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Linwood Group Pty Ltd v Grange Warner Pty Ltd[2016] QDC 32

Linwood Group Pty Ltd v Grange Warner Pty Ltd[2016] QDC 32

DISTRICT COURT OF QUEENSLAND

CITATION:

Linwood Group Pty Ltd v Grange Warner Pty Ltd [2016] QDC 32

PARTIES:

LINWOOD GROUP PTY LTD ACN 091 421 715

(Plaintiff)

v

GRANGE WARNER PTY LTD ACN 124 421 567

(Defendant)

FILE NO/S:

3061/14

DIVISION:

Civil

PROCEEDING:

Trial

DELIVERED ON:

3 March 2016

DELIVERED AT:

Brisbane

HEARING DATE:

15, 16 and 17 February 2016

JUDGE:

Bowskill QC DCJ

ORDER:

  1. The plaintiff’s claim is dismissed. 
  2. The defendant’s counterclaim is allowed in part, in so far as the payments referred to in paragraph 74.2 and 74.4 are concerned.
  3. It is appropriate that an order be made for the dissolution of the partnership, and for the taking of accounts.
  4. Direct the parties, within 7 days, to submit a draft of such declarations, orders and directions as they agree ought to be made having regard to the reasons or, failing agreement, each party to submit the form of order they contend is appropriate, together with submissions.

CATCHWORDS:

PARTNERSHIP – RELATIONSHIP BETWEEN PARTNERS – CAPITAL, ADVANCES AND SHARE OF PROFIT OR LOSS – Partnership for the purposes of property development - Where the plaintiff made advances to the partnership under written and oral loan agreements, for the purposes of the partnership business - Whether the loan agreements, or any of them, were independent and separate from the partnership arrangements, so as to permit the plaintiff to maintain an action to recover half of the funds so advanced from the defendant, without the taking of an account

PARTNERSHIP – RELATIONSHIP BETWEEN PARTNERS – Whether there were various oral agreements for the payment of particular amounts by the partnership to the plaintiff – Whether the plaintiff was entitled to recover from the defendant its half share of an amount alleged to be payable under an alleged “service agreement” – Whether plaintiff liable to account to the partnership for amounts paid to the plaintiff which the defendant claimed were unauthorised

EVIDENCE – PROOF – STANDARD OF PROOF – claim based on communications with a deceased person – caution to be exercised

Partnership Act 1891 (Qld), ss 27 and 47

Brown v The New South Wales Trustee and Guardian(2012) 10 ASTLR 164; [2012] NSWCA 431

Clune v Collins Angus & Robertson Publishers Pty Ltd (1992) 25 IPR 246

Craig v Finance Consultants Pty Ltd[1964] NSWR 1012

Dillon v Dillon[1986] TASSC 8

Hurst v Bryk [2002] 1 AC 185

Neale v Bank of Western Australia [2014] NSWSC 315

Zisis v Knighton [2008] NSWCA 42

COUNSEL:

P O'Brien for the Plaintiff

N Shaw for the Defendant  

SOLICITORS:

Crouch & Lyndon Lawyers for the Plaintiff

Porter Davies Lawyers for the Defendant

Introduction

  1. [1]
    This is a dispute arising from a partnership formed for the purpose of undertaking property development.
  2. [2]
    The plaintiff (Linwood) and the defendant (Grange Warner) entered into a partnership in March 2007.   In their dealings with one another, Linwood was represented by its director, Michael Gafney; and up until about March 2013 Grange Warner was represented, primarily, by its director, Maurice Anderson, but also, to an extent, his son, also a director, Mark Anderson.  Maurice Anderson passed away in June 2014.[1]Grange Warner’s accountant, Richard Wan, became a director of that company in about March 2013, and has also represented Grange Warner since that time.
  3. [3]
    The partnership undertook two property developments, one at Elof Road, Caboolture; and the other at Teddington Road, Maryborough.  The developments involved the acquisition of vacant land at each of these locations, and then undertaking the necessary works to subdivide and develop the land into residential vacant lots for sale.
  4. [4]
    The relationship between the partners broke down in about January 2013, and the partnership is no longer conducting any business, other than the sale of the remaining lots in the Teddington Road, Maryborough development.  That is being undertaken by statutory trustees for sale, who were appointed on 21 August 2014.
  5. [5]
    By this proceeding, which was commenced in August 2014, Linwood seeks to recover from Grange Warner money Linwood says it loaned to Linwood and Grange Warner, under loan agreements,[2]which were separate from the partnership agreement, and under which it is said Grange Warner is liable to repay half of the money so loaned (an amount of $327,347, including legal fees, under the first loan agreement, and $205,599 under the further loan agreement, together with interest) directly to Linwood, without the taking of accounts of the partnership.  Alternatively, Linwood seeks to recover this money as capital contributions in excess of Linwood’s 50% partnership share, under the partnership agreement.[3]Linwood also claims $33,127.82 said to be payable under an oral “service agreement”, pursuant to which it says that the partnership agreed to pay Linwood to provide certain services at the Teddington Road, Maryborough site.[4]
  6. [6]
    Grange Warner opposes the relief sought by Linwood in respect of the loan(s) on the basis that Linwood cannot sue one partner for recovery of part of the moneys loaned by Linwood to the partnership.  Grange Warner contends that what ought to occur is for the partnership to be dissolved, and an order made for the taking of accounts, in the context of which loans, advances and capital contributions by the partner(s) can be appropriately dealt with in accordance with the priority provided for in the partnership agreement.[5]Grange Warner denies the existence of any “service agreement”.[6]
  7. [7]
    Grange Warner also brings a counterclaim, in which it is alleged that Linwood caused to be paid to itself from the partnership bank account five amounts totalling $255,498.87, in circumstances where it was not authorised under the partnership agreement to do so, and seeks orders or declarations requiring Linwood to bring these amounts into account, in the taking of accounts.[7]
  8. [8]
    There is no dispute about the fact of certain payments having been made by the plaintiff, either to the partnership, or for expenses of the partnership, as particularised in schedule 1 to the amended reply and answer (filed 22 June 2015).  It is the characterisation of the payments, and terms under which they were paid that is disputed.

The partnership agreement

  1. [9]
    The partnership agreement was made on 15 March 2007.[8]   
  2. [10]
    Under the partnership agreement, the percentage share of each of Linwood and Grange Warner was 50%.[9]
  3. [11]
    Clause 2.6 provided:

“2.6 Capital of the Partnership

  1. (a)
    The capital of the Partnership consists of the sum or sums contributed by, or credited to, the Partners in the sums specified in item 8 of the schedule [50%], together with such other sum or sums which any of the Partners may with the consent of the other Partner or Partners contribute to the Partnership for capital purposes, which sum or sums will be credited to the capital account of the Partner or Partners contributing the same.
  1. (b)
    The Partners are entitled to the capital and the assets for the time being of the Partnership and to the goodwill of the Partnership Business (if any) in their respective Percentage Share or such other share as agreed by the Partners from time to time.
  1. (c)
    If a partner advances capital contributions in excess of that Partner’s Percentage Share or if there are in the Partnership Account undrawn profits, then such sums will be treated as interest free loans repayable on demand by the Partnership to the applicable Partner.
  1. [12]
    Clause 2.8 provided that “[a] Partner may be paid an agreed salary which is to be treated as a working expense”.
  2. [13]
    Clause 5 provided as follows:

“5 Realisation

5.1 If the Partnership is ended and the Partners do not elect to carry on the Partnership Business in accordance with Clause 4, then the assets of the Partnership must be realised and the proceeds applied in this order:

  1. (a)
    the costs of realisation and distribution;
  1. (b)
    payment and discharge of liabilities;
  1. (c)
    repayment of loans from Partners;
  1. (d)
    undrawn profits;
  1. (e)
    Partners’ capital;

and any surplus must be divided in the proportions of Percentage Share for each Partner.”

  1. [14]
    The place of business of the partnership was designated as 18 Terrence Street, Aspley, which was Michael Gafney’s home address.  Cheques drawn on the partnership bank account(s) were required to be signed by Michael Gafney and Maurice (William) Anderson.[10]
  2. [15]
    During the period from March 2007 to March 2013, Michael Gafney, Maurice Anderson and Mark Anderson met on a weekly basis (with a few exceptions over the years) at Michael Gafney’s home, to discuss partnership business.
  3. [16]
    The Partnership Act 1891 (Qld) applies to the partnership.  Relevantly, sections 27 and 47 of the Act provide as follows:

“27 Rules as to interests and duties of partners subject to special agreement

  1. (1)
    The interests of partners in the partnership property and their rights and duties in relation to the partnership must be decided, subject to any agreement express or implied between the partners, by the following rules –
  1. (a)
    all the partners are entitled to share equally in the capital and profits of the business, and must contribute equally towards the losses whether of capital or otherwise sustained by the firm;
  1. (b)
    the firm must indemnify every partner in relation to payments made and personal liabilities incurred by the partner –
  1. (i)
    in the ordinary and proper conduct of the business of the firm; or
  1. (ii)
    in or about anything necessarily done for the preservation of the business or property of the firm;
  1. (c)
    a partner making for the purpose of the partnership, any actual payment or advance beyond the amount of capital which the partner has agreed to subscribe, is entitled to interest at the rate of 6% per annum from the date of the payment or advance;
  1. (d)
    a partner is not entitled, before the ascertainment of profits, to interest on the capital subscribed by the partner;
  1. (e)
    every partner may take part in the management of the partnership business;
  1. (f)
    no partner is entitled to remuneration for acting in the partnership business;

…

  1. (i)
    the partnership books are to be kept at the place of business of the partnership … and every partner may, if the partner thinks fit, have access to and inspect and copy any of them.”

“47 Rules for distribution of assets on final settlement of accounts

In settling accounts between the partners after a dissolution of partnership, the following rules are, subject to any agreement, to be observed –

  1. (a)
    losses, including losses and deficiencies of capital, are to be paid first out of profits, next out of capital, and lastly, if necessary, by the partners individually in the proportion in which they were entitled to share profits;
  1. (b)
    the assets of the firm including the sums (if any) contributed by the partners to make up losses or deficiencies of capital, are to be applied in the following manner and order –
  1. (i)
    in paying the debts and liabilities of the firm to persons who are not partners in the firm;
  1. (ii)
    in paying to each partner rateably what is due from the firm to each partner for advances as distinguished from capital;
  1. (iii)
    in paying to each partner rateably what is due from the firm to each partner in relation to capital;
  1. (iv)
    the ultimate residue (if any) is to be divided among the partners in the proportion in which profits are divisible.”
  1. [17]
    It may be observed that the partnership agreement does contain some provisions varying the effect of parts of s 27, namely:
    1. (a)
      clause 2.6(c), which provides that advances in excess of a partner’s percentage share are to be treated as interest free loans repayable on demand (cf s 27(c)); and
    2. (b)
      clause 2.8, which provides that a partner may be paid an agreed salary which is to be treated as a working expense (cf s 27(f)).
  2. [18]
    Although clause 5 uses different language, it is to substantially the same effect as s 47(b).

Credibility

  1. [19]
    The court heard evidence from three witnesses: Michael Gafney; Mark Anderson; and Richard Wan. 
  2. [20]
    There was also received into evidence a bundle of documents (comprising 3 volumes) which were tendered by agreement.[11]
  3. [21]
    Mr Wan’s evidence was essentially limited to the tender of ledger entry reports for the partnership, for the years ended 30 June 2010 and 2011,[12]which he had obtained from an accounting practice referred to as Ascendia, which had taken over from the partnership’s original accountants, R W Corrie & Co.  Mr Wan’s evidence did not touch upon the controversial issues in dispute at the trial.
  4. [22]
    Both for the purposes of its claim, and in responding to the counterclaim, Linwood relies upon proving a number of oral agreements, which are said to have been made between Michael Gafney, on behalf of Linwood, and Maurice Anderson, on behalf of Grange Warner, at various of the weekly partnership meetings that took place at Michael Gafney’s Aspley home.  These include:
    1. (a)
      an oral agreement made on 29 April 2011, supplementing the written loan agreement made on that date;
    2. (b)
      the further oral loan agreement, said to have been made in December 2011;
    3. (c)
      an oral agreement, made in about February 2008, the effect of which was that Linwood would be paid a project management fee, of $2,000 per lot, for services in relation to the Elof Road development;[13]
    4. (d)
      an oral agreement made in about February 2009, the effect of which was that Linwood would be paid a fee for the costs incurred in raising finance for the Elof Road development;[14]
    5. (e)
      an oral agreement made in about February 2009, the effect of which was that Linwood would be paid an amount to equalise the uneven contributions made by the partners for the Elof Road development and interest on that amount;[15]
    6. (f)
      an oral agreement made in about September 2009, the effect of which was that Linwood would be paid an additional project management fee, in relation to the integration of additional land, owned by Mr Gafney’s son, Justin Gafney, into the partnership’s land at Elof Road;[16]
    7. (g)
      an oral agreement made in about October 2009, the effect of which was that Linwood would be paid a project management fee, of $3,000 per lot, for services in relation to the Teddington Road project;[17]and
    8. (h)
      an oral agreement made in June 2011, the effect of which was that Linwood would be paid $50 per hour for additional services provided by Mr Gafney in relation to the Teddington Road project.[18]
  5. [23]
    In relation to two of these alleged agreements (those referred to in subparagraphs (d) and (e) above), the plaintiff relied upon documentary evidence, in the form of what was said to be a written record of matters agreed at a partnership meeting on 5 February 2009.  This is addressed further below.
  6. [24]
    But that is the only written record of anything agreed at any partnership meeting.[19]
  7. [25]
    As already noted, Maurice Anderson passed away in June 2014.  There was tendered in evidence[20]a statutory declaration made by him on 16 May 2013,[21]and also an affidavit sworn on 8 November 2013,[22]the latter in the context of Grange Warner’s successful application to set aside a statutory demand previously issued by Linwood, in a bid to recover the loan moneys the subject of this proceeding.  This material was principally relied upon in relation to the counterclaim, because it contains assertions by Maurice Anderson about a practice of signing blank cheques.  It does not directly address any of the alleged oral agreements.
  8. [26]
    Mark Anderson’s evidence was that he was present at every partnership meeting except perhaps one.[23]Michael Gafney agreed that Mark Anderson was present at nearly all of the meetings;[24]although when asked about who was present when the various oral agreements were made, could not specifically recall whether or not Mark was.
  9. [27]
    Mark Anderson denied knowledge of any of the agreements alleged by Mr Gafney (including the written loan agreement).  However, I do not regard this as reliable evidence that no such agreements were made between Michael Gafney and Maurice Anderson, because the clear impression formed from Mark’s evidence was that he did not have any real involvement in the financial aspects of the partnership business.  Indeed, he described the partnership as being “between Mike and my father”;[25]and when asked about loan funding for the partnership, also said “that was between Mike and my father”.[26]When asked what his role in the business of the partnership was, he said:  “Messages and general – like a gofer – just do anything.  Whatever came up, I did it and helped as best I could.  Yeah.”[27]He appeared to have no knowledge of the funding requirements, or arrangements, for the partnership.
  10. [28]
    That leaves the position then where Michael Gafney has given evidence about various oral agreements reached, with Maurice Anderson, who is now deceased. 
  11. [29]
    In Brown v New South Wales Trustee and Guardian (2012) 10 ASTLR 164; [2012] NSWCA 431 at [67] Campbell JA[28]observed that:

“It is elementary that in a claim based on communications with a deceased person, the court treats uncorroborated evidence of such communications with considerable caution …:  Plunkett v Bull (1915) 19 CLR 544; Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 789; Hunt v Barlow [2000] NSWSC 324 at [5]-[8] per Bryson J; Cross on Evidence at [15150].  Ultimately, though, the question remains whether the claim has been made out on the balance of probabilities.”[29]

  1. [30]
    In Clune v Collins Angus & Robertson Publishers Pty Ltd (1992) 25 IPR 246 at 253 Wilcox J said that:

“… it is trite to say that evidence of conversations between a living witness and a dead person should be scrutinised with particular care, especially where there was no occasion for the dead person to record his version of them before his death.  Of course, that is not to say that such evidence cannot be true; it obviously may.  But it does mean that any matter adversely affecting the credit of the witness has special importance; the witness cannot be refuted in the usual way.”

  1. [31]
    I note also the following observation made by Hammerschlag J in Neale v Bank of Western Australia [2014] NSWSC 315 at [198]:[30]

“Where a party seeks to rely upon spoken words as a foundation for a cause of action the conversation must be proved to the reasonable satisfaction of the Court.  This means that the Court must feel an actual persuasion of its occurrence or its existence.  In the absence of some reliable contemporaneous record or other satisfactory corroboration, a party may face serious difficulties of proof.  Such reasonable satisfaction is not a state of mind that is obtained or established independently of the nature and consequences of the fact or facts to be proved.  The seriousness of an allegation made, inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question of whether the issue has been proved to the reasonable satisfaction of the Court.  Reasonable satisfaction should not be produced by inexact proofs, indefinite testimony, or indirect inferences:  see Briginshaw v Briginshaw (1938) 60 CLR 336 at 362; Helton v Allen (1940) 63 CLR 691 at 712; Refjek v McElroy (1965) 112 CLR 517 at 521; Watson v Foxman (1995) 49 NSWLR 315 at 319.”

  1. [32]
    It is these principles that have been applied in making the findings, and for the reasons articulated, below.

Relationship between the partners – division of labour

  1. [33]
    In order to address some of the issues in dispute, it is helpful to have an understanding about the practical contributions made by each of the partners’ representatives. 
  2. [34]
    It was clear from the evidence that Michael Gafney had a far more proactive role in the work involved in both developments, than Maurice or Mark Anderson.  
  3. [35]
    As explained by Maurice Anderson in his November 2013 affidavit:[31]

“I have limited experience with administration and accounting.  Accordingly, Michael volunteered to attend to the accounting and secretarial work the partnership required, including dealing with the Local Council for approval and dealings with subcontractors.  It was my role to assist Michael and generally oversee the development and planning work.”

  1. [36]
    Michael Gafney maintained the books and records of the partnership at his home.[32]Although Mr Gafney, in his evidence, suggested that it was the responsibility of both partners to keep such records (adding that, if Grange Warner chose not to, that was a matter for it),[33]it seems clear, looking at the evidence overall, that Michael Gafney took on the role of keeping the books and records of the partnership, for the partnership.  That is, he was carrying out that role, I find, in the full knowledge that the Andersons were not.  In a practical sense, he was also the person who paid the bills.[34]It is reasonable to infer that Maurice Anderson was happy to leave all of that to him.[35]
  2. [37]
    Michael Gafney’s role was also more proactive, it seems, in relation to the actual development work.  In so far as the Maryborough development is concerned, Mark Anderson’s evidence was that he and his father only went to the Teddington Road property once, when they first looked at the land (I infer, prior to purchasing it).[36]He said they did not go there because it was too far for both of them to travel (Maurice lived at Tweed Heads, and Mark lives at Taigum).  But Michael Gafney, it was agreed, actually lived at the Maryborough site for a period of time, in the context of supervising the works that were being undertaken.[37]
  3. [38]
    Mark Anderson said he and his father used to go to the Caboolture property once or twice a week, to see how things were going.[38]Mark also said he went up there on several occasions to mow grass.[39]But in relation to the Caboolture property also, Mark said that “Mike was dealing with the contractors”.[40]
  4. [39]
    Both Mark Anderson and Michael Gafney made reference to the fact that Maurice was “getting on in years”, to use Mark’s phrase,[41]and that apart from putting in his capital, and attending the weekly meetings, he was not otherwise actively involved in the work of either of the developments.  Mr Gafney said “I was just left to do it all”.[42]Maurice was aged 83 when he passed away.[43]
  5. [40]
    The relationship between Michael Gafney and Maurice and Mark Anderson is said to have broken down in about January 2013.  This occurred in circumstances where, a couple of months before this, Michael Gafney had asked Maurice and Mark Anderson to enter into a “second loan agreement”, in essence, confirming the amount of money advanced by Linwood to that point, and Grange Warner’s agreement to repay half of that amount, with the obligation to repay proposed to be secured by a mortgage and directors’ guarantee.[44]Maurice Anderson sought advice about that from Grange Warner’s accountant, Mr Wan,[45]whose advice was that they should verify the amounts, by reference to the books and records of the partnership, before signing the documents;[46]which seems to have precipitated the present dispute.
  6. [41]
    There is no question of this partnership continuing.  The project work is completed, save for the sale of the remaining lots at the Teddington Road site; but in any event it was clear that the relationship between the parties is such that they neither wish to, nor consider they would be able to, work together again.

Loan agreements

  1. [42]
    In this proceeding, the parties agreed that on or about 29 April 2011, Linwood and Grange Warner agreed that the plaintiff would lend money to the partnership.[47]It may be inferred from the timing that this was for the purpose of the Teddington Road development (the Elof Road development having been completed by June 2010).
  2. [43]
    It is also agreed that Grange Warner made no contributions to the partnership after 29 April 2011.[48]
  3. [44]
    In contrast to this, in his November 2013 affidavit, Maurice Anderson suggests no knowledge at all of any such loan, as he refers to Michael Gafney telling him in October-November 2012 that Linwood had advanced further funds to the partnership, in addition to those advanced by Grange Warner, and says “I did not understand why Linwood had advanced the extra money – pursuant to the partnership agreement, contributions were to be 50/50 and Michael had not asked Grange to provide any further funds for the partnership”.[49]In relation to the written document, Maurice said “I have no recollection of the April 2011 Loan Agreement or the circumstances in which it was signed”.[50]
  4. [45]
    Plainly, significant caution must be exercised in acting upon the tendered statements of Maurice Anderson, in circumstances where the plaintiff has not had the opportunity to cross-examine him.  But even apart from considerations of that kind, this assertion seems implausible, in light of the documentary evidence and the facts admitted.
  5. [46]
    Nevertheless, there was a clear dispute between the parties about the terms, and effect, of any agreement under which Linwood advanced money to the partnership.

The plaintiff’s case

  1. [47]
    Linwood contends that by an agreement made on or about 29 April 2011, Linwood and Grange Warner agreed that Linwood would lend moneys to the partnership to fund the development of the property at Teddington Road.  Linwood contends that this agreement was partly in writing and partly oral.  The written part is contained in a document entitled “Loan Agreement” dated 29 April 2011;[51]the oral part is said to be constituted by conversations between Michael Gafney and Maurice Anderson at a partnership meeting on about 29 April 2011.[52]The written terms will be referred to shortly.  The oral terms of this agreement are pleaded as being:
    1. (a)
      that the loan by Linwood to the partnership would be advanced as funds were required by the partnership for the purpose of the property development at Teddington Road, Maryborough; and
    2. (b)
      the initial drawdown of the loan would be for an amount of $200,000 on about 29 April 2011.
  2. [48]
    Linwood contends that there was a further, oral agreement reached in about December 2011, again between Michael Gafney and Maurice Anderson, that Linwood would lend sufficient additional moneys to the partnership in an amount exceeding $625,000 (the amount referred to in the written loan agreement) to allow the partnership to complete the development at Teddington Road.[53]

The written loan agreement

  1. [49]
    The parties to the written loan agreement are identified as Linwood and Grange Warner (together referred to as the “Borrower”) and Linwood (referred to as the “Lender”).   The agreement was signed by Maurice Anderson (on behalf of Grange Warner) and Michael Gafney, on behalf of Linwood, in both its capacity as a borrower and the lender.
  2. [50]
    Relevantly, the written loan agreement included the following:
    1. (a)
      clause 1.2(j) (construction) provided that, “In this agreement, unless the subject or the context otherwise requires… (j) where a party comprises two or more persons any agreement or obligation to be performed or observed by that party binds those persons jointly and each of them severally, and a reference to that party is deemed to include a reference to any one or more of those persons”;
    2. (b)
      clause 2 (loan) provided:

“2.1 Advance

The Lender will provide, and the Borrower will accept, the Principal Sum by way of cash advance on the Drawdown Date on the terms and conditions set out in this agreement.  The advance will be provided to the Borrower by way of cheque drawn by the Lender payable to the Borrower or as the Borrower directs in writing.

2.2 Repayment

Subject to clause 5.2,[54]the Borrower must repay the Principal Sum and all other moneys then outstanding under this agreement on the Repayment Date…”

  1. (c)
    in the schedule, the principal sum was printed as $625,000 (item 6).  The drawdown date was handwritten (by Mr Gafney) as “29/4/11 - $200,000 (item 4).  The repayment date was printed as “6 months from the date of this Agreement” (item 7);
  2. (d)
    clause 3.1 provided for the payment of interest, “at the Higher Rate computed from the date of advance of the Principal Sum”, with “Higher Rate” being defined in clause 1.1 by reference to the “base interest rate”, also defined; and
  3. (e)
    clause 5.1 provided for the lender to recover “legal and other expenses” expended “to make good” the borrower’s default.

Mr Gafney’s evidence about this agreement, and the additional oral terms of it

  1. [51]
    Michael Gafney’s evidence was that the purpose of this loan agreement was to fund the development at Teddington Road.[55]At the time the written agreement was drawn up, April 2011, his evidence was that the partners thought that $625,000 would be sufficient to complete the development,[56]and that it would take about 6 months to complete.[57]He said that Maurice Anderson (Grange Warner) was not able to obtain any further funds,[58]and so he (Gafney) agreed that that he “could fund the – the works so that we could get the developments to a finished stage and then start to sell the allotments”.[59]But the whole of the funds were not immediately required, so he only advanced what was needed to keep the development going, beginning with the amount of $200,000 which he transferred into the partnership’s bank account on 29 April 2011.[60]He said this was the arrangement agreed to by Maurice Anderson, that is, that Mr Gafney would advance the money as the partnership needed it.[61]
  2. [52]
    This, explained Mr Gafney, was the reason for his handwritten notation, in the schedule to the loan agreement, at item 4, next to the words “drawdown date”, of “29/4/11 - $200,000” – because that was the amount he transferred on 29 April 2011.
  3. [53]
    Mr Gafney referred to an “understanding” with Maurice Anderson that “we would do whatever we could to get the development finished because we went through some pretty bad times with the development, and it was sort of touch and go at one stage whether we’d actually be able to finish it.  So the main emphasis was on that.”[62]
  4. [54]
    Part of the explanation which Mr Gafney gave, for the whole of the $625,000 not being required straight away, was due to a dispute which the partnership had with the contractors initially engaged, VDM Constructions, which culminated in the contract with VDM being terminated in June or July 2011.  Following that, work did not resume until August 2011.[63]
  5. [55]
    Following the transfer of the $200,000 on 29 April 2011, Linwood made the following further transfers, together totalling $625,000, which it says was pursuant to the written loan agreement:
    1. (a)
      22 June 2011 - $100,000;
    2. (b)
      5 November 2011 - $25,000;
    3. (c)
      5 November 2011 - $25,000;
    4. (d)
      14 November 2011 - $50,000;
    5. (e)
      27 November 2011 - $165,000;
    6. (f)
      6 December 2011 - $10,000;
    7. (g)
      9 December 2011 - $5,000; and
    8. (h)
      18 December 2011 - $45,000.[64]
  6. [56]
    As Mr Gafney explained it, he could not recall whether there was a discussion prior to each of these further advances, although there may have been; he simply advanced these various sums of money, according to whatever the requirement for funds was at the relevant time.[65]

The further agreement

  1. [57]
    Mr Gafney’s evidence was that in December 2011, he and Maurice Anderson had another discussion, about the fact that more money would need to be provided to complete the development, and the result of that was that he continued to fund the development.  Although it was not specifically mentioned in his discussions with Maurice Anderson, Mr Gafney said it was his understanding “that it would purely be a continuation of that loan agreement”.[66]
  2. [58]
    Mr Gafney agreed that, at this point in time, the partnership did not have the money to complete the development itself; that he was in a position to advance the funds to complete the project; that if he had not done so, the project would have failed; and that he and Maurice agreed to do whatever was needed to get the development finished.[67]
  3. [59]
    Mr Gafney also knew, at this time, that there was no way the partnership would be able to repay him until the development was completed;[68]and agreed that he had no expectation that he would be paid until the lots started selling.[69]
  4. [60]
    Mr Gafney said it was also agreed, at this time, that “once we got to a point where we knew just how much was …. advanced, etcetera, and how much we needed, then we would formalise that with a – a loan agreement which – a second loan agreement…”.[70]
  5. [61]
    In fact, the “second loan agreement” was never concluded.  As already noted, this is the document which is said to have prompted Maurice Anderson to speak to his then accountant, Richard Wan, who in turn advised Maurice Anderson of the need to verify the books and records of the partnership.[71]
  6. [62]
    The further payments made to the partnership account by Linwood, starting with a payment of $84,944 on 18 December 2011, are set out in the schedule to the amended reply and answer.
  7. [63]
    In total, and excluding the legal fees paid by Linwood after the dispute arose, it appears from that schedule that from 29 April 2011 to December 2013, Linwood advanced the sum of $1,036,400 to the partnership.

Linwood’s claim to recover half the moneys advanced from Grange Warner

  1. [64]
    In making its claim to recover directly from Grange Warner half of the moneys advanced under the loan agreements just referred to, Linwood contends that these are separate and independent agreements, insulated from the partnership agreement and rules which apply under ss 27 and 47 of the Partnership Act, the latter expressly providing that they are subject to agreement.
  2. [65]
    Linwood’s argument is that it does not bring this claim in its capacity as a partner under the partnership agreement; but rather as the lender under the loan agreement, which sits outside the general partnership.  In particular, in so far as the written loan agreement is concerned, Linwood emphasises the defined repayment date (6 months); and also relies upon the interpretation provision in clause 1.2(j) as contemplating recovery of the half of the moneys advanced from one of the borrowers, Grange Warner.[72]

Relevant principles

  1. [66]
    In Dillon v Dillon[73](Dillon), Cosgrove J (with whom Underwood J agreed) at [16], accepted as correct the following propositions:

“A.  All that a partner is entitled to on dissolution is (a) to have the property of the partnership applied in payment of the debts and liabilities of the firm and (b) to have the surplus assets after such payment applied in payment of what may be due from them as partners to the firm…

B. Partners may agree at or after dissolution on a stated and settled account, but such agreement, to be effective, must be precise.

C. A partner cannot maintain an action for a separate balance on the partnership account or for any particular partnership asset until an account has been taken and settled by the parties or by the court.  In the absence of a stated and settled account then, a partner seeking what is due to him must apply to the court for an account.  There is no other legal path which he can follow.[74]

D. Some transactions between partners may be of such a nature that they are insulated from the general law of partnership.  This may arise from the agreement of the partners or their conduct.  Such transactions do not fall into the partnership account and may be sued upon without an account being taken…

E. It is incorrect to describe a credit due to a partner as ‘a liability of the partnership’.  That phrase is apt only to describe liabilities of the partners to third persons.”[75]

  1. [67]
    His Honour also said, at [18]-[19], that:

“The foundation for each of them is to be found in the basic concept of partnership which governs the legal relationship between the partners…  Although the firm may require a partner to contribute or to disgorge, no partner has, for himself, any right of action against another partner in respect of partnership property.  It follows that ‘partners are not, as regards partnership dealings, considered as debtor and creditor between themselves until the concern is wound up or until there is a binding settlement of the accounts.’ (Halsbury, 4thedn., vol. 35, para.148).  It is true that the amount due to an outgoing partner from continuing partners is a debt from the date of dissolution (s 48 Partnership Act 1891) but the amount of the debt cannot be ascertained until an account is taken and cannot therefore be the subject of an action or of a judgment.

As Lord Goddard CJ said in Green v Hertzog (1954) 1 WLR 1309 at 1311/12:-

‘Although the words ‘creditor’ and ‘debtor’ are used, there are no creditors or debtors in the ordinary acceptance of those terms, because the liability of partners is joint.  Therefore, if money is lent or advanced to a partnership of which the person advancing the money is a partner, he is advancing some of that money to himself, and the only way in which that money can be recovered is by taking the accounts of the partnership.  The Partnership Act, 1890, by section 44(2) expressly provides for that.’

This case is correctly cited in the 14thedition of Lindley on Partnership for this proposition:-

‘When, however, a partnership has embarked upon a dissolution, then the only means by which a partner can claim the repayment of money lent to the partnership is in the taking of a general account in the winding up of the partnership; in such a case, no action lies at common law for the recovery of the money.  Green v Hertzog (1954) 1 WLR 1309.  See also Greenwood v Kanter, 110 SJ 54(CA).’”[76]

  1. [68]
    In the same case, Brettingham-Moore J said, at [35]:

“Where partners have made an agreement which does not involve any consideration of the partnership accounts they may sue upon such agreement as for a debt owing without an account being taken…  But it must be clear that there has been agreement which is completely independent of the partnership arrangements.  Normally the indebtedness of one partner to another as at the date of dissolution can only be ascertained by the taking of accounts …”[77]

  1. [69]
    These statements of principle from Dillon were referred to with approval by McColl JA (with whom Hodgson and Tobias JJA) agreed, in Zisis v Knighton [2008] NSWCA 42 at [35]-[36] (Zisis).  Immediately before referring to Dillon, McColl JA said, at [34]:

“The relation between partners is not that of debtor and creditor unless and until the partnership accounts have been finally taken after dissolution and a balance has been ascertained to be owing from one to another.  However, ‘[w]here a partner retires, either ad hoc or in accordance with the partnership agreement, and leaves his share in the firm, he no longer has any continuing interest or share in the assets, but is merely a creditor of the firm so that the retiring partner may sue the continuing partners for the value of his share in the assets of the firm or for any sum that the continuing partners agreed to pay the former upon his retirement without the necessity, first of all, of taking a general account’:  Halsbury’s Laws of England, 4thed, vol 35 (at pars [3], [122]).”

  1. [70]
    The principles were also succinctly summarised in the following passage from the reasons of Lord Millett in Hurst v Bryk [2002] 1 AC 185 at 194:

“… while partnership is a consensual arrangement based on agreement, it is more than a simple contract … it is a continuing personal as well as commercial relationship.  Neither during the continuance of the relationship nor after its determination has any partner any cause of action at law to recover moneys due to him from his fellow partners.  The amount owing to a partner by his fellow partners is recoverable only by the taking of an account in equity after the partnership has been dissolved:  see Richardson v Bank of England (1838) 4 My & Cr 165; Green v Hertzog [1954] 1 WLR 1309.  Only the Court of Chancery was equipped with the machinery necessary to enable such an account to be taken, and the basis upon which the account was taken reflected equitable principles.  These could be modified by agreement, but they did not find their source in contract.”[78]

Consideration

  1. [71]
    It is of course Linwood’s contention that these principles were modified in this case, by the loan agreement(s). 
  2. [72]
    Linwood relied in particular upon the decision in Zisis in support of its contention that the loan agreements in this case were separate and independent from the partnership, such as to enable Linwood to sue Grange Warner to recover its share of the moneys loaned, without the taking of accounts.
  3. [73]
    In Zisis, the appellant (Zisis) and respondent (Knighton) (and their respective related corporate entities) had conducted a dental technician business in partnership, since October 1993.  In February 1999 they entered into an agreement pursuant to which Knighton sold their half interest in the partnership to Zisis, for a fixed purchase price, together with payment of certain additional amounts (taking into account takings, profits and outgoings at the time of completion) determined in accordance with the agreement (referred to as the Agreement in the passages quoted below).  
  4. [74]
    The dispute was about payment of those additional amounts.  It seems that Zisis was arguing that those disputed amounts could only be worked out following the taking of accounts of the partnership; whereas Knighton sought to recover them under the Agreement itself, separately from any taking of accounts.  Zisis’ position was said to be “fundamentally flawed” because, as Tobias JA said at [8]:

“In the present case, the respondents’ claims are not made in their capacity as partners under the partnership agreement but as vendors of their share of the partnership business under the terms of the Agreement.  It therefore follows that it is unnecessary for the respondents to rely upon the rule that whenever money allegedly belonging or owing to a firm in respect of a partnership transaction is sought to be recovered from a partner, there must be the taking of an account.  That rule has no application where a party’s rights and obligations are no longer governed by the partnership agreement but by a separate and independent agreement being, in the present case, an agreement for the sale of a share in a business.”[79]

  1. [75]
    Linwood relied in particular on the highlighted part of the last sentence just quoted, arguing that the same reasoning applied in this case, because the parties’ rights and obligations were not governed by the partnership agreement, but by the loan agreement(s).
  2. [76]
    But, as is clear when the whole of that paragraph is read, and as Tobias JA further explained at [9], the rule[80]did not apply because “the Agreement brought about an end to the partnership and constituted a contract between the parties under which the respondents as vendors of their share in the partnership business agreed to accept the amounts payable by the appellants as purchasers thereunder in lieu of any entitlements arising from the taking of partnership accounts”.   That is not the case here.
  3. [77]
    McColl JA, after referring to the principles set out in Dillon, found that the Agreement was an express agreement of the kind contemplated by Dillon.[81]
  4. [78]
    Apart from confirming the general principles, I do not consider that the decision in Zisis supports Linwood’s argument in this case.  The factual circumstances are plainly distinguishable from the present case.
  5. [79]
    I was not referred to any other authorities, particularly in any context analogous to the present case – that is, where advances by a partner, to the partnership, for the purposes of the partnership business, were found to be insulated from the general law of partnership.
  6. [80]
    The nature of the transaction (loans of money from one of the partners, Linwood, to both partners, Linwood and Grange Warner, for the purposes of the partnership business) is not such as to suggest it should be so insulated; and I do not consider that Linwood has established, in this proceeding, that the loan agreement(s) were “completely independent of the partnership arrangements”.
  7. [81]
    I do not accept that the loan agreements are transactions “outside the partnership” or “insulated” from it.   In fact, the position appears to be quite the contrary:[82]
    1. (a)
      the moneys were loaned by Linwood to the partnership for the purposes of funding the Teddington Road land development to its completion;
    2. (b)
      at the time the written loan agreement was made, April 2011, the parties thought that the amount of $625,000 would be sufficient to complete the development and that this would take 6 months; and
    3. (c)
      Linwood agreed to advance the funds to complete the development project, at a time when Grange Warner was not able to obtain further funds to contribute (and after which Grange Warner made no further contributions).
  8. [82]
    The written terms of the loan agreement are explicable in light of these surrounding circumstances,[83]in particular:
    1. (a)
      as to the payment of interest (not otherwise contemplated by the partnership agreement); and
    2. (b)
      as to a defined “repayment date” of 6 months – being coextensive with the time when the project was anticipated to be finished,

not as an independent agreement, separate from the partnership, but as an agreement reflecting arrangements between the partners for the funding of their project, in circumstances which were, it seems, more “one-sided”, in terms of funding, than they had previously been.  Prior to this time, both partners had contributed, albeit in different amounts at different times, but overall equally.[84]

  1. [83]
    It is apparent, also, from Mr Gafney’s evidence regarding the further oral loan agreement he says was made in December 2011, that he had no expectation of being repaid the money he had advanced to the partnership at that stage, before the completion of the project.[85]It is reasonable to infer, from the fact that the project was ongoing; the partnership had no funds other than those Linwood was contributing to complete the project; and the fact that Linwood made no demand for payment of moneys advanced, that prior to December 2011 the position was the same.
  2. [84]
    Having regard to the surrounding circumstances, I do not regard the provision of a “repayment date” of 6 months under the written loan agreement, let alone a boilerplate interpretation provision such as clause 1.2(j), as being sufficient to clearly demonstrate that the loan agreement was an “agreement which is completely independent of the partnership arrangements”.
  3. [85]
    In the circumstances, this aspect of Linwood’s claim against Grange Warner must be dismissed.  Consistent with the authorities referred to above, Linwood cannot recover from its partner, Grange Warner, the funds which it loaned to the partnership, until an account has been taken.
  4. [86]
    As to how the funds so advanced are properly to be characterised, firstly, I accept Mr Gafney’s evidence about the proposal for the advance of the $625,000 changing from what was proposed in the written agreement, being a one-off advance of the whole amount, to an agreement to advance those funds incrementally as they were needed.  It is clear that a lot of what was done in the context of this partnership was “informal”, notwithstanding the significant amounts of money involved.   Simply because the parties elected to document one aspect of their arrangements, is not a basis to reject the binding effect of other, oral arrangements, including to the extent they varied the written terms; the latter being, it seems, quite consistent with how most of their commercial dealings with one another were carried out.
  5. [87]
    However, it is difficult to accept the contention that the further funds advanced, in excess of the $625,000, were “a continuation” of the written loan agreement.  Mr Gafney acknowledged that this was “not specifically mentioned” in his discussions with Maurice Anderson.  What was agreed, however, I accept, was that Linwood would continue to loan money to the partnership, to enable it to complete the Maryborough land development.
  6. [88]
    In my view, it is appropriate to characterise the funds advanced as follows:
    1. (a)
      the $625,000 advanced from 29 April to 18 December 2011, as a loan from Linwood to the partnership, pursuant to the written loan agreement, as varied by the oral agreement made on or about 29 April 2011;
    2. (b)
      in relation to payment of interest on that amount, I propose to invite further submissions from the parties, having regard to clause 3.1 of the written agreement, but also taking into account the oral variation to the agreement; the incremental advances; the delay in the project’s completion; the subsequent events culminating in this litigation; and the conclusion reached at paragraphs [81], [82], [84]and [85] above;
    3. (c)
      the further funds advanced from 18 December 2011 to December 2013, and particularised in the schedule to the amended reply and answer (excluding the amounts for legal fees), also as a loan from Linwood to the partnership, but to be treated as an interest free loan under clause 2.6(c) of the partnership agreement;
    4. (d)
      in respect of all of these amounts (subject to the ultimate finding regarding interest at (b)), I regard them as falling within clause 5.1(c) of the partnership agreement (which is consistent in any event with s 47(b)(ii) of the Partnership Act 1891), as loans from Linwood to the partnership, as distinguished from capital.
  7. [89]
    The amounts for legal fees particularised in the schedule to the amended reply and answer are not capable of being characterised as a loan from Linwood to the partnership, whether under the written loan agreement or otherwise.  In light of the conclusions reached above, about Linwood’s claim in this proceeding, they are not recoverable, in my view, under clause 5.1 of the loan agreement.  It is noted that Grange Warner, in the draft order it submitted at the end of the trial has these amounts treated as amounts referred to in clause 5.1(e) of the partnership agreement (partners’ capital).  Again, I propose to invite further submissions about this, before making final orders.
  8. [90]
    It is appropriate that an order be made for the dissolution of the partnership and the taking of accounts, and in that context for the moneys which it is agreed were advanced by Linwood (not including the legal expenses) to the partnership, to be accounted for as repayment of loans from Linwood, under clause 5.1(c), after the payment of liabilities to third parties, but before the distribution of partners’ capital, or any profits.

Service Agreement

  1. [91]
    Michael Gafney gave evidence that, in about June 2011, he and Maurice Anderson entered into an agreement, under which Mr Gafney was to perform certain services at the Teddington Road site, and that he would be paid at the rate of $50 per hour for that work.
  2. [92]
    As already noted, it was agreed between the parties that Mr Gafney lived on the Teddington Road site “for a period of time”.[86]Mr Gafney’s evidence was that from August 2011 until Christmas 2012 he was “actually living on site to try to get the estate finished” (he said he was living in a caravan, on the neighbouring property) and from January 2012 he was there “on a less frequent basis”.[87]
  3. [93]
    It was also agreed that, following the termination of the VDM Constructions contract, the plaintiff would:
    1. (a)
      arrange engagement of new contractors;
    2. (b)
      perform some site works; and
    3. (c)
      supervise landscaping, watering of plants, poison weeds, replace diseased and dead plants, construct garden beds and attend to mowing.[88]
  4. [94]
    However, Grange Warner denied any agreement to pay Linwood, or Gafney, for this work.
  5. [95]
    Mark Anderson was adamant that there was no agreement for anyone to be paid, saying:  “…none of us get paid by the partnership. I don’t get paid for it.  My father didn’t get paid for it.  And Mike didn’t get paid for it.  That – when you do subdivisions if you’re – you’re doing the development, you put that time in.  If you want to do development, you put that time in anyway”.[89]He said that Michael Gafney did ask to be paid, at one meeting, and said that “Dad said to him, well, I don’t get paid.  Mark doesn’t get paid.  So you’re not going to get paid”.[90]
  6. [96]
    Michael Gafney’s evidence was that the reason he “lived on site” was in order to supervise the uncontracted works, being earthworks and plant hire that were being carried out “on an hourly basis”, after the contract with VDM was terminated, and before the new contractors were engaged – to make sure they were getting what they were being charged for.[91]His evidence was that it was agreed as between him and Maurice Anderson that he would be “compensated for my hourly rate”, of $50 an hour, for doing this. 
  7. [97]
    There is no record of any agreement to this effect.
  8. [98]
    Mr Gafney said it was also agreed that he would be reimbursed for any expenditure he was required to make.[92]There are entries in the “cashbooks” which were included in the agreed bundle of documents that are consistent with this occurring on a reasonably regular basis.[93]They are not large amounts.  There does not appear to have been any controversy about this, at least in this proceeding.
  9. [99]
    Linwood did not produce any invoice, or other request for payment under this alleged “service agreement”, until September 2013.  An invoice (number 36) dated 1 September 2013 was issued by Linwood to both Grange Warner and Linwood, seeking payment of $65,230 for:

“Works undertaken due to termination of civil contractor – site works over and above a contract supervisory role – works physically performed by Linwood Group

1,008 hrs (25.2 weeks) at $50.00 per hr

for the period 1/7/11 to 30/6/13 as per attached schedule … ”[94]

  1. [100]
    The amount of the invoice also includes various hire charges.
  2. [101]
    The “attached schedule”[95]is a printout of a spreadsheet, listing dates, number of hours, days, distance (travelled) and “purpose” (which includes the places travelled to and the work that was done).
  3. [102]
    Mr Gafney’s evidence, initially, was that this schedule was put together by him, based on various other notes he had kept during the course of the project, but which had been lost or destroyed.  In response to a challenge to his evidence, in cross-examination, he subsequently produced, in the course of his evidence, a document which he said showed that the details from the schedule to invoice 36 had been in existence since at least January 2013 (because it formed part of a cashbook he had sent to his accountant, attached to an email, at that time[96]).   I accept his evidence in that regard.
  4. [103]
    However, there are a number of other difficulties with Mr Gafney’s evidence about this “service agreement”:
    1. (a)
      on his evidence, the reason for this agreement was to supervise the uncontracted works necessitated as a result of the termination of the VDM contract, and pending commencement of new contractual arrangements;
    2. (b)
      his evidence was that these uncontracted works started in August, and were completed by about October 2011;[97]
    3. (c)
      the new superintendent was engaged prior to August 2011;
    4. (d)
      accordingly, the terms of the agreement described by Mr Gafney do not explain why he would be seeking payment for work extending well beyond October 2011, in fact up until September 2012;
    5. (e)
      in addition, although it was agreed that Mr Gafney was “living on site” for a period of time, and Mr Gafney said that he was living there for the whole of the period from August to Christmas 2011, the schedule annexed to invoice 36 appears inconsistent with that, showing him travelling up to Maryborough from Brisbane on a number of occasions;
    6. (f)
      Mr Gafney also relies, in answer to one aspect of the counterclaim, on an alleged agreement that Linwood would be paid a project management fee for Teddington Road, of $3,000 per lot.  Mr Gafney’s explanation for the differentiation between works performed in accordance with that alleged agreement, and the alleged service agreement, was unpersuasive;[98]and
    7. (g)
      finally, his explanation for not delivering an invoice until September 2013 – that the partnership did not have any money prior to that; that he did not consider the amounts significant given the large amounts of money he had advanced; and that he had not had time to do it previously[99]– does not withstand scrutiny.  The evidence regarding the partnership’s financial position, at the end of June 2013, was inconsistent with there being available funds; and the financial position of the partnership did not change from end of June 2013, to September 2013.[100]
  5. [104]
    It really does appear as though, in the context of the difficulties Mr Gafney was having with Mr Wan, and vice versa, Mr Gafney made the decision to put in an invoice to recover for this additional time he had recorded, travelling up to Maryborough and doing certain things on site.
  6. [105]
    Although, as will become apparent, I have accepted that it is more probable than not that an arrangement was agreed upon, for Linwood to be paid an additional amount (the project management fees), having regard to the additional work carried out by Linwood in relation to both projects, I am not satisfied to the requisite standard that this additional “service agreement” was made. 
  7. [106]
    The plaintiff’s claim regarding the service agreement is therefore dismissed.

Grange Warner’s Counterclaim

  1. [107]
    As already noted, the only part of the counterclaim pressed by Grange Warner at the trial was the claim that Linwood, by Mr Gafney, improperly caused five payments to be made to it, which Linwood ought to be required to bring to account upon the dissolution of the partnership.
  2. [108]
    It is pleaded by Grange Warner that at no time did the partnership resolve, nor did Linwood and Grange Warner agree, that any amount would be paid to any of the partners under the “agreed salary” provision of the partnership agreement (clause 2.8).[101]
  3. [109]
    The payments Linwood made to itself, and which are challenged by Grange Warner, are particularised in paragraph 74 of the amended defence and counterclaim, as follows:
    1. (a)
      payment made on or about 19 November 2009 in the amount of $41,800;
    2. (b)
      payment made on or about 23 December 2009 in the amount of $83,600;
    3. (c)
      payment made on or about 11 March 2010 in the amount of $16,386.37;
    4. (d)
      payment made on  or about 23 June 2010 in the amount of $44,412.50; and
    5. (e)
      payment made on or about 6 May 2011 in the amount of $69,300.
  4. [110]
    In support of Grange Warner’s case, reliance was placed on the statutory declaration, and affidavit of Maurice Anderson, already referred to.
  5. [111]
    In the statutory declaration (exhibit 2), Maurice Anderson states that he did not authorise the payments referred to in subparagraphs (a), (c), (d) and (e) above.[102]He says that on “various occasions” he signed blank cheques, at Michael Gafney’s request, and also says, in respect of these four payments, that he has never seen the cheques fully completed with payee details and amounts shown.[103]
  6. [112]
    In relation to the payment referred to in subparagraph (b) above, in the statutory declaration Maurice Anderson says he was advised that this cheque (and another cheque referred to, for a far greater amount of $688,000 which is not in dispute in this proceeding) was “for the ‘repayment of loan advanced by Linwood Group to the Partnership”.[104]
  7. [113]
    In his affidavit (exhibit 3), by reference to the cheques for payments (a), (b), (c) and (d) above (exhibit MA-2 to the affidavit), Maurice Anderson said at [29]:

“I have reviewed the partnership cheques received from Suncorp, which are completed as payable to Linwood.  I do not recall signing any of these cheques, although the signature on the cheques appears to be mine.  I believe that these cheques may have been some of the blank cheques I signed at Michael’s request.  When I was signing the blank cheques, Michael did not tell me he intended to use them to pay funds to Linwood.  I understood they were to be used to pay overdue or pressing creditors of the partnership which had been involved in aspects of the development.”[105]

  1. [114]
    Mark Anderson’s evidence was that “every week”, at the partnership meetings, Mike Gafney would produce blank cheques for Maurice to sign; that Mike never showed them anything, no pieces of paper, he just used to say there were particular bills to be paid, and produce blank cheques for Maurice to sign.[106]His evidence was that “every single cheque” was signed in blank.[107]
  2. [115]
    I do not accept Mark Anderson’s evidence about this.  It is not consistent with what Maurice Anderson said about this practice (of something that happened sometimes) and is, I find, exaggerated and unreliable.
  3. [116]
    Michael Gafney’s evidence was that his practice was to produce invoices requiring payment at each partnership meeting, and in some cases he would already have prepared the cheques beforehand, ready to be signed at the meeting.[108]His evidence was that there were about 400 cheques used by the partnership overall.[109]He said there would have been some occasions when the cheques were blank when signed by Maurice;[110]but he cannot now recall which ones they might have been.[111]
  4. [117]
    It is reasonable to be unable to now recall the circumstances in which 5 out of about 400 cheques were signed.   Maurice Anderson refers to a similar inability to recall, in paragraph [29] of his affidavit, before expressing a “belief” that these cheques (or at least 4 of them) may have been some of those he signed in blank.  I do not regard paragraph [29] as being sufficiently clear or unequivocal to make any finding about that, bearing in mind again the need for caution in acting on this evidence. 
  5. [118]
    In any event, I propose to deal with the payments the subject of paragraph 74 of the amended defence and counterclaim in terms of whether I am satisfied, on the balance of probabilities, as to the basis for payment contended by Linwood in answer to the counterclaim (and not on the basis of any findings about whether the cheques were blank or not when signed).

Project management fee – Elof Road (paragraph 74.1)

  1. [119]
    In relation to the first payment, of $41,800 on about 19 November 2009,[112]Mr Gafney described this as “the project management fee for lots 1 to 19 at Elof Road, Caboolture”, being a fee for “basically causing that estate to be developed and doing all the work associated with it, planning and supervisory work and even sales work”.  He said that “[w]e had an agreement between Maurice Anderson and myself and Grange Warner in general that I would be paid the sum of $2000 per lot in recognition of the work that was required to complete that development”.[113]
  2. [120]
    This was said to be an agreement reached at a partnership meeting, although Mr Gafney could not recall when this was.[114]Mark Anderson said he could not remember ever agreeing at any meeting to this.[115]Reference has also been made, above, to Mark Anderson’s more general evidence, that there was never any agreement for any of the partners to be paid.
  3. [121]
    I am cautious about accepting Mark Anderson’s evidence, couched in such absolute terms, because of the point earlier made, about his apparent lack of involvement in the financial matters concerning the partnership, but also what I regard as his overstatement, or exaggeration about other matters, such as the signing of blank cheques.
  4. [122]
    His denial of knowledge of this agreement must also be balanced with the fact that Linwood (by Mr Gafney) plainly did more work in relation to the development than Grange Warner (by Maurice or Mark Anderson). 
  5. [123]
    It must be said that there are unsatisfactory aspects, in terms of credibility and reliability, of the evidence before the court from both sides of this dispute.  The determination of the issues is made more difficult because of the absence, for the most part, of any contemporaneous, corroborating documents and the unfortunate passing of Maurice Anderson.  Although perhaps in another context the lack of any documentation of this kind of agreement (remuneration of one of the partners) would tell against a finding in favour of it having been made, here, it is clear that most of the business of the partners was conducted without documentation and, accordingly, less weight can be placed on the absence of it in any particular respect.
  6. [124]
    Although I have some hesitation, having regard to the principles referred to at paragraphs [29]-[31] above, overall, in my view, the balance of probabilities favours a finding that there was an agreement between Maurice Anderson and Michael Gafney, for Linwood to be paid some kind of fee reflecting the additional effort expended on the part of Linwood.  That is also contemplated by clause 2.8 of the partnership agreement.
  7. [125]
    The only evidence of this agreement is what Mr Gafney describes, and in circumstances where I accept that it is more probable than not that an agreement of that kind was made, I accept his evidence as to the terms of it.
  8. [126]
    There is, therefore, no requirement for this payment to be brought to account by Linwood, in the taking of accounts by the partnership.

Lending fee – Elof Road (paragraph 74.2)

  1. [127]
    The second payment, of $83,600, made on 23 December 2009,[116]is described, in the applicable invoice issued by Linwood, as an “administration fee”, in relation to the Elof Road development.[117]In his evidence, Mr Gafney described this as “a lending fee for Elof Road”.  He said:

“We had an agreement in February 2009 that because of the difficulty in obtaining finance from either Westpac or ANZ … that we would investigate the possibility of myself withdrawing money from my super fund and using that money to fund the development.  The agreement was that the partnership would reimburse me for expenses, establishment fees, tax fees that I would incur by – by withdrawing my superannuation, and also establishment fees for my wife’s loan account that she took out with Suncorp.”[118]

  1. [128]
    There is in evidence a document said to record resolutions made at a partnership meeting on 5 February 2009, at which each of Maurice and Mark Anderson, and Michael Gafney were present.
  2. [129]
    In that document, under the heading “agenda”, the following appears:

“7. Discussion with Suncorp re borrowing a further 250K on 18 Terrence st. If mg is to borrow and contribute to partnership, then partnership is to reimburse linwood for establishments costs and interest.

  1. Discussion with Maurice and Mark re the possibility of Mike withdrawing money from the Gafney Superannuation Fund and contributing it to the partnership via Linwood.  If this is to happen, then partnership is to reimburse linwood for any tax liable on the withdrawal.
  1. It would need to be acknowledged that upon the sale of the assets, expenses incurred as above, would come back to Linwood would be liable for tax on this money at 15% plus Medicare levy.  The partnership agrees to pay this amount in addition to the amounts mentioned in 7 & 8 above.”[119]
  1. [130]
    Under the heading “resolutions”, on the second page, in relation to items 7, 8 and 9, it was recorded that “Partners understand this is required if we do this”.[120]
  2. [131]
    There were three further items, listed as numbers 10, 11 and 12 under “agenda”.  It is sufficient to refer to what was recorded about those under “resolution”:

“10. Decision is to move forward, firstly MA to approach Westpac Chermside for funding of approx. 500K. If Westpac does not come good for the money, we agree to go forward on Suncorp money and then lastly the super fund money.

  1. Once bank funding has been obtained, Linwood is to be repaid contributions to the point where contributions by each party are equal.  Until such time, Linwood having contributed in excess of that of the Grange Trust, shall be entitled to interest calculated at 6% on the amount by which its contributions exceeds those of the Grange Trust.  Agreed.
  1. Do the parties agree that landscaping at Elof road will be done by Linwood Group and that the partnership shall pay to Linwood an amount equal to the landscaping allowance as provided by Saunders Havill.  Agreed.”[121]
  1. [132]
    The document appears to be signed by each of Mr Gafney, Maurice and Mark Anderson, although Mark Anderson had no recollection of the document.[122]It must be noted, however, that Mark Anderson did not profess to have any recollection of many other matters as well, including the written loan agreement.
  2. [133]
    This was relied upon as a document reflecting the agreement referred to.  In the context of a case where there is almost no documentation of any of the disputed payments, this ought to strengthen the plaintiff’s argument.  However, the difficulty that emerged in relation to this payment is that Mr Gafney’s evidence about the actual amount was inconsistent, contradictory, and frankly unconvincing.
  3. [134]
    It seems that the amount sought to be paid was initially $76,000.
  4. [135]
    Mr Gafney said that the cheque was initially written out for that amount, but was then changed to $83,600 “because we weren’t aware of whether there was GST incurred”, “we thought about it and then thought, well, we should do so” (that is, add GST).[123]What is curious is that the invoice (exhibit 8) is for the GST inclusive amount.  Having regard to Mr Gafney’s evidence, it is reasonable to infer the invoice was prepared after the cheque was prepared, not before.
  5. [136]
    Mr Gafney’s evidence was that, of the two possibilities referred to in the partnership minute (borrowing money from a financial institution, or withdrawing money from his superannuation fund), after that meeting, both were done:  his wife borrowed $150,000 and then subsequently $250,000; and he withdrew money from his superannuation fund, although he could not remember how much.[124]
  6. [137]
    As to how the  figure of $76,000 was arrived at, Mr Gafney’s evidence was as follows:
    1. (a)
      Initially, he said it was comprised, in part, of the amount of $58,288.18 which appears in an annexure to an email from his accountant,[125]which Mr Gafney said “indicates the fees that were incurred by – by myself”.[126]However, on examination, that amount is the total of PAYG withholding tax (whether estimated or assessed, it is not clear) on benefits paid from the Gafney Superannuation Fund, with due dates ranging from 31 December 2008 to 29 June 2009.  This amount is therefore not a “fee”, and, in addition, relates to benefits paid before February 2009.
    2. (b)
      Mr Gafney then sought to explain the difference between the $58,288.18, and the $76,000, as including an amount in anticipation of tax that might be payable when the money was repaid to Linwood/Gafney.[127]
    3. (c)
      He then said that it included “costs associated with initiating the asset line accounts to the sum of $400,000”.[128]
    4. (d)
      In this regard, in re-examination, he was taken to a bank statement, for an “asset line” account in the name of his wife, which was established in April 2008,[129]and he said that the establishment fees, stamp duty and registration fees (together, about $1000), as well as ongoing account keeping fees of $10 a month, in relation to this account were included in the $76,000.[130]However, when the fact that this pre-dated the 5 February 2009 meeting was drawn to his attention, he said he would have to “investigate whether they were part of ... the funds”.[131]
    5. (e)
      Mr Gafney then referred to a later asset line account, established on 17 February 2009, and said the fees associated with this were “definitely” included.[132]
    6. (f)
      In relation to the fact that some of the superannuation withdrawals were also prior to 5 February 2009, his explanation was that the partnership minute was simply the date when the agreement was documented, not the date when it was reached,[133]but that is inconsistent with the wording of the document, as recording a meeting held on 5 February, in which “possibilities” – not things that have already been agreed and/or done – are discussed.
    7. (g)
      Ultimately, he said the figure was “a nominal amount [adding together all the various components he had referred to] and agreed to by both parties”.[134]
    8. (h)
      Elsewhere, this payment was described:
      1. as noted, in the invoice, as an “administration fee”;
      2. in paragraph 15 of the amended reply and answer, which Mr Gafney agreed was prepared on his instructions, as a “fee for the costs incurred by [Linwood] in raising finance for the Elof Road development”;
      3. in the general ledger obtained from the accountant (exhibit 4) as being for  “project management service” (although noting that Mr Gafney denied any knowledge about how this general ledger was prepared[135]);
      4. in the cashbook kept by Mr Gafney, as “lending fees for Elof Rd”;[136]
      5. in the statutory declaration by Maurice Anderson, as being “repayment of loan advanced by Linwood Group”;[137]and
      6. in an affidavit sworn by Mr Gafney on 4 December 2013, in response to Grange Warner’s application to set aside the statutory demand, as a payment for interest in respect of money lent to the partnership by Linwood.[138]
  7. [138]
    I am not persuaded, having regard to the evidence referred to, that there was any agreement to pay the amount of $83,600 to Linwood.   There may have been an agreement to reimburse the establishment fees and interest for a loan taken out by, or on behalf of, Linwood; or for tax liabilities on superannuation withdrawals, as is suggested by the partnership minute which is at exhibit 1, tab 85.  However, I am not satisfied, on the balance of probabilities, as to what was done in that regard after the 5 February 2009 meeting; what costs/expenses/taxation liabilities there were, if any, associated with that; or how the figure of $83,600 was calculated.
  8. [139]
    In the circumstances, the defendant is entitled to orders requiring this amount to be brought into account by the plaintiff.

Payment of interest on unequal contributions (paragraph 74.3)

  1. [140]
    In relation to the third payment, of $16,386.37,[139]Mr Gafney’s evidence was that this represented the payment of interest on unequal contributions, as contemplated by resolution 11 made on 5 February 2009.[140]
  2. [141]
    The calculation of this figure is referred to in the correspondence from R W Corrie & Co, to the partnership, of 4 March 2010.[141]
  3. [142]
    Having regard to both the record of the partnership meeting, and the letter from the accountant, I am satisfied to the requisite standard that this was a payment agreed to be made, at the time it was made.
  4. [143]
    There is therefore no requirement for this payment to be brought into account by the plaintiff.

Project management fee – integration of developments (paragraph 74.4)

  1. [144]
    The fourth payment was for an amount of $44,412.50, made on 23 June 2010.[142]This was described by Mr Gafney as an “entitlement of administration fee in the amount – in the net GST amount of 40,375 and it was to be paid in the initial instance by Justin Gafney [Mr Gafney’s son] in his – as part of his integration of the – his development with our development”.[143]
  2. [145]
    As further explained by Mr Gafney, the partnership initially purchased the Elof Road property with the intent of developing it into 19 lots.  A neighbour approached them, asking if they wanted to buy his property as well.  The partnership did not have the money to do that, but it was considered desirable to have a larger area of land for the development.  Michael Gafney’s son, Justin Gafney, purchased the neighbour’s land, and then there was an “integration process”, involving amendments to the development application and meeting other council requirements, in order to integrate Justin Gafney’s land into the partnership’s original proposed development.[144]
  3. [146]
    Mr Gafney said he undertook that process, and said that it was agreed, between him and Maurice Anderson, at the partnership meetings that “that sum would be paid in recognition of the work that was required for the integration”.  He could not recall when this agreement was made.[145]
  4. [147]
    Initially, Mr Gafney said there was no basis for calculating the amount of the payment, saying “I think it was decided later on that that would be the amount... because … at the time we weren’t aware exactly of how – how much the development cost was going to be for the 19 lots or, indeed, for the 25 lots”.[146]
  5. [148]
    However, he then said:

“… there was only discussion as the development progressed… the process was that we signed a development agreement with – with my son to purchase Neville’s [the neighbour’s] block and he – he, together with the partners, signed a development agreement to say that he would incorporate that into our development and that he would pay a fee for the cost involved with that.  Now, we invoiced him.  We gave him one invoice, and I can’t remember when it was, he paid that.  We gave him the second invoice, which he paid.  And the third progress payment, which was the third and final one, he paid that.  That was the amount of 40,375 net of GST.”[147]

  1. [149]
    When asked by Mr O'Brien how that related to an agreement between himself and Maurice Anderson for him to be paid the amount of $40,375, Mr Gafney stated: “I’m just saying that the agreement was that Justin would pay that to the partnership and then that would be paid to Linwood.”[148]
  2. [150]
    I was referred to a copy of the “development deed” between Justin Gafney and the partners, which was said to be the documentation of this arrangement.  The copy of that document referred to in the course of the trial[149]is incomplete, in so far as the “consideration” is concerned.[150]However, in preparing these reasons, I became aware of another copy of that document, in the agreed bundle,[151]which has a figure of $350,000 written in at item 5 of the reference schedule.[152]
  3. [151]
    Although they were not referred to at the trial, there are also included in the agreed bundle tax invoices issued by the partnership to Justin Gafney, for “development costs for lots 20 to 25” at Elof Road:
    1. (a)
      in the amount of $253,000 (including GST), described as “claim no. 1”;[153]which appears to have been paid in 3 instalments (two of $100,000 and one of $53,000) in December 2009;[154]
    2. (b)
      in the amount of $38,640.83 (including GST), described as “claim no. 2”;[155]which appears to have been paid on 31 May 2010;[156]and
    3. (c)
      in the amount of $44,412.50 (including GST), described as “claim no. 3”;[157]which also appears to have been paid on 30 June 2010.[158]
  4. [152]
    On that same date, 30 June 2010, the amount of $44,412.50 is then paid out of the partnership account, to Linwood.
  5. [153]
    I am not satisfied, to the requisite standard, that there was any agreement with Maurice Anderson about this.   I found Mr Gafney’s evidence about this alleged agreement vague and unconvincing.  For the reasons already given, I have, not without some hesitation, accepted Mr Gafney’s evidence about an agreement for payment of a “project management fee”; but it is more difficult to accept his evidence about a project management fee relating to the integration of the developments and, upon careful consideration, I am not satisfied on the balance of probabilities that such an agreement was made.
  6. [154]
    Accordingly, it will be necessary for Linwood to bring this amount to account.

Project management fee – Teddington Road (paragraph 74.5)

  1. [155]
    The fifth and final payment the subject of challenge in the counterclaim is an amount of $69,300 paid on or about 6 May 2001.[159]Mr Gafney said this was the “project management fee” for Teddington Road.  He said the arrangement was that “where Linwood charged $2000 a block at Caboolture, it charged the sum of $3000 a block to do the Maryborough development, mainly because of the extra distance involved, time and the need to get accommodation”.  He said this was agreed to “during the process that we started the Teddington Road development”.[160]
  2. [156]
    Mr Gafney said that this agreement, and the “service agreement” the subject of the plaintiff’s claim were two separate agreements, explaining again the need for “someone to take charge of … earthworks that could not be quoted…” on the Teddington Road project, because of the termination of the VDM contract.[161]
  3. [157]
    For the reasons already addressed, I have rejected Linwood’s claim in respect of the alleged “service agreement”.  However, and consistently with the conclusion reached in relation to the project management fee for the Elof Road development, I accept that, having regard to the additional work undertaken by Linwood in the partnership business, it is more probable than not that an agreement would have been reached with Maurice Anderson about this.  I accept Mr Gafney’s evidence as to the terms of it.
  4. [158]
    In the circumstances, there is no requirement for Linwood to bring this amount into account.

Orders and declarations

  1. [159]
    For the foregoing reasons, the plaintiff’s claim is dismissed.   The defendant’s counter-claim is allowed in part (in so far as it concerns the payments referred to in paragraph 74.2 and 74.4). 
  2. [160]
    In terms of the relief sought by the defendant, I am satisfied it is appropriate to make an order for the dissolution of the partnership, and for the taking of accounts.
  3. [161]
    It is appropriate to allow the parties time to consider these reasons, before inviting submissions on the form of the declarations, orders and directions that ought to be made.  I will direct that, within 7 days, the parties submit a draft of such declarations, orders and directions as they agree ought to be made or, failing agreement, that each party submits the form they contend is appropriate, together with submissions of no more than 3 pages explaining the basis for any differences.  If either party considers a further oral hearing is desirable, that will be accommodated as soon as reasonably possible.

Footnotes

[1]Exhibit 1, tab 163, p 929.

[2]Being an agreement made on or about 29 April 2011, which was partly in writing, and partly oral (paragraphs 6 to 11 of the amended statement of claim, filed in court on 17 February 2016) and a further oral agreement, made in December 2011 (paragraph 11A of the amended statement of claim).

[3]Paragraphs 24-29 of the amended statement of claim.  A further alternative claim, for moneys had and received, was abandoned at the commencement of the trial. 

[4]Paragraphs 34-41 of the amended statement of claim.

[5]Paragraphs 3, 5 and 65 of the amended defence and counterclaim filed 13 May 2015.

[6]Paragraphs 37-38 of the amended defence and counterclaim.

[7]Paragraphs 65, 68-80 of the amended defence and counterclaim.  The other parts of the counterclaim, pleaded in paragraphs 81 to 119, were abandoned at the commencement of the trial, with the parties agreeing to an order that those parts of the counterclaim be dismissed, with the defendant to pay the plaintiff’s costs on the standard basis.

[8]Exhibit 1, tab 1.

[9]Exhibit 1, tab 1, clause 2.4 and item 8 of the schedule.

[10]Partnership agreement, exhibit 1, tab 1, pp 4 and 13, clause 2.3 and item 7 of the schedule.

[11]Exhibit 1.

[12]Exhibits 4 and 5.

[13]Paragraph 14 of the amended reply and answer.

[14]Paragraph 15 of the amended reply and answer.

[15]Paragraph 18 of the amended reply and answer.

[16]Paragraph 16 of the amended reply and answer.

[17]Paragraph 17 of the amended reply and answer.

[18]Paragraphs 35-37 of the amended statement of claim.

[19]Counsel for the defendant indicated there was a second partnership minute, but it was said not to be included in the 3 volumes of document tendered as an agreed bundle (exhibit 1).

[20]Pursuant to s 92 of the Evidence Act 1977 (Qld).

[21]Exhibit 2.

[22]Exhibit 3.

[23]T 2-71.7 and .19.

[24]T 1-53.38.

[25]T 2-71.37.

[26]T 2-72.47; also 2-92.45.

[27]T 2-69.9-.10.

[28]With whom Bergin CJ in Eq (at [114]) and Sackville AJA (at [115]) agreed.

[29]As to which, see also Onassis v Vergottis [1968] 2 Lloyd’s Rep 403 at 431; Camden v McKenzie [2008] 1 Qd R 39 at [34] per Keane JA (as his Honour then was); and Campbell v Campbell [2015] NSWSC 784 at [73]-[79] per Sackar J.

[30]Referred to in Campbell v Campbell [2015] NSWSC 784 at [79].

[31]Exhibit 3 at [11].

[32]List of Agreed Facts at [7].

[33]T 3-25.30-.34

[34]T 3-25.43.

[35]Affidavit of Maurice Anderson, exhibit 3, at [10]-[12]; see also Mark Anderson at T 2-72.32: “it was Mike’s job to make sure all the bills were paid”.

[36]T 2-69.30-.31.

[37]List of Agreed Facts at [21]-[23].

[38]T 2-69.25-.26.

[39]T 2-76.42-.44.

[40]T 2-75.24-.31.

[41]T 2-77.7-.12 (Mark Anderson) and T 3-8.33-.34 (Michael Gafney).

[42]T 3-9.2.

[43]Exhibit 1, tab 163.

[44]Exhibit 1, tab 4.

[45]Affidavit of Maurice Anderson, exhibit 3, at [26]-[27].

[46]Exhibit 1, tab 7, letter from Mr Wan to Mr Gafney dated 18 January 2013.

[47]List of Agreed Facts at [14].

[48]List of Agreed Facts at [9].

[49]Exhibit 3 at [22]-[23].

[50]Exhibit 3 at [30(a)].

[51]Exhibit 1, tab 2.

[52]Amended statement of claim at [6]-[11].

[53]Amended statement of claim at [11A].  

[54]Clause 5.2 provided for termination of the agreement on default, in which event the moneys advanced were to become due and payable immediately.

[55]T 1-30.25-.26.

[56]T 1-34.22-.23.

[57]T 2-35.37 – 2-36.5.

[58]T 1-47.44 – 1-48.1.

[59]T 1-31.1-.18.

[60]T 1-28.11 – 1-29.2; 1-31; 1-34.

[61]T 1-31.38-.39.

[62]T 1-33.38-.41.

[63]T 1-30.31-.45; 1-33.

[64]Schedule to the amended reply and answer (the payment of these sums is admitted – List of Agreed Facts at [16]).

[65]T 2-22.22-.39.

[66]T 2-23.10; 2-24.11-.27.

[67]T 2-24.29-.43.

[68]T 2-24.45-.46.

[69]T 2-25.2.

[70]T 1-36.31-.33.

[71]Exhibit 1, tab 7, letter from Mr Wan to Mr Gafney dated 18 January 2013.

[72]T 3-76.36 – 3-77.12.

[73][1986] TASSC 8 (Supreme Court of Tasmania, Full Court, 17 February 1986).

[74]See also Craig v Finance Consultants Pty Ltd & Anor [1964] NSWR 1012 at 1014.

[75]Emphasis added.

[76]Emphasis added.

[77]References omitted.  Emphasis added.

[78]Emphasis added.

[79]Emphasis added.

[80]Said to be enunciated by Young J in Phoenix Freight Systems Pty Ltd v Seko Air Freight Inc (1995) 17 ACSR 754, a case in which it was not clear what the relationship between the parties was (that is, whether it was a partnership or not), but in which Young J said, at 754, “[i]f there was a partnership agreement and the balance of the partnership agreement has not been ascertained or agreed upon, then any outstanding balance would not be a debt at all, both parties would have a case for having the partnership accounts taken before the court and that would be their only right”, referring to Moravia v Levy (1786) 2 Term Rep 483; 100 ER 260.

[81]At [39].  McColl JA also referred, at [37], to Moravia v Levy, as an example of a case in which the court had found that in the context of a partnership agreement which contained a covenant to account at certain times, there was an express promise to pay the balance struck.

[82]See again paragraphs [42], [43], [47], [51] and [53] above.

[83]As to the relevance of surrounding circumstances to the task of construing a contract, see Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [40]; Electricity Generation Corp v Woodside Energy Ltd (2014) 251 CLR 640 at [35].

[84]See, for example, exhibit 1, tab 164, p 930; see also Mr Gafney at T 2-21.21-.34 and 2-23.22-.26.

[85]See paragraphs [57]-[59] above.

[86]List of Agreed Facts at [23].

[87]T 1-37.28-.30; 1-42.36-.41.

[88]List of Agreed Facts at [22].

[89]T 2-76.2-.6.

[90]T 2-76.9-.10.

[91]T 1-42.43 - 1-44.3; T 2-8.10-.17; T 2-9.15.

[92]T 1-44.5.

[93]For example, exhibit 1, tab 24, pp 157-161, 163, 165 and 168.

[94]Exhibit 1, tab 52, p 397.

[95]Exhibit 1, tab 53, p 399.

[96]Exhibit 9; see also T 2-6.6 – 2-7.

[97]T 2-9.19.

[98]T 3-14 – 3-15.

[99]T 1-60.1-.14.

[100]T 2-3.20 – 2-5.38.

[101]Paragraph 68 of the amended defence and counterclaim.

[102]Exhibit 2 at [1].

[103]Exhibit 2 at [1] and [4]. 

[104]Exhibit 2 at [2]. 

[105]Emphasis added.

[106]T 2-71.41 – 2-72.25.

[107]T 2-78 – 2-79.

[108]T 3-4.2-.3; 3-6.16-.24.

[109]T 3-4.23.

[110]T 3-6.28.

[111]T 3-4.35; 3-5.33.

[112]Paragraphs 74.1 and 75 of the amended defence and counterclaim.

[113]T 3-8.13-.37.

[114]T 3-8.25.

[115]T 2-82.

[116]Paragraphs 74.2 and 76 of the amended defence and counterclaim.

[117]Exhibit 8.

[118]T 3-9.11-.18.

[119]Emphasis added.

[120]Exhibit 1, tab 85, p 585.

[121]Exhibit 1, tab 85, pp 584-585.

[122]T 2-85 – 2-86.

[123]T 3-29.18-.27.

[124]T 3-19.25 – 3-20.13.

[125]Exhibit 1, tab 86, p 588.  

[126]T 3-9.40-.47.

[127]T 3-19.12-.14.

[128]T 3-20.42-.43.

[129]Exhibit 1, tab 109.

[130]T 3-55.1-.19.

[131]T 3-55.36.

[132]Exhibit 1, tab 110; T 3-55.37-.46.

[133]T 3-21

[134]T 3-56.8.

[135]T 3-24 – 3-26.

[136]Exhibit 1, tab 67, p 444.

[137]Exhibit 2 at [2].

[138]T 3-28; exhibit 7 at [9].

[139]Paragraphs 74.3 and 79 of the amended defence and counterclaim.

[140]T 3-10.

[141]Exhibit 1, tab 40, p 282.

[142]Paragraph 74.4 and 77 of the amended defence and counterclaim.

[143]T 3-11.14-.18.

[144]T 3-11 – 3-12.  An executed copy of a “development deed” between Justin Gafney and Grange Warner and Linwood was included in the agreed bundle (exhibit 1, tab 90), but it is incomplete in so far as the “consideration” is concerned (that is, the space is blank in the schedule).

[145]T 3-11.38-.46; 3-12.27-.31.

[146]T 3-12.1-.4.

[147]T 3-12.12-.20.

[148]T 3-12.11-.25.

[149]Exhibit 1, tab 90, pp 594-601; T 3-54.

[150]Exhibit 1, tab 90, p 600.

[151]Exhibit 1, tab 99, pp 630-637.

[152]Exhibit 1, tab 90, p 636.

[153]Invoice dated 23 December 2009, exhibit 1, tab 103, p 711.

[154]Exhibit 1, tab 104, p 713.

[155]Invoice dated 31 May 2010, exhibit 1, tab 105, p 715.

[156]Exhibit 1, tab 107, p 717.

[157]Invoice dated 30 June 2010, exhibit 1, tab 106, p 716.

[158]Exhibit 1, tab 107, p 718.

[159]Paragraphs 74.5 and 78 of the amended defence and counterclaim.

[160]T 3-12.37-.46.

[161]T 3-13.17-.18.

Close

Editorial Notes

  • Published Case Name:

    Linwood Group Pty Ltd v Grange Warner Pty Ltd

  • Shortened Case Name:

    Linwood Group Pty Ltd v Grange Warner Pty Ltd

  • MNC:

    [2016] QDC 32

  • Court:

    QDC

  • Judge(s):

    Bowskill DCJ

  • Date:

    03 Mar 2016

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
Briginshaw v Briginshaw (1938) 60 C.L.R 336
1 citation
Jump To
Cite 1 - (1938) 60 C.L.R 336
Brown v New South Wales Trustee and Guardian [2012] NSWCA 431
2 citations
Jump To
Cite 1 - [2012] NSWCA 431
Cite 2 - [2012] NSWCA 431
Brown v New South Wales Trustee and Guardian (2012) 10 ASTLR 164
2 citations
Jump To
Cite 1 - (2012) 10 ASTLR 164
Cite 2 - (2012) 10 ASTLR 164
Camden v McKenzie[2008] 1 Qd R 39; [2007] QCA 136
1 citation
Jump To
Cite 1 - [2008] 1 Qd R 39
Campbell v Campbell [2015] NSWSC 784
2 citations
Jump To
Cite 1 - [2015] NSWSC 784
Cite 2 - [2015] NSWSC 784
Clune v Collins Angus & Robertson Publishers Pty Ltd (1992) 25 IPR 246
2 citations
Jump To
Cite 1 - (1992) 25 IPR 246
Cite 2 - (1992) 25 IPR 246
Craig v Finance Consultants Pty Ltd [1964] NSWR 1012
2 citations
Jump To
Cite 1 - [1964] NSWR 1012
Cite 2 - [1964] NSWR 1012
Dillon v Dillon [1986] TASSC 8
4 citations
Jump To
Cite 1 - [1986] TASSC 8
Cite 2 - [1986] TASSC 8
Cite 3 - [1986] TASSC 8
Cite 4 - [1986] TASSC 8
Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd and Ors (2014) 251 CLR 640
1 citation
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Cite 1 - (2014) 251 CLR 640
Eyota Ply Ltd v Hanave Pty Ltd (1994) 12 ACSR 785
1 citation
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Cite 1 - (1994) 12 ACSR 785
Green v Hertzog (1954) 1 WLR 1309
3 citations
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Cite 1 - (1954) 1 WLR 1309
Cite 2 - (1954) 1 WLR 1309
Cite 3 - (1954) 1 WLR 1309
Helton v Allen (1940) 63 CLR 691
1 citation
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Cite 1 - (1940) 63 CLR 691
Hunt v Barlow [2000] NSWSC 324
1 citation
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Cite 1 - [2000] NSWSC 324
Hurst v Bryk [2002] 1 AC 185
2 citations
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Cite 1 - [2002] 1 AC 185
Cite 2 - [2002] 1 AC 185
Moravia v Levy (1786) 2 Term Rep 483
1 citation
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Cite 1 - (1786) 2 Term Rep 483
Moravia v Levy (1786) 100 ER 260
1 citation
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Cite 1 - (1786) 100 ER 260
Neale v Bank of Western Australia [2014] NSWSC 315
2 citations
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Cite 1 - [2014] NSWSC 315
Cite 2 - [2014] NSWSC 315
Onassis and Calogeropoulos v Vergottis [1968] 2 Lloyd's Rep 403
1 citation
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Cite 1 - [1968] 2 Lloyd's Rep 403
Phoenix Freight Systems Pty Ltd v Seko Air Freight Inc (1995) 17 ACSR 754
1 citation
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Cite 1 - (1995) 17 ACSR 754
Plunkett v Bull (1915) 19 CLR 544
1 citation
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Cite 1 - (1915) 19 CLR 544
Rejfek v McElroy (1965) 112 CLR 517
1 citation
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Cite 1 - (1965) 112 CLR 517
Richardson v Bank of England (1838) 4 My & Cr 165
1 citation
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Cite 1 - (1838) 4 My & Cr 165
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165
1 citation
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Cite 1 - (2004) 219 CLR 165
Watson v Foxman (1995) 49 NSWLR 315
1 citation
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Cite 1 - (1995) 49 NSWLR 315
Zisis v Knighton [2008] NSWCA 42
2 citations
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Cite 1 - [2008] NSWCA 42
Cite 2 - [2008] NSWCA 42

Cases Citing

Case NameFull CitationFrequency
Linwood Group Pty Ltd v Grange Warner Pty Ltd (No 2) [2016] QDC 551 citation
1

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