Court of Appeal (WA)|2012-03-29|Before: Pullin JA

FAZIO -v- FAZIO [2012] WASCA 72 (29 March 2012)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : FAZIO -v- FAZIO [2012] WASCA 72

MARK ANTHONY CONLAN as Executor of the Estate of VINCENZO FAZIO (Dec)

Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA

Citation : FAZIO -v- FAZIO [2010] WASC 263

Partnership - Inferred agreement - Relevance of subsequent conduct - Release of interest - Accord and satisfaction - Abandonment - Repudiation - Inferences - Jones v Dunkel - Whether judge's findings beyond pleaded case - Sufficiency of evidence - Business records - Proprietary estoppel

Partnership Act 1895 (WA), s 7(1), s 7(2), s 8(3), s 16, s 29, s 33, s 37, s 42, s 43(a), s 43(b), s 44, s 45, s 50, s 51, s 57

First Respondent : Mr C L Zelestis QC & Mr M N Solomon

Second Respondent : Mr C L Zelestis QC & Mr M N Solomon

Third Respondents : Mr C L Zelestis QC & Mr M N Solomon

Fifth Respondent : Mr C L Zelestis QC & Mr M N Solomon

Sixth Respondent : Mr C L Zelestis QC & Mr M N Solomon

Seventh Respondent : Mr C L Zelestis QC & Mr M N Solomon

Eighth Respondent : Mr C L Zelestis QC & Mr M N Solomon

Ninth Respondent : Mr C L Zelestis QC & Mr M N Solomon

Tenth Respondent : Mr C L Zelestis QC & Mr M N Solomon

Eleventh Respondent : Mr C L Zelestis QC & Mr M N Solomon

Twelfth Respondent : Mr C L Zelestis QC & Mr M N Solomon

Thirteenth Respondent : Mr C L Zelestis QC & Mr M N Solomon

Adler v Australian Securities and Investments Commission [2003] NSWCA 131; (2003) 179 FLR 1

Agricultural & Rural Finance Pty Ltd v Gardiner [2008] HCA 57; (2008) 238 CLR 570

Albrighton v Royal Prince Alfred Hospital [1980] 2 NSWLR 542

ALH Group Property Holdings Pty Ltd v Chief Commissioner of State Revenue [2012] HCA 6

Australian Securities and Investments Commission v Rich [2009] NSWSC 1229; (2009) 236 FLR 1

Banque Commerciale SA (in liq) v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279

Barnes v Addy (1874) LR 9 Ch 244

Barnes v Alderton [2008] NSWSC 107

Barrier Wharfs Ltd v W Scott Fell & Co Ltd [1908] HCA 88; (1908) 5 CLR 647

Beattie and Sutherland v Osman (No 4) [2009] NSWSC 834

Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) and (No 10) [2008] WASC 239; [2009] WASC 107; (2008) 39 WAR 1

Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153

Brandi v Mingot (1976) 12 ALR 551

Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833; (2001) 117 FCR 424

Brown v Wren Brothers [1895] 1 QB 390

Butler v Wilson [2011] NSWSC 262

Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd [1974] HCA 22; (1974) 131 CLR 321

Commissioner of State Taxation of the State of South Australia v Cyril Henschke Pty Ltd [2010] HCA 43; (2010) 242 CLR 508

Connell v Bond Corporation Pty Ltd (1992) 8 WAR 352

DHJPM Pty Ltd v Blackthorn Resources Ltd (formerly called AIM Resources Ltd) [2011] NSWCA 348

Dilosa v Latec Finance Pty Ltd (1966) 84 WN (Pt 1) (NSW) 557

DTR Nominees Pty Ltd v Mona Homes Proprietary Ltd [1978] HCA 12; (1978) 138 CLR 423

EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2010] WASCA 78; (2010) 41 WAR 23

Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523

Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95

Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89

Fazio v Fazio [2010] WASC 263

Federal Commissioner of Taxation v Everett [1980] HCA 6; (1980) 143 CLR 440

Festic v Atkinson (Unreported, WASCA, Library No 8484, 19 September 1990)

Fifteenth Eestin Nominees Pty Ltd v Rosenberg [2009] VSCA 112; (2009) 24 VR 155

Fitzgerald v Masters [1956] HCA 53; (1956) 95 CLR 420

Gould & Birbeck & Bacon v Mount Oxide Mines Ltd (in liq) [1916] HCA 81; (1916) 22 CLR 490

Holloway v McFeeters [1956] HCA 25; (1956) 94 CLR 470

Hughes v NM Superannuation Pty Ltd (1993) 29 NSWLR 653

Integrated Computer Services Pty Ltd v Digital Equipment Corporation (Aust) Pty Ltd (1988) 5 BPR 11,110

Intelmail Explorenet Pty Ltd v Vardanian (No 2) (2009) FCA 1018; (2009) 82 IPR 281

Jones v Sutherland Shire Council [1979] 2 NSWLR 206

Jorgensen v Boyce (1896) 22 VLR 408

Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; (2007) 233 CLR 115

Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; (2011) 243 CLR 361

Kuligowski v Metrobus [2004] HCA 34; (2004) 220 CLR 363

Lang v James Morrison & Co Ltd [1911] HCA 49; (1911) 13 CLR 1

Leeder v The State of Western Australia [2008] WASCA 192

Lewis v Lewis [2001] NSWSC 321

Lighting by Design (Aust) Pty Ltd v Cannington Nominees Pty Ltd [2008] WASCA 23; (2008) 35 WAR 520

LJ Hooker Ltd v Dominion Factors Pty Ltd [1963] 63 SR (NSW) 146

Lukin v Lovrinov (Unreported, SASC, Perry J, 9 April 1998)

MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) [1975] HCA 55; (1975) 133 CLR 125

Manly Council v Byrne [2004] NSWCA 123

Marist Brothers Community Inc v Shire of Harvey (1994) 14 WAR 69

Marminta Pty Ltd v French [2003] QCA 541

Maslen v Perpetual Executors Trustees & Agency Co (WA) Ltd [1950] HCA 55; (1950) 82 CLR 101

Massoud v NRMA Insurance Ltd (1995) 62 NSWLR 657

McDermott v Black [1940] HCA 4; (1940) 63 CLR 161

Meares v Safecar Security Ltd [1983] QB 54

Morgan v Babcock & Wilcox Ltd [1929] HCA 25; (1929) 43 CLR 163

Moss v Elphick [1910] 1 KB 846

Mullins v Laughton [2003] 2 WLR 1006

Osborn v McDermott [1998] 3 VR 1

Palmer v Moore [1900] AC 293

Paterson v MacKenzie [1921] NZGLR 43

Rowella Pty Ltd v Abfam Nominees Pty Ltd [1989] HCA 65; (1989) 168 CLR 301

Rushton (Qld) Pty Ltd v Rushton (NSW) Pty Ltd [2003] QCA 210; (2003) 1 Qd R 320

Ryder v Frohlich [2004] NSWCA 472

Sanpine v Koompahtoo Local Aboriginal Land Council (2005) NSWSC 365

Scaffidi v Perpetual Trustees Victoria Ltd [2011] WASCA 159

Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193

Seltsam Pty Ltd v McGuiness [2000] NSWCA 29; (2000) 49 NSWLR 262

Sobell v Boston (1975) 1 WLR 1587

Summers v The Commonwealth [1918] HCA 33; (1918) 25 CLR 144

The Administration of the Territory of Papua and New Guinea v Daera Guba [1973] HCA 59; (1973) 130 CLR 353

The Trustees of the Property of Cummins v Cummins [2006] HCA 6; (2006) 227 CLR 278

Thompson v De Lissa (Unreported, NSWSC, Powell J, 16 February 1990)

Truong v Lam [2009] WASCA 217

United Builders Pty Ltd v Mutual Acceptance Ltd [1980] HCA 43; (1980) 144 CLR 673

Vroon BV v Foster's Brewing Group Ltd [1994] VicRp 53; [1994] 2 VR 32

WA Country Health Service v Wright [No 2] [2010] WASCA 120

Walker v Melham [2007] NSWSC 264

Wallera Pty Ltd v CGM Investments Pty Ltd [2003] FCAFC 279

Watson v Foxman (1995) 49 NSWLR 315

West v Government Insurance Office of NSW [1981] HCA 38; (1981) 148 CLR 62

Williams v The Minister Aboriginal Land Rights Act 1983 and the State of New South Wales [2000] NSWCA 255

1 PULLIN JA: This is an appeal against a judgment which dismissed the appellant's claim for a declaration that he was a partner in Italia Limestone. The firm was established in the 1950s. By the 1960s the partners consisted of three groups, each holding a one-third share. One group was the Fazio family, the second the Catalano family and the third the Mignacca family. The Mignacca and Catalano families were not concerned about how the Fazios held their one-third interest. The appellant became a partner in Italia Limestone, taking a share of the Fazio family's one-third interest, sometime in the late 1960s or early 1970s. In 1975 the Fazio partners acquired the interests of the Mignacca family. As a result, the Fazios then held two-thirds of the partnership and the Catalanos held one-third.

2 Mr Fazio senior, the appellant's father, was the dominant figure in the Fazio group. The appellant worked in the partnership doing physical work. The appellant fell out with his father and he ceased working for the firm in 1984.

3 The central issue in the case was whether the appellant and his father reached an agreement whereby the appellant retired from the partnership in 1984. The retrospectant circumstantial evidence led at trial overwhelmingly revealed that the appellant and the other parties conducted themselves on the basis that the appellant had retired from the partnership and had no further interest in it. For example, the evidence revealed that the appellant signed a business name form in 1984 which stated that, with effect from 1 July 1984, he ceased to carry on business under the business name of Italia Limestone and the other partners were continuing to carry on business under that name. The other partners also signed the form and it was lodged with the relevant department. The evidence also revealed that at no time after October 1984 did the appellant, in many statements of his assets and liabilities, refer to any interest in the partnership either as an asset or a liability. The subsequent tax returns did not disclose any income from the partnership and the partnership's tax returns made no further mention of the appellant as a partner. The appellant knew, as was the fact, that he did not receive any share in partnership profits and was not called upon to sign any legal documents relating to partnership affairs. Unlike the period before 1984, he never received partnership accounts. He was never called upon to contribute capital to the partnership or to guarantee any borrowings.

4 Then, nearly 20 years later in 2003, the appellant wrote a letter to the firm's accountants asking for partnership records and asserting that he was a partner. This request for records was not complied with and the appellant made no similar assertion until after his father died in 2007. The appellant then commenced proceedings alleging that he was still a partner and seeking, inter alia, a declaration to that effect, a winding up of the partnership and an account.

5 Despite the appellant's denial that he had retired from the firm, the trial judge found that there had been an agreement between the appellant and his father which provided that:

(a) the appellant would retire from the partnership with effect from 1 July 1984;

(b) the partnership would continue without there being a winding up of its affairs;

(c) the appellant would be absolved from any liabilities arising from the future conduct of the partnership business; and

(d) the appellant and his wife would be given a property in Barrett Street, Spearwood, in consideration for the appellant's surrender of his interest in the partnership.

6 The trial judge inferred that the other partners acquiesced in, and consented to, the agreement between the appellant and his father in those terms, given that they continued to operate the business and to prepare and sign documents which are consistent with that finding (trial judge's reasons [439], [441]).

8 There were nine numbered paragraphs in the grounds of appeal, but there were 57 subgrounds in one of them, each containing a separate allegation of error. Despite the number of separate allegations of error, they were ineffectual in demonstrating error in the trial judge's finding of an inferred agreement. They were ineffectual because even if there were merit in those grounds, there were other circumstances found by the trial judge which are unchallenged and which on their own, pointed overwhelmingly to the existence of the agreement. For example, the list of circumstances found and recorded in the trial judge's reasons at [228] were unchallenged. That paragraph read:

The plaintiffs accept that after 1984 none of the usual indicia of partnership suggested that Jack remained a partner in Italia Limestone. He did not receive any share of partnership profits, nor did he return any partnership income in his own taxation returns. Given his evidence with respect to the magnitude of the dispute that had arisen in relation to his taxation liability in respect of partnership profits during the year ended 30 June 1984, the significance of this cannot have escaped his attention. Similarly, he would have been well aware that he was no longer required to pay provisional tax in respect of anticipated partnership profits. Before 1984 he was called upon to sign legal documents relating to partnership affairs, but after 1984 he was not called upon to sign any such documents. He never asked for, nor received partnership accounts after 1984, and never enquired, nor was he advised in any detail as to the state of the partnership's assets and liabilities until he asserted an interest in the partnership in December 2003. He was never called upon to contribute capital to the partnership. He was not called upon to guarantee any partnership borrowings after 1984, nor was it ever suggested that he would be responsible for partnership debts, notwithstanding the financial difficulties which the partnership suffered in the early 1990s. Jack also accepts that when preparing statements of his own assets and liabilities for the purpose of borrowing, at no time after 1984 did he refer to a partnership interest in those statements, as either an asset or a liability.

9 The undisputed circumstances and evidence that property, namely real estate in Barrett Street, Spearwood, was transferred to the appellant and his wife around the time of the agreement, supports the trial judge's conclusion that he could infer the existence of the agreement referred to above.

10 In Hughes v NM Superannuation Pty Ltd (1993) 29 NSWLR 653, 670, Sheller JA said:

As had been said by this Court, in B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147 at 9149 and 9154-9156, subsequent communications may be taken into consideration as a factor in order to determine whether prior dealings between the parties gave rise to a binding agreement.

This demonstrates that retrospectant circumstantial evidence is admissible to prove the existence of a contract. See also the other cases cited by Murphy JA on this subject in his overview to ground 4.

11 During the hearing of the appeal, counsel for the appellant was closely questioned about the primary submission that there was insufficient evidence from which to infer that the appellant did retire as from 1 July 1984 on terms that the remaining partners would continue business in the partnership name. Counsel for the appellant, who may have recognised the futility of that primary submission, then developed the alternative argument that if there were such an agreement, then there was no evidence that the agreement involved any consideration in exchange for the appellant relinquishing his interest in the partnership;

and that in consequence the appellant was entitled on this alternative basis for relief under s 55 of the Partnership Act 1895 (WA).

12 However, as the trial judge found and as Murphy JA has explained, the evidence revealed that such consideration was paid in the form of the transfer of the Barrett Street property.

13 What is set out above is the essence of the reason why the appellant's claim was correctly dismissed by the trial judge and why the appellant's appeal should be dismissed. Murphy JA has dealt with the appellant's appeal in much greater detail. Subject to these reasons, I agree with Murphy JA's reasons dismissing the appeal. I would also uphold those aspects of the respondent's notice of contention upheld by Murphy JA, for the reasons given by him.

14 NEWNES JA: I agree with Murphy JA, for the reasons his Honour gives, that none of the grounds of appeal has been made out and the appeal should be dismissed. I would add that to the extent the appellant sought to rely on the appeal on an alternative contention that the appellant was entitled to relief under s 55 of the Partnership Act 1895 (WA) because there was no consideration for the relinquishment of his interest in the partnership upon his retirement, that contention must fail. As Murphy JA has set out, the consideration was the transfer to the appellant of the Barrett Street property. I agree with Murphy JA in relation to the notice of contention.

15 This is an appeal from a judgment in which the primary judge dismissed a claim by a son in a family partnership dispute concerning disputed events going back to the 1960s. The family was the Fazio family. The appellant and his wife commenced proceedings after the appellant's father, the senior member of the family and, historically, the driving force behind the family's interest in the partnership, had passed away. The appellant and his wife contended that the appellant remained a partner of the partnership until it was dissolved upon the death of the appellant's father in 2007. The first to third respondents (the other partners) denied this. The appellant and his wife also contended that the appellant's brother had never been admitted to the partnership.

16 Broadly speaking, the principal issues in the case at trial were whether the appellant's brother had been admitted to the partnership and whether an agreement had been made in or about mid-1984, under which the appellant had agreed, for consideration, to retire from the partnership and to relinquish his interest in it, with effect from 1 July 1984. There were also estoppel claims, including a claim that the father's estate, the mother, and the brother, held one-third of the non-partnership family assets on trust for the appellant.

17 The primary judge found that the appellant's brother had been made a partner of the partnership. He also held that by an agreement made in mid-1984, the appellant had retired from the partnership and relinquished his interest in it, the consideration for which involved the appellant and his wife being given, for no payment, a property in Barrett Street, Spearwood (the 'Barrett Street property').

18 The second, but not the first, finding is under challenge in this appeal. The estoppel claims were dismissed and the dismissal of one of the estoppel claims is also under challenge. Although the appellant's wife was a plaintiff in the action below, she was not an appellant in this appeal.

20 The respondents, by notice of contention, allege that the primary judge's decision should be upheld on additional grounds, including that the appellant had, it is to be inferred, abandoned his interest in the partnership in favour of the other Fazio members. Had it been necessary, I would have allowed the notice of contention on this particular ground.

21 These reasons will, in large measure, adopt the terminology used by the primary judge in identifying the parties and the participants in the events the subject of the proceedings:

Italia Limestone Company (Italia Limestone) - the business name of the partnership in question.
The Fazio family - various members of whom were partners of the relevant partnership.
Vince (or Vincenzo) Fazio - the (late) father of the appellant and his siblings.
Giuseppina - Vince's wife and the mother of the appellant and his siblings.
The appellant - Jack (or Giacomino).
Maria - Jack's wife.
Rudy (or Ridolfo) - Jack's brother and the other son of Vince and Giuseppina.
Sarina - the sister of Jack and Rudy and the daughter of Vince and Giuseppina.
The Catalanos - the family which held a one-third interest in the partnership. The relevant family members are Sebastiano (also called Sam) Catalano and his wife, Rosaria Catalano.
The Mignaccas - the family which held an interest in the partnership up to about early 1976 and thereafter ceased to have an interest in it.
Danehill Nominees Pty Ltd - a trustee company, the units in which were, in effect, held as to two-thirds by the Fazio family (through Anham Nominees Pty Ltd as trustee for the V Fazio Family Trust) and as to one-third by the Catalano family (through Dangan Nominees Pty Ltd as trustee for the Catalano Family Trust).

Overview of the litigation and the judge's findings of agreement Overview

22 The judge gave the following overview of the litigation: Fazio v Fazio [2010] WASC 263 [1] - [8], [345].

23 Vince and his wife Giuseppina Fazio, migrated to Australia from Italy in 1952 with their 3-month-old son, Jack. Their second child, Rudy, was born in Perth in 1961. Their third child, Sarina, was born in Sicily in 1967 while the family was visiting Italy.

24 In 1956 Vince started a limestone quarrying and stone masonry business known as Italia Limestone, in partnership with a number of other Italian immigrants. The composition of the partnership changed over the years, as some proprietors left, and were replaced by others. By the late 1960s, the proprietors of the business were members of the Fazio family, members of the Catalano family and members of the Mignacca family. At some point around then, or perhaps in the early 1970s, Vince and Giuseppina brought Jack into the partnership, giving him an equal portion of their share in the partnership business. In December 1975, the Fazio partners, in effect, acquired the interest of the Mignacca partners, whereafter the Fazio partners held two-thirds of the interest in the partnership, and the Catalano partners held one-third.

25 Jack worked in the partnership business and was paid wages. However, there was disharmony between Jack and his father, Vince, and in 1984, Jack ceased to work in the business. Generally speaking, after 1984, the documents and records relating to the partnership do not record or suggest that Jack remained a partner.

26 The relationship between Jack and his father deteriorated further over time, and, in the last five years of Vince's life, there were a number of incidents involving hostility and aggression between the two of them. Jack's relationship with his father impacted adversely upon his relationship with his siblings, and he became estranged from them, as well as from his parents.

27 In the latter part of 2003, Jack wrote to the partnership accountants seeking access to all partnership records which they held, and contending that he was a partner. The accountants did not state a definitive position on the subject of his interest in the partnership, but refused him access to the partnership records which they held.

29 Despite some fluctuating fortunes, particularly in the early part of the 1990s, when the business was under significant financial pressure, the partnership's business prospered, and assets were acquired by various corporate entities related to and controlled by the proprietors of the partnership. Often those assets included land in proximity to the outer suburbs of Perth, which was quarried for limestone used in building houses and in other construction work in those suburbs, or in coastal groynes. As Perth expanded in size, the business became a substantial enterprise, and had a significant turnover.

30 The proceedings were commenced by Jack and his wife, Maria, on 12 March 2008.

31 Under Vince's Will, Vince left Jack $1 million and conferred financial benefits on Jack's and Maria's children.

32 The primary judge found, in effect, that there was an agreement, for consideration, for Jack to retire from the partnership and relinquish his interest in it with effect from 1 July 1984, and that the agreement was made in the middle of 1984. His Honour's findings are summarised at [439] - [441]:

I find that at some point around the middle of 1984, it was agreed between Jack and Vince that Jack would retire from the partnership with effect from 1 July 1984, on the following terms:

(a) the partnership would continue, without there being a winding up of its affairs;

(b) Jack would be absolved from any liabilities arising from the future conduct of the partnership business; and

(c) Jack and Maria would be given the lot in Barrett Street, Spearwood in consideration for Jack's surrender of his interest in the partnership.

The defendants asserted that it was also agreed that Vince would pay for the cost of architect's plans for the house to be built in Barrett Street, as part of the consideration for Jack's retirement from the partnership. However, the evidence falls short of establishing that connection.

It is to be inferred that the other partners acquiesced in, and consented to the agreement between Jack and his father in these terms, given that they continued to operate the business, and to prepare and sign documents which are consistent with this finding.

33 The appellant accepted, as did the respondents, that the finding in [439] is to the effect that it is to be inferred that there was an express (oral) agreement between Jack and Vince, in the terms stated, made in mid-1984. The appellant contended, however, that on the proper construction of the judge's reasons, the judge did not find an agreement under which the other partners were bound. This contention is addressed later in these reasons.

Nature of the appeal and disposition - overview Introduction

34 The scope and detail of the appellant's challenges in this appeal are considerable, to say the least. Whilst there are only nine grounds of appeal, ground 4 alleges 57 separate errors, many of which contain multiple contentions. It was to ground 4 that most of the arguments, in written and oral form, were directed in the appeal. The errors alleged in ground 4 all attack the finding that the first to third respondents had established that Jack had retired from the partnership in 1984. Grounds 1 to 3 alleged other very discrete errors in relation to partnership issues, and grounds 5 and 6 attacked certain estoppel findings. The grounds of appeal, in their totality, contend in effect that the judge fundamentally erred in his approach to fact-finding.

35 Interspersed amongst the errors alleged in the grounds, and, in particular ground 4, were, it seems to me, seven principal propositions contended for by the appellant. These seven propositions are, I think, conveniently addressed together, rather than where they expressly or implicitly appear in their manifestations in support of various grounds. Accordingly, I will address those seven propositions before addressing, in detail, each of the appellant's grounds and contentions in support of the grounds. After dealing with the seven propositions, I will address grounds 4.1 to 4.57, then grounds 5 and 6, then grounds 1 to 3 and finally grounds 8 and 9.

36 Even before dealing with the appellant's seven principal propositions, it is appropriate to explain, in broad overview, why the appeal, with respect to the partnership issues, must fail. I will do that in the remaining parts of this section of these reasons, under the following subheadings:

37 In relation to his general approach to fact-finding, the judge said (reasons [49]):

A significant number of witnesses were called, including many (but not all) of the principal players. Of course, one of the most significant players, Vince, is deceased. The other principal witnesses were required to give evidence of events which took place over the course of many years. One of the most significant periods in the history of the various events involving the Fazio family which were addressed by the evidence was the period between 1982 and 1984, leading up to Jack's departure from full-time engagement in the Italia Limestone business. That period was more than 25 years prior to the trial. It would not be reasonable to expect any witness to have a precise recollection of the exact sequence of events, or of particular dates, or of the precise terms used in conversations at that time. Accordingly, I have allowed a significant degree of latitude in evaluating evidence given by witnesses of events and conversations which took place many years ago.

38 The judge then referred to the schism and conflict within the Fazio family and continued (reasons [51] - [52]):

Given the inherent doubts which must attend oral recollections of events which occurred many years ago, in most instances decades earlier, and the partiality of most of the witnesses, I have placed significant weight upon contemporaneous documentary evidence and upon the inferences properly drawn from that evidence. Where it is possible to establish objective facts from that evidence, I have then assessed the oral testimony in light of the inherent probabilities of a particular version of events, in the context of the established objective facts.

I am not convinced that any witness gave evidence which he or she knew to be false. As will be seen, however, I have in many instances rejected the oral testimony that was given by one or other witness as a result of the process I have just described. In those instances, generally speaking, I consider that the evidence which I have rejected was given because of the insidious influence and effect of the family conflict which I have described upon the honest recollection and perception of the witness.

39 The judge also indicated that for the most part, he did not rely on the demeanour of the witnesses in making findings of fact. However, he was critical, in particular, of certain non-party witnesses called by the respondents and had some reservations about the evidence of Rudy and Sarina, based on their demeanour (reasons [53] - [55]).

40 With respect to Jack and his wife Maria, his Honour said that the impression he formed from their demeanour was that, in general, they were doing their best to provide truthful answers to the questions provided, but nevertheless their perception and the accuracy of their recollections had been overtaken by the conflict to which his Honour had referred. In some instances, his Honour concluded 'that their evidence had been fashioned to assist the case which they [sought] to advance' (reasons [53]).

41 The judge rejected Jack and Maria's evidence on numerous issues (eg, reasons [151], [193], [223], [245], [267], [277], [308], [322], [340]). In relation to the partnership issues, the judge also made express adverse findings about Jack's credibility on important matters, including, at least on some occasions, having regard to demeanour. In relation to one matter, for example, his Honour said that Jack's 'dissembling answers, and his reluctance to acknowledge that his evidence-in-chief was wrong, when plainly it was, reflect adversely upon his general credibility' [94]. The judge also said that Jack's 'transparently disingenuous attempts to distort the true nature of [one] transaction reflect adversely on his credibility generally' [151]; that Maria's evidence on an aspect of a matter concerning the Barrett Street property 'was not given confidently or plausibly' [173]; that Jack's explanation of a matter in cross-examination was 'plainly an invention' [215]; that Jack's cross-examination on another matter told 'very strongly against his credibility generally' [266]; and that in relation to the possession of certain partnership financial documents, the evidence of Jack and Maria 'was given in an attempt to avoid the obvious forensic significance of their discovery of those documents' [378].

42 The judge's observations of the inherent doubts which must attend oral recollections of events occurring many years earlier echoed the observations of the plurality in West v Government Insurance Office of NSW [1981] HCA 38; (1981) 148 CLR 62, 69 that (in an accident case in which four passengers were not called) the 'delay [of over 10 years] between accident and trial would surely have grossly affected the recollection of those witnesses of such a long-past event'.

43 It is also to be observed that the judge's general approach in placing significant weight on contemporaneous documents and in evaluating oral testimony in the light of the inherent probabilities of the event in question is broadly consistent with the approach referred to by the Victorian Court of Appeal in Fifteenth Eestin Nominees Pty Ltd v Rosenberg [2009] VSCA 112; (2009) 24 VR 155. In that case, involving a family dispute, the court said at [112] - [113]:

The witnesses were giving evidence many years after the representations had allegedly been made. The circumstances make applicable the approach described by Tamberlin J in Lake Cumbeline Pty Ltd v Effem Foods Pty Ltd (t/as Uncle Ben's of Australia) (in a passage cited with approval by the High Court when it upheld his Honour's decision):

'[Given the lapse of time] between the events and conversations raised in evidence and the hearing of the evidence before me, the only safe course is to place primary emphasis on the objective factual surrounding material and the inherent commercial probabilities, together with the documentation tendered in evidence. In circumstances where the events took place so long ago, it must be an exceptional witness whose undocumented testimony can be unreservedly relied on. The witnesses in this case unfortunately did not come within that exceptional class. The discussions referred to in evidence were capable of bearing quite opposed meanings depending on subtle differences of nuance and emphasis, and a proper appreciation of the significance of those matters must necessarily be considerably diminished over such a long period of time.'

Difficulties of recollection are likely, in our view, to be even greater in a case such as the present, where the dispute in question concerns dealings between members of the same family about family finances and inheritance. Recollections of what was said, or intended, are inevitably clouded by the overlay of emotion and by the intrusion of individual hopes and expectations and feelings of entitlement. The emotional overlay is all the more significant where, as here, those contending that promises were made, and relied on, are seeking to make good their sense of disappointed expectations. (footnotes omitted)

44 The limited reliance on demeanour adopted by the judge also accords with the tenor of the observations of Gleeson CJ, Gummow and Kirby JJ in Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 [31]:

Further, in recent years, judges have become more aware of scientific research that has cast doubt on the ability of judges (or anyone else) to tell truth from falsehood accurately on the basis of such appearances. Considerations such as these have encouraged judges, both at trial and on appeal, to limit their reliance on the appearances of witnesses and to reason to their conclusions, as far as possible, on the basis of contemporary materials, objectively established facts and the apparent logic of events. This does not eliminate the established principles about witness credibility; but it tends to reduce the occasions where those principles are seen as critical. (footnotes omitted)

Reference may also be made to Watson v Foxman (1995) 49 NSWLR 315, 318 - 319 in this regard.

45 Much of the appeal was concerned with the drawing of inferences by the primary judge. It is convenient at the outset to mention the relevant principles.

46 The drawing of an inference is 'an exercise of the ordinary powers of human reason in the light of human experience': G v H [1994] HCA 48; (1994) 181 CLR 387, 390. In Morgan v Babcock & Wilcox Ltd [1929] HCA 25; (1929) 43 CLR 163, 173, Knox CJ and Dixon J said that the matter 'must inevitably be judged by considering whether general human experience would be contradicted, if the proved facts were unaccompanied by the fact sought to be proved'; see also Martin v Osborne [1936] HCA 23; (1936) 55 CLR 367, 385; Jones v Sutherland Shire Council [1979] 2 NSWLR 206, 222 - 227. In Martin v Osborne, Evatt J said that in the 'ordered processes of logical thought ... regard must be had to every hypothesis which can compete with the hypothesis suggested by experience and knowledge of human affairs' (381). His Honour observed that in that case the course of argument 'laid bare the paucity both in number and quality of the hypotheses which might be advanced' as alternative explanations for the hypothesis suggested by experience and knowledge of human affairs in that case.

47 Martin v Osborne was a criminal case in which the respondent was charged with driving a commercial passenger vehicle on a particular day, whilst unlicensed. The informant was required to prove, beyond reasonable doubt, that the passengers on the day in question were being carried for reward. The informant did not call direct evidence from any passengers of payment for carriage. The informant did call evidence to show that the defendant had, on the two preceding days, and the day in question, carried people between Melbourne and Ballarat. Evidence of the fact of carriage on the two preceding days had been objected to. Latham CJ, Dixon, Evatt and McTiernan JJ (Starke J dissenting) held that the evidence was admissible to show that the respondent was operating the car regularly for the carriage of passengers between the two places and held that, from this fact, the proper inference was that the respondent was doing so for reward, including on the day in question. Hence the prosecution's case was proved. The inference was properly drawn in proof of the offence, notwithstanding the absence of direct evidence from any passengers. (See especially Latham CJ (370); Dixon J (377 - 378); Evatt J (380 - 381, 401 - 402); McTiernan J (404).)

48 The drawing of inferences was referred to by the High Court in Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1, 5 in the following terms, quoted in Luxton v Vines [1952] HCA 19; (1952) 85 CLR 352, 358:

Of course as far as logical consistency goes many hypotheses may be put which the evidence does not exclude positively. But this is a civil and not a criminal case. We are concerned with probabilities, not with possibilities. The difference between the criminal standard of proof in its application to circumstantial evidence and the civil is that in the former the facts must be such as to exclude reasonable hypotheses consistent with innocence, while in the latter you need only circumstances raising a more probable inference in favour of what is alleged. In questions of this sort, where direct proof is not available, it is enough if the circumstances appearing in evidence give rise to a reasonable and definite inference: they must do more than give rise to conflicting inferences of equal degrees of probability so that the choice between them is mere matter of conjecture: see per Lord Robson, Richard Evans & Co Ltd v Astley [1911] AC 674, at p 687. But if circumstances are proved in which it is reasonable to find a balance of probabilities in favour of the conclusion sought then, though the conclusion may fall short of certainty, it is not to be regarded as a mere conjecture or surmise: cf per Lord Loreburn above, at p 678. (emphasis added)

49 See also Holloway v McFeeters [1956] HCA 25; (1956) 94 CLR 470, 480 - 481; Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298, 304 - 305, 309 - 310; and see The Trustees of the Property of Cummins v Cummins [2006] HCA 6; (2006) 227 CLR 278 [45] - [48] in relation to an assessment, on the facts of that case, of competing hypotheses in the drawing of inferences.

50 Characterisation of a reasoning process between permissible inference and conjecture often occurs on a continuum, in which there may be no bright line division: cf Seltsam Pty Ltd v McGuiness [2000] NSWCA 29; (2000) 49 NSWLR 262 [84].

51 In order for an appellate court to interfere with a trial judge's findings of fact, it is necessary for an appellant to demonstrate error by the trial judge: Fox v Percy [27]; Leeder v The State of Western Australia [2008] WASCA 192 [84]; Adler v Australian Securities and Investments Commission [2003] NSWCA 131; (2003) 179 FLR 1 [16] - [17]; Williams v The Minister Aboriginal Land Rights Act 1983 and the State of New South Wales [2000] NSWCA 255 [60]; Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833; (2001) 117 FCR 424 [23] - [28]. In Williams v The Minister Aboriginal Land Rights Act [60], Heydon JA (as his Honour then was) said (Spigelman CJ & Sheller JA agreeing):

The plaintiff bore the burden in the appeal not merely of showing that on the facts her contentions might be available or even correct, but of showing that the trial judge's conclusions ought to be reversed. The plaintiff made only limited challenges to the credit-based findings of the trial judge. Most of her challenges were to inferences drawn, or characterisations made, by the trial judge. Even in relation to those challenges, however, the Court of Appeal is in the same position as that ascribed to the Full Federal Court in Minister for Immigration, Local Government and Ethnic Affairs v Hamsher [1992] FCA 184; (1992) 35 FCR 359 at 369 per Beaumont and Lee JJ:

'... the court is not obliged to proceed to make new findings of fact on all relevant issues and discharge the judgment appealed from if those findings differ from those of the trial judge and do not support the judgment. The court must be satisfied that the judgment of the trial judge is erroneous and it may be so satisfied if it reaches the conclusion that the trial judge failed to draw inferences that should have been drawn from the facts established by the evidence. The court is unlikely to be satisfied if all that is shown is that the trial judge made a choice between competing inferences, being a choice the court may not have been inclined to make but not a choice the trial judge should not have made. Where the majority judgment in Warren v Coombes [(1979) [1979] HCA 9; 142 CLR 531] (at 552-553) states that an appellate court must not shrink from giving effect to its own conclusion, it is speaking of a conclusion that the decision of the trial judge is wrong and that it should be corrected. (See also Edwards v Noble [1971] HCA 54; (1971) 125 CLR 296, per Barwick CJ (at 304), per Menzies J (at 308-309) and per Walsh J (at 318-319).)'

52 Numerous arguments by the parties centred upon the nature of partnership, the nature of a partner's interest in a partnership, and the legal effect of dissolution. It is convenient to outline the relevant principles at this point.

Partnership - relation springing from agreement

53 Partnership is the relation which exists between persons carrying on business in common with a view to profit: s 7(1) of the Partnership Act 1895 (WA). Partnership is a relation springing from agreement, express or implied: Booth v Booth [1935] HCA 15; (1935) 53 CLR 1, 27. Under the general law, the agreement may be inferred from the circumstances proved in evidence: Peacock v Peacock [1809] EngR 130; (1809) 2 Camp. 45; the court may impute to the parties a tacit agreement to operate a business as partners: Booth v Booth (27). The general law principle is reflected, in this State, in s 7(2) of the Partnership Act, which provides that in deciding whether a partnership does or does not exist, the court may have regard to the contract and intention of the parties as appearing from the whole of the facts of the case. See also s 29 of the Partnership Act, which provides that the mutual rights and duties of partners, whether ascertained by agreement or defined by the statute, may be varied by the consent of all the partners, and such consent may be either express or inferred from a course of dealing.

54 Where a person is said to be a partner of a business, it is necessary to consider whether the business is being conducted by the persons conducting it, both on their own behalf, and as agent for the person alleged to be a partner: Lang v James Morrison & Co Ltd [1911] HCA 49; (1911) 13 CLR 1, 11; Paterson v MacKenzie [1921] NZGLR 43, 44.

55 A partner's interest in a partnership is an equitable chose in action: Federal Commissioner of Taxation v Everett [1980] HCA 6; (1980) 143 CLR 440, 446 - 447; United Builders Pty Ltd v Mutual Acceptance Ltd [1980] HCA 43; (1980) 144 CLR 673, 688; Commissioner of State Taxation of the State of South Australia v Cyril Henschke Pty Ltd [2010] HCA 43; (2010) 242 CLR 508 [27] - [28].

56 The right is not a title to specific property, but a right to the partner's portion of the surplus after the realisation of assets and the payment of liabilities: s 33 of the Partnership Act; Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd [1974] HCA 22; (1974) 131 CLR 321, 327 - 328. The interest of each partner can be finally ascertained only upon completion of the winding-up and the identification of any surplus share: Commissioner of State Taxation v Cyril Henschke Pty Ltd [25].

57 This reasoning is reflected in a provision such as s 50 of the Partnership Act: Commissioner of State Taxation v Cyril Henschke Pty Ltd [25]. Section 50 provides, in effect, that a partner is 'entitled' to have the assets applied to the payment of the partnership's (or firm's) debts and liabilities and to have the surplus assets applied in what is due to the partners (usually on the taking of accounts). The entitlement includes, in the absence of agreement to the contrary, the sale of the goodwill of the partnership business: s 51. By s 57 of the Partnership Act, in settling accounts between the partners after a dissolution, the statutory regime therein set out is to be applied, subject to any agreement to the contrary, leading to what is referred to as the 'ultimate residue' to be shared amongst the partners in the proportions in which profits are divisible. The 'ultimate residue' in s 57(3)(d) relates to the surplus remaining after external creditors have been paid (subpar (a)), and the partners have received out of the assets of the partnership a return of the advances they had made and of the capital they had contributed (subpars (b) and (c)). The 'ultimate residue' is in the nature of profit and not capital: Rowella Pty Ltd v Abfam Nominees Pty Ltd [1989] HCA 65; (1989) 168 CLR 301, 306 - 307.

58 It has also always been accepted that a partner has an interest in every asset in the partnership, and that the interest is a 'beneficial interest' of its own kind (sui generis): Canny Gabriel (328); Commissioner of State Taxation v Cyril Henschke Pty Ltd [24]; see also Maslen v Perpetual Executors Trustees & Agency Co (WA) Ltd [1950] HCA 55; (1950) 82 CLR 101, 129. The partner's interest before a winding-up is more than a 'mere equity' for priority purposes, even though the partner's precise entitlement (to the surplus) can only be ascertained once the winding-up of the partnership has been completed: Canny Gabriel (328); Commissioner of State Taxation v Cyril Henschke Pty Ltd [26]. It is a present beneficial interest in the nature of a proprietary interest: Connell v Bond Corporation Pty Ltd (1992) 8 WAR 352, 365. Thus, even in an insolvent partnership in respect of which there will be a deficiency, and not a surplus, there is, nonetheless, a proprietary interest in such assets as constitute the partnership property pending realisation: Connell v Bond (368).

59 A partnership may be 'dissolved' in the sense of terminated or determined - as opposed to 'dissolved' in the other sense in which it is sometimes used to connote the winding-up of the business - in a variety of ways. (As to dissolution in the sense of termination, see, eg, Lindley and Banks on Partnership (19th ed, 2010) [24-01]; Geraghty v Minter [1979] HCA 42; (1979) 142 CLR 177, 180 - 181, 181 - 182, 190 - 192.) Dissolution in the sense of termination can include, for example, subject to any agreement to the contrary, dissolution by the death or bankruptcy of a partner (s 44 of the Partnership Act), or where the partnership was for a fixed term or a single venture and the fixed period has expired or the single venture has terminated (s 43(a) and (b)).

60 A partnership may also be determined by curial decree in a variety of specified circumstances, including where an order is made on a 'just and equitable' ground: s 46.

61 A partnership is also dissolved by the happening of an event which makes it unlawful to carry on the business: s 45.

62 A partnership (whether for a fixed term or at will) may be determined by mutual agreement: Maslen v Perpetual Executor Trustees (112); Lindley and Banks on Partnership [24-04].

Partnership - Inferred agreement - Relevance of subsequent conduct - Release of interest - Accord and satisfaction - Abandonment - Repudiation - Inferences - _Jones v Dunkel_ - Whether judge's findings beyond pleaded case - Sufficiency of evidence - Business records - Proprietary estoppel

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (687 paragraphs)

FAZIO -v- FAZIO [2012] WASCA 72 (29 March 2012)

Partnership - relation springing from agreement

The wedding gift of the South Terrace, Fremantle property to Jack and Maria

Jack's qualification as a real estate salesman in mid-1984

Partnership business name - mid to late 1984

Jack's statements of assets and liabilities after 1984

Jack's tax return in respect of the 12-month period from 1 July 1984 to 30 June 1985

The partnership's accounts and tax return for the 12-month period from 1 July 1984 to 30 June 1985

Liabilities incurred by the partners - August 1984

Partnership affairs and Jack's role after 1984

Jack's other business interests since 1984

Jack's failure between 1984 and 2008, to commence proceedings to assert any interest

The transfer of the Barrett Street property to Jack and Maria July/September 1984

Parties

Legislation Cited (1)

Cases Cited (64)

Partnership - Inferred agreement - Relevance of subsequent conduct - Release of interest - Accord and satisfaction - Abandonment - Repudiation - Inferences - **_Jones v Dunkel_** - Whether judge's findings beyond pleaded case - Sufficiency of evidence - Business records - Proprietary estoppel

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (687 paragraphs)

FAZIO -v- FAZIO [2012] WASCA 72 (29 March 2012)

Partnership - relation springing from agreement

The wedding gift of the South Terrace, Fremantle property to Jack and Maria

Jack's qualification as a real estate salesman in mid-1984

Partnership business name - mid to late 1984

Jack's statements of assets and liabilities after 1984

Jack's tax return in respect of the 12-month period from 1 July 1984 to 30 June 1985

The partnership's accounts and tax return for the 12-month period from 1 July 1984 to 30 June 1985

Liabilities incurred by the partners - August 1984

Partnership affairs and Jack's role after 1984

Jack's other business interests since 1984

Jack's failure between 1984 and 2008, to commence proceedings to assert any interest

The transfer of the Barrett Street property to Jack and Maria July/September 1984

Parties

Legislation Cited (1)

Cases Cited (64)

Partnership - Inferred agreement - Relevance of subsequent conduct - Release of interest - Accord and satisfaction - Abandonment - Repudiation - Inferences - _Jones v Dunkel_ - Whether judge's findings beyond pleaded case - Sufficiency of evidence - Business records - Proprietary estoppel