Kidd v van Heeren
[2021] NZHC 1414
•17 June 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2014-404-725
[2021] NZHC 1414
BETWEEN THE ESTATE OF MICHAEL DAVID KIDD
by its administrator BRYAN JOHN COOPER
Plaintiff
AND
ALEXANDER PIETER VAN HEEREN
Defendant
Hearing: 3-5, 8-12, 15-19, 22-26 and 29-31 March 2021 Appearances:
S J Mills QC, B O’Callahan, EJH Morrison and J Ding for the plaintiff
M D O’Brien QC, S D Williams and JRS Lewis for the defendant R C Knight and L A Moyle for Ms van Heeren-Hermans
Judgment:
17 June 2021
INTERIM JUDGMENT OF JAGOSE J
This judgment was delivered by me on 17 June 2021 at 11.00am.
Pursuant to Rule 11.5 of the High Court Rules.
………………………… Registrar/Deputy Registrar
Counsel/Solicitors:
S J Mills QC, AucklandM D O’Brien QC, Auckland
B O’Callahan Barrister, Auckland S D Williams Barrister, Auckland R C Knight Barrister, Auckland K3 Legal Limited, Auckland
Fee Langstone, Auckland
KIDD v VAN HEEREN [2021] NZHC 1414 [17 June 2021]
Contents
Introduction [1]
Summary background [6]
Evidence for the accounting [17]
Affirmative defences [25]
—preliminary issues [27]
—proper law of the partnership [36]
—partnership dissolution [47]
—nature of Mr Kidd’s claim [60]
The account at 18 January 1991 [66]
—introduction [66]
—1.01: Salaries – Tisco (directors’ emoluments) [83]
—1.02: Salaries – other South African companies (directors’ emoluments) [93]
—1.03: Salaries – WWL (directors’ fees) [98]
—2.01: Dividends from Tisco from 1976 to 1991 inclusive [102]
—3.01: Interest on shareholder loan balance with Tisco [104]
—4.01: Drawings – funds received by van Heeren from Genan [108]
—4.05: Drawings – funds paid to Credit Suisse accounts [118]
—4.06: Drawings – net sales value of St Heliers property [119]
—5.01: Partnership assets – cash [127]
… 5.1.1 and 5.1.5: DEM 6 million deposit with BNZ Singapore [131]
… 5.1.2 and 5.1.18: balance of Wellesley share sale proceeds [132]
… 5.1.6 and 5.1.22: funds held in Europe [137]
… 5.1.13–5.1.15 and 5.1.36A–E: transfers [144]
—5.02: Partnership assets – Sider liability [145]
—5.03: Partnership assets – Brasschaat acquisition and renovations [149]
—5.04: Partnership assets – Fenton Ltd [157]
—5.05: Partnership assets –WWL and Huka Lodge [159]
—5.06: Partnership assets – Optech [165]
—5.07: Partnership assets – Dunsel Investments [169]
—5.08: Partnership assets – Huka Trust [173]
—5.09, 5.10, and 5.12: Partnership assets – chartering companies [177]
—5.11: Partnership assets – Dibeen Investments [181]
—5.13: Partnership assets – Briar Trading Ltd [182]
—5.14: Partnership assets – gold bullion and accounts [186]
—5.15: Other gold [188]
—5.16: Prime NZ assets [189]
—5.17: Berrax NV [191]
—6.01: TAS shipment [192]
—6.02: Tisco [196]
—7.01: Drawings to be added back [197]
—7.02: Retentions to be deducted [202]
—interest [204]
The account at the date of final judgment [206]
—8.01: Value of Mr van Heeren’s property and assets [211]
—9.01: Huka Trust [214]
—9.02: WWL preference shares [215]
—9.03: St Heliers property proceeds [216]
—9.04: Brasschaat property proceeds [217]
—10.01: Adjustment for Huka Trust related party loans [218]
—10.02: “Unaccounted” cash [219]
—10.03: Adjusted value of 17 partnership entities [220]
—10.04: Adjusted value of 20 additional partnership entities [226]
—10.05: Briar [230]
—10.06: Gold account [235]
—10.07: Other gold [236]
—10.08–10.17: Mr van Heeren’s personal expenditure and remuneration [237]
—11.01–11.02: Litigation expenses, payments to Ms van Heeren-Hermans [238]
—12.01–12.02: Adjustments [239]
Result [242]
Next steps [244]
Schedule 1: text of Ms Snyman-Van Deventer’s brief (footnotes omitted) p76
Schedule 2: partnership assets value at 18 January 1991 p89
Introduction
[1] This interim judgment takes the account between Michael Kidd and Alexander van Heeren on the ending of their partnership late last century. A further judgment will be necessary to bring that accounting up to date.
[2] At the time the men gave their evidence for trial, each was resident in South Africa. Mr Kidd died at Gauteng on 18 February 2021. I then expressed, and now repeat, this Court’s condolences to his survivors.1 The proceeding is continued in the name of his administrator, Bryan Cooper, resident in the United Kingdom.2
[3] Trial was set down for four weeks from 1 March 2021, extended — after a two-day delay to accommodate Auckland’s renewed Alert Level 3 lockdown for COVID-19’s management in the community — to the whole of the month. Given Mr Kidd’s terminal illness, his evidence earlier was taken from South Africa by an audio-visual link in sittings over four nights in the first half of December 2020. Due COVID-19 travel restrictions, evidence of overseas witnesses (including Mr van Heeren) also was taken by audio-visual links in night sittings during trial. For the benefit of overseas parties, the audio aspect of the link was maintained for the
1 Kidd v van Heeren HC Auckland CIV-2014-404-0725, 19 February 2021 (Minute of Jagose J) at [2].
2 Administration Act 1969, ss 24–25; and Kidd v van Heeren HC Auckland CIV-2014-404-0725, 25 February 2021 (Minute of Jagose J) at [10]. Mr Cooper personally has been involved in related proceedings: see, for example, van Heeren v Cooper [1991] 1 NZLR 731 (CA); Cooper v van Heeren HC Auckland CIV-2004-404-2545, 26 October 2005; and Cooper v van Heeren [2007] NZCA 207, [2017] 3 NZLR 783. But that is immaterial for the purpose of administration.
entirety of trial. I am grateful to the Registry and the parties for accommodating those arrangements as the best alternative to in-person attendance at trial in the circumstances, despite their significant additional burdens in time, timing and effort.
[4] My judgment partly is ‘interim’, because — as invited by the expert witness accountants — there remain issues for their calculation on the basis of my findings here. These are calculations relating to the partnership’s cash balance on dissolution,3 and interest accruing on other values from earlier dates.4 The judgment was sought as interim by Mr Kidd’s senior counsel, Stephen Mills QC, to enable Mr Kidd’s perceived entitlement to election under s 79(2) of the Partnership Law Act 2019, although that may be affected by my finding as to the applicable law.
[5] My judgment also is interim because my findings have consequences for bringing the accounting up to date. Unless earlier agreed between the parties, further evidence will be necessary to make that assessment.
Summary background
[6] After meeting at their common South African employer, Mr Kidd and Mr van Heeren went into business on their own account from 1975.5 Their business predominantly was in international steel trading, initially conducted through various entities in South Africa and Zimbabwe (and subsequently also New Zealand, and a majority-owned company in the United Kingdom), collecting and holding the bulk of trading surpluses in entities offshore from South Africa. The partnership business extended beyond international steel trading to investment of its profits.
[7] By 1981, Mr van Heeren had relocated to New Zealand. Mr Kidd remained domiciled in South Africa, although his work took him all over the world. In the later 1980s, he relocated to the United Kingdom. Without excluding the other’s involvement in their respective areas, Mr Kidd was the steel trader, and Mr van Heeren the financial manager, in the partnership’s business.
3 See [130] below.
4 See [205] below.
5 The business initially was conducted also with Jack Ford-Massing, whose involvement ceased from early 1976.
[8] Although I discuss particular aspects of the financial structures later in this judgment, for introductory purposes, the partnership conducted its international steel trading business principally from Galaxy Export/Import Company Pty Ltd, trading as Tisco International SA (“Tisco”), in South Africa and Ferromar Pvt Ltd (“Ferromar”) in Zimbabwe (formerly (Southern) Rhodesia). The business was conducted against a background of United Nations economic sanctions on trade with both countries.6
[9] Trading surpluses were retained offshore in Netherlands Antilles’ Genan Trading Company NV (“Genan”) and New Zealand’s Prime International Limited (“Prime NZ”), which distributed funds to bank accounts and investments, including as held by other corporate entities primarily in New Zealand and the United Kingdom. Funds also were made available to the partners, who met periodically to review the partnership’s and their own respective financial positions.
[10] Genan employed a local company, NV Fides, to act as its professional directors. In the context of UN sanctions, Genan also was used to distance the business from its South African or Rhodesian principals. So too was the United Kingdom’s Prime International Limited (“Prime UK”) (and Prime NZ, the distinction between which was blurred), and Jocrow (Steel) Limited (“Jocrow”). Similarly, Ferromar operated for the benefit of the United Kingdom company, Briar Trading Limited. But Briar’s business was conducted on behalf of Genan and Prime NZ, Tisco maintaining ledgers for Briar “in account with” each Genan and Prime NZ, meaning Briar reported no profit.
[11] In very general terms, Tisco, as the operational entity, fell within Mr Kidd’s primary supervision; Genan, as the investment vehicle, within Mr van Heeren’s. Those roles were not exclusive: for example, in South African proceedings, Mr Kidd was found to be “an integral and essential part of the Prime NZ operations”.7 The joint business ceased in the early 1990s, after the men settled disposition of South African
6 Concerning the question of Southern Rhodesia, SC Res 253 (1968) (terminated pursuant to SC Res 460 (1979)); concerning the question of South Africa, SC Res 421 (1977) (terminated pursuant to SC Res 919 (1994)).
7 Kidd v van Heeren South Gauteng High Court 27973/1998, 21 May 2013 [South African judgment] at [48], noted by Fogarty J as among “findings of fact which resolved issues”: Kidd v van Heeren [2015] NZHC 517 [Interim payment order] at [58].
(and Hong Kong) entities to Mr Kidd in terms of 18 January 1991 sale and indemnity agreements.
[12] In 1996, Mr Kidd issued the present proceeding in this Court, claiming against Mr van Heeren specific performance and a variety of breaches of obligation. Mr van Heeren resisted the claim on grounds including the men’s full and final settlement in terms of the indemnity agreement. As determination of disputes arising under that agreement was subject to South African courts’ jurisdiction, the New Zealand proceeding was stayed, pending South African determination of the agreement’s interpretation, operation, rectification or validity.8
[13] In 2013, finding the indemnity agreement to have been obtained by Mr van Heeren’s misrepresentation,9 Satchwell J in the Gauteng Division of the High Court of South Africa held the indemnity agreement to be “void and of no force and effect”.10 In coming to that conclusion, the Judge found the men were carrying out their business in partnership,11 which partnership had acquired worldwide assets materially in excess of those disposed by the sale agreement:12
[T]he partnership … , through Genan and Prime NZ as also Tisco and Jocrow and the other entities, made acquisitions throughout the world. These include but are not limited to Prime NZ, Huka [Lodge], Dolphin Island, Cromwell/Wellesley shares which ultimately became a substantial stash of monies, Optech, gold bars and bearer certificates, cash on hand in bank accounts. The full extent of the funds retained and the assets acquired is unknown to me.
[14] On return to this Court in 2014, Mr Kidd amended his claim to seek an account in winding up the partnership.13 He pleaded Mr van Heeren had control of all the partnership’s assets, save those transferred to or retained by Mr Kidd “on partial account”.14 In April 2015, Fogarty J directed such account be taken, holding the parties
8 Kidd v van Heeren [1998] 1 NZLR 324 (HC) [Stay decision] at 34.
9 South African judgment, above n 7, at [170]–[171].
10 At [173].
11 At [126].
12 At [132].
13 The pleading for trial is Mr Kidd’s second amended statement of claim dated 27 May 2014.
14 The transferred or retained assets are pleaded as the South African companies other than Ocean Steel; the Drury Hills house; Bramlin Ltd; the Jocrow (Steel) Ltd shareholding; and an asset of Prime International Ltd, being “the benefit of a purchase of steel from Tous Aciers Speciaux of France, known as the Siamasse shipment” (also as the “TAS shipment”).
were bound by the South African findings of the men’s partnership,15 and its acquisition of specified and other worldwide assets,16 as issues estoppel.17 By ‘issue estoppel’ is meant, for reasons of public policy in “the twin objectives of finality and protection of litigants from repeated suits”,18 the South African findings are determinative in this jurisdiction. Fogarty J declared, by reason of the South African judgment:19
… the defendant is issue estopped from denying the partnership and the accumulated worldwide assets of the partnership, as found by the Judge, particularly in [126] and [132] of her judgment.
The declaration was upheld on appeal,20 from which further leave to appeal was refused.21
[15] This judgment now begins to take the account ordered by Fogarty J. However, before turning to it, the background includes also the Judge’s April 2015 direction Mr van Heeren make an interim payment into Court of USD 25 million, for Mr Kidd’s proposal for its investment and use.22 After Mr van Heeren’s extensive opposition to and delay in making the interim payment,23 the Court of Appeal appointed receivers to Huka Lodge’s owner, Worldwide Leisure Ltd (“WWL”, as bare trustee for Mr van Heeren),24 for the lodge’s sale to realise funds to make the interim payment.25 On such sale, payment was made on 4 February 2021, the excess in purchase price going to WWL. In the meantime, Mr Kidd had borrowed some USD 4.314 million from LCM Operations Pty Ltd (“LCM”), on terms said to entitle it to recover some USD 17.256 million in priority on any distribution from the interim payment, plus interest on the borrowing at the rate of 30 per cent per annum (compounding annually) from 14 May 2021.
15 Interim payment order, above n 7, at [117], referring to South African judgment, above n 7, at [126].
16 At [117], referring to South African judgment, above n 7, at [132].
17 At [117].
18 van Heeren v Kidd [2016] NZCA 401, [2017] 3 NZLR 141 [Court of Appeal judgment] at [178].
19 Interim payment order, above n 7, at [171].
20 Court of Appeal judgment, above n 18, at [180]–[183].
21 van Heeren v Kidd [2016] NZSC 163.
22 Interim payment order, above n 7, at [172(f) and (g)].
23 Kidd v van Heeren [2019] NZCA 275, (2019) 24 PRNZ 596 at [2].
24 At [66].
25 At [79] and [84].
[16] Shortly before trial, both Mr Kidd and Mr van Heeren claimed their respective impecuniosity such the pending trial was put at risk. Mr Kidd proposed to be paid out the interim payment, to settle LCM’s claim and to use the balance. I declined to permit such payment, on grounds of “the risks of non-recovery from LCM, and the proximity of trial and its prompt determination”. Instead, with LCM’s consent, I directed expert disbursements be made from the interim payment sum; with WWL’s directors’ consents, I earlier had directed identified litigation expenses be paid by WWL. After trial’s conclusion, I declined Mr Kidd’s renewed claim to be paid out the interim payment in advance of the commencement of interest’s accrual, while directing residual litigation expenses or costs be paid by WWL (to a cap proposed by WWL’s directors). Nothing in those orders affects any party’s ultimate liability for litigation expenses in determination of costs in this proceeding.26
Evidence for the accounting
[17] Ultimately for the account, but also relied upon in various aspects of interceding litigation here and elsewhere, the parties instructed expert forensic accountants: Shane Browning for Mr Kidd, and Alan Greyling and John Hagen for Mr van Heeren (the “accountants”). Their evidence before me drew on the vast detail of their previous testimony in this proceeding, but also of Mr Browning in the South African proceeding and of Mr Greyling in proceedings between the parties in Liechtenstein (in which reliance also may have been made on Mr Browning’s evidence).27
[18] For the account, I directed the expert witnesses convene and conference — under supervision of independent expert, Barry Jordan — to prepare a joint witness statement identifying the areas of their agreement and disagreement, including their
26 Kidd v van Heeren [2020] NZHC 3126; Kidd v van Heeren [2020] NZHC 3198; Kidd v van Heeren CIV-2014-404-0725, 12 February 2021 (Minute of Jagose J); Minute of 19 February, above n 1; Minute of 25 February, above n 2; Kidd v van Heeren CIV-2014-404-0725, 1 March 2021 (Minute of Jagose J); Kidd v van Heeren CIV-2014-404-0725, 19 March 2021 (Minute of Jagose J); Kidd v van Heeren CIV-2014-404-0725, 12 May 2021 (Minute of Jagose J); and Kidd v van Heeren CIV-2014-404-0725, 19 May 2021 (Minute of Jagose J). My May 2021 decisions were upheld by the Court of Appeal: Kidd v van Heeren [2021] NZCA 244 [Interim payment release decision].
27 Mr Browning’s witness statements for trial followed his ten affidavits filed in this proceeding; Mr Greyling’s witness statements respectively followed his nine such affidavits. Both accountants’ evidence developed as new information came to light, or different views were taken. For those reasons, together with their obligations to this Court as expert witnesses, I do not place any weight on their abandonment (or maintenance) of earlier positions they held.
reasons for the latter.28 I am grateful for Mr Jordan’s assistance, which was provided over six video conference sessions in January and February this year, and resulted in the 120-page joint experts’ report dated 22 February 2021.29
[19] In very broad terms, the accountants agreed they were to identify and value the partnership’s net assets at 18 January 1991 and add back the partners’ drawings, for equal division between them, then to deduct the value of partnership assets held by each partner to arrive at a net amount due to one or other. The resulting statement calculated Mr Kidd’s contended entitlements as at 18 January 1991, and their contended present value at 22 February 2021. Mr Browning calculated Mr Kidd was entitled to USD 22.768 million as at 18 January 1991, with a present value of USD 71.123 million; Mr Greyling and Mr Hagen comparably calculated Mr Kidd was entitled to USD 4.640 million as at 18 January 1991, with a present value of USD 10.418 million.
[20] The gap between the accountants partly is explicable by their (instructed) polar positions on the evidence available to them: Mr Browning assumes every asset directly or indirectly now or ever owned by Mr van Heeren is a partnership asset unless established to the contrary; Mr Greyling and Mr Hagen assume no asset is a partnership asset unless affirmatively established (including by law, through the assets and partnership issues estoppel).
[21] In addition to dispute as to identity of the offshore entities recipient of trading surplus,30 there is dispute if the partnership assets included particular residential properties,31 bank accounts,32 or quantities of gold claimed personal to Mr van Heeren. The accountants’ calculations also were complicated by the incomplete nature of the financial records available to them, which I address more fully at [70] below. Partly explained by the lapse of time since the partnership’s commencement in 1975, and
28 Mr Jordan also was appointed court expert, to answer any questions not agreed by the expert witnesses as may be put for his expert opinion: Kidd v van Heeren CIV-2014-404-0725, 4 December 2020 (Minute of Jagose J) at [1]–[2]. In the event, by reason of both the scope of expert witnesses’ dispute and the close proximity of trial, no such questions were proposed for his answer.
29 Joint Experts’ Report dated 22 February 2021.
30 See [69] below.
31 See n 117 below.
32 See n 118 below.
cessation of joint business in 1991, there is no complete or even comprehensive set of accounting or banking records for the partners, partnership, or entities. Instead, facts and inferences are sought to be drawn primarily from (incomplete sets of) periodic reporting sheets, listing that day’s balances at various bank accounts held by Genan, Prime NZ, and Briar, often with explanatory annotation of particular contributions to those individual balances.
[22] The calculations were subject to the accountants’ different instructions from the parties’ respective counsel. Mr Browning calculated Mr Kidd’s half-share entitlement to profits derived from the 18 January 1991 assets. Mr Greyling and Mr Hagen calculated Mr Kidd was entitled only to profits derived from his proportionate entitlement to the net balance of the 18 January 1991 assets. The difference is founded in the parties’ distinct approaches to the account, as either of a debt in the value of Mr Kidd’s share of the partnership’s assets at 18 January 1991 (as Mr van Heeren contends), or of his on-going proprietary interest in those assets until the partnership’s final accounting (as is Mr Kidd’s contention).
[23]Mr Greyling and Mr Hagen also calculated Mr Kidd’s alternative entitlement
— based on their instructions the partnership’s assets at 18 January 1991 exclude those transferred by Mr Kidd’s contended February 1990 sale of his shares in Genan to Mr van Heeren — as USD 1.276 million at 18 January 1991, with a present value of USD 2.820 million. (Mr Kidd responds Mr van Heeren is estopped from denying the inefficacy of the Genan shares sale, which I address at [51] below).
[24] In those circumstances, I cannot (and do not) run each party’s every contention to ground. As the accountants commend,33 particularly given the incomplete financial record, a broad-brush approach often has been necessary to surmount the lack of definitive information.
Affirmative defences
[25] Mr van Heeren’s amended defence for trial raises affirmative defences the proper law of the partnership was the law of South Africa; the partnership was
33 See [70]–[71] below.
dissolved pursuant to an oral dissolution agreement between the men in 1990/1991; and Mr Kidd has no proprietary claim to partnership assets retained by Mr van Heeren thereafter, but only a debt claim in a sum to be determined by the taking of the mutual account between the men as at 18 January 1991.34
[26] Mr Kidd applied to strike out the amended defence either in its entirety on the ground no preliminary issue remained to be tried; or of particular paragraphs predominantly on grounds those paragraphs’ allegations either already had been determined in South Africa,35 or as capable of there being determined now were abusive.36 On similar grounds, Mr Kidd gave notice of admissibility disputes raised by Mr van Heeren’s proposed evidence.37 I had no opportunity before trial to address these issues and, particularly as my pre-trial determination of them contestably may have excluded evidence for the impending trial, I determined I would address those matters at trial.38
—preliminary issues
[27] Part 16 of the High Court Rules 2016 governs this Court’s taking of an account. For present purposes, the following rules have materiality:
16.2Orders for accounts and inquiries
The court may, on the application of any party, before, at, or after the trial of a proceeding, order an account or an inquiry, whether or not it has been claimed in that party’s pleading.
16.3Directions
(1) At the time of ordering an account or an inquiry, or at another time, the court may —
(a)give directions or further directions about the account or inquiry:
(b)order additional accounts or inquiries:
34 The pleading is Mr van Heeren’s second amended statement of defence dated 29 July 2020.
35 In reliance on the res judicata (“the matter has been decided”) doctrine, and more particularly its emanation as issues estoppel: KR Handley Spencer Bower and Handley: Res Judicata (5th ed, LexisNexis, United Kingdom, 2019) at [1.01] and [1.05].
36 It is an abuse to raise in subsequent proceedings between the parties matters capable of being determined in prior proceedings between them: Henderson v Henderson (1843) 3 Hare 100 (Ch).
37 High Court Rules 2016, r 9.5(2) and (6).
38 Minute of 12 February 2021, above n 26, at [13]; and Minute of 1 March 2021, above n 26, at [5]. I also understood it was argued for Mr van Heeren Mr Kidd’s 11 August 2020 application required leave, as coming after the 1 March 2021 trial date was allocated on 5 August 2020. But leave only is required after the close of pleadings date, which is the later of either trial allocation or 60 working days before trial: High Court Rules 2016, r 7.6(4A).
(c)direct that the relevant books of account are prima facie evidence of the truth of the matters contained in them.
(2) An order or direction under subclause (1) overrides rules 16.6 to 16.21.
16.4Summary order for accounts
(1) If a party’s pleading claims an account or makes a claim that involves taking an account, the court may, on application by that party at any stage of the proceeding, order —
(a)an account; and
(b)that any amount certified on the account as due to any party be paid to that party.
(2) The court must not make an order under subclause (1) —
(a)if there is some preliminary question to be determined; or
(b)against a defendant who has not filed a statement of defence or an appearance, until the time for filing a statement of defence has expired.
16.5Mutual accounts
(1) The court may order that each party account to the other if it considers that each is accountable to the other because of —
(a)the relationship between the parties; or
(b)their course of dealing; or
(c)any other reason.
(2) At the time of making an order under subclause (1), or at any time afterwards, the court may direct —
(a)that the result of the account be certified as the net balance found to be due to 1 party; or
(b)that the certificate show the amounts found to be due to each party.
(3) An order under this rule overrides rules 16.6 to 16.21.
(Rule 16.5(3) overrides pt 16’s subsequent mechanisms for taking an account.)
[28]Fogarty J’s substantive 14 April 2015 orders were:39
(a) An account is to be taken between the plaintiff and the defendant to determine the amount due to the plaintiff arising out of the plaintiff’s claim as a partner as against the defendant.
(b) That any amount certified by the High Court on the basis of that account be paid.
[29] Mr Kidd submits Fogarty J’s 14 April 2015 judgment was made under r 16.4(1), inferring by reference to r 16.4(2)(a)’s prohibition no preliminary question
39 Interim payment order, above n 7, at [172].
remained to be determined. He draws support for that from the Court of Appeal’s subsequent rejection of Mr van Heeren’s argument preliminary issues remained before an account, as Fogarty J had ordered be taken, could proceed. The contended preliminary issues then included “the proper law of the partnership, the terms of the partnership and the impact of the mutual accounting process”.40
[30] In rejecting Mr van Heeren’s argument, the Court of Appeal held “[t]he terms of this judgment are such that we see no basis for disturbing Fogarty J’s orders.”41 Those terms were to endorse Fogarty J’s finding of the assets and partnership issues estoppel arising from the South African judgment. Argument as to the proper law of the partnership then only had materiality if “appropriately levelled at the finding”.42 But the Court of Appeal did not expressly exclude preliminary issues from subsequent argument.
[31] Rule 16.4(2)’s prohibition is as to the making of a “summary order for accounts”. Such summary order must not be made if there is some preliminary issue to be determined, or a timely defence or appearance has yet to be filed. At the time of Fogarty J’s 14 April 2015 judgment, Mr van Heeren’s defence broadly denied all allegations (save the existence of the pleaded entities), including that of the parties’ partnership, which Mr van Heeren affirmatively pleaded fully and finally was settled by the January 1991 sale and indemnity agreements, and raised an affirmative defence of prospective time limitation but no other.43
[32] In context, however, by “preliminary issue”, r 16.4(2)(a) refers to any issue with potential to undermine the summary order for accounts itself: that is to say, any issue affording a basis on which to resist the order, but not necessarily the accounts’ content. Indeed, on other than an order for mutual accounts, the account’s content — there being the accounting party’s verified specification of receipts — expressly is open to dispute on grounds of omission or error (but otherwise is deemed correct).44
40 Court of Appeal judgment, above n 18, at [180].
41 At [181].
42 At [182].
43 The pleading was Mr van Heeren’s statement of defence dated 5 June 2014. The limitation defence was maintained in the amended defence for trial, but no argument was addressed to it. I therefore disregard it.
44 High Court Rules, rr 16.11–16.13.
[33] Rule 16.4 is not an alternative to r 16.5, for the taking of mutual accounts on grounds “each party … is accountable to the other” because of any of the specified reasons. Each rr 16.4 and 16.5 make separate provision for orders to be made under their respective “subclause (1)”. Rule 16.5 contains no prohibition comparable to that in r 16.4(2). But that is because the Court’s jurisdiction to order a mutual account is founded on its consideration the parties are accountable to each other. Such may well be ordered on a summary basis under r 16.4, as much as may an individual account under r 16.2.45 An order under either rr 16.2 or 16.5 is not prohibited by reason of any preliminary issue remaining for determination. Rather, such preliminary issue would be determined in the course of the application’s determination. Rule 16.4’s disqualifying preliminary issues are as to summary entitlement to account, and not its content.
[34]Fogarty J’s 14 April 2015 orders — made summarily, as the Judge stipulated46
— plainly were grounded in the parties’ undeniable partnership, and their necessary joint or separate receipt of partnership assets, and thus were for (staged, as Fogarty J ordered) mutual account. The Judge referred to Mr van Heeren as “the principal accounting party”,47 Mr Kidd only being relieved of further work “in the meantime”,48 for subsequent “completion of the account”.49 The Judge’s order the account was “to determine the amount due to the plaintiff arising out of the plaintiff’s claim as a partner as against the defendant” is explicable by his ‘confidence’ “the remedy of account will result in a substantial judgment in favour of Mr Kidd”.50 It was not to deny the taking of mutual account, even summarily. His confidence is made out by the expert witnesses’ ultimate positions.
45 McGechan’s commentary proposes r 16.5 “does not confer any separate jurisdiction in itself”, but rather the Court’s account jurisdiction is under either rr 16.2 or 16.4: Robert Osborne (ed) McGechan on Procedure (online ed, Thomson Reuters) at [HR16.5.01]. In my view, the jurisdiction springs from either r 16.2 or 16.5, either of which may be exercised summarily under r 16.4. Notably, r 16.5(3) specifies the balance of pt 16 does not apply to mutual accounts. The jurisdiction to order mutual account under r 16.5 is distinct from that to order one party to account to another under r 16.2.
46 Interim payment order, above n 7, at [120].
47 At [172(c)].
48 At [172(e)].
49 At [172(h)].
50 At [172(a)] and [148].
[35] Whether Fogarty J’s 14 April 2015 order for account was made under rr 16.4 and/or 16.5, Mr van Heeren is not prevented from raising issues going to the content of (but not to entitlement to) that account. The Judge allowed, for example, “maybe arguments endeavouring to displace the statutory presumption of equality of ownership, quantum and remedies to obtain payments”;51 “possibly a challenge to a 50/50 share”,52 by rebuttal of its presumption.53 Such are not ‘preliminary’ to determination of entitlement to account, but ‘preliminary’ to determination of its content. Mr van Heeren’s amended defence does not dispute Mr Kidd’s entitlement to an accounting. I therefore decline to strike out the whole of Mr van Heeren’s amended defence.
—proper law of the partnership
[36] Mr van Heeren’s amended defence admits the parties’ partnership and pleads “the proper law of the partnership was the law of South Africa”. As said,54 the pertinence of that contention is said to resound in: dissolution of the partnership on or about 18 January 1991 in accordance with the contended oral dissolution agreement; conversion of any proprietary interest Mr Kidd may have had in partnership assets at the date of dissolution to a debt claim as at that date; and “application of the South African law principle of in duplum”, limiting any interest payable on the debt to an amount equivalent to its sum. Mr Mills argued the question of the proper law applying to the taking of the partnership account “is the subject of res judicata or issue estoppel or Henderson v Henderson abuse”.55
[37] None of the prior judgments is explicit as to the proper law of the partnership. Smellie J’s 1996 judgment notes the proper law of the partnership prospectively to be an issue.56 The South African judgment was to determine “the meaning, scope and validity” of the indemnity agreement,57 which was to be “determined according to South African law in the Republic of South Africa”.58 Satchwell J observed whether
51 At [132].
52 At [148].
53 At [106].
54 See [25] above.
55 See nn 35 and 36 above.
56 Stay decision, above n 8, at 31.
57 South African judgment, above n 7, at [1].
58 At [3].
or not there was a partnership between the men “was not a highlight in the pleadings”.59 But her Honour concluded “[i]t is difficult to comprehend the joint enterprise … constituting anything other than a partnership”, a view that was “fortified” by “the creation, movement and inter exchange of steel trading and funds”. The consequential “acquisition of the worldwide assets … confirms the finding of a partnership”.60 Inferentially, the Judge applied South African law in so finding.
[38] In summarily ordering the taking of an account between the men, before Mr van Heeren pleaded the proper law of the partnership, Fogarty J applied New Zealand law. His Honour expressly relied on s 27 of the Partnership Act 1908, as to rules applying to the interests and duties of partners, to conclude Mr van Heeren bore the onus of rebutting the statutory presumption of equal sharing.61 But that was in the context of Mr Kidd “seek[ing] to carry to New Zealand” the issues estoppel of the parties’ partnership and its acquisition of worldwide assets established by the South African judgment.62 Hence the Judge held “the disputes determined by the [South African judgment] should be final and conclusive in New Zealand”: first, by reliance on the issues estoppel, to avoid the two courts “making contradictory findings”; and second, as res judicata, to protect Mr Kidd from “having to make the same case with the same voluminous evidence” in New Zealand.63 As a matter of common law, the issues estoppel “resolv[ed] the dispute as to partnership, and to the accumulation of assets, which stood in the way of any duty to account.”64
[39] Enforcement in New Zealand of a partnership duty to account knows no jurisdictional constraint. Rather, by resort to this Court’s procedure for mutual account, it falls to me to determine the applicable law. In principle, matters of procedure are governed by the domestic law of the country to which the court in which the proceeding is taken belongs (the lex fori);65 matters of substance, by the law to which
59 At [119].
60 At [126].
61 Interim payment order, above n 7, at [105]–[106]. The 1908 Act now has been replaced by the Partnership Law Act 2019, a revision Act “not intended to change the effect of the law”: s 4, referring to Legislation Act 2012, s 35.
62 At [104].
63 At [116].
64 At [132], citing [117] of the judgment.65 Lord Collins (ed) Dicey, Morris & Collins: The Conflict of Laws (15th ed, Sweet & Maxwell, 2012) at [7R–001].
the court is directed by its choice of law rule (the lex causae).66 Subject to partners’ agreement for determination of disputes in and according to the law of any particular jurisdiction, it is open to this Court to order a partnership account in terms of the proper law of the partnership, wherever that may be. In summarily ordering such account, Fogarty J cannot be considered to have determined the proper law of the partnership, whether or not New Zealand.
[40] Certainly the Judge referred to New Zealand law in holding Mr van Heeren’s duty to account was “a continuing obligation as a partner in a winding up of the partnership”,67 and in referring to the “presumption of 50/50 sharing”,68 at least if “statutory”.69 The Judge did not limit rebuttal of that presumption to “any agreement (express or implied) between the parties”,70 as otherwise inferentially may have rejected any alternative proper law (if imposing a different consideration). Rather the point is as taken by the Court of Appeal, that “[its] attention was also not drawn to any difference in partnership law applicable in the two jurisdictions of significance for present purposes”,71 even while it endorsed Fogarty J’s finding “it is unlikely that Mr van Heeren will be able to displace the presumption that the partnership anticipated equal sharing in the profits”.72 That ‘present purpose’ was determination of the scope of the issues estoppel established by the South African judgment for taking of the partnership account in New Zealand. To the extent argument as to the proper law of the partnership had relevance to — was “more appropriately levelled at” — that determination,73 the Court of Appeal saw “no basis for disturbing Fogarty J’s orders”.74
[41] Thus, subject to the issues estoppel and res judicata, Mr van Heeren is entitled to plead the proper law of the partnership to be South African law. I therefore also decline to strike out that pleading. Instead, to turn to it, the proper law of the partnership may depend if Mr Kidd’s claim is to be characterised as contractual (as
66 At [7–003].
67 Interim payment order, above n 7, at [147], referring at n 62 to s 41 of the Partnership Act 1908.
68 At [155].
69 At [161].
70 At [105], in referring to s 27(a) of the Partnership Act 1908.
71 Court of Appeal judgment, above n 18, at [172].
72 At [182].
73 At [182].
74 At [181].
debt, as Mr van Heeren asserts), or proprietary (as Fogarty J and the Court of Appeal considered).75
[42] On the former (contractual) foundation, the proper law is of the place with the “closest and most real connection” to the contract.76 On the latter (proprietary) foundation, if a partner’s interest in the partnership’s assets is in its net surplus after realisation of the partnership’s assets and payment of its debts and liabilities, the proper law is that of the firm’s principal place of business.77 Otherwise, if the partner’s interest directly is in any or all of the firm’s assets, the proper law is that of the asset’s location.78
[43] Irrespective of the foundation for the accounting, as debt or net surplus, the proper law of the partnership here plainly is South African law. The parties were resident in South Africa; commenced their international steel trading partnership in South Africa; and operated it from South Africa (including the hub of its financial reporting). The partnership business’ engine-room was in South Africa. The partnership’s distribution of net surplus, including for investment, beyond that jurisdiction does not change its principal place of business as being in South Africa. Mr Kidd claims no personal interest in any partnership asset.
[44] Mr van Heeren called expert evidence on the South African law of partnership from Elizabeth Snyman-Van Deventer, a professor of mercantile law in the Faculty of Law at the University of the Free State in South Africa’s Bloemfontein and an advocate of the High Court of South Africa. She is “responsible” for the most recent updates of “the standard works on the South African law of partnership … most often quoted by the South African courts”, being “statement[s] of the law only and not a typical textbook or academic discussion or criticism of the law”.79
75 Interim payment order, above n 7, at [160]; and Court of Appeal judgment, above n 18, at [145]– [146].
76 New Zealand Basing Ltd v Brown [2016] NZCA 525, [2017] 2 NZLR 93 at [30]; rev’d on different grounds: [2017] NZSC 139, [2018] 1 NZLR 245), referring to Amin Rasheed Shipping Corp v Kuwait Insurance Co [1984] AC 50 (HL) at 61–63.
77 Roderick I’Anson Banks Lindley & Banks on Partnership (20th ed, Sweet & Maxwell, London, 2017) at [36-55] and n 268, citing Laidley v Lord Advocate (1890) 15 App Cas 468 (HL); Beaver v Master in Equity of Victoria [1895] AC 251 (PC); and Commissioner of Stamp Duties v Salting [1907] AC 449 (PC).
78 At [36-55].
79 Brief of Evidence of Elizabeth Snyman-Van Deventer dated 2 February 2021 at [8].
[45]Ms Snyman-Van Deventer’s written brief of evidence ‘endeavoured’:80
… to give a comprehensive exposition of the South African law of partnership and, so far as might be relevant, my expert opinion on the application of that law to the particular facts of this case.
I have been asked to address especially the following South African law issues: the essential elements of partnership; contributions; the ways a partnership may be dissolved; general consequences of dissolution; the action to enforce a dissolution agreement; and the remedies available for breach of the dissolution agreement.
She advised, in South African law, “a partnership is the carrying on of a business (to which each of the partners contributes) in common for the joint benefit of the parties with a view to making a profit”,81 the parties’ legitimate or legal agreement for which conclusively is established if such is their intention.82 Absence of any of such “essentialia” prevents finding of a partnership, or is determinative of its dissolution.83
[46] Mr Mills’ careful cross-examination of Ms Snyman-Van Deventer also obtained the following summary points:
Q. … The first [question] is that if a dissolution of a partnership is dependent on a condition, then the rights and duties of the partners remain unchanged until that conditions is fulfilled. Is that correct?
A. Yes.
Q. My second one was, if a partner wrongfully retains possession of partnership assets, following a dissolution, the partners continue to be treated as co-owners under South African law until the issues are finally resolved.
A. Yes, co-owners, not partners, yes.
Q. Next, there’s an obligation of perfect fairness and good faith between the partners which remains until the final settlement of accounts. Is that correct?
A. Yes, or final dissolution or termination, yes.
…
Q. … My next question for you is: am I right that if a partner continues trading with partnership assets that he has, or she, has unlawfully retained, then that
80 At [3]–[4]. Because of its criticality in comprehending this judgment, I annex the text of Ms Snyman-Van Deventer’s brief at Schedule 1, omitting her application of that law to this case.
81 At [23]–[24], citing Joubert v Tarry and Co 1915 TPD 277 at 280–281 and Pezzutto v Dreyer 1992 3 SA 379 (A) at 390B.
82 At [24]–[28].
83 At [29].
partner who has unlawfully retained must account for the profits to the other partner, the former partner?
A. Yes, if [un]lawfully retained, yes.
…
Q. My next — I’ve got two more for you, the next one is: if the contributions the respective partners have made are incapable of being separated out, then they’ll be treated as having equal shares. Is that the South African position?
A. Yes.
Q. So even though you don’t start from a presumption of 50/50, if you can’t separate it out then you end up 50/50, do you?
A. Yes, we start with, hopefully there will be agreement between the partners in the way in which they will divide. If not, the basic rule will be, it will be in accordance with the contribution. If you cannot determine that, only then will we look at the equal share.
Q. Yes. And finally, and I think, I think this’ll be the same as New Zealand law if I’ve got this correctly, there’s no debtor-creditor relationship with partnerships until there’s been a final settlement of the accounts, is that right?
A. I do not understand the question.
Q. Well, I thought that what you were telling the Court in your brief of evidence is that describing the relationship between, let’s say, two partners after they’ve ended their partnership, it doesn’t become as between them a debtor-creditor relationship until all of the final accounting has been done, and the Court has said A owes X amount to B, and it’s only at that point that you have a debtor-creditor relationship. Is that right?
A. No sir, it can actually be earlier when you use either the [inaudible] to go to court to ask the Court for a division.
Q. But it’s – we may be a little bit at cross purposes, it’s only at the point where the Court has ordered the division that there is then a debtor-creditor relation to the partnership amounts.
A. It’s not only the Court, it’s also from the moment where the partners make an agreement, and for specific division, and they agreed to divide things in according to a specific, a specific, in a specific way.
Q. Yes okay, so it’s the point at which by some means or other, by agreement or by the Court intervening and ordering it, that you have a determination as to who owes who what. Would that be right?
A. Yes.
I refer to Ms Snyman-Van Deventer’s evidence in its relevant context of this judgment.
—partnership dissolution
[47] Fogarty J’s 14 April 2015 judgment is open to being read as meaning the men’s partnership subsisted until finally it was wound up by distribution of its net assets,84 as previously I had done.85 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.86 South African law does not appear to allow for unilateral dissolution, except to the extent such implies the partners’ agreement to mutual end.87 The materiality of dissolution is in commencement of the former partners’ subsequent liability: under South African law, for each other’s respective share of his preceding “undivided share in the [firm’s] capital along with other partnership property”.88
[48] Mr van Heeren claims Mr Kidd’s February 1990 discussions with him — in which they agreed to divide the partnership’s assets between them, any imbalance in value to be addressed by offsetting payment in a subsequent accounting — constituted agreement to dissolve the partnership. The division is said to have been accomplished by Mr Kidd’s 21 February 1990 transfer of shares in Genan to Mr van Heeren, and Mr van Heeren’s 18 January 1991 transfer of shares in the South African entities (and the Hong Kong Bramlin Ltd) to Mr Kidd, which by default left Mr van Heeren with the balance of the partnership assets (in which Mr Kidd had no legal, as distinct from beneficial, interest).
[49] The particular prize in that contention is exclusion of the value of those entities and their subsequent transactions from calculation for division.89 In that respect, the assertion is similar to, if perhaps less ambitious in scale than, those Mr van Heeren previously essayed in attempted diminution of the partnership’s assets. In relation to Genan, those staunchly were rebuffed by Fogarty J,90 as inconsistent with
84 Interim payment order, above n 7, at [123] and [160].
85 Kidd v van Heeren [2017] NZHC 3199 [Receivers decision] at [86].
86 See, for example, ss 66 and 76 of the Partnership Law Act 2019.
87 Brief of Evidence of Elizabeth Snyman-Van Deventer, above n 79, at [73] and [75]. See also [109]: “Neither can a partner appropriate the sole right to liquidate the partnership”, citing Kaplan v Turner 1941 SWA 29.
88 At [85], citing Ben Beinart “Capital in Partnership” [1961] Acta Juridica 118 at 122.
89 The contended impact of Genan’s exclusion already has been identified. See [23] above.90 Kidd v van Heeren [2015] NZHC 2082 at [57]–[64]; and Kidd v van Heeren (No 7) [2015] NZHC 2475 at [20]–[24].
Satchwell J’s findings (which included finding the Genan share sale “[had] not been proven”)91 — a rebuff upheld by the Court of Appeal.92 Critically, Genan was the “conduit” by which the partnership’s trading surpluses were transferred to its other entities and investments.93
[50] On its face, the Genan share sale agreement was for Mr van Heeren’s payment to Mr Kidd of USD 3 million “in full and final payment for all [Mr Kidd’s] shares in Genan”. The agreement describes the men as “partners in the company of Genan Trading Company N.V.”, and records, in consideration for Mr van Heeren’s payment, “[a]ll the joint partnership assets and shares of Genan from the date of this Agreement shall be the sole property of [Mr van Heeren]”. The ultimate position taken by Mr van Heeren calculates transfer of Genan’s USD 6.727 million in cash reserves to him, for which Mr Kidd was paid USD 3 million for his share.
[51] There is room for some discomfort about Mr Kidd’s assertion the Genan share sale agreement was a “fraud”, obtained by misapplication of his signature provided on blank paper for administrative purposes. It convincingly is gainsaid by Gabrielle McLachlan, who witnessed both men’s signatures, and by John Walker’s unchallenged handwriting expert evidence as to application of Mr Kidd’s signature directly to the documented agreement, and his opinion such application was by Mr Kidd. That was not in evidence before Satchwell J. But the efficacy of the Genan share sale agreement directly was in issue in South Africa — including on broader grounds,94 and in which Mr van Heeren called and gave no evidence — where Satchwell J found “current worldwide partnership assets” obtained through Genan’s conduit, after its purported sale to Mr van Heeren.95
[52] Whether unarguable as res judicata, a Henderson v Henderson abuse, or inconsistent with the issues estoppel, Mr van Heeren cannot now be heard to argue the Genan share sale agreement was effective to transfer partnership assets to him in 1990.
91 South African judgment, above n 7, at [75] and [132].
92 Court of Appeal judgment, above n 18, at [164]–[165].
93 South African judgment, above n 7, at [51–[72]; Interim payment order, above n 7, at [94]; and Court of Appeal judgment, above n 18, at [164].
94 South African judgment, above n 7, at [76].
95 Interim payment order, above n 7, at [93]–[94] (emphasis added), referring to South African judgment, above n 7, at [132].
As previously I noted,96 Fogarty J did not accept the submission: Satchwell J had found Genan to be a conduit for the partnership’s acquisitions,97 meaning that was “part of the issue estoppel”.98 The permissible “consequences” of the Genan share sale agreement for argument on the account do not extend to its effective transfer of partnership assets to Mr van Heeren.99
[53] The remaining evidence for Mr van Heeren’s contended “oral dissolution agreement” is indeterminate. The Genan share sale agreement preceded Mr Kidd’s exploration from September 1990 of the termination of his relationship with Mr van Heeren. I am not satisfied it was a building block for the partnership’s agreed dissolution. ‘Agreement’ requires some degree of certainty. Despite Mr van Heeren’s subsequent denial of any partnership, the men may have been working through issues necessary to give that certainty. But they were forever bedevilled by Mr van Heeren’s perception of personal ownership of particular assets, inconsistently with what would become the assets issue estoppel.
[54] In addition to Genan itself, Mr van Heeren perceived he personally owned Fenton Ltd (which acquired Fiji’s Yanuca (or Dolphin) Island in May 1986), an 80 per cent shareholding in Optech International Ltd, the proceeds of Cromwell Corporation Ltd and Wellesley Resource Ltd shares, and Worldwide Leisure Ltd (which acquired Huka Lodge in December 1984). As a very substantial portion of the partnership’s assets, any ‘agreement’ to dissolve the partnership without reference to them was inchoate.
[55] I find no oral agreement of sufficient certainty between the men to constitute their express agreement to dissolve their partnership. Specifically, Mr Kidd’s evidence in South Africa, and reiteration and acceptance under cross-examination before me, of the men’s meeting in the Marriott Hotel in Amsterdam on 25 September 1990 — and, in particular, of his acceptance they agreed “Alex would assume ownership in the remainder of the partnership assets but would account to [him] for the balance of his
96 Receivers decision, above n 85, at [25].
97 South African judgment, above n 7, at [132].
98 Kidd v van Heeren (No 7), above n 90, at [23].
99 Interim payment order, above n 7, at [95].
half-share” — was so at odds as to what those partnership assets constituted as not to found the contended oral agreement.
[56] As a matter of pleading, it is claimed and admitted the partnership’s business and investment activities ceased “on or about 18 January 1991”. Mr Mills argued initially dissolution did not occur until the partnership was wound up, and subsequently no later than 1994 when Mr van Heeren first relied on the indemnity agreement as fully and finally settling the partners’ claims against each other. But cessation of the partnership’s business and investment activities is effective to dissolve the partnership according to South African law, as by the partners’ agreement to be implied from the actual cessation of their joint business.100
[57] I sought the parties’ submissions if unlawful purpose or conduct of the partnership business was effective to achieve its automatic dissolution at law from the earlier point in time of the unlawfulness. Ms Snyman-Van Deventer confirmed that was the position in South African law, as would a partnership’s purpose or conduct contrary to public policy (albeit such was “a grey area” during South Africa’s apartheid era). Both Mr Kidd and Mr van Heeren separately were explicit the partnership business at least had been conducted “illegally” from soon after its outset, in breach of both UN sanctions and South African foreign exchange and tax laws. At least from Mr Kidd, that evidence was express before Satchwell J,101 who may be expected to have been alive to its consequences for her finding of the partnership. Obviously, the partnership’s automatic dissolution at some earlier date would materially affect the issues estoppel: for example, the Judge found as late as 17 January 1991 Mr Kidd “remain[ed] a partner in a worldwide partnership”.102
100 Brief of Evidence of Elizabeth Snyman-Van Deventer, above n 79, at [73] and [77].
101 Mr Kidd’s evidence there included:
Galaxy/Tisco became a highly profitable international steel trading company breaking Rhodesian and South African trading sanctions by exporting the steel products of these countries worldwide.
Galaxy/Tisco subsequently generated large sums of foreign currency in U.S. Dollars off shore of South Africa from such transactions in contravention of South African foreign exchange and tax laws and also U.N. sanctions.
102 South African judgment, above n 7, at [137].
[58] I am entitled (or even required) to explore the prospective illegality.103 The Court of Appeal contemplated I “may consider it an abuse of process; a collateral attack on the liability judgment”.104 I do not. Counsel did not raise the issue; I did. The issues estoppel does not apply to me.105 But the sanctions’ contravention, at worst, only fell into South African public policy’s grey area. There is no evidence of domestic South African law beyond that essayed by Ms Snyman-Van Deventer as to partnership law. While I must be astute the Court is not used effectively to endorse or enforce unlawful arrangements or those contrary to public policy,106 I lack a foundation on which to conclude in South African law the partnership may earlier have dissolved by reason of any unlawfulness in its purpose or conduct. For the same reason, neither have I a sufficient basis on which to deny the parties their accounting on dissolution.
[59] I therefore conclude, in terms of South African law, the parties’ agreement to dissolve their partnership arises by implication from the cessation of their partnership business and investment activities on or about 18 January 1991.
—nature of Mr Kidd’s claim
[60] As said — on dissolution, under South African law — the former partners take their respective shares in the firm’s formerly undivided capital and other property:107
In the absence of a contrary agreement, a partner’s capital is to be repaid to him or her upon dissolution of the firm: each partner receives what he or she has risked in the business should there be a surplus of assets.
… Absent agreement on equal sharing, South African law is clear that on dissolution each partner is entitled to a share of the surplus according to the proportion of his contribution to the total pool of contributions. It is only when it is impossible to determine that one contributed more than the other that the partners will share equally or when there was an agreement to that effect.
103 Banks, above n 77, at [8-70].
104 Interim payment release decision, above n 26, at [25].
105 Thoday v Thoday [1964] P 181 (CA) at 197 as cited in Handley, above n 35, at [1.13]; and
Thompson v Thompson [1957] P 19 (CA) at 29 as cited in Handley, above n 35, at [15.06].
106 Horsfall v Potter [2017] NZSC 196, [2018] 1 NZLR 638 at [54], commenting on Patel v Mirza
[2016] UKSC 42, [2017] AC 467. See also Zheng v Deng [2020] NZCA 614 at [42(c)].
107 Brief of Evidence of Elizabeth Snyman-Van Deventer, above n 79, at [85]–[87] (footnotes omitted).
[61] After dissolution, the former partners’ relationship is that of co-owners of the partnership assets until they are realised and distributed for division between them:108 “[t]he general rule is that partners are not considered as debtors and creditors inter se until there has been a final or prior binding settlement of accounts”.109 Such settlement is the co-owners’ right:110
… to have the partnership property applied in payment of the partnership debts, and to have the surplus assets, if any, applied in payment of what may be due to him after deducting what may be due by him to the firm.
[62] Hence, on this accounting, Mr Kidd’s claim is made as co-owner with Mr van Heeren of the partnership assets. As co-owners, “their relationship is merely that of co-owners of joint property or of a joint estate”.111 In terms of the partnership assets, each is liable to account to the other for “that portion of the profits which is fairly attributable to the use of the capital contributed by [him]”.112 Until the assets are realised and distributed for division, their continued use of the assets is done “as trustees” for the co-owners, on which (absent alternative agreement, of which there is none here, either express or tacit) they remain liable to account to the other.113 The sale agreement is to be construed in that context, rather than as received on partial account.
99. If however the assets have been distributed or retained on dissolution by agreement, then this will not apply. The former partnership assets will at that point cease to be partnership assets.
[LAWSA] Although the bonds of the partners’ further association are dissolved, the relationship between the partners is finally terminated only when the liquidation of the firm is completed.
100.[LAWSA] Property contributed quoad usum can on dissolution of the partnership immediately be reclaimed in whole by the contributing partner. It is not subject to sale and division between the partners. Compensation for fair wear and tear cannot be claimed, but the contributing partner is entitled to the fruits and any appreciation in
value of such property. Property contributed quoad dominium falls for division between the partners on dissolution. It remains common property and each partner normally has the right to continue in joint possession for the purpose of liquidation.
101.[LAWSA] The general rule is that partners are not considered as debtors and creditors inter se until there has been a final or prior binding settlement of accounts and that a partner has no right of action against another partner for payment of any amount owed to him in connection with partnership affairs unless the firm’s accounts are settled and a credit balance remains due to the partner.
102.[LAWSA] Hence, actual repayment of money taken by a partner from the partnership funds is necessary on dissolution of the partnership only when the partner’s liability to the firm exceeds what is due out of the partnership fund to him, and then only to the extent of the excess.
103.[LAWSA] Upon dissolution of a partnership, each partner has a right against his co-partners to have the partnership property applied in payment of the partnership debts, and to have the surplus assets, if any, applied in payment of what may be due to him after deducting what may be due by him to the firm.
104.[LAWSA] This usually entails that the partnership must be liquidated, that is, a realisation of assets, payment of creditors and distribution of assets must take place. A liquidation need not, however, always be resorted to. Where, for example, partners agree that the dissolved partnership’s assets and liabilities are to be taken over by a new firm, and an outgoing partner is to be paid a sum representing his share in the firm, a formal or general liquidation of the partnership is not required.
105.[LAWSA] Although dissolution by the withdrawal of a partner in theory requires a liquidation of the partnership, in practice the remaining partners more often than not take over the business of the partnership, and the assets, either in terms of an express partnership agreement or by an express or tacit dissolution agreement.
106.[LAWSA] It is only in the absence of such agreement that formal liquidation takes place.
107.[LAWSA] Where partners agree, either in the partnership agreement or at a later stage, on the manner in which the partnership is to be liquidated upon dissolution, any partner can, upon dissolution of the firm, employ the actio pro socio to claim specific performance of such an agreement.
108.[LAWSA] In the absence of an agreement to this effect, the actio pro socio may in general be brought by a partner to have the partnership liquidated and wound up.
109.[LAWSA] It is not, however, the function of the court to act as liquidator, and an action cannot be brought against a co-partner which will cast this duty upon the court. Neither can a partner appropriate the sole right to liquidate the partnership. As a general rule therefore, in the event of disputes arising between the partners concerning the liquidation, the proper procedure is to appoint a liquidator to realise the partnership assets for the purpose of liquidating the partnership debts and to distribute the balance of the assets or their proceeds amongst the partners. This procedure is nevertheless not mandatory in all cases.
110. [LAWSA] Thus, in appropriate cases a partner may, for purposes of liquidating the partnership, claim an account from his co-partner together with a rebate on it and payment of what is found to be due. A partner may also present an account
to his co-partners and claim from them what is allegedly due to him in terms of that account: if the correctness of the account is disputed, the court will settle the account, provided that the issues between the parties are restricted and properly defined.
111. [LAWSA] Furthermore, if, after a distribution of assets and payment of creditors, a partner retains possession of a particular partnership asset or assets which have not been included in the distribution, a partner may institute the actio pro socio to claim a distribution of these assets.
112. [LAWSA] Where the partners cannot agree on the method of dividing a particular jointly owned partnership asset, or where a partner should retain possession of such an asset after dissolution, a partner can, as co-owner of the asset, institute the actio communi dividundo to claim a division of that asset.
113. [Bamford] A court will in general not set aside a dissolution agreement if the effect is to revive the partnership:
‘There may well be cases in which the cancellation of a dissolution agreement could have the effect of continuing an existing partnership, or even of reviving a former partnership. The examples that come to mind are those of a partnership in which the dissolution has not yet taken effect, or of a partnership in a particular asset or a particular source of income, or of a partnership reinstated as at the date of dissolution for the sole purpose of bringing all partnership assets properly and fairly to account in a revised dissolution. Here, on the plaintiff's allegations, the partnership ceased on 1 December 1972, and the undoing of the agreement of dissolution at this stage cannot create a general partnership during a period when none existed. The court cannot by a fiction deem the parties to have continued the partnership when, in fact, they did not do so. [The argument that the plaintiffs
are claiming nothing more than restitutio in integrum] might have had some validity if the plaintiffs' claim was that they be restored to the status quo ante as at 1 December 1972, so that a fair and proper dissolution as at that date could now be determined. However, the claim is not for that I have not been able to find
. . . any statement of principle or any precedent for a proposition that the court is entitled, in according relief for a dissolution procured by misrepresentation, to resurrect a general partnership which was in fact dissolved and ended so as to impose on the parties the reciprocal rights and obligations of partnership for a period during which they were not in fact partners, and in respect of their business activities during that period transacted entirely outside the bounds of the former partnership.’
114. [LAWSA] If the dissolution of a partnership cannot be effected by agreement and it appears that the renunciation itself or certain aspects thereof will be contested by the other partners, the partner who made the renunciation should approach the court for an order to effect or confirm the dissolution. If, for example, the facts are not clear or there is a likelihood of such a conflict of evidence that it would be preferable to have oral evidence, procedure should be by way of action rather than notice of motion.
APPLICATION
…
[13] SETTLEMENT OF ACCOUNTS
119. [LAWSA] As a general rule partners are not, in so far as partnership transactions are concerned, considered as debtor and creditor inter se until the partnership is wound up or until there is a binding settlement of accounts.
120.[LAWSA] A partner therefore has, as a general rule, no right of action against a co-partner for payment of any amounts owed to him in connection with the partnership’s affairs, unless the firm’s accounts are settled and there remains a credit balance due to him.
128.[LAWSA] There are two main reasons behind this rule. In the first place, the extent of a partner’s share in respect of any specific portion of the partnership assets can be determined only after a settlement of partnership accounts covering a specific time period. In the second place, it should be borne in mind that partners only share in the net profits and losses of the business and not in the gross returns or expenses of each individual transaction. Before the net profits or losses can be determined, a settlement of accounts is necessary.
129.[LAWSA] In certain instances a claim can be instituted by a partner against a co- partner without the necessity of having the partnership accounts settled.
130.[LAWSA] As the general rule requiring a settling of accounts is only applicable where a partner sues for the pro rata share owed to him in connection with the partnership affairs, an action can be maintained without a settlement of accounts where the claim is not one for a share owed, for example, where a partner claims that money be paid into the partnership account or that a co-partner transfer property to the partners in joint ownership.
131.[LAWSA] A claim can also be instituted without a settlement of accounts where the partners specifically agree that payment can be made to a partner regardless of the state of the partnership accounts.
132.[LAWSA] A settlement of accounts is naturally not required where the claim has nothing to do with the partnership affairs but concerns a private dispute between the partners.
133.[LAWSA] The rule that a settlement of accounts is generally required before a partner can sue his co-partner does not mean that there must be agreement as to the correctness of the accounts. In the absence of an express or tacit agreement as to its correctness, a dispute concerning the accounts can be brought to court by means of an action for an account and a debate.
134.[LAWSA] A partner may also by means of an ordinary actio pro socio proceed to claim what is owed to him upon his version of the accounts. If the defendant disputes the correctness of the plaintiff's version of the accounts, a defence can be raised in the pleadings in the usual manner. The court will then settle the dispute, provided that the dispute is of a limited or restricted nature. Where this is not the case, such as where the dispute concerns a wide variety of issues concerning the partnership business, the latter procedure cannot be followed, and the proper action would be for a debatement of the accounts.
135.[LAWSA] Disputes concerning the partnership accounts can also be settled by a third party such as a liquidator.
Schedule 2: partnership assets value at 18 January 1991
USD million 1.01 Salaries – Tisco (directors’ emoluments) - 1.02 Salaries – other companies (directors’ emoluments) - 1.03 Salaries – WWL (directors’ fees) - 2.01 Dividends from Tisco from 1976 to 1991 inclusive - 3.01 Interest on shareholder loan balance with Tisco - 4.01 Drawings – funds received by van Heeren from Genan - 4.05 Drawings – funds paid to Credit Suisse accounts 0.500 4.06 Drawings – net sales value of St Heliers property - 5.01 Partnership assets – cash 10.213 5.1.1 —DEM 6 million deposit with BNZ Singapore 7.262 5.1.2 —balance of Wellesley share sale proceeds - 5.1.6 —funds held in Europe - 5.1.13–5.1.15 —transfers 2.679 5.02 Partnership assets – Sider liability - 5.03 Partnership assets – Brasschaat acquisition and renovations - 5.04 Partnership assets – Fenton Ltd 0.500 5.05 Partnership assets –WWL and Huka Lodge 6.726 5.06 Partnership assets – Optech 0.050 5.07 Partnership assets – Dunsel Investments 7.659 5.08 Partnership assets – Huka Trust 0.240 5.09–5.10, & 5.12 Partnership assets – chartering companies 0.305 5.11 Partnership assets – Dibeen Investments 2.387 5.13 Partnership assets – Briar Trading Ltd 0.342 5.14 Partnership assets – gold bullion and accounts 0.823 5.15 Other gold - 5.16 Prime International assets (0.136) 5.17 Berrax NV (0.004) 6.01 TAS shipment 0.187 6.02 Tisco 1.140 7.01 Drawings added back 10.022 Interest […] TOTAL 50.895
7
13
1