New South Wales Supreme Court CITATION : McMahon's Management Consultants Pty Limited v The Trustee of the Property of Bryan Francis McMahon [2007] NSWSC 1502 HEARING DATE(S) : 13 December 2007 JUDGMENT DATE : 13 December 2007 JURISDICTION : Equity Division JUDGMENT OF : Windeyer J at 1 DECISION : Order that limited partnership be wound up under the Corporations Act 2001. Order that appointment of receivers of law practice be terminated and granted leave to act as liquidator. CATCHWORDS : CORPORATIONS – winding up in insolvency of limited partnership as Part 5.7 body - benefits of winding up – unsecured creditors – priority of employee claims - PARTNERSHIP – whether limited partnership should be wound up under Corporations Act or dissolved under Partnership Act LEGISLATION CITED : Corporations Act 2001 (Cth) Partnership Act 1892 McMahon's Management Consultants Pty Limited (Plaintiff) PARTIES : The Trustee of the property of Bryan Francis McMahon a bankrupt (First Defendant) Jackper Pty Limited (Second Defendant) Tradeway Accommodation Pty Limited as Trustee for Tradeway Enterprises Trust No 2 (Third Defendant) FILE NUMBER(S) : SC 4866 of 2007 J T Johnson (Plaintiff) COUNSEL : S Nadel (First Defendant) No Appearance (Second and Third Defendants) Kemp Strang (Plaintiff) Malcolm Johns & Company (First Defendant) SOLICITORS : No Appearance (Second and Third Defendants) C Shrewsbury (Amicus Curiae - Law Society of New South Wales) A Smith (Australian Taxation Office) - 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION WINDEYER J THURSDAY 13 DECEMBER 2007 4866/07 - McMAHON'S MANAGEMENT CONSULTANTS PTY LIMITED v THE TRUSTEE OF THE PROPERTY OF BRYAN FRANCIS McMAHON A BANKRUPT AND TWO ORS JUDGMENT 1 HIS HONOUR: In this matter I am satisfied that the requirements to allow this limited partnership to be wound up as a Part 5.7 body under the Corporations Act 2001 are satisfied. The only question which has arisen is whether or not it is appropriate to order a winding up under the Corporations Act or whether there should be a dissolution of partnership under the Partnership Act 1892. 2 So far as a winding up under the Corporations Act is concerned, first, it is a more simple procedure and a cleaner procedure. Secondly, such an order would be to the advantage of employees who have claims for unsatisfied wages and the like. That order would, however, be of some disadvantage to unsecured creditors who are not partners in the partnership because the claim of all unsecured creditors will rank equally in the winding up and that would not be the position as to partners under the Partnership Act. 3 Nevertheless, the body or the creditor subject to the greatest disadvantage in a winding up under the Corporations Act is the Commissioner for Taxation who has indicated a preference for the partnership to be wound up under the Corporations Act. 4 The next major creditor has been paid out although the payer might be subrogated to claims of that creditor. The third substantive creditor has not indicated a position. Everybody was aware that the matter would be dealt with as an urgent matter this morning and, in my view, it is appropriate to go ahead on that basis. The persons who have consented to be appointed as liquidators are already receivers of the assets of the partnership and thus, unless leave is granted, they cannot be appointed as liquidators as s 532(2)(c)(i) would prevent this. It is appropriate in the circumstances, as it would be quite inconvenient to have another person involved, to give leave to those persons to act as liquidator and give their consent. Accordingly I grant leave. This seems to me to be an inappropriate expression, but as that is what the Act says, I will do that. As the receivers will become liquidators I terminate the receivership and then they can account to themselves. It is appropriate to terminate the receivership so that the matter proceeds as a liquidation. The receivers will, therefore, account to themselves as liquidator for the moneys which have come to their hands as receivers. 5 I order that the appointment of David John Frank Lombe and Neil Robert Cussen as receivers of the law practice be terminated. I order that the partnership, McMahons National Lawyers LP, be wound up in insolvency as a Part 5.7 body as that term is defined in the Corporations Act. 6 I order that David John Frank Lombe and Neil Robert Cussen be appointed liquidators of the subject partnership. 7 I order that the costs of these proceedings be paid out of the assets of the partners. 8 I order that the exhibits be returned to be retained by the liquidators. 9 These orders will be taken out forthwith. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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