or issues into which he alleges the bankruptcy court should inquire and that the bankruptcy court will examine that issue or those issues.
That was the course followed by the trial Judge. The notice filed in accordance with r.20 of the Bankruptcy Rules, giving notice that Mr Wolff intended to appear on the hearing of the petition to oppose the petition, specified as the ground of opposition to the petition the limited ground that Mr Wolff had not been a partner of Mr Harry Hopes, in whose name the debts to the petitioning creditor, Mr D. Donovan, had been incurred. The crux of the notice specified that:-
"The claim which was made and which formed the Judgement sum were debts that were never incurred by BERNARD SIMON WOLFF but were debts incurred by HARRY ROY HOPES."
That was the issue which was raised for the consideration of the Bankruptcy Court. And that was the issue to which the affidavits subsequently filed on behalf of the petitioning creditor and the debtor were directed. Thus, although the affidavit by the petitioning creditor dealt fully with this issue, it verified the details of the debts only perfunctorily, for the details were not the subject of the notice of intention to oppose.
When the matter first came on for hearing before the trial Judge, both counsel had in mind that the trial Judge would first rule upon the question whether his Honour would go behind the judgment and that then, if he would do so, the substance of the matter would be argued. Counsel for the debtor indicated that, in this event, there would be cross-examination of the deponents. However, the trial Judge did not assent to this course and it is clear from his comments in the transcript that he was of the view that the matter could adequately be dealt with on the affidavits. His Honour indicated that he was prepared to sit late to dispose of the matter. The transcript of the proceedings before the trial Judge shows that both counsel accepted that his Honour would deal with the substance of the matter. The matter was then dealt with on the affidavits. Neither counsel sought to cross-examine any deponent. On that material, counsel for the petitioning creditor sought a sequestration order and counsel for the debtor submitted that the petition should be dismissed. I see no error in this aspect of the matter.
On the material before him, the trial judge was satisfied that the debtor, Mr Wolff, was a silent partner in the business operated by Mr Harry Hopes. His Honour's finding was fully supported by the material. Even Mr Wolff's own affidavit conceded that he, Mr Wolff, acquired a share in the business. Partnership was established. The trial Judge's finding that there was a partnership at all relevant times was well-founded on the evidence, having regard to the burden which lay upon the debtor, Mr Wolff, as the person having knowledge peculiar to him, to dispute that the partnership did not commence when it appeared to have done.
The trial Judge took care to ensure that the debts for which there was judgment were partnership debts and not debts for which Mr Hopes was solely liable. His Honour found with respect to one part of the debts that Mr Wolff was not liable as a partner; but that finding did not affect the entitlement to a sequestration order having regard to the operation of s.41(5) of the Bankruptcy Act 1966 (Cth).
Counsel for Mr Wolff submitted to the trial Judge and submitted again in this appeal that the petition should have been dismissed as there was inadequate verification of each specific item making up the partnership debts the subject of the judgment. The remarks of Fullagar J. in Corney v. Brien, set out above, were relied upon. The trial Judge thought that the material sufficiently verified these aspects of the matter. In the light of the ambit of the notice of intention to oppose, I see no error in his Honour's approach. The issue which was raised for the consideration of the bankruptcy court was whether or not the debtor, Mr Wolff, was liable as a partner. It was that issue which was fully investigated. The verification given as to the items of the debts was sufficient in the circumstances.
Counsel for Mr Wolff raised in this appeal an issue with respect to a timber agreement dated 9 December 1983, entered into by Mr Hopes with Mr Donovan, an agreement which his Honour found to have been entered into in the course of the partnership. It was submitted that there was no liability under the agreement for the months of September, October, November and December 1986, months during which Mr Hopes did not carry on the timber business. However, the point raised was outside the ambit of the notice of intention to oppose. The trial Judge dealt adequately and in my view correctly with the issue insofar as it was within the ambit of the dispute before him.
I agree with the orders proposed by Lee and Hill JJ.
JUDGE2
Mr Bernard Simon Wolff appeals against the judgment of a judge of this court (Spender J.) and seeks an order that the sequestration order made by his Honour against him be set aside. The sequestration order was based upon an act of bankruptcy consisting of failure to comply with a bankruptcy notice founded on a judgment obtained by Mr Donovan against Mr Wolff by default in the District Court of New South Wales at Kyogle on 24 July 1987. No attempt had been made by Mr Wolff to set aside that judgment.
The action on which the judgment was based was commenced by way of statement of liquidated claim. In it Mr Donovan's claim was set out as follows:
"Money due and payable from the Defendant to the Plaintiff pursuant to a timber agreement dated 9th December, 1983 between the Plaintiff and Harry Roy Hopes, the partner of the Defendant for and on behalf of Hopewood Timbers, and in particular for payments due from May, to December, 1986 $55,672.90 Money due and payable from the Defendant to the Plaintiff pursuant to a Deed of Guarantee dated 17th March, 1986 between the plaintiff and Harry Roy Hopes, for and on behalf of Hopewood Timbers, a partnership between the Defendant and the said Harry Roy Hopes, wherein the said Harry Roy Hopes was on 16th September, 1986 declared bankrupt $26,342.07 Money due and payable from the Defendant to the Plaintiff in respect of the charging of items supplied by Hastings Derring (sic) Pty. Limited to Hopewood Timbers on the Plaintiffs account in May, 1986.
$ 2,838.96
----------
$84,853.93"
Notice of intention to oppose the petition was given by Mr Wolff on the following grounds:
The claim which was made and which formed the Judgment sum were debts that were never incurred by BERNARD SIMON WOLFF but were debts incurred by HARRY ROY HOPES. That the debts themselves were based upon a guarantee between DONALD DONOVAN and HARRY ROY HOPES solely and an agreement between DONALD DONOVAN and HARRY ROY HOPES.
The matter came on for hearing before his Honour at 3.29 p.m. Counsel appearing for Mr Wolff indicated in opening that his Honour had to be satisfied at the outset that there were substantial reasons in the case for questioning whether there was a debt in truth and reality upon which the judgment was based. He explained that he did not propose to deal with objections to affidavits read by the petitioning creditor at that stage. He said:
"The reason why I did not propose to go through my objections to the petitioning creditor's material at this stage was that I had hoped to go straight to what I submit are the merits of the question as to whether your Honour should go behind the judgment, because if your Honour finds that there is sufficient or substantial reason to do so, then I would submit that the hearing would take about four or five hours, and certainly I would wish to adduce further oral evidence and cross-examine deponents, the petitioning creditor's deponents.
The following discussion then ensued:
His Honour: "What, to have a rerun of the judgment?" Mr Eliadis: "If your Honour is satisfied on what I say, that you are prepared to go behind - it might be that your Honour is prepared immediately on my submissions to dismiss the petition - I do not know - but it might be that a fuller investigation is required. In any event I will go straight to my submissions then..."
Counsel then proceeded with submissions.
Later in the proceedings, however, counsel for Mr Wolff did make some objections to evidence. He also submitted that on the evidence the respondent had not satisfied the onus of showing that there was a debt for which Mr Wolff was responsible.
Counsel for Mr Donovan, when commencing his case, was asked how long he was likely to be. He replied that he would be probably ten minutes. He said:
"I agree with my friend's approach to get your Honour to decide quickly whether you should go behind. "
His Honour then indicated that he would sit until the case was finished. He heard submissions from the petitioning creditor as to the facts. In reply counsel for Mr Wolff renewed submissions that Mr Donovan had not satisfied the onus of showing that there was no true debt. His Honour concluded the hearing at 5.58 pm and reserved judgment.
The appellant now submits before us that his Honour should have, in accordance with counsel's request, treated the matter before him in two stages, the first stage being to determine whether there was a prima facie case to go behind the judgment debt. Then if his Honour was so satisfied he should have afforded to the appellant the opportunity to call further evidence and to cross-examine the deponents called in evidence for the respondent as a second stage in the proceedings. His Honour's failure to afford such an opportunity was, it was submitted, an error of law.
Alternatively, it was submitted that the onus of showing that there was a true debt lay upon the petitioning creditor and that there was no evidence, or insufficient evidence, before his Honour upon which it could be found that Mr Wolff was liable to pay to the petitioning creditor any of the amounts referred to in the statement of claim upon which the judgment was based.
A perusal of the reasons for judgment make it abundantly clear that his Honour was of the view that the present was an appropriate case for going behind the judgment to see whether there was "in truth and reality" a debt due: Wren v Mahony (1972) 126 CLR 212 at 224 per Barwick C.J. It was not disputed before his Honour, nor for that matter before us, that a court of bankruptcy was entitled to make such an enquiry. What his Honour did in the judgment was to consider the evidence before him and hold in respect of all of the claims other than the claim in respect of the guarantee (the second count) that the moneys claimed to be owing to the petitioning creditor by Mr Wolff were in fact owing. As no notice had been given pursuant to s.41(5) of the Bankruptcy Act 1966 (Cth) ("the Act") asserting that the amount in the bankruptcy notice was overstated his Honour formed the view that he was satisfied that Mr Wolff was indebted to Mr Donovan at least to the extent of $58,511.86 being the sum of the first and third elements of the District Court plaint. His Honour then applied the decision of Gibbs J. in Re: Bedford; Ex parte H.C. Sleigh (Queensland) Pty Limited (1967) 9 FLR 497 in holding that the failure to comply with a bankruptcy notice given upon an irregular judgment entered for an amount actually due at the time as well as for an amount exceeding the amount actually due at the time of judgment was an act of bankruptcy upon which the judgment creditor was entitled to found a petition. That his Honour was entitled to take this approach was not challenged before us on appeal.
As was said by the full court of this court in Boral Johns Perry Industries Pty Limited v Piccardi (23 June 1989, unreported, at 13):
"It is well established that a court
exercising bankruptcy jurisdiction has
power to go behind a default judgment, and will do so, in a case where a reason is
shown for questioning whether - behind the judgment, or, as it is sometimes said, as the consideration for it - there was
really a debt: Petrie v Redmond (1942) 13 ABC 44; Corney v Brien (1951) 84 CLR 343; Wren v Mahony (1971-2) 126 CLR 212."
As the above quotation makes clear it will not be in every case that the court will go behind a judgment. The existence of the judgment is prima facie evidence of the debt: cf In Re Fraser; Ex parte Central Bank of London (1892) 2 QB 633 at 636-7. No doubt it will be relevant that the judgment debtor has made no attempt to set aside the judgment although failure so to do may be explained, as it was in the present case, by the fact that the debtor lacked funds to pursue this course. It was, however, made clear by Lord Esher in In Re Flatau; Ex parte Scotch Whisky Distillers Limited (1888) 22 QBD 83 at 85-6 that the court will not go behind the judgment as a matter of course but only if appropriate circumstances are shown to exist. Sir Garfield Barwick expressed the law in Wren v Mahoney (supra) at 224-5 as follows:
"The judgment is never conclusive in bankruptcy. It does not always represent itself as the relevant debt of the petitioning creditor, even though under the general law, the prior existing debt has merged in a judgment. But the Bankruptcy Court may accept the judgment as satisfactory proof of the petitioning creditor's debt. In that sense that court has a discretion. It may or may not so accept the judgment. But it has been made quite clear by the decisions of the past that where reason is shown for questioning whether behind the judgment or as it is said, as the consideration for it, there was in truth and reality a debt due to the petitioning creditor, the Court of Bankruptcy can no longer accept the judgment as such satisfactory proof. It must then exercise its power, or if you will, its discretion to look at what is behind the judgment: to what is its consideration ... the emphasis is upon the paramount need to have satisfactory proof of the petitioning creditor's debt. The Court's discretion in my opinion is a discretion to accept the judgment as satisfactory proof of that debt. That discretion is not well exercised where substantial reasons are given for questioning whether behind that judgment there was in truth and reality a debt due to the petitioner." (emphasis added)
Where a judgment is obtained by default the court in bankruptcy will more readily look behind the judgment than it would if the judgment were obtained following a hearing on the merits: Re Pinkerton; Ex parte B.G. Textiles Pty Ltd (In liq.) (1984) 4 FCR 64, Re Wong; Ex parte Kitson (1979) 38 FLR 207 at 218 et seq; and Simon v Vincent J. O'Gorman Pty Ltd (1979) 41 FLR 95.
If a party seeks to have the judge in Bankruptcy decide as a preliminary question whether reason is shown for questioning whether behind the judgment there is really a debt, before proceeding to determine the issue as to whether there was in truth a real debt, the party should request the Judge to rule that such a procedure be adopted. In the present case, however, although counsel for Mr Wolff did raise the question of a preliminary hearing no assent to this course was obtained from the trial Judge and, the matter having been raised, both parties proceeded to the reading of evidence, the taking of objections and the giving of submissions on the basis that the court would determine the entire issues between the parties. In these circumstances, no assent to the course of a split proceeding having been obtained from the court and such a request having been, by implication, dropped, the appellant cannot now complain if he did not take the opportunity when it arose to call the whole of the evidence upon which he proposed to rely and to cross-examine the witnesses of the petitioning creditor.
In our opinion the first ground of appeal must fail. We should not, however, like it to be thought in what we have said above that we think it would be appropriate in the normal case, or even often appropriate, for the case to be split by a preliminary decision being made as to whether sufficient facts have been shown to suggest that an investigation into the judgment should be pursued. If, however, the case is an appropriate one for such a course then it would be preferable for the matter to be raised at a directions hearing prior to the ultimate hearing so that all parties are clear as to the way in which the case is to proceed.
As we have already indicated the present was a case where the facts were such as to make it clearly appropriate for the court more fully to investigate the circumstances behind the default judgment and in our opinion and notwithstanding a submission to the contrary from the respondents before us, his Honour did embark upon a full consideration of the facts before him rather than merely treating the proceedings before him as a preliminary enquiry to determine whether further evidence should be adduced.
Whether his Honour erred in holding that the claims of the petitioning creditor in the sums of $55,672.90 and $2,838.96 were real debts of Mr Wolff.In Corney v Brien (1951) 84 CLR 343 Fullagar J. at 358 said:
"The question whether the judgment is to be reopened or 'gone behind' at all will, of course, often involve some preliminary investigation of the merits of the attack on the judgment. But, when once the court decides that it will 'go behind' the judgment, the cases which I have cited show, in my opinion, that the whole matter is open ... But, when once the enquiry is undertaken, I think that the ultimate burden of proof rests on the person claiming to be a creditor.
The joint judgment of Dixon, Williams, Webb and Kitto JJ. contains no discussion of onus of proof at all. No doubt, however, the true position is that there is a shifting onus. Once the judgment is proved, and it is prima facie evidence of the existence of the underlying debt there is a tactical onus on the debtor to show that there are circumstances which make it appropriate to go behind the debt to see whether the judgment was in truth and reality a true debt. The overall onus of proof of the existence of a real debt underlying a judgment, however, remains always with the petitioning creditor.
Matters of onus, however, do not really arise in the present case.
The claim for $55,672.90 arose out of an agreement (referred to by the parties as "the timber agreement") dated 9 December 1983 entered into between the petitioning creditor therein called the "vendor" and a Mr Hopes, therein called the "purchaser". The agreement makes no reference at all to Mr Wolff nor to any partnership of which Mr Wolff was a partner. Under it the petitioning creditor agreed to sell to Mr Hopes all the millable hardwood timber standing on certain land identified in the agreement as being in the Parish of Koreelah, County of Buller subject to a proviso that the timber concerned have a stated minimum circumference. The price under the agreement for the timber was $540,000 plus an amount calculated in accordance with a formula and was to be paid in instalments, the first $10,000 of which was to be payable before 7 February 1984. The balance of purchase price was payable by ten payments in each twelve months of the term of the agreement, which payments were subject to adjustment in accordance with consumer price index variations. The agreement provided that in the event of default and until payment was made, all rights to remove timber would be suspended.
It was not suggested by Mr Donovan in evidence that any reference was made in the course of the negotiations with Mr Hopes in relation to the agreement to the fact that Mr Hopes was acting otherwise than on his own behalf.
Accordingly, Mr Wolff could in the present circumstances only be liable upon the agreement, for the default which ultimately occurred in payment of amounts under it if Mr Hopes was acting as agent for Mr Wolff by virtue of an express agency (this as such was not suggested) or if Mr Hopes, being a partner in a partnership of which Mr Wolff was a member was acting in the carrying on in the usual way of a business of the kind carried on by him in partnership with Mr Wolff so that his acts operated to bind the partnership and his partners pursuant to s.8 of the Partnership Acts, 1891 to 1965 (Qld). Section 8 of the Partnership Acts is subject to the exception, referred to in that section, where the partner so acting had in fact no authority to act for the firm in the particular matter, and the person with whom he was dealing knew that he had no such authority or did not know or believe him to be a partner. There was no suggestion that the exception was applicable here.
Evidence was given by Mr Wolff on affidavit that he was unaware of what had happened between Mr Hopes and Mr Donovan. He said that he had regarded the timber business of which he became a partner as simply an entity he chose to invest in. He merely invested money and was to receive income and took no part in the running of the business.
Evidence of the business name registration of the firm "Hopewood Timbers" disclosed that Mr Wolff had become a registered proprietor of that business name on 21 February 1984 and had ceased to be a proprietor on 11 August 1986. In his affidavit, which may be said to have been carefully worded, having regard to the issue which had arisen between the parties as to the existence of a partnership, he did not expressly deny that any partnership existed between Mr Hopes and Mr Wolff prior to 21 February 1984.
On 16 August 1986 it became known that Mr Hopes had disappeared. He was made bankrupt as a result of a debtor's petition on 16 September 1986. On 16 April 1987 Mr Wolff was interviewed by a Detective Senior Sergeant Michael Sullivan of the Criminal Investigation Branch at Casino in connection with inquiries then being made by Detective Sullivan. In the course of his statement, which was not signed, but in respect of the tender of which no objection was made, Mr Wolff said:
"In early 1983 I again made contact with Harry Roy HOPES. About this period he asked me if I was interested in going into a partnership with him cutting timber. At that time Harry HOPES was a member in a partnership trading as 'HOPEWOOD TIMBERS'. This partnership was made up of Harry Roy HOPES and his partner Paul WOODCOCK making the trading name 'HOPEWOOD TIMBERS'. (sic) Paul WOODCOCK at that time wanted to get out of this partnership and Harry Roy HOPES enquired from me if I was interested in buying out Paul WOODCOCK's side of the partnership. At that time I was to pay $15,000 into the partnership which was to allow some money to go to Paul WOODCOCK and the remainder of the money to purchase new equipment for the partnership. In May 1984 I signed this partnership and paid $15,000 to this partnership. I was then to be a silent partner in the partnership in the business trading as 'HOPEWOOD TIMBERS'. At that particular time Harry HOPES was cutting timber in Yabbra State Forest in New South Wales. Shortly after joining this partnership, due to the size of the logs being snigged by Harry Hopes it became necessary to attempt to obtain a larger dozer for this work. On the 30 May 1983 I went with my father and Harry Hopes to Fogarty's Earth Moving Contractors at Browns Plains in Brisbane. There my father purchased a D7 Caterpillar Tractor complete with a logging winch. ...
When Harry Hopes was cutting timber in Yabbra State Forest there was a dispute with the Forestry which lead (sic) to Harry being told to leave the forest. About that time Harry then began to cut timber on a property owned by Mr Don Donovan. This property was also in New South Wales. Harry Hopes set up a sawmill on Mr Don Donovan's property and I visited the saw mill from time to time. Up to this time I considered that I was consulted and kept informed of the transactions and business carried out by the partnership 'HOPEWOOD TIMBERS'. Some time prior to 1986 because of wet weather and the paddocks being wet in Don Donovan's property, Harry Hopes moved the sawmill to Don Donovan's property in Queensland. ..."
It will be observed that although the statement refers to the "partnership" as having been signed on May 1984 and the payment of $15,000 then having been made, the remainder of the statement makes it quite clear that prior to 30 May 1983 the partnership was in existence. The statement also makes it clear that the partnership was one for the cutting of timber and that it extended to the cutting of timber on a property owned by Mr Donovan.
No attempt was made by Mr Wolff to tender a copy of the partnership agreement which, according to his statement, was in writing, or to prove when the $15,000 was paid, and in the absence of any other evidence from Mr Wolff the inference was inescapable that the reference to the "partnership" having been signed in May 1984 was mistaken and should have been a reference to May 1983. Not surprisingly his Honour reached the same view. Accordingly, his Honour held that the statement made it plain that Mr Hopes and Mr Wolff were in partnership in a business of timber felling and milling prior to the execution of the timber agreement between Mr Donovan and Mr Hopes on 9 December 1983.
It follows that his Honour did not err in law in holding that in executing the timber agreement in December 1983 a partnership existed and that the execution of that agreement was an act for the purpose of the business of the partnership and one for the carrying on in the usual way of the timber logging and milling business of the partnership. Accordingly s.8 of the Partnership Acts 1891-1965 has the consequence that the agreement entered into by Mr Hopes bound Mr Wolff.
His Honour found on the evidence before him, and in our view correctly, that the commencement of logging on the petitioning creditor's property was a matter known to Mr Wolff and that the logging was part of the activities which Mr Wolff knew the firm was engaging in at the relevant time. It must therefore follow that, notwithstanding the fact that Mr Wolff was unaware of the entry into the agreement and was merely a "silent partner", he was jointly and severally liable for the amounts owing to Mr Donovan by reason of the default in payment of the instalments and under the timber agreement.
It becomes unnecessary therefore to consider whether the amount of $2,838.96 claimed by Mr Donovan to relate to the charging of items supplied by Hastings Deering Pty Limited to Mr Donovan's account and said to be in relation to goods ordered by Mr Hopes for the partnership, was also an amount truly owing by Mr Wolff to Mr Donovan. It was conceded by counsel for Mr Wolff, and properly conceded, that if the appeal should fail in respect of the first count for $55,672.90 then irrespective of the third count of $2,838.90 his Honour was entitled to make a sequestration order having regard to the decision of Gibbs J. in In Re Bedford (supra).
It follows that the appeal must be dismissed with costs. At the appeal the trustee of Mr Wolff's estate appeared and sought an order that costs incurred by him in administering the estate between the time of the sequestration order and the appeal be provided for in the event that the appeal was successful. He did not otherwise seek to participate in the appeal. The course taken by the trustee was a proper one and we would order, if it be necessary, that the costs of the trustee on a solicitor and client basis be treated as the trustee's costs in the administration of Mr Wolff's estate.
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