PAVE WEALTH SERVICES PTY LTD -v- JONES [2023] WASC 175 (24 May 2023)

Last Updated: 25 May 2023

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION : PAVE WEALTH SERVICES PTY LTD -v- JONES [2023] WASC 175

CORAM : MASTER SANDERSON

HEARD : 18 APRIL 2023

DELIVERED : 24 MAY 2023

PUBLISHED : 24 MAY 2023

FILE NO/S : CIV 2283 of 2022

BETWEEN : PAVE WEALTH SERVICES PTY LTD

Plaintiff

AND

DANIELLE JONES as executrix of the estate of MICHAEL FREDERICK JONES

First Defendant

DANIELLE JONES-BALLARD

Second Defendant

Remedies - Equitable doctrine of tracing as embodied in s 65 of Trustee Act - Turns on own facts

Legislation:

Restraint of Debtors Act 1984 (WA)
Trustees Act 1962 (WA)

Result:

Plaintiff's right to claim costs upheld

Category: B

Representation:

Counsel:

Plaintiff	:	GJ Douglas & T Watson
First Defendant	:	JP Cook
Second Defendant	:	JP Cook

Solicitors:

Plaintiff	:	Douglas Cheveralls Lawyers
First Defendant	:	Mendelawitz Morton Commercial Lawyers
Second Defendant	:	Mendelawitz Morton Commercial Lawyers

Cases referred to in decision:

MASTER SANDERSON:

1. There are some cases which seem to take on a life of their own. Often these cases at first instance appear relatively straightforward - the type of case that might be expected to settle at mediation. But for some reason no resolution is possible and even a trial, an appeal and enforcement proceedings do not bring the action to an end. This is such a case. Perhaps this decision will terminate the proceedings, although that is by no means certain. The point at issue is not straightforward.
2. The relevant background facts are set out in an affidavit of Paul Antony Stojanovic sworn 24 November 2022. In about 2009, Mr Stojanovic started discussions with Michael Frederick Jones about purchasing a financial planning business. That business was Prosperity Partners. In late 2009, the plaintiff company entered into an agreement with Mr Jones to buy Prosperity Partners. (At the time the agreement was entered into, the plaintiff rejoiced in the name Headless Canary Pty Ltd. It changed its name in 2011.) The sale of the business settled in April 2010 and thereafter Mr Stojanovic realised the value of the business had been misrepresented by Mr Jones and the plaintiff had paid more than was reasonable.
3. Mr Jones passed away in May 2013. He left a last will and testament dated 13 February 2012 appointing his wife, the second defendant, the executor of his estate. The will provided for two bequests to each of Mr Jones' daughters with the rest and residue of the estate passing to the second defendant. As at the date of his death, Mr Jones owned a property in Dalkeith. On 3 October 2013, the property was transferred to the first defendant by way of a transmission application consistent with the terms of the will.
4. In September 2014, the plaintiff's former solicitors notified the first defendant of the plaintiff's claim arising from allegedly misleading and deceptive conduct by Mr Jones and his company, Wotif Pty Ltd, in relation to the purchase of the business. On 26 June 2015, the plaintiff commenced proceedings in relation to that claim in the District Court. The matter proceeded to trial and on 12 February 2020, her Honour Judge Braddock ordered judgment against Wotif Pty Ltd in an amount of $437,000 plus interest of $256,453.15. The claim against the first defendant (the same first defendant as in these proceedings) was dismissed.
5. The plaintiff lodged an appeal. The appeal was successful. On 14 January 2021, the court ordered that judgment be entered for the plaintiff against the defendants in an amount of $693,453.15. I will come back to the precise form of the orders made by the Court of Appeal later in these reasons.
6. In early January 2019, Mr Stojanovic became aware that the Dalkeith property was on the market. He made an application under s 17 of the Restraint of Debtors Act 1984 (WA) to restrain the transfer of the property by the second defendant. That application was unsuccessful. In or about the end of 2019, the second defendant sold the Dalkeith property for $2,850,000 and the transfer was registered on 31 January 2020.
7. The plaintiff then sought to enforce the Court of Appeal judgment against the second defendant by action CIV 1092 of 2021. It relied upon s 65 of the Trustees Act 1962 (WA). In fact, the orders sought were as follows:
   1. An order pursuant to section 65 of the Trustees Act 1962 (WA) that the second defendant shall pay to the plaintiff the sum of $693,453.15 plus interest and costs pursuant to the order of the Supreme Court of Western Australia made on 14 January 2021, being a sum not exceeding the value of 78 Philip Road, Dalkeith in the State of Western Australia, distributed to the second defendant by the first defendant on or about 3 October 2013 pursuant to the terms of the will of the late Michael Frederick Jones.
   2. An order that the second defendant pay the plaintiff’s costs of this application.
   3. Such further or other order or orders that the Court deems fit.
8. Section 65 of the Trustees Act is in the following terms:
   65. Deceased estate, claims made after distribution of, tracing, following assets

(1) This section applies where a trustee has distributed any assets forming part of the estate of a deceased person or subject to a trust, and there is nothing in any Act to prevent the distribution from being disturbed.

(2) Where this section applies, the Court may make an order on a claim, being -

(a) an application under the Family Provision Act 1972; or
(b) a claim to which section 63 applies; or
(c) a claim by a person to be a beneficiary under the will, or to be entitled on the intestacy, of the deceased person, or to be beneficially interested under the trust;

any of which application or claims are, hereinafter in this section, called the claim.

(3) An order under subsection (2) may provide that -

(a) any person to whom any assets, to which the section applies, were distributed, or his personal representative, shall pay to the person making the claim or to the trustee a sum not exceeding the value of those assets; or
(b) any person, who has received, otherwise than in good faith and for valuable consideration, any interest in any assets, to which this section applies, from the person to whom they were distributed or his personal representative, shall pay to the person making the claim or to the trustee a sum not exceeding the value of that interest;

and for the purpose of giving effect to that order the Court may make such further order as it thinks fit.

(4) The remedies given to any person by this section are in addition to all other rights and remedies (if any) available to that person, and nothing, other than the provisions of subsection (7) and (8), restricts those other rights and remedies.

(5) Subject to the provisions of subsection (6), an order under this section shall not be made by the Court -

(a) where the claim is an application for an order under the Family Provision Act 1972, unless -

(i) the application is made within the period specified in section 7(2)(a) of that Act; or
(ii) leave to file out of time has been given under section 7(2)(b) of that Act;

or

(b) in the case of any other claim, unless the application for that order is made within the time within which the applicant could have enforced his claim in respect of the estate, without special leave of the Court, if the assets had not been distributed;

but, notwithstanding the foregoing provisions of this subsection, the order may be made, with the special leave of the Court, on application made within the time within which the applicant could have enforced his claim, in respect of the estate, with special leave of the Court, if the assets had not been distributed.

(6) Notwithstanding anything to the contrary in subsection (5), where a trustee has made a distribution of any assets forming part of the estate of a deceased person or subject to a trust, and any person who is entitled to apply for an order under this section has, within the time specified in that subsection, applied to the Court for an order on the claim and that person was not aware of the distribution at the time when he made that application, the Court may hear an application by that person under this section after the expiration of the period prescribed by subsection (5), if it is made within 6 months after the date on which the person first became aware of the distribution, and may make an order accordingly.

(7) Notwithstanding any rule of law to the contrary, where a trustee has made a distribution of any assets forming part of the estate of a deceased person or subject to a trust -

(a) a person may exercise the remedies (if any) given to him by this section and all other rights and remedies available to him (including all rights that he may have to follow assets and any money or property into which they have been converted) without first exercising the rights and remedies (if any) available to him against the trustee in consequence of the making of the distribution; and
(b) a person shall not exercise any remedy that may be available to him against the trustee in consequence of the making of the distribution, until he has exhausted all other remedies available to him, whether under this section or in equity or otherwise.

(8) Where a trustee has made a distribution of any assets forming part of the estate of a deceased person or subject to a trust, relief (whether under this section or in equity or otherwise) against any person other than the trustee or in respect of any interest of any such person in any assets so distributed and in any money or property into which they have been converted, shall be denied, wholly or in part, if the person from whom relief is sought received the assets or interest in good faith and has so altered his position in reliance on his having an indefeasible interest in the assets or interest, that, in the opinion of the Court, having regard to all possible implications in respect of the trustee and other persons, it is inequitable to grant relief or to grant relief in full.

(9) Without prejudice to the provisions of subsection (8), an order under this section may provide that any payment directed to be made by that order shall be made by periodic payments or by instalments, and the Court may fix the amount or rate thereof in the order, and may from time to time vary, suspend or discharge the order for cause shown, as the Court thinks fit.

9. In effect, this section is the statutory analogue of the equitable doctrine of tracing. Although the remedy of tracing is well‑recognised, it is not a remedy which is often invoked. Prior to this decision, there was no authority touching on the proper interpretation of the section. I determined that the plaintiff was entitled to rely on this section to enforce the judgment.
10. An argument then developed as to the proper form of the orders. The plaintiff proposed the following form:
    1. The second defendant shall pay to the plaintiff $695,453.15, being the sum ordered also payable by the first defendant and another to the plaintiff by Order 3 of orders dated 14 January 2021 of the Supreme Court of Western Australia Court of Appeal in Appeal Number CACV 28 of 2020.
    2. The second defendant shall pay to the plaintiff interest on the sum referred to in Order 1 from 7 February 2020 to 14 January 2021 at the rate of 3% per annum, and at the prescribed rate thereafter, being the interest ordered also payable by the first defendant and another to the plaintiff by Order 5 of orders dated 14 January 2021 of the Supreme Court of Western Australia Court of Appeal in Appeal Number CACV 28 of 2020.
    3. The second defendant shall pay to the plaintiff the plaintiff's costs of the District Court of Western Australia action CIV 2379 of 2015, to be taxed if not agreed:
       1. up to and including 14 September 2016 - on a party and party basis; and
       2. from 15 September 2016 - on a solicitor and own client basis,

being the sum ordered also payable by the first defendant and another to the plaintiff by Order 4 of orders dated 14 January 2021 of the Supreme Court of Western Australia Court of Appeal in Appeal Number CACV 28 of 2020.

4. The second defendant shall pay to the plaintiff the plaintiff's costs of the appeal CACV 28 of 2020 on a party party basis to be taxed if not agreed, being the sum ordered also payable by the first defendant and another to the plaintiff by Order 6 of orders dated 14 January 2021 of the Supreme Court of Western Australia Court of Appeal in Appeal Number CACV 28 of 2020.
5. The second defendant shall pay to the plaintiff the plaintiff's costs of the cross appeal CACV 28 of 2020 to be taxed on an indemnity basis so that the plaintiff receives all of its legal costs except for those unreasonably or unnecessarily incurred or unreasonable in amount, being the sum ordered also payable by the first defendant and another to the plaintiff by Order 7 of orders dated 14 January 2021 of the Supreme Court of Western Australia Court of Appeal in Appeal Number CACV 28 of 2020.
6. The second defendant shall pay this plaintiff the costs of this application, to be taxed if not agreed.
11. The defendants proposed the following orders:
    1. The second defendant shall pay to the plaintiff the sum of $693,453.15.
    2. The second defendant shall pay the plaintiff's costs of the application.
12. On 23 September 2021, I made orders in terms of the defendants' minute. The parties had each filed detailed submissions as to why orders ought be made in terms of their minute. In essence, I was satisfied that under s 65(3)(b), the reference to 'a sum' meant an amount that was certain. Pursuant to the judgment of the Court of Appeal, the plaintiff was entitled to an amount of $693,453.15. But as at the date of judgment in the tracing application, the costs to which the plaintiff was undoubtedly entitled had not been assessed or agreed and no 'sum' relating to costs had been determined. I was not satisfied that the concluding words of s 65(3) were sufficient to allow an order to be made in relation to costs before the sum of those costs was certain.
13. The plaintiff then taxed its costs and that sum now forms the basis of this application. The defendants meet the claim by saying that based upon the doctrine of res judicata or Anshun estoppel, the plaintiff is precluded from recovering its costs. Put simply, the argument is this. The plaintiff could have, prior to taking proceedings under s 65, taxed its costs. Then when the application was made, there would have been a sum certain - the amount of the damages plus the amount of the costs. The defendants say it is not open to the plaintiff to revisit the question of liability of the defendants for costs. This argument depends in part, at least, on the proper approach to the principles underpinning both res judicata and Anshun estoppel.
14. The classic statement of principle in relation to res judicata is found in the judgment of Dixon J in Blair v Curran [1939] HCA 23; (1939) 62 CLR 464. His Honour said:[1]

A judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or their privies. The estoppel covers only those matters which the prior judgment, decree or order necessarily established as the legal foundation or justification of its conclusion, whether that conclusion is that a money sum be recovered or that the doing of an act be commanded or be restrained or that rights be declared. The distinction between res judicata and issue‑estoppel is that in the first the very right or cause of action claimed or put in suit has in the former proceedings passed into judgment, so that it is merged and has no longer an independent existence, while in the second, for the purpose of some other claim or cause of action, a state of fact or law is alleged or denied the existence of which is a matter necessarily decided by the prior judgment, decree or order.

Nothing but what is legally indispensable to the conclusion is thus finally closed or precluded. In matters of fact the issue‑estoppel is confined to those ultimate facts which form the ingredients in the cause of action, that is, the title to the right established. Where the conclusion is against the existence of a right or claim which in point of law depends upon a number of ingredients or ultimate facts the absence of any one of which would be enough to defeat the claim, the estoppel covers only the actual ground upon which the existence of the right was negatived. But in neither case is the estoppel confined to the final legal conclusion expressed in the judgment, decree or order. In the phraseology of Coleridge J in R v Inhabitants of the Township of Hartington Middle Quarter [1855] EngR 264; (1855) 4 E & B 780, at p 794 [1855] EngR 264; [119 ER 288, at p 293], the judicial determination concludes, not merely as to the point actually decided, but as to a matter which it was necessary to decide and which was actually decided as the groundwork of the decision itself, though not then directly the point at issue. Matters cardinal to the latter claim or contention cannot be raised if to raise them is necessarily to assert that the former decision was erroneous.

15. The defendants also relied on the decision of the Victorian Court of Appeal in Gibbs v Kinna [1998] VSCA 52; [1999] 2 VR 19. Kenny JA (with whom the other members of the court agreed) put the position in this way:[2]

The rule of res judicata is that, generally speaking, no proceeding can be maintained on a cause of action upon which judgment has been entered. The cause of action is said to merge in the judgment, in the sense that it no longer has an existence independent of the judgment: see Blair v Curran [1939] HCA 23; (1939) 62 CLR 464, at 532 per Dixon J; Jackson v Goldsmith [1950] HCA 22; (1950) 81 CLR 446 at 466 per Fullagar J dissenting on other issues; Anshun's Case 147 CLR at 597, and Chamberlain v Deputy Commissioner of Taxation [1988] HCA 21; (1988) 164 CLR 502 at 507‑8. In Henderson v Henderson at 3 Hare 115; 67 ER 319, Sir James Wigram VC said that the rule

'... applies, except in special cases, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of the litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time.'

16. So far as the Anshun estoppel point is concerned, the defendants say this is a clear case where costs could have been claimed in the one proceeding. The fact the plaintiff chose to seek to enforce the judgment sum prior to costs being assessed was a forensic decision and the plaintiff must live with the consequences. It was the defendants' submission that whichever way the present application was considered, it amounts to nothing more than a repeat of the earlier proceedings. That is not permissible and the application should therefore be dismissed.
17. The plaintiff says that for the purposes of this application, both res judicata and Anshun estoppel can be regarded as estoppel. On the facts in this case, I would accept that is so. There may be circumstances where res judicata and Anshun estoppel apply differently and can be distinguished. But in this case they represent two ways of applying the same principle. The plaintiff says the defendants' argument fails because the authorities establish that if an action is brought prematurely because a fact required to prove a cause of action has not yet occurred, an action after that event has occurred will not be barred by estoppel. The plaintiff says that any claim in relation to the costs in the form of proceedings was premature and could not have been made until after the certificates of taxation in respect of the costs orders issued. In particular, the plaintiff relied upon the statement of principle found in Spencer Bower and Handley: Res Judicata (5th ed, 2019). The learned authors say (at 8.17):

If an action is brought prematurely, for example, before a period of credit had expired or a contract had been rescinded, an action after those events have occurred will not be barred. If an action fails because a composition with creditors remains in force, an action after the composition has become void is not barred ...

A prosecution which failed because notice was not given did not bar a prosecution after it was. These cases illustrate the principle that a decision in favour of a defendant does not bar proceedings 'founded on any new or altered circumstances' and the statement ... that an issue estoppel created by a dismissal is limited to 'the actual ground upon which the existence of the right was negatived'.

18. In support of this statement of principle, the plaintiff relied upon the decision of the English Court of Appeal in Lordsvale Finance Plc v Bank of Zambia [1996] QB 752. In the Zambia case, the plaintiffs commenced proceedings claiming payment of an outstanding principal sum together with default interest due under the agreements. Judgment was entered in favour of the plaintiffs for the principal sum claimed 'plus interest (if any) to be assessed'. Upon demand, the defendant failed to pay the interest and the plaintiffs commenced a second action to recover it. The defendant claimed the second action was barred by reason of res judicata. That argument was rejected. Colman J said:[3]

It only remains to add that, had the issues as to interest been adjudicated pursuant to such an order and the plaintiffs' claim had failed, as it must have done, for want of a demand, the defendant would have been entitled to a judgment dismissing the plaintiffs' claim. Such a judgment would, however, have left wholly intact the plaintiffs' entitlement subsequently to perfect their cause of action for default interest by getting the agent to make demand. Had they then done so and after that demand commenced fresh proceedings claiming default interest, it would have been quite impossible for the defendant to raise a defence of res judicata for the simple reason that the judgment against the plaintiffs in the first action was based on facts materially different from those on which the subsequent cause of action was based.

19. In relation to the Anshun estoppel argument, the plaintiff relied on the Federal Court decision of O'Farrell v Palicave Pty Ltd [2009] FCAFC 64. In that case, the defendant argued that an Anshun estoppel arose in a claim for repayment of a loan from the fact that the plaintiff had confined the first claim to recovery of overdue instalments of principal rather than suing for the full amount of the loan. The Full Court of the Federal Court found there was no inconsistency between a judgment for instalments of principal and a judgment, if entered, for the balance outstanding under the loan agreement. This finding was made relying on two New South Wales Court of Appeal cases in which it was found that a judgment recording either success or failure in a claim for the entire unpaid rent cannot conflict with (and is not inconsistent with) a judgment rejecting a claim for an outstanding instalment of rent.
20. The plaintiff makes two further points. First, it says the Anshun principle cannot be enlivened unless the matter relied upon as giving rise to the estoppel is so closely connected with the subject matter of the first action that it would have been unreasonable not to rely upon it in that action. The plaintiff says there could be nothing unreasonable in a failure to sue for costs in circumstances where the cause of action had not accrued when earlier proceedings were commenced. Second, the plaintiff notes that a finding of unreasonableness ought not be lightly made. If the Anshun principle is too readily applied, there is a possibility of serious injustice. That statement is supported by the O'Farrell decision. The plaintiff says where, as here, the effect of the estoppel for which the defendants contend would be to extinguish the second defendant's liability for costs when the second defendant knew at all times she was liable for costs would be unjust.
21. In the end, I am satisfied largely for reasons advanced by the plaintiff that this claim is not precluded either by res judicata or Anshun estoppel. Returning to the decision of the Court of Appeal, the order was that the first defendant pay the plaintiff a specified sum and pay 'the plaintiff's legal costs to be taxed if not agreed'. At no time could the defendants have been in any doubt as to their liability. It is certainly true they did not know precisely what the liability would be because at the date the s 65 application was made, the costs had not been taxed. But it renders no injustice to the defendants to now permit costs which they always knew would have to be paid to be claimed as part of the overall outcome of the proceedings.
22. Accordingly, there will be an order in terms of pars 1 and 2 of the originating summons.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

MM
Associate

24 MAY 2023

---

[1] Blair v Curran (531 ‑ 532).
[2] Gibbs v Kinna [21].
[3] Lordsvale Finance v Bank of Zambia (759).