DISTRICT COURT OF QUEENSLAND

The case for the plaintiff

1. [1]
   The plaintiff claims the sum of $104,000 being monies owing for two loans, $40.000 and $64,000 made by the plaintiff to the first defendant or alternatively the second defendant on 20 October 2005 and 31 March 2006. Interest on the $40,000 loan is also claimed pursuant to the Supreme Court Act 1995, and interest on the $64,000 loan is claimed at the rate of 20 per cent pursuant to the loan agreement.  Costs are also claimed.

2. [2]
   The plaintiff, Mr Frew, worked as a mechanic for some 16 years and then worked in sales with a company called Repco before commencing work at Coventry Auto Parts when they commenced business in Queensland running the tool and equipment division.^[1]  

3. [3]
   As tool and equipment manager for Coventry Mr Frew sourced equipment from various suppliers. He made sales in equipment throughout the various branches of Coventry (which numbered about 13 in Queensland) and was also responsible for installing equipment and training clients. He commenced employment with Coventry in early 2001.^[2]

4. [4]
   Mr Frew resigned from his position with Coventry at the end of 2006 and finished up in January 2007. During the time he worked at Coventry he met the first defendant Mr Morgan at a trade show held by one of Coventry’s suppliers at Virginia. Mr Morgan approached Mr Frew later on and the two became friends. Mr Morgan wanted to become a supplier to Coventry Auto Parts. In fact, Mr Morgan did become a supplier trading under the name Autoquip.^[3]

5. [5]
   The relationship between Mr Frew and Mr Morgan probably commenced in 2001 when Mr Morgan offered to supply to Coventry a computer diagnostic tool and to support it by training Coventry’s customers in the use of the equipment. The advantage to Coventry would be that Mr Frew’s time would be freed up in his support role.^[4]  Mr Frew was happy with the service provided by Mr Morgan and so further products were supplied by him to Coventry.

6. [6]
   In relation to the dealings between Coventry and Autoquip Mr Frew stated that any statements or invoices would have gone straight to the administration or to the local branches through which the product was sold. In the latter case Mr Morgan would have invoiced the local branch rather than Coventry.^[5] 

7. [7]
   According to Mr Frew’s evidence, Mr Morgan brought up the idea of a partnership when he and Mr Frew were in Cairns after attending a trade show in the second half of 2005. Mr Frew stated that:

“…And he brought up the issue and he gave  me a price as $40,000 to become a 50 per cent owner of the business and I didn’t think it was appropriate for me, at that time, to become a partnership of a business that we did a lot of business with.  Okay, being that I was working for a company.  So I said, ‘Look, if you need the $40,000 I can loan you $40,000’ and we come to the agreement with the car and the overseas trips which I thought was pretty good.  Okay.  It was income I didn’t have to declare.  So I thought it was a very good arrangement and in fact, that arrangement would be still in place today if the client – oh, sorry, if Greg hadn’t neglected to pay my $64,000 back.

You told his Honour that you said to Mr Morgan that you were prepared to loan him the $40,000.  Was there any term of the loan discussed?—No.  No, like I say, it was open ended but because of the trust I’d built up with Greg, I felt – and Sandra, I felt that we could ask for that back any time and there wouldn’t be a problem getting it back.  I, sort of, never had the feeling that I wouldn’t be able to have that money back if I asked for it.”^[6]

8. [8]
   Mr Frew stated that the topic of the partnership possibly arose subsequently when he and his wife went to the Morgan’s home for a meal sometime after the Cairns conversation but before he had actually got the money together. However, according to Mr Frew, no agreement was ever finalised to form a partnership in the business of Autoquip.^[7]  Mr Frew denied having signed any documentation in relation to a partnership trading as Autoquip.^[8] 

9. [9]
   The $40,000 was obtained by Mr Frew by refinancing his mortgage and the amount was deposited on 20 October 2005 into a Suncorp account the number of which had been provided by Mr Morgan.^[9]  Mr Frew and his wife found a vehicle they liked and informed Mr Morgan of the price that vehicle was provided for the personal use of Mrs Frew.  In mid 2008 the vehicle, a Honda Accord, was reclaimed.^[10]  Mr and Mrs Frew participated in a number of overseas trips to China paid for and organised by Mr Morgan.  These trips were to trade shows to enable Mr Frew to identify equipment that he could suggest to Mr Morgan to import and which could be sold on behalf of Coventry.^[11]

10. [10]
    In relation to the further loan in the sum of $64,000, advanced on 14 February 2006, Mr Frew stated that:

“Towards the end of the – of that year I – I needed to keep equipment sales going and Greg had no stock.  Okay.  And I said ‘What’s going on?’  And he said to me that he was having to repay a loan to Tony Edwards.  All right.  So, that’s how we came about to give him a loan so that he could bring the stock in, or I gave him a loan to bring the stock in so that we could continue with our sales at Coventry Auto Parts.”^[12]

11. [11]
    According to Mr Frew he was told by Mr Morgan to directly deposit the money into an account of a company named Beijing Hongtec Co Limited.^[13]  At the time Mr Morgan asked Mr Frew to make that payment there was a discussion about a rate of return on the advance and according to Mr Frew Mr Morgan told him there would be 20 per cent interest paid.  Mr Frew believed his money would be returned within 6 to 12 months.^[14]  The product duly arrived from Beijing Hongtec in China and Coventry ordered the product from Autoquip.^[15]

12. [12]
    Mr Frew began making demands for the repayment of the $64,000 loan in the second half of 2006.^[16]  However, he had no intention of asking for the first loan to be repaid because he envisaged himself forming a partnership with Mr Morgan in the future and “that money could be used to do that.”^[17]  Mr Morgan promised that money from his mother’s estate would be used to repay the $64,000 loan and that the money was expected to be available in November 2006.  Mr Frew telephoned Mr Morgan in January 2007 and requested a letter from Mr Morgan confirming that he was owed the money.  A recording of that telephone conversation was made and is contained on a CD.^[18]  Subsequently a letter was received from Mr Morgan on Autoquip letterhead which states as follows:

“18^th April 2007

 To Whom It May Concern

This letter is to support Mr M Frew’s application for a bridging loan.  The official trading name of the above business is Mobile Diagnostics Pty Ltd as trustee for the Morgan Family Trust (ABN 45907736938) trading as Autoquip.  My Name is Gregory Morgan sole director of the company.  The company operates as an automotive equipment supplier to the automotive industry, primarily in Queensland.

Mr Frew deposited approximately $64,000 (sixty four thousand dollars) with the company approximately 12 months ago in the way of investment into stock.  This money has continued to be worked within the business with no fixed time for repayment.  At this stage the company is not able to repay this amount of money due to

 1. Money owed by debtors

 2. Stock holding and

3. Money placed with overseas suppliers while stock is being manufactured for delivery.

To assist him in his property purchase, however I have stated to Mr Frew that I am prepared to pay him $32,000 from an inheritance that I have coming to me.  This inheritance has come about through the passing of my mother in December of last year.  The inheritance has been delayed by the Commonwealth Bank requiring probate of the Will.  Although my mother was a Queensland resident she initially resided in New Zealand and the executors for her Will are Malley & Co solicitors in Christchurch NZ.  I have had Woodward Lawyers of Coolangatta acting on my behalf to handle any matters in regard to the Will in Australia and in turn they have been liasoning [sic] with the NZ solicitors to expedite matters.  The disbursement of funds would have been completed some weeks ago if the Commonwealth Bank had not required the probate of the Will.

I have attached a copy of a letter from Woodward Lawyers giving an update of the proceedings to this point.  The probate being officially noted by the Queensland Supreme Court, is being done this week and this is the last official document (I am told) that is required by the Commonwealth Bank for the release of funds currently held by them.  All other funds in regard to the estate are being held by Woodward Lawyers and Malley & Co, and these are clear for disbursement as soon as the Commonwealth Bank release the funds that they are holding.

It is estimated that the disbursement of funds should be made within the next six to eight weeks, the main obstacle being the transference of correspondence between Australia and NZ.

There is approximately $75000 to $80000 in the estate, and there are only two beneficiaries of the estate in equal 50% share.  The only unknown matters are legal costs funeral expenses etc. however it is known that a minimum of $32000 dollars will be available to me upon disbursement of funds.

I have stated to Mr Frew that the amount of $32000 will be transferred to him or an account he nominates as soon as I have payment from the executors.

I hope the above information and the attached correspondence is of assistance to you.  If any further information is required please contact me on (07)5546 6220.

Yours faithfully

Gregory Morgan.”^[19]

13. [13]
    According to Mr Frew he noticed two things in particular about the contents of this letter. Firstly, the official trading name for the business, “Mobile Diagnostic Pty Ltd Trustee for the Morgan Family Trust” had not been known to him previously. Secondly, the statement that “the money is continued to be worked in the business and no fixed time for repayment” was contrary to his belief that the loan was for a relatively short period of between 6 and 12 months. By the date of the letter demand had already been made for repayment of the loan.^[20]

14. [14]
    In cross examination Mr Frew confirmed that Mr Morgan had raised with him in Cairns in September 2005 the possibility of his joining Autoquip as a partner, but that he thought it was inappropriate considering his position with Coventry. Mr Frew justified receiving benefits such as the use of a car and overseas trips from Autoquip on the basis that he was simply getting a fixed return on his loan without having a lot to do with the business as would be the case were he a partner.

15. [15]
    It was conceded by Mr Frew that he may have seen an invoice from Coventry to Mobile Diagnostics Pty Ltd, the Morgan Family Trust but that it was very unlikely that he would have seen a statement.^[21] 

16. [16]
    In relation to the loan of $64,000 Mr Frew was shown an invoice from Beijing Hongtec for $62,951.^[22]  He conceded that it may have been the case that this was the amount he paid rather than $64,000.  However, his bank account statement showed a payment of $64,000^[23] leading Mr Frew to speculate whether the difference may be explained by the imposition of bank fees.^[24]  In any event, Mr Frew stated that the agreement with respect to the $64,000 loan was reached in his office one or two weeks prior to his providing the money and it was at that time that a rate of interest of 20 per cent was also offered by Mr Morgan.^[25]  

17. [17]
    In relation to two letters sent by Mr Frew’s solicitor to the solicitors for the defendants the second of which was dated 27 November 2007, Mr Frew conceded that reference was made in both to the existence of a partnership between himself and Autoquip. Mr Frew sought to explain those references by stating that he simply left it to his solicitor to attempt to obtain repayment of the loans but that the situation was corrected subsequently in a letter dated 4 December 2007 from MSB Lawyers to Woodward Lawyers.

18. [18]
    Mrs Rosemary Frew, the wife of the plaintiff testified that she had visited the home of Mr and Mrs Morgan on approximately four occasions but that at none of those had any type of agreement between her husband and Mr Morgan been reached. She did recall that the topic of a partnership between the two men was raised in one conversation but that she was talking with Mrs Morgan at the time and the discussion about the partnership was only brief.^[26]  The only cross examination of Mrs Frew related to the circumstances in which she received exclusive use of the Honda motor vehicle.

19. [19]
    Mrs Frew was recalled at the request of Mr Morgan at the conclusion of the evidence for the defendants. Mrs Frew stated that she was not aware of Mobile Diagnostics either on 18 October 2005 (the date of the vehicle purchase contract) or on 22 October 2005 (the date when the vehicle was picked up).^[27] 

The case for the defendants

20. [20]
    The defendants’ case is that on or about 20 October 2005 the plaintiff acquired a 50 per cent interest in Autoquip from the second defendant. The acquisition was made by the plaintiff pursuant to an oral agreement made between the plaintiff and the first defendant on behalf of the second defendant on the evening following a trade fair in Cairns on or about 28 September 2005 and at a meeting at the first defendant’s home at Upper Coomera between the first defendant and his wife and the plaintiff and his wife in or about mid October 2005.

21. [21]
    In relation to the second loan of $64,000 the defendants’ case is that Mr Frew and the second defendant reached an oral agreement for Mr Frew to lend $62,951 to Autoquip in order for it to purchase motor vehicle hoist equipment from China. No rate of interest or repayment date was agreed to as between Mr Frew and the second defendant or by Mr Morgan on its behalf, in respect of the equipment loan. For the reasons set out in the counter claim only the sum of $9,348.50 are conceded to be due by the second defendant to Mr Frew.

22. [22]
    Mr Morgan testified that he was introduced to Mr Frew in mid to late 2001.^[28]  At that time he was trading as Autoquip which he had established in or about 1999.  Autoquip was registered by that name on 19 January 2000 but Mr Morgan had used the business name prior to its registration.  On or about 8 February 2002 the registered business name was changed to Mobile Diagnostics as trustee for the Morgan Family Trust.^[29]

23. [23]
    On 28 September 2005 Mr Morgan and Mr Frew shared a meal during which Mr Morgan proposed that Mr Frew come in as a 50 per cent partner with Autoquip. The conversation was as follows:

“Would you like to have a half-share in Autoquip?” And he said, “What would that cost?”  And, I said, “I would want $40,000”.  He said, “Just one moment, I like what I hear but”, he said, “I want to make a phone call”.  He moved away and made the phone call, I believe, to his wife.  He then came back and he said to me, “Yes”, he said, “I want to go ahead.”  We then had further discussions as to how we would – of the particular products we would buy and a little bit of direction.”^[30]

24. [24]
    Subsequently a further discussion was held between Mr Morgan and Mr Frew in relation to the latter’s buying into the business during which Mr Frew indicated that he wanted to involve his wife a bit further.^[31]  Mr Morgan invited Mr and Mrs Frew to have a meal with Mr Morgan and his wife to discuss the partnership and formally work out their respective roles.^[32]  During the meal it was, according to Mr Morgan, asked by Mrs Frew “What’s in it for us?” to which Mr Morgan replied “Well, Malcolm tells me that you’re driving an older car and that it was due – or rather overdue for replacement”.  And I said, “Well, why doesn’t the company buy you a vehicle and pay for the vehicle – while Malcolm’s working for Coventry’s and this goes as a payment towards a share in what Autoquip is doing”.^[33]  Mr Morgan stated that the evening finished quite amicably with everyone feeling good about what had transpired.^[34]

25. [25]
    On the following weekend (15 October 2005) Mr Frew, his two sons, a Mr Edwards and Mr Morgan unloaded a container of hoists and wheel balancers and tyre changers which had been ordered prior to the conversation between Mr Frew and Mr Morgan in Cairns.

26. [26]
    On 18 October 2005 Mr and Mrs Frew “went looking at cars and on the 18^th October, they did buy a car and took delivery of it on the 22^nd of October”.^[35]  Mr Morgan, who was self represented on the second day of the trial, tendered a vehicle purchase contract dated 18 October 2005 from Southside Honda in relation to the purchase of a Honda Accord motor vehicle.^[36]  The signature of Mrs Frew appears on the form in three places namely in relation to the trading allowance for her existing vehicle, also in relation to her statement as supplier of the trade in vehicle, and finally at the foot of the document.  The name of the customer at the top of the form is Mobile Diagnostics Pty Ltd.  Mr Morgan stated that Mrs Frew had signed the form on behalf of Mobile Diagnostics but when asked if she had authority to sign on behalf of the company Mr Morgan conceded that:

“In actual point, probably not, but in the relationship that we had with the Frews, I had no objection for her signing that particular document.  It was accepted by Mobile Diagnostics that they were supplying a car to the Frews and rather than me have to drive from Upper Coomera up to Southside Honda in Brisbane, Mrs Frew was already there.   She had chosen the car.  She had taken her trade-in vehicle in, which they were being paid a cheque for, and it was – I had no objection to her signing on behalf of the company.”^[37]

27. [27]
    Mr Morgan emphasised that the Frews had knowledge of Mobile Diagnostics at the time the vehicle purchase contract was signed by Mrs Frew.^[38]

28. [28]
    Mr Frew accompanied Mr Morgan and Mr Edwards to a Trade Show in Beijing in November 2005. At the trade show Mr Morgan and Mr Frew decided to build up Autoquip’s stock of hoists and, according to Mr Morgan, stated:

“I’ve only put the 40,000 in to be a partner in Autoquip”, he said, “what if I was to put in some operating capital as a loan to the business and”, he said, “I will bring in a couple of containers of hoists”, which he – which did happen.  The hoists were ordered.   We had already viewed the particular hoists that we wanted to bring in at the Trade Show and it was agreed to bring in another two containers of hoists totalling $62,951 from Beijing Hongtec, and Malcolm sent that money directly to Beijing Hongtec himself.^[39]

29. [29]
    The business of Autoquip continued through 2006 during which time sales were rather good.^[40]  In September 2006 Mr Morgan and Mr Frew travelled “as partners” to Frankfurt and attended a Trade Show.  At the end of 2006 Mr Morgan claimed he had no idea that Mr Frew was unhappy with his role in the business and Mr Morgan believed the idea still was that Mr Frew would eventually come in and be a full working partner in the business instead of making some sales through Coventrys for Autoquip.^[41]

30. [30]
    In January 2007 Mr Frew advised Mr Morgan that he had resigned from Coventry but that he wanted to keep going in the automotive equipment business. He also wanted to have something to do with his son’s mortgage company business.^[42]  Mr Frew made two further sales on behalf of Autoquip to a company in Jimboomba in February and May of 2007.^[43] 

31. [31]
    At some unspecified point Mr Frew indicated to Mr Morgan that he would like to do something about the return of the loan monies to which Mr Morgan replied that because Mr Frew was not actively working in the business and because it had lost quite a large part of the business from Coventrys there was a cash flow problem. Mr Morgan told Mr Frew that he had money coming from the estate of his mother who passed away in December 2006. Probate was not granted until September or October 2007 and prior to that Mr Morgan received a letter from the solicitors acting on behalf of Mr and Mrs Frew asking for the return of both advances (the $40,000 and $64,000 amounts). Mr Morgan gave that to his solicitor and from that point on there was no further direct contact between the parties.^[44]

32. [32]
    Mr Morgan stated that he offered $32,000 in respect of the $64,000 advanced by Mr Frew and referred to exhibit 3 which indicated that the loan would be paid by Autoquip and not by Mr Morgan personally as the amount of $62,951 had been loaned by Mr Frew through purchase of stock to Autoquip.^[45]

33. [33]
    The books of account of Autoquip do not reflect anything with respect to the loan monies.^[46]  Mr Morgan denied that he had ever agreed to pay 20 per cent interest on the $64,000 loan from Mr Frew.^[47] 

34. [34]
    Mr Morgan stated in his evidence that the emails admitted into evidence as exhibit 11. point to the fact that Mr Frew was operating as a partner for Autoquip and not a consultant. The emails show the prices at which Autoquip would receive stock from suppliers in China.^[48]

35. [35]
    In cross examination Mr Morgan conceded that the emails (exhibit 11.) disclose Mr Frew’s email address at Coventrys.^[49]  Mr Morgan also conceded that the financial statements and taxation returns for the financial years ended 30 June 2005, 30 June 2006 and 30 June 2007 were prepared on his instructions and that the company continued to be the sole operator of the Autoquip business after the time he claimed a partnership had been formed.^[50]  Mr Morgan agreed that the financial statements prepared by his accountant and the declarations made to the tax office do not disclose any partnership between himself and Mr Frew.^[51]  He also agreed that no partnership ABN or tax file number in respect of a partnership between himself and Mr Frew had ever been applied for.^[52]  No partnership financial returns have ever been prepared or submitted to the taxation office.^[53] 

36. [36]
    Mr Morgan agreed that the business of Autoquip was disposed of in September 2007 and that Mr Frew played no role in that disposal.^[54]  He also agreed that his Counsel on the first day of the hearing had not suggested to Mr Frew in cross examination that he and Mr Morgan had travelled as partners to Frankfurt.  Nor had it been put to Mr Frew or his wife that there was great excitement at the dinner at the Morgan’s residence because Mr Frew and Mr Morgan were entering into a partnership.^[55] 

37. [37]
    The $62,951 loan from Mr Frew was conceded by Mr Morgan to have been a loan to Mobile Diagnostics Pty Ltd and that the company has not repaid any part of the loan.^[56]  The business of Autoquip was sold to a couple of companies one of which was Gresson Pty Ltd of which Mr Morgan is the sole director and sole shareholder.^[57] 

38. [38]
    The wife of the first defendant, Mrs Sandra Morgan stated in her evidence that she recalled the dinner in early October 2005 at her residence. She stated that there was great excitement at that meeting because of the partnership. Her evidence was:

“We discussed what would happen with that partnership.  It was discussed in full because Malcolm was really concerned at the time, because he was still working for Coventrys, that the knowledge of the partnership wasn’t made open, because he saw it as a conflict of interest.  At that point, I think Rosemary said, “Well, what’s in it for us?”  at this point, and then it was discussed about a car being made available, because Rosemary said – and they are words to the effect of, she was driving an old clunka and she could do with a new car.  So that was discussed.  Then it was also discussed about travel overseas.  I think we’d just – we’d been over to China in Easter of that year and we were still quite excited and wide eyed about what we’d seen in China, and, of course, we were talking about that at the dinner, and we talked about, perhaps, travel overseas being part of the – until Malcolm was able to leave Coventrys and come into the business as a full time working partner.  We were talking about maybe travel to China for Malcolm and for Rosemary.”

39. [39]
    In cross examination Mrs Morgan stated that she believed that the partnership was formed in Cairns^[58] but later in her evidence she stated that she thought that the partnership was officially formed at the dinner party at her residence.^[59]

The credibility of the witnesses

40. [40]
    Credibility of the witnesses is of particular significance in this case. There is nothing (apart from references to a partnership in two letters written by the plaintiff’s solicitor) in writing to confirm the version put forward by Mr Frew or by Mr Morgan. It is disconcerting, to say the least, that mature and experienced business men would conduct their commercial affairs in such a cavalier and off-handed manner. The lack of any written support in documents relating to the business of Autoquip, including financial statements and taxation returns, is particularly damaging to the cases of the first defendant and the second defendant.

41. [41]
    I found Mr Frew to be an honest witness who struggled at times to remember details of conversations. He was subjected to a lengthy cross examination by counsel for the defendants but remained consistent throughout his testimony. With respect to Mrs Frew I consider her to be an honest and forthright witness such that I have confidence in accepting her account of the conversation at the dinner party at Mr and Mrs Morgan’s residence. It is a matter of regret that counsel for the defendants did not put or suggest to Mrs Frew that there had been great excitement at that dinner in accordance with the evidence given by Mr and Mrs Morgan.

42. [42]
    So far as the evidence of Mr Morgan is concerned I thought that he tended at times to overstate his case with regard to partnership discussions between himself and Mr Frew. Whilst I have no doubt that the formation of a partnership was discussed after the trade fair in Cairns, I am not persuaded that any agreement had been reached in relation to the finalisation of such discussions. Mr Morgan’s credibility is weakened by the absence of any documentation in the records of Autoquip that suggests that a partnership had been formed with Mr Frew. The evidence of Mrs Morgan as to the conversation at dinner at her residence I found unconvincing. Although I am able to accept that the topic of a partnership was raised at the dinner I have strong doubts that the conversation extended to the stage where it could be concluded that an agreement had been reached.

The contentions of the parties

43. [43]
    The defendants submit that the $40,000 advance by Mr Frew was a payment by him to Mobile Diagnostics for the acquisition of a one half interest in the business Autoquip. However, Mr Morgan’s evidence asserts that what was being purchased, in effect, was a partnership between himself and Mr Frew. It is difficult to understand how a partnership could eventuate between Mr Frew and Mr Morgan when the legal interest in the business was owned by the company and not by Mr Morgan.

44. [44]
    The financial statements of the business (which was always owned by the company) reveal no change in structure from a time prior to the alleged partnership, during it and after it notionally ceased. All the financial statements were prepared upon the instructions of Mr Morgan in such a way, according to him, to conceal from Mr Frew’s employer (Coventry) the fact that Mr Frew had an interest in the business because of a perceived conflict of interest. However, the financial statements would have shown simply income to the business in respect of the disposal of half of its operation. As counsel for the plaintiff observed, there is nothing confidential about that. Contrary to the submission by the defendants of sharing of profit, the statements for the 2006 year, which falls during the existence of the putative partnership, reveal that a profit was made but there is no evidence in the financial statements of any profit being taken by Mr Frew. All the profit was apparently taken by Mr Morgan quite inconsistently with the counterclaim. This profit is not brought to account in the reconciliation set out in the counterclaim alleging that Mr Frew owes the business money.

45. [45]
    The provision of a motor vehicle for the exclusive use of Mr and Mrs Frew and the overseas travel paid for by the business are, in my view, equally consistent with Mr Frew’s position being that of a consultant as with the contention that he was a partner.

46. [46]
    The second advance appears in the financial records of the plaintiff as one of $64,000.^[60]  However, in the financial records of the business it appears as $62,951.^[61]  Mr Frew was unable to explain the discrepancy other than by suggesting it may have been a result of the imposition of bank charges.  I propose to treat the advance as being in the sum of $62,951 in the absence of any evidence that satisfactorily explains the difference in the two amounts.  I do so notwithstanding the notation by Mr Morgan in exhibit 3 in the following terms: “To whom it may concern – Mr Frew deposited approximately $64,000 with the company approximately 12 months ago in the way of investment into stock.”  That advance is admitted to be a loan by Mr Morgan who maintains that it was a loan to the company and not to himself personally.  Once again there is no mention of this in the books and records of the company and undoubtedly that claim is contrary to declarations made by Mr Morgan to the tax office as to the truthfulness and correctness of the company’s financial statements.

47. [47]
    As to whether the interest rate of 20 per cent as alleged by Mr Frew with respect to the advance of $62,951 was, in fact, offered by Mr Morgan, I note the evidence of the latter to the effect that the same interest rate was not paid on a loan by Mr Edwards contrary to what Mr Frew alleges he was told by Mr Morgan. Curiously, Mr Edwards’ attendance under a subpoena was excused pursuant to an agreement by counsel for the plaintiff and counsel for the defendants at the beginning of the first day of the hearing. In this regard I prefer the evidence of Mr Frew to that of Mr Morgan and find that the interest rate offered by Mr Morgan was indeed 20 per cent per annum.

48. [48]
    As to whether the advance of $62,951 was made to Mr Morgan or to the second defendant, counsel for the plaintiff submits that at the time Mr Morgan commenced trading with Coventry and Mr Frew, Mr Morgan was Autoquip for all intents and purposes. He was the sole trader and there is no evidence of any overt act taken by Mr Morgan to alert Mr Frew to a change of the structure in the business.^[62]  Thus, Mr Frew was entitled to assume that Autoquip was and remained Mr Morgan throughout their dealings. 

49. [49]
    In respect of the alleged counterclaim, counsel for the plaintiff submits that the evidence fails to establish the existence of a partnership and certainly fails to disclose any dissolution of such partnership. Contrary to the case pleaded for the defendants that at the time of dissolution of partnership the accounts of the business of Autoquip showed a deficit of assets over liabilities of some $34,000, there is no evidence by way of the balance sheet of the business as at 30 September 2007 to this effect. The balance sheet is simply not in evidence before me. Furthermore, there is no evidence to support the pleading^[63] that on 6 September the second defendant on behalf of the partnership sold the remaining assets for $65,000.

50. [50]
    The counterclaim particularises^[64] an alleged agreement for sale dated 8 April 2008 between the second defendant and two other companies.  No such document is in evidence and none has been disclosed.  Similarly, the counterclaim^[65] refers to a disposal of goodwill, plant and equipment of the partnership agreement for $35,000.  Again, there is no evidence before me in relation to this disposal.

51. [51]
    Counsel for the plaintiff concedes that his client made a loan for the purpose of obtaining stock for the business (Autoquip) but submits that no evidence has been led of the second defendant having contributed $40,000 or any other amount to itself buy stock.^[66] 

52. [52]
    In relation to the deductions from amounts owing to Mr Frew based upon the continued use of the Honda motor vehicle,^[67] Counsel describes as fanciful the arrangement whereby Mr and Mrs Frew were able to have the use of the car when they did not work in the partnership, “but at some point in time they couldn’t have the use of the car when they still didn’t work in the partnership.”^[68]

53. [53]
    The case for the plaintiff was summarised by his Counsel in terms that he dealt with the first defendant (Mr Morgan); Mr Morgan was Autoquip; he developed a rapport with Mr Morgan; Mr Morgan asked for money on a particular basis; he felt comfortable because of their relationship and he advanced the money.^[69] 

54. [54]
    Mr Morgan submits that there is no objective evidence of either advance being a loan to him personally. He points to one of the invoices in evidence revealing that the order was “taken by Mal”^[70]  As demonstrating knowledge on the part of Mr Frew of the existence of Mobile Diagnostics.  In relation to the use of the Honda motor vehicle by Mr and Mrs Frew, Mr Morgan submits that the car had simply been purchased by the business and there was no necessity to document the identity of persons entitled to use it.^[71]  The advance of $62,951 was said by Mr Morgan to have been a loan to Mobile Diagnostics and not a loan to himself personally.

55. [55]
    Mr Morgan submitted that the evidence before the Court shows that Mr Frew had access to confidential information of supplies to Autoquip which is indicative of a partnership relationship.^[72]  He contends that Mr Frew was provided with a share of profits in the form of the exclusive use of a Honda motor vehicle and free trips for himself and his wife.^[73] 

56. [56]
    Mr Morgan submits that Mr Frew had access to confidential information of Autoquip including details of customers, contact files, international suppliers and their pricing equipment. He claims that he and Mr Frew were concerned for each others financial wellbeing. Mr Frew identified that Autoquip needed to acquire more equipment in January 2006 and set about ordering and paying for equipment from Beijing Hongtec on 12 February 2006. These were not simply the acts of a consultant as claimed by Mr Frew.^[74] 

57. [57]
    In relation to the repayment of monies to Mr Frew, Mr Morgan submitted that he had indicated that monies would be repaid from an inheritance about to be received from his late mother’s estate. Mr Morgan stated that such payment would have been made by way of a loan by the first defendant (himself) to the business.^[75] 

58. [58]
    The matters particularly relied upon by Mr Morgan as evidencing that neither the $40,000 or $62,951 advance was made to him personally include the following:

• The business trips to China in November 2005 and January 2006 and to Frankfurt in September 2006 and the payment of $62,951 on account of stock for Autoquip in February 2006 indicate that Mr Frew was involved in the carrying on of the business of Autoquip;^[76]
• The letters from MSB Lawyers of 15 and 22 November refer to the existence of a partnership;^[77]
• The CBA loan was recorded as a payment to Autoquip as reflected in the letter dated 19 October 2005;
• The use by Mr Frew of the letter sent by the first defendant on 18 April 2007 advising that Mr Frew was owed $62,951 by the company Mobile Diagnostics and not Mr Morgan personally;^[78]
• Other than Mr Frew’s oral testimony there is no evidence that either payment was made to Mr Morgan personally;^[79]
• Mr Frew must have been aware that the business of Autoquip was owned and operated by Mobile Diagnostics Pty Limited as trustee for the Morgan Family Trust as that was recorded on every tax invoice that Autoquip delivered to Coventry’s;^[80]
• Mr Frew transferred the $40,000 advance directly into the Suncorp business cheque account of Mobile Diagnostics Pty Limited as trustee for the Morgan Family Trust trading as Autoquip, and this payment was made on direction to the Commonwealth Bank by the plaintiff;^[81]

59. [59]
    Mr Morgan submitted that if it be found that the $40,000 advance was not for a purchase of a 50 per cent interest in Autoquip, but rather a loan made by Mr Frew, then it should be found that the loan was made to the business of Autoquip and as such made to Mobile Diagnostics and not to Mr Morgan personally.^[82]

FINDINGS

60. [60]
    This case largely turns upon the credibility of the witnesses there being very little objective documentary evidence to support the competing claims. Although I accept that discussions as to the formation of a partnership between Mr Frew and Mr Morgan had commenced and continued beyond the occasion of the dinner at Mr and Mrs Morgan’s residence, I am not persuaded that any finalisation of the proposed partnership was reached. In relation to the first advance of $40,000 I prefer the evidence of Mr Frew to the effect that this was a loan to Mr Morgan personally rather than to the business of Autoquip. I find that the sum was not advanced for the purpose of purchasing a 50 per cent interest in Autoquip. The provision of the exclusive use of the Honda motor vehicle to Mr and Mrs Frew together with the travel to China and Germany are consistent with Mr Frew’s claim that he was acting in the role of a consultant in the business of Autoquip and not that of partner. Any suggestion that the advance was made to Autoquip (under any corporate designation) is negatived, in my view, by the complete absence of any documentary entry evidencing such suggestion.

61. [61]
    In relation to the advance of $62,951, I am satisfied that this was by way of a loan by Mr Frew to the business of Autoquip for the purpose of purchasing stock. I have concluded that Mr Frew knew at the time the money was advanced of the existence of Mobile Diagnostics Pty Limited and, on balance, I am satisfied that the loan was not made personally to Mr Morgan. As I have indicated previously I accept that the interest rate in respect of this loan was 20 per cent per annum.

62. [62]
    I therefore give judgment to the plaintiff against the first defendant in the sum of $40,000 together with interest at 10 per cent per annum^[83] from the date of demand of 4 December 2007^[84] in the amount of $6,377.15.  I dismiss that part of the plaintiff’s claim in respect of the $40,000 advance against the second defendant. I give judgment to the plaintiff against the second defendant in the sum of $62,951 together with interest at 20 per cent per annum from 20 October 2005 to the date of judgment 24 July 2009 in the amount of $47,351.18.  I dismiss that part of the plaintiff’s claim in respect of the $62,951 against the first defendant.  I order that the counterclaim be dismissed.^[85]

63. [63]
    I will, if required, hear submissions with respect to costs on a date to be fixed.