LEIGH ROBERTS as Trustee of the Estate of KEITH GILBERT ROBERTS

LEIGH ROBERTS as Trustee of the Estate of HILDA DORCAS ROBERTS

LEIGH ROBERTS as Trustee of the Estate of ADA ETHEL ATWELL

JOHN CHARLES STACY as Trustee of the Estate of EDNA PHOEBE PATERSON

EVELYN DIANE BROADLEY as Trustee of the Estate of GLADYS JANET ADDISON BROADLEY

MAURICE EUGENE FRICHOT as Trustee of the Estate of DOROTHY MAY BECKETT

JONATHAN GRAHAM NICHOLLS as Trustee of the Estate of JOYCE CORONA NICHOLLS

Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA

Citation : MALCOLM WALTER ATWELL and IAN GEORGE ATWELL as trustees of the Estate of WALTER CHARLES ATWELL on behalf of all other partners in the Atwell Family Agency other than the first defendants -v- ROBERTS [No 3] [2009] WASC 96

Partnership - Dissolution - Notional winding up - Pre-emptive rights provision - Retirement or death of partners - Admission of new partners by the continuing partners - Consequences of the formation of new partnerships - Alleged breach of the pre-emptive rights provision - Approval of accounts and distribution of profits

Equity - Equitable relief - Rescission - Specific performance - Injunctions, inquiries or accounts

Limitation Act 1935 (WA), (repealed), s 38

Partnership Act 1895 (WA), s 32, s 33, s 42, s 43, s 44, s 50, s 56

Property Law Act 1969 (WA), s 20

Trustees Act 1962 (WA), s 2, s 10

First-named First Respondent : Mr M L Bennett & Mr M P Bruce

Second-named First Respondent : Mr M L Bennett & Mr M P Bruce

Third-named First Respondent : Mr M L Bennett & Mr M P Bruce

First-named Second Respondent : Mr M L Bennett & Mr M P Bruce

Second-named Second Respondent : Mr M L Bennett & Mr M P Bruce

Third-named Second Respondent : Mr M L Bennett & Mr M P Bruce

Fourth-named Second Respondent : Mr M L Bennett & Mr M P Bruce

Fifth-named Second Respondent : Mr M L Bennett & Mr M P Bruce

Sixth-named Second Respondent : Mr M L Bennett & Mr M P Bruce

Seventh-named Second Respondent : Mr M L Bennett & Mr M P Bruce

Eighth-named Second Respondent : Mr M L Bennett & Mr M P Bruce

Adam v Newbigging (1888) 13 App Cas 308

Andco Nominees Pty Ltd v Lestato Pty Ltd (1995) 126 FLR 404

Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99

Australian Trade Commission v Film Funding and Management Pty Ltd [1989] FCA 188; (1989) 24 FCR 595

Ballas v Theophilos [No 2] [1957] HCA 90; (1957) 98 CLR 193

Beneficial Finance Corporation Ltd v Multiplex Constructions Pty Ltd (1995) 36 NSWLR 510

Byrne v Reid [1902] 2 Ch 735

Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd [1974] HCA 22; (1974) 131 CLR 321

Chan v Cresdon Pty Ltd [1989] HCA 63; (1989) 168 CLR 242

Charles v Federal Commissioner of Taxation [1954] HCA 16; (1954) 90 CLR 598

Commissioner of State Taxation (SA) v Cyril Henschke Pty Ltd [2010] HCA 43; (2010) 242 CLR 508

Duke Group Ltd (in liq) v Pilmer [1998] SASC 6529; (1998) 144 FLR 1

Elders Trustee & Executor Co Ltd v EG Reeves Pty Ltd [1987] FCA 332; (1987) 78 ALR 193

Ex parte Kenzler [1983] 2 Qd R 281

Fazio v Fazio [2012] WASCA 72

Federal Commissioner of Taxation v Everett [1980] HCA 6; (1980) 143 CLR 440

Gebauer Nominees Pty Ltd v Cole [No 2] [2008] WASCA 41

George Attenborough & Son v Solomon [1912] UKHL 4; [1913] AC 76

Hadlee v Commissioner of Inland Revenue (NZ) [1989] 2 NZLR 447

Hagan v Waterhouse (1991) 34 NSWLR 308

Hendry v Perpetual Executors and Trustees Association of Australia Ltd [1961] HCA 44; (1961) 106 CLR 256

Homfray v Fothergill [1866] LR 1 Eq 567

Hurst v Bryk [2002] 1 AC 185

Legione v Hateley [1983] HCA 11; (1983) 152 CLR 406

Lovegrove v Nelson [1834] EngR 959; (1834) 3 My & K 1

Lyle & Scott Ltd v Scott's Trustees [1959] AC 763

Mackay v Wilson [1947] NSWStRp 7; (1947) 47 SR (NSW) 315

McGowan v Commissioner of Stamp Duties [2001] QCA 236; [2002] 2 Qd R 499

Muir v City of Glasgow Bank & Liquidators (1879) 4 App Cas 337

Perpetual Executors & Trustees Association of Australia Ltd v Federal Commissioner of Taxation (Thomas' case) [No 2] [1955] HCA 66; (1955) 94 CLR 1

Rasch Nominees Pty Ltd v Bartholomaeus [2012] SASC 70

Renowden v Hurley [1951] VicLawRp 2; [1951] VLR 13

Rushton (Qld) Pty Ltd v Rushton (NSW) Pty Ltd [2002] QCA 210; [2003] 1 Qd R 320

Safeguard Industrial Investments Ltd v National Westminster Bank Ltd [1981] 1 WLR 286

Sahade v BP Australia Pty Ltd [2004] NSWSC 512

SJ Mackie Pty Ltd v Dalziell Medical Practice Pty Ltd [1989] 2 Qd R 87

Stern v McArthur [1988] HCA 51; (1988) 165 CLR 489

Sterns Trading Pty Ltd v Shteinman (1988) NSW ConvR 55-414

Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165

Transfield Properties (Kent Street) Pty Ltd v Amos Aked Swift Pty Ltd (1994) 36 NSWLR 321

Watson v Federal Commissioner of Taxation (1982) 61 FLR 268

Weiner v Harris [1910] 1 KB 285

Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; (2011) 86 ALJR 1

Wolfson v The Registrar­General of New South Wales [1934] HCA 29; (1934) 51 CLR 300

Woodroffe v Box [1954] HCA 22; (1954) 92 CLR 245

1 PULLIN JA: This is an appeal against EM Heenan J's judgment which included an order dismissing the appellants' action against the second and third respondents. The appeal should be dismissed for the following reasons.

2 The second respondents, either as trustees of estates of deceased members who were former partners of an inter vivos trust, or as a continuing partner (as at the time of the trial) were sued because it was asserted by the appellants that each of them, or each of the interests which they represented, disposed of or acquired a share or shares in a partnership which were described as 'units' in the partnership deed otherwise than in accordance with pre-emptive rights provisions, giving rise to the transactions which were alleged to be invalid or which the appellants contended should be set aside. The appellants contended at trial that, on behalf of the original unit holders, these second respondents should 'have those transactions rescinded and be ordered to issue appropriate disposal notices for the shares in the partnership which were wrongly and invalidly transferred' (Atwell v Roberts [No 3] [2009] WASC 96 [17]). At the appeal the appellants' counsel said that the appellants no longer sought rescission. Now they seek an account.

3 The third respondents are parties who were other members of the firm at the time of trial. These third respondents objected to the appellants purporting to represent them and either wished to take no part in the proceedings or to have an opportunity to do so without consequences as to costs. None of the third respondents sought to make any submissions to the court.

4 I adopt the recital of facts set out in Buss JA's reasons. Various transactions are impugned, the first of which occurred in 1983, which is nearly 30 years ago, and it was about 20 years after that date before any protest was raised about the first of the transactions.

5 The trial judge was confronted with numerous applications to amend the pleadings before the trial was due to commence. The parties then decided that they would formulate some questions that should be answered as preliminary points. The parties formulated the questions and the trial judge agreed to answer them. The questions and answers were incorporated into the judgment, with the answers standing as declarations of the court.

6 The business of leasing out the Atwell Arcade in Fremantle has been conducted by 40 partnerships over several decades under the name 'Atwell Family Agency'. The first partnership was created by a deed dated 16 December 1964. This deed was superseded by a deed dated 25 March 1976 (the 1976 Deed). The 1976 Deed contained a schedule with 'Rules' of the partnership.

7 The appellants refer in the statement of claim to the 'Atwell Family Agency' as 'the Partnership' (par 1) and state that 'the Partnership' 'carries on and has ... carried on' the business of leasing the Atwell Arcade. This gives the impression that there was one continuing partnership because the name remained the same.

8 The impression that the partnership was a continuing single legal entity rather like a company was encouraged by the fact that the 1976 Deed and Rules defined a partner's interest by the number of 'units' the partner held in the partnership. The impression was further encouraged by various provisions in the 1976 Deed and Rules. For example, one provision stated that 'units standing in the name of a partner may be transferred to his spouse, brother or sister or to a child of such partner or in the event of there being no child then surviving such partner to a grandchild of such partner' (r 5(c)). Further, the pre-emption provisions provided that the partner proposing to 'dispose' of or sell his units should give existing partners the first right of refusal to purchase the units.

9 The premise underlying the appellants' submissions about the pre-emption provisions was that without them a partner could retire and freely dispose of, or sell 'units' - ie his or her share or part of his or her share in the partnership in the same way as a share in a company. The premise was fallacious because a partnership is not, in the event a partner retires, a continuing legal entity. A person cannot become a partner with other persons unless all of the other proposed partners give consent. If consent is given, a new partnership will come into existence. A stranger cannot create a new partnership against the wishes of the non-retiring partners. A stranger cannot 'buy' an interest in a partnership from a retiring partner and then demand to participate in the 'old' partnership or in a new partnership without the non-retiring partners agreeing. If the non-retiring partners consent to the stranger becoming a partner, then a new partnership is formed.

10 The appellants asserted that on six occasions over the last 30 years, partners disposed of or sold their units in the partnership to others without observing the pre-emption provisions. The primary contention by the appellants was that because the pre-emption provisions had not been observed by the retiring partner, the appellants and third respondents gained a 'property' right which gave the appellants the right to relief against the second respondents. The 'property' was and is in this appeal said by the appellants to be an entitlement 'to receive ... an offer to purchase the units' held by the retiring partner (see prayer for relief). The appellants accept and concede in this court that on each of the six occasions when a retiring partner or the estate of a deceased partner purported to dispose of the units to a person, the new person became a partner in a new partnership together with the non-retiring or surviving partners. This could only mean that the non-retiring or surviving partners consented to the new person joining them in a new partnership and that the old partnership was dissolved.

11 The trial judge found that the new partners introduced on each of the six occasions participated fully in the new partnership formed after each such occasion. They attended meetings, received accounts and minutes of meetings and participated in a distribution of profits for periods ranging back over 30 years. These findings of fact were not challenged by the appellants. The appellants allege that some even actively participated in the management of the partnership. The trial judge found that the remaining partners on each of the six occasions agreed to 'the introduction of [a] ... new member': Atwell [No 3] [90]. The trial judge concluded that the appellants' primary contention which assumed that the units in the partnership 'were enduring and of the same character for all successive versions of the family partnership' (Atwell [No 3] [80]) was based on the fallacious premise that the 'Atwell Family Agency' was a 'continuing entity which survives, unaffected as to identity, by the deaths or retirement of members': Atwell [No 3] [23]. Ground 1 of the appellants' grounds of appeal contends that the trial judge erred in reaching that conclusion. Ground 1 must be dismissed. The legal propositions and authorities supporting the trial judge's conclusion and the dismissal of ground 1 are as follows:

(a) it is an axiom of partnership law that any change in the membership of a partnership occurring, whether by reason of the retirement, expulsion, death or otherwise of a partner has the consequence of dissolving the partnership: SJ Mackie Pty Ltd v Dalziell Medical Practice Pty Ltd [1989] 2 Qd R 87, 90 - 91;

(b) after dissolution, the next step is to wind up the affairs of the partnership by realising the assets and paying the debts and liabilities of the firm before distributing the surplus, if any, among the partners according to their rights and interests: Partnership Act 1891 (Qld) s 42; Rushton (Qld) Pty Ltd v Rushton (NSW) Pty Ltd [2002] QCA 210; [2003] 1 Qd R 320, 323;

(c) winding up in that way may be avoided if the parties agree on a sale to one or more of the remaining partners of the share of the outgoing partner or if there is a provision in the partnership agreement to that effect. This is sometimes described as a technical or notional dissolution which is something of a misnomer because it is not the dissolution, but rather the winding up, that is notional. In those circumstances, the partnership or firm itself is dissolved as soon as there is a change in membership, but the assets and, as between the partners, responsibility for the liabilities of the partnership are taken over by the remaining partners: Rushton (323); Commissioner of State Taxation of the State of South Australia v Cyril Henschke Pty Ltd [2010] HCA 43; (2010) 242 CLR 508 [12]; Fazio v Fazio [2012] WASCA 72 [65];

(d) a share in a partnership, even if designated by reference to 'units', does not enjoy a corporate or quasi-corporate existence apart from the members who comprise it: Mackie (90); Henschke [10];

(e) it is not possible to avoid the legal propositions set out above by terms of a partnership agreement: Hadlee v Commissioner of Inland Revenue [1989] 2 NZLR 447, 455 (Eichelbaum CJ); Henschke [11];

(f) in consequence, it is impossible to give literal effect to the pre-emption provisions which are drawn as though a partner's interest (or units) in the partnership agreement has some transmissible, legal existence, rather like a share in a company;

(g) this is not to say that it was impossible for existing partnership members by their agreement inter se to impose express formal restrictions upon the admission of further individuals to their ranks. They can; and if they insist upon strict adherence to that formality, the newcomer will never be admitted to their ranks as a partner. But that is because, by requiring strict compliance with that formality, they reject him as a partner or, what is the same thing, they refuse to dissolve their existing partnership and form a new partnership of which he is a member: Mackie (91);

(h) conversely, however, if they do agree to accept him as a partner, the fact that the requisite formality has not been complied with

becomes irrelevant. The newcomer is ex hypothesi not a partner to the partnership agreement by which the relevant restriction is imposed, and so is himself not bound by it. The original partners, who are bound by it, may by common consent or acquiescence choose to ignore it. If they do so, no-one is in a position to complain that a term of the original partnership agreement has been disregarded, waived, or set aside. And if both or all agree to disregard it, the result that follows is a new partnership comprising the original partners and the incoming partner now accepted as a member: Mackie (91). However, they may agree that the restriction should apply to the new partnership.

As stated above, those propositions support the trial judge's conclusion and warrant the dismissal of ground 1.

12 I agree with Buss JA's reasons and conclusions in relation to grounds 2, 3 and 4.

13 BUSS JA: This appeal from a judgment of EM Heenan J concerns a partnership dispute.

14 The appeal raises issues as to the proper construction of a pre-emptive rights provision in a deed evidencing the terms and conditions of successive unit partnerships; whether various transfers of units in partnerships constituted pursuant to the deed were made in compliance with the provision; and, if any transfer did not comply with the provision, the effect of the non-compliance.

15 The Atwell Arcade is an arcade comprising numerous retail shops and similar premises. It is located in the Fremantle business district. The land on which the Atwell Arcade is situate has been owned for many years by members of the Atwell family.

16 Each of the partnerships was known as the Atwell Family Agency.

17 The first relevant partnership was constituted by a deed dated 16 December 1964 (the 1964 Deed). The 1964 Deed was amended by a deed dated 15 October 1965.

18 The 1964 Deed as amended was superseded by a deed dated 25 March 1976 (the 1976 Deed).

19 The events of which the appellants complained occurred after the execution of the 1976 Deed.

20 The schedule to the 1976 Deed contains the 'Rules of the Partnership' (the Rules).

21 Since 25 March 1976, the Atwell Family Agency has been dissolved on numerous occasions as a result of partners dying or retiring or new partners being admitted. The first schedule to the trial judge's reasons contains a chronology of the successive partnerships. Since 18 March 1975 there have been 29 partnerships trading as the Atwell Family Agency. It is convenient, in these reasons, to refer to each of the successive partnerships as 'the Partnership'.

22 At all material times, the land on which the Atwell Arcade is constructed was registered in the names of three members of the Partnership who were appointed to the management committee established under the Rules (the Committee). These partners have held the land on trust for the partners. The only material asset of the Partnership has been the Atwell Arcade. The only material business of the Partnership has been the leasing of retail accommodation in the Atwell Arcade.

Overview of relevant provisions of the 1976 Deed

23 Clause 1 of the 1976 Deed provides that the parties agree to carry on the business of property owners under the style of 'Atwell Family Agency' in partnership between themselves and 'any other persons who may be admitted to partnership in manner provided in this deed'. Clause 1 also provides that the parties agree to carry on the business upon the terms and conditions set out in the Rules.

24 By cl 2, the provisions of the 1976 Deed are 'deemed' to have come into force on 1 July 1975.

25 By cl 3, the death or bankruptcy or other disability of any partner shall not determine the partnership as between the remaining partners.

26 Clause 4 provides for the admission to the Partnership of the legal personal representative of a deceased partner, any new trustee of the estate of a deceased partner or of any settlement made by a partner, or any transferee of 'units' (a notion embodied in the Rules) in the Partnership in whose name the units were entered in accordance with the Rules. Clause 4 deems such persons to become partners, subject to the Rules, with the other persons who are then partners.

27 Clause 5 provides for the legal title to partnership property to be held in the names of the members of the Committee as trustees for the partners.

Overview of relevant provisions of the Rules

28 Rule 2 deems each partner to hold 'units' in the Partnership.

29 Rule 3 states that the 'partnership' is 'divided into 142884 units'. Rule 3 then specifies the number of units 'held by the partners respectively' on 1 July 1975.

30 Rules 4 to 10 regulate the acquisition and disposal by partners of units in the Partnership.

31 Rules 4 to 8 create a pre-emptive rights provision.

32 By r 9, before any units are entered in the books of the Partnership as belonging to a person not already a partner, 'he shall sign his name at the foot of this Schedule in token of his agreeing to be bound by the Rules'.

33 By r 10, no sale or transfer of units is permitted if the effect of the sale or transfer would be to increase the number of partners in the Partnership beyond 20.

The parties to the appeal and other persons of significance

34 Walter Charles Atwell (WC Atwell) was a party to the 1964 Deed. He died on 17 March 1975. The trustees of WC Atwell's estate were his wife, Elsie Frances May Atwell (Elsie Atwell) and his sons, Malcolm Walter Atwell (Malcolm Atwell) and Ian George Atwell (Ian Atwell). Malcolm Atwell and Ian Atwell are the appellants (in their capacity as the trustees of WC Atwell's estate).

35 WC Atwell's will provided for, relevantly, WC Atwell's units in the Partnership to be held on trust. During Elsie Atwell's life, all income of WC Atwell's estate was payable to Elsie Atwell. Upon her death, the income was payable to Malcolm Atwell and Ian Atwell.

36 The trustees of WC Atwell's estate when the 1976 Deed was executed were Elsie Atwell, Malcolm Atwell and Ian Atwell.

37 Elsie Atwell died on 9 November 1998. Between 25 March 1976 and 9 November 1998, Elsie Atwell, Malcolm Atwell and Ian Atwell were trustees of WC Atwell's estate. Since Elsie Atwell's death, Malcolm Atwell and Ian Atwell have been the trustees.

38 Raymond John Atwell (Ray Atwell) is the son of Malcolm Atwell and the nephew of Ian Atwell. Ray Atwell is not a member of the Partnership.

39 The first-named first respondent and the first to fourth-named second respondent (Leigh Roberts) is the son of Keith Gilbert Roberts (Keith Roberts). Keith Roberts was a party to the 1964 Deed and the 1976 Deed. Keith Roberts died on 27 February 2003.

40 Keith Roberts, in his capacity as trustee of the Hamersley Trust, was the purported recipient of units under several of the six alleged unauthorised transfers which are impugned by the appellants. During his lifetime, Keith Roberts was a member of the Committee.

41 Leigh Roberts and the other first respondents, Noel Henry Atwell (Noel Atwell) and Audrey Atwell are the current members of the Committee.

42 The second respondents are the purported transferors and transferees of units (or the legal personal representatives of such transferors or transferees) under the alleged unauthorised transfers.

43 The appellants asserted against the second respondents at trial that:

(a) each of the second respondents, or each of the interests he or she represents, disposed of or acquired a share or shares in the Partnership otherwise than in accordance with the pre-emptive rights provision;

(b) as a result, the transactions in question were invalid, or alternatively should be set aside; and

(c) the second respondents 'should have those transactions rescinded and be ordered to issue appropriate disposal notices for the shares in the partnership which were wrongly and invalidly transferred' [17].

44 The third respondents were joined in the primary proceedings by order of the trial judge made on 5 March 2009. His Honour noted in his reasons that this order was made 'as a sequel' to orders he had made requiring notice to be given to those members of the current partnership whom the appellants claimed to represent in their capacities as representative plaintiffs under O 18 r 12 of the Rules of the Supreme Court 1971 (WA). At a directions hearing on 5 March 2009, each of the third respondents objected to the appellants purporting to represent them. On 5 March 2009, when his Honour joined the third respondents, the question of the appellants' claims to represent these individuals, who were former members of past partnerships, was left open to be addressed and resolved later, if necessary [21].

45 The third respondents did not take part in the appeal.

The alleged unauthorised transfers of units

46 The appellants challenged six purported transfers of units, as follows:

(a) Transaction No 1: a purported transfer of 23,220 units from the estate of Ada Ethel Atwell to the Hamersley Trust in 1983 (the Ada Atwell Transfer);

(b) Transaction No 2: a purported transfer of 4,267 units from Edna Phoebe Paterson to Noel Atwell on or around 14 February 1985 (the Edna Paterson Transfer);

(c) Transaction No 3: a purported transfer by Gladys Addison Broadley of 2,620 units to Noel Atwell and 1,500 units to the eighth-named second respondent (Gary Atwell) on or around 31 March 1985 (the Gladys Broadley Transfers);

(d) Transaction No 4: a purported transfer of 23,100 units from Hilda Dorcas Roberts to Keith Roberts as trustee of the Hamersley Trust in 1986 (the Hilda Roberts Transfer);

(e) Transaction No 5: a purported transfer of 2,135 units from the estate of Dorothy May Beckett to the Hamersley Trust on or around 30 June 1986 (the Dorothy Beckett Transfer); and

(f) Transaction No 6: a purported transfer of the units, the subject of the Ada Atwell Transfer, the Hilda Roberts Transfer and the Dorothy Beckett Transfer, from the Hamersley Trust to Leigh Roberts as trustee for K Roberts, M Lister and the Sonoma Trust in 2001 (the Hamersley Trust Transfer).

The defence as it stood shortly before the commencement of the trial

47 The defence, as it stood shortly before the commencement of the trial, asserted in substance that:

(a) the 1976 Deed and the Rules only bound the parties to the 1976 Deed and ceased to have any effect upon the original partnership created under the 1976 Deed being dissolved by the first change in the composition of the partnership or, alternatively, by the first change in the composition of the partnership inconsistent with the terms of the 1976 Deed and the Rules, in that the new partners, in each successive partnership, were entitled to waive, adopt or vary any requirement concerning the transfer of units in the partnership and they did so;

(b) each of the new partnerships, created upon each of the alleged unauthorised transfers, accepted and approved the transfer of units to the transferees in question;

(c) for reasons specific to each of the second respondents (for example, waiver or consent) a disposal notice was not required for the relevant transfer of units;

(d) a 6 year limitation period applies pursuant to s 38 of the Limitation Act 1935 (WA) and is a defence to the appellants' claims in relation to the alleged unauthorised transfers of units which occurred in 1983, 1985 and 1986; and

(e) the defences of estoppel, laches and acquiescence apply to each of the impugned transactions.

The application to amend the defence shortly before the commencement of the trial

48 Shortly before the commencement of the trial, counsel for the respondents made an application for leave to amend their defence.

49 Counsel for the appellants opposed the amendments on the ground that they were extensive and, if leave to amend was granted, it would be impossible to proceed with the trial on the listed commencement date.

50 Counsel for the appellants made a separate application for leave to amend their reply in numerous respects. This prompted counsel for the respondents to seek leave to file a rejoinder.

51 In the event, none of the parties wished to proceed to trial on the pleadings as they stood.

52 The trial judge was satisfied that if leave to amend the defence were to be granted then the appellants could not be expected to proceed with the trial on the listed commencement date.

53 His Honour explored with counsel for the parties the possibility that the trial should proceed on limited and specified issues. His Honour suggested that 'the parties should attempt to formulate issues for resolution dealing with [various] points which could then be tried without the need to address or take evidence on the many fact laden new issues or varied issues arising from the proposed amendments' [40].

54 In the event, the parties agreed upon separate issues, as follows:

1. Did the pre-emptive rights in the 1976 Partnership Deed (the pre-emptive rights) cease to bind all succeeding Atwell Family Agency partnerships after and by reason of the dissolution which occurred upon:

(i) the transfer of the units by the trustee of the estate of Harold Atwell Adam to Mavis Victoria Adam in 1977;

(ii) the death of Evelyn Rose Adam between 1978 - 1980;

(iii the death of Ada Ethel Atwell on 24 March 1983; or

(iv) any subsequent or other dissolution event,

2.1 (a) did the terms of the pre-emptive rights provisions contained in the 1976 Deed require that the transfers of the units to Keith Gilbert Roberts in his capacity as trustee of the Hamersley Trust pleaded in pars 14, 16 and 23 of the statement of claim require compliance with those pre-emptive rights?

(b) did any of the disposals complained of in pars 14, 16, 18, 20, 23 and 24 of the statement of claim fail to strictly comply with the pre-emptive rights provisions in the terms contained in the 1976 Deed and, if so, which?

2.2 If the answer to question 2.1 is 'yes', with respect to each disposal in connection with which the answer is 'yes':

2.2.1 (a) Did Malcolm Walter Atwell and Ian George Atwell as trustees of the estate of Walter Charles Atwell deceased (M & I Atwell) become a partner or partners by the 1976 Deed jointly with Elsie Frances Atwell and, if so, did they continue to be a partner or partners of all successive partnerships?

(b) can M & I Atwell complain?

2.2.2 If the answer to question 2.2.1 is 'yes', with respect to each disposal in connection with which M & I Atwell were a partner or person and entitled to complain:

(a) Is the claim of M & I Atwell a claim solely for breach of contract and, if so, what are the implications for limitation periods applying under the Limitation Act 1935 (WA) (the Act) or by analogy?

(b) Is there a fiduciary relationship which may apply to extend the six-year or 20-year limitation period?

(c) Was each subsequent partnership after the 1976 Deed constituted by a deed or by agreement and, if by agreement, is the plaintiffs' claim within s 38(1)(e)(i) of the Act?

(d) Is there a limitation period applying by the Act or by analogy and, if so:

(i) is it six years or 20 years?

(ii) is there a fiduciary relationship which may apply to extend the six-year or 20-year limitation period?

3.1 Do joint trustees of a trust estate count as one member of a partnership for the purposes of s 11 of the Partnership Act 1895 (WA) and s 115 of the Corporations Act 2001 and its predecessors or is each joint trustee a separate member for those purposes?

3.2 If the answer to question 3.1 is that each joint trustee is a member for those purposes, what is the legal affect on the enforceability of the 1976 Deed and subsequent partnerships?

55 The trial judge ordered that these issues be tried.

The text of the 1976 Deed: the trial judge's reasons

56 The trial judge observed that many of the controversies in the litigation, and the problems which had arisen, had their genesis in 'the language adopted, no doubt deliberately, by the original parties to the [1976 Deed]' [23]. His Honour added:

The essential problem involves an underlying fallacy that the firm, 'Atwell Family Agency', is a continuing entity which survives, unaffected as to identity, by the deaths or retirements of members [23].

The alleged non-compliance with the pre-emptive rights provision of the alleged unauthorised transfers of units: the trial judge's reasons

57 The trial judge found that each of the alleged unauthorised transfers of units involved a breach, at least in some aspect, of the pre-emptive rights provision. His detailed reasoning was as follows:

At this point it is necessary to notice the submission for the plaintiffs that the obligation to comply with the pre-emptive rights procedures, for disposal notices to be given and for valuations to be obtained where appropriate, arises whenever there is a change in the beneficial interest in the units. They submit that the need to comply with those procedures cannot be avoided merely because the transferee of the units is himself or herself an eligible member who may take under Rule 5 without the need for a disposal notice or compliance with the valuation procedures, if that person holds the benefit of the units for another or others, not within that category - as in the case of an executor, or a trustee of an inter vivos trust. I shall defer, for the moment, the determination of that submission because it is first necessary to appreciate its impact in the situations which existed when each of these six challenged transactions occurred. To do this it will be necessary to return to them in chronological order:

When Ada Ethel Atwell died on 24 March 1983 her nephew, Keith G Roberts, was already a member of the partnership and, indeed, was a member of the Committee (see partnership No 13 listed in Schedule 1). By her last will she appointed Mr K G Roberts as her sole executor and trustee and he obtained probate of that will (exhibit 7). Under the will, all Ms A E Atwell's interests in the Atwell Family Agency were left to this trustee for the time being of the Hamersley Trust who then was the same Mr K G Roberts (exhibit 6A). Accordingly, if one looks at the personal eligibility of Mr K G Roberts to 'acquire' those units without the need for disposal notices or valuations, the first and second defendants submit that he was eligible in his capacity as a legal personal representative of a deceased partner (under clause 4(a)), and he was eligible as the trustee of a settlement made by a partner (Hilda Dorcus Roberts was the settlor of the Hamersley Trust) and he was also a partner of partnership No 13 at the same time (listed in First Schedule). The point by the plaintiffs is that, even if in any of those of those three capacities, Mr Roberts might have been eligible to take the Ada Ethel Atwell units for himself, the prospect that the beneficial interest in them might pass to other more distant beneficiaries under the Hamersley Trust, gave rise to the need to comply with the disposal notice procedure and, if necessary, the valuation procedure.

Another submission for the plaintiffs is that when Rule 5(b) permitted units standing in the name of the legal personal representative or trustee of the estate of any deceased partner or the trustees of any settlement made by a partner to be entered in the names of new trustees for the time being, and where cl 4(b), permitted any new trustee of the estate of a deceased or of any settlement made by a partner to become registered as the holder of units, that could not relate to newly created inter vivos trusts. The submission is that only such inter vivos trusts as had previously been established and whose former trustee had previously been recorded as a member of the firm and the holder of those units came within cl 4(5). So it was submitted that the transfer to Mr Roberts as trustee of the Hamersley Trust was not permitted under Rule 5(b) or cl 4(b), because no previous trustee of that trust had been recorded as the holder of those units.

I consider that this last submission is well founded and should be accepted so that, if strict compliance with cl 4(b), and Rule 5(b) of the 1976 partnership agreement were insisted upon by the partners making the decision to approve the transfer of the Ada Atwell units in 1983 to Mr Keith G Roberts, in his capacity as trustee of the Hamersley Trust, relying on cl 5(b) would not dispense with the need for a disposal notice or the other steps of valuation if they became necessary.

1. 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.
2. 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.
3. 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.
4. 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.
5. 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].

The nature and extent of the prohibition against the disposal of units in the Partnership under the pre-emptive rights provision: the trial judge's reasons

58 The trial judge noted that the appellants, on the one hand, and the first and second respondents, on the other, were in dispute as to whether the restrictions upon the transfer or acquisition of units in the Partnership under the 1976 Deed 'apply only to the legal ownership of such units' (being the first and second respondents' position) or 'must, of necessity, be regarded as extending to the beneficial interest in those units' (being the appellants' position) [77].

59 His Honour said that if the prohibition in the 1976 Deed against the disposal of units, without compliance with the pre-emptive rights provision, was restricted to 'legal interests' and did not include 'beneficial interests', it may be capable of evasion [80]. His Honour then said:

All that this demonstrates is that the regime of pre-emptive rights attempted in the 1976 agreement is not watertight or comprehensive and that, in any event, the plaintiff's contentions are based on the fallacy that the 'units' which are to be transferred are enduring and of the same character for all successive versions of the family partnerships. That the regime specified by the 1976 agreement is not comprehensive is readily apparent from the fact that a retiring partner or the representatives of the deceased partner may not be willing to 'transfer' their 'units' in the partnership to anyone at all and may, instead, demand payment from the continuing members of the former partnership of the value of the share of the deceased or retiring partner's interest or, failing that, seek a dissolution. The fallacy, as already remarked, is the assumption that the units in the partnership are a separate species of property which endure and continue from one partnership to another being analogous to a share in a company with limited liability [80].

Accordingly, I am satisfied that in the context of the 1976 agreement and these various partnerships the restriction upon the transfer or acquisition of 'units' in the partnership relates solely to the legal ownership of such 'units' as demonstrated by the recording of the unit holder's name in the partnership records [80].

61 The appellants' amended statement of claim dated 29 September 2009 claimed extensive relief in relation to the alleged unauthorised transfers of units.

62 In par G of their prayer for relief the appellants claimed mandatory injunctions that:

(i) Leigh Roberts as trustee of the Estate of Ada Ethel Atwell issue a Disposal Notice for the Units held by the late Ada Ethel Atwell at a price being the value of the Units at 24 March 1983;

(ii) John Charles Stacy as trustee of the Estate of Edna Phoebe Paterson issue a Disposal Notice for the Units held by Edna Phoebe Paterson at a price being the value of the Units at 14 February 1985;

(iii) Evelyn Diane Broadley as trustee of the Estate of Gladys Addison Broadley issue a Disposal Notice for the Units held by Gladys Addison Broadley, at a price being the value of the Units at 31 March 1985, except the 750 Units transferred to Garry Atwell and then transferred with proper notice to third parties;

(iv) Leigh Roberts as trustee of the Estate of Hilda Dorcus Roberts issue a Disposal Notice for the Units held by the late Hilda Dorcus Roberts at a price being the value of the Units at 5 January 1986;

(v) Maurice Eugene Frichot as trustee of the Estate Dorothy May Beckett issue a Disposal Notice for the 2135 Units held by Dorothy May Beckett that were invalidly transferred to Keith Gilbert Roberts as trustee for the Hamersley Trust at a price being the value of the Units at 30 June 1986;

(vi) Alternatively to (i), (iv) and (v) the Trustee for the Hamersley Trust issue a Disposal Notice for all Units transferred in 2001 at a price being the value of the Units at the date of transfer; and

(vii) the Committee institute proceedings under s 60(4) of the [Real Estate and Business Agents] Act to recover all payments made pleaded in paragraph 34, alternatively paragraph 36.8, other than payments to Partners the subject to [sic] prayer for relief J below.

An order that any Partner who accepts an offer made pursuant to a Disposal Notice given under the injunctions referred to in prayer for relief G has liberty to apply for directions for the taking of accounts as between them and the transferor with respect to all income and other distributions made since the date at which the price is determined.

64 In par K of their prayer the appellants claimed '[all] other necessary accounts, enquiries and assessments including enquiries to ascertain the value of the Units at the times referred to in prayer for relief G above'.

Events confirming the admission of new partners or the increase in existing partners' unit holding after each of the six impugned transactions: the trial judge's reasons

65 The trial judge found that it was 'clear beyond any dispute' that, after the changes in the Partnership, whether by the introduction of new partners or the increase in existing partners' unit holding, after each of the impugned transactions, each newly formed partnership carried on the business of the Atwell Family Agency, and 'treated each of the newly admitted partners, or the partners whose unit holding had been increased by the transaction, as a member of that firm entitled to vote and participate in the distribution of profits in the same way as all the other partners' [81].

Annual general meetings of each new firm were held regularly at which the new partner was entitled to attend and vote and sometimes did. Schedules with the accounts were distributed to each of those partners as required by the agreement - see for example exhibits 8 (1 - 9), 11, 15, 22, 45 - 47 among others. The Committee produced accounts and made recommendations as to the distribution of profits ('dividends') which, once approved at the AGMs (as they always were), were then acted upon and distributions made to each of the partners so identified including the new partner.

This pattern of partnership business and operation continued without objection or protest until about 2003 when allegations that units had been invalidly transferred to partners were first raised by or on behalf of Mr Malcolm Walter Atwell and Mr Ian George Atwell as the surviving trustees of the estate of their late father, W C Atwell. These were later taken up by Mr M W Atwell's son, Mr Raymond Atwell who, while never a partner, had been permitted to attend various AGMs or EGMs of the partnership as a spokesman for his father and uncle, as trustees of the estate of W C Atwell [82] - [83].

67 The trial judge then said that 'this process, of treating new members of each successive partnership occurring after these challenged transactions, as regular partners of each succeeding new firm and the sharing of profits with them in proportion to the units held continued without interruption or challenge from 1983, immediately following the first of the challenged transactions - the Ada Atwell transfer - until well after the last of them, the Hamersley Trust transfer in 2001' [84].

68 His Honour decided that there could be no doubt that, as a result of this acceptance of new partners into the succession of firms after each of the impugned transactions, 'all of the members of each newly formed firm accepted each other, and any newcomer or existing partner with an increased unit holding, as a partner in each newly established and continuing firm' [86].

The only possible conclusion is, that by admitting the new member into the partnership, or increasing the unit holding of an existing member, and then carrying on business in a succession of partnerships, all the members of the newly formed partnerships have agreed upon the admission of that new member and to the shareholding which he or she had in the firm as recorded at the time. That extinguishes any prospect of endurance of the pre-emptive rights except in a case of fraud or misrepresentation which is not alleged here. That being so there is simply no basis to challenge, retrospectively, the admission of those interests into the sequence of partnerships which are recorded in the First Schedule or to seek to set aside those 'transfers' of units.

Each succeeding partnership was a separate association of members quite distinct from its predecessor or successor. The members of that particular partnership, so long as it endured, were content, by their mutual acceptance of each other to carry on business in partnership together on the terms which they did. At the termination of each succeeding partnership, by death or retirement of a member, a new partnership came to be formed again, upon terms mutually agreed by its members. Their agreement is patent from the fact of the existence and continuation of the partnership business itself and especially in the sharing of profits. Whatever may have been the potential rights or entitlements of members of a former partnership to seek to acquire units from the retiring partner or the representatives of a deceased partner, the history speaks for itself. Those matters were resolved, either in conformity or not in conformity with the rules, and the terms of the partnership agreement and, the new partnership having been formed, was carried on together with the mutual consent of each member [92] - [93].

70 So, his Honour was of the view that any rights which other partners may have had under the pre-emptive rights provision, when the units the subject of each impugned transaction became available for transfer, ceased to exist upon the transferees becoming partners of the newly formed partnership with the consent of all of the persons who may have been entitled to insist upon the observance of the provision.

Did any right to enforce the pre-emptive rights provision constitute an equitable interest in any property? - the trial judge's reasons

71 The trial judge observed that the appellants' claims for relief depended, to a significant extent, upon their contention that 'the right which a member of the [Partnership] ... had at any one time to insist upon strict observance of the pre-emptive rights provisions is a species of property, an equitable interest, not only which endured after an occasion when it had been wrongly disregarded but which takes priority over subsequent proprietary or equitable interests acquired in [the Partnership] and in the partnership property by persons, whom [the appellants] allege, were wrongly admitted to membership in disregard of the pre-emptive rights provisions' [94].

72 His Honour recorded the concession by counsel for the appellants at trial that 'the grant of a right of pre-emption conferred on the grantee no right to call for a transfer of the property unless the grantor chose to fulfil the conditions on which the right became exercisable' [94]. However, counsel for the appellants argued at trial that 'once the pre-emptive right is triggered by a decision to dispose of the property, the grantee has a proprietary interest capable of enforcement in equity which will rank for priority according to the ordinary rules including that, generally speaking, the interest first in time prevails' [94].

73 The trial judge held that 'while the interest of a partner in the partnership property is entirely equitable, the partner's relations with fellow partners, both during the lifetime of the partnership or after dissolution and in the course of a winding up entail not only or exclusively equitable rights or obligations but also contractual obligations as determined by the terms of any applicable partnership agreement ' [98].

74 His Honour accepted that, in certain circumstances, injunctive relief may be granted in relation to contractual rights of pre-emption, and that where a contractual right of pre-emption has been triggered by a decision of the grantor to dispose of the property in question the right may be enforced by an order in the nature of specific performance, but, on his Honour's analysis, these propositions did not vindicate the appellants' arguments. His Honour explained:

For vindication to occur it would be necessary for the pre-emptive right to endure not only after it has, on this hypothesis, been wrongly disregarded by the grantor or others but also up to the point when the intervention of equity is sought. If by this latter date the right has ceased to exist and is incapable of restoration, there is nothing which can be regarded as an equitable interest which might rank in priority with any subsequent interest.

The point is that if the right of pre-emption is not utilised by any of the persons who have a right to claim it, and the subject matter is then sold to some third party in a manner which requires the consent of all those who are entitled to enforce the right of pre-emption, that consent terminates the right and for reasons expatiated upon earlier, the inevitable conclusion from the formation of each new succeeding partnership is that this is what occurred [99] - [100].

75 The trial judge said that the appellants' argument that they had an equitable interest in the units transferred under the impugned transactions rested on 'very weak foundations' [105]. He continued:

I have already explained how the particular units in the firm available for transfer or disposal under the pre-emptive rights provisions in the event of a death or retirement producing a dissolution of one partnership and the formation of another are essentially monetary claims because the former partnership has become dissolved. Secondly, even if the claims did involve an equitable interest in the property of the (dissolved) partnership the interest will not survive the formation of the new partnership because, the constitution of the partnership having changed, it becomes an interest in a new and different firm [105].

76 His Honour decided that the only sustainable proposition that could be advanced by the appellants was that the rights which continuing partners had immediately on the partnership dissolutions effected by each of the impugned transactions 'may potentially have led a court of equity to intervene to protect those rights' [109], for example, by injunctive relief or orders for specific performance. He elaborated:

The submission that the plaintiffs have an equitable interest therefore depends upon the court being satisfied that, in all the circumstances, full equitable relief to the extent sought by the plaintiffs, including orders for rescission of the six completed transactions, injunctions, specific performance and accounts and inquiries necessary to achieve adequate restitution were possible and should in the exercise of discretion be granted. This demonstrates just how tendentious it is to assert, without qualification, that the plaintiffs enjoy equitable interests in the units which were, according to them, wrongfully transferred.

Earlier I have concluded that any rights which other partners may have had under the pre-emptive provisions at the times when the units the subject of these transactions became available for transfer, had ceased to exist upon the transferees becoming partners of the newly formed partnerships with the consent of all those persons who may have been entitled to insist upon observance of the pre-emptive rights. There are other reasons, which I have also mentioned, which also point unambiguously to the conclusion that no such rights as the plaintiffs seek to assert could possibly have endured, at the latest, beyond the next change in the constitution of the family firm after the impugned transaction. Once these factors are appreciated the plaintiffs' submission that the persons whom they claim to represent have an equitable interest in the partnership property which passed to the six transferees can be seen to be unsustainable [109] - [110].

Did any right to enforce the pre-emptive rights provision constitute an equitable interest in any property? - the trial judge's reasons

77 The trial judge found that an unascertainable number of incoming partners, probably less than 10 between 1977 and 2007, became partners without signing the 1976 Deed or executing it as a deed [115]. However, his Honour said that each such new partner became bound by the terms and conditions of the Partnership which existed from time to time as a result of his or her agreement to join the firm, notwithstanding any lack of subscription to or execution of the 1976 Deed [115].

78 His Honour said that '[when] it comes to determining what the terms and rules of each succeeding partnership were, from time to time, all the indications are that, despite occasional relaxation of the formalities of subscription or execution of the 1976 agreement, and occasional instances where the Pre-emptive Rights Provisions, or the ensuing valuation procedure if rendered necessary, were not strictly or fully observed, that all sequences of the partnership did treat the 1976 agreement as applying to the terms on which they conducted the affairs of the firm' [116].

... despite occasional episodes of new members not signing the 1976 partnership agreement, and some occasions when the formalities were not observed or fully observed, a requirement which could be insisted upon or relaxed with the unanimous agreement of all the members as I am satisfied it was from time to time, the terms of the 1976 agreement and its rules were treated as applying to all successive partnerships from 1976 to date [117].

Were the appellants partners in the Partnership? - the trial judge's reasons

80 The trial judge found that, from in or about 1979 to her death on 9 November 1998, Elsie Atwell was a partner in the Partnership as a representative of WC Atwell's estate and that, during this period, neither of the appellants was a partner, despite being joint executors and trustees of the estate [133], [134], [140], [141], [143] - [147]. In particular, his Honour said:

I have been pressed with authority that for the estate to be bound all of the three joint trustees should have executed the document and that one trustee did not have the authority to bind the estate. However, the course of events from 1976 until the death of Mrs Elsie Atwell in 1998, followed by transmission of the interest of the estate of W C Atwell to the surviving trustees from then on, can lead to no other conclusion but that all the trustees had agreed to the action of Mrs Elsie Atwell in executing the 1976 agreement on behalf of the estate and in continuing to treat the interest of the estate as one single interest, the proceeds of which were to be shared or distributed in accordance with the will of the deceased. For this reason, therefore, I consider that Mrs Elsie Atwell should be treated as the single nominee of the estate as member of the Atwell Family Agency from 1976 until her death, and to have had the authority of her co-trustees to be, as it were, a trustee for the trustees of the estate interest. There is nothing to suggest that at any time the estate interest was dealt with otherwise than in accordance with the will of the deceased [145].

81 His Honour also found that the appellants first became partners, jointly in their capacity as executors and trustees of WC Atwell's estate, on 10 November 1998 [138], [172].

82 His Honour's reasons for making these findings were as follows:

(a) the Partnership treated Elsie Atwell as the sole representative of WC Atwell's estate [133], [136];

(b) Elsie Atwell was listed as a partner in the Partnership for WC Atwell's estate [134];

(c) Elsie Atwell's signature on the 1976 Deed was witnessed, but the signatures of the appellants were not, and the appellants signed the 1976 Deed at the request of Elsie Atwell on an occasion subsequent to her signing the deed [140]; and

(d) Malcolm Atwell's and Ian Atwell's names were not directly entered in the Partnership books or records as the holders of units, they did not receive correspondence from or communicate with the Committee and they were not in partnership 'with each other together in a larger partnership' [143].

The 20 person rule - alleged oversized partnership: the trial judge's reasons

83 The respondents alleged that in several of the successive partnerships in and after 1976 the total number of partners exceeded 20 and that, in consequence, each of the partnerships was illegally formed or constituted.

84 The trial judge rejected this allegation. He was not satisfied that there was any occasion when the members of the Atwell Family Agency exceeded 20 [146]. His Honour added:

I realise that this means, on certain occasions, as in the case of Mrs Elsie Atwell, that the interest which she held in the firm was held on account for others to whom she had obligations as trustee, but that does not make the others partners for the purposes of the 20 person rule or at all [146].

Was the 1976 Deed a deed and, if so, did it remain a deed? - the trial judge's reasons

85 The trial judge held, consistently with his view that Elsie Atwell was the sole representative of WC Atwell's estate who was admitted to the partnerships after her husband's death, that the fact that Malcolm Atwell's and Ian Atwell's signatures on the 1976 Deed were affixed later, and not attested, did not detract from the execution of that document as a deed by Elsie Atwell on behalf of the estate [147]. He elaborated:

In other words, it is the deed to which she, but to which neither of her sons, is a party. The evidence established that the sons' signatures were appended later and were evidently the product of an arrangement by their mother, who did not fully comprehend the necessities or formalities, but those additions do not alter the position that she executed the agreement as a deed [147].

86 His Honour said that the 'appearances' were that the 1976 Deed was executed as a deed by each of the original parties, but a number of succeeding members did not execute the document formally as a deed and, in some cases, not at all [148].

87 The trial judge concluded, however, that all members of the Partnership from time to time 'should be taken as being bound by [the 1976 Deed] as if it were a deed' [148].

88 The facts which gave rise to this issue, and his Honour's findings and reasoning, were as follows:

Consistently with the view which I have reached that it was Mrs Elsie F Atwell who was the sole representative of the estate of W C Atwell admitted to the family partnerships after her husband's death, I reach the conclusion that the fact that Malcolm Atwell's and Ian Atwell's signatures on that deed were affixed later and not attested does not detract from the execution of the agreement as a deed by Mrs Atwell on behalf of the estate. In other words, it is the deed to which she, but to which neither of her sons, is a party. The evidence established that the sons' signatures were appended later and were evidently the product of an arrangement by their mother, who did not fully comprehend the necessities or formalities, but those additions do not alter the position that she executed the agreement as a deed.

The appearances also are that the agreement was also executed as a deed by each of the original parties, although a number of succeeding members did not execute the document formally as a deed and, in some particular instances, not at all. Nevertheless, I consider that by binding themselves to the terms of that agreement, subject to occasional departure by mutual agreement, and taking benefits in the form of distributions of profits, all members of the partnership from time to time should be taken as being bound by the document as if it were a deed (see authorities mentioned earlier) [147] - [148].

The issues listed for determination before me do not require or permit any finding as to when these contractual rights of pre-emption could be exercised but, as I have already observed, it is apparent that if they are to be exercised at all they must be exercised before the identified subject matter passed into the hands of third parties without notice of the alleged irregularity or, at the latest, while the same subject matter remained in existence and capable of restoration if the circumstances so warranted [150]. (emphasis added)

Limitation: a specialty involving an action for debt or covenant: the trial judge's reasons

90 The trial judge decided that none of the causes of action relied on by the appellants was an action in debt or covenant and, accordingly, the 20-year limitation period under s 38(1)(e)(i) of the Limitation Act 1935 (WA) did not apply [153]. Further, his Honour accepted that there was no analogous statutory limitation period for the causes of action in question which could or should be applied in the equitable jurisdiction [153].

The consequences of ineligible partners being admitted to the Partnership by mistake or by ignorance of some admitting partners: the trial judge's reasons

91 The trial judge was satisfied that 'the formation of successive partnerships, including each partnership following the admission or enlargement of the interests of individual partners following each of the six impugned transactions, can only mean that the admission of each of those partners, or the enlargement of the interests of a continuing partner following such a transaction, occurred with the consent of the other partners of that firm' [160]. His Honour emphasised:

Indeed, the continuation of each such partnership with the newly admitted partner or the partner with the enlarged interest, and the sharing of profits during the period of each such firm, can only connote the consent of each of the partners of that firm to carry on business together with each other in partnership with the mutual trust, confidence and acceptance of each other [160].

92 However, in response to those points, the appellants raised as an issue the consequences of a continuing partner having consented to the admission of a new partner, or the enlargement of the interest of an existing partner, as a result of a mistake about or ignorance as to the 'eligibility' of the incoming partner or the 'eligibility' of the existing partner to enlarge his or her interest.

93 His Honour made three points about this issue. First, there could not at any stage have been a mistake by the other partners about the identity of the incoming partner or the partner whose interest became enlarged [161]. Secondly, there was no allegation of fraud against the incoming partner or the partner whose interest became enlarged, nor was there any allegation of fraud against the members of the Committee who processed and recorded the introduction of the incoming partner or the increase in the interest of the existing partner, nor was there an allegation of fraud against anyone else [162]. Thirdly, there was no allegation of any innocent misrepresentation against anyone [163].

94 The trial judge said that, in the present case, 'the indications of affirmation by participating in the business of the new partnership and sharing profits are very strong but, even more formidable, is the absence of the prospects of any substantial restitution' [165]. He added:

The restoration of the parties to the position which would have obtained but for the voidable transaction in the present setting could only ever have occurred before there were any further changes in the partnership such as, for example, the formation of a succeeding partnership by the death or retirement of an existing member or the introduction of another new member. This is because a rescission of the admission of the new partner consequent upon any of the impugned transactions must, of necessity, involve the offering of an opportunity to acquire those units to members of the firm which existed before the new entrant was admitted. The same goes for rescission of the acquisition of further units by a continuing partner. The effect of the pre-emption rights is to confer, only upon those persons, the opportunity to acquire at the agreed or determined price the units of the former member who had died or retired. Once the membership of the partnership has changed by the admission of other members, as a result of subsequent alterations, deaths or retirements or sales or transfers of units between existing partners, there is no longer the same firm nor are the same persons entitled to the benefit of the conditional pre-emptive rights [165].

The evidence is clear beyond any contest that there have been changes in the membership of the firm and the introduction of new partners, or alteration in the extent of the interest of other partners, which have occurred since each of the impugned transactions, the latest of which was in 2001 ... In practical terms this means that even were a claim for rescission based on innocent misrepresentation to have been raised in these pleadings, or even if it were capable of being accommodated on the existing pleadings, it could not lead to the remedy of rescission being granted in respect of any of the six impugned transactions.

Accordingly, while the plaintiffs' submissions that a person who enters into a partnership induced by fraud or misrepresentation is entitled to rescind on general equitable principles, the position still is that there are no prospects for rescission on those grounds in the present case. It is now simply impossible for the parties who might, if the situation had been as alleged by the plaintiffs, have had an opportunity to exercise the pre-emptive rights to acquire or enlarge their interests in former partnerships to do so now because each of those former partnerships has been determined and dissolved by the formation of successive partnerships [166] - [167].

The trial judge's answers to the separate issues stated at trial

96 The trial judge's answers to the separate issues stated at trial (see [54] above) were as follows:

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.

The trial judge's disposition of the appellants' action

97 The trial judge held that, as a result of the answers he had given to issue 2, the appellants' claims for relief arising out of the impugned transactions must necessarily fail [173].

98 His Honour made declarations in answer to the issues stated for trial.

1. The 1976 [Deed] continued to bind the various partnerships which traded as the Atwell Family Agency before and after each dissolution of the various partnerships that occurred in the period 25 March 1976 to 17 April 2009.
2. Membership of the various partnerships which traded as the Atwell Family Agency in the period 16 December 1964 to 17 April 2009 never offended the 20 partner limit prescribed by Australian law.
3. No limitation period, whether express or by analogy, applies to the acquirers of the units pleaded in the plaintiffs' statement of claim.

100 Further, his Honour ordered that the appellants' action against the second and third respondents be dismissed.

101 The appellants rely on four grounds of appeal. The grounds read:

1. 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.
2. 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'.
3. 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.
4. 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.

Ground 1 of the appeal: the appellants' submissions

102 As I have mentioned, the trial judge observed that the text of the 1976 Deed reflected an underlying fallacy that the Partnership was a continuing entity which survived, unaffected as to identity, by the deaths or retirements of members [23].

103 Counsel for the appellants submitted that the 1976 Deed and the Rules attempted to govern the affairs of the Partnership in a manner similar to the governance of a body corporate. In particular, it was argued that cl 4 and cl 5 of the 1976 Deed and r 2 - r 10 of the Rules created 'a situation where the relationship between the Partners, and the Partners' rights and obligations, were analogous to shareholders of a body corporate'.

104 It was also submitted that there had been 'a number of "technical" or "notional" dissolutions of the Atwell Family Agency which have occurred as a result of existing partners dying or retiring and/or new partners being admitted'.

(a) partnerships do not have perpetual succession, and a firm is dissolved by the death or retirement of a partner; and

(b) if the business of the firm continues to be carried on by the surviving or continuing partners (with or without the admission of new partners), a new firm is formed.

106 However, it was argued that his Honour erred in approaching the issues for determination by failing to construe the 1976 Deed and the Rules 'so as to give full force and effect to the parties' agreement as to how their affairs were to be conducted'.

107 Section 43 of the Partnership Act 1895 (WA) (the Act) provides:

Subject to any agreement between the partners, a partnership is dissolved -

(a) if entered into for a fixed term, by the expiration of that term;

(b) if entered into for a single adventure or undertaking, by the termination of that adventure or undertaking;

(c) if entered into for an undefined time, by any partner giving notice in writing to the other or others of his intention to dissolve the partnership.

In the last mentioned case the partnership is dissolved as from the date mentioned in the notice as the date of dissolution, or, if no date is so mentioned, as from the date of the communication of the notice.

108 By cl 1 of the 1976 Deed, the parties agreed that they would, upon the terms and conditions of that deed and the Rules, carry on the business of property owners under the name 'Atwell Family Agency' in partnership between themselves 'and any other persons who may be admitted to partnership in manner provided in this deed'.

109 By cl 2 of the 1976 Deed, that deed was 'deemed' to have come into force on 1 July 1975. Also, by cl 2, 'the partnership shall continue until determined by a majority vote of the partners taken in accordance with the rules'.

(1) Subject to any agreement between the partners every partnership is also dissolved by the death or bankruptcy of any partner.

(2) A partnership may, at the option of the other partners or any of them, by written notice, be dissolved if any partner assigns his share of the partnership property or suffers such share to be charged under this Act for his separate debt.

(3) The dissolution shall take effect from the date of the death, bankruptcy, or notice as the case may be.

(4) Such notice shall be given within 28 days after the partner or partners giving the same has or have notice of the assignment or charge.

111 By cl 3 of the 1976 Deed, the death, bankruptcy or other disability of any partner 'shall not determine the partnership as between the remaining partners' (emphasis added).

112 Clause 4 of the 1976 Deed identifies the persons who, upon the occurrence of certain events, will become partners. Clause 4 contains a patent formatting error. As the trial judge noted [45], there is no doubt that cl 4 should be construed as if it were set out in the following format:

Any of the following persons that is to say:-

(a) the legal personal representative of a deceased partner and

(b) any new trustee of the estate of a deceased partner or of any settlement made by a partner

(c) any transferee of units in whose names units are entered in accordance with the Rules of the Partnership and who sign their names at the foot of the Rules as persons bound by the Rules

shall be deemed to have become partners subject to the Rules (as they are from time to time in force) of the partnership with the other persons who are then partners and accordingly to be entitled to a share in the assets and as between the partners to be liable to bear a share of the losses of the partnership proportionable to the number of units from time to time entered in their name.

113 In r 1 of the Rules the term 'Partner' is defined, for the purposes of the Rules so far as the context admits or requires, as follows:

'Partner' includes any of the parties to this Deed and also any person who upon transmission after the death of any partner or transfer of units in any way permitted by the Rules is entered in the books as the holder of one or more units and who signs his name at the foot of this Schedule as a person intending to become bound by the Rules and 'partners' means the partners for the time being.

114 Rule 2(1) 'deems' each partner 'to hold units in the partnership'.

An entry made in the books [of the partnership] with the approval of the Committee of a transfer of units (if the transfer is not contrary to the Rules) shall be effective without any instrument in writing as evidence of the right to the units so entered but the Committee shall require an authority in writing from the persons concerned before an entry is made of a transfer.

116 Rule 3 states that the 'partnership' is 'divided into 142884 units'. Rule 3 then specifies the number of units 'held by the partners respectively' on 1 July 1975.

117 The term 'units' is not defined in the 1976 Deed or the Rules, but it is apparent from the context that a partner's units represent that partner's share in the Partnership, and the total number of units comprises the totality of the partners' shares. A 'unit', as an abstract concept, is not in itself a discrete item of property.

118 Rule 5 provides for the transfer of units where the proposed transfer is not subject to the pre-emptive rights provision. It reads:

Without the prior giving of a disposal notice in accordance with Rule 6 or the observance of any requirement of the Rules consequent upon the giving of such a notice:

(a) units standing in the name of a deceased partner may be entered in the names of his legal personal representatives upon their signing their names at the foot of this Schedule as persons bound by the Rules; and

(b) units standing in the names of the legal personal representatives or trustees of the estate of any deceased partner or the trustees of any settlement made by a partner may be entered in the names of new trustees for the time being upon the legal personal representatives or new trustees signing their names at the foot of this Schedule as persons bound by the Rules; and

(c) units standing in the name of a partner may be transferred to his spouse brother or sister or to a child of such partner or in the event of there being no child then surviving such partner to a grandchild of such partner.

Before any units are entered in the books as belonging to a person not already a partner he shall sign his name at the foot of this Schedule in token of his agreeing to be bound by the Rules.

No sale or transfer of units may be permitted at any time if the effect of such sale or transfer is to increase the number of partners in the partnership beyond twenty.

121 A partnership, including each partnership governed by the 1976 Deed, has no legal personality distinct from that of the individual partners. See SJ Mackie Pty Ltd v Dalziell Medical Practice Pty Ltd [1989] 2 Qd R 87, 90 (McPherson J, Macrossan & Shepherdson JJ agreeing); Commissioner of State Taxation (SA) v Cyril Henschke Pty Ltd [2010] HCA 43; (2010) 242 CLR 508 [10] (French CJ, Gummow, Hayne, Heydon & Kiefel JJ).

122 It is a fundamental principle of the law of partnership that any change in the membership of the partnership, whether occurring as a result of the retirement, expulsion, death or otherwise of a partner, effects a dissolution of the partnership. See Hadlee v Commissioner of Inland Revenue (NZ) [1989] 2 NZLR 447, 455 (Eichelbaum CJ); SJ Mackie (90 - 91); McGowan v Commissioner of Stamp Duties [2001] QCA 236; [2002] 2 Qd R 499 [15] (McPherson JA, Helman J agreeing); Rushton (Qld) Pty Ltd v Rushton (NSW) Pty Ltd [2002] QCA 210; [2003] 1 Qd R 320 [9] (McPherson JA, McMurdo P & Wilson J agreeing); Cyril Henschke [11] - [12].

123 Numerous provisions of the 1976 Deed including the Rules (in particular, cl 1 and cl 2 of the deed, the definition of 'Partner' in r 1, and r 2, r 3, r 5, r 9 and r 10) reflect the idea that the partnership is a corporate (or, at least, a quasi-corporate) body which is distinct from the members who comprise the partnership. This idea is also implicit in the creation of units in the partnership. See SJ Mackie, where McPherson J made these observations about comparable provisions in a unit partnership deed:

Underlying the provisions particularly of cll 7.2 and 8, and implicit in the description 'unit' partnership, is the notion that a partnership like this enjoys a corporate or at least quasi-corporate existence apart from the members who comprise it. That is, of course, quite foreign to the conception of a partnership as understood by English law, which regards any change in membership as destroying the identity of the firm. See Lindley on Partnership, 15th ed, at 34, 50, and 543. Hence it is that under our law the transfer of a share to a non-partner inevitably breaks the continuity of the firm, thus constituting a new firm or partnership of those members of the former partnership who remain, together with the newcomer. This approach is sometimes contrasted with that of continental legal systems and of Scotland, where a partnership is seen as possessing at least some features or attributes of distinct legal personality. It was to accommodate this difference that in the United Kingdom s 4(2) of the Partnership Act 1890, a provision naturally omitted from the corresponding Queensland Act of 1891, provides that in Scotland a firm is a legal person distinct from the partners of whom it is composed. Use of the word 'firm' to describe the members of a partnership under English law has in the course of time helped to promote the reception of this foreign heresy; but the rule nevertheless remains, as a recent Scots writer on the subject has accurately observed, that in our legal system the word 'firm' is no more than 'a collective title for the individuals who comprise it' (JB Miller, The Law of Partnership in Scotland, at 451 - 452; Edinburgh W Green & Son Ltd 1973). In Queensland, as in England, a firm as such still has, as Farwell J expressed it in Sadler v Whiteman [1910] 1 KB 868, 889, 'no existence' (90).

His Honour's observations concerning the Partnership Act 1891 (Qld) apply to the Act.

124 Similarly, in Hadlee, Eichelbaum CJ explained:

In law the retirement of a partner, or the admission of a new partner, constitutes the dissolution of the old partnership and the formation of a new one. Here, upon the happening of such events there were no overt signs of dissolution; the partnership's financial structure and arrangements were such that none was required but that does not alter the underlying legal significance of any retirement or new admission (Income Tax Commissioners (City of London) v Gibbs [1942] AC 402, particularly at 414 per Viscount Simon LC; at 429, 430 per Lord Wright; at 432 per Lord Porter; Brace v Calder [1895] 2 QB 253 at 258 per Lord Esher MR; at 261 per Lopes LJ; at 263 per Rigby LJ; Lindley on the Law of Partnership, 15th ed (1984), pp 543, 983) (455).

This passage was cited with apparent approval by French CJ, Gummow, Hayne, Heydon and Kiefel JJ in Cyril Henschke [11].

125 Section 50 of the Act provides, in essence, that on the dissolution of a partnership the property of the partnership must be applied in payment of the firm's debts and liabilities, and after such payment any surplus assets are to be applied in payment of what may be due to the partners respectively, after deducting what may be due from them as partners to the firm. However, as McPherson JA noted in Rushton:

Winding up in that way may be avoided if the parties agree on a sale to one or more of the remaining partners of the shares of the outgoing partner, or if there is a provision in the partnership agreement to that effect. This is sometimes described as a technical or notional dissolution, which is something of a misnomer because it is not the dissolution but, at most, the winding up that is notional. The partnership or firm itself is dissolved as soon as there is a change in membership, but the assets and, as between the partners, responsibility for the liabilities of the partnership are taken over by the remaining partners [9]. (emphasis added)

126 It is evident from this examination of the applicable legal principles and case law that:

(a) counsel for the appellant's contention that the relationship between the partners, and the partners' rights and obligations, under the 1976 Deed including the Rules were analogous to shareholders of a body corporate, is apt to mislead; and

(b) his contention that there had been a number of 'technical' or 'notional' dissolutions of the Atwell Family Agency, is misconceived.

127 Clause 3 of the 1976 Deed contains in effect an agreement between the partners for the time being that the death, bankruptcy or other disability of any partner will not determine the Partnership as between the remaining partners.

128 Each partnership has, however, been dissolved, as a matter of law, upon any change in the membership of the partnership including a change occurring upon retirement or death. The fact that any winding up may have been 'technical' or 'notional' does not derogate from the occurrence or diminish the significance, as a matter of law, of the dissolution.

129 In my opinion, the trial judge was correct in his observation that the 1976 Deed (including the Rules) reflected an underlying fallacy that the Partnership was a continuing entity which survived, unaffected as to identity, by the deaths or retirements of members [23].

130 The construction of an instrument involves ascertaining what a reasonable person would have understood the parties to the instrument to mean. Consideration should ordinarily be given not only to the language of the instrument, but also to the surrounding circumstances known to the parties when the instrument was executed, and the apparent purpose and object of any transaction created by or evidenced in the instrument. These propositions were enunciated in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 [40] (Gleeson CJ, Gummow, Hayne, Callinan & Heydon JJ) in the context of an instrument that was a contract. However, the propositions are applicable to instruments generally, subject to any particular rules of construction which have been developed in relation to a particular kind of provision or instrument. See also Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99, 109 (Gibbs J).

131 In the present case, it was not suggested by the parties that consideration should be given to the surrounding circumstances known to the parties when the 1976 Deed was executed. It is therefore unnecessary to analyse the emphatic observations by Gummow, Heydon and Bell JJ in Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; (2011) 86 ALJR 1 [2] - [5].

132 The provisions of an instrument which creates or evidences a business structure must be construed in the context of any legislative framework or legal principles applicable to the structure or its method of operation.

133 I am satisfied that his Honour construed the 1976 Deed (including the Rules) in a conventional manner and in accordance with the approach mandated by the High Court. His Honour did not err as alleged in ground 1 of the appeal.

Ground 2 of the appeal: the appellants' submissions

135 The trial judge decided that the restriction upon the transfer or acquisition of units in the Partnership under the 1976 Deed related solely to the 'legal ownership' of the units 'as demonstrated by the recording of the unit holder's name in the partnership records' [80].

136 The provisions of r 6 - r 8 of the Rules apply where a partner proposes 'to dispose of all or any of [their] units', other than in circumstances where the exceptions in r 4 and r 5 apply.

137 Counsel for the appellants submitted that the word 'dispose' in r 6 should be construed as referring to or including the creation or transfer of 'any beneficial or equitable interest in partners' units'. He advanced two reasons in support of this submission. First, the nature of partners' units in the Partnership was fundamentally different from the nature of shares in a company and, on that basis, cases in which pre-emptive rights relating to company shares have been held to relate only to legal title are distinguishable. Secondly, the purpose and context of the pre-emptive rights provision in the present case supports a construction of the word 'dispose' that includes the creation or disposal of equitable interests.

138 As I have mentioned, r 4 to r 10 regulate the acquisition and disposal by partners of units in the Partnership and r 4 to r 8 create a pre-emptive rights provision.

1. Without the prior giving of a disposal notice in accordance with Rule 6 and the observance of the requirements of the Rules consequent upon the giving of the notice a partner may acquire units from any other partner at such a price as they shall mutually agree.

140 I have set out the text of r 5 at [118] above. Rule 5 permits units to be transferred, in certain circumstances, without compliance with the pre-emptive rights provision.

1. (1) Except where disposal is permitted without the prior giving of a disposal notice or the observance of any requirement of the Rules consequent upon the giving of such a notice a partner (called 'the disposer') proposing to dispose of all or any of his units shall give notice in writing (called the 'disposal notice') to the Committee that he desires to dispose of the units named in the notice.

(2) The notice shall specify the sum the disposer fixes as the sale price of the units and shall constitute the Committee his agent for the sale of the units to other partners at the price so fixed.

1. Upon receiving a disposal notice the Committee shall inform all partners of the numbers of units available and of the sale price fixed by the disposer. Any partner who desires to purchase any of the units may within fourteen days after the Committee informs him of the proposed sale give notice to the Committee of the number he desires to purchase. If two or more partners give notice of their desire to purchase the units shall be allocated to them rateably according to their existing holdings so that no purchaser shall receive more than he desires to purchase and entries accordingly shall be made in the books as soon as the purchase money is paid.
2. If the Committee do not within twenty-eight days after being served with the disposal notice effect a sale of all the units named in it the following procedure shall apply:

(a) The Committee shall obtain a valuation of such units from the accountant or accountants for the time being of the partnership and supply a copy thereof to the disposer;

(b) If the disposer does not within 7 days of the receipt of such valuation give notice to the Committee that he does not accept such valuation the sale price of the units shall be as fixed by such valuation;

(c) If the disposer gives notice in accordance with the last preceding paragraph that he does not accept such valuation the Committee shall thereupon obtain a further valuation of such units from a person appointed by the President of the Real Estate Institute of Western Australia and in such a case the sale price of the units shall be as fixed by such further valuation;

(d) The costs of any such further valuation as aforesaid shall be borne by the disposer;

(e) If the Committee does not within twenty-eight days after the price of the units has been fixed under the provisions of sub-paragraphs (b) or (c) of this paragraph effect a sale of all the units named in the disposal notice the disposer shall be at liberty to sell the units remaining unsold to any person not being a partner at any price not being less than the valuation price fixed as aforesaid but no sale to any person not being a partner shall be permitted at a lesser price than fixed as aforesaid unless and until the Committee has been advised by the disposer that he is willing to sell at such lesser price and the Committee has given notice to all the partners of such lesser price and no partner within fourteen days after such notice is given gives notice of his desire to purchase at such lesser price in which last event such units shall be sold to such partner or partners in accordance with the Provisions of Article 7.

142 A partner's share in the partnership is a chose in action, namely, a right to his or her proportion of the surplus after the realisation of assets and the payment of debts and liabilities. The share is not a title to specific property. However, a partner has an interest in every asset of the partnership. This interest has been described as a 'beneficial interest', but the interest is sui generis. See Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd [1974] HCA 22; (1974) 131 CLR 321, 327 - 328 (McTiernan, Menzies & Mason JJ). In Perpetual Executors & Trustees Association of Australia Ltd v Federal Commissioner of Taxation (Thomas' case) [No 2] [1955] HCA 66; (1955) 94 CLR 1, Dixon CJ described a partner's interest with respect to partnership assets as 'a right in respect of assets but ... a right, or a congeries of rights, growing out of the partnership articles' (15). See also s 33 of the Act; Cyril Henschke [22] - [27].

143 On dissolution, each partner retains a 'beneficial interest' in every asset of the partnership. See Hendry v Perpetual Executors and Trustees Association of Australia Ltd [1961] HCA 44; (1961) 106 CLR 256, 265 - 266 (Taylor & Menzies JJ). This interest continues to subsist until the partnership has been actually or notionally wound up. Actual winding up involves realisation of the partnership assets and payment of the partnership debts and liabilities before distributing any surplus among the partners according to their rights and interests. A notional winding up, instead of an actual winding up, may occur if the partners agree to that course of action; for example, 'if the parties agree on a sale to one or more of the remaining partners of the shares of the outgoing partner, or if there is a provision in the partnership agreement to that effect': Rushton [9].

144 By s 32 of the Act, where the partnership property includes land, the land shall, unless the contrary intention appears, be treated as between the partners (including the representatives of a deceased partner), and also as between the heirs of a deceased partner and his executors or administrators, as personal and not real estate.

145 It was not suggested, either before the trial judge or in the appeal, that there was any contrary intention in relation to the treatment, as between the partners of the Partnership, of the land on which the Atwell Arcade is situate.

146 A partner's chose in action is, of course, fundamentally different from a share in a company. A share is a separate piece of property. It confers upon the holder no legal or equitable interest in the company's assets. See Charles v Federal Commissioner of Taxation [1954] HCA 16; (1954) 90 CLR 598, 609 (Dixon CJ, Kitto & Taylor JJ).

147 Federal Commissioner of Taxation v Everett [1980] HCA 6; (1980) 143 CLR 440 was concerned with the assignment of a partner's share. Barwick CJ, Stephen, Mason and Wilson JJ held that the right to receive partnership profits is not separate and severable from a partner's interest in the partnership:

The fundamental consideration, as we see it, is that the partner's fractional interest is an entire chose in action; it is capable of division by assignment into further fractions, but it is not capable of division by assignment so that the right to participate in partnership profits which is inherent in the interest is hived off from the rest of that interest. Consequently, a partner's entitlement to participate in profits is not separate and severable from the interest of the partner (450).

148 In McGowan, before 30 June 1998 the appellants, Messrs McGowan and Roche, carried on a practice of solicitors in partnership with Mr Shine. On or about that date, Mr Shine decided to retire from the partnership. He executed a deed of assignment in which he assigned his interest in the assets and future profits of the partnership to Messrs McGowan and Roche. The Court of Appeal of Queensland held that the deed of assignment was properly assessed to ad valorem stamp duty as a conveyance. McPherson JA analysed the legal nature of the assignment, as follows:

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)

149 So, a partner's interest in the assets of the partnership is equitable, and a partner's share in the partnership, being an equitable chose in action, is capable of assignment in equity. Historically, the chose in action was enforceable in equity but not at common law. See, now, s 20 of the Property Law Act 1969 (WA); Everett (447); Meagher RP, Heydon JD and Leeming MJ, Meagher, Gummow & Lehane's Equity Doctrines & Remedies (4th ed 2002), [6-035].

150 The decision in Everett establishes that a portion of a partner's interest (as well as the whole interest) is assignable (448 - 449).

151 However, by s 44(2) of the Act, a partnership may, at the option of the other partners or any of them, by written notice, be dissolved if any partner assigns his or her share of the partnership property. By s 44(3), the dissolution takes effect from the date of the notice.

152 The relationship between an assignee of a partnership interest, on the one hand, and the partners, on the other, is dealt with in s 42 of the Act. Section 42 provides:

(1) An assignment by any partner of his share in the partnership, either absolute or by way of mortgage, does not, as against the other partners, entitle the assignee during the continuance of the partnership to interfere in the management or administration of the partnership business or affairs, or to require any accounts of the partnership transactions, or to inspect the partnership books, but entitles the assignee only to receive the share of profits to which the assigning partner would otherwise be entitled, and the assignee must accept the account of profits agreed to by the partners.

(2) In case of a dissolution of the partnership, whether as respects all the partners, or as respects the assigning partner, the assignee is entitled to receive the share of the partnership assets to which the assigning partner is entitled as between himself and the other partners, and, for the purpose of ascertaining that share, to an account as from the date of the dissolution.

153 By s 56 of the Act, subject to any agreement between the partners, the amount due from surviving or continuing partners to an outgoing partner, or the representatives of a deceased partner, in respect of the outgoing or deceased partner's share, is a debt accruing at the date of the dissolution or death.

154 Rule 2(2) contemplates that a record of the names of the partners and the number of units held by them respectively (that is, the extent of their respective shares) will be recorded in the books of the Partnership. See also the definition of 'Partner', which stipulates in effect that a 'partner' includes, relevantly, any person who, amongst other things, 'upon transmission after the death of any partner or transfer of units in any way permitted by the Rules is entered in the books as the holder of one or more units'.

155 Rule 4 and r 5 permit the transfer of units in certain circumstances without compliance with the pre-emptive rights provision. Rule 8 provides for the transfer of units 'to any person not being a partner' where the transferor has given a disposal notice under r 6 but none of the other partners desires to purchase all or any of the units the subject of the notice.

156 In my opinion, where a transfer of units is made pursuant to r 5 or r 8 to a person who is not a partner:

(a) The person will become a partner with the surviving or continuing partners because the surviving or continuing partners have given their consent, by agreeing to be bound by the Rules, to the person joining them in partnership. See, in particular, the definition of 'Partner' in r 1, r 8, r 9 and r 10. See also Lovegrove v Nelson [1834] EngR 959; (1834) 3 My & K 1, 20 (Brougham LC); Byrne v Reid [1902] 2 Ch 735, 742 (Stirling LJ).

(b) The transfer will effect a dissolution of the subsisting partnership and the creation of a new partnership.

(c) The winding up of the subsisting partnership will be notional.

157 In my opinion, where a transfer of units is made to another partner or partners pursuant to r 4 or a disposal notice given in accordance with r 6:

(a) The extent of the share of the transferee partner or partners will be increased.

(b) The subsisting partnership will not be dissolved unless the transferor partner ceases to hold any units.

(c) If the transferor partner ceases to hold any units the subsisting partnership will be dissolved and a new partnership will be created.

(d) If the subsisting partnership is dissolved there will be a notional winding up.

158 Rule 6(1) provides that, except where 'disposal' is permitted without the giving of a disposal notice or the observance of any requirement of the Rules consequent upon the giving of such a notice, a partner proposing to 'dispose' of all or any of his units shall give notice in writing (the disposal notice) to the Committee that he or she desires to dispose of the units named in the notice.

159 Neither the word 'disposal' nor any cognate forms of that word are defined in the 1976 Deed (including the Rules). The natural and ordinary meaning of 'disposal', at least when used in the sense of a disposal of property, has a broad connotation. The nature and extent of the prohibition against the disposal of units in the Partnership under the pre-emptive rights provision must be determined by reference to the nature and character in equity of a 'unit' and the context in which the prohibition appears in the Rules.

160 As I have mentioned, although the term 'units' is not defined in the 1976 Deed (including the Rules), it is readily apparent that a partner's units represent that partner's share in the Partnership, and the total number of units comprises the totality of the partners' shares. The number of units held by a partner represents the extent of his or her share.

161 In my opinion, a disposal notice is required to be given where a partner proposes to assign absolutely the whole or a portion of his or her share in the Partnership. My reasons are as follows.

162 First, a partner's interest in the assets of the Partnership is equitable and a partner's share in the Partnership is an equitable chose in action. An equitable chose in action is assignable in equity.

163 Secondly, r 4 is concerned with the 'acquisition' of units by a partner from any other partner 'at such price as they shall mutually agree'.

164 Thirdly, r 5 is concerned with the 'transfer', and r 8 is concerned with (amongst other thing) the 'sale', of units to a person who is not a partner.

165 Rule 5(a) and r 5(b) permit units 'standing in the name of' certain specified persons or entities to be 'entered in the names of' other specified persons or entities.

166 Rule 5(c) permits units 'standing in the name of' a partner to be 'transferred' to certain specified relatives of the partner.

167 It is plain, from the context (in particular, the definition of 'Partner' in r 1, r 2 and r 9), that r 5(a) and r 5(b) are referring to names entered or to be entered in respect of units in the books of the Partnership and that r 5(c) is referring to the names of partners entered in respect of units in those books.

168 Rule 8 permits the 'sale' of units the subject of a disposal notice, at the 'price' determined in accordance with r 8, if and to the extent that the other partners have not given notice of their desire to purchase all or any of those units.

169 It is plain, from the context, that r 8 is referring to units entered in the books of the Partnership as being held by a particular person or entity.

170 Fourthly, r 7 is concerned with the 'purchase' of the whole or a portion of a partner's units by another partner or partners, pursuant to a disposal notice, at the 'price' specified in the notice.

171 Fifthly, it follows, from the legal reality that units represent a partner's share in the Partnership, that r 4, r 6, r 7 and r 8 provide for the sale and purchase, and r 5 provides for the transfer, (in legal effect, the equitable assignment) of a partner's share (that is, his or her equitable chose in action).

172 Sixthly, the word 'dispose', in that part of r 6(1) which requires (except, in effect, as permitted under r 4 and r 5) that a partner proposing to 'dispose of' all or any of his or her units must give a disposal notice, takes its colour from the scheme embodied in r 4 to r 10.

173 The text of r 4 to r 10, and the transactions they permit or contemplate, indicate that a disposal notice is required (subject to the specified exceptions) in the case of a proposed absolute assignment of the whole or a portion of a partner's share in the Partnership. The requirement for a disposal notice does not, however, extend to a limited assignment (for example, an assignment by way of charge) or the assignment of the benefit of a partner's share (see Everett (448 - 449)).

174 The first and second respondents' contention at trial that the pre-emptive rights provision applied 'only to the legal ownership' of the units, on the one hand, and the appellants' contention at trial that this provision 'must, of necessity, be regarded as extending to the beneficial interests in those units', on the other (see the trial judge's reasons at [77]), failed to recognise the true nature and character in equity of each partner's share in the Partnership.

175 The first and second respondents' contention appears to equate 'legal ownership' of the units with the recording in the books of the Partnership of the names of the partners and the number of units 'owned' or 'held' by each of them.

176 This also appears to have been the trial judge's view. As I have mentioned, his Honour decided that 'the restriction upon the transfer or acquisition of "units" in the Partnership relates solely to the legal ownership of such "units" as demonstrated by the recording of the unit holder's name in the partnership records' [80].

177 The appellants, in ground 2 of the appeal, perpetuate their failure to recognise the true nature and character in equity of a partner's share in the Partnership.

178 Ground 2 has been made out to the extent that it challenges the trial judge's characterisation of the proposed dealings or transactions which require the giving of a disposal notice. Otherwise, ground 2 fails. His Honour's mis-characterisation does not, however, affect the outcome of the appeal.

Ground 3 of the appeal: the appellants' submissions

179 As I have mentioned, the trial judge found that, from in or about 1976 to her death on 9 November 1998, Elsie Atwell was a partner in the Partnership as a representative of WC Atwell's estate and that, during this period, neither of the appellants was a partner, despite being joint executors and trustees of the estate [133], [134], [140], [141], [143] - [147]. Also, as I have mentioned, his Honour found that the appellants first became partners, jointly in their capacity as executors and trustees of WC Atwell's estate, on 10 November 1998 [138].

180 Counsel for the appellants submitted that the uncontradicted evidence of each of the appellants, which appears to have been accepted by his Honour [140], was that they signed the 1976 Deed in or about 1976. It was argued, on the basis of these facts, that the only conclusion or inference reasonably open to his Honour was that the appellants were partners, jointly with Elsie Atwell, at all material times until her death.

181 Although partnership is a consensual arrangement based on agreement, it is more than a simple contract. Also, partnership is a continuing personal relationship. It is not merely a commercial relationship. See Hurst v Bryk [2002] 1 AC 185, 194 (Lord Millett); Cyril Henschke [22].

182 It is a question of fact whether or not a partnership exists. Similarly, it is a question of fact whether a particular person or entity is a partner. These issues are to be determined on the basis of the substance of the relationship between the alleged partners. See Adam v Newbigging (1888) 13 App Cas 308, 315 (Lord Halsbury); Weiner v Harris [1910] 1 KB 285, 290 (Cozens-Hardy MR); Duke Group Ltd (in liq) v Pilmer [1998] SASC 6529; (1998) 144 FLR 1, 232 (Mullighan J).

183 Brinsden J pointed out in Watson v Federal Commissioner of Taxation (1982) 61 FLR 268 that it is possible for an executor and trustee of a deceased partner, who has power to carry on a partnership business, 'to become by agreement whether express or tacit ... a partner in a new partnership between the surviving partners and the executor trustee' (275). His Honour added that whether or not a particular partnership exists depends upon the intention of the parties. This intention is to be ascertained from all the relevant circumstances.

184 In the present case, the trial judge, in concluding that the appellants were not accepted, as partners, by the partners in 1975 or by the partners of any of the succeeding partnerships up to Elsie Atwell's death on 9 November 1998, relied on a body of evidence adduced at the trial. The relevant evidence included the following:

(a) On 22 April 1975, the Partnership subsisting immediately before the execution of the 1976 Deed, decided that Malcolm Atwell (one of the appellants) was not eligible to join the Committee because he was not then a partner of the firm [122]. This evidence is contained in the minutes of an extraordinary meeting of the Partnership held on 22 April 1975 (exhibit 39: GAB 180).

(b) The appellants' names were not directly entered into any of the books or records of the Partnership as the holders of any units [143]. This reflects the decision of the Committee, as recorded in the report of the chairman, WC Atwell, dated 30 June 1966 (exhibit 38: GAB 179) that 'in the case of deceased estates it will be necessary, in the event of any estate desiring to divide its ownership, that the units held in that estate must be held in the name of a single nominee'. See also his Honour's reasons at [121] - [123].

(c) The appellants did not receive individually any correspondence from, or have any other communication with, the Partnership or the Committee [143]. Also, before Elsie Atwell's death the appellants did not participate in or carry on any aspect of the business of the Partnership and did not attend annual general meetings of the firm. After WC Atwell's death, Elsie Atwell attended most of the general meetings. See his Honour's reasons at [85].

(d) Elsie Atwell appears to have been very intelligent, experienced in business and familiar with the affairs of the Partnership [85]. His Honour noted:

Both her sons [the appellants], and her grandson, spoke of her familiarity with the affairs of the partnership; how she collected most, if not all, of the notices, minutes and other correspondence which she received about the affairs of the partnership and how they trusted her to make all necessary decisions about the administration of the partnership on behalf of their father's estate in a general way. Nevertheless, she would discuss, as she considered necessary, any questions of importance with them [85].

(e) Malcolm Atwell said in evidence that he recalled signing the 1976 Deed 'after [he] was provided with a copy of the deed and asked to sign it by Elsie Atwell' but he '[could not] recall precisely when [he] signed the deed, although it was a long time ago' (ts 512).

(f) Ian Atwell said in evidence-in-chief that he could not recall precisely when he signed the 1976 Deed (ts 461). He did recall, however, that it was 'at the time when other persons were signing the deed' (ts 461). Ian Atwell said in effect in cross-examination that his mother, Elsie Atwell, had asked him to sign the 1976 Deed (ts 465). He could not recall whether she had already signed it (ts 465).

185 Further, the trial judge made the following findings in relation to the execution of the 1976 Deed by Elsie Atwell:

Each of the original parties to [the 1976 Deed] is identified by name in a manner which treats each interest as being one so that, in respect of this deceased, in the introduction to the agreement the interest is described as 'the trustee of the will of Walter Charles Atwell (dec'd) of the 15th part' and concluding with 'the trustee of the estate of Frank Pusey Atwell (dec'd) of the 20th part'. In the provision for execution each of those 20 parties is to sign and deliver individually so that, in the case of this deceased, the attestation clause is 'The trustee of the will of Walter Charles Atwell, signed, sealed and delivered by the trustee of the will of Walter Charles Atwell in the presence of'. The original of the 1976 agreement makes it clear that, in all probability, the agreement was signed and delivered as a deed by Mrs Elsie F Atwell, and that her signature was duly attested by a witness. However, the document shows that it was also signed by Mr Malcolm Atwell and Mr Ian Atwell, whose signatures were not witnessed and who signed it, as best they can recall, at the request of their mother, on some subsequent occasion, presumably because she thought that it was necessary or desirable ... Having regard to the structure of the 1976 agreement, and the description of the parties, I consider that it was always intended that only one person would execute, as a deed, the agreement on behalf of his or her interest or the interest which he or she represented and that, in the case of the estate of W C Atwell (dec'd) the approach was to treat the execution of the document by Mrs Atwell as sufficient to bind the estate and to record her, in her capacity as executor or trustee of the estate, as the member of the partnership in the place of the deceased [140]. (emphasis added)

186 It is apparent from this passage that, on the basis of the structure of the 1976 Deed, the description of the parties in the deed, the witnessed signature of Elsie Atwell to the deed and the absence of any witnesses to the later signatures of the appellants, his Honour found that the Partnership treated the execution of the 1976 Deed by Elsie Atwell as sufficient to bind the estate as a member of the Partnership. His Honour's finding that Malcolm Atwell and Ian Atwell signed the 1976 Deed 'on some subsequent occasion' was reasonably open [140].

187 I am satisfied that the trial judge did not make any material error of law or fact in arriving at his conclusion that the appellants were not members of the Partnership prior to the death of Elsie Atwell on 9 November 1998.

Ground 4 of the appeal: the appellants' submissions

189 The trial judge found that there had been changes in the membership of the Partnership, including the introduction of new partners and alterations in the extent of the interests of other partners, after the occurrence of each of the impugned transactions [166].

190 His Honour held that all of the members of each new partnership accepted each other as partners, including any newcomer or any former partner with an increased unit holding, in the new partnership. The partners of the new partnership included all of the former partners who may have been entitled to insist on the observance of the pre-emptive rights provision [81], [86], [92] - [93], [109] - [110].

191 The trial judge also held that, in the present case, the remedy of rescission was not available in relation to any breach which may have occurred of the pre-emptive rights provision. Even if the situation had been as alleged by the appellants, it was now 'simply impossible' for the parties who might have had an opportunity to exercise the pre-emptive rights now to acquire or enlarge their interests in former partnerships 'because each of those former partnerships has been determined and dissolved by the formation of successive partnerships' [167].

192 Counsel for the appellants argued that the trial judge had erred in his determination of this issue.

193 First, it was argued that the 1976 Deed including the Rules imposed a positive obligation on partners to enter into a new firm with a new partner or partners if certain conditions were satisfied (namely, that the new partner or partners were persons referred to in r 5 or that the procedure prescribed by r 6 - r 8 had been complied with). As the administration of the Partnership's affairs in accordance with the Rules had been delegated to the Committee, partners were entitled to presume that, if a 'newcomer was presented to them as a new Partner admitted to the Partnership', the 1976 Deed and the Rules positively obliged them to enter into a new firm carrying on business with the newcomer. According to counsel, a finding that, in these circumstances, the partners would lose their right to complain about breaches of the pre-emptive rights provision without them having become aware that there had been such breaches would leave a wrong without a remedy.

194 Secondly, it was argued that, in relation to the transfer of units to a person who was an existing partner but who was to hold the units on trust for a non-partner (which was the case in most of the impugned transactions), recourse to notions of the continuing partners accepting a 'newcomer' as a partner with whom they would carry on business in common had no application. According to counsel, the acceptance of the new firm could only constitute an acceptance of the relationship between the persons named as partners, 'albeit in circumstances where, contrary to the purpose of the pre-emptive rights provisions, an outsider (the identity of whom may not even be known to the continuing Partners) obtains both an interest in the assets of the Partnership (even though not as a Partner) and the right, upon changing trustee, to demand that any person (who may have no relationship to the family whatsoever) be admitted as a Partner'.

195 In Woodroffe v Box [1954] HCA 22; (1954) 92 CLR 245, Fullagar and Kitto JJ analysed the nature of a right of first refusal or pre-emptive right:

The term 'first refusal' is not a technical term. It is a colloquial term, and indeed a somewhat inept term, because what the potential offeree wants is an opportunity of accepting an offer rather than an opportunity of refusing an offer ... It seems clear that a mere promise to give the first refusal should be taken prima facie as conferring no more than a pre-emptive right. If I promise to give you the first refusal of my property, I am making prima facie only a negative promise: I am saying: 'I will not sell my property unless and until I have offered it to you and you have refused it.' ...

The truth is, indeed, that, in dealing with such a loose and colloquial expression, it may often be a mistake to cling strongly to a preconceived meaning. The safer and sounder course is to regard it as an expression of fairly flexible import, to look at the whole of what the parties to an instrument have said, and in the light of that whole to determine whether they have or have not conveyed an intention that an immediate offer is being made or is to be made (257 - 258).

196 In the present case, the pre-emptive rights provision, properly construed, confers rights of pre-emption and not options to purchase.

197 The pre-emptive rights provision is, in substance, a negative contractual stipulation. When the 1976 Deed was executed the pre-emptive rights provision did not confer on any partner an equitable interest in any other partner's interest for the time being in the Partnership or its assets. See Mackay v Wilson [1947] NSWStRp 7; (1947) 47 SR (NSW) 315, 325 (Street J).

198 However, I will assume (favourably to the appellants), for the purpose of considering the merits of ground 4 of the appeal, that when the pre-emptive rights provision in the Rules is triggered by a partner's decision to dispose of his or her interest in the Partnership, so that the other partners then have an option to acquire that interest subject to compliance with the Rules (in particular, r 8), the other partners then have an equitable interest in the disposing partner's interest. There is a division in the case law on this issue. See Transfield Properties (Kent Street) Pty Ltd v Amos Aked Swift Pty Ltd (1994) 36 NSWLR 321, 341 - 343 (Santow J) and Rasch Nominees Pty Ltd v Bartholomaeus [2012] SASC 70 [42] - [50] (Kourakis J) and the authorities cited in those cases.

199 The measure or extent of the other partners' equitable interest in the disposing partner's interest is commensurate with the protection which equity will afford to the other partners. This equitable interest of each of the other partners exists only so long as the option to acquire is specifically enforceable by him or her. Specific performance in this context embraces all of the remedies that would be available to each of the other partners in equity to protect the interest which he or she has under the option, including relief by way of injunction as well as specific performance in the strict sense. See Legione v Hateley [1983] HCA 11; (1983) 152 CLR 406, 446 (Mason & Deane JJ); Stern v McArthur [1988] HCA 51; (1988) 165 CLR 489, 521 - 523 (Deane & Dawson JJ); Chan v Cresdon Pty Ltd [1989] HCA 63; (1989) 168 CLR 242, 252 (Mason CJ, Brennan, Deane & McHugh JJ).

200 In the present case, I am of the opinion that the trial judge was correct in deciding that any equitable interest of the other partners, arising from a partner having triggered the pre-emptive rights provision in the Rules by deciding to dispose of his or her interest in the Partnership, did not survive the formation of the next succeeding partnership. My reasons for that opinion are as follows.

201 First, as his Honour found, the 1976 Deed including the Rules governed each of the successive partnerships [115] - [117].

202 Secondly, on the retirement or death of a partner in any of the successive partnerships, that partnership was dissolved. On dissolution, each partner's share in the partnership comprised a right to his or her proportion of the surplus after the realisation of assets and the payment of debts and liabilities.

203 Thirdly, on the dissolution of each successive partnership, there was, by the agreement of the partners, a notional instead of an actual winding up. The only material asset of the Partnership, namely the Atwell Arcade, has never been sold or otherwise disposed of. Although, on dissolution, each partner retained a 'beneficial interest' in the assets of the partnership, that interest was extinguished upon the notional winding up of that partnership and the formation of the next partnership.

204 Fourthly, on the dissolution and notional winding up of any of the successive partnerships, and the formation of the next partnership, the constitution of the new partnership was different from the constitution of the old partnership, and each of the partners in the new partnership acquired a new and different share.

205 Fifthly, as his Honour found, there is no doubt that, after each of the six impugned transactions, each new partnership carried on the business of the Atwell Family Agency, and each of the partners in the new partnership treated and accepted the other partners (including partners who were not members of the old partnership and partners whose 'unit holding' in the new partnership was different from their 'unit holding' in the old partnership) as members of the new partnership, with entitlements to vote and to participate in the distribution of profits and the firm's affairs generally in the same manner as all other partners [81] - [84], [86], [90] - [93]. His Honour held that the partners of each new partnership included the persons who may have been entitled to insist upon observance of the pre-emptive rights provision [109] - [110]. Those persons must necessarily have consented to the formation and constitution of the new partnership (including the identity of the members and their respective unit holding). As his Honour noted:

[T]he fact is that each of the persons on whose behalf these proceedings have been brought, is one who agreed to the introduction of each new member of the partnership after the impugned transactions or to the increase in the unit holdings of a partner in that new partnership consequent upon the transaction. Simply stated the persons whose the rights of pre-emption are now being sought to be enforced, are all persons who agreed to the admission of the new partner or to the change in the unit holding of the partnership consequent upon a transaction in which it is said that the rights of pre-emption were not observed or fully observed.

The admission of each new partner, following upon those transactions, was unconditional [90] - [91].

206 Sixthly, at trial, counsel for the appellants expressly disavowed any suggestion that the appellants or any of the other partners had been induced to enter into any of the successive partnerships of which they had been members as a result of fraud or misrepresentation (ts 734). See, also, his Honour's reasons at [92].

207 Seventhly, on the dissolution and notional winding up of an old partnership and the formation of a new partnership, it became impossible to restore the parties to the positions they occupied when the triggering of the pre-emptive rights provision in the Rules (by a partner's decision to dispose of his or her interest in the old partnership) conferred on the other partners in the old partnership an equitable interest in the disposing partner's interest. The subject matter of the pre-emptive rights provision was extinguished. See, also, his Honour's reasons at [99] - [100], [105], [109] - [110], [165] - [167].

208 In the circumstances I have described at [200] - [207] above, neither the appellants nor any other partners have any subsisting proprietary interest in respect of which equity would grant relief by specific performance or injunction.

209 The appellants were not without a cause of action in respect of any breach of the pre-emptive rights provision about which they had standing to complain. Prior to the dissolution and notional winding up of the partnerships in question and the formation of the new partnerships, it was open to the appellants to claim relief in equity. After the occurrence of those events, and subject to any available limitation or other defences, the appellants had a cause of action for breach of contract and a remedy in damages for any loss they had suffered as a result of the breach.

210 Finally, I note that, consequent upon each absolute assignment of a partner's interest in contravention of the pre-emptive rights provision, the assignee became a member of the new partnership, but any other persons or entities with an interest in the subject matter of the assignment did not, consequent upon the assignment, become a member of that firm.

The appellants' claim against the first respondents: the 'unauthorised remuneration issue'

212 In the primary proceedings the appellants claimed that from about 1974 unauthorised remuneration was paid from time to time to various members of the Committee [11]. The first respondents are the current members of the Committee. The appellants, in their amended statement of claim, sought an account of all unauthorised amounts paid to the first

respondents and Keith Roberts and other consequential relief. However, this 'unauthorised remuneration issue' was not tried before the primary judge [11]. It was not part of the separate issues ordered to be tried before his Honour.

213 After stating his answers to the issues tried before him, the trial judge said:

That leaves the claims for compensation for alleged unauthorised commissions paid to the management committee which have not been dealt with at all. I will hear submissions from the parties as to how that remaining issue should be dealt with but it would seem appropriate to give directions to allow a trial of that issue to be conducted in the event that those claims are still to be pursued [173].

214 The formal orders made by his Honour on 10 August 2009 included:

1. All issues with respect to the causes of action raised by paragraphs 1 to 11 and 26 to 36 of the Statement of Claim (Payments Claim) be adjourned sine die and be listed for directions before a Judge in chambers at the request of either party on 7 days notice.

215 This order related to the 'unauthorised remuneration issue', which is pleaded in paras 26 - 36 of the amended statement of claim.

216 The 'unauthorised remuneration issue' is not referred to in the grounds of appeal and none of the parties made any submissions on the issue to this court.

218 Buss JA has set out the relevant background which, subject to what follows, I gratefully adopt.

219 The appeal raises, in substance, questions as to the operation and effect of the 1976 partnership deed (the 1976 deed) and, in particular, its pre-emption provisions. The appellants contend, in effect, that there were six 'transfers' by which a partner in the partnership 'transferred' his or her interest in the partnership to an incoming partner in breach of the pre-emption provisions and claim, inter alia, that they are entitled to specific performance in relation to their alleged pre-emption rights. It is

convenient, at the outset, to refer to the 'transfers' impugned by the appellants.

220 The judge's findings of fact as to the disputed 'transfers' are to be gathered from [49] and [68] - [76] of his reasons, read in the context of the first schedule to his reasons, the evidence, particularly exhibit 18 (GB 206 - 210), exhibits 23, 26 - 29 and exhibit 32 (GB 263). On the proper construction of his reasons, I would understand his Honour made the following findings of fact.

221 Ada Atwell (Ada) was one of the original parties to the 1976 deed. She is described in the deed as a 'spinster'. She died on 24 March 1983, holding 23,220 units. Under her Will, Ada appointed her nephew, Keith Roberts (Keith) as her sole executor and trustee. She left her interest in the partnership to the trustee for the time being of the Hamersley Trust (reasons [74]). The trustee of the Hamersley Trust was thus a specific legatee. The trustee of that trust was also the same nephew, Keith. Keith was, himself, a partner in the partnership prior to Ada's death, and he held 120 units in the partnership. In the new partnership between the surviving partners following Ada's death, he remained a partner, and was recorded as holding 120 units in his personal capacity and 23,220 units in his capacity as Ada's legal personal representative. Keith is then said to have 'transferred' the 23,220 units from Ada's estate, to himself as trustee for the Hamersley Trust. It is this 'transfer' which is challenged.

222 Before moving to the second transfer, it is convenient to set out material provisions of Ada's Will:

1. I APPOINT my nephew KEITH GILBERT ROBERTS of 7 Linden Gardens Floreat Park aforesaid to be the Executor and Trustee of this my Will ...
2. I GIVE DEVISE AND BEQUEATH free of all duties payable by reason of my death all my share estate and interest in the business property assets and liabilities of the business of Property Owners carried on under the style or firm name of 'Atwell Family Agency' unto the Trustee for the time being of 'The Hamersley Trust' (hereinafter sometimes referred to as 'the Trust') for the purposes thereof.
3. I DIRECT my Trustee to convert into cash such of my remaining assets as shall need to be so converted to yield by way of net proceeds an amount which shall when added to my ready moneys be sufficient to pay thereout my just debts funeral and testamentary expenses and all probate estate and other duties payable by reason of my death and leave a balance of ...
4. I GIVE DEVISE AND BEQUETH all my property of whatsoever nature and wheresoever situate and whether real or personal and not hereinbefore already disposed of unto my Trustee UPON TRUST for the Trustee for the time being of 'the Hamersley Trust' for the purposes of the Trust.

1. I DECLARE that the receipt of the said KEITH GILBERT ROBERTS or other the Trustee or Trustees for the time being of 'the Hamersley Trust' shall be a full and sufficient discharge for all property and moneys given devised and bequeathed or paid to it hereunder and that my Trustee shall not be required to see to the proper application of such property or moneys or any part thereof. (emphasis added)

223 Edna Paterson (Edna) was one of the original parties to the 1976 deed. By 1985, she held 4,267 units. On 14 February 1985, Edna 'transferred' all her units to her nephew, Noel Atwell (Noel). In the new partnership created following her retirement, Noel became a partner and held 4,267 units in that new partnership.

224 Gladys Broadley (Gladys) was also one of the original partners under the 1976 deed. By 1985, she held 4,120 units.

225 On or around 31 March 1985, Gladys 'transferred':

(a) 2,620 units to her cousin, Noel (GB 207 - the judge, apparently incorrectly, refers to 2,630 units: reasons [49] point 3);

(b) the remaining 1,500 units to her cousin, Gary John Atwell (Gary) - and thereby retired.

226 In the new partnership created following her retirement, Noel is recorded as holding a total of 6,887 units (GB 208 - being the sum of 2,620 plus 4,267 units under the second 'transfer'), and Gary is recorded as holding 1,500 units.

227 Hilda held 23,100 units. Keith was her son. Under her Will, Hilda appointed Keith as executor and left all her interest in the partnership to the trustee (Keith) of the Hamersley Trust. Hilda died on 5 January 1986. In the new partnership consequent upon her death, Keith was recorded as holding 120 units in his personal capacity, 23,220 units as trustee for the Hamersley Trust (pursuant to the first 'transfer') and 23,100 units as Hilda's legal personal representative (BB 91).

228 On 17 March 1986, Keith is said to have 'transferred' the 23,100 units from Hilda's estate to himself as trustee for the Hamersley Trust.

I revoke all other wills made by me. I appoint MY SON KEITH GILBERT ROBERTS ... to be my Executor, and direct that my Funeral and Testamentary Expenses and all my debts shall be paid as soon as conveniently may be after my decease.

I Give, devise and bequeath unto

THE TRUSTEES FOR THE TIME BEING OF THE HAMERSLEY TRUST MY SHARE REPRESENTED BY 23100 UNITS IN THE ATWELL FAMILY AGENCY, TO BE DEALT WITH IN ACCORDANCE OF THE TRUST DEED DATED 18TH DECEMBER 1972 - AND TO MY SON KEITH GILBERT ROBERTS ... THE REMAINING BALANCE OF MY REAL AND PERSONAL ESTATE. SHOULD THE SAID KEITH GILBERT ROBERTS PREDECEASE ME THEN I BEQUEATH UNTO THE HAMERSLEY TRUST ALL MY REAL AND PERSONAL ESTATE. (italics in original)

230 Dorothy Beckett (Dorothy) was also one of the original partners under the 1976 deed. She held 4,270 units when she died, on 9 October 1985. She had two daughters, Ms Spurge and Ms Cowley.

231 Under her Will, she appointed Mr Frichot her executor and she bequeathed her interest in the partnership to her two daughters equally.

232 Following her death, Mr Frichot, as Dorothy's legal personal representative, became a partner of the 'continuing' partnership, holding 4,270 units to be applied in accordance with Dorothy's Will. One daughter, Ms Spurge, took her half share of these units (2,135 units) and became a partner.

233 Presumably in accordance with the wishes of the other daughter, Mr Frichot sold the other half, ie, 2,135 units, to Keith. Keith took the units as trustee for the Hamersley Trust on 30 June 1986. It is the latter 'transfer' which is challenged.

234 On 15 June 2001, Keith 'transferred' the units held as trustee for the Hamersley Trust (then totalling 48,455 units - GB 254) to Leigh Roberts (Leigh). Leigh was Keith's son. Leigh became a partner in the new partnership created by the disposition of those units. Leigh held the units as trustee for K Roberts, M Lister and the Sonoma Trust. The 'transfer' from Keith to Leigh is challenged.

235 The principles concerning partnership were recently considered in Fazio v Fazio [2012] WASCA 72 [53] - [73] and those principles inform the following discussion in these reasons for judgment. It is unnecessary to repeat the principles here.

236 The 1976 deed comprises recitals and operative provisions (cls 1 - 5), together with a schedule described as the 'Rules of the Partnership' (the Rules).

237 The deed indicates that the business of the partnership was not intended to be conducted by each of the partners being directly involved in the management of its affairs. Rather, there was to be a 'Committee of Management' of no fewer than three partners, to be elected in general meeting: cl 21(1) of the Rules. The committee was given the power to 'make regulations (not inconsistent with the Rules) as to any matter of management or carrying on of the affairs of the partnership and all such regulations ... shall be entered in the minutes and be binding on all the partners': cl 21(4).

238 The deed also provided for the appointment of a Manager who was to 'have control of and manage the business' and who could employ people to assist in operating the business. The Manager's powers were subject to any regulation made by the committee and to any resolution made by the partners in general meeting. See cls 20, 21(5) and 23 of the Rules.

239 By cl 32 of the Rules, the Manager and committee members were to be indemnified out of the funds of the partnership for liabilities incurred in the discharge of their duties unless they were attributable to wilful default or dishonesty.

240 Provision was also made for the keeping and recording of minutes of meetings of the committee and of the partnership, and for the keeping and provision of accounts: cls 26 and 27 of the Rules.

241 By cl 35 of the Rules, the Rules of the partnership may be altered by resolution of the partners in general meeting passed by partners 'holding 3/5ths of the units'.

242 The partnership was deemed to commence on 1 July 1975 and was to continue until determined by majority vote of all the partners in accordance with the Rules: cl 2 of the deed.

243 By cl 3 of the deed, the death, bankruptcy or other disability of a partner should not 'determine the partnership as between the remaining partners'.

244 Clause 3 operates against the background of s 44(1) of the Partnership Act 1895 (WA) which provides:

1. Dissolution by death, bankruptcy, assignment or charge

(1) Subject to any agreement between the partners every partnership is also dissolved by the death or bankruptcy of any partner. (emphasis added)

245 Clause 3 provides, in effect, relevantly, that there is not to be a general dissolution upon the death of a partner and that the partners intend there to be a 'continuing' partnership between the surviving or remaining partners. Absent such provision, ordinarily the legal personal representative of the deceased partner and the surviving partners would be entitled to a winding-up to have the property applied in payment of partnership liabilities, and the surplus applied in payment of what was due to each of them: Hendry v The Perpetual Executors &Trustees Association of Australia Ltd [1961] HCA 44; (1961) 106 CLR 256, 265.

246 Any 'continuing' partnership would be a new partnership different from the partnership existing prior to the death of the partner.

247 Subject to any agreement to the contrary, the amount due from the surviving partners in the 'continuing' partnership to the personal representatives of the deceased partner, in respect of the latter's share, is a debt accruing at the date of death: s 56 of the Partnership Act.

248 The members of the partnership are the original parties to the deed and new partners 'admitted to [the] partnership in [the] manner provided in [the] deed': cl 1 of the deed.

249 The deed provides, in effect, that a party may be 'admitted' to the partnership in accordance with the Rules: cl 4 of the deed; cl 1 of the Rules, definition of Partner; and cls 2 and 4 - 10 of the Rules.

250 A person, upon 'transmission' following the death of a partner or upon 'transfer' in accordance with the Rules, and who signs the Rules as a person intending to be thereby bound, may become a partner: definition of 'Partner' in cl 1 of the Rules.

251 The word 'transmission' is apt to signify 'the devolution of property upon some person by operation of law, unconnected with any direct act of the party to whom the property is transmitted - as, by death, bankruptcy, insolvency ... ': Wolfson v The Registrar­General of New South Wales [1934] HCA 29; (1934) 51 CLR 300, 311.

252 Where the person to whom the units are transferred is 'not already a partner', he or she must first sign the Rules as an expression of their intention to be bound thereby: cl 9 of the Rules.

253 Any 'entry made in the books with the approval of the Committee', in relation to, in effect, an authorised 'transfer' of units, is of itself sufficient evidence of the agreement that the transferee is a partner: cl 2(2) of the Rules.

254 A partner may be a corporation: cl 2(3) of the Rules.

255 The term 'unit' is simply a description given to a partner's share in the partnership: SJ Mackie Pty Ltd v Dalziell Medical Practice Pty Ltd [1989] 2 Qd R 87, 90.

Acquisition and disposal of units - overview - pt III of the Rules

256 Each of cls 4 and 5 of the Rules provide for what may be done 'without the prior giving of a disposal notice' and the observance of the Rules consequent upon the giving of a 'disposal notice'.

257 A 'disposal notice' is, by cl 6(1) of the Rules, a notice which 'shall' be given (in writing) where a partner is 'proposing to dispose of all or any of his units', except where the 'disposal' is 'permitted' by, in effect, cls 4 and 5 of the Rules: cl 6(1) of the Rules. (I will refer to a disponee who is not a permitted disponee as a 'third party'.)

258 The reference to 'all' the partner's 'units' is to be taken as a reference to his whole share in the partnership, and the reference to 'any' 'units' is to be taken to refer to a partner's fraction of his share in the partnership.

259 Clauses 7 and 8 provide for what is to occur after a 'disposal notice' has been issued.

260 As noted earlier, by cl 9, the disponee of any units, where the disponee is not already a partner, is to sign the Rules before having his name entered in the books as a partner.

261 By cl 10, no sale or disposition is to be 'permitted' if the effect would be to increase the number of partners beyond 20.

Clause 4 - permitted disposals: between partners

262 Clause 4 provides, in effect, that any partner may 'acquire' units from another partner at any price agreed. Thus, a 'permitted' 'disposal' under cl 6 includes, by cl 4, one where any or all of one partner's units are acquired by another partner (or partners).

263 There is no obligation under cl 4 for a partner to offer his units collectively to the other partners for rateable acquisition, and the units may be acquired for any consideration, or for none.

264 Where only some units of a partner are acquired by another partner, the partnership remains extant and there is merely an adjustment in the respective proportionate interests held by the 'disposing' partner and the 'acquiring' partner.

265 Where a partner transfers all of the units to another partner pursuant to cl 4, involving, in substance, a consensual retirement, a new firm, in point of law, is created which takes on the assets and liabilities of the former firm.

266 Clause 4 provides the opportunity for a partner wishing to retire to reach agreement with any existing partner (or partners) to sell his units, and thereby realise their value. If an agreement were not reached under cl 4, the partner seeking to retire may utilise cls 6 - 8 to realise their value by sale to a third party if no existing partner is willing to purchase.

267 Clauses 5(a) and (b) permit the legal personal representative of a deceased person, or the trustee of his estate, to become a partner of the firm. Thus, where a partner has provided for the disposition of his interest in the firm by Will, to be held on the testamentary trusts contained in his Will, the trustee of his estate may become a partner of the (new) firm in association with the surviving partners of the (old) firm. Similarly, new trustees of the deceased partner's estate may also become partners under cl 5(b).

268 Clauses 5(a) and (b) operate against the legal background described in Lindley and Banks on Partnership (19th ed, 2010) pars 26-02, 26-04 and 26-22 as follows:

[S]ubject to any contrary agreement, the death of a partner dissolves the partnership as regards all the partners. Although the doctrine of survivorship will not in general apply to any part of the deceased partner's beneficial share, the conduct of the winding up is vested exclusively in the surviving partners. It follows that the rights of the personal representatives are limited, as Lord Lindley explained:

'Unless all the partners have agreed to the contrary, when one of them dies, his executors have no right to become partners with the surviving partners; nor to interfere with the partnership business; but the executors of the deceased represent him for all purposes of account, and, unless restrained by special agreement, they have the power, by bringing an action, to have the affairs of the partnership wound up in a manner which is generally ruinous to the other partners.'

The reference to the 'ruinous' effects of a winding up reflects the fact that a deceased partner's share will normally be ascertained and paid out by means of a sale of all the partnership assets, whether or not pursuant to a court order, since the surviving partners have no inherent right to acquire that share at a valuation. Equally, the surviving partners will be obliged to complete any business left unfinished at the date of dissolution, so that the court may defer a forced sale of those assets and the ultimate adjustment of accounts as between the partners until a particular subsisting contract has been fully performed.

...

Because of the potential implications for the surviving partners, the personal representatives of a deceased partner will often wish to explore ways in which a general dissolution and winding up can be avoided.

There is, in general, no bar on the personal representatives selling the deceased's share to the surviving partners, unless one of those representatives is also a member of the firm. If such a sale cannot, for whatever reason, be arranged, the only option may be to leave the deceased's share in the business. This course is not without risk, even if the consent of the beneficiaries is obtained, since the representatives might inadvertently become (or be held out as) partners and thereby incur personal liability for the continuing firm's debts and obligations, notwithstanding their trustee status. Lord Lindley summarised the difficulty which executors face in these terms:

'The position of the executors of a deceased partner is, in fact, often one of considerable hardship and difficulty; if they insist on an immediate winding up of the firm, they may ruin those whom the deceased may have been most anxious to benefit; whilst if for their advantage the partnership is allowed to go on, the executors may run the risk of being ruined themselves.'

Accordingly, the representatives may in practice have no choice but to force a sale of all the assets and a winding up of the partnership affairs in the normal way.

...

Liability of personal representatives

If the deceased partner's personal representatives are admitted as partners they will obviously incur personal liability for the debts and obligations of the new firm, on normal principles. However, as Lord Lindley observed:

'... the acts of an executor, to whatever extent they may render him personally liable, do not impose liability on the assets of the deceased, unless those acts have been properly performed by the executor in the execution of his duty as executor.'

An administrator is, essentially, in the same position. (citations omitted) (emphasis in original)

269 Clause 5(b) also provides that new trustees of an estate of a deceased partner or of a trust settled by a partner may be entered into the books as partners, if they sign the Rules to signify their agreement. Clause 5(b) appears against the background of s 7 and s 10 of the Trustees Act 1962 (WA) which deal, amongst other things, with the devolution of property by law on new trustees.

Permitted disposal - spouses, siblings, children and grandchildren

270 By cl 5(c) of the Rules, a 'partner' may transfer units standing in the name of that partner, to 'his' spouse, sibling or child, or (if no child survives him at the time of the disposition) to his grandchildren. The words 'partner' and 'his' in cl 5(c) are unlikely to be construed so as to enable a trustee of a deceased's partner's estate, who has become a partner under cl 5(b), to transfer that share to 'his', ie, the trustee's, spouse, sibling, etcetera. The judge, in effect, treated it as applying, where a partner has died, to the spouse, sibling, etcetera of the deceased partner (reasons [49] point 5), and there is no challenge to that construction. See also in this respect Safeguard Industrial Investments Ltd v National Westminster Bank Ltd [1981] 1 WLR 286, 292.

271 Clause 5(c) could apply to a sale by a partner to the designated family members, but in its practical operation, it was presumably contemplated that it would typically operate by way of gift.

272 Unlike cl 5(a) and (b) of the Rules, cl 5(c) does not refer to the designated family transferees being permitted to have their units being entered against their names on the books of the partnership, but that is plainly the intention, with the result that, on doing so, they would become members of the 'new' partnership.

Disposals to third parties - cls 6, 7, 8, 9 and 10 of the Rules - preliminary

273 Clauses 6, 7 and 8 of the Rules deal with disposal notices to persons except where disposal is permitted under cls 4 and 5.

274 Disposal notices in this context are not new. In Homfray v Fothergill [1866] LR 1 Eq 567, the partnership agreement relevantly provided, in effect, that 'no partner should sell' his share in the partnership except in accordance with provisions which required the partner to give to the other partners at least two months' notice of his intention to sell his share, and thereafter to make an 'offer' to sell his share to the partners collectively and, if that offer were not accepted, to make a second 'offer' to any partners wishing to purchase jointly and if no partners wished to purchase jointly, then to make a further 'offer' to individual partners. After giving notice of his intention (569 - 570, 574), the relevant defendant made an offer (complete as to terms and price) to his co-partners collectively, which was not accepted. He then refused to make the offer to the other partners who were jointly willing to buy his share. In a suit brought by the other partners who were willing to buy, the defendant contended that he was not obliged to make the second offer under the partnership provisions. The court held that the defendant was obliged to re-offer his interest to the other partners and could not choose, at his election, whether or not to make the second offer. Having made the first offer, he had assumed the 'character of vendor' (574).

In cases of private partnership composed of a few individuals, as distinguished from joint-stock companies, clauses relating to a partial dissolution by a sale or transfer of shares are of vital importance. The introduction of any stranger to whom the caprice of one partner may sell and transfer his share, might not only produce disagreeable consequences by a compulsory association with a stranger, but might disconcert and perhaps destroy a successful business.

To the retiring partner, who wishes to sell his shares, the principal, if not the only, matter of importance is the price which he is to obtain. But if, by contract, the continuing partners have a right of pre-emption, the great value and importance of that right must be recognised, and this Court will restrain by injunction the violation of it, and will, in a proper case, enforce its performance by decree.

...

As soon as the character of vendor is assumed, the right of pre-emption is an absolute right, excluding choice by the vendor.

How far there may be a right to retract an offer before acceptance, and to what extent the locus penitentiae may be permitted, must depend on a fair consideration of the terms of the clauses and the conduct of the parties.

Where, as is usual, and as occurs in this case, a preliminary notice is necessary, and a day is fixed when the offer is to be accepted or rejected, if a question arise whether the offer might be retracted at any time between the notice and the day fixed for acceptance or rejection, although on the first impression there might seem to be a right to retract, still that may be modified by acts fairly done by the continuing partners on the faith of and in reliance on the bona fides of the notice.

276 These observations are to be read in light of the principle that a partner's retirement dissolves the partnership, and that both the 'continuation' by the remaining partners, and the admission of a new partner involves the creation of a new partnership. Ordinarily, a third party purchaser could not be foisted on the other partners as a new partner in place of a retiring partner without the agreement of the other partners and the resultant creation of a new partnership. However the other partners may be commercially or practically obliged to facilitate the sale of the retiring partner's interests to the third party by admitting the third party as a new partner, in order to avoid the consequences of a winding-up upon the retirement of the retiring partner.

277 Where, however, the partnership agreement provides for the circumstances in which new partners are to be taken in, and provides for the execution of an instrument constituting the admission of new partners, the court may, at least, compel execution of the instrument, although not the performance of the resultant relationship of partnership created thereby: see Renowden v Hurley [1951] VicLawRp 2; [1951] VLR 13, 20 - 22; Meagher RP, Heydon JD and Leeming MJ, Meagher, Gummow & Lehane's Equity: Doctrines & Remedies (4th ed, 2002) [20-60]; cf Byrne v Reid [1902] 2 Ch 735, 740 - 741, 743 - 745.

278 Clauses 6 to 10 of the Rules were presumably drawn in the expectation that a partner who disposed of his interest in the partnership in accordance with cls 6 to 8 to a third party, could, if necessary, obtain an order compelling the partnership, by the committee, to enter the third party's name into the books of the partnership subject to the third party signing the Rules: see cl 2(2) of the Rules.

279 By cl 6(1), except for a permitted disposition, a partner 'proposing to dispose of all or any of his units' shall give notice in writing (the disposal notice) that 'he desires to dispose of' the units specified in the notice.

280 By cl 6(2), the partner is to inform the committee, via the 'disposal notice', of the number of the units and the 'sale price' of the units that the partner 'desires to dispose of' to a third party. The partner, by providing the notice, also thereby appoints the committee his agent for the 'sale' of the units at the price in the notice, to the other partners, subject to the terms of cls 7 and 8. It is to be noted that the sale price in the disposal notice may be any price fixed by the disposer, and is not required to be a 'reasonable' price, or a 'fair value' fixed by an expert, or a 'market' price.

281 The committee presumably receives the notice on behalf of the other partners. By cl 7, 'upon receiving' the disposal notice, the committee shall 'inform' the other partners of the units 'available' and of the sale price fixed by the disposer. Any partner who 'desires' to purchase units may, within 14 days, notify the committee of the number of units he 'desires' to purchase. If two or more partners notify a 'desire' to purchase, the committee is to allocate the units rateably amongst them, according to their existing unit holdings.

282 There may be a question as to whether the disposal notice operates to authorise the committee to convey an invitation to treat to the other partners at the price fixed, and to accept, on the disposer's behalf, any offers made by other partners at the price fixed, subject to effecting rateable allocation where there are two or more offerer partners. A contractual regime of that nature was contained in the relevant articles of association in Lyle & Scott Ltd v Scott's Trustees [1959] AC 763, 765 - 766, to which the appellants referred in their submissions. On the other hand, it might be that on the proper construction of cls 6 - 7, the committee is conveying an offer to the other partners to sell at the price fixed in the disposal notice, capable of immediate acceptance, but somehow defeasible if rateable allocation is required. It is to be noticed that unlike in the partnership agreement in Homfray v Fothergill, where provision was made for three cascading offers by the disposing partner to the other partners, the provisions in pt III do not, in terms, refer to the making of an 'offer' by a disposer.

283 If there is no sale (or if all the disposer's units are not sold) under cl 7, the committee, by cl 8, must, in effect, within the next 14 days (ie, 28 days from the date of the service of the disposal notice) obtain a valuation of the units from the firm's accountants and supply a copy of the valuation to the disposer. Unless the disposer disputes the valuation within seven days, the disposer is, in effect, treated as authorising the committee to inform the partners, on his or her behalf, of the remaining units available for sale at the price fixed by such valuation. If the disposer does dispute the valuation, the committee must obtain another valuation by a person appointed by the president of the Real Estate Institute of Western Australia. Once that valuation is obtained, the disposer is again, in effect, taken to authorise the committee to inform the other partners of the units remaining available for sale at the price fixed by the second valuation.

284 If the units are not sold, again subject to rateable allocation, at the valuation price (whichever valuation applies), within 28 days, the disposer may sell elsewhere at not less than the valuation price.

285 If, however, the disposer then receives an offer from a third party at a 'lesser price than fixed' by valuation, the disposer must, if he wishes to sell at that lower price, advise the committee of the lower price. The committee must then notify the other partners of the new, lower, price. If there is no sale to the other partners (again subject to rateable allocation) within 14 days, the disposer is entitled to sell the units to the third party.

286 As with the disposal notice, there may be a question as to whether the committee, when it 'informs' the other partners of the price fixed by valuation or by the third party offerer, is conveying an offer by the disposer, or an invitation to treat.

287 The first ground of appeal alleges in effect that the primary court erred in (1) construing the 1976 deed as reflecting an 'underlying fallacy' that the partnership was a continuing entity which survived unaffected by the deaths or retirements of its members, when (2) the court should have construed it 'in such a manner as to give effect to the parties' intentions to the maximum extent possible'.

288 As to the first part of this ground, insofar as it is said that the judge erred in detecting an 'underlying fallacy' in the drafting of the 1976 deed, the ground should be dismissed. For the reasons conveniently summarised by Pullin JA as subpars (a) to (h) of [11] above, the deed did reflect the underlying fallacy to which the judge referred.

289 The second part of this ground does not identify with precision any particular error made by the judge in his construction of the instrument. In my view it adds nothing to ground 2, which alleges particular errors of construction in relation to the pre-emption provisions. The second part of ground 1 cannot succeed if no error is demonstrated with respect to ground 2, to which I now turn.

290 Ground 2 alleges in effect that the judge erred in finding that the pre-emption provisions in cl 6 - cl 8 of the Rules of the 1976 deed did not apply merely to the creation of beneficial interests in a partner's share in the partnership. In my respectful view the judge's conclusion was correct.

291 Although the word 'dispose' is of wide import, particularly in certain statutory contexts (see the observations of Gummow J in Australian Trade Commission v Film Funding and Management Pty Ltd [1989] FCA 188; (1989) 24 FCR 595, 612 - 613), its meaning must be ascertained from the context in which it appears in the phrase 'proposing to dispose of ... his units' in cl 6(1) of the Rules, read in the context of pt III of the Rules and the deed as a whole.

292 At the outset, it is to be noted that even where a partner is recorded in the books of the partnership as holding his interest or part of his interest on trust, the denotation of trusteeship in the books does not render him any the less a partner: Muir v City of Glasgow Bank & Liquidators (1879) 4 App Cas 337. Conversely, a trust is not a separate entity, and a trustee does not have any additional or qualified legal personality: see Jacobs' Law of Trust in Australia (7th ed, 2006) [2102]; Elders Trustee & Executor Co Ltd v EG Reeves Pty Ltd [1987] FCA 332; (1987) 78 ALR 193, 253; Gebauer Nominees Pty Ltd v Cole [No 2] [2008] WASCA 41 [50].

293 In my view, on its proper construction, cl 6(1) of the Rules operates where a partner proposes to sell his interest, or a part of his interest, in the partnership to a third party on terms that the sale is conditional upon the third party becoming a partner in the firm styled 'Atwell Family Agency'. A partner is not, in my view, 'proposing to dispose of ... his units' within the meaning of cl 6(1) of the Rules if, under the proposed transaction, he is to remain a partner, and is merely carving out, in favour of a third party, the beneficial interest of his equitable chose in action, by an equitable assignment as discussed in Federal Commissioner of Taxation v Everett [1980] HCA 6; (1980) 143 CLR 440, 448 - 451 (FCT v Everett).

294 The following matters in my view support this conclusion. First, cl 6 in particular, and provisions of pt III of the Rules as a whole, refer in terms to 'units'. There is no mention of the acquisition or disposition of an 'interest', or a 'beneficial interest' in a unit. This provides some indication that the clause is not dealing with the creation of beneficial interests: see Hagan v Waterhouse (1991) 34 NSWLR 308, 388 - 389.

295 Secondly, cl 6 - cl 8 of the Rules operate on the basis that a 'sale price' will be 'fixed' by the vending partner, or by valuation, or will be the price offered by a third party. The scheme of these provisions suggest that the disposer is disposing of an interest in the partnership which, subject to cl 9, is intended to result in the third party becoming a partner unless the other partners exercise their rights under cl 7 - cl 8. It is, objectively, unlikely that the parties contemplated that a partner would sell his 'units' to a third party on the basis that the purchaser would acquire the vending partner's beneficial interest only. That would leave a partner, who had sold all his units, as a partner of the firm, with all the attendant consequences of continuing liability, and would leave the purchaser of the interest with an obligation to indemnify the vending partner, but with no say in the management or operation of the firm: FCT v Everett (448).

296 Thirdly, cl 9 is an integral aspect of the scheme effected by cl 6 - cl 8 of the Rules. There would be no occasion or necessity for a mere assignee, who took a beneficial interest only, either to sign the Rules, or to have their name entered into the books as a partner in accordance with cl 9.

297 Fourthly, cl 10 supports this construction. Clause 10 would have no application to the assignment of the beneficial interest in a partner's share in the partnership.

298 Fifthly, cls 6, 7 and 8 do not appear to address testamentary dispositions. They appear to address dispositions by a living partner or, for example, by the trustee of an estate of a former partner where the trustee has himself become a partner under cl 5(b). The appellants, correctly in my view, submitted that they 'accept that ... a legal personal representative of a deceased partner may hold under a Will for beneficiary not within r 5(c)' (appellants' submission, par 48). It would be a curious result to read pt III as, on the one hand, giving full rein to any disposition on testamentary trusts, but on the other, preclude the creation of any inter vivos trust over the units.

299 Finally, a share in a partnership is a species of equitable property, the enjoyment of which ordinarily includes the assignability of the beneficial interest in it. The right of the partners to carry on business without the intrusion of unwanted co-adventurers is not served by a curtailment or limitation of the proprietary rights of a partner in the manner suggested by the appellants. There would be no reason to curtail or limit the proprietary rights of a partner in the manner suggested by the appellants unless the language of the instrument clearly required that result. In my view, it does not.

300 Accordingly, in my view, ground 2 does not succeed.

301 There are other reasons why cl 6 of the Rules of the 1976 deed is not engaged in relation to the first, fourth, fifth and sixth transfers. As to the first transfer, Ada's interest in the partnership was vested in Keith, as trustee of the Hamersley Trust, by virtue of the disposition in Ada's will. A legatee of an interest in the partnership takes such interest by virtue of the disposition of the will, which becomes operative by the assent of the executor: George Attenborough & Son v Solomon [1912] UKHL 4; [1913] AC 76, 83; Ex parte Kenzler [1983] 2 Qd R 281, 287. Transmission of the interest to a legatee is not, generally, regarded as an assignment or transfer of the interest: Ex parte Kenzler (285 - 287); and Andco Nominees Pty Ltd v Lestato Pty Ltd (1995) 126 FLR 404, 421 ­ 422. In assenting to the bequest, Keith, as executor of Ada's will, was not 'proposing to dispose of ... his units' within the meaning of cl 6(1) of the Rules. The same reasoning applies to the fourth transfer. Hilda's units were vested in Keith as trustee for Hamersley Trust by virtue of Hilda's will. In relation to the fifth transfer, insofar as there was a transfer from Mr Frichot to Keith of 2,135 units, the transfer was permitted by cl 4 of the Rules of the partnership. Each was a partner at the time. The fact that Keith, upon acquiring the units, held them subject to the trusts of the Hamersley Trust did not render the disposition from Mr Frichot as a partner, to Keith as a partner, a disposition of units contrary to cl 6(1). The sixth transfer was also permitted. The transfer from Keith, to his son Leigh, was permitted under cl 5(c). The fact that Leigh then held the units on trust did not somehow result in Leigh not being a 'child' of Keith within the meaning of cl 5(c) of the Rules.

302 By ground 3, the appellants contend, in effect, that the judge erred in finding that the first and second named appellants were not partners prior to 9 November 1998. The judge found, in effect, that the 'parties' to the 1976 deed did not include the first and second appellants. That finding was made and explained by his Honour at [132] ­ [138]. It was plainly open. Accordingly, they were not partners at the commencement of the 1976 deed (see recital (3) and cl 1). Further, the judge's findings, at reasons [133] - [134], are to the effect, that they were not, in the period up to 9 November 1998, admitted to partnership in the manner provided in the 1976 deed (see cl 1 thereof), or were otherwise partners by agreement. Having regard to the matters referred to by the judge, that finding was also plainly open. Accordingly, the ultimate finding attacked in this ground of the appeal was open to his Honour and no error has been shown. I would dismiss ground 3.

303 Buss JA has set out the precise terms of ground 4. Ground 4 has particular relevance to the second and third impugned transfers, given my findings that cl 6 was not, in any event, engaged with respect to the first, fourth, fifth and sixth transfers.

304 As best I understood it, the appellants' arguments with respect to this ground comprised three essential steps. First, the appellants contend that where one partner (who I will call a 'disposing partner') disposes of his interest in the partnership without compliance with cl 6(1) of the Rules of the 1976 deed, an option, in effect, arises in favour of each of the other partners to acquire the disposing partner's interest in the partnership. It is not contended that cls 6 to 8 of the Rules operate from inception to create an equitable interest in the share of the disposing partner, but rather that those provisions create a right of pre-emption which, when the conditions for the exercise of the right have been satisfied, operate, in effect, as the grant of an option: Woodroffe v Box [1954] HCA 22; (1954) 92 CLR 245, 261. The option is said to give each of the other partners (to whom I will refer as 'optionee partners') an equitable (proprietary) interest in the disposing partner's share in the partnership. In that regard, the appellants also referred to Pritchard v Briggs [1980] Ch 338 and the observations of Templeman LJ (418 - 420) and Stephenson LJ (422 - 423) on rights of pre-emption being 'converted' into an option upon the fulfilment of the conditions attending the rights of pre-emption. Reference was made to Australian authorities which had considered Pritchard v Briggs, including Sahade v BP Australia Pty Ltd [2004] NSWSC 512 [43]. See also Beneficial Finance Corporation Ltd v Multiplex Constructions Pty Ltd (1995) 36 NSWLR 510, 522 - 532; Rasch Nominees Pty Ltd v Bartholomaeus [2012] SASC 70 [42] - [53].

305 The appellants' point is that if a court of equity would order the contract of purchase created by the exercise of an option to be specifically performed, then the option to purchase would itself create an equitable interest in the property, the extent of the equitable interest depending upon the terms of the option: see in this regard Ballas v Theophilos [No 2] [1957] HCA 90; (1957) 98 CLR 193, 208 (Williams J).

306 Secondly, the appellants contend that the interest of the other partners as 'optionees', and the interest created by any assignment or contract to assign the units to a third party, would be competing equitable interests, requiring a consideration of questions of priority. The appellants referred to cases where it was held that questions of knowledge and notice would be relevant to the determination of priority issues where the effect of the grant was that the optionee's interest arose simultaneously with the interest created in a purchaser contrary to the terms of the grant: Sahade v BP [46]; Sterns Trading Pty Ltd v Shteinman (1988) NSW ConvR 55-414, 57,791 - 792. The appellants observe that the judge, in the trial of the preliminary issues, noted that he did not deal with matters of that kind (reasons [42], [88]).

307 Thirdly, the appellants contend that 'none of the firms in which the impugned transfers occurred are at an end' (written submissions par 66). They contend, in effect, that an optionee partner may obtain an order, in equity, compelling a disposing partner to transfer his interest (or take such steps as are necessary to enable the optionee partner to acquire such interest) in the partnership of which he was a partner, even though that partnership's assets have been taken over by a successor partnership formed in consequence of the disposition of the disposing partner's share to the third party. The appellants sought to draw support for their contention by reference to Commissioner of State Taxation of the State of South Australia v Cyril Henschke Pty Ltd [2010] HCA 43; (2010) 242 CLR 508 [18] - [29]. The appellants nevertheless accepted, as I understood it, that where a partner retires by mutual agreement on terms that the remaining partners will continue in partnership and take on the assets and liabilities of the old firm, without a break in the continuity of the business, the dissolution of the firm effected by the retirement of the partner is in the nature of a 'technical dissolution' or a 'notional dissolution', and that the 'continuing' partners are, in point of law, operating a new partnership - in this regard see Commissioner v Henschke [11] - [12], [19], [24] - [29]; Rushton (Qld) Pty Ltd v Rushton (NSW) Pty Ltd [2002] QCA 210; (2003) 1 Qd R 320; Fazio v Fazio [65].

308 Assuming (without deciding) that an equitable interest in a disposing partner's share is created in accordance with the first step of the appellants' argument, the argument nevertheless breaks down, in my view, in the third step. In my view, the appellants' reliance upon Commissioner v Henschke in support of their proposition is misplaced.

309 In Commissioner v Henschke, the question was whether the instrument in question, a 'Retirement Deed', operated as a 'conveyance' within the meaning of s 60 of the South Australian stamp duties legislation. Under s 60, the word 'conveyance' was defined to include, in effect, an instrument 'by the operation of which' any equitable interest is 'vested in' any person (Commissioner v Henschke [17]). One partner, Mrs Henschke, retired from the partnership and received a payment of money in accordance with the terms of a Retirement Deed. The deed had two aspects to its operation. The first was, upon her acceptance of the payment, to discharge by accord and satisfaction, the former agreement by virtue of which Mrs Henschke had an interest in the dissolved partnership and her chose in action against the other partners. The second was that the assets previously committed to the dissolved partnership were to be held and applied for the purpose of the second partnership: Commissioner v Henschke [19], [28]. The court said that under the deed 'there were vested in the members of the second partnership the equitable choses in action representing their present partnership interests ... the Retirement Deed thus was a conveyance within the meaning of s 60 of the Act': Commissioner v Henschke [28].

310 An argument to the effect that the Retirement Deed simply left the assets of the former partnership under the control of the 'continuing' partners comprising the second partnership once the release of Mrs Henschke's interest was effected, and that the need for a 'conveyance' was accordingly obviated, was rejected. The interests of the 'continuing' partners in the former partnership were not the same as their interests in the second partnership, and the deed operated to vest in the continuing partners their equitable choses in action in the second partnership. The effect of the deed's operation with respect to the 'release' by Mrs Henschke was the enlargement of the interests held by the 'continuing' partners in the assets of the second partnership, to be applied by them in the conduct of the second partnership: Commissioner v Henschke [29].

311 Commissioner v Henschke is, relevantly for present purposes, authority for the proposition that where there is a binding agreement involving a 'technical dissolution' of the former partnership, with consideration having been given for the retiring partner's chose in action, the retiring partner's chose in action is discharged by accord and satisfaction: Commissioner v Henschke [19], [28]; Fazio v Fazio [65].

312 The appellants do not contend that the agreements by which disposing partners resigned from the partnership and successor partnerships were created, were not binding at law. Nor is it alleged that the optionee partners, or their agents, the committee members, were induced by fraud or misrepresentation to enter into the successor partnership agreements. The fact that the optionee partners, prior to the successor partnership agreements into which they entered (either directly or through the agency of the committee) had an equitable interest in the disposing partner's share is not, of itself, a basis upon which the successor partnership agreements could be avoided in equity at the suit of the optionee partners.

313 Accordingly, the partnership in which a disposing partner had an interest does not continue after the commencement of the successor partnership formed in consequence of the disposition of the disposing partner's share to the third party, and the disposing partner, whose interest has been discharged by accord and satisfaction, has no subsisting interest in the former partnership (or an interest in the successor partnership for that matter) which could now be assigned.

314 It follows that an order of the kind postulated by the appellants would be impossible to perform. Specific performance will not be ordered if performance is impossible. The learned authors of Meagher Gummow & Lehane's Equity: Doctrines & Remedies (4th ed, 2002) par 20-140 observed:

Equity will not specifically enforce what cannot be done: Ferguson v Wilson (1866) LR 2 Ch App 77. And it does not matter that the impossibility may be entirely due to default on the part of the defendant; if, for whatever reason, the defendant cannot possibly perform his obligation, specific performance will not be decreed against him: Seawell v Webster (1859) 29 LJ Ch 71 ... Equity 'never does a vain thing, or enforces a void or impossible contract. Men may divide the moon by imaginary lines, but equity will not enforce their contract': Hall v Vernon 34 SE 764 at 765 (1899) per Dent P.

315 I would accordingly dismiss ground 4 of the appeal.

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : ATWELL -v- ROBERTS [2013] WASCA 37 (S)

BETWEEN : MALCOLM WALTER ATWELL and IAN GEORGE ATWELL as Trustee of the Estate of WALTER CHARLES ATWELL on behalf of all partners in the Atwell Family Agency other than the respondents

LEIGH ROBERTS as Trustee of the Estate of KEITH GILBERT ROBERTS

LEIGH ROBERTS as Trustee of the Estate of HILDA DORCAS ROBERTS

LEIGH ROBERTS as Trustee of the Estate of ADA ETHEL ATWELL

JOHN CHARLES STACY as Trustee of the Estate of EDNA PHOEBE PATERSON

EVELYN DIANE BROADLEY as Trustee of the Estate of GLADYS JANET ADDISON BROADLEY

MAURICE EUGENE FRICHOT as Trustee of the Estate of DOROTHY MAY BECKETT

JONATHAN GRAHAM NICHOLLS as Trustee of the Estate of JOYCE CORONA NICHOLLS

Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA

Citation : MALCOLM WALTER ATWELL and IAN GEORGE ATWELL as trustees of the Estate of WALTER CHARLES ATWELL on behalf of all other partners in the Atwell Family Agency other than the first defendants -v- ROBERTS [No 3] [2009] WASC 96

Costs - Special costs order - Legal Profession Act 2008 (WA), s 280(2) - Inadequacy of the applicable costs determinations - Complexity and importance

Legal Profession Act 2008 (WA), s 275(1), s 280

Supreme Court (Court of Appeal) Rules 2005 (WA), r 5(1)

Supreme Court Act 1935 (WA), s 37(1)

First-named First Respondent : Mr M L Bennett & Mr M P Bruce

Second-named First Respondent : Mr M L Bennett & Mr M P Bruce

Third-named First Respondent : Mr M L Bennett & Mr M P Bruce

First-named Second Respondent : Mr M L Bennett & Mr M P Bruce

Second-named Second Respondent : Mr M L Bennett & Mr M P Bruce

Third-named Second Respondent : Mr M L Bennett & Mr M P Bruce

Fourth-named Second Respondent : Mr M L Bennett & Mr M P Bruce

Fifth-named Second Respondent : Mr M L Bennett & Mr M P Bruce

Sixth-named Second Respondent : Mr M L Bennett & Mr M P Bruce

Seventh-named Second Respondent : Mr M L Bennett & Mr M P Bruce

Eighth-named Second Respondent : Mr M L Bennett & Mr M P Bruce

Atwell v Roberts [2013] WASCA 37

Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66(S)

1 JUDGMENT OF THE COURT: On 15 February 2013, this court dismissed the appellants' appeal. See Atwell v Roberts [2013] WASCA 37.

2 The appeal raised issues as to the proper construction of a pre-emptive rights provision in a deed evidencing the terms and conditions of successive unit partnerships; whether various transfers of units in partnerships constituted pursuant to the deed were made in compliance with the provision; and, if any transfer did not comply with the provision, the effect of the non-compliance.

3 On 15 February 2013, this court made the following orders:

1. Appeal dismissed.
2. The appellants pay the first and second respondents' costs of the appeal to be taxed, including the first and second respondents' costs of each amendment to the appellants' case and the first and second respondents' answer and the first and second respondents' costs of the written submissions in answer to the Court's request for clarification dated 2 July 2012.
3. There be liberty to apply for any special costs order within 30 days.

4 Pursuant to Order 3, the first and respondents made application for a special costs order. They seek orders as follows:

1. The costs to be paid by the appellants to the first and second respondents pursuant to Order 2 of the orders made by this Honourable Court on 15 February 2013 be taxed without regard to the maximum limits (including hourly limits) prescribed by any relevant scale.
2. Pursuant to section 280(2) of the Legal Profession Act 2008 (WA), the limits (including hourly limits) on costs fixed for Item 23 of the Legal Practitioners (Supreme Court) (Contentious Business) Determination 2012 (WA) and any corresponding items of the Legal Practitioners (Supreme Court) (Contentious Business) Determination (WA) 2008 and 2010 be removed for the purposes of any taxation referred to in Order 1 herein and Order 2 of the orders made by this Honourable Court on 15 February 2013.
3. Pursuant to Order 69 Rule 3 of the Rules of the Supreme Court 1971 (WA), the appellants pay the first and second respondents' costs of the running appeal hearing transcript and the transcript of each of the directions hearings held on 27 August 2010 and 7 December 2011.
4. The appellants pay the first and second respondents' costs of the first and second respondents' second Counsel fee on hearing (including preparation) to be taxed on the basis set out herein.
5. The appellants pay the first and second respondents' costs of this application to be taxed on the basis set out herein.

6 The first and second respondents have filed an affidavit sworn 14 March 2013 by Amy Joanne Rumble, a legal practitioner employed by their solicitors, in support of the application. The appellants have filed an affidavit sworn 2 April 2013 by Christopher Stephen Williams, a partner of the firm of solicitors acting for them, in opposition to the application. The parties have also filed and served written submissions.

7 Section 37(1) of the Supreme Court Act 1935 (WA) provides:

Subject to the provisions of this Act and to the rules of court and to the express provisions of the Magistrates Court (Civil Proceedings) Act 2004, or any other Act, the costs of and incidental to all proceedings in the Supreme Court, including the administration of estates and trusts, shall be in the discretion of the Court or judge, and the Court or judge shall have full power to determine by whom or out of what estate, fund, or property, and to what extent such costs are to be paid.

8 Section 37(1) confers a broad discretion on the court in relation to costs with full power to determine, relevantly, to what extent such costs are to be paid. This discretionary power enables the court to make orders with respect to the allowance of costs generally. See also O 66 r 1(1) of the Rules of the Supreme Court 1971 (WA), which should be read together with s 37(1).

9 By O 66 r 10(2) of the Rules of the Supreme Court, relevantly, in the case of an appeal, the costs of the proceedings giving rise to the appeal, as well as the costs of the appeal and of the proceedings connected with it, may be dealt with by the court hearing the appeal.

10 Rule 5(1) of the Supreme Court (Court of Appeal) Rules 2005 (WA) provides that the Court of Appeal Rules must be read with the Rules of the Supreme Court.

11 Section 280(1) of the Legal Profession Act 2008 (WA) (the Act) provides, relevantly, that the taxation of bills of law practices and any other aspect of the costs charged by law practices is regulated by an applicable costs determination.

12 Section 275(1) of the Act empowers the Legal Costs Committee (established under s 310) to make legal costs determinations regulating the costs that may be charged by law practices in respect of, relevantly, contentious business before the Supreme Court.

(2) Despite subsection (1), if a court or judicial officer is of the opinion that the amount of costs allowable in respect of a matter under a costs determination is inadequate because of the unusual difficulty, complexity or importance of the matter, the court or officer may do all or any of the following -

(a) order the payment of costs above those fixed by the determination;

(b) fix higher limits of costs than those fixed in the determination;

(c) remove limits on costs fixed in the determination;

(d) make any order or give any direction for the purposes of enabling costs above those in the determination to be ordered or assessed.

14 By s 280(3) of the Act, nothing in s 280(1) is to be construed as limiting the power of a court, a judicial officer or a taxing officer of a court to determine in any particular case before that court or judicial officer the amount of costs allowed.

15 In Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66(S) [3], Martin CJ, McLure P and Buss JA said in relation to s 280(2):

The section requires that before making an order pursuant to its terms the court must form an opinion which has two components. First, the court must determine that the amount of costs allowable in respect of a matter under a legal costs determination is inadequate. Second, the court must conclude that the inadequacy arises because of the 'unusual difficulty, complexity or importance of the matter' (Heartlink Ltd v Jones as Liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254 (S) [11]). Having heard the matter and being familiar with the way in which the case was conducted and the issues which were litigated, the court is in a position to form the opinions required under the section as matters of impression rather than science or mathematics: EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2008] WASC 275 (S) [7]; Verdell Pty Ltd v F & G Nominees Pty Ltd [2002] WASC 58 (S2) [14].

16 As noted in Cape Lambert, the usual manner of establishing that the amount of costs allowable under an applicable costs determination is inadequate, for the purposes of s 280(2), is to demonstrate that there is 'a fairly arguable case that the bill to be presented to the taxing officer may tax at an amount which is greater than the limit imposed by that determination' [4].

17 Also, as noted in Cape Lambert, the word 'unusual' in s 280(2) of the Act qualifies only the term 'difficulty' and not the terms 'complexity' or 'importance' [5].

18 On or about 27 August 2009, the appellants filed their appeal notice. They challenged the judgment and orders made by the primary judge on 10 August 2009, after a five-day trial of numerous separate issues agreed upon by the parties.

19 The work undertaken by the first and second respondents' legal representatives in relation to the appeal is covered by the Legal Practitioners (Supreme Court) (Contentious Business) Determination 2008 (the 2008 Scale), the Legal Practitioners (Supreme Court) (Contentious Business) Determination 2010 (the 2010 Scale) and the Legal Practitioners (Supreme Court) (Contentious Business) Determination 2012 (the 2012 Scale).

20 Ms Rumble's affidavit includes particulars of the number of hours spent by her (a junior practitioner), Mr Bruce (a senior practitioner who carried out work as a solicitor and who also appeared as second counsel at the hearing of the appeal) and Mr Bennett (who appeared as counsel at the trial and as leading counsel at the hearing of the appeal).

21 Ms Rumble deposes that the hourly rates charged by Mr Bennett, Mr Bruce, herself and articled clerks and paralegals engaged in working on the appeal exceeded, at all times, the limits imposed by each relevant scale. She also deposes that, in her belief, an award of costs within the limits imposed by the relevant scales (including the limits on hourly rates) would be inadequate to compensate the first and second respondents for the costs of the work properly and necessarily performed by their legal representatives 'due to the unusual difficulty, complexity and importance of the matter' [79].

22 Ms Rumble does not, however, specify either the aggregate amount charged by the first and second respondents' legal representatives for the work undertaken in the appeal or the particular amounts they have charged for each discrete sub-item in the item applicable to appeals to this court from a single judge under each relevant scale.

23 Where a party makes an application for a special costs order pursuant to s 280(2) of the Act, the affidavit filed in support of the application should annex a draft bill of costs that specifies the amounts proposed to be claimed under each discrete sub-item and the total amount proposed to be claimed. Nevertheless, despite this omission in the present case, it is readily apparent, on the basis of the number of hours apparently worked and the maximum hourly rates permitted under the relevant scales, that the total amount which the first and second respondents' legal representatives have charged is highly likely substantially to have exceeded the total amount allowable under the relevant scales.

24 We are satisfied that there is a fairly arguable case that the bill to be presented for taxation by the first and second respondents may tax at an amount which is greater than the limits applicable under the relevant scales, and that the amounts allowable under the relevant determinations are inadequate within s 280(2) of the Act.

25 In the appeal, the appellants relied on four grounds of appeal. The grounds alleged that the primary judge had made various errors of law and fact in determining the numerous separate issues the subject of the trial. The alleged errors of fact and law related to events which occurred between the 1970s and 2003. The appeal involved factual complexity arising from the significant number of partnerships that were formed and dissolved during the period in question. There were issues of legal complexity arising from the necessity to construe various provisions of the partnership deed and rules (some of which were lacking in clarity) in the context of the Partnership Act 1895 (WA) and pronouncements on the law of partnership in the cases.

26 The resolution of the issues of fact and law raised in the appeal were of substantial importance to the members of the current partnership and to other persons and entities (including members of earlier partnerships) who were joined in the proceedings. These issues had the potential significantly to impact upon the efficacy of many transactions between members of earlier partnerships and on the conduct of future dealings between members of the current partnership.

27 In our opinion, the matters in the appeal are properly to be characterised as being of complexity and importance within the meaning of s 280(2) of the Act.

28 In the circumstances, it is appropriate to make special costs orders nos 1 and 2, as sought by the first and second respondents.

29 The first and second respondents obtained transcripts of directions hearings held before Pullin JA on 27 August 2010 and 7 December 2011. These transcripts comprised 13 and eight printed pages respectively.

30 The first and second respondents also obtained a running transcript of the appeal hearing on 15 June 2012. The transcript comprised 130 printed pages.

31 We are persuaded that it was reasonably necessary, for the proper conduct of the appeal, that the first and second respondents obtain the transcripts of the directions hearings on 27 August 2010 and 7 December 2011, but not the transcript of the hearing on 15 June 2012. The appeal was listed for one day only.

32 We would make special costs order no 3, as sought by the first and second respondents, to the extent we have indicated.

33 As we have mentioned, Mr Bruce appeared as second counsel for the first and second respondents at the hearing of the appeal. He had the conduct of the matter, as a solicitor, in the primary proceedings since May 2008 and in the appeal since August 2009. Ms Rumble attended at the hearing of the appeal as instructing solicitor.

34 Also, as we have mentioned, Mr Bennett appeared as counsel at the trial and as leading counsel at the hearing of the appeal.

35 We are persuaded that the nature and extent of the factual and legal complexity in the appeal made it reasonably necessary for the first and second respondents to be represented at the hearing of the appeal by leading counsel and second counsel. We note that the appellants were also represented by leading counsel and second counsel.

36 It is appropriate to make special costs order no 4, as sought by the first and second respondents.

37 As we have mentioned, the appellants opposed the first and second respondents' application for a special costs order.

38 The first and second respondents have succeeded, to a very significant extent, in their application.

39 It is therefore appropriate to make special costs order no 5, as sought by the first and second respondents.