NEW SOUTH WALES COURT OF APPEAL
CITATION:
Zisis v Knighton [2008] NSWCA 42
This decision has been amended. Please see the end of the judgment for a list of the amendments.
FILE NUMBER(S):
40160 of 2007
HEARING DATE(S):
26 February 2008
JUDGMENT DATE:
1 April 2008
PARTIES:
Paul Zisis - First Appellant
Zisis Dental Ceramics Pty Ltd - Second Appellant
Paul Knighton - First Respondent
Felician Investments Pty Ltd - Second Respondent
JUDGMENT OF:
Hodgson JA Tobias JA McColl JA
LOWER COURT JURISDICTION:
Supreme Court
LOWER COURT FILE NUMBER(S):
SC 14052 of 2006
LOWER COURT JUDICIAL OFFICER:
Malpass AsJ
LOWER COURT DATE OF DECISION:
1 March 2007
LOWER COURT MEDIUM NEUTRAL CITATION:
[2007] NSWSC 139
COUNSEL:
C Mantziaris - Appellants
G J Bateman - Respondents
SOLICITORS:
Tonkin Drysdale Partners - Appellants
Helliars City Solicitors - Respondents
CATCHWORDS:
PARTNERSHIP – sale of interest in partnership pursuant to agreement of sale – agreement of sale providing for purchaser to account to vendor for half of debts owing to business at time of completion – claim for money due under agreement – whether agreement on stated and settled account – held yes – LOCAL COURT – jurisdiction – whether proceedings in nature of action for accounts – held no.
LEGISLATION CITED:
Local Courts Act 1982
Local Court Act 2007
Civil Procedure Act 2005
Partnership Act 1892 (NSW)
Partnership Act 1891 (Tas)
Suitors’ Fund Act 1951
Uniform Civil Procedure Rules (2005)
CATEGORY:
Principal judgment
CASES CITED:
Azzopardi v Tasman UEB Industries Limited (1985) 4 NSWLR 139
Dillon v Dillon (Supreme Court of Tasmania, Full Court, 17 February 1986, unreported, BC8600040)
Glover v Australian Ultra Concrete Floors Pty Ltd [2003] NSWCA 80
Knighton & Felician Investments Pty Limited v Zisis & Zisis Dental Ceramics Pty Limited [2007] NSWSC 139
Knighton & Felician Investments Pty Limited v Zisis & Zisis Dental Ceramics Pty Limited (Local Court of New South Wales, Bradd LCM, 20 June 2006)
McDonald v Dennys Lascelles Ltd [1933] HCA 25; (1933) 48 CLR 457
Moravia v Levy (1786) 2 Term Rep 483; 100 ER 260
Nowlan v Marson Transport Pty Ltd [2001] NSWCA 346; (2001) 53 NSWLR 116
Phoenix Freight Systems Pty Ltd v Seko Air Freight Inc (1995) 17 ACSR 754
Spain v Union Steamship Co of New Zealand Ltd [1923] HCA 21; (1923) 32 CLR 138
TEXTS CITED:
Halsbury's Laws of England, 4th ed, vol 35
DECISION:
1. Leave to appeal granted. 2. Appellants to file the Notice of Appeal within seven days. 3. Appeal dismissed. 4. Appellants to pay the respondents’ costs of the appeal.
JUDGMENT:
IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL
CA 40160/07
SC 14052/06HODGSON JA
TOBIAS JA
McCOLL JA
Tuesday 1 April 2008
Paul Zisis and Anor v Paul Knighton and Anor
Judgment
HODGSON JA: I agree with the orders proposed by McColl JA and with her reasons. I would add the following.
In the Statement of Liquidated Claim, the respondents made claims for money due under clauses…
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- Zisis v Knighton [2008] NSWCA 42
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- [2008] NSWCA 42
- Decision Date
CaseChat Overview and Summary
The legal issues before the Court of Appeal were whether the agreement constituted a stated and settled account, and whether the proceedings were in the nature of an action for accounts, which would impact the jurisdiction of the Local Court. The appellants argued that the Magistrate had erred in finding that they had not raised the issue of jurisdiction before the Local Court.
The Court of Appeal, in dismissing the appeal, acknowledged that the appellants had indeed raised the issue of jurisdiction before the Magistrate, albeit late in the proceedings. However, the Court found that the primary judge's secondary reasons for allowing the respondents' summons carried more weight. The Court applied the principle that while the relationship between partners is not typically one of debtor and creditor until partnership accounts are settled, a retiring partner who leaves their share in the firm becomes a creditor of the firm. Such a partner can sue for sums agreed to be paid upon retirement without the necessity of a full account, provided the transaction is insulated from the general partnership accounts by agreement or conduct. The Court found that the agreement in this case fell into this category, allowing the respondents to sue for the agreed sum without a formal account.
Leave to appeal was granted, but the appeal was ultimately dismissed. The appellants were ordered to pay the respondents' costs of the appeal.
Orders
Orders of the court
1. Leave to appeal granted. 2. Appellants to file the Notice of Appeal within seven days. 3. Appeal dismissed. 4. Appellants to pay the respondents' costs of the appeal.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Full text does not contain this section.
Ratio Decidendi
Legal Principle Established
As to costs, the respondents submitted that Malpass AsJ did not find that the respondents had commenced their proceedings in the wrong forum and there is no reason to depart from the normal order that costs should follow the event. They did not address the issue of the Magistrate’s determination of costs.Consideration Malpass AsJ concluded (at [9]) that the appellants had not agitated the question of jurisdiction before the Magistrate. It is common ground, and it is apparent from the Magistrate’s costs reasons, that the appellants had in fact done so, but not until closing address. It follows that Malpass AsJ’s primary reason for allowing the respondents’ Summons was based on a misapprehension of the appellants’ case in the Local Court. However, in my view Malpass AsJ’s secondary reasons for allowing the Summons had more weight. The relation between partners is not that of debtor and creditor unless and until the partnership accounts have been finally taken after dissolution and a balance has been ascertained to be owing from one to another. However “[w]here a partner retires, either ad hoc or in accordance with the partnership agreement, and leaves his share in the firm, he no longer has any continuing interest or share in the assets, but is merely a creditor of the firm so that the retiring partner may sue the continuing partners for the value of his share in the assets of the firm or for any sum that the continuing partners agreed to pay the former upon his retirement without the necessity, first of all, of taking a general account”: Halsbury's Laws of England, 4th ed, vol 35 (at pars [3], [122]). These propositions were accepted in Dillon v Dillon (Supreme Court of Tasmania, Full Court, 17 February 1986, unreported, BC8600040) by Cosgrove J (with whom Underwood J agreed) who said (BC8600040 at 6 - 7):“A. All that a partner is entitled to on dissolution is (a) to have the property of the partnership applied in payment of the debts and liabilities of the firm and (b) to have the surplus assets after such payment applied in payment of what may be due to the partners respectively after deducting what may be due from them as partners to the firm (s 4, [sic, s 49] of the Partnership Act 1891). There is an entitlement to a share in the profits or to interest under s 47, but that need not trouble us here.B. Partners may agree at or after dissolution on a stated and settled account, but such agreement, to be effective, must be precise. C. A partner cannot maintain an action for a separate balance on the partnership account or for any particular partnership asset until an account has been taken and settled by the parties or by the court. In the absence of a stated and settled account then, a partner seeking what is due to him must apply to the court for an account. There is no other legal path which he can follow.D. Some transactions between partners may be of such a nature that they are insulated from the general law of partnership. This may arise from the agreement of the partners or their conduct. Such transactions do not fall into the partnership accounts and may be sued upon without an account being taken …” (emphasis added)