King v Peters [2007] NSWSC 200

New South Wales Supreme Court

CITATION : King v Peters [2007] NSWSC 200

HEARING DATE(S) : 5 & 6 March 2007

JUDGMENT DATE : 9 March 2007

JUDGMENT OF : Hammerschlag J

DECISION : That the Notice of Motion dated 12 December 2006 be dismissed. No order as to costs.

CATCHWORDS : CORPORATIONS – Winding up – Application for leave to proceed against a company in liquidation sought under s.500(2) Corporations Act 2001 (Cth) – Requirements for leave – Whether applicant as partner in a dissolved partnership with receivers appointed has standing to bring a claim in relation to partnership property

LEGISLATION CITED : Corporations Act 2001 Uniform Civil Procedure Rules 2005 (NSW)

Murray v King (1984) 4 FCR 1 CASES CITED : Ogilvie-Grant v East (1983) 7 ACLR 669 Vagrand Pty Ltd (in liq) v Fielding (1993) 10 ACSR 373

PARTIES : Larry Edward King & Anor v Mark Arthur Peters & Anor

FILE NUMBER(S) : SC 005348/2005

COUNSEL : S Chrysanthou (Plaintiffs/Cross Defendants) G Mahony (2nd Defendant/Cross Claimant)

SOLICITORS : Speed and Stacey Lawyers (Plaintiffs/Cross-Defendants) Purcell Lawyers (2nd Defendant/Cross-Claimant)

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IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

HAMMERSCHLAG J

9 March 2007

5348/2005 LARRY EDWARD KING & ANOR v MARK ARTHUR PETERS & ANOR JUDGMENT 1 By notice of motion dated 12 December 2006, Mrs Tina Peters seeks leave pursuant to s 500(2) of the Corporations Act 2001 to proceed with an Amended Statement of Cross-Claim against Mendarma Pty Ltd (in liquidation) ("Mendarma"), the fifth cross-defendant to that pleading. That pleading was filed in the proceedings on 15 September 2006. 2 The proceedings arise out of a partnership to which Mrs Peters and her husband Mark Arthur Peters had with Mr Larry Edward King and Mrs Pamela Elizabeth King, the plaintiffs in the proceedings. The proceedings were commenced by Summons claiming various orders in relation to the now dissolved partnership which was known as "The Written Bloodstock" and which operated a horseracing syndicate. Apart from a declaration as to dissolution of the partnership and the appointment of receivers and managers to the partnership property, the Summons seeks the taking of partnership accounts. Originally, and on 9 November 2005, a Statement of Cross-Claim had been filed on behalf of both Mr and Mrs Peters. However, Mr Peters became bankrupt and by operation of provisions of the Bankruptcy Act 1966 (Cth) his trustee was deemed to have abandoned his proceedings. 3 The Amended Statement of Cross-Claim was filed so as to reconstitute the cross-claim without Mr Peters as a cross-claimant. However, at the time of its filing Mendarma was in liquidation and no leave was then sought to proceed. On 2 November 2005 this Court appointed Mr A M Sims to be the receiver and manager of the partnership giving to him, mutatis mutandis in relation to the partnership, the powers provided for in s 420 of the Corporations Act. The Court ordered the then parties namely, Mr and Mrs King and Mr and Mrs Peters, to deliver all assets of the partnership in their custody, possession, control or power to the receiver and manager within seven days of the making of the order. 4 Mendarma itself had administrators appointed to it on 3 November 2005 and liquidators were appointed on 30 November 2005. The consent of the administrators under s 440D of the Corporations Act was obtained on 8 November 2005. 5 Mr Peters was the sole director of Mendarma. Mrs Peters was never an officer or member of or shareholder in Mendarma. 6 The background to the cross-claim is, in brief terms, set out below. 7 Denham Properties Pty Limited ("Denham") is a company associated with the Kings. 8 The defendants to the Amended Statement of Cross-Claim are the Kings (as first and second cross-defendants), Denham (as third cross-defendant), Mr Donnelly and Ms Duggan (as fourth cross-defendants) and Mendarma (as fifth cross-defendant). 9 Mendarma had entered into certain transactions with Denham including: a an instrument described as a Mortgage over Horses ("the Mortgage") dated 15 June 2005; b an instrument dated 12 May 2004 described as a Deed of Option over Horses ("the Option"); and c a loan agreement dated 12 May 2004 with Denham as lender and Mendarma as borrower ("the Loan Agreement"). 10 It was not made clear to me precisely what the relationship was between the business of the partnership and the various transactions between Denham and Mendarma. However, the transactions appear to presuppose that the particular horses concerned were the property of Mendarma. 11 On about 26 October 2005 Mr Donnelly and Ms Duggan were appointed by Denham as receivers and managers of the horses asserted to be the subject of the Mortgage. 12 The cross-claims in respect of which leave is sought to proceed against Mendarma, fall into two broad categories: a the first category is relief including declaratory relief that the partnership is the sole beneficial owner of the horses so that they were never subject to the Mortgage (prayers 1, 5, 7(a) and 8 which could also be in category 2); and b the second category consists of orders going to the validity or effectiveness of the Mortgage and the Option insofar as they purport to operate on the horses (including relief based on an asserted proper construction of those instruments), and with respect to the Loan Agreement, relevantly here, insofar as it purports to give rise to a debt payable by Mendarma. This second category also includes an estoppel claim asserted to affect the operation of the transactions (prayers 2, 3, 4, 6 and 7(b)). 13 There is also a claim for an injunction restraining the fourth cross-defendants (i.e. the Denham appointed receivers and managers of the horses) from dealing with the horses and a claim for damages against the fourth cross-defendants for trespass, including aggravated and exemplary damages which relief would flow, it seems, from success in either category. 14 The liquidator of Mendarma has not appeared to oppose or to consent to the relief sought. The evidence reveals that these proceedings have been before the Court on at least eleven occasions between March 2006 and December 2006 and that Mendarma has never appeared. The evidence also reveals that one of the liquidators of Mendarma informed a meeting of creditors on 30 March 2005 that legal advice had been sought with respect to Denham's charge over Mendarma (presumably the Mortgage) and that the liquidators were preparing to commence proceedings. No proceedings have been commenced. 15 I will deal in turn with each of the two categories of claims sought to be brought against Mendarma. 16 Ms S Chrysanthou of counsel appeared for Mr and Mrs King, Denham and the Receivers and Managers appointed by Denham under the Mortgage. She initially put that leave should be refused because Mrs Peters had no standing to bring those claims in that they related to partnership property and only the receiver and manager appointed by the Court could bring them given the powers the Court conferred upon him. However she accepted that the appointment of a receiver to partnership property gives him no more than possession of the assets in respect of which he is appointed and that his appointment does not in any way affect any right to the property in question. The law is that the Court itself has possession by the receiver and his possession is by all parties to the action according to their titles: Murray v King (1984) 4 FCR 1 at 7 citing with approval Kerr on Receivers 15th Ed at 130. In appointing a receiver the Court deals with the possession only, until the right is determined, if the right be in dispute: Kerr and Hunter on Receivers and Administrators 18th Ed at 138 par 6-4. An attempt by a partner to interfere with the exercise of the receiver's duties or to deal with property vested in him constitutes contempt of court.