Re Terence J Chamberlain v Deputy Commissioner of Taxation [1987] FCA 44 (17 February 1987)

FEDERAL COURT OF AUSTRALIA

Re: TERENCE J. CHAMBERLAIN
And: DEPUTY COMMISSIONER OF TAXATION
No. ACT G40 of 1986
Res Judicata

COURT

IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY
GENERAL DIVISION
Sheppard J.
Neaves J.
Miles J.

CATCHWORDS

Res Judicata - action to recover amounts due upon notices of assessment of income tax - earlier action to recover amounts due under the same notices of assessment - amount sued for in earlier action one tenth of amount actually due - later action to recover the correct amount - whether doctrine of res judicata applies - whether public policy requires exception to the operation of the doctrine.

Income Tax Assessment Act 1936, ss. 177, 204, 207, 208 and 209

HEARING

CANBERRA
17:2:1987

Counsel for the appellant: Mr. F. Costigan, Q.C. with Mr. P. Dodson

Solicitors for the appellant: Messrs. Crowley & Chamberlain of Canberra City, A.C.T.

Counsel for the respondent: Mr. A. Robertson

Solicitors for the respondent: Australian Government Solicitor of Canberra City, A.C.T.

ORDER

The appeal be dismissed.

The appellant pay the respondent's costs of the appeal.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

DECISION

This is an appeal from a judgment of the Supreme Court of the Australian Capital Territory (Kelly J.) in an action in which it was ordered that judgment be entered for the respondent (the plaintiff in the proceedings) in the sum of $256,476.25. In the special indorsement upon the writ by which the proceedings were commenced, this sum was said to be due by the appellant, who was the defendant in the action, for income tax payable pursuant to a number of notices of assessment and amended assessment of income tax issued for the years of income ending 30 June 1975 to 1982 inclusive. There were also claims for additional tax in respect of all but one of the years. A number of credits were allowed. One of these was for the sum of $25,557.92 paid on 3 August 1984. It will be necessary to say more of that sum in due course. After the allowance of the credits, an amount of $230,021.28 was said to remain due and payable. The respondent claimed further additional tax upon that sum and this accounts for the difference between the amount of the judgment and the amount of $230,021.28 claimed in the writ.

2. The action proceeded by way of pleadings. It is unnecessary to say anything of the respondent's amended statement of claim. For the purposes of this appeal the essential paragraph of the appellant's defence was paragraph 6 which was as follows:-

"In answer to the entire statement of claim the
defendant says that in an action brought by the
plaintiff against the defendant in the Supreme
Court of the Australian Capital Territory, the
short title of which was Deputy Commissioner of
Taxation v. Terence J. Chamberlain, the plaintiff
entered judgment prior to the commencement of
these proceedings against the defendant for
$25,557.92, plus $115.00 for costs, for the same
debt and in respect of the same cause of action
as that alleged in the statement of claim herein;
and the said judgment still remains in force".

3. Particulars of the judgment referred to were given. It was said to have been recovered in proceedings between the present respondent as plaintiff and the present appellant as defendant in the Supreme Court of the Australian Capital Territory (No. S.C. 697 of 1984). The writ in the proceedings was said to have been issued on 26 July 1984 and judgment was ordered to be entered on 6 August 1984. Paragraph 7 of the defence said that, in the premises, the plaintiff (the respondent to this appeal) was estopped and precluded from maintaining his claim in this action against the defendant (the appellant).

4. An alternative defence was pleaded in paragraphs 8, 9 and 10. This defence was not relied upon in the appeal, but for completeness it is necessary to refer to it. Paragraph 8 was in the following terms:-

"8. Furthermore, and in the alternative, by
agreement between the parties it was agreed
inter alia, as follows:-

a. Without admission of liability, the defendant
would consent to judgment being entered
against him in the aforesaid Supreme Court
action in the sum of $25,557.92 together with
costs of $115.00.

b. The defendant would forthwith pay the
aforesaid monies pursuant to the said
judgment to the plaintiff.

c. The defendant would forthwith withdraw all
outstanding objections to income tax
assessments issued to him in respect of
income earned up to and including the
financial year ended 30 June 1984.

d. The plaintiff would accept the aforesaid
payment and withdrawal of outstanding
objections in full and final satisfaction and
discharge of any claims which the plaintiff
then had, or but for the said agreement might
have had, against the defendant".

5. By paragraph 9 of the defence it was pleaded that on 3 August 1984, pursuant to the agreement alleged in paragraph 8, the appellant paid to the respondent the sum of $25,557.92 and $115 for costs, "which payment the plaintiff accepted, and the defendant consented to the said judgment being entered against him, and on 6 August 1984, the defendant withdrew the aforesaid objections" (these being the objections referred to in para. 8c. of the defence). Paragraph 10 of the defence pleaded that, in the premises, the respondent was estopped and precluded from alleging that the appellant was further indebted to him.

6. These paragraphs were put in issue in the respondent's reply. The allegations in para. 8 of the defence were denied.

7. As mentioned, the writ of summons issued by the respondent in the present proceedings contained a special indorsement; see rules 5 and 6 of Order 4 of the Rules of the Supreme Court. It set out particulars of each of the notices of assessment which were relied upon, the additional tax which was claimed and the credits which were allowed. The indorsement opened with the words, "THE PLAINTIFF'S CLAIM is for the sum of $230,021.28 being a debt due to the Crown from the Defendant in respect of ..."

8. The respondent had, as is alleged in the defence, earlier sued the appellant in proceedings in the Supreme Court of the Australian Capital Territory (No. S.C. 697 of 1984). The proceedings were commenced by writ issued on 26 July 1984. This writ was also specially indorsed. The indorsement began with the words, "THE PLAINTIFF'S CLAIM is for the sum of $25,557.92 being a debt due to the Crown from the Defendant in respect of ..." and there then followed the same particulars as were indorsed on the writ in the present proceedings. In other words, each of the notices of assessment was specified along with the amount due pursuant to it. Credits were allowed, but these, of course, did not include the amount of $25,557.92 which was allowed by way of credit in the present proceedings. Notwithstanding that the balance should have been $255,579.20, it was shown as $25,557.92, precisely one tenth of the correct amount. This was the amount which was claimed at the beginning of the indorsement. It was claimed again at the end of the indorsement which concluded with the words, "And the plaintiff claims the sum of $25,557.92 for debt and $115 for costs". There is no evidence of how what appears to have been a glaring arithmetical error came to be made.

9. There were no pleadings in action No. S.C. 697 of 1984. An appearance was entered on 6 August 1984. On 3 August 1984 representatives of the parties to the action signed terms of settlement. These were in the following terms:-

"By consent and without admission of liability:-

1. Judgment for the Plaintiff in the sum of
$25,557.92 together with costs to be
assessed and agreed at $115.00.

2. The settlement monies to be paid by the
Defendant to the Plaintiff forthwith".

10. Judgment in the action was ordered to be entered on 6 August 1984, the same day upon which the appearance was entered. The judgment was in the following terms:-

"Terms of Settlement having been filed herein IT
IS THIS DAY ADJUDGED that the Plaintiff recover
against the Defendant the sum of $25,557.92 for
debt and $115.00 for costs".

11. In the instant proceedings the only evidence which was led in the respondent's case comprised the notices of assessment which were specified in the indorsement to the writ and certain certificates under regulation 53 of the Income Tax Regulations showing the amount remaining due and payable with respect to each assessment. The notices of assessment were plainly admissible pursuant to s. 177 of the Income Tax Assessment Act 1936 ("the Act") and the certificates pursuant to regulation 53.

12. The appellant's case was equally short. It consisted of the record in action No. S.C. 697 of 1984, particularly the writ, the terms of settlement and the judgment each of which has been referred to.

13. There was thus no evidence of the reason why the apparent error in the earlier writ of summons was made or how it came to be made, no evidence of the agreement alleged in para. 8 of the defence and no evidence to support the allegation made therein that the appellant withdrew objections to the notices of assessment, or some of them, as a condition of the agreement which was entered into. Indeed, there was no evidence that there were any such notices of objection at all.

14. No application was made to set aside the judgment. It would have been open to the present respondent to make such an application. In the absence of evidence and argument, it is not possible to say whether such an application would have succeeded or not. Some of the difficulties which may have confronted the respondent, if he had made such an application, are referred to in P.W. Young The Law of Consent at pp. 182-5. It is unnecessary to say more of that matter. It can have no relevance to the outcome of this appeal.

15. The respondent's causes of action in each of the proceedings are statutory in nature. They arise by reason of the operation of ss. 204, 208 and 209 of the Act. Section 209 provides that any tax unpaid may be sued for and recovered in any Court of competent jurisdiction by the Commissioner or a Deputy Commissioner suing in his official name. The word "tax" includes additional tax under s. 207 of the Act. Section 208 provides that income tax, when it becomes due and payable, shall be a debt due to the Commonwealth and payable to the Commissioner in the manner and at the place prescribed. For the purposes of that section also, "income tax" includes additional tax under s. 207. Section 204 provides that, subject to the provisions of Part VI of the Act, in which the sections appear, any income tax assessed shall be due and payable by the person liable to pay the tax on the date specified in the notice as the date upon which tax is due and payable, not being less than 30 days after service of the notice or, if no date is specified, on the thirtieth day after the service of the notice. Section 177 of the Act is an evidentiary provision making the production of a notice of assessment conclusive evidence of the due making of the assessment and, except in proceedings on appeal against the assessment, that the amount and all the particulars of the assessment are correct.

16. The learned primary Judge commenced his consideration of the matter by dealing with a submission made on behalf of the respondent that estoppel did not lie to prevent enforcement of a statute which was enacted to raise public revenue. His Honour made reference to Maritime Electric Company Limited v. General Dairies Limited (1937) AC 610, State of South Australia v. ATSA Pty Limited (1980) 29 ALR 367 and the dissenting judgment of Latham C.J. in The Commissioner of Taxes (South Australia) v. The Executor Trustee and Agency Company of South Australia [1938] HCA 69; (1938) 63 CLR 108. His Honour considered that these authorities amply supported the proposition relied upon by counsel for the respondent. He said that it followed that the respondent could not be estopped from claiming the balance of the tax due to the Crown from the appellant by any such agreement as was alleged in para. 8 of the statement of claim "even had such an agreement been made". There was no challenge to this part of his Honour's judgment.

17. Before this Court counsel for the appellant relied entirely on his Honour's refusal to uphold submissions made in support of the defence of res judicata. Res judicata was the subject of extensive consideration by the High Court in Port of Melbourne Authority v. Anshun Pty Limited [1981] HCA 45; (1981) 147 CLR 589. There Gibbs C.J., and Mason and Aickin JJ., in a passage also quoted by the learned primary Judge, said (p. 597):-

"The distinction between res judicata (in England
called 'cause of action estoppel') and issue
estoppel was expressed by Dixon J. in Blair v.
Curran [1939] HCA 23; (1939) 62 CLR 464, at p. 532, in these
terms: 'in the first the very right or cause of
action claimed or put in suit has in the former
proceedings passed into judgment, so that it is
merged and has no longer an independent
existence, while in the second, for the purpose
of some other claim or cause of action, a state
of fact or law is alleged or denied the existence
of which is a matter necessarily decided by the
prior judgment, decree or order.'

The distinction was restated by Fullagar J. in
his dissenting judgment in Jackson v. Goldsmith
[1950] HCA 22; (1950) 81 CLR 446, at p 466. His Honour
expressed the rule as to res judicata by saying:
'where an action has been brought and judgment
has been entered in that action, no other
proceedings can thereafter be maintained on the
same cause of action. This rule is not, to my
mind, correctly classified under the heading of
estoppel at all. It is a broad rule of public
policy based on the principles expressed in the
maxims 'interest reipublicae ut sit finis litium'
and 'nemo debet bis vexari pro eadem causa'.'
His Honour went on to discuss issue estoppel,
citing the comment of Dixon J. in Blair v. Curran
(1939) 62 CLR at p 531: 'A judicial
determination directly involving an issue of fact
or of law disposes once for all of the issue, so
that it cannot afterwards be raised between the
same parties or their privies.'

The difference between res judicata (cause of
action estoppel) and issue estoppel has been
expressed in similar terms in the House of Lords
- see Carl Zeiss Stiftung v. Rayner & Keeler Ltd.
(1967) 1 AC 853, at pp 913, 964 et seq.

Subject to an examination of the application of
the principle in Henderson v. Henderson (1843) 3
Hare 100 (67 ER 313), it is evident from the
discussion which has already taken place that
this is not a case of res judicata. The rule as
to res judicata comes into operation whenever a
party attempts in a second proceeding to litigate
a cause of action which has merged into judgment
in a prior proceeding. Here the indemnity cause
of action was not litigated in the Soterales
proceedings. The judgment in that case did not
deal with that cause of action, though it
evidently proceeded on the assumption that the
Authority was not entitled to an indemnity".

18. In the course of his judgment Brennan J. referred (p. 610) to the "imprecision in the meaning of the term cause of action". He said that it was sometimes used to mean the facts which support a right to judgment, sometimes to mean a right which has been infringed and sometimes to mean the substance of an action as distinct from its form. His Honour went on to say (pp. 610 - 611) that imprecision in the meaning of cause of action tends to uncertainty in defining the ambit of the rule that a judgment bars subsequent proceedings between the same parties on the same cause of action. He also referred (p. 611) to the judgment of Dixon J. (as he was) in Blair v. Curran [1939] HCA 23; (1939) 62 CLR 464 where it is said (p. 532) that "the very right or cause of action claimed or put in suit has ... passed into judgment so that it is merged and has no longer an independent existence ..." Brennan J. continued (p. 611):-

"If cause of action is taken to mean a right, the
rule is stated in terms of the passing of the
right into judgment, and the rule precludes a
party bound by the judgment from maintaining
against another party bound by it any subsequent
proceeding to recover a judgment giving a remedy
to enforce or to compensate for an infringement
of that right. The rule does not preclude
litigation seeking a remedy to which a party is
entitled in virtue of a different right from that
which was first put in suit provided that the
facts which support the right sued upon in the
second action are not the same facts as those
supporting the right which passed into the first
judgment: thus in Brunsden v. Humphrey (1884) 14
QBD 141 where the same act of negligence
caused damage to the plaintiff's property and
injury to the plaintiff's person it was held that
different rights were infringed and that an
action for damages for personal injury was not
barred by recovery of a judgment for damage to
property.

If cause of action is taken to mean the facts
which support a right to judgment, the rule of
res judicata bars an action for relief founded
upon the same facts as those upon which an
earlier judgment was recovered, though the right
sued upon in the second action is different from
the right which passed into or was negated by the
earlier judgment".

19. His Honour then went on to show (pp. 611-2) how the principle operated in a case where the same facts supported rights to different remedies against the same defendant. That is not a matter relevant to the case in question here.

20. Against that background, it is next convenient to refer to the approach adopted by the learned primary Judge in reaching the conclusion that the appellant should fail. The foundation for his judgment was the dictum of Sir James Wigram V.C. in Henderson v. Henderson (1843) 3 Hare 100; 67 ER 313 where his Lordship said (Hare pp 114 to 115; ER p 319):-

"In trying this question I believe I state the
rule of the Court correctly when I say that,
where a given matter becomes the subject of
litigation in, and of adjudication by, a Court of
competent jurisdiction, the Court requires the
parties to that litigation to bring forward their
whole case, and will not (except under special
circumstances) permit the same parties to open
the same subject of litigation in respect of
matter which might have been brought forward as
part of the subject in contest, but which was not
brought forward, only because they have, from
negligence, inadvertence or even accident,
omitted part of their case. The plea of res
judicata applies, except in special cases, not
only to points upon which the Court was actually
required by the parties to form an opinion and
pronounce a judgment, but to every point which
properly belonged to the subject of litigation,
and which the parties, exercising reasonable
diligence, might have brought forward at the
time".

What his Lordship there said has been frequently referred to by courts dealing with the problem; see, for example, the earlier cited passage from the judgment of Gibbs C.J. and Mason and Aickin JJ. in the Anshun case.

21. It is to be observed that in two places his Lordship made allowance for cases which might be special. He used the expressions, "except under special circumstances" and "except in special cases". It was in these expressions that the learned primary Judge found the solution to the problem which this case poses. His Honour said:-

"The authorities are of little help in
ascertaining what constitute the 'special
circumstances' and 'special cases' to which Sir
James Wigram referred in Henderson v. Henderson
(supra). Rowe v. Rowe (1980) Fam. 47. However,
it seems to me that the application of the
principle that the Commissioner has no power to
excuse taxpayers from the duty of paying taxes in
accordance with the law unless expressly
authorised to do so by statute (Commissioner of
Taxes (South Australia) v. Executor Trustee and
Agency Co. of South Australia Ltd. (supra) and
Maritime Electric Co. Ltd. v. General Dairies
Ltd. (supra)) constitutes special circumstances
and makes this a special case. Accepting that
res judicata is not a species of estoppel but
rather the application of the principles that
nobody ought to be harassed twice in the same
matter and that there must be an end to
litigation, it nevertheless seems to me that when
considered in relation to the duty cast upon the
Commissioner it is so nearly akin to estoppel
that it ought to be applied in the same way to
the circumstances as would the doctrine of
estoppel. It follows that, to adapt with respect
the words of Sir John Latham earlier quoted, no
application of the doctrine of res judicata can
avail to release persons from an obligation to
obey a statute which imposes a duty of a positive
kind".

The reference to what was said by Latham C.J. is a reference to his dissenting judgment in The Commissioner of Taxes (South Australia) v. The Executor Trustee and Agency Company of South Australia Limited (63 CLR at p 133) to which his Honour had earlier referred.

22. In the submission of the appellant, his Honour fell into error because:-

(a) Henderson v. Henderson (supra) was not a relevant
authority. The case was not concerned with res judicata
but with the question whether issues not raised in the
original proceedings could be raised in the subsequent
action. There was, accordingly, no room for the
application of the principle propounded in Henderson's
case to the doctrine of res judicata.

(b) In any event there were no special circumstances which
fell within the principle enunciated by Sir James Wigram
V.C. in Henderson's case. The matters relied upon by the
learned primary Judge did not amount to special
circumstances nor did they make the present case a special
case.

(c) The revenue cases precluding reliance upon the doctrine of
estoppel by conduct as a defence against a claim by a
revenue authority do not apply in relation to res
judicata.

23. Counsel for the respondent supported the judgment by reliance upon the following submissions:-

(a) The right asserted by the respondent was a matter of
public right or duty to collect the tax in full.
Reference was made to ss. 204, 208 and 209 of the Act. It
was said that the income tax always remained due and
payable with the consequence that the earlier judgment had
no effect on the appellant's liability for it.

(b) A defendant could not set up res judicata any more than he
could set up estoppel in the face of a statute. Reliance
was placed, inter alia, on the decision of the Privy
Council in Kok Hoong v. Leong Cheong Kweng Mines Limited
(1964) AC 993.

(c) The learned primary Judge was, in any event, correct in
concluding that the case was a special one so that the
defence of res judicata did not apply.

24. We turn to consider these submissions. Two - one made by the appellant and one by the respondent - may be put out of the way fairly quickly. Contrary to the appellant's submission, Henderson v. Henderson was a case about res judicata. It was said to be so by Lord Wilberforce in Carl Zeiss Stiftung v. Rayner & Keeler Limited (1967) 1 AC 853 at p 966. This was expressly referred to in the joint judgment of Gibbs C.J. and Mason and Aickin JJ. in the Anshun case (p. 599). That does not, however, mean that what was said in the case must not be read in the context of the facts upon which the decision is based. More will be said of this a little later. Then, contrary to the respondent's first submission, the fact that the debts sued for are debts due to the Commonwealth is not itself determinative of the outcome of the appeal. The sections of the Act, ss. 204, 208 and 209, with which the respondent seeks to underpin his submission, create the statutory debt which is owed to the Commonwealth and empower the Commissioner or a Deputy Commissioner to sue for it. But what needs to be understood is that the ultimate goal is judgment. Except in certain special cases, it is only when judgment is obtained that the respondent can take steps to compel payment of the amount which is due. The sections relied upon are the source of the causes of action which the respondent has, but once those causes of action pass into judgment the force of the sections is spent. They are replaced by a far more valuable right, namely, the right conferred upon the respondent by the judgment to enforce payment.

25. Each of the authorities on res judicata to which reference has been made, emphasizes this point. Thus in Blair v. Curran Dixon J. (as he was) said that "the very right or cause of action claimed or put in suit has in the former proceedings passed into judgment, so that it is merged and has no longer an independent existence (62 CLR at p. 532). In Anshun Brennan J. said that the foundation of the rule, whether it be termed res judicata, or cause of action estoppel or judgment recovered, is the merging of the cause of action in the judgment (147 CLR at p. 611). Furthermore, res judicata is not based on estoppel. To paraphrase what was said by Fullagar J. in Jackson v. Goldsmith (81 CLR at p 466), it is a rule of public policy based on the principles that litigation between parties should finish and, furthermore, that no-one should be pursued more than once for the same cause of action.

26. A starting point for the consideration of the defence of res judicata in a given case is to come to conclusions on what causes of action are relied upon in the instant case and what causes of action were relied upon in the proceedings which have resulted in the earlier judgment upon which the defence of res judicata is based. This is the first exercise to be undertaken here. Although there were no pleadings in the earlier proceedings, it is clear from the special indorsement on the writ that the action was brought to recover the balances of the amounts due under the various assessments of income tax and additional tax which were particularised. It is true that the particulars were prefaced with a claim for $25,557.92, one tenth of the correct amount, and that the indorsement concluded with a similar claim. Thus the particulars in the indorsement were at variance with what was claimed. Nevertheless, the indorsement manifested a clear intention to sue for the balances of the various notices of assessment. The fact that the total was incorrectly shown was not, in our opinion, to the point. Nor was the circumstance that, if the error had been drawn to the attention of the Court before judgment had been entered, it would have given leave to amend the indorsement so as to correct it. Notwithstanding these matters, the fact remains that the action was to recover the balances due on the notices of assessment. Reference was not made to the relevant sections of the Act, but plainly the causes of action were statutory in nature and based upon s. 209 thereof.

27. In the present proceedings the causes of action were exactly the same. The amounts varied to a degree because of adjustments that had to be made to calculations of additional tax and the payment, in the meantime, of the amount of the judgment recovered in the earlier proceedings. But the realities are that precisely the same causes of action were relied upon in each of the proceedings. Prima facie, therefore, the defence of res judicata was made out.

28. In most cases where the defence of res judicata has arisen for consideration, the problem has been to determine whether a matter of claim or defence not relied upon in the earlier proceedings should be permitted to be raised in the later proceedings. The Anshun case was such a case; so was Henderson v. Henderson (supra) relied upon by the learned primary Judge. Other instances of cases in this category are Hoystead v. Commissioner of Taxation (1926) AC 155, Greenhalgh v. Mallard (1947) 2 All ER 255 and Brisbane City Council v. Attorney-General for Queensland (1979) AC 411. In the latter case Lord Wilberforce referred to the judgment of Somervell L.J. in Greenhalgh v. Mallard (at p 257) where his Lordship said that res judicata was not confined to the issues which the Court was actually asked to decide; "... it covers issues or facts which are so clearly part of the subject-matter of the litigation and so clearly could have been raised that it would be an abuse of the process of the Court to allow a new proceeding to be started in respect of them". His Lordship went on to refer to the earlier cited dictum of Sir James Wigram V.C. in Henderson v. Henderson (supra). In the Brisbane City Council case Lord Wilberforce said (p. 425) that this (i.e. what Somervell L.J. had said) was the true basis of the doctrine which ought only to be applied when the facts are such as to amount to an abuse: "otherwise there is a danger of a party being shut out from bringing forward a genuine subject of litigation". Lord Wilberforce had earlier referred to the dictum of Sir James Wigram, V.C. in Henderson's case as the "classic statement of this doctrine".

29. A consideration of what Sir James Wigram, V.C. said reveals that the principle which applies is that the Court requires the parties to litigation "to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest". It was in that context that his Lordship used the expression "special circumstances". The context was the same where his Lordship later used the expression "special cases". It follows that his qualification to the principal rule, which excludes its operation in cases where the circumstances are special, can have no relevance to a matter such as this where the causes of action in each proceeding are identical and it is not sought in the later proceedings to raise a matter of claim overlooked in the earlier ones. Whilst, therefore, the submission of counsel for the respondent that Henderson's case was not a case concerning res judicata is, as we have earlier said, not correct, the case is, nevertheless, not helpful in the resolution of the present problem. That is because it is a case dealing with the question whether a party, who has omitted some matter of claim or defence, should be permitted to rely upon it in later proceedings. Except in special circumstances, he will not be permitted to do so whether or not the omission was caused by negligence, inadvertence or even accident. Here the error which is patent on the face of the indorsement in the earlier proceedings was probably the result of negligence, inadvertence or accident and we are prepared, notwithstanding the absence of direct evidence on the point, to infer that it was. But the error is not an error of omission of a claim; rather it is an arithmetical error in the calculation of the correct amount of a claim which was in fact made.

30. Because the causes of action relied upon in the first proceedings became merged in the judgment which was entered, the revenue cases relied upon by counsel for the respondent have no relevance; nor have cases which decide that in some circumstances a party may not set up an estoppel in the face of a statute. In this respect, counsel placed particular reliance upon the decision of the Privy Council in Kok Hoong v. Leong Cheong Kweng Mines Limited (1964) AC 993; see the judgment of Viscount Radcliffe at pp 1014 - 1019. But, in our opinion, that case was, upon analysis, a case of issue estoppel, not res judicata, so that it has no relevance to the question to be determined here.

31. The consideration of the authorities which we have undertaken has led us to the conclusion that no assistance is to be gained from them except insofar as they state the principle and show the reason for, and origin of, it. The most convenient statement of these matters is to be found in the passage from the judgment of Fullagar J. in Jackson v. Goldsmith (81 CLR at p 466) cited in the Anshun case (147 CLR at p 597). What his Honour said discloses that the doctrine of res judicata is founded on a broad rule of public policy based on the principles expressed in the maxims that it is in the public interest that litigation should finish and that no-one should be twice troubled in relation to the same cause. In our opinion, one has to be careful, when giving effect to rules of public policy, that one does not construct doctrine or rules which become so inflexible that they place a court in such a strait jacket that it loses or surrenders its primary function which is to do justice between parties according to law. It was no doubt this consideration which moved Sir James Wigram, V.C. to qualify his statement of the rule, when given the extended application it has been found to have, by excepting special cases.

32. In the present case, what appears to have been an obvious mistake has been made. We would have preferred to have had evidence from the respondent of what precisely occurred to bring the mistake about. In the absence of that evidence, one has to engage in a degree of speculation which is undesirable. Nevertheless, as we have said, we are prepared to infer that there was no reason for the mis-statement of the amount which was claimed except a mathematical error made by an employee or a machine.

33. On the appellant's side, no evidence was tendered except the record of the earlier proceedings. There was thus no evidence of prejudice of any kind to the appellant except, of course, that, if the respondent were to recover in the second action, the appellant would be worse off to the extent of about $250,000. But that prejudice has to be understood in the context that it will only arise if he is compelled to pay an amount which, so far as the evidence discloses, was due and recoverable in the first proceedings. His only chance of avoiding what, on the face of the evidence appears to be a just claim, is to take advantage of the arithmetical error which was made.

34. This is a very unusual case. Indeed, it borders on the absurd. One would hope that its circumstances would not be repeated. Be that as it may, it is our opinion that a principle founded on public policy should not be permitted to force a court to reach a conclusion which not only confounds another public policy, namely, that people should, generally speaking, pay their debts whether they are debts due to governments, to other persons or to private undertakings or concerns, but which itself involves an absurdity.

35. One answer made by counsel for the appellant to such a proposition was that justice could have been done if the respondent had made application to set aside the judgment. That may well have been a course open to the respondent. But that does not warrant the conclusion that that was the only remedy which the respondent had. Furthermore, if the appellant had had a good answer to such an application, based perhaps on matters of the kind pleaded in para. 8 of his defence earlier quoted, it was open to him to lead at least some evidence to that effect in these proceedings. In the absence of any such evidence the appellant's case becomes one of reliance upon the bare record in the earlier proceedings balanced against a claim which, upon the face of the particulars comprised in the indorsements on each of the writs, appears not only to be correct, but also to be just. We emphasize that this is the totality of what is revealed; there is no evidence of prejudice to the appellant except prejudice of the kind earlier mentioned which we regard as irrelevant.

36. In the unusual circumstances of this case we consider that the appellant ought not to be permitted to rely on the doctrine of res judicata. The proceedings are not an abuse of the process of the Court in the sense referred to by Somervell L.J. in Greenhalgh v. Mallard (supra). In our opinion, a balancing of the two earlier mentioned public policies requires that the respondent be entitled to sue.

37. For the reasons we have given, we dismiss the appeal with costs.