MARTIN V MULCOCK HC AK CIV 2008-404-002295

MARTIN V MULCOCK HC AK CIV 2008-404-002295 4 November 2008IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2008-404-002295BETWEEN GLENN MARTIN Appellant AND DIANE JEANETTE MULCOCK AND WILLIAM MCCREADY (AS TRUSTEES OF THE SEXTON FAMILY TRUST) AND ALAN MULCOCK AND WILLIAM MCCREADY (AS TRUSTEES OF THE WOOTTON FAMILY TRUST) Respondents Hearing: 9 July 2008 Appearances: PH Bremer for Appellant DB Hickson for Respondents Judgment: 4 November 2008 at 2:00 pmJUDGMENT OF ASHER JThis judgment was delivered by me on 4 November 2008 at 2:00 pm pursuant to Rule 540(4) of the High Court Rules .. Registrar/Deputy Registrar .. DateSolicitors: Treadwells, PO Box 859 Wellington Castle Brown, PO Box 9670 Newmarket, AucklandTable of ContentsParagraph NumberIntroduction [1]Background [2]The District Court decision [13]Issues on the appeal [16]Should the partnership accounts be re-opened? [21]The 1989 partnership agreement [26]The meaning of the handwritten note [36]Background circumstances [41]Events after the handwritten note [47]Credibility issues [65]Conclusion on the terms of the partnership [69]Failure to grant leave to amend the pleadings [72]General conclusion [74]Result [77]Costs [79]Introduction[1] This is an appeal against a decision of the District Court at Manukau determining that a partnership between the appellant and the respondents was a partnership on equal terms in accordance with what was shown in the partnership accounts. The partners were the appellant, Glen Martin, and the respondents, Diane Mulcock and William McCready as trustees of the Sexton Family Trust and Alan Mulcock and William McCready as trustees of the Wootton Family Trust ("the Mulcock trustees"). The Mulcock trustees had sought an order for the taking of an accountant, and the Court rejected Mr Martin's defence that the partnership accounts were incorrect and do not reflect an agreed credit in his favour.Background[2] The Sexton Family Trust and the Wootton Family Trust ("the Mulcock Trusts") are for the benefit of Alan and Diane Mulcock. [3] In 1988 Mr and Mrs Mulcock purchased a 13-acre block of land at Piriaka, south of Taumarunui, beside the Whanganui River. The block included a house and grazing land. Mr Martin owned a small property across the road from the Mulcocks on which he farmed deer. The Mulcocks and Mr Martin got to know each other. The Mulcocks' farm was fenced in a manner suitable for deer farming and Mr Martin had an interest and some experience in the farming of deer. Their association led in 1989 to an informal agreement between the Mulcock trustees and Mr Martin to enter into a partnership to farm deer known as the Glenalan Partnership. It was agreed that the partnership would purchase a 40-acre block of land at nearby Oio to operate a deer farm. [4] The parties agreed that the Glenalan Partnership would be owned as follows: a) Mr Martin 50 per cent b) Wootton Family Trust 25 per centc) Sexton Family Trust 25 per cent [5] The purchase price for the Oio property was $80,000 plus GST. The agreement for sale and purchase was entered into on or about 14 June 1989. At this time there existed no formal partnership agreement and the parties did not jointly own any assets or operate a bank account. [6] The agreement showed the purchasers to be the two Mulcock Trusts and Mr Martin. Mr Martin did not have any cash available to contribute to the purchase of the property. He did, however, have some knowledge of deer farming together with local knowledge and considerable enthusiasm for the project. The Mulcock trustees did have sufficient funds to pay for the start-up of the farming operation and the purchase of the Oio property. As a consequence, the Mulcock trustees paid the purchase price. [7] Mr Mulcock at his own instigation wrote the following on the backing sheet of the agreement for sale and purchase ("the handwritten note"):I, Alan Mulcock, hereby undertake to pay the deposit, the purchase price and solicitors' costs associated with this intended purchase even though title is in the joint names of the two Trusts 50 percent and 50 percent in the name of Glen Martin. In consideration of Glen Martin not being required to pay 50 percent of these costs and capital he has undertaken to manage the property in a manner to be determined in a separate partnership agreement.[8] It was also understood at the time of the purchase of the Oio property that Mr Martin would in due course build a house on the property, which he would pay for and which would become a partnership asset with the appropriate credit for his contribution. [9] After the purchase of the Oio property, the partnership purchased and farmed deer on the property. The Mulcock trustees introduced most of the working capital for the partnership. It does not appear ever to have run at a profit. However, in the financial year ended 31 March 1992 Mr Martin did, as planned, build a house on the Oio property. To do this he borrowed $86,778.32 from the ANZ Bank, drew $16,000 from the partnership and contributed cash of $35,400. His total contribution to the partnership for this was shown in the accounts as $138,178.32.[10] In about September 1994 the partnership sold the Oio property and leased another block of land in the area for the deer. The net proceeds of the sale of the Oio property were $269,775. The Mulcock trustees and Mr Martin received half the proceeds amounting to $134,887.53 each. From his share Mr Martin repaid the balance still owing on the ANZ mortgage and a refund of what was called a partnership loan for stock. There is a dispute, which is not clarified in the evidence or resolved by the District Court Judge, as to whether Mr Martin made a modest profit on his financial contributions towards building the house. [11] The accounts prepared initially by the Mulcocks' accountants Gosling Chapman for the year ended 31 March 1991 showed a substantial differential between the Mulcock trustees' total balance of $178,908 in credit and Mr Martin's balance of $12,527 in debit. The difference reflected the Mulcock trustees' entire contribution of the original capital. The accounts for the year ended 31 March 1992 showed a closing balance for Mr Martin of $103,080 in credit, which reflected his contribution to the costs of the house, and a closing balance for the Mulcock trustees of $144,464 in credit. After the Oio property was sold in 1994 and Mr Martin had used the proceeds to pay off other debts, the accounts reverted to showing the Mulcock trustees as substantially in credit while Mr Martin was substantially in debit. For the year ended 31 March 1995 the Mulcock trustees' closing balance was $79,863 in credit and Mr Martin's closing balance was $56,014 in debit. The 1996 accounts and those which followed exhibited a similar differential. The 1997 accounts showed that the Mulcock trustees were in credit for $79,503 and Mr Martin in debit for $56,374, and the accounts that followed continued to reflect this differential. Mr Martin did not sign off the accounts as correct up to 1997 but did thereafter. [12] Mr Martin also received regular annual payments from the partnership by way of management fees. These fees are shown in the accounts as having been paid from the year ending 31 March 1992. It would appear therefore that for the first 18 months of the partnership Mr Martin was paid no management fees. Management fees of $2,000 per annum were then paid regularly through the 1990s, although it appears to be common ground that they fell behind more recently and that moneys are owed in that regard to Mr Martin.The District Court decision[13] The evidence was heard on 21 and 22 March 2007. The Judge reserved his judgment to allow counsel to file submissions on what he described at [13] of his reserved judgment as "the key issue in the proceedings, namely, the terms of the partnership agreement". There were then failures to meet timetabling directions as to the filing of submissions. [14] Mr Martin submitted in closing submissions that the partnership arrangements encompassed three separate agreements, an agreement as to the ownership of Oio property, an agreement for the management of the Oio property including the deer herd, and the partnership agreement itself. The Judge found that this was a new claim which should have been specifically pleaded. As no leave had been given to amend the pleadings or to file further submissions after the hearing he determined that the Court would "set aside" that submission. Despite this ruling, the Judge went on to deal with the substance of Mr Martin's claim and the three agreements submission "in any event". He found that the evidence did not support Mr Martin's submission of there being three separate arrangements [15] The Judge concluded also that he did not accept Mr Martin's evidence that it was not intended that he contribute to the costs of acquiring the Oio property. He rejected Mr Martin's claim that he did not have to make any payment towards the purchase of the Oio property and that the management fees of $2,000 per annum were only a top-up of the credit he was entitled to for management. He stated at [61]: "The partnership terms are of equal shares in accordance with the partnership terms".Issues on the appeal[16] The parties agree that the partnership was validly dissolved on 31 March 2005 and that it must be wound up. The two issues upon which the submissions on appeal focused were:a) Whether the Judge was correct to deny leave to amend the statement of claim to plead three separate agreements; and b) Whether the Judge was correct to reject Mr Martin's defence that his contribution to the Oio property was his undertaking to manage the property so that he received a corresponding credit in the partnership accounts. [17] Other ancillary issues relating to outstanding management fees and grazing fees do not appear to have been dealt with in the judgment and were not the subject of detailed submissions on appeal. [18] For reasons that I will set out later in this judgment I consider the argument over leave to amend the pleadings to be something of a distraction. The key issue is whether the partnership agreement in fact contained a term in accordance with Mr Martin's interpretation of the handwritten note to the effect that his contribution to the purchase of the Oio property was to manage it. This was always at the core of the pleadings and the evidence, and was thoroughly traversed in the District Court both factually and legally. If there was such a term, the accounts should show a credit to Mr Martin as an equal cash contributor towards the acquisition of the Oio property, that contribution being made by his management of the property rather than the actual payment of cash. [19] Mr Hickson for the Mulcock trustees, however, submitted that in the light of the background circumstances, the handwritten note did no more than excuse Mr Martin from the obligation to make an initial cash contribution towards the purchase. Thus, it was intended that the partnership accounts should reflect the cash inputs in the usual way. [20] I will deal first with the Judge's determination of the substantive issue as to the terms of the partnership.Should the partnership accounts be re-opened?[21] Mr Martin seeks in essence to re-open the partnership accounts and to adjust them to reflect what he claims was his equal contribution to the purchase and set -up of the Oio property. In doing so he immediately comes up against the barrier of the general principle that a partnership account which has already been stated and settled between parties cannot generally be re-opened: Lindley and Banks on Partnership(18ed 2002) at paras 23-109 - 23-1190), Heywood v Parfitt HC CHCH M406/90 12 July 1991, Tipping J. The accounts of this partnership were undoubtedly settled, in the sense that the partners apparently acquiesced to them by signing off on the accounts over a number of years. [22] However, where a settled account is affected by fraud or misrepresentation or there is a manifest error in the accounts, the Court may direct that the account be re- opened: Lindley and Banks on Partnership at paras 23-110; Williamson v Barbour(1877) 9 Ch D 529; Heywood v Parfitt at 17. Thus in Miles v Clarke [1953] 1 All ER 779, Harman J was prepared to re-open accounts which showed that a lease in the name of one of the partners was partnership property. Her Honour was prepared to do so because from the start there was a "monstrous unreality". An asset shown as an asset of the partnership was not "in truth" such an asset. If Mr Martin is correct in his argument, in this case similarly the accounts reflect a "monstrous unreality" so that a re-opening of the accounts is justified. [23] While he emphasised the fact that the accounts were settled to support his arguments as to the terms of the partnership, Mr Hickson for the Mulcock trustees has not sought to argue that the fact that the accounts are settled is an end to the matter. He was correct in doing so, as if it can be shown that there was an explicit agreement that Mr Martin be given a credit for a half-share of the contribution to the purchase of the Oio property, there would be a manifest error in the accounts. [24] It was also open to the Mulcock trustees to argue that the Mr Martin's signing off on the accounts over such a long period gave rise to estoppel by acquiescence. However, again, this has not been the primary focus of their argument. Mr Martin's signing off on the accounts has rather been put forward assubsequent conduct which supports the Mulcock trustees' interpretation of the handwritten note. [25] As was observed in Heywood v Parfitt, it is extremely important that courts do not too easily upset settled accounts upon which the parties have acted. However, given the way that this case has been argued and the key issue arising as to the effect of the handwritten note, I propose dealing now with the substantive issue of the terms of the partnership agreement between the parties.The 1989 partnership agreement[26] The parties did not enter into a written partnership agreement, despite what appears from the handwritten note to have been an intention to do so. A partnership created orally is as valid as one created in writing: Lindley and Banks on Partnershipat para 7-05. This is so even where, as in this case, the partnership involves the ownership of land: Lindley and Banks on Partnership at para 7-06. The provisions of the Statute of Frauds requiring contracts for the disposition of land to be in writing (now in ss 24-25 of the Property Law Act 2007) are inapplicable where the parties become partners: Lindley and Banks on Partnership at para 7-14; Webb and MolloyPrinciples of the Law of Partnership (6ed 1996) at para 2.37(ii). [27] Further, the doctrine of part performance in relation to land which saves oral agreements in certain cases, is preserved by s 26 of the Property Law Act 2007. In this case the parties undoubtedly part performed the partnership agreement by registering the property in their joint names and investing in it. Indeed the existence of a partnership between the parties for the purposes of owning and operating a deer farming business has been admitted in the statement of defence. In submissions Mr Bremer accepted the existence of a partnership and focussed rather on the terms of the purchase of the Oio property from which he submitted the credit in Mr Martin's favour arose. It is necessary to consider then the specific terms of the oral partnership agreement. [28] Mr Martin asserted in his brief of evidence that it was his understanding that the purchase of the Oio property and later building on it "were to be separate fromthe trading (livestock) side of the partnership". He did not suggest that they were not part of the partnership, and indeed in his evidence he appeared to accept that the purchase of the Oio property was for the benefit of the partnership. Mrs Mulcock in her evidence clearly regarded the purchase of the Oio property as just an aspect of the partnership. This is indeed what the accounts showed. I am satisfied that as a matter of fact the District Court Judge was correct to approach the issue of the purchase of the Oio property on the basis that it was an aspect of an equal partnership, and not on the basis of it being one of three separate agreements. There is nothing in the evidence to suggest that there was ever any intention to create two or indeed three different contracts; rather, the actions of the parties show an evolving single partnership contract. [29] This being so, any agreement in relation to the Oio property and in particular the handwritten note must be seen as a term or variation of the already established partnership agreement. A partnership agreement is like any other agreement and must be interpreted according to the normal rules of construction, including an examination of the factual matrix: Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989 at 997; Re White [2001] Ch 393 at [50], [67] and [75]; Lindley and Banks on Partnership at para 10-03. Variations to a partnership by consent are expressly recognised as part of a partnership at s 22 of the Partnership Act 1908. [30] There is no evidence suggesting that a single meeting took place on which the terms of the partnership were agreed, and it seems clear from the evidence that specific arrangements were made at the time when issues arose. Thus it appears that the purchase of the Oio property took place after the parties had generally agreed to start a deer farming partnership. [31] Mr Martin's description of events on which his contention of an entitlement to a half contribution to the Oio property was based was very general. He stated that there was a clear understanding that when the Oio property was "eventually sold and the proceeds split between equally between myself and the Mulcock family, that was to be an end to the relationship." He claimed that the handwritten note supported this understanding. He gave evidence that he did not expect the contribution of the Mulcock trusts to remain a debt carried forward after sale. Presumably he wasasserting that the slate was to be wiped clean of all contributions to the farm property on its eventual sale. Mr Martin did not contest Mrs Mulcock's assertion that it was agreed at the time the Oio property was purchased that he would contribute to the partnership by funding the construction of a house on it. This aspect of the arrangements was not recorded in writing. Mr Martin did not state how his contribution of the cost of building the house, which it was contemplated from the outset that he would make, was to be treated. [32] Mr Mulcock is suffering from a serious illness which affects his memory and was not able to give evidence. Mrs Mulcock did give evidence. She disputed Mr Martin's understanding that he would not have to contribute to the purchase of the Oio property save by managing the enterprise. She said that she was aware of the handwritten note and had discussed it with her husband before he wrote it out. She said that the purpose of the note was to record that Mr Martin was to be shown as a one-half owner of the land after purchase, but that he did not have actually to make any cash contribution towards the purchase price at that time. She observed that Mr Martin had agreed to provide farm management services on the property. She clarified this position when being questioned by the Judge. She said that she and her husband were going to pay for the land and because Mr Martin had no cash he did not have to contribute at that time. He was, however, going to make a contribution in due course when he paid for the house to be built on the property. The management fees that he was to receive were to cover his actual management services, and were a separate issue entirely. [33] In the end the argument is one of contractual interpretation. The handwritten note, which is pleaded by Mr Martin as part of the agreement, must be interpreted in accordance with the accepted principles. Lord Hoffmann's well-known restatement of the fundamental principles of contractual interpretation in Investors' Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 has been accepted in New Zealand in Boat Park Ltd v Hutchinson [1999] 2 NZLR 74 (CA), and as noted earlier, such principles will apply to any interpretation of a partnership agreement.[34] Parties' declarations of subjective intent are not admissible as an aid to interpretation but only as an aid to rectification: Investors' Compensation Scheme Ltd v West Bromwich Building Society. In determining the meaning of the document, the Court assumes the position of a reasonable person with knowledge of the background which would reasonably have been available to the parties when they entered into the contract. However, the starting point is the words of the contract (and any variation of the contract), which should be given their natural and ordinary meaning. [35] In this case, as I have stated, the partnership agreement was largely oral. The agreement was for an equal partnership. The issue is the terms of that agreement.The meaning of the handwritten note[36] The handwritten note expressly contemplates a formal partnership agreement that will be drafted in the future, and clearly covers only a specific aspect of the partnership. It can be viewed as recording one of the terms of the partnership, or a variation of what was already agreed. The vagueness of the evidence as to how the partnership was constituted, understandable given the passage of time and the lack of a written partnership agreement, make it difficult to determine whether the handwritten note should be classified as recording a term of the partnership or a variation. However it is categorised, it was only part of the partnership agreement, and the principles of interpretation are the same. [37] According to the submissions of the Mulcock trustees, the intention on Mr Mulcock's part in drafting the handwritten note was to provide some protection for Mr Martin against any claims by a vendor that he should have to contribute to the purchase to the purchase price, rather than to set out the full contractual position. According to the submissions for Mr Martin it was to absolve him from the need to contribute any cash to the purchase at any time. Because the partnership contract was oral save for the handwritten note, it is not possible to adopt the usual simplistic approach of putting all the statements by the parties as to their subjective intent to one side. In this case a credibility issue arises and if Mrs Mulcock's evidence is topreferred, the handwritten note had an entirely different purpose from that put forward by Mr Martin. [38] Turning to the words themselves, the first sentence is straightforward and has a clear meaning. Mr Mulcock is to pay all the costs of the intended purchase, but the title will be put in the joint names of the Mulcock trustees as to 50 per cent, and as to the other 50 per cent in the name of Mr Martin. [39] The issue between the parties is as to the interpretation of the second sentence. Mr Martin is not required "to pay 50 per cent" of those purchase costs, and in return undertakes to manage the property in a manner to be determined in a separate partnership agreement. Does this, as Mr Martin effectively contends, mean that he should be given a credit in the accounts for half the purchase costs on account of his future management work, while the Mulcock trustees who paid the full amount should be credited with only half of their contribution? Or does it, as the Mulcock trustees contend, mean that Mr Martin does not have to make any cash contribution at the time of purchase towards the purchase of the Oio property despite being shown as a half owner on the title, and that the accounts will reflect contributions to that purchase in the usual way? The question then, is whether "not being required to pay" means not being required to pay now, or not being required ever to pay in the sense of receiving a credit of half the purchase price. [40] Both interpretations are available. The phrase "not being required to pay" may mean no more than not being required to pay cash on purchase, and not be intended to alter the state of the accounts and to give Mr Martin a half credit of the purchase costs. On the other hand it is possible to say that "not required to pay" means that any obligation ever to pay for the 50 per cent ownership of the Oio farm is extinguished by the agreement. Regrettably the separate partnership agreement referred to in the second sentence, which is likely to have clarified any issues of interpretation, was never prepared or signed. There is a genuine ambiguity in the second sentence.Background circumstances[41] I turn to the background circumstances to help resolve the ambiguity. As stated, I do not consider the handwritten note to constitute a stand-alone contract. It must be as part of a loosely formed partnership agreement formed prior to the note being drafted. The Mulcock trustees and Mr Martin had formed the partnership because they wished to farm deer for profit. The Mulcock trustees had the cash to pay for the land on which the farming could take place, and Mr Martin had the ability to manage the stock. It was not contested that it was understood that Mr Martin in due course would be contributing capital by paying for the building of the house which he would live in, and indeed this is what transpired approximately two years later. [42] Those circumstances do not support an interpretation of the handwritten note that absolves Mr Martin from ever contributing in any way to the purchase. If that were so, it would be inconsistent for Mr Martin to also agree at around the same time to later fund the building of the house, as that would be over and above what was apparently agreed to be his equal contribution. The fact that he would in due course be putting in his own funds is more consistent with him having an ongoing obligation to put up funds in due course in the usual way. [43] It is also a relevant background factor that Mr Martin achieved a significant advantage in not having immediately to contribute any cash for the purchase of the Oio property, even if he received no credit of an equal amount. The effect was that he became a half-owner of the property and was shown on the title as such, but did not have to pay any interest or other fees for the advance of his half-share by the Mulcock trustees. That in itself warranted some consideration, such as the provision of management services. [44] The first accounts for 31 March 1991 show total initial contributions by each trust of $89,454, a total of $178,908. It would seem highly unlikely that The Mulcock trustees would make such a contribution on the basis that Mr Martin was entitled to half of that as his own credit, only because of the prospect of undefined and indefinite future management services.[45] These factors must be balanced against Mr Martin's assertion, supported by unchallenged expert evidence, that his management services warranted payments of between $10,000 and $15,000 per annum. This was a sum substantially in excess of what he actually received. However to this it must be observed that the Mulcock trustees were contributing substantially unequal capital without receiving interest from the other partner. If interest were paid on their initial capital of $178,908, it would have amounted to a sum of at least $10,000 to $15,000 annually. Thus the ongoing benefits that each was giving to the partnership cannot be regarded as clearly unequal at the outset. There is also the factor that the Mulcocks would be putting in time in relation to the partnership without payment, although presumably much less than that of Mr Martin. [46] On balance, these background factors support the District Court Judge's decision as to the correct interpretation of the handwritten agreement.Events after the handwritten note[47] Evidence of the parties' subsequent conduct is now admissible in New Zealand as an aid to interpretation: Gibbons Holdings Ltd v Wholesale Distributors Limited [2008] 1 NZLR 277 (SC); Valentines Properties v Huntco Corporation[2000] 3 NZLR 16 (CA). That evidence is relevant to give a meaning to the words as they were used at the time of the contract. In Gibbons Tipping and Anderson JJ expressed the qualification that the conduct should be mutual or shared and objectively capable of indicating the parties' perception of the meaning of the contract before it can be taken into account: at [53] and [74]. [48] Not every act by a party after the formation of the contract can be taken into account. Often subsequent conduct will be self-serving or manipulative. Such conduct can, however, very credibly indicate meaning, particularly if the conduct is against interest or carried out a short time after the formation of the contract when the parties are happily working together. I proceed on the basis that a party's subsequent unilateral conduct against interest can be an aid to interpretation. Subsequent conduct in relation to a relational contract such as this, which involvedextensive ongoing contact between parties who were amiably working together, is particularly helpful. [49] Counsel for both parties relied on a number of instances of subsequent conduct as an aid to interpretation of the handwritten note. [50] First, Mr Martin does not appear to have been paid any management fees for the year ending 31 March 1991. This factor could be treated as consistent with either Mr Martin's or the Mulcocks' interpretation. Mr Martin may have been managing the farm for no financial reward either because he had not had to front up with the initial cash or alternatively because he was to receive a credit for half of the Mulcock trustees' initial contributions. [51] Secondly, Mr Martin was paid management fees of $2,000 per annum for the year ended 31 March 1992 and thereafter. These payments stopped in the year 2001 and I understand that it is accepted that the partnership owes Mr Martin for management fees from that point. The fact that Mr Martin received management fees from 1992 is inconsistent with his claim that he was providing free management in return for a credit of half the capital introduced by the Mulcock trustees. It indicates that he did receive consideration for that work, and suggests that he cannot therefore claim the benefit of a further credit. [52] I have mentioned the evidence from an expert that Mr Martin could have been entitled to management fees in the region of $10,000 to $15,000 per annum. It is submitted for Mr Martin that the payments of $2,000 per annum were an unsolicited extra offered by the Mulcock trustees. However, I have already referred to the fact that the Mulcock trustees received no interest on their substantial and unequal cash payments. Moreover, Mr Martin had a fulltime job, so any payment of management fees has to be seen in the context that his work was an extra and part- time. Further the Mulcocks also contributed amounts of time and effort into the running of the partnership. Although these were not as significant as those of Mr Martin, it was a joint enterprise. In such circumstances it is unlikely that Mr Martin would have received an unsolicited top up.[53] I consider that the fact that Mr Martin was in fact paid management fees from the year ending 31 March 1992, and that these were shown in the accounts without any corresponding credit for Mr Martin's notional half-share of the capital contributions, indicates that his interpretation of the contract is not correct. [54] A third factor is that Mr Martin made a substantial contribution to the partnership by building a house on the partnership property, and this was in fact credited to his partnership current account. It indicates that he was going to contribute capital in the usual way of equal partners, and is inconsistent with the claim of entitlement to credit in respect of the purchase of the Oio property. The later sale of the property and equal division of the proceeds is consistent with either approach. [55] As a fourth factor, it is also relevant that Mr Martin made at least two cash contributions to the partnership totalling $8,350. This is certainly inconsistent with his broader contention, referred to later, that the Mulcock trustees would contribute the cash and he would contribute his skills and management. [56] As a fifth factor, from 1997 Mr Martin signed off as correct the annual financial statements which showed his current account to be substantially in debt, in contrast to the substantial credit of the Mulcock trustees. He did this on seven occasions through to 31 March 2004. It was Mrs Mulcock's evidence that Mr Martin would meet with her and her husband to examine the accounts and discuss them. Mr Martin contends that he was inexperienced in business matters and simply did not realise what he was signing off. However, Mr Martin was a director of six different companies over a period of 20 years. The Judge in his decision clearly did not find Mr Martin's explanation credible, and it is not difficult to see why. [57] Mr Bremer submitted that in light of the recent observations of the Supreme Court in Austin, Nichols & Co Inc v Stichting Lodestar [2008] 2 NZLR 141, the appellate court in an appeal by way of rehearing should carry out its own assessment of the facts and should not hesitate to substitute its own findings of fact, even in relation to issues of credibility.[58] While Austin, Nichols is an important reminder of the duty of an appellate Judge to apply independent judgment to findings of fact, including those of credibility, it is clear from Austin, Nichols that the onus is still on an appellant to show that the trial Judge was wrong on such a point: at [4]. In Austin, Nichols the Court recognised the "advantage" that a trial Judge has when considering an issue of credibility, although this must not be transformed into a slavish deference to the trial Judge's conclusion: at [13]. Thus, while the appellate court must review the evidence on a matter of credibility at issue on appeal, a trial Judge's finding is of relevance and should be disregarded only with caution. [59] In this case I consider that the learned Judge was correct in his rejection of Mr Martin's explanations as to why he signed off on the accounts on seven occasions. Given Mr Martin's background, his explanation lacks credibility. [60] As a sixth factor, Mr Mulcock drafted a handwritten letter to Mr Martin dated 30 October 1995, which indicates that Mr Martin had asked him to check the accounts and items relating to the purchase and subsequent sale of the Oio property and the building of the house. Mr Martin denies receiving this letter, and the District Court Judge did not make a finding on the point. However, even if the letter was not received, the very sending of it by Mr Mulcock to Mr Martin indicates interest in and some understanding of the accounts on the part of Mr Martin. The letter reads as one that follows discussion between the parties about the accounts. [61] Finally, on 9 May 2004 the Mulcocks wrote an informal friendly letter to Mr Martin following a meeting that they had with him confirming his debt of $62,000 to the partnership on the basis of the Gosling Chapman accounts. There was no objection to this on the part of Mr Martin. A further letter was sent to him by the Mulcocks on 8 July 2004, which indicated that since September 2003 Mr Martin had been raising the subject of the future of the Glenalan Partnership and the possibility of the Mulcocks selling out to him. There was no apparent protest to these letters until Mr Martin wrote to the Mulcocks on 14 July 2004. [62] It is arguable that letters setting out a party's position are not subsequent conduct that should be considered as an aid to interpretation. Such letters are notongoing contractual action, but statements arising out of conflict made for the purposes of a particular party. In this case I treat them with caution, but here do not disregard them given the oral nature of the contract, save for the handwritten note, and the credibility issues that arise. [63] The fact that Mr Martin did not make any written objection to the Mulcocks' position until July 2004 is an indication that the partnership as agreed in 1998 did not include the terms that he now seeks to relies on. [64] On an overview, all this subsequent conduct, while not mutual save for the joint signing of the accounts, is entirely inconsistent with the terms of the partnership agreement and the interpretation of the handwritten note as put forward by Mr Martin.Credibility issues[65] In the letter of 14 July 2004 Mr Martin asserted (as reflected in the handwritten note): that the arrangements involved you people contributing the capital to the farming operation and my contribution being my time over the last 15 years.[66] On this interpretation, Mr Martin would never have to contribute any capital. Mr Martin repeated this in a letter of 8 September 2004, and again in his brief of evidence. He asserted that he would be given a credit in the partnership accounts equal to all the cash contributions of the Mulcock trustees during the course of the partnership. In other words, all the cash put in by the Mulcocks, and not just that put forward to purchase the Oio property, was to be met by a corresponding credit in Mr Martin's favour. [67] These statements go further than the agreement now relied on by Mr Martin. As expressed by him in the statement of defence, in his evidence and in the submissions on his behalf, his entitlement not to pay was limited to the contributions to the purchase of the Oio property only. The earlier proposition is also inconsistent with the agreement that he would contribute cash towards the building of the house. Such an arrangement would have been most unpalatable to any reasonablecommercial party in the position of the Mulcock trustees, given the open-ended nature of any partnership, and the large amounts they paid over the years. [68] Thus, in addition to the behaviour that was inconsistent with his present claim, it is relevant that Mr Martin originally put his claim even higher than he now puts it. This reflects on the truthfulness of his evidence.Conclusion on the terms of the partnership[69] The learned District Court Judge did not attempt a detailed analysis of the words of the handwritten note. For the reasons given I do not consider that the words of the handwritten note when considered with the background facts and subsequent conduct support Mr Martin's interpretation that the note absolved him from having to contribute financially to the Oio property. More generally, the Judge clearly rejected Mr Martin's evidence and preferred the evidence of Mrs Mulcock as to the nature of the partnership. In my view he was correct to do so. On an overview Mr Martin's position lacks credibility. [70] Thus, I consider that the District Court Judge was correct to reject Mr Martin's defence that the partnership accounts are incorrect and that he is entitled to a credit for half of the financial contributions to the purchase of the Oio property. [71] It is not necessary to consider the issues of estoppel and acquiescence which were not argued in any detail or considered by the District Court Judge.Failure to grant leave to amend the pleadings[72] While the Judge devoted a considerable portion of his judgment to whether Mr Martin was entitled to rely on the existence of three separate agreements relating to the parties' joint activities, I consider that issue to have been something of a red herring. The test for whether an application to amend pleadings should succeed is whether irremediable prejudice will result if the amendment is granted. Mr Martin in his submissions was effectively suggesting three different legal categories for the facts already pleaded and the arguments that had already taken place. Those threedifferent categories had not been pleaded, and the Judge treated the submission as an application to amend pleadings. However, that submission in the District Court was really a refinement of the position already put forward on behalf of Mr Martin. There were no new factual matters that required an answer. The Mulcock trustees responded to the three arguments submission in their submissions in reply in the District Court. As a consequence I do not consider that they suffered prejudice. If the case had turned on this point only I would have concluded that the Judge was in error in refusing to accept Mr Martin's submission on the three agreements. [73] Nevertheless, I do not consider that error to have created any unfairness for Mr Martin. Having heard submissions the Judge did consider the three agreements argument on its merits in the alternative at [52], and concluded that the submission was not made out. On appeal before me the three separate agreements argument was not put forward as a particular submission on behalf of Mr Martin, although I did receive full submissions from both sides on the nature of the agreement between the parties. This indicates the lack of importance of the point. As I have indicated I consider that the Judge's alternative consideration of the contractual position between the parties to have been fair, and for the reasons I have already set out I agree with his conclusion.General conclusion[74] Mr Martin's essential defence that the partnership accounts were incorrect and that he should have been credited with the payment of half the purchase price of the Oio property failed in the District Court. I consider for the reasons given that the Judge's overall conclusion was correct. The dissolution of the partnership should proceed on the basis that the Gosling Chapman accounts of the parties' capital contributions between 1988 and 2005 are correct. [75] Further adjustments, however, may need to be made. I do not have detailed submissions on any further possible adjustments, and I am not clear how far any such points could be taken on appeal. I note that the learned Judge expressly recorded the need for a further hearing as to the final orders to be made.[76] In case there are further issues that the parties wish me to determine on this appeal I propose treating this judgment as an interim judgment only, and to reserve leave to the parties to seek directions on any further matters.Result[77] The appeal against the Judge's decision on the terms of the partnership is dismissed. [78] The appeal is adjourned in case there are further issues where the parties seek directions. If any further hearing is sought application should be made to the Court within 14 days.Costs[79] The successful respondents are entitled to costs from the appellant on a 2B basis. Asher J