MLW Investments v Tacsum [2006] NSWSC 1256

New South Wales Supreme Court

CITATION : MLW Investments v Tacsum [2006] NSWSC 1256

HEARING DATE(S) : 20 November 2006

JUDGMENT DATE : 20 November 2006

JURISDICTION : Equity

JUDGMENT OF : Campbell J

EX TEMPORE JUDGMENT DATE : 11/20/2006

DECISION : Receiver not removed. Applicant to pay costs of its partner on party/party basis, and of receiver on indemnity basis.

CATCHWORDS : PARTNERSHIP – dissolution and winding up – removal of receiver – when justified – accounts on basis of wilful default – when ordered – costs of unsuccessful notice of motion to remove receiver – RECEIVERS – removal – when justified – PROCEDURE – costs – costs of unsuccessful motion to remove receiver of partnership

LEGISLATION CITED : Uniform Civil Procedure Rules 2005

CASES CITED : Domino Hire v Pioneer Park [2003] NSWSC 496

MLW Investments Pty Limited - Plaintiff/Respondent PARTIES : Tacsum Pty Limited - Defendant/Applicant Nicholas Plataniotis - Receiver/Respondent

FILE NUMBER(S) : SC 4536/06

R W Tregenza - Plaintiff/Respondent COUNSEL : D A Allen - Defendant/Applicant J E Rowe - Receiver/Respondent

Malouf Solicitors - Plaintiff/Respondent SOLICITORS : Shanahans Solicitors - Defendant/Respondent Coleman & Greig - Receiver/Respondent

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EQUITY LIST

CAMPBELL J

MONDAY 20 NOVEMBER 2006

4536/06 MLW INVESTMENTS PTY LIMITED v TACSUM PTY LIMITED JUDGMENT – Ex Tempore 1 HIS HONOUR: This is the hearing of a Notice of Motion relating to the affairs of a partnership. The partnership was effectively a two man partnership involving a business of motor vehicle body modifications, that the two men involved conducted through their respective companies. It is those companies that are the plaintiff and the defendant. The plaintiff and the defendant had, by August 2006, reached a situation where it was fairly clear that the partnership could not continue. On 11 August 2006 the defendant sent to the accountant for the plaintiff, Mr Plataniotis, an email that explained that on Wednesday, the 30th, the defendant would be terminating all staff and paying out all entitlements. The defendant's alter ego said that on the 31st of the month he would be leaving the firm with certain equipment and stock that he itemised. He said he wished to dissolve the partnership. He said to Mr Plataniotis, "I request that since you created the partnership that you also dissolve the partnership." 2 On 30 August 2006 these present proceedings were begun by the filing of a Summons in Court. Leave to serve short notice was granted. 3 The matter came back before his Honour Palmer J on 1 September 2006. On that day various orders were made. One of them dealt with the fact that the defendant had begun a rival business. It appears that it was using a name quite similar to that of the partnership business and there was an order preventing it from carrying on business under two particular names "or a name which is only colourably different". An order was made up to and including 5pm on 25 September 2006 that Mr Plataniotis be appointed receiver of the partnership. Other orders were made, as follows: "3. Up to and including 5pm on 25 September 2006 the receiver have power to carry on the said partnership business and be given the powers of in relation to the said business as are given to a receiver pursuant to the provisions of section 420 of the Corporations Act 2001 to the extent to which the provisions of that section are capable of being applied to a receiver of a partnership and as if each reference in that section to "corporation" was and is a reference to "said partnership". 4. Up to and including 5pm on 25 September 2006 the receiver have power to employ such person or persons to manage and assist in the conduct of the said partnership business and at such salary as the receiver considers appropriate. 5. Up to and including 5pm on 25 September 2006 the receiver have power to realise the said partnership business and assets including the goodwill thereof subject to the approval of the parties and that either party be at liberty to bid at any auction sale of such assets." 4 As well, there was a direction: "10. The Receiver to provide to the parties and to the Court by 4pm on 20 September 2006 a report as to the affairs of the partnership, particularly with reference to whether the partnership can be sold as a going concern." 5 The evident thinking behind these orders was that the receiver would produce the Report as to Affairs in sufficient time to enable the parties to decide prior to 25 September 2006 what course they wished the partnership business to take. The proceedings were stood over before the Duty Judge on 25 September 2006. 6 On 20 September 2006 the receiver provided a report, of the kind contemplated by the orders of 1 September. The highlights of that report were that the business was trading at marginal profitability, and that the business was unlikely to be attractive to any potential purchaser as a going concern, other than the partners themselves. Reasons were given for those conclusions, which included the fact that the departure of some significant staff, and the fact that the defendant was conducting a rival business, would both be likely to be seen as unattractive by any third party purchaser. 7 On 21 September, the receiver made what he described as an addendum to his report of 20 September 2006. That report contained some allegations that money had been received by the defendant that was properly due to the partnership. The money totalled $25,500 and related to two particular transactions. The receiver's report described the conduct involved as "fraudulent and deceptive activity". 8 By the time of this addendum, the defendant was conducting its new rival business under a name that was nothing like the name of the partnership business. The receiver included in his addendum report the statement that that name "is a name that is colourably different to the business name of the partnership business." 9 On 25 September 2006 the matter came back before Gzell J. On that date orders were made that included orders 1 and 2 in the Summons - namely, a declaration that the partnership business was dissolved and an order that it be wound up under the direction of the Court. Mr Plataniotis was appointed as receiver (not merely as interim receiver), and an order was made that he had, until further order, the powers granted to him as interim receiver by Palmer J. As well, orders were made for the taking of accounts, in the form commonly granted in partnership suits. In accordance with that usual form, there was provision for the defendant to pay or transfer to the plaintiff such amount as might be found to be due upon the taking of accounts and inquiry. In accordance with the Court's usual practice, and Part 46 of the Uniform Civil Procedure Rules, any such inquiry would be held before an Associate Justice. 10 Other orders made by Gzell J on 25 September 2006 by consent were: "9. Direct the plaintiff or interest associated with the plaintiff to offer to purchase the partnership business as a going concern or such part of the partnership business or assets of the partnership business as it may wish to purchase by 29 September 2006. 10. Defendant also be at liberty to make any offer it wishes for the partnership business or any part or asset of it. 11. In the event that the parties do not agree concerning the acquisition by one of them or interests associated with them by 5 October 2006 then any disputes concerning such sale or term of such sale be referred to an Associate Justice of the Court for determination."