WLD Practice Holdings Pty Limited v Sara Stockham

Supreme Court of NSW|2021-05-20|Before: Sackar J

Judgment

I heard oral argument in these proceedings on 20 May 2021. They follow a judgment of mine from October 2020 (WLD Practice Holdings Pty Limited v Sara Stockham [2020] NSWSC 1488 ("the Primary Decision")) and the appeal from that decision (Sara Stockham Pty Ltd v WLD Practice Holdings Pty Ltd [2021] NSWCA 51 "the Court of Appeal Decision").
I respectfully adopt the summary of the history of this matter from the Court of Appeal Decision as follows: [2] Two dentists, Dr Scott David Williams and Dr Sara Stockham, agreed to conduct their practices jointly. Entities controlled by them became equal unit holders of the "WLD Practice Holdings Trust", established by deed dated 29 September 2015, the trustee of which is the respondent. The same entities were also equal shareholders of the respondent, and the two dentists were the respondent's directors. They, their companies and the trustee entered into a Unitholders Agreement dated 28 October 2016 which, relevantly, addressed the circumstances when one unit holder wished to sell its units. Speaking generally, provision was made for the appointment of a valuer to determine "fair market value" in accordance with cl 13. [3] The Court was told that on 6 May 2019, the first applicant, Sara Stockham Pty Ltd, which is controlled by the second applicant, Dr Stockham, gave a notice triggering the valuation process. Many of the details of the litigation that has ensued are not apparent from the appeal books. It seems that the trustee sought judicial advice pursuant to s 63 of the Trustee Act 1925 (NSW) concerning the appointment of a valuer, while Dr Stockham and her company sought a stay of that application based on a dispute resolution clause. The stay application was dismissed: WLD Practice Holdings Pty Ltd, in respect of the WLD Practice Holdings Trust v Sara Stockham [2020] NSWSC 395. Shortly thereafter, advice to the effect that the trustee would be justified in engaging, among others, Mr Matthew Gwynne of PKF Australia was obtained: WLD Practice Holdings Pty Ltd, in respect of the WLD Practice Holdings Trust v Sara Stockham [2020] NSWSC 464. No appeal has been brought from either of those decisions. [3] Subsequently, Dr Stockham and her company sought orders for the production of trust documents to her, seemingly for the purpose of making submissions to Mr Gwynne. The original cross-summons was dated 28 April 2020. The course which the parties followed thereafter is not entirely clear from the documents. Helpfully, a copy of an amended notice of motion filed on 14 September 2020 was provided to the Court. The motion sought leave to file a proposed amended cross-summons seeking a larger range of documents, liberty to use those documents for the purposes of resolving the dispute or in subsequent proceedings concerning, inter alia, cl 7.8 of the Unitholders Agreement and, most relevantly for present purposes, prayer 3: "3. AN ORDER either: (a) that by reason of clause 7.8 of the unitholders' agreement the valuation of the shares and units in the WLD Practice Holdings Trust being undertaken by Matthew Gwynne is to be undertaken on the basis that any Major Policy Issue falling within Schedule 3 to that agreement effected by the Plaintiff trustee of the Trust is to be disregarded unless a unanimous resolution approving the transaction had first been passed, or alternatively (b) declaring the true meaning and effect of clause 7.8 of the unitholders' agreement for the purposes of that valuation." [5] The cross-summons also sought orders declaring that a valuation made by Mr Gwynne dated 25 August 2020 was not made in accordance with the requirements of cl 13 of the Unitholders Agreement and an order setting that valuation aside. It would appear that the litigation was no longer designed to provide documents to be used in a submission to Mr Gwynne, but extended to a challenge to the reasoning in his report, which by that time had been prepared. (In principle, it might have been open to seek an interlocutory injunction to prevent the report from being finalised, but that would require proferring the usual undertaking as to damages, and there is nothing in the materials to suggest that such an application was made.) [6] In those circumstances, rather than moving on the amended notice of motion, the parties agreed to orders for the separate determination of two questions pursuant to r 28.2 of the Uniform Civil Procedure Rules 2005 (NSW)…

Evidence

The Plaintiff, in support of the Motion, read the affidavit of Walter MacCallum dated 14 May 2021.

The Plaintiff's Submissions

The Plaintiff filed submissions in this matter supporting the relief sought in prayers 6, 7 and 8 of the Motion (dated 14 May 2021), submissions in reply (dated 19 May), supplementary submissions (dated 24 May) and further submissions in reply (dated 31 May).

Re-litigation

Prayer 8 of the Motion sought an order under r.13.4 or 14.28 of the UCPR striking out paragraphs [16] to [95] of the Points of Defence filed on 12 May 2021.
The Plaintiff submitted that there were two contentions made in the impugned paragraphs of the Points of Defence: 1. that the valuation the subject of these proceedings is invalid by reason of Mr Gwynne's failure to have regard to cl.7.8 of the Unitholders Agreement in performing it; and 2. that, by reason of various factual matters detailed in those paragraphs, the Second Defendant was not a "Bad Leaver" for the purposes of the Unitholders' Agreement.
In its supplementary submissions, it also addressed a further point as to why paragraphs [80]-[92] specifically should be struck out, as these put forward a separate reason as to why the Defendants believed the valuation should be struck out with regard to cl.6.2 of the Unitholders Agreement.

Re-litigating the question of whether the Valuer was required to have regard to cl.7.8

The Plaintiffs submitted that the Defendants' contentions were barred by the orders of this Court made on 12 November 2020 in the Primary Decision disposing of the separate questions.
The Defendants' challenge to these orders was unsuccessful in the Court of Appeal. Leeming JA (Gleeson JA and Emmett AJA in agreement), held (at [10] of the Court Appeal Decision) that "the primary judge answered both questions correctly. It follows that neither those answers, nor the subsequent dismissal of the cross-summons, should be altered on appeal."
The Plaintiff submitted that the Defendants are currently seeking to re-agitate the same questions that have been determined by myself and reaffirmed by the Court of Appeal. The Court of Appeal (at [13]) emphasised that the parties are "bound by the answer" that I gave in answering the separate questions, that is, bound by the orders themselves.
The Plaintiff therefore argued that the orders of 12 November 2020 give rise to res judicata between the parties on the question of the extent, if any, to which the Valuer must take into account clause 7.8 in performing a valuation. The orders were said to create "a new charter by reference to which that question is in future to be decided" by rejecting the proposition that cl.7.8 has any role in determining Fair Market Value.
The Plaintiff submitted that the purpose of paragraphs [16] to [92] was to relitigate this question. This was said to be especially apparent in paragraphs [39], [55], [63], [71] and [79] which contend the valuation is invalid because the Valuer ignored the effect of cl.7.8 which would in effect give this clause a role in contradiction to the orders.
The Plaintiff argued that the Defendants misstated the issue at [6] of their strike-out submissions in that the issue is not "what is the true (legal) meaning of the judgment and orders in [2020] NSWSC 1488?" The issue is the true meaning of the orders alone, because it is these that alter the parties' legal rights, not the reasons (R v Ireland (1970) 126 CLR 321 at 330).
It was said that it is not possible to construe the orders in a way that leaves open the possibility of a new attack on the validity of the valuation on the basis of cl.7.8. The Plaintiff therefore stated that the Defendants' case is precluded by the orders, because they do not seek to invite the Court to construe the orders, rather to ignore them and begin afresh.
The Plaintiff submitted that the Defendant's submissions misread the Court of Appeal's decision in a way that would involve reversing the judgment's meaning. The Court of Appeal held at [22] that "[h]is Honour determined merely that the Valuer was not required to disregard transactions relating to a Major Policy Issue unless certain circumstances were satisfied." Therefore, the Court determined that there was no requirement that the Valuer must disregard all transactions entered into breach of cl.7.8. At [29], the Court of Appeal held that if the Valuer did wish to take into account cl.7.8, then he could do so. The Plaintiff submitted this was in direct contradiction with the Defendants' assertion that the Valuer was not entitled to ignore cl.7.8. Similarly, the Plaintiffs submitted that the Defendants' argument that the Valuer was required to consider alleged "transactions" entered into in breach of cl.7.8 was both wrong and contrary to the Court of Appeal's decision which found that any breach of cl.7.8 sounds in damages (CA at [26]-[27]).
The Plaintiff contended that to the extent that the Defendants seek to advance a version of their argument that the valuation is invalid which differs from the argument advanced in the Cross-Summons, they are precluded from doing so by Anshun estoppel. In support of this contention, the Plaintiff highlighted that the reason why the two separate questions were agreed and determined was to resolve on a final basis the issue of whether Mr Gwynne's valuation was a valuation for the purposes of the Agreement. If the second question was determined in the negative (as it was), then the challenge to the valuation would fail and the Cross-Summons was to be dismissed (which it was).
Further, the Plaintiff submitted that an attempt to relitigate an issue already resolved in court amounts to an abuse of process. This was said to be relevant for two reasons. First, abuse of process is a basis for striking out pleadings, pursuant to r.13.4(1)(c), and the Plaintiff invokes it here. Secondly, abuse of process is also a basis on which to award costs on the indemnity basis, which the Plaintiff seeks (Coshott v Prentice (2014) 100 ACSR 418 at [138]; Brezniak v Habib (No 2) [2015] NSWSC 204).

Re-litigating the question of whether the Valuer was required to have regard to cl.6.12

The Plaintiff made further submissions with regard to the striking out of [80] to [92] of the Points of Defence which concerned cl.6.12.
The Plaintiff submitted that the defence is unarguable for the reasons outlined in paragraphs [23] to [33] and [38] to [41] of the Court of Appeal Decision. It contended that the cl.6.12 argument is weaker than the cl.7.8 argument and that the Defendants' submissions dated 27 May 2021 in support of this argument are made in complete ignorance of this Court's reasons, the Court of Appeal's reasons and the Plaintiff's reply submissions. The Plaintiff reiterated that the Defendants' argument should be rejected for the reasons of this Court and the Court of Appeal, namely that a transaction made in breach of cl.6.12 is not void and the Valuer is not required to consider any breach of the clause. Rather, any breach sounds in damages.
Further, the Plaintiff submitted that the Points of Defence do not articulate how non-compliance with cl.6.12 could be said to affect the validity of the valuation under cl.13, or by what construction that conclusion is reached. Instead, they simply assert their argument without explanation.
The Plaintiff argued that this assertion was simply a "re-run" of the same arguments made in respect of cl.7.8 which was demonstrated when comparing the key paragraphs of the Points of Defence, being: 1. Paragraphs [29], [37], [45], [53], [61], [69] and [77] (regarding cl.7.8) and paragraph [87] (regarding cl.6.12) - which allege that the Plaintiff was liable to indemnify or restore to the Trust certain liabilities or amounts; and 2. Paragraphs [31], [33], [47], [55], [63], [71] and [79] (regarding cl.7.8) and paragraph [89] (regarding cl.6.12) - which allege that the Valuer deliberately ignored the liability of the Plaintiff to indemnity or restore to the Trust certain liabilities or amounts.
The Plaintiff noted for completeness that paragraphs [80] to [83] and [90] to [92] did not add anything, rather repeated the same allegation throughout paragraphs [31], [39], [47], [55], [63], [71], [79] and [89].
The Plaintiff additionally submitted that the Defendants are precluded by Anshun estoppel in agitating any arguments relating to cl.6.12 because they should have raised this argument at the time of agreeing to the separate questions, but chose not to.
The Plaintiff noted that the Defendants had considered such an argument at the time they filed their Amended Notice of Motion, because proposed order 2(c) of their proposed Amended Cross-Summons of 14 September explicitly referenced cl.6.12 alongside cl.7.8. When the parties then agreed the separate questions the Defendants did not propose any question to embody an argument relating to cl.6.12. Further, in its submissions filed on 2 October 2020, the Plaintiff referenced cl.6.12 expressly. It noted that the effect of the Defendants' argument on cl.7.8 meant the Valuer would need to be satisfied there had been compliance with all provisions of the Unitholders Agreement, including cl.6.12. The Defendants' response to that was to note that cl.7.8's effect was "unique" in the Unitholders Agreement. Therefore the Plaintiffs submitted that what the Defendants did not do was what they seek to do now, that is, contend that cl.6.12 does indeed condition the validity of a valuation performed under cl.13.
Finally, the Plaintiff submitted that the attempt to litigate the cl.6.12 argument is an abuse of process for the same reasons as expressed in relation to the cl.7.8 argument.

The "Bad Leaver" contention

The Plaintiff submitted that paragraphs [93]-[95] conclude that Second Defendant was not a "Bad Leaver" (as per cl.1.1(f)(i)) without giving explanation as to how, or why, the various factual matters relied on in [16] to [92] could support such a contention.
The Plaintiff submitted the relevant facts were therefore: 1. The Commencement Date was 28 October 2016. 2. On 6 May 2019, the Second Defendant issued a Notice of Sale indicating that it "wishes to sell all its shares in WLD Practice Holdings Pty Ltd and all its units in the WLD Practice Holdings Trust". 3. 6 May 2019 was 2 years and 6 months after the Commencement Date. That is, it was less than three years after the Commencement Date.
Therefore the Second Defendant was a "Bad Leaver" as defined in the agreement. The Plaintiff noted the Points of Defence makes no attempt to explain how the "Bad Leaver" definition could be applied in any other way. It was argued that this part of the pleading should be struck out under r.14.28(1)(a) of the UCPR which allows part of a pleading to be struck out if it "discloses no reasonable cause of action or defence".
Further, the Plaintiff argued that even if the Points of Defence did articulate how the "Bad Leaver" could not apply, the Defendants' case is illegitimate regardless. The Plaintiff submitted that the Defendants recognised this in correspondence sent by their solicitor in 2019, David Bonnell. The Plaintiff highlighted particular correspondence in [22] of its written submissions dated 14 May 2021. It was then asserted that these admissions demonstrated that the Second Defendant was a Bad Leaver.

Prayer 7 - Summary dismissal of the Third Cross-Summons

The Plaintiff submitted that the Third Cross-Summons is reflective of the contentions advanced by the Defendants in [16] to [92] of the Points of Defence and is therefore also an abuse of process, precluded by res judicata, and precluded by Anshun estoppel, so should be summarily dismissed.

Prayer 6 - Summary judgment

The Valuation Costs Application seeks to recover the amounts expended by the Plaintiff in connection with the valuation, of which the Plaintiff submitted the Second Defendant is contractually required to pay in whole, by virtue of cl.11.3(a) of the Unitholders Agreement. This clause provides: Following an Event of Default, the Trustee Company must procure that the Trustee Company Accountant makes a determination of the Fair Market Value of the Defaulting Unitholder's Units, in accordance with 13. The Defaulting [Unitholder] must bear one hundred per cent (100%) of the costs of the determination of the Fair Market Value.
The Plaintiff argued that once the impugned paragraphs of the Defence are struck out, there is nothing left in the Defence capable of preventing summary judgment.
The Plaintiff submitted that the only substantive defence to that part of the claim is at [6] of the Points of Defence, which has three particulars: 1. Particular (a) is a reference to the challenge to the validity of the valuation under cl.13, which was addressed in the Plaintiff's submissions on prayer 8. 2. Particular (b) is a reference to the contention that the Second Defendant was not a Bad Leaver, also addressed by the Plaintiff's submissions. 3. Particular (c) is a contention that the costs for which the Plaintiff is seeking recoupment "are not costs of obtaining the determination of the Fair Market Value", which the Plaintiff submitted was unarguable. The invoices from, and payments to, Mr Gwynne and Mr Ma are evidence of costs expressly paid for the purpose of procuring the determination of the Fair Market Value.
With regard to the third particular, the Plaintiff further submitted that the Defendants indeed seemed to accept in their summary judgment submissions that the $44,000 incurred by Mr Gwynne is properly claimed (subject to the GST issue), and that what the Defendants really take issue with is Mr Ma's fees. The Plaintiff therefore did not press for Mr Ma's costs in this summary judgment application, instead only for the $44,000.

The Defendants' Submissions

The Defendants filed submissions opposing the Plaintiff's claim for summary judgment (dated 17 May 2021), submissions opposing the Plaintiff's application to strike out the Points of Defence (dated 18 May), and submissions in answer to the Plaintiff's submissions of 24 May (dated 27 May).

Prayer 8 - Strike out Points of Defence

The Defendants submitted that the Plaintiff's attempt to strike out the impugned Points of Defence should fail for the reasons below.
The Defendants submitted that the role of the Court is to construe documents, including judgments, and that document then bears the meaning which the courts decide on its proper construction (Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1967) 118 CLR 469 per Barwick CJ; MLC v Evatt [1971] AC 793).
The Defendants argued that the Plaintiff disregarded this principle in its submissions, because it based its contentions on its opinion as to the meaning of the decision and orders in the Primary Decision. This opinion was said to be erroneous. The Defendants submitted that the true meaning of those orders is to be derived from the Court of Appeal's decision.
The Defendants submitted that the real issue is what the true (legal) meaning of the judgment and orders in the Primary Decision is.
The Defendants argued that the answer to this question comes from the Court of Appeal Decision, particularly the finding at [29] that "his Honour's reasons should not be understood as holding that a valuer would invariably ignore clause 7.8." The Defendants submitted that it follows that the decision and orders of this Court in the Primary Decision as upheld by the Court of Appeal determine that: 1. Clause 7.8 of the Unitholders Agreement is a contractual embargo on the Trustee giving effect to decisions in respect of Major Policy Issues in the absence of a Unanimous Resolution 2. A Valuer conducting a cl.13 valuation is not required invariably to ignore cl.7.8 3. Clause 7.8 does not require an entirely separate accounting treatment to be given in order to conduct a cl.13 valuation, namely altering every transaction in excess of $50,000 which is not evidenced by written authorisation from both unitholders.
The Defendants then submitted that the example provided by the Court of Appeal at [29] gives an illustration of when a Valuer acting under cl.13 would not ignore cl.7.8 of the Unitholders Agreement, being in the case of minority shareholders. The Defendants argued that in such a scenario if the Valuer ignored cl.7.8, the resulting valuation would fail to comply with the Unitholders Agreement and be invalid. Therefore, the Defendants claimed that the Plaintiff was in error in contending that a Valuer acting under cl.13 is to totally disregard cl.7.8 for all purposes, because it was in direct contradiction to the Court of Appeal's findings.
The Defendants therefore submitted that given that the Valuer could not invariably ignore cl.7.8, the issue raised by the Defendants in the impugned paragraphs of the Points of Defence is whether in the present case the Valuer was legally entitled to cl.7.8 in relation to the specified transactions totalling $2.426 million. If, as the Defendants allege, this was a relevant factor then failing to take into account such relevant considerations would invalidate the valuation, as in the case of Holt v Cox (1997) 23 ACSR 590. This was said to be a question of law which will depend on evidence which has not been received by Court. Therefore, the Points of Defence should not be struck out.
The Defendants also rejected the Plaintiff's claim for Anshun estoppel and argued that the Plaintiff's reading of the Court of Appeal decision was wrong. They argued that a judgment that Gwynne's valuation is invalid because he ignored an alleged breach or breaches of cl.6.12 of the Unitholders Agreement will not conflict with the primary judgment, as affirmed by the Court of Appeal.
The Defendants stated that the issue of whether the Valuer was entitled to look at particular breaches of the Unitholders Agreement (as distinct from a global total rejection of all transactions not proved to have been entered into compliance with cl.7.8) has not been considered by the Court and was not the subject of any decision. It would therefore remain an unadjudicated cause of action.
The Defendant also rejected the Plaintiff's claim that because the parties agreed on questions to be decided upon in the primary judgment that meant they should be precluded from pursuing the issues in the Points of Defence. The Defendants argued for several reasons that sole responsibility should not be attributed to them for failing to propose additional questions. The separate questions arose out of a cross claim relating only to cl.7.8 and not cl.6.12 of the Unitholders Agreement or any provision in the Trust Deed. The Defendants submitted that neither side can now assert that the Court's answers to the questions actually asked carry consequences for questions which both sides agreed were not to be asked.
In relation to the Plaintiff's Anshun estoppel argument, the Defendants submitted that even if the principle were potentially applicable, for the Court to strike out a proceeding on those grounds, it must take into account "the public and private interests involved" (Johnson v Gore Wood & Co [2002] 1 AC 1 at 31 per Lord Bingham, quoted by Kiefel CJ, Bell and Keane JJ in UBS AG v Tyne as trustee of the Argot Trust (2018) 265 CLR 77 ("UBS v Tyne") at [7]). These interests involve the prejudice the Plaintiff would suffer, the prejudice the Defendants would suffer, and the effect on the efficiency of the administration of justice if a second action wee commenced which could have been dealt with in a single action (J & E Vella & Hobson [2020] NSWCA 188 at [31] per Bell P, Basten and White JJA).
Applying those principles to the present case, the Defendants reiterated that the Plaintiff did not ask for any other questions to be submitted for the Court's determination. The Defendants also submitted that the Plaintiff would suffer no or no material prejudice if the Court were to decide on the merits of the Defendants' case, because the issue had not previously arisen. By contrast, estoppel would result in a grave prejudice to the Defendants by barring them from the possibility of recouping substantial economic loss. Furthermore, the Defendants argued that the public interest includes not denying a party the opportunity to present a meritorious case for curial determination (see, e.g., Barakot Ltd v Epiette Ltd [1998] 1 BCLC 283).
Finally, in relation to the Plaintiff's assertion of an abuse of process the Defendant pointed to the two bases which enliven the Court's power to dismiss proceedings as an abuse of process stated in UBS v Tyne. There, Kiefel CJ, Bell and Keane JJ (at [1]) found that these grounds are firstly, where the use of the Court's procedures occasions unjustifiable oppression to a party, and secondly, where the use of the Court's processes serves to bring the administration of justice into disrepute.
With regard to the first ground, the Defendants argued that there was no oppression to the Plaintiff in this case because it was never required to answer the Defendants' allegations in court. In relation to the second ground, the Defendants submitted that there was nothing in the Points of Defence which could bring the administration of justice into disrepute.

Prayer 6 - Summary judgment

In relation to the Plaintiff's claim for summary judgment, the Defendants submitted that they have issued to the Plaintiff notices to produce documents relevant to the Plaintiff's claims and need to inspect those documents to meet the case against them. Further, the Defendants stated that they intend to cross-examine Walter MacCallum on his affidavit of 14 May 2021 and require the documents to be produced to do so.
The Defendants submitted that the relevant question concerning the summary judgment is what is meant by the expression "the costs of the determination of the Fair Market Value" in cl.11.3(a). They noted that there was no dispute that these costs mean or include the fee charged by the Trustee Company Accountant for performing his role as a Valuer under cl.13 of the Unitholders Agreement. Instead, the dispute centres around whether "the costs of the determination of the Fair Market Value" include other expenses allegedly incurred by the Trustee.
The answer to that question, the Defendants submitted was "no", either in absolute terms, or alternatively "not necessarily".
In support of the first submission, the Defendants argued that the expression "costs of the determination of the Fair Market Value" means the cost incurred in engaging the Trustee Company Accountant to perform the valuation, not the internal costs incurred by the Trustee. This was said to be because the act of "determination of the Fair Market Value" is the act of the Trustee Company Accountant, so the cost of such is the cost charge by the Accountant for fulfilling this task and nothing more.
If approaching the question from a different angle, the Defendant argued the answer remained the same. The "cost" payable by the "Bad Leaver" under cl.11.3(a) is the cost the Trustee would incur if the determination of the Fair Market Value were not made under cl.11 but under cl.10.4(e)(i). In that circumstance the Trustee pays the cost of the determination under cl.13.2(e). The "determination of the Fair Market Value" is then borne by the Trust, i.e., all unitholders pro rata - the purpose of cl.11.3(a) is to pass the burden to the bad Leaver exclusively - but not to increase the size of the burden.
The Defendants submitted this construction makes commercial sense in that the person making the termination (the Trustee Company Accountant) will, by virtue of the office, have access to all relevant accounting documents and records. If those records are true and complete, the accountant will automatically have immediate access to them and there would be no occasion for the Trustee to incur expense obtaining them. If the Trustee does have to incur expense to provide complete and accurate Trust accounting documents then that ipso facto reveals that the Trustee is in breach of its obligations (cl.7.3(a) of the Trust Deed) to keep and maintain complete accurate accounts and records of the Trust.
Further, the Defendants argued that if "the cost of determination of the Fair Market Value" extended beyond the costs of the Trustee Company Accountant to include cost incurred by the Trustee, there is no reason why the phrase would not also extend to costs incurred by any unitholder in making submissions to the Accountant under cl.13.2(d). This would then give rise to the question of whether the submissions of other unitholders were relevant. This cannot be contended as a matter of commercial construction, and if that be correct, then the same answer should apply to any external costs allegedly incurred by the Trustee in providing records to the Accountant.
In support of the alternative answer to the proposed question ("not necessarily"), the Defendant submitted that the Trustee is bound to act gratuitously subject only to the rights of indemnity under cl.6.2 of the Trust Deed and no obligation is imposed on unitholders to reimburse the Trustee for any expense for the Trustee's own costs.
The Defendant pointed to the following provisions of the Trust Deed as being relevant: 1. The Trustee is required to keep a complete and accurate record of all receipts and expenditures on account of the Trust Fund (Trust Deed cl.7.3(a)) 2. Promptly after the close of each Accounting Period, the Trustee will prepare a written accounting report (prepared in accordance with normally accepted accounting procedures) for such period consisting of a balance sheet and statement of income and expenditure and a list of assets held at the close of such year
Clause 11 of the Unitholders Agreement is to be read consistently with the Trust Deed (where there is no inconsistency) (Unitholders Agreement recital D and cl.1.4).
Therefore, the Defendants submitted that "the cost of determination of Fair Market Value" in cl.11.3(a) does not include the cost of any action required of the Trustee to perform its obligations under cl.7.3(a) and (b) of the Trust Deed.
The Defendants argued that the Plaintiff does not prove the claim by producing invoices, rather it must prove that the work for which the invoices were rendered was work required to be performed to enable the Trustee Company Accountant to determine the Fair Market Value of the Units, and was not work the Trustee was required to perform in its normal duties.
The Defendants also contended that even assuming the entitlement of the Plaintiff to recover from the Second Defendant any external costs under cl.11.3(a), the Plaintiff must prove that the invoices actually relate to costs incurred by the Trustee "in the determination of Fair Market Value". As this applies to the document or information requested by Matthew Gwynne, the Defendants assert that insofar as the Plaintiff was under a duty to have these readily at hand and prepared without cost to the Second Defendant, any costs incurred in providing the documents is not "costs of the determination of Fair Market Value".
Therefore, to assist the Court in determining which, if any, costs are recoverable by the Plaintiff, the Defendants proposed that examination of produced documents is necessary and summary judgment should not be entered.
Finally, the Defendants submitted that, if the Plaintiff was otherwise entitled (which was not admitted) summary judgment should not be entered for more than $44,000 (plus $4000 for GST if entitlement to that could be proven).

Legal Principles

As noted recently by Gordon J in Clayton v Bant (2020) 385 ALR 41 (at 55 [53]), a final judgment in adversarial proceedings carries consequences which "may be recognised as one or more of res judicata, cause of action estoppel, issue estoppel, and Anshun estoppel." Relevant to the current proceedings are the principles of res judicata and Anshun estoppel.
The High Court in Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507 ("Tomlinson") (per French, Bell, Gageler and Keane JJ at 516 [20]) explained res judicata as follows (footnotes excluded): An exercise of judicial power, it has been held, involves "as a general rule, a decision settling for the future, as between defined persons or classes of persons, a question as to the existence of a right or obligation, so that an exercise of the power creates a new charter by reference to which that question is in future to be decided as between those persons or classes of persons". The rendering of a final judgment in that way "quells" the controversy between those persons. The rights and obligations in controversy, as between those persons, cease to have an independent existence: they "merge" in that final judgment. That merger has long been treated in Australia as equating to "res judicata" in the strict sense.
In the same case it was noted (at 517 [22]) that there are three forms of estoppel recognised in Australian law: "cause of action estoppel", "issue estoppel" and Anshun estoppel. The first form "operates to preclude assertion in a subsequent proceeding of a claim to which a right or obligation which was asserted in the proceeding and which was determined by the judge". The second "operates to preclude the raising in a subsequent proceeding of an ultimate issue of fact or law which was necessarily resolved as a step in reaching the determination made in the judgment". On the last category of estoppel, French CJ, Bell, Gageler and Keane JJ commented (at 517-518 [22]) that: The third form of estoppel is now most often referred to as "Anshun estoppel", although it is still sometimes referred to as the "extended principle" in Henderson v Henderson. That third form of estoppel is an extension of the first and of the second. Estoppel in that extended form operates to preclude the assertion of a claim, or the raising of an issue of fact or law, if that claim or issue was so connected with the subject matter of the first proceeding as to have made it unreasonable in the context of that first proceeding for the claim not to have been made or the issue not to have been raised in that proceeding. The extended form has been treated in Australia as a "true estoppel" and not as a form of res judicata in the strict sense. Considerations similar to those which underpin this form of estoppel may support a preclusive abuse of process argument.
This form of estoppel is underpinned by the importance of the timely, cost effective and efficient conduct of civil litigation such that "if reasonable diligence would have led to the bringing of the claim in the existing proceedings, any further proceedings might be met by a stay on Anshun grounds (UBS v Tyne at [38] per Kiefel CJ, Bell and Keane JJ, citing Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 at 209-210 [86] per Gummow, Hayne, Crennan, Kiefel and Bell JJ). There are, however, still reasons why a party may justifiably refrain from litigating an issue at first instance, but attempt to do so in a subsequent proceeding, including expense, importance of the issue or motives extraneous to the actual litigation (Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 at 603 per Gibbs CJ, Mason and Aickin JJ).
Proceedings relitigating issues may also amount to an abuse of process and may therefore be dismissed under r 13.4 of the UCPR or in the exercise of the Court's implied incidental power to prevent an abuse of its processes (HIH Insurance Ltd (in liq), Re; De Bortoli Wines (Superannuation) Pty Ltd v McGrath (2014) 101 ACSR 1 ("HIH Insurance") at 6 [19] per Brereton J, citing Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 at [25]). This is reflective of the notion that courts must protect litigants and the system of justice itself against abuse of process (UBS v Tyne at [45] per Kiefel CJ, Bell and Keane JJ).
Abuse of process is a similar but separate doctrine to estoppel, "informed in part by similar considerations of finality and fairness" and when "applied to the assertion of rights or obligations, or to the raising of issues in successive proceedings, it overlaps with the doctrine of estoppel" (Tomlinson at 518 [24] per French CJ, Bell, Gageler and Keane JJ). Therefore, reasserting a right or obligation or raising the same issue in a later proceeding can be both the subject of an estoppel and conduct constituting an abuse of process (Tomlinson at 518 [24] per French CJ, Bell, Gageler and Keane JJ). Depending on the facts, an attempt to relitigate an issue resolved in earlier proceedings may be an abuse of process, even in the absence of an estoppel or res judicata (HIH Insurance at 6 [19], citing Reichel v Magrath (1889) 14 App Cas 665 at 668; Walton v Gardiner (1993) 177 CLR 378 at 393). This is because the doctrine of abuse of process, while related to estoppel, "is inherently broader and more flexible" in that it is "capable of application in any circumstances in which the use of a court's procedures would be unjustifiably oppressive to a party or would bring the administration of justice into disrepute" (Tomlinson at 518-519 [25] per French CJ, Bell, Gageler and Keane JJ).

Consideration

For reasons which follow I consider the Points of Defence should be struck out and summary judgment should be entered on the valuation costs application and the third cross summons should be dismissed.
The starting point of the analysis is my judgment of 27 October 2020, WLD Practice Holdings Pty Ltd v Sara Stockham [2020] NSWSC 1488.
In that judgment I gave answers to two questions (at [1]) as follows: (a) What is the true meaning and effect of clause 7.8 of the Unitholders' Agreement? (b) On the proper construction of clause 13 of the Unitholders Agreement, is the Trustee Company Accountant (the Valuer), in determining the Fair Market Value for a Unit under that clause, required to disregard any transaction relating to a Major Policy Issue unless the Valuer is satisfied that there is evidence before the Valuer of a Unanimous Resolution approving the transaction in accordance with clause 7.8, with the result that a failure to do so will invalidate the valuation?
My answers (at [42]) were as follows : (a) In my view clause 7.8 is a contractual embargo upon the Trustee giving effect to decisions in respect of Major Policy Issues in the absence of a Unanimous Resolution. The clause in my view has no role to play in the Trustee Company Accountant (Valuer) determining the Fair Market Value of a Unit under clause 13. In other words the Valuer does not need to be satisfied or take into account whether there is evidence that clause 7.8 has been complied with, with respect to any Major Policy Issue. Nor is the Valuer's satisfaction as to such matters a condition to the validity of any determination under clause 13. (b) No.
The background for those questions is to be found in [3]-[7] of the Defendant's proposed amended cross summons annexed to the Defendants' amended notice of motion of 13 September 2020. The questions were agreed in that context.
The Court of Appeal in Sara Stockham Pty Ltd v WLD Practice Holdings Pty Ltd [2021] NSWCA 51 upheld my answers to those questions and it was accepted by the parties that if unfavourable answers were given to the questions posed the cross-summons would be dismissed, [7].
The judgment of the Court of Appeal reveals at [19] that what had been put at trial was that if a Major Policy Issue transaction is entered into without complying with cl.7.8(a) the cl.7.8(b) as between unitholders, the transaction is "void and of no effect".
The answer to the second question was accepted as correct. The argument before the Court of Appeal was therefore concerned only with the answer to the first question, see [22]-[23].
As the Court of Appeal made clear the parties were bound by the answers given, [33]. It follows in my view that as a result, cl.7.8 has no role to play in the Trustee Company Accountant (Valuer) determining the Fair Market Value of a Unit pursuant to cl.13. Further the Valuer is not required in undertaking a valuation for a Unit to disregard any transaction on a Major Policy Issue in the absence of evidence it was the subject of a Unanimous Resolution.
The consent orders of 12 November 2020 in relation to those answers gives rise to a res judicata between the parties on the question of the extent, if any, to which the Valuer must take into account cl.7.8 in performing a valuation.
The form of the Points of Defence at [16]-[92] purport, in my view, to do just that.
There is repeated a formula with respect to a number of transactions for varying amounts of money (each in excess of $50,000) and which it is asserted were transacted without a Unanimous Resolution, in contravention of cl.7.8, in breach of trust and which were void and of no effect. In addition to it being asserted that Mr Williams was knowingly concerned in the breach of trust in each of the relevant transactions, it is ultimately alleged in respect of each transaction, at [31], [39], [47], [55], [63], [71] and [79] that the Valuer, Mr Mathew Gwynne, "deliberately ignored" the effect of cl.7.8 of the Agreement and as a result the determination of Fair Market Value was not a valid determination for the purposes of cl.13.
Each of these allegations proceed on the basis that cl.7.8 must play a role in the Trustee Company Accountant determining Fair Market Value under cl.13. However the answers to the separate questions hold in my view precisely the opposite.
The only challenge to the Fair Market Value determination was directed to the effect of cl.7.8. The outcome of the litigation, namely the decision on the separate questions, in effect determined the fate of the Gwynne's valuation.
True, the points of defence purport to deal with a myriad of individual transactions but the mechanism said in each case to invalidate the determination of the Fair Market Value under cl.13 is to "deliberately" ignore the effect of cl.7.8.
As a result of decision of the Court of Appeal in my view the Defendants can no longer contradict the proposition that cl.7.8 has a role to play in the determination of the Fair market Value of a Unit under cl.13, nor is the Valuer's satisfaction as to such matters a condition to the validity of any determination under cl.13.
Yet in the concluding and operative paragraphs of the defence (and referred to in paragraph 13, above) and which are said to render Mr Gwynne's cl.13 valuation invalid it is the deliberate failure on his part to take cl.7.8 into account. It is hard to imagine a clearer transgression of the effect of the Court of Appeal's decision.
In my view the orders of the Court, namely those of 12 November 2020, give rise to a res judicata between the parties on the question of the extent to which the Valuer must take into account cl.7.8 in performing a valuation under cl.13 on a final basis. The defence as pleaded in my view as a central theme seeks impermissibly to relitigate this proposition (which is the only challenge to the valuation) in the paragraphs pleaded.
These paragraphs of the defence should in my view be struck out.
However in [80] to [92] a different basis is advanced as to why the Gwynne valuation of Fair Market Valuation is invalid. It is contended by reason of a breach of cl.9.2(b) and 6.12 which as to the latter provision it is asserted Mr Gwynne again "deliberately ignored" the effect of yet another provision of the Deed resulting in his cl.13 valuation being invalidated valuation of Fair Market Value.
The Points of Defence do not, I consider, establish how a failure on the part of the Valuer to take cl.6.12 could invalidate the process of valuation under cl.13. The fact of the Valuer deliberately ignoring the relevant clause is asserted with the consequence of invalidity but without explanation as to how or why such a conclusion is to be arrived at.
Even though this is a different and therefore discrete argument I am of the view the Defendants should not be permitted to put it. The Defendants should be prevented from doing so because of the principle in Anshun. This argument is so connected, indeed inextricably bound up with the argument pursuant to cl.7.8 that it would be wholly unreasonable for this argument not to have been advanced. Nothing has been put as to why it could not have been put sooner. Again it follows I would strike out those portions of the defence.
It seems to me consistent with the decision in Anshun that the Defendants should be precluded from agitating such arguments in relation to cl.6.12.

The "Bad Leaver" argument

At the very conclusion of the Points of Defence at [94] it is asserted that "in the premises" in particular the circumstances outlined in [24] to [93] the Second Defendant was not a "Bad Leaver".
There is no articulation of what relevance those paragraphs have to the concept of "Bad Leaver". Put compendiously it may be that what is asserted is that because the Valuer has either by reason of his deliberately ignoring cl.7.8 and/or 6.12 leading to in an invalid determination of Fair Market Value for the purposes of cl.13, somehow, unexplained the provisions of Unitholders Agreement is inapplicable.
The fundamental problem with that analysis, apart from it being a non-sequitur, is that there is no dispute that the definition of "Bad Leaver" is to be found in cl.1.1(f)(i) to include a "Unitholder who issues a Notice of Sale (as defined) to the Company, wishing to sell some or all of the Units at any time prior to the period expiring three (3) years from the Commencement Date".
The Commencement Date was the 28 October 2016. On 6 May 2019, the Second Defendant issued a Notice of Sale indicating it wished to sell all of its shares in the Trust. That date was within three years of the Commencement Date. Hence the Second Defendant is a "Bad Leaver" as defined. That is the end of the matter as far as I am concerned. There is no provision of the Unitholders Agreement that would, in the way asserted in the pleading, lead to any interrelationship between the definition of "Bad Leaver" and the valuation process pursuant to cl.13.
Further arguments are relied upon by the Plaintiff at [22] of their submissions but they are factual matters about which it is unnecessary to express a view in my opinion given the uncontroversial facts and the relevant definitions. The only matters relied upon for the Points of Defence on the question of "Bad Leaver" are those in [24]-[93]. They are entirely concerned with the instances as a result of which the Fair Market Value is alleged to have been invalidly determined. The particular matters articulated in paragraph 93(a), (b) and (c) can only be viewed in the light of the various allegations in [24]-[91]. The allegations therein give the only content to [93].
It seems to me that that the allegation of "Bad Leaver" for the reasons outlined is untenable.
It follows that the Points of Defence should be struck out.

Summary Dismissal of the Third Cross Summons

The Third Cross Summons cannot stand in my view in the light of my decision on the Points of Defence.

Summary Judgment on the Valuation Costs Application

The Plaintiff seeks to recoup the amounts expended by the Plaintiff in connection with the valuation. Clause 11.3 of the Unitholders Agreement provides that the "Defaulting [Unitholder] must bear one hundred per cent of the costs of the determination of Fair Market Value".
The striking out of the Points of Defence means in my view that there is nothing standing in the way of summary judgment as against the Second Defendant. There are invoices from Mr Gwynne and Mr Ma for their work in producing the valuation. The assertion in paragraph 6 of the Defence, in my view, is equally untenable and the assertions therein are not of substance. Summary judgment should therefore be entered on the issue of the valuation costs.
I would invite the parties to submit short minutes of order reflecting the outcome of this hearing and arguments as to costs and GST.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 04 June 2021

At a glance

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Judgment (18 paragraphs)

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Legislation Cited (2)

Cases Cited (15)

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