New South Wales Court of Appeal CITATION : Ryder & 1 Ors v Frohlich & 1 Ors [2004] NSWCA 472 HEARING DATE(S) : 4 - 5 November 2004 JUDGMENT DATE : 21 December 2004 JUDGMENT OF : Hodgson JA at 1; Ipp JA at 2; McColl JA at 17 DECISION : 1.The appeal should be dismissed, save that order 3 made by the primary judge be set aside and the following order be substituted:; "3.The matter be remitted to the Master to determine:; (a) as at the date of termination of the partnership (being 2 March 2001):; (i) the nature and value of the partnership assets, including the nature of the "right" Mr Ryder and Mr Frohlich had to manage the Diversified Fund and whether it had a goodwill value which survived the dissolution of the partnership (but not including any other interest in the Diversified Fund); (ii) whether monies were owing to Mr Ryder referable to the value of the business as at 2 March 2001 and whether Mr Ryder owed monies to Mr Frohlich - being those referred to in Mr Frohlich's cross-claim; (b) whether, in the light of the identification of the partnership assets and their use, if any, after 2 March 2001, Mr Ryder is entitled to a share of profits pursuant to s 42 of the Partnership Act 1892 (NSW) and, if so, to determine the amount of that share; (c) in the light of the findings made, the respective indebtedness of Mr Ryder and Mr Frohlich."; 2. The appellants to pay 80% of the costs of the appeal. CATCHWORDS : CONTRACT - PARTNERSHIPS - Agreement between first appellant and first respondent to establish hedge investment fund - identity of partners - TERMINATION - term of partnership agreement that each partner would contribute equally in terms of time and effort - first respondent left partnership to take up full-time employment - whether partnership agreement terminated - whether first respondent accepted first appellant's repudiation - principles concerning repudiation and partnerships - Abandonment - whether partnership agreement abandoned - Conduct of trial - terms of referral to Master - Estoppel - whether appellants estopped from asserting any share in the business or profits after the termination date. (D) Corporations Law s 9, s 88, s 601FA LEGISLATION CITED : Partnership Act 1890 (Imp) s 35(d) Partnership Act 1892 (NSW) s 26, s 30, s 32, s 35, s 42 Carter, J.W. Breach of Contract (The Law Book Company Limited, 2nd Ed, 1991) Carter and Harland, Contract Law in Australia (Butterworths, 4th Ed) Chitty on Contracts (Sweet & Maxwell, 28th Ed) Lindley & Banks on Partnership (Sweet & Maxwell, 17th Ed, 1995) Peden, Elisabeth & J.W. Carter, The Bonds of Partnership, (2000) 16 Journal of Contract Law at 277-281 Australian Broadcasting Corporation v XIVth Commonwealth Games Limited (1988) 18 NSWLR 540 Australian Energy Limited v Lennard Oil NL (No 2) [1988] 2 Qd R 230 Barclay's Bank Trust Co Limited v Bluff [1982] 1 Ch 172 Black Clawson International Ltd v Papierwerke Waldhof-Aschaffenburg AG [1981] 2 Lloyd's Rep 446 Blacktown Concrete Services Pty Limited v Ultra Refurbishing & Construction Pty Limited (In Liq) (1998) 43 NSWLR 484 Chandroutie v Gajadhar [1987] 1 AC 147 Chilean Nitrate Sales v Pansuiza Compania de Navegacion SA (The Hermosa) & Marine Transportation Co [1982] 1 Lloyd's Rep 570 CIC Insurance Limited v Bankstown Football Club Limited (1995) 8 ANZ Ins Cas 61-232 Cutts v Holland [1965] Tas SR 69 Darlington Futures Limited v Delco Australia Pty Limited [1986] HCA 82; (1986) 161 CLR 500 D T R Nominees Pty Limited v Mona Homes Pty Limited [1978] HCA 12; (1978) 138 CLR 423 Equuscorp Pty Limited v Glengallan Investments Pty Limited [2004] HCA 55; (2004) 211 ALR 101 Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95 Fitzgerald v Masters [1956] HCA 53; (1956) 95 CLR 420 Foran v Wight [1989] HCA 51; (1989) 168 CLR 385 Freeth v Burr (1874) LR9CP 208 Heyman v Darwins Limited [1942] AC 356 Hitchman v Crouch Butler Savage Associates (1983) 80 LS Gaz 550; (1983) 127 Sol Jo 441b Hochster v De la Tour (1853) 2 El & Bl 678; (1853) 118 ER 922 Holland v Wiltshire [1954] HCA 42; (1954) 90 CLR 409 Hudson Crushed Metals Pty Ltd v Henry [1985] 1 Qd R 202 Hugh Stevenson & Sons Ltd v Aktiengesellschaft fur Cartonnagen-Industrie [1917] 1 KB 842 Hugh Stevenson & Sons Ltd v Aktiengesellschaft fur Cartonnagen-Industrie [1918] AC 239 CASES CITED : Hurst v Bryk [2002] 1 AC 185 In re Ruddock (1879) 5 VLR (IP & M) 51 In the matter of ACN 007 764 249 (in liq) (formerly Adelaide Industrial Equipment); Smith v Deputy Commissioner of Taxation (Full Court of the Federal Court of Australia, 22 November 1996, unreported) Jorgensen v Boyce (1896) 22 VLR 408 Karacominakis v Big Country Developments Pty Limited [2000] NSWCA 313; [2001] ANZ ConvR 513; [2001] ANZ ConvR 577 Lakshmijit v Sherani [1974] AC 605 Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23; (1989) 166 CLR 623 Lombok Pty Limited v Supetina Pty Limited (1987) 14 FCR 226 Lukin v Lovrinov & Anor [1998] SASC 6614 Marminta Pty Limited v French [2003] QCA 541 M'Lure v Ripley (1850) 2 Mac & G 274; (1850) 42 ER 105 Mullins v Laughton [2002] EWHC 2761 (Ch); [2003] Ch 250 Pacific Carriers Limited v BNP Paribas [2004] HCA 35; (2004) 78 ALJR 1045 Palmer v Moore [1900] AC 293 Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd [1954] HCA 25; (1954) 90 CLR 235 Photo Productions Limited v Securicor Transport Limited [1980] AC 827 Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14; (1985) 157 CLR 17 Repatriation Commission v Nation (1995) 57 FCR 25 Ripley v M'Lure (1849) 4 Ex 345; 154 ER 1245 Ross T Smyth & Co Limited v T D Bailey Son & Co [1940] 3 All ER 60 Ryder & Anor v Frohlich & Anor [2004] NSWSC 418 Shevill v Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620 Summer v The Commonwealth [1918] HCA 33; (1918) 25 CLR 144 Syers v Syers v Paraire (1876) 1 App Cas 174 Thompson v De Lissa (Supreme Court of New South Wales, unreported, 16 February 1990) Toll (FGCT) Pty Limited v Alphapharm Pty Limited [2004] HCA 52 Tropical Traders Limited v Goonan [1964] HCA 20; (1964) 111 CLR 41 Universal Cargo Carriers Corporation v Citati [1957] 2 QB 401 Wallera Pty Limited v CGM Investments Pty Limited [2003] FCAFC 279 Wood Factory Pty Limited v Kiritos Pty Limited (1985) 2 NSWLR 105 Nicholas John Ryder (First Appellant) PARTIES : Protected Equity Investments Pty Limited (ACN 086 671 516) (Second Appellant) Peter Frohlich (First Respondent) Coastal Capital Limited (ACN 061 336 445) (Second Respondent) FILE NUMBER(S) : CA 40476/04 I M Wales SC/M W Young (Appellants) COUNSEL : B W Walker SC/R G McHugh (Respondents) (4 November 2004) R G McHugh/S T Chrysanthou (Respondents) (5 November 2004) SOLICITORS : Grahame Jackson & Associates (Appellants) Speed and Stracey Lawyers Pty Ltd (Respondents) LOWER COURT Supreme Court JURISDICTION : LOWER COURT SC 2314/03 FILE NUMBER(S) : LOWER COURT Cripps AJ JUDICIAL OFFICER : IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40476/04 SC 2314/03 HODGSON JA IPP JA McCOLL JA Tuesday, 21 December 2004 Nicholas John RYDER & 1 ORS v Peter FROHLICH & 1 ORS FACTS The first appellant, Mr Ryder, is an investment banker. The second appellant, Protected Equity Investments Pty Ltd ("Protected"), is a private company wholly owned by Mr Ryder's family trust. The first respondent, Mr Frohlich, is also an investment banker. The second respondent, Coastal Capital Ltd ("Coastal"), is his family company. Mr Ryder was a director, but not shareholder, of Coastal. Mr Frohlich and Mr Ryder agreed in early 1999 to create an "absolute return" investment fund and to attract subscribers to it. The Coastal Magma Diversified Performance Fund (the "Diversified Fund") was established in about June 2000. Coastal was the "responsible entity" for the Diversified Fund. Mr Ryder contributed equally with Mr Frohlich to the establishment of the Diversified Fund and to attracting subscribers to it until March 2001. As at March 2001 the Diversified Fund had not made a profit. Hence there was no revenue to share between the parties. Because of this Mr Ryder decided to take full-time employment with Salomon Barney Smith ("Salomons"). Due to Mr Frohlich's efforts in attracting additional subscribers, investment capital in the Diversified Fund rose substantially between March 2001, when Mr Ryder left to work for Salomons, and the time of trial. Mr Ryder played no part in attracting the additional subscribers. Cripps AJ found that a partnership existed between Mr Ryder and Mr Frohlich, a fundamental term of which was that Mr Ryder and Mr Frohlich would contribute equally in terms of time and effort to the establishment of the Diversified Fund, to advising in respect to it and to attracting subscribers to it. He held that that partnership had been dissolved when Mr Ryder went to work for Salomons. He remitted the matter to the Master to determine the indebtedness of the partners as at the date of dissolution. HELD per McColl JA (Hodgson and Ipp JJA agreeing), dismissing the appeal save as to amending order 3 made by the primary judge: 1. The primary judge's decision that the partnership was between Mr Ryder and Mr Frohlich and that Protected and Coastal were not members of that partnership was correct. In re Ruddock (1879) 5 VLR (IP & M) 51; Australian Broadcasting Corporation v XIVth Commonwealth Games Limited (1988) 18 NSWLR 540; Equuscorp Pty Limited v Glengallan Investments Pty Limited [2004] HCA 55; (2004) 211 ALR 101; Pacific Carriers Limited v BNP Paribas [2004] HCA 35; (2004) 78 ALJR 1045; Toll (FGCT) Pty Limited v Alphapharm Pty Limited [2004] HCA 52; Equuscorp Pty Limited v Glengallan Investments Pty Limited [2004] HCA 55; (2004) 211 ALR 101 referred to. 2. The partnership was terminated by Mr Ryder's anticipatory breach and Mr Frohlich's acceptance of that breach by his agreement to Mr Ryder's departure. Heyman v Darwins Limited [1942] AC 356; Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd [1954] HCA 25; (1954) 90 CLR 235; Holland v Wiltshire [1954] HCA 42; (1954) 90 CLR 409; Tropical Traders Limited v Goonan [1964] HCA 20; (1964) 111 CLR 41; Lakshmijit v Sherani [1974] AC 605; Wood Factory Pty Limited v Kiritos Pty Limited (1985) 2 NSWLR 105; Foran v Wight [1989] HCA 51; (1989) 168 CLR 385; Karacominakis v Big Country Developments Pty Limited [2000] NSWCA 313; [2001] ANZ ConvR 513; [2001] ANZ ConvR 577 applied. Jorgensen v Boyce (1896) 22 VLR 408; Palmer v Moore [1900] AC 293; Fitzgerald v Masters [1956] HCA 53; (1956) 95 CLR 420; Cutts v Holland [1965] Tas SR 69 discussed and applied. M'Lure v Ripley (1850) 2 Mac & G 274; (1850) 42 ER 105; Thompson v De Lissa (Supreme Court of New South Wales, unreported, 16 February 1990); Lukin v Lovrinov & Anor [1998] SASC 6614; Hurst v Bryk [2002] 1 AC 185; Mullins v Laughton [2002] EWHC 2761 (Ch); [2003] Ch 250 discussed. Freeth v Burr (1874) LR9CP 208; Ross T Smyth & Co Limited v T D Bailey Son & Co [1940] 3 All ER 60; Universal Cargo Carriers Corporation v Citati [1957] 2 QB 401; Chilean Nitrate Sales v Pansuiza Compania de Navegacion SA (The Hermosa) & Marine Transportation Co [1982] 1 Lloyd's Rep 570; Shevill v Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620; Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14; (1985) 157 CLR 17; Hudson Crushed Metals Pty Ltd v Henry [1985] 1 Qd R 202; Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23; (1989) 166 CLR 623; In the matter of ACN 007 764 249 (in liq) (formerly Adelaide Industrial Equipment); Smith v Deputy Commissioner of Taxation (Full Court of the Federal Court of Australia, 22 November 1996, unreported) referred to. 3. In circumstances where Mr Ryder evinced an immediate intention to take up full-time employment at Salomons, which Mr Frohlich accepted, the partnership arrangement was also abandoned on 2 March 2001. Summers v The Commonwealth [1918] HCA 33; (1918) 25 CLR 144; Fitzgerald v Masters [1956] HCA 53; (1956) 95 CLR 420; D T R Nominees Pty Limited v Mona Homes Pty Limited [1978] HCA 12; (1978) 138 CLR 423; CIC Insurance Limited v Bankstown Football Club Limited (1995) 8 ANZ Ins Cas ¶61-232; Wallera Pty Limited v CGM Investments Pty Limited [2003] FCAFC 279; Marminta Pty Limited v French [2003] QCA 541 applied. 4. It was apparent from the conduct of the trial that the partnership's right to manage the Diversified Fund was an asset of the partnership. 5. The Master should determine the nature of the "right" to manage the Diversified Fund in order to value the business as at March 2001 as well as whether that right had a goodwill value which could enure to Mr Ryder's benefit. 6. The appellants were not estopped from seeking relief pursuant to s 42 of the Partnership Act 1892 (NSW). 7. In dealing with the issue of whether Mr Ryder is entitled to a share of profits pursuant to s 42 of the Partnership Act 1892 (NSW), the Master would have to make an appropriate allowance for Mr Frohlich's work post termination: Hugh Stevenson & Sons Ltd v Aktiengesellschaft fur Cartonnagen-Industrie [1917] 1 KB 842; Hugh Stevenson & Sons Ltd v Aktiengesellschaft fur Cartonnagen-Industrie [1918] AC 239 applied. Per Ipp JA (Hodgson JA agreeing): 8. It would offend common sense to entertain the notion that the appellants could be permitted to assert that the partnership was not terminated as the judge found: Black Clawson International Ltd v Papierwerke Waldhof-Aschaffenburg AG [1981] 2 Lloyd's Rep 446 referred to. ORDERS 1. The appeal should be dismissed, save that order 3 made by the primary judge be set aside and the following order be substituted: "3. The matter be remitted to the Master to determine: (a) as at the date of termination of the partnership (being 2 March 2001): (i) the nature and value of the partnership assets, including the nature of the "right" Mr Ryder and Mr Frohlich had to manage the Diversified Fund and whether it had a goodwill value which survived the dissolution of the partnership (but not including any other interest in the Diversified Fund); (ii) whether monies were owing to Mr Ryder referable to the value of the business as at 2 March 2001 and whether Mr Ryder owed monies to Mr Frohlich – being those referred to in Mr Frohlich's cross-claim; (b) whether, in the light of the identification of the partnership assets and their use, if any, after 2 March 2001, Mr Ryder is entitled to a share of profits pursuant to s 42 of the Partnership Act 1892 (NSW) and, if so, to determine the amount of that share; (c) in the light of the findings made, the respective indebtedness of Mr Ryder and Mr Frohlich." 2. The appellants to pay 80% of the costs of the appeal. IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40476/04 SC 2314/03 HODGSON JA IPP JA McCOLL JA Tuesday, 21 December 2004 Nicholas John RYDER & 1 ORS v Peter FROHLICH & 1 ORS Judgment 1 HODGSON JA: I agree with the orders proposed by McColl JA, and I agree substantially with her reasons. I also agree that the matter could be disposed of for the reasons given by Ipp JA. 2 IPP JA: I have had the benefit of reading in draft form the reasons to be published by McColl JA and, subject to the limitations set out below, agree generally with them. 3 The first issue in the appeal is whether there were four partners or only two. 4 Cripps AJ based his decision that there were only two partners on Mr Ryder's oral evidence. Mr Ryder testified in this regard: "[There were] two partners being Mr Frohlich and Mr Ryder with two legal – two other companies which could substitute for the partners". He said further that the two companies, said by the appellants to have been partners in the partnership, "were not partners in the sense that you might think of them. They are just nominees for the two partners". 5 The judge pointed out that Mr Ryder himself said that there were two "partners" (Mr Frohlich and Mr Ryder) and the arrangement was that either one of them could "substitute" their corporate entity as they pleased. 6 The draft documents that were intended to lead to a formal agreement are equivocal on this issue. There is no consistency in this respect in other documents to which the parties referred. Much of the material reflects a belief on the part of both parties that there were only two partners. I am not persuaded that Cripps AJ erred on this issue. I would not uphold the appellants' appeal in this regard. 7 The second issue is whether the partnership terminated on 2 March 2001. 8 Mr Ryder's evidence was that on 23 February 2001 he said to Mr Frohlich: "I have received a good job offer from Salomon Smith Barney, which I am interested in accepting". According to Mr Ryder, Mr Frohlich responded with words to the effect: "I think you should take the job …". Mr Ryder then duly joined Salomons. 9 Cripps AJ said that by joining Salomons Mr Ryder had "put it out of his power to perform an essential and fundamental term of the agreement he had with Mr Frohlich. It is not merely that he undertook some work inconsistent with what he was obliged to contribute to the partnership. What he did was to put it out of his power entirely to perform his obligations". 10 The appellants did not suggest that the judge, in so finding, erred. Indeed, they accepted that Mr Ryder, by taking full-time employment with Salomon's, repudiated the partnership agreement. 11 In my opinion, that repudiation was unequivocally accepted by Mr Frohlich when – according to Mr Ryder himself – he said: "I think that you should take the job". By saying that, Mr Frohlich made it plain that he accepted the consequences of what Mr Ryder was doing. He told Mr Ryder in effect to leave the partnership: to go. This was an unequivocal acceptance of the repudiation. 12 McColl JA has set out other statements by Mr Frohlich and conduct on his part that indicate an acceptance by him of the repudiation. Her Honour has also discussed various other ways in law how the partnership agreement came to an end. In my view, to adapt the words used by Mustill J in Black Clawson International Ltd v Papierwerke Waldhof-Aschaffenburg AG [1981] 2 Lloyd's Rep 446 at 457, whatever technical labels one may choose – acceptance of repudiation, abandonment, agreement by conduct, unilateral act, or some other doctrine – common sense rebels against the notion that the appellants can now be permitted to assert that the partnership was not terminated as the judge found. In my opinion, it is unnecessary to examine this issue any further. 13 The respondents have put their case on the basis that the partnership agreement came to an end on 2 March 2001 when Mr Ryder joined Salomons. I think the partnership agreement came to an end on 23 February 2001 but, as the respondents conducted the matter on the basis that the partnership was terminated on 2 March 2001, that must be taken as the termination date. I would dismiss the appeal in respect of this issue. 14 I come now to the order that should be made. I agree with McColl JA that, before Cripps AJ, it seemed to be common ground that the partnership's right to manage the Diversified Fund was an asset of the partnership. That being so, the Master should determine the value of the right to manage the Fund in order to value the partnership business as at 2 March 2001. The Master should also determine whether, as at 2 March 2001, the right to manage the Fund had a goodwill value that was part of the partnership business. 15 The appellants have been partially successful, but only to a very minor extent. I agree that they should pay 80% of the costs of the appeal. 16 Accordingly I agree with the orders proposed by McColl JA. 17 McCOLL JA: This is an appeal from a decision of Cripps AJ in which he determined that a partnership existed between the first appellant ("Mr Ryder") and the first respondent ("Mr Frohlich"), a fundamental term of which was that each would contribute equally in terms of time and effort to the establishment of a hedge investment fund referred to as the Coastal Magma Diversified Performance Fund (the "Diversified Fund"), to advising in respect to it and to attracting subscribers to it, but that that partnership had been dissolved in March 2001 when Mr Ryder went to work for Salomon Barney Smith ("Salomons"). 18 Mr Ryder is an investment banker. The second appellant, Protected Equity Investment Pty Ltd ("Protected"), is a private company wholly owned by Mr Ryder's family trust. 19 Mr Frohlich is also an investment banker. The second respondent, Coastal Capital Ltd ("Coastal"), is his family company. Mr Ryder was a director, but not shareholder, of Coastal. Statement of the case 20 The key questions the primary judge had to resolve were whether, as the appellants alleged, they had entered into a partnership with the respondents in or about April 1999 or whether, as the respondents contended, the parties had entered into a joint venture. Secondly, the primary judge was required to determine whether the relationship between the parties had been terminated in March 2001 as the respondents contended or was repudiated by the respondents' assertion on 14 February 2003 that the appellants were not entitled to an equal share of the business. 21 In addition the appellants claimed that they had rights in relation to the Diversified Fund which should be determined and valued in an inquiry before the Master. There was also a dispute as to whether Coastal International Equity Fund (the "Equity Fund") which was created by Mr Frohlich in September 2002 was part of the partnership business at the time of hearing or, if it was not, whether it was a business of the same nature as and competing with the business of the partnership without the consent of the appellants in circumstances requiring the respondents to account for all profits they made in that business: s 30 Partnership Act 1892 (NSW) (the "Partnership Act"). 22 The respondents contended that Mr Ryder was estopped from asserting that he had an equal entitlement to share in the profits made in the management of the Diversified Fund after March 2001. The respondents also denied that the appellants were entitled to a share of any revenue of the business other than that attributable to subscribed funds to the Diversified Fund received before March 2001. 23 The respondents also cross-claimed against the appellants, claiming, in effect, that if there was an agreement between the parties as claimed by the appellants, monies were owing by the appellants to the respondents. 24 It is important, for reasons which will become apparent, to note that the primary judge was not asked to determine any issue concerning the monetary claims between the parties. He was only asked to determine liability: Ryder & Anor v Frohlich & Anor [2004] NSWSC 418 at [16]. The primary judge's factual findings 25 The primary judge identified (at [17]) the first matter for determination as "the characterisation of the legal relationship between the parties … and the terms of that relationship". To that end, his Honour found the following facts. 26 Mr Frohlich and Mr Ryder agreed in early 1999 to create an "absolute return" investment fund and to attract subscribers to it. "Absolute return" investment funds are funds that are managed in a way that ensures that movements in the equity bond or property markets do not substantially influence the return on investment ([23]). 27 The Diversified Fund was established in about June 2000. Coastal was the "responsible entity" for the Diversified Fund ([25]). I interpolate to note that a "responsible entity" of a registered scheme was required to be a public company holding a dealer's licence authorising it to operate a managed investment scheme: s 601FA of the Corporations Law which then applied. Being the "responsible entity" meant Coastal was the company so identified in the Australian Securities and Investments Commission's ("ASIC") records of the Diversified Fund's registration: s 9 of the Corporations Law. 28 Mr Ryder became a non-executive director but not a shareholder of Coastal ([25]). He contributed equally with Mr Frohlich to the establishment of the Diversified Fund and to attracting subscribers to it until March 2001 ([48]). 29 As at March 2001 the Diversified Fund had not made a profit. Hence there was no revenue to share between the parties. Because of this Mr Ryder decided to take full-time employment with Salomons. 30 Due to Mr Frohlich's efforts investment capital in the Diversified Fund rose from $4 million, as it was in March 2001 when Mr Ryder left, to a little over $30 million at the time of trial ([48]). The primary judge found the Fund's improved position had nothing to do with Mr Ryder. By then another person was doing the work Mr Ryder would have done had he remained. That person spent approximately 35-36 hours per week undertaking that work. The primary judge concluded that Mr Ryder took no part in attracting the additional subscribers to the Diversified Fund ([48]). 31 The primary judge found that Mr Ryder and Mr Frohlich contributed equally in terms of time and effort until March 2001 ([48]). As a result of Mr Ryder taking up fulltime employment with Salomons, Mr Frohlich then had to work 80 hours per week (at [41]). 32 The primary judge rejected Mr Ryder's estimate that after he left to work for Salomons he spent between one and one and half hours a week in discharge of his obligations as a director of Coastal. His Honour accepted Mr Frohlich's evidence that Mr Ryder had overstated his involvement with Coastal after his departure (at [46]). 33 The Equity Fund was established in about September 2002. The primary judge concluded (at [58]) that it was the result of Mr Frohlich's own efforts. By the time of trial it appeared that the Equity Fund had captured a number of investments. It was confined to international investors and was directed to equity markets in contrast to the Diversified Fund which had a wider range of investments and attracted retail as well as institutional investors. The primary judge found ([48]) that Mr Ryder took no part in the establishment of the Equity Fund or attracting subscribers to it. Until Mr Ryder commenced proceedings against Mr Frohlich (and Coastal) the primary judge found, he never thought he had an interest in anything other than the Diversified Fund ([47]). 34 His Honour concluded that it was significant that after Mr Ryder's employment with Salomons was terminated in or about October 2002 he offered to return to the business with Mr Frohlich "if you want me to" ([47]). The primary judge found that that evidence "does not sit comfortably with his assertion that he had merely moved from a full-time partner to a part-time partner". Primary judge's conclusions 35 The three issues the primary judge identified as relevant to liability were: the characterisation of the parties' legal relationship and its terms and the effect of Mr Ryder's departure for Salomons. 36 The primary judge ([35]) regarded aspects of draft agreements which had passed between Mr Ryder and Mr Frohlich as relevant in determining the agreement they ultimately concluded. His Honour accepted that those documents demonstrated that Mr Frohlich and Mr Ryder had agreed to "work together to establish a fund and obtain subscribers for it and [to] contribute equally in terms of time and effort" and did in fact so contribute (at [41]). 37 The primary judge noted (at [36]) Mr Ryder's concession that the arrangement was between Mr Frohlich and himself and "that the business … was to advise selected clients interested in 'absolute return' investment funds". 38 The primary judge made adverse findings concerning Mr Ryder's credit. He concluded (at [34]) that "[a]t all times Mr Ryder appeared to have a firm understanding of the direction he wished his evidence to go and that any facts or circumstances inconvenient to that course were denied or ignored by him". 39 The primary judge found that Mr Frohlich and Mr Ryder carried on the business of establishing the Diversified Fund and advising Coastal with respect to it. He held ([38], [39] and [41]) that the legal relationship between Mr Ryder and Mr Frohlich which resulted in the establishment of the Diversified Fund was a partnership whose business was the establishment of the Diversified Fund, advising Coastal with respect to it and attracting subscribers to it. 40 He rejected ([39]) the appellants' submission that Coastal and Protected were partners in the partnership. He also held ([40]) that Protected was "not part of the business" nor was Coastal, "otherwise than it was the responsible entity of the Diversified Fund". 41 He reached this conclusion "… largely because Mr Ryder himself referred to the circumstance that there were two 'partners' (i.e. Mr Frohlich and Mr Ryder) and an arrangement which allowed either one of them to 'substitute' their corporate entity as they pleased" (at [20]). 42 The primary judge found (at [56]) that after Mr Ryder assumed his new position he did nothing to advance the business other than to attend some compliance meetings and a presentation shortly after he left which he admitted he was under no obligation to do. His Honour concluded (at [53]): "Mr Ryder by his conduct put it out of his power to perform an essential and fundamental term of the agreement he had with Mr Frohlich. It is not merely that he undertook some work inconsistent with what he was obliged to contribute to the partnership. What he did was to put it out of his power entirely to perform his obligations ." (emphasis supplied) 43 The appellants' primary position before the primary judge was that the partnership had not been terminated, continued to subsist and should be dissolved by the Court pursuant to s 35 of the Partnership Act. 44 They argued that the partnership had not been terminated by Mr Ryder's announcement on or about 2 March 2001 that he intended to accept Salomons' job offer because, even if that announcement constituted a "fundamental breach" of the partnership contract, the respondents had not, by words or conduct, communicated acceptance of that breach so as to bring the partnership to an end. The appellants asserted that it was the respondents who subsequently breached the partnership agreement in February 2003 by refusing to permit them to receive 50% of the net revenue and by maintaining they were not entitled to an equal share in the partnership business. 45 The respondents put their case on termination in a number of ways before the primary judge. They contended that by ceasing to work in the business in any significant manner after March 2001 either Mr Ryder or both appellants had breached and thus repudiated the agreement - a breach the respondents accepted by pleading their defence. Alternatively, they pleaded an estoppel based on the fact that they asserted that as the appellants made, in substance, no claim to an equal share in the business or its profits between 2 March 2001 and 17 February 2003, they had represented that they did not regard themselves as entitled to claim an equal share in the business in reliance upon which representation the respondents had continued to carry on the business. 46 The respondents also relied upon the appellants' failure to lay claim to the partnership business or its profits between March 2001 and February 2003 as constituting a waiver of any breach of the partnership agreement by the respondents and also as supporting the proposition that the appellants were precluded from obtaining the relief they sought by reason of "laches, acquiescence and/or delay". 47 In the course of the trial, however, Mr Richard McHugh who appeared for the respondents submitted that Mr Frohlich's conduct in March 2001 in permitting Mr Ryder to accept the full time position at Salomons constituted communication of acceptance of Mr Ryder's repudiation of the agreement. In addition, in written submissions before the primary judge the respondents submitted that Mr Ryder abandoned the parties' arrangement by taking up employment with Salomons on 2 March 2001. 48 The primary judge concluded that neither Photo Production Limited v Securicor Transport Limited [1980] AC 827 or Darlington Futures Limited v Delco Australia Pty Limited [1986] HCA 82; (1986) 161 CLR 500, upon which the appellants relied to contend the partnership had not been brought to an end, precluded Mr Frohlich from maintaining that Mr Ryder by his conduct in March 2001 put an end to the agreement. His Honour described those cases as being concerned with "the discarded doctrine of fundamental breach in its application to exclusion clauses in contracts". 49 The primary judge appears to have reached his conclusion that the partnership had been terminated by Mr Ryder's announcement by applying the following passage in Chitty on Contracts (Sweet & Maxwell, 28th Ed at para 25-017 – "Chitty"): "A renunciation of a contract occurs when one party by words or conduct evinces an intention to perform, or expressly declares that he is or will be unable to perform, his obligations under the contract in some essential respect. The renunciation may occur before or at the time of performance ... Short of such an express refusal or declaration, however, the test is to ascertain whether the action or actions of the party in default are such as to lead a reasonable person to conclude that he no longer intends to be bound by its provisions. The renunciation is then evidenced by conduct.... Even a deliberate breach, actual or threatened, will not necessarily entitle the innocent party to treat himself as discharged, since it may sometimes be that such a breach can appropriately be sanctioned in damages. If the contract is entire and divisible, that is to say, if it is expressly or impliedly agreed that the obligation of one party is dependant or conditional upon complete performance by the other, then refusal to perform or declaration of inability to perform any part of the agreement will normally entitle the party in default to treat himself as discharged from further liability …" (emphasis supplied) 50 After referring to this passage, the primary judge held that Mr Ryder's conduct in gaining employment with Salomons meant he put it out of his power entirely to perform "an essential and fundamental term of the agreement he had with Mr Frohlich" (at [53]). His Honour found the observation of Holroyd J in Jorgensen v Boyce (1896) 22 VLR 408 to be apposite. That case concerned a working partnership between a plaintiff and a defendant to mine gold, which the primary judge found (at [54]) to be "a type of relationship relevantly not dissimilar to the relationship between Mr Frohlich and Mr Ryder." He quoted with approval (at [55]) the following passage from Holroyd J's judgment (22 VLR 408 at 410): "The plaintiff then went away on the 3rd November 1894, and Neils Jorgensen also went away on the 24th November, saying that the prospects were not good enough, and that he could not afford to stop. What then was the plaintiff [it was agreed 'plaintiff' should read 'defendant'] to do? His partner had gone, and that partner's substitute had also gone. Was he to work the claim alone, incurring all the toil, risk and expense without any chance of having these shared by his partner – while, if he got any gold, he would have to save half for the man who did nothing? In my opinion the plaintiff ceased to be a partner when he ceased to do his share of the work either by himself or by his brother, and it seems extraordinary to me that he should now come forward and ask for a share of the proceeds." 51 The primary judge held ([53], [56]) that Mr Ryder's conduct brought the partnership to an end on 2 March 2001. 52 Having regard to that conclusion, the primary judge said it was unnecessary to deal with the submission that the respondents should account for and pay over to the partnership all profits made by the respondents in the Equity Fund by virtue of s 30 of the Partnership Act. He held (at [57]) that the Equity Fund was not part of the partnership business because it did not come into existence until after Mr Ryder had left and the partnership was dissolved. Accordingly, as I understand his Honour's reasons, because the partnership no longer existed at the time the Equity Fund was established it could not be said to have competed with the partnership. 53 The primary judge made declarations and orders (at [60]) which were embodied in the following Order entered on 24 May 2004: "THE COURT DECLARES that - 1. A partnership did exist between Mr Frohlich and Mr Ryder an essential and fundamental term of which was that each would contribute equally in terms of time and effort to the establishment of the Diversified Fund and for subscribers for it. 2. The conduct of Mr Ryder in March 2001 had the consequence that thereafter the partnership was dissolved. THE COURT ORDERS that - 3. The matter be remitted to the Master to determine as at the date of dissolution of the partnership (being March 2001) whether monies were owing to Mr Ryder referable to the value of the business at that date and whether Mr Ryder owed monies to Mr Frohlich – being those referred to in the cross-claim to which I have already referred but have not, at the request of the parties, determined. 4. Costs are reserved. 5. The proceedings be relisted in the general list before the registrar on 1 June 2004." Issues on appeal 54 The essential issues raised by the appellants were whether the primary judge erred: (a) in concluding that the partnership was limited to Mr Ryder and Mr Frohlich. (b) in concluding that Mr Ryder had terminated the partnership on 2 March 2001 by taking up employment at Salomons. (c) in finding the Equity Fund was not part of the partnership business or failing to determine whether the Equity Fund was of the same nature and in competition with the partnership business. (d) in holding that Mr Ryder was only entitled to a share in the value of the partnership business as at March 2001. 55 In the event that their challenge to the finding that the partnership terminated in March 2001 failed, the appellants nevertheless contended the primary judge erred in failing to find, given the fact that the respondents continued to carry on the partnership business after that date: (a) that pursuant to s 42 of the Partnership Act the appellants were entitled to such share of the profits made since March 2001 that were attributable to the appellants' share of the partnership assets. (b) that the value for the appellants' share of the partnership assets was to be determined in accordance with their value at the date of judgment, as opposed to the value of those assets in March 2001. 56 The respondents did not challenge the conclusion that the arrangement between Mr Ryder and Mr Frohlich was a partnership. They filed a Notice of Contention seeking to maintain the primary judge's decision on the following bases: 1. that in all the circumstances, the respondents' conduct on or after 2 March 2001: (a) constituted acceptance of the appellants' repudiation of the agreement; or (b) in the alternative, constituted communication of acceptance of the appellants' repudiation of the agreement. 2. that by reason of the conduct of the parties on and after 2 March 2001, the appellants were estopped from asserting: (a) any share in the business, or in the profits derived therefrom, being carried on by the respondents after 2 March 2001; and (b) any of the relief claimed in the Statement of Claim. 3. that by reason of the conduct of the parties on and after 2 March 2001, the partners by the consent of all of them varied their mutual rights and duties on and from 2 March 2001, to the effect that the appellants' interest in the business was confined to 50% of the value of the net assets of the business as at 2 March 2001 and did not extend to any increase in those assets or in their value or to any profits made by the business after that date. 4. that no order pursuant to s 42 of the Partnership Act should have been made because: (a) there were no assets, or alternatively no net assets, of the partnership business as at 2 March 2001; (b) further, or in the alternative, no profits were made by the partnership business after that date which are attributable to the use of either the first or second appellant's share of the partnership assets; (c) further, or in the alternative, all profits made after 2 March 2001 were wholly attributable to the first respondent's carrying on of the business. 57 Although Mr Walker SC, who appeared on appeal with Mr McHugh for the respondents, referred to ss 26 and 32 (which provide that a partnership may be determined or dissolved by the unilateral act of one partner) in oral argument, the Court was informed by Mr McHugh that the respondents did not rely upon Mr Ryder's departure announcement as constituting notice under either of those provisions. 58 The issue concerning s 42 of the Partnership Act assumed greater significance in argument on the appeal than it had before the primary judge or in the parties' written submissions. Consideration Four partners or two? 59 Although the relationship between the parties was never formalised in an executed document, Mr Ryder and Mr Frohlich exchanged three draft documents in their ultimately unsuccessful attempt to reach formal agreement concerning their arrangement. The appellants relied upon the fact that those drafts named both appellants and both respondents as parties to the arrangement as well as the fact that both corporate entities had acted in a manner consistent with being partners to support their proposition that there were four rather than two partners. They also submitted that Coastal was involved in the business by virtue of being the responsible entity of the Diversified Fund and the Equity Fund while, they contended, there was uncontested evidence that Protected had made a financial contribution to the business and a number of documents used in the business said Protected had an interest. 60 The respondents argued that the draft documents were both equivocal on the issue of the identity of the partners and, in some instances, inconsistent with the proposition that both Mr Ryder and Mr Frohlich as well as their corporate structures were all members of the partnership. 61 The three draft documents, respectively created in April 1999 and in or about 11 June 1999 and 15 June 1999 (the latter being the dates on which they were forwarded as attachments to emails), listed each of Coastal, Mr Frohlich, Protected and Mr Ryder as a party in the context of the following definitions: " 'Coastal Party' means any one of Coastal or Peter Frohlich or any associate or entity controlled by Peter Frohlich who together are referred to as the 'Coastal Parties'. 'Ryder Parties' means any one of Protected or Nick Ryder or any associate or entity controlled by Nick Ryder who together are referred to as the 'Ryder Parties'." 62 In the first draft, described as a "Deed for Establishment of Funds Management Business", "Harbour Protected Growth Fund Limited" was also identified as a party in the context of the "business" being defined as "the business of advising the Harbour Fund and other Absolute Return Funds or Managed Accounts conducted by the Coastal and Ryder Parties together …". Harbour did not survive the first cut. 63 Each of the three drafts contemplated that the "Coastal and Ryder Parties" should own the "business" equally. 64 Each draft, in varying terms, defined the "business" as involving advising (inter alia) "Managed Accounts" conducted by the Coastal and Ryder Parties together. "Managed Accounts" referred to a portfolio owned by any investor client. The third draft defined the "business" as "advising Managed Accounts on Absolute Return Strategies conducted by the Coastal and Ryder Parties together …" 65 Each draft provided that Coastal would act as the "Investment Advisor" and would issue a "Proper Authority" to Mr Ryder and appoint him advisor. I assume that the "Proper Authority" was a reference to a copy of Coastal's securities licence, on which s 88 of the Corporations Law required to be endorsed a statement that Mr Ryder was employed by or acted by arrangement with Coastal. 66 Mr Frohlich forwarded the first draft to Mr Ryder in April 1999. Mr Ryder forwarded the second draft to Mr Frohlich while Mr Frohlich returned the third draft to Mr Ryder. The second and third drafts were entitled "Investment Advisory Joint Venture Agreement". On 16 June 1999 Mr Frohlich emailed Mr Ryder and informed him he wanted to work on a Savoy clause (a clause dealing with exit strategies) which was "1/3 complete". 67 The primary judge did not determine why no final agreement was executed. Mr Wales SC who appeared with Mr Marcus Young for the appellants suggested in argument that the explanation was to be found in an email from Mr Frohlich to Mr Ryder in March 2000 in which he wrote "the absence of the shareholders agreement is reflexive (sic, as in original) of the fact that I find this document boring, tedious to type, and … there have been a variety of more pressing matters … I have no intention of resiling from the basic understanding agreed at the outset so whilst I accept that the delay is irritating, I hope you do not consider our arrangement as somehow 'at risk'." Mr Walker did not disagree with Mr Wales' submission in this respect. 68 Various documents were brought into existence which referred to the involvement of the parties in the business. 69 In June 1999 the "Coastal Group" and the "Magnum Group" entered into a joint venture "letter agreement" pursuant to which they agreed to work together to form a "multi-manager, multi-strategy hedge fund … designed for and marketed to Australian investors". "Coastal" was said, for the purposes of the letter agreement, to include "all entities directly or indirectly owned or controlled by either Peter Frohlich or Nick Ryder". 70 In June 2000 a prospectus for the Diversified Fund was lodged with ASIC. Under the heading "Declarations of Interests", the following appeared: " P J P Frohlich and N J Ryder are directors of Coastal and have an equal economic interest in the net fees to be received from the management of the fund." (emphasis supplied) 71 A document dated 16 October 2000 described as "Coastal's response to Rothschild Australia Asset Management's Due Diligence checklist", provided in connection with a proposed investment mandate for Rothschild's "Total Return" Fund, described Coastal as having entered into a joint venture in the following manner: "(a) Protected Equity Investments & Nicholas Ryder Coastal and Peter Frohlich (a director of Coastal) have entered into an unincorporated joint venture with Protected Equity Investments Pty Limited (a company associated with a director of Coastal, Nicholas Ryder) and Nicholas Ryder to provide absolute return investment management service to clients. Frohlich and Ryder or their associates own the interests in the joint venture in equal proportions . Coastal is the nominee or 'managing partner' of the joint venture so that clients conveniently deal with Coastal and not the joint venture participants. The economic benefit of the investment service to be provided by Coastal to Rothschild would be shared by the Frohlich and Ryder interests ." (emphasis supplied) 72 In March 2001 a document prepared to make a presentation to Amcor, a potential investor, referred to Mr Frohlich and Mr Ryder under the heading "Coastal Principals". 73 In the Directors' Report to Coastal's Financial Statements, signed by Mr Frohlich and Mr Ryder on 29 September 2002, the following appeared: "Nicholas Ryder, director of the company, is a director of Protected Equity Investments Pty Limited, a company which has an economic interest in certain activities of the company under an unincorporated joint venture." 74 Finally, the appellants relied upon two documents of an accounting nature in support of the four partners thesis. The first was an invoice in June 1999 from Coastal to Protected seeking reimbursement of office expenses. The second was a profit and loss statement kept by Coastal listing income and expenses attributable to Protected. These documents were said to recognise Protected's role as a partner. 75 The various documentary references to the role of the parties to the agreement are not entirely consistent however the constant theme, in my opinion, is that Mr Ryder and Mr Frohlich are the principal parties in the relationship. 76 Mr Walker's essential proposition was that conceptually both men thought of their arrangement as involving themselves and that their nominated corporate alter egos, Coastal and Protected, could be involved as, too, could any "associates or entity" controlled by either of them and later identified. 77 Mr Walker submitted that the fact that a dual rather than a quadruplet partnership was proposed could be seen from the agreement that the ownership of the business was split 50:50 between the Coastal and Ryder Parties – a division incompatible with the notion of quadrivalence. 78 The respondents also submitted that the four partner thesis was incompatible with his Honour's finding that the business of the partnership was "advising Coastal with respect to [the Diversified Fund]" ([39]). They argued that it would be unusual for Coastal also to be a partner for it would then be "in the business of advising itself". They pointed out that it had never been suggested that Coastal was property or the nominee of the partnership, propositions which would be inconsistent with the fact that Coastal was Mr Frohlich's wholly owned family company in which the appellants held no shares and which pre-existed the partnership. 79 The primary judge based his conclusion that the partnership involved Mr Ryder and Mr Frohlich but not Coastal and Protected largely on Mr Ryder's oral evidence in which he said he believed that "[there were] two partners being Mr Frohlich and Mr Ryder with two legal - two other companies which could substitute for the partners" and that Protected and Coastal "were not partners in the sense that you might think of them. They are just nominees for the two partners". 80 Later Mr Ryder also said that the way he "understood the joint venture to work was there was [sic] two individuals were effectively the joint venturers or partners. We had an ability to substitute different corporate entities, if you like, underneath those two partners …". 81 Where there is a dispute as to the characterisation of a contractual relationship not reduced to writing, or of its parties or terms, the determination of those issues must be made by reference to the parties' dealings, their oral and written communications and their conduct: In re Ruddock (1879) 5 VLR (IP & M) 51. The identity of the parties is to be determined objectively as, too, are the rights and liabilities of the parties: Pacific Carriers Limited v BNP Paribas [2004] HCA 35; (2004) 78 ALJR 1045; see also Toll (FGCT) Pty Limited v Alphapharm Pty Limited [2004] HCA 52. 82 The meaning of the contractual arrangement is to be determined objectively: Equuscorp Pty Limited v Glengallan Investments Pty Limited [2004] HCA 55; (2004) 211 ALR 101 at [34] per Gleeson CJ, McHugh, Kirby, Hayne and Callinan JJ; Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95 at 105 [23] per Gaudron, McHugh, Hayne and Callinan JJ; Australian Broadcasting Corporation v XIVth Commonwealth Games Limited (1988) 18 NSWLR 540 at 549 per Gleeson CJ. 83 In this context, in my view, the draft joint venture agreements are of some utility. Although they were not executed, the core concepts were retained and appear to me to reflect Mr Ryder's evidence concerning the parties' roles. While they identify both appellants and both respondents as parties, their terms make it plain that the operative definition was that of "Coastal Parties" and the "Ryder Parties" with each "camp" owning 50% of the business. The fact that the parties intended the business to be structured around Mr Ryder and Mr Frohlich (and include any entity they nominated) was the most sensible interpretation of the documents. Throughout the body of each draft the relevant responsibilities are identified as being undertaken by the Coastal and Ryder Parties respectively. There is no distinction between the roles or responsibilities of, for example, Mr Ryder and Protected. One exception to this is that Coastal is identified in each document as having, in effect, a third party role. This was recognised in the recitals to the drafts as arising by virtue of it being the responsible entity. 84 In my view, the primary judge was correct to conclude that the partnership was between Mr Ryder and Mr Frohlich and that Protected and Coastal were not members of that partnership. 85 The first ground of appeal must be rejected. Terminating the partnership 86 The appellants accepted, for the purposes of the termination argument, that Mr Ryder's announcement of his departure for Salomons in March 2001 constituted a repudiation of the partnership agreement. I understand that that concession meant the appellants accepted the primary judge's finding that Mr Ryder had "by his conduct put it out of his power to perform an essential and fundamental term of the agreement he had with Mr Frohlich." 87 They complained that the primary judge found that termination of the partnership agreement had occurred by virtue of Mr Ryder's act, independent of any act constituting communication of an election to terminate on Mr Frohlich's part. 88 The appellants contended that that approach was erroneous. They submitted that however Mr Ryder's conduct was characterised, the partnership agreement remained on foot in the absence of unequivocal words or conduct by Mr Frohlich and/or Coastal evincing an election to terminate: see Carter and Harland's Contract Law in Australia, Butterworths, 4th Ed at [1967] ("Carter and Harland"). The appellants also contended that the evidence as to the state of the relationship after March 2001 supported the proposition that the partnership continued as Mr Ryder continued to perform work for the benefit of the business although at a greatly reduced level. The appellants also relied upon the fact that documents generated by the business following March 2001 continued to describe Mr Ryder as having an interest in the business of managing the Diversified Fund. 89 In argument Mr Wales accepted that the filing of the Amended Defence purporting to accept Mr Ryder's repudiation of the agreements effected a termination of the partnership relationship. Accordingly, he contended that if the appellants were correct in their submission that the partnership had not terminated in March 2001, it had been terminated by the filing of the defence on 16 June 2003. 90 Mr Wales submitted that the primary judge erred in applying Jorgensen v Boyce. He contended that Jorgensen v Boyce was simply wrong or turned on its own facts in the context of a partnership agreement whose terms were said by the judge to be well known and commonly understood in the gold mining industry. 91 The respondents put their case on termination in a number of ways. First, they contended that the primary judge had correctly held that where a party to a contract disables himself from performance, the innocent party is not required to communicate an election to terminate. They said that Mr Ryder's departure for Salomons meant he had disabled himself from performing his part in the partnership and that the situation was indistinguishable from that described in Jorgensen v Boyce. They contended there was no need for an election to terminate in circumstances where the party at fault had made performance impossible because an election must involve a real choice - a choice which was not available where the other party had disabled himself from future performance. They relied upon Lombok Pty Limited v Supetina Pty Limited (1987) 14 FCR 226 at 236 – 237 where Lockhart J said: "A breach automatically terminates a contract only where its effect is to render the contract impossible of future performance … in other cases, where the breach is sufficiently serious, the party not in breach is given an option either to insist upon performance or to accept the breach as a repudiation of a contract." 92 The respondent submitted that in circumstances where Mr Ryder had disabled himself from future performance so that Mr Frohlich considered it was "self-evident that the joint-venture had terminated because [Mr Ryder] had 'bailed out and gotten a job'", to require an election to terminate would not only be redundant but would allow Mr Ryder to make a virtue out of his own breach. 93 The respondents submitted that, in any event, Mr Frohlich had made it clear by his conduct on or about 2 March 2001 that he had elected to terminate the partnership. 94 The respondents relied upon Mr Frohlich's evidence that when he left in March 2001 Mr Ryder told Mr Frohlich "just decide what you want to do with the business. I leave that up to you". They also relied upon the fact that after Mr Ryder's departure Mr Frohlich took sole responsibility for the tasks which had been performed by the partnership. They noted that although Mr Ryder made virtually no contribution after March 2001 Mr Frohlich had not suggested that he remained obliged to continue his contribution to the partnership business. Equally, they noted that Mr Ryder was unapologetic concerning his failure to contribute equally in terms of time and effort to the partnership, an attitude they submitted was only consistent with his belief that he was under no such obligation after he went to Salomons. 95 Thus, the respondent submitted, the parties' conduct evinced a clear understanding that the arrangement was at an end. They contended that it would have been artificial, contrary to principle and plainly unjust to require of Mr Frohlich in the circumstances that he expressly say to Mr Ryder, "I accept your repudiation: our contract is at an end". 96 The respondents challenged the proposition that Mr Ryder continued to perform work for the business after March 2001. First, they pointed to the fact that the primary judge concluded that the work Mr Ryder performed after his departure was minimal. Significantly, his Honour had found that Mr Ryder had nothing to do with the subsequent success of the Diversified Fund or the establishment of the Equity Fund. Secondly, the respondents contended that the substance of Mr Ryder's involvement after March 2001 was not pursuant to the partnership but, rather, in his capacity as a director of Coastal, a position from which he resigned on 18 February 2003, the day his parents withdrew a large sum they had invested in the Diversified Fund. 97 Accordingly, the respondents submitted that Mr Ryder's post-March 2001 activities were not consistent with the partnership remaining on foot, but were referable to his desire to monitor his family's investment after the partnership came to an end. 98 Insofar as post-March 2001 documents were concerned the respondents pointed out that Mr Frohlich had acknowledged that Mr Ryder had a moral if not a legal entitlement to a share of the management revenue derived from subscribers to the Diversified Fund, as at the time Mr Ryder departed, as long as those subscribers remained in the Fund. On the other hand Mr Frohlich did not believe Mr Ryder was entitled to any of the fees from subscriptions received after he left. 99 It was consistent with the former proposition, however, the respondents submitted, that Mr Ryder's "interest" was disclosed in the Fund's documents. The respondents drew attention to the fact that whereas the original prospectus for the Diversified Fund had identified Mr Ryder and Mr Frohlich as having an "equal economic interest", a subsequent prospectus referred merely to the men as having "an economic interest", the omission of the word "equal" being said to reflect the alteration of the relationship between the men post-March 2001. 100 The respondents also contended that the primary judge was entitled to rely upon Mr Ryder's statement after his employment with Salomons was terminated when he offered to return to the business with Mr Frohlich "if you want me to": Judgment at [49]. The primary judge found that "that evidence does not sit comfortably with his assertion that he had merely moved from a full time partner to a part-partner". The respondents submitted that Mr Ryder's statement was not that of a person who believed he was a party to a subsisting legal relationship but, rather, was consistent at an attempt to establish a new relationship. 101 The respondents also submitted that the parties had mutually abandoned the contract. They referred to D T R Nominees Pty Limited v Mona Homes Pty Limited [1978] HCA 12; (1978) 138 CLR 423 at 434 where Stephen, Mason and Jacobs JJ said: "Neither party intended that the contract should be further performed. In these circumstances the parties must be regarded as having so conducted themselves as to abandon or abrogate the contract. The position is similar to that with which Isaacs J dealt in Summers v The Commonwealth (1918) 25 CLR 144. The plaintiff did not succeed in his action for damages for breach of contract, but on the other hand the defendant had not rescinded. Time passed which neither party took any steps to perform the contract. It was held that the parties so conducted themselves as mutually to abandon or abrogate the contract." Termination: consideration 102 I accept the appellants' submission that the primary judge appears to have held that Mr Ryder's announcement was sufficient to terminate the partnership agreement without Mr Frohlich electing to accept his repudiation. His Honour appears to have regarded the passage from Chitty he extracted and Jorgensen v Boyce as supporting that approach. 103 In my view, however, the renunciation to which Chitty refers is properly treated as a form of repudiation. According to Professor Carter "[t]he word 'renunciation' …has equivalent meaning" to the word "repudiation": J.W. Carter, Breach of Contract, (The Law Book Company Limited, Second Edition, 1991 at [702] footnote 1). 104 That statement is borne out by Lord Porter's speech in Heyman v Darwins Limited [1942] AC 356 at 397 where his Lordship said: "The three sets of circumstances giving rise to a discharge of contract are tabulated by Anson as: (1) renunciation by a party of his liabilities under it; (2) impossibility created by his own act; and (3) total or partial failure of performance … all these acts may be compendiously described as repudiation, though that expression is more particularly used of renunciation before the time for performance has arrived." 105 In the same case (at 378) Lord Wright said: "The word 'repudiation' has led to difficulties because it is an ambiguous word constantly used without precise definition in contract law". 106 In Universal Cargo Carriers Corporation v Citati [1957] 2 QB 401 at 436, Devlin J (as his Lordship then was) after referring to the three illustrations given by Lord Porter said "The third of these is the ordinary case of actual breach and the first two state the two modes of anticipatory breach". His Honour went on to explain that of the two modes of anticipatory breach, "renunciation has since the decision in Hochster v De la Tour [(1853) 2 El & Bl 678; (1853) 118 ER 922] established itself as the favourite" and (at 437) that that case also "established that a renunciation, when acted upon, became final." 107 In Chilean Nitrate Sales v Pansuiza Compania de Navegacion SA (The Hermosa) & Marine Transportation Co [1982] 1 Lloyd's Rep 570 at 572, Lord Justice Donaldson (who delivered the judgment of the Court of Appeal) sought to explain the "distinction" between "repudiation" and "renunciation", saying: "… we use the term 'repudiatory' to indicate breaches of contract which have already occurred and are of a sufficiently serious character to entitle the party not in breach to treat the contract as being at an end. We use the term 'renunciatory' to indicate conduct which, whether or not it amounts to an actual breach of contract, foreshadows a breach which would have this potentially dissolutive character. An alternative term, sometimes used, is 'anticipatory' since the effect is to allow the injured party to anticipate a breach and act upon it before it occurs. What he is permitted to anticipate is either impossibility of future performance created by the prior conduct of the party treated as a defaulter or a future failure to perform foreshadowed by a prior declaration, by words or conduct, of an intention not to perform in the future. In the case of future impossibility, the law does not require the injured party to await the inevitable. In the case of notice of a future refusal to perform, the law allows the injured party to take the other party at his word and, so doing, to treat the future breach of contract as inevitable." (emphasis supplied) 108 Donaldson LJ also made it clear (at 573) that in order for a renunciation to take effect, the injured party must act. He characterised the case of a party in default who announces he will not perform the contract as one of "breach by evinced intention" and said that such a breach entitled the injured party to treat the breach as terminating the contract (at 573, 575, 2nd column), in other words as giving the injured party an election to terminate. 109 The proposition that renunciation in Chitty should properly be understood to refer to the concept of repudiation is also borne out by examining the authorities there referred to. In this respect it should be noted that his Honour did not set out the third sentence in para 25 – 017 from Chitty which states: "An absolute refusal by one party to perform his side of the contract will entitle the other party to treat himself as discharged, as will a clear and unambiguous assertion by one party that he will be unable to perform when the time for performance should arrive." 110 The principal authority relied upon in support of first proposition in this sentence is Freeth v Burr (1874) LR9CP 208 in which (at 213) Lord Coleridge CJ spoke of acts or conduct which "do or do not amount to an intimation of an intention to abandon and altogether to refuse performance of the contract" or of acts and conduct which "evince an intention no longer to be bound by the contract". Freeth v Burr is frequently referred to as authority for the circumstances in which a person will be held to have repudiated or renounced a contract. 111 Ross T Smyth & Co Limited v T D Bailey Son & Co [1940] 3 All ER 60 is also relied upon in Chitty's treatment of "renunciation". It, too, was a case concerned with repudiation as Lord Wright's statement (at 71), that "repudiation of a contract is a serious matter, not to be lightly found or inferred", makes plain. 112 The interchangeability of the terms "repudiation" and "renunciation" is reflected in Lord Wright's statement in Heyman v Darwins Ltd to which I have already referred, a sentiment which was echoed in Shevill v Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620 at 625 – 626 by Gibbs CJ (with whom Brennan and Murphy JJ agreed). His Honour accepted the proposition that "repudiation is an ambiguous word and is used in various senses". Speaking of a valid and binding contract, he said: "Such a contract may be repudiated if one party renounces his liabilities under it – if he evinces an intention no longer to be bound by the contract ( Freeth v Burr (1874) LR 9 CP at 208 – 213) or shows that he intends to fulfil the contract only in a manner substantially inconsistent with his obligations and not in any other way ( Ross T Smyth & Co Limited v T D Bailey, Son & Co [1940] 3 All ER 60 at 72; Carr v J A Berriman Pty Limited (1953) 89 CLR 327 at 351). In such a case the innocent party is entitled to accept the repudiation, thereby discharging himself from further performance and sue for damages: Heyman v Darwins Limited [1942] AC at 399." (emphasis supplied) 113 Freeth v Burr has been treated as an authoritative statement of the nature of conduct which constitutes repudiation in numerous Australian cases: see Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14; (1985) 157 CLR 17 at 40 per Brennan J (as his Honour then was); Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23; (1989) 166 CLR 623 at 647 – 648 per Brennan J; Wood Factory Pty Limited v Kiritos Pty Limited (1985) 2 NSWLR 105 at 144 per McHugh JA; Hudson Crushed Metals Pty Ltd v Henry [1985] 1 Qd R 202 at 206 per Connolly J (with whom Derrington J agreed); In the matter of ACN 007 764 249 (in liq) (formerly Adelaide Industrial Equipment); Smith v Deputy Commissioner of Taxation (Full Court of the Federal Court of Australia, 22 November 1996, unreported, Foster, O'Loughlin and Mansfield JJ). 114 The fact that renunciation was treated as falling within the concept of repudiation can also be seen from Holland v Wiltshire [1954] HCA 42; (1954) 90 CLR 409 at 413, 415 where Dixon CJ spoke of the purchasers' conduct as constituting renunciation while Kitto J (at 420 – 422) referred to it as constituting repudiation. Importantly for present purposes, both spoke of the relevant conduct as giving the innocent party, the vendor under a contract for sale of land, the option to accept the renunciation/repudiation to bring the contract to an end - an option which was exercised by the vendor advertising the land for sale and then selling it: Dixon CJ at 413, 416; Kitto J at 419, 422. 115 In my opinion, the primary judge's finding that Mr Ryder's conduct in announcing he was taking employment with Salomons meant he put it out of his power entirely to perform "an essential and fundamental term of the agreement he had with Mr Frohlich" was a finding that Mr Ryder had committed an anticipatory breach in that he had renounced his liabilities under the partnership agreement: Heyman v Darwins Limited, above; Foran v Wight [1989] HCA 51; (1989) 168 CLR 385 at 394 per Mason CJ, at 417ff per Brennan J. 116 That anticipatory breach was ineffective to terminate the partnership agreement unless accepted by Mr Frohlich. A long line of authority establishes that an innocent party confronted with repudiatory conduct which includes anticipatory breach amounting to repudiation may accept the repudiation and elect to terminate the contract: Heyman v Darwins Limited, above, at 399; Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd [1954] HCA 25; (1954) 90 CLR 235 at 250 per Kitto J, at 261 per Taylor J; Holland v Wiltshire, above; Foran v Wight, above, per Mason CJ at 407; per Brennan J at 421; per Dawson J at 441; see also Chitty which, when dealing with "anticipatory breach" (at para 25 – 020) in the section dealing with "Renunciation", states that the injured party may elect to accept the renunciation and treat it "as discharging him from further performance". 117 Where the innocent party proposes to "accept the repudiation", that acceptance is manifested by "so acting as to make plain that in view of the wrongful action of the party who has repudiated, he claims to treat the contract as at an end": Heyman v Darwins Limited, above, at 361 per Viscount Simon LC. The innocent party does not have to recite a mantra such as "I accept your repudiation" or the like to communicate acceptance of the termination. 118 In Lakshmijit v Sherani [1974] AC 605 at 616, Lord Cross, delivering the judgment of Lord Diplock, Viscount Dilhorne and himself, said: "No particular form of communication is needed. It is sufficient if the vendor makes it unequivocally clear to the purchaser that he is treating the agreement as being at an end: see Car & Universal Finance Co Limited v Caldwell [1965] 1 QB 525." 119 As McHugh JA (as his Honour then was) explained in Wood Factory Pty Limited v Kiritos Pty Limited, above, at 146, it is not even necessary that the defaulting party receive direct notification from the person rescinding. Thus in Holland v Wiltshire, above, at 416, Dixon CJ said that the vendor's "election to treat the contract as discharged by the purchasers' breach was sufficiently manifested by his proceeding to advertise the property for sale and by his selling of it". These propositions were accepted recently in Karacominakis v Big Country Developments Pty Limited [2000] NSWCA 313 at [155]; [2001] ANZ ConvR 513; [2001] ANZ ConvR 577, where Giles JA (with whom Handley and Stein JJA agreed) said: "It is not necessary that the communication of acceptance of a repudiation be in those terms, or by direct notification. Words or conduct may communicate acceptance if they are consistent only with electing to terminate the contract ( Sargent v AFL Developments Pty Limited (1974) 131 CLR 634 at 646) and it is enough to make the election manifest to the relevant party ( Wood Factory Pty Limited v Kiritos Pty Limited) … ". 120 The question of whether the innocent party has elected to terminate is determined objectively. It is "an effect which the law annexes to conduct which should be justifiable only if an election had been made one way or the other … ": Tropical Traders Limited v Goonan [1964] HCA 20; (1964) 111 CLR 41 at 55. Was Mr Ryder's anticipatory breach accepted? 121 In my opinion the evidence discloses that Mr Frohlich accepted Mr Ryder's repudiatory conduct thus terminating the partnership agreement. 122 It is useful at this stage to revisit the evidence of what occurred in 2001. According to Mr Ryder, on 23 February 2001 he informed Mr Frohlich of his intention to seek employment with Salomons. On Mr Ryder's version, Mr Frohlich responded by saying he thought Mr Ryder "should take the job as they are offering you a lot of money". Mr Frohlich denied that conversation. His version was that "Mr Ryder's acceptance of the job with Salomons was presented to me as a fait accompli". Mr Frohlich said that in the week that ended on 2 March 2001 Mr Ryder informed him he was starting at Salomons the following week. He said that Mr Ryder's full-time involvement with he and Coastal ceased on about 2 March 2001. 123 The primary judge accepted (as was uncontroversial) that Mr Frohlich did not say to Mr Ryder when informed he was taking employment with Salomons, "I terminate this joint venture", but, rather, Mr Frohlich "considered that it was self-evident that the joint venture had terminated because he (Mr Ryder) 'had bailed out and gotten a job'" (at [50]). This appears to be a reference to evidence Mr Frohlich gave during cross- examination in the following passage: "Q. Now, Mr Frohlich, you contend in this case, don't you, amongst your various contentions, that the agreement and the joint venture – if I can use a neutral term – between you and Mr Ryder and Coastal and Protected Equity Investments was terminated on or around 2 March 2001; is that right? A. Yes. Q. How do you say you came to be terminated? A. Because the critical ingredient on which the arrangement was based no longer existed. Q. But you never said to Mr Ryder, "I terminate this joint venture", did you? A. Not explicitly, no. Q. Did Mr Ryder ever say to you, "I terminate this joint venture"? A. No, he did not. Q. You said you didn't explicitly say, "I terminate this joint venture". Did you, by some process of hints and obscure language, you say, convey the concept that you were terminating the joint venture? A. I considered it self-evident since he had bailed out and gotten a job. Q. So you had thought that it was too obvious even to say? A. I think so, yes. Q. But you certainly didn't say it, did you? A. I did not explicitly say it, no. Q. And when you say you didn't explicitly say it, you didn't say it at all, did you? A. No, I did not. Q. You never in a letter set out your - what I assume you're saying is your belief that there was a termination, did you? A. No, but to the extent there was no formal and concluded agreement in the first place, it seemed somewhat redundant to formally attempt to terminate what itself was informal. Q. So you thought it was just so obvious in Mr Ryder's mind that he must have known that that's what you were doing even though you didn't say anything; is that right? A. Clearly I'm not in a position to know what was in Mr Ryder's mind. Q. But that's what you believed in March of 2001: It was so obvious that Mr Ryder obviously knew that the joint venture had come to an end; is that right? A. Well, Mr Ryder certainly gave me the impression that whatever arrangement that had preceded his departure or getting a job no longer existed. Q. You thought it was just so obvious to him that the joint venture had ended that it wasn't even worth spending ten seconds saying to him, "By the way the joint venture is over"; is that right? A. Yes. Q. And you say, do you, that, after that time, you then had a belief that the joint venture was terminated; is that right? A. Yes, although I believed that Mr Ryder was entitled to a share of some of the revenue that was associated with subscriptions that had been attracted in our funds before he departed." 124 In my opinion, Mr Frohlich accepted Mr Ryder's repudiation of the partnership agreement both by his words and his conduct. On either version of the departure announcement conversations, Mr Frohlich did not demur when Mr Ryder announced his intention to depart. In saying that he was going to leave and work for Salomons, Mr Ryder was acting in a manner that was fundamentally inimical to the continuance of the partnership. Mr Frohlich, on Mr Ryder's evidence, agreed to this and on Mr Frohlich's evidence he did not object and plainly agreed when Mr Ryder left on 2 March 2001 and joined Salomons. 125 In a partnership which contained a term requiring each partner to contribute equally in terms of time and effort, Mr Ryder's announcement was clearly repudiatory (as the appellants accepted) and Mr Frohlich's agreement to his departure was clear acceptance, communicated to Mr Ryder, that he no longer regarded the partnership as on foot. If confirmation of Mr Frohlich's election to treat the partnership at an end were needed, it was evinced in Mr Frohlich thereafter doing all the work the partners had hitherto undertaken. That conduct was inconsistent with the continuation of the partnership. In my opinion Mr Frohlich accepted Mr Ryder's breach on 2 March 2001. 126 The fact that Mr Ryder also regarded the partnership as at an end is made plain by the language of request rather than entitlement he used when he sought to return to the fold after his employment with Salomons was terminated. Repudiation and partnerships 127 In Hurst v Bryk [2002] 1 AC 185, Lord Millett (with whose opinion on this point all Lords with the exception of Lord Nicholas of Birkenhead agreed) undertook a detailed analysis of the question whether a partnership could be dissolved by one or more partners accepting a repudiatory breach on the part of other partners. In that case, Lord Millett strongly queried whether a partnership could be dissolved by an accepted repudiation. It had been common ground between the parties that a partnership could be dissolved in that manner. Because of this Lord Millett (at 196) left the point open. Lord Millett noted (at 194) that "successive editions of Lindley on Partnership over a period of more than 100 years" had doubted whether the contractual doctrine of repudiation applied in a partnership context. Those doubts had been rejected by Harman J in Hitchman v Crouch Butler Savage Associates (1983) 80 LS Gaz 550; (1983) 127 Sol Jo 441b to which Lord Millett referred as being the case in which "repudiation as a ground of dissolution (of a partnership) first saw the light of day". 128 Lord Millett founded his doubt that the doctrine of repudiatory breach brought about the automatic dissolution of the partnership relationship on a number of bases. These were (at 195) that the Partnership Act 1890 (Imp) made no mention of repudiatory breach of contract as one of the circumstances in which a partnership was dissolved. His Lordship also thought that allowing repudiatory breach as a ground of dissolution was inconsistent with s 35(d) of the Act giving the Court a discretionary power to decree a dissolution of a partnership when a partner, other than the partner suing, wilfully or persistently committed a breach of the partnership agreement or otherwise so conducted himself in matters relating to the partnership business that it was not reasonably practicable for the other partner or partners to carry on the business in partnership with him. 129 Significantly, however, his Lordship was inclined to doubt that the contractual doctrine of repudiatory breach operated in the area of dissolution of the partnership relationship because (at 194): "Disputes between partners and the dissolution and winding up of partnerships … have always fallen in the jurisdiction of the Court of Chancery. This is because, while partnership is a consensual arrangement based on agreement, it is more than a simple contract …; it is a continuing personal as well as commercial relationship … (at 196) by entering into the relationship of partnership, the parties submit themselves to the jurisdiction of the court of equity and the general principles developed by that Court in the exercise of its equitable jurisdiction in respect of partnerships. There is much to be said for the view that they thereby renounce their right by unilateral action to bring about the automatic dissolution of their relationship by acceptance of a repudiatory breach of the partnership contract, and instead submit the question to the discretion of the Court". 130 Lindley & Banks on Partnership (Sweet & Maxwell, 17th Ed, 1995) at 24-07 suggest that "Lord Millett perhaps failed to take into account … the position in which the innocent partner is thereby placed" with the partnership and that partner's liability as a member continuing until a court ordered dissolution which could not be backdated: see Lindley & Banks on Partnership, above, at 24-88. 131 Lord Millett's observations were also criticised in an article, The Bonds of Partnership, Elisabeth Peden and J. W. Carter, (2000) 16 Journal of Contract Law at 277, see also at 279) where the authors assert that, contrary to Lord Millett's view, "general principles of contract law may be used to determine whether a partner is entitled to terminate a partnership contract". The authors submit, cogently, (at 279, 281) that "discharge consequent upon acceptance of repudiatory contract and dissolution are not synonymous" and that "the proper prospective on discharge is that it is analogous to retirement … (and) ends the contract, and so far as the partner who has exercised the right of discharge is concerned, ends the partnership … (leaving) the remaining partners … [to] decide to continue to carry on the partnership business". Criticism was also expressed in Carter and Harland, above, at [1937]. 132 As far as my researches reveal, Hurst v Bryk has been considered only in one decision, Mullins v Laughton [2002] EWHC 2761 (Ch); [2003] Ch 250 at [87] ff where Neuberger J, despite noting that the Law Commission Paper Partnership Law (Consultation Paper No 159 at para 6.28 – 6.31) "respectfully questioned Lord Millett's view", concluded that Lord Millett's view should prevail. It might be noted that Neuberger J distinguished (at [91]) the situation of "a lease where there is an interest in land which is effectively detached from the contract which created it" from "a partnership [which] cannot be detached from the partnership agreement: the relationship is contractual, but is subject to equitable principles and the provisions of the Partnership Act 1890". 133 Neither of the parties drew the Court's attention to Hurst v Bryk. As will be apparent, I have concluded that the primary judge's decision can be sustained both on the basis that Mr Frohlich elected to accept Mr Ryder's repudiatory conduct as well as on the basis that the partnership had been determined by abandonment, so it is not necessary to explore this fascinating point further. It might be noted, however, that a conclusion that ordinary principles of contract law applied to partnership, notwithstanding the provisions of the Partnership Act 1892 (NSW), might be thought to be appropriate "in the light of the essential elements of the bargain, the modern money economy and the modern development of contract law": Progressive Mailing House Pty Limited v Tabali Pty Limited, above, at 29 per Mason J (as he then was). Termination: conclusion 134 In light of my conclusion that the primary judge was correct to conclude that the partnership agreement was terminated in March 2001 it is unnecessary to dwell at length upon the other bases the respondents advanced in support of that conclusion. However as I am of the view that the respondents would also be entitled to succeed on these alternative bases I shall address them briefly. Abandonment 135 Where it is plain from the conduct of parties to a contract that neither intends that the contract should be further performed the parties will be regarded as having so conducted themselves as to abandon or abrogate the contract: DTR Nominees Pty Limited v Mona Homes Pty Limited [1978] HCA 12; (1978) 138 CLR 423 at 434 (per Stephen, Mason and Jacobs JJ with whom Aickin J agreed); Summers v The Commonwealth [1918] HCA 33; (1918) 25 CLR 144 at 151 – 152 per Isaacs J. The inference of abandonment will be drawn where "an 'inordinate' length of time has been allowed to elapse, during which neither party has attempted to perform, or called upon the other to perform, a contract made between them … What is really inferred in such a case is that the contract has been discharged by agreement, each party being entitled to assume from a long-continued ignoring of the contract on both sides that … 'the matter is off altogether' ": Fitzgerald v Masters [1956] HCA 53; (1956) 95 CLR 420 at 432 per Dixon CJ and Fullagar J. 136 Whether there is abandonment or abrogation of a contract is a matter of fact to be inferred from an objective assessment of the conduct of the parties: see CIC Insurance Limited v Bankstown Football Club Limited (1995) 8 ANZ Ins Cas ¶61 – 232 per Kirby P; Wallera Pty Limited v CGM Investments Pty Limited [2003] FCAFC 279 at [2] per Ryan J, at [30] – [32] per Kiefel J; at [57] per Gyles J; Marminta Pty Limited v French [2003] QCA 541 at [22] per Jerrard JA, Williams JA and Philippides J agreeing. 137 The underlying premise of the abandonment cases is that a period of time elapses during which neither party to the contract manifests any intention to perform the contract, leading to the inference that the contract has been abandoned. It is clear that the question whether an "inordinate length of time has been allowed to elapse" is relative. In DTR Nominees Pty Limited v Mona Homes Pty Limited the High Court was prepared to infer abandonment after a period of less than five months had elapsed during which neither party took any steps to perform the contract. In Fitzgerald v Masters it was held that a contract for the sale of land had not been abandoned even though proceedings for its specific performance were not commenced until 26 years after its execution. 138 In this case where Mr Ryder evinced an immediate intention to abandon his obligation under the partnership by taking the position at Salomons which Mr Frohlich accepted and thereafter assumed all the duties the two men had hitherto performed, I am of the opinion that the partnership arrangement was abandoned on 2 March 2001. Jorgensen v Boyce 139 The line of authority of which Jorgensen v Boyce, above, forms part has emerged in the partnership context. The authorities underline the proposition to which Lord Millet referred in Hurst v Bryk, above, at 194, that " while partnership is a consensual arrangement based on agreement, it is more than a simple contract …; it is a continuing personal as well as a commercial relationship". 140 In such cases, particularly where the partnership business involves a speculative element, it is seen to be "…of the highest importance that those engaged in them should know on whom they can confidently rely for aid": Lindley & Banks on Partnership, above, at 23-22. 141 Just as "repudiation" and "renunciation" have been used interchangeably, so too has a variety of terminology been used to characterise the conduct which brings such partnership agreements to an end in circumstances where, in effect, one partner "pulls up stumps". 142 In M'Lure v Ripley (1850) 2 Mac & G 274; (1850) 42 ER 105 Lord Lindley observed: "If a partner formally withdraws from an adventure when its prospects are bad [he will] be unable to claim a share of the profits resulting from it if it ultimately proves to be profitable; such cases, however, are not so much cases of laches as of estoppel or agreements to release." 143 In Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd, above, at 247 Dixon CJ noted that Ripley v M'Lure (1849) 4 Ex 345; 154 ER 1245 "might at a later date have been decided as a case of anticipatory breach". 144 Lord Lindley treated mining partnerships as the most obvious example of circumstances in which the partners were entitled to know, in effect, where they stood. It may be that this is the genesis of the decisions in Palmer v Moore [1900] AC 293 and Jorgensen v Boyce. In the latter case the substratum of the partnership was working the gold claim. By ceasing to do his share of the work the plaintiff was found to have ceased to be a partner. 145 In like vein, in Palmer v Moore, above, the Privy Council upheld a decision of the Chief Judge in Equity of the Supreme Court of New South Wales that one of three lessees of a gold mining lease had abandoned his interest in favour of his co-lessees in circumstances where it was accepted that he said (at 296): "He [Lamrock] said he was unable to contribute anything towards the expenses of the mine, that I [Moore] and [Maguire] could do what we liked with it, and I distinctively remember the words he added, 'I am out of it'." 146 In the Privy Council's view (at 298) the fact that the respondent acted on Lamrock's letter, furnished the money required for working the lease thereafter out of his own resources and made no claim upon Lamrock for contribution constituted evidence that he had accepted Lamrock's proposal. 147 Similarly, in Fitzgerald v Masters, above, where the respondents were both parties to a contract of sale whereunder the respondent was to purchase 50% of the deceased's homestead farm as well as a partnership to conduct the business upon the farm, Dixon CJ and Fullagar J (at 431) were of the view that when the respondent left the farm "because there was 'not enough in it for two … and the deceased was to 'carry on with the place', the partnership was dissolved". This was so even though the respondent entertained the belief that the partnership continued to subsist until the death of the deceased some twenty-one years later. McTiernan, Webb and Taylor JJ (at 439 – 440) were also of the view that in circumstances where the partnership was not prospering and it appeared that the respondent "left the property after the deceased had said there was 'not enough in it for the two of them' and he acceded to the deceased's suggestion that he should accept a position at Tumut which was then offering it was probable that the partnership arrangement was then terminated". 148 In Cutts v Holland [1965] Tas SR 69 the plaintiff and the defendant entered into a partnership to carry on the business of bulldozing contractors. The partners fell out owing to excessive drinking by the defendant and his failure to work during a large proportion of usual working hours and he left Tasmania without giving any notice of his intention to his partner. All efforts to find him had been unsuccessful. The plaintiff sought a declaration that the partnership had been dissolved. Gibson J was of the view that under the rules of equity and common law, the operation of which continued save as to inconsistency pursuant to s 5 of the Partnership Act 1891 (Tas), that the case was one "in which, if the Act had not been passed a renunciation of the contract of partnership by the defendant would be proved … [which] would have entitled the plaintiff to treat the contract as at an end, and his conduct shows that he did". His Honour was of the view that the defendant's disappearance operated as a waiver of any right of the defendant to require notice of the plaintiff's election to treat the partnership as at an end. His Honour saw Palmer v Moore as analogous. In his view the defendant's conduct in abandoning the partnership business impliedly told the plaintiff to do what he liked with the business and the plaintiff "by acting on the offer and conducting the business as his own and spending money on it (but at the same time recognising his liability as a partner for antecedent debts) accepted an offer which had the effect of dissolving the partnership by agreement" (at 71 – 72). 149 In Thompson v De Lissa (Supreme Court of New South Wales, unreported, 16 February 1990) Powell J (as he then was) treated Jorgensen v Boyce, Palmer v Moore and Cutts v Holland as cases of determination of a partnership by mutual agreement, the agreement being inferred from the conduct of the partners. 150 Perry J categorised the situation slightly differently in Lukin v Lovrinov & Anor [1998] SASC 6614, a case in which one of three partners in a fishing business verbally informed the other partners that he was no longer interested in the affairs of the partnership but simply wanted his share of a tuna quota attached to the licence of one of the other partners. This announcement followed a long period of time over which that partner had refused to make any real contribution to the operation of the partnership. His Honour was of the view that "if one partner by his or her words or conduct effectively abandons the partnership, it will be regarded in law at an end". He treated Palmer v Moore and Jorgensen v Boyce as examples of that proposition. Accordingly, his Honour concluded that a statement by the plaintiff to another partner, "there was enough love, (sic) I want my quota", a statement he repeated in response to suggestions that he talk the matter over with the other partners, "signalled an effective abandonment by the plaintiff of his participation in the partnership". 151 In my opinion the primary judge was correct in regarding Jorgensen v Boyce as apposite. This line of authority is capable of being classified as cases of termination by anticipatory breach which was accepted. As I have already explained, that is how the parties' conduct should be characterised. 152 In my opinion, the partnership terminated on 2 March 2001 by reason of Mr Ryder's anticipatory breach which was accepted by Mr Frohlich as well as by abandonment. 153 Grounds 2 and 3 should be rejected. The Equity Fund 154 The appellants accepted that the appeal could only succeed in relation to the Equity Fund if it was established that the partnership terminated after March 2001. As the appellants have failed in their challenge to the finding that the partnership terminated at that time, these grounds of appeal do not arise. Partnership business 155 As the oral argument developed it was apparent that there was another controversy between the parties – the nature of the partnership business. This emerged in the following manner. 156 The appellants complained that, assuming the primary judge's conclusion that the partnership terminated in March 2001 was correct, nevertheless his order referring the matter to the Master to determine the value of the business and whether Mr Ryder owed moneys to Mr Frohlich at the date of termination was too limited. It will be recalled that his Honour remitted the matter to the Master to determine (inter alia) "as at the date of dissolution of the partnership (being March 2001) whether monies were owing to Mr Ryder referable to the value of the business at that date". 157 The appellants' contention was founded on the proposition that "whenever the partnership was terminated, the common position was that the business of the partnership (comprising, at least, the management of the Diversified Fund) was still trading as at the hearing of the matter". The consequence was, according to the appellants, that even if the partnership was terminated in March 2001, the respondents continued to operate the partnership business. In the first place this occurred "with the assistance of the appellants, but after 13 February 2003 without that assistance [the respondents] having effectively excluded the appellants from the business)". The appellants submitted that the primary judge's order should have reflected those "uncontroversial facts". 158 The appellants also contended that as the partnership business was continued "by a subset of the original partners", the "outgoing partners" (the plural assuming the four partner thesis was sustained) had elected, pursuant to s 42 of the Partnership Act, to take a share of the profits made by the partnership business since termination. The appellants also contended that even if the partnership was terminated at a past date, they were entitled to receive their equal shares of the assets of the partnership as at the date of realisation of those assets and were not limited to the historical value of their share of the assets at the termination date: see Barclay's Bank Trust Co Limited v Bluff [1982] 1 Ch 172; Chandroutie v Gajadhar [1987] 1 AC 147. 159 Accordingly, the appellants submitted that the primary judge should have ordered that a valuation be taken of the business "as at its present value" (the temporal context of "present" was not defined but presumably means at the date of the accounting exercise) and that his Honour should also have referred the assessment of the appellants' share of post-dissolution profits to the Master. 160 The respondents submitted that the nature of the partnership business was far from "uncontroversial" at the hearing. They contended that the appellants' case proceeded from a fundamental misconception as to what the business and assets of the partnership were. They disputed the proposition that the management of the Diversified Fund (which they contended must mean the "right to manage the Fund and to draw fees from managing it") was part of the partnership business. 161 The respondents accepted that, as part of the partnership, Coastal was to remit to the partners, in consideration of their advice, the net profit of fees earned managing the Diversified Fund. However they contended the right and legal responsibility to manage the Diversified Fund fell to Coastal as the responsible entity pursuant to the Corporations Law. Thus the respondents contended the legal right to manage the Diversified Fund could not be a partnership asset. 162 The respondents also argued that neither the Diversified Fund, nor any goodwill attaching to it, formed part of the goodwill of the partnership. Rather, they contended any goodwill attaching to the Diversified Fund was Coastal's. To the extent any goodwill attached to the partnership, the respondents contended it was the "goodwill … 'of Mr Frohlich and Mr Ryder advising the fund but that is as high as it can get.' " (emphasis in original) 163 The respondents contended that the issue of the nature of the partnership business had been resolved by the primary judge's finding (not challenged by any ground of appeal) that the partnership carried on the business of "establishing the Diversified Fund and advising Coastal with respect to it" [39] and "attracting subscribers to it" [41]. 164 The significance of this submission was that if the partnership business was as found by the primary judge in [39] and [41], the respondents contended that that business was no longer being carried on once the partnership was terminated by Mr Ryder's departure. Rather, the respondents argued, after March 2001, Mr Frohlich was acting in his capacity as executive director and controller of Coastal which, in turn, was exploiting its rights as the Diversified Fund's responsible entity. The respondents pointed out that while Mr Ryder "was free to walk away from the partnership business of advising Coastal", Mr Frohlich did not have that opportunity because of his legal responsibilities as an executive director of Coastal. 165 The corollary of this proposition, the respondents contended, was that there were no "partnership assets" which could have been used to generate profits after Mr Ryder ceased to be a partner to which an order under s 42 of the Partnership Act could attach nor, indeed, could there be any partnership assets to which a post-termination value could attach. 166 In reply, Mr Wales submitted that there was no issue on the pleadings that the assertion in the Statement of Claim that the partnership was "an asset management business with respect to 'absolute return investments'" was correct. The pleaded response to that paragraph of the Statement of Claim (paragraph 2) was, in substance, a non-admission that any agreement was ever concluded between the parties and otherwise the allegations in that paragraph were not admitted. Accordingly, Mr Wales submitted that "the parties seem to be ad idem in the pleadings that the business of the partners was a funds managing business". 167 The appellants submitted that the primary judge's statements concerning the partnership business did not lead to an issue estoppel because they were not reflected in the Court's order and could not, therefore, be the subject of an appeal. Mr Wales submitted that the words "the business" could not be interpreted by going to the judgment. 168 Secondly, they contended that the issue of the nature of the partnership business was not raised on the pleadings and that if it was in issue the matter should be remitted to the Equity Division for determination prior to the reference to the Master proceeding. Mr Wales contended that while there was an issue at trial as to whether the arrangement between the appellants and the respondents was to be characterised as a partnership (as the appellants contended) or a joint venture (as the respondents contended), they were "ad idem that the business of the partners was a funds managing business". This submission appears to have been advanced to support the proposition that paras [39] and [41] could not be said, in the circumstances, to support an estoppel. In oral argument Mr Wales also appeared to embrace a concern raised by the Court that if the primary judge had determined the nature of the partnership business, he had failed adequately to reveal his reasons for his conclusion. 169 Mr Wales also complained that the respondents had never pleaded that if the partnership business was to advise Coastal, that business only endured while being carried on by the two partners so that there was no entitlement to an accounting after March 2001. The respondents' response was that the appellants had never pleaded an entitlement to post termination accounting pursuant to s 42 of the Partnership Act but had first raised this proposal in final written submissions before the primary judge. 170 At the conclusion of the oral argument the Court gave the appellants leave to file written submissions in support of amending the Notice of Appeal to include grounds of appeal challenging the "finding" as to the partnership business and raising a "no reasons" ground concerning that "finding" as well as submissions concerning the interpretation of an order by reference to findings in the judgment. 171 The appellants filed supplementary submissions. They submitted, however, that they did not need to seek to amend the Notice of Appeal. They contended that as the Notice of Appeal already challenged the primary judge's finding concerning the identity of the partners in the partnership, to the extent his Honour's findings about the nature of the partnership business were part of that finding, they were already the subject of appeal. The appellants contended that his Honour's findings did not constitute "an authoritative finding on the question of partnership business" but, rather, were "elliptical and inconsistent". They submitted that the passages the respondents contended were findings as to the nature of the partnership business were inconsistent with the primary judge's statement (at [40]) that "Protected was not part of the business nor was Coastal otherwise than it (Coastal) was the responsible entity of the Diversified Fund". 172 The supplementary submissions did not address the "no reasons" point or the question of interpreting an order by reference to findings in the judgment. 173 The appellants did, however, contend that there was nothing in the primary judge's findings which supported the respondents' contentions as to the nature of the partnership business and/or the identity of the assets of that business. They contended that it was common ground that Coastal was the responsible entity with the statutory responsibility of managing the Diversified Fund so that the role of the partnership could only be to perform tasks important to the success of that Fund. They submitted that those tasks were those to which the primary judge had referred such as giving advice, attracting investors and setting up the Diversified Fund in the first place. They contended that such rights as Coastal possessed with respect to the Diversified Fund were held on behalf of the partnership so that any goodwill associated with that Fund was also held on its behalf. They submitted that there was nothing in the primary judge's findings that was inconsistent with that proposition. They contended that that proposition was supported by Mr Walker's concession that Coastal was obliged to pass to the Ryder and Frohlich interests the entirety of the profits earned by the management of the Diversified Fund demonstrating that it functioned as a "mere vehicle" for the conduct of that Fund. 174 The appellants also contended that the primary judge was clearly of the view that the value of the goodwill associated with the Diversified Fund would be a matter for the Master to determine. They referred to paragraph [59] of his judgment where in referring to the question whether he should remit the matter to the Master to take accounts as at March 2001 as to the respective entitlements of Mr Frohlich and Mr Ryder, he noted the parties' competing positions, including Mr Ryder's proposition that although the Fund was not profitable as at March 2001 "the investments it had had the potential to generate profits and hence a value". The appellants contended that by acknowledging that the Master would entertain a debate about the value of the business as at March 2001 in terms of its potential to generate profits, the primary judge was necessarily dealing with the valuation of partnership goodwill as, they contended, the profitability of the Diversified Fund could not logically relate to the valuation of chattels. In other words, as I understand this submission, the appellants contended it was implicit in the primary judge's judgment that Mr Ryder was entitled to an accounting which included assessing the value of the Diversified Fund as at March 2001. 175 The respondents' supplementary submissions contended that if the Order was thought to be ambiguous as to the meaning of "business", that ambiguity may be resolved by resort to extrinsic material and, in particular, the reasons for judgment. 176 The respondents also argued that in light of the appellants' failure to seek to amend the Notice of Appeal to challenge the primary judge's findings about the nature of the partnership business, the appellants' supplementary submissions exceeded the Court's leave and ought not be entertained. Out of abundant caution, the respondents also addressed the additional matters raised by the appellants. 177 The respondents contended the primary judge had made clear findings of fact as to the nature and extent of the partnership business. They submitted that the primary judge's reference to Coastal being the responsible entity did not convey that Coastal was a part of the partnership business in the sense of being an asset of the partnership or convey that the right to draw fees from managing the Diversified Fund was an asset of the partnership. Rather, the respondents contended the reference to Coastal simply picked up the point that, as the responsible entity of the Diversified Fund, Coastal was the source of the partnership business' intended income being the profits, if any, which Coastal earned from managing the Diversified Fund. 178 The respondents also complained the appellants could not argue that Coastal's rights with respect to the Diversified Fund were "held on behalf of the [two partner] partnership". The respondents also disputed the appellants' reliance on Mr Walker's concession as supporting the proposition that Coastal held its rights with respect to the Diversified Fund on behalf of the partnership. They contended that the effect of that "concession" was that the informal arrangement between Coastal and the partnership pursuant to which the partnership advised Coastal and attracted subscribers to the Diversified Fund and Coastal would pass onto the partnership the profits, if any, derived from managing the Fund, collapsed once the partnership terminated. For these reasons the respondents also submitted that Coastal's goodwill associated with the Diversified Fund could not be held on behalf of the partnership. They challenged the proposition that the valuation of the goodwill associated with the Diversified Fund was inherent in the primary judge's reference to the Master. 179 The respondents also addressed some submissions to the value of the goodwill of the partnership as at its termination as well as to the utility of a s 42 exercise. These are matters which, in my view, need not be addressed as part of this appeal. Partnership business: consideration 180 The respondents submitted that the question of the nature of the partnership business was an issue before the primary judge. They pointed out that the primary judge identified (at [17]) as the first matter for determination "the categorisation of the legal relationship between all the parties or some of them and the terms of that relationship" and also referred to the fact that Mr Young on behalf of the plaintiffs had submitted that "all the four parties formed part of the partnership entered into for the purpose of conducting an asset managed business with respect to 'absolute return' investments". Later his Honour noted (at [36]) that: "36 In evidence Mr Ryder conceded that, in effect, the arrangement (to use a neutral term) was between Mr Frohlich and himself and that the business (again to use a neutral expression) of the arrangement was to advise selected clients interested in 'absolute return' investment funds." 181 The respondents also drew attention to the fact that in their written submissions, filed pursuant to directions prior to the commencement of the trial, they had contended that the principal issues in the proceedings included the nature of the business conducted pursuant to whatever arrangement was found to exist between the parties. They had positively contended that: "… Coastal was the entity which had the legal right and duty to manage the Fund. The business of the joint venture was the business of advising Coastal with respect to the Fund and, in effect, managing the Fund on Coastal's behalf". They effectively repeated this submission in their written submissions at the conclusion of the evidence. 182 That submission was later fleshed out in the respondents' written submissions in the following manner: "36. Coastal was the [Diversified] Fund's 'responsible entity' within the meaning of s 601FA of the Corporations Law and, later, the Corporations Act . That meant that the legal right and, indeed, the duty of managing the Fund were Coastal's. But it is clear that the arrangement between Mr Frohlich and Mr Ryder was one pursuant to which they were to advise Coastal with respect to the [Diversified] Fund and manage it on Coastal's behalf. The business of the joint venture was thus the business of advising Coastal with respect to the [Diversified] Fund and, in effect, managing the Fund on Coastal's behalf." 183 The appellants' written submissions before the primary judge did not address the nature of the partnership business. In his final oral submissions Mr Young addressed the primary judge on the issue of the nature of the relationship between the parties. He submitted that the draft agreements substantially set out their arrangement. The primary judge asked him what he submitted the business was as defined in the documents to which he responded by reading recital A in the first draft Deed which was, relevantly: "Peter Frohlich and Nick Ryder have agreed to work together to establish a specialist asset management business to promote a series of 'absolute return' investment funds to be marketed to investors in Australia and overseas..." 184 When he went to the second draft Deed, however, Mr Young drew attention to the definition of the "business" in cl 1.1 which stated: "'Business' means the business of advising Managed Accounts conducted by the Coastal and Ryder Parties together but does not extend to advising other managed accounts and clients listed from time to time in Schedule A." 185 The following exchange then took place: "HIS HONOUR: The business [was] advising managed accounts on an absolute return strategies. YOUNG: Yes. HIS HONOUR: Conducted by these parties. YOUNG: Yes, your Honour. For those reasons, the plaintiff says that there was a partnership and all of the four parties of these proceedings (sic, as in original) were partners to it." 186 In response to a query from the primary judge Mr Young submitted that the partnership asset was the goodwill attached to the management of the Diversified Fund "producing income for the partnership". 187 In his oral submissions Mr McHugh took the primary judge through the draft agreements and to the alterations the definition of "business" underwent until, by the time of the third draft, it was confined to "advising Managed Accounts" and "the idea of funds management" had dropped out. He submitted that: "… the whole format of the document is difficult to reconcile with the actual business being conducted. The business that was being conducted was being conducted by Coastal. It was the business of managing the [Diversified Fund], and Mr Ryder and Mr Frohlich, pursuant to their joint venture, were engaged in, in effect, running the managed fund on behalf of Coastal. They were providing management assistance to Coastal. They did that through the advice of both being directors, while they were there, but the substance of the economic arrangement was that the two of them were pooling … their expertise and their resources and then they were to get an equal economic interest in the net return for the management fees. That was what the arrangement was; that's very different from advising selected portfolios owned by third party clients …" (emphasis supplied) 188 When he addressed the issue of "business" by reference to paragraph 36 of his written submissions, Mr McHugh agreed with the primary judge's proposition that the business was the "provision of management services". He submitted that while Coastal was the responsible entity and, as a matter of law, had the right to manage the Fund: "What the joint venture was doing at this stage was providing really management services to Coastal in relation to the fund … in terms of what the business was, the plaintiffs have called it a 'right to manage '. Certainly there was a provision of managerial services to Coastal and that's what the business was ." (emphasis supplied) 189 In the course of his submissions the primary judge asked Mr McHugh whether the fund was "property of the agreement". Mr McHugh's response was that the assets of the Fund were not a partnership asset, being owned legally by Coastal and beneficially by the investors, but that "the only property the joint venture had, if there was any, is the right to manage the funds, the arrangement with Coastal whereby Mr Frohlich and Mr Ryder were going to provide management services." However subsequently, again in response to a question from the primary judge concerning the property of the parties at termination, Mr McHugh submitted that the goodwill attaching to the Diversified Fund was Coastal's. He acknowledged, however, that the property of the parties at termination "may be the goodwill of Mr Frohlich and Mr Ryder advising the fund". 190 In dealing with the orders the primary judge might make if he found in favour of the appellants' partnership contention, Mr McHugh accepted that "given the way the partnership business has just been defined, that presumably means the winding up of the fund itself." He referred his Honour to Syers v Syers & Paraire (1876) 1 App Cas 174 to support the proposition that he should order the appellants, as the outgoing partners, to sell to the respondents at valuation at the date of termination, rather than wind up the business. Accordingly he submitted that if the primary judge determined a partnership existed between the parties, "Mr Ryder … should have something referable to the value of the interest at the date he left". In reply Mr Young accepted that the appellants were prepared to accept that approach rather than persist with a winding-up. 191 Dealing with s 42 of the Partnership Act, Mr McHugh submitted that the improvement in the Diversified Fund's position could not be attributed to the "use of Mr Ryder's share". Mr Young contended, however, that the s 42 exercise would require the Court to consider the extent to which the Diversified Fund's subsequent profits resulted from use of the appellants' "capital" in the partnership represented by their "share of the goodwill". 192 In reply the following exchange occurred: "YOUNG: … What the business is – that has been run as a partnership on the plaintiffs' case – is the business whereby those funds are managed and management fees are obtained for the management of that fund. That is the partnership business . HIS HONOUR: I thought you told me earlier it included the funds. That's what I couldn't understand YOUNG: I was speaking loosely. The fund was set up as, in effect, a device for earning these management fees but there is no claim by the plaintiffs that the millions of dollars to be divided only between the parties here [sic]…." 193 What emerges from this analysis is that there was an at times confusing debate before the primary judge as to whether the business of the partners was a funds management business or of establishing and attracting subscribers to the Diversified Fund as well as advising those subscribers. The debate seems to have taken place principally to identify the focus of the accounting exercise which would take place before the Master. 194 It was common ground that whatever the nature of the partnership business, the partners were entitled to 50% of Coastal's net profits from managing the Diversified Fund. At the end of the day, Mr Young acknowledged that the Diversified Fund was not a partnership asset, but that the "business" of managing it was, and that that "business" had a value at the date of termination which could be determined by the Master. While Mr McHugh agreed that that was the case he also accepted, in my opinion, that that "business" had a value which included goodwill which could be determined by an accounting exercise. 195 I accept that the meaning of the word "business" in paragraph [3] of the primary judge's orders may be determined by having regard to the findings in the judgment: Australian Energy Limited v Lennard Oil NL (No 2) [1988] 2 Qd R 230 at 232 per Andrews CJ (with whom Kelly SPJ agreed); see also Thomas J at 243; Repatriation Commission v Nation (1995) 57 FCR 25 at 33 per Beaumont J (with whom Black CJ and Jenkinson J agreed); see also Blacktown Concrete Services Pty Limited v Ultra Refurbishing & Construction Pty Limited (In Liq) (1998) 43 NSWLR 484 at 491 – 492 per Santow J (as his Honour then was). 196 However I also accept the appellants' submission that the primary judge's finding is elliptical and arguably inconsistent. Having regard to the manner in which the case was conducted, his Honour's statement that the business was establishing the Diversified Fund and advising Coastal with respect to it and attracting subscribers to it must be taken to have encompassed a "right" to manage the Diversified Fund, the nature and value of which right (including whether it had a goodwill value) was to be determined pursuant to the reference to the Master. In addition, in my opinion, Mr McHugh acknowledged that if a partnership was found to exist, the right to manage the fund was an asset of the partnership which should preferably be dealt with by an order for sale at valuation rather than a winding up, a course with which Mr Young concurred. 197 It might be assumed that when his Honour referred the matter to the Master for determination of "whether monies were owing to Mr Ryder referable to the value of the business at that date", he did so on the assumption that what appeared to be common ground before him would form the basis of the accounting exercise. 198 The effect of this conclusion is that it is for the Master to determine the nature of the "right" to manage the Diversified Fund in order to value the business as at March 2001 as well as whether that right had a goodwill value which could enure to Mr Ryder's benefit. The s 42 claim 199 His Honour made no explicit reference to the appellants' claim for s 42 relief. It may be idle to speculate why that is so, but the probability is that the omission can be explained by the fact that s 42 was not pleaded, although it was referred to in the appellants' final written and oral submissions. The respondents did not object to it being raised at that late stage, but contended that there was no partnership capital or asset used after termination which would attract the operation of s 42. Mr Wales submitted that his Honour's referral to the Master implicitly recognised that the arguments about the effect of s 42 would proceed at that stage. In my view that that is an available interpretation of the judgment having regard, for example, to the fact that when his Honour referred to the parties' agreement that he should not determine any issues concerning the monetary claims, he illustrated the effect of that request (at [16]) by saying that the Master would determine the question whether "the business, however characterised, was worthless on 2 March 2001 … with appropriate grounds being established for that to happen". A corollary of that proposition, in my opinion, would be that the Master was to determine the nature of the partnership assets and the extent to which, if at all, those assets were used post termination in a manner which would attract s 42 relief. 200 The respondents' Notice of Contention asserted that by reason of the conduct of the parties on and after 2 March 2001 the appellants were estopped from asserting any share in the business, or in the profits derived therefrom, being carried on by the respondents after the termination date. The essence of this case was that Mr Ryder represented that he would no longer have any interest or claim on the partnership, that Mr Frohlich acted to his detriment on that representation and Mr Ryder should not now be permitted to resile from that position. The primary judge did not determine the estoppel case. The appellants submitted that if the Court was of the view that the estoppel issue arose, the matter should be remitted to the Equity Division for determination. 201 In my opinion the respondents cannot succeed on the estoppel case. As I have already noted, Mr Frohlich acknowledged that Mr Ryder had a moral if not a legal entitlement to a share of the management revenue derived from subscribers to the Diversified Fund as at the time Mr Ryder departed as long as those subscribers remained in the Fund. Mr Ryder's "economic interest" was acknowledged in documents published after March 2001. In such circumstances I do not accept that Mr Frohlich acted upon any representation that Mr Ryder would no longer have any interest or claim on the partnership. 202 Finally I accept that in dealing with the s 42 issue, the Master would, as the respondents submitted, have to make an appropriate allowance for Mr Frohlich's work post termination: see Hugh Stevenson & Sons Ltd v Aktiengesellschaft fur Cartonnagen-Industrie [1917] 1 KB 842 (affirmed on appeal, Hugh Stevenson & Sons Ltd v Aktiengesellschaft fur Cartonnagen-Industrie [1918] AC 239). Orders 203 The appellants have failed on their principal grounds of appeal, but Mr Ryder has succeeded in challenging the manner in which the reference to the Master is framed. The matters to which the accounting exercise relates should be made explicit. 204 In my view the appeal should be dismissed, save that I propose that order 3 made by the primary judge be set aside and the following order be substituted: "3. The matter be remitted to the Master to determine: (a) as at the date of termination of the partnership (being 2 March 2001): (i) the nature and value of the partnership assets, including the nature of the "right" Mr Ryder and Mr Frohlich had to manage the Diversified Fund and whether it had a goodwill value which survived the dissolution of the partnership (but not including any other interest in the Diversified Fund); (ii) whether monies were owing to Mr Ryder referable to the value of the business as at 2 March 2001 and whether Mr Ryder owed monies to Mr Frohlich – being those referred to in Mr Frohlich's cross-claim; (b) whether, in the light of the identification of the partnership assets and their use, if any, after 2 March 2001, Mr Ryder is entitled to a share of profits pursuant to s 42 of the Partnership Act 1892 (NSW) and, if so, to determine the amount of that share; (c) in the light of the findings made, the respective indebtedness of Mr Ryder and Mr Frohlich." 205 The appellants' last ground of appeal complained that the primary judge erred in reserving costs rather than ordering the respondent to pay the appellants' costs. No written or oral submissions were addressed to this ground of appeal and I have, therefore, assumed it was abandoned. 206 Having regard to the fact that the appeal has achieved only a fine-tuning of the order referring the matter to the Master, I propose that the appellants pay 80% of the costs of the appeal. ********** Last Modified: 12/21/2004 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.