Bayley v Sivewright; Sivewright v Sivewright

The facts

1. With the exception of the question of the source of funds for the payment of the Insurance Policy, the primary facts relevant to the issues as finally presented were neither in dispute nor particularly extensive. The Court's findings are set out in what follows.
2. Stephen worked full-time as a police officer and operated the Partnership with his brother Ian over two properties in the Lismore area. Ian, who was employed at the local meatworks, left what might be called the day to day paperwork and administration of the Partnership to Stephen.
3. The two brothers had originally been in a farming partnership with another brother, Jack. In 2013, they wound up that partnership and bought out Jack's share. They had to borrow money to do so. The two brothers continued to be in business together through the Partnership, which came into existence in 2013 and appears to have always been in significant debt. There was no partnership deed or other document evidencing the terms of the Partnership.
4. On 9 September 2013, Stephen and Ian met with Mr Brett Michael of Charter Financial Planning Ltd. On 29 October 2013, Mr Michael wrote one letter addressed to Stephen and Ian together. That letter included (emphases added): When we met, you told us: • Your main concern is the high level of farm associated debt that your partnership currently owes and you want life insurance on both your lives so that in the event of an untimely death of either, funds are available to extinguish all debt and payout the estate issues also. With these goals in mind, we went through a process of discussions, education, challenges and prioritisation to arrive at your final goals. The outcome of these discussions are summarised below: • Making sure you had enough life insurance to cover your debts was priority for you both and also having funds to buy out the estate inheritance to leave the surviving partner debt free and with full ownership of the farm. To this end I recommend life insurance on both lives for sum insured $2M with cross ownership of the policies.
5. Enclosed with the letter was a document entitled "Your insurance plan", addressed to both Stephen and Ian and dated 29 October 2013 (the "Plan"). Because of its importance to the resolution of this case, the Plan is attached as Annexure A to these reasons. I have marked certain sections with an asterisk for emphasis.
6. AMP subsequently issued two life insurance policies, each with its own unique policy number. One was in the name of Ian insuring Stephen's life, and the other was in the name of Stephen insuring Ian's life. There is no doubt that the policies commenced on 11 November 2013. However, there are in evidence two schedules for the Insurance Policy: one issued on 11 November 2013 for $2,431,012.50, and one issued on 12 November 2013 for $2,000,000. Ian received the former amount. What is important for present purposes is not that two schedules were issued, but that both expressly stated that the owner was Ian and the person insured was Stephen, with no nominated beneficiaries.
7. Stephen and Ian operated a joint bank account (the "Joint Account"). With the exception of a transaction listing for the last two weeks of the operation of the Partnership (including the date of Stephen's death), no bank records of the operation of the Joint Account were in evidence. Nor did any party tender formal accounts for the Partnership, although I infer that such accounts were prepared. I infer this first from the fact that one of the witnesses, Ms Jenny Haines, described herself as the accountant for the Partnership, and second from Ian's evidence referred to in the next paragraph. Ms Haines was not required for cross-examination.
8. Ian described how the Joint Account was operated in his affidavit of 3 November 2019 at [4]-[6]: "4. … We had a single joint account. All of our income, whether from the farming partnership activities, or from my own employment outside of the partnership at Casino Meatworks, or Stephen's income outside of the partnership from his employment with NSW Police, were paid into that single bank account. 5. In turn, all of our expenses, whether partnership expenses relating to the farming operations, or our individual personal expenses, were paid out of that single bank account. 6. At the end of the financial year we would provide all of the account information to our accountant, Ms Haines, who would then prepare accounts, allocating our respective income to each of us (including our share of farm income if any) any allocating our expenses be they allowable partnership expenses, or our personal expenses."
9. Leon also gave evidence in cross-examination about how Stephen used the Joint Account (T31:10-30): "Q. Was it your understanding that Stephen and Ian had a joint bank account? A. That's correct. Q. Was it your understanding that Stephen's wages from the police force were paid into that bank account? A. Correct. Q. Was that Stephen's only bank account that you're aware of? A. I am aware of him having credit cards, if you mean that as well. Q. But in terms of a deposit account - well, I withdraw that. He transferred money from that account that you were talking about to you from time to time; is that right? A. He would of - would repay loans from that account, correct. Q. You would pay money to him into that account. That's correct, isn't it? A. I would loan him money, correct, and I would also deposit my weekly rent into that account. Q. It was your understanding that this joint account that he had with Ian was what he used for his everyday transactions; is that right? A. That was one of the accounts as well as his credit cards."
10. At [6] of her affidavit of 1 November 2019, Ms Haines said: "To my knowledge, the partnership did not operate a partnership bank account nor did either Ian or Stephen operate individual accounts. To my knowledge Ian and Stephen operated a single joint bank account from which partnership and personal income was deposited and from which partnership and personal expenses were drawn."
11. The premiums for each of the life insurance policies were paid out of the Joint Account.
12. At [11] of his affidavit of 5 July 2019, Ian said: "The policy premiums were paid out of our partnership bank account as a business expense of the partnership."
13. Ms Haines observed at [2]-[5] of her affidavit of 1 November 2019 that: "2 I am aware that Ian was the owner of an AMP Life Insurance Policy over the life of Stephen, and that Stephen was the owner of an AMP Life Insurance Policy over the life of Ian. 3 In accordance with ATO guidelines, income protection insurance is deductible, however life insurance is not an allowance deductible expense. 4 Accordingly, at no time were the premiums paid by either of Ian or Stephen considered as expenses that could be deducted from the gross income generated by the partnership. 5 Put otherwise, from an accounting perspective, premiums in respect to the policy owned by Ian were paid from his funds, and premiums in respect to the policy owned by Stephen were paid from Stephen's funds."
14. In [29] of his affidavit of 31 January 2021, Ian said: "I have previously said that the insurance premiums came from our partnership income. I have since been advised by Ms Haines that was not the case. Ms Haines has said to me that the life insurance premiums are not a deductible business expense and therefore premiums I paid for my policy were accounted for as my personal expenditure, as were the premiums paid by Stephen for his policy."
15. I note the last sentence just quoted was not objected to and again that Ms Haines was not required for cross-examination. Furthermore, the parties were in agreement that, without disrespect to Ian, he did not have personal knowledge or understanding of the Partnership accounting.
16. Stephen made the Will on 12 May 2014, appointing Ian as executor and trustee and leaving his entire estate to Sarah.
17. On 10 April 2018, Stephen wrote to his solicitor, Mr Hunter. This is the Alleged Codicil that Leon sought to propound, but which was subsequently accepted as not being an issue (see [8(2)] above). The letter said (emphases added): "Dear David, Please find additional instructions in relation to my Will. In the event of my death I would like the following to happen. Ian and I currently have Life Insurance for each other. I have attached a copy of the policies for your information. The life insurance policy that covers me is in excess of $2.4 million dollars. Ever thought (sic) the life insurance is in Ian name (sic), I would like it to be split in the following ways: $1 million to pay out the Farm Loan/Home Loan if needed and any credits cards (sic) in my name. $500,000 is to be paid to Leon Thomas Bayley. $700,000 is to be paid to Sarah Sivewright $200,000 is to be paid to Ian Sivewright. Any money left is to be used to buy cattle to restock Casino farm. I have advised all the parties of my wishes for your information and hopefully Ian will agree to this. I would also like to transfer the ownership of Diddine Brahman Stud over to Sarah Sivewright. I have advised the Brahman Society to change ownership over to Sarah Sivewright on the 10th of April 2018. Regards Stephen William Sivewright 10th April 2018"
18. Stephen wrote letters dated 11 April 2018 to Leon, Sarah and Ian. As one might expect, the letter to Leon was deeply personal. However, it contains nothing relevant to these proceedings.
19. The letter to Sarah said (emphases added): "Dear Sarah. I know that this is going to be hard for you. I have always loved you and thought as you as being my daughter and not my niece. So where does this leave us all now. It is going to be a very hard time for you all now, but you need to enjoy the rest of your life and move forward. As you know, I have always thought of you as being my own and as such you will now be set for life. My share of the properties that I owned have been left to you. You don't have to worry, no money is owed on the farm in Casino as my Life Insurance will now take care of that. The life insurance was in excess of $2.4 million dollars. Ever thought (sic) the life insurance is in Ian name (sic) I would like it to be split in the following ways: $1 million to pay out the Farm Loan / Home loan is needed and any credits cards in my name. $500,000 is to be paid to Leon. $700,000 is to be paid to Sarah $200,000 is to be paid to Ian Any money left is to be used to buy cattle to restock Casino farm as we know it is running low. Also Dad will receive money from the Police Association. This money is to be used to paid for my funeral and the rest is to be left to Mum and Dad. They can do as they wish with any of that money that is left over. You may think that Leon is not getting much from me. Well he isn't getting any of the farms but I think he would want you to have them. Leon will be receiving my First State Super from work. You may wish to explore with Ian later in life and see if he is happy to transfer his half of the property in Lismore to you and you transfer your half of the property in Casino to him. That way you will be the sole owner of the property in Lismore and he will be the sole owner of the property in Casino. I have also advised ABBA to transfer the stud over to your name. You are now the principal owner of Diddine Brahman Stud. Please don't give up and I love you. Your loving uncle Stephen William Sivewright 11th April 2018"
20. The letter to Ian said (emphases added): "Dear Ian. I know that this is going to be hard for everyone but being in the nature of the job I was doing and it was taking its toll on me. So where does this leave us all now. It is going to be a very hard time for you all now, but you need to enjoy the rest of your life and move forward. As you know, I have always thought of Sarah as being my own and as such you both now will be set for life. My share of the properties that I owned have been left to Sarah. You don't have to worry, no money will be owed on the farm in Casino as my Life Insurance will now take care of that. The life Insurance was in excess of $2.4 million dollars. Ever thought (sic) the life insurance is in your name, I would like it to be split in the following ways: $1 million to pay out the Farm Loan/Home loan is needed and any credits cards in my name. $500,000 is to be paid to Leon. $700,000 is to be paid to Sarah $200,000 is to be paid to Ian Any money left is to be used to buy cattle to restock Casino farm as we know it is running low. Also Dad will receive money from the Police Association. This money is to be used to paid for my funeral and the rest is to be left to Mum and Dad. They can do as they wish with any of that money that is left over. You may think that Leon is not getting much from me. Well he isn't getting any of the farms but I think he would want Sarah to have them. Leon will be receiving my First State Super from work. You may wish to explore with Sarah later in life and see if she is happy to transfer her half of the property in Casino to you and you transfer your half of the property in Lismore to her. That way you will be the sole owner of the property in Casino and she will be the sole owner of the property in Lismore. I have also advised ABBA to transfer the stud over to Sarah. Sarah is now the principal owner of Diddine Brahman Stud. Please don't give up and enjoy your life. Stephen William Sivewright 11th April 2018"
21. Stephen took his own life that same day.
22. Ian received $2,431,156.80 from AMP pursuant to the Insurance Policy.
23. Probate of the Will was granted to Ian on 22 August 2018.

Legal principles

1. There was no dispute between the parties about the relevant legal principles.
2. The Partnership Act 1892 (NSW) (the "Act") provides: "19. Variation by consent of terms of partnership The mutual rights and duties of partners, whether ascertained by agreement or defined by this Act, may be varied by the consent of all the partners, and such consent may be either expressed or inferred from a course of dealing. 20. Partnership property of firms other than incorporated limited partnerships (1) All property, and rights and interests in property, originally brought into the partnership stock or acquired, whether by purchase or otherwise, on account of the firm, or for the purposes and in the course of the partnership business, are called in this Act partnership property, and must be held and applied by the partners exclusively for the purposes of the partnership, and in accordance with the partnership agreement. … 21. Property bought with partnership money Unless the contrary intention appears, property bought with money belonging to the firm is deemed to have been bought on account of the firm. … 33. Dissolution by bankruptcy, death, or charge (1) Subject to any agreement between the partners, every partnership is dissolved as regards all the partners by the death or bankruptcy of any partner. … 39. Rights of partners to application of partnership property On the dissolution of a partnership every partner is entitled, as against the other partners in the firm, and all persons claiming through them in respect of their interests as partners, to have the property of the partnership applied in payment of the debts and liabilities of the firm, and to have the surplus assets after such payment 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 …"
3. In determining whether an asset in one partner's name is held as partnership property, the High Court in Carter Bros v Renouf (1962) 111 CLR 140 at 163 said that the relevant question is: "… whether or not the acquisition was in fact an acquisition on account of the firm or for the purposes and in the course of the partnership business. In most cases the answer depends upon the proper inference to be drawn from the manner and circumstances of the acquisition. A common case is that in which property is bought with partnership money. The fact that it is so bought is of course not conclusive. The partners may have agreed to withdraw the money from the partnership and employ it in a separate joint investment, as happened, according to the findings, in Butler v Madden (1941) 41 SR (NSW) 245; 58 WN 187; or they may have agreed to the one partner's applying it for his own purposes either as a loan or a gift from the partnership or on account of his share of profits; and in such a case the property bought would not be partnership property. But where there is no proof that the partners had any common intention inconsistent with that which the unexplained employment of partnership moneys suggests, the conclusion must be that the purchase was on account of the firm (see s. 24), and that therefore the purchasing partner is a trustee of the property for the firm: Lindley on Partnership 12th ed. (1962) p. 361; Underhill on Trusts 11th ed. (1959) p. 216."
4. The need to examine the circumstances surrounding the asset's purchase was also explained by Gleeson JA (Meagher and Barrett JJA agreeing) in Sze Tu v Lowe (2014) 89 NSWLR 317; [2014] NSWCA 462 at [131]-[134]: "131 In Butler v Madden (1941) 41 SR (NSW) 245, Nicholas CJ in Eq referred to ss 20 and 21 of the Partnership Act and the Bank of England case when stating that there is a "strong presumption" that property bought with money of the partnership is partnership property, adding: But it is also established that partners may agree among themselves that an asset however acquired may descend according to the terms of their agreement and not as a partnership asset. 132 This is the principle now reflected in the opening words of s 21: "Unless the contrary intention appears". The relevant intention is that of the partners; and it is to be ascertained by examining the whole of the circumstances pertaining to the outlay of partnership funds in the purchase of property. The question is whether the evidence establishes an intention of the partners that the acquisition should be, in one of the ways to which Turner LJ referred (or otherwise), an acquisition not for the account of the partnership. If such an intention of the partners is not established, the statutory presumption operates. 133 Evidence of events at the time of purchase may be sparse. Resort to records such as partnership accounts may then provide an answer. In Cameron v Murdoch (1986) 63 ALR 575; 60 ALJR 280 (PC), the Court was required to decide some 20 years after the event whether a house purchased with partnership funds but in the name of one partner (who then occupied it) was partnership property. The decision that it was not was based on entries in the accounts for the year of purchase showing a deduction from the relevant partner's capital account of a sum described as "on account of purchase of house L6,574". This, said the Privy Council, was evidence from which the judge was entitled to draw the inference that the house had been purchased by the partner for his own account and not for the account of the partnership. He had, in effect, withdrawn the purchase price from the partnership for his own use; and the accounts, which recorded the consensus of the partners, reflected that withdrawal. 134 In Walker v Melham [2007] NSWSC 264, a combination of absence of reference to purchased land in the partnership accounts and oral evidence about application of funds produced a finding that the s 21 presumption had been displaced by a contrary intention or agreement of the partners. The fact that property was not recorded in partnership accounts was also influential in Harvey v Harvey [1970] HCA 11; 120 CLR 529 where the question was whether land on which the partnership business was conducted formed part of the partnership property."
5. In Hungerford (by his tutor Ahadizadeh) v Richardson and Ors [2017] NSWSC 297, Lindsay J said at [58]-[61]: "58 In an inquiry into the ownership of property used by a partnership, little regard is paid to legal title; the questions to be determined generally are: (a) whether the original owner retains both the legal and beneficial interest in the property or whether the title holder has, expressly or by implication, transferred the beneficial interest in favour of the partners collectively; and/or (b) whether the property was acquired using resources of the partnership. As an unincorporated partnership of several persons cannot hold property in its own name because it is not a distinct legal entity, some person or persons must hold title for the benefit of the partners. Partnership law is primarily concerned with those beneficial interests. Equity modifies the common law not by affecting its procedures but by imposing obligations upon the persons, who, originally or by transfer, are possessed of legal title to the property. So we are instructed by KL Fletcher, The law of partnership in Australia (9th ed, Law Book Co, 2007) chapter 5, especially pages 141-142 and 147. 59 As Lord Eldon put it in Crawshay v Collins (1808) 15 Ves. Jun. 218 at 226; 33 ER 736 at 740: "The obligation implied among partners, is, that they use the joint property for the benefit of all, whose property it is." 60 The classic work, Lindley on Partnership, also instructs us that "[whatever] at the commencement of a partnership is thrown into the common stock, and whatever has from time to time during the continuance of the partnership been added thereto or obtained by means thereof, whether directly, by purchase or circuitously by employment in trade, belongs to the firm, unless the contrary can be shown": RI Banks, Lindley and Banks on Partnership (19th ed, Thomson Reuters, 2010; second cumulative supplement, 2013), [18-06]. 61 The same text, citing Barber v Rasco International Limited [2012] EWHC 269 at [90]-[91], is authority for the proposition that "where the partnership business is run through a company owned by one of the partners, any contract entered into by the company for the purposes and in the course of the business will be partnership property"."
6. Lindley and Banks on Partnership (Sweet & Maxwell, 20th ed, 2017) states at [18-03]-[18-04] that: "18-03 … it is up to the partners to agree between themselves what assets are to be treated as partnership property. In the absence of an express agreement, the relevant factors will generally be: (1) the circumstances of the acquisition, with particular reference to the source from which it was financed, (2) the purpose of the acquisition, and (3) the manner in which the asset has subsequently been dealt with. The importance of these factors, which are illustrated in many of the earlier cases, is firmly established by [the equivalent of sections 20 and 21 of the Partnership Act 1892 NSW] … 18-04 Although these statutory rules will assist in determining what is and what is not partnership property when the intentions of the partners are not readily apparent, they cannot be applied in the face of a contrary agreement, whether express or implied."

Was the insurance policy an asset of the partnership? - Parties' submissions

1. The parties accepted that the Court would have to infer the intention of Stephen and Ian from the surrounding facts, including Mr Michael's letter, the Plan, Ian's affidavit and oral evidence, and the letters sent by Stephen before his death.

Plaintiffs' submissions

1. Counsel for Leon and Sarah both contended that the Insurance Policy was an asset of the Partnership under ss 20 and 21 of the Act, and drew attention to the following factors in support of that view.
2. In the first instance, they submitted that the Insurance Policy was bought with Partnership money. The plaintiffs relied on the evidence set out at [18], [19] and [22] above that Stephen and Ian used a joint bank account, into which they each deposited their wages and any Partnership income, and out of which the Insurance Policy premiums were paid. The plaintiffs drew particular attention to Ian's statement that "the policy premiums were paid out of our partnership bank account as a business expense of the partnership" (see [22] above).
3. The plaintiffs acknowledged Ms Haines' evidence at [23] that Stephen and Ian each paid for their policies personally. The plaintiffs contended that the test of tax deductibility which formed the basis of Ms Haines' evidence did not bear on the beneficial ownership of the policy.
4. Further, the plaintiffs submitted that there was a common intention between Stephen and Ian that the Insurance Policy should be Partnership property, and that the Insurance Policy was bought for Partnership purposes and in the course of Partnership business. The plaintiffs relied on Mr Michael's letter at [14] above and Ian's testimony which was said to affirm this same purpose of the Insurance Policy. The plaintiffs highlighted Ian's statement in cross-examination that the insurance was to "protect our business that we had in farming" (T66:47-48). The plaintiffs also relied on Stephen's letters expressing his wishes as to the use of insurance proceeds as an indication that Stephen understood that he had an interest in those funds.
5. Mr Hill for Leon also contended that Ian's acceptance in cross-examination that he would pay the Partnership's debts with the Insurance Policy proceeds (extracted below at [76]) constituted an admission that the whole of the proceeds are Partnership property.
6. Mr Liebhold for Sarah advanced three further arguments.
7. First, he submitted that the Court could apply, by analogy, the decision of the House of Lords in Foskett v McKeown [2001] 1 AC 102 ("Foskett") that trust funds misappropriated and used, through a mixed fund, to pay the premiums on a life policy could be traced into the death benefit paid on that policy.
8. Second, Mr Liebhold contended that Stephen and Ian contracted to vary the operation of s 39 of the Act (as permitted under s 19 of the Act) such that the proceeds of the Insurance Policy would be used first to discharge all Partnership liabilities and then either to purchase the Estate's interest in the Partnership or to be divided evenly between the surviving partner and the Estate.
9. Mr Liebhold submitted that the insurance advice from Mr Michael on 29 October 2013 constituted the offer, the applications in response to the advice constituted acceptance and the premiums the consideration. Mr Liebhold submitted that Stephen and Ian's intention to create legal relations was clear.
10. Third, it was submitted that the actions and intentions of Stephen and Ian in relation to the acquisition and retention of the life insurance policies gave rise to a constructive trust, under which each held an insurance policy over the life of the other on trust and under fiduciary duties to apply the proceeds of the policy in accordance with their common intention.

Defendant's submissions

1. It was contended for Ian that the Insurance Policy was owned legally and beneficially by him alone. Mr Lawrence advanced four submissions in support of this contention.
2. First, this outcome is consistent with the natural reading of the Plan and the policy documents.
3. Second, for the Partnership to have a beneficial interest in the proceeds of the Insurance Policy would, as a matter of mathematics, work against the parties' intention set out in Mr Michael's letter at [14] above - namely, to allow the surviving partner to repay the Partnership's debts and purchase the Estate's half-interest in the partnership.
4. Third, Stephen acknowledged in the letters he wrote just before his death that the insurance proceeds would be paid to the policy owner, Ian, who was also beneficially entitled to it, and that any departure from that arrangement would require Ian's agreement. Mr Lawrence emphasised the following points in Stephen's letters (set out at [27], [29] and [30] above): To Mr Hunter: "I have advised all the parties of my wishes for your information and hopefully Ian will agree to this." To Ian: "Ever thought (sic) the life insurance is in your name…" To Sarah: "Ever thought (sic) the life insurance is in Ian name (sic)…" and "…no money is owed on the farm in Casino as my Life insurance will now take care of that."
5. The parties accepted that 'ever thought' was a typographical error, intended to read 'even though'.
6. Fourth, each policy was paid for by the relevant partner personally, and not with Partnership funds. The evidence in support of this finding was said to be Ms Haines' evidence at [20] and [23] above and Leon's testimony at [19] and [23] above.

Was the Insurance Policy an asset of the Partnership? - Consideration

1. For the reasons which follow, the Court accepts Ian's submissions and finds that the Insurance Policy and its proceeds are his, legally and beneficially.
2. As I have already recorded, the relevant evidence - which the parties accepted the Court would have to consider as a whole - was not extensive. However, four critical factual matters are clear. In what follows I will refer only to the Insurance Policy because that is what is relevant. However, for the avoidance of doubt, the Court's findings and conclusions apply mutatis mutandis to the corresponding insurance policy which was in Stephen's name over the life of Ian.
3. First, insofar as both Stephen and Ian's contemporaneous intention is concerned, the best objective evidence is the Plan. The Court finds that they intended to, and did, give effect to the arrangements recommended in the Plan. Those arrangements were that Ian would personally own an insurance policy over Stephen's life, of an amount sufficient, upon dissolution of the Partnership by Stephen's death, to pay out the Partnership's debts and leave Ian in a position to buy the Estate's share of the Partnership. For example, the Plan includes (my emphasis): "we recommend your AMP insurance be cross-owned by each partner personally" and "this ensures that any payments received from the policy will be paid to the surviving partner directly." I have marked the relevant sections of the Plan in Annexure A.
4. The documents for the Insurance Policy (see [16] above) are consistent with the Plan in that they show Ian as the owner and Stephen as the life insured. That is prima facie evidence of the Insurance Policy ownership, which the plaintiffs bore the onus to displace.
5. One way the plaintiffs might have displaced this evidence would have been to demonstrate that the Insurance Policy was paid for with Partnership funds. Their failure to do so is the second reason for the Court finding in Ian's favour. The Court approaches this critical factual matter in two ways.
6. First, Leon and Sarah have failed to prove that Partnership funds were used to pay for the Insurance Policy. This is both because they have been unable to adduce persuasive evidence to that effect and because of the weight of the evidence to the contrary.
7. The only positive evidence to which they pointed was Ian's evidence of the premium being a business expense of the Partnership. However, Ian withdrew that evidence (see [24] above) and it was not contested that he was unlikely to have understood how the financial side of the Partnership operated. I accordingly disregard Ian's initial evidence and accept his deference to Ms Haines' knowledge.
8. Second, the contrary evidence enables the Court to find, as it does, that the premiums for the Insurance Policy were paid by Ian personally. While the accounts of the Partnership were not in evidence, the Court accepts Ms Haines' unchallenged evidence (see [20] and [23] above) as evidence that the Insurance Policy was treated as Ian's personally, with the premiums being allocated to his personal expenses and not to those of the Partnership. That finding is consistent with, and corroborated by, the Plan and the Court's finding in [59] and [60] above.
9. Third, the Court finds that Stephen well understood that the Insurance Policy and its proceeds were Ian's. This finding is based on two matters: 1. Stephen's own words (which I have emphasised in the letters written shortly before his death set out at [27] to [30] above) acknowledge that the Insurance Policy is in Ian's name, and that what Stephen "would like" to happen to the proceeds after payment of the Partnership's debts required Ian's agreement; and 2. Stephen's wishes represent a clear departure from his and Ian's intentions, referred to in the Plan, that there be funds left from the insurance proceeds after payment of the Partnership's debts to enable Ian to buy the Estate's share of the Partnership. Acting on the wishes expressed in Stephen's final letters would have given Ian $200,000, which on no view would have been sufficient to buy the Estate's half of the Partnership (valued, for example, at $850,000 on p 4 of the Plan).
10. Fourth, the conclusions reached in the preceding paragraphs are fortified by the fact that the intentions set out in the Plan are satisfied if the Insurance Policy is Ian's, but not satisfied if the Insurance Policy is the Partnership's. This can be demonstrated from the figures in the Plan. The Plan was based on Ian having to pay out $1,120,000 in debts and $850,000 for the half share of the Partnership's property (see p 4 of the Plan).
11. Assuming the Insurance Policy payout of $2,430,000 (rounding the actual payout of $2,431,156.80 for simplicity) is Ian's absolutely, he would be able to meet both those payments from the insurance proceeds. However, if the insurance proceeds belong to the Partnership, a quite different result occurs. The Partnership's debts would be paid from the insurance, leaving the Partnership with cash of $1,310,000 ($2,430,000 - $1,120,000). Half of that amount - $655,000 - would go to Ian from the Partnership. This would be less than the $850,000 he needed to buy out the Estate's share of the Partnership's non-cash assets.
12. It is next necessary to consider the application of the Act in light of the Court's factual findings set out above. The relevant provisions are set out in [35] above.
13. Section 21 of the Act may be immediately dismissed from consideration, because the Court has found the Insurance Policy was not "bought with money belonging to the firm." Even if this were wrong, I find in the alternative that the Court's conclusions set out at [59] to [67] above (excluding those relating to the source of funds) demonstrate a "contrary intention" for the purposes of s 21, to the effect that the Insurance Policy had not been purchased on account of the Partnership.
14. Turning to s 20 of the Act, the Court's factual conclusions mean that the Insurance Policy was not "originally brought into the partnership stock or acquired…on account of the firm." The remaining possibility is that it was acquired "for the purposes and in the course of the partnership business" (my emphases).
15. Based on the Court's factual findings set out at [59] to [67] above, I also conclude that neither of those limbs is satisfied. First, those findings demonstrate that the purchase of the Insurance Policy was directed to Ian's situation as an individual after the Partnership had been dissolved in a particular circumstance - that circumstance being Stephen's death while the Partnership was on foot (see s 33 of the Act at [35] above). Second, the "partnership business" was farming. The Insurance Policy was not bought for the purposes or in the course of the farming business. The Insurance Policy had no impact on the Partnership's operation of the farming business. By way of contrast, the answer would be quite different if the policy taken out in Ian's name insured, for example, cattle owned by the Partnership.
16. In reaching this conclusion, I have not overlooked the plaintiffs' reliance on Ian's evidence in cross-examination that the policies "would protect our business that we had in farming." However, this must be seen in context (T66:44-48): "He has given me advice on it of the way that Brett Michaels has sat down and explained it to me that my policy was mine and Steve's policy - so what would happen - if anything happened to Steve it would go to me and if anything happened to me it would go to Steve. It would protect our business that we had in farming."
17. That answer was given in response to a question about what advice Ian had been given by his solicitor about the Insurance Policy since he had received the proceeds. Ian's solicitor's advice is, with respect, irrelevant to anything the Court must decide.
18. If the conclusion set out in [71] is wrong and the Insurance Policy was acquired "for the purposes and in the course of the partnership business", the Court finds in the alternative that those same factual findings demonstrate a course of dealing for the purposes of s 19 of the Act, from which the Court infers the consent of Ian and Stephen that their respective insurance policies would be theirs and not the Partnership's.
19. My findings are unaltered by Mr Hill's submission that by accepting that he would pay the Partnership's debts with the proceeds of the Insurance Policy, Ian had admitted that the proceeds were Partnership property. This does not follow and no such admission was made.
20. While Ian did accept in cross-examination that he would pay the Partnership's debts with the proceeds of the Insurance Policy, neither he nor his counsel admitted any legally enforceable obligation to do so nor accepted that the proceeds were Partnership property. Ian said (T67:30-35, T68:30-35): "Q. Do you see that you've admitted there that you haven't used the life insurance proceeds towards discharging the partnership liabilities, but you contend that you are not required to do that. Do you accept that? A. I am required in a way to cover the debts. The debts will be paid out of that policy. … Q. Your Honour, I don't wish to take up more time than necessary, but perhaps in the circumstances, I could ask you, Mr Sivewright, whether it is your position now - as of today - that you can no longer claim that you are not required to pay partnership liabilities out of the life insurance proceeds? A. The liabilities will be paid out of the process [scil. proceeds], such as the bank - what's owing to the bank, and other - other thing. But I believe, as of the personal solicitor's bills, I don't believe I have to pay that."
21. Finally, I will consider the three additional arguments raised by Mr Liebhold (see [47] to [50] above).
22. First, I am unable to see how Foskett is of any relevance. That was a case concerning breach of trust and tracing. In this case the applicable route would have been the statutory and common law position that the Insurance Policy would prima facie have been the Partnership's if it had been bought with Partnership funds.
23. Second, for all its ingenuity, Mr Liebhold's contractual argument is unsustainable on the evidence for at least three reasons.
24. First, I do not accept that on a plain reading the Plan (or anything else written by Mr Michael) can be read or understood as an offer from each partner to the other.
25. Second, there is no evidence that either partner ever discussed or gave thought to what might happen to the balance of the Insurance Policy proceeds, whether or not Ian bought out the Estate's half of the Partnership. There is therefore no basis to find an express term dealing with any such balance. Nor do I accept that a term of the kind proposed in Mr Leibhold's argument could be implied on the basis of being so obvious that it goes without saying.
26. Third, the sale price is a material term for an enforceable contract for the sale of an asset such as land: Corser v Commonwealth General Assurance Corporation Limited [1963] NSWR 225. In the absence of either a specified purchase price for the Estate's share of the Partnership, or a specified mechanism for how that price might be determined, I am unable to see how the Court could find any contract that involved the possible purchase of the Estate's share that would be sufficiently certain to be enforceable.
27. Finally, Mr Liebhold sought to invoke a constructive trust. It is true that, as partners, Stephen and Ian owed each other fiduciary duties. But given the Court's conclusion on the facts, no breach of any such duties has been made out (Mr Liebhold also did not suggest what particular fiduciary duty might have been breached and how). Furthermore, while it may be accepted that Stephen and Ian had a "common intention", the Court has found that common intention was to implement the Plan in accordance with its terms.
28. It follows, and the Court finds, that there was no intention by one to confer a beneficial interest on the other (or on the Partnership) in the former's insurance policy. The Court has also found that Ian paid for the Insurance Policy with his own funds, and not with the Partnership's or Stephen's funds. Taken individually or together, none of the circumstances referred to in this and the preceding paragraph are of a kind where equity would find a constructive trust to exist over the Insurance Policy or any part of its proceeds in favour of either the Partnership or the Estate.

Conclusion

1. The parties will be given an opportunity to agree what the next steps should be, consistent with the just, quick and cheap resolution of the remaining family provision claims in light of the Court's findings in these reasons.

Annexure A - Sivewright_2021_02_22_11_30_56_191 (210001, pdf)

Amendments 24 February 2021 - Spelling error para 3 "tpgether" changed to together; para 5 "focussed" changed to focused; para 56 word "to" removed before Ms Haines'; para 62 "Ian" changed to Leon; the word paragraph(s) removed throughout - e.g. at paragraph 77 (see paragraphs [47] to [50] above) becomes (see [47] to [50] above). 24 February 2021 - Annexure A appended to judgment DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 24 February 2021