Industrial Relations Commission of New South Wales in Court Session CITATION : Gase v Hardy [2000] NSWIRComm 125 APPLICANT: PARTIES : Judith Mari Gase RESPONDENT: Ian Cedric Hardy FILE NUMBER: IRC 1031 of 2000 CORAM: Boland J CATCHWORDS : Unfair contract - partnership arrangement - breeding of alpacas - partnership borrowings from bank - security for bank loan was property owned by applicant - personal relationship between partners broke down - partnership business became unviable - debt owed to bank - bank sought to enforce mortgage over applicant's property - applicant sought to use net proceeds from sale of partnership assets to reduce bank debt - respondent claimed partnership arrangement required equal capital contribution - cross claim - arrangement found to be unfair - orders varying partnership arrangement to compel partners to use proceeds of sale of partnership assets to reduce partnership debts - respondent ordered to pay one half of the balance of debt after payment of proceeds of sale of partnership assets. Industrial Relations Act 1996 LEGISLATION CITED : Industrial Relations Act 1991 (Repealed) Property (Relationships) Act 1984 Farm Debt Mediation Act 1994 A M Thompson Pty Ltd v Total Australia Limited (1980) 2 NSWLR 1 Barry v Incitec (1991) 45 IR 143 Beahan v Bush Boake Allen (1999) 93 IR 1 Brown v Rezitis (1970) 127 CLR 157 Davies v General Transport Development Pty Ltd [1967] AR (NSW) 371 CASES CITED : Incitec v Barry (1992) 45 IR 48 Incitec v Industrial Court of New South Wales (1992) 45 IR 155 McNaught v Micador (1996) 83 IR 111 Nordby v Barclays (1993) 53 IR 319 Port Macquarie Golf Club Ltd v Stead (1996) 64 IR 53 Stevenson v Barham (1977) 136 CLR 190 HEARING DATES: 06/13/2000; 06/16/2000; 07/04/2000; 07/05/2000 DATE OF JUDGMENT: 08/02/2000 APPLICANT: Mr M Lawler of Counsel Solicitor - Mr P Thompson Thompson Eslick LEGAL REPRESENTATIVES: RESPONDENT: Mr P Newall of Counsel Solicitor - Ms M Hole Wm. Walker Taylor Edwards & Smith JUDGMENT: - 1 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: BOLAND J DATE: 2 AUGUST 2000 Matter No IRC 1031 of 2000 JUDITH MARI GASE v IAN CEDRIC HARDY Application under s.106 of the Industrial Relations Act 1996 JUDGMENT 1 This case is about whether a partnership arrangement entered into between two people to operate an alpaca breeding business was unfair within the meaning of s 106 of the Industrial Relations Act 1996 ("the Act") and, if so, whether this Court should make orders to relieve the unfairness and what should be the nature of those orders. 2 The circumstances that gave rise to these proceedings, briefly stated, are that in 1995 two partners borrowed a sum of money from a bank to fund the operation of their business. Security for the borrowing was the house and property owned by one of the partners. In July 1998 the personal relationship between the partners broke down and the partnership business became unviable. As at 3 July 2000 the partnership debt to the bank stood at $348,778.78. The bank sought to enforce its mortgage over the house and property and obtain the debt that was owing to it. 3 One of the partners, Judith Mari Gase, who is the applicant in these proceedings and who found herself at risk of losing her house and land, has sought orders, the effect of which would be to use the proceeds of the sale of the plant, equipment and animals of the partnership business to reduce the partnership's debt to the bank. She had also sought a contribution from the respondent towards reducing the debt. The respondent, Ian Cedric Hardy, who is the other partner, had refused. (I will refer to Mr Hardy as "Ian Hardy" to avoid confusion with Kenneth L Hardy, the accountant to the partnership to whom I shall refer to later). Ian Hardy's position was that he had made a much greater financial contribution to the partnership than the applicant and that it would be unfair on him for the applicant to obtain the relief she seeks. His primary position was that before the question of the debt was addressed the applicant should be required to pay into the partnership, or to him directly, an amount that would make her financial contribution equivalent to his. Relief sought by Applicant 4 Mr M Lawler, of counsel, appeared for the applicant. 5 The original relief sought by the applicant was set out in the Summons for Relief filed on 13 March 2000. The relief sought was amended on the last day of the hearing without objection and was in the following terms: "1.4.1 a variation to the terms of the Partnership Arrangement to compel the partners to that arrangement - relevantly the Applicant and the Respondent - to cause partnership assets (namely the stock, plant and equipment) to be sold and the net proceeds of that sale to be used to reduce the partnership debts which are due to the National Australia Bank (the "Bank"). It should be noted that, as at 3 July 2000, the Bank debt amounted to $348,778.78. 1.4.2 consequential orders that the proceeds of the plant, stock and equipment (which amount to $209,784.87) - which are deposited into a Westpac Bank account, be paid forthwith to the Bank. 1.4.3 a variation to the Partnership Arrangements to the effect that in the event the net proceeds of the sale of the plant, stock and equipment are not sufficient to pay the Bank debt, then both parties do all acts and things necessary forthwith to pay the balance of the debt outstanding from their own funds. 1.4.4 a consequential order against the Respondent that he forthwith pay - either to the Applicant or to the Bank - an amount equivalent to one half of the balance of the Bank debt after payment to the Bank of the net proceeds of the plant, stock and equipment. It should be noted that the Respondent's share of the balance of the Bank debt is calculated, as at 3 July 2000, to be $69,496.96." Relief sought by Respondent 6 Mr P Newall, of Counsel, appeared for the respondent. 7 On 23 May 2000 Ian Hardy filed a Summons for Relief under s 106 of the Act in Matter No. 2246 of 2000. The Summons was, in effect, a counter-claim against Ms Gase. It was agreed between the parties that this Summons and the one filed by Ms Gase should be joined and that the evidence in relation to Ms Gase's Summons should be the evidence in Matter No. 2246 of 2000. I agreed to this approach. 8 The relief sought by Ian Hardy was in the following terms: "1. A declaration that the terms of the Partnership Agreement entered into between the Applicant and the Respondent as set out in the document signed by the Applicant and Respondent in or about 1995 ("the Agreement") were and are fair. 2. A declaration that the Partnership Agreement (as defined in paragraph B.8 below) was unfair in its operation as against the Applicant. 3. A declaration that the Applicant and the Respondent were obliged, under the terms of the Agreement, to make equal capital contributions to the partnership. 4. An order pursuant to s.106(5) that the Respondent pay into the partnership account forthwith such a sum as to render the financial contributions of the Respondent to the partnership equivalent to that sum which the Applicant has contributed to partnership funds during the life of the partnership. OR THE ALTERNATIVE An order pursuant to s.106(5) that the Respondent pay to the Applicant a sum equal to one-half of the Applicant's financial contribution to the partnership funds during the partnership. 5. OR IN THE ALTERNATIVE to the orders sought in 4 above: (a) a declaration that the assets of the partnership are held by the partners not equally but in proportion to the financial contributions made to the partnership funds by each of the partners; and (b) an order that the Partnership Agreement be varied to so provide. 6. A declaration that the Applicant has equity in the property presently in the name of the Respondent, at 180 Menangle Road, Menangle Park ("the Property"). OR IN THE ALTERNATIVE A declaration that the Property is a partnership asset. 7. A declaration that the parcel of land purchased from the State Rail Authority in 1999 or 2000, being Lot 1 in DP 877582 ("the Other Land") is a partnership asset. 8. An order that the Respondent pay into the partnership account forthwith the full value of any partnership assets sold by the Applicant, including but not limited to the full sale price, less commissions, of any alpacas sold by the Partnership or the Respondent since July 1998, and further including but not limited to the sum of $30,000 representing part of the sale price of the alpaca, "The Pines Queen of Sheba". 9. Such further or other order as the Commission sees fit to provide relief to the Applicant. 10. Orders in favour of the Applicant for: (a) interest on such sums as are to be paid to the Applicant; (b) costs." Background 9 In March 1992 Ms Gase, purchased a property at Menangle Road, Menangle in New South Wales known as "The Pines", together with furniture, for $465,000. In this judgment I shall refer to the property at Menangle Road as "The Pines." The purchase was made from funds received by Ms Gase from a family law settlement involving her former husband. That settlement was of the order of $640,000. Ms Gase moved into The Pines shortly after settlement of the sale. 10 In May 1993, Ms Gase obtained an overdraft facility to a limit of $50,000 from the National Australia Bank ("the Bank") in Campbelltown. Security for the overdraft facility was a mortgage over The Pines. The overdraft facility was used in relation to a business conducted by Ms Gase originally known as "Cane and Things" but later changed to "Old Country Lane". The business involved a shop selling cane and gift wares. In March 1994, Ms Gase increased the overdraft facility to $100,000. In relation to her business, Ms Gase operated a cheque account with the Bank styled "Old Country Lane" ("OCL account"). 11 Ms Gase had been involved, from time to time, in a personal relationship with Ian Hardy, from about November 1987. 12 In 1992 or 1993, at the instigation of Ms Gase, she and Ian Hardy visited the Royal Easter Show. Ian Hardy said in his affidavit that after visiting the Show he proposed to Ms Gase that they purchase and farm alpacas. Ms Gase said that there was no serious discussion about breeding alpacas as a commercial venture before early 1995. 13 In May 1994, Ms Gase and Ian Hardy attended a weekend seminar and auction of alpacas in Mudgee, New South Wales. Ms Gase was aware of the auction by virtue of her membership of the Australian Alpaca Association. Ms Gase's evidence was that there was no prior intention to purchase alpacas at the auction. However, at the auction Ian Hardy bid for a number of animals and was successful in respect of five alpacas for $53,900. Another alpaca was later purchased by Ian Hardy for $1500. Ian Hardy had forgotten his cheque book and Ms Gase paid for five of the alpacas out of the OCL account. Ian Hardy reimbursed Ms Gase by cheque for $53,900 sometime before the end of May 1994. 14 To further support her contention that prior to the auction there was no intention to purchase the animals, Ms Gase deposed that they had to make hasty arrangements to agist and transport the animals. The animals remained on agistment following the purchase until they were moved to The Pines in about October 1994. Ms Gase said that she paid agistment fees out of her OCL account. Ms Gase said at this time, she saw her involvement in alpacas as a hobby and not a full time business. 15 Ian Hardy deposed that the purchase of the alpacas at Mudgee was not on a whim. Before purchasing any alpacas Ian Hardy said that he and Ms Gase attended a four day alpaca seminar in Canberra at the Australian National University. Ms Gase deposed that they attended the seminar in July 1994, that is after the purchase of alpacas at an auction in Mudgee. A document tendered in the proceedings (Exhibit 34) shows that Ms Gase was correct and the seminar occurred in July 1994, adding further support to her contention that there was no prior intention to purchase the animals at the Mudgee auction. 16 Between October 1994 and March 1995 Ms Gase looked after the alpacas on a daily basis. She did not receive payment for this. Ms Gase estimated that she spent between 3-4 hours per day Monday to Friday and 5-15 hours on weekends. 17 Ian Hardy stated that between late 1994 and March 1995 he worked on weekends, public holidays and during his annual leave over the Christmas period 1994. He said he worked on the property building fences, installing water reticulation systems, tree planting, weed picking, animal care and husbandry, that he re-laid the timber floor in the library of the house, including re-laying bearers and joists and installing cedar skirting boards and that he carried out general repairs and maintenance. He described the work on the house as "major renovations." Ian Hardy said that he either did this work himself or paid for it to be done and for all materials. Ian Hardy said he did not get paid for this work. 18 Ian Hardy also said he worked extensively in the business, once it had been established, spending all of his free time working with the alpacas, maintaining the property, plant and equipment and carrying out the administrative tasks associated with the running of the business. He said he was not remunerated for this work. 19 Ms Gase disputed much of Ian Hardy's evidence about the nature and extent of his work contribution. She said that between about June 1994 and September 1994 Ian Hardy was unemployed and during this period he did some maintenance and repair work on her house. This involved replacing bearers in the library and one of the bedroom floors. Ms Gase said this work was done in the capacity of a friend and not as part of any partnership arrangement. She said that the only thing Ian Hardy paid for was a skirting board at a cost of about $200. She agreed that during the latter part of 1994 and early 1995, on weekends and holidays, Ian Hardy helped on the property, picked weeds and erected some fences. Ms Gase denied that Ian Hardy did what could be described as 'animal care and husbandry' and did not install a water reticulation system. She said he fixed a board on the front fence, rebuilt a gate and painted gutters and fascia boards. Apart from this, Ms Gase said that Ian Hardy did little in the way of repairs and maintenance. Ms Gase denied that Ian Hardy worked extensively in the business spending all his free time with the alpacas and maintaining the property, plant and equipment and carrying out administrative tasks. She said he never repaired or maintained equipment. She said that Ian Hardy worked occasionally only on the weekend and estimated that he worked, on average, one half day out of every three weekends. 20 It should be noted that much of the work Ian Hardy claimed that he performed - certainly during the period up to April/May 1995 - related to the personal relationship with Ms Gase. The business partnership did not commence, in my view, until May 1995. 21 In February 1995, Ms Gase entered into negotiations for the sale of her business, "Old Country Lane." At around this time discussions between Ms Gase and Ian Hardy about starting a full time alpaca breeding business became more frequent. In about February 1995 Ms Gase and Ian Hardy purchased a quality Peruvian male alpaca named "Cedar House Bannister" for $25,000. A deposit of $5,000 was paid by Ms Gase out of her OCL account into which Ian Hardy later deposited $3,000. The balance of the purchase price was paid by Ms Gase ($5,000) and Ian Hardy ($15,000). 22 In March 1995 Mr Hardy moved in with Ms Gase at The Pines and a de facto relationship was formed. In the same month Ian Hardy secured full time employment in Sydney. 23 Also, in about March 1995, Ian Hardy commenced working on a detailed business proposal to be put to the Bank in support of a loan application to assist in starting up an alpaca breeding business. Ian Hardy said that the plan was developed in consultation with Ms Gase and with her concurrence. The plan was set out in Ian Hardy's handwriting in an exercise book and was headed "The Pines Alpaca Business Feasibility Plan." Part of the plan was that security for the loan would be a mortgage over The Pines. Ms Gase said she did raise the question with Ian Hardy of what would happen if something went wrong and whether she might lose her house. She said she was assured by Ian Hardy to the effect that nothing would go wrong and that he would not let her lose her house. Ms Gase said she trusted and respected Ian Hardy and agreed to set up the business with him and to meet the Bank about obtaining a loan. 24 In April 1995 Ms Gase effected the sale of her business and the net proceeds of the sale ($121,048.53) were used to repay the Bank debt under the overdraft facility. The mortgage was not formally discharged. At about this time Ms Gase sold a vehicle for $38,000 which was deposited into the OCL account and used to clear other debts. 25 In or about June 1995 Ms Gase and Ian Hardy secured a loan of $300,000 from the Bank at Campbelltown in order to operate their alpaca business as a partnership. Security for the loan was the mortgage over The Pines. A Partnership Cheque Account ("PCA") was opened in the name of "The Pines Alpacas". 26 Ian Hardy said the proposition that The Pines was to be used to secure the business loan was discussed and agreed between himself and Ms Gase before they approached the Bank, that the arrangement was entered into freely by Ms Gase and that she understood what she was doing. 27 Ms Gase said that her understanding of the partnership business was as follows: "(a) the partnership was to be between myself and Ian Hardy; (b) we were to be equal partners; (c) the Partnership's Bank was the National Australia Bank who had provided a business loan to us of $300,000 which was secured over my home; (d) I was to work in the business full time; (e) Mr Ian Hardy was to continue to work at his full time job in the city with AMP and would use his income to assist us with our living expenses and business expenses. Although (sic) I expected the business would trade profitably, having regard to the information that Mr Ian Hardy had set out in his feasibility plan which he had supplied to the Bank; (f) the alpacas would live on my property; and (g) the hobby business that had been running before with the alpacas would be converted into this full time business." 28 Ian Hardy stated that of the $300,000 loan, "between $30,000 and $100,000, was used to pay creditors of Ms. Gase's previous business venture and not for the purpose of our joint business venture." Ms Gase denied this. She said in respect of the $300,000 loan an amount of $220,688 was deposited into the PCA and an amount of $77,075 was deposited into the OCL Account. Her evidence was that the amount of $77,075 was reimbursement for alpaca related expenses. In her affidavit of 8 May 2000 at paragraph 53 Ms Gase listed $77,539.56 worth of alpaca related expenses incurred prior to July 1995. 29 Ms Gase's evidence in this respect was supported by Mr Kenneth L Hardy ("Kenneth Hardy") who was a "close personal friend" of Ms Gase (and he said, a friend of Ian Hardy) and the accountant to the partnership. At par 33(d) of his affidavit (Exhibit 20) Kenneth Hardy stated: "(d) based on the above information I say that $77,075.00 which was deposited by the Bank into the Old Country Lane Account, as referred to in the Bank's letter of 23 June 1995, was a reimbursement to Judy by the Partnership Business of monies that she had paid from the Old Country Lane Account towards the Partnership Business expenses, prior to the Partnership Business cheque account being in place." 30 In July 1996 the loan of $300,000 was restructured into two loans of $170,000 as a "Fixed Rate Interest Only Interest in Advance Loan" and $150,000 "National Tailored Home Loan Package". At the same time the loan was increased by $20,000. This was deposited into the PCA. The Pines remained as security for these loans. 31 In or about September or October 1997 Kenneth Hardy prepared a written partnership agreement that was signed by both Ms Gase and Ian Hardy. The document is witnessed but not dated. The agreement was prepared by Kenneth Hardy, essentially to provide evidence of the existence of a partnership to the Australian Taxation Office ("ATO") in order to obtain a tax file number for the partnership business. In relation to the written partnership agreement Kenneth Hardy stated at par 53(d) of his affidavit: "(d) at the time I prepared the Partnership Agreement, I did so without discussion with Judy or Ian as to the terms of their Partnership. The document was prepared from other agreements that I held in old files relating to other clients (sic) Partnership arrangements. I made no inquiry with Judy or Ian as to whether this document as drafted by me reflected the terms and conditions of their Partnership arrangements." 32 The document was subsequently signed by Ms Gase and Ian Hardy and returned to Kenneth Hardy "sometime between 8 October 1997 and 17 October 1997". On 17 October 1997 Kenneth Hardy forwarded the new tax file number application form, together with a copy of the written partnership agreement as executed by Ms Gase and Ian Hardy, to the ATO requesting a tax file number. 33 The significance of the written partnership agreement was that, amongst other things, it provides in cl 6 that "The total capital of the partnership shall be contributed equally by the partners." It was a cornerstone of Ian Hardy's case that he contributed a large amount of capital to the partnership whereas Ms Gase did not. It was Ms Gase's case that the written partnership agreement did not, in fact, reflect the arrangement between the partners firstly, because its purpose was not to reflect the arrangement between the parties and secondly, because neither Ms Gase nor Ian Hardy gave proper consideration to the written agreement before signing it. 34 Between March 1995 and July 1998 Ian Hardy continued to live with Ms Gase at The Pines and commuted on working days to his full time employment in Sydney. From May 1995, Ms Gase said she became involved in the partnership business working full time and, as a general rule, worked seven days a week, twelve hours a day. Her work involved looking after the alpacas in all respects, doing necessary paperwork and managing and maintaining the property. Ms Gase gave a full account of her daily routine and work activities in the business at par 56 of her affidavit of 8 May 2000. 35 Ms Gase deposed that her workload became so great that by March 1997 she was forced to engage casual assistance from a farm hand, Mr Barry Rose, who worked on the property between 1997 and 1998 as required. Ms Gase said that "When Barry worked on the Property, he assisted me to complete the duties which I set out above. His hours varied, but increased as the herd grew. He remained working until 15 June 1999 when I was unable to afford to pay him. He was initially paid at the casual rate of $10 per hour which was later increased to $11 an hour in July 1998." 36 Ms Gase said that despite assistance from Mr Rose she was still required to work full time. 37 At par 60 and 61 of her affidavit of 8 May 2000 Ms Gase stated: "60 Since October 1999, I have been "tied" to the Property because there needs to be someone there are (sic) at all time to look after the animals. I find that if I have to be away for a day, for example, to go to see my solicitors in respect of the preparation of this case, or to go into town to shop and do banking etc, I have had to call on a farm hand to look after and care for the alpacas. I am currently paying $11.50 an hour for someone to be with the alpacas while I cannot be there during the day. 61 I am also finding that I just cannot cope with the work load and I have had to employ someone to work to assist me from time to time. This is especially the case for lead training, inoculations, drenching and cutting toe nails. I have attempted to keep this to a minimum because it is difficult to afford." 38 It should be noted that Ms Gase's work came to an end when the alpaca herd was sold at auction on 13 May 2000. 39 The evidence of Ms Gase about the nature and extent of work that is involved in the maintenance and care of alpacas, having regard to the size of the herd, and the upkeep of the property was, in a general sense, supported by the evidence of Jane-Marie Hicks. Ms Hicks was the Manager of an alpaca stud at Mittagong in New South Wales which had about 650 animals in its herd. Ms Hicks was presented as an expert witness and there was debate between counsel as to the admissibility of certain of her evidence. Ms Hicks' evidence about the nature and extent of work required of Ms Gase in tending to an alpaca herd such as that at The Pines was admitted into evidence. 40 It is clear that between May 1995 and July 1998 Ian Hardy also provided assistance to Ms Gase in maintaining the animals and tending to the property, although, as I have said, the extent to which he did this was a matter of contest between the parties. Ian Hardy maintained that he worked on the property in all of his available spare time. In his oral evidence he said that during daylight saving periods after returning in the evening from his full time employment he would work for two hours in the partnership business. Ms Gase said, on the other hand, that Ian Hardy left the property each week day at approximately 7.00 am and returned at approximately 6.30 pm. During week days she said that he did not work on the property or attend to any tasks relating to the alpacas. On weekends, Ms Gase said that Ian Hardy worked only occasionally. 41 A matter of very great difference between the parties was their respective contributions to the partnership business. In his affidavit of 9 May 2000 Ian Hardy asserted at par 19 that "Over the period between 1994 and December 1999 I contributed moneys to the partnership in the order of $730,000." At par 22 Ian Hardy deposed that "It was a term of the Partnership Agreement that the partners would contribute equally to the capital of the partnership. I have contributed, in financial terms alone, in excess of $730,000 to the partnership." Ian Hardy also said that he received no compensation for his work in relation to the partnership business. 42 At par 22 of his affidavit Ian Hardy stated that "I have provided detail and shown documents to members of an accounting firm known as Financial Management Corporation Pty Limited and I understand that they have reduced that information to writing in a summary which is set out in a report entitled "Investigating Accountants' Reports prepared by Financial Management Corporation Pty Limited - Ian Hardy v. Judith Gase 4 May 2000." In relation to the report by Financial Management Corporation Pty Limited, it was not submitted into evidence. Mr Newall for Ian Hardy, submitted the report to assist the court in understanding the basis of certain calculations and it was received on that basis. 43 For Ms Gase's part, a large amount of financial information was provided. An analysis of this information was provided through the evidence of Kenneth Hardy. This evidence consisted of two affidavits (exhibits 20 and 21) as well as oral evidence. 44 Kenneth Hardy had been requested by Ms Gase's Solicitors to express an opinion, as a chartered accountant, as to the respective contributions (in dollar terms) made by Ms Gase and Ian Hardy to the partnership. In order to carry out the request Kenneth Hardy was provided with two spreadsheets. Spreadsheet Number One was headed "Drawings" and listed cheques drawn on the PCA for the period 23 June 1995 to 30 June 1999 as taken from Kenneth Hardy's workings relating to the 1995, 1996, 1997, 1998 and 1999 year end accounts. In columns, the drawings were allocated to Ms Gase, Ian Hardy or both. Kenneth Hardy was asked to assume that cheques under the column for Ian Hardy were drawn for the personal benefit or use of Ian Hardy, cheques under the column for Ms Gase were drawn for the personal benefit or use of Ms Gase and cheques identified with the notation "both" were drawn for non business related expenses and for the joint personal use of Ian Hardy and Ms Gase as a consequence of their relationship. Spreadsheet Number Two was headed "Deposits" and was prepared from Bank statements for the PCA and by reference to the two deposit books which Ms Gase held for the account that records various deposits to the partnership bank cheque account over the period 23 June 1995 to 17 January 2000. The Spreadsheet apportioned entries in columns for Ian Hardy (IH), Ms Gase (JG), "Business Generated" and "Unknown". With respect to the entries appearing under the respective columns Kenneth Hardy was asked to make the following assumptions: "(a) the entries under the column marked "IH Contributions" are entries identified as contributions made by Ian Hardy or by persons on his behalf; (b) the entries under the column marked "JG Contributions" are entries identified as contributions made by Judy Gase or persons on her behalf; (c) the entries under the column marked "Business Generated" are revenue or deposits which have been generated by the activities of the business. You will see that these include deposits relating to the sale of stock, interest and loans to the Partnership; and (d) the entries under the column marked "Unknown" are entries which, on the information that has been provided to us to date, we have not been able to identify the source of those funds." 45 In relation to the entries under the column marked "Unknown", Kenneth Hardy was asked to provide his opinion on two different bases relating to the treatment of the entries as follows: "(A) Firstly, on the assumption that all entries in the "Unknown" column are in fact business generated revenue income and therefore should not be treated as part of the personal contributions from Ian Hardy and/or Judy Gase; and (B) Secondly and alternatively, on the assumption that 50% of the entries in the "Unknown" column should be treated as business generated expense with the other 50% being attributed as personal contributions from Ian Hardy." 46 It should be noted that the information on Spreadsheets One and Two were provided by Ms Gase's Solicitors and drawn up on the advice of Ms Gase and by reference to relevant source documents. 47 Importantly, in preparing his opinion on the respective contributions to the partnership, Kenneth Hardy was also asked by Ms Gase's Solicitors to take into account a number of other matters. In particular, he was asked to assume: "(i) Judy Gase has provided her labour at all times from 1 May 1995 to 1 May 2000 (being a period of 5 years) at a rate of at least $60,000 per annum; (ii) Judy Gase has contributed her land for the agistment of animals from 1 May 1995 to 1 May 2000. Could you please calculate this at a rate you consider appropriate (Kenneth Hardy calculated this at the rate of $8.00 per animal per week); (iii) Judy Gase has been funding the majority of the Partnership Business expenses since Mr Ian Hardy left the business in July 1998 in the net amount of $12,590 for the period 30 June 1998 to 30 June 1999 and $41,972 for the period 30 June 1999 to date; and (iv) since 30 June 1999, Ian Hardy has made contributions to the Partnership by the payment of the insurance premiums relating to the animals for the period 30/6/99-30/6/00 in the amount of $7,900." 48 For the purpose of providing his opinion Kenneth Hardy was also asked: "1. not to take into account any contribution that Judy Gase has made to the Business by her providing her property situated at Menangle Park as security for the loan facilities provided to the Business from the National Australia Bank. We have requested this because we seek your opinion on the respective contributions of the partners prior to this contribution being taken into account; and 2. to the extent that you consider any of the assumptions that you have been asked to make are inappropriate or do not accord with your understanding of events relating to the Partnership or the affairs of the partners as you know them to be, would you please make reference to those in providing your opinion and make the appropriate adjustments accordingly." 49 Kenneth Hardy's opinion as to the respective contributions of Ms Gase and Ian Hardy to the partnership are set out at par 62 to his affidavit of 9 May 2000: "62 The Calculation identifies that the respective net contribution of Partners i.e. the personal contributions less their personal drawings to be: ASSUMPTION A i.e. on the assumption that the "unknown" deposits are all business related: Ian Hardy - $373,508 Judy Gase - $458,671. ASSUMPTION B i.e. on the assumption that the "unknown" deposits are split 50/50, being between business generated and Ian Hardy's contributions: Ian Hardy - $399,890 Judy Gase - $458,671". 50 In his second affidavit of 2 June 2000 Kenneth Hardy referred to a second request from Ms Gase's Solicitors to: (a) review the report prepared by Financial Management Pty Limited ("FMC"); (b) have regard to further information that had come to light since Kenneth Hardy had sworn his first affidavit; (c) make appropriate adjustments, if any, to the calculation which was attached to Kenneth Hardy's first affidavit concerning the net contributions between Ms Gase and Ian Hardy relating to the partnership business. 51 Kenneth Hardy's revised figures, taking into account further information that had come to light since his first affidavit, are set out in the table below: Assumptions Ian Hardy Judith Gase Net Difference Assumption A: $376,109 $455,042 $78,933 revised $373,508 $458,671 $85,163 original Assumption B: $398,439 $455,042 $56,603 revised $399,890 $458,671 $58,781 original 52 The other exercise Kenneth Hardy was asked to do, and which was set out in his second affidavit, was to reconcile the FMC's report with his own. Apart from the fact that the FMC's calculations cover the period 1 May 1994 to 30 June 1999 and Kenneth Hardy's covers the period 1 May 1995 to 1 May 2000, the FMC report did not include a number of assumptions that Kenneth Hardy was asked to make by Ms Gase's Solicitors. For example, Kenneth Hardy was asked to make the assumption that Ms Gase had provided her labour for five years at a rate of $60,000 per annum and that she had contributed her land for agistment for five years at the rate of $8.00 per animal per week. Accordingly, there was a very significant difference between FMC's calculations of the respective contributions and that of Kenneth Hardy's. FMC's original calculation of the respective net contributions was: Ian Hardy: $430,937.47, but if it were accepted that Ian Hardy had paid the items identified in Annexure A to his affidavit the figure was $621,410.52; Ms Gase: $52,338.47. 53 On reviewing FMC's figures, Kenneth Hardy calculated that, given the assumptions on which FMC worked, the net contribution of the parties should have been shown as follows: Ian Hardy - $358,515 Ms Gase - $55,538. 54 As it has already been stated, Ian Hardy's position was that Ms Gase's capital contribution to the partnership was not equal to his as required by the written partnership agreement, indeed far from it. He, therefore, argued, in effect, that before the question of partnership debt was addressed there had to be some evening up of contributions. Ian Hardy argued on several grounds, which I will come to later, that it was entirely inappropriate to ascribe sums to Ms Gase representing market wages and agistment fees or rent. Taking Kenneth Hardy's revision of FMC's figures, Ian Hardy would presumably argue that Ms Gase owes the partnership - or him personally - $302,977 (the difference between $358,515 and $55,538). 55 The question of "who paid for what" was an issue between the parties in relation to a number of significant items of expenditure and the cross examination on these went, in a number of respects, to the credit of both Ms Gase and Ian Hardy. Ian Hardy claimed that he contributed actual moneys to the partnership of the order of $730,000. As I understand it, this comprised of approximately $540,000 that Ian Hardy asserts could be identified from accounting records of the partnership plus about $190,000 that were additional expenses that Ian Hardy claimed he paid for in cash. These additional expenses are identified in Annexure A of his affidavit of 9 May 2000. Some of the more significant contested claims were as follows: 1. Whether Ian Hardy paid $21,000 cash for an animal called "Dahlia ". In Annexure A to his affidavit, Ian Hardy claimed that he paid cash (as opposed to moneys drawn on any cheque account) for an alpaca called "Dahlia". No receipts were produced by him relating to the purchase and he did not call Keith Parish, the person to whom he claimed the cash payment was made. Ms Gase said that, to the best of her knowledge, Dahlia was paid for on 26 June 1995 from a withdrawal from the PCA by cheque number 1563. Under cross examination Ms Gase maintained that her statement in her affidavit regarding the purchase was correct and that Ian Hardy did not purchase the animal for cash. In his cross examination Ian Hardy conceded that he did not have a recollection of paying cash for the animal. 2. To what extent Ian Hardy paid for fencing . In Annexure A to his affidavit Ian Hardy identified $45,000 as an amount he paid in cash for various fencing. He produced no receipts or other documentation relating to this expenditure and no evidence was called from those he asserted were paid the cash. Ms Gase said that Ian Hardy may have paid for some of the fencing ($8,000) but that he did not pay anything like $45,000. At par 11 of her affidavit of 2 June 2000 Ms Gase set out a table derived from various sources referred to in the affidavit showing expenditure between May 1994 and February 1998 which, to the best of her knowledge, related to fencing. The table showed the date, the particulars of the purchase, the amount expended and the source of the funds. Ms Gase said that other than where she recorded "don't know" or "cash" under the "Source" column, the costs were either funded by her from the OCL account or from the PCA. Under cross examination Ms Gase conceded that the purchases in respect of which cash was offered were, she thought, paid for by Ian Hardy. These cash purchases amount to about $600. Ms Gase also conceded that Ian Hardy put moneys into the PCA to pay for some items of fencing but the amount of these contributions was not identified, except to say that Ms Gase did not agree with the proposition put to her by Mr Newall that Ian Hardy made cash payments of $15,000 in respect of fencing. Under cross examination, Ian Hardy referred to amounts totalling about $45,000 but his recollection lacked precision. Ian Hardy did say, however, that in referring to cash payments in relation to the fencing and other items of expenditure, these were not necessarily paid directly but may have been paid into the PCA by way of reimbursement. 3. Whether Ian Hardy contributed his tax refunds to the partnership business for the 1998 tax year . In his affidavit of 9 May 2000 Ian Hardy stated that he invested the tax benefits he obtained over the years 1993-1998 in the partnership business. Under cross examination Ian Hardy conceded that the refund for the 1998 year was not invested back into the business. 4. To what extent Ian Hardy paid the wages of the farmhand . In Annexure A to his affidavit of 9 May 2000 Ian Hardy claimed that he paid wages in cash to a "Farmhand" of $53,565. No receipts or other paperwork were provided by Ian Hardy relating to these cash payments. Mr Barry Rose, the farmhand, was not called to corroborate Ian Hardy's claim. In her affidavit of 2 June 2000 Ms Gase said that between March 1997 and April 2000 Mr Rose was paid a total of $54,731. This information was derived from various sources referred to in her affidavit. Over the period March 1995 to July 1998, the period that Ian Hardy lived with Ms Gase, Mr Rose was paid $25,899. Of this amount a sum of $8,758 was withdrawn from the PCA to pay Mr Rose. Ms Gase concluded, therefore, that Ian Hardy may have paid Mr Rose in cash an amount of approximately $17,000. 5. To what extent Ian Hardy paid for a large shed erected on the property . In Annexure A to his affidavit Ian Hardy claimed that he paid $20,000 in cash for a shed. This is a significant amount of money but no documentation, such as a bank statement, showing a withdrawal of funds to that amount were provided relating to this purchase by him. Referring to certain source records, and in re-examination, Ms Gase explained that the invoice for the shed was for an amount of $10,570 plus $200 for an extra window in the shed. She identified cheques drawn on the PCA for an amount of $10,770. There was an issue of who paid for the concrete footings of the shed. Ms Gase claimed that the footings were paid for by a cheque for $3,500 drawn on the PCA. Under cross examination Ian Hardy nevertheless stated that he had a recollection of paying $20,000 for the shed. 6. Whether or to what extent Ian Hardy paid for various pieces of farm machinery and equipment . In Annexure A to his affidavit Ian Hardy claimed that he paid cash for a number of items of machinery and equipment. For example, a Tuza horse float ($6,400), a pooper scooper ($1,500), a weighing machine ($1,000), a farm bike ($3,500). In each case Ian Hardy provided no corroborating evidence that he had made the cash purchase. On the other hand, Ms Gase was able to identify cheques drawn on the PCA relating to each of these purchases. Where Ms Gase was uncertain who may have paid for an item or where she was aware that Ian Hardy had paid she gave him the credit. 7. Whether or to what extent Ian Hardy paid interest on the Business Loan . In cross examination Ian Hardy claimed that he paid the interest on the borrowings from the Bank in all of the years of the partnership until 1998. He later conceded, however, under cross examination that interest for the 1996 year was funded from a Bank loan. 56 In cross examination Ms Gase's credit was put in issue in relation to a number of matters. Some of these have already been addressed, for example, the question of Ian Hardy's contribution to the repair and maintenance of the house, the upkeep of the property and the care of the alpacas. Other significant matters raised in the context of credit were as follows: 1. Statement of Claim in Supreme Court Proceedings . In December 1999 Ms Gase caused a statement of claim to be filed in the Supreme Court of New South Wales Equity Division under the Property (Relationships) Act 1984. The Claim sought certain orders essentially to effect a sale of The Pines Alpacas business, with the sale of the proceeds to be applied to discharge the encumbrances over The Pines and that the plaintiff, Ms Gase, be declared solely entitled to The Pines. Ian Hardy sought to challenge the credit of Ms Gase by referring to apparent misrepresentations by her in the Statement of Claim. The alleged misrepresentations related to: (i) a statement by Ms Gase that at the commencement of the de facto relationship with Ian Hardy her home was unencumbered when, in fact, it was mortgaged to the Bank for a debt. Ms Gase explained that the Statement of Claim was prepared by her former Solicitors in rushed circumstances, that she did not question their summation of her story, that to her it was "legalese" and that, in any event, the debt was in the process of being discharged prior to the de facto relationship commencing (due to the sale of her business) and was cleared within one month of the de facto relationship commencing; (ii) a statement that she contributed her "income" to the de facto relationship when she did not receive cash money by way of salary or wages from the partnership. Ms Gase explained that in the accounts of the partnership she was credited with an income of $26,000 per annum and that she regarded this as a contribution of income to the partnership; (iii) a statement that she contributed "various savings" to the de facto relationship in circumstances where it was put to Ms Gase that she had no savings. The evidence is that Ms Gase did have some money to her credit in her OCL account and she regarded this as savings. 2. The purchase of Dahlia . It was put to Ms Gase in cross examination that Ian Hardy purchased the alpaca Dahlia from a Mr Parish "directly himself from his own funds". This was strongly pressed by counsel for Ian Hardy, clearly on his instructions. However, in cross examination Ian Hardy conceded that he had no recollection of paying cash for the animal and conceded that it could have been paid by cheque as, in fact, Ms Gase had contended. Mr Newall argued that who paid for Dahlia is not free of doubt because there is no explanation as to how the animal came to be on the property prior to the date Ms Gase claims it was paid for out of partnership funds. 3. Ian Hardy's Furniture . In her affidavit of 2 June 2000 Ms Gase said that Ian Hardy "did not move any of his furniture into my house". Ms Gase later conceded that Mr Hardy had brought with him a mirror, a black cabinet and some kitchen equipment to the value of a few hundred dollars. Mr Lawler argued "In the circumstances where the Respondent's contribution to the furniture was a few hundred dollars when the Applicant's household was in excess of $160,000 worth of furniture, it is not surprising that the Applicant considered his contribution de minimus." 4. Arrangements Relating to the Murray Animals . Ms Gase was asked a series of questions in cross examination concerning her knowledge about the arrangements with a Mr Alex Murray and his interest in certain alpacas via the "Thistle Superannuation Fund". Ms Gase had claimed that she did not have much involvement with or understanding of the arrangements with Mr Murray and that Ian Hardy had handled these. It was put to Ms Gase in cross examination that, in effect, she was not telling all that she knew about the arrangements involving Mr Alex Murray given that she had written a letter to Mr Murray sometime in 1995 which was tendered as Exhibit C. However, it was not put to Ms Gase in cross examination that the letter was written at the request of Ian Hardy and, as the evidence shows, taken from a draft (Exhibit 30) prepared by Ian Hardy. 57 In July 1998 Ian Hardy moved out of the home at The Pines ending the de facto relationship with Ms Gase and took up residence in Mosman, Sydney. Initially the separation was amicable but over the following weeks and months the relationship deteriorated. 58 In October 1998 Ms Gase opened an account with the Bank in her name and arranged an overdraft facility of $62,000. The overdraft was used to pay business expenses and to purchase a parcel of land adjacent to The Pines from the State Rail Authority of New South Wales. The overdraft was secured by the mortgage over The Pines. The purchase of the railway land was a matter of significant controversy between the parties. In relation to this parcel of land Ian Hardy claimed that: (i) he and Ms Gase entered into negotiations with the State Rail Authority ("SRA") in an attempt to purchase the land in early 1998; (ii) he and Ms Gase agreed to tender a price for the land for use by the partnership; (iii) he was aware that the tender process would take place in October 1998 but that he was obliged to be overseas at that time; (iv) he was advised by phone by Ms Gase that "Our tender was accepted"; (v) he assumed the land had been bought by the partnership in joint names; (vi) in February 1999 he became aware that the land had been bought only in Ms Gase's name; (vii) he became, in practice, responsible for payments on the debt of $62,000 as it was secured by the mortgage upon which he was a signatory and making payments. This was done without his authorisation. 59 Ian Hardy claimed in his Summons for Relief in matter number 2246 of 2000 "A declaration that the parcel of land purchased from the State Rail Authority in 1999 or 2000, being Lot 1 in DP 8777582 ("the Other Land") is a partnership asset". In cross examination Ian Hardy accepted that the railway land was of no use to him because it was flood prone and would be unlikely to be "zoned in any future planning instrument to allow additional urban development". Ian Hardy also conceded in cross examination that he was not a signatory to the mortgage over The Pines. 60 For her part, Ms Gase rejected there was any misrepresentation or fraud in relation to the purchase of the railway land. She denied there was any express or implied agreement with Ian Hardy to purchase the land jointly. Ms Gase said that as far as she was concerned, at the time of the purchase of the railway land the relationship with Ian Hardy was over and that he had entered into a new relationship and was overseas. Ms Gase said, and the evidence shows, the railway land was not purchased out of partnership funds but out of an account called "My Account" set up by Ms Gase in her name to receive moneys under the overdraft facility arranged by Ms Gase with the Bank. The amount of the overdraft was $62,000. 61 In about September 1999 Ian Hardy instructed the Bank that he would not be putting further money into the partnership account and would not be responsible for any increases in debt of the partnership. Subsequent attempts by Ms Gase to draw cheques on the partnership cheque account were dishonoured by the Bank. Ms Gase deposed that she was forced to sell personal items and jewellery in order to meet expenses. 62 In November 1999, following letters from the Bank to the partnership in September 1999, a meeting was arranged by the Bank to discuss discharge of the partnership's debt to the Bank. 63 In December 1999 Ms Gase caused a statement of claim to be filed in the Supreme Court of New South Wales Equity Division under the Property (Relationships) Act 1984 seeking certain orders essentially to effect a sale of The Pines Alpacas business with the sale of the proceeds to be applied to discharge the encumbrances over The Pines and that the plaintiff, Ms Gase, be declared solely entitled to The Pines. 64 Between January and March 2000 there was considerable correspondence between the parties' solicitors relating to their respective positions vis a vis the partnership relationship but nothing was resolved. Ian Hardy refused to contribute any sum towards repayment of the partnership's debt to the Bank and refused to agree to Ms Gase selling stock, plant and equipment owned by the partnership in order to allow, at least in part, the bank debt to be cleared by the sale of those assets. The position taken by Ian Hardy was essentially that The Pines was Ms Gase's contribution to the partnership and, therefore, part of the partnership's assets or alternatively, the partnership stood as a debtor to Ian Hardy for the loans he made to the partnership. 65 In a letter dated 8 March 2000 Ian Hardy's solicitors advised the applicant that he proposed to withdraw his opposition to the New South Wales Rural Assistance Authority issuing a certificate under s 11 of the Farm Debt Mediation Act to allow the Bank to proceed to enforce the mortgage over The Pines. Up until this time both Ms Gase and Ian Hardy had opposed the grant of such a certificate. The letter also advised the applicant that Ian Hardy saw no alternative other than for the Bank to enforce the mortgage. Ian Hardy also advised the applicant that contrary to arrangements she had made, he would advise the Australian Alpaca Association that he did not consent to the sale of alpacas, the property of the partnership, at an auction to be held on 13 May 2000. 66 On 13 March 2000 Ms Gase caused to be filed in this Court a Summons for Relief under s 106 of the Act, thereby initiating these proceedings. 67 On 15 March 2000 Ms Gase caused to be filed in this Court a notice of motion and affidavit in support seeking an order that Ian Hardy be restrained from interfering with the auction of plant, equipment and stock scheduled for 13 May 2000. 68 The notice of motion came before Peterson J on 20 March 2000. In an Interlocutory Judgment delivered ex tempore his Honour ordered that Ian Hardy be restrained from interfering with the auction. The order by his Honour was stood over for further consideration on Thursday 23 March. 69 On 23 March Peterson J issued directions in relation to conciliation of the matter and this took place on 5 April 2000. Conciliation was unsuccessful. 70 On 11 April the summons for relief came before me and certain directions were issued relating to the filing and serving of affidavit material. It was also foreshadowed by the respondent's solicitors that an argument relating to this Court's jurisdiction to deal with the matter would be put and this was set down for 18 April. On that date the parties informed the Court that it had been agreed that the auction of the plant, equipment and stock of the partnership would proceed on 13 May and that the proceeds from the auction would be put into trust. Moneys in the trust would be released either upon an order by this Court or by joint agreement of the solicitors for both parties. The respondent also indicated on 18 April that it would not be proceeding with its argument relating to jurisdiction. 71 Plant, equipment and stock of the partnership were sold at auction on 13 May 2000 and realised a sum of $209,784.87. This money, which is subject to variation due to interest and bank charges, sits in account number 338219 at the Westpac Bank. 72 On 8 June 2000 I was informed that Ian Hardy had instructed a new firm of solicitors and that the retainer with Nash, O'Neill, Tomko had been withdrawn. Submissions for the Applicant 73 The main points of Mr Lawler's case for the applicant may be summarised as follows: 1. It is well accepted that the Commission has broad powers to grant relief of the nature sought. This jurisdiction includes making orders against persons not parties to the contract: Brown v Rezitis (1970) 127 CLR 157 per Barwick CJ at 165; 2. The partnership arrangement was one whereby the applicant was required to work tending alpacas. The arrangement was, therefore, one under which work was performed in an industry; 3. Since the High Court decision in Stevenson v Barham (1977) 136 CLR 190 there can be no doubt that the jurisdiction under s 106 of the Act extends to partnership arrangements which lead to work being performed in an industry, notwithstanding that the arrangement was in the nature of a business transaction and did not per se involve one person working for another; 4. The arrangement between Ms Gase and Ian Hardy was unfair to the extent it was "unfair, harsh or unconscionable" within the meaning of s 105 (a) of the Act and it "provides a total remuneration that is less than a person performing the work would receive as an employee performing the work" within the meaning of s 105 (c) of the Act; 5. There is no dispute that the partnership arrangement was set up in such a way so as: "3.3.1 the Applicant was to work full-time in the partnership business; 3.3.2 the Applicant was not to receive any wage or salary for the work but rather was to be "credited" a nominal salary ie $26,000 for the work performed as a book entry in the financial accounts; 3.3.3 the Respondent was not to work full-time in the business and was free to work full-time in other employment including as a shopping centre manager; 3.3.4 the business was to borrow money from the Bank (an amount of $300,000 which was later increased to $320,000). This borrowing was to be secured only by way of a mortgage over the Applicant's home and not to be secured over any other assets (including any partnership assets) or any assets held in the name of the Respondent." 6. These partnership arrangements were unfair to the applicant as they placed her in a disadvantageous position: the respondent was free to cease contributing money to the business, which he did, while the applicant - because of the risk of losing her home - was committed to remain in the business to support it; the respondent was able to earn real income whilst the business was trading at a loss and the applicant received no remuneration for her loss; the arrangement placed the burden of the business failing on the applicant;. 7. The applicant was not in an equal bargaining position to that of the respondent at the time the partnership arrangements were put into place; the applicant did not seek independent advice; 8. The test of what is fair under the Act is a broad test. There is no single test of unfairness. The authorities suggest that unfairness depends upon the contemporary understanding of what is fair in the context of both substantial and procedural concepts. Inequality in bargaining position is relevant and a balancing act must be undertaken: A M Thompson Pty Limited v Total Australia Limited (1980) 2 NSWLR 1; 9. In this case, if it be accepted that the parties' contribution to the business is about equal, it is unfair for the applicant to then be left with the burden of the Bank debt and not be able to sell partnership assets to clear the debt; 10. Unfairness may also turn upon what was the reasonable expectation of the parties at the time of entering into the contract: Nordby v Barclays (1993) 53 IR 319. In the present case the applicant had an expectation that the business would not lose and that she would not lose her house; 11. The partnership arrangement was unfair: there was no equality in the sense of both the applicant and the respondent putting in equal security for the business debt; the applicant worked for five years without payment; the respondent had not contributed his income into the partnership on a regular basis; the respondent's contribution to the business by way of labour was not significant; the applicant is at risk of losing her home while the respondent benefited by receiving tax savings all of which were not put back into the business; it is only as a consequence of the applicant's efforts that the partnership was able to achieve maximum returns because of the quality of the herd; 12. The partnership arrangement was unfair in that, inter alia, it did not give fair credit to the value of the applicant's labour to the business for the purpose of treating it as a capital contribution; the wages of $26,000, as credited to the accounts, did not represent the worth of the applicant's labour; a figure of $60,000 per annum over a five year period can be justified as the value of the applicant's labour; 13. The partnership arrangement was unfair because it did not provide any credit to the applicant for use of her land for the grazing of the animals; an average agistment rate of $8 per head per day over five years is not an unreasonable basis for calculating the applicant's contribution for use of her land; 14. Section 106 of the Act can be invoked to deal with a contract which may not be unfair but which becomes unfair in its operation; 15. The arrangement between the applicant and the respondent operated unfairly: the respondent vetoed the applicant from using the proceeds from the sale of the partnership assets to pay the bank debt which if paid would stave off action being taken by the Bank to sell her home; the respondent has failed to acknowledge the contribution that the applicant has made to the business by the provision of her labour and her land; the lack of terms in the partnership arrangements to compel the respondent to continue to support the business which has meant that the applicant has been left to fund the partnership expenses at the risk of losing her home; the applicant has foregone her career and any alternative business opportunities while the respondent has been able to continue in highly paid employment and has advanced his career; the disingenuous conduct of the respondent leading to the commencement of these proceedings; 16. The written partnership agreement should not be taken as recording the terms and conditions of the partnership arrangement to the extent that it purports to do this. It was not prepared to record the arrangements between the partners but was essentially for taxation purposes; 17. The unfairness of the arrangement can be easily cured by the making of the orders sought in these proceedings: the net proceeds of the auction should be paid immediately to the Bank; the balance of the debt should be shared equally; it should accepted that the respective contributions to the business by the applicant and the respondent are equal or largely equal and that consequently their contribution to the debt should also be equal; 18. The applicant is a witness of credit; 19. The evidence of the respondent was demonstrated to be vague, unsatisfactory and unreliable in a number of material respects. There was a total absence of documentation to support the respondent's assertions, especially in relation to those items of expenditure that the respondent claimed he paid cash for. The evidence of Ms Gase should be preferred to the evidence of Ian Hardy where there is conflict between the two; 20. The respondent has no interest in, or any claim to, the railway land; he did not provide any funds for the purchase of the land; he was not present in the country at the time the land was purchased; he left the applicant and the relationship had been brought to an end; the respondent was no longer living in a "caring and loving" relationship with the applicant and had left her to commence another relationship; the respondent admitted that the land would have no value to him. Submissions for the Respondent 74 The main points of Mr Newall's case for Ian Hardy may be summarised as follows: 1. Without a finding of unfairness within the meaning of the Act, the Commission will not substitute its own view of what the contract might have been if the Commission were a party; the contract between Ms Gase and Ian Hardy cannot be held to be unfair on its face or in its operation and accordingly the Commission's jurisdiction is not enlivened; 2. The nature of the Commission's jurisdiction pursuant to Part 9 of Chapter 2 of the Act is an equitable one: Brown v Rezitis , followed in Beahan v Bush Boake Allen (1999) 93 IR 1. Ms Gase did not come to the Commission with clean hands. Her assertions in her Statement of Claims in the Supreme Court to the effect that she was receiving income that was put to the acquisition of assets, etc, and that The Pines was unencumbered, is at odds with her evidence in these proceedings. This sought of conduct is not that of a party with clean hands; 3. The basic and underlying relationship between the applicant and the respondent was a de facto relationship. All the evidence shows that the partnership arrangement arose out of the personal relationship and was inextricably linked to it. The matter is more properly one that should be before the Supreme Court pursuant to the Property (Relationships) Act 1984. The contract between the parties which essentially goes to a de facto relationship, is not a contract of the nature that s 106 or indeed the Act was enacted to address. Because the matter is more properly a matter for the Supreme Court and because there are proceedings alive in that Court there is no need for the Commission, as an exercise of its discretion, to make orders in the matter; 4. The effect of the orders sought by the applicant would be that while the partners share equally any losses or debts of the partnership, she would be permitted to have the advantage of the benefits of the partnership business, which have included the ability to cease work in her shop business, substantial improvements to the property which remains in her name, and a substantially improved lifestyle, including overseas trips and a high standard of living generally and at the same time, after the event, be paid substantial lump sums by the partnership. The effect of the orders would be that the partners do not at all share equally in any profit or benefit of the partnership, but that Ms Gase has the lion's share of any and all benefits. This would be manifestly unfair on Ian Hardy; 5. The partnership arrangement was, on its face, that the partners make an equal capital contribution to the partnership funds. Ian Hardy demonstrably made a substantially greater contribution. This is apparent on the evidence of Kenneth Hardy, the accountant to the partnership. Further, Ian Hardy supported Ms Gase personally; 6. It cannot be said that the partnership agreement was unfair insofar as it required equal capital contributions from the partners. Equally it cannot be said to be unfair that the partners bear equally any profit or loss; 7. There was a partnership agreement in writing which both partners signed. The agreement was prepared by Kenneth Hardy, a close friend of Ms Gase; Ms Gase was an experienced businessperson and understood what she was doing in signing the written agreement; 8. The partnership was one of equals; both parties were experienced business people; Ms Gase understood what she was doing in providing her property as security for the business loan; the Commission will not exercise its discretion pursuant to s 106 to permit the section to be a refuge for those who have become disgruntled with a bargain entered into on even terms: Davies v General Transport Development [1967] AR (NSW) 371. Relevant considerations include the conduct of the parties and their relative capacity to appreciate the bargain that they have made: McNaught v Micador (1996) 83 IR 111 at 117. The Commission will be slow to interfere in a bargain freely reached between equals; 9. Ms Gase made no complaint about the fairness of the arrangement during its currency; where mature, experienced adults with business acumen enter into a bargain with financial implications as equals, the Commission will find no unfairness and therefore will not, as both a matter of jurisdiction and of discretion, make any orders. 10. It is entirely inappropriate to consider ascribing a sum to Ms Gase representing 'market wages' for the following reasons: (i) the parties never at any time regarded this arrangement as one between employer and employee but one between two de facto partners working together on a project which they both loved; (ii) Ms Gase was not an employee she was a partner. She stood to gain and did gain through material and lifestyle advantages. She was not treated as an employee; (iii) Market or award wages are not applicable. Ms Gase was given financial support and had the benefit of being able to remain on her property all day; she took overseas holidays; (iv) There is no evidence that would assist in forming a view on what an appropriate market rate might be; (v) There is a substantial difficulty arising from the attempt to artificially impose after the event, a financial situation which was not within the contemplation of the parties. It is impossible to speculate on what other arrangements the partners would have come to if the $60,000 per annum figure claim were to have been paid. This money could only have come from Ian Hardy; (vi) It would be unfair to order dollar payments to Ms Gase and not to Ian Hardy for work done by him in the partnership business. If the Commission were to make orders allocating monies to Ms Gase with respect to work performed, then it must also allocate such monies, albeit in possibly a lesser sum, to Ian Hardy for work performed. Ms Gase was allocated an income on paper of $26,000 per annum. This cannot be ignored; (vii) Any wages owed to Ms Gase would have to be paid by the partnership. If Ms Gase were to be owed, say, $60,000, Ian Hardy could at worst only owe $30,000 of that; (viii) Any money owed to Ms Gase would have had to come from the partnership. This would have impacted on the partnership's ability to buy stock, service its loans etc. It is not available to speculate that Ms Gase would have turned the funds paid to her back into the business. There is no evidence of that: (ix) The Commission could not proceed on the basis that Ms Gase had no income during the period of the partnership in the light of her Statement of Claim in the Supreme Court. 11. Any claim for agistment or rent must similarly founder. Such a payment was not within the contemplation of the parties at the time of the partnership. Had it been other arrangements would have had to have been made to balance the payment. Any payment for agistment would have had to have come from Ian Hardy. If the partnership is held to be indebted to Ms Gase then both partners must be equally indebted; 12. It is clear on the evidence that the parties contributed disproportionately to the partnership. While there are disagreements about particular contributions, even if these were taken against Ian Hardy the contributions he has made are still grossly disproportionate to those of Ms Gase; 13 Ms Gase did not deal cleanly with Ian Hardy in relation to the railway land. She was not frank with him in permitting him to continue under the impression that the land was to be bought by the partnership, when she had herself determined that it was not; 14 The way in which Kenneth Hardy came to give his evidence, and the evidence itself, was partisan; 15 The Commission will not find unfairness so as to ground jurisdiction. If the Commission were to find that it has jurisdiction arising from some perceived unfairness, it will not in the circumstances as a matter of discretion grant relief and where relief is being sought on foot elsewhere. The applicant did not have clean hands. If the Commission is against the respondent on that the Commission will not find that there is as a matter of discretion, any unfairness warranting intervention. If the Commission is against the respondent on that the only possible orders that could be made are those sought by Ian Hardy. 75 At the conclusion of submissions Mr Newall raised a concern that Mr Lawler, in his submissions in reply, had introduced a new pleading based on s 105 (c) of the Act, namely, that the contract was an unfair contract because it provides a total remuneration that is less than a person performing the work would receive as an employee performing the work. It was agreed that the parties could provide supplementary written submissions on this point. This was done by both parties and I have read the written submissions. Oral and Documentary Evidence 76 Before going to relevant considerations relating to jurisdiction and the question of unfairness, I should say something about the oral and documentary evidence. 77 Apart from his affidavit and oral evidence, Ian Hardy produced no other evidence. What evidence he did provide was uncorroborated. By comparison, the applicant's case is notable for the large amount of material relating to the accounts and finances of the partnership and her personal financial situation. As well, the applicant provided a comprehensive analysis of the partnership's financial dealings and called expert evidence relating to those dealings. 78 Mr Newall, labouring under a very late change of solicitors by Ian Hardy, decided not to put into evidence a report commissioned by Ian Hardy's solicitors (prior to their retainer being withdrawn) from Financial Management Corporation Pty Ltd, which shows their calculation of the respective contributions by the partners to the partnership. As I have already indicated this was not submitted as part of the evidence for the respondent. 79 I generally regarded Ms Gase as truthful and a witness of credit. She was not evasive. She was occasionally forgetful but perhaps that was understandable given the large amount of information relating to transactions, details of which she was asked to recall from time to time. Mr Newall attacked the applicant's credibility, as he was entitled to do, by pointing to inconsistencies between her Statement of Claim in the Supreme Court and her evidence in these proceedings. He also argued that Ms Gase had not dealt cleanly with Ian Hardy in relation to the railway land. I do not accept that these attacks undermine the truthfulness of the witness. The applicant has provided explanations relating to these matters, which I have referred to earlier, and I accept these explanations. As to the proposition that Ms Gase had not been truthful about Ian Hardy's furniture, I accept Mr Lawler's submission that in comparative terms the furniture was de minimus. 80 Mr Newall argued that the way in which Kenneth Hardy came to give his evidence, and the evidence itself, was partisan. This is because of what was admitted to be a close friendship between Kenneth Hardy and Ms Gase and the fact that Kenneth Hardy had not been paid and had not sought to be paid for his work in providing expert accounting and financial evidence on behalf of Ms Gase. Be that as it may, there is nothing to suggest that in arriving at his figures relating to the capital contributions of each of the partners Kenneth Hardy was anything other than objective. 81 I found Ian Hardy to be argumentative and often evasive in his answers in cross examination. Annexure A to his affidavit, which purports to be a list of items of expenditure for which Ian Hardy says he paid cash, or in respect of which he put cash into the PCA, was largely based on his assertions. It was not supported by documentary or other oral evidence, which it seems to me in relation to several items at least, could have been put forward by him if what he stated was in fact true and correct. His excuse that the applicant had most of the source documents relating to financial transactions really did not hold water. The material was all discoverable or could have been the subject of summonses for production or summonses to attend and give evidence. 82 Consequently, in matters of contest between the evidence of Ms Gase and Ian Hardy I generally preferred the evidence of Ms Gase. Consideration Jurisdiction 83 The initial question to be determined here is whether there is jurisdiction to make the orders sought under s 106 of the Act. This depends on whether there is any contract whereby a person performs work in any industry: s 106 (1) of the Act. 84 It is not disputed that there was a contract or arrangement between Ms Gase and Ian Hardy to conduct a partnership business involving the farming of alpacas. It is also not disputed that Ms Gase worked full time in the partnership business tending to the alpacas, maintaining the property and undertaking administrative tasks associated with the business. She performed work in an industry. "Industry" is defined in s 7 of the Act to include: "(a) any trade, manufacture, business, project or occupation in which persons work, or (b) a part of an industry or a number of industries." 85 In his submissions, Mr Newall argued that the underlying relationship between the applicant and respondent was a de facto relationship and that the contract between the parties, which essentially went to that de facto relationship, was not a contract of the nature that s 106 of the Act was enacted to address. I emphasise that I am not here concerned with the de facto relationship except to the extent that I need to distinguish dealings under that relationship from the partnership arrangement. It is the partnership arrangement, as a contract or arrangement under s 106 of the Act, with which I am concerned. Unfairness 86 In Port Macquarie Golf Club Ltd v Stead (1996) 64 IR 53 a Full Bench of the Court summarised the approach to be taken to appeals under s 275 of the Industrial Relations Act 1991 (the predecessor to s 106 of the Act). There are a number of points in the summary that apply equally to the approach to be taken at first instance to the question of unfairness. These are set out at pages 59 and 60: "1. The initial question which arises, once it be established that the impugned contract or arrangement meets the necessary jurisdictional test of being one under which a person performs work in any industry, is whether the contract or arrangement offends one or more of the grounds in pars (a), (b), (c), (d) (e) or (f) of s 275(1); that process involves a mixed question of fact and of law: Hodges at 63; and Autobake at 20." 87 Mr Lawler argued that the partnership arrangement offends s 105 (a) and s 105 (c) of the Act. As mentioned earlier, Mr Newall for the respondent objected to the late mention in submissions in reply by Mr Lawler of reliance on s 105 (c). I have read the written supplementary submissions by both counsel and I am prepared to accept that the issue of the adequacy of Ms Gase's remuneration and what employees doing comparable work might receive was squarely raised in both Ms Gase's summons and in the evidence filed on her behalf. While there was no specific reference to s 105 (c), nor was there any specific reference to the other paragraphs in s 105 by the applicant. I am satisfied it is proper for me to consider whether the contract or arrangement between Ms Gase and Ian Hardy offends s 105 (a) and (c). 88 The extract from Port Macquarie Golf Club continues: "5. The nature and degree of fairness within the purview of s 275, as a matter of law, relates to the ordinary standards of fairness by directing attention to the particular circumstances of the individual contract or arrangement concerned; whether or not a contract or arrangement is unfair is a matter to be decided upon examination of the facts of each particular case: Incitec Ltd v Barry (1992) 45 IR 148 at 154; Baker." "6. Unfairness may arise either from the terms of the contract or arrangement itself, the surrounding circumstances and/or from the manner of performance or operation of the contract or arrangement: Barry v Incitec Ltd (1991) 45 IR 143 at 146; Incitec Ltd v Industrial Court of New South Wales (1992) 45 IR 155 at 157 158 and Baker at 270-271." "7. The test of unfairness involves the commonsense approach characteristic of the ordinary juryman by applying standards providing a proper balance or division of advantage and disadvantage between the parties who have made the contract or arrangement, bearing in mind the conduct of the parties, their capability to appreciate the bargain they had made and their comparative bargaining positions when entering into the contract or arrangement: Davies v General Transport Development Pty Ltd [1967] AR (NSW) 371 at 374; A & M Thompson Pty Ltd v Total Australia Ltd [1980] 2 NSWLR 1 at 13 and Baker at 271-272." The Partnership Arrangement - Was it Unfair? 89 Weighing up the contract or arrangement between Ms Gase and Ian Hardy against these principles, I have analysed a number of elements to assist in arriving at a conclusion about whether the overall contract or arrangement was unfair. These are discussed below. 90 The contract or arrangement required Ms Gase to provide The Pines as security for the $300,000 loan; Ian Hardy was not required to and did not provide any security for the loan under the partnership arrangement. This produced a situation that in the event the partnership business was unable to meet its debt, the Bank would seek to recover its debt by enforcing its security over The Pines. This would leave Ms Gase with the burden of the debt. 91 The respondent's answer to this was that Ms Gase and Ian Hardy went into the partnership arrangement with their 'eyes open'; that Ms Gase was an experienced business person who knew what she was doing in providing her property as security and that the partnership was a partnership of equals. In A & M Thompson Pty Ltd & Ors v Total Australia Ltd it was said at 13 that: "… a case involving the issue of unfairness of a contract cannot be disposed of simply by concluding that the complaining party was fully aware of the nature of the transaction before entering into it, and later came to regret the bargain. It is insufficient to claim, as Total has done here, that the Thompsons "had their eyes open" when they entered into the subject licence agreement in 1977. Section 88 F envisages a much more searching examination of the circumstances than that. Otherwise, its purpose would not be achieved." 92 It was also argued for the respondent that Ms Gase welcomed the change in lifestyle offered by the partnership business and actively participated in drawing up a business plan to be submitted to the Bank in support of the loan application. 93 Mr Lawler submitted that, influenced by her relationship with Ian Hardy, Ms Gase did not focus on the fact that The Pines was to be security for the business. Ms Gase knew that this was the case but trusted Ian Hardy who had said to her that he would not let her lose her home as a consequence of the business venture. Mr Lawler also submitted that Ms Gase was not a particularly successful businessperson and was certainly not in the league of Ian Hardy who had experience as a real estate agent and was the manager of a large shopping centre. I consider that this assessment is correct. 94 I do not think that there is much doubt that Ms Gase was looking forward to the prospect of farming alpacas and was a willing participant in obtaining a loan to finance the business. She obviously had some reservations about putting up The Pines as security for the loan but went ahead, nevertheless. Ms Gase clearly had the opportunity to seek independent professional advice about obtaining the loan but chose not to because, I believe, she did indeed put a good deal of trust in Ian Hardy and his business acumen. 95 In my opinion, Ms Gase was capable of understanding the nature of the arrangement she was getting into. I think, however, Ian Hardy was the dominant personality in the relationship and that Ms Gase was prepared to defer to him and to his business experience. Ian Hardy, by virtue of his income, was the dominant economic power in the partnership. In this connection, one must look at the "proper balance or division of advantage and disadvantage" between Ms Gase and Ian Hardy in relation to the taking out of the loan: A & M Thompson Pty Ltd v Total Australia Ltd at 13. There was a significant imbalance. In order to obtain the loan Ms Gase submitted her house and property as security whereas Ian Hardy submitted nothing by way of security. Ian Hardy could have walked away from the contract or arrangement the day after the loan was obtained and left Ms Gase with the burden of the debt. This, of course, is not the complete picture of the contract or arrangement but it serves to highlight the unfairness of it in relation to obtaining the loan. The fact that Ms Gase was prepared to submit her home - her only substantial possession - as security for the business loan, knowing that the other partner was offering nothing by way of security, also serves to demonstrate the degree of influence Ian Hardy had over the applicant and supports the conclusion the partnership was not one of equals. 96 One of the main planks - perhaps the main plank in the respondent's case, is that he contributed most of the money to the partnership. In his affidavit Ian Hardy asserted that he contributed in excess of $730,000. This figure was put into considerable doubt having regard to other evidence and to the cross examination of Ian Hardy. Annexure A to Ian Hardy's affidavit, which purported to be payments he made in cash as distinct from payments by cheque, did not stand up to scrutiny in a number of significant respects (eg., purchase of Dahlia, wage payments to farm hand, machinery and equipment). The figure that I am prepared to work on is the one calculated by Kenneth Hardy of $398,439. This figure is extracted from Kenneth Hardy's second affidavit (Exhibit 21) and is based on an assumption (Assumption B) that the "unknown" deposits shown on the spreadsheets provided by Ms Gase and her solicitors were split "50/50" between business generated contributions and Ian Hardy's contributions. 97 Excluding allowances for such factors as income and agistment costs, Kenneth Hardy calculated Ms Gase's capital contribution to the partnership as being $55,538. 98 Based on what he described as a disproportionately greater contribution by Ian Hardy to a partnership that required equal capital contributions, Mr Newall argued that it would be unfair to require Ian Hardy to pay half the partnership debt. The respondent's case was that what should have occurred was Ms Gase make good the requirement to contribute half the capital contribution - this would mean paying to the partnership or directly to Ian Hardy an amount of about $342,000. Once that was done the partnership could settle its debt by the partnership paying half each. The effect of this, of course, would be that: (i) the Bank would move to enforce its security by selling Ms Gase's house; (ii) from the proceeds, Ms Gase would be required to pay Ian Hardy $342,000; and (iii) either Ian Hardy would pay back to Ms Gase half the debt ($175,000) or Ms Gase would be left to sue for recovery of that amount. 99 The respondent relies on the terms of the written partnership agreement to support his case that the contract or arrangement required equal capital contributions by the partners and, indeed, that is what the document says. The difficulty I have, however, in accepting this as a term of the contract or arrangement is that, clearly, it was not prepared as a document to reflect the intentions of the partners. It was prepared purely for tax purposes as Kenneth Hardy explained in his evidence. Secondly, it was not the intent of the parties, in making the contract or arrangement, that there would be equal capital contributions. The partnership agreement was prepared without any consultation between Kenneth Hardy and the partners. Kenneth Hardy's evidence was that "I made no inquiry with Judy or Ian as to whether this document (the written agreement) as drafted by me reflected the terms and conditions of their Partnership arrangements". The evidence was that the applicant and respondent signed the written agreement sometime in October 1997. It seems to me the document was signed by the parties, not on the basis that it reflected their intentions regarding the partnership arrangement but simply because Kenneth Hardy needed a signed document in order to obtain a tax file number for the partnership business. 100 Ms Gase explained in her affidavit her understanding of the partnership arrangement as follows: "(a) the partnership was to be between myself and Ian Hardy; (b) we were to be equal partners; (c) the Partnership's Bank was the National Australia Bank who had provided a business loan to us of $300,000 which was secured over my home; (d) I was to work in the business full time; (e) Mr Ian Hardy was to continue to work at his full time job in the city with AMP and would use his income to assist us with our living expenses and business expenses. Although (sic) I expected the business would trade profitably, having regard to the information that Mr Ian Hardy had set out in his feasibility plan which he had supplied to the Bank; (f) the alpacas would live on my property; and (g) the hobby business that had been running before with the alpacas would be converted into this full time business." 101 The reference to "equal partners" could not be taken as meaning that Ms Gase would make an equal capital contribution to the business because Ms Gase had very little capital to contribute and both she and Ian Hardy knew this. Did Ms Gase contribute her property to the partnership which had a value of about $600,000? The evidence does not indicate this was the case at all and Ian Hardy did not seriously press this. The evidence is that Ms Gase provided her property only as security for the business loan. 102 In any event, Ian Hardy did not rely specifically on the intentions of the parties at the time of making the original agreement to support his contentions relating to equal capital contributions. Instead, he pointed to the written partnership agreement signed by the partners some two and a half years after the original arrangement commenced and argued that the written agreement required equal capital contributions by the partners. 103 Nothing in Ms Gase's circumstances had changed between the time the original partnership agreement was made and the time the written agreement was signed that enhanced Ms Gase's capacity to make a capital contribution equal to that of Ian Hardy. That she would have signed the written agreement in the knowledge and understanding that in doing so she became obliged to make a capital contribution equal to that of Ian Hardy, beggars belief. The written agreement did not reflect the intention of the parties. For Ian Hardy to seek to use the written agreement to make good his claim for equal contributions knowing Ms Gase could not possibly make a capital contribution equal to his own was at best opportunistic and at worst disingenuous 104 The contract or arrangement required Ms Gase to work in the partnership business on a full time basis. This involved working seven days a week. As a consequence of much of her effort the partnership produced a high quality herd and The Pines Alpacas had gained a good reputation amongst breeders. Ms Gase was not paid any income for her labour. Instead, she was credited a nominal salary of $26,000 per annum as a book entry in the financial accounts. This led to a situation where the applicant became totally dependent on the respondent and when the respondent stopped supporting the business the applicant was immediately put at risk of losing her house and property. Ian Hardy continued in full time employment for the whole of the relevant period. In 1995 Ian Hardy's salary package was worth $97,946 per annum and by April 2000 it was worth $215,375 per annum. No doubt this was the fruits of hard work and dedication. On the other hand, Ms Gase's hard work and dedication to the partnership business has brought nothing but the prospect of losing her home. 105 The respondent's answer to this is that: Ms Gase benefited from working full time at her property in the partnership business because it meant a substantially improved lifestyle - one that she wanted and enjoyed - including overseas trips and a high standard of living generally; it allowed her to cease work in her shop business; she obtained substantial improvements to the property which remains in her name; she obtains tax benefits arising out of losses in the partnership business; she was supported by Ian Hardy between at least March 1995 and July 1998; Ian Hardy also worked in the partnership business in his spare time. 106 It is clear on the evidence that Ms Gase obtained significant benefits from the partnership. But in weighing up the balance or division of advantage or disadvantage between the parties it is impossible to escape the conclusion that it was Ms Gase who was disadvantaged and not Ian Hardy. Ian Hardy gained a good deal from the partnership arrangement as well; a lifestyle that presumably suited him, including a high standard of living as he puts it, not all paid for by him alone; tax benefits that were not all put back into the business. He was not operating under any burden of a debt secured over his assets. At the same time, he was continuing to work in full time employment and to accrue benefits in terms of increased remuneration and promotion. This led to the situation where, once the partnership business became unviable, Ian Hardy stood to lose what he put into the partnership but he would be unaffected in terms of his full time occupation and livelihood. On the other hand, Ms Gase is left with no income, no job, and the burden of the partnership debt by virtue of the mortgage over her property. That cannot be a fair outcome 107 While it is certainly the case that Ms Gase benefited from the partnership to the extent that significant improvements were made to her property, for example, the erection of sheds and high quality fencing, it is also the case that her contribution of the use of the property to the partnership was not ascribed any value. She received no credit whatsoever for allowing her land to be used for the purposes of the partnership business. 108 While the initial separation of the applicant and respondent in July 1998 was amicable, it became increasingly acrimonious. Eventually, Ms Gase was unable to access funds from the PCA and was forced to sell furniture and jewellery to meet ongoing expenses. The Bank had moved to enforce its mortgage over the Pines and farm debt mediation procedures had been invoked by the Bank. Ms Gase proposed that the assets of the partnership be auctioned and the proceeds used to reduce the debt owed to the Bank. Ian Hardy objected to this course. He threatened to facilitate the Bank's mortgage enforcement action against The Pines and to frustrate the sale of the partnership assets. As it happened, and in light of an Interlocutory Judgment restraining Ian Hardy from interfering with the auction, the auction proceeded and the monies from the sale put into trust. 109 The manoeuvring by Ian Hardy in early 2000 was obviously designed to stop Ms Gase from acquiring and using the proceeds of the sale of assets to reduce the partnership debt, with the respondent claiming, of course, that before any debt was to be settled there had to be an evening up of contributions to the partnership. 110 The position, as it stands at the present in relation to the partnership arrangement, is that the respondent refuses to allow the proceeds of the sale of assets to used to reduce the debt. Consequently, the Bank is seeking to enforce its mortgage over The Pines and Ms Gase risks losing her home. Summary 111 My analysis of the evidence and material before me may be summarised as follows: 1. Ms Gase and Ian Hardy agreed to form a partnership for the purpose of farming alpacas. I am prepared to accept that the partnership came into existence from 1 May 1995, noting that the applicant has given credit in the calculations by Kenneth Hardy for the respondent's contributions to the partnership made prior to 1 May 1995 with respect to the animals purchased in the Mudgee auction, his contribution to the purchase of the animal "Cedar House Bannister" and fencing costs which the applicant has been able to attribute to the respondent. The partnership, technically at least is still on foot but with the selling of plant, equipment and stock on 13 May 2000 it has only the proceeds of that sale ($209,784.87) and is faced with a debt of $348,778.78 as at 3 July 2000 owed to the Bank; 2. Ms Gase and Ian Hardy agreed sometime in about March or April 1995 to borrow $300,000 from the bank to finance the partnership business. This was later increased to $320,000. Ms Gase's property, The Pines, was to be used as security for the loan. Ian Hardy was not required to and did not provide any security. The borrowings were not secured over any partnership assets. Ian Hardy assured Ms Gase that the business would not lose and that she would not lose her home. This situation constituted a one sided arrangement to the detriment of Ms Gase; 3. Ms Gase was to work in the business on a full time basis. As the alpaca herd grew this involved long hours and weekends. As a consequence of her labour the partnership developed a high quality herd and was able to obtain a high return at the auction on 13 May 2000. Ms Gase concedes that she enjoyed this way of life. Nevertheless, she was not paid for her labour except to the extent that she was credited with an amount of $26,000 per annum as a book entry in the financial records of the partnership. Consequently, she was left wholly dependent on Ian Hardy and when he ceased his support for the partnership business, as he did, Ms Gase was left to manage the business and tend to the animals as best she could with limited resources. Eventually she was left with no choice but to propose selling off the assets of the partnership to reduce the debt and avoid losing her home; 4. Ian Hardy paid for living expenses for himself and Ms Gase and he paid for business expenses to the extent he considered appropriate because while he contributed a significant amount to the partnership it was not the whole of his income and other cash assets. The terms of the contract or arrangement did not specify what Ian Hardy's contribution would be to the partnership. Ian Hardy's income, which was used to pay living and business expenses, was derived mainly from his full time employment as a senior executive in a large organisation responsible for running large shopping centres. In 1995 Ian Hardy's salary package was worth $97,946 per annum and by April 2000 it was worth $215,375 per annum. Ian Hardy continues in his full time employment. Both he and Ms Gase benefited from the partnership in terms of lifestyle; 5. Ian Hardy was to work in the business in his spare time, from time to time and to the extent he considered appropriate. I say "considered appropriate" because I accept Ms Gase's evidence that between March 1995 and July 1998 Ian Hardy worked occasionally on weekends and worked an average of half a day a weekend out of every three weekends; 6. Ms Gase would provide her property to be used for the purposes of the business. Her property was improved as a consequence of the business but despite the fact that the use of her property was a significant contribution to the partnership, it was not ascribed any value or consideration; 7. Both partners would share the profits of the business. Losses, I do not think were actually contemplated at the time the contract or arrangement was formed. Indeed, Ian Hardy assured Ms Gase "there's no way we can lose." But in the event that losses were in the contemplation of the parties, other than paper losses, I do not accept that it was the intent of the parties that Ms Gase's property was to be taken into account in sharing the losses, including any debt. I think the intent of the parties in relation to any debt would have been limited to the value of the assets of the partnership and shared equally; 8. The applicant and respondent were not in equal bargaining positions at the time the contract or arrangement was entered into. Ian Hardy had very substantial financial skills whereas Ms Gase did not. Ian Hardy was clearly the dominant partner and Ms Gase relied on him and his undertakings that the business would not lose and that she would not lose her house; 9. The written partnership agreement did not form part of the contract or arrangement between the applicant and the respondent; 10. The applicant is prevented by the actions of the respondent from using the proceeds from the sale of the partnership's assets to reduce the debt owed to the Bank; 11. The Bank is seeking to enforce its mortgage over The Pines; 12. If the Bank enforces if its mortgage over the Pines Ms Gase will bear the burden of the whole debt and be left in a position of having to pursue Ian Hardy for his share of the debt. Assessing Contributions to the Partnership Arrangement 112 The written partnership agreement formed no part of the contract or arrangement between the parties. Moreover, for the reasons I have explained, it could not have been the intention of the parties at the time the original partnership agreement was made, that the partners would make equal capital contributions. In the absence of any other material to suggest otherwise, I find that it was not a term of the contract or arrangement between Ms Gase and Ian Hardy that there was a requirement on each of the partners to make equal capital contributions to the partnership. 113 This leaves me to assess the overall contributions by each of the parties to the partnership. Obvious contributions by Ms Gase were her labour and her land. I do not accept Mr Newall's arguments that no credit should be given in this regard. 114 It cannot possibly be fair that a person puts in long hours of work, seven days a week that contributes to a quality herd and a good reputation for the stud, but no value or not proper value, is placed on that labour for the purpose of determining that person's contribution to the business. I do not accept the respondent's contention that the benefits which accrued to the applicant as a partner negated any need to place a value on Ms Gase's labour. 115 In fact, a value was placed on Ms Gase's labour and that was $26,000 per annum. The question is whether that represents proper value. Kenneth Hardy's calculations are based on a nominal salary of $60,000. This is based on a base salary of $40,000 (consistent with the evidence of Ms Hicks as to what her employer was paying farm hands) plus overtime payments. 116 Mr Lawler provided calculations for the hours worked (including overtime) by Ms Gase for the period 1 May 1995 to 15 May 2000 based on the wage of a Station Hand Grade 3 under the Pastoral Employees (State) Award. This produced an average annual salary of $55,098.51. Having considered the work undertaken by Ms Gase, the evidence of Ms Hicks and the terms of the Pastoral Industry (State) Award, in particular the definition of a Senior Station Hand Grade 3, I am prepared to accept that the notional value I should ascribe to Ms Gase's labour is at the rate of $55,000 per annum. This produces a figure for the period 1 May 1995 to 15 May 2000 of about $278,000 compared to the figure of $300,000 assumed by Kenneth Hardy. 117 In relation to the use of land, a figure of $8.00 per animal per week was used by Kenneth Hardy in his calculations. The evidence of Elizabeth Mackey, who is an agricultural teacher and breeder of alpacas, was that three or four years ago she paid $10 per animal per week for agistment. It seems to me that the figure of $8.00 is not unreasonable and I accept it as the basis for calculating the use of Ms Gase's land for the grazing of alpacas. 118 On this basis, taking labour and land into account, and using Kenneth Hardy's calculations, Ian Hardy's contribution to the partnership was of the order of $400,000 and that of Ms Gase, of the order of $433,000. Thus, the contributions by the partners to the business were of the same general order. 119 If I am to ascribe a notional value to Ms Gase's labour then it is necessary that the same be done in respect of Ian Hardy. I am unable to do that with any precision because I have not been provided with any estimates as to the times he worked in the partnership business. Assuming though it was 20 per cent of the hours worked by Ms Gase over the five year period, a figure that I consider on the evidence to be more than fair (noting that Ian Hardy was engaged in his full time occupation Monday to Friday and did little, if any, work after July 1998), the notional value to be ascribed to Ian Hardy's labour would be about $56,000. This still leaves the respective total contributions of the same general order. 120 On the logic of Ian Hardy's argument, if the partners have made the same or similar contributions to the partnership, their share of the debt should be the same or similar. 121 I find that the Partnership Arrangement in these proceedings is an unfair contract within the meaning of s 106(1) and in particular s 105(a) and (c) of the Act. The Railway Land 122 I need to say something about the Railway land. I accept Mr Lawler's submission in this respect, namely, that Ian Hardy: (i) did not provide any funds for the purchase of the land; (ii) he was not present in the country at the time the land was being purchased; (iii) he had left the applicant and the relationship had been brought to an end; (iv) he was no longer living in a "caring and loving relationship" with the applicant and had left her to commence another relationship; (v) he admitted the land would have no value to him. 123 I find that Ian Hardy has no interest in the Railway land. Exercise of Discretion 124 If a contract or arrangement is found to offend one or more of the grounds in s 105 of the Act such as it being unfair, harsh or unconscionable, then the next question involves the exercise of a discretion, to be performed judicially as to whether the contract or arrangement should be avoided or varied: Port Macquarie Golf Club Ltd v Stead at 60. 125 Mr Newall submitted that even if unfairness is found to exist I should not proceed to exercise my discretion because there are live proceedings involving substantially the same issues before the Supreme Court. Moreover, because of the nature of the relationship between Ms Gase and Ian Hardy, it is more appropriate for the matter to be dealt with in the Supreme Court under the Property (Relationships) Act 1984. 126 The proceedings in the Supreme Court are at a very early stage. Indeed, as I understand it, the pleadings are not yet completed. 127 The issues before the Supreme Court and this Court are substantially similar. But the proceedings in the Supreme Court are concerned with the de facto relationship that existed between Ms Gase and Ian Hardy, not a contract or arrangement whereby a person performs work in any industry. 128 Mr Lawler submitted said that the applicant has no particular commitment to the Supreme Court proceedings and subject to the issue of costs indicated that those proceedings could be discontinued. Apparently, no agreement was reached between the parties in this respect and the Supreme Court proceedings remain on foot. It seems likely, however, given a decision by me in this matter the proceedings in the Supreme Court will be discontinued. Even if they are not, I do not regard the Supreme Court proceedings as grounds for me refraining from exercising my discretion in this matter to remedy what I find to be an unfair contract or arrangement. Orders 129 For all the reasons I have given I intend to make orders varying the Partnership Arrangement, and money orders, to the effect of those advanced by the applicant as set out in the early part of this judgment. In broad terms these are: 1. an order varying the terms of the Partnership Arrangement to compel the partners to cause the net proceeds of the sale of partnership assets to be used to reduce the partnership debts which are due to the National Australia Bank; 2. a consequential order that the net proceeds of the sale of partnership assets be paid forthwith to the National Australia Bank; 3. an order varying the terms of the Partnership Arrangement to the effect that in the event the net proceeds of the sale of the partnership assets are not sufficient to pay the Bank debt, the both parties do all acts and things necessary forthwith to pay the balance of the debt outstanding from their own funds; 4. a consequential order against the respondent that he forthwith pay - either to the applicant or to the Bank - an amount equivalent to one half of the balance of the Bank debt after payment to the Bank of the net proceeds of the sale of the partnership assets. 130 The respondent shall pay the applicant's costs as agreed or assessed. 131 The applicant is directed to file and serve orders that will reflect this judgment within 21 days. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.