(2020) 95 ALJR 34
Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589
Source
Original judgment source is linked above.
Catchwords
(2020) 95 ALJR 34
Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589
Judgment (6 paragraphs)
[1]
[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
[2]
Judgment
THE COURT: This is an application for leave to appeal by Sara Stockham and Sara Stockham Pty Limited, who were respectively the first and second defendants below, from two judgments of Sackar J sitting in the Equity Division of the Supreme Court of New South Wales. By his judgment of 4 June 2021, his Honour directed summary judgment against the second defendant on a claim by the plaintiff, WLD Practice Holdings Pty Limited, for the costs of a valuation made pursuant to cl 11.3(a) of a Unitholders Agreement ([2021] NSWSC 634). By his further judgment of 17 June 2021 his Honour continued the operation of a freezing order relating to an amount of money, now $136,000, provided by the first defendant as security ([2021] NSWSC 817).
The Unitholders Agreement was made on 28 October 2016 between the defendants, the plaintiff as trustee of the WLD Practice Holdings Trust (the respondent on appeal) and Dr Scott Williams and his company. It concerned the conduct of a dental practice. On 6 May 2019 the second defendant gave a notice under the Agreement triggering a sale of its units in the trust at a value to be determined by an independent accountant appointed under cl 13 of the Agreement.
The Equity Division proceedings were initiated by a summons in which the plaintiff sought judicial advice under s 63 of the Trustee Act 1925 (NSW), or the Court's inherent jurisdiction, relating to the valuation process. The summons was subsequently amended to seek, in the alternative, declarations concerning the same subject matter.
By cross-summons filed on 28 April 2020, the defendants sought inter alia orders concerning inspection by them of books and records of the trust.
By notice of motion dated 25 August 2020 the defendants sought an order restraining an accountant who had been appointed to undertake the valuation (Mr Matthew Gwynne) from proceeding with his valuation and sought leave to file an annexed form of amended cross-summons (the "Amended Cross-Summons"). The Amended Cross-Summons sought orders concerning documents and two orders concerning the meaning of cl 7.8 of the Unitholders Agreement. That clause requires the agreement of all unitholders to decisions involving any "Major Policy Issues".
Mr Gwynne however proceeded to complete his valuation on 25 August 2020 (the "Valuation").
By an amended notice of motion filed on 14 September 2020, the defendants sought leave to file a further amended cross-summons (the "Proposed Further Amended Cross-Summons") which, in addition to the orders sought by the earlier draft, sought the following orders:
"5. AN ORDER declaring that the valuation made by Matthew Gwynne dated 25 August 2020 was not made in accordance with the requirements of clause 13 of the UHA [Unitholders Agreement].
6. AN ORDER setting aside the said valuation of Matthew Gwynne as invalid for the purposes of clause 13 of the UHA.
7. AN ORDER that any action taken by the Cross Defendant on the basis that the said valuation of Matthew Gwynne is a valid valuation under clause 13 of the UHA was and is a nullity and of no legal effect."
At a hearing before Sackar J on or before 21 September 2020 the parties agreed that an efficient way of proceeding would be to determine separately the two questions raised in the defendants' Proposed Further Amended Cross-Summons because answers to those questions which were unfavourable to the defendants would remove any question about the validity of the Valuation. In consequence, a hearing concerning those questions was conducted and by judgment of 27 October 2020 Sackar J answered the questions unfavourably to the defendants. On 12 November 2020 his Honour made formal orders to give effect to that judgment, stating the questions and his answers, and dismissing "the cross-summons". The orders implicitly rejected the defendants' application to amend their cross-summons. The orders were expressed to be made "by consent" which should be understood as indicating the agreement of the parties that the orders reflected his Honour's reasons for judgment and their earlier agreement as to the consequences of answers which were unfavourable to the defendants.
By its judgment of 6 April 2021, this Court dismissed the defendants' application for leave to appeal against Sackar J's judgment of 27 October 2020 and his consequential orders (Sara Stockham Pty Ltd v WLD Practice Holdings Pty Ltd [2021] NSWCA 51). Leeming JA (with whom Gleeson JA and Emmett AJA concurred) referred as follows to the consequences of the decision:
"[7] The form of the questions reserved for separate determination reflected the alternative orders sought in prayer 3 of the proposed amended cross-summons. Although there was no transcript, this Court was told, without objection, that it was accepted at the time those questions were reserved that unfavourable answers to those questions would lead to the dismissal of the cross-summons, because there was no longer utility in seeking production of the documents."
In the course of his supplementary reasons, Emmett AJA noted that "[t]he parties to the cross-summons agreed to the formulation of two preliminary questions, one determination of which [that is, unfavourably to the defendants] would result in the dismissal of the cross-summons by consent".
Following the Court of Appeal judgment, there remained for determination at first instance the plaintiff's claim for the defendants to pay the plaintiff's costs of the Valuation in accordance with the terms of the Unitholders Agreement. In response to that claim, the defendants filed Points of Defence which raised the following issues going to the validity of the Valuation as an answer to the claim.
First, in paragraphs [23]-[79] of the Points of Defence, the defendants identified seven allegedly unauthorised debts or expenditures of the trust in relation to which they said that the valuer "deliberately ignored the effect of cl 7.8" of the Unitholders Agreement with the consequence that the Valuation was not a valid determination under cl 13 of the Agreement.
In paragraphs [80]-[92] of the Points of Defence, the defendants complained of failures of the plaintiff to prepare appropriate financial accounts, to ensure that distributions to unitholders were properly authorised and to keep proper records of all receipts and expenditures of the trust. In paragraphs [93]-[95], they alleged that these breaches of the Unitholders Agreement amounted to a repudiation of its provisions and forced the second defendant to give notice of the sale of its units in the trust. This was said to have the consequence that the contractual provision as to the payment of costs of the Valuation did not apply, presumably because the valuation process was not triggered and any purported valuation was void. In other words, it was contended that the second defendant was not what the Agreement described as a "Bad Leaver", that is, a unitholder who wanted to sell its units earlier than the date for which the Agreement provided.
[3]
The "Third Cross-Summons"
For reasons given in his judgment of 4 June 2021, Sackar J concluded that the Points of Defence should be struck out, with the consequence reflected in his orders of 17 June 2021 that the plaintiff was entitled to judgment against the second defendant for the amount of the Valuation costs ($44,000), and that the "Third Cross-Summons" should be dismissed. This "Third Cross-Summons" had been filed on 12 May 2021, and sought an order "setting aside" the Valuation.
His Honour's view was that the matters raised in paragraphs [16]-[79] of the Points of Defence (the earlier paragraphs being only responsive to the Points of Claim or preliminary in character) were res judicata by reason of the judgment of the Court of Appeal. Whether this was so or not, the defendants are precluded from making the allegations in those paragraphs by the closely related principle stated in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; [1981] HCA 45 (see also Clayton v Bant [2020] HCA 44; (2020) 95 ALJR 34). That is, the manner in which the proceedings were conducted was such that the defendants ought to have raised any arguments they had as to the validity of the Valuation, which were additional to those embodied in the two questions concerning cl 7.8 that the Court answered, prior to the Court's effective determination that the Valuation was valid. The questions were adopted by the parties with the concurrence of the Court to enable the prompt and efficient resolution of what the parties considered to be the real issues in dispute. They accepted that answers to the questions which were unfavourable to the defendants would result in a determination that the Valuation was valid. That this was so was reflected in the consent orders made following Sackar J's decision of 27 October 2020. These included an order that the "cross-summons" be dismissed, which in the context of the proceedings as they had been conducted rejected the defendants' challenge to the validity of the Valuation which the Proposed Further Amended Summons sought to advance.
We note that subsequent to the hearing in this Court of the application for leave to appeal from Sackar J's judgments of 4 and 17 June 2021, the defendants sought leave to tender letters dated 25 October 2021 and 1 November 2021 passing between the parties after the hearing before Sackar J. As the assertions in them do not qualify or contradict what we have said in this judgment, leave to tender them is rejected.
In this Court, the defendants contended that these paragraphs ([16]-[79]) of their Points of Defence did not conflict with the answers given by the Court to the separate questions in light of the observations made by Leeming JA in [29] of his judgment. It is unnecessary to address this contention because, as we have said, even if the answers to the separate questions did not render the matters sought to be raised by the defendants in their Points of Defence res judicata, those allegations were so closely related to those that were raised by the separate questions that the principle in Anshun prevents them being raised.
Sackar J took the view that the defendants were precluded by the principle in Anshun (as well as that of res judicata) from agitating the remaining group of allegations in the Points of Defence, namely, those in paragraphs [80] to [92]. For the reasons we have given in relation to the preceding part of the Points of Defence, the defendants do not have any arguable basis for contending that his Honour was in error in so concluding.
As to the allegation in paragraphs [93] to [95], Sackar J held that the contention that the second defendant was not a "Bad Leaver" under the Unitholders Agreement was unarguable. Even if there was repudiatory conduct entitling the defendants to terminate the Unitholders' Agreement, far from doing so, the defendants elected to affirm it, invoking the valuation process for which it provided by giving a notice in circumstances which, by definition, rendered the second defendant a "Bad Leaver".
As the defendants' proposed appeal from Sackar J's judgment of 4 June 2021 therefore lacks merit, leave to appeal should be refused. That conclusion is reinforced by considerations of proportionality, bearing in mind that only $44,000 is in dispute. We add that this judgment is concerned only with the defendants' purported challenges to the Valuation. It is not concerned with the availability or otherwise to the defendants of damages or other claims against other parties to the Unitholders Agreement.
[4]
The freezing order
In his judgment of 17 June 2021, Sackar J gave two principal reasons for extending the "freezing order". The first was that it was appropriate that the sum in question be retained by way of security for the plaintiff's costs, that being the basis upon which the order had originally been made. His Honour referred in this context to costs orders he had made against the defendants, including one for indemnity costs.
This was a sufficient basis for his Honour's order, with the result that the proposed appeal against the order does not have any reasonable prospect of success. As well, the order was an interlocutory one on an issue of practice and procedure. As a result leave to appeal should be refused. It is unnecessary in these circumstances to address the second reason given by his Honour, namely that, on the true construction of the Unitholders Agreement, the plaintiff has an arguable case that the second defendant is liable for the costs of the Valuation.
We add that, notwithstanding the defendants' arguments in this Court, it was open to his Honour implicitly to take the view that the plaintiff's position was not sufficiently protected by the prospect that the orders for costs in its favour could be enforced in New Zealand.
[5]
Order
For these reasons, we dismiss the summons seeking leave to appeal, with costs.
[6]
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Decision last updated: 18 November 2021