Medium Neutral Citation: Cappe v Tsung [2018] NSWCA 86
Hearing dates: 22 February 2018
Date of orders: 26 April 2018
Decision date: 26 April 2018
Before: Basten JA at [1];
Meagher JA at [2];
Emmett AJA at [31]
Decision:
Appeal dismissed with costs

Catchwords: PARTNERSHIP – special majority of partners accepted offer by corporation to acquire the partnership business – whether special majority could vary inter se entitlement of partners to share in surplus from proceeds of sale – whether cash amounts and shares issued were wholly the proceeds of partnership property
Legislation Cited: Partnership Act 1892 (NSW), ss 4, 5, 6, 19, 20, 21, 24, 28, 29, 32, 33, 34, 35, 38, 39, 44; Pt 2, Divs 2, 3, 4
Corporations Act 2001 (Cth), s 127
Cases Cited: Blisset v Daniel (1853) 10 Hare 493; 68 ER 1022
Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321
Carter Bros v Renouf (1962) 111 CLR 140
Commissioner of Stamp Duties (Qld) v Livingston (1964) 112 CLR 12
Commissioner of State Taxation (SA) v Cyril Henschke Pty Ltd (2010) 242 CLR 508
Construction Engineering (Aust) Pty Ltd v Hexyl Pty Ltd (1985) 155 CLR 541
Federal Commissioner of Taxation v Murry (1998) 193 CLR 605
Gambotto v WCP Ltd (1995) 182 CLR 432
Harvey v Harvey (1970) 120 CLR 529
Inland Revenue Commissioners v Gray [1994] STC 360
Rowella Pty Ltd v Abfam Nominees Pty Ltd (1989) 168 CLR 301
Talbot v McDonald (1925) 25 SR (NSW) 267
Tobin v Broadbent (1947) 75 CLR 378
Tsung v Cappe [2017] NSWSC 1053
Category: Principal judgment
Parties: Ian Philip Cappe (First Appellant)
Warren Shane Lun (Second Appellant)
Craig Matthew Dyer (Third Appellant)
Andrew Wallace Hooper (Fourth Appellant)
Rohit Singh (Fifth Appellant)
Joanna Sommerfeld (Sixth Appellant)
Lincoln Geoffrey Gillam (Seventh Appellant)
Willie Pei Chiao Tsung (Respondent)
Representation:
Counsel:
J Giles SC with P Silver (Appellants)
R Newlinds SC with D Barnett (Respondent)
Solicitors:
Thomson Geer (Appellants)
Bridges Lawyers (Respondent)

File Number(s): 2017/270966
Decision under appeal

Court or tribunal:

Supreme Court of NSW

Jurisdiction:

Equity

Citation:

[2017] NSWSC 1053

Date of Decision:

11 August 2017

Before:

Hammerschlag J

File Number(s):

2017/170673

headnote

[This headnote is not to be read as part of the judgment]

The respondent (Dr Tsung) and seven appellants (the Continuing Doctors) operated a diagnostic imaging practice (the Partnership Business) pursuant to a Partnership Agreement. Six of the partners, including Dr Tsung, held a one-seventh share in the partnership. Two of the partners held a one-fourteenth share in the partnership. Relevantly, cl 32 of the Partnership Agreement provided that where consideration needed to be given to the partnership accepting an offer by a corporation to acquire all or part of the partnership business, the motion could only succeeded where a minimum of twelve out of the total fifteen votes were in favour of the motion.

On 11 July 2016,…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Cappe v Tsung

Details

AGLC: Cappe v Tsung [2018] NSWCA 86
Case: [2018] NSWCA 86
Decision Date: 26 April 2018

CaseChat Overview and Summary

The appeal concerned a dispute between partners of a partnership and a corporation that had acquired the partnership business. A special majority of partners had accepted the corporation's offer to purchase the business. The central question was whether this special majority possessed the authority to vary the inter se entitlement of the partners to share in the surplus proceeds arising from the sale of the partnership property. A further issue was whether the cash amounts and shares received by the partners constituted the wholly the proceeds of partnership property.

The court was required to determine whether the partners, acting by a special majority, had the power to alter the pre-existing entitlements of individual partners to the distribution of sale proceeds. This involved considering the scope of the partners' collective power to manage and dispose of partnership assets and to vary the terms of their partnership agreement, particularly in the context of a sale of the entire business. The court also had to assess the nature of the consideration received from the corporation, specifically whether it was entirely derived from the partnership's assets.

The court reasoned that the partnership agreement did not grant the partners, even acting by a special majority, the power to vary the inter se entitlements of the partners to share in the surplus from the proceeds of sale. The court found that the cash and shares received were indeed the proceeds of partnership property. Consequently, the appeal was dismissed with costs.

Orders

Orders of the court

Appeal dismissed with costs

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.

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Citations

Cappe v Tsung [2018] NSWCA 86

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Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty Ltd in the matter of Combined Projects (Arncliffe) Pty Ltd [2020] NSWSC 1778

Cases Citing This Decision

Lewis v Estate of Juan Martinez [2025] NSWCA 2
Citation 1

…Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321 Cappe v Tsung [2018] NSWCA 86 Chandrasekaran v Western Sydney Local Health District (t/as Westmead Hospital) (No 2) [2024] NSWCA 21 Commissioner of State Taxation v Cyril Henschke Pty Ltd (2010) 242 CLR 508; [2010] HCA 43 CVC/O…
Lewis v Martinez and the persons named in the Schedule (No 5) [2024] NSWSC 359
Citation 2 (Para 32)

…I was referred to the decision of Meagher J in Cappe v Tsung [2018] NSWCA 86, at [25]:…
Rosenbaum v Baidarman (No 2) [2021] NSWSC 574
Citation 3

…LR 271 Capital Securities XV Pty Ltd (formerly known as Prime Capital Securities Pty Ltd) v Calleja [2018] NSWCA 26 Cappe v Tsung [2018] NSWCA 86 Commissioner of State Revenue v Rojoda Pty Ltd (2020) 376 ALR 378 Effem Foods Pty Ltd v Lake Cumbeline Pty Ltd (1999) 161 ALR 599 Fox v Percy (2003) 214 CLR 118 Foxman v…
Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty Ltd [2020] NSWSC 1778
Citation 4

…stle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321; [1974] HCA 22 Cappe v Tsung [2018] NSWCA 86 Carbone as Trustee for the S & N Carbone Family Trust v Mills [2019] NSWCA 15 Caringbah Investments Pty Ltd v Caringbah Business and Sports Club Ltd (in liq) [2016] NSWCA 165 Case) Cave…

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Cases Cited

Willie Pei Chiao Tsung v Ian Philip Cappe [2017] NSWSC 1053
Citation 1 (Para 11)

…The primary judge (Hammerschlag J) rejected each of the Continuing Doctor’s arguments: Tsung v Cappe [2017] NSWSC 1053. Ground 1 of appeal challenges his rejection of the first, and ground 2, the rejection of the second.…
Commissioner of State Taxation v Cyril Henschke Pty Ltd [2010] HCA 43
Citation 2 (Para 20)

…artnership following the transfer of its assets to another entity: Commissioner of State Taxation (SA) v Cyril Henschke Pty Ltd (2010) 242 CLR 508; [2010] HCA 43 at [11]–[12]. A special majority would have authority to determine the firm’s collective share in that new entity, which would depend on the relative v…
Gambotto v WCP Ltd [1995] HCA 12
Citation 3 (Para 25)

…: see Blisset v Daniel (1853) 10 Hare 493 at 506; 68 ER 1022 at 1028 (Page Wood V-C) (as to powers of expulsion between partners); Gambotto v WCP Ltd (1995) 182 CLR 432 at 446 (Mason CJ, Brennan, Deane and Dawson JJ), 452 (McHugh J) (as to powers to appropriate shares in a company).…
Rowella Pty Ltd v Abfam Nominees Pty Ltd [1989] HCA 65
Citation 4 (Para 3)

…al contributions, less what was due from him as a partner to the firm: Partnership Act 1892 (NSW), s 39; Rowella Pty Ltd v Abfam Nominees Pty Ltd (1989) 168 CLR 301 at 306–307. And the assets to be so applied upon dissolution would include proceeds from the sale of any partnership property earlier held: Harvey v Harv…
Construction Engineering (Aust) Pty Ltd v Hexyl Pty Ltd [1985] HCA 13
Citation 5 (Para 13)

…ts actually or ostensibly for the conduct of the partnership business: Partnership Act , s 5; Construction Engineering (Aust) Pty Ltd v Hexyl Pty Ltd (1985) 155 CLR 541 at 547–548. And the majority would only have power to decide “ordinary matters connected with the partnership business”, as opposed to changes “in th…
Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd [1974] HCA 22
Citation 6 (Para 16)

…tion of assets and the payment of debts and liabilities”: Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321 at 327 (McTiernan, Menzies and Mason JJ). These collective and individual entitlements of the partners are viewed from wholly different perspectives, as Hoffma…
Harvey v Harvey [1970] HCA 11
Citation 7 (Para 3)

…And the assets to be so applied upon dissolution would include proceeds from the sale of any partnership property earlier held: Harvey v Harvey (1970) 120 CLR 529 at 563 (Walsh J).…
Commissioner of Stamp Duties (Qld) v Livingston [1964] HCA 54
Citation 8 (Para 24)

…e held on dissolution (embodied in Partnership Act , s 39): see Cyril Henschke at [24]–[25], citing Commissioner of Stamp Duties (Qld) v Livingston (1964) 112 CLR 12 at 22 (Viscount Radcliffe).…
Carter Bros v Renouf [1962] HCA 67
Citation 9 (Para 22)

…The third consideration is the proprietary and fiduciary character of the mutual rights and duties of partners. In Carter Bros v Renouf (1962) 111 CLR 140 at 163–4, Kitto, Taylor, Menzies, Windeyer and Owen JJ explained the duty, absent any contrary “common intention”, to account for property purchased with partnersh…
Tobin v Broadbent [1947] HCA 46
Citation 10 (Para 25)

…al wording in an express power is insufficient to authorise what would otherwise constitute a breach of fiduciary duty by an agent: Tobin v Broadbent (1947) 75 CLR 378 at 401 (Dixon J). And even specific powers to deal with the property of a minority interest-holder are strictly construed: see Blisset v Daniel (1853…
Federal Commissioner of Taxation v Murry [1998] HCA 42
Citation 11 (Para 15)

…the assets (including goodwill) generating income in that business: see Federal Commissioner of Taxation v Murry (1998) 193 CLR 605; [1998] HCA 42 at [23] (Gaudron, McHugh, Gummow and Hayne JJ).…
Blisset v Daniel 63 ER 1022
Citation 12 (Para 25)

…bent (1947) 75 CLR 378 at 401 (Dixon J). And even specific powers to deal with the property of a minority interest-holder are strictly construed: see Blisset v Daniel (1853) 10 Hare 493 at 506; 68 ER 1022 at 1028 (Page Wood V-C) (as to powers of expulsion between partners); Gambotto v WCP Ltd (1995) 182 CLR 432 at 446 (Ma…
Blisset v Daniel 68 ER 1022
Citation 13 (Para 25)

…even specific powers to deal with the property of a minority interest-holder are strictly construed: see Blisset v Daniel (1853) 10 Hare 493 at 506; 68 ER 1022 at 1028 (Page Wood V-C) (as to powers of expulsion between partners); Gambotto v WCP Ltd (1995) 182 CLR 432 at 446 (Mason CJ, Brennan, Deane and Daws…

Legislation Cited

Partnership Act 1892 (NSW) 19, 20, 21, 24, 28, 29, 32, 33, 34, 35,...
17 mentions (from Para 2)
Corporations Act 2001 (Cth) 127
2 mentions (from Para 70)

Medium Neutral Citation:	Cappe v Tsung [2018] NSWCA 86
Hearing dates:	22 February 2018
Date of orders:	26 April 2018
Decision date:	26 April 2018
Before:	Basten JA at [1]; Meagher JA at [2]; Emmett AJA at [31]
Decision:	Appeal dismissed with costs
Catchwords:	PARTNERSHIP – special majority of partners accepted offer by corporation to acquire the partnership business – whether special majority could vary inter se entitlement of partners to share in surplus from proceeds of sale – whether cash amounts and shares issued were wholly the proceeds of partnership property
Legislation Cited:	Partnership Act 1892 (NSW), ss 4, 5, 6, 19, 20, 21, 24, 28, 29, 32, 33, 34, 35, 38, 39, 44; Pt 2, Divs 2, 3, 4 Corporations Act 2001 (Cth), s 127
Cases Cited:	Blisset v Daniel (1853) 10 Hare 493; 68 ER 1022 Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321 Carter Bros v Renouf (1962) 111 CLR 140 Commissioner of Stamp Duties (Qld) v Livingston (1964) 112 CLR 12 Commissioner of State Taxation (SA) v Cyril Henschke Pty Ltd (2010) 242 CLR 508 Construction Engineering (Aust) Pty Ltd v Hexyl Pty Ltd (1985) 155 CLR 541 Federal Commissioner of Taxation v Murry (1998) 193 CLR 605 Gambotto v WCP Ltd (1995) 182 CLR 432 Harvey v Harvey (1970) 120 CLR 529 Inland Revenue Commissioners v Gray [1994] STC 360 Rowella Pty Ltd v Abfam Nominees Pty Ltd (1989) 168 CLR 301 Talbot v McDonald (1925) 25 SR (NSW) 267 Tobin v Broadbent (1947) 75 CLR 378 Tsung v Cappe [2017] NSWSC 1053
Category:	Principal judgment
Parties:	Ian Philip Cappe (First Appellant) Warren Shane Lun (Second Appellant) Craig Matthew Dyer (Third Appellant) Andrew Wallace Hooper (Fourth Appellant) Rohit Singh (Fifth Appellant) Joanna Sommerfeld (Sixth Appellant) Lincoln Geoffrey Gillam (Seventh Appellant) Willie Pei Chiao Tsung (Respondent)
Representation:	Counsel: J Giles SC with P Silver (Appellants) R Newlinds SC with D Barnett (Respondent) Solicitors: Thomson Geer (Appellants) Bridges Lawyers (Respondent)
File Number(s):	2017/270966
Decision under appeal	Court or tribunal: Supreme Court of NSW Jurisdiction: Equity Citation: [2017] NSWSC 1053 Date of Decision: 11 August 2017 Before: Hammerschlag J File Number(s): 2017/170673