Corporate Law – Assessment Item 1
The due date for this assignment which has a weighting of 30% is the
Sunday 19/04/2015. Assignments must be typewritten.
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 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
2
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
[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
4
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.
5
[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
6
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 Zacharia
1
. There, Deane J held that the
relationship between partners is a fiduciary one
2
; 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
7
[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 Peters
4
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 trust
5
. 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
8
held that the milk quotas were capable of forming the subject matter of a trust
7
. 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
9
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 Ltd
9
:
“… 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].
10
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
11
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,
12
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
Kelly
11
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.
13
[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.
14
[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
15
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).
16
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.
Passed 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
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.