BETWEEN : GUY DOMINIC JOSEPH D'SOUZA and WILHELMINA MARIA D'SOUZA as trustees for the D'SOUZA FAMILY TRUST

Corporations Act 2001

Boyle v Wilis [1880] VicLawRp 22; (1880) 1 ALT 189

Burt, Boulton & Hayward v Bull [1895] 1 QB 276

Clydesdale v McManus and Anor (1934) 36 WALR 89

Gardner v London Chatham and Dover Railway Co (1867) LR Ch App 201

Hopkins v Worcester and Birmingham Canal Properties (1868) LR 6 Eq 437

Re Scottish Properties (1977) 2 ACLR 264

1 COMMISSIONER JOHNSON QC: By chamber summons dated 21 January 2003 the plaintiffs in their representative capacity seek orders extending the operation of a caveat over certain properties and the appointment of a receiver of the assets of a joint venture between the plaintiffs and the first defendant.

2 The action was commenced by writ of summons issued on 21 January 2003. There was some issue taken at the hearing of this application on behalf of the defendants as to the status of the amended writ of summons and statement of claim filed on 26 February 2003. The amendment to the writ and statement of claim deals solely with properly identifying the capacity in which the first and second named plaintiffs bring this action. In my view, even if I accept the defendants' submission that leave has been granted to amend the writ but not the statement of claim, nothing turns on this issue. Irrespective of whether one is dealing with the statement of claim in its original form or as amended, the causes of action and the relief sought remain the same.

3 In this action the plaintiffs in their representative capacity seek the following:

(i) the joint venture has been dissolved with effect from 17 January 2003 and

(ii) the second defendant holds the two units as constructive trustee for the benefit of the plaintiffs and the first defendants.

(b) The appointment of a receiver to the assets of the joint venture with power to manage and continue the business of the joint venture until the remaining assets of the joint venture have been disposed of.

(c) All necessary and usual inquiries and partnership accounts.

(d) Such orders as may be necessary to secure the winding up of the joint venture and the sale of its assets.

(e) Damages, alternatively, orders as may be appropriate in terms of section 87(2) of the Trade Practices Act 1974, alternatively, equitable compensation.

(f) As against the second defendant only, an order extending the operation of the caveat.

(g) Interest.

4 As to the chambers summons presently before this Court, in submissions filed prior to the hearing of the application, and during the course of the hearing, counsel for the plaintiffs advised that the plaintiffs did not intend to pursue the orders sought with respect to the caveat. Therefore, the sole issue before the Court concerns the appointment of a receiver of all the assets of the joint venture.

5 Both parties have filed affidavits in support of their respective positions on this application. It is not in dispute that in late 1998 the first and second named plaintiffs and the second defendant commenced discussions with respect to a joint venture for the purpose of property development. The joint venture between the plaintiffs and the second defendant's company, the first defendant, commenced in early 1999. However, the joint venture was not evidenced in writing until March 2000 when the plaintiffs and the first defendant entered into a Joint Venture Agreement ("the JV Agreement") which was stated to be for the purpose of construction of residential units on land selected by the joint venturers. It was also common ground that, pursuant to the joint venture, in approximately February 1999 a property at 8 Edgehill Street, Scarborough ("the Scarborough property") was purchased with a view to demolishing the existing building and erecting four luxury units. At some point in the course of financing the development, the second defendant ("Gray") arranged for Gerardus (Gary) Vile, who was the brother of the second-named defendant ("Mrs D'Souza"), to put up his house as security in return for a payment of $15,000. This arrangement was evidenced in writing in March 2000 when the plaintiffs and the first defendant as joint venturers entered into an agreement with Vile. The development proceeded and, in April 2002, two of the units were sold for purchase prices of $520,000 and $590,000. At some later point in time, Gray and Vile commenced living in the two remaining units, purportedly as owners having each acquired their unit for $500,000.

6 In approximately mid October 2002 Gray wrote to the first-named defendant ("Mr D'Souza") informing him that there was a loss with respect to the joint venture project of approximately $777,000.00. On 2 January 2003 solicitors for Gray wrote to Mr and Mrs D'Souza giving notice of a dispute pursuant to cl 17.1 of the JV Agreement including a dispute concerning matters relating to the final accounting of the joint venture. On 17 January 2003 the plaintiff's solicitors wrote to the first defendant's solicitors terminating the joint venture. The termination was stated to arise from the first defendant's fundamental breach of its obligations under the JV Agreement; in particular the failure to properly account and the appropriation by Gray of the two remaining units as his own property.

7 There are a number of further facts which are not in dispute but which the plaintiffs maintain they were unaware of at the time they occurred. The first is the fact that, on acquisition, the Scarborough property was registered solely in Gray's name; secondly, the fact that the unit which sold for $520,000 included vendor finance of $100,000 and thirdly, the fact that Gray and Vile went into possession of the two remaining units, purportedly as owners.

8 An affidavit of Mr D'Souza was filed in support of the application. Mrs D'Souza, also filed an affidavit in which she deposes to the fact that she has read Mr D'Souza's affidavit and confirms its contents in so far as they relate to her.

9 In Mr D'Souza's affidavit he sets out in some detail his account of the history of the joint venture and his dealings with Gray. He states that his wife was employed as a domestic cleaner for Gray. Mr D'Souza was introduced to Gray in about 1995 and, thereafter, Gray became a family friend. He and Mr and Mrs D'Souza socialized together and provided assistance to each other. Over time Gray gained the trust of Mr D'Souza. During various visits from about 1996, Gray suggested that Mr and Mrs D'Souza should become involved in a property development with him. He suggested that the D'Souzas use their residence at 54 Blythe Avenue Yokine ("the Yokine property") as security to provide capital for a joint property development.

10 Towards the end of 1998 Gray again suggested that the D'Souzas consider property development with him as interest rates were low and property values were rising. Gray suggested that he and Mr and Mrs D'Souza go into a joint venture using the Yokine property to obtain a line of credit to be used for the purchase of a property suitable for development. Gray stated that neither of the D'Souzas would be required to do any work on the project. Further, according to Mr D'Souza, Gray knew that Mr D'Souza had no capacity for gainful employment due to injuries sustained at work and in a motor vehicle accident and would not, therefore, be in a position to meet mortgage repayments.

11 Over time and after inspecting several properties, Gray informed Mr D'Souza that he had selected the Scarborough property as viable and potentially the most profitable of all those inspected. Gray informed Mr D'Souza that development of the property would yield an estimated net profit of at least $500,000. He was further informed that the total cost of the land and the units would be approximately $1.5M, that provision of $500,000 was required for various contingencies and the four units would sell for upwards of $2.5M

12 On 25 January 1999 the Police and Nurses Credit Society Ltd ("Police and Nurses Credit") approved a loan to Gray and the D'Souzas in their personal capacities for $100,000 for investments purposes. The loan was secured over the Yokine property by way of a registered first mortgage. No guarantor was required. That money was stated by Gray to be required for payment for plans, shire approvals and set up expenses for the loans required for the development. Gray insisted that he have sole authority to disburse the loan funds for the project.

13 In approximately February 1999 Mr D'Souza was advised by Gray that he had purchased the Scarborough property for the joint venture with settlement to take place in October 1999. Gray did not produce a copy of the offer and acceptance but told Mr D'Souza that the purchase price was $580,000.

14 In approximately September 1999 Mr D'Souza was advised that more security was needed for the joint venture. Gray arranged for a loan to the first defendant through Countrywide Credit. Gray arranged for Vile to put up his house as security in return for a $15,000 payment. A first mortgage advance of $642,500 was made by Countrywide Credit on 7 October 1999 secured over the Yokine property, the Scarborough property and Vile's property. Those funds provided, inter alia, for the purchase of the Scarborough property and discharging the loan with Police and Nurses Credit.

15 Shortly after settlement, Mr D'Souza was advised by Gray that further funds were required for the construction of the units. Gray had arranged with Police and Nurses Credit for a loan to discharge the loan with Countrywide Credit and provide funds for construction. The loan was again secured over the Yokine property, the Scarborough property and Vile's property. Mr D'Souza alleges that over time he advanced to Gray amounts totalling $138,760.59 of which $45,900.00 remains outstanding.

16 Mr D'Souza further alleges that he and his wife have also advanced the sum of $189,000 to Gray by mortgaging their home to Perpetual Trustees Victoria Limited ("Perpetual Trustees") on the assurance from Gray that he would be solely responsible for the mortgage repayments and for discharging the mortgage when all the units were sold, even if there was a shortfall. Until approximately October 2002 Gray arranged for payments to be made in respect of the mortgage over the Yokine property to Perpetual Trustees but then cancelled this arrangement. The account statement annexed to Mr D'Souza's affidavit reveals that there were five dishonoured mortgage repayments during the period 10 June 2002 to 11 November 2002.

17 Mr D'Souza alleges that from approximately June 2001 he has been requesting a full accounting in respect of the joint venture. No such account has been given. In approximately mid October 2002 Gray wrote to Mr D'Souza informing him that there was a loss with respect to the joint venture project of approximately $777,000.00 of which he intended to pay $575, 152.72 and expected Mr D'Souza to pay the balance. Accompanying the letter was a brief one page report reflecting the loss to the project. In the letter Gray makes the following statement:

"Our properties were on the market for over 1 1/2 years, and we had only sold two of the four. So to resolve Scarborough, Gary and I bought the last two units for $500,000 each. Taking into consideration, the price we got for unit 4, the over supply of properties in this price bracket in the Scarborough area and if we sold them on the open market we would have to pay real estate commissions. These purchase prices are more than fair and reasonable."

18 Mr D'Souza immediately phoned Gray and demanded that he urgently provide a complete set of accounts. Following further telephone calls Gray suggested a meeting to be held on 16 November 2002. A few days prior to the meeting Gray provided further incomplete accounts together with copies of the contracts for sale by offer and acceptance for the two units initially sold which included the information about the $100,000 vendor finance. Mr D'Souza requested full details of the vendor finance but they were not forthcoming. According to Mr D'Souza, at the meeting on 16 November 2002 Gray admitted that the documentation was incomplete and promised to provide the missing documentation within 10 days. That information was not provided and Mr D'Souza then lodged a caveat over the Scarborough property.

19 By 9 December 2002 the documentation had still not been received and Mr D'Souza sent a letter to Gray requesting the documentation be provided by 18 December 2002. In that letter Mr D'Souza asserts that on 29 November 2002 Gray left a message on his answering machine claiming that the outstanding account documentation could not be provided as it was being withheld by Gray's accountant pending payment of his outstanding account. On 6 January 2003 Mr D'Souza made a further written request for the paperwork and account documentation to be provided no later than Tuesday 14 January 2003.

20 On 17 January 2003 Mr D'Souza obtained a market appraisal indicating that the remaining units were at that time worth between $600-620,000. On the same day, not having received the requested financial information, the plaintiff's solicitors wrote to the first defendant's solicitors terminating the joint venture.

21 In his affidavit Mr D'Souza alleges that Gray has appropriated the two unsold units to himself and is residing in one of the units rent free. He states that Gray has allowed Vile to live in the other unit and has received rent from him for which he has failed to account to the joint venture. He further alleges that Gray has drawn from joint venture funds a salary of approximately $7,000 per month without such payment or amount being mutually agreed upon by the joint venturers as required by cl 7.2 of the JV agreement.

22 Mr D'Souza also alleges that Gray has used joint venture funds for purposes unrelated to the joint venture. Annexed to the affidavit is a document said to have been provided by Gray on or about 10 November 2000 which refers to an outstanding account with respect to a venture in Northbridge. The reference is to a sum of $50,199.72 being for professional fees and land rates and taxes.

23 Two affidavits were filed on behalf of the defendants, one from Gray and one from Vile. Gray's affidavit contains surprisingly scant information about a number of the central issues raised on behalf of the plaintiffs, including the failure to properly account.

24 Gray states that the Scarborough property was purchased by an offer made in Gray's name by agreement with the D'Souza Family Trust because Gray was the primary borrower and it was his then substantial income that was to be relied upon to enable borrowings for the development. He further states that the plaintiffs executed numerous mortgage documents as the development progressed and received independent legal advice. The documents are said to show that Gray was the primary borrower, that the D'Souzas were guarantors for the borrowing and that the Scarborough property being used as the primary security was registered in Gray's name.

25 Gray further deposes to the fact that two of the units were sold to arms length purchasers in April 2002 at prices of $590,000 and $520,000. According to Gray, the units had been 18 months on the market without selling and repayments on secured borrowings of approximately $1.8M together with other unsecured borrowings were crippling the joint venture. Gray then goes on to assert that the two remaining units were sold at $500,000 each, one to Vile and one to himself. The prices are said to have been established by the arm's-length sales of the two best units. Gray further states that settlement on the sale to Vile has not been effected but he has had possession of the unit since August 2002. The unit is said to be mortgaged to Beneficial Finance to secure $467,000 and Vile has been making payment of $3,250 per month on that mortgage since August 2002. Such payments have been made either directly by Vile or by Gray paying the mortgage and offsetting those payments against monies Gray owes Vile. Gray states that his unit is mortgaged to Liberty Finance to secure $495,000 and that he has been making monthly payments of $3,790 on that mortgage from in or about August 2002.

26 In his letter of mid October 2002 annexed to the affidavit of Mr D'Souza, Gray asserts that all major issues were discussed in detail with Mr D'Souza and that Mr D'Souza was allowed to make the final decision. He asserts that both Mr and Mrs D'Souza were aware of this fact. In his affidavit he states that he sought and obtained approval from the plaintiffs for all four sales but provides no detail of the surrounding circumstances and identifies no document to support the assertion.

27 In his affidavit, Vile claims to be the equitable owner of one of the units on the Scarborough property. He states that in or about August 2002 he agreed to purchase the unit for the sum of $500,000 from the joint venture. He states that he has known about the joint venture from its inception and had agreed to allow the joint venture to use his then residence as security for borrowings to finance the joint venture project at Scarborough. He was present when the joint venture agreement was entered into between the plaintiffs and the first defendant. Through discussions with his sister and Gray he maintained an interest in and was aware of the progress of the joint venture project.

28 Vile states that he learned in April 2002 that the two "best" units in the development had sold for $590,000 and $520,000. In about June 2002 he had discussions with Gray about the possibility of buying one of the units and offsetting monies owed to him against the purchase price. In August 2002 he agreed to buy one of the two remaining units for the sum of $500,000. He states that this agreement was entered into orally with Gray on behalf of the joint venture. Settlement could not immediately be effected and he agreed to make mortgage payments on the unit by way of rent until settlement. Vile provides no explanation as to why settlement could not be immediately effected. Vile states that he understood from Gray that he had obtained the agreement of Mr and Mrs D'Souza to the purchase and that they had agreed that he could purchase the unit. He further asserts that he recalls discussing his purchase with Mr and Mrs D'Souza in late August 2002. He discussed the price and the fact that it was in line with the other two sales and that the joint venture would not have to pay any sales commission on the sale. Other than reference to a hope that their son could live in the unit pending sale, according to Vile, the D'Souzas otherwise did not raise any objection with him about the purchase of the unit.

29 Vile states that he has lived in the unit since August 2002 and has made all mortgage payments on the unit since moving in, either by payments to Gray for forwarding to the mortgagee or by Gray making the payments and offsetting them against monies he owes Vile. It is to be noted that, according to Vile, these payments are being offset against monies owed to him by Gray and not by the joint venture.

30 On behalf of the plaintiffs it is said that the joint venture has been terminated, if not by the letter from the plaintiffs' solicitors dated 17 January 2003, then by the misconduct of the defendants. Counsel for the plaintiffs submits that Gray, both in his personal capacity and as the sole director of the first defendant, has so conducted himself that both are in breach of their fiduciary duty to the plaintiffs arising from the joint venture. It is also said that the first defendant is in fundamental breach of its obligations under the joint venture agreement. The allegations of misconduct are as follows:

(a) The registration by Gray of the Scarborough property in his own name rather than in the name of the joint venture.

(b) The appropriation by Gray of the remaining two units.

It was pointed out on behalf of the plaintiffs that no documentation has been provided in relation to the alleged sale of these units. Further, although the issue is addressed in the affidavit material filed on behalf of the defendants, no explanation is provided as to why title cannot be passed to Vile and no adequate information is provided as to the circumstances surrounding the decision to "sell" the units to Gray and Vile.

(c) The failure by Gray to provide a full and proper accounting of the joint venture despite repeated requests, including a failure to provide details of the vendor finance provided in relation to the sale of one of the first two units.

Clause 9 of the JV Agreement requires that proper books of account shall be kept by the joint venture and that each joint venturer shall at all times have free access to examine the books of account and all letters, papers and documents and other financial or business records.

Counsel for the plaintiffs submits that it is common cause that the plaintiffs were passive parties to the joint venture and that, therefore, the obligation to provide full and proper accounting rested with Gray, the active partner with responsibility for the development. It is said that the level of compliance to date is wholly inadequate and that the affidavits filed on behalf of the defendants do not provide any further information or documentation and simply fail to address the allegation.

(d) The drawing by Gray of a salary without authorization.

Clause 7.2 of the JV Agreement allows for the payment of a salary to a joint venturer providing the joint venturers resolve to approve such a payment.

Again, it is noted that this issue is not addressed in the affidavit material filed on behalf of the defendants.

(e) The use by Gray of joint venture funds for a purpose unrelated to the joint venture.

It was submitted that, although the joint venture agreement allows for other developments, the only development that the joint venture actually participated in was with respect to the Scarborough property. It must therefore be the case that any costs in relation to a development in Northbridge would be outside the scope of the agreement. Indeed, Gray in his affidavit acknowledges that the joint venture was set up for the sole purpose of effecting the development of the Scarborough property and yet provides no explanation in the affidavit for the payments made in relation to a development in Northbridge.

31 It can be seen that, with respect to most of the allegations of misconduct, counsel for the plaintiffs highlights the fact that the defendants have failed to address these allegations notwithstanding that they should be in a position to do so. Further, it is said that, even where certain issues are addressed, the information provided is inadequate. For example, while it is asserted by the defendants that certain actions were taken with the knowledge and on the authority of the plaintiffs, no detail of the surrounding circumstances is deposed to or relevant documentation provided to the Court. For these reasons it is said that, for the purposes of this application, the Court should accept the version of events given by the plaintiffs.

32 In my view, there is considerable force in the submission that where the defendants decline to adduce evidence on central matters which should be well within their knowledge, then it is open to the Court to accept the plaintiffs' uncontroverted version of events as the basis of a determination on an application of this type. That is not to say that where there are competing versions of events it is appropriate or even possible to determine the true factual position based on the affidavit evidence alone.

33 On behalf of the defendants it was submitted that the complaints of the plaintiffs are accounting complaints and there is a specified procedure under the JV Agreement for dealing with accounting complaints which the first defendant had initiated prior to the commencement of this action. It is further said that it is not a difficult process to obtain an accounting of the joint venture. While I accept the proposition that it should not be a difficult process to obtain an accounting, on the evidence it has in fact proved to be exceedingly difficult. Neither do I accept the submission that the complaints relate only to issues of accounting. The allegations in this matter go far beyond issues of that type. There are before the Court serious allegations of misappropriation of joint venture funds and property

34 Counsel for the defendants also said that the dispute resolution procedure set out in cl 17 of the JV Agreement requires an unsettled dispute to be referred for arbitration and that such is the appropriate forum for the plaintiffs' claim. The plaintiff asserts that this is not an appropriate case for arbitration and, in any event, determination of the appropriate forum lies within the discretion of this Court. In my view, the issue of which forum is appropriate for the resolution of the dispute between the parties is not a matter for determination on this application.

35 It is also said that there is no provision in the JV Agreement to unilaterally terminate the agreement. The Court was referred to cl 12.1 of the JV Agreement which relevantly provides that if any joint venturer shall commit a breach of any agreement or covenant herein contained then the other joint venturer may within three months after becoming aware of such matter by written notice require the joint venturer in breach to retire from the joint venture. Clause 12.2 provides that any joint venturer receiving such a notice shall be deemed to have retired from the joint venture on the date of receipt of that notice. In the instant case there are but two joint venturers. The issuing of a notice to the defendant to retire from a joint venture between two entities would effectively bring an end to any joint venture in any event. As the plaintiffs seek a declaration that the joint venture has been dissolved with effect from 17 January 2003 this issue falls to be determined in the primary action. Ultimately, I do not consider that, in the context of an interlocutory application of this type, anything turns on which process was utilised to advise the defendants that the plaintiffs wished to end the joint venture partnership

36 It was also submitted on behalf of the defendants that the fact that there is no detailed response to the plaintiffs' primary affidavit is because, taken at its highest, a receiver should not be appointed to take possession of the two units because that property is preserved by caveat. In such circumstances, it is said, the appointment of a receiver becomes unnecessary. This submission is wholly dependent on the proposition that the two units are the extent of the joint venture property. The property of the joint venture will extend to any funds that are properly owing to the joint venture. The plaintiffs raise serious allegations about the conduct of the defendants including allegations that Gray misappropriated funds. The defendants have elected to provide neither a detailed accounting nor to provide a rebuttal of a number of these allegations. On the evidence adduced I am far from satisfied that the two units are the extent of the joint venture property.

37 Notwithstanding the proposition that it was unnecessary to provide a detailed response to the plaintiffs' primary affidavit, explanations were given from the bar table on a number of issues including the repayment of the vendor finance, the inability to pass title of the unit to Vile and the monies paid with respect to the Northbridge development. It was further asserted by counsel for the defendants that the plaintiffs have been given all materials relevant to the joint venture. I note that there is no such allegation in the affidavit of Gray and the documents annexed to the affidavit of Mr D'Souza could not, in my view, properly be described as all the material relevant to a joint venture involving the development of a site and the sale of four units on that site including the financing of the development.

38 It is plainly the case that the defendants had the opportunity to address these issues by way of affidavit evidence and elected not to. I decline to take into account any of the information given from the bar table.

39 It is also submitted on behalf of the defendants that no circumstance of urgency has been identified which would require the appointment of a receiver by way of interlocutory application. Again, this proposition appears to based on the fact that the units are protected by caveat and repayments on the mortgages over the unit are being made. In my view, where the allegations against the defendants include misappropriation of funds and no real attempt has been made to provide a proper accounting, the preferable course is to take action sooner rather than later. In that way, the prospects of identifying and recovering as much of the joint venture property as possible are maximised.

40 It is further submitted on behalf of the defendants that the appointment of a receiver would alter the status quo which would both adversely affect the rights of Vile, a third party to these proceedings, and also not be in the best interests of the joint venture. Counsel for the defendants suggests that the preferred option would be for Gray and Vile to remain in possession and maintain the mortgage repayments subject to an order restraining the first and second defendants from dealing with any assets of the joint venture.

41 The suggestion that an alteration in the status quo would adversely affect the joint venture is said to arise from the fact that if the receiver is appointed and Gray and Vile are no longer in possession of the units as purchasers then the mortgages over the properties will not be serviced. The difficulty I have with that submission is that it is not clear on the evidence before me that either Gray or Vile are servicing mortgages for which the joint venture is liable and, therefore, whether there is indeed a benefit to the joint venture by them remaining in possession.

42 In the absence of a full accounting there is insufficient evidence to determine the identity of the person or entity liable to meet the obligations under the mortgage and hence who exactly is benefiting from the payments being made by Gray and Vile. The plaintiffs do not profess to know and the affidavit of Gray is silent on the issue. In his affidavit Vile simply says that he has made mortgage payments to Gray for forwarding to the mortgagee or by Gray making payments and offsetting them against monies Gray owes Vile. The only further information on the subject was provided by counsel for the defendants who stated from the bar table that the mortgages are Gray's alone and are not guaranteed by the plaintiffs.

43 I turn now to consider the legal principles relevant to this application. Section 25(9) of the Supreme Court Act 1935 provides that a receiver may be appointed by an interlocutory order of the Court or a Judge in all cases in which it shall appear to the Court or a Judge to be just or convenient that such order should be made; and any such order may be made either unconditionally or upon such terms and conditions as the Court or Judge shall think just. The words "just or convenient" do not confer an arbitrary or unregulated discretion on the court: Harris v Beauchamp Bros [1894] 1 QB 801 at 809. The jurisdiction rests upon the principle that the applicant's legal remedy to protect his or her right is inadequate and that equity should intervene by the special remedy of a receiver: Bond Brewing Holdings Ltd v National Australia Bank Ltd [1991] VicRp 31; (1990) 1 ACSR 445 at 461, 462.

44 It is also useful to consider the role of a receiver before determining whether, on the facts of this case, it is appropriate to make such an appointment and, if so, on what terms.

45 The appointment of a receiver is necessarily an interim measure. The appointment is made at the instance of a party to an action to take possession of and get in the property which is the subject matter of the action or the title to which, or control of which, is in dispute between the parties. The receiver is to hold the property so that it may be preserved for the benefit of the party found entitled, or, ultimately, distributed among the parties in accordance with their entitlements: Meagher Gummow & Lehane's "Equity: Doctrines and Remedies" 4th Edition at 908. In short, the object of the appointment of a receiver is to protect something which may turn out to belong to another: Clydesdale v McManus and Anor (1934) 36 WALR 89 per Northmore CJ at 90.

46 A receiver takes possession of the property as the court's officer with the duty of dealing with it fairly in the interests of all the parties to the proceedings: Re Newdigate Colliery Ltd [1912] 1 Ch 468 at 478. The receiver's responsibility is to the court. He or she is not the agent of or the trustee for any of the parties, nor subject to their control: Co-operative Farmers' & Graziers' Direct Meat Supply Ltd v Smart [1977] VicRp 47; [1977] VR 386 at 391.

47 There is certainly precedent for appointing receivers to partnerships such as that created by the JV agreement. In Tate v Barry (1928) 28 SR (NSW) 380 at 382-3 Long Innes J, citing Baxter v West (1858) 28 LLJ Ch 169, said that it was "settled that in a suit instituted in equity for the winding up of a partnership already dissolved or for the dissolution of an admitted partnership in which it is clear that dissolution will be granted at the hearing, the plaintiff is entitled, as a general rule, and practically as a matter of course, to the appointment of an interim receiver."

48 In Lamerand v Lamerand (No 1) (1960) 80 WN (NSW) 198 on an application for the appointment of a receiver to a business Jacobs J concluded (at 198):

"It would seem to me that there are before the court to be dealt with on this interim application certain assets of a business which are admittedly the assets of a dissolved partnership and with which undoubtedly in this suit the court will eventually deal in one way or another on the final hearing of the suit, provided the suit is determined on its merits. That being so I consider that the first rule to which I have referred applies and that the court will almost as of course appoint an interim receiver."

49 In Mitchell v Simons (1862) 1 SCR (NSW) Eq 70 the primary judge described the approach to the appointment of a receiver in the following terms (at 73):

"I must consider if there be an existing partnership, and if there be, a receiver ought to be appointed, as a dissolution must be decreed.....It appears to me, on the evidence now before me, that there was a partnership; and then as there are allegations of improper conduct on the part of the defendant, on the authority of Goodman v Whitcomb [1820] EngR 525; (1 Jac & W 589) a receiver ought to be appointed. "

50 These authorities support the appointment of a receiver where there is a partnership, that partnership has been dissolved or will be dissolved by court order or otherwise, and where there are allegations of improper conduct. The role of a receiver in such circumstances is to take possession of the property which is in dispute between the parties so that it may be preserved for the benefit of the party found to be entitled to it on the hearing of the action.

51 In this case it is not in dispute that there was a partnership between the plaintiffs and the first defendants. Whilst there is a dispute about whether the partnership has actually been dissolved, it is apparent that this partnership cannot continue and there must be a final accounting and, if appropriate, a distribution pursuant to the JV agreement. There have been a number of serious allegations made by the plaintiffs against the first and second defendants. Some of those allegations are disputed and it is neither possible nor appropriate for me to determine the true position on the limited materials available to me. It is the case, however, that in relation to a number of those allegations, the defendants have elected not to rebut the allegations when it is clearly within their power to do so. In particular, despite repeated requests, it is apparent that at no stage has Gray, who was the active participant in the development, provided an accounting which is not only required by the express terms of the JV agreement but would provide evidence in relation to other allegations brought against the defendants. For these reasons, I have reached the conclusion that, in the absence of the appointment of an interim receiver with the power to fully investigate the financial circumstances of the joint venture, the plaintiffs are entitled to be provided with all financial information relevant to the joint venture and their interests will not otherwise be adequately protected pending trial. Further, full financial information concerning the operation of the joint venture will assist the Court in determining the issue of whether the second defendant holds the two units as constructive trustee for the benefit of the joint venturers.

52 Having determined that it is appropriate to appoint an interim receiver, it does not follow that I am prepared to make all of the orders set out in the chambers summons. In determining whether it is appropriate to appoint a receiver and, if so, the scope of the powers conferred on the receiver, the Court is required to consider the risk of injury to the interests of other parties: Clifford v Middleton [1974] VicRp 87; [1974] VR 737 at 743; Cummins v Perkins [1899] 1 Ch 16 at 19; Owen v Homan (1853) 20 ER 752 at 766.

53 In Bond Brewing v National Australia Bank Kaye J observed at (456):

"The appointment of a receiver is one of the oldest remedies of the Court of Chancery, and a very useful remedy it is. But its very efficacy means that a corresponding caution must attend its employment. Where a receiver is sought to protect property of which no one is in actual possession, no one will be ousted by the appointment and probably no great harm will be done. But where the subject matter is in the defendant's hands he may suffer an irreparable wrong by being dispossessed and of course this danger will weigh with a judge from whom the remedy is sought. The appointment of a receiver which is to be, so to speak, at the expense of the defendant's possession and without his consent is a step never to be taken without proper consideration of the defendant's position."

54 I have considered the impact on Gray and Vile of the appointment of a receiver. I remain of the view that it is appropriate in the circumstances of this case for such an appointment to be made. However, I am not at this time and on the currently available evidence prepared to make orders that would have the effect of dispossessing them of the properties in which they reside. Neither am I prepared to make orders that would allow for the properties to be sold which would be necessary in order for the receiver to exercise the power to discharge the liabilities of the joint venture from its assets. I must emphasise that this is an interim position. Once further information is forthcoming, it may well be appropriate to widen the powers of the receiver. For the time being, however, I consider that the interests of the plaintiffs can be protected and the potentially adverse impact on Gray and Vile can be overcome by limiting the powers of the receiver.

55 I have also given consideration to requiring an undertaking as to damages. An undertaking as to damages is often required if damage is to be apprehended. The apprehended damage is not so much that the receiver will exercise his or her powers so as to cause loss to the business but more the consequences which might flow from the fact of the appointment and the defendant's loss of his or her title to control his or her assets and affairs: National Australia Bank v Bond Brewing Holdings Ltd [1990] HCA 10; (1990) 169 CLR 271 at 276, 277. However, in this case I consider that the combination of the operation of O 51 r 9 and the restricted powers conferred on the receiver obviate the need for an undertaking as to damages. Should the receiver's powers later be enlarged it may be necessary to revisit this issue.

56 It is also commonly the case that if the application is to appoint a named person, an affidavit of his or her fitness for the post is required: Re Church Press Ltd; Victoria House Printing Co Ltd v Church Press Ltd (1917) 116 LT 247 at 248, 249. I note that the nominated receiver is identified as an Official Liquidator and as no issue has been taken on behalf of the defendants as to the identity of the nominated receiver, I do not intend to press this requirement.

57 However, as indicated, I propose to vary the terms of the appointment originally sought by the plaintiffs in the chambers summons. As the nominated receiver may have based his provisional acceptance of such an appointment on matters set out in the chambers summons, the Court will require the filing of a written consent to be appointed as receiver.

58 I propose to make orders in the following terms:

1. Subject to the giving of security in accordance with Order 51 Rule 3, Charles Philippe Louis Nilant, Official Liquidator, of Clout & Associates, Chartered Accountants (or such other suitable person acceptable to this Honourable Court), be appointed, until further order, as the receiver of all the assets of the joint venture which previously existed between the plaintiffs and the first defendant with the following powers:

1.1 To take possession of and collect all the books of account, records and other financial statements of the joint venture.

1.2 To take possession of and collect all assets of the joint venture with the exception of the two units registered in the name of the second defendant situate at 8 Edgehill Street, Scarborough.

1.3 To conduct investigations into any dealings by the parties to the joint venture in relation to the cash, fixed property and any other assets which form part of the property of the joint venture and to conduct investigations as to what the same represents, from where it was derived or to whom it was disposed of.

1.4 To demand and call up any debts due to the joint venture;

1.5 To wind up the business affairs of the joint venture will all proper accounts and enquiries of all dealings and transactions of the joint venture and of the parties to the joint venture.

1.6 To do all such things as may be necessary for the orderly realization of the property of the joint venture other than to take possession of or sell the units registered in the name of the second defendant situate at 8 Edgehill Street, Scarborough.

1.7 To have the powers prescribed by section 420(1) of the Corporations Act 2001 as if a reference therein to a company was a reference to the joint venture.

1.8 To do all things incidental to the exercise of the aforementioned powers.

2. Within 21 days after receipt from the first and second defendants of all the books of account, records and other financial statements of the joint venture (or such later date as the Court on the application of any of the parties or the receiver may determine) the receiver do file and serve a statement of the affairs of the joint venture, including all assets known to him at that time.

3. Without prejudice to the rights of any secured creditor, the reasonable disbursements and liabilities necessarily incurred in the care, preservation and realization of the secured property be paid out of the assets of the joint venture. The plaintiffs, the first and second defendants shall jointly and severally indemnify the receiver in respect of his remuneration and liabilities necessarily incurred during the term of his appointment in the event that there are insufficient funds of the joint venture available.

4. Without prejudice to the rights of any secured creditor, the receiver's remuneration, if not agreed to, be taxed and paid out of the assets of the joint venture, such remuneration to be fixed in accordance with the former Guide to Hourly Rates issued by the Insolvency Practitioners' Association of Australia and current at June 2000. The plaintiffs, the first and second defendants shall jointly and severally indemnify the receiver in respect of his remuneration and liabilities necessarily incurred during the term of his appointment in the event that there are insufficient funds of the joint venture available.

5. There be liberty to apply.

59 As the appointment of the receiver is conditional on the provision of a written consent and the giving of security, and as the receiver's powers do not extend to taking possession or disposing of the units in which Gray and Vile currently reside, it will be necessary to protect the plaintiffs' interests in relation to those properties in an alternative manner such as caveat, an undertaking or an injunction. I propose to hear further from the parties before deciding this issue.