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[2003] WASC 131
General information, not legal advice.
Supreme Court of WA
2003-07-08
Barker J
Original judgment source is linked above.
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
CITATION : WILLIAMS -v- NICOSKI & ANOR [2003] WASC 131
Partnership - Whether plaintiff and first defendant entered into a partnership at will - Whether property of partnership (if formed) included business operated or rights enjoyed by first defendant under a limited agency agreement made by first defendant with second defendant prior to the formation of partnership - Whether plaintiff and first defendant jointly made a limited agency agreement with second defendant after alleged formation of partnership - Whether property of partnership (if formed) included business operated or rights enjoyed by plaintiff and first defendant jointly under a limited agency agreement with second defendant (if made) - Whether partnership (if formed) was determined or dissolved - Whether partnership at will may be determined or dissolved otherwise than by agreement between the partners or "notice in writing" pursuant to s 37(1) or s 43(c) of The Partnership Act 1895 (WA) - Whether, if no agreement between partners, and notice in writing to determine or dissolve partnership at will is required, such notice in writing must be an "express" notice - Whether letters written by first defendant's solicitors in the course of an exchange of "without prejudice" correspondence with plaintiff's solicitors are admissible in evidence to prove giving of notice in writing of intention to determine or dissolve partnership - Whether, if letters of plaintiff's solicitors are admissible in evidence, such letters gave notice of the intention of first defendant to determine or dissolve partnership at will - Whether, if partnership was not determined or dissolved by letters of first defendant's solicitors (if admissible in evidence), partnership was determined or dissolved by commencement of partnership action by plaintiff in any event - Whether open to the Court, in the circumstances of the case, to decree dissolution of partnership at will under s 46(g) of The Partnership Act on ground that it is "just and equitable" to do so - Whether, if partnership found to exist or to have existed, plaintiff entitled to usual orders for winding up, taking of accounts and sale of goodwill of partnership business - Whether, if partnership to be wound up, first defendant entitled on taking of accounts to an allowance for work and skill
Contract - Action for damages for breach of contract - Whether, if partnership was formed, first defendant breached partnership agreement by excluding plaintiff from management of business - Whether, if first defendant breached partnership agreement by excluding plaintiff from management of business, plaintiff has proved pleaded loss or damage
Contract - Action for damages for breach of contract - Whether plaintiff and first defendant jointly made a limited agency agreement with second defendant - Whether second defendant breached a limited agency agreement with plaintiff and first defendant jointly (if made) by paying commissions and other benefits due under the agreement to first defendant alone and not to plaintiff and first defendant jointly - Whether, if breach of agreement is established, plaintiff has proved pleaded loss or damage
Equity - Action for equitable compensation - Whether second defendant, in the alleged performance of a limited agency agreement with plaintiff and first defendant (if made), owed plaintiff a fiduciary duty not to pay to first defendant alone commissions and other benefits due under the agreement to plaintiff and first defendant jointly
Partnership Act 1890 (Eng), s 26, s 32, s 35
The Partnership Act 1895 (WA), s 6, s 7(1), s 8(3), s 30(1), s 34(1), s 34(5), s 35(1), s 35(2), s 36, s 37, s 40, s 43, s 46(d), s 46(g), s 50, s 51
Plaintiff's action against first defendant successful in part
Plaintiff's action against second defendant dismissed
First Defendant : Mr C L Zelestis QC & Mr M D Howard
Second Defendant : Mr C L Zelestis QC & Mr M D Howard
Anderson v Densley [1953] HCA 47; (1953) 90 CLR 460
Ansett Transport Industries (Operations) Pty Ltd v Australian Federation of Air Pilots (No 2) [1991] VicRp 98; [1991] 2 VR 636
Australian Liquor, Hospitality and Miscellaneous Workers Union v Liquorland (Aust) Pty Ltd [2002] FCA 528
Birtchnell v Equity Trustees, Executors and Agency Co Ltd [1929] HCA 24; (1929) 42 CLR 384
Chan v Zacharia [1984] HCA 36; (1984) 154 CLR 178
Crofter Hand Woven Harris Tweed Co Ltd v Veitch [1941] UKHL 2; [1942] AC 435
Elliott v Seymour [1999] FCA 976
Fatimi Pty Ltd v Bryant [2002] NSWSC 750
Foster v Commissioner of Stamps [1966] WAR 144
Lonrho Ltd v Shell Petroleum Co Ltd (No 2) [1982] AC 173
Lonrho Plc v Fayed [1992] 1 AC 448
Mackie Pty Ltd v Dalziell Medical Practice Pty Ltd [1989] 2 Qd R 87
McKellar v Container Terminal Management Services Ltd [1999] FCA 1101; (1999) 165 ALR 409
McKernan v Fraser [1931] HCA 54; (1931) 46 CLR 343
R v Associated Northern Collieries [1911] HCA 73; (1911) 14 CLR 387
Trade Practices Commission v Allied Mills Industries Pty Ltd [1980] FCA 108; (1980) 32 ALR 570
Trego v Hunt [1896] AC 7
United Dominions Corporation Ltd v Brian Pty Ltd [1985] HCA 49; (1985) 157 CLR 1
Wedderburn v Wedderburn (No 4) [1856] EngR 367; (1856) 22 Beav 84
1 In August 1996, the plaintiff (Mr Williams) and the first defendant (Ms Nicoski) began living together, as man and wife. On 4 March 1997, they were engaged to be married. On 22 December 1997 they parted and their engagement came to an end.
2 Central to this action is a claim by Mr Williams that, in the course of their personal relationship as partners, he and Ms Nicoski also entered into a business partnership to carry on a Nutrimetics consultancy that Ms Nicoski had been operating since 1988 pursuant to a limited agency agreement with the second defendant (Nutrimetics). The consultancy was engaged in the business of the sale of "Nutrimetics" health and beauty products, principally to women. Ms Nicoski denies any such business partnership was ever formed.
3 Put shortly, Mr Williams says he and Ms Nicoski are partners in a Nutrimetics consultancy that Ms Nicoski had begun operating in 1988 under the terms of a limited agency agreement she made with Nutrimetics during that year. He says that the partnership was created by an agreement made orally between him and Ms Nicoski in February 1997 and is evidenced in writing by a limited agency agreement with Nutrimetics that he and Ms Nicoski signed on 1 April 1997, as well as by a letter addressed to Nutrimetics that Ms Nicoski and he also signed on 1 April 1997. He says the partnership is one terminable at will and not constituted by deed, and that it has never been determined or dissolved. He now seeks a decree of the Court under The Partnership 1895 (WA) dissolving the partnership on the basis that it is "just and equitable" to do so.
4 Mr Williams not only seeks a decree dissolving such partnership and related orders for the winding-up of the partnership, and the taking of accounts, but also seeks an order for the sale of partnership assets. In that regard, Mr Williams claims that, in respect of the period from February 1997 to 1 April 1997, the partnership assets included the rights of Ms Nicoski under her 1988 limited agency agreement with Nutrimetics; and that, in respect of the period since 1 April 1997, they include his and Ms Nicoski's rights under the limited agency agreement he alleges was made with Nutrimetics in 1997. In the event the Court finds that the 1997 agreement was not made as he alleges, Mr Williams claims that the partnership assets include the rights of Ms Nicoski under her 1988 limited agency agreement.
5 Ms Nicoski denies that she ever agreed to enter into partnership with Mr Williams in respect of her Nutrimetics consultancy. She denies that she agreed to take Mr Williams in as a partner in early February 1997 in respect of the existing business that she had operated under the limited agency agreement she had made with Nutrimetics in 1988. She also denies that she and Mr Williams signed a limited agency agreement on 1 April 1997.
6 To the extent that there was any agreement between her and Mr Williams concerning the conduct of her Nutrimetics consultancy, Ms Nicoski says it was an arrangement not intended to have any legal effect and was purely personal in nature.
7 Ms Nicoski also says that, if a partnership were formed in 1997, it did not include as one of its assets the business she had been operating since 1988, and indeed did not have any assets.
8 Mr Williams also claims that, since 22 December 1997, when his personal relationship with Ms Nicoski finally ended, he has been excluded from management of the partnership business, contrary to his entitlement under the agreement and The Partnership Act 1895. He claims damages for breach of that term.
9 Ms Nicoski denies she has excluded Mr Williams from management of the business on the basis that there never has been a partnership. She denies that Mr Williams is entitled to damages for any such breach, in any event.
10 Ms Nicoski says that, if the Court should find that there was a partnership at any material time between her and Mr Williams, then it was terminated at law, at the latest by 22 January 1998; and there is no occasion for the making of orders for the winding-up and taking of accounts of the partnership or for the sale of the goodwill of the business.
11 Mr Williams also claims that he and Ms Nicoski concluded a limited agency agreement with Nutrimetics on or about 1 April 1997, which agreement has been breached by Nutrimetics in that, ever since he and Ms Nicoski parted, Nutrimetics has paid commissions and provided other benefits arising thereunder directly to Ms Nicoski, and not to him and Ms Nicoski jointly, as required under the agreement.
12 Mr Williams also claims that Nutrimetics repudiated the agreement.
13 In the alternative, Mr Williams claims that, at all material times, Nutrimetics owed him a fiduciary duty under that agreement not to pay commissions and other benefits to Ms Nicoski alone, which duty has been breached.
14 In consequence of these alleged breaches, Mr Williams claims respectively damages and equitable compensation.
15 Nutrimetics denies that it made a limited agency agreement with the plaintiff and first defendant on or about 1 April 1997.
16 It also says that, if there were such an agreement, it has not been obliged to pay commissions or provide benefits to Mr Williams under it since the personal relationship of Ms Nicoski and Mr Williams ended in December 1997. It says this is because the term of the agreement pleaded by Mr Williams, namely, that commissions and other benefits would be paid and provided on the provision of joint services by Ms Nicoski and Mr Williams, has not been satisfied by them jointly.
17 Nutrimetics also denies that it owed any fiduciary obligations to Mr Williams at any material time.
18 It denies Mr Williams has suffered any pleaded loss, in any event.
19 At the heart of a relationship that bespeaks a business partnership of the type here in dispute is the requirement that the persons concerned carry on business with a view of profit. Indeed, s 7(1) of The Partnership Act expressly provides:
"(1) Partnership is the relation which subsists between persons carrying on a business in common with a view of profit."
20 By s 6 of the Act, the rules of equity and common law applicable to partnership continue in force in relation to a partnership, except so far as they are "inconsistent with the express provisions of this Act". In this the Act, like similar Acts elsewhere in Australia and New Zealand, follows the model of the Partnership Act 1890 (Eng) drafted by Lord Lindley, often called "Lord Lindley's Act".
21 In deciding whether or not a partnership does or does not exist in any particular case, The Partnership Act 1895, by s 7(2), directs that:
"(2) ... the Court shall have regard to the true contract and intention of the partners as appearing from the whole facts of the case."
22 The Act, in s 8, sets out some rules which must be regarded in determining whether a partnership does or does not exist. For example, there is the rule expressed in s 8(3) that:
"(3) The receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business, but the receipt of such a share, or of a payment contingent upon or varying with the profits of a business, does not of itself make him a partner in the business; ... "
Section 8(3) then particularises a number of circumstances which do not, of themselves, make a person a partner in a business.
23 The Act also makes specific provision in respect of partnership property. Section 30(1), for example, provides:
"(1) All property and rights and interests in property originally brought into the partnership stock, or acquired, whether by purchase or otherwise, on account of the firm or for the purposes and in the course of the partnership business, are called in this Act partnership property, and must be held and applied by the partners exclusively for the purposes of the partnership, and in accordance with the partnership agreement."
This provision does not, however, assist in determining what property and rights and interests in property were originally brought in and this must be determined by reference to the facts of each case.
24 It should also be noted that the word "property" as used in s 30(1) is not defined in the Act and so would, according to usual interpretation, include personal and real property; that is to say, "things" and land, amongst other forms of property, as well as "assets" more generally described: "Lindley and Banks on Partnership", 18th ed, 2002, London, Sweet & Maxwell, Ch 18, [18 - 01] - [18 - 23].
25 The Act also lays down rules governing the interests and duties of partners. For example, rr (1) and (5) of s 34, subject to any agreement between partners to the contrary, provide:
"(1) All the partners are entitled to share equally in the capital and profits of the business, and must contribute equally towards the losses, whether of capital or otherwise, sustained by the firm.
...
(5) Every partner may take part in the management of the partnership business, and shall attend diligently to the partnership business, and shall not be entitled to any remuneration for acting in the partnership business."
26 No majority of partners can expel a partner unless a power to do so has been conferred by written agreement between the partners: s 35(1). Where such power is conferred, it may be exercised only in good faith with a view to the benefit of the firm and the partner whom it is sought to expel must have an opportunity of being heard: s 35(2). Of course, in a partnership of two, there is no majority capable of expelling a partner and so the question of dissolution of a partnership arises.
27 By s 36 of the Act, provision is made for the retirement of a partner where the partnership has been entered into for a fixed term.
28 Section 37 of the Act makes provision, according to the heading to the section, for "retirement from partnership at will" in the following terms:
"(1) Where no fixed term has been agreed upon for the duration of the partnership, any partner may determine the partnership at any time on giving notice in writing of his intention so to do to all the other partners.
(2) Where the partnership has originally been constituted by a deed, a notice in writing, signed by the partner giving it, shall be sufficient for this purpose."
29 The Act, by s 43, makes express provision for dissolution of a partnership by expiration of notice:
"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 in writing to the other or others of his 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 so mentioned, as from the date of the communication of the notice."
30 While the heading to s 37 suggests the provision relates to "retirements" only and not to dissolution of a partnership, the preferred view is that s 37 and s 43(c) cover the same ground: see "Lindley and Banks on Partnership" (supra) [9-02] - [9-03] in respect of the similar provisions of Lord Lindley's Act. .
31 It will be noticed that both s 37(1) and s 43(c) refer to the giving of notice "in writing". Such notice appears to be additional to that of the common law and does not appear in the equivalent provisions of Lord Lindley's Act or in those of other Australian States. The significance and consequences of this difference are considered further below.
32 The Court also has the power to decree a dissolution of a partnership. A number of specified circumstances are set out in s 46, including (d) and (g):
"On application by a partner the Court may decree a dissolution of the partnership in any of the following cases:
....
(d) When a partner, other than the partner suing, wilfully or persistently commits a breach of the partnership agreement, or otherwise so conducts himself in matters relating to the partnership business that it is not reasonably practicable for the other partner or partners to carry on the business in partnership with him.
...
(g) Whenever in any case whatever circumstances have arisen which, in the opinion of the Court, render it just and equitable that the partnership be dissolved."
33 As to what follows the dissolution of a partnership, s 50 of the Act expressly provides that:
"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."
"On the dissolution of a partnership every partner shall be entitled, as the absence of any agreement to the contrary, to have the goodwill of the business sold for the common benefit of all the partners."
34 Section 40 of the Act should also be noted. It provides that the partners must account for all benefits derived. Section 40(1) expressly provides that:
"(1) Every partner must account to the firm for any benefit derived by him, without the consent of the other partners, from any transaction concerning the partnership, or from any use by him of the partnership, property, name, or business connection."
35 The partnership alleged by Mr Williams in par 2 of the statement of claim is one that is said to arise by virtue of a partnership agreement made between him and Ms Nicoski in January and February 1997, to carry on the business that Ms Nicoski had been operating for some time prior thereto, of selling products supplied by Nutrimetics to members of the public, recruiting other persons to sell Nutrimetics products and supervising these persons, in an equal partnership (the Nutrimetics consultancy).
36 By the expression "in an equal partnership", I understand the plaintiff to claim that after taking account of proper expenses in operating such a business the plaintiff and the first defendant are entitled to share the net income of the business and other benefits accruing to the partnership in equal shares, as provided for by s 34 rule (1) of the Act.
37 Mr Williams says that the partnership he alleges is evidenced by a letter of request addressed to Nutrimetics that he and Ms Nicoski signed on 1 April 1997, as well as by a limited agency agreement with Nutrimetics that he and Ms Nicoski also signed on 1 April 1997.
38 In par 5A of the statement of claim, Mr Williams pleads out the items of "property" that he says constitute partnership property.
39 In par 5B of the statement of claim Mr Williams pleads that, when he and Ms Nicoski entered into the partnership agreement he alleges, they agreed, either expressly or impliedly, that the Nutrimetics business that Ms Nicoski had been operating prior to that time would be partnership property.
40 As of January 1997, Ms Nicoski operated a Nutrimetics consultancy pursuant to a limited agency agreement concluded with Nutrimetics and had been doing so since 1988. While neither she nor Nutrimetics are now able to produce a copy of that limited agency agreement, it is common ground that the 1988 limited agency agreement was in the form and terms of Form No 90610 commonly used by Nutrimetics in 1988 (a copy of which form is attached to these reasons and marked "1988 LAA").
41 By the 1988 limited agency agreement, a "Consultant" is appointed by Nutrimetics as "an independent agent to take (but not accept) orders from customers for the products of Nutri-Metics". (In this form and in other documents of the second defendant admitted into evidence, the company is described as "Nutri-Metics". However, because in the title to this action it is styled "Nutrimetics", without the hyphen and uppercase "M", I will so describe it unless quoting documents where the other spelling is used.) By cl A2, a consultant is permitted, but under no obligation, to seek and take from customers purchase orders for products distributed by Nutrimetics at the retail prices referred to in the agreement. If such orders are accepted by Nutrimetics, and the purchase price paid for, Nutrimetics will "allow to Consultant the commissions set forth in the Nutri-Metics Profit Recognition Plan ('The Plan') as amended from time to time."
42 By cl A3, the consultant may engage such other persons to perform the services as "he" shall from time to time think fit provided that in selecting such persons "he" shall ensure that they are of character and appearance which will not cause the reputation of Nutrimetics to suffer.
43 By cl A4, the consultant is entitled to terminate the agreement at any time by written notification to Nutrimetics.
44 By cl B1 of the 1988 limited agency agreement, the consultant is entitled to seek and obtain, and submit to Nutrimetics, any such purchase orders for the products at the retail price as established by Nutrimetics as quoted on the Retail Price List as revised from time to time, which orders are subject to acceptance by Nutrimetics. This clause expressly provides that, "The Consultant is not authorised to accept any orders on behalf of Nutri-Metics".
45 By cl B3, the consultant agrees that "he" will place with Nutrimetics at least one order per month to retain his "active status as a Consultant" and that this agreement "shall terminate automatically upon the expiration of 6 consecutive months during which no orders are placed".
46 Clause B5 provides that Nutrimetics may, at its option, terminate the agreement for any action by the consultant which, in Nutrimetics' opinion, is contrary to its best interests by delivering or mailing written notice of termination to the consultant.
47 The 1988 limited agency agreement does not, in terms, prohibit or restrict the assignment, sale or transfer of the consultant's "status" or rights and interests under the agreement to any other person.
48 Counsel for Ms Nicoski, who are also counsel for Nutrimetics, contend that the 1988 limited agency agreement is not assignable because it is personal to the consultant. Counsel further submit that a purported assignment by a consultant would entitle Nutrimetics to terminate the agency under cl B5.
49 It is not immediately obvious that Nutrimetics' power of termination under cl B5 would be activated by the act of a consultant assigning his or her rights under the agreement. If there is a power to assign, it may be done lawfully; if there is not, it may not be done. Whether the consultant with whom the agreement was made or a person to whom the agreement is assigned has acted in a manner contrary to the best interests of Nutrimetics would be another issue. The question remains whether there is a power to assign the 1988 limited agency agreement.
50 There is ample authority for the proposition that a contractual right to personal service is a personal right of an employer and is incapable of being transferred to anyone else. Similarly, it is accepted that rules of law restricting the assignability of contracts are by no means limited to contracts of personal service. In the case of contracts for the sale of goods, for example, (unless the contract expressly or by implication covers the purchaser and his assigns) the seller is entitled to rely on the credit of the purchaser and to refuse to recognise any substitute: see, generally, Nokes v Doncaster Amalgamated Collieries Ltd [1940] AC 1014 at 1018 - 1019.
51 This principle has been applied in a number of cases where the contract in question involves an element of personal skill or an element of personal confidence to which, for the purposes of the contract, a stranger cannot make any pretensions: Tolhurst v Associated Portland Cement Manufacturers (1900) Ltd [1903] AC 414 at 417. Thus, in Bruce v Tyley [1916] HCA 34; (1916) 21 CLR 277, it was held that a tender to the military authorities made after the beginning of the First World War for the collection and removal of kitchen refuse from a military camp was not assignable: see Barton J at 284 and Isaacs J at 288.
52 It is, in my view, far from clear that an agreement such as the 1988 limited agency agreement between a consultant and Nutrimetics so depends on the elements of personal skill and personal confidence that the contract is unassignable. Indeed, it is quite clear that cl A3 of that agreement permits the performance of a consultant's services by other persons, albeit persons who "are of a character and appearance which will not cause the reputation" of Nutrimetics to suffer. The selection of such "persons" appears to be in the sole discretion of the consultant, although a poor choice may possibly entitle Nutrimetics to consider whether the action of the consultant in so doing is contrary to its best interests and so activate the power of termination in cl B5.
53 But in principle, the fact that the contract provides for the right of a consultant effectively to delegate his or her performance of services to other persons is a reason for suggesting that it is not a contract that must necessarily be performed by the consultant only. Therefore, I incline to the view that there is no general principle of law which would prevent a consultant assigning his or her rights under the 1988 limited agency agreement.
54 The form and terms of the limited agency agreement commonly utilised by Nutrimetics in its dealings with "Consultants" in 1997, however, are quite different from the form and terms of the 1988 agreement. The form and terms of the 1997 agreement commonly used by Nutrimetics are set out in Form No 90454 (a copy of which is attached to these reasons and marked "1997 LAA").
55 On its face, there are at least two significant differences in the terms of the 1997 limited agency agreement when compared with the 1988 limited agency agreement. First, by cl 1(f), the agreement provides, in respect of a consultant, that his or her status as an agent for Nutrimetics "is a personal one and I cannot sell or transfer it in any way without prior permission from Nutri-Metics".
56 Secondly, by cl 2(a), the consultant agrees that his or her "orders on Nutri-Metics will be accompanied by a payment for the Recommended Retail Price less the instant Bonus shown in the current Plan".
57 The 1997 limited agency agreement specifically refers to "the Plan" in cl 4(a), and the consultant acknowledges that "I have read the Plan and agree to be bound by its provisions. I acknowledge that I will be bound by the Company policies issued from time to time and that they will form part of my agreement with Nutri-Metics." The Plan is also referred to in cl 5(c). But otherwise the Plan is not defined.
58 It is not in contest that, in 1997, the Plan constituted the "International Business Plan" of Nutrimetics, and that under it there were various status levels which, in ascending order, went from "Associate Consultant" to "Presidential Ambassador". The status levels of "Consultant", "Sales Leader", "Executive Sales Leader" and "Presidential Director" are some of those in between. Under the Plan, promotion from one status level to another is achieved when a certain number of the consultant's downlines - that is to say, other consultants (of whatever status level) introduced by a consultant - achieved certain levels within the Plan. Mr Rodney James Sullivan, the chief financial officer of Nutrimetics since 6 July 1998, gave evidence concerning the operation of the Plan and the financial benefits and incentives that it offers consultants.
59 It may also be noticed that, by cl 3(c) of the 1997 limited agency agreement, the consultant agrees that he or she may:
" ... sell on my own as a 'natural person' or as a partnership. If I wish to form or dissolve a partnership after becoming an agent I must first obtain the written permission of Nutrimetics."
There is no such provision in the 1988 limited agency agreement.
60 The evidence of Ms Pat Lyons, who worked for Nutrimetics in its Perth office in April 1997 (and whose evidence is referred to further below) discloses that the general practice of Nutrimetics in 1997 was to require a consultant to obtain the written permission of Nutrimetics to change from a sole agency to a partnership, and to require the members of the partnership to sign a current limited agency agreement at the time of so doing.
61 Thus, the 1997 limited agency agreement expressly deals with the question of assignment of the agreement by a sole consultant, including by the bringing-in of another person as a partner, something not expressly dealt with by the 1988 limited agency agreement.
62 The 1997 limited agency agreement expressly provides a consultant with the right to terminate the agency at any time in writing addressed to the head office of the company effective on receipt by the company.
63 Nutrimetics also has the power under the 1997 limited agency agreement to terminate the consultant's status as an agent if the consultant has taken "any action which in the opinion of Nutrimetics has been contrary to its best interests".
64 In this case, Mr Williams not only says he and Ms Nicoski agreed to operate her 1988 business in partnership, and share the profits therefrom, but also says they agreed that her rights under the 1988 limited agency agreement (or, put another way, that business) would become an asset of their partnership; in effect, that she agreed to assign to him a half interest in her 1988 limited agency agreement.
65 Thus, two critical issues arise in the partnership action between Mr Williams and Ms Nicoski:
(1) Did Ms Nicoski and Mr Williams enter into a partnership?
(2) If there were a partnership, did it include, as a partnership asset, the rights under Ms Nicoski's 1988 limited agency agreement?
66 In determining whether there is or was a partnership agreement between Mr Williams and Ms Nicoski, and if so the terms of it are or were, it is necessary to consider what, if anything, the parties expressly agreed, orally or in writing, and, in the event there is no whole express agreement, the whole facts of the case from which an agreement might be inferred: Harvey v Harvey [1970] HCA 11; (1970) 120 CLR 529 per Walsh J at 562.
67 That the parties were involved in a personal relationship at material times and, indeed, on 4 March 1997, engaged to be married, is a factor to be borne in mind when assessing the relevant evidence, as suggested by what McHugh JA states in Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 at 336G. Depending on the circumstances, intending spouses may not have intended to enter into legal relations in respect of a disputed transaction: Cohen v Cohen [1929] HCA 15; (1929) 42 CLR 91
68 However, the fact that persons maintain a personal relationship does not of itself discount the possibility of them having entered into a business partnership. On the one hand, a person in a close personal relationship with another, holding his or her own hopes and expectations, may misconstrue the statements and conduct of the other concerning the extent to which their personal relationship was to be extended as a business relationship. On the other hand, because of their close personal relationship, they may be prepared also to assume a business relationship in circumstances where others, not so personally involved, would not so readily do.
69 Thus, the injunction of s 7(2) of The Partnership Act is that, in deciding whether a partnership does or does not exist in a particular case, the Court "shall have regard to the true contract and intention of the parties as appearing from the whole facts of the case".
70 Mr Williams commenced in a position as a senior buyer with the Aherns department store in Perth in July 1991. He had previously graduated with a bachelor's degree in marketing from the South Australian Institute of Technology in 1985, following which he had commenced work in retail merchandising with Grace Brothers in Sydney. He remained with Grace Brothers until he took up the opportunity with Aherns. He remained with Aherns, serving in a number of positions, until he resigned his position on 5 February 1997.
71 Mr Williams had gained some familiarity with the nature of the Nutrimetics business prior to his making the acquaintance of Ms Nicoski in June 1996. He first attended a Nutrimetics hostess workshop held for his then wife in about 1990 at the Nutrimetics head office in Balmain, Sydney, New South Wales. In 1991, his mother, Ms Vinchey, was working as a customer service officer at the Nutrimetics State office in Victoria Park, Perth, Western Australia. In the five years prior to Mr Williams taking up the Aherns position, he made frequent social visits to Perth to see his mother and visited her at the Nutrimetics Perth office. In the course of so doing, he became friendly with the Nutrimetics centre manager in Perth, Ms Pat Lyon, as well as staff at the Perth office, including Ms Teresa Smith. He accompanied his mother to the Nutrimetics staff Christmas party held in Perth in December 1995.
72 Mr Williams says that in mid-1996, Ms Lyon asked him if he would be interested in applying to be the Nutrimetics State Manager for South Australia. He says he declined the offer as he wished to stay in Perth. Given Mr Williams' retail background and his apparent growing familiarity with the nature of the Nutrimetics business, the making of such an approach might not be considered unlikely and his evidence was not contradicted.
73 In early June 1996, Mr Williams met Ms Nicoski during one of his visits to Nutrimetics' State office in Perth. He also met her mother and another Nutrimetics consultant, Mrs Peggy Lombardi, both of whom were well-established Nutrimetics consultants and who were attending a Nutrimetics meeting.
74 Mr Williams and Ms Nicoski thereafter became socially acquainted and learned something of each other's personal and work histories. Mr Williams discovered that Ms Nicoski, like himself, had previously been married. He also learned that since 1991 she had been putting all her efforts into promoting a Nutrimetics consultancy she had established in Queensland and Western Australia. He learned from Ms Nicoski that Ms Nicoski's mother had established a successful Nutrimetics agency in Perth. As a result of her mother's experience, Ms Nicoski had joined Nutrimetics in about 1988 as a means of earning some income and was a "downline" consultant of her mother. She had then signed an agency agreement with Nutrimetics.
75 Mr Williams seems to have been impressed by what he learned about Nutrimetics, especially as to the income-earning potential of a successful Nutrimetics consultancy. Ms Nicoski told him that her mother was reputed to be earning over $30,000 per month and had travelled the world attending the annual Nutrimetics international seminar, received a prestige new vehicle every three years, and with her husband had won the Nutrimetics "King and Queen of Seminar" title the previous year to their meeting, and had just qualified for the Nutrimetics property investment or "Home Award" of $120,000 cash.
76 In August 1996, Mr Williams and Ms Nicoski began living together in a house Mr Williams was then renting in South Perth. He says that Ms Nicoski asked him if she could run her Nutrimetics consultancy from the house and use one of the spare bedrooms as her office. He says he agreed to this.
77 None of this is contentious from Ms Nicoski's point of view. She says she did, indeed, sign a limited agency agreement with Nutrimetics in May 1988, although a copy of the agreement then signed no longer exists. None of the parties disputes the fact of the signing of the limited agency agreement in 1988.
78 Ms Nicoski says that when she first became a Nutrimetics consultant, she did so "purely for the kit", to open an account and to purchase Nutrimetics products at a discount price. At that stage, she was at college. Ms Nicoski's mother sponsored her consultancy agreement with Nutrimetics. In March 1991, Ms Nicoski commenced work as a full-time Nutrimetics consultant under the 1988 agreement and received appropriate training for that purpose. In April 1991, she was appointed a "District Director", the first level of management under the "management plan" that was used by Nutrimetics up until 1994. Between April 1991 and the end of 1992, her main focus was on building her consultancy in Perth. She says that this involved a rigorous personal programme that included conducting at least four or five "shows" a week. She explained that these shows were always held in private homes and were organised at convenient times during the week or weekend. The person holding a show is referred to as the "hostess" and the hostess' responsibility is to invite five or more friends to attend a show. Ms Nicoski also explained the process of organising and running a show and the personal endeavours required on the part of a Nutrimetics consultant.
79 Under the form of limited agency agreement signed by Ms Nicoski in 1988, a Nutrimetics consultant earns revenue and receives benefits by selling products, but also by introducing new consultants, or "downlines" as they are termed, to Nutrimetics. The consultant becomes the "upline" of that new consultant. The consultant also earns commissions from the sales of a downline of their downline.
80 In December 1992, with her then husband, Ms Nicoski moved to Queensland to live. In Queensland she set about promoting what she referred to as a "new dimension" to her consultancy. This involved sponsoring new consultants and building a new customer base from shows and mail-outs. Her mother was apparently willing and able to oversee Ms Nicoski's consultancy in Perth while she concentrated on expanding her consultancy in Queensland.
81 It seems that, in Queensland, Ms Nicoski was successful in generating business for her Nutrimetics consultancy. One of the consultants she sponsored during that time was Ms Paula Kuhnemann, who became a consultant on 5 April 1995. It seems the Kuhnemann downline prospered in Queensland, especially in the years following 1995. This meant that Ms Nicoski's consultancy (and her uplines, including her mother) also benefited. In November 1995, Ms Nicoski was "promoted" by Nutrimetics to the second level of management under the Nutrimetics management plan, namely, "Sales Director".
82 Ms Nicoski and her then husband separated during the latter part of 1995, and in December 1995 she returned to live in Western Australia.
83 Ms Nicoski says that, when she returned to Perth, she concentrated on rebuilding her business in Perth in the same way as she had built it prior to moving to Queensland. She denies that, at that point, her business was "waning", or that she had told Mr Williams it was waning, when she first met him. She says that her promotion to sales director in late 1995 refutes any such suggestion.
84 It may be said that on the evidence before me it is difficult to make any useful assessment of how financially successful Ms Nicoski's Nutrimetics consultancy was as at, say, the end of June 1996, about the time she met Mr Williams. However, it would seem reasonable to comment that it appears her Nutrimetics consultancy in Perth had been in what might be called caretaker mode during her absence since December 1992 - some three and a half years - but that she was entitled to her own commissions and the upline benefits of the downlines she had established, particularly in Queensland, as at the time of her return to Perth. The evidence of Mr Williams suggests that, about eight months after her return to Perth, Ms Nicoski's consultancy was earning monthly revenue of about $3000.
85 Ms Nicoski says that Mr Williams did not have any "actual" involvement in her Nutrimetics consultancy during the period between June 1996 and the end of 1996, that is to say, from when they met until the end of the calendar year 1996. Ms Nicoski says that, at her invitation, Mr Williams occasionally attended Nutrimetics' Perth functions that "husbands" were invited to attend, such as cocktail parties. At this time, Mr Williams was working at Aherns. Ms Nicoski says he was unhappy in his employment there and she would attempt to involve him in Nutrimetics' functions because they provided "an atmosphere of positive motivation".
86 Mr Williams recalls, in particular, attending a Nutrimetics function at El Caballo Blanco, a function centre near Perth, in August 1996, a few weeks after he and Ms Nicoski had commenced living together. Ms Nicoski was invited as a downline of her mother. Mr Williams says that Ms Nicoski conveyed to him her mother's enthusiasm for the two of them to attend the function and the willingness of her mother to pay for their accommodation at El Caballo Blanco.
87 Mr Williams says that, on the Sunday morning at this function, Ms Nicoski's mother invited Ms Nicoski and him to join her and Mrs Peggy Lombardi for breakfast at the hotel before they returned to Perth. In the course of this breakfast meeting, Mr Williams says that Mrs Lombardi explained how the secret to achieving great success in Nutrimetics was to sponsor a successful downline, as she had Ms Nicoski's mother.
88 It appears, as a result of attending this function, Mr Williams' interest in the Nutrimetics consultancy of Ms Nicoski grew. He says that he started attending Nutrimetics training sessions every Wednesday evening at the State office in Perth. Ms Nicoski's mother conducted these sessions and they included consultants, directors and leaders in Ms Nicoski's mother's downline.
89 Mr Williams says that Ms Nicoski's mother asked him to be a guest speaker at weekly training sessions on a number of occasions in late 1996. She told him she believed he had valuable experience and could give her downlines insights into retail marketing in Australia, given his retail management skills.
90 It might reasonably be observed at this point, in the light of this uncontradicted evidence, that Mr Williams at least believed he was being encouraged to see a future in retailing Nutrimetics products, perhaps with Ms Nicoski. Such a belief, no doubt, would have been fuelled by Mr Williams' attendance at a Nutrimetics conference in Kuala Lumpur, Malaysia, in October 1996 and the circumstances in which that came about.
91 Mr Williams took a week of annual leave at short notice from Aherns so that he could attend the Nutrimetics Kuala Lumpur conference with Ms Nicoski in October 1996. He says Nutrimetics paid his airfare and accommodation costs to enable him to attend the conference. Ms Nicoski also attended, as did her mother. Mr Williams says he assisted both of them to write their presentation notes and spent some hours researching, writing and reviewing Ms Nicoski's presentation notes with her at their South Perth home prior to their departure. The conference was to be attended by persons of "Executive Sales Leader" level and above. Mr Williams says that Ms Nicoski told him that her mother had "pushed and pulled strings for you to come". He says that Ms Lyon also told him in her office at Nutrimetics' Perth office, that Ms Nicoski's mother had put a great deal of pressure on senior management at Nutrimetics' head office in Sydney to obtain permission for him to attend. Ms Lyon told him that his attendance was approved subject to him being actively involved in the daily activities of the seminar.
92 Mr Williams says that, at the Kuala Lumpur conference, which was called "Growth through Partnership", he listened to and spoke with such Nutrimetics' luminaries as Bill and Imelda Roche, Nigel Sinclair, John Watt, Roger and Naomi Alberts, Karen and Ron Brady, Mary and Paul Costalos, as well as many other directors from Australia, New Zealand and Malaysia. He says that, at the conference, Ms Nicoski asked him whether he could see a career in Nutrimetics, to which he responded by saying that he could "definitely see a career for us in Nutrimetics together; I'm looking around the room at all these joint agencies and all these partnerships and we could achieve a huge career together."
93 None of the above evidence, save for the use by Mr Williams of the expression "joint agencies", is contradicted by Ms Nicoski. She says that that expression was not used in the words that Mr Williams spoke to her. She believes he said something like, "husband and wife teams". In other words, the substance of the conversation with her in Kuala Lumpur, and the events that transpired in Kuala Lumpur at the conference, recounted by Mr Williams, are not contradicted by Ms Nicoski.
94 Following the Kuala Lumpur conference in October 1996, Mr Williams says the question of the two of them, Ms Nicoski and himself, operating jointly as a Nutrimetics consultancy was discussed between them at their South Perth home. He says that, on one occasion, Ms Nicoski said: "I have only just been made a sales director even though I began full-time in 1991; you and I could achieve what mum has achieved and we could even do more than she can; you with all your experience coupled with me we can catch up to where mum is in a short time and we can go further than that and then some [sic]. Mum has even said to me that in the future she wants to give me the business so it will become our business." Mr Williams says that he responded by saying: "If I am going to join you in Nutrimetics I have to resign and we have to be sure that we can make a go of this if there is going to (be) money in it. I can't do both. I would be automatically sacked by Aherns." Ms Nicoski does not contradict this conversation, save to deny that she had any conversation with Mr Williams as early as October 1996 concerning the prospect of him resigning from Aherns. However, it would appear from the context in which Mr Williams gave this evidence that he was indicating that the conversation took place some time after the Kuala Lumpur conference and not necessarily in October 1996.
95 Mr Williams further says that, one evening when he returned from work at Aherns to the South Perth home, one of Ms Nicoski's downline consultants was in the course of leaving after a workshop. He asked Ms Nicoski how it had gone, to which she replied: "Great. We can do so well if you joined me ... it's getting harder for me, you know, I would love you to join me." He says that he replied, "Yes we can and we will but not this year. I can't leave my commitments at Aherns so close to Christmas trading." In relation to this alleged conversation, Ms Nicoski expressly denies what is attributed to her. She says it does not make sense and it did not happen. Plainly, on Mr Williams' account, the conversation he recounts occurred prior to Christmas trading and so, by inference, must have been in late November or early December 1996. While Ms Nicoski says such a conversation does not make sense and did not happen, why this should be so is not immediately apparent and, for present purposes, it might be said that, given the involvement of the two of them in Nutrimetics' events during the last half of the 1996 calendar year up until about late November or early December, and what had transpired between them to that point, what Mr Williams states was said is not inherently implausible.
96 Indeed, in late 1996, Mr Williams says, and it is not contradicted by Ms Nicoski, that he accompanied her to Bunbury, south of Perth, to address a group of new Nutrimetics consultants at the Lord Forrest Hotel. Ms Pat Lyon in the Perth office of Nutrimetics gave permission for him to attend the meeting and the Nutrimetics Perth office paid the cost of his and Ms Nicoski's attendance, including overnight accommodation and meals.
97 In late December 1996, Ms Nicoski became seriously ill. She was hospitalised for some weeks. During that period, she was unable to manage her Nutrimetics consultancy. Mr Williams says, and Ms Nicoski does not contradict him, that while he continued working at Aherns during the hectic Christmas period, he attended every Nutrimetics weekly training session as Ms Nicoski's representative. This enabled him to ensure that all her downlines "remained positive" and were working their businesses.
98 The weekly training sessions involved a number of Ms Nicoski's mother's senior consultants speaking to all consultants from the stage in the auditorium at the Victoria Park office. Groups of downlines then adjourned to parts of the auditorium or to a private room where their upline would host a meeting. Mr Williams spoke on the stage in place of Ms Nicoski and hosted the meetings with her downlines. He advised the downlines how to order Nutrimetics products and he took their orders. He says in December 1996, he used his own money to pay for Nutrimetics brochures, stock and literature. None of this is contradicted by Ms Nicoski.
99 Prior to her hospitalisation, Ms Nicoski had entered into an agreement to purchase a home unit in Wembley, Perth. The settlement of this transaction took place during her hospitalisation. Mr Williams did what was necessary, including by way of paying utility costs, agents' settlement fees and adjusted rates from his personal funds, to assist in the completion of the settlement on her behalf. While Ms Nicoski was hospitalised, Mr Williams organised the packing and removal of effects from the South Perth home to the Wembley unit and met the expenses of so doing. This move to Wembley appears to have occurred in late December 1996.
100 On Ms Nicoski's discharge from hospital, she and Mr Williams began living at her Wembley unit. This appears to have happened in early January 1997. Mr Williams says that Ms Nicoski said to him upon her discharge: "I love you, you have done so much for me ... I need you to join me in Nutrimetics when can we do this, I don't think I can do this on my own any longer." He says he replied: "I think the time is right." He says she then cried; they embraced and she said something along the lines of, "It has been my dream to work with you."
101 Ms Nicoski agrees that she then told Mr Williams that she loved him and that she thanked him for looking after her. However, she denies that she said that she needed him to join her in the business and also denies that she said, "I don't think I can do this any longer", or that Mr Williams said, "I think the time is right." She says that they did not embrace and it was never her "dream" to work with him. She says, "I would never have said that."
102 By contrast, Ms Nicoski says that, at the beginning of 1997, she was healthy again and was motivated to take her business "ahead". She says that the Kuhnemann consultancy in Queensland was then growing rapidly and she, Ms Nicoski, needed to make a "concerted effort" to achieve the next level of management of Executive Sales Director. Because Ms Kuhnemann was doing so well in Queensland, Ms Nicoski says she was anxious to make sure that she, Ms Nicoski, was promoted to this level before Ms Kuhnemann.
103 Having regard to the events leading up to January 1997 that had occurred between the two at a personal level and in relation to Nutrimetics' activities generally since they met in June 1996, what Mr Williams says passed between him and Ms Nicoski in January is not inherently implausible. Why Ms Nicoski would never have said the things that Mr Williams attributes to her is not immediately apparent having regard to the events involving them personally and in relation to Nutrimetics activities to that point.
104 Mr Williams says that Ms Nicoski, having told him in January that the time was right for him to join her in Nutrimetics, then made available to him her bank statements and cheque butts and records. This is stated in par 44 of his witness statement that went into evidence, to which he adds:
"I had approximately $22,000 in my personal ANZ Bank account in February 1997 and I expected to receive a tax refund of around $8000 once I submitted my tax return after June 30. At that time Georgette had little personal savings and a $140,000 mortgage. I decided with a revenue of about $3000 initially, which is what she was then earning, we could pay the business and our personal expenses, including the mortgage payment which was about $1100 per month."
105 Mr Williams' account to this effect, has a certain jumbled nature to it. The purport of his evidence, as I understood it, was that, in around middle to late January or early February 1997, he made an assessment of his and Ms Nicoski's financial circumstances and formed the view that they could together operate Ms Nicoski's existing Nutrimetics consultancy, and, from the revenue earned, meet the business expenses related to it as well as their personal expenses, including the monthly payments due under the mortgage registered against her Wembley unit. I understood Mr Williams to suggest that Ms Nicoski's consultancy business was then earning revenue of about $3000 per month.
106 Mr Williams was challenged about the accuracy of aspects of this testimony. For example, he was asked how he could have expected, at this time, to receive a tax refund of around $8000 once he had submitted his tax return after June 30, when he had not, in fact, filed a tax return for some years previously. He accepted he had not filed tax returns for some years. His answers to the question did not clearly explain the basis of his belief. Paragraph 44 of Mr Williams' witness statement, as a number of other portions of it, has an air of reconstruction about it.
107 Less ambiguously, Mr Williams says that, in about mid-January 1997, he arrived home from work at Aherns and said to Ms Nicoski: "The timing is now perfect. I have made the decision I want to join you as a business partner. It is clear to me where my future lies. Making it even more clear for me is the fact that I am sure that Aherns is going to be sold in the future and there is much more we can gain from working together than if I was to stay with Aherns." He says that Ms Nicoski replied: "When are you going to resign, when are you going to resign?" He says he responded, "Well we have got the sales directors' seminar coming up and I will resign a couple of days before then because I have booked my annual leave and then I will resign and we will hop on the plane and go straight to the sale directors' seminar together as partners and we can announce it to everybody while we are there." He says that Ms Nicoski responded: "This is what I have always dreamed. You and I working together. ... What do you think our situation is going to be regarding income? How do you think we are going to go financially, because you leaving Aherns we're not going to have your income?" He says that he said, "Well you know given that I'm going to have about $20,000 in my bank account with more coming we should have enough. I'm going to work out exactly how much we have got. I have no doubt that we will be able to be earning by the end of year what we have been earning separately before we decided to form this partnership." This evidence is contained in par 46 of his witness statement.
108 In relation to this evidence, Ms Nicoski says a number of things. First, that Mr Williams had told her, for a couple of months prior to this occasion, that he was unhappy with his position at Aherns. In the middle of January he had come home and told her that the managing director of Aherns was going to demote him. Mr Williams said that he had been offered the same money, but for a different job, and that it was effectively a demotion. He was distressed, according to her. Mr Williams, in cross-examination, effectively conceded he was likely to have been demoted if he had stayed with Aherns.
109 Next, Ms Nicoski says that she said to Mr Williams words to the effect that, "If you don't want to take the demotion, if it really makes you feel this way, then quit. You've got a university degree, surely you can get another job somewhere else. While you're trying to find a new job, why not help me out with my business." She says that she spoke words to the effect that: "You can help me with deliveries, mail-outs and other administrative things until you find a new job." She says that she told him she would support him in terms of living expenses. She says he agreed immediately.
110 Further, Ms Nicoski denies ever saying to Mr Williams words or words to the effect of, "When are you going to resign?" She denies that the particular account given by Mr Williams in par 46 of his witness statement of a discussion in around mid-January when he arrived home from work at Aherns concerning "The timing is now perfect", and so on, ever took place. She said again that she had never "dreamed" of going into business with him and did not tell him she did so dream. She also denied discussing the formation of a "partnership" or "going into partnership" with Mr Williams.
111 Finally, in relation to par 44 of Mr Williams' witness statement, Ms Nicoski denies that she made available her bank statement and cheque butts and records following such a meeting or at about that time in January. She also says that Mr Williams did not have $22,000 in his personal ANZ account until 6 February 1997. (This date, it should be noted, is the day after Mr Williams actually resigned his position at Aherns.)
112 It appears to me that what Mr Williams says in par 44 of his witness statement concerning Ms Nicoski making available her bank statements and cheque butts and records and assessing the state of their joint financial position, including the amount he had in his bank account with the ANZ, constitutes a reconstruction of events. For example, he cannot have been discussing the future with Ms Nicoski in mid-January 1997 by reference to the actual state of his bank account as of 6 February 1997. However, he may well have had an expectation of receiving a termination payment in this order, at the relevant time. The question is whether he did, in fact, in mid to late January make some assessment, as he claims, of the ability of himself and Ms Nicoski jointly to manage a Nutrimetics consultancy and meet their personal expenses, in the event that he were to resign his position at Aherns.
113 When pressed in cross-examination about what he actually said in January 1997 concerning the financial circumstances and future financial obligations of himself and Ms Nicoski, it seems to me that Mr Williams accepted that he did not expressly state the things set out in his witness statement at pars 44 - 46.
114 Later in his cross-examination when he was pressed about what he actually said in another conversation in February 1997, recounted at pars 56 - 58 of his statement of evidence, concerning the future tax liability of Ms Nicoski, Mr Williams conceded that, in February 1997, Ms Nicoski did not have a tax bill or a loan. Mr Williams said that, in effect, he meant to say "at that time I had understood that Nicoski was already in the process of getting a loan through her father and her mother through the National Bank, so I'm speaking figuratively." He added that Ms Nicoski's father had already done a rough assessment of her tax liability and it was in the hands of her accountant. Similarly, he understood that she was in the process of getting a loan to cover what she anticipated her tax debt would be.
115 As a result of his cross-examination, rather than as a result of the purported verbatim account of discussions that appear in his statement of evidence, I consider Mr Williams' evidence in cross-examination not to be improbable.
116 It is, of course, probable that a reasonably prudent person would make a financial assessment of how they and their partner in life would be able to afford business and personal expenses if one of them were to cease their present paid employment and commence working in the business of the other. But such an assessment would not necessarily be dependent on the two of them having made a decision effectively to become business partners in the business. In other words, the broad account given by Mr Williams of making an assessment of his and Ms Nicoski's financial capacities in late January or early February 1997 is as consistent with his evidence, that he and Ms Nicoski were planning on Mr Williams giving up his job at Aherns and jointly with her operating the Nutrimetics consultancy, as it is with Ms Nicoski's account, that Mr Williams was unhappy with his position at Aherns, wished to leave it rather than suffer an effective demotion, and assist her in the operation of her Nutrimetics business for a period while he obtained a new job commensurate with his qualifications and experience.
117 At this point in the evidence given by Mr Williams and Ms Nicoski, significant differences begin to enter into their respective account of events. Mr Williams' testimony, which in these respects is contained in a written statement of evidence and includes what purport to be verbatim accounts of conversations between them, is that expressions such as "business partner", "partners" and "partnership" were used in their speech. Mr Williams was challenged as to whether these express words or expressions were, in fact, used at this point. He accepted, at least for the most part, that they were not. However, he did not resile from the substance of his evidence that the burden of those discussions concerned an agreement whereby the two of them should commence jointly operating Ms Nicoski's Nutrimetics consultancy.
118 For my part, I am not satisfied that the parties expressly agreed to constitute a partnership in respect of Ms Nicoski's existing business as a result of anything said in January 1997.
119 The most that can be said from the evidence relating to this period is that the question of Mr Williams joining Ms Nicoski in the operation of her business was discussed during this period. However, I find that none of the discussions and nothing in their conduct unambiguously suggests that a partnership agreement of the type pleaded was then concluded.
120 Mr Williams says that, as a result of his discussions with Ms Nicoski in around mid-January, he resigned from Aherns on 5 February 1997 and informed Ms Nicoski of his resignation immediately upon his return to the Wembley unit that evening. He says that he told her, "It's done, I have resigned, I've got my first appointment this afternoon, we are now joint consultants, we have our career in Nutrimetics. What time is Marissa Wylie arriving?" He says that Ms Nicoski said, "She is here in about an hour". He says that they duly met with Ms Wylie and that this was his first meeting with one of his and Ms Nicoski's downlines.
121 As I have indicated, at this point the accounts given of conversations concerning a partnership in a Nutrimetics consultancy are somewhat in dispute. Ms Nicoski says she and Mr Williams had an understanding to this effect, that should Mr Williams resign his position at Aherns, he could assist her in particular ways in the conduct of her business.
122 The dispute is whether or not the two of them agreed, at about or in the period leading up to the time of Mr Williams' resignation from Aherns on 5 February 1997, in effect (1) to carry on her Nutrimetics consultancy in common with a view of profit and (2) to treat the partnership as one which included Ms Nicoski's existing business. Mr Williams says that they did and says that they even used the expression "business partners". Ms Nicoski says they did not and it was never her intention that the two of them should operate a "partnership", let alone one that incorporated her existing business.
123 In respect of Mr Williams' account of what he and she said following Mr Williams' resignation from Aherns, Ms Nicoski denies that Mr Williams said the words "joint consultants", or words to the effect that "we have got our career in Nutrimetics". Indeed, she denies that any such discussion took place. As to Marissa Wylie, Ms Nicoski says that Ms Wylie was one of her consultants and that the appointment (which by implication she accepts had, in fact, been arranged for that day) was an appointment with Ms Nicoski and not an appointment with Ms Nicoski and Mr Williams together.
124 At this point, I should comment on the extent to which I consider Mr Williams and Ms Nicoski to be reliable witnesses. It is appropriate that I do so because senior counsel for Ms Nicoski challenged Mr Williams' reliability, indeed credibility, in cross-examination, and because much of the case, especially that put by Mr Williams as to the conclusion of a partnership agreement in January and/or February 1997, depends upon the conversations said to have been held and oral agreements said to have been made by the parties in that period.
125 As I have already noted, the primary evidence of Mr Williams and Ms Nicoski was contained in statements of evidence filed in accordance with directions made well before the trial. To some extent, the use of such statements as a primary means of conveying alleged verbatim conversations of central importance to the resolution of an action is an unhelpful practice. It may be that, in such cases, it is sufficient for the substance of an alleged conversation to be set out in such a statement, leaving it to the witness to give a viva voce account of what was actually said and agreed. In this case, the Court was largely left to form impressions about the reliability of the written statements of evidence by virtue of what fell out in cross-examination.
126 Be that as it may, Ms Nicoski, in cross-examination, by and large adhered to the written statement of evidence filed by her.
127 However, Mr Williams, in cross-examination, departed at times from what he had said in his written statement of evidence. For example, as I have noted already, it became clear in cross-examination that he had largely reconstructed the events described in par 44 of his statement of evidence. It also became clear, as explained in greater detail below, that his account of the establishment of the "Babylon" account (an account established by Ms Nicoski in January 1997 to make provision for her expected taxation payments) was also reconstructed.
128 Further, in his written statement of evidence, Mr Williams claimed that, in the course of actual conversations in January and February, expressions such as "partner", "partnership" and the like were used. In cross-examination he conceded that this was not always so.
129 I have formed the view that, in many instances, Mr Williams has reconstructed his recollection of particular events and what was actually said by him and Ms Nicoski on particular occasions in January and February 1997. For example, in the account just set out of what Mr Williams says he said on the evening of 5 February 1997, following his resignation from his position at Aherns, I find it difficult to accept that everything he says he said was then stated by him, or, at least, that he stated each of the matters in question all on the one occasion.
130 These observations make all the more important the consideration by the Court of the whole facts of the case in which the parties were involved.
131 In that regard, I return to an account of the events as they appear to have occurred in the period following 5 February 1997.
132 As I have indicated, up until Mr Williams resigned his position at Aherns on 5 February 1997, there is a common thread to the evidence of these parties. For some time past, Mr Williams had been involved, or had involved himself, in Nutrimetics activities and Ms Nicoski's consultancy to such an extent that it might be reasonable to surmise that both he and Ms Nicoski could see an opportunity for the two of them to operate her Nutrimetics consultancy together. There were a number of well promoted examples of husband and wife teams having done just that within the larger Nutrimetics organisation. "Going into partnership" in February 1997 might, in those circumstances, particularly following the hospitalisation of Ms Nicoski and the possibility that Mr Williams might leave his job with Aherns, have been seen by them as a commercial proposition worth considering.
133 On the other hand, it might also be said that, in circumstances where Ms Nicoski had been ill and Mr Williams dissatisfied with his present employment, an arrangement whereby Mr Williams would leave his employment with Aherns and assist Ms Nicoski in operating and building-up her Nutrimetics consultancy, pending his securing a job that better suited him, would be a perfectly sensible one for two persons who enjoyed a close personal relationship to make.
134 In these circumstances, in determining whether a business partnership was formed between Mr Williams and Ms Nicoski, it is important to have regard to the circumstances and events subsequent to 5 February 1997.
135 On 6 February 1997, the day after Mr Williams resigned from Aherns and the day on which $22,000 was credited to his ANZ bank account, he and Ms Nicoski travelled to Sydney from Perth for a Nutrimetics sales directors' seminar. It is fair to observe that Mr Williams' attendance at this conference with Ms Nicoski must have been in contemplation when he tendered his resignation to Aherns. Indeed, Mr Williams says he made mention of the forthcoming sales directors' seminar in Sydney in his conversation with Ms Nicoski in mid-January and said he should time his resignation to permit their attendance at the seminar.
136 While there is no dispute between Mr Williams and Ms Nicoski that the two of them attended the sales directors' seminar in Sydney in February following his resignation from Aherns, there is dispute as to who paid for the airfares and the accommodation to permit them to attend the seminar. He says that, from what he had read in the Nutrimetics literature, he had formed the view that attendance at the seminar was expected by the company. Mr Williams says that he paid for the airfares and the accommodation. However, Ms Nicoski says that the costs were debited to her account with Nutrimetics in February 1997 by the company. That is to say, Nutrimetics paid the expenses and debited her account with the company. Both agree that her mother and father also attended the seminar. Mr Williams says he also paid for the airfares of Ms Nicoski's mother and father. Indeed, Mr Williams' financial records tendered in evidence show that on 31 January 1997 he used his American Express (Amex) credit card to pay Qantas four separate amounts of $502.40 on account of air tickets. Those records also show that the Amex card was used on 10 February 1997 to pay Sheraton on the Park in Sydney (where the seminar was held) a sum of $174.43. Mr Williams acknowledges that Ms Nicoski's parents subsequently reimbursed him for the airfares that he initially paid for them. However, he says he was never reimbursed by Ms Nicoski for the cost of her airfare or the seminar expenses.
137 Ms Nicoski says that her Nutrimetics commission statement for February 1997 shows that she was credited a sum of $1600 in respect of a sundry item entered as "PART PAY REC'D - SD SEMINAR". The reference to "SD SEMINAR" may be taken to be a reference to "Sales Directors' Seminar". No other evidence was adduced to show exactly what the sales directors' seminar registration or other fees were in respect of which Nutrimetics might have made reimbursement. Nor is there any evidence of any other payment made by Mr Williams or Ms Nicoski for which this may be considered a reimbursement. Working from Mr Williams' expenses in respect of the Sydney conference, or Sydney visit, recorded on his Amex statement, to which I have referred, the total sum is only in the order of $1180, being the cost of the two airfares, plus the Sheraton on the Park expense. No evidence, as I say, makes plain whether there were registration fees, or the like, levied by Nutrimetics in respect of the seminar. One suspects there would have been. In the end, I am unable to resolve that dispute on the evidence. What can be noted is that it was Mr Williams who initially paid for the air tickets for himself and Ms Nicoski and her parents to attend the sales directors' seminar in Sydney. In all of the circumstances, that act, of itself is not an act that necessarily bespeaks the act of a business partner. However, it is an act which may be considered consistent with the act of a business partner, or someone who wishes to enter into a business relationship with another. In so observing, it needs to be borne in mind that the approbation of Ms Nicoski's mother seems, at all material times, to have been important to Mr Williams.
138 While attending the sales directors' seminar in Sydney, Mr Williams says that he and Ms Nicoski met for coffee with Ms Nicoski's parents at the first floor restaurant of the Sheraton on the Park hotel in Sydney and "spoke detail for over an hour". He says that in Ms Nicoski's presence, her mother said that she was concerned about the sudden drop in income Mr Williams' resignation from Aherns would cause. But she added that she had no doubt that they would be a great success working together and that the two of them had the skills and personal attributes to achieve the highest levels in Nutrimetics. Mr Williams says that he explained to Ms Nicoski's mother that he was confident, following his resignation, that the two of them had sufficient financial security to see them through the latter part of the year; and that he said to her words to the effect that he believed the partnership would grow sufficiently by the end of 1997 to be earning similar income and benefits to those the two of them had been earning separately "prior to the formation of the partnership". Mr Williams says that Ms Nicoski's mother agreed with him and also said that she was planning to leave Nutrimetics within the next five years and it was her wish to assign her business to Ms Nicoski and him. Mr Williams further says, "Georgette and I said to each other words to the effect that we agreed to assist Karen (Ms Nicoski's mother) with running her Nutrimetics business at every opportunity."
139 Ms Nicoski says she does not recall having coffee with Mr Williams and her parents in the restaurant of the hotel, but does not deny that they did so. She says that, if Mr Williams did say the words he alleges, then she denies that at any stage of the seminar did she ever intend to enter into any agreement and certainly not one "between Williams and me on the one hand and Nutrimetics on the other". Her evidence, in this respect, is in a witness statement intended to be responsive to what Mr Williams stated in pars 49, 50 and 51 of his witness statement, the substance of which is set out above, concerning the discussion over coffee at the Sheraton on the Park hotel in Sydney, and which does not make mention of an alleged agreement involving Nutrimetics. Ms Nicoski's mother was not called to give evidence and there is no evidence to refute what Mr Williams says was discussed over coffee at the Sheraton on the Park hotel. Having regard to the history of events preceding this occasion, dating from June 1996, I find it is probable that Mr Williams did say the things to Ms Nicoski's mother and that Ms Nicoski's mother responded, in the manner he has represented, in the presence of Ms Nicoski while they were in Sydney at the sales directors' seminar in February 1997.
140 Of itself, this testimony does not prove that the parties had concluded a partnership agreement or help explain what the terms of such an agreement might have been. However, it does tend to support a contention that the prospect of Mr Williams and Ms Nicoski becoming joint consultants to Nutrimetics was the subject of active discussion between Ms Nicoski and Mr Williams in early February 1997.
141 Mr Williams says that he also spoke with the managing director of Nutrimetics, Mr Nigel Sinclair, who hosted an evening at the seminar, while he was in Sydney and said words to the effect:
"Nigel, I am sure you will be pleased to know that I have resigned from Aherns and have joined Georgette as her partner"
143 and then added, having pointed towards Roger and Naomi Alberts:
"I am sure you will be the next Roger and Naomi Alberts. You have outstanding mentors in Karen and Don Nicoski. Nutrimetics and me are there to help you and will do everything possible to help you achieve your goals."
144 Mr Sinclair was not called to give evidence on behalf of the second defendant and this evidence stands uncontradicted. It plainly supports a view that, so far as Nutrimetics was concerned, Ms Nicoski and Mr Williams were considered to be, or at least were considered likely to form, a joint consultancy of the type that persons such as Roger and Naomi Alberts and Karen and Don Nicoski had formed, and which Nutrimetics had recognised on prior occasions. However, this conversation on its own does not support the view that a consultancy agreement was concluded between Nutrimetics, on the one hand, and Ms Nicoski and Mr Williams on the other hand; nor is it contended by the plaintiff that such a consultancy was concluded on this occasion.
145 At the sales directors' seminar in Sydney, Mr Williams also met Ms Paula Kuhnemann and her husband for the first time. It appears that theirs was also a joint consultancy and that they had by this time achieved the level of sales director.
146 Mr Williams says that, on the return of Ms Nicoski and himself to Perth in mid-February 1997, the two of them attended a Nutrimetics training session held at the State office in Perth which was attended by 100 or so other directors and consultants. He says that at this training session Ms Nicoski's mother said to those assembled words to the effect that, "Troy has joined Nutrimetics as a business partner with Georgette." Ms Nicoski does not dispute Mr Williams's evidence in this regard. What Ms Nicoski's mother may have said cannot, of course, on its own conclusively establish the fact contended for. However, it again tends to support the view that Mr Williams and Ms Nicoski had in fact concluded an agreement in February to operate her Nutrimetics consultancy in partnership.
147 Mr Williams says that, at about the same time in February 1997, he and Ms Nicoski spent a day at the dinner table of the Wembley home unit reviewing "our business, setting goals and putting business strategies in place". (I refer to this "review" further below.) He says that they worked from 8 am to 6 pm doing this. He says they spread butcher's paper over the table and wrote on the paper and in their diaries. He says he no longer has his diary as it was left with Ms Nicoski and she has said she disposed of it as well as her own diary. Mr Williams says that during lunch on this day he said words to the effect that he would be injecting funds into the partnership, whereupon Ms Nicoski said, "You do not need to pay me anything to become my business partner. You have invested considerable time, effort and money into the business already." As a result, Mr Williams says that he said words to the effect, "No, I mean I am happy to use my personal ANZ Bank account funds and credit cards to pay outstanding business debts of the partnership and pay ongoing expenses until the business gets on its feet or until my funds run out." He also says that he said words to the effect that they should pay off the personal loan Ms Nicoski had taken out to pay a tax bill from partnership income, to which she said, "Thank you." He says that he also agreed that partnership income should be used to pay monthly mortgage payments for the Wembley home unit.
148 In respect of this evidence, Ms Nicoski denies that she spent any day from 8 am to 6 pm with butcher's paper on a table while Mr Williams and she planned anything. She says she did personal planning on her own account in a notebook that she specifically bought for the purpose or used coloured cards for that purpose. She denies that any such planning discussion took place.
149 Ms Nicoski says that she does recall that on a few occasions Mr Williams would offer to draw on his personal ANZ account to help ease the burden of living as a couple on one income. But she says there was no discussion of him paying anything to "become my business partner". She says he was only helping her with her business until he found another job.
150 As to the repayment of a personal loan she had taken out to pay her tax bill, Ms Nicoski says that she did not contemplate taking out a personal loan until May 1997 so that it was not possible for Mr Williams, in February 1997, to have referred to the repayment of that loan. Indeed, the evidence shows that on 27 May 1997 Ms Nicoski opened a loan account at the National Australia Bank in respect of a loan facility of $13,300. A cheque was drawn on 27 May 1997 payable to the Commissioner of Taxation. As in the instance of Mr Williams's evidence set out par 44 of his witness statement and discussed above, there is an air of reconstruction of events in the account that Mr Williams has provided in par 58 of his witness statement. However, as noted earlier, when Mr Williams was pressed in cross-examination about this, he said that he accepted that Ms Nicoski did not in February already have a tax assessment, but that her father had already done a rough assessment and it was in the hands of her accountant. Additionally, he understood that, through her father and mother, Ms Nicoski had put in train a proposal that the National Bank should provide her with a loan to meet her anticipated tax debt. I consider this latter evidence not to be improbable. However, plainly there was no more explicit discussion earlier in February, only a mention of what kind of financial liabilities would lie ahead.
151 The account of Mr Williams as to what was "agreed" over the butcher's paper in mid-February 1997 generally has an air of reconstruction to it. While I am satisfied that goals were discussed and generally agreed upon (and were revised by the two of them later in the year), I do not accept that, by reason of anything Mr Williams claims was said on that day, Ms Nicoski agreed that the assets of her existing business should become an asset of a partnership between them. Indeed, in cross-examination, Mr Williams readily conceded (Tr 391) that there was no discussion about the "ownership of the business" that day, although he insisted that, "we had agreed it was our joint consultancy".
152 Mr Williams further says, in pars 59 and 60 of his witness statement, that Ms Nicoski had a cheque account with the National Australia Bank Whitfords branch which was her only cheque account and from which she paid both personal and business expenses. Mr Williams says that Ms Nicoski suggested that he should become a signatory to "the partnership bank account", although it did not then happen. Ms Nicoski acknowledges that her principal bank account into which Nutrimetics paid her monthly commissions was this account, but denies having had any discussion, at least in February 1997, about Mr Williams becoming a signatory to it. She says it wasn't until much later, between 30 May and the middle of June, that they discussed it and that the first statement on which Mr Williams' name appears is that dated 18 June 1997.
153 The fact that Mr Williams did not become a signatory to this account until much later in the year - well after April 1997 - and the inclination of Mr Williams to reconstruct much of his evidence, gives me reason to doubt that the parties had any particular discussion about this account before May 1997.
154 However, Mr Williams says that, following the return from the sales directors' seminar in Sydney, he involved himself in the conduct of the Nutrimetics consultancy in various ways. For example, he says that he began writing a new business plan and a marketing plan for the business and showed Ms Nicoski how to apply formal marketing skills which he had learnt whilst studying for his marketing degree. I do not doubt that he did.
155 As noted above, Mr Williams says that the two of them reviewed their business goals and strategies in mid-February. He says they identified their short-term goals, including stabilisation of the income from the consultancy each month, to qualify for a new car mid-year from Nutrimetics, to "repair relations" with Paula Kuhnemann and to be the best performing sales directors in WA in terms of sales and sponsoring by the end of December 1997. He says they set themselves the medium-term goal to be elevated to "Executive Sales Director" status within a year and a half. He says they set themselves the long-term goals to be "Presidential Directors" within three to five years and to be earning $30,000 per month in commission, to each be driving a new Nutrimetics car and to be eligible for the "Home Award" within five years.
156 Ms Nicoski, while denying that Mr Williams spent any time teaching her how to apply marketing skills, because she says she already had those, does not dispute Mr Williams's evidence concerning the setting of short-term, medium-term and long-term goals in those terms at about this time.
157 Nor does Ms Nicoski seriously disagree with Mr Williams' further statement that the two of them calculated and wrote monthly sales and sponsoring targets for their "entire team". She says that they each wrote "our own monthly sales and targets for the entire team". She kept her own and tracked her own targets. She says Mr Williams' practice was to "fiddle on the computer, and make graphs and calculate percentages".
158 Similarly, Ms Nicoski does not dispute that it was necessary for "communications" to be improved with Paula Kuhnemann in relation to that particular downline relationship.
159 Mr Williams says that, in February 1997, he also requested "genealogy reports" from the Perth office of Nutrimetics and that such reports were provided by Ms Teresa Smith on a number of occasions. These reports provided a 6-month order history and contact details for the downlines of the consultancy. He says he spent many hours contacting inactive consultants as a result of this analysis. Ms Nicoski does not deny that Mr Williams obtained these reports, but says that the only reason the consultancy business prospered at about this time was because of her work in the field with new consultants and her managers and had nothing to do with the reactivation of inactive members. Again, I do not doubt that Mr Williams did these things.
160 In late February 1997, Mr Williams and Ms Nicoski set up and managed the Nutrimetics corporate stand at the Perth Bridal Fair at the Sheraton Hotel over several days. About this there is no dispute.
161 All of this evidence tends to support Mr Williams' claim that the two of them had made an agreement earlier, in January or February, to operate Ms Nicoski's business in partnership, but of itself does not unambiguously suggest this is so.
162 On 4 March 1997 Ms Nicoski and Mr Williams were engaged to be married.
163 In late March 1997, the two of them hosted what Mr Williams described as the first of many training weekends at the Wembley home unit for the most senior members of their downline group. Ms Nicoski says that she was the one who had home meetings for "her team". However, she acknowledges that Mr Williams and she planned training weekends together from time to time.
164 It also appears that Ms Nicoski and Mr Williams conducted a number of Nutrimetics hostess workshops in the homes of a number of his friends and former colleagues from Aherns and that they subsequently sponsored a number of these persons as Nutrimetics consultants. Ms Nicoski says that this was her initiative and that she was the person who conducted the workshops and that some of these did indeed become Nutrimetics consultants.
165 The evidence discloses that a number of limited agency agreements between Nutrimetics and persons sponsored as the downlines of Ms Nicoski and Mr Williams were signed. However, examples of these provided by Mr Williams, and which do not appear to be in dispute, are in respect of the limited agency agreements that were signed much later - for example, by Andrea Hogan on 6 June 1997 and Natalie Sherlock on 17 November 1997. The sponsors in each case were stated to be "G. Nicoski and T. Williams". These agreements were forwarded to Nutrimetics. It appears that neither was ever rejected or returned by Nutrimetics.
166 Mr Williams' conduct during March again tends to support his claim that he and Ms Nicoski had earlier agreed to operate her Nutrimetics business in partnership, but again on its own, or when considered with the earlier events, does not compel a conclusion that this is so.
167 Mr Williams says that, in about mid-March 1997 (that is, soon after his engagement to Ms Nicoski), he noticed that his name had not appeared alongside that of Ms Nicoski on the invoices for stock in respect of the consultancy or on any of Nutrimetics' records that they received. He says that, when he asked Ms Nicoski about this, she became agitated and said words to the effect, "You are my business partner and Nutrimetics knows this." Mr Williams says that he then said to Ms Nicoski that the limited agency agreement stipulated that the two of them should advise Nutrimetics of the partnership in writing and should receive written approval from the company. He says he assumed this had been done earlier in February. (In light of his evidence, Mr Williams would appear to have been aware of the usual terms of the 1997 limited agency agreement referred to above.)
168 If Mr Williams is correct in his recollection of what Ms Nicoski said in about mid-March, his evidence tends to confirm his claim that he and Ms Nicoski had already agreed to go into partnership operating Ms Nicoski's existing business. I have little doubt that there was some discussion in mid-March concerning the conduct of a joint consultancy. However, given my findings concerning Mr Williams' propensity to reconstruct what was said on particular occasions, I am less able to be satisfied that Ms Nicoski specifically said what he attributes to her. Something obviously was said on the topic of Nutrimetics' approval because together they later attended Nutrimetics' office in Perth and raised the question of Mr Williams' inclusion on Ms Nicoski's existing account with Nutrimetics.
169 Mr Williams says that, after he raised the question with Ms Nicoski in mid-March, he visited the Nutrimetics office in Perth and ascertained that only Ms Nicoski's personal details appeared on the company's record of the consultancy. He says that he then informed Ms Nicoski that the two of them needed to go to the Perth office of Nutrimetics to speak with Ms Pat Lyon to query why his name was still not appearing on Nutrimetics documentation.
170 On 1 April 1997 Ms Nicoski and Mr Williams attended at the Perth office of Nutrimetics and spoke with Ms Teresa Smith at the reception desk. They then spoke with Ms Pat Lyon. Mr Williams says that Ms Nicoski informed Ms Lyon that the two of them were concerned that his name still did not appear on company records, or words to that effect. Mr Williams says that Ms Lyon, following the making of a telephone call, advised them that the head office in Sydney had not detected "the error". Ms Lyon advised that the two of them needed to complete a new limited agency agreement showing both their names on the existing account number 184584 with an accompanying letter signed by them requesting Nutrimetics to add Mr Williams "as a partner on the account". Mr Williams says that he and Ms Nicoski immediately completed a new limited agency agreement and letter of request at the reception desk and, when they had completed them, handed them to one Carol Smith, the assistant to Ms Lyon, with a request that she ensure that the documents were sent that day to Nutrimetics' head office in Sydney.
171 Ms Nicoski acknowledges that she and Mr Williams attended at the Nutrimetics office on 1 April 1997. However, she says that she asked: "How do I put Troy's name on my account for recognition and things like that?" She says she was advised, probably by Pat Lyon, to write a note requesting this to be done. She denies that Pat Lyon made a reference, following a telephone call, to the effect that "the error had not been detected by head office". Ms Nicoski also denied that a limited agency agreement was signed on that day. She says only a note of request was written and signed by her that day. She says the reason she agreed to attend at the Perth office of Nutrimetics on 1 April was because, following a leadership meeting at the office on 27 March, Mr Williams became very angry when she was presented with several achievement certificates in recognition of her having ranked in the top 10 sales directors in Australia and no mention was then made of him. It was as a result of his "nagging" which had got to "fever pitch" that she agreed to go to Nutrimetics and eventually signed the note.
172 The "note" to which Ms Nicoski and Mr Williams refer was handwritten by Ms Nicoski on a piece of lined paper and signed by each of them . It states as follows:
"To whom it may concern,
Could you please alter my Limited Agency Agreement form to include Troy M. Williams.
He is now full time in the business and I would like his name to be included on all recognition.
Thank you
(signed) I G Nicoski 184584
(signed) Troy Williams
1/4/97"
173 At the foot of the document the numbers "(08) 9447-8390" are handwritten seemingly in handwriting different from that in the body of the document. The document is also stamped towards the bottom right-hand side as follows: "RECEIVED - 2 APR 1997". This is acknowledged to be a date stamp later applied in the Nutrimetics head office in Sydney.
174 Ms Nicoski says that, in effect, she only wrote and signed this request to Nutrimetics to stop Mr Williams' nagging that had got to "fever pitch". She says that when she requested that his name be included "on all recognition" she simply intended that his name should be added to hers when references were made to her in things like the "Tempo" magazine, which is published by Nutrimetics.
175 Mr Williams' name first appeared on the commission statement for the Nutrimetics consultancy for the month of March 1997, which was sent out some time during the first week of April 1997. In other words, Nutrimetics acted on the request they received soon after receiving it.
176 However, there remains a dispute whether the note dated 1 April 1997 signed by Ms Nicoski and Mr Williams stood alone or was accompanied by a new limited agency agreement signed by the two of them; and whether, in any event, even if it be concluded there was no accompanying signed limited agency agreement, the written request itself evidenced the conclusion of a limited agency agreement between Nutrimetics and Ms Nicoski and Mr Williams that replaced the limited agency agreement that had subsisted up to that time between the company and Ms Nicoski.
177 If the main issue in this action depended on the terms of the note, I would not be inclined to find that it was unequivocal evidence of a partnership having been concluded, either on 1 April 1997 or at some time earlier. The question then is whether a new joint limited agency agreement was signed (and concluded with Nutrimetics).
178 In determining this issue, counsel for Mr Williams submits that the Court should regard the fact that Ms Nicoski initially admitted the signing of the form of limited agency agreement in her defence, but later withdrew her admission. I am not inclined to give this pleading point weight in a case like this. The objective facts are those which should carefully be considered.
179 In this regard, it is instructive to consider what Ms Teresa Smith and Ms Pat Lyon recall of the events in question on 1 April 1997. Ms Smith confirms that Mr Williams and Ms Nicoski attended at the offices of Nutrimetics in Perth. She recalls that the only people in the reception area were herself, Carol Smith and Pat Lyon. She first spoke to Mr Williams and Ms Nicoski when they arrived. They said they wished to see Pat Lyons. Pat Lyon came to the reception desk and spoke with them. She heard Ms Nicoski say to Ms Lyon that she "wanted Troy to be included as a partner in her business" and asked what needed to be done. At that point, Ms Lyon went away and came back a little while later. She did not hear what was then said. The next thing she saw was Carol Smith, who was Ms Lyon's personal assistant, give Ms Nicoski and Mr Williams a limited agency agreement form. She knew it was such a form because of the colour of it. Such a form is a "self-carbonating form" that has three copies, the top copy being blue and the other copies yellow and green respectively. She saw Ms Nicoski and Mr Williams begin writing on the form although she did not see them complete it. She says she saw Ms Carol Smith take away the form and put it on her desk. Ms Nicoski and Mr Williams left the reception area soon thereafter. Later she saw Carol Smith place the form and another piece of paper in an envelope.
180 Within a week of 1 April 1997 Ms Teresa Smith noticed on the computer that the records had been changed and that Ms Nicoski's and Mr Williams' details appeared under what previously had been Ms Nicoski's consultancy code. These changes could not be effected at the Perth office as they did not have authority to do this. Thus the inference she drew was that the changes were effected on the computer system at the head office of Nutrimetics in Sydney. Nothing in the cross-examination of Ms Teresa Smith altered her view of these events.
181 Ms Lyon recalls that in or about April 1997 Mr Williams and Ms Nicoski came into the office and that she spoke with them in the reception area. She recalls that Ms Nicoski said words to the effect: "Why hasn't Troy's name been added to my limited agency agreement?" She says she told them she would ring Bev Newsome to find out what the correct procedure was to add Troy's name to Georgette's account. She returned and spoke with them after speaking with Bev Newsome in the Sydney office. She gave Mr Williams and Ms Nicoski a blank limited agency agreement form and told them that they needed to complete a new limited agency agreement and to write a letter requesting Nutrimetics to make the change. She then left them at the reception desk with the form. A few moments later, Carol Smith came to her door and was holding papers in her hand and asked what she was to do with them. She did not read the papers, but told her to put them in an envelope addressed to Bev Newsome and put them in the "overnight bag", which would convey the documents to Nutrimetics' head office in Sydney.
182 Ms Lyon said that the practice of Nutrimetics was that a change to commission statements would only be made following receipt at head office in Sydney of a new limited agency agreement.
183 After these events she noted that Mr Williams was added to the account and that all subsequent recognition of achievement in relation to the consultancy was to both Troy and Georgette. During 1997 she saw trophies engraved with both their names. There were photos of both of them taken when they had been recognised for an achievement or presented with an award. These framed photos were hung on the wall of the Perth office. She also read articles in "Tempo" magazines referring to the two of them and saw photos of them in "Tempo" magazines during 1997.
184 In support of the claim of both Ms Nicoski and Nutrimetics that no limited agency agreement was signed by Ms Nicoski and Mr Williams and received by Nutrimetics in April 1997, each of Ms Nicoski and Nutrimetics refer to the fact that no such limited agency agreement currently exists. Ms Nicoski says that she never received a copy of any such agreement from Nutrimetics following 1 April 1997. Nutrimetics say that despite searches of the company records no such agreement has been discovered.
185 Nutrimetics disputed the process by which a man in the position of Mr Williams would have his name added to the existing consultancy of a woman in the position of Ms Nicoski. However, exhibit D12 in the proceedings, being a bundle of consultancy documents produced by Nutrimetics, shows that consultancies comprising both wives and husbands were not uncommon and that requests were in fact made from time to time for a husband to be added as a consultant with his wife and that Nutrimetics did from time to time accede to such requests and recognised such joint consultancies. This practice, as noted above, was also confirmed by Ms Pat Lyon. It seems also to be one capable of being accommodated, if not contemplated, by cl 3(c) of the Form No 90454 limited agency agreement used by Nutrimetics at this time in 1997.
186 In my view, having regard to the evidence of Ms Teresa Smith and Ms Pat Lyon, both of whom I consider to be reliable witnesses with no demonstrated interest in the outcome of the proceedings, and notwithstanding some differences in detail in their accounts of what occurred on 1 April 1997, the substance of the account given by Mr Williams of what documents were signed at the Perth office of Nutrimetics on 1 April 1997 is, in all probability, correct. Indeed, the testimony of Mr Williams, when considered with the substance of the evidence of Ms Pat Lyon and Ms Teresa Smith, the fact that, after 1 April 1997, the records of Nutrimetics were altered in respect of the consultancy account previously operated by Ms Nicoski alone to include Mr Williams, and that commissions were then paid to them jointly, and that, in company publications thereafter, the consultancy was referred to as being that of both Ms Nicoski and Mr Williams, leads me to the conclusion that Nutrimetics' Perth office sent to Nutrimetics' Sydney office, not only the handwritten request of Ms Nicoski dated 1 April 1997, but also a limited agency agreement in the form of the document attached to these reasons and marked "1997 LAA" which had been signed by Ms Nicoski and Mr Williams on 1 April 1997.
187 Further, in light of Ms Pat Lyon's evidence, both as to the usual practice of Nutrimetics in dealing with such requests for the addition of a man to a woman's consultancy and as to the advice which I accept she received from Bev Newsome at the Sydney office on the day in question, I find it highly probable that the limited agency agreement was produced to Mr Williams and Ms Nicoski at the Perth office, signed by them in the Perth office, sent to the Sydney office in the overnight bag despatched from the Perth office, received in the Sydney office of Nutrimetics the next day - 2 April 1997 - and immediately accepted and acted upon.
188 That the limited agency agreement signed on 1 April 1997 cannot now be produced by Nutrimetics is, in light of evidence as to the storage practices of Nutrimetics, not altogether surprising. On one occasion such records were lost or destroyed. Furthermore, the records of Nutrimetics in relation to other joint consultancies did not consistently comprise both a letter of request and a limited agency agreement. Moreover, in about August 2000, when Ms Nicoski wrote to Nutrimetics requesting that she alone be the consultancy operator she enclosed a new "distributor agreement". However, as Mr Sullivan who gave evidence on behalf of Nutrimetics, admitted in his evidence, when cross-examined, there is no trace of that distributorship agreement either, only a letter referring to it and requesting the change made. Nor can Nutrimetics discover Ms Nicoski's 1988 limited agency agreement. In other words, it might reasonably be concluded that the administrative practices of Nutrimetics are not so reliable that one can draw anything from what appears from the array of Nutrimetics documents that comprise exhibit D12 or by reference to what one might have expected to be found if the usual practice described by Ms Pat Lyon were adhered to.
189 In summary, I find on the balance of probabilities that on 1 April 1997 both the handwritten letter of request of Ms Nicoski dated 1 April 1997 and a limited agency agreement in the form commonly used by Nutrimetics as of that date, signed by Ms Nicoski and Mr Williams and dated 1 April 1997, was provided to Nutrimetics at their Perth office and forwarded to the Sydney office; and that on 2 April 1997 the agreement was received by Nutrimetics at their head office in Sydney and accepted and acted upon by Nutrimetics immediately thereafter.
190 This finding strongly supports Mr Williams' claim that he and Ms Nicoski had earlier concluded an agreement in January or February 1997 to operate her existing Nutrimetics business in partnership. The events of 1 April 1997 appear to be the culmination of an earlier agreement. Even on Ms Nicoski's account of events concerning the reason why she signed the "note" on 1 April 1997, this is so. The question is whether the earlier agreement was a partnership agreement, as Mr Williams claims, or a non-contractual employment "arrangement", as Ms Nicoski claims. Once it is found, as I have, that the parties signed both the "note" and a limited agency agreement as joint consultants, and not just the "note", there can be, in my view, little doubt that their earlier agreement was a contractual partnership agreement. At least, on the balance of probabilities, the whole of the facts of the case lead me to infer such an agreement. Later events between April and 22 December 1997 also tend to confirm this view and certainly do not detract from it.
191 It appears that the personal relationship of Ms Nicoski and Mr Williams began to break down in the period towards the end of August or early September 1997. Ms Nicoski says that one of the reasons for this was that Mr Williams was insufficiently occupied by what "I could give him" by way of work. She then suggested to him that he try to find other employment. Following a visit to Los Angeles, USA, and a cruise to Mexico for a Nutrimetics seminar in October 1997, the personal relationship of the parties appears to have broken down nearly entirely. In late October, Mr Williams obtained part-time employment with the Strathfield Car Radio retail business.
192 However, before the personal relationship deteriorated and these events occurred, the evidence of Mr Williams suggests that he was actively engaged in the business of the consultancy after 1 April 1997. He says that he and Ms Nicoski attended a meeting with Ms Lee Ahrens each month from April 1997 at the Perth office to review their achievements and set targets for the future based on their business plan. Ms Ahrens was the Nutrimetics State Manager for Western Australia, South Australia and Victoria at that time. Mr Williams says that in mid-1997 Ms Ahrens said to him that she thought Ms Nicoski and he could possibly qualify as Executive Sales Directors by December 1997 based on their results to that point.
193 Mr Williams says that in mid-1997 Lee Ahrens met with him and Ms Nicoski again at the Perth office. He says that they were told by Ms Ahrens that they were both exceptional people and had what it took to attempt the elevation to executive sales directors. He says that he and Ms Nicoski agreed with Ms Ahrens that they would attempt the four-month qualifying test to become executive sales directors at the end of July. Nutrimetics' company policy was that in order to achieve the status of executive sales directors the consultancy had to achieve group sales in excess of $125,000 retail a month for four consecutive months, as well as have 12 consultants at the "Sales Leader" status level.
194 Mr Williams says, and it is not seriously denied - and I accept his evidence in this regard - that he conducted without Ms Nicoski separate workshops all over Perth during the course of the year. Additionally, he dealt with Nigel Sinclair of Nutrimetics concerning the inability of Nutrimetics to fill orders which resulted in orders being cancelled and unhappy customers. He also introduced a filing system for use by Ms Nicoski and himself which improved, amongst other things, the manner in which limited agency agreements for downline consultants were kept in their home office. Additionally, he updated customer mailing lists and tracked sales so that he and Ms Nicoski knew what products each of their customers were buying and which helped to identify their best customers. I also accept that, in early 1997, Mr Williams arranged through Nutrimetics' office in Perth for business cards to be printed for both him and Ms Nicoski. It is also clear that Mr Williams attended at the Nutrimetics office at Perth during the period February to December 1997 to place orders on account number 184584 with Nutrimetics in order to supply downline consultants, as well as to collect orders and attend meetings and training sessions. It is also clear that both Mr Williams and Ms Nicoski usually attended formal training sessions each Wednesday with their downlines at the Perth office of Nutrimetics and conducted weekly feedback with their "team", discussing sales, sponsoring, company promotions, company policy changes, company news and general issues.
195 Mr Williams further says that he and Ms Nicoski banked all sales income they received in bank account number 6495 677 131918. He says he deposited thousands of dollars paid to them by their customers into this account between February and December 1997. He says this income was in addition to the monthly commissions that Nutrimetics deposited into that bank account. He says in excess of $110,000 in income was deposited into that account between February and December 1997.
196 Mr Williams also claims that, in June 1997, he and Ms Nicoski decided it would be a good idea to establish a further and separate account into which they should attempt to pay approximately $1000 a month in order to meet their taxation bills. He says this gave rise to the establishment of what they called the "Babylon" account. He says that Ms Nicoski asked him whether he should be a signatory to it, to which he said, "No. You can sign the cheques to pay the tax office for our tax bill when they become due".
197 As noted earlier, Mr Williams was closely cross-examined concerning the establishment of this account. He claimed that the idea to establish the account was his and that he suggested the name "Babylon" because of a book "The Richest Man in Babylon", written by one Richard S Clason at the end of the 19th century, which contained various stories on wealth creation. He said that he put the idea for the account forward and Ms Nicoski accepted it was a good idea. Mr Williams was shown documents that disclosed that the "Babylon cash management account" had in fact been maintained by Ms Nicoski since well before June 1997. When faced with this documentary evidence, Mr Williams conceded that the account was opened by Ms Nicoski in January 1997. By way of explanation for what he had stated in his statement of evidence, he said that he had prepared the statement in reliance on documents pertaining to the account that had been provided on discovery. He maintained that his recollection was that it was he who had suggested the name of the account because he had read the book and that he was otherwise reliant on the limited documentation pertaining to the account provided in discovery.
198 No matter how one looks at it, the evidence given by Mr Williams in his written statement of evidence at pars 110 and 111 is largely a reconstruction. As I have noted elsewhere, this is not the only instance where Mr Williams had reconstructed his evidence. On his behalf, counsel submits that, because the plaintiff only had the discovered bank statements to consider in preparing his written statement of evidence, he had gathered that the Babylon account had been opened in June 1997 and had formed the belief that he had been part of the opening of that account and that this had occurred in June 1997.
199 As I say, there can be no doubt that Mr Williams reconstructed his evidence concerning the circumstances in which the Babylon account had been opened. When confronted with the documentary evidence suggesting that his evidence concerning the date of commencement of the Babylon account was wrong, he frankly conceded it. However, he maintained that he was responsible for suggesting the name Babylon. In her evidence, Ms Nicoski also exhibited a clear awareness of the Babylon name and its origins by reference to the text to which Mr Williams also referred. One rather gathers that Mr Clason's book is something of a "Bible" amongst Nutrimetics consultants.
200 There can be little doubt that the "Babylon" account was opened in January 1997 and that, in all probability, it was styled in the way it was by Ms Nicoski.
201 As counsel for Mr Williams suggests, the Babylon issue shows that Mr Williams has been extremely reliant on documents, and far too careless in his perusal of the documents in the preparation of his evidence. While I accept he did not set out in his written statement of evidence what he then knew to be untrue, the fact is that his recollection of many events is not as particular as his written statement of evidence suggests and, indeed, is often aided, if not reconstructed, by reference to documents.
202 Mr Williams also says that, by July 1997, he and Ms Nicoski had amended their short-term goals to include winning the "King and Queen of Seminar" award in September and to achieve executive sales director status by December, and to commence their membership qualification to the "Million Dollar Club" by December and to then begin their three-year qualification for a "Home Award" of $120,000.
203 Mr Williams says that in August 1997 the consultancy successfully completed four months of sales sufficient to qualify for a new Nutrimetics company car. He says the qualification was for either two Ford Festivas or a Toyota Celica valued at $35,000. He says they agreed that he would pass up the opportunity of a new Festiva for himself and they should take the single car. He says that on 28 August 1997, Lee Ahrens made a special presentation of a new Celica in front of over 200 directors and consultants at the monthly leadership meeting. She said words to the effect, "Congratulations to Georgette and Troy on achieving their new Nutrimetics car." Nutrimetics paid all the running costs except petrol for the car. The October 1997 edition of the "Tempo" magazine included a photograph of Ms Nicoski and Mr Williams with the new car. In relation to Mr Williams' evidence of dealings with Lee Ahrens from April 1997 onwards and the amendment of their short-term goals, as well as the award of the car, Ms Nicoski says only that she denies there was any discussion between her and Mr Williams along the line he alleges in par 119 of his witness statement. Again, it appears that the substance of his statements of dealings in relation to the consultancy involving him and Ms Nicoski is not denied.
204 In relation to the USA/Mexico cruise seminar in October 1997, Mr Williams says that in fact he and Ms Nicoski authorised Nutrimetics to deduct several thousand dollars from their commissions from consultancy 184584 over several months to pay for the air fares, accommodation and costs of the seminar cruise to enable each of them to attend. In addition to these deductions, he says he wrote several cheques from the business account payable to Nutrimetics as part-payment of the costs of attending the seminar. He says that at a gala dinner he and Ms Nicoski were presented as the runners up for the national "King and Queen of Seminar" prize and as winners of the national sales leader development award. They also received an award for outstanding business development nationally. They were presented with two trophies as well as certificates and were photographed holding their trophies with Bill Roche and Nigel Sinclair. The photographs were subsequently published in the December edition of the "Tempo" magazine and put on display on the Nutrimetics "wall of fame" at the Perth office. Both his and Ms Nicoski's name were engraved on the trophies they received as well as on the printed certificates.
205 In early October, in the Perth office, following return from the seminar Ms Nicoski's mother called Ms Nicoski and Mr Williams to the stage and said words to the effect, "Please join me in congratulating Georgette and Troy on their seminar trophies and awards." At a Nutrimetics leadership monthly meeting in October 1997 to launch the Christmas brochure, Nigel Sinclair of Nutrimetics said words to the effect, "Congratulations Georgette and Troy on your outstanding year so far. I believe they are the next Roger and Naomi Alberts."
206 Of this evidence (which is set out in pars 123 - 130 of Mr Williams witness statement) Ms Nicoski says little save to reflect on the deterioration of the personal relationship between her and Mr Williams during this period. Whilst she says it was her endeavours that primarily resulted in the trophies and awards and that she estimates Mr Williams' contribution to be about 1 per cent of the effort, again she does not deny the substance of the factual matters recounted by him.
207 When eventually Ms Nicoski suggested to Mr Williams that he obtain alternative employment, Mr Williams and Ms Nicoski and Ms Nicoski's mother discussed the prospect of Mr Williams taking part-time employment and ceasing to be as involved as he had been in the consultancy. He says that Ms Nicoski said to her mother that she would not be happy until he got a part-time job in addition to his Nutrimetics duties. He said that Ms Nicoski said she wanted more money for the "finer things in life" and was constantly worried about the loans the partnership was repaying. According to Mr Williams, Ms Nicoski's mother said that she believed this phase with Georgette would pass quickly and that he would be able to quit his part-time job after Christmas. Ms Nicoski's mother appears to have acted as an intermediary in relation to this issue. Again, Ms Nicoski does not deny Mr Williams' account of what transpired and the intermediary role played by her mother at this point.
208 Mr Williams says that in about October 1997 he set up and managed the corporate display stand for Nutrimetics at the Perth Royal Show. He says that he also did this for the Perth Bridal Expo in July 1997 which was held at the Burswood Convention Centre and he also says that he did the same thing at the Northam Town Fair in August 1997. On each occasion, Ms Pat Lyon gave him permission to take Nutrimetics products and display material to set up at the displays and that a number of directors and consultants assisted him in operating these displays. He says prospects were met and contact details were collected. He also says that Ms Nicoski and he conducted Nutrimetics workshops in 1997 for the staff of Perth Travelodge Hotel and Perth Parkroyal Hotel over a two-week period.
209 In respect of this evidence, Ms Nicoski says that she asked Mr Williams to set up these displays because she was so busy in the field doing workshops and sponsoring. She thought this would be something to keep him occupied. She says she conducted the workshops at the Perth Travelodge and the Perth Parkroyal Hotel and got Mr Williams to do a small segment on male products.
210 Mr Williams relies also on a particular document apparently created in this period as further written evidence of a partnership having earlier been formed by the parties. This document went into evidence as exhibit P3. It appears to be a letter to a third person concerning Ms Nicoski's taxation position. It notes a number of "miscellaneous items not detailed in earlier information" from between August 1996 and February 1997. It has a further heading "General tax queries - please amend tax claim as appropriate." The document is unsigned, but was produced by Ms Nicoski in her discovery in the proceedings. Mr Williams said he had not seen the document until it was discovered. It comprises two pages. On the top of the first page, Ms Nicoski's name and address in Wembley appear. By its terms, it appears to be a letter from Ms Nicoski to a person who advises Ms Nicoski concerning taxation matters. The last sentence on page 2 of the document is: "Troy and I live together at the above address." However, Ms Nicoski did not recognise the document as hers.
211 By contrast, Mr Williams suggested that the letter was one Ms Nicoski must have sent to her accountant, Mr Tilley. The evidence showed that Ms Nicoski and her parents used Mr Tilley as a tax accountant, as apparently did other Nutrimetics consultants.
212 The penultimate paragraph of exhibit P3 states:
"Also my fiance Troy has joined me fulltime in the business. Please advise what is the best way to function - tax wise. Should we form a formal partnership?"
213 The document in the third-last paragraph on page 2 refers to a number of expenses, including "June 1997 Strata Levy $260", which suggests that the document may have been composed in or around June, or even July, 1997. As it was a request to "Please amend tax claim", it may suggest that it was after 30 June 1997. However, there is little other evidence to explain when the document was composed.
214 On behalf of Mr Williams, it is submitted that this particular document is further written evidence of a partnership, as Ms Nicoski (assuming she wrote this letter) has referred to formalising the partnership, not creating one.
215 In my view, exhibit P3 probably was authored by Ms Nicoski. Much of the information set out in it is information within her knowledge. The document was discovered by her. The document is written in the first person. There is evidence that Ms Nicoski did take tax advice from a Mr Tilley.
216 However, by asking the question, "Should we form a formal partnership?" I consider the document is equivocal so far as its reference to the partnership is concerned. It may be a query as to whether or not a partnership should be formed; or it may be, as is contended on behalf of Mr Williams, that it is a question put on the basis that there is presently an informal partnership. In the event, I do not find the terms of exhibit P3 to be decisive one way or the other, in assessing whether a partnership agreement was concluded in January or February. The document is simply another document or event which needs to be considered, along with the other relevant facts of the case, in determining whether an agreement should be inferred from the whole facts of the case.
217 In my view, the overt conduct of Mr Williams and Ms Nicoski in the period between 1 April 1997 and 22 December 1997, quite apart from the creation of this document, when viewed in the light of my finding that they signed a limited agency agreement with Nutrimetics on 1 April 1997, strongly suggests they had earlier, in January or February 1997, agreed to operate Ms Nicoski's existing business in partnership.
218 On 22 December 1997, Ms Nicoski broke off her engagement to Mr Williams. The two met at the Wembley home unit at Ms Nicoski's request. She told him to leave the home unit. He did.
219 Thereafter, it appears that Mr Williams completed only a few deliveries of Nutrimetics products to downlines.
220 It appears, at least it is his case, that while he recognised that the personal relationship was at an end, Mr Williams considered he still had an interest in the consultancy business. At that point, Mr Williams took legal advice and letters were exchanged by their solicitors.
221 The events of 22 December 1997 are explained in part by other events that occurred during December. In December, Ms Nicoski and Mr Williams were promoted to the status of "Executive Sales Directors". A celebratory dinner was planned by the Nutrimetics Perth office at the Hyatt Hotel for Friday, 19 December 1997. Following a disagreement between Mr Williams and Ms Nicoski concerning the persons invited to this dinner, the personal relationship between the two soon came to an end.
222 On Monday 22 December, when Ms Nicoski met with Mr Williams at her Wembley home unit, she told Mr Williams that she wished to call off their engagement. What then was said is disputed. Mr Williams says that he said to Ms Nicoski words to the effect that they also had a legal partnership and that they would have to decide how best to jointly manage the Nutrimetics business for the future. He says that Ms Nicoski went into the bedroom of the unit saying words to the effect that the business belonged to her alone and that he was not to approach any customers of the business. Mr Williams says he said that he had every intention of continuing to deal with customers as it was his right to do so and that he was about to make a delivery to one such customer. He says that he told Ms Nicoski several times that they were equal partners in the consultancy and she replied to the effect that he was not to take part in the management of the business in any way. He says that he told her that he believed she needed to consult a lawyer and that he was planning to do the same.
223 Ms Nicoski denies that Mr Williams and she discussed anything other than her telling him that the engagement was off. She says there was never any discussion about "a legal partnership" or about "our Nutrimetics partnership" and that simply did not happen. She says that after she called off the engagement Mr Williams said to her words to the effect: "I am going to ring all of your customers and consultants and tell them that you are a bitch and that I would not be involved in your business any more." She says she responded with words to the effect: "The business has always belonged to me; you are not to approach any of my customers or consultants and you are not to have anything more to do with my business."
224 Whatever be the precise truth, plainly the question of the future conduct of the business of the consultancy and to whom it belonged was mentioned in heated discussion.
225 Soon thereafter the parties consulted their solicitors and an exchange of correspondence took place.
226 In my view, having regard to the whole facts of the case, Mr Williams and Ms Nicoski agreed to enter into a partnership as of 5 February 1997, to operate Ms Nicoski's existing Nutrimetics consultancy.
227 I have, in the course of arriving at this finding, provided an account of the dealings between the parties over a period of nearly 18 months. It discloses, in summary, that in the period of the personal relationship of Ms Nicoski and Mr Williams from about June 1996 up until and including January 1997, Mr Williams was, in a sense, unusually involved in or interested in Ms Nicoski's existing Nutrimetics consultancy. His interest was, plainly, encouraged and accommodated not only by Ms Nicoski, but also by her mother, herself apparently a highly successful Nutrimetics consultant. Moreover, Nutrimetics itself facilitated, if not encouraged, Mr Williams' involvement by approving his attendance at conferences, including an international conference in Kuala Lumpur. None of that, however, resulted in a partnership between Ms Nicoski and Mr Williams in respect of Ms Nicoski's existing business. Nor is it pleaded that it did.
228 However, what is pleaded by Mr Williams is that, during January and February 1997, a partnership agreement was concluded. If one looks at the contemporaneous account of what was allegedly said and done during January 1997 and in the early part of February 1997, the evidence is lacking to prove an express agreement to enter into partnership and insufficient to enable an agreement to be inferred from the whole facts of the case. If matters rested there, I would have my doubts about it. However, matters do not rest there.
229 On 5 February 1997, Mr Williams resigned his position at Aherns. He then immediately attended the Nutrimetics conference in Sydney, at which Ms Nicoski's mother and father were also present. From that point on, Mr Williams was directly involved in the business that Ms Nicoski had previously been operating on her own account. The question is whether he was involved as Ms Nicoski would have it, as an employee or on some other contract for the provision of services, or as a partner in that business, as Mr Williams alleges. Again, the contemporaneous account of events during February and even March fails to make the position crystal clear. Ms Nicoski and Mr Williams provide contesting accounts of what they discussed. However, what is not in dispute is that Mr Williams was actively involved in the business from 5 February up until the end of March.
230 What happened then on 1 April 1997 is highly significant to the determination of the dispute as to whether or not there was earlier a partnership agreement concluded. As I have found, on that date not only did Ms Nicoski and Mr Williams sign the "note" to Nutrimetics, but they also signed the form of limited agency agreement used by Nutrimetics at that time in 1997, which limited agency agreement was then forwarded to Nutrimetics' head office in Sydney and accepted and acted on by Nutrimetics. Thereafter, however one views the evidence and record of dealings between Nutrimetics on the one hand and Ms Nicoski and Mr Williams on the other, Ms Nicoski and Mr Williams were treated and acted as joint consultants. From the time that Mr Williams pressed for the finalisation of arrangements with Nutrimetics in the way that he did, there occurred a sequence of events from which it should be inferred, on the balance of probabilities, that he and Ms Nicoski did in fact earlier agree to form a partnership, and that as of 5 February 1997 they operated Ms Nicoski's existing business in partnership.
231 However, there remains a question, which I will deal with below, as to whether or not the partnership included as one of its assets Ms Nicoski's existing business. But before turning to that question I should deal with some quite specific submissions put to the Court on behalf of Ms Nicoski as to why a partnership should not be found to exist or have existed at any material time.
232 On behalf of Ms Nicoski it is submitted that the evidence, when viewed closely, shows Mr Williams did not in fact believe that Ms Nicoski was intending to create legal relations in the three discussions they had respectively, in January, 5 February and 12 February 1997, upon which Mr Williams seemed to place particular reliance. Mr Williams was cross-examined about the extent to which he believed he was entering into legal relations with Ms Nicoski at material times. He conceded that, in the discussions he had with Ms Nicoski upon her discharge from hospital in early January when personal sentiments were exchanged, he did not regard the discussion as one between people intending to enter into legal relations. However, he did consider a second discussion some two or three days after that as having such a character. Mr Williams expressly disagreed with the proposition that he understood during his discussion with Ms Nicoski in February 1997 concerning, amongst other things, his expectation of an $8000 tax refund, that the discussion carried with it no intention to effect legal relations. While he accepted that no words were said by Ms Nicoski to suggest that she was entering into any legally binding agreement with him, he did not agree that the discussions were carried on with no intention to effect legal relations. He again conceded that much at page 465 of the transcript.
233 However, I do not consider that Mr Williams, in acknowledging the propositions put to him by senior counsel for the defendants, resiled from his testimony that the discussions were relevant to the discussion of a partnership. He merely acknowledged that Ms Nicoski never used words, that is, "never said anything" to indicate she was entering into a legally binding arrangement. This much is apparent from what Mr Williams said when the following exchange occurred (Tr 466 - 467):
"I'm suggesting to you that even if you say that you did, your understanding was that she was entering into no legally binding arrangement with you on that occasion?---No, I don't say that she - I can't assume what she is thinking.
No. I'm asking you for your understanding from what she said to you. Your understanding from what she said to you in February was that she was not entering into any legally binding arrangement at all. Isn't that so?---No, I disagree with that."
234 Mr Williams, after further cross-examination relating to this issue, made it quite plain that he understood, as a result of discussions between himself and Ms Nicoski in mid-February, that she was giving him a commitment of at least five years working together in the business. This plainly confirmed his intent in relation to the evidence he gave to convey the view that he was entering into a business partnership with Ms Nicoski. He certainly did not, in my view, concede that the arrangement he had in mind was not intended to have legal effect and was of a personal nature only. It should also be noted in passing that the reference by Mr Williams to a commitment of at least five years working together was, having regard to the whole of the evidence, a reference to his discussions with Ms Nicoski concerning the short-term goals, medium-term goals and long-term goals, the latter of which included becoming executive directors in a five-year time-frame.
235 On behalf of Ms Nicoski, it is also submitted that the implementation of the partnership alleged by Mr Williams following its alleged formation was not consistent with the conclusion of a partnership agreement. It is contended on behalf of Ms Nicoski that the arrangement apparently involved the use of business income to pay all mutual expenses, both of a personal and a business kind; that there was no differentiation between the nature of expenses paid; and that the parties simply lived off the business income. While this may be so, at least superficially, it does not, in my view, of itself prevent a conclusion that, at a material point, Ms Nicoski and Mr Williams concluded an agreement to enter into a partnership.
236 What is clear is that, once Mr Williams resigned his position at Aherns, the parties, by reason of their personal relationship, were dependent on income derived from the business to meet all their expenses. According to Mr Williams, Ms Nicoski's mother made this very observation in Sydney in early February. They do not appear to have made any ready distinction between business income and expenses and personal expenses in proceeding in this way.
237 The objective facts in any case may lead to the conclusion that the parties did conclude a partnership agreement, notwithstanding that in the carrying out of the partnership business thereafter there was a certain intermingling of the personal affairs of the parties, and in particular the payment of personal expenses, with the operation of the business and the payment of business expenses. However, where the parties who are involved in a business, and are dependent on that business for their income, also live together and effectively share a number of personal expenses and are inexperienced in matters of such a partnership business, as the evidence suggests they were here, such intermingling should not be considered a necessary or compelling reason for finding that the parties did not agree to enter into a partnership. As to what expenses were agreed to be partnership expenses, I will return.
238 I have already noted above that there is some disputation between Ms Nicoski and Mr Williams as to whether or not the expression "partnership" or similar expressions such as "partners" or "business partners" were in fact used in discussions before February 1997, or after that date. Whether or not such words were explicitly used may be an indication as to whether or not the parties intended to and did in fact conclude a partnership. However, the absence of the use of such expressions between persons engaged in the ordinary exigencies of personal and business life, who are not experienced in partnership matters, and in circumstances where they have not consulted lawyers for the provision of legal advice or documentation to govern their business relationship, is not itself a reason to conclude that a partnership was not intended or in fact formed.
239 For my part, I consider, as I have already indicated, that Mr Williams, in his evidence, particularly in his written statements of evidence, has reconstructed certain conversations and events. He has also conflated events and referred to them as having been discussed at times when they had not yet occurred or considered that they occurred after they have in fact occurred (as in the case of the establishment of the "Babylon" account). Mr Williams conceded in cross-examination that in many instances he or Ms Nicoski did not actually use words such as "partnership" or "partners" in the conversations.
240 Nonetheless, the whole facts of the case concerning what Ms Nicoski and Mr Williams actually did, especially on 1 April 1997, in both signing Ms Nicoski's letter of request (or "note") to Nutrimetics and a limited agency agreement, and in the period thereafter, lead me to the conclusion that the agreement they had earlier made was not merely a personal one, but a business one.
241 As I have found, the whole facts of the case lead to a finding that as of 5 February 1997, Ms Nicoski and Mr Williams concluded an agreement to operate Ms Nicoski's existing Nutrimetics consultancy in partnership. The questions that then arise, are (1) what were the terms of the partnership, and (2) what property, if any, constituted partnership property?
242 The business: As to the first question, it is plain that Ms Nicoski and Mr Williams shared the fruits of the Nutrimetics consultancy business that Ms Nicoski had been operating prior thereto, as well as that developed under the limited agency agreement signed on 1 April 1997. That is to say, they carried on the consultancy business (or businesses, if one treats that developed under the 1997 limited agency agreement as a separate business) so identified in common with a view to profit and were entitled to share the capital and profits in equal shares.
243 The 1988 limited agency agreement: However, nothing in the events I have referred to, including those of 1 April 1997, leads me to find that the partnership so concluded involved an agreement that the business of Ms Nicoski's existing consultancy, which she had developed under her 1988 limited agency agreement, and in particular the rights she had under that agreement, became partnership property. While the partnership was entitled to enjoy the income and benefits derived from the operation of Ms Nicoski's business during the subsistence of the partnership, as well as the income and benefits derived from the business developed under the 1997 limited agency agreement, I do not consider the rights under the 1988 agreement became partnership property. On the other hand, I consider the rights under the 1997 agreement do constitute partnership property.
244 In par 5B of his statement of claim, Mr Williams pleads that, further to par 5A:
"That part of the Partnership property which existed at the commencement of the Partnership, became Partnership property by reason that the Plaintiff and the First Defendant agreed that would be so, that agreement being:
(a) implied, by reference to acts and expressed intentions; and
(b) further and in the alternative, an express agreement formed in January 1997 by which the First Defendant agreed that in consideration of the Plaintiff working full-time in the Business, agreeing to enter the Partnership with the First Defendant, and agreeing to pay certain expenses of the Business whilst he continued to have money to do so, and until the revenue of the Business grew, the property of the Partnership would comprise the assets of the Business."
The plaintiff gives further particulars of this plea as follows:
"Particulars
The express agreement was oral and it comprised conversations between the Plaintiff and the First Defendant at the First Defendant's home unit in Wembley in January 1997 and on or about 10 February 1997, particularised at paragraphs 43, 46, 47 and 57 of the Witness Statement of the Plaintiff dated 1 November 2002."
245 There is a certain tautology in the first part of par 5B where it is pleaded that "That part of the Partnership property which existed at the commencement of the Partnership became partnership property". The question is, what property pre-existing the partnership became partnership property? In particular, did the rights under the 1988 agreement become partnership property?
246 As to whether the business of Ms Nicoski carried on by her under the 1988 limited agency agreement became an asset of the partnership, it is submitted on behalf of Ms Nicoski that her rights and status as an agent of Nutrimetics and the alleged goodwill held by her in respect of the limited agency agreement did not become partnership property. It is said, first, that the 1988 limited agency agreement could not be assigned. I have referred to that argument above. I do not think it is necessarily correct.
247 However, it is also contended that that is so because the assets could not have become partnership property other than by a legally binding agreement involving consideration. In this respect, Kelly v Kelly (1990) 64 ALJR 234, O'Brien v Komesaroff [1982] HCA 33; (1982) 150 CLR 310 at 322 and Harvey v Harvey [1970] HCA 11; (1970) 120 CLR 529, are relied upon. It is said that Kelly v Kelly in particular demonstrates how difficult it is for a Court to infer an agreement involving consideration when there has been no express agreement and that Kelly demonstrates that the true nature of alleged consideration must be carefully analysed when considering whether it supports an inference of agreement by conduct.
248 It is submitted on behalf of Ms Nicoski that it is clear there was no express agreement concerning the assets of Ms Nicoski's existing business, as alleged in par 5B of the statement of claim. It is said the plaintiff's own evidence was to that effect (Tr 391-392, 468 and 470). It is further said on behalf of Ms Nicoski that there was nothing in the conduct of the parties which could support an inference of an agreed acquisition of property. In this regard it is said that she had operated her own business for some eight years before she met Mr Williams and there is no foundation for concluding that she implicitly agreed to transfer her business and agency agreement to the partnership.
249 The question of what actually constitutes partnership property is to be determined by reference either to the express agreement of the parties or implied by reference to the conduct of the parties, as the authorities cited on behalf of Ms Nicoski demonstrate. There is no simple "one-size-fits-all" rule in this regard. It is commonplace to observe that property used by a partnership can remain the separate property of a partner and not be or become partnership property: see, for example, Miles v Clark [1953] 1 WLR 537. A good example of this is farming land which may be utilised by a farming partnership, but which remains the property of a particular partner, as explained in Harvey v Harvey (supra). In Miles v Clarke (supra), Harman J at 782 expressed the view that "no more agreement between the parties should be inferred than is absolutely necessary to give business efficacy to that which has happened". In Kelly v Kelly (supra), at 237, the Full Court said that that comment may overstate the position, "but it would plainly be wrong to ascribe agreement to the parties unless their dealings clearly point in that direction".
250 In O'Brien v Komesaroff (supra) at 322, Mason J observed:
" ... not all the property of each partner used for the purposes of the partnership business can be said to be brought into the partnership. It may in some circumstances remain the separate property of one partner ... Whether property of a partner becomes partnership property depends on the agreement of the parties ... The acts and intention of the parties, not the operation of s 24 [the Victorian equivalent of s 30(1) of The Partnership Act] determine finally and ultimately the question whether property owned by a partner becomes partnership property."
251 Thus, in Kelly v Kelly (supra) at 237, the Full Court observed that, "the fact that the abalone permit was the principal source of partnership profits led to no necessary conclusion that it was brought into the partnership as part of its assets". In Kelly's case, the Court ultimately determined that, on all of the facts, including the fact that the parties did not intend an initial abalone permit to be a partnership asset, that a written partnership agreement between them contemplated the use of the separate property of a partner in the partnership business, and the lack of evidence to show that partnership funds had been used to acquire the subsequent abalone authority, which was the subject of dispute in the case as to whether or not it was a partnership asset, did not found an inference that the parties intended the abalone authority to be held by the respondent on behalf of the partnership. The Court concluded, at 238:
"The only inference which clearly emerges is that when the abalone authority replaced the pre-existing permit the parties simply did not turn their minds to the question of ownership. In those circumstances, there is no basis upon which this Court could properly interfere with the finding of the learned trial judge, confirmed by the Full Court, that the abalone authority did not constitute partnership property."
252 Counsel for Mr Williams submits that, in this case, the partnership property and partnership business were, in effect, inseparable and that, in practical terms, there could have been no retention of the business assets by Ms Nicoski while the partnership carried on the business. I accept that this is so in relation to the business developed under the limited agency agreement with Nutrimetics that was concluded on or about 2 April 1997, but only because under that agreement the parties were joint consultants and, in that sense, "jointly owned" the rights under the agreement. However, I do not consider it so in respect of the business developed under the 1988 limited agency agreement. The parties simply agreed to share the income and benefits to be derived from the rights held by Ms Nicoski under that agreement. The joint consultancy provided for by the 1997 limited agency agreement did not depend upon the 1988 limited agency agreement as a matter of fact or law.
253 I do not consider that the plaintiff and the first defendant expressly agreed anything in respect of the assets of Ms Nicoski's existing business, save that they would share the profits and benefits arising from the exercise of Ms Nicoski's rights under the 1988 agreement. I do not accept that the conversations relied upon by Mr Williams and referred to in the particulars constitute, inter alia, an oral agreement that all of Ms Nicoski's rights and entitlements under the 1988 agreement should, in effect, become the joint property of Mr Williams and herself. In fact, I do not think that the parties consciously turned their minds to the question whether the rights under the 1988 limited agency agreement were to become partnership property. At most, on Mr Williams' account, they agreed to a "joint consultancy".
254 It is not expressly pleaded by the plaintiff, or by the first defendant, that the 1988 limited agency agreement came to an end upon the conclusion of the 1997 limited agency agreement. There is no necessary reason why the conclusion of the 1997 agreement should have terminated the 1988 agreement, although counsel for Ms Nicoski suggests that her failure to effect sales under it for a six-month period may have automatically terminated it. While Mr Williams may have had plans to build a successful Nutrimetics consultancy on the edifice of the business Ms Nicoski had established pursuant to the 1988 limited agency agreement, I am not satisfied on the balance of probabilities, either by reference to what Mr Williams says was agreed or their acts, that Mr Williams and Ms Nicoski agreed that her existing business should become an asset of the partnership.
255 On behalf of Mr Williams, it is also contended that the act of Ms Nicoski in requesting an alteration to her 1988 agreement "to include Troy M Williams" is an indication that the parties agreed that the rights, benefits and entitlements she had under the 1988 agreement were to be available to the new partnership. However, it must be remembered that that request was accompanied by the signed 1997 limited agency agreement. In my view, when Nutrimetics accepted that new agreement on 2 April 1997, it primarily governed the relationship. I consider the letter signed on 1 April 1997 by Ms Nicoski and Mr Williams to be equivocal so far as indicating an intention that her existing rights were to become the property of the partnership. The note is equally consistent with an agreement to share the profits and benefits derived from the operation by the partnership of the existing business.
256 On behalf of Mr Williams, it is further contended that the fact that the original consultancy number 184584 was maintained after 1 April 1997 is further evidence that Mr Williams and Ms Nicoski intended that there should only be a single consultancy and that is the new one established in the name of the partnership. Again, I consider this undoubted fact to be equivocal. A fresh limited agency agreement was then completed. In a practical sense, the parties contemplated that they would henceforth operate only one consultancy business and this is what they did.
257 However, as I have found, I do not consider that Mr Williams and Ms Nicoski turned their minds expressly, or by their conduct, to the question of whether the rights, benefits and entitlements Ms Nicoski had under the 1988 agreement - that is to say, the assets of her existing business - should become the property of the new partnership. On the balance of probabilities, I am not satisfied that the plaintiff's claim that they did so intend is made out. There is an insufficiency of evidence to support Mr Williams' claim in this regard.
258 The evidence of Mr Williams and Ms Nicoski rather leads me to the view, on the balance of probabilities, that they intended establishing new downlines as the principal means of promoting a consultancy that might resemble some of the highly successful consultancies they were aware of within the Nutrimetics organisation. The question of stimulating old downlines, no doubt, was an issue. The downline that figured most in their discussions was the Kuhnemann agency in Queensland. Revenue to be earned from that downline would plainly be important to Mr Williams and Ms Nicoski in establishing their partnership business. The partnership was entitled to share the profits and benefits derived from that downline, but the business asset it represented - the 1988 limited agency agreement - was not, in my opinion, a business asset of the partnership. It was akin to farming land or a statutory licence owned by one partner, but used by the partnership to earn income, without itself becoming partnership property. Thus, the encouragement given by Mr Williams to Ms Nicoski to maintain the Kuhnemann downline is an act which of itself does not resolve the question whether the parties expressly or impliedly agreed that all of Ms Nicoski's rights, benefits and entitlements under the 1988 agreement were to become the property of the partnership.
259 Accordingly, what does appear to be clear on the evidence, or at least should properly be inferred from the whole facts of the case, is that Mr Williams and Ms Nicoski agreed to share the profits and benefits to be derived from the operation of her existing business, as well as from any new business they might together develop, as and from 5 February 1997. However, that agreement did not involve the assets of Ms Nicoski's existing business becoming the assets of the new partnership. By contrast, it should properly be inferred from the whole facts of the case that the rights under the 1997 limited agency agreement did become partnership property.
260 Therefore, in summary, I find that a partnership between Mr Williams and Ms Nicoski commenced as of 5 February 1997 in respect of the operation of her existing Nutrimetics consultancy. I specifically find that the property of the partnership did not include the business assets of Ms Nicoski's Nutrimetics consultancy established under her 1988 limited agency agreement. However, I do consider that the partnership property included the business developed under the 1997 limited agency agreement between Mr Williams and Ms Nicoski on the one part and Nutrimetics on the other, and the rights, entitlements and benefits it conferred on the partnership.
261 Partnership expenses: Mr Williams pleads that the partnership was an equal partnership. Section 34 of The Partnership Act provides that the interests of partners in partnership properties and their rights and duties in relation to the partnership shall be determined, subject to agreement, express or implied, between the partners by the rules therein set out, including rule (1) , that all partners are entitled to share equally in the capital and profits of the business, and must contribute equally towards the losses, whether of capital or otherwise, sustained by the firm. As, in my view, there is no relevant agreement between the partners to the contrary, the rule set out in s 34(1) applies here.
262 In this respect, I do not accept the submission made on behalf of Ms Nicoski that it was agreed that the business income would be applied in payment of all business and in the repayment of the loan obtained by Ms Nicoski to pay her 1996 tax assessment and in making repayments on Ms Nicoski's Wembley unit, where the parties lived and from where they operated their partnership business.
263 While Mr Williams plainly stated that he proposed that certain expenses, including the tax liability of Ms Nicoski and mortgage repayments for the home unit in Wembley, should be met out of business income, when considered in context his evidence does not, in my view, constitute an admission of a partnership agreement that all such personal expenses were to be a partnership expense. Initially, he explained that he paid a number of business expenses on behalf of Ms Nicoski between December 1996 and February 1997. He had used his AMEX account for this purpose. Later in 1997, when funds were available, he said some of these were paid into the American Express account to enable him and Ms Nicoski to continue to use that account "to fund business expenses". In that context, Mr Williams specifically stated in February 1997 that he would "be injecting funds" into the National Australia Bank account maintained by Ms Nicoski and that they should pay out of that account partnership expenses and also the personal loan (for tax) and home loan repayments. He agreed that that was something he volunteered to Ms Nicoski. However, there was no agreement about it. Ms Nicoski did not accept there was any agreement to that effect. It was, in my view, simply a statement of intention made by Mr Williams. Indeed, Mr Williams stated (at Tr 390):
"As I've said in my statement, the conversation was I said to Nicoski, 'I will inject funds into the partnership account'. Nicoski's reply was, 'You don't have to pay me anything to be in the partnership.' And I said, 'No, no, no. What I'm saying is I will use my funds to pay partnership expenses until such time as my funds run out'."
Mr Williams then disagreed with the proposition that Ms Nicoski had never agreed with him that he should inject funds into the partnership. Later, in cross-examination (at Tr 444) when the question of what funds would be injected and what discussion or agreement there was about it, Mr Williams stated:
"After Georgette Nicoski said to me, 'You don't have to pay me to be a partner,' I said to her - I clarified and said, 'No, what I mean is that I will be paying partnership expenses until such time as my money runs out or until the business gets up on its feet'."
Mr Williams stated that it was not his expectation that he would be reimbursed eventually. He put this statement in the following context:
"Because I was waiting to strike a profit at some point in the future."
He agreed that partnership income would be used to pay off Ms Nicoski's personal loan for a tax bill and also in respect of monthly mortgage payments for the Wembley unit. Mr Williams also agreed that, at the time these discussions took place, there was no discussion concerning a "reckoning" being made concerning the income and expenses.
264 In the end, despite the close cross-examination of Mr Williams concerning the basis upon which business and personal expenses would be met, I am of the view that the parties did not agree anything to the effect that the partnership income would be expended in the payment of personal expenses such as tax, home unit mortgage payments and the like. Rather, it appears from the evidence that, given the close personal relationship between the parties, and the fact that they were starting out in business together, Mr Williams simply proposed that business income be used as cash flow to acquit all expenses without regard to their nature. The proposal was made in the realisation that there would, at least early on, be no other income stream to meet personal expenses. This proposal was not expressed by Mr Williams as being a term of the partnership agreement, but rather as a practical means of ensuring that important personal expenses were met while the partnership business was being built up. The parties do not appear to me to have turned their minds to the question of "reimbursement" of Mr Williams (or Ms Nicoski) for the payment of personal expenses once the business began to turn a profit. The question of a partnership reckoning was, at the stage this discussion took place, far from the minds of the parties. As it transpires, the occasion for a reckoning never arrived, at least not during 1997.
265 Ms Nicoski says the partnership, if it existed, was terminated on 22 December 1997. As I understand this submission, it is said on behalf of the first defendant that what passed between Ms Nicoski and Mr Williams on 22 December 1997 constituted termination at common law.
266 There is an important question, apparently undecided in relation to The Partnership Act 1895, whether the means of determining a partnership at will at common law remain available in light of the particular provisions of the Act. By s 6 of the Act, as noted above, the rules of equity and common law applicable to a partnership continue in force in relation to a partnership after the commencement of the Act, except so far as they are "inconsistent" with the express provisions of the Act.
267 At common law, a partnership at will could be determined on notice by one partner to the other partners. That notice did not need to be in writing, although for obvious reasons the giving of written notice would largely remove the opportunity for subsequent disputation as to whether or not notice of intention to dissolve a partnership had been given.
268 As to the position before the coming into operation of the Act, the following statement from Lindley on Partnership & Companies, 4th ed, 1878, London, William Maxwell & Son, Vol 1 at pages 220 - 221 conveniently sets out the law:
"Any member of an ordinary partnership, the duration of which is indefinite, may dissolve it at any moment he pleases, and the partnership will then be deemed to continue only so far as may be necessary for the purpose of winding up its then pending affairs [footnote omitted]. This rule applies to ordinary mining partnerships [footnote omitted]; and as well where there are many as where there are only a few partners [footnote omitted]. It also applies although one of the partners to whom the notice is given may be a lunatic [footnote omitted] ...
A notice that the partnership must, to be effectual, be explicit, and be communicated to all partners [footnote omitted]. The notice may be prospective [footnote omitted]. A proposal to dissolve on terms which are not accepted, does not amount to a dissolution [footnote omitted]. Nor does a notice that a partner's share has been forfeited; for by such notice it is not intended that the partnership shall be considered as dissolved as to all the partners, but only that the one partner shall have no further interest in it [footnote omitted]. An answer to a bill in chancery has been held sufficient notice [here reference is made to Syers v Syers 1 App.Ca.174]
It has never been determined that a partnership constituted by deed can only be dissolved either by deed or by operation of law: and it is apprehended that no deed is requisite. In Doe v Miles [footnote omitted] the question was raised; but as the partners had all signed a notice advertising a dissolution, Lord Ellenborough presumed that it had been effected with all due solemnity. It is clear from the report that there was, in fact, no deed of dissolution, but there may have been in the article some clause providing for a dissolution otherwise than by deed.
A dissolution of a partnership at will may be inferred from circumstances, eg, a quarrel, although no notice to dissolve may have been given [here is cited Pearce v Lindsay, [1860] EngR 846; 3 De GJ & Sm. 139.
A notice once given cannot be withdrawn without consent [footnote omitted]."
269 In the reference to Doe v Miles [1816] EngR 327; 4 Camp 373 Lindley (as he then was) included the following footnote:
"(u) [1816] EngR 327; 4 Camp 373, and 1 Stark 181. In Hutchinson v Whitfield, Hayes (Ir Ex), 78, it was agreed that the partnership should be dissolved by deed only; but it was held that an award dissolving the partnership was valid, the submission being under seal."
270 As Higgins and Fletcher, The Law of Partnership in Australia and New Zealand, 8th ed, at pages 215 - 216, explains, where a partnership for an undefined time has been constituted less formally than by deed, the courts have recognised that any conduct that results in the other partners being informed of one partner's obvious intention to determine the partnership will suffice by way of notice of intention to dissolve the partnership.
271 In Pearce v Lindsay [1860] EngR 846; (1860) 3 De GJ & Sm 139 it was held that the filing of a defence denying the existence of a partnership was, at common law, a sufficient notice to terminate a partnership agreement under hand. In Unsworth v Jordan [1896] WN 2(5), the Court recognised that notice sufficient to terminate an oral partnership at will could be inferred when one party issued and served a summons seeking a dissolution of the partnership and taking of accounts. Syers v Syers (1876) 1 App Cas 174 decided that the mere service of pleadings in which the existence of the partnership is denied is an effective notice for the purpose of terminating a partnership at will, where a partnership had in fact existed. All that is required of the notice is that it should be clear and unambiguous: see Syers v Syers (supra) at 183 per Lord Cairns. Indeed, it appears that it is not necessary that the partner giving such notice appreciates its legal effect: Toogood v Farrell [1988] 2 EGLR 233, cited by Lindley and Banks on Partnership (supra) at [24-21].
272 It follows that at common law a notice, whether given orally or in writing, may determine a partnership at will. However, the notice must be clear and unambiguous so that the other partners (or partner, if there is only one other) is left in no real doubt that the other partner intends that the partnership should be considered at an end, either upon the giving of that notice or at some particular date in the future. It follows that at common law the notice of intention to dissolve the partnership need not be "express", in the sense that it does not need to be given on a particular occasion or in a particular form of words.
273 As noted above, the Partnership Act 1890 (Eng) (Lord Lindley's Act) was intended to both consolidate and amend the law of partnership, as was The Partnership Act 1895 of this State. As noted earlier, the Act followed the model of Lord Lindley's Act. Lord Lindley's Act was, amongst other things, designed to consolidate and amend the powers of a Court to decree the dissolution of a partnership. Prior to the passage of Lord Lindley's Act, the courts had a jurisdiction to dissolve a partnership, usually in circumstances where the duration of the partnership was defined, by reason of the hopeless state of the partnership business, the confirmed lunacy of one of the partners and misconduct on the part of one or more of the members of the firm and the destruction of mutual confidence. However, other circumstances were also recognised as affecting the continuance of a partnership including death or the occurrence of some event which renders the continuance of the partnership illegal: see generally Lindley on Partnership, 4th ed, pp 222 - 231.
274 Lord Lindley's Act specifically deals with most aspects of partnership, although in most instances continuing to permit partners to regulate their own affairs by agreement. Lord Lindley's Act deals with the nature of partnership, relations of the partners to persons dealing with them, relations of partners to one another, as well as dissolution of partnership and its consequences.
275 By s 32 of Lord Lindley's Act it is provided that:
"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 his 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 so mentioned, as from the date of the communication of the notice."
276 Subsequent provisions of Lord Lindley's Act dealt with dissolution by death, bankruptcy, etcetera, and by illegality of partnership. Section 35 of Lord Lindley's Act expressly provided for the dissolution of a partnership by decree of the court.
277 In my view, the provisions of Lord Lindley's Act dealing with dissolution of partnership and its consequences were and are intended to be a complete statement of the law governing the topic of dissolution and to operate in substitution for the rules of the common law or equity that may have applied prior to the commencement of the Act in relation thereto. Thus, the statement in s 32, as to the circumstances in which a partnership "is dissolved", apply by force of the statute. Similarly, the circumstances in which a Court is empowered to decree a dissolution of partnership is limited to the particular cases set out in s 35 of Lord Lindley's Act. The principal qualification that one might make to this, is in relation to those cases where the partners to a partnership, whether a partnership at will or for a fixed term or a single adventure or undertaking had, by agreement agreed to the dissolution of their partnership. Lord Lindley's Act does not proscribe proceedings for a declaration that a partnership was in fact dissolved at a particular date by virtue of the agreement of a party and the seeking of appropriate orders for accounts and the like following such dissolution. This is in fact contemplated by the introductory words to s 32 that make the prescribed means of dissolution "subject to any agreement between the partners". The only other qualification that need be made is that the rules of equity also continue to apply to the dealings of partners.
278 In other words, there are circumstances where a partnership is dissolved under Lord Lindley's Act by reason of the operation of s 32 and where the Court may declare, should it be necessary, that such dissolution has occurred; and then there are other cases where a decree of dissolution of the Court is required because of the circumstances identified in s 35 of Lord Lindley's Act, and the Court so decrees. Normally, the jurisdiction of the Court to decree dissolution of a partnership under s 35 of Lord Lindley's Act would only arise in respect of a partnership for a fixed term that has not expired or in respect of a partnership for single adventure or undertaking which has not terminated and in respect of which difficulties have arisen. Obviously, in respect of a partnership at will, because of its nature, the power of a Court to decree dissolution of a partnership would not normally need to be invoked.
279 In respect of a partnership at will, s 32(c) of Lord Lindley's Act specifically contemplates that a partner may give notice to the other or other partners of his or her intention to dissolve the partnership and that the partnership "is dissolved" as from the date mentioned in the notice.
280 By way of confirmation, s 26 of Lord Lindley's Act expressly deals with the question of "Retirement from partnership at will", but in terms, as will be seen, that reflect precisely the terms of the common law prior to the passage of Lord Lindley's Act. While the heading of this section refers to "Retirement" from partnership at will, as noted earlier it is generally accepted that this provision governs the determination of such a partnership generally. Section 26 of Lord Lindley's Act provides as follows:
"26(1) Where no fixed term has been agreed upon for the duration of the partnership, any partner may determine the partnership at any time on giving notice of his intention so to do to all the other partners.
(2) Where the partnership has originally been constituted by a deed, a notice in writing, signed by the partner giving it, shall be sufficient for this purpose."
281 It may be noticed immediately that s 26(1) was intended to and does in fact reflect the common law as stated by Lindley on Partnership, 4th ed (supra).
282 Further, it will be noticed that s 26(2) of Lord Lindley's Act was intended to and does in fact reflect the law as Lindley himself "apprehended" it to be in the fourth edition of his work, to the effect that the common law recognises that a partnership at will constituted by deed may nonetheless be terminated by a notice that is not itself sealed as a deed.
283 Lindley and Banks on Partnership (supra) say of s 26(2) that it establishes that a notice in writing is merely "sufficient" and not "necessary" to work a dissolution of a partnership at will constituted by deed, and that oral notice will be effective in all cases to effect a termination, even where the partnership was originally constituted by deed: see Lindley and Banks on Partnership (supra) [24-21]; the learned author also cites in support of this statement Walters v Bingham [1988] 1 FTLR 260, 267, although it is not clear why this is so.
284 Thus, if a partnership at will, whether constituted by deed or made orally, is determined by notice, be it notice given orally or in writing, the partnership "is dissolved" as and from the date of such notice by virtue of s 32(c) of Lord Lindley's Act. It is the force of s 32(c) in such circumstances that effects the dissolution of the partnership.
285 As I say, s 32(c) and s 26 of Lord Lindley's Act, which continue to apply today in England, and in most States and Territories of Australia in an equivalent statutory form, appear to me largely, if not wholly, to reflect the common law. Thus, under the terms of Lord Lindley's Act, and its equivalents, it seems to me that a partnership at will of the type I have found to exist here between Ms Nicoski and Mr Williams, might be terminated upon oral notice or by notice to be inferred from the conduct of the parties, including from a quarrel, as Lindley on Partnership, 4th ed (supra) at page 222 indicated.
286 However, in this State the relevant provisions of the Act are different from those found in Lord Lindley's Act in a very particular respect. That is, that in s 43(c) - which is otherwise identical to section 32(c) of Lord Lindley's Act - it is stated that a partnership is dissolved if entered into for an undefined time by any partner "giving notice in writing" to the other or others of his intention to dissolve the partnership. The words "in writing" do not appear in s 32(c) of Lord Lindley's Act.
287 Similarly, in s 37(1) of the Act - which is otherwise identical to s 26(1) of Lord Lindley's Act - the words "in writing" have been added after the words "giving notice". However, s 37(2) is identical with s 26(2) of Lord Lindley's Act.
288 The question raised for consideration here is whether s 43(c) and s 37(1) of the Act are intended to effect any material change to the partnership rule stated by the equivalent provisions of Lord Lindley's Act; or to put this another way, whether they are intended to effect any material change to the common law position that the provisions of Lord Lindley's Act appear to have declared or codified.
289 On behalf of Ms Nicoski it is correctly said that at common law a partnership at will was terminable informally. It is said that the Act in this State by s 6 only displaces the common law where the common law is inconsistent with the express provisions of the Act. This again plainly is so. It is then contended that s 37(1) and s 43(c), which enable termination by written notice, are "facilitative, not prescriptive". It is said they are not expressed to be the exclusive means of termination and that there is no "policy reason" for supposing that they were intended to be exclusive. On the contrary, it is contended, very clear words will be required to express a legislative intention to impose formality on dealings between partners. Thus, it is contended that, on their ordinary meaning, no express provision in the Act displaces the common law.
290 However, on behalf of Mr Williams, it is said that the Act expressly requires a notice dissolving a partnership to be in writing: s 37(1) and s 43(c). It is contended that it is inconceivable that the Parliament in taking this step was merely giving a partner the option of notifying the dissolution in writing, as well as orally. On behalf of Mr Williams it is accepted that, at common law, either method, written or oral, was available. By referring to written notice the Parliament cannot have meant to provide a means of dissolving a partnership at will which was not previously available. Therefore, written notice must be considered the sole means by which a partnership at will can be dissolved, save for a decree of dissolution.
291 In my view, as inconvenient as it may seem to some, I consider the contention made on behalf of Mr Williams to be correct. While there is no helpful legislative history or other report available to explain why it was that, uniquely in this state, Lord Lindley's Act was redrafted in respect of the relevant provisions of the Act to add the words "in writing", it appears the addition of these words in the present s 43(c) and s 37(1) was quite deliberate. It may be that the words were added because there was a belief that the recommended practice - recommended in every addition of "Lindley on Partnership" published after the passage of Lord Lindley's Act - of giving notice in writing to avoid later evidentiary difficulties (see "Lindley and Banks on Partnership" (supra) at [24 -22] at page 686) should be made mandatory. In view of the competing versions of Ms Nicoski and Mr Williams as to what was said, and not said, at their meeting on 22 December 1997, and the difficulty in deciding whether one version should be preferred to the other, such a legislative belief, if held, is probably a reasonable one.
292 Be that as it may, it seems to me that because s 43 prescribes the circumstances in which a partnership "is dissolved" (subject to any agreement between the parties - which may be an inferred agreement) it is to that provision that attention must be directed in determining whether a partnership at will has been dissolved in the circumstances of this case. Section 43(c) in that regard is quite clear; there is no ambiguity about it. Where there is no agreement between the parties to the contrary, the partnership "is dissolved by any partner giving notice in writing to the other ... of his intention to dissolve the partnership" and "the partnership is dissolved as from the date mentioned in the notice as the date of dissolution". The requirement for written notice is inconsistent with the requirement for the common law that any form of notice is sufficient to effect dissolution.
293 In this particular instance, there is no express agreement as to dissolution; nor do I consider any such agreement can be inferred by reason of the events of 22 December 1997 or at any other time. While Mr Williams walked away from his personal relationship with Ms Nicoski, he did so without agreeing expressly or impliedly that his interest in the business was at an end. Ms Nicoski did not accept that there was a partnership in the business. An agreement cannot be inferred in these circumstances by which the partnership was brought to an end. It may further be argued that Ms Nicoski's statements to Mr Williams on 22 December 1997, in effect denying the existence of a partnership in the course of a quarrel, should be construed as notice of dissolution of any partnership. However, even if this may be argued, such notice does not constitute "notice in writing" for the purposes of s 43(c).
294 The question then is whether there is any "notice in writing" that gives notice of the intention of one partner or the other to dissolve the partnership. On behalf of Mr Williams it is said there is no such notice in writing and so the Court must now decree the partnership dissolved under s 46. On behalf of Ms Nicoski, it is submitted that letters that were written on her behalf by her solicitors to Mr Williams early in 1998 constitute such notice in writing. However, on behalf of Mr Williams, it is submitted that such letters were part of an exchange of "without prejudice" correspondence designed to resolve the dispute and their contents are privileged and should not be received into evidence for this purpose. If these letters are admitted into evidence, counsel for Mr Williams submits there is nothing in the letters which constitutes a clear and unambiguous notice of intention to dissolve the partnership.
295 In relation to the terms of "notice in writing" required to satisfy s 43(c) and s 37(1) of the Act it is submitted on behalf of Ms Nicoski that written notice does not need to be "express notice". I accept that this is the case. The question is a rather practical one, having regard to the principles identified above, namely, whether notice has been given in writing by a partner to the other partner or partners of his or her intention to dissolve the partnership in terms that are sufficiently clear and unambiguous. As noted above, the filing of a defence in an action denying the existence of a partnership constitutes sufficient notice: Syers v Syers (supra). As noted in Unsworth v Jordan (supra), the commencement of proceeding by one partner for an account and consequential relief in respect of a partnership may also constitute notice to the other partner or partners of his or her intention to dissolve the partnership. In such case, such notice, in my view, would also constitute notice "in writing".
296 There are some instances where "express notice" is required by a statute to effect a particular transaction or outcome, but this is not such a case. In Consolidated Trust Co Ltd v Naylor [1936] HCA 33; (1936) 55 CLR 423, at 439, Dixon and Evatt JJ had to determine whether an endorsement under the hand of a mortgagee on a deed of mortgage of land amounted to an assignment of the respondent's covenant sufficient to satisfy the requirements of s 12 of the Conveyancing Act 1919-1932 (NSW). That provision required that "express notice in writing" of the assignment be given. At CLR 438 - 439 their Honours stated:
"The object of the requirement made by the words 'of which express notice in writing shall have been given' is, we think, correctly stated in Warren's Choses in Action (1899), at pp.177, 178. 'The term "express notice" is doubtless employed by way of opposition to notice arising by implication or operation of law, and to what was known in equity as constructive notice. It means a notice which indicates an express intention - a direct and definite statement of a thing, as distinguished from supplying materials from which the existence of such a thing may be inferred.' The purpose is to make essential actual notice that the debt has been assigned."
297 In relation to the requirement that a notice of intention to dissolve a partnership at will be "in writing", it seems to me that a particular notice which indicates an express intention - "a direct and definite statement of a thing" - is not required and that it is sufficient for a document, which by its terms provides the notice in clear and unambiguous terms, is sufficient.
298 In my view it is open to consider whether the terms of a letter or letters written by a solicitor on behalf of a partner to the other partner of a partnership or his or her solicitor constitutes or constitute sufficient notice of the intention of their client to terminate the partnership. However, before I consider whether such letters Ms Nicoski seeks to rely upon in this case have that effect, I should first determine whether the letters are admissible in evidence over the objection and claim of Mr Williams to a "without prejudice" privilege in respect of them.
299 By letter dated 22 January 1998 Deacons Graham and James, solicitors for Ms Nicoski, wrote to Healy Pynt, solicitors for Mr Williams, by facsimile transmission of that date marked "Without Prejudice". This fax does not refer to any prior written communication received by Ms Nicoski or Deacons Graham and James from Mr Williams or his apparent solicitors, but by the very fact of its transmission suggests that Ms Nicoski and her solicitors were aware that Mr Williams had appointed solicitors to act for him. The fax in relevant parts reads:
"We act for Georgette Nicoski.
Our client has consulted us in relation to her financial affairs arising out of her association with Troy Williams.
Our client wishes to expeditiously resolve this matter without resort to litigation and has instructed us that upon receipt of the information sought below, she will make to your client an offer to settle once and for all, all financial and associated matters between them."
300 The fax then sets out a request for information concerning a handwritten document prepared by Mr Williams.
301 It appears that Healy Pynt on behalf of Mr Williams responded to that fax and that further communications occurred between the solicitors resulting in Healy Pynt, on behalf of Mr Williams, rejecting an offer of settlement made by Deacons Graham and James on behalf of Ms Nicoski. By fax dated 9 June 1998, Deacons Graham and James wrote to Healy Pynt in the following relevant terms under the heading "Without prejudice save as to costs":
"We refer to your without prejudice facsimile of 5 May 1998. We note your client's rejection of our client's offer of settlement. Our client has instructed us to respond to your facsimile adopting the headings and numbering in your facsimile:
1. The Partnership
1.1 Our client has instructed us not to engage in a lengthy and unproductive debate about whether or not there was a partnership. Our client rejects your client's suggestion that the business increased significantly as a result of his efforts. The majority of the business is located in Queensland ...
2. Claim in respect of shared living expenses
2.1 Again, our client has instructed us not to engage in lengthy and unproductive debate regarding the shared living expenses ..."
302 Then, by fax dated 7 September 1998, Deacons Graham and James again wrote to Healy Pynt under the heading "Without prejudice/save as to costs", in the following relevant terms:
"We have your letter of 13 August 1998.
We make the following brief points in response to your letter of 9 July 1998:
PLAINTIFF'S PRIVILEGE
2. If any partnership did exist then it was certainly brought to an end on 31 December 1997.
Our client is prepared to agree to repeat our client's last offer of settlement of 9 June 1998 and to allow that offer to remain open for acceptance by 10 September 1998.
If your client does not accept our client's offer then the matter must proceed to court."
303 On behalf of Ms Nicoski, it is said that the communication of her solicitors to Mr Williams' solicitors is not privileged as a "without prejudice" communication. It is contended that "without prejudice" privilege only protects admissions and does not render immune from tender other statements made in the course of correspondence, such as those set out above.
304 To this end, counsel for Ms Nicoski relies on Field v Commissioner for Railways (NSW) [1957] HCA 92; (1957) 99 CLR 285, in which it was held that an oral admission made by the plaintiff to a medical specialist nominated by the respondent as a result of a course of conduct proposed in "without prejudice" negotiations was not sufficiently incidental to those communications to be considered a privileged admission made as part of the "without prejudice" negotiations. The majority of the Court (at CLR 291) in a joint judgment (Dixon CJ and Webb, Kitto and Taylor JJ) stated:
"The law relating to communications without prejudice is of course familiar. As a matter of policy the law has long excluded from evidence admissions by words or conduct made by parties in the course of negotiations to settle litigation. The purpose is to enable parties engaged in an attempt to compromise litigation to communicate with one another freely and without the embarrassment which the liability of their communications to be put in evidence subsequently might impose upon them. The law relieves them of this embarrassment so that their negotiations to avoid litigation or to settle it may go on unhampered. This form of privilege, however, is directed against the admission in evidence of express or implied admissions. It covers admissions by words or conduct. For example, neither party can use the readiness of the other to negotiate as an implied admission. It is not concerned with objective facts which may be ascertained during the course of negotiations. These may be proved by direct evidence. But it is concerned with the use of the negotiations or what is said in the course of them as evidence by way of admission. For some centuries almost it has been recognised that parties may properly give definition to the occasions when they are communicating in this manner by the use of the words 'without prejudice' and to some extent the area of protection may be enlarged by the tacit acceptance by one side of the use by the other side of these words: [citations omitted]"
305 Thus, it is contended, on behalf of Ms Nicoski, that the contents of the solicitor's communications, which are said to bear on the question of notice of intention to dissolve the partnership, have no bearings on "admissions" made on behalf of Mr Williams and that she is now free to tender those portions of the communications which constitute notice of their intention to dissolve the partnership.
306 On behalf of Mr Williams, it is contended that the "without prejudice" privilege is a joint privilege and applies to all communications, not merely to admissions in them.
307 "Cross on Evidence", 6th Australian ed, (J D Heydon, ed, 2000) at [25350] in discussing statements made "without prejudice" states that:
"The statements often relate to the offer of a compromise, and, were it not for the privilege, they would constitute significant items of evidence on the ground that they were admissions. However, the rule is not confined to admissions; it extends to all bona fide without prejudice statements which touch upon the strengths or weaknesses of the parties' cases or place a valuation on a party's rights."
308 The learned editor of this edition of "Cross on Evidence", in making this statement, refers to Unilever plc v Proctor and Gamble Co [1999] 1 WLR 1630, distinguishing and explaining Kurtz and Co v Spence and Sons (1887) 58 LT 438 and Skinner and Co v Shew and Co [1893] 1 Ch 413. What is said would also appear to be supported by what the Court said in Harrington v Lowe (1996) 190 CLR 311 at 323 - 4.
309 As McNicol "Law of Privilege" (Law Book Company Ltd 1992) at page 435 states:
"The general rule is that communications between parties which are genuinely aimed at settlement whether oral or in writing, cannot be put in evidence without the consent of both parties in the event of those negotiations for settlement being unsuccessful [footnote omitted]. The 'without prejudice' rule is a rule governing the admissibility of evidence and it operates as a joint privilege [footnote omitted] in excluding from evidence all negotiations, whether they be offers of relief, offers of payment, offers of compromise, or admissions made for the purpose of settling the dispute.
Statements of the rule and its precise scope are varied and it has been decided by the present author that the most accurate statement of the rule is that recorded above since it covers all communications between the parties made for the purpose of settling the dispute. This is to be compared with the narrower view that the privilege merely protects from curial disclosure 'admissions made by parties during settlement negotiations' [Here footnote 3 refers to Field v Commissioner for Railways (NSW) (supra) and a number of other authorities] or the view that the privilege only covers 'communications which contain an offer for the purpose of settling the dispute' [footnote omitted] or 'negotiations which include an offer of settlement' [footnote omitted]."
310 McNicol argues that, if one accepts the general public policy rationale described in ch 8 of her text, that the privilege exists to encourage litigants to settle their differences out of court rather than litigate them to the finish, then to limit the rule to "admissions" made by the parties is too narrow and does not adequately reflect the underlying rationale of the privilege.
311 It may be said that the dicta in Field relied on by the defendants is not directed to the question raised for consideration in this case and that the Court was only concerned with the question whether an undoubted admission fell from a plaintiff on a previous occasion. Certainly, doubts have been raised as to whether the dicta in Field should be taken to mean that only admissions are capable of falling within the "without prejudice privilege": Village/Nine Network Restaurants and Bars Pty Ltd v Mercantile Mutual Custodians Pty Ltd v [2001] 1 Qd R 276 at [12] - [15] per Pincus J.
312 For my part, I would accept that the so-called without prejudice privilege extends to all communications in the course of negotiations designed to resolve a dispute which, in the terms of Field v Commissions for Railways (NSW) (supra), may be considered "fairly incidental to the purposes of the negotiations".
313 In particular, I respectfully indicate my agreement with what Laddie J said in Unilever PLC v Proctor and Gamble Co (supra) at 1639 that:
"It seems to me that the rule against the subsequent use of without prejudice discussions is wide enough to cover all statements made by each party touching upon the strength or weakness of its own and its opponent's case and any valuation, for whatever reason, it places on its or its opponent's rights. These are the issues which go to the heart of any attempt to compromise litigation. Parties should be free to discuss them without fear of their words coming back to haunt them in court proceedings. For these reasons, I have come to the conclusion that the without prejudice covers not only admissions, but assertions also ..."
314 In my view, the statements made in the letters of Ms Nicoski's solicitors concerning "whether or not there was a partnership" and "if any partnership did exist then it was certainly brought to an end on 31 December 1997" and other statements concerning resolutions "once and for all", made in the context of a genuine attempt to resolve the dispute at an early stage without resort to litigation, are exactly the kind of statements which should be considered "fairly incidental to the purpose of the negotiations" and to which the without prejudice privilege should attach.
315 The statements that Ms Nicoski would seek to rely upon in the letters of her solicitors were all made in a context in which the parties were endeavouring to resolve a commercial dispute without resort to litigation. Whether or not a partnership existed at material times was referred to in most indefinite terms. The statement, that if there was a partnership then it was certainly brought to an end on 31 December 1997, was an assertion, in my view, for the purpose of encouraging Mr Williams and his solicitors to accept the reasonableness of the offer of settlement being put forward on Ms Nicoski's behalf.
316 In these circumstances, I consider that the contents of the letters of Ms Nicoski's solicitors that she seeks to have admitted into evidence are the subject of a joint privilege enjoyed by Ms Nicoski and Mr Williams arising from without prejudice negotiations and may not be admitted into evidence without the consent of Mr Williams. He has, through counsel, withheld that consent and I will not admit those letters into evidence.
317 In any event, should I be wrong concerning the scope of the "without prejudice" privilege, I do not consider that the letters referred to (which were marked MFI D5, MFI D6, MFI D7 respectively) constitute a clear and unambiguous notice by Ms Nicoski to Mr Williams of her intention to dissolve the partnership. This is so whether one takes them alone or reads them together. There is nothing in the passages I have identified in the fax of Deacons Graham and James dated 22 January 1998 that discloses Ms Nicoski's view concerning the existence of a partnership one way or the other. The same comment may also be made about the solicitor's fax dated 9 June 1998. In this fax Ms Nicoski, through her solicitors, expressly desists from debating whether or not there was a partnership. The fax of the solicitors dated 7 September 1998 again is equivocal about whether or not a partnership ever existed, but does suggest that if it existed then it was brought to an end on 31 December 1997. In my view, the context in which that letter was written cannot be construed as a clear and unambiguous notice by Ms Nicoski to Mr Williams that she was, as of 7 September 1998, terminating the partnership at will. Rather, the statement is merely her view that at a particular point in time the partnership, if it existed, in fact came to an end. It is not a denial of the existence of a partnership. It is a recognition that if the partnership existed, it was brought to an end at a particular date. It is interesting to observe that Ms Nicoski does not plead in this action that 31 December 1997 was the date upon which the partnership was in fact terminated. Rather, the plea in par 18 of the defence of the first defendant is that "in December 1997" any partnership was terminated "as a result of oral notification being given by the first defendant to the plaintiff on the termination of the partnership and the de facto relationship". This plea, on the evidence, can only relate to the meeting between the partners on 22 December 1997.
318 In summary, I am not satisfied that the three letters of Deacons Graham and James upon which Ms Nicoski seeks to rely should be admitted into evidence. In any event, even if they were to be admitted, I am not satisfied that they constitute notice in clear and unambiguous terms of Ms Nicoski's intention to dissolve the partnership, either taken alone or when read together. They are statements made in the course of protracted negotiations between solicitors designed to achieve the "without prejudice" resolution of a commercial dispute. In that context it would not be reasonable, in my view, for communications between solicitors over an eight-month period to be construed as sufficient notice of Ms Nicoski's intention to terminate the partnership.
319 However, it would seem to me that when Mr Williams served his writ of summons on the first defendant on or about 19 April 1999, in which writ he sought relief including an order dissolving the partnership and an order that the partnership be wound up and that all necessary accounts and inquiries be taken, he thereby gave notice in writing to Ms Nicoski that the partnership was dissolved as of that date. Because such notice was in writing, it, by force of s 43(c) of The Partnership Act, dissolved the partnership. Therefore, it is not necessary, or indeed open to me to make a decree of dissolution under s 55, or to determine the date of dissolution on some other basis. Accordingly, I find that the partnership of Ms Nicoski and Mr Williams in the business of the Nutrimetics consultancy was dissolved as of 19 April 1999, pursuant to s 43(c) of the Act.
320 I should add in passing that, even if this were a case where it was appropriate to decree the dissolution of the partnership under the "just and equitable" ground of s 46 it would not appear appropriate retrospectively to set the date of dissolution as at 22 December 1997, as counsel for Ms Nicoski contends in the alternative. Section 46 does not specify the date on which a partnership will stand dissolved; accordingly, the old law still applies. As Lindley and Banks on Partnership (supra) at [24 - 88] state, the rule was and still is that, where the order of the Court is necessary for the dissolution of the partnership, the dissolution will, in the absence of special reasons, date from the judgment, as stated in Lyon v Tweddell (1881) 17 Ch D 529. The learned editor adds:
"The court can, of course, declare a partnership dissolved with effect from a date earlier than the judgment where the dissolution resulted from the service of a notice [footnote omitted] or the occurrence of some other determining event specified in the Act or in the agreement [footnote omitted]. Although there is one New Zealand authority [Phillips v Melville [1921] NZLR 571] which appears to be authority for the proposition that the Court can order a dissolution retrospectively [footnote omitted], the partnership was at will and was clearly dissolved by the service of the writ [footnote omitted]. If the decision went any further than merely recognising this, it was, in the current editor's view, per incuriam [footnote omitted]." (emphasis in original).
In the last (omitted) footnote, the learned editor states that in Phillips v Melville [1921] NZLR 571, Cooper J purported to follow the decision in Unsworth v Jordan (supra), which was clearly a case involving a partnership at will.
321 In view of the findings I have made, the plaintiff is not entitled to an order dissolving the partnership, because the partnership was dissolved as of or about 19 April 1999.
322 However, the Court should declare that the partnership I have found was formed as of 5 February 1997, was dissolved as of 19 April 1999.
323 It would ordinarily follow in a usual partnership action (which perhaps this is not) that the plaintiff is also entitled to an order that the partnership be wound up and that all necessary accounts and inquiries be taken. However, such consequential relief is resisted by Ms Nicoski.
324 Mr Williams also seeks specific relief in respect of partnership property to the following effect: that Ms Nicoski holds all rights and benefits arising from her appointment as "Executive Sales Director" on trust for the partnership and that the same is property of the partnership and that an account of money held by Ms Nicoski in the "Babylon tax account" is held in trust for the two of them.
325 Additionally, Mr Williams seeks an order that all partnership assets be sold.
326 In the alternative, Mr Williams seeks an inquiry into the proper method of winding up the partnership and, in particular, whether the business can and should be carried on by one or other of the plaintiff and the first defendant or whether the property should be sold and if so how.
327 By reason of the various and alternative forms of relief sought by the plaintiff a question arises as to what the partnership assets or property of the partnership comprised at the date of dissolution of the partnership. In par 5A of his statement of claim Mr Williams claims that the partnership property comprises:
(a) In respect of the period from February 1997 to 1 April 1997, the rights of Ms Nicoski under the limited agency agreement made by her with Nutrimetics in 1988
(b) Since 1 April 1997, the rights of Ms Nicoski and Mr Williams under a limited agency agreement with Nutrimetics signed on 1 April 1997
(c) Moneys paid or payable by Nutrimetics to the partnership since 5 February 1997 as commission on sales by Consultants sponsored by Mr Williams and Ms Nicoski or either of them for Consultants recruited by those Consultants and so on (the downlines)
(d) Any other moneys paid by the second defendant to the partnership since 5 February 1997 under either of the 1988 limited agency agreement or the 1997 limited agency agreement
(e) The right to future moneys payable by Nutrimetics under the 1997 agreement or the 1988 agreement as commission on sales by downlines
(f) Moneys paid to the partnership since 5 February 1997 for the products of Nutrimetics sold by the partnership
(g) The value of benefits paid or provided by the second defendant to the partnership and to either of Mr Williams or Ms Nicoski under either the 1988 agreement or the 1997 agreement or in connection with the business of the partnership including the value of cars, gifts and trips
(h) The goodwill of the business including the value of the future commission from sales by downlines of the business, the business connections and the position Executive Sales Director held by Ms Nicoski and Mr Williams, further and alternatively the business.
328 In par 5B of the statement of claim, which is set out above in full, the plaintiff also claims that the assets of the business carried on by Ms Nicoski alone became an asset of the partnership. I have already dealt with this claim above and rejected it.
329 On behalf of Ms Nicoski, it is submitted that most of the items alleged in par 5A do not constitute property. For example, the status as "Executive Sales Director" is said merely to relate to commission entitlements and is not itself a transferable property right. It is said on her behalf that the only two possible items of partnership property in this case are rights under the limited agency agreement and the business goodwill. With that submission, I agree.
330 As noted, s 50 of the Act provides that on the dissolution of a partnership every partner is entitled 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. Additionally, s 51 of the Act provides that on the dissolution of a partnership, every partner shall be entitled, in the absence of any agreement to the contrary, to have the goodwill of the business sold for the common benefit of all the partners. Section 40(1) also expressly provides that every partner must account to the firm for any benefit derived by him without the consent of the other partners from any transaction concerning the partnership or from any use by him of the partnership, property, name, or business connection.
331 In my view, it is sufficient in a case such as this, in light of the findings I have made concerning the existence of a partnership of a particular nature as from 5 February 1997 and its dissolution as at 19 April 1997, to order the winding-up of the partnership and the taking of accounts and necessary inquiries. If the partnership is wound up and accounts taken, the question of benefits arising or moneys received before the 1997 limited agency agreement was concluded and under the 1997 limited agency agreement will be considered in accordance with the requirements or entitlements created by ss 50 and 40(1) of the Act.
332 I do not accept the submissions made on behalf of Ms Nicoski that an accounting should not be required because of the inadequacies of the financial records of the plaintiff or the non-production of same, or the complexities of any proposed accounting. An accounting is possible, even if on occasions it may require a "by and large" approach.
333 Additionally, in my view, Mr Williams is entitled to have the goodwill of the business, as well as the rights and entitlements under the 1997 limited agency agreement, sold or transferred for the common benefit of the partners, in accordance with s 51 of the Act.
334 However, it is submitted on behalf of Ms Nicoski that the 1997 limited agency agreement is not assignable without the consent of Nutrimetics and should not be affected by any such order. It is common ground that the terms of the 1997 limited agency agreement are the same as those set out in Nutrimetics Form 90454 (which are attached to these reasons). Clause 1(f) of the agreement provides: "My status as an agent is a personal one and I cannot sell or transfer it in any way without prior written permission from Nutrimetics." It is said that the express requirement for consent is a clear and unequivocal meaning. Senior counsel for Nutrimetics at the commencement of the trial and at the conclusion of the trial said that his instructions were that such consent was declined on behalf of Nutrimetics.
335 On behalf of Mr Williams, it is submitted that the consent of Nutrimetics to the sale or assignment of the business, its goodwill and the rights generally under the 1997 limited agency agreement, is not required. It is said that this agreement is in terms prepared by Nutrimetics and the contra preferentum rule should apply. Thus, in the case of any ambiguity or uncertainty, the document must be construed against Nutrimetics. It is contended that cl 1(f) does not preclude sale or assignment of the business and rights under the agreement without consent, but merely precludes any sale or assignment of the "status" of the consultant without consent. Thus, it is contended that the agreement distinguishes between the "status" of a consultant - for example, the position of "Executive Sales Director" - and the business and rights, benefits and entitlements of a consultant arising under the agreement, and that it is only in respect of the "status" of the consultant that the covenant against assignment operates.
336 In my view, the contentions made on behalf of Mr Williams in this regard should not be accepted. Clause 1(f) is clear in its terms. Under the agreement, it is the consultant's "status as an agent" that cannot be assigned. Without the right to act as an "agent" of Nutrimetics, a person cannot claim the rights, benefits or entitlements provided by the agreement. It is those "agency" rights (perhaps better described as "distributor's" rights, in light of cl 2 of the agreement which governs prior payment by the agent for supply of products) which entitle a consultant to obtain and sell the products of Nutrimetics and to receive commissions, as well as commission income on the sales of downlines, and the right to receive various benefits or entitlements under the relevant Plan of Nutrimetics. Thus, the covenant protects against persons other than the consultant having the right to claim the rights, benefits and entitlements the contract provides for, without the consent of Nutrimetics.
337 On behalf of Mr Williams, counsel further submits that, if consent is required for sale or assignment of the rights under the agreement, the Court can and should order a sale of the partnership assets, including the goodwill of the business, and should not be deterred by the statement of Nutrimetics of its present intention not to give such consent. In my view, this submission should be acceded to and the submission made on behalf of Ms Nicoski to the contrary should not be accepted.
338 My principal reason for considering that Mr Williams should have an order for the sale of the partnership assets, including the goodwill of the business for the common benefit of all the parties, is that the Act provides, in ss 50 and 51, for this outcome in the absence of any agreement to the contrary. There is no agreement to the contrary, only a limitation on sale, so far as Mr Williams and Ms Nicoski are concerned, in that Nutrimetics must give its consent to the assignment or sale of the agency constituted by the 1997 limited agency agreement.
339 While it is true that Mr Sullivan, on behalf of Nutrimetics, in re-examination clarified his evidence to suggest that it would only be if there were a judicial order compelling consent that Nutrimetics would consent to such a sale or assignment, my own view is that his evidence, that Nutrimetics does not consent to a sale or assignment, should be accepted as a statement of Nutrimetics' present intention, at the time he gave evidence, and not necessarily a position that Nutrimetics would hold at some future time. Whether or not a sale or assignment of the agency can be effected following the order of this Court, remains to be seen. The question of the grant or refusal of consent to such a sale or assignment by Nutrimetics may well constitute a barrier to sale or assignment. As noted by counsel for Mr Williams, the Court, by ordering the sale of the business, is not thereby giving consent on behalf of Nutrimetics or forcing Nutrimetics to give consent to such a sale.
340 There is no doubt, notwithstanding the submissions made on behalf of Ms Nicoski to the contrary, that a business of the type that is the subject of the 1997 limited agency agreement here may have a "goodwill". Not only is this possibility contemplated by s 51 of the Act in making provision for the goodwill of a business to be sold for the common benefit of all the partners, but the evidence before the Court suggests that in the marketplace such businesses are sold for significant sums, which include a "goodwill" factor. It is submitted on behalf of Ms Nicoski that the type of goodwill pleaded in par 5A(h) of the statement of claim is not "goodwill" properly defined. On the basis of what is said in Federal Commissioner of Taxation v Murry (1998) 193 CLR 605 at 630, that may be so. However, in my view it is only so in respect of the particularised items of goodwill in par 5A(h)A, B and C of the statement of claim. That is not to say that there is no other "goodwill" as more broadly pleaded in par 5A(h).
341 Nor does it assist to submit that any goodwill that there is, is personal and is not transferable, as Murry, at 625, suggests. This submission assumes that the only possible source of goodwill in this case depends upon Ms Nicoski's personality and personal selling skills, which of their nature are not transferable. However, the evidence before the Court establishes that while the endeavours of a woman in a Nutrimetics consultancy might be considered of paramount importance, because the products are designed principally for sale to women, men have participated and do participate in such consultancies. The evidence in this case shows that at material times Mr Williams did participate in the business, addressed weekly meetings of downlines, attended seminars, helped assist in the preparation of speeches, supported displays at trade functions, participated in the business planning of the partnership and, at least to some extent, was included in the dealings with and training of the downlines of the partnership. It is for the partners in any partnership to agree amongst themselves about the particular roles they should play in the business.
342 Therefore, I reject the broad submission that in this case the goodwill of the business constituted by the 1997 limited agency agreement is not now capable of being sold. Patently there is property capable of being sold. Whether or not it can, in fact, be sold, or sold for valuable consideration in the marketplace, are other issues. However, each is an issue that this Court is not required to determine in this action.
343 Turning then to the plaintiff's pleas in pars 5A and 5B of the statement of claim against the first defendant, I specifically find that the items referred to are not partnership property, except where I state otherwise, but that the plaintiff is entitled to an account or an order for sale in respect of some of those items, as follows:
(a) Mr Williams is entitled to an account of income derived under Ms Nicoski's 1988 limited agency agreement in respect of the period between 5 February 1997 and 19 April 1999, but the rights under that agreement in that period (or otherwise) are not partnership property;
(b) the rights, benefits and entitlements under the 1997 limited agency agreement are partnership property;
(c) Mr Williams is entitled to an account in respect of moneys paid or payable by Nutrimetics to the partnership since 1 April 1997, as commissions on sales by consultants sponsored by the plaintiff and the first defendant jointly or either of them under the 1997 limited agency agreement;
(d) (i) Mr Williams is entitled to an account in respect of any other moneys paid by Nutrimetics between 5 February 1997 and 19 April 1999 under Ms Nicoski's 1988 limited agency agreement;
(ii) Mr Williams is also entitled to an account in respect of moneys paid by Nutrimetics to the plaintiff and the first defendant under the 1997 limited agency agreement;
(e) Mr Williams is entitled to an account of all moneys or benefits payable by Nutrimetics under the 1997 limited agency agreement;
(f) Mr Williams is entitled to an account of moneys paid to the partnership between 5 February 1997 and 19 April 1999 for products of Nutrimetics sold by the partnership;
(g) Mr Williams is entitled to an account of the value of any benefits received by Ms Nicoski under either the 1988 limited agency agreement or the 1997 limited agency agreement, including by way of cars, gifts and trips, in respect of the business of the partnership for the period 5 February 1997 to 19 April 1999;
(h) Mr Williams is entitled to a declaration that the partnership property includes the goodwill of the partnership business and the 1997 limited agency agreement or the rights and entitlements arising thereunder (but do not include the 1988 limited agency agreement), as well as to an order for sale in respect thereof.
344 I do not consider that Mr Williams is entitled to a declaration that the "Babylon" account is partnership property. Whatever payments were relevantly made under the 1988 limited agency agreement or under the 1997 limited agency agreement will be accounted for on the undertaking of the inquiries and on the taking of the accounts I have just referred to.
345 The precise terms of the relief which should be granted in consequence of these findings is referred to below.
346 Mr Williams also claims damages and equitable compensation as against Ms Nicoski for her alleged breach of a term of the partnership agreement that Mr Williams should be able to take part in the management of the business.
347 I noted above that r (5) of s 34 of the Act provides that subject to any agreement between the parties to the contrary, every partner "may take part in the management of the partnership business". This rule is expressed as an entitlement although it is not denied that there is a correlative duty imposed on other partners to permit the other partner or partners to exercise that entitlement.
348 I cannot see how, in the circumstances of this case, even if breach is established, it can be said that Mr Williams is entitled to more than the form of relief I have already found he should have upon the dissolution of the partnership. Once an account is taken, all necessary inquiries conducted and any partnership property capable of being sold is sold, and a winding-up of the business and affairs of the firm is concluded in accordance with s 50 of the Act, Mr Williams will have his full entitlement on the winding-up and will not suffer any loss. He will get the benefit he is entitled to from the operation of the partnership during the period he was ostensibly excluded from participating in its management.
349 However, on behalf of Mr Williams, counsel contends that if he had not been prevented from participating in the management of the business, the growth of the business in financial terms would have been such that it would have generated much more income than it has in fact produced during the period of his exclusion and that the business would be worth on assignment or sale a considerably greater sum than it may now be worth.
350 On behalf of Mr Williams, it is further submitted that the final amount of his loss on this account must be left to be determined on the winding-up of the partnership, for only then will the Court know the payout which is due to the plaintiff or, on shortfall, the amount which the plaintiff is obliged to contribute; those are said to be amounts to be deducted from or added to the payout the plaintiff would have received had he remained in management. However, whilst it is said the final calculations of that payout must await the winding-up (when the value of the moneys and values of benefits received and due to the partnership have been calculated) the Court is in a position to declare that the business would have had a value of $349,476 had the plaintiff remained in management.
351 Mr Williams relies upon expert evidence given by Mr Mitchell as to why a value of $349,476 should be placed on the business. The expert evidence of Mr Mitchell, which was tendered in reports prepared by him, was the subject of objection by Ms Nicoski and on behalf of Nutrimetics. The objections to the admissibility of Mr Mitchell's evidence were on the following grounds:
(a) That the witness lacked expertise in that he had no relevant qualification and that his experience did not supply any requisite expertise. In his first report it was said that he had lacked expertise in that he had no relevant qualification and that his experience did not supply any requisite expertise. In his first report it was said that he had been guilty of admitted gross carelessness (see Tr 514) and had revealed a complete absence of an intuitive knowledge of the gross over-valuation he had performed (see Tr 515). The failure to recognise such an extreme error is in itself evidence of incompetence and an absence of expertise. It was submitted that no skilled professional person could have published such a report.
(b) Further, it was said that his second report was based upon hearsay as to significant matters which were not proved by direct evidence - for example, the eight-year estimate of future profit with fixed 20 per cent per annum increases and his reliance upon a rate of return on investment relating to insurance business sales. Further, it was submitted that the projections which provided the "foundation" figures came from a letter apparently written by Mr Williams, but those projections were not proved by admissible evidence. Nor did the plaintiff even attempt to prove that he had any expertise which would allow him to give evidence of such projections. Such deficiencies rendered Mr Mitchell's evidence inadmissible; Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370 at 374 - 379, 387 - 389; Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705 at 729 - 745 (special leave refused)
(c) Further, that the purported valuation of the second report was not relevant to a pleaded issue for it did not attempt to assess the market value of the business (as the damages claim was eventually pleaded in par 6(8) of the amended statement of claim against Ms Nicoski), but valued a fixed future eight-year income - upon the assumption that the plaintiff and the first defendant continued to work together for the entirety of the eight-year period. It is said that Mr Williams conceded that the value of an income stream on fixed assumptions is completely different from valuing a business in which a competent valuer would have to consider risk, non-transferability of the business and other material factors.
352 On behalf of the plaintiff it is submitted that Mr Mitchell's reports should be received and that Mr Mitchell was "simply wrong in saying in cross-examination that he did not value the business". Counsel for Mr Williams submits that Mr Mitchell valued the business by valuing the income stream, which is an acceptable means of valuing this particular business. It is submitted that Mr Mitchell was justified in adopting that approach over other approaches to the valuation of the business because of the continuing income stream flowing from commissions on downline sales. It is said the evidence of Mr Sullivan made clear the chief asset in the consultant business was the continuing flow of commission income. There is other evidence to that effect as well.
353 In my view, on balance, the reports and evidence of Mr Mitchell may be received into evidence. Mr Mitchell has demonstrated some experience in respect to the valuation of businesses. His evidence goes to an estimate of the worth of a particular business with a particular income stream, where very broad assumptions are made about the nature of the business. The worth of Mr Mitchell's evidence concerning the value of the Nutrimetics consultancy in question here, however, is of little, if any, assistance to the Court. I accept the submissions made on behalf of Ms Nicoski and Nutrimetics that Mr Mitchell's second report was no more than an attempt to place a value on a fixed, assumed, future (post-2002) income stream. Such an estimate is only marginally relevant, if at all, to the pleaded claim for damages contained in par 6(8) of the statement of claim as to the value of the business assuming Mr Williams' continuing involvement in it as at the date of trial.
354 It is also correct to observe that the assumed income stream was not verified by direct evidence and failed to take account of the fact that the partnership was terminable at will in any event.
355 I also find that there is no evidence to support the first limb of the pleaded claim for damages, namely, that the business would have had a greater value if Mr Williams had continued in its joint management with Ms Nicoski; indeed, the evidence strongly points the other way - Ms Nicoski's efforts constituted the primary basis for the generation of business revenue.
356 Consequently, I also find that there is no proved sum from which to deduct the claimed proceeds of sale so as to determine the difference which is claimed as damages.
357 Finally, I find that par 6(8)(b) of the statement of claim cannot stand alone, as the shortfall on winding up there alleged is not causally related to the alleged breach.
358 I find that the plaintiff has failed to prove the damage claimed under par 6(8) of the statement of claim. For this reason, I would dismiss the plaintiff's action for damages against the first defendant.
359 Mr Williams also maintains an action against Nutrimetics for damages for breach of their limited agency agreement he claims was entered into by himself and Ms Nicoski, on the one hand, and Nutrimetics, on the other hand, on 1 April 1997. In the alternative, Mr Williams claims equitable compensation against Nutrimetics on the basis that it breached a fiduciary duty owed by the company to himself and Ms Nicoski as joint consultants under that agreement.
360 I have already found that Mr Williams and Ms Nicoski did conclude a limited agency agreement with Nutrimetics in April 1997. The evidence discloses that Mr Williams and Ms Nicoski signed such an agreement on 1 April 1997 and that it was received at the head office of Nutrimetics in Sydney on or about 2 April 1997 and then accepted and acted upon.
361 The question then is whether Nutrimetics breached the agreement at any material time as a result of which they are liable to Mr Williams in damages.
362 Mr Williams pleads that, since January 1998, Nutrimetics, in breach of the contract, has dealt solely with Ms Nicoski to his exclusion and has paid and provided the remuneration due to Ms Nicoski and himself jointly under the agreement, to Ms Nicoski alone.
363 On behalf of Mr Williams, it is also pleaded that he, by the letter of his solicitors dated 15 June 1998, gave notice to Nutrimetics that Ms Nicoski did not have his authority to instruct Nutrimetics to direct commission payments due to him and to her jointly to her alone and that he demanded that Nutrimetics account to him for commission income due to him and Ms Nicoski jointly.
364 It is further pleaded that, despite this notice and demand, Nutrimetics, in breach of the limited agency agreement, refused or failed to account to him in respect of commission payable on products sold by the two of them and on products sold by their downlines and in respect of other benefits including motor vehicles, jewellery and travel and accommodation.
365 Put simply, Mr Williams alleges that Nutrimetics breached the 1997 limited agency agreement by dealing with Ms Nicoski alone after 22 December 1997.
366 Mr Williams pleads further that Nutrimetics repudiated the limited agency agreement on 23 December 1997 by accepting Ms Nicoski's instructions to redirect commissions to her without his authorisation. In the alternative he pleads that the limited agency agreement was repudiated in February 1998 by Nutrimetics when it published an article in its publication "Nutrimetics" entitled, "Introducing Georgette Nicoski, Nutrimetics' new Executive Sales Director from Western Australia". In a further alternative, Mr Williams pleads that the limited agency agreement was repudiated on 16 December 1998 by a letter from Nutrimetics to his solicitors.
367 There is no doubt on the evidence adduced in this action that, immediately after 22 December 1997, Nutrimetics, at the request of Ms Nicoski, directed all commissions and paid all other entitlements and conferred benefits on account of consultancy 184584 directly to Ms Nicoski. In that sense, Nutrimetics appear to have acted as though they were dealing with Ms Nicoski under the 1988 limited agency agreement and without regard to the terms of the 1997 limited agency agreement under which Mr Williams and Ms Nicoski were joint consultants. Nutrimetics also effectively ignored Mr Williams' solicitors' advice by the letter dated 15 June 1998, that Ms Nicoski did not have Mr Williams' authority to redirect the remuneration under that agreement.
368 On the face of it, Nutrimetics failed to pay commissions and other entitlements and confer benefits due under the 1997 limited agency agreement to Mr Williams and Ms Nicoski jointly. While Nutrimetics paid what it was required to pay under the agreement, it did so by directing commissions and conferring other benefits on Ms Nicoski alone.
369 On behalf of Nutrimetics it is submitted that the plaintiff's pleaded case is that there was a contract between Mr Williams and Ms Nicoski jointly, on the one part, and the second defendant, on the other, whereby Mr Williams and Ms Nicoski agreed to "jointly provide" selling services and Nutrimetics agreed to pay them jointly a commission. Nutrimetics says that it is clear on the plaintiff's pleaded case that the remuneration provided for by the limited agency agreement was payable to Mr Williams and Ms Nicoski jointly only when the plaintiff and the first defendant jointly provided the selling services and thereby sold products. Nutrimetics thus contends that, on the plaintiff's own case, he and Ms Nicoski were unable to provide services jointly to the second defendant from about 22 December 1997 onwards and so Nutrimetics laboured under no obligation under the 1997 limited agency agreement to pay Mr Williams any commissions or confer any benefits on him.
370 Nutrimetics also contends that, because of the nature of the 1997 limited agency agreement, the agreement could not, and did not, survive the termination of the relationship between Mr Williams and Ms Nicoski and their failure to continue to act jointly. Thus, it is said that, even if the joint agents were partners, termination of their partnership would end their joint engagement; as in Friend v Young [1897] 2 Ch 421. It is said that joint performance became impossible when their relationship ended.
371 Nutrimetics further submits that under a contract of the kind that the limited agency agreement is, the agent makes no promise to do any work - there is no promise to achieve the result or even to attempt to achieve the result: Luxor (Eastbourne) Ltd v Cooper [1941] AC 108 at 117, 124 and 153; Taylor v Smith [1926] VicLawRp 14; [1926] VLR 100 at 110; and that under such a contract the agent becomes entitled to commission only upon fulfilment of the criterion described in the contract and this will usually involve proving that the agent was the effective cause of the sale of the property: Moneywood Pty Ltd v Salamon Nominees Pty Ltd [2001] HCA 2; (2001) 202 CLR 351 at 358, 360, 373, 388 and 408.
372 Nutrimetics says that it is not alleged in the statement of claim against Nutrimetics that any selling services were provided jointly after the end of December 1997 and it is not alleged that any sales were in fact solicited, that is to say, caused, by the joint provision of selling services after that date. It follows, in this submission, there was no joint entitlement to receipt of income under the alleged agency agreement and no breach of contract by the second defendant in not paying any commissions or other entitlements or benefits to Mr Williams and the first defendant jointly after December 1997.
373 Counsel for Mr Williams accepts that the normal rule is that a payment made by a creditor to joint promisees is discharged if payment is made to either of the promisees: "Halsbury's Laws of Australia" [110-3000]; Manzo v 555/255 Pitt Street Pty Ltd (1990) 21 NSWLR 1 at 7; Steeds v Steeds (1889) 22 QBD 537. However, counsel for Mr Williams submits that this is not so when the creditors are trustees: McIntyre v Gye (1994) 51 FCR 472 at 479. He contends on behalf of Mr Williams, as I understand it, that because each of the plaintiff and the first defendant held any partnership property in their own individual names on trust for the partnership (as to which see Lindley and Banks (18th ed) [18-07] page 492 and [18-63] page 513), it follows that they are trustees for the purpose also of the payments due to be made by Nutrimetics to them under the 1997 limited agency agreement.
374 Mr Williams accepts that the services continued to be jointly provided, in a factual sense, only up to about 22 December 1997, or perhaps late December/early January 1998. However, he contends that, thereafter, the services provided by the first defendant alone were consideration on behalf of both joint consultants; and relies on Williams, "Joint Obligations" London, Butterworth & Co (Publishers) Ltd, 1949, page 40 [4], page 92, page 159; Coulls v Bagot's Executor & Trustee Co Ltd [1967] HCA 3; (1967) 119 CLR 460; and Carter and Harland, "Contract Law in Australia", 3rd ed, page 346, in support of this proposition.
375 Mr Williams expressly pleads as against Nutrimetics that:
"In consideration of the Plaintiff and the First Defendant jointly providing the services of selling the Second Defendant's products and recruiting and supervising other persons who would sell products and in turn recruit and supervise other persons who would sell products and in turn recruit and supervise other persons, and so on (all those persons called 'Downlines'), the Second Defendant would pay the Plaintiff and the First Defendant jointly a commission on the products sold by them and on products sold by their Downlines and provide them jointly with other benefits including motor vehicles, jewellery and travel and accommodation (the commission and other benefits herein called 'Remuneration')."
376 I consider that the purport of this plea is that, under the agreement, upon the provision of the services so described by or for the plaintiff and first defendant (as joint consultants under the agreement pleaded), Nutrimetics would pay the "remuneration" pleaded to Mr Williams and Ms Nicoski jointly.
377 In my view, if the services pleaded are actually provided by or on behalf of the plaintiff and first defendant, then, under the agreement pleaded, Nutrimetics is obliged to pay the remuneration pleaded without regard to which of the plaintiff or first defendant may have actually performed the services.
378 No doubt, if A contracts with D to provide services for remuneration and B says to D that she has provided services of the kind provided for in that contract and claims the remuneration due under the contract, D may well refuse to satisfy the claim. It would be a simple question of contract. D would be entitled to say that it has no contractual obligation to pay B for the services referred to in the contract. There will be no privity of contract between B and D. On the other hand, without regard to any contractual obligation that it may have to pay A remuneration under the contract for the services actually performed by B, D might decide to satisfy B's claim. But having done so, the question will remain, if A makes a claim in respect of the services provided, whether A is entitled to be remunerated for them by D. If it is clear from the terms of the contract that A could choose to perform those services himself or arrange for some other person to provide the services on his behalf, then the terms of the contract with D will be satisfied and D will have an obligation to satisfy A's claim. The position will be no different from the circumstance in which any person in the position of A is entitled to subcontract: see Nokes v Doncaster Amalgamated Collieries Ltd (supra) at 1018 - 1020.
379 The question in this case is whether there was provision of services pursuant to the agreement by or on behalf of the joint consultants, the plaintiff and the first defendant. If there was, then Nutrimetics is obliged to pay the remuneration provided for by the contract. This is because the performance of the act that entitled the joint consultants to remuneration may be performed by either. While under the agreement there is no obligation to provide services, where services are provided by one or other of the joint consultants for the purposes of the agreement pleaded, Nutrimetics incurs an obligation to provide the agreed remuneration. Similarly, where the remuneration is paid to one of two joint creditors, it is a good discharge of the joint debt at common law: Powell v Brodhurst [1901] 2 Ch 160 at 164.
380 Accordingly, I do not accept the submission made on behalf of Nutrimetics that it was open to Nutrimetics, in effect, to determine to whom it was prepared to pay remuneration in respect of the services provided by Ms Nicoski after 22 December 1997. This is not a case where either Ms Nicoski or Nutrimetics purport to set up some other limited agency agreement pursuant to which she purported to provide services to Nutrimetics. It is not argued on behalf of Ms Nicoski, for example, that she provided the services in question after 22 December 1997 on the basis of the 1988 limited agency agreement or some other agreement. (Indeed, as noted above, counsel for Ms Nicoski suggests the 1988 limited agency agreement may have come to an end under cl B3.) Nor was it argued on behalf of Ms Nicoski or Nutrimetics that she acted pursuant to an implied contract or some other ad hoc arrangement in her dealings with Nutrimetics after 22 December 1997. The evidence, such as it is, discloses that Ms Nicoski continued to operate under the limited agency agreement that had been put in place on or about 2 April 1997, and under consultancy number 184584. The only things that Ms Nicoski did after 22 December 1997 were, first, to ensure that Nutrimetics remitted remuneration payable under that agreement to a bank account maintained by her solely, and, secondly, well after the date of dissolution of the partnership, to file an "amended limited agency agreement form" with Nutrimetics at the end of May/June 2000 (see the letter by Ms Nicoski to Nutrimetics, undated, at trial bundle vol 7 page 1792). Mr Sullivan, of Nutrimetics, confirmed that, on or about 23 December 1997, Nutrimetics received a facsimile transmission from Ms Nicoski and, upon receipt of it, changed the details of the bank account that was debited when Ms Nicoski purchased Nutrimetics products and into which commission due to her was paid.
381 In other words, it appears clear, at least on the balance of probabilities, that Ms Nicoski purported to continue to provide services to Nutrimetics after 22 December 1997 largely (if not wholly) pursuant to the terms of the 1997 limited agency agreement. In those circumstances, Nutrimetics had an obligation to pay their joint consultants, Ms Nicoski and Mr Williams.
382 It is further contended on behalf of Nutrimetics that the breakdown in the personal relationship of Ms Nicoski and Mr Williams as of about 22 December 1997 also brought about a cessation of any obligation that Nutrimetics had to remunerate the joint consultants under the 1997 limited agency agreement.
383 I do not accept this submission made on behalf of Nutrimetics. The fact is that the events of about 22 December 1997, which resulted in the personal relationship of Ms Nicoski and Mr Williams coming to an end, did not result in the termination or dissolution of the consultancy or the partnership that then existed.
384 If the limited agency agreement were with a partnership and the partnership had effectually been terminated as of about 22 December 1997, a question would have arisen whether, as in Friend v Young (supra), the agency agreement also came to an end. In Friend v Young, the principal had contracted with a firm, by name. The agency agreement was found to have been terminated when one of the partners in the partnership died. His death brought the partnership to an end and so it was held the agency contract between the principal and the firm also came to an end. The entity with which the principal had contracted no longer existed.
385 However, here it is not clear (nor is it pleaded) that Nutrimetics contracted with a partnership. In any event, the partnership of the plaintiff and the first defendant did not come to an end on 22 December 1997. There is no other evidence to suggest the 1997 limited agency agreement between Nutrimetics and its consultants was terminated.
386 I return then to the question whether the provision of the remuneration required by the 1997 limited agency agreement to Ms Nicoski alone satisfied the obligation that Nutrimetics plainly had to accord such remuneration to Mr Williams and Ms Nicoski jointly. As I have observed, the common law rule is that the payment of one joint creditor satisfies the obligation to all joint creditors. However, counsel for Mr Williams submits that this general rule at law is qualified by the rule at equity, as explained in McIntyre v Gye (supra) by the Full Court of the Federal Court (Davies, Burchett and Gummow JJ) (at FCR 479) to this effect:
"Payment to one of a number of joint creditors discharges a debt owed to them jointly at law; in determining, in the course of administration of deceased estates or corporate liquidations, whether or not a claim for debt had been discharged, equity followed the law as to the sufficiency of payment to one of several joint creditors, save where the joint creditors were trustees; Re C Flower MP & Metropolitan Board of Works (1884) 27 Ch D 592; Powell v Brodhurst [1901] 2 Ch 160 at 164; 'Halsbury's Laws of England', 4th ed, vol 9, para 623."
387 The exception at equity is well-established. In In re C Flower MP & Metropolitan Board of Works (1884) 27 Ch D 592, as the headnote reveals, trustees of real estate sold parts of it to the Metropolitan Board of Works and they sent in a requisition that the vendors should attend personally to receive the purchase moneys, or direct the moneys to be paid to their joint account at a bank. One or more of the trustees resided in the country. It was held that the requisition must be complied with by the trustees. Kay J, while accepting that there was considerable inconvenience in this outcome, observed (at 597):
"The duty of trustees is to prevent one of themselves having the exclusive control over the money, and certainly not, by any act of theirs, to enable one of themselves to have the exclusive control of it. That would be contrary to their duty, and although it would differ in degree it would be precisely the same kind of breach of trust which would be committed by authorising their solicitor, or any other agent outside themselves, to receive it."
His Lordship therefore held, at 598, that the purchasers:
" ... had a right to insist that the trustees should either all meet in a room, so that they can pay the moneys down on a table in their presence, or that the trustees should name a bank where they can pay the moneys to their joint account as they have proposed to do."
388 However inconvenient this result might be from a commercial and practical point of view, the Court plainly was motivated by a desire to ensure that a trustee should not be placed in a position which might give rise to an opportunity to abuse his or her trusts.
389 In Re C Flower, the application of the rule in equity arose because real estate was held in trust. However, in Powell v Brodhurst (supra), the problem was different. There, the defendant mortgaged real estate to mortgagees to secure six thousand pounds, the six thousand pounds being expressed to be advanced out of moneys belonging to the mortgagees on a joint account. One thousand pounds was paid by the defendant to a firm of solicitors later on and duly applied in part discharge of the mortgage debt. Subsequently, the mortgage debt and security was transferred to two partners of the law firm (including one Harrison) and consideration of five thousand pounds was paid out of moneys expressed to belong to them on a joint account. The defendant later paid a further one thousand pounds to the firm of solicitors. It was duly applied in part discharge of the mortgage debt. Then the two solicitors transferred the mortgage debt and security to two other men, one of whom was a solicitor in the same firm (one Ingram) as joint tenants in consideration of four thousand pounds. The transferees were trustees of the settlement, but the defendant had no notice of this fact. Later, the defendant sent another one thousand pounds (this meaning that three thousand pounds of the principal of six thousand pounds was then dealt with). The receipt of this sum was acknowledged by Harrison (one of the partners in the firm and one of the former transferees) as received in part discharge of the mortgage debt. The sum of one thousand pounds was paid into the banking account of the firm and credited by the firm to the defendant, but it was not, in fact, applied in discharge of the mortgage. Interest on the principal sum was paid throughout to the firm and, following the payment of this third instalment of one thousand pounds, was thereafter paid on the balance of three thousand pounds only. However, the firm still continued to account to the beneficiaries under the settlement for interest on four thousand pounds. Then the last two transferees died, Ingram being the survivor in the first instance. His executors transferred the mortgage debt and security to the plaintiffs as the new trustees of the settlement.
390 The plaintiffs then alleged that four thousand pounds was still due on the covenant and security, claiming an account of what was due under the covenant and an order for payment and an account of what was due under the mortgage, as well full closure on the mortgage. The defendant admitted that three thousand pounds was due, denied his liability to pay any more and claimed to redeem on that footing.
391 It appears that Ingram had been taken ill some year or so before his death and did not attend at the offices of the solicitor or attend personally to any business from that time. Neither he nor his co-trustee had expressly authorised the firm to receive the third payment of one thousand pounds and it was very possible that neither of them knew of that payment.
392 Farwell J at 164 said there were two questions involved in the case: (1) the liability under the covenant, which is a question of common law, and (2) the liability in the foreclosure action, which is a question of equity. In his opinion, the old rule of common law that the payment to one of two joint creditors is a good discharge of the joint debt still remained good. Both sides agreed that there was a joint debt.
393 However, Farwell J noted that the joint debt in this case was not paid to either of the joint creditors, but to the firm of which one of them was a member. Without denying that an agent can accept the payment of a debt due to a joint creditor, his Lordship was not prepared to find that Ingram had authorised the receipt of the money in the circumstances as they existed.
394 Farwell J then, at 165, noted that the real contest between the parties was as to the extent to which the property is charged. The plaintiffs argued that, even assuming that one thousand pounds had been paid off so that only three thousand pounds could be recovered under the covenant at law, nevertheless the defendant could only redeem on payment of the full four thousand pounds. The defendant argued that the mortgage is merely a security for the debt covenanted to be paid and that, insofar as the debt is gone, the mortgage must be diminished to the same extent. His Lordship referred to Matson v Dennis [1864] EngR 409; (1864) 4 De GJ & Sm 345 in the Court of Appeal at 350 where Knight-Bruce LJ stated:
"The question is, whether when an equitable charge is vested in two persons - and as I will assume as joint-tenants - the money can be paid to one without any special authority from the other so as to discharge the estate. I am not speaking of an action. I am speaking of discharging an equitable burden upon an estate, and so discharging the estate.
In my judgment, and in the absence of special circumstances such as are not shewn to exist in the present case, that cannot be done. The purchaser is entitled to have it taken here, that Mr M'Leay was alive at the time, and that some money has, without any consent on his part, been paid to the other joint-tenant or tenant in common. That, I repeat, in my judgment, does not discharge the estate in equity."
395 Farwell J expressed the view that this opinion coincided with his own (at 167). He added at 167 that:
"The fallacy of the defendants' argument consists in the assumption that the question whether the money covenanted to be paid is recoverable at law is the only relevant consideration in foreclosure or redemption proceedings and in a disregard of the principles of equity that underlie foreclosure and redemption. The mortgagee's estate is absolute at law on breach of the covenant to pay on the appointed day, but the Court interferes for the benefit of the mortgagor on the terms that he does equity. The mere payment of the principal and interest legally recoverable is not necessarily sufficient. For example, money laid out in permanent improvements may have to be paid, although there is no covenant under which it could be recovered at law, and in a mortgage of a reversionary interest in land, where time runs from the falling into possession of such interest, foreclosure will be granted although the remedy on the covenant is statute-barred ... and arrears of interest for more than six years may be retained in an action to redeem a mortgage of a reversion ... and the mortgagee's right to tack and consolidate depends on the same principle. If a mortgagor chooses to pay otherwise than in strict accordance with the terms of his contract he does so at his own risk. The proviso for redemption in a mortgage to several is never expressed to take effect on payment to the mortgagees, or either of them, but to the mortgagees or the survivor of them; and if a mortgagor pays to one, although such payment may be a good discharge in law, yet the matter is at large when he comes into equity, and the Court takes into consideration all the facts of the case, and ascertains whether the payee was beneficially entitled to the whole or to a part only, or whether he was a trustee with the other mortgagee, and treats the payment as good in whole, or in part, or together bad accordingly. It is not a question of fixing the mortgagor with notice of a trust, but is the inquiry that the Court makes to satisfy itself that it is just and equitable under all the circumstances to deprive the mortgagee of his legal title in the property comprised in the mortgage."
396 Having so found, Farwell J added at 168 that the above was an answer to the argument of the defendant, namely, that Ingram could have received the money and given a valid receipt at a later date. Farwell J stated that:
"The mortgagor did not, in fact, pay to the survivor, but to one of two. He can rely only on the receipt as at the time when it was given, and he has only himself to thank because he chose to pay otherwise than in accordance with the contract."
397 It followed that judgment was granted in the principal sum due of four thousand pounds, not three thousand pounds. Earlier in his judgment, Farwell J noted that this approach did not prevent an action by the defendant against the solicitors (of whom Ingram or his estate may be one) for recovery of the third instalment of one thousand pounds.
398 The question in the case before me is whether the plaintiff and the first defendant as joint consultants were also "trustees" or, put another way, whether the payments made by Nutrimetics under the 1997 agreement constituted the satisfaction of something in the nature of the equitable charge to joint tenants referred to in Matson v Dennis (supra). If they were trustees, they must have been trustees for each other, as there is no suggestion they were trustees for some third party or parties. They were not express trustees for the purpose of any particular dealing, for example, as were the appellants in Re C Flower (supra). However, as partners, they were undoubtedly fiduciaries, partners being one of the accepted fiduciary categories: Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41 at 96 - 97 per Mason J. But as partners, their relationship was not entirely fiduciary and was affected by any relevant agreement between them as well as the terms of The Partnership Act. As fiduciaries they laboured under the fiduciary obligations each owed to the other. In relation to property acquired for the purposes of the partnership, but held in their individual names, at equity such property is held on trust for the partnership: Lindley and Banks On Partnership (supra) at [18-07]. This rule is reflected in the terms of s 30(1) of the Act, set out above.
399 But the treatment in equity (and by the Act) of such after-acquired property does not mean, in my opinion, that the partners are "trustees" for the purposes of the exception noted in McIntyre v Gye (supra). Indeed, fiduciaries are not necessarily to be equated with "trustees" in all cases. For example, a fiduciary is not a "trustee" for the purposes of legislation giving trustees defences against proceedings for breach of trust: Permanent Building Society (In Liq) v Wheeler (1992) 10 WAR 109 at 143; nor for the purposes of limitation legislation: Clay v Clay [2001] HCA 9; (2001) 202 CLR 410. Indeed, in Clay v Clay at 427 - 428, the Court stated:
"It should be accepted that a trust may arise from legislation which does not expressly so provide by, for example, using the word 'trust'. The decision of this Court in Registrar of the Accident Compensation Tribunal v Federal Commissioner of Taxation [1993] HCA 1; (1993) 178 CLR 145 at 165-166; see also Victoria v Sutton [1998] HCA 56; (1998) 195 CLR 291 at 300 [18], 314 [618], indicates that this must be so. However, the mere circumstance that, by statute, one party is placed in the position of the fiduciary to a second party does not render the first party a trustee. In Erwin v Shannon's Brick, Tile and Pottery Co Ltd (1938) 38 SR (NSW) 555, Jordon CJ rejected the suggestion that, because the plaintiff in an action under the Compensation to Relatives Act 1897 (NSW) stood in a fiduciary relation to the class of dependents for whose benefit the action was brought, the plaintiff was a trustee having the authority to compromise actions given by ss 49 and 5 of the Trustee Act 1925 (NSW). Jordon CJ said (at 563):
'But a person is not necessarily a trustee, whether express, implied or constructive, by reason merely of the fact that he owes fiduciary duties to others ... '."
400 In this case, the conduct of one or other of the parties if they are to acquire property for the purposes of the partnership, but to hold it in their own name, may entitle another partner in the case of a dispute to obtain a declaration that such property is held on an implied or constructive trust. In that sense, and at that point, that is at the point of acquisition, the partner holding the property may become a trustee at equity.
401 For present purposes, then, it may be accepted that property acquired by a partner for the purposes of the partnership, but held in his or her own name, constitutes him or her a trustee in respect of that property.
402 In this case, what Mr Williams says is that, when Nutrimetics paid remuneration to Ms Nicoski alone, it paid out in circumstances where both he and Ms Nicoski were "trustees". I am not at all satisfied that they were, at least at that material point. Nor do I consider Nutrimetics' obligation to pay commissions under the 1997 agreement to joint consultants involves the satisfaction of something like an equitable charge. No doubt, Ms Nicoski owed Mr Williams fiduciary duties as a partner. Perhaps when in receipt of remuneration, especially property such as a motor vehicle or other personal property, she may be said to have held it in trust for the partnership. But I do not accept that, in respect of the payment of commissions, she was a "trustee" for the purposes of the exceptional rule referred to in McIntyre v Gye (supra).
403 It is not pleaded by Mr Williams that Nutrimetics knew actually or constructively that it was dealing with a partnership at any material time when it made payments of commission to Ms Nicoski alone. While he pleads in his action against Nutrimetics that there was in fact a partnership between him and Ms Nicoski, he does not plead that Nutrimetics dealt with Ms Nicoski on this understanding. Rather, the plea made against Nutrimetics by Mr Williams is that Nutrimetics had breached obligations arising at law and equity by virtue of a contract under which Mr Williams and Ms Nicoski were "joint consultants". Even if there were a plea that Nutrimetics knew that it was dealing with a partnership at material times, it does not seem to me necessarily to follow that it could not properly make payment of commissions to Ms Nicoski.
404 While it is ordinarily accepted that a partner acting as an agent acts in a fiduciary character so far as the other partners are concerned, (as to which see Cassels v Stewart (1881) 6 App Cas 64 at 79 per Lord Blackburn) it has been stated that it does not follow that a partner who, as agent of the firm, receives partnership money from a third party will necessarily be treated as acting in a fiduciary capacity: see Piddocke v Burt [1894] 1 Ch 343 (a decision under the Debtors Act 1869 (Eng), s 4(3)). Chitty J appears to have accepted the argument that while a partner receiving money due to the partnership may be liable to account to them, there is no fiduciary relationship between one partner and his co-partners, at least within the meaning of the Debtor's Act. The decision is perhaps to be explained on the basis that there was no precedent under that Act for a writ of attachment to go against a partner who has received money on account of a partnership business which a partner has failed to pay over to some third person or into Court under an order for payment. Taken at its broadest, however, this decision suggests that a distinction may be drawn in such circumstances between a duty to account to the partnership and receipt of the moneys as a fiduciary.
405 In the ordinary course of a partnership's business, there is no reason to assume that payments made by a debtor must always be made to all of the partners. Such an assumption would be contrary to s 13 of The Partnership Act which provides, shortly stated, that an act done in the firm name or in any other manner showing intention to bind the firm by any person thereto authorised, is binding on the firm and/or partners. This reflects what Lord Lindley explained the position to be prior to the Partnership Act 1890, in terms of four basic principles: see Lindley and Banks On Partnership at [12-111]. These included the first principle that the firm must be treated as receiving what any partner receives as its real or ostensible agent, ie, in the course of transacting the business of the firm.
406 Indeed it is generally accepted that a partner has implied authority to receive and give good discharge for debts due to the firm, although as Powell v Brodhurst (supra) demonstrates, not for a debt owing to one of the partners in a personal capacity. A payment by a debtor of the partnership to one of the partners is prima facie a payment of the partnership: Moore v Smith [1851] EngR 758; (1851) 14 Beav 393; Halsbury's Laws of England, 4th ed, Vol 35, par [53]; Lindley and Banks on Partnership at [12-58].
407 Whether or not a debtor pays money to one partner knowing that he or she does not intend to account to the other partners in the partnership which is entitled to the payment is a separate question. In such a case, it might be argued either that the partnership has not been paid, because there was no receipt by a partner with authority to receive the money on behalf of the partnership (as in Powell v Brodhurst (supra)), or because the debtor who made the payment was complicit in a breach of the partner's fiduciary obligations to his or her other partners (The second limb of the rule in Barnes v Addy (1874) LR 9 Ch App 244). In this case, there is a further plea by Mr Williams against Nutrimetics that Nutrimetics breached fiduciary obligations owed to him in particular. But there is no plea that the payments of money and other remuneration made to Ms Nicoski were made in the knowledge that she was not entitled to receive them on account of the partnership or that Nutrimetics was complicit in a breach of fiduciary obligation by Ms Nicoski to Mr Williams.
408 However, Mr Williams does plead that, by the letter of his solicitors dated 15 June 1998, he gave notice to Nutrimetics that Ms Nicoski did not have his authority to instruct Nutrimetics to direct commission payments due to him and Ms Nicoski jointly to her alone and that he demanded that Nutrimetics account to him for commission income due to him and Ms Nicoski jointly. The question is, what effect did this notice have in June 1998.
409 In my view, Nutrimetics was obliged to pay the commissions to its joint consultants. However, as I have found, it was sufficient for Nutrimetics, to satisfy this obligation, to pay the commissions to one of the joint creditors alone. That was Nutrimetics' legal entitlement pursuant to the terms of the 1997 limited agency agreement. In those circumstances, the unilateral direction by Mr Williams in June 1998, through his solicitors, that Nutrimetics should not pay commissions to Ms Nicoski alone, and should account to him for those commissions already paid, was a direction made otherwise than in conformity with the existing agreement. Thus, in my view, his direction through his solicitors in June 1998 had no legal effect so far as the obligations and entitlements of Nutrimetics under the 1997 limited agency agreement were concerned.
410 In the event, there is no plea that at the time Nutrimetics paid these commissions, whether before or after June 1998, Nutrimetics knew actually or constructively that its joint consultants constituted a partnership so far as the exercise of the rights given by the agreement were concerned. Therefore, the question of the authority of Ms Nicoski to receive the payments of commission as agent for the partnership does not arise.
411 Because, in my view, for the reasons set out above, Nutrimetics was entitled contractually to pay commissions due under the 1997 limited agency agreement to one of the joint consultants, rather than to both of them, no question of repudiation of the agreement can arise from the conduct of Nutrimetics in paying commissions to Ms Nicoski alone after December 1997.
412 Even though it does not arise strictly as a result of the findings I have made, I should also consider the further head of damages claimed by Mr Williams as against Nutrimetics in par 7(2) of the statement of claim against Nutrimetics. This is because I do not consider it can be made out in any event. It is similar in effect to the claim for damages for breach of the partnership agreement made by Mr Williams against Ms Nicoski in par 6(8) of the statement of claim against her. Mr Williams claims unliquidated damages against Nutrimetics to the "value of the lost opportunity to increase the Remuneration under the Contract and increase the value of the business operated by the Plaintiff and the First Defendant under the Contract". It is said, as in the case of the claim against the first defendant, that the value lost is that value the business would have, had Mr Williams not been excluded from it (see par 7, particular (2)).
413 I do not accept that this can constitute a relevant measure of damage for the pleaded breach. Even if it were open on the evidence to argue that the exclusion of a partner from the management of a business has caused a reduction in the current value of the business to the detriment of that partner, I find it difficult to comprehend how the failure of a principal, pursuant to a limited agency agreement with joint consultants, to make payments of remuneration to the consultants jointly, rather than to one consultant alone, can have caused a loss in the value of the business of the partnership. The breach Mr Williams complains of does not truly relate to the alleged exclusion of the plaintiff from the management of the partnership business pleaded in par (2) of the particulars to par 7 of the statement of claim.
414 In any event, there is simply no evidence to show that any such loss was caused by such alleged breach. Ms Nicoski seems to have done quite nicely without Mr Williams' involvement in the management of the business and there is nothing to suggest the value of the business would be any greater if Mr Williams had received directly half the payments that Nutrimetics made to Ms Nicoski after December 1997.
415 In any event, the assessment of damages put forward, relevant as it is on Mr Mitchell's expert evidence, is wholly without merit. For the same reasons that I dismissed this head of damage in relation to the claim of Mr Williams for damages as against the first defendant pursuant to par 6(8) of the statement of claim in the action against her, I do not consider the evidence of Mr Mitchell supports any findings of loss as against Nutrimetics.
416 This claim is premised on the Court finding that Mr Williams and Ms Nicoski concluded a limited agency agreement with Nutrimetics in April 1997, which I have found was then concluded. On behalf of Mr Williams, it is contended that Mr Sullivan of Nutrimetics, described Nutrimetics and its consultants, particularly its senior consultants, as a "family", and that he agreed that the relations between Nutrimetics and its consultants were not governed solely by contract. Rather, they had a relationship by which the company undertook to protect the interests of its consultants and the consultants undertook to protect the interests of the company. It is submitted that there could be no clearer statement of a fiduciary relationship than the evidence given by Mr Sullivan to this effect.
417 It is further submitted that the fiduciary relationship and the fiduciary duties that flowed from it were stressed repeatedly in Nutrimetics publications and at its gatherings. For example, it was submitted that the relationship finds contractual form in that the limited agency agreement incorporates the company policies, such as the document entitled "Winning Through Integrity" and the "Sara Lee" brochure referred to at trial bundle Vol 6, 1360-1375. This brochure was provided to Mr Williams in mid-1997 when the Sara Lee company "took over" Nutrimetics. It is submitted that both documents contain the clearest statement of a fiduciary relationship.
418 Based on these statements or representations the plaintiff claims that Nutrimetics in its dealings with him under the 1997 limited agency agreement owed him duties of honesty and good faith and "to avoid placing itself in a position of conflict between its duties to the plaintiff and its personal interests".
419 Counsel submits on behalf of Mr Williams that, in breach of these duties, Nutrimetics facilitated Ms Nicoski's actions by which she failed to honour her obligations to Mr Williams by directing commissions solely to her and by recognising and promoting her as their sole consultant under the limited agency agreement when they knew he was their joint consultant with her.
420 Nutrimetics' obligation was to pay commissions and other benefits and entitlements to Mr Williams and Ms Nicoski. As I have found, Nutrimetics satisfied this obligation by paying commissions and according other benefits or entitlements to Ms Nicoski in the period after 22 December 1997.
421 The substance of the claim of Mr Williams is that Nutrimetics, knowing there subsisted a joint consultancy between him and Ms Nicoski at material times, should have inquired of him before acceding to Ms Nicoski's request to direct all remuneration under the agreement to her alone. As I have noted above, if Mr Williams and Ms Nicoski were trustees, a submission to this effect would carry weight: McIntyre v Gye (supra). However, in my view, they were not trustees, at least so far as their dealings at material times with Nutrimetics were concerned.
422 As noted in Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41, the archetype of a fiduciary is the trustee, but it is recognised that there are other classes of persons who normally stand in a fiduciary relationship to one another, such as partners, principal and agent, director and company, and so on: see Gibbs CJ at 68, and Mason J at 96 - 97. As the Chief Justice there noted:
"There is no reason to suppose that these categories are closed. However, the difficulty is to suggest a test by which it may be determined whether a relationship, not within one of the accepted categories, is a fiduciary one."
423 In Hospital Products, Mason J at 96 - 97 stated:
"The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position. The expressions 'for', 'on behalf of' and 'in the interests of' signify that the fiduciary acts in a 'representative' character in the exercise of his responsibility, to adopt an expression used by the Court of Appeal."
424 It is clear that, while the traditional or accepted categories are not closed, there are a number of factors which are said to be indicative of the existence of a fiduciary relationship, including: relationships of trust and confidence or confidential relations; the exercise of a power or discretion which will affect the interests of another person in a legal or practical sense, so that the other person is especially vulnerable to abuse by the fiduciary of his position: see LAC Minerals Ltd v International Corona Resources Ltd [1989] 2 SCR 574 at 597 per Sopinka J; Meagher Gummow and Lehane's Equity Doctrines and Remedies, 4th ed (editors Meagher Heydon and Leeming) at 157.
425 It is also clear that actual trust and confidence is not a necessary feature of all relationships which are undoubtedly fiduciary: Hospital Products Ltd at CLR 69 per Gibbs CJ.
426 In this case, Mr Williams contends that Nutrimetics owed him a particular fiduciary obligation - that is, that it was in a fiduciary relationship with him in particular.
427 It does not appear to be argued on behalf of Mr Williams that the 1997 limited agency agreement of itself creates the particular fiduciary duty contended for. At first glance, the 1997 limited agency agreement appears to create a relationship of principal and agent between Nutrimetics and the joint consultants that is fiduciary in nature. It may be, however, on closer analysis that the 1997 limited agency agreement is more in the nature of a distributorship agreement and not one that necessarily results in a fiduciary relationship between the parties: see Hospital Products Ltd.
428 However, what does appear to be put, on behalf of Mr Williams, is that certain Nutrimetics documents which are effectively incorporated into the 1997 limited agency agreement create the necessary relationship of trust and confidence and the duty he pleads. For example, it is said that the Nutrimetics code of conduct "Winning Through Integrity" (trial bundle vol 6 page 1337) has this effect by providing variously as follows:
"WE HAVE A RESPONSIBILITY TO EACH OTHER
The success of Nutrimetics lies in our core philosophy 'to help people help other people'. We depend on the relationships that we form with other Consultants and all the people we come into contact with. We owe each other honesty, respect and fair treatment.
....
IT IS NOT ACCEPTABLE FOR CONSULTANTS TO:
• solicit or entice Consultants from another line of sponsorship.
.... "
429 In my view, the documents upon which the plaintiff relies in putting the fiduciary claim do not have the effect contended for. In particular, they do not result in Nutrimetics undertaking or agreeing to act for or on behalf of or in the interests of each of the joint consultants in the exercise of a power or discretion which will affect the interests of each joint consultant in a legal or practical sense. What they do encourage is that the consultants appointed under one limited agency agreement treat fairly consultants appointed under other agreements. In my view, the documents say nothing about the exercise of the contractual relationship between Nutrimetics and its consultants under each particular agreement.
430 It is, in these circumstances, difficult to understand how Nutrimetics, by reason of the documentation relied upon, can be said to have undertaken to act in a particular matter in the interests of its consultants, or each one of them where joint consultants are appointed, or is entrusted with a power to affect the interests of its consultant, or each of them, in a legal or practical sense.
431 Moreover, it is difficult to see how, in any relevant sense, Nutrimetics has preferred its interests over those of Mr Williams, in the circumstances of this case, in any event. By the 1997 limited agency agreement, Nutrimetics undertakes to pay the agreed remuneration to Ms Nicoski and Mr Williams jointly for services provided. As I have found, by providing that remuneration to Ms Nicoski severally, the obligation to pay the consultants jointly was satisfied. While it may be said that Nutrimetics ignored Mr Williams in so doing, it is difficult to see how, on the evidence, or by reference to the terms of the limited agency agreement, or having regard to all the circumstances in which that agreement was made or in which Nutrimetics have expressly or impliedly undertaken to implement it, Nutrimetics can be said to have been placed in a fiduciary relationship with Mr Williams individually such that the company was obliged to treat Mr Williams and Ms Nicoski separately, as if they were trustees, when it came to the payment of commissions under the agreement.
432 As noted above, what is not pleaded in this action is that Nutrimetics was knowingly involved in a breach of a fiduciary duty owed by Ms Nicoski to Mr Williams arising by virtue of their partnership relationship in respect of the remuneration or benefits arising under the 1997 limited agency agreement: see Barnes v Addy (supra). There would be obvious evidential difficulties in Mr Williams proving the knowing involvement of Nutrimetics in relation to such an alleged breach of fiduciary duty. No doubt, for that reason, the fiduciary duty pleaded against Nutrimetics has been cast in the way that it has. In effect, the plea is that Nutrimetics should have made further inquiries before making payment to Ms Nicoski alone; not that it was knowingly involved in an alleged breach of fiduciary duty owed by her to Mr Williams.
433 In the result, I am not satisfied that Nutrimetics owed Mr Williams the fiduciary duty pleaded. It follows that Nutrimetics did not breach any fiduciary duty owed to Mr Williams alone when they dealt with Ms Nicoski in the manner complained of.
434 Mr Williams is entitled to a declaration that the partnership I have found came into existence on 5 February 1997, was dissolved as of or about 19 April 1999, being the approximate date of the service of the writ in this action on Ms Nicoski.
435 Mr Williams is entitled to appropriate orders for the taking of accounts and inquiries and an appropriate order for sale of the partnership property and goodwill of the partnership business established under the 1997 limited agency agreement.
436 However, Ms Nicoski is entitled to the benefit of a declaration that the property of the partnership does not include the assets of the business she established under the 1988 limited agency agreement.
437 It is unnecessary to consider the alternative form of relief sought in par 5B of the prayer for relief, in terms of sale and purchase by a member of the partnership. It is not usual, in any event, for the Court to make such an order without the consent of all the parties authorising one of them to purchase the interests of the other at valuation: see Higgins and Fletcher, "The Law of Partnership in Australia and New Zealand" (supra) page 234.
438 While I consider that there should be appropriate inquiries conducted and accounts taken, I consider it is also appropriate to order that, in the taking of such accounts, Ms Nicoski be granted an allowance for her work and skill in deriving profits, benefits or property for the partnership.
439 It is accepted that a fiduciary who is ordered to account for his profit will, at least if he has acted honestly, be held entitled to an allowance for his work and skill. If he has been unassailably honest and unusually skilful, that allowance should be "liberal": Boardman v Phipps [1966] UKHL 2; [1967] 2 AC 46. It is also said that an element of dishonesty will not necessarily disentitle the defaulting fiduciary altogether, though the degree of liberality will undoubtedly be reduced in such a case: Green & Clara Pty Ltd v Bestobell Industries Pty Ltd (No 2) [1984] WAR 32.
440 In the circumstances of this case, I consider Ms Nicoski is entitled to a liberal allowance for her work and skill involved in developing the profits, benefits and property of the partnership. This follows because, in my view, the development of the business of the partnership was highly dependent upon the personal efforts and skills of Ms Nicoski before the separation of the parties on 22 December 1997 and was entirely dependent on her efforts thereafter.
441 As to the terms of the orders that should now be made in light of my findings, the Court will hear further from the parties as to why the declarations and orders set out in the draft Orders attached to these reasons should not be made.
442 Otherwise the action against Ms Nicoski made in reliance on the partnership agreement should be dismissed.
443 Save in respect of the making of a declaration that the plaintiff and the first defendant on the one part and the second defendant on the other part concluded a limited agency agreement in the form of the 1997 limited agency agreement on 2 April 1997, referred to in the draft Orders, the plaintiff's action against the second defendant should be dismissed.
NUTRIMETICS INTERNATIONAL (AUSTRALIA) PTY LTD Second Defendant
(1) declares that the plaintiff and the first defendant were partners in the business of selling products supplied by Nutrimetics to members of the public, recruiting other persons to sell Nutrimetics' products and supervising those persons as and from 5 February 1997 (the partnership) and were entitled to the capital and profits of the business;
(2) declares that the partnership was dissolved as and from 19 April 1999;
(3) declares that the plaintiff and the first defendant, as independent agents, concluded a limited agency agreement with the second defendant (Nutrimetics) as of 2 April 1997 and that such agreement was in the form and on the terms of the Nutrimetics Form No 90454 '"Limited Agency Agreement" attached to these orders and marked "1997 LAA" (the 1997 limited agency agreement);
(4) declares that the 1997 limited agency agreement is partnership property;
(5) declares that the assets of the Nutrimetics business operated by the first defendant before she concluded the partnership with the plaintiff, including a limited agency agreement between the first defendant and Nutrimetics in 1988 in the form and on the terms of the Nutrimetics Form No 90610 "Limited Agency Agreement" attached to these orders and marked "1988 LAA" (the 1988 limited agency agreement), are not partnership property;
(6) orders that the following accounts or inquiries be taken by a Master of the Court:
(a) an account of all receipts and payments, dealings and transactions of the plaintiff and the first defendant under the 1988 limited agency agreement in respect of the partnership business from 5 February 1997 until 19 April 1999;
(b) an account of all receipts and payments, dealings and transactions of the plaintiff and the first defendant under the 1997 limited agency agreement in respect of the partnership business from 2 April 1997;
(c) an account of all the debts and liabilities of the partnership;
(d) an account of all credits or payments that may become payable under the 1997 limited agency agreement;
(e) an inquiry as to what has become of any property of the partnership business;
(7) orders that, in taking the accounts and inquiries directed above, the first defendant to be at liberty to submit any claim as to just allowances which she may be advised ought to be made to them on account of her services in managing, transacting and carrying on the business alone between 22 December 1997 and 19 April 1999 and such allowances, if any, as shall appear to be proper in respect therefor are to be made accordingly;
(8) orders that the business of the partnership carried on pursuant to the 1997 limited agency agreement by the plaintiff and the first defendant (with the goodwill, the 1997 limited agency agreement and any effects) be sold as a going concern by private treaty, subject to the written permission of Nutrimetics to the sale of the plaintiff and the first defendant's status under the 1997 limited agency agreement as independent agents for Nutrimetics under the 1997 limited agency agreement;
(9) orders that the plaintiff and the first defendant be at liberty to bid for and become the purchaser at the sale of the said business as a going concern;
(10) orders that the conduct of the sale of the said business be committed to the solicitors for the first defendant, notwithstanding that both the plaintiff and the first defendant have been given liberty to apply;
(11) orders that the money to arise by the sale of the said business as a going concern be lodged in the Court to the credit of this action "Proceeds of Sale of Partnership Assets", subject to further order by a Master;
(12) orders that, in the event that Nutrimetics does not consent to the sale of the 1997 limited agency agreement as provided aforesaid, or that the said business of the partnership is not or cannot be sold as a going concern, such other saleable property and effects as are found to belong to the partnership upon the taking of the account and inquiry (apart from the 1997 limited agency agreement), be sold by the solicitors for the first defendant, and the money to arise from such sale of such property and effects be lodged in the Court to the credit of this action "Proceeds of Sale of Property and Effects", subject to further order of the Master;
(13) The Master, following satisfaction of these orders and payment of any just debts and making provision for any just liabilities of the partnership that the Master may think necessary, do pay out any balance of moneys to the plaintiff and the first defendant;
(15) The plaintiff's action against the first defendant otherwise be dismissed.
(16) The plaintiff's action against the second defendant be dismissed.
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
CITATION : WILLIAMS -v- NICOSKI & ANOR [2003] WASC 131 (S)
Partnership - Final orders in partnership and contract actions - Whether s 34(5) of The Partnership Act 1895 (WA) prevents the award of an allowance for work and skill
Final orders for winding up and taking of accounts of partnership and in respect of limited agency agreement
First Defendant : Mr C L Zelestis QC & Mr P C Blackman
Second Defendant : Mr C L Zelestis QC & Mr P C Blackman
1 On 8 July 2003, I published my reasons for decision in these proceedings.
2 I then indicated that for the reasons which I had published, I would find for the plaintiff in the partnership action against the first defendant, but would dismiss the plaintiff's action for damages or equitable compensation against the second defendant, save in respect of the making of a declaration that on 2 April 1997, the plaintiff and the second defendant concluded a limited agency agreement in the form of the 1997 limited agency agreement attached to the reasons.
3 I further indicated that I would hear from the parties as to why declarations and orders should not be made in accordance with the draft orders attached to the reasons for decision.
4 I then received written submissions from the parties, as well as supplementary oral submissions, concerning the terms of the final orders that should be made.
5 As to draft order 6, concerning the taking of accounts in the partnership action, the first defendant submits that the account should only be in respect of the period from 22 December 1997. This submission is made on the basis that the plaintiff had made it clear, both in its pleadings and in the way counsel put his case, that an account was only denied by the first defendant in respect of the period following the ending of the personal relationship of the parties on 22 December 1997.
6 I accept the submission made on behalf of the first defendant. Paragraph 9 of the statement of claim against the first defendant expressly pleads that the first defendant "has failed to account to the Partnership for the income of the Business earned in and from December 1997." Further, in par 3 of the prayer for relief, the plaintiff claims against the first defendant an inquiry into "income, moneys and benefits received and enjoyed solely by the first defendant" which were due to the partnership, as well as an order that the first defendant "account to the Partnership for such income, moneys and benefits."
7 So far as the terms of draft order 6 are concerned, the first defendant also submits that there should only be a single accounting of income and expenses from 22 December 1997. I also accept this submission. The practical position was, especially following 1 April 1997, that the parties operated a single consultancy, whether or not it may strictly be said that commissions and benefits were thereafter received pursuant to one or other of the 1988 limited agency agreement and the 1997 limited agency agreement. Accordingly, there should be an amendment to order 6, expressly providing that the accounting be performed as a single accounting exercise.
8 The first defendant further submits that she alone paid all income tax assessed and payable in respect of the business income during the accounting period and that order 6 should be amended specifically to provide that all income tax paid by her in respect of business income for which there is to be an account, should be treated as a business expense. I consider that, in all the circumstances, the first defendant should be restored to the position, as nearly as possible, that she would have been in had the partnership agreement been met.
9 But for the making of these orders, the first defendant would have been liable for income tax on the taxable income of the business during the accounting period. If the parties had accounted for tax purposes as a partnership, each would have paid income tax on his and her equal share of that taxable income. To the extent that the first defendant has paid income tax on the profits she must now account for, and is unable to obtain a refund of any portion thereof I consider that sum may be considered a business expense and treated so by the Master.
10 The first defendant further submits that, because the Court has found that the first defendant should account for benefits received from the second defendant, "including by way of cars, gifts and trips" (see reasons par [343](g)), it is necessary to distinguish in the final orders between "benefits" which were applied towards earning business income and "benefits" which were purely for personal enjoyment. It is said, by way of example, the benefit of the use of a motor vehicle in respect of which the second defendant paid the leasing fees should not result in any accounting where that benefit was applied in activities directed towards the earning of business income. The position is said to be similar in relation to trips which involved training. Thus, it is submitted that draft order 6 should be amended to provide that, in relation to benefits, only those benefits enjoyed exclusively by the first defendant personally and which were not applied or related to the conduct of the business and the earning of income, should be brought to account.
11 I consider that, in the course of the accounting, the extent to which a benefit has involved the personal enrichment of the first defendant and not been used wholly in the business of the partnership and the earning of business income, should be the subject of inquiry and account. The Master who conducts the taking of the account and the making of this inquiry will necessarily need to bear in mind this distinction. Thus, I think it is appropriate to make it clear in the final orders that the account should only be in respect of those "benefits" which were not wholly applied in the running of the business and the earning of income. The extent of each benefit that is the subject of the accounting will, therefore, need to be assessed by the Master.
12 At trial Senior Counsel for the first defendant submitted that the first defendant would be entitled to such an allowance if the Court were to find a partnership and order an account. The plaintiff did not directly address this submission, but in light of the terms of the draft order now seeks to do so.
13 In my reasons for decision published on 8 July 2003, I found that on the taking of the account the first defendant is entitled to an allowance for work and skill. I also suggested that it should be a liberal allowance. The plaintiff questions the extent to which an allowance can be ordered in a partnership action having regard to the terms of s 34 of The Partnership Act 1895.
14 Section 34(5) of the Act provides that, subject to agreement to the contrary, "every partner may take part in the management of the partnership business, and shall attend diligently to the partnership business, and shall not be entitled to any remuneration for acting in the partnership business."
15 This rule recognises the rule that applied before the Act came into operation. As stated, it applies subject to agreement between partners to the contrary. It also has exceptions which applied both before and after the Act came into operation.
16 In this respect, as noted in Lindley and Banks on Partnership (supra) at [20-46] and [20-47], both prior to and after the enactment of the Partnership Act 1890 (Eng) Lord Lindley accepted there are exceptions to the general rule that a partner in the absence of agreement is not entitled to remuneration for services rendered to the firm. One exception noted is where one partner is in breach of his duty to attend to the partnership business.
17 In Airey v Borham [1861] EngR 553; (1861) 29 Beav 620; 54 ER 768, two partners had agreed to devote their whole time to the partnership business, but later quarrelled, with the result that one of them was left to carry the business on alone. The partnership was ultimately dissolved and an inquiry was directed in order to ascertain what allowance ought to be made to him for so doing. The learned editor of Lindley and Banks observes of this decision that in his opinion "such a claim is still maintainable in an appropriate case".
18 It is also plain that the general rule concerning remuneration does not apply in the case of services rendered by a partner in carrying on a partnership's business following a dissolution: see Lindley and Banks (supra) at [20-48] and [20-49].
19 In this case, as I have accepted in the reasons, the first defendant was largely responsible for the profits of the partnership prior to the ending of the partners' personal relationship on 22 December 1997 (see par [440]). After 22 December 1997 and until 19 April 1999 when the partnership was dissolved, she was solely responsible for the business of the partnership.
20 The evidence shows that the business of the partnership is best performed by an enterprising woman. However, she can be assisted by an able man working in partnership with her. On the evidence the successful partnerships operating this type of business have been "husband and wife" teams.
21 Once the personal relationship of the plaintiff and the first defendant ended in the manner that it did on 22 December 1997 - in acrimonious circumstances - there was virtually no likelihood that the partners could operate the business together. In theory perhaps they could have, but in practice it was most unlikely that they could do so.
22 While it may be accurate to observe the plaintiff was denied his entitlement to participate in the business after 22 December 1997 because of the view the first defendant took of the plaintiff's claim to a partnership, in practical terms once the personal relationship died so did the ability of the plaintiff to attend diligently to the partnership business in accordance with the duty expressed in s 34(5). Put another way, in practical terms, once the personal relationship of the partners ended the only way the business could turn a profit was through the continued endeavours of the first defendant. If she had not been prepared to work the business there would not have been a profit.
23 Thus in my view, after 22 December 1997, the first defendant was effectively required to operate the business of the partnership as a sole proprietor, whereas previously it had been operated by the plaintiff and the first defendant together. In these usual circumstances, I consider, and considered in my reasons, that the first defendant is entitled to an allowance for the additional work and skill she was obliged to do and exercise in the business as a result of the breakdown of her personal relationship with the plaintiff.
24 It is now for the Master in taking the account to make an assessment of what allowance should be made in this regard. This should not involve a detailed inquiry. The plaintiff has already given evidence concerning the nature and extent of his contribution to the business, as has the first defendant in respect of her contribution. I have accepted in my reasons that the first defendant's contribution was by far the greatest and most significant to the success and profitability of the business. This finding will need to be taken into account when the Master assesses an appropriate allowance.
25 It follows that the award of an allowance is not to be treated by the first defendant as a means of obtaining remuneration for all the time and expense incurred by her in earning the profits of the partnership in the accounting period. It is but a recognition in equity of the additional work and skill she has she has been required to apply in earning the profits of the business during the accounting period. Possibly it may not be a great sum, but that is for the Master to assess.
26 In these circumstances, I consider the award of such an allowance to the first defendant to be open at equity and on the proper construction of s 34(5) of the Act. Accordingly, the provision of such an allowance may be made in conformity with s 6 of the Act.
27 In respect of costs, the plaintiff and the first defendant agree that costs of the action between the plaintiff and the first defendant should be reserved until the winding-up and taking of accounts in the partnership action have been completed. I accordingly accept that an order in those terms should be made.
28 So far as the action between the plaintiff and the second defendant is concerned, the plaintiff says that the ordinary rule that costs should follow the event should not be applied in this case and, indeed, that either the first defendant or second defendant should be responsible for those costs.
29 The plaintiff says that the involvement of the second defendant in the proceedings only commenced when the writ was amended in late 1999. In those amended proceedings, the plaintiff alleged in the statement of claim against the second defendant that the 1997 limited agency agreement was concluded in or about April 1997. That allegation was subsequently denied by the second defendant in its defence.
30 The plaintiff says that all other issues in the proceedings against the second defendant "flowed from that denial". It is submitted on behalf of the plaintiff that the second defendant could have admitted the relationship between the parties "and all else could possibly have fallen away". The plaintiff, thus, submits that it was necessary and reasonable for the plaintiff to continue in the manner in which it did against the second defendant.
31 Alternatively, the plaintiff submits that, if the plaintiff is to be held responsible for the costs of the second defendant, the circumstances here are such that a Bullock order should be made, so that the plaintiff should be entitled to recover from the first defendant his costs of the action to be taxed, including the costs incurred against the second defendant. This submission is made, as I understand it, on the basis that it was necessary for the plaintiff in the action against the first defendant to join the second defendant as a proper party to the proceedings in order to have an order made that bound the second defendant and the first defendant in respect of the 1997 limited agency agreement.
32 While the latter proposition is true to an extent, it is also true, as Senior Counsel for the second defendant and the first defendant submits, that the plaintiff's action against the second defendant was never, at any material time, confined to an action for a declaration concerning the 1997 limited agency agreement, but was for a large damages claim for breach of contract, and a claim for equitable compensation in respect of breach of fiduciary duty.
33 I accept the submissions made on behalf of the defendants that it is not appropriate to accede to the plaintiff's submissions concerning costs in the action against the second defendant. The second defendant has successfully defended the plaintiff's substantive action against it and it is entitled to its costs.
34 Because the plaintiff's action against the second defendant goes well beyond that for a declaration, a Bullock order against the first defendant is not appropriate.
35 However, I accept that, depending upon if and how the costs of the action between the plaintiff and the first defendant are ordered and taxed, it may become appropriate to make orders establishing the basis of taxation of the costs that the plaintiff should pay in respect of his action against the second defendant. The order for costs should make such provision.
36 In those circumstances, I now make final orders in terms of the document entitled "Final Orders" attached to these supplementary reasons. Judgment should be entered in accordance with the terms of these Final Orders.
NUTRIMETICS INTERNATIONAL (AUSTRALIA) PTY LTD Second Defendant
1. declares that the plaintiff and the first defendant were partners in the business of selling products supplied by Nutrimetics to members of the public, recruiting other persons to sell Nutrimetics' products and supervising those persons as and from 5 February 1997 (the partnership) and were entitled to the capital and profits of the business;
2. declares that the partnership was dissolved as and from 19 April 1999;
3. declares that the plaintiff and the first defendant, as independent agents, concluded a limited agency agreement with the second defendant (Nutrimetics) as of 2 April 1997 and that such agreement was in the form and on the terms of the Nutrimetics Form No 90454 '"Limited Agency Agreement" attached to these orders and marked "1997 LAA" (the 1997 limited agency agreement);
4. declares that the 1997 limited agency agreement is partnership property;
5. declares that the assets of the Nutrimetics business operated by the first defendant before she concluded the partnership with the plaintiff, including a limited agency agreement between the first defendant and Nutrimetics in 1988 in the form and on the terms of the Nutrimetics Form No 90610 "Limited Agency Agreement" attached to these orders and marked "1988 LAA" (the 1988 limited agency agreement), are not partnership property;
6. orders that the following accounts or inquiries be taken by a Master of the Court:
(a) an account of all receipts and payments, dealings and transactions of the plaintiff and the first defendant under the 1988 limited agency agreement in respect of the partnership business from 22 December 1997 until 19 April 1999;
(b) an account of all receipts and payments, dealings and transactions of the plaintiff and the first defendant under the 1997 limited agency agreement in respect of the partnership business from 22 December 1997;
(c) an account of all the debts and liabilities of the partnership;
(d) an account of all credits or payments that may become payable under the 1997 limited agency agreement;
(e) an inquiry as to what has become of any property of the partnership business;
(f) for the purposes of pars (a) and (b) of this order, the accounts be taken as a single account, whether the receipts and payments or the dealings and transactions of the plaintiff and the first defendant occurred under the 1988 limited agency agreement or under the 1997 limited agency agreement in respect of the partnership business;
(g) in the taking of the account for the purposes of this order, to the extent that the first defendant has paid income tax on the profits the subject of the account, and is unable to obtain any refund of any portion thereof, such income tax shall be considered a business expense;
(h) in the taking of the account for the purpose of this order, where the first defendant has received a benefit or remuneration under the 1988 limited agency agreement or the 1997 limited agency agreement that does not comprise commissions paid as money, such benefit or remuneration, or proportion thereof, that was applied in the running of the business and the earning of income, as assessed by the Master, shall not be brought to account.
7. orders that, in taking the accounts and inquiries directed above, the first defendant to be at liberty to submit any claim as to just allowances which she may be advised ought to be made to them on account of her services in managing, transacting and carrying on the business alone between 22 December 1997 and 19 April 1999 and such allowances, if any, as shall appear to be proper in respect therefor are to be made accordingly;
8. orders that the business of the partnership carried on pursuant to the 1997 limited agency agreement by the plaintiff and the first defendant (with the goodwill, the 1997 limited agency agreement and any effects) be sold as a going concern by private treaty, subject to the written permission of Nutrimetics to the sale of the plaintiff and the first defendant's status under the 1997 limited agency agreement as independent agents for Nutrimetics under the 1997 limited agency agreement;
9. orders that the plaintiff and the first defendant be at liberty to bid for and become the purchaser at the sale of the said business as a going concern;
10. orders that the conduct of the sale of the said business be committed to the solicitors for the first defendant, notwithstanding that both the plaintiff and the first defendant have been given liberty to apply;
11. orders that the money to arise by the sale of the said business as a going concern be lodged in the Court to the credit of this action "Proceeds of Sale of Partnership Assets", subject to further order by a Master;
12. orders that, in the event that Nutrimetics does not consent to the sale of the 1997 limited agency agreement as provided aforesaid, or that the said business of the partnership is not or cannot be sold as a going concern, such other saleable property and effects as are found to belong to the partnership upon the taking of the account and inquiry (apart from the 1997 limited agency agreement), be sold by the solicitors for the first defendant, and the money to arise from such sale of such property and effects be lodged in the Court to the credit of this action "Proceeds of Sale of Property and Effects", subject to further order of the Master;
13. The Master, following satisfaction of these orders and payment of any just debts and making provision for any just liabilities of the partnership that the Master may think necessary, do pay out any balance of moneys to the plaintiff and the first defendant;
14. The plaintiff's action against the first defendant otherwise be dismissed.
15. The costs of the action between the plaintiff and the first defendant be reserved until the winding-up and taking of the accounts of the partnership has been effected in accordance with the above orders.
16. The plaintiff's action against the second defendant otherwise be dismissed.
17. The plaintiff do pay the costs of the second defendant to be taxed, subject however to further orders as to the basis of such taxation.
19. In relation to orders 14 and 16 there be a certificate for second counsel and an allowance for transcript.
Williams
Nicoski & Anor [2003] WASC 131
(1953) 90 CLR 460
(1929) 42 CLR 384
(1984) 154 CLR 178
(1999) 165 ALR 409
(1931) 46 CLR 343
(1911) 14 CLR 387
(1980) 32 ALR 570
(1985) 157 CLR 1
(1916) 21 CLR 277
(1970) 120 CLR 529
(1985) 2 NSWLR 309
(1929) 42 CLR 91
(1990) 64 ALJR 234
(1982) 150 CLR 310
(1936) 55 CLR 423
(1957) 99 CLR 285
(1996) 190 CLR 311
(1998) 193 CLR 605
(1995) 12 WAR 370
(2001) 52 NSWLR 705
(2001) 202 CLR 351
(1990) 21 NSWLR 1
(1994) 51 FCR 472
(1967) 119 CLR 460
(1984) 156 CLR 41
(1992) 10 WAR 109
(2001) 202 CLR 410
(1993) 178 CLR 145
(1998) 195 CLR 291