CATCHWORDS

RES JUDICATA AND ISSUE ESTOPPEL - extension of res judicata declared in Port of Melbourne Authority v. Anshun Proprietary Limited (1981) 147 CLR 589 - whether applicable to a matter which could only have been raised by a cross-claim - principles applicable where an Anshun estoppel is sought to be used to base an application for a stay, striking out, or summary dismissal of a claim - whether caution should be exercised in any application of the principle to the raising of cross-claims - discussion of the concept for the purposes of the principle of "conflicting judgments" - reference to reasons why a party might reasonably refrain from raising an issue in litigation and why the law should not require him to do so.

Port of Melbourne Authority v. Anshun Proprietary Limited

  (1981) 147 CLR 589

Boles v. Esanda Finance Corporation Ltd (1989) 18 NSWLR 666

Effem Foods Pty Limited v. Trawl Industries of Australia Pty

  Limited (1993) 43 FCR 510

Trawl Industries of Australia Pty Limited v. Effem Foods Pty

  Limited (1992) 36 FCR 406

Tanning Research Laboratories Inc. v. O'Brien (1990) 169 CLR

  332

West Wiltshire District Council v. Garland [1995] 2 WLR 439

General Steel Industries Inc. v. Commissioner for Railways

  (N.S.W.) (1964) 112 CLR 125

Wardley Australia Limited v. The State of Western Australia

  (1992) 175 CLR 514

Scott v. Beneficial Finance Corporation Ltd 31 May 1994,

  unreported, Wilcox, Einfeld and Beazley JJ

Brewer v. Brewer (1953) 88 CLR 1

Rogers v. R. (1994) 123 ALR 417

Cromwell v. County of Sac. (1897) 94 US 351

CURRABUBULA HOLDINGS PTY LIMITED v. MITA COPIERS AUSTRALIA PTY LIMITED

NG 92 of 1995

Burchett J.

Sydney

5 May 1995

IN THE FEDERAL COURT OF AUSTRALIA)

                                  )

NEW SOUTH WALES DISTRICT REGISTRY)    NG 92 of 1995

                                  )

GENERAL DIVISION                  )

           BETWEEN:     CURRABUBULA HOLDINGS PTY LIMITED

                             Applicant

               AND:     MITA COPIERS AUSTRALIA PTY LIMITED

                             Respondent

CORAM: Burchett J.

PLACE: Sydney

DATE : 5 May 1995

                     ORDER OF THE COURT

     THE COURT ORDERS THAT the motion be dismissed with costs.

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

IN THE FEDERAL COURT OF AUSTRALIA)

                                  )

NEW SOUTH WALES DISTRICT REGISTRY)    NG 92 of 1995

                                  )

GENERAL DIVISION                  )

           BETWEEN:     CURRABUBULA HOLDINGS PTY LIMITED

                             Applicant

               AND:     MITA COPIERS AUSTRALIA PTY LIMITED

                             Respondent

CORAM: Burchett J.

PLACE: Sydney

DATE : 5 May 1995

                    REASONS FOR JUDGMENT

BURCHETT J.:

     The respondent to this application moved on notice of motion for summary dismissal of the proceeding.  In support of the motion, the sole ground urged was that the proceeding is ineluctably barred by the extended doctrine of res judicata expounded by the High Court in Port of Melbourne Authority v. Anshun Proprietary Limited (1981) 147 CLR 589 at 602-603, particularly as explained by Samuels J.A. (with whom Priestley and Meagher JJ.A. agreed) in Boles v. Esanda Finance Corporation Ltd (1989) 18 NSWLR 666 at 673. 

     I drew attention in my judgment in Effem Foods Pty Limited v. Trawl Industries of Australia Pty Limited (1993) 43 FCR 510 at 531-532 to the fact that an application to stay or strike out a proceeding on the ground of res judicata has been held, on high authority, to be available where it can be said that the institution of the proceeding in the face of an applicable res judicata was an abuse of the process of the court.  There is, of course, no inconsistency between the recognition of this as the basis on which a summary application is brought and a recognition that the ground of an Anshun estoppel is not itself abuse of process, but the particular kind of unreasonableness expounded in Anshun and in Boles.  But the fact that the Anshun estoppel is raised, not as it was in Anshun at the hearing of the action, but in an application for summary judgment, does have the consequence which I pointed out in the passage I have cited from Effem Foods.  That consequence is that the Court's discretion can only be exercised in favour of the summary remedy with great caution and in a very clear case.  This was put strongly by the Privy Council in Yat Tung Investment Co Ltd v. Dao Heng Bank Ltd [1975] AC 581 at 590: the power is "a power which no court should exercise but after a scrupulous examination of all the circumstances".  In a recent decision, West Wiltshire District Council v. Garland [1995] 2 WLR 439, speaking of the power to strike out generally, Balcombe L.J. (with whom Butler-Sloss and Leggatt L.JJ. agreed) quoted (at 443) an earlier statement of Sir Thomas Bingham M.R., who had said that

    "where the legal viability of a cause of action is unclear (perhaps because the law is in a state of transition), or in any way sensitive to the facts, an order to strike out should not be made.  But if after argument the court can be properly persuaded that no matter what (within the reasonable bounds of the pleading) the actual facts the claim is bound to fail for want of a cause of action, I can see no reason why the parties should be required to prolong the proceedings before that decision is reached."

     In Anshun itself, as appears at 594, the question came before the High Court by way of an appeal from a decision given at the hearing of an action.  An earlier summons for summary judgment had been dismissed on the basis that the point was not clear.  The notice of motion in the present case did not seek a stay or striking out of the application: cf. Chamberlain v. Deputy Commissioner of Taxation (1988) 164 CLR 502 at 510-511; Effem Foods (supra) at 531-532.  What was sought was summary dismissal.  But I do not think the precise form of the relief sought affects the applicability of the well known caution against "the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner by the court", which was stated by Dixon J. in Dey v. Victorian Railways Commissioners (1949) 78 CLR 62 at 91 and by Barwick C.J. in General Steel Industries Inc. v. Commissioner for Railways (N.S.W.) (1964) 112 CLR 125 at 129.  What was said by Mason C.J., Dawson, Gaudron and McHugh JJ. in Wardley Australia Limited v. The State of Western Australia (1992) 175 CLR 514 at 533 seems to me to be as applicable to the question whether a defence based upon the principle of Anshun is bound to succeed, as it is to the question whether a limitation defence is bound to succeed.  Their Honours said:

    "We should, however, state in the plainest of terms that we regard it as undesirable that limitation questions of the kind under consideration should be decided in interlocutory proceedings in advance of the hearing of the action, except in the clearest of cases.  Generally speaking, in such proceedings, insufficient is known of the damage sustained by the plaintiff and of the circumstances in which it was sustained to justify a confident answer to the question."

Similarly, the detail of the circumstances in which it must be determined whether the failure to raise a point in an earlier proceeding was unreasonable will often be insufficiently known at the interlocutory stage.  What is reasonable is a question very apt to call for a consideration of the full circumstances.

     The material put before me in this case shows that the present respondent Mita Copiers Australia Pty Limited ("Mita") brought a proceeding against Condor OA Pty Ltd ("Condor"), Anthony Paola and the present applicant Currabubula Holdings Pty Limited ("Currabubula") in the Commercial Division of the Supreme Court of New South Wales.  In that proceeding, Mita alleged that Condor had incurred indebtedness to it as its distributor of photocopying equipment, and had also taken over a debt owed to it by previous distributors of some $800,000.  Mita then alleged that Paola and Currabubula had guaranteed the debts of Condor; or alternatively that they had guaranteed the debts other than those taken over, and that payments made, which would have discharged current debts if allocated against them, had in fact been allocated to the debts taken over, leaving a large amount of current debt for which Paola and Currabubula were responsible as guarantors.  On the face of the guarantee, it seems to me that Mita's claim that it extended to the debt of $800,000 taken over could not be sustained.  It was limited to "amounts ... owing ... for all goods, services or both which [Mita] may from time to time supply or have supplied to [Condor]".  The debt taken over related to goods supplied to previous distributors.  It follows that the claim brought against Currabubula could only have succeeded on the basis that the payments made by Condor were validly allocated to the debt taken over, so that amounts owing in respect of goods and services supplied to Condor were left unpaid.  A perusal of the judgment handed down by Hunter J. on 10 October 1994 shows that very much of the evidence considered by him was concerned with this issue, which he found against Mita.  Accordingly, its claim was dismissed with costs.

     A few months later, the applicant commenced the present proceeding in this court.  By its statement of claim, Currabubula pleads a series of conversations between Mr Paola, a director of both Currabubula and Condor, and officers of Mita, in which various representations are alleged to have been made on behalf of Mita concerning the debts taken over by Condor and the benefits intended to be conferred upon Condor.  It is alleged that these representations were made in trade and commerce, and that in reliance upon them the applicant executed the guarantee, provided financial accommodation to Condor, and expended funds in support of Condor's business.  The representations are claimed to have amounted to misrepresentations within the meaning of s. 52 of the Trade Practices Act 1974, whereby the applicant has suffered loss.  Damages are sought pursuant to s. 82 of the Trade Practices Act.

     There is no doubt that the cause of action sued upon in this Court could have been maintained by way of cross-claim in the proceeding in the Commercial Division of the Supreme Court.  If it had been, as a claim by one of three defendants, it might or might not have been permitted to go to a hearing at the same time as Mita's claim against Condor, Paola and Currabubula.  Mita now asserts that the pursuit of the matter by cross-claim would have saved a great deal of time and expense, as a number of the witnesses relevant to each claim are relevant to the other.  It is not clear to me how true this is, since the judgment of Hunter J. seems to suggest that much of the time was taken up in the Supreme Court with evidence on the relatively confined point whether each of the various payments made was authorized to be allocated to the discharge pro tanto of the debt that had been taken over.  But even if the evidence was identical, the decision of the Privy Council in Duedu v. Yiboe [1961] 1 WLR 1,040, which is cited with approval in the joint judgment of Brennan and Dawson JJ. in Tanning Research Laboratories Inc. v. O'Brien (1990) 169 CLR 332 at 346, shows that this in itself could not justify dismissal of Currabubula's action.  In Duedu v. Yiboe the coincidence of the evidence required to support the plaintiff's case with that required to support his case in the previous action was so complete that, as appears from the judgment of Lord Hodson speaking for himself, Lord Denning, and Lord Morris of Borth-y-Gest (at 1,044), the plaintiff was able to succeed in the second case by tender of the record of the earlier one without calling any further evidence.  The plaintiff had prevailed as defendant in an action in trespass.  Lord Hodson said (at 1,046):

    "The ownership of the land was decided in favour of the plaintiff and should have settled his title to the land.  If he had counterclaimed he should have obtained a declaration of his title.  Not having counterclaimed he was forced to get over his procedural difficulty by instituting fresh proceedings founded upon the judgment he had earlier obtained in order to obtain the relief which he seeks, that is to say, a declaration of his title to the land.  To this relief he is plainly entitled."

     It would be productive of very great inconvenience, and indeed would be a travesty of justice, if in a case of that kind the law were otherwise.  In Tanning Research Laboratories, Brennan and Dawson JJ. said (at 346):

    "A plaintiff who has an unadjudicated cause of action which can be enforced only in fresh proceedings (Duedu v. Yiboe [1961] 1 WLR 1,040, at p. 1,046) 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 pp. 599-601."

     The principle of law which must be applied in considering whether Mita has made out the necessary clear case to justify the summary order it seeks is authoritatively declared, for Australian courts, by the majority decision of the High Court in Port of Melbourne Authority v. Anshun Pty Ltd (supra), the effect of which I endeavoured to summarize in Effem Foods (supra) at 538-539.  What was there involved was an initial action in which both the Authority and Anshun Pty Ltd ("Anshun") were sued as joint or concurrent tortfeasors in respect of an injury to a workman sustained by the use of a piece of equipment, a crane, hired by the Authority to Anshun.  Each sought contribution from the other under the relevant statute providing for contribution between tortfeasors.  In fact, a contractual indemnity had been given by Anshun to the Authority in respect of any injury arising out of the use of the crane.  The injured person recovered a verdict, and contribution was assessed at 90% against the Authority and 10% against Anshun.  Then the Authority commenced the action which was appealed to the High Court, claiming its right to a contractual indemnity.  In the joint judgment of Gibbs C.J., Mason and Aickin JJ., the conclusion was reached (at 597) that the case was not one of res judicata, in the ordinary sense.  Nor was it a case of issue estoppel.  But their Honours examined and re-stated the principle stated by Sir James Wigram V.C. in Henderson v. Henderson (1843) 4 Hare at 115; 67 ER at 319.  After a lengthy discussion, they said (at 602-603):

    "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 U.S. [24 Law. Ed., at p. 199].

     It has generally been accepted that a party will be estopped from bringing an action which, if it succeeds, will result in a judgment which conflicts with an earlier judgment.  In this respect the discussion in Brewer v. Brewer (1953) 88 C.L.R. 1 is illuminating."

     With regard to this principle, there are several points which it is important to bear in mind.  In the first place, as Samuels J.A. remarked in Boles at 674, the actual language in which the principle is stated in the joint judgment was appropriate to the particular type of case with which the High Court was dealing, and this language "must be confined to defences".  It is not really applicable to claims.  But that does not mean that the broad test of reasonableness cannot be applied.

     In the next place, as Samuels J.A. also pointed out in Boles (at 669), the rule must be seen as an extension of the principle of res judicata.  Actually, the joint judgment in
the High Court in Anshun (at 598-599) allows of its application to cases of issue estoppel, but expressly says that this "is to be treated with caution".  The great authority of Lord Wilberforce and Lord Reid is brought forward in support of the proposition that the principle is "an instance of res judicata".  Once it is seen in this light, the emphasis must be placed on the particular cause of action said to have become merged in the previous judgment in default of its having been then relied upon.  Obviously, a rule so understood can be more readily applied to a defence that might have been raised, but was not, than to a separate cause of action which, even by the greatest extension of the principle, can only with difficulty be seen as part of the res the subject of the earlier judgment, so as to be merged in that judgment as judicata.

     Thirdly, there is an independent ground for treating with some caution the application of Anshun to an issue that could only have been raised as a separate cause of action by cross-claim.  There may have been many reasons why the original proceeding was not enlarged by the addition of such a cross-claim.  It would be very undesirable for the law to embrace a principle the tendency of which would be to require defendants to magnify cases brought against them by the introduction of separate causes of action by way of cross-claim, for fear that failure to raise a doubtfully significant question might preclude reliance upon it later when it might possibly turn
out in fact to be very important.  It is not the policy of the law to encourage a proliferation of conflict.

     In the joint judgment in Port of Melbourne Authority v. Anshun Pty Ltd, reference is made (at 600-601) to the particular problem whether a party should be required to raise a cross-claim, or rather, whether it can be said that a party acted unreasonably in not raising a cross-claim.  Their Honours comment:

    "To require that the defendant always raise his cross-claim or set-off at the first available time could cause great inconvenience."

The passage which I have already quoted from the judgment of Brennan and Dawson JJ. in Tanning Research Laboratories strongly suggests that their Honours would not generally see a failure to raise a cross-claim in a forum chosen by the opposite party as unreasonable.  The other members of the court in that case did not commit themselves to any statement either way; they considered the question should be left to the hearing, which was to be by arbitration.  Toohey J. (at 355) emphasized another matter I have already mentioned, that the application of an Anshun estoppel may be affected by the full facts of the case.  He added: "The precise scope of Anshun is itself a matter of some debate", a proposition which requires me to take account of the dictum of Sir Thomas Bingham M.R. cited at the commencement of these reasons. 

     The question whether the Anshun principle applies to a litigant's failure to make a cross-claim in earlier proceedings was raised in the full court of the Federal Court in Scott v. Beneficial Finance Corporation Ltd (Wilcox, Einfeld and Beazley JJ., unreported, 31 May 1994).  As the court was of the firm opinion that there was no error of principle disclosed by the decision of the trial judge finding it not to have been unreasonable of the respondent to omit to plead a cross-claim, the question did not have to be decided, and the court expressly refrained from expressing any view upon it.  In their joint judgment, their Honours simply said:

    "It is clear that the test to be applied in relation to the Anshun principle is whether it was unreasonable of that person not to plead a particular defence or, if the principle applies to cross-claims, a particular cross-claim."

However, in Bryant v. Commonwealth Bank of Australia (1994) 123 ALR 642 at 649, Einfeld J. held "that there is no strict limitation of the Anshun principle to defences as opposed to cross-claims".  But his Honour added a reference to the proposition in the majority judgment in Port of Melbourne Authority v. Anshun Pty Ltd, which I have quoted, that "[t]o require that the defendant always raise his cross-claim or set-off at the first available time could cause great inconvenience".  He added:

    "In my opinion a cross-claim can form the basis of an Anshun estoppel, but in view of the nature of a cross-claim and the many reasons why it may be unreasonable to expect parties to raise all such claims on the first occasion, it will only be the exceptional case when a cross-claim will satisfy the Wigram test."

This decision, which is subject to appeal, is referred to in a later case Bryant v. Commonwealth Bank of Australia (Sackville J., unreported, 3 March 1995).  Sackville J. makes the following comment on the view expressed by Einfeld J.:

    "But his Honour recognised that it would only be in an exceptional case that a cross claim would satisfy the test."

He notes that Einfeld J. considered certain issues nevertheless did satisfy the test, "primarily because they were so intimately related to the subject of the [earlier] proceedings". 

     In considering whether a particular claim which could only have been raised in the earlier proceeding by cross-claim is a claim it was unreasonable not to raise then, one specific matter of which the joint majority judgment in Port of Melbourne Authority v. Anshun Pty Ltd makes mention (at 603-604) is the question whether the failure to raise the issue was likely to contribute to the existence of conflicting judgments.  On this question, their Honours refer to the discussion in Brewer v. Brewer (1953) 88 CLR 1 as "illuminating".  In that case, Fullagar J. (with whom Dixon C.J. agreed) made quite clear (at 15) the nature of a conflicting judgment.  It is one that contradicts an assumption that is "fundamental" to the earlier decision, "in the sense that, if the assumption had not been made, the decision must have been different".  I do not think Gibbs C.J., Mason and Aickin JJ. in Port of Melbourne Authority v. Anshun Pty Ltd (at 603-604) intended to depart from this view of the matter.  In the same judgment, Fullagar J. made a statement that must add weight to the caution which, as all the authorities make clear, should be exercised before a party is held barred by the extended res judicata.  He said (at 20):

    "The truth is that the rules of issue-estoppel have been carefully defined by the courts for the very purpose of determining as precisely as possible under what circumstances a party may put forward on a subsequent occasion material not put forward on a prior occasion.  Such rules lose their value and their significance when attempts are made on vague grounds to give the effect of an estoppel to circumstances which admittedly create no estoppel."

With this admonition may be compared the remarks of Deane and Gaudron JJ. in Rogers v. R. (1994) 123 ALR 417 at 435, where they said:

    "Considerations bearing on estoppel resulting from the failure to raise some issue which could reasonably have been raised in earlier proceedings have sometimes been conflated with considerations relevant to the various principles aimed at ensuring the final, binding and conclusive nature of judicial determinations.  This seems to have been the case with the so-called `extended principle' in Henderson v. Henderson which would allow that:

         `[t]he 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.'

     It is clear that that principle, if it be one, is to be treated with caution."  (Emphasis added.)

The need for that caution explains why in the authorities, including Anshun itself (at 604) - as to which see the comment of Dawson J. in Chamberlain v. Deputy Commissioner of Taxation (1988) 164 CLR 502 at 512 -, Trawl Industries of Australia Pty Limited v. Effem Foods Pty Limited (1992) 36 FCR 406 at 422-423, and Re Neal; Ex parte Neal v. Duncan Properties Pty Ltd (1994) 123 ALR 614 at 621-622, so much emphasis has been placed on the question whether a party is seeking a judgment that will conflict with an earlier judgment.  In such a case, the principle of Anshun makes its nearest approach to the well defined principles of res judicata and issue estoppel.

     As Samuels J.A. pointed out in Boles (at 673), an application of the Anshun principle

    "requires the conclusion that it was unreasonable for [the party concerned] to have refrained from raising its present claim ... in the first action.  Such an estoppel therefore depends upon the exercise of a broad discretion since the question of whether a litigant's conduct was unreasonable can scarcely be determined in any other way."

Bearing in mind the considerations I have mentioned, and those which are implicit in the authoritative statements I have quoted, I think that, assuming the principle applies to an issue which could only have been raised by cross-claim, it
would be a rare case where a positive finding could be made, particularly in summary proceedings and without the benefit of a full hearing, that the failure to make a cross-claim was unreasonable.  But where the earlier proceedings terminated in favour of a defendant who later wishes to prosecute a claim which he could have raised, but only by cross-claim, in the earlier proceedings, it would surely be an even rarer case that would call for such a finding.  For why should the court regard it as unreasonable of a litigant to rely on battle lines which the event proved impregnable, and therefore to refrain from calling up unnecessary reserves?  Practical considerations make a further demand for caution here, and give weight to the warning uttered, in a similar context, by Lord Reid, which is quoted by Lord Keith of Kinkel in Arnold v. National Westminster Bank Plc. [1991] 2 AC 93 at 107. 

     It is worth repeating that, in the passage I have cited from Anshun in which the principle is declared, it is accepted "a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings".  The joint judgment cites Cromwell v. County of Sac. (1897) 94 US 351.  There Field J., delivering the opinion of the court, said (at 356):

    "Various considerations, other than the actual merits, may govern a party in bringing forward grounds of recovery or defence in one action, which may not exist in another action upon a different demand, such as the smallness of the amount or the value of the property in controversy, the difficulty of obtaining the necessary evidence, the expense of the litigation, and his own situation at the time.  A party acting upon considerations like these ought not to be precluded from contesting in a subsequent action other demands arising out of the same transaction."

     In the present case, I am clearly of opinion that Currabubula has not been shown to have acted unreasonably in refraining from raising a cross-claim in the proceeding in the Supreme Court.  Its present action cannot result in a judgment inconsistent with that reached on a discrete point in the earlier proceeding.  It is not enough that questions now raised could have been raised in the Supreme Court, nor that some duplication - even substantial duplication - of some of the evidence will be involved.  The High Court has made the ultimate test depend upon considerations of reasonableness in which these matters are but factors to be weighed with all the circumstances.  In my opinion, the motion should be dismissed with costs.

     I certify that this and the preceding sixteen (16) pages are a true copy of the Reasons for Judgment herein of his Honour Justice Burchett.

     Associate:

     Date: 5 May 1995

     Counsel for the Applicant:        Mr B.A.J. Coles Q.C. with Mr D.P. Robinson

     Solicitors for the Applicant:         Gadens Ridgeway

     Counsel for the Respondent:       Mr J.C. Campbell Q.C. with Mr R.G. Kaye

     Solicitors for the Respondent:    Mallesons Stephen Jaques

     Date of hearing:                  2 May 1995