Public Trustee v Schultz [1964] HCA 44

High Court of Australia McTiernan, Taylor and Menzies JJ. Public Trustee v Schultz [1964] HCA 44

ORDER Appeal dismissed with costs. Cross-appeal dismissed with costs to be set off against the costs of the appeal.

Cur. adv. vult.

The following written judgments were delivered:—

August 5 McTiernan J.

The appellant is the administrator of the estate of a Mrs. Donaldson who died at Griffith on 11th October 1950. The respondent and Mrs. Donaldson were partners in a timber and hardware business carried on under the name, Area Builders Supply Company, at Griffith. It was a prosperous business. At the date of Mrs. Donaldson's death the goodwill of the business was of substantial value. The respondent and Mrs. Donaldson were equal partners. The partnership articles gave sole management of the business to the respondent and allowed a moderate weekly remuneration to him for his services. The respondent and Mrs. Donaldson's husband were partners in the business for some time before his death. Mr. Donaldson died on 28th July 1932. He left by will his interest in the business to his wife. At the respondent's invitation she and the respondent entered into a partnership with one another to carry on the business. Mrs. Donaldson contributed her husband's share left to her by his will to the capital of the partnership and the respondent contributed his own half share. The partnership was constituted by articles dated 23rd May 1933. They were made retrospective to 28th July 1932. The partnership continued until 11th October 1950, the date of Mrs. Donaldson's death. Upon her death cl. 15 of the partnership articles took effect. The result of the operation of this clause was that the respondent acquired her share in the "partnership business and the property and goodwill thereof" at a price measured by Mrs. Donaldson's share in the "capital and property of the partnership". Sub-clause (a) of cl. 15 provides that the amount of such share is to be ascertained from an annual account taken by the partners, if the partner whose share is acquired by the survivor dies on or after the taking of the first annual account "or as the same shall be ascertained on the taking of such account by the parties interested". The relevant date of the account was in this case 30th June 1950. It is necessary to refer to cl. 8 of the articles, which provides for the taking of annual accounts by the partners. The partners thereby agreed to take out as at June 30th annually a balance sheet, to include in it the estimated value of the goodwill, and to sign such account; and if they did this that it would be conclusive between them as to matters stated therein. None of the balance sheets of the partnership included estimated value of goodwill and only two were signed by the partners; these related to certain years previous to the year which ended on 30th June 1950.