Kendall v Hamilton

THE BARRY PICKETT PTY LTD PROOFS OF DEBT 6 Barry Pickett Pty Ltd ("BP") lodged two proofs of debt arising from the same judgment debt, one in the separate estate of B K Kitt and the other in the joint estate of K S Kitt and M A Kitt. The judgment in the sum of $92,203.15 was obtained in the District Court of New South Wales in proceedings brought by BP against B K, K S and M A Kitt ("the Kitts") as partners "trading as Oberon Plant Hire". The claim itself was for fuels "supplied by the Plaintiff to the Defendants at the Defendants' request …" which remained unpaid as at 4 February 2000. 7 Though the available material evidencing the true character of the debt is sparse indeed, it appears to have had its genesis in an application made to BP by B K Kitt to open a credit account in his own name but for the use of the Kitts trading as OPH. This application seems to have been approved. BP was (inter alia) a wholesale supplier of fuels. Apparently fuels were supplied to the Kitts and the account was maintained as a running account in respect of purchases of fuel from time to time. 8 There is nothing in the material before me to suggest that the credit agreement and the various contracts for sale and purchase of fuels were other than contracts entered into by the Kitts as partners. BP did not provide the Official Trustee with direct evidence of this. It had in the interim sold its wholesale fuel business (though not the debts owing to it) and the location of the records concerning customer accounts was apparently unknown. Nonetheless, BP through its lawyers has acknowledged in correspondence with the Official Trustee that it supplied fuel to all three Kitts as partners and that it had one contract with the partners. I would note in passing that BP provided no evidence that one or all of the partners had agreed to be jointly and severally liable for fuel supplied to the partnership from time to time. 9 The claim made by BP in the District Court also acknowledged that BP's appreciation of the true character of the dealings it had with the Kitts was as I have described above. In these circumstances I am satisfied that the debts so incurred arose out of contracts binding on all partners. 10 The curiosity of the matter is that the partnership on whose behalf the initial credit account was made was purportedly OPH, not OPH Transport. The credit application is undated. Again though the evidence is sparse, it is clear that BP was contracting with the Kitts as partners in respect of the business they were carrying on and that that business was the trucking and transport one by whatever trading name called. 11 It is also clear on the evidence, that the debt incurred by the partners was incurred before B K Kitt resigned from the partnership around May 2000.

APPLICABLE PRINCIPLES 12 It is orthodox partnership law that, save in circumstances where a partner so acts as to render himself or herself separately or severally liable on a contract with the partnership, a contract which is binding on the firm is binding on all the partners jointly and on none of them severally: Kendall v Hamilton (1879) 4 App Cas 504; Partnership Act 1891 (SA) s 9; and see Lindley & Banks on Partnership, 13-02 (18th ed, 2002). 13 When BP sued the Kitts it sued and obtained judgment on that joint obligation which itself merged in the new obligation created by the judgment: on merger see e.g. Corney v Brien (1951) 84 CLR 343 at 353; Commonwealth v Precision Pools Pty Ltd (1994) 53 FCR 183 at 191-2. The obligation so created by the judgment, though new, was not different in its incidents from the liability sued upon to judgment: cf Militz v Bowering-Wood [1954] SASR 175 at 179. The pre-existing obligation was joint. Correspondingly, the obligation created by the judgment was joint. I emphasise this for this reason. BP in lodging its proofs of debt has proceeded on the premise that the Kitts' liabilities to it are joint and several. 14 Section 110 of the Bankruptcy Act deals with the application of the estates of joint debtors and is decisive of the directions I should give. It provides: "110(1) [Joint debts and separate debts] In the case of joint debtors, whether partners or not, the joint estate shall be applied in the first instance in payment of their joint debts, and the separate estate of each joint debtor shall be applied in the first instance in payment of his or her separate debts. 110(2) [Procedure where surplus] If there is a surplus in the case of any of the separate estates, it shall be dealt with as part of the joint estate and if there is a surplus in the case of the joint estate, it shall be dealt with as part of the respective separate estates in proportion to the right and interest of each joint debtor in the joint estate."

CONCLUSION 15 In the absence of any evidence at all indicating that BP's fuel contracts resulted in the Kitts being jointly and severally liable to BP as distinct from only jointly liable, the conclusion is inevitable that the ordinary contractual rule applies and that the Kitts are jointly liable to BP. In consequence, s 110(1) requires that BP's proof of debt is initially to be lodged in the triple estate of the bankrupts. I will direct accordingly. 16 It is unnecessary that I express any view on the various other possibilities raised by the Official Trustee which are premised upon the liabilities of the Kitts being other than joint. I decline to do so notwithstanding the request of the Official Trustee to the contrary. Any view I expressed would be of an advisory character and it would not have the benefit of being informed by a contradictor. The present application has been heard ex parte. 17 The matter to be emphasised about the conclusion at which I have arrived, is that it has been virtually preordained by an absence of evidence that could properly lead to a different conclusion. 18 I will order that the costs of this application be borne on a pro rata basis by all of the estates except the joint estate of K S Kitt and M A Kitt. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finn .