Nair v Arturus Capital Limited [2011] NSWSC 499 (31 May 2011)

Last Updated: 14 June 2011

Supreme Court New South Wales

Case Title:	Nair v Arturus Capital Limited
Medium Neutral Citation:	[2011] NSWSC 499
Hearing Date(s):	On written submissions
Decision Date:	31 May 2011
Jurisdiction:	Common Law
Before:	Harrison J
Decision:	Direct the parties to bring in short minutes of order to give effect to these reasons.
Catchwords:	ESTOPPEL - prior judicial determination of separate questions - Corporations Act ss 200B and 200F - judgment inter partes - res judicata - issue estoppel - Anshun estoppel - whether entitlement to termination benefit remains subject to approval by members of defendant in general meeting - where s 200F(2)(a) previously considered but s 200F(2)(b) not argued - whether unreasonable for employer not to have raised the issue for decision in earlier proceedings - employer not entitled to raise issue in later proceedings
Legislation Cited:	Corporations Act 2001
Cases Cited:	Bass v Permanent Trustee Company Limited [1999] HCA 9; [1999] HCA 9; (1999) 198 CLR 334 Henderson v Henderson [1843] EngR 917; (1843) 67 ER 313 Jackson v Goldsmith [1950] HCA 22; (1950) 81 CLR 446 Nair v Arturus Capital Limited [2011] NSWSC 381 Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589
Texts Cited:
Category:	Consequential orders
Parties:	Chenicheri Hariharan (Hari) Nair (Plaintiff) Arturus Capital Limited (Defendant)
Representation
- Counsel:	- Counsel: P Silver (Plaintiff) I R Pike (Defendant)
- Solicitors:	- Solicitors: HWL Ebsworth Lawyers (Plaintiff) Ellison Tillyard Callanan (Defendants)
File number(s):	2008/285665
Publication Restriction:

Judgment

1. HIS HONOUR : On 6 May 2011, I published reasons for judgment in this matter: see Nair v Arturus Capital Limited [2011] NSWSC 381. I indicated that I required further submissions on the question of Anshun estoppel and related topics. It will be recalled that the defendant contended that Davies J did not resolve the Corporations Act 2001 s 200F(2)(b) issue and that it remained open to the defendant to raise it before me. Dr Nair contended otherwise. For the reasons that appear below, I consider that Dr Nair is correct.
   
2. Sections 200B and 200F are in the following relevant terms:
   

" 200B Retirement benefits generally need membership approval

Benefits in connection with retirement if person has held a managerial or executive office

(1) An entity mentioned in subsection (1AA) must not give a person a benefit in connection with a person's (the retiree's ) retirement from an office, or position of employment, in a company or a related body corporate if:

(a) the office or position is a managerial or executive office; or

(b) the retiree has, at any time during the last 3 years before his or her retirement, held a managerial or executive office in the company or a related body corporate;

unless there is member approval under section 200E for the giving of the benefit.

...

200F Exempt benefits and benefits given in certain circumstances

(1) ...

(2) Subsection 200B(1) does not apply to a benefit given in connection with a person's retirement from an office or position in relation to a company if:

(a) the benefit is:

(i) a genuine payment by way of damages for breach of contract; or

(ii) given to the person under an agreement made between the company and the person before the person became the holder of the office or position as the consideration, or part of the consideration, for the person agreeing to hold the office or position; and

(b) the value of the benefit, when added to the value of all other benefits (if any) already given in connection with the person's retirement from offices or positions in the company and related bodies corporate, does not exceed the amount worked out under whichever of subsections (3) and (4) is applicable.

(3)..."

The defendant's contentions

3. The defendant commenced by contending that the relevant "office" was the office that Dr Nair commenced to occupy under the Workplace Agreement on 23 June 2007. The relevant period for the purposes of s 200F is therefore less than one year so that s 200F(3) applies. The benefit payable to Dr Nair under the Workplace Agreement is greater than that permitted under s 200F(3). In such circumstances s 200F(2)(b) is not satisfied, the benefit is not exempt and member approval is required. Whether or not an exemption applies is a matter of law. The defendant submitted that it follows from this that it is not open to the parties, whether by agreement or conduct or otherwise, to act as if the benefit is exempt without regard to the question of whether or not the requirements of s 200F have been satisfied.
   
4. The defendant drew upon the obvious legislative intent behind the provisions as contextual support for the result it promoted. The provisions are designed to prohibit the giving of a "golden handshake" without some control or supervision by the members of the corporation concerned. The defendant suggested that there was some irony in the argument propounded by Dr Nair inasmuch as the result he seeks would achieve the very result that the provisions were designed to guard against - namely, an agreement between a company and a senior executive that a retirement benefit is payable in circumstances where no member approval has been obtained. The defendant contended that for these reasons, questions of res judicata , issue estoppel and Anshun estoppel do not arise.
   
5. It also contended that they were unavailable in any event upon the facts of the case. In this respect the defendant emphasised that what is being considered is the effect of an interlocutory judgment from a single judge deciding separate and agreed questions. No judgment has been given or entered in the proceedings as a whole. As a matter of record, the Court has not yet determined the question of whether or not the benefit to be paid to Dr Nair satisfies the requirement of s 200F(2)(b) of the Act.
   
6. On the issue of Anshun estoppel, the defendant was unable to locate any authority that supported the proposition that it applied in the case of an interlocutory decision. Anshun itself, and cases since Henderson v Henderson [1843] EngR 917; (1843) 67 ER 313, have been concerned with attempts to raise an issue in later proceedings in circumstances where the issue should have been raised in earlier, but different, proceedings. The issues and difficulties such as finality of litigation and the possibility of inconsistent decisions, which lie at the heart of the estoppel in question, do not arise in the case of an interlocutory decision such as in the present case. The defendant submitted that for that reason alone, Anshun principles had no application.
   
7. Moreover, it was submitted that at a practical level, Dr Nair is not prejudiced in any way if the s 200F(2)(b) issue is now to be considered at this stage of the proceedings. The facts are not in dispute. The decision of Davies J did not conclude the matter. It is now and was always clear that there were important issues that would remain for determination after his Honour's decision, ultimately by me, including the significant issue of the construction and application of various clauses of the Workplace Agreement. Both those issues and the construction of the relevant provisions of the Act fell to be decided by reference to those same undisputed facts. It is also obvious that the parties themselves anticipated that a further hearing would be necessary, even after the separate and preliminary issues had been identified and determined. That is what occurred. The costs of the further proceedings before me are unlikely to have been greatly increased, if increased at all, as a result of the inclusion of the s 200F(2)(b) issue.
   
8. On the issues of res judicata the defendant emphasised that no judgment has yet been entered and that, as such, the cause of action relied upon has not therefore passed into judgment: see, for example, Jackson v Goldsmith [1950] HCA 22; (1950) 81 CLR 446 at 466. With respect to issue estoppel, the defendant submitted that, whilst there is authority for the proposition that an issue estoppel can arise out of an answer to a separate question (see Bass v Permanent Trustee Company Limited [1999] HCA 9; (1999) 198 CLR 334 at [57]), it is clear that for an issue estoppel to arise the issue must actually have been decided: see On Equity , Young, Croft and Smith at [12.60]. There has not been a determination of the question of whether or not s 200F(2)(b) has been satisfied.
   
9. The issue is simply whether or not the amount of the benefit claimed by Dr Nair exceeds the amount worked out under the applicable subsection. Davies J found that Dr Nair became the holder of a new office as from 23 June 2007, even though the office was similar to that which he had previously occupied but with some different obligations and entitlements: see [23] of his Honour's reasons. His Honour made his finding in the context of s 200F(2)(a)(ii). It provided the foundation for his Honour's conclusion that the retirement benefit under the Workplace Agreement was given in consideration for Dr Nair agreeing to hold office. The defendant contended that the "office" for the purposes of s 200F(2)(a)(ii) was the office that Dr Nair commenced to occupy on 23 June 2007. That is the way that Dr Nair conducted the hearing before Davies J and his Honour accepted Dr Nair's submissions in that regard.
   
10. The defendant contended that as a matter of ordinary statutory construction, the "office" referred to in s 200F(5) must be the same as the "office" referred to in s 200F(2), and in particular s 200F(2)(a)(ii). The relevant office is thus that which Dr Nair commenced to occupy on 23 June 2007. The "relevant period" during which Dr Nair held the office was less than 12 months. Section 200F(3) therefore applies and the benefit is only exempt if it is in effect less than 12 months' remuneration. In those circumstances, the value of Dr Nair's benefit, when added to the value of all other benefits already given in connection with his retirement from office in the company, exceeded the amount worked out under s 200F(3).
    
11. Accordingly, the defendant contended that the issue of whether or not the benefit to be paid to Dr Nair was caught by s 200F(2)(b) of the Act could and should be determined by me. It submitted that there could be no issue that the benefit exceeds the amount that is permitted by the provision. Section 200B(1) therefore applies and approval of the benefit in accordance with s 200E of the Act is required.
    

Dr Nair's contentions

12. Dr Nair disputes that the defendant can now argue, either procedurally or as a question of fact, that the value of the benefit, which he claims is payable to him, when added to the value of all other benefits already given in connection with his retirement from offices or positions in the company, exceeds any amount worked out under the applicable subsection. Dr Nair emphasised that the defendant formulated the separate questions that Davies J decided. The question directed to s 200F did not deal with its individual parts. It was simply whether, assuming the benefit was otherwise payable to Dr Nair by the defendant, it was required to be approved by the members of the defendant pursuant to s 200B of the Corporations Act . The stated purpose of the defendant's application was to seek a determination of questions that would dispose of the matter entirely if decided in its favour. Dr Nair contended that it was not in these circumstances envisaged that the question would somehow be limited and deal only with one part of the two-part test in s 200F. He submitted that the answer to the question "necessarily" encompassed both issues.
    
13. Although not emphasised in the original submissions before me, Dr Nair referred to and relied upon the manner in which the defendant conducted the proceedings before Davies J. That included the content of the defendant's written submissions, which did not deal with s 200F(2)(b). It also included a reference to what was said by Dr Nair's counsel Mr Silver, which I recorded at [37] of my earlier reasons for judgment. Dr Nair emphasised what I had there identified, namely, that the s 200F(2)(b) issue was specifically not addressed or contradicted by the defendant's counsel. Dr Nair contended that in those circumstances it should be assumed or accepted that the s 200F(2)(b) point had been "abandoned" by the defendant.
    
14. Following Davies J's decision, the defendant lodged a notice of intention to appeal. That was not pursued. Dr Nair submitted that the defendant's failure to contest the correctness of his Honour's decision necessarily implies an acceptance by the defendant that it dealt fully and finally with the question of whether the amount of the benefit was or was not caught by the terms of s 200F(2)(b).
    
15. In terms of Anshun principles, Dr Nair contended that the defendant's failure to argue the s 200F(2)(b) point before Davies J must have been deliberate. If it were otherwise it might have been expected that submissions would have been made to me that the failure resulted from inadvertence. The latter would arguably have supported a more charitable view of the Anshun point against the defendant than if the failure to argue the point had been deliberate. Dr Nair submitted that the absence of any evidence or submissions that the failure to argue the point was as a result of inadvertence or because the question asked was vague should lead me to infer that the evidence that could have been led would not have assisted the defendant's case. A Jones v Dunkel submission was made in these circumstances. Dr Nair submitted that I should proceed upon the basis that a deliberate decision not to argue the s 200F(2)(b) point had been made before Davies J because there had been no contradiction at the time of the statement that the point was not in dispute. Even if the failure to argue the point had been inadvertent, the defendant ought to have argued it but did not.
    
16. Dr Nair's submissions on the issues of res judicata and issue estoppel proceeded upon the singular basis that, once it is accepted that the question decided by Davies J encompassed the whole of s 200B, and therefore both parts of s 200F(2), that was the end of the matter.
    

Consideration

17. Because the relevant question decided by Davies J was whether Dr Nair's benefit required approval by the members of the defendant pursuant to s 200B of the Act, it seems to me that the question necessarily calls up for consideration each of the reasons dealt with by the section why it might not require approval. These exemptions are to be found residing in s 200F(2). His Honour dealt in terms only with the first. In particular, his Honour dealt with the issue raised by s 200F(2)(a)(ii) . The second exemption arises under s 200F(2)(b) and is concerned only with the calculation of the amount of the benefit in accordance with either s 200F(3) or (4) of the Act. The former subsection applies if the relevant period for the person is less than 1 year. The latter subsection applies in every other case. The availability of the s 200F(2)(b) exemption in either case is therefore tied to the amount of the benefit. That issue was not argued before Davies J or determined by him.
    
18. The defendant's submissions before me sought to argue matters that Dr Nair complains could and should have been raised before Davies J. These are the matters summarised by me at [10] above. Dr Nair's concern is underpinned by the defendant's failure to mention or refer in its submissions before me to the invitation effectively extended to the defendant's counsel by Mr Silver to contest the s 200F(2)(b) point. It will be recalled that I raised this at [37] of my earlier judgment as follows:
    

"[ 37] Although I was not referred to it at the time, the transcript of the proceedings before Davies J on 19 April 2010 is instructive on this topic. Mr Silver of counsel, who appears now and who appeared then for Dr Nair, said the following things to his Honour:

'SILVER: The defendant says that it was the agreement that was approved, not the payment. So that is what your Honour has to decide on that point. The first issue is whether the exception applies, and there are two aspects to that. I will read the section briefly. The exemption is s 200F(2), and the relevant portion of that is (a)(ii), there doesn't seem to be a dispute that we qualify (b), in other words the dollar amounts [sic] seems in order. So that your Honour will be asked to make a decision under s 200F(2)(a)(ii), and that reads...

*****

Moving to the formula, that is the second part of the exemption in the s 200F(2), and that's under s 200F(2)(b), that has not been put into contention in the submissions but the dollar figures, if one fills them into the formula, we say fulfil the requirements of the exemption. If there's any argument about that, we can address it but it hasn't been raised'."

19. At one level I could probably make certain assumptions, or even draw some fairly reliable conclusions, about the amount of the benefit, and the requirement for membership approval. However, I have not heard evidence on the matter and so I am not in a position to do so. In particular, Dr Nair contests the defendant's suggestion, implicit in its submissions, that I should adopt such a course. Moreover, the threshold issue with which I am here concerned is whether the defendant remains entitled to contest that question or should now be permitted to do so.
    
20. One troubling aspect of the present inquiry is the fact that, depending on the outcome, the members of the defendant might, without being heard, end up becoming deprived of their rightful opportunity to exercise a function conferred upon them by the Parliament as the result either of the decision or the inadvertence of the defendant with respect to the manner in which it conducted the litigation before Davies J. The members are not separately represented and there is no contradictor of Dr Nair's claims apart from the defendant. The defendant has not dealt at all with the question of whether or not the unanswered statements made by Mr Silver to Davies J are of any significance. The members may hypothetically have chosen to take a different approach to the issue if given the chance in the circumstances.
    
21. There is an echo of the concern that I have to be found in that part of Davies J's judgment dealing with the second question he was asked to decide. That question was whether the members in general meeting had in fact approved the termination benefit. In answering that question in the negative, his Honour in part reasoned at [41] as follows:
    

"[41] Moreover, there is nothing to indicate that the members were aware prior to the annual general meeting itself of Dr Nair's resignation and intention to resign, nor does the evidence establish when, relative to the passing of the resolution approving the remuneration report that Dr Nair's resignation was identified or discussed. This is particularly significant where there are proxy votes. It seems to me to be inconsistent with the intention of the process set out in s 200E that the members had no notice of Dr Nair's resignation and the payment of the termination benefit prior to the meeting itself. Sub-section (2) emphasises the need for notice about the resolution that was being voted upon and the information that had to be made available to enable the members to make an informed decision. I do not consider that notification to the ASX is a substitute for the full knowledge that must be conveyed in accordance with s 200E(2) including the fact that Dr Nair had resigned or announced his intention to do so."

22. It seems to me that it is instructive to examine and understand precisely what his Honour dealt with when he answered the first question he was asked to decide and why he did so. In literal terms he decided that Dr Nair's benefit, if otherwise payable by the defendant, did not require approval by the members of the defendant at a general meeting pursuant to s 200B of the Act. His Honour dealt in detail with s 200F(2)(a)(ii), which was one of the exemptions to s 200B, or in other words, one of the circumstances where members' approval is not required. His Honour did not refer at all to s 200F(2)(b), other than to set out the terms of the relevant provisions of the Act.
    
23. This is unsurprising given that the defendant appeared to accept that it was not in contest. No other reasonable conclusion is available in the circumstances. His Honour's reasons are detailed and clear. If there had been the slightest suggestion that the s 200F(2)(b) issue remained alive and that his Honour should decide it, then that would undoubtedly have occurred. Counsel for the defendant did not raise a voice about it and the s 200F(2)(a)(ii) issue emerged as the focus of dispute between the parties to the exclusion of any others. The issue of whether or not the members had voted on the matter at general meeting was of a different character.
    
24. In Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589 at 602-4, Gibbs CJ, Mason and Aicken JJ said this:
    

"[36] In these cases in applying the Henderson v. Henderson principle to a plaintiff said to be estopped from bringing a new action by reason of the dismissal of an earlier action, Somervell L.J. and Lord Wilberforce insisted that the issue in question was so clearly part of the subject matter of the initial litigation and so clearly could have been raised that it would be an abuse of process to allow a new proceeding. Even then the abuse of process test is not one of great utility. And its utility is no more evident when it is applied to a plaintiff's new proceeding which is said to be estopped because the plaintiff omitted to plead a defence in an earlier action.

[37] In this situation 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. Generally speaking, it would be unreasonable not to plead a defence 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 a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings e.g. expense, importance of the particular issue, motives extraneous to the actual litigation, to mention but a few. See the illustrations given in Cromwell v. County of Sac. (1876) 94 US (24 Law Ed, at p 199).
*****

40. The likelihood that the omission to plead a defence will contribute to the existence of conflicting judgments is obviously an important factor to be taken into account in deciding whether the omission to plead can found an estoppel against the assertion of the same matter as a foundation for a cause of action in a second proceeding. By "conflicting" judgments we include judgments which are contradictory, though they may not be pronounced on the same cause of action. It is enough that they appear to declare rights which are inconsistent in respect of the same transaction."

25. The descriptions "new action", "earlier action", "first action", "second action", "initial action", "new proceeding", "one proceeding", "other proceedings" and "second proceeding" are all used in these paragraphs in the course of a judgment explaining the relevant principle. It is difficult to think that the High Court was not contemplating separate proceedings, as opposed to determinations in the same proceedings, when using these expressions in this particular context. This would also be consistent with the apparent lack of any authorities applying the principle in the case of an interlocutory decision.
    
26. In the present case the parties apparently conducted the hearing of the separate questions on a common basis that accepted that s 200F(2)(b) was not in issue. That can only mean in the circumstances that the defendant agreed that the amount of the benefit payable to Dr Nair was such that it did not require approval by the members. The decision that his Honour reached was interlocutory, and arguably not one to which Anshun principles obviously applied.
    
27. There is a further complicating factor. The decision that his Honour came to on s 200F(2)(a)(ii) suggests that Dr Nair's benefit would have fallen to be assessed by reference to s 200F(3). On one view it would have exceeded the amount worked out under that subsection . If that were so it would mean that the basis upon which the parties conducted the hearing before his Honour was erroneous. I appreciate that Mr Silver foreshadowed that if the defendant had indicated that the s 200F(2)(b) issue remained alive, he could meet it, but the admittedly limited material that I have seen does not necessarily support that prediction. Indeed, having regard to the amount claimed in the statement of claim, it seems difficult to understand. The very strong inference therefore is that if his Honour had been asked to deal with the effect of s 200F(2)(b) he might have answered the second question in the affirmative.
    
28. However, it is clear since the decision of the High Court in Bass v Permanent Trustee Co Ltd at [57] that interlocutory determinations of issues bind the parties throughout the remainder of the proceedings:
    

"[57]... Once an issue is determined at the interlocutory stage, and the trial continues, the primary judge's hand is tied in respect of all matters of fact and law involved in that determination. In Fidelitas Shipping Co Ltd v V/O Exportchleb , Diplock LJ pointed out :

'Where the issue separately determined is not decisive of the suit, the judgment upon that issue is an interlocutory judgment and the suit continues. Yet I take it to be too clear to need citation of authority that the parties to the suit are bound by the determination of the issue. They cannot subsequently in the same suit advance argument or adduce further evidence directed to showing that the issue was wrongly determined. Their only remedy is by way of appeal from the interlocutory judgment and, where appropriate, an application to the appellate court to adduce further evidence'".

29. The defendant has argued in effect that the issue has not in fact been separately determined because his Honour was diverted from the s 200F(2)(b) portion of the equation and his decision was therefore an incomplete answer. In other words, his Honour's negative answer to the separate question was only a negative answer to the s 200F(2)(a)(ii) issue and not the additional s 200F(2)(b) issue. Accordingly, even though the defendant wishes to raise an argument, which may produce a different answer to the separate question that his Honour has already answered, and which binds the parties, it does not wish to re-litigate the same issue. Put another way, the defendant wishes to argue that the separate question determined by his Honour involved what was in effect two issues and that his Honour has only answered the first. This argument contends that the defendant is not seeking to have a determination that will produce a different answer to the same question but one that will produce another answer to a different question. In other words, the form of the question that his Honour was asked to determine should not be permitted to disguise the fact that it was a question in two parts with potentially different answers.
    
30. Unfortunately, and from my position inexplicably, the defendant chose not to agitate the second issue. In the conduct of adversary litigation, where the parties are each sophisticated clients, and have at all times been represented by competent lawyers, binding consequences must necessarily flow from the decisions they make in the course of that litigation. This is especially so in this case following the publication of his Honour's decision. Dr Nair was prepared to argue s 200F(2)(b) if required and was subsequently content with his Honour's decision. Dr Nair was also prepared on that basis to proceed to the next stage of the proceedings before me. The defendant took a different approach. It declined to argue the point before Davies J but nevertheless gave notice of an intention to appeal against the decision. This was ultimately not pursued. The effect of that in my view is that both parties have become bound by his Honour's decision and by the answers it produced to the questions he was asked. Neither party should now be permitted to re-litigate what his Honour decided. This is all the more so given the fact that Dr Nair's counsel squarely flagged the s 200F(2)(b) issue, and invited the defendant to contradict his understanding that the issue had fallen away. There was no response.
    
31. This is not a case of Anshun estoppel strictly so called: it is not a case of a party attempting in later proceedings to argue or to raise what could and should have been dealt with in former or earlier proceedings. Instead this is a case of a party adopting a particular forensic position at one stage of a single proceeding but later seeking in the same proceeding to alter or resile from that position in the face of an interlocutory judgment with which that party is unhappy. Davies J determined a separate issue at an interlocutory stage at the request of the parties and the trial continued. To the extent that I was then asked to decide certain remaining issues in the proceedings, my hands had become tied in respect of all matters of fact and law involved in his Honour's prior determination. Other than by way of an appeal, I do not think that the defendant should now be entitled to have a second go.
    

Conclusion and orders

32. It follows that Dr Nair is entitled to judgment for the amount of the benefit calculated in accordance with the terms of the Workplace Agreement. There may be other matters that the parties would wish to raise, including the questions of interest on the judgment amount and costs. I will therefore direct the parties to provide me with short minutes of the orders for which they respectively contend if agreement about the orders cannot be reached. I will also stand these proceedings over before me to a date convenient to the Court and to the parties to be arranged in consultation with my Associate, so that any remaining argument can be heard and final orders can be made.

**********