Belgravia Nominees Pty Ltd v Lowe Pty Ltd [No 2]
[2014] WASC 315
•11 SEPTEMBER 2014
BELGRAVIA NOMINEES PTY LTD -v- LOWE PTY LTD [No 2] [2014] WASC 315
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2014] WASC 315 | |
| Case No: | CIV:2583/2013 | 6 AUGUST 2014 | |
| Coram: | MASTER SANDERSON | 11/09/14 | |
| 8 | Judgment Part: | 1 of 1 | |
| Result: | Appeal dismissed | ||
| A | |||
| PDF Version |
| Parties: | BELGRAVIA NOMINEES PTY LTD JOONDEL DEVELOPMENTS PTY LTD LOWE PTY LTD COLIN REGINALD HEATH |
Catchwords: | Appeal from decision of registrar Refusal of leave to amend statement of claim and to add a defendant Former partner in dissolved partnership seeking to recover money paid during course of partnership Whether action could be maintained |
Legislation: | Nil |
Case References: | Butchart v Dresser (1853) 4 De GM & G 542; 43 ER 619 City of Kwinana v Lamont [2014] WASCA 112 Seal & Edgelow v Kingston [1908] 2 KB 579 Sew Hoy v Sew Hoy [2001] 1 NZLR 391 |
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:
Appeal from decision of registrar - Refusal of leave to amend statement of claim and to add a defendant - Former partner in dissolved partnership seeking to recover money paid during course of partnership - Whether action could be maintained
Legislation:
Nil
Result:
Appeal dismissed
Category: A
Representation:
Counsel:
Plaintiffs : Mr M F Holler
First Defendant : Mr D H Solomon
Second Defendant : Mr D H Solomon
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 De GM & G 542; 43 ER 619
City of Kwinana v Lamont [2014] WASCA 112
Seal & Edgelow v Kingston [1908] 2 KB 579
Sew Hoy v Sew Hoy [2001] 1 NZLR 391
1 MASTER SANDERSON: This is an appeal from a decision of Registrar C Boyle refusing the plaintiffs leave to join Penhurst Nominees Pty Ltd (Penhurst) as a third defendant to the proceedings and refusing leave to amend the writ of summons. The learned registrar took the slightly unusual step of publishing written reasons for his decision. Having read the reasons for decision and the submissions of the parties in relation to the appeal, I was initially satisfied the decision was correct and I could add nothing to the reasons published by the registrar. However, during the course of oral submissions counsel for the plaintiffs dealt, in detail, with a number of cases which appear to have been mentioned in passing before the registrar and referred to a number of further cases which were not brought to the registrar's attention. Accordingly, I reserved my decision to consider whether or not they warranted the appeal being granted. Having considered these decisions I am satisfied the decision of the learned registrar was, in all respects, correct and the appeal ought be dismissed.
2 In his reasons the registrar identified the question in the application as being whether one member of a dissolved partnership of two members can, without the concurrence of the other, maintain an action. The registrar summarised the facts which are, as he said, common ground, as follows:
1. Belgravia Nominees Pty Ltd (Belgravia) and Penhurst carried on a partnership engaging in land trading.
2. The partnership entered into an agreement with the first defendant under which the first defendant by its agent and principal actor the second defendant was to provide certain services to the partnership in respect of its land.
3. Pursuant to the agreement between April 2006 and January 2012 the partnership made payments to the first defendant totalling a little over $4.3 million.
4. The partnership was dissolved in June 2012.
3 The plaintiffs issued a writ claiming the first defendant was prohibited by certain provisions of the Real Estate and Business Agents Act 1978 (WA) from receiving the payments referred to. As against the second defendant it is said, by virtue of certain provisions of the legislation, he is liable jointly and severally with the first defendant and both are required to repay the $4.3 million paid, together with interest.
4 The plaintiffs accepted that had the partnership been continuing it could not have maintained the 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). It was on this basis the plaintiff sought to join Penhurst as a party to the proceedings. Penhurst would not join as a plaintiff and therefore on the plaintiffs' case it had to be joined as a defendant.
5 It was the defendants' position that with or without Penhurst it is not competent for the plaintiffs to maintain or pursue this action. Therefore no amendment should be allowed because the amendment would not remedy the fatal defect. For the same reason Penhurst ought not be joined as a party.
6 The outcome of the application and this appeal depended upon the proper interpretation of s 49(1) of the Partnership Act. That section is in the following terms:
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.
7 As the learned registrar pointed out there are two, and only two, circumstances when the authority of partners to bind the firm continues after dissolution of the partnership. The first is 'so far as may be necessary to wind up the affairs of the partnership'. The second is 'to complete transactions begun but unfinished at the time of dissolution'. The learned registrar concluded the second of these two circumstances did not apply in the present case. That decision was not challenged on appeal. The learned registrar determined the present action was not necessary to wind up the affairs of the partnership. It was that finding which was challenged on appeal. The learned registrar stated his conclusions quite succinctly, he said:
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 [21].
8 Counsel for the plaintiffs began by referring to the decision in Butchart v Dresser (1853) 4 De GM & G 542; 43 ER 619. This was a case to which the registrar was referred. Counsel emphasised a particular passage in the judgment of Lord Justice Turner. His Lordship said:
The general law is clear, that a partnership, though dissolved, continues for the purpose of winding up its affairs. Each partner has, after and notwithstanding the dissolution, full authority to receive and pay money on account of the partnership, and has the same authority to deal with the property of the partnership, for partnership purposes, as he had during the continuance of the partnership. This must necessarily be so. If it were not, at the instant of the dissolution, it would be necessary to apply to this Court for a receiver in every case, although the partners did not differ on any one item of the account. Nor is there any inconvenience in this state of the law; for it is competent to any partner to apply, in case of necessity, for a receiver, and to have the affairs of the partnership wound up under the direction of this Court, and thus to prevent his partner from exercising unduly any power which he has as a partner.
9 This statement of principle must be treated with some caution. The decision pre-dates the introduction of the English Partnership Act 1890 (UK). His Lordship was doubtless setting out the law as it stood as at the date of the judgment. But if there is any conflict between his Lordship's statement of principle and the terms of the Partnership Act, it is of course the Partnership Act which must prevail.
10 Of the two cases to which the registrar was not referred the first is Seal & Edgelow v Kingston [1908] 2 KB 579. The facts of this case are somewhat complicated, at least at a procedural level. But for present purposes they can be summarised in this way. An action was commenced by Seal in the firm name against the defendant who had been a client of the firm to recover an amount alleged to be due from the defendant to the firm on a bill of costs. Seal acted as solicitor to the plaintiffs in the action. The defendant delivered a defence by which it was, in substance, alleged that under an agreement made by the defendant with Edgelow, the defendant was not liable to the plaintiffs for any costs. Edgelow took out a summons for an order that the action should be stayed on the ground that it had been brought by Seal without his authority. The matter went first to the master then to a single judge. Eventually it wound up in the Court of Appeal. What is relevant for present purposes is the statement of principle articulated by the Court of Appeal judges. Sir Gorell Barnes, president of the Court of Appeal, put the position this way:
It is clear upon the authority of Whitehead v Hughes that Seal had the right as one of the partners in the firm to use the name of the other partner for the purpose of bringing an action to recover a debt due to the firm, on giving his partner an indemnity against costs. As was said by Bayley B in the case referred to, 'One of several partners has a clear right to use the names of the other partners. If they object to their names being used, they may apply for an indemnity against the costs to which they might be subjected by the use of their names'.
11 Lord Justice Farwell was of a similar view. He said:
It is obvious that where there are two partners, one of whom is endeavouring to get in the firm's assets, the other partner, who has got an indemnity against any liability for the costs of the action, must assist him by complying with an order for discovery.
12 The second case referred to is the New Zealand decision of Sew Hoy v Sew Hoy [2001] 1 NZLR 391. The facts of that case taken from the headnote are as follows:
In 1973 three brothers and their wives purchased land which they held together as partners. The Crown then compulsorily acquired the land under the Public Works Act 1928 and shortly thereafter one of the partners died, thereby dissolving the partnership. Final compensation was not made by the Crown until 1982. By then, the Public Works Act 1981 had come into force. As a result, all the former partners became entitled to the benefit of the statutory offer-back rights conferred by s 40 of that Act. In 1992 the Crown offered back a portion of the land to all the original members of the partnership, including the trustees of the estate of the deceased partner (the trustees). The trustees were the only part to express interest in the Crown's offer before the statutory deadline. Accordingly, the Crown entered into negotiations with the trustees to purchase the land. Four of the other partners (the partners) brought proceedings against the trustees, claiming that they breached fiduciary duties owed to the partnership in two respects: first, by failing to pass on information obtained by the trustees that indicated that the land had the potential to be profitable; and secondly, by pursuing individual interests at the expense of the group interest. The partners claimed that the fiduciary relationship arose by virtue of s 41 of the Partnership Act 1908, which dealt with continuing obligations following the dissolution of a partnership. In the alternative, the partners claimed that such obligations arose from the close family relationship between the partners and co-owners of the land. In the High Court, it was held there were no continuing fiduciary relationships as between the partners, on either basis. The partners appealed.
13 The appeal was dismissed. The Court of Appeal held the partnership came to an end in 1982 upon receipt and distribution of the final compensation payment. Section 41 was thereupon spent and did not give rise to any continuing obligations. McGrath J put the position this way:
On the meaning I attribute to 'the affairs of the partnership' in s 41, a mere expectancy is not covered because an expectation of a benefit, even if well founded, does not amount to 'property'. In Perpetual Executors and Trustees Association of Australia Ltd v Federal Commissioner of Taxation (1948) 77 CLR 1 at pp 26 - 27, Dixon J said of 'property' in an estate duty context:
No doubt this expression is of the widest character and covers every form of personal property recognised at law or in equity, every possible interest including all choses in action. But it cannot be satisfied unless some right cognisable at law or in equity exists in the deceased. An expectation, however well founded in fact, and however well warranted by political or business considerations, will not do, if it is devoid of legal title [65].
15 Nor does the decision in Sew Hoy. It does not seem to me the passage I have quoted from McGrath J actually takes the matter any further. But any doubt on that question can be put to rest by quoting from the decision of Keith J who wrote the leading decision with which the other two judges agreed. His Honour said:
The rights and obligations of former partners do not continue for other purposes ('but not otherwise'). In this case it was neither necessary nor possible in order to complete the winding up of the partnership to deal with the chance that there might be a future offer by the Crown under s 40. There was no transaction then unfinished in relation to the land. The mere possibility of a future offer back did not leave the sale to the Crown unfinished. If the s 40 offer occurred and it was accepted that would give rise to an entirely new venture involving only those who chose to accept, and it would require of them substantial expenditure [33].
16 It is true if the action presently on foot were pursued to its conclusion then funds would come back to the partnership and those funds would have to be distributed to the former partners in conformity with the requirements of the Act. But there is no guarantee the action will be successful. These proceedings do not have to be taken to bring to a conclusion the affairs of the partnership. In my view the plaintiffs cannot maintain the action and the learned registrar was right to refuse leave.
17 Two further matters should be mentioned which are, I think, relevant. First, in approaching this matter the starting point is the way in which s 49(1) is worded. As the learned registrar noted this really is a question of statutory construction. As to that, the Court of Appeal in City of Kwinana v Lamont [2014] WASCA 112 [47] said:
The High Court of Australia has iterated, and reiterated, that the starting point and ending point for the task of statutory construction is the statutory text. The context, including legislative history and extrinsic materials, has utility only to the extent that it assists in fixing the meaning of the statutory text: Thiess v Collector of Customs [2014] HCA 12 [22] (the court); Federal Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55; (2012) 87 ALJR 98, 107 [39] (the court); Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27, 46 - 47 [47] (Hayne, Heydon, Crennan & Kiefel JJ). The duty of a court is to give the words of the statutory provision the meaning that the legislature is taken to have intended them to have. Ordinarily, but not universally, that meaning will correspond with the grammatical meaning of the provision: Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 [78].
18 The second point is that the plaintiffs here are not left without a remedy. A receiver can be appointed to the affairs of the partnership and if the receiver takes the view action against the present-named and proposed defendants is warranted, then those proceedings can be issued. In my view that is the way the matter ought be approached. It will ensure the interests of the partners are properly protected.
19 For these reasons I would dismiss the appeal. The plaintiffs ought pay the costs of appeal, including the reserved costs.
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