Lewarne v Momentum Productions Pty Ltd

REASONS FOR JUDGMENT 1 On 7 August 2007, Stone J concluded that the parties to the present proceeding were in partnership in the operation of a hotel named the East Village Hotel at 234 Palmer Street, East Sydney (Lewarne v Momentum Productions Pty Ltd [2007] FCA 1136). On 9 October 2007, Stone J made orders giving effect to her conclusions in the earlier judgment and appointing Mr John Vouris receiver and manager of the partnership and the partnership business (Lewarne v Momentum Productions Pty Ltd [2007] FCA 1530). Subsequently, on appeal, a Full Court varied her Honour's findings by deciding that the first respondent was not in partnership with the applicant and the second respondent, but otherwise left unaffected her Honour's orders for the realisation of the partnership assets and the role to be played by Mr Vouris in that connection (Momentum Productions Pty Ltd v Lewarne (2009) 174 FCR 268). 2 Mr Vouris, in an affidavit sworn on 24 June 2013, gave evidence about the steps which he took pursuant to the orders made by Stone J on 9 October 2007. Upon his appointment as receiver and manager, he stopped trading the hotel business. From that date he attempted to realise the assets of the partnership. He set out in his affidavit the steps he took to obtain a reliable valuation of the assets of the business and to establish its liabilities. He sought funding from the applicant and the second respondent to enable him to meet the debts of the business, but funding was not made available and he decided not to reopen the hotel. On or about 26 October 2007, the lease of the hotel was terminated by the lessor as rental arrears and ongoing rent were not able to be paid. 3 The second respondent was to pay a large amount to the partnership and to secure that obligation the partnership had an equitable charge over a home unit at Narrabeen. However, the Commonwealth Bank of Australia held a mortgage over the Narrabeen property and took possession of the property for the purpose of sale. The proceeds of sale were insufficient to discharge the debt owed to the Commonwealth Bank of Australia and nothing remained for Mr Vouris to recover on behalf of the partnership. He served a letter of demand upon the second respondent, followed by a bankruptcy notice and a creditor's petition, but before the creditor's petition was heard the second respondent lodged a debtor's petition, which was accepted on 30 March 2009. No dividends were paid to creditors in the bankrupt estate of the second respondent, who was later discharged from his bankruptcy on 31 March 2012. 4 It was not possible for Mr Vouris to realise any value from the liquor licence because the lessor had re-entered the hotel premises and the partnership no longer had the benefit of the lease. Mr Vouris also gave evidence about proceedings commenced in the Supreme Court of New South Wales by the first respondent against the lessor and the circumstances in which those proceedings were, ultimately, dismissed. 5 Eventually, Mr Vouris was able to negotiate a sale of remaining assets to the lessor for the amount of $33,000. In his affidavit, he deposed to the fact that the lessor, however, only paid $20,000. It was not commercially practical for Mr Vouris to pursue the lessor for the remaining $13,000 owed by it. Finally, Mr Vouris said the following: 48. Pursuant to order 4 of the Appointment Orders I was to realise the assets of the Partnership and the Partnership Business and apply the proceeds in due course of administration in accordance with orders 9 and 10 of the Appointment Orders. 49. I have realised all the assets of the Partnership and the Partnership Business. At page 139 is a Summary of Receipts and Payments in the receivership as at 5 February 2013. The Summary shows that I have realised the amount of $40,621.94, of which $27,995 had been distributed on account of various expenses as at 5 February 2013. I have since expended the balance of $12,626.94 on account of legal fees and disbursements with respect to the making of this application. 50. I have incurred remuneration and disbursements in the receivership in excess of $125,000 plus GST. These costs have been written off. 51. I have not identified any other sources or potential sources of funds from which distribution could be made in accordance with orders 9 and 10 of the Appointment Orders. 52. I am not aware of any claims on the Partnership or the Partnership Business which have not been resolved. 6 Mr Vouris has now made an application that he be discharged from his position as receiver and manager. 7 In an affidavit sworn on 8 July 2013, Ms Lisa Chapman, who appeared for Mr Vouris, set out the steps that were taken to bring the proceedings and Mr Vouris' application to the attention of the parties. I am satisfied from what appears in that affidavit and from the submissions that were made, both written and oral, that the other parties were properly served and do not oppose the making of an order that Mr Vouris be discharged from his position of receiver and manager. 8 Apart from an order that Mr Vouris be discharged, Ms Chapman sought an order that Mr Vouris be granted leave to dispense with the requirement to file final accounts under rule 14.25 of the Federal Court Rules 2011. Ms Chapman referred, in support of the application for that order, to a judgment of Jacobson J in Kerr, in the matter of Angel's Castle Pre-School Pty Ltd (In Liquidation) (No 2) [2012] FCA 57. Jacobson J there set out the principles under which such an order might be made. They include the fact that the cost of complying with the formal procedure of filing and passing accounts might exceed any benefit that may accrue from doing so. It seems to me that the present case, also, is a case in which it is appropriate to make an order dispensing with the requirement to file final accounts. 9 For the foregoing reasons, I make the orders sought. I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Buchanan.