Cleary v Jeans [2006] NSWCA 9 (9 February 2006)

CITATION: Cleary v Jeans [2006] NSWCA 9

FILE NUMBER(S):

41197 of 2004

HEARING DATE(S): 12 September 2005

DECISION DATE: 09/02/2006

PARTIES:

Stephen Thomas Cleary (Claimant)

John Anthony Jeans (Opponent)

JUDGMENT OF: Handley JA Bryson JA Young CJ in Eq

LOWER COURT JURISDICTION: Supreme Court - Common Law Division

LOWER COURT FILE NUMBER(S): SC 20049 of 2004

LOWER COURT JUDICIAL OFFICER: Mathews AJ

COUNSEL:

A Bell SC/D McLure (Claimant)

J M Ireland QC (Opponent)

SOLICITORS:

J K O'Sullivan (Claimant)

Moloney - Lawyers (Opponent)

CATCHWORDS:

ABUSE OF PROCESS – earlier proceedings based on estoppel – later proceedings against another party based on the truth – later proceedings not abuse of process

ESTOPPEL – representation conveyed by pleadings and affidavits – capable of supporting estoppel against amendment of pleadings

RES JUDICATA - Anshun estoppel – not available in proceedings for fraud inducing conduct creating estoppel enforced in earlier proceedings

RES JUDICATA - abuse of process – collateral challenge to prior decision – no abuse where prior decision based on estoppel and later proceedings based on truth

D

LEGISLATION CITED:

DECISION:

Appeal dismissed with costs

JUDGMENT:

IN THE SUPREME COURT

OF NEW SOUTH WALES

COURT OF APPEAL

CA 41197/04

HANDLEY JA

BRYSON JA

YOUNG CJ in Eq

9 FEBRUARY 2006

STEPHEN THOMAS CLEARY v JOHN ANTHONY JEANS

CATCHWORDS

ABUSE OF PROCESS – earlier proceedings based on estoppel – later proceedings against another party based on the truth – later proceedings not abuse of process

ESTOPPEL – representation conveyed by pleadings and affidavits – capable of supporting estoppel against amendment of pleadings

RES JUDICATA - Anshun estoppel – not available in proceedings for fraud inducing conduct creating estoppel enforced in earlier proceedings

RES JUDICATA - abuse of process – collateral challenge to prior decision – no abuse where prior decision based on estoppel and later proceedings based on truth

FACTS

The respondent sued a Bank in the Federal Court of Australia for damages and an order setting aside a guarantee he had given. The Bank cross-claimed against the respondent under the guarantee. At that stage the appellant’s execution of the guarantee was common ground. On the third day of the trial, the respondent was asked in the witness box to confirm his signature on the guarantee and he refused to do so. He then applied for leave to withdraw his admissions in the pleadings that he had executed the guarantee. The Federal Court Judge held that the respondent’s claim raised a triable issue but refused the application for leave to amend because of the prejudice to the Bank. The Federal Court dismissed the respondent’s claims and entered judgment for the Bank on its cross-claim. The respondent sued the appellant, an officer of the Bank, for damages in the Supreme Court alleging that the appellant had fraudulently attested a forged signature on the guarantee and that the respondent had not checked his signature until asked to do so in the witness box having assumed it was genuine. The appellant applied for summary dismissal on the basis of an Anshun estoppel or abuse of process. The Judge held that the allegation of fraud excluded an Anshun estoppel and prevented the proceedings being an abuse of process. HELD (by majority): (1) The respondent’s assertions in his pleadings and affidavits in the Federal Court had supported an estoppel against the amendments sought by him in that Court. Pleadings are not normally assertions of the truthfulness of the facts pleaded, but the pleaded allegation that the respondent had executed the guarantee was fundamental to his whole case, and he had also made statements to that effect in three affidavits; (2) The underlying basis of the Federal Court decision to enforce the guarantee was an estoppel by representation, and that decision would not be inconsistent with a decision of the Supreme Court based on the truth. The fact that a litigant has been held liable on the basis of an estoppel in one proceedings does not prevent him relying on the truth against a different party in another proceeding; (3) Since the respondent did not have a full opportunity to litigate the signature issue in the Federal Court because he was estopped from doing so allegedly as a result of relying on the appellant’s fraudulent misrepresentation in the attestation clause, there was no Anshun estoppel and it was not an abuse of process to litigate the signature issue in the Supreme Court.

ORDERS

Appeal dismissed with costs.

IN THE SUPREME COURT

OF NEW SOUTH WALES

COURT OF APPEAL

CA 41197/04

HANDLEY JA

BRYSON JA

YOUNG CJ in Eq

9 FEBRUARY 2006

STEPHEN THOMAS CLEARY v JOHN ANTHONY JEANS

Judgment

1 HANDLEY JA: This summons for leave to appeal from a decision of Mathews AJ, refusing to summarily dismiss proceedings for res judicata or abuse of process, was heard on the basis that, if leave were granted, the proceedings could be disposed of without a further hearing. At the end of the oral hearing the Court granted leave and directed the filing of a notice of appeal.

2 The abuse of process relied upon was based on earlier proceedings in the Federal Court in which the respondent and his company sued the Commonwealth Bank for misleading and deceptive conduct claiming damages and an order setting aside the respondent’s guarantee of the company’s indebtedness under a loan made in June 1998. The Bank cross-claimed against the respondent under his guarantee. At that stage the execution of the guarantee was common ground.

3 The trial began in March 2003. On the third day counsel for the Bank asked the respondent in the witness box to confirm that the signature on the guarantee was his. When his attention was drawn to the document he said that it was not his usual signature and was different from the signature by which he had attested the fixing of the company’s common seal on another page of the same document.

4 The respondent then applied to the trial Judge, Sackville J, for leave to withdraw his admissions in the pleadings that he had executed the guarantee. The application was refused and the trial continued on the existing pleadings. On 16 May the Judge dismissed the claims of the respondent and his company and entered judgment for the Bank on its cross-claim against the respondent for $4,749,813.30. An appeal to the Full Court was dismissed on 19 December 2003 (Jeans v Commonwealth Bank [2003] FCAFC 309; (2003) 204 ALR 327). The only ground of appeal was that the trial Judge should have allowed the respondent to withdraw his admissions. The High Court refused special leave.

5 The respondent’s disputed signature on the guarantee was attested by the appellant, Mr Cleary, the bank officer who implemented the loan transaction. On 4 March 2004 the respondent sued Mr Cleary in the Supreme Court for fraud alleging that his signature on the guarantee was forged and claiming as damages the amount of the Federal Court judgment.

6 The appellant applied by notice of motion for summary dismissal on the basis of an issue or Anshun estoppel, or abuse of process. Mathews AJ rejected all three grounds and dismissed the motion. The issue estoppel claim was rejected because the defendant was not a privy of the Bank and was therefore not entitled to the benefit of issue estoppels flowing from the Federal Court judgment. The appellant did not challenge this part of the Judge’s decision.

7 The respondent alleged in his amended statement of claim that he relied on Mr Cleary’s fraudulent misrepresentation in the attestation clause on the guarantee when he accepted that his signature was genuine, and continued to do so until he was confronted with the signature in the witness box. Thus he alleged in substance that the appellant’s fraudulent misrepresentation was responsible for his inability to have the validity of his signature litigated in the Federal Court.

8 The Judge held that these allegations, which Sackville J had said raised a triable issue, excluded any Anshun estoppel and prevented the proceedings being an abuse of process.

9 Mr Adam Bell SC, who appeared for the appellant, submitted that the Federal Court proceedings were the appropriate vehicle for the determination of the forgery question, that it should have been brought forward in those proceedings, and it was unreasonable for the respondent not to have done so. He further submitted that the present proceedings raised the possibility of conflicting judgments because a judgment against the appellant on the basis that the respondent’s signature was not genuine would be inconsistent with the judgment of the Federal Court. It was also submitted that these proceedings were a collateral attack on that judgment.

10 These submissions reflect the prima facie position and in normal circumstances, as the primary Judge said, the Court would have enforced an Anshun estoppel or dismissed the proceedings as an abuse of process. The question is whether the allegation of fraud is sufficient to avoid these results.

11 It will be convenient to first consider whether a judgment for the respondent in the action would be inconsistent with the judgment in the Federal Court. The latter was not based on a finding that the respondent’s signature was genuine, but on his admissions in the pleadings and affidavits. However that is an understatement of the real position. In normal circumstances a party who discovered, during the trial, that the document sued on was arguably a forgery would be permitted to amend to raise that allegation: Cropper v Smith (1884) 26 Ch D 700 CA, 711; Shannon v Lee Chun [1912] HCA 52; (1912) 15 CLR 257; Queensland v J L Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146. However as Sackville J held this was not a normal case.

12 Leave to amend was refused because of the prejudice the Bank would suffer if the amendments were allowed.

13 Sackville J found that the respondent had represented to the Bank that the signature on the guarantee was his. He said (p 13):

“The starting point for the relief he sought was the fact that he had executed a personal guarantee. Mr Jeans did not merely plead that fact ... [He] swore that he had executed the personal guarantee in three separate affidavits executed over a period of three years.”

14 In Boileau v Rutlin [1848] EngR 661; (1848) 2 Exch 665, 680-1 [1848] EngR 661; [154 ER 657, 663], in a passage cited with approval by Deane and Dawson JJ in Jamieson v R [1993] HCA 48; (1993) 177 CLR 574, 580 Parke B said:

“Pleadings ... are not to be treated as positive allegations of the truth of the facts therein, for all purposes, but only as statements of the case of the party, to be admitted or denied by the opposite party, and if denied to be proved, and ultimately submitted for judicial decision.”

15 In their joint judgment Deane and Dawson JJ, with the approval of Gaudron J (592), said (579):

“... the traditional nature of ... an unverified pleading was not that of a representation ... of the objective accuracy of the assertions of fact which it contained.”

16 Before final judgment pleadings containing positive assertions of fact are statements of the party’s intention as McHugh J recognised in Commonwealth v Verwayen [1990] HCA 39; (1990) 170 CLR 394, 503. Because of the power to amend by leave they are not unequivocal. In the normal case therefore, as Mason CJ, Gaudron and McHugh JJ said in Commonwealth v Verwayen (above) at 414, 485, 503 pleadings alone provide a poor basis for an estoppel, but all three recognised that Verwayen was not an ordinary case. Nor was this case in the Federal Court.

17 The respondent’s execution of the guarantee was fundamental to his whole case in the Federal Court and his three affidavits contained sworn statements to that effect. Those representations were not equivocal and they cannot be characterised as statements of intention. They could support an estoppel against the amendments sought.

18 Sackville J found that the Bank had relied on these representations in its conduct of the proceedings and would be prejudiced if the respondent were permitted to withdraw his admissions. He said (pp 15-16):

“... yet another delay in these already protracted proceedings would work unfairness to the CBA ... Yet another adjournment would expose it to a risk that some of the very large costs incurred in this case might prove to be irrecoverable ... In my view, having regard to the history of this litigation, it would be unfair to the CBA to grant leave to the applicants to withdraw their admissions and mount a case of fraudulent conduct against Mr Cleary and the CBA.”

19 Thus he found all the elements of an estoppel by representation in accordance with the classic formulation of Dixon J in Grundt v Great Boulder Proprietary Gold Mines Ltd [1937] HCA 58; (1938) 59 CLR 641, 674-6. The underlying basis of the judgment of the Federal Court was an estoppel by representation and to ascertain that this was so we are entitled to look behind the formal orders of that Court. Thus in R v Humphrys [1977] AC 1, 41 Lord Hailsham said:

“The Court will enquire into realities and not mere technicalities.”

20 Similarly in Rogers v R [1994] HCA 42; (1994) 181 CLR 251, 263 Brennan J said that the Court could look at “any material that shows what issues were raised and decided”.

21 The judgment in the Federal Court based on an estoppel would not be inconsistent with a judgment in the Supreme Court based on the truth. A party cannot normally rely in the same proceedings on an estoppel contrary to the truth and the truth: In re Savoy Estate Ltd [1949] Ch 622 CA, 634, 636 per Evershed MR where the estoppel was based on res judicata but the principle must be the same.

22 In Heskell v Continental Express Ltd [1950] 1 All ER 1033, 1044 Devlin J said:

“A man cannot in one breath invoke both the truth and an estoppel; he must make his choice ... He cannot, in presenting a case against a defendant mix fact and fiction in the proportions which suit him best.”

23 The fact that the respondent has been held liable on the basis of an estoppel in one proceeding does not prevent him relying on the truth against a different party in other proceedings, particularly where the plaintiff’s liability in the first proceedings was a result of his reliance on a fraudulent misrepresentation by the person sued in the later proceedings.

24 The principle is not limited to cases of fraud. A principal held liable for the acts or omissions of his agent on the basis of ostensible authority can sue the agent for damages for exceeding his actual authority. Ostensible authority depends on a holding out by the principal which creates an estoppel: Armagas Ltd v Mundogas SA [1985] UKHL 11; [1986] AC 717, 777-8; Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising and Addressing Co Pty Ltd [1975] HCA 49; (1975) 133 CLR 72, 78-9; Hudgell Yeates & Co v Watson [1978] QB 451 CA, 470.

25 Proceedings to recover a loss incurred as a result of a judgment in earlier proceedings are competent where the plaintiff alleges that the adverse judgment was the result of the defendant’s breach of duty.

26 The point is illustrated by cases dealing with the liability of solicitors for negligence in the management of court proceedings. This was well established before the Third Edition of Bullen & Leake in 1868; see pp 83-84, 275 and Godfroy v Dalton [1830] EngR 387; (1830) 6 Bing 460, 467. It has not been affected by the decision in D’orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; (2005) 79 ALJR 755 which confirmed the immunity of barrister and solicitor advocates.

27 An action against a solicitor for negligence in which damages are claimed for the loss of an earlier case is not a collateral challenge to the earlier decision where the plaintiff claims that but for the negligence there would have been a more favourable result. In Walpole v Partridge & Wilson [1994] QB 106 at 124-5 Ralph Gibson LJ said:

“If there is a sufficiently arguable case to show that the defendant solicitors, by their breach of duty, put the plaintiffs in the position of being unable properly to contest the first decision, so that the plaintiffs were reasonably compelled to submit to judgment on the issue, then, in my judgment, the plaintiffs' claim is not shown to be an abuse of the process of the court merely because it will, if it succeeds, require the court to assess damages on the basis that the prior decision of the court would not have been made if the solicitors had not been in breach of duty.”

28 The same point was made by Sir Thomas Bingham MR in Smith v Linskills [1996] 1 WLR 763 at 769-70:

“It is evident in civil cases particularly that a party may lack any opportunity to resist a hostile claim, as for example where judgment is entered against him on the ground of procedural default, or may lack a full opportunity, as when summary judgment is given against him. We understand Lord Diplock [Hunter v Chief Constable of the West Midlands Police [1982] AC 529, 536, 541] to have been intending to preserve a party's right to make a collateral attack on a decision made against him in such circumstances.”

29 If the respondent establishes that he was induced by the appellant’s fraudulent representation in the attestation clause to conduct his case in the Federal Court until the third day of the trial on the basis that he had executed the guarantee and thus estop himself, as against the Bank, from alleging otherwise he was “unable properly to contest” the decision to enforce the guarantee against him and lacked “a full opportunity” to litigate the signature issue against the Bank.

30 Although proof of his damages will require the respondent to establish that the signature on his guarantee was not genuine, for the reasons given, these proceedings are not a collateral attack on the judgment of the Federal Court and are not an abuse of process.

31 The same conclusions flow from the principles which determine causation in deceit. If the respondent proves that he and his solicitors assumed, without carefully checking, that his signature on the guarantee was genuine because it had been attested by the appellant any carelessness on their part in failing to check his signature will not be an answer. As Lord Herschell said in Bloomenthal v Ford [1897] AC 156, 168 (although the facts were very different):

“The very person who makes a statement of that sort has put the other party off making further inquiry. He has produced on his mind an impression as a result of which further inquiry is thought to be unnecessary or useless.”

32 Similar principles apply to the assessment of damages in deceit. Lord Atkin said in Clark v Urquhart [1930] AC 28, 67-8:

“... in principle, the measure of damages [in deceit] ... would be based on the actual damage directly flowing from the fraudulent inducement.”

33 This principle was adopted by Dixon CJ in Toteff v Antonas [1952] HCA 16; (1952) 87 CLR 647, 650:

“In an action of deceit a plaintiff is entitled to recover as damages a sum representing the prejudice or disadvantage he has suffered in consequence of his altering his position under the inducement of the fraudulent misrepresentation made by the defendant.”

34 In Smith New Court Securities Ltd v Citibank NA [1996] UKHL 3; [1997] AC 254 the House of Lords restated the principles which govern the assessment of damages for fraud. Although that case involved the acquisition of shares the restated principles are of general application. Lord Browne-Wilkinson, who gave the principal speech, included the following among the matters which may be relevant to the assessment of the plaintiff’s loss (267):

“... where ... (a) the misrepresentation has continued to operate after the date of the acquisition of the asset so as to induce the plaintiff to retain the asset or (b) the circumstances of the case are such that the plaintiff is, by reason of the fraud, locked into the property.”

35 On the facts pleaded the misrepresentation continued to operate on the respondent until the third day of the trial but by then he was locked in because of the estoppel. Thus, on the case pleaded, the estoppel which prevented him obtaining leave to amend was a result of the fraud. In principle therefore the prior judgment cannot be an answer to this action.

36 Since writing the above I have had the benefit of reading the judgment of Bryson JA. I agree with most if not all of what he has written about abuse of process in general but I am unable to agree with his conclusion. I do not consider that it is open to this Court to find that the respondent’s case is so fantastic as to be scandalous and an abuse of process.

37 In the first place I do not consider that the appellant’s case was really conducted on that basis either before Mathews AJ or this Court. In the second place Sackville J, who was in a position of considerable advantage in this respect, said that Mr Jeans’ allegations raised a triable issue. If Sackville J was not prepared to dismiss the allegations as so fantastic as to be frivolous and vexatious I cannot see how, with all respect, it is open to this Court to do so.

38 In my judgment the appeal fails and should be dismissed with costs.

39 BRYSON JA: Mr Cleary appeals by leave from an order of Mathews AJ. Mr Cleary applied for summary disposal of proceedings brought against him in the Common Law Division by the respondent Mr Jeans, and on 17 December 2004 Mathews AJ dismissed his Notice of Motion – [2004] NSWSC 1245. Handley JA has given an account of the history of the controversy and the circumstances of the application, the basis of which so far as now calling for consideration was a claim that the Common Law proceedings were an abuse of process.

40 The Notice of Motion before Mathews AJ required that learned Judge to make a determination, on the facts and circumstances before her, whether the collateral attack which Mr Jeans clearly makes on the earlier judgment was or was not an abuse of process. In dealing with Anshun estoppel Mathews AJ said ([2004] NSWSC 1245 at para 45):

However in this case Mr Jeans, in his amended statement of claim, alleges that he was relying on Mr Cleary’s fraudulent misrepresentation (that he had witnessed Mr Jeans signing the guarantee) when he accepted, in the earlier stages of the Federal Court proceedings, that the signature on the guarantee was his own. This is a matter which has not been previously ventilated.

Her Honour also said:

On its face, it appears to be a strange proposition, and it may well encounter serious factual and legal hurdles. But this is not the occasion for exploring those issues. I am concerned here with estoppel. And in my view there is no legal basis for shutting Mr Jeans out from asserting this matter. Nor is there any realistic possibility of severing this off from the other allegations in the statement of claim. Indeed this course has never been suggested.

Mathews AJ said at para 47:

The defendant/applicant submits, on similar grounds, that the commencement of these proceedings against Mr Cleary was an abuse of process. Were it not for the matter I have just raised, I would have acceded to this proposition. However Mr Jeans’ assertion that Mr Cleary’s fraudulent misrepresentation was responsible for Mr Jeans’ inability to have the genuineness of the signature ventilated in the Federal Court, raises a fresh issue which he is entitled to have adjudicated and determined. Accordingly I find that there is no abuse of process.

41 In Mathews AJ’s reasoning, it was a conclusive demonstration that there was no abuse of process that Mr Jeans raised a fresh issue which had not been previously ventilated, the fresh issue being that he alleged that Mr Cleary made a fraudulent misrepresentation and that the fraudulent misrepresentation was responsible for Mr Jeans’ inability to have the genuineness of the signature ventilated in the Federal Court. In my view the novelty of the allegation was not a demonstration that there was no abuse of process; its novelty is part of the matter for consideration when deciding whether there was or was not an abuse of process, but it is not conclusive, and the implications of its novelty do not necessarily favour a decision that there was no abuse of process. The simple and narrow ground of novelty on which Mathews AJ acted does not in my opinion dispose of the question.

42 The facts of the present case are quite unlike those of any other to which we have been referred, a striking dissimilarity being that the reasons for Judgment of Sackville J. in the Federal Court - Deangrove Pty Ltd (Receivers and Managers Appointed) and Anor v. Commonwealth Bank of Australia, 16 May 2003, [2003] FCA 470 - did not dispose of any contentious issue of fact about whether Mr Jeans executed the Deed of Guarantee dated 12 June 1998, but proceeded on the basis which both parties, Mr Jeans first in order of time, had alleged when they approached the Federal Court seeking remedies. Mr Jeans’ evidence about whether he executed the Deed of Guarantee was considered on credit only: see para 83. The decision was based on Mr Jeans’ own assertion in his pleadings that he had executed the Deed of Guarantee. Nor does Mr Jeans say that his legal representatives did not conduct his Federal Court litigation in a satisfactory way. The present facts are not like to any ordinary range of considerations, and it is not possible to apply the test to which Lord Diplock referred in Hunter v. Chief Constable of the West Midlands Police [1982] AC 529 at 541; that test is whether Mr Jeans had a full opportunity of contesting the decision. When the earlier decision was based not on a disposition of an issue which was challenged, but on a state of facts which the challenging party himself approached the Court contending to be correct and to be the basis of his claim for relief, the language in which earlier formulations of the matter for decision was expressed may well not be readily applicable.

43 A collateral attack on an earlier decision of a Court is not necessarily an abuse of process. It may be quite legitimate to make such an attack, and to show that an earlier judgment was based on a wrong view of fact or of law, or that a chance was lost of persuading the earlier Court that some other view should have been adopted in a finding of fact, in the application of a legal standard or in some other matter. Claims against legal advisers relating to the manner in which earlier litigation was conducted provide ready examples where collateral attacks on earlier decisions have been made. This is illustrated by Walpole and Anor v. Partridge & Wilson [1994] QB 106, where the plaintiff sued solicitors who had conducted earlier proceedings in which he had failed. There have been varying outcomes, according to circumstances, where there have been claims of abuse of process, and there must have been many such cases where there was no such claim, reasonably enough.

44 We were referred to judgments of a high authority which show that the power of the Court to control its own process extends to power to stay or dismiss proceedings which are an abuse of process rather than to allow the ordinary course of the Court’s process to be followed to conclusion. Judicial exegeses should not be understood as attempts to define exhaustively all circumstances in which there is an abuse of process or the circumstances in which the Court’s inherent power enables it to act against abuse of process. As is characteristic of statements in judgments, such expositions should be understood as directed to the subject matter and shaped by the facts and circumstances under consideration. Important statements of principle to which we were referred included the following passage in Hunter v. Chief Constable of the West Midlands Police at 541 (Lord Diplock):

My Lords, collateral attack on a final decision of a court of competent jurisdiction may take a variety of forms. It is not surprising that no reported case is to be found in which the facts present a precise parallel with those of the instant case. But the principle applicable is, in my view, simply and clearly stated in those passages from the judgment of A L Smith LJ in Stephenson v Garnett [1898] 1 QB 677 and the speech of Lord Halsbury LC in Reichel v Magrath (1889) 14 App Cas 665 which are cited by Goff LJ in his judgment in the instant case. I need only repeat an extract from the passage which he cited from the judgment of A L Smith LJ in Stephenson v Garnett [1898] 1 QB 677 at 680–681:

... the Court ought to be slow to strike out a statement of claim or defence, and to dismiss an action as frivolous and vexatious, yet it ought to do so when, as here, it has been shewn that the identical question sought to be raised has been already decided by a competent court.

The passage from Lord Halsbury LC's speech in Reichel v Magrath 14 App Cas 665 at 668 deserves repetition here in full:

... I think it would be a scandal to the administration of justice if, the same question having been disposed of by one case, the litigant were to be permitted by changing the form of the proceedings to set up the same case again.

45 A valuable and recent review of English decisions relating to collateral challenge to an earlier decision as an abuse of process was made by Morritt VC in the leading judgment in the Court of Appeal of England in Secretary of State for Trade and Industry v. Bairstow [2004] Ch 1 at 12 [28] –17 [38]. In case law collected by his Lordship the decision or the aspect of the earlier decision which was under a collateral challenge characteristically related to an issue, whether of fact or law, which the party making the challenge disputed in the earlier proceedings, or would have contended with if the course of events had given him the opportunity. At the conclusion of his review Morritt VC stated propositions which the English cases established. Morritt VC’s formulation in para 38 was influenced by expressions in speeches in Arthur J S Hall & Co. v. Simons [2002] 1 AC 615, reviewed by Morritt VC at 16 [37]. I will set the formulations out, but I will omit proposition (b), which relates to an earlier criminal decision and to evidence legislation in effect in England:

38 In my view these cases establish the following propositions. (a) A collateral attack on an earlier decision of a court of competent jurisdiction may be but is not necessarily an abuse of the process of the Court....(c) If the earlier decision is that of a court exercising a civil jurisdiction then it is binding on the parties to that action and their privies in any later civil proceedings. (d) If the parties to the later civil proceedings were not parties to or privies of those who were parties to the earlier proceedings then it will only be an abuse of the process of the Court to challenge the factual findings and conclusions of the judge or jury in the earlier action if (i) it would be manifestly unfair to a party to the later proceedings that the same issues should be relitigated or (ii) to permit such relitigation would bring the administration of justice into disrepute.

46 What Morritt VC said in proposition (d) is not directly applicable in the present case because Mr Jeans has not challenged factual findings and conclusions in the earlier proceedings; the challenge is to a fact which he himself alleged and made a basis of his claim in the earlier proceedings, no less so because he unsuccessfully sought to depart from that allegation and his amendment was disallowed.

47 The formulation given by Lord Halsbury LC in Reichel v. Magrath (1889) 14 App Cas 665 at 668, cited by Lord Diplock and also by Morritt VC, cannot be directly applied to the present case. The passage refers to not permitting a litigant to change the form of proceedings and set out again the same question as was disposed of in an earlier case. That is not what Mr Jeans has done; the question was not disposed of in the first case but was accepted on the basis of the allegations of Mr Jeans as also of his opponent, and Mr Jeans although changing the form of the proceedings is not setting up the same case again, but seeking to contradict it. Later in the same passage Lord Halsbury said:

It surely must be in the jurisdiction of the Court of justice to prevent the defeated litigant raising the very same question which the Court has decided in a separate action.

This too is not precisely what Mr Jeans has done. Abuses of process can take an unmeasurable number of forms, not all of which can be foreseen, and the Court’s power to deal with abuses is not limited by expressions found in judgments which disposed of earlier abuses. On the absence of closed categories of abuse of process see too Jago v. District Court of New South Wales [1989] HCA 46; (1989) 168 CLR 23 at 74, Walton v. Gardiner (1993) 177 CLR 378 at 393.

48 In the Federal Court proceedings before Sackville J. there were two applicants, namely Deangrove Pty Limited (Deangrove), the Commonwealth Bank’s customer and debtor and Mr Jeans who was Deangrove’s sole shareholder and director. Mr Jeans’ part in the litigation before the Federal Court can be seen in the broad as two claims: Mr Jeans’ claim that he should be relieved against liability under the Deed of Guarantee given by Mr Jeans against default by Deangrove, and the Bank’s claim that it should recover judgment against him under that Guarantee. Upon the pleadings upon which the Federal Court disposed of the litigation, there was no issue of fact about whether or not Mr Jeans had executed the Deed of Guarantee; both parties approached the Federal Court alleging in their pleadings that he had executed it, and as Mr Jeans’ application for amendments was refused, there was no room for the Federal Court to take any other view of the facts as it proceeded to decide whether the Bank’s entitlement under the Deed of Guarantee was enforceable or whether there were facts and circumstances which meant that the Federal Court should not enforce it. At the centre of Mr Jeans’ claim against Mr Cleary in the Supreme Court is the proposition that Mr Cleary did not execute the Deed of Guarantee: the Federal Court’s decisions against him were based on the proposition that in fact he did. For this reason his claim should in my opinion be categorised as a collateral attack on the Federal Court’s decisions.

49 Senior counsel for Mr Jeans disputed the contention that Mr Jeans has sought to put in issue, in the Common Law proceedings, the question whether he is liable to the Bank under the Guarantee. In any address to the substance, it is in my opinion plain that, in Mr Jeans’ case, although the decision of the Federal Court and the liability which it imposed upon Mr Jeans cannot now be challenged, the decision was wrong and he had no liability to the Bank because he was not a party to the Guarantee; that is a necessary basis for any contention that he suffered loss through what he says Mr Cleary has done.

50 Mathews AJ commented on the improbability of the case of fact which Mr Jeans now seeks to put forward, but does not appear to have regarded that improbability as a relevant matter; in her Honour’s mind it was sufficient that Mr Jeans raised a fresh issue by alleging that Mr Cleary’s fraudulent misrepresentation was responsible for Mr Jeans’ inability to have the genuineness of the signature ventilated in the Federal Court. In my view the probability or improbability of the allegations now made against Mr Cleary is relevant when determining whether the present proceedings are an abuse of process, and the manner in which Mr Jeans conducted his claim in the Federal Court is also a relevant matter.

51 The fact that the challenging party himself led the Federal Court to the earlier decision does not conclusively show that the later collateral challenge is an abuse of process. The facts and circumstances may reveal some good reason why the challenging party took his earlier course, or they may serve to support fully a decision that there is an abuse of process in the second proceedings. The reasons for the change of ground and for the collateral challenge must be considered in whole.

52 It is Mr Jeans’ position of fact, as can be understood from evidence he gave in the Federal Court, that he knew that the Bank required him personally to execute a Deed of Guarantee, and that he himself affixed and attested the seal of the principal debtor, of which he himself was the only relevant officer, but that he did not, on that or on any occasion, execute the same document at the space indicated for his own signature, which was immediately before the space for execution by the principal debtor. He did execute the Deed on behalf of the principal debtor, whose position under the Deed of Guarantee, important enough as it was, was relatively minor in relation to his own obligations. Mr Jeans’ allegations involve as propositions of fact not only that Mr Jeans did not himself execute the Deed of Guarantee, but further that Mr Cleary, the attesting witness, forged Mr Jeans’ signature. A further matter of fact on which Mr Jeans relies is that by forging the signature and affixing his own attestation Mr Cleary made a representation, to Mr Jeans, that Mr Jeans had executed the Deed of Guarantee; and that Mr Jeans acted on this representation in the conduct of the litigation; and in the conduct of the litigation Mr Jeans not only alleged that Mr Jeans had executed it, but also stated on oath, on several occasions, that he had done so; including one or more occasions after the document was produced by the Bank in the litigation and Mr Jeans had the opportunity to see it. In the course of giving evidence before Sackville J., when counsel for the Bank showed Mr Jeans the signature on the Deed of Guarantee and, in a forensic flourish which may later have been regretted, called on Mr Jeans to confirm that he had executed it, Mr Jeans at first expressed doubt, and after an interval denied that it was his own signature. This led to Mr Jeans’ application, which was considered and determined at length by Sackville J., for leave to amend his pleadings. The interlocutory decision of Sackville J. is not correctly or sufficiently described as refusing leave to Mr Jeans to withdraw an admission. In the circumstances, to make the proposed amendment would have been to abandon the basis upon which Mr Jeans had approached the Federal Court. Mr Jeans’ application for leave to amend his pleadings brought about unusually full examination and judicial consideration of the facts and circumstances which led to Mr Jeans’ change of position.

53 In the facts as Mr Jeans put them, for some extended period until the true facts revealed themselves to him in the witness box, Mr Jeans was unaware that he had not in fact signed one of the two executions on the Deed of Guarantee, but was led into the belief that he had, the influence which brought that belief about being Mr Cleary’s attestation: this in a context in which Mr Jeans did not form his beliefs by looking at the original or a copy of his own signature or of the attestation on the Deed of Guarantee. Among the improbabilities in this array, the improbability that a representation by Mr Cleary, consisting of one or both of forging Mr Jeans signature and attesting the forged signature as a witness, caused Mr Jeans to believe and to conduct his litigation on the basis that in truth and in fact Mr Jeans had executed the Deed of Guarantee, with such a degree of conviction that he swore to the fact, has a degree of extravagance which it is difficult to express.

54 It was Mr Jeans’ business to execute the Deed of Guarantee both on behalf of Deangrove and also on his own behalf, after it had been arranged that he would give a Guarantee, and the document contained only incidental provisions affecting Deangrove; how it could come about that Mr Jeans executed it on behalf of Deangrove, but omitted to do so himself, and then regarded the transaction as proceeding and Deangrove (of the affairs of which he was in sole control) as in a position actually to obtain the contemplated finance, is beyond all rational explanation; and requires some explanation which is not rational, in terms of mistake and omission followed by disregard of the existence and consequences of the omission, coinciding with unrevealed criminal conduct of Mr Cleary in forging the execution. It must in my view be recognised that this is in the realm of the fantastic and has no claim to be adjudicated. The manner in which, according to Mr Jeans’ evidence in the Federal Court, he conducted the Federal Court proceedings and came to realise what had occurred after repeatedly asserting and averring to the contrary effect, further demonstrates the already clearly fantastic character of the allegations. It would be an abuse of power to require Mr Cleary to go to trial and answer such a fairytale.

55 I do not think that it should be said (in the terms of Morritt VC’s proposition (d)) that it would be manifestly unfair to Mr Cleary that the issue of Mr Jeans’ execution of the Deed of Guarantee should be relitigated or (as better stated in the present strange circumstances) should be litigated for the first time notwithstanding the course taken earlier; Mr Cleary did not have a connection with or involvement in the Federal Court proceedings which, in my opinion, would generate any manifest unfairness to him. To my mind however it is altogether clear that to permit Mr Jeans to litigate now the issue whether he executed the Deed of Guarantee would be scandalous and would tend to bring the administration of justice into disrepute, all the more so because the allegation is now augmented with contentions not only that Mr Jeans did not execute the deed, but that Mr Cleary did so, and that Mr Cleary made a representation by doing so, and that Mr Cleary made a representation to Mr Jeans, and that Mr Jeans’ conduct was shaped by that representation. In my opinion the Court while engaged in the administration of justice should not allow its own time and attention to be used, and should not require Mr Cleary to deal with or to answer so fantastic an allegation or so radical a reversal of position.

56 In my estimation, reasonable observers representing the Australian community and its values, who knew the history of this controversy and the allegations which Mr Jeans now makes, would regard it as a scandal that the Court allowed him to make them and made Mr Cleary go to trial to establish whether Mr Jeans has such a claim against him. Such an event would tend to bring the administration of justice into disrepute, and the Court should prevent it from happening. The Court’s own respect for the repute in which reasonable people should hold it impels the Court to withhold its trial process from Mr Jeans.

57 In my respectful view the Court’s judgment upon the relevant facts and circumstance on whether there was an abuse of process is the question of importance on the appeal, and that question has an importance which the majority judgments have not accorded to it. This is not a question which can be decided in the abstract or in principle; it must be decided on an evaluation of the facts and circumstances of the present case. I regret the necessity of dissenting from the opinions of the majority and of the learned primary judge, for all of whom I hold respect; and I am conscious that I have spoken with some force. The claim of a plaintiff to have his proceedings fully heard and determined according to the ordinary course of procedure is a strong one; but the claim of a defendant not to have the Court bring the power of the State to bear upon him and to subject him of a trial of proceedings which are an abuse of process and have no substance is also a strong one. The Court’s inherent power to control abuse of process is without meaning unless there is readiness to exercise it when an abuse of process occurs.

58 In my opinion the appeal should be allowed, the proceedings in the Common Law Division should be summarily dismissed, and Mr Jeans should be ordered to pay the costs of the proceedings in that Division including the costs of the Notice of Motion, and also the costs of the application for leave to appeal and of the appeal.

59 YOUNG CJ in EQ: I have read in draft the reasons for judgment of Handley JA and Bryson JA. Their Honours differ on the issue of abuse of process.

60 The line of cases of which Walpole v Partridge & Wilson [1994] QB 106 is the most frequently cited really commenced with the case of the clergyman who wished to relitigate his title to a parish and whose attempt was thwarted by the House of Lords in Reichel v Magrath (1889) 14 App Cas 665.

61 The history of the principle of abuse of process by a collateral attack on a judicial decision was traced by the English Court of Appeal in Secretary of State for Trade and Industry v Bairstow [2004] Ch 1.

62 At pp 16-17 in paragraph [38], Morritt VC laid down the following propositions from the cases, which, so far as they are relevant in NSW are as follows:

“(a) a collateral attack on an earlier decision of a court of competent jurisdiction may be but is not necessarily an abuse of process of the court; ...

(c) If the earlier decision is that of a court exercising a civil jurisdiction then it is binding on the parties to that action and their privies in any later civil proceedings;

(d) If the parties to the later civil proceedings were not parties to or privies of those who were parties to the earlier proceedings then it will only be an abuse of the process of the court to challenge the factual findings and conclusions of the judge or jury in the earlier action if (i) it would be manifestly unfair to the later proceedings that the same issues should be relitigated or (ii) to permit such relitigation would bring the administration of justice into disrepute.”

63 Mr Bell SC for the applicant put that this statement was, at least insofar as it differentiated between civil and criminal cases, unable to stand in the light of the High Court’s decision in D’Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; (2005) 79 ALJR 755. That may or may not be so, and, further, the statement needs to be relaxed to accommodate the particular law that applies to barristers and advocates as a result of Giannarelli v Wraith [1988] HCA 52; (1988) 165 CLR 543, but I would accept it as a good general statement of the NSW law on the aspect of abuse of process currently under consideration. See also Mason CJ in Rogers v The Queen [1994] HCA 42; (1994) 181 CLR 251 at 256, and the decision of this Court in Rippon v Chilcotin Pty Ltd [2001] NSWCA 142; (2001) 53 NSWLR 198.

64 Mr Bell would rather the Court follow the decision of Wilcox J in R v Balfour; Ex Parte Parkes Rural Distributions Pty Ltd (1987) 17 FCR 26. That case was complicated by the fact that an administrative decision was involved and does not discuss the general line of authority. I would not seek guidance in it when there is a series of other authoritative decisions on this point.

65 Mr Bell also relied on the decision of Allsop J in Michaels v Commonwealth (2002) 124 FCR 473. That was an unusual case in that no counsel appeared on either side representing parties. It involved a challenge to a criminal conviction and is no real guide here.

66 Professor Adrian Zuckerman in his "Civil Procedure" (LexisNexis, London 2003) says at 24.82:

"When considering an objection to the raising of an issue on the grounds of collateral attack the first matter to consider is whether a collateral attack is indeed involved."

67 Professor Zuckerman notes cases such as Palmer v Durnford Ford [1992] QB 483 where a litigant consented to judgment for his opponent in a case because of an incompetent expert. He sued his solicitor and the expert. Professor Zuckerman's analysis of the case is clearly correct. An action against an expert for negligence causing the plaintiff to bring a case against X or an action against a solicitor for loss by the latter's negligence in mounting a hopeless case, is not a collateral attack on a judgment, indeed to the contrary it relies on the judgment to show loss.

68 In the instant case, the kernel of the plaintiff's case is that Mr Cleary's alleged fraud caused the plaintiff loss in bringing about the plaintiff's conduct in making an admission which directly caused him to suffer a verdict in the Federal Court.

69 In this sense there is not really a collateral attack on the Federal Court judgment at all.

70 This is probably the reason why advocates' immunity needs to be considered separately; cf D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; (2005) 79 ALJR 755.

71 It may be that criminal cases such as Smith v Linskills [1996] 1 WLR 763 are inconsistent with this analysis and the civil cases on the subject, but, if this is so (and I do not need to explore it here) there may well be good public policy reasons for the difference.

72 Bryson JA states that the improbability of the case of fact being made by the plaintiff provides good reason for dismissing the proceedings as an abuse of process.

73 This is a ground which under Australian authorities must be employed only in the clearest case.

74 The prime thrust of the appellant's submissions was the collateral attack point. Indeed the point raised by Bryson JA was hardly touched on in argument.

75 I would not consider it appropriate to allow the appeal on the ground his Honour replies upon.

76 I thus agree with Handley JA that the appeal be dismissed with costs.

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LAST UPDATED: 09/02/2006