De Campo Holdings Pty Ltd v Cianciullo [1977] WAR 56

Patel v Premabhi [1954] AC 35

By a written partnership agreement dated 19 September 1963 the plaintiffs and defendants entered into a Deed of Partnership under the name "M O & B G Sims & Co" to be carried on at Glenewin and/or at such other place or places as the partners may agree upon.

The plaintiffs are husband and wife as are the defendants and the evidence indicates that in 1995 following disagreements between the partners, it was agreed that the partnership should be wound up as from 1 April 1996. It has been agreed between the parties that 1 April 1996 is the date upon which the partnership should be finally wound up.

"19. Upon the termination of the partnership (subject to the provisions of clause 16 of this Deed) a general account and valuation of the assets, credits, debits and liabilities of the partnership shall be taken THEN after the partners or their representatives have made due provision for paying and discharging any debts and liabilities of the partnership and for payment of undrawn profits and for the payment to each partner of his or her contributed share in the capital of the partnership the remaining assets, credits and effects shall be divided equally between all partners or their representatives."

On 17 September 1997, at the conclusion of the hearing of this action, I made the following orders:

1. There be a declaration that the partnership between the plaintiffs and the defendants was dissolved on 1 April 1996;

2. Colin Arthur Blyth of 8 St George's Terrace, Perth prepare accounts for the partnership for the period from 1 July 1995 to 1 April 1996;

3. Within 14 days the parties deliver to Mr Blyth all source documents and other material in their possession or power which he considers necessary for the preparation of the aforementioned accounts;

4. Each party be at liberty to make written submissions to Mr Blyth within 21 days and within the same period deliver a copy of those submissions to the other parties' solicitors;

5. Each party be at liberty to deliver submissions in reply to submissions made by the other party within 14 days thereafter and within the same time deliver a copy of those submissions to the other parties' solicitors;

6. Within 30 days of the time allowed in para 5 hereof, for the receipt of the parties' final submissions, Mr Blyth prepare a full set of the usual accounts for the partnership for the above period and within the same time deliver the accounts to the court with copies to each of the parties' solicitors;

7. The parties have liberty to apply to the court in respect of any legal issue arising from the accounts but not in respect of any factual issue therein.

Mr Blyth, pursuant to those orders, will draw up accounts to 1 April 1996 in accordance with the provisions of cl 19 of the Partnership Deed.

The evidence indicates that the male plaintiff and male defendant are identical twins. Their father started farming in the Beverley area in approximately 1917. A partnership under the name "O O Sims & Sons" commenced in 1949 pursuant to which both the male plaintiff and male defendant were in partnership with their father and continued in that partnership until 1962 after which time M O & B G Sims & Co was formed commencing 1 July 1963.

The evidence establishes that the partnership proceeded amicably until approximately 1985 or 1986 when difficulties arose between the partners. It is not necessary in these reasons to canvas those difficulties and no evidence was called in relation to them.

A decision was made to dissolve the partnership and an argument has arisen between the plaintiffs and the defendants as to the appropriate way to divide the farming property. There are certain other ancillary questions to determine which will be discussed later in these reasons. However, generally speaking it has been agreed that the plaintiffs will farm what has been called the northern portion of the common property and the defendants will farm the southern portion of the property. The main area of dispute between the plaintiffs and the defendants relates to an area of some 66 acres which is presently part of Lot 5784 and is a wedge shaped section of property, the longest boundary of which abuts Northbourne Road. That section of land contains a contour bank built by the plaintiffs which services a dam on Lot 5784. The effect of the contour bank is to cause rainwater to run into the dam constructed on Lot 5784 on the far side of Northbourne Road. The plaintiffs maintain that the triangular portion of land that is in dispute and which is coloured yellow on exhibit "B" is of vital interest and importance to their section of the property. The defendants, on the other hand, maintain that their land is less productive than the plaintiffs' and as a consequence they need a greater area of land so that the land retained by the plaintiffs is of equal productivity to their land. The male defendant in his evidence expressed the view that the 66 acres was not sufficient for that purpose but he would be prepared to accept that as an appropriate sub-division.

The evidence indicates that if the 66 acres in dispute is retained by the plaintiffs, then in terms of area the two properties would be almost exactly equal. If on the other hand the area in dispute is annexed to the defendants' land then the defendants would have a total of 142 acres more than the plaintiffs. The additional 10 acres arises out of a disparity in a report to which I will refer later.

It follows that if the property is sub-divided on the basis that the plaintiffs retain the disputed portion of land the total sub-division of arable land is almost exactly half although there is a very small adjustment to be made which will be discussed later in these reasons.

In an endeavour to resolve their differences the plaintiffs and the defendants jointly engaged Peter McKenzie Falconer ("Mr Falconer"), a management consultant and valuer, to work out a fair proposal for subdividing the farming property. Mr Falconer's original report is dated 25 March 1996 and his proposal was that the disputed 66 acres of land should be part of the plaintiffs' share. His evidence indicates that if the property is divided that way, it would result in the plaintiffs having 1,745 arable acres and the defendants having 1,755 arable acres. On valuing each of the properties, that subdivision would result in a difference in value of $2,470 in favour of the plaintiffs thus resulting in a balance payment of $1,235 from the plaintiffs to the defendants in order to bring about equality. Mr Falconer's evidence was that this proposal was in his view the fairest proposal because it resulted in properties of almost equal area and equal value as between the plaintiffs and the defendants.

I would add that in my view Mr Falconer impressed me as a competent and fair valuer and his evidence indicates that he gave careful consideration to the views put to him by both the plaintiffs and the defendants in reaching his valuation. In my opinion his initial report was produced by bringing an unbiased mind to the problem of fairly subdividing the land so as to bring about equality between the parties. In that respect his evidence was not shaken and whilst, as these reasons will subsequently reveal, there are some areas that require adjustment, I am of the view that he was a credible witness whose evidence should be accepted.

After Mr Falconer's original report was supplied to the parties, Mr Falconer's evidence was that both parties were unhappy with his report and as a result he prepared a second report dated 27 April 1996. In that report his evidence indicates that he made minor changes to the soil type classifications after submissions from both the male plaintiff and male defendant and he said:

"I believe that small adjustments were warranted in relation to the soil type classification, and that of course had some effect on the valuation because the different soil areas had a different value."

Mr Falconer indicated that those minor changes did not result in any change in his view about the appropriate subdivision proposal in terms of the areas of land, but did result in a minor change in value in that by using those different values the plaintiffs would have to pay to the defendants the sum of $12,000 in order to balance out the partnership share.

The most substantive factor bringing about that difference related to a shearing shed on the plaintiffs' side of the property which will be discussed later in these reasons.

In relation to the 66 acres I would add that the male defendants' initial approach to the case, both in cross-examination and in his evidence-in-chief, was that the disputed area of land was required as part of his property in order to give him access between the western area of his property and the eastern area. As can be seen from exhibit "B" there is no common boundary between Lots 5265 and 5667 so that for the defendants to move stock between those two lots requires access onto Northbourne Road. If, on the other hand, the disputed 66 acres was annexed to the defendants' land, then there would be direct access from the western to the eastern sections of the defendants' land.

"I think, sir, much has been said about the using of the Northbourne Road to gain access to the northern part of my farm. That muddies the water to some extent in that it isn't the access once you are on Northbourne Road, but it is the difficulty of getting to Northbourne Road from the southern section of the farm. In that I can expand by saying when the paddocks that face onto Northbourne Road are in crop and I want to take sheep out there I can't take them through the crop, I am then forced - as counsel tried to explain earlier, I have got to take them out onto Weaver Road and then up Northbourne Road and that makes what could have been a one hour job into a three or four hour job."

"I would have the opportunity of taking them down the bottom right hand corner of the dark shaded area onto Weaver Road because the situation where all your paddocks are in crop in the same year is not very common."

As I understood the male defendant's evidence, he was saying that when the land was in crop he had to take stock to the truncated section of his property in the orange marked portion at the bottom of exhibit "B" and along that narrow section of land onto Weaver Road. In order for that stock to be transferred to Lots 5667 or 4316, the stock would have to be taken along Weaver and Northbourne Roads. Had the male defendant's evidence remained there, the argument presented undoubtedly had merit as the inconvenience to the defendants by using that access route is apparent. In cross-examination however, the male defendant revealed that he has since purchased Lots 7829, 5259 and 4660, so that he has access to Weaver Road along its entire length and access to Northbourne Road, almost to the corner of Mills Road.

I accept the male plaintiff's evidence as being preferable to that of the male defendant. I have reached that view not only because of the difference in demeanour between those two witnesses, but also because the male defendant in his evidence-in-chief did not disclose the fact that he had purchased Lots 4660, 5259 and 7829, thus leaving the court with the impression that his access to Weaver Road was limited to the truncated portion of land shown on the bottom of exhibit "B". I would add in dealing with the conflicting evidence between the male plaintiff and the male defendant that the male defendant prepared and presented to the court a different partition proposal shown on appendix "A" to exhibit "3". The male defendant's proposal was that the disputed 66 acres should substantially form part of his property but that the contour bank should be excised in the manner indicated by the purple line. The effect of that would be that the contour bank would remain part of the plaintiffs' property but the defendant would require a further small triangulated section from the south-eastern portion of Lot 5784.

I would finally add in considering the appropriate subdivision of the land that the male plaintiff's evidence is that even with the disputed 66 acres coming into his property, the plaintiffs would have 13 dams, four of which would be substandard and nine of which would be adequate and the defendant would have 15 dams, 5 of which are larger than normal.

Taking all of those matters into account, I am of the view that the plaintiffs should retain the disputed 66 acres.

I would finally add that when the male defendant's evidence is closely analysed, it is apparent that the substance of his objection to the plaintiff having the 66 acres is that he maintains the view that the southern portion of the property which he is farming is less productive than the northern section. The male plaintiff disputes that contention. In my opinion there is no evidence to support the male defendant's contention in that regard. No crop figures were produced to differentiate his portion of the property from that of the plaintiffs, nor was there any scientific or technical expert to testify that his property was less productive than that of the plaintiffs. The only evidence called on behalf of the defendants in that regard was the male defendant's assertion that:

"I want more land because my land is inferior to his and that I need more of it to produce the same amount as what his farm will produce."

In the absence of some supporting evidence, and in view of the fact that I prefer the plaintiffs' evidence to that of the defendants in any event for reasons I have already expressed, I am not persuaded that the defendants' contention in that regard is correct. I would therefore resolve the issue as to the disputed 66 acres in favour of the plaintiffs.

The second area of contention between the parties relates to a remaining lot in an area of land owned by the partnership and known as the "Blackburn blocks". The evidence indicates that all but one of those lots has been sold and that the defendants have received $26,621 more than the plaintiffs from the sales of the blocks to date. It follows that from the sale of the remaining lot, the plaintiffs are entitled to a credit in the sum of $26,621 and the balance should be split equally between the plaintiffs and the defendants.

In relation to the remaining lot there is a dispute between the parties as to the price at which that lot is to be sold. In my opinion the best evidence as to the value of that lot is to be found in the evidence of Nick Di Giulio, a real estate agent, who has been responsible for selling the Blackburn lots. In relation to Lot 13934, Mr Di Giulio testified that he had been trying to sell that lot for approximately two years and that the asking price had fallen from $50,000 to its present sale price of $35,000. Mr Di Giulio indicated that there were difficulties with this particular lot, because although it is of a sufficient size to be attractive to a hobby farmer (in excess of 40 acres) the entrance to the property is from behind a main road and the block is too far away from York or Beverly for a convenient dwelling house to be constructed. In addition, the road connecting the property to the main road is a gravel road of some three and a half to four kilometres. Mr Di Giulio's evidence was that he considered it likely that he could obtain $35,000 for the property and he was confident he could sell it at that price, but he did not exclude the possibility that he could obtain a little more for it.

The male plaintiff's position is that he is happy for this remaining lot to be sold at $35,000, but the male defendant maintains that there is a distinct possibility that a greater sum could be obtained.

Giving weight to all of the evidence as best I can, I am of the view that the property should be offered for sale at $40,000 for one month and if the property does not sell at that price, then the price should be reduced to $38,000 for a further month, and if it then fails to sell, the parties should be at liberty to return to the court to fix a further reduced selling price being not less than $35,000. During that period the property should be actively marketed by Mr Di Giulio.

There is also a dispute between the plaintiffs and the defendants as to the crop that is presently on Lot 13934 and doing the best I can in relation to the evidence concerning the crop, I am of the view that as the plaintiffs have planted and tended that crop, and consistent with the arrangements with the other Blackburn lots, if the lot is not sold prior to harvest then the plaintiffs should be entitled to the proceeds of the sale of the crop and the plaintiffs should have the obligation of harvesting and selling the crop.

The next item in issue between the parties relates to a shearing shed which is presently on the plaintiffs' land. When Mr Falconer initially valued that shed in his report of 25 March 1996, he did so on the basis that the shed, which was then partly constructed, would be completed at partnership expense. That in fact has not taken place. The plaintiffs have produced a schedule which indicates that the shed has now been completed and the plaintiffs have expended $3,242.71 on materials and contributed a labour cost of $8,200. The labour cost as calculated by the plaintiffs is clearly an estimate as the labour has been contributed almost entirely by the male plaintiff and his relatives and to a limited extent by a friend. I am not prepared to accept the plaintiffs' evidence as to the labour cost. In my opinion the best evidence as to the value of the shearing shed comes from Mr Falconer, who initially valued the shearing shed on the basis of completion by the partnership at $13,000. His valuation of the shearing shed as it was, uncompleted, was $4,000, making a difference of $9,000. I accept Mr Falconer's evidence as preferable to that of the male plaintiff so that the adjustment in that respect should be the sum of $9,000 and not the figure sought by the plaintiffs.

There is one further portion of land in dispute between the parties which is an area of 1.8 acres of land shown on exhibit "B" as Lot 26594. The evidence indicates that that small portion of land is in the defendants' property, but no allowance has been made for its value. There is no evidence which adequately deals with that small portion of property which is of very minor importance in relation to the total area in dispute between the parties. In view of the other conclusions to which I have come, I am of the view that that 1.8 acres should remain as the defendants' land with no adjustment being made for its value.

I will make these reasons available to counsel for the parties prior to their publication so that the numerical calculations can be completed. In the end result the calculations will reflect Mr Falconer's first report but with no adjustment for Lot 26594, thus substantially following the plaintiffs' scenario 1(b) as put to me by Mr Zilko in final address with an adjustment to be made for the fact that Lot 26594 will remain part of the defendants' property, without an adjustment figure.

I turn to the final issue for resolution, namely the period during which the nominated accountant Mr Blyth should be required to adjust the partnership accounts.

As indicated earlier in these reasons, Mr Blyth is already required to complete the final accounting period terminating on 1 April 1996, but that order only covers the period from 30 June 1995 until that date.

A dispute has arisen between the plaintiffs and the defendants in relation to earlier accounts prepared by their then accountant, James Andrew Christie ("Mr Christie").

Mr Christie testified that he had been preparing the accounts for the Partnership M O & B G Sims & Co over a number of years with the assistance of his staff. The accounts were prepared from source documents supplied to him substantially by the male defendant and from those source documents, profit and loss accounts and balance sheets were prepared together with the appropriate income tax returns. Mr Christie's evidence was that the accounts were signed off usually by the male defendant and were accepted as being correct. Mr Christie testified that until the time when there was talk of a dissolution of the partnership, there was no complaint about the accounts or talk of any adjustment to them. Mr Christie said that he did not retain the source documents which were returned to the parties. In cross-examination Mr Christie said that when he was asked by the male defendant to look into errors which the male defendant maintained had occurred in the accounts, he endeavoured to identify the errors explained to him. It appears that Mr Christie spoke to both the plaintiffs and the defendants in that regard and he was advised that "from time to time there were family sort outs and in these family sort outs they corrected certain errors". Mr Christie's evidence was that doing the best he could, there seemed to be a figure of $1,500 required to balance the accounts but he was unable to be precise as to the figure which was apparently in dispute between the parties. Mr Christie also indicated that the errors could be:

"...many thousands more than that...depending on how far you went back into the accounts or what you took into account and what wasn't subject to these family arrangements."

The male defendant in his evidence was anxious to have the opportunity to put before the appointed accountant Mr Blyth, evidence of the errors which he says occurred in the preparation of the accounts over the years. The difficulty for Mr Blyth with that approach would be that he would have no contrary evidence, nor any documentation to resolve the issue as to what was sorted out at the family conferences to which Mr Christie referred. Whilst it may be possible for one of the parties who has kept the appropriate documentation to present a case that there were errors in the accounts, in the end result it could be productive of gross unfairness for the accountant to act on one party's information in that regard.

On the evidence before me, and bearing in mind that the parties signed off the partnership accounts over the years in which the partnership operated, I have come to the view that the best course is for no adjustments to be made in relation to this aspect of the case. Should it be the case that one party or the other can establish that there is some error that has been made in the accounts which results in a sum payable by one party to the other, then that can be resolved by independent litigation which can identify those claims. In addition, in such litigation the Statute of Limitations may be pleaded where relevant and evidence could be taken as to the issues resolved at family conferences.

In my opinion it would be inappropriate for Mr Blyth as the appointed accountant in preparing the final accounts of the partnership to take evidence or submissions from either party in order to seek to resolve what are said to be discrepancies in the earlier accounts.

For these reasons, in my opinion, the appropriate course is for Mr Blyth to prepare the accounts to finalise the partnership and not to make any inquiries beyond what is necessary to complete that task.

As a final judgment figure will not be available until the accounts are completed and returned to the court, it is not possible to pronounce judgment in favour of either party at this stage of the proceedings. I will therefore publish these reasons and adjourn the matter sine die so that when all the information is available this case may be finalised.