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Court tosses finding HWL Ebsworth ‘invalidly’ expelled partner
An appeal court has reversed a finding that HWL Ebsworth breached its partnership deed when it expelled a capital partner ahead of the failed IPO.
Naomi Neilson
In a decision handed down last April, Justice Michael Elkaim of the NSW Supreme Court found HWL Ebsworth invalidly pushed out capital partner Gregory Lewis in what was a “forced and absolute divorce from the firm”.
However, on a cross-appeal, Justices Anthony Payne, Anna Mitchelmore and Kristina Stern found Lewis was “not wrongly expelled”.
The declaration made by Justice Elkaim in April was tossed out, as was a declaration the partnership between Lewis and the firm dissolved in February 2021 when the statement of claim was filed.
By granting the cross-appeal, Justices Payne, Mitchelmore and Stern have reversed an order granting Lewis damages arising from the breach.
An appeal by Lewis, which advanced 23 grounds, was also dismissed.
In the November resolution, former managing partner Juan Martinez – who died in March 2024 – proposed to the other 181 capital partners that Lewis be expelled ahead of the planned initial public offering (IPO). Due to a lack of interest from fund managers, this was later abandoned.
Lewis had been given the option to retire and become a fixed draw partner, but he refused. Two other capital partners accepted this offer.
In the cross-appeal judgment, Justices Payne, Mitchelmore and Stern said Justice Elkaim erred in his conclusions about a notice period ahead of the expulsion motion and the use of a single-voting button in two resolutions.
On the latter, Lewis claimed this button created a situation where the vote was “like a meeting which was null and void and at which no business could be validly transacted”, but this was rejected on the cross-appeal.
“The [partnership deed] rules, which also apply to in-person meetings, are flatly inconsistent with Lewis’ submissions and the conclusions of the primary judge on this issue,” the appeal bench determined.
They found the rules “specifically envisaged” a single voting button could apply to an email vote on more than one resolution.
Lewis took issue with the language of a “unanimous resolution”, having told Justice Elkaim a successful resolution would need 80 per cent of all capital partners to vote to expel him, and not 80 per cent of those who voted.
In his case, 74 did not vote. Of the 107 who did, all but one voted yes, which was “well in excess of the 80 per cent required”.
“It does not necessarily follow from the serious consequences for Lewis that an extraordinary resolution seeking his expulsion needs to be passed by 80 per cent of the capital partners entitled to vote,” the bench said.
“Constructing the deed and the rules with the same ‘measure of strictness’ as was identified by the primary judge, it remains clear that the deed and the rules provide that an extraordinary resolution requires 80 per cent support from those capital partners who actually voted.”
The construction of the extraordinary resolution relied on by Justice Elkaim was found to have been “inconsistent” with the deed and the rules.
Justices Payne, Mitchelmore and Stern also took issue with Justice Elkaim’s use of a semicolon in Lewis’ definition of extraordinary resolution.
“Lewis’ preferred construction of ‘extraordinary resolution’ is not advanced by the mere insertion of a semicolon,” they said.
The appeal bench also objected a submission the capital partners needed to inform Lewis of the grounds for expulsion.
In place of Justice Elkaim’s four orders, the appeal bench dismissed a further amended statement of claim and ordered Lewis to pay the capital partners the costs of this claim.
The case is Lewis v Estate of Juan Martinez [2025] NSWCA 2.
Naomi Neilson
Naomi Neilson is a senior journalist with a focus on court reporting for Lawyers Weekly.
You can email Naomi at:
