How optimistic iNO was when we published “Bitter Partnership Dispute Edges Closer to End Game” under the assumption that resolution was nigh.
Now, with the benefit of six years of hindsight, iNO would no longer bet that this week’s decision of the NSW Supreme Court of Appeal represents the last hurrah for liquidator and trustee Anthony Warner in his 10 year fight with ex-partner and fellow liquidator Steve Kugel.
” …. given the way the dissolution of the partnership was effected, with Mr Warner presenting it as a fait accompli and taking over the premises and staff to pursue the business as his own, the complaint of unfairness rings hollow”. NSW Supreme Court of Appeal.
While three judges yesterday dismissed Warner’s latest attempt to correct what he sees as an error by the judge who’s had carriage of these long running proceedings, the record shows that neither man is inclined to give up or back down so further skirmishing cannot be discounted.
And speaking of discounts, it was the proposition that a hypothetical vendor of a book of external administrations would be expected to pay the purchaser a “discount” that comprised one of the key issues Warner wanted found in his favour after NSW Supreme Court judge Guy Parker in 2023 rejected the proposition “owing to the prohibitions contained in s 595 of the Corporations Act 2001 (Cth) and a cll 3.20 and 3.21 standard published by the Accounting Professional and Ethical Standards Board (APES 330 Insolvency Services) (the “APES Standard”)”.
According to Warner Capital Pty Ltd v Shazbot Pty Ltd [2024] NSWCA 245 Judge Parker “expressed a prima facie view that cl 3.21 of the APES Standard would be contravened if the hypothetical purchaser were to be paid money by the vendor as an inducement to acquire the book. (See also: Shazbot Pty Ltd v Warner Capital Pty Ltd (No 3) [2023] NSWSC 527)
“The primary judge did not find that a purchaser acquiring the book would require such a payment to take over the book, and in doing so rejected the evidence of expert witnesses called by Mr Warner.
“These findings were based on the fact that there was no evidence of prior sales of this kind, a discount would never be required owing to the economies of scale that expanding a practitioner’s book would have if they had capacity to take on the work, and that practitioners could resign from administrations which represented a liability,” the appeals court said.
Warner’s appeal was dismissed with costs, so however much he’ll have to fork out to Kugel in respect of the amounts he must account to Kugel for in consequence of the dissolution of their partnership in 2014 is now that much more.
iNO’s mail is that Kugel has incurred almost $1.5 million in legal costs pursuing his rights and defending Warner’s efforts to deny him. Warner is also on the hook for interest on various adverse costs orders.
iNO asked Warner this morning if he’d seek to continue to prosecute his case but received no response prior to publication.
Further reading:
Mother of all partnership disputes ain’t over yet
Liquidator wins interest fight with former partner
So you want to sell an insolvency practice?
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