Sobey v Sobey - [2019] VSC 536

60 VR 44

SOBEY v SOBEY and Others Supreme Court of VictoriaRandall AsJ 6 April 2018, 16 August 2019[2019] VSC 536Partnership and Partners — Dissolution of partnership — Taking of accounts — Where one partner continued operating partnership business and using its assets before finalisation of dissolution — Where plaintiff entitled to share of post-dissolution profits attributable to, or interest calculable by reference to, share of partnership assets — Where the plaintiff elected an award of interest — Where negative net assets at dissolution — Whether interest calculated against gross assets or net assets — Whether subsequent discharge of business’s liabilities relevant — Partnership Act 1958 (Vic), s 46.

The plaintiff had been a member of a partnership operating a family farming business (Partnership). In late 2010, the plaintiff left the business, which was then operated solely by his brother, the third defendant.

The Court had previously declared the Partnership dissolved as at 28 January 2011 and ordered a taking of accounts.

Pursuant to s 46 of the Partnership Act 1958 (Vic) (Partnership Act), the plaintiff was entitled to either a share of the profits since dissolution, or to interest from the date of dissolution, calculated upon his share of the Partnership’s assets. The taking of accounts proceeded on the basis that the plaintiff elected to claim interest.

At the date of dissolution, the Partnership’s assets were $971,268 and liabilities $1,468,642. That is, its gross asset position was positive but its net asset position was negative. Further, in January 2012 the plaintiff’s parents had discharged the borrowings that had been the liabilities of the Partnership business.

The plaintiff claimed interest upon the gross assets of the Partnership at the date of dissolution, and contended that the liabilities were irrelevant as they were subsequently discharged. He claimed alternately that if interest was to be calculated upon net assets, he was entitled to interest from January 2012 when the liabilities were discharged. He claimed as a further alternative that the Court should take a flexible approach to its calculation to account for the discharge of the liabilities.

The third defendant opposed these claims, asserting that the plaintiff was only entitled to interest upon the Partnership’s net assets at the time of dissolution, that such position had been negative and that the plaintiff was consequently not entitled to any interest.

Held:

The amount of interest payable to the plaintiff pursuant to s 46 of the Partnership Act was nil, as the Partnership’s net assets at the date of dissolution were negative. [69].

(a)
The proper approach to determining interest payable under s 46 was to consider the Partnership’s net assets at the date of calculation. [27], [36].
Oddy v Fry (Unreported, Supreme Court of Victoria, McDonald J, 22 May 1997); Fry v Oddy [1999] 1 VR 557 explained.Sandhu v Gill[2006] Ch 456; Walker v Melham[2007] NSWSC 264; Beale v Trinkler [2007] NSWSC…

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

AGLC: Sobey v Sobey [2019] VSC 536
Case: [2019] VSC 536
Decision Date: 16/08/2019

CaseChat Overview and Summary

The case involved a dispute between Andrew Sobey and James Sobey, who were partners in a family farming business. The Court had previously declared the partnership dissolved and ordered a taking of accounts. Pursuant to s 46 of the Partnership Act 1958 (Vic), Andrew was entitled to either a share of the profits since dissolution or interest from the date of dissolution, calculated upon his share of the Partnership’s assets. Andrew elected to claim interest. The issue before the Court was whether interest was to be calculated upon Andrew's share of the gross assets or net assets of the Partnership at the date of dissolution. The Court held that the proper approach to determining interest payable under s 46 was to consider the Partnership’s net assets at the date of dissolution. The Court also held that the date for the calculation of interest pursuant to s 46 was the date of the Partnership’s dissolution and that the discharge of liabilities after the dissolution of the Partnership was irrelevant to the taking of accounts. Accordingly, Andrew was not entitled to any interest.

Orders