The prima facie rules respectively entitling a fixed term partner to a proportionate refund of his or her premium and a contractual joint venturer to a proportionate repayment of his or her capital contribution on the premature dissolution of the partnership or collapse of the joint venture are properly to be seen as instances of a more general principle of equity. That more general principle of equity can also be readily related to the general equitable notions which find expression in the common law count for money had and received (cf Moses v Macferlan (1760) 2 Burr 1005 at 1012 ; [97 ER 676 at 680-1]; J & S Holdings Pty Ltd v NRMA Insurance Ltd (1982) 41 ALR 539 ; 61 FLR 108 at 120) and to the rationale of the particular rule of contract law to which reference has been made (cf Fibrosa , supra , at pp 61ff and esp at p 72). Like most of the traditional doctrines of equity, it operates upon legal entitlement to prevent a person from asserting or exercising a legal right in circumstances where the particular assertion or exercise of it would constitute unconscionable conduct (cf Story: Commentaries on Equity Jurisprudence , 12th ed (1877: Perry), vol 2, para 1316; Legione v Hateley , 152 CLR at p 444). The circumstances giving rise to the operation of the principle were broadly identified by Lord Cairns LC, speaking for the Court of Appeal in Chancery, in Atwood v Maude, supra , at p 375 where "the case is one in which, using the words of Lord Cottenham in Hirst v Tolson (1850) 2 Mac and G 134 ; 42 ER 52, a payment has been made by anticipation of something afterwards to be enjoyed [and] where … circumstances arise so that future enjoyment is denied". Those circumstances can be more precisely defined by saying that the principle operates in a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specially provided that that other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do (cf Atwood v Maude at pp 374-5 and per Jessel MR, Lyon v Tweddell (1881) 17 Ch D 529 at 531).
43 This analysis produces the following results. Prima facie, neither The Redrock Company nor Liquor National is entitled, following termination of the arrangements between them, to appropriate for their own benefit the business, business name, goodwill or commercial opportunities that arise as a result. All those assets are held for the benefit of those entitled to the joint venture upon winding up. Where neither has exercised its right to buy out the other, it would seem, prima facie, that those assets ought to be sold and divided between Liquor National and The Redrock Company, in proportions 51:49. For The Redrock Company to carry on business under the name Redrock Beverages, which is only colourably different from, and conveys an association with, Redrock Distributors, and to exploit a distribution agreement with Australian Pure Waters which it was obliged to obtain, if at all, for the benefit of the joint venture, is a breach of its fiduciary obligations as a joint venturer, and is misleading and deceptive. Accordingly, Liquor National has a seriously arguable case that it is entitled to an injunction restraining The Redrock Company from carrying on the Redrock business and/or requiring it to account for the profits it makes from doing so.
44 The Redrock Company's response is that the venture failed without attributable blame on its part, and that it ought to be entitled to a return of its contributions, including the business name, and the benefit of the association with the supplier, Australian Pure Waters. There is much to be said for the view that the joint venture was never fully implemented: not only was the contemplated vehicle not incorporated, but the Heads of Agreement themselves left many matters for further resolution and were expressed in imprecise terms; the agreement 'in legal form' that they contemplated was never prepared; and there may be something to be said for the view that this joint venture came to an end before it was fully perfected, so that the Muschinski v Dodds doctrine might be attracted. That view, it must be said, is one which was forcefully expressed on behalf of the Liquor National in its termination letter to Redrock Distributors, although I apprehend Liquor National now takes rather a different approach.
45 However, although the vehicle was not incorporated, it was not the failure to incorporate the vehicle that brought about the failure of the joint venture. While Liquor National contends that it terminated the agreement for The Redrock Company's breach in preparing to set up in competition, The Redrock Company contends that Liquor National was in breach by failing to account to the joint venture for the moneys to which it was entitled and which were then, in part, to be passed on to The Redrock Company after payment of overheads. In the latter months of 2006, The Redrock Company or the joint venture through Mr Stonier and Mr Kinsella were pressing for payment and were not receiving what they demanded. There is a significant factual dispute, not capable of resolution on this application, as to who is in the right and who is in the wrong in that respect. But if, in fact, as on the present material is at least arguable, Liquor National was not accounting to the joint venture for the amounts for which the Heads of Agreement contemplated it would account, then it might well be the case that its breach in that respect precipitated what subsequently happened.
46 In short, on the material presently available to the Court, it is at least arguable that the Muschinski v Dodds doctrine may be attracted, and that The Redrock Company may be entitled to recover on the winding up of the joint venture what it contributed, rather than simply 49 percent of the proceeds.
47 That said, as presently minded, I think the contrary argument is the stronger one, largely because of the provisions of the buy out clause, and partly because for the first 18 months of the arrangement the greatest benefit was for The Redrock Company, with Liquor National foregoing its profit share during that period, and it would prima facie seem inequitable that The Redrock Company could have that benefit and recover its contribution, and leave Liquor National with none of the benefit that it was envisaged it would eventually derive from the arrangement by way of profit share.
48 Accordingly, both parties have an arguable case so far as final relief is concerned, but Liquor National, at least on its alternative position, somewhat more strongly so. Which of them will ultimately prevail is incapable of resolution and it would be inappropriate to endeavour to resolve it at this stage. That means that the outcome of the interlocutory proceedings must abide the balance of convenience.
Entitlement of a partner to a receiver
49 On the breakdown of a partnership either partner, prima facie, has a strong case for the appointment of a receiver. In Tate v Barry (1928) 28 SR 380, Long Innes J said that it should be regarded as settled in an equity suit for the winding up of a partnership already dissolved, or for the dissolution of an admitted partnership in which it was clear that dissolution would be granted at hearing, that the Plaintiff was entitled as a general rule, and practically as a matter of course, to the appointment of an interim receiver. That was endorsed by McLelland J (as he then was) in Davey v Donnelly (NSWSC, 16 May 1991, unreported).
50 In more recent times, however, the approach has been somewhat modified, with reference being made to the substantial cost of installing a receiver in a partnership with only moderate assets and to the circumstance that the law has moved on since 1928 [see Cuming v Hennessy [2005] NSWSC 1219 (Young CJ in Eq)]. In Fitz-Gibbon v Khoury (NSWSC, Powell J, 1 March 1985, unreported), Powell J said that the Court must pay attention, notwithstanding the general rule, to the circumstances, that an interim receiver and manager was not inevitable, the Court retaining a residual discretion as to whether an appointment should be made; and that one of the bases upon which, in an appropriate case, an appointment might be refused, is that the consequences of such an appointment would be ruinous, for which reference was made to Tate v Barry and to Sobell v Boston [1975] 2 All ER 282.
51 In Henry v Stewart (NSWSC, Cohen J, 9 June 1995, unreported) - which, like many of the cases that consider the ruinous consequences of an appointment, concerned a partnership of solicitors - his Honour observed that it was desirable that there should be no step which would have an adverse effect upon the professional standing and integrity of the parties as solicitors, and it could not be denied that news of a receiver of a professional practice might well cause members of the public to hesitate in resorting to it. More recently, in Rowlands v MacDonald [2002] NSWSC 282, Barrett J said (at 29):
The 'ruinous' concern manifests itself principally in cases where, following the dissolution which is the occasion for the application for appointment of a receiver, some or all of the partners will conduct business with the aid of the existing goodwill.
52 If I do not appoint a receiver, but require accounts to be maintained strictly with an opportunity for regular inspection and verification, then presumably The Redrock Company will continue to carry on The Redrock business. If, ultimately, it is held liable in these proceedings, it will be required to account to Liquor National for a proper share of the profits which it derives from that business, and although Liquor National will be deprived of the business until final determination of the matter, this can be met by an award of interest. On the other hand, if I do appoint a receiver, the receiver will endeavour to carry on the business, but may have great difficulty in doing so if Australian Pure Waters is not prepared to supply the receiver, and having regard to the evidence that Australian Pure Waters, which has expressed the view that it will decide who it wants to supply and it will supply The Redrock Company, it is far from clear in that the receiver would obtain supply from Australian Pure Waters. As the Split Rock and Tiro brands seem to be the main stay of the Redrock business, this could be destructive of the business. That would be to the detriment of both parties, or at least of whichever party ultimately succeeds.
Other balance of convenience considerations
53 Additionally, appointment of a receiver would visit on the ultimately successful party, if not both parties, the costs of the receivership. It may affect the ultimate saleability of the business, and the price that might be realised. If The Redrock Company ultimately succeeds, the asset which it recovers might well be a diminished one. The Defendants will be forced into default of the obligations which they have entered into consequent upon or in anticipation of the termination of the joint venture. Although it might be said that all this is counterbalanced by the Plaintiff's undertaking as to damages, it does not seems to me that an undertaking as to damages, however valuable, meets the potential for the Defendants being put into default of obligations with lessors and financial institutions.
54 Accordingly, on the balance of convenience it seems to me that this case is in the territory of those in which appointment of a receiver may be "ruinous". Appointment of a receiver in this case might well ruin a business which it is desirable be maintained in the interests of whichever party ultimately succeeds. It may do so because it is far from certain that a receiver will secure the source of supply from Australian Pure Waters, which is the main stay of the business. In addition, irremediable prejudice would be occasioned to the Defendants by appointment of a receiver, putting them into default of their obligations to third parties. I see no irremediable prejudice to Liquor National, because any detriment to it may be remedied upon the winding up of the joint venture.