Milne v Benjafield [1999] NSWSC 253

New South Wales Supreme Court CITATION : Milne v Benjafield [1999] NSWSC 253 CURRENT JURISDICTION : Equity FILE NUMBER(S) : 1712/99 HEARING DATE(S) : 23 March 1999 JUDGMENT DATE : 23 March 1999

PARTIES : David Keith Gordon Milne (P) Peter Vivian Benjafield (D) JUDGMENT OF : Hamilton J

COUNSEL : D Cowan (P) J G F Harrowell, solicitor (D) SOLICITORS : Bamford Hogg (P) Hunt & Hunt (D) CATCHWORDS : CORPORATIONS [188] - Receivers, managers and controllers - Appointment - By Court - Person appointed should be wholly disinterested - Appearance of impartiality - Whether acquaintance with applicant's solicitor disqualifies. Re Stewden Nominees No 4 Pty Ltd (1975) 1 ACLR 185 Re Dunquil Pty Limited (in liq) (1985) 9 ACLR 950 CASES CITED : Advance Housing Pty Limited (in liq) v Classic Developments Pty Limited (1989) 14 ACSR 23 Re Biposo Pty Ltd; Condon v Rodgers (1995) 120 FLR 339 Ungar v Haddonstone Pty Limited, 22 December 1998, NSWSC, Hamilton J, unreported DECISION : Plaintiff's nominee appointed receiver despite alleged appearance of impartiality.

KLV:CAT 2

~23/03/99 3 THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

HAMILTON J

TUESDAY, 23 MARCH 1999

1712/99 DAVID KEITH GORDON MILNE v PETER VIVIAN BENJAFIELD

JUDGMENT

HIS HONOUR: 1 These proceedings concern the dissolution of a partnership which conducted a solicitors' practice. There were 2 partners in the practice. One is the plaintiff and one is the defendant. It is common ground that the partnership was dissolved on 30 November 1998. The reason why some time has passed before the present application for the appointment of a receiver has been brought before the Court is that discussions have been taking place in an attempt to resolve the matter without outside intervention, but ultimately they have failed. However, the negotiations were successful in at least one regard, in that the files have been divided between the solicitors and each is continuing to conduct a practice on his own account. Furthermore, after discussions, an order will be made by consent for the appointment of a receiver. After further discussions suggested by me, orders will also be made by consent as to the disbursement of funds received by the plaintiff and the defendant after 30 November 1998, of which some part at least may belong to the old partnership, rather than to the new practices which have been set up. 2 The only matter which has been contested so as to require the decision of the Court is the identity of the receiver. The defendant has put forward as receiver David John Lombe, chartered accountant and partner at Deloitte Touche Tohmatsu, chartered accountants. Mr Lombe is an "A" list liquidator. It has been stated and not disputed that he has considerable experience in the receivership of solicitors' practices. Mr Lombe has deposed that he has no professional knowledge of or relationship with the dissolved partnership or its partners. Mr Harrowell, solicitor for the defendant, frankly states to the Court that he is acquainted with Mr Lombe and that Mr Lombe has in the past done and probably is at present doing work for or in association with the defendant's solicitors' firm. That firm, Hunt & Hunt, is a well-known, medium sized firm of solicitors in this town and has a considerable practice in insolvency matters, and Mr Harrowell is the partner in charge of that section of the firm. In that role he is acquainted with most of the "A" list liquidators. The opposition to Mr Lombe's appointment arises from his acquaintance with Mr Harrowell. It is said that a receiver must be impartial and appear to be impartial, and that acquaintance with the solicitor of one of the parties, either generally or certainly, in this instance, destroys the necessary appearance of impartiality. In saying that, Mr Cowan, of counsel for the plaintiff, very properly eschews any suggestion other than that Mr Harrowell and Mr Lombe are honourable professional men of good standing. 3 Certainly it has traditionally been said that "a receiver appointed in an action should, as a general rule, be a person wholly disinterested in the subject matter": see Kerr on Receivers (17th Ed, 1989) 104. The position of a court appointed receiver is that, by his appointment, he acts in the role of an officer of the court, much as does a court appointed liquidator. There has been a deal of discussion of recent years of the requirements of liquidators as to independence and impartiality. In short, it has been said that it is important that a liquidator should be independent and should be seen to be independent: per Bowen CJ in Eq in Re Stewden Nominees No 4 Pty Ltd (1975) 1 ACLR 185 at 187. There was further discussion of this proposition by Olsson J in the Supreme Court of South Australia in Re Dunquil Pty Limited (in liq) (1985) 9 ACLR 950 and in this Court in Advance Housing Pty Limited (in liq) v Classic Developments Pty Limited (1989) 14 ACSR 23 by Santow J, in whose judgment there is a useful collection of the recent authorities. Further reference to the matter has been made by Young J in Re Biposo Pty Ltd; Condon v Rodgers (1995) 120 FLR 339 at 405-6 and by myself in Ungar v Haddonstone Pty Limited, 22 December 1998, unreported. 4 The rival for appointment suggested by the plaintiff is a Mr Lee. He has been selected by the plaintiff on the basis that he is the only "A" list liquidator whom Mr Harrowell asserts that he believes he is not acquainted with, nor has his firm ever employed. He is unable, however, in view of the extensive nature of the firm's insolvency practice to give categorical assurance that he has never had any dealing with Mr Lee. Nobody knows of Mr Lee's experience or particular expertise in any particular field. It is not known and is not put forward that he has any experience in the affairs of solicitors' firms. It is said by Mr Cowan for the plaintiff that this is of no matter, because, from an accounting point of view, the affairs of solicitors' firms, particularly of a small firm such as that under investigation, are so uncomplicated that any competent accountant, as an "A" list liquidator must be, can easily deal with the accounting matters involved. In my view the matter is not as simple as that. It is plain from the discussion that has taken place in Court that this is a matter in which what may be required is the dissection of moneys coming in as between the entitlement to them of the old partnership and of the new practices. In my view, considerable experience in dealing with solicitors' practices and the way in which they are conducted may be of great assistance in dealing with questions such as these, so that the receiver's work may be more speedily, easily and cheaply carried out. 5 I fully accept the importance of the principle of independence and the appearance of independence as discussed in the references set out above. However, I am unable to see that there is any real loss of the appearance of independence simply through the acquaintance, almost inevitable in a sense, between a partner of a large accounting firm sought to be appointed to a specialised receivership such as the present and a partner of a city firm of solicitors which has a large insolvency and receivership practice. I cannot see that there is a valid objection to the appointment of Mr Lombe on that ground. The only other candidate is Mr Lee, and I think that the appointment of Mr Lombe is distinctly preferable upon the ground of his established experience in the particular subject matter of this receivership. 6 In those circumstances I appoint Mr Lombe to the receivership of the firm the subject of the proceedings. I stand the matter over to 10 am tomorrow before me. …oOo…