Supreme Court Act 1935 (WA), s 25(9)

Corporate Affairs Commission v Smithson [1984] 3 NSWLR 547

D'Souza v Aaronisle Pty Ltd [2003] WASC 111

Groves v Groves [2004] WASC 79

Rowlands v Macdonald [2002] NSWSC 282

Wedge v Wedge (1994) 12 WAR 489

Boehm v Goodall [1911] 1 CH 155

Carter v Fey [1894] 2 Ch 541

Gray v Chaplin [1826] EngR 973; (1826) 2 Russ 126; 38 ER 283

Marshall v Charteris [1920] 1 CH 520

McLean v McKinlay [2004] WASC 2

Church Press Ltd; Victoria House Printing Co Ltd v Church Press Ltd (1917) 116 LT 247

1 LE MIERE J: The second and third defendants have applied, pursuant to O 51 of the Supreme Court Rules for the appointment of a receiver and manager to the former partnership of the parties. The plaintiff opposes the application.

2 From on or about 1 September 2001, the plaintiff, Frank Egan, and the defendants carried on business as mortgage brokers in partnership in New South Wales, Western Australia and Victoria under the business names of Education Mortgage Services, EMS, Teachers Mortgage Services and TMS. The plaintiff pleads that by written agreement dated 14 November 2002 made between the plaintiff and Egan, Egan assigned to the plaintiff his one-fifth interest in the partnership and the benefit of advances totalling $40,000 made by Egan to the partnership. The third-named defendant (O'Donoghue) has sworn that the second-named and third-named defendants were not parties to the alleged assignment.

3 It is common ground that the partnership was dissolved on 10 April 2003 when the defendants notified the plaintiff in writing of their intention to dissolve the partnership effective from 10 April 2003.

5 The plaintiff commenced this action by writ of summons issued on 22 July 2003. The writ was endorsed with a statement of claim. Paragraphs 1 to 6 of the statement of claim pleaded the history of the partnership. By par 7, the plaintiff pleaded the interests in the partnership held by each of the parties, namely that the plaintiff held a two-fifths interest and that each of the defendants held a one-fifth interest. Paragraph 8 pleaded that the partnership was dissolved on 10 April 2003. As I have said, that is common ground. By par 9, the plaintiff pleaded that the defendants had excluded him from participation in the conduct of the winding up of the partnership. The relief claimed by the plaintiff included a declaration that the partnership was dissolved on 10 April 2003 and a declaration that as at the date of the partnership the plaintiff held a two-fifths interest in the partnership and the defendants each held a one-fifth interest in the partnership. Thirdly, the plaintiff sought an order for the taking of an account and inquiry. Fourthly, the plaintiff claimed that a receiver be appointed to wind up the business and affairs of the partnership. Finally, the plaintiff sought an order that the defendants be restrained from carrying on business under the name of Education Mortgage Services until the affairs of the partnership have been wound up and the partnership property disposed of.

6 The third-named defendant (O'Donoghue) filed a memorandum of appearance on 15 August 2003. The second-named defendant (Okell) filed a memorandum of appearance on 9 September 2003. The first-named defendant (Piachniarski) has not been served with the writ of summons. None of the defendants have filed or served a defence.

7 On 29 January 2004 the second and third-named defendants filed a chamber summons for the appointment of a receiver and manager pursuant to O 51. The chamber summons sought orders for the appointment of a receiver and manager of the partnership trading under the names Education Mortgage Services, EMS, Teachers Mortgage Services and TMS.

8 At the hearing of this application, the second and third defendants read into evidence the affidavits of Mr O'Donoghue sworn on 11 February 2004 and 25 March 2004. The plaintiff objected to parts of those affidavits and their annexures. I received the affidavits together with the annexures subject to the qualification that the correspondence annexed to the affidavits is not received as evidence of the truth of their contents except insofar as the contents are, on their face, within the knowledge of the deponent. The second and third defendants also read the affidavit of Mr Piachniarski sworn 11 May 2004. The plaintiff read into evidence an affidavit sworn by himself on 10 March 2004.

Affidavit of O'Donoghue sworn 11 February 2004

9 The second and third defendants' application for the appointment of a receiver and manager was supported by an affidavit sworn by the third-named defendant (O'Donoghue) on 11 February 2004. Mr O'Donoghue swore, amongst other things, to the following matters. The majority of the business carried on by the partnership was transacted in New South Wales. In New South Wales, the partnership entered into arrangements with "Associates" who conducted mortgage broking businesses on behalf of the partnership under the name Education Mortgage Services in defined and agreed geographical territories. As at April 2003, the partnership had arrangements or agreements with the following lending institutions to arrange mortgages on behalf of consumers in return for the payment of a commission: Commonwealth Bank of Australia Ltd, Homeside Lending, Nombas Pty Ltd trading as Essential Financial Services, St George Bank Ltd and Westpac Banking Corporation Ltd.

10 Annexed to Mr O'Donoghue's affidavit is a copy of a letter from Toomey Pegg Drevikowsky, the solicitors for the second and third-named defendants, to Solomon Bros, the solicitor for the plaintiff, dated 5 September 2003. Mr O'Donoghue swears that the factual matters deposed to in that letter are true and correct. The letter denies that the plaintiff had been excluded from the winding-up of the partnership's affairs and asserts that he was informed of details of the winding-up and received, or was in a position to obtain, information to put him in a position to know what moneys the partnership had received and expended. The letter asserted that the plaintiff had engaged in various conduct that hindered the winding-up of the partnership affairs and that the plaintiff had failed to account for certain funds and assets of the partnership. In relation to the plaintiff's claim for the appointment of a receiver the letter said:

"On our instructions, in addition to the balance in the partnership's bank account, the only other assets of any significance are trail commissions which will be paid by relevant financiers from time to time. Mr O'Donoghue estimates that existing liabilities of about $5,000 - $10,000 remain to be paid. These are comprised mainly of legal and accounting fees, bills for which have been requested but have not yet been received. Of course, there will also be accounting and legal fees and other expenses in relation to the winding-up itself.

Having regard to the processes which our client has suggested above for keeping your client informed in relation to the income and outgoings of the partnership during the winding-up period and, having regard to the relatively small value of the partnership's assets and the simplicity of the business, we contend that the appointment of a receiver is disproportionately expensive, complicated and unnecessary."

11 The letter went on to summarise the position of the second and third defendants as follows:

"(1) A declaration that the partnership was dissolved on 10 April 2003 will not be disputed.

(2) Subject to receiving satisfactory proof of an effective assignment of Mr Egan's interest in the partnership with the plaintiff, a declaration that as at the date of dissolution of the partnership the plaintiff held a two-fifth interest in the partnership and the defendants each held a one-fifth interest in the partnership would not be disputed.

(3) The second and third defendants have done all that could reasonably be expected of them to account for the assets and liabilities of the partnership as of the date of dissolution and transactions since that date. By contrast, the plaintiff must provide a full accounting.

(4) The appointment of a receiver and orders restraining the defendants from carrying on business under the name of Education Mortgage Services are unnecessary. However, if the plaintiff fails to give a satisfactory account and a receiver and an inquiry are required, then the plaintiff should bear the costs personally."

12 Annexed to Mr O'Donoghue's affidavit is a copy of a letter from Jackson McDonald, the Western Australian agents for Toomey Pegg Drevikowsky, to Solomon Bros dated 24 December 2003. Mr O'Donoghue swears that the factual matters deposed to in that letter are true and correct. In that letter, Jackson McDonald said that the second and third defendants were dissatisfied with the lack of progress in winding up the affairs of the partnership and were also concerned that the plaintiff had not responded to particular matters in the letter of Toomey Pegg Drevikowsky to the plaintiff dated 5 September 2003. The letter goes on to raise particular matters of concern to the second and third defendants relating to the signing of cheques and the alleged failure to account for funds or assets of the partnership as well as other matters. The letter stated that the second and third defendants proposed to apply to the Court for the appointment of a receiver and manager to break the impasse between the parties and resolve the matters in dispute between them. The letter asserted that the plaintiff's conduct was solely responsible for the failure to resolve those matters.

13 In his affidavit, Mr O'Donoghue said that he and the second-named defendant, Okell, sought the appointment of a receiver and manager to the partnership for the purpose of:

"(a) Facilitating the payment of creditors of the partnership business.

(b) Terminating arrangements and agreements between the partnership and third party lending institutions.

(c) Disposing of partnership assets.

(d) Inquiring into and accounting for the assets of the partnership located in the partnership's Perth office and payments made by the plaintiff in relation to the business conducted at that office.

(e) Inquiring into and taking account of loans from partners to the partnership, commissions paid by the partnership to partners, commissions paid to partners and payment made from the partnership's bank account.

(f) Preparing accurate profit and loss accounts and balance sheets for the partnership for each of the years ended 30 June 2002, 30 June 2003 and to prepare an accurate balance sheet as at the date of dissolution (ie, 10 April 2003).

(g) Preparing amended income tax returns for the partnership for relevant tax years which may be necessary consequent upon preparation of accurate profit and loss statements as referred to in subpar (f)."

14 Mr O'Donoghue swears that the majority of the partners, the partnership bank account, the bulk of the partnership's books and records, the bulk of the financial institutions with which the partnership dealt, the bulk of the outstanding creditors of the partnership and the "Associates" were all located in Sydney. For that reason, the second and third defendants seek that if a receiver and manager is appointed, the winding up of the affairs of the partnership should be conducted predominantly in Sydney and the receiver and manager should be located in Sydney. The second and third defendants nominate Christopher Thomas Wykes of Lawler Partners, Sydney, a chartered accountant and official liquidator of the Supreme Court of New South Wales to act as receiver and manager of the partnership.

15 The second and third defendants' application for the appointment of a receiver and manager came on before Roberts-Smith J in chambers on 24 February 2004. His Honour made timetabling directions to progress the hearing of the summons.

16 On 10 March 2004 the plaintiff swore an affidavit in opposition to the second and third defendants' application for the appointment of a receiver and manager. The plaintiff deposed that immediately prior to its dissolution on 10 April 2003, the partnership owed $80,000 to the plaintiff (including a debt owed to Frank Egan which Egan had assigned to the plaintiff), $40,000 to the first named defendant (Piachniarski), and $5,000 to the second named defendant (Okell).

17 The plaintiff referred to the agreements with three individuals and a company collectively referred to as the "Associates" pursuant to which the Associates were paid a proportion of up front and trailing commissions paid by financial institutions to the partnership in respect of successful loan applications submitted through the partnership to financial institutions through the efforts of the Associates.

18 The plaintiff refers to the partnership's agreements with various financial institutions, including St George Bank and Westpac, pursuant to which the partnership was paid up front, and trailing commissions in respect of successful loan applications submitted through the partnership to the financial institutions (Commission Agreements).

19 The plaintiff swears to a number of matters concerning the commissions due or payable to the partnership as follows. At the time the action was commenced, Westpac was paying trailing commissions to the partnership in excess of $10,000 per month and St George Bank was paying trailing commissions to the partnership in excess of $4,000 per month. Prior to and after commencing this action, the plaintiff attempted to secure a purchaser willing to take assignment of the rights to the Commission Agreements. He has not been able to secure any such purchaser. The Commission Agreements may not be assigned as no purchaser willing to take an assignment has been found. To the best of the plaintiff's knowledge the Commission Agreements have not been terminated to date. By reason of those matters concerning the Commission Agreements, the plaintiff no longer seeks the appointment of a receiver. The plaintiff says that it is not in the interests of any party that a receiver be appointed to terminate the Commission Agreements.

20 The plaintiff swears as to the assets of the partnership as follows. A sum in excess of $178,000 is in the partnership's account with the Commonwealth Bank. At the plaintiff's instigation, no cheques may be drawn against the partnership account without the signature of himself and each of the defendants. Accordingly, the moneys in the partnership account are not at risk of being dissipated. The second asset of the partnership is the Commission Agreements, that is, the trailing commissions which are continued to be paid by Westpac, St George Bank and other financial institutions to the partnership pursuant to the Commission Agreements. Those commissions are, or will be, paid into the partnership account. Thirdly, the plaintiff holds $6,000 on behalf of the partnership. Fourthly, the plaintiff says that $2,400 and an unknown amount by way of refund of a bond in respect of the partnership's Sydney lease is held by the defendants on behalf of the partnership. Fifthly, there is a bond, of $1,820, less any authorised deduction, paid in respect of an apartment in Sydney leased by the partnership. Sixthly, there are various business names of the partnership.

21 The plaintiff deposes that he relied on the defendants to advise and consult him with respect to the dissolution of the partnership. By mid 2003 the defendants were not responding to the plaintiff's request for information regarding the dissolution of the partnership and he consulted his present solicitors. The defendants have continued to not provide the plaintiff with information concerning the affairs of the partnership.

22 The plaintiff swears that the matters required to be done to wind up the affairs of the partnership are the preparation of tax returns, the assignment, if any, of various business names, the collection of trailing commissions pursuant to the Commission Agreements until they are terminated, the accounting of an advance drawing of $5,000 by the partnership to the third named defendant (O'Donoghue) and the distribution of partnership assets to the parties.

23 The plaintiff joins issue with the contentions of the defendants concerning matters in dispute between the parties in relation to loans to the partnership, commissions received and amounts received or not accounted for to the partnership.

Affidavit of O'Donoghue sworn 25 March 2004

24 Mr O'Donoghue swore a further affidavit on 25 March 2004. Mr O'Donoghue took issue with matters raised in the plaintiff's affidavit sworn 10 March 2004 and annexed various documents in support of his contentions.

25 Mr O'Donoghue referred to a conversation between his solicitor, Mr Drevikowsky, and Mr Atkinson, the plaintiff's solicitor, on 13 February 2004:

"Atkinson:

Why do your clients want to terminate the agreement with the banks? That wouldn't be in anyone's interests because they would have to forfeit their commissions.

Drevikowsky:

My clients' don't necessarily want to terminate the agreements. What we want to do is make sure the arrangements with the lenders are properly managed to make sure the commissions are paid, as in the second part of that order. Maybe the summons could have been expressed better. We can amend the summons if we have to."

26 On 5 May 2004, the plaintiff filed an amended (substituted) statement of claim. The amended statement of claim pleads a number of matters not pleaded in the original statement of claim. The new matters include advances made to the partnership by the partners relevant to the taking of an account of the partnership. The amended statement of claim also pleads amounts said to be assets of the partnership held by the plaintiff for the defendants and a list of business names.

27 The plaintiff no longer seeks the appointment of a receiver. The relief now sought by the plaintiff is as follows. First, declarations that the partnership was dissolved on 10 April 2003 and that as of the date of dissolution of the partnership the plaintiff held a two-fifths interest in the partnership and the defendants each held a one-fifth interest in the partnership. Secondly, the plaintiff seeks orders that the plaintiff and the defendants pay various amounts into the partnership bank account. Thirdly, the plaintiff seeks an order that the plaintiff on behalf of the partners do various things to wind up the affairs of the partnership, including arranging for the preparation of tax returns and the payment of debts. Fourthly, the plaintiff seeks an order that the advances by the plaintiff and the defendants pleaded in the statement of claim be repaid from the funds in the partnership bank account. Fifthly, the plaintiff seeks an order that upon the winding up of the partnership, the funds in the partnership bank account be distributed two-fifths to the plaintiff and one-fifth to each of the defendants. Sixthly, the plaintiff seeks an order that the parties be restrained from doing any act, or signing any document, the effect of which will be to diminish the value of trailing commissions to be paid pursuant to agreements between the former partnership and financial institutions.

First named defendant consents to appointment of receiver and manager

28 The first named defendant (Piachniarski) swore an affidavit on 11 May 2004. Mr Piachniarski swears that he has not been served with any process in this action. He says that he consents to the appointment of a receiver and manager to the partnership, and to orders being made in accordance with the minute of proposed orders and directions prepared by the solicitors for the second and third defendants and dated 10 May 2004, (an undated copy of which is annexed to Mr Piachniarski's affidavit).

29 The orders proposed by the second and third defendants are important. The second and third defendants propose that Christopher Thomas Wykes be appointed until further order as the receiver and manager of all of the assets of the partnership for the purpose of facilitating the winding-up of the partnership's business and affairs. Paragraph 2 of the proposed orders is that the receiver shall have the following powers:

"(a) To take possession of and collect all the books of account, records and other financial statements of the partnership.

(b) To take possession of and collect all assets of the partnership which includes the power to demand and call up any debts due to the partnership.

(c) Subject to para 3 of this order, to dispose of the partnership assets and to do all such things as may be necessary for the orderly realisation of partnership property.

(d) To investigate and enquire into the conduct of the partnership affairs and of all dealings and transactions of or in relation to the partnership.

(e) To have the powers prescribed by s 420(1) of the Corporations Act 2001 as if a reference therein to a company was a reference to the partnership.

(f) To do all things incidental to the exercise of the aforementioned powers."

30 Paragraph 3 of the proposed order is in these terms:

"Within 28 days of the date of his appointment, the receiver shall investigate the existing arrangements and agreements between the partnership and -

(a) Commonwealth Bank of Australia Ltd;

(b) Homeside Lending;

(c) Nombas Pty Ltd trading as Essential Financial Services;

(d) St George Bank Ltd; and

(e) Westpac Banking Corporation Ltd;

and report to the Court and the parties as to the receiver's proposal for the treatment of those agreements and arrangements in light of the dissolution of the partnership, especially in relation to the distribution to the parties of future trail commissions or the proceeds of such commissions."

31 In pars 4 and 5 of the minute of proposed orders and directions, the second and third defendants seek the following orders:

"4. Within 28 days of the date of his appointment, the receiver shall provide to the Court and the parties a written report detailing the result of his investigations into:

(a) the circumstances in which and terms upon which furniture and equipment located in the partnership's Perth office may have been disposed of;

(b) the extent to which the interest bearing loans alleged to have been made by the plaintiff, Mr Egan and Mr Piachniarski to the partnership as shown in the partnership balance sheet as at 30 June 2002 (prepared by Mr Colin Pope) can be substantiated;

(c) the extent to which and circumstances in which commissions otherwise properly due and payable to the partnership may have been paid directly to the plaintiff, Mr Egan or Mr Piachniarski, in the period from 1 July 2001 to 30 June 2002;

(d) the accuracy of the allocation of partnership losses to members of the partnership as shown in the Partners' Distribution Summary attached to the financial statements for the partnership for the year ended 30 June 2002. (Prepared by Mr Colin Pope).

(e) the details and nature of the transaction to which cheque number 183 dated 5 December 2002 drawn on the partnership bank account in favour of Francis Egan in the sum of $4017.41 relates.

5. Within 28 days of the date of his appointment, the receiver shall provide to the Court and the parties draft:

(a) profit and loss accounts for the years ended 30 June 2002 and 30 June 2003;

(b) balance sheets for the partnership as at 30 June 2002 and 10 April 2003;

(c) amended income tax returns for the partnership for the years ended 30 June 2002, 2003;

to the extent that such drafts can accurately be prepared from the financial documents books and records made available to the receiver."

32 Finally, the second and third defendants seek an order that the plaintiff indemnify the receiver in respect of his reasonable remuneration, disbursements and liabilities necessarily incurred during the term of his appointment.

33 The powers of the receiver sought by subpara 2(d) and pars 3 and 4 of the minute of proposed orders relate to investigations to be carried out by the receiver concerning the matters referred to therein. It is not usual for a receiver and manager appointed by the Court to carry out investigations of the sort envisaged by the minute of proposed orders. Counsel for the second and third defendants submitted that the proposed investigations by the receiver and manager were to try and find a practical way to facilitate the resolution of the disputes between the plaintiff and the defendants. Counsel submitted that if the receiver completed an investigation and presented a report to the Court, the contents of that report might assist the parties to reach a resolution of the matters in dispute. Counsel submitted that the receiver's investigation is intended to have no effect other than that which the Court may consider appropriate upon review of the report and having heard from the parties in relation to the report. If, counsel submitted, having looked at its content and having heard from the parties, the Court considers that the report cannot be in any way used to further advance the resolution or determination of the matter - not even used to send the parties off to mediation - then so be it.

34 A receiver may be appointed by an interlocutory order in all cases in which it shall appear to the Court just or convenient that such an order shall be made: Supreme Court Act 1935, s 25(9). The Court also possesses inherent power to appoint receivers: Corporate Affairs Commission v Smithson [1984] 3 NSWLR 547 at 552.

35 The power to appoint a receiver is discretionary. However, the second and third defendants submit that where a partnership has been dissolved and the parties are in serious dispute, a receiver will be appointed by the Court almost as a matter of course. A breakdown of relations between the parties and an inability on their part to co-operate in the winding up of the partnership affairs is usually sufficient to warrant the appointment of a third party receiver for that purpose.

36 It is often said that if the partnership is already dissolved, appointment of a receiver is not automatic but the Court usually appoints a receiver, almost as a matter of course: see, eg, Higgins & Fletcher, "The Law of Partnership in Australia and New Zealand", 8th ed, page 317; Laws of Australia, 4.8: 71; "Civil Procedure Western Australia" [51.1.18]. In Wedge v Wedge (1995) 12 WAR 489 consent orders were made for the dissolution of a farming partnership. The plaintiff sought an order for the appointment of a receiver and manager with a view to the sale of the partnership assets. Parker J referred to the 16th edition of Lindley & Banks on Partnership where, at par 23.150, the author quotes, without disagreement, from Lord Lindley: " ... whilst if the partnership was already dissolved, the Court usually appoints a receiver, almost as a matter of course." His Honour went on to hold that although there was no apparent risk to the assets in the case, the circumstances attending the affairs of the partnership and the breakdown of relations between the parties brought the case within the category of serious dispute between the parties. The normal approach, his Honour said, is for a receiver to be appointed in circumstances such as those.

37 The author of the 18th edition of Lindley & Banks on Partnership, at para 23.160, makes the following comment on Lord Lindley's statement:

"Lord Lindley's use of the expression 'almost as a matter of course' in relation to appointments following a general dissolution should not be taken too literally. There is nothing approaching a presumption that a receiver will be appointed in such a case and sufficient ground will always have to be shown, as a Court of Appeal made clear in Toker v Akgul."

38 The author had earlier said at par 23.157 that where an action is brought seeking the dissolution of the partnership and/or the winding up of its affairs, a receiver and, in particular, a receiver and manager will more readily be appointed, but it is clear from the Court of Appeal's judgments in Toker v Akgul that such application will not be granted as a matter of routine. In every case, it will be necessary to show sufficient grounds for the appointment and that the expenses associated therewith will not be disproportionate to the nature and value of the partnership business.

39 The principle stated by Parker J in Wedge v Wedge has been followed in this Court in D'Souza v Aaronisle Pty Ltd [2003] WASC 111 and Groves v Groves [2004] WASC 79.

40 In Rowlands v Macdonald [2002] NSWSC 282, Barrett J referred to the general principle that where a partnership has been dissolved, the plaintiff is entitled as a general rule, and practically as a matter of course, to the appointment of an interim receiver. His Honour added the following qualification:

"But the remedy remains discretionary and it was emphasised by Powell J in Fitz-Gibbon v Khoury (unreported, NSWSC, 1 March 1985) that the court must pay attention to the surrounding circumstances:

'This general rule notwithstanding, it is equally well established that it is not inevitable that, in any such case, an interim receiver and manager will be appointed, and that the Court retains a residual discretion as to whether any appointment should be made; one of the bases upon which, in an appropriate case, an appointment will be refused, is that the consequences of such an appointment will be "ruinous" (see, for example, Walters v Taylor (1807)15 Ves 16; [1807] EngR 206; 33 ER 658; Tate v Barry (1928) 28 SR (NSW) 380; Sobel v Boston [1975] 2 All ER 282).' "

41 In my view, where the partnership is already dissolved, the Court will appoint a receiver if sufficient grounds are shown. The Court should not appoint a receiver as a matter of course, that is, merely because the partnership has been dissolved and one of the partners seeks the appointment of a receiver. However, where the partnership is already dissolved, the burden on a partner seeking the appointment of a receiver to show sufficient grounds for the appointment is much less than where the partnership is continuing. One situation in which the interests of the parties is best served by the appointment of a receiver is where there is a serious dispute between the parties or a breakdown of the relations between them that hinders or prevents the orderly winding up of the partnership affairs.

42 There is no apparent risk to the assets of the partnership, other than the trailing commissions. The principal asset is the money presently in the partnership bank account. No money can be withdrawn from the partnership bank account without the approval of the plaintiff and the defendants.

43 There has been a breakdown in relations between the partners. The plaintiff commenced this action and alleged that he had been excluded from participation in the conduct of the winding up of the partnership. The plaintiff continues to complain that he has not been provided with full information by the second and third defendants. The plaintiff further alleges that the defendants have not accounted to the partnership for various specified funds and assets. For their part, the second and third defendants complain that the plaintiff has frustrated the payment of outstanding creditors of the partnership by refusing to sign cheques. They also complain that the plaintiff has failed to account to the partnership for certain funds or assets. There is a dispute between the parties concerning debts which the plaintiff says are owing by the partnership to him. In my view, these matters constitute a serious dispute sufficient to justify the appointment of a receiver. The conflict has not reached the point of physical violence, as was the case in Wedge v Wedge, but it is a serious impediment to the proper winding up of the affairs of the partnership.

44 Furthermore there is a difficulty concerning the trailing commissions that needs to be attended to. As I have referred to already, the partnership has a number of ongoing agreements with lending institutions to arrange mortgages on behalf of consumers in return for the payment of a commission. Trailing commissions continue to be paid by the lending institutions to the partnership in respect of mortgages previously arranged by the partnership. The second and third defendants submit that those agreements or arrangements need to be addressed and dealt with to:

"(a) ensure that the partnership is relieved from the performance of any future obligations in respect of attracting mortgage business to those institutions, and

(b) make suitable arrangements for the continued payment of existing trailing commissions to the partnership members (after payment of debts) or alternatively for the sale of those commissions as an asset of the partnership business."

45 The agreement between the partnership and Westpac is annexed to the affidavit of the plaintiff. It does not appear from that agreement that there are any express obligations on the partnership to arrange mortgages or loans from Westpac. The agreement provides that Westpac may terminate the agreement and, in effect, discontinue the payment of trailing commissions, upon an event of default. There are four specified events of default. The most relevant are:

"(a) an administrator, receiver, receiver and manager, liquidator or similar officer is appointed or an order is made for the administration, winding up or dissolution of the Broker or Westpac or steps are taken towards this (for example, a resolution is passed or an application is made to a court);

...

(c) Westpac withdraws or cancels the accreditation of the Broker, or any principal of the Broker (and if this occurs, Westpac may terminate this agreement under cl 7.2 by giving notice of termination at the same time as giving notice of the withdrawal or cancellation of accreditation, and in the same notice, if it is the Broker whose accreditation has been withdrawn or cancelled)."

46 It is arguable that an event of default has already occurred. An application has been made to the Court for the appointment of a receiver or receiver and manager. Further, if "dissolution" includes the dissolution of a partnership then that has already occurred.

47 There is always the possibility that Westpac may withdraw the accreditation of the partnership ("Broker") on the grounds that the partnership has ceased referring borrowers to Westpac, has ceased conducting the business of arranging finance on behalf of potential applicants for finance from Westpac and indeed has been dissolved.

48 In my view, the orderly winding up of the affairs of the partnership requires that the partnership deals with its arrangements with Westpac and the other lenders to make provision in respect of the trailing commissions and the agreements now that the partnership has been dissolved and has ceased to operate the business of arranging finance on behalf of potential borrowers. It is also necessary that the agreements and arrangements with the Associates be dealt with.

49 In my view, there are two principal arguments against the appointment of a receiver. The first is that it would be "ruinous" in that it might lead to the lenders ceasing to pay trailing commissions to the partnership. It is said that the appointment of a receiver would be an event of default under the Westpac agreement that might lead to Westpac ceasing to pay the trailing commissions to the partnership. In my view, there are two answers to that argument. First, events of default have, arguably, already occurred as I have discussed above. Secondly, the affairs of the partnership must be wound up one way or another. In the absence of some agreement between the parties, the affairs of the partnership cannot be permitted to remain unresolved indefinitely in the hope that the trailing commissions will continue to be paid into the partnership bank account.

50 A second argument against the appointment of a receiver is that the expense of doing so is disproportionate to the benefit that might result from the appointment. It is undesirable that the assets of the partnership should be consumed by the payment of fees to a receiver. However, the fees will be proportionate to the work that is to be done. If there is not much to be done by the receiver, then the fees will be relatively modest.

51 The disputes between the parties, the breakdown in their relations and the effect it has had of frustrating the proper and efficient winding up of the partnership affairs, together with the necessity to deal with the agreements with the lending institutions and arrangements with the Associates warrant the appointment of a receiver.

52 The receiver's function is limited to holding the property of the partnership and does not extend to carrying on a business. The court may therefore empower the receiver to act as receiver and manager. A receiver and manager is authorised to continue the business to wind it up as a going concern.

53 In this case, the winding up of the partnership affairs would require that the trailing commissions and agreements between the partnership and lending institutions and the agreements with the Associates be dealt with. That involves something more than getting in and holding the property of the partnership. It is appropriate to appoint a receiver and manager in this case.

54 I have set out above the orders sought by the second and third defendants. I am willing to confer on the receiver and manager the powers specified in pars 2(a), (b), 3 and 5 of the second and third defendants' minute of proposed orders and directions dated 10 May 2004.

55 The second and third defendants propose that, with the exception of the arrangements and agreements between the partnership and the lending institutions, the receiver and manager be empowered to dispose of the partnership assets and do all such things as may be necessary for the orderly realisation of partnership property. In relation to the arrangements and agreements between the partnership and the lending institutions, the second and third defendants propose that the receiver and manager is to report to the Court his proposal for the treatment of those agreements and arrangements. It is not clear that there is any property of the partnership for a receiver to sell. The principal assets of the partnership are the money in the partnership bank account and the agreements with the lending institutions, or the right to receive the trailing commissions pursuant to them. Nevertheless, there may be some assets of relatively small value that need to be realised. Accordingly, it is appropriate to confer on the receiver a power to realise partnership assets in the terms of, or similar to, par 2(c) of the second and third defendants' minute of proposed orders.

56 I am not prepared to make orders in terms of pars 2(d) and 4 of the second and third defendants' minute. In my view, it is not the function of a receiver and manager to carry out an investigation into the conduct of the partnership affairs by the partners. There are a number of disputes between the parties. If not resolved earlier, they will be resolved in this action.

57 In any event, I do not consider that the course envisaged by pars 2(d) and 4 of the second and third defendants' minute of proposed orders would be efficacious in this case. The disputes between the parties involve what has happened and been agreed in the past and other questions of fact. A receiver has no power, or indeed means to determine those questions of fact. A receiver has no role to play in the resolution of those disputes.

58 The second and third defendants have nominated Christopher Thomas Wykes to be appointed as receiver and manager. The evidence before the Court on the hearing of this application concerning the qualifications and suitability of Mr Wykes to be appointed receiver was inadequate. That was recognised by the parties. The parties asked that I should determine whether or not a receiver should be appointed and if I determined to appoint a receiver then the parties should confer further on the identity of the receiver to be appointed. I agreed to that course. Accordingly, I will give the parties an opportunity to confer in relation to the identity of a receiver and manager, and to lead further evidence if they cannot reach agreement.

59 The parties asked that I should give them a further opportunity to confer and, if necessary, make submissions and lead evidence on the necessary orders on the appointment of a receiver and manager. I will give the parties that opportunity. The matters to be addressed include the remuneration of the receiver and security to be given by the receiver.

60 The second and third defendants' minute of proposed orders proposes that the plaintiff shall indemnify the receiver in respect of his reasonable remuneration, disbursements and liabilities necessarily incurred during the term of his appointment. That is an extraordinary order. The usual order is that the remuneration of a receiver is payable out of the property taken into possession and the parties to the action are not personally responsible to him or her for it even if his or her appointment was made by their consent: "Civil Procedure Western Australia" [51.4.1]. I see no grounds in this case for making an order that the plaintiff pay the receiver's costs or otherwise indemnify the receiver. The remuneration of the receiver should be payable out of the property of the partnership.

61 A receiver and manager of the partnership property should be appointed. The powers of the receiver should include those specified in pars 2(a), (b), (c), (f), 3 and 5 of the second and third defendants' minute of proposed orders and directions, or orders to a similar effect. I will give the parties leave to confer and, if necessary, adduce further evidence and make further submissions concerning the identity of the receiver to be appointed, the remuneration of the receiver, security to be given by the receiver and any other necessary or incidental orders. I will otherwise adjourn this application to enable those matters to be attended to.