Commissioner of State Taxation v Cyril Henschke Pty Ltd  HCA 43. 1.12.10. French CJ, Gummow, Hayne, Heydon & Kiefel JJ.
22. The significance of the interplay between the law of contract and the doctrines and remedies of equity was further explained by Lord Millett in Hurst v Bryk  1 AC 185.
His Lordship observed that disputes between partners and the dissolution and winding up of partnerships have always fallen within the jurisdiction of the Court of Chancery, and continued:
"This is because, while partnership is a consensual arrangement based on agreement, it is more than a simple contract, to use the expression of Dixon J in McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457; it is a continuing personal as well as commercial relationship. Neither during the continuance of the relationship nor after its determination has any partner any cause of action at law to recover moneys due to him from his fellow partners.
The amount owing to a partner by his fellow partners is recoverable only by the taking of an account in equity after the partnership has been dissolved: see see Richardson v Bank of England (1838) 4 My. & Cr. 165: Green v Hertzog  1 WLR 1309.
Only the Court of Chancery was equipped with the machinery necessary to enable such an account to be taken, and the basis upon which the account was taken reflected equitable principles. These could be modified by agreement, but they did not find their source in contract."
23. This foundation for the engagement of equitable doctrines and concomitant remedies has given rise to judicial consideration of the nature of the interest conferred by equity upon each partner with respect to partnership assets as they exist from time to time and in advance of a "general" dissolution under the control of a court of equity. ...
24. Any such interest with respect to partnership assets was described by Dixon CJ in Perpetual Executors & Trustees Association of Australia Ltd v FCT [No 2] (1955) 94 CLR 1 at 15 as "a right in respect of assets but ... a right, or a congeries of rights, growing out of the partnership articles".
As Windeyer J indicated in Bolton v FCT  ALR 481 at 485, 491, the right is generally regarded as equitable and is "a fractional interest in a surplus of assets over liabilities on a winding up and in the future profits of the partnership business".
In Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) PtL (1974) 131 CLR 321, McTiernan, Menzies and Mason JJ said that the interest of the partner is sui generis.
25. The position here is not sufficiently or accurately expressed merely by use of the term "beneficial interest" any more than when considering the operation of discretionary trusts and unit trusts.
The critical point, putting to one side the prospect of future profits, was explained by Kitto J in Livingston v Commissioner of Stamp Duties (Qld) (1960) 107 CLR 411 at 453. It is that the interest of each partner can be ascertained finally only upon completion of the liquidation and the identification of any surplus share. That reasoning is reflected in the terms of s 39 of the Partnership Act, and exemplifies a proposition expressed by Viscount Radcliffe upon the further appeal in Livingston. His Lordship said:"Equity in fact calls into existence and protects equitable rights and interests in property only where their recognition has been found to be required in order to give effect to its doctrines."
26. The controversy in Canny Gabriel turned on the proposition that, if the equities otherwise are equal, the first of two competing equitable interests prevails, but that, if the first be but a "mere equity" of the kind considered in Latec Investments Ltd v Hotel Terrigal Pty Ltd (In Liquidation) (1965) 113 CLR 265, it may not retain priority over the subsequent equitable interest.
The decision in Canny Gabriel was that the equitable interest of a partner in the assets before winding up was more than a "mere equity" and thus retained priority over a subsequent equitable charge.
That may be accepted but is not decisive of the present appeal, which does not concern the principles of priorities in equity.
27. United Builders Pty Ltd v Mutual Acceptance Ltd (1980) 144 CLR 673 decided that, as Mason J put it, with the agreement of Barwick CJ, Gibbs and Wilson JJ:
".... according to long established principle, a mortgage or charge over a partner's share or interest in the partnership does not vest any interest in the assets of the partnership against the other partners.
What the mortgage or charge does is to confer an entitlement on the holder on dissolution of the partnership in relation to the partner's share of the partnership assets. ...
The vital consideration is that the partner's interest is in truth a chose in action, which, as FCT v Everett (1980) 143 CLR 440 at 446 acknowledged, 'consists of a right to a proportion of the surplus after the realization of the assets and payment of the debts and liabilities of the partnership'.
A mortgage or charge is considered to vest rights over that chose in action but it is not considered to carry any title to the specific assets until dissolution. ...
A fixed charge is appropriate to create a security over a partner's share.
It gives rise to a present security over the chose in action which is the partner's share.
Although it creates no specific interest in the partnership assets until dissolution, this is not because the charge is dormant; it is because the rights conferred by the charge relate to the existing chose in action and that the security over the chose in action confers no entitlement to the assets of the partnership until dissolution."