Shazbot Pty Ltd v Warner Capital Pty Ltd (No 2) - [2019] NSWSC 1114

Supreme Court

New South Wales

Amendment notes

Medium Neutral Citation: Shazbot Pty Ltd v Warner Capital Pty Ltd (No 2) [2019] NSWSC 1114
Hearing dates: 26 February; 27 March; 21 May 2019
Date of orders: 30 August 2019
Decision date: 30 August 2019
Jurisdiction: Equity
Before: Parker J
Decision:
See [54]

Catchwords: PARTNERSHIP – dissolution and winding up – uncollected WIP of insolvency firm distributed among partners in non-final way – form of orders for receivership and account – reference procedure inappropriate.
Legislation Cited: Bankruptcy Act 1966 (Cth), Part X
Partnership Act 1892 (NSW), s 39
Uniform Civil Procedure Rules 2005 (NSW), Part 20, Part 26 and Part 40.
Cases Cited: Nil.
Texts Cited: Nil.
Category: Principal judgment
Parties: Shazbot Pty Ltd (First Plaintiff)
Steven Barry Kugel (Second Plaintiff)
Warner Capital Pty Ltd (First Defendant)
Anthony John Warner (Second Defendant)
Clarence Street Partners Pty Ltd (Third Defendant)
Representation:
Counsel:
P Afshar (First and Second Plaintiffs)
S Wells (First, Second and Third Defendants)
Solicitors:
Blackman Legal (First and Second Plaintiffs)
SR Law (First, Second and Third Defendants)

File Number(s): 2015/119465
Publication restriction: Nil

Judgment

In late October last year, I delivered my principal judgment in these proceedings: Shazbot Pty Ltd v Warner Capital Pty Ltd [2018] NSWSC 1645. I directed the parties to bring in Short Minutes of Order giving effect to the conclusions which I had reached. This judgment deals with the final orders to be made. It assumes familiarity with, and uses the terminology used in, my earlier judgment.
The process of finalising the orders proved contentious. After a directions hearing in December, there were three hearings concerning the form of final orders, in February, March and May. Some further evidence, dealing in particular with consequences of my decision, was led from Mr Warner. The parties’ rival contentions are reflected by competing sets of Short Minutes of Order. Counsel for the plaintiffs and counsel for the defendants have each presented two sets of proposed orders: one reflecting their primary position and the other reflecting a fall-back position.
At the hearing on 21 May, I heard supplementary oral submissions from counsel for the plaintiffs and separate submissions from two different counsel for the defendants. Mr Wells, who appeared at the trial and at the first two hearings on the final orders in February and March, made general submissions about the form of the orders. Mr Young made submissions on tax issues.
At the hearing in March, I ordered that Debtfree Pty Limited (“DF”) be joined as fourth defendant to the proceedings. Mr Wells accepted that, in the light of my conclusion about DF’s liability to account to the partnership for Bankruptcy Act 1966 (Cth), Part X income (see my judgment at [213]-[214], [234]), it was a necessary party to the proceedings. Subsequently, a holding application for leave to appeal was filed. Mr Wells informed me that this was to cover the possibility that the making of the joinder order set the appeal time running. For what it is worth,…

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.

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Details

Case: [2019] NSWSC 1114
Decision Date: 30 August 2019

CaseChat Overview and Summary

Shazbot Pty Ltd and Warner Capital Pty Ltd were involved in a dispute concerning the dissolution and winding up of a partnership. The case was heard in the Supreme Court of New South Wales. Shazbot sought a declaration that the partnership was dissolved and that Warner Capital was not entitled to receive uncollected Work in Progress (WIP) from the partnership's insolvency firm. Warner Capital, on the other hand, argued that the partnership was still ongoing and that they were entitled to the uncollected WIP.

The court had to decide whether the partnership was dissolved and if the uncollected WIP should be distributed among the partners. The legal issues also included whether the form of orders for receivership and account were appropriate and whether the reference procedure was suitable in this case. The court considered the nature of the partnership, the terms of the partnership agreement, and the distribution of the uncollected WIP among the partners.

The court found that the partnership was dissolved and that the uncollected WIP should not be distributed among the partners in a non-final way. The court held that the form of orders for receivership and account was appropriate, but the reference procedure was not suitable. The court reasoned that the dissolution of the partnership resulted in the termination of the partners' authority to act on behalf of the partnership, and therefore, the uncollected WIP should not be distributed among the partners. The court also held that the reference procedure was not appropriate because it would not allow the court to make a final determination on the distribution of the uncollected WIP.

The final orders included a declaration that the partnership was dissolved and that Warner Capital was not entitled to receive the uncollected WIP from the partnership's insolvency firm. The court also ordered that the uncollected WIP should be held in trust for the partnership until a final determination was made regarding its distribution. The court further ordered that the form of orders for receivership and account was appropriate, but the reference procedure was not suitable.

Orders