Bary v Bary

[2024] NZHC 711

IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY

I TE KŌTI MATUA O AOTEAROA WHAKATŪ ROHE

CIV-2022-442-035

[2024] NZHC 711

BETWEEN

DAVID BARY

Plaintiff

AND

ARON BARY

First Defendant

AND

AB CONTRACTING NELSON LIMITED

Second Defendant

Hearing:

19 and 20 February 2024

Appearances:

G D Pearson and M M S Gray for Plaintiff

F B Q Collins for First and Second Defendants

Judgment:

3 April 2024

JUDGMENT OF GRICE J

Table of Contents

Introduction  [1]

Background  [7]

The positions of the parties

The plaintiff ’s claim  [10]

The defendants’ position  [11]

The second defendant  [13]

Was there a partnership?  [16]

Legal provisions concerning partnership  [21]

Privilege  [34]

The evidence  [43]

Analysis

The transfer  [76]

BARY v BARY [2024] NZHC 711 [3 April 2024]

Withdrawal from the partnership  [87]

Abandonment  [107]

Agreement to release  [111]

Agreement to dissolve  [115]

Limitation  [120]

Specific performance  [134]

Constructive trust  [141]

Equitable defences  [147]

Laches  [150]

Estoppel  [157]

Unclean hands  [163]

Failure to register caveat  [166]

Conclusion  [169]

Costs  [175]

Introduction

[1]                  This is a claim brought by David Bary (Dave) against his brother Aron Bary (Aron) concerning a partnership for a building project commenced in 1997.1 A house was to be built on a hillside section purchased by the partnership in Nelson (the Property).

[2]                  The project was more difficult than anticipated. By 2001, in addition to their initial and subsequent contributions as well as rental from the house, each partner was contributing a set monthly sum to cover the partnership liabilities. Attempts had been made to sell the house, but no offers were received that would cover the partnership liabilities. This was largely due to the house not meeting Nelson City Council code compliance requirements.

[3]                  In September 2001, following correspondence between the partners suggesting one of them should buy the house, Aron made a formal offer to purchase the Property.

1      I refer to the plaintiff and first defendant using their forenames as requested by them to avoid confusion.

When he did not hear from Dave within the stipulated time, Aron transferred the beneficial interest in the Property from the partnership to himself personally.

[4]                  Dave objected to the transfer, prompting further exchanges between the brothers. On 28 March 2002 Dave vacated the house, which he had been renting from the partnership, and stopped making any contributions to the partnership. Apart from an unanswered letter which Dave sent Aron in 2003, Dave and Aron had nothing to do with each other until nearly 20 years later, when Dave lodged a caveat on the Property to prevent a sale. The caveat was maintained by order of this Court.2

[5]                  Dave says that Aron continues to hold the Property on trust and claims a share in the partnership.

[6]                  The defendant raises a number of defences. Initially, Aron also pursued a counterclaim for damages due to his loss of opportunity to purchase a house in Westport because Dave had prevented the sale of the Property by lodging the caveat. This was discontinued at the hearing.

Background

[7]                  Dave, the older brother, had initiated the project, but at his request for reasons personal to Dave at the time, all records relating to the Property were in Aron’s name. Ownership of the Property was registered in Aron’s name and the mortgage was in his sole name.

[8]                  In late 1997 a price for building the house was agreed upon with the builder, Mr Banks, who drew up the plans. However, subsequently it was decided that a bottom story would be added to the house. This required new foundation plans to be drawn up and engineering approval to be obtained, as well as demanding substantially more work. Various difficulties were encountered in the course of the building process, leading to delays and the failure to obtain a code compliance certificate.

2      Bary v AB Contracting Nelson Ltd [2022] NZHC 1404 [the caveat decision].

[9]                  From April 2002 to the present time Aron has had responsibility for the project. He has paid all liabilities and outgoings and had the use of the Property. Aron had been unable to sell the Property despite numerous attempts. The code compliance certificate was not obtained until 2021. At that time, Aron again put the Property on the market for sale. Dave became aware that the property was to be sold and discovered that the caveat he thought had been lodged in 2001 had not been registered. He lodged a caveat which remains on the title.

The positions of the parties

The plaintiff ’s claim

[10]              The plaintiff pleads that a trust came into existence and Aron or his company, AB Contracting Nelson Ltd (the Company), which is the present owner, holds the land as a partnership asset. Mr Pearson, for the plaintiff, submits that Aron has knowingly failed to discharge his fiduciary obligations to the partnership as trustee, and the defendants must account for their fiduciary obligations before disposing of the Property. The plaintiff seeks an order for specific performance requiring the defendants to perform their fiduciary duty as trustees, and a taking of account of Dave’s interest in the Property.   Alternatively, damages are sought in the sum of

$396,790.50, being a half share of the current value of the Property less the mortgage.

The defendants’ position

[11]              The defendants’ say that Dave consented to Aron becoming the sole legal and beneficial owner of the Property, and in the alternative, Dave is estopped from seeking a share of the Property’s value. The defences of abandonment, laches, unclean hands, and equitable set off are also raised in the statement of defence.

[12]              It is contended that Dave’s claim is effectively a claim for a common law remedy to challenge the distribution made after the sale of the Property to Aron, which is now time-barred.

The second defendant

[13]              The statement of defence pleads that the Company is the sole beneficial owner of the Property. Aron is the shareholder and director of that company. It would be difficult to contend that if the Court found the claim(s) succeeded against Aron, the plaintiff would be defeated by the fact that the Company is a separate entity.

[14]              I agree with the comments of Associate Judge Johnston in the caveat decision. He rejected an argument that because the claim in question was brought in personam against Aron, it should not affect the Company’s ability to deal with its own assets.

The Associate Judge addressed the issue as follows:3

[58] In my view that contention cannot succeed for the reasons already outlined, that is to say  that  the  transfer  of  the  property  from  Aron  to  AB Contracting Ltd was not a transfer to a bona fide purchaser for value without notice of David’s equitable claim simply by reason of the fact that Aron who was fully aware of the circumstances was at all material times a shareholder and director of (and the guiding mind and will of) AB Contracting Ltd.

[15]              For those reasons, if I find that any of the plaintiff’s claims are made out, the transfer to the Company would not prevent relief being granted against the Company and/or Aron.

Was there a partnership?

[16]              The parties agree that they formed a partnership to acquire the land and build the house. There was no written agreement, but the parties agree that they intended that the venture would include the building of the house and its sale for profit. The question of whether or not there was a legal partnership is a question of law.

[17]              I accept as a matter of law that there was a partnership governed by the Partnership Law Act 2019 (the Act), which met the prerequisites recently summarised in Patel v Patel.4 Under s 8 of the Act, which sets out the definition of “partnership”, the partners must be able to show that they:

3      The caveat decision, above n 2.

4      Patel v Patel [2019] NZHC 2705.

(a)carried on a business, which includes “every trade, occupation, or profession”;

(b)in common; and

(c)with a view to profit.5

[18]              A property development falls within the bounds of a trade, and the venture was carried out in common with the object to procure a profit on sale of the house. Counsel for both parties proceeded on the basis that the partnership was for a single venture, being the development of the Property.

[19]              Counsel agreed that although the Partnership Act 2008 was in force at the time the partnership was established, the 2019 Act now applies. This is clear from sch 1, cl 1 of the Act, which states that the Act applies to every partnership regardless of when it was formed. Thus, the Act has retrospective effect.

[20]I am satisfied that the project was a partnership in this case.

Legal provisions concerning partnership

[21]              The Act implies partnership obligations into the partnership arrangement between the parties. In Patel v Patel, Gwyn J described the consequences of the partnership relationship as fiduciary in nature but with an equal balance of power.6 The fiduciary duties imposed include duties of good faith and honesty. However, as noted in the Partnership chapter of The Laws of New Zealand, while the relationship is frequently spoken of as one that is fiduciary in nature, that description cannot be applied to the partnership relationship in a “general or unqualified sense”.7 The partners must act in good faith in relation to partnership decisions and give each partner the opportunity to be heard.8 The Act is silent as to how a deadlock between partners who are equally divided on an ordinary matter should be broken.

5      Patel v Patel, above n 4, at [23].

6      Patel v Patel, above n 4, at [30].

7      P R H Webb Laws of New Zealand Partnership and Joint Ventures (online ed) at [96].

8      Webb, above n 7, at [99].

[22]              Under the Act, partnership property must be held and applied by the partners exclusively for the purposes of the partnership, and in accordance with the partnership agreement.9 Property bought with partnership money must be treated as having been bought for the firm.10 The rights and obligations of the partners continue to exist following the dissolution of the partnership to the extent that is necessary to wind up the affairs of the partnership.11

[23]              The profits and losses are shared equally between the partners unless there is a contrary agreement, and in the absence of such agreement, it is not relevant that one partner may have contributed more capital to the partnership, or worked longer or harder.12 That said, the courts are generally prepared to find that if a partner made unequal capital contributions, it can be inferred that the intention was that the capital would not be shared equally on dissolution, but would be returned to those partners who contributed it.

[24]              Partnership land is treated as personal property as between the partners. Section 40 of the Act as relevant provides:

40     Partnership land treated as personal property as between partners

(1)Land that has become partnership property must be treated as between the partners as personal property and not real property.

….

(3)     This section applies unless the contrary intention appears.

[25]              This is consistent with a share in a partnership being a chose in action.13 A partner does not have title to specific partnership property but has a beneficial interest in the entirety of the partnership assets and in each particular asset of the partnership.14 In accordance with this principle, Rodney Hansen J noted in Weston-Webb v Vargo that a claim for unjust enrichment (rather than a taking of account) relating to works

9      Partnership Law Act 2019 [the Act], s 36.

10     Section 39.

11     Section 75.

12     Patel v Patel, above n 4, at [33].

13 Webb, above n 7, at [111], citing Hadlee v Commissioner of Inland Revenue [1991] 3 NZLR 517 (CA) at 528; aff’d [1993] 2 NZLR 385 (PC). See also Rose v Rose [2007] NZCA 406, [2009] NZFLR 167 at [46]–[50]; aff’d [2009] 3 NZLR 1 (SC).

14 Webb, above n 7, at [111].

carried out by a partner on the building was not the appropriate cause of action in the context of competing claims by partners regarding the distribution of partnership assets.15 The partner’s interest includes the right to have the partnership assets administered in accordance with the Act.16

[26]              A partner has a “beneficial interest” in the assets of the partnership, including real estate belonging to the partnership. This is sufficient to support a caveat, as was recognised in the Associate Judge’s decision to maintain the caveat in this case.17

[27]              Partners also have the obligation to maintain partnership’s records, which must be reasonably available at the place of business of the partnership. Every partner may, when that person thinks fit, have access to, inspect, and copy any of the records.18 In addition, partners must provide true accounts and full information of all things that affect the partnership to any partner or their legal representatives.19 Every partner must also account to the firm for a benefit that the partner obtains, without the consent of the other partners, from any transaction concerning the partnership or the use of partnership property.20

[28]A partnership may be dissolved in three ways under s 66 of the Act as follows:

66Partnership dissolved at end of term, by end of venture or undertaking, or by notice

(1)A partnership is dissolved,—

(a)     if entered into for a fixed term, at the end of the term:

(b)     if entered into for a single venture or undertaking, by the end of the venture or undertaking:

(c)     if entered into for an undefined time, by any partner giving notice to all the other partners of the partner’s intention to dissolve the partnership.

15     Weston-Webb v Vargo HC Whangarei CIV-2003-488-354, 22 April 2004 at [12].

16     Maw v Maw [1981] 1 NZLR 25.

17     Bei v B & Z Trades Company Ltd [2024] NZHC 20 at [16]; and the caveat decision, above n 2, at [2].

18     The Act, s 52.

19     The Act, s 54.

20     The Act, s 55.

(2)However, see section 68, which provides for rights and duties to continue if a partnership that was entered into for a fixed term is continued at the end of the term.

(3)Subsection (1) is subject to any agreement between the partners.

(4)In the case of subsection (1)(c), the partnership is dissolved from—

(a)     the date stated in the notice as the date of dissolution; or

(b)     if no date is stated, the date on which the notice is received by the other partner or partners.

[29]              In addition, a court may declare a partnership is dissolved on various grounds, including when a partner is guilty of conduct that is calculated to prejudicially affect the carrying on of the business, wilfully or persistently breaches the partnership agreement, or otherwise acts in matters relating to the partnership business where it is not reasonably practicable for the other partner to carry on the partnership.21 In addition, the court may declare a partnership to be dissolved where circumstances have arisen that in the opinion of the court make it just or equitable to dissolve the partnership, or if the partnership business can be carried on only at a loss.22

[30]                After a partnership is dissolved, the authority of the partners to bind the firm, as well as the rights and obligations of the partners, continue to the extent necessary to wind up the affairs of the partnership and complete transactions begun before, but unfinished at, the time of the partnership dissolution.23 Otherwise, the rights and obligations do not continue.

[31]              Where a member of a firm ceases to be a partner and the continuing partners carry on business of the firm with its capital or assets without any final settlement of accounts as between the firm and the outgoing partner, the outgoing partner is entitled, at their option, to:

(a)share in the profits that are made after the dissolution of the partnership and that the court finds to be attributable to the use of the outgoing partner’s share of the partnership assets; or

21     Section 72(c) and (d).

22     Section 72(e) and (f).

23     Section 75.

(b)interest at the rate of 5 per cent per year on the amount of the outgoing partner’s share of the partnership assets.24

[32]              Rules concerning the distribution of partnership assets are set out in the Act. Debts and liabilities of the firm to third parties are paid out of the assets of the partnership first, followed by payments to each partner rateably of any amounts due from the firm to the partner for advances (as opposed to capital), and then a payment to each partner rateably what is due in respect of capital.25 The division of the remainder among partners is in the proportion in which they are entitled to share the profits.26

[33]              Losses are paid first out of profits, next out of capital, and lastly by the partners individually in the proportion in which they are entitled to share in the profits.27 The partnership shares are prima facie equal subject to any express or implied agreement.28

Privilege

[34]              Several letters produced in this proceeding were marked “without prejudice”. Privilege was sought by Dave in relation to parts of those letters. The relevant provisions of the Evidence Act 2006 in relation to privilege and waiver are as follows:

57     Privilege for settlement negotiations, mediation, or plea discussions

(1)A person who is a party to, or a mediator in, a dispute of a kind for which relief may be given in a civil proceeding has a privilege in respect of any communication between that person and any other person who is a party to the dispute if the communication—

(a)      was intended to be confidential; and

(b)      was made in connection with an attempt to settle or mediate the dispute between the persons.

(2)A person who is a party to a dispute of a kind for which relief may be given in a civil proceeding has a privilege in respect of a confidential document that the person has prepared, or caused to be prepared, in connection with an attempt to mediate the dispute or to negotiate a settlement of the dispute.

24     Section 79.

25     Section 84(a)–(c).

26     Section 84(d).

27     Section 83.

28     Section 45.

…

(3)This section does not apply to—

(a)      the terms of an agreement settling the dispute; or

(b)      evidence necessary to prove the existence of such an agreement in a proceeding in which the conclusion of such an agreement is in issue; or

(c)      the use in a proceeding, solely for the purposes of an award of costs, of a written offer that—

(i)is expressly stated to be without prejudice except as to costs; and

(ii)relates to an issue in the proceeding; or

(d)      the use in a proceeding of a communication or document made or prepared in connection with any settlement negotiations or mediation if the court considers that, in the interests of justice, the need for the communication or document to be disclosed in the proceeding outweighs the need for the privilege, taking into account the particular nature and benefit of the settlement negotiations or mediation.

65     Waiver

(1)A person who has a privilege conferred by any of sections 54 to 60 and 64 may waive that privilege either expressly or impliedly.

(2)A person who has a privilege waives the privilege if that person, or anyone with the authority of that person, voluntarily produces or discloses, or consents to the production or disclosure of, any significant part of the privileged communication, information, opinion, or document in circumstances that are inconsistent with a claim of confidentiality.

(3)A person who has a privilege waives the privilege if the person—

(a)      acts so as to put the privileged communication, information, opinion, or document in issue in a proceeding; or

…

(5) A privilege conferred by section 57 (which relates to settlement negotiations or mediation) may be waived only by all the persons who have that privilege.

[35]              Dave wrote to Aron’s lawyers, Knapps Lawyers (Knapps), and Aron personally and on occasion through his lawyers, Messrs Duncan Cotterill. All the letters that

Dave wrote personally were marked “without prejudice”. Aron also personally wrote a letter to Dave dated 14 March 2002 marked “without prejudice.”

[36]              In his opening submissions, Mr Pearson observed that Associate Judge Johnston had noted that although there had been an issue concerning the admissibility of the correspondence given that it involved without prejudice exchanges, by the time the application was argued neither party objected to its admission.29 The Associate Judge also expressed the preliminary view that the evidence fell within the exception contained in s 57(3) of the Evidence Act, which relates to proving the existence and terms of a settlement agreement.

[37]              Aron raised no objections concerning the admissibility of the letters. I deal with privilege as Mr Pearson and Dave referred to it.

[38]              To successfully claim privilege, the communication must be both intended to be confidential and made in connection with an attempt to settle the dispute. Some of the relevant communications either wholly or in part do not meet those requirements. In addition, in view of the waiver of privilege by Dave of parts of some letters, where others are relevant to the issue for which the waiver was provided it is in the interests of justice that those others are also admitted on the same issue.

[39]              The letters of 12 February 2002 (Dave to Knapps), and 14 March 2002 (Aron to Dave), make various allegations and assertions, and include offers made in attempt to settle the dispute concerning the future of the partnership. In the usual course, the material in the relevant letters insofar as they meet the settlement confidentiality requirements would be protected from disclosure by privilege under s 57(1) of the Evidence Act. However, Mr Pearson relied on the contents of those letters, submitting that they were admissible for the purpose of clarifying the terms of settlement or that there was no settlement, contrary to the assertions of Aron. Dave produced his letters dated 12 February 2002 and 25 February 2002 in his affidavit, referring to them as evidence that he had informed Aron that he intended not to pay the money into the partnership accounts but was told he had to keep paying. Those letters do contain

29     The caveat decision, above n 2, at [10], n 4.

offers but parts of them are admissible by virtue of waiver for the purposes outlined by Mr Pearson and Dave, there being no privilege sought by Aron.

[40]              Dave’s letter to Knapps dated 25 February 2002 contains a short reference back to a previous offer, but it largely makes assertions as to Dave’s intended actions which are not made in connection with an attempt to settle the dispute. Therefore, apart from the references to the clarification of the earlier settlement proposal which are privileged, that letter is admissible. In addition, that letter includes threats to cease contributions to the partnership which would be admissible for the reasons set out in the next paragraph in relation to the 17 March letter.

[41]              The letter of 17 March 2002 from Dave to Aron contains a proposal contemplating Dave retiring from the partnership and Aron taking over the liabilities and assets of the partnership. Insofar as that contains a settlement proposal, it is privileged. The statements in that letter about Dave intending not to continue contributions to the partnership not connected to that proposal are not privileged. Dave has also waived privilege in relation to his earlier threats to cease contributions so that matter has been put in issue and therefore the relevant statements are admissible. In any event, I would have found that the material relating to those threats must be disclosed in the interests of justice. In view of the waiver of privilege on that issue in relation to the earlier correspondence, it would not be just if only part of the material relating to that issue were before the Court.

[42]              A letter of 27 March 2002 from Dave to Knapps marked “without prejudice” merely says that Dave disputes that the partnership has debts of $6,400, and that no further funds will be forthcoming as there is no debt. It also notes that Dave will be vacating the Property. A further letter of 28 March 2002 from Dave to Knapps marked “without prejudice” contains no offer. That letter merely provides notice that Dave is vacating the Property and encloses the keys to the Property and a cheque for rent. The letter concludes with Dave stating that “I am currently seeking legal advice as to my next course of action and will contact you shortly.” These letters are not communications made with an attempt to settle the dispute and are not therefore privileged.

The evidence

[43]              Dave said he was a businessman with some experience and expertise in management and had been involved in a number of speculative building projects which had been financially rewarding. He noted that as the one who had instigated the project, he had largely been responsible for its management. Dave’s lawyers Duncan Cotterill did the conveyancing. The statement reporting on the completion of the purchase dated 22 December 1997 to Aron was sent to Dave. The statement records that the firm had also arranged for an execution of a power of attorney in favour of Dave.

[44]              Dave introduced the builder, Mr Banks, to the project. There was no written contract with Mr Banks, who had built a house on the same street for Dave and his then wife some time earlier. Mr Banks’ evidence is largely consistent with that of Dave as to the initial arrangements. Mr Banks gave a price estimate of $16,000 to build the house on a “labour only” basis, on the condition that both brothers would work alongside him. He was to be paid once the house was sold. However, Mr Banks said in his evidence that after giving that price, when the plans were ready to go to the council for approval, a bottom story was added to the project. This meant an entire new foundation plan had to be drawn and approved by the engineers. A block wall, concrete floor, additional stairs, windows, and cladding also had to be added instead of a pole platform for the top two floors. Mr Banks said at that stage no additional labour costs had been added to the $16,000 price in order to account for this work.

[45]              Mr Banks described the building agreement as a “gentleman’s agreement”. He said the labour only basis of the building contract meant he had to coordinate all subcontractors but was also reliant on the assistance of Aron and Dave. Mr Banks was critical of Dave’s contribution, saying that he did not carry out his share of the work, which meant Mr Banks had to call upon other people to assist him. Mr Banks said that Aron helped with the work when he was home from sea.

[46]              Mr Banks also said that at various stages Dave took materials from the Property to use in construction on the bottom floor of his own house at 18 Maire Street, which was originally to be a rumpus room for his children. Dave denies this.

[47]              In his evidence Dave is critical of Aron’s contribution and his abilities in project management and finances. Dave was largely responsible for keeping the accounts and managing the administrative side of the venture from its inception. In June 2001, Dave was asked by Aron’s solicitors, Knapps, to provide records relating to the partnership, which Dave said he found strange given that Aron had never been interested in seeing documents relating to the project before.

[48]              Dave acknowledged there were cost blowouts and building delays. He accepted that the project kept stalling, and it could not get a code compliance certificate which meant the value of the house could not be realised. He said in his evidence that he had underestimated the project and found that the costings were too “light”, as they had not taken into account the geotechnical issues encountered with land, or the addition of the basement. He said the project became too big and too difficult for Mr Banks, so progress was slow. He said that Mr Banks should not have been paid until the house had the compliance certificate.

[49]              Mr Banks said he had worked right up to the house being ready for final inspection for the code compliance certificate, which Dave had said he would arrange to be done. Mr Banks said that when there was no further work to be performed, he expected to be paid for his labour. When Dave and his partner Christine moved into the house Mr Banks requested payment, as he was by then under considerable financial pressure. Mr Banks took legal advice on the matter and considered that he was entitled to the payment for building the house when Dave took possession and rented the Property.

[50]              It is not necessary to resolve the issue of whether Mr Banks should have been paid and whether he, rather than Dave or the partnership, was responsible for obtaining the code compliance certificate. The relevant issue is that Mr Banks was pressing for payment and likely had a good argument that he should have been paid as he said.

[51]              Mr Banks gave evidence in a straightforward manner. He agreed that initially he was to be paid when the house was built as Dave alleged. However the position had changed considerably by 2001. Dave agreed that the project was more difficult than initially contemplated, which to an extent was caused by amendments to the plans

that significantly added to the work required. The house could not be sold so it was rented. Dave asserted that Mr Banks should not have been paid. Dave did not appear to consider whether these changes had altered the original arrangements with the builder such as to entitle him to payment for his work.

[52]              Despite Dave downplaying the liabilities of the partnership, it is apparent that the builder was putting pressure on the partnership by pressing for payment. In addition, the house could not be sold without a code compliance certificate. These matters would have needed to be resolved one way or another by the partnership. They remained unresolved at the time Dave ceased contributions to the partnership in March/April 2002. Mr Banks’ account was not paid until after Dave moved out of the house in March 2002.

[53]              Dave and his partner Christine moved into the  house  in  around  June or July 2001, initially intending to pay rent in addition to the $200 per week that Dave and Aron were already paying into the partnership account. However, Dave did not pay rent to the partnership, on the basis of advice that he could credit the rental against

$8,000 of tax benefits which Aron had taken. Once that had been exhausted, Dave started paying rent as well as the $200 per week. That $200 per week was to top up the shortfall in the outgoings for the project after taking the rental into account. Following Dave moving into the house, tensions between Aron and Dave escalated.

[54]              By August 2001, the brothers were communicating by letter with a view to ending the partnership. Dave said he found it offensive that Aron questioned his integrity throughout the project. Dave’s view was that Aron had become frustrated about having to keep spending money on the project, which he had thought would be completed in 6–8 months.

[55]              On 27 August 2001, Knapps wrote to Dave asking whether Dave was interested in purchasing the Property. They thanked Dave for sending through papers relating to the construction of the Property, noting that Aron had been through them in some detail. Knapps referred to Dave having instructed valuers Duke & Cooke Ltd to undertake a market valuation of the Property and asked for a copy of that valuation.

They offered to draft an agreement for sale and purchase if Dave wished to make an offer on the house.

[56]              In a letter dated 18 September 2001, Knapps again wrote to Dave, acknowledging receipt of the Duke & Cooke valuation and a Summit Real Estate marketing plan. They noted that the suggested market prices had been conveyed to Aron. Knapps asked whether Dave intended to make an offer on the Property and suggested that he send a formal offer through his solicitors. In a letter of the same date Knapps advised Aron that the Duke & Cooke valuation and the Summit Real Estate marketing plan indicated a market value of $225,000.

[57]              Knapps wrote to Dave on 28 September 2001, saying that Aron had offered to purchase the Property for $220,000, and if Dave did not respond by 5.00 pm on       1 October 2001, they would assume that he was happy with the sale price and proceed with processing the transaction. Dave would then be required to vacate the Property. This gave Dave less than one working day to respond to the offer, as 28 September was a Friday.

[58]              Dave did not respond within that timeframe. Knapps drew up an agreement for sale and purchase dated 5 October 2001, which transferred the Property from Aron (as trustee for the partnership of Aron and Dave) to Aron alone for a purchase price of

$220,000. The purchase price was to be paid by Aron taking over liability for the vendor’s debt at possession date secured by Mortgage No. 374108.4, and by payment of the balance into the trust account of Richards Woodhouse, Chartered Accountants. A condition of the sale was that those accountants would hold the funds to enable payment of the vendor’s GST liability and pending determination of all partnership assets and liabilities and inter-partner obligations.

[59]              On 9 October 2001, Knapps wrote to Dave saying that a transfer had been effected for a purchase price of $220,000 inclusive of GST, with Aron taking over the current ANZ partnership debt of $188,608.38 and paying the balance of $31,391.62 to the partnership accountants to be held pending determination of all partnership assets and liabilities and inter-partner obligations and issues. Notice was given that as the partnership no longer owned the Property, Dave was required to vacate it within the

42-day period provided under the Residential Tenancies Act 1986. Pending his leaving, he would be expected to pay a weekly rental of $360, being $250 for upstairs and $110 for downstairs. Knapps suggested that the resolution of the partnership differences be undertaken by arbitration, noting that a full audit of the partnership affairs could be undertaken, otherwise the matter would need to be resolved in the District Court.

[60]              This precipitated a response from Dave’s solicitors, Duncan Cotterill, dated 12 October 2001. They noted their concern at the transfer, stating the relationship was a partnership under the Partnership Act, however resolution pursuant to that Act did not seem to have occurred. The lawyers asked a series of questions, including whether the partnership had been dissolved formally; whether Dave had been released from his obligations under the ANZ loan; whether the partnership assets had been valued; whether the partnership accounts had been completed; and by what authority the rental for the Property had been set at $360. They said Dave did not accept Aron’s actions and would take steps accordingly.

[61]              Dave then replied personally by letter dated 12 February 2002 to the Knapps letter of 9 October 2001. That letter was marked “without prejudice” and made a proposal for settlement. I do not set out the terms of the offer but note that in that proposal Dave said he would be ceasing his payments of $200 per month into the partnership account.

[62]              On 18 February 2002 Knapps responded without instructions from Aron, saying that they had sent the accounts to the accountant to finalise the partnership position, following which they would advise Aron of the overall position of the partnership including on any adjustment needed. They said Aron would be back from sea in April 2002 and Dave should continue to pay the $200 per month to ensure the mortgage repayments continued until dissolution.

[63]              On 25 February 2002 Dave again wrote to Knapps.30 Dave said that he no longer had any interest in Aron’s opinions or concerns, and that in his view it was clear

30     This letter was marked “without prejudice” but contained no offer. The issue of privilege as relevant to this exchange of letters is discussed above.

Aron still did not intend to conclude the matter. Dave clearly expressed that he was tired of dealing with Aron and so would take the necessary action to bring the matter to a conclusion. He went on to say:31

By his actions Aron does not regard the property at 30 Maire St as a partnership, your letter of 18 October, 2001 also questions whether there was a partnership in existence and therefore so do I. The mortgage, title, bank account etc are all in his name; the financial cost in my opinion is, at the very least, even and therefore he can have the lot!

In my opinion there was / is and never will be any partnership between Aron and myself – there is nothing to dissolve. I am no longer interested in any correspondence from him regarding 30 Maire St and was not / am not, and never will be financially connected to it, or him at all.

We have paid the total mortgage payments for some months now (which are above market rent) and are no longer prepared to do so. From 11 March, 2002 we will pay a weekly rental of $250.00 until we have found another property
– we will have vacated 30 Maire St by 11 April, 2002 as advised in previous correspondence. I will make no further financial contribution from the date that we vacate. The keys will be delivered to your office.

Your client will probably be required to make a contribution to the bank account in order to cover the March mortgage payment (due 12 March 2002). The responsibility of the April (and any future mortgage payments and any costs associated with the property) will be soley his – the March mortgage payment will be re-couped in part by the rental payments we will make.

We know Aron will be back from sea before April, 2002 and request that you advise him of our intentions. I enclose the account for the water rates – your client will need this in order to claim gst.

One last point I would like to make…

The project was that of a spec house. Both Aron and I went into this with ‘eyes open wide’ – had Aron chosen to take a more active role in the project any concerns he had could have been addressed at the time.

The most common comment made by Land Agents throughout our endeavours to sell has been that the house had too many issues surrounding it’s incomplete state. Their opinion was that this is the likely reason no firm offers had been presented – Aron should put some thought into where the project would be had it not been for my efforts. The only reason the property now has any realisable value has been through my determination to see it complete as best able under these conditions.

I trust the message of this correspondence is clear. I believe I have been more than patient and have, until now, considered Aron’s interests at all times, this has not been reciprocated and I have had enough!!!

31     The letter dated 18 October 2001 referred to in the following quote has not been produced.

[64]              On 14 March 2002, Aron wrote directly to Dave in a letter marked “without prejudice”. Aron said the partnership owed in the region of $6,000 “after sale of the house”. In the letter he also made various allegations and made a proposal for settlement.

[65]              On 17 March 2002 Dave replied in a letter marked “without prejudice”, responding to some of the comments made by Aron, justifying claims, and criticising Aron’s lack of contribution to the partnership. Dave referred to the partnership having “turned to custard”. Dave said that he was “walking away” and would pay nothing further toward the costs of the Property other than rent. He made an offer to end the matter. The notice of intention to walk away and cease contributions was not connected to the proposal made.

[66]              In a letter dated 27 March 2002 marked without prejudice from Dave to Knapps, Dave disputed that the partnership debts were approximately $6,400 and for that reason said no further funds would be forthcoming from him. He said was moving from the Property by choice and that they would receive the keys when it had been vacated. The following day, Dave advised Knapps by letter that he had vacated the Property on 28 March 2002 and enclosed the keys. He concluded by saying:

Please note that this does constitute a conclusion to this matter and I am currently seeking legal advice as to my next course of action and will contact you shortly.

[67]              Dave now says that there was a “not” missing in that paragraph and it should read “does not constitute a conclusion to this matter”. He said this is borne out by the comments that he was seeking legal advice as to his next action and would contact Knapps shortly.

[68]              Dave made no further contributions to the partnership from then on. Aron continued managing the Property and paying the outgoings, including the mortgage, from that time until the present.

[69]              Nothing was heard from Dave or his lawyers until Dave wrote to Aron in a letter dated 25 July 2003, stating that he was contacting Aron in an effort to resolve matters concerning the Property. He noted that he had obtained a Duke & Cooke

valuation of the Property at $340,000. The valuation report states that the valuation was subject to the obtaining of a certificate of code compliance. In the letter to Aron, Dave suggested this presented an opportunity to recover the money that he and Aron had put into the house and to also receive some gain. Dave offered to discuss or enter mediation and said that if Aron failed to respond by 31 August 2003, he would commence legal action.

[70]              Aron says he got the letter and thought it was a “joke”. He did not want to reopen the dispute and said that he had been advised earlier by his lawyers to leave things as they were, so took no further steps. Aron did not tell his lawyers about the 2003 letter.

[71]              On 13 May 2004, Aron and his wife incorporated AB & KB Investments Ltd, which purchased the Property on 30 March 2005 for a valuation figure of $430,000. Aron says he and his wife were going to move to Westport and wanted to separate the Property from their other interests.

[72]              In 2008 Aron separated from his wife and he subsequently took over the Company, so is now the sole shareholder and director of the second defendant.

[73]              Aron has been unsuccessfully trying to sell the Property. He said he had attempted to do so in February 2007, May 2010, and April 2016. Aron says that in each case the offers were low due to the lack of a code compliance certificate and weathertightness issues, even though the house is of stucco construction rather than the monolithic cladding which is usually associated with “leaky building” issues. A report by the Department of Building and Housing dated 26 October 2011 observed that the reported defects were “unlikely to be a complete list” given the limited scope of the report. It went on to note that “it is important that suitable expertise is engaged to design and supervise any remediation work required”.

[74]              The house failed a Council inspection on 14 April 2021. The inspection report set out additional work that was required. Aron said he was required to retain independent building surveyors to obtain code compliance. In May 2021, the code

compliance certificate was issued for the house, and Aron made his most recent attempt to sell the Property.

[75]              In mid-2021, Dave became aware that there was no caveat lodged over the Property and that the Property was on the market. He filed an application to maintain the caveat, which Aron opposed. Associate Judge Johnson made a final order that the caveat not lapse on 17 June 2022.32

Analysis

The transfer

[76]              Mr Pearson submits that Dave never agreed to give up his interest in the partnership or the Property, and legally Aron was not entitled to assume that Dave’s silence in responding to his proposal to purchase the Property amounted to acceptance. He contends that this is supported by the fact that Aron acknowledged the need to resolve  their  ongoing  partnership  issues   in   letters   dated   9   October   2001,  12 October 2001, and 14 March 2002.

[77]Mr Pearson refers to the Associate Judge’s comment in the caveat decision:33

…[t]hat the law does not impose liability on an offeree where an offeror has proclaimed that silence shall be deemed consent is axiomatic.

[78]              Mr Pearson submits that this is particularly applicable here, given that Aron’s proposal meant that Dave would not receive any money for his contribution to the Property.

[79]              Mr Collins submits that in the circumstances Dave had a duty to speak if he did not consent to Aron’s proposal to purchase the Property. While he acknowledges the law’s general reluctance to impose liability for acquiescence by silence, Mr Collins submits that in these circumstances Dave’s silence could give rise to an estoppel on the basis that he was under a duty to speak. Mr Collins notes that the fiduciary duties imposed in a partnership are duties of good faith, honesty and fairness. In this context,

32     The caveat decision, above n 2, at [31].

33    The caveat decision, above n 2, at [31], citing Felthouse v Bindley (1862) 11 CBNS 869, (1862) 142 ER 1037.

he submits that it was improper for Dave to refuse to disclose that he would not consent to the sale, and this silence fostered Aron’s belief that the sale could proceed and the partnership would be dissolved.

[80]              Mr Collins relies on Infinity Enterprises NZ Ltd v Kinara Trustee Ltd, in which the following passage from Ted Baker Plc v AXA Insurance UK Plc was cited:34

75. The reference to ‘acting honestly’ did not … mean that the party against whom the estoppel was asserted had to be guilty of actual dishonesty in the sense of acting fraudulently. … [A]bsent a relationship of good faith or partnership or something akin to a joint enterprise the courts would not impose a duty to speak in the absence of impropriety of some description by the person alleged to be estopped. That impropriety might, however, come from the act of staying silent itself, as where a reasonable person would expect the person who is alleged to be estopped, acting honestly and responsibly, to bring the true facts to the attention of the other party known to him to be under a mistake as to their respective rights and obligations.

[81]              Mr Collins submits that, as a member of the partnership who had initiated the arrangement and knew the development was in trouble, Dave had a positive obligation to respond promptly if he disagreed with the purchase.

[82]              In my view, Dave’s silence cannot be construed as agreement or acquiescence. The parties had been in correspondence, attempting to negotiate that one of them take over the development. There was no indication in the correspondence that Dave had agreed that Aron should buy him out. There was not even any reasonable period for Dave to respond to Aron’s offer. Dave was effectively given one working day to respond.

[83]                Although the parties were in dispute, Dave was not guilty of any relevant impropriety at the time of the transfer such that estoppel would operate at that time to prevent him from asserting his rights to his interest in the partnership. In the event of a failure to agree on a resolution, it was then open to either party to apply to the Court for a dissolution of the partnership and taking of account or other relief. Dave’s lawyers did not avoid the transfer but instead put Aron on notice by stating that

34    Infinity Enterprises NZ Ltd v Kinara Trustee Ltd [2020] NZCA 309, [2020] 3 NZLR 626 at [101], citing Ted Baker Plc v AXA Insurance UK Plc [2017] EWCA Civ 4097, [2017] Lloyd’s Rep IR 682.

“David Bary does not accept the actions or assertions being made by Aron and we will take steps to protect his position accordingly”.

[84]              Dave was aware of the transfer of the Property to Aron. The transfer by Aron of the Property to himself was a breach of his partnership fiduciary obligations. At that stage, despite the transfer, Aron held the Property on behalf of the partnership as a partnership asset.

[85]              For the reasons which follow, the situation changed after Dave ceased contributions to the partnership following the letter of 28 March 2002. There is no evidence that the value of the partnership assets had increased. Therefore, in the period between the transfer and that letter Aron had derived no benefit from transferring the beneficial interest in the property. I find for the reasons set out below that Dave abandoned the partnership following the letter of 28 March. After that Aron legally was entitled to the assets and took on the liabilities of the partnership.

[86]              In summary, despite the breach of fiduciary obligations by Aron in effecting the transfer he gained no benefit at that time which he might be required to disgorge in equity.

Withdrawal from the partnership

[87]              Dave was the instigator of the project and based on his own evidence he did much of the management work. While Dave  was  critical  of the builder’s  work,  Mr Banks’ evidence was that he worked on the house until it was ready for the final inspection to attain code compliance, which Dave said he would arrange to be carried out. The failure to obtain that certificate and the consequent inability to sell the house at a price which would recoup costs in a timely manner was a core reason for the breakdown of the relationship between the brothers.

[88]              The evidence indicates that Aron and Dave had each made an initial contribution to the partnership of approximately $20,000.   Dave says he  contributed

$39,767.11, which included his share of a tax credit of $4,850. However, it is not clear whether this was the tax credit that Dave recouped by withholding payment of rent on the house when he took occupation. Dave says Aron paid $34,270 into the partnership.

Beyond that it is not possible for me to determine their respective contributions. The accounting and related records put before me are not complete. This is not surprising given the length of time which has passed.

[89]              As to their contributions to work on the house, Dave denigrated his brother’s efforts. Mr Bank’s evidence was that Dave did not contribute to the labour as agreed. Mr Banks made no criticism of Aron’s contribution when he was home from sea. That said, Aron was away at sea for months at a time and could not contribute to the building in those periods. In any event, I am not required to resolve the differences between the brothers as to their respective contributions nor reach a conclusion as to what the final accounting between the brothers should have been. It is sufficient to note that on the material before me there did not appear to be any significant disparity between the contributions while the partnership was on foot.

[90]              Dave confirmed that the partnership had tried to sell the house numerous times before Aron purported to take the beneficial interest in the Property in October 2001. Dave said in his evidence that the reason it could not be sold was because it did not have a code compliance certificate. Dave also confirmed that he was not interested in purchasing the Property when the discussions were taking place in 2001. He said he would have been unable to raise a mortgage due to the lack of a code compliance certificate on the Property.

[91]              Dave indicated in his letter of 25 February 2002 that he intended stop all financial contribution and Aron could “keep the lot”. While Dave said that he considered there was no partnership so there was nothing to dissolve, his expressed intention was to leave Aron with the liabilities. In that letter Dave made the point that the mortgage, title, bank account et cetera were all in Aron’s name. Dave said all costs would be the responsibility of Aron. In his letter of 27 March, Dave reiterated he would make no further contribution to the partnership funding to Knapps.

[92]              In cross examination in relation to his ceasing contributions to the partnership in March 2002, Dave said he had not wanted to be involved with Aron any further. He said:

Q.       … But you did leave Aron to finish this build, didn’t you?

A. I didn’t leave Aron to  do  anything.  I  simply  wanted Aron, Aron himself out of my life. I had no problem with the project, I would’ve happily carried on with it, but I didn’t want his involvement with me.

Q. And you left him with sole responsibility to pay the loan to ANZ,  correct?

A. Not immediately, no. We continued to pay for quite some months afterwards,

Q. But you did ultimately leave that  responsibility  solely  to  Aron,  correct?

A.       I don’t know how to answer that one to be honest.

Q.       I put to you Dave that you’d had enough of a failed business venture?

A.       No I’d had enough of my brother.

Q.       And that you walked away from it, correct?

A.       No – no, that wasn’t the case at all, no.

Q.       Well that’s what happened?

A.No because there was no ability to be anywhere near that house.  By  that stage Aron had moved in there with his wife.

Q.You  had in effect though decided to end the partnership at this point in time, hadn’t you?

A.       No I don’t believe I had.

[93]              Dave said the comments in his letter of 25 February saying he had had enough and would not be “financially connected” to the Property or make any further financial contribution were made in the context of an emotional outburst. In response to questions about ceasing to make any financial contribution, he said:

A.       There was no need to.

Q.       But you made no financial contribution to the partnership?

A.       No, the market rent for that property would cover it.

Q.       But you were –

A.       There was nothing more to do on the property.

Q.       Well hold on, there is –

A. The house was all but completed, other than the code of compliance, okay.

Q. And as it turned out, you did in fact deliver the keys to Aron’s lawyers’ offices?

A.       That’s right, yep.

Q. And do you agree that from that point on you made no further contribution to the property or the partnership?

A.No, I didn’t.  There was no need to because the house – he would’ve had to pay in the same way as we had to pay while we’re there or get a tenant in and it would more than cover any liabilities. It had been doing so for some time. So this suggestion that it, that it was a fail, it wasn’t a failed venture. I never saw it that way. The only failure was the relationship I had with my brother.

[94]              Dave accepted that he had left Aron to take responsibility for the project, but said that this was not by agreement. He said:

Q.Yes but as it turned out Aron actually did accept full responsibility for the ANZ loan, the code compliance certificate –

A.He  did  – there  was  no agreement between me and Aron at all.  We were partners for goodness sake.

[95]              In the circumstances, Dave’s walking away from his brother was the same as walking away from the partnership. As a partner, he had an obligation to contribute to the partnership. He failed to make any contributions or expend any effort to complete the project. He was aware the house was not saleable at an appropriate price without the code compliance certificate and also knew that the house would be sold at a loss, if it could be sold at all. Dave was aware that there was a substantial outstanding liability to the builder which would have to be resolved and that further costs would be incurred in the work required to comply with the code. He was also aware that even with rental income the partners had needed to make top-up contributions to service the liabilities.

[96]              Dave says that it must have been obvious that he was not walking away from his share in the partnership as his letter of 28 March 2002 concluded:

Please note that this does constitute a conclusion to this matter and I am currently seeking legal advice as to my next course of action and will contact you shortly.

[97]              Dave says that sentence should read “does not constitute a conclusion to this matter”. That appears consistent with the rest of the sentence. However even if the

meaning is as contended, it takes the matter no further. Dave had forcefully and in writing stated he was not going to contribute further to the partnership and Aron would have to take over the liabilities and assets. Dave acted on his expressed intention when he stopped making any payment toward or working on the project.

[98]              Aron accepted Dave’s withdrawal from the partnership by continuing to pay all the contributions required, including the mortgage repayments, and undertaking the work to complete the house to a standard that met code compliance. The bank loan was in Aron’s name alone, so he was responsible to the bank for repayment. The house was in his name from the outset so the bank would be unlikely to look to Dave for repayment of the loan. Aron also took over responsibility for paying the builder, as well as paying the other liabilities.

[99]              Dave accepted that the house was virtually unsaleable at the time he ceased contributions the partnership. He had obtained the valuation which was the basis for the payment in October 2001 by Aron, although the price paid of $220,000 appears to be $5,000 lower than the valuation. However, there is no indication as to whether that valuation was predicated on the house having a code compliance certificate. The same valuers valued the house for Dave in 2003 and that valuation stated it was subject to the house being issued a code compliance certificate.

[100]          The remaining equity in the Property after repayment of the bank loan appears to have been in the region of $36,000, which it seems from the correspondence would have been insufficient to repay the outstanding debts on the Property. The figures for the partnership compiled by Knapps for Aron and the partnership indicate that there would be a net debt position of $6,400 on sale of the house. Aron confirmed that in his evidence, although he agreed that not all of those debts required immediate payment. He said that he paid the builder out of the funds he paid to the accountants following the transfer of the Property to himself.

[101]          In any event, Dave did not contact Aron “shortly” after 28 March 2002, but wrote to him on 25 July 2003, some 16 months later. That letter did not make any offer to contribute to the partnership. The letter said that Dave was writing in an effort to resolve matters in a “fair and reasonable manner” and referred to a new

Duke & Cooke valuation of $340,000. Dave wrote that this could provide an opportunity for them both to recover some of the money expended on the project. Dave said if Aron failed to respond by 31 August 2003 that he would commence legal action. The valuation attached was produced at the hearing and states that the valuation is subject to the issue of the code compliance certificate. The house did not have a code compliance certificate at that date.

[102]          Aron did not respond to the July 2003 letter. No legal action followed until  20 years later.

[103]          I now consider the legal implications of Dave’s withdrawal from the partnership and Aron’s assumption of all liabilities and responsibility for the project. In summary, I conclude that Dave abandoned the partnership. Acceptance of that abandonment can be inferred by the actions of Aron in taking over all contributions to the partnership and its liabilities. He sought no further contribution from Dave.

[104]          Dave now has no claim on the partnership assets due to that accepted abandonment. The partnership was therefore dissolved by agreement when Dave’s contributions stopped following his letter of 28 March 2002. I conclude that Dave was released from the partnership obligations and Aron’s agreement may be implied by his actions.

[105]          If I am wrong about the agreement to release, I am of the view that there was nevertheless an agreement to dissolve the partnership, as evidenced through the correspondence between Dave and Aron in early 2002, but no agreement as to how the accounts would be settled. Dave expressed his intention to leave the partnership and he did so by stopping his contributions. Aron’s agreement may be implied by his actions in taking over the contributions and all liability for the partnership debts and obligations, making no call on Dave. Following the dissolution of the partnership, both parties were responsible for ensuring there was final accounting. However, the final accounting did not occur and any action to enforce that is now time barred.

[106]I now consider the legal basis for those conclusions in more detail.

Abandonment

[107]          In his commentary in relation to evidence of abandonment, the author of Lindley & Banks on Partnership refers to the decision in Prendergast v Turton.35 In that case, several partners refused to contribute additional funds needed for the partnership as the capital was exhausted. The others made the contributions and several years later succeeded in making a profit running a mine. Only then did the defaulting partners make a claim. Their claim was rejected on the basis of estoppel and abandonment.

[108]          A case with similarities to the present one is the House of Lords decision in Palmer v Moore.36 In that case a joint lessee for a gold mine had given written notice to his co-lessees that he was unable to contribute to the joint expenses and they could do as they liked with the lease. The Court held this was an abandonment of his beneficial interest therein, which was accepted by one of the co-lessees subsequently working the mine at his own expense. In that case, given the claimant partner held a vested right or interest in the lease, the law required that the claimant partner could not waive or abandon that right except by acts which were equivalent to an agreement. Their Lordships found that the fact that a remaining partner furnished the money required for working the lease out of his own resources, and sought no contribution by the claimant partner following the indication by the latter that he would not contribute, was sufficient acceptance.

[109]          The author of Lindley & Banks notes that where abandonment can be proved, it may be unnecessary to rely on laches or acquiescence, citing Lord Lindley’s observation as follows:37

… if a partner formally withdraws from an adventure when its prospects are bad [he will] be unable to claim a share of the profits resulting from it if it ultimately proves to be profitable; such cases, however, are not so much cases of laches as of estoppel or agreements to release.

35 Roderick I’Anson Banks Lindley & Banks on Partnership (21st ed, Thomson Reuters, London, 2022) at [23-36], citing Prendergast v Turton (1841) 1 Y & C Ch Cas 98, aff’d (1843) 13 L J Ch 268.

36 Palmer v Moore [1900] UKPC 7, [1900] AC 293.

37 Banks, above n 35, at [23-35].

[110]          In this case Aron’s actions in taking over the partnership liabilities was an implied acceptance of Dave’s abandonment leading to an agreement to release.

Agreement to release

[111]          Mr Collins submits that Dave in effect confirmed the dissolution through his correspondence to Aron’s solicitors in early 2002 when he disclaimed any interest in the Property and renounced any ongoing partnership obligation. On this basis, it is argued that Aron and Dave ended the partnership and at the relevant time demonstrated a  mutual  intent  that   the   partnership   to   be   dissolved.   Mr   Collins   cites  Kidd v Van Heeren, where it was stated that: 38

At New Zealand law, a partnership stands to be dissolved – whether expressly by notice, or impliedly from conduct – with the partners thereafter liable to each other for its winding up.

[112]          Mr Collins submits it is likely that the Property would have sold for a price that would have resulted in a loss for the partnership at the time at which Dave disclaimed any interest. He suggests that Dave sought to remove himself of the obligation to pay any owing debts or undertake the considerable work required to finish the house in order to receive a code compliance certificate.

[113]          I accept those submissions, which are supported by the evidence I have set out above. In terms of the Act the agreement to release amounts to an agreement to dissolve the partnership.

[114]          Therefore, by taking over the liabilities in fact, Aron released Dave from his obligations as a partner in return for his retaining the assets of the partnership.

Agreement to dissolve

[115]          Alternatively, if I am wrong and there was no agreement to release then I consider that nevertheless there was an agreement to dissolve the partnership, albeit that there was no agreement as to how the accounts were to be settled.

38     Kidd v Van Heeren [2021] NZHC 1414 at [47].

[116]          Dave evidenced his intention to dissolve the partnership, as apparent from his letters and his ceasing to pay the contributions. In the face of that evidence, he cannot now disavow that intention by saying he merely wanted Aron “out of his life”. He acted on that intention by leaving Aron with all responsibility for the partnership. Aron then impliedly agreed to Dave’s intention to dissolve the partnership, by assuming responsibility for all liabilities and management of the Property.

[117]          While the communications between Dave and Aron were clearly unsuccessful in resolving the remaining disputes in relation to the partnership, particularly settlement of the accounts, this does not mean that the partnership continued to exist. Similarly, Dave’s letter of July 2003 attempting to resolve matters in relation to the partnership does not indicate that the partnership continued to exist, but rather that there were lingering issues which needed to be addressed following its dissolution.

[118]          Therefore, this amounts to an agreement between the partners in terms of s 66(3) of the Act to dissolve the partnership. This is an exception to the general rule that a partnership entered into for a single venture or undertaking is dissolved by the end of that venture or undertaking.39

[119]          The partnership had been brought to an end by agreement of the partners to dissolve the partnership. However, both parties remained under an obligation to participate in the dissolution of the partnership, including by determining the final settlement of accounts between the partners.40 Of course, before that settlement could occur the parties needed to agree on the issues in dispute at the time.

Limitation

[120]          In view of my conclusion that there was an agreement to release, Dave has no partnership liabilities nor does he have a claim on the assets.

[121]          However if I am wrong about that, in the alternative I have found the partnership was dissolved by agreement and Dave’s interest in the partnership at the

39     The Act, s 66(1)(b). Where a partnership is entered into for an undefined time, it can be dissolved by notice given by any partner of an intention to dissolve the partnership under s 67.

40     The Act, s 82.

date of dissolution is based on his share in the partnership assets and liabilities. To ascertain that interest, the parties needed to finally settle accounts following the dissolution of the partnership.41 This never occurred. Any claim for accounting is now time-barred under the Limitation Act 2010.42 Dave cannot bypass the taking of account by directly pursuing a claim to an asset of the partnership. Without a taking of account, he cannot establish the amount of his share in the partnership.43 In view of the lapse of some 20 years since the matter for which the accounting would have been sought, any claim for accounting or for recovery of an interest in partnership is time-barred.

[122]          If the partnership had proceeded to a dissolution and a taking of account at the time, the Property would be part of the partnership assets and together with the liabilities would have been part of the reckoning in the taking of the accounts between the parties. Either partner could have sought a taking of account. Aron was in no better position to do this than Dave.

[123]          There was no suggestion that Dave was kept from the accounts or other partnership information. Dave also held himself out as the partner more experienced in running businesses and on his evidence had been the one that set up the partnership. It was Aron who sought information and the records from Dave in 2001. Dave was granted a power of attorney for Aron. At the outset it was Dave who had wanted the records to be in Aron’s name. This included the bank account, the title to the Property and the mortgage. Therefore, Dave could walk away from the liability of the mortgage without the fear of direct recovery by the bank against him personally.

[124]          Dave would have been entitled to pursue the realisation of his interest by a taking of account to establish the amount of that interest.44 He likely would have had a net liability to the partnership. He conceded in his evidence that the partnership was unable to sell the Property for a value which would have allowed a profit at that time. There were debts outstanding, and the house still had no code compliance certificate.

41     The Act, s 82.

42     Limitation Act 2010, s 32 provides for a limitation period of up to 6 years after the date at which the matter in respect of which the account is sought arose.

43     Marshall v Bullock [1998] EWCA Civ J0327-15.

44     Sobell v Boston [1975] 2 All ER 282.

[125]          The partnership was therefore dissolved through implied agreement between Aron and Dave, as evidenced by Dave’s assertion of his intention to walk away, his actions in doing so and Aron’s taking over all liabilities and completing the house without further call on Dave. Dave has lost the opportunity of claiming his share, as the time bar prevents him from pursuing a taking of account or otherwise recovering his interest. Section 32 of the Limitation Act provides that actions must be brought within a period of 6 years after the date at which the matter in respect of which the accounting arose. The recovery of debts are similarly time limited.45

[126]          In order to pursue his claim which would be barred by the Limitation Act, Dave has formulated it as an action for breach of trust, seeking relief by way of specific performance and equitable damages. Mr Pearson’s oral submissions elaborated on this, suggesting that the Property was held by Aron on a constructive trust for the partners.

[127]          I will deal with specific performance and damages in substitution for that relief separately, as the Limitation Act does not apply to such relief. However, the Limitation Act generally draws no distinction between claims in law and in equity. It contains a general provision for application of the limitation periods to equitable claims by analogy as follows:

9      Act may be applied by analogy to equitable claims

Nothing in this Act prevents it from being applied by analogy to a claim in equity to which no defence prescribed by this Act applies.

[128]          The accepted approach to the analogy adopted by the New Zealand courts remains that set out by the Court of Appeal in Johns v Johns.46 In that case, the Court embarked on a lengthy discussion of limitation by analogy saying:47

The fiduciary claim will always prima facie survive the statutory barring of an allied common law or indeed equitable claim. There will be a bar by analogy only when the fiduciary claim parallels the statute barred claim so closely that it would be inequitable to allow the statutory bar to be outflanked by the fiduciary claim. In order to determine how close the parallel is the Court must

45 Limitation Act, s 11.

46 Johns v Johns [2004] 3 NZLR 202 at [20]. This case was cited as the basis for the reasoning in other more recent decisions such as Becker v Anderson [2013] NZHC 2798 and Horspool v Glaister Ennor [2016] NZHC 1386.

47 At [80].

examine not only the underlying facts but also the nature of the relationship between the parties and the policy and purpose of the different causes of action. If there is a sufficient difference in any material respect, the suggested parallel is unlikely to be close enough to make it appropriate in equity to apply an analogous bar.

[129]          The courts have recognised that it would be undesirable if two plaintiffs could end up with potentially different results. This  was  highlighted  in  the  English  High Court decision of Coulthard v Disco Mix Club Ltd, noting:48

It would have been a blot on our jurisprudence if those self-same facts gave rise to a time bar in the common law courts but none in the courts of equity.

[130]          The English approach is different to that in New Zealand in that the English starting position is that the Limitation Act applies to equitable claims. Nevertheless, the New Zealand courts have recognised the need to avoid “relabeling” of common law claims. This was noted by William Young J in the Supreme Court decision in Proprietors of Wakatu v Attorney-General, when he said:49

It would be odd if the courts were to permit limitation defences to breach of trust claims to be defeated by the simple mechanism of relabeling the claims as being for breach of fiduciary duty.

[131]          In any event, the facts of this case satisfy the John v John requirements in that they give rise to a claim at common law which would be analogous to the claim formulated as a constructive trust for breach of fiduciary obligations or similar equitable claim for an interest in the partnership. Dave is seeking that his interest in the partnership be ascertained and that his share be realised.

[132]          Mr Pearson says the Property remains an asset of the partnership and Dave as a partner is entitled to a share in the partnership. Mr Pearson submits that if Aron is entitled to retain the Property, he would have made unauthorised gains from his fiduciary position.

[133]          There are no reasons why equity should intervene in this case. Dave walked away from the partnership and failed to contribute to the project, either financially or by application of effort, for 20 years. Aron agreed to release Dave and took over all

48     Coulthard v Disco Mix Club Ltd [2000] 1 WLR 707, [1999] 2 All ER 457 at 730.

49     Proprietors of Wakatu v Attorney-General [2017] NZSC 17, [2017] 1 NZLR 423 at [942].

liabilities, including the bank mortgage. Alternatively, the partnership was dissolved by agreement and no final settlement accounting was undertaken. The partnership apparently had a negative equity at the time that Dave walked away. Aron would be unfairly prejudiced if it were found that Dave remained in the partnership. He not only took over the liabilities, maintained the Property, paid all outgoings and obtained a code compliance certificate for the house making it saleable, but put those contributions into the property in reliance on Dave’s express intention consonant with his actions that he would make no further contributions nor seek a share in the property. I recognise that the claim for lost opportunity to purchase another property was discontinued by Aron but nevertheless from the time Dave walked away from the partnership, Aron’s resources and attention would likely have been tied up to a considerable extent in the project.

Specific performance

[134]          In his statement of claim Dave seeks relief by way of specific performance, requiring the respondents to perform their fiduciary obligation as trustees and take account of the extent of Dave’s interest in the property.

[135]          Specific performance is generally a remedy sought by a person who is the beneficial owner of a property. In this case Dave is not the beneficial owner of a property but rather alleges that he has a share in the partnership. This share is a chose in action.

[136]The remedy perfects what has already taken place in substance. The authors of

A to Z of New Zealand Law note:50

Specific performance is a discretionary remedy, the discretion is exercised on well-established but not rigid principles. As Gresson J put it in Gurney v Gurney (No 2), “the Court acts on equitable principles with an eye to the substantial justice of the case.” The result is that specific performance will not normally be available if:

(a)Damages are an adequate remedy; or

(b)The plaintiff is in substantial breach of contract or is unable or unwilling to perform his or her obligations under the contract; or

50     A to Z of New Zealand Law (2009, online ed) Equity at [26.24.1] (footnotes omitted).

(c)The plaintiff has acquiesced or been guilty of laches, misrepresentation, or unfair conduct; or

(d)The decree would cause the defendant great hardship; or

(e)The contract was procured by means which, although not amounting to grounds of invalidity like duress or undue influence, are nevertheless regarded by equity as unfair; or

(f)The contract is supported by consideration which is sufficient in law but which is materially inadequate in the eyes of equity; or

(g)There is a lack of mutuality of remedy.

[137]          Specific performance is not available at common law. In this case the relief is based on a claim of equitable ownership of land. Therefore, it is generally not subject to the Limitation Act.

[138]            Specific performance may be ordered where partners have agreed to share profits. It serves as a foundation for an order for a taking of accounts. However, in this case Dave no longer has an interest in the partnership. Alternatively, the partnership was dissolved and the plaintiff has acquiesced or has been guilty of laches or unfair conduct by his actions in leaving the partnership and failing to make any contribution for over 20 years. It would cause great hardship to Aron, having taken responsibility for all partnership liabilities and completing the house to make it saleable, to order specific performance as sought.

[139]          Therefore, a claim of specific performance based on an existing interest in the Property must fail.

[140]This claim for relief is dismissed.

Constructive trust

[141]          Mr Pearson further argued in submissions that the nature of the interest he sought to enforce in equity was based on a constructive trust. Dave seeks an interest by way of a remedial trust. Dave says the Property remains an asset of the partnership and Dave as a partner is entitled to a share in the partnership. Mr Pearson submits that if Aron is entitled to retain the Property, he would have made unauthorised gains from his fiduciary position. He argues that the test under Lankow v Rose is satisfied, as

Dave has made direct and indirect contributions to the Property, has a reasonable expectation of an interest in the Property, and Aron should reasonably expect to yield to Dave’s interest.51

[142]          Mr Collins also referred to Bunyan v Parish regarding the principles in relation to assessing whether the Court should impose a constructive trust.52 While the Judge in that case did refer to the constructive trust principles, the case involved a claim by a co-owner registered as the owner of the property. The issue arose in relation to a de facto relationship dispute. The relief sought and granted was under the Property Law Act 2007. The case has limited application here.

[143]          The interest of each of the partners in the firm was an entitlement to a share in the partnership assets. This includes the totality of the rights enjoyed under the partnership and all the debts and liabilities of the partnership as well as the assets. The nature of partners’ shares in partnership property has been described as an “equitable chose in action” consisting of the right to the partners proportion of the surplus after realisation of the assets and payments of the debts and liabilities of the partnership”.53

[144]          Any interest that Dave had in the Property was a beneficial interest derived from his share in the partnership. A claim to that interest was sufficient to maintain the caveat over the Property. However, as the partnership has now been dissolved, I have found that his share was determined by an agreement to release. Alternatively at the time he left the partnership his interest was yet be determined by a final settlement of accounts. His interest would have likely been of negative value.

[145]          The claim of constructive trust fails as Dave can now have no reasonable expectation of an interest in the Property, given that he has no interest in the partnership and no reasonable expectation of Aron yielding any interest to Dave in the Property. Alternatively, if he had been entitled to a share following dissolution it would have been of negative value and in view of his actions in failing to contribute

51     Lankow v Rose [1995] 1 NZLR 277 at 294.

52     Bunyan v Parish [2016] NZHC 2225, [2017] NZAR 931 at [35].

53     Banks, above n 35, citing Rojoda Pty Ltd v Commissioner of State Revenue [2018] WASCA 224 at [10].

he cannot have a reasonable expectation of an interest in any partnership assets nor could Aron reasonably expect to yield to Dave’s interest.

[146]The claim under this head fails.

Equitable defences

[147]          Mr Collins submits that laches only becomes relevant if Dave has a valid equitable claim. He argues that Aron was holding the Property as an asset transferred out of the partnership, and the only argument that Dave can make is that the distribution in 2001 was an improper distribution of partnership assets. However, this is a common law claim rather than an equitable one and would be time barred as more than six years have elapsed.

[148]In relation to equitable relief, Mr Collins submits that:

(a)The parties’ overall conduct for more than 20 years reinforces that:

(i)Dave had disclaimed any interest in the Property and renounced any partnership obligation, notwithstanding that he thought he had a caveat to protect his interest.

(ii)Aron relied on Dave’s representation that he would have no claim over the Property, as indicated by the considerable improvements he made to it and that it formed part of Aron’s matrimonial settlement.

(iii)Dave was opposed to making any further financial contribution to completing the project. Aron also had to incur the time and effort required to obtain the code compliance certificate in challenging circumstances.

(b)There were clear representations by Dave on which Aron relied, and an ongoing common assumption between them that Aron would take sole

responsibility for ANZ borrowings, completion of the build, and any future costs.

[149]          Regarding the question of whether Dave made a representation, Mr Collins submits that courts have moved away from requiring an “unequivocal” assurance, toward accepting an assurance that is “clear enough” to justify the reliance.54 He says that Dave clearly represented that he wanted nothing more to do with the partnership and disclaimed any interest in the Property. He then delayed bringing a claim for over 20 years, despite believing he had registered a caveat. Mr Collins submits that Aron assumed all responsibility for managing the Property, and given that Dave chose to avoid the problem of the failed development at the time, it is inequitable for him to now claim the fruits of Aron’s long-term investment.

Laches

[150]          Professor Rickett in The Laws of New Zealand explains the nature of laches as follows:55

Relief in equity will be denied to a plaintiff if that party has, by inaction or standing by, placed another party, the defendant or a third party, in a situation in which it would be inequitable and unreasonable to place that other party if the claim were afterwards to be asserted. Courts of equity require that parties who come to them to ask for their active interposition to give these parties relief should use due diligence, after there has been such notice or knowledge as to make it inequitable to lie by and not pursue that claim. A defendant will be able successfully to resist an equitable claim on these grounds if he or she can demonstrate that the plaintiff, by delaying the institution or prosecution of his or her case, either has acquiesced in the defendant’s conduct, has caused the defendant to alter his or her position in reasonable reliance on the plaintiff’s acceptance of the status quo, or has otherwise permitted a situation to arise which it would be unjust to disturb. The defences of laches and acquiescence require an inquiry as to whether it would be unconscionable to grant relief in the light of the reasonable expectations of the parties. As to the defence of laches, the length of the delay and the nature of the acts of the plaintiff during the interval are crucial in determining the balance of justice or injustice between the parties, and in some cases an inference may be drawn as a matter of common sense that delay in making a claim has prejudiced the defendant.

54     Huang v Dawson Builders Ltd [2017] NZHC 1444 at [51], citing Thorner v Majors (2009) 1 WLR 776 at [56].

55     Charles Rickett Laws of New Zealand Equity (online ed) at [275].

[151]          Acquiescence is sometimes also mentioned in conjunction with laches. Acquiescence refers to laches coupled with prejudice. This depends on the plaintiff having knowledge of his or her rights, not in the sense of the legal conclusions to be drawn from the facts, but of the facts from which those rights arise.56

[152]          Mere delay will not usually be sufficient to establish laches particularly if it would lead to a loss of an interest in land. The Supreme Court in Eastern Services Ltd v No 68 Limited referred  to  the classic exposition  of the doctrine of laches  by  Lord Selborne LC as follows:57

Now the doctrine of laches in Courts of Equity is not an arbitrary or a technical doctrine. Where it would be practically unjust to give a remedy, either because the party has, by his conduct, done that which might fairly be regarded as equivalent to a waiver of it, or whereby his conduct and neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of these cases, lapse of time and delay are most material. But in every case, if an argument against relief, which otherwise would be just, is founded upon mere delay, that delay of course not amounting to a bar by any statute of limitations, the validity of that defence must be tried upon principles substantially equitable. Two circumstances, always important in such cases, are the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy.

[153]          The Court noted that equity had been “most reluctant to accept that an equitable interest in land could be ‘lost or destroyed by mere inaction’”.58

[154]          The Court had earlier noted that it was cautious about endorsing an unqualified principle that mere delay without prejudice would give rise to laches, given that the doctrine required a balancing of equities. The Court said:59

We share the caution indicated by Cooke P for the Court of Appeal  in Neylon v Dickens about endorsing an unqualified principle concerning mere delay without prejudice. This is because the doctrine of laches requires a balancing of equities in relation to the broad span of human conduct. In the abstract, facts and the weight to be given to them are infinitely variable. But in a particular case they have to be identified and weighed for what they are, as a singular exercise.

56     Charles Rickett, above n 55, at [277].

57     Eastern Services Ltd v No 68 Limited [2006] NZSC 42, [2006] 3 NZLR 335 at [34], citing

Lindsay Petroleum Company v Hurd (1874) LR 5 PC 221 at 239–241.

58 At [39].

59 At [37].

[155]          If I had not found that the evidence in this case supported an agreement to release or alternatively a dissolution by agreement, I would have found that Aron was entitled to rely on laches as a defence against the equitable relief sought including specific performance. In this case the factors which indicate that it is unconscionable for Dave to be granted relief include: the length of the delay (over 20 years); the fact that the partnership had no equity at the time Dave ceased contributing to it; and that Aron relied on Dave’s assertions that he was walking away from the partnership leaving Aron to take over responsibility and make all the contributions, including the mortgage payments and obtaining the code compliance certificate.

[156]          Mr Pearson argued the defence of laches did not apply, as for many years Dave was under the assumption that his solicitors had lodged a caveat over the Property. Once he understood the situation, he did not delay in lodging a caveat. I do not consider this state of affairs is relevant to the consideration of laches here. Aron would not have been aware of the dealings between Dave and his lawyers resulting in the non-registration of the caveat. In any event, a caveat does not provide any substantive rights which would have enhanced Dave’s claim. Dave was well aware of the fact that the property was in Aron’s name and that Dave was not contributing to the partnership nor had he sought its dissolution. This was not a case where Aron had sought to hide the facts nor where Dave was unaware of the situation. It would be unjust in the circumstances to allow Dave after the lapse of so many years to now get relief in a claim for an interest in the partnership.

Estoppel

[157]          Professor Rickett describes estoppel in the context in which it is raised here as:60

Inactivity on the part of one party which induces another to adopt a certain belief and to act on that belief will give rise to a claim in estoppel and not laches. The use of the term “acquiescence” to refer to equitable estoppel rather than laches should not blur the line between the two doctrines.

60     Rickett, above n 55, at [278].

[158]          Mr Pearson submits that Dave is not estopped from claiming an interest in the Property, because he has not allowed Aron to rely on an assumption, belief, or expectation such that his denial of that would be unconscionable. It is submitted that:

(a)The evidence does not support the argument that Dave consented to Aron acquiring sole legal and beneficial ownership of the Property either personally or via his interest in the Company.

(b)Dave continued to contribute to the Property after October 2001.

(c)Even after the Property was purportedly transferred to Aron personally, correspondence between Dave and Aron recognised that there were partnership issues which needed to be resolved, in particular, determining Dave’s interest in the Property.

(d)The letter from Knapps dated 18 February 2002 advising that Dave’s proposal made on 12 February 2002 would be likely to find favour with Aron shows that the solicitors recognised the need for Aron’s instructions in order to respond to the proposal.

(e)In his letters, Dave was equivocal about whether he would give up his interest from a particular point moving forward, or at all. His proposal to “walk away” did not amount to a final agreement.

[159]          Mr Pearson argues that the letters exchanged between Dave and Aron tended to rebut the other’s position rather than work towards resolving the remaining partnership issues, and that it was not reasonable in those circumstances for Aron to hold an expectation that Dave had agreed that Aron was the sole legal and beneficial owner from October 2001.

[160]          Mr Collins cites Eastern Services Ltd v No 68 Ltd as authority for the proposition that an equitable interest could be lost by release or express agreement, noting that Dave was unequivocal about disclaiming any interest in the Property.61

61     Eastern Services Ltd, above n 57.

[161]          I have concluded that on the evidence there was an agreement to release Dave from the partnership or alternatively the partnership was dissolved by agreement between the partners. Therefore, the points raised by Mr Pearson concerning the lack of consent by Dave to the transfer are not relevant given the subsequent events. The other points raised are not supported by the evidence.

[162]          In the alternative, I would have found that the detrimental reliance by Aron on Dave expressed intention to leave the partnership and his cessation of contribution leaving all partnership responsibility to Aron supports an estoppel claim. Dave is estopped from pursuing an equitable claim against the Property for the same reasons as support the claim of laches.

Unclean hands

[163]            Mr Pearson submits that Aron has unclean hands and so should not be entitled to retain the Property. One of the best known maxims of equity is that “He who comes into Equity must come with clean hands”.62     This is explained by the authors of      A to Z of New Zealand Law as meaning that where a person seeks to invoke equitable relief he or she must not have acted improperly in relation to that transaction. 63 The authors note that even if the plaintiff can show a violation of his or her equitable rights, relief to give effect to those rights may not issue if it would allow the plaintiff to derive a benefit from his or her wrong.

[164]          I have found that Aron was in breach of his fiduciary obligations to the partnership when he transferred  the  Property  to  himself  beneficially  in  September 2001. However, in view of my conclusions on the dissolution of the partnership either by an agreement to release Dave from the partnership or by agreement to dissolve, the earlier breach by Aron becomes irrelevant for the purposes of considering whether it would be inequitable not to grant relief.

62     Jones v Lenthal (1669) 1 Ch Cas 154, 22 ER 739.

63     A to Z of New Zealand Law (2009, online ed) Equity at [26.38.2].

[165]          In any event, Dave does not have clean hands himself. He was in breach of his fiduciary obligations to the partnership by ceasing contributions and taking no further part in the operations of the partnership.

Failure to register caveat

[166]          Dave says that in October/November 2001 he had instructed his lawyers, at that time Duncan Cotterill, to register a caveat to protect his interest in the Property.

[167]          Dave’s lawyers reported to him in November 2001 that they had lodged the caveat over the Property. However, the lodgement was in fact rejected, so no caveat was registered against the Property. Dave was unaware of this fact until 2021, when the error was discovered. A caveat was lodged on behalf of Dave precipitating the present proceeding.

[168]          Dave says he was content knowing the caveat had been registered, as that would have alerted him to any dealings on the Property. However, as the caveat was not registered, Dave was not alerted when Aron transferred the Property into his company’s name. It was only chance that led Dave to the discovery the caveat had not been registered. I do not consider that this adds anything to Dave’s claim. The caveat would have added no legal interest that needed consideration. Dave suffered no loss or detriment that would be attributable to Aron due to the failure to register the caveat.

Conclusion

[169]          In summary, despite the breach of fiduciary obligations by Aron in effecting the transfer of the Property to himself personally, he gained no benefit which he might be required to disgorge in equity.

[170]          Dave abandoned the partnership, by expressing his intention to walk away from the partnership in his letters dated 25 February 2002 and 28 March 2002, and acting on that intention by ceasing to make any contributions to the partnership. Aron accepted this by taking responsibility for the partnership, resulting in an agreement to release. As an alternative, if I am wrong about that conclusion, Dave and Aron nevertheless agreed to dissolve the partnership in terms of s 66 of the Act.

[171]          Any claim for a final settlement and accounting of Dave’s partnership interest is time barred.

[172]          There is no reason in this case that equity should intervene to allow a claim to be brought which could have been brought at the time the partnership was dissolved, but which is now time barred under the Limitation Act.

[173]          The claim of specific performance must fail, for the reasons set out above. The claim of constructive trust also fails, as Dave can now have no reasonable expectation of an interest in the Property, given that he has no interest in the partnership or his interest was not finalised at the time he left the partnership 20 years ago.

[174]          If I had not found that the evidence in this case supported the conclusion that Dave abandoned the partnership, Aron was entitled to rely on the equitable defences of laches or claim estoppel to prevent Dave’s claim for specific performance or other equitable relief including equitable damages.

Costs

[175]          Aron had filed a counterclaim seeking to recoup losses attendant on the lodging of the claim, however he abandoned that at the hearing and has since filed a formal notice of discontinuance of that claim.

[176]          The parties confirm that whatever the outcome, the successful party should have costs on a 2B basis as a starting point. This seems appropriate and subject to submissions it appears a case where costs should follow the event. However, counsel seek that costs be reserved.

[177]          If costs are sought, any application should be made by memorandum filed and served within five days of this judgment and any response within another five days, with a reply in a further three days. The memoranda should refer to any relevant authorities and attach copies of those.

Grice J

Solicitors:

Tavendale and Partners Ltd, Christchurch LegalFocus Limited, Nelson

Gibson Sheat, Wellington