Warner Capital Pty Ltd v Shazbot Pty Ltd [2020] NSWCA 121

Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Warner Capital Pty Ltd v Shazbot Pty Ltd [2020] NSWCA 121 Hearing dates: 12 and 13 March 2020 Decision date: 25 June 2020 Before: Macfarlan JA at [1] Meagher JA at [2] Gleeson JA at [3] Decision: (1) Appeal allowed in part as to grounds 5, 6, 7, 8 and 9(a)(i) and (c)(i). (2) Cross appeal dismissed. (3) Set aside orders 4, 5, and 8 made by the primary judge on 16 September 2019. (4) Vary orders 6 and 7 made by the primary judge on 16 September 2019 by deleting the words "to the Receiver" wherever appearing in orders 6(a), (b), (c) and 7(a) and (b). (5) Order that it is a condition of the relief granted by the primary judge on 16 September 2019, as amended by order (4) above, that Shazbot Pty Ltd transfer to Warner Capital Pty Ltd its share in CRS Warner Kugel Pty Ltd and its units in the CRS Warner Kugel Unit Trust. (6) Remit the matter to the primary judge for the taking of accounts, with the following directions: (a) within 21 days of these orders, the parties' legal representatives are to confer and attempt to reach agreement as to the quantum of each item of income the subject of the account and the value of the assets and liabilities of the Partnership Firm as at 22 September 2014 (as defined in order 1 made on 16 September 2019), and to file a document recording the extent of any agreement as to the account required to be given by the plaintiffs and the defendants respectively; (b) within 42 days of these orders, to the extent that the parties are unable to agree on narrowing the scope of the account: (i) the first, third and fourth defendants shall file their detailed account verified by affidavit with respect to the matters identified in order 6(a), (b) and 7(b), (c) made on 16 September 2019, as amended by order 4 above; (ii) the first and second plaintiffs shall file their detailed account verified by affidavit with respect to each item referred to in order 6(c) and 7(a) made on 16 September 2019, as amended by order 4 above; (iii) direct that the items of each said account shall be numbered consecutively; (iv) the account shall also state what the plaintiffs and defendants respectively claim to be the assets and liabilities of the Partnership Firm as at 22 September 2014, and the value thereof, to the extent that those matters are not agreed pursuant to the direction in 6(a) above. (c) the primary judge shall give such further directions with respect to the inquiry as considered necessary. (7) Direct the parties to file and serve short written submissions (not exceeding five pages) on the question of costs of the appeal and cross-appeal as follows: (a) appellants' submissions within 7 days; (b) respondents'/cross-appellants' submissions within a further 7 days; (c) appellants'/cross-respondents' submissions in reply (if any) within a further 5 days. (8) For the avoidance of doubt, the question of costs of the proceedings below is to be determined by the primary judge. Catchwords: PARTNERSHIPS – legal characterisation of business relationship between two insolvency practitioners – where insolvency practice conducted through a corporate trustee of a unit trust – where income derived by the practitioners in a personal capacity – where cheques for remuneration endorsed to corporate trustee – where practitioners had previously conducted a business in partnership – whether insolvency practice was a partnership PARTNERSHIPS – dissolution – account of partnership assets and liabilities – valuation of work in progress – where finding that work in progress comprised "collectible" component and so-called "goodwill" component – whether appropriate to have reference to collections actually made in valuation of collectible work in progress PARTNERSHIPS – dissolution – where no utility in appointing a receiver – form of orders appropriate to give effect to account of partnership assets and liabilities EQUITY – fiduciary duties – where shareholder transferred share to director's nominee for nominal consideration upon dissolution of partnership – whether breach of fiduciary duty claim pleaded – whether open for primary judge to find director breached fiduciary duty owed to shareholder Legislation Cited: Bankruptcy Act 1966 (Cth), s 109, Pts IX, X Corporations Act 2001 (Cth), ss 251A, 443D(b), 556(1)(c) and (de) Evidence Act 1995 (NSW), s 69 Partnership Act 1892 (NSW), ss 1, 1B, 39 Partnership Act 1895 (WA), s 50 Supreme Court Act 1970 (NSW), s 75A(8) Uniform Civil Procedure Rules 2005 (NSW), r 15.1(1), Pt 20, Div 3 Cases Cited: AM Marketing Pty Ltd v Howard Media Pty Ltd [2010] NSWSC 803 Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345; [2012] HCA 17 Badeley v Consolidated Bank (1888) 38 Ch D 238 Breen v Williams (1996) 186 CLR 71; [1996] HCA 57 Brunninghausen v Glavanics (1999) 46 NSWLR 538; [1999] NSWCA 199 Castagna v R; Agius v R [2019] NSWCCA 114 Commissioner of State Revenue v Rojoda Pty Ltd [2020] HCA 7 Cuming v Hennessy [2005] NSWSC 1219 Dovuro Pty Ltd v Wilkins (2003) 215 CLR 317; [2003] HCA 51 Federal Commissioner of Taxation v Phillips (1978) 36 FLR 399; 8 ATR 783 Friend v Brooker (2009) 239 CLR 129; [2009] HCA 21 Gosford Christian School Ltd v Totonjian [2006] NSWSC 725; (2006) 201 FLR 424 Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; [1984] HCA 64 Howard v Federal Commissioner of Taxation (2014) 253 CLR 83; [2014] HCA 21 Hurst v Bryk [2002] 1 AC 185 Isaac v Dargan Financial Pty Ltd (2018) 98 NSWLR 343; [2018] NSWCA 163 Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281; [1995] HCA 4 Kuru State of New South Wales (2008) 236 CLR 1; [2008] HCA 26 Multicon Engineering Pty Ltd v Federal Airports Corporation (1997) 47 NSWLR 631 Percival v Wright [1902] 2 Ch 421 Pilmer v Duke Group Limited (in liq) (2001) 207 CLR 165; [2001] HCA 31 Raftland Pty Ltd v Federal Commissioner of Taxation (2008) 238 CLR 516; [2008] HCA 21 Rowe v Australian United Steam Navigation Co Ltd (1909) 9 CLR 1; [1909] HCA 25 Sargent v ASL Developments Ltd (1974) 131 CLR 634; [1974] HCA 40 Sidameneo (No 456) Pty Ltd v Alexander [2011] NSWCA 418 Trego v Hunt [1896] AC 7 University of Wollongong v Metwally (No 2) (1985) 59 ALJR 481; [1985] HCA 28 Walker v European Electronics Pty Ltd (in liq) (1990) 23 NSWLR 1 Warner v Mayfair Limited, In the matter of the Personal Insolvency Agreement of Gore [2015] FCA 441 Texts Cited: K L Fletcher, The Law of Partnership in Australia (9th ed, 2007, Law Book Co) Lindley & Banks on Partnership (20th ed, 2017, Sweet & Maxwell) Category: Principal judgment Parties: Warner Capital Pty Ltd (First Appellant) Anthony John Warner (Second appellant) Clarence Street Partners Pty Ltd (Third appellant) Debtfree Pty Ltd (Fourth appellant) Shazbot Pty Ltd (First respondent) Steven Barry Kugel (Second respondent) Representation: Counsel: S A Wells / J R Anderson (Appellants) P Afshar (Respondents)