LARBALESTIER v JACKSON SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL KirBy P, HOPE and SAMUELS JJA 10 August 1988, 10 August 1988 [1988] NSWCA 81 PARTNERSHIP — termination of partnership at will — one partner writes to others claiming contributor by joint venturers — appellant's solicitor writes that he "disputes your claim entirely and has instructed us to defend any legal proceedings" — also asks that further correspondence be addressed to solicitors — agreed that this letter was shortly afterwards given to all partners — whether letter effective to terminate partnership — held (Hope JA; Kirby P and Samuels JA concurring) letter ineffective to terminate partnership because by the partnership Act 1892 s26, s32 notice must be given unequivocally and must be given to the other partners and in this case the letter was equivocal and was not so given but depended on others to distribute it. Syers v Syers (1876) 1 App Cas 174 (HL); Pearce v Lindsay (1860) 3 De G J & Sm 139; 46 ER 591 referred to. Partnership Act 1892, s26, s32(c). ORDER Appeal dismissed with costs. Hope JA The issue in this appeal is whether a partnership which was held by Needham J to exist between the plaintiff and the three defendants was determined, as his Honour further held, by the filing and serving of an amended notice of defence on 2 June 1987 by the second defendant, or whether, as is submitted by the second defendant in his appeal, it was determined by a letter sent by him to the plaintiff on 17 March 1981 and later communicated by the plaintiff to the first and third defendants. The partnership which his Honour found to exist was formed in respect of the operation of a tin mine in Cooktown between the parties as equal partners. The plaintiff is a stockbroker with some accountancy qualifications, the first defendant is a solicitor, the second defendant is a barrister and the third defendant is an accountant. In respect of the conduct of the partnership business Needham J found that the plaintiff was the source of funds, the second defendant was exercising some managerial control and the third defendant was attending to the paperwork. The second defendant (the present appellant) was held by him to have involved himself in some ways in respect of the activities of the partnership which it is not relevant to consider for present purposes. The partnership required to purchase the right to mine tin and it was the plaintiff who provided wholly or substantially the finance to make that purchase. His Honour also found the terms upon which that finance was provided. The partnership business was not a success and the plaintiff, not having been paid the moneys which otherwise would have been due to him under the terms which had been arranged, wrote a letter to the second defendant, the present appellant, on 10 March 1981 in these terms:- "Dear Barry, I enclose herewith a copy of a letter from Mr. Bill Stubbs, Solicitor in Brisbane in which he summarises the likely outcome of the recent court hearing in Cairns. Whilst it is pleasing to see him so confident the result did not come without considerable expense as a result of nine days in court. Bill Anderson's expenses amounted to approximately $6,000; the Barristers' expenses collectively amounted to $17,500; Bill Stubbs estimates his expenses will be in the vicinity of $8,000 - 2 UNREPORTED JUDGMENTS $10,000 and John Britton's expenses amounted to $3,100. The cost of motel rooms for witnesses and legal people for nine days plus the weekend prior to the court hearing during which witnesses were interviewed came to approximately $5,000. John Britton has also sent an account to Dominion the precise details of which I am not aware, and Dominion will be responsible for their Barrister who sought and was granted permission to retire after the second day. Whether this is all that Dominion should be responsible for I do not know and we should discuss this. I estimate that my time is approximately as valuable as David Jackson's and intend to charge the joint venture $10,000 compensation. Also enclosed is a report prepared by Ray Osborne for the court hearing which shows that the total deficiency of the operation including payout on leases of $111,328 and arrears of royalty payments to Doyle Acree shows a deficiency of $479,917. My method of accounting for the joint venture has been to debit all of the expenses to an account maintained here and credit all of the receipts for the sales from ATS in the same account. This account will have a debit balance of approximately $290,000 after interest at the agreed rate of 14% and expenses associated with the court costs have been paid. When you, Mal and Bob approached me to finance this operation, I agreed on the basis that I would not be responsible for the administration of the tin mine. To compensate for this, I agreed to an interest rate which you all agreed at the time was generous and I have also personally guaranteed the leases on the plant and equipment. At the time of our first discussions, it was anticipated that the mine would be profitable within six months and I would be repaid within 12 months. It is now two years and three months since I made the first payment and having money tied up in this venture precludes me from taking advantage of many potentially profitable situations which occur. As a result, I wish to advise that I require each of the partners in the joint venture to contribute equally to the costs of financing the mine. As our agreement of the 3rd December indemnifies me against the first $25,000 of any loss, to enable the costs to be shared in accordance with the agreement, it will be necessary for you, Mal and Bob to contribute $85,000 each. The $25,000 can be adjusted if the mine can be sold for sufficient to recoup all losses. I realise that this may cause some problems however it should come as no surprise as I have mentioned it previously on several occasions without actually setting a time limit for the money to be forthcoming. I now advise that I would like to receive the funds prior to the preparation of our Quarterly Return to the Stock Exchange on the 31st March, 1981. Please contact me if you wish to discuss the matter further or require any further information. Yours sincerely, BG. JACKSON" On 17 March the solicitors for the second defendant wrote a letter to the plaintiff in these terms:- "RE: MR. BJE. LARBALESTIER We act for Mr. Larbalestier who has handed us a copy of your letter of demand dated 10th March, 1981. Mr. Larbalestier disputes your claim entirely and has instructed us to defend any legal proceedings and claim costs. We are also instructed that any further correspondence should be directed directly to the writer. Yours sincerely, PIETERSE & PIETERSE" When the plaintiff sent his letter on 10 March 1981 to the second defendant, he sent letters in the same terms to the first and third defendants. On 8 April 1981 the plaintiff sent a copy of the letter of 17 March 1981 from Pieterse & Pieterse URJ LARBALESTIER v JACKSON (Hope JA) 3 to the first and third defendants, making slightly different comments about it to each of them. In his letter to the first defendant he said that the letter from Pieterse & Pieterse denied any involvement by the second defendant in the tin mining operations in Cooktown. In the letter to the third defendant he said that the second defendant denied any responsibility for expenses incurred in the tin mine at Cooktown. It is not in issue that the first and third defendants received the copy of the letter of 17 March 1981 sent to them by the plaintiff with the letters of 8 April 1981. The learned trial Judge, having held that there was a partnership, concluded that the letter of 17 March 1981 did not constitute a termination of that partnership. Among other things he said that it would seem to him to follow from authorities to which he referred that a mere denial of the partnership was insufficient, without more, to determine a partnership at will. His conclusion was that the letter was not a notice which s26 of the Partnership Act required to be given by a terminating partner to all the other partners. However, his Honour held the filing of the amended defence by the second defendant effected a termination of the partnership, and it is not an issue in the appeal that if the second defendant's submission as to the effect of the letter of 17 March 1981 is not upheld, his Honour's conclusion as to the effect of the filing of the amended defence should stand. It is common ground that the partnership found by his Honour to exist was a partnership at will. There are two provisions in the Partnership Act 1892 dealing with the determination of a partnership at will, and it is not suggested that either has any different relevant effect from the other. $26(1) provides:- Where no fixed term has been agreed upon for the duration of a partnership, any partner may determine the partnership at any time on giving notice of his intention so to do to all the other partners. $32(c) provides:- Subject to any agreement between the parties a partnership is dissolved- (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. The submission for the second defendant is that the letter of 17 March 1981, although not explicitly dissolving or terminating the partnership at will, was a denial of the existence of the partnership and accordingly amounted to a communication that the second defendant no longer had the will that the partnership should be continued. The sending by the plaintiff of a copy of the letter to each of the first and third defendants was a service of notice of the determination of the partnership upon those defendants for the purposes of s26 and s32. Accordingly, both those provisions had been complied with, and the partnership was effectively dissolved upon the receipt by the plaintiff of the letter of 17 March 1981 and the subsequent receipt of copies of that letter by the first and third defendants, not long after 8 April 1981. It will be seen that the letter which the plaintiff wrote to each of the defendants on 10 March 1981 was essentially a claim for the payment of various sums of money. The claim was based on what was alleged to be the agreement between the parties, and in particular, in the third last paragraph, the plaintiff expressly stated that he required that each of the "partners" in the joint venture should contribute equally to the cost of financing the mine. 4 UNREPORTED JUDGMENTS There is no doubt that the plaintiffs claim assumed the existence of the partnership agreement and of the terms which Needham J found to have been entered into; and further, that in the passage to which I have referred, there was an express reference to the parties to the proceedings being "partners". The second defendant relies upon the whole of the language of his solicitor's letter of 17 March 1981 as a rejection of every claim made in the plaintiff's letter, and In particular the word "entirely" is pointed to as describing the intent of the letter to apply to each claim which could fairly be shown to be made in the letter which had been written by the plaintiff. The second defendant bases his claim upon compliance with the provisions of s26(1) and s32(c), and on a submission that the effect of the letter was to give notice of intention to determine the partnership. It is submitted for the second defendant that a denial of the existence of the partnership is an expression of an intention that there should be no longer any partnership and is the equivalent of a determination of the partnership. To support this submission the Court was referred to a number of decisions, including Pearce v Lindsay (1860) 3 De G J & Sm 139; 46 ER 591; Syers v Syers (1876) 1 App Cas 174; Brady v Powers (1906) 98 NY Supp 237 and Gleeson v Costello (1914) 138 Pacific Reporter 544. However I do not think that for present purposes it is necessary to analyse those decisions or to decide whether a claim that no partnership was ever entered into is a notice by a member of a partnership at will that the partnership is dissolved. I will assume that it could have that effect. The letter of 17 March 1981 did not explicitly purport to dissolve the partnership or to deny that any partnership existed. What it did so was to dispute the plaintiff's claim "entirely". It is not in issue that a notice under s26 or s32 to dissolve a partnership at will, in the absence of any agreement to the contrary, need not be in writing or that it may be made informally, and may take many forms. However, in my opinion, if the notice is not an explicit notice purporting to determine the partnership at will, it must be a notice which does so unequivocally so that any partner receiving such a notice can be in no doubt that the party sending the notice is intending to determine the partnership. it is not necessary to dwell upon the inconvenience of any other view of the operation of the two sections. In my opinion the letter in question was not of such an unequivocal kind that it would not leave the plaintiff and, when they received copies of it, the first and third defendants, without any doubt as to what the second defendant was intending. It may be that on a close analysis of what was said in the plaintiff's letter and what was said in the letter of the second defendant's solicitors, one could arrive at a conclusion that it would, or might, amount to a denial of the existence of any partnership. However, in my opinion another view, and the more likely view, is that any party receiving the letter would regard it as a denial of a claim that the plaintiff was entitled to the money payments to which he referred in his letter. I say that being fully aware that it would seem that the plaintiff did regard the second defendant as denying his obligations under the partnership and that he was a member of the partnership. However, I have concluded that the terms of the letter are equivocal and accordingly that the letter of 17 March denying "entirely" the claim that the plaintiff had made was not so unequivocal that it amounted to a notice of determination for the purposes of s26 and s32. I come to this conclusion on the assumption that a notice of denial of the existence of a partnership is sufficient notice of determination of a partnership at will, but I do not express any concluded opinion upon that matter. URJ LARBALESTIER v JACKSON (Samuels JA) 5 The other matter which has to be resolved is whether what occurred was, to use the language which appears in both of the sections, that the second defendant gave notice of his intention to determine the partnership to all the other partners, that is, to the plaintiff and to the first and third defendants. As appears from what I have already said what happened was that the plaintiff made a money claim upon the second defendant. The second defendant's solicitors wrote to the plaintiff denying that claim "entirely". I assume for present purposes that the letter of the second defendant's solicitors amounted to a denial of the existence of the partnership, and could be, in appropriate circumstances, notice of the determination of the partnership. However, the letter was one which was directed solely to the plaintiff. The occasion for writing it was a claim made in a letter directed to the second defendant by the plaintiff. The plaintiff was not answering any other claim or writing to anybody else. He did not ask the plaintiff to give a copy of his letter to anybody else or to notify anybody else of its contents, and the language of the letter shows clearly enough that it was directed solely to the plaintiff. What the sections require is that the partner seeking to determine the partnership must give notice of his intention so to do to all the other partners. The casual passing on of the letter by the plaintiff to the first and third defendants does not, in my opinion, amount to the giving by the second defendant of notice of his intention to dissolve the partnership within the meaning of the two sections. There was no obligation on the plaintiff to give that notice. The letter of the second defendant's solicitors did not in any way contemplate that he would do so and the plaintiff did not hold any position within the partnership which would place any obligation on him to do so. The fact that he did do so was entirely a matter of his own volition and he was in no way acting on behalf of the second defendant when he did so. Accordingly I have concluded that not only was the letter of 17 March 1981 not a notice of intention by the second defendant to dissolve the partnership but also that the second defendant did not give notice of his intention to determine the partnership to the first and third defendants. In my opinion, the appeal should be dismissed with costs. Kirby P I agree. Samuels JA I agree. KIRBY P: The order of the Court accordingly is appeal dismissed with costs. COUNSEL for the appellant: K. HANDLEY QC (with him A. ASHBURNER) 1st Respondent: R. CONTI QC (with him PM. BISCOE) SOLICITORS for the appellant: PIETERSE & PIETERSE Ist Respondent: HENRY DAVIS YORK