Pave Wealth Services Pty Ltd v Danielle Jones as Executrix of the Estate of Michael Frederick Jones
[2020] WADC 16
•7 FEBRUARY 2020
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: PAVE WEALTH SERVICES PTY LTD -v- DANIELLE JONES as Executrix of the Estate of MICHAEL FREDERICK JONES [2020] WADC 16
CORAM: BRADDOCK DCJ
HEARD: 13-16 MAY 2019
DELIVERED : 7 FEBRUARY 2020
FILE NO/S: CIV 2379 of 2015
BETWEEN: PAVE WEALTH SERVICES PTY LTD
Plaintiff
AND
DANIELLE JONES as Executrix of the Estate of MICHAEL FREDERICK JONES
First Defendant
WOTIF PTY LTD
Second Defendant
Catchwords:
Sale of business - Client list - Financial advisors - Misleading and deceptive conduct - Valuation evidence - Valuation of income stream - Admissibility of expert evidence
Legislation:
Fair Trading Act 1987 (WA)
Trade Practices Act 1974 (Cth)
Result:
Judgment for plaintiff against second defendant
Action against first defendant dismissed
Representation:
Counsel:
| Plaintiff | : | Mr G Douglas |
| First Defendant | : | Mr D Huggins |
| Second Defendant | : | Mr D Huggins |
Solicitors:
| Plaintiff | : | Douglas Cheveralls Lawyers |
| First Defendant | : | Huggins Legal |
| Second Defendant | : | Huggins Legal |
Case(s) referred to in decision(s):
Automasters Australia Pty Ltd v Bruness Pty Ltd [2004] WASCA 229
Bevanere Pty Ltd v Lubidineuse (1985) 59 ALR 334
Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304
Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594
Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216
Houghton v Arms (2006) 225 CLR 553
Makita (Aust) Pty Ltd v Sprowles (2001) 52 NSWLR 705
Pave Wealth Services Pty Ltd v Danielle Jones as Executrix of the Estate of Michael Frederick Jones [2019] WADC 21
Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370
R v Bjordal [2005] SASC 422; (2005) 93 SASR 237
Re Ku-ring-gai Co-Operative Building Society (No 12) Ltd (1978) 36 FLR 134
BRADDOCK DCJ:
Introduction
This action concerns an agreement to transfer a 'client base' from a business called Prosperity Partners, of which Wotif Pty Ltd (Wotif) was the corporate trustee to Mr Paul Stojanovic, of the plaintiff company. Prosperity Partners were financial advisors to the clients comprising the 'client base'.
By way of general background, income may be generated by financial advisors or consultants in commissions earned upon business being placed with various entities for clients. Commissions may relate to different forms of financial product, eg life insurance or superannuation. The commissions may differ in quantum and characteristics. The provision of financial advice and dealings in securities or other financial products is regulated under the Corporations Act 2001 (Cth), administered by the Australian Securities and Investment Commission (ASIC). There is a detailed regulatory framework covering this complex area. Relevant for current purposes, however, is that entities or individuals who deal in financial securities must hold a licence. Persons who give financial advice must be appointed as a 'representative' of and be under the supervision of a relevant 'licence holder'. The client lists of financial advisors are assets of the business which may, as with other assets, be bought and sold.
Significant people and entities involved in the events leading to this litigation are:
1.Paul Stojanovic, (Mr Stojanovic) a financial advisor with many years of experience in financial planning.
2.Headless Canary Pty Ltd, incorporated on 13 November 2009, which in 2011 changed its name, to Pave Wealth Pty Ltd (the plaintiff).
3.Danielle Jones, the widow of Mr Jones and executrix of his estate (the first defendant).
4.Michael Frederick Jones (Mr Jones), deceased, director of Wotif Pty Ltd (the second defendant), a corporate trustee for the Prosperity Unit Trust, which traded as Prosperity Partners.
5.Consultum Financial Advisors Pty Ltd (Consultum), the licence holder under which Mr Jones and others acted as financial advisors at Prosperity Partners.
Mr Stojanovic knew Mr Jones for some years before 2009. They had worked together previously. In about 2008, Mr Stojanovic decided that he wanted to move out of his then role as manager of an investment company and set up his own business in financial planning. He considered that Mr Jones ran a successful financial planning firm. He regarded Mr Jones as something of a mentor.
In his then employment with Zurich Investments, Mr Stojanovic was aware of a number of financial advisors who might want to retire. He looked for opportunities to acquire the business of one of them. He discussed this with Mr Jones. This resulted in Mr Jones suggesting that there might be an opportunity for him to acquire clients of Prosperity Partners and work within Prosperity Partners. Eventually, they reached an arrangement whereby Mr Jones would 'carve out' clients from his client list and transfer them to Mr Stojanovic, for a fee. The arrangement had to be approved by Consultum, the licence holder, who would have to appoint Mr Stojanovic to be a representative of Consultum.
This action concerns negotiations and representations leading to the arrangement reached between Mr Jones and Mr Stojanovic. A written agreement for the transfer and assignment of a client list (Client Base) was signed on about 18 November 2009. It provided for the payment of $525,000 for the Client Base. Mr Stojanovic then had to raise finance to pay Mr Jones.
Mr Jones assisted Mr Stojanovic in securing finance through his contacts with the Commonwealth Bank of Australia (CBA) and St George Bank. This took a few months. In the end, an offer was made by St George Bank to advance the money to the then incorporated Headless Canary Pty Ltd. The agreement for transfer 'settled' on 29 April 2010, when Mr Stojanovic authorised St George Bank to pay funds at Mr Jones' direction and various security documents must have been signed.
From December 2009, Mr Stojanovic worked within Prosperity Partners, at their premises, as an authorised representative. The records of Consultum show him receiving commissions from clients in this capacity from that month.
This arrangement did not go well. Mr Stojanovic was of the view that he did not get the help and support in the office that he was promised. Neither did he receive the income that he was led to believe would flow from the Client Base. On 28 January 2011, Mr Stojanovic wrote to Mr Jones resigning from Prosperity Partners and terminating a 'Facilities and Service Agreement', which had been signed contemporaneously between the second defendant and Mr Stojanovic. He took his clients and moved to an office at another location and continued in business on his own account.
The proceedings
Essentially, this claim is for misleading and deceptive conduct allegedly engaged in by Mr Jones in relation to the agreement with Mr Stojanovic. The plaintiff claims to have suffered loss by having paid more than the Client Base was worth and seeks damages accordingly.
The history of this litigation is somewhat tortuous. It serves no purpose to chart the progress of the action from the filing of the writ, on 29 June 2015, to the trial of the action, on 13 May 2019. The matter proceeded to trial on a re-amended statement of claim, filed on 21 February 2019, together with particulars which followed on 11 March 2019. An amended defence was filed on 18 March 2019. Further and better particulars of the re-amended defence were given on 27 March 2019.
Programming orders were made on 22 February 2019, by Lemonis DCJ, after he heard argument on 6 February and 13 February 2019 which resulted in the amended pleadings being filed. Despite this, two days before the commencement of the trial, the defendants filed submissions with a minute of a further proposed amended defence. I ordered that the trial proceed and adjourned the issue of further amendments. Many aspects of those amendments were not ultimately pursued.
In this action, Pave Wealth Pty Ltd is the plaintiff, Mrs Jones is the first defendant and Wotif Pty Ltd is the second defendant. Mr Stojanovic is the sole director of the plaintiff. Mr Jones was the sole director of the second defendant.
Chronology
In this context, a short chronology of significant events is useful.
13-11-09
Headless Canary Pty Ltd incorporated
13-11-09 - 29‑04‑10
Alleged representations made (per statement of claim)
12-11-09
Jones sends Stojanovic draft agreement
18-11-09
Agreements for sale of Client Base and facilities and services signed
03-12-09
Jones emails CBA
09-12-09
Jones emails CBA
10-12-09
Jones emails Stojanovic copy CBA
04-01-10
Jones emails St George Bank
12-01-10
Wray of St George Bank emails Stojanovic copy Jones
28-01-10
A letter Jones and Stojanovic to Wray at St George Bank
18-03-10
Offer from St George Bank to Headless Canary Pty Ltd
29-04-10
Plaintiff pays $525,000 at Jones' direction
28-12-11
Stojanovic resigns from Prosperity Partners
The writ filed on 29 June 2015 was indorsed as follows:
The plaintiff claims damages for loss and damage occasioned by, and restitution, pro tanto, of payments made to the second defendant as a result of misleading and deceptive conduct engaged in by the second defendant and by the first defendant and by the late Michael Frederick Jones the executrix of whose estate is the first defendant, such conduct comprising misrepresentations made by the said late Michael Frederick Jones in trade or commerce contrary to s 18 of the Australian Consumer Law, namely, that persons named in a list handed to the plaintiff's director Paul Anthony Stojanovic on or about 9 November 2009 were fully engaged clients of the second defendant in that they continued to instruct the second defendant to provide financial services to them and manage funds for them, which representations were false in that the second defendant was not, at the time of the said representations, administering any files, providing any services, managing any funds or maintaining any contact for or with most of the persons named in the same list.
The Australian Consumer Law is contained in sch 2 of the Competition and Consumer Act 2010 (Cth). It has been adopted by each State and Territory as the law of each jurisdiction. It replaces the Fair Trading Act in each jurisdiction. It came into effect on 1 January 2011. Prior to that date, the relevant provisions relating to misleading and deceptive conduct were to be found in s 52 of the Trade Practices Act 1974 (Cth) (the TPA).
By its re-amended statement of claim dated 21 February 2019, the plaintiff seeks damages for misleading and deceptive conduct contrary to s 52 of the TPA or s 10 of the Fair Trading Act 1987 (WA) (FTA). These provisions are applicable to alleged events prior to 1 January 2011. The acts or omissions complained of in this action occurred before the commencement of sch 7 of the Trade Practices Amendment (Australian Consumer Law) Act (No. 2) 2010, on 1 January 2011. Claims under both TPA and FTA were included in the original statement of claim, filed 7 July 2016. Those claims remain as originally drafted in the re‑amended statement of claim of 21 January 2019.
The claim revolves around alleged misrepresentations which are said to have induced the plaintiff to enter into the agreement for the purchase of the Client Base. The representations are contained in par 7 of the re‑amended statement of claim which reads:
7.Between 13 November 2009 and April 2010, the Deceased acting personally and/or on behalf of the Second Defendant:
(a)presented the Plaintiff with a document titled 'Agreement for Sale of Client Base' that provided for the sale of the Plaintiff of the Second Defendant's rights and interests in ongoing revenue derived from a specific segment of its clients (the 'Client Base') for $525,000; and
(b)made the following representations to the Plaintiff in relation to the Client Base and its proposed sale to the Plaintiff ('Representations'):
A.The Second Defendant was receiving many business accolades and was doing very well, and the Deceased was receiving close to $100,000 a month in revenue.
B.The Client Base consisted of recurring, secure clients who had engaged and were still engaging the Second Defendant on a 'fee for service' basis.
C.The Client Base had a retention rate of 99%.
D.The Client Base included some highly valued clients of the Second Defendant.
E.The Client Base consisted of clients who paid fixed fees for service packages that did not fluctuate from month to month.
F.Once it acquired the Client Base, the Plaintiff would receive earnings of $150,000 per year each year just from the Client Base (as opposed to its own efforts in generating new business).
G.The Plaintiff could walk in and receive those earnings without doing anything more than general client relationship management, and could start writing good business off that base with the potential to earn much more.
H.At the time of making that representation, the Second Defendant provided financial services to all of the clients constituting the Client Base and derived a fixed annual income including but not limited to trail commission from all clients.
I.The Second Defendant was an award-winning business that would provide the Plaintiff with support to enable the Plaintiff to grow its business and avoid common hurdles faced by start-up businesses.
J.The Plaintiff was getting a very good deal based on the value of the Business, which had been valued based on a 4-times-ongoing-revenue multiple.
K.Upon settlement of the sale, the Plaintiff would be provided with a physical client file for each client comprising the Client Base, containing a history of the services provided to that client and contact information for that client.
Particulars of Representations
(i)All of the Representations were expressly communicated in conversations and correspondence between the Deceased and Paul Stojanovic ('Mr Stojanovic'), who became Director of the Plaintiff on 13 November 2009.
(ii)Representation H was also made by the Deceased providing Mr Stojanovic with a spreadsheet of clients on which the Deceased had highlighted some names said to be belong to fully engaged clients of the Second Defendant at the time the spreadsheet was prepared who would become fully engaged clients of the Plaintiff upon acquisition of the Client Base.
(iii)Representation H was also made to the Plaintiff in the document titled 'Agreement for Sale of Client Base', as prepared by the Second Defendant, which included a recital stating as much.
7A.Further, the Deceased made the Representations to Mr Stojanovic between September 2009 and 13 November 2009 knowing that:
(a)a company was about to be registered;
(b)that company would be owned and directed by Mr Stojanovic; and
(c)that company would acquire the Client Base.
Particulars of knowledge
(i)at various times between September and 13 November 2009, terms of an agreement to purchase the Client Base from the Second Defendant ('Agreement') were negotiated between the parties that expressly provided for the acquisition of the Client Base by a company that was to be incorporated for that purpose by Mr Stojanovic.
It is alleged that, contrary to s 52 of the TPA or s 10 of the FTA, the representations or each of them were misleading in that contrary to the representations:
(a)on the Settlement Date 50 of the clients that comprised the Client Base were not engaged as clients of the Second Defendant;
(b)none of the clients that comprised the Client Base engaged the Second Defendant on a 'fee for service' basis, on the date of the Agreement or on the Settlement Date;
(c)the Client Base did not have a retention rate of 99% when the Representations were made;
(d)the Client Base did not include any highly valued clients of the Second Defendant when the Representations were made;
(e)earnings from the Client Base fluctuated from month to month at the time the Representations were made;
(f)the Client Base did not generate $150,000 per year in earnings at the time the Representations were made;
(g)at the date of the Agreement, the Second Defendant did not have current engagement agreements with a significant proportion of the Client Base and/or was not providing any financial services to a significant proportion of the Client Base;
(h)many of the clients that comprised the Client Base had no knowledge of the Business, the Deceased or the Second Defendant when the Representations were made;
(i)the Plaintiff was not provided with full client files for all clients that comprised the Client Base at or after the Settlement Date or at all;
(j)the Plaintiff was not given access to adequate support from the Second Defendant at any time; on the contrary: employees of the Business who were tasked to assist the Plaintiff were either unskilled or were expressly told by the Deceased not to prioritise work for the Plaintiff over work for other advisors in the Business; and
(k)the value of the Business was exaggerated by the Deceased.
Particulars of exaggeration
(i)The Client Base would not have been valued at a 4‑times-ongoing-revenue multiple at the time the representations were made if the true state of the Client Base as stated in paragraphs 11(a) to 11(h) were known to the person providing the valuation.
(ii)When the Plaintiff obtained valuations of its business after the Settlement Date the entire business was valued at around $200,000, which is substantially less than the $600,000 value attributed to the Client Base by the Deceased at the time of the Representations.
Full particulars will be provided after the exchange of discovery and expert evidence regarding valuation.
11A.Further or alternatively, by the words and or conduct pleaded in subparagraphs 7.b.F., 7.b.G., 7.b.I. and 7.b.K. the Second Defendant made representations as to future matters pursuant to sections 51A of the Trade Practices Act 1974 (Cth).
11B.At the time the Second Defendant made the representations pleaded in paragraph 11A above, they had no reasonable grounds for making those representations.
The first defendant, in response, denied that any representations were made and pleaded that, if any representation were made, they were made to Mr Stojanovic in his personal capacity and not as a director of the plaintiff company. It is pleaded that the agreement concerned the purchase of the Client Base by Mr Stojanovic and the payment of income derived from it to Mr Stojanovic. Detailed denials of the pleaded alleged representations follow in the defendants' defences.
The second defendant also pleads that:
(a)The agreement was executed between 13 December and 18 December 2009.
(b)The effect of the agreement as pleaded involved an illegal purpose, particularised as leading to the plaintiff carrying on a financial services business contrary to s 911A of the Corporations Act 2001. Thus, it would be unenforceable.
The second defendant admits it received $525,000. It is pleaded that the Client Base generated earnings in excess of $150,000 per year.
The defendants also allege that the claims have been pleaded contrary to O 20 r 2 of the Rules of the Supreme Court 1971. Further, it is said that par 11A and par 11B plead a new cause of action, that is barred by virtue of s 82(2) of the TPA.
The plaintiff must prove, therefore, that it was misled and as a result entered into the agreement, paid too much for the Client Base and thereby suffered loss.
The defendants rely upon the failure of the plaintiff to plead, in its statement of claim, that the misrepresentations alleged were made in 'trade or commerce'. It is said that it was a private transaction.
The defendants challenged the admissibility of Mr Charlie Napoli's evidence required in the proof of loss.
The trial
The plaintiff called evidence from Mr Stojanovic, Mr Craig Read‑Smith, a software developer, and Mr Charlie Napoli, a forensic accountant. Documents were tendered in evidence, mostly without objection. They comprise communications between the parties, the agreement between the parties, communications with third parties by Mr Jones, and the documents evidencing the commissions paid in relation to the relevant clients of Consultum. The defendants called no additional evidence.
Law on misleading and deceptive conduct
Section 52(1) of the TPA provided:
A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive ...
Section 10 of the FTA provided in the same terms save that the prohibition referred to a 'person'.
Trade or commerce has been interpreted generously[1] but must have the character of being part of the corporation's trading or commercial activities and have a commercial or trading character.[2]
[1] Re Ku-ring-gai Co-Operative Building Society (No 12) Ltd (1978) 36 FLR 134, 167.
[2] Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 [20] - [24]; Houghton v Arms (2006) 225 CLR 553 [33] - [34].
Where a corporation sells a capital asset, the transaction may be 'in trade or commerce', even where the sale of such assets is not the business of the corporation.[3]
[3] Bevanere Pty Ltd v Lubidineuse (1985) 59 ALR 334.
Misleading and deceptive are terms not defined in the TPA but bear their ordinary meanings. Such conduct must be likely to cause or have caused error and is to be determined in the light of all relevant facts and circumstances.[4]
[4] Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 [102].
A promise or a prediction may be misleading, if unqualified or constrained to certain circumstances.[5]
[5] Campbell v Backoffice Investments Pty Ltd [33].
It is unnecessary to prove knowledge or intention to deceive on the part of the corporation making the statement or involved in the conduct.[6]
[6] Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216, 228 (Stephen J).
An inaccurate opinion or a prediction which does not materialise may be misleading or deceptive in the absence of reasonable grounds for giving or making it the onus is on the representor to establish such grounds.[7]
[7] Section 51A of the TPA.
Issues
To succeed in this action, the plaintiff must prove that:
1.The plaintiff company is the appropriate litigant. That is, the plaintiff has standing to sue on these matters. The defendant pleaded Mr Stojanovic was acting in his personal capacity.
2.One or more representation was made by Mr Jones and/or the second defendant in relation to the agreement to purchase the Client Base.
3.One or more proven representation induced the concluded agreement and/or the payment of $525,000.
4.One or more proven representation was misleading or deceptive pursuant to s 52 of the TPA or s 10 of the FTA.
5.Any misleading or deceptive representation was made in trade or commerce.
6.One or more misleading or deceptive representation resulted in loss or damage to the plaintiff.
7.The quantum of that damage. The evidence of Mr Napoli is relevant on this issue.
The evidence – Mr Paul Stojanovic
Mr Stojanovic's evidence was to the effect that he was the sole director of the plaintiff company, from its incorporation under the name Headless Canary Pty Ltd. He had worked previously in a financial planning firm as a sub-agent, he had held account management roles working with financial planners in a firm called Asgard. He had worked in another company with financial planners, assisting them in building and growing businesses. He had worked as a business development manager at Zurich Investments.
In 2008, Mr Stojanovic spoke to Mr Jones about running a business himself in the financial planning area. He considered that Mr Jones ran a successful financial planning firm. He said he thought of Mr Jones as a mentor. He had known him since he worked at Asgard where Mr Jones had been State Manager for Western Australia. He had discussed with Mr Jones a particular possibility that he had identified where a financial planner was retiring.
In 2008, he started to discuss with Mr Jones 'what it would look like if I came on board under Prospertity Partners'. Although he had entered into some negotiations with a Mr Cohen, Mr Jones came to him with an offer to purchase some clients from his business. Mr Jones said that he could offer him a deal of $150,000 worth of revenue, which Mr Stojanovic described as being 're-occurring' revenue. Mr Stojanovic said it meant that he would be buying a Client Base from Prosperity Partners or Mr Jones. Mr Stojanovic said that re-occurring referred to revenue coming in on a regular basis, monthly, and could be insurance commission or a commission linked to an investment or superannuation product, where a percentage of the funds were held under management. Mr Stojanovic said it was a revenue stream. He said that Mr Jones had said that he would effectively take a portion of his own Client Base and isolate it, 'carving it out' of Prosperity Partners. He said that Mr Jones said he would go through his Client Base and highlight on the commission statements which clients would be selected.
Mr Stojanovic also said that Mr Jones ran a very successful business. Mr Jones indicated to him that he was applying a discount on the value of the clients, as Mr Jones said his business had been valued at four times annual profit. He was going to offer Mr Stojanovic a reduced acquisition price - at a multiple of three and a half. Mr Stojanovic said that the clients were active, fully engaged. The difference between what Mr Jones was offering and what Mr Cohen had offered was that Mr Jones' systems, processes and staff were part of the value. It was clear that he regarded Mr Jones' business as more progressive and modern, and that Mr Stojanovic saw an advantage in starting his new business within Prosperity Partners, with clients already familiar with that firm.
Mr Stojanovic gave an overview of various products, and the commissions received from them, in the industry. He said initial commissions were not ongoing revenue. Trailing commissions were continuing payments in relation to business previously written, as distinct from upfront commissions, and funds under management also generated continuing ongoing commissions. The discussions took place in late October and November 2009. On an occasion in November 2009, Mr Jones showed Mr Stojanovic two documents,[8] which were the commission statements from all Prosperity Partners' clients for two fortnightly periods in October of 2009. On those documents Mr Jones had highlighted, in blue, a number of clients which he showed to Mr Stojanovic. Those clients, Mr Jones indicated to Mr Stojanovic, were the ones that Mr Jones would acquire.
[8] Exhibit 2 and exhibit 3.
Mr Stojanovic explained that the commission statements were generated by Consultum who collected commission and revenue for their representatives and categorised that commission under different headings. Each representative had a specific code and the business was attributed to each representative or advisor in relation to that code. On those documents were the clients of and commission due to those representatives who worked for Prosperity Partners including all of Mr Jones' clients.
Mr Stojanovic also explained that Consultum was responsible for providing services and compliance. He said that they were responsible for making sure the advisors were compliant and reporting through ASIC. With reference to the documents, Exhibit 2 and Exhibit 3, Mr Stojanovic explained that there was a category, called 'NEW', which was a commission linked to, for example, a contribution into a superannuation fund. Mr Stojanovic said that NEW meant it was not re‑occurring, it was not ongoing revenue because there was no guarantee that it would continue. New business could generate high percentage commissions. But they were not re-occurring. There were trailing commissions in relation to various categories of insurance, also shown on the commission statements.
Although he saw the documents and discussed them with Mr Jones in November 2009, Mr Stojanovic said he only received copies of those documents after they had settled on the business. He said that Mr Jones had flagged the clients and that the list would then go to Consultum who would extract the clients and hold them separately until settlement. When asked what was discussed about the amount of commission that was to be earned from the clients, he said 'all I knew was that there was to be $150,000 worth of re-occurring revenue in total per annum'. Mr Jones, according to Mr Stojanovic, had said at the time that those 'clients would equate to that $150,000 or $12,500 of re-occurring revenue a month'. Mr Stojanovic could not check how much he was being given by reference to the commission statements until they had settled and the clients had been moved across or isolated. He did not ask if he could check. He did ask for the document but was not given it until it after payment.
On 12 November 2009, Mr Jones sent to Mr Stojanovic an email with an attachment described as 'Agreement for Sale of Client Base'.[9] It is a document apparently produced by a firm of solicitors called 'Curwood and Co, of Subiaco'. Mr Stojanovic had no dealings with that firm. Mr Stojanovic said it outlined what he was purchasing from Prosperity Partners. He had no input into the terms of the agreement and he had no experience in these kinds of agreements. However, he did suggest to Mr Jones that there should be a 'claw back' provision in the agreement in case some of the revenue did not come through. Mr Jones responded that there would be no clawback because the business was pretty well secure. He said that Mr Jones said that it would not be needed.
[9] Exhibit 10.
Mr Stojanovic's evidence was that he was already in Prosperity Partner's offices by this time, setting up his business. He said that he had to become licensed before he could start working.
Mr Stojanovic registered the plaintiff company on 13 November 2009 and produced the ASIC extract.[10] At the time of its incorporation the plaintiff was named Headless Canary Pty Ltd. It subsequently changed its name to Pave Wealth Pty Ltd. At the same time, Mr Stojanovic became an authorised representative to Consultum. Mr Stojanovic said that the plaintiff company, then Headless Canary Pty Ltd, was to purchase the Client Base. He was the authorised representative able to give advice under authority of the second defendant. He intended that the business and the rights would 'sit with' his company.
[10] Exhibit 4.
The evidence was that shortly after incorporation, the agreement for the purchase of the Client Base was signed by Mr Stojanovic on behalf of his company and Mr Jones on behalf of his. This document was tendered.[11] It is undated. Mr Stojanovic's evidence was that it was signed after the company was incorporated, within the week.
[11] Exhibit 5.
At the same time, the parties signed a second document, which was a 'facilities and service agreement'. That document is described as being 'to facilitate Mr Stojanovic conducting his financial planning business at the premises of the second defendant' with facilities and services being provided by Prosperity Partners. It provides that Prosperity Partners would provide rent, 50% use of a dedicated full time client service manager, a dedicated underground parking spot, stationary, computers, telephones, IT support and reception services. Prosperity Partners granted to Mr Stojanovic the exclusive right to use an office on their premises and Mr Stojanovic was responsible as an agent for Prosperity Partners, with his invoices to be issued in the name of Prosperity Partners and invoices to be paid into their bank account. There was an arrangement for deduction of service fees and remitting of the balance to Mr Stojanovic's account. The document is signed by Mr Jones, Mr Stojanovic and a witness.
After those agreements were signed, Mr Stojanovic sought finance for the purchase. Firstly, with CBA and, subsequently, with St George Bank. In relation to both banks, Mr Jones assisted Mr Stojanovic with the appropriate contact at the bank and explaining the transaction that the finance was to facilitate. The borrowings were to be secured. As might be expected, the bank sought supporting documents. Ultimately, an offer of finance was made by St George Bank to the plaintiff, facilitating settlement of the agreement on 29 April 2010.
Mr Stojanovic said that after settlement, he was not given information about the clients that were on the list of his Client Base. He said there were inadequate or no files, no physical client files came across to him, and he did not receive adequate contact details. Mr Stojanovic said that Mr Jones indicated that the files were downstairs in a storeroom, but said that by the time he left Prosperity Partners, he would have had less than 50 physical files and no electronic files for his clients. He sat down with an employee, Mr Griffiths, who was able to assist him with introductions in a lot of cases. He was able to access information through the product providers to access the clients.
Mr Stojanovic said that after he had settled, it appeared that he was missing revenue from the monthly commission statements. He said he thought this was the case because he was not receiving $12,500 per month. He noticed a shortfall in the value of monthly commissions. He asked Consultum for the original list so he could check what he currently held against it. He made a list of clients that were not transferred to his code. Mr Stojanovic said he had identified $1,224.57 as a shortfall in one monthly period. He said that some clients might have rolled their moneys out of AMP to another product provider.
Mr Stojanovic and his solicitors obtained the commission statements relevant to the Client Base, for the periods March 2009 to March 2010 and March 2010 to March 2011. These documents were provided by Consultum in both excel spreadsheet and PDF format. They contained a large amount of information. Mr Stojanovic and his solicitors engaged Mr Craig Read-Smith, a software developer to amalgamate the material from those excel spreadsheets into one master spreadsheet for the purposes of review and ease of access.
Although this summary of events in relation to the documents is easily stated, in evidence the process of eliciting how it came about, and making plain what should have been a fairly straight forward proposition, was tortuous.
Mr Read-Smith was called to give evidence, at short notice, interposed into Mr Stojanovic's evidence. He confirmed that he had been sent the excel spreadsheets relating to the Consultum commission statements for those periods mentioned above. With the assistance of software he 'parsed' the data from the original spreadsheets and wrote them into a combined spreadsheet.[12] The source documents were provided to Mr Read-Smith.[13]
[12] Exhibit 21.
[13] Exhibits 22 and 23.
Mr Stojanovic parted company with Mr Jones and Prosperity Partners at the end of February 2011. He wrote a letter of resignation on 28 January 2011.[14]
[14] Exhibit 19.
In cross-examination, the evidence of Mr Stojanovic was not directly challenged whether in relation to the representations he alleged had been made, the circumstances surrounding the entry into the agreement, the history of his relationship with Mr Jones and its subsequent deterioration. In fact, much of the cross-examination constituted exploration of the evidence and clarification of certain documents. It was not suggested to Mr Stojanovic that all the clients initially carved out by Mr Jones, highlighted in blue on Exhibit 2 and Exhibit 3, were in fact 're‑occurring' income producing clients. It was apparent that the commissions were paid inclusive of GST. That was not a surprising matter. It was apparent that Mr Charlie Napoli was instructed by Mr Stojanovic and his solicitors, to value the income flowing from the Client Base, excluding that income defined by the code 'NEW'. It was not suggested to Mr Stojanovic that business defined as 'NEW' was a recurrent form of revenue. Mr Stojanovic repeated that Mr Jones had told him that the clients he would receive were engaged clients of Prosperity Partners, in that they were regularly reviewed or regularly seen.
Mr Stojanovic was cross-examined about the period over which he said representations were made, from which it was apparent that representations had also been made before September 2009 and that there were representations made as far back as 2008. It was put to him that the contract was pleaded as being entered on 12 January 2010. Mr Stojanovic said that that was when they first sought finance with St George Bank. In re-examination he confirmed that the income derived from the business was less than $150,000 and that as far as he recalled in the first year it was approximately $95,000.
Mr Stojanovic presented as a man well informed and knowledgeable in his area of business and specifically in the products with which he dealt. He was, at times, sorely tried by the length and lack of focus both in his examination‑in‑chief and in cross-examination. He maintained his evidence mostly with a degree of equanimity and repeatedly explained the concepts involved. His credit as a witness was not directly challenged, neither in his honesty or accuracy nor was it suggested that he was re‑constructing elements of his testimony.
Nevertheless, he was speaking of events some eight or nine years prior to trial. In such circumstances, it is necessary to remember that human memory is fallible, and that honest witnesses can be mistaken. I formed the view that, at times, in relation to conversations with Mr Jones, Mr Stojanovic was relating his overall understanding of conversations, bearing in mind some of these had clearly been repeated exchanges, rather than quoting verbatim what was said specifically by either man on each occasion. To my mind that is understandable.
It is necessary to assess his evidence in the light of its inherent probabilities, in its context and in the light of objectively established facts. This case is greatly assisted by contemporaneous documents, specifically those in which Mr Jones joined in communicating with CBA and St George Bank. In light of those documents and the events which followed the entry into the agreement, the contemporaneous incorporation of the plaintiff, and the documentary evidence showing Mr Stojanovic's relationship with Consultum from December 2009, I am confident in my assessment of Mr Stojanovic as a reliable witness of truth, if not in terms of the precise wording of every conversation.
It is useful therefore to turn now to the documentary evidence led by the plaintiff which supports Mr Stojanovic, and the plaintiff's case, in relation to alleged representation.
Firstly, the agreement for the sale of the Client Base itself[15] (the agreement). This document is expressed to be made between 'Paul Stojanovic of Headless Canary Pty Ltd' and Wotif Pty Ltd as trustee of the Prosperity Unit Trust trading as Prosperity Partners. The recitals read:
A.Prosperity Partners presently provides financial services to all of the clients constituting the Client Base and derives income including trail commission from the Client Base.
B.With effect from 09/11/2009, Prosperity Partners has agreed to sell and assign all of its rights and interests in the ongoing revenue derived from the Client Base to Paul Stojanovic of Headless Canary Pty Ltd for the sum of $525,000.
[15] Exhibit 5.
'Client Base' is defined in the document to mean:
Prosperity Partners clients identified in the Paul Stojanovic quarantine account with such information set out in Annexure 1'.
Clause 3 of the agreement gives effect to that statement of intent and reads:
(a)Wotif Pty Ltd will assign to Paul Stojanovic of Headless Canary Pty Ltd the benefit of and all of its rights and interests in relation to the Client Base Revenue;
(b)Wotif Pty Ltd will cease providing any financial services to the Client Base (and from the Settlement Date Wotif Pty Ltd will desist from providing any financial services to the Client Base);
(c)Paul Stojanovic of Headless Canary Pty Ltd will pay to Prosperity Partners the sum of $525,000.
On 9 December 2009 Mr Jones emailed Mr Bede Cronin of CBA. That email was copied directly to Mr Stojanovic. In the text of the email Mr Jones asserted the following:
The base I am selling to Paul has been with us for over 20 years and has a 99% retention rate (I monitor this every month across my entire business), given the fact that my business has been nominated 4 times for the National Practice of the Year award and last year won it this should testify to how well it is run, managed and clients are cared for in order that they do not leave the company and therefore the business actually increases its revenue year on year as it has done for the past 5 years in a row (even through the GFC our revenue increased over 18.7%) and we enjoy a very high independent client satisfaction survey and a client retention rate, overall of over 98%.
Due to the superior business model that we employ in Prosperity Partners and being a pioneer of the true fee for service model our business has been valued at 4 times ongoing revenue multiple, the reason that Paul is paying upfront with no run off provision is due to the $75,000 discount I have already applied to the sale of the base to help him get started (Paul and I have been friends and colleagues for well over 10 years so i am more than happy to assist him).
Mr Jones goes on to say that Mr Stojanovic will be operating under 'our banner' and that 'we are all here' to support and assist Paul to become successful.
On 10 December 2009, Mr Jones emailed Mr Stojanovic with a copy to Mr Cronin. The email contained the paragraph:
Paul, to confirm our verbal discussions of this morning, after much discussion last night and in light of the note you received from CBA yesterday, my wife and I have agreed to reduce our asking price for the base to a 3 times multiple of the recurring income of $150,000 as per our previous agreement (All terms and conditions remain unchanged).
The email concludes by asking Mr Stojanovic to convey the new terms to CBA and ask for confirmation of funding.
On 3 December 2009, Mr Jones had emailed Mr Lee Sando (of Consultum) with copy to Mr Stojanovic and Mr Cronin, to ask Mr Sando to arrange for confirmation of recurring income, by way of email or letter to Mr Cronin, and to confirm to Mr Cronin that Mr Stojanovic would be issued with his own corporate authorised representative agreement. Mr Jones continues:
… the clients being sold to Paul are all evenly matched in regard to income and assets. (there is no top 10 list) this has been done deliberately so that he isnt exposed …
He offers to send the list to Mr Sando, if he wished. He said he was expecting settlement in early January 2010.
On 4 January 2010 Mr Jones emailed Mr Stephen Wray at St George Bank. The title of the email was "New Loan Facility for Paul at our Office'. Mr Jones said:
As discussed at the Christmas party, Paul and I have entered into an arrangement for Paul to purchase $150,000 of recurring annual revenue from Prosperity Partners for the sum of $525,000.
In the next paragraph:
The deal has been approved and sanctioned by our dealer group and Paul's company will be effectively making the purchase from my company, the terms are a once off payment for the full amount and the client base will then be separated from my company and placed into a separate account with the dealer which Paul will fully control and I will have no further beneficial interest in.
In the following paragraph he again referred to 'a retention rate over the past 5 years of over 99% we do not expect any run off from the transaction'. Mr Jones explained to Mr Wray that Mr Stojanovic would be looking for 100% finance and security would be offered.
On 28 January 2010, in a letter to the St George Bank for the attention of Mr Stephen Wray, signed by both Mr Jones, as director of Wotif Pty Ltd and Mr Stojanovic, as director of Headless Canary Pty Ltd the following information was conveyed to the St George Bank:
This letter is to confirm that the client base being sold from Wotif Pty Ltd to Headless Canary Pty Ltd represents a generic ongoing portion of the current Wotif client base financed for the past four years through SGB and generating $150,000 of recurring income per annum.
The base consists of 1,193 clients; the current mix is superannuation and insurance business on one single platform with AMP being one of the largest fund managers in Australia.
The base has been deliberately handpicked to ensure there is no concentration of risk to the purchaser or the bank financing the deal with all the revenue spread evenly throughout the client base.
The resulting offer of finance from St George Bank is dated 18 March 2010, in the sum of $525,000, on the basis of various securities being executed. The securities included a guarantee and indemnity to the sum of $200,000 given by Mr Jones.
The admissibility of expert evidence
Expert evidence is admissible where it is established that the opinion evidence in issue forms a part of a specialised field of knowledge, in which the witness has acquired expertise by training, study or experience. The evidence must be wholly or substantially based upon that expert knowledge.
The witness must identify the assumptions of the facts upon which his opinion is based. Then those facts must be supported by evidence in order to render the expert opinion evidence relevant and of value. The expert must give the basis for any conclusions reached.[16]
[16] Makita (Aust) Pty Ltd v Sprowles (2001) 52 NSWLR 705 [85]; R v Bjordal [2005] SASC 422; (2005) 93 SASR 237 [26]; Automasters Australia Pty Ltd v Bruness Pty Ltd [2004] WASCA 229 [28], [29].
The evidence of Mr Napoli was challenged by the defendants on the grounds that:
(a)he had no experience in the sale of client lists; and
(b)the facts upon which his opinion was based were unproven.
The latter included the quantum of revenue from the Client Base (the NEW categorisation), the nature of the clients in the Client Base, the lack of formal handover, the ongoing engagement with clients, the amount of funds under management, and the lack of information amongst other matters. Criticism was made of Mr Napoli's reliance on documents about the market at the time rather than his opinion.
Further, it was alleged that Mr Napoli did not give a reasoned basis for adopting a multiplier of 1.0. It was said that although he listed a number of factors there was no reasoning given to justify their relationship to the specific lower multiples.
Thus there appear to be four basic questions:
(1)qualification or expertise;
(2)the validity of the figures given;
(3)the evidence in support of the circumstances considered by Mr Napoli; and
(4)whether there was sufficient intellectual basis for the adoption of multipliers by Mr Napoli.
The evidence of Mr Napoli
Mr Napoli is a forensic accountant engaged by the plaintiff. He prepared two reports for the purposes of this litigation.[17] He is a chartered accountant of more than 30 years in private practice, holds many professional memberships and has given evidence widely in all superior jurisdictions in the State of Western Australia. His qualifications in these respects were not challenged.
[17] Exhibit 26 and exhibit 27.
Mr Napoli's experience in valuing assets such as the Client Base was queried in cross-examination. His evidence was that he had been involved in valuing a number of financial planning businesses for court purposes. He did not accept that there was any difference, in principle, between valuing a whole business or a client list forming part of such business. He said that each was buying a revenue stream. He said many factors were involved in such valuation, not only supply and demand.
He was aware of the market in the years 2009 and 2010 and said there was demand for quality Client Bases in the financial planning business.
I accept that Mr Napoli has the necessary qualifications and experience to undertake a valuation of the Client Base. This is because the process described by Mr Napoli is obviously applicable to various types of businesses that comprise clients whose business produces income and his general considerations of revenue stream capitalisation are transferrable between entities.
He was initially instructed to consider the value between 1 April 2010 and 27 April 2011, then, subsequently at the date of settlement on 29 April 2010.
He was provided with instructions to value trailing commissions in each instance and given access to the commission statements for the relevant periods. He was also supplied with summaries, from which income from clients Mr Stojanovic subsequently introduced and 'one off' fees had been removed. For the period 1 April 2010 to 1 April 2011 Mr Napoli was instructed that the income was $95,802.42. He valued the Client Base at 29 April 2010 on the basis of ongoing revenue (trail commissions or annual recurring revenue).
In performing his valuation, Mr Napoli calculated the income of that kind for the preceding year to be $84,428, net of GST. He also made a deduction of $4,000 in respect to clients which were in the highlighted lists but were not present in the list Consultum transferred to Mr Stojanovic.
In cross-examination there was considerable confusion about the documents, but it was not suggested to him that his calculations were mathematically flawed.
He adopted a multiple of 'future maintainable earnings' as his method of valuation. This aspect of his methodology was not disputed.
His evidence was that many factors have a bearing on the multiplier to be adopted, such as the type of clients in the list, the type of business, their location, the quality of business records and processes, the amount of assets under management and compliance history. He relied on the information he was given to the effect that there were few files provided, incomplete contact details, no signed client agreements, little other information, no database of information, no indication of assets under management, amongst other things.
Some of these circumstances relied upon by Mr Napoli were supported by the evidence of Mr Stojanovic. Mr Napoli concluded that he would use a multiplier of 1, thus valuing the Client Base at 29 April 2010 at $80,000, or one years' worth of maintainable net earnings. The basis for adopting this figure appears to be a consideration of all the factors mentioned in broad terms.
I am satisfied that the source documentary evidence relied upon by Mr Napoli corresponded with the documents produced at trial.[18]
[18] Exhibit 2, exhibit 3, exhibit 21 and exhibit 29.
Mr Napoli was briefed on the basis that non-recurring income had been excluded. Thus, his figures comprised the categories TRA, INS, REN and excluded any business categorised as NEW. He gave no evidence as to the correctness of such an approach. He confirmed only the meaning of categorisation of the abbreviations, which he was given with Mr Sando of Consultum. The value of his calculations on this basis depends upon findings of fact as to the composition of the Client Base.
I find that Mr Napoli's evidence is relevant, admissible expert evidence as to method and calculations. I accept his calculations of the 'recurring' income to April 2010 to be of the order of $80,000, subject to my findings below.
Whilst the plaintiff bears the onus of proving its loss, it is significant that no opposing evidence of value was called or alternative basis of approach suggested to Mr Napoli by the defendants.
I will return to the question of the appropriate multiplier and final valuation later.
Agreed issues for determination
After the conclusion of the evidence at the trial, counsel provided a joint list of issues, prior to submissions. These are set out below:
1.Whether Michael Jones made representations to Paul Stojanovic that the client list comprised $150,000 of 'recurring' or 'ongoing' revenue and if he did whether he had reasonable grounds for the making of this representation or similar representations.
2.Whether Michael Jones made representations to Paul Stojanovic that the client list comprised 'engaged clients' and if he did what is meant by the concept of engaged clients.
3.Whether Mr Stojanovic relied on those representations and caused the plaintiff to enter into the sale agreement.
4.Whether the client list was comprised of $150,000 of recurring revenue.
5.Whether the client list comprised 'engaged clients'.
6.If the answers to 4 and 5 is 'no', whether the plaintiff suffered a loss as a result.
7.The quantum of the loss referred to in 6.
8.Whether revenue identified as 'NEW' on the commission statements, should be excluded from any calculation of recurring or ongoing revenue.
9.Whether the plaintiff by not pleading that representations were made to it in trade or commerce has failed to plead an element of its causes of action and, if so, whether its claim fails as a result.
10.Is Mr Napoli's evidence admissible and if it is what weight should be placed upon it.
11.How should the following issues that underlie the applications made by the defendants at trial be decided:
(1)Do paragraphs 11A and 11B of the Re-Amended Statement of claim plead a new cause of action that is barred by virtue of subsection 82(2) of the Trade Practices Act 1974 or plead matters that are otherwise contrary to Order 20 Rule 2 of the Rules of the Supreme Court.
(2)Should the defendants have leave to plead that any claims made pursuant to the Fair Trading Act 1987 (WA) are barred.
(3)Should the defendants have leave to plead they had reasonable grounds in relation to the allegations made at paragraphs 7b.F and 7b.I of the Re-Amended Statement of Claim.
Findings of fact
From the evidence of Mr Stojanovic and the correspondence set out above, I have no doubt that there were extensive discussions prior to the execution of the agreement between Mr Stojanovic and Mr Jones about the benefits of this particular deal. It is necessary, however, for the purposes of this action, that I make findings of what specific representations, if any, were made by Mr Jones to Mr Stojanovic. General statements of enthusiasm, and Mr Jones 'talking up' Prosperity Partners are not in my view sufficiently specific. It was clear that Mr Stojanovic had a favourable view of Prosperity Partners generally from the outset of discussions.
I accept the evidence of Mr Stojanovic that a representation was made to him, by Mr Jones, that he was purchasing '$150,000 of recurring income'. My reasons for this are, firstly, that Mr Stojanovic was very clear in his evidence of Mr Jones' statements in those terms. Secondly, the correspondence in which Mr Jones was 'assisting' Mr Stojanovic to secure finance, is also clear in those terms. The joint signed letter on 28 January 2010 states precisely that the Client Base is generating $150,000 of recurring income. Similarily, Mr Jones' email of 10 December speaks of recurring income of $150,000. Mr Jones' email of 4 January speaks of an arrangement for the purchase of $150,000 of 'recurring annual revenue'.
No proposition was put at trial disputing the authenticity of those documents. Mr Stojanovic confirmed he was aware of the documents, was a signatory to the letter and a contemporaneous recipient of the emails.
Whilst the documentary assertions postdate the agreement, they forcefully confirm and support Mr Stojanovic's evidence as the fundamental issue of what was represented to be the subject matter of the sale. I therefore find that Mr Jones represented to Mr Stojanovic, prior to the agreement being signed and subsequently, that the arrangement was for the purchase of $150,000 worth of recurring annual income.
I am satisfied on the balance of probabilities that both before the entry into the agreement, and between its signature and before the payment of the $525,000 to Mr Jones and/or the second defendant, representations were made in terms of par 7(b)(B) of the statement of claim that the Client Base consisted of 'recurring' clients.
The quantum of the 'recurring' income is the subject, in part, of the representation pleaded in par 7(b)F of the ASOC. Paragraph 7(b)F appears to be expressed as a representation as to future matters. There is no evidence that Mr Jones made any statement in the precise terms pleaded. Its drafting, with the qualification in parenthesis, gives the text of par 7(b)F the character of an explanation rather than an assertion, as indeed is the case in par 7(b)G also.
The representation in par 7(b)(F) of ASOC, in my view, is primarily a representation as to the value and recurring nature of the Client Base. It is phrased 'once it acquired the Client Base, the plaintiff would receive earnings of $150,000 per year each year just from the Client Base (as opposed to its own efforts in generating new business). It is, in my view, a re-statement of that which is implied in the representation that the Client Base consisted of recurring clients and any representation that the agreement was the purchase of $150,000 per annum of recurring income. My judgment in this case is not based upon the matters in par 7(b)G or par 7(b)F.
On Mr Stojanovic's evidence, I also accept that Mr Jones told him that the Client Base consisted of engaged clients.[19]
[19] ts 436, ts 265 and ts 266.
Paragraph 7(b)B of the ASOC in its second assertion, refers to clients who had 'engaged … etc'. Whether the 'clients' were 'engaged' figures as counsel's second issue in the list of agreed issues. There was evidence from Mr Stojanovic about what he understood this to mean. However, my view is that 'engaged' was something of an imprecise term concerning the relationship between client and financial advisor. It might be reflected in the frequency of contact or review of the client's needs. It might denote clients who had signed a contract of engagement. In the context of par 7(b)B of the ASOC, it appeared to refer to clients on a specific contractual arrangement.
I am satisfied that the term was used by Mr Jones. This was in context of the clients in the Client Base being 'recurring' and 'secure' and reinforced the representation that was to be sold as had this repeating characteristic, generally speaking.
The key representation made by Mr Jones, on the evidence, is that the Client Base comprised $150,000 of recurring income. It is alleged that the Client Base did not generate this sum, and that income fluctuated.[20]
[20] Paragraph 11(g), par 11(f) of ASOC.
I accept Mr Stojanovic's evidence that the Client Base did not generate $150,000 per annum. That shortfall became apparent quite quickly and he began to investigate. His evidence was that he thought the Client Base produced about $95,000 in the first year.
On that basis alone I could conclude that the representation was false and misleading. However, as the matter evolved at trial, the position is more complex. It involves more detailed consideration of the client business included in the Client Base and what conclusions can be drawn about its revenue producing capacities at the time of the agreement.
I have come to the conclusion that the second defendant bore a greater burden in the conduct of the defence. The second defendant should pay two thirds of the plaintiff's costs of the proceedings. This allows for the fact that there was success by the first defendant in relation to the discreet issue and, incorporates the view I have taken of the appropriate balance between the corporate and the individual defendant.
I will make provision for any costs that may be shown to have been incurred by the first defendant solely.
The costs of this costs application is a separate matter. Both parties put forward positions in which they have neither been wholly successful nor unsuccessful. In my view, on a provisional basis it is therefore appropriate each party should bear their own costs. I have heard no submissions in this regard. I do not invite them. I will make no orders but if any party wishes to pursue this matter there will be liberty to apply.
Accordingly, the orders I make are as follows:
1.the second defendant pay to the plaintiff two thirds of the plaintiff's costs of the action, to be taxed if not agreed, up to and including 14 September 2016 on a party/party basis;
2.the second defendant pay to the plaintiff two thirds of the plaintiff's costs of the action from 15 September 2016 on a solicitor/client basis, to be taxed if not agreed;
3.the plaintiff pay to the first defendant one third of the defendants' costs of the action, plus any costs exclusively incurred by the first defendant on a party/party basis, to be taxed if not agreed; and
4.Liberty to apply.
I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
ZB
Associate to her Honour Judge Braddock
27 MARCH 2020
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