Old v Hodgkinson; Old v McInnes - [2008] NSWSC 697

CITATION: Old v Hodgkinson; Old v McInnes [2008] NSWSC 697

HEARING DATE(S): 20/05/08

JUDGMENT DATE :
9 July 2008

JURISDICTION: Equity Division

JUDGMENT OF: Young CJ in Eq

DECISION: Decline to adopt the referee's approach to the question of goodwill.

CATCHWORDS: PARTNERSHIP [37]- Dissolution- Whether goodwill ought to be considered in settling the accounts of a dissolved partnership- Goodwill generally has no existence independent from the conduct of the business- Former partners continuing to trade, but now as two separate firms- One new firm apparently making use of components of goodwill of former partnership- Nonetheless goodwill of former partnership must have nil value when taking accounts of former partnership.

CASES CITED: 260 Oxford Street Pty Ltd v Premetis [2006] NSWCA 96
Federal Commissioner of Taxation v Murry (1998) 193 CLR 605
Geraghty v Minter (1979) 142 CLR 177
Inland Revenue Commissioners v Muller & Co's Margarine Ltd [1901] AC 217
Robb v Alcock (Needham J, 31.7.78 unreported)
Robb v Alcock (1978) 2 BPR 9630
Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549
Walker v Martin (SAFC, 23.12.1993, unreported - BC 9300519)

PARTIES: 1063/04 Fraser Patison Old (P)
Hugh Rudyard Hodgkinson (D1)
Kenneth John McInnes (D2)
4064/04 Fraser Patison Old (P)
Kenneth John McInnes (D1)
Hugh Rudyard Hodgkinson (D2)

FILE NUMBER(S): SC 1063/04; 4064/04

COUNSEL: R D Marshall and B A Arste (P)
M Condon (D)
L Nikolaidis (S) (Referee)

SOLICITORS: Horowitz & Bilinsky (P)
M Condon (D)
M D Nikolaidis & Co (Referee)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

YOUNG CJ in EQ

Wednesday 9 July 2008

1063/04 – OLD v HODGKINSON
4064/04 – OLD v McINNES

JUDGMENT CONCERNING GOODWILL

1 HIS HONOUR: This judgment deals with a further episode of a long running dispute between three patent attorneys who were for a short time in partnership.

2 I will endeavour to simplify the facts as much as I can for the purpose of giving rulings on the question that was argued before me and that is whether the referee correctly considered the aspect of goodwill when making his report to the Court on the accounts between the parties.

3 There were a considerable number of disputes between the former partners after the dissolution of the partnership which raised questions of law and of accounting. After considerable debate, I referred all matters to a referee, Mr Andrew Wily, a chartered accountant and liquidator. Mr Wily filed his report on 19 March 2007. Each of the former partners has filed notice of motion to adopt or reject that report in whole or in part.

4 After further debate, the issues in dispute arising from the report were isolated. I am presently dealing with only one of them, namely whether Mr Wily’s report insofar as it deals with the subsistence of goodwill in the Hodgkinson Old & McInnes partnership after its dissolution should be rejected.

5 The matter was debated before me on 20 May 2008 when Mr R D Marshall and…

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 Old v Hodgkinson; Old v McInnes

Details

AGLC: Old v Hodgkinson; Old v McInnes [2008] NSWSC 697
Case: [2008] NSWSC 697
Decision Date: 9 July 2008

CaseChat Overview and Summary

The case of Old v Hodgkinson; Old v McInnes involved a dispute between former partners regarding the dissolution of their partnership. The matter was heard in the Supreme Court of Victoria, where the primary issue was the valuation and distribution of the partnership's assets, specifically whether the goodwill of the dissolved partnership should be considered in settling the accounts. The court had to determine the extent to which the goodwill of the former partnership should be taken into account, particularly in light of the former partners continuing to trade in separate firms.

The central legal issue was whether the goodwill of the dissolved partnership should be valued and included in the settlement of the accounts among the former partners. The court had to consider the general principle that goodwill generally has no independent existence separate from the conduct of the business, and whether this principle applied to the circumstances where the former partners continued to trade as separate entities. The court also examined whether the goodwill could be apportioned between the two new firms based on the components of the former partnership's goodwill they were using.

The court reasoned that while the former partners continued to trade using components of the goodwill of the former partnership, the goodwill of the dissolved partnership must have nil value when taking the accounts of the former partnership. This was because goodwill generally has no independent existence separate from the conduct of the business, and the former partners were now operating as separate firms. The court found that the goodwill of the dissolved partnership should not be considered in the settlement of the accounts, as it had no value independent of the ongoing business operations. Consequently, the court ordered that the goodwill of the former partnership be disregarded in the final settlement of the accounts between the former partners.

Orders