In the matter of Lorebray Pty Ltd

1. [1]

   In these proceedings, the plaintiff, who is the receiver and manager of the assets of the McNamee Property Trust (the Trust) seeks orders to bring about the sale of properties included in the assets of the Trust and orders for the winding up of a partnership and a joint venture of which the trustee of the Trust was a member and for the taking of accounts.

2. [2]

   These proceedings arise out of a dispute between two sides of the McNamee family. The individuals on each side are the children of Mr John McNamee Snr (John) and Peggy McNamee. For convenience I will adopt the parties’ description of these as the “Red Hill side” and the “McMardi side”. The first and fifth defendants fall within the McMardi side, and the remaining defendants fall within the Red Hill side. Without intending any disrespect, I will refer to relevant family members by their first names.

3. [3]

   In general terms, John conducted a property development business through trustee companies, one of which was the first defendant, Lorebray Pty Ltd (Lorebray), which is the trustee of the Trust, which is a discretionary trust which includes members of both sides of the family as discretionary beneficiaries.

4. [4]

   Lorebray engaged in two property developments, one concerning land at Brooklyn, New South Wales, through a partnership known as the Brooklyn Partnership (the Brooklyn development) and the other concerning land at Kellyville, New South Wales through a joint venture known as the Kellyville Joint Venture (the Kellyville Development).

5. [5]

   It is common ground that both the Brooklyn Partnership and the Kellyville Joint Venture have terminated, although the circumstances in which this occurred is in dispute.

Parties

1. [6]

   The plaintiff and first cross-defendant is Mr David Sampson (the Receiver), who was appointed as receiver and manager of the assets of the Trust by way of consent orders made by Black J in proceedings brought in this Court by members of the Red Hill side for the winding up of Lorebray, referred to below.

2. [7]

   The first defendant and second cross-defendant is Lorebray, which is trustee of the Trust. Its directors are William McNamee (a member of the McMardi side) and Brenden Miller (an independent director).

3. [8]

   Previously, Stephen McNamee (a member of the Red Hill side) was a director, but he resigned from that position on 12 March 2021.

4. [9]

   The second defendant is Red Hill MCN Pty Ltd (Red Hill), which is a 50% shareholder of Lorebray.

5. [10]

   The third defendant and second cross-claimant is Peter McNamee (Peter).

6. [11]

   The fourth defendant and first cross-claimant is Brooklyn Road Pty Ltd (BRPL). The sole director of BRPL and one of its shareholders is Peter.

7. [12]

   The fifth defendant is McMardi Pty Ltd, which is the other 50% shareholder of Lorebray.

8. [13]

   The sixth defendant and third cross-claimant is Mrs Helen McNamee (Helen), who is the wife of Peter.

9. [14]

   The seventh defendant and fourth cross-claimant is Phillipa Hardy, who is a director and a shareholder of Red Hill.

10. [15]

    The eighth defendant and fifth cross-claimant is John Hardy, who is the husband of Phillipa Hardy (the seventh defendant). I will refer to Phillipa and John as “the Hardys”.

Background to the proceedings

1. [16]

   On 3 December 2019, a Settlement Deed was entered into to resolve a number of disputes in the family. Pursuant to that Deed it was agreed that the directors of Lorebray would be Stephen McNamee (a member of the Red Hill side), William McNamee (a member of the McMardi side) and Brenden Miller (a solicitor and an independent director). Stephen McNamee resigned from that position on 12 March 2021.

2. [17]

   Clause 6 of the Shareholders Agreement entered into on the same day pursuant to the Settlement Deed required steps to be taken to ensure that the issued shares of Lorebray were held as to 50% by Red Hill and as to the other 50% by McMardi.

3. [18]

   On 11 December 2019, Peter sent a letter to the directors of Lorebray requiring Lorebray to pay the amount of $736,500 in respect of payments due by it in relation to the Brooklyn development and also informing the directors that a further contribution of $2 million would be required over the following 12 months for continuing development costs, and requesting that the directors advise “if and how Lorebray Pty Ltd will meet its financial obligations over the next 12 months”. This led to further correspondence between Mr Miller and Mr Allsop, (the solicitor for the Red Hill side) in which Mr Miller sought further information regarding amounts said to be owing by Lorebray in respect of both the Brooklyn development and the Kellyville development. Further letters passed between them in which a number of issues were canvassed, and the resulting impasse led to Red Hill, Peter and BRPL (members of the Red Hill side) commencing proceedings on 12 March 2021 against Lorebray for its winding up on just and equitable grounds or alternatively because it was insolvent (winding up proceedings).

4. [19]

   The winding up proceedings were heard by Black J. After five days of hearing, Black J made orders by consent appointing Mr Sampson (the plaintiff) as receiver and manager without security of the assets of the Trust and conferring on him, with respect to those assets, the powers that a liquidator has in respect of a company pursuant to s 477(2)(a)–(k) of the Corporations Act 2001 (Cth), including the power to realise the assets for the purpose of satisfying the indemnity of Lorebray as trustee of the Trust. The orders took effect on 19 October 2021.

5. [20]

   It is common ground that those orders require Lorebray’s interest in the land that is the subject of the Brooklyn development and the Kellyville development is to be sold. However, there is a disagreement between the Red Hill side and the McMardi side as to who the sales are to be effected to, which has led to these proceedings.

Background facts relating to the two developments

1. [21]

   The Brooklyn development comprises three adjoining parcels of land located at 35, 37 and 39 Brooklyn Road, Brooklyn. The properties were acquired by the following steps:

   1. (1)

      On 20 January 2003, Lorebray (as Trustee of the Trust) and Gaofind Pty Ltd (as Trustee of the Brooklyn Road Trust) acquired 35 Brooklyn Road for $1,575,000 as tenants in common in equal shares. Each paid 50% of the purchase price and other costs of purchasing the property.

   2. (2)

      On 16 August 2004, following the appointment of BRPL as Trustee of the Brooklyn Road Trust, BRPL became the registered proprietor of the interest in 35 Brooklyn Road, previously held by Gaofind Pty Ltd.

   3. (3)

      On around 23 June 2006, Lorebray (as Trustee of the Trust) and Peter and Helen (in their capacities as trustees of the McNamee Superannuation Fund) acquired 39 Brooklyn Road for $1,055,000 as tenants in common in equal shares. Each paid 50% of the purchase price and other costs of the acquisition.

   4. (4)

      On around 24 October 2006, Lorebray (as Trustee of the Trust) and BRPL (as Trustee of the Brooklyn Road Trust) entered into a deed with Kanna Holdings Pty Ltd, the owner of 37 Brooklyn Road (a thin strip of land lying between 35 and 39 Brooklyn Road) that Kanna Holdings Pty Ltd would transfer 37 Brooklyn Road to Lorebray and BRPL in exchange for a transfer of an equivalent parcel of land owned by Lorebray and BRPL through a boundary adjustment. It was agreed in the deed that no actual moneys were payable for the exchange. The land comprising 37 Brooklyn Road was ultimately transferred into the names of Lorebray, and Peter and Helen (in their capacities as Trustees of the McNamee Superannuation Fund) as tenants in common in equal shares.

2. [22]

   The circumstances surrounding the purchase of these properties is described by Peter in his affidavit. He saw an advertisement for the sale by auction of 35 Brooklyn Road in around mid-2002, and had a discussion with his father about its purchase in about September or October 2002 with a view to the property being developed as a waterfront residential development. Following the purchase of 35 Brooklyn Road, Peter formed the view that the optimum development of 35 Brooklyn Road was in conjunction with the neighbouring properties at 37 and 39 Brooklyn Road, so that the residential development would be larger and would include a marina for the owners of residential lots to be constructed on the properties. He states in his affidavit that he met regularly with his father from 2002 to 2020, usually weekly, and in one of these meetings in 2006 he had conversation with this father for the purchase of the properties to the following effect:

3. [23]

   Peter gave evidence in his affidavit of a similar conversation in 2006 in which John also agreed that the Trust would fund its share of the costs of development up to the time that external funding for the construction cost was obtained.

4. [24]

   In relation to the purchase of 39 Brooklyn Road, Peter gave evidence in his affidavit that he had a conversation with John in early 2006 in which he said to John:

5. [25]

   Following the acquisition of 39 Brooklyn Road and the boundary adjustment which lead to the acquisition of 37 Brooklyn Road, Peter says that had discussions with John regarding documenting the terms of their agreement to develop the three properties. This document, which is noted below was not executed, was expressed to be between Lorebray (defined as “Lorebray”) and BRPL, Peter and Helen (defined collectively and severally as “Brooklyn Road”) and included relevantly the following:

6. [26]

   Peter says that John told him that the Deed sets out their agreement. However, it was not executed by any of the parties to it. In what follows, I will refer to the document as the “unsigned Deed”.

7. [27]

   Three aspects of the unsigned Deed may be noted. First, it treats the persons who are co-owners of 35, 37 and 39 Brooklyn Road as participants in a joint venture. The two parties are, Lorebray on the one hand and BRPL, Peter and Helen on the other. Second, the unsigned Deed contemplates that “Lorebray” on the one hand and “Brooklyn Road” on the other will each be liable to contribute 50% of the capital and to bear 50% of the losses of the joint venture. Third, the unsigned Deed contemplates that the Brooklyn Road party will be responsible for the day to day management of the joint venture, using its reasonable best endeavours to complete the joint venture within two years, and no doubt to reflect time, resources and attention required to achieve this, would be entitled to a greater share of the profits of the joint venture than Lorebray: the Brooklyn Road party would receive 55%, 57.5% or 60% of the profits of the joint venture depending on the nature of the development approval obtained and the other matters referred to in cll 1.1 to 1.3.

8. [28]

   The development applications were approved by Hornsby Council on 2 July 2008, which permitted the construction of a marina and a 13-lot residential subdivision on 35-39 Brooklyn Road.

9. [29]

   One of the first tasks undertaken for the development was dredging the seabed adjoining the land. This dredging work was undertaken pursuant to a licence granted by the Minister for Lands to BRPL, Lorebray, Peter and Helen jointly dated 23 January 2009. The licence was expressed to be for a term expiring on 7 July 2013. A number of technical and other practical problems arose with the dredging operations which lead to significant delays.

10. [30]

    In around 2015, the Australian Taxation Office conducted a GST audit of the GST claims made by Lorebray and BRPL for GST which had been incurred in respect of the Brooklyn development. Peter says in his affidavit that Mr Gavin Hilton of Goodwin Chivas, the accounting firm which acted for Lorebray advised him after the conclusion of the audit that Lorebray and BRPL should operate the Brooklyn development as a partnership, so that a single entity for tax purposes, being the partnership, could make GST claims. He says that his father, John, agreed with this approach and that his father said to him around this time words to the effect “I have spoken to Gavin. From now on Lorebray and Brooklyn Road will be partners on the same terms as our earlier agreement set out in the [unsigned Deed]”.

11. [31]

    Peter has put into evidence accounts which appear to have been prepared by Mr Hilton for a partnership between BRPL and Lorebray in respect of the Brooklyn development for the year ended 30 June 2016, which are unsigned although Peter says they were approved by John. The balance sheet discloses for the 2016 year partnership capital of $3,423,602, (contributed equally by BRPL and Lorebray) and net assets of the same amount comprising land held for resale at cost ($1,709,089), land development costs ($1,708,707) and GST on acquisitions ($5,806). Mr Hilton was not called to give evidence.

12. [32]

    The financial statement for the year ending 30 June 2017 showed the net assets of the partnership as $3,691,408 as at 30 June 2017 and the incurrence of a small loss for the year of $32,195 and no loss or profit for the prior year. The balance sheet as at 30 June 2017 (with corresponding amounts for 30 June 2016 shown in the final column) is set out below. These accounts bear John’s signature under the “Partner’s Declaration” that the financial statements and notes present fairly the partnership’s financial position as at 30 June 2017 and its performance for the year ended on that date. As noted above, Peter’s evidence was that John had previously approved the financial statements for the 2016 year (shown in the final column).

13. [33]

    Also in evidence are the financial statements for the 2018 to 2021 financial years but there is no evidence that John approved these accounts. They show (for the 2019 and subsequent years) an amount as a “Loan to McNamee Property Trust” of $150,000 as at 30 June 2018 and increasing to $910,000 by 30 June 2021.

14. [34]

    In February 2017, there were discussions between Peter and his brother, Stephen, regarding the preparation of an agreement for the Brooklyn development, which appears to have been prompted by Peter’s request to John that BRPL should be paid a management fee for the work it was doing in relation to the development. Ultimately, no agreement was entered into.

15. [35]

    Around this time, Peter says that he told John that he estimated that a further $2 million would be required to complete the dredging work, and then construct the seawall, boardwalk and other facilities necessary for the marina.

16. [36]

    In around April 2017, the Council issued an order requiring all the work approved under the existing development consents to be carried out within 13 months. Peter informed John in May 2017 that the costs to complete the work would be about $2 million with Lorebray’s share being about $1 million. Peter’s evidence is that he had discussions with his father in June 2017 in which his father said he could not provide any further funding at that time and it appears that Lorebray did not make any further contributions for development costs after 30 June 2017.

17. [37]

    Peter says in his affidavit that from July 2017, the work carried out for the Brooklyn development was paid entirely by BRPL and amounted to $1,150,000. He said in his affidavit that it related to dredging, drying and removal of dredged sediment and further site works, including the construction of the footings for the boundary wall between the adjoining marina and 35 Brooklyn Road, as well as work carried out to maintain the site.

18. [38]

    On 29 September 2021, the Council gave notice of an intention to issue a development control order under the Environmental Planning & Assessment Act 1979 (NSW) in respect of all three Brooklyn properties and the order was ultimately issued on 19 May 2022. Both documents indicate that the Council had been investigating numerous breaches of the development approvals since they were granted, including that the works were being carried out without a construction certificate, inadequate sediment controls and noise pollution. They also indicate that the dredging licence had terminated on 7 July 2013. The cross-claimants allege that the terms of the control order cannot be satisfied. Peter says that John indicated that Lorebray would not be able to contribute to the funding of the development until sale of the land forming part of the Kellyville development took place.

19. [39]

    On 11 October 2012, Lorebray entered into a joint venture agreement (JVA) with Phillipa and John Hardy for the development of three parcels of land at Arnold Avenue, Kellyville. Two of the parcels, located at 37A and 39 Arnold Avenue, were legally owned by Lorebray and their development has been completed by a subdivision and sale, with the proceeds of sale being distributed to the parties in accordance with the JVA. The remaining parcel of land, located at 41 Arnold Avenue, is legally owned by Phillipa and John Hardy, but on the terms of the JVA. No party to the proceedings contented that the joint venture was in law a partnership.

20. [40]

    Clause 2(a) of the JVA provides that the parties form the joint venture constituted by the Agreement to create and sell the “Subdivided Lots” (being the individual residential lots created by virtue of the subdivision of the Property in accordance with the Development Consent) and for that purpose to raise the funds required to do so, and states that each of the parties shall own and undivided fractional part in the Joint Venture Property in the same proportions as the agreed sharing of profits set out in cl 5(a).

21. [41]

    Under cl 5(a), the parties share net profits and losses of the joint venture as to 60.4% in the case of Lorebray and as to 39.6% in the case of Phillipa and John Hardy.

22. [42]

    Each party agrees to make its portion of the Joint Venture Property available for subdivision in common with the rest of the Joint Venture Property and to do and execute all acts, deeds and things whatsoever as shall be necessary to fulfil the purpose of the joint venture (cl 2(c)).

23. [43]

    Clause 6 deals with funding of the operations of the joint venture and provides as follows:

24. [44]

    It is common ground that the joint venture has been terminated, but there is a dispute as to how and the consequences of that termination. The central issue in dispute is whether the termination occurred under cl 21(a), in which event the Hardys would have an entitlement to buy-out the interest of Lorebray under cl 21(a)(B) or under cl 22, in which case they do not.

25. [45]

    Clauses 21, 22 and 24 provide relevantly as follows:

26. [46]

    On 20 October 2021, the Hardys gave a notice to the Receiver and Lorebray purporting to terminate the JVA pursuant to cl 21, because Lorebray had committed material breaches of the JVA and the Trust was placed under external administration by the orders of Black J on 5 October 2021. The notice related:

27. [47]

    On 10 December 2021, the Hardys served on the Receiver and Lorebray a document titled “Damages Calculation Sheet” which was expressed to be a calculation of the “nett value of Lorebray’s interest in the partnership” which came to $865,129 and by that email, the Hardys indicated that they would purchase Lorebray’s interest for that amount.

Relief sought

1. [48]

   By its amended originating process filed on 22 November 2022, the plaintiff seeks orders conferring on him the power to sell the Brooklyn properties and, in the alternative, an order pursuant to s 66G of the Conveyancing Act 1919 (NSW) that he be appointed trustee for sale of the Brooklyn properties. He also seeks orders for the winding up of the partnership between Lorebray, BRPL, and Peter and Helen McNamee in respect of the Brooklyn properties and an order for the taking of accounts of the partnership, and also orders approving the Receiver’s remuneration. In relation to the Kellyville properties he seeks orders that he be appointed receiver and manager without security of the land with power to sell the Kellyville properties, or in the alternative an order pursuant to s 66G that he be appointed trustee for sale.

2. [49]

   In the cross-claim, the cross-claimants seek in relation to the Brooklyn development:

3. [50]

   In relation to the Kellyville development, the fourth and fifth cross-claimants seek:

Parties’ submissions

1. [51]

   The Receiver submitted that there appears to be no dispute that there was a partnership and that it was terminated. Further, the Trust clearly has a legal interest in 50% of each parcel of land comprising the Brooklyn development and an equitable interest in the whole of that property and the orders which the Receiver seeks provide for him to realise those properties in light of the resistance from BRPL, either by being appointed receiver generally, or by an order under s 66G of the Conveyancing Act.

2. [52]

   Lorebray submitted that all the co-owners of the Brooklyn properties (ie Lorebray, BRPL, and Peter and Helen) were partners in the partnership to develop those properties or, if they were not partners, they were engaged in an informal, unwritten joint venture to the same effect. However, it denies that the terms of the partnership (or joint venture if there was no partnership) are governed by the unsigned Deed.

3. [53]

   Lorebray submitted that if, as it contended, all three co-owners were partners in a partnership, that partnership had been dissolved and in accordance with the ordinary position Lorebray was entitled to require upon dissolution of the partnership that its assets are sold at a public auction: Lucas v Lucas [1962] Qd R 205 at 209, 212; Calacoci v Calacoci [2020] NSWSC 476 at [115]–[119]. Alternatively, if there is no partnership, then as a co-owner of the Brooklyn properties Lorebray has an entitlement to bring about the sale pursuant to s 66G of the Conveyancing Act: Pascoe v Dyason [2011] NSWSC 1217 at [5]-[8].

4. [54]

   BRPL’s submissions were as follows. First, it was common ground that there was a partnership in respect of the development of 35, 37 and 39 Brooklyn Road, but the only entities which were members of that partnership were Lorebray and BRPL and consequently, the only partnership asset in terms of real property was 35 Brooklyn Road, ie. 37 and 39 Brooklyn Road were not assets of the partnership. Each of the partners was required to contribute 50% of the costs of the development and to participate in the development as a partner, which obligation had been breached. It was put that this obligation arose because the unsigned Deed was binding on the partners or, alternatively, even if it was not. Lorebray and BRPL are in dispute both as to whether the unsigned Deed is binding and whether Lorebray was in breach of an obligation to contribute to the costs of the development from 2017.

5. [55]

   Second, BRPL submitted that the ascertainment and quantification of the amounts owing by Lorebray to BRPL will occur on the taking of a partnership account, but the relevant point for present purposes is that BRPL has a case fit to be tried on the proposition that upon the taking of accounts, Lorebray would be found to owe an appreciable sum to BRPL.

6. [56]

   Third, BRPL does not resist the sale of the Brooklyn properties as such. Rather, it submits that the sale of 37 and 39 Brooklyn Road would need to be effected by the mechanism of a statutory trust for sale under s 66G and the Receiver should not be appointed as trustee for such a sale because he has an apparent conflict of interest. It is also submitted that BRPL, Peter and Helen should each have a pre-emptive right to purchase the Brooklyn Road properties, relying on Syers v Syers [1875] 1 App Cas 174.

7. [57]

   Fourth, BRPL submits that the process for the sale of the Brooklyn Road properties, whether as an asset of the partnership in relation to No. 35 or under s 66G in relation to Nos. 37 and 39 should be a process that is consistent with the pre-emptive right to purchase the properties which they say precludes a sale by public auction but would include either a private sale performed by a valuation or competitive process that gave them the right and opportunity to meet anyone else’s price, such as a sale by tender.

8. [58]

   Fifth, they submitted that the sale of the properties should be postponed until after accounts have been taken, so that the money that is paid to Lorebray reflects the final adjustment of each partners’ rights and liabilities under the partnership, relying on Lucas v Lucas [1962] Qd R 295.

9. [59]

   The Receiver noted that there is no dispute that Lorebray and the Hardys were parties to the JVA and that the part of the Kellyville properties remaining unsold (being a relatively small part of what was 41 Arnold Avenue) is “joint venture property” under the JVA. The dispute between the parties seems now to be about the means by which the JVA was terminated, whether it was by the Hardys giving notice pursuant to cl 21 or whether the JVA had already terminated pursuant to cl 21(c). The Receiver pointed out that the consequence of the difference in the position of Lorebray and the Hardys is that if the JVA was terminated for breach pursuant to cl 21 then the mechanism contained in that clause for the Hardys to acquire Lorebray’s interest in the joint venture would apply whereas if the JVA was terminated under cl 22(c) then the process set out in cl 22(d) would apply and the joint venture property would be sold. The Receiver submitted that Lorebray’s position was correct and for that reason sought an extension of his receivership over the Kellyville property so that it could be sold in accordance with cl 22.

10. [60]

    Lorebray submitted that it was clear that the JVA had terminated on 11 October 2021 pursuant to cl 22(c). As a result, the Hardys are not entitled to require the Receivers to sell Lorebray’s interest in the Kellyville property to them at a price of $865,129, because cl 21(a)(B) does not apply. In any event, Lorebray submitted that the document purporting to be the Accountant’s calculation the “nett value” of Lorebray’s interest, was not a determination complying with cl 21(a)(B). This is because there is no evidence other than bare assertion that the document has anything to do with Mr Hilton (who did not give evidence); the document is not on its face a determination of the value of Lorebray’s interest in the joint venture (but rather is described a “damages calculation sheet”); there has been no compliance with cl 24 of the JVA; further, the calculations in the document are irrational even as a calculation of the Hardys’ loss.

11. [61]

    Lorebray also submitted that insofar as the Hardys contend that Lorebray was in breach of cl 6(c), that clause does not impose an obligation on Lorebray to raise funds but rather to identify Lorebray as the joint venture party in whose name funds were to be raised, a construction confirmed by cl 6(d).

12. [62]

    Lorebray also submitted that insofar as the Hardys alleged that they have suffered loss and damage by reason of the failure of Lorebray to contribute to the costs of the development, there is insufficient evidence before the Court to prove that loss or damage. Also, insofar as the Hardys plead an estoppel in the cross-claim, it does not amount to any more than an assertion by the Hardys of a desire to purchase the Kellyville property which the Receiver proposes to do by selling that property at public auction.

13. [63]

    The Hardys submitted that the JVA was terminated by the Hardys pursuant to cl 21 with a result that the Hardys have the right to purchase Lorebray’s interest in the assets of the joint venture for an amount fixed under cl 21(a)(B), which had occurred by Mr Hilton’s determination. It was submitted that the rights conferred by cl 21 were available to be exercised by the Hardys after the sunset date. It was submitted that a notice given by the Hardys was permitted by cl 21(a)(iii) on the basis that the appointment of a receiver to the trust constituted a “party [being] placed under external administration within the meaning of the Corporations Act, 2001”.

14. [64]

    The Hardys also submitted that they had spent some $367,802 as at 30 June 2022 to meet the liabilities of the joint venture and were entitled pursuant to cl 6(e) of the JVA to receive that amount in priority to the distribution of any profits of the joint venture to Lorebray.

15. [65]

    The Hardys submitted, in the alternative, by analogy to Syers v Syers order, that they should be permitted to purchase Lorebray’s interest in the joint venture. This is on the basis that Lorebray has breached the JVA by reason of its failure to contribute necessary capital which constitutes, among other things, a breach of the obligation to act in good faith. That breach has, as with the Brooklyn Road development, been long-running and caused prejudice to a venture to which the Hardys have been attempting to develop since 2012. The damages that may arise from any such breach can be brought to account upon the taking of accounts.

Issues

1. [66]

   In relation to the Brooklyn development the issues which arise are:

2. [67]

   In relation to the Kellyville development, the issues which arise are:

Brooklyn Development

1. [68]

   The first issue which arises is whether, as BRPL contends, the unsigned Deed records the terms of a joint venture for the Brooklyn development reached between John on behalf of Lorebray and Peter on behalf of BRPL in 2007. For the following reasons, I do not accept Peter’s evidence that John agreed to be bound by the unsigned Deed in 2007, or in 2015. I will deal with the evidence on this issue chronologically.

2. [69]

   First, Peter has not put into evidence any contemporaneous document (such as letters or emails from 2007 or 2015) which support the inference that John on behalf of Lorebray agreed to the unsigned Deed.

3. [70]

   Nor is there any subsequent document or record which refers to the unsigned Deed. Post-contractual conduct is admissible on the question of whether a contract has been entered into: JD Heydon Heydon on Contract (Thomson Reuters, 2019) at [4.170]. The post-contractual conduct here disclosed by the evidence, suggests that the unsigned Deed was not agreed.

4. [71]

   Second, the evidence is that for 2016 and subsequent years Mr Hilton, the Accountant retained by Lorebray and BRPL, commenced preparing financial statements for a partnership for the Brooklyn development following a GST audit in 2015. Each of these financial statements describes the partners as being Lorebray and BRPL and state that they are prepared “in accordance with the Partnership agreement”, but without identifying that agreement. The identification of the partners in this way is not consistent with the unsigned Deed which also included Peter and Helen as parties to the joint venture.

5. [72]

   Third, there is a series of emails in February and March 2017 in which Peter discussed with his brother, Stephen McNamee, a solicitor, the terms of a “detailed document” to set out terms governing the Brooklyn project. The email chain commences with an email dated 21 February 2017 from Stephen to Peter listing “bullet points” for discussion purposes. It appears from the email (and subsequent emails in the chain) the Stephen was acting as a middleman between Peter and his father. Most of the bullet points in the list were already dealt with in the unsigned Deed. Peter did not respond to the list by saying that there was already such an agreement (being the unsigned Deed).

6. [73]

   On 13 March 2017, Peter sent an email to Stephen which incorporated his responses to some of the “bullet points”. The following is an extract of part of Stephen’s email of 8 March 2017, with the responses inserted by Peter shown in italics:

7. [74]

   Stephen responded by email on 13 March 2017 in which he said “You refer to the agent’s commission. [Dad] asks is that included in the 7.5%?”. Peter responded later on that day by email stating: “No. I mentioned that number by way of comparison”. In other words, part of the justification for the management fee which Peter was suggesting of 7.5% plus GST, was that an agent’s commission on the ultimate sale of the 13 residences would be 3%. Later on the same day, Stephen sent an email to Peter as follows:

8. [75]

   Peter responded by an email on 17 March 2017 in which he set out a detailed explanation for why he considered that his proposed management fee was reasonable, including the significant amount of work required to be done to complete the development. He concluded by saying “7.5% fee for Dad’s half is very generous by any reasonable assessment”. The email is set out in full below because it describes the nature of the work undertaken by BRPL to progress the development:

9. [76]

   Ultimately, nothing came of these discussions which appear to conclude at the end of March 2017. The significance of the email chain is two-fold. First, it is inconsistent with any understanding between Peter and John in 2017 that the unsigned Deed is binding. This is shown, for example, by paragraph 5 of the email quoted at [73] above which deals with the same topic covered by cl 2.4 of the unsigned Deed, and does so in a different way. Also, para 6 seeks a management fee of 7.5%, which is put forward as compensation for the management time to be spent by BRPL, which has already been addressed in cll 1.1–1.3 of the unsigned Deed. If the unsigned Deed had really been agreed to by the parties, then it would be expected that one of them would raise these inconsistencies in the discussions.

10. [77]

    The email chain is also significant because the emails referred to at [73] and [74] above indicate that Lorebray was a 50% participant in the development, which would be inaccurate if the unsigned Deed was binding because it contemplates that Lorebray’s interest is, at most, an entitlement to 45% of the profits and contains a mechanism for further diluting Lorebray’s interest if it fails to make capital contributions (cl 2.4). Nowhere in the email chain is there any mention of the unsigned Deed.

11. [78]

    Fourth, shortly after Mr Miller was appointed as an independent director of Lorebray, Peter sent to Lorebray on 11 December 2019 a “letter of demand” (which was Peter’s description in the covering email), requiring Lorebray to pay the amount of $736,500 to BRPL to meet Lorebray’s obligation to contribute to the costs of the development. Mr Miller responded on the same day by letter which stated:

12. [79]

    When no written joint venture agreement was forthcoming, Mr Miller followed up by an email on 19 December 2019 which stated relevantly:

13. [80]

    Despite these requests, Peter did not produce the unsigned Deed to Mr Miller. There is no reason why he would not have done so, had he regarded the unsigned Deed as binding at that time (December 2019).

14. [81]

    Fifth, in January 2020, Mr Miller (who is a solicitor), exchanged correspondence with the solicitor for BRPL, Mr Allsop, regarding both the Brooklyn development and Kellyville development, including what steps would be taken by Lorebray to contribute funds to each of them. In a letter sent on 17 January, 2020, Mr Miller sent to Mr Allsop, under the heading “Brooklyn Road development”:

15. [82]

    Mr Allsop responded by letter on 28 January 2020, which commenced “I am instructed to reply as set out below”, and then stated under the hearing “Brooklyn Road development”:

16. [83]

    Peter accepted in cross-examination that he must have seen this letter at about 17 January 2020. He could provide no explanation for why he did not raise with Mr Allsop at that time that the unsigned Deed existed and set out the agreed terms of the partnership for the Brooklyn development.

17. [84]

    Finally, in cross-examination Peter was asked when was the last time he discussed the unsigned Deed with his father and he responded that it was the time in 2007 when his father sent it to him. This evidence contradicted what he said in his affidavit about the alleged conversation with his father in 2015, referred to in [30] above.

18. [85]

    While in other circumstances this might be regarded as a slip of memory, when regard is had to the other evidence referred to above, the more likely explanation is that Peter did not discuss the unsigned Deed with his father after 2007. I note there is no contemporaneous record of the statements in Peter’s affidavit regarding a discussion with his father about the unsigned Deed in 2015.

19. [86]

    It is also relevant to note that the unsigned Deed was adverse to the interests of Lorebray in that despite having contributed 50% of the cost of the acquisition of the land, it was to be entitled to no more than 45% of the profits, but still bear 50% of the losses of the venture. There is nothing in the evidence to suggest that Lorebray, in 2007 or later, would be willing to agree to such a change to its interests in the joint venture. This provides a reasonable explanation for why Lorebray did not execute the document.

20. [87]

    For all these reasons, I do not accept Peter’s evidence that the unsigned Deed was ever adopted by Lorebray as the agreement governing the Brooklyn development.

21. [88]

    It is common ground that a partnership came into existence in respect of the Brooklyn Road development and has now been terminated. There is a dispute as to who were the members of the partnership and whether the partnership property comprised of 35, 37, and 39 Brooklyn Road or only 35 Brooklyn Road.

22. [89]

    A partnership is defined in s 1(1) of the Partnership Act 1892 (NSW) to be the relation which exists between persons carrying on a business in common with a view to profit. In determining whether a partnership has come into existence, it is not sufficient that property is held in co-ownership or that the co-owners share gross returns from the property: Partnership Act subs 2(1) and (2).

23. [90]

    In my view, the evidence establishes that Lorebray and BRPL were conducting a business in common with a view to profit. Their activities in developing the land, described in the email set out at [75] above constitute a business, which was carried on with a view to profit: United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1; FCT v Whitfords Beach Pty Ltd (1982) 150 CLR 355.

24. [91]

    As there is no written partnership agreement, it was therefore a partnership at will.

25. [92]

    In determining who are the partners and what is the partnership property where there is no written agreement, it is necessary to have regard to the facts, the evidence, the accounts, the way in which the parties acted and see what the proper inference is: Re Hulton; Hulton v Lister (1890) 62 LT 200 at 204 per Lindley LJ. In the present case, the accounts of the partnership treat BRPL and Lorebray as partners, but do not mention Peter and Helen as partners, and it appears that only 35 Brooklyn Road is included as an asset of the partnership in those accounts.

26. [93]

    There is no reason in principle why there cannot be a partnership between Lorebray and BRPL for the development of the land with the co-owners of 37 and 39 Brooklyn Road (being Lorebray and Peter and Helen as trustees of their superannuation fund) making available those properties to the partnership by way of a licence: O’Brien v Komesaroff (1982) 150 CLR 310 at 322; Harvey v Harvey (1970) 120 CLR 529 at 549. That this was the agreement reached by Lorebray and BRPL, as partners, is indicated by the partnership accounts for the years ended 30 June 2016 and 2017 because they do not include 37 and 39 Brooklyn Road as partnership property and show that partnership capital was not used to acquire those properties. As those accounts were agreed to by each of Lorebray and BRPL, they are binding on each of them as a settled account, which will not be disturbed unless fraud, misrepresentation or relevant error can be proved: R I’Anson Banks, Lindley & Banks on Partnership (Thomson Reuters, 21st ed, 2022) at [23-183]-[23-186]; M Blackett-Ord and S Haren, Partnership Law (Bloomsbury Professional, 6th ed, 2020) at [14.42]-[14.46]. There is no evidence to suggest that one of the exceptions for fraud, misrepresentation or error applies.

27. [94]

    Peter gave evidence that the reason he and Helen purchased the half interest in 39 Brooklyn Road was because they had the money in their superannuation fund. He also gave evidence that they would transfer their interest to BRPL when the external funding for the development was obtained. I infer from this that Peter and Helen acquired the half interest in 39 Brooklyn Road (and similarly the half interest in 37 Brooklyn Road), as a temporary measure on the basis that BPRL would acquire their interest in those properties (and the licence) once the development reached the stage where construction finance was necessary. At that point, Peter and Helen could not continue to be co-owners as the trustees of a superannuation fund are prohibited from borrowing money: Superannuation Industry (Supervision) Act 1993 (Cth) s 67(1).

28. [95]

    In light of these matters, the better view is that the partners in the partnership were Lorebray and BRPL, the partnership property comprised 35 Brooklyn Road and the partnership used 37 and 39 Brooklyn Road under a licence from the co-owners of those properties, Lorebray and Peter and Helen.

29. [96]

    Sections 24 and 39 of the Partnership Act are relevant to this issue. Section 24(1) provides relevantly:

30. [97]

    Section 39 provides:

31. [98]

    Absent contrary agreement, a partner cannot be compelled by the other partners to contribute capital or make advances for the purposes of the partnership business over and above what was originally agreed: Meekin Enterprises Pty Ltd v Gersbach (McLelland CJ in Eq, 1 August 1996, unreported); R I’Anson Banks, Lindley & Banks on Partnership (Thomson Reuters, 21st ed, 2022) at [17-17]; M Blackett-Ord and S Haren, Partnership Law (Bloomsbury Professional, 6th ed, 2020) at [9.8]. In circumstances where one partner contributes further capital but the other one does not do so, the partner who makes its contribution will be entitled on the taking of accounts on dissolution to recover back their capital in the proportions in which they contributed it, but the one who contributes more than the other cannot charge interest without express or inferred agreement: Partnership Act s 24(4); Lindley & Banks on Partnership at [17-22] and [20-49]; Partnership Law at [9.7] and [9.9].

32. [99]

    As a separate matter, where a partner pays amounts bona fide in conducting business of the partnership, it is entitled to treat that amount as an “advance” to the partnership on which interest is payable, absent contrary agreement, under s 24(3) of the Partnership Act. The time for quantifying the amount of principal and interest payable on the advances is when an account is taken on a dissolution of the partnership because no partner can be a creditor of the partnership: Lindley & Banks on Partnership at [23-119]; Partnership Law at [14.22].

33. [100]

    I am not satisfied that the evidence establishes that Lorebray agreed to contribute further capital on a 50:50 basis to the partnership. I have not accepted Peter’s evidence regarding his discussions with John about the adoption of the unsigned Deed in around 2007 and later in 2015, and I consider that this calls into question the reliability of his recollection of other conversations with John about the funding of the Brooklyn development. Rather than John giving a blanket approval to Peter to incur expenditure, it is more likely that he wished to have a right to approve the expenditure before it was incurred. This is consistent with the fact that Lorebray did not execute the unsigned Deed. It is also consistent with the fact that, according to Peter, they had regular informal meetings on a weekly basis at which they discussed progress of the development which would be expected to include partnership expenditure, and the email of 13 March 2017 at [74] above where this requirement was made explicit. That was expressed in terms that Lorebray was not obliged to contribute capital for further expenditure prior to its approval of that expenditure. Significantly, Peter did not respond to that email by saying that it was contrary to the long-established agreement between the parties. Rather, in my view, the present case is one where BRPL has made advances to the partnership in respect of expenses incurred in conducting the business of the partnership, which it is entitled to recoup on the taking of the partnership accounts, with interest in accordance with s 24(3) of the Partnership Act. However, it will be necessary for BRPL to provide particulars of the expenses incurred before recovery of those amounts on the taking of accounts. Lindley & Banks states the principle as follows at [20-42] (footnotes omitted);

34. [101]

    In the present case, no particulars of the expenditure said to have been incurred by BRPL have been provided, and as noted above simply comprised a list of the amounts said to have been paid, with dates of payment.

35. [102]

    On dissolution of a partnership, each partner is normally entitled, absent a contrary provision in the partnership agreement, to require that all the partnership property is sold. However, the Court in ordering a sale has a discretion to determine the mode of sale which is most beneficial in the sense of fair and just to the parties: Lucas v Lucas [1962] Qd R 205 at 209; Lindley & Banks on Partnership at [23-190].

36. [103]

    An example is Syers v Syers [1876] 1 App Cas 174 where two brothers had conducted a business of running a music hall in partnership, with the appellant holding a 7/8th interest and the respondent a 1/8th interest. On dissolution of the partnership it was held that the appropriate order was, in effect, that the appellant should have a right to acquire the 1/8th interest of the respondent based on the value of the business on the date of dissolution as if it had been sold as a going concern, and only if he did not do so would the business be sold. The considerations which led to the making of this order, rather than an order for sale, were the nature of the business, the very small interest which the respondent held and the impact that a sale at public auction would have had on the business: see Syers at 183–4 and 191.

37. [104]

    In Lucas a father and son carried on a farming business. The partnership was dissolved and the father sought an order for sale of the partnership assets. Gibbs J made orders permitting the son to purchase the father’s interest at a price determined by the valuation of the partnership property which had already been made. His Honour said at 212:

38. [105]

    It will be seen that Gibbs J regarded the facts of that case as exceptional and the matters which led to the making of an order for a private sale, rather than the usual order, were that the son had been living in the property for a number of years, there was a valuation of the property which was not in dispute and that on a taking of accounts, there was likely to be a significant sum owing by the father to the son. The third matter is present here, but not the first two.

39. [106]

    While the Court has a discretion as to the nature of the order made, the starting point is that a sale is normally the appropriate order. As indicated by Syers and Lucas the Court has a discretion to make a different order where that is necessary to achieve fairness and justice between the parties. It seems to me that in the present case it is necessary that the order which is made must ensure that the partnership assets are sold at the best price which can be obtained so that one partner is not placed in a better financial position, as a result of the dissolution, than the other.

40. [107]

    In the present case, there is a dispute between Lorebray and BRPL as to the value of the Brooklyn properties. In the winding up proceedings valuations of the Brooklyn properties were tendered which were widely disparate. A valuation prepared by Mr Stephen Barry dated 6 September 2021 placed a value on all three Brooklyn properties on a sale together on an “as is” basis at $8.5 million. Mr Mark Ellis provided an updated valuation on 11 November 2021 which placed the value of all three properties, on a sale together on an “as is” basis, at $3.25 million. This divergence in views can be seen as reflecting the current state of the development of the properties, their unique nature and also that the valuation of land is an art and not a science, which requires the exercise of judgments and the forming of opinions about which uncertainty is likely: Strike Australia Pty Ltd v Database Corporate Pty Ltd [2019] NSWCA 205 at [9]–[14].

41. [108]

    It seems to me that in these circumstances the Court should be careful not to create a situation where one partner (Lorebray) is forced to accept a price for the underlying properties, or its interest in the partnership, which is based on a valuation which it does not accept. In my view, the appropriate course is to make an order giving power to the Receiver to sell the Brooklyn properties in such manner as the Receiver considers will achieve the best price available. That could be by auction or by private treaty or by tender. Orders 7-10 of the amended originating process confer broad powers on the Receiver designed to achieve this objective and it seems to me that they are appropriate in the circumstances.

42. [109]

    The Receiver can be expected to take advice on which method of sale (auction, private treaty or tender) is appropriate. As was submitted for the plaintiff, his current role as Receiver of the assets of the trust requires him to act in the interest of both sets of defendants and there is no inconsistency between that role and the role of conducting the sale process for the Brooklyn properties. By way of analogy, it is not uncommon for a trustee in bankruptcy of one co-owner to be appointed as a trustee for sale of the property under s 66G (and its equivalent provisions in other jurisdictions): Scott, in the matter of Le [2019] FCA 1661 at [9]. Contrary to the submissions for BRPL, I do not see any conflict of interest, apparent or real, in the Receiver performing this role.

43. [110]

    Section 66G of the Conveyancing Act 1914 provides relevantly:

44. [111]

    While the making of an order under s 66G(1) is discretionary, it is clear that the circumstances in which the Court will decline to make an order for sale and division of the proceeds under s 66G are limited and essentially involve some proprietary right or some contractual or fiduciary obligation with which the order would be inconsistent: Ngatoa v Ford (1990) 19 NSWLR 72 at 75. White J summarised the position in Tory v Tory [2007] NSWSC 1078 at [42]:

45. [112]

    The parties opposing an order for sale under s 66G bear the onus of dissuading the Court from making such an order: Thorn v Boyd [2016] NSWSC 1344 at [60].

46. [113]

    The co-owners of 37 and 39 Brooklyn Road are Lorebray and Peter and Helen. It is common ground that an order for sale under s 66G should be made, but Peter and Helen contend that it should be by a process which is consonant with the pre-emption right to purchase which BRPL contends for in relation to 35 Brooklyn Road. For the reasons that I gave above in relation to the 35 Brooklyn Road property, I would not make an order conferring on Peter and Helen a pre-emptive right.

Kellyville Development

1. [114]

   In relation to the Kellyville development, the issues which arise are:

2. [115]

   It is not in dispute that the ninth anniversary of the date of the JVA was 11 October 2021 and that the parties had not agreed in writing before that date that the JVA would not terminate on 11 October 2021. It follows that the effect of cl 22(c) of the JVA is that the JVA came to an end on 11 October 2021. In those circumstances, cl 22(d)(c) requires that the joint venture property be sold and the proceeds applied, firstly, in payment of all Project Expenses and then divided and paid to the parties in the same proportions as shares of profits and losses under cl 5(a) of the JVA. The only remaining joint venture property is the part of 41 Arnold Avenue which has not yet been sold and this is the property to which cl 22(d)(i) applies.

3. [116]

   I agree with the submission for Lorebray that, in these circumstances, cl 21(a) had no work to do. Clause 21(a) allows a party to terminate the Joint Venture in one of the three ways set out in subparagraph (A), (B) or (C) if one of the alternative events stated in subparagraphs (i), (ii), (iii) or (iv) has occurred. It seems to me, in accordance with the ordinary meaning of the words “may terminate the Joint Venture” that cl 21(a) can only operate while the joint venture is still on foot. The expression “Joint Venture” is defined in cl 1(a) to mean “the relationship of the parties constituted by this Agreement”. Given that the JVA has come to an end under cl 22(c), it follows that there is no joint venture relationship for a party to terminate under cl 21. This view is also supported by the structure of cll 21 and 22. Clause 21(a) sets out a comprehensive mechanism for unwinding the joint venture if a notice is given under cl 21(a), which includes the ability of the non-defaulting party to give a notice requiring the defaulting party to sell its interest in the joint venture to the defaulting party (cl 21(a)(A) or (B)) or alternatively the default position under cl 21(c) applies which is in substance the same as that applicable where the agreement has come to an end under cl 22 (see cl 22(d)). In other words, the two provisions have comprehensive regimes for what occurs when the joint venture terminates under whichever of the two provisions applies. Further, where cl 22(c) is enlivened, cl 22(d)(i) states in mandatory terms what is to occur (“Joint Venture Property shall be sold…”) which indicates a clear intention that it is to govern in that case. In circumstances where the non‑defaulting party has not availed itself of the rights conferred by cl 21(a) assuming they are available, there is nothing illogical or uncommercial in giving full effect of the operation of cl 22 if the sunset date has passed.

4. [117]

   The Hardys claim to be entitled to require the Receiver to sell Lorebray’s interest in the Kellyville property to them at a price of $865,129 is based on cl 21(a)(B) and that they amount of $865,129 reflects the determination of the “nett value” of Lorebray’s interest in the joint venture by the Accountant (Mr Hilton) pursuant to cl 24. In my view, this question does not arise given the conclusion reached that the agreement had terminated under cl 22. I note there are two further difficulties which arise with the Hardys reliance on cl 21(a). First, in my view it cannot be said that Lorebray has been “placed under external administration within the meaning of the Corporations Act 2001”. While the expression “external administration” is not defined comprehensively in the Corporations Act, s 198G contemplates that a company under external administration is one falling within s 5-15 of Schedule 2 to the Corporations Act and Lorebray is not such a company. The Receiver was appointed in respect of the assets of the trust, and not Lorebray, pursuant to s 67 of the Supreme Court Act 1970 (NSW) and the inherent jurisdiction of the Court: Meagher, Gummow and Lehane’s Equity Doctrines and Remedies (5th ed), [29-095]. Second, as submitted for Lorebray, it is not clear that the Hardys have properly invoked cl 21(a)(B) because the document entitled “Damages Calculation Sheet” does not purport to be a determination by the Accountant or be a determination of the value of Lorebray’s interest in the joint venture.

5. [118]

   Clause 6(c) needs to be read with cl 6(d). The former provides that funds required for the purposes of the joint venture shall be borrowed or raised by Lorebray on the basis of the regime set out in that clause. Clause 6(d) sets out what will occur if Lorebray is unable to borrow or raise sufficient funds required for the performance of the Agreement and states that in that situation either party or both parties may, but shall not be required to, advance such deficiency or any part thereof.

6. [119]

   Where cl 6(d) applies, the consequences are threefold. First, interest is payable to the party who makes the advances (here the Hardys) “at the actual cost of those funds to the person making the advance or, if not borrowed, at the Rate”. The “Rate” is defined in cl 1(a) to mean 2.4% above the Bank Bill Swap Rate as set by the ANZ Bank. The interest is calculated on daily balances and is not capitalised. Second, under cl 6(e) those advances and interest accrued thereon are required to be repaid and paid to the party advancing the same prior to the distribution of profits under the JVA. No date for repayment of the advance or payment of interest is specified and the implication from cl 6(e) and the definition of “Project Expenses” (which includes “(a) all loans made of funds advanced for the purposes of the joint venture, and all costs, interests, duties and expenses relating to those loans”) is that where one party advances funds for the purposes of the joint venture pursuant to cl 6(d), those advances are to be repaid to that party (together with interest) prior to a distribution of profit to the other party. Third, the making of such advances has no effect on the party’s joint venture shares (cl 6(d)).

7. [120]

   In my view, as submitted for Lorebray, cl 6(d) was engaged in the present case. To the extent that the Hardys have funded expenditure of the joint venture, that did not involve a breach by Lorebray of the JVA and the Hardys rights are as set out in the previous paragraph.

8. [121]

   As submitted for Lorebray the evidence does not establish that the Hardys have suffered loss or damage and the only material where loss has been claimed is the “Damages Calculation Sheet” which was put forward for a different purpose in the correspondence between the parties. This aspect of the cross-claim has not been made out.

9. [122]

   It is common ground that the Kellyville property is joint venture property and that under cll 2(a) and 8(a) of the Joint Venture Agreement, each party has an undivided fractional interest in that property in accordance with their proportionate entitlement to profit. Consequently, although the Hardys hold legal title to the Kellyville property, Lorebray has an equitable interest in the property which engages s 66G. In my view, the Hardys have not made out any basis for the Court declining to make an order under s 66G. In particular, there is nothing in cl 22(d) which would make a sale pursuant to s 66G inconsistent with a contractual right of the Hardys, given that for the reasons explained above cl 21(a)(B) does not apply. Further, I do not see any basis, by analogy with Syers v Syers or otherwise, for giving the Hardys a pre-emptive right to acquire Lorebray’s interest in the Kellyville property.

Conclusion

1. [123]

   For the above reasons I have concluded that orders should be made for the sale of the Brooklyn properties, the taking of accounts of the Brooklyn partnership, the sale of the remaining Kellyville property, and that no pre-emptive right to purchase the properties arise or should be given on the basis of, or by analogy with, Syers v Syers.

2. [124]

   The parties asked to be heard as to the form of the orders and I will list the matter for the making of directions for that purpose.