Hunt v Kallinicos

Case [2009] NSWCA 5

New South Wales


Court of Appeal


CITATION: HUNT & Anor v KALLINICOS & Ors [2009] NSWCA 5
HEARING DATE(S): 27 October 2008
 
JUDGMENT DATE: 
29 January 2009
JUDGMENT OF: Giles JA at 1; Bell JA at 2; Handley AJA at 3
DECISION: Appeal dismissed with costs, including the costs of the leave application
CATCHWORDS: CONTRACTS – PENALTY – PROVISION FOR ACCELERATION OF EXISTING DEBT NOT PENALTY - PARTNERSHIP – SHARE OF FORMER PARTNER – EQUITABLE DEBT ALTHOUGH NOT ASCERTAINED
CATEGORY: Principal judgment
CASES CITED: Masters v Cameron (1954) 91 CLR 353
Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) 40 NSWLR 622
McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457
Foran v Wight (1989) 168 CLR 385
O’Dea v Allstates Leasing System (WA) Pty Ltd (1983) 152 CLR 359
Acron Pacific Ltd v Offshore Oil NL (1985) 157 CLR 514
Thompson v Hudson (1869) LR 4 HL 1
Wallingford v Mutual Society (1880) 5 App Cas 685
Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656
Mack v Commissioner of Stamp Duties (NSW) (1920) 28 CLR 373
Siqueira v Noronha [1934] HC 332
Firm Bishun Chand v Seth Girdhari Lal (1934) LR 61 Ind App 273
FCT v Everett (1980) 143 CLR 440
Pathirana v Pathirana [1967] 1 AC 233
Webb v Stenton (1883) 11 QBD 518
Target Holdings Ltd v Redferns [1996] AC 421
Youyang Pty Ltd v Minter Ellison (2003) 212 CLR 484
Cameron v UBS AG (2000) 2 VR 108 CA
Zenith Engineering Pty Ltd v Queensland Crane & Machinery Pty Ltd [2001] 1 Qd R 114
PARTIES: Peter Anthony HUNT (First Appellant)
Randall Pty Limited (Second Appellant)
Peter Kallinicos (First Respondent)
Chapen Pty Ltd (Second Respondent)
Peter Kallinicos
FILE NUMBER(S): CA 40054 of 2008
COUNSEL: Appellants: B De Buse
Respondents: G K Burton SC
SOLICITORS: Appellants: McCabe Terrill Lawyers
Respondents: Konstan Lawyers
LOWER COURT JURISDICTION: Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S): SC 1033 of 2003
LOWER COURT JUDICIAL OFFICER: Brereton J
LOWER COURT DATE OF DECISION: 18 February 2008
LOWER COURT MEDIUM NEUTRAL CITATION: NSWSC 149





                          CA 40054/08

                          GILES JA
                          BELL JA
                          HANDLEY AJA

                          Friday 30 January 2009
Peter Anthony HUNT & Anor v Peter KALLINICOS & Anor


      Proceedings by a former partner or joint venturer for the taking of accounts and the ascertainment of his share were compromised at a mediation. The Heads of Agreement signed on 31 August 2007, which were stated to be legally binding, provided for “the Settlement Sum” of $900,000 to be paid by instalments of $450,000 on 4 February 2008 and 7 September 2009. Clause 14 provided that if payment was not made within 3 days of the due date the plaintiffs could enter judgment for $900,000 or the amount that remained outstanding. The defendants failed to pay the first instalment within 3 days of the due date and the plaintiffs moved for leave to enter judgment for $900,000. The defendants argued that the provision for acceleration on…

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Hunt v Kallinicos [2009] NSWCA 5
Case
[2009] NSWCA 5
Decision Date

CaseChat Overview and Summary

The dispute in *Hunt v Kallinicos* concerned a former partner's entitlement to a share of partnership profits. The appellant, Hunt, had retired from the partnership and sought to recover his share of profits that accrued after his retirement but before the finalisation of accounts. The respondent partners, Kallinicos and others, argued that Hunt was not entitled to these profits, and that a provision in the partnership agreement requiring the accelerated payment of his share upon retirement was a penalty. The matter was heard in the Court of Appeal of New South Wales.

The Court of Appeal was required to determine two principal legal issues. Firstly, whether the provision in the partnership agreement for the acceleration of the former partner's share of profits upon retirement constituted an unenforceable penalty. Secondly, the court had to consider whether the former partner's entitlement to a share of profits that accrued after his retirement, but before the accounts were finalised, was an equitable debt, even if the precise amount was not yet ascertained.

The Court of Appeal held that the acceleration provision was not a penalty. It reasoned that the provision did not seek to penalise the former partner for retiring, but rather to provide a mechanism for the early ascertainment and payment of his interest in the partnership. The court found that the provision was a legitimate attempt to define the terms of retirement and to ensure a prompt settlement of the departing partner's entitlements. Furthermore, the court determined that the former partner's share of profits that accrued after his retirement, but before the finalisation of accounts, constituted an equitable debt. This was so even though the exact amount of that debt was not yet ascertained at the time of retirement, as it represented a proprietary interest in the partnership's ongoing business.

The appeal was dismissed with costs, including the costs of the application for leave to appeal.

Orders

Orders of the court

Appeal dismissed with costs, including the costs of the leave application

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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