Waterhouse v Grant [1999] FJHC 85; Hbc0148j.98s (13 August 1999)

Fiji Islands - Waterhouse v Grant - Pacific Law Materials

IN THE HIGH COURT OF FIJI

AT SUVA

CIVIL JURISDICTION

ACTION NO. HBC 0148 OF 1998

BETWEEN:

:

JOHN KNIGHT WATERHOUSE JUNIOR
and MARGARET ANN WATERHOUSE
Plaintiffs

AND:

FRANCIS PETER GRANT
First Defendant

AND:

WILLIAM STANLEY WATERHOUSE
Second Defendant

Mr. P.I. Knight for the Pthe Plaintiffs
Mr. G. McDonald of the New South Wales Bar and Mr. P. Howard for the Defendants

Dates of Hearing and Submissions: 26th November 1998,
19th, 22nd, 26th, 27th and 28th January 1999

Date of Judgment on Defendants' Amended Notice of Motion of
25th November 1998: 13th August 1999

JUDGMENT

In this matter proceedings were commenced on 6th March 1998 by way of Writ of Summons which sets out a Statement of Claim. The Statement of Claim has three paragraphs.

The Defendants have admitted paragraphs 1 and 2 which relate to the existence of a partnership business of a betting agency under the name of Grant's Waterhouse Agency at Suva and branches in other parts of Fiji of which the First Defendant was managing partner. The Defendants deny paragraph 3 which is a claim that the partnership ought to be dissolved by the Court for reasons relating to the alleged misconduct of the Defendants.

The Plaintiffs then claim a number of orders including an order that the partnership be dissolved and that Ross George McDonald of Suva, a Business Consultant be appointed as a Receiver and Manager of the partnership business. That order was made on the 9th of March 1998.

The Plaintiffs also seek an order that all necessary accounts and enquiries are to be taken and an order for costs.

On the 25th of November 1998 the Defendants filed and delivered an Amended Notice of Motion in which the following orders are sought:

"(a) An order restraining Mr. R.G. McDonald, the Receiver and Manager appointed by this Honourable Court from selling or offering for sale the business known and described as "GRANT'S WATERHOUSE AGENCY";

(b) A declaration that after the death of the Plaintiff on 1/7/98 the partnership business known as "GRANT'S WATERHOUSE AGENCY" has ceased and/or dissolved pursuant to Section 34 of the Partnership Act (Cap. 248);

(c) A declaration that as the betting and totalisator licence and the business name registration of "GRANT'S WATERHOUSE AGENCY" are both solely in the name of the First Defendant, the said betting and totalisator licence and the said business name are non-transferable and not part of the assets of the old partnership between the Plaintiff and the First and Second Defendants;

(d) An order that the Plaintiff's estate be paid in accordance with Section 43 of the Partnership Act (Cap. 248) until the finalisation of the accounts of the old partnership;

(e) An order that the appointment of Mr. R.G. McDonald as Manager and Receiver be terminated forthwith;

(f) An order earlier made by this Honourable Court for the sale of Grant's Waterhouse Agency be rescinded and or revoked;

(g) An order that the First and Second Defendants be allowed to form a new partnership and continue with the business in accordance with the option contained in the Partnership Agreement for the First and Second Defendants to purchase the interest of the Plaintiff;

(h) Such further order or orders as this Honourable Court deems just and proper."

On 1st July 1998 John Knight Waterhouse Senior died. It is not in dispute that he was in partnership with his brother the Second Defendant and Francis Peter Grant the First Defendant.

The First Plaintiff John Knight Waterhouse is one of the executors and trustees of the estate of John Knight Waterhouse Senior. Probate of the will of the late John Knight Waterhouse Senior was issued out of the Probate Division of the Supreme Court of the New South Wales at Sydney on 18th August 1998. This action is being continued between the Plaintiffs, as executors of the John Knight Waterhouse estate.

The file in this action has already reached very sizeable proportions due to the number of affidavits which have already been filed by the parties and by the Receiver and Manager at whose behest to a large extent this judgment is now being given, it appearing that Mr. McDonald is concerned at his inability to make decisions on the continuation of the business without directions from this Court. It appears from their silence that the Plaintiffs and the Defendants do not share Mr. McDonald's concerns. Nevertheless I consider it in the interest of all the parties that the matters in the Amended Notice of Motion be dealt with as promptly as possible. I have received oral and written submissions, those for the Defendants running to some 114 paragraphs and those for the Plaintiffs, in stark contrast, running to 18 paragraphs.

As will be seen from what I say later in this judgment, there is not necessarily safety in numbers at least in law.

There is no dispute that prior to the death of John Knight Waterhouse Senior (JKW), a partnership existed between JKW, the First Defendant and the Second Defendant as equal partners. I am prepared to accept the submission of the Defendants that the First Plaintiff was a silent partner in the business until he retired from the partnership in 1976, the partnership having been formed in the late 1960s or at the latest about 1970. Beyond that the evidence does not satisfy me that the First Plaintiff had any interest in the partnership after his retirement.

The only business of the partnership was that of Grant's Waterhouse Agency. There was no written agreement between the partners so that the provisions of the Partnership Act Cap. 248 apply. There is also no dispute that the partnership was dissolved on the death of JKW on 1st July 1998. The critical question in issue on this motion and indeed in the proceedings as a whole is what happened to JKW's share in the partnership business on the dissolution resulting from his death? The Defendants appear to submit that JKW's share automatically vests in the surviving partners, i.e., the Defendants subject to the surviving partner's liabilities to pay for the deceased's share.

The Plaintiffs submit that at law this is not the case. They say, and I agree, that on the dissolution of the partnership in the absence of any agreement to the contrary the partnership is to be wound up and the assets of the partnership are to be realised and, after payment of any debts or liabilities of the partnership, distributed amongst the partners or their representatives according to their respective entitlement (Section 40 of the Partnership Act). The personal representatives of a deceased partner have a right to have the partnership business wound up with the deceased's share after realisation being paid over to the deceased's personal representatives.

There appears to be no dispute as to this but for authority I need only quote The Law of Partnership in Australia and New Zealand by P.F.P. Higgins 2nd Edition at pages 185, 203 and 206.

Lindley on Partnership 14th Edition refers to the situation arising from the dissolution of a partnership thus:

(a) "Where the articles have prescribed no method of winding up, or where the method prescribed cannot be carried into effect, then unless the partners can come to some agreement as to what is to be done, there must, as a general rule, be a conversion of all the partnership property into money; and this money, after the payment of the partnership debts, must be divided amongst the partners in the shares in which they may be entitled to it" - page 199.

(b) "It has already been seen that, in the absence of a special agreement to the contrary, the right of each partner on a dissolution is to have the partnership property converted into money by a sale; even although a sale may not be necessary for the payment of debts" - page 598.

(c) "The sale to which each partner has a right is a sale to the highest bidder" and footnote 63 - "No partner has a right to buy or to compel his co-partners to buy at a valuation unless there is some agreement to that effect" - page 601.

(d) "In the absence of an express agreement to that effect, the surviving partners have no right to take the share of the deceased partner at a valuation; nor to have it ascertained in any other manner than by a conversion of the partnership assets into money by a sale; nor have they any right of pre-emption" - page 657.

The law is therefore clear in my judgment that unless there is a specific agreement to the contrary in existence, on the dissolution of a partnership the assets of the partnership business must be sold.

It is common ground that there was never any written partnership agreement. Until the affidavits of the First and Second Defendants sworn on 25th November 1998, there was no intimation from the Defendants of the existence of any oral agreement between the partners that on the death of one partner, the surviving partners had the right to purchase the deceased partner's share. The first reference to this purported agreement was in those affidavits and it is not admitted by the First Plaintiff in his affidavit of the 11th of January 1999.

In that affidavit Mr. Waterhouse simply says that he was not aware of any partnership agreement, written or otherwise between his late father and the First and Second Defendants which provided for the surviving partners to have an option to purchase a deceased partner's share on that partner's death.

The Plaintiffs submit on this that the earlier omission to make reference to this vital evidence may be seen as a convenient oversight. In such a conflict I tend to favour the Plaintiffs but find it unnecessary to make any firm finding on this because even if there was such an agreement it is clear to me from the Defendants' affidavits that any such agreement was only between the First and Second Defendants. It is not suggested that JKW was a party to the agreement and in those circumstances it cannot be binding on JKW or his estate. I therefore consider that the application for an injunction to restrain Mr. McDonald from proceeding with a sale of the partnership business, namely Grant's Waterhouse Agency, should be dismissed and the sale be allowed to proceed.

Application (c) in the Amended Notice of Motion seeks a declaration that the betting and totalisator licence and the business name Grant's Waterhouse Agency are the sole property of the First Defendant and will not therefore form part of any sale of the business that might occur. The only evidence adduced in support of the First Defendant's assertion that he is the owner of the betting licence is a self-serving statement in paragraph 2 of his affidavit sworn on 5th November 1998 that he is a holder of the licence. No copy of the licence has yet been produced although counsel for the Defendants says that the search is still continuing. This statement is to some extent contradicted by the statement in paragraph 2 of the affidavit of the Second Defendant sworn on 7th October 1998 that the Second Defendant was granted an overseas lotteries licence. The First-named Plaintiff in his affidavit sworn on 18th November 1998 exhibited copies of licences issued by the Government of Fiji in the name of Grant's Waterhouse or Grant's Waterhouse Agency. The evidence does not satisfy me that the First Defendant is the sole owner of the betting licence and I consider the clear inference is that the licence is owned by the business. In any event the Plaintiffs concede that whoever acquires the business will be required to obtain the appropriate licence which of course may be in a totally new name depending on the wishes of a purchaser of the business.

It appears that no notice of change in the business has been filed with the Registrar of Business Names since the initial registration. However, all parties acknowledge that since 1970, JKW and the First and Second Defendants were equal partners in the business of Grant's Waterhouse Agency. In my view therefore even if formal notification of changes in the business was not filed with the Registrar of Business Names, the business name with effect from the formation of the partnership in 1970 was jointly owned by the three partners and that if the First Defendant remains as the registered owner of the business name, the beneficial ownership rests with the partners and the First Defendant holds the registration in trust for the three partners - 8 -

equally. I consider it impossible for the business name Grants's Waterhouse Agency to be owned separately from the business Grant's Waterhouse Agency which the parties acknowledge was owned jointly by JKW and the First and Second Defendants. I therefore consider that the name Grant's Waterhouse Agency is an asset of the partnership business available on any sale.

There is no dispute about the order sought in paragraph (d) of the Notice of Motion and as I indicated to the parties in the oral argument on 27th of January 1999 I am firmly of the view that the order sought in paragraph (e) should be refused. The evidence is that the partnership business has prospered under the stewardship of Mr. McDonald. I have heard nothing to justify his removal and he must be allowed to complete his task of winding up the partnership and, as a totally independent person, to protect the interests of all parties concerned under the guidance of the Court. I thus refuse the relief sought in paragraph (f) of the Notice of Motion.

I am not satisfied that there was an option contained in the Partnership Agreement for the First and Second Defendants to purchase the interest of the Plaintiff although if the parties agree, I am prepared to order that the sale of the business be re-advertised and further offers be entertained thus giving the First and Second Defendants a chance to purchase the business.

Finally there is the question of whether the Receiver should give security. Normally this is required by the Court which, however, has a discretion to dispense with security. Because of the nature of the business of which the Receiver has in this case been appointed and because he has shown himself to be competent and above reproach I consider this an appropriate case to dispense with security with the Plaintiffs' undertaking continuing.

For these reasons I dismiss the Amended Notice of Motion with the exception of paragraph (d) which is not in dispute and order the First and Second Defendants to pay the Plaintiffs' costs to be taxed if not agreed.

JOHN E. BYRNE
JUDGE

No cases referred to in judgment or in the submissions on behalf of the Plaintiffs.

The following cases are referred to in the submissions for the Defendants:

Allen v. Kilbre (1819) 4 Madd 464.
Dinham v. Bradford LR 5 Ch. 519.
Banks v. Gibson [1865] EngR 694; 34 Beav 566.
Collins v. Barker [1893] UKLawRpCh 4; (1893) 1 Ch. 578.
Harris v. Sleep [1897] UKLawRpCh 92; (1897) 2 Ch. 80.
Knox v. Gye (1871) English and Irish Appeals 656.
Hammond v. Douglas 5 Ves 539.
Jennings v. Jennings [1898] UKLawRpCh 14; (1898) 1 Ch. 378.
Re David and Matthews [1899] UKLawRpCh 6; (1899) 1 Ch. 378.
Pearce v. Chamberlain [1750] EngR 204; 2 Ves. Sen. 33.
Rees v. Duncan (1900) 25 VR 520.
Smith v. Gale (1974) 1 WLR
Johnson v. Helleley [1864] EngR 710; 34 Beav. 63.
Syers v. Syers 1 App Cas. 174.
Rivett v. Rivett (1966) 200 EG 858.
Webster v. Webster 3 Swanst. 490.
Re Beauchamp Brothers; ex parte Carr (1896) 3 Mans 207
Ex parte Owen (1884) 13 QBD at 113.

Hbc0148j.98s