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[2023] VSC 743
General information, not legal advice.
Supreme Court of Victoria
2023-12-12
Daly AsJ
Original judgment source is linked above.
PRACTICE AND PROCEDURE - Receivers and managers - Application for appointment of a receiver and manager of assets of a farming business operated by a partnership between the plaintiff and the first defendant pursuant to s 37(1) of the Supreme Court Act 1986 (Vic) and rule 39.02 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) - Choy v St Kilda Baths Pty Ltd [1999] VSCA 212 and Martyniuk v King [2000] VSC 319 referred to - Whether circumstances justify the appointment of a receiver - Farm business assets are not at risk of dissipation or waste such as to necessitate the appointment of a receiver - Appointment of receiver is inappropriate and unnecessary - Receiver not capable of resolving underlying factual disputes between the partners - Application refused.
PRACTICE AND PROCEDURE - Interlocutory injunction - Application for injunctive relief to prevent the sale of farm business assets of a partnership - Yimiao Australia v Cyber Intelligence [2023] VSCA 21 referred to - Whether a grant of the injunction would authorise an unlawful act - Partnership Act 1958 (Vic), ss 42-3, 46 - Balance of convenience favours the granting of an interlocutory injunction restraining the first defendant from selling or disposing of any assets of the partnership - Application granted, subject to conditions.
1 These reasons concern two applications made by the parties in a proceeding with respect to a bitter dispute within a fifth generation Victorian farming family. In the first application, the first defendant, Mrs Jill Lidgett,[1] applies for the appointment of SMB Advisory as the receiver and manager of the assets and undertaking of the SJ Lidgett & JR Lidgett Partnership ('partnership'), a farming business operated by Jill and the plaintiff, her son Simon. The farming business operates from the property which is the subject of Simon's primary claim in this proceeding ('Highton farm').
2 Simon opposes Jill's application, and has applied in turn for interlocutory relief, including, among other things, an interlocutory injunction to restrain Jill from selling or otherwise disposing of certain assets of the partnership ('farm business assets') until the determination of this proceeding, or further order.
3 The partnership was dissolved by Jill giving notice on 10 February 2023. Simon does not dispute that the dissolution of the partnership was valid. However, he says that given the nature of the farming business operated by the partnership, and given his claim in this proceeding that Jill holds her share of the farm business assets on trust for him, then the status quo should be preserved in order to enable Simon to manage the farm business assets until the hearing and determination of this proceeding.[2] Further, he says that, even if interlocutory injunctive relief is not granted, and the farm business assets must be sold, he is in a better position than any receiver to liquidate the farm business assets in an orderly and cost effective manner.
4 For the reasons which follow, I will refuse Jill's application to appoint a receiver to the partnership. Further, I will grant the interlocutory injunctive relief sought by Simon, subject to some reasonably strict conditions. In addition to providing the usual undertaking as to damages, Simon will be required to:
(a) comply with the interim regime established by the orders made by consent on 10 October 2023 ('10 October orders'), with some modifications;
(b) agree to and facilitate the appointment of a new accountant for the partnership;
(c) agree to the appointment of a joint expert to value the farm business assets prior to trial;
(d) allow access to any livestock agent appointed by Jill to inspect the livestock upon reasonable notice being provided;
(e) provide evidence of insurance coverage for the farm business assets, in particular for the livestock, and appropriate public liability insurance;
(f) agree not to sell any farm business assets (including livestock) without the consent of Jill, such consent not to be unreasonably withheld,[3] or to use the property which is the subject of this proceeding for any purpose other than as a family residence and to manage and maintain the farm business assets; and
(g) use all necessary endeavours and take all necessary steps to ensure that the trial of the proceeding be ready to commence on the scheduled date of 4 June 2024.
Factual background and the parties' claims in this proceeding
6 This section of the reasons will be, in the interests of expedition, a relatively truncated summary of the background to this proceeding, noting that the key events span a period of over 40 years.
7 The Highton farm has been held by the Lidgett family for many generations. The Highton farm comprises approximately 700 acres of farmland near Ballan, valued in September 2022 at $9.4 million. Until transfers of the titles upon which the Highton farm were located were made on 22 December 2022 and 9 February 2023, Jill was the registered proprietor of the Highton farm, having inherited the Highton farm from her late husband (Simon's father Peter) after he suddenly died in 1981, when Simon was 11 years of age.
8 From 1996 at the latest, the partnership operated the farming business, after Jill left the house on the Highton farm ('homestead') to enable Simon and his wife Anita to live at the homestead. The farming business involves the breeding and sale of cattle and sheep, although part of the Highton farm has on occasion been used for cropping, primarily grain and fodder for the livestock. Since at least 1996, Simon has managed the day to day operations of the farming business, with Jill playing largely a passive role in the farming business. Neither Simon nor Jill drew a wage from the partnership, although both draw funds for living expenses from time to time. The partnership did not pay rent to Jill for its use of the Highton farm.
9 A list of the farm business assets compiled by Simon on or around 7 March 2023 is in evidence. The farm business assets include plant and equipment with a total estimated value of $26,541, plus livestock estimated by Simon to be valued at $230,400 at that time.[4] Jill disputes this valuation, saying that she believes that the livestock are worth considerably more than that. The livestock on hand as at 4 March 2023 was a herd of 127 cattle, 103 calves, three bulls, and 297 sheep, including one ram.
10 The dispute between the parties over the sale of the Highton farm and the partnership seems to have developed gradually over recent years, with the parties having instructed solicitors to act on their behalf no later than June 2022, after discussions within the family about succession planning failed to reach any agreed conclusion. In August 2022, the parties agreed to participate in a mediation, which was conducted over two days in October and November 2022. The mediation was attended by Simon, Anita, Jill and Anna Lidgett, one of Jill's three daughters (Simon being her only son). Following the further adjournment of the mediation in November 2022, Jill, with the assistance of her current solicitors, initiated the creation of a family trust, the Lidgett Property Trust ('family trust'), of which Jill and each of her four children are among the beneficiaries, with Anna being appointed as trustee of the family trust. Jill then transferred the Highton farm to the family trust in two stages, on 22 December 2022 and 9 February 2023. On the following day, 10 February 2023, Jill gave notice of the dissolution of the partnership. This proceeding was commenced by Simon against Jill and Anna on 24 March 2023.
11 A summary of the claims made by Simon in this proceeding were summarised in a recent decision of Moore J in another proceeding,[5] as follows:
The claims in Simon's proceeding are set out in an amended statement of claim filed on 7 September 2023 (the ASOC). By way of background, Simon alleges that Jillian inherited the Highton property from her husband (and Simon's father) in June 1982 and that she was not able to conduct a farming operation on her own. If he had not remained working on the Highton property from 1985, Simon alleges that Jillian would have had to either sell or lease the Highton property, or enter into a share farming arrangement on inferior terms.
A central allegation made by Simon is that, from about 1986, Jillian promised to him that, if he remained working on the Highton property for a reasonable time, or alternatively until her death, she would devise the Highton property to him by her will and bequeath to him all her interests in various farm business assets situated on it (the promise). Simon pleads that, on the basis of the promise, he expected to obtain ownership of the Highton property upon Jillian's death and that, by her conduct between 1986 and 2020, Jillian represented to him that he would inherit the property if he remained working on it for a reasonable time or until her death.
Simon alleges that he relied upon the promise and the foregoing expectation to his detriment such that, on and prior to 9 February 2023 when Anna in her capacity as trustee of the Trust became the registered proprietor of the properties which comprise the Highton property, Jillian held the Highton property on a constructive trust for herself during her lifetime, and then for his benefit (the constructive trust).
Simon also relies upon the promise in pleading that he and Jillian entered into a contract pursuant to which Jillian would ensure that, by her will, she would fulfil the promise and that, in consideration for that promise, Simon would remain working on the Highton property for no wage (the contract).
Simon pleads that, in about August 2022, he and Jillian entered into an agreement to participate in a mediation (the agreement to mediate), which included terms that the parties would participate in the mediation in good faith and maintain the status quo with respect to their dispute until the termination of the mediation. He alleges that he attended a mediation on 6 October 2022 with Jillian and Anna, which was then adjourned and reconvened on 15 November 2022, and again adjourned (the mediation). Simon pleads that, on 10 February 2022, Jillian informed him that she did not wish to reconvene the mediation.
Against the backdrop of these allegations, Simon alleges that, on 9 February 2023:
(a) Jillian was bound by the contract and by the agreement to mediate not to transfer ownership of any of the three titles comprising the Highton property to any person other than him;
(b) Jillian had never previously evinced to him any intention to transfer ownership of any of the three titles comprising the Highton Property to any person other than him;
(c) 'the parties' were in the process of negotiating in good faith in relation to the claims the subject of Simon's proceeding;
(d) Jillian transferred registered ownership of each of the three titles comprising the Highton property to Anna in the latter's capacity as trustee of the Trust;
(e) Jillian knew, or ought to have known, that if Simon were aware of her intention to transfer ownership of any of the three titles comprising the Highton property to any person other than him, that he would have registered caveats on those titles; and
(f) Jillian deceived Simon by not informing him of her intention to make the transfers and thereby deliberately avoided alerting Simon to the failure of the mediation and the prudence of registering caveats on the three titles comprising the Highton property.
Simon alleges that the transfers of the registered ownership of the titles comprising the Highton property from Jillian to Anna (in her capacity as trustee of the Trust) were:
(a) in breach of the contract;
(b) in breach of the obligation of good faith in the agreement to mediate;
(c) deceptive, dishonest, opportunistic and unconscionable; and
(d) in breach of the abovementioned constructive trust,
and therefore occurred pursuant to a fraudulent design and done by means of fraud within the meaning of ss 42(1) and 43 of the Transfer of Land Act 1958 (the alleged fraud). Simon also alleges that, by this conduct, Jillian engaged in misleading or deceptive conduct in contravention of s 18 of the Australian Consumer Law (ACL), and acted unconscionably within the meaning of the unwritten law and within the meaning of ss 21 and 22 of the ACL.
Simon advances an accessorial liability claim against Anna. He pleads that, in her personal capacity and as trustee of the Trust, Anna holds the Highton property on constructive trust for him because, by receiving registered ownership of the properties comprising the Highton property, she:
(a) knowingly assisted in the alleged fraud;
(b) knowingly received registered ownership of the titles in the Highton property as the proceeds of the alleged fraud;
(c) stood to benefit from the transfers;
(d) stood to benefit from the alleged fraud;
(e) intended to obtain these benefits;
(f) acted deceptively, dishonestly, opportunistically and unconscionably; and
(g) received registered ownership of the Highton property by means of fraud within the meaning of ss 42(1) and 43 of the Transfer of Land Act.
(a) engaged in misleading or deceptive conduct in contravention of s 18 of the ACL by failing to disclose to him during the mediation her intention to engage in the transfers;
(b) acted unconscionably within the meaning of the unwritten law and s 20 of the ACL by engaging in the transfers of title comprising the Highton property; and
(c) was involved in Jillian's alleged contraventions of ss 18, 20 and 21 of the ACL.
(a) A claim of conspiracy by unlawful means based on the allegation that Jillian and Anna (in her personal capacity and in her capacity as trustee of the Trust) acted in concert in transferring to Anna the registered ownership of the titles comprising the Highton property, as a result of which Simon alleges he has suffered loss and damage.
(b) A claim for equitable compensation. Simon alleges that he has suffered loss and damage as a result of Jillian's transfer to Anna of registered ownership of the titles comprising the Highton property, conduct said to be contrary to the promise and expectation, and in breach of the constructive trust.
In his prayer for relief, Simon relevantly seeks the following relief:
...
Declaration that [Jillian] was contractually bound to devise the Highton property and bequeath the farm business assets to [Simon] upon her death.
...
Order under ss 237(1)(a)(i) and 243(a)(ii) of the Australian Consumer Law that the transfers to [Anna] of the registered ownership of the property known as "Highton", 30 Lidgett's Lane, Greendale, Victoria, described in Volume 8672 Folio 391, Volume 4061 Folio 081 and Volume 2454 Folio 634 are void ab initio.
Declaration that [Anna] in her personal capacity and in her capacity as trustee of the Lidgett Property Trust, holds the property known as Highton ... on constructive trust for [Simon].
Order that [Anna], in her personal capacity and in her capacity as trustee of the Lidgett Property Trust, do all such things and sign all such documents as may be required to transfer to [Simon] the property known as "Highton" ...
E Alternatively, equitable compensation.
F Alternatively, damages.[6]
12 The above summary makes little reference to Simon's claims with respect to the farm business assets, but the promise said to have been made by Jill in or about 1986 included a promise that she would bequeath to Simon all her interests in livestock, farm implements, machinery, wool, skins and crops situated on the Highton farm from time to time. Paragraph B of Simon's prayer for relief seeks an order that Jill do all things necessary to transfer the ownership of the farm business assets to him.
13 Simon has filed a further amended statement of claim since the publication of the reasons in the judicial advice proceeding following the partial success of a strike out application brought by Jill,[7] but for present purposes, there has been no material alteration in the manner in which Simon advances his claims in this proceeding.
14 In her defence and counterclaim filed on 9 August 2023, Jill stated that the partnership was in possession of the Highton farm, not Simon. She said that the partnership has been dissolved, and ought to be wound up. She said that to the extent that Simon has made any use of the farm business assets since 10 February 2023, that use is unauthorised and improper.
15 Jill denied that she was incapable of operating the farm business after Peter's death by reason of her health or for any other reason. She said that she continued the farm business until 1996 with the assistance of a casual employee, family members and friends, and that Simon was apprenticed to her until 1993, and took on greater responsibilities after that. She denied that if she had not entered into the partnership she would have been required to sell or lease the Highton farm, or enter into a sharecropping arrangement. She said that if she had been required to do so, then that would have been more financially beneficial to her than participating in the partnership has been.
16 Jill denied making the promise pleaded by Simon and said:
(a) while Jill had a will prepared for her in 1983, she did not sign a will in that year;
(b) she was the sole owner of the Highton Property from 1981 and the registered proprietor of the Highton Property from 1982;
(c) from 1981 until entry into the Partnership she owned the assets used in the course of farming the Highton Property, including livestock;
(d) since entry into the Partnership the assets used in the course of farming the Highton Property, including livestock, have been owned by the Partnership;
(e) until about November 2022 she expected that she would continue as the registered proprietor of the Highton Property until her death and intended that on her death her four children would each receive an equal inheritance (measured in economic terms);
(f) until about November 2022 she hoped and intended that as part of the equal division of her estate Simon could inherit the Highton Property, but she only intended that this occur on the basis that Simon and each of her daughters benefited equally from her estate (measured in economic terms). She:
(i) envisaged that to achieve an equal economic outcome in circumstances where Simon inherited the Highton Property would require:
(A) that Simon make payments to her daughters so as to compensate them, as the Highton Property was by far her largest asset; and
(B) that her daughters inherit her assets other than the Highton Property;
(ii) did not know whether it would prove possible for Simon to make the payments to her daughters which would be necessary to ensure an equal division of her estate, so did not know whether it would be possible for Simon to become the owner of the Highton Property;
(g) it has always been her intention that Simon would not obtain any additional interest in the Highton Property by reason of having farmed it in partnership with her;
(h) her communications with Simon in respect of her intentions as to her estate have been consistent with the matters set out in (f) to (h) above.
17 Jill denied that Simon had an expectation of a current entitlement to obtaining ownership of the Highton farm and the farm business assets, saying that she does not know what expectations Simon had and when he developed them.
18 Jill admitted that she gifted the proceeds of sale of a property she inherited to her three daughters, because her daughters had needed to borrow money to purchase their homes, while Simon and his family had lived at the homestead rent free since 1996.
19 Jill did not admit the allegation that the farming business had a low level of profitability, and says that she did not know what level of profitability the farm business had prior to 2009. She did not admit that Simon had lost opportunities of the kind pleaded by him. She said that Simon has taken drawings from the partnership, and other payments, including Job Keeper payments and consultancy income earned by his partnership with Anita.
20 Jill denied the allegations made by Simon regarding the funding of the purchase of her home in Bacchus Marsh ('Bacchus Marsh property') consistent with her claims in a related proceeding concerning the ownership of the Bacchus Marsh property ('related proceeding'). She admitted that Simon and Anita purchased a block of land adjoining the Highton farm in 2009. She does not admit that Simon expended funds on improvements to the Highton farm, but said that the improvements to the homestead were funded by the partnership.
21 Jill admits that she benefited from Simon's work for the partnership, but said that Simon and his family also benefited from the partnership. She denied that until about November 2020 she had said nothing to disabuse Simon of the expectations that he had concerning the ownership of the Highton farm, and says that '...her relationship with Simon has been characterised, over many years, by disputation, principally in relation to what was to become of the Highton property...'.
22 In relation to what occurred in the lead up to and the aftermath of the mediation in October/November 2022, Jill pleaded, in summary, as follows:
(a) she admitted that as at 9 February 2023 she had not informed Simon that she had transferred the Highton farm to the family trust, or of her intention to do so;
(b) she admitted attending the mediations, but said that the mediations were conducted on the basis that what was said was confidential and subject to privilege; and
(c) she referred to the correspondence between the parties in the lead up to the mediations, observed that Simon was legally represented at the time, and said that she does not know why Simon failed to lodge a caveat over the Highton farm to protect his asserted interest in the Highton farm.
23 Jill said further that even if Simon's claims with respect to the Highton farm and the farm business assets are made out, the Court should refuse to provide him with any relief by reason of his lack of clean hands, given that Simon has:
(a) failed to cause the preparation of true accounts of the Partnership;
(b) failed to keep his assets, and Anita's assets, separate from Partnership assets;
(c) used the assets of the Partnership for his own benefit, and for Anita's benefit;
(d) continued using Partnership assets and has purported to continue conducting the Partnership business notwithstanding its dissolution;
(e) conducted the Partnership through personal bank accounts to which Jill does not have access;
(f) obtained more substantial benefits from use of the Highton Property than he is entitled to, given that since 1996 he has occupied and farmed the Highton Property in his capacity as one of two equal partners in the Partnership and in no other capacity;
(g) used the Highton Property for his own benefit, and that of Anita, notwithstanding that it was occupied by the Partnership for the benefit of the Partnership;
(h) conducted business at the Highton Property for his benefit, and that of Anita, and without accounting to the Partnership from income earned by so doing.
24 Jill also relies upon the defence of laches, or delay.
25 Jill's counterclaim concerns the dissolution of the partnership, and repeats many of the allegations made in her defence (and made in the course of the hearing of the current applications) regarding Simon's management of the partnership. In her prayer for relief, Jill claims the following relief with respect to the partnership:
26 On 23 November 2023 Simon filed a further amended statement of claim following the determination of the defendants' strike out application. During the course of the hearing of the application, Jill foreshadowed making specific claims against Simon with respect to Simon's management of the partnership in her amended counterclaim.
27 On 11 December 2023, while judgment in the current applications was reserved, Jill filed a further defence and counterclaim. The amendments to the defence and counterclaim were extensive. Time does not permit me to traverse the new allegations in any detail, but the new allegations substantially accord with the evidence relied upon and submissions made during the course of the hearing of the current applications, save that a new allegation was introduced to the effect that Simon breached his obligations towards Jill and/or the partnership by working as a farm manager on a neighbouring property, 'Glen Pedder'.
28 In paragraph 9A(c) of the further defence and counterclaim, Jill said that if any contract was made between her and Simon in the terms alleged by Simon (which she denied), then Simon failed to perform the contract, by reason of the following matters:
The nature of the conduct engaged in by Simon is such that it has not resulted in the production of documents which comprehensively and accurately record the farming activity at the Highton Property and the economic benefits enjoyed from that activity.[8]
29 Jill also relied upon the above matters (or other matters in similar terms) for the purpose of, among other things:
(a) contending that she was entitled to terminate any contract she was held to have entered with Simon;
(b) contending that it would not be unconscionable for her to resile from any promise she made to Simon with respect to the Highton farm;
(c) contending that she was induced to participate in the mediation without sufficient information;
(d) supporting Jill's contention that Simon has failed to come to court with clean hands; and
(e) claiming that Simon has breached his fiduciary duties towards Jill.
30 Jill's prayer for relief in her further defence and counterclaim seeks the following additional relief:
(a) equitable compensation;
(b) an order pursuant to s 43 of the Partnership Act 1958 (Vic) ('Partnership Act') that the business and affairs of the partnership be wound up; and
(c) as an alternative to equitable compensation, an order consequential on the winding up of the business and affairs of the partnership, that:
- the property of the Partnership be applied in payments of the debts and liabilities of the Partnership; and
- the surplus assets of the Partnership be applied in payment of whatever amount is found to be due to the partners after deducting such amounts as are due from them to the Partnership as partners.
31 Finally, Anna has foreshadowed bringing an application for summary judgment against Simon with respect to the claims against her, both in a personal capacity, and in her capacity as trustee of the family trust. However, I was informed at the hearing of the applications that the second defendant is considering her position in that regard following the outcome of the judicial advice proceeding, and will reach a concluded view on the matter soon.
32 As indicated earlier in these reasons, in the related proceeding, Jill claims that Simon, as the registered proprietor of the Bacchus Marsh property, holds two-thirds of the Bacchus Marsh property on trust for her.[9] The Bacchus Marsh property was purchased by Simon in 1995 for $112,500, and, following the carrying out of some renovations, Jill has lived there ever since. There is no evidence before me of the value of the Bacchus Marsh property, but given the passage of time, the renovations,[10] and given that Bacchus Marsh is now in effect part of Greater Melbourne, I can draw the inference that the Bacchus Marsh property is now worth many multiples of the original purchase price. The Bacchus Marsh property secures a line of credit said by Simon to be used to bolster the cash flow of the farming business as needed. Simon says that the amount outstanding under the line of credit is $76,993,[11] and, accordingly, he and Anita (as his co-borrower) are creditors of the partnership for that amount.
33 Relevantly for the purposes of the current applications, since about June 2022, Jill's solicitors have been pressing Simon and the partnership's accountants ('MOR') for financial and other information concerning the farm business and the partnership accounts. The drawn out nature of this process, and what is said to be the piecemeal approach by which partnership documents have been provided to Jill and her lawyers, is relied upon by Jill in support of her contentions in the current applications.
34 It appears that Simon and his solicitors have now provided (albeit belatedly, and in several tranches) all, or almost all of the partnership documents requested by Jill and her solicitors. Further, Jill and her solicitors have also obtained documents via subpoenas issued by the Court directed at, among others, Anita and MOR. Objections to the subpoenas directed at Anita and MOR made on behalf of Simon on 18 August 2023 were dismissed by Efthim AsJ on 4 September 2023, save that the parties agreed a process by which Simon's claims for legal professional privilege over a significant number of documents produced by MOR ('disputed documents') could be determined. I will hear Simon's application to withhold the disputed documents from being inspected by Jill ('privilege application') on 15 December 2023.
35 In her summons filed on 3 July 2023, Jill applies for the following orders:
Receiver and manager
SMB Advisory of 551 Little Lonsdale Street Melbourne VIC 3000 be appointed as receiver and manager of the assets and undertaking of the S J Lidgett & J R Lidgett Partnership (the Partnership) pursuant to section 37(1) of the Supreme Court Act 1986 (Vic} and Rule 39.02 of the Rules.[12]
The receiver shall have all of the powers conferred by section 420(2) of the Corporations Act 2001 (Cth), but on the basis that references to 'the corporation' in that section be read as references to the Partnership, including without limitation the following powers:
a) to enter into possession and take control of the property of the Partnership;
b) to sell the assets of the Partnership;
to pay into Court the proceeds of sale of the Partnership assets, after payment of any costs of sale and the payment of the receiver's remuneration and disbursements; and
d) to prepare accounts for the Partnership, including final accounts.
The parties may provide submissions to the receiver in respect of the manner in which he ought to exercise his powers. The receiver is obliged to consider any submissions he receives but is not obliged to act in accordance with them, or to provide reasons for his decisions.
The receiver shall be remunerated in accordance with the scale prescribed from time to time by the practice note in respect of the remuneration of liquidators, provisional liquidators and receivers, with such remuneration to be payable by the partners of the Partnership in equal shares.
5. The receiver has liberty to apply for directions at any time.
Accounts and inquiries
Pursuant to Rule 52.01 of the Rules, the Court order the making of an inquiry into the affairs of the Partnership, namely:
whether any partner has permitted a person other than the Partnership to conduct any business on property occupied by the Partnership and/or using any Partnership assets and, if so, whether they have done so on arms-length terms or, if not, with the informed consent of all partners;
whether the accounts of the Partnership accurately record the contributions of the partners to the Partnership and the income received by the partners from the Partnership.
Pursuant to Rule 52.01 of the Rules, the Court order a taking of the accounts of the Partnership so as to determine:
a. the assets of the Partnership;
b. the liabilities of the Partnership; and
whether the dealings of the Partnership have been accurately recorded in its accounts.
The costs of the making of inquiries and the taking of accounts are to be paid, in the first instance, by the Partnership and equally by the partners.
36 Paragraph 2 of Jill's summons seeks that the Court should appoint a receiver with 'all of the powers conferred by s 420(2) of the Corporations Act 2001 (Cth)'. For completeness , s 420(2) of the Corporations Act 2001 (Cth) provides that the receiver of the property of a corporation has the following relevant powers:
(a) to enter into possession and take control of property of the corporation in accordance with the terms of that order or instrument; and
(b) to lease, let on hire or dispose of property of the corporation; and
(c) to grant options over property of the corporation on such conditions as the receiver thinks fit; and
(d) to borrow money on the security of property of the corporation; and
(e) to insure property of the corporation; and
(f) to repair, renew or enlarge property of the corporation; and
(g) to convert property of the corporation into money; and
(h) to carry on any business of the corporation; and
(j) to take on lease or on hire, or to acquire, any property necessary or convenient in connection with the carrying on of a business of the corporation; and
(k) to execute any document, bring or defend any proceedings or do any other act or thing in the name of and on behalf of the corporation; and
(m) to draw, accept, make and indorse a bill of exchange or promissory note; and
(n) to use a seal of the corporation; and
(o) to engage or discharge employees on behalf of the corporation; and
(p) to appoint a solicitor, accountant or other professionally qualified person to assist the receiver; and
(q) to appoint an agent to do any business that the receiver is unable to do, or that it is unreasonable to expect the receiver to do, in person; and
37 Shortly before the hearing of the current applications, Jill sought leave to file an amended summons seeking orders in the alternative to the appointment of a receiver, being:
(a) an interlocutory injunction preventing Simon from binding or purporting to bind the partnership save to complete transactions begun prior to 10 February 2023, or prior to the 10 October orders, or to wind up the affairs of the partnership;
(b) an interlocutory injunction requiring Simon to sell the farm business assets within four weeks; and
(c) an interlocutory injunction restraining Simon from withdrawing money from the partnership bank account, or to spend or use any of the money of the partnership, without Jill's consent.
38 However, the amended summons was not pressed at the hearing of the current applications.
39 In his summons filed on 21 July 2023, Simon applied for the following relief:
40 The current applications were originally returnable before me on 9 October 2023. However, the parties required more time to file and serve their evidence, and to digest the documents produced upon subpoenas issued by the Court at Jill's request. Accordingly, the current applications were adjourned to 28 November 2023, and only the defendants' strike out application proceeded on 9 October 2023. In the interim, the parties agreed to the 10 October orders, which provided as follows:
Subject to the following orders and until the hearing and determination of the injunction application, or further order, the plaintiff conduct the business of the Partnership in the ordinary course but subject to the following orders.
Until the hearing and determination of the injunction application or further order:
(a) the first defendant not interfere in the plaintiff's conduct of the business of the Partnership;
(b) the first defendant not sell or otherwise dispose of any assets of the Partnership;
(c) the first defendant take all necessary steps to remove the requirements for her consent to transactions by the plaintiff on the Partnership's bank account with Westpac, details BSB 033-602 Account Number 154 323 ('Partnership account');
(d) the first defendant not transact on the Partnership account;
(e) the plaintiff take all necessary steps to ensure that the first defendant has electronic banking access to the Partnership account;
(f) the plaintiff ensure that all income of the Partnership is banked into the Partnership account;
(g) the plaintiff ensure that all expenses of the Partnership are paid from the Partnership account;
(h) the plaintiff cause the Partnership to transact on a basis which does not involve it incurring indebtedness to any person;
(i) the plaintiff not cause the Partnership to borrow funds from any person or lend funds to any person without the first defendant's prior written approval;
(j) the plaintiff not cause the Partnership to repay any existing indebtedness of the Partnership;
(k) the plaintiff not cause the Partnership to pay wages to any person or drawings to any partner without the first defendant's prior written approval;
(l) the plaintiff not cause the Partnership to incur any expense to a lawyer or accountant without the first defendant's prior written approval, save for the preparation of the Partnership's final accounts for the 2022-2023 financial year and the preparation and filing of Business Activity Statements as and when they are due; and
(m) the plaintiff provide a fortnightly report to the first defendant, in writing, by which he reports on:
(ii) the application of any NILS tags to any animals;
(iii) the purchase of any animals or other assets;
(iv) the sale of any animals or other assets;
(v) any known births or deaths of animals;
(vi) income received; and
(vii) expenses incurred.
The plaintiff cause the $54,844.33 paid into Macquarie Bank account BSB 182182 Account Number 008043499 on 17 July 2023 to be paid into the Partnership Account.
Until the hearing and determination of the injunction application, no partner take any step to prepare, file or lodge any taxation document for the Partnership without the prior written approval of the other, save for Business Activity Statements as and when they are due.
41 Jill relied upon the following evidence in support of her application for the appointment of a receiver and in opposition to Simon's application for an interlocutory injunction:
(a) an affidavit sworn by her on 3 May 2023 ('Jill's first affidavit');
(b) an affidavit sworn by her on 28 July 2023 ('Jill's second affidavit');
(c) an affidavit sworn by her solicitor, Mr Simon French, on 12 May 2023 ('first French affidavit');
(d) an affidavit sworn by Mr French on 8 August 2023 ('second French affidavit');
(e) an affidavit sworn by Mr French on 5 October 2023 ('third French affidavit');
(f) an affidavit sworn by Mr French on 3 November 2023 ('fourth French affidavit');
(g) an affidavit sworn by Mr French on 22 November 2023 ('fifth French affidavit'); and
(h) an affidavit sworn by Mr French on 27 November 2023 ('sixth French affidavit').
42 Simon relied upon affidavits sworn by him on 21 July 2023 ('Simon's first affidavit'), 28 September 2023 ('Simon's second affidavit'), and 21 November 2023 ('Simon's third affidavit').
43 The affidavit evidence, especially the evidence relied upon by Jill, was extensive and wide ranging, and the exhibits voluminous, forming the vast bulk of an application book which ran to nearly 3,000 pages, although many of the documents were duplicates. Again, in the interests of expedition, I do not propose to refer to the evidence in great detail save for the summaries below, except where necessary for providing the reasons for my disposition of the applications. Given that much of the affidavit evidence was responsive to the evidence relied upon by the other party, I shall summarise the affidavits in chronological order.
44 In Jill's first affidavit, Jill deposed, in summary, as follows:
(a) as to the origin of the partnership, and its formalisation by registration on 10 March 2000;
(b) that neither she nor Simon took wages from the partnership, but each took living expenses from partnership income;
(c) she deposed as follows:
Anita has for some years undertaken the bookkeeping for the Partnership. Simon and Anita are responsible for liaising with the Partnership's accountant. For many years Simon made clear to me through word and action that he does not welcome my involvement in the affairs of the Partnership, and particularly does not welcome my involvement in the management of the farm. As a result, I have almost no understanding of the Partnership's practical or financial affairs.
The Partnership's accountant is Paul Hansen of MOR Accountants (Paul). I have had very limited dealings with Paul. Simon and Anita have been responsible for almost all dealings with Paul in respect of the Partnership.
I am informed by my solicitor Simon French and believe that he has made substantial efforts to obtain information about the Partnership's affairs but has met considerable resistance in obtaining this information.
The difficulties faced in obtaining information concerning the Partnership, and in particular difficulties in obtaining current and accurate information as to the assets and liabilities of the Partnership, have exacerbated my concerns as to the accuracy of such information as is available.
(d) as to the dispute between her and Simon regarding the Highton farm;
(e) the reasons why she decided she wanted to dissolve the partnership, including:
(a) Simon's exclusion of me from the Partnership affairs;
(b) The very disappointing profitability of the farm over many years;
(c) My dissatisfaction with the accounts of the Partnership as prepared by Paul pursuant to instructions provided by Simon and Anita. The fact that I had recent [sic]
(d) The fact that I had recently learned that Simon and Anita were conducting a separate business on the Land without my approval and without accounting to the Partnership for the income they earned from so doing;
(e) My limited access to the Land whilst Simon and his family lived there and while Simon farmed the Land on behalf of the Partnership;
(f) My disappointment in Simon's conduct in seeking ownership of the Land to the exclusion of his sisters and without accepting on an obligation to fairly compensate them; and
(g) Simon's bullying behaviour towards me over the years in respect of his assertions of an interest in the Land.
(f) her concerns about Simon's management of the farm business, including the use of part of the Highton farm for a sunflower farm run by Anita ('Greendale Sunflower Farm'), the accuracy of the partnership accounts, and the inadequate recognition of the value of her contribution to the partnership;
(g) her desire to sell the farm business assets as soon as possible;
(h) her doubts about Simon's estimate of the value of the livestock, and the validity of Simon's claim that he and Anita are creditors of the partnership;
(i) her loss of faith in Simon as a partner; and
(j) Jill's first affidavit concluded as follows:
For the reasons outlined above, I believe that a receiver ought to be appointed to the Partnership to:
(a) Sell the assets of the Partnership, with priority given to the sale of the Partnership's livestock which ought to occur as soon as possible;
(c) Determine who the Partnership's trade and finance creditors are and in what amount and then pay them;
(d) Appoint an accountant to prepare accounts (including revising former accounts if required) concerning the Partnership having regard to issues raised by Partners and issues identified by the Receiver;
(e) Determine what amounts, if any, are owed to Partners;
(f) Repay debts owed to Partners; and
(g) Distribute capital to partners.
45 The following documents were exhibited to Jill's first affidavit:
(a) the trust deed for the family trust;
(b) the partnership termination notice dated 10 February 2023;
(c) other correspondence between the solicitors for the partnership regarding the dissolution of the partnership, and the ongoing occupation of the Highton farm by the partnership;
(d) a screenshot of a website promoting the Greendale Sunflower Farm;
(e) a bundle of financial documents provided to her on 13 March 2023, including the partnership annual general ledger, the partnership tax return for FY2021,[13] partnership financial statements of FY2022, a profit and loss statement for the Greendale Sunflower Farm, and a bundle of bank statements;
(f) a valuation of the Highton farm dated 20 September 2022;
(g) the originating motion in the trustee proceeding;
(h) a letter from Mr French to Westpac requiring that she be added as a signatory to the partnership bank account; and
(i) a summary of the partnership assets and livestock holdings prepared by Simon.
46 In the first French affidavit, Mr French deposed as to his attempts to obtain documents regarding the partnership's affairs since he was first instructed by Jill in June 2022. The first French affidavit exhibited correspondence between him and Simon's solicitors, along with some of the documents received by him from Simon, Simon's solicitors, and MOR.
47 In Simon's first affidavit, Simon deposed, in response to Jill's first affidavit and the first French affidavit, and in support of his application for interlocutory injunctive relief, in summary, as follows:
(a) the Lidgett family has been conducting a farming business on the Highton farm for over five generations, since the late 19th century;
(b) from the time of his father's death in 1981 he conducted most of the farming operations, while Jill continued to maintain the books of the farm business;
(c) he completed his farming apprenticeship in 1993, and in 1994, he and Jill created the partnership and Jill retired;
(d) Anita commenced keeping the books for the partnership after they married in 1996. Since that time, and until the parties were in dispute, Jill never asked to see any financial records of the partnership;
(e) Jill has always been free to withdraw funds from the partnership's bank accounts, and has regularly done so, generally without consulting him;
(f) he denied Jill's allegation that he has taken personal advantage from the operations of the partnership at the expense of the partnership, and said that he believes the partnership accounts are accurate;
(g) he said that he disagrees with Jill's insistence that the assets of the partnership be sold immediately, because selling the farm business assets (and in particular, the livestock) would effectively nullify his claim to the farm business assets. He deposed as follows:
The most valuable assets of the Partnership are the livestock. As at 18 July 2023, there are 180 cattle and calves, 2 bulls, 245 sheep and 1 ram.
The livestock include bloodlines that I have spent my entire career developing, building on the breeding done by my family on my father's side for four generations prior to me, as I have described in paragraph 5 above. The bloodlines comprised in the livestock are my life's work and the continuation of the legacy of the prior four generations of Lidgetts. If the livestock were sold then the emotional detriment I would suffer, and the loss to future generations of my family, would be irrevocable and could not be compensated with money. The sale of the livestock would also destroy my livelihood and the career I have developed on the Highton Property over my entire working life of about 30 years.
(h) Jill's notification to Westpac after the dissolution of the partnership to the effect that she be a co-signatory for the partnership bank account was done without consultation with him, and he and Anita have had to lend funds to the partnership to make payments to creditors and to preserve the welfare of the livestock;
(i) he denied Jill's allegation that he has engaged in bullying behaviour;
(j) he provided some details about the operation of the Greendale Sunflower Farm, which he said was established by Anita. Simon said that the sunflower season lasts approximately four weeks, and that planting and harvesting the sunflower crop benefited the partnership by improving the soil on the Highton farm and generating fodder for the partnership's livestock. Simon said that the Greendale Sunflower Farm generated modest profits, which were used to recarpet the homestead;
(k) that Jill attended annual meetings with the partnership accountants with him and Anita. He does not dispute Jill's entitlement to access the books and records of the partnership, and so far as he is aware, all of the documents that her solicitors have requested have been provided to them;
(l) he deposed as follows:
Regarding paragraph 33 of Jill's Affidavit, I believe the value of the livestock owned by the Partnership at the start of this year was about $230,400. I believe that cattle prices have fallen by about half since I made that estimate , and that their current market value is about $143,000. These estimates of market value are based on Ballarat Saleyards stock reports and my long experience as a cattle and sheep breeder and trader. I believe higher prices would be achieved if the livestock were marketed in the ordinary course of the Partnership's business, considering several factors such as the timing of sales after cows have calved and sheep have lambed.
(m) in relation to Jill's application to appoint a receiver, he deposed as follows:
I believe the appointment of a receiver to the Partnership would serve no proper or useful purpose and, in any event, would be premature prior to the determination of these Proceedings. Furthermore, the fees that a receiver is likely to charge would be disproportionate to the net value and profitability of the Partnership. Nonetheless, I believe the Partnership is solvent and will continue to be able to pay its debts as they fall due if I am allowed to continue its farming business in the ordinary course, at least until the determination of these Proceedings.
(n) in relation to his application for injunctive relief, he deposed as follows:
In paragraph 45 of Jill's Affidavit, Jill sets out the reasons why she believes a receiver should be appointed to the Partnership. Those reasons demonstrate that Jill intends to bring the Partnership's farming business to an end, sell the livestock "as soon as possible", and wind-up the Partnership.
In paragraph 44 of Jill's Affidavit, Jill acknowledges that I might have a claim for damages against Jill if the Partnership assets are sold and therefore are not available to me. I reiterate that in these Proceedings I claim that Jill holds her interest in the Farm Business Assets on constructive trust for me, including most importantly the livestock.
As I have explained in paragraphs 5 and 17 above, the livestock have such personal value to me and my lineage that I could not be fully compensated in monetary terms for the wrongful disposal of the livestock. I also have no wish to pursue my mother into bankruptcy should her personal assets be insufficient.
Paragraph 45 of Jill's Affidavit demonstrates her intention to wind-up the Partnership as soon as possible and along with it the farming business on the Highton Property, which the Lidgett family on my father's side has operated over five generations, including my entire career of over 30 years. In these Proceedings, in addition to my claims over the Farm Business Assets, I also claim a proprietary interest in the Highton Property. If I succeed in these Proceedings, I intend to continue the farming business on the Highton Property. If Jill succeeds in selling the farming assets prior to the determination of these Proceedings, it will destroy an important part of the subject matter of my claims, along with my livelihood and the legacy farm that I wish to pass on to my children.
...
If the injunctions I seek were granted, I would undertake to conduct the business of the Partnership in its ordinary course, keep Jill informed of its operations and ensure that she has ongoing access to the records of the Partnership. I am aware of my fiduciary obligations as a partner, and I would continue to abide by those obligations.
I would also give the usual undertaking as to damages.
48 Exhibited to Simon's first affidavit were the following documents:
(a) photographs of medallions won by his great-grandfather for his livestock between 1898 and 1925 and a photograph of his prize shorthorn bull;
(b) an article from the Live Stock Annual of Australia describing the Highton farm and his great-grandfather's breeding operations on the Highton farm;
(c) a copy of the obituary published following his father's sudden death in 1981;
(d) copies of certificates from the 1990s said to evidence the quality of meat and wool obtained from livestock bred on the Highton farm;
(e) the profit and loss statement for the partnership for FY2023, and the partnership balance sheet as at 30 June 2023, prepared by MOR. The profit and loss statement showed that the partnership had a net profit of $37,460 in FY2022, and $123,250 in FY2023, most of which was derived from sales of cattle;
(f) the Livestock Trading Statement and Capital Account Drawings Statement for the year ending 30 June 2023 prepared by MOR. The Capital Account Drawings summary showed that between 2017 and 2022, Jill's drawings from the partnership ranged between $16,000 and $30,000, and were generally somewhat in excess of Simon's drawings, although they dropped substantially in FY2023;
(g) copies of the annual general ledger for the partnership from 1 July 2016 showing the payment of Jill's and Simon and Anita's personal expenses from the partnership funds, the income tax paid by the partnership on behalf of Jill, Simon and Anita, and Simon's capital contributions to the partnership;
(h) documents said to evidence the quality of the bloodlines of the cattle bred on the Highton farm;
(i) a ledger showing transactions related to the Greendale Sunflower Farm business for FY2022, which showed that revenue from the sale of sunflowers was $6,140.04 in FY2021 and $7,784.69 in FY2022;
(j) photographs titled 'Jill amongst the sunflowers - 27 February 2021'; and
(k) an asset schedule for plant and equipment, which showed the value of the partnership's plant and equipment to be $26,518.75 as at 30 June 2023.
49 In Jill's second affidavit, she deposed, in summary as follows:
(a) she has discovered that the partnership has earned income from consulting fees paid by Athol and Julie Lidgett, relatives who own a neighbouring cattle farm;
(b) she disputed Simon's version of events as to what occurred after Peter's death. After discussions with all of her children, she decided to remain on the Highton farm, and conducted the farming operations with the assistance of an employee, family and friends;
(c) Simon was apprenticed to her until 1993, and from about 1994 she and Simon farmed the Highton farm together. While she had back pain necessitating surgery in 1996, her back pain did not prevent her from conducting the farming business;
(d) until 1996 she was responsible for keeping the books for the farming business;
(e) Simon and Anita have never paid rent for the homestead, and the partnership has never paid rent to her;
(f) she has never promised Simon and Anita exclusive possession of the Highton farm;
(g) Simon had always told her that the partnership is not profitable, and encouraged her to draw as little as possible from it. She has paid for food and personal items from income she has earned from outside the partnership;
(h) since February 2022 Simon has used an account with the Macquarie Bank in his and Anita's names for the purposes of the partnership, without her permission; and
(i) Simon and Anita did not seek her permission before borrowing funds from the partnership, and she never discussed with Simon and Anita about them lending funds to the partnership.
50 In relation to the dissolution of the partnership, Jill deposed that Simon's assertion that she has insisted that the farm business assets be sold immediately is untrue. She has attempted to negotiate an outcome whereby Simon would buy her interest in the farm business assets. As those negotiations have not borne fruit, the farm business assets should be sold. She never promised to give Simon the farm business assets, and there is a ready market for livestock and farming equipment.
51 In relation to the historical information referred to in Simon's first affidavit, Jill deposed that during the time she lived and worked on the Highton farm, the farm was stocked with Angus cattle, not shorthorn cattle, which was the breed for which previous generations of Lidgetts won prizes.
52 Jill denied that her conduct was preventing the partnership from operating using its own funds. She said:
...I stand ready, willing and able to approve payment of any proper Partnership expense incurred:
(i) in finalising the Partnership's affairs;
(ii) owing by the Partnership in respect of its activities prior to its dissolution;
(iii) incurred in respect of the finalisation of transactions commenced prior to its dissolution,
upon being satisfied that it is a proper expense of the Partnership and that the Partnership has funds available to pay it.
53 In relation to Simon's application for injunctive relief, Jill deposed as follows:
...I do not want to continue in Partnership with Simon and certainly do not want to continue in a Partnership with Simon whereby he is entitled to conduct it unilaterally.
(a) It has always been my intention that my four children benefit equally from my estate. I hoped that it would prove possible for me to implement some arrangement whereby Simon would receive the Highton Property in my estate, on the basis that his sisters were properly compensated (by a combination of my other assets and payments from Simon) so that they each benefited equally.
(b) Simon has for some years badgered me in relation to what was to occur in relation to the Highton Property. He has repeatedly sought to have me put the Highton Property into a trust which he would ultimately come to control. Simon's attempts to have me do as he wished with the Highton Property has been a point of contention between us for many years. It was my intention that Simon would receive the Highton Property in my estate if my daughters were properly compensated. I was not willing to transfer the Highton Property into a trust to benefit Simon.
(c) My relationship with Simon has broken down, primarily due to the dispute as to what ought to occur in respect of the Highton Property. I decided that I wished to deal with the Highton Property in my lifetime and hence I transferred it into a trust with my four children and myself listed as specified beneficiaries.
(d) Simon accuses me in this proceeding of acting fraudulently and unconscionably. I strongly reject these allegations, which are false and which have greatly upset and offended me.
(e) Further, I have learned information as to the manner in which Simon has conducted the Partnership which has caused me to lose faith in his integrity. Simon has caused the preparation of Partnership accounts which are inaccurate and is presently conducting Partnership affairs without reference to me and through a bank account to which I have no access.
(f) I now realise that I have been foolish in signing accounts and tax returns without adequately understanding them, in reliance on Simon, Anita and the various external accountants used by the Partnership over the years (and who I formerly used). I now believe that these tax returns and accounts are inaccurate and have been prepared so as to suit Simon and Anita rather than to reflect the true dealings.
(f) I do not consent to the Partnership continuing to use Paul Hansen as its external accountant given that I have lost faith in him.
(g) I do not intend to sign any tax document for the Partnership, or consent to the filing of any tax document by the Partnership, until I have a proper opportunity to consider all of the Partnership records and satisfy myself that the documents are accurate.
(h) The Partnership has been dissolved. Given that, I believe the ordinary course of business is for its assets to be sold and for its affairs to be wound up. I do not consent to continue the Partnership with Simon as if it had not been dissolved.
(i) I refer to paragraph 20 of Simon's affidavit and maintain that Simon has engaged in a bullying manner towards me. He has for some years sought to have me agree that he ought to be entitled to inherit the Highton Property without being obliged to properly compensate his sisters and has become angry when I have not agreed to do as he wished.
(j) I refer to paragraph 55 of Simon's affidavit. I believe his reference to Macquarie Bank is mistaken and the reference ought to be to Westpac Bank. I confirm that I require that all payments by the Partnership be approved by each of Simon and I. I am now aware that Simon is circumventing this requirement, and unilaterally conducting the Partnership, by using a bank account in the name of himself and Anita to conduct Partnership business.
54 In relation to the Greendale Sunflower Farm, she learned from relatives that the business of growing and selling sunflowers was being conducted at the Highton farm. Anita did not tell her that she was running the sunflower farm for her own benefit. She deposed as follows:
I visited the Highton Property on 27 February 2021. My daughter Anna was also there.
(i) I visited it during the afternoon, I do not recall the exact time. There were many people at the farm, with more arriving and many cars parked on the side of the road.
(ii) I observed people paying cash for sunflowers and secateurs. I saw a box on the table at the entrance which contained cash.
(iii) I estimate that when I visited there were around 50 customers at the farm. People were walking around with dogs and children, taking photos.
I believed that the business was being conducted on behalf of the Partnership, as:
(i) I owned the Highton Property, while the Partnership occupied the Highton Property and farmed it;
(ii) neither Simon nor Anita asked my permission to use the Highton Property for any purpose other than it being farmed by the Partnership, nor told me that they intended to conduct (or were conducting) a business for their own benefit on the Highton Property.
I believe that most of the income earned in respect of the Greendale Sunflowers business is earned in cash. I believe this because:
(i) I was informed of this by relatives, who I believe.
(ii) The Greendale Sunflowers business was promoted as a cash-only business. ...
(iii) Anita said so in an email to Paul Hansen. ...
55 Jill deposed as to what she has learned from the partnership records provided to her, including:
(a) that the partnership accounts are false, in that they have allocated income to her that she did not in fact receive;
(b) that the partnership accounts show that income has been allocated to Simon, Anita and their children to suit their personal affairs rather than dividing the income of the partnership equally between her and Simon; and
(c) that Simon's assertion that the partnership accounts were altered in 2021 to show that she was being paid rent for the Highton farm to enable her to make a contribution to her superannuation fund was incorrect, as she closed her superannuation account in 2016.
56 Jill noted that she no longer owns the Highton farm, and that its future is a matter for Anna. On 20 June 2023, Anna served a notice upon the partnership to vacate the Highton farm ('Notice to Vacate'), which expires on 1 August 2023, following which the partnership will be trespassing on the Highton farm. She does not believe that the farm business generates sufficient income to pay a commercial rental for the Highton farm, which Simon says is $46,900 per annum, and Jill says is $103,312 per annum.
I am concerned that the Partnership has been conducted on a basis which does not distribute the benefits of the Partnership equally between Simon and myself.
(i) I believe the Partnership accounts are inaccurate, and that Simon and Anita have caused them, over many years, to be prepared in a way which does not allocate to me half of the income of the Partnership but which diverts Partnership income to other persons (for example, to Simon and Anita's children). My concerns arise in part from emails between Simon, Anita and Mr Hansen. Copies of various of those emails are to be exhibited to an affidavit Mr French is to swear on this application.
(ii) I believe that I have not received all of the Partnership income attributed to me in the accounts. I have no confidence that Simon will in future keep accurate Partnership accounts which result in me receiving half of the benefits accrued from conducting the Partnership.
(iii) I am concerned at the loans Simon and Anita claim to have made to the Partnership and caused the Partnership to repay to them. I have no visibility into the making of, or repayment of, these loans.
...
I am concerned that if Simon is permitted to carry on the Partnership indefinitely without reference to me, I may be exposed to significant financial risk without any ability to control or avoid that risk.
I am further concerned that Simon may be unable to meet any amount he is required to pay on his undertaking as to damages. I am not aware of any substantial unencumbered assets owned by Simon and which would be available to me.
I am willing to give the usual undertaking as to damages if required upon the appointment of a receiver to the Partnership. I am also willing, as I have set out above, for my portion of the net proceeds of sale of the Partnership assets to be held in trust pending the hearing and determination of this proceeding.
58 Exhibited to Jill's second affidavit were the following documents in addition to the documents already in evidence and previously described in these reasons:
(a) further extracts from the Greendale Sunflower Farm website;
(b) email exchanges between Anita and Paul Hansen of MOR in September 2021 regarding the Greendale Sunflower Farm and the preparation of partnership accounts and individual tax returns for the 2021 financial year;
(c) the exit statement of Jill's superannuation fund;
(d) the Notice to Vacate;
(e) a valuation report for the Highton farm prepared for Jill's solicitors in September 2022; and
(f) correspondence between the parties' solicitors in April 2023 regarding, among other things, the parties' negotiations regarding the winding up of the partnership.
59 The second French affidavit runs to some 53 pages, and exhibits a bundle of documents which runs to some 1369 pages, so I will not summarise the contents of the second French affidavit in any detail in these reasons. The following extract from the second French affidavit summarises the matters canvassed in the second French affidavit:
I will now summarise, very briefly, some of the important matters dealt with in this affidavit. A great deal of the information provided by Simon in respect of the SJ & JR Partnership has proved false or unreliable, he has refused or failed to provide important documents and he has delayed in providing important documents and access to the partnership's accounting records. For example:
(a) In March 2023 Simon provided a document purporting to set out the partnership's indebtedness to he and his wife Anita Lidgett (Anita). The document showed that as at late February 2023 he and Anita were owed $78,900 by the partnership . On 20 July he provided documents which disclosed that this information was false and that in fact he and Anita had been indebted to the partnership throughout 2023.
(b) I have sought to reconcile information provided by Simon, and in partnership accounts, as to livestock numbers with information obtained from the National Livestock Identification System (NLIS) database. The information cannot be reconciled. The number of livestock recorded as being present on the Property is far larger than the number of livestock recorded in the partnership's records. The number of livestock sold by the partnership as disclosed in the records produced by Simon cannot be reconciled to the movements in livestock recorded on the NLIS database. In particular, as at 1 August 2023:
(i) the NLIS recorded 695 sheep tags at the Property whereas Simon claims that the partnership owns 245 sheep;
(ii) the NLIS recorded 570 cattle tags at the Property whereas Simon claims that the partnership owns 182 cattle.
(c) The partnership records produced by Simon record:
(i) no natural increase (births) of calves at the Property in 2022 (despite 91 in 2021 and 165 in 2023);
(ii) no natural increase (births) of lambs in 2022 (despite 119 in 2021 );
(iii) a natural increase of 1 lamb in 2023.
These numbers are implausible for a farm conducted as a breeding operation.
(d) There is a real risk that Simon and Anita are trading, for their own benefit, livestock reared on the Property without accounting to the partnership for so doing.
(e) The partnership accounts exclude moneys earned from the conduct of a sunflower business at the Property, notwithstanding that the Property has been occupied and farmed by the SJ & JR Partnership. Further, the records of the sunflower business do not record the cash income earned in conducting that business.
(f) The value of the Partnership's livestock substantially exceeds the value as estimated by Simon.
(g) There have been very serious delays in the provision of partnership records despite repeated requests. Access to the partnership's QuickBooks account was not provided until July 2023 without any proper explanation for the delay. Simon, through his lawyers, have made false and misleading statements as to the extent to which partnership records have been provided. The external accountant has repeatedly sought Simon's approval before providing partnership records to Jill.
(h) The QuickBooks records were provided after numerous deletions were made. Jill cannot properly assess why these changes were made or what effect they have.
In relation to purported liabilities of the partnership:
(a) The partnership accounts have been prepared on the basis that personal indebtedness of Simon and Anita to Westpac Bank and Macquarie Bank is recorded as debts of the SJ&JR Partnership. The records produced do not enable Jill to ascertain whether these debts ought to be recorded as partnership debts, and whether the partnership ought to have made payments in respect of these debts.
(b) It appears from the partnership records that the partnership has made loan payments in respect of a home loan in Simon's name. This loan may relate to the Bacchus Marsh Property but I cannot determine this question on the basis of the documents provided.
(c) As identified above, Simon has provided inconsistent documents in relation to the creditor/debtor relationship between he and Anita (on the one hand) and the partnership (on the other hand). He has not provided access to the source documents which would be required to determine the true position in respect of these dealings. From the available records it appears that he and Anita have been indebted to the partnership for significant periods. Jill did not agree that Simon and Anita were entitled to borrow funds from the partnership.
(d) Simon and Anita have caused the partnership to pay them 'reimbursements' at times they were indebted to the partnership.
Simon has excluded Jill from the conduct of the SJ & JR Partnership, and now appears to be carrying on the partnership unilaterally.:
(a) Simon has conducted the partnership in a manner oppressive and unfair to Jill, and beyond his authority.
(b) it is apparent from communications produced between Simon, Anita and the Partnership's accountant that the financial affairs of the partnership have not been conducted on the basis that Jill is entitled to half of the economic benefits available through farming activities conducted at the Property, and that many decisions affecting Jill's interests have been made without her involvement.
(c) Simon has conducted partnership business through bank accounts to which Jill does not have access, and has caused partnership funds to be held in his personal accounts, so that it was necessary for seek assistance from Anita (a non-partner) if she required access to partnership funds.
(d) Simon presently appears to be unilaterally carrying on the business of the SJ&JR Partnership, notwithstanding that the partnership was dissolved on 10 February 2023. Following its dissolution Simon repeatedly informed Jill in writing that he acknowledged the dissolution, and made statements which appeared to confirm his agreement that the partnership was to be wound up. He did not advise Jill that he was continuing to conduct the partnership business until this emerged from his 21 July affidavit.
For many years the SJ&JR Partnership occupied the Property, which was owned by Jill and which she permitted the partnership to use without charge. Jill no longer owns the Property and there is no agreement between the partnership and the registered proprietor as to its occupation. The partnership continues to occupy the Property. The registered proprietor served notice on the partnership revoking its licence to occupy the Property and that notice has now expired so that the partners are liable for trespass if the partnership has not vacated the Property.
There are animal welfare concerns in relation to the partnership's livestock.
(a) Simon has twice, by letter, expressed serious concerns as to the welfare of the partnership's livestock.
(b) An agricultural consultant has recently reviewed livestock at the Property. He had concerns about the condition of the sheep and cattle. He observed that the sheep had not been drenched or crutched and Simon told him that this was because he could not afford to do it. The failure to drench and crutch the sheep is contrary to appropriate livestock management.
60 The balance of the second French affidavit was organised under the following headings and subheadings:
False and unreliable information provided by Simon Lidgett
• Concerns regarding income reconciliation
• Simon's 'Rough estimate' of 10 March 2023
• Sunflower business
• Inaccurate livestock numbers and valuations
• Concerns regarding AM & SJ Partnership and the Pykes Hill companies
• Concerns regarding under-reporting of livestock values
• Concerns regarding AM & SJ Partnership & Pykes Hill Companies
Lack of co-operation by Simon Lidgett
• Requests for documents
False, misleading and evasive statements regarding access to partnership records
• Refusal to agree to audit
• Failure/refusal to provide & extensive delays in supplying documents
Transactions between Simon & Anita and the partnership
• Macquarie Farm Loan
Loans to the SJ & JR Partnership from Simon and Anita (SJ & AM Partnership)
Simon acting beyond his authority
Conducting new partnership business since dissolution on 10 February 2023
Conduct of the partnership in an oppressive and unfair manner
• Simon's Unilateral conduct
Assertions of rights regarding partnership assets
• Jill's denial of the claim
• Simon's assertions regarding bloodlines and proprietary rights
Other considerations
• Partnership rights of occupation are extinguished
• Animal welfare concerns
• Recent changes to the Reckon records
61 The following documents were exhibited to the second French affidavit:
(a) Mr French's analysis of the records of the partnership, including financial records and livestock movements;
(b) financial records of the partnership including invoices, tax returns, bank statements, general ledgers, partnership balance sheets and profit and loss statements;
(c) documents setting out the assets and liabilities of the partnership, including stock numbers and a list of partnership creditors (including the debt owed to Simon and Anita for a loan to the partnership);
(d) correspondence from Simon and Anita, and promotional material and financial records relating to the Greendale Sunflower Farm;
(e) financial records and tax returns for the AM & SJ partnership, as well as invoices and remittance advices of livestock sales of the AM & SJ partnership;
(f) individual tax returns for Simon and Anita;
(g) correspondence between the parties and repeated requests for the disclosure of various critical documents said to demonstrate a lack of cooperation and extensive delay by Simon;
(h) requests for access to financial documents held by MOR and Simon and Anita;
(i) the title search for the Bacchus Marsh property;
(j) a loan offer letter from Westpac and Westpac bank statements in the name of the partnership from 2009 - 2023;
(k) a document relating to the renewal of Simon's registration as a wool classer with the Australian Wool Exchange;
(l) various email correspondence between MOR and Simon and Anita regarding the financial affairs of the partnership;
(m) the proposed Lidgett family farm succession plan prepared by MOR; and
(n) an appraisal of livestock prepared on behalf of Jill by Mr Xavier Bourke, a livestock agent engaged by Jill to inspect the livestock on the Highton farm, which provided an estimated value of the livestock herd of $189,525 as at 25 July 2023.
62 Simon's second affidavit was largely responsive to the allegations of impropriety made in the second French affidavit, as follows:
(a) he noted that Mr Hansen of MOR undertook a reconciliation of the partnership loan accounts when preparing the financial statements for the partnership for FY2023. Mr Hansen concluded that the partnership operated by him and Anita ('AM & SJ Lidgett partnership') owed the partnership money, not vice versa, as previously asserted by Simon.[14] This assertion was made as reflecting the honestly held, but mistaken belief on the part of Anita, who manages the book keeping for the partnership. The outstanding debt was promptly repaid by Simon and Anita;
(b) he said that the National Livestock Identification Service ('NLIS') database is not and never has been used by the partnership to do a livestock stocktake, as for a range of reasons it is unreliable;
(c) he said that he and Anita have never operated a livestock trading business on the property, and the AM & SJ Lidgett partnership is only a vehicle for the consultancy services provided by him to a neighbouring farmer. However, over the years Anita's father has given Anita and their children about 30 calves and 20 lambs, which have been treated as partnership livestock when sold;
(d) as for the Greendale Sunflower Farm, he deposed as follows:
I refer to My July Affidavit at paragraphs 22 to 31. For the reasons I explained there, the revenues for the sunflower business were Anita's and not the Partnership's.
The sunflowers benefited the Partnership. I used the sunflowers as a break crop to assist in weed control in the paddock and also as a soil conditioner for the heavy black clay soil in the paddock. After the 4- week sunflower season, I used the remainder of the crop as stock feed for the Partnership's livestock. ...
Rather than ploughing the sunflowers into the ground, Anita and I decided to earn a small amount of proceeds by opening to the public and selling some of the sunflowers over a short window of time. The small earnings derived from this activity were the result of the personal efforts of Anita and family members.
Jill was aware that Anita intended to use the proceeds from sales of sunflower heads on improvements to the residence on the Property.
(e) the valuations that he has provided for the partnership livestock are his genuine estimates based upon his knowledge and experience, and that Mr French provides no explanation for his assertion that those estimates significantly undervalue the partnership's livestock;
(f) he denied the assertions that he prevented Jill from accessing the records and accounts of the partnership or the partnership accountant, and repeated his assertion that the partnership accounts are accurate;
(g) he denied the allegation that he conducted the financial affairs of the partnership on the basis that Jill is not entitled to half of the economic benefits of the partnership, and said that Jill had access to partnership funds through her cheque book, and that the partnership accounts show that Jill has taken substantial drawings from the partnership over the years;
(h) he denied that Anna has a right to repossess the Highton farm, and noted that she has not taken any legal action to do so apart from serving the Notice to Vacate. He said that he has good grounds for asserting that he has an equitable lease over the Highton farm;
(i) he has used both the Westpac loan account (initially taken out to purchase the Bacchus Marsh property) and the Macquarie Bank loan account as lines of credit to fund the expenses of the partnership, without any protest from Jill until recently;
(j) the delays in providing Jill and her solicitors with the documents they have requested are attributable to the time required to compile them;
(k) in relation to the Greendale Sunflower Farm, he deposed as follows:
As to paragraph 18, I say that the Property has only a small area of arable land, which cannot have a crop grown on it continually. Cropping needs to be done in rotation. I say that I grew wheat crops on the Property during drier years. Occasionally I cut wheat for hay as feed for the Partnership's livestock rather than sell it as a crop. I have not grown wheat crops in the last two years because the weather has been too wet. The sunflower farm had no influence whatsoever in my decisions to conduct cropping on the Property for the Partnership. The sunflower farm did not affect the Partnership's business detrimentally in any way whatsoever.
(l) he deposed further as to the income derived by Anita from the Greendale Sunflower Farm and what she did with that income, and said that Jill always knew about the planting of the sunflowers;
(m) he disputed the accuracy of some of the assertions in the second French affidavit regarding the contents of the partnership accounts, livestock numbers, and the condition of the livestock, and provided explanations in relation to these matters. In relation to the asserted number of livestock on the Highton farm, he deposed as follows:
I refute the assertion that there are 695 sheep and 570 cattle on the Property. The Property comprises 670 acres of farming land used by the Partnership. 50 acres of this land is used for soil conservation and tree planting. The stocking rate is one breeding cow and calf to every 4 acres. This calculates to 155 cows with calves at foot to be the total stocking rate. That is consistent with paragraph 16 of My July Affidavit, where I explained that the Partnership had 180 cattle and calves, two bulls, 245 sheep and one ram on the Property as at 18 July 2023.
I also say that Anita and I have our own 15 Friesian cattle and three Angus cattle on the Property. As I say in paragraph 8 above, Anita and I purchased milk powder for the abovementioned young livestock with our own funds, so the Partnership assets were unaffected. Those cattle are easily distinguished from Partnership livestock, as the Friesian cattle are black and white and the Angus cattle have a different button on the rear of their ear tags. The Property cannot possibly stock the numbers of livestock asserted by Mr French.
(n) he denied the assertion that he and Anita established Pykes Hill Pty Ltd as a vehicle through which he could divert the business of the partnership to them;
(o) conducting an audit of the partnership accounts would be costly and futile, because the partnership accounts are accurate; and
(p) in relation to the Macquarie Bank loan account, he deposed as follows:
As to paragraphs 84 to 97, I say that I have discussed those matters with Mr Hansen and he confirms my understanding that:
During the past 28 years I have used the Westpac loan as a line of credit for the Partnership - that is, I drew upon it when funds were needed by the Partnership to pay its operating costs, and I caused the Partnership to deposit funds into the loan account to repay those loans when the Partnership had funds in its bank account that were in excess of its requirements from time to time.
At some stage in the past, prior to MOR Accountants' involvement, the Westpac loan was described in the Partnership's financial statements as a debt of the Partnership even though the loan was solely in my name, and l was solely liable for it. The debt is properly described as a debt to me personally, as the funds I drew from the Westpac loan for the Partnership were loans by me to the Partnership.
The vast majority of transactions on the Westpac loan were transfers to and from the bank account of the Partnership. That is not to say, however, that the Westpac loan was a liability of the Partnership to Westpac (or to Macquarie, after I refinanced the Westpac loan).
The Westpac loan was treated as a loan facility for the Partnership purely for accounting purposes. In effect, it was a loan facility by me to the Partnership.
The Westpac loan was paid down to nil in January 2022 from contributions from Anita and me as a step in the refinancing with Macquarie Bank. The Macquarie loan is in my name and Anita's, not the Partnership's. Anita and I are liable for it. The Partnership is not.
The Macquarie loan was redrawn for $79,000 representing a replacement of the Westpac loan that had been paid out by me and Anita.
MOR Accountants continued to include the Macquarie loan in the financial statements of the Partnership as it was simply replacing the previous Westpac loan. As before, the entry effectively describes a loan facility by me to the Partnership, not by Macquarie to the Partnership.
This new Macquarie loan continued to operate as a line of credit for the Partnership and continued to be accounted for as such in the financial statements, in the manner I have described above.
The Macquarie loan described in the Partnership's financial statements is therefore a loan repayable to me and Anita by the Partnership. It is not a loan repayable to Macquarie.
No assets of the Partnership have ever been used to secure either the Westpac loan or the Macquarie loan.
...
(q) in relation to Mr French's assertion that the partnership accounts are inaccurate and/or misleading, Simon deposed as follows:
To the best of my knowledge, Jill has copies of, or access to, all the Partnership's records.
Mr French failed to identify any specific transactions that are false, let alone explain why he believes they are false. His expression of opinion, plainly beyond his expertise, that some transactions recorded as "capital introductions" and "loans" are "most likely false" is a grave accusation and is scandalous for lack of specific justification. l am not aware of any false transactions in the Partnership's accounts.
(r) in relation to Jill's contention that the farm business assets should be sold, Simon deposed as follows:
I have felt it necessary to continue the business of the Partnership in a limited capacity to preserve the Farm Business Assets, especially the livestock, over which I have claims in these proceedings.
In any event as I explain in paragraph 20 above, I believe it does not benefit the Partnership for the livestock to be sold in a winding up scenario, which would entail lower prices, rather than in an orderly manner in the ordinary course of business.
I believe Jill's dissolution of the Partnership is strategic in the broader context of my claims over the Farm Business Assets and the Property in these proceedings, and l am not aware of any way in which my continuation of the Partnership's business has caused any detriment to Jill.
I rely on this affidavit in support of my application for injunctive relief to enable me to continue the Partnership business until the final determination of these proceedings.
(s) as for the contention that Jill has been excluded from the partnership, Simon deposed as follows:
- I repeat what I have said in paragraph 71 above. I have not excluded or oppressed Jill in any way whatsoever and I believe Mr French has no proper basis to make such allegations.
- Jill never indicated to me that she did not understand some aspect of the Partnership's accounts or finances. If she had, I would have explained it to her or assisted her to discuss the matter with the Partnership's accountants. By my observations of her interactions with the Partnership's accountants, she well understood such matters.
- Specifically as to paragraph 112(g), I repeat that Anita and I have not conducted any business of our own "through" the Partnership or otherwise using the Partnership or "in respect of the Property", with the minor exception of the sunflower farm.
The communications from MOR Accountants are consistent with Jill having no involvement in the operation or finances of the Partnership, by her own intention. However, I repeat that she discussed matters concerning the Partnership at our consultations with the Partnership's accountants and she was always free and able to make her own enquiries. She never sought to do so until this dispute arose.
(t) as for the allegation that the partnership accounts had been manipulated in such a manner as to benefit Simon and his family, and in a manner adverse to the interests of Jill, Simon deposed as follows:
I say that Mr Hansen has informed me, and I believe, that:
The management of financial affairs by MOR Accountants was at all times concerned with achieving the best financial outcome for the Partnership.
The splitting of income was a mechanism to maximise the benefit of tax thresholds and caused no detriment to the Partnership or to Jill. Significantly, it did not affect her ability to take drawings from the Partnership.
The introduction of rental income did not impact Jill as the Partnership paid all her income tax.
I repeat that Jill never indicated to me that she did not understand some aspect of the Partnership's accounts or finances. If she had, I would have explained it to her or assisted her to discuss the matter with the Partnership's accountants. By my observations of her interactions with the Partnership's accountants, she well understood such matters.
As to paragraph 123, l say that Jill was always aware of the amounts attributed to my children as wages and that such a financial decision benefited Jill by way of tax savings. These were journal entries. A similar application of wages occurred in favour of Jill upon her request in or about June 2012 when Jill sought to top up her superannuation with $26,000 and an entry was put through the QuickBooks assigning it to wages and superannuation, and again in or about June 2015 when $35,000 of partnership funds were transferred to her personal superannuation and made as an entry in QuickBooks as wages being in the form of salary sacrificed superannuation. I believe these events demonstrate that Jill was well aware of the Partnership's accounts and finances and how they might benefit her financially.
63 The third French affidavit largely concerned matters relevant to the adjournment of the hearing of the current applications from the original scheduled date of 9 October 2023. In the third French affidavit, Mr French referred to the provision by Simon's solicitors of hundreds of pages of documents on 28 July 2023, the unexplained delay in the filing and service of Simon's second affidavit, the issue of subpoenas directed at Anita and MOR and Simon's objections to those subpoenas, and disputes between him and Simon about what was said during the discussions each held with Mr Xavier Bourke, a livestock agent engaged by Jill to inspect the livestock on the Highton farm.
64 The following documents were exhibited to the third French affidavit:
(a) correspondence between the parties' solicitors regarding requests for partnership documents, the subpoena objections, access to QuickBooks, the bookkeeping software package used by the partnership, the conduct of various interlocutory applications, including the current applications;
(b) a letter of instruction from him to Mr Bourke dated 20 July 2023 seeking a report valuing the farm business assets; and
(c) an appraisal of the value of the livestock prepared by Mr Bourke in July 2023, which valued the livestock at $189,525, and subsequent correspondence between Mr Bourke and Mr French's firm regarding discussions which took place between Mr Bourke and Simon during the course of the inspection.
65 In the fourth French affidavit, Mr French deposed that the purpose of the fourth affidavit was to respond to various matters in Simon's second affidavit, and to update the Court with respect to developments since swearing the second French affidavit on 8 August 2023. The fourth French affidavit also made corrections to some minor errors in the second French affidavit.
66 The substantive part of the fourth French affidavit largely responded to Simon's contention that the NLIS database cannot be relied upon to conduct a stocktake of the livestock on the Highton farm, because the NLIS database includes tags which have not yet been affixed to an animal, and because purchasers of livestock may not update the NLIS database in a timely fashion or at all. Mr French deposed at length as to matters and documents which support his contention that the issues with the reliability of the NLIS database cannot explain all of the discrepancies between the livestock numbers recorded in the partnership accounts and the numbers shown in the NLIS database. He withdrew his earlier assertion that the carrying capacity of the Highton farm is considerably greater than the herd of livestock currently held by the partnership.
Simon and Anita have arranged farm and crop insurance over many years, pursuant to which S & A Lidgett has been recorded as the insured party. The farm insurance policies variously record that S & A Lidgett were undertaking primary production activity, sheep, cattle and grain farming at 30 Lidgetts Lane, Greendale.
68 Mr French also challenged Simon's assertion that Mr Hansen of MOR was impartial, pointing to correspondence which he said supported his assertion that 'Simon and Anita caused the partnership to change accountants from Mulcahy to MOR because it was perceived that Mulcahy were not progressing the family succession planning to Simon's satisfaction', including emails between Anita and Mr Hansen, invoices which showed work being carried out by MOR for the SJ & AM partnership, occasions where it was said that MOR made decisions with Simon and Anita which would have a material impact upon Jill without consulting Jill, and the fact that Simon has claimed legal professional privilege over documents produced upon subpoena by Anita and MOR, being communications between Simon, Simon's solicitors, Anita, and MOR which are said to concern the current proceeding.
69 Mr French also deposed as to certain matters which he relied upon to rebut Simon's assertion that he has provided partnership records in a timely manner, and has not behaved oppressively towards Jill. He deposed, in summary, as follows:
(a) his firm first requested access to the partnership records on 3 June 2022. After at least 20 follow up communications, Jill was granted access to the partnership QuickBooks accounts on or around 14 July 2023;
(b) following the conclusion of the first mediation in October 2022, he wrote to Simon's solicitors to request partnership documents that would be necessary to provide to an auditor. These were provided in a piecemeal fashion over the next 10 months, and Jill was put to considerable expense in order to obtain the records of the partnership, and Jill continues to seek access to the partnership records; and
(c) Simon has refused to take steps to wind up the partnership.
70 The following documents were exhibited to the fourth French affidavit:
(a) a letter from his firm to Simon's solicitors dated 4 October 2023 where Mr French sought clarification with respect to certain aspects of Simon's second affidavit, and the response to that letter dated 13 October 2023, and a further request for clarification made on 27 October 2023;
(b) a bundle of invoices evidencing livestock sales by the partnership;
(c) a table showing the stock numbers as at 18 July 2023 compiled by Simon;
(d) a table showing stock numbers as at 10 June 2021 compiled by Simon, along with a livestock trading statement for FY2021;
(e) a PIC card issued to the AM & SJ Lidgett partnership;[15]
(f) insurance policy documents addressed to Simon and Anita, for what was described as a 'Farm Package' for farming operations at the Highton farm;
(g) an email to the partnership's former accountant ('Mulcahy's) dated 27 August 2021, said to have been from Simon, Anita and Jill, which expressed disappointment about Mulcahy's failure to progress the family's succession plan;
(h) email correspondence in 2021 between Simon and/or Anita and Mulcahy's regarding the succession planning process;
(i) MOR file notes and correspondence between Simon, Anita and MOR in 2021 regarding succession planning;
(j) a list of documents produced by MOR upon subpoena over which Simon claims legal professional privilege;
(k) Simon's original letter of demand dated 1 June 2022;
(l) an extract from ASIC database showing Simon as the holder of the business name for the Greendale Sunflower Farm; and
(m) correspondence between the solicitors for the parties regarding the partnership's ongoing occupation of the Highton farm.
71 Simon's third affidavit responded to the allegations made in the fourth French affidavit.
72 In relation to the Greendale Sunflower Farm, Simon noted that the sunflower farm was open to the public on selected days over a four week period in March 2021, and selected days over a six week period in March 2022. Anita estimated that the sunflower farm had 2000 paying visitors in 2021, and 1000 paying visitors in 2022. Adult visitors were charged $5 each, and could pick one sunflower each. Only about one in 20 visitors purchased more sunflowers.
73 Simon also deposed that he believes that Mr French has overlooked the impact of lost tags and the failure of purchasers to transfer PIC numbers upon the accuracy of the NLIS database, and has ignored his explanation as to how the reporting of the number of livestock in the partnership accounts changed between FY2022 and FY2023. He deposed that the PIC registered in the name of the AM & SJ Lidgett partnership has never been used, and that the insurance cover for the farm business assets was addressed to Simon and Anita so that the insurance premiums would be billed to them.
74 Simon denied that MOR is partisan, and denied Mr French's assertion regarding the reason for engaging MOR in 2021. He said that Jill approved the change to MOR. He said that the decisions regarding the allocation of income in the partnership accounts were made at meetings at which Jill was present, and in any event those changes had no material impact on Jill.
75 As for the winding up of the partnership business, Simon deposed as follows:
A major reason why I wish to prevent the liquidation of the Partnership's livestock in the manner sought by Jill, and presumably by a receiver if one is appointed, is that expertise and money is required to prepare livestock for sale. From my experience as a farmer and livestock trader over many years, I say:
It is normal practice amongst livestock producers that worms, lice, hoof issues and other infections must be addressed and dealt with prior to selling livestock. It is expected that the livestock would be vaccinated.
Sheep require drenching, crutching (and possibly shearing) and treatment for lice. Lambs should be marked. Sheep that are showing signs of flystrike, lameness, worms, lice infestation, and other issues, are prohibited from being sold in saleyards.
Livestock for sale must not be in the late stages of pregnancy, as transportation to the sale yards, and the yards themselves on auction days, are stressful environments for livestock. Fatal maladies can result such as grass tetany and pregnancy toxemia. For that reason, livestock must be pregnancy-tested and certified, with the associated costs.
Cows and calves of young ages need to be matched and tagged together to avoid fatalities.
Livestock cannot be sold for slaughter during a certain withholding period, to avoid proximity to agricultural treatments such as drenching and backline lice control. Some treatments, such as Moxiguard long-acting drench for sheep, require a withholding period of significantly more than 100 days for meat export.
Livestock sold in cattle yards are inspected by officials of Agriculture Victoria to ensure that they do not enter the yards with ailments or disease.
If a livestock producer presents an animal to the sale yards in breach of relevant regulations, that can result in fines and euthanasia of the livestock, along with the associated costs.
When sending livestock for sale, it is necessary to purchase special ear tags and to make a vendor's declaration that addresses the abovementioned health requirements.
Transportation of livestock to sale yards is expensive. The livestock needs to be held appropriately prior to transport. Only fit livestock should be transported.
Cows that are more than about 6 years old are not normally sold into the store saleyard system, as the prices achieved are too low to be economic compared with the associated sale expenses. Disposal of such livestock is usually done by obtaining a kill space and grid price at an abattoir. Nonetheless, each animal must be checked to ensure it is fit for transport.
Mr French ignores the fact that I have attempted to sell some of the Partnership's livestock since the dissolution, but Jill's actions in effectively shutting down the Partnership's bank account has rendered the Partnership unable to pay the expenditures required for sale. I have caused the Partnership to sell a small number of cattle since the dissolution. Those sales occurred on-farm and incurred little cost. That is not a viable solution for the sale of large numbers of livestock.
It is obvious to me that neither Jill, Mr French, nor their proposed receiver has considered any of these matters. I believe this is consistent with Jill's complete lack of knowledge of standard farming practices and her ignorance and dismissal of matters of animal welfare.
Mr French has not explained how a receiver would obtain the necessary funds to cover the abovementioned expenditures required prepare the Partnership's livestock for sale. He has not demonstrated how the receiver would engage and pay for the skills of persons with the necessary expertise to conduct the process. I have seen no indication of Jill being willing to use her own funds for the process, and certainly Jill does not have the necessary expertise.
Jill's approach of seeking the immediate sale of the livestock would be financially prohibitive for the reasons I explained above, especially with the added expense of a receiver's fees and possibly the fees of an external farming consultant. I believe the net assets of the Partnership could not cover such expenses without contribution of funds by Jill.
Rather, I believe the Partnership would be advantaged by the Court granting the interlocutory relief that I seek. That would enable me to continue the Partnership's farming business, retain and care for the livestock, and allow them to produce calves and lambs, all of which would increase the value of the herd. If I were unsuccessful at trial in my claims for the Farm Business Assets, the Partnership would also have the benefit of my expertise in an orderly sale of the herd without the need for the involvement of a receiver.
76 Exhibited to Simon's third affidavit was a lengthy article published on the 'Beef Central' website dated 15 December 2020 and titled 'Tag retention: NLIS tag losses still frustrating producers', together with comments posted on the site between the date of publication and June 2021, and a statement published by the CEO of a major livestock tag producer responding to the contents of the article.
77 The fifth French affidavit responded to some of the matters deposed to in Simon's third affidavit, but largely concerned matters relevant to a foreshadowed application by Simon to further adjourn the hearing of the current applications following the service of further expert reports sought to be relied upon by Jill.[16] The fifth French affidavit largely annexed correspondence between the parties regarding the conduct of the applications, correspondence evidencing further requests for partnership documents made by him on behalf of Jill, and a letter from Jill's treating cardiologist dated 22 November 2023 which referred to Jill suffering from a serious heart condition, and that what he said were the 'constant delays' in this proceeding were causing Jill a lot of stress, which has affected her physical and mental health.[17]
78 The sixth French affidavit was filed and served the day before the hearing of the current applications. Mr French deposed that the purpose of this affidavit was to put before the Court further documents supplied by Simon after he swore the fifth French affidavit, and to provide further background to assist with the scheduling of the privilege application.
On 22 November at 12:28pm, I received an email from Simon's solicitor enclosing the following documents:
(a) Fortnight update information (3/11/23);
(b) Copy of assets and liabilities as at 5 November 2023;
(c) Copy of ATO account;
(d) Copy of Macquarie Offset farm loan account;
(e) BAS April-June, July-Oct, June; and
(f) Amount owing to ATO for BAS.
In the email, Mr Bryant wrote that he believed the documents had been provided to us by MOR Accounting at an earlier date.
On 22 November 2023, at approximately 1:00pm, a USB stick was delivered to my offices from Mr Bryant containing the following documents:
(a) NVDs for cattle, sheep and lamb sales between 2016 and 2023; and
(b) Invoices for the sale of cattle, sheep and lamb sales between 2016 and 2023, corresponding to the NVDs.
80 Copies of the documents above were exhibited to the sixth French affidavit.
81 Both parties relied upon the decision of Warren J in Martyniuk v King ('Martyniuk')[18] in support of their respective contentions about the merits or otherwise of the appointment of a receiver to the partnership. In Martyniuk,[19] her Honour was concerned with an application to appoint a receiver to a unit trust, in circumstances where there had been a breakdown in the relationship between one unit holder and the other two unit holders. The trust owned, among other things, a company which operated and managed nursing homes.
82 In Martyniuk,[20] the (successful) applicant to appoint a receiver relied upon the following matters:
(a) the affairs of the trust were in disorder and disarray, with taxation returns not having been lodged for 15 years, and the public officer refused to sign the tax returns;
(b) one of the disputants refused to cooperate in the management of the nursing homes at a time when ongoing management was necessary;
(c) there had been a complete breakdown in the relationship between the parties, with the unit holders being unable to agree upon any matter; and
(d) the sole remaining director of the trustee was in poor health, and wished to resign from office.
83 Her Honour conducted a thorough survey of the relevant authorities, commencing her discussion as follows (omitting citations):
The general legal principle is that if misconduct, waste, or improper disposition of assets or that a trust is in a state of disarray can be shown, or if it appears that the trust property has been improperly managed, or is in danger of being lost or if it can be satisfactorily established that parties in a fiduciary position have been guilty of a breach of duty there is a sufficient foundation for the appointment of a receiver: Kerr on Receivers, 17th Ed. at pp.13-14. It is further observed in Kerr (at 5):
'Object of appointment. A receiver can only be properly appointed for the purpose of getting in and holding or securing funds or other property, which the court at the trial, or in the course of the action, will have the means of distributing amongst, or making over to, the persons or person entitled thereto. The object sought by such appointment is therefore the safeguarding of property for the benefit of those entitled to it.'
As observed in Halsbury Laws of England 4th ed. (Vol. 39, para 827), the general ground on which the court appoints a receiver is ultimately in every case the protection or preservation of property for the benefit of persons who have an interest in it. The basis upon which a receiver may be appointed has been regarded by the courts on even as wide a basis as when the circumstances render it just and convenient.[21]
84 It is clear from her Honour's observations above and her summary of the relevant principles governing applications to appoint receivers, that while the protection and preservation of property is the primary purpose of appointing a receiver, a receiver may also be appointed to a trust (or, for that matter, a partnership) where its affairs are in disarray, or where the parties are deadlocked.
85 That the Court's jurisdiction to appoint a receiver is not to be lightly exercised, and indeed should only be considered as a 'last resort', or 'where there is no other avenue open to the applicant', is evident from her Honour's reference to the Full Court decision in National Australia Bank v Bond Brewing Holdings Limited ('Bond Brewing'), [22] as follows:
No court will make such an order unless convinced of its necessity. A case for some kind and degree of interlocutory relief may be made out which falls short of this extremely drastic remedy; for example, the court may not be satisfied - and it is of course for the applicant to persuade the court that nothing less than what he seeks will do - that in all the circumstances it should do more than grant an injunction. At times the court will be induced to refuse the remedy of a receiver by undertakings offered by the defendant.[23]
86 In Bond Brewing,[24] the Full Court also referred to the American jurisprudence regarding the appointment of receivers, referring with apparent approval to the following statement of principle:
A court in exercising its discretion to appoint or refuse a receiver must take into account all the circumstances and facts of the case, the presence of conditions and grounds justifying the relief, the ends of justice, the rights of all the parties interested in the controversy and subject matter, and the adequacy and effectiveness of other remedies. This discretion is to be exercised with great caution and circumspection, after full consideration of the facts of a particular case and the interests of all parties concerned, for a reason strongly appealing to the judge to whom the application is made.
The appointment of a receiver should be denied where it is likely to do irreparable injury to others, or where greater injury will probably result from the appointment than if none were made.[25]
87 Accordingly, while the Court's discretion to appoint a receiver may be enlivened in a wide range of circumstances, not just where there is an imminent risk to property, the authorities make it clear that the discretion ought to be exercised very cautiously, and only after a fulsome exploration of less drastic alternatives.
88 As observed in Simon's written outline of submissions, the principles governing the grant of interlocutory injunctions are well known, and well settled. Simon's submissions referred to the following summary in the decision of the Court of Appeal in Yimiao Australia v Cyber Intelligence:[26]
The plaintiff seeking interlocutory injunctive relief must demonstrate that there is a serious question to be tried ....
The injury the plaintiff is likely to suffer must be one for which damages will not provide an appropriate remedy.
The balance of convenience must favour the granting of the injunction. This will require consideration of the strength of the plaintiff's claim.
Ultimately, the Court should take the course that appears to carry the lower risk of injustice if it should turn out to have been wrong, in the sense of granting an injunction to a party who fails to establish the asserted right at trial, or failing to grant an injunction to a party who succeeds at trial.[27]
89 These principles were discussed by Vickery J in Perfection Fresh Australia Pty Ltd v Melbourne Market Authority,[28] where his Honour said, after summarising the relevant principles in similar terms to the extract above, as follows (omitting footnotes):
In addressing the first criterion, in Australian Broadcasting Corporation v O'Neill the High Court emphasised the need for the Court to carefully consider the nature and strength of the Plaintiff's case. In that case, Gummow and Hayne JJ said that:
There is then no objection to the use of the phrase "serious question" if it is understood as conveying the notion that the seriousness of the question, like the strength of the probability referred to in Beecham, depends upon the considerations emphasised in Beecham.
In addressing Beecham Group Ltd v Bristol Laboratories Pty Ltd, their Honours in Australian Broadcasting Corporation v O'Neill explained the reference to the need for the plaintiff to establish a "prima facie" case as follows:
By using the phrase "prima facie case", their Honours did not mean that the plaintiff must show that it is more probable than not that at trial the plaintiff will succeed; it is sufficient that the plaintiff show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial. That this was the sense in which the Court was referring to the notion of a prima facie case is apparent from an observation to that effect made by Kitto J in the course of argument. With reference to the first inquiry, the Court continued, in a statement of central importance for this appeal:
How strong the probability needs to be depends, no doubt, upon the nature of the rights [the plaintiff] asserts and the practical consequences likely to flow from the order he seeks.
As is further detailed below, in this case, the nature of the claims advanced and the relief sought are, as was the case in A_ustralian Broadcasting Corporation v O'Neill_, of central importance.
While typically set out as separate requirements, the High Court confirmed that these organising principles are to be considered together and inform one another. ...
For example, where a plaintiff has an apparently very weak claim, the balance of convenience must be stronger so that, overall, the lesser risk of injustice lies in the granting of the injunction.
As Woodward J said (Smithers and Sweeney JJ agreeing) in Bullock v Federated Furnishing Trades Society of Australasia:
[A]n apparently strong claim may lead a court more readily to grant an injunction when the balance of convenience is fairly even. A more doubtful claim (which nevertheless raises a 'serious question to be tried') may still attract interlocutory relief if there is a marked balance of convenience in favour of it.
As to the need to show a prima facie case, while the plaintiff does not need to satisfy the Court that it is probable (more likely than not) that the plaintiff will succeed at trial, it is necessary to show that there are sufficient prospects of success so as to justify the preservation of the status quo.
Standing back and assessing the whole, the Court will be concerned to adopt the course which carries the "lesser risk of injustice" if it should turn out to have been wrong. The consequences of any injunction, including the impact of any injunction on the defendant and third persons, will also be relevant in the exercise of discretion, as will delay in the making of the application. Where (as here) the injunctive relief sought on an interim or interlocutory basis is substantially the relief sought in the proceeding, the Court may pay particular attention to the prospects of success. ...[29]
90 Further, and relevantly for the purpose of the current application, the courts will generally not grant an injunction compelling a person to carry on a business.[30]
91 Given that Jill submits that this Court is not empowered to grant an injunction because the grant of an injunction would contravene the relevant provisions of the Partnership Act 1958 (Vic) ('Partnership Act'), selected provisions of the Partnership Act are reproduced below.
92 Division 2 of Part 2 of the Partnership Act is concerned with the relationship of partners to persons dealing with them.
93 Sections 9 and 10 of the Partnership Act provide as follows:
9. Power of partners to bind the firm
Every partner is an agent of the firm and his other partners for the purpose of the business of the partnership, and the acts of every partner who does any act for carrying on in the usual way business of the kind carried on by the firm of which he is a member bind the firm and his partners, unless the partner so acting has in fact no authority to act for the firm in the particular matter and the person with whom he is dealing either knows that he has no authority or does not know or believe him to be a partner.
10. Partners bound by acts on behalf of firm
An act or instrument relating to the business of the firm and done or executed in the firm-name or in any other manner showing an intention to bind the firm by any person thereto authorized whether a partner or not is binding on the firm and all the partners.
This section shall not affect any general rule of law relating to the execution of deeds or negotiable instruments.
94 Sections 13 and 14(1) of the Partnership Act provide as follows:
13. Liability of partners
Every partner in a firm is liable jointly with the other partners for all debts and obligations of the firm incurred while he is a partner, and after his death his estate is also severally liable in a due course of administration for such debts and obligations so far as they remain unsatisfied but subject to the prior payment of his separate debts.
14. Liability of the firm for wrongs
(1) Subject to subsection (2), where by any wrongful act or omission of any partner acting in the ordinary course of the business of the firm or with the authority of his or her co-partners loss or injury is caused to any person not being a partner in the firm or any penalty is incurred the firm is liable therefor to the same extent as the partner so acting or omitting to act.
95 Sections 42 and 43 of the Partnership Act provide as follows:
42. Continuing authority of partners for purposes of winding up
After the dissolution of a partnership the authority of each partner to bind the firm and the other rights and obligations of the partners continue notwithstanding the dissolution so far as may be necessary to wind up the affairs of the partnership and to complete transactions begun but unfinished at the time of the dissolution but not otherwise:
Provided that the firm is in no case bound by the acts of a partner who has become bankrupt but this proviso does not affect the liability of any person who has after the bankruptcy represented himself or knowingly suffered himself to be represented as a partner of the bankrupt.
43. Rights of partners as to application of partnership property
On the dissolution of a partnership every partner is entitled as against the other partners in the firm and all persons claiming through them in respect of their interests as partners to have the property of the partnership applied in payment of the debts and liabilities of the firm and to have the surplus assets after such payment applied in payment of what may be due to the partners respectively after deducting what may be due from them as partners to the firm, and for that purpose any partner or his representatives may on the termination of the partnership apply to the court to wind up the business and affairs of the firm.
96 Section 46 of the Partnership Act provides as follows:
Share of profits made after dissolution
Where any member of a firm has died or otherwise ceased to be a partner and the surviving or continuing partners carry on the business of the firm with its capital or assets without any final settlement of accounts as between the firm and the outgoing partner or his estate then in the absence of any agreement to the contrary the outgoing partner or his estate is entitled at the option of himself or his representatives to such share of the profits made since the dissolution as the court may find to be attributable to the use of his share of the partnership assets or to interest at the rate of seven per centum per annum on the amount of his share of the partnership assets:
Provided that where by the partnership contract an option is given to surviving or continuing partners to purchase the interest of a deceased or outgoing partner and that option is duly exercised the estate of the deceased partner or the outgoing partner or his estate as the case may be is not entitled to any further or other share of profits, but if any partner assuming to act in exercise of the option does not in all material respects comply with the terms thereof he is liable to account under the foregoing provisions of this section.
97 In his written outline of submissions, Simon submitted, in relation to his claim for interlocutory injunctive relief, in summary, as follows:
(a) his claims for a proprietary interest in the Highton farm and the farm business assets have merit;
(b) if the injunction is not granted, and the farm business assets are sold, Simon will lose the economic and personal benefits of the qualities and bloodlines of a herd of livestock that he has built up over his entire career, particularly the cattle, building upon the efforts of the generations before him;
(c) there are insufficient funds available to the partnership to properly prepare the livestock for sale. If the livestock are not sold for their true market value, the partnership will be insolvent;
(d) accordingly, if he is successful in his claims in this proceeding but the livestock is sold, he will be required to attempt to recover damages from his mother, and to replace the livestock at a significantly higher cost;
(e) if he were to purchase Jill's share of the farm business assets in the interim he will be out of funds in circumstances where the defendants' litigation tactics have given rise to disproportionate legal costs, and where Jill has refused to acknowledge the debt owed by the partnership to him and Anita; and
(f) there would be negligible prejudice to Jill by granting the interlocutory injunctive relief sought by him. Simon has proffered the usual undertaking as to damages, and Jill has provided no evidence of financial need or distress. She will benefit from the profits made by the partnership in the interim, and if she is able to make good her allegations of misconduct at trial, she will be able to recover any sums due to her after the taking of accounts of the partnership.
98 At the hearing of the current applications, counsel for Simon submitted as follows:
(a) there is a complete overlap between the claims Simon brings in relation to the farm business assets and the assets of the partnership, and his application for an interlocutory injunction;
(b) contrary to Jill's submissions, Simon does not seek to force Jill to continue to be in partnership with him. The legal links between the partners have been severed by the dissolution of the partnership, and Simon merely seeks to hold and preserve the farm business assets, and to continue to use them as he has done for many decades, not to force Jill to participate in the business of the partnership;
(c) damages are not an adequate remedy, not only because of Simon's personal attachment to the livestock, but because as the major creditor, he faces losses if the farm business assets are liquidated under fire sale conditions, and he does not want to pursue his mother into bankruptcy by enforcing any award of damages;
(d) there is nothing in the Partnership Act which ousts the jurisdiction of this Court with respect to disputes between partners.[31] Jill's submissions that she is exposed to potential loss or liability if the partnership business is continued is not correct, by reasons of the terms of s 42 of the Partnership Act;
(e) further, s 42 does not prohibit the continuation of the partnership business, it merely prevents Simon from binding Jill after the dissolution of the partnership. Indeed, the continuation of the partnership business is something which is contemplated by s 46 of the Partnership Act; and
(f) the dissolution of the partnership does not wind up the partnership. Jill could have made an application to wind up the partnership under s 43 of the Partnership Act, but she has failed to do so,[32] and in any event, such an application would be doomed to fail.
99 As for Jill's application that a receiver be appointed to the partnership, Simon submitted that the application is misconceived and disproportionate for the following reasons:
(a) the farming business is marginally profitable, such that the cost of appointing a receiver, engaging a livestock agent to sell the livestock, and, as appears to be contemplated by Jill and her legal advisors, conducting a wide ranging audit of the partnership business and accounts would consume the modest assets of the partnership;
(b) contrary to Jill's contentions, the partnership accounts are accurate, and Jill's contentions to the contrary are matters to be determined at trial;
(c) even if Simon's application for injunctive relief is unsuccessful, there is no need to appoint a receiver to wind up the partnership, as he has undertaken to do so in an orderly and expert manner;
(d) there is no evidence that the farm business assets require protection or preservation in the hands of Simon, and under the regime imposed by the 10 October orders, the conduct of the farming business is controlled and transparent;
(e) there are no claims by Jill against Simon in her counterclaim with respect to any wrongdoing in his capacity as partner,[33] and it is inappropriate for Jill to seek the appointment of a receiver for any purpose other than in furtherance of her claims in this proceeding; and
(f) Jill has failed to file and serve the receiver's written consent to the appointment as required by r 39.04 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) ('Rules'), and the receiver has failed to provide a guarantee for security as required by r 39.05 of the Rules.
100 At the hearing of the current applications, counsel for Simon submitted in summary, as follows:
(a) he referred to the reasons of Batt JA in Choy v St Kilda Sea Baths Pty Ltd[34] ('Choy'), where his Honour said that the appointment of a receiver was unnecessary and inappropriate given the availability of a less drastic remedy;
(b) through the appointment of a receiver to investigate the partnership accounts, Jill is attempting to move the task of preparing her own case into the hands of someone for whom she would not have to pay;
(c) he referred to the reasons of Warren J in Martyniuk,[35] where her Honour observed that the objective of the appointment of a receiver is the 'safeguarding of property for the benefit of those entitled to it';[36]
(d) there is nothing in the evidence which indicates that the farm business assets are in any danger in Simon's hands, and indeed, the last thing he wants to do is dissipate or destroy the very thing that he lays claim to in this proceeding;
(e) Jill has not made any claims against Simon in her counterclaim, and, in any event, the proper person to adjudicate any claims she makes is not a receiver, but a judge of this Court;
(f) the application to appoint a receiver, viewed in the context of the net assets of the partnership, raises questions of proportionality under the Civil Procedure Act 2010 (Vic); and
(g) no taking of final accounts can be ordered before any preliminary questions, such as Simon's claim to the farm business assets, and any claims for breach of fiduciary duty that Jill may have, have been heard and determined.
101 In her written outline of submissions in relation to Simon's application for an interlocutory injunction, Jill submitted that the Court is not empowered to grant the injunction sought by Simon, because in seeking an injunction, Simon is asking the Court to authorise him to bind the partnership other than in accordance with s 42 of the Partnership Act. Jill submitted as follows:
It could not be just and convenient to grant an injunction which authorises Simon to conduct himself contrary to statute and, in granting such an injunction a Court could not be doing justice according to law. Simon has no existing legal or equitable right to contravene the Partnership Act and seeks no legal or equitable relief capable of being enforced by a final judgment entitling him to do so. It is unsurprising that Simon seeks no final relief to this effect, given that there is no cause of action the relief for which includes an order authorising the plaintiff to conduct himself contrary to statute.
The essence of the doctrine of separation of powers is that Parliament makes laws and the judiciary determine disputes as to the construction and application of those laws. Courts are not empowered to authorise non-compliance with a statute.
102 In the alternative, should her submissions regarding the effect of s 42 of the Partnership Act not be accepted, Jill submitted that in any event, the injunction should not be granted, for the following reasons:
(a) Jill is unwilling to continue as a partner and the Court should not require her to continue to be a partner;
(b) Simon's claim to the farm business assets is very weak;
(c) the partnership is currently a trespasser on the Highton farm;
(d) contrary to Simon's contention that granting the injunction is necessary to preserve the status quo pending the trial, the true status quo is that the partnership has been dissolved, and in the ordinary course would proceed to be wound up;
(e) Simon has failed to accept a reasonable offer made by Jill with respect to the farm business assets which would have avoided the need for the current applications;
(f) Simon's contention that an award of damages would not be an adequate remedy for Simon's claim to the farm business assets is 'exceptionally weak';
(g) there is no utility in the continuation of the partnership, and Simon's conduct of the partnership strongly mitigates against the continuation of the partnership;
(h) Simon has not adduced any evidence to address Jill's concerns regarding Simon's capacity to meet any award of damages consequent upon any undertaking by him; and
(i) Jill's submissions concluded as follows:
If the injunction is granted Jill will have unlimited liability in respect of the conduct of a primary production business - inherently, a risky venture - in which she is an unwilling participant, bound by decisions of a person she does not trust.
103 In relation to her application that a receiver should be appointed to the partnership business, Jill submitted, in summary, as follows:
(a) she has offered to provide an undertaking as to damages, and to have her portion of the net proceeds of sale of the farm business assets held on trust pending the hearing and determination of the proceeding;
(b) there is a serious breakdown in trust and confidence between the partners, and she has lost faith in MOR;
(c) there is no evidence before the Court as to whether the appointment of a receiver would be more or less expensive than the current disputation about the affairs of the partnership;
(d) if the evidence relied upon by her in support of her application for the appointment of a receiver is accepted at trial, there are likely to be findings of serious misconduct against Simon, and thus it is appropriate that an independent person consider those claims;
(e) she has been put to great expense to obtain access to partnership records and to investigate Simon's conduct of the farming business and the partnership accounts;
(f) Jill submitted as follows:
[I have] significant concerns regarding the Partnership records and there is strong evidence that MOR has operated in Simon and Anita's interests and against the interests of Jill in various ways (for example, in respect of 'rent' in 2021 and the allocation of consulting income to the Partnership). Further, Partnership accountants including MOR have, over the years, had significant involvement (on the instructions of Simon and Anita) in "succession planning". It would be inappropriate for MOR to continue on as Partnership accountants. Even if alternative accountants were appointed, it is inconceivable that Simon and Jill would cooperate to provide them with joint instructions sufficient to enable the Partnership to be wound up.
Records of the Partnership's primary production business are unreliable. This extends to the business in relation to livestock and crops and includes:
An unexplained lack of natural increase (births) of lambs in 2022 and 2023, notwithstanding that the Partnership owned a large number of ewes during these years.
b. Implausible natural increase numbers for cattle.
- Inconsistent records and non-existent records for livestock numbers.
Average income levels far lower than the market rental for the Property, notwithstanding that the Partnership has benefited from (i) not paying rent for the land it occupies; and (ii) not paying for labour.
Inconsistencies with the NLIS database and Partnership records.
Lack of income from crop farming in recent years which is unexplained
g. Serious discrepancies concerning the Sunflower business.
Inevitably the Partnership accounts are inaccurate as they do not address these matters. The only real dispute is as to the scale of the inaccuracies. Given that Simon has already admitted wrongdoing in using the Partnership land for his own benefit (including in respect of livestock), and given contemporaneous records (for example, documents in respect of insurance) which reveal primary production businesses conducted by Simon and Anita outside the Partnership, the Partnership accounts cannot be accepted at face value.
(g) Simon's evidence is unreliable with respect to his primary claims in this proceeding, his discussions with Mr Bourke, and with respect to the motivation for changing the partnership's accountant to MOR in August 2021.
104 Counsel for Jill referred to the decision of the House of Lords in Co-Operative Insurance Society v Argyle Stores Holdings[37] as standing for the proposition that while this Court is empowered to grant an injunction to compel a person to carry on a business, it is in very unusual circumstances that the Court will do so, and, in the circumstances of this case, it would be an extremely undesirable course of action to take.
105 Counsel for Jill observed that the ancillary orders sought by Simon in his summons were not in aid of any final relief sought by Simon.
106 Counsel for Jill submitted that Jill, in making an application for the appointment of a receiver relies not only upon the allegations of misconduct, but also the fact that the partnership's affairs were in disarray.
107 Counsel for Jill disputed Simon's contention that the farm business assets and the assets of the partnership are one and the same. The farm business assets do not include the cash at bank, or the goodwill of the partnership.
108 Counsel for Jill submitted that the most compelling reason for refusing the injunction application is that given the onerous obligations of a partner, including exposure to unlimited personal liability for the losses and obligations of the partnership, a person should be permitted to end a partnership at any time in the absence of any agreement to the contrary.
109 Further, allowing the injunction application will permit Simon to operate the partnership business to the exclusion of Jill, contrary to the rules established by s 28 of the Partnership Act, and contrary to Jill's wishes.
110 Counsel for Jill submitted that Simon's claim to the farm business assets based upon a promise said to be made by Jill in 1986 is very weak, as the farm business assets were transferred to the partnership in 1996, which superseded any prior promise made by Jill, if indeed any such promise was made.
111 Counsel for Jill rejected Simon's contention that there is a material distinction between continuing the partnership and continuing the business of the partnership, submitting that once a partnership has been dissolved, the partnership comes to an end, and any continuing business is conducted under the auspices of a new partnership. The evidence of ongoing trading of livestock evidences Simon's intention to unilaterally carry on the business of the partnership and cause it to enter transactions, thus exposing Jill to further liabilities.
112 Counsel for Jill submitted that the risk Jill faces by the ongoing operation of the partnership business could not be ameliorated by an undertaking for damages, because of the potentially unlimited nature of the liability, and the risks being unknowable and incapable of estimation, given the risks inherent in any primary production business.
113 Counsel referred to the Notice to Vacate, and said that Simon's claim to an equitable lease over the Highton farm is unpleaded, and sits uncomfortably with the partnership having occupied the Highton farm for many decades. Further, the partnership accounts, if they are accurate, show that the partnership is incapable of paying a market rent for the property.
114 Counsel for Jill submitted that Simon's failure to accept Jill's reasonable offer to sell him her share of the partnership assets at their market value is inconsistent with his contention that the livestock, or at least the cattle, has special value to him and must be preserved. The modest value of the livestock is inconsistent with Simon's contention that the livestock herd is the product of special bloodlines over many generations. Further, the documentary evidence does not support Simon's contentions in that regard: the certificates exhibited to Simon's first affidavit do not relate to any animals owned by the partnership or located on the property.
115 Counsel for Jill submitted that the balance of convenience is well in favour of winding up the affairs of the partnership, rather than forcing Jill to continue with Simon as a partner against her will. Simon's contention that allowing him to continue to manage the farm business assets will increase the value of the livestock herd should be rejected, given the limitation on the carrying capacity of the Highton farm, and the apparent failure of the sheep breeding program in FY2021 and FY2022.
116 Counsel for Jill submitted that the Court should not accede to the suggestion that regime established by the 10 October orders be continued, as the 10 October orders were agreed to by Jill as a short term, interim measure, and the 10 October orders are not a suitable basis for a longer term arrangement. In any event, Simon has failed to comply with the 10 October orders in the period since the 10 October orders were made, and his defaults were not rectified until the day before the hearing of the current applications commenced. Simon has failed to provide any explanation for those defaults, and in any event, the continuation of the 10 October orders would require ongoing supervision by the Court.
117 In relation to Jill's application for the appointment of a receiver to the partnership, counsel submitted as follows:
I say a receiver ought be appointed because of the breakdown in trust and confidence between the partners and because the court can't have confidence in the partnership accountants and because the court can't have confidence in respect of the manner in which Simon has conducted himself in the affairs of the partnership.
I say that it's extremely likely that the partners - unlikely that the partners will themselves reach agreement as to final accounts. They require the court's intervention, otherwise it will not happen, given the extent of the breakdown in relations.
Jill's evidence is that her relationship with Simon has broken down. She strongly rejects the accusations that she's behaved fraudulently and unconscionably. The allegations are false and have greatly upset and offended her. She's lost faith in Simon's integrity by reason of information she has learnt as to how Simon has conducted the partnership, and she lost trust in Simon and Anita based on the information now available to her as to the manner in which they've conducted themselves. ...
Further, Jill has lost faith in the partnership accountant, who's also providing advice to Simon in respect of the present proceeding. Jill intends to seek a large number of adjustments in her favour in respect of the partnership by reason of the manner in which Simon has conducted himself.
118 Counsel for Jill accepted that factual disputes of the nature raised by the evidence relied upon by Jill need to be determined by a Court, not a receiver, and said that the receiver would not necessarily be required to conduct a free ranging analysis of the partnership accounts, or reconstruct the partnership's accounts from the inception of the partnership.
119 Counsel for Jill referred to the decision of Warren J in Martyniuk,[38] which concerned an application for the appointment of a receiver to a trust. While her Honour did say that the appointment of a receiver was a last resort, Warren J did appoint a receiver to the trust, because, among other things, there had been a complete breakdown of the working relationship between the parties, the sole remaining director of the trustee company was in poor health and wished to resign from office, and taxation returns had not been lodged, such that it was desirable that an impartial person who could make rational business decisions manage the trust.
120 Counsel for Jill submitted that the above observations are apposite to the current applications. Counsel submitted as follows:
My client relies both in opposition to the injunction application and in support of the receivership application on the significant evidence of misconduct. That is only one basis on which the receivership is sought. The affairs of this partnership are in disarray. The accounts are not to be trusted. The relationship has broken down. The partners will not agree. It's extremely unlikely the partners will agree to final accounts without the court's intervention.
121 Counsel for Jill accepted that the appointment of a receiver would come at a cost, but he observed that continual legal disputation also comes at a cost. However, the court is not in a position to determine which is the more economical or cost effective of the options, but it would be undesirable to do nothing, because Jill will, quite reasonably, not approve any partnership accounts or taxation returns unless she is satisfied they are accurate.
122 Counsel for Jill acknowledged that I am not in a position to make a final finding of fact in respect of the current applications, but if the evidence which is currently before the Court is accepted at trial, he submitted that:
...it's likely to result in finding that Simon had seriously misconducted himself, including by carrying on a primary production business on the property for his and Anita's benefit while the property was occupied by the partnership and he was working the property on behalf of the partnership through Greendale Sunflowers, through the growing of crops, and the ownership and sale of livestock.
It's also likely to result in findings that Simon has failed to cause the partnership to maintain accurate and complete accounts, including of undeclared cash dealings entered into in respect of the primary production business Simon and Anita have conducted on the property. And it's likely to result in finding that Simon has caused the partnership account to be prepared on a basis which is inaccurate and favours his interests over Jill's.
123 Counsel submitted that the difficulties faced by Jill have been compounded by the extreme difficulties and delay she has faced in gaining access to partnership records. Further, counsel submitted that the unsuitability of MOR to remain as the partnership accountants is relevant to the determination of both of the current applications. That unsuitability arises from the fact that MOR has prepared deliberately inaccurate accounts which benefit Simon and Anita, to the detriment of Jill, and MOR has been engaged by Simon and Anita separately, and has engaged in private privileged communications with one partner in respect of a legal dispute between the partners while acting for the partnership. In August 2021 MOR was engaged in discussions regarding a proposed succession plan for the Lidgett family, and sought approval from Simon and Anita prior to providing partnership records to Jill.
124 Counsel for Jill referred to what he said were a number of anomalies in the partnership accounts, including with respect to the treatment of Simon's consultancy income in the partnership accounts, and the attribution of rental income to Jill in the partnership accounts without that rent being paid to her or acknowledged as a capital contribution by her.
125 Counsel for Jill then referred to the evidence of Mr French with respect to the history of his attempts to get access to the records of the partnership saying as follows:
This is a very important topic to my client. For there to be ever a fair trial of the dispute between my client and her son and former business partner, there must be equivalent access to partnership records. My client must have access to the documents she needs to prove her case.
She is on the outside looking. She's greatly disadvantaged. She's spent a vast amount of money getting to this point. It's intolerable to be in a position where, on the outside looking in, deprived of access to documents and delayed in getting access to documents.
126 Counsel for Jill submitted that there is evidence that Simon has diverted partnership income into a bank account controlled by him and Anita so as to avoid Jill having influence over the manner in which partnership income is expended.
127 He submitted that it appears that partnership income has been used to repay the loan taken out by Simon to purchase the Bacchus Marsh property, such that Simon's evidence that he repaid that loan from his own funds should not be accepted.
128 Counsel for Jill submitted that the insurance policy documents in evidence supports a conclusion that Simon and Anita have been using the Highton farm to carry out primary production activities on their own behalf. He submitted that Simon's evidence to the effect that the reference in the policy documents to Simon and Anita as being the policy holders as being an administrative matter should not be accepted, as an insurer would be entitled to reject a claim with respect to the farm business assets on the basis that the partnership was not the insured party.
129 Counsel for Jill then went to make the following submissions in relation to the Greendale Sunflower Farm:
(a) Simon registered the Greendale Sunflower Farm on 24 September 2021. Section 23 of the Business Names Registration Act (Cth) provides that only the owner of a business may register a business name;
(b) given Simon's evidence that the business is Anita's, and his evidence that the registration of the business in his name was of no significance to him and Anita, this evidence is indicative of the way in which Simon approaches his legal and financial obligations, as he clearly regards contraventions of Commonwealth statutes as being of no significance;
(c) Simon and Anita have not accounted to the partnership for income earned from the Greendale Sunflower Farm, and Jill is concerned that the accounts do not record the cash income of the business, which she believes was not disclosed in tax returns;
(d) the fact that $5,000 was spent on promotional expenses, and loans were made from the Greendale Sunflower Farm in FY2022, means that the income was likely to have been significantly higher than the sum of $8,000 recorded in the partnership accounts;
(e) to the extent that any primary production business was carried out at the Highton farm, it ought to have been conducted for the benefit of the partnership; and
(f) counsel for Jill submitted as follows:
It's disturbing that Simon continues to believe it appropriate that he conduct a primary production business on the property for his own benefit, or permit family members to do so, or that he believe he is unilaterally entitled, as one of the two partners, to permit others to carry on primary production businesses on the property.
The property is being provided at no cost by Jill to the partnership, for use by the partnership. Simon is not empowered to - as one of the two partners - to authorise others to conduct private business on the partnership, nor to do so himself. He concedes, by his evidence, at paragraph 23 of his first affidavit, that the Greendale Sunflowers business was conducted on land occupied by the partnership. ...
I say that what I've just submitted to Your Honour in respect of Greendale Sunflowers means that the court may safely find Simon is a person willing to conduct, or sanction the conduct by his wife of, a primary production business at the property for his own benefit or the benefit of family members, while the property is occupied by the partnership and conducting a primary production business on it; cause the preparation of false accounts, and the lodgement of false tax returns; engage in 'off the books' cash trading, or sanction the engaging in of 'off the books' cash trading; to divert partnership income to his own interests; and to provide false or incomplete records to Jill.
And this is the argument I was getting to before in relation to the insurance. I say that the fact that Simon has been willing to engage in this conduct makes it more likely that he engages in other conduct. So when I come to talk to Your Honour - fairly briefly - about livestock trading - unauthorised livestock trading - the fact that Simon admits or says he doesn't require Jill's permission to conduct other primary production activities on the property, makes it more likely that he has engaged in that activity. And the fact that he has obtained insurance for, on its face, private business on the property makes it more likely that he engaged in this conduct.
All of these things feed into each other, especially where they're supported by contemporaneous documents, to make it increasingly likely that each of the other items is also accurate.
130 During the course of making his submissions, counsel for Jill relied upon a series of tables derived from the partnership records highlighting the following matters:
(a) records showing that between FY2013 and FY2022 insurance policies were issued in the name of Simon and Anita in respect of grain crops and sheep and cattle grazing at the Highton farm;
(b) sales revenue earned and promotional expenses incurred by the Greendale Sunflower Farm;
(c) livestock tallies for FY2021, FY2022, and FY2023 showing no natural increase in the number of cattle in FY2022, compared with 91 in FY2021 and 165 in FY2023, and no natural increase in the number of sheep in FY2022 (and only one in FY2023) compared with 119 in FY2021;
(d) a table comparing the crop income recorded in the partnership accounts with the feeding expenses recorded in the partnership accounts for each year since FY2015; and
(e) a table showing the discrepancies between the income from livestock sales shown by the NVD records since FY2017 and the income recorded in the partnership accounts in the corresponding years.
131 Counsel for Jill submitted the following regarding what conclusions can be drawn from an analysis of the livestock records of the partnership:
(a) the number of cattle born on the property was insufficient for the herd to be self-replacing;
(b) there was no natural increase in the herd of sheep in FY2021 and FY2022, which is implausible, and causes him to speculate that there may have been 'off the books' sales of livestock;
(c) there are discrepancies in Simon's evidence and in the livestock records of the partnership which remain unexplained;
(d) the discrepancy between the number of active livestock tags registered to the partnership and the number of cattle and sheep said to be on the Highton farm is too large to be explained by the unreliability of NLIS database;[39]
(e) Simon's evidence is that approximately 50 animals given to Anita and the children were raised at the Highton farm, using land which could have been stocked with partnership livestock;
(f) there is no explanation as to why copies of the partnership's National Vendor Declaration books and invoices ('NVD records') were not provided until very recently, and there appear to be some records missing from the NVD records;
(g) an analysis of the NVD records shows that in FY2020 the income from the partnership from livestock sales should have been at least $250,000, not the $167,000 shown in the partnership accounts, and in FY2023 the NVD records show income of $253,495, compared with the sum of $180,000 shown in the accounts; and
(h) counsel for Jill submitted as follows:
The finding I do seek is that the information available gives rise to serious concerns such that Jill has justified in opposing Simon's application for an interlocutory injunction. And that she's justified in seeking to have an independent person take control of the partnership by reason of her justifiable lack of confidence in the partnership accounts, and justifiable concerns that unauthorised dealings are taking place on the property while in possession of the partnership by one of the partners.
132 Counsel for Jill also identified apparent inconsistencies in the partnership accounts with respect to crop income and herd feeding expenses, which are also said to support the contention that Simon ought not be able to unilaterally conduct the partnership.
133 Counsel submitted that Simon's evidence is unreliable, because, among other things, Simon instructed his solicitors that Jill had not removed herself as a signatory to the partnership's bank account in response to the 10 October orders, when in fact she had.
134 Counsel for Jill made the following additional submissions in response to Simon's submissions in support of his application for an injunction and in opposition to Jill's application to appoint a receiver to the partnership:
(a) the credibility of the evidence relied upon by Simon to assert that the costs of preparing the livestock for sale would exceed the value of the net assets of the partnership is very weak;
(b) in response to a question from me about the costs associated with the proposed receiver, counsel accepted that there was no evidence before the Court as to the likely cost to the partnership to appoint a receiver;
(c) in response to Simon's contention that it was unnecessary for Simon to address Jill's detailed allegations in respect of his conduct of the business of the partnership, counsel submitted that the Court should not make assumptions in Simon's favour and should not assume good explanations can be given by Simon to address the allegations raised by Jill;
(d) Simon's submissions to the effect that Jill's allegations are unsubstantiated should be rejected, as the evidence relied upon Jill in the current applications is voluminous and compelling;
(e) Simon's submissions to the effect that he could manage the sale of the assets in an orderly and expert manner should be rejected because the partnership records do not establish Simon to be an expert farmer;
(f) the most important aspect of the receiver's role is getting in the books and records of the partnership and preparing final accounts;
(g) referring once again to the decision of Warren J in Martyniuk to support his submission that it is appropriate to appoint a receiver if there is any disarray, breach of trust, risk of loss, improper management, or where it is just and convenient to do so;
(h) if a receiver requires special expertise as to sell the livestock, he can engage an expert agent to sell the livestock. But it would be entirely inappropriate for Simon to have control of the sale process, given his conflict of interest; and
(i) counsel submitted as follows:
Simon has shown that he can't be relied on to comply with an interlocutory - sorry - with an interim regime or an interlocutory regime. It's not a suitable case for the court to fashion a detailed interlocutory regime to hold the position pending trial, because of the lack of cooperation, the involvement of livestock, and the imbalance in information and access to records.
The evidence demonstrates that Simon complies with orders for the provision of information and documents only when under the court's close scrutiny. Any regime which left Simon in control of the partnership's affairs would be so likely to require the court's ongoing close supervision that it ought be unpalatable to the court, and is unpalatable to Jill. Jill would remain at an unreasonable forensic disadvantage pending trial, incurring expenses, and significant difficulties in obtaining documents, having regard to past conduct.
135 In his written submissions in reply, Simon submitted, in summary, as follows:
(a) Jill's contention that Simon's claim to a proprietary interest in the farm business assets is weak because her contribution of the assets to the partnership somehow superseded the promise she made to Simon is disingenuous and incorrect, as:
[T]he fact that Jill altered her ownership of the Farm Business Assets from sole direct ownership to co-ownership with Simon in the Partnership does not unbind her conscience from the obligation to convey the Farm Business Assets [to Simon]...
(b) the quality of the current herd of livestock is the result of Simon's skill and effort throughout his career;
(c) it was reasonable for Simon to reject Jill's offer to sell her share of the farm business assets to him;
(d) granting an interlocutory injunction will not require Jill to carry on a business: rather, Simon simply wishes to continue trading with the livestock in the same manner as the partnership did prior to its dissolution;
(e) the terms of s 42 of the Partnership Act would protect Jill from being bound by any new transaction engaged in by Simon;
(f) Jill's submission that the injunctions sought by Simon are not in aid of the final relief sought by him in this proceeding is incorrect, because Simon's claim for a proprietary interest in the farm business assets plainly justifies the injunction he seeks to prevent their sale. Further, given that the herd of livestock is a dynamic asset, the composition of which changes over time, the other orders sought by Simon are ancillary to the injunction, to enable him to breed, raise and sell the livestock in order to preserve and enhance the value of the herd;
(g) contrary to Jill's submissions, the terms of s 42 of the Partnership Act do not prohibit Simon from carrying on the business using the farm business assets. This section, read together with ss 43 and 46 of the Partnership Act, contemplates the continuation of the partnership business using the assets of the partnership after its dissolution; and
(h) Simon submitted as follows:
In the summons filed on 21 July 2023, at paragraph 4, the Plaintiff seeks "such other orders as are appropriate". There are three alternative forms of order that might be appropriate:
- Ordering the injunctions sought in paragraphs 1 to 3 but modifying the injunction in paragraph 2 to include the words "conduct business with the Partnership's assets on his own behalf" instead of the words "conduct of the business of the Partnership".
- In lieu of the injunctions sought in paragraphs 1 to 3 of the summons, an order extending the orders made on 10 October 2023 to the final determination of the proceeding or other order of the Court.
- Injunction in the form of paragraph 1 of the summons, with or without a further injunction compelling Jill to ensure that Simon may apply the Partnership's assets to the maintenance and wellbeing of the livestock.
136 Simon submitted that it was not necessary for him to engage with the allegations made by Mr French in his affidavit regarding Simon's alleged misconduct, because:
a. They are irrelevant to the present application. That is because:
- They are matters for trial (assuming Jill amends her counterclaim).
- The purpose of the appointment of a receiver is to preserve the relevant property. Here, there is no evidence that Simon will not preserve the value of the livestock.
- In so far as Jill alleges that a receiver is required because she has lost her trust in Simon and the Partnership's accountants, it is premature as there are not yet any pleadings alleging misdeeds.
- In so far as Jill alleges that a receiver is required because the management of the Partnership is in disarray, the Partnership is dissolved and there is nothing left for a receiver to manage, but simply to await the Court's determination of:
1. Simon's claims over the Farm Business Assets;
2. any counterclaims by Jill;
- an application to wind-up the assets of the Partnership in due course after the determination of Simon's claims over the Farm Business Assets; and
- a taking of account, after determining any preliminary questions, including any counterclaims by Jill.
In so far as Jill alleges that a receiver is required because she has not had full access to the Partnership records:
1. She now has access to all the Partnership's records.
A receiver would not be in any better position than her to obtain access to Partnership records (noting that Simon does not dispute Jill's entitlement to them).
Once Jill pleads her claims, Simon will have obligations of discovery and must comply with s 26 of the Civil Procedure Act 2010.
Mr French's affidavits are replete with his opinions and speculations, which are inadmissible and should be struck from the affidavits.
The time involved in rebutting each allegation would be disproportionate. Simon's affidavits speak for themselves in response to the allegations made by Mr French.
137 Simon did submit, nevertheless, that he had adequately rebutted Jill's allegations with respect to the accuracy of the partnership accounts, the allegation that Simon and Anita carried out their own business at the Highton farm, and the allegations regarding the Greendale Sunflower Farm.
138 In his oral submissions, counsel for Simon submitted that, to avoid the wastage of the farm business assets, there needs to be a practical and realistic approach to preserving the subject matter of this proceeding.
139 In relation to the question of whether Simon has a prima facie claim to the farm business assets, counsel for Simon submitted that equity would not countenance the technical argument advanced by Jill to the effect that Simon has no claim to the farm business assets because Jill transferred the ownership of the farm business assets to the partnership after her promise was allegedly made.
140 Counsel for Simon submitted that, contrary to Jill's submissions, s 42 of the Partnership Act does not prevent Simon from continuing to trade with the assets of the partnership. It simply protects Jill from any liability with respect to the ongoing operation of the partnership business. He observed that, in the decision of the Court of Appeal in Sobey v Sobey,[40] the parties had continued to trade with the assets of the partnership after its dissolution, and the Court made no suggestion to the effect that this course of conduct was prohibited by the terms of s 42 of the Partnership Act.
141 Counsel for Simon submitted that it would be open to the Court to order the continuation of the regime put in place by the 10 October orders. That might involve the Court engaging in a certain amount of supervision, but it may be that a certain degree of supervision is warranted in all of the circumstances.
142 Counsel for Simon submitted that Simon has not engaged in a line by line rebuttal of every allegation advanced by Jill and Mr French. That evidence is largely irrelevant, because they are matters for trial. Where Mr French's evidence should properly have been directed towards was the question of the whether the farm business assets would be in danger in Simon's hands, not to issues such as whether Simon could be trusted as a manager of the partnership, or whether the historical records of the partnership were accurate or not. He rejected Jill's contention that Simon could not be trusted to sell the farm business assets, or that the appointment of a receiver was necessary to ensure Jill had access to partnership records.
143 As can be seen from the summary of the evidence and submissions in the preceding sections of these reasons, the evidence relied upon and submissions made by Jill in particular descended to a great level of detail regarding the affairs of the partnership. In the following section of these reasons, I will explain my reasons for dismissing Jill's application and acceding to Simon's application, albeit subject to the imposition of reasonably strict conditions, some of which I expect will be distasteful to Simon. In doing so, I will not refer at any great length to the parties' evidence and submissions, given the need for expedition.[41]
144 Turning first to Jill's application to appoint a receiver to the farm business assets, three questions arise. First, does the evidence establish (at least sufficiently for the purposes of an interlocutory application) that there are circumstances of the kind which would attract the remedy of that kind? And secondly, if such circumstances are found, do they justify the rather draconian remedy of the appointment of a receiver? And finally, if a receiver is to be appointed, what should the receiver be appointed to do?
145 Jill contends that a receiver should be appointed to the partnership for the following reasons:
(a) the relationship between the parties has completely broken down, and Simon will not co-operate to wind up the affairs of the partnership, such that the partnership is deadlocked ('deadlock issue');
(b) the affairs of the partnership are in disarray, as the partnership accounts are inaccurate, the partnership is a trespasser on the Highton farm, and Jill will not sign any taxation returns for the partnership because she does not trust either Simon or MOR ('disarray issue'); and
(c) Simon has engaged in serious misconduct with respect to his conduct of the partnership business. He has excluded Jill from the partnership business, and has been slow to provide her with information she requires. Jill believes the information in the partnership accounts is false, and that the partnership accounts have been manipulated for tax reasons and for the benefit of Simon and his family without her knowledge and consent. The Highton farm has been used for purposes other than the business of the partnership, such as the Greendale Sunflower Farm, and raising cattle and sheep gifted to Anita and the children. There is evidence to suggest that the AM & SJ partnership has been operating a business from the Highton farm, and solid grounds for concluding that Simon has sold partnership livestock without accounting to the partnership ('misconduct issue').
146 The evidence that Jill relies upon to support her contentions with respect to the above matters is summarised in some detail in the summary of the evidence and submissions provided earlier in these reasons, and I will not repeat these matters here.
147 I accept that the above matters, if established, could enliven the discretion of this Court to appoint a receiver. However, in my view, and in the particular circumstances of this case, the consequences of many of the matters raised above are less dire than contended for by Jill, and her position with respect to some matters seem to be somewhat overstated. Further, and most importantly, even if all of Jill's contentions were accepted without question, I am not satisfied that the farm business assets are at risk of dissipation or waste, such that the appointment of a receiver is necessary to preserve them.
148 My review of the authorities confirms that the primary purpose (albeit not the sole purpose) of appointing a receiver is the protection and preservation of property. There is nothing in the evidence which seriously supports the contention that the farm business assets, including the livestock, are at risk. Indeed, the evidence is to the contrary.
149 Prior to turning in more detail to each of the issues set out in paragraph 145 above, I will deal with a threshold issue raised by Simon. Simon submitted that the decision of the Court of Appeal in Choy[42] is authority for the proposition that a receiver should not be appointed unless there is a clear pathway for the final determination of clearly articulated claims with respect to the property to which the receiver is to be appointed. Currently, Jill's counterclaim makes no claims against Simon with respect to his conduct of the partnership business. Rather, it merely seeks the appointment of a receiver, orders pursuant to s 46 of the Partnership Act with respect to the profits of the partnership after its dissolution, and orders for the winding up of the partnership and the preparation of final accounts.
150 I doubt that the position is quite so absolute, given the remedy has its origins in equity, and given that there are a wide range of circumstances in which a receiver might be appointed. All I understand the Court to be saying in Choy[43] is that where a party is in dispute with another about their entitlement to certain property or funds, then a Court should generally not appoint a receiver to that property at the request of one of the claimants in the absence of a properly articulated claim to that property, and in circumstances where there is a clear pathway to progress the resolution of the underlying dispute. In the current case, Jill makes no claim to the farm business assets over and above her 50 percent share (indeed, Simon is the party making a claim to the farm business assets). She seeks the appointment of a receiver for quite different reasons.
151 In any event, even if Jill was required to make and articulate her claims against Simon in order to seek the relief she does, her claims or potential claims against Simon with respect to his conduct of the partnership business are tolerably clear from her evidence and submissions in the current applications.[44] However, in my view, those claims do not justify the imposition of such a draconian remedy as the appointment of a receiver to the partnership, noting the thrust of the authorities to the effect that the appointment of a receiver is something which should only be done as a last resort.[45]
152 Jill makes the overarching submission that Simon is not to be trusted, and his evidence in these applications should not be believed. The necessary consequence of that submission is that I should accept all of Jill's evidence and Mr French's evidence without question, and disregard any explanation or rebuttals that Simon has advanced with respect to the issues identified by them in their evidence and submissions.
153 I cannot accede to that submission. Most, if not all of the matters relevant to the misconduct issue are matters for trial (and, for that matter, cannot and will not be resolved by the appointment of a receiver), which is the appropriate occasion for the credibility of the parties and their witnesses to be tested. I do not consider that I should make findings about the credibility or otherwise of the parties effectively 'on the papers'.[46]
154 In any event, to the extent that there could be said to be glaring inconsistencies between Simon's evidence and contemporaneous documents, there are inconsistencies on both sides. For example, Jill's evidence in Jill's first affidavit to the effect that she had not given her consent for the Highton farm to be used to conduct the business of the Greendale Sunflower Farm seems somewhat disingenuous once one views the photographs of Jill amongst the sunflowers in 2021 exhibited to Simon's first affidavit.
155 Simon said that the sunflowers were visible to anyone attending the Highton farm, and that the Greendale Sunflower Farm was the subject of discussions within the family, and Jill was a party to some of those discussions. Simon and Anita may ultimately have to account for the profits of the Greendale Sunflower Farm to the partnership. But the question of whether permitting Anita to run the Greendale Sunflower Farm was a serious breach of Simon's fiduciary duty to Jill will ultimately turn upon whether a judge accepts Jill's evidence that she had no knowledge of, and did not consent to the Highton farm being used in this way. Similarly, the question of whether the Greendale Sunflower Farm generated an income well in excess of what is shown in the accounts in evidence is clearly a matter for trial.
156 The allegation that Simon has sold partnership livestock 'off the books' is a serious allegation, and is an allegation, if made out, which would amount to relevant misconduct. I accept that there are some odd discrepancies between the partnership records and the partnership accounts (such as the discrepancies between the income shown by the NVD records and the partnership accounts), and matters which may require further investigation and/or explanation, such as the years where there was no natural increase in the livestock herd. The same could be said about the allegation that Simon has caused the accounts of the partnership to be manipulated for his benefit, although I suspect the party with the most cause for complaint would be the Australian Taxation Office ('ATO'). However, once again, these allegations are matters for trial.
157 Other allegations made by Jill against Simon which are said to amount to disloyalty or even misconduct seem to me to be somewhat misconceived or overblown. It seems that considerable effort and expense has been gone to identify all possible grounds for complaint against Simon, even if they concern relatively trivial matters, no doubt at least in part because of the total breakdown of relationships within the family. By way of example, reference was made in the second French affidavit to a certificate showing Simon's registration as a wool classer, which was said by Mr French to make no reference to the partnership. But one does not need any particular expertise in the primary production industry to know that wool classing is a qualification acquired by an individual with relevant expertise, not a non-corporeal entity such as a partnership. The proposition that Simon's registration as a wool classer could amount to a breach of duty to the partnership seems to me to be absurd.
158 Similarly, the allegation that by allowing Anita and his children to raise livestock gifted to them on the Highton farm, Simon breached his fiduciary duty to the partnership seems to me to be motivated by other than a genuine concern for the health of the farm business. If it had not been for this dispute, would Jill have begrudged part of the Highton farm being used for her grandchildren's hobby sized livestock herd?
159 Accordingly, some of the allegations relevant to the misconduct issue seem somewhat overblown, and others which concern more serious matters can only be resolved at a trial. Unless I was to also make orders that the receiver appointed also be appointed as a special referee to determine all of the disputes between the parties regarding the partnership accounts and the conduct of the partnership business, Jill's contention that a receiver could address and resolve her concerns about the accuracy of the partnership accounts and the misconduct issue reflects a misunderstanding of what a receiver can and cannot do. A receiver can prepare a final account, but only after key factual disputes have been resolved at a trial. If Simon has breached his fiduciary duty to Jill by misappropriating partnership funds or other assets, or by preferring his own interests ahead of Jill, a receiver may be able to form an opinion on those matters, but a receiver cannot usurp the role of the Court by finally determining the rights of the parties, unless the parties agree or the Court orders otherwise. Accordingly, the appointment of a receiver will not, in the absence of any agreement or court order to the contrary, have the utility that Jill and her advisors hope that the appointment of a receiver might have. Finally, a receiver is not required to locate or call in the assets of the partnership, they are all in place on the Highton farm.
160 Turning now to the deadlock issue, it is common ground that the relationship of trust and confidence between Jill and Simon has completely broken down, and that the parties cannot agree upon how the affairs of the partnership should be finalised. Where the parties disagree is whether the current state of affairs necessitates the appointment of a receiver.
161 I do not consider that the appointment of a receiver is necessary to address the deadlock issue. Indeed, the appointment of a receiver runs the real risk of imposing a further financial burden upon an already marginally profitable business. Given that Simon has proffered an undertaking to take steps to realise the farm business assets in an orderly fashion in the event that his application for an interlocutory injunction is unsuccessful, and I accept that he has the necessary expertise to do so, it is not necessary for a receiver to be appointed to realise the farm business assets. There is no cause for concern that the farm business assets would be sold for an undervalue: it would be in Simon's interests for the farm business assets to be sold for their maximum achievable value, and any accounting can take place after any claims made by Jill (and Simon and Anita) in this proceeding have been heard and determined.
162 As for the disarray issue, I consider that Jill's contentions in that regard are somewhat overstated. The question of whether the partnership accounts are accurate is disputed, and as such, is a matter for trial. While I accept that it is undesirable that taxation returns have not been submitted, there is no evidence of any communications with the ATO that indicate that this matter needs to be attended to as a matter of urgency: this would not be the first time that a business could not comply strictly with its reporting obligations by reason of disputation between partners or shareholders.
163 As for the assertion that the partnership is a trespasser on the Highton farm, that may well be correct, but there is no evidence of any formal action being taken to eject the partnership from the Highton farm apart from the service of the Notice to Vacate. Given the nature of Simon's claims in this proceeding, one suspects that any application by Anna under Order 53 of the Rules would have limited prospects of success, at least before the hearing and determination of Anna's summary judgment application, which may or may not proceed. In any event, the question of whether the Highton farm is necessary for the purpose of the partnership only arises if Simon's application for an injunction is successful. If it is, but he is subsequently forced to vacate the Highton farm, I expect that it would be very inconvenient, but not impossible for Simon to lease alternative farming land, if required.
164 Accordingly, the proposition that the partnership's affairs are in disarray is somewhat overstated, and the fact that the partnership's affairs may be in somewhat of a state of disarray does not necessarily warrant the appointment of a receiver.
165 There is another further reason why the appointment of a receiver is not necessary or appropriate. While there is no evidence before me as to the likely cost of a receiver, professional services are expensive. I can infer that the cost of a receiver would be in the tens of thousands of dollars at least, especially if the receiver was to conduct an extensive audit of the partnership accounts and records. It seems to me that a party seeking to appoint a receiver to a modestly profitable business should be in a position to put before the Court at least some evidence of the estimated costs involved, and no such evidence has been provided, save to say that the receiver would be remunerated in accordance with the relevant scale. While Jill asserts that the value of the livestock is considerably more than that contended for by Simon, evidence relied upon to support that assertion does not make good that proposition. Simon's estimate of the value of the livestock is $143,000, while Mr Bourke says it is $189,000. Jill now seems to accept that the Highton farm is not overstocked. In circumstances where the value of the farm business assets, on the best case scenario for Jill,[47] is unlikely to exceed $200,000, the appointment of a receiver would be a disproportionate remedy.
166 Accordingly, the application for the appointment of a receiver will be refused. It has not been shown that the appointment of a receiver is necessary to protect the partnership assets. The appointment of a receiver, in the absence of any order appointing the receiver as a special referee, will not be able to adjudicate upon Jill's claims with respect to the misconduct issue, or Simon's claim that the partnership is significantly indebted to him and Anita. The consequences of the deadlock issue and the disarray issue for the security of the partnership assets have been somewhat overstated, and are capable of being ameliorated. And there is a real risk that, particularly if Simon's claim that he is a creditor of the partnership is ultimately accepted, the modest assets of the partnership could be largely consumed by the costs of a receiver.
167 Turning now to the injunction application, ultimately, the issue is which course of action will cause the least injustice.
168 Turning first to the strength of Simon's claims in this proceeding, Jill says Simon's claims in this proceeding are very weak. None of the particulars in the further amended statement of claim relied upon by Simon to support his claim to a proprietary interest in the Highton farm evidence any promise made by Jill with respect to the farm business assets. Further, Jill's transfer of the farm business assets to the partnership is inconsistent with such a promise being made, and she is no longer in a position to leave the farm business assets to Simon. And Jill's submissions with respect to the trustworthiness of Simon and the credibility of his evidence in the current applications could be taken to be also made in support of a submission to the effect that the credibility of his substantive claims in this proceeding should also be diminished.
169 In relation to the last point, I have already observed that the state of the evidence in the current applications, untested as it is, does not permit me to draw any particular conclusions about the credibility of the evidence that Simon will give at trial, or, for that matter, the likely credibility of Jill's evidence. I will proceed on the basis that Simon has a viable claim to the farm business assets, while Jill has valid defences. As for the viability of Simon's claims to the farm business assets, while I accept that the words said by Simon to have been spoken by Jill did not refer expressly to the farm business assets, the draft will relied upon by Simon did, and it seems to me at least plausible that if Jill is ultimately found to have made the promise to Simon in the terms alleged by him, then that promise extended beyond the Highton farm to include the farm business assets. For example, by way of analogy, if the farming property which was the subject of a similar promise was an orchard, it seems to me that it would be highly unlikely that such a promise would be held not to extend to the fruit producing trees on the farm property.
170 Further, I agree with Simon's submission to the effect that Jill's transfer of the farm business assets to the partnership will not impede a court from granting relief with respect to her share of the farm business assets. After all, in cases where a court grants relief in a proprietary estoppel, equity looks backwards, not forwards,[48] and the Court has sufficient flexibility to craft relief consistent with the requirements of conscience. Indeed, one could argue that the transfer of the farm business assets to the partnership is consistent with Simon's claim: that Jill was prepared to, in effect, transfer half of the farm business assets to him during her lifetime arguably makes it more likely that she intended to transfer the balance to him upon her death.
171 Accordingly, the outcome of any analysis of the merits of the parties' claims and defences in this proceeding could best be characterised as neutral. In any event, I note the observations in the authorities to the effect that the grant of an injunction may be justified even when the claim of the party claiming interlocutory relief is weak, if the balance of convenience overwhelmingly favours the grant of an injunction.[49]
172 Before turning to the balance of convenience (including the question of whether damages would be an adequate remedy for Simon's claims in this proceeding), I will deal with Jill's submission to the effect that the Court is not empowered to grant the injunction sought by Simon, because this Court cannot, via the grant of injunctive relief or otherwise, authorise what would otherwise be an unlawful act.
173 I have no difficulties with that submission, as far as it goes, although I note that the powers of the Court do extend to restraining a party from exercising what would otherwise be their lawful rights. However, I do not agree with Jill's submission to the effect that granting the injunction sought by Simon would, in effect, authorise a breach of the Partnership Act, or be in conflict with the regime put in place by the Partnership Act upon dissolution of a partnership.
174 The relevant sections of the Partnership Act are extracted at paragraphs 93 to 96 of these reasons. Jill relies upon s 42 of the Partnership Act to contend that, by granting the injunction, this Court would be authorising Simon to continue the partnership business contrary to s 42 of the Partnership Act.
175 This submission misapprehends both the consequences of granting the injunction, and the effect of s 42 of the Partnership Act. The terms of the injunction do not have the effect of compelling Jill to continue business in partnership with Simon. Simon merely seeks to restrain Jill from selling the farm business assets. Really, the effect of the injunction is to restrain Jill from exercising her rights under s 43 of the Partnership Act to wind up the business and affairs of the partnership. As observed by counsel for Simon in his submissions, the relevant provisions of the Partnership Act make a clear distinction between the dissolution of a partnership and the winding up of the business and affairs of the partnership.
176 If the dissolution of a partnership had the effect of winding up a partnership, there would be no need for there to be an express reference to the right of a partner to apply to the Court to wind up a partnership, as is made in s 43 of the Partnership Act.[50] And, I agree that s 46 of the Partnership Act expressly contemplates the continuation of the business of a partnership after one of the partners ceases to be a partner.
177 Rather, the effect of s 42 of the Partnership Act is to provide that Jill is no longer bound by any transaction entered into by Simon after its dissolution, although s 46 provides that she would be entitled to any profits until the preparation of final accounts. In the context of how the partnership actually operates, any liabilities incurred by the partnership since 10 February 2023 will be sheeted home to Simon alone. For example, if in fact the Macquarie Bank loan in the names of Simon and Anita is a loan of the partnership, Simon alone, not the partnership, would be liable for any increase in the loan since 10 February 2023, save where the borrowings could be shown to have been made for the purposes contemplated by s 42 of the Partnership Act. Further, while I have not considered the issue in any great detail, any liability of Jill for the debts and obligations of the partnership under s 13 of the Partnership Act would have ceased after 10 February 2023, insofar as those debts and obligations were incurred after 10 February 2023. An example of such an obligation would be any liability to the family trust for Simon's continuing occupation of the Highton farm after he was served with the Notice to Vacate.
178 Accordingly, by granting an injunction, the Court would not be forcing Jill to carry on the business of the partnership with Simon contrary to s 42 of the Partnership Act or otherwise. In effect, granting the injunction would mean that Simon would continue to be the caretaker of the farm business assets until the hearing and determination of Simon's claim to the farm business assets at trial.
179 The matters discussed above are also relevant to the determination of where the balance of convenience lies.
180 Turning now to the matters relevant to the balance of convenience, the following matters weigh in favour of the grant of the injunction:
(a) I accept that damages will not be an adequate remedy if the livestock is required to be sold and Simon's claims to the farm business assets are ultimately made out at trial;
(b) granting the injunction will in effect preserve the status quo pending trial, which is now scheduled to commence in less than six month's time;
(c) there is no evidence that Jill is in immediate need of the funds that would be realised by the sale of the farm business assets; and
(d) if an injunction is not granted, the partnership will incur the costs involved in preparing the livestock for sale, which may prove to have not been necessary should Simon's claim to the farm business assets succeed at trial.
181 The following matters weigh against granting an injunction;
(a) ordinarily the courts are loathe to grant an injunction which would compel a party to carry on a business;
(b) it is at least arguable that damages would be an adequate remedy to meet Simon's claim to the farm business assets, although I think the better view is that damages would not be an adequate remedy;
(c) the proposition that the partnership is a trespasser on the Highton farm is arguable, and if action is taken to enforce the Notice to Vacate, the farm business assets may have to be sold in any event;
(d) by permitting Simon to, in effect, manage the business of the partnership against Jill's wishes, Jill continues to be exposed to the risks and potential liabilities associated with operating the partnership business;
(e) if Simon is permitted to hold and use the farm business assets under the regime provided for by the 10 October orders, or some similar regime, the court will be required to supervise Simon's compliance with those orders; and
(f) if Jill's claim in the related proceeding to the effect that Simon holds two thirds of the Bacchus Marsh property on trust for her is successful, then the value of Simon's undertaking as to damages may be quite limited.
182 In my view, the balance of convenience favours granting the injunction. The matters relied upon by Jill to contend that the injunction should not be granted are either not as significant as contended for by Jill, or can be ameliorated by the conditions I intend to impose upon the grant of the injunction.
183 Turning first to the matters weighing in favour of the grant of the injunction, I accept that while it is at least arguable that damages would be an adequate remedy to meet any claim by Simon to the farm business assets, given that there is a ready market for plant and equipment and livestock, and given that the farm business assets are capable of being valued with some precision.
184 However, I accept that there is something special about a breeding operation, where livestock are bred for sale, rather than production, and I accept Simon's evidence that the livestock herd has a value to Simon greater than what can be measured in money. I also accept that if Simon is successful in his claim to the Highton farm and the farm business assets, but only after the farm business assets have been sold, then the damages recoverable by Simon may be insufficient to restore the farming business to what it was before. To explain further, it is clear from the evidence that the plant and equipment on the Highton farm must be quite out of date, and would realise little when sold, but if Simon's claims are successful, then that plant and equipment would have been replaced.
185 During the course of the hearing of the applications, counsel for Jill submitted that there was not a complete overlap between the farm business assets and the assets of the partnership, as the farm business assets do not include the cash at bank and the goodwill of the partnership. I agree. While the partnership accounts do not record goodwill as an asset of the partnership, it seems to me that if there is any goodwill which could be assigned a value, that value can only be attributable to the reputation of the partnership's breeding practices and bloodlines, the fruits of which would be destroyed should the livestock be sold.
186 Accordingly, the above matters lead me to conclude that, on balance, damages would not be an adequate remedy, and also support the desirability of preserving the status quo pending the trial of the proceeding, noting that the trial is now scheduled to commence in less than six months time.
187 Further, I accept that there is no evidence that Jill has any immediate need for the funds that will be raised by the sale of the farm business assets. That she has no such need is supported by her offer that her share of the proceeds of sale of the partnership assets be held in trust pending the hearing and determination of the proceeding.
188 Finally, while I accept that Simon has not quantified the costs associated with preparing the livestock for sale, he has given detailed evidence (which has not been contradicted by Jill) of the steps that are required to do so. I accept, therefore, that the costs associated with preparing the livestock for sale would not be trivial.
189 Turning now to the arguments why the injunction should not be granted, I accept that ordinarily the Court should be reluctant to force a party to carry on a business they do not wish to carry on, particularly if it requires that party to continue an association they no longer wish to continue. However, the purpose of the injunction is not to compel Jill to carry on a business: it is to enable Simon to keep the farm business assets in his custody pending the resolution of the dispute between the parties about their ownership. Jill would not be required to do anything: she would simply be restrained from, in effect, taking action to wind up the business of the partnership.
190 Jill is concerned about being exposed to the inherent risks associated with the conduct of a primary production business, and to the risk that Simon will incur liabilities on her behalf. However, in my view, those risks are not real, by reason of the dissolution of the partnership and the consequences of the dissolution, as set out in ss 13 and 42 of the Partnership Act, as discussed earlier in these reasons. To the extent that those risks are real, they can be ameliorated by the conditions that I will impose upon the grant of the injunction.
191 I propose to impose a regime substantially similar to that imposed by the 10 October orders, plus some additional conditions. I accept that could involve the Court being required to supervise compliance with that regime and those conditions. However, in any event, this proceeding will require some degree of case management to ensure that the trial commences on the scheduled date, and also, the period of supervision will be limited. The Court's indefinite supervision will not be required.
192 As for the submission to the effect that granting an injunction would be futile, because the partnership does not have security of tenure on the Highton farm, while I agree that the partnership's tenure at the Highton farm is legally precarious, I accept that from a practical perspective, Anna will have some difficulties in immediately evicting Simon from the Highton farm. As noted earlier in these reasons, Anna is likely to face some hurdles in successfully making an application under Order 53, at least prior to the hearing and determination of her summary judgment application, and she has not taken any other action to evict Simon and the partnership from the Highton farm. And, in any event, while I accept that it would be costly and inconvenient for Simon to relocate the farm business assets to another property, I also accept that it would not be impossible.
193 As for the value of Simon's undertaking as to damages, I accept that if Jill's claim to the lion's share of the Bacchus Marsh property is successful, then his assets will be considerably diminished. However, he will still have a one-third share of the Bacchus Marsh property, and while there is no evidence of its current value (or the value of a property Simon and Anita own in Woolongong), given the likely escalation in the value of the Bacchus Marsh property, Simon's net asset position may well exceed the value of Jill's share of the partnership assets, even on a worst case scenario for Simon.
194 In any event, the conditions I will impose upon the grant of the injunction will ameliorate the potential disadvantages to Jill of granting the injunction. These conditions include a requirement that Simon provide confirmation[51] that the insurance policy documents included in the evidence cover the farm business assets, include public liability insurance for the Highton farm and the farm business, and that the fact that the insurance policy is in the names of Simon and Anita would not jeopardise any claim with respect to the farm business assets and the Highton farm. Given that the partnership accounts show that the partnership incurs considerable expenses with respect to insurance, I expect that the insurance records in evidence do relate to the insurance of the farm business assets and the Highton farm, contrary to Jill's submissions.
195 The other conditions that I will impose upon the grant of an injunction are as follows:
(a) that Simon take all reasonable steps and use all reasonable endeavours to ensure that the trial of the proceeding scheduled to commence on 4 June 2023 commences on or around that date;
(b) that Simon facilitate the valuation of the farm business assets prior to trial; and
(c) Simon co-operate with Jill to appoint a new accountant to the partnership.
196 The first condition is self explanatory. The second condition is imposed in aid of a direction I will subsequently make to appoint a joint expert to value the farm business assets prior to trial. The third condition is imposed, at least in part, to ameliorate Jill's concerns about the independence of MOR.
197 I have no reason to doubt the professionalism of MOR and Mr Hansen. Further, I am in no position to make any findings with respect to Jill's allegations that the partnership accounts are inaccurate, or have been manipulated to benefit Simon and his family at Jill's expense. However, I accept that MOR cannot be perceived as fully independent or impartial in circumstances where Simon has objected to the production of documents evidencing communications between him and MOR on the basis that they are subject to a claim by him for legal professional privilege.
198 The very foundation of a claim for legal professional privilege is the confidentiality of the relevant communication. Indeed, non-confidential communications cannot be the subject of a claim for legal professional privilege. It cannot be the case that MOR is truly impartial, or can be perceived to be truly impartial, if its principals are party to confidential communications with one partner of a partnership in circumstances where the partners are in dispute, for the purpose of that partner advancing his position in that dispute. The partnership accountant should be impartial, and transparent. However, Jill's concern that MOR is not impartial is reasonably based.
199 Subject to further consultation with the parties as to the appropriate form of order, I propose to make the following orders:
1. Until the hearing and determination of the proceeding or further order:
(a) the first defendant be restrained from selling or otherwise disposing of any of the farm business assets (as defined in the further amended statement of claim dated 23 November 2023);
(b) the plaintiff not sell any of the livestock of the partnership without the first defendant's written consent, such consent not to be unreasonably withheld;
(c) the first defendant not transact on the partnership account without the plaintiff's written consent, such consent not to be unreasonably withheld;
(d) the plaintiff take all necessary steps to ensure that the first defendant has electronic banking access to the partnership account;
(e) the plaintiff ensure that all income of the partnership is banked into the partnership account;
(f) the plaintiff ensure that all expenses of the partnership are paid from the partnership account;
(g) the plaintiff not cause the partnership to borrow funds from any person or lend funds to any person without the first defendant's prior written consent, such consent not to be unreasonably withheld;
(h) the plaintiff not cause the partnership to repay any existing indebtedness of the partnership;
(i) the plaintiff not cause the partnership to pay wages to any person or drawings to any partner without the first defendant's prior written consent, such consent not to be unreasonably withheld;
(j) the plaintiff and the first defendant are directed to confer and agree upon the appointment of a new accountant for the partnership, and to facilitate the transfer of the books and records of the partnership to the new accountant;
(k) the plaintiff co-operate with a valuer to be jointly appointed by the plaintiff and the first defendant in due course to value the partnership assets;
(l) the plaintiff permit access to the Highton farm to any livestock agent appointed by Jill to inspect the livestock upon the provision of reasonable notice; and
(m) the plaintiff provide a fortnightly report to the first defendant, in writing, by which he reports on:
(i) any purchases of NLIS tags;
(ii) the application of any NLIS tags to any animals;
(iii) the purchase of any animals or other assets;
(iv) the sale of any animals or other assets;
(v) any known births or deaths of animals;
(vi) income received; and
(vii) expenses incurred.
2. Until the hearing and determination of the proceeding, no partner take any step to prepare, file or lodge any taxation document for the partnership without the prior written consent of the other, save for Business Activity Statements as and when they are due.
3. The plaintiff's summons filed on 21 July 2023 be otherwise dismissed.
4. The applications in the first defendant's summons filed on 3 July 2023 be dismissed.
5. The parties' costs be reserved for determination in due course.
6. Notification of any application by any party with respect to the costs of the current applications be provided to the other party and the Court by 4:00pm on 19 December 2023.
7. There be liberty to apply on 7 business days notice to the other parties and the Court with respect to paragraphs 1 and 2 of this Order.
ANNA ELIZABETH LIDGETT (in her own capacity and in her capacity as Trustee of the Lidgett Property Trust)
[1] For ease of reading, and to distinguish between family members, first names are used for the parties in these reasons. No disrespect is intended.
[2] Following the hearing of the current applications, but foreshadowed at the commencement of the hearing, I fixed the trial of the proceeding to commence on 4 June 2024, on an estimate of two to three weeks. Some careful and robust case management will be required to ensure that all necessary interlocutory steps can be completed so that the trial commences on that date.
[3] For example, some livestock sales may be required to fund expenses required to preserve the welfare of the livestock, or to dispose of ageing livestock at the appropriate time.
[4] Some months later, Simon revised his estimate down to $143,000.
[5] In the proceeding before Moore J ('judicial advice proceeding') Anna applied for judicial advice in her capacity as trustee of the family trust that it would be appropriate and justified for the family trust to defend the claims against her in this proceeding in her capacity as trustee of the family trust (claims are also made against her personally), and to pay the costs of defending Simon's claims in this proceeding out of the assets of the family trust. His Honour declined to provide the advice sought by Anna, making the following orders:
(a) Anna Lidgett, in her capacity as trustee of the Lidgett Property Trust, is directed that it would be appropriate to and she would be justified in playing no active role in and abiding by the judgement of the Court in proceeding S ECI 2023 01185.
(b) Subject to further order of the Court, Anna Lidgett, in her capacity as trustee of the Lidgett Property Trust, is directed that it would not be appropriate and she would not be justified in paying the costs of defending proceeding S ECI 2023 01185 out of the assets of the Lidgett Property Trust.
See [2023] VSC 673.
[7] This application was determined by me in orders made on 18 October 2023, with reasons provided in 'Other Matters'.
[8] Particulars were provided of the asserted inaccuracies in the partnership accounts which largely accord with the allegations made during the course of the current applications.
[9] On 30 November 2023, while judgment in the current applications was reserved, Irving AsJ dismissed an application for summary judgment brought by Simon in the related proceeding. The parties and their advisors will be asked to consider whether the related proceeding should be heard together with this proceeding, given the overlap between the parties and the subject matter in the two proceedings, and given that I doubt that the length of the trial will be greatly extended should the two proceedings be heard together.
[10] In his reasons provided when dismissing the summary judgment application in the related proceeding, (see [2023] VSC 705) Irving AsJ reproduced parts of Jill's pleading in the related proceeding, which included the following particulars:
The Defendant made or arranged the following renovations and improvements to the [Bacchus Marsh] Property in 1995/96: renovations to bedrooms, building of an en-suite bathroom, installation of bathroom cabinetry in the main bathroom, installation of pantry, cupboards and flooring in the kitchen, installation of larger windows and French doors in the lounge room, internal repainting of most of the house, installation of a garden shed and chook-house, installation of shelves and doors in the garage, paving the front garden and the rear garden, installation of a reticulated water system, installation of heating and gas to the house, installation of two hot water services and installation of a rainwater tank.
I do not understand the extent of the renovations to be in dispute, and I expect that the renovations would have added considerable value to the Bacchus Marsh property once completed.
[12] Supreme Court (General Civil Procedure) Rules 2015 (Vic) ('Rules').
[13] The financial year ended 30 June 2021.
[14] Save for the debt said to be owed by the partnership for the Macquarie loan.
[15] Required for the purposes of registering individual animals in the NLIS database.
[16] Which were ultimately not relied upon for the purpose of the current applications.
[17] It was the receipt of this evidence which prompted me to arrange for the trial of this proceeding to be listed at the earliest available date.
[18] [2000] VSC 319 ('Martyniuk').
[30] Co-Op Insurance Society v Argyll Stores (Holdings) [1997] UKHL 17; [1998] AC 1 [9].
[31] See the requirements of s 85 of the Constitution Act 1975 (Vic).
[32] She now does so in her further defence and counterclaim filed on 11 December 2023.
[33] However, this has now been addressed by the filing and service of Jill's further defence and counterclaim filed on 11 December 2023.
[39] There are 537 active cattle tags, and 677 active sheep tags, compared with 222 cattle and 246 sheep as at 30 June 2023.
[41] The need for expedition arises from, among other things, the time required to prepare for trial less than six months away, in circumstances where the pleadings have not closed, the need to deal with the pending privilege application and Anna's foreshadowed summary judgment application, and the pending summer break.
[44] And those claims are now articulated with more precision in the further defence and counterclaim filed on 11 December 2023.
[45] See the discussion in Martyniuk [34].
[46] Noting that neither Simon or Jill have been physically present in Court during the hearing of the applications before me, let alone subject to any cross-examination.
[47] That is, if Simon's claim to be a creditor of the partnership is ultimately rejected.
[48] See Milling v Hardie [2014] NSWCA 163 [55]; Thorner v Major [2009] UKHL 18; [2009] 3 All ER 945, 975.
[49] Bullock v Federated Furnishing Trades Society of Australasia [1985] FCA 19; (1985) 5 FCR 464, 472.
[50] Such an application is now formally made by Jill in the further defence and counterclaim filed on 11 December 2023.
[51] A letter from the insurance broker who arranged the insurance cover may be sufficient evidence for present purposes.
Lidgett
Lidgett [2023] VSC 743
(1985) 5 FCR 464