Dwyers Legal - Case Update

The final nail has been put into the coffin of Dwyers Legal, one of Perth’s oldest and most respected law firms, with the Court also providing some helpful guidance on which priority regime governs the winding up of a partnership whose members are companies in liquidation.

The firm collapsed into administration in February of this year after providing legal services to clients across Western Ausralia for over a century. Mervyn Kitay of Worrells was appointed administrator.

Shortly after the appointment was made, the Supreme Court of Western Australia clarified that the administrator was entitled to be indemnified out of the law firm’s assets in priority to creditors and the partners themselves. At that time, the administrator advised that he intended to seek potential buyers for the business and explore the possibility of a DOCA.

Now, the Court has appointed Mr Kitay as liquidator of Dwyers Legal and receiver over the assets of the two trusts which were equal partners in the partnership. The Court stated that appointing a liquidator or administrator of a corporate trustee as a receiver of a trust's assets facilitates and simplifies the winding up of the corporate trustee by providing for the trust's business and assets to be under the same control as the corporate trustee while it is in external administration. This aids in the vindication of the trustee company's right of indemnity out of the trust's assets.

The Court also made a number of directions as to the conduct of the winding up, including with respect to the priorities for the distribution of the assets of the partnership. It relied on its previous decision in Woodhouse v Francis [No 2] [2022] WASC 318 to answer the question of which priority regime governs the winding up of a partnership whose members are companies in liquidation. Specifically, the Court found that the priorities regime in s 556 of the Act does not apply to the winding up of the partnership, and that the joint assets of the partnership should be applied first to the payment of the debts of the partnership.

Accordingly, the Court ruled that the proceeds of the partnership property be applied in accordance with the partnership agreement and partnership deeds in the following order:

1. the costs of winding up the partnership;

2. the debts and liabilities of the partnership to persons who are not partners;

3. the amount due to each partner for excess contributions (as distinguished from capital contributions) and any interest due on them;

4. each partner's share of the capital in the partnership shares and any interest due on it; and

5. any surplus to the partners in the partnership shares.

The Court also extended its previous order that Mr Kitay was entitled to an indemnity from the assets of the partnership.

Read the decision HERE.

Professionals involved: Boika Panov of Mendelawitz Morton Commercial Lawyers.