Recent Question/Assignment
Corporate Law – Assessment Item 1- 2015
The due date for this assignment which has a weighting of 30% is the Wednesday of Week 6 of Term 1. Assignments must be typewritten and in a font of at least 12.
NOTE: You are required to engage in some research of your own to back up your arguments.
Assessment item 1— Written Assignment
Due date:
11:55pm AEST, Wednesday of Week 6
ASSESSMENT
Weighting Length: 30%
Part A: Short Answer (not longer than 1500 words)
Part B: Essay (Not longer than 1500 words, including substantive material in footnotes) 1
Objectives
This assessment item relates to all course learning outcomes as stated in the Course Profile.
Assessment details
Answer BOTH Parts below (A and B).
THE CASE
SUPREME COURT OF QUEENSLAND
CITATION: The Public Trustee of Queensland & Anor v Meyer & Ors
[2010] QSC 291
PARTIES: THE PUBLIC TRUSTEE OF QUEENSLAND as EXECUTOR OF THE ESTATE OF JOSEPH EDWIN JAMES
(First applicant)
PITGATE PTY LTD (ACN 080 300 278)
(Second applicant)
v
IAN DEREK MEYER
(First respondent)
ROSEMARY LYNN MEYER
(Second respondent)
MEYER GOLD MINING PTY LTD (ACN 054 255 846)
(Third respondent)
FILE NO: 1998 of 2007
DIVISION: Trial
PROCEEDING: Application
ORIGINATING
COURT: Supreme Court, Cairns
DELIVERED ON: 5 August 2010
DELIVERED AT: Brisbane
HEARING DATE: 19, 20 and 21 April 2010
JUDGE: Peter Lyons J
ORDER: Order made in terms of the initialled draft placed with the file
CATCHWORDS: PARTNERSHIP – PARTNERSHIP PROPERTY – whether plant and equipment of a partner used for the purposes of the partnership business can be said to be brought into the partnership – where financial statements recorded expenses for the hire of plant – where there was no express agreement
PARTNERSHIP – PARTNERSHIP PROPERTY – whether an agent is entitled to the benefit of an application initially made for the partnership - whether rights and interests held by an agent, arising from an application made by reason of the role as an agent, in connection with the partnership business, are held on constructive trust for the partnership – where the application is made after a partnership has been dissolved by the death of a partner
EVIDENCE – BURDEN OF PROOF, PRESUMPTIONS, AND WEIGHT AND SUFFICIENCY OF EVIDENCE – sufficiency - whether uncorroborated evidence from a surviving party should be accepted where other party is deceased
STATUTES: Partnership Act 1891 (Qld), ss 32, 23(1) CASES: Chan v Zacharia (1984) 154 CLR 178, cited
Birmingham v Renfrew (1936) 57 CLR 666, cited
Eggins v Robinson [2000] NSWCA 61, cited
Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, cited
Kelly v Kelly (1990) 64 ALJR 234, cited
Miles v Clarke [1953] 1 WLR 537, cited
O’Brien v Komesaroff (1982) 150 CLR 310, 322, followed
Plunkett v Bull (1915) 19 CLR 544, cited
Staib v Powell [1979] Qd R 151, cited
Swift v Dairywise Farms Limited [2000] 1 All ER 320, cited
Tasmanian Seafoods Pty Ltd v Peters[1999] QSC 144, cited
COUNSEL: A Philp SC for the Public Trustee
M Jonsson for the Court Appointed Receivers
D Morzone for the First, Second and Third respondents
SOLICITORS: Official Solicitor for the Public Trustee
Williams Graham Carmen Solicitors for the Court Appointed
Receivers
Apels Solicitors for the First, Second and Third Respondents
[1] As a result of arrangements made initially in about 1994 between the late Joseph Edwin James (Mr James) and the first respondent (Mr Meyer), a partnership has for many years conducted a mining venture, with mining being carried on in the vicinity of Chillagoe (I shall refer to this location as the Chillagoe mine site). The applicants have been appointed as the receivers and managers of the partnership, and the trustees of certain property. Questions have arisen as to whether certain plant and equipment is partnership property; and as to whether Mr Meyer is absolutely entitled to the benefit of an application for a Mineral Development Licence (MDLA 415).
Background
[2] Some time prior to 1994, Mr James acquired an interest in a mining lease relating to a perlite deposit near Chillagoe. He was said to be a prospector with a good knowledge of the region of the Alice River on Cape York Peninsula, and its mineralisation. In 1993, Mr Meyer was involved in a hard rock mining venture on the Alice River. When difficulties were encountered, another party to the venture called in Mr James to assist. At some time thereafter, Mr James discussed with Mr Meyer the perlite mining lease.
[3] Subsequently, Mr Meyer acquired an interest in the mining lease (ML 20152).
Records from the Department of Mines and Energy record that on 8 January 1993, Mr James acquired a 49% interest in the mining lease; and on 10 January 1994 Mr Meyer acquired 51% interest in the lease.
[4] At some time prior to 30 June 1995, a partnership commenced to operate the lease and to mine perlite. It was originally constituted by Mr James and the third respondent to these proceedings (MGM). However, the constitution of the partnership changed in about October 1997 when Pitgate, who is the second applicant in these proceedings, replaced Mr James as a partner. By then the name of the partnership was Chillagoe Perlite. The holders of ML 20152 remained unchanged.
[5] The partnership in due course operated successfully. By 1997, its gross sales amounted to $395,638, and the net profit amounted to $157,214. By 2001, gross sales appear to have reached $1,172,208, with a net profit of $222,828. Mr James died on 9 June 2004. For the 2004 year, the financial statements prepared at the instigation of the applicants (which are disputed) disclose sales approaching
$2,000,000, and a net profit of $361,705.
[6] Much of the plant and equipment used in the venture was provided by Mr Meyer, or persons or interests associated with him.
[7] The partnership conducted operations at the Chillagoe mine site, and also at what was referred to as the Mareeba processing plant (Mareeba site). At the beginning of the case, I was told, without objection, that the title to the Mareeba site was registered in the name of the two individuals, whom I take to be Mr James and Mr Meyer.
[8] In about 1998, it appears that Mr James and Mr Meyer decided that it would be wise to allow for the need to expand mining activities beyond the boundaries of ML
20152. They lodged, in their own names, an application for a Mineral Development Licence (MDLA 295). Consistently with ML 20152, a 51% interest in MDLA 295 was in the name of Mr Meyer, and a 49% interest in the name of Mr James. The total area the subject of this application was 638 hectares. The application had not been determined at the time of Mr James’s death.
[9] South Australia provided a significant market for the product from the venture.
Land was acquired there for the mining venture. I was told, again without objection, that land was acquired in the name of a different company, apparently Chillagoe Perlite South Australia Pty Ltd.
[10] After Mr James’ death, Mr Meyer, with the assistance of his wife, continued to conduct the mining operation. The wages paid to them, and the hiring charges for equipment, were significantly increased.
[11] In the present proceedings, a consent order was made on 3 May 2007, appointing the present applicants as trustees of ML 20152, an interest identified as Mining Development Licence 295 (apparently a reference to MDLA 295), and the Mareeba
site. They were also appointed receivers and managers of the partnership, and an order was made that the affairs of the partnership be wound up.
[12] Although the order made no reference to the South Australian property, the parties apparently agreed to a sale of it being conducted by the applicants.
[13] The applicants took possession of the plant and equipment located at the Chillagoe mine site and the Mareeba site. This plant and equipment is used in the day to day operations of the partnership. They then attempted to determine the extent of the partnership property. That resulted in Mr Meyer making a claim that much of the plant and equipment was either his, or belonged to persons or entities associated with him (together, the Meyer interests). The extent of the claim has varied from time to time. The applicants have accepted the claim in part.
[14] On 24 March 2005, an entry was made in the records of the Department of Mines and Energy, recording the transmission of the interest of Mr James in MDLA 295 to the Public Trustee, as his personal representative.
[15] Correspondence with the Department of Mines and Energy in 2007 reveals that difficulties were raised with the Department in recording that the applicants had any interest in ML 20152 and MDLA 295. On 29 January 2008, Mr K F Nielsen, as a director of Pitgate and as agent for The Public Trustee, signed a form requesting that Mr Meyer be the nominated person, and his address be the address for service, for correspondence from the Department relating to MDLA 295 and ML 20152. That document was also signed by Mr Meyer, and lodged on the same day with the Department of Mines and Energy (the nomination document).
[16] On 1 May 2009, the Minister for Natural Resources, Mines and Energy wrote to Mr Meyer advising that he had formed the view that MDLA 295 could not be progressed further, as the applicant (Mr James) had died, and was no longer an eligible person; and accordingly the application was rejected. However the letter advised that the Minister would permit Mr Meyer to re-apply, without being “the holder of a prerequisite tenure”. The correspondence indicates that the applicants only became aware of this letter, when, in June 2009, they sought confirmation of the active status of MDLA 295, and were then sent a copy of the letter to Mr Meyer on 3 July 2009.
[17] In the meantime, no doubt in response to the Minister’s letter, on 22 May 2009, Mr Meyer made an application for a Mineral Development Licence (MDLA 415). That application has not been determined. One of the matters the subject of the present application is whether Mr Meyer holds his rights and interest in respect MDLA 415 absolutely, or for the benefit of the partnership. It is convenient to deal now with that matter.
MDLA 415
[18] I have already set out some of the background relating to the making of this application. However, it is convenient to mention some further matters.
[19] On the appointment of the applicants, they wrote to Mr and Mrs Meyer as directors of MGM, requesting that they identify, amongst other things, the assets of the partnership. The reply included, as assets of the partnership, MDLA 295 (as well as ML 20152, the Mareeba site, and the South Australian land). That led to the applicants taking action to secure an interest in MDLA 295, of which brief mention has already been made. At no time in his correspondence with the applicants did Mr Meyer assert that, on Mr James’s death, he alone was entitled to the benefit of MDLA 295, or indeed, that it was not partnership property.
[20] MDLA 415 was made in the name of Mr Meyer only. The application form included the following, in what appears to be Mr Meyer’s handwriting:-
“The Mineral Development Licence should be granted to facilitate the applicant ongoing investigation and development of the perlite deposit which lies within this area.”
[21] Statements accompanying the application included the following statement relating to proposed activities:-
“Ongoing technical analysis of the size and capabilities of perlite to expand our current business for the Australian market. For example, we would undertake further technical analysis for the specifications to expand our share of the cryogenic market and Filter Aid production in Australia.”
[22] The following was also included in the statements accompanying the application:- “Our financial status to fund this project is our current perlite mining
and manufacturing business which has a gross turnover of approximately $2 million per year. We currently process up to
4,000,00 (sic) tonne per year. Our mining operation has been continually growing and expanding since it started. Technical resources held by us, include ongoing lab analyses, testing for the specific requirements, and employment of a consultant. Our mining interest is a lease (ML 20152) we have been mining and manufacturing perlite on, for approximately 12 years within this mineral development licence. During this time, we have researched, developed and gained a substantial part of the horticultural and foundry slag coagulation market.”
[23] ML 20152 is the mining lease which was operated by the partnership, and acknowledged by Mr Meyer to be a partnership asset. The reference to “our current perlite mining and manufacturing business” and to “our business” plainly are references to the business of the partnership.
[24] In his affidavit, Mr Meyer swears that at no time did he treat Mr James’s interest in MDLA 295 as part of the Chillagoe Perlite business. He seeks to explain the application as made in recognition that a Mineral Development Licence over the surrounding land was an asset “which had potential value to the Chillagoe Perlite venture”, but continues that “as an untested and undeveloped resource, it played no part in the operation of the Chillagoe Perlite venture”. He sought to explain the
inclusion of MDLA 295 as an asset to be held by the applicants pursuant to the Court order on the basis that to treat it in this way might assist in the finalisation of the administration of Mr James’s estate. He stated that he made MDLA 415, to protect his personal interest, and that of his company “as a potential future operator of the Chillagoe Perlite venture”.
[25] I note, however, that no explanation was given for the inclusion of MDLA 295 in the list of assets of the partnership, provided to the applicants under cover of a letter of 15 May 2007. Nor is there any explanation for the failure to assert that the interests held in MDLA 295 were not a partnership asset until the present dispute arose in 2009. MDLA 415 plainly recognises that the foundation for that application was the partnership business. It goes so far as to state that the mining lease, though not formally held in the name of the partners, was the subject of the partnership activity. It is difficult to reconcile statements in this application with an assertion that the mining lease was not partnership property. Equally, it is difficult to reconcile those statements with an assertion that MDLA 295 was not a partnership asset.
[26] Further, the opportunity was given to Mr Meyer to make MDLA 415, as a result of the nomination document. That document was executed by a person acting as agent for The Public Trustee, representing Mr James’s estate; and as a director of Pitgate Pty Ltd, which might be regarding as representing Mr James’s interests in the partnership in the same way that MGM represents Mr Meyer’s interest in that partnership.
[27] Counsel for the applicants referred me to s 32 of the Partnership Act 1891 (Qld) which requires every partner to account to the firm for any benefit derived by the partner without the consent of the other partners, from any use by the partner of a partnership business connection. The operation of this provision is extended to transactions undertaken after a partnership has been dissolved by the death of a partner.
[28] The parties to the partnership were neither Mr Meyer nor Mr James. Unaided, this provision could not apply unless it were possible to identify Mr Meyer and MGM as a single entity. While it may be possible to do that, that was not explored by the parties. Nor was consideration given to the question whether Mr Meyer, as a director of one of the partners, had profited from his position in a way that meant his interests in MDLA 415 were held on behalf of MGM, which in turn held those interests for the benefit of the partnership.
[29] Reliance was also placed on Chan v Zacharia1. There, Deane J held that the relationship between partners is a fiduciary one2; and that after the dissolution of the partnership the partners remained under a fiduciary obligation to cooperate in and act consistently with the agreed procedure for the realisation, application and distribution of partnership property.3 Again, strictly speaking, it may be argued that Mr Meyer was not personally a member of the partnership, and accordingly the propositions formulated by Deane J do not apply to him.
1 (1984) 154 CLR 178
2 See p 196
3 See p 197
[30] In my view Mr Meyer and Mr James made the application which became MDLA
295 as agents for the partnership. They did so, in connection with the partnership business, with a view to its expansion beyond the area the subject of ML 20152. Indeed, I consider the better view to be that ML 20152 came to be held by Mr James and Mr Meyer on trust for the partnership. That is reflected in Mr Meyer’s treatment of the mining lease in his letter to the applicants of 15 May 2007. It is also consistent with the statements made in support of the application which became MDLA 415. In this context, I also note that the nomination document contained the signature of Mr Nielsen in two capacities, as the agent for The Public Trustee of Queensland (obviously representing Mr James’s estate); and also as a director of Pitgate (one of the partners). Further, the partnership financial statements record bonds and other expenses attributable to the mining lease.
[31] The opportunity to make the application which became MDLA 415 came to Mr Meyer in part, by reason of his role as an agent for the partnership in relation to MDLA 295. It also came to him by reason of the nomination document, which resulted in his receipt of the letter from the Minister giving him the opportunity to make the later application.
[32] Finally, the application rested on the current mining venture and mining lease. It was on the basis of his identification with those things that Mr Meyer made the application.
[33] I note that the Public Trustee, who represents the interest of the estate of Mr James, supports the position taken by the applicants, and does not seek to assert that Mr James had any interest in MDLA 295, other than as an agent for the partnership. The Public Trustee supports the grant of relief sought by the applicants.
[34] In my view, it is clear that Mr Meyer does not hold his rights and interests in relation to MDLA 415 absolutely, or in his own right. I consider that in respect of that application, he has fiduciary obligations to the partnership and holds such rights and interests as he might have for their benefit.
[35] Counsel for the applicants referred me to Tasmanian Seafoods Pty Ltd v Peters4 where Margaret Wilson J made an order for specific performance in respect of the sale of a beneficial interest in a permit for the commercial collection of trochus. She did so, notwithstanding an implied prohibition on the transfer of the legal title in the permit. She held that it could be the subject of a trust5. He also referred me to Swift v Dairywise Farms Limited6. In that case, a company had made loans to farmers, secured by rights identified as “milk quotas”. A milk quota gave the holder an exemption from a levy which would otherwise have been payable; and could only be attached to appropriate land, on which milk could be produced. The company did not have appropriate land, but a related company did. Consequently, security was provided by farmers entering into agreements with the related company, and transferring their quotas to that company pending repayment of the loans. When the lender went into liquidation, its liquidators contended that the related company held the securities over the quotas on trust for the lender. It was
4 [1999] QSC 144
5 See [at 28] para
6 [2000] 1 AllER 320
held that the milk quotas were capable of forming the subject matter of a trust7. On the basis of these cases, it was submitted that the rights and interests which Mr Meyer has in MDLA 415 are held by him subject to a constructive trust in favour of the partnership. On the basis of the authorities to which he has referred, I am prepared to accept that submission, and make a declaration accordingly. If it were not possible to do so, I would have granted injunctive relief, to ensure that any benefit associated with the application was made available to the partnership.
Disputed plant and equipment
[36] Mr Meyer has given evidence that over the years, his family has mined at different locations, resulting in relocation and modification of its mining equipment. In
1990, when he married the second respondent, he took a share of the family’s mining equipment. MGM became the vehicle through which Mr and Mrs Meyer carried on mining activities, using that equipment. They did so initially on the Palmer River, and then at Alice River, near Laura. The operation at Alice River was conducted in partnership with a Mr Ward. Mr Ward owned the leases, and the Meyer interests provided the equipment. When that operation ceased, the Meyer interests retained the mining equipment which was then relocated to the Chilagoe area, and used for partnership purposes.
[37] Mr Meyer has given evidence to the effect that it is generally not possible for him to produce documentary proof of purchase of the plant and equipment claimed by the Meyer interests. He explained that in part by reference to the fact that much of it was acquired when he ceased to carry on mining with the other members of his family in about 1990; and in part because other equipment has been acquired over a lengthy period, often without any formal documentation of purchase. He has put in evidence a folder in which he has set out the history of the purchase of various items of plant and equipment claimed by the Meyer interest, and has included photographs of the items of equipment. He has also included written statements by others providing some corroboration for the evidence from Mr Meyer as to the origins of these items. It is apparent that the items claimed by the Meyer interests include some substantial and potentially valuable pieces of equipment. The attitude taken by the respondents to this evidence was that the origin of the equipment did not matter, the real issue being whether the plant and equipment was brought into the partnership.
[38] In his affidavit, Mr Meyer has deposed to discussions with Mr James, which appear to have taken place prior to June 1994, and which included a discussion about the basis on which Mr Meyer and interests associated with him would become involved in the mining of the perlite deposit. The agreement deposed to by Mr Meyer included an arrangement that the Meyer interests would make available its machinery and plant to do the mining and processing of the mine’s product; and “the venture” would pay a hire charge for the use of that equipment.
[39] The submissions made on behalf of applicants/receivers and managers of the partnership make reference to s 23(1) of the Partnership Act 1891 (Qld), which provides that all property originally brought into the partnership stock, or acquired
7 See p 326-327
on account of the partnership, or for the purposes and on account of the partnership business, is to be held and applied by the partners exclusively for the purposes of the partnership, and in accordance with the partnership agreement. However, those submissions correctly draw attention to the observation of Mason J (as he then was) in O’Brien v Komesaroff8 to the effect that not all property of each partner used for the purposes of the partnership business can be said to be “brought into the partnership”; and that the acts and intention of the party determine finally and ultimately whether property owned by a partner becomes partnership property.
[40] The submissions made on behalf of the applicants/receivers and managers also draw attention to the fact that it was no longer possible to obtain evidence from Mr James as to the arrangements made about the property now in dispute. They refer to the following statement of McLelland CJ in Eyota Pty Ltd v Hanave Pty Ltd9:
“… In a claim based on communications with a deceased person, the court will treat uncorroborated evidence of such communications with considerable caution, and will regard as of particular significance any failure of the claimant to bring forward corroborative evidence which was or ought to have been available.”
[41] The claim made by Mr Meyer that certain plant and equipment is not partnership property faces some difficulties.
[42] In his reply to the letter from the applicants of 15 May 2007 (the reply was apparently dated 30 May 2007), Mr Meyer provided a handwritten inventory of plant and equipment of the partnership. Notwithstanding that the letter from the applicants had also called on him to identify assets or property claimed to be personal property, he did not do so at that time.
[43] However, on 9 July 2007, MGM issued an invoice to the partnership for the hire of equipment. The list was not extensive. Much of the equipment might be described as mobile equipment, but included dryers and miscellaneous plant items. The invoice was apparently an invoice for hire for one month, and the amount claimed was $12,090.
[44] In September 2007, an offer was made on behalf of MGM to purchase the interest of Pitgate in the partnership. To enable the applicants to consider the offer, Mr Meyer provided a schedule which identified by underlining the property which was not the property of the partnership. The number of items so underlined was very limited. The offer was subsequently rejected. The applicants then decided to sell the property of the partnership by public tender. On 28 July 2008, the applicants wrote to Mr Meyer calling on him to provide an inventory of all vehicles, plant and equipment which he asserted was owned by him, Mrs Meyer, or MGM. That resulted in the production of a significantly more extensive list of plant and equipment, sent by facsimile to the applicants on 6 August 2008. Mr Meyer gave evidence that this was his attempt to “make sense of” a previous list produced on
8 (1982) 150 CLR 310, 322.
9 (1994) 12 ACSR 785, 789; in this context reference is also made to Plunkett v Bull (1915) 19 CLR
544; Birmingham v Renfrew (1936) 57 CLR 666, 674; Staib v Powell [1979] Qd R 151; and Eggins v
Robinson [2000] NSWCA 61 at [26].
behalf of the applicants of all of the property of which they had taken possession, rather than simply a list of the property claimed by the Meyer interests.
[45] In September 2008, in the course of an inspection of the plant and equipment, Mr
Meyer claimed some additional items, identified in a letter of the applicants of 9
September 2008. Attached to that letter was another list which Mr Meyer had provided of plant and equipment claimed by the Meyer interests. On 23 October
2008, Mr Meyer wrote to the applicants with yet another list of property claimed on behalf of the Meyer interests. The applicants were not prepared to accept the claims made without substantiation.
[46] The position taken by Mr Meyer as to the plant and equipment claimed by the Meyer interests was later identified by reference to a schedule sent by his solicitors to the solicitors for the applicants on 29 July 2009 (the 2009 schedule). Some 241 items are listed in the 2009 schedule (though in some cases an item is represented by more than one piece of plant of equipment). On my count, Mr Meyer claims approximately 150 of the items. The applicants are prepared to admit that a number of the items (by my count, 28) are not partnership property. I note that the claim as identified on the 2009 schedule is not identical to the claim in Mr Meyer’s affidavit.
[47] Some of the items in dispute are obviously substantial items of equipment.
However, they also include shed beams, which had been incorporated into a building; lengths of flex pipe; a computer desk and a cupboard.
[48] Mr Meyer was cross-examined about a perlite furnace, which he claims to be the property of MGM. He identified it with a perlite furnace referred to in depreciation schedules of that company, as early as 1994. However, he said that for the purpose of using it in the partnership business, it had to be rebuilt three times. He said the cost of maintenance, and possibly improvements, was paid by the partnership; and that the claim of ownership by the company was based on the fact that it had been owned by the company before the partnership was formed, and it had not been purchased by the partnership. However, in the list provided to the applicants in September 2007, this was identified as partnership property. It was then claimed as property of the Meyer interests in August 2008, and subsequently.
[49] Another item claimed by Mr Meyer was a jaw crusher which had been used in the operation on the Alice River. It was brought to Chillagoe, where the shaft broke, and was considered not worthy of repair. A new jaw crusher was purchased, and in his oral evidence, Mr Meyer claimed this crusher. However, it emerged that the jaw crusher was no longer claimed by Mr Meyer.
[50] Mr Meyer was cross-examined about the perlite drilling plants. These apparently are an assembly of a number of specific parts. Mr Meyer acknowledged that some of the parts were purchased by the partnership, but claimed ownership of other parts on the basis they had been MGM’s equipment at the time of a previous tin mining operation.
[51] In the 2007 inventory, Mr Meyer had identified an IT 12 loader and a half ton forklift as property of the partnership. In the 2009 schedule Mr Meyer asserted neither to be partnership property. He now claims the loader not to be partnership
property. He says that a forklift, which he describes as the “heavy forklift”, is partnership property; but says that another forklift, the Caterpillar forklift, is the property of MGM.
[52] It is apparent from the cross-examination of Mr Meyer that most of the plant and equipment the subject of the claim is relatively elderly, and that there has been some incorporation of the equipment into equipment purchased by the partnership, or vice versa. The age of much of the equipment is confirmed by material assembled by Mr Meyer, which became exhibit 2. Some of the equipment was said to have been acquired in the 1970s, and more in the 1980s.
[53] However, there is some evidence which provides some support for the claim by the
Meyer interests. Mr Park was the accountant for the partnership between 1996 and
2004. He prepared financial statements including tax returns over that period to 30
June 2003. The financial statements record expenses for the hiring of plant. In the early years, the charge was relatively modest, but by 2001 had increased to $4,719, and in 2002 to $8,509. In 2003, the amount for this expense was $15,677.
[54] There was some corroboration for the proposition that hire charges recorded in the financial statements of the partnership were in fact paid to the Meyer interests. Mr Park was asked questions to that effect about ledgers which became exhibit 4.
[55] The financial statements also include depreciation reports. The early depreciation reports record purchase dates for individual items of plant and equipment. The first recorded item was a rolls crusher, the date of purchase being 18 August 1995. The
2003 financial statements include a report from Mr Park dated 23 October 2003 indicating that they were prepared some months prior to the death of Mr James. They include a depreciation schedule identifying plant and equipment. Much of the equipment there recorded might be described as office equipment, though some plainly relates to mining operations. It seems to be accepted that generally, the items claimed by the Meyer interests are not identified in any depreciation report or depreciation schedule for the partnership.
[56] The first set of partnership financial statements in evidence is for the year ending 30
June 1996. The financial statements include financial information for the previous year. No plant and equipment is identified in the 1995 information. The plant and equipment identified in 1996 is the rolls crusher, identified as purchased on 18
August 1995. The financial statements record no capital contributions by the partners in 1995. A sum of $500 was recorded as a capital contribution by MGM in
1996. There has been no suggestion that that reflects the contribution by the Meyer interests of the plant and equipment now claimed by those interests; indeed, in evidence, Mr Park accepted that $500 would not represent “anything like” the value of the plant and equipment, and was unlikely to reflect a contribution of that plant and equipment. Given the extent of the plant and equipment, that evidence is likely to be correct. I note that the amount is relatively close to the funds of MGM in the partnership at 30 June 1995; though again, there is no evidence which identifies that as the explanation for the capital contribution in 1996.
[57] In re-examination, Mr Park gave evidence that a partner contributing equipment of any value to a partnership would be likely to require the contribution to be recorded,
even if the equipment could not be depreciated for taxation purposes. He also expressed the view that the accounts were a strong indication that no attempt was made to bring the equipment claimed by the Meyer interests into the partnership.
[58] The following points are made in the submissions on behalf of the applicants/receivers and managers:-
(a) the Meyer interests permitted the applicants to take possession of the property in dispute (along with property admitted to be partnership property);
(b) notwithstanding the invitation to do so in the letter from the receivers and managers at 15 May 2007, Mr Meyer did not identify assets or property which the respondent might claim as theirs. Rather, a list was provided, all items of which seemed to be acknowledged as partnership property;
(c) in September 2007, MGM offered to purchase Pitgate’s interest in the mining lease and mineral development permit, including “All plant and equipment”. Although the schedule provided by Mr Meyer on that occasion included some items with underlining, a note explain that the items underlined were not the property of the partnership. Only one of the items at present in dispute was underlined.
[59] These matters reflect some of the difficulties with the evidence of Meyer to which I
have referred.
[60] As was pointed out in O’Brien,10 not all the property of each partner used for the purposes of partnership business can be said to be brought into the partnership: whether such property belonging to a partner becomes partnership property depends on the agreement of the parties, and the accent intention of the parties, not the operation of the Partnership Act, determined finally and ultimately the question whether property owned by a partner becomes partnership property.
[61] I have previously mentioned the statements of Mason J in O’Brien. In Kelly v
Kelly11 the High Court cited the following passage from Miles v Clarke:12 “No more agreement between the parties should be inferred than is absolutely necessary to give business efficacy to that which has happened.”
[62] Their Honours then made the following observation:
“That comment may overstate the position, but it would plainly be wrong to ascribe agreement to the parties unless their dealings clearly point in that direction.”
10 At 322.
11 (1990) 64 ALJR 234, 237.
12 [1953] 1 WLR 537, 540.
[63] In view of the approach to be taken because it is no longer possible to obtain evidence from Mr James, as the difficulty in the evidence of Mr Meyer to which I have referred, I would be reluctant to accept his evidence if it stood alone. I should say that, although I had the opportunity to observe Mr Meyer give evidence under cross-examination, that opportunity was of limited assistance in determining whether to accept or reject his evidence. However, there are some objective matters, which would appear to have had the express or at least tacit consent of Mr James, which provide support for Mr Meyer’s evidence.
[64] The first is that, from the outset, the financial statements record expenses for the hire of plant. No other explanation has been advanced for these expenses, than that they reflect a recognition that the plant provided by the Meyer interests was not partnership property. As I have indicated, there is some corroboration of the payment of some of these expenses to the Meyer interests in ledgers placed in evidence. The amounts appear to be small, when the extent and apparent value of the plant and equipment is taken into account. Mr Meyer explained that by reference to the fact that in the early years, when the business was being established, the full hire charges were not to be paid. Whatever might be the explanation for the amounts, in my view it is of some significance that some payment of hire charges was made.
[65] The second matter which seems to me to be significant is that the financial statements of the partnership, which were produced during Mr James’ lifetime, contained no record suggesting that the disputed plant and equipment became partnership property. Nor do they record any entry in the capital accounts of the partnership in favour of MGM in recognition of the contribution of plant and equipment, whether by MGM, or the Meyer interests. From the outset, the partnership balance sheets record land and building, as well as some plant and equipment (which can be related to the depreciation reports and schedules, and which plainly is not the disputed plant and equipment). Some of the financial statements also record partners’ funds. In those circumstances, the absence of any entry reflecting that the disputed plant and equipment had become partnership property is, in my view of considerable significance.
[66] As I have indicated, Mr James knew of the existence of the perlite deposit, and introduced Mr Meyer to it. However, the evidence of Mr Meyer (confirmed by a Mining Lease Report provided to the applicants) is that Mr Paul Ray, prior to the involvement of MGM, held a 51% interest in ML20152. For the Meyer interests to become involved in the perlite mine, it was necessary to purchase Mr Ray’s interest. The plant and equipment provided by the Meyer interests was obviously necessary to enable the operation to proceed. There is no reason to think that its success was guaranteed, and in the early years sales and profits were relatively modest. These circumstances make it some what unlikely that the Meyer interest would have agreed to contribute their plant and equipment to the partnership, at least without some significant recognition of that fact in the financial statements. That view is supported by the fact that the equipment is likely to have been important to them, by virtue of the long-term involvement of the Meyer family in mining; and by the fact that, (on Mr Meyer’s evidence) in the venture in which he had previously been engaged, the plant and equipment did not become partnership property.
[67] In view of these circumstances, and the absence of any positive evidence that the partners agreed that the plant and equipment was to become partnership property, I am not prepared to find that the disputed plant and equipment is partnership property; rather, I am of the view that it is retained by the Meyer interests.
[68] In reaching that conclusion, I am conscious of the difficulties which arise from the fact that at different times, Mr Meyer has made different claims about the extent of the property said to belong to the Meyer interests. While that is a little troubling, it seems to me to be in part explicable by the extent of the property involved, the relatively long period of time over which the partnership has operated, and the greater attention which appears to have been given to the origins of some of the items of property, in the course of preparing for the hearing. Moreover, it is not surprising that there might be some uncertainty about the ownership of plant, where an item originally belonged to the Meyer interests, and was later repaired or restored at the expense of the partnership.
[69] There is also the fact that the July 2007 invoice for hire charges includes a limited amount of plant and equipment. Mr Meyer explained that by saying that, by this time, the applicants had been appointed as receivers; and that it was not possible to identify a commercial market rental for some of the equipment. He also gave evidence that the arrangement with Mr James was that hire charges would be on a rate per tonne of material mined. I also note that the rate charged in the July 2007 invoice results in hire charges for plant and equipment substantially higher than what was charged when Mr James was alive.
[70] A consideration of these matters, in the end, and having regard to factors which seem to me of greater significance, does not lead me to alter my conclusion.
Conclusion
[71] I am prepared to make a declaration that Mr Meyer holds such rights and interests as he might have in MDLA 415 for the benefit of the partnership between MGM and Pitgate. I am also prepared to make an appropriate declaration to give effect to my conclusion that the disputed items of plant and equipment are not partnership property, but are the property of the Meyer interests. I propose to hear submissions as to the appropriate form of relief to be granted, and as to costs
Part A: 15 Marks
Your managing partner has handed you the Supreme Court of Queensland’s decision in The Public Trustee of Queensland & Anor v Meyer & Ors [2010] QSC 291). And asked you to answer the following questions. You should assume you are answering the questions for someone who has not read the case, so be sure to provide sufficient detail in your answers. You do not need to provide reference details for Part A of the assignment.
(1) Explain who were the respective parties to the action. Why were there so many parties? (2 marks).
(2) What were the legal issues to be determined with regards to MDLA 415? (2 Marks).
(3) What did the first Respondent argue with respect to the MDLA 295 and MLDA 415? (1 Mark).
(4) What did the Applicants allege with respect to the requirement for ‘partners to account to the firm’ in respect of MDLA 415? (2 Marks).
(5) What did the court decide with respect to the Applicants’ arguments on partners having to account to the firm and MDLA 415? In your answer, explain how the court applied the relevant law, in the light of relevant facts and law cited in the judgment. (2 Marks).
(6) With regards to MDLA 415, what declaration did the court make and why? In your answer explain the law the court relied upon in reaching its decision to make the order. (2 Marks).
(7) On what grounds did the Applicants claim that the plant and machinery was partnership property? (2 Marks).
(8) What did the court decide with respect to the plant and equipment? Explain how the court reached its decision, including relevant law and evidence. (2 Marks).
PART B 15 MARKS
Please prepare a short research essay on the following issue.
“There is no common, unifying principle, which underlies the occasional decision to pierce the corporate veil’: Idoport Pty Ltd v National Australia Bank Ltd [2004] NSWSC 695. Critically evaluate and discuss this statement with reference to relevant case law and statute (if applicable).
In answering Part B you are expected to consult both primary material (e.g. case law, statute) and secondary sources (e.g. journal articles, academic books). Any internet sites consulted must be relevant to the topic and should be from academic and Australian legal websites (e.g. ASIC website or Law Reform Commission).
DO NOT copy material from websites or other sources without proper acknowledgement of the source. Your essay must conform to normal academic essay requirements and include a clear introduction and overall argument.
ASSESSMENT CRITERIA
These criteria are a general guide as to the standard expected at various levels.
High distinction standard
• The answer is very well written and clearly expressed
• There is a demonstrated appreciation and understanding of issues involved
• The answer is well structured and logically organised
• Demonstrated mastery of the referencing system
• There is evidence of a comprehensive analysis of the issues
Distinction standard
• The answer is well written and expressed
• The answer is structured and logical
• The issues have been reasonably well defined and appreciated
• There is correct use of referencing
• Issues have been analysed
Credit
• The answer is generally well written and expressed
• The answer is structured and sequential
• Referencing is satisfactory
• Issues are identified and addressed
• There has been an attempt to analyse some of the issues
Pass standard
• The answer is able to be followed and understood
• The answer could perhaps be better organised and structured
• The referencing may need improvement
• Issues may need to be identified and addressed in more depth
• Analysis when present may be incorrect
Fail standard
• The answer is sometimes significantly short of the required length
• The written expression is poor and difficult to understand
• The answer is poorly organised
• There has been a failure to address issues
• Referencing is generally inadequate.
The due date for this assignment which has a weighting of 30% is the Wednesday of Week 6 of Term 1. Assignments must be typewritten and in a font of at least 12.
NOTE: You are required to engage in some research of your own to back up your arguments.
Assessment item 1— Written Assignment
Due date:
11:55pm AEST, Wednesday of Week 6
ASSESSMENT
Weighting Length: 30%
Part A: Short Answer (not longer than 1500 words)
Part B: Essay (Not longer than 1500 words, including substantive material in footnotes) 1
Objectives
This assessment item relates to all course learning outcomes as stated in the Course Profile.
Assessment details
Answer BOTH Parts below (A and B).
THE CASE
SUPREME COURT OF QUEENSLAND
CITATION: The Public Trustee of Queensland & Anor v Meyer & Ors
[2010] QSC 291
PARTIES: THE PUBLIC TRUSTEE OF QUEENSLAND as EXECUTOR OF THE ESTATE OF JOSEPH EDWIN JAMES
(First applicant)
PITGATE PTY LTD (ACN 080 300 278)
(Second applicant)
v
IAN DEREK MEYER
(First respondent)
ROSEMARY LYNN MEYER
(Second respondent)
MEYER GOLD MINING PTY LTD (ACN 054 255 846)
(Third respondent)
FILE NO: 1998 of 2007
DIVISION: Trial
PROCEEDING: Application
ORIGINATING
COURT: Supreme Court, Cairns
DELIVERED ON: 5 August 2010
DELIVERED AT: Brisbane
HEARING DATE: 19, 20 and 21 April 2010
JUDGE: Peter Lyons J
ORDER: Order made in terms of the initialled draft placed with the file
CATCHWORDS: PARTNERSHIP – PARTNERSHIP PROPERTY – whether plant and equipment of a partner used for the purposes of the partnership business can be said to be brought into the partnership – where financial statements recorded expenses for the hire of plant – where there was no express agreement
PARTNERSHIP – PARTNERSHIP PROPERTY – whether an agent is entitled to the benefit of an application initially made for the partnership - whether rights and interests held by an agent, arising from an application made by reason of the role as an agent, in connection with the partnership business, are held on constructive trust for the partnership – where the application is made after a partnership has been dissolved by the death of a partner
EVIDENCE – BURDEN OF PROOF, PRESUMPTIONS, AND WEIGHT AND SUFFICIENCY OF EVIDENCE – sufficiency - whether uncorroborated evidence from a surviving party should be accepted where other party is deceased
STATUTES: Partnership Act 1891 (Qld), ss 32, 23(1) CASES: Chan v Zacharia (1984) 154 CLR 178, cited
Birmingham v Renfrew (1936) 57 CLR 666, cited
Eggins v Robinson [2000] NSWCA 61, cited
Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, cited
Kelly v Kelly (1990) 64 ALJR 234, cited
Miles v Clarke [1953] 1 WLR 537, cited
O’Brien v Komesaroff (1982) 150 CLR 310, 322, followed
Plunkett v Bull (1915) 19 CLR 544, cited
Staib v Powell [1979] Qd R 151, cited
Swift v Dairywise Farms Limited [2000] 1 All ER 320, cited
Tasmanian Seafoods Pty Ltd v Peters[1999] QSC 144, cited
COUNSEL: A Philp SC for the Public Trustee
M Jonsson for the Court Appointed Receivers
D Morzone for the First, Second and Third respondents
SOLICITORS: Official Solicitor for the Public Trustee
Williams Graham Carmen Solicitors for the Court Appointed
Receivers
Apels Solicitors for the First, Second and Third Respondents
[1] As a result of arrangements made initially in about 1994 between the late Joseph Edwin James (Mr James) and the first respondent (Mr Meyer), a partnership has for many years conducted a mining venture, with mining being carried on in the vicinity of Chillagoe (I shall refer to this location as the Chillagoe mine site). The applicants have been appointed as the receivers and managers of the partnership, and the trustees of certain property. Questions have arisen as to whether certain plant and equipment is partnership property; and as to whether Mr Meyer is absolutely entitled to the benefit of an application for a Mineral Development Licence (MDLA 415).
Background
[2] Some time prior to 1994, Mr James acquired an interest in a mining lease relating to a perlite deposit near Chillagoe. He was said to be a prospector with a good knowledge of the region of the Alice River on Cape York Peninsula, and its mineralisation. In 1993, Mr Meyer was involved in a hard rock mining venture on the Alice River. When difficulties were encountered, another party to the venture called in Mr James to assist. At some time thereafter, Mr James discussed with Mr Meyer the perlite mining lease.
[3] Subsequently, Mr Meyer acquired an interest in the mining lease (ML 20152).
Records from the Department of Mines and Energy record that on 8 January 1993, Mr James acquired a 49% interest in the mining lease; and on 10 January 1994 Mr Meyer acquired 51% interest in the lease.
[4] At some time prior to 30 June 1995, a partnership commenced to operate the lease and to mine perlite. It was originally constituted by Mr James and the third respondent to these proceedings (MGM). However, the constitution of the partnership changed in about October 1997 when Pitgate, who is the second applicant in these proceedings, replaced Mr James as a partner. By then the name of the partnership was Chillagoe Perlite. The holders of ML 20152 remained unchanged.
[5] The partnership in due course operated successfully. By 1997, its gross sales amounted to $395,638, and the net profit amounted to $157,214. By 2001, gross sales appear to have reached $1,172,208, with a net profit of $222,828. Mr James died on 9 June 2004. For the 2004 year, the financial statements prepared at the instigation of the applicants (which are disputed) disclose sales approaching
$2,000,000, and a net profit of $361,705.
[6] Much of the plant and equipment used in the venture was provided by Mr Meyer, or persons or interests associated with him.
[7] The partnership conducted operations at the Chillagoe mine site, and also at what was referred to as the Mareeba processing plant (Mareeba site). At the beginning of the case, I was told, without objection, that the title to the Mareeba site was registered in the name of the two individuals, whom I take to be Mr James and Mr Meyer.
[8] In about 1998, it appears that Mr James and Mr Meyer decided that it would be wise to allow for the need to expand mining activities beyond the boundaries of ML
20152. They lodged, in their own names, an application for a Mineral Development Licence (MDLA 295). Consistently with ML 20152, a 51% interest in MDLA 295 was in the name of Mr Meyer, and a 49% interest in the name of Mr James. The total area the subject of this application was 638 hectares. The application had not been determined at the time of Mr James’s death.
[9] South Australia provided a significant market for the product from the venture.
Land was acquired there for the mining venture. I was told, again without objection, that land was acquired in the name of a different company, apparently Chillagoe Perlite South Australia Pty Ltd.
[10] After Mr James’ death, Mr Meyer, with the assistance of his wife, continued to conduct the mining operation. The wages paid to them, and the hiring charges for equipment, were significantly increased.
[11] In the present proceedings, a consent order was made on 3 May 2007, appointing the present applicants as trustees of ML 20152, an interest identified as Mining Development Licence 295 (apparently a reference to MDLA 295), and the Mareeba
site. They were also appointed receivers and managers of the partnership, and an order was made that the affairs of the partnership be wound up.
[12] Although the order made no reference to the South Australian property, the parties apparently agreed to a sale of it being conducted by the applicants.
[13] The applicants took possession of the plant and equipment located at the Chillagoe mine site and the Mareeba site. This plant and equipment is used in the day to day operations of the partnership. They then attempted to determine the extent of the partnership property. That resulted in Mr Meyer making a claim that much of the plant and equipment was either his, or belonged to persons or entities associated with him (together, the Meyer interests). The extent of the claim has varied from time to time. The applicants have accepted the claim in part.
[14] On 24 March 2005, an entry was made in the records of the Department of Mines and Energy, recording the transmission of the interest of Mr James in MDLA 295 to the Public Trustee, as his personal representative.
[15] Correspondence with the Department of Mines and Energy in 2007 reveals that difficulties were raised with the Department in recording that the applicants had any interest in ML 20152 and MDLA 295. On 29 January 2008, Mr K F Nielsen, as a director of Pitgate and as agent for The Public Trustee, signed a form requesting that Mr Meyer be the nominated person, and his address be the address for service, for correspondence from the Department relating to MDLA 295 and ML 20152. That document was also signed by Mr Meyer, and lodged on the same day with the Department of Mines and Energy (the nomination document).
[16] On 1 May 2009, the Minister for Natural Resources, Mines and Energy wrote to Mr Meyer advising that he had formed the view that MDLA 295 could not be progressed further, as the applicant (Mr James) had died, and was no longer an eligible person; and accordingly the application was rejected. However the letter advised that the Minister would permit Mr Meyer to re-apply, without being “the holder of a prerequisite tenure”. The correspondence indicates that the applicants only became aware of this letter, when, in June 2009, they sought confirmation of the active status of MDLA 295, and were then sent a copy of the letter to Mr Meyer on 3 July 2009.
[17] In the meantime, no doubt in response to the Minister’s letter, on 22 May 2009, Mr Meyer made an application for a Mineral Development Licence (MDLA 415). That application has not been determined. One of the matters the subject of the present application is whether Mr Meyer holds his rights and interest in respect MDLA 415 absolutely, or for the benefit of the partnership. It is convenient to deal now with that matter.
MDLA 415
[18] I have already set out some of the background relating to the making of this application. However, it is convenient to mention some further matters.
[19] On the appointment of the applicants, they wrote to Mr and Mrs Meyer as directors of MGM, requesting that they identify, amongst other things, the assets of the partnership. The reply included, as assets of the partnership, MDLA 295 (as well as ML 20152, the Mareeba site, and the South Australian land). That led to the applicants taking action to secure an interest in MDLA 295, of which brief mention has already been made. At no time in his correspondence with the applicants did Mr Meyer assert that, on Mr James’s death, he alone was entitled to the benefit of MDLA 295, or indeed, that it was not partnership property.
[20] MDLA 415 was made in the name of Mr Meyer only. The application form included the following, in what appears to be Mr Meyer’s handwriting:-
“The Mineral Development Licence should be granted to facilitate the applicant ongoing investigation and development of the perlite deposit which lies within this area.”
[21] Statements accompanying the application included the following statement relating to proposed activities:-
“Ongoing technical analysis of the size and capabilities of perlite to expand our current business for the Australian market. For example, we would undertake further technical analysis for the specifications to expand our share of the cryogenic market and Filter Aid production in Australia.”
[22] The following was also included in the statements accompanying the application:- “Our financial status to fund this project is our current perlite mining
and manufacturing business which has a gross turnover of approximately $2 million per year. We currently process up to
4,000,00 (sic) tonne per year. Our mining operation has been continually growing and expanding since it started. Technical resources held by us, include ongoing lab analyses, testing for the specific requirements, and employment of a consultant. Our mining interest is a lease (ML 20152) we have been mining and manufacturing perlite on, for approximately 12 years within this mineral development licence. During this time, we have researched, developed and gained a substantial part of the horticultural and foundry slag coagulation market.”
[23] ML 20152 is the mining lease which was operated by the partnership, and acknowledged by Mr Meyer to be a partnership asset. The reference to “our current perlite mining and manufacturing business” and to “our business” plainly are references to the business of the partnership.
[24] In his affidavit, Mr Meyer swears that at no time did he treat Mr James’s interest in MDLA 295 as part of the Chillagoe Perlite business. He seeks to explain the application as made in recognition that a Mineral Development Licence over the surrounding land was an asset “which had potential value to the Chillagoe Perlite venture”, but continues that “as an untested and undeveloped resource, it played no part in the operation of the Chillagoe Perlite venture”. He sought to explain the
inclusion of MDLA 295 as an asset to be held by the applicants pursuant to the Court order on the basis that to treat it in this way might assist in the finalisation of the administration of Mr James’s estate. He stated that he made MDLA 415, to protect his personal interest, and that of his company “as a potential future operator of the Chillagoe Perlite venture”.
[25] I note, however, that no explanation was given for the inclusion of MDLA 295 in the list of assets of the partnership, provided to the applicants under cover of a letter of 15 May 2007. Nor is there any explanation for the failure to assert that the interests held in MDLA 295 were not a partnership asset until the present dispute arose in 2009. MDLA 415 plainly recognises that the foundation for that application was the partnership business. It goes so far as to state that the mining lease, though not formally held in the name of the partners, was the subject of the partnership activity. It is difficult to reconcile statements in this application with an assertion that the mining lease was not partnership property. Equally, it is difficult to reconcile those statements with an assertion that MDLA 295 was not a partnership asset.
[26] Further, the opportunity was given to Mr Meyer to make MDLA 415, as a result of the nomination document. That document was executed by a person acting as agent for The Public Trustee, representing Mr James’s estate; and as a director of Pitgate Pty Ltd, which might be regarding as representing Mr James’s interests in the partnership in the same way that MGM represents Mr Meyer’s interest in that partnership.
[27] Counsel for the applicants referred me to s 32 of the Partnership Act 1891 (Qld) which requires every partner to account to the firm for any benefit derived by the partner without the consent of the other partners, from any use by the partner of a partnership business connection. The operation of this provision is extended to transactions undertaken after a partnership has been dissolved by the death of a partner.
[28] The parties to the partnership were neither Mr Meyer nor Mr James. Unaided, this provision could not apply unless it were possible to identify Mr Meyer and MGM as a single entity. While it may be possible to do that, that was not explored by the parties. Nor was consideration given to the question whether Mr Meyer, as a director of one of the partners, had profited from his position in a way that meant his interests in MDLA 415 were held on behalf of MGM, which in turn held those interests for the benefit of the partnership.
[29] Reliance was also placed on Chan v Zacharia1. There, Deane J held that the relationship between partners is a fiduciary one2; and that after the dissolution of the partnership the partners remained under a fiduciary obligation to cooperate in and act consistently with the agreed procedure for the realisation, application and distribution of partnership property.3 Again, strictly speaking, it may be argued that Mr Meyer was not personally a member of the partnership, and accordingly the propositions formulated by Deane J do not apply to him.
1 (1984) 154 CLR 178
2 See p 196
3 See p 197
[30] In my view Mr Meyer and Mr James made the application which became MDLA
295 as agents for the partnership. They did so, in connection with the partnership business, with a view to its expansion beyond the area the subject of ML 20152. Indeed, I consider the better view to be that ML 20152 came to be held by Mr James and Mr Meyer on trust for the partnership. That is reflected in Mr Meyer’s treatment of the mining lease in his letter to the applicants of 15 May 2007. It is also consistent with the statements made in support of the application which became MDLA 415. In this context, I also note that the nomination document contained the signature of Mr Nielsen in two capacities, as the agent for The Public Trustee of Queensland (obviously representing Mr James’s estate); and also as a director of Pitgate (one of the partners). Further, the partnership financial statements record bonds and other expenses attributable to the mining lease.
[31] The opportunity to make the application which became MDLA 415 came to Mr Meyer in part, by reason of his role as an agent for the partnership in relation to MDLA 295. It also came to him by reason of the nomination document, which resulted in his receipt of the letter from the Minister giving him the opportunity to make the later application.
[32] Finally, the application rested on the current mining venture and mining lease. It was on the basis of his identification with those things that Mr Meyer made the application.
[33] I note that the Public Trustee, who represents the interest of the estate of Mr James, supports the position taken by the applicants, and does not seek to assert that Mr James had any interest in MDLA 295, other than as an agent for the partnership. The Public Trustee supports the grant of relief sought by the applicants.
[34] In my view, it is clear that Mr Meyer does not hold his rights and interests in relation to MDLA 415 absolutely, or in his own right. I consider that in respect of that application, he has fiduciary obligations to the partnership and holds such rights and interests as he might have for their benefit.
[35] Counsel for the applicants referred me to Tasmanian Seafoods Pty Ltd v Peters4 where Margaret Wilson J made an order for specific performance in respect of the sale of a beneficial interest in a permit for the commercial collection of trochus. She did so, notwithstanding an implied prohibition on the transfer of the legal title in the permit. She held that it could be the subject of a trust5. He also referred me to Swift v Dairywise Farms Limited6. In that case, a company had made loans to farmers, secured by rights identified as “milk quotas”. A milk quota gave the holder an exemption from a levy which would otherwise have been payable; and could only be attached to appropriate land, on which milk could be produced. The company did not have appropriate land, but a related company did. Consequently, security was provided by farmers entering into agreements with the related company, and transferring their quotas to that company pending repayment of the loans. When the lender went into liquidation, its liquidators contended that the related company held the securities over the quotas on trust for the lender. It was
4 [1999] QSC 144
5 See [at 28] para
6 [2000] 1 AllER 320
held that the milk quotas were capable of forming the subject matter of a trust7. On the basis of these cases, it was submitted that the rights and interests which Mr Meyer has in MDLA 415 are held by him subject to a constructive trust in favour of the partnership. On the basis of the authorities to which he has referred, I am prepared to accept that submission, and make a declaration accordingly. If it were not possible to do so, I would have granted injunctive relief, to ensure that any benefit associated with the application was made available to the partnership.
Disputed plant and equipment
[36] Mr Meyer has given evidence that over the years, his family has mined at different locations, resulting in relocation and modification of its mining equipment. In
1990, when he married the second respondent, he took a share of the family’s mining equipment. MGM became the vehicle through which Mr and Mrs Meyer carried on mining activities, using that equipment. They did so initially on the Palmer River, and then at Alice River, near Laura. The operation at Alice River was conducted in partnership with a Mr Ward. Mr Ward owned the leases, and the Meyer interests provided the equipment. When that operation ceased, the Meyer interests retained the mining equipment which was then relocated to the Chilagoe area, and used for partnership purposes.
[37] Mr Meyer has given evidence to the effect that it is generally not possible for him to produce documentary proof of purchase of the plant and equipment claimed by the Meyer interests. He explained that in part by reference to the fact that much of it was acquired when he ceased to carry on mining with the other members of his family in about 1990; and in part because other equipment has been acquired over a lengthy period, often without any formal documentation of purchase. He has put in evidence a folder in which he has set out the history of the purchase of various items of plant and equipment claimed by the Meyer interest, and has included photographs of the items of equipment. He has also included written statements by others providing some corroboration for the evidence from Mr Meyer as to the origins of these items. It is apparent that the items claimed by the Meyer interests include some substantial and potentially valuable pieces of equipment. The attitude taken by the respondents to this evidence was that the origin of the equipment did not matter, the real issue being whether the plant and equipment was brought into the partnership.
[38] In his affidavit, Mr Meyer has deposed to discussions with Mr James, which appear to have taken place prior to June 1994, and which included a discussion about the basis on which Mr Meyer and interests associated with him would become involved in the mining of the perlite deposit. The agreement deposed to by Mr Meyer included an arrangement that the Meyer interests would make available its machinery and plant to do the mining and processing of the mine’s product; and “the venture” would pay a hire charge for the use of that equipment.
[39] The submissions made on behalf of applicants/receivers and managers of the partnership make reference to s 23(1) of the Partnership Act 1891 (Qld), which provides that all property originally brought into the partnership stock, or acquired
7 See p 326-327
on account of the partnership, or for the purposes and on account of the partnership business, is to be held and applied by the partners exclusively for the purposes of the partnership, and in accordance with the partnership agreement. However, those submissions correctly draw attention to the observation of Mason J (as he then was) in O’Brien v Komesaroff8 to the effect that not all property of each partner used for the purposes of the partnership business can be said to be “brought into the partnership”; and that the acts and intention of the party determine finally and ultimately whether property owned by a partner becomes partnership property.
[40] The submissions made on behalf of the applicants/receivers and managers also draw attention to the fact that it was no longer possible to obtain evidence from Mr James as to the arrangements made about the property now in dispute. They refer to the following statement of McLelland CJ in Eyota Pty Ltd v Hanave Pty Ltd9:
“… In a claim based on communications with a deceased person, the court will treat uncorroborated evidence of such communications with considerable caution, and will regard as of particular significance any failure of the claimant to bring forward corroborative evidence which was or ought to have been available.”
[41] The claim made by Mr Meyer that certain plant and equipment is not partnership property faces some difficulties.
[42] In his reply to the letter from the applicants of 15 May 2007 (the reply was apparently dated 30 May 2007), Mr Meyer provided a handwritten inventory of plant and equipment of the partnership. Notwithstanding that the letter from the applicants had also called on him to identify assets or property claimed to be personal property, he did not do so at that time.
[43] However, on 9 July 2007, MGM issued an invoice to the partnership for the hire of equipment. The list was not extensive. Much of the equipment might be described as mobile equipment, but included dryers and miscellaneous plant items. The invoice was apparently an invoice for hire for one month, and the amount claimed was $12,090.
[44] In September 2007, an offer was made on behalf of MGM to purchase the interest of Pitgate in the partnership. To enable the applicants to consider the offer, Mr Meyer provided a schedule which identified by underlining the property which was not the property of the partnership. The number of items so underlined was very limited. The offer was subsequently rejected. The applicants then decided to sell the property of the partnership by public tender. On 28 July 2008, the applicants wrote to Mr Meyer calling on him to provide an inventory of all vehicles, plant and equipment which he asserted was owned by him, Mrs Meyer, or MGM. That resulted in the production of a significantly more extensive list of plant and equipment, sent by facsimile to the applicants on 6 August 2008. Mr Meyer gave evidence that this was his attempt to “make sense of” a previous list produced on
8 (1982) 150 CLR 310, 322.
9 (1994) 12 ACSR 785, 789; in this context reference is also made to Plunkett v Bull (1915) 19 CLR
544; Birmingham v Renfrew (1936) 57 CLR 666, 674; Staib v Powell [1979] Qd R 151; and Eggins v
Robinson [2000] NSWCA 61 at [26].
behalf of the applicants of all of the property of which they had taken possession, rather than simply a list of the property claimed by the Meyer interests.
[45] In September 2008, in the course of an inspection of the plant and equipment, Mr
Meyer claimed some additional items, identified in a letter of the applicants of 9
September 2008. Attached to that letter was another list which Mr Meyer had provided of plant and equipment claimed by the Meyer interests. On 23 October
2008, Mr Meyer wrote to the applicants with yet another list of property claimed on behalf of the Meyer interests. The applicants were not prepared to accept the claims made without substantiation.
[46] The position taken by Mr Meyer as to the plant and equipment claimed by the Meyer interests was later identified by reference to a schedule sent by his solicitors to the solicitors for the applicants on 29 July 2009 (the 2009 schedule). Some 241 items are listed in the 2009 schedule (though in some cases an item is represented by more than one piece of plant of equipment). On my count, Mr Meyer claims approximately 150 of the items. The applicants are prepared to admit that a number of the items (by my count, 28) are not partnership property. I note that the claim as identified on the 2009 schedule is not identical to the claim in Mr Meyer’s affidavit.
[47] Some of the items in dispute are obviously substantial items of equipment.
However, they also include shed beams, which had been incorporated into a building; lengths of flex pipe; a computer desk and a cupboard.
[48] Mr Meyer was cross-examined about a perlite furnace, which he claims to be the property of MGM. He identified it with a perlite furnace referred to in depreciation schedules of that company, as early as 1994. However, he said that for the purpose of using it in the partnership business, it had to be rebuilt three times. He said the cost of maintenance, and possibly improvements, was paid by the partnership; and that the claim of ownership by the company was based on the fact that it had been owned by the company before the partnership was formed, and it had not been purchased by the partnership. However, in the list provided to the applicants in September 2007, this was identified as partnership property. It was then claimed as property of the Meyer interests in August 2008, and subsequently.
[49] Another item claimed by Mr Meyer was a jaw crusher which had been used in the operation on the Alice River. It was brought to Chillagoe, where the shaft broke, and was considered not worthy of repair. A new jaw crusher was purchased, and in his oral evidence, Mr Meyer claimed this crusher. However, it emerged that the jaw crusher was no longer claimed by Mr Meyer.
[50] Mr Meyer was cross-examined about the perlite drilling plants. These apparently are an assembly of a number of specific parts. Mr Meyer acknowledged that some of the parts were purchased by the partnership, but claimed ownership of other parts on the basis they had been MGM’s equipment at the time of a previous tin mining operation.
[51] In the 2007 inventory, Mr Meyer had identified an IT 12 loader and a half ton forklift as property of the partnership. In the 2009 schedule Mr Meyer asserted neither to be partnership property. He now claims the loader not to be partnership
property. He says that a forklift, which he describes as the “heavy forklift”, is partnership property; but says that another forklift, the Caterpillar forklift, is the property of MGM.
[52] It is apparent from the cross-examination of Mr Meyer that most of the plant and equipment the subject of the claim is relatively elderly, and that there has been some incorporation of the equipment into equipment purchased by the partnership, or vice versa. The age of much of the equipment is confirmed by material assembled by Mr Meyer, which became exhibit 2. Some of the equipment was said to have been acquired in the 1970s, and more in the 1980s.
[53] However, there is some evidence which provides some support for the claim by the
Meyer interests. Mr Park was the accountant for the partnership between 1996 and
2004. He prepared financial statements including tax returns over that period to 30
June 2003. The financial statements record expenses for the hiring of plant. In the early years, the charge was relatively modest, but by 2001 had increased to $4,719, and in 2002 to $8,509. In 2003, the amount for this expense was $15,677.
[54] There was some corroboration for the proposition that hire charges recorded in the financial statements of the partnership were in fact paid to the Meyer interests. Mr Park was asked questions to that effect about ledgers which became exhibit 4.
[55] The financial statements also include depreciation reports. The early depreciation reports record purchase dates for individual items of plant and equipment. The first recorded item was a rolls crusher, the date of purchase being 18 August 1995. The
2003 financial statements include a report from Mr Park dated 23 October 2003 indicating that they were prepared some months prior to the death of Mr James. They include a depreciation schedule identifying plant and equipment. Much of the equipment there recorded might be described as office equipment, though some plainly relates to mining operations. It seems to be accepted that generally, the items claimed by the Meyer interests are not identified in any depreciation report or depreciation schedule for the partnership.
[56] The first set of partnership financial statements in evidence is for the year ending 30
June 1996. The financial statements include financial information for the previous year. No plant and equipment is identified in the 1995 information. The plant and equipment identified in 1996 is the rolls crusher, identified as purchased on 18
August 1995. The financial statements record no capital contributions by the partners in 1995. A sum of $500 was recorded as a capital contribution by MGM in
1996. There has been no suggestion that that reflects the contribution by the Meyer interests of the plant and equipment now claimed by those interests; indeed, in evidence, Mr Park accepted that $500 would not represent “anything like” the value of the plant and equipment, and was unlikely to reflect a contribution of that plant and equipment. Given the extent of the plant and equipment, that evidence is likely to be correct. I note that the amount is relatively close to the funds of MGM in the partnership at 30 June 1995; though again, there is no evidence which identifies that as the explanation for the capital contribution in 1996.
[57] In re-examination, Mr Park gave evidence that a partner contributing equipment of any value to a partnership would be likely to require the contribution to be recorded,
even if the equipment could not be depreciated for taxation purposes. He also expressed the view that the accounts were a strong indication that no attempt was made to bring the equipment claimed by the Meyer interests into the partnership.
[58] The following points are made in the submissions on behalf of the applicants/receivers and managers:-
(a) the Meyer interests permitted the applicants to take possession of the property in dispute (along with property admitted to be partnership property);
(b) notwithstanding the invitation to do so in the letter from the receivers and managers at 15 May 2007, Mr Meyer did not identify assets or property which the respondent might claim as theirs. Rather, a list was provided, all items of which seemed to be acknowledged as partnership property;
(c) in September 2007, MGM offered to purchase Pitgate’s interest in the mining lease and mineral development permit, including “All plant and equipment”. Although the schedule provided by Mr Meyer on that occasion included some items with underlining, a note explain that the items underlined were not the property of the partnership. Only one of the items at present in dispute was underlined.
[59] These matters reflect some of the difficulties with the evidence of Meyer to which I
have referred.
[60] As was pointed out in O’Brien,10 not all the property of each partner used for the purposes of partnership business can be said to be brought into the partnership: whether such property belonging to a partner becomes partnership property depends on the agreement of the parties, and the accent intention of the parties, not the operation of the Partnership Act, determined finally and ultimately the question whether property owned by a partner becomes partnership property.
[61] I have previously mentioned the statements of Mason J in O’Brien. In Kelly v
Kelly11 the High Court cited the following passage from Miles v Clarke:12 “No more agreement between the parties should be inferred than is absolutely necessary to give business efficacy to that which has happened.”
[62] Their Honours then made the following observation:
“That comment may overstate the position, but it would plainly be wrong to ascribe agreement to the parties unless their dealings clearly point in that direction.”
10 At 322.
11 (1990) 64 ALJR 234, 237.
12 [1953] 1 WLR 537, 540.
[63] In view of the approach to be taken because it is no longer possible to obtain evidence from Mr James, as the difficulty in the evidence of Mr Meyer to which I have referred, I would be reluctant to accept his evidence if it stood alone. I should say that, although I had the opportunity to observe Mr Meyer give evidence under cross-examination, that opportunity was of limited assistance in determining whether to accept or reject his evidence. However, there are some objective matters, which would appear to have had the express or at least tacit consent of Mr James, which provide support for Mr Meyer’s evidence.
[64] The first is that, from the outset, the financial statements record expenses for the hire of plant. No other explanation has been advanced for these expenses, than that they reflect a recognition that the plant provided by the Meyer interests was not partnership property. As I have indicated, there is some corroboration of the payment of some of these expenses to the Meyer interests in ledgers placed in evidence. The amounts appear to be small, when the extent and apparent value of the plant and equipment is taken into account. Mr Meyer explained that by reference to the fact that in the early years, when the business was being established, the full hire charges were not to be paid. Whatever might be the explanation for the amounts, in my view it is of some significance that some payment of hire charges was made.
[65] The second matter which seems to me to be significant is that the financial statements of the partnership, which were produced during Mr James’ lifetime, contained no record suggesting that the disputed plant and equipment became partnership property. Nor do they record any entry in the capital accounts of the partnership in favour of MGM in recognition of the contribution of plant and equipment, whether by MGM, or the Meyer interests. From the outset, the partnership balance sheets record land and building, as well as some plant and equipment (which can be related to the depreciation reports and schedules, and which plainly is not the disputed plant and equipment). Some of the financial statements also record partners’ funds. In those circumstances, the absence of any entry reflecting that the disputed plant and equipment had become partnership property is, in my view of considerable significance.
[66] As I have indicated, Mr James knew of the existence of the perlite deposit, and introduced Mr Meyer to it. However, the evidence of Mr Meyer (confirmed by a Mining Lease Report provided to the applicants) is that Mr Paul Ray, prior to the involvement of MGM, held a 51% interest in ML20152. For the Meyer interests to become involved in the perlite mine, it was necessary to purchase Mr Ray’s interest. The plant and equipment provided by the Meyer interests was obviously necessary to enable the operation to proceed. There is no reason to think that its success was guaranteed, and in the early years sales and profits were relatively modest. These circumstances make it some what unlikely that the Meyer interest would have agreed to contribute their plant and equipment to the partnership, at least without some significant recognition of that fact in the financial statements. That view is supported by the fact that the equipment is likely to have been important to them, by virtue of the long-term involvement of the Meyer family in mining; and by the fact that, (on Mr Meyer’s evidence) in the venture in which he had previously been engaged, the plant and equipment did not become partnership property.
[67] In view of these circumstances, and the absence of any positive evidence that the partners agreed that the plant and equipment was to become partnership property, I am not prepared to find that the disputed plant and equipment is partnership property; rather, I am of the view that it is retained by the Meyer interests.
[68] In reaching that conclusion, I am conscious of the difficulties which arise from the fact that at different times, Mr Meyer has made different claims about the extent of the property said to belong to the Meyer interests. While that is a little troubling, it seems to me to be in part explicable by the extent of the property involved, the relatively long period of time over which the partnership has operated, and the greater attention which appears to have been given to the origins of some of the items of property, in the course of preparing for the hearing. Moreover, it is not surprising that there might be some uncertainty about the ownership of plant, where an item originally belonged to the Meyer interests, and was later repaired or restored at the expense of the partnership.
[69] There is also the fact that the July 2007 invoice for hire charges includes a limited amount of plant and equipment. Mr Meyer explained that by saying that, by this time, the applicants had been appointed as receivers; and that it was not possible to identify a commercial market rental for some of the equipment. He also gave evidence that the arrangement with Mr James was that hire charges would be on a rate per tonne of material mined. I also note that the rate charged in the July 2007 invoice results in hire charges for plant and equipment substantially higher than what was charged when Mr James was alive.
[70] A consideration of these matters, in the end, and having regard to factors which seem to me of greater significance, does not lead me to alter my conclusion.
Conclusion
[71] I am prepared to make a declaration that Mr Meyer holds such rights and interests as he might have in MDLA 415 for the benefit of the partnership between MGM and Pitgate. I am also prepared to make an appropriate declaration to give effect to my conclusion that the disputed items of plant and equipment are not partnership property, but are the property of the Meyer interests. I propose to hear submissions as to the appropriate form of relief to be granted, and as to costs
Part A: 15 Marks
Your managing partner has handed you the Supreme Court of Queensland’s decision in The Public Trustee of Queensland & Anor v Meyer & Ors [2010] QSC 291). And asked you to answer the following questions. You should assume you are answering the questions for someone who has not read the case, so be sure to provide sufficient detail in your answers. You do not need to provide reference details for Part A of the assignment.
(1) Explain who were the respective parties to the action. Why were there so many parties? (2 marks).
(2) What were the legal issues to be determined with regards to MDLA 415? (2 Marks).
(3) What did the first Respondent argue with respect to the MDLA 295 and MLDA 415? (1 Mark).
(4) What did the Applicants allege with respect to the requirement for ‘partners to account to the firm’ in respect of MDLA 415? (2 Marks).
(5) What did the court decide with respect to the Applicants’ arguments on partners having to account to the firm and MDLA 415? In your answer, explain how the court applied the relevant law, in the light of relevant facts and law cited in the judgment. (2 Marks).
(6) With regards to MDLA 415, what declaration did the court make and why? In your answer explain the law the court relied upon in reaching its decision to make the order. (2 Marks).
(7) On what grounds did the Applicants claim that the plant and machinery was partnership property? (2 Marks).
(8) What did the court decide with respect to the plant and equipment? Explain how the court reached its decision, including relevant law and evidence. (2 Marks).
PART B 15 MARKS
Please prepare a short research essay on the following issue.
“There is no common, unifying principle, which underlies the occasional decision to pierce the corporate veil’: Idoport Pty Ltd v National Australia Bank Ltd [2004] NSWSC 695. Critically evaluate and discuss this statement with reference to relevant case law and statute (if applicable).
In answering Part B you are expected to consult both primary material (e.g. case law, statute) and secondary sources (e.g. journal articles, academic books). Any internet sites consulted must be relevant to the topic and should be from academic and Australian legal websites (e.g. ASIC website or Law Reform Commission).
DO NOT copy material from websites or other sources without proper acknowledgement of the source. Your essay must conform to normal academic essay requirements and include a clear introduction and overall argument.
ASSESSMENT CRITERIA
These criteria are a general guide as to the standard expected at various levels.
High distinction standard
• The answer is very well written and clearly expressed
• There is a demonstrated appreciation and understanding of issues involved
• The answer is well structured and logically organised
• Demonstrated mastery of the referencing system
• There is evidence of a comprehensive analysis of the issues
Distinction standard
• The answer is well written and expressed
• The answer is structured and logical
• The issues have been reasonably well defined and appreciated
• There is correct use of referencing
• Issues have been analysed
Credit
• The answer is generally well written and expressed
• The answer is structured and sequential
• Referencing is satisfactory
• Issues are identified and addressed
• There has been an attempt to analyse some of the issues
Pass standard
• The answer is able to be followed and understood
• The answer could perhaps be better organised and structured
• The referencing may need improvement
• Issues may need to be identified and addressed in more depth
• Analysis when present may be incorrect
Fail standard
• The answer is sometimes significantly short of the required length
• The written expression is poor and difficult to understand
• The answer is poorly organised
• There has been a failure to address issues
• Referencing is generally inadequate.
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