Luigi Iacullo v Dominic Iacullo and Lillian Iacullo

Judgment 1These proceedings are the third of three proceedings that were heard together before me commencing on 28 November 2011. In these proceedings, each of the Plaintiff (who I will refer to, without disrespect, as "Luigi") and the Defendants (who I will refer to, without disrespect, as "Dominic" and "Lillian") dispute different portions of a determination made, in accordance with orders made by the Court, by trustees ("Trustees") for sale of a property situated at Moorefields Road, Roselands ("Property O"). 2I should first set out the background to the determination made by the Trustees. By Summons filed on 16 November 2007, Luigi sought orders under s 66G of the Conveyancing Act 1919 (NSW) for, inter alia, the sale of Property O. Orders were made by consent by Brereton J on 29 February 2008 for the appointment of the Trustees and that "there be a taking of accounts after the property has been sold by the trustees". That form of order appears to correspond to that which was considered but ultimately not made under Pt 48 r 3 of the former Supreme Court Rules (which corresponds to Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") r 46.4) in Ross v Byrne [2002] NSWSC 182. 3On 4 August 2009, Bergin CJ in Eq made a further order by consent that: "The Trustees for sale appointed by Brereton J pursuant to orders made on 29 February 2008 take [account] in accordance with order 4 made by Brereton J on 29 February 2008 until further order." 4After voluminous communication with the parties and their legal advisers that addressed a range of matters that were in dispute, the Trustees delivered their account by letter dated 5 May 2010. 5By Notice of Motion filed on 21 October 2010, Luigi sought an order that: "The Trustees' determination dated 5 May 2010 be varied by crediting [Luigi] with the payment of his one-half share of the sum of $208,000, such sum which was advanced by [Dominic and Lillian] to the Partnership of, D, L and L Iacullo at the time of the settlement of the purchase of 143 [Property O]." 6Luigi's claim is elaborated by points of claim filed on 14 April 2011. Luigi contended that a direction made by letter dated 10 November 1999 to IMS Developments Pty Ltd ("IMS Developments") to pay Dominic and Lillian the sum of $49,980 was made by him in part repayment to Dominic and Lillian of his half of the $208,000 loan made by Dominic and Lillian to the partnership. Luigi also contended that a direction dated 12 September 2000 to IMS Developments to cause the sum of $76,000, otherwise payable to Badminton Investments Pty Ltd ("Badminton Investments"), to be paid to the Engadine Unit Trust on behalf of Dominic and Lillian was made by Luigi to repay to Dominic and Lillian the balance of Luigi's half of the $208,000 loan made by Dominic and Lillian to the partnership. Nature of the Court's jurisdiction to review the Trustees' determination 7Each party challenges separate aspects of the Trustees' determination. An initial question arose before me as to the jurisdictional basis on which the Court was entitled to review the Trustees' determination. Luigi did not identify a basis for the Court's exercise of jurisdiction in his opening submissions. Dominic and Lillian contended that, although the orders of 29 April 2008 and 4 August 2009 were attended by a degree of informality, the correct view was that the Trustees were appointed as referees under UCPR r 20.14. 8In my view, the better approach is to treat the Trustees' determination as, in substance, a referee's report under UCPR Pt 20 Div 3. The assessment of complex financial issues between the parties by the expert accountants who had been appointed as Trustees involved a use of their specialist expertise to resolve issues to which that expertise was relevant in a manner which is common in such references. The principles applicable to the review of a referee's report were helpfully summarised by McDougall J in Banabelle Electrical v State of New South Wales [2005] NSWSC 714 at [9], in a passage which was adopted in Powers v Stoikos [2007] NSWSC 675 at [13], and include that: (1) An application under Pt 72 r 13 is not an appeal either by way of hearing de novo or by way of rehearing. (2) The discretion to adopt, vary or reject the report is to be exercised in a manner consistent with both the object and purpose of the rules and the wider setting in which they take their place. Subject to this, and to what is said in the next two sub-paragraphs, it is undesirable to attempt closely to confine the manner in which the discretion is to be exercised. (3) The purpose of Pt 72 is to provide, where the interests of justice so require, a form of partial resolution of disputes alternative to orthodox litigation, that purpose would be frustrated if the reference were to be treated as some kind of warm up for the real contest. ... (5) Where a report shows a thorough, analytical and scientific approach to the assessment of the subject matter of the reference, the Court would have a disposition towards acceptance of the report, for to do otherwise would be to negate both the purpose and facility of referring complex technical issues to independent experts for inquiry and report. (6) If the referee's report reveals some error of principle, absence or excessive jurisdiction, patent misapprehension of the evidence or perversity or manifest unreasonableness in fact finding, that would ordinarily be a reason for rejection. In this context, patent misapprehension of the evidence refers to a lack of understanding of the evidence as distinct from the according to particular aspects of it different weight; and perversity or manifest unreasonableness mean a conclusion that no reasonable tribunal of fact could have reached. The test denoted by these phrases is more stringent than 'unsafe and unsatisfactory'. (7) Generally, the referee's findings of fact should not be re-agitated in the Court. The Court will not reconsider disputed questions of fact where there is factual material sufficient to entitle the referee to reach the conclusions he or she did, particularly where the disputed questions are in a technical area in which the referee enjoys an appropriate expertise. Thus, the Court will not ordinarily interfere with findings of fact by a referee where the referee has based his or her findings upon a choice between conflicting evidence. (8) The purpose of Pt 72 would be frustrated if the Court were required to reconsider disputed questions of fact in circumstances where it is conceded that there was material on which the conclusions could be based. (9) The Court is entitled to consider the futility and costs of re-litigating an issue determined by the referee where the parties have had ample opportunity to place before the referee such evidence and submissions as they desire. (10) Even if it were shown that the Court might have reached a different conclusion in some respect from that of the referee, it would not be (in the absence of any of the matters referred to in sub para (6) above) a proper exercise of the discretion conferred by Pt 72 r 13 to allow matters agitated before the referee to be re-explored so as to lead to qualification or rejection of the report. (11) Referees should give reasons for their opinion so as to enable the parties, the Court and the disinterested observer to know that the conclusion is not arbitrary, or influenced by improper considerations; but that it is the result of a process of logic and the application of a considered mind to the factual circumstances proved. The reasoning process must be sufficiently disclosed so that the Court can be satisfied that the conclusions are based upon such an intellectual exercise. (12) The right to be heard does not involve the right to be heard twice. (13) A question as to whether there was evidence on which the referee, without manifest unreasonableness, could have come to the decision to which he or she did come is not raised 'by a mere suggestion of factual error such that, if it were made by a trial judge, an appeal judge would correct it'. The real question is far more limited: 'to the situation where it is seriously and reasonably contended that the referee has reached a decision which no reasonable tribunal of fact could have reached; that is, a decision that any reasonable referee would have known was against the evidence and weight of evidence'. (14) Where, although the referee's reasons on their face appear adequate, the party challenging the report contends that they are not adequate because there was very significant evidence against the referee's findings with which the referee did not at all deal, examination of the evidence may be undertaken to show that the reasons were in fact inadequate because they omitted any reference to significant evidence. (15) Where the court decides that the reasons are flawed, either on their face or because they have been shown not to deal with important matters, the court has a choice. It may decline to adopt the report. Or it may itself look at the detail of the evidence to decide whether or not the expense of further proceedings before the referee (which would be the consequence of non adoption) is justified. 9Even if the Trustees' determination was not treated as being in the nature of a report under UCPR Pt 20 Div 3, it should be treated as the outcome of a process agreed by the parties and formalised by the consent order. In my view, the Court would have jurisdiction to review the Trustees' determination on the basis that the process ordered by consent was expressly subject to further order of the Court. That reservation allows the Court to now adopt the account in the form determined by the Trustees or with such variation as either party establishes should be made. In my view, the Court would exercise a similar restraint in reviewing the Trustees' account on that basis as it would exercise in determining whether to adopt, vary or reject a referee's report, reflecting a similar policy that, where the power to make a determination has been conferred on an expert third party, it would be undesirable for all issues determined by that party to be open to an unlimited reconsideration of disputed facts before the Court since this would deprive the parties and the community of the cost savings and efficiencies which an expert determination would otherwise deliver. Neither party contended to the contrary of that approach. The information before the Trustees 10There is evidence before me of the inquiries that had been made by the Trustees and information that had been provided to them. That evidence discloses that the Trustees had undertaken a painstaking process of gathering relevant information from the parties. I refer to some of those inquiries and the information provided to them below. 11By letter dated 5 November 2009 (Supplementary TB 72), the Trustees provided a spreadsheet to the parties identifying partner capital contributions during the period from 23 August 1996 to 29 February 2008 and additional spreadsheets. They identified the assumptions that they had made in preparing those spreadsheets and afforded any party who disputed the veracity of those assumptions the opportunity to provide them with documentary evidence to support those assertions. 12It appears that Luigi's solicitor responded by letter dated 13 November 2009 identifying various comments in respect of those assumptions and spreadsheets. The Trustees then wrote to Dominic and Lillian by letter dated 16 November 2009 (Supplementary TB 110) seeking their response to matters that had been raised by Luigi. The Trustees had access to at least some tax returns of the partnership over the relevant period. 13By letter dated 14 December 2009, the Trustees requested Luigi to produce documentary evidence of the relevant payments, and copies of correspondence and contemporaneous file notes of telephone conversations with Dominic concerning the requests which he contended he had made that Dominic stop deducting monies paid from the partnership bank account in respect of the Vincentia loan (Supplementary TB 265). By letter dated 22 December 2009, Luigi responded to the request for documentary evidence for the former and did not respond to the request for the latter (Supplementary TB 282). 14By letter dated 18 March 2010 (Supplementary TB 381), the Trustees wrote to Luigi (with a similar letter to Dominic and Lillian) noting that: "As you are aware, the purchase of [Property O] in 1998 was partially financed by a loan to Mr Dominic Iacullo and Mrs Lillian Iacullo of $208,000 from the GIO Building Society, which was secured by a property owned by Mr Dominic Iacullo and Mrs Lillian Iacullo at Vincentia. It is said that there was a verbal agreement whereby you would repay your share of the Vincentia borrowings. I understand that you and Mr Dominic Iacullo and Mrs Lillian Iacullo were unitholders in the IMS Unit Trust and the Engadine Unit Trust. You assert that you repaid your share of the Vincentia borrowings pursuant to the directions you gave to IMS Development Pty Ltd, as Trustee for the IMS Unit Trust, on 10 November 1999 and 12 September 2000." The Trustees also sought further information from Luigi as to the circumstances in which interest and the borrowings on the Vincentia loan were paid from the Property O bank account during the period from 12 September 2000 to 30 June 2003 and drew Luigi's attention to the work papers attached to the partnership income tax returns for the years ended 30 June 2002 and 30 June 2003 showing that deductions were claimed for the Vincentia loan repayments in each of those years. 15By letter dated 31 March 2010, Luigi's solicitors outlined Luigi's position in respect of that amount, noting that: "As between Luigi for the one half and Dominic and Lillian for the other half it was acknowledged that Luigi 'owed' Dominic and Lillian half of the sum of $208,000." That letter also pointed to the circumstances in which Luigi contended those amounts had been repaid and drew attention to Luigi's affidavit sworn on 7 September 2008 in Supreme Court proceedings 5484 of 2007 and the exhibits thereto. 16By letter dated 7 April 2010 (Supplementary TB 401), the Trustees advised Luigi that: "The partnership income tax returns for the years ended 30 June 2001, 2002 and 2003 brought to account, as expenses of the partnership, the monies paid from the partnership bank account in respect of the Vincentia borrowings. At least for the years ended 30 June 2001, 2002 and 2003, there is contemporaneous evidence that the partners agreed that the Vincentia borrowings were expenses of the partnership. May I have your comments, in writing, within seven days?" By letter dated 13 April 2010 (Supplementary TB 422), Luigi's solicitors responded to that letter. The Trustees' determination as to whether Luigi had repaid half of the Vincentia loan 17I turn now to the basis on which the Trustees reached their determination. The Trustees found, and no party has challenged, that Luigi paid half of the acquisition costs of Property O other than half the sum of $208,000 and paid the sums of $49,980 and $76,000 to Dominic and Lillian, and also paid half of the expenses including interest payable in relation to the acquisition, retention and redevelopment of Property O. The amount of $208,000 was referable to a borrowing by Dominic and Lillian from GIO that funded part of the purchase price of Property O, which was secured by way of a first mortgage over another property owned by Dominic and Lillian at Vincentia. That loan was serviced by monthly payments of principal and interest of $1,568 that were paid out of the Property O account until June 2003. 18The Trustees observed that: "It appears to be common ground between the parties that there was an oral agreement between on one hand, Mr Dominic Iacullo and Mrs Lillian Iacullo, and Mr Luigi Iacullo, on the other hand, whereby Mr Luigi Iacullo would repay half of the Vincentia loan. Mr Luigi Iacullo asserts that he did so pursuant to the directions to pay $49,980 on 10 November 1999 and $76,000 [on] 12 September 2000, respectively. Mr Dominic Iacullo and Mrs Lillian Iacullo assert that the loan was not repaid." 19The Trustees referred to the respective parties' submissions in respect of the payment of $49,980 on 10 November 1999. They noted Dominic's assertion that those monies represented a repayment by Luigi of other cash loans or advances, agreed verbally between the brothers and not recorded in writing; they referred to Luigi's affidavits sworn in November 2007 and September 2009 in which he deposed that he repaid his share of the Vincentia loan pursuant to the directions made on 2 November 1999 in the sums of $49,980 and $76,000, and they noted a letter dated 1 December 2009 from Mr Michael Murr, a director of IMS Developments, on which Luigi also relied. 20The Trustees summarised their conclusion as follows: "The Trustees reject Mr Luigi Iacullo's submission, regarding the application of the directions to pay $49,980 on 10 November 1999, to his loan account, for the following reasons: (a) there is no contemporaneous evidence in the Trustees' possession that the direction to pay $49,980 was for the purpose of repaying the Vincentia loan; (b) the Michael Murr letter of 1 December 2009 was written some ten years after the transaction and accordingly is of little evidentiary weight; (c) whilst Mr Dominic Iacullo has admitted receipt of the sum of $49,980 on or about 10 November 1999, he asserted that it was for the repayment of other loans or advances. There is no further documentary evidence from Mr Dominic Iacullo to substantiate this assertion, such as when the advances were made to Mr Luigi Iacullo, how much they were for and for what purpose; and (d) the fact that Mr Dominic Iacullo and Mrs Lillian Iacullo ceased to be making repayments in respect of the Vincentia loan out of the partnership bank account on 30 June 2003 is not evidence that Mr Luigi Iacullo repaid part of the Vincentia loan on 9 November 1999." 21The Trustees also reviewed the parties' submissions in respect of the direction to pay $76,000 on 12 September 2000 and summarised their conclusion as follows: "The Trustees reject Mr Luigi Iacullo's submission regarding the application of the direction to pay $76,000, to his loan account for the following reasons: (a) there is a lack of contemporaneous evidence regarding the purpose of the directions to IMS Unit Trust on 12 September 2000 being for the repayment of the Vincentia loan. Mr Luigi Iacullo has not produced any contemporaneous evidence as to the purpose of those directions; (b) little evidentiary weight can be placed on the Michael Muir letter of 1 December 2009, which was written some nine years after the transaction; and, (c) the fact that no further payments were made in respect to the Vincentia loan from the partnership bank account after 30 June 2003, some two and a half years after the directions to the IMS Unit Trust on 12 September 2000, does not provide any assistance in determining whether Mr Luigi Iacullo repaid his share of the Vincentia borrowings on 12 September 2000." 22Luigi relied in submissions to the Trustees, and also seeks to rely in these proceedings, on a direction given to the IMS Unit Trust to pay an interim distribution of profits due to Luigi, to Dominic and Lillian on 10 November 1999 (also sought to be tendered before me as Luigi 4.11.10 [16] , LI Ex 9). Luigi also relied in submission to the Trustees, and seeks to rely in these proceedings, on a letter dated 9 November 1999 from D'Angelo Solicitors in respect of a bank cheque in favour of Dominic and Lillian in the sum of $99,960 which he contends is their share and Luigi's share of the interim distribution of profit in the IMS Unit Trust at that time (sought to be tendered before me as Luigi 4.11.10 [17] , LI Ex 16). Luigi relied in submission to the Trustees, and also seeks to rely in these proceedings, on a direction given to IMS Developments dated 12 September 2000 in respect of the payment of $76,000 to Dominic and Lillian (Luigi 4.11.10 [20], LI Ex 17). Those documents established that the relevant payments were made, which Dominic and Lillian did not contest before the Trustees and do not contest before me, not that they had the character that Luigi attributes to them. The Trustees correctly noted the lack of contemporaneous evidence regarding the purpose of the directions. 23Luigi also relied before the Trustees (and in these proceedings) on a letter dated 1 December 2009 written by Mr Michael Murr in his capacity as director of IMS Developments Pty Ltd and Pacificon Pty Limited to support his contention that he had repaid his half of the $208,000 loan. Mr Murr's letter (Supplementary Bundle 239) asserted that Luigi was entitled to an interim profit distribution of $49,980 from the IMS Unit Trust and that the effect of Luigi's letter dated 10 November 2009 was that Dominic and Lillian were paid Luigi's share of that distribution of $49,980. As I noted above, Dominic and Lillian do not contest the payment of that amount. Mr Murr went on to assert that: "My recollection is that at the time you [Luigi] advised me that you owed Dominic and Lillian Iacullo about $100,000 (in relation to a loan they took out in their names to enable them and you to jointly purchase [Property O]) and that by directing that your interim profit distribution of $49,980.00 be paid to Dominic and Lillian Iacullo you were paying back to them approximately half the amount you owed them." 24Mr Murr's letter also referred to a letter of direction dated 12 September 2000 in relation to an amount owed by IMS Developments Pty Ltd as trustee for IMS Unit Trust to Badminton Investments in the amount of $190,400 and a subscription for units in the Engadine Unit Trust of $76,000 by Dominic and Lillian Iacullo and stated that: "I further recall that at the time you [Luigi] advised me that the sum of $76,000 being advanced by your company on behalf of Dominic and Lillian Iacullo was more than you owed Dominic and Lillian Iacullo in relation to a loan they took out in their names to enable them and you to jointly purchase [Property O], and that my response at the time had been words to the effect - 'You are brothers. You will sort it out'". 25In my view, the Trustees did not commit any error of principle or misapprehend the evidence or act perversely or manifestly unreasonably in giving little weight to Mr Murr's letter. They were correct in noting that that letter was written many years after the relevant events, some ten years after the first direction and over nine years after the second direction. It might reasonably be expected that Mr Murr's recollection of conversations with Luigi some nine or ten years before would have weakened over time. While the Trustees did not express their reasoning in the terms that a Court might have adopted, their approach was consistent with the caution with which Courts have treated evidence of oral communications given many years after the event and in circumstances where disputes have arisen between the respective parties. That approach was, in my view, consistent with principle and commonsense. 26The Trustees also noted that income tax returns and workpapers of the partnership for the years ended 30 June 2001, 2002 and 2003 recorded payments totalling $48,515 which were claimed as expenses in the partnership income tax returns for the Vincentia loan and that those income tax returns were prepared by Luigi or staff under his direction and control. 27The Trustees also referred to Luigi's claim that he had pressed Dominic and Lillian Iacullo to stop paying the Vincentia loan from the partnership bank account after he made the direction that the IMS Unit Trust pay $76,000 on 12 September 2000. The Trustees noted that there was no contemporaneous documentary evidence to substantiate that assertion, other than a file note dated 9 February 2002, and noted that Dominic stated that Luigi did not ask him to stop making such payments. The Trustees expressed the view that the file note dated 9 February 2002 did not provide unambiguous evidence of Luigi's assertions and was of limited assistance. 28Luigi also relied before the Trustees on affidavit evidence filed previously in the proceedings, as to which Luigi and Dominic were in contest, as to conversations in which Luigi claimed that he asserted that he had repaid the amount owed and requested Dominic to cancel the periodic payments and that Dominic agreed on that course. Luigi sought to led corresponding affidavit evidence in these proceedings, which I admitted subject to relevance and to which I will refer further below (Luigi 4.11.10 [21], [23] and [25]). The Trustees had regard to this evidence and were, in my view, entitled to treat it with caution. I have referred in my judgment in proceedings 07/257623 to the principles applicable to the proof of facts in civil proceedings, given the fallibility of human memory, in the absence of some reliable contemporaneous record or other satisfactory corroboration: Watson v Foxman (1995) 49 NSWLR 315 at 318-319; Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 2) [2008] FCA 810 at [41]; Varma v Varma [2010] NSWSC 786 at [424]-[425]. 29Luigi also sought to rely before the Trustees (and also before me) on a reference in Dominic's affidavit of 18 August 2009 to half of the mortgage as being $260,000 which did not include half of the amount of $208,000. In my view, the Trustees did not err in giving little weight to that matter, since that paragraph was directed to the first bank loan on Property O and not the second loan taken out by Dominic and Lillian with GIO secured on the Vincentia property. 30Luigi also criticises the Trustees' findings on the basis that they failed to require Dominic and Lillian to substantiate the "bald assertion" that Luigi caused them to be paid the relevant sums in repayment of monies previously owed. However, it was a matter for Luigi to establish that the amount of $125,980 that was paid in fact had the character he sought to attribute to it, of repayment of half of the loan of $208,000, not for Dominic and Lillian to establish the contrary. I can see no basis for a finding that the Trustees' approach was flawed so as to require the Court's intervention. 31In my view, the Trustees' findings properly analysed the issues before them, and that should lead the Court toward a disposition to accepting their view in accordance with principle (3) as summarised in Banabelle Electrical . I see no error of principle, patent misapprehension of the evidence or perversity or manifest unreasonableness in their assessment of the evidence before them, and the factual material before them seems to me to have been sufficient to support the view they reached, namely that Luigi had not established that the payment on which he relied had the character he attributed to them. In my view, the Trustees did not act unreasonably in treating the evidence on which Luigi relied as having little weight and in treating the fact that interest deductions were claimed for the relevant payments in the income tax returns of the partnership as a matter that undermined Luigi's account of events. Admissibility of additional evidence 32A further question arises as to the evidence that is admissible in respect of any review of the Trustees' decision. Dominic and Lillian objected to the admission of new evidence in these proceedings and that evidence was admitted subject to relevance. New evidence may not be admitted in a review of a referee's report except by leave of the Court: UCPR r 20.24(2). I have concluded that I should not admit such further evidence, since the evidence sought to be led before me is largely if not entirely the evidence which had already been put before the Trustees. 33Luigi sought to rely in the proceedings before me on the matters set out in paragraphs 15-30 of his affidavit sworn 4 November 2010, which I admitted subject to relevance and subject to rulings on specific objections. He relied on his direction dated 10 November 1999 to the IMS Unit Trust; the letter dated 9 November 1999 from D'Angelo Solicitors and his direction dated 12 September 2000 in respect of the payment of $76,000 to Dominic and Lillian to which I have referred above. Those documents had been before the Trustees and were considered in their reasoning. He referred to a conversation with Dominic that he said occurred at the time of the direction on 12 September 2000 and to further conversations on 9 February 2002 and on a later date on which he said he had objected to payments from the partnership account in respect of the Vincentia loan. He had also relied on the corresponding conversations in materials provided to the Trustees. 34The findings which I have made in proceedings 07/257623 also mean that, even if I had admitted the affidavit evidence of conversations to the effect of those on which Luigi had already relied before the Trustees, I would not have accepted the evidence of these conversations where that evidence was not corroborated by other evidence. Luigi also denied before me that he personally supervised the preparation of the income tax returns in which interest on the Vincentia loan was claimed as a deduction after Luigi claims to have repaid his share of that loan. However, those returns were prepared by an accountant in the firm in which Luigi is a partner and Luigi accepted that they were prepared on the basis of information provided by Luigi and Dominic. Although he declined to accept that those returns were prepared on his "instructions" (as distinct from the information he and Dominic provided), I would not have accepted his denial of that proposition. 35Luigi also contended before me that, during the period in which Dominic and Lillian were represented by their former solicitors, from 2005 until the end of 2008, they did not assert that Luigi had failed to repay half of the sum of $208,000. I give little weight to this matter. There were numerous matters in dispute between the parties at various times and I do not consider that any inference can be drawn that a failure to raise a particular matter at an earlier point meant that matter had no basis. 36I therefore consider that Luigi's challenge to the Trustees' determination has failed. Dominic and Lillian's challenge to the Trustees' determination 37Dominic and Lillian challenge the Trustees' failure to award interest in their favour on the amount of $208,000 claimed to be outstanding. They claim interest on $104,000 in the sum of $39,292 up to May 2010 and thereafter at the rate of 7% per annum. 38Dominic had sought interest for the Vincentia loan from July 2003 onwards in the accounting before the trustees. The Trustees do not appear to have expressly dealt with this matter. The basis of the claim to interest appears to be that the partnership, and Luigi to the extent of his interest in it, was obliged to reimburse Dominic and Lillian the interest that they paid in respect of the mortgage over the Vincentia property. 39I have outlined above the inquiries which were made by the Trustees in respect of the Vincentia loan generally. The Trustees also investigated the question of liability for interest in respect of the Vincentia loan. By letter dated 16 November 2009 (Supplementary TB 110), the Trustees requested Dominic and Lillian to advise their understanding of the oral agreement with Luigi regarding, inter alia, payment of interest in respect of that loan and sought clarification why the partnership ceased to make payments of interest after 30 June 2003. By letter dated 25 November 2009 (Supplementary TB 194), Dominic advised the Trustees that there was an agreement that Luigi would pay the repayments on the Vincentia loan to GIO until he had paid the $104,000; presumably, that reference was intended to be to Dominic's share of that interest. 40By letter dated 26 November 2009 (Supplementary TB 229), Dominic's solicitors contended that the Vincentia loan was an advance by Dominic and Lillian to the partnership to enable it to purchase Property O; pointed to the fact that the partnership had made principal and interest payments on that loan to 30 June 2003 without objection from Luigi; and contended that: "When the partnership ceased to make principal and interest payments on the Vincentia loan after 30 June 2003, Dominic and Lillian paid those principal and interest repayments out of their personal account. However, the partnership continued to have and still has the benefit of the balance of the Vincentia loan. Dominic and Lillian are entitled to now call upon the partnership to repay the balance of the Vincentia loan plus interest. The balance of the principal amount plus interest on the Vincentia Loan from 6 August 2003 to date should therefore be repaid to Dominic and Lillian because it is clearly a debt owed to them by the partnership. That position was again advanced in letters dated 16 April 2010 and 13 May 2010 from Minter Ellison (Supplementary TB 425; Supplementary TB 462). The amount of interest was calculated as $78,584 as at May 2010 (Supplementary TB 470). 41It appears that the position adopted by Luigi throughout the period was that he had repaid his share of the loan, not that he contested that he was required to reimburse the amount of interest on the loan if that had not occurred. The Trustees rejected the former submission, and I have found that I should not disturb the Trustees' finding that Luigi has not established that matter. 42Notwithstanding the inquiries they had made, the Trustees do not seem to have dealt with the question of liability for the interest paid by Dominic and Lillian in respect of the Vincentia loan in their determination. I can see no basis for treating the obligation to pay interest on the Vincentia loan differently from the obligation to repay the principal in respect of that loan. Since the Trustees found that Luigi had not repaid his half of that loan and that amount should be debited to him in the accounting, the interest paid by Dominic & Lillian referable to that amount should be treated in the same manner. Conclusion 43As noted above, I consider that Luigi's challenge to the Trustees' determination has failed. Dominic's challenge has succeeded to the extent that half-share of the interest on the Vincentia loan which was paid by Dominic and Lillian personally rather than by the partnership should be debited to Luigi. It seems to me that the proper course is to make an order under UCPR r 20(3) and treat the Trustees' letters as in substance a report and adopt their findings, subject to variation to address that matter. However, I will hear the parties as to the form of orders that should be made consequential upon my judgment and as to costs.