Paltos v Milevski

The appeal concerned the winding up of a two-person solicitors' partnership. Receivers appointed to the partnership transferred many of its assets to a new firm established by one of the former partners. The central dispute revolved around the valuation and transfer of the partnership's goodwill. The Court of Appeal of New South Wales was tasked with determining whether the goodwill had been validly transferred to the new firm.

The primary legal issues before the court were whether the partnership's goodwill had been transferred to the new firm and, if so, on what basis its value should be assessed. Specifically, the court considered whether the continuity of the business was sufficient to establish a transfer of goodwill and whether the assumption of a broad non-compete covenant by a hypothetical purchaser was a valid consideration in valuing the goodwill.

The Court of Appeal held that the goodwill had not been transferred to the new firm. This conclusion was based on the finding that there was no continuity of the business in a manner that would permit the transfer of goodwill. Furthermore, the court found that even if goodwill had been transferred, the claim for its value was erroneously based on the assumption that a hypothetical purchaser would benefit from a broad non-compete covenant from the former partners, which was not a permissible basis for valuation in this context.

The appeal was dismissed, with costs awarded to the respondent. The stay granted on the judgment and orders below was dissolved, and the sum of $25,000 paid by the appellant as security for the costs of the appeal was ordered to be released to the respondent.