Chittleborough v Troy Group Pty Ltd [No 2]
[2025] WASCA 4
•16 JANUARY 2025
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: CHITTLEBOROUGH -v- TROY GROUP PTY LTD [No 2] [2025] WASCA 4
CORAM: BUSS P
MITCHELL JA
VAUGHAN JA
HEARD: 21 NOVEMBER 2024
DELIVERED : 16 JANUARY 2025
FILE NO/S: CACV 10 of 2024
BETWEEN: GLENN CHITTLEBOROUGH
Appellant
AND
TROY GROUP PTY LTD
First Respondent
TROY SMSF PTY LTD AS TRUSTEE FOR THE TROY SUPERANNUATION FUND
Second Respondent
MARK ANTHONY AND GAIL ELAINE TROY as trustee for THE TROY FAMILY TRUST
Third Respondent
DELIA BREE TROY
Fourth Respondent
FILE NO/S: CACV 12 of 2024
BETWEEN: TROY GROUP PTY LTD
First Appellant
TROY SMSF PTY LTD AS TRUSTEE FOR THE TROY SUPERANNUATION FUND
Second Appellant
MARK ANTHONY AND GAIL ELAINE TROY as trustee for THE TROY FAMILY TRUST
Third Appellant
DELIA BREE TROY
Fourth Appellant
AND
GLENN CHITTLEBOROUGH
Respondent
ON APPEAL FROM:
Jurisdiction : DISTRICT COURT OF WESTERN AUSTRALIA
Coram: BLACK DCJ
Citation: TROY GROUP PTY LTD -v- CHITTLEBOROUGH [2023] WADC 151
File Number : CIV 4783 of 2018
Catchwords:
Practice and procedure - Costs - Costs orders - Whether Respondents should pay the Appellant's costs on the dismissed claims - Turns on own facts
Calculation of loss - Whether unpaid liabilities incurred by a third-party formed part of the Appellants' loss - Third-party subvention - Whether outstanding invoices constituted a genuine liability - Whether the Fourth Appellant had suffered any loss - Turns on own facts
Legislation:
District Court of Western Australia Act 1969 (WA), s 64, s 79
Rules of the Supreme Court 1971 (WA), O 66 r 1
Result:
Appeals dismissed
Category: B
Representation:
CACV 10 of 2024
Counsel:
| Appellant | : | J C Yeldon |
| First Respondent | : | C S Williams |
| Second Respondent | : | C S Williams |
| Third Respondent | : | C S Williams |
| Fourth Respondent | : | C S Williams |
Solicitors:
| Appellant | : | Huggins Legal |
| First Respondent | : | Solomon Brothers |
| Second Respondent | : | Solomon Brothers |
| Third Respondent | : | Solomon Brothers |
| Fourth Respondent | : | Solomon Brothers |
CACV 12 of 2024
Counsel:
| First Appellant | : | C S Williams |
| Second Appellant | : | C S Williams |
| Third Appellant | : | C S Williams |
| Fourth Appellant | : | C S Williams |
| Respondent | : | J C Yeldon |
Solicitors:
| First Appellant | : | Solomon Brothers |
| Second Appellant | : | Solomon Brothers |
| Third Appellant | : | Solomon Brothers |
| Fourth Appellant | : | Solomon Brothers |
| Respondent | : | Huggins Legal |
Case(s) referred to in decision(s):
Capitalink Pty Ltd v Withnall [2024] NSWCA 172
Currabubula Holdings Pty Ltd v State Bank of New South Wales [2000] NSWSC 232
Howards Storage World Pty Ltd v Haviv Holdings Pty Ltd [2010] FCAFC 5; (2010) 182 FCR 84
National Insurance Co of New Zealand Ltd v Espagne (1961) 105 CLR 569
Rasch Nominees Pty Ltd v Bartholomaeus [2013] SASCFC 105
Rasch Nominees Pty Ltd v Bartholomaeus [No 3] [2013] SASC 14
Redding v Lee (1983) 151 CLR 117
Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388
JUDGMENT OF THE COURT:
Summary
The court is dealing with two appeals against orders made by the trial judge in the primary proceedings. The primary proceedings involved the plaintiffs' claims against the defendant, Mr Chittleborough, for damages to compensate them for loss sustained in an investment induced by Mr Chittleborough's misleading and deceptive conduct. The trial judge found the plaintiffs to have suffered loss caused by Mr Chittleborough's misleading and deceptive conduct. However, her Honour also found that only one of the plaintiffs had proven residual loss after accounting for the proceeds of a settlement of the plaintiffs' claims against third parties relating to the investment. The trial judge awarded damages in favour of that plaintiff, dismissed the other plaintiffs' claims, and ordered that there be no order as to the costs of the action.
Both the plaintiffs and Mr Chittleborough have now appealed against the primary orders. The plaintiffs challenge the trial judge's findings as to the extent of their residual loss after accounting for the settlement sum. Mr Chittleborough seeks to impugn the trial judge's failure to order the unsuccessful plaintiffs to pay his costs of the primary proceedings.
For the following reasons, none of the grounds of appeal are established and both appeals should be dismissed.
Background
The plaintiffs in the primary proceedings were:
1.Troy Group Pty Ltd (Troy Group);
2.Troy SMSF Pty Ltd as trustee for the Troy Superannuation Fund (Troy SMSF);
3.Gail Troy and Mark Troy as trustee for the Troy Family Trust (Trustees); and
4.Delia Troy.
Troy Group and Troy SMSF are companies controlled by Mark Troy. Gail and Mark Troy are husband and wife, and Delia Troy is their adult daughter. The Troys knew Mr Chittleborough through their association at the Jehovah's Witness Church.
In 2014 and 2015, the plaintiffs invested a total of $865,000 in three corporate entities referred to collectively in the primary decision as 'Bux'. This involved the following payments being made to Bux:[1]
[1] Troy Group Pty Ltd v Chittleborough [2023] WADC 151 [30] (primary decision).
Table 1: Payments by plaintiffs to Bux
Item
Date
Payee
Amount
1.
15/12/2014
Troy Group
$50,000
2.
27/02/2015
Troy Group
$40,000
3.
23/04/2015
Delia Troy
$25,000
4.
01/05/2015
Troy Group
$120,000
5.
23/07/2015
Trustees
$50,000
6.
07/08/2015
Troy SMSF
$300,000
7.
04/11/2015
Troy SMSF
$10,000
8.
17/11/2015
Troy SMSF
$120,000
9.
10/12/2015
Troy Group
$10,000
10.
10/12/2015
Troy SMSF
$140,000
Total
$865,000
These payments were made because of misleading and deceptive conduct by Mr Chittleborough. The purported investment opportunity was a scam and share certificates that were issued to the plaintiffs were fraudulent. In the primary proceedings, the plaintiffs claimed damages against Mr Chittleborough in respect of that conduct, under s 18 of the Australian Consumer Law (Cth) and cognate provisions.
In 2016, Troy SMSF commenced proceedings in the General Division of this court against two of the Bux companies, seeking to recover $350,000 which it had invested in Bux shares.
Steenhof Brothers Pty Ltd (Steenhof) acted as the solicitors for Troy SMSF in the Supreme Court proceedings. Steenhof was retained by Mark Troy in his personal capacity, although acting in his personal capacity he did not invest any funds in Bux. Mark Troy acting in his personal capacity also engaged Complexas Investments Ltd to investigate and obtain evidence for use in proceedings to recover the plaintiffs' investment. Troy Group, Troy SMSF and Mark Troy made the following payments of invoices issued by Complexas Ltd and Steenhof:[2]
[2] Primary decision [265].
Table 2: Payments made to Complexas and Steenhof
Item
Date
Payor
Payee
Amount
1.
13/12/2016
Mark Troy
Complexas
$20,000.00
2.
28/04/2017
Troy Group
Complexas
$20,000.00
3.
29/04/2017
Troy Group
Complexas
$5,768.78
4.
15/02/2016
Troy Group
Steenhof
$5,000.00
5.
05/04/2016
Mark Troy
Steenhof
$2,524.00
6.
09/05/2016
Troy Group
Steenhof
$5,000.00
7.
06/07/2016
Troy Group
Steenhof
$10,356.07
8.
25/07/2016
Troy Group
Steenhof
$2,009.00
9.
27/07/2016
Troy Group
Steenhof
$1,439.20
10.
08/08/2016
Troy Group
Steenhof
$3,448.20
11.
29/08/2016
Troy Group
Steenhof
$8,000.00
12.
19/09/2016
Troy Group
Steenhof
$15,000.00
13.
26/10/2016
Troy Group
Steenhof
$6,000.00
14.
21/11/2016
Troy Group
Steenhof
$3,534.70
15.
05/12/2016
Troy Group
Steenhof
$1,100.00
16.
28/02/2017
Mark Troy
Steenhof
$2,996.83
17.
02/05/2017
Troy Group
Steenhof
$8,514.00
18.
05/07/2017
Troy SMSF
Steenhof
$13,602.50
Total
$134,293.28
Some of the payments of Steenhof invoices were found to relate to the costs of the primary proceedings, and so were to be excluded from the plaintiffs' damages claim.
Although the letter agreement and one of the invoices (exhibit 34) were issued in the name of Complexas Investments Ltd, the balance of the invoices were issued by Complexas Ltd. It does not appear that the relationship between these two entities was explored at trial and the parties and trial judge did not distinguish between them at trial. The parties maintained that stance on appeal. Except to the extent it is necessary to distinguish between these entities, we will adopt the trial judge's approach of referring to them collectively as Complexas.
Settlement of the Supreme Court proceedings, and the broader dispute between Mark Troy, Delia Troy, Troy SMSF and Troy Group, on the one hand, and Bux, on the other hand, was effected by a settlement deed dated 22 June 2017. Pursuant to that settlement deed, one of the Bux companies was required to pay a settlement sum of $945,000 to Troy SMSF.[3]
[3] Exhibit 29 (Green AB 121 - 135).
The settlement sum of $945,000 was paid into Steenhof's trust account on 22 June 2017. On 28 June 2017, Steenhof distributed $630,000 of those funds to Troy SMSF and $290,000 to Troy Group. This left a balance of $25,000 in the trust account. On 5 July 2017, $13,602.50 was applied to pay Steenhof's invoices (being the payment referred to at item 18 in table 2 above) and the remaining balance of $11,397.50 was paid to Mark Troy.[4]
[4] See exhibit 35.1 (Green AB 149 - 150) and exhibit 111 (Green AB 233).
At trial, the plaintiffs primarily framed their damages claim on a global basis. They claimed to have suffered a loss of $219,655.58, comprising the investment losses of $865,000 plus investigation disbursements of $211,131.08 and legal fees of $88,524.50 incurred in the investigation and pursuit of claims against Bux less the $945,000 settlement sum.[5]
[5] Plaintiffs' Further Re-amended Statement of Claim, pars 71A - 72 (Blue AB 157 - 158).
The trial judge found that the quantification of loss could not be approached in the global way advanced by the plaintiffs. Her Honour held that the onus was on the plaintiffs to prove, not only that each plaintiff sustained a loss, but also the quantum of that loss. This exercise was complicated by the informality in the way Mark Troy dealt with the separate entities constituting what he often called 'the Troy Family Group'.[6] There is no challenge in this appeal to these aspects of the trial judge's approach to the assessment of damages.
[6] Primary decision [213] - [221].
The orders ultimately made by the trial judge reflect the following amounts paid by and to the plaintiffs:
Table 3: Amounts paid by and to the plaintiffs
Sum invested Settlement sum received Steenhof fees paid Complexas fees paid Surplus (deficit) Troy Group $220,000 $290,000 $67,841.17[7] $25,768.78 ($23,609.95) Troy SMSF $570,000 $630,000 $5,571.50[8] $0 $54,428.50 Trustees $50,000 $0 $0 $0 ($50,000) Delia Troy $25,000 unknown $0 $0 unknown [7] This is the sum of $69,401.17 referred to in the table at primary decision [362] less an amount of $1,560 for payments made to Steenhof in respect of the primary proceedings: see trial ts 817 - 818.
[8] This is the sum of $13,602.50 referred to in the table at primary decision [362] less an amount of $8,031 for payments made to Steenhof in respect of the primary proceedings: see the calculations at par 10 of the Defendant's Outline of Submissions in the primary proceedings filed on 22 January 2024 which were accepted by the plaintiffs at par 5 of the Plaintiffs' Outline of Submissions in the primary proceedings filed on 23 January 2024.
On this basis, the trial judge found that Troy Group suffered damages of $23,609.95. Troy SMSF recovered $54,428 more than it expended, and so suffered no loss. The trial judge found that the payment of $50,000 by the Trustees (referred to at item 5 of table 1 above) was a loan by the Trustees to Troy SMSF, which could be repaid out of the surplus held by Troy SMSF, so that the Trustees suffered no loss.[9] This would still leave Troy SMSF with a surplus, meaning that it suffered no loss. As discussed below, the trial judge in effect found that there was no evidence as to the amount of the settlement sum received by Delia Troy, so that her loss had not been proven.
[9] See primary decision [375] - [378] taking account of the adjustments for fees paid to Steenhof referred to at footnote 8 above.
The trial judge made the following orders in the primary proceedings:[10]
1. judgment is entered against [Mr Chittleborough] in favour of [Troy Group] in the amount of $23,609.95;
2. [Mr Chittleborough] shall pay interest at the rate of 6% per annum pursuant to s 32 of the Supreme Court [Act] 1935 (WA) to [Troy Group] on the sum of $23,609.95 from 10 December 2015 to the date on which judgment is entered;
3. [Troy SMSF's, the Trustees' and Delia Troy's] claims are dismissed; and
4. there shall be no order as to the costs of the action.
[10] Primary orders 14/02/2024.
The plaintiffs' appeal to this court
In CACV/12/2024, the plaintiffs appeal against all the primary orders on three grounds. By ground 1, the plaintiffs in effect complain about the trial judge's failure to take account of liabilities incurred by Mark Troy in his personal capacity to Steenhof and Complexas in assessing the damage suffered by the plaintiffs. By ground 2, the plaintiffs complain that the trial judge wrongly found that a Complexas invoice which had not been paid did not constitute a genuine liability of Mark Troy to Complexas. By ground 3, the plaintiffs challenge the trial judge's finding that Delia Troy suffered no residual loss after payment of the settlement sum was taken into account.
Although the plaintiffs' appeal is against all the primary orders, their orders wanted do not seek any variation to the damages awarded to Troy Group if ground 1 succeeds. In effect, counsel for the plaintiffs, at the hearing of the appeal, partly abandoned the appeal against order 1 of the primary orders.[11]
Ground 2: whether Complexas invoice represents a genuine liability
[11] See appeal ts 5 - 6.
In addition to the Complexas invoices which were paid (referred to in table 2 above and allowed for in table 3 above), there was evidence in the primary proceedings of invoices issued by Complexas which had not been paid.
The trial judge accepted Mark Troy's evidence that he and Peter Hooke, another investor in Bux, had engaged Complexas to investigate the alleged fraud by Bux. The trial judge found that exhibit 22 was the costs agreement between Complexas, Mark Troy and Mr Hooke.[12] That agreement provided for Mark Troy and Mr Hooke to pay a fixed fee of $40,000 per month plus costs and expenses to be charged at cost. The letter agreement was signed by Mark Troy on 25 November 2016.[13]
[12] Primary decision [279].
[13] Exhibit 22 (Green AB 24 - 27).
The trial exhibits included the following invoices issued by Complexas:
Table 4: Complexas invoices
Exhibit
Invoice date
Invoice #
Description
Amount
30
10/12/2016
MT/001
Investigation 23/11/2016 - 23/12/2016
$20,000
31.1
15/02/2017
MT/002
Investigation 09/01/2017 - 10/02/2017 ($20,000); unpaid balance of previous invoice ($953.06) and 50% of expenses 23/11/2016 - 10/02/2017 ($5,512.30)
$26,465.36
32
22/03/2017
MT/003
Investigation 16/02/2017 - 24/03/2017 ($20,000); unpaid balance of previous invoice 1 and 2 ($1,900) and 50% of expenses 16/02/2017 - 24/03/2017 ($3,868.78)
$25,768.78
125B
11/04/2017
MT/003
Investigation 16/02/2017 - 24/03/2017 ($20,000); unpaid balance of previous invoice 1 and 2 ($1,900) and expenses 16/02/2017 - 24/03/2017 ($5,018.20)
$26,918.20
33
11/10/2017
MT/004
Commission $143,250 (being 15% of $955,000 settlement sum less discount of $43,250 = $100,000)
£60,000
34
07/12/2018
INV-0270
Success fee 15% of $945,000
$141,750
All of the above invoices, other than exhibit 34, were issued in the name of Complexas Ltd. Exhibit 34 was issued by Complexas Investments Ltd.
As noted in table 2 above, Mark Troy and Troy Group made the following payments to Complexas:
13/12/2016$20,000.00
28/04/2017$20,000.00
29/04/2017$5,768.78
Mark Troy gave evidence that he had received and paid the invoices which are exhibits 30 and 31.1.[14] He gave evidence of receiving the invoice which is exhibit 32, but did not give any evidence about the payment of that invoice.[15] Mark Troy gave evidence that he had received the invoice which is exhibit 33, but said he had 'never paid it as yet'. Mark Troy explained:[16]
At present I hadn't caused the invoice to be paid because I really didn’t have the funds to pay it. And I explained to Mr Wombell [the principal of Complexas] that I had ongoing court actions and that I'd settle at the end of the court actions even if I was to pay it off.
BLACK DCJ: Just to be clear when you say you told Mr Wombell you'd settle with the court action, what court action are you referring to?---The one that's now - - -
This one?---Yeah.
Okay. And when did you tell Mr - - - ?---I spoke to him about seven months ago or so.
WILLIAMS, MR: Did you make any contact with Mr Wombell any time soon after receiving his email on 11 October 2017?---Yes. I spoke to him almost like within a day.
And what did you say to Mr Wombell?---There would be something that I paid off and there was ongoing – further ongoing investigations.
Did Mr Wombell say anything to you?---No, he was fine with it.
Did he say anything to you?---He was happy for me to wait to pay him off because I'd paid all my lawyers off and I'd be paying everybody off through the process of it all.
[14] Trial ts 319 - 323.
[15] Trial ts 323 - 324.
[16] Trial ts 325.
Mark Troy's evidence was to the effect that, when he received the invoice which is exhibit 34, Mr Wombell told him that the invoice had increased because he was taking too long to pay. Mark Troy's evidence was that:[17]
I said the event of the settlement of court cases, as I finished the court cases, I would then cede the finished payment on or pay him off for the full amount.
Mark Troy's evidence was that he had not paid this invoice.
[17] Trial ts 327.
In cross-examination, Mark Troy was asked about the version of the third invoice which is exhibit 125B and confirmed that he had not paid that invoice.[18] The cross-examination also addressed discrepancies in the invoices. It was put to Mark Troy that the invoice which is exhibit 34 was not genuine.[19]
[18] Trial ts 444 - 445.
[19] Trial ts 463 - 464.
The trial judge gave the following reasons for concluding that the loss relating to Complexas' fees was confined to the fees already paid:[20]
The evidence adduced at the trial regarding the investigator invoices was confusing and unsatisfactory. Mr Troy was unclear what was owed and was unable to provide a satisfying explanation as to why, if the invoices represented a genuine liability, that they had not been paid at an earlier time.
Having regard to the unsatisfactory state of the evidence regarding the outstanding alleged liability to Complexas, I am not satisfied on the balance of probabilities as to the quantum of the remaining liability to them.
…
Mr Troy said that he planned to have the invoices paid once all the legal proceedings were over. This appears contrary to the due date on the invoices and some of the communications between Complexas and Mr Troy following the delay in payment of their accounts. These materials suggested that an earlier payment of the invoices was anticipated by them.
Mr Troy gave unclear evidence about why all invoices had not already been paid given the sizeable settlement sum received and the considerable time that had passed since.
[20] Primary decision [353] - [354], [356] - [357].
The trial judge also could not find which, if any, of the plaintiffs might have assisted Mark Troy in paying any outstanding invoice, and concluded that the court should not engage in a highly speculative exercise of trying to guess what the loss to each plaintiff might have been, if any, had the invoice been paid.[21]
[21] Primary decision [355], [358] - [359].
By ground 2, the plaintiffs contend that the trial judge erred in:
1.finding that the outstanding balance of the invoice which is exhibit 32 did not constitute a genuine liability owed to Complexas; and
2.conflating the analysis as to whether that invoice related to a genuine liability owed to Complexas with the analysis of whether the invoice which is exhibit 34 related to a genuine liability owed to Complexas.
The plaintiffs contend that the invoice which is exhibit 32 is of a different character to the invoice which is exhibit 34. Unlike the invoice which is exhibit 34, the invoice which is exhibit 32 is for amounts provided for in the letter agreement[22] as it related to work for which the evidence showed Complexas had done and was provided contemporaneously. Other than the fact of partial non-payment, there was no other evidence which cast any doubt upon Complexas' entitlement to be paid the amount of the invoice that is exhibit 32. They submit that these factors, of themselves, ought to be determinative of the invoice which is exhibit 32 representing a genuine liability owed to Complexas.
[22] Exhibit 22 (Green AB 24 - 27).
We do not accept the plaintiffs' submissions. Mark Troy gave no adequate explanation as to why there were different versions of the third invoice (exhibits 32 and 125B), in different formats with different dates and claiming different amounts. Nor was there any adequate explanation as to why those invoices had not been paid at the time the $945,000 in settlement sum was received on 22 June 2017. The features of the invoices which are exhibits 33 and 34 which cast doubt on their authenticity are well-capable of giving rise to doubts as to the genuineness of liabilities indicated in the third invoices which are exhibits 32 and 125B. There is no proper basis for this court, which has not had the advantage of seeing Mark Troy give evidence, to overturn the trial judge's credit-based finding that she was not satisfied that the unpaid invoices represented a genuine ongoing liability of Mark Troy to Complexas.
For these reasons, ground 2 is not established.
Ground 3: loss suffered by Delia Troy
The alternate basis on which Delia Troy framed her claim for damages was for the $25,000 she invested plus interest, loan protection insurance premiums and other charges paid on funds which she borrowed to fund the investment.[23] Mr Chittleborough denied that Delia Troy suffered the claimed losses and pleaded that she did not receive any funds from the settlement.[24] The plaintiffs joined issue with that pleading in their reply.[25]
[23] Plaintiffs' Further Re-amended Statement of Claim, pars 71A.4, 73.4, 74 (Blue AB 157, 159 - 160).
[24] Further Re-amended Defence, par 85 (Blue AB 182).
[25] Plaintiffs' Amended Reply, par 10 (Blue AB 191).
Delia Troy gave evidence that she borrowed the funds used to make the $25,000 investment from ANZ Bank.[26] The loan was drawn down on 23 April 2015[27] and rolled over to another ANZ loan account on 1 February 2016.[28] On 5 July 2017, the loan was paid out in a transfer of $19,268.71 from another ANZ bank account in Delia Troy's name.[29] Over the terms of the loans, she made regular payments of principal and interest on the loans. She paid a total of $35,913.45, which comprised the investment sum plus the following borrowing costs:
Interest[30] $7,113.31
Bank charges[31] $564.17
Loan insurance premiums[32] $3,235.97
[26] Primary decision [128]; trial ts 545.
[27] Exhibit 57 (Green AB 165).
[28] Exhibit 58 (Green AB 167) and exhibit 63 (Green AB 180).
[29] Exhibit 103 (Green AB 232).
[30] Being the sum of $592.03 (exhibit 57, Green AB 165), $1,893.17 (exhibit 58, Green AB 167), $1,133.25 (exhibit 63, Green AB 180), $3,211.19 and $283.67 (exhibit 103, Green AB 232).
[31] Being the sum of $150 (exhibit 57, Green AB 165), $92.97 (exhibit 58, Green AB 167), $180 (exhibit 63, Green AB 180), $120 and $21.20 (exhibit 103, Green AB 232).
[32] Being the sum of $2,004.81 (exhibit 54, Green AB 154) and $2,942.69 (exhibit 59, Green AB 169) less an insurance rebate of $1,711.83 received when the loan was paid out (exhibit 103, Green AB 232).
Delia Troy was not asked in her evidence-in-chief about whether she received any payment from the settlement sum received on 22 June 2017. In cross-examination, she gave evidence that, in signing the settlement deed, she expected to be compensated under the deed.[33] The cross-examination continued:[34]
And you went into this deed and I submit it was on your understanding that you would be - that you would be able to pay out your loan on the basis of the moneys you'd received?---Yes, and I did.
I see. So were you able to use some of these settlement funds to pay out your loan?---Yes.
All of it?---Yes.
So there's no loan with the ANZ Bank that you're yet to pay out?---No.
The cross‑examination then ended, and Delia Troy was not re‑examined.
[33] Trial ts 564.
[34] Trial ts 565.
In the primary decision, the trial judge dealt with Delia Troy's claim in the following terms:[35]
[Delia Troy] did not pay any of the fees [to Steenhof or Complexas]. Nor did she have any liability to pay those fees.
She did borrow money from the bank to invest in Bux which amounts to $25,000 plus the relevant interest and bank fees. She gave evidence however that at an earlier time she received a sum of money that she used to discharge that loan and she is no longer out of pocket.
It is unclear from the evidence led at trial how she was repaid or who paid her but the evidence did not establish that her evidence that she was repaid was mistaken. [Delia Troy] is best placed to know if she has sustained any loss or not.
In circumstances where [Delia Troy] has not paid any of the fees and has no liability to do so and otherwise asserts she has no remaining loss, her claim must fail.
Accordingly, the claim brought by [Delia Troy] is dismissed.
[35] Primary decision [379] - [383].
On 23 January 2024, the plaintiffs filed submissions as to the orders which should be made following the publication of the primary decision. The submissions contended that, while Delia Troy had accepted that the then balance of the ANZ loan was discharged with a portion of the settlement sum, she had previously paid $17,094.88 in servicing the loan. The plaintiffs contended that there was no evidence, and it was not put to Delia Troy, that any other person made the various payments servicing the loan. Consequently, the plaintiffs contended that judgment should be entered in Delia Troy's favour in the amount of $17,094.88.[36]
[36] Plaintiffs' Outline of Submissions in the primary proceedings filed on 23 January 2024, pars 13 - 16.
This issue was the subject of oral submissions made before the trial judge on 14 February 2024. After noting the argument, the trial judge said:[37]
It seems to me that that really misses the point in that, for a start, the onus is, of course, upon the plaintiff to prove a loss, rather than any onus or obligation upon the defendant to prove that the funds in the bank statement were repaid. I do not accept as a starting position that the defendant had to put to the witness or otherwise establish how it was that those funds were repaid or whether they were repaid.
The evidence of Delia Troy, even taken at its highest for the plaintiff[s], left a lacuna in the evidence, so to speak, or an absence of evidence as to precisely what happened in relation to the additional costs beyond the initial investment. Quite patently and quite obviously, [Delia Troy] is correct when [she] says that there were expenses incurred.
[37] Trial ts 814.
The trial judge found that, due to the informality with which Mark Troy dealt with the relevant funds, documents including bank statements did not simply speak for themselves.[38] The trial judge said:[39]
Accordingly, I find that [Delia Troy] has not proved that [she] sustained any remaining loss, and accordingly I find against [Delia Troy] in terms of [her] claim, and therefore in my orders shortly I will be dismissing [Delia Troy's] claim. I should make it clear, however, that I'm not dismissing it on the fact that [Delia Troy] did not suffer [loss] as a consequence of the conduct of [Mr Chittleborough], but rather because there was an absence of evidence to prove that there was any residual loss.
[38] Trial ts 814 - 815.
[39] Trial ts 815 - 816.
Her Honour observed that she had found that Mr Chittleborough had caused loss to each of the four plaintiffs and that the 'issue was more about whether or not there was any loss that could be claimed in all of the circumstances'.[40]
[40] Trial ts 816.
By ground 3, the plaintiffs in effect contend that the trial judge erred in not upholding the argument summarised at [37] above.
In our view, the trial judge was correct to find that there was a lacuna in the evidence as to the residual loss sustained by Delia Troy after payment of the settlement sum.
Determining whether the claimed residual loss was sustained, and if so the amount of that loss, required the court to deduct, from the investment sum of $25,000 and borrowing costs, the settlement sum received by Delia Troy.
Delia Troy accepted that she had received part of the $945,000 settlement sum and that she was 'able to use some of these settlement funds to pay out' her outstanding ANZ loan. This evidence was ambiguous as to whether the reference to 'some of these settlement funds' was to part of the $945,000 or part of her share of that total sum. The effect of Delia Troy's evidence was that she had received at least the $19,268.71 used to pay out the loan on 5 July 2017, but she did not give evidence that this was all she had received.
The way Delia Troy received the funds used to pay out the ANZ loan account was not addressed in the evidence. The payout amount was transferred from another account in Delia Troy's name,[41] and there was no evidence as to how funds used to discharge the ANZ loan came to be transferred into that other account.
[41] The account with a number ending in 841 was the account in Delia Troy's name to which the loan amount was initially transferred: see exhibit 55 (Green AB 160).
The loss, if any, which Delia Troy suffered was a matter she could have easily proved. She gave evidence that she borrowed money, incurred borrowing costs and received some of the settlement sum. She therefore gave evidence as to the existence of the three elements from which the existence and extent of her claimed residual loss could be determined. However, she did not give evidence of the amount of the settlement sum she received, which was required to determine whether she suffered a residual loss and, if so, the amount of that residual loss. Further, attribution of payment of some of the settlement sum to her would affect the calculation of the other plaintiffs' loss.
The court will generally be very hesitant to draw inferences in favour of a party who could have given direct evidence of the fact when that party refrained from doing so.[42] In substance, however, counsel for the plaintiffs now argues that the trial judge was in error in failing to infer that the amount that Delia Troy received from the settlement sum was no more than the $19,268.71 used to discharge the ANZ loan. Delia Troy having failed to prove a critical fact which was within her knowledge and readily provable by her, the trial judge was correct not to attempt to speculate as to the amount, if any, of her residual loss.
[42] See the recent discussion in Capitalink Pty Ltd v Withnall [2024] NSWCA 172 [56] - [61] (Bell CJ), [86] (Leeming JA), [89] (Stern JA).
For these reasons, the trial judge was correct to conclude that the evidence did not prove that Delia Troy suffered any loss for which she was not compensated by the settlement sum received in June 2017. Ground 3 is not established.
Ground 1: principle of third-party subvention
The plaintiffs submit, uncontroversially, that:[43]
There is an accepted principle that, in assessing damages, benefits that a plaintiff has received or is to receive from a source other than the defendant are to be disregarded in assessing the quantum of the plaintiffs loss if, inter alia, such benefits were given or promised by way of bounty, to the intent that the plaintiff should enjoy them in addition to and not in diminution of any claim for damages.
[43] Plaintiffs' written submissions, par 14 (White AB 11), citing National Insurance Co of New Zealand Ltd v Espagne (1961) 105 CLR 569, 573 (Dixon CJ), 598 - 600 (Windeyer J); Redding v Lee (1983) 151 CLR 117, 122 - 125 (Gibbs CJ), 136 - 139 (Mason & Dawson JJ, Wilson J agreeing at 151), 159 and 162 (Brennan J), 166 - 168 (Deane J).
By ground 1, the plaintiffs contend that this principle extends in the present case to payments made by Mark Troy to Steenhof and Complexas for services provided for the plaintiffs' benefit. They contend that the trial judge erred in dismissing that claim on the following basis:[44]
The difficulty here however is that the liability for the claimed loss, namely the obligation to pay the legal and investigative fees, rested with Mr Troy, not the plaintiffs. This principle is not directed at the establishment of liability for loss but rather the calculation of the quantum of the loss. Where it applies, at its simplest, the principle requires the court to ignore or disregard the payment made by the third party in calculating what is owed by the wrongdoer.
The principle of third-party subvention does not lead to a shifting of the loss sustained personally by Mr Troy as a consequence of the contracts he entered into, to the plaintiffs. It would only apply if it was the plaintiffs who owed the fees and Mr Troy had paid the fees on a gratuitous basis. The principle would then result in the plaintiffs being able to claim the full loss, not diminished by Mr Troy's gratuitous payments to them.
Accordingly, I find the principle has no application to the circumstances here.
[44] Primary decision [326] - [328].
It is unnecessary to address the plaintiffs' argument that this finding of the trial judge is wrong as, even if the argument succeeded, it would not lead this court to vary the orders made by the trial judge.
The three payments to Steenhof and Complexas made by Mark Troy are set out at items 1, 5 and 16 of table 2 above and total $25,520.83. The plaintiffs' primary submission is that this amount should be apportioned equally between the four plaintiffs and in the alternative for that amount to be apportioned by value of the losses of each of the plaintiffs.[45] The failure of ground 2 means that there are no unpaid liabilities of Mark Troy which can be brought to account for this purpose.
[45] Appeal ts 4.
However, the payments made by Mark Troy were taken into account so far as the settlement sum received in June 2017 was used to reimburse Mark Troy for those expenses. The settlement sum available to the plaintiffs has been reduced by that amount. The plaintiffs' case at trial was that Mark Troy received $25,000 of the settlement sum.[46] On that basis, the payments made by Mark Troy for which he has not been reimbursed by the plaintiffs only amounted to $520.83. As the plaintiffs formulated their claim at trial, that is the only amount to which the principle of third-party subvention could apply.
[46] See the table at primary decision [362].
If that were to occur, and the amount were to be apportioned equally as the plaintiffs propose, then the damages awarded to Troy Group would be increased by $130.21. However, as noted at [19] above, the plaintiffs abandoned any claim to vary the damages awarded to Troy Group by the primary orders if ground 1 succeeded. The addition of $130.21 would not produce a net loss by either Troy SMSF or the Trustees. Nor would the addition of $130.21 resolve the lacuna in the evidence as to the existence or amount of any loss suffered by Delia Troy.
We note that the position advanced by the plaintiffs at trial in relation to the amount of the settlement sum received by Mark Troy does not appear to accord with the evidence. As noted at [12] above, of the $25,000 remaining after distributions had been made by Steenhof to Troy Group and Troy SMSF, $13,602.50 was applied to pay Steenhof's invoices (being the payment referred to at item 18 in table 2 above) and the remaining balance of $11,397.50 was paid to Mark Troy. Payment of the invoice referred to at item 18 in table 2 above was found to have been made by Troy SMSF. Therefore, Mark Troy was only reimbursed for $11,397.50 of the $25,520.83 in fees he paid to Steenhof and Complexas.
However, even if the plaintiffs were to be permitted to depart from the case they advanced at trial, the discrepancy just noted would not alter the outcome of the appeal. In the alternative scenario in which Mark Troy received only $11,397.50 of the settlement sum, the deficit or surplus of each plaintiff would be as indicated in the following table.
Table 5: Plaintiffs' losses or surplus in the alternative scenario
Sum invested Settlement sum received Steenhof fees paid Complexas fees paid Surplus (deficit) Troy Group $220,000 $290,000 $67,841.17[47] $25,768.78 ($23,609.95) Troy SMSF $570,000 $643,602.50[48] $5,571.50[49] $0 $68,031 Trustees $50,000 $0 $0 $0 ($50,000) Delia Troy $25,000 unknown $0 $0 unknown Non-party Mark Troy $0 $11,397.50 $5,520.83 $20,000 ($14,123.33) [47] See footnote 7.
[48] Being the sum of $630,000 referred to in the table at primary decision [362] plus the $13,602.50 of settlement funds applied to pay Steenhof's costs.
[49] See footnote 8.
In that alternative scenario, the Trustees continue to suffer no loss as they have simply advanced a loan of $50,000 to Troy SMSF which is recoverable from the surplus of $68,031 retained by Troy SMSF. The payments made by Mark Troy for which he has not been reimbursed would be $14,123.33. That is less than the remaining surplus retained by Troy SMSF after repayment of the Trustee's loan. It would remain the case that the evidence would not be sufficient to determine the existence and extent of any residual deficit of Delia Troy. While the residual deficit of Troy Group would increase, the plaintiffs abandoned any claim to the adjustment of the damages awarded to Troy Group if ground 1 succeeds.
Looking at the matter globally, the plaintiffs collectively invested $865,000. Delia Troy incurred $10,913.45 in borrowing costs (see [34] above). The plaintiffs and Mark Troy were found to have paid a total of $124,702.33 in investigative and legal costs to obtain the settlement with Bux,[50] and there is no challenge to that finding. Deducting these amounts from the settlement sum of $945,000 leaves a global deficit of $55,615.78. The total damages awarded were $23,609.95, leaving a global deficit of $32,005.83 which has not been the subject of any damages award.
[50] Being the sum of $67,814, $25,768.78 and $5,571.50 referred to at table 3 above together with the payments totalling $25,520.83 made by Mark Troy referred to in the table at primary decision [362].
That uncompensated global deficit is not the product of any limitation in the law of third-party subvention or any error by the trial judge. Rather, it is the product of the way in which the plaintiffs dealt with the settlement sum and the forensic choices which they made at trial and on appeal. It would have been a simple matter to have deducted investigative and legal costs from the $945,000 settlement sum before making distributions of the balance to each plaintiff. Any residual loss of each plaintiff would then have been readily ascertainable and provable. However, the confusing way in which the plaintiffs dealt with the settlement sum, and the shortfalls in evidence as to what was done with that sum, precludes a finding as to which plaintiff or plaintiffs bore the burden of that uncompensated global deficit. There is no challenge on appeal to the trial judge's conclusion that it was necessary for each plaintiff to prove the particular loss they sustained. In that context, the uncompensated global deficit is the inevitable result of the plaintiffs' own forensic and financial choices.
For these reasons, ground 1 could not in the circumstances of this case lead to any variation of the primary orders. It follows that the plaintiffs' appeal must be dismissed.
Mr Chittleborough's appeal to this court
In CACV/10/2024, Mr Chittleborough appeals against the order that there be no order as to the costs of the primary proceedings. Because the appeal is under s 79 of the District Court of Western Australia Act 1969 (WA), leave to appeal against a costs order is not required.[51]
Parties' position at trial
[51] Contrast s 60(1)(e) of the Supreme Court Act 1935 (WA).
At trial, the plaintiffs sought an order that Mr Chittleborough pay their costs of the action, or alternatively a percentage of those costs. This was on the basis that the primary proceedings were determined, for all practical purposes, as if a plaintiff had generally succeeded on liability and the damages quantified were lower than sought. Mr Chittleborough on the other hand, contended that the plaintiffs should pay his trial costs, on the basis that:
1.the claims for damages by Troy SMSF, the Trustees and Delia Troy were dismissed; and
2.Troy Group was only barely successful, having received an award of about 10% of the damages claimed, on a basis that was not pursued by it at trial.
In the alternative, Mr Chittleborough contended that Troy Group should bear its own costs or receive only 25% of its costs of the action.[52]
Trial judge's approach
[52] Defendant's Outline of Submissions in the primary proceedings filed on 22 January 2024, pars 4 - 5.
The trial judge delivered ex tempore reasons for ordering that there be no order as to costs.
Her Honour noted that there had been a measure of success and failure by all parties. Her Honour said that the 'case was both a global case and an individual case'. It was a global case in the sense that it essentially involved a claim by entities associated with Mark Troy and Delia Troy who shared common legal representation. However, it was a case brought by four plaintiffs and ultimately separate findings were made for each plaintiff.[53] Further, as the trial judge put it, 'the plaintiffs and [Mr Chittleborough] both won and both lost', in the sense that:[54]
1.Mr Chittleborough failed in his contention that his conduct was not causative of the loss sustained by the plaintiffs, failed on various other issues raised during the trial and was ordered to pay damages to Troy Group.
2.Although they succeeded on many issues, Troy SMSF, the Trustees and Delia Troy failed in their claim for damages and Troy Group obtained an award of damages which was significantly less than was sought.
[53] Trial ts 847.
[54] Trial ts 847 - 848.
The trial judge referred to s 64(3) of the District Court of Western Australia Act, O 66 r 1 of the Rules of the Supreme Court 1971 (WA) (Rules) and the decision of this court in Strzelecki Holdings Pty Ltd v Jorgensen.[55] The trial judge identified the relevant principles,[56] in a way that was consistent with this court's observations in Strzelecki that:[57]
Without limiting the Court's wide discretion as to costs, the starting point in relation to the award of costs under the RSC is that the Court will generally order that the successful party to the action or matter recover their costs. …
What constitutes 'success' in proceedings is to be determined by the reality of the circumstances involved in the case. The Court may depart from the general rule that costs follow the event and modify a costs order to take into account matters such as any unreasonable conduct of a generally successful party, or to the failure of that party on one or more specific issues.
(citations omitted)
[55] Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388.
[56] Trial ts 849.
[57] Strzelecki [49] - [50].
The trial judge found that neither the plaintiffs nor Mr Chittleborough acted unreasonably in their conduct of the case.[58] The trial judge concluded:[59]
In my view, when I consider all of the matters both for and against each side, and when I consider the fact that it was both a global claim and an individual claim, and when I consider the extent to which both parties can be said to have won or lost, I find that the only way in which I can do what is fair and just between the parties, is to make an order that perhaps no one will be happy with.
But I do make an order that there shall be no order as to costs that go either way. In other words, lest there be any uncertainty, I do not order that the [plaintiffs are] required to pay any costs of [Mr Chittleborough]. And I do not require that [Mr Chittleborough] is to pay any costs of the plaintiff[s]. Put simply both parties will bear their own costs in this matter.
Mr Chittleborough's appeal to this court
[58] Trial ts 850.
[59] Trial ts 850.
Mr Chittleborough appeals against the trial judge's order on three grounds, which in effect contend:
1.The trial judge acted on a wrong principle in ordering there should be no order as to costs in circumstances where the claims by Troy SMSF, the Trustees and Delia Troy were dismissed, and the court found there was no disentitling conduct of the kind referred to in O 66 r 1(2) and O 66 r 1(3) of the Rules.
2.The trial judge acted on a wrong principle in failing to consider each of the plaintiffs' claims individually in the exercise of her Honour's costs discretion.
3.The order that there be no order as to costs was unreasonable or plainly unjust.
Mr Chittleborough contends that he was completely successful against Troy SMSF, the Trustees and Delia Troy, as their separate and distinct claims were dismissed. Having decided each of the plaintiffs' claims individually, it was wrong in principle for the trial judge to treat the plaintiffs as one party for the purpose of making a costs determination. In the absence of a finding of conduct which would disentitle him from recovering costs, Mr Chittleborough submits that he was entitled to an order that costs follow the event. He contends that a sound exercise of discretion would not lead to the result that he was not entitled to recover anything by way of costs. Mr Chittleborough submits that the trial judge's contrary approach involved an error of principle as alleged by grounds 1 and 2 and resulted in an order that was unreasonable or plainly unjust, as alleged by ground 3.
Mr Chittleborough asks this court to set aside the trial judge's costs order and substitute an order that he is to be paid at least 75% of his costs of the primary proceedings by Troy SMSF, the Trustees and Delia Troy. He accepts that, in that event, this court might also require him to pay Troy Group's costs of the primary proceedings.[60]
Disposition of Mr Chittleborough's appeal
[60] See appeal ts 43.
As this court observed in Strzelecki:[61]
As orders as to costs involve the exercise of a discretion, the well-established principles applicable to appeals against discretionary decisions apply in respect of costs decisions. An appellate court is not entitled to substitute its own decision for the decision under appeal merely because it would have reached a different decision, or because it considers that a different result would be more just and equitable. Instead, before it intervenes, an appellate court must be satisfied that the order made stands outside the limits of a sound discretionary judgment. In order to establish that that was so, an appellant must establish either an express error (namely that the primary judge acted upon a wrong principle, mistook the facts, took into account an irrelevant consideration, or failed to take into account a relevant consideration) or demonstrate that an error can be inferred. An error may be inferred if the order under appeal is shown to be unreasonable or plainly unjust. (citations omitted)
[61] Strzeleckie [43].
In all the circumstances of the present case, the only realistic alternative approach to costs was to treat the plaintiffs' claims separately and make orders reflecting the outcome of each claim, which would be to the effect that:
1.Mr Chittleborough pay at least a significant proportion of Troy Group's costs of the action, reflecting Troy Group's substantial but not complete success; and
2.Troy SMSF, the Trustees and Delia Troy each pay a proportion (reflecting the distinct issues on which Mr Chittleborough failed) of Mr Chittleborough's increased costs by reason of having to defend their respective claims.
Orders of that kind would apply the general approach that, where several plaintiffs sue by the same solicitor, and one succeeds while the others fail, the successful plaintiff will be entitled to recover the whole of his costs from the defendant and not merely a proportion. In those circumstances, the unsuccessful plaintiffs will ordinarily be obliged to pay the defendant's costs as occasioned by their having been joined.[62]
[62] Currabubula Holdings Pty Ltd v State Bank of New South Wales [2000] NSWSC 232 [104] (Einstein J), approved in Howards Storage World Pty Ltd v Haviv Holdings Pty Ltd [2010] FCAFC 5; (2010) 182 FCR 84 [72] (Edmonds J); Rasch Nominees Pty Ltd v Bartholomaeus [No 3] [2013] SASC 14 [12] (Kourakis CJ). To any extent that these authorities were not relied on by the trial judge, they are the subject of the plaintiffs' notice of contention.
If that approach had been taken in the present case, we find it difficult to see how Mr Chittleborough's net position would be improved. However, it was open to the trial judge, who was in a much superior position to this court, to make a broad assessment[63] that the respective costs awards would be likely to substantially cancel each other out. Further, this approach would involve the parties, who in their disputes to date have demonstrated a willingness to incur costs which are likely to be disproportionate to the amount at stake, in a series of difficult costs assessments. Those assessments would have a high potential to generate disputes as to which costs incurred by Mr Chittleborough were attributable to each claim. The approach advocated by Mr Chittleborough is likely to see the parties incur considerable additional costs liabilities in determining the costs of the primary proceedings for little net gain.
[63] See Strzelecki [52].
The provisions in the Rules for orders as to costs are not so inflexible as to demand the parties be exposed to an uneconomic assessment of their separate costs in the primary proceedings. Order 66 r (1) provides that, subject to certain matters, costs of proceedings are in the discretion of the court. The rule provides that without limiting the general discretion conferred on the court, the court will generally order that a successful party recover their costs. There is no closed set of categories in which a departure from the general rule may be appropriate. The court has a wide discretion to award costs, although the discretion to award costs is not unfettered and must be exercised judicially. The breadth of the discretion can accommodate the practical realities of associated claims brought by commonly represented plaintiffs who are related to each other and, as between themselves, do not separately distinguish between their financial interests. As Gray J (Lindgren J agreeing) observed in Howards Storage World:[64]
The overriding principle that costs are in the discretion of the Court can also be expressed in terms of the negative proposition that no rule or principle should be applied mechanically in the determination of the question where costs should lie in any particular case. Attention must always be paid to the particular circumstances of the individual case. The aim is to do substantial justice in relation to costs, based on the outcomes of the various issues in the proceeding, as between the entities that are parties to that proceeding.
Although guiding rules of principle and practice have developed, the discretion remains unfettered, and each case must be decided on its own facts.[65]
[64] Howards Storage World [17], [20].
[65] See Rasch Nominees Pty Ltd v Bartholomaeus [2013] SASCFC 105 [60] (Stanley J, Gray & Sulan JJ agreeing).
In our view, the trial judge correctly identified the relevant principles guiding the exercise of her Honour's costs discretion, as identified by this court in Strzelecki. Those principles did not mandate that the trial judge treat the position of each related plaintiff entirely separately or ignore the practical financial impact of doing so. It was well open to the trial judge to consider that, rather than putting the parties through a costs assessment exercise of the kind noted above which was likely to result in similar amounts being paid by and to Mr Chittleborough, the just exercise of her Honour's costs discretion was to leave each party to bear their own costs. This is not a case where legal error in the exercise of the costs discretion can be inferred from an outcome which is unreasonable or plainly unjust.
For these reasons, none of the grounds of Mr Chittleborough's appeal against the primary costs order are established.
Orders
For the above reasons, none of the grounds of appeal are established and both appeals should be dismissed. We would hear from the parties as to the costs of the appeals.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
KP
Associate to the Hon Justice Mitchell
16 JANUARY 2025
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