IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE	
CIV-2022-419-353
[2023] NZHC 844	

UNDER	Section 73 of the Partnership Law Act 2019	
IN THE MATTER OF	the GJ & EM STARK PARTNERSHIP	
BETWEEN	JULIET ANNA MOSES in her capacity as executor and trustee of the Estate of GEORGE JOHN STARK
Plaintiff	
AND	EILEEN MARY STARK
Defendant

KEITH RICHARD STARK in his capacity as attorney in relation to property of
EILEEN MARY STARK
Second Defendant	

Hearing:	18 April 2023	
Appearances:	JWA Johnson and ST Dymond for the Plaintiff	
Judgment:	20 April 2023	

JUDGMENT OF ASSOCIATE JUDGE BRITTAIN

This judgment was delivered by me on 20 April 2023 at 3.00 pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors/Counsel:
North End Law, Hamilton
Bankside Chambers, Auckland Copy to: Mr K Stark

MOSES v STARK [2023] NZHC 844 [20 April 2023]

Introduction

[1]	The plaintiff, Juliet Moses, is one of two partners in the GJ & EM Stark Partnership, in her capacity as the executor and trustee of the estate of George Stark, who passed away on 13 July 2020. The other partner is George’s surviving wife, the first defendant, Eileen Stark.

[2]	Mrs Stark is not competent to manage her own affairs, and the second defendant, her son Keith Stark, is her attorney in relation to property pursuant to a power of attorney.

[3]	Ms Moses seeks the interim appointment of a receiver to the partnership pending determination of the substantive proceeding, to enable her to further her administration of the estate.

[4]	The partnership’s assets include:

(a)	a farm on Tahuna Road, Ohinewai;

(b)	a rural property on Rutherford Road, Ohinewai, which may be subject to a claim by Mrs Stark that this is her separate property;

(c)	loans to Keith Stark, his former wife Linda Stark, and a company they control, Keilin Farms Ltd;

(d)	43.74 per cent of the shares in Waitotara Farms Ltd; and

(e)	a bank account.

[5]	The remaining shares in Waitotara Farms Ltd are owned by Keith Stark, Linda Stark and Keilin Farms Ltd. From the limited evidence available at present, it appears that Keith Stark may be farming the partnership’s farm on Tahuna Road, the rural property on Rutherford Road and Waitotara Farms Ltd as one farming operation.

The substantive proceeding

[6]	The amended statement of claim dated 14 April 2023 pleads that the partnership dissolved on George’s passing, pursuant to s 69 of the Partnership Law Act 2019 (the PLA), which provides:

69	Partnership dissolved by death or bankruptcy

(1)	A partnership is dissolved with respect to all the partners by the death or bankruptcy of any partner.

(2)	This section is subject to any agreement between the partners

[7]	Ms Moses seeks a declaration that the partnership is dissolved, also relying in the alternative on the Court’s discretion to dissolve a partnership under s 72 of the PLA, which provides:

72	Court may dissolve partnership

The court may, on an application under section 73, declare a partnership to be dissolved if—

(a)	a partner is a mentally impaired person who, in the opinion of the court, permanently lacks wholly or partly the competence to manage their own affairs; or

(b)	a partner is in any other way permanently incapable of performing the partner’s part of the partnership agreement; or

(c)	a partner is guilty of conduct that, in the opinion of the court after having regard to the nature of the business, is calculated to prejudicially affect the carrying on of the business; or

(d)	a partner—

(i)	wilfully or persistently breaches the partnership agreement; or

(ii)	otherwise acts in matters relating to the partnership business in such a manner that it is not reasonably practicable for the other partner or partners to carry on the business in partnership with the partner; or

(e)	the partnership business can be carried on only at a loss; or

(f)	circumstances have arisen that, in the opinion of the court, make it just and equitable to dissolve the partnership.

The Family Court proceeding

[8]	The estate has also commenced a proceeding in the Family Court, seeking an order revoking Keith Stark’s power of attorney and the appointment of an independent property manager for Mrs Stark (the Family Court proceeding). I am advised by counsel for Ms Moses that Keith Stark is defending that proceeding.

[9]	Counsel for Ms Moses advised that the Family Court proceeding is awaiting allocation of a three-day fixture. At present, there is no indication of when that matter will be heard.

The first judgment in this proceeding

[10]	The application for the appointment of an interim receiver to the partnership was declined by Associate Judge Sussock on 7 March 2023 (the first judgment).1 The background to the dispute between Ms Moses and Keith Stark is set out in the first judgment and need not be repeated.

[11]	Associate Judge Sussock declined the application for the following reasons:

(a)	The status of the Family Court proceeding was then unknown. If Keith Stark was to be replaced as Mrs Stark’s attorney by an independent property manager then many of the difficulties would be able to be resolved without the appointment of an interim receiver and the inevitable costs associated with that.

(b)	The partnership’s bank account appeared from the correspondence to be frozen.

(c)	There did not appear to be any imminent threat to the remaining assets if an interim receiver was not appointed.

(d)	The report of a farm management consultant did not compare the current state of the farm to the state of the farm prior to George Stark’s

1	Moses v Stark [2023] NZHC 427.

death and had a number of matters on which the consultant required further information.

(e)	The delay in bringing proceedings did not support an application for the appointment of an interim receiver. If there was a serious risk of dissipation of assets, then the application would have been brought sooner.

(f)	Keith Stark was willing to attend a roundtable meeting or mediation as recently as November 2022 to attempt to resolve matters.

(g)	Keith Stark had contacted the Court and advised that he intended to defend the substantive proceeding.

(h)	The authorities relied on by the estate as supporting the position that the appointment of an interim receiver is a matter of course to “hold the ring” were all cases where there was a real risk of dissipation of assets. There did not appear to be any real urgency to “hold the ring” here.

[12]	Associate Judge Sussock granted leave to Ms Moses to make a second application for the appointment of an interim receiver.2 That application has now been filed. Keith Stark has taken no steps and did not attend the hearing of this application.

The renewed application

[13]	Ms Moses renews her application for the appointment of an interim receiver on the basis of anticipated delay in resolving the Family Court proceeding and otherwise largely on the same grounds as advanced when the application was first heard by Associate Judge Sussock:

(a)	The partnership’s bank account is effectively frozen, and Ms Moses has no oversight.

2	At [45].

(b)	Concerns that Keith Stark may be selling stock owned by the partnership without accounting to the partnership for the proceeds of sale.

(c)	Concerns about Keith Stark’s management of the partnership’s farm, based on a report from a farm management consultant.

(d)	Keith Stark’s conflict of interests, particularly regarding:

(i)	whether he is a debtor of the partnership; and

(ii)	the level of the management fees that he is taking, either personally or by payments to Keilin Farms Ltd.

(e)	A deadlock exists between the partners.

Jurisdiction

[14]	The PLA makes no express provision for the appointment of receivers or managers of partnerships. Jurisdiction to appoint a receiver derives from the High Court’s inherent jurisdiction, and extends to the appointment of a manager.3

[15]	The jurisdiction has its origins in the law as administered in the English Court of Chancery before the Supreme Court of Judicature Acts of 1873 and 1875 (UK).4 Relevantly, the PLA provides that the common law and rules of equity applicable to partnerships are to continue in force expect so far as they are inconsistent with the express provisions of the Act.5

[16]	In the first judgment, Associate Judge Sussock analysed an Associate Judge’s jurisdiction and concluded that an interim order for appointment of a receiver was within her jurisdiction.6 Essentially, her view was that while the appointment of a receiver may be akin to the grant of an interim injunction, s 22(4) of the Senior Courts

3	See Vuletic v Vuletic HC Auckland CP1328/88, 28 July 1988.
4	Evans v Orr [1923] NZLR 769 (SC) at 771.
5	Partnership Law Act 2019, sch 1 cl 3.
6	Moses v Stark, above n 1, at [11]–[16].

Act 2016 only excludes jurisdiction for Associate Judges to decide a proceeding “for a declaration or an injunction”, and the appointment of a receiver is not “an injunction”.7

[17]	The application for the interim appointment of a receiver has been made on an interlocutory basis. Under r 7.34 of the High Court Rules 2016 (HCR), interlocutory applications are dealt with in chambers. Under r 2.1, an Associate Judge has the jurisdiction to deal with interlocutory applications in chambers, except where that jurisdiction is excluded by s 22(4) of the Senior Courts Act. I agree with Associate Judge Sussock’s finding that s 22(4) of the Senior Courts Act does not exclude an Associate Judge’s jurisdiction in respect of interlocutory applications for an order appointing a receiver on an interim basis.

Legal principles

[18]	The authors of The Laws of New Zealand state that the Court will only appoint a receiver on an interlocutory application before the trial of a substantive claim if:

(a)	the partnership property is in danger; or

(b)	the partnership has been or is about to be dissolved; or

(c)	the claim is for dissolution by the Court or a declaration that the partnership has already been dissolved; or

(d)	special grounds, such as misconduct, exist for the appointment.8

[19]	There is overlap between the second and third stated grounds. More importantly, there is a distinction between the appointment of a receiver or manager in situations where the partnership continues, and appointment in situations where the partnership has been, or is about to be, dissolved.

7	At [16].
8	PRH Webb Laws of New Zealand Partnership (online ed) at [153].

[20]	A more stringent approach to the exercise of the Court’s discretion is warranted where the partnership has not come to an end, and it is not inevitable that the substantive litigation will have that result. In those situations, the appointment of a receiver is an order of “last resort”.9 The Court must be satisfied that no other adequate legal or equitable remedy is available, and the onus is on the applicant to show that nothing less than appointment of a receiver will do.10 In other words, where dissolution has not occurred and is not inevitable, there is a higher onus on the applicant to point to a risk to the property of the partnership, or misconduct, or to other special grounds that exist for the appointment of a receiver or manager. Generally, mere disagreement or lack of cooperation between partners will not, without more, warrant the appointment of a receiver.11

[21]	However, in the opposite situation, where there is an absence of misconduct or danger to the assets of the partnership but dissolution is for some other reason an inevitability, the authors of The Laws of New Zealand suggest that the appointment of a receiver is almost a matter of course.12

[22]	In Vuletic v Vuletic,13 the High Court reviewed academic commentary and case law consistent with this general principle. Wylie J accepted that where the Court is satisfied that a partnership has dissolved, or that an order for dissolution will inevitably be made at trial, the appointment of a receiver is prima facie a matter of course.14

[23]	On the facts, Wylie J was prepared to assume a strong prima facie case to dissolution having already occurred, or to its inevitability.15 In addition, there was likely exclusion of the aggrieved partner from the management of the partnership’s affairs.16 His Honour stated:17
My own view is that in exclusion cases, at least at an interlocutory stage the underlying principle justifying interference by the Court by appointment of a

9	Armani v Armani [2021] NZHC 3145, [2022] 2 NZLR 547 at [67].
10	At [67].
11	See Roberts v Eberhardt (1853) Kay 148.
12	Webb, above n 8, at [153].
13	Vuletic v Vuletic, above n 3.
14	At 6–7.
15	At 10–11.
16	At 10–11.
17	At 9.

receiver is the inherent potential risk to partnership property, or perhaps more accurately to the applicant’s interest therein.

[24]	The Court was not, however, prepared to appoint a receiver on an interim basis because in a practical sense that would determine the substantive issue for trial, which was the appropriate method of winding up the affairs of the partnership. If a receiver was appointed, it would be virtually impossible to turn the clock back for some other method of winding up.18

[25]	The applicant had not established a “proved or even a likely need to preserve the partnership property from jeopardy”.19 Wylie J stated that the outcome might have been different “[w]ere there a clearly demonstrated risk or likelihood of irreparable harm to partnership property or the plaintiff’s interest therein”.20

[26]	Vuletic v Vuletic is therefore authority for the proposition that the Court retains a discretion to refuse the appointment of a receiver or manager on an interim basis, even where dissolution has occurred or is inevitable and appointment of an interim receiver is prima facie a matter of course. The range of factors that may be considered when exercising the discretion is not closed. Risk to property and misconduct remain relevant.

[27]	In Rowlands v Macdonald,21 the New South Wales Supreme Court considered whether to appoint an interim receiver in a situation where a partnership had been dissolved. Barrett J characterised the situation between the partners as one of “mistrust and stand-off”.22

[28]	Barrett J repeated the general principle that where it is clear that dissolution will be granted at the hearing, the plaintiff is entitled as a general rule, and practically as a matter of course, to the appointment of an interim receiver.23 Barrett J

18	At 13.
19	At 14–15.
20	At 15.
21	Rowlands v MacDonald [2002] NSWSC 282.
22	At [26].
23	At [27].

emphasised, however, that appointment remains discretionary and that relief might be refused where it would be “ruinous” to the business of the partnership.24

[29]	In that case, Barrett J identified two factors which supported his decision to appoint a receiver. First, the parties were in a serious state of dispute warranting the introduction of a third party manager.25 Secondly, the evidence suggested that there may have been irregularities in the financial affairs of the partnership, including intermingling of partnership monies with those of the individual partners.26

Discussion

[30]	In the present case, there is a written partnership agreement between George Stark and Mrs Stark dated 12 April 1965. The term of the partnership was six years from 1 May 1965, and thereafter terminable on one month’s written notice. There is no clause in the partnership agreement that precludes dissolution of the partnership on the death of a partner under s 69 of the PLA. Therefore, the partnership dissolved by operation of law on the death of George Stark on 13 July 2020. This is a situation where appointment of an interim receiver may be considered to be a matter of course, unless there are factors which warrant an exercise of the Court’s discretion to the contrary.

[31]	The need for an interim receiver or manager depends on whether Mrs Stark’s affairs are managed by someone other than Keith Stark, and how the interests of Mrs Stark are best served. Mrs Stark has the benefit of a life interest in George Stark’s estate, including the net annual income. Therefore, Mrs Stark is presently entitled to all of the partnership’s income.

[32]	There is presently a deadlock in the management of the partnership. It is inappropriate for Keith Stark to continue to manage the partnership on Mrs Stark’s behalf, in a situation where he has a conflict between the mutual interests of his mother and the partnership, and his own personal interests and the interests of Waitotara Farms Ltd.

24	At [28]–[29].
25	At [30].
26	At [30].

[33]	It appears likely that there will be a delay in the resolution of the Family Court proceeding. Keith Stark is self-represented. He has a history of failing to comply with procedural directions made in the Family Court and this Court. That is delaying both proceedings. The deadlock in the management of the partnership will remain for so long as Keith Stark controls the affairs of Mrs Stark.

[34]	I am satisfied that in the interim the partnership’s property should be managed by a receiver and manager, for the following reasons:

(a)	the length of the likely delay before the Family Court resolves who will manage Mrs Stark’s affairs;

(b)	the farm management consultant’s view that the partnership’s farm is poorly maintained and neglected, requiring a significant investment of time and money to bring it up to an acceptable standard;

(c)	the current potential for the intermingling of the financial affairs of the partnership, Keith Stark and Waitotara Farms Limited, which may prove difficult to unravel;

(d)	the risk that Keith Stark is operating the partnership or utilising the partnership’s assets for his own benefit; and

(e)	to ensure that partnership income is being used to serve the needs of Mrs Stark.

[35]	At this stage, it is appropriate for a receiver and manager to be appointed to:

(a)	manage the ongoing business of the partnership, including the sale of stock in the ordinary course of business; and

(b)	to recover any loans owed to the partnership by third parties.

[36]	It is not yet appropriate for the receiver to take any steps to sell the partnership’s real estate or tangible assets. That will require a further application by the receiver for

directions under r 7.66 of the HCR, or orders made at a trial of the substantive proceeding.

Result

[37]	Steven Khov and Kieran Jones are appointed jointly and severally as receivers and managers (the receivers) of the GJ & EM Stark Partnership, subject to the following directions:

(a)	The receivers may take such steps as they see fit to manage the ongoing business of the partnership, including the sale of stock in the ordinary course of business.

(b)	The receivers may take such steps as they see fit to preserve the assets of the partnership and to recover any loans owed to the partnership by third parties.

(c)	The receivers may not take any steps to sell the partnership’s real estate or tangible assets, except as permitted in order (a), without further directions from the Court.

(d)	Leave is reserved to the receivers to apply for further directions.

[38]	The reasonable remuneration of the receivers shall be met from the assets of the partnership, subject to approval of that remuneration at the conclusion of the receivership.

[39]	Costs are reserved.