Reported Decision: 72 NSWLR 365 New South Wales Court of Appeal CITATION: Trinkler v Beale & Ors [2009] NSWCA 30 HEARING DATE(S): 11 December 2008 JUDGMENT DATE: 2 March 2009 JUDGMENT OF: Giles JA at 1; Macfarlan JA at 4; Gyles AJA at 60 (a) Leave to appeal granted. (b) The appellant within fourteen days to file a Notice of Appeal in the form of the draft contained in the Red Appeal Book. (c) The undertaking as to stamping of the Heads of Agreement proffered by the appellant to the Court be accepted. DECISION: (d) The Court specifies the period of 28 days from the date of these orders as the time within which the undertaking is to be complied with. (e) Appeal dismissed. (f) The appellant to pay the respondents' costs of the leave application and appeal. . CATCHWORDS: PARTNERSHIP - agreement for dissolution - part of one partner's interest held by nominee company - other partner held sole share in the company on trust for the first partner - whether on dissolution of the partnership the other partner was required to give "fair value" to the first partner for the surrender of his beneficial interest in the company share - TRUSTS - "fair -dealing" rules of equity relating to the purchase of trust property by a trustee from a beneficiary - applicability in the context of the partnership dissolution in this case. LEGISLATION CITED: Partnership Act 1892 CATEGORY: Principal judgment Associated Alloys Pty Ltd v ACN 001452106 Pty Ltd [2000] HCA 25; (2000) 202 CLR 588 Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd [1974] HCA 22; (1974) 131 CLR 321 Chan v Zacharia [1984] HCA 35; (1984) 154 CLR 178 CASES CITED: Federal Commissioner of Taxation v Everett [1980] HCA 6; (1980) 143 CLR 440 Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41 Law v Law (1905) 1 Ch 140 Warman International Ltd v Dwyer (1995) 182 CLR 544 R C Anson Banks, Lindley & Banks on Partnership, 18th ed (2002) Sweet & Maxwell TEXTS CITED: Fletcher, The Law of Partnership in Australia 9th ed (2007) Law Book Co Meagher Gummow and Lehane's Equity Doctrines & Remedies 4th ed (2002) Butterworths George Trinkler (Appellant) PARTIES: Aileen Beale (First Respondent) Philip Beale (Second Respondent) Clemelle Way Pty Ltd (Third Respondent) FILE NUMBER(S): CA 40214/08 COUNSEL: J E Thomson (Appellant) D F Jackson QC/B DeBuse (Respondents) SOLICITORS: Sparke Helmore (Appellant) Macelbing Mednis & Associates (Respondents) LOWER COURT JURISDICTION: Supreme Court LOWER COURT FILE NUMBER(S): SC 5235/05 LOWER COURT JUDICIAL OFFICER: Gzell J LOWER COURT DATE OF DECISION: 18 April 2008 LOWER COURT MEDIUM NEUTRAL CITATION: Beale v Trinkler [2008] NSWSC 347 IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40214/08 SC 5235/05 GILES JA MACFARLAN JA GYLES AJA MONDAY 2 MARCH 2009 TRINKLER v BEALE & ORS Judgment 1 GILES JA: For the reasons given by Macfarlan JA, the "fair-dealing" rules did not apply to transfer by the appellant to the second respondent of the appellant's beneficial interest in the share in Clemelle Way Pty Ltd. Clause 2(b) of the Heads of Agreement required transfer of the appellant's interest "in the Branch Lane or Clemelle Way Pty Ltd". The interest in the Branch Lane property was his beneficial interest as partner in the property, the title to which was in Clemelle Way Pty Ltd. The transfer of the appellant's beneficial interest in the share in Clemelle Way Pty Ltd was one way, although not the only way, of transferring to the second respondent the interest of Clemelle Way Pty Ltd in the Branch Lane property. It had no separate purpose, and was entirely subsidiary to the transfer of the interest in the Branch Lane property. It did not bring the "fair-dealing" rules into the dissolution of the partnership. 2 It is unnecessary to consider whether in a transfer between trustee and beneficiary the requirement for giving full value does not apply or is satisfied by fully informed agreement to accept the valuation of an independent valuer, made thereafter or (as here) made prior to the agreement. I agree with what Macfarlan JA has said concerning the rejection of Mr Roberts' evidence. 3 I agree with the orders proposed by Macfarlan JA. 4 MACFARLAN JA: This application for leave to appeal raises issues as to whether the stringent "fair-dealing" rules of equity applicable to purchases by a trustee of a beneficiary's interest in a trust had any application to the arrangement by which the parties in the present case sought to terminate their partnership and, if they did, whether the rules were complied with. Leave to Appeal 5 The judgment of Gzell J in relation to which leave to appeal is sought is not a final judgment as it does not completely dispose of the proceedings for dissolution of partnership which came before his Honour. In particular, aspects of the proceedings, including the taking of accounts, were referred by his Honour to an Associate Justice for determination. However, as the judgment resolves issues of some general legal importance, as those issues are of considerable monetary significance to the parties and as they are most conveniently resolved at this stage of the proceedings, my view is that leave to appeal should be granted. I proceed on the basis that that is the appropriate course to be taken and refer to the parties henceforth as appellants and respondents. Factual Circumstances 6 Prior to about August 2002, George Trinkler, (the appellant) and Phillip Beale (the second respondent) decided to purchase two rural properties, situated near Newcastle, New South Wales for the purposes of subdivision and sale. One was known as Lot 18 Branch Lane, Karuah ("the Branch Lane" property) and the other, Lot 7131 Bucketts Way, Stroud ("the Bucketts Way" property). 7 The purchases were effected later in 2002 in the names of Aileen Beale (the first respondent who was the wife of the second respondent) and Clemelle Way Pty Ltd (the third respondent which was a company nominated by the appellant), as tenants in common. 8 The second respondent's evidence indicated that his wife provided his share of the funds required in respect of at least one of the purchases. 9 Clemelle Way Pty Ltd was a company apparently acquired by the appellant for the purposes of the venture. At or about the time of the property purchases the second respondent became the sole director and shareholder of the company and agreed by deed of trust to hold his share in the company on trust for the appellant "and/or his heirs and assignees at law". The primary judge's description of how this came about was as follows: "The sole shareholder and director of Clemelle Way was to have been Mr Trinkler's first wife but she changed her mind. Mr Beale suggested members of Mr Trinkler's family as a replacement but Mr Trinkler rejected all of them. Finally, Mr Beale agreed to become the sole director and to hold the one issued share of Clemelle Way on trust for Mr Trinkler." (Red Appeal Book 61 T-Z, 62C). 10 The Branch Lane property was purchased for $1,550,000 and the Bucketts Way property for $200,000. The appellant and second respondent guaranteed the repayment of funds borrowed to assist in the purchase of the properties. They agreed that, pending subdivision, cattle would be bred on the Branch Lane property to generate funds to service the loans. This activity commenced and was still continuing at the date of the hearing at first instance. 11 In 2005, discussions between the appellant and the second respondent as to the termination of their arrangements led to the second respondent obtaining valuations of the rural properties from the firm of Fagan Simm. The valuations were $2.4 million for the Branch Lane property and $420,000 for the Bucketts Way property. After becoming aware of the valuation amounts, the parties signed a handwritten Heads of Agreement document which was drafted by the second respondent and dated 1 May 2005. 12 The Heads of Agreement was in the following terms: "HEADS OF AGREEMENT 1. George Trinkler and Philip Beale and Aileen Beale and Clemmelleway Pty Ltd hold interests in two properties known as lot 18 Branch Lane Karuah and lot 7131 Bucketts Way Stroud hereinafter Branch Lane and Buckets Way. The parties wish to dissolve their partnership as to the interests in the land but not as to cattle grazing. 2. Both Bucketts Way and the Branch have been valued for the parties and the parties agree as follows a) The Bucketts Way property will be transferred to Trinkler. b) Any interest claim to beneficial interest, accretion, shares or options Trinkler has in the Branch Lane or Clemellway Pty Ltd will be surrendered or transferred to Philip Beale who owns and has owned since 2002 all the issued capital in Clemellway Pty Ltd and Aileen Beale will continue to hold her interest in Branch Lane unaltered in any way. c) Clemellway Pty Ltd and or P. Beale on the one hand and Trinkler [on] the other shall share equally the cost of the conveyance and stamp duty in respect of the transfer of the Buckets Way from Clemellway Pty and Aileen Beale to Trinkler. d) Any and all guarantees of Trinkler for the loan from the National Australia Bank, Hamilton, Newcastle in respect of the Branch Lane is to be extinguished at the time of settlement of the transfer to Trinkler of Buckets Way. e) Any and all guarantees of P. Beale for the loan from the Commonwealth Bank of Australia in respect of the Bucketts Way is to be extinguished at the time of settlement of the transfer to Trinkler of Buckets Way. f) P. Beale and Clemellway Pty Ltd will allow 50% of the accretion in value of Branch Lane above the original purchase price and stamp duty plus initial contribution. g) Trinkler will allow 50% of the increase in value of Bucketts Way above the amount of the original purchase price plus stamp duty and initial contribution. h) The parties agree to bring into existence any and all documentation including contracts or deeds necessary to effect the agreement herein. i) Trinkler and Clemellway P/L will each pay half the stamp duty required to transfer Bucketts Way to Trinkler. George Trinkler ……………………………. Philip Beale ……………………………. Aileen Beale ……………………………. Clemellway Pty Ltd ……………………………." (Red Appeal Book 60F-X, 61I-R) The document was signed by or on behalf of each of the persons listed, namely, Mr Trinkler and his company Clemelle Way Pty Ltd and Mr and Mrs Beale. The reference in clause 1 to cattle grazing was a reference to the cattle breeding activity to which I referred earlier. 13 It was contended by the appellant at first instance that the agreement said by the second respondent to be constituted by the Heads of Agreement document was void for uncertainty because it failed to identify a purchase price for the transfer of the Bucketts Way property and failed to identify how the allowances referred to in subclauses 2(f) and (g) were to be brought to account. The primary judge rejected this submission and held that the parties' intentions as to their financial arrangements were made sufficiently clear by the document. This finding is not challenged on appeal. Similarly, the rejection by the primary judge of a contention that the appellant was induced to enter into the Heads of Agreement by reason of a misrepresentation by the second respondent is not challenged on appeal. 14 During the course of the hearing of the appeal, the Court drew attention to the fact that the Heads of Agreement document did not appear to have been stamped. Subsequently, by their written note of 12 December 2008, the second and third respondents offered through their counsel "the usual undertaking by person liable" (see rule 31.13 of the Uniform Civil Procedure Rules 2005) in relation to the stamping of the Heads of Agreement. This undertaking should be accepted by the Court. 15 After 1 May 2005, a contract for the transfer of the Bucketts Way property to the appellant, designed to give effect to the Heads of Agreement, was prepared. The exchange of counterparts of the contract was to take place on 2 August 2005 but the appellant instructed his solicitor not to proceed. He took no steps thereafter to carry the Heads of Agreement into effect and on his instructions, on 17 November 2005, his solicitors purported to rescind the Heads of Agreement on his behalf. The present proceedings for partnership dissolution and related orders were commenced by the first and second respondents on 4 October 2005. By their amended statement of claim filed on 16 April 2006 they sought, inter alia, specific performance of the Heads of Agreement, and an order for the taking of partnership accounts. The Parties' Cases 16 The appellant's case focussed on the fact that the Heads of Agreement provided by subclause 2(b) for any interest which he held in Clemelle Way Pty Ltd to be "surrendered or transferred" to the second respondent. He contended that this amounted to an agreement by him, as beneficiary of the trust of the sole share in Clemelle Way Pty Ltd, to sell his beneficial interest to the trustee of the share, the second respondent. He submitted that the equitable "fair-dealing" rules required the trustee to demonstrate, inter alia, that the sale occurred at "full value" and that the trustee had failed to do that. The question of whether "full value" was given was said to turn upon the value attributed by the parties for the purposes of the Heads of Agreement to the Branch Lane property, this being the figure arrived at by Fagan Simm. Whilst that figure of $2,400,000 does not appear in the Heads of Agreement, the document refers to the two properties having been "valued for the parties" and the extrinsic evidence identifies the amounts of the valuations. 17 The appellant's concern about the valuation of the Branch Lane property arose out of communications after the date of the Heads of Agreement with Mr Daryl Ford who owned a property adjoining the Branch Lane property. Mr Ford indicated that he was prepared to offer $3,000,000 for the Branch Lane property. Subsequently, in late October 2005, he made a written offer of $3,240,000 and on 6 July 2007 he increased the offer to $3,000,500. 18 The appellant called Mr Drew Roberts as an expert valuer witness. He valued the property as at April 2005 at $3,150,000. The first and second respondents called Mr Benjamin Hood to give expert valuation evidence. He valued the property at $2,500,000 as at 27 April 2005. This was $100,000 in excess of the valuation as at that date of Fagan Simm. 19 Apart from joining issue on the question of whether "full value" had been given, the first and second respondents contended, in support of a Notice of Contention filed by them, that "there is no reason […] to regard Mr Beale as subject to the duties of a trustee buying a beneficiary's interest when the venture was being terminated, and terminated at the appellant's instigation." (Written Submissions of 10 December 2008, [52]). The "Fair-Dealing" Rules 20 The content of these rules is not in contest. They are described as follows in Jacobs' Law of Trusts in Australia, 7th ed (2006) LexisNexis Butterworths at [1747]: "But there is no rule of law forbidding a trustee to purchase trust property from a beneficiary; yet if a trustee does effect such a purchase, the transaction is open to review by the court and the onus will be on the trustee to show the following: (1) that the trustee gave full value for the interest, unless it is proved that the beneficiary intended to make a gift to the trustee, in which case it must be shown that the beneficiary knew the value of the gift; (2) that the trustee, before purchasing, disclosed all information which could affect the judgment of the beneficiary; (3) that if the trustee held a position in relation to the beneficiary which resulted in the beneficiary reposing confidence in the trustee's judgment, the trustee gave to the beneficiary the full benefit of the trustee's judgment; and (4) that the beneficiary, although not necessarily having independent advice, was 'at arm's length' from the trustee." 21 It was not contended on the appeal that there was in the present case any departure from the second, third or fourth requirements. The complaint by the appellant was thus that the second respondent trustee did not establish that "full value" had been given. 22 A statement of the rules to similar effect is to be found in the article "Self-Dealing Trustees" by the Hon Mr Justice B H Macpherson, CBE appearing in Trends in Contemporary Trust Law (1996) Oxford University Press at 135. The author quotes the following description given by Megarry V-C in Tito v Waddell (No 2) [1977] 1 Ch 106 at 225: "[…]: if a trustee purchases his beneficiary's beneficial interest, the beneficiary may have the sale set aside unless the trustee can establish the propriety of the transaction, showing that he had taken no advantage of his position and that the beneficiary was fully informed and received full value". Mr Justice Macpherson concluded that not only trustees in the traditional sense but "fiduciaries, such as solicitors and agents" were subject to the rule or rules (at 149). He did not deal with the question of whether and, if so, to what extent the rules apply to partners. The Decision at First Instance 23 The primary judge held that subclause 2(b) of the Heads of Agreement provided for a purchase of trust property by a trustee from a beneficiary and that the "fair-dealing" rules applied. He accordingly took the view that it was necessary for the second respondent, being the trustee of the sole share in Clemelle Way Pty Ltd who had purchased the beneficial interest in the share from the appellant beneficiary, to establish that he had paid, or at least was obligated to pay, "full value" for it. In conformity with the way in which the case was presented to him, the primary judge considered this question by considering the value of the Branch Lane property. An assumption implicit in this approach was that the Branch Lane property was the sole asset of significance of Clemelle Way Pty Ltd and that that company did not have any liabilities of significance other than in respect of the loan obtained to acquired it. There is no reason to think that this assumption was incorrect. 24 The primary judge's conclusions as to the question of "full value" were expressed as follows: "43 It was submitted that Mr Beale had failed to discharge his onus of proof that he gave full value for the share in Clemelle Way because Mr Hood put a value $100,000 higher than that of Fagan Simm and Mr Roberts put an even higher value on the property, and the share was worth half the value of Branch Lane. 44 Neither Mr Beale nor Mr Trinkler was a land valuer. The logical course was that adopted under the heads of agreement for the appointment of an independent valuer to value the properties and for the parties to accept the valuations. It was submitted that, notwithstanding the adoption of this logical approach, if the land was worth more than the value attributed to it by Fagan Simm, Mr Beale had failed to give full value and the heads of agreement should be set aside. 45 I do not accept that a court of equity would endorse such an absolute and inflexible approach to the "fair-dealing" rules. Just as the scope of a fiduciary's duties will vary depending upon the sphere of activity in which the fiduciary undertakes to act for or on behalf of a principal, so too, the "fair-dealing" rules must adapt to the relevant circumstances. 46 None of the authorities cited in Jacobs or in Meagher, Gummow & Lehane deal with a situation where the parties agree to the appointment of an expert and the acceptance of a valuation report as the basis for establishing the purchase price of the beneficiary's interest. 47 If by adopting such a valuation report a fiduciary obtains no benefit or gain from a conflict of personal interest and fiduciary duty; if the fiduciary gains no advantage at the expense of the principal: the "fair-dealing" rules are not, in my view, infringed even if Fagan Simm were mistaken as to the market value of Branch Lane. 48 The appointment of an independent valuer and the acceptance of his valuations did not involve Mr Beale taking advantage of his fiduciary position as trustee of the share in Clemelle Way. On the contrary, the appointment of the independent valuer precluded Mr Beale from benefiting from his fiduciary's role and it placed him and Mr Trinkler at arm's length because independent advice was sought by the parties. 49 Valuation evidence is a matter of opinion. It is not surprising that the Fagan Simm valuation differed from that of Mr Hood by a figure of $100,000. That does not establish that Fagan Simm had not expressed an opinion as to market value of Branch Lane. It does not establish that the opinion was wrong. And it does not establish that Mr Beale failed to give full value for the equitable interest in the share in Clemelle Way. 50 Mr Roberts' valuation was far in excess of the Fagan Simm and Hood valuations. I am concerned that, notwithstanding his assertion to the contrary, Mr [Roberts] was influenced by Mr Ford's offer in arriving at a valuation of Branch Lane at the earlier date of April 2005, the material date for consideration of the purchase price for the surrender or transfer of the share in Clemelle Way under the heads of agreement. In my view he gave too much weight to hindsight. The neighbour's offer had not been received when Fagan Simm performed their task. There is no suggestion that they lacked the expertise of competent registered valuers. Mr Beale was entitled to accept their valuation and in agreeing to pay a price based on that valuation he could not be said, in my view, to have failed to give Mr Trinkler full value for his share." (Red Appeal Book 71A-X; 72B-T) Applicability of the "Fair-Dealing" Rules in the Present Case 25 The agreement made in 2002 for the acquisition, subdivision and sale of the two rural properties clearly gave rise to a partnership. Clause 1 of the Heads of Agreement of 2005 confirms this to have been the case and identifies the partners as the four parties to these proceedings, namely, Mr and Mrs Beale, Mr Trinkler and Clemelle Way Pty Ltd. This characterisation of the relationship is consistent with the way in which the appellant said in evidence that the prospective arrangement (then as to one property) was first raised with him: the second respondent told him that he was seeking partners to be involved in the purchase of the property and then subdivision of part of it (Black Appeal Book 116T). The second respondent's recollection of the initial conversation also included reference to the appellant becoming a partner of the second respondent. 26 Furthermore, it is clear in my view that, when acquired, the Branch Lane and the Bucketts Way properties became partnership property. This was not a case of one or more of the partners allowing use by the partnership of properties owned prior to the inception of the partnership but of the partnership venture involving the purchase of property, for utilisation by the partnership, with funds provided or borrowed by the partners. The conclusion that properties constitute partnership property is more readily arrived at in the latter as distinct from the former case (see Fletcher, The Law of Partnership in Australia 9th ed (2007) Law Book Co [5.10 -.15]). Further, clause 1 of the Heads of Agreement identifies the properties as partnership property by referring to the parties' "partnership as to their interests" in these properties. 27 The nature of a partner's interest in partnership property was described in Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd [1974] HCA 22; (1974) 131 CLR 321 at 327 as follows: "The partner's share in the partnership is not a title to specific property but a right to his proportion of the surplus after the realization of assets and the payment of debts and liabilities. However, it has always been accepted that a partner has an interest in every asset of the partnership and this interest has been universally described as a "beneficial interest", notwithstanding its peculiar character. The assets of a partnership, individually and collectively, are described as partnership property (Partnership Act, 1892, as amended (N.S.W.), s. 20). This description acknowledges that they belong to the partnership, that is, to the members of the partnership." (See also Chan v Zacharia [1984] HCA 35; (1984) 154 CLR 178 at 193; Federal Commissioner of Taxation v Everett [1980] hca 6; (1980) 143 CLR 440 at 446-7; Fletcher at [5.40]). 28 The corollary of the fact that partners have beneficial interests in each partnership asset is that partners who hold legal title to partnership property do so subject to trust obligations to hold and apply the property in accordance with the rights and entitlements of all of the partners (Chan v Zacharia at 193-4 per Deane J). It follows that the first and third respondents, who held the legal title to the Branch Lane property and who were members of the partnership, were subject to trust obligations of that character. 29 I return then to the Heads of Agreement. 30 As plainly indicated by clause 1, and as is implicit in the remainder of the document, the Heads of Agreement constituted an agreement between the four partners of the partnership relating to the two rural properties to dissolve that partnership. 31 Agreements for dissolution of partnerships are of course a commonly encountered and necessary part of commercial activity. As would be expected, the Courts have been prepared to give effect to them. Where otherwise appropriate the Court will order specific performance and grant injunctions. (R C Anson Banks, Lindley & Banks on Partnership, 18th ed (2002) Sweet & Maxwell at [23-48, 49; 23-147]). The partners must adhere to their fiduciary duties in making such dissolution agreements. Thus the ordinary obligations not to mislead each other and to make full disclosure of relevant matters are applicable (Partnership Act 1892, s 28; Fletcher [4.15]; Lindley & Banks [16-01, 02, 06]. It was not contended on the appeal that either of these duties was breached by any of the partners. 32 Case authority does not suggest that the duties of partners to each other applicable on the making of dissolution agreements go beyond the duties not to mislead and to make full disclosure. In particular, there is no basis in the authorities relating to partnership law for a principle that a partnership dissolution agreement may be rescinded by a partner if "full value" is not given to the partner for his or her partnership interest. Such a principle would impose a substantial limitation upon the ability of partners to put an end to their arrangements in the most efficient and cost effective manner. It would enable a partner who had contracted for dissolution of the partnership with partners who had not misled him or her and had made full and frank disclosure to revisit the commercial arrangements freely entered into. This is what the appellant has sought to do in the present case. 33 The decision of the English Court of Appeal in Law v Law (1905) 1 Ch 140 is inconsistent with such a principle. That was a case of a sale by one partner to another of a share in the partnership business. The court held that there was a duty to make full disclosure and not to mislead resting on each of the partners but there was no suggestion by the court that the selling partner could subsequently complain if it transpired that he did not receive a fair price for his share of all of the partnership assets which existed. In that case, the purchasing partner was aware of the existence of more partnership assets than those of which the selling partner was aware. The selling partner's complaint of non disclosure was defeated by what was held to be an election on his part not to insist on his right of full disclosure. 34 To like effect is the statement in Lindley & Banks at [23-56]: "It is, perhaps, self evident that the rescission of a dissolution or other agreement cannot be obtained merely because it turns out to be disadvantageous to one or more of the partners. As Lord Lindley explained: 'Supposing every member of a firm to be sui juris , any one may retire upon any terms to which he and his co-partners may choose to assent; and if there is no fraud, misrepresentation or concealment on either side, all will be bound by any agreement into which he and they may enter, although it may ultimately turn out that a bad bargain has been made.' 35 Subclause 2(b) of the Heads of Agreement in this case provided inter alia for "any interest" or "claim to beneficial interest" which the appellant had "in the Branch Lane" to be "surrendered or transferred" to the second respondent. The words "the Branch Lane" were a reference to the Branch Lane property. They were so defined in clause 1. 36 Prior to the execution of the Heads of Agreement, the interests of the appellant in respect of the Branch Lane property stemmed from the fact that he and his nominee company Clemelle Way Pty Ltd comprised two of the four partners of the partnership which beneficially owned the property. Ultimately he would therefore be entitled, directly or indirectly, to one-half of the proceeds of sale of the property after discharge of relevant liabilities. The effect of subclause 2(b) of the Heads of Agreement was that in respect of his own partnership share the appellant forewent any claim to an interest in the Branch Lane property. As no trust was involved in the holding of this partnership share, there can be no doubt that the disposition (or surrender) of this interest was not subject to the "fair-dealing" rules. There was thus no obligation on the acquirer, the second respondent, to show that "full value" was given to the respondent in respect of this disposition, although as a partner, and therefore fiduciary, the second respondent was required to make full disclosure and to refrain from any misrepresentation. He adhered to these requirements. 37 The remainder of the appellant's effective interest in the Branch Lane property flowed from the fact that his nominee company, Clemelle Way Pty Ltd (the sole share in which was held by the second respondent on trust for him), was a partner in the property partnership. It would be surprising if the incidental fact that this part of the appellant's effective interest in the Branch Lane property was held not by himself but by a nominee on his behalf required a radically different principle to be applied in relation to the disposition of this part than applied in respect of the disposition of the other part of the appellant's effective interest in the property. 38 The appellant's use of a company to hold part of his interest in the venture was related to a divorce settlement of his and to an obligation on his part to pay maintenance to his second wife. As the primary judge found, the appellant's first wife was to be the sole shareholder and director of Clemelle Way Pty Ltd but she changed her mind. This circumstance, which was purely incidental, and indeed accidental, so far as the partnership and the second respondent were concerned, resulted in the second respondent becoming the sole shareholder and director. 39 Unlike the trust in Associated Alloys Pty Ltd v ACN 001452106 Pty Ltd [2002] HCA 25; (2000) 202 CLR 588, a case strongly relied upon by the appellant, the trust which was utilised by the appellant in the present case was not intended to, and did not, play any role in the commercial arrangements between the parties. The appellant utilised it purely for the purpose of holding part of his interest. In contrast, the commercial arrangements between the buyer and seller of goods in Associated Alloys incorporated a retention of ownership clause designed to protect the interests of the seller. The clause provided that if the goods were used in a manufacturing or construction process the proceeds of such process were to be held in trust for the seller. The High Court found no reason not to give effect to the trust according to its terms and to apply the principles ordinarily applicable to trusts. 40 In the present case, there was however an agreement by partners to dissolve their partnership. The agreement was of a conventional character. The principles applicable to such dissolution agreements would not entitle the partner to resist enforcement of such an agreement simply upon the basis of a contention that the other partner or partners had not given "full value" for his or her interest. To conclude that a different result should in part follow in the present case because of the way in which one half of the appellant's effective interests in the partnership were, purely for his own convenience, held, would in my view result in a triumph of form over substance and arbitrarily and unnecessarily derogate from partners' freedom to contract for dissolution of their arrangements in such manner as they thought appropriate. Whilst the maxim that "equity looks to the intent rather than to the form" has, as pointed out in Meagher Gummow and Lehane's Equity Doctrines & Remedies 4th ed (2002) Butterworths at [3-190] been "much misunderstood and misapplied", the present is in my view a case where it is applicable. The agreement constituted by the Heads of Agreement was in substance one for the dissolution of partnership. The fact that a trust was involved in an incidental way did not change the essential character of the relationship between the parties and of the partnership dissolution agreement into which they entered. It was not a case like Associated Alloys where the parties chose to utilise a trust to assist in regulating their relationship. 41 Consistent with this approach are the statements of Deane J in Chan v Zacharia at 205: "… one cannot but be conscious of the danger that the over-enthusiastic and unnecessary statement of broad general principles of equity in terms of inflexibility may destroy the vigour which it is intended to promote in that it will exclude the ordinary interplay of the doctrines of equity and the adjustment of general principles to particular facts and changing circumstances and convert equity into an instrument of hardship and injustice in individual cases: see Canadian Aero Service Ltd v O'Malley ((1973) 40 DLR (3d) 371, at p 383); Cretney, (loc. cit., pp 168ff); Oaklley, Constructive Trusts ((1978), pp 57ff). There is 'no better mode of undermining the sound doctrines of equity than to make unreasonable and inequitable applications of them': per Lord Selborne LC, Barnes v Addy ((1874) LR 9 Ch App 244 at p 251)." 42 Also relevant in this context are the comments of the High Court in Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544 made in connection with the obligation of a fiduciary to account for profits made within the scope and ambit of his or her duty: "It is necessary to keep steadily in mind the cardinal principle of equity that the remedy must be fashioned to fit the nature of the case and the particular facts. As Fletcher Moulton LJ observed in In re Coomber; Coomber v. Coomber ((1911) 1 Ch 723 at 728-729): 'Fiduciary relations are of many different types ... and the Courts have again and again, in cases where there has been a fiduciary relation, interfered and set aside acts which, between persons in a wholly independent position, would have been perfectly valid. Thereupon in some minds there arises the idea that if there is any fiduciary relation whatever any of these types of interference is warranted by it. They conclude that every kind of fiduciary relation justifies every kind of interference. Of course that is absurd. The nature of the fiduciary relation must be such that it justifies the interference. There is no class of case in which one ought more carefully to bear in mind the facts of the case ... than cases which relate to fiduciary and confidential relations and the action of the Court with regard to them. … … the stringent rule requiring a fiduciary to account for profits can be carried to extremes and that in cases outside the realm of specific assets, the liability of the fiduciary should not be transformed into a vehicle for the unjust enrichment of the plaintiff.' 43 Taken to its logical conclusion the appellant's argument would open many partnership dissolution agreements to challenge by former partners. It frequently happens, as occurred in the present case, that the legal title to partnership property is held by some, but not all, of the partners. The appellant's argument would require any partners who held the legal title to partnership property, and who were therefore trustees for the partnership, to show that they gave full value if a partnership dissolution involved their retaining some of that property beneficially. 44 A reason why particular caution needs to be exercised in applying trust principles to the relations between partners is that fiduciary duties are owed by each partner to each other. The confidence which exists between them is a mutual one (Chan v Zacharia ibid at 196). There is thus in this respect not necessarily an imbalance of position which usually exists in fiduciary relationships. 45 In Hospital Products Limited v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41, Mason J said that the critical feature of traditional fiduciary relations: "[I]s that the fiduciary undertakes or agrees to act for or on behalf of or in interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position" (at 96-7). 46 These comments apply to the relationship of partners as well as to the other accepted fiduciary relationships referred to by his Honour, namely, "trustee and beneficiary, agent and principal, solicitor and client, employee and employer [and] director and company" (at 96). The distinguishing feature of the partnership relationship is however that in that relationship the duties are mutual. Therefore unlike the position with the other relationships, there is not one person who is "vulnerable to abuse by the fiduciary of his position" and one who is not. Rather, both parties are in a sense at the same time both vulnerable and ascendant. There is thus a greater equality in the relationship. 47 The courts should in my view be loath to permit a person who was a party to a relationship which was in substance and effect of this character to disclaim a bargain freely entered into. The requirements to disclose and not to mislead are in ordinary circumstances sufficient protection for the parties. In particular, where a trust is only an incidental and accidental part of the relationship, there is in my view no warrant for imposing a requirement that in an objective sense parties receive "full value" for their interests if they decide to terminate their relationship. Rather, effect should be given to the parties' own bargain. If the giving of "Full Value" were required to be demonstrated 48 My conclusion therefore is that the "fair-dealing" rules were not applicable. I should nevertheless express my views as to the primary judge's conclusion that whilst the rules were applicable, they were not infringed. 49 This issue required consideration of the evidence as to the value of the Branch Lane property at the end of April 2005. As indicated earlier, the parties adopted the Fagan Simm valuation of $2,400,000 for the purpose of their partnership dissolution agreement. The expert valuer called by the first and second respondents, Mr Hood, valued the property at $2,500,000 as at that time. I agree with the primary judge's view that the difference of $100,000, which was one of only about four percent, was not of significance bearing in mind the subjective nature of the valuation process. 50 The valuation as at the end of April of the expert valuer called by the appellant, Mr Roberts, was however $3,150,000. 51 In [43-8] of his judgment (see [21] above), the primary judge took the view that the "fair dealing" rules must adapt to the circumstances and that effect should be given to the parties' agreement as to value notwithstanding Mr Roberts' expert evidence placing a much higher value on the property. Whilst the outcome of his Honour's analysis accords with my conclusion that the second respondent did not have to demonstrate that the "full value" of the Branch Lane property coincided with the figure adopted by the parties, my view is that the correct path to this conclusion is as I have outlined earlier in this judgment. 52 The alternative way in which his Honour dealt with Mr Roberts' evidence was as follows: "Mr Roberts' valuation was far in excess of the Fagan Simm and Hood valuations. I am concerned that, notwithstanding his assertion to the contrary, Mr [Roberts] was influenced by Mr Ford's offer in arriving at a valuation of Branch Lane at the earlier date of April 2005, the material date for consideration of the purchase price for the surrender or transfer of the share in Clemelle Way under the heads of agreement. In my view he gave too much weight to hindsight. The neighbour's offer had not been received when Fagan Simm performed their task. There is no suggestion that they lacked the expertise of competent registered valuers. Mr Beale was entitled to accept their valuation and in agreeing to pay a price based on that valuation he could not be said, in my view, to have failed to give Mr Trinkler full value for his share." (Red Appeal Book 72L-T). 53 In this passage the primary judge appears to conclude that Mr Roberts' evidence should be rejected because he was "influenced by Mr Ford's offer in arriving at a valuation of Branch Lane at the earlier date of April 2005", this being the material date. His Honour records that Mr Roberts' evidence was to the contrary of this proposition but does not give reasons for his rejection of that evidence. Submissions were made on behalf of the appellant, both orally and in writing, as to the basis upon which his Honour would have been justified in taking the view that he did. However, those submissions did not in my view give any clear indication as to matters which were capable of forming and, it should be inferred, did form, the basis for his Honour's conclusion. Accordingly, if, contrary to the views which I have expressed earlier, the real issue to be determined in the case was whether the valuation of the Branch Lane property adopted by the parties reflected its value at the end of April 2005, the matter would have to be remitted to the primary judge for further consideration. 54 I add that if this were the issue and if it were determined favourably to the appellant, consideration of any relief to be granted would have to focus upon the fact that the aspect of the transactions to which the "fair dealing" rules applied was the surrender by the appellant of his beneficial interest in the sole share in Clemelle Way Pty Ltd and that that company's beneficial rights in respect of the Branch Lane property were limited to such rights as it had as one of the four partners of the property partnership. As I have concluded that the Branch Lane property was partnership property, it would be incorrect in my view to regard the share in Clemelle Way Pty Ltd as indirectly giving entitlement to a one half beneficial share in the Branch Lane property. 55 A final matter is that the appellant contended that a separate reason why he did not receive full value for his share in Clemelle Way Pty Limited was that the Heads of Agreement contemplated the continuation of the cattle grazing/breeding partnership and that that was disadvantageous to him because that partnership was paying rent to the owners of the property at a rate in excess of its lease or agistment value, the difference being designed to cover finance costs on the facility obtained to purchase the property. 56 The appellant's case on this point was described in his Amended Cross Claim as follows: "[T]hrough his on-going involvement in the cattle partnership Trinkler was unknowingly continuing to pay for or materially subsidising Aileen Beale's and Clemelle Way's finance expenses to maintain ownership of the Branch Lane property". (Red Appeal Book 36P-R). 57 This pleading aptly illustrates that the appellant's complaint as to this matter in truth relates to the conduct of the cattle grazing/breeding partnership and not to that of the property partnership or to the value of his interests in it. If, as the appellant asserts, the cattle partnership has paid excessive rental to interests associated with one of the partners that will be a matter to be considered by the Associate Justice to whom matters concerning that partnership have been referred by the primary judge, the order having been made that: "The balance of the proceedings are referred to an Associate Justice for the taking of accounts and determination of the balance of any relief in relation to the winding up of the cattle partnership between the second plaintiff and the first defendant". (Red Appeal Book 83H-K). 58 In my view, the Heads of Agreement document did not purport to, or in fact, deal with the cattle partnership. The reference to that partnership in clause (I) was only to ensure that there was no doubt that it was not affected by the Heads of Agreement. As it was not suggested that Clemelle Way Pty Ltd was a partner in the cattle partnership or that the property partnership had a right, which constituted a valuable asset, to receive in the future above-market rental from the cattle partnership, the appellant's complaint did not in my view impact on the issue presently under consideration, namely, whether the appellant received "full value" for his share in Clemelle Way Pty Ltd. Orders 59 In my view the following orders should be made: (a) Leave to appeal granted. (b) The appellant within fourteen days to file a Notice of Appeal in the form of the draft contained in the Red Appeal Book. (c) The undertaking as to stamping of the Heads of Agreement proffered by the appellant to the Court be accepted. (d) The Court specifies the period of 28 days from the date of these orders as the time within which the undertaking is to be complied with. (e) Appeal dismissed. (f) The appellant to pay the respondents' costs of the leave application and appeal. 60 GYLES AJA: I agree with the orders proposed by Macfarlan JA and, subject to the issue discussed below, with his Honour's reasons. 61 I would prefer to leave open the question as to whether the "fair dealing" rules were complied with, if applicable. 62 The trial judge decided the issue as to whether the second respondent gave full value for the interest in Clemelle Way Pty Ltd by giving considerable, perhaps decisive, weight to the result of the agreed procedure for valuation. If the issue of value is a completely objective question, then I agree with Macfarlan JA that the trial judge did not evaluate the evidence appropriately. However, it may be that an agreed procedure for valuation by an arm's length expert valuer could satisfy the test, at least where there is no fundamental flaw in the valuation. That question is of general importance and, so far as the submissions here go, appears to be novel. It is best answered in a real, rather than hypothetical, situation. ********** 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.