QUESTION
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Raulfs v Fishy Bite Pty Ltd
[2011] NSWSC 105; BC201100933
Court: NSWSC
Judges: Rein J
Judgment Date: 2/3/2011
Catchwords & Digest
Partnerships and joint ventures — Partnerships — Total failure of consideration — Claim for inconsistent right
Partnerships and joint ventures — Partnerships — Misappropriation of funds — Account of funds
Determination on orders.
Applicant entered into partnership with first respondent company owned by second respondent.
Third respondent former de facto partner of second respondent.
Applicant gave $400,000 by way of cheque to first respondent pursuant to partnership deed.
Second respondent subsequently organised withdrawal of $400,000 from first respondent’s bank account and paid money into account jointly operated by self and third respondent to discharge mortgage secured against second and third respondents’ residential property.
Second and third respondent ended relationship and second respondent transferred interest in residential property to third respondent as part of property settlement.
Applicant also gave total of $230,000 to second respondent in connection with proposed purchase of restaurant pursuant to understanding applicant and first or second respondent would become partners in restaurant.
Applicant subsequently applied for and obtained order for dissolution of partnership and appointment of receiver.
Sought return of monies paid to first and second respondents.
Claimed partnership dissolved and therefore entitled to return of $400,000 on basis had been paid as capital contribution to partnership.
Claimed $400,000 not used for express purpose of capital for new partnership and applicant therefore entitled to Quistclose trust.
Claimed entitled to constructive trust in accordance with Muschinski v Dodds.
Claimed there had been total failure of consideration on basis second respondent had precluded applicant from any role in partnership and management and administration of business.
Claimed $400,000 ought to be repaid to applicant because partnership effectively never operated.
Claimed third respondent liable for receipt of misappropriated funds on basis had authorised second respondent to operate joint account.
Respondents submitted partnership deed had not reflected agreement between applicant and second respondent on behalf of first respondent and partnership agreement ought to be rectified.
Submitted respondent had been entitled to use $400,000 capital from applicant in any purpose as wished.
Submitted second respondent not personally liable to repay money on basis had not appreciated could not remove $400,000 for own purposes.
Submitted applicant had not paid total amount of $230,000 in relation to restaurant.
Respondent failed to establish partnership deed ought to be rectified on basis did not reflect agreement between applicant and second respondent.
On review applicant had claimed two inconsistent rights on basis had obtained order for dissolution of partnership and sought to enforce rights as partner and also asserted that partnership agreement had failed for want of consideration.
Accordingly applicant unable to maintain claims of constructive trust and total failure of consideration.
On evidence third respondent unaware of second respondent’s misappropriation of funds and therefore not liable to applicant by reason of joint account.
Applicant failed to establish had handed over $230,000 to second respondent in connection with proposed purchase of restaurant.
However applicant entitled to return of $400,000 on basis had paid monies as contribution to partnership.
Appropriate first and second respondents pay $400,000 to receiver of partnership.
Parties to make submissions prior to final orders.
Determination made.
Litigation History
Annotations: All Cases Sort by: Judgment Date (Latest First)
| Annotation | Case Name | Citations | Court | Date | Signal |
| Related | Raulfs v Fishy Bite Pty Ltd | [2008] NSWSC 1195; BC200809884 | NSWSC | 30/10/2008 |
Cases considered by this case
Annotations: All Cases Sort by: Judgment Date (Latest First)
| Annotation | Case Name | Citations | Court | Date | Signal |
| Cited | John Nelson Developments Pty Ltd v Focus National Developments Pty Ltd | [2010] NSWSC 150; BC201001055 | NSWSC | 5/3/2010 | |
| Ctied | Franklins Pty Ltd v Metcash Trading Ltd | (2009) 76 NSWLR 603; (2009) 264 ALR 15; [2009] NSWCA 407; BC200911627 | NSWCA | 16/12/2009 | |
| Considered | Bofinger v Kingsway Group Ltd | (2009) 239 CLR 269; (2009) 260 ALR 71; (2009) 83 ALJR 1210; [2009] HCA 44; BC200909276 | HCA | 13/10/2009 | |
| Considered | Heperu Pty Ltd v Belle | (2009) 76 NSWLR 230; (2009) 258 ALR 727; [2009] NSWCA 252; BC200907812 | NSWCA | 26/8/2009 | |
| Cited | Agricultural & Rural Finance Pty Ltd v Gardiner | (2008) 238 CLR 570; (2008) 251 ALR 322; (2008) 83 ALJR 196; (2009) 25 BCL 112; [2008] HCA 57; BC200810883 | HCA | 11/12/2008 | |
| Cited | SCEGS Redlands Ltd v Barbour | [2008] NSWSC 928; BC200807890 | NSWSC | 5/9/2008 | |
| Considered | Farah Constructions Pty Ltd v Say-Dee Pty Ltd | (2007) 230 CLR 89; (2007) 236 ALR 209; (2007) 81 ALJR 1107; [2007] HCA 22; BC200703851 | HCA | 24/5/2007 | |
| Cited | Challenger Managed Investments Ltd v Direct Money Corp Pty Ltd | (2003) 59 NSWLR 452; (2003) 12 BPR 22,257; [2003] NSWSC 1072; BC200307738 | NSWSC | 28/11/2003 | |
| Considered | Twinsectra Ltd v Yardley | [2002] All ER (D) 321 (Mar); [2002] UKHL 12; [2002] 2 AC 164; [2002] 2 All ER 377; [2002] 2 WLR 802 | UKHL | 21/3/2002 | |
| Considered | Roxborough v Rothmans of Pall Mall Australia Ltd | (2001) 208 CLR 516; (2001) 185 ALR 335; (2001) 76 ALJR 203; (2001) 22(20) Leg Rep 2; (2001) 48 ATR 442; [2001] HCA 68; BC200107592 | HCA | 6/12/2001 | |
| Cited | Marsden v Amalgamated Television Services Pty Ltd | [1999] NSWSC 428; BC9902159 | NSWSC | 7/5/1999 | |
| Cited | Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd | [1998] 3 VR 133; [1998] ANZ ConvR 111; (1997) V ConvR 54-572; BC9705570 | VSCA | 28/10/1997 | |
| Cited | Boscawen v Bajwa; Abbey National plc v Boscawen | [1995] 4 All ER 769; [1996] 1 WLR 328 | EWCACiv | 10/4/1995 | |
| Considered | Baltic Shipping Co v Dillon (The Ship Mikhail Lermontov) | (1993) 176 CLR 344; (1993) 111 ALR 289; (1993) 67 ALJR 228; (1993) ASC 56-206; (1993) Aust Contract R 90-022; [1993] HCA 4; BC9303547 | HCA | 10/2/1993 | |
| Cited | Australian Elizabethan Theatre Trust, Re; Lord v Commonwealth Bank of Australia | (1991) 30 FCR 491; (1991) 102 ALR 681; (1991) 5 ACSR 587 | FCA | 2/8/1991 | |
| Cited | Chamberlain v Deputy Commissioner of Taxation (ACT) | (1988) 164 CLR 502; (1988) 78 ALR 271; (1988) 62 ALJR 324; (1988) 88 ATC 4323; (1988) 19 ATR 1060; [1988] HCA 21; BC8802663 | HCA | 12/5/1988 | |
| Cited | National Commercial Banking Corp of Aust Ltd v Batty | (1986) 160 CLR 251; (1986) 65 ALR 385; (1986) 60 ALJR 379; (1986) Aust Torts Reports 80-013; [1986] HCA 21; BC8601427 | HCA | 13/5/1986 | |
| Considered | Muschinski v Dodds | (1985) 160 CLR 583; (1985) 62 ALR 429; (1985) 60 ALJR 52; (1985) 11 Fam LR 930; (1985) DFC 95-020; (1986) NSW ConvR 55-274; (1985) V ConvR 54-183; [1985] HCA 78; BC8501051 | HCA | 6/12/1985 | |
| Cited | Chan v Zacharia | (1984) 154 CLR 178; (1984) 53 ALR 417; (1984) 58 ALJR 353; [1983-84] ANZ ConvR 691; [1984] HCA 36; BC8400496 | HCA | 7/6/1984 | |
| Cited | Markus v Provincial Insurance Co Ltd | (1983) 25 NSWCCR 1; BC8300012 | NSWSC | 11/5/1983 | |
| Cited | Consul Development Pty Ltd v DPC Estates Pty Ltd | (1975) 132 CLR 373; (1975) 5 ALR 231; (1975) 49 ALJR 74; BC7500014 | HCA | 26/2/1975 | |
| Considered | Barclays Bank Ltd v Quistclose Investments Ltd | [1970] AC 567; [1968] 3 All ER 651; [1968] 3 WLR 1097 | UKHL | 31/10/1968 | |
| Cited | Black v S Freedman & Co | (1910) 12 CLR 105; (1910) 17 ALR 541; [1910] HCA 58; BC1000004 | HCA | 28/10/1910 | |
| Cited | Gibert v Gonard | (1884) 54 LJ Ch 439 | – | 25/11/1884 | |
| Cited | Pooley v Driver | (1876) 5 Ch D 458 | EWHCCh | 29/11/1876 | |
| Cited | Barnes v Addy | (1874) LR9ChApp 244; (1874) 43 LJ Ch 513; (1874) 30 LT 4; (1874) 22 WR 505 | EWHCCh | 12/2/1874 | |
| Cited | Browne v Dunn | (1829) 3 Sim 23; (1829) 57 ER 909 | – | 28/3/1829 |
SOLUTION
- a. In the instant case Mrs. Deborah Raulfs has applied to the court seeking recovery of her money paid in the partnership with the respondents.
b. The claim of the applicant was based on two aspects first was the claim of refund of $400,000 which was paid by her during her incorporation into the partnership and it was not even disputed by the respondents and it was also admitted that the respondents used the money to pay off debts in the month of October 2006. The second aspect was the refund of $230,000 which the applicant claims to have paid in connection with purchasing a restaurant Seasalt, it is also claimed that the money has been paid and misappropriated by the respondent and later on it was told to her that the money has been stolen and restaurant could not be purchased.
- a. Fishy Bite Pty Ltd the company which was a partnership concern was the first defendant in the present case.
b. Louie Ajaka a partner in the 1st defendant company has been included as the 2nd defendant in the instant case.
c. 2nd defendant was wholly or substantially the owner of the company. He has admitted that the applicant was inducted as the partner and accepted that he has taken the deposit from the applicant to induct her as the partner.
d. Mr. Ajaka had been experienced in the restaurant business for 17 years and had been operating a fish and owning a fish and chip shop at Bronte. He also has been managing a restaurant and had part interest upon it.
- a. It was held that the 2nd defendant is required to pay the receiver of the partnership a sum of $400,000 less $ 32,000.
b. The taped telephonic conversations between the 2nd defendant and the applicant were considered as valuable evidence and the defendant’s claim to rectify the partnership deed was rejected. The court held that the defendant’s explanation of the facts of the partnership and the relation between the partners is unsatisfactory and it also held that the conduct of 2nd defendant in accepting the money from the applicant reflects dubious and misleading nature of the defendant. Moreover after consulting various precedents and evidences of the witnesses it was proved that the conduct of the 2nd defendant in accepting the money was not satisfactory and was accordingly ordered to be returned.
JH16
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