Wimpole Properties Pty Ltd v Beloti Pty Ltd (No 1)
[2011] VSC 7
•31 January 2011
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
No. 8333 of 2009
| WIMPOLE PROPERTIES PTY LTD (ACN 006 321 875) | Plaintiff |
| V | |
| BELOTI PTY LTD (ACN 088 218 106) & ORS | Defendants |
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JUDGE: | JUDD J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 15 and 16 December 2010 | |
DATE OF JUDGMENT: | 31 January 2011 | |
CASE MAY BE CITED AS: | Wimpole Properties Pty Ltd v Beloti Pty Ltd (No 1) (Second revision) | |
MEDIUM NEUTRAL CITATION: | [2011] VSC 7 (Second revision) | 8 February 2011 |
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RECEIVER – Partnership property – Partnership dissolved – Unauthorised dealings with partnership property – Receiver appointed.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D M B Derham QC with Mr D T Forbes | Andrew Gray & Associates |
| For the First to Seventh, Ninth and Eleventh to Fourteenth Defendants | Mr J D S Barber | Chadwicks |
HIS HONOUR:
Introduction
By a summons dated 27 August 2010, issued in a proceeding commenced by Wimpole Properties Pty Ltd in this court, Wimpole sought the appointment of James Patrick Downey as receiver of leaseholds at the Somers Holiday Park, the Koonwarra Holiday Park and the management of businesses operated as holiday parks. By a further summons, dated 26 November 2010, Wimpole sought orders restraining Beloti Pty Ltd and the defendants, other than the Registrar of Titles, from selling or otherwise dealing with any lease or caravan site at Koonwarra, Somers and another property known as Blue Gum Holiday Park. The second summons was in truth an alternative claim. If the appointment of a receiver was effective there would be no need for the injunctions. Both summonses were listed for hearing on 15 December 2010. On the following day, I appointed Mr Downey as an interim receiver of unsold leases at Koonwarra and Somers, to supervise and administer the marketing and sale of the leases by one of the defendants, Simms Corp Hotels & Leisure Pty Ltd, and to receive and manage the proceeds from uncompleted and new sales.
Background
This proceeding had been commenced by Wimpole in August 2009. There are 14 defendants. For present purposes the most important defendant is Beloti. The statement of claim, including schedules, extends to 111 pages. The allegations range far and wide. Wimpole alleged misleading and deceptive conduct by Beloti and others in relation to the acquisition of project sites. The relevant representations concern profitability. Wimpole claimed an entitlement to rescind the partnership agreement and sought orders dissolving the partnership. The scope of Wimpole’s claim has since been modified and there is no longer a claim in respect of Blue Gum.
Wimpole also made claims for partnership profits and for an accounting as between partners and to the partnership. Wimpole claimed, amongst other relief, a declaration that the partnership was rescinded; an order that the business and affairs of the partnership be wound up; and the appointment of a receiver over partnership property. Wimpole contended that Blue Gum and a further property known as the Nicholson River Holiday Park, were not partnership property.
A few months earlier, Beloti and Simms Corp Hotels & Leisure had commenced a proceeding by writ, issued out of the County Court of Victoria, against Wimpole and Andrew Phillips. The County Court proceeding was transferred to this court and both proceedings are now managed together. In that proceeding Beloti sought damages from Wimpole for repudiation of a partnership agreement. Simms Corp Hotels & Leisure sought damages from Wimpole calculated by reference to an alleged entitlement to commissions. That claim is by no means straightforward, at least as presently pleaded. It is not necessary to say more about the claim at this time. By its defence in the County Court proceeding, Wimpole admitted dissolution of the partnership, but joined issue with the allegations of breach.
The partnership agreement as pleaded by Beloti was in writing, described as an ‘Investment & Profit Share Agreement’. It is dated 9 March 2005. The agreement was made between Beloti, Wimpole and Simms Corp Management Advisory Pty Ltd. Beloti alleged that the written document was the consolidation of earlier discussions, although some terms were not expressly captured by the writing. Beloti alleged that the partners had agreed to acquire certain properties which had potential for development as holiday parks, and subdivide the properties into leaseholds to be sold to the public with or without a dwelling. It was contemplated that purchasers might use or rent a site (as a caravan park or with a cabin) throughout the development phase and thereafter. A park manager would maintain the common facilities for a fee to earn commission on rentals.
There were four parcels of land acquired pursuant to the agreement, which became known as Nicholson River Holiday Park, Blue Gum Holiday Park, Koonwarra Holiday Park and Somers Holiday Park. Each parcel of land was described in the agreement as a ‘Project’, presupposing some development or management activity.
The relationship and entitlements of Beloti and Wimpole under the agreement were not as equal partners. Wimpole was described as the owner of the Nicholson River and Blue Gum projects, but only a one-third owner of Koonwarra and Somers projects. Beloti was described as the owner of the remaining two-thirds of the Koonwarra and Somers projects. The use of the descriptor ‘owner’ may be an overstatement. On one view, perhaps the most plausible, ownership of a project meant no more than a right to derive income from the management of the holiday park prior to sale of the last lease. Thus, Wimpole would be entitled to the whole of the revenue from the management of Nicholson River and Blue Gum, but only one-third of the income from the management of Somers and Koonwarra.
The partners agreed that in respect of each project, they would incorporate a separate entity to take a lease over the property, subdivide, and sell individual leases (cl 6.1). Somers Developments Pty Ltd and Koonwarra Developments Pty Ltd were such entities. Andrew Troedel was and is a director of Wimpole. He is also a director of Somers Developments and Koonwarra Developments. Peter Simitzis and Geoffrey Russell Downing, who are defendants in this proceeding, are directors of Beloti, Somers Developments and Koonwarra Developments. It seems common ground that the sale of leaseholds at Somers and Koonwarra, and the management of those sites was and is under the control of Beloti. The evidence supports that conclusion.
Under the partnership agreement, funding was to be primarily obtained through borrowings from a bank, with the balance to be provided by Wimpole and Beloti in proportions to be agreed (cl 5). The profit from the sale of leases at Nicholson River and Blue Gum was to be shared equally between Beloti and Wimpole, but for Koonwarra and Somers, Wimpole would receive only one-third and Beloti two-thirds (cl 7.1). Following the last sale of a project leasehold in any project, Simms Corp Management Advisory would become entitled to acquire the management rights at a price of twice the net profit of the project ‘on an annual basis’ as at the date of the last sale (cl 8). The basis for the calculation of the amount payable is unclear. It might be thought that the parties intended the price to be a reflex of the operating profit earned from the management of the site up to the point of the last sale. A handwritten amendment was made to cl 8.3 and suggests that the calculation should be made as a reflex of the proportional division of net profit derived from the sale of leases. Depending on the method of calculation, there would be very different outcomes.
The parties did not advance detailed submissions on the proper construction of the agreement, and it is unnecessary to reach any concluded view at this time on the numerous uncertainties or ambiguities. Suffice to say, on completion of the Nicholson River and Blue Gum Projects (that is, following the last sale of a leasehold), Wimpole stood to lose its right to the whole of the operating profit derived from the management of those holiday parks if Simms Corp Management Advisory were to exercise its right under cl 8 to acquire the management rights.
The agreement conferred important rights on Simms Corp Hotels & Leisure, which are the subject of its claim in the County Court proceeding. It was to be exclusively retained to market and sell the leases (cl 6.3). While the definition ‘Simms Corp’, employed at different times in the agreement is ambiguous, variously referring to Simms Corp Management Advisory and Simms Corp Hotels & Leisure, the context would suggest that it is the latter company which was to be appointed to sell the leases at a commission of $7,000 plus GST per lease sold (cl 6.4). That entity was also entitled to a rental allowance of $300 per week and a commission of $1,000 for each cabin sold. There was also a commission entitlement of $8,000 for each house and land package ‘whether or not in conjunction with the sale of the site or lease’. Presumably, the commission of $8,000 was payable in substitution for the leasehold commission of $7,000 plus the cabin commission of $1,000. If that is correct, the concluding words to the commission entitlement of $8,000, highlighted above, make no sense.
While the agreement lacks clarity, consistency and precision, it is tolerably clear that the rights and obligations created thereunder were predicated on the assumption that the whole or a substantial part of each parcel of land would be leased to a new development entity, subdivided and the new individual leases sold to the public. When all leases had been sold, the project would conclude, save for the reversionary interest under the leases, proprietary rights in relation to any unleased land and any remaining management rights over the holiday parks.
In its statement of claim Beloti alleged that Wimpole had wrongfully suspended the sales program at Blue Gum, Koonwarra and Somers and failed to develop and sell leases at Nicholson River. Beloti alleged that its partnership with Wimpole had broken down and claimed that, by the issue and service of the writ, notice had been given to Wimpole of Beloti’s intention to dissolve the partnership pursuant to s 36 of the Partnership Act 1958. Beloti also claimed damages for repudiation of the partnership agreement.
Beloti’s case proceeded on the basis of an obligation to develop and sell all leases on all sites. That obligation is not plainly expressed in the words of the agreement. Initially, Wimpole rejected any such obligation, contending that Nicholson River and Blue Gum were not partnership property, and that it was not required to subdivide and sell the leases at those sites. If correct, Wimpole’s contention would enable it to avoid creating triggers for entitlements under the partnership agreement. Simms Corp Hotels & Leisure would not derive commission from the sale of leaseholds or house and land packages at Blue Gum and Nicholson River; Beloti would not derive 50% of the net profit on each sale; and Simms Corp Advisory Management would not become entitled to acquire the management rights.
During the hearing of its applications, Wimpole conceded, correctly in my opinion, that the Nicholson River and Blue Gum projects were partnership property. They were acquired and held pursuant to the partnership agreement. They were referred to as ‘Projects’, and profit share entitlements were prescribed in relation to their management and upon the sale of leases. In such circumstances it would contradict a fundamental objective of the agreement if Wimpole were to be excused from any obligation to convert the properties into leases and sell them.
Partnership is Dissolved
In the County Court proceeding, Beloti alleged that the partnership had been entered into for an undefined time and thus could be and was dissolved by service of the writ. Those allegations were admitted by Wimpole in its defence.
Section 36 of the Partnership Act provides,
36 Dissolution by expiration or notice
Subject to any agreement between the partners a partnership is dissolved—
(a)if entered into for a fixed term by the expiration of that term;
(b)if entered into for a single adventure or undertaking by the termination of that adventure or undertaking;
(c)if entered into for an undefined time by any partner giving notice to the other or others of his intention to dissolve the partnership.
In the last-mentioned case the partnership is dissolved as from the date mentioned in the notice as the date of dissolution or if no date is so mentioned as from the date of the communication of the notice.
By its defence in the County Court proceeding, Wimpole rejected the basis for Beloti’s allegation of repudiation and advanced a case for rescission. Both parties now accept that the partnership is dissolved, and that no order of the court is required to achieve dissolution. Wimpole advanced evidence that Beloti was engaged in unauthorised dealing with partnership property by marketing and selling leases; and by mortgaging property to the National Australia Bank.
In Taylor v Neate[1] Chitty J said,
And when the parties will not agree, after they have dissolved, as to the mode of executing works which they have to execute according to an existing contract, it is quite clear that the Court must intervene, and that it will not allow one partner to insist upon something being done in a particular way. The result is that the Court must take into its own hands, by the appointment of a proper officer, the management of such a concern as this is, and that manager must of necessity enter into subordinate contracts. For instance, in the case before me, he must employ workmen and pay the wages, and it is said that some weeks will elapse before these contracts can be worked out.
[1][1888] 39 ChD 538.
Wimpole and Beloti cannot agree how the business of the partnership and its assets are to be wound up. There is mutual distrust. Both partners continue to deal with partnership property as if their own. Beloti, through Simms Corp Hotels & Leisure, has continued to offer for sale and sell leaseholds and cabins. It sought to justify its action on the basis that sales were necessary to reduce the partnership debt to the bank, to produce working capital, and generate commissions, which Beloti must receive in order to pay its legal expenses in these proceedings.
In about 2008, after the relationship between the partners had broken down, Beloti refinanced the Somers Project, replacing the existing partnership facility at the bank without the knowledge or consent of Wimpole. Beloti said that the new facility (Somers facility) had been used to repay the existing facility and to provide additional capital. Beloti argued that the facility had been obtained in its name alone, and therefore did not require the knowledge or consent of Wimpole. Mr Simitzis, a director of Beloti, said that the new facility had been used entirely for the purpose of development and upkeep of Somers. Repayment of the facility was, however, secured by partnership assets.
Beloti’s marketing and sale of leases at Somers and Koonwarra was not disclosed to Wimpole. Had Beloti discharged its continuing obligation to discover relevant documents in this proceeding, Wimpole would have been alerted to the marketing and sales. Beloti failed to disclose such documents until very recently. It was through events other than discovery that Wimpole discovered the existence of the Somers facility with the bank. There is another facility with the bank, in relation to Koonwarra, which is in default. The bank has issued notices to pay to Wimpole, Beloti and others.
Notwithstanding the dissolution of the partnership, it is not to be assumed that a receiver will be appointed as a matter of course. The applicable principles are not in dispute, and were helpfully summarised by Le Miere J in Moloney v Piachniarski,[2]
The power to appoint a receiver is discretionary. However, the second and third defendants submit that where a partnership has been dissolved and the parties are in serious dispute, a receiver will be appointed by the court almost as a matter of course. A breakdown of relations between the parties and an inability on their part to cooperate in the winding up of the partnership affairs is usually sufficient to warrant the appointment of a third party receiver for that purpose.
It is often said that if the partnership is already dissolved, appointment of a receiver is not automatic but the court usually appoints a receiver, almost as a matter of course: see, for example, K L Fletcher, Higgins and Fletcher The Law of Partnership in Australia and New Zealand, 8th ed, Thomson, Pyrmont, 2001, p 317; Laws of Australia, Law Book Co, 4.8: 71; “Civil Procedure Western Australia”, [51.1.18]. In Wedge v Wedge (1995) 12 WAR 489 consent orders were made for the dissolution of a farming partnership. The plaintiff sought an order for the appointment of a receiver and manager with a view to the sale of the partnership assets. Parker J referred to the 16th edition of N L Lindley, Lindley and Banks on Partnership, Sweet & Maxwell, London, 1990, where, at para 23.150, the author quotes, without disagreement, from Lord Lindley: “… whilst if the partnership was already dissolved, the court usually appoints a receiver, almost as a matter of course”. His Honour went on to hold that although there was no apparent risk to the assets in the case, the circumstances attending the affairs of the partnership and the breakdown of relations between the parties brought the case within the category of serious dispute between the parties. The normal approach, his Honour said, is for a receiver to be appointed in circumstances such as those.
The author of the 18th edition of Lindley & Banks on Partnership, at para 23.160, makes the following comment on Lord Lindley’s statement:
Lord Lindley’s use of the expression “almost as a matter of course” in relation to appointments following a general dissolution should not be taken too literally. There is nothing approaching a presumption that a receiver will be appointed in such a case and sufficient ground will always have to be shown, as a Court of Appeal made clear in Toker v Akgul.
[2](2004) 51 ACSR 564; (2004) WASC 240, [35] – [41].
The author had earlier said at para 23.157 that where an action is brought seeking the dissolution of the partnership and/or the winding up of its affairs, a receiver and, in particular, a receiver and manager will more readily be appointed, but it is clear from the Court of Appeal’s judgments in Toker v Akgul that such application will not be granted as a matter of routine. In every case, it will be necessary to show sufficient grounds for the appointment and that the expenses associated therewith will not be disproportionate to the nature and value of the partnership business.
…
In Rowlands v Macdonald [2002] NSWSC 282; BC200201583, Barrett J referred to the general principle that where a partnership has been dissolved, the plaintiff is entitled as a general rule, and practically as a matter of course, to the appointment of an interim receiver. His Honour added the following qualification:
But the remedy remains discretionary and it was emphasised by Powell J in Fitz-Gibbon v Khoury (unreported, NSWSC, 1 March 1985) that the court must pay attention to the surrounding circumstances:
“This general rule notwithstanding, it is equally well established that it is not inevitable that, in any such case, an interim receiver and manager will be appointed, and that the Court retains a residual discretion as to whether any appointment should be made; one of the bases upon which, in an appropriate case, an appointment will be refused, is that the consequences of such an appointment will be ‘ruinous’ (see, for example, Walters v Taylor (1807)15 Ves 16; 33 ER 658; Tate v Barry (1928) 28 SR (NSW) 380; Sobel v Boston [1975] 2 All ER 282).”
In my view, where the partnership is already dissolved, the court will appoint a receiver if sufficient grounds are shown. The court should not appoint a receiver as a matter of course, that is, merely because the partnership has been dissolved and one of the partners seeks the appointment of a receiver. However, where the partnership is already dissolved, the burden on a partner seeking the appointment of a receiver to show sufficient grounds for the appointment is much less than where the partnership is continuing. One situation in which the interests of the parties is best served by the appointment of a receiver is where there is a serious dispute between the parties or a breakdown of the relations between them that hinders or prevents the orderly winding up of the partnership affairs.
Wimpole sought the appointment of an interim receiver pending final determination of the proceeding, even though such a receiver was to sell partnership property and assume management of the sites. Such an appointment might ordinarily be characterised as final relief, where the real purpose of the appointment is to realise the assets of the partnership.
To appoint a receiver at this stage of the proceeding to sell partnership assets, and effectively commence the process of winding up the partnership, might be arresting were it not for the special circumstances of this case. Notwithstanding the claims and counterclaims made by Wimpole and Beloti, it is common ground that the partnership is dissolved. In the absence of agreement, the question is not whether a receiver should be appointed to sell the partnership assets, but whether the process of sale should await the conclusion of the trial on all issues.
In my opinion, there is no principle that would preclude the appointment of a receiver at this time to commence the sale process, if the appointment is justified in the proper exercise of discretion. In the present circumstances, such an appointment is necessary. Beloti has already commenced to sell partnership property. In the absence of agreement, a managed realisation of partnership assets is inevitable and would be in the interests of both partners. Undertaking the process at this time will not prejudice other claims for damages for breach of the partnership agreement, or for contraventions of the Trade Practices Act. These may be litigated and, if successful, result in an award of damages or an adjustment in the distribution of partnership funds.
Beloti submitted that the appointment of a receiver would be ruinous because of the associated costs and, more importantly, the prejudicial impact of removing its source of income to be derived from the sale of leases, the management of Koonwarra and Somers, and commissions (through Simms Corp Hotels & Leisure) on the sale of leases and cabins. Beloti submitted that the interruption of the sales program for leases at Koonwarra and Somers would prevent it from repaying the bank, and probably result in a default under the Somers facility.
Beloti argued that without its sources of revenue, it could not afford to prosecute its case in the proceedings. It conceded that its financial position was precarious. Beloti went further and submitted that Wimpole’s conduct in refusing to cooperate in the sale of leases, characterised as a repudiation of the partnership agreement, was designed to starve Beloti of funds and prevent it from obtaining a just remedy. It was not entirely clear how Beloti supported that allegation and to what effect, save that it was said to be a factor to be taken into account in the exercise of the discretion to appoint a receiver. Beloti did not go so far as to contend that Wimpole’s conduct was a contempt or that its case was an abuse of process.
In my opinion, Wimpole was under an obligation to develop Nicholson River and cooperate in the sale of leases at Nicholson River and Blue Gum. The agreement would be frustrated unless Wimpole discharged such obligations in relation to the partnership property - Nicholson River and Blue Gum. If, as Beloti alleged, Wimpole failed to perform its contractual obligations, Beloti would be denied a profit share under the partnership agreement, and Wimpole would continue to enjoy all of the profit from the management of Nicholson River and Blue Gum. Even if it be assumed, for present purposes, that Wimpole’s conduct was in breach of partnership obligations, it is an impermissible step, in the absence of other evidence, for Beloti to convert those breaches, and so-called ‘litigation tactics’, into the basis to attribute impropriety of the kind alleged.
I reject the submission that Wimpole’s application for the appointment of a receiver should be refused because of its alleged breach of the partnership agreement, or repudiation, or its conduct in this litigation, or those matters in combination. Having had the management of this case, I am acquainted with the procedural steps taken by the parties. The litigation tactics of Wimpole, about which Beloti complained, were, for the most part, attempts by Wimpole to assert rights and claim remedies. While Wimpole may be said to have adopted an aggressive approach in the assertion of its rights, its conduct falls far short of providing any support for a complaint of impropriety. In my view the attribution of an improper motive to Wimpole, to cause financial harm to Beloti and prevent it from prosecuting its case, is without substance.
On the other hand, Beloti conceded that it had concealed its unauthorised dealings with partnership property and omitted to discover highly relevant documents relating to the implementation of its sales program for the leases at Koonwarra and Somers. Had proper discovery been given by Beloti, Wimpole would have been alerted to the dealings.
The precarious financial position in which Beloti finds itself is unfortunate. I accept that, in the absence of revenue from sales of leases or land packages, it will lose a primary source of income. I note that Beloti did not rely upon the possible prejudice to its relationship with the bank, under the Somers’ facility, should a receiver be appointed to that project. The appointment of a receiver would almost certainly trigger an event of default. Beloti’s position may simply reflect a realistic assessment of its relationship with the bank, and its tenuous financial position. After all, a notice of default under the Koonwarra facility had already been given by the bank. There are also unpaid rates.
In order to meet the argument that its precarious financial position put partnership assets at risk, Beloti submitted that it was trading profitably. Having reviewed the accounts relied upon by Beloti to advance that position, I am not satisfied that they demonstrate any such thing. The accuracy of the accounts was challenged. The profitability reflected in the accounts seems to be the result of income generated from the sale of cabins. That profit exposed a different problem. Where a lease had been sold with a cabin, Beloti had made an allocation of sale price between the lease and the cabin. While the leases are partnership property, the cabins appear to be sold by Beloti on its own account. There was no agreement about the allocation. The unilateral decision to allocate proceeds involved Beloti in a serious conflict of interest.
Beloti also submitted that Simms Corp Hotels & Leisure, a related entity, was well-placed to sell the leases and house and land packages. Beloti argued that, if permitted to continue to sell, it would be able to generate sufficient funds to repay the bank and fund the litigation. It submitted that the prime selling season was the summer months and that there were already a number of prospects which might result in sales. Beloti submitted that the profit on sale of a lease, available to repay the bank, was in the order of $80,000 and that there were around 100 leases at Koonwarra and Somers available for sale.
Beloti submitted that, if a receiver were to be appointed to sell the leases at Somers and Koonwarra, the receiver should also be appointed to realise the Blue Gum and Nicholson River projects. I declined to extend the power of the interim receiver, appointed on 16 December 2010, to those projects, confining the scope of his role to supervise the sales which Beloti said were imminent or could be made in the near future. The Blue Gum and Nicholson River Projects did not fall into that category. Such leases as existed were not then being marketed. After all, that was the substance of Beloti’s complaint and the basis for its allegation of repudiation.
In my opinion the appointment of a receiver at this time to sell or manage the sale of the partnership property that is designed and intended for sale, such as existing leases, is not only appropriate, but necessary. The parties are agreed that the partnership is dissolved. No one partner should deal with partnership property without the consent of the other. Both Beloti and Wimpole are dealing with partnership property without the other’s consent.
Beloti has demonstrated its willingness to engage in unauthorised dealings with partnership property, through the sale of leases and by providing such property as security to the bank for the Somers’ facility. I am persuaded that it did so deliberately, knowing that if Wimpole was informed, it would object. There is also Beloti’s conflict of interest involving the allocation of price between cabins and leases. The impecuniosity of Beloti is another factor which is relevant to the exercise of discretion to appoint a receiver. It is unable to meet the continuing obligations to the bank under the Koonwarra facility. Its survival seems to depend on cash flow from the sale of partnership assets. In the absence of support from Wimpole, it is very likely that the bank will move to recover the balance of the outstanding loans.
Beloti submitted that a receiver, appointed to sell the partnership property, may decide to sell the whole of the land and businesses in ‘one line’ rather than individual leases. Beloti submitted that such an approach would have the effect of reducing the potential profit available to repay the bank and distribute between the partners. That may be so, but an experienced and prudent receiver will inform him or herself as to the most appropriate sale process, with the object of maximising returns while managing risks. It is by no means apparent that a receiver would adopt one course or another. In the event of uncertainty or serious objection by one partner, a receiver may approach the court for directions. The appointment of a receiver can have the beneficial effect of dissuading a security holder, such as the bank, from exercising remedies. Beyond these practical considerations, however, the receiver is a person independent of the partners, under the supervision of the court. A receiver will do what must be done without the risks associated with the unauthorised actions of individual partners dealing with partnership property.
In the circumstances I propose to extend the appointment of Mr Downey as receiver to all four projects to realise the leases, land and operations conducted thereon and to manage the operations pending a sale. Mr Downey will no doubt consider representations from Wimpole and Beloti as to how best to realise the partnership assets and manage the sites in the meantime. He may, but need not, continue to engage Wimpole and Beloti to manage the sites presently managed by them. He may, but need not, engage Simms Corp Hotels & Leisure to sell leases. Those will be matters for Mr Downey, subject to the supervision of the court. I will hear the parties on the form of appropriate orders, including the powers of the receiver and manager.
First revision – 31 January 2011
Since preparing these reasons, and advising the parties of the day appointed for delivery of judgment, two further affidavits were brought to my attention. I have read the affidavits and delivered the following additional reasons immediately after handing down judgment, advising the parties the additional reasons would be incorporated into the reasons for judgment as a first revision.
Mr Troedel, a director of Wimpole, prepared and filed an affidavit sworn 17 January 2011. Mr Troedel deposed that the Koonwarra property was advertised for sale by Jones Lang LaSalle, and had been so advertised at the time of Wimpole's application on 15 December 2010. The substance of Mr Troedel's complaint was that the sale was not authorised, and the court was not informed of it.
I have already found that Beloti deliberately withheld information from its former partner concerning its selling activity, and that its failure to discover relevant documents was one means by which it achieved that objective. While the new evidence takes that matter no further, it demonstrated a more broadly based level of concealment.
Mr Simitzis prepared and filed an affidavit in reply sworn, 21 January 2011. After referring to some discussions with Matthew George of Jones Lang LaSalle he deposed,
At no time have I provided to Mr George any auction or sale authority. Such an authority would be required before an agent could formally list a property for sale. Mr George did send me draft authorities but I refused to sign them. I did not discuss price with Mr George.
Throughout this process I was well aware that the Koonwarra Holiday Park was and is co-owned by Wimpole Properties and it did not occur to me to attempt to sell it without Wimpole Properties’ consent.
…
Until I read Mr Troedel’s affidavit I did not know that the two properties were still, or were again, on Jones Lang LaSalle’s website. I did not authorise Mr George or anyone else at Jones Lang LaSalle to put the properties on their website after the conclusion of the mediation. I have now telephoned Jones Lang LaSalle’s office and requested them to remove the reference to the properties from their website.
I find this evidence of Mr Simitzis difficult to accept. It is improbable that an estate agent interested in earning a commission would advertise a property for sale without the approval of the owner. Further, the advertisement contains details which indicate that detailed instructions were given. Such instructions are consistent with approval to act. Of more significance at this time, however, is the extent to which the conduct of Beloti is inconsistent with an important plank of its case in opposition to the appointment of the receiver.
Beloti had argued that one of the risks associated with the appointment of the receiver was the prospect that he might sell the holiday park, or parks, ‘in one line’. That is precisely what Beloti proposed should be done with Koonwarra through Jones Lang LaSalle.
Second Revision – 8 February 2011
Following judgment, the parties and the receiver, who by then was represented by his solicitor, consulted with the object of preparing an agreed form of order to include appropriate powers for the receiver. Before the matter resumed for hearing on 2 February 2011, Wimpole filed a supplementary submission in which it took exception to the accuracy of a reference in the Reasons for Judgment to its concession that Nicholson River and Blue Gum projects were partnership property. Having reviewed the transcript, I am satisfied that the concession actually made by Wimpole was much more narrow. It only conceded that the leases at Blue Gum, which are held by Blue Gum Park Developments Pty Ltd, were partnership property. Thus, Wimpole persists in its contentions, found at paragraphs 119 to 129 inclusive in its first amended statement of claim, that the Blue Gum property, apart from the leases, and the business conducted thereon is not partnership property and that the Nicholson River property and the business conducted thereon is not partnership property. There has been no subdivision of Nicholson River into leases for sale to the public.
The basis upon which Wimpole presently makes these allegations is cl 4.1 of the partnership agreement which provides,
On settlement of the purchase of each Project, the property which is the subject of the Project will be owned as follows:-
(a) Nicholson River Holiday Park – Wimpole;
(b) Blue Gum Holiday Park – Wimpole;
(c)Koonwarra Holiday Park – one third Wimpole and two thirds Beloti;
(d)Somers Holiday Park – one third Wimpole and two thirds Beloti.[3]
[3]Emphasis added.
The court was also informed that a variation had been made to the partnership agreement, as a consequence of a conversation, the effect of which was that Nicholson River need not be developed by subdivision and sale of leases. No such allegation is presently found in the statement of claim and, as far as I am aware, was first mentioned in court on 3 February 2011.
The consequence of Wimpole’s contention that the Nicholson River and Blue Gum land and businesses (with the exception of the Blue Gum leases) is not partnership property means that the receiver is unable to deal with the land and businesses until that issue has been determined. Accordingly, I proposed to the parties, and they have accepted, the need to resolve that issue as soon as possible. Thus, it is proposed that a preliminary question or questions will be settled for determination at a trial to commence on 9 March 2011.
In the circumstances it is necessary to confine the realisation of partnership assets by the receiver to such assets as are not in contention. At present, those assets are the leases which are held in Somers Developments Pty Ltd, Koonwarra Developments Pty Ltd and Blue Gum Park Developments Pty Ltd. Until Wimpole’s contentions are ruled upon, it is also undesirable for steps to be taken to dispose of the management businesses conducted by Beloti at the Koonwarra and Somers, even though Beloti concedes that the businesses are partnership property. Thus, the scope of the receiver’s powers to realise partnership assets will be confined at this time to the leases.
Costs
Wimpole sought its costs of its application for the appointment of a receiver. Beloti opposed the application on the basis that Wimpole had sought the appointment of a receiver over the partnership assets under the control of Beloti at Somers and Koonwarra, but the scope of the receivership now extended to the leases at Blue Gum.
In my opinion, Wimpole is entitled to its costs of its application brought by summons dated 27 August 2010. The application was substantially successful. The appointment of a receiver of the leases at Somers and Koonwarra was necessary substantially because Beloti was engaged in the unauthorised sale of those assets.
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