Morkaya v Parkinson; Parkinson v Morkaya

Supreme Court of NSW|2008-10-02|Before: Brereton J, McLelland J, Powell J, Cohen J

CITATION : Morkaya v Parkinson; Parkinson v Morkaya [2008] NSWSC 1050

HEARING DATE(S) : 29 August, 4 September & 2 October 2008

JURISDICTION : Equity Division Duty List

CATCHWORDS : INTERLOCUTORY APPLICATION - interim management of two businesses owned by former couple - where de facto relationship disputed - where one business (OSP) run by corporation (Ativa) in which couple were shareholders and directors and other (DCA) arguably a partnership - where personal relationship has irretrievably broken down - where interlocutory regime already in place for interim management of businesses with female partner having control of OSP and male of DCA - where male partner applies for interim control of OSP - principles applicable on dissolution of partnership - whether female partner had mismanaged OSP and/or failed to conduct it openly and impartially - whether male partner should be given control of OSP - where corporation was insolvent or approaching insolvency - where there was reason to doubt the ability of either partner to manage the business impartially and transparently - where both partners had prima facie preferred his or her own interests to those of corporation and creditors - whether provisional liquidator should be appointed - whether male partner should be required to seek leave before filing further notices of motion - whether sufficient reason to alter current regime for interlocutory management - whether female partner should have greater visibility of DCA business - whether parties should be ordered to release rental bond of premises leased by both businesses to lessor.

LEGISLATION CITED : (NSW) Property (Relationships) Act 1984, s 20

Alcock v Robb (1978) 2 BPR 9625 Beale v Trinkler [2007] NSWSC 1058 Chan v Zacharia (1984) 154 CLR 178 Cuming v Hennessy [2005] NSWSC 1219 Davey v Donnelly (NSWSC, 16 May 1991, McLelland J, unreported) Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (1998) 28 ACSR 688 Fitz-Gibbon v Khoury (NSWSC, Powell J, 1 March 1985, unreported) CASES CITED : Grace v Grace [2007] NSWSC 6; (2007) 25 ACLC 141 Henry v Stewart (NSWSC, Cohen J, 9 June 1995, unreported) Liquor National Wholesale Pty Ltd v The Redrock Co Pty Ltd [2007] NSWSC 392 Morkaya v Parkinson [2008] NSWSC 642 Nutech Wall & Ceiling Systems v VMF Holdings (NSW) [2008] NSWSC 980 Rowlands v MacDonald [2002] NSWSC 282 Sobell v Boston [1975] 2 All ER 282 Tate v Barry (1928) 28 SR (NSW) 380

2905/08 Aydan Morkaya (plaintiff) PARTIES : David Anthony Parkinson (defendant) 2945/08 David Anthony Parkinson (plaintiff) Aydan Morkaya (defendant)

COUNSEL : Ms L M Snelling (Ms Morkaya) Mr A R Martin (sol) (Mr Parkinson)

SOLICITORS : Sayan & Associates (Ms Morkaya) Martin Legal (Mr Parkinson)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION DUTY LIST

2905/08 Aydan Morkaya v David Anthony Parkinson 2945/08 David Anthony Parkinson v Aydan Morkaya & 1 Or JUDGMENT 1 HIS HONOUR: Prior to 2006, Ms Morkaya and Mr Parkinson had been in a personal relationship over a period of about ten years, during which they also conducted commercial enterprises together. One of those enterprises was a One Stop Pine ("OSP") franchise acquired by Ativa Pty Ltd ("Ativa"), in which they were both equal shareholders and directors. Another was the business of DCA Computers ("DCA"), to the profits of which - according to a deed dated 10 February 2004 - they were to be equally entitled. Both businesses were conducted from the same premises at Victoria Road, Castle Hill, which were leased by Ativa, and Mr Parkinson managed the finances of both businesses. The personal relationship between Ms Morkaya and Mr Parkinson broke down by late 2007, but they continued to co-operate both businesses from the Castle Hill premises until April 2008, when Mr Parkinson moved the stock and equipment from DCA to other premises, in circumstances that are controversial - Mr Parkinson says that he was excluded from the Castle Hill premises, whereas Ms Morkaya says he removed the stock and equipment overnight without any notice. The present applications are primarily concerned with the interim management of the two businesses, pending final resolution of the issues between them.

The proceedings 2 On 22 May 2008, Ms Morkaya commenced proceedings 2905/08, claiming adjustive property orders pursuant to (NSW) Property (Relationships) Act 1984, s 20, to the effect that Mr Parkinson transfer to her his share in Ativa and resign as an officer, and that he pay her $500,000 and thereupon be solely entitled to DCA and any other property in his name or control. She alleges that the property of the parties at separation comprises one share each in Ativa (which carried on the OSP business), equal one-half partnership shares in DCA, her Homebush property (said to worth $580,000), his Bankstown unit and Roseland home (yet to be valued), and his share in DCA Group Holdings Pty Ltd. She alleges that their liabilities comprised her debt of $464,000 to Citibank (secured on her Homebush property), and his mortgage liabilities of about $270,000 (secured on his Bankstown unit) and $538,000 (secured on his Roselands home). 3 Mr Parkinson disputes that there was a de facto relationship within the meaning of the Property (Relationships) Act. On 23 May 2008, he commenced proceedings 2945/08 against Ms Morkaya and Ativa, claiming a winding up of Ativa on grounds of oppression and on the just and equitable ground, and relief against Ms Morkaya for breach of fiduciary duty as a director. He also filed an interlocutory process, and on the same day obtained from Hammerschlag J, by consent and without admission and upon the usual undertaking as to damages, the following orders (emphasis added): 1. The defendants [Ms Morkaya and Ativa] are by themselves, their agents and servants, refrained from disposing of, selling, destroying, damaging, or otherwise dealing with the stock of the retail furniture business known as "One Stop Pine" conducted by the second defendant from premises situate at and known as Shop 3, Castle Hill Homemakers Centre, 6 Victoria Avenue, Castle Hill in the State of New South Wales, other than in the normal course of business as a retailer of furniture , or alternatively, with the prior written consent of the plaintiff. 2. The defendants shall deposit the proceeds from all sales of that stock not yet deposited into the bank account of the second defendant opened in the name "Ayza" at the Commonwealth Bank and the defendants shall not use any moneys standing to the credit of the second defendant in that account other than for the purposes of the normal course of business of the second defendant as a retailer of furniture except with the prior written consent of the plaintiff. 3. The defendants shall take all steps necessary to ensure that the plaintiff has read access to all of the bank accounts of the second defendant including read access by Internet banking. 4. The defendants shall in respect of the proceeds of any sales of the said stock made in the period of 35 days preceding this order and for all future sales, keep accurate and complete accounts disclosing the precise nature of each item of stock sold from the second defendant's premises and the price for which it was sold and the defendants shall provide to the plaintiff's solicitors copies of such accounts on a weekly basis commencing on 23 May 2008 in respect of sales of stock made in the period of 35 days ending today. 4 Both proceedings then came before Macready AsJ on 6 June 2008. According to the record of proceedings, his Honour - upon Ms Morkaya's usual undertaking as to damages - by consent made orders 2, 3, 4, 5, 6, 7, 8, 9 and 10 in her Notice of Motion filed in proceedings 2905/08 on 22 May 2008, which were as follows (emphasis added): 2. The defendant [Mr Parkinson] is restrained from doing any act or thing or giving any direction intended to or that has the effect of diverting written communication intended for One Stop Pine Castle Hill ("OSP") and/or Ativa Pty Ltd to any address other than Shop 3, Homemaker City, 6 Victoria Road, Castle Hill. 3. The defendant is restrained from doing any act or thing or giving any direction intended to or that has the effect of diverting communications intended for One Stop Pine Castle Hill ("OSP") and/or Ativa Pty Ltd to any address other than Shop 3, Homemaker City, 6 Victoria Road, Castle Hill. 4. The defendant shall immediately do or cause to be done all acts and things necessary to reconnect the OSP facility to implement internet sales and is thereafter restrained from doing any act or thing or causing any act or thing to be done to disconnect the OSP internet sales facility. 5. The parties shall each do all acts and things and give all such oral and written directions to the staff of One Stop Pine Castle Hill ("OSP") and DCA Computers or DCA Computers Australia ("DCA") that all payments for sales made by any staff members, whether by cash, cheque, EFTPOS or credit card shall be entered into a "day" book and all such payments shall be paid to the credit of the OSP bank account or the DCA bank account and they shall each cause a photocopy of the "day book" to be provided to each other by facsimile by not later than 10.00 am on the following day. 6. The parties shall each make all payments for all accounts of OSP and/or DCA as are legitimately incurred in the day to day operation of OSP and/or DCA by cheque only and they shall each prepare a list ("such list") of all such payments so made on a day to day basis to be prepared and shall cause of [sic] copy of such list to be provided to the other by facsimile by not later than 10.00 am on the following day. 7. For the purposes of personal expenditure the plaintiff is limited to drawing the sum of not more than $750 per week from OSP and the defendant the sum of not more than $750 per week from DCA. 8. The defendant is restrained from disposing of, assigning, selling, alienating or otherwise dealing with the ER6 Ford Falcon Sedan registered number ARPXXX owned by Ativa Pty Ltd and used exclusively by the defendant and the Ford Utility registered number AQDXXX used by the staff of DCA and the defendant and/or DCA are further restrained from charging any operating costs of the subject vehicle. 9. The defendant shall forthwith cause a sum equivalent to not less than one half of the rental payments currently outstanding to CBRE Richard Ellis for the premises Shop 3, Homemaker City, 6 Victoria Road, Castle Hill to be paid to CBRE Richard Ellis in partial liquidation of the parties' personal liability to the landlord for unpaid rent. 10. The parties are each restrained from selling, assigning, alienating, encumbering or further encumbering or otherwise dealing with real estate registered in their name or under their control, motor vehicles in their possession or under their control. 5 Although it was at one stage apparently thought by or on behalf of Ms Morkaya that orders were also made in terms of paragraph 11 of the Notice of Motion (which related to disclosure of documents), nothing in the record of proceedings or elsewhere indicates that to be so. 6 After the orders were made, Mr Parkinson objected that he had not agreed to the order in paragraph 9. Macready AsJ granted him leave to file a motion to set aside that order, returnable on 13 June 2008. In proceedings 2945/08, his Honour granted Mr Parkinson leave to file an interlocutory process in which he claimed orders providing for him to have access to the books and records of OSP and Ativa, access to the Castle Hill premises and associated relief, and alternatively the appointment of a provisional liquidator to Ativa. That motion was adjourned to 13 June 2008 and directions made in connection with affidavit evidence. 7 On 13 June, the proceedings were referred again to Macready AsJ. His Honour acceded to Mr Parkinson's application to set aside the order made in accordance with paragraph 9 of the motion of 22 May, and set aside the order. On Ms Morkaya's application for order 1 in the motion of 22 May (to the effect that Mr Parkinson provide access to the password and internet access to the website for OSP), his Honour made an order that within 14 days Mr Parkinson take all reasonable steps to make available to Ms Morkaya the website onestoppine.com.au, and that if that involved any expenditure of funds the cost was to be met by Ms Morkaya. On her renewed application for order 9 in the motion, his Honour made an order that Mr Parkinson pay within seven days to the landlord's agent CB Richard Ellis the sum of $10,000. On Mr Parkinson's application for access to Ativa's records, his Honour thought that in view of the falling out between the parties and the difficulty surrounding it and the threats that had been made, any orders ought to accommodate access without personal access to the premises. His Honour observed: The fact of the matter is for the time being the plaintiff is going to carry on the pine business and the defendant the computer business each from their separate places. 8 His Honour further observed that while there had been substantial production pursuant to the orders made by Hammerschlag J on 23 May, there was argument as to whether it was sufficient, and made orders that Ms Morkaya give discovery of the documents contemplated to be produced under order 4 made on 23 May 2008 for the period preceding the making of that order; that in respect of the future inspection of records she produce to Mr Parkinson's solicitor or an accountant nominated by Ms Morkaya for inspection - on a weekly basis if requested, or otherwise as and when requested at an interval greater than a week - the invoice books, further payment receipt books, delivery manifests, movement of stock from the premises, wages records, creditor's invoices and cheque butts of OSP; and that in respect of such production Mr Parkinson be at liberty through his representatives to make copies in a mutually agreed way, noting that original records such as cheque butts were not to be removed from the place of inspection with the intent that they should be available to be used in the business as soon as convenient after inspection. 9 Mr Parkinson claimed a stay pending appeal from the order that he pay the sum of $10,000 towards rent. Palmer J on 20 June declined the stay sought, but granted a stay of seven days to enable Mr Parkinson to make arrangements to comply with that order [Morkaya v Parkinson [2008] NSWSC 642]. 10 On 4 July 2008, the Registrar by consent made directions that: 1. Defendant have leave to file and serve his cross claim in proceedings 2905/08 by 4.00 pm on 11 July 2008. 2. Plaintiff file and serve her defence to cross claim in proceedings 2905/08 by 4.00 pm on 25 July 2008. 3. The orders made respectively on 6 and 13 June 2008, compelling the parties to provide discovery of documents be extended to midday on 9 July 2008. 4. Compliance with order 3 above will be by: (a) the plaintiff producing discovery at Izzett & Co at Parramatta; (b) the defendant producing discovery at the office of the plaintiff's solicitor. The applications

11 On 25 August 2008, Mr Parkinson filed a motion in proceedings 2945/08, claiming until further order the following relief: 1. The plaintiff [Mr Parkinson] be granted sole custody of and control over the One Stop Pine, Castle Hill ("OSP") business, pending the final determination of these proceedings. In the alternative to order 1 above: 2. The plaintiff be granted access to the premises of OSP 3 days per week for the purpose of conducting audits of that business as the plaintiff considers necessary or advisable. 3. The plaintiff to provide 2 days' notice to the first defendant's solicitor prior to attending the premises of OSP pursuant to order 2 above. 4. The first defendant [Ms Morkaya] be restrained from attending the premises of OSP at the same times and dates, at which the plaintiff attends those premises pursuant to order 2 above. 5. The first defendant direct all staff of OSP to co-operate with the plaintiff for the purpose of conducting the audits pursuant to order 2 above. 6. An independent accountant be appointed to attend the OSP premises on a weekly basis to prepare transaction summaries and reconciliations of the OSP business with the accountant to be nominated by the President of the Institute of Chartered Accountants. 7. The first defendant be required to provide all reasonable co-operation with the activities of the independent bookkeeper pursuant to order 6 above, including directing the staff of OSP to provide such co-operation. 8. The first defendant return and retain all records of the OSP business at the premises of the OSP business, such that all of those records may be accessed by the plaintiff and the independent bookkeeper, pursuant to orders 2 & 6 above respectively. 9. The first defendant return to the Ayza bank account, Account Number 2098 XXXX XXXX, an amount equivalent to all moneys which have been paid out of that account otherwise than in the ordinary course of business of OSP as a furniture retailer, within 7 days of the date of this order. 10. The first defendant's solicitors and the first defendant's counsel return to the Ayza bank account, Account Number 2098 XXXX XXXX, an amount equivalent to all moneys, which have been paid to the first defendant's solicitors and the first defendant's counsel out of that account, otherwise than in the ordinary course of business of OSP as a furniture retailer, within 7 days of the date of this order. 11. The first defendant cause to be implemented by the accountant appointed by the President of the Institute of Chartered Accountants as described in order 6 above an electronic inventory and accounting system, such as MYOB, into the business of OSP. 12. The plaintiff be granted access to the electronic inventory and accounting system and its records, during the course of conducting audits pursuant to order 2 above. 13. The first defendant be restrained from removing or obscuring, or causing the removal or obscuring, from the OSP premises any reasonable signage relating to the relocation of the business of DCA Computers. 14. The first defendant, her servants and agents be restrained from making misrepresentations or adverse representations to any persons regarding the DCA Computers business. 15. The first defendant be required, within 7 days of the date of this order, to take all necessary steps to: (a) cause the plaintiff to be made a signatory for cheques relating to the Ayza bank account, and

(b) ensure that the cheque account of the Ayza bank account be made a 'dual-signature' account, such that the signatures of both the plaintiff and the first defendant be required on each cheque, for whichever bank account currently or in the future operates the cheque account for OSP. 16. In the alternative to order 15 above, the moneys realised from the ordinary business of OSP be paid into the Ativa Pty Limited bank account.

The first defendant pay all creditors of the OSP business from funds realised by the OSP business, as and when debts to those creditors fall due from time to time.

The first defendant: (a) transfer the direct debit facilities of the various creditors of the OSP business from the Ativa Pty Limited bank account to the Ayza bank account, or

(b) in the alternative to (a) above, the first defendant ensure that sufficient funds are placed into the Ativa Pty Limited bank account, such that the direct debit facilities of the various creditors of the OSP business are satisfied. 19. The matter be placed in the Expedition List. 12 As will be apparent, the purport of the motion is primarily to transfer from Ms Morkaya to Mr Parkinson interim control of the business of OSP, and alternatively to establish more extensive reporting, consulting and access obligations to facilitate his monitoring of that business, although claims 9 and 10 seek orders remedying alleged defaults, and claims 13 and 14 relate to conduct of Ms Morkaya in respect of the business of DCA. 13 Ms Morkaya filed a motion in proceedings 2905/08 on the same day, claiming a total of 17 orders, which occupy seven typed A4 single-spaced pages, including declarations that Mr Parkinson was in contempt of various earlier orders (specifically, the order of 13 June requiring him to pay $10,000 to the landlord's agent, and the order for transfer of the onestoppine.net.au website), and a raft of other orders relating to the interim control of both businesses. This was amended and replaced with a somewhat less extensive document on the second day of the hearing, 4 September 2008, and I shall in due course come to its terms.

14 The motion was heard in the duty list, commencing on 29 August and continuing on 4 September 2008, when following submissions, judgment was reserved. I was about to have the matter listed for judgment when, on 16 September, a communication was received in my chambers from Mr Parkinson's solicitor, requesting that I read an additional affidavit sworn that day, a copy of which was forwarded with the letter. This course was opposed by the solicitor for Ms Morkaya, and the matter was therefore relisted on the first mutually convenient date, which was 2 October, when both parties tendered further evidence and made further submissions. At the conclusion of the hearing I gave brief reasons and pronounced orders, indicating that I would give full reasons at a later date; these are those reasons.

15 Although it was contended for Mr Parkinson that the two matters and the two motions were quite separate, I think that is an entirely unrealistic view. They are all manifestations of the breakdown of the former relationship of Ms Morkaya and Mr Parkinson, which relationship had both personal and commercial elements, and are the product of the current level of distrust each has in the other's motives. It is nonetheless convenient to deal first with Mr Parkinson's motion. Interim control of OSP 16 The predominant issue concerns interim control of OSP. Prior to the present motions, the effect of Mr Parkinson's departure from the Castle Hill premises with the business assets of DCA, and the orders subsequently made in these proceedings, was that he retained control of DCA, whereas Ms Morkaya had control of One Stop Pine. Each was distrustful of the other, and each obtained orders against the other intended to give a measure of comfort and oversight in respect of the other's conduct of the business that remained in her or his hands. 17 Mr Parkinson's case is that Ativa is spiralling into insolvency, that Ms Morkaya has misapplied its funds for her personal purposes, that creditors are not being paid, that gross receipts, and in particular cash receipts, are in decline, and that he has the experience, ability and self-interest to salvage the situation; accordingly, he seeks primarily that he be given control of OSP, alternatively that a receiver be appointed to OSP, and alternatively further injunctions controlling Ms Morkaya's conduct of the business and facilitating his monitoring of it. 18 While OSP is a business owned and operated by the company Ativa, that company is itself an incorporated partnership with Ms Morkaya and Mr Parkinson as shareholders, and principles applicable on the dissolution of partnerships are informative. Generally speaking, on the breakdown of a partnership, one partner is not entitled to take for itself the assets of the partnership including its name, business and goodwill [Chan v Zacharia (1984) 154 CLR 178; Alcock v Robb (1978) 2 BPR 9625, 9627; Liquor National Wholesale Pty Ltd v The Redrock Co Pty Ltd [2007] NSWSC 392, [41]]. As White J has recently observed, the fact that a partnership is dissolved, or a joint venture terminated, as at a particular date, does not mean that all relations between the partners or joint venturers necessarily cease at that date. The partnership or joint venture must be wound up, and in the absence of express or implied agreement to the contrary, if one of the partners or joint venturers leaves it to the other to complete the process of winding-up, the other does so as quasi-receiver or trustee for the partners [Nutech Wall & Ceiling Systems v VMF Holdings (NSW) [2008] NSWSC 980, [10]]. Between dissolution of a partnership (whether by notice or otherwise) and its winding up, neither partner is entitled to appropriate for his or her own use the assets of the partnership, at least without the consent of the other. If one partner is permitted to carry on the partnership business pending winding up, he or she does so as quasi-receiver or trustee for the partners, according to their ultimate entitlements as may be determined upon the taking of accounts. The partnership assets and business do not somehow cease, upon dissolution of the partnership, to be held for the benefit of the partners according to their interests following taking of accounts [Beale v Trinkler [2007] NSWSC 1058, [11]-[12]]. Similar principles apply in connection with corporations: one shareholder is not entitled to take the companies' business and conduct it for his or her own benefit to the exclusion of the other. 19 The circumstance that the partners may be or have been in a personal relationship does not detract from these principles, save that in the exercise of the discretionary property jurisdiction orders may be made that one party transfer his or her interest or shareholding to the other. These proceedings will ultimately result either in one party obtaining ownership and control of Ativa to the exclusion of the other, or its winding up. 20 The court is not equipped to run businesses on behalf of shareholders or partners in dispute pending winding up or final determination. Nor is it an appropriate use of judicial resources to resolve every dispute that may arise between the parties with respect to the conduct of their businesses pending a final determination. Traditionally, the appropriate remedy in the situation where a partnership breaks down and the partners are unable to agree as to the conduct of the business pending the winding up of the partnership is the appointment of an interim receiver or receiver and manager to conduct the business pending final hearing or winding up - although, because it is recognised that this can be ruinous, sometimes one of the parties will be permitted to conduct the business, or the receiver will be permitted to employ one of the partners to do so. Thus, upon the breakdown of an admitted partnership, either party has a strong case for the appointment of a receiver, although the court will not invariably make such an appointment, retaining a residual discretion, one of the factors informing which is the potentially ruinous consequences of an appointment [Tate v Barry (1928) 28 SR (NSW) 280; Davey v Donnelly (NSWSC, 16 May 1991, McLelland J, unreported); Fitz-Gibbon v Khoury (NSWSC, Powell J, 1 March 1985, unreported); Cuming v Hennessy [2005] NSWSC 1219; Sobell v Boston [1975] 2 All ER 282; Henry v Stewart (NSWSC, Cohen J, 9 June 1995, unreported); Rowlands v MacDonald [2002] NSWSC 282]. But despite the potentially ruinous consequences, if the parties are in intractable dispute appointment of a receiver may be inevitable. If the court is to decline to appoint a receiver in such circumstances, it will usually require that there be some mechanism in place to provide comfort to the court and to the party not in control as to the interim management of the partnership business [Liquor National Wholesale v The Redrock Co, [52]]. 21 It was to achieve such an end that the interim regime was installed in respect of OSP, effectively leaving Ms Morkaya with interim responsibility (which, as the foregoing shows, she was bound to exercise as a quasi-receiver or trustee for both parties), subject to mechanisms allowing Mr Parkinson to monitor her management. An interlocutory regime having already been put in place, largely although not entirely by consent, the essential question is whether sufficient cause is shown for altering that regime. The present regime, as Macready AsJ observed, has the practical effect that Ms Morkaya is entrusted with the management of OSP, and Mr Parkinson with the management of DCA. Neither party seeks to disturb this in respect of DCA - although Ms Morkaya seeks the establishment of more stringent reporting and accounting obligations in that respect. But in respect of OSP, Mr Parkinson contends that evidence now available establishes, in several respects, that the interim regime is demonstrably inadequate, and that Ms Morkaya ought not be entrusted with the conduct of the business of OSP pending the final determination of the proceedings.

22 Mr Parkinson's grounds of complaint may be summarised as follows:

· Payments not in the ordinary course of business (said to be contrary to the orders of 6 June); · Unexplained reduction in cash deposits (said to be indicative of appropriation of cash by Ms Morkaya); · Unexplained decline in revenues (especially though not only in cash takings); · Failure to pay creditors, including rent; · Failure to produce documents in accordance with the existing orders. Payments not in the ordinary course of business 23 Between 4 June and 10 July 2008, Ms Morkaya paid $23,000 from Ativa's funds - which she had banked to the credit of an account in the name of Ayza - to a Citibank mortgage loan account in her name and secured on her Homebush home. Ms Morkaya says that the loan was for business purposes, in that she originally borrowed $240,000 from the ANZ bank for the OSP business and to contribute to DCA, and that when she later sold her Bossley Park property on which that loan was secured and purchased the Homebush property, she refinanced with Citibank using Homebush as security for the amount required to discharge the ANZ loan and additional borrowings required to complete the purchase. Ms Morkaya accepted that the loan was partly attributable to the purchase of her Homebush property and not to the business. Mr Parkinson accepted that part of the funds secured by the mortgage had been invested as working capital for the OSP business. He said that it had been ordinary practice to pay a weekly amount of between $285 and $362, depending on interest rates from time to time, from the business to the Citibank mortgage account, but never more than $367 per week. Both appeared to accept that the Citibank loan was an "interest-only" facility, and that lump sum capital repayments had not previously been made in reduction of it. 24 Accordingly, Ms Morkaya's payments of $8,000, $9,000, $2,000 and $4,000 between 4 June and 10 July involved a radical departure from previous practice, being the first occasion on which such payments had been made. She advanced two reasons for this: first, that the loan was in arrears which had accrued over about five to six weeks, and secondly because having discovered the level of debt in which the business was with arrears of rent and unpaid supplier's invoices, "I felt it would be a reasonably prudent business management to create a buffer fund by moving the money into the loan account and keep the funds available to cover a business emergency, eg a very bad week in which we don't cover our costs …". 25 As to the first reason, the period of six weeks to which Ms Morkaya refers corresponds with the period during which she had been in control of OSP, so hardly provides a satisfactory explanation. As to the second, in circumstances where Ms Morkaya was complaining about Mr Parkinson's failure to comply with the order that he pay $10,000 off the rental arrears, and there were other significant business debts due and payable, it defies belief. The payments in reduction of the Citibank loan were not in the ordinary course of OSP's business as a furniture retailer. 26 Between 16 June and 3 July 2008, Ms Morkaya also paid from the Ayza account at least $10,000 to her lawyers in these proceedings. On 29 July 2008, she paid a further $3,000. When objection to this was raised by Mr Parkinson's lawyers in correspondence, Ms Morkaya's solicitors responded: Noting your client's allegation about the payment of legal fees from the Ayza account raises more than one question, being he demands a higher degree of probity from his former partner than he has given to her over the years. We will show the court where your client has used OSP funds to pay his personal rent, and a range of other costs that were not costs of OSP. Second, we note your client's payment of fees to his lawyers from the DCA account. Third, we note from the bank statements the last payment of wages to our client was paid on 21st April, by your client. Our instructions are that, considering the parlous state in which your client appears to have left OSP, she has not taken wages since that date. This despite [sic] the court order of 6th June entitling her to draw $750.00 per week for her personal benefit. Our instructions are that the funds used to pay her legal fees to date, have been used by her instead of drawing her wage to -6/06 and thereafter the $750.00 per week to date. Fourth, we have to ask, is your client seriously asserting that all legal fees and disbursements associated with these proceedings are unrelated to the operation of OSP and its survival. We remind you that it was your client who brought proceedings under the corporations law. If your client is seriously making this assertion, we put you on notice that we will be asking the court to make an order to the effect that our client's legal fees and disbursements are a properly incurred expense of OSP. 27 The first and second responses seem to involve the proposition that two wrongs make a right. The third, even if correct, could not possibly justify the total amount paid to the lawyers; it has the hallmarks of retrospective reconstruction; and payments were made faster than the sum of $750 per week accrued. The fourth ignores the established position that the role of a corporation as a defendant in such proceedings is a very limited one, and the expenditure of its funds on what is in substance a dispute between the shareholders is improper [Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (1998) 28 ACSR 688, 732-4 (Young J); Grace v Grace [2007] NSWSC 6; (2007) 25 ACLC 141, [51]-[52]]. The payments to Ms Morkaya's lawyers were not in the ordinary course of OSP's business as a furniture retailer. 28 Accordingly, the payments to the Citibank mortgage account and to Ms Morkaya's lawyers were not in the ordinary course of Ativa's business, and in the light of the orders made by consent by 6 June, they were inappropriate and provocative. They preferred her personal interests not only to the interests of Mr Parkinson but also to those of creditors generally. Until observations of the court during the hearing made it manifest that it would be prudent for her to do so, no undertaking to desist from such expenditure in the future was proffered. Moreover, despite those indications, the evidence tendered on the reopening on 2 October showed that Ms Morkaya on 29 August 2008 drew further cheques on the Ayza account to her lawyers. This gives little confidence that Ms Morkaya will manage the business in an appropriately impartial manner if she remains in control. Unexplained reduction in cash deposits 29 Analysis of the day book for OSP for the period 26 May to 9 July 2008 shows cash receipts of $29,639 against cash deposits of $12,348, indicating that $17,291 cash received during that period was not banked. Ativa's receipts for the period January 2007 to March 2008 showed cash and cheques comprising between 11 and 26% of receipts, averaging 17%. (Ms Morkaya made a belated attempt, on the reopening, to dispute this by tendering her own analysis, but a cursory examination established that it did not compare like with like - because it examined pure cash as a proportion of deposits excluding EFTPOS, whereas Mr Parkinson's examined cash and cheque deposits as a proportion of total takings including EFTPOS, and because insofar as it purported to identify pure cash deposits it involved no analysis of deposits to determine whether they were mixed cash and cheques). In April, the proportion of cash and cheque deposits to total takings fell to 12% and in May it was 13%, but it dropped to 7% in June, 8% in July and 3% in August. 30 In her affidavit sworn 20 August 2008, Ms Morkaya advanced an explanation of the position in May 2008, but even if accepted that does not explain the on-going situation. In her affidavit of 3 September 2008, she says that staff wages of approximately $2,900 per week have mostly been paid in cash, together with staff amenities of $180 per week, and other purchases such as stationery. She adds that most customer refunds are made in cash. If that be so, it is in disregard of the order made on 6 June 2008 in accordance with paragraph 6 of Ms Morkaya's own Notice of Motion filed 22 May 2008, which requires that all payments for all accounts of OSP legitimately incurred in its day-to-day operation be made by cheque only. Again, this affords no confidence that Ms Morkaya will in the future manage OSP in strict compliance with interlocutory controls.

31 On the reopening, an affidavit of Mr Parkinson sworn 16 September 2008 was read that showed that for a month from 19 August to 13 September, only $850 had been deposited in cash and cheques. Although Ms Morkaya adduced evidence in purported response to that affidavit, she provided no explanation for that remarkable circumstance.

Unexplained decline in revenues 32 Mr Parkinson also says that there has been a progressive decline in gross receipts, especially but not only in cash. His analysis of receipts over the period from January 2007 to August 2008 supports that: until October 2007 EFTPOS deposits were about $115,000 per month, and cash and cheques about $22,000 per month. While cash takings remained consistent until March 2008, EFTPOS receipts declined to $100,000 in November 2007 and then to $90,000 in January 2008. As has been noted, cash then declined: to $15,000 in April, $10,000 in May, and $5,000 in June and $8,000 in July, with only $3,000 in August - and remarkably only $850 between 19 August and 13 September. And after recovering to $121,000 in April, EFTPOS declined to $92,000 in May and $71,000 in June, before a slight recovery to $91,000 in July and $84,000 in August. 33 Although some downturn was to be expected, associated with disruption of Mr Parkinson's departure in April/May, it is noteworthy that from a high of $124,000 in September 2007, EFTPOS receipts had already fallen to $96,000 in March 2008 under Mr Parkinson's management. Before he departed, he had proposed and initiated arrangements for a liquidation sale to realise stock and free up cash. In an email of 9 April 2008, apparently to the property manager, in which he sought to have Ativa released from the lease, he wrote: As discussed we are currently suffering the worst sales period I have seen in our time here. Since Feb sales have been around 50% down and our cash flow has suffered significantly. If this situation continues we are unlikely to survive more than a month or so as my partner Aydan and I do not have cash reserves available. … This weekend we are having a clearance sale in order to generate some cash, however, this is a short term fix as we will necessarily sell produce at below cost. … Rather than send my partner and I bankrupt, where everybody loses, could you please ask the owner if they could charge us an exit fee and release us from the current lease. Then advertise the facility to someone else who is in a better position to deal with a slow retail environment. Our overheads are just too high for the level of sales achieved this year. 34 Given the decline in revenues during Mr Parkinson's management, and his explanation for it in that letter, I do not think that any inference of mismanagement adverse to Ms Morkaya can be drawn from the decline in revenues. Failure to pay creditors, including rent 35 Mr Parkinson also complains that unpaid creditors are increasing and are pressing for payment. He says that this occasions loss and damage to his trading reputation as well as that of the business. 36 However, while there is evidence of a significant level of unpaid creditors, it appears that under Mr Parkinson's management there had already been incurred $155,000 of unpaid creditors by 1 May 2008. Many of them have been paid, in part if not in whole, in the meantime. No doubt others have been incurred, but given the level of unpaid creditors already incurred under Mr Parkinson's management, I am unable to infer that this is a manifestation of mismanagement by Ms Morkaya. 37 Two outstanding creditors in particular are threatening legal action against Mr Parkinson personally as a guarantor. One of these is BP Australia, in respect of Ativa's petrol account; another is Ford Credit, in respect of a motor vehicle lease. Ms Morkaya says that she has not paid those accounts because they relate to a motor vehicle that Mr Parkinson has retained for his own use. Mr Parkinson says that the relevant petrol account was incurred before April 2008 and does not relate to his subsequent use of the vehicle, for which he has paid personally, and that so far as the lease is concerned, the vehicle is still an asset of Ativa, even if he uses it. I do not think that any significant inference can be drawn adverse to Ms Morkaya from her non-payment of those creditors; their circumstances point more of the breakdown of the relationship than to business mismanagement. 38 Mr Parkinson also points to an increase in arrears of rent - he alleged from $49,000 at the end of April to a maximum of $100,000; the arrears are $94,000 now. However, rent was already significantly in arrears by April 2008. The rental history demonstrates that no rent had been paid in March or April 2008 (while he was managing the finances), that as at 1 May 2008 there were arrears of $73,228; that they climbed to $94,000 by 1 July 2008, and $100,000 by 1 August 2008; and that they now stand at $94,000. They would be $84,000 had the $10,000 ordered by Macready AsJ to be paid by Mr Parkinson been paid. Moreover, Mr Parkinson's argument that the arrears would only have been $29,000 as at 30 April had inter alia $15,000 standing to the credit of Ativa's bank account on that date been applied for rent involves a significant degree of hypocrisy, since he took those funds himself on or about 29 April and has not complied with the order that he pay $10,000 on account of rent. 39 Thus while the arrears have increased, there were already significant arrears under Mr Parkinson's management. I do not think an inference of mismanagement can be drawn from the circumstance that they have increased, although it does give rise to very serious doubts as to solvency. 40 While Mr Parkinson managed OSP, a tax debt was incurred and an instalment arrangement negotiated with the Australian Taxation Office ("ATO"). Since Ms Morkaya has been in control of OSP, payments under that instalment arrangement have not been made, and the ATO has indicated that it proposes to institute recovery action. Ms Morkaya says (and Mr Parkinson disputes) that despite requests she had not been provided with sufficient particulars of this liability, at least until recently. Wherever the truth lies in this respect, the circumstance that there is a significant outstanding unpaid tax liability is another significant indicium on the question of solvency.

Failure to produce documents 41 Mr Parkinson deposes to considerable difficulties in obtaining inspection of documents at Izzett & Co, in accordance with the orders of 13 June 2008, as modified on 4 July 2008. On one occasion, 17 July 2008, he sent an employee to inspect the records. The employee was refused permission to do so, and on behalf of Ms Morkaya an endeavour was made to justify this before me on the basis that inspection was to be by Mr Parkinson personally. In light of the orders of 13 June, which expressly authorise copying by representatives, that position was untenable; but even in the absence of that order one wonders how, reasonably, inspection by an employee could have been refused. Although it appears that subsequently the arrangements have been more satisfactory, this history again gives no comfort for thinking that Ms Morkaya will act reasonably, impartially and objectively if the interim management of OSP is left in her hands. Conclusion: the business is in jeopardy in Ms Morkaya's control 42 Although I do not draw an inference of mismanagement from the unpaid trade creditors, the arrears of rent, and the unpaid tax debt, together they provide a clear picture of a business that is unable to pay its debts as and when they fall due. The amount of unpaid creditors, the increase in arrears in rent (currently, only about half of the monthly rent is paid each month), the unpaid tax debt and the dishonour fees being incurred on the Ativa bank account, are significant indicia of insolvency.

43 Moreover, Ms Morkaya's payments from the business to the Citibank loan account and to her lawyers - coupled with the absence of any apparent appreciation that any of this was inappropriate - provide grounds for concluding that in a context of impending if not actual insolvency she has preferred her own interests to those of Mr Parkinson and creditors generally. Together with her retention of cash (even if, as she says, it was used to pay wages and other business expenses) despite the terms of the orders made on her own application on 6 June, and the difficulties she has placed in the way of Mr Parkinson inspecting documents, these matters also provide grounds for concluding that she cannot be relied upon to manage the business with the rigorous impartiality and openness required by an interlocutory regime under which she has control of the business on behalf of the parties in the present conflictual situation. Should Mr Parkinson be given control? 44 However, it does not follow that appointment of Mr Parkinson to manage and control the business is the solution to this.

45 While he professes the experience and qualifications to do so, much of the present situation - including the tax debt and the rent arrears - had its origins under his management. Mr Parkinson points out that he has an MBA and business experience and claims the experience and ability to manage OSP, and emphasises that it is in his own interest to do so well - given the impact of its failure on his financial position and that he is liable as a guarantor. This argument would be more compelling were it not for the arrears of rent, the unpaid tax liability and the unpaid creditors already accumulated by April 2008 under his management, which does not bespeak successful management while he was in control of OSP's finances. 46 At about the time he left the Ativa premises, Mr Parkinson appropriated $14,000 - being almost the entire amount standing to the credit of its bank account. Although he has given inconsistent explanations for the application of these funds - at first asserting that they had been paid to critical suppliers - he now maintains that they have been applied to reduce loans made by him to OSP. Assuming that to be the correct version, Mr Parkinson by taking those funds deprived Ativa of the ability to pay the rent in respect of its premises, and preferred his own interests to those of Ativa and its creditors. Elsewhere he somewhat audaciously suggests that Ms Morkaya could have used this sum to pay the rent - but he had made that course impossible by taking the funds.

47 Mr Parkinson says that he has sent a cheque to the real estate agent for the $10,000 rent ordered to be paid by Macready AsJ. The agent denies receipt. This was pointed out to Mr Parkinson two months ago, but -- so far as the evidence discloses - he has done nothing to follow it up. He apparently thinks that by sending a cheque he has complied with the order, but the order required him to pay the sum, and if the cheque has not been received and banked he has not paid it. This cavalier attitude to his obligation to comply with court orders does not engender confidence that he will comply strictly and impartially with an interlocutory regime under which he had interim management of OSP. On the reopening - by which time he might have been expected to have remedied the situation, given observations made during the first part of the hearing - it was said on his behalf that he did not have the funds to pay; this was quite a different position to that advanced on 4 September.

48 Other aspects of Mr Parkinson's conduct do not instil confidence that he would be an impartial and objective interim manager. Until ordered to do so, he precluded access to OSP's website by refusing to provide the password, and even now there are on-going difficulties in Ms Morkaya gaining access. Conclusion: provisional liquidation 49 Ativa is probably insolvent, or insolvency is at least impending. There are grounds for concluding that in a context of impending if not actual insolvency Ms Morkaya has preferred her own interests to those of Mr Parkinson and creditors generally. There are also grounds for concluding that she cannot be relied upon to manage the business with the rigorous impartiality and openness required by an interlocutory regime under which she has control of the business on behalf of the parties in the present conflictual situation. However, the state of the business under Mr Parkinson's management by April 2008 does not bespeak successful management while he was in control. There is reason to conclude that he too has preferred his own interests to those of Ativa and its creditors. And in several respects his conduct does not engender confidence that he will comply strictly and impartially with an interlocutory regime under which he had interim management of OSP.

50 Although this course may well be ruinous - for example, it will probably provide grounds for termination by the franchisor of the OSP franchise, and by the lessor of the lease (although the lessor would apparently already have such grounds from the rent default), there appears no practical alternative to the appointment of an independent receiver/manager. Given that Ativa, a corporation, operates the business, the appropriate mechanism is the appointment of a provisional liquidator to Ativa.

51 Ms Morkaya submitted that any such appointment should be deferred, at least until after the Christmas trading period. It was submitted on her behalf that she was doing her utmost to turnaround the business, that it was in a better position now than when Mr Parkinson left, and that the Christmas trading period would afford it an opportunity to recover. However, when insolvency is impending, interests other than those of the parties intrude. The evidence does not establish that the business is in a better position now than when Mr Parkinson left: while recent affidavits show that the amount outstanding to "old" suppliers has been reduced - in respect of purchases made before 1 May 2008 - it does not show what has happened in respect of purchases since that date, and in particular whether they have been paid as and when they fall due or whether they have simply replaced the older debt. There is no evidence of the overall financial position of the business now which enables a comparison with the position as at 1 May. However, it is known that only half the monthly rent has been paid as it falls due (although there has also been some reduction in the arrears), which is not suggestive of a sufficient improvement to think that insolvency was still impending if not actual. Ms Morkaya's repeated payment of corporate funds to her solicitors is not consistent with her claim to have done everything possible in the interests of the business. The absence of any banking of cash or cheques between 19 August and 13 September, except for $850, again suggests either a serious decline in takings, or a serious inability to comply with an interlocutory management regime that requires impartiality and transparency.

Ancillary relief 52 This conclusion renders it largely unnecessary to consider the alternative relief sought in Mr Parkinson's motion. Indeed, Mr Parkinson did not press for orders 2 to 8 (relating to access to the business premises and documents for the purposes an audit).

53 However, he did press for orders 9 and 10 - to the effect that Ms Morkaya refund the amounts disbursed from the Ayza bank account other than in the ordinary course of its business as a furniture retailer, and that she and her lawyers refund the amounts paid from the Ayza account to them. I am at this stage unpersuaded that such orders should be made: first, ultimately the preferable process for resolution on a final basis of Ms Morkaya's liability to restore those sums to Ativa is a matter for the liquidator. The court prefers to resolve disputes about the application of corporate funds to minority litigation after the event and not prospectively, as Young J pointed out in Fexuto v Bosnjak (1998) 28 ACSR 688, 733: It is sometimes difficult to determine just what is the dividing line between expenditure on legal costs to protect the company's real interests and those to support the majority and, for this reason, courts will not make a determination in advance: see Re a company [1994] 2 BCLC 146. 54 Moreover, there may be matters presently unknown to me which afford Ms Morkaya a defence - such as loan accounts against which she can in whole or in part set-off the amounts she has taken (although there would still be a potential preference issue). Then, it is not apparent that there would be utility in any such order, as it seems doubtful that she would have available liquid funds to comply with it in the short term; thirdly, the funds are no longer in her hands. Finally, it is not to be overlooked that Mr Parkinson has himself taken $14,000 of Ativa's funds, and has adopted a cavalier attitude to his obligation to pay $10,000 in reduction of the rent arrears. None of that is to suggest that a liquidator of Ativa might not be entitled to pursue Ms Morkaya for the sums in question in due course. 55 Mr Parkinson sought, but at the hearing did not seriously press for, orders 11 and 12 - compelling Ms Morkaya to cause Ativa to adopt an electronic inventory and accounting system, and giving him access to it for the purposes of monitoring the business. There is some evidence that Ativa has - on 24 May 2008 - acquired MYOB software. However, as Mr Parkinson does not appear to have implemented such a system during his management of OSP, it is difficult to see why Ms Morkaya should be ordered to do so. This is just the type of business decision in which the court will not become involved. 56 Mr Parkinson did press for orders 13 and 14, to the effect that Ms Morkaya be restrained from removing, obscuring or causing the removal or obscuration of any reasonable signage at OSP's premises relating to the relocation of the business of DCA, or making (unspecified) misrepresentations or adverse representations to any persons regarding the DCA business. This claim is based on evidence that Ms Morkaya has removed, or authorised or directed the removal of, signs located by Mr Parkinson at the premises advising of DCA's relocation, and made statements to potential customers adverse to DCA, which Ms Morkaya does not appear to dispute. This is another illustration that the emotion of the dispute has overridden business judgment: Ms Morkaya claims to be a partner in the DCA business, and in any event DCA is property available for division, which she proposes Mr Parkinson retain; it is therefore plainly in her interests to see its value enhanced, not diminished. Removing signs etc detracts from DCA's goodwill, and thus from the value of the divisible assets.

57 Property (Relationships) Act, s 38(1)(h)(i), authorises the grant of injunctions "for the protection of or otherwise relating to the property or financial resources of the parties to an application or either of them". While the proposed order in respect of adverse representations is in my view too lacking in specificity to be justifiable, the proposed order in respect of signage would fall within s 38(1)(h)(i). Ativa - not Ms Morkaya - is entitled to possession of the premises, and an order against Ms Morkaya may be of limited utility, at least once a provisional liquidator is appointed. But as Ativa is the corporate alter ego of the parties, it too is amenable to relief of this kind, although leave should be reserved to the provisional liquidator to apply for discharge of the order.

58 Orders 15, 16 and 17 sought by Mr Parkinson - to the effect that he be made a signatory on the Ayza cheque account and that the account be operated on a "both to sign" basis, or that Ms Morkaya be required to bank takings into the Ativa bank account, and that she pay all creditors of OSP from funds realised by the business as and when the debts fall due from time to time, will be superceded by the appointment of a provisional liquidator. In any event, for reasons already mentioned, I do not think that the solution to the current problems of Ativa is to reintroduce Mr Parkinson to management; and in circumstances of apparent insolvency the court cannot make an order for payment of creditors as and when they fall due: the impossibility of such an order in the current state of affairs is manifested in particular by the state of the rent account and the tax debt. Moreover, that situation had arisen before Mr Parkinson departed. The orders will need to make clear, however, that the Ayza account is prima facie an asset of Ativa to control of which the provisional liquidator will be entitled.

Ms Morkaya's application 59 Ms Morkaya's amended Notice of Motion omits the application for declarations that Mr Parkinson is in contempt (which ought always be dealt with in a separate motion and not intermingled with other applications). She now first seeks (by paragraph 1) an order restraining Mr Parkinson from bringing further interlocutory applications without the leave of the court. This application is founded on the basis that the matter has already been before the court on seven occasions, most of them at the instance of Mr Parkinson. While I accept that in an extreme case the court may impose such a restriction, the circumstances of this case do not begin to approach those necessary to attract it. It is a more than sufficient response that on this application Mr Parkinson has succeeded in demonstrating that in Ms Morkaya's hands the assets of Ativa - including in particular the business of OSP - are in jeopardy.

60 Ms Morkaya seeks (by paragraph 3), and Mr Parkinson does not oppose, an order that he provide all requisite information to an IT expert to enable the implementation of the transfer of the onestoppine.net.au website "to the plaintiff for the benefit of one stop pine [sic] and the costs thereof are to be paid by One Stop Pine as a legitimate business expense". Macready AsJ's order of 13 June 2008 in respect of access to the website was "that within 14 days the defendant [Mr Parkinson] take all reasonable steps to make available to the plaintiff the website for One Stop Pine.com.au. If this involves any expenditure of funds those costs are to be met by the plaintiff". That followed consideration by his Honour of evidence suggesting that while Ativa might have paid some costs associated with its establishment, Mr Parkinson had obtained websites for OSP and DCA on accounts in his own name for which he had paid. Implementation has not been completed, because Mr Parkinson has insisted that Ms Morkaya personally (as the order required), and not Ativa, bear the costs. However, as it is Ativa, not Ms Morkaya personally, who is entitled to the website, any such transfer should in my view not be to Ms Morkaya, but to Ativa, and in those circumstances should be at the cost of Ativa. 61 Ms Morkaya next seeks a raft of orders relating to the interim management of both businesses. So far as OSP is concerned, this will be superceded by the appointment of a provisional liquidator; however, I will indicate the view I would have taken were that course not to be adopted. As to DCA, while Mr Parkinson denies that Ms Morkaya has any interest in DCA, her claim to be a partner in the business is supported by the 14 February 2004 deed, executed by both of them; in any event, the DCA business constitutes property of the parties or one of them, available for division under Property (Relationships) Act, s 20, and s 38(1)(h)(i) authorises injunctions for the protection of, or otherwise relating to, such property. While the control of DCA remains in Mr Parkinson's hands, he is a quasi-receiver or trustee for the parties in the manner I have indicated, and a regime to facilitate monitoring by Ms Morkaya is an appropriate condition of his retaining such control. 62 By paragraph 4, Ms Morkaya seeks an order for reciprocal provision of extensive documentary records on a monthly basis in respect of the OSP and DCA businesses. So far as OSP is concerned, this is sought in substitution for the corresponding order made on 13 June, and differs from the existing regime in that it is monthly rather than weekly, and the records covered ("the business records") are more extensive, or at least more particularly defined. I would not have acceded to the proposal that, in respect of OSP, the frequency of provision of the business records be reduced to monthly; although weekly reporting is a considerable burden, not only is insufficient reason shown for varying the regime ordered by Macready AsJ, but the evidence on this application of the present jeopardy to the business justifies a rigorous and frequent reporting system. I did not understand Mr Parkinson to oppose the order sought in its application to any of the DCA entities. 63 By paragraph 5, Ms Morkaya sought an order for retrospective production, for the period from April, of the DCA business records. Again, I did not understand Mr Parkinson to oppose the order sought. 64 The claim in paragraph 6 of Ms Morkaya's motion is for an order that, provided Mr Parkinson has complied with the disclosure required of him by the preceding orders, he may attend at the offices of her nominated accountants to inspect the OSP business records. This, too, is superceded by the appointment of a provisional liquidator, but I would not have made such inspection conditional on compliance by him with "the preceding orders", since that would effectively make Ms Morkaya, at least in the first instance, judge of his compliance, and would exacerbate the difficulties that have already arisen in that respect. Rather, I would have removed Izzett & Co from the process and required each party to produce their respective business records at the office of their respective solicitors, who (unlike accountants) are officers of the court. 65 By paragraph 7 of her motion, Ms Morkaya claims an order requiring Mr Parkinson to provide her with read-only access to bank accounts of the DCA entities and the Morkaya/Parkinson Family Trust. As an apparent partner in DCA it is reasonable that Ms Morkaya should be able to monitor these accounts pending final hearing, and this is a reasonable condition associated with leaving the interim management of those entities with Mr Parkinson. 66 By paragraph 8 of her motion, Ms Morkaya claims an order restraining Mr Parkinson from dealing with DCA's stock other than in the ordinary course of business. In circumstances where Mr Parkinson has apparently sought to appropriate the partnership business to himself, and Ms Morkaya is under a similar restraint in respect of OSP (order 1 of 23 May), this is an appropriate means of protecting the interests of Ms Morkaya in the property of the parties pending the hearing. Paragraph 9 proposes a similar order against Ms Morkaya in respect of OSP, but order 1 of 23 May already serves that purpose. 67 By paragraph 10 of her motion, Ms Morkaya claims an order making Mr Parkinson responsible for payment of registration, insurance and fines in respect of the Ford motor vehicle owned by OSP but in his possession or control; and by paragraph 11 an alternative order for return of the vehicle to Ms Morkaya. The Ford is property of Ativa. While it is common experience that in the course of overlapping personal and commercial relationships involving closely held corporations, one party may have practical use of a partnership or corporate asset, it is inappropriate that that continue where third party rights intervene, as they do with the approach of insolvency. The vehicle should be delivered up to the provisional liquidator. 68 By paragraph 12 of her motion, Ms Morkaya claims an order requiring the parties to release the rental bond for the Castle Hill premises to the lessor, in partial reduction of arrears of rent. The fate of the bond is a matter for the lessor, who has a security interest in it. It may be appropriate on expiration of the lease to make some order in respect of it, if the lessor does not then have recourse to it in any event; but it would be an unjustified encroachment on the lessor's rights to require release of the bond, albeit to the lessor, now - just as the court would not ordinarily compel a mortgagee to consent to the discharge of its mortgage. 69 By paragraph 13 of her motion, Ms Morkaya seeks the discharge of orders 1, 2 and 4 of 23 May. The discharge of order 1 was sought in light of the proposed substitution of the order claimed in paragraph 9; subject to any application the provisional liquidator might make, I prefer to leave the original order on foot. The discharge of order 2 would not be appropriate: the evidence on this application shows that there is every risk that unless restrained Ms Morkaya would use funds generated by OSP other than for its proper purposes and in the ordinary course of its business. But for the appointment of a provisional liquidator, I would not discharge order 4, which is the source of Ms Morkaya's obligation to account for the OSP business in her hands. 70 By paragraph 14 of her motion, Ms Morkaya seeks the discharge of "orders 5 and 6 of 6 June", but to just what orders that is intended to refer, and on what basis, is not clear.

Conclusion 71 Ativa is probably insolvent, or insolvency is at least impending. There are grounds for concluding that in a context of impending if not actual insolvency Ms Morkaya has preferred her own interests to those of Mr Parkinson and creditors generally. There are also grounds for concluding that she cannot be relied upon to manage the business with the rigorous impartiality and openness required in an interlocutory regime under which she has control of the business on behalf of the parties in the present conflictual situation. 72 However, the state of the business under Mr Parkinson's management by April 2008 does not bespeak successful management while he was in control. There is reason to conclude that he too has preferred his own interests to those of Ativa and its creditors. And in several respects his conduct does not engender confidence that he will comply strictly and impartially with an interlocutory regime under which he had interim management of OSP. 73 Although it may well prove ruinous - for example, it will probably provide grounds for termination by the franchisor of the OSP franchise, and by the lessor of the lease (although the lessor would apparently already have such grounds from the rent default) - and ultimately contrary to Mr Parkinson's interest as that would reduce the assets left for Ms Morkaya, thus increasing her claim for an adjustive property order against his assets - there appears no practical alternative to the appointment of an independent receiver/manager. Given that Ativa, a corporation, operates the business, the appropriate mechanism is the appointment of a provisional liquidator to Ativa. 74 While I accept that in an extreme case the court may impose a restraint on bringing interlocutory applications, the circumstances of this case do not begin to approach those necessary to justify such a course.

75 There being no application to alter the control of DCA, I am nonetheless satisfied that it is an appropriate condition of Mr Parkinson retaining interim management that there be an interlocutory reporting regime to ensure transparency of his management pending final hearing. 76 Both parties ask that the final hearing be expedited. This in due course will be a matter for the Expedition List Judge. At this stage, the matter is not ready for hearing. I propose to retain management of it until it is ready for allocation of a hearing date. 77 As it seems to me, it is not in Mr Parkinson's ultimate interest that the value of OSP or Ativa be reduced (or that the franchise or lease be jeopardised), since on an adjustment of property interests between them it is likely though not inevitable that OSP would remain with Ms Morkaya, and the greater its value the less the adjustive payment against Mr Parkinson would be. Nor - for similar reasons - is it in Ms Morkaya's interest that the value of DCA be depreciated. The orders proposed will thus probably not advance the interests of either party. But in circumstances where they are unable to agree on any less radical course, and the interests of creditors intervene, I see no alternative. For those reasons, following the resumed hearing on 2 October 2008, I made the following orders: 1. Upon David Anthony Parkinson by his counsel giving to the court the usual undertaking as to damages: 1.1 Order that Brian Patrick Dunphy be appointed liquidator of Ativa Pty Ltd provisionally.

1.2 Order that the provisional liquidator have the powers referred to in (CTH) Corporations Act 2001, s 472(4), and in carrying on the business of the company may employ the parties or either of them for that purpose.

1.3 Order that Ms Morkaya be restrained from by herself, her servants or agents removing or obscuring or causing the removal or obscuration of reasonable signage relating to the relocation of the business of DCA Computers situated at OSP's Castle Hill premises.

1.4 Order pursuant to Corporations Act , s 483(1): (a) that Ms Morkaya within 72 hours pay to the provisional liquidator all moneys standing to the credit of the Ayza account;

(b) that Mr Parkinson within 72 hours deliver to the provisional liquidator motor vehicle registered number ARPXXX; 1.5 Order that Mr Parkinson within 7 days do all things and give all consents and authorities necessary or convenient to procure that the provisional liquidator have control of the website onestoppine.net.au, at the cost of Ativa.

Upon Ms Morkaya by her counsel giving to the court the usual undertaking as to damages: 2.1 Order that until further order, in respect of DCA Computers Auburn, DCA Computers Australia, DCA Computers Castle Hill, DCA Computers & Custom Technology, ABN 119 718 160 Pty Ltd and DCA Group Holdings Pty Ltd, Mr Parkinson produce at the office of his solicitors on the second Wednesday of each month continuously from 10.00 am until 4.00 pm for inspection by Ms Morkaya her servants and/or agents the documents described in the schedule for the preceding calendar month.

2.2 Order that by 7 October 2008 and until further order, Mr Parkinson do all things and give all instructions necessary to permit Ms Morkaya to have read only access to the following bank accounts: (a) 062-098 XXXX XXXX DCA Computers Australia, Castle Hill;

(d) all accounts held in the name of ABN 119 718 160 Pty Ltd;

(e) all accounts held in the name of DCA Group Holdings Pty Ltd;

(f) all accounts held in the name of the Morkaya/Parkinson Family Trust.

2.3 Order that until further order Mr Parkinson be restrained from by himself, his servants or agents selling, transferring, charging or otherwise disposing of, alienating, encumbering or adversely dealing with the stock of DCA Computers or removing such stock from the premises at 4, 8 Victoria Road, Castle Hill except in the usual course of business as a retailer, repairer and service agent of computers and related products.

Order that costs of the interlocutory application be costs in the proceedings.

Schedule 1. Computer generated cash and carry invoices, recording each item sold, the manufacturers identification, the price paid and the form of payment, together with the sale amount and purchase cost price;

Computer generated special sale invoices recording each item sold, the manufacturer's identification, the deposit taken, the amount of deposit taken and the amount of any balance payable, together with the purchase cost price to the business and the price of sale;

Computer generated service and repair invoices for the provision of service and repair work carried out by staff from time to time, including a description of each item requiring service and/or repair, the nature of service and repair provided, the price charged for service and/or repair work done and the method of payment;

Computer generated invoices for all sub-contract off-site services provided by the staff of the subject entity from time to time to its customers, including but not limited to the date upon which each off-site service was provided, the nature and extent of the services provided, the charges made for each such service and the form of payment for each such service and date of payment;

All invoices issued to the subject entity by manufacturers and suppliers of stock and/or equipment and/or components purchased by the business for use in its operation or for re-sale;

In respect of all internet payment transfers, whether in payment of staff wages and/or suppliers' invoices, a hard copy of each and every such transfer;

In respect of all payments of suppliers, invoices and/or staff wages and/or other legitimate business expenses made by cheque, the cheque butts for the same indicating the date of payment, the identity of the payee, and the nature and amount of each and every payment made in the day to day operation of the business;

All records of the deposit of cash and/or cheques into any bank accounts operated in the name of the defendant or the subject entity;

Delivery records in respect of all stock received from suppliers and manufacturers for sale in the day to day operation of the business, whether received by delivery or pick-up;

Delivery records for all orders delivered to customers for the purchase of computers and/or components or for the provision of service and/or repair work or for the provision of sub-contract work. 78 I shall hear the parties as to the appropriate directions for the further preparation of the matter for hearing.

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At a glance

Court

Decision date

Before

Source

Judgment (62 paragraphs)

Cases Cited (8)

Cited By (4)