Shazbot Pty Ltd v Warner Capital Pty Ltd [2018] NSWSC 1645

Shazbot Pty Ltd v Warner Capital Pty Ltd [2018] NSWSC 1645

Between 19 September 2007 and 22 September 2014, Steven Barry Kugel and Anthony John Warner conducted CRS Warner Kugel in partnership, not merely through a corporate trustee structure. Upon dissolution, the second plaintiff is entitled to an account of partnership assets and liabilities, including WIP and goodwill, in accordance with the Partnership Act 1892 (NSW) s 39. Shazbot Pty Ltd is entitled, at its election, to either an account of profits or equitable compensation arising from the undervalued transfer of its share in Debtfree Pty Ltd as a result of breach of fiduciary and equitable obligations.

Parties
First Plaintiff: Shazbot Pty Ltd; Second Plaintiff: Steven Barry Kugel; First Defendant: Warner Capital Pty Ltd; Second Defendant: Anthony John Warner; Third Defendant: Clarence Street Partners Pty Ltd
Jurisdiction
Australia
Judgment Date
31 October 2018
Procedural Posture
Principal Judgment / Trial
Outcome
Declarations and orders in favour of the plaintiffs
Legal Topics
Partnerships – Legal Characterisation, Dissolution and Winding Up, Accounts, Goodwill, Directors' Fiduciary Duties, Equitable Compensation
Equity Partnerships and Joint Ventures Partnerships – Legal Characterisation Dissolution and Winding Up Accounts Goodwill Directors' Fiduciary Duties Equitable Compensation

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Parties

Shazbot Pty Ltd

First Plaintiff

Steven Barry Kugel

Second Plaintiff

Warner Capital Pty Ltd

First Defendant

Anthony John Warner

Second Defendant

Clarence Street Partners Pty Ltd

Third Defendant

Procedural Posture

Principal Judgment / Trial

Legal Issues

  1. 1 Whether CRS Warner Kugel was conducted as a partnership between Mr Warner and Mr Kugel
  2. 2 Entitlement to account for partnership assets, liabilities, and profits, in particular work in progress (WIP) and goodwill
  3. 3 Whether the transfer of Shazbot Pty Ltd’s share in Debtfree Pty Ltd to Warner Capital Pty Ltd attracted equitable relief due to breach of fiduciary duty

Ratio Decidendi

Between 19 September 2007 and 22 September 2014, Steven Barry Kugel and Anthony John Warner conducted CRS Warner Kugel in partnership, not merely through a corporate trustee structure. Upon dissolution, the second plaintiff is entitled to an account of partnership assets and liabilities, including WIP and goodwill, in accordance with the Partnership Act 1892 (NSW) s 39. Shazbot Pty Ltd is entitled, at its election, to either an account of profits or equitable compensation arising from the undervalued transfer of its share in Debtfree Pty Ltd as a result of breach of fiduciary and equitable obligations.

Court Disposition

Declarations and orders in favour of the plaintiffs

Orders

  • The second plaintiff, Steven Barry Kugel, is entitled to an order for an account of the assets and liabilities of the insolvency practice CRS Warner Kugel, conducted in partnership with the second defendant between 19 September 2007 and 22 September 2014.
  • The business of the partnership included acting as company administrator, company liquidator, trustee in bankruptcy and administrator of Bankruptcy Act 1966 (Cth), Part X arrangements, but did not include the Part IX debt agreement business operated by Debtfree Pty Ltd.