McMillan Investment Holdings Pty Limited v Mangos & Ors - [2023] NSWSC 1327 - NSWSC 2023 case summary — Zoe

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McMillan Investment Holdings Pty Limited v Mangos & Ors

[2023] NSWSC 1327

Supreme Court of NSW|2023-10-20|Before: Chen J

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At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2023-10-20

Before

Chen J

Catchwords

[1984] HCA 57 Dionisatos (for the Estate of the late George Dionysatos) v Acrow Formwork & Scaffolding Pty Ltd (2015) 91 NSWLR 34
[1999] NSWCA 390 Government Insurance Office of NSW v Aboushadi (1999) Aust Torts Reports 81-531
[1999] NSWCA 396 Heydon v NRMA Ltd (No 2) (2001) 53 NSWLR 600
[2021] NSWCA 232 National Australia Bank Ltd v Bond Brewing Holdings Ltd [1991] 1 VR 386 Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681

Source

Original judgment source is linked above.

Catchwords

[1984] HCA 57 Dionisatos (for the Estate of the late George Dionysatos) v Acrow Formwork & Scaffolding Pty Ltd (2015) 91 NSWLR 34[1999] NSWCA 390 Government Insurance Office of NSW v Aboushadi (1999) Aust Torts Reports 81-531[1999] NSWCA 396 Heydon v NRMA Ltd (No 2) (2001) 53 NSWLR 600[2021] NSWCA 232 National Australia Bank Ltd v Bond Brewing Holdings Ltd [1991] 1 VR 386 Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681[2018] NSWCA 84 One.Tel Ltd v Deputy Commissioner of Taxation (2000) 101 FCR 548[2014] NSWCA 107 Re Minister for Immigration and Ethnic Affairsex parte Lai Qin (1997) 186 CLR 622[1997] HCA 6 SAS Trustee Corporation v Budd (2005) 3 DDCR 382

Judgment (44 paragraphs)

[1]

Shellharbour City Council v Minister for Local Government [2017] NSWCA 256 Townsend v Stone Toms & Partners (1984) 27 BLR 26 Woolworths Ltd v Strong (No 2) (2011) 80 NSWLR 445; [2011] NSWCA 72 Texts Cited: Keith Mason, JW Carter and Greg Tolhurst, Restitution Law in Australia (2nd ed, 2008, LexisNexis Butterworths) Keith Mason, JW Carter and Greg Tolhurst, Restitution Law in Australia (3rd ed, 2016, LexisNexis Butterworths) Category: Principal judgment Parties: McMillan Investment Holdings Pty Limited (plaintiff) John Bernard Mangos (first defendant) Natalie Mangos (second defendant) Christopher Wallace (third defendant) Representation: Counsel: J Lockhart SC with J T Svehla (plaintiff) A Fernon SC (first and second defendants) K Young (third defendant)

[5]

The genesis of the disputes: a short summary

In general terms these proceedings concern, or arise out of, financial transactions that occurred in and around 2015 and 2016. For the plaintiff parties, there were a number of claims against the defendants for monies said to be owed under various instruments including a facility agreement, general security deed and mortgage all dated on or around 27 March 2015 and an agreement entered in early 2016. There was also, arising out of these instruments and the involvement of the parties, claims against a solicitor (and the incorporated legal practice of which he was a director) for professional negligence: the same solicitor is alleged to have provided advice to the plaintiff, as well as each of the defendants.
The most recent version of the plaintiff's pleading is the fourth further amended statement of claim filed 25 August 2023 ('4FASOC'). It will be necessary to refer to what was alleged in that claim, as well as the third further amended statement of claim filed 26 April 2019 ('3FASOC').
Some further details about how the dispute arose are as follows.
The first and third defendants were relevantly directors of two businesses -Sydney Allen Printers Pty Ltd and Sydney Allen Manufacturing Pty Ltd. In early 2015, Sydney Allen Printers was involved in a dispute. A solicitor (and the incorporated legal practice of which he was a director) is alleged to have been retained to act for the first defendant and third defendant and, later, the second defendant. The solicitor gave advice in connection with a resolution of the dispute which involved the payment of approximately $850,000 plus GST to the creditor.
The money involved in the settlement was to be by facility agreement ('the facility agreement') between the plaintiff (as lender) and Sydney Allen Printers (as borrowers). The first and third defendants were guarantors of that agreement. In addition, the first and third defendants executed a general security agreement, and the second defendant executed a mortgage over property that she owned at Illawong, NSW as additional security.
In mid 2015, Sydney Allen Printers fell into arrears with a different creditor. The plaintiff agreed to fund the settlement of that dispute which required the first defendant to enter into a loan agreement with the plaintiff. The documentation prepared by the solicitor - described variously in the pleadings by the parties as the '$150K Loan Documents' - was executed by the first and second defendants on or around 27 January 2016. This loan agreement has been referred to in the pleadings as the '$150K loan', and it is convenient to use that description in these reasons. Put simply, by that loan, the plaintiff agreed to loan the first defendant and/or the first and second defendants that amount, but, contrary to its terms, it was not repaid, despite requests for that to occur: 4FASOC, pars 50-60. As at 26 March 2019, the amount alleged to be outstanding was $241,077.82 (3FASOC, par 59).
On or around 28 August 2015 the plaintiff took an assignment from Westpac of certain debts alleged to be owed by the first, second and third defendants to Westpac together with certain securities alleged to have been given by them. There were two loans assigned by Westpac to the plaintiff: one between Westpac and the first and second defendants - entered in 2009, and was for the amount of $490,000; the other was between Westpac and the third defendant - entered in 2007, and was for the amount of $128,000. (This assigned loan forms the basis of the Westpac debt claim).
By May 2016 both Sydney Allen Printers and Sydney Allen Manufacturing had been placed into liquidation, and various secured creditors, including the plaintiff, took steps to enforce their security.
On 16 July 2018 the plaintiff commenced proceedings against the first, second and third defendants seeking to recover amounts allegedly owed to it by them under the facility agreement, the $150K loan and the two Westpac debts.
The plaintiff (and the directors of the plaintiff - together, 'the McMillan parties') also brought proceedings for professional negligence against the solicitors retained to provide advice in connection with the facility agreement and loan and security documentation. This occurred via a cross claim - the third cross claim, described in more detail at [25]ff, below - and not as part of the principal proceedings.
The first and second defendants disputed their liability to the plaintiff, and cross claimed against the plaintiff (and the directors of the plaintiff) seeking to set aside the facility agreement and loan and security documentation, as well as making an alternative claim for damages against those parties. They also cross claimed (in that same cross claim filed - the first cross claim) against the third defendant (seeking statutory and equitable contribution). They also advanced, by separate cross claim (the fourth cross claim), a claim for professional negligence against a solicitor (and the incorporated legal practice of which he was a director) arising out of their entry into the facility agreement and loan and security documentation. As earlier noted, the solicitor involved was the same one involved in the claim brought by the plaintiff (and the directors of the plaintiff).
The third defendant disputed his liability to the plaintiff, and cross claimed against the plaintiff (and the directors of the plaintiff) seeking to set aside the facility agreement and loan and security documentation, as well as making an alternative claim for damages against those parties. He also cross claimed (in that same cross claim filed - the second cross claim) against the first defendant (seeking statutory and equitable contribution). He also advanced, by separate cross claim (the fifth cross claim), a claim for professional negligence against a solicitor (and the incorporated legal practice of which he was a director) arising out of their entry into the facility agreement and loan and security documentation. Again, the solicitor involved was the same one involved in the claim brought by the plaintiff and in the claims brought by the first and second defendants.

[7]

The statements of claim

The proceedings were commenced by statement of claim filed by McMillan Investment Holdings Pty Ltd ('the plaintiff') on 16 July 2018. There were four named defendants: John Mangos ('the first defendant'); Natalie Mangos ('the second defendant'); Christopher Wallace ('the third defendant'); and Westpac Banking Corporation ('the fourth defendant').
This statement of claim has been amended on a number of occasions, as follows: 1. an amended statement of claim was filed on 29 October 2018; 2. an amended statement of claim was also filed on 8 November 2018; 3. a further amended statement of claim was filed on 13 March 2019; 4. a second further amended statement of claim was filed on 23 April 2019; 5. a third further amended statement of claim was filed on 26 April 2019; and, 6. a fourth further amended statement of claim was filed on 25 August 2023.
As I have earlier noted, the proceedings by the plaintiff - and the McMillan parties - involved claims under the facility agreement and the $150K loan as well as the Westpac debts. I have, sufficiently for present purposes, described the circumstances surrounding the entry into the facility agreement and the $150K loan: see [9], above. (To signpost: this claim was the subject of the settlement culminating in the orders made on 24 August 2023: by the 4FASOC, pars 50-60 - which were the relevant paragraphs dealing with this claim - were deleted). Some further explanation about the circumstances of the two Westpac debts is as follows.
The plaintiff sued upon the amount alleged to be owing by the first and second defendants under the Westpac debt: 4FASOC, par 49. The loan was for $490,000 but, as at 26 March 2019, the amount outstanding was $74,870.11: 4FASOC, par 49. The allegation of the plaintiff was that, contrary to repeated demands made by it to the first and second defendants for payment of the money owing to it under the Westpac debt, the first and second defendants wrongfully failed to pay the outstanding money: 4FASOC, pars 61-63. (To signpost: this claim was not the subject of the settlement culminating in the orders made on 24 August 2023, but formed part of the ultimate settlement that occurred in October 2023).
The plaintiff also sued the third defendant in relation to the Westpac debt. I will explain this claim in a little more detail, given the existence of that debt remains in issue. (That claim - the Westpac debt claim - is dealt with at [37]ff, below).
On or around 3 July 2009, Westpac entered into a loan agreement with the third defendant for the amount of $128,000. The third defendant was required to execute a mortgage over his property in Currumbin as security for that loan - which he did, albeit that Westpac did not register that mortgage.
At the time that Westpac assigned its rights and interests in the loan (and the mortgage) to the plaintiff on or around 28 August 2015, the third defendant owed Westpac $116,768.91.
From around 28 September 2015 to 16 November 2018, the third defendant made payments to the plaintiff in relation to that loan - but not thereafter: 4FASOC, pars 72, 73. The allegation of the plaintiff is that, despite demands for him to do so, the third defendant wrongfully failed to pay the outstanding money: 4FASOC, pars 75, 76. The plaintiff sued upon the amount alleged to be owing by the third defendant under the Westpac debt: 4FASOC, pars 64, 69, 76ff.

[8]

The cross claims

There were five cross claims filed (and, often, amended versions of those cross claims). It is convenient to identify and group those claims by the parties who brought them.
In addition to commencing proceedings by statement of claim, the plaintiff as well as Julie-Anne McMillan and Robert Ian McMillan (as second and third cross claimants) brought one cross claim: the third cross claim filed on 9 September 2019. The cross defendants to that cross claim were the first and second defendants (as first and second cross defendants); the third defendant (as third cross defendant); PMFPL Pty Ltd (as fourth cross defendant); FD Legal Pty Ltd (as fifth cross defendant); and Westpac Banking Corporation (as sixth cross defendant).
Pausing momentarily to briefly identify and explain the roles of some of those additional parties - namely, Paul Fordyce, PMFPL Pty Ltd and FD Legal Pty Ltd. Paul Fordyce is, and was, a solicitor until around 2016-2017. He was a director of PMFPL Pty Ltd and also became a director of FD Legal Pty Ltd. Again, put very simply, by the third cross claim the McMillan parties alleged professional negligence against PMFPL Pty Ltd arising out of a retainer that was entered in or around February 2015 in connection with a loan facility and the preparation of documentation (including securities) for that facility: see the third cross claim, pars 7-8. As earlier mentioned, the loan facility was between the plaintiff and two companies - Sydney Allen Printers and Sydney Allen Manufacturing. The security was provided by not only those entities, but also the first, second and third defendants: see the third cross claim, pars 7-10.
The involvement of FD Legal Pty Ltd arose in connection with a retainer that was alleged to have been entered in and around May to early June 2017: see the third cross claim, pars 26ff. Unless necessary to refer separately to each of the incorporated legal practices (and the solicitor), they will simply be described as 'the solicitor parties'.
I return now to the overview of the pleadings and parties.
The first and second defendants brought two cross claims - as follows: 1. The amended first cross claim filed on 13 November 2019. The cross defendants to the amended first cross claim were the plaintiff (as first cross defendant); Julie-Anne McMillan (as second cross defendant); Robert Ian McMillan (as third cross defendant) and the third defendant (as fourth cross defendant). Put very simply, by the amended first cross claim the first and second defendants sought a range of orders (including declaratory orders) against the plaintiff to the effect that the facility agreement and the loan and security documentation were void and unenforceable; they sought, in the alternative, damages against the plaintiff and the directors of the plaintiff (against the directors that claim extended to a claim for exemplary damages); they sought statutory, as well as equitable, contribution against the third defendant. What has been set out is some - not all - of the relief sought. 2. The fourth cross claim filed on 22 July 2022. The cross defendants to the fourth cross claim were an incorporated legal practice (PMFPL Pty Ltd - as first cross defendant), and a solicitor who was a director of the incorporated legal practice (Paul Fordyce - as second cross defendant), who were retained to provide the first and second defendants with advice relating to their entry into the facility agreement and loan and security documentation as well as a later agreement, in relation to a loan entered between the plaintiff and first defendant in early 2016 involving $150,000.
The third defendant brought two cross claims - as follows: 1. The amended second cross claim filed on 4 September 2023.The cross defendants to that cross claim were the plaintiff (as first cross defendant); Julianne McMillan (as second cross defendant); Robert Ian McMillan (as third cross defendant); and the first defendant (as fourth cross defendant). Put very simply, by the amended second cross claim, the third defendant sought orders that in substance replicated the relief that the first and second defendants sought against the first, second and third cross defendants in the amended first cross claim. Further, the third defendant sought statutory and equitable contribution against the first defendant. Again, as with the amended first cross claim, what has been set out is some - not all - of the claims and relief sought. 2. The fifth cross claim filed on 29 July 2022. The cross defendants to the fifth cross claim were PMFPL Pty Ltd (as first cross defendant) and Paul Fordyce (as second cross defendant). Although not identical to the fourth cross claim, it replicates the substance of what was alleged by the first and second defendants against the solicitor parties.

[9]

The settlement in July 2023

On or around 14 July 2023 the McMillan parties entered into a settlement agreement with the solicitor parties. The consequence of that resolution led to the application by the plaintiff to discontinue a number of claims: put simply, the claims under the facility agreement and the $150K loan debt claim. Other claims, however, remained: the plaintiff pursued the first and second defendants for the Westpac debt (4FASOC, pars 32-49) and the third defendant in relation to the Westpac debt (4FASOC, pars 64-75).
It is sufficient to presently note that, in general terms, the settlement involved: 1. the payment of $900,000 to the McMillan parties by the solicitor parties; 2. the McMillan parties agreed to make application for leave to discontinue the facility agreement and the $150K claims against the first, second and third defendants - that is, all claims except for what was defined as the 'Continuing Claims' - as well as any claims against the solicitors (see cll 4 and 5, and the definitions of 'Abandoned Claims', 'Application' and 'Continuing Claims'); 3. the McMillan parties agreed to the discontinuance of the third cross claim (see in particular solicitors cll 4 and 5, and the definition of 'Application'); 4. the application for the discontinuance expressly excluded 'Continuing Claims', which by the definition provided included the Westpac debt claim; and, 5. mutual releases by the McMillan parties and the solicitor parties (cll 8 and 9).
The intent of the requirement to agree not to pursue any claims against the first, second and third defendants - other than the Westpac debt claims (claims that did not involve the solicitor parties) - was (at least) twofold. First, to shield the solicitor parties from any exposure that might arise in them in the event that the first, second and third defendants had a liability to the plaintiff or the McMillan parties generally in connection with the claims that were to be discontinued. Secondly, it would permit the solicitor parties to argue that neither the first, second nor third defendants had suffered any loss in connection with any cross claims that they had against the solicitor parties.

[14]

Background facts

The following facts are either agreed or uncontroversial, and I find them to be as follows. They are supplementary to the findings I have earlier made.
On or around 3 July 2009, Westpac entered into a loan agreement with the third defendant for the amount of $128,000. The third defendant was required to execute a mortgage over his property in Currumbin as security for that loan - which he did, albeit that Westpac did not register that mortgage.
On or around 28 August 2015, Westpac assigned its rights and interests in the loan (and the mortgage) to the plaintiff. At the time of that assignment, the third defendant owed Westpac $116,768.91.
From around 28 September 2015 to 16 November 2018, the third defendant made payments to the plaintiff in relation to that loan. To be clear, the last payment that the third defendant made pursuant to the loan agreement was on 16 November 2018 and, since that time, he has made no payments to the plaintiff as required by its terms.
In May 2018, prior to the plaintiff commencing legal proceedings, the third defendant sold the Currumbin property and Westpac provided to him, at his request, a release of the mortgage.
The plaintiff commenced proceedings by statement of claim filed on 16 July 2018. That claim included against the third defendant - amongst other claims - the Westpac debt: see 4FASOC, pars 64-76. Further, by the third cross claim filed 9 September 2019, the McMillan parties brought proceedings against Westpac alleging, inter alia, that Westpac breached the duties owed to the plaintiff by discharging and releasing the mortgage absent authorisation and direction of the plaintiff: third cross claim, pars 65-70.
On or around November 2020 the plaintiff settled the claim against Westpac, with the McMillan parties - that is, not simply the plaintiff - entering into a settlement deed which relevantly required Westpac to pay the sum of $150,000 inclusive of costs. On 10 February 2021 that amount was paid into the trust account of the solicitors for the plaintiff: affidavit of Marc Ryckmans sworn 16 October 2023, par 12. Since that time, the money paid into the trust account as part of that settlement has remained there: affidavit of Marc Ryckmans sworn 16 October 2023, par 12.
As at the time the amount was paid into the trust account of the solicitors for the plaintiff, the amount alleged to be owing was $127,081.13; and, as at the date of hearing, the amount alleged to be owing was $157,231.25: affidavit of Marc Ryckmans sworn 16 October 2023, par 14, annexure B. These amounts were agreed to be outstanding - subject to the extinguishment argument raised by the third defendant.
The plaintiff and third defendant agreed about the characterisation of the respective claims made by the plaintiff against Westpac and the third defendant (plaintiff's debt submissions at [3]; third defendant's debt submissions at [8]). That is, it was accepted: 1. that the claim against the third defendant by the plaintiff was in debt; and 2. that the claim against Westpac was for breach of its duties as an agent, bailee and trustee in dealing with the Currumbin property.

[16]

The rule against double compensation

The relevant rule was stated in Townsend v Stone Toms & Partners (1984) 27 BLR 26, 38 by Oliver LJ as being: The starting point, and one on which there is a good deal of clear authority, is that where a plaintiff with concurrent claims against two persons has actually recovered all or part of his loss from another, that recovery goes in diminution of the damages which will be awarded against the defendant. A plaintiff can never, as I understand the law, merely because his claim may lie against more than one person, recover more than the total sum due.
Purchas LJ explained the rule in these terms (at 49): It follows that if in the first action a plaintiff recovers all that he is entitled to, then there is nothing left to recover in the second action. The law, now embracing equity, will not permit a plaintiff, by whatever procedural device he employs, to recover more than the damage that he has suffered, whether he claims in contract, tort or both. (The rule against double recovery.)
This decision has been repeatedly followed: see, for example, Boncristiano v Lohmann [1998] 4 VR 82, 89 ('Boncristiano'); Baxter v Obacelo Pty Ltd (2000) 48 NSWLR 522; [2000] NSWCA 69 at [32]-[34]; Franklins Self Serve Pty Ltd v Wyber (1999) 48 NSWLR 249; [1999] NSWCA 390 at [29] (and the cases there cited); SAS Trustee Corporation v Budd (2005) 3 DDCR 382; [2005] NSWCA 366 at [33] ('Budd'). The rule has been explained as a principle ("the principle of full satisfaction prevents double recovery"), and it reflects the fundamental idea that a party "cannot recover in the aggregate from one or more defendants an amount in excess of [their] loss": Personal Representatives of Tang Man Sit v Capacious Investments Ltd [1996] AC 514, 522.
The principle is frequently applied in the context of statutory schemes for the payment of damages or compensation, but its application is not so limited. Rather, as explained in Budd at [33], the principle is one of general application: The rule against double compensation may be invoked by one or more defendants. If it can be shown that the plaintiff/claimant has already received recompense in any form in respect of the loss for which compensation is claimed against the defendant invoking the rule, then the plaintiff's loss requiring compensation from that defendant is regarded as discharged pro tanto. To award compensation with respect to that loss against that defendant would be to permit double recovery by the plaintiff in respect of a loss no longer calling to be compensated. See also Dionisatos (for the Estate of the late George Dionysatos) v Acrow Formwork & Scaffolding Pty Ltd (2015) 91 NSWLR 34; [2015] NSWCA 281 at [201]-[202].
The engagement of the rule depends upon whether "the claims against the various defendants are 'concurrent' in the sense that the relief sought is the same"- that is, there are concurrent or overlapping claims for the same damage: Boncristiano at 89; Government Insurance Office of NSW v Aboushadi (1999) Aust Torts Reports 81-531; [1999] NSWCA 396 at [28]-[31]. In that situation, where there is recovery of an amount by a party against one of several wrongdoers, the amount recovered goes in diminution of the damages that are awarded against the other wrongdoer.

[17]

The settlement with Westpac

In connection with the requirement for there to be concurrent, or overlapping, claims for the same damage, the parties were at odds about this; as it happens, this was the critical - indeed only - issue for determination. Here, that issue turns upon whether the plaintiff's Westpac debt claim against the third defendant is concurrent (in the sense described) with the claim that the plaintiff brought against Westpac by the third cross claim. The parties approached the matter on the footing that this issue was to be resolved by an examination of the pleadings, and what was recovered.
The third defendant submitted that, upon proper analysis of the pleadings, it was clear that the plaintiff sought recovery against the third defendant in respect of the same loss and damage that was the subject of the claims and settlements with Westpac. The plaintiff, however, contested that characterisation of the pleadings, submitting that there were distinctly different claims advanced (and therefore resolved) and that, critically, there was no recovery in respect of the losses that were the subject of the debt claim against the third defendant.
In order to resolve this issue it is necessary to examine the two pleadings which were the subject of argument - the 3FASOC and the third cross claim: the former contained the Westpac debt claim against the third defendant; the latter contained the claim against Westpac.
I will start with the 3FASOC. Relevantly, in connection with the Westpac debt claim, the claim against the third defendant involved the following allegations and claim for relief: 1. The relevant loan between Westpac and the third defendant was dated 3 July 2009, which was assigned from Westpac to the plaintiff on 28 August 2015 - an assignment that included the assignment of securities from Westpac to the plaintiff: 3FASOC, pars 64, 69. 2. Between 28 September 2015 to 16 November 2018, the third defendant made payments to the plaintiff in relation to the Westpac debt: 3FASOC, par 72. 3. From 17 November 2018 to date, the third defendant made no payments to the plaintiff in relation to the Westpac debt: 3FASOC, par 73. 4. From around 10 November 2016 to 5 March 2019, the plaintiff made demands upon the third defendant for the payment of the amount owing under the Westpac debt, and the third defendant failed and refused to pay such monies or any part of them: 3FASOC, par 75(b). 5. The third defendant was in default under the Westpac debt by reason of his failure to pay the plaintiff the money that was outstanding from time to time: 3FASOC, par 76.
The third cross claim was brought by the McMillan parties, and there were six cross defendants to that cross claim - one of which was Westpac (the sixth cross defendant). Relevantly, the claim against Westpac involved the following allegations and claim for relief: 1. The relevant loan between Westpac and the third defendant was dated 3 July 2009, and was assigned from Westpac to the plaintiff on 28 August 2015: third cross claim, par 17. The assignment included the assignment of securities from Westpac to the plaintiff - which included the Westpac Currumbin property mortgage (third cross claim, par 17(a) and the definition of 'Westpac/Mr Wallace Debt and Securities Assignment'. 2. In the period 9 to 31 May 2018, Westpac drafted, prepared and executed a release of mortgage over the Currumbin property following a request by, or on behalf of, the third defendant and, subsequently, delivered possession, custody and control of the title to the third defendant, or on his behalf: third cross claim, pars 33(a) and (b). 3. During the period 9 to 31 May 2018, the third defendant effected a sale of the Currumbin property: third cross claim, par 34. 4. On and following the assignment of the debt and the securities from Westpac to the plaintiff, Westpac relevantly held the Currumbin property title "as agent, bailee or trustee" for the plaintiff, and was not entitled or committed to deliver up or deal with the Currumbin property title unless "authorised, directed and requested by the plaintiff": third cross claim, pars 67(a) and (c). As I have earlier noted, the third defendant accepted that the proper characterisation of the claim brought by the plaintiff against Westpac was as alleged in par 67(a). 5. By engaging in the relevant conduct (both acts and omissions), "Westpac breached the duties and obligations which it owed to [the plaintiff] pleaded in paragraph 67": third cross claim, par 69. 6. By reason of the matters alleged, in the breach of duty by Westpac, the plaintiff alleged to have suffered loss and damage - the particulars of which were identified in the third cross claim, par 47: third cross claim, par 70. 7. The plaintiff alleged to have "suffered loss and damage" of three types: 1. the plaintiff's "legal costs in defending" the amended first cross claim (described in the third cross claim as the "Mangos Guarantee and Mortgage Extinguishment Claim"): third cross claim, par 47(a); 2. the "economic loss which will be suffered by [the plaintiff] if the Mangos Guarantee and Mortgage Extinguishment Claim is successful": third cross claim, par 47(b); and 3. the plaintiff's legal costs, "in whole or part", of the third further amended statement of claim, and the first, second and third cross claims: third cross claim, par 47(c). 1. In relation to these claims, the plaintiff sought "an order for damages, alternatively equitable compensation, alternatively equitable damages" and damages pursuant to s 236(1) of the Australian Consumer Law: relief claimed, pars 15(a) and (b).
In relation to the claim against the third defendant, as I have earlier noted the third defendant accepted that the claim brought by the plaintiff against him was a debt claim and the claim against Westpac was against them for breach of the duty owed to the plaintiff as an "agent, bailee or trustee". In my view, that concession was entirely appropriate. It acknowledges what is otherwise apparent from the pleading itself: namely, that the claims brought by the plaintiff against, on the one hand, Westpac and, on the other, the third defendant, were not the same.
Further, in my view, as the plaintiff essentially submitted, those distinct causes of action sought recovery in connection with different losses: as against the third defendant, the plaintiff sought recovery of the money owed under the Westpac debt; as against Westpac, the plaintiff sought recovery of damages that was either loss and damage connected to the amended first cross claim (third cross claim, pars 47(a) and (b)) or legal costs (which were not pursued against the third defendant - and agreed by the parties could be put to one side). The losses so claimed by the plaintiff in the action against Westpac were of a different and distinct character: see [60(7)] above. They were not concurrent or overlapping claims in respect of the same damage; rather they were separate causes of action claiming different losses. Put simply, there was not, as the plaintiff submitted, a singular liability related to a common debt or common amount: Farrow Finance Co Ltd (in Liq) v ANZ Executors and Trustee Co Ltd [1998] 1 VR 50, 79.
It follows that the plaintiff's settlement of the claim against Westpac cannot, in and of itself, amount to a recovery other than in respect of the claimed losses. Further, and in any event, there is, in my view, contrary to what the third defendant argued, nothing in the deed of settlement between Westpac and the McMillan parties to demonstrate otherwise. Rather, in my view, the deed of settlement supports the characterisation that was argued by the plaintiff, which I accept. That is because the deed merely reflects a settlement of the proceedings, and the claims that the McMillan parties (not simply the plaintiff) had against Westpac: in essence, to discontinue the proceedings against Westpac (as contained in the third cross claim) and to release them upon the payment of $150,000. To the extent that the third defendant submitted that it should be held that there has been a recovery because of the description of the 'claims' in the recitals to the deed, I do not accept that submission. To the extent that 'claims' bears (and has) a definition, the purpose, in my view, of that definition is to provide, by way of amplification, the terms of the release that has been provided. The fact that a broadly worded release is provided (unremarkably, given its purpose) in my view does not amount to a claim by the plaintiff seeking the same loss or damage (less still a recovery) nor, in the present situation, does it engage, in my respectful view, the rule against double compensation.

[18]

The settlement with the solicitor parties

The third defendant next argued that if the settlement with Westpac was not captured by the rule against double compensation, then the settlement between the McMillan parties and the solicitor parties was. There were, as with the above analysis, two strands to this argument: the engagement of the rule was said to be evident from an analysis of the pleadings and by reason of the deed of settlement.
This argument turned upon the proper characterisation of the third cross claim, par 50. The essential argument of the third defendant was that, by that pleading, the plaintiff sought - and, consequently by the settlement, therefore recovered - damages from PMFPL in connection with the same loss claimed against the third defendant. The plaintiff disputed both the characterisation and the alleged consequence of the settlement.
Given the respective arguments focused upon the third cross claim, par 50, I will set out that paragraph in full. It provides as follows: 50. By reason of PMFPL t/as PMF Legal engaging in such conduct, [the plaintiff] has suffered loss and damage. Particulars (a) The matters and state of affairs pleaded in paragraph 46 commencing with "MIH" after paragraph 46(b) would have existed. (b) The particulars to paragraph 47 are repeated.
The third defendant's argument is that, in effect, paragraph 50(a) reflected a claim brought by the plaintiff against its former legal representatives that, by reason of the negligence of those legal representatives, it lost the benefit of security and, in particular, the benefit of the Westpac debt.
I do not accept that submission. In my view, as the plaintiff essentially argued, the function of par 50(a) was directed to a different end: it was directed to pleading a counterfactual; namely, it set out the steps to demonstrate the causal link between the breach of duty (identified in par 46) and what would have occurred had there been no breach of duty. That is apparent from the structure of the pleading itself and, in particular par 47, which then pleads that by "reason of the matters pleaded" in pars 44-46, the plaintiff "has suffered loss and damage" of the three types in par 47 (as set out in [60(7)], above).
For the reasons earlier given in connection with the third defendant's first argument (see [61]-[62], above), the loss and damage claimed against the solicitor parties are confined to the losses particularised in par 47 of the third cross claim.
The second strand of the third defendant's argument was that the settlement with the solicitors, as reflected in the agreement dated 14 July 2023 (exhibit C), contained "promises" that were "in part satisfaction of the McMillan parties as costs of these proceedings" which were required to be taken into account and, separately, that such "settlement amounts need to be accounted for by the plaintiffs in the debt claim to ensure that [the] McMillan parties are not unjustly enriched" (third defendant's debt submissions at [3]).
In relation to these submissions, the following matters should be noted. First, neither the plaintiff, nor the McMillan parties, advanced any claims in relation to costs as part of the subject matter of this dispute; there was, therefore, no argument directed to this by either side and each side agreed any claims in connection with costs could be ignored. Given this, the first part of the third defendant's submissions was not pressed. Secondly, as noted earlier, no separate claim in connection with an unjust enrichment was advanced; rather, the argument, as developed during oral submissions, was confined only to the rule against double compensation.
Putting these matters to one side, I do not accept the third defendant's submission. In my view, the deed of settlement between the McMillan parties and the solicitor parties made clear that the recovery was in connection with the 'Claims', which excluded the 'Continuing Claims'. The settlement was to operate by requiring the McMillan parties to make 'the Application': this term was defined, in effect, to mean an application by notice of motion for leave to discontinue the 'Claims', except the 'Continuing Claims'. Put simply, and as the plaintiff and McMillan parties essentially submitted, the settlement sum was in connection with the claims forgone and the releases provided (which were also in connection with the 'Claims'). In short, there is nothing in the deed of settlement to suggest that the plaintiff recovered in connection with the same loss that is claimed against the third defendant.

[22]

Background facts

I find the background facts to be as follows. They are supplementary to the findings I have earlier made. Where there is a contest about any facts, they are identified and resolved in what follows. To the extent that specific issues of fact - or characterisation - are raised by submissions of the parties, they are also dealt with later when dealing with those submissions.
On 3 November 2018, the first and second defendants entered into a contract to sell the Illawong property for $2.653 million. The plaintiff had three registered mortgages over that property.
On 29 January 2019, the second defendant entered into a contract to purchase a property at Woolooware for $1.285 million.
On 8 February 2019, the first and second defendants filed a notice of motion, that was returnable before the Common Law Duty Judge, seeking, inter alia, an order that the plaintiff deliver up the certificate of title to the Illawong property. On 27 February 2019 the plaintiff and the first and second defendants entered into an agreement - described as 'terms of settlement' - wherein it was agreed that a bank cheque (payable to the Supreme Court of New South Wales) would be provided to the plaintiff, upon settlement of the sale of the Illawong property, in the amount of $1.863 million - following which: (a) the plaintiff would pay that money into Court; and (b) the plaintiff would discharge its three mortgages over the Illawong property. The terms of settlement were signed by counsel for the respective parties.
The amount of $1.863 million represented the amount that the plaintiff contended, but the first and second defendants disputed, was owing (or would become owing) and payable by the first and second defendants under those mortgages.
On 12 March 2019 the sale of the Illawong property settled, following which the plaintiff delivered to the first and second defendants discharges of the three mortgages, and the first and second defendants delivered to the plaintiff three bank cheques made payable to the Court in the amount of $1,863,141.87 (4FASOC, par 88). On that date, as agreed, the plaintiff paid the three bank cheques into Court (4FASOC, par 89).
On 2 April 2019, the first and second defendants served a further notice of motion on the plaintiff, and at that time indicated they would seek to have that notice of motion returnable before the Common Law Duty Judge later that morning. Relevantly, by prayer 2 of that notice of motion, the first and second defendants sought an order that the amount of $315,947.93 be paid out to the plaintiff. (The events surrounding the filing of that notice of motion are addressed in some more detail later: see [104]ff, below).
On 2 April 2019 following agreement between the parties, orders were made by consent that from the proceeds of the three bank cheques paid into Court on 12 March 2019: 1. the amount of $1,055,007.12 was to be paid out of Court forthwith to the second defendant so as to be applied as part of the purchase price for the Woolooware property (4FASOC, par 92(a)); 2. the amount of $315,947.93 was to be paid out of Court to the plaintiff forthwith "without prejudice to all parties as rights that are the subject of this proceeding (to discharge the former Westpac debt and the [$150K loan] …" (4FASOC, par 92(b)); 3. the amount of $492,186.82 was to remain in Court without prejudice to all parties' rights, pending further order of the Court (4FASOC, par 92(c)); and, 4. upon settlement of the contract for sale of the Woolooware property, the second defendant undertook to give the plaintiff a first ranking registrable mortgage over that property limited to the sum of $537,171.00 (4FASOC, par 92(d)).
On 5 April 2019, the second defendant completed the contract for purchase of the Woolooware property and gave the plaintiff a mortgage in the terms required. Further, the amount of $315,947.93 was paid out of Court to the plaintiff.
The amount of $315,947.93 was made up of money alleged to be owing under the $150K loan (approximately $241,077.82, including interest) and money alleged to be owing under the Westpac debt - being the loan between Westpac and the first and second defendants entered on or about 21 November 2007 that was assigned to the plaintiff on or around 28 August 2015 (approximately $74,870.11 - including interest).
Although presently dealing with matters of fact, a submission made by the first and second defendants about a "fact" should be addressed in connection with the $150K loan: it was submitted that not only did the first and second defendants contest their liability to the plaintiff for the sum of $315,947.93, but that the $150K loan had not been validly assigned (first and second defendants' interest submissions at [5] and [6]). The first and second defendants made a similar submission during the hearing. The plaintiff pointed out that no such issue had ever been raised before (and there was no pleading to that effect in the defence filed by the first and second defendants) and, when pressed about this, the first and second defendants conceded that "the parties probably acted on the basis that there was an assignment …". When pressed further, the first and second defendants did not seek to raise this as an issue relevant to the interest determination; any issue about the assignment can therefore be put to one side.
The consent orders made on 2 April 2019 did not require the plaintiff to provide an undertaking as to damages as a condition of the payment of that money out of Court to it (as the "price" for that to occur), nor were they required to provide one on any other occasion.
As it happens, the dispute between the parties in connection with those loans resolved and, following on from the resolution and as part of it, orders were made dismissing those claims on 24 August 2023 and 18 October 2023. As I have earlier noted, the claim by the plaintiff under the $150K loan was dismissed by the orders made on 24 August 2023; and the claim by the plaintiff pursuant to the Westpac loan that was assigned to it was dismissed as part of the settlement with the solicitor parties, and on 18 October 2023 as part of the settlement reached on 13 October 2023: see [32]ff, above.
The overall settlement agreement that was reached between the parties on 13 October 2023 has been recorded in a deed of release. A term of that deed provides that the plaintiff agrees to an order that it pay the sum of $315,947.93 "into Court subject to the resolution of costs and the proposed freezing application" referred to in cl 4.4: cl 4.3. The deed also makes provision, as between the parties, that the issue as to whether interest on this amount is payable - and if so, in what amount - was to be the subject of determination by the Court: cll 4.3 and 4.6(c).
I turn now to deal with the respective arguments.

[24]

Judgments or orders set aside: consideration

It may be accepted, as the first and second defendants submitted, that sums paid pursuant to a court order which is set aside on appeal must be repaid with interest. The leading authority is Commonwealth v McCormack (1984) 155 CLR 273; [1984] HCA 57 where the principle was stated as (at 276): "An appellant who has satisfied a judgment for the payment of money is entitled, on the reversal of the judgment, to repayment of the money paid by him with interest". See also Heydon v NRMA Ltd (No 2) (2001) 53 NSWLR 600; [2001] NSWCA 445 at [12] ('Heydon'). The underlying principle engaged in that situation is unjust enrichment: Heydon at [14]. Nevertheless, in my view, it is inapt to describe that which has occurred in the present case as involving a court setting "aside an order on appeal", or anything relevantly akin to that situation, and the first and second defendants did not explain why it was. In my view the first and second defendants' reliance upon the line of authority referred to is misplaced. The circumstances here are quite removed from that situation: no judgment was entered.
Further it cannot be said that there was an order - erroneously made - requiring the payment of the sum of $315,947.93 that was subsequently overturned (National Australia Bank Ltd v Bond Brewing Holdings Ltd [1991] 1 VR 386, 597). Again, the circumstances here are quite removed from that situation. That is because: (a) the money paid into Court by the plaintiff on 12 March 2019 occurred as a consequence of an agreement between the parties dated 27 February 2019, and was not the subject of a determination of any issue in dispute; (b) the amount of $315,947.93 paid out of Court on 5 April 2019 to the plaintiff was the subject of an agreement between the parties and a subsequent consent order (reflecting an agreement) between the parties and so too was not the subject of a determination of any issue in dispute - in fact, that agreement and consent order followed from, and arose out of, an application for the money to be paid out to the plaintiff that was made by the first and second defendants; (c) the amount of $315,947.93 that is to be paid back into Court, following the settlement reached on 13 October 2023, is (again) the product of an agreed position not the subject of a determination of any issue in dispute - that is, the parties have agreed for this to occur and for an order to be made giving effect to it; and (d) no order is being set aside or disturbed.

[26]

Compulsion

Beyond the fact that the money had been paid into Court, the submissions of the first and second defendant skipped over any analysis of how the money came to be paid into Court and, subsequently out of Court to the plaintiff and how, given those matters, restitutionary principles were engaged nor, further still, why there was compulsion.
As set out in Chapter 7 of Keith Mason, JW Carter and Greg Tolhurst, Restitution Law in Australia (3rd ed, 2016, LexisNexis Butterworths) - of which, the second edition was relied upon by the first and second defendants - the feature of the payments in the situation argued by the first and second defendants is that "the payment was compelled" (at p 279, [701]).
In my view it is not correct to characterise that which occurred by the payment of money out of Court to the plaintiff - or anything in connection with the money being paid into Court - as being a payment that was compelled. That is not this case. I consider it to be clear (and find) that - as a matter of substance - it was consensual: that is, the first and second defendants agreed to pay the money to the plaintiff - and, to be clear, they did so voluntarily. I have explained, and made findings about, what occurred above. There is, I add, no suggestion of any untoward conduct by the plaintiff nor anything that was suggested to be "unjust" in connection with the agreement(s) entered or orders made (or to be made): no submissions were made about any such matters.
Given the argument of the first and second defendants, and the submission to the effect that it was important to focus upon the substance, the following matters warrant emphasis.
It was the first and second defendants who approached the Common Law Duty Judge on 8 February 2019 seeking an order that the plaintiff deliver up the certificate of title to the Illawong property, as well as discharge the mortgages that it held over that property. On 27 February 2019 the plaintiff and first and second defendants resolved the dispute in connection with those matters - essentially upon the terms as I have earlier set out. The first and second defendants' notice of motion, filed 8 February 2019, was also to be dismissed.
It was again the first and second defendants who approached the Common Law Duty Judge on 2 April 2019. The notice of motion itself was not in evidence, but the terms of it are recorded in the judgment of Walton J in McMillan Investment Holdings Pty Ltd v Mangos [2021] NSWSC 37 at [65]. Relevantly, by prayer 2 of the notice of motion, the first and second defendants sought the following: The sum of $315,947.93 in Court be paid to [the plaintiff] forthwith without prejudice to all parties' rights that are the subject of this proceeding (to discharge the Westpac Debt and the $150,000 loan facility gross of interest up to 26 March 2019).
The first and second defendants also sought, by that notice of motion, that money paid into Court be paid out in order to complete the purchase of the Woolooware property (order 1) and that other amounts - namely, $342,186.82 and $150,000 - remain in Court, essentially "without prejudice to all parties' rights that are the subject of this proceeding ..." (orders 3 and 4).
At the return of the motion on 2 April 2019, the parties provided Davies J - sitting as the Common Law Duty Judge - with a document titled: "Terms of Order made by the Court by consent". Specifically, order 2 proposed (and agreed) by the parties became order 2 as made by Davies J. It reflected the terms of the order sought by the first and second defendants (being prayer 2) in the notice of motion filed by them on 2 April 2019: see [104], above.
Having recounted those matters, and looking at the substance of what occurred, I am unable to accept that there was any relevant compulsion to do what the first and second defendants did. In my view the only finding that is open - which I have made in [101], above - is that the key events were consensual (and, thus, voluntary), initiated by the first and second defendants and agreed upon by the parties. During the course of submissions, the first and second defendants conceded that the payment was made "voluntarily" - albeit that the payment was "without prejudice" etc. To the extent the first and second defendants fix their upon the consent order, the full context, and the agreement that underlay the making of that order has been set out. Those matters explain the order, and make plain that it was based upon an agreed position.
Nor do I accept that there is any basis to find that the order made (being, order 2 made on 2 April 2019) is wrong: the basis for it being made was an agreement between the parties prompted by the notice of motion brought by the first and second defendants specifically seeking that order.
The first and second defendants' submissions did not address these matters of detail - what the plaintiff submitted was the premise of the argument - nor how or why, given the above matters (and the concession made by the first and second defendant), the element of compulsion was demonstrated.
The first and second defendants also sought to argue that the payment made "was an interim payment" (first and second defendants interest submissions at [14]). Presumably this submission was made to secure a finding of compulsion. I do not accept that submission. As I have explained, the application was brought by the first and second defendants (not the plaintiff) for the payment of the money out of court to the plaintiff. That is not an application for an interim payment in any sense (as to which, see s 82 of the Civil Procedure Act 2005 (NSW)), and the first and second defendants' notice of motion filed on 2 April 2019 was not framed as an application of that kind.
In my view, the absence of compulsion - the fact I have found the payment was consensual (and voluntary) and initiated by the first and second defendants - denies a right to restitution (and the correlative right to interest) based upon the principles relied upon by the first and second defendants. That is sufficient, in my view, and given the way the matter was argued, to dispose of the application by the first and second defendants.

[27]

The return of the money

As to this matter, the first and second defendants submitted that it did not matter how the money came to be returned to them: in this specific respect the first and second defendants relied upon that part of the decision in Heydon at [14] where it was said that "restitution is available regardless of the means whereby the judgment is discharged".
For the reasons that I have earlier given, that is not this situation: no judgment is being "discharged" (see [95]-[96], above). Furthermore, it is important to emphasise the full context of the passage in Heydon (and what it was directed to) upon which the first and second defendants rely. The entire subject of the discussion by Mason P was dealing with the basis of restitution with interest of money paid under a judgment (that is, by compulsion) later set aside: that is apparent from a consideration of the discussion in Heydon at [12]-[14]. That discussion of principle led into the summary that the first and second defendants relied upon. The confined part of the passage in Heydon at [14] relied upon by the first and second defendants was not a freestanding statement of principle, in my view.
The first and second defendants also relied upon Chapter 7 of Keith Mason, JW Carter and Greg Tolhurst, Restitution Law in Australia (2nd ed, 2008, LexisNexis Butterworths) at p 268 [707] in aid of the above submission (that is, relying upon Heydon at [14] - as set out in [112], above) that "it does not matter why the order for payment no longer applies, restitution should be given if the monies paid pursuant to a Court order are to be repaid" (first and second defendants' interest submissions at [12]). In my respectful view, the paragraph from Restitution Law in Australia relied upon does not assist the first and second defendants: it establishes that the precise manner in which "the order pursuant to which the benefit was conferred was … set aside" did not matter. (The text then sets out a number of examples). Putting to one side the question of compulsion (upon which this principle clearly rests), the order made for the payment out was not erroneous, nor has it been set aside.
The first and second defendants argued that, as a matter of substance, there was a right to restitution and interest upon the orders made (a submission that appears to be directed to the ultimate position sought by the first and second defendants) and the mere fact that the money is to be "returned" to the first and second defendants triggered the entitlement to interest in line with the principle identified. I am, respectfully, unable to accept the breadth of that submission given the above discussion. In that respect it is also necessary to note the following.
First, the overall agreement reached between (relevantly) the plaintiff and first and second defendants on 13 October 2023 involved, inter alia, a term that the plaintiff will consent to an order that the amount of $315,947.93 be paid into Court (no order has been made and the Court was simply asked to note that agreement: par 20). Again, to the extent that the first and second defendants seek to anchor the case on the return of the money in the consent order (yet to be made) then I do not accept that any order (assuming it will be made) reflects the reality and the true position: the order is the product of agreement between all parties to resolve the dispute.
Secondly, in connection with the orders made on 24 August 2023 that resulted in the dismissal of a number of causes of action that were contained in the 3FASOC: the orders relevantly extended to the claim on the $150K loan. Further, in connection with the settlement reached in October 2023, that resulted in the dismissal of the outstanding claims by all parties (subject to some presently irrelevant exceptions) - but each side expressly agreed to the entry of that settlement agreement to be "[w]ithout admission" (recitals N and O). In each situation, there has been no determination of the rights and liabilities of any party in consequence of these agreements leading to the orders, nor is there any agreement about such matters.
The first and second defendants submitted that it was incorrect to submit, as the plaintiff did, that all relevant steps were consensual because, in their submission, the orders made on 24 August 2023 were not by consent. It is apparent that the only issue that arose on 24 August 2023 was whether the "settled claims" should be discontinued or dismissed: the plaintiff, initially, sought the former, but ultimately did not oppose the latter when sought by the first and second defendants. It is correct, as the first and second defendants submitted, that the plaintiff brought an application for these orders, but they were for an order that the proceedings be discontinued. Further, each active party agreed that orders should be made that, in substance, allowed this to occur subject only to a notation that essentially precluded the plaintiff on bringing fresh proceedings or claiming the same relief in fresh proceedings. That approach reflected what was agreed between the plaintiff and the solicitor parties (see the definition of 'Application' in the settlement deed dated 14 July 2023, and [72], above for a discussion about the terms of that deed). As it happens, the plaintiff agreed to an order that the proceedings be dismissed, rather than simply discontinued, with a notation in the terms that I have outlined. Thus, I do not accept that there is any material inaccuracy in what was submitted by the plaintiff; rather, it is essentially aligns with what occurred.
Thirdly, the first and second defendants advanced a claim for interest which was accepted by the parties to be reflected in the relief claimed, par 12, of the amended first cross claim filed 29 August 2023. (The earlier version of this cross claim, also described as the amended first cross claim, but filed on 13 November 2019, made the same claim). In particular, the first and second defendants' interest claim specifically sought interest upon the amount that was paid as referred to in par 92 of the 3FASOC - an amount that included the amount paid out to the plaintiff on 5 April 2019. That cross claim was dismissed by orders made on 13 October 2023 albeit that that prayer for relief was preserved. The basis for that claim, at least as expressed in the pleading, was somewhat opaque: it referred to sums paid to the plaintiff "under protest". The precise juridical basis for that "claim" was not explained during submissions: as the plaintiff submitted, the first and second defendants did not seek to establish, in the particular circumstances that arose, any legal basis for that claim. In any event, there is no basis to make any finding of the kind referred to in par 12 of the amended first cross claim. In fact, it is contrary to the express finding that I have made - namely, that the payment was consensual (and voluntary) and initiated by the first and second defendants.
Thus, and in addition to the conclusion that I have reached in connection with the question of compulsion (see [111], above), I do not accept, for the above reasons, that the agreed "return" of the money triggers any entitlement to interest in the manner argued by the first and second defendants.
Given the conclusion that I have reached, it is unnecessary to determine the rate of interest.

[30]

Rule 42.20 of the UCPR and background principles

The parties accepted that r 42.20(1) of the Uniform Civil Procedure Rules 2005 (NSW) ('the UCPR') was the applicable costs rule given the orders made on 24 August 2023 and on 18 October 2023 (relevantly) either dismissed particular causes of action or the proceedings generally.
Rule 42.20(1) of the UCPR provides: If the court makes an order for the dismissal of proceedings, either generally or in relation to a particular cause of action or in relation to the whole or part of any claim, then, unless the court orders otherwise, the plaintiff must pay the defendant's costs of the proceedings to the extent to which they have been dismissed.
The parties also accepted that the relevant principles that inform the operation of r 42.20(1) include those summarised in Benjamin & Khoury Pty Ltd v Rahme (No 4) [2023] NSWSC 1162 at [72]-[76]: 72. The relevant principles that inform the operation of r 42.20(1) may be summarised relevantly as follows. 73. Rule 42.20(1) is not an inflexible rule: it is to apply "unless the court otherwise orders". The rule does not give rise to a presumption that costs will be ordered against the discontinuing party or against the party whose claim is dismissed (Fordyce v Fordham (2006) 67 NSWLR 497; [2006] NSWCA 274 at [84]). In that respect it "goes no further than to state the first point of consideration; there is no presumption which must be outweighed; what the rule says is what the order for costs is to be unless there is a discretionary decision to order otherwise": Australiawide Airlines at [53]. Nevertheless, the plaintiff must demonstrate a "sound positive ground or good reason" for making a different costs order: Australiawide Airlines at [53]; Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32 at [53]-[54], [70]-[71]. 74. Not unexpectedly, although "there is no close control over the discretion of the Court to order otherwise" (Australiawide Airlines at [54]), there are circumstances that have been accepted as bearing upon whether a court should order otherwise that the plaintiff pay the defendant's costs of the dismissed proceedings. Those circumstances include (but are not limited to) the following. First, generally speaking, where a party litigates for a period and then, in effect, surrenders or capitulates to the other, that will usually be a basis to award costs against the party that surrendered or capitulated: One.Tel Ltd v Deputy Commissioner of Taxation (2000) 101 FCR 548; [2000] FCA 270 at [6] ('One.Tel'); Nichols at [27]-[29]. Secondly, cases where some supervening event removes or modifies the subject of the dispute such that proceeding further would be inutile: One.Tel at [6]. How that "event" might inform the costs discretion - one way or the other - depends upon its nature. Thirdly, a "marked difference in the reasonableness of the actions taken by the parties": Edwards Madigan Torzillo Briggs Pty Ltd v Stack [2003] NSWCA 302 at [5]. That is, if one party has acted "so unreasonably" that may justify a particular costs order, or the discretion on costs being exercised against that party: Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622, 624; [1997] HCA 6 ('Lai Qin'). Fourthly, even if both parties have acted reasonably, where the Court can be confident of the outcome - where a party would have "almost certainly" succeeded - that may also justify the favourable exercise of the discretion: Shellharbour City Council v Minister for Local Government [2017] NSWCA 256 at [6]-[7] ('Shellharbour City Council'); In the matter of Cartwright Transport Pty Ltd (in liquidation) (No 2) [2019] NSWSC 1381 at [12] (Gleeson JA sitting at first instance). 75. It is also, at this point, necessary to say something about how the Court is to approach the task of determining whether it should otherwise order that costs be payable by the plaintiff. I have touched upon these matters, earlier in these reasons. 76. Some matters are clear. It is not, on an application of this kind, permissible for the Court to undertake a hypothetical trial of the matter, under the guise of a costs application, in order to determine the likely outcome of the litigation: Nichols at [3], [31]-[32]; Tomra Collection Pty Ltd v Minto [2021] NSWSC 1323 at [56] ('Tomra'). These decisions drew upon what was said to that effect in Lai Qin at 624. See also Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194, 200; [1993] FCA 585.
To that summary the following three matters may (relevantly) be added concerning the situation of where there is a settlement. First, in situations where there has been a compromise across substantially all issues in the proceedings except costs (and therefore no hearing on the merits), the discretion of the Court necessarily is exercised without the benefit of what ordinarily is either the most significant, or possibly the determinative, factor to be taken into account in the exercise of the costs discretion: that is because success "in the action or on particular issues is the fact that usually controls the exercise of the discretion": Re Minister For Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622, 624; [1997] HCA 6 ('Lai Qin'). Where settlement occurs, there is a general, and complementary, principle: where the parties "resolve their differences, except as to the costs already incurred in litigation, they should usually expect that the court will not award costs": Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84 ('Nichols') at [2]. In that same case Payne JA put the matter in these terms (at [30]): If both parties to a proceeding which has been settled without a hearing on the merits have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings.
Secondly, when a settlement occurs the Court ordinarily "will not look behind the settlement to the reasons or motivation of the parties to settle, and hence will not evaluate the reasonableness of the parties in settling": Ralph Lauren 57 Pty Ltd v Byron Shire Council (2014) 199 LGERA 424; [2014] NSWCA 107 at [29].
A further matter to note, in connection with the costs discretion involved in an application under r 42.20(1) of the UCPR, is that it remains relevant to consider (as I have, and as the first and second defendants submitted), that the power to award costs is an important aspect of rendering justice between litigants and that general rationale for costs provides important context "as does whether the formal disposition of the proceedings by dismissal truly reflects 'the event'": Nadilo v Eagleton (2021) 250 LGERA 89; [2021] NSWCA 232 at [6] and [7].
The specific focus of the parties' submissions was upon whether there had been a "supervening event" (being a settlement with the solicitor parties) that had the effect of modifying the underlying subject matter, as the plaintiff essentially argued in connection with the settlement resulting in the 24 August 2023 orders; or whether those circumstances were, as the first, second and third defendants submitted, properly characterised as a "surrender or capitulation". And, in connection with what occurred subsequent to the 24 August 2023 orders, the materiality of the overall settlement of the proceedings: the plaintiff essentially argued that the overall settlement was a significant matter that fully supported the principal order that the plaintiff sought, whereas the first, second and third defendants maintained that that settlement was also properly characterised as a "surrender or capitulation".
Given the focus of the submissions of the defendant parties upon "surrender or capitulation" it is useful to briefly say something further about those matters, and some of the guiding principles that have emerged. Relevantly, they are as follows.
First, whether a party has surrendered or capitulated is to be distinguished from a situation where a party has been prosecuting (or defending) a claim with potential futility seeded in that action from its commencement - and foreseeably so: ACN 116 149 092 Pty Ltd v Coopers Brewery Ltd [2006] FCA 1119 at [22]. (That is not, however, this case and it was not submitted by the defendants that it was). Secondly, a plaintiff or a defendant "might be found to have effectively surrendered or capitulated": FCA US LLC v Mahindra Automotive Australia Pty Ltd [2021] FCA 1091 at 35.Thirdly, and as noted in the extract of principles at [128] above, whether a party has surrendered or capitulated is also to be distinguished from cases in which a supervening event or settlement renders the proceedings futile or moot or removes or modifies the subject of the dispute: One.Tel Ltd v Deputy Commissioner of Taxation (2000) 101 FCR 548; [2000] FCA 270 at [6] ('One.Tel'). And, as to the distinction identified in One.Tel, whilst it is of assistance, "neither category can be precisely defined, nor is the boundary between them clear": Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32 at [80] ('Bitannia').
There was no dispute about the costs principles that have been set out so far; rather the arguments of the parties turned upon the characterisation of the events - essentially those surrounding the August 2023 settlement, the entry of orders made on 24 August 2023 and the settlement on 13 October 2023 - and the findings that should be made about them.

[32]

Consideration and disposition

Given the arguments of the first and second defendants, it is appropriate to commence with an examination of the matters that are argued by them to support a finding that there has been a capitulation or surrender (these terms are used synonymously, and interchangeably, within these reasons) by the McMillan parties.
The first and second defendants argued that that ultimate finding should be reached by an examination of - and intermediate findings based upon - "success". In particular, viewed through the lens of "success", it was argued that capitulation was evident because: (a) the recovery by the plaintiff (and McMillan parties generally) was, in context, limited, and did not reflect any substantive measure of success, given what was claimed; and (b) the cross claims filed by the first and second defendants were "defensive" - in the sense that the cross claims "arose only by reason of the primary claim" - and, in any event, the first and second defendants "largely achieved the relief sought in their First Cross Claim and Fourth Cross Claim" (first and second defendants' costs submissions at [9]).
Thus, to be clear, the defendants argued the matter on the basis that a consideration of "success" was to be derived from an assessment of, and drawing upon, what occurred in connection with all claims in the proceedings. And, undertaking that exercise, argued that the McMillan parties should be found to have capitulated.
I will deal with each of the submissions of the first and second defendants that are argued to support a finding that the McMillan parties capitulated. It is convenient to deal with the arguments in connection with the success (or otherwise) of the respective parties together. In approaching the matter in this way it is important to emphasise, given the terms of r 42.20(1) of the UCPR, that I am not suggesting that the burden of persuading the Court about what order as to costs ought be made rests upon the defendant parties; in this situation the plaintiff bears "the burden of persuading the Court that some other order is appropriate": Bitannia at [70] (and the authorities at [128], above). Rather I am addressing the respective matters that the defendant parties argued were destructive of the submissions of the McMillan parties and demonstrated why, in effect, they were the "clear winners".

[33]

The "success" of each party

The first and second defendants argued that the McMillan parties enjoyed only a modest recovery on their claims, in monetary terms, and that fact tended to support a finding in the terms sought by them - viz., capitulation. The thrust of the argument for the first and second defendants was that the negotiated position that the plaintiff (and McMillan parties generally) secured with the solicitor parties reflected a significant compromise of the claims that, to that point, were pursued in the 3FASOC. This was argued to be demonstrated by the fact that, on those claims, the McMillan parties only recovered a portion of the monetary amounts sought on those claims.
In relation to this issue, the McMillan parties argued that, in connection with the claim under the facility agreement and the $150K debt, the amount sought by those claims was less than the amount that was recovered by the settlement with the solicitor parties: the amount claimed was submitted to be approximately $878,000, whereas the money recovered via the settlement with the solicitor parties was $900,000 (exhibit B, p 85). The first and second defendants contested that this was so, pointing out that there was, an entitlement under (at least) the facility agreement to claim legal costs as well as interest - and these amounts were not factored into the $878,000 figure relied upon by the plaintiff. In aid of this submission, the first and second defendants also drew attention to the fact that, in relation to costs, they were quantified in an amount over $600,000 as at 11 February 2021 (exhibit B, p 85); and further, they submitted that a somewhat conservative estimate of interest would be an amount over $100,000. In that broader context, the first and second defendants submitted that the McMillan parties had significantly compromised these claims and that compromise reflected capitulation.
The McMillan parties accepted that there was an entitlement to claim legal costs and interest, but emphasised that this was a settlement and, like most settlements, was a product of compromise unquestionably informed by a range of considerations including commercial ones. In particular, the McMillan parties submitted that the compromise was not a reflection or recognition that the claims that were compromised were weak or hopeless.
I accept the submissions made by the McMillan parties and, to be clear, I am not prepared to infer (and find) that the compromise was in any way a reflection or recognition that the compromised claims were weak or hopeless. To the extent that there was a measure of compromise - something that I consider to be objectively unremarkable and unexceptional, and common to most "settlements" - then that does not, in my view, mandate a finding that the compromised claims were weak or hopeless, less still that the compromise amounted to a capitulation.
Nor am I prepared to find that the McMillan parties had, in terms, no or limited success. Given the way this matter was argued, it is, with respect, difficult to accept that proposition given that the McMillan parties are to be paid the sum of $900,000.
If the matter is approached somewhat more broadly (and practically), then that only reinforces why I am unwilling to make the intermediate finding that the first and second defendants seek: in addition to the recovery of $900,000, the plaintiff is entitled to judgment of approximately $150,000 against the third defendant in connection with the Westpac debt (see [37]-[74], above), and the McMillan parties have also recovered, by way of settlement, $150,000 from Westpac. That evidence does not, in my respectful view, warrant the finding in the terms sought by the first and second defendants.
In my view, although there are obviously questions of degree involved, the McMillan parties have secured extra curial success by this settlement (or, as they also described it, the settlement constituted a supervening event) thereby removing the subject matter of the dispute, as they argued. I have, in being so satisfied, approached the matter by looking to the substance of the outcomes sought, and obtained, by the McMillan parties: Nadilo at [85].
The defendants emphasised that the McMillan parties had not identified any authority where an order of the kind now sought by them had been made on broadly similar facts - that is, where a settlement involved some, but not all, parties. I do not think the absence of authority matters. The costs issue is to be resolved according to the facts of the case informed by the rule and the organising principles to which reference has been made. In any event, to the extent an authority is needed, then the facts in Hyder Consulting (Victoria) Pty Ltd v CGU Insurance Limited [2003] VSC 223 ('Hyder Consulting') are sufficiently similar, and that authority supports the making of the order that the McMillan parties seek.
In short, in Hyder Consulting, proceedings involving multiple defendants were settled. The third defendant to those proceedings had a cross claim and the parties to it agreed that as that cross claim was not to proceed (given the settlement of the primary claim), it should be dismissed (at [14]). The third defendant (the cross claimant), following on from the order dismissing the cross claim, sought an order that there be no order as to costs of the cross claim: the third defendant submitted that, the cross claim having been rendered "futile by settlement of the main proceeding" and each party having acted reasonably, "the proper exercise of the Court's discretion … was to make no order as to costs" (at [12]).
That submission - and the characterisation that the cross claim had been rendered futile by the settlement of the primary action - was accepted by Mandie J who made no order as to costs of the cross claim (at [15]): In this case the counterclaim has been rendered futile not by settlement of the counterclaim itself between the particular parties now before the Court, but has rather been rendered futile by other events namely, the settlement of the tunnel cases and of the claim by Hyder against Heath in this proceeding.
It is evident from the above that Mandie J accepted that a settlement in the proceedings generally - involving some, but not all parties - could constitute a supervening event rendering the proceedings futile.
That is essentially the position that was argued by the McMillan parties. As in that case, so too here, I consider the supervening event - being the August 2023 settlement removing the subject matter of the dispute - to be "some sound positive ground or good reason for departing from the ordinary course" provided by r 42.20(1) (Australiawide Airlines Ltd v Aspirion Pty Ltd [2006] NSWCA 365 at [54]), as the McMillan parties argued. I am satisfied that the proper exercise of the costs discretion, to that point, is to make no order as to costs of the proceedings. (I deal later with the position beyond then, but - to signpost - my holding is the same).
The first and second defendants also argued that the orders made on 24 August 2023 established that the McMillan parties had been unsuccessful. Those orders are, of course, relevant, and I have considered them. But I do not regard them as foreclosing an assessment of "success": Nichols at [2] and [6]. As was said in McNamara v San [2010] NSWSC 809 at [12]: "… all the relevant circumstances, and not just the fact of dismissal, should be considered". Nor do I consider that they dictate a different outcome to the one identified in [154] above. In my respectful view, in line with the way in which the matter was argued, it is not only important to consider the matters to which I have earlier referred to, but also important - so as to put the making of those orders into proper perspective - to consider the wider context of how the orders came to be made.
The first and second defendants, in furtherance of the above argument, emphasised that the orders were made at the "behest" of the McMillan parties. Whether - and if so in what way - that was intended to mean anything other than that the McMillan parties filed a notice of motion seeking leave to discontinue the proceedings is unclear, and the submission was not developed further. In any event, the circumstances giving rise to the making of the orders are rather simple: there was a settlement and a term of the resolution involved the McMillan parties agreeing not to proceed with the claims under the facility agreement and the $150K debt. (As I have mentioned elsewhere, a purpose of the settlement was to confine the exposure of the solicitors not only to the McMillan parties, but to the first, second and third defendants). The making of the orders on 24 August 2023 was not opposed by the defendants but in real terms agreed to by them - no doubt reflecting the fact that what the solicitor parties had agreed to do assisted them. The background to the making of the orders is therefore important: it reflects the settlement that has been earlier described. Given that context, I do not consider that the orders made dictate, on their own, or in combination with the other matters raised by the defendants, a different finding about "success" or, more generally, a finding that there had been "capitulation" by the McMillan parties. Nor do I accept that, given what I consider to be the other surrounding circumstances, including the "supervening event" (in the way earlier described), that the order reflects the event.
The first and second defendants further submitted that not only had the plaintiff and McMillan parties more generally not been successful, but that they had been successful - a matter which, it was argued, was said to be evident from a consideration of three matters: first, the terms of the orders that were made; secondly, the fact that the first and fourth cross claims were "defensive"; and, thirdly, because, in any event, they enjoyed success on those cross claims. I am not prepared to find, unequivocally, that the first and second defendants were "successful", as argued. And, to be clear, I do not accept that any of these matters raised detract from my earlier findings, nor the conclusion at [154], above.
In relation to the submission that the "orders" made demonstrate that the first and second defendants were successful (I have earlier dealt with a similar argument - that the orders made demonstrated that the McMillan parties had been unsuccessful - above), I accept, of course, that the first and second defendants had the benefit of what the McMillan parties and the solicitor parties agreed in consequence of their settlement, and that orders were made on 24 August 2023 giving effect to the terms of that agreement in the manner earlier described. In that sense they had a measure of success; but so too did the McMillan parties. Nevertheless, as I have essentially already explained above, I am unable to accept that the making of those orders, in and of itself and as a matter of substance, inevitably translates into a finding that the first and second defendants succeeded. A consideration of the orders made on 18 October 2023 does not dictate a contrary finding: those orders were made consequent upon a settlement involving all parties and all remaining issues (except those requiring resolution by this judgment).
To the extent that the first and second defendants sought findings that they had been "successful" by reason of the fact that the cross claims that they made were merely "defensive" and, irrespective of that, they enjoyed success upon them, I am not prepared to make those findings. On the contrary, in my view, the appropriate findings (which I make) are that their cross claims were not merely defensive, as they argued; and, further, to the extent that one can determine, on an application of this kind, "success" of those claims, in my view it is inapt to describe the outcome of those cross claims in those terms. (I explain why I have reached these conclusions later in these reasons: see [169]-[180], below).
Thus, I do not accept any of the submissions raised to support the intermediate finding sought by the defendants - viz., that they were "successful". They have had a measure of success, in the way that I have described and found.
In furtherance of the first and second defendants' overarching "capitulation" submission, it was submitted that the McMillan parties "unilaterally decided not to pursue significant and numerous claims against" the first and second defendants, and to do so "amounts to a capitulation not resulting from any settlement with the [first and second defendants] or other change of position in relation to the [first and second defendants]" but rather from "a commercial decision, the basis of which is not apparent or not disclosed" (first and second defendants' costs submissions at [13]). It is, of course, at least partly correct, as the first and second defendants submitted, that the decision not to pursue the claims involving the facility agreement and the $150K agreement was unilateral in the sense that they were not a party to the agreement resulting in the dismissal of those claims. (The reason for why they were not involved is not known, and no submissions were made about this by the defendants). But it is not correct, in my view, to suggest that the basis was neither apparent, nor disclosed: it is quite clear that the settlement resulted from a compromise involving the McMillan parties and the solicitor parties. And nor do I consider that, axiomatically, the fact that the resolution did not directly involve the defendant parties dictates a finding that the defendant parties succeeded, as I have earlier explained.
Separately, I would add the following. In my view the submissions of the defendants tended to downplay a practical reality: that there were multiple parties involved in a dispute encompassing many and varied, not to mention overlapping and intertwined, issues between all parties (to be clear, including the solicitor parties) to the dispute. The short point is that the considerations involved in success cannot, realistically, exclude this wider setting.
That wider context not only informed the finding that I have made in connection with whether the McMillan parties succeeded (as to which, see [148]ff above), but also feeds into the following related matter. Assuming (for present purposes) it is permissible to infer whether there had been a capitulation by a party based upon what has occurred in August 2023 (as the defendants argued), then a possible inference is that the capitulation was by the solicitor parties (at least in connection with the liabilities under the facility agreement and the $150K loan). Yet, notwithstanding what had occurred by the August 2023 settlement, the defendant parties each subsequently agreed, by the agreement entered on 13 October 2013, not only to the dismissal of all claims they had brought against the solicitor parties, but also agreed to there being no orders as to costs between them. Regardless of whether it is permissible to draw that inference, determining whether the McMillan parties 'capitulated' upon their claims cannot occur in a vacuum - the point remains that an important participant in the overall dispute was the subject of an agreement between that party and the defendants, and that agreement dealt with all questions of costs in the proceedings between them.
The settlement reached on 13 October 2023 between all parties essentially resolved all remaining issues - an agreement that resulted in the orders made on 18 October 2023 - and I accept, as the McMillan parties submitted, that the Court should not, contrary to what was argued by the defendants, attempt to dissect the settlement so as to ascertain a "winner" or "winners".
In any event, it is important to emphasise, that the deed itself is the product of compromise and agreement and, further, was expressed to be "without prejudice". In my view that settlement between the parties is "some sound positive ground or good reason for departing from the ordinary course" as provided by r 42.20(1): in that situation (which deals with the period beyond the August 2023 settlement and entry of orders) I am satisfied that the proper exercise of the costs discretion is to make no order as to costs of the proceedings: Nichols at [2] and [30]. To be clear, I do not accept, as the defendants submitted, that the orders made following on from the settlement can reasonably and fairly be viewed as determinative of, and reflect, the event. Nor do I accept that any of the other matters argued by the defendant parties in connection with the period leading up to the orders made on 24 August 2023 - which I have earlier addressed and made findings about - detract from that conclusion.

[34]

The first and fourth cross claims were 'defensive' and advanced only a modest claim for damages

I have already made findings about whether the cross claims were defensive and advanced only modest claims for damages: see [159], above. What follows are my reasons for making those findings.
The first, second and third defendants each submitted that the cross claims they filed - in the case of the first and second defendants, the first and fourth cross claims; in the case of the third defendant, the second and fifth cross claims - were "defensive". That characterisation was argued to support a finding that the first and second defendants had been "successful".
Before dealing with the argument, the following two matters should be noted. First, all parties agreed that the substance of the cross claims brought by the first and second defendants, and the third defendant, respectively, were relevantly the same - thus, there was no need to distinguish between the cross claims brought by the defendants in the analysis that follows. Secondly, although not the subject of any precise explanation, I understood the first and second defendants, by the employment of the term "defensive" to mean responsive - and only responsive - to the specific claims raised by the plaintiff and not extending to advancing independent and separate claims.
I do not accept the first and second defendants' characterisation of their cross claims as being defensive.
It is important to provide some brief context, and to deal with each of the cross claims advanced by the first and second defendants - the first and fourth cross claims - separately. Much of what was claimed, and a general overview of the causes of action advanced, has been earlier set out and need not be repeated. Drawing upon that, without undue repetition, the following emerges. In relation to the amended first cross claim, it is clear that although the first and second defendants sought relief in connection with the claims under the facility agreement and the $150K loan, they advanced a number of other claims against the McMillan parties beyond dealing with those claims. For example, there were claims for damages and exemplary damages founded upon a cause of action of actionable interference in contractual relations (as to the 'claims', see also at [180], below). Further, as later explained and contrary to what was submitted by the first and second defendants, the first and second defendants did not simply press a modest and confined claim for damages, but rather a substantial one: the first and second defendants, in a Scott Schedule dated 3 October 2023, maintained a claim for $1,464,836.61 against the McMillan parties (Scott Schedule, item 1).
Separately, the practical reinforcement of why I consider the first and second defendants' characterisation of the amended first cross claim to be inapt, is evident from what occurred following the orders made on 24 August 2023 - orders that included dismissal of parts of the 3FASOC, and the amended third cross claim.
Notwithstanding the making of these orders, the first and second defendants continued to maintain the amended first cross claim. If indeed this cross claim was, as submitted, truly "defensive" (in the sense described) then it is difficult to see how or why the overall claim (or at least some of the causes of action within it) was to be pursued following the making of the 24 August 2023 orders. That is, being defensive, at least some of the claims within the cross claim inevitably should have fallen away. But that did not occur. Rather, the first and second defendants pressed on with those cross claims in their entirety - as the plaintiff submitted, "undeterred". I will explain this in some more detail.
Against the backdrop of the notice of motion dated 28 July 2023 and filed by the McMillan parties on 31 July 2023 - a notice of motion that sought orders that the McMillan parties be granted leave to discontinue those parts of the 3FASOC that had been the subject of a settlement with the solicitor parties and to discontinue the third cross claim filed 9 September 2019 - on 3 August 2023 Cavanagh J made a number of orders, including the following order: 1. By 9 August 2023 the First and Second defendants are to identify what parts (if any) of the: (a) Amended Defence; (b) Amended First Cross-Claim; and, (c) Fourth Cross-Claim, they continue to press in light of the Plaintiff's motion dated 28 July 2023 … and the basis upon which those parts of the Amended Defence, the Amended First Cross-Claim and Fourth Cross-Claim are pressed.
In relation to the amended first cross claim, the first and second defendants made no amendments, by way of contraction, to that cross claim and in fact advised the parties and the Court that they intended to press it, without any form of amendment. In my view, that conduct is a practical demonstration that reinforces why the 'defensive' characterisation they now seek to advocate is inapt; with respect, that conduct, and what the Court was advised, is inconsistent with it.
In relation to the fourth cross claim, I also do not accept, as the first and second defendants argued, that it was "defensive". Again, following on from the order made by Cavanagh J on 2 August 2023, the first and second defendants confirmed to the parties and subsequently to the Court that that cross claim was also to be maintained unamended, despite the application to discontinue those parts of the 3FASOC and the third cross claim. Further, when the matter was before me on 24 August 2023: (a) counsel for the first and second defendants confirmed this; (b) counsel for the first and second defendants also actively resisted the application for summary relief filed by the solicitor parties in connection with that cross claim (that application was returnable for hearing on that day and in substance sought summary relief based on the fourth cross claim disclosing no reasonable cause of action as a consequence of the settlement and orders made); and (c) counsel for the first and second defendants advised the Court that not only did there remain a viable claim notwithstanding the orders made, but also that the first and second defendants intended to amend that claim to seek other kinds of loss and damage. In relation to that last matter, the first and second defendants thereafter filed a notice of motion on 29 August 2023 (as did the third defendant, who made an identical application) seeking leave to amend the fourth cross claim to claim those further damages which was heard (on 6 September 2023) and subsequently dismissed (by orders made on 7 September 2023): McMillan Investment Holdings Pty Limited v Mangos [2023] NSWSC 1078.
If, as was argued by the first and second defendants, the fourth cross claim was truly "defensive" then it is somewhat difficult to reconcile that submission to the various matters which I have referred to in [175], above. In my view they cannot be.
The first and second defendants next argued that although the amended first cross claim did contain a claim for damages, it was said to be a very modest one. It was submitted that I should make that finding because the limit of the claim for damages advanced in this cross claim was expressly linked to the affidavit of the first defendant affirmed 26 February 2019 - which was said to confine that claim for damages at between $233,000 and $260,000. The submission was that the claim (what was described in submissions as damages that followed from the 'improper use' of the money by the McMillan parties) was, by evidence, confined to that amount. Accordingly, so it was submitted, that was the "real figure".
I do not accept that the first and second defendants, by the amended first cross claim, only advanced a modest claim for damages in the way submitted. I will briefly explain why.
On 20 September 2023 I made an order (order 1) requiring the defendants to file and serve a schedule of damages in the following terms: The first and second and third defendants serve a schedule of damages in Scott Schedule form identifying the heads of damage and amount claimed in relation to the first and second cross claims by 3 October 2023.
In compliance with that order the first and second defendants served a schedule of damages, in Scott Schedule form, dated 3 October 2023 - which identified that the first and second defendants were claiming the amount of $1,464,836.61 from the McMillan parties pursuant to the amended first cross claim. The Scott Schedule referred to par 29 of the amended first cross claim. That paragraph, which needs to be read with par 30 of the amended first cross claim, identified causes of action supporting this claim for damages as being "breach of the terms of the Facilities Agreement, the Fiduciary Duties or the provisions of the Corporations Act Duties".
In my view the filing and service of that Scott Schedule makes plain that the claim advanced was not, as argued, modest but a substantial one.
The position of the third defendant was, in relation to this last matter, different from the position of the first and second defendants. Unlike the first and second defendants - who complied with the order made on 20 September 2023 requiring the service of a schedule of damages, in Scott Schedule form, by 3 October 2023 - the third defendant did not. I am conscious of the fact that the third defendant, of course, at least at that time, may well have been representing himself. Nevertheless, it remained an order to be complied with. In any event, no specific submission was advanced by the third defendant to the effect that, by an examination of the pleadings or other evidence, the third defendant was not going to pursue a claim of the kind advanced by the first and second defendants in their cross claim (or any other claim). As it happens, a similarly pleaded claim remained in the third defendants cross claim seeking the same quantum of damages that was sought by the first and second defendants. In those circumstances I accept, as the McMillan parties submitted, those claims not being expressly abandoned, must be taken to have been pressed by the third defendant. (That submission, I add, is entirely consistent with the approach taken by the defendants when dealing with the cross claims by the defendants during the course of submissions - that is, it was accepted that the claims advanced by the third defendant in his cross claims relevantly mirrored those advanced by the first and second defendants in their cross claims: see [168], above).

[40]

The 'delay' submission

The first and second defendants also submitted that the proceedings had been commenced in 2018 and that, following the commencement, the plaintiff amended the claim with a degree of frequency - as was submitted, the plaintiff was "simply getting its house in order". In this respect the first and second defendants drew attention to the summary of those amendments (which occurred in the period 8 November 2018 to 26 April 2019) provided in the judgment of Walton J in McMillan Investment Holdings Pty Ltd v Mangos [2021] NSWSC 37 at [16].
In my view that submission, aside from restating the commencement of the proceedings, is of limited significance; to the extent that the first and second defendants were implicitly critical of the plaintiff, and McMillan parties more generally, I do not accept the submission. As is clear, the amendments were made over a relatively confined period (around five months) and, absent any detailed consideration about what those amendments involved (and matters such as their materiality and why they were made - a task not undertaken), then I do not respectfully consider that a glimpse of the procedural history adds to what has been argued. That is particularly where, first, no party argued that there was any particular conduct of an opposing party that was unreasonable, in any respect, that would justify the primary order sought by that party; and, secondly, to the extent that it would be necessary to examine the conduct of the parties in the context of the procedural history - to assess, as it was put by the first and second defendants why "these proceedings have dragged on" - it would be necessary to look at the full history, rather than in the confined way argued, in order to make findings. For example, part of the delay is plainly a consequence of the first and second (and third) defendants failing to serve their evidence on time and thereby requiring an adjournment and vacation of the 10 day listing of the matter that was to commence on 7 February 2022 - see the judgment of Davies J that vacated that hearing date: McMillan Investment Holdings Pty Ltd v Mangos [2021] NSWSC 1635 at [4]-[14].

McMillan Investment Holdings Pty Limited v Mangos & Ors

At a glance

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Cases Cited (42)

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