Dreamtouch Pty Ltd v Ganbros Pty Ltd

[2013] QSC 19

SUPREME COURT OF QUEENSLAND

CITATION:

Dreamtouch Pty Ltd & Anor v Ganbros Pty Ltd & Ors [2013] QSC 19

PARTIES:

DREAMTOUCH PTY LTD ACN 100 759 966 (as Trustee for the Brian Weller Family Trust)
(First Applicant)

NIPRUMA PTY LTD ACN 107 982 614 (as Trustee for the Kim Weller Family Trust)
(Second Applicant)

AND

GANBROS PTY LTD ACN 010 001 117 (as Trustee for the Joe Ganim Family Trust)
(First Respondent)

GANBOYS PTY LTD ACN 010 001 108 (as Trustee for the Peter Ganim Family Trust)
(Second Respondent)

GANSONS PTY LTD ACN 010 001 126 (as Trustee for the Paul Ganim Family Trust)
(Third Respondent)

CHRISWELL PTY LTD ACN 107 982 598 (as Trustee for the Christine Weller Family Trust)
(Forth Respondent)

FILE NO/S:

SC 872 of 2013

DIVISION:

Trial

PROCEEDING:

Application

DELIVERED ON:

19 February 2013

DELIVERED AT:

Brisbane

HEARING DATE:

18 February 2013

JUDGE:

Jackson J

ORDERS:

That there be a declaration that the partnership was dissolved on 16 January 2013;1.   

That the first, second and third respondents serve defences to Maroochy Tavern, in the matter BS 491/13, not in the name of the partnership; and  2.   

3.   The Applicant pay the Respondent’s costs of the application to be assessed.

CATCHWORDS:

PARTNERSHIP – RELATIONSHIP BETWEEN PARTNERS AND THIRD PARTIES – GENERALLY –where the parties are former partners in a partnership – where the partnership is dissolved – where the partnership accounts are not finally settled – where a third party alleges to be a creditor of the former partners – where the applicants, who are related to the creditor apply to the court to appoint receivers – whether the court should appoint receivers

Uniform Civil Procedure Rules 1999 (Qld), r 87

Chan v Zacharia (1984) 154 CLR 178, 197, referred to
Noke & Chiswell v Ingham (1745) 1 Wills KB 89; 95 ER 508, cited
Sutherland v Gustar [1994] Ch 304, cited
Tomlinson v Smith [1896] 1 QB 386, cited

COUNSEL:

P O’Shea QC and G Dietz for the Applicants
G Gibson QC and D de Jersey for the First, Second and Third Respondents
R Burton (solicitor) for the Fourth Respondent

SOLICITORS:

Tucker & Cowen Solicitors for the Applicants
HopgoodGanim for the First, Second and Third Respondents

Allens Linklaters for the Fourth Respondent

1. JACKSON J:  The parties to the present proceeding are former partners.  The partnership was a single undertaking venture for the ownership an operation of the Kuraby Hotel.

1. There is no dispute that the partnership is dissolved.  The hotel business was sold in 2008.  The land was sold and the contract for that sale was completed in December 2012.  Notice of dissolution of the partnership was given by the applicants on 16 January 2013. Most of the proceeds of that sale have already been distributed among the former partners.

1. However, the partnership accounts have not been finally settled.  An amount of approximately $30,000 of partnership funds has been retained to finalise any claims of sundry creditors. There is no dispute among the former partners about that. There is no reason, in principle, why any of the former partners might not deal with the sundry creditors’ claims by paying them and seeking the agreement of the other former partners to take the payments into the final partnership accounts or claiming indemnity from them if they wrongly refuse to contribute to a proper joint liability.

1. On the evidence, the only remaining matter of substance concerns a claim made against the former partners by a creditor, Maroochy Tavern Pty Ltd (“Maroochy Tavern”).  It claims to be a creditor of the former partners (it would be inaccurate to describe them now as “the partnership”) for the sum of $2,570,308.00.

1. Brian Weller and Kimberley Weller are directors of the first and second applicants.  Brian Weller is a shareholder of Maroochy Tavern.  I infer that the applicants are related to Maroochy Tavern.

1. On 16 January 2013, Maroochy Tavern started a proceeding against the former partners by claim in this court, number 491/13, in the firm name, which is a permitted procedural method of proceeding against the members of a firm.  The claim is for $2,570,308 for debt.  An alternative sum of $568,805.48 is claimed as value of services provided, that is, as a claim now recognised as one for restitution.  Interest under statute and costs are also claimed.

1. On the settlement of the sale of the land in December 2012, the then partners had agreed to retain the amount of $2,570,308.00 in the partnership account against the then proposed claim by Maroochy Tavern.  That fund remains to meet Maroochy tavern’s claim, if it is successful.

1. The applicants do not wish to oppose Maroochy Tavern’s claim or to incur costs in defending its claim.  The other former partners intend to defend that claim.  The notice of appearance and defence are almost due.  The applicants seek to intervene so as to prevent the other former partners from being able to defend the claim as they intend to do.  The method by which they seek to achieve that end is by seeking an order that the court appoint receivers and confer upon the receivers the power to do things, including “defending any proceedings… in the name of the partnership.”.

1. By this strategem, the applicants seek to remove the other former partners’ present rights to defend Maroochy Tavern’s claim.  As I understood it, the applicants propose that those rights be replaced by the decision of the receivers, as to whether it is in the interest of the former partners as a whole, to defend Maroochy Tavern’s claim.  It seems to me that there may be considerable conceptual difficulties in the exercise of the court’s power to appoint a receiver on the grounds that it is just or convenient to do so in such a situation as this, but it is unnecessary to explore those points in detail in order to resolve the present application.

1. The applicants sought to shore up the application to appoint receivers with that and other powers by relying on the need for other matters concerning the former partnership to be finalised, and by emphasising that the relations between the former partners had irretrievably broken down.  They referred to allegations of serious impropriety made by some of the respondents’ officers against representatives of the applicants or the persons engaged in managing the former partnership’s affairs.  However, in answer to my question whether there was any subject matter of dispute between the parties other than Maroochy Tavern’s claim, their counsel answered that on the evidence there was none.

1. Another matter on which the applicants relied to justify the appointment of the receivers with those powers was that an employee of the first and second applicants or their related corporations who had until now dealt with the management of the payment of accounts and the affairs of the former partnership was no longer willing to do so.  However, the accountant of the former partnership has indicated his willingness to do so.  The outstanding accounts appear to be few in number on the evidence and, apart from Maroochy Tavern’s claim, relatively trivial in amount. Less, at this stage, than the $30,000 which has been set aside by agreement of the former partners to pay them. There is no justification in that relatively minor clerical task to appoint receivers, in my view.

1. In my view, the lack of substance on these points serves to reinforce that the applicants’ real purpose in bringing the application is to take away the respondents’ right to defend Maroochy Tavern’s claim.  I asked whether the applicants pressed the application for the receivers if the receivers were not granted the power to defend the Maroochy tavern claim.  The applicants counsel did not have instructions to answer that question.

1. As an alternative to the application to appoint receivers with that power, the applicants applied for an order that the first, second and third respondents provide an indemnity against any order for costs made against the former partners in the firm name and against any liability of the former partners for costs.

1. The respondents submitted that any order of that kind was unnecessary but indicated that they would undertake to give such indemnities if the court was of the contrary opinion.

1. There is no suggestion in the affidavit material that the respondents’ proposed defence to Maroochy Tavern’s claim is one that has no reasonable prospect of success or would be an abuse of process or that the respondents’ intention to defend the claim is not bona fide.

1. It is appropriate to start by acknowledging that the relationship of the former partners is well recognised in law as one which “was curtailed and altered by the dissolution of the partnership”: Chan v Zacharia.[1]  Nevertheless, it retains its fiduciary character in respect of the partnership property to be realised and applied.

   [1](1984) 154 CLR 178, 197.

1. However, the defence of Maroochy Taven’s claim is not partnership property.  It is the defence of a claim brought by a third party for a joint debt.  The rules relating to the suit against partners in the firm name are essentially procedural in nature.  The creditor’s cause of action against the defendants is not altered.  While a partnership is on foot, there may be questions as to the authority of one partner or manager to cause notice of appearances to be filed by the partners who appear, but that is not the present problem.  There is no reason why each of the former partners cannot appear in answer to Maroochy Tavern’s claim, or not, as they choose.

1. At common law, when joint contractors were sued together they were able to sever their pleas or join together in one plea.[2]  A successful defence by one of joint promisors will operate to discharge all, but that does not exclude the conduct of separate defences, which may include grounds personal to some which will not operate for the benefit of all.

   [2]Noke & Chiswell v Ingham (1745) 1 Wills K B 89; 95 ER 508; G. Williams, Joint Obligations (Butterworths, 1949) at 76.

1. The applicants rely on UCPR r 87 as requiring that a person who files a defence “for the partnership” may only do so in the partnership name. If that rule otherwise applied to a defence filed by the respondents, the Court has power to direct that it not apply to his proceeding under UCPR.  In my opinion, it would be appropriate in the circumstances of this case to make such a direction, by directing that the respondents file and serve their defences to the Maroochy Tavern claim not in the name of the partnership.

1. At that point, in my view the only remaining point of potential difficulty which is raised is the contention of the applicants that they should be protected by an indemnity against Maroochy Tavern’s costs and against liability for the first second and third respondent’s costs.

1. In my view there is no apparent reason why the applicants should need an indemnity against the first second and third respondents’ costs.  They will not be a party to any costs agreement with those respondent’s lawyers.  There is no suggestion that the first second or third respondent has authority or would purport to exercise any authority to retain lawyers on the applicants’ behalf.

1. That leaves the question of an indemnity against the costs of Maroochy Tavern.  No submissions were made as to the circumstances in which the applicants, if they chose not to defend the Maroochy Tavern claim as against them, would be liable for the costs incurred by Maroochy Tavern against the respondents, if they unsuccessfully defend the claim.

1. There is authority which suggests that in the case of an ongoing partnership it might be a condition of the entitlement of one or more partners to defend a claim in the firm name without the authority of or concurrence of the other partners that the defenders undertake to indemnify the others against costs.[3]

   [3]Sutherland v Gustar [1994] Ch 304, 310; Tomlinson v Smith [1896] 1 QB 386, 392.

1. There are other cases which deal with the question of whether an undertaking must be given by a partner who wishes to start a proceeding in the firm name.  They are not on point, in my view.  And neither of the cases mentioned below was a case of a defendant seeking to defend in their own name only, as the respondents in this case seek to do.

1. The practice of requiring an undertaking to dissenting partners does not appear to be discussed in the leading texts.  In the short time available, I have been unable to pursue fully whether the applicants as dissenting former partners are entitled to an indemnity.  In those circumstances, at this stage I am not prepared to order that the first second or third respondents give such an undertaking.

1. The remaining relief which the applicants seek is an order that it be declared that the partnership was dissolved on 16 January 2013 and an order that the business and affairs of the partnership be wound up.  The respondents oppose the declaration on the ground that it is unnecessary.  However, there seems to be some dispute whether the dissolution was effected by sale of the land on 17 December 2012 or on notice of dissolution on 16 January 2013.  In my opinion, it is appropriate in the circumstances to declare that the partnership was dissolved on 16 January 2013.

1. As to the order sought that the business and affairs of the partnership be wound up, there seems at this stage to be no need for the court to make particular orders for the administration of the process of winding up of the partnership.  A general order for winding up does not seem to be called for.  Little remains to be done.  The Maroochy Tavern claim may proceed.  What impact it has on the rights and obligations of the former partners inter se is not a matter which can be established in advance of the result of that litigation.  There are no other presently pressing matters which have been identified in the evidence.  In my view, if a need for particular orders or for the determination of particular questions of the former partners’ rights and liabilities emerges, an appropriate application for orders in the court’s supervisory jurisdiction may then be made.

1. Accordingly, the order which I propose to make on the application is a declaration that the partnership was dissolved on 16 January 2013.