[12] It follows that there is no basis for the contention advanced on behalf of Mr Trinkler, that somehow following dissolution of the partnership the assets ceased to be held for the benefit of the partners according to their interests following taking of accounts, but instead were transmogrified into assets held by the former partners as co-owners. "
9 In ACE Project Group Pty Ltd v Ginger Development Enterprises Pty Ltd [2006] NSWSC 962, a partnership was dissolved and one side of the partnership assigned to the other side the authority to deal with the partnership assets. This included realising the partnership assets by sale, liquidating the partnership debts and having the surplus assets divided. All costs reasonably incurred in winding up the partnership were allowed as partnership expenses on the taking of accounts.
10 The fact that a partnership is dissolved, or a joint venture is terminated, as at a particular date, does not mean that all relations between the partners or joint venturers necessarily cease at that date. The partnership or joint venture must be wound up. In the absence of express or implied agreement to the contrary, if one of the partners or joint venturers leaves it to the other to complete the process of winding-up, the other party does so as "quasi-receiver or trustee for the partners".
11 Even if the joint venture were not a partnership, and no analogy could be drawn with a partnership, it would be appropriate to account as on a winding-up of the projects which were in the joint venture. If the parties' relations were wholly contractual, then on the plaintiff's case, on accepting the defendants' repudiation of the joint venture agreement, it would be entitled to damages to put it in the same position as if the joint venture agreement had been performed. Those damages would have to be assessed by reference to the profits or losses which would ultimately have been derived or incurred from the various projects which formed the joint venture had the agreement not been repudiated. Prima facie, that measure of damages would be determined by the ultimate profits and losses of the various projects, adjusted if necessary for any variance attributable to the fact that the projects were being completed by the defendants rather than in accordance with the requirements of the joint venture agreement had it remained on foot.
12 Notwithstanding its change of tack, the plaintiff submitted that parts of the referee's report should be adopted from which the Court should make a finding as to the profit of the joint venture after completion of the projects the subject of the joint venture. The plaintiff submitted that the defendants had calculated that as at 30 June 2003, being the date at which the projects were taken to have been completed, there was a loss of $796,667. The plaintiff contended that certain adjustments should be made on expenses for wages and salaries, overheads, certain disputed expenses claimed by the defendants in annexures 10 and 11 to Mr Murray's final report, and in the defendants' final position paper. (Mr Murray is an accountant who provided reports on the reference as an expert on behalf of the fourth to seventh defendants.) The plaintiff also submitted that it was clear from the referee's report that the defendants' calculation of loss included a double-counting of trade creditors of $1,351,566, which should be reversed. Hence, it was submitted that relevant parts of the report should be adopted from which, according to the plaintiff, it followed that the profit for the joint venture on completion of all of the joint venture projects was $985,169.70.
13 I do not accept this submission. It appears from the whole of the referee's report that when he adopted the assumption that the joint venture ended on 9 April 2002, he assumed that the joint venture had ended for all purposes. He did not assume that the joint venture remained on foot for the purpose of its being wound up. I cannot assume that his reasoning on all of the disputed questions would have been the same had he adopted a different assumption. He did not address in any detailed or critical way the matters for which the plaintiff now contends because they were not relevant to the way he decided the issues.
14 The most significant item in the plaintiff's contention is the alleged double-counting in the defendants' calculation of profit and loss of the joint venture after completion of all of the projects of trade creditors as at 9 April 2002 of $1,351,556.64. The referee was not called upon to decide whether there was a double counting because he did not determine the profit or loss of the joint venture after completion of the joint venture projects.
15 In appendix 8 to his report, the referee summarised what he understood to be the profit and loss statement for the joint venture that produced the loss calculated by the defendants. That summary recorded the defendants' contention that for the period from 10 April 2002 to 30 June 2002 and from 1 July 2002 to 30 June 2003 the costs of sales during those periods were $336,631.13 and $928,262.91 respectively. The appendix also summarised what was apparently the defendants' contention that other expenses were incurred of $1,227,455.18 for the period from 10 April 2002 to 30 June 2002 and $898,582.15 for the period from 1 July 2002 to 30 June 2003; a total of $2,126,037.33. The appendix also summarised the apparent contention of the defendants that in calculating profit or loss to 30 June 2003 deductions should be made for trade creditors of $1,351,556.64, being trade creditors as at 9 April 2002. There is an apparent anomaly not only in relation to the deduction of $1,351,556.64 for trade creditors as at 9 April 2002, but also in relation to costs of sales, which are not deducted as expenses in appendix 8 to the referee's report. The plaintiff submitted that the figure of $1,351,556.64 for creditors outstanding as at 9 April 2002 were included in the expenses of $2,126,037.33 incurred after that date and prior to 30 June 2003, and that the costs of sales was also included in that figure. The defendants deny that the figure of $1,351,556.64 for trade creditors outstanding as at 9 April 2002 is included in the expenses of $2,126,037.33, except for an immaterial sum of $5,589.79.
16 The reports of Mr Murray provided to the referee do not clearly reveal how the asserted loss of $796,367 to the completion of the projects was arrived at, although his affidavit prepared for this application provides a clearer explanation. In his reports of 4 August 2003 and 29 July 2004, Mr Murray annexed profit and loss statements for the period from 10 April 2002 to 30 June 2002 and from 1 July 2002 to 30 June 2003. It is not apparent from the face of the reports whether they were prepared on the cash or accruals basis. Both reports provided figures for costs of sales and other expenses which cannot be reconciled with the figures in appendix 8 to the referee's report. In his first report, Mr Murray also noted the existence of trade creditors of $815,696.94 for tax liabilities which were unpaid as at 30 June 2003. The plaintiff tendered copies of profit and loss statements for the two periods which included handwritten amendments which might explain the otherwise incomprehensible statements of other expenses incurred of $1,227,455.18 and $898,592.15 for the two periods in question. It is not clear whether those documents were before the referee. Counsel for the plaintiff submitted that the document showed that the defendants' position taken before the referee was that those figures for expenses incurred included expenses for costs of sales. That may be so, but it leaves the adjustments unexplained. Thus, in the case of the profit and loss statement for 1 July 2002 to 30 June 2003, the handwritten adjustments involved the exclusion from the costs of sales of $590,076.42 otherwise shown as an expense for building materials. In the case of the earlier profit and loss statement, the expense for building materials was shown in the profit and loss statement as a negative figure of $179,343.01. The handwritten adjustments to the profit and loss statement did not exclude this figure (notwithstanding the handwritten notation to the contrary) but duplicated it as a negative expense, that is, as an item of revenue.
17 The affidavit sworn by Mr Murray on this application did not address these matters.
18 The referee noted the differences in the positions taken by the parties but did not make any findings about them. They were not relevant to the basis upon which the referee proceeded, namely, of striking a profit for the joint venture as at 9 April 2002.
19 I do not accept that the defendants should be taken to have confined their case before the referee to a case that the total expenses, including costs of sales, for the period from 10 April 2002 to 30 June 2003, including also expenses for creditors were unpaid as at 30 June 2003, totalled $2,126,037.33. I sympathise with the referee and with the plaintiffs for the lack of articulation of the defendants' position on these matters. As I understand the defendants' position, the profit and loss statements which are annexures 8F and 9F to Mr Murray's report account only for expenses incurred after 9 April 2002 and do not include as expenses those which were incurred in the prior periods but paid after 9 April 2002, or which remain unpaid. Nor, as I understand the defendants' position, did the profit and loss statements deal only with cash receipts and payments. They are an unhappy amalgam.
20 On the other hand, there is force in the defendants' position that the accounting has been made more complicated by the plaintiff's contention that accounts should be struck as at 9 April 2002. That has raised complicated questions about cash and accrual accounting as at 9 April 2002 and has obscured the real issue.
21 On this application the defendants have read an affidavit of Mr Murray to the effect that in his earlier reports the expenses post 9 April 2002 totalling $2,249,188.62 represented expenses incurred excluding trade creditors as at 9 April 2002. These questions have not been considered by the referee. The question of what was the profit or loss of the joint venture, on the basis of the ultimate fate of the joint venture projects, has not been considered by the referee. In my view, the materials placed by the defendants before the referee on this question were confusing. On the other hand, the plaintiff did not address itself to the proper question. The referee should be asked to determine this question. He is entitled to proper assistance from the parties, particularly the defendants. The calculations, assumptions and methodologies should be completely articulated.
22 There are other reasons which make it impossible to adopt the referee's report as a statement of profit or loss of the joint venture after completion of all of the projects. The referee calculated depreciation of the assets employed in the joint venture as at 9 April 2002. On an accounting of completion of the projects, the figure for depreciation of the assets employed in the joint venture would be different. It is not possible to calculate the difference from the referee's report.
23 There are also two categories of disputed expenses described as expenses in appendices 10F and 11F of the final report of Mr Murray for the defendants. There are numerous expenses ranging from $5 to $23,974. The referee took the sensible approach of examining the larger disputed items and then applying the percentage allowed after review of the larger items to the whole of the items in dispute. However, some of the larger items disallowed by the referee were disallowed because they related to expenses incurred after 9 April 2002. On the concession now made by the plaintiff, that would not be a sufficient ground for rejecting those items. It may well be the case, as the plaintiff submitted, that this can be the subject of an arithmetical adjustment. The plaintiff is prepared to concede those items which were rejected solely on the grounds that they related to a period after 9 April 2002, with consequential arithmetical adjustments to the percentage allowance of other smaller disputed items. I accept that this is a proper approach. Had these been the only items in question, I would have been prepared to accept the referee's report subject to such arithmetical adjustments.
24 Another possible area of dispute is the allocation of overhead expenses. The first and third defendants (VMF Holdings (NSW) Pty Ltd and Quest Contracting Pty Ltd), were engaged not only in joint venture projects but also in other projects. Some of the expenses allowed in relation to the joint venture project related to overheads applicable to the entirety of their businesses. The referee added back what he considered to be the appropriate percentage of such overhead expenses incurred up to 9 April 2002 which were not incurred in connection with the joint venture. It is not clear that the same percentage would necessarily apply if accounts were taken as at the completion of the projects which were subject to the joint venture.
25 For these reasons, I do not consider that I should accept the referee's report in part and make a finding on the basis of the part adopted that a profit was earned by the joint venture up to the completion of the projects, as submitted by the plaintiff. Instead, I will refer to the referee the question what was the loss or profit of the joint venture on the assumption that the income and expenses of the joint venture projects contracted for as at 9 April 2002 up to their completion are to be taken into account in determining joint venture profit or loss.
26 The plaintiff's notice of motion of 23 June 2008 should be dismissed and the defendants' notice of motion of 18 June should be otherwise dismissed. The costs of the defendants' notice of motion filed on 18 June 2008 and the plaintiff's notice of motion filed on 23 June 2008 should be the defendants' costs in the proceedings. I will hear the parties on appropriate directions for the conduct of that reference.