John James McNicholas v Triada Sarandopoulos

The defendant's role in the proceedings

1. At the time when the defence to the amended statement of claim was filed, Ms Sarandopoulos was represented by Mr Jeevan Menon, a solicitor who practised under the name Legal World, who filed a notice of appointment of solicitor on 13 March 2017. On 3 November 2017, the proceedings were called over by the Registrar in Equity, when they were fixed for hearing on 26 and 27 April 2018. At the call over, Ms Sarandopoulos was represented by a solicitor employed by Mr Menon. However, a notice of ceasing to act was filed by Mr Menon on 28 December 2017. On 29 December 2017, Mr Menon sent an email to Macedone Legal, the solicitors acting for Mr McNicholas, indicating that his retainer had been terminated by Ms Sarandopoulos. Mr Menon provided a last known address for Ms Sarandopoulos in Hurstville, New South Wales.
2. Subsequently, Mr Christopher Daniele, a solicitor employed by Macedone Legal, made enquiries with a view to ascertaining the present whereabouts of Ms Sarandopoulos. Searches conducted by Mr Daniele disclosed that Ms Sarandopoulos had been the owner of the property situated at the Hurstville address until December 2017, when the property was sold. Mr Daniele conducted further searches that disclosed a mailing address for Ms Sarandopoulos in Belmore, New South Wales and a mobile telephone number. The Belmore address is the address of an accountancy firm.
3. On 20 April 2018, Mr Daniele telephoned the mobile telephone number and received an automated message indicating that the call could not be connected. On 23 April 2018, Mr Daniele wrote to Ms Sarandopoulos at the Belmore address confirming that the proceedings were listed for hearing on 26 April 2018 and enclosing a copy of submissions filed on behalf of Mr McNicholas. The letter was sent by express post. By email of 24 April 2018, a copy of the letter was sent to an email address previously used by Ms Sarandopoulos.
4. The proceedings were listed to commence not before 12 noon on 26 April 2018. When the matter was called on for hearing, there was no appearance for Ms Sarandopoulos. There was no indication that Ms Sarandopoulos had been present earlier in the day. In the circumstances, I considered that it was appropriate to commence the hearing notwithstanding the failure of Ms Sarandopoulos to appear at the hearing.
5. Mr McNicholas relied on two affidavits sworn by him on 12 August 2016 and 4 July 2017. While two affidavits had been filed on behalf of Ms Sarandopoulos, in the absence of Ms Sarandopoulos, neither of those affidavits was read at the hearing.

Existence and terms of a partnership

1. Mr McNicholas and Ms Sarandopoulos first met in late 2005. In December 2006, a bakery business known as "Grecian Delights Patisserie", conducted in Rocky Point Road, Ramsgate, came on the market for sale. The owner of the business was known to Ms Sarandopoulos. Ms Sarandopoulos told Mr McNicholas that she knew a business close by that was up for sale. She said that the owner's wife had approached her and said that they were selling the business and that she thought that she and Mr McNicholas could make money out of it. Ms Sarandopoulos suggested to Mr McNicholas that they look at the business with a view to its purchase and they arranged to inspect the shop.
2. From January 2007, Mr McNicholas and Ms Sarandopoulos inspected the shop three times over a period of approximately four weeks. During each inspection, Mr McNicholas and Ms Sarandopoulos were accompanied by the owner of the business.
3. In late February 2007, after the third inspection, Mr McNicholas and Ms Sarandopoulos had a discussion in which Ms Sarandopoulos asked Mr McNicholas whether he was "happy to go through with this". When he said "let's do it", Ms Sarandopoulos said that she did not have the money at that time but would pay him back. Mr McNicholas said that, if that was the case, he would need to "have a think about it".
4. In early March 2007, Mr McNicholas and Ms Sarandopoulos had a another conversation, in which Mr McNicholas said that he would pay the $50,000 needed for the purchase of the business and any additional start-up costs, and that Ms Sarandopoulos could repay half of that total once the business began operating. Ms Sarandopoulos responded "OK". Mr McNicholas then said that they would be equal partners in the business and split all profits and losses equally. Ms Sarandopoulos agreed to that proposition.
5. On 5 March 2007, Mr McNicholas and Ms Sarandopoulos entered into a contract for the sale and purchase of the business as joint purchasers. On that day Mr McNicholas paid a deposit of $5,000 from his personal funds. They obtained an Australian Business Number (ABN) and had a business name registered in their joint names.
6. In March 2007, Mr McNicholas and Ms Sarandopoulos agreed to borrow $10,000 to cover various start-up expenses. On 15 March 2007, Mr McNicholas borrowed $62,000 from St George Bank to cover the remaining acquisition and start-up costs. The contract for the purchase of the business was completed on 1 April 2007, when Mr McNicholas paid the balance of the purchase price of $45,000. He also paid a further sum of $17,000 to cover additional costs that needed to be paid in respect of a bond for a lease of the premises on which the business was conducted, insurance and legal expenses. During April 2007, Ms Sarandopoulos contributed approximately $17,000 from her personal funds for the purchase of equipment needed by the business through use of a personal credit card.
7. In early April, Mr McNicholas and Ms Sarandopoulos received notification of registration in the Australian Business Register, were given an ABN and the business name was registered. The partnership was also issued with a notification of registration for goods and services tax. On 10 April 2007, they were issued with a tax file number for the partnership. On 11 April 2007, Mr McNicholas and Ms Sarandopoulos lodged a bond in the sum of $5,720 in respect of a tenancy of the premises.
8. Mr McNicholas and Ms Sarandopoulos began trading from the premises in early April 2007. At that time, Ms Stavoula Sarandopoulos (Stavoula), who is the daughter of Ms Sarandopoulos, began working in the business for two days a week.
9. On 30 April 2007, Mr McNicholas and Ms Sarandopoulos opened a joint business cheque account with Westpac Banking Corporation (Westpac). Cheques drawn on that account required the signature of both Mr McNicholas and Ms Sarandopoulos.
10. On 20 April 2008, a lease of the business premises was granted by the landlord to Mr McNicholas and Ms Sarandopoulos as joint lessees. The term of the lease was from 13 February 2008 to 12 February 2011.
11. From April 2007 to December 2008, both Mr McNicholas and Ms Sarandopoulos were equally involved in the day-to-day operations of the business, including all decision making, banking, dealings with suppliers, preparation of food and serving customers. However, up to December 2008, the business did not produce any profit and operated at a loss from commencement.
12. In the light of the evidence summarised above, I am satisfied that a partnership came into existence between Mr McNicholas and Ms Sarandopoulos with effect no later than 1 April 2007. The partnership was for an undefined term, such that it would continue at will. The terms of the partnership were that each of the partners would contribute capital in equal shares, would be entitled to share in profits equally and would bear losses equally. Thus, the question remaining is whether the partnership was dissolved and, if so, when it was dissolved.

Dissolution

1. From December 2008, Ms Sarandopoulos no longer contributed to the day-to-day operation of the business. However, she regularly attended the premises to drop off and pick up Stavoula on the days when she worked in the business. From that time, Mr McNicholas took control of all of the day-to-day operations of the business.
2. In early 2009, Ms Sarandopoulos attended the premises of the business and a conversation took place to the following effect: "Ms Sarandopoulos: I do not think I want to be part of the business any longer, it is not making us any money and I think I want out. Mr McNicholas: You cannot just walk out. You will need to make arrangements with our bank, the ATO and our landlord." Notwithstanding that conversation, Ms Sarandopoulos did not take any formal steps to dissolve the partnership.
3. In late 2009, Mr McNicholas and Ms Sarandopoulos had a telephone conversation in which Ms Sarandopoulos said that she did not want "to be part of the business any more". Mr McNicholas responded that Ms Sarandopoulos would "need to contact our bank, the ATO and our landlord". Ms Sarandopoulos took none of those steps. Further, from 13 January 2009 to 15 December 2010, Ms Sarandopoulos and Mr McNicholas jointly signed some 40 cheques drawn on the Westpac business cheque account for expenses relating to the business. From late 2009, the cheques included monthly rental payments for the sum of $2860 made out to the landlord under the lease, and additional amounts made out to suppliers and service providers and the Australian Taxation Office.
4. On 14 December 2010, Mr McNicholas received a letter from Ms Sarandopoulos saying as follows: "This is to confirm that this is the last cheque I am signing. I am making it payable to you, John McNicholas, so that you can withdraw all money in the Grecian Delights bank account and start another. As you know my last day at Grecian Delights was 9 December 2008 and that was also the date of dissolving of the partnership between you and me. I also object to your constant SMS and calling, also I made it quite clear then to you that I am not responsible for any of the business debts or your debts." It is likely that the "last cheque" refers to a cheque that was signed by Ms Sarandopoulos and made out to Mr McNicholas. The cheque was dated 15 December 2010, although it is unclear whether it was Mr McNicholas or Ms Sarandopoulos who dated it. Rather than use the cheque in the manner suggested in the letter, it appears that Mr McNicholas altered and initialled the cheque to make it payable to the landlord.
5. After sending the letter of 14 December 2010, Ms Sarandopoulos no longer attended the business premises. Notwithstanding the communication in early 2009 and the further communication in late 2009, Stavoula continued to work in the business. However, she ceased working in the business in late December 2010 and no longer attended the premises.
6. Section 26 of the Partnership Act relevantly provides that, where no fixed term has been agreed upon for the duration of a partnership, any partner may determine the partnership at any time on giving notice of the partner's intention to do so to the other partner. Section 32 relevantly provides that, subject to any agreement between the partners, a partnership entered into for an undefined term is dissolved by any partner giving notice to the other of the partner's intention to dissolve the partnership. In that case, the partnership is dissolved as from the date mentioned in the notice as the date of dissolution.
7. As I have indicated, I consider that a partnership between Mr McNicholas and Ms Sarandopoulos was entered into for an undefined term. Clearly enough, the letter of 14 December 2010 is unequivocal notice by Ms Sarandopoulos to Mr McNicholas of her intention that the partnership be dissolved. However, the Partnership Act does not contemplate dissolution on a date prior to the date of giving notice. Accordingly, the partnership was dissolved no later than 14 December 2010.
8. The question, however, is whether the earlier oral communications by Ms Sarandopoulos can fairly be treated as notice to Mr McNicholas of her intention to dissolve the partnership. If the oral communications of early 2009 or late 2009, which are briefly described above, can fairly be characterised as notice of the intention of Ms Sarandopoulos to dissolve the partnership, the partnership was dissolved from that date.
9. Mr McNicholas points to the failure of Ms Sarandopoulos after the conversations in early 2009 and late 2009 to take any steps to give effect to any intention to dissolve the partnership or to terminate the arrangements that had been put in place for the carrying on of the business. Thus, she took no step to notify any other person of her wish that the partnership be dissolved, such as taxation authorities, the landlord, Westpac or the Australian Business Register. On the other hand, it would have been open to Mr McNicholas to give notice of the dissolution of the partnership and take the steps that would be consequential on the dissolution.
10. Where a business is carried on in partnership, dissolution of a partnership does not necessarily require the immediate cessation of trading. The fact that the term of a lease held by a partnership has not expired does not mean that the partnership is not dissolved. The goodwill of the business and any stock in trade or plant and equipment and the leasehold interest would simply be assets of the partnership that would require realisation.
11. Ms Sarandopoulos had nothing to do with the conduct of the business after December 2008, apart from signing cheques when requested to do so by Mr McNicholas. Of course, until such time as a fresh authority was given to Westpac, it would not have been possible for cheques to be drawn on the business cheque account unless signed by each of Mr McNicholas and Ms Sarandopoulos. The fact that Stavoula continued to work in the business, notwithstanding that her mother had given notice of her intention to dissolve the partnership, is equivocal in terms of whether or not the notice was effective. It was not suggested on behalf of Mr McNicholas that any notice given at the end of 2009 was waived by the continued signing of cheques by Ms Sarandopoulos or her failure to take the steps that were open to either party to take to notify the taxation authorities, the landlord and registration authorities and Westpac that the partnership had been dissolved.
12. Notice of intention to dissolve a partnership must be clear and unambiguous [1] . However it is not necessary for a partner giving notice to appreciate its legal effect [2] . Where a partnership for an undefined term is constituted with a degree of informality, any conduct by one partner that results in the other partner being informed of the first partner's intention to dissolve the partnership will suffice. Indeed, notice of intention to dissolve a partnership may be inferred from the conduct of the parties [3] .
13. The conduct of Ms Sarandopoulos at the end of 2008, in no longer attending the business premises, and her statement in January 2009, coupled with her further statement at the end of 2009, is evidence of Ms Sarandopoulos evincing quite unequivocally her intention that she no longer wished to be involved in the partnership business. I consider that, no later than late 2009, Ms Sarandopoulos had given notice of her intention to dissolve the partnership. By the operation of s 32 of the Partnership Act, the partnership was dissolved from that date. The precise date is not presently relevant since it clearly preceded the date which is six years before the commencement of the proceedings.
14. I consider that the claim for an account by Mr McNicholas is barred by the operation of the Limitation Act. It is not clear whether there is any utility in any of the other relief claimed by Mr McNicholas. I propose to give Mr McNicholas the opportunity of considering my conclusion and the reasons for it before making any orders.

Endnotes

1. Syers v Syers (1876) 1 App Cas 174, 183. See R I Banks (ed), Lindley & Banks on Partnership (Sweet & Maxwell, 2017, 20th Ed) at [24-28].
2. Toogood v Farrell [1988] 2 EGLR 233.
3. See Keith L Fletcher, The Law of Partnership in Australia (Lawbook Co, 2007, 9th Ed) at p 232. 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: 03 May 2018