Champerslife Pty Ltd v Manojlovski & Anor [2010] NSWCA 33 (16 March 2010)

Last Updated: 17 March 2010

NEW SOUTH WALES COURT OF APPEAL

CITATION:
Champerslife Pty Ltd v Manojlovski & Anor [2010] NSWCA 33


FILE NUMBER(S):
2008/00290172

HEARING DATE(S):
16 February 2010

JUDGMENT DATE:
16 March 2010

PARTIES:
Champerslife Pty Ltd - Applicant
George Manojlovski and Raymond Grech - Respondents

JUDGMENT OF:
Allsop P Giles JA Handley AJA

LOWER COURT JURISDICTION:
District Court

LOWER COURT FILE NUMBER(S):
DC 211/08

LOWER COURT JUDICIAL OFFICER:
Hughes DCJ

LOWER COURT DATE OF DECISION:
30 June 29008


COUNSEL:
J Horowitz - Applicant
D C Price - Respondents

SOLICITORS:
Beswick Solicitors - Applicant
Hunt & Hunt - Respondents

CATCHWORDS:
ESTOPPEL - Anshun estoppel - test is one of reasonableness - whether a matter should, not could, be raised - Anshun estoppel applicable where matter not raised as a defence raised as a cause of action - whether failure to apply for joinder and for matter to be transferred unreasonable - similarily of substance of claim per se not unreasonable. PRIVIES - whether control and ability of a company to litigate means it should have. PRIVIES OF INTEREST - relationship between estopped party and potential claimant - whether Anshun estoppel applicable to privies where director controls company - whether Champerslife claiming under or through another person - in any event that person not Anshun estopped.

LEGISLATION CITED:



CASES CITED:
Aldi Stores Ltd v WSP Group plc [2007] EWCA Civ 1260; [2008] 1 WLR 748;
Arrowcrest Group Pty Ltd v Gill [1993] FCA 541; (1993) 46 FCR 90;
Belton v Carlow County Council (1997) 1 IR 172;
Bryant v Commonwealth Bank of Australia [1995] FCA 1299; (1995) 57 FCR 287;
Carl Zeiss Stiftung v Rayner & Keller Ltd (No 2) [1967] 1 AC 853;
Clegg v Abel (1898) 14 WN (NSW) 131;
Cordes v Dr Peter Ironside Pty Ltd [2009] QCA 302;
Davis v Hedges (1871) LR 6 QB 687;
Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd [1993] FCA 342; (1993) 43 FCR 510;
General Steels Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125;
Gleeson v J Wippell & Co Ltd [1977] 1 WLR 510;
Greenhalgh v Mallard [1947] 2 All ER 255;
Henderson v Henderson [1843] EngR 917; (1843) 3 Hare 100; 67 ER 313;
House of Spring Gardens Ltd v Waite [1991] 1 QB 241;
Johnson v Gore Wood & Co [2002] 2 AC 1;
Landsal Pty Ltd v REI Building Society (1993) 41 FCR 421;
Ling v Commonwealth of Australia [1996] FCA 1646; (1996) 68 FCR 180; (1996) 139 ALR 159;
Meriton Apartments Pty Ltd v Industrial Court of New South Wales [2009] NSWCA 434;
MCC Proceeds Inc v Lehman Bros International [1997] EWCA Civ 3068; [1998] 4 All ER 675;
Pigram v Ramsay (1966) 68 SR (NSW) 141;
Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; 147 CLR 589;
Ramsay v Pigram [1968] HCA 34; (1968) 118 CLR 271;
Shiels v Blakeley [1986] 2 NZLR 262;
Tanning Research Laboratories Inc v O'Brien [1990] HCA 8; (1990) 169 CLR 332;
Trawl Industries of Austarlia Pty Ltd v Effem Foods Pty Ltd (1992) 36 FCR 406;
Webster v Lampard [1993] HCA 57; (1993) 177 CLR 598;
Wire Supplies Ltd v CIR [2006] 2 NZLR 384; [2007] 3 NZLR 458 CA;
Yat Tung Investment Co Ltd v Dao Heng Bank Ltd [1975] AC 581;
Zavodnyik v Alex Constructions Pty Ltd [2005] NSWCA 438; (2005) 67 NSWLR 457.

TEXTS CITED:


DECISION:
(1) Order nunc pro tunc that it be decided separately from any other question whether the first plaintiff is estopped from bringing the proceedings as alleged in para 4 of the amended defence filed on 18 April 2008; (2) So far as leave be necessary, grant leave to appeal; (3) Direct the filing of a notice of appeal within 7 days; (4) Answer the separate question no; (5) Set aside the orders made by Hughes DCJ on 30 June 2008 as regards the first plaintiff and in lieu thereof order that as regards the first plaintiff the notice of motion filed on 16 May 2008 be dismissed; (6) Respondents pay the appellant’s costs of the application heard by Hughes DCJ and of the application for leave to appeal and the appeal.



JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 2008/00290172

DC 211/08

ALLSOP P

GILES JA

HANDLEY AJA

Tuesday 16 March 2010

CHAMPERSLIFE PTY LTD v MANOJLOVSKI & ANOR

Judgment

1 ALLSOP P: The reasons of Gibbs CJ, Mason J and Aickin J in Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; 147 CLR 589 at 602-603 referred to the “inutility” of founding the test for the application of the principle in Henderson v Henderson [1843] EngR 917; (1843) 3 Hare 100; 67 ER 313 on abuse of process. It is to be recalled that Lord Wilberforce, speaking for the Privy Council in a Queensland appeal only three years earlier, approved the statement of Somervell LJ in Greenhalgh v Mallard [1947] 2 All ER 255 at 257 to the following effect:

"... res judicata for this purpose is not confined to the issues which the court is actually asked to decide, but ... 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."

2 Lacking utility might be thought to be different from being wrong in principle. Nevertheless, their Honours went on to express the relevant test for Australia at 602 as follows:

“... we would prefer to say that there will be no estoppel unless it appears that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it.”

3 The question of unreasonableness is derived significantly from the matter being so relevant to the subject matter of the first proceeding. There are at least two related assessments that have to be made: was the matter so relevant that it can be said to have been unreasonable not to rely upon it in the first proceeding? Whilst it is necessary to eschew language of abuse of process, the character of the assessments is such as to make relevant to a point what Lord Bingham of Cornhill said in Johnson v Gore Wood & Co [2002] 2 AC 1 at 31:

“It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before.” (emphasis added)

Leaving to one side his Lordship’s reference to “abusive” and “misusing or abusing the process of the court”, what is of assistance from what he said is the recognition that the assessment is not to be made mechanistically, but rather there is a value judgment to be made referable to the proper conduct of modern litigation.

4 One fundamental error in the approach of the respondent was to build on the proposition that because the matter could have been raised in the first proceeding to draw a conclusion, it should have been. That mechanistic approach was what Lord Bingham was rejecting in the above passage from Johnson v Gore Wood. It is also what Gibbs CJ, Mason J and Aickin J found objectionable in Yat Tung Investment Co Ltd v Dao Heng Bank Ltd [1975] AC 581. In that case at 590, Lord Kilbrandon spoke of the principle as “an abuse of process to raise in subsequent proceedings matters which could and therefore should have been litigated in earlier proceedings” (emphasis added). This way of putting it overstated the principle. The mere fact that the matter could have been raised does not mean it should have been raised (for the operation of the principle). Rather, it has to be so relevant as to make it unreasonable not to raise it.

5 As to the question of privies, the submission was put on behalf of the respondents that Justice Handley, writing extra-judicially, “Anshun Today” (1997) 71 Australian Law Journal 934 at 941, supported the proposition that Champerslife could be estopped from propounding its claim because Mr Lawrence was estopped from running his (separate) claim. I do not read his Honour as saying any such thing. What his Honour was implicitly directing himself to was the operation of the Anshun principle to the privy in respect of the claim to which it was privy. As Giles JA points out in his reasons, any application of the Anshun doctrine to Mr Lawrence would not by the operation of privity of interest prevent Champerslife bringing its own case. It does not have or hold that case through any privity involving Mr Lawrence. That is not to say, however, that in an appropriate case (which might be thought to be unusual) it might be that X, which was not a party to litigation to which Y was a party, could, by the operation of the Anshun doctrine, be prevented from bringing a case that Y, if it controlled X, could have caused X to bring in the earlier proceedings: cf Johnson v Gore Wood & Co. Certainly here, there was every reason to conclude that it was not unreasonable for Mr Lawrence not to bring his own claim for damages (if he thought he had a case) and not to cause Champerslife to bring its own claim in the Local Court proceedings. I would reserve any further discussion of privity in relation to res judicata or Anshun to a case where such is necessary.

6 As to the question of leave to appeal, I am not persuaded that leave would be required, but if it were, there was no issue about its grant. I therefore need say no more on this topic.

7 I have read the reasons of Giles JA in draft. I agree with the orders that his Honour proposes. Subject to the above, I agree with his Honour’s reasons for the orders proposed. I have also read the reasons of Handley AJA. Nothing in my reasons above is intended to be in conflict with what his Honour has said.

8 GILES JA: Hughes DCJ ordered that proceedings brought by Champerslife Pty Ltd (“Champerslife”) and Mr Wayne Lawrence against Mr George Manojlovski and Mr Raymond Grech in the District Court be dismissed. The dismissal was expressed in the formal order as -

“Pursuant to rule 13.4 of the Uniform Civil Procedure Rules 2005 (NSW) the proceedings be dismissed (on the basis that the plaintiffs are estopped from bringing these proceedings on the basis of the principles identified in Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1987) 147 CLR 589).”

9 Rule 13.4 of the Uniform Civil Procedure Rules (“the Rules”) is concerned with summary dismissal. Champerslife applied for leave to appeal from the dismissal, on the basis that leave was required to appeal “from a judgment or order on an application for summary judgment under the rules”: District Court Act 1973, s 127(2)(d): the correct basis may have been that summary dismissal is an interlocutory order. The application was listed for concurrent hearing as if an appeal.

10 The notice of motion applying for dismissal had invoked r 13.4, and the claim to relief was in terms later taken up in the formal order. However, in their written submissions filed for the hearing Messrs Manojlovski and Grech said that the notice of motion had been treated and conducted “as a preliminary separate point”. Perhaps unusually for respondents to an application for leave to appeal, they said that Champerslife did not need leave, but had an appeal as of right.

11 At the hearing Champerslife agreed “that it was dealt with below as a separate question”.

12 To give effect to that dealing with the notice of motion, an order should have been made for decision of a separate question pursuant to r 28.2 of the Rules. The order dismissing the proceedings should not have been expressed as pursuant to r 13.4; rather, it should have been made as the order required by the decision of the question, in accordance with rr 28.3 and 28.4 of the Rules.

13 Insufficient attention was given at the time to the basis on which the judge was being asked to act. It was important, because an application for summary dismissal would be dealt with according to the approach enunciated in various forms of words in cases such as General Steels Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at 129 and Webster v Lampard [1993] HCA 57; (1993) 177 CLR 598, and because of the possible significance to appellate rights.

14 It is appropriate to remind practitioners of the need clearly to formulate and present a matter proposed for separate decision, and properly to address the consequences of the decision.

15 To regularise the position an order should be made, nunc pro tunc, for the decision of a separate question. The question can not extend to an estoppel as regards Mr Lawrence, who did not apply for leave to appeal, was not represented, and so did not agree that the notice of motion was dealt with as a separate question. As will appear, the order for dismissal should be set aside as regards Champerslife, and it is unnecessary to correct its expression prior to doing so. For completeness, the notice of motion should be dismissed as regards Champerslife.

16 On the now agreed basis, and in particular upon the order for decision of a separate question being made, Champerslife probably has an appeal as of right from a final order disposing of the proceedings: Landsal Pty Ltd v REI Building Society (1993) 41 FCR 421 at 425-6; Arrowcrest Group Pty Ltd v Gill [1993] FCA 541; (1993) 46 FCR 90 at 100. It is not necessary to decide. If leave to appeal is required, it should be granted. The dismissal brought the District Court proceedings to an end. It was accepted that the claim in the proceedings was to a sum in the order of $653,000. For the reasons which follow, the dismissal was egregiously erroneous. Declining to intervene in the termination of the claim would be a gross injustice.

Background

17 Messrs Manojlovski, Grech and Lawrence were parties to a joint venture agreement for the development of land at Braemar. Champerslife was the owner of the land, and appears to have been the joint venture vehicle. It also was a party to the joint venture agreement.

18 There was dispute over performance of the joint venture and associated matters, including what was called in the Deed next mentioned “the corporate governance of Champerslife”. Proceedings were brought in the Supreme Court.

19 The proceedings were settled on the terms of a Deed of Settlement (“the Deed”) dated 21 November 2006. The parties to the Deed were Messrs Manojlovski, Grech and Wayne Lawrence, possibly Mr David Lawrence (he was named as a party apparently because concerned with the corporate governance, but it is not clear that he executed the Deed), and Champerslife. In substance, Mr Wayne Lawrence bought out the interests of Messrs Manojlovski and Grech in the joint venture.

20 The Deed was rather haphazardly drafted, showing the signs of continuing negotiations. It included provisions to the effect that –

Messrs Manojlovski and Grech would resign as directors and secretary of Champerslife;

Messrs Manojlovski and Grech acknowledged that they were not shareholders of Champerslife and that shares issued to them should be cancelled;

the joint venture would be terminated;

the proceedings would be discontinued; and

the parties would release each other from all claims in relation to the joint venture or the proceedings.

21 The clauses of the Deed particularly material to the present proceedings were cll 1, 24 and 25 -

“1. In consideration for the releases, covenants not to sue, resignation as directors and acknowledgment of non-entitlement to shares in the Company, Wayne will pay, or cause to be paid, to George and Ray the sum of $60,000 such sum to be paid:

(a) $30,000 on or before 24 November 2006; and

(b) $30,000 on or before 31 August 2007.”

“24. Plans: Ray and George shall deliver to Wayne any and all plans and other documents in their possession or control necessary for commencement of construction of the remaining development on the property on or before 24 November 2006.”

“25. Champerslife company records: Ray and George shall surrender to Wayne all original company records in their possession or control on or before 24 November 2006.”

22 Mr Lawrence became the sole director and shareholder of Champerslife. He did not pay the first $30,000 to Messrs Manojlovski and Grech. He maintained that they had not delivered to him the plans and other documents, or all original records of Champerslife.

The Local Court proceedings

23 In March 2007 Messrs Manojlovski and Grech brought proceedings against Mr Lawrence in the Local Court, claiming the first $30,000 pursuant to cl 1 of the Deed. In his defence filed in May 2007 Mr Lawrence said that the Deed required that they “perform the document delivery obligations [that is, those under cll 24 and 25] simultaneously with the defendant’s payment obligations [that is, those under cl 1]”; that they had failed and refused to perform the document delivery obligations; and that for that reason they had “not accrued entitlement to require the defendant to satisfy the payment obligation”. He denied that he was in breach of the Deed.

24 In October 2007 Messrs Manojlovski and Grech amended to claim as well the $30,000 payable on 31 August 2007. It does not seem that an amended defence was filed; presumably the defence of May 2007 was taken to apply.

25 The matter was heard by Bradd SM on 6 November 2007. Over the objection of counsel for Messrs Manojlovski and Grech, evidence was given going to whether the plans and other documents and all original records of Champerslife had been handed over.

26 The learned Magistrate made no finding as to handing over of documents and records, relevantly saying in his reasons published on 4 December 2007 -

“Has Mr Manojlovski and Mr Grech breached a Contract?

8. The claim of Mr Manojlovski and Mr Grech is based on the failure of Mr Lawrence to pay agreed amounts by a due date. It is an action to recover a debt due for payment.

9. Mr Lawrence’s defence is that the consideration has not been executed, and the issue is breach of contract. Mr Lawrence says that Mr Manojlovski and Mr Grech have breached the contract by not complying with terms 4 and 5 [sic: terms 24 and 25] of the deed of settlement.

10. The consideration is expressly stated in term 1 of the deed. Terms 24 and 25 are not pre-conditions to be satisfied before payment is made. There is no evidence that the consideration set out in term 1 has not been executed. Consideration has been executed and the action arises in debt.

11. The defence denying breach of the deed is not a defence to a claim for a debt due. The claim is for a liquidated sum of $60,000 that is fixed by the deed to be paid in the sum of $30,000 on 24/11/2006; and $30,000 on 31/08/2007. The amended statement of claim was filed on 04/10/2007, at a time when payment was due.”

27 His Honour held that “the $60,000 is recoverable as a debt due”. He gave judgment accordingly.

The District Court proceedings

28 Champerslife and Mr Lawrence brought their proceedings in the District Court on 25 January 2008. Champerslife was the first plaintiff and Mr Lawrence was the second plaintiff.

29 The statement of claim alleged that Mr Lawrence was the sole director and shareholder of Champerslife (para 1); that the parties had entered into the Deed resolving the Supreme Court proceedings (paras 2 and 3); that the Deed provided in cll 24 and 25 that Messrs Manojlovski and Grech must deliver to Mr Lawrence the plans and other documents and the original company records on or before 24 November 2006 (para 4); that they had not done so and were in breach of the Deed (para 5); and that “the plaintiffs have suffered loss and damage caused by the defendants’ breaches” (para 6). The particulars of suffering loss and damage were -

“(a) The plaintiffs were denied the opportunity to complete the development of the Property by the defendants’ breaches and the expected profit from doing so.

(b) The plaintiffs incurred costs in mitigation of their losses on account of the defendants’ breaches.

Particulars

Further particulars of loss will be the subject of evidence by the plaintiffs.”

30 The statement of claim treated the breaches of cll 24 and 25 of the Deed as breaches of covenants in favour of each of Champerslife and Mr Lawrence, giving each a cause of action. The allegation of suffering loss and damage, however, did not distinguish between them, or explain individual loss and damage.

31 An amended defence filed on 18 April 2008 by Messrs Manojlovski and Grech alleged -

“4. In further answer to the entirety of the Claim the Defendants say that the Plaintiffs are estopped from bringing these proceedings.

Particulars

4.1 The claim could and should have been raised in Local Court proceedings 2745 of 2007 (“Local Court Proceedings”), heard on 6 November and in which judgment was delivered by Magistrate Bradd on 4 December 2007;

4.2 As the facts pleaded in paragraphs 3, 4 and 5 of the Claim are the same facts as pleaded by the Second Plaintiff in his defence in the Local Court Proceedings it was unreasonable for him not to have raised the Claim in the Local Court Proceedings.

4.3 As the Second Plaintiff is the sole director and sole shareholder of the First Plaintiff, it was unreasonable for the First Plaintiff not to have joined with the Second Plaintiff in raising the claim in the Local Court Proceedings.”

32 By notice of motion filed on 16 May 2008 Messrs Manojlovski and Grech applied for an order -

“1. That, pursuant to rule 13.4 of the Uniform Civil Procedure Rules 2005 (NSW), the proceedings be dismissed (on the basis that the plaintiffs are estopped from bringing these proceedings on the basis of the principles identified in Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589).”

The disposal of the notice of motion

33 The notice of motion was heard by Hughes DCJ on 30 June 2008. As has been noted, it is now agreed by Champerslife that it was treated and conducted as the decision of a separate question. Due to a malfunction of the recording equipment, his Honour’s reasons are not available. For the same reason, the transcript of the hearing before his Honour is incomplete and does not provide reliable assistance in perceiving his reasons.

34 In an affidavit read before us Mr Timothy Lynch, the solicitor then appearing for Champerslife and Mr Lawrence, deposed -

“I have had reference to my own record of the proceedings in recalling his Honour’s judgment and reasons as follows:

‘The Plaintiffs should and could have brought their damages claim as a cross-claim in the Local Court proceedings and therefore cannot maintain the current proceedings. I order that the Statement of Claim be dismissed, with costs’.”

35 It appears that the reasons for his Honour’s decision did not extend beyond the one sentence. How the formal order came to be expressed as it was, in the terms of the notice of motion applying for summary dismissal, was not explained.

The position as regards Mr Lawrence

36 Although a plaintiff in the District Court and respondent to the notice of motion, Mr Lawrence does not seek to appeal. Thus the dismissal of the proceedings as regards Mr Lawrence will stand notwithstanding a successful appeal.

37 Assuming that Champerslife is a covenantee under the covenants in cll 24 and 25 of the Deed, a matter not in issue on appeal, Champerslife could sue to recover any loss or damage it suffered by reason of their breach. If Mr Lawrence suffered separate loss or damage, he had a separate claim to recover it. The dismissal can be set aside as regards Champerslife, whatever the position as regards Mr Lawrence.

Anshun estoppel

38 The name comes from Port of Melbourne Authority v Anshun [1981] HCA 45; (1981) 147 CLR 589, in which there was considered what was described as the principle in Henderson v Henderson [1843] EngR 917; (1843) 3 Hare 100; 67 ER 313. In the latter case Sir James Wigram VC said at 115; 319 -

“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.”

39 Anshun estoppel is sometimes referred to as an extended res judicata doctrine. As was succinctly stated by Handley AJA, with whom Allsop P and Tobias JA relevantly agreed, in Meriton Apartments Pty Ltd v Industrial Court of New South Wales [2009] NSWCA 434 at [60], “[t]he Anshun test is based on the reasonableness or otherwise of the conduct of a litigant in earlier proceedings”. The statement may need to be supplemented to allow for the conduct of a person who was not a litigant in earlier proceedings, but its point is the test of unreasonableness.

40 In Port of Melbourne Authority v Anshun Pty Ltd at 602-3 Gibbs CJ and Mason and Aickin JJ said that abuse of process as the test in applying the Henderson v Henderson principle was “not one of great utility”, and that -

“ ... there will be no estoppel unless it appears that the matter relied upon ... in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to have relied on it. Generally speaking, it would be unreasonable not to plead a defence if, having regard to the nature of the plaintiffs’ claim, and its subject matter it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in the one proceeding.

In this respect, we need to recall that there are a variety of circumstances, some referred to in the earlier cases, why a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings eg expense, importance of a particular issue, motives extraneous to the actual litigation, to mention but a few.”

41 A question of Anshun estoppel can arise where a matter not raised as a defence is later raised as a cause of action, as in Port of Melbourne Authority v Anshun Pty Ltd itself. A similar test of unreasonableness can be applied in relation to a matter not brought as a claim in the earlier proceedings but later raised as a cause of action, including where the matter was not brought as a cross-claim: Bryant v Commonwealth Bank of Australia [1995] FCA 1299; (1995) 57 FCR 287; Zavodnyik v Alex Constructions Pty Ltd [2005] NSWCA 438; (2005) 67 NSWLR 457. But there is greater scope for circumstances in which a party may justifiably refrain from litigating a matter by bringing a cross-claim.

42 In Port of Melbourne Authority v Anshun at 600 Gibbs CJ and Mason and Aickin JJ said that “[t]o require that the defendant always raise his cross-claim or set-off at the first available time could cause great inconvenience”. Their Honours had earlier referred to Davis v Hedges (1871) LR 6 QB 687, in which it was held that a plaintiff was not precluded from claiming damages for non-performance and improper performance of work by reason of his failure to raise the claim when earlier sued by the defendant for the price of the work alleged to have been improperly done. As an illustration of the inconvenience, they said that in Davis v Hedges Hannen J noted that an action for the price of goods delivered or work performed may be maintainable before it is possible for a defendant to ascertain the extent to which a breach of warranty or breach of contract may afford a defence.

43 There was some early resistance to Anshun estoppel in relation to a matter not brought as a cross-claim in earlier proceedings. In Tanning Research Laboratories Inc v O’Brien [1990] HCA 8; (1990) 169 CLR 332 at 346 Brennan and Dawson JJ said -

“A plaintiff who has an unadjudicated cause of action which can be enforced only in fresh proceedings cannot be precluded from taking fresh proceedings merely because he could have and, if you will, should have counterclaimed on that cause of action in a forum chosen by the opposite party in proceedings in which the opposite party sued him. We do not read the majority judgment in Port of Melbourne Authority v Anshun Pty Ltd as holding the contrary, except in a case where the relief claimed in the second proceeding is inconsistent with the judgment in the first: see especially at 599-601.”

44 The other members of the Court did not join in this view, which has not prevailed. In Bryant v Commonwealth Bank of Australia at 297-8 Beaumont, Wilcox and Moore JJ said that their Honours may have had in mind where the cross-claim depended on facts remote from those of the principal claim. They distinguished a case where the defendant’s claim was “intimately connected with that of the plaintiff, in the sense that each arises, substantially, out of the same matters of fact”. But as was said by Wilcox J in Ling v Commonwealth of Australia [1996] FCA 1646; (1996) 68 FCR 180; (1996) 139 ALR 159 at 160 -

“The decision in Bryant does not mean that it will always be appropriate to apply the Anshun principle to cross-claims. Some cross-claims have little or no connection with the claim in the action. There may be no more than an identicality of parties. It is difficult to see any justification for applying the Anshun principle to a case of that kind. Some cross-claims overlap the facts of the principal claim but involve additional facts. Where this occurs, a question of degree arises. It would be wrong to say that the Anshun principle is excluded whenever there are additional facts; to go so far would be to render it nugatory. However, where the additional facts are substantial, it may be appropriate to accept the reasonableness of separate proceedings.”

Anshun estoppel in this case

45 Messrs Manojlovski and Grech put the Anshun estoppel in two ways -

that Champerslife was estopped by its unreasonable conduct; and

that Champerslife was a privy of Mr Lawrence and was estopped because Mr Lawrence was estopped by his unreasonable conduct.

The submissions in support of the first way also included that Champerslife was a privy of Mr Lawence. This was, or should have been, a different sense of privy from that material to the second way of putting the estoppel: see below.

Estoppel by Champerslife’s conduct

46 Champerslife was not a defendant in the Local Court. The claim for $60,000 could be made, and was made, only against Mr Lawrence. Champerslife could not cross-claim, because s 22 of the Civil Procedure Act 2005 authorises only cross-claims by defendants. Recalling the judge’s reasons, it was hardly unreasonable for Champerslife not to do what it could not do, that is, bring its damages claim as a cross-claim in the Local Court proceedings.

47 Messrs Manojlovski and Grech submitted that Champerslife should have applied to be joined in the Local Court proceedings so that it could then cross-claim against them, and then brought and prosecuted a cross-claim. They said that joinder was authorised under r 6.24 of the Rules, because Champerslife “ought to have been joined as a party” or it was “a person whose joinder as a party is necessary to the determination of all matters in dispute in [the] proceedings”.

48 Champerslife had no interest in the debt claim against Mr Lawrence, and was not a necessary party for that determination of the matters in dispute in the Local Court proceedings. Nor could it be said that Messrs Manojlovski and Grech ought to have joined it so that it could cross-claim against them. At best, it could be said that on a wide notion of whether it ought to have been joined, in the abstract, it should have been joined because of the common issue of breach of cll 24 and 25 of the Deed.

49 I doubt that r 6.24 would go that far, but even if it would an application for joinder would have faced formidable difficulties.

50 First, in the Local Court Messrs Manojlovski and Grech opposed the taking of evidence in their proceedings going to whether the plans and other documents and all original records of Champerslife had been handed over. It can not be doubted that they would have opposed the far greater amplification of what they regarded – with justification, as it turned out – of a simple debt claim, which would have come from joining with it proof and dispute over damages in the order of $653,000 of the nature particularised in the District Court proceedings.

51 Secondly, there were sound grounds for opposition and for doubting that the Court would order joinder. The claim to recover the damages went well beyond the defence of the debt claim. For the defence, it was necessary for Mr Lawrence to establish breach of one or other of the document delivery obligations and that, as a matter of construction of the Deed, he was not obliged to pay the $60,000 if a document delivery obligation had not been fulfilled. It was not necessary for him to allege or establish any loss or damage suffered by him by reason of the breach. Nor was it necessary, or even relevant, that there be established any loss or damage suffered by Champerslife. Given the nature and size of the claim, that would be likely significantly to enlarge the evidentiary and legal canvas. Assuming power to join, it is highly unlikely that a joinder application would have succeeded in the Local Court.

52 It was submitted before us that the substance of the defence to the debt claim in the Local Court was the same as the substance of the claim in the District Court proceedings, and that both arose out of the same facts. That is correct only on in a very narrow view of the facts in which the substance of the defence and the claim are found, limited to breach of the documentary delivery obligations; in truth there was much more in the claim. Further, the submission did not address the correct question, that of unreasonableness of Champerslife’s conduct. A mechanistic approach should not be taken, in the nature of identifying some common facts and finding an estoppel because they twice arise. As was said in Port of Melbourne Authority v Anshun at 603, there are a variety of circumstances why a party may justifiably refrain from litigating an issue in one proceedings yet wish to litigate the issue in other proceedings. It is necessary to consider all the circumstances bearing upon unreasonableness.

53 It was not unreasonable for Champerslife not to have made a joinder application with such dubious prospects of success. In Meriton Apartments Pty Ltd v Industrial Court of New South Wales at [59] it was observed that it would be strange if a litigant in the Federal Court was bound, at the risk of an Anshun estoppel, to invoke its accrued jurisdiction, when the Court can decline to exercise that jurisdiction. It was held that there was no estoppel. This is a far stronger case.

54 Messrs Manojlovski and Grech submitted in the alternative that Champerslife should have brought its own proceedings and applied to have them heard together with the Local Court proceedings. A more complex procedure would have been necessary. Given the amount of its claim, well beyond the monetary jurisdiction of the Local Court, Champerslife would have had to bring its proceedings in the District Court. It would then have had to apply to have the Local Court proceedings transferred to the District Court for a joint hearing. It is not clear that it had any standing so to apply, but in any event for like reasons to those described above the prospects of a successful application were as doubtful as the prospects of a successful joinder application. It was not unreasonable for Champerslife not to have taken this course.

55 As I have indicated, the submissions of Messrs Manojlovski and Grech in support of the first way of putting the estoppel included that Champerslife was a privy of Mr Lawrence. It was said that it was his privy because Mr Lawrence was the sole director and shareholder of Champerslife and so its directing mind, to which was added that the Champerslife records were to be delivered to him as its agent and he owed it fiduciary duties in dealing with the documents. It was submitted that Champerslife should have applied to be joined in the Local Court proceedings because it was a privy of Mr Lawrence, and I take the same to have been intended for the alternative submission.

56 The facts of sole directorship and shareholding, and that Mr Lawrence was to receive the documents on behalf of Champerslife, may be accepted. The privity asserted by Messrs Manojlovski and Grech, however, was not the same as the privity in the second way of putting the estoppel. It amounted to Mr Lawrence being in a position to cause Champerslife to make a joinder application, or to bring District Court proceedings and apply to have the Local Court proceedings transferred to the District Court for a joint hearing. That he could have caused this might provide support for an argument that he should have done so, possibly even that Champerslife acted unreasonably because he did not do so. But the fact that Mr Lawrence could have caused Champerslife to take a particular course did not mean that he should have done so, or that Champerslife acted unreasonably.

57 The matters which were said to give rise to privity were considerations in a possible argument that Champerslife acted unreasonably; I return to this in considering Johnson v Gore Wood & Co (2002) 2 AC 1 later in these reasons. But those matters do not change that it was not unreasonable for Champerslife not to have taken the course(s) earlier described. Indeed, even if Champerslife’s claim could procedurally have been joined up with the debt claim, in light of the matters to which I have referred the debt claim against Mr Lawrence was best litigated in relatively brief manner, leaving Champerslife’s claim for separate determination, and for that reason alone Champerslife did not act unreasonably.

Estoppel as a privy of Mr Lawrence because Mr Lawrence was estopped

58 The nature of the estoppel should be appreciated. Estoppel of a claimant through privity of interest is on a different basis from Anshun estoppel by the claimant’s conduct. It does not depend on unreasonableness of the claimant’s conduct, but on the relationship between the claimant and another person who is Anshun estopped; as was said in Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd [1993] FCA 342; (1993) 43 FCR 510 at 541 per Burchett J, “in the eye of the law there is an identity between” the privy and the party bound by the estoppel. Privies are entitled to and bound by relevant estoppels because of the relationship.

59 Messrs Manojlovski and Grech submitted, relying on Ramsay v Pigram [1968] HCA 34; (1968) 118 CLR 271 at 279 per Barwick CJ, that an estoppel applied also to the privies of a party, and that Champerslife was a privy in interest of Mr Lawrence and was estopped because Mr Lawrence was estopped. The asserted privy of interest was again because Mr Lawrence was the sole director and shareholder of Champerslife and so its directing mind, together with agency and fiduciary duties in relation to the delivery of the Champerslife records.

60 In Ramsay v Pigram one issue was whether Pigram was estopped from asserting negligence of a police officer in a claim against the government, represented by Ramsay, because of an issue estoppel arising from earlier proceedings brought by the police officer against Pigram. Ramsay argued that privity of interest between the government and the police officer entitled him to rely on the estoppel. All members of the Court rejected the argument.

61 The Chief Justice referred to the three classes of privies of blood, of title and of interest. His Honour said that the basic requirement of a privy in interest is that the privy must claim under or through the person of whom he is said to be a privy. He held that there was no privity of interest because the action between Pigram and the police officer was personal to them, and it could not be said that the government “in any sense claims under or in virtue of the police officer or of any right of his, or ... derives any relevant interest through him”.

62 There may be a difficulty in applying estoppel through privity of interest to an Anshun estoppel in circumstances such as the present. An Anshun estoppel does not preclude success on a particular issue, such as the negligence of the police officer in Ramsay v Pigram. It precludes bringing a particular claim. Assume that Mr Lawrence is estopped from bringing a claim for his own loss or damage suffered from breach of cll 24 and 25 of the Deed. It makes no sense to say that Champerslife as his privy in interest is estopped from bringing a claim for Mr Lawrence’s loss or damage. It must be said that Champerslife is estopped from bringing a claim for its own loss or damage. How can that be said?

63 Writing extra-judicially, Handley AJA has suggested that Anshun estoppel should be available against a privy: 71 ALJ 934 at 941. That may be so where, for example, the relationship is that of trustee and beneficiary, as in Cordes v Dr Peter Ironside Pty Ltd [2009] QCA 302 (although, as that case shows, the relevant principle may be res judicata). His Honour’s suggestion was not elaborated, and privity of interest can be said to arise in a variety of circumstances. This matter was not the subject of submissions, and it need not be taken further since for other reasons the submission should not be accepted.

64 That Mr Lawrence was sole director and shareholder of Champerslife did not give rise to privity of interest in the sense considered in Ramsay v Pigram. Regrettably, the submissions on behalf of Messrs Manojlovski and Grech did not initially draw attention to Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd.

65 Trawl had sued Effem in the Supreme Court on causes of action which included contraventions of s 52 of the Trade Practices Act 1974 (C’th). Orders were made dismissing those claims. Trawl and a number of other companies and persons, including directors and shareholders of Trawl, then sued Effem in the Federal Court for contravention of s 52 of the Trade Practices Act, relying on the same misrepresentations as had previously been relied on for that purpose. The claim by Trawl was stayed. In the Full Court the question was whether a defence of res judicata would be effective against the other companies and persons as its privies.

66 Following Ramsay v Pigram, it was held that the other companies and persons were not claiming under or through Trawl and were not its privies. Northrop and Lee JJ were prepared to accept for present purposes that they had an economic or financial interest in that they would have gained financially if Trawl had succeeded in the proceedings in the Supreme Court. But their Honours declined to extend privity of interest to that situation, holding that the High Court authority did not allow it. Burchett J was of a like view, and his Honour’s reasons included (at 542) -

“None of the other respondents claims under or through the respondent Trawl, or can on any basis be identified with that respondent. A director and shareholder of a company is not, as such, its privy: Clegg v Abel (1898) 14 WN (NSW) 131, a case relied on by Walsh JA in Pigram v Ramsay (supra, at 148). Assistance given in the prosecution of Trawl's action is not enough. Such assistance as was given did not mean that Trawl's action was taken on their behalf. Their claims were distinct from Trawl's.”

67 In Clegg v Abel (1898) 14 WN (NSW) 131 it was held that the dismissal of an information laid against a company did not bar an identical information laid against its shareholder/director. The reasons spoke of both double jeopardy and res judicata. In Pigram v Ramsay (1966) 68 SR (NSW) 141 at 148 Walsh J referred to it in connection with res judicata estoppel against a privy. The correct principle would appear to be autrefois acquit, and Clegg v Abel may not properly support absence of privity of interest (in the sense considered in Ramsay v Pigram) between a company and its shareholder/director. Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd, however, does so.

68 Messrs Manojlovski and Grech sought to distinguish Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd on the ground that Mr Lawrence was sole director and shareholder, describing Champerslife as his alter ego. Champerslife, of course, had its separate legal identity, and contemplation of its creditors underlines that separate identity. The matter was put thus by Keane J, with the agreement of O’Flaherty and Murphy JJ, in Belton v Carlow County Council (1997) 1 IR 172 at 181, addressing privity of interest whereby third parties were bound by an issue estoppel -

“Assuming that the third parties are the owners of all the shares in the company and are the only directors (as to which there is no finding of fact in the case stated), I am satisfied that there is no such privity of interest between them and the company. It has, of course, been settled law since the decision in Salomon v Salomon [1897] AC 22 that the company on the one hand and its shareholders on the other are separate and distinct legal entitles. Moreover while the interest of the company and its controlling shareholders may very often coincide, that is not is not always the case. The interest of the shareholders is to receive a dividend, in the event of the company’s profits allowing it to be paid, and to share in any surplus assets of the company on a winding-up. The company’s affairs must, however, be conducted by the directors, not merely in the interests of the shareholders, but of those of any persons who may have an interest in its financial well being: specifically the creditors, whether secured or unsecured. In the event of the company becoming insolvent (and it should be said that there is no evidence that this was at any stage the case with this company) the latter’s interests will become paramount: ... “

69 It remains that Champerslife did not claim under or through Mr Lawrence, or claim to enforce any right or interest of Mr Lawrence. That is not to deny, as earlier indicated, that the fact that a person controls a company and can cause it to act in a particular way, may be a consideration in whether the company is Anshun estopped: again, see the consideration of Johnson v Gore Wood & Co later in these reasons.

70 For a further reason, there is no estoppel of Champerslife as a privy of Mr Lawrence.

71 Necessary to the estoppel through privity of interest is that Mr Lawrence was himself Anshun estopped from claiming in the District Court proceedings loss or damage suffered by reason of breach of cll 24 and 25 of the Deed. In my opinion, for the reasons next given Hughes DCJ was in error in upholding an estoppel. There is no appeal by Mr Lawrence from the judge’s decision but, privity of interest aside, the decision in that respect does not bind Champerslife. It was not submitted that it did when the Court sought assistance on Anshun estoppel as against Mr Lawrence.

72 Mr Lawrence could have cross-claimed against Messrs Manojlovski and Grech. His loss or damage may or may not have been in the order of $653,000, but it does not matter because if transfer of the Local Court proceedings to the District Court was necessary it would probably have occurred consequent on a cross-claim brought as of right.

73 But it does not follow that Mr Lawrence should have cross-claimed against Messrs Manojlovski and Grech. The question was whether it was unreasonable for him not to have cross-claimed.

74 As earlier described, the claim to recover loss or damage went well beyond the defence of the debt claim, and would be likely significantly to enlarge the evidentiary and legal canvas. Mr Lawrence could sensibly wish to conduct a discrete defence of the debt claim – it was not a case of inevitable judgment against him on that claim, and there was a respectable argument that the obligations were reciprocal. As was said by Wilcox J in Ling v Commonwealth of Australia, there is a question of degree. In the present case, the additional matters in a cross-claim by Mr Lawrence were substantial, and in my opinion it was (to adopt Wilcox J’s words) “appropriate to accept the reasonableness of separate proceedings”. It was not unreasonable, in my view, for Mr Lawrence to defend the debt claim as he did, and leave his claim for subsequent proceedings in the District Court.

75 The circumstances differ from those in Davis v Hedges, but that case accepts reasonableness in leaving a claim for subsequent proceedings. Messrs Manojlovski and Grech submitted to the contrary, saying that Davis v Hedges supported an Anshun estoppel in the present case. In their submission, that case involved election to claim damages for improper performance or non-performance of work either in reduction of the price of the work, or in separate proceedings thereafter; and by raising breach of cll 24 and 25 of the Deed as a defence, Mr Lawrence had made an election equivalent to claiming damages in the Local Court and could not claim them thereafter. The submission is unsound, for two reasons. There was no election equivalent to claiming damages in the Local Court. Further, Davis v Hedges permits dividing the cause of action and partially using it in reduction of the price.

Johnson v Gore Wood & Co

76 The Court drew attention to this decision. Messrs Manojlovski and Grech submitted that it supported their reliance on estoppel through privity of interest.

77 Mr Johnson controlled Westway Homes Ltd (“Westway”). On behalf of Westway he instructed Gore Wood & Co, solicitors, to act in a transaction. Westway brought proceedings against Gore Wood & Co for professional negligence in so acting, and by a settlement obtained damages. Mr Johnson then brought separate professional negligence proceedings against Gore Wood & Co, alleging that they had been retained to act for him also in relation to the transaction and that he had suffered his own loss. An issue was whether the second proceedings were an abuse of process, that being the basis of the principle of Henderson v Henderson in the English courts (but not in Australia, see Port of Melbourne Authority v Anshun Pty Ltd at 602). Reversing the Court of Appeal, it was held in the House of Lords that they were not, and that Mr Johnson was entitled to recover in respect of any loss he had suffered that was not merely a reflection of the loss suffered by Westway.

78 The circumstances were complex, and need not be gone into at any length. Mr Johnson explained the reasons for not bringing his own proceedings at the time of Westway’s proceedings; in substance that he was under financial stress and needed a swift decision of Westway’s proceedings, that additional complex issues would have to be litigated, and that he had to find new employment and was restricted in the time he could devote to litigation.

79 Lord Bingham, with whom Lords Goff, Cooke and Hutton relevantly agreed, said (at 31) that it was -

“ ... wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before.”

80 His Lordship said (at (34) that the Court of Appeal had -

“ ... adopted too mechanical an approach, giving little or no weight to the considerations which led Mr Johnson to act as he did and failing to weigh the overall balance of justice.”

81 Lord Millet referred (at 59) to the difference of “critical importance” between res judicata, whereby a party could not re-litigate a question which had already been decided, and denying the party the opportunity of litigating for the first time a question which had not previously been decided. His Lordship echoed Lord Bingham in saying that, although Mr Johnson could have brought his proceedings as part of or at the same time as Westway’s proceedings, it did not follow that he should have, or that a failure to do so meant that bringing his own proceedings was an abuse of process.

82 In the course of their speeches both Lord Bingham and Lord Millet made mention of privity.

83 Lord Bingham referred (at 32) to a submission that the “rule” in Henderson v Henderson did not apply to Mr Johnson, since he had not been the plaintiff in the first proceedings against Gore Wood & Co. He rejected the submission, describing it as “[a] formulaic approach to the application of the rule”. He said that Westway was the corporate embodiment of Mr Johnson, who made decisions and gave instructions on its behalf, and that if Mr Johnson had wished to include his personal claim in Westway’s proceedings, or to issue proceedings in tandem with those of Westway, he had power to do so. His Lordship considered that there was satisfied a test he took from the judgment of Sir Robert Megarry VC in Gleeson v J Wippell & Co Ltd [1977] 1 WLR 510 at 515, his citation from that judgment including -

“I do not say that one must be the alter ego of the other: but it does seem to me that, having due regard to the subject matter of the dispute, there must be a sufficient degree of identification between the two to make it just to hold that the decision to which one was party should be binding in proceedings to which the other is party. It is in that sense that I would regard the phrase ‘privity of interest’.”

84 Lord Millet said (at 60) -

“Particular care [in applying the principle in Henderson v Henderson], however, needs to be taken where the plaintiff in the second action is not the same as the plaintiff in the first, but his privy. Such situations are many and various, and it would be unwise to lay down any general rule. The principle is, no doubt, capable in theory of applying to a privy; but it is likely in practice to be easier for him to rebut the charge that his proceedings are oppressive or constitute an abuse of process than it would be for the original plaintiff to do so.

Mr Johnson conceded that he and the company are privies. He was in a position to decide when to pursue the two claims and whether to pursue them together or separately, and that is enough for present purposes. But Mr Johnson and the company are different legal persons, each with its own creditors, and that is a fact of critical significance. Mr Johnson's personal claims raised difficult issues not present in the company's action: (i) did he retain the firm to act for him personally; (ii) should the firm have foreseen that failure to exercise the option properly would cause loss to Mr Johnson personally as well as to the company; (iii) which if any of his personal losses were recoverable (the issues in the cross appeal); and (iv) quantum. It was not in the company's interest for his personal claims to be joined with its own much simpler claim, or for its case to be delayed until Mr Johnson's own case was ready for trial. Had the company been in liquidation and its action brought by the liquidator, he would have been well advised to insist on separate trials and to object to any delay in the trial of the company's action.

In these circumstances I am satisfied that Mr Johnson, who was bound to have regard to the interests of the company and its creditors, was entitled to defer the bringing of his own claims until after the company's claim had been resolved. ... ”

85 Messrs Manojlovoski and Grech submitted that Lord Bingham approved a test for privity of interest whereby, looking to substance rather than form, identity between a company and its controlling director will be recognised; and that in the application of that test, privity of interest between Champerslife and Mr Lawrence as referred to by Barwick CJ in Ramsay v Pigram should be found whereby the former was bound by the Anshun estoppel of the latter.

86 It is evident, however, that Lord Bingham was not speaking of privity of interest where, because of the relationship between the claimant and another person who is estopped, the claimant is bound by the estoppel. Rather, the privity of interest was a statement of the ability of the claimant (Mr Johnson) to have controlled the conduct of another (Westway) and to have brought his claim in conjunction with Westway’s claim. This did not mean that Mr Johnson was bound by an estoppel to which Westway was subject. It was one consideration in deciding whether or not there was an abuse of process, and despite the privity there was not an abuse of process.

87 Similarly, the conceded privity to which Lord Millet referred was one consideration in deciding whether or not there was an abuse of process, namely, that Mr Johnson was in a position to decide when to pursue the two claims and whether to pursue them together or separately. Despite the privity, there was no abuse of process.

88 This was not privity of interest as considered by Barwick CJ in Ramsay v Pigram. It was akin, in the context of abuse of process, to the privity asserted by Messrs Manojlovoski and Grech in support of the first way they put the Anshun estoppel. I would respectfully prefer not to use the language of privity, or privity of interest, in relation to the reasonableness of otherwise of conduct in litigating or not litigating a claim lest there come the confusion which the submissions of Messrs Manojlovoski and Grech encountered. It is sufficient to state the facts as considerations in determining reasonableness or unreasonableness.

89 Anshun estoppel is founded on unreasonable conduct, not abuse of process. The concepts are, however, not dissimilar. Johnson v Gore Wood & Co rejects a mechanical approach and requires regard to all the circumstances: in particular, it affirms that the fact that a matter could have been raised in earlier proceedings does not mean it should have been, or that there was abuse of process. It is the same where the question is the reasonableness or otherwise of conduct in litigating or not litigating a claim, and for that reason I have referred to the speeches of Lord Bingham and Lord Millet beyond their mentions of privity.

Summary

90 Champerslife was not Anshun estopped because of its own conduct. Assuming that it could be, nor was it bound by an estoppel as a privy of Mr Lawrence, and in any event Mr Lawrence was not estopped.

Orders

91 I propose the orders -

1. Order nunc pro tunc that it be decided separately from any other question whether the first plaintiff is estopped from bringing the proceedings as alleged in para 4 of the amended defence filed on 18 April 2008.

2. So far as leave be necessary, grant leave to appeal.

3. Direct the filing of a notice of appeal within 7 days.

4. Answer the separate question no.

5. Set aside the orders made by Hughes DCJ on 30 June 2008 as regards the first plaintiff and in lieu thereof order that as regards the first plaintiff the notice of motion filed on 16 May 2008 be dismissed.

6. Respondents pay the appellant’s costs of the application heard by Hughes DCJ and of the application for leave to appeal and the appeal.

92 HANDLEY AJA: In this matter I have had the benefit of reading the reasons for judgment of the President and Giles JA in draft.

93 Giles JA has summarised the facts and the history of the earlier and later proceedings which I need not repeat.

94 The Magistrate decided that Mr Wayne Lawrence (Mr Lawrence) was indebted to the respondents for $60,000 pursuant to the Deed of Settlement of 21 November 2006 and that any breach by them of cll 24 and 25 (the clauses) of the Deed was not an answer to their claim for the debt.

95 This decision did not create any res judicata estoppels which could affect the appellant's claim for a breach of the clauses, even if a relationship of privity existed between Mr Lawrence and the appellant.

96 I agree with the reasons of the President and Giles JA for holding that it was not unreasonable for Mr Lawrence to defend the action in the Local Court without raising a cross-claim for breach of the clauses or causing the appellant to commence its own proceedings for breach and applying to have the two actions heard together.

97 Their decision is amply supported by Davis v Hedges (1871) LR 6QB 687 which confirmed the already established principle that proceedings for recovery of a debt could be defended without affecting the defendant’s right to bring proceedings later for breach of warranty. That in substance is what has happened here.

98 Their decision is also supported by the reasoning in Ling v The Commonwealth [1996] FCA 1646; (1996) 68 FCR 180; and Meriton Apartments Pty Ltd v Industrial Court of New South Wales [2009] NSWCA 434.

99 It is also supported by Aldi Stores Ltd v WSP Group plc [2007] EWCA Civ 1260; [2008] 1 WLR 748 CA where a claimant was found to have acted reasonably when it decided not to join, as additional defendants, the Pt 20 parties (the equivalent of cross defendants) joined by the defendant and was free to bring separate proceedings against the Pt 20 parties later. Thomas LJ said at 764:

"... there is a real public interest in allowing parties a measure of freedom to choose whom they sue in a complex commercial matter and not to give encouragement to bringing a single set of proceedings against a wide range of defendants or to complicate matters by cross-claims."

100 Accordingly, as the other members of the Court have held, the proceedings in the Local Court did not create any Anshun estoppel against the appellant’s proceedings for breach of the clauses.

101 Since the proceedings in the Local Court did not create any relevant res judicata estoppel or Anshun estoppel there is strictly no occasion for this Court to consider any question of privity as between Mr Lawrence and the appellant.

102 Questions of privity as between a controlling shareholder and the company, and vice versa, are complex and potentially of considerable practical importance, and I would have preferred to leave such questions until they arose for decision in some other case.

103 However since dicta has already been offered on the topic I feel compelled to add my own.

104 I agree with the President that the test for privity in an Anshun case is not the same as the test where a cause of action or issue estoppel is raised.

105 In my opinion the test of relevance and reasonableness mandated by Anshun gives content to the somewhat amorphous test of abuse of process accepted in Johnson v Gore Wood & Co [2002] 2 AC 1 (Johnson). In practice the former very often becomes the real test of the latter.

106 The test for an issue estoppel or a cause of action estoppel is objective. For issue estoppel it is whether the precise question of fact or law sought to be litigated in the later proceedings was decided in the earlier as a fundamental basis for the decision. For cause of action estoppel it is whether the cause of action in the later proceedings is in substance the same as that litigated to judgment in the former.

107 The principle in Henderson v Henderson [1843] EngR 917; (1843) 3 Hare 100 [67 ER 313] at p 115 [p 319] widens the scope of both forms of res judicata estoppel without introducing subjective factors. The test is whether the new point "properly belonged to the subject of litigation" in the earlier proceedings. The relevant evidence is restricted to the pleadings in both proceedings and the reasons for judgment in the earlier.

108 Where the extended form of res judicata in Anshun or Johnson is in issue the enquiry is extended to include the reasonableness of the litigant's conduct in the earlier proceedings, or the existence of an abuse of process in the later.

109 In Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45, 147 CLR 589 at 602-3 Gibbs CJ, Mason and Aickin JJ said:

"... there will be no estoppel unless it appears that the matter relied upon ... was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it. Generally speaking it would be unreasonable not plead a [matter] if, having regard to the nature of the plaintiff’s claim, and its subject matter it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in the one proceeding. In this respect we need to recall that there are a variety of circumstances, some referred to in the earlier cases, why any party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings eg expense, importance of a particular issue, motives extraneous to the actual litigation, to mention but a few."

110 The matters referred to would not be relevant if a res judicata estoppel was in issue. No question of privity arose.

111 In Johnson [2002] 2 AC 1 the second action, by Mr Johnson personally, was held not to be abusive although it could have been joined with the earlier action by his company. Lord Bingham said at p31:

"The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the Court is satisfied ... that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all. I would not accept that it is necessary, before abuse may be found, to identify any additional element such as a collateral attack on a previous decision or some dishonesty, but where those elements are present the later proceedings would be much more obviously abusive, and there will rarely be a finding of abuse unless the later proceeding involves what the Court regards as unjust harassment of a party. It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before ... while I would accept that lack of funds would not ordinarily excuse a failure to raise in earlier proceedings an issue which could and should have been raised then, I would not regarded as necessarily irrelevant, particularly if it appears that the lack of funds has been caused by the party against whom it is sought to claim."

112 A broad merits-based judgment, which, inter alia, takes account of the matters referred to by Lord Bingham, involves a broader enquiry than that for res judicata estoppel.

113 Privity was in issue in Johnson because the plaintiffs were different, but this did not matter since Mr Johnson, the second litigant, controlled the first. Lord Bingham said at p 32:

"Two subsidiary arguments were advanced ... in the courts below and rejected by each. The first was that the rule in Henderson v Henderson ... did not apply to Mr Johnson since he had not been the plaintiff in the first action ... In my judgment this argument was rightly rejected. A formulaic approach to application of the rule would be mistaken. [The company] was the corporate embodiment of Mr Johnson. He made decisions and gave instructions on its behalf. If he had wished to include his personal claim in the company's action, or to issue proceedings in tandem with those of the company, he had power to do so."

114 That decision is hardly surprising. Earlier proceedings by one litigant could not make later proceedings by another an abuse of process unless there was a relevant connection between the litigants. Since the issue was abuse of process realities must be relevant. The "broad merits-based judgment" excluded any narrow or artificial approach.

115 Here the order of events is reversed. Mr Lawrence was the defendant in the first case, and his company the plaintiff in the second. The company did not control Mr Lawrence, but the order of events cannot affect the result in such a case. Mr Lawrence could have had the company issue proceedings and applied to have them heard in tandem with the proceedings against himself. The existence of an Anshun estoppel must be determined in the light of such realities.

116 Lord Bingham’s reasoning (para [111]), would apply with equal force where the second plaintiff was another company controlled by Mr Johnson which had no interest as shareholder or creditor in the first.

117 I agree with the President that an Anshun estoppel binds privies in the technical sense. If a predecessor is Anshun estopped those who claim through him cannot be in a better position when enforcing rights derived from their predecessor. This does not mean that successors are bound when enforcing their own rights.

118 The appellant did not succeed to any rights of Mr Lawrence. The rights it invokes are its own and always have been. Mr Johnson invoked his own rights, which had never belonged to his company, but, as a shareholder, he had a derivative interest in his company's rights, whereas the appellant had no interest in the liability of Mr Lawrence enforced in the Local Court.

119 Lord Bingham quoted with approval the following passage in the reasons for judgment of Megarry VC in Gleeson v J Wippell & Co Ltd [1977] 1 WLR 510, 515:

"... It seems to me that the substratum of the doctrine is that a man ought not to be allowed to litigate a second time what has already been decided between himself and the other party to the litigation. This is in the interest both of the successful party and of the public. But I cannot see that this provides any basis for a successful defendant to say that the successful defence is a bar to the plaintiff suing some third party, or for that third party to say that the successful defence prevents the plaintiff from suing him, unless there is a sufficient degree of identity between the successful defendant and the third party. I do not say that one must be the alter ego of the other: but it does seem to me that, having due regard to the subject matter of the dispute, there must be a sufficient degree of identification between the two to make it just to hold that the decision to which one was a party should be binding in proceedings to which the other is a party. It is in that sense that I would regard the phrase ‘privity of interest’".

120 The problem in Gleeson was very different. The plaintiff had sued a company for breach of her copyright and failed. She later sued another company for a related breach of the same copyright. The second company set up an issue estoppel but, apart from a trading relationship, the companies were unrelated. The claim to privity was far-fetched and rightly failed. The extended doctrine was not invoked. The question of privity for issue estoppel in Gleeson was very different from the question of privity in Johnson.

121 There is normally no privity between defendants sued on different causes of action for their own acts and omissions, but privity may exist in special circumstances: House of Spring Gardens Ltd v Waite [1991] 1 QB 241 CA considered by Gummow J in Trawl Industries of Australia Pty Ltd v Effem Foods Pty Ltd (1992) 36 FCR 406, 413-4 (Trawl). The position for different defendants is far removed from the facts here and in Johnson.

122 In Trawl directors and shareholders (the applicants) sued under s 52 of the Trade Practices Act after their company had failed in proceedings based on substantially the same representations. Each had his own cause of action based on his own reliance and his own damage. The losses relied on were direct, based on fresh investments and guarantees, and not purely derivative. The applicants did not rely on losses from earlier investments.

123 Gummow J (ibid at 412-3) held that Trawl had not claimed under or in virtue of any legal right of the applicants, had not derived any interest through them or represented their interests (ibid at 415). No single individual directed or effectively controlled Trawl (ibid at 418).

124 Gummow J implicitly rejected a claim for privity on the alternative basis ie that the applicants claimed through or under Trawl or derived a relevant interest from it or through it (ibid at 412-3, 415).

125 The Full Federal Court affirmed the decision that the applicants’ proceedings were not barred by res judicata estoppels: [1993] FCA 342; (1993) 43 FCR 510.

126 The appellant, as a separate party to the Deed of Settlement has its own cause of action for breach of the clauses, and does not claim through or under Mr Lawrence. The converse does not necessarily follow and I would leave open the question whether a shareholder who claims under or through the company, or has a mutual interest with it, can be its privy.

127 The existing case law provides a foundation such an argument. In Carl Zeiss Stiftung v Rayner & Keller Ltd (No 2) [1967] 1 AC 853 at 910 (Carl Zeiss) Lord Reid said:

"... privity of interest ... can arise in many ways, but it seems to me to be essential that the person now to be estopped from defending himself must have had some kind of interest in the previous litigation or its subject-matter."

128 In the same case Lord Guest said at 936 that the Council of Gera

"have no interest in the subject-matter of these proceedings ... Before a person can be privy to a party there must be community or privity of interest between them."

129 In Ramsay v Pigram [1968] HCA 34, 118 CLR 271 a police officer successfully sued the driver of another vehicle for negligence, and a defence of contributory negligence failed. The other driver sued the Government relying on its vicarious liability for the negligence of the police officer. The High Court rejected the Government's claim to be a privy of the police officer and entitled to the benefit of the issue estoppels created by the decision in his favour. Barwick CJ said at 279:

"The basic requirement of a privy in interest is that the privy must claim under or through the person of whom he is said to be a privy. Here it is quite clear that the Government had no interest in the action between the respondent and the police officer: nor can it be said that the action brought by the police officer was brought by him in any sense on behalf of the Government or that in relation to the defence of contributory negligence the respondent could have been treating the Government as the real defendant to that claim."

130 Windeyer J at 290 agreed generally with the Chief Justice. The other Judges who delivered substantive judgments also held, for brief reasons, that there was no privity.

131 I see no reason in principle why an issue estoppel binding on a company should not bind its controlling shareholder/director and vice versa where, as will generally be the case, the shareholder has a real financial "interest" in proceedings brought by the company. Nor do I see any reason why the converse should not also apply, although ordinarily a company will have no equivalent interest in proceedings by or against its controlling shareholder/director.

132 An alternative ground for reaching that result may be the principle that identity of parties is a matter of substance, not form. In Carl Zeiss (above) at 911 Lord Reid said:

"There does, however, seem to me to be a possible extension of the doctrine of privity as commonly understood. A party against whom a previous decision was pronounced may employ a servant or engage a third party to do something which infringes the right established in the earlier litigation and so raise the whole matter again in his interest. Then if the other party to the earlier litigation brings an action against a servant or agent, the real defendant could be said to be the employer, who alone has the real interest, and it might well be thought unjust if he could vex his opponent by relitigating the original question by means of the device of putting forward his servant."

133 Lord Wilberforce, although in dissent on this issue, said at 968:

"... one must look to see who in reality is behind the action."

134 In Gleeson (above) Megarry V-C said at 516:

"A defendant ought to be able to put his own defence in his own way, and to call his own evidence. He ought not to be concluded by the failure of the defence and evidence adduced by another defendant in other proceedings unless his standing in those other proceedings justifies the conclusion that a decision against the defendant in them ought fairly and truly to be said to be in substance a decision against him."

135 I see no reason why this principle should not apply to actions by different plaintiffs.

136 In Trawl Gummow J, as already mentioned (para [123), left this question open by noting that none of the applicants controlled Trawl. The reasoning of Lord Bingham in Johnson quoted above (para [119]) established that in substance the real plaintiff in both cases was the same. Other authorities supporting that approach are considered in Spencer Bower and Handley "Res Judicata" 4^th ed 2009 paras 9.14-9.16, 9.47. They include MCC Proceeds Inc v Lehman Bros International [1997] EWCA Civ 3068; [1998] 4 All ER 675 CA, 695 where Mummery LJ said that “the focus should be on matters of substance, not form”. He held that there was sufficient identity between the defendant in the first action, and its wholly owned subsidiary in the second, and there was “a community of interest between them” (ibid at 696). See also Shiels v Blakeley [1986] 2 NZLR 262 CA, 268; and Wire Supplies Ltd v CIR [2006] 2 NZLR 384, 395-6; [2007] 3 NZLR 458 CA, 465.

137 I am not persuaded that the decision in Belton v Carlow CC [1997] 1 IR 172, referred to by Giles JA, is the last word on this topic. In that case proceedings by the company to recover compensation from the Council for fire damage to its factory had failed. The Council then sued the controlling directors/shareholders to recover the compensation it had paid the owner of an adjoining property damaged in the same fire. In the first case the Judge found that the fire had been deliberately started, and that the directors/shareholders were responsible (ibid at 174). There was ample evidence to support those findings (ibid at 175-8).

138 The earlier proceedings were brought by insurers in the name of the company but Keane J assumed that the directors/shareholders had "some control over the proceedings" (ibid at 182). There does not appear to have been any conflict of interest which would justify treating the company suing for the benefit of insurers and the company in its own right as different parties.

139 Keane J held that the interest of the directors/shareholders and the company were not identical because any recovery would have been held for the benefit of the company, and I would add its insurers, and the company had no interest in the proceedings against the directors/shareholders.

140 I cannot accept without the benefit of further argument that the converse situation is relevant when considering whether an issue estoppel binding on a company is binding on its controlling directors/shareholders. A res judicata estoppel binding on a landlord is binding on his tenant who claims under him but as a general rule the converse does not apply: Spencer Bower and Handley op cit paras 9.16, 9.43. Other examples could be given.

141 These matters do not affect the outcome in the present appeal, and I agree, for the reasons given, that the appeal should be allowed and the orders proposed by Giles JA should be made.

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LAST UPDATED:
16 March 2010