W & K Consulting Pty Ltd v Leda Management Services as trustee for Leda

District Court of NSW|2024-03-27|Before: Mr J

Notice of motion seeking dismissal, strike out or stay of proceedings

This notice of motion, filed by the applicant defendant on 13 December 2023 (before the filing of a defence), seeks as against the respondent plaintiff, pursuant to UCPR r 13.4 or UCPR r 14.28, alternative orders that the proceedings either be dismissed, or struck out as an abuse of process, or that the proceedings be stayed on account of an alleged estoppel which is said to arise from the resolution of some previous proceedings that involved some of the parties: Port of Melbourne Authority v Anshun Pty Ltd (1961) 147 CLR 589 ("Anshun").

Evidence

The parties produced a common Court Book containing a series of relevant historical documents and correspondence: Exhibit "A", Tabs 1 - 7, pp 1 - 771. Those documents included an affidavit affirmed on 13 December 2023 by Mr Paul Forbes, the solicitor for the applicant defendant. That affidavit exhibited extensive documents. An addendum to the Court Book comprised an affidavit of the solicitor for the respondent plaintiff, Mr Kevin Emanuel, affirmed on 22 March 2024, with annexures marked pp 1 - 75. In these reasons reference will be made to aspects of those materials where it becomes relevant to do so. There was no oral evidence.

Factual background

In these proceedings, the plaintiff, W & K Consulting Pty Ltd, a building consultancy business, sues the defendant, a builder, Leda Management Services Pty Limited, which trades as the trustee for Leda (NSW) Finance, claiming damages for alleged breach of contract concerning the provision of consulting services in respect of certain building works involving The Residence, at the Cranbrook School, a private school in Sydney.
The present claim, which was filed on 20 November 2023, arises in the context of some complex historical negotiations and arrangements agreed to by directors of the respective companies, namely, Mr Wayne James Holborow (for the respondent plaintiff) and Mr William Robert ("Bob") Ell (for the applicant defendant).
Some of those arrangements resulted in earlier proceedings numbered 2021/00153652 which were filed in this Court on 28 May 2021. Unlike the present proceedings, the final amended iteration of those earlier proceedings involved multiple parties, persons, and entities, as follows: 1. The first named plaintiff in those proceedings was Mr Wayne James Holborow, a director of the second named plaintiff; 2. The second named plaintiff in those proceedings was W & K Consulting Pty Ltd. That entity is the respondent plaintiff in the present proceedings; 3. The first named defendant in those proceedings was Mr William Robert (Bob) Ell; 4. The second named defendant in those proceedings was Leda Management Services Pty Ltd; 5. The third named defendant in those proceedings was Leda Holdings Pty Ltd.
Mr Holborow and Mr Ell were the respective directors and guiding minds of the relevant corporate entities involved in those earlier proceedings, and in the present proceedings.
On 22 November 2022, a compromise settlement was reached in those earlier proceedings by the filing of consent orders: Exhibit "A", Tab 6, pp 741 - 742.
In the present proceedings filed on 20 November 2023, a further dispute has now emerged from the various arrangements between the parties.
The disputes between the parties in those earlier proceedings and in the present proceedings arise from some agreements that evolved regarding consulting work variously carried out by Mr Holborow, including through his various corporate entities. This included another of Mr Holborow's entities, described as "Owlframe": Exhibit "A", Tab 6, pp 74 - 98. The consulting work in question concerned some building works involving a project at The Residence, at the Cranbrook School.
An unusual if not unorthodox and opaque aspect of the negotiations culminated in a formalised binding Deed of Agreement executed on 14 November 2019 between Mr Holborow and Mr Ell regarding payment for Mr Holborow's consulting services in respect of those works. In that Deed of Agreement Mr Ell had agreed to pay "in cash or equivalent tax effective value", a total of $250,000 on account of outstanding annual private school fees that were otherwise payable by Mr Holborow: Exhibit "A", Tab 6, p 391.
In the earlier proceedings, on 22 November 2022, following a course of negotiations that took place over a period of months, resolution of the issues raised in those proceedings was achieved by the entry of a consent judgment that provided for the plaintiffs to be paid $340,000 to cover a principal amount of $294,000, plus costs and interest, with the provision that the proceedings "be otherwise dismissed", and that all prior cost orders be vacated.
The minute of consent judgment filed in those earlier proceedings contained the following additional notation: "THE COURT NOTES: The agreement of the parties to this proceeding that W & K Consulting Pty Ltd does not intend to, and cannot, bring fresh proceedings relating to the subject matter of this dispute against any of the defendants to these proceedings and does not intend to, and cannot, rely on s 91 of the Civil Procedure Act 2005 (NSW) following the making of Order 2 that the proceedings be otherwise dismissed."
The solicitors who acted for the respective plaintiffs and defendants in the earlier proceedings also act for the parties in these present proceedings.
Some seven months after that settlement, on 20 June 2023, the solicitor for the respondent plaintiff issued a letter of demand to the applicant defendant seeking payment in lieu of reasonable notice of termination of Mr Holborow's engagement. That letter also claimed an alleged short payment of an invoice for services, and raised a claim for long service leave. Those matters form the factual basis for the present proceedings.

Claims made by the respective parties in the respective proceedings

The determination of the present motion requires a consideration of the pleadings and documentary substratum in both sets of proceedings, as set out in the Court Book.

Pleadings in the present proceedings

The respondent plaintiff's statement of claim in the present proceedings was filed on 20 November 2023. The parties indicated that, for present purposes, paragraphs 15 to 28 of the statement of claim may be excluded from the required consideration: T16.29.
In that statement of claim, between paragraphs 1 to 14, the respondent plaintiff raises a question as to an express reliance on the 14 November 2019 Deed of Agreement referred to in paragraph [10] above, as well as a number of other factual elements, as follows: 1. Reference is made to the existence of an historical consultancy agreement between the parties described as the "Owlframe Agreement" which was to commence on 29 August 2010 and was to remain in force for 3 years whereby the applicant defendant would pay the entity Owlframe the sum of $340,000 per annum plus increments excluding GST for consultancy fees plus statutory entitlements for long service leave; 2. Reference is made to an act of novation whereby from July 2022, the entity Owlframe, the respondent plaintiff and the applicant defendant agreed to novate the terms of the agreement to substitute the present plaintiff as the relevant fee earning consultant; 3. Reference is made to a course of conduct following the expiry of the Owlframe Agreement on 29 August 2013, whereby the respondent plaintiff and the applicant defendant continued to observe the terms of that expired agreement, including as to allowances for applicable annual increments of remuneration for Mr Holborow's services; 4. The respondent plaintiff raises an alleged breach of agreement by the applicant defendant, arguing that the respondent plaintiff was to be provided with a reasonable period of notice of termination of the agreement in the period of the COVID-19 pandemic. This has given rise to a claim for damages which at the hearing of the motion, was identified to be in the current amount of $319,479.53: T24.8. This raises a factual issue to be determined.

Pleadings in the former proceedings

The documents comprising the previous proceedings are identified in Exhibit "PGF 1" to the affidavit affirmed by Mr Forbes, the solicitor for the applicant defendant: Exhibit "A", Tabs 5 and 6.
The previous proceedings were filed on 28 May 2021. In those proceedings an amended statement of claim was filed on 27 October 2021 (Exhibit "A", Tab 6, pp 26 - 33) and a further amended statement of claim was subsequently filed on 26 July 2022 (Exhibit "A", Tab 6, pp 717 - 727).
The effect of the final iteration of those pleadings was to add W & K Consulting Pty Ltd as the second plaintiff and Leda Management Services Pty Ltd and Leda Holdings Pty Ltd as the second and third defendants. Mr Holborow remained as the first plaintiff and Mr Ell remained as the first defendant in those proceedings. Between paragraphs 1 and 17 of that further amended statement of claim a number of factual elements were raised, as follows: 1. The terms of the Deed of Agreement dated 14 November 2019 were raised, as referred to at paragraph [11] above; 2. An allegation was made that Mr Ell was indebted to Mr Holborow as a result of non-payment of certain entitlements requiring calculation; 3. An alternative series of allegations were made to the effect that the corporate defendants were indebted to the corporate plaintiff for certain non-payments requiring calculation.
The particularisation of the alleged indebtedness of the two corporate defendants in those earlier proceedings referred to the 14 November 2019 Deed of Agreement arising from certain discussions between Mr Holborow and Mr Ell, and related correspondence.
Those earlier proceedings were resolved in accordance with the terms of a consent judgment entered on 22 November 2022, as referred to at paragraphs [11] and [12] above.

Residual dispute following settlement of the earlier proceedings

The essential question to be determined in this motion is whether the two sets of proceedings involve the same subject matter of dispute. In that regard, a difficulty that the applicant defendant faces in this motion is that no particularised defence has yet been filed in the current proceedings.
Therefore, the full extent of any residual matters in dispute cannot be readily ascertained or defined. That is a matter of some contextual importance in this case. This is so especially where, in the course of argument, it was indicated that the applicant defendant made some relevant quantum concessions in favour of the respondent plaintiff.

Submissions of the parties

The respective parties provided disparate written submissions supplemented by further extensive oral submissions, each making reference to authorities.

Submissions of applicant defendant

Shortly summarised, the applicant defendant justified the alternatively expressed quests for dismissal, strike out, or stay of the current proceedings, by raising arguments based on the principles of cause of action estoppel, res judicata, and Anshun estoppel.
In that context, it was argued that the final consent judgment entered in the earlier proceedings has resulted in a merger of rights that extinguished the cause of action that has subsequently been raised and invoked by the respondent plaintiff in the current proceedings. The latter argument was based on the contentious proposition that the respondent plaintiff has clearly acted unreasonably in not pursuing the subject matter of its current claim in the earlier proceedings.

Submissions of respondent plaintiff

Shortly summarised, the respondent plaintiff argued that no res judicata has arisen to operate as a bar to the present proceedings because the claims made in the respective proceedings were fundamentally different.
In that regard, the respondent plaintiff argues that the applicant defendant has placed undue reliance on the notation entered on 22 November 2022 rather than relying on the effect of the actual court orders made on that date.
The respondent plaintiff's argument contrary to the res judicata argument raised by the applicant defendant was developed to show that whereas, in the first proceedings, the claim was limited to two elements of liquidated damages payable under the terms of the 14 November 2019 Deed of Agreement, in contrast, the present claim involves damages for a breach of that agreement by reason of a claim of a failure of the applicant defendants to provide the respondent plaintiff with a reasonable period of notice of termination of the agreed services, as well as alleged associated failures to provide the respondent plaintiff with full payment for services rendered, along with an alleged failure to pay the value of certain statutory entitlements to long service leave due to Mr Holborow.
In answer to the claim by the applicant defendant that an Anshun estoppel arises that precludes the respondent plaintiff's present claim, the respondent plaintiff argues that a close examination of the full factual context of the respective claims should operate to defeat the estoppel arguments raised in the applicant defendant's motion.

Relevant Legislation

Section 91 of the Civil Procedure Act 2005 (NSW) provides: 91 Effect of dismissal of proceedings (1) Dismissal of - (a) any proceedings, either generally or in relation to any cause of action, or (b) the whole or any part of a claim for relief in any proceedings, does not, subject to the terms on which any order for dismissal was made, prevent the plaintiff from bringing fresh proceedings or claiming the same relief in fresh proceedings. (2) Despite subsection (1), if, following a determination on the merits in any proceedings, the court dismisses the proceedings, or any claim for relief in the proceedings, the plaintiff is not entitled to claim any relief in respect of the same cause of action in any subsequent proceedings commenced in that or any other court.
UCPR r 13.4 provides: 13.4 Frivolous and vexatious proceedings (1) If in any proceedings it appears to the court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings - (a) the proceedings are frivolous or vexatious, or (b) no reasonable cause of action is disclosed, or (c) the proceedings are an abuse of the process of the court, the court may order that the proceedings be dismissed generally or in relation to that claim. (2) The court may receive evidence on the hearing of an application for an order under subrule (1).
UCPR r 14.28 provides: 14.28 Circumstances in which court may strike out pleadings (1) The court may at any stage of the proceedings order that the whole or any part of a pleading be struck out if the pleading - (a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading, or (b) has a tendency to cause prejudice, embarrassment or delay in the proceedings, or (c) is otherwise an abuse of the process of the court. (2) The court may receive evidence on the hearing of an application for an order under subrule (1).

Consideration

My consideration and determination of the respective arguments of the parties now follow.

Construction of notation to consent judgment in earlier proceedings

The applicant defendant relies on res judicata and issue estoppel as bars to the respondent plaintiff's claims. The distinction between res judicata and issue estoppel is that in the former, when proceedings pass into judgment, merger occurs and the claim no longer has an independent existence, whereas in the latter case, a state of fact or law is relied upon to deny the existence of a right to proceed: Blair v Curran [1939] HCA 23; (1939) 62 CLR 464, at 532.
The applicant defendant contentiously relies upon a particular construction of the notation which was recorded at the time the consent judgment was entered in the previous proceedings on 22 November 2022. For convenience, that notation is replicated below: "THE COURT NOTES: The agreement of the parties to this proceeding that W & K Consulting Pty Ltd does not intend to, and cannot, bring fresh proceedings relating to the subject matter of this dispute against any of the defendants to these proceedings and does not intend to, and cannot, rely on s 91 of the Civil Procedure Act 2005 (NSW) following the making of Order 2 that the proceedings be otherwise dismissed."
It is accepted that orders, including consent orders, must be the subject of ordinary rules of construction that must proceed in the same way as the construction of a contract: Australian Consolidated Press Ltd v Morgan (1965) 112 CLR 483, at 503; Athens & Anor v Randwick City Council [2005] NSWCA 317, at [28].
The appropriate context for the construction includes the surrounding circumstances, the pleadings, and the evidence: Rogers v Wentworth (Unreported, NSWCA, per Hope, Samuels and Mahoney JJA, 18 April 1988); Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd (No 17) [2023] WASC 72, at [24]-[25]; Electricity Generation Corporation v Woodside Energy Ltd & Ors [2014] HCA 7; (2014) 251 CLR 640, at [48].
The first observation to be made about the notation relied upon by the applicant defendant is that it cannot be reasonably construed to be an order of the Court.
The second observation to be made is that the operative phrase which contemplates the possibility of fresh proceedings "relating to the subject matter" of the resolved dispute requires a contextual construction as to the precise nature of the elements of dispute that were quelled by the consent orders that were agreed at that time.
The third observation to be made is that the notation represents a statement of the existence of an absence of intent at that time not to rely on a potential statutory right embodied within s 91 of the Civil Procedure Act 2005 (NSW) to bring a claim in fresh proceedings. In my view, that notation is problematic because, if enforced, would tend to oust the jurisdiction of the Court to consider the justness or otherwise of the factual content and context of any future dispute that may arise between the parties.
The construction of the notation raises the question of whether the present proceedings, which are obviously "fresh proceedings", "relate to" the "subject matter" of the dispute settled by the earlier proceedings.
The applicant defendant relies on the construction of the phrase "relating to" as having a very wide or "extremely wide" but indefinite import which must be derived from the context: O'Grady v Northern Queensland Co Ltd [1990] HCA 16; (1990) 169 CLR 356, at 376; Re Dingjan : Ex Parte Wagner (1995) 183 CLR 323, at 370.
In my view, an examination of the two sets of pleadings shows distinctively separate subject matters, namely fees and long service leave entitlements as raised in the present proceedings. The relationship is distinctly more tenuous than the posited "direct or indirect" formulation relied upon by the applicant defendant.
For those reasons, I consider that properly construed, the notation replicated at paragraph [37] above does not assist or serve the interests of the applicant defendant in this instance.

Different subject matter negates res judicata and summary dismissal

To succeed in the application for summary dismissal, the applicant defendant must overcome the high bar of demonstrating that as a result of the resolution of the earlier proceedings, no justiciable issue remains to be litigated between the parties to the present proceedings.
An order for summary dismissal should not be made unless the Court can be satisfied to a high degree of certainty that the proceedings are clearly untenable: Agar v Hyde (2000) 201 CLR 552, at 575 [57]; Dey v Victorian Railways Commissioners (1949) 78 CLR 62, 84-85; [1949] HCA 1, at 85; General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125, at 129.
Those same principles apply to cases where s 56 of the Civil Procedure Act 2005 (NSW) is engaged: Bott v Carter [2012] NSWCA 89, at [13]. Any consideration along those lines must take into account the requirements of s 58 of that Act.
In that regard, in determining the issue in dispute, due emphasis must be placed on the dictates of justice concerning the relevant circumstances of the case: s 58(1) and s 58(2)(b)(vii) of the Civil Procedure Act 2005 (NSW).
Where a final judgment has been entered having the effect of quelling the actual controversy between the parties, the rights, and obligations, which are the subject of such controversy cease to exist and merge into the final judgment and this should be treated as equating to res judicata: Tomlinson v Ramsey Food Processing Pty Ltd [2015] HCA 28, at [20].
That principle has also been observed to apply in the circumstances of a consent judgment where a fair construction of the circumstances was required on the proviso that the same subject matter was not being relitigated: Re South American and Mexican Co [1895] 1 Ch 37, at 50.
In the circumstances identified in the documentary evidence tendered on the motion, where monetary claims made are based on evidence which claims the non-fulfilment of express or implied contractual obligations, the proceedings brought by the respondent plaintiff cannot be reasonably characterised as frivolous, vexatious, or an abuse of process: UCPR r 13.4(1).
Similarly, in those circumstances, the factual circumstances raised by the respondent plaintiff in its claim against the defendants cannot be reasonably characterised as tending to cause prejudice, embarrassment, delay, or an abuse of the processes of the Court: UCPR r 14.28(1).
In my view, the evidentiary components of the affidavit of Mr Forbes relied upon by the applicant defendants do not reveal a reasonable basis for invoking the Court's jurisdiction under those cited rules to either dismiss, strike out, or stay the present proceedings.

Anshun or cause of action estoppel does not arise

The applicant defendant made the forthright submission that the asserted failure of the respondent plaintiff to bring a claim based on the termination of the consultancy agreement that subsisted between them was clearly unreasonable, concluding that its Anshun estoppel argument was irresistible, thereby justifying a stay of the present proceedings.
I do not accept that submission. The fact that both litigants were parties to the earlier proceedings is not to the point or determinative. There was no clearly defined dispute over termination and related entitlements at the time the earlier proceedings were resolved. The present claim only emerged some seven months after the earlier proceedings had been finalised by the entry of a consent judgment.
Whilst in hindsight, there may be something of a "close connection" between an aspect of the present proceedings and an aspect of the earlier proceedings, the entire historical context must be examined in order to identify and resolve that dispute. In my view, a shortcut finding of an Anshun estoppel in the present circumstances would be controversial, unjust, and would thwart rather than promote the dictates of justice as between the parties.
In Port of Melbourne Authority v Anshun Pty Ltd (1961) 147 CLR 589, at 603.1, the plurality observed: "[T]here are a variety of circumstances, some referred to in the earlier cases, why any party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings eg expense, importance of a particular issue, motives extraneous to the actual litigation, to mention but a few."
In the context of the complex factual relationship between the parties and their guiding minds, namely, Mr Holborow and Mr Ell, where specific findings on contentious matters of fact will be required, the passage cited in the preceding paragraph is apt, and in my view contraindicates making an estoppel finding as sought by the applicant defendant in this instance.
In that regard, I accept the respondent plaintiff's submission that the factors identified and relied upon by the applicant defendant for its estoppel claim do not go anywhere near demonstrating a relevant relationship between the subject matter of the earlier proceedings so as to render the present claim unreasonable: Anshun, at 602.8.
The earlier proceedings were "relatively straight forward" and were based on the existence of a signed written agreement between Mr Holborow and Mr Ell, which Mr Ell did not dispute. That dispute emerged from the complication by which Mr Ell sought to involve corporate entities.
In contrast, the respondent plaintiff's present claim is for damages and concerns what amount ought to be assessed for reasonable notice of termination. That is an entirely separate issue.
In that regard, the respondent plaintiff has correctly pointed out that the relevant question is not whether that issue could have been raised as the subject matter of the earlier proceedings, but instead, whether that should have occurred: Champerslife Pty Ltd v Manojlovski [2010] NSWLR 25, at [4]; Clayton v Bart (2020) 272 CLR 1, at [31]; [34].
I consider that submission to be compelling, and it should be accepted. I am reinforced in that view because it is not apparent that any ultimate judgment in favour of the respondent plaintiff in these proceedings would be in conflict with any identified issue that was quelled by settlement of the earlier proceedings: Anshun, at 603.3.
Furthermore, I observe the required caution against shutting out a claim which has apparent intrinsic merit without first undertaking a scrupulous examination of the underlying factual circumstances: Habib v Radio 2UE Sydney Pty Ltd [2009] NSWCA 231, at [85]; Hannigan v Inghams Enterprises Pty Ltd [2021] NSWSC 641, at [18]. An examination along those lines can only occur at a trial of the issues.
Accordingly, the claim for a stay of proceedings based on a claim of Anshun estoppel must be rejected.
The applicant defendant must now file its defence to allow a factual evaluation to proceed to findings which will quell the disputes raised in these proceedings, assuming the parties are unable to reach a consensual resolution in the meantime.

Disposition

The conclusion reached from the above consideration is that the applicant defendant has not justified any aspect of the relief claimed in its notice of motion. Accordingly, that notice of motion must be dismissed, with the consequence that the applicant defendant must pay the respondent plaintiff's costs incurred in resisting the motion. That result requires that appropriate case management orders must now be made.

Orders

I make the following orders: 1. The notice of motion filed by the applicant defendant on 13 December 2023 is dismissed; 2. The applicant defendant is to pay the respondent plaintiff's costs of the dismissed motion; 3. The exhibit may be returned; 4. Appropriate case management orders will be made after hearing from the parties.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 18 April 2024

At a glance

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Judgment (18 paragraphs)

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Legislation Cited (2)

Cases Cited (20)