In the matter of Lorebray Pty Ltd (No 2)

1. [1]

   On 22 December 2023 I delivered judgment in this matter: In the matter of Lorebray Pty Ltd [2023] NSWSC 1650 (Judgment). I heard submissions from the parties on 6 February 2024 as to the form of the final orders. While there is common ground as to many of the proposed orders sought by the plaintiff, there remain a number of areas in dispute. These are my reasons for the final orders to be made.

Plaintiff’s proposed orders

1. [2]

   The plaintiff has sought the following orders to be made (proposed orders):

2. [3]

   The first and fifth defendants were in agreement as to all of the orders sought by the plaintiff. The remaining defendants (Red Hill parties) provided a competing set of proposed orders (Red Hill proposal). While the competing sets of orders exhibited a number of areas of common ground, the following matters remain in dispute:

Areas of dispute

1. [4]

   Proposed orders 1 and 3. Proposed orders 1 and 3 involve the appointment of the plaintiff as receiver and manager of both the Brooklyn Property and the Kellyville Property with a power of sale. The Red Hill proposal is that the plaintiff, Mr David Sampson (a registered liquidator) and Mr Darren Vardy (also a registered liquidator) be appointed as trustees for sale of those properties under s 66G of the Conveyancing Act 1919 (NSW) and that the same persons will also be appointed as receivers and managers of the business of the partnership and the joint venture for the purpose of winding them up (as proposed orders 13, 22 and 23 of the proposed orders are to be retained).

2. [5]

   It is not in dispute that the Court has the power, which is broad and discretionary, to appoint a person as a receiver and manager in respect of the property of partnerships and by extension joint ventures under s 67 of the Supreme Court Act 1970 (NSW) and also its inherent jurisdiction: Booth v Cerreto [2017] NSWSC 468 at [29] and Liquor National Wholesale Pty Ltd v The Red Rock Co Pty Ltd [2009] NSWSC 1418 at [96], [100]. The power under s 67 is to appoint a receiver by interlocutory order in any case in which it appears to the Court to be just or convenient to do so.

3. [6]

   It will usually be appropriate to appoint a receiver under s 67 or in the Court’s inherent jurisdiction where the partnership or joint venture has been dissolved and there is a serious dispute between the parties or a breakdown in relations between them that hinders or prevents the orderly winding up of the affairs of the partnership or joint venture: Rowlands v MacDonald [2002] NSWSC 282 at [28]; Moloney v Piachniarski [2004] WASC 240 at [35]–[41]; Wimpole Properties Pty Ltd v Beloti Pty Ltd [2011] VSC 7 at [23]. However, as noted in these cases, such an appointment is not made as a matter of course and ultimately the exercise of the power depends on a consideration of all the relevant circumstances.

4. [7]

   The Red Hill parties submit that trustees for sale should be appointed under s 66G of the Conveyancing Act for two reasons. First, 37 and 39 Brooklyn Road are not partnership property and, as property held in co-ownership, the appropriate order is for trustees for sale of those properties to be appointed under s 66G. The same is true in relation to the Kellyville Property, which is held under a joint venture and not a partnership. Even in the case of property held in a partnership, the Court can appoint trustees for sale under s 66G rather than a receiver, as in Stone v Stone [2014] NSWSC 1655 at [32]–[34]. Second, s 66I provides that on a sale under a statutory trust for sale the Court may allow any of the co-owners of the property to purchase the property on such terms as to payment of deposit, or as to setting off or accounting for the purchase money or any part thereof instead of paying the same, or as to any other matters as to the Court seem reasonable. The Red Hill parties seek such an order in the present case (see [22] below).

5. [8]

   In my view, none of these matters requires the appointment of trustees for sale rather than a receiver to effect the sale of the Brooklyn Property and the Kellyville Property. First, while 37 and 39 Brooklyn Road are not partnership property or subject to a formal joint venture, they have been made available to the partners in the Brooklyn Partnership on an informal basis which can be described as a joint venture. They are jointly owned by a partner in the Brooklyn Partnership (Lorebray) and persons closely associated with the other partner (Peter and Helen McNamee) and were acquired and have been used since acquisition for the purposes of the partnership business. It is necessary and appropriate that they be offered for sale together with 35 Brooklyn Road which is partnership property.

6. [9]

   Second, while in Stone Darke J ordered that trustees for sale be appointed under s 66G in relation to the partnership property, he noted at [35] that if the partnership had been dissolved, but not wound up, there would be much to be said for the view that a receiver ought to be appointed with power to sell the land.

7. [10]

   The reason why the appointment of a receiver with a power of sale is preferable in such circumstances is that in determining whether to make an order under s 66G it is necessary to consider whether it would be inconsistent with some proprietary right or other contractual or fiduciary obligation. The effect of an order under s 66G is that the rights of co-owners of the property become a right to compel performance of the trust and to share in the net proceeds of sale in accordance with their beneficial interests: Harb v Harb [2010] NSWSC 1251 at [19]. As a consequence, the obligation on trustees for sale to account to the beneficiary for his or her interest in the proceeds of sale of the property is a debt: Prentice v Coshott [2017] FCA 1239 at [28]. To make an order under s 66G in the case of partnership property, would ordinarily be inconsistent with the rights of the partners on dissolution under ss 39 and 44 of the Partnership Act 1892 (NSW): Re Bolous [1985] 2 QdR 165 at 167. This makes an order under s 66G for 35 Brooklyn Road inappropriate. While 37 and 39 Brooklyn Road are in a slightly different position, as they are not partnership property, it would be undesirable, and likely to cause extra cost, to have separate trustees for sale of those properties and a receiver with a power of sale for 35 Brooklyn Road.

8. [11]

   The considerations referred to in the previous paragraph may not apply to the Kellyville Property as it is subject to a joint venture. However, it is accepted by all the parties that a receiver and manager should be appointed to wind up the Kellyville Joint Venture. The appointment also of trustees for sale would be likely to create additional cost and no clear benefit.

9. [12]

   Third, insofar as s 66I of the Conveyancing Act is concerned, it permits the Court to allow a co-owner to purchase the property on such terms, including as to a set-off, as the Court may allow. These “terms” may, but need not be, that there should be a set-off against the purchase price of the purchaser’s beneficial interest in the property. In particular, the “terms” may instead confer on the trustees for sale a discretion to allow a set-off if they regard it as appropriate: see eg the orders discussed in Vlatko v Short [2022] NSWSC 1542 at [4], order 5.

10. [13]

    There is no reason why a receiver with a power of sale cannot be given the power to set off any amount owing or expected to be owing to the purchaser following the taking of accounts (in the latter case, on a provisional basis if the taking of accounts has not been finalised). Hence, this is not a reason for appointing trustees for sale rather than a receiver. In my view, it is appropriate to confer power on the receiver here to determine at the appropriate time what, if any, set-off should be allowed. I propose to amend the proposed orders to achieve this, as noted below.

11. [14]

    In the event that the receiver is uncertain as to the extent of the set-off he should allow due to uncertainty as to the amount owing or expected to be owing to the purchaser, the receiver or trustee for sale could seek advice or directions from the Court: see HN QCV Bottletree Village Pty Ltd v QCV Bottletree Village Pty Ltd [2018] NSWSC 1807 at [65]–[68]. This would be advice or directions as to how the receiver should act in conformity with the law.

12. [15]

    In my view, it is appropriate that the plaintiff be appointed as a receiver and manager in respect of both the Brooklyn Property and the Kellyville Property because the Brooklyn Partnership and the Kellyville Joint Venture have both terminated, there has been a breakdown in the relationship between the parties and the appointment of a receiver and manager will not be disproportionate to the value of the assets subject to the receivership. In addition, appointing the plaintiff as receiver and manager with a power of sale of the Brooklyn Property and the Kellyville Property will avoid unnecessary expense from a duplication of roles, which is likely to arise if trustees for sale were also appointed as s 66G requires that two individuals be appointed as trustees for sale.

13. [16]

    Proposed orders 2 and 4. The proposed orders require vacant possession to be given to the plaintiff within 28 days (in the case of the Brooklyn Property) and three days (in the case of the Kellyville Property). The Red Hill proposal requires that vacant possession be given before completion of any sale of the relevant properties.

14. [17]

    This dispute relates to the presence on the land of certain dredging equipment which has previously been brought onto the land for the purposes of the dredging activities conducted by the Brooklyn Partnership. There is no evidence before the Court as to the nature of the difficulties in giving vacant possession of each property. In my view, it is important that the receiver have vacant possession after a reasonable time in order to be able to market the properties effectively. I will extend the period for vacant possession of the Brooklyn Property to three months and the period for vacant possession of the Kellyville Property to 28 days.

15. [18]

    The Red Hill parties wish to amend proposed orders 2(c) and 4(b) by the insertion of the words “identified by the applicants” after the word “any other documents”. In my view, this amendment is not necessary because the obligation is only to provide such documents as are reasonably required by the plaintiff.

16. [19]

    Proposed order 5. The Red Hill parties submitted that this should be amended by adding at the end the words “but on the basis that the properties not be listed for sale earlier than six months from the date of making these orders (or as agreed by the owners of the McNamee Properties)”. The purpose of this delay was to seek to tie in the sale of the Brooklyn Property and the Kellyville Property to the finalisation of the accounts of the partnership and the joint venture. In my view, it is not desirable that there be any delay in the marketing of the Brooklyn Property or the Kellyville Property and it should be left as a matter for the discretion of the receiver as to the timing of any sale by reference to market conditions (and any other relevant matters), rather than the straightjacket imposed by a six-month delay.

17. [20]

    Proposed order 6. The Red Hill parties submitted that there should be added at the end of proposed order 6 the words “[the plaintiff] shall take into consideration the views of the defendants about the best means of sale.” I see no difficulty in making this amendment and will do so.

18. [21]

    Proposed order 7. The Red Hill parties submit that proposed order 7 should be amended to require the receiver to approach the Court for the setting of the reserve price, absent agreement with the seventh and eighth defendants. I will not make that change as it is a matter for the receiver to decide whether he needs to approach the Court on that matter.

19. [22]

    Proposed order 10. The Red Hill parties propose adding the following orders to give to the Red Hill parties a right to a set-off against the purchase price in the event that any of the third, fourth and sixth defendants purchase the Brooklyn Property or the seventh and eighth defendants purchase the Kellyville Property:

20. [23]

    The fixed percentages in sub-paragraph (a) of each of the above orders reflects the partnership interest of BRPL and/or the co-ownership interest of Peter and Helen McNamee in the case of the Brooklyn Property and the joint venture interest of Philippa and John Hardy in the case of the Kellyville Property.

21. [24]

    In many cases, it will be appropriate to allow a co-owner a right of set-off to reflect the proprietary interest which that co-owner already has in the property. This is reflected in s 66I, although it confers a discretion to allow the set-off rather than requiring it in all cases. A suitable order in the case of the appointment of trustees for sale under s 66G may be to leave it to the discretion of the trustees for sale as to whether, and on what terms, the set-off is given and how the purchase price is to be paid (including dispensing with the requirement for payment of a deposit): see for example, Vlatko v Short [2022] NSWSC 1542 at [4].

22. [25]

    In the present case, all the parties are in dispute as to the amount ultimately payable as between themselves following the dissolution of the partnership and the joint venture. In these circumstances, in my view the appropriate course is to confer on the receiver the power to allow an appropriate set-off. This will be done by including in order 7 the following additional power:

23. [26]

    Proposed order 13. The Red Hill parties submit that order 13(b) should be amended by replacing the words “carrying on the partnership” with the words “wind up the partnership business, subject to the fourth defendant continuing to be responsible for the maintenance of the Brooklyn Property”. I will make the change of “carrying on” to “wind up”, but decline to order that BRPL should continue to be responsible for the maintenance of the Brooklyn Property as that is properly a function of the receiver.

24. [27]

    Proposed order 15. The Red Hill parties submit that order 15(c) should be amended to replace the word “excludes” with “includes”. In my view, this change should not be made as no payment should be made to the partners until the accounts have been taken.

25. [28]

    Proposed orders 16 and 26. The Red Hill parties submit that there should be added at the end of these orders a provision for the giving of a right of set-off where any of the parties is the purchaser of the assets of the partnership or the joint venture. This is covered by the proposed amendment to order 7 referred to at [25] above. There is no evidence to suggest that there are any significant assets apart from the Brooklyn Property and the Kellyville Property.

26. [29]

    Proposed orders 18 and 28. The Red Hill parties propose removing the qualification to these orders, which would defer the taking of accounts until the sale of the assets of the Brooklyn Partnership and the Kellyville Joint Venture be removed. I agree that this change should be made because there should be no delay in commencement of the process of taking accounts, particularly as the parties have indicated to the Court that there is likely to be a dispute as to the amounts claimed by the parties and to defer commencing the taking of accounts until the sale occurs would only build in further delay.

27. [30]

    Proposed orders 20 and 30. The Red Hill parties propose that these orders which require the costs of the parties in respect of the taking of accounts be paid out of the assets of the partnership or joint venture, as appropriate, be deleted. I agree as it should be a matter for the Judge who takes the accounts of the partnership and the joint venture to determine who pays the costs of that process.

28. [31]

    Proposed order 31. The Red Hill parties propose no order is made regarding the cross-claim. As the cross-claim was argued at the hearing and dealt with in the Judgment, it is appropriate that proposed order 31 is made. I note that to the extent the Red Hill parties seek to recover expenses incurred by them in the conduct of the business of the Brooklyn Partnership or the Kellyville Joint Venture, this will be dealt with when accounts are taken in accordance with the proposed orders: see Judgment at [100] and [119]–[120].

29. [32]

    Proposed order 32. The Red Hill parties propose that this be amended to give the parties, rather than just the plaintiff, liberty to seek directions from the Court on any matter arising from the orders, and to seek a variation to any order in the case of the practicality. I will grant liberty to apply generally to allow for unforeseen circumstances in the implementation of the proposed orders.

30. [33]

    The Red Hill parties seek an order that the matter be listed before the Expedition List Judge. I will include orders to that effect.

31. [34]

    The Red Hill parties seek an order that orders 1–10 of the proposed orders be stayed for 28 days pending any appeal or application for leave to appeal being brought.

32. [35]

    The relevant considerations in considering whether to grant a stay pending an appeal were set out Kalifair Pty Ltd v Digi-Tech (Australia) Ltd [2002] NSWCA 383; (2002) 55 NSWLR 737 at 741 as follows:

33. [36]

    Senior Counsel for the Red Hill parties did not indicate what the possible grounds of an appeal might be, or what is the nature of the prejudice which will be suffered by the Red Hill parties if a stay is not granted. It was not suggested that, absent a stay, the appeal will be rendered nugatory. On the face of it, this is not a strong case for a stay. However, given the history of the long-standing dispute between the parties, and having regard to the balance of convenience, I will grant a stay of orders 1–12 for period of 14 days on the basis that this will permit any appeal to be filed and an application to be made to the Court of Appeal for an extension to this stay should that be considered necessary.

Conclusion

1. [37]

   The Court makes the following orders:

   1. (1)

      Pursuant to section 67 of the Supreme Court Act 1970 (NSW), David Sampson (the Plaintiff) be:

   2. (2)

      Lorebray Pty Limited, Peter John McNamee, Brooklyn Road Pty Limited, Helen Monica McNamee, must:

   3. (3)

      Pursuant to section 67 of the Supreme Court Act 1970 (NSW), the Plaintiff be:

   4. (4)

      Lorebray Pty Limited, Philippa Margaret Hardy and John Hardy as trustees of the Hardy Family Trust must:

   5. (5)

      The Plaintiff have the power to conduct and complete the sale of the Kellyville Property and the Brooklyn Property (together the McNamee Properties) in accordance with these Orders and convey the McNamee Properties upon completion of the sale, together with the power to do anything necessarily ancillary to these steps.

   6. (6)

      Any sale conducted pursuant to these orders may be by auction or by private treaty or by tender, and may be by unconditional contract or by grant of an option (as the Plaintiff deems appropriate). The plaintiff shall take into consideration the views of the defendants about the best means of sale.

   7. (7)

      In order to exercise the power or powers granted above, the Plaintiff;

   8. (8)

      The Plaintiff be empowered to:

   9. (9)

      The Plaintiff be remunerated for the work done by him in respect of the sale of the McNamee Properties at the rates charged from time to time for work of that type by the firm BPS.

   10. (10)

       Subject to the terms set out in Order 7 above, any party be at liberty to purchase the McNamee Properties.

   11. (11)

       Declares that the partnership between Lorebray Pty Limited and Brooklyn Road Pty Limited, respect of the development being undertaken at the Brooklyn Property (the Partnership), was dissolved in accordance with the notice of termination sent by Richard Allsop on 20 October 2021 and the acceptance by Henry William Lawyers on 22 October 2021.

   12. (12)

       The Partnership business be wound up under the direction of the Court.

   13. (13)

       For the purpose of winding up the Partnership business:

   14. (14)

       The parties deliver all the books and records of the Partnership and the Partnership assets in their custody, possession, control or power to the Plaintiff within 14 days of the making of this order.

   15. (15)

       The Plaintiff have the following powers:

   16. (16)

       The Partnership business and assets including the goodwill thereof be realised by the Plaintiff and that Lorebray Pty Limited, Brooklyn Road Pty Limited, Peter John McNamee and Helen McNamee be at liberty to purchase from the Plaintiff(s) any Partnership asset including the Brooklyn Property.

   17. (17)

       The Plaintiff be empowered to draw remuneration for his services as receiver and manager in an amount equal to the cost of the time actually spent in the performance of such services by the Plaintiff or any director in or employee of the firm of BPS calculated at the firm's standard rates from time to time for work of that nature, such amount to be drawn by the Plaintiff at the end of each calendar month from bank accounts maintained by them in respect of the receivership.

   18. (18)

       The proceedings be referred to a Judge of the Equity Division of the Supreme Court for the taking of accounts of the Partnership to determine the net profit or loss of the Partnership and inquiry into the amount, if any, payable on the taking of accounts.

   19. (19)

       The proceedings be reserved for further consideration and, after the determination by the Judge of the account, the parties cause the matter to be re-listed for orders as to the distribution of profits and losses and interest on any amount payable.

   20. (20)

       The joint venture between Lorebray Pty Limited, Philippa and John Hardy on behalf of the Hardy Family Trust in respect of the development being undertaken at the Kellyville Property (the Joint Venture) be wound up under the direction of the Court.

   21. (21)

       Pursuant to section 67 of the Supreme Court Act 1970 (NSW) the Plaintiff be appointed receiver and manager of the Joint Venture business without security.

   22. (22)

       The Plaintiff have power to wind up the Joint Venture business and have the powers in relation to the Joint Venture business as are given to a liquidator pursuant to section 477 of the Corporations Act 2001 (Cth).

   23. (23)

       The parties deliver all the books and records of the Joint Venture and the Joint Venture assets in their custody, possession, control or power to the Plaintiff within 7 days of the making of this order.

   24. (24)

       The Plaintiff have the following powers:

   25. (25)

       The Joint Venture business and assets including the goodwill thereof be realised by the Plaintiff and that Lorebray Pty Limited, Philippa and John Hardy be at liberty to purchase from the Plaintiff(s) any Joint Venture asset including the Kellyville Property (or part thereof).

   26. (26)

       The Plaintiff be empowered to draw remuneration for his services as receiver and manager in an amount equal to the cost of the time actually spent in the performance of such services by the Plaintiff or any director in or employee of the firm of BPS calculated at the firm's standard rates from time to time for work of that nature, such amount to be drawn by the Plaintiff(at the end of each calendar month from bank accounts maintained by them in respect of the receivership.

   27. (27)

       The proceedings be referred to a Judge of the Equity Division of the Supreme Court for the taking of accounts of the Joint Venture to determine the net profit or loss of the Joint Venture and inquiry into the amount, if any, payable on the taking of accounts.

   28. (28)

       The proceedings be reserved for further consideration and, after the determination by the Judge of the account, the parties cause the matter to be re-listed for orders as to the distribution of profits and losses and interest on any amount payable.

   29. (29)

       The cross claim is otherwise dismissed,

   30. (30)

       The Plaintiff be at liberty to seek advice or directions from the Court on any matter arising from his appointment or these orders.

   31. (31)

       The Second, Third, Fourth, Sixth, Seventh and Eighth Defendants pay the Plaintiff’s costs of and occasioned by these proceedings including the costs of the cross claim, as agreed or assessed.

   32. (32)

       The Second, Third, Fourth, Sixth, Seventh and Eighth Defendants pay:

   33. (33)

       Any party seeking expedition of the proceeding to file and serve any notice of motion and further supporting affidavit evidence (if any) by 10am on 28 February 2024 (Expedition Application).

   34. (34)

       The respondent to the Expedition Application to file and serve any affidavit evidence in relation to the Expedition Application by 12:00pm on 29 February 2024.

   35. (35)

       By 5:00pm on 29 February 2024, the parties' legal representatives to confer and attempt to agree on a timetable for the preparation of the matter to trial and an accurate estimate of the necessary hearing time, on the assumption that the Expedition Application is successful.

   36. (36)

       The Expedition Application be listed before the Expedition List Judge on 1 March 2024.

   37. (37)

       Liberty to apply to the Equity Duty Judge on three days’ notice.

   38. (38)

       Orders 1–10 be stayed for 14 days pending any appeal or application for leave to appeal being brought.