Waterwood Hotel Management Pty Ltd v KOP International Pty Ltd

Background

1. The underlying dispute between the parties and the background to the circumstances in which the Referee's Report was given are set out in the Primary Judgment and in the Referee's Report. It is not necessary here to revisit that background in any detail, other than to explain that Waterwood is a company that was incorporated by Mr Lye (also referred to as Cory) for the purposes of the dealings the subject of the dispute before Pembroke J; that each of KOP and MOOT is a company owned and controlled by Mrs Xu; and that, at the relevant time, KOP was the owner of the Newport Mirage Hotel from which MOOT conducted a hotel business.
2. The dealings between the parties, and the dispute that arose between them, concerned arrangements entered into in 2015 for Mr Lye (through Waterwood) to "take over for a period the management of the hotel business" (as Pembroke J described those arrangements at [6] of the Primary Judgment - as to which see further below).
3. In June 2015, litigation between the parties ensued when the defendants expelled Waterwood from the hotel premises and an ex parte application was brought before the then duty judge (Kunc J) for orders in effect to restrain the defendants from excluding Waterwood from the hotel business. On 12 June 2015, Kunc J made interlocutory ex parte orders requiring the defendants to permit Waterwood to re-enter the hotel premises and to operate the hotel business; and restraining the defendants from interfering with the possession of the premises and operation of the business.
4. Those injunctions were short-lived. On 18 June 2015, Kunc J heard a motion by the defendants for the discharge of the ex parte orders and, on 30 June 2015, his Honour discharged those orders (see Waterwood Hotel Management Pty Ltd v KOP International Pty Ltd [2015] NSWSC 852, to which I will refer as the Discharge Judgment). At the same time, his Honour struck out Waterwood's statement of claim (albeit with leave to file and serve an amended statement of claim).
5. The criticisms made by Kunc J of the pleading (that his Honour then struck out) (see at [72]) and his Honour's observations of the fundamental legal problems faced by Waterwood in its claims to be entitled to operate the hotel business (see from [44]ff) are of some relevance to the submissions made by Waterwood on the issue of costs now before me. Relevantly, his Honour considered that the then pleading "completely fail[ed] to grapple with the problem of how Waterwood says MOOT has any enforceable legal, equitable or other obligations to Waterwood in respect of the Business when MOOT is not a party to [either of the relevant agreements]" (see at [72]). His Honour expressed the view, albeit obviously only a preliminary view and in obiter, that Waterwood had a "weak case" (see at [69]).
6. Waterwood then re-pleaded its claim (albeit, as it transpired, to no great avail). By that amended pleading, Waterwood brought a claim for damages for breach of contract or compensation for damages resulting from misrepresentation or restitution for moneys had and received (see at [29] of the Primary Judgment). Pembroke J noted that there were some other subsidiary (and, his Honour observed, "less clearly articulated") contentions in the pleading, referring to agency, resulting or implied trust and estoppel, and that toward the end of the amended statement of claim there was an allegation that KOP and MOOT were estopped from denying their pleaded representations, from alleging that KOP had no right, title or interest in the hotel business or that the various agreements were not binding on them (see at [29] of the Primary Judgment); and his Honour also noted that there was also a contention in Counsel's addresses that there was an estoppel by deed (see at [30]).
7. By cross-claim filed on 31 May 2016, the cross-claimant (MOOT) brought a claim against Mr Lye for the sum of $114,377.36 (plus interest and costs) for various claims of moneys had and received or for loss and damages allegedly suffered by reason of the matters there pleaded. Mr Lye, as I understand it, is an accountant and, as adverted to above, the controlling mind of Waterwood (see at [1] of the Primary Judgment).

The Primary Judgment

1. The matter was heard by Pembroke J over three days in late January and early February 2018. It is fair to say that his Honour seems to have been singularly unimpressed by the legal and business advisers involved in the transaction in question (neither of whom gave evidence), saying that the evidence suggested that "they were both incompetent in relation to this transaction" (see at [1] of the Primary Judgment) and describing the "outcome of the collective naiveté, inexperience and incompetence" of the advisers as being the production of "several contractual documents that reveal considerable confusion and neglect" (see at [2] of the Primary Judgment). His Honour considered the contractual "arrangement" in one material respect to be deeply flawed (so much so that it would be "inappropriate for a court of equity to enforce it, or to allow a claim for damages on it") (see at [2] of the Primary Judgment) and, as I have already noted, his Honour proceeded to dismiss all Waterwood's claims based on contract, representation and estoppel (as well as the allegation of a resulting or implied trust) (see at [32]-[33] of the Primary Judgment).
2. Relevantly for present purposes, however, his Honour accepted that, to the extent that it could prove its entitlement, Waterwood should have the benefit of a claim in restitution (see at [2] and [35] of the Primary Judgment) (the critical words here, in my opinion, being "to the extent"). His Honour was there clearly not finding that such an entitlement had been proved.
3. His Honour dealt in his substantive reasons with the claim in restitution in a single paragraph, at the conclusion of his Honour's reasons, as follows (at [35]): 35. The restitution claim is less controversial. The claim is pleaded on a narrow basis, namely that 'the defendants have been unjustly enriched by the plaintiff's satisfaction of their liabilities'. I was told in effect, that the parties recognise the need for such an outcome and desire an accounting between themselves. I am satisfied that the plaintiff should have this opportunity. The situation is not unlike that in Pavey & Matthews Pty Ltd v Paul (1986-7) 162 CLR 221. As Deane J said at 256: The quasi-contractual obligation to pay fair and just compensation for a benefit which has been accepted will only arise in a case where there is no applicable genuine agreement or where such an agreement is frustrated, avoided or unenforceable. In such a case, it is the very fact that there is no genuine agreement or that the genuine agreement is frustrated, avoided or unenforceable that provides the occasion for (and part of the circumstances giving rise to) the imposition by the law of the obligation to make restitution.

Referee's Report

1. On the hearing of the reference, which I understand occupied half a day, there was before the Referee a document headed "Plaintiff's Schedule of Claims for Restitution" (to which I will refer as the Plaintiff's Schedule) and a document headed "Defendants' Response to Claims for Restitution" (to which I will refer as the Defendants' Response), both of which were put before me on the present application.
2. Both parties adduced evidence. Waterwood relied on affidavits affirmed by Mr Lye (an affidavit affirmed 17 January 2019 that was prepared for the purposes of the reference and two affidavits that had been affirmed on 19 August 2016 and 19 April 2017 which were read at the substantive hearing before Pembroke J), an affidavit of his sister, Ms Bianca Lye, affirmed 19 April 2017 (also from the substantive hearing), and an affidavit of Ms Lye's husband, Mr Robert Chong, affirmed 19 April 2017 (also from the substantive hearing). Waterwood also tendered before the Referee the following of the defendants' affidavits from the substantive hearing: an affidavit affirmed 5 January 2017 by Mrs Xu; an affidavit affirmed by Ms Jiangyuan Yan on 5 January 2017; an affidavit affirmed by Ms Min Xu (Mrs Xu's daughter) on 17 January 2017; an affidavit affirmed by John Yick-Cheung Lee on 18 January 2017; and an affidavit affirmed by Lihua (Lucy) Lu on 23 January 2017. Waterwood also tendered the trial transcript before Pembroke J (admitted as Exhibit F) and the bank statements of MOOT for the period 3 December 2014 to 3 March 2015 (noting that its bank statements thereafter was exhibited to an affidavit of Mrs Xu) (admitted as Exhibit G) and of Bianca Lye (admitted as Exhibit H). Meanwhile, the defendants read the affidavit of Ms Min Xu affirmed 19 March 2019 and tendered the exhibit to that affidavit (admitted as Exhibit 1).
3. On the hearing of the present application, Waterwood has (notionally, since the hearing is on the papers) tendered the evidence on the reference and the transcript of the reference hearing. With its written submissions, Waterwood also included as an aide memoire a chronological summary of the evidence entitled "Plaintiff's Chronology on Reference".
4. As will be apparent, therefore, Waterwood has placed before the Court on the present application (as to the adoption or otherwise of the Referee's Report) what seems to be the whole of the evidence relied upon at the reference.

Adoption of the Referee's Report: generally

1. It is convenient first to outline the principles concerning adoption of a referee's report.

Relevant principles

1. The order referring the matter out to the Referee in the present case was made pursuant to r 20.14 of the UCPR, as noted above. However, the principles applicable to a reference made under the previous iteration of the Court rules (former Pt 72 r 13 of the Supreme Court Rules 1970 (NSW)) are equally applicable to references under the present rules (see Illawarra Hotel Company Pty Ltd v Walton Construction Pty Ltd (2013) 84 NSWLR 410; [2013] NSWCA 6 at [15]-[16] per Barrett JA, with whom Meagher JA and I agreed) (Illawarra Hotel).
2. The principles in relation to applications for the adoption, variation or rejection of a referee's report were considered by Einstein J in ABB Engineering Construction Pty Ltd v Abigroup Contractors Pty Ltd [2003] NSWSC 665 at [34]-[35], citing inter alia Super Pty Ltd v SJP Formwork (Australia) Pty Limited (1992) 29 NSWLR 549; and were conveniently distilled by McDougall J in Chocolate Factory Apartments Ltd v Westpoint Finance Pty Ltd [2005] NSWSC 784 (Chocolate Factory) (at [7]; and see Illawarra Hotel at [15]) as follows: (1) An application under Pt 72 r 13 is not an appeal either by way of hearing de novo or by way of rehearing. (2) The discretion to adopt, vary or reject the report is to be exercised in a manner consistent with both the object and purpose of the rules and the wider setting in which they take their place. Subject to this, and to what is said in the next two sub paragraphs, it is undesirable to attempt closely to confine the manner in which the discretion is to be exercised. (3) The purpose of Pt 72 is to provide, where the interests of justice so require, a form of partial resolution of disputes alternative to orthodox litigation, that purpose would be frustrated if the reference were to be treated as some kind of warm up for the real contest. (4) In so far as the subject matter of dissatisfaction with a report is a question of law, or the application of legal standards to established facts, a proper exercise of discretion requires the judge to consider and determine the matter afresh. (5) Where a report shows a thorough, analytical and scientific approach to the assessment of the subject matter of the reference, the Court would have a disposition towards acceptance of the report, for to do otherwise would be to negate both the purpose and the facility of referring complex technical issues to independent experts for enquiry and report. (6) If the referee's report reveals some error of principle, absence or excessive jurisdiction, patent misapprehension of the evidence or perversity or manifest unreasonableness in fact finding, that would ordinarily be a reason for rejection. In this context, patent misapprehension of the evidence refers to a lack of understanding of the evidence as distinct from the according to particular aspects of it different weight; and perversity or manifest unreasonableness mean a conclusion that no reasonable tribunal of fact could have reached. The test denoted by these phrases is more stringent than "unsafe and unsatisfactory". (7) Generally, the referee's findings of fact should not be re-agitated in the Court. The Court will not reconsider disputed questions of fact where there is factual material sufficient to entitle the referee to reach the conclusions he or she did, particularly where the disputed questions are in a technical area in which the referee enjoys an appropriate expertise. Thus, the Court will not ordinarily interfere with findings of fact by a referee where the referee has based his or her findings upon a choice between conflicting evidence. (8) The purpose of Pt 72 would be frustrated if the Court were required to reconsider disputed questions of fact in circumstances where it is conceded that there was material on which the conclusions could be based. (9) The Court is entitled to consider the futility and cost of re-litigating an issue determined by the referee where the parties have had ample opportunity to place before the referee such evidence and submissions as they desire. (10) Even if it were shown that the Court might have reached a different conclusion in some respect from that of the referee, it would not be (in the absence of any of the matters referred to in sub para (6) above) a proper exercise of the discretion conferred by Pt 72 r 13 to allow matters agitated before the referee to be re-explored so as to lead to qualification or rejection of the report. (11) Referees should give reasons for their opinion so as to enable the parties, the Court and the disinterested observer to know that the conclusion is not arbitrary, or influenced by improper considerations; but that it is the result of a process of logic and the application of a considered mind to the factual circumstances proved. The reasoning process must be sufficiently disclosed so that the Court can be satisfied that the conclusions are based upon such an intellectual exercise. (12) The right to be heard does not involve the right to be heard twice. (13) A question as to whether there was evidence on which the referee, without manifest unreasonableness, could have come to the decision to which he or she did come is not raised "by a mere suggestion of factual error such that, if it were made by a trial judge, an appeal judge would correct it". The real question is far more limited: "to the situation where it is seriously and reasonably contended that the referee has reached a decision which no reasonable tribunal of fact could have reached; that is, a decision that any reasonable referee would have known was against the evidence and weight of evidence". (14) Where, although the referee's reasons on their face appear adequate, the party challenging the report contends that they are not adequate because there was very significant evidence against the referee's findings with which the referee did not at all deal, examination of the evidence may be undertaken to show that the reasons were in fact inadequate because they omitted any reference to significant evidence. (15) Where the court decides that the reasons are flawed, either on their face or because they have been shown not to deal with important matters, the court has a choice. It may decline to adopt the report. Or it may itself look at the detail of the evidence to decide whether or not the expense of further proceedings before the referee (which would be the consequence of non adoption) is justified.

Waterwood's submissions as to rejection of the of the Referee's Report

1. As noted above, Waterwood submits that the Referee's Report should be rejected and that there should be substituted an award of restitution in the amount of $427,100.99 plus interest and costs (that being almost the entirety of the amount it had claimed by way of restitution before the Referee). Waterwood also seeks its costs of the proceedings. This includes a claim by Mr Lye for his costs on the indemnity basis. I will return to the issue of costs later in these reasons.
2. Waterwood submits (somewhat emotively, though it was not alone in the making of emotive submissions) that the defendants "inveigled their part-time bookkeeper and casual manager of [three to four] months, for whose services they had previously paid significant fees, to assume the burden of running, maintaining and enhancing their hotel business and premises for his own benefit in any profits earned and risk in losses suffered, assuming and satisfying all their and its related liabilities, for [four] months (with an invalid promise of a [five] year term and option of renewal)" and says that the effect of the Referee's Report is that they obtained Waterwood's "satisfaction of their pre-'lease' liabilities, assumption and satisfaction of substantial further liabilities for the benefit of the business and provision of bookkeeping and management services for those [three] months for just $4,197".
3. Waterwood accepts that neither the hearing of the reference nor the present application is the occasion for criticism of the findings of Pembroke J in the Primary Judgment. In particular, it is accepted that both parties and the Referee were required on the reference (and the parties are again required on this hearing) to accept those findings which were legally indispensable to the conclusion that only the claim to restitution succeeded (citing Blair v Curran (1939) 62 CLR 464 at 532 per Dixon J). Waterwood also accepts that the parties (and the Referee) needed to accept, construe and give those findings practical application. However, Waterwood says that, beyond those findings, the Referee was (and this Court is now) required to make its own findings.
4. Waterwood identifies a number of errors in the Referee's Report as follows.

Error as to the scope of the reference

1. As adverted to above, Waterwood maintains that the scope of the reference was broader than an assessment of the amount of restitution required. Waterwood says that what his Honour found was that Waterwood was entitled to an "accounting between" the parties in circumstances where it may thereby obtain "fair and just compensation for a benefit which has been accepted …where there is no applicable genuine agreement…" (this being a reference to his Honour's reasons at [35], in which his Honour quoted from Pavey & Matthews Pty Ltd v Paul (1986-7) 162 CLR 221; [1987] HCA 5 (Pavey & Matthews) as extracted above).
2. Waterwood notes that, while the pleading of the restitution claim was said to be "narrow" and related to unjust enrichment "by the plaintiff's satisfaction of their liabilities", his Honour noted that the parties "desire an accounting between themselves" (referring to [35] of the Primary Judgment). Thus, it is submitted that, ultimately, the order of referral was not so "narrow"; and that it required an enquiry and report on "the question of accounting between the parties" and "assessment of the amount of restitution (if any), to which the plaintiff is entitled…".
3. The complaint here made by Waterwood is that (referring to [16] of the Referee's Report), the Referee construed the reference as limited to "the Plaintiff's satisfaction of liabilities", which Waterwood says followed on from "a somewhat obscure rejection of Mason and Carter's consideration of the scope of unjust enrichment claims" (see at [15] of the Referee's Report). In this regard, Waterwood notes that the decision of Windeyer AJ in A&M Green Investments Pty Ltd v Progressive Pod Properties Pty Ltd [2011] NSWSC 502, to which the Referee there referred, was overturned on appeal (see Progressive Pod Properties Pty Ltd v A & M Green Investments Pty Ltd [2012] NSWCA 225) and it is said that the relevance of Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635; [2008] HCA 27 (Lumbers v W Cook Builders) to a claim by Waterwood was undisclosed.
4. It is further noted that it does not appear that the Referee found any of Waterwood's claims to be outside the terms of reference but it is suggested that this "perceived limitation" on the terms of reference led the Referee to fail fully to consider Waterwood's entitlement to restitution for benefits evidently received and requested by the defendants (it is said "based upon his own undisclosed, legal and factual construction of some of its claims").

Error as to relevance of the parties' intentions

1. Waterwood submits that the Referee misdirected himself that the parties' intentions as to the effect of their dealings and actions were irrelevant (at [12] and [14]). In this regard, it is submitted that Pembroke J's finding that the lease of the hotel business was unenforceable (for want of title of the "lessor" - see at [11] of the Primary Judgment) did not mean that the lease was prima facie or at all to be ignored in determining whether a benefit was accepted (by KOP, MOOT or their mutual sole director, Mrs Xu) (cf the Referee's Report at [14]). It is noted that (at [35] of the Primary Judgment) his Honour said the situation was not unlike that in Pavey & Matthews in which the obligation was described as one "to pay … compensation for a benefit which has been accepted [under an unenforceable agreement]" (quoting Deane J in Pavey & Matthews at 256).
2. Waterwood points out that Deane J in Pavey & Matthews noted (at 257) that the unenforceability of the contract did not render it "irrelevant" and that it remained evidence "on the question whether what was done was done gratuitously" and in "many cases, such as where the claim is for money … paid, the obligation to make restitution will plainly involve the obligation to pay the precise amount … paid. In those cases where a claim for a reasonable remuneration or price is involved, the unenforceable agreement may … be referred to as evidence, but again as evidence only, on the question of the appropriate amount of compensation".
3. Waterwood contends that, in the assessment of the restitution here to be made, the intentions of the parties as evidenced by their unenforceable agreement are therefore clearly relevant. It is submitted that an agreed contract price is evidence of the market rate and, in the absence of evidence of the market rate, the Court must fix a reasonable sum as best it can (citing an unspecified edition of Mason and Carter's text, The Law of Unjust Enrichment at [1421]-[1430]; and see Independent Grocers Co-operative Ltd v Noble Lowndes Superannuation Consultants Ltd (1993) 60 SASR 525 at 559 per Matheson J). It is said that the Court presumes a reasonable sum to be what would have been payable under "a normal commercial arrangement" for managerial services rendered; it may have regard to earnings, which would have been earned, if the contract was not void with a "predisposition to fulfil the expectation of the parties" at the time of the request for the services (citing Brenner v First Artists' Management Pty Ltd [1993] 2 VR 221 at 263-264 per Byrne J).

Error as to ownership of money in MOOT's bank account

1. It is noted that the Referee found (referring to [17] of the Referee's Report), that "the parties relationships include inter alia the fact that in law the defendants, not the plaintiff, owned the funds transferred from the defendants' bank accounts"; and it is said that, consequently, the Referee gave Waterwood no credit for the satisfaction of liabilities of the defendants incurred before or during the term of Waterwood's conduct of the business, irrespective of the source of that money in the working cash left in the MOOT account by the defendants, for which they demanded credit from Waterwood on adjustment, or afterwards in the labour of the Waterwood's employees or direct contractors or the staff inherited from the defendants and as managed by Waterwood.
2. It is said that while Pembroke J opined (referring to [20] of the Primary Judgment) that, by reason of payments having been made from the bank account in MOOT's name, Waterwood had not "expended any of its own funds", his Honour expressly made no finding to that effect. It is submitted that, in context, his Honour was there talking only of the legal, not beneficial, title to the account from which moneys were paid.
3. It is noted that Pembroke J found (at [19] of the Primary Judgment) that Waterwood intended to conduct the business for the term "through and with the banking facilities of … [MOOT] and in its name". It is submitted that all the evidence as to the intentions of the parties as to ownership of money left in the account at lease commencement (being 1 March 2015), including deposits for events yet to be provided and of money subsequently added to the account from accounts payable or Waterwood's labours on its own account, pointed to it being beneficially held for Waterwood. It is said that, from lease commencement, Waterwood was regarded by the parties as responsible for the conduct of the business and all its liabilities but also entitled to all its proceeds and to an adjustment reflective of the ultimate division of responsibility between the parties for liabilities and provision of services as of 1 March 2015.
4. Waterwood points to the fact that, in cross-examination on the reference, Mrs Xu's daughter acknowledged that payments for the business from the bank account prior to 1 March 2015 were listed by Waterwood and submitted to her for authorisation with approval of her mother and afterwards there was no "need to authorise because [Mr Lye] is operating the account" (see the transcript of the reference hearing at 9-10).

Defendants' submissions as to the adoption of the Referee's Report

1. Before turning to the respective parties' submissions as to the particular claims, it is useful to summarise the general position of the defendants in relation to the Referee's Report.
2. As adverted to above, the defendants seek orders that: the Referee's Report be adopted in whole under r 20.24(1) of the UCPR; the second defendant, MOOT, pay Waterwood the sum of $4,197.12; Waterwood pay the defendants' costs of the proceedings, including the costs of the reference hearing but excluding those of the cross-claim (as to which it is contended that there should be no order as to costs); and the proceedings be otherwise dismissed. In summary, the defendants say that Waterwood fails because it "did not even vaguely establish any entitlement to restitution".
3. In relation to Waterwood's claim for $427,100.99, the defendants emphasise the following matters: that between 5 March to 5 June 2015, Waterwood, through the controlling mind of Mr Lye, operated the business using the bank account of MOOT (referring to the Primary Judgment at [20]); trading revenue was banked into MOOT's account; the business expenses, salaries and wages were paid from the MOOT bank account (referring to the Primary Judgment at [20]); and it was not apparent that Waterwood expended any of its own funds (although no finding was made as to this) (again, referring to the Primary Judgment at at [20]).
4. In short, the defendants say that the parties had a three month business relationship during which time there was no evidence that Waterwood spent any of its own money in running the business (other than $4,197.12). Indeed, they say that the evidence established the very opposite, namely that expenses were paid from MOOT's bank accounts.
5. The defendants argue that it is against these facts that Waterwood's claim should be approached, namely: a claim for repayment to it of $427,100.99 which was never its money and which it never expended. It is submitted that Waterwood does not seek restitution for unjust enrichment; rather, it seeks "unjustified enrichment".
6. It is noted that the genesis of the claim for restitution is contained in [30] of the amended statement of claim filed on 16 July 2015 (which I extract in due course below). The defendants say that they accepted before Pembroke J (as they did before the Referee) that restitution is available if Waterwood paid MOOT's liabilities. However, they say that the first element of such a claim is that Party A (i.e., Waterwood) expended its money. Following on from this, they say that this is where the entirety of Waterwood's claim failed and so fails (other than as to $4,197.12); namely, that the hotel's expenses during that brief three month period were not paid by Waterwood using Waterwood's money.

Determination

1. As to the scope of the reference, and hence the scope of the Referee's Report, what the Referee was directed to enquire and report upon was "the question of accounting between the parties and assessment of the amount of restitution (if any), to which the plaintiff is entitled in accordance with the findings of the Court in the [Primary Judgment]…" (emphasis added). That is, in its terms, the order required that the enquiry and assessment to be made was one predicated on findings having been made (presumably, but not necessarily limited thereto, in relation to the restitution claim) in the Primary Judgment.
2. On one view, what is reflected at [35] of the Primary Judgment is simply an acceptance by his Honour that Waterwood should have the opportunity to establish whether (and to what extent, if at all) the defendants had been "unjustly enriched by the plaintiff's satisfaction of their liabilities", this being the "narrow" basis on which the restitution claim had been pleaded and the parties having "recognised[d] the need for such an outcome" and "desir[ing] an accounting between themselves".
3. On that basis, his Honour's stated satisfaction that the parties should have that "opportunity" suggests that what his Honour there contemplated was that the Referee should determine the extent to which (if at all) Waterwood had discharged, using its own funds, any liabilities of the defendants (his Honour seemingly accepting that, in the circumstances of the case, the defendants would be unjustly enriched to the extent that Waterwood had in fact discharged their liabilities). That is, in other words, that it was to be a more limited factual enquiry into which the Referee was to enquire and on which the Referee was to report (contra a more general enquiry as to whether the "unjust" factor required of an enrichment claim had been established). That this is so seems indicated by the extract quoted by Pembroke J (at [35] of the Primary Judgment) of the judgment of Deane J in Pavey & Matthews (at 256) (namely, the reference in that passage to the quasi-contractual obligation to pay fair and just compensation for a benefit which has been accepted). That seems to me what must have been intended by his Honour's reference to an enquiry and assessment of the restitutionary claim "in accordance with" the findings in the Primary Judgment (and, indeed, this seems to be how the Referee understood his task on the reference).

Issues raised on the specific claims in the Plaintiff's Schedule

1. I turn now to the particular amounts claimed in the Plaintiff's Schedule and the complaints made by Waterwood (and responses by the defendants) as to the conclusions reached by the Referee in relation to these amounts.

Claim 1(a): $15,000 deposit

1. This claim relates to the sum of $15,000 that was advanced by Mr Lye to Waterwood and paid to KOP originally as a "holding deposit" for the "lease" and then subsumed in the "bond" for the "lease". It was paid in three instalments in January 2015.
2. The defendants opposed (and the Referee at [19]-[20] of the Referee's Report rejected) this claim on the basis that Mr Lye had been repaid this amount out of a MOOT bank account a month after lease commencement.

Waterwood's position

1. Waterwood says that that payment could only satisfy the loan from Mr Lye to Waterwood; and that the moneys used were the proceeds of the conduct of the business by Waterwood, to which it was entitled as against the defendants. It is said that MOOT's bank statement for the period from 3 March 2015 shows that by the time the payment was made to Mr Lye, Waterwood had deposited over $360,000 into the account from the proceeds of its conduct of the business and $58,000 from Waterwood itself (from a balance of $118,596 on the hand-over date, 5 March 2015).
2. It is said that, in any event, the $15,000 was "plainly repayable" by KOP, not MOOT, and that it cannot be suggested that Waterwood, in causing the payment to be made from the MOOT account to Mr Lye, did so with the intention of satisfying KOP's liability. It is said that nor can it be claimed back by MOOT from Waterwood because Waterwood was clearly authorised to make payments from the account in MOOT's name for Waterwood's own purposes and benefit. It is thus said that KOP's liability remains unsatisfied and it is unconscionable for the defendants to claim the benefit of Waterwood's "own labour" as satisfying that liability.

Defendants' position

1. The defendants, as noted above, accept that Waterwood did pay the $15,000 the subject of this claim (as a holding deposit). They say that, as such, this was not the payment of MOOT's liabilities - it was the payment of Waterwood's obligation under the '"lease" (referred to by the defendants in their submissions as the "business lease").
2. The defendants note that, during the reference, they read the affidavit of Ms Ming Xu, the daughter of Mrs Xu, a bank officer who deposed (at [9] of her affidavit) that in March 2015 there was a transfer of $15,000.00 from the "Mirage Cash" account to Mr Lye. The defendants in their submissions to the Referee noted that MOOT had a bank account (number ending 5408), which was commonly referred to as the "Mirage Cash" account, and they submitted that: However, there has already been restitution of this amount. On 30 March 2015, being a time when Mr Lye had control of the Defendants' bank accounts, there was a transfer of $15,000 from the Mirage Cash account to Mr Lye. The record of that transfer appears at page 22 of Exhibit MX-1. [Emphasis omitted]
3. The defendants say that the $15,000, paid from two sources (Mr Lye's accountancy practice AGC Advisory Pty Ltd (AGC Advisory) and Mr Lye), was repaid and that this is precisely what the Referee has found (referring to [20] of the Referee's Report): 20. In submissions on the day of the hearing of the reference it was suggested that this repayment was from monies held in trust by [MOOT] for the plaintiff. I was not referred to any evidence in support of this claim and give [h]is Honour's findings, including at paragraph 32, I do not accept that the money was held in trust. The money was the money of the second defendant. Accordingly I do not accept this claim.
4. The defendants say that Waterwood is here repeating the argument made at the reference in arguing that the money in the MOOT account was really its money because a trust of some kind had arisen over that money. They note that the Referee said (at [20] of the Referee's Report), as to this argument, that "I was not referred to any evidence in support of this claim". The defendants say that Waterwood, in its submissions, does not suggest there is any such evidence yet it still makes the same unsupported allegation. It is submitted by the defendants that, while there are a number of different ways in which trusts are created, a "trust by mere assertion" is not one of them.

Claim 1(b): bond

1. This claim was that the total rental "bond" paid was $45,000, of which $15,000 was supplied by the "holding deposit" (which I have just outlined); and the balance of $30,000 was paid to KOP from the MOOT account on 30 March 2015.

Waterwood's position

1. Waterwood says that this claim was opposed (and rejected) on the basis only that the money was paid from the MOOT account and was the proceeds of MOOT's business (referring to [21] of the Referee's Report). It is said that crucial to that determination appear to be findings from the bank statement that: $58,000 had been paid to Waterwood by MOOT (from its account) on 30 March 2015 but it is submitted that the money moved in the opposite direction from Waterwood to MOOT; and that a total of $50,000 had been transferred from the MOOT account to Waterwood on 11 March 2015 and again on 18 March 2015. It is said that that leaves a balance of over $300,000 deposited into the account by Waterwood as proceeds of its conduct of the business "enhanced by its own bundle of rights and interests" prior to the payment out to KOP for the bond.
2. Waterwood submits that it was entitled to restitution of this money paid from the repository of the proceeds of its management of the business, to which it was intended by the parties to be wholly entitled to use for its benefit as it wished.

Defendants' position

1. As to this item, the defendants maintain their position that this sum of $30,000 was never Waterwood's money. It is noted that in their submissions at the reference the defendants stated: 25. The balance of the rental bond (a further $30,000) and some amounts for "rent" are said by the Plaintiff to have been paid as part of the sum of $113,333.33 paid from the Second Defendant to the First Defendant on 30 March 2015. Of this, it must be said that: (i) this was a transfer between the Defendants' bank accounts that did not concern the Plaintiff's funds; and (ii) while $58,000 had been transferred from the plaintiff to the Second Defendant on the same day, as set out above, that transfer occurred in circumstances where Mr Lye had caused $100,000 to be transferred from the Second Defendant to the Plaintiff. The $58,000 transferred back was repayment of the Second Defendant's own funds, being income of the hotel business, to which the Plaintiff was not otherwise entitled. 26. The Plaintiff is not entitled to obtain restitution in respect of these funds as the Second Defendant was not "unjustly enriched". Rather, it was repaid its own money. [Emphasis omitted] and that the Referee accepted these submissions (at [21] of the Referee's Report): 21. Paragraph 1(b) of the plaintiff's claims. Claim 1(b)(i) is a repeat of the claim I have just dealt with and do not accept. Claim 1(b)(ii) is a claim for $30,000 on 30/3/2015 paid as a rental bond. This was a part of a payment of $113,333.33 paid from the second defendant to the first defendant on 30 March 2015. There had been payment of $58,000 paid to the plaintiff by the second defendant on the same day. However that was merely the repayment of part of $1000,000 paid by the second defendant to plaintiff and was thus a repayment of the second defendants own funds. In these circumstances there has been no use of the plaintiff's funds. It was a payment of the funds owned by the second defendant. [Emphasis omitted]
2. The defendants say that Waterwood has identified no error; and it merely repeats its argument that the defendants' money was really its money by stating that the defendants' money was "enhanced by [the Plaintiff's] own bundle of rights and interests". The defendants dismiss this statement (not without force, in my opinion) as rhetoric.

Rent for March and April 2015 and Waterwood's position

1. This claim was that on 30 March 2015, of the transfer to KOP from MOOT's account of $113,333.33 and after payment of the bond, $83,833.33 was paid towards the "rent" for the months of March and April 2015.
2. This claim was opposed (and rejected), it is said solely, on the basis that the money came from MOOT's account (referring to [22] of the Referee's Report).
3. Waterwood says that the money came from the proceeds of Waterwood's labours; that Waterwood was authorised to pay those funds out of the account for its own benefit; and that it was accepted by KOP as payment by Waterwood in satisfaction of the assumed obligation between them under the "lease". Consequently, it is said that with the invalidation of the lease, it is prima facie repayable by KOP to Waterwood. It is said that the defendants bear the onus to demonstrate (but have not alleged and cannot demonstrate) any counter-vailing benefit to Waterwood for the money because it represents the product of Waterwood's own labour.
4. On 10 April 2015, the balance of the "rent" payable for April was paid by transfer of $17,500 to KOP from the MOOT account. It is said that, by the time that payment was made, more than $450,000 had been deposited into the account by Waterwood as proceeds of its conduct of the hotel business. Again, it is submitted that the money is repayable by KOP and MOOT has "no viable claim" to a credit for it, coming from money received from Waterwood for the benefit of Waterwood.

Rent for May and June 2015 and Waterwood's position

1. On 3 June 2015, Waterwood claimed from KOP by email a credit of $50,833.33 against the adjustment figure accepted by the defendants for rent for the months of May and June 2015. The claim to restitution of this amount was opposed (and rejected) on the basis that no money was actually paid.
2. Waterwood says that the sum of $202,873.27 had been agreed on 27 and 28 May 2015 to be owed by the defendants to Waterwood as confirmed in Ms Lucy Lu's email of 28 May 2015. It is noted that, while Pembroke J said (at [21] of the Primary Judgment) that "final agreement had not been reached", that was only because additional invoices, not previously available but foreshadowed in discussion by the parties at the time of agreement on the $202,873.27, had been located and raised afterwards by Mr Lye in his email of 3 June 2015 totalling another $12,117.67. It is noted that Mrs Xu said that she had offered on 5 June 2015 to sign a "written confirmation" of agreement on an adjustment of "about $300,000" in Waterwood's favour in accordance with Ms Lucy Lu's advice (referring ro Mrs Xu's affidavit of 5 January 2017 at [108]-[111]). It is said that Mrs Xu clearly understood there was agreement on a substantial amount exceeding $200,000.
3. Waterwood says it is entitled to a refund of the rental credit claimed in light of the invalidation of the lease under which it was notionally "paid", or alternatively, to the benefit of the defendants' admission as to the amount it owed Waterwood for satisfaction of its liabilities.

Defendants' position in relation to rent claims

1. As to the "rent" claims, the defendants' response is the same as the preceding items. They say that the funds were the defendants' own funds. It is noted that the Referee dealt with this claim (at [22] of the Referee's Report): 22. Claim 1(c) is for Rent paid. (i) is for the balance of $83,333.33 paid from second defendant to the first defendant. (ii) is for March to April of $50,833.33 paid from second defendant to the first defendant. (iii) is said to be a credit on 3 June 2015 rent for May and June. As to (i) and (ii) there is no use of the plaintiff's funds. As to (iii) as there was no valid lease and no use of anyone's monies there can be no valid claim.
2. It is said that Waterwood (at [29]-[33] of its written submissions) raises a number of arguments that all have the same purpose: an attempt to treat the defendants' money as its own.
3. As to the first of those arguments, the defendants respond as follows. First, as to the submission that the money "came from the proceeds of the Plaintiff's labours", the defendants say that the fatal problem with this argument is that the claim in restitution pursued by Waterwood was only for the payment, by Waterwood, of the defendants' liabilities; it was not a claim for quantum meruit or quantum valebat. It is said that, even if such a claim could be pursued, it does not have the effect of changing the ownership of money - it merely creates an obligation for a defendant to pay a sum of money akin to, but not legally characterised as, damages.
4. As to the balance of the arguments (referring to [30]-[33] of Waterwood's written submissions), it is simply said that these "are again all misconceived".

Claim 2(a): payment of MOOT's tax

1. As to this claim, Waterwood says that there was no dispute that, on 5 June 2015, Waterwood paid MOOT's tax liabilities totalling $138,631 for the period prior to the commencement of the "lease".

Waterwood's position

1. It is said that the payment was made despite the defendants' failure to pay the agreed adjustment sum or any of it (due at most 28 days from commencement), upon demand of Mrs Xu with the threat of repossession of the hotel; but that, nonetheless, she proceeded to give notice of termination of the lease and expelled Waterwood from the hotel.
2. It is said that because of the peremptory nature of the defendants' demand for payment of the tax and the fact that it exceeded the balance of the MOOT account at the time, it was paid "piecemeal" (referring to as described by Mr Lye in his affidavit of 19 August 2015 at [120] and of 17 January 2019 at [6]).
3. It is said that the sum of $32,492 was paid by Mr Lye's sister and a contractor of Waterwood to work in the hotel through her company, Aveton Wealth Management Pty Ltd (Aveton Wealth) (Ms Bianca Lye). It is noted that, because she is not a party to the proceedings, the Referee rejected this part of the claim. However, to that disposition, it is here submitted that in the circumstances described in evidence of both parties, the money was paid by Ms Lye as agent of Waterwood at the request of Waterwood's director on behalf of Waterwood; to meet a liability of MOOT to the Australian Taxation Office (ATO); as demanded by the defendants to be satisfied by Waterwood under the "lease" and as accepted by the defendants as satisfying that obligation of Waterwood and the liability to the ATO of MOOT; and thus giving rise to an obligation in Waterwood to refund it to her, as a loan or otherwise.
4. In the circumstances, where MOOT was found not to be entitled to the money by reason of the invalidity of the "lease", it is said that MOOT is clearly liable to refund it to Waterwood, rather than Ms Lye, as the payer at law. It is said that it is irrelevant what arrangements may have been made between Waterwood and Ms Lye for repayment of her advance to it. It is noted that Ms Lye was a witness for Waterwood in these proceedings and so it is said that "obviously" she supports Waterwood's entitlement to claim back the benefit of her payment; and, in these circumstances, that it was "perverse and unreasonable" to reject the claim.
5. The balance of the tax liability of $106,139 was paid to the ATO from the MOOT account. However, it is said that, in order to be able to do that, immediately beforehand Waterwood made transfers totalling that sum from its own bank account held at Australia and New Zealand Banking Group.

Defendants' position

1. The defendants note that this claim is for $138,631.00 for the alleged payment of MOOT's tax liabilities and that the sum comprised of two payments: $106,139.00 paid from the MOOT account to the ATO; and $32,492.00 allegedly transferred from Ms Bianca Lye's bank account to the ATO.
2. As to the $106,139.00, the defendants here repeat their short submission made to the Referee: (i) in respect of the tax liabilities at Item 2(a): i. the $106,139 was transferred from the Second Defendanfs own account to the ATO. While that transfer was made on the same day as several other transfers between the Second Defendanfs Mirage Cash account and the Plaintiffs bank account, as set out above, those transfers occurred in the circumstances of the series of transactions as set out above from which the Plaintiff benefited in the sum of $14,140, and those transfers were of funds earned by the Second Defendanfs hotel business …
3. As to the payment by Ms Bianca Lye, the defendants point out that she is not a party to these proceedings and that the Referee rejected this part of the claim on this basis alone. The defendants say that Waterwood does not identify any error (because this finding was beyond argument); and instead (at [35] of its submissions) it seeks to describe her as the "Plaintiff's agent and adding "a grab-bag of other urgings". The defendants say that this is all without any evidence. They say that Ms Bianca Lye gave no evidence at the reference. They point to the observation by the High Court that "'[n]o word is more commonly and constantly abused than the word "agent"'" (Cassegrain v Gerard Cassegrain & Co Pty Limited (2015) 254 CLR 425; [2015] HCA 2 at [32] per French CJ, Hayne, Bell and Gageler JJ., quoting Kennedy v De Trafford [1897] AC 180 at 188 per Lord Herschell). They say that Waterwood has engaged in this very heresy.
4. The Referee rejected Waterwood's claim as follows (at [23] of the Referee's Report): 23. Claim 2 (a) is for payment of tax liabilities of [MOOT] in the sum of $138,631. $32,492 was paid by Bianca Lye, who is not a party to these proceedings, and thus is not recoverable. The balance of $106,139 was paid from the second defendant to the ATO. This was said to be after three particular transfers from the plaintiff to the second defendant. If one takes into account all the transfers between the second defendant and the plaintiff including the ones making up the $106,139 the plaintiff is ahead by $14140 …

Claim 2(b): tax paid on earnings after lock-out

1. Waterwood (perhaps somewhat surprisingly given the submissions here made) says that this claim of $3,126.90 for tax paid on income of the business, when conducted in the name of Waterwood after the lock-out, was "understandably rejected" by the Referee (referring to [25] of the Referee's Report) on the basis that it was not a liability of the defendants.

Waterwood's position

1. Nevertheless, it is said that the Referee's rejection is only supportable on the "narrow" approach taken by the Referee, rather than that taken by Waterwood overall to the assessment of the restitution (contended to be) due to Waterwood from its conduct of the hotel business.
2. It is said that Waterwood has taken the "more common sense and just approach" of adding back in favour of the defendants all the income of the business during the period of its conduct by Waterwood and then claiming from the defendants its costs of making that income for them. It is said that, if the defendants are credited therefore with the gross income received by Waterwood, the income tax paid by Waterwood on that income is logically an expense incurred in relation to income of the defendants and therefore a liability properly of the defendants satisfied by Waterwood.

Defendants' position

1. In relation to this claim, the defendants note that they made the following submission to the Referee: (ii) in respect of the tax liability at Item 2(b), this is a liability of the Plaintiffs. It is not obvious how the Defendants have been unjustly enriched by the Plaintiffs payment of its own tax liability based on its receipt and retention of the profits generated by the Second Defendant's business. As set out above, the Plaintiff has retained funds transferred to it from the Second Defendant's bank account, and from the EFTPOS, cash and cheque revenue of the Second Defendant in the period from 19-30 June 2015.
2. The Referee rejected this claim on the basis that "[t]his is a payment of the plaintiff's own tax liability by the plaintiff and cannot lead to a claim".
3. The defendants say that, not only does Waterwood not identify any error, it states (at [37] of its submissions) that the claim was "understandably rejected by the Referee at (25) on the basis that it was not a liability of the Defendants". As to the argument then advanced (at [38] of Waterwood's submissions) based on fairness, the defendants say that there is not a claim in restitution when Party A pays Party A's own liability.

Claim 2(c): wages paid

1. This claim relates to payment of wages of employees of the hotel. Those payments were made in the name of MOOT and were paid to a total of $313,359.67 during the period of Waterwood's conduct of the business from monies in the MOOT account.
2. The claim was substantially rejected on the basis that the payments were "from the second defendant's funds" (see at [26] of the Referee's Report); however, a relatively nominal amount of the wages claimed was paid directly by Waterwood, totalling $4,197.12, which the Referee allowed.

Waterwood's position

1. Waterwood here complains that the basis for that conclusion is not disclosed (it being said "presumably" to be "just because they were made from the account in [MOOT]'s name"). Waterwood further complain that no investigation of the source or beneficial title to the money taken from the account was undertaken. It is said that, throughout the period, all such money was held for Waterwood as the source of the funds and the payer into the account. It is said that, if it had thus become MOOT's money, then MOOT prima facie benefited from it without consideration in a corresponding amount from the proceeds of Waterwood's management and enhancement of the business and is liable to make restitution. It is submitted that, however the payment of the wages is construed, it is sourced in Waterwood and thus Waterwood is entitled to recompense for the defendants' resulting unjust enrichment.

Defendants' position

1. The defendants' submission to the Referee was that "[t]hese are liabilities of the Second Defendant, paid by the Second Defendant. The Plaintiff is not entitled to be reimbursed for money it has not expended".
2. As indicated above, the Referee rejected the claim (at [26] of the Referee's Report): 26. Claim 2(c)(i). These are wages of the hotel employees. They are paid from the second defendants' funds and thus there can be no claim…
3. The defendants say that Waterwood again fails to disclose any error by the Referee and notes that (in [39] of its written submissions) Waterwood says that funds in the MOOT bank account, used to pay MOOT's employees, were "sourced in the Plaintiff and that it is entitled to recompense for the Defendant's resulting unjust enrichment". It is said that this submission is "meaningless".
4. As to claim 2(c)(ii) for payment of $4,197.12 by Waterwood to MOOT's employees, the defendants note that this is the only part of the claim upon which Waterwood succeeded. The defendants say that they do not challenge the finding (and particularly do not do so bearing in mind its de minimis nature).

Claim 2(d) payments to contractors

1. This claim was rejected on the basis of lack of evidence of the making of the payments (see at [27] of the Referee's Report) but it is here said by Waterwood that the making of those payments was admitted by the defendants in the Defendants' Response (referring to 2 and (d)). It is noted that the opposition was confined to: the source being, again, the MOOT account and "the Defendants' hotel business" (a matter already addressed in the above submissions), and that the arrangements between Waterwood and the recipients of the payments claimed were "not disclosed to and did not bind the Defendants".

Waterwood's position

1. Waterwood says that the agreements, under which Waterwood assumed a liability on behalf of the business conducted in MOOT's name for the services of AGC Advisory and Aveton Wealth (Ms Bianca Lye and Mr Robert Chong), "indisputably" provided to that business (noting that their presence and work at the hotel is mentioned throughout the evidence of both sides at trial) and therefore on its behalf were put into evidence on the reference. It is submitted that this evidence showed the following.
2. First, (referring to p 42 of the exhibit to Mr Lye's affidavit of 17 January 2019) the letter of engagement of AGC Advisory from 1 March 2015 to 30 June (scil.) 2015 at an agreed rate of $80,000 per annum plus GST (signed by Ms Bianca Lye on behalf of Waterwood), for: … bookkeeping and taxation services, …including full time (at least 40hrs pw) bookkeeping services, weekly payroll services up to 40 employees and company tax services, such as payroll tax, business activities statement and annual company tax lodgement" and "monthly financial statements.
3. It is noted that Mrs Xu and her husband (Jack) had previously agreed with Mr Lye the bringing in an assistant to do bookwork while he did management work. It is said that Mrs Xu "unbelievably" said she approved of "interns" for "work…experience", not hired or to be paid, but on the very next paid AGC Advisory an invoice of 24 December 2014 there was included the item "20hrs professional services; 2 staffs".
4. Second, (referring to p 46 of the exhibit to Mr Lye's affidavit of 17 January 2019) that the service agreement with Ms Bianca Lye (performed through Aveton Wealth and her husband, Mr Robert Chong) agreed on a fee from 1 March 2015 of $140,000 per annum plus GST to perform the list of management, recruiting and supervisory services to the hotel business (see at p 59 of the exhibit).
5. It is said that there was no dispute at the reference that Mr Lye had been requested by Mrs Xu to provide, and that he did expend the amount of time claimed in providing, bookkeeping and taxation services for the hotel business, as well as providing management services to the hotel with which he was "entrusted" by Mrs Xu (referring to [6] of the Primary Judgment). It is said that the rate applied is that which the defendants paid him through his accounting practice company prior to the "lease". It is said that there was no dispute that the rates charged by him and Aveton Wealth were fair for the time, and which it was not disputed that they spent providing the services contracted.

Defendants' position

1. The defendants note that this was a claim in relation to payments made by Waterwood to various "contractors", namely: $58,076.76 to Aveton Wealth for "hotel general management services"; $26,769.23 to AGC Advisory (i.e., Mr Lye's firm) for "bookkeeping, payroll and taxation services"; and Ms Bianca Lye's expenses of $37,259.00 for "moving from Malaysia to take up position of Hotel General Manager".
2. The defendants made the following submissions to the Referee in relation to those claims.
3. First, as to AGC Advisory, that the evidence of Mr Lye read at the reference (being Mr Lye's affidavit affirmed 17 January 2019 at p 4) disclosed a contract between Mr Lye's accounting practice (it will be recalled, AGC Advisory) and Waterwood dated 5 March 2015. It is said that it was immediately apparent from this that this was Waterwood's own liability and it was argued that how the defendants must pay Waterwood for a liability assumed by Waterwood was never made clear.
4. Second, as to the amount referable to Ms Bianca Lye (also known as Kah Yee Lye), it is noted that Mr Lye's affidavit (at p 46) set out a "Service Agreement" document between Waterwood and Ms Lye; and it was said that that agreement established that this is, or was, a liability of Waterwood.
5. Third, it was submitted that there was no evidence advanced by Waterwood that it paid these contractors any amounts from its own funds.
6. It is noted that the Referee rejected this claim as follows (at [27] of the Referee's Report): 27. Claim 2 (d) for payment of contractors. The claims are for services by various contractors, Aveton Wealth Management (Bianca Lye) $58076.76, AGC advisory (Mr Lye) $26,769.23, and Bianca Lye S37259. There is no sworn evidence of payment and there are no records identifying the payments. I reject the claim.
7. Insofar as Waterwood (at [46] of its submissions) states that "there was no proper basis for rejecting this claim and it ought to have been allowed", the defendants say that there was a complete absence of evidence for these claims.

Claim 2(e): payment of suppliers for goods and services to the hotel

1. It is noted that this claim was again rejected by the Referee essentially on the basis of lack of evidence of payment. Waterwood here complain that that was not in issue on the Defendants' Response (referring to 2 and (d)) and that copies of invoices and receipts for such supplies (being exhibit 'I') extended the exhibit to the affidavit of Mr Lye of 17 January 2019 to 926 pages. It is also noted that a subsidiary ground was that payments in the name of MOOT were likely made from the MOOT account. It is said that the only defence was, again, that the payments were made from the MOOT bank account and lack of authorisation of the contracts.

Waterwood's position

1. In relation to the payments in MOOT's name totalling $530,883.23, Waterwood repeats the submission previously made as to its entitlement to the money paid into the MOOT bank account and used to satisfy such liabilities applies.
2. In relation to the payments in Waterwood's own name totalling $26,868.07, it is said that there could be no question of them having been paid from the MOOT account because the evidence was that Waterwood was denied access to it in the period of its return to the hotel and discharge of the interlocutory injunction of Kunc J (being 12 to 30 June 2015), when such supplier agreements were entered as a result in Waterwood's name. In any event, it is noted that Waterwood's tax return (admitted at p 28 of Mr Lye's exhibit on the reference) recorded (at p 29) the payment of $26,299 in "cost of sales" during this period. It is said that, although Mr Lye was cross-examined upon this return at the reference hearing, no doubt as to its correctness or authenticity was put to him (see the transcript of the reference hearing at 4-5).
3. Following, Waterwood contends that there is no basis for denying restitution for the benefit of Waterwood's satisfaction of the liability of MOOT to meet the expense of these suppliers of goods and services to the business in the circumstances of the unenforceability of the "lease".

Defendants' position

1. The defendants note that this claim was for the payment of suppliers comprising two categories: MOOT's suppliers, comprising $530,883.23; and Waterwood's suppliers, comprising $26,768.07.
2. As to the first of those categories, it is said that these are avowedly the liabilities of the second defendant. The defendants say that Waterwood did not adduce any evidence of payment by anyone for these alleged liabilities, let alone payment by Waterwood. It is said that it is fair to assume that, in a restitutionary claim where Party A contends it is entitled to restitution because it paid Party B's liabilities, it would adduce evidence that payment was made by someone. It is said that there was no evidence of payment at all and that the same observation applies to the claim for payments alleged to have been made by Waterwood.
3. The Referee dealt with those claims as follows (at [28] of the Referee's Report): 28. Claim 2 (e) for suppliers of goods and services to the Hotel. Claim (i) is for suppliers in the name of [MOOT] in the sum of $530,883.23. There is no evidence of payment by anyone and the likelihood is that they were paid by [MOOT] the second defendant. I do not accept the claim. Claim (ii) is for suppliers in the name of Waterwood in tire sum of $26868.07. These were incurred after 5 June and there is no evidence that they have been paid by the plaintiff. I reject the claim.
4. It is said that Waterwood (at [49]-[50] of its written submissions) "sidesteps" the Referee's reasoning (i.e., these were expenses that post-dated Waterwood's termination on 5 June 2015). It is said that, after that date, Waterwood had no involvement in the Second Defendant's hotel business and that there was no error by the Referee.

Claim 3: advance payment of hotel liabilities beyond 30 June 2015

1. Waterwood notes that the response to this claim was of non-admission but that, to the extent the payments may have come from the business or MOOT account, there is no entitlement to restitution.
2. It is noted that the claim was rejected (see at [29] of the Referee's Report) on the basis of lack of evidence of payment. Relevantly in this regard, the Referee rejected Waterwood's spreadsheet showing the payments on the basis that it was not a business record.

Waterwood's position

1. Waterwood points to the affidavit of Mr Lye of 17 January 2019 on the reference in which he deposed (at [11]) to the Excel spreadsheet (annexure J) being "kept by the plaintiff showing the breakdown of routine stocktake payments made... for stock purchases to be supplied after 30 June 2015". It is said that there was no objection to Mr Lye's evidence and he was not challenged as to the authenticity of this document as a business record or otherwise in cross-examination at the reference.
2. Following, complaint is made as to the Referee's conclusion that it was a "compilation", noting that this was neither pleaded nor put to Mr Lye. It is said that, in any event, that would not necessarily deprive it of admissibility or probity. It is said that no reason is given for the Referee's conclusion. Waterwood says that if it is because of the column headed "claim amount", that is not inconsistent with it being a business record of purchases of supplies not yet delivered kept during the course of the business and of claims made on a stocktake of the business as at 30 June 2015. It is said that that column may also have simply been added to the record kept of supplies purchased, but not yet delivered, for the purposes of identifying the extent of the claim (and "it only deletes items"). It is said that such explanations might have been given if Mr Lye had been challenged on the document, but he was not.
3. As to the defence that the payments came from the MOOT account, it is noted that two payments are dated after the expulsion of Waterwood from the hotel and termination of its access to that account. These payments are identified as follows: a) Sandbox 1/7/15 $6,035.67, and b) S&N Simonetta 10/6/15 $1,001.00 Total: $7,036.67
4. It is said that there can be no basis for the defendants' speculation that these payments came from the MOOT account (but that the defence is "misconceived", in any event).
5. Waterwood maintains that there was no proper legal basis for rejecting this claim.

Defendants' position

1. The defendants note that this was a claim for $36,312.12. They say that the sole evidence of this claim was the document at page 774 of Mr Lye's affidavit. It is noted that the affidavit of Mr Lye (at [11]) contended that these represented "routine payments made by Waterwood for stock purchases". The defendants say that there was no evidence that Waterwood made these payments; there was no evidence as to when this document was created; and that it was, as the Referee properly described, a "compilation" spanning alleged expenditure much of which fell outside the date of the parties' relevant relationship (being 5 March to 5 June 2015).
2. The Referee rejected this claim as follows (at [29] of the Referee's Report): 29. Claim 3 is said to be for advance payments made in the period 1 March to 30 June 2015. There is a spreadsheet, which is a compilation and not a business record showing the calculations. There is no evidence that the plaintiff has paid them and I reject this claim.
3. The defendants say that there was no evidence that Waterwood paid any of those expenses. It is further said in this context that Waterwood never grappled with the most fundamental part of the claim it was advancing (that is, the need to establish that it made payments for another party's liabilities).

Claim 4(a): Fees payable to Lit Moon Lye

1. The Defendants' Response denied this claim, alleging that no fees were payable to Mr Lye or no benefit was conferred. Waterwood here notes that the claim was rejected (at [30] of the Referee's Report) on the following bases: lack of "agreement with the Plaintiff" ("by whom unspecified"); that Mr Lye was not a claimant in the proceedings; and lack of evidence of payment.

Waterwood's position

1. It is noted that Pemboke J accepted (at [6] of the Primary Judgment and generally) that Mr Lye was requested to provide management services to the hotel and did provide them himself, as well as through his sister and brother-in-law, as contemplated by the parties in negotiating the "lease". It is said that a liability to make restitution for a benefit received does not require an "agreement" with the party benefited. It is said that, if the Referee was looking for an agreement between Waterwood and Mr Lye, the fact that Mr Lye himself makes the claim through Waterwood indicates clearly that he and Waterwood (for whom he also speaks as its director) accept an obligation between them to pay for the services rendered by him. It is asked, again rhetorically, why would he not be expected to provide the management services through an arrangement for payment by the company, with which the defendants entered into the lease for the very purpose of him providing those services?
2. It is submitted that, given the fact that Mr Lye provided his services on the assumption of the validity of the "lease" to Waterwood, the "obvious inference" is that Waterwood is liable to him for the benefit of those services. It is said that the ultimate beneficiaries of those services, who requested them to be performed by him and accepted his performance of them, are the defendants such that they too are liable for them to him; or, differently, would be if not for Waterwood's undertaking of liability to pay Mr Lye for his services.
3. As a consequence, it is said that, however the formalities of "round-robin obligations" may be considered, the substance of the situation is simply that Waterwood provided services to MOOT through Mr Lye at its request and those services were accepted by it on the assumption of validity of the "lease" and, in the absence of the consideration promised under that "lease" of an opportunity to profit from his hotel management over five to 10 years, the defendants have been unjustly enriched by those management services which they sought. It is said that, with Mr Lye's authority and direction, Waterwood is entitled to claim restitution for his services given in its name.
4. Waterwood says that there is no need for it to pay Mr Lye the amount claimed as representing the value of his services given in its name in order to seek restitution from the defendants. It is noted that Mr Lye's affidavit on the reference stated (at [12]) that he had spent eight hours a day for 87 (working) days between 1 March 2015 and 30 June 2015 performing the work of management of the hotel, which he had previously performed on a casual basis, and additionally supervising the other managers. It is said that for that work as a casual in addition to his bookkeeping and accountancy services, he had previously through AGC Advisory been paid $45 per hour by MOOT, as noted in a pre-lease invoice of AGC Advisory (exhibited as 'K' to his 19 January 2017 affidavit on the reference). It is said that there can therefore be no dispute as to the fairness of the rate on a contract basis.

Defendants' position

1. The defendants note that they made the following submissions to the Referee concerning the claims as to the management fees said to be payable to Mr Lye: 35. Mr Lye was not paid any management fee by the Plaintiff; nor was there any contractual arrangement between Mr Lye and either the Plaintiff or the Defendants for such a fee to be paid. 36. No claim for quantum meruit was made by Mr Lye in the proceedings. The Plaintiff only sought restitution for funds it had expended which unjustly enriched the Defendants. No such funds have been expended in relation to this item.
2. It is noted that the Referee dealt with the claim as follows (at [30] of the Referee's Report): 30. Claim 4(a) being restitution of benefit obtained by the defendants from Management fees payable to Cory Lye in the sum of $31,320. There was no such agreement with the plaintiff. Mr Lye has made no claim in the proceedings and I was taken to no evidence of such funds being expended. The claim is rejected.
3. The defendants say that there was no error; that this claim was nothing more than an assertion; that it should never have been advanced; and it was rightly rejected.

Claim 4(b): balance of business proceeds

1. The balance of the MOOT account at the date of expulsion of Waterwood from the hotel and termination of its access was $11,690.56. This was claimed as the proceeds of Waterwood's conduct of the hotel business for its own benefit.
2. The claim was denied in the Defendants' Response and rejected by the Referee (see at [31] of the Referee's Report) on the basis, it is said solely, that the money was that of MOOT.

Waterwood's position

1. Waterwood here complain that no consideration was given to: the source of the funds in Waterwood's labours; that payment into that account was by Waterwood and was made on the mutual assumption of the parties in reliance on the "lease" and "Supplementary Agreement", that Waterwood was entitled to it and entitled to use that account as a mere repository of its money; and the authority given by the defendants to Waterwood so to use the account for deposits and withdrawals for its own benefit.
2. It is submitted that there is no basis for denying the beneficial title of Waterwood to that money.

Defendants' position

1. The defendants in their submission did not address this claim separately.

Claims 5 and 6: defendants' credit against above claims and calculation of total net claim

1. Claim 5 lists the credits to be given to the defendants on a proper accounting between them and Waterwood against the claimed entitlements of Waterwood (described as "payments made" but said to include liabilities incurred). It is noted by Waterwood that, after allowance of the credits listed totalling $991,259.33 (and reduction of claim 4(a)), the net claim is $427,100.99.

Waterwood's position

1. The Defendants' Response admitted the amounts calculated in credit for moneys on account at commencement of the "lease" and paid into the MOOT account as proceeds of Waterwood's conduct of the business. It asserted a slight increase ($2,263.22) in the credit for proceeds paid into Waterwood's own account but it is said that the evidence in support (Mrs Xu's affidavit at [30] and [33]) was correctly not admitted as such by the Referee (see the transcript of the reference hearing at 2). It is noted that the Defendants' Response further claimed that all the money left in, or deposited in, the account belonged to the defendants and "absurdly" that Waterwood was liable to reimburse it for all that money (including what Waterwood deposited in the account) without stating a basis or alternative method of accounting between the parties.
2. It is noted that the Defendants' Response also made additional claims (in [8]) against Mr Lye of the kind made only against him in its cross-claim (which it is said had been effectively abandoned at trial and which the defendants and the Referee (at [11] of the Referee's Report) accepted on the reference had not been referred).
3. It is said that the credits and calculation were not considered by the Referee, having allowed only $4,197.12 on claim 2(c) in total.
4. Waterwood says that the credits allowed by Waterwood sought to permit a common sense accounting between the benefits and liabilities to the defendants (in claims 1 to 4) of its conduct of the business, as sought and accepted. It says that the following should occur.
5. First, to add back the moneys in the MOOT account of $163,796.25 as at 1 March 2015, being the date of commencement of the "lease", and consequently of accounting between the parties (although Waterwood did not actually receive full control of the account until after the "lease" was signed on 5 March 2015). In the meantime, it is noted that, on 4 March 2015, Mrs Xu transferred $30,000 to KOP's overdraft account and the amount actually inherited from previous management at the end of 5 March 2015 was $118,596.55. It is said that the amount transferred to KOP by Mrs Xu was subsequently taken into account on the adjustment between the parties, to the extent it was agreed, so that if that extent of the adjustment agreement is not applied, the amount "inherited" should be accordingly reduced.

Defendants' position

1. The defendants did not address these submissions separately. They turn on the assumption that there was an error to be adjusted in the final accounting between the parties.

Claim 7: interest

1. The claim for interest on the award was made alternatively pursuant to s 100 Civil Procedure Act or as equitable compensation.

Waterwood's position

1. Waterwood says that the Defendants' Response denied the claim without giving any reason.
2. Waterwood notes that an "integral element of the loss" of a plaintiff is being deprived of use of its money from the date the cause of action arose, for which it is entitled to compensation by an award of interest (citing Hungerfords v Walker (1989) 171 CLR 125; [1989] HCA 8, where compound interest was awarded).
3. It is submitted that there is no difference between awards of interest as damages or compensation and statutory awards of interest, in default of which the defendant obtains an unwarranted enrichment (citing Hexiva Pty Ltd v Lederer (No 2) [2007] NSWSC 49 where Brereton J, as his Honour then was, said at [12], "loss will be presumed from deprivation of money due", such that proof is only required for interest in excess of the statutory rates; and see, as also cited by Waterwood, at [7]-[8]).
4. Waterwood submits that there is no apparent reason why interest at the statutory rate ought not be allowed.

Defendants' position

1. The defendants did not separately address this issue.

Waterwood's conclusion on the Referee's Report

1. Waterwood thus submits that the Referee's Report should be rejected, except to the extent that the Referee accepted claim 2(c)(ii), and, in its place, an award ought be entered in the amount of $427,100.99 plus interest from 30 June 2015 at the rates prescribed in the Practice Note pursuant to s 100 of the Civil Procedure Act and costs.

Defendants' conclusion on the Referee's Report

1. As noted above, the defendants maintain that the Referee's Report should be adopted in full and that, other than for the relatively nominal amount awarded by the Referee, the claim by Waterwood did not succeed.

Determination

1. It is evident from the submissions made in relation to the individual claims that the principal complaint, if not the substance of the complaints, by Waterwood is that the Referee did not accept that it obtained an entitlement to moneys in the MOOT bank account such that liabilities discharged by payments out of that account amounted to a benefit conferred by Waterwood at its expense.
2. As already noted, there was a basis on the factual findings in the Primary Judgment for the Referee to proceed as he did. In the absence of an entitlement to treat the moneys in the MOOT account as Waterwood's own moneys, any liabilities discharged by the payments out of those accounts must logically be seen as payments out of MOOT's own moneys. It does not appear that there was an analysis on a running account balance or the like in an endeavour to show that payments out of particular amounts must have come from revenue earnt by Waterwood (and simply banked into the MOOT account which it was then permitted to operate).
3. As to the findings by the Referee that there was no evidence that various liabilities were liabilities of MOOT (at least one of which was accepted by Waterwood, though it maintained its argument that this item should still not be accepted on the basis of the broader construction of the scope of the enquiry), there is at least a basis for the countervailing contention by the defendants.
4. I bear in mind that it is well recognised that, generally, a referee's findings of fact should not be re-agitated in the Court and that the Court will not reconsider disputed questions of fact where there is factual material sufficient to entitle the referee to reach the conclusions he or she did. I also bear in mind that the purpose of the referral procedure, if the Court were required to reconsider disputed questions of fact in circumstances where it is conceded or can be seen that there was material on which the conclusions could be based, would be substantially undermined.
5. I am not persuaded that Waterwood has established any patent misapprehension of the evidence or perversity or manifest unreasonableness in fact finding that would give rise to a reason for rejection of the Referee's Report. In this particular regard, I note that patent misapprehension of the evidence refers to a lack of understanding of the evidence as distinct from the according to particular aspects of it different weight; meanwhile, perversity or manifest unreasonableness mean a conclusion that no reasonable tribunal of fact could have reached. Further, that the test denoted by these phrases has been said to be more stringent than "unsafe and unsatisfactory".

Costs

1. It is now necessary to consider the disposition of orders as to costs.

Waterwood's submissions

1. Waterwood made submissions in relation to costs of the proceedings and also in relation to the cross-claim. Accordingly, I outline these submissions in turn.

Costs of the proceedings

1. Waterwood maintains that it is, on the current state of the proceedings, the successful party (despite the quantum of that success being relatively nominal, if not indeed infinitesimal). It says that, if the award on the reference is increased as sought, it will have been substantially successful on its claim.
2. Consequently, Waterwood says that the usual rule applies under r 42.1 of the UCPR in favour of Waterwood: that costs follow the event unless it appears to the Court that it should otherwise order.
3. Waterwood accepts that, if the award is not substantially increased as sought, an order contrary to the usual might be considered appropriate to be made. It also accepts that r 42.34 of the UCPR may be engaged if the award is not increased as sought (plus interest) to exceed $500,000.
4. It is noted that, if r 42.34 of the UCPR does apply, the Court will not "ordinarily" make an order for costs, unless satisfied that "the commencement and continuation of the proceedings in the Supreme Court was warranted". It is submitted that there can be "no serious doubt" that the commencement of the proceedings in this Court was justified in the circumstances as they then existed; that is, where the defendants were purporting to exercise rights of termination of a "lease" involving expenditure by Waterwood on "rental" of $550,000 per annum for five years (with a further term of five years) in addition to capital investment and the defendants did not claim it was unenforceable until the hearing before Kunc J which resulted in the Discharge Judgment. It is submitted that the reasonableness of continuing the proceedings in this Court was "effectively endorsed" by the judgment of Kunc J on that motion.
5. Moreover, it is said that there was a real question as to whether the "lease" gave rise to an implied trust of the hotel land by KOP for the purposes of the lease of the business also impliedly agreed upon by MOOT through their mutual sole shareholder and director. It is said that it was at least doubtful that there was jurisdiction in any court, other than a superior court, to determine this question (citing Taxa Australia Pty Ltd v Wang [2018] NSWSC 1668).
6. Other relevant matters to warrant the proceedings being determined in this Court are said to be: that the amount in issue could possibly exceed the jurisdictional threshold; and that the proceedings gave rise to complex legal or factual issues, as reflected in the engagement of Senior Counsel (as the defendants have retained, even on the reference) (citing State of New South Wales v Quirk [2012] NSWCA 216 at [171] per Tobias AJA, with whom Beazley JA (as Her Excellency then was) and Hoeben JA agreed).

Costs of the cross-claim

1. In relation to the cross-claim, it is noted that a cross-claim was filed by MOOT against Mr Lye (and not against Waterwood). It is submitted that the bringing of the cross-claim against Mr Lye personally, rather than Waterwood (where, it is also said, if the claim had any viability at all it would have been against Waterwood), indicates the "tactical advantage apparently sought of intimidating [Waterwood]'s director with the threat of personal liability".
2. It is noted that the cross-claim was filed late by leave granted by the Registrar on a contested motion in a reserved judgment delivered 17 May 2016; and that costs were reserved for later argument, although it is said that the Registrar made clear a "firm view" that it was "MOOT's own conduct and delays that have resulted in the need to bring this application" (referring to [52] of the Registrar's reasons).
3. Waterwood says that the cross-claim was "patently unarguable". In support of that contention, Waterwood notes that the cross-claim was founded on the allegations (at [2]) that Mr Lye was "at all material times until in or about June 2015 … engaged in the management of the Hotel Business" and in that capacity was "entitled" to engage in unspecified "conduct in the ordinary course of running the Hotel Business", without pleading any relevant conditions of such engagement or entitlement or any link between any term or breach of the alleged "engagement" or "entitlement".
4. As to the particular claims contained in the cross-claim, they are: first, an amount said to have been incurred in a contract for a loan entered into with Hunter Premium Funding Ltd (see at [3]-[10]); second, a complaint as to "diversion" of EFTPOS revenue (see at [11]-[13]); third, a claim for moneys had and received arising from alleged "misdirected cash and cheque sales" (see at [14]-[16]); fourth, a claim as to amounts payable to the ATO (see at [17]-[24]); and fifth, a claim in respect of payments to "related entities" (see at [25]-[30]).
5. As to those claims, Waterwood makes a series of complaints as to the way the claims are pleaded in the cross-claim and/or as to whether the claims are arguable.
6. As to the first claim in relation to the loan to Hunter Premium Funding Ltd, the nub of the complaint seems to be that the pleading does not disclose how it is that the "manager" of the business "somehow undisclosed" caused it "through" someone else to borrow to fund a premium for its policies of insurance; that is, for the defendants' benefit. In this regard, complaint is made that the basis on which any liability on the part of Mr Lye could arise has not been disclosed. It is said that, for an undisclosed reason, he was said to have lacked authority to cause it to obtain the loan; "despite the open-ended 'entitlement', apparent relationship to the ordinary course of the business and the obvious fact it took the loan".

Defendants' submissions as to costs

1. The defendants also made submissions in relation to costs of the proceedings and in relation to the cross-claim. As such, again, I outline these submissions in turn.

Costs of the proceedings

1. As to the issue of costs, the defendants summarise the status of the proceedings as follows. They say that, after Kunc J discharged its injunction (initially granted ex parte), Waterwood filed an amended statement of claim on 16 July 2015 seeking: damages at law or in equity; compensation under ss 236, 237 or 243 of the Australian Consumer Law (Competition and Consumer Act 2010 (Cth), Sch 2); restitution for moneys had and received by the defendants for the use of the plaintiff; interest; and costs. The defendants say that Waterwood's claim failed (noting in this respect that the restitution claim was not one opposed by the defendants).
2. As to that restitution claim, the defendants say that their position before Pembroke J was that if Waterwood could establish that it in fact expended money to pay MOOT's liabilities then it would be entitled to restitution; and that that it was on that basis that Pembroke J sent that issue to the Referee for determination.
3. The defendants note that Waterwood filed even more evidence for the reference hearing in addition to submissions; and claimed $428,900.99.
4. It is said that, if the present application fails and the Referee's Report is adopted in whole, Waterwood has obtained an amount of $4,197.12 in restitution, which is less than 25% of the jurisdiction of the Small Claims Tribunal of the Local Court. It is submitted that, in that event, these proceedings have been an "abject failure" on both liability and quantum; and that for Waterwood to suggest, as it does, that it has succeeded in these proceedings is "caprice".
5. It is noted that this case has occupied: the resources of three judges of this Court (Kunc J, Pembroke J, and now me); the resources of one referee; and six days of hearing (two before Kunc J, three before Pembroke J, and one before the Referee) excluding the time devoted to the present application. Relevantly, it is noted that these judicial and other resources have been consumed for the sum of $4,197.12.
6. Further, the defendants advance the following principles.
7. First, that the "event" depends on the issues contested more than the formal result of the proceedings (citing Hansen t/as Derrawee Pastoral Company v Monterey (Coolah) Pty Limited [2012] NSWSC 1383 at [29] per Schmidt J).
8. Second that, even if Waterwood is treated as the "successful party", the Court can still award costs against it where it only obtains an award of trivial damages. The defendants quote Lord Devlin in Anglo Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873 (quoted at [23] of Hooker v Gilling (No 2) [2007] NSWSCA 214 per McColl JA with whom Ipp and Basten JJA agreed) where his Lordship said: … [I]t is necessary to decide whether the plaintiff really has been successful, and I do not think that a plaintiff who recovers nominal damages ought necessarily to be regarded in the ordinary sense of the word as a 'successful' plaintiff …

The cross-claim

1. As to the cross-claim, the defendants say that the cross-claim was not pursued at the trial in any sense (other than occupying six paragraphs in the defendants' Outline of Submissions, those being [56]-[61] out of 61 paragraphs of submissions); that it was not considered by Pembroke J in the Primary Judgment; and that it was not a subject of the referral. It is said that no time was devoted to it. Indeed, the defendants say that Waterwood has spent more time dealing with the cross-claim in its written submissions in this application than the defendants ever have. They say that the cross-defendant can hardly claim victory for claims that were so insignificant they did not even rate a mention in the judgment and were never determined.
2. For this reason, it is submitted that there should be no order for the costs of the cross-claim.

Determination as to costs

1. I have great difficulty in seeing Waterwood as having achieved success in the proceedings as a whole. It succeeded on only a most insubstantial portion of the restitution claim and failed abysmally on the rest. I consider that in those circumstances it should bear the costs of the proceedings.
2. I accept that there was a reasonable basis for the commencement of the proceedings insofar as Waterwood was seeking to preserve the arrangements that had been put in place in relation to the operation of the hotel business. However, I cannot accept that Waterwood's claim in the proceedings has in any way been "vindicated" by the Discharge Judgment nor that, on any view, could it be said to have been in the outcome of the Primary Judgment. The unfortunate fact is that the arrangements the subject of the claims made by Waterwood were conceptually confused and the pleaded claims were, on the whole, not established on the evidence or simply untenable.
3. As to the cross-claim, for reasons similar to those where claims are not pursued and costs are sought (see, for example, Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6) and cases where satellite litigation over costs has been deplored (see, for example, South West Helicopters Pty Ltd v Stephenson (No 2) (2018) 98 NSWLR 96; [2018] NSWCA 99), the exercise of now determining what would have been the fate of the cross-claim is not appropriate. Nor is it appropriate to speculate as to the motivation of the bringing of the claim against Mr Lye personally (in this regard, I note that it does not seem to be suggested that any abuse of process application was made in relation to the claim).
4. I can accept that the cross-claim may well have been poorly pleaded and doomed to failure. However, even if so, that would not distinguish it from the amended statement of claim (and criticism of this kind is not unprecedented in the course of this litigation - it seems to have been a constant refrain from those judicial officers who have dealt with the matter).
5. Nor is the delay in bringing the cross-claim (of which the Registrar complained) of any moment in the current state of the litigation.
6. Rather, what does distinguish it from the amended statement of claim is that it does not appear to have been pursued at the hearing.

Orders

1. For the above reasons I make the following orders: 1. Order pursuant to r 20.24(1) that the report of Mr Richard Hugh Macready be adopted in whole. 2. Order the second defendant to pay the plaintiff the sum of $4,197.12 plus interest pursuant to s 100 of the Civil Procedure Act 2005 (NSW) calculated in accordance with the Court rules from the date of the payments comprising that amount to the date of judgment. 3. Order the plaintiff to pay the defendants' costs of the proceedings, including the costs of the reference hearing but excluding the cross-claim, as to which order that there be no order as to costs. 4. Order that these proceedings be otherwise dismissed.

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