ATWELL -v- ROBERTS [2013] WASCA 37 (15 February 2013)

ATWELL -v- ROBERTS [2013] WASCA 37 (15 February 2013) - WASCA 2013 case summary — Zoe

[174]

With the transfer of the units formerly held by Edna Paterson in February 1985, the transfer was made to Noel Henry Atwell who was Henry Atwell's son. This was an inter vivos transfer by Mrs Edna Paterson to a cousin who was not a member of the partnership at the time (partnership No 15 listed in Schedule 1) so that he was not an eligible transferee under Rule 4 or Rule 5(c). The defendants plead that a disposal notice was given but it is agreed that the valuation procedures were not strictly complied with.
The transfer of units held by Gladys Broadley to Noel Atwell and Garry Atwell in 1985 were also inter vivos transfers. Noel Henry Atwell was, by then, a member of the partnership (partnership No 16 listed in the First Schedule) although it must be noted that the plaintiffs contend that he was wrongly admitted as a partner in March 1985 pursuant to the Edna Paterson transfer. If he was properly a partner of the date of this third impugned transfer in 1985 then he was an eligible transferee without the need for a disposal notice in accordance with Rule 4. However Garry Atwell was not then a partner. He was the son of Lloyd D Atwell, a cousin of Mrs Gladys Addison Broadley and, therefore, not an eligible transferee under Rule 5(c). The position of the defendants in this respect, as already explained, is that disposal notices were given but that the valuation procedure was not strictly complied with. If the partners for the time being in about June 1985 had required strict compliance with the pre-emptive rights procedures in relation to the transfer of units to Mr Gary Atwell then this transaction was not strictly in accordance with those procedures.
The Hilda Roberts transfer of 23,100 units to the Hamersley trust in 1986 has already been described. Hilda Dorcus Roberts died on 5 January 1986 appointing her son Keith Gilbert Roberts as her executor who accepted the position and proved her will (exhibit 23). By her will she left the whole of her shares in the units in the Atwell Family Agency to her executor and trustee to be held on the terms of the Hamersley Trust (the deed dated 18 December 1972 - exhibit 6A). At the time of her death and at the time of the transfer of those units Mr K G Roberts was already a member of the partnership, in his personal capacity; as trustee of the Hamersley Trust; and as trustee of his mother's estate (see partnership No 19 listed in the First Schedule). He had also been a member of the earlier partnership when his mother was a member (see partnership number 18 listed in the First Schedule). Subject to the determination of the issue about transfers of an equitable interest in the units, Mr Roberts was therefore eligible to be registered as the holder of his mother's units under Rule 5(b) when this transfer was processed. The remaining issue in this respect is whether or not the possibility of the beneficiaries under the Hamersley Trust might be varied to introduce beneficiaries not within the limited family circle provided by Rule 5(c) meant that the transfer of units to the trustee of the Hamersley Trust required compliance with the disposal notice procedure. This is similar to the issue raised in respect of the Ada Ethel Atwell transfer above.
The Dorothy Beckett transfer occurring on about 30 June 1986 involved a transfer of the units from the estate of Dorothy May Beckett who had died on 9 October 1985 and who had appointed her solicitor, Mr M E Frichot, as her sole executor (exhibit 26). The transfer of one parcel of those units to Mrs Rosemary June Spurge without compliance with the pre-emptive rights provisions was authorised because Mrs Spurge was her daughter and so eligible under Rule 5(c). It was the transfer of the other moiety of her units to Keith Gilbert Roberts as trustee for the Hamersley Trust which has produced this challenge. As previously noted, Mr K G Roberts was a member of the partnership at the time (partnership No 19 listed in the First Schedule) and also as trustee of the Hamersley Trust he was the trustee of a settlement which had been made by a previous partner, his mother although she had died before this later disposition. Accordingly if the members for the time being of partnership No 19 required strict compliance with the pre-emptive rights provisions in respect of this transfer then similar issues arise here as arise in the case of the Hilda Roberts transfer.
The Hamersley Trust transfer of units to Leigh Roberts as trustee for K Roberts, M Lister and the Sonoma Trust in 2001 involves the twin submissions that the units in question should never have been transferred to the Hamersley Trust under any of the three earlier transfers and that the transfer from the Hamersley Trust to Leigh Roberts as trustee for K Robert, M Lister and the Sonoma Trust could not have been validly achieved without compliance with the pre-emptive rights provisions because of the capacity for beneficiaries to include persons outside the family circle defined by Rule 5(c). This again raises the issue of changes in the beneficial interest [74] - [76].

[239]

2(a) Neither Malcolm Walter Atwell nor Ian George Atwell was a member of any of the successive firms known as the Atwell Family Agency until 10 November 1998, when they became recorded jointly as a single member of a partnership as the two surviving trustees for the estate of Walter Charles Atwell (see partnership 28 in the First Schedule). They continue jointly as one single member of the current partnership in that capacity.

2(b) Alex Atwell died on 6 March 1997 and from 7 March 1997 his administrators, David Henry Atwell, Malcolm Walter Atwell and Bradley John Atwell, were registered in their capacity as joint administrators as a single member of the partnership.

2(c) David Henry Atwell died in late 2007 and from the date of his death Malcolm Walter Atwell and Bradley John Atwell, as the surviving joint administrators of the estate of Alex Atwell, continued, in their joint capacity, as one single member of the partnership. They continue in that capacity as a single partner of the current firm. However, in the absence of the joinder of his co-administrator, Bradley John Atwell, the plaintiff Malcolm Walter Atwell is unable to represent, and does not represent in these proceedings, the estate of Alex Atwell (dec'd).

2(d) In their capacities as the surviving trustees of the estate of W C Atwell (dec'd), and as trustees of the estate of Elsie F Atwell (dec'd), Malcolm Walter Atwell and Ian George Atwell have the standing to bring this action and to seek the relief claimed in respect of any or all of the six transactions referred to in the statement of claim which they allege were invalid or which they contend should be set aside for want of compliance with the pre-emptive rights provisions contained in the 1976 partnership agreement.

2(e) In respect of each of the disposals challenged by the plaintiffs the claims are based on alleged breaches of contract insofar as they concern claims against the disponors of the units which were transferred, coupled with claims for recission, declarations of priority and incidental relief. So far as the claims are based against the acquirers of the units, they are not claims for breach of contract but for rescission of the contracts between the acquirers, and the disponors of those units, coupled with claims for declarations of priority of equitable interests, and incidental relief.

2(f) No limitation period directly applies to the claims against the acquirers of the units, nor is there any statutory limitation period which might, by analogy in the exercise of discretion, be applied against those claims in equity.

2(g) Accordingly, s 38(1)(c)(v) of the Limitation Act 1935 does not apply to the plaintiffs' claims against the second defendants.

2(h) The limitation period applying to claims by the plaintiffs against the disponors of the units which are subject to each of the six impugned transactions has not been separately addressed or identified in this action so far or in any of the issues ordered to be tried. For that reason, it is undesirable, as well as unnecessary, to attempt to determine whether there is any such statutory limitation period and, if so, what it is.

2(i) It is unnecessary to decide whether or not the 1976 partnership agreement was duly executed as a deed by all the original parties, or whether the members of succeeding partnerships of the firm, the Atwell Family Agency, who did not duly execute that agreement as a deed are nevertheless bound as if each had so duly executed it. Were the 1976 partnership agreement to be treated as a deed binding all members of successive partnerships known by the name Atwell Family Agency, the effect would be to establish a 20-year limitation period under s 38(1)(e)(i) of the Limitation Act 1935 as the period applying to actions for debt or covenant. None of the relief sought by the plaintiffs in these proceedings is available upon an action in debt or covenant.

3.1 The answer to this question depends upon how the partnership treated trustees of a trust estate, whether the estate of a deceased member, or of interests derived under an inter vivos deed of settlement. It is possible for such trustees, if each consents and all other members of the partnership in question also consent, for them each to be admitted as a member of a partnership and so to be partners. In the case of the successive partnerships of the Atwell Family Agency, however, the evidence establishes that the members of the various partnerships deliberately treated the interests of a deceased estate of a former partner or of the trust estate held by an existing partner under a deed of settlement, as a single interest constituting only one member of the partnership. In cases where there were joint trustees for such a trust estate the method of dealing with the participation of that estate in the partnerships varied over time. In some instances, notably in the case of the estate of W C Atwell (dec'd), the practice followed until the death of Mrs Elsie F Atwell in 1998 was to allow only one of several co-trustees of the estate to become a partner in the firm so representing the estate. In other instances, notably with regard to the estate of Alex Atwell, the practice adopted was to record three joint administrators of that joint estate as a single entity representing that estate as a partner. Despite this variation in practice on these and some other occasions the successive partnerships only ever treated such trust estate interests as a single interest. Where joint trustees were registered as the representatives of the estate, they were only ever treated as being a single member of the partnership in question in their joint capacities.

3.2 This question does not now arise.

[246]

The primary Court erred in law, further or alternatively in fact, in construing the [1976 Deed] on the basis that its terms reflected an underlying fallacy that the firm known as the 'Atwell Family Agency' was a continuing entity which survived, unaffected as to identity by the deaths or retirements of members, in that the primary Court should have construed the 1976 Deed in such a manner as to give effect to the parties' intentions to the maximum extent possible.
The primary Court erred in law, further or alternatively in fact, in holding that the pre-emptive rights conferred by Rules 6 to 8 ... related only to the transfer or acquisition of the legal ownership of 'units' in the firm known as the 'Atwell Family Agency' (as demonstrated by the recording of the unit holder's name in the partnership records) and did not relate to the transfer or acquisition of a beneficial interest in such 'units', in that the primary Court should have held that provisions of Rules 6 to 8 applied to both transfers of legal title to 'units' in the firm known as the 'Atwell Family Agency' and to the creation or transfer of beneficial interests in such 'units'.
The primary Court erred in law, further or alternatively in fact, in holding that Mrs Elsie Atwell alone was a partner in the successive firms known as the 'Atwell Family Agency' from 1976 until her death on 9 November 1998, in that the primary Court should have held that, at all material times prior to Elsie Atwell's death on 9 November 1998, Elsie Atwell, the first-named appellant and the second-named appellant were, jointly, a partner in each of the successive firms known as the 'Atwell Family Agency' in their capacity as joint executors and trustees of the estate of the late Walter Charles Atwell.
The primary Court erred in law, further or alternatively in fact, in holding that, upon the formation of any new firm including as a partner a person who would not have been entitled to become a partner had the pre-emptive rights conferred by Rules 6 to 8 ... been followed, all rights under Rules 6 to 8 were lost and no person had an entitlement to seek any relief with respect to the admission (or purported admission) of the new partner, in that the primary Court should have held that any continuing partners were entitled to specific enforcement of Rules 6 to 8, even after the formation of a new firm, or successive new firms.

[311]

When Mr Shine retired on 30 June 1998, the intention was that the surviving partners Messrs McGowan and Roche would succeed to the practice. By reason of that change in the firm, it necessarily became in law a different firm or partnership: SJ Mackie v Dalziell Medical Practice Pty Ltd [1989] 2 Qd R 87, 91 - 92. On dissolution, s 42 of the Partnership Act 1891 requires the property of a partnership to be applied in payment of the debts and liabilities of the firm, with any surplus of realisable assets being distributed in accordance with the rights of the partners. But, subject always to paying or providing for the creditors, it is open to the partners to arrive at some other arrangement for disposing of partnership assets, and, in this instance as in many others, that was what was done on dissolution. Although a partner has no title to specific property owned by the partnership, 'he has a beneficial interest in the partnership assets, indeed in each and every asset of the partnership': see Federal Commissioner of Taxation v Everett [1980] HCA 6; (1980) 143 CLR 440, 446. On dissolution each partner retains that interest: Hendry v Perpetual Executors & Trustees Association [1961] HCA 44; (1961) 106 CLR 256, 266; which has been authoritatively described as 'a right to a proportion of the surplus after realisation of the assets and payment of the debts and liabilities of the partnership': FCT v Everett [1980] HCA 6; (1980) 143 CLR 440, 446.

Here it was agreed to transfer that interest for a price from Mr Shine to the members of the new firm of Roche and McGowan. To accomplish it, the parties chose the avenue of an assignment as provided in cl 2 of the Deed. Their purpose might equally well have been achieved if Mr Shine had executed an instrument releasing his interest to the other partners ... The interest of a partner in the partnership assets is equitable and, as FCT v Everett shows, assignable, and an equitable assignment is, under s 54 of the Act, liable to stamp duty as a conveyance or transfer [15] - [16]. (emphasis added)

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ATWELL -v- ROBERTS [2013] WASCA 37 (17 June 2013)

Legislation Cited (5)

Cases Cited (24)