FEDERAL COURT OF AUSTRALIA

Zetta Jet Pte Ltd v The Ship “Dragon Pearl” (No 2) [2018] FCAFC 132

ORDERS

THE COURT NOTES THAT:

1.    Upon the undertaking of Jonathan D King in his capacity as the Chapter 7 Trustee of Zetta Jet Pte Ltd through his counsel:

(a)    to submit to such order (if any) as the Court may consider to be just for the payment of compensation (to be assessed by the Court or as it may direct), to any person (whether or not that person is a party), affected by the operation of the order or undertaking or any continuation (with or without variation) of order 7; and

(b)    to pay the compensation referred to in paragraph (a) to the person affected by the operation of order 7.

THE COURT ORDERS THAT:

2.    There be leave to appeal.

3.    The appeal against the orders made by Perram J on 31 July 2018 in VID 737 of 2018 be dismissed.

4.    The appeal against the orders made by Perram J on 31 July 2018 in VID 770 of 2018 be allowed.

5.    The orders made by Perram J on 31 July 2018 in VID 770 of 2018 be set aside.

6.    The matter be remitted to Perram J or another single judge for a further hearing of the amended interlocutory process dated 19 July 2018 in VID 770 of 2018 seeking an interlocutory injunction, insofar as that application was brought by the second appellant on the basis of a foreshadowed claim under s 588FF of the Corporations Act 2001 (Cth).

7.    Until the further hearing and determination of the amended interlocutory process referred to in order 6 or further order the second respondent, Linkage Access Limited, be restrained, whether by itself, its officers, employees, agents or assigns from:

(a)    removing the first respondent, the Ship “Dragon Pearl” (the Ship), from Australian waters;

(b)    transferring, assigning, encumbering or otherwise dealing with any right, title or interest in the Ship; or

(c)    moving the Ship from the moorings or premises of Maritimo Boat Masters Yard, Lot 6/7 John Lund Drive, Hope Harbour, Queensland, Australia, without first giving two (2) clear business days’ written notice to the appellants through their solicitors.

8.    There be liberty to apply to vary or discharge order 7 on seven days’ notice.

9.    The appellants pay the costs of the appeal against the orders made by Perram J on 31 July 2018 in VID 737 of 2018.

10.    The costs of the appeal against the orders made by Perram J on 31 July 2018 in VID 770 of 2018 be costs in the amended interlocutory process dated 19 July 2018.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THE COURT:

1    In proceedings in this Court, Zetta Jet Pte Ltd and Mr King (a trustee appointed to Zetta Jet under the insolvency law of the United States) claimed that Zetta Jet was the owner in equity of a vessel, Dragon Pearl. The vessel had been arrested on 16 October 2017 and was in the custody of the Admiralty Marshal pending the outcome of the proceedings. The case was listed for a five day trial to commence on 5 June 2018. After a late and unsuccessful application to adjourn the proceedings, counsel was invited to open and lead evidence. Counsel indicated that he was not in a position to do so. The proceedings were dismissed: Zetta Jet Pte. Ltd v The Ship “Dragon Pearl” [2018] FCA 878. An appeal against the decision to dismiss the proceedings was unsuccessful: Zetta Jet v The Ship “Dragon Pearl” [2018] FCAFC 99.

2    Half an hour after the appeal was dismissed, the vessel was sold by the registered owner for US$1 to Linkage Access Limited. Zetta Jet and Mr King then commenced fresh proceedings against Linkage to arrest the vessel. The application for a warrant to arrest the ship was refused: Zetta Jet Pte Ltd v The Ship “Dragon Pearl” [2018] FCA 981. However, the in rem claim against the vessel remained on foot.

3    A third set of proceedings were then commenced in which application was made for an interlocutory injunction to restrain Linkage from removing the vessel from Australian waters or alienating title in the vessel until a trial of claims in those proceedings. The interlocutory injunction was sought on the basis that Mr King had a pending application for recognition as a foreign representative of Zetta Jet under the UNCITRAL Model Law on Cross-Border Insolvency given effect in Australia by the Cross-Border Insolvency Act 2008 (Cth). The Act confers a jurisdiction to grant urgent provisional relief pending the determination of such an application.

4    Claims to proprietary relief of the same kind as those that had been advanced against the previous owner of the vessel in the first proceedings were advanced in support of the application for an injunction. A new proprietary claim was also made based upon an alleged alienation to defraud creditors of Zetta Jet.

5    In addition, in support of the application, Mr King stated that he proposed to seek relief under s 588FF of the Corporations Act 2001 (Cth) in respect of what was said to be a single composite uncommercial transaction by which the vessel came to be owned by Linkage. (A transaction of a company is an uncommercial transaction if, and only if, it may be expected that a reasonable person in the company’s circumstances would not have entered into the transaction having regard, to certain specified matters, including the benefit and detriment to the company: s 588FB. An uncommercial transaction is voidable if entered into in any of the insolvency contexts described in s 588FE.)

6    The relief that may be sought under s 588FF includes an order that property the company has transferred under a transaction of a kind specified in the Act be transferred to the company being administered in insolvency, in this case Zetta Jet. It also allows, amongst other things, for an order requiring a person to pay to the company an amount that, in the court’s opinion, fairly represents some or all of the benefits a person has received “because of the transaction”.

7    In opposition to the interlocutory injunction, Linkage said that a res judicata arose in respect of claims in rem by Zetta Jet or Mr King against the vessel by reason of the dismissal of the original proceedings. Therefore, Linkage had purchased the vessel from a party who had been judicially determined to be the owner as against claims by Zetta Jet and Mr King. As a result, they could not set up any claims to ownership of the vessel as the basis for a claim against Linkage. An application for summary dismissal of the second in rem proceedings was also brought on that basis.

8    The submission based upon res judicata was upheld by the primary judge and, on that basis, the application for injunctive relief was refused and orders were made for the summary dismissal of the second in rem claim against the vessel. As a result, his Honour did not find it necessary to deal with other matters raised in answer to the application for the interlocutory injunction or questions going to discretion: see Zetta Jet Pte Ltd v The Ship “Dragon Pearl” (No 2) [2018] FCA 1130.

9    The recognition application by Mr King otherwise remains on foot.

10    Zetta Jet and Mr King now seek leave to appeal. If leave is given, they seek orders on appeal setting aside the dismissal and granting the interlocutory relief that was refused by the primary judge.

Summary of decision

11    For the following reasons, the primary judge was correct in summarily dismissing the in rem proceedings against the vessel. The primary judge was also correct in otherwise refusing the claim to injunctive relief based upon principles of res judicata insofar as the claims before his Honour depended upon a Barnes v Addy claim to ownership in equity by Zetta Jet of the vessel or the other proprietary claim based on an alleged alienation to defraud creditors.

12    However, his Honour did not separately consider the significance, if any, for the application for injunctive relief of the foreshadowed claim to relief under s 588FF.

13    In those circumstances, leave to appeal should be granted and the orders of the primary judge should be varied to allow Mr King to pursue his application for urgent provisional relief based upon the foreshadowed claim to orders under s 588FF. It may be that those claims may be met by a claim of Anshun estoppel or abuse of process. That was the position of the respondents on the appeal. Whether that is so will depend, amongst other things, upon an examination of the issues in the initial proceedings, a view as to the nature and extent of the statutory powers conferred by s 588FE and s 588FF as well as the evidence as to the circumstances of the transfer of the vessel to Linkage. It may also be relevant to consider whether the statutory claims can be made against Linkage in circumstances where the claim to ownership at law or in equity by Zetta Jet of Dragon Pearl has been dismissed. When these claims are examined, issues may arise as to whether further arguments should be considered or further evidence received in light of the issues. Ultimately, there may be discretionary matters to be considered. Of particular significance will be issues of security for the undertaking as to damages and whether any relief that might be granted should be conditioned upon appropriate orders for payment of costs to date in the proceedings in which Zetta Jet and Mr King have been unsuccessful. These interlocutory matters are all best decided by a single judge.

Relevant principles as to res judicata

14    The main argument advanced in support of the appeal is that the principles of res judicata do not apply because the claims in rem in the original proceedings, though finally determined, were not dismissed “on the merits”, in the sense of being judicially assessed or evaluated by a determination that involves finding the facts and applying the law to those facts to reach a conclusion.

15    In a number of English authorities, the view has been expressed that the term res judicata applies both to a cause of action estoppel and an issue estoppel arising from a final adjudication. Further, in both instances there is a requirement that the decision be both final and “on the merits” before there is a res judicata: see DSV Silo und Verwaltungsgesellschaft mbH v Owners of the Sennar [1985] 1 WLR 490 (The Sennar [No 2]); R (Coke-Wallis) v Institute of Chartered Accountants in England and Wales [2011] UKSC 1; 2 AC 146; and R (Gray) v Police Appeals Tribunal [2018] EWCA Civ 34; 1 WLR 1609.

16    However, in Tomlinson v Ramsay Food Processing Pty Ltd [2015] HCA 28; 256 CLR 507, the plurality equated res judicata with an exercise of judicial power by delivering a final judgment. In expressing the principle in that way, their Honours said that an exercise of judicial power creates a new charter by reference to which that question is in future to be decided as between those persons or classes of persons. “The rendering of a final judgment in that way ‘quells’ the controversy between those persons. The rights and obligations in controversy, as between those persons, cease to have an independent existence: they ‘merge’ in that final judgment. That merger has long been treated in Australia as equating to ‘res judicata’ in the strict sense”: at 516 [20] (footnotes omitted). No distinction was drawn between a case where the disputed rights and obligations were upheld and one where they were dismissed.

17    These propositions were footnoted by reference to Australian authority and with a note to compare the position as stated in Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2013] UKSC 46; [2014] AC 160 at 180 [17] where Lord Sumption JSC (with other members of the Court agreeing) described res judicata as a “portmanteau term which is used to describe a number of different legal principles with different juridical origins”. Even so, his Lordship described the “first principle” as “once a cause of action has been held to exist or not to exist, that outcome may not be challenged by either party in subsequent proceedings” (ascribed the label “cause of action estoppel”).

18    Importantly, the plurality in Tomlinson then said that the notion of “cause of action estoppel” was largely redundant where a judgment is rendered in the exercise of judicial power because res judicata in the strict sense applies: 256 CLR at 517 [22]. On such reasoning, res judicata applies solely by reason of the character of the exercise of judicial power in pronouncing a final judgment. It does not matter what led to the final judgment – whether it be default, consent or an adjudication on the merits. Further, it is not a concept that includes issue estoppel.

19    Their Honours then separately described issue estoppel as applying where an ultimate issue of fact or law was necessarily resolved as a step in making the final determination: 256 CLR at [22].

20    It is to be noted that an issue of fact or law is not “necessarily resolved” unless there has been a decision on the merits. For that reason, it may be said that there needs to be a decision “on the merits” in the sense described in [14] above in order for there to be an issue estoppel: Kuligowski v Metrobus [2004] HCA 34; 220 CLR 363 at 375 [25]. However, a res judicata (or cause of action estoppel) was not described in Tomlinson in a manner that makes the principle dependent upon a determination on the merits in that sense.

21    In Rogers v The Queen [1994] HCA 42; 181 CLR 251 at 275, the principle of res judicata was described by Brennan J as applying where there has been a final judicial decision of a question between the parties. Deane and Gaudron JJ said that res judicata arises when a cause of action passes into a judgment – language that describes the principle by the result of its application rather than the circumstances when it applies. However, their Honours went on to describe the reasons for the principle in the following terms which suggest no qualification to the types of final judgment to which the principle is to apply, in particular:

(1)    A judgment of the court must be respected as fundamental to any civilised and just judicial system.

(2)    Judicial determinations must be final, binding and conclusive.

(3)    There is injustice if a party is required to litigate afresh matters which have already been determined by the courts.

(4)    Decisions of the courts, unless set aside or quashed, must be accepted as incontrovertibly correct.

22    Each of these propositions applies irrespective of the circumstances in which a final judgment is entered. They would be substantially undermined if some types of final judgments gave rise to res judicata and others did not according to some form of inquiry as to whether there was a decision on the merits in the sense of a judicial assessment based upon an evaluation of the facts and application of legal principles. In particular, a party could simply decline to advance a case at trial preventing the matter from being adjudicated on the merits in that sense and thereby deprive the other party of securing finality.

23    To similar effect is the earlier judgment of Fullagar J in Jackson v Goldsmith [1950] HCA 22; 81 CLR 446 at 466-467 (cited with apparent approval in Tomlinson) where the rule as to res judicata was stated as: “where an action has been brought and judgment has been entered in that action, no other proceedings can thereafter be maintained on the same cause of action”. This was said to be a broad rule of public policy and not correctly classified as an estoppel. Therefore, his Honour said, in the case of res judicata only the actual record is relevant whereas on a plea of issue estoppel any material may be looked at which will show what issues were raised and decided. Again, the requirement that issues must be shown to have been decided is a requirement that pertains only to issue estoppel.

24    In this Court, res judicata was described in the following terms in State of Western Australia v Fazeldean on behalf of the Thalanyji People (No 2) [2013] FCAFC 58; 211 FCR 150 at 155 [25] (Allsop CJ, Marshall and Mansfield JJ):

Where an action has been brought and judgment entered on the action, no other proceeding may be maintained on the same cause of action. If the cause of action was recognised to exist in the judgment, it merges in the judgment and no longer exists; if it was found not to exist, the unsuccessful party may no longer assert that it does.

25    Also, the reasoning of Fullagar J in Jackson v Goldsmith was applied in Fernando v Commonwealth of Australia [2014] FCAFC 181; 231 FCR 251 at 261 [42]-[45] (Besanko and Robertson JJ). On that approach, the entry of final judgment in the action is what gives rise to res judicata. No distinction is made as to the circumstances in which final judgment may have been entered.

26    Importantly, unlike the position in the United Kingdom, res judicata has been distinguished from issue estoppel since the statement by Dixon J in Blair v Curran [1939] HCA 23; 62 CLR 464 at 532 as follows:

The distinction between res judicata and issue-estoppel is that in the first the very right or cause of action claimed or put in suit has in the former proceedings passed into judgment, so that it is merged and has no longer an independent existence, while in the second, for the purpose of some other claim or cause of action, a state of fact or law is alleged or denied the existence of which is a matter necessarily decided by the prior judgment, decree or order.

27    Further, the proposition that for a res judicata to arise there must be both a final judgment and it must be on the merits (in the sense of some form of reasoned adjudication of the merits) is contrary to the well-established position in Australia that res judicata applies to a final judgment in default or by consent: Linprint Pty Ltd v Hexham Textiles Pty Ltd (1991) 23 NSWLR 508 at 519-521 and 526-527; Chamberlain v Deputy Commissioner of Taxation (ACT) [1988] HCA 21; 164 CLR 502. However, in such cases, particularly where judgment is entered in default of defence, care must be taken in determining exactly what has been concluded by the judgment: Rogers v Legal Services Commission of South Australia (1995) 64 SASR 572 at 596-597.

28    There are principles that permit a default judgment to be set aside in certain circumstances. Also, a final judgment may be corrected for slip or error. Or it may be set aside on the basis that it was procured by fraud. However, where these steps are available, but not taken, the final judgment gives rise to a res judicata. It is not burdened by any uncertainty or defect that may be associated with a need to consider how it was obtained.

29    Next, it must be noted that the general rule that a judgment or order that has been formally recorded cannot be reconsidered does not apply to an order made ex parte: International Finance Trust Company Limited v New South Wales Crime Commission [2009] HCA 49; 240 CLR 319 at 376 [130]. The doctrine applies to final orders made inter partes.

30    In some instances, judgment may be entered procedurally, such as by operation of a self-executing order in default of compliance with a direction or other order of the court. In some cases, dismissal is effected by operation of the rules, such as where cases have been inactive for a specified period and notice has been given but further steps have not been taken. However, such cases are in a different category because there is no hearing. They are akin to cases where orders are made ex parte. The doctrine of res judicata does not apply to orders of this kind: Mango Boulevard Pty Ltd v Spencer [2008] QCA 274 at [57]-[61]. They are not a final determination of rights. Consistently with that position, a self-executing order for judgment operating in default of compliance can always be the subject of an application for an extension of time for compliance after the specified date: Firmware Technologies Inc v Asia Platinum Group Ltd [2016] WASCA 179 at [41]-[49].

31    Also, it is to be noted that a permanent stay or dismissal of proceedings for want of prosecution is an interlocutory order because it is not a final determination of legal rights, even though that may be its practical effect: National Mutual Life Association of Australasia Ltd v Grosvenor Hill (Qld) [2001] FCA 237. Therefore, a dismissal for want of prosecution does not give rise to a plea of res judicata in subsequent proceedings: Rogers v Legal Services Commission of South Australia 64 SASR at 594. In that case, the Court held that a dismissal on the basis that a claim did not disclose a cause of action did not result in any res judicata because it did not affirmatively adjudicate the claim. It only decided the question whether there was a claim disclosed by the particular pleading: 64 SASR at 597.

32    It follows that since Blair v Curran, in the High Court there has been no qualification as to the effect that is to be given to a final judgment that determines in any way an underlying cause of action that may be said to merge in the judgment. There is no suggestion that res judicata depends upon the circumstances in which a final adjudication of a cause of action occurred (whether that be by default, consent or the absence of attendance by a party at a hearing where notice has been given that an order for judgment may be made or by reason of a failure by a party to advance any case at trial or final hearing). The same is reflected in the judgments of this Court.

33    It is an important principle. A party who is commanded to attend a trial or final hearing to answer a claim based upon a cause of action would face the same injustice if the claim could be re-agitated after final judgment was given dismissing the claim irrespective of the circumstances in which the judgment was given. Whether a claim is allowed or dismissed by consent, default or after a contested hearing, the need for finality is the same in each instance. A party who wishes to preserve the right to bring further proceedings should seek leave to discontinue. The need for finality is one reason why an application for such leave may be refused if brought late in the day and without explanation beyond inability to proceed with the case.

34    In applying these principles, care may need to be taken to ensure that an order expressed as a dismissal was, in substance, to be taken as a final adjudication of underlying causes of action. The term dismissal may be used inaccurately to describe an instance where a party is being allowed to discontinue. Or the “dismissal” may be on terms that the party is at liberty to bring fresh proceedings, in which case it will not be a final adjudication of the causes of action in the proceedings (see r 39.03 Federal Court Rules 2011 (Cth)). Or it may be a procedural dismissal in the sense explained above. But these matters do not detract from the character of a final judgment and the res judicata that arises.

35    Consistently with these principles, no purpose is served by inquiring into the particular circumstances in which final judgment was obtained in order to determine whether a res judicata arises. The relevant question is to inquire into what cause of action was adjudicated by the final judgment. For that reason, in determining the extent of the res judicata that arises in a particular case, the court looks only at the record (the nature of the claim and the final orders): Fernando v Commonwealth 231 FCR at 261 [45]; Pollnow v Armstrong [2000] NSWCA 245 and Willoughby v Clayton Utz [No 2] [2009] WASCA 29; 40 WAR 98 at 107 [27]-[28].

36    In support of the claim that there was no res judicata unless the final judgment could also be shown to arise from a determination “on the merits”, Zetta Jet and Mr King relied upon the decision in Willoughby. In that case, reference was made at 40 WAR 104 [14] by Pullin JA (with whom Wheeler and Miller JJA agreed) to the view expressed in Spencer Bower, Turner and Handley, Res Judicata (3rd ed, LexisNexis, 1996) that a party setting up a plea of res judicata must establish that the decision was (i) final; and (ii) on the merits. A statement to the same effect appears in the 4th edition (LexisNexis, 2009) at [1.02] (and is dealt with in Chapter 6 of the text). However, it is to be noted that the authors follow the English practice of using the term res judicata to apply to both a cause of action estoppel and an issue estoppel. As we have noted, in Australia, the terminology is not used in this way. There is a clear distinction between res judicata (which gives effect to the need for finality in respect of adjudicated causes of action) and issue estoppel (which arises where a matter of fact or law has been necessarily adjudicated).

37    Pullin JA then held that, in determining whether there was a res judicata, regard could not be had to the reasons for judgment in determining whether there was a final judgment, but that they could be considered in determining whether a cause of action was decided “on the merits” or was “litigated”: 40 WAR at 107 [28].

38    Pullin JA then noted at 107 [29] that the term “litigated” had been used by Fullagar J in Jackson v Goldsmith 81 CLR at 467. His Honour appears to have been referring to the following passage:

In the first place, if A sues B to judgment and in subsequent proceedings between them a plea of res judicata is raised, the primary question will be whether the cause of action in the later proceedings is the same as that which was litigated in the former proceedings.

39    It is to be noted that Fullagar J went on to say:

On the other hand, if A sues B to judgment and in subsequent proceedings between them a plea of issue estoppel is raised, the plea may succeed although the causes of action in the two proceedings are entirely different. The question will be whether an issue of fact or law which is raised in the later proceedings was an issue of fact or law which was also raised in the earlier proceedings and therein determined.

40    Fullagar J then dealt with the nature of materials that may be considered in the case of a res judicata compared to issue estoppel.

In the second place, it follows from the very nature of the difference between the plea of res judicata and the plea of issue estoppel that different materials are relevant in each case. Where the plea is of res judicata, only the actual record is relevant. Where the plea is of issue estoppel, any material may be looked at which will show what issues were raised and decided. Reasons given for the judgment pronounced are likely to be particularly important for this purpose.

41    Fullagar J then cited authority which made clear that the reference to reasons being a “particularly important” part of the material which may be looked at was intended to apply to reasons as part of the material that may be considered in deciding whether there was an issue estoppel. In doing so, his Honour was not suggesting that there may be a broad enquiry by reference to such materials where the plea is of res judicata, quite the contrary. There would be no point to the distinction his Honour was making if those materials could be referred to in deciding whether there was a res judicata as well as deciding whether there was an issue estoppel.

42    In context, the term “litigated” was used by Fullagar J as a means to refer to whether a particular cause of action had been part of the subject matter of the earlier proceedings.

43    In addition to English authorities, Pullin JA referred to Marshall v The Town Planning Appeal Tribunal (WA) [2006] WASCA 146 at [15] where McLure JA (Malcolm CJ and Murray AJA agreeing) stated:

The doctrine of res judicata provides that where an action has been brought and final judgment on the merits has been entered in that action, no other proceedings may be maintained on the same cause of action. To determine what is res judicata, only the record may be examined.

44    The statement was not amplified by McLure JA when the principle was applied: at [28]. It may be that the statement reflected the language in Spencer Bower, Turner and Handley which we have already noted. It may be that the terminology was used as an emphatic way of describing a final judgment. What is clear is that the statement did not support the approach of referring to the reasons or other aspects of the proceedings in order to determine whether the doctrine of res judicata applied.

45    Finally, Pullin JA made reference to the English cases which, as we have noted, are founded upon a different use of the terminology. His Honour concluded by referring to the statement by Lord Brandon in The Sennar (No 2) [1985] 1 WLR at 499. The passage was dealing with an argument that a judgment of a Dutch court that it had no jurisdiction was procedural in nature and did not give rise to an issue estoppel. It is to be understood in that context and is as follows:

In my opinion, this argument is based upon a misconception with regard to the meaning of the expression “on the merits”. Looking at the matter positively a decision on the merits is a decision which establishes certain facts as proved or not in dispute; states what are the relevant principles of law applicable to such facts; and expresses a conclusion with regard to the effect of applying those principles to the factual situation concerned. If the expression “on the merits” is interpreted in this way, as I am clearly of the opinion that it should be, there can be no doubt whatever that the decision of the Dutch Court of Appeal in the present case was a decision on the merits for the purposes of the doctrine of issue estoppel.

46    Pullin JA then posed the question as being whether the proceedings which were said to give rise to a res judicata had been “litigated” or “decided on the merits” thereby equating the two concepts: 40 WAR at 107-108 [30]. He found that the only matter that had been litigated in the earlier proceedings in which final judgment had been given was the question of standing: 40 WAR at 108 [30]. That was because the order dismissing the earlier proceedings was based only on an adjudication of the standing question: 40 WAR at 101 [4](i).

47    Accordingly, the result in the case rested upon a determination that the cause of action had not been “litigated” in the earlier proceedings (in the sense in which that term was used by Fullagar J, namely the decision said to provide the basis for the plea of res judicata needed to be demonstrated to be an adjudication of the cause of action that was raised in the second proceedings). Only the standing aspect had been determined.

48    Therefore, the decision in Willoughby does not provide a foundation for a conclusion that there is no res judicata unless there is a decision on the merits in the sense of a presentation of evidence and argument and the application of the law to the facts in a reasoned way. To reach that view would be directly inconsistent with the manner in which the principle has been expressed by the High Court, particularly in the subsequent decision in Tomlinson. Rather, Willoughby is a case where the res judicata was confined to that which was actually litigated in the previous proceedings.

49    Zetta Jet and Mr King also sought to find support in Hoysted v Federal Commissioner of Taxation [1921] HCA 56; 29 CLR 537 at 552 (noting that the decision was overruled by the Privy Council on a different point) where Knox CJ and Starke J referred to judgment “upon the merits of a cause in litigation” being a bar to all further litigation of the same claim or demand. However, it is clear from the following passages (at 552-553, 555) that their Honours were considering concepts that would be described today separately in Australia as res judicata and issue estoppel. This is evident also from the judgment of Higgins J at 560-561 where his Honour distinguishes between the two concepts by stating that res judicata is said to apply “where another action is brought for the same cause of action as has been the subject of previous adjudication”. These are distinctions that have been stated more starkly in more recent decisions.

50    There may be cases where an issue arises as to whether a final judgment actually determines all of the causes of action raised in the proceeding. A case may involve claims based upon a number of causes of action, but the final judgment may rest upon an adjudication of only one. This may arise because there is a trial of preliminary issues. Or the case may have been conducted in such a way that the advancement of a particular cause of action was withdrawn prior to trial. This may have occurred informally. In such cases, some of the causes of action may not have been finally adjudicated even though there has been final judgment on the claim. Therefore, it may be necessary to inquire as to the causes of action to which a final judgment relates. Also, as we have noted, what may be termed procedural judgments do not give rise to a res judicata. Nor do judgments or orders made ex parte.

51    The existence of each of these instances explains the requirement that a decision be both “final” and “on the merits” (or “litigated”) before it may give rise to a res judicata. However, it is equally clear that a default judgment and a judgment by consent may give rise to a res judicata. Therefore, the requirement that the final judgment be a judgment “on the merits” does not confine res judicata to those instances where there has been presentation of evidence and argument and the application of the law to the facts in a reasoned way.

Application of res judicata principles in this case

52    The trial of the original proceedings that was listed was of all causes of action then raised. So, there was no need to consider whether only some of the causes of action may have been determined on the merits by the final judgment. It follows that the judgment in the original proceedings brought by Zetta Jet and Mr King was final in respect of all causes of action raised. The fact that it was entered after an application to adjourn was refused and counsel indicated that he was not in a position to open the case and call evidence, does not mean that it was not final and on the merits. In dismissing the original in rem proceedings, the trial judge put to counsel that he must either commence the case and advance arguments in support of it or indicate that he was not in a position to do so and the case should be dismissed. Counsel then stated that he was not in a position to call any witnesses. He stated that he also had no instructions to close the case. After further questions from the Court in which it was made clear that if the case did not proceed then it must be dismissed, counsel then said “I can’t lead evidence, and I can’t take the matter further. I’ve made the submission”.

53    There was no application made for leave to discontinue. There was no order staying the proceedings for want of prosecution. The matter was listed for trial and the trial proceeded, but Zetta Jet and Mr King took no steps to advance a case. The case was then dismissed. An appeal was brought against the dismissal. The appeal appears to have been treated as an appeal against final orders. The appeal was refused.

54    In those circumstances, the principles of res judicata as that term has been consistently used by the High Court apply.

The foreshadowed claim of an uncommercial transaction

55    The second matter advanced to support the appeal concerned the foreshadowed claim for relief based upon a claim for the avoidance of an uncommercial transaction. It was argued that the proposed claim for relief under s 588FF provided a cause of action that had not been adjudicated in the original proceedings and therefore was a basis upon which urgent provisional relief could be sought by Mr King. The primary judge did not address that claim separately. However, the merits of that claim must be evaluated on the basis that there has been a final adjudication that neither Zetta Jet nor Mr King as trustee had a claim in rem to the vessel at the time it was owned by the previous owner. (We note that no argument was advanced to the effect that the additional proprietary claim based on an alienation to defraud creditors that was not made in the first proceedings could be an answer to the res judicata defence raised in respect of the second in rem claim and support the application for an interlocutory injunction.)

56    Further, the uncommercial transaction claim was made to impugn the transaction by which the vessel was transferred to Linkage which, on the evidence before the primary judge, occurred separately and after the original proceedings. As to this aspect, reliance was placed upon Capital Finance Australia Ltd v Tolcher [2007] FCAFC 185; 164 FCR 83 at 107-108 [120] (Gordon J) where the term “transaction” as used in the concept of uncommercial transaction in s 588FB was said to be a word of “wide connotation”. Even so, issues arise as to whether there could be an uncommercial transaction of a kind that would justify an order that Dragon Pearl be transferred to Zetta Jet in circumstances where, at the time, Zetta Jet was not the legal owner of Dragon Pearl and (for reasons we have given) has been finally determined to have no proprietary claim in equity to the vessel.

57    However, it remains the case that the claim was not considered by the primary judge. Further, there may be a basis for a statutory claim under s 588FF against the previous owner of the vessel (Dragon Pearl Limited) that there should be an order for transfer of the vessel even though there be no claim to ownership of the vessel. The claim may be made on the basis that the transfer to Linkage for US$1 was not a reason why such an order should not be made in exercise of the statutory power conferred under s 588FF. Alternatively, there may be a basis for an asset preservation order in respect of the vessel in aid of a monetary claim under s 588FF even though it be legally owned by Linkage on the basis that the circumstances of the sale to Linkage indicate that, in truth, Linkage is no more than a holder of the vessel in the interests of Dragon Pearl Limited. The possibility that the remedies available to Mr King on an application for urgent provisional relief may include an application for a freezing order in respect of property said to be the subject of a claim that it might be brought into an insolvency administration was recognised by the primary judge (at [19]) but not considered further. For those reasons, there may be merit in the claim to the interlocutory injunction even though there is a res judicata in respect of an in rem claim by Zetta Jet to the vessel.

58    These are important matters not fully explored in the appeal which was heard on an urgent basis outside of usual court hours.

59    Linkage contended that the decision of the primary judge concerning the uncommercial transaction claim should be upheld on other grounds not relied upon by the primary judge, namely Anshun estoppel or an abuse of process. In our view, these arguments are best dealt with by remitting the matter for further consideration on the basis of all the evidence. If they are not accepted then other discretionary issues will arise. Amongst those, there are important issues concerning any security that might be required and appropriate orders in relation to costs that have been ordered to be paid as a result of unsuccessful claims to the vessel that have been brought to date. This Court sitting on appeal should not, in effect, take over the further conduct of an application for an interlocutory injunction.

60    It was also submitted that Zetta Jet and Mr King had said they would seek to bring the uncommercial transaction claim as an alternative basis to support the second in rem proceedings and such a course was inconsistent with the uncommercial transaction claim being anything other than an in rem claim. However, it is possible for the claim to be made on the basis that it would support the in rem claim in the second proceeding, but also support wider relief in the foreshadowed separate claim to be brought if Mr King’s application for recognition as a foreign representative is successful. Therefore, the fact that there is a res judicata in respect of the in rem claim does not mean that there is necessarily nothing left in the uncommercial transaction claim.

61    It was also submitted that an Anshun estoppel claim had been advanced before the primary judge and the only answer raised was that the uncommercial transaction claim was only permitted upon recognition. The point, it was said, was not an answer because it did not explain why that application had not been brought earlier, particularly as there had been many months between the arrest of the vessel and the trial date in the first proceedings. In particular, Mr King had been given authority by a court in the United States to apply for recognition on 11 December 2017. Accordingly, it was said, the claim could and should have been made in the earlier proceedings. On that basis there was submitted that there was an Anshun estoppel that extended to Linkage even though it had not been a party to the original proceedings.

62    There may be merit in these submissions, but we do not consider them to be so plainly correct that the matter should not be remitted on the basis that there would be no utility in doing so.

63    As to whether there is an abuse of process, that may depend upon the nature of security, if any, proffered by Mr King and whether there are appropriate arrangements for costs that have been awarded to be met. These are matters that may require some inquiry as to the costs incurred and their nature, and are best addressed by a single judge.

Leave to appeal, costs and injunctive relief

64    In our view, having regard to the English authorities to which we have referred, there was sufficient doubt to support the grant of leave to appeal on the issue of res judicata. As the decision of the primary judge brought the proceedings to an end there would be substantial injustice if the claim was found to have merit, but leave was refused. For those reasons, we would grant leave to appeal generally. We would dismiss the appeal against the summary dismissal of the second in rem proceedings against the vessel. We would allow the appeal as to the dismissal of the application for an interlocutory injunction and remit the matter to the primary judge to consider whether the uncommercial transaction claim provides an arguable basis for the injunction and otherwise whether the injunction should be granted and if so, on what terms.

65    Pending the determination of the appeal, orders were made restraining Linkage from removing Dragon Pearl from Australian waters and from transferring, assigning, encumbering or otherwise dealing with any right, title or interest in the vessel. Provided an appropriate undertaking is proffered, those orders should be extended until further order with liberty to Linkage to apply. It is appropriate to make those orders to preserve the subject matter of the application for injunctive relief until that application is determined. There should be liberty to apply on seven days’ notice in the meantime.

66    As to costs, the appellants have been unsuccessful in their challenge to the summary dismissal of the second in rem proceedings and the respondents should have the costs of the appeal against those orders. Otherwise, the costs on the appeal concerning the refusal of the application for injunctive relief should form part of the costs in that application.

Associate:

Dated:    16 August 2018