Curran v Curran [2004] NSWSC 563

New South Wales Supreme Court

CITATION : Curran v Curran [2004] NSWSC 563 revised - 28/06/2004 HEARING DATE(S) : 22/06/04 JUDGMENT DATE : 22 June 2004 JURISDICTION: Equity Division JUDGMENT OF : Young CJ in Eq DECISION : Notice of motion for interim relief dismissed.

CATCHWORDS : PARTNERSHIP [17]- Receivership- Dispute as to whether partnership existed, but if it did, it was clearly terminated- One partner seeks to sell asset- Whether receiver should be appointed. Davey v Donnelly (McLelland J, 16 May 1991) Fitz-Gibbon v Khoury (Powell J, 1 March 1985) CASES CITED : Pini v Roncoroni [1892] 1Ch 633 Sobell v Boston [1975] 1 WLR 1587 Tate v Barry (1928) 28 SR (NSW) 380 Francis Denis Michael Curran (P) PARTIES : John Michael Curran (D1) CFH Pty Ltd (D2) FILE NUMBER(S) : SC 3195/04 COUNSEL : P Biscoe QC (P) P Larkin and D B Beukes (D1) SOLICITORS : Grahame W Howe & Co (P) Stacks Port (D1)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

YOUNG CJ in EQ

Tuesday 22 June 2004

3195/04 – CURRAN v CURRAN JUDGMENT 1 HIS HONOUR: The parties to the present proceedings are brothers and are barristers. The plaintiff alleges and the defendant denies that there was a partnership at will over the ownership of the Royal Hotel at Wardell, New South Wales. Title to the property is registered in the sole name of the defendant and he basically maintains that it is his, although it seems on any account that the plaintiff did make some contributions to the moneys which brought about its purchase. 2 If there was a partnership at will, it is clear that it came to an end no later than 17 April 2004. 3 The sole asset of the partnership it appears, if there be a partnership, is the hotel. 4 The hotel business appears to be vested in the second defendant, a company which has not appeared because it is basically a trustee company for various trusts controlled by either the plaintiff or the defendant and the plaintiff and the defendant are its directors and at the moment anyhow they cannot agree on anything. 5 The plaintiff commenced these proceedings on 1 June 2004 and obtained leave to serve short from the then Duty Judge and the matter was returnable before the Duty Judge on 8 June and adjourned to 17 June and then until today. 6 The interlocutory relief which the plaintiff seeks is formally set out in the notice of motion which was filed in court this morning. The first prayer is that the defendant be restrained from selling or disposing of the Royal Hotel without the written authority of the plaintiff. Secondly, that a receiver and manager be appointed to the freehold of the business of the Royal Hotel. There is an order that the matter is specially fixed for hearing or, alternatively, expedited, but that has not been explored and it will be a matter for the Expedition Judge after pleadings have been formulated. 7 The interlocutory proceedings have been thoroughly ventilated this morning, although in the usual fashion without cross-examination. Mr Peter Biscoe QC appeared for the plaintiff and Mr Larkin and Mr Beukes appeared for the first defendant. The defendant agrees that he has the property up for auction on 29 June and wishes to continue to pursue that auction. However, the defendant concedes that the plaintiff has given sufficient material to constitute a sufficiently arguable or prima facie case for the purpose of the rules as to when an interlocutory injunction or appointment of a receiver will be granted or made. 8 Accordingly, the principal issue for me to determine is whether, on the balance of convenience, the injunction should be granted or the receiver appointed. 9 The principles to be applied in such a case as this are set out in the standard texts as well as in the decisions of this Court. Lindley on Partnership (and I quote from the 13th edition 1971 but the text has been the same for the last 100 years) says that if the partnership has already been dissolved or an order for dissolution will be made on the evidence, the Court usually appoints a receiver almost as a matter of course, see page 553. 10 It was pointed out by Stirling J in Pini v Roncoroni [1892] 1 Ch 633 at 637 that Lindley was not saying that the plaintiff was entitled as of right to the appointment of a receiver where dissolution will inevitably occur but merely that that is what the Court usually did. 11 In this State the leading case is Tate v Barry (1928) 28 SR (NSW) 380 at 383 where Long Innes J said that it was: "... regarded as settled that in a suit instituted in Equity for the winding up of a partnership already dissolved, or for the dissolution of an admitted partnership in which it is clear that dissolution will be granted at the hearing, the plaintiff is entitled as a general rule, and practically as a matter of course, to the appointment of an interim receiver." 12 That was followed up by Powell J in what has long been considered the leading case in the area, Fitz-Gibbon v Khoury (1 March 1985, unreported) where his Honour, after quoting the passage from Tate v Barry said: "This general rule notwithstanding, it is equally well established that it is not inevitable that, in any such case, an interim receiver and manager will be appointed, and that the Court retains a residual discretion as to whether any appointment should be made; one of the bases upon which, in an appropriate case, an appointment will be refused, is that the consequences of such an appointment will be 'ruinous'." 13 That again was confirmed by McLelland J, as his Honour then was, in Davey & Anor v Donnelly & Anor (16 May 1991, unreported) where his Honour said: "The rationale of this rule is that no partner has any greater right than the others to wind up the partnership affairs to the exclusion of those others. Nevertheless, the Court has an over-riding discretion in the matter, and for substantial cause shown will refuse, or limit the terms of, the appointment of a receiver." 14 It is of little value to go through the cases as to what are the circumstances in which the Court will refuse to appoint a receiver despite Lindley's general rule. I will give one example. In England in Sobell v Boston [1975] 1 WLR 1587, Goff J held that he would not normally appoint a receiver to a solicitors' partnership where the business was continuing because the fact that a solicitors' partnership was in receivership would send the wrong messages to the clients. 15 The high point of the plaintiff's case is that emphasised by McLelland J in Davey's case. That is that each party has the right to wind the partnership up but the partnership should be wound up impartially and that the defendant has usurped the role of the impartial receiver or person charged with the winding up and has abrogated to himself how it will be wound up and thus denies the plaintiff's rights. 16 The defendant, whilst not answering that point directly, says that the balance of convenience favours no order for the appointment of the defendant as receiver. This latter suggestion is opposed by the plaintiff on the ground of the friction between the parties. 17 The defendant's principal arguments on the balance of convenience can be summarised as follows: first, delay in bringing the proceedings. The partnership, if there be a partnership, was dissolved on 17 April. The present suit was not commenced until 1 June. Mr Biscoe QC seeks to make this point by saying that there was no direct threat to sell the property by auction until mid-May. Mr Larkin says that the plaintiff's evidence itself, fairly read, shows that he had a fair indication that that was going to happen in mid-April. I cannot resolve that point, but it does not really matter very much because it is quite plain that between the time that the plaintiff did know that there was going to be a public auction and the filing of the summons there had been four advertisements placed in the Sydney Morning Herald telling everybody about it. 18 At the eleventh hour the plaintiff gave an undertaking to pay any costs of the aborted auction that would be thrown away by the imposition of an injunction. That is a relevant matter. However, it is also relevant to note Mr Larkin's submission that in view of the fact that there have been approximately nineteen responses to the advertisement, that prejudice will be suffered if the auction does not go ahead. 19 The second matter is that the plaintiff has filed a caveat on the land. As I said, the land is solely in the name of the defendant. However, a partner has no caveatable interest in land which is partnership land and so the filing of the caveat is inconsistent with the plaintiff's claim of partnership and he who does not do equity does not get equity. 20 Thirdly, the undertakings have been proffered by the defendant in the form of the document which is DX03. These, Mr Larkin says, go a long way to allowing the sale to proceed yet give the plaintiff a fair amount of protection. 21 Fourthly, he says that there would be great expense caused to the partnership if a receiver and manager were appointed. I have mentioned a figure of $350 an hour. I do not know whether that is the current rate but certainly the appointment of a professional accountant, who first has to familiarise himself or herself with the background then take legal advice and then make decisions and consult the parties, normally would amount to many thousands of dollars. 22 The argument is that even if there is a usurping of rights by the defendant in the light of the undertaking, such an expense is not warranted. 23 Fifthly, it is put that to grant an injunction or to postpone the auction would be to undo the benefit of the advertisements which have already been placed and the nineteen enquiries that have followed and if the auction is postponed some of this interest will be lost and may never be regained. Partly this point is alleviated by the undertaking to pay the costs of the aborted auction but not completely, both for the reasons I have set out earlier and also because of the difficulty in determining what are the losses that will have been suffered. 24 There would have been a sixth point and that is that after Sobell's case the Court does not appoint receivers in a partnership run by barristers but no one relied on that. 25 The plaintiff, on the other hand, says that all these matters are outweighed by the following points: first, the right to have the partnership wound up impartially, the point made in Davey's case. 26 Second, the matter referred to by Higgins and Fletcher in the Law of Partnership, 8th Edition p 317, that a receiver will be appointed almost as a matter of course if the parties are in serious dispute and the partnership has been dissolved or inevitably will be dissolved. 27 Third, and this is really another way of putting the second point, the Tate principle and, fourth, that the plaintiff is entitled to have some control as to when the property will be sold and those are the three major reasons. The sale on 29 June is extremely disadvantageous to the plaintiff and the defendant knew of this. The three major reasons are: first, that the plaintiff is interested in bidding for the hotel at the auction and until this suit is determined he does not know what his present interest is, whether it be sixteen per cent as claimed in some quarters or fifty per cent, or otherwise. 28 Second, that the plaintiff fully expects his income in the current fiscal year to be very much greater than in the next fiscal year. He will thus be paying the top tax rate this year on any profit made on the sale whereas next year he may be paying a lesser rate. 29 Third, although this was not pressed in argument and the evidence on it is a little inconsistent, that the defendant knew that the plaintiff would be in Ireland on 29 June and that he and his wife were committed to be overseas until about 18 July so that they would not be able to participate fully in the auction. 30 The fifth point was that the conduct of the defendant showed that it was unsafe to leave the auction in his hands, particularly because of the timing, the fixing of the reserve price at about a half a million dollars under the price for which the property was purchased only two years ago, and the flavour of the correspondence between the parties. 31 It is a fine matter of balance but, in my view, the defendant's submissions have greater strength than those of the plaintiff. After all, the defendant has as much interest as the plaintiff in getting the best price. 32 The question as to whether there has been adequate advertising is not one that I can determine. There is a little evidence both ways. 33 It must be remembered that even in mortgagee cases it is not of itself a ground for setting aside or injuncting a sale that the advertising was not adequate or proper but that is merely part of the bigger question as to whether a fiduciary duty has been breached on behalf of the mortgagee or the receiver. Likewise, in mortgagee cases, there is no right in a party to dictate the time of the sale. The authorities for this proposition are in the twentieth chapter of the Australian edition of Fisher and Lightwood on Mortgages. 34 The situation in the instant case is even weaker because, whilst there were fiduciary duties owed between the brothers as partners prior to 17 April and there may be some residuary fiduciary duties owed between them afterwards in the winding up, the obligation of a partner who abrogates to himself the conduct of a sale to get the best price is by no means as clear as it is in the mortgagee cases. 35 It was because of this that I suggested that it might be wise to appoint the defendant as receiver because that would clearly bring in the obligation under s 420A of the Corporations Act 2001 to get the best price. That was resisted by the plaintiff and as it was only suggested to help the plaintiff I will do nothing more on it. 36 Accordingly, in my view, although there is a fairly fine balance, I decline to give the interim relief sought. 37 I dismiss the notice of motion dated 22 June 2004. The plaintiff is to pay the first defendant's costs of the motion. I decline to adjust the order for costs that Barrett J made on 17 June 2004. 38 The plaintiff's statement of claim duly verified is to be filed by 4 pm on 13 July 2004. The defence and any cross-claim to be filed by 27 July 2004. Any defence to a cross-claim to be filed by 10 August 2004. 39 I stand the matter over to the Registrar's List on 16 August at 9.30 am with liberty to any party to restore the matter to the Registrar's list on three days' notice. The exhibits are to remain with the file.