Beale v Trinkler

Supreme Court of NSW|2010-04-01|Before: Gzell J, Gzell Beale J

CITATION : Beale v Trinkler [2010] NSWSC 246

DECISION : I direct the parties to bring in short minutes to reflect my judgment.

CATCHWORDS : Partnership. Further matters concerning accounting. Costs of the whole accounting. No matter of principle.

PARTIES : Aileen Ann Beale and Philip Beale v George Trinkler and Bura Investments Pty Ltd

COUNSEL : Mr B DeBuse for plaintiffs Mr JE Thomson for 1st defendant

SOLICITORS : MacElbing Mednis & Associates for plaintiffs Sparke Helmore Building for 1st defendant

1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

1 HIS HONOUR: In this matter I gave judgment on the taking of accounts of the partnership on 13 October 2009. At the time I gave judgment the parties asked me not to give a decision on certain late claims which were raised just before the hearing on the basis that the parties would endeavour to resolve these matters. The parties have not resolved these additional claims and they have asked me to determine the contentious additional claims. At the commencement of the hearing before me on 23 March 2010 there were three outstanding disputes. They were as follows:

(a) Rent payable for the period 1 July 2004 to 1 May 2005. (b) Proceeds of cattle sale $19,681 in respect of Bowe & Lidbury invoice dated 22 April 2006 (c) Accounting fees claimed by Mr Roger Huntington, the plaintiffs' accountant. 2 In respect of (b) above during the course of the hearing it became apparent from the terms of Exhibit 10 before me that the item had in fact been disbursed equally between the two parties. Accordingly, there is now no dispute on this matter. Rent payable for the period 1 July 2004 to 1 May 2005. 3 I will not set out the background concerning the partnership as that is conveniently dealt with in my earlier judgment now reported as Beale v Trinkler [2009] NSWSC 1093 and the judgment of Justice Gzell Beale v Trinkler [2008] NSWSC 347. 4 In my judgment of 13 October 2009 I dealt with the matter under the heading, "An allowance for occupation of the property" at paragraphs 16 to 25. In recent exchanges between the accountants, Mr Huntington applied an annual rent of $115,000 for the period 1 July 2004 to 30 April 2005. The rent was based on the finance charges the subject of the decision in my earlier judgment. In contrast Mr Anthony Croese, accountant for the defendant, has applied rent over the same period based on the agistment rates which I said should apply in paragraph 31 of my judgment. 5 This squarely raises the question of whether I had decided that the arrangement which I described in paragraphs 19 and 20 in my judgment continued to apply during the year ended 30 June 2005. It is apparent from the material before me that there was no agreement for the year ended 30 June 2005 accounts because of the dissolution of the partnership on 1 May 2005. 6 In support of plaintiff's contention reference was made to the purpose set out in paragraph 58 of the Court of Appeal judgment referred to in paragraph 22 of my judgment and the factual circumstance that there was an agreed excessive rental at the time when the properties were jointly owned. It was submitted that this situation should continue until the deed severed the ownership on 1 May 2005. 7 Reference was made to the cross-examination of the parties before Gzell J on 18 April 2008 (see Exhibit 3) but that was before me on the last occasion. 8 On the first hearing before me the submissions addressed in general terms the matter by reference to the period of May 2005 onwards: see paragraph 14 of my earlier judgment, paragraph 8 of the defendant's submissions dated 30 August 2009 and paragraph 2 of the defendant's submissions dated 10 September 2009. It is also clear that the defendant's submissions were predicated on there being no agreement for lease. In the recent hearing it was put that the accounts for 2004 and earlier were binding on the parties as they evidenced an agreement for those particular years. The parties did not challenge the rental in those earlier years. Presumably each party went into the new financial year on 1 July 2004 in the expectation that the same situation would apply. 9 Although there is no agreement for lease I think there would be an estoppel arising from the past conduct which could only be resiled from on some reasonable basis. The reasonable basis is provided by the parties' actions in signing the agreement on 1 May 2005 which separated ownership and responsibility for the financing. 10 In these circumstances and in deciding what is a reasonable allowance in the taking of accounts, I think that the period up to 1 May 2005 should be based upon the $115,000 per annum rate and thereafter on the agistment basis.

Accounting fees claimed by Mr Huntington, the plaintiff's accountant. 11 The accounts appear at pages 19 to 22 of the affidavit of Mr Patrick Kaluski sworn 12 March 2010. The accounts are as follows:

7 September 2005 Income tax returns 30 June 2003 and 2004 years $5,390.00

15 February 2006 Income tax returns 30 June 2005 $4,812.50

30 June 2008 Attendance with senior counsel And attendance at Supreme Court $1,787.50

11 November 2008 Accounts for years ended 30 June 2006 to 2008 $7,700.00 12 The account of 30 June 2008 is in respect of the management of this case and should not be allowed as a partnership expense. 13 The accounts do not give detail but by way of example the first account is as follows:

Professional services rendered in respect of completing the writing up of the books of the company for the years ended 30 June 2003 and 2004 and preparing profit and loss account for the years then ended and balance sheet as at those dates.

Assisting in the preparation of quarterly BAS Returns for the periods 31 December 2002 to 30 June 2004

Attending to minutes of meetings of directors and shareholders and Australian Securities & Investment Commission requirements.

Preparing and lodging 2003 and 2004 income tax returns for the following: Beale Trinkler Partnership Clemelle Way Pty Limited

Obtaining necessary information from partners including cheque books, copies of bank statements and other documents. Sundry discussions from time to time concerning the 4,900.00 company's affairs generally 490.00 GST $5,390.00 Total including GST

14 There is very little detail in this account. The later accounts were in the same format. Presumably the preparation of the BAS returns related to the cattle partnership and certainly some of the income tax return charges would relate to the partnership. The first defendant submitted that there was so little information provided that nothing could be allowed. Mr Croese dealt with the matter and his view was that a reasonable fee for the accountancy would be $1,500 plus GST per annum. 15 No doubt Mr Huntington may sue for his accounts which have not yet been paid but at this stage it is necessary to make an apportionment if that is possible. 16 In cross-examination Mr Croese conceded that in the case of the relevant accounts they would involve more investigation work and a figure of $2,000 to $2,500 would be justified. I will allow accounting fees of $2,250 per annum for all the years in question. Costs 17 I have heard argument on the costs of the referred matters. The first defendant seeks an order that the plaintiff pay the costs of the hearing before me and the necessary pre-trial work. For his part the plaintiff seeks an order that the costs be shared equally out of the partnership property and, in the event that there are no assets remaining in the partnership, that each party be ordered to pay their own costs. I set out at paragraph 11 of my earlier judgment the terms of the reference to me. When making that order on 29 April 2008 his Honour dealt with costs of the action up to that date. I take it from the terms of the reference that I am to determine the balance of the costs. 18 The plaintiff relied upon the decision of Kraft v Kupferwasser (1991) 23 NSWLR 236 at 244 where Powell J said: "….at lease since 1878 the rule has been to pay the costs of an action for dissolution out of the partnership assets unless there is good reason to the contrary." 19 This general rule is subject to exceptions which were usefully referred to in Meekin Enterprises v Gersbach (Supreme Court of New South Wales, McLelland CJ in Equity, 6 August 1997, unreported) where McLelland CJ stated at 2:

"The distinction to be drawn is between proceedings which are necessary for the administration of partnership assets where there is no relevant fault on either side, on the one hand, and proceedings which are rendered necessary by reason of the default of one of the partners, on the other. When the proceedings are caused by such default there is normally good reason not to order payment of costs out of the partnership assets, but rather to order costs against the partner in default, at least up to the conclusion of the hearing, as illustrated by the decision of Jessel, MR in Norton v Russell (1875) 19 Eq 343. I think that the position is accurately summarised in the following passage from Lindley & Banks on Partnership (16 th ed) at para23-para112: "... it has long been an established rule that all the costs of dissolution proceedings should be paid out of the partnership assets, unless there is a good reason for making some other order. Where, however, such proceedings are, in reality, commenced in order to obtain an adjudication on some disputed claim between the partners, the unsuccessful litigant will normally be ordered to pay the costs up to the date of trial." 20 It is necessary to see whether in the terms of his Honour's distinction and that in Lindley & Banks on Partnership there is good reason to make some other order. In this case the first defendant suggests that the plaintiff's extensive delay in preparing the case coupled with the plaintiff's lack of success on the issues which were last debated before me and the late reference to other matters the day before the last hearing before me commenced, justified some other order. 21 I turn to the question of delay. The history of the proceedings is set out in paragraph 21 to 56 of Mr Kaluski's affidavit of 27 November 2009. The initial orders on 13 June 2008 set a timetable which contemplated completed accounts by 1 August 2008. Due to the failure of the plaintiff to supply information to the accountant that did not happen and fresh orders expected the accounts to be completed by 26 September 2008. Once again this did not happen and there was further investigation needed including orders for filing of accounts for Clemelle Way Pty Limited in October 2008. The matter was supposed to have been ready by 5 February 2009 but this was not achieved. Over the next few months there were orders on three different occasions for the plaintiff to file further information. It was not until 14 May 2009 that that the evidence was complete and the matter set down for hearing. 22 The progress of the accounts indicates that time was taken to check and deal with what was put forward by the plaintiff s and it is also clear that there was a substantial delay on a number of occasions by the plaintiff preparing the initial accounting records. 23 So far as the success on the hearing before me this was summarised in submissions by the defendant in these terms by reference to the issues I have summarised in my judgment of 13 October 2009 at paragraph 14. "Items 7 & 8 could not be dealt with on the last occasion and item 7 is now conceded by the plaintiffs.

On each of items 1-6 Mr Trinkler was in substance successful on the issues litigated.

On issue 1, Mr Beale's contentions were rejected as not legally maintainable and the Court accepted the position put forward by concession by Mr Trinkler, that the landowners were entitled to a claim in unjust enrichment based on actual use of the property.

On issue 2, the analysis of Mr Trinkler's expert was accepted in preference to that of Mr Beal's stock and station agent, and the rates were applied at the midpoint of Mr Dwyer's assessed agistment returns.

Issue 3 resulted in substantial success for Mr Trinkler to uphold his claim for remuneration following the dissolution of the partnership.

A number of Mr Trinkler's expense claims the subject of issue 4 involving significant amounts in total were also upheld, even though they were challenged by Mr Beale as not being actually incurred or being improperly claimed or having been previously reimbursed.

Mr Trinkler's claims in relation to issue 5 were also upheld. These serious allegations involving alleged dishonesty on Mr Trinkler's part were persisted in even when the basis on which they had been made was disavowed by the author of the document on which they were based, who explained the discrepancy was a tired bookkeeping error on his part. Mr Trinkler's case was supported by the stock and station agent who sold the cattle whose evidence was corroborated by the contemporaneous records concerning ownership as reported by the truck driver on delivery of the cattle. This evidence also confirmed the driver's evidence. Given the seriousness of the allegations this issue took a significant portion of the hearing.

Mr Trinkler was also substantially successful on issue 6, although this took little time at the hearing.

So far as the current hearing is concerned it is noted that the issues appear to reflect further misconceptions and errors on the part of the plaintiffs about the final accounts.

The matters that have needed to be litigated have been consistently resolved against the stance being taken by the plaintiffs, and various matters that were once in contention (for example the late notified payment of $6,596.27) have been abandoned on the way through. The time and expense of resolving the issues that needed resolution under the reference has also been unduly contributed to by failure to address the various matters the subject of directions in a timely fashion." 24 There has been substantial success by the first defendant on nearly all the issues in the first accounting before me. The plaintiff has been successful on the more important matters argued on the second hearing. There were only a small number of issues in the accounting which were debated as the parties agreed on many of the items in the accounts. It is appropriate today to regard to the accounting as a separate issue as his Honour has dealt with the costs of the main proceedings up to the conclusion of the hearing. 25 The accounting was necessary and there was success on both sides. In the circumstances where there are no funds left out of which costs can be paid it is appropriate to order that there be no order for the costs of the accounting to the intent that each party should bear their own costs. 26 I direct the parties to bring in short minutes to reflect my 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.

At a glance

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Judgment (31 paragraphs)

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Cases Cited (3)

Cited By (1)