Wool bales which were not marked and which would not have been present in 1997. Income from wool clips is brought to account in the financial statements. As to hay bales from the 2003 season, although costs of production are included in financial statements this item is not listed as an asset because it supports livestock used to produce income.
416 Wapper prepared a valuation of plant and equipment which was based on the same format as Robertson. Wapper was not given any instructions about the ownership of the plant and equipment which he inspected. Wapper was not able to determine the ownership of the plant and equipment or livestock which he inspected. Wapper did however attempt to identify and value the plant and equipment contained in the Depreciation Schedule at 15 December 1997.
417 Ellery and Lipson reported on the sheep and cattle numbers in 1997. The Court should be careful to avoid bringing both the financial experts values and Robertson's valuations to account.
418 Although Robertson and Wapper agree on the value of many items, the most significant difference in value appears to arise over a few larger items of farm equipment and about which Lorraine has not presented any evidence of ownership. It should also be noted that Wapper did not value all of the items in Robertson's report.
419 Lorraine's second amended statement of claim seeks the appointment of a Receiver to the Yard partnership. On Lorraine's best case her interest in land is owned personally and it would not form a partnership asset. The current sheep, livestock, hay and wool belongs to a different partnership. Lorraine has failed to establish what property a Receiver should be entitled to take possession of without risk of trespass or conversion. A Receiver could not conduct the farm business or Renown Garage on commercial terms.
420 The Court should allow the parties to make further submissions if required.
The Expert Financial Reports
421 The Court has received the financial expert reports of Mr Ellery and Mr Lipson. Ellery stated it was beyond his role to explore the implications of the registration of ownership. Lipson's report was received absolutely but it is again noted that the assumptions and language used by Lipson overstep the functions of a financial expert concerning issues and findings which are properly the subject of determination by the Court.
422 Adopting the substance of the historical Financial Statements it appears that both financial experts are in substantial agreement as to relevant issues. The main difference is the valuations adopted in the respective calculations made by Ellery and Lipson. Ellery also referred to possible dangers which might arise from Lipson's methodology in adopting a current value of Lorraine's interest. The Court should allow the parties to make further submissions if required.
423 That does not mean that there are not differences between the approaches adopted by Mr Ellery and Mr Lipson. There are several issues which arise for consideration. Alfred's claim is that he is the beneficial owner of land transferred to Yardoo in 1997. One objective was to demonstrate the Financial Statements could not be relied upon as proof of beneficial ownership of land by Yardoo. Ellery's first report 24 November 2004 concluded that the Financial Statements prepared by Brodie for the Yard partnership and Yardoo in 1975 - 1977 did not correctly record the financial transactions relating to the purchase of Pomona by Trevor and Lorraine and later transfer to Yardoo. All parties, Mr Brodie and the expert financial witnesses agree that the Financial Statements do not record the purchase transactions correctly and they do not correspond with the registered ownership of the properties. Notwithstanding what Ellery or Lipson say about the Financial Statements and consequential adjustments to the Yard partnership and Yardoo, the Court should accept Brodie's evidence that the financial statements were not intended to and do not reflect the legal and beneficial ownership of assets. No matter what the loan accounts record, or how the principal of each loan account might be adjusted, the liabilities have never been treated in a commercial manner. The Yard partnership farmed the land owned by Yardoo without commercial payment. There has been no intention or attempt to repay the principal of any loan account by the Yard partnership and Yardoo from profits. There has been no attempt to refinance any liability arising from the transfer with a third party using the transferred land as security. There has been no payment or credit for interest on commercial terms. That is consistent with Brodie's witness statement. Those are issues relevant to intent. If there was an intention that Alfred should transfer the legal and beneficial ownership of the land to Yardoo for a commercial price there should have been a corresponding intention that Alfred would be paid on commercial terms. It is not sufficient to simply record a liability in the loan accounts. The effect of the failure to adopt a commercial payment to Alfred was that the profits of Yardoo and the Yard partnership were artificially inflated. It created the false impression they were able to afford the acquisition of additional properties. It was income foregone by Alfred. Even if the loan accounts are adjusted in 2005 in the manner which Ellery and Lipson summarise, after 30 years without interest Alfred will never be compensated for the true value of the properties transferred. That is the reason equity intervenes.
424 In paragraph 20 of Lorraine's Second Further Amended Statement of Claim, Lorraine claims Yardoo is indebted to her in the sum of $123,171.00. There is no corresponding plea in respect of loan accounts as recorded for the Yard partnership at 1997.
425 Alfred's claim is limited to the ownership of the land. It is relevant to note that Gladys, Alfred and Trevor have not taken issue with Lorraine for any claim arising from the annual distribution of profits as recorded in the Financial Statements of either the Yard partnership or Yardoo.
426 Pomona was registered in the names of Trevor and Lorraine as tenants in common. The 1975 partnership accounts treated Pomona as a partnership asset. Ellery's report 24 November 2004 concluded the errors arising in the partnership accounts from the sale of Pomona to to Yardoo had been corrected by subsequent transactions. Mr Brodie said that he was not aware of the earlier errors in the accounts and doubts he made any adjustments with the intent of correcting the errors in the 1995 - 1997 financial statements. Ellery also stated the Yardoo accounts continued to carry the errors relating to Bethune's vendor finance and that the loan accounts should be adjusted. The adjustments for finance provided by Alfred are contained in the second report but that only relates to capital. That does not affect the lack of commercial intent to repay the loans.
427 Lipson's report 7 September 2004 assumed that the purchase money for the original purchase of Pomona by Trevor and Lorraine was provided by the Yard partnership. That assumption by Lipson and inclusion of Pomona as a partnership asset contradicts Lorraine's claim of a gift or advancement. That is an issue for determination by the Court. Alfred stated that it was money sourced from General Credits and he produced copies of the relevant accounts.
428 Lipson's statements and assumptions about the original purchase of Pomona overlooked other accounting issues. If correct there should have been a loan from the Yard partnership to Trevor and Lorraine which they would have been liable to repay when they transferred Pomona to Yardoo. No such loan was recorded in the Yard partnership accounts in 1975. There was no allowance for repayment of principal and interest by Trevor and Lorraine to the Yard partnership. When Trevor and Lorraine transferred Pomona to Yardoo they would therefore have had personal liabilities to Bethune for vendor finance; the Yard partnership for the principal ($15,000) and interest repayments made to Bethune 1993 - 1997; and the Yard partnership for the balance of the purchase price plus interest. No such payment was recorded in the Yard partnership accounts. The accounts credited Trevor and Lorraine with 100% of the transfer price without any liabilities. It is doubtful they would have received any net proceeds if the transaction was commercial, and there may have been a reduction in their loan accounts. Lipson acknowledged that that if properties were not owned by the partnership they should not be included in the partnership account. Lipson also agreed that if Pomona was owned by Trevor and Lorraine as tenants in common and the purchase money provided by the partnership that Pomona should not have been included in the partnership assets; a loan to Trevor and Lorraine should have been included as an asset in the Yard partnership accounts; and that upon the sale of Pomona to Yardoo, Trevor and Lorraine would have a credit for the purchase price but a liability to repay the existing loans. No provision was made for payment of interest by Trevor and Lorraine to the Yard partnership.
429 Lipson's analysis of the transaction is incorrect. It does not support the proposition that loan accounts recorded in the financial statements are a method of payment or a transfer of beneficial ownership. The issues raised by Lipson when analysed correctly demonstrate that both before the purchase of Pomona and upon its transfer to Yardoo, Trevor and Lorraine did not have any capital invested in the Pomona or in the new company structure.
430 Another issue arising from Mr Lipson's evidence is the proper accounting treatment of Paladin and Brian's Block. Lorraine claims that they are partnership assets or in the alternative that they owned beneficially by the parties. Paladin was purchased in the names of Gladys, Alfred, Trevor and Loraine on 14 September 1981 and was included in the Yard partnership Balance Sheet 30 June 1982_._ Alfred stated that he paid the deposit and there is an increase in the loan accounts of Gladys and Alfred. Brian's Block was purchased on 17 December 1985 in the sole name of Lorraine. Brian's Block is recorded as an asset in the Yard partnership. The liabilities to Brain Yard are included although the nature of his loans have changed and now relate to Hawick and the "MV Kookaburra". Alfred said he paid part of the purchase price for Brian's Block and there is a related movement in the partnership capital accounts for Gladys and Alfred.
431 The respective claims made by Alfred and Lorraine concerning Paladin and Brian's Block raise the following alternatives. If the properties are owned by the Yard partnership then the assets and related liabilities should be recorded in the assets and liabilities of the Yard partnership. If the properties are beneficially owned by Alfred then the assets and related liabilities should not be recorded in the assets and liabilities of the Yard partnership. If the properties are beneficially owned by Gladys, Alfred, Trevor and Lorraine as individuals then the assets and related liabilities should not be recorded in the assets and liabilities of the Yard partnership.
432 Lorraine's claim that Paladin and Brian's Block are owned beneficially by the four individuals and Lipson's related evidence raises an obvious inequity. Lipson agreed that such a claim would have been treated differently in the partnership accounts and taxation returns of the individuals. Alfred's evidence is that he paid the deposit and part of the purchase money from savings. Lipson accepted it was an amount of about $64,000 from 1983 to 1985. The effect would have been that Alfred would have paid for the whole or a substantial portion of a one quarter share of the properties and owned that interest freehold or with minimal liabilities. Trevor and Lorraine did not pay anything to purchase their interests and presumably they would have paid their portion and annual interest from income received by them. The Financial Statements prepared by Brodie recorded Paladin as a partnership asset and expenses costs associated with Brian's Block. Once again the related loan accounts are not treated in a commercial manner especially if the relevant interest were owned personally.
433 Lipson's Report stated that it was reasonable to conclude that the Yard partnership had sufficient financial resources to finance the purchase of Paladin and Brian's Block. However when asked about whether the partnership could have afforded the purchase without the capital paid by Alfred, Lipson stated "that asks me to crystal ball backwards." However that is what Mr Lipson has done in reaching his other conclusions.
434 If there was an intention that the parties each own beneficially a one quarter interest in the properties there should have been a corresponding intention that they would each pay for their separate interest in a commercial manner.
435 What Lorraine wants is for the money paid by Alfred to continue to be treated as a non performing loan by Alfred to all of the Yard family members jointly and to have the Yard partnership pay the costs of her ownership. Lorraine's claim also overlooks payments from 1997 to 2005 for a mortgage over Paladin. She wants the capital gains during that period but not the expense. Alfred has not received interest on his additional capital and he has not received income or a credit in the loan accounts for those items. Even if rent is assumed to equal the finance costs Lipson's report fails to give credit to Alfred as a person who has paid for his interest in those properties or to adjust for any income that he should have received as an owner. Lorraine's amended claim is another example of Lorraine overreaching at Alfred's expense. The financial reports indicate the type of return could expect at 7% pursuant to section 47 Partnership Act. The valuation reports and in particular Mr Wakeham presents a bigger prize: large capital gains with no capital invested by Lorraine and costs serviced at Alfred's expense.
436 The last full year of accounts for the Yard partnership was 30 June 1997. Remeljej & Associates prepared accounts dated 30 June 1998 for the termination of the Yard partnership as at 15 December 1997.
437 Remeljej & Associates also prepared accounts for the new partnership which carried forward the assets of the Yard partnership but did not include any liability for the purchase of assets from the Yard partnership. Lipson considered the final accounts had limited value and expressed concerns about the failure to record a liability to Lorraine as a discontinuing partner for her portion of the assets of the Yard partnership. In response to Lipson's criticism, first, Trevor and Loraine are both subject to Orders of the Family Court restraining them from disposing of any assets; and second, the ownership of land partnership liabilities and amounts are the issues for determination by this Court.
438 Lipson's report of 6 September 2004 was prepared before Lorraine amended her claim to include her partnership interest in land as personal property. If Lorraine does own an interest in land personally then the land should not be included as an asset in the Yard partnership and the new partnership does not have a liability to her. Lipson's criticism of the accounts 15 December 1997 is inappropriate because of Lorraine's change of position.
439 Both experts were given the opportunity to comment further. Ellery stated that in the event of an injunction it was appropriate to make the accounting adjustments after the court made orders as to ownership. Lipson stated that for accounting purposes the properties should remain in the partnership hands or person in whose name it is registered. The Financial Statements prepared by Remeljej & Associates have not pre-empted the issues in dispute. The Court should allow the parties to make further submissions if required as to adjustments.
440 Although Ellery and Lipson agree in principle about the accounts and how they might be adjusted, Alfred does not agree that such adjustments provide a proper or an equitable result. That is for the following reasons. The reports assume that existing registered ownership of land is correct. The reports agree that the accounts do not reconcile with related transactions however any adjustments are based on the capital sums at the time of purchase. Lipson agrees that his analysis of the original purchase of Pomona with finance provided by the Yard partnership is incorrect. Lipson agrees that if each party is the owner of a beneficial interest in Paladin and Brian's Block there would have been a different accounting and taxation treatment. The original and subsequent accounts do not deal with the transactions in a commercial manner. Neither Ellery nor Lipson attempt to make adjustments for commercial issues such as interest, let alone the related issues of adjusting profits and distributions. The balance sheets are inflated.
441 Lorraine's claim with respect to Yardoo has different financial consequences. Lorraine claims that as the beneficial owner of one of four shares (which she did not pay for) she is entitled to one quarter of the current assets of Yardoo at the present 2005 value. The claim against Yardoo raises many issues in common with the partnership such as the loan account transactions in 1977. All parties agree the loan accounts are wrong and Ellery stated they have not been corrected. Adjustment to the capital of Alfred's loan accounts in 2005 will not do justice. Underlying all of those issues is Alfred's claim that he provided the initial capital (land and cash) upon which the current assets of Yardoo are based. Again the memorandum of transfer and record of transactions in the loan accounts are not proof of beneficial ownership even if they recite the value of land in 1977. The purchase of Hawick also has parallels with the acquisition of land by the Yard partnership. Both are based on the complete absence of any attempt to give effect to the transactions in a commercial manner.
442 As a director and shareholder of Yardoo, Lorraine had an obligation under ss.181 and 182 Corporations Act to ensure that Yardoo did actually pay Alfred on commercial terms for the land transferred to it. As a shareholder Lorraine knew she did not pay or contribute to Yardoo. Lorraine also knew the loan accounts have never been treated in a commercial manner by payments of principal and interest to Alfred. A more realistic comparison is that Alfred's loans have been capitalised. It is remarkable that Lorraine should claim relief for oppression when Yardoo has failed to pay Alfred any principal or interest for the land transferred to Yardoo in 1977. The orders that Lorraine seeks for 25% of the current value of assets are themselves oppressive if given effect to.
443 As a witness Alfred demonstrated an independent and intelligent recollection of events. His statement is his own. The history of events is well documented. Alfred's evidence can be tested by contemporaneous documents. However documents such as the Memoranda of Transfer and the payment of related stamp duty do not evidence intent per se. The prospective liability for death duties provided the motive to transfer the land but the there was no intention to provide a beneficial interest in the land until Alfred's death.
444 Lorraine asserts the Memoranda of Transfer documents are proof of an intention to transfer the beneficial ownership of land to Yardoo, but does not apply the same analysis to the original purchase of Pomona. Lorraine's evidence and assertions that she was the beneficial owner of one half of Pomona were at best muted. If Lorraine was the beneficial owner of one half of Pomona she should have made an unqualified claim to that effect in 1973 - 77. Lorraine does not claim she had any separate intention 1977 or that her intention as beneficial owner overrides Alfred's intention. To the contrary Lorraine's evidence is she did as she was directed by Alfred to give effect to Alfred's intentions in both 1973 and 1977. If Lorraine was the beneficial owner then she had a corresponding obligation to pay for her land if she was going to exercise any such rights.
445 Lorraine does not apply the same analysis to Brian's Block which was registered in her sole name. There are many parallels with Alfred's claims. No matter what the Memorandum of Transfer records Lorraine again did as she was instructed. Lorraine now says she is not the beneficial owner and that Brian's Block was "purchased by the partnership being carried on by A, G, T and L Yard and that such properties are owned by the partnership legally and beneficially in equal shares".
446 Lorraine claims she is the trustee of Brian's Block. However there is no declaration of trust, no conversations with other family members upon which she relies, no document in writing pursuant to section 53 Property Law Act 1958 and no evidence of intent. These are the same issues Lorraine pleads in defence of Alfred's claim that he is the beneficial owner of Brian's Block.
447 As to Lorraine's further submissions, if Lorraine was the beneficial owner of one half of Pomona prior to 1997 it is reasonable to expect she could have made a claim to that effect in the current proceedings. The submission that Equity would require an adjustment prior to granting relief was intended to demonstrate that Lorraine cannot keep all the benefits without the costs. Mr Lipson agreed. If Lorraine had an expectation during 1973 to 1997 that she did in fact have a legal and beneficial interest in the properties her evidence should have stated when she developed that expectation and why. Alfred says Lorraine did not form any expectation because she knew such an expectation was contrary to Alfred's actual control of the properties as the real owner.
448 As to the submission of compensation for 28 years of marriage to Trevor Lorraine's submissions continue to confuse Alfred's claim in equity with Family Court issues. Alfred did not marry Lorraine and he does not have any obligation to compensate Lorraine for her marriage with Trevor.
449 The submissions assume that Lorraine has achieved some superior or additional right over the prior rights of Alfred. They assume a superior right over Gladys, Alfred and Trevor as members of the Yard partnership. The submissions ignore the following matters. Gladys and Alfred have been married for nearly 60 years. Alfred had operated the Renown Garage since 1951. Alfred accumulated significant assets and savings prior to the marriage of Trevor and Lorraine in 1969, and some before Lorraine was born. The terms of Lorraine's participation in the Yard partnership and Yardoo was not based on commercial considerations but on tax decisions made by Brodie or estate advice by Penrose. The Yard partnership did not pay rent to Alfred. Yardoo and the Yard partnership would not have made the same profits if they had to pay Alfred the value of his properties plus interest on commercial terms. The extra money paid by Alfred to purchase Paladin and Brian's Block.
450 Lorraine's submissions also refer to the need to compensate for her contribution to the Yard partnership. The relevant matters are the following. In 1969 Trevor was employed at the Renown Garage and Lorraine was a hairdresser. They had limited assets saving and possibly prospects. In other circumstances that might have been their lot in life. Trevor and Lorraine did not have the capacity to buy the house which Alfred paid for and Lorraine still resides in. Lorraine did not pay to become a member of the Yard partnership or Yardoo. It was an accounting decision made by Mr Brodie. From 1973 to 1997 Lorraine did obtain personal benefits from the Yard partnership. Trevor and Lorraine spent portion to provide for their family. Since 1997 Margaret Sims has been working to maintain the farm business and properties. Lorraine's claim to a share in partnership assets relates to the amount in excess of drawings but exclusive of normal commercial costs which would have been payable on a third party basis.
451 Although the Partnership Act contains rules of distribution and compensation by continuing partners, Lorraine does not want those rules applied. Section 28 (3) Partnership Act provides for interest on capital at 7% per annum. Section 43 provides that surplus assets are to be paid to the partners. Section 48 (b) contains further rules of distribution. Lorraine did not put any capital into the partnership in 1973 but she wants a minimum of 25% of the capital at the date of termination and preferably 25% of the current value of properties in 2005. Lorraine knows the partnership did not pay commercial interest on the loans and additional money paid by Alfred, but she wants 25% of the additional assets purchased with the money foregone by Alfred.
452 Alfred has not acted with the intention of defeating Lorraine's claims. Lorraine's only realistic expectation was that Trevor as the only child would inherit upon Alfred's death. Alfred is acting to protect his own assets acquired over 60 years and prevent them being taken as part of a matrimonial dispute. His claims are prior in time and in equity.
453 As expected Alfred has made provision in his will for Trevor and his grandchildren. Alfred was not obliged to make any provision for Lorraine and could change dispositions of property during his life. Alfred is not insensitive to Lorraine's position and for example withdrew the claim where Lorraine lives. Lorraine however told the Court there is no way she would recognise any of Alfred's claims with respect to the Schedule 1, 2 and 3 properties. Lorraine wants more out of the Yard partnership and Yardoo than any other person. Lorraine wants the current value of assets which includes at least 25% of the original capital which Alfred contributed. The schedule 1, 2 and 3 properties still exist and have a current value in excess of $2 million.
454 The equitable relief Alfred claims is similar to the result the law would recognise in other circumstances. In 1973 the family partnership was limited to farming land or using garage assets owned by Alfred. Alfred did not have any obligation to bring Lorraine into a partnership. It was a change which was driven by accountants and contemporaneous tax practices. It was never a commercial transaction. If the Yard partnership had continued as a business using land owned by Alfred without the transfer of any land by Alfred to Yardoo or purchase of new properties in the name of other persons, Alfred would have owned all the assets personally and Lorraine would not have any recourse against his assets. If the transfer of land to Yardoo was an illegal contract there is still a resulting trust of the land to Alfred and again Loraine would not be entitled to keep the assets.
455 In summary, the submissions for Alfred are as follows.
456 Prior to 1969 Alfred owned land and had assets. At all times Alfred exercised actual control over the assets. The land and assets owned by Alfred did not form part of the partnerships conducted by Alfred prior to 1973. The transfer of land and assets to Yardoo was a mechanism so that Trevor could inherit without death duties at the time of death. There was no intention to transfer an immediate beneficial interest in the land or shares. The scheme only had effect on Alfred's death. The Memorandum of Transfer and loan accounts was not a conveyance for value. The loan accounts were incorrect and not proof of payment. After the transfer of land to Yardoo there was no intention or attempt to repay any loan account liabilities to Alfred on a commercial basis. The profits 1977 to 1997 would not have been available except for the use of land owned by Alfred, such as the South Blocks, and used by the Yard partnership without rent or compensation, and capital provided to purchase Pomona and Paladin. On a practical basis it is doubtful any Court would unravel the accounts from 1977 to 1997 and reallocate profit for that period. The loan account adjustments in issue relate to historical errors from 1977. Although the adjustments might affect Lorraine's loan account they are inadequate. The only method of doing equity is to make the declarations of beneficial ownership sought by Alfred or reconvey the properties in specie. Alfred's claim to the properties purchased after 1977 is consistent with section 24 Partnership Act and related equitable principles. Lorraine has not established that she has a personal beneficial interest in Paladin and Brian's Block.
457 The Orders sought on behalf of Alfred are that he is the beneficial owner of all the land the subject of his claim. If the Court rejects Alfred's claim and grants relief to Lorraine on the basis of an adjustment of accounts and one quarter of the valuations of the Yard partnership and Yardoo, the effect will be to give Lorraine a windfall. Not because of any business agreement on commercial terms or the conduct of the business on commercial basis but simply because Lorraine happened to be married to Trevor.
458 The Court should not exercise its discretion to wind up Yardoo when it is
apparently solvent and the winding up would destroy the farming activities not only of Alfred and Trevor but also long term provisions for Alfred's grandchildren. The expert financial evidence anticipates that financial adjustments can be made by agreement between the experts as to calculations depending on the judgment of the Court.
SUBMISSIONS ON BEHALF OF LORRAINE YARD
459 Submissions on behalf of Lorraine Yard are summarised in paragraphs 460-506.
460 There is no evidence of any express agreement that Trevor and Lorraine hold the property on an express trust for Alfred. There is no compliance with the formal requirements, in any event, of s.53 Property Law Act. Further, there is evidence of actual intention which rebuts any presumption of a resulting trust (to the extent Alfred provided funds for the purchase, and if such a presumption is not reversed by the presumption of advancement). The intention was to reduce "death taxes". At least $13,000 of the deposit monies for the purchase of Pomona came from partnership funds (Renown Garage Account and Farm Account). The Bethune vendor finance of $65,000 was paid off in the period 1974 to 1979 from partnership funds. Later receipts for interest on the mortgage in respect of the Pomona property were issued in the name of the four person partnership. The subsequent purchase of Pomona by Yardoo from Trevor and Lorraine in consideration of the raising of loan accounts in each of their favour, and in circumstances where no consideration was paid to Alfred or Gladys, is further evidence that Trevor and Lorraine were the beneficial owners of Pomona prior to its transfer to Yardoo.
461 The evidence of Brodie in cross-examination was clear that at and before the incorporation of Yardoo there was no discussion of a trust. Ellery stated that the documents sighted by him confirmed the transactions as genuine transactions which passed legal and beneficial title to Yardoo and that for any effect in minimizing probate or estate duty, beneficial title in all the properties had to be passed to Yardoo.
462 Alfred asserts that he received no payment for the transfer of the Schedule 1 properties to Yardoo, but the accounting evidence of Brodie and Ellery is that the loan accounts constituted such payment. The fact of agreement on the loan accounts being good consideration is sufficient for the loan accounts to constitute legal consideration: Manzi v Smith.[40] In Temples Wholesale Flower Suppliers v FCT[41], the Full Court of the Federal Court first refers approvingly to Whim Creek Consolidated (NL) v FCT [42] which held that a debit to an advance account in the books of a company was held to be a payment (in that instance to the company) as there was an agreed set-off of the sum in question. It is the fact of agreement that the loan accounts will constitute payment that is the key, which is clearly established in this case, inter alia, by (a) the accountant's letter of 31 May 1977 (CB 158) "The purchase of the relevant assets by the Company should be by way of loans with appropriate Mortgages and/or acknowledgement of debt"; (b) the Freeman and Pitts letter to the four Yards (CB 161) "It is understood that the transfers may be passed at the Stamps Office without required proof as to the manner of payment of the consideration, and accordingly have not prepared any acknowledgement of debt by the Company. If necessary some form of acknowledgement will be prepared at a later date"; and (c) the agreement for the sale of business to Yardoo which records (CB 166) "The said purchase price shall be payable on demand and shall be entered in the books of account of the purchaser as a debt owing to the vendors in equal shares."
463 All of the subsequent accounts and Annual Returns were signed by Alfred without any demur. Alfred stated in cross-examination that the agreed method of payment for the transfer of properties to Yardoo was to be the raising of the loan accounts in Yardoo.[43]
464 As to subsequent acquisitions by Yardoo, there is no evidence to support an express trust of the Schedule 4 properties in favour of Alfred. No evidence was led of any agreements, despite this being pleaded. This contention was never suggested in cross-examination to Lorraine. There is no evidence of any affixing of a seal by Yardoo as a trustee company (contrary to AIfred's pleading of his case). The sources of funds in the case of the subsequent purchases by Yardoo also proves that there is no basis for a resulting or constructive trust in favour of Alfred. Alfred was in no case the source of funds so as to raise an inference of a resulting or constructive trust in his favour. The property Murrayville Slaughter Yards (4.1) was registered in the name of Yardoo but paid for from partnership accounts. The property Herbie's Town (4.2) was purchased by Yardoo for $1000 and Alfred accepted in cross-examination that the source of funds for the purchase was Yardoo. The 50% interest in the property Hawick (4.3) was purchased in the name of Yardoo for $200,000 on the basis of a loan from Brian Yard for $125,000 with the balance of funds of $75,000 being paid from a partnership bank account.
465 As to subsequent acquisitions by the partnership there is no evidence of any agreement prior to the acquisition of the properties in Schedule 5 (or at any other time) that they would be held on trust for Alfred. The property Szader's Block (5.2) was registered in the name of Trevor but the Court should find that it is held on a resulting trust for the partnership of four as the source of funds for the purchase (CB 288/290) were three cheques from a partnership AGC Credit Account totalling $21,188. The presumption of advancement does not apply to the purchase of Szader's Block as the funds for the purchase came from the partnership of four, not from one of Trevor's parents. The property Paladin at Loebethal (5.3) was purchased in the name of the four partners in 1981/82 for $178,000 and is registered in their joint names. The source of funds was the partnership. The property Brian's Block (5.4) was purchased in the name of Lorraine for $195,000. The property was paid for by partnership funds. In a letter of 19 February 1999 (CB 166) Alfred and Trevor Yard claim Brian's Block as being a partnership asset of the four partners.
466 Ellery's First Statement records the equal distribution of profits from the partnership, and he accepted in that the partnership operated on the basis of four equal partners and that there was an equal distribution of dividends from Yardoo. Ellery (Para 7.4) records the transfer of legal ownership of the properties, and he accepted that in order for there to be the probate/succession duty effect of reducing liability that there had to be a transfer of both legal and beneficial title.
467 At the time of the formation of the partnership and of Yardoo and of the purchase of the properties there were convivial relations between the family members including Lorraine. Trevor as Alfred's only son could be expected to receive the properties. Alfred was deeply concerned about probate/succession duties. The transfers of all the Schedule 1 to 3 properties was the reflection of this motivation to transfer properties inter vivos to minimise death duties. There is clear evidence to support the conclusion that each of the subsequent purchases by Yardoo (4.1, 4.2 and 4.3) was intended to be held by Yardoo legally and beneficially. At the time of the purchases, the partnership of four was profitable and was used as the source of funds to fund the balance of the purchases other than external borrowings. As the partnership of four had the same equal rights as the shareholding of four the Court should conclude that there was a actual intention that Yardoo hold the beneficial title to the properties. As the partnership funds were the source of funding of the Schedule 4 properties other than external loans there is no basis for Alfred to claim a resulting or constructive trust in respect of any of these properties. There is clear evidence also that each of the Schedule 5 properties was intended to be held as partnership properties. Paladin is registered in the names of all four, and the source of funds was partnership accounts and external borrowings in the name of the partnership. The source of funds for Trevor's purchase of Szader's Block was the AGC General Credits partnership account, and the source of funds for Lorraine's purchase of Brian's Block, other than a loan from Brian Yard, were partnership funds. The Court should find that the latter two properties were held on a resulting trust for the partnership. The fact that Brian's Block was registered in Lorraine's name demonstrates Alfred's determination to avoid probate/estate duties by registering properties in the names of parties who could be expected to succeed to properties on his death (in this case Trevor and Lorraine). This is especially the case when at the time relations between the partnership of four were convivial. All of the evidence is consistent with the one objective of Alfred: to transfer properties away from his own legal ownership with the actual intention that beneficial ownership should be transferred and held so that upon his death probate/estate duties would be reduced. The Court should find that there is evidence of this actual intention on the part of Alfred in respect of the Schedule 1 and 2 properties, and of all concerned in respect of the Schedule 3 to 5 properties. It is not a question of a delayed intention; rather the intention is to make a current disposition of property, albeit for a longer term objective or purpose. Alfred's case, that the properties in Schedules 1 to 5 are held by the various registered proprietors on trust for him, defies approximately 20 years of financial reports and taxation returns which record the ownership and exploitation of the properties by Yardoo and the partnership for the equal benefit of the shareholders and the partners respectively.
468 Lorraine submits that applying the dicta of Gibbs CJ in _Calverley v Gree_n[44], there should be held to be a presumption of advancement applying to a joint purchase in the name of son and daughter-in-law in the case of the original purchase of Pomona. The decision of Yoshino v Niddrie[45] does not stand for the contrary proposition. It merely contains a statement that the matter had not been conclusively determined. The purchase in the name of a son is a classic example of a relationship of loco parentis giving rise to the presumption of advancement, The joint purchase in the name of Lorraine and Trevor, at a time when Alfred was clearly concerned with the impact of death/succession duties, is such a circumstance as referred to by Gibbs CJ at 250 in Calverley v Green "wherein the relationship between the parties is such that it is more probable than not that a beneficial interest was intended to be conferred".
469 In any event from the evidence as to circumstances of the transfer of the Schedule 1, 2 and 3 properties in May to December 1977, the Court should infer an actual intention on Alfred's part to transfer beneficial title in all the Schedule 1,2 and 3 properties to a company in which he voluntarily created four equal shareholdings. The Court should not find that there were voluntary transfers (i.e. without consideration) as the shareholder loan accounts provided good consideration at law for the transfers, and the evidence is certain that Alfred was intending to dispose of property to Yardoo to minimise death/succession duties on his death. This is not a case like Manzi v Smith[46] where the only evidence was journal entries and nothing more. Here, the evidence was of the underlying agreement that payment would be made by the raising of the loan accounts. Unlike Manzi v Smith there is evidence of the parties, in particular Alfred, binding themselves by agreement to the raising of loan accounts as being the relevant payments for the transfers of the properties. The parties, unlike Manzi v Smith, adopted the raising of the loan accounts as the fact of payment. The Accountant's letter of 31 May 1977 (CB 158) states "The purchase of the relevant assets by the Company should be by way of loans with appropriate Mortgages and/or acknowledgement of debt"; the Freeman Pitts letter to the four (CB 161) states "It is understood that the transfers may be passed at the Stamps Office without required proof as to the manner of payment of the consideration, and accordingly have not prepared any acknowledgement of debt by the Company. If necessary some form of acknowledgement will be prepared at a later date"; and the agreement for the sale of business records (CB 166) "The said purchase price shall be payable on demand and shall be entered in the books of account of the purchaser as a debt owing to the vendors in equal shares".
470 The Schedule 4 properties were all registered in the name of Yardoo. Herbie's Town (4.2) was purchased using Yardoo's funds. Applying the presumptions referred to by Gibbs CJ in Calverley v Green as the source of funds (other than external borrowings) for the purchase of the Murrayville Slaughter Yards and the 50 percent interest in Hawick was partnership funds, then the presumption would be that Yardoo held these 2 properties on a resulting trust for the partnership members equally. The more natural inference is that it was the actual intention at the time of purchase that beneficial title rest in Yardoo, but the conclusion is clearly open on an application of the relevant presumptions as to resulting trusts, that the interest in these two properties (a 50 percent share in the case of Hawick) were held on a resulting trust for the partnership members equally.
471 The interests held in respect of each of the Schedule 5 properties were held either directly by the four partners (in the case of Paladin) or on a resulting trust for the four partners (Szader's BIock and Brian's Block). The source of funds in the case of the Paladin purchase were the partnership funds. The source of funds (other than external funds borrowed in the name of the Partnership) in the case of each of Szader's Block and Brian's Block were partnership funds and the relevant presumption would apply to impose a resulting trust in favour of four partners equally.
472 If the Court finds that there was an intention to transfer legal and beneficial title to Yardoo, then there are no circumstances of good conscience demanding the imposition of a constructive trust in favour of Alfred. Alfred achieved what he intended to do. There is no aspect of conscience or good faith supporting the imposition of a constructive trust. The Court will have found that the intention of the parties was achieved and there is no place for the further intervention of equity.
473 Alfred's case is that he retained the beneficial ownership of the properties in Schedules 1 to 5, and the purpose of the legal title being transferred out of or held other than in his own name was to minimise the impact of probate/estate duties. On the evidence of Brodie and Ellery, such a purpose could only have been effected if the beneficial ownership was also transferred out of his name or held other than in his own name. If, notwithstanding Lorraine's submissions concerning the evidence in these proceedings, it is accepted that Alfred did indeed retain beneficial ownership of the properties, the only way by which the purpose of minimising probate/estate duties could be achieved would be for his Estate to practise a deception upon the probate/estate duty authorities by failing to disclose that he had so retained the beneficial ownership. Accordingly the trusts alleged by Alfred, if they arose consistently with Alfred's evidence, arose for the illegal purpose of deceiving the probate/estate duty authorities and illegally avoiding probate/estate duties. Trusts set up for an illegal purpose are unenforceable: Nelson v Nelson[47]. Thus, Alfred does not come to equity with clean hands and, even if his case is accepted, he should nevertheless be denied equitable relief. Although illegality has not been pleaded by Lorraine, the court if necessary should of its own motion refuse to enforce the trusts alleged by Alfred and refuse to grant the relief sought by Alfred, as Alfred cannot prove the existence of the trusts without proving the illegal purpose.
474 Yardoo should be wound up. It no longer has any business as, following Lorraine's separation, Alfred transferred the Renown Garage business back to the partnership. This is demonstrated by the Remeljej Accounts as of 30 June 1998. The appropriate time for the valuation of the interests of the shareholders in Yardoo is now, as Yardoo has continued to hold all of the Schedule 1 to 4 properties to the present. Yardoo does not act in any trustee capacity, and the four shares are held by the four shareholders beneficially with equal entitlements. The Court should regard Yardoo as a `quasi-partnership' company[48] whose sub-stratum has failed. In addition, under the `just and equitable' ground for winding up Yardoo: (a) the control and management of Yardoo's affairs have been characterized by oppression; Yardoo is a domestic company in the nature of a partnership whose members are unable to co-operate in the conduct of its affairs; (b) it is now impossible for the planned business of Yardoo with the Renown Garage and livestock transactions to be carried on. Alfred determined after 15 December 1997 that Yardoo would no longer have a business; (c) there is compelling evidence of a breach of directors' duties by Alfred and Trevor in that Alfred has transferred the business of the company away from it, the directors of Yardoo have refused to allow Lorraine any access to information of the books and records of the company, and Trevor and Alfred purported to convene the extraordinary meeting of 19 July 1999 whereby they purported without notice to Lorraine to remove her as a director and shareholder of Yardoo which attempts were clearly illegal and of no effect. No notice of this meeting was given to Lorraine.
475 There is a clear case of "oppressive conduct" in the conduct of the affairs of Yardoo:[49] Yardoo sold Tully's Block (1.8) to Vic Grain in January 2001 without any reference to Lorraine; Alfred and Trevor both stated that from 11 December 1997 Lorraine was not entitled to any information concerning the company's affairs; the business of Yardoo was transferred away from Yardoo without any consultation with Lorraine and so as to directly defeat any claim by Lorraine; Lorraine has been consistently denied access to the financial records of Yardoo; an extraordinary meeting allegedly held on 19 July 1999 (Ex 1) without notice to Lorraine purported (which attempts were illegal and of no effect) to remove Lorraine as a shareholder of Yardoo; Alfred's decision taken after the separation of Trevor and Lorraine to take away from Yardoo all income earning activities so that Lorraine would be removed from having any right to claim access to any source of income; Alfred took active steps after the separation to try and defeat Lorraine having access to any income or any rights of claim to property by removing from Yardoo any sources of income; and Trevor confirmed that it was his intention to remove Lorraine from the company after separation and that he was a prime mover in the purported attempt on 19 July 1999 to remove Lorraine as a director and shareholder from Yardoo.
476 There has been no winding up of the Partnership. The partnership with Lorraine commenced in 1973 or 1974. No notice has ever been given to Lorraine of the holding of a meeting for dissolution, or of the partnership's dissolution under section 36. There has been no Gazettal or newspaper notice as required by s. 41 of the Partnership Act.
477 The Court should order the dissolution of the partnership under s.39(f) (just and equitable ground) of the Partnership Act and the payment to Lorraine of an amount due under s.43 Partnership Act. The Court should adopt the expert Second Report and conclusions of Lipson as to the amount to be paid to Lorraine under s.43 in this respect. Alternatively, if the Court finds that there was a dissolution on or about 15 December 1997, then the Court should order a payment under s.43 in accordance with the Lipson Second Report and make a further order of an amount for payment under s.46 for the use of Lorraine's share of the Partnership assets since dissolution.
478 As the two partnership properties Paladin (5.3) and Brian's Block (5.4) are registered in the names of all four partners and Lorraine alone respectively, there can only be an order for the winding up of the partnership now and if necessary, orders for the sale of both properties as a consequential order to the order for the dissolution of the partnership.
479 Section 36 Partnership Act requires a notice of dissolution to be given by the dissolving partner to the other partners. Such a notice was never given. No meeting had ever been held to resolve to dissolve the partnership.
480 The "just and equitable" ground (s.39(A)) is clearly available to Lorraine on the facts of this case. Whether a dissolution is just and equitable is a question of fact.[50] Section 43 allows each partner upon the dissolution of a partnership to have the partnership property applied in payment of the firm's debts and liabilities and after such payment to leave the surplus assets applied in payment of what is due to the partners. In general, under s.43 the Courts will order a sale of partnership assets on dissolution unless there is an agreement to the contrary. Where a partnership is dissolved, the Court will order the appointment of an independent receiver and manager as a matter of course where the parties are in serious dispute.[51]
481 By virtue of s.46, Lorraine is entitled to a share of the profits made after dissolution such as the Court finds to be attributable to the use of her interest on the capital of the partnership, or at her election to receive interest at the rate of seven percent per annum on the amount of her share of the partnership assets.
Valuations
482 The appropriate date for valuation of the landholdings is now, not 15 December 1997.
483 The company Yardoo is the owner of Pomona, 50% of Hawick, Carina, South Blocks, Town blocks, the Abattoir, the Garage and Herbies. Therefore, any supposed dissolution of a partnership on 15 December 1997 has no significance to the appropriate values to be ascribed to these landholdings which must be valued at current values. All four parties are registered as tenants in common of Paladin and therefore the current value again is the only relevant value. Brian's Block is registered in the name of Lorraine Yard solely and therefore again the present value is the only relevant value. Lorraine's holding of Brian's Block on trust for all four partners is a current holding. The creation of a new partnership of three did not vest ownership of the land in the new partnership. The appropriate date for the valuation of Lorraine's interest is at the time when within this proceeding the Court orders a dissolution of the partnership; that is, current values should be applied.
484 There was no evidence of any meeting in December 1997 to dissolve the partnership or any satisfaction of the requirements of the Partnership Act 1958. There is no evidence of any notice given under s.36(c) Partnership Act at any time.
485 Further, the filing by Lorraine of a proceeding seeking an order for the dissolution of the partnership does not of itself act to dissolve the partnership. The relevant date is the date upon which in this proceeding the Court orders the dissolution of the partnership under s.39(f) Partnership Act and the payment to Lorraine of an amount due under s.43 Partnership Act. The proceeding seeks an order for dissolution and does not of itself institute a dissolution of the partnership.
486 There is no evidence which suggests otherwise than that, upon the incorporation of Yardoo in October 1976 and the issue of the "D" Class Share in Yardoo it was intended that Lorraine would hold that share beneficially. Relations at the time were cordial and it was agreed that all partners would each be given one share in Yardoo, in the same way that all the partners were treated equally in the partnership. The fact is that the shares were issued to each member of the family and the evidence supports the inference that at that time of convivial relations it was intended that each partnership member would receive one share beneficially in Yardoo, as they at all relevant times shared equally in the partnership profits.
487 The Financial Records and Statutory Returns of Yardoo all record, consistently, Lorraine as the beneficial owner of a "D" Class Share in Yardoo.
488 Lorraine Yard submits that the date of the Court Order is a more appropriate date for the valuation of her one "D" class share than the date of the issue of the proceedings or the date of the oppressive conduct: Re London School of Electronics Ltd[52]. The guiding principle in respect of valuing a company's share is that the valuation must be fair in all the circumstances: Reid v Bagot Well Pastoral Co. Pty Ltd[53]. The Court should apply the net asset method applied by both Ellery and Lipson to the valuation of Lorraine's share.
489 It is unmeritorious to suggest that at some time after 15 December 1997 the titles of Paladin and Brian's Block were transferred into a partnership of three (which is the assumption of Ellery's Second Report). All four partners are registered as joint registered proprietors of Paladin and Lorraine is registered as the sole registered proprietor of Brian's Block. There is no evidence supporting a transfer of these properties to a partnership of three. By way of contrast, in the case of the 1976/77 transfer to Yardoo there were valuations and transfers executed, registered and stamped. Under s.53(1)(a) Property Law Act 1958, no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same. Under s.53(1)(c) a disposition of an equitable interest or trust subsisting at the time of the disposition must be in writing signed by the person disposing of the same or by his agent. In the case of the 1976/77 transfer all statutory requirements were met. There is no evidence to support a transfer of Paladin or Brian's Block to a partnership of three at anytime. They remain vested legally as stated, and Lorraine is entitled to an order for 25% of their net values at current values.
490 Irrespective of the case propounded by Alfred of a resulting or constructive trust, there are clearly assets of the four person partnership in the form of stock, plant and equipment. Loans and cash at Bank to which Lorraine has on any view an entitlement irrespective of any arguments as to resulting or constructive trusts. This is clear from Ellery's Second Report (Appendices 2 and 4) and is properly valued by Lipson (Second Report) in his Attachments and at paragraphs 8.5 to 8.8 of his Second Report. Although there were small differences in the capital accounts of different partners as of June 1997_,_ the failure of the partnership of three to produce any Financial Statements after June 2000 means that the only proper approach for the Court to take is to award Lorraine a 25% interest in the net asset pool of the partnership of four on current values. This award should be made irrespective of any findings in respect of resulting or constructive trusts.
491 The Court should find based upon the principles enunciated in Wayde's case that this case represents a clear ease of gross oppression or unfair treatment of Lorraine as a minority shareholder in Yardoo. The extraordinary meeting and illegal events of 19 July 1999 (Exhibit 1) and the total exclusion of Lorraine from any information are proof enough for a finding of oppression under s.232(a), (b) (c) and (e) Corporations Act 2001 as being acts or conduct or proposed resolutions oppressive to, unfairly prejudicial to or unfairly discriminatory against a member being Lorraine.
492 The Court therefore has the jurisdiction under s.233(1) Corporations Act 2001 to order the purchase of Lorraine's D class share by the other members (s.233 (1) (d)). The value which the Court should set for that purchase should be the value set by Lipson in his Second Report (paragraphs 8.9 to 8.14), which like Ellery's Second Report relies upon the insertion of updated valuation figures in the 30 June 2002 Yardoo Accounts (see Attachment Three to Lipson which only differs from Ellery paragraphs 11.2 to 11.4 and Appendix 6 in the values given as current values for the real estate owned by Yardoo) (Wakeham's values as opposed to those of Wapper).
493 No discount should be applied to Lorraine's one D class share when the majority are being ordered to buy out the oppressed minority.[54]
494 In addition to these two amounts, Lorraine is entitled to an order for payment by the other three partners of an amount equal to 25 percent of the net current values of Paladin and Brian's Block. Lorraine is prepared to accept 25% of the net value of Brian's Block although she is the sole legal registered proprietor.
495 Lorraine has a loan account in the books of Yardoo in the sum of $123,171.00 (Reports of Ellery and Lipson).
496 The loan account represents, in part, the consideration paid to Lorraine for the transfer of her half-interest in Pomona. The Court should not make any adjustment to the amount of the loan account because of the manner in which the original purchase of Pomona was funded. No direct evidence has been led by Alfred to the effect that the amount of the loan account was wrong. Brodie does say, in paragraph 53 of his Statement, that "the 1977 Financial Statements for Yardoo are inconsistent with the 1975 and 1976 partnership accounts for GM, AJ, TJ and JL Yard." However, Brodie does not state which set of accounts correctly reflected the parties' intentions at the time, The contemporaneous evidence that is before the Court is the Freeman and Pitts letter dated 17 June 1977 (CB 161) which indicates that consideration of $170,240.00 was to be paid by Yardoo to Trevor and Lorraine in the form of a Ioan account for the transfer of Pomona. Ellery's conclusions in his First Report with respect to the amount of Lorraine's loan account are a reconstruction. Whilst Ellery is in a position to say that there is an inconsistency between the partnership accounts and the Yardoo accounts, he has no knowledge of the parties' relevant intentions at the time of the 1977 transfer or at the time of the purchase of Pomona.
497 The Court should either order payment of the loan account under the common law, or as part of the remedy for oppression under s 233(j) of the Corporations Act 2001.