Lewis v Estate of Juan Martinez

1. [1]

   PAYNE JA: This is an appeal and cross-appeal from two decisions by Elkaim AJ (“the primary judge”): Lewis v Martinez and the persons named in the Schedule (No 5) [2024] NSWSC 359 (the “(No 5)” judgment) and Lewis v Martinez and the persons named in the Schedule (No 6) [2024] NSWSC 543 (the “(No 6)” judgment). As the primary judge’s decision was on a separate question and thus interlocutory, leave to appeal and cross-appeal was required. The Court granted leave to appeal and leave to cross-appeal at the outset of the hearing.

2. [2]

   The appellant, Mr Gregory Lewis, as the nominated representative of the trustee of the Lewis Practice Trust, was a Capital Partner at the law firm HWL Ebsworth prior to the expulsion of the trustee of the Lewis Practice Trust from the partnership. The 181 cross-appellants were the other nominated representatives of practice trusts participating as Capital Partners at HWL Ebsworth.

3. [3]

   The reason that the trustees of the various practice trusts, rather than the individual nominated representatives, were identified as Capital Partners was presumably for taxation reasons but that topic was not a matter explored in evidence. The trial and the appeal were conducted on the basis that the partners were, in fact, the individual nominated representatives of the trustee partners. Despite the apparent artificiality of this assumption, I will adopt the parties’ approach.

4. [4]

   HWL Ebsworth’s partnership was governed by a Partnership Deed dated 20 May 2016 (the “Deed”). The Partnership Rules are in Annexure A to the Deed. The trustee of the appellant’s practice trust became a partner in October 2014.

5. [5]

   In July 2020, the first respondent, Mr Martinez, suggested the sale of the partnership through an Initial Public Offering (IPO). A “Capital Partner Information Pack” describing the proposed IPO was distributed to the Capital Partners. The summary suggested a possible enterprise value of $1.2 billion which, if raised, would be distributed according to the respective partner’s “calibration points”. As I will explain, net profits of the partnership are to be shared in accordance with the calibration points of each partner. Calibration points are approved by the Capital Partners from time to time and are as set out in the Rules. Rule 8 allowed Mr Martinez to make a recommendation to the Capital Partners as to proposed calibration points for each Capital Partner.

6. [6]

   On 11 August 2020, resolutions were passed by the Capital Partners about the allocation of calibration points amongst the Capital Partners. Mr Martinez determined that the appellant and two other Capital Partners would retire as Capital Partners and would be offered partnership as Fixed Draw Partners (FDP). As an FDP, the partner would not be entitled to share in the proceeds of any successful IPO. The other Capital Partners nominated in this resolution resigned as Capital Partners and became FDPs. The appellant did not.

7. [7]

   On 13 August 2020, the appellant received an email from Mr Martinez with the subject “7 Day Notice of Intention to move a resolution to the HWL Ebsworth Lawyers partnership expelling the Lewis HWL Practice Trust as Capital Partner” in the following terms:

8. [8]

   Thereafter, various communications, including without prejudice negotiations took place between the appellant and Mr Martinez. On 4 November 2020, Mr Martinez refused to withdraw the notice of intention to move the resolution seeking the expulsion of the appellant but gave a commitment to provide 72 hours’ notice before acting on the notice.

9. [9]

   On 4 November 2020, the without prejudice negotiations having failed, Mr Martinez gave notice to the appellant that a resolution would be put to the partnership seeking his expulsion in accordance with the Deed.

10. [10]

    The expulsion resolution was emailed to the Capital Partners on 7 November 2020 at 4:38pm. The email was not sent to Mr Lewis. It stated:

11. [11]

    The “voting buttons” allowed recipients of the email to lodge their vote, either “yes” or “no”, by clicking a button on a computer. Only one button could be pressed to record a vote in respect of both the expulsion resolution and the time variation resolution, that is, there was no option to vote “no” to one resolution and “yes” to the other.

12. [12]

    On 7 November 2020 at 5:24pm, Mr Martinez sent a further email to the other Capital Partners, not including Mr Lewis, in the following terms:

13. [13]

    There were 181 Capital Partners on 7 November 2020. 86 voted “Yes” before voting closed at 5pm on 8 November 2020. 20 voted “Yes” after 5pm. 74 Capital Partners did not vote. One voted “no”.

14. [14]

    On 10 February 2021, the appellant commenced proceedings in the Supreme Court against the remaining Capital Partners.

15. [15]

    On 10 February 2023, Slattery J made an order in the proceedings that:

16. [16]

    The matter came before the primary judge to determine the separate question in the (No 5) judgment. On 8 April 2024, the primary judge made the following orders:

    1. (1)

       A declaration that the expulsion of the plaintiff by the resolution put to the defendants on 7 November 2020 was invalid by reason of breaches of the Partnership Deed.

    2. (2)

       A declaration that as between the plaintiff and the defendants the partnership was dissolved with effect from 10 February 2021, being the date of the filing of the statement of claim.

    3. (3)

       An order that the plaintiff’s damages arising from the breaches of the Partnership Deed, if any, are to be assessed.

    4. (4)

       An order that the defendants are to pay the plaintiff’s costs of the hearing in respect of liability, such costs, subject to any consent agreement between the parties, are not to be payable until the conclusion of the proceedings.

    5. (5)

       All other costs are reserved.

    6. (6)

       A direction that all parties provide a representative of the first defendant with a copy of this decision and the decision made on 26 March 2024 (Lewis v Martinez and the persons named in the Schedule (No 4) [2024] NSWSC 308).

17. [17]

    As I will explain in greater detail, Mr Lewis subsequently sought, by notice of motion, to have the orders varied in substantial respects. The primary judge dismissed the notice of motion in the (No 6) judgment.

Primary Judgment (No 5)

1. [18]

   The primary judge held that the expulsion of the trustee of the Lewis Practice Trust on 7 and 8 November 2020 was invalid because:

2. [19]

   The primary judge held that the expulsion resolution could only be considered after the requirement for seven days’ notice had been waived. It was not sufficient that the resolution seeking to vary the seven days’ notice was in the same email as the resolution seeking to expel the appellant. The waiver of notice resolution should have preceded the expulsion resolution, perhaps to the extent of a separate resolution on a separate day.

3. [20]

   The primary judge held that the two resolutions could not be voted upon by a single button which did not allow for one to be considered separately to the other. The primary judge reasoned that being expelled as a Capital Partner was a serious matter, being “a complete, forced, and absolute divorce from the firm”. The primary judge stated that, of the 13 clauses in the Deed that required an Extraordinary Resolution to achieve a particular result, only cl 20 which provided for expulsion dictated seven days’ notice. The primary judge said that it was not sufficient that the voter could press “no” if they disagreed with either resolution because “[i]f they were of the view that expulsion was appropriate it is unlikely they would have considered, separately, the waiver [of notice] resolution”. Had the seven days’ notice period been provided, during this period they might have been “open to persuasion or deeper thought about their intended vote of expulsion”: at [45]. :

4. [21]

   The primary judge also found that the expulsion resolution was invalid because less than 80% of the Capital Partners voted. At the date of the vote there were 181 Capital Partners. 87 people voted on time, and 107 people voted in total (including late voters). Only one person voted no. If 80% of all 181 Capital Partners was required, then an affirmative vote of either 86 or 106 did not achieve the required 80% vote. If 80% of all Capital Partners who voted was required, as only one person voted “no” out of 87 or 107 people in total, then more than 80% of the votes were “yes”. The primary judge said, “I think I am bound to find that the 80% must be 80% of the whole of the partnership”. Thus, it was concluded that the resolutions were not carried.

5. [22]

   As explained above, the expulsion resolution occurred in the context of a potential IPO. Mr Lewis submitted to the primary judge that the resolution had an improper purpose as it allocated “disproportionate weighted Calibration Points” to Mr Martinez and was designed “to exclude [Mr Lewis] from participating in the IPO and to enable other Capital Partners (and, in particular, Mr Martinez) to benefit from his expulsion”. Mr Lewis submitted that there was a duty “of utmost good faith owed between partners, and that the expulsion of a partner for the purpose of expropriating a partner’s interest in the partnership violates that duty”.

6. [23]

   The Capital Partners submitted that the scope of the fiduciary duty did not extend to the consideration of an expulsion because the interests of the partners would obviously be affected by the expulsion. The Capital Partners relied on Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1 at 17, which held:

7. [24]

   The primary judge held that there are two difficulties with applying Noranda:

   1. (1)

      Clause 15(e) of the Deed provided that the Capital Partners must be “just and faithful to the other Capital Partners in all matters relating to the affairs of the Partnership”. An expulsion is an affair of the partnership; and

   2. (2)

      Removing a partner’s rights and expelling that partner from the partnership goes well beyond “the enjoyment of the rights of ownership.” The expulsion of a partner is a matter so grave that it demanded the attention, and due consideration, of those deciding upon the expulsion.

8. [25]

   The primary judge stated:

9. [26]

   Since many Capital Partners lost calibration points, and others increased their calibration points, the primary judge reasoned that it “is equally feasible…that those partners whose points increased derived their benefit not from [Mr Lewis’] points but from other partners who lost points”. The primary judge said that it would be different if Mr Lewis was the only person to have lost points and Mr Martinez was the only person to have gained points, but in “the scheme of multiple increases and decreases I do not think I can make a finding of improper purpose directed at [Mr Lewis’] points”.

10. [27]

    The primary judge held:

11. [28]

    The email sent at 4:38pm on 7 November, quoted above at [10] gave no reasons for the proposed expulsion of Mr Lewis as a Capital Partner. Some reasons were given in a second email sent at 5.24pm, quoted above at [12].

12. [29]

    In answering the question of whether it was necessary to give reasons for a proposed expulsion, the primary judge noted that cl 20.2(a) of the Deed provided that “no reason need be given for expulsion of a Capital Partner by Extraordinary Resolution”. However, his Honour relied on cl 2.3(b) of the Rules which provided:

13. [30]

    The primary judge held that the Capital Partners should have given reasons with the proposed resolution and that it did not matter why Mr Martinez failed to give reasons initially. Although it was not necessary to decide, the primary judge held that the 4.38pm email set out at [10] was in breach of the Rules.

14. [31]

    The primary judge was satisfied that the Capital Partners were in breach of the Deed. The Capital Partners accepted that if the November expulsion resolution was invalid, that a declaration to that effect should be made against all of the Capital Partners.

15. [32]

    The primary judge proceeded on the basis that it was common ground that the partnership had come to an end, although the reasons for this agreement differed. The primary judge explained that s 39(f) of the Partnership Act 1958 (Vic) empowered the Court to make the dissolution declaration sought by Mr Lewis on the grounds that it was just and equitable to do so. The dissolution was only between Mr Lewis on the one side and Capital Partners on the other side and had no effect on the partnership as between the Capital Partners themselves.

16. [33]

    The primary judge stated:

17. [34]

    Mr Lewis sought “buy-out” orders of the kind made in Syers v Syers (1876) 1 App Cas 174 and Mullins v Laughton [2003] Ch 250 including (as necessary integers of any such order) “the interest of Lewis in the goodwill, debtors, work in progress, cash at bank and other property of HWL Ebsworth” and also in respect of his “share of the net profits of the Partnership to the date on which payment is made to buy-out his interest in the partnership property” based on the calibration points that the appellant had or ought to have had before the August resolution.

18. [35]

    The Capital Partners opposed the making of such an order on the basis that identifying heads of damages was a topic properly the subject of the assessment process. The primary judge addressed this issue in the following way:

Primary Judgment (No 6)

1. [36]

   On 15 April 2024, Mr Lewis filed a notice of motion seeking variation of the orders pursuant to r 36.16 of the Uniform Civil Procedure Rules 2005 (NSW):

2. [37]

   Mr Lewis submitted that the primary judge should exercise the jurisdiction provided by r 36.16 because:

3. [38]

   The primary judge said:

4. [39]

   The primary judge then addressed separately each of the four issues about which the appellant complained.

5. [40]

   The primary judge accepted that the usual position may be that dissolution of a partnership under the just and equitable ground occurs on the date judgment is given but did not accept that “there is a rule to this effect”. His Honour held that he had a discretion to fix a different date of dissolution. In the present case, it was possible to identify the date of dissolution of the partnership as at the date of the filing of the Further Amended Statement of Claim (“FASOC”) in which Mr Lewis sought a declaration that the partnership was at an end.

6. [41]

   The primary judge concluded that Mr Lewis had pleaded at [91] of the FASOC that the cross-appellants had repudiated the partnership, and that this repudiation was accepted by Mr Lewis’ filing of the FASOC. The primary judge confirmed that at the date of dissolution, under s 39 of the Partnership Act, the just and equitable ground, should be the date of filing the FASOC.

7. [42]

   Mr Lewis submitted that the primary judge should have made a “buy-out” order containing all the integers described above.

8. [43]

   The primary judge quoted the (No 5) judgment at [118] (set out at [35] above) in finding that the “nature and heads of the damages” which the appellant sought are “kept alive”. The primary judge said: “I see no confusion, no misapprehension, and no reason for any variation. The assessment process will take place and will decide upon the nature of the damages which flow from my liability findings. I specifically adopted, with slight amendment, one of the orders sought by [Mr Lewis]”.

9. [44]

   It followed that the question of whether a “buy-out” order should be made and the components of such an order would be determined in the second tranche of the hearing before the primary judge.

10. [45]

    Mr Lewis sought to reopen the primary judge’s reasons to allow Mr Lewis to contend that he remained a Capital Partner.

11. [46]

    The Capital Partners opposed reopening the primary judge’s reasons to allow Mr Lewis to contend that he remained a Capital Partner, because that matter had not been pleaded. Mr Lewis submitted that there was no need for him to plead that he remained a Capital Partner because, as a matter of law, having not been properly expelled from the partnership, he remained a Capital Partner.

12. [47]

    The primary judge rejected Mr Lewis’ attempt to reopen the primary judge’s reasons to allow Mr Lewis to contend that he remained a Capital Partner. Although Mr Lewis had not acted as nor been treated as a Capital Partner since the purported expulsion, the primary judge said “[t]his was not the appellant’s fault. This is precisely why he now has an entitlement to damages as contemplated by [118] of my reasons”. The primary judge “reject[ed] the notion of any misapprehension”.

13. [48]

    Mr Lewis sought to contend that he was entitled to findings that he had suffered a loss of a chance to increase his calibration points.

14. [49]

    The primary judge stated that Mr Lewis’ submission that he could not claim a loss of a chance to increase his calibration points arose from an overly restrictive reading of [118] of the (No 5) judgment. His Honour held that Mr Lewis could, in the second tranche of the hearing, advance a claim for damages on the basis of a lost opportunity to increase his calibration points.

Grounds of Appeal and Cross-Appeal

1. [50]

   On 17 July 2024, the appellant filed an amended notice of appeal in the proceedings no 2024/162806 which listed 23 grounds. The grounds ranged widely, such that a three-day trial became a full three-day appeal:

2. [51]

   The notice of cross-appeal was dated 8 July 2024. The notice of cross-appeal contained the following eight grounds:

3. [52]

   The cross-appellants, the Capital Partners, also filed a notice of contention containing one ground:

4. [53]

   The matters addressed by the cross-appeal arise logically before the matters addressed by the appeal. For that reason, it is appropriate to address the cross-appeal first.

Notice of cross-appeal grounds 1-6: Validity of the November 2020 expulsion resolution

1. [54]

   Grounds 1-6 concern questions of construction of the Deed and the Rules. The principles of construction were described by the primary judge as being:

2. [55]

   In Variety Video v Jones [2001] NSWSC 5 at [75], Austin J said “although consistency of interpretation of commercial agreements by courts is a desirable objective, the first task of any court is to construe the agreement before it”. I agree.

3. [56]

   I am prepared to assume, as the primary judge found, that the expulsion provisions of the Deed should be construed using "a measure of strictness", reflecting an objective intention of the parties that expulsion be by “Extraordinary Resolution” as defined. This is because exercise of the expulsion power has significant implications for the rights of the affected parties.

4. [57]

   Nevertheless, it is a task of construction which is engaged. It is only by application of the principles of construction that “a measure of strictness” may be determined and employed. The principles of construction are clear. In Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 French CJ Hayne, Crennan and Kiefel JJ said:

5. [58]

   In Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited (2015) 256 CLR 104; [2015] HCA 37, French CJ, Nettle and Gordon JJ said:

6. [59]

   Grounds 1 and 2 of the cross-appeal each express a conclusion that the primary judge erred in finding that the 8 November 2020 resolution of the Capital Partners was invalid because of breaches of the Deed. The findings made supporting the primary judge’s conclusion are the subject of grounds 3-6 of the cross-appeal, to which I now turn.

7. [60]

   As the present question is one of construction, it is important to sketch the essential terms of the Deed.

8. [61]

   Clause 1 of the Deed includes the following definitions:

   1. (1)

      An Extraordinary Resolution “means a resolution of the Capital Partners passed by not less than 80% of the Capital Partners voting in a manner as stipulated by the Rules from time to time”.

   2. (2)

      A Fixed Draw Partner “means partners appointed by the Managing Partner who do not contribute capital and are ineligible to vote upon partnership resolutions and have a fixed draw of profits as determined by the Managing Partner.”

   3. (3)

      A Unanimous Resolution “means a resolution passed by all Capital Partners voting in a manner as stipulated by the Rules from time to time”.

9. [62]

   A number of matters should immediately be noted. An Extraordinary Resolution and a Unanimous Resolution, as defined by the Deed, refer to a resolution passed by an identified percentage of the Capital Partners “voting in a manner as stipulated by the Rules from time to time”. The Deed, in terms, identifies the manner of voting by Capital Partners and the central importance of the Rules in that process. As I will explain, the fact that the Deed uses the phrase “voting in a manner as stipulated by the Rules from time to time” for both Extraordinary Resolutions and Unanimous Resolutions is a critical issue of construction that was overlooked by the primary judge.

10. [63]

    The partnership continues until it is dissolved in accordance with its terms: cl 2.1. Critically, the admission, retirement or expulsion of a Capital Partner will not, without the unanimous consent of the Capital Partners, dissolve the partnership and it is specifically provided that the remaining partners will continue to conduct the practice under the terms of the Deed: cl 2.4.

11. [64]

    Clause 9.1 provides that unless otherwise stated, all decisions are to be made by a majority of the Capital Partners. Clause 9.2 provides that the “Capital Partners may by Extraordinary Resolution make and vary the Rules for the conduct of meetings”.

12. [65]

    Importantly, cl 17 of the Deed provides for the consequences of voluntary retirement or the death or permanent disability of a Capital Partner, namely that “[a] Capital Partner who dies or becomes permanently disabled is treated as a partner who has retired voluntarily” and cl 19.1 provides that no payment of goodwill arises on the death or retirement of a Capital Partner.

13. [66]

    Clause 19 states:

14. [67]

    A Capital Partner leaving the partnership for any reason has only the entitlements of a Capital Partner expressed in the Deed: cll 19.2 and 20.2(d) of the Deed. That is so whether the Capital Partner retires, dies (cl 19.1) or is expelled (cl 20.2(b)). The entitlements of the departing partner are to receive their proportion of undrawn profits as at the date of departure, together with their share of WIP: cll 18.3 and 20.3 of the Deed. The Deed governs the Capital Partners’ rights on expulsion to the exclusion of the Partnership Act provisions which would otherwise apply.

15. [68]

    At the heart of the cross-appeal is the correct construction of cl 20 of the Deed which deals with the expulsion of Capital Partners. Clause 20 provides:

16. [69]

    A number of initial observations should be made. First, cl 20.5 is a specific power in addition to the general power in cl 9.2 of the Deed. The terms of cl 20.5 are critical. It provides a specific power to vary the terms of cl 20 including all procedures referred to in this clause. In relation to construction of the very restraint that the primary judge found was important, the requirement for seven days’ notice, cl 20.5 of the Deed expressly permitted variation of that seven days’ notice requirement. That is, the notice provisions in cl 20.4 were subject to the specific power of variation by the terms of cl 20.5 itself.

17. [70]

    Secondly, no finding was made by the primary judge that the terms of the November resolution failed to effect a variation of the notice procedures within the meaning of cl 20.5 and no notice of contention seeking such a finding was filed. Thirdly, the Deed confers specific powers on the Capital Partners to expel another Capital Partner without giving any reason for doing so: cl 20.2(a). Fourthly, Capital Partners are entitled to expel another Capital Partner on the basis that he or she has no entitlement to goodwill of the partnership: cl 20.2(b). I will return to cl 20 later in these reasons.

18. [71]

    The Rules are important to the determination of this appeal. Decision making occurs pursuant to cl 9 of the Deed and pursuant to the Rules. The Rules are referred to in cl 20 of the Deed and are expressly incorporated in the definitions of Extraordinary Resolution and Unanimous Resolution. The Rules are set out in Annexure A to the Deed. The relevant parts of the Rules are as follows:

    1. (1)

       Rule 1.3 provides that “notice of a meeting of Capital Partners must be given by the Managing Partner at least seven days (or such period as may be agreed upon or ratified by the Capital Partners by Majority Resolution) before the time appointed for the holding of the meeting”.

    2. (2)

       Rule 1.5 provides that “[n]o quorum is required to transact business. A proposed resolution shall be validly dealt with on the basis of any required vote by those Capital Partners voting provided all Capital Partners have been notified of a meeting in accordance with these Rules”.

    3. (3)

       Rule 2 provides explicit permission for email resolutions and the application of voting buttons to accept or reject a proposed resolution or, importantly, “resolutions”:

19. [72]

    As I have explained, at [19], the primary judge found that the November resolution was invalid because:

20. [73]

    I am unable to accept that the Deed and the Rules, properly construed, have this effect. The Deed expressly provided the right to the Capital Partners to expel a Capital Partner. The specific mechanism for effecting an expulsion of a Capital Partner was itself designed to be flexible: cl 20.5 of the Deed; Rule 2.

21. [74]

    The notice provisions of cl 20.4 were “procedures” within the meaning of cl 20.5, capable of change, including waiver, by Extraordinary Resolution. Rule 2.1 permitted any resolution to be considered by email. Rule 2.3 gave specific permission for voting buttons to be applied to accept or reject the proposed (plural) resolution(s). Rule 1.3 provided specific permission for notice of a meeting to be subject to ratification after the event. These provisions provide express powers which are inconsistent with the primary judge’s conclusion that there was an implicit requirement in the Deed and Rules for a resolution seeking to vary or waive the period of seven days’ notice required by cl 20.4(b) to have preceded the expulsion motion.

22. [75]

    The making of a resolution “that all time limits or other technical requirements are hereby waived and/or abridged” was within the power in cl 20.5 and cl 9.2 and Rule 1.3. There was no express or implied requirement for the resolution “that all time limits or other technical requirements are hereby waived and/or abridged” to precede the expulsion resolution. The resolutions were designed to be addressed simultaneously. The Capital Partners could vote ‘no’ if they disagreed with either resolution. Specific permission for resolutions (plural) to be addressed by email vote was given by Rules 2.1 and 2.3.

23. [76]

    There was power to make the Extraordinary Resolution to vary the seven days’ notice required by cl 20.4(b). So much was not doubted by the primary judge. If the intention of the Deed, objectively ascertained, was that a resolution varying the notice provision in cl 20.4(b) had to precede the expulsion resolution there would have been some explicit or implicit support for that conclusion. To the contrary, the Deed and the Rules clearly provide that multiple email resolutions may be voted on at the same time. As I have said, Rule 2.3 provides express power to “apply voting buttons or allow for email vote to accept or reject the proposed resolution(s)” (emphasis added). A requirement for successive resolutions or, in this case, for a particular order of resolutions, is also inconsistent with the express power to ratify, after the event, a change in the meeting notice provisions provided by Rule 1.3.

24. [77]

    Construing the Deed and the Rules with the same measure of strictness as identified by the primary judge, the resolution that “all time limits and other technical requirements are hereby waived and or abridged” and the order it appeared in the November email were within the specific powers of a meeting considering an expulsion motion: cll 20.5 and 9.2; Rules 1.3 and 2. No reason based on a construction of the Deed and the Rules was identified by the primary judge or Mr Lewis requiring the resolution waiving time limits to precede the expulsion resolution. I accept the Capital Partners’ submission that the primary judge erred in concluding that “[t]he variation of the seven days’ notice should have preceded the expulsion resolution, perhaps to the extent of a separate resolution on a separate day”. Mr Lewis’ complaint about the order of resolutions should have been rejected.

25. [78]

    As to the second conclusion reached by the primary judge, that use of a single voting button was impermissible, I am likewise unable to agree. Mr Lewis claimed that the single button created a situation where the vote itself was “like a meeting which was null and void and at which no business could be validly transacted”. That is not so. The Rules, which also apply to in-person meetings, are flatly inconsistent with Mr Lewis’ submissions and the conclusion of the primary judge on this issue. Rule 1.3 provides express power that “notice of a meeting of Capital Partners must be given by the Managing Partner at least seven days … before the time appointed for the holding of the meeting”. That notice provision is subject to the parenthetical “or such period as may be agreed upon or ratified by the Capital Partners by Majority Resolution”. In the ordinary course a Majority Resolution is sufficient to reduce the time required from calling a meeting. Non-compliance with the notice provision can be ratified by a meeting of the Capital Partners; that is those present and voting may, by Majority Resolution, ratify, after the event, a non-compliance with the notice provision. This express provision is inconsistent with the construction of the Deed advanced by Mr Lewis and accepted by the primary judge.

26. [79]

    Further, as I have earlier explained, Rule 2.3 provided specific permission to “apply voting buttons or allow for email vote to accept or reject the proposed resolution(s)”. The Rules specifically envisaged that a single voting button could apply to an email vote on more than one resolution, which may include Extraordinary Resolution(s). It will be recalled that an Extraordinary Resolution is defined in cl 1.1 of the Deed as being “a resolution of the Capital Partners passed by not less than 80% of the Capital Partners voting in a manner as stipulated by the Rules from time to time”. Voting in a manner “as stipulated by the Rules” clearly envisaged that a single voting button could be applied to an email vote on more than one resolution.

27. [80]

    A Capital Partner was entitled to vote ‘no’ even if he or she agreed with one of the two co-joined resolutions. I would not lightly conclude that a partner of a national law firm faced with the November resolutions would not have understood that by voting “yes” he or she was agreeing with both resolutions. To the extent it is relevant, Mr Lewis, who bore the onus, did not prove that any Capital Partner failed separately to consider the waiver resolution. I do not accept that Mr Lewis’ appeal to the undoubted "seriousness of consequences" means that the Deed and the Rules do not work in the way intended. If any recipient of the email was in any doubt about the meaning of the resolutions, they had the ability to seek clarification and, if not forthcoming, simply to vote “no”.

28. [81]

    Construing the Deed and the Rules with the same “measure of strictness” identified by the primary judge, the Deed and the Rules expressly permitted the application of a single voting button to accept or reject more than one proposed Extraordinary Resolution. The primary judge erred in concluding that “[t]he two resolutions could not be voted upon by a single button which did not allow for one to be considered separate to the other”. The primary judge should have rejected Mr Lewis’ claim to that effect.

29. [82]

    There were a number of separate points advanced by Mr Lewis on appeal which were not the subject of findings by the primary judge or any notice of contention advanced by Mr Lewis. I will nevertheless address them briefly.

30. [83]

    As to the construction of cl 20.5 of the Deed, I reject Mr Lewis’ submission that these grounds of the cross-appeal “must fail” because they do not account for the distinction between variation and waiver. The resolution sought to waive or abridge the notice requirement. On its correct construction, cl 20.5 of the Deed permitted time limits for a particular expulsion vote to be changed or waived. In context, the power to vary “procedures” for a particular vote did not require alteration of the notice obligations for all future cases. Contrary to Mr Lewis’ submissions in this Court, the primary judge did not decide that the power in cl 20.5 was not properly engaged by the November resolution. In context, there was no need to distinguish between a requirement being “varied” or “waived”, because a waiver of the contractual requirement for notice, in context, should be understood as a variation of the procedures provided by cl 20.4(b) of the Deed. The resolution passed as part of the November resolution was a “variation” of a procedure referred to in cl 20 properly made within the meaning of cl 20.5.

31. [84]

    I reject Mr Lewis’ submission that a “person to whom notice of a meeting is required to be given … cannot themselves waive the obligation of the person convening the meetings … to give notice”. That is the clear meaning of the Deed. There is no issue in this case that every Capital Partner received the November notice and could vote if he or she so chose. I reject Mr Lewis’ submission that the notice provisions could only be waived by Mr Lewis himself. This was not a conclusion reached by the primary judge and no notice of contention was addressed to this issue. In any event, the suggestion that only Mr Lewis could waive the notice requirement in cl 20.4(b) is not what the Deed plainly provides.

32. [85]

    I would uphold grounds 3 and 4 of the cross-appeal.

33. [86]

    It will be recalled that the primary judge found that an Extraordinary Resolution was not carried unless 80% of all Capital Partners voted in favour of the resolution rather than 80% of the Capital Partners who voted. I do not agree.

34. [87]

    As I have explained, the definition of “Extraordinary Resolution” in the Deed specifically identifies “Capital Partners voting in a manner as stipulated by the Rules” (see cl 1.1). Rule 1.5 of the Rules provides that no quorum is required to transact partnership business and states:

35. [88]

    The words “required vote” in Rule 1.5 refer to the percentages in the definitions of various types of resolutions in cl 1.1 of the Deed. It is clear that the words “Capital Partners voting” in Rule 1.5 is a reference to the Capital Partners who cast a vote, not all Capital Partners entitled to vote. Rule 1.5 makes it clear that it is not necessary for all, or 80%, of the Capital Partners entitled to vote actually to vote, for that vote, if passed by 80% of Capital Partners who do vote, properly to be described as an Extraordinary Resolution.

36. [89]

    Mr Lewis’ reliance on the language of a Unanimous Resolution in cl 1.1. is misplaced. The Rules make it clear that the percentage required is the percentage of those who attend and vote, in the case of an in-person meeting. An in-person meeting can consider all types of resolution, including an Extraordinary Resolution. As I have explained, Rule 2.1 provides that all resolutions may be considered by email resolution rather than an in-person meeting. It would be an incoherent construction of the Deed and the Rules to require a fundamentally different methodology to consider an online vote for an Extraordinary Resolution compared with an in-person vote for an Extraordinary Resolution. I have concluded that, on the correct construction, the Deed and the Rules adopt the same methodology for considering the necessary majority to pass an Extraordinary Resolution by in person and online voting.

37. [90]

    No doubt this Extraordinary Resolution was an important matter. Extraordinary Resolutions, however, are required by the Deed for many things, for example clause 2.2(b) (changing of the firm’s name), cl 3.1(b) (approval of a nominated person), cl 5.3 (further contribution to the capital), cl 7.5 (amendments to the profits and losses clause), cl 8.2 (payment of excess net profits), cl 8.3 (excess drawings), cl 9.2 (making and varying the Rules for the conduct of meetings), cl 9.5 (changes to equal voting rights), cl 12.1 (admission of new Capital Partners), cl 15.2 (changes to negative duties), and cl 16.1(signing authority on account of the Partnership) of the Deed. All are no doubt important matters for the partnership having significant consequences for Capital Partners.

38. [91]

    It does not necessarily follow from the serious consequences for Mr Lewis that an Extraordinary Resolution seeking his expulsion needs to be passed by 80% of the Capital Partners entitled to vote. Construing the Deed and the Rules with the same "measure of strictness" as was identified by the primary judge, it remains clear that the Deed and the Rules provide that an Extraordinary Resolution requires 80% support from those Capital Partners who actually voted. As I have said, of the 107 Capital Partners who voted, 106 were in favour of both resolutions and 1 was against. This was a percentage of about 99% of the Capital Partners who voted, well in excess of the 80% required.

39. [92]

    Respectfully, to reason as the primary judge did almost entirely from the consequences to Mr Lewis of the successful expulsion motion does not address the relevant principles of construction. Much less does the drafting technique of inserting semi colons into the definition of “Extraordinary Resolution” (as the primary judge did) advance matters. Mr Lewis’ preferred construction of “Extraordinary Resolution” is not advanced by the insertion of a semi-colon. As I have said, the construction preferred by the primary judge is inconsistent with the Deed and the Rules.

40. [93]

    Mr Lewis’ point, advanced at the appeal hearing but not adopted by the primary judge, that cl 25.1 of the Deed is inconsistent with Rule 1.5 and prevails cannot be accepted. Clause 25.1 of the Deed [1] is facultative only and is not inconsistent with the Rules. The Rules prescribe email communication as an acceptable means of communication for the purposes of passing resolutions, including Extraordinary Resolutions. The Rules operate harmoniously with the Deed in this respect. Voting as provided for in the Rules is voting in accordance with the Deed. The definitions of “Extraordinary Resolution” and “Unanimous Resolution” adopt, in explicit terms, the methods of voting identified in the Rules.

41. [94]

    I have concluded that the Deed clearly required that an Extraordinary Resolution needed to obtain the approval of 80% of the Capital Partners voting, rather than 80% of the Capital Partners entitled to vote. The primary judge erred in concluding the contrary.

42. [95]

    I would allow ground 5 of the cross-appeal.

43. [96]

    The primary judge found that reasons for Mr Lewis’ expulsion were required to be provided to Mr Lewis by Rule 2.3(b), which I have set out at [71] above. I am unable to agree.

44. [97]

    Applying the approach to construction I have identified at the outset, the expulsion power in cl 20 of the Deed is clear – no reason for the expulsion of a Capital Partner need be given (cl 20.2(a)) and expulsion can occur for any reason the Capital Partners deem appropriate (cl 20.2(c)). In context, “any” reason plainly includes “no” reason.

45. [98]

    All that Rule 2.3 required was the identification in the proposed email resolution of “the basis for the resolution with any relevant information”. The November email identified the basis of the resolution with any relevant information, namely that “[p]ursuant to the authority provided by our Partnership Deed dated 20 May 2016 I [the managing partner] put the following email resolution to the Capital Partnership”. No more was required to comply with Rule 2.3(b). To construe identification of “the basis for the resolution” as involving the giving of a reason for Mr Lewis’ expulsion would involve construing Rule 2.3 as requiring the very thing cl 20 of the Deed provided need not occur. The Deed and the Rules should be construed as a coherent whole. The conclusion reached by the primary judge did not construe the Deed and the Rules as a coherent whole. The Capital Partners were not obliged by Rule 2.3(b) to provide Mr Lewis with reasons for his expulsion.

46. [99]

    If I am wrong, and “the basis for the resolution with any relevant information” in Rule 2.3 required the identification of a reason for Mr Lewis’ expulsion, the clear wording of the Deed would prevail. This is because, to the extent of any conflict between the provisions of the Deed and the Rules, the Deed prevails: cl 28.

47. [100]

    I reject Mr Lewis’ submission that the Capital Partners needed to inform Mr Lewis of the grounds upon which it is proposed that he be expelled, and that this requirement is a result of the distinction between “having” reasons and “giving” reasons. The Deed is clear. The Capital Partners did not have to give any reason for their decision to expel Mr Lewis. There was no impermissible conflation of “giving reasons” with “having reasons”, as there was no requirement for the Capital Partners to give reasons either before or after the expulsion of Mr Lewis as a Capital Partner.

48. [101]

    For these reasons I would uphold ground 6 of the cross-appeal.

49. [102]

    The Capital Partners’ primary case was that the declaration made by the primary judge dissolving the partnership from the date of the statement of claim was erroneous because Mr Lewis was validly terminated as a Capital Partner by the passing of the Extraordinary Resolution in November. I have concluded that the Capital Partners are correct and that Mr Lewis was validly expelled as a Capital Partner by the November Extraordinary Resolution.

50. [103]

    Ground 7 arose on the alternative basis that the November Extraordinary Resolution was invalid. In that event, the Capital Partners submitted that Mr Lewis expressly accepted a repudiatory breach of the Deed in paragraph [91] of the FASOC which provided:

51. [104]

    As to whether the contractual doctrine of “accepted repudiation” applies to partnerships, particularly multi-partner partnerships, the cross-appellants contended that the views expressed in Ryder v Frohlich [2004] NSWCA 472 at [133] represent the law. Mr Lewis rejected that contention and relied on Hurst v Bryk [2002] 1 AC 185. Mr Lewis pointed out that Hurst v Bryk was referred to with approval, at least in part, by a majority of the High Court in Commissioner of State Taxation v Cyril Henschke Pty Ltd (2010) 242 CLR 508; [2010] HCA 43.

52. [105]

    In Ryder v Frohlich, McColl JA said:

53. [106]

    The different approaches of courts in Australia and the UK to the question of termination of a partnership by acceptance of repudiation of a partnership agreement have been the subject of vigorous academic debate: see, for example, Stephen Graw, “Terminating Partnerships by ‘Accepted Repudiation’: the Differing UK and Australian Approaches” Society of Legal Scholars 110th Annual Conference, University of Central Lancashire (3-6 September 2019); Elisabeth Peden and John Carter, “The Bonds of Partnership” (2000) 16 Journal of Contract Law 275.

54. [107]

    Given the conclusions I have reached on grounds 1-6 of the cross-appeal, I need not decide whether Ryder v Frohlich or Hurst v Bryk identifies the correct approach. Determination of the question whether termination of a partnership by acceptance of repudiation of a partnership agreement is the law in Australia should await a case where a decision on this question affects rights. In such a case, careful consideration will need to be given to Cyril Henschke, and to whether the High Court has actually decided the issue. Such an exercise is one that this Court should not undertake in a case where the decision about that issue does not matter to the overall outcome.

55. [108]

    Before leaving this issue, on the contingent basis I am considering this issue, there are two other bases for termination of the partnership which need be considered: ss 36(c) and 39 of the Partnership Act.

56. [109]

    Section 36(c) of the Partnership Act provides for dissolution by notice:

57. [110]

    As I will explain when addressing the notice of appeal, paragraph [91] of the FASOC was a notice within the meaning of s 36(c) of the Partnership Act and Mr Lewis ceased to be a Capital Partner on the day that pleading was filed.

58. [111]

    Finally, as I will explain, assuming (as the primary judge found) that the just and equitable ground in s 39 of the Partnership Act was the correct basis for dissolution of the partnership, the primary judge was correct in this case that Mr Lewis ceased to be a Capital Partner on the date the FASOC was filed.

59. [112]

    On the contingent basis I am addressing ground 7, I would dismiss it.

60. [113]

    The Capital Partners submitted that the costs of the hearing of the separate question should have been reserved. Given the conclusions I have reached on the principal grounds (1-6) of the cross-appeal, this question does not arise. The Capital Partners are entitled to their costs of the appeal, cross-appeal and the costs of the proceedings below.

61. [114]

    On the assumption I am wrong about grounds 1-6, I would nevertheless have set aside the primary judge’s order that the costs of the hearing of the separate question should be paid by the Capital Partners. Given the limited findings made by the primary judge at the hearing of the separate question, it was entirely possible, as the Capital Partners submitted, that at a second stage hearing, Mr Lewis may ultimately have been entitled to no more than nominal damages for breaches of the Deed. The failure to have regard to that matter was an error warranting intervention by this Court.

62. [115]

    If it were necessary to re-exercise the costs discretion (i.e. if I am wrong about grounds 1-6), I would not make any order for costs of the separate hearing. This is principally because, as I have said, on the limited findings made by the primary judge it is possible that Mr Lewis would be entitled to only nominal damages. There were a large number of issues not determined by the primary judge. It may be that, ultimately, Mr Lewis would have succeeded on some or all of those undetermined issues. Equally he could have failed on some or all of those issues. In Chandrasekaran v Western Sydney Local Health District (t/as Westmead Hospital) (No 2) [2024] NSWCA 21, Gleeson, Leeming and Adamson JJA stated:

63. [116]

    In reaching this conclusion I accept, as the High Court said in Firebird Global Master Fund II Ltd v Republic of Nauru (2015) 90 ALJR 270 at [6], that there are “good reasons not to encourage applications regarding costs on an issue-by-issue basis”. This, however, was an unusual case. There was a large number of separable issues, each litigated in the context of a separate question, and about which no findings were made by the primary judge. As I will explain, the complaint that the primary judge did not determine a number of significant issues which had been litigated was also at the heart of Mr Lewis’ appeal. It may ultimately have been, after a second hearing, that Mr Lewis could have demonstrated that he was entitled to some or even all of the costs of the separate question.

64. [117]

    If it were necessary to re-exercise the costs discretion, however, I would not have awarded Mr Lewis the costs of the separate question and would have allowed ground 8 of the cross-appeal.

65. [118]

    Grounds 1-6 of the cross-appeal should be allowed. Mr Lewis (or more accurately the Lewis Practice Trust) was not wrongly expelled as a Capital Partner. If it were necessary to do so I would have dismissed ground 7 of the cross-appeal and allowed ground 8.

66. [119]

    It follows that orders 1-4 made by the primary judge on 8 April 2024 should be set aside.

Notice of contention

1. [120]

   The Capital Partners filed a notice of contention containing one ground, that the primary judge erred in finding that the Capital Partners owed a fiduciary duty to Mr Lewis in considering a motion for his expulsion as a Capital Partner.

2. [121]

   The Capital Partners submitted that the primary judge erred at [79]-[82] of the (No 5) judgment in which his Honour “seemingly found” that a fiduciary duty was owed because:

   1. (1)

      cl 15(e) of the Deed says the partners must be “just and faithful to the other Capital Partners in all matters relating to the affairs of the Partnership” and that an expulsion is an affair of the partnership; and

   2. (2)

      removing a partner’s rights and expelling that partner from the partnership goes well beyond the “enjoyment of the rights of ownership”.

3. [122]

   The Capital Partners argued that the first basis is wrong because cl 15(e) does not impose a fiduciary duty. To be “just and faithful” was said to entail a narrower duty than a fiduciary duty. In any event, the construction of cl 15(e) of the Deed must accommodate the balance of the Deed and in particular, cl 20, to give it a coherent operation. The Capital Partners argued that the second basis is wrong because if it were the case that removing a partner’s rights and expelling that partner from the partnership went well beyond “the enjoyment of the rights of ownership”, that is all the more reason why there would be no imposition of a fiduciary duty when considering expulsion. It was submitted that mutual trust and confidence will not exist when considering expulsion.

4. [123]

   This is a potentially complex issue. Given that it is not strictly necessary to determine the issue give the conclusions I have reached about grounds 1-6 of the cross-appeal, the issue should await a case where the conclusion would be dispositive.

Notice of appeal

1. [124]

   Despite the conclusions I have reached on ground 1-6 of the cross-appeal, which are dispositive, in accordance with Kuru v State of New South Wales (2008) 236 CLR 1; [2008] HCA 26 at [12] and Boensch v Pascoe (2019) 268 CLR 593; [2019] HCA 49 at [8], I will address the grounds of the notice of appeal where possible.

2. [125]

   Grounds 1-18 in the appellant’s amended notice of appeal relate to the orders of the primary judge made on 8 April 2024 in the (No 5) judgment. Grounds 19-23 relate to the orders of the primary judge made on 10 May 2024 in the (No 6) judgment dismissing the appellant’s motion to set aside or vary the orders made in the (No 5) judgment. Mr Lewis submitted that if any of grounds 19-23 are upheld, the consequence is the primary judge ought to have corrected the (No 5) judgment in disposition of the notice of motion, rather than requiring him to appeal. Some of grounds 19-23 are relevant to the first eighteen grounds with respect to the 8 April 2024 orders. I have addressed these relevant grounds collectively where it is possible and appropriate to do so.

3. [126]

   On 10 February 2023, Slattery J made the separate question order I have set out at [15] above. The primary judge explored making a deliberate departure from that order with the parties during the hearing, but his Honour ultimately accepted Mr Lewis’ submission that the order should be adhered to. The terms and effect of the order were accurately set out by the primary judge at [8]-[9]. However, Mr Lewis submitted that the primary judge departed from that order, in making order 2:

4. [127]

   Mr Lewis submitted the consequence was that the primary judge constructively failed to hear and determine his claim in accordance with the order made by Slattery J. Mr Lewis sought to vary the order made through the r 36.16 motion (see above at [38]-[51]), which was dismissed.

5. [128]

   The Capital Partners submitted that the primary judge followed the split hearing order. His Honour determined that there were breaches of the Deed and ordered Mr Lewis’ damages arising from those breaches to be assessed. In the (No 5) Judgment at [118], the primary judge made clear that the nature of the orders he was making would “keep alive the plaintiff’s contentions as to the nature and heads of damages which he seeks”. In oral submissions, the Capital Partners added that grounds 1 and 2 of the appeal are based upon a misconception. It was submitted that the primary judge concluded that the appellant may seek a buy-out order in the quantum phase as a head of damage.

6. [129]

   In reply, Mr Lewis submitted that, by concluding that he may seek a buy-out order in the quantum phase as a “head of damage”, the primary judge has left the parties in a position which will require them to marshal expert evidence on various assumptions because the basis for any such valuation has not been determined.

7. [130]

   This case shows the undesirability of ordering a separate question without at least identifying precisely and in advance what must be decided. There are cases where a separate question is desirable: see for example Murray Darling Basin Authority v Doyle’s Farm Produce Pty Ltd [2021] NSWCA 191. There are cases where it is not, at least without identifying with precision what is to be the subject of the separate question. In State of New South Wales v Dargin [2019] NSWCA 47, Leeming JA said:

8. [131]

   The outcome of grounds 1 and 2 depends on a construction of [118] of the (No 5) judgment which I have set out at [35] above. There is much force in the complaint by Mr Douglas KC, on behalf of Mr Lewis, that it is by no means clear that a “buy-out” order of the kind made in Mullins v Laughton and Syers v Syers could properly be described (as it was by the primary judge) as a species of “special damages”. On the other hand, the primary judge in the (No 6) judgment stated that Mr Lewis was entitled to lead further evidence and to seek a buy-out order in the second phase of the hearing. The Capital Partners accepted in this Court that it was open to Mr Lewis in the second phase of the hearing to seek a buy-out order and to identify what components should be the subject of that order; for example, “goodwill” of the partnership. I note in passing that it is sometimes difficult to determine the existence of and value of goodwill in a legal partnership: compare Bartier Perry Pty Ltd v Paltos [2021] NSWCA 158 and Paltos v Milevski [2023] NSWCA 7 which came to different conclusions on different evidence about orders to be made on dissolution of the same legal partnership.

9. [132]

   Although a valiant attempt was made by Mr Douglas KC to persuade this Court that sufficient evidence had been led for this Court to itself determine that a “buy-out” order should be made and to identify the components of such an order, there plainly was not a sufficient evidential foundation in this case for making such an order. This is a case where neither party was seeking an order winding up the partnership. It does not automatically follow that a buy-out order follows if I had made a determination that the November expulsion resolution was void. Much less do I accept that any “buy-out” order should necessarily be fashioned encompassing goodwill of the partnership, which order would be inconsistent in important respects with the Deed.

10. [133]

    There is nothing in the cases cited by Mr Lewis justifying, let alone mandating at the present stage of proceedings, the making of a buy-out order containing “the interest of Lewis in the goodwill, debtors, work in progress, cash at bank and other property of HWL Ebsworth”. Were it necessary to determine this issue, the matter would have been remitted to the primary judge to consider, giving both parties an opportunity to lead such evidence as they thought fit, to address whether a buy-out order should be made, and if made, the components of that order and the value to be attributed to each component of that order.

11. [134]

    Perhaps surprisingly, given the maintenance of the grounds and the written submissions, Mr Douglas KC submitted that:

12. [135]

    I agree. The making of a buy-out order (and its components) “are all facts for another day”. I am not satisfied that all of the evidence necessary to make a determination of whether or not to make a buy-out order and its components had been led in the first hearing. The primary judge reached the same conclusion, and expressly left open the possibility that he would be persuaded to make such an order at the second stage of the hearing. The Capital Partners, whilst opposing the making of such an order, accepted that it was open to Mr Lewis to advocate for the making of such an order at the second stage hearing. It follows that if it were necessary to do so and I had come to a different conclusion on the cross-appeal, I would have dismissed grounds 1 and 2 of the appeal.

13. [136]

    By grounds 3-5, Mr Lewis challenged the primary judge’s failure to make specific findings of fact regarding his claim that he lost the opportunity in August 2020 for his calibration points to increase. Mr Lewis’ claim is based on Mr Martinez’s actions: first, by causing the “FDP” notation to be made against the appellant in August Resolution 1, and second, by recommending that the appellant’s calibration points be reduced to zero, effectively excluding him from participating in the proposed IPO. Mr Lewis asserted that these actions by Mr Martinez constituted a breach of the Deed.

14. [137]

    Clause 7.1 of the Deed provided that the net profits are to be shared in accordance with the calibration points of each partner. Clause 7.2 provided that the calibration points “are approved by the Capital Partners from time to time and are as set out in the Rules”. Rule 8 obliged Mr Martinez to make a recommendation in good faith to the Capital Partners as to the appellant’s proposed calibration points, and for calibration points to be set between 0.05 and 1.00. The proposal for zero calibration points was outside that range. Mr Lewis submitted that the evidence demonstrated that he was entitled to a substantial increase in calibration points, and Mr Martinez acknowledged in making the FDP notation that the Deed did not enable a Capital Partner to be made an FDP by a vote of Capital Partners.

15. [138]

    Clause 15 of the Deed related to the “Conduct of Capital Partners”. Under cl 15.1, each partner must:

16. [139]

    Clause 15.3 provided for an indemnity by a Capital Partner who breaches any of the obligations in cl 15.1 in favour of the other Capital Partners.

17. [140]

    Mr Lewis submitted that the primary judge should have made the following findings and that his failure to do so was appealable error:

18. [141]

    Mr Lewis submitted that he lost the chance to increase his calibration points which gave rise to a claim in damages. Mr Lewis submitted that this Court is in as good a position as the primary judge to make those findings of fact because the factual dispute was in narrow compass. I disagree for the following reasons.

19. [142]

    First, the detailed conclusions of fact now sought by Mr Lewis were not pleaded. No declaration was sought about the events of August 2020. That the matter was not put at trial in the way advanced on appeal is demonstrated by the fact that no contention was made at the trial that Mr Martinez breached Rule 8. In those circumstances I agree with the Capital Partners’ submission that there was no reason for Mr Martinez in his affidavit to address those matters and no conclusion adverse to the Capital Partners should be drawn from his failure to do so.

20. [143]

    Secondly, as with the “buy-out” order the subject of grounds 1-2, the primary judge made clear that he would permit Mr Lewis to advance a loss of a chance case as part of his damages claim in the second phase hearing.

21. [144]

    Thirdly, I am not persuaded that Mr Lewis demonstrated at the first phase hearing that he was entitled in August 2020 to any increase in calibration points. Mr Martinez’s email to Mr Lewis on 5 August 2020 records that given “the history of contribution, performance and overdrawing” Mr Lewis was “not proposed to be a participant in the IPO sell down process”. I reject Mr Lewis’ submission that the Capital Partners were, on the state of the evidence at the first phase hearing, obliged to lead evidence in support of the matters addressed in Mr Martinez’s 5 August 2020 email. Mr Lewis had every opportunity to address the alleged loss of opportunity by reason of the events of August 2020. That he failed to lead evidence is not fairly attributable to the conduct of the litigation by the Capital Partners. Mr Lewis’ self-assessment of his value to the partnership was to the contrary of Mr Martinez’s email. I am not convinced there was sufficient contemporaneous support to prefer Mr Lewis’ value to the partnership in August 2020 to the view expressed by Mr Martinez in that email. In particular, the purported aide memoire handed up on the third and last day of the appeal on behalf of Mr Lewis, which was not given to the primary judge [2] and which was said to support a finding that he “exceeded the performance of someone on his calibration points by 45%” did not, of itself or by reference to other evidence, establish any such thing.

22. [145]

    Mr Lewis had no contractual entitlement to any increase in his calibration points and Mr Lewis did not lose any of his points until his expulsion. ln those circumstances there is no occasion to make a finding of breach. However, even if there was, Mr Lewis lost nothing by the August 2020 resolution. Even if Mr Lewis was to stay as a Capital Partner it is almost certain that Mr Lewis’ calibration points were not going to be increased. I am not persuaded that Mr Lewis lost an opportunity having value.

23. [146]

    Fourthly, Mr Lewis was not expelled from the partnership in August 2020. Mr Lewis’ calibration points were not reduced in August 2020 and he continued to receive his entitlements based on the existing allocation of calibration points until the date of his expulsion from the partnership in November 2020. Mr Lewis received partnership drawings on 2, 16 and 30 September 2020 and 14 and 28 October 2020, on the basis he was a Capital Partner with an allocation of 16 calibration points. The proposed IPO did not go ahead. If I were forced now on the basis of the evidence led at the first phase of the hearing to make a finding about the events of August 2020, I would not find any breach of Deed in August or any breach of fiduciary duty by reason of the events of August 2020.

24. [147]

    I have concluded, however, that if it were necessary to do so, the fairest course would be to permit the parties to lead such further evidence as they were each advised and agitate the question of alleged “loss of a chance” damages based on the events of August 2020 in the second phase hearing as envisaged by the primary judge. Although seeking to agitate the position that there was no relevant loss of a chance, Mr Williams SC on behalf of the Capital Partners accepted that Mr Lewis could agitate damages based upon an alleged loss of a chance based on the events of August 2020 at any second stage hearing.

25. [148]

    It follows that if it were necessary to do so I would reject grounds 3-5 of the notice of appeal.

26. [149]

    In the FASOC, Mr Lewis contended that the Capital Partners breached s 28(8) of the Partnership Act “by purporting to pass and adopt the August Resolutions and October Resolutions, to make a change in the nature of the partnership business without the consent of all existing partners”.

27. [150]

    Section 28(8) of Partnership Act provides:

28. [151]

    Mr Lewis submitted that the proposed IPO and sell down involved a “change [to] the nature of the partnership business”, but not all Capital Partners consented to the change (including Mr Lewis himself). Further, the IPO and sell down envisioned the use of “Weighed Calibration Points”, rather than actual calibration points, for the purposes of allocating shares in the listed entity. In the absence of unanimity, such an approach breached s 28(8) because the partners could not vary inter se the right of a partner to share in the surplus from the sale of the business carried on by the partnership.

29. [152]

    In support of the latter point, Mr Lewis relied upon Cappe v Tsung [2018] NSWCA 86. In that case, the respondent and the seven appellants operated a diagnostic imaging practice pursuant to a partnership agreement. Six partners, including Dr Tsung, held a one-seventh share in the partnership. Two of the partners held a one-fourteenth share in the partnership. At one point all the partners received an offer to sell the business. A clause in their partnership agreement required a special majority for such decisions. While the appellants voted in favour, Dr Tsung abstained. Dr Tsung later argued he was entitled to his proportionate share of the assets, as he hadn't agreed to any variation. The Court of Appeal agreed, ruling that the special majority could not alter the partners’ proportional entitlements without unanimous consent. Mr Lewis submitted that the primary judge did not grapple with this aspect of his case about unanimous consent as it was not mentioned in his Honour’s reasons.

30. [153]

    The Capital Partners contended that, given the ineffectiveness of the August and October Resolutions and the abandonment of the IPO, it was not necessary for the primary judge to address the asserted breach of s 28(2) of the Partnership Act. It was pointed out that at the trial, Senior Counsel for Mr Lewis accepted that declarations that the August and October Resolutions were null and void did not need to be made. The Capital Partners submitted that the duty of the primary judge “does not extend to referring to every argument or piece of evidence” and the obligation to give reasons does not “include resolving every issue presented by the parties”. The primary judge was only required to expose the reasons for resolving a point “critical to the contest between the parties” and he had done that.

31. [154]

    If it were necessary to do so I would reject ground 6. A large number of provisions in the Partnership Act are expressed to be subject to any agreement in the partnership agreement or deed. Those provisions include s 28(8), which is subject to the terms of the partnership deed, as is the balance of s 28. Sections 24, 26, 29, 30, 36, 37, 47, 48, 68 and 69 of the Partnership Act are all provisions that are made subject to any agreement that the partners may make in their deed or other agreement.

32. [155]

    In the present case, it is plain that the Deed permitted, by its terms, a “change [to] the nature of the partnership business” by conducting an IPO. The Deed contained many provisions that provide otherwise as to how the partnership is able to conduct its business, including where it was a “Unanimous Resolution” which was required. Accordingly, s 28(8) did not apply. Nothing said in Cappe v Tsung required a conclusion to the contrary.

33. [156]

    Even if, contrary to my conclusion, s 28(8) of the Partnership Act applied and unanimous consent to conduct an IPO was required, the August and October Resolutions had no effect. There was never an IPO or a change in the nature of the partnership business.

34. [157]

    Finally, as I have said, Senior Counsel for Mr Lewis accepted before the primary judge that declarations that the August and October Resolutions were null and void did not need to be made. The primary judge cannot be criticised for failing to make declarations that Senior Counsel for Mr Lewis assured him were unnecessary.

35. [158]

    If it were necessary to do so, I would reject ground 6 of the appeal.

36. [159]

    Grounds 7-8 challenge the absence of any finding of fact by the primary judge that, by August Resolutions 1 and 3 (Ground 7) and by October Resolution 2 (Ground 8), Mr Martinez improperly sought to exclude Mr Lewis from participation in the proposed IPO.

37. [160]

    In the (No 5) judgment at [77], the primary judge quoted from Mr Lewis’ submissions that the improper purpose asserted was “to exclude him from participating in the IPO process and to enable other Capital Partners (and, in particular, Mr Martinez) to benefit from his expulsion”. His Honour considered and rejected the second aspect of that identified improper purpose at [92]. I note that this finding is challenged in grounds 9-12, to which I will come. The present complaint is that the primary judge failed to address the first aspect of the alleged improper purpose, namely, to exclude Mr Lewis from participating in the IPO.

38. [161]

    Mr Lewis submitted that the facts support the conclusion that the expulsion resolution in November 2020 occurred because Mr Martinez had decided in August 2020 that Mr Lewis was not to participate in the proposed IPO. Mr Martinez’s email to Mr Lewis on 13 August 2020 stated that in response to the appellant’s “continued agitation of the IPO decision”, Mr Martinez would have to take a different approach. Hours later, Mr Martinez gave the appellant notice of his intention to move for his expulsion (set out at [9] above).

39. [162]

    The appellant submitted that the purpose of exclusion from participating in the IPO was itself an improper purpose for the reasons given by Jessel MR in Russell v Russell (1880) 14 Ch D 47 at 479. In that case, the Master of the Rolls explained that the duty of good faith had been breached in Blisset v Daniel (1853) 10 Hare 493; 63 ER 1022 because “the partners were not to meet together and say, ‘We should like to have so-and-so’s shares, and, therefore, we will expel him.’ That was a consequence of expulsion, but it was not to be the motive of the expulsion – it was not a bona fide exercise of the power”. Mr Lewis submitted that it should have been concluded that the Capital Partners met together to pass the expulsion motion and should be understood to have said, “We would like to have Mr Lewis’ interest in the partnership so that he will not participate in the IPO, so we will expel him”.

40. [163]

    Mr Lewis submitted the abandonment of the IPO was irrelevant because Mr Martinez (and the other respondents) were operating under the assumption that the IPO would proceed. Thus, the primary judge’s failure to make findings about the events of August 2020 meant that he did not resolve a point critical to the contest between the parties.

41. [164]

    The Capital Partners submitted that it was correct for the primary judge not to find that the August and October Resolutions sought to exclude Mr Lewis from participation in the proposed IPO. In any event, the reasons for the expulsion, contained in Mr Martinez’s email of 7 November 2020 at 5:24pm, were that Mr Lewis “did not accept the FDP designation given to him in the original restructure vote”; “had been threatening legal action”; and attempts to compromise had been unsuccessful. No reference was made to the proposed IPO or a desire to obtain Mr Lewis’ interest in the partnership. It must also be borne in mind that a Capital Partner leaving the partnership for any reason has only the entitlements as a Capital Partner expressed in the Deed, which precludes any entitlement to goodwill.

42. [165]

    There is a problem at the heart of these grounds. Mr Lewis’ pleaded case was that Mr Martinez improperly sought to exclude Mr Lewis from participation in the proposed IPO, by reason of Mr Martinez’s desire to obtain for himself Mr Lewis’ calibration points.

43. [166]

    The primary judge correctly identified the “improper purpose” articulated in writing and orally before him thus:

44. [167]

    There was never a case conducted by Mr Lewis, in the pleading or in submissions, that it was an improper purpose of the August and October resolutions simply to exclude Mr Lewis from the IPO; that is, without also asserting that this was done to obtain Mr Lewis’ calibration points.

45. [168]

    The primary judge cannot legitimately be criticised for failing to make findings he was never asked to make. I would reject grounds 7 and 8 of the appeal.

46. [169]

    Grounds 9-12 challenge the primary judge’s conclusion that the November Resolution did not involve the exercise of the expulsion power otherwise than for a proper purpose.

47. [170]

    Ground 9 complains about paragraph [83] of the (No 5) judgment where the primary judge said that “it is fundamental to any conclusion that there must first be identified the existence of an improper purpose”. The appellant argued that the statement is contrary to law because “his Honour was required to ask himself whether or not the expulsion power was exercised for a proper purpose, and it was not at all fundamental to that task that [the appellant] was required to prove an improper purpose”. Mr Lewis referred to Hancock v Rinehart [2015] NSWSC 646 at [61] where Brereton J stated that “the crucial question is simply whether the power (or discretion) was exercised bona fide for a proper purpose, and an answer that it was not does not depend in every case on proof of what the extraneous purpose was”.

48. [171]

    Mr Lewis submitted that despite the burden of proof falling on him, given that the purpose for which the expulsion power was purportedly exercised was “a matter particularly and solely within their knowledge … the burden is on them to prove this if they can”, citing General Accident, Fire and Life Assurance Corp v Robertson [1909] AC 404 at 413 (Lord Loreburn LC). Mr Lewis submitted that the absence of any reason being given to expel him constituted an exercise of power for an improper purpose, citing Manning River Cooperative Dairy Co Ltd v Shoesmith (1915) 19 CLR 714 at 717-718 (Griffith CJ).

49. [172]

    The Capital Partners submitted that ground 9 must be rejected because the appellant articulated an improper purpose which he invited the primary judge to find, and which was rejected:

50. [173]

    Mr Lewis should not be permitted on appeal to advance a different case about the existence of a proper purpose than the one advanced at trial. The primary judge’s approach was not inconsistent with Brereton J’s approach in Hancock. As Brereton J said in that case, proof of improper purpose does not depend in every case on proof of what the extraneous purpose was. This was a case where Mr Lewis identified and prosecuted a case which identified a particular improper purpose, which he failed to prove. It is not a case within the exception identified by Brereton J to the usual case of proof of improper purpose.

51. [174]

    Even if Mr Lewis were permitted to raise this issue in this way, I would reject Mr Lewis’ claim. That is, I am not satisfied that Mr Lewis proved that the power was not exercised bona fide for the purpose for which it was conferred. I am satisfied that the reasons for the expulsion motion given in Mr Martinez’s 7 November 2020 email (set out at [12] above) are matters relevant to the business of the partnership. Those reasons were inconsistent with Mr Lewis’ claim that the power was exercised for an improper purpose.

52. [175]

    Mr Lewis was in his mid- 60’s at the time of the November 2020 resolution. A key feature of the proposed IPO involved the making of long-term employment contracts with Capital Partners. I am not satisfied in those circumstances that Mr Lewis established that it was an improper use of the power to seek to exclude a person near the end of their professional career from the IPO. The Capital Partners had a legitimate commercial interest in whether an older partner remained a Capital Partner, in circumstances where they were about to enter 3-year-long employment contracts. The apparent commercial objective of the IPO calibrations was to give weight to the performance of younger Capital Partners who were in the phase of their careers of building practices. Mr Lewis himself acknowledged in correspondence with Mr Martinez that younger partners whose future earnings over many years will be capitalised should receive preference.

53. [176]

    Finally, the Capital Partners also had a legitimate commercial interest in the status of a partner who was threatening legal action against the partnership. It was not an improper purpose to take that matter into account.

54. [177]

    I would reject ground 9.

55. [178]

    By grounds 10 and 11, Mr Lewis submitted, in the alternative, that to the extent it was necessary for him to prove an improper purpose, the primary judge erred in concluding that it was not established. Mr Lewis pointed to the events of August 2020 and submitted that Mr Martinez had improperly decided to exclude the appellant from participation in the IPO, that he had improperly sought by August Resolution 1 to remove Mr Lewis’ Calibration Points, and that he had improperly threatened Mr Lewis with expulsion if he did not accede to Mr Martinez’s position. Since the primary judge had already accepted that the purported expulsion in November 2020 was the culmination of those events in August 2020, Mr Lewis said the primary judge should have found that Mr Martinez’s purpose was to give effect to his improper decisions to exclude Mr Lewis from participation in the IPO and that this purpose was improper.

56. [179]

    By ground 11, Mr Lewis complained about the primary judge’s conclusion with respect to the proper purpose rule. Mr Lewis submitted that “[t]here was sufficient evidence from which to conclude that the respondents purported to expel Lewis for a particular improper purpose; namely, those identified in Ground 10”. Secondly, Mr Lewis submitted that in the absence of any explanation from the respondents as to the propriety of their purpose in purporting to expel the appellant, the primary judge erred in not concluding that it involved the absence of a proper purpose.

57. [180]

    For essentially the same reasons as given in relation to ground 9, I disagree.

58. [181]

    If it were necessary to do so I would conclude that the Capital Partners, including Mr Martinez, acted to remove Mr Lewis as a Capital Partner for reasons integral to the business of the partnership. I reject Mr Lewis’ submission that Mr Martinez’s internal correspondence with the management team shows that his “true purpose” in seeking to expel the appellant was because he was refusing to accept the “unlawful sale of his interest in the partnership” under the IPO.

59. [182]

    The Capital Partners had an obvious interest in the membership of the Capital Partnership, including whether older partners remained as Capital Partners or became FDPs. Those business interests of the partnership, and its membership, were acute when the Capital Partners were contemplating entering into arrangements that provided for long-term employment contracts for Capital Partners. The Capital Partners no doubt acted because Mr Lewis, unlike the other three Capital Partners so identified in the August resolution, refused to resign as a Capital Partner and become a FDP. The Capital Partners were also entitled to take into account their business interests in relation to a Capital Partner who was threatening to sue his or her fellow Capital Partners. I would not conclude that any of the matters articulated in the contemporaneous documentation as reasons for seeking Mr Lewis’ expulsion could or should be described as improper purposes.

60. [183]

    I would reject grounds 10 and 11.

61. [184]

    In ground 12 Mr Lewis complained that the primary judge’s finding as to Mr Martinez’s inferred rationale for withholding an explanation for the attempted expulsion was “contrary to law and was not open on the evidence”. Mr Lewis submitted that the primary judge declined to draw the allegedly correct inference that Mr Martinez withheld that evidence because he was “conscious that success in the litigation would be rendered impossible or less likely if the material withheld were revealed”: Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11 at [62] (Heydon, Crennan and Bell JJ).

62. [185]

    Mr Lewis also submitted that where an improper purpose case was advanced in relation to the exercise of a power for which no reasons were required to be given under the relevant contract, Isaacs J’s approach in Australian Metropolitan Life Assurance Co Ltd v Ure (1923) 33 CLR 199 at 221 was applicable. That approach was said to be “in the analogous context of the discretion of directors of a proprietary company to refuse to register a share transfer without giving any reason, it is clear that despite such a clause, where a party can show circumstances that (if left unexplained) point ‘either affirmatively to the existence of an unjustifiable reason or negatively to the absence of any legitimate reason’”.

63. [186]

    Mr Lewis submitted that “Mr Martinez’s affidavit was simply silent as to why he had withheld an explanation” and “[i]t was not open to his Honour to infer that the reason why he was silent was because of cl 20.2 in the Partnership Deed”. Mr Lewis submitted that the primary judge’s approach to Mr Martinez’s evidence is inconsistent with the approach Mr Lewis suggested (and that the primary judge appeared to have accepted). That is, given Mr Martinez’s death before the hearing, “the weight to be given to his affidavit, untested by cross-examination, ‘will always be discounted, as appropriate … judged according to all the circumstances of the case”. The proper inference, Mr Lewis submitted, was not that Mr Martinez was labouring under the misapprehension that he could legitimately withhold any explanation from the Court, but that the respondents were obliged to justify their conduct given Lewis’ prima facie case of misconduct and, having failed to do so, the silence of their party-witness was tantamount to an admission.

64. [187]

    I have concluded that Mr Lewis’ submissions should be rejected. I do not accept that it was shown that Mr Martinez was conscious that success in the litigation would be rendered less likely if the material “withheld” were revealed. The principle in Kuhl was thus inapplicable. Mr Martinez provided an affidavit. He died before the hearing. To the extent Mr Martinez was required to expose reasons for expelling Mr Lewis from the partnership, those reasons are recorded in the contemporaneous documents. The statement of Isaacs J in Australian Metropolitan does not take the matter further. The onus of showing that the Managing Partner did not act bona fide in the best interests of the partnership remained on Mr Lewis, the party challenging the decision. Mr Lewis did not establish any prima facie case of misconduct by the Capital Partners or similar conduct to that found in Australian Metropolitan.

65. [188]

    I would reject ground 12.

66. [189]

    Ground 13 complains about order 1 which provides that “the expulsion of [Mr Lewis] … was invalid by reason of breaches of the Partnership Deed”. Mr Lewis submitted that the purported Expulsion Resolution was not merely a breach of the Deed. By order 2, the primary judge declared that the partnership was dissolved “with effect from” the date of the filing of the FASOC. Mr Lewis submitted that in so doing, the primary judge appears to have accepted that Mr Lewis remained a Capital Partner after the purported Expulsion Resolution, and that Mr Lewis’ interest in the partnership property and his entitlement to a share in the partnership profits were not affected during that time. Accordingly, Mr Lewis submitted that he should have the comfort of a declaration that the November resolution was “null and void and of no legal effect”.

67. [190]

    On the contingent basis I am addressing this ground, I am unable to agree that a declaration in those terms should have been made. The declaration now sought was not part of any relief Mr Lewis sought in the proceedings. No error has been shown in the primary judge granting relief in the form that he did.

68. [191]

    I would reject ground 13.

69. [192]

    Grounds 14-16 challenge the primary judge’s approach in determining the date of the dissolution of the partnership.

70. [193]

    By ground 14 Mr Lewis argued that paragraphs [108] and [112] of the (No 5) primary judgment are wrong in finding that Mr Lewis had not, until closing submissions, stated that his position was that he remained a Capital Partner of the partnership. Mr Lewis submitted that he “had initially sought relief in the initial Statement of Claim in the nature of a buy-out of his interest in the Partnership property, as well as an order that the respondents pay to him his share of the net profits to the date on which any such buy-out order was made”. Alternatively, Mr Lewis submitted, to the extent the point was not made on the pleadings, the Capital Partners had “allowed” Mr Lewis to raise this issue of him remaining at all times a Capital Partner. Mr Lewis submitted that “the Court is permitted and possibly obliged” to decide this issue.

71. [194]

    Mr Lewis submitted that the effect of the primary judge’s conclusion that the November resolution was a breach of the Deed “must be” that the appellant remained a Capital Partner. It was submitted that Mr Lewis retained an interest in the partnership property and an entitlement to a share in the partnership profits. In other words, Mr Lewis “did not become entitled to damages for the loss of that which he did not lose”.

72. [195]

    I have concluded that it is tolerably clear that, prior to closing submissions, Mr Lewis’ case was not that he remained a Capital Partner:

    1. (1)

       Mr Lewis pleaded that he accepted the Capital Partners’ claimed repudiation of the partnership agreement;

    2. (2)

       Mr Lewis sought a declaration that following the claimed repudiation he was relieved from future performance obligations under the Deed; and

    3. (3)

       The pleaded entitlement to a buy-out order was premised on Mr Lewis no longer being a Capital Partner and his being entitled to the value of Mr Lewis’ interest in the partnership at the time of expulsion.

73. [196]

    Given that, on any view, Mr Lewis accepted that the partnership must be brought to an end, and he did not seek, until final submissions, to contend that the partnership was still on foot, I would reject ground 14.

74. [197]

    By grounds 15-16 Mr Lewis alleged that the primary judge erred in finding that the date on which the partnership was dissolved was 10 February 2021. Mr Lewis’ complaint was twofold:

    1. (1)

       First, he submitted that “[n]o authority was cited by his Honour in support of the selection of that date”.

    2. (2)

       The second was that the primary judge “erred by conflating the dissolution of a partnership by notice (in s 36(c) of the Partnership Act), and the dissolution of a partnership by the Court [on the just and equitable ground] (as in s 39 of the Act)”.

75. [198]

    Mr Lewis submitted that backdating of an order of dissolution of a partnership is appropriate under s 36(c) but not s 39 of the Partnership Act and that “well-settled authority makes clear the proper date is the date of judgment”, citing Lyon v Tweddell (1881) 17 Ch D 529 at 530 (Jessel MR), 531 (James LJ) and 531 (Lush LJ).

76. [199]

    In relation to s 36(c) of the Partnership Act, Mr Lewis accepted that the section makes provision, subject to any agreement between the partners, for the dissolution of a partnership by any partner giving notice to the others of his intention to dissolve the partnership. Mr Lewis submitted that “no case was raised by the respondents that invoked s 36(c)” and “the primary judge erred by deciding this matter without giving Mr Lewis a sufficient opportunity to argue the point”.

77. [200]

    As to s 39 of the Partnership Act, Mr Lewis submitted that there should not have been any backdating. This was submitted to be because “to the extent that the date of decree is ‘logically involved’ in the seeking of the decree by Lewis” and “insofar as the appellant had … limited his grounds for relief to the just and equitable ground in s 39(f)”, “the primary judge would have applied the direct authority that the date of judgment was the proper date”.

78. [201]

    Mr Lewis’ case on appeal, at least until the third day, was that the decision whether to backdate is “not a discretion for the Court”. Although Lyon v Tweddell “might be understood as leaving room for backdating in certain circumstances”, “[t]here is no reason why the approach in Lyon v Tweddell should not be applied according to its terms so that where … the just and equitable ground was invoked in the result of an unsuccessful expulsion attempt … the date of dissolution to be decreed by this Court should have been the date of judgment (and, now, the date of judgment in the Court of Appeal)”. This is because the language of the Act makes clear that, contrary to the language in s 36, s 39 “gives the Court a power to be exercised when the facts that precondition its exercise are established”. It is the exercise of judicial power and not any notice given by a former partner that brings about the dissolution of the partnership.

79. [202]

    Mr Lewis submitted that this Court should not accord “unwarranted significance” to his pleaded acceptance of repudiation by the Capital Partners. Mr Lewis submitted that his pleading of repudiation at [91] in the FASOC was “pleaded in deference to the obiter statement of McColl JA in Ryder v Frohlich [2004] NSWCA 472”. Finally, Mr Lewis submitted that to the extent the Court had any discretion to exercise the power to backdate, “the discretion miscarried because it deprived Lewis of his proprietary interest in the Partnership property and the share in the Partnership profits”.

80. [203]

    My reasons for rejecting grounds 15 and 16 may be shortly expressed. Mr Lewis did not submit at the trial that the appropriate date for dissolution was the date of judgment. In any event, it is not correct there is a rule (of construction or otherwise) that an order may not be made backdating (from the date the order is made) the dissolution of a partnership under s 39 of the Partnership Act. Decisions consistent with the existence of such a discretion include Singh v Singh [2024] NSWSC 932 at [32]; Pirrottina v Pirrottina [2024] NSWSC 558 at [134]-[140] (noting an appeal is reserved but not on this issue) and Yard v Yardoo Pty Ltd [2007] VSCA 35 at [104]-[105] where the dissolution of a partnership under provisions equivalent to s 39 of the Partnership Act was backdated. I do not accept Mr Lewis’ written submission that the ability retrospectively to make an order under s 39 is limited to two person partnerships. Neither authority nor principle supports such a limitation.

81. [204]

    In the present case, on the primary judge’s findings there was every reason to fix the date from which the order took effect as being the date the FASOC was filed by Mr Lewis seeking a declaration that he was no longer a Capital Partner. Contrary to Mr Lewis’ submission, the pleadings contained a clear and unambiguous notice of intention to dissolve the partnership.

82. [205]

    I would reject grounds 15-16.

83. [206]

    By grounds 17-18 Mr Lewis asserted that the primary judge erred in overlooking the fact that the relief he has given to Mr Lewis was incomplete. Mr Lewis submitted this was demonstrated by order 3 made on 8 April 2024 which provided that Mr Lewis’ “damages arising from the breaches of the Partnership Deed, if any, are to be assessed”. The essence of these grounds is that the primary judge failed to comply with his duty to decide upon the fair terms of the dissolution and that he should have made a “buy-out” order.

84. [207]

    In ground 17, Mr Lewis submitted that “Order 3 by its terms does no more than award Lewis damages arising from the breach of the Partnership Deed”. Mr Lewis submitted that this order awarding damages does not deal with Mr Lewis’ asserted interest in the partnership property, since damages in contract are “designed to put the innocent party in the position he would have been had the breach not occurred” (citing Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272; [2009] HCA 8) and in the case of partnerships, “a person who succeeds in challenging the validity of an expulsion has suffered no loss because he can simply return to the body from which he was purportedly expelled” (citing Wood v Woad (1874) LR 9 Exch 190)

85. [208]

    Mr Lewis submitted that by omitting specific reference in the order to the appellant’s interest in the partnership, the primary judge thereby failed to discharge his duty to “decide upon what fair terms the dissolution should be made” when “dissolving a partnership on equitable grounds”, including that the primary judge failed to “look at all the facts, and do what is equitable between the parties” (citing Lyon v Tweddell at 531).

86. [209]

    Mr Lewis submitted that a “buy-out order” of the kind made in Mullins v Laughton applying Syers v Syers should have been made by the primary judge at the first stage of the hearing.

87. [210]

    The steps in Mr Lewis’ arguments are these. First, in the ordinary course, having decided the partnership should be dissolved on the just and equitable ground, the primary judge would have made a general winding up order for the partnership. Secondly, since no party was seeking a general winding up order, a buy-out order of the kind made in Syers v Syers was appropriate “in order to allow the other former partners to carry on the business of the Partnership”. Thirdly, as to the components of such a “buy-out” order, a court that dissolves a partnership “cannot refrain from dealing with the proprietary interests of the former partners … by not either ordering a general winding up or ordering a buy-out, insofar as disposing of the contractual claims between partners does not exhaust equity’s jurisdiction”: Hurst v Bryk at 193-196.

88. [211]

    The Capital Partners contended, at least in writing, that a buy-out order was not available because Mr Lewis’ equitable claims were rejected; Mr Lewis only succeeded on his contractual claims. In what is in many respects the critical paragraph on relief issues in the (No 5) judgment at [118], which I have set out at [35] above, the primary judge stated that the basis upon which he found that the appellant’s expulsion was invalid was breaches of the Deed, and that damages were therefore appropriate.

89. [212]

    The Capital Partners submitted that a buy-out order would be incompatible with the finding that the partnership was dissolved with effect from 10 February 2021. As the Capital Partners repeatedly emphasised, this was a “no goodwill” partnership and it was submitted that it followed that there was nothing remaining to “buy-out” given the payments which had already been made to Mr Lewis. The Capital Partners submitted that Mr Lewis was not entitled to any relief by reference to any claimed value of interest in the property of the partnership at the assessment stage; he was entitled to whatever heads of damage he can establish at that stage for breach of contract.

90. [213]

    What the primary judge actually did about the complaint at the heart of ground 17 was explained in the (No 6) judgment. As I have set out at [43] above, what the primary judge said of the complaint that he had not made a “buy-out” order at this stage was “I see no confusion, no misapprehension, and no reason for any variation. The assessment process will take place and will decide upon the nature of the damages which flow from my liability findings. I specifically adopted, with slight amendment, one of the orders sought by [Mr Lewis]”.

91. [214]

    I have already expressed doubt about whether the term “specific damages” was a description apt to include the possible making of a “buy-out order”. Nevertheless, it is tolerably clear that in the (No 6) judgment, the primary judge was leaving it open to both parties to lead whatever further evidence they wished to and to agitate for the making (or non-making) of a buy-out order and, if made, the components of such an order at the second stage hearing. The position of the parties was complex.

92. [215]

    Mr Lewis’ case can be summarised thus:

    1. (1)

       Mr Lewis sought damages at common law. Having decided that equitable relief was appropriate (i.e. dissolution on the just and equitable ground), the primary judge could not make an award of damages. In Cyril Henschke at [22], the High Court endorsed Lord Millett’s statement in Hurst v Bryk at 194 that, “Neither during the continuance of the relationship nor after its determination has any partner any cause of action at law to recover moneys due to him from his fellow partners”. Thus, to the extent the primary judge purported to award common law damages for breach, instead of granting equitable relief in consequence of dissolution, his Honour erred.

    2. (2)

       Mr Lewis submitted that, before the winding up of the partnership, he held a sui generis interest in all of the assets of the partnership: Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321 at 327-328. He retained that interest on dissolution pending a final liquidation: Hendry v Perpetual Executors & Trustees Association (1961) 106 CLR 256 at 266.

    3. (3)

       Mr Lewis’ case was that the partnership property he held included goodwill. Goodwill is the right to conduct a business in substantially the same manner and by substantially the same means as have attracted custom to it: FCT v Murry (1998) 193 CLR 605. A mere agreement that a business has no goodwill does not mean that the business has in fact or law no goodwill: Foster v Commissioner of Stamps [1966] WAR 144 at 147.

    4. (4)

       Mr Lewis submitted that the monetary value of his interest is to be assessed on the basis of “a rateable proportion of the total value of the [partnership] as a going concern without any discount for the fact that the holding in question is a minority holding”: CVC/Opportunity Equity Partners Ltd v Almeida [2002] UKPC 16 at [37]. This is “based on a notional sale of the business as a whole to an outside purchaser”: CVC at [41].

    5. (5)

       Mr Lewis submitted that given his interest in the partnership property subsisted until any winding up (or buy-out order) in consequence of the dissolution, “where the partnership business survives the dissolution as a going concern, each partner retains an interest in that business as well as every asset employed in it”: Burdett-Coutts v IRC [1960] 1 WLR 1027 at 1035.

93. [216]

    The Capital Partners submission was summarised thus:

94. [217]

    I have decided that on the contingent basis I am addressing this ground it is undesirable to determine the issues raised by this ground. Those issues are complex and both parties seek to lead additional evidence on the question of whether a “buy-out” order should be made and, critically, the contents of that order. Identification and quantification of goodwill of a legal partnership can be a challenging task, involving expert evidence. I have earlier referred to Bartier Perry Pty Ltd v Paltos [2021] NSWCA 158 and Paltos v Milevski [2023] NSWCA 7, two decisions reaching different conclusions (based on different expert evidence) about the existence and valuation of goodwill in the same legal partnership.

95. [218]

    In the course of the three days of submissions on appeal, Mr Williams SC and Mr Douglas KC, whilst continuing to advocate for their primary positions, each accepted that the question of whether a “buy-out” order could be made, including its terms, was a matter which could be agitated at the second stage hearing.

96. [219]

    I am not satisfied that there is sufficient evidence before this Court for me to identify the components of any “buy-out” order, should I be persuaded one should be made. If it were necessary to do so, I would not interfere in the primary judge’s determination that at the second stage hearing both parties should be permitted to lead whatever further evidence they wished to and to agitate for the making (or non-making) of a buy-out order. Despite the eminence of Neuberger J, it does not follow that in every case where a breach of a partnership agreement has been found and the partnership is dissolved under the just and equitable ground that, necessarily, an order of exactly the same kind made by Neuberger J in Mullins v Laughton should be made.

97. [220]

    Any attempt by this Court to fashion a buy-out order on the basis of the limited information available is fraught with danger, including the danger of inviting further costly factual disputes which an appellate court is ill designed to resolve. Even if I were persuaded of appealable error in ground 17, the appropriate order would be to remit the matter to the primary judge to determine whether a buy-out order (including where or not it contained a component for goodwill) should be made. Given that the issue would have been addressed in the second stage of the hearing, I would have declined at this stage to interfere.

98. [221]

    I would reject ground 17.

99. [222]

    By ground 18 Mr Lewis submitted that, in addition to failing to make a buy-out order, the primary judge erred by limiting the appropriate relief to be granted to damages in consequence of the established breaches of the Deed. Mr Lewis submitted that the primary judge ought to have awarded equitable compensation to him in consequence of the breach of the improper purpose rule and breach of fiduciary duty that, as dealt with in grounds 3-12, the appellant submits the primary judge erred in rejecting.

100. [223]

     Ground 18 may be dealt with shortly. I have explained in addressing ground 17 that it remained open to Mr Lewis to advance a claim for a buy-out order (including the possible components of that order) at the second stage of the hearing. As I would not allow grounds 3-12 of the appeal it follows that ground 18 must also be dismissed.

101. [224]

     For essentially the reasons contained in grounds 17-18, in ground 22 Mr Lewis complains that his Honour erred in failing to make orders as to the terms on which the partnership was to be dissolved, including a buy-out order. For the same reasons as I have rejected grounds 17-18, ground 22 should be rejected.

102. [225]

     Ground 19 is the overarching challenge to the primary judge’s dismissal of the notice of motion under UCPR r 36.16. The substantive grounds are addressed in relation to grounds 20-23. As I will explain, I reject grounds 20-23 and it follows that ground 19 should also be rejected.

103. [226]

     By ground 20, Mr Lewis complained that the primary judge was incorrect to find, at [9]-[10] of the (No 6) judgment, that, because the submissions made to his Honour appeared to him to be submissions of the kind that might be made on an appeal, it was not appropriate to exercise the power to reopen the judgment. Rather, if an error of form or substance is recognised, such an error should be corrected then and there, rather than involving the parties in an appeal process: Majak v Rose (No 5) [2017] NSWCA 238 at [12]. Mr Lewis submitted that his Honour acted on a wrong principle in the House v King (1936) 55 CLR 499 sense, such that his Honour’s exercise of the discretion enlivened under r 36.16(3A) miscarried.

104. [227]

     Mr Lewis submitted that the High Court has made clear the nature of its own power to reopen judgments before entry, but the considerations that weigh in the exercise of that power do not apply congruently to lower courts, insofar as those considerations are premised on its role “as a final court of appeal to prevent irremediable injustice being done by a Court of last resort”: State Rail Authority (NSW) v Codelfa Construction Pty Ltd (1982) 150 CLR 29 at 45. I agree with Mr Douglas KC that the principles applied by the High Court about the nature of its own power to reopen judgments before entry do not apply congruently to this Court and no more need be said about them.

105. [228]

     I reject Mr Lewis’ submission that a fair reading of his Honour’s reasons suggests that, because his Honour had taken the view that Mr Lewis’ submissions in support of the Notice of Motion ought to have been made on appeal and not to him, he only dealt with the detail of Mr Lewis’ submissions “briefly”. To the contrary, the primary judge left open to Mr Lewis to advance at the second stage of the hearing:

     1. (1)

        whether a buy-out order should be made and the integers of that order if made; and

     2. (2)

        whether Mr Lewis could establish any loss of a chance.

106. [229]

     I have concluded that there was no error of principle in the exercise of the discretionary UCPR r 36.16(3A) power. That power is to be exercised “sparingly and with caution”: Dibb v Transport for New South Wales (No 2) [2024] NSWCA 176 at [8] (Payne, Kirk and Stern JJA). The jurisdiction is directed at where the Court proceeded under a misapprehension, not with deliberate decisions which are said to be incorrect: Dickson v Commissioner of the Australian Federal Police (No 2) [2023] NSWCA 111 at [4] (Meagher and Brereton JJA).

107. [230]

     The primary judge appropriately addressed the matters of substance raised by Mr Lewis. Mr Lewis was entitled, under the conclusions reached by the primary judge, to agitate at the second stage of the hearing the principal matters about which he complained.

108. [231]

     I would reject ground 20.

109. [232]

     By ground 21, Mr Lewis complained that the primary judge erred in failing to hear submissions from him about the date of dissolution before delivering the (No 5) judgment. Mr Lewis submitted that the question of the date of dissolution, and the primary judge’s conclusion that he could select that date as a matter of discretion was arrived at without notice to the parties and was unsupported by authority.

110. [233]

     Mr Lewis’ submission was that when the matter was argued before the primary judge in respect of the Notice of Motion, neither party took the position that the Court retained a discretion to select for itself the date of dissolution. Mr Lewis submitted that “the procedure in the Equity Division has been” to take “a freer attitude … to reopening decisions than may be the case elsewhere”, citing Twenty-First Australia Inc v Shade [1998] NSWSC 325. Mr Lewis submitted that it would not be improper for his counsel to consider that, before final orders were entered, the parties would have an opportunity to address the court on the precise terms of the orders that would be made, including the date of dissolution (should it be ordered).

111. [234]

     I reject Mr Lewis’ submission. Mr Lewis himself sought a declaration that by filing the FASOC he had accepted that the partnership was at an end. The primary judge was entitled to determine the date of dissolution having regard to the pleadings and the submissions. In any event, Mr Lewis was subsequently given an opportunity to argue the issue which was addressed by the primary judge in the (No 6) judgment at [12]-[17]. There were extensive submissions made about the date of dissolution at that hearing.

112. [235]

     I would reject ground 21.

113. [236]

     By grounds 22 and 23, Mr Lewis submitted that the primary judge erred in failing to make a buy-out order and in awarding him damages for breach of the Deed. It was submitted that both of the parties’ pleadings, insofar as they invoked an accepted repudiation as an automatic dissolution of a multi-person partnership, were wrong in law. The parties’ positions as to the law taken in the pleadings are not binding on the court: Liao v NSW [2014] NSWCA 71 at [211]-[213]. Once the primary judge found that an accepted repudiation did not of itself dissolve the partnership, Mr Lewis’ action for damages for breach of contract was unsustainable, and the Court was required to make orders as to the terms on which the partnership was to be dissolved.

114. [237]

     As I have explained in dealing with ground 17, whilst the language of “special damages” used by the primary judge was inapt, I am not satisfied that there is sufficient evidence before this Court for me confidently to identify the components of any “buy-out” order, should I be persuaded one should be made. If it were necessary to do so, I would not interfere in the primary judge’s determination that at the second stage hearing both parties should be permitted to lead whatever further evidence they wished to and to agitate for the making (or non-making) of a buy-out order. I would for the same reasons reject grounds 22 and 23.

115. [238]

     Late in the afternoon of the third day of an appeal which had been fixed for a two day hearing, Mr Douglas KC sought to amend Mr Lewis’ notice of appeal so that there would be a ground of appeal added in relation to an alleged denial of natural justice:

116. [239]

     That amendment was opposed. Mr Williams SC said:

117. [240]

     The Court rejected the proposed amendment and reserved its reasons.

118. [241]

     My reasons for rejecting the proposed amendment are that it was simply too late to seek such an amendment and the Capital Partners would have been prejudiced by allowing it. The proposed amendment seeks to raise a new case. It is fundamental that parties not be permitted to raise a new case on appeal, especially as here the case had not been identified until the close of the three day oral hearing of the appeal and in circumstances where the documentary record relevant to the proposed ground is incomplete.

119. [242]

     The proposed amendment is a departure from the appeal that was run. The proposed amendment was only notified at the very end of the third day of the appeal. The appellants should not be permitted to run their case in this way. No explanation was offered for why, in a 23 ground notice of appeal, this proposed new ground had been overlooked. It would be inimical to the dictates of Part 6 of the Civil Procedure Act to permit this late change to the notice of appeal. If allowed, the amendment would have required, at the very least, another round of submissions about complex questions that would arise in circumstances where there was already a multitude of issues. In addition, it is likely that the voluminous appeal record would need to be enlarged, perhaps significantly. I was not satisfied that the Capital Partners were in a position to deal with the issues raised in a timely way.

120. [243]

     The inevitable result of allowing the very late amendment to the notice of appeal would have been that the matter would not have been concluded. Given the composition of the Court and the time of year, it is likely that the hearing of the appeal would have been adjourned for a very considerable period.

121. [244]

     For these reasons leave to amend the notice of appeal was refused.

Proposed Orders

1. [245]

   As I have said, leave to appeal and cross-appeal was granted on 14 October 2024, the first day of the appeal. For the reasons I have given I propose the following orders:

   1. (1)

      Cross-appeal allowed.

   2. (2)

      Set aside orders 1-4 made by the primary judge on 8 April 2024 and in lieu thereof order:

   3. (3)

      Appeal dismissed.

   4. (4)

      Appellant/Cross-respondent (Mr Lewis) to pay the Cross-appellants/Respondents’ (the Capital Partners’) costs of the appeal and the cross-appeal.

2. [246]

   MITCHELMORE JA: I agree with Payne JA.

3. [247]

   STERN JA: I agree with Payne JA.