Legal principles and discussion
29The parties accept that they entered into partnership. This is not in dispute. In relation to the dissolution of a partnership, the Partnership Act 1892, Part 2 (Partnerships generally), Division 4 (Dissolution of partnership) relevantly provides:
32 Dissolution by expiration or otherwise
Subject to any agreement between the partners, a partnership is dissolved:
(a) If entered into for a fixed term, by the expiration of that term:
(b) If entered into for a single adventure or undertaking, by the termination of that adventure or undertaking:
(c) If entered into for an undefined time, by any partner giving notice to the other or others of the partner's intention to dissolve the partnership.
In the last-mentioned case the partnership is dissolved as from the date mentioned in the notice as the date of dissolution, or, if no date is mentioned, as from the date of the communication of the notice.
30This provision expressly states that the ability of a partner to dissolve a partnership may be restricted by the terms of the partnership agreement.
31It is therefore necessary to first determine whether, on the evidence available, the partnership was for a fixed term or for a single adventure or undertaking, or whether there was any other agreement restricting Plaintiff's ability to dissolve the partnership. I will then consider the effect, if any, of the letters of Mr Wakim and the filing of the present summons on the partnership arrangement. Finally, I will consider whether, in the circumstances, the Plaintiff is entitled to orders for the sale of the Property under s 66G of the Conveyancing Act.
32In the present case, there is no written partnership agreement between the Plaintiff and the Defendant. I will quote in some length the Defendant's evidence at paragraphs [15]-[17], [25] and [27] of his first affidavit, as these paragraphs are relevant to defining the agreed duration, if any, of the partnership:
[15] In mid-2010, Mr Reynolds and I had a phone conversation in which we discussed selling the property. During this conversation I recall saying words to the effect:
Defendant: We have had no offers on the property for six years. I think we should get someone interested in redeveloping the property. I am in the education industry and I think one of the options could be redeveloping the Property as an educational complex.
Plaintiff: How long will you need?
Defendant: One to two years.
Plaintiff: Ok.
[16] I understood from that conversation that the Plaintiff and I had agreed to continue in partnership in respect of the Property for at least two years from the middle of 2010.
[17] Mr Reynolds and I had further discussions about my proposal over the phone. I then did not hear from Mr Reynolds for a period of time in late 2011 until I received the correspondence from his solicitor, Paul Wakim...
...
[25] ... In or around February or March 2012 I once again discussed redeveloping the Property as an educational college with Mr Reynolds. I recall saying words to the effect:
"We should fix up the offices and hire someone to attract potential investors, and to promote the idea of redeveloping the Property as a commercial enterprise, for example as an educational college."
Mr Reynolds agreed to this proposal and consequently I hired Mr Azam...
Mr Reynolds and I agreed to discuss my redevelopment proposal further at a face-to-face meeting on 16th April 2012.
...
[27] ... [A]t the meeting on the 16th April 2012 Mr Reynolds and I discussed certain matters relating to the partnership.
33The Defendant then said in his second affidavit at [3]-[5]:
[3] I refer to paragraph 15 of my first Affidavit and I say that over a period of time prior to our phone conversation in mid-2010, Mr Reynolds has expressed to me a desire to sell his half share of the Property. ... We agreed that I would handle the sale, and that I would be given one to two years to procure it. One possible way to sell Mr Reynolds' share which we discussed was redeveloping the property as an educational complex.
[4] I refer to paragraph 17 of my first Affidavit and I say that...I continued to have discussions about future plans for the commercialization of the Property after Mr Reynolds instructed Mr Wakim.
[5] I refer to paragraph 25 of my first Affidavit and I say that Mr Reynolds and I did not discuss or settle upon a timeframe for the proposal. We certainly did not agree that the proposal would be discontinued if it had not been finalised by the present time
34The Defendant, in effect, relies on this evidence to assert at best that:
(1)in mid-2010 there was an agreement between the parties that the partnership would continue for one to two years;
(2)the letters of Mr Wakim did not have the effect of bringing the partnership to an end; and
(3)in February or March 2012 the parties further agreed that the partnership would continue for the purpose of developing an educational college.
35In his written submissions, the Plaintiff disputes the existence of any agreement to a minimum duration, and says that in any event, the evidence would, if accepted at its highest, only support the existence of an informal agreement in mid-2010 that the Defendant would be given one or two years to organise a redevelopment of the property as an educational complex, and that such time has passed.
36In my view, it is not necessary to make a finding as to whether there was a term that the partnership would continue for a minimum period of two years from mid 2010. That time has long gone. It is however necessary to consider whether the conversation which the Defendant alleges took place in February or March of 2012 constitutes some form of agreement that the partnership would not be terminated before a particular time.
37It seems clear to me on the evidence that the parties did not fix a time for the duration of the partnership, nor did they specify a particular date after which the partnership would come to an end. It seems to me that the only argument available to the Defendant is that his conversation with the Plaintiff in February or March 2012 amounted to an agreement entered into for a single undertaking, namely the redevelopment of the Property into some educational complex. For the reasons which follow, I do not accept that the partnership was for a single undertaking.
38First, the parties had acquired other properties, namely the Harden Blocks, and therefore it cannot be said that the parties had entered into partnership for the single adventure or undertaking of developing the Property into an educational complex. Secondly, at the time the parties entered into partnership, there was no specificity as to the business to which the Property would be put, and in the Defendant's words, the parties simply wanted to "explore all of the Property's commercial opportunities". Third, even after the alleged conversation in February or March of 2012, the Defendant, in his own evidence, still describes the redevelopment as a "proposal". There was simply no agreement to undertake any specific work in relation to the Property.
39Accordingly, I find that there is no term in the partnership agreement presently preventing the dissolution of the partnership by notice. It is therefore necessary to determine whether the Plaintiff has provided notice of intention to dissolve the partnership, within the meaning of s 32 of the Partnership Act.
40Although the principles regarding dissolution by notice have not received much detailed judicial consideration in Australia, it is clear that notice of termination may be inferred by conduct (Ryder v Frohlich [2004] NSWCA 472 at [148]-[152] per McColl JA), and that the institution of a proceeding for the dissolution of a partnership may stand as notice of intention to dissolve the partnership, and that, if an order for dissolution is made, the dissolution is to date back to the date of the writ (Yard v Yardoo Pty Ltd [2007] VSCA 35 at [104] per Nettle JA).
41I have reviewed the letters sent by the Plaintiff's solicitor which are said to constitute notice of intention of dissolution. In the letter of 21 November 2011, the Plaintiff's then solicitor relevantly said:
My client has formed the opinion that should the partnership continue to operate in its present form, there will be dire financial consequences...
To minimise the ongoing losses, my client requires that you agree to the second flat in the residence to be immediately offered for rent by a local agent...
42The letter then goes on to advise the Defendant that the Plaintiff is prepared to accept an offer by the Defendant to acquire the Plaintiff's share in the Property on certain conditions, and that if this proposal goes ahead, and the conditions associated with it are not met, a trustee will be appointed to sell the Property. At best, this letter indicates that the Plaintiff may, at some future time, and depending on what takes place, seek to dissolve the partnership.
43The second letter dated 29 November 2011 is in generally strong terms, and threatens the appointment of a trustee to sell the Property, but does suggest that the partnership is at an end.
44The Defendant responded to these letters by email dated 29 November 2011 to the Plaintiff's solicitor. The response indicates that there has been some discussion between the parties about a sale of the Plaintiff's share in the Property.
45In my view, this correspondence indicates that the parties, whilst not dissolving the partnership, were not getting along. But I think it is clear, from the authorities cited above, that the partnership would have come to an end by the date on which the summons was filed by the Plaintiff, namely 19 November 2012.
46There is some authority to the effect that a right to dissolve a partnership must be exercised bona fide (Bova v Avati [2009] NSWSC 921 at [133] per Ward J). I note for completeness that there is no suggestion, nor does the evidence indicate, that the Plaintiff is acting in bad faith in seeking to dissolve the partnership.
47The consequences which flow from a dissolution of partnership are specified in s 39 of the Partnership Act:
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 the partner's representatives may, on the termination of the partnership, apply to the Court to wind up the business and affairs of the firm.
48Therefore on dissolution the Plaintiff is entitled to have the partnership property sold and applied in accordance with s 39. Given my finding that at least from the time the Plaintiff filed the summons to commence the present proceedings the partnership was dissolved, the Plaintiff is entitled in principle to the relief he seeks in paragraphs 1 to 4 of the present summons.
49The next issue raised for consideration is whether, regardless of the status of the partnership, the Plaintiff, as a co-owner of the Property, is entitled to have a trustee appointed to sell the Property in accordance with s 66G of the Conveyancing Act. It is unnecessary to set out the text of this lengthy provision. In effect, it provides for any co-owner of property (other than chattels) to apply to the court for the property to be sold or possibly partitioned. The primary right is for sale and if a co-owner wants partitioning in lieu of sale then that party must show that the commercial and other relevant interests provides good reason for the partition.
50In written submissions, the Plaintiff appears to assert that the right of a co-owner to seek orders for sale is one of right, independent of, and therefore unfettered by, any agreement between the parties. This is not however entirely correct.
51In Ngatoa v Ford (1990) 19 NSWLR 72, Needham J said that the wording of s 66G (in particular the use of the word "may") conferred a limited discretion on the court to refuse to make an order under that section. In that case, Needham J dismissed a summons seeking orders under s 66G in circumstances where there was an existing partnership agreement in place between the parties that contained a clause which specified the procedure to be followed by a partner seeking to dispose of their share in the partnership property. His Honour held that contractual limitation on the disposal of an interest in the property is a proper matter to be taken into account in the exercise of the court's discretion. His Honour said (at 77):
It is not, I think, desirable that one should attempt to define exhaustively the circumstances in which an order may be refused; judicial experience is that such matters should be resolved on a case by case basis. My opinion is, however, that a contractual limitation upon the exercise of the right, provided it does not fall within the principle of Hall v Busst (1960) 104 CLR 206 [i.e. the law will not enforce an impermissible restraint on alienation], is a proper consideration to be taken into account in such applications.
The next question is whether the facts of the present case bring it within that principle. In my opinion, they do. The making of an order for sale in the present case would be inconsistent with the rights of the defendants under cl 4 of the deed. Clause 3 provided the circumstance in which the plaintiff might dispose of his interest in the land. It is not a valid distinction to say that the plaintiff here is not seeking to sell his share, but the whole of the land. The effect is the same.
For these reasons I dismiss the summons.
52Needham J's decision was approved by Handley, Sheller and Cripps JJA in Williams v Legg (1993) 29 NSWLR 687, where the court said (at 691-692):
The cases are referred to and discussed in the judgment of Needham J in Ngatoa v Ford (1990) 19 NSWLR 72. We are indebted to his Honour's research and analysis. We agree with his conclusion that there are circumstances in which an application made by a person entitled to do so can, as a matter of discretion, be refused by the court.
53Their Honours elaborated (at 693):
the section could not be intended to require a court to extend relief to one who is putting forward a claim for what is equitable assistance merely to enable that party thereby to escape contractual obligations. "To do so would be to disregard the well-established rule of equity that he who seeks equity must do equity." For present purposes in describing the ambit of the discretion it is sufficient to say that it enables the court to refuse an order for sale where the order would be inconsistent with some proprietary right, or some contractual or fiduciary obligation...
54In Hogan v Baseden (1997) 8 BPR 15,723, Mason P observed that:
It would not be a proper exercise of the power to decline relief under s66G of the Conveyancing Act to refuse an application on grounds of hardship or general unfairness... It follows that in the unhappy event that the parties are unable to settle their differences then the making of an order appointing trustees for sale seems inevitable unless the respondent could establish a legally binding agreement not to put her out of occupation of her home, or circumstances that would ground some estoppel to similar effect. On either issue the Court would need to address at least four questions: first, whether anything that was said on the particular topic was intended to have legal effect; secondly, whether any arrangement or understanding (if legally effective) it was intended to apply in the circumstances which happened following the breakdown of amicable relations between the parties; thirdly, whether any agreement or understanding was subject to a condition that the respondent would dispose of her remaining interest in the property in any particular way upon her death; fourthly, whether the rights (if any) of occupancy reserved to the respondent under such arrangement (if it existed) were in the nature of a life estate or a right of residence terminable upon the respondent vacating occupancy for any reason.
55Nothing in the facts of the case before me would present answers to any of Mason P's questions that would justify a refusal of orders under s 66G. As I have already noted, there is no agreement between the parties which would be breached in the event that orders were made under s 66G. The Defendant's residence in the Property is not pursuant to any arrangement such as a life estate or otherwise.