Belgravia Nominees Pty Ltd v Lowe Pty Ltd
[2014] WASC 225
•27 JUNE 2014
BELGRAVIA NOMINEES PTY LTD -v- LOWE PTY LTD [2014] WASC 225
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2014] WASC 225 | |
| Case No: | CIV:2583/2013 | 23 MAY 2014 | |
| Coram: | REGISTRAR C BOYLE | 27/06/14 | |
| 6 | Judgment Part: | 1 of 1 | |
| Result: | The application is refused | ||
| B | |||
| PDF Version |
| Parties: | BELGRAVIA NOMINEES PTY LTD JOONDEL DEVELOPMENTS PTY LTD LOWE PTY LTD COLIN REGINALD HEATH |
Catchwords: | Procedure Joinder of parties Dissolved partnership Authority of one partner to bind partnership Partnership Act s 49(1) |
Legislation: | Partnership Act 1893 (WA) Real Estate and Business Agents Act 1978 (WA) |
Case References: | Butchart v Dresser (1853) 4 DeGM & G 542; 43 ER 619 Cheesborough v Thompson (1866) 5 SCR (NSW) 366 Duncan v The MFV Marigold PD145 [2006] CSOH 128 John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19 Tobin v Dodd [2004] WASC 288 Wedge v Wedge (1995) 12 WAR 489 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- JOONDEL DEVELOPMENTS PTY LTD
Plaintiffs
AND
LOWE PTY LTD
First Defendant
COLIN REGINALD HEATH
Second Defendant
Catchwords:
Procedure - Joinder of parties - Dissolved partnership - Authority of one partner to bind partnership - Partnership Act s 49(1)
Legislation:
Partnership Act 1893 (WA)
Real Estate and Business Agents Act 1978 (WA)
Result:
The application is refused
Category: B
Representation:
Counsel:
Plaintiffs : Mr M F Holler
First Defendant : Mr C S Williams
Second Defendant : Mr C S Williams
Proposed Joined Defendant : Mr C S Gough
Solicitors:
Plaintiffs : Robertson Hayles Lawyers Pty Ltd
First Defendant : Solomon Brothers
Second Defendant : Solomon Brothers
Proposed Joined Defendant : Minter Ellison
Case(s) referred to in judgment(s):
Butchart v Dresser (1853) 4 DeGM & G 542; 43 ER 619
Cheesborough v Thompson (1866) 5 SCR (NSW) 366
Duncan v The MFV Marigold PD145 [2006] CSOH 128
John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19
Tobin v Dodd [2004] WASC 288
Wedge v Wedge (1995) 12 WAR 489
1 REGISTRAR C BOYLE: The first plaintiff (Belgravia) applies under O 18 r 6(2)(b) of the Rules of the Supreme Court 1971 (WA) for leave to amend the writ by joining Penhurst Nominees Pty Ltd (Penhurst) as a third defendant.
2 The question raised by this application is whether one member of a dissolved partnership of two members can, without the concurrence of the other, maintain this action.
3 The question arises because the first plaintiff applies to join its former partner to the action. The present defendants and proposed third defendant both oppose the application. Counsel for the proposed third defendant appeared by leave at the hearing of the application and made submissions.
4 The following facts are either common ground, or it is accepted that for the purposes of this application they are to be taken as correct:
1. Belgravia and Penhurst carried on a partnership engaging in land trading.
2. The partnership entered into an agreement with the first defendant (Lowe) under which the first defendant by its agent and principal actor the second defendant (Mr Heath) was to provide certain services to the partnership in respect of its land.
3. Pursuant to that agreement between April 2006 and January 2012 the partnership made payments to Lowe totalling a little over $4.3 million.
4. The partnership was dissolved in June 2012.
5 Belgravia sues by a writ issued on 18 October 2013, claiming that Lowe was prohibited by certain provisions of the Real Estate and Business Agents Act 1978 (WA) from receiving those payments. The exact basis of that claim does not matter for present purposes. The claim is that by virtue of certain other provisions of the legislation, Mr Heath is personally liable jointly and severally with Lowe to refund the $4.3 million paid, together with interest. Again, for present purposes, the exact nature of the personal claim against Mr Heath is not material.
6 The claim is for monies claimed to be due to the dissolved partnership. It seeks to enforce a right belonging to the partnership, not to the first plaintiff alone.
7 The second plaintiff (Joondel) was a party to the agreement between the partnership and Lowe. For the purposes of this act of the drama, Joondel may be treated as background furniture only.
8 Belgravia accepts that, had the partnership been continuing, it could not have maintained this action without Penhurst being a party. That is because one of the two partners could not unilaterally maintain such an action affecting the interests of the other. It would be outside the authority of a partner under s 26 of the Partnership Act 1895 (WA), as discussed below. It would also offend the principles referred to in such cases as John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; and see Civil Procedure Western Australia [15.6.5] and the other cases there cited. Belgravia submits therefore that the joinder of Penhurst is necessary. Since Penhurst will not join in the action as a plaintiff, it must be joined as a defendant.
9 The defendants and Penhurst submit that, with or without Penhurst, it is not competent for Belgravia to commence or pursue this action. Therefore no amendment should be allowed, because amendment would not remedy the fatal defect. A fruitless amendment will not be allowed: Tobin v Dodd [2004] WASC 288 [7], and see Civil Procedure Western Australia, [21.5.4].
10 The resolution of this question depends upon two provisions of the Partnership Act 1895, dealing with the authority of partners respectively while the partnership continues, and after dissolution.
11 The first is s 26, dealing with the powers of a partner in a subsisting partnership:
26. Special powers of partners
Subject to the provisions of this Act, the acts of every partner who does an act necessary for or usually done in carrying on business of the kind carried on by the firm of which he is a member shall bind his partners to the same extent as if he were their agent duly appointed for that purpose; unless the partner so acting has in fact no authority to act for the firm in the particular matter, and the person with whom he is dealing -
(a) knows that he has no authority; or
(b) does not know or believe him to be a partner.
12 The authority of partners after the dissolution of a partnership is set out in s 49(1):
(1) After the dissolution of a partnership, the authority of each partner to bind the firm, and the other rights and obligations of the partners, continue notwithstanding the dissolution, so far as may be necessary to wind up the affairs of the partnership, and to complete transactions begun but unfinished at the time of the dissolution, but not otherwise.
13 The language of the two provisions is distinctly different. In the case of an existing partnership, the partnership is bound by an act 'necessary for or usually done in carrying on business of the kind carried on by the firm'. After dissolution, a partner has authority to bind the firm only by acts of two kinds: the first is those necessary to wind up the affairs of the partnership; and the second is to complete transactions begun but unfinished at the dissolution.
14 If the specific enumeration of powers were not sufficient, it is clear from the concluding words 'but not otherwise' that the intent of s 49(1) is to limit the continuing authority of partners to acts of those two kinds only.
15 The defendant submits, and the plaintiffs accept, that the institution and conduct of this action by the plaintiffs could not be classified as acts to complete transactions begun but unfinished. I think that submission and concession were both properly made. The plaintiffs refer to the discussion on the subject of continuing authority in Fletcher K, The Law of Partnership in Australia (9th ed, 2007) [7.70].
16 The topic of what constitutes the completion of a transaction is fraught with logical and evidentiary difficulties, and there is a more extensive discussion of the authorities in Banks & Ors, Lindley and Banks on Partnership (19th ed, 2010) [13-61] to [13-71].
17 I turned to that text not only for assurance that it was clear that the initiation and prosecution of this action could not be acts necessary to complete a transaction (which assurance it did provide) but also in hope of some assistance on the scope of the second limb of the continuing authority of a partner in a dissolved partnership. Regrettably, I could find no assistance either in the text or in any of the submissions of the parties as to the proper construction of the words in s 49(1) 'so far as may be necessary to wind up the affairs of the partnership'. Neither party was able to refer me to any decided case that assists.
18 The parties did refer me to Butchart v Dresser (1853) 4 DeGM & G 542; 43 ER 619, Cheesborough v Thompson (1866) 5 SCR (NSW) 366 and Wedge v Wedge (1995) 12 WAR 489, but these are all cases dealing with the question of completing transactions and not the other limb of s 49(1). Even the scholarly examination of the history of the Partnership Acts by Lord Reed in Duncan v The MFV Marigold PD145 [2006] CSOH 128 shed no light on this corner of the legislation.
19 It is a question that I think needs to be determined by considering the words of the statute.
20 The plaintiffs submit that the commencement of this action was within authority if it is arguable that the getting in of assets is necessary for the winding up of the affairs of the partnership. It would not be appropriate, in the plaintiffs' submission, to determine that question summarily.
21 I think otherwise. The statement of claim discloses the nature of this action. Not only is this not an action to complete a transaction, it is in fact an action to undo a completed transaction and recover monies paid under that transaction by a form of statutory restitution.
22 That is an action of a kind that might be undertaken by a receiver of the partnership, or by the partners in agreement in the course of a winding up. However, it cannot even arguably be described as an action of a type 'necessary' in a winding up. That is, the partnership might be wound up without this action.
23 Obviously, if this action was successfully prosecuted and the monies paid recovered, the outcome of the partnership winding up would be different: the partnership would be better off by $4 million or so. But that is not to say the action is 'necessary' for the winding up. There may be room for argument about where the boundary of necessity may be. (It may be a fractal basin boundary: legal distinctions often are). But it seems to me that the language of s 49(1) imports the strictest kind of necessity, of the 'but for' or 'without which not' type. Wherever the limit of that necessity lies, this action is clearly outside it.
24 It therefore appears to me that the first plaintiff did not have authority under s 49(1) of the Partnership Act to commence this action. It is not even an arguable proposition. That want of authority cannot be cured by joining a former partner as a defendant.
25 The application must accordingly be refused.
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