Calacoci v Calacoci [2020] NSWSC 476

Five partners, three plaintiffs and two defendants – from the same extended family carried on a partnership. There was no written agreement.

The second defendant was married to the first defendant.

The partnership business was owning rental property (shops and units) and collecting rent. The first defendant took a leading role and was a paid a management fee. All partners were paid drawings, controlled by the first defendant.

Drawings were paid 1/4 to each plaintiff, and 1/8 each to the defendants.

The partnership was dissolved in 2019. Issues regarding public auction versus “buyout” of the partnership property arose.

The central issue: what was each partner’s entitlement?

The shops were owned 1/4 by each plaintiff with the defendant’s jointly the remaining 1/4. The units were owned with each partner having a 1/5 interest.

The plaintiffs contended for a “four quarters” approach to the units, and the defendant for a “five fifths” approach.

The first defendant historically signed off on partnership financials on the “four quarters” basis but later claimed to have done so without inquiry.

The defendants leant on s24 of the Partnership Act 1892 (NSW) asserting that all partners share equally in profits and losses absent other agreement.

The plaintiffs relied on s21 to argue assets bought with the partnership funds (as the units were) are partnership assets.

The plaintiffs said they had no knowledge of the units being purchased in “five fifths” and did not look closely at the sale contracts and letters received in relation to the sale – an error “on par” with the first defendant’s ignorance of the financial documents he signed.

The financial records of the partnership had similar discrepancies; sometimes “four quarters”, sometimes “five fifths” and sometimes another basis.

The plaintiffs were unsophisticated and relied on the first defendant to manage the partnership’s affairs.

The solicitor who acted for the partners on purchasing the units gave basic conveyancing advice, not partnership “structure” advice.

In favour of “five fifths”: the plaintiffs signed contracts, accepted payments, and managed their tax affairs on this basis.

In favour of “four quarters”: the units were bought with partnership money, drawings were paid on this basis, the first defendant was paid a management fee, there was no agreement to vary the partnership proportion, and successive financial statements were prepared on this basis.

The Court found, on balance, “four quarters”.

If you require assistance with any kind of corporate dispute you should seek legal advice.

Our team of qualified corporate and commercial lawyers at Chamberlains Law Firm can assist you with these issues to ensure that the dispute is managed correctly.