Jones v Waterdale Enterprises Pty Ltd [No 2] - [2025] WASC 71

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION:   JONES -v- WATERDALE ENTERPRISES PTY LTD [No 2] [2025] WASC 71
CORAM:   WHITBY J
HEARD:   26 FEBRUARY 2025
DELIVERED          :   6 MARCH 2025
FILE NO/S:   CIV 2326 of 2022
BETWEEN:   TREVOR JONES
Plaintiff
AND
WATERDALE ENTERPRISES PTY LTD
Defendant
WATERDALE ENTERPRISES PTY LTD
Plaintiff by counterclaim
TREVOR JONES
Defendant by counterclaim

Catchwords:

Practice and procedure - Application for a trial of preliminary issues - Whether court required to determine disputed facts - Whether evidence of surrounding circumstances may be adduced to assist construction of contract - No sufficient saving of time, inconvenience and costs by determination of preliminary issues - Turns on own facts

Legislation:

Rules of the Supreme Court 1971 (WA)

Result:

Application dismissed

Category: B

Representation:

Counsel:

Plaintiff	:	P Fletcher
Defendant	:	C P K Russell SC
Plaintiff by counterclaim	:	C P K Russell SC
Defendant by counterclaim	:	P Fletcher

Solicitors:

Plaintiff	:	Fletcher Law
Defendant	:	HHG Legal Group
Plaintiff by counterclaim	:	HHG Legal Group
Defendant by counterclaim	:	Fletcher Law

Case(s) referred to in decision(s):

Briggs v Curtis Quick & Associates [1999] WASCA 139
Lansdale Pty Ltd v Moore [2009] WASCA 176
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104
Palmer v Citic Ltd [No 2] [2019] WASC 14

WHITBY J:

Introduction and summary

The plaintiff was a finance broker from 2002 until he retired on 16 February 2022. As a finance broker, the plaintiff earned two types of commissions:
(1) an 'upfront' commission that was paid upon approval of a loan application the plaintiff submitted to a financier; and
(2) a 'trailing' commission that was paid on an ongoing basis on approved loans until each loan was repaid or refinanced. The trailing commission was calculated by reference to the outstanding amount under a loan and would reduce as the outstanding amount reduced.
The defendant carries on business under the name of 'Peel Finance Brokers' as trustee of the Boag Family Trust (PFB). The defendant provides a service to finance brokers and specified financiers (the PFB Panel Lenders) which facilitated the submission of loan applications from the finance brokers to the PFB Panel Lenders and the collection and distribution of commissions earned by the finance brokers.
On or about 8 September 2003, the plaintiff entered into an agreement with PFB by which PFB agreed to provide its services to the plaintiff and the plaintiff agreed to be paid 80% of his upfront commissions collected by PFB, and 75% of his trailing commissions collected by PFB. The parties refer to this agreement as the Sub‑Originators Agreement (SOA).
Up until January 2013, the plaintiff completed loan applications for his clients and submitted them to various PFB Panel Lenders using PFB's facilities.
From late 2004 to January 2013, each month the PFB Panel Lenders paid PFB the upfront and the trailing commissions referable to the current loans in place. PFB would then remit the agreed percentage of commissions to the plaintiff.
On 21 January 2013, PFB entered into a contract with Finance & Systems Technology Limited (FAST), an aggregation company, who contracted directly with lenders. From this time, most PFB Panel Lenders paid the commissions to FAST who would then remit those commissions, less the amounts payable from PFB to FAST, to PFB. PFB would then remit the remaining commissions at the agreed percentages to the plaintiff.
On 16 February 2022, the plaintiff retired from the business of finance broking.
The plaintiff says he is entitled to continue to receive trailing commissions that are being paid to PFB in relation to the loans which he submitted to the PFB Panel Lenders and which were approved (Approved Loans). PFB disputes this.
On 15 December 2022, the plaintiff commenced this action seeking a declaration and an injunction to the effect that, under the SOA, PFB must pay the trailing commissions in relation to the Approved Loans to the plaintiff.
The defendant makes an application, pursuant to O 32 r 4 of the Rules of the Supreme Court 1971 (WA) (RSC), that the court determine preliminary issues in the action. The defendant relies upon the affidavit of Terrance David Boag sworn 2 December 2024 (save for [30]) (Boag Affidavit) in support of the application.
The preliminary issues comprise eight questions, some of which contain sub-questions. In essence the defendant seeks to have the proper construction of various clauses in the SOA determined separately from the issue of quantum. The defendant submits that the proper construction of the SOA will determine whether the plaintiff is entitled to receive ongoing trailing commissions or whether the defendant is entitled to cease paying them to the plaintiff.
For the reasons that follow, I find that the determination of preliminary issues is unlikely to achieve a substantial saving in time, inconvenience or expense given that there are disputed facts that bear upon the determination of several of the preliminary issues. The defendant's application for determination of the preliminary issues prior to trial should be dismissed.

Preliminary Issues

The preliminary issues that the defendant proposes be determined are set out in the chamber summons dated 2 December 2024. They are as follows:
Question 1
Has the Sub-Originators Agreement between the Plaintiff and the Defendant dated 8 September 2003 (SOA) been terminated?
Question 2
If the answer to question 1 is yes, what was the date of termination?
Question 3
If the answer to question 1 is yes, was the SOA terminated:
(a) pursuant to clause 8.2 of the SOA;
(b) pursuant to clause 8.1 of the SOA; or
(c) by the acceptance of a repudiation.
Question 4
Having regard to the answers to questions 1 and 3 was the Defendant, from termination of the SOA, entitled to:
(a) cease paying commissions to the Plaintiff pursuant to clause 8.4 of the SOA;
(b) withhold any and all trail commissions pursuant to clause 5.3 of the SOA.
Question 5
If the answer to question 4(a) or 4(b) is yes, does the Defendant have any obligation to pay Plaintiff any further commissions?
Question 6
If the answer to question 1 is yes, is the Plaintiff obliged to return to the Defendant documents, reports, data, specifications, or other documents, and things of whatever type or nature relating to the business of the Defendant pursuant to clause 8.3 of the SOA?
Question 7
If the answer to question 6 is yes, are all of the records created while the Plaintiff was subject to the SOA in relation to the Plaintiff's clients and the loans applied for by the Plaintiff's clients captured in the obligation under clause 8.3 of the SOA?
Question 8
On the proper construction of the SOA, for the purposes of clause 5.1 and 5.2 of the SOA is the Defendant only obliged to calculate the commissions payable to the Plaintiff on the amount of commission actually received from FAST?
(Preliminary Issues)

Legal principles applicable to pre-trial determination of issues

The defendant applies for separate pre-trial determination of the Preliminary Issues pursuant to O 32 r 4 of the RSC. O 32 r 4 of the RSC provides:
The court may order that any question or issue arising in a cause or matter whether of law or fact or partly of law and partly of fact, and whether raised by the pleadings or by agreement of the parties or otherwise be tried separately from any other question or issue whether before or at or after the trial or further trial of the proceedings, and may direct that a case and the question or issue for decision be stated.
The legal principles applicable to such an application are well established and not in dispute. The court has a discretion to order the separate pre-trial determination of preliminary questions and the exercise of that discretion depends upon what is in the interests of justice in the particular case. Therefore, it is not possible to comprehensively list the circumstances where it will be appropriate to order a separate trial of issues.[1] However, as a general proposition, the determination of issues by a separate trial is only appropriate where there is a clear demarcation between issues and the determination of separate issues is likely to result in a substantial saving in time, inconvenience and expense.[2]
[1] Lansdale Pty Ltd v Moore [2009] WASCA 176 [22] (Lansdale).
[2] Lansdale [22].

As a starting point, the court must approach an application of this nature with caution. It may be the case that the perceived benefit of determining preliminary issues is illusory. This is because such determination may actually cause delay and an increase in costs - the very things the preliminary determination was intended to avoid.[3]
[3] Lansdale [20].
In exercising the discretion to order determination of preliminary issues, the court must have regard to the objectives of O 1 r 4A and r 4B of the RSC - that being the just resolution of the proceedings with expedition and proportionality of costs.

The defendant's submissions

The defendant contends that there are features of this action which strongly support a determination of the Preliminary Issues. Those features are:
(1) there is a clear demarcation between the issue of the proper construction of the SOA and the issue of quantum;
(2) to determine the preliminary issues, the court need only determine the proper construction of the SOA having regard to the terms of the SOA and to the facts set out in the proposed statement of agreed facts (Proposed Facts); [4]
(3) given neither party pleads any surrounding circumstances that are relevant to the construction of the SOA, no evidence of surrounding circumstances is relevant to the determination of the Preliminary Issues;
(4) to the extent that there are disputed questions of fact, including whether the plaintiff repudiated and/or breached the SOA, the court can resolve these by reference to the correspondence between the parties referred to in the Proposed Facts; and
(5) the determination of the Preliminary Issues can be completed in one day, as opposed to a trial which it estimates will take six days.[5]
[4] Boag Affidavit TDB-1.
[5] Defendant's outline of submissions filed 24 January 2025 Schedule A.
The defendant submits that the determination of the Preliminary Issues will result in one of the following outcomes:
(1) the plaintiff's claim will be dismissed;
(2) the plaintiff's claim will be upheld in part or in full with the quantum to be determined – the defendant says that if this is the result, the parties will be able to resolve the amount to be paid between themselves; or
(3) the defendant's counterclaim in relation to the return of documents will either by upheld or dismissed.
The defendant says that this is a more efficient and timely way to resolve the proceedings, rather than the way forward proposed by the plaintiff - that being that the parties provide discovery, attend a mediation and then if the matter is not resolved, proceed to a 'full blown' trial. Mr Boag deposes that it is his belief that, given the diametrically opposed views of the parties, it is an all or nothing case which is unlikely to be resolved at a mediation.[6] The defendant says that the determination of the Preliminary Issues will significantly increase the prospect of settlement of the whole action and the counterclaim.
[6] Boag Affidavit [34].
Mr Boag deposes that, if the defendant's application for a trial of Preliminary Issues is successful, it will forego the parts of its counterclaim that cannot be determined as preliminary issues.[7]
[7] Boag Affidavit [32].

Plaintiff's submissions

The plaintiff submits that, based on the established legal principles, this case is not one in which it is appropriate to determine the Preliminary Issues prior to trial. This is because, the plaintiff says, the court will be required to determine disputed facts as to whether the plaintiff repudiated, or breached a term of, the SOA.
The plaintiff says that a determination of the Preliminary Issues in such circumstances would not save time or costs, but rather may increase the costs and delay the resolution of the issues between the parties.
The plaintiff says that any saving of time by virtue of the defendant forgoing parts of its counterclaim is illusory - as those portions of the counterclaim are insignificant and will not substantially increase the length of the trial.

Disposition

In my view, the defendant's application relies upon the court accepting that the Preliminary Issues can be determined by construing the SOA by reference to the SOA and the Proposed Facts (or by reference to additional facts that may be agreed between the parties). If this is not the case and evidence is required to be adduced in order to resolve factual disputes, there will not be a significant saving of time or costs such as to warrant a separate trial of the Preliminary Issues.
I must be satisfied that the court can construe the SOA under those conditions proposed by the defendant. That requires the court to consider the nature of the exercise it is being asked to undertake in determining the Preliminary Issues.
The legal principles relating to construction of contracts are well settled. Contracts must be construed objectively, by ascertaining what a reasonable businessperson in the position of the parties would have understood the words in the contract to mean, having regard to the surrounding circumstances known to the parties and the commercial purpose of the contract.[8]
[8] Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104 [46].
The defendant contends that, upon a proper construction of the SOA, it is entitled to withhold the future payment of trailing commissions to the plaintiff. The defendant says that it is entitled to do so pursuant to one or more of the following clauses of the SOA:
(1) Clause 5.3:
If this agreement is terminated, Peel Finance Brokers may, at its own discretion, withhold any and all trail commissions unless otherwise agreed to between the parties.
(2) Clause 8:
8.1 This agreement may be terminated summarily should the Sub‑Originator breach any of the terms or conditions of this agreement as herein described, or this agreement may be terminated by Peel Finance Brokers or the Sub-Originator at any time by giving one month's notice in writing to the other party.
8.2 If a party breaches a term of this Agreement ("Defaulting Party"), the other party ("Non-Defaulting Party") may terminate this agreement by giving the Defaulting Party fourteen (14) Business Days notice in writing.
8.3 In the event this Agreement is terminated, the Sub‑Originator will return to Peel Finance Brokers documents, reports, data, specifications, or other documents, and things of whatever type or nature relating to the business Peel Finance Brokers.
8.4 If this Agreement is terminated by Peel Finance Brokers pursuant to clause 8.2, … Peel Finance Brokers shall, notwithstanding any other provision in this Agreement to the contrary, be entitled to immediately cease payment any further commissions to the Sub‑Originator without prejudice to Peel Finance Brokers' other rights and remedies under this Agreement or at law.
The defendant says that these clauses provide for two scenarios in which the defendant is entitled to cease paying the plaintiff trailing commissions. First, under cl 5.3, the defendant has a discretion to withhold trailing commissions if the SOA is terminated. Second, under cl 8.4, the defendant has an absolute right to cease paying the plaintiff any commissions if the defendant terminates the SOA pursuant to cl 8.2. The defendant is entitled to terminate the SOA pursuant to cl 8.2 if the plaintiff is in breach of the SOA.
My task on this application is not to construe the SOA - rather it is to determine whether it is possible to construe the SOA having regard to the terms of the SOA itself and the Proposed Facts.
Clauses 5.2 and 8.4 of the SOA are premised on there being a termination of the SOA. Preliminary Issue 3 seeks a determination of whether the SOA was terminated pursuant to cl 8.1 or cl 8.2 or by acceptance of a repudiation. The court could not determine Preliminary Issues 1 and 2 without first determining Preliminary Issue 3. Preliminary Issue 3 is a question of fact, not a question of construction of the SOA. In order to answer Preliminary Issue 3, the court is required to determine as a matter of fact, whether:
(1) the plaintiff's conduct constituted a repudiation of the SOA;
(2) whether the plaintiff's or the defendant's conduct constituted notice in writing that the SOA was terminated; and/or
(3) whether the plaintiff was in breach of a term of the SOA.
The defendant says that, in order to determine these facts, all the court is required to have regard to are the Proposed Facts and determine whether or not the court considers the correspondence amounted to notice of termination and/or whether the breaches that are alleged in the correspondence are breaches that can be relied upon to terminate the SOA.
One of the breaches of the SOA upon which the defendant relies for the purposes of cl 8.2 is that the plaintiff, by failing to comply with the defendant's direction to transfer to FAST's platform (referred to as 'MyCRM'), was a breach of the SOA.[9] The defendant also contends that the plaintiff's letter to the defendant dated 23 January 2022,[10] in which the plaintiff states he will be retiring as from 16 February 2022, constitutes a notice of termination of the SOA pursuant to cl 8.1 of the SOA.
[9] Boag Affidavit TBD-9.
[10] Boag Affidavit TDB-8.
The plaintiff disputes that he was contractually obliged to transfer his clients to the FAST's MyCRM platform and therefore, disputes that he is in breach of the SOA. The plaintiff also disputes that he terminated the SOA as a result of his letter advising the defendant of his retirement.
In my view, these are factual issues in dispute upon which evidence may be required to be given by the plaintiff and Mr Boag. Determination of each of the Preliminary Issues are all dependent upon the factual findings the court makes in relation to Preliminary Issue 3.
Further, even if those factual issues could be agreed between the parties, given the constructional choices of the SOA that arise, regard may be had to the surrounding circumstances known to the parties at the time they entered into the SOA and the commercial purpose of the SOA.
I do not accept the defendant's submission that the plaintiff is precluded from adducing any evidence of surrounding circumstances because he has not specifically pleaded any surrounding circumstances. I do not accept that proposition for the following reasons.
The following authorities were referred to by senior counsel for the defendant in support of the proposition that, if the plaintiff contends that the SOA is to be construed by reference to any surrounding circumstances, it must plead what those circumstances are:
(1) Contractual Construction: Surrounding Circumstances and the Ambiguity Gateway by the Hon Justice Kenneth Martin (as his Honour then was);
(2) Briggs v Curtis Quick & Associates;[11] and
(3) O 20 r 9(1)(b) and (c) of the RSC.
[11] Briggs v Curtis Quick & Associates [1999] WASCA 139 [22] (Briggs).
In my view, none of these are authority for the proposition advanced by the defendant.
Firstly, this is what K Martin J said in his paper delivered to the Thomsons Contract Law Seminar held in Perth on 20 June 2013:[12]
After the dust of a search has settled in the wake of these expensive quests there is, I humbly suggest, an essential need for the party who wants to argue there is a significant mutually known surrounding fact(s) or circumstance(s) that existed at the time of contracting, to do at least two things. Firstly, it should plead out the fact to openly identify it. It needs to do this so the opposition can be both:
(i)apprised of what that alleged fact or circumstance is before trial; and
(ii)have a fair opportunity to indicate whether or not it accepts the existence of the fact or circumstance.
Identification can avoid diverting excursions into side issues over facts which, at the end of the day, may either be uncontested or even accepted.
The second requirement is for the party advancing a supposedly relevant surrounding fact or circumstance, having identified it, to then go on to clearly explain at some point in the trial process how and why the fact or circumstance assist in advancing its construction position.
[12] Contractual Construction: Surrounding Circumstances and the Ambiguity Gateway by the Hon Justice Kenneth Martin (as his Honour then was), 30 - 31.

His Honour made these observations following his discussion of pre‑trial discovery seeking documents relating to surrounding circumstances being a long, costly and burdensome 'trawling exercise'. His Honour's observations as to the two things that should occur where a party seeks to argue a mutually known surrounding circumstance do not amount to a binding statement of law that surrounding circumstances of a contract must be pleaded in order to adduce evidence as to those circumstances. His Honour was simply expressing his view as to what ought to occur to avoid a party being taken by surprise. It may well be that the parties do plead those surrounding circumstances at the outset of the action. However, that it not always the case and the party is not precluded from relying on evidence of relevant surrounding circumstances at the trial if it does not plead those circumstances. Whether such evidence is admissible will be a matter for the trial judge, having regard to the rules of evidence. To illustrate that his Honour's observations are not a binding proposition of law, I refer to the case of Palmer v Citic Ltd [No 2][13] in which his Honour, in refusing an application for a trial of preliminary issues involving the construction of a contract, said:[14]
To arrive at a final meaning of [a clause in the contract] a full objective appreciation of the nature of the [contract] and its surrounding transactions and their objective commercial purposes … would need to be carefully assembled and understood, as a necessary part of any construction exercise.
…
I assess that a very great potential still exists here for further facts to emerge bearing upon the construction at a subsequent trial if, say, the preliminary questions were answered on a basis that the indemnification covenant did, as a matter of interpretation potentially apply to the facts pleaded by the plaintiffs in their respective statements of claim…
[13] Palmer v Citic Ltd [No 2] [2019] WASC 14 (Palmer v Citic).
[14] Palmer v Citic [142], [147].
While the constructional exercise in Citic v Palmer was a much more substantial exercise than in this case, his Honour clearly contemplated that further facts may emerge, other than those presently pleaded, that would bear upon the construction of the contract. His Honour did not find that the parties were precluded from adducing evidence of such facts on the basis that they were not pleaded.
Secondly, the comments in Briggs relied upon by the defendant are these:[15]
It is trite that a contract should be pleaded with particulars showing whether it is in writing or verbal or to be implied or partly one and partly the other: Turquand v Fearon (1879) 48 LJQB 703 at 704; Bullen & Leake and Jacobs Precedents of Pleadings 12th edition at 56. The author of that text tells us that:
In actions founded on contract, the pleader should always state with full particulars the material facts relating to the contract, namely, the parties to the contract, its date and how it was made, whether orally or in writing or under seal or how otherwise. If the contract was made orally, particulars should be given of the date when, and the persons between whom the contract was made … If any terms of the contract are alleged to be implied, particulars should be given of the facts and matters relied on as giving rise to the alleged implied terms.
[15] Briggs [22].
The defendant says that, by analogy, if the plaintiff alleges that surrounding circumstances are relevant to the construction of the SOA, those are material facts relating to the contract and must be pleaded. In my view, Briggs is not authority for that proposition. The observations in Briggs are relevant to a plea of an implied term. The surrounding circumstances that are relevant to the construction of a contract are not analogous to the existence of an implied term.
Thirdly, the defendant relies on O 20 r 9 (1) (b) and (c) of the RSC which provide that a party must specifically plead, in any pleading subsequent to a statement of claim, any matter which may take the other party by surprise or any matter which raises issues of fact not arising out of the preceding pleading. The defendant says that, given it pleads in its defence the effect of certain terms of the SOA, the plaintiff must specifically plead, in its reply, any surrounding circumstances that go to an alternate construction. The defendant submits that, if those facts are not pleaded, it would be unfair, and they would take the defendant by surprise.
I accept that it would be unfair for the defendant not to be given the opportunity to controvert any facts raised by the plaintiff for the first time at trial. However, I do not accept that is what would occur at trial even if the surrounding circumstances were not pleaded. The action is subject to pre-trial case management and in the ordinary course, orders for discovery and exchange of witness outlines will be made. To the extent that surrounding circumstances are relied upon, the pre-trial case management orders are intended to address the risk of either party being taken by surprise.
I do not accept, as a binding principle of law, that the plaintiff is precluded from adducing evidence of surrounding circumstances merely because he has not pleaded those circumstances.
In summary, in order to construe the SOA, the court will be required to determine disputed facts and have regard to the surrounding circumstances of the SOA which are both matters upon which the parties will be required to give evidence. This factor alone is sufficient to weigh against a separate trial of the Preliminary Issues as it means that there will not be a significant saving of time or costs. Given this finding, it is unnecessary to consider whether the plaintiff's unjust enrichment claim would still need to be determined if the Preliminary Issues were determined or the extent to which an abandonment of part of the defendant's counterclaim would reduce the length of trial.
Further, even if various additional facts could be agreed, and I have some hesitancy in accepting that all relevant facts could be agreed, the time taken in attempting to agree them may outweigh any saving in time associated with a separate trial of the Preliminary Issues.
I also make this observation - I do not accept that there is no prospect of the matter resolving at mediation. It is more often than not that an outcome at trial will be an 'all or nothing' proposition. It is that very fact that provides significant incentive for the parties to engage in mediation and consider a commercial compromise.
In my view, the determination of the Preliminary Issues is unlikely to result in a substantial, if any, saving in time, inconvenience and expense. The interests of justice do not favour a separate trial of the Preliminary Issues and the defendant's application should be dismissed.
My final observation is this - the dismissal of this application should not discourage the parties from attempting to narrow the issues for trial. On the contrary, the parties are encouraged to continue to attempt to agree facts which will have the effect of reducing the issues in dispute at the trial.
I am of the view that the appropriate order for costs of this application is that the defendant pay the plaintiff's costs of the application. However, I will provide the parties with an opportunity to confer and if orders cannot be agreed, to make submissions in relation to costs.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CS
Associate to the Hon Justice Whitby
6 MARCH 2025