IBBS vs. IBBS - (18 Jun 2020)

Costs of winding up of a partnership are to be paid out of the partnership assets unless there are good reasons to the contrary

Company

In present matter, On 11 March 2019 the Plaintiff, in his own capacity and in his capacity as executor of the deceased's estate, brought an application for the winding up of the partnership pursuant to Section 44 and 57 of the Partnership Act, 1895 (WA). As noted by counsel for the Plaintiff, the application is in fact made pursuant to Section 50 of that Act (the Partnership Action). The Partnership Action arose out of the parties' inability to come to an agreement as to what constituted the plant and equipment of the partnership, its value, how it should be disposed of and which liabilities were partnership liabilities. The Partnership Action has been case managed together with the Land Action. On 23 April 2020, orders for the winding up of the partnership and the appointment and remuneration of a receiver and manager were made by consent and the question of costs were reserved following written and oral submissions by the parties.

Both parties sought the winding up of the partnership. While there was an indication that there may have been an in-principle agreement reached at an earlier stage about how to deal with or dispose of the partnership assets, that seems to have been superseded by the Plaintiff's proposal of 27 June 2018 to which there was no substantive response.

The Plaintiff submits that, costs should follow the event because there was never any dispute between the parties about the necessity to wind up the partnership and the plaintiff was obliged to incur the expense of the application by the intransigence and delay of the defendant. The plaintiff submits that the proposal of 27 June 2018 should have disposed of the matter.

The Defendant submits that, there is no reason to depart from the general rule that the costs of winding up of a partnership are to be paid out of the partnership assets unless there are good reasons to the contrary. While the defendant’s failure to respond to the plaintiff's proposal of 27 June 2018 was no doubt frustrating, this is not the forum to determine whether a failure to agree to the way in which each of the assets of the partnership should be dealt with was unreasonable by either party. The Court does not conduct a trial of the case for the purpose of determining only the incidence of costs when the orders have been agreed to by consent.

Certainly there was a lengthy delay from the Plaintiff's proposal of 27 June 2018 to the commencement of the action relative to the initial endeavours to finalise the partnership, which was unexplained. However, that is not to say that had the defendant responded, it would have avoided the need for the application. There is no evidence that the outstanding matters between the parties contained in the Plaintiff's proposal of 27 June 2018 were agreed to by the Defendant. The appropriate order is that the parties' costs of the action be the costs in the winding up of the partnership and be paid from the assets of the partnership.

Tags : WINDING UP COSTS ASSETS PARTNERSHIP