Gumbleton v Hewitt

[2012] NSWSC 886

Supreme Court

New South Wales

Medium Neutral Citation:

Gumbleton v Hewitt [2012] NSWSC 886

Hearing dates:

13 July 2012

Decision date:

13 July 2012

Jurisdiction:

Equity Division

Before:

Rein J

Decision:

1. Partnership dissolved as and from 26 November 2010.

2. Under the circumstances, it is not appropriate to burden the partnership with costs for appointment of a receiver.

Catchwords:

PARTNERSHIP - rights and duties of partners inter se - where defendant removed money to which defendant was not entitled from partnership bank account -breach of partnership relationship or conduct justifying termination of the partnership

PARTNERSHIP - dissolution and winding up - by the court - where size of partnership is not substantial - where some partnership assets very likely could not be traced but in respect of which the plaintiff seeks no relief - where there is no appearance by the defendant - where neither party seeks appointment of receiver - not appropriate to appoint receiver

Legislation Cited:

Civil Procedure Act 2005
Partnership Act 1892

Cases Cited:

Cuming v Hennessey [2005] NSWSC 1219
Daniels v Smith [2006] NSWSC 1424

Category:

Principal judgment

Parties:

Edward Gary Gumbleton (Plaintiff)
John Patrick Hewitt (Defendant)

Representation:

Counsel:
D Mackay (Plaintiff)
No appearance by the defendant
Solicitors:
McCartney Young Lawyers (Plaintiff)
No appearance by the defendant

File Number(s):

SC 2011/362591

ex tempore Judgment

1. These proceedings concern a partnership established in February 2007 by the plaintiff, Mr Edward Gary Gumbleton, and the defendant, Mr John Patrick Hewitt, for the purchase, rearing and sale of cattle. The business was quite successful, and cattle were purchased, and reared, and then sold.

1. From the original $25,000 that each partner contributed, there was a significant profit, achieved by reason of the sale of cattle. Documents relating to the sale of cattle produced under subpoena by Ian Weir and Son Pty Ltd can be found as Exhibit C.

1. The plaintiff discovered that the defendant had removed two significant amounts from the partnership account conducted with the Summerland Credit Union. The removals can be found on the Summerland Credit Union bank statements in annexure A to the affidavit of Mr Gumbleton dated 22 May 2012 (see Tab 8 of Exhibit A), and was firstly an amount of $18,850, and secondly an amount of $79,400.

1. The plaintiff's position is that those withdrawals were made without his approval. The plaintiff alleges that the monies were paid into an account solely in the name of Mr Hewitt. The relevant account into which the monies were paid is found in documents produced by the Commonwealth Bank of Australia on subpoena in Exhibit B.

1. The plaintiff claims that the partnership has come to an end by virtue of this breach of partnership duty, and he has made demands for the return of the money and the winding up of the partnership or for the termination of the partnership and accounting of profits: see letter of Ms Michelle McCartney dated 6 April 2011 in annexure G to the affidavit of Mr Gumbleton dated 12 October 2011 at Tab 4 of Exhibit A.

1. The plaintiff relies on s 35 of the Partnership Act 1892 which relevantly states as follows:

"On application by a partner the Court may order a dissolution of the partnership in any of the following cases:

(c) When a partner, other than the partner suing, has been guilty of such conduct as, in the opinion of the Court, regard being had to the nature of the business, is calculated to prejudicially effect the carrying on of the business.

(d) When a partner, other than the partner suing, wilfully or persistently commits a breach of the partnership agreement, or otherwise conducts himself or herself in matters relating to the partnership business so that it is not reasonably practicable for the other partner or partners to carry on the business in partnership with the partner.

(f) Whenever in any case circumstances have arisen, which, in the opinion of the Court, render it just and equitable that the partnership be dissolved."

1. The plaintiff relies on his affidavit of 12 October 2011 to explain the circumstances in which he says the partnership has come to an end and ought to be declared to be dissolved.

1. The defendant has not appeared in this matter. The matter was called in court at 10am and called outside of court, and the defendant did not appear.

1. I am satisfied on the evidence which has been tendered, copies of which are found in Exhibit A, and the further affidavit of Ms Elizabeth Anne Griffiths dated 12 July 2012, that the defendant has received notice of the proceedings generally, and specifically of today's hearing and of the material that would be tendered at this hearing.

1. I am satisfied on the evidence that the defendant has removed the amount of $98,250 from the partnership account, and that as to half of that money that it was money to which the defendant had no entitlement.

1. Accordingly, I am satisfied that the plaintiff is entitled to 50 per cent of that money, that is, the amount of $49,125, leaving aside the question of interest to which I shall return. I am satisfied that the withdrawals constituted a breach of the partnership relationship or involved conduct that justifies a termination of the partnership pursuant to s 35 of the Partnership Act.

1. I should also note that the plaintiff accepts that there is a possibility that some cattle have remained in the possession of Mr Hewitt after the sales to which I have earlier referred, but the plaintiff accepts it would be very difficult to trace these cattle, and he does not therefore seek any accounting in respect of those additional cattle or order in relation to them.

1. Mr D Mackay of counsel, who appears for the plaintiff, has provided helpful written submissions, and has pointed out that normally in partnership disputes, the Court will order the appointment of a receiver and or the taking of accounts (see Daniels v Smith [2006] NSWSC 1424) but in Cuming v Hennessey [2005] NSWSC 1219, Young J, as he then was, accepted that the appointment of a receiver, although usual, is not something which will occur in every case without consideration of its appropriateness.

1. In my view, given the size of the partnership, the absence now of any identifiable cattle, and the inability to trace any cattle that might have been taken by Mr Hewitt beyond those which were sold, and the failure of the defendant to appear, and also having regard to the fact that neither party seeks the appointment of a receiver, it is not appropriate, in my view, to burden the partnership with further costs, and I accede to the plaintiff's application that the Court consider the matter now based on the material before it and determine the amount that should be paid by the defendant.

1. I have explained why the plaintiff is entitled to the amount of $49,125. It seems to me that the plaintiff, having been kept out of money by the defendant's withdrawals, should be paid interest on the amount owing to him in accordance with s 100 of the Civil Procedure Act 2005 calculated at $6856.47 from 26 November 2010 and that he should obtain an order for costs of these proceedings.

1. An offer was made on 6 April 2011 by the plaintiff to accept $45,000 in full settlement of his claims. There has never been a defence to the matter by the defendant and the offer was not accepted, unreasonably in my view, and costs on the indemnity basis should be paid from 7 April 2011 and on the usual basis up to 6 April 2011.

1. I make declarations in accordance with pars one and two and I make orders in accordance with pars three to seven of the short minutes of order which I shall initial with today's date and place with the papers.

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Decision last updated: 03 August 2012