FEDERAL COURT OF AUSTRALIA

Brookfield v Davey Products Pty Ltd [2000] FCA 448

PRACTICE & PROCEDURE – pleadings – O 11 r 10 Federal Court Rules – whether particulars of fraud or dishonesty adequately pleaded.

COURTS – res judicata – issue estoppel – prior judgments – whether rights of parties finally determined – abuse of process if current claim allowed – application for permanent stay.

COSTS – security for costs – impecunious applicant company and individual – effect of order for security for costs on applicants.

Bankruptcy Act 1966 (Cth) s 41(6A) and s 41(7)

Federal Court of Australia Act 1976 (Cth) s 56

Trade Practices Act 1974 (Cth) s 52

Social Security Act 1991 (Cth)

Federal Court Rules O 11 r 10, O 12 r 3 , O 15 r 2, O 20 r 2, O 28 r 3(1)(b), O 37 r 6

Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 considered

Commonwealth Bank of Australia v Quade (1991) 178 CLR 134 considered

Dey v Victorian Railways Commissioners (1949) 78 CLR 62 applied

General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 applied

Walton v Gardiner (1993) 177 CLR 378 applied

Theseus Exploration NL v Foyster (1972) 126 CLR 507 applied

Gamser v Nominal Defendant (1977) 136 CLR 145 applied

Blair v Curran (1939) 62 CLR 464 considered

Ramsay v Pigram (1968) 118 CLR 271 applied

Jackson v Goldsmith (1950) 81 CLR 446 applied

Ramsay v Pigram (1968) 118 CLR 271 applied

Administration of the Territory of Papua New Guinea v Guba (1973) 130 CLR 353 applied

Morton v Vouris (1996) 21 ACSR 497 applied

Rogers v R (1994) 181 CLR 251 applied

Licul v Corney (1976) 180 CLR 213 referred to

Carr v Finance Corporation of Australia Ltd (1981) 147 CLR 246 referred to

D A Christie Pty Ltd v Baker [1996] 2 VR 582 applied

Walton v Gardiner (1993) 177 CLR 378 referred to

Re Wakim; ex parte McNally (1999) 163 ALR 270 referred to

Edensor Nominees Pty Ltd v Australian Securities & Investment Commission [1999] FCA 1722 referred to

Pearson v Naydler [1977] 1 WLR 899 applied

Fletcher v Federal Commissioner for Taxation (1992) 92 ATC 4437 applied

Lucas v Yorke (1983) 50 ALR 228 applied

Rockwell Machine Tool Co Ltd v E P Barrus (Concessionaires) Ltd [1968] 2 All ER 98 referred to

Compagnie Financiere et Commerciale du Pacifique v The Peruvian Guano Co (1882) 11 QBD 55 referred to

Bell Wholesale Co Pty Ltd v Gates Export Corporation (No 2) (1984) 2 FCR 1 distinguished

Reches Pty Ltd v Tadiran Pty Ltd (1998) 85 FCR 514 distinguished

IAN WALTER BROOKFIELD and SEPTIC PRODUCTS AUSTRALIA PTY LTD

(IN LIQUIDATION) v DAVEY PRODUCTS PTY LTD

SG 112 OF 1993

MANSFIELD J

12 APRIL 2000

ADELAIDE

THE COURT ORDERS THAT:

1.                  The claims made in pars 1, 2 and 4 of the notice of motion be refused.

2.                  The applicants provide particulars of pars 17 and 22 of the Points of Claim in accordance with these reasons.  Davey Products to prepare minutes of order.  Liberty to the parties to speak to the terms of the minutes of order.

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

REASONS FOR DECISION

1                     The current claim in this matter commenced by notice of motion filed on 27 November 1998.  It sought orders that the judgment of the Court (Branson J) given on 8 February 1996 be set aside, as it “proceeded on a misapprehension as to the facts and the law” and “was obtained by extrinsic fraud”.  The applicant on that motion was Ian Walter Brookfield (“Mr Brookfield”).

2                     Subsequently, in accordance with directions of the Court, Points of Claim have been filed by solicitors now acting in the matter.  In those Points of Claim, the applicants are identified as Mr Brookfield and Septic Products Australia Pty Ltd (in liquidation) (“Septic Products”).  The present expression of the claims of Mr Brookfield and Septic Products (together “the applicants”) is set out in amended Points of Claim filed on 18 June 1999 (“the Points of Claim”).  I shall call that claim “the current claim”.

3                     The respondent Davey Products Pty Ltd (“Davey Products”) has now moved pursuant to O 20 r 2 of the Federal Court Rules (“the Rules”) to dismiss or permanently stay the current claim of the applicants.  In the alternative, Davey Products seeks orders that the Points of Claim be struck out or that pars 17, 22, 23 and 25(b) of the Points of Claim be struck out.  Davey Products also seeks an order for security for costs against the applicants.

4                     There may be an issue whether the current claim of the applicants should be in this matter.  That question may be put to one side for the time being.  Its significance emerges when considering the nature of the current claim as expressed in the Points of Claim.

The nature of the current claim

5                     Originally the applicants commenced proceedings against Davey Products and others in this matter (Action SG 112 of 1993).  The proceedings against the other respondents were subsequently resolved.  The matter proceeded only against Davey Products.  On 8 February 1996, Branson J, after a lengthy hearing, dismissed the application and ordered the applicants to pay the costs of Davey Products to be taxed.  On 19 December 1997 Branson J varied that costs order to provide that Mr Brookfield pay the costs of Davey Products in the sum of $380,493.82.

6                     The decision of Branson J was upheld by the Full Court (von Doussa, O’Loughlin and Lehane JJ) on 12 September 1996 (in Action SG 20 of 1996).  The applicants sought special leave to appeal to the High Court of Australia, but that application was refused.

7                     The matter which proceeded to trial before Branson J involved claims against Davey Products that it had engaged in misleading and deceptive conduct in about 1991 in relation to the sale and supply to the applicants of submersible Lowara pumps for use in household waste water systems produced by the applicants.  The applicants also pursued claims arising out of the same conduct for breach of contract and for negligent misrepresentation.  The gravamen of the applicants’ complaint was that Davey Products falsely and misleadingly represented that:

·                      the Lowara pumps were capable of adequately substituting the pumps which the applicants had previously used in their waste water treatment systems;

·                      that the Lowara pumps were capable of working in the waste water systems being produced by the applicants; and

·                      that the Lowara pumps were of merchantable quality and were fit for the purpose for which Davey Products knew they were required in that the pump shafts were not manufactured from a steel that was sufficiently strong for that purpose.

I will call that claim “the primary claim”.

8                     Once the High Court had refused special leave to appeal, it appeared that the primary claim of the applicants against Davey Products had reached finality.  As the current claim demonstrates, that was not the case.

9                     The current claim is made because, it is alleged, Davey Products failed to give proper discovery of documents in the primary claim.  Davey Products filed lists of documents in the primary claim on 23 March 1995, 19 April 1995, 2 August 1995 and 4 August 1995.  All verified by affidavit in the usual form by Mr Dallas Wilsdon (“Mr Wilsdon”) who was at that time (and according to the Points of Defence, until July 1996) the South Australian State Manager of Davey Products.  Davey Products has since filed a further list of documents in the matter on 10 May 1999.  The applicants sought further and better discovery from Davey Products by requests made on ten occasions between 3 February 1995 and 8 August 1995.

10                  The Points of Claim refer specifically to a further affidavit of Mr Wilsdon sworn on 30 July 1995 in the matter in which he is alleged to have said that:

·                    he had inspected the records of Davey Products to determine the total number of Lowara pumps which Davey Products had sold throughout Australia and the number returned to or replaced by Davey Products;

·                    based on that inspection, he had prepared a schedule (exhibit DW25) summarising the total sales figures, and a further schedule (exhibit DW27) summarising the sales and returns of pumps sold to manufacturers of waste water treatment systems;

·                    a fire had occurred in the Sydney offices of Davey Products in 1993 which destroyed those records which would enable Mr Wilsdon to determine the reason that a pump was returned to or replaced by Davey Products.

11                  The Points of Claim controvert those statements attributed to Mr Wilsdon.  The applicants allege firstly that the fire occurred in 1991, and that the only records then destroyed were those relating to Lowara pumps returned in New South Wales in the period September 1990 to March 1991.  They further allege that the schedule of total sales wrongly contained within it the assertion that Davey Products had no records of pumps returned in 1988/1989 or 1989/1990 when in fact Davey Products did have such records, and that such records disclosed that many pumps had been returned during those two financial years.  It is also alleged that Davey Products did not make full and proper discovery of documents it possessed on any of the occasions upon which a list of documents was filed and served, or at any time up to the date of the hearing of the trial or of the appeal, and in particular that it did not discover “customer sales reports”, “warranty transaction reports” and “return job cards”.  The applicants further allege that Davey Products has not at any time discovered those documents, nor the source documents for the information contained in exhibit DW25, notes memoranda and other records of examination and testing of Lowara pumps returned as faulty, or notes memoranda correspondence and other records of communication with Lowara as to the causes and extent of the failure of such pumps.  I shall call the documents so identified as not having been discovered “the non-discovered documents”.  It is further alleged that Davey Products now says that it destroyed the non-discovered documents after 6 May 1996 and before 12 September 1996.

12                  The applicants allege that the existence of the non-discovered documents was at all material times “concealed from the Court and the applicants”.  They claim that Davey Products through its counsel and solicitors has acknowledged on two occasions in May 1999 that the discovery made by Davey Products in relation to the primary claim in the matter was and remains incomplete.  Paragraph 22 of the Points of Claim alleges:

“Davey by its servants and agents:

(a)           deliberately withheld from the applicant the documents relating to the extent of failures of the Davey Lowara pumps; or

(b)           alternatively, were recklessly indifferent to their obligation to make discovery and well knowing the documents would negate the basis of the defence to the applicants’ claim, turned a blind eye to its obligations to discover such documents and permitted its solicitors to defend the claim on grounds which it knew or ought to have known were false; or

(c)           alternatively, well knowing that the pumps were failing in large numbers instructed their solicitors to falsely assert that the pumps failed because of a modification in the applicants’ operating system when the respondent well knew that numbers of Lowara pumps were failing in exactly the same manner in other applications which did not involve such a modification;

(d)           destroyed documents which it well knew had been withheld from discovery when the appeal to the Full Federal Court was pending and which it knew:

(i)                  would support the appeal; and

(ii)        would be relevant in any new trial ordered by that Court.”

13                  The applicants claim that the significance of the non-discovered documents, had they been available to the applicants, is that there would have been “a real possibility, if not a high probability” that the applicants’ primary claim would have been successful at first instance or, if the discovery had been made only after the judgment of Branson J and before the Full Court heard the appeal, on appeal.

14                  Accordingly, it is claimed that the orders of the Court at first instance and on appeal in the primary claim were obtained by material non-disclosure by Davey Products, and by an abuse by Davey Products of the process of the Court.  Orders are sought setting aside the judgment dismissing the applicants’ primary claim and the costs order made against Mr Brookfield, and for consequential orders.

Other proceedings

15                  In Action SG 99 of 1997 the applicants sought orders staying the execution of the costs order made by Branson J on 19 December 1997 “until 2 August 1998 when the application to have judgment set aside will be served and filed”, and for “full and proper discovery”.  The significance of the date 2 August 1998 was not then explained, but I understand from later submissions that it was a date by which Mr Brookfield expected to have procured the evidence upon which he would make an application such as the current claim.  On 19 May 1998, O’Loughlin J dismissed that application.

16                  The applicants on 21 July 1998, in that action, sought an extension of time within which to file and serve a notice of appeal from that decision.  On 6 August 1998, I declined to extend that time to enable the applicants to appeal from the decision of O’Loughlin J.

17                  I shall call those proceedings “the stay proceedings”.

18                  In yet further proceedings in Action SG 7158 of 1998, following the service of a bankruptcy notice upon him in respect of the costs ordered to be paid by the order of Branson J on 19 December 1997, Mr Brookfield applied on 31 August 1998 for orders declaring that the bankruptcy notice was null and void

“because it [was] based on a judgment debt obtained by extrinsic fraud, misleading and deceptive conduct and a breach of duty by officers of the Court.”

19                  On 25 September 1998, I dismissed that application.  I shall call that claim “the bankruptcy proceeding”.  As appears from the reasons for judgment in the bankruptcy proceeding, it was dismissed because the application (which was in effect an application to set aside the bankruptcy notice) was made outside the time prescribed by s 41(6A) and s 41(7) of the Bankruptcy Act 1966 (Cth).  Apart from certain evidence given by Mr Brookfield in the bankruptcy proceeding being relied upon by Davey Products in its claim for security for costs, that proceeding has no special significance to the resolution of the present motion.

20                  Subsequently, the current claim was made in the manner described above.  Davey Products, by its counsel, has not submitted that the procedure adopted, that is by notice of motion in the action in which the primary claim was first brought, is itself a reason why the current claim should be dismissed.  That is, however, a matter which may require consideration in due course.  It is not a factor which I have regarded as relevant to determination of the notice of motion of Davey Products to have the current claim dismissed.  In other words, I have assumed for the purposes of deciding the issues raised on that motion that the current claim of the applicants as expressed in the notice of motion and in the Points of Claim is brought in properly constituted proceedings.

The claim to have the current claim dismissed

21                  Davey Products’ principal contention is simply that there is nothing new in the current claim, as the allegations of deliberate withholding of discoverable documents have been made since July 1997 and have been determined adversely to the applicants by O’Loughlin J on the stay proceedings.  Thus, it is contended, O’Loughlin J’s decision gives rise to res judicata, or to an issue estoppel as between the applicants and Davey Products.  Alternatively, Davey Products claims that the subject matter of the current claim could and should have been raised in the stay proceedings and that the appellants should now be estopped from pursuing it; they rely upon Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 (“Anshun”).  Finally, they contend that the current claim is an abuse of the process of the Court, as it gives rise to the same matters as were addressed in the stay application and therefore amounts to a collateral attack on the decision of O’Loughlin J given in those proceedings.

22                  In Commonwealth Bank of Australia v Quade (1991) 178 CLR 134 (“Quade”), the High Court (Mason CJ, Deane, Dawson, Toohey and Gaudron JJ) said at 142-143:

“It is neither practicable nor desirable to seek to enunciate a general rule which can be mechanically applied by an appellate court to determine whether a new trial should be ordered in a case where misconduct on the part of the successful party has had the result that relevant evidence in his possession has remained undisclosed until after the verdict.  The most that can be said is that the answer to that question in such a case must depend upon the appellate court’s assessment of what will best serve the interests of justice, “either particularly in relation to the parties or generally in relation to the administration of justice”.  In determining whether the matter should be tried afresh, it will be necessary for the appellate court to take account of a variety of possibly competing factors, including, in addition to general considerations relating to the administration of justice, the degree of culpability of the successful party, any lack of diligence on the part of the unsuccessful party and the extent of any likelihood that the result would have been different if the order had been complied with and the non-disclosed material had been made available.  While it is not necessary that the appellate court be persuaded in such a case that it is “almost certain” or “reasonably clear” that an opposite result would have been produced, the question whether the verdict should be set aside will almost inevitably be answered in the negative if it does not appear that there is at least a real possibility that that would have been so.”

23                  The applicants propose to rely upon that decision in support of their current claim.  Although Quade was decided in the context of further documentation coming to light between the judgment after trial and the hearing of the appeal, Davey Products accepts for the purpose of determining its motion that the observations of the High Court identify considerations relevant to whether the current claim may succeed.  The real questions are whether O’Loughlin J, in determining the stay proceedings, took account of those general observations or at least did so in relevant respects, and, in the alternative, whether the appellants should have ventilated the current claim before O’Loughlin J in the stay proceedings so that, in accordance with Anshun, the current claim can no longer be pursued.  It is therefore necessary to consider the reasons for decision in the stay proceedings.

The reasons for decision in the stay proceedings

24                  O’Loughlin J carefully analysed the decision of Branson J on the primary claim.  His Honour identified the claims of the applicants against Davey Products in the primary claim as based upon breach of contract, negligent misstatement and breach of s 52 of the Trade Practices Act 1974 (Cth) (“the Trade Practices Act”).  As his Honour observed, the losses alleged in the primary claim were all losses of Septic Products rather than losses of Mr Brookfield.  With respect to each of the three causes of action, his Honour reasoned that

(a)                the primary claim based on negligent misstatement failed because, whatever the representations made by Davey Products about the capabilities of its pumps were, they had been made for Mr Brookfield at a time before Septic Products was incorporated and there was no evidence that Septic Products relied upon any representations; thus, Septic Products had failed to establish the requisite degree of proximity between Davey Products and Septic Products to give rise to a duty of care

(b)               the primary claim based in contract involved sales of Davey Products pumps to Septic Products from mid March 1991, in circumstances where there were implied conditions as to the merchantable quality of the pumps and that the pumps were reasonably fit for the purpose for which they were supplied (at least in respect of some of the pumps supplied); however, in respect of the sales of pumps to which those implied conditions applied, the claim in contract failed because the actual use to which the pumps were put was different from the particular purpose made known to Davey Products, and that modifications to the waste water system made by the applicants altered the working environment so that the failures of the pumps were related to that altered working environment; their use in that altered working environment was not a particular purpose made known to Davey Products

(c)                the claim based upon provisions of the Trade Practices Act also failed because Mr Brookfield did not suffer loss directly by any misleading conduct and he was unable to recover loss on behalf of or in the name of Septic Products under s 82 of the Trade Practices Act even though the liquidator of Septic Products had assigned its cause of action to him.

25                  O’Loughlin J then observed:

“Most aspects of her Honour’s findings were challenged – all unsuccessfully – in the appeal processes and they are not now capable of further challenge unless the applicants can, as a result of establishing fraud or otherwise convincing the Court that fresh evidence warrants a new trial, have the litigation process reopened.”

26                  The order sought in the stay proceedings, as O’Loughlin J noted, was to suspend the costs order made by Branson J on 19 December 1997 “until perjury and fraud charges are laid” against Mr Wilsdon.  His Honour noted that, at the time the stay proceedings were heard and determined, Mr Brookfield did not, and did not then claim to have, evidence supporting his allegations of perjury and fraud.  He proposed to bring such a claim in the future.  He restricted the basis of his claim for the stay

“… to the alleged deliberate failure on the part of Davey Products and its solicitors to make proper discovery of all relevant documents prior to and during the course of the trial.”

27                  His Honour, after considering the evidence, found that Mr Wilsdon’s affidavit of 30 July 1995, about the availability of documents showing the extent to which pumps supplied by Davey Products at times material to the primary claim, was wrong.  It was wrong because:

(a)                it asserted that a fire in 1993 destroyed records which would disclose why pumps supplied by Davey Products were returned to or replaced by Davey Products at material times, whereas the fire occurred on 16 March 1991;

(b)               despite the assertion referred to, the only records destroyed in the fire were those relating to pumps returned to or replaced by Davey Products in the period September 1990 to 16 March 1991, and only those relating to returns or replacements in New South Wales; and

(c)                the schedule summarising the numbers of pumps returned to or replaced by Davey Products stated there were no records available to indicate why those pumps were returned in the financial years 1988/89 and 1989/90, whereas the primary records of Davey Products upon which that schedule was based included information covering those two financial years were available.  Those primary records had in fact been provided to the applicants by Davey Products in the course of producing documents for inspection before the trial of the primary claim.

His Honour found that the schedule summarising the numbers of pumps sold to manufacturers of waste water treatment systems, and of the numbers so supplied which were returned or replaced, were said to be collated from “customer sales reports, warranty transaction reports, and return job cards”.  Those documents were not discovered.  His Honour found that they should have been discovered.

28                  However, O’Loughlin J also observed that the applicants could have and should have explored those matters.  Mr Wilsdon’s affidavit was apparently contradictory because on the one hand it asserted the destruction of the records by fire and yet he deposed to having searched the records of Davey Products.  The primary records referred in par 27 above were provided to the applicants, and they showed that records were available which the schedule stated were not available.  The existence of the undiscovered documents was clearly signalled, but no request for discovery of those specific documents was made.

29                  In August 1996, when the New South Wales office of Davey Products was moved, all its old records were then destroyed.  That was some six months after the trial of the primary claims was completed.  His Honour did not draw any inference adverse to Davey Products as a consequence of its then destruction of its records.

30                  It is clear that Mr Brookfield claimed that the failure to make discovery of “customer sales reports, warranty transaction reports and return job cards” was a deliberate omission by Davey Products and its solicitors.  His Honour said that there was no evidence of a deliberate omission of discoverable documents, or of a deliberate refusal to follow its solicitors’ advice about what documents are discoverable.  He concluded:

“There is not, in my opinion, the slightest suggestion of bad faith on the part of [Davey Products’] solicitors.  That conclusion is obvious because of the express reference to the ‘non-discovered’ documents in Ex DW27 [the schedule] and because of the contents of Ex DW28 [the primary records produced].  This is a clear case of a genuine mistake about whether or not certain documents were discoverable.”

31                  Having made those findings, his Honour then considered what the legal consequences should be.  Quade’s case was, he observed, different.  In that case, there had been no lack of diligence on the part of those entitled to fuller discovery in not being aware of the documents that were subsequently discovered.  The findings referred to above led his Honour to remark:  “that cannot be said of Mr Brookfield and the company and their advisers with respect to the undiscovered documents …”.  The existence of those documents was well known to Mr Brookfield and to Septic Products.  They failed to persuade his Honour in the stay proceeding that there was no lack of diligence on their part in pursuing further discovery.

32                  O’Loughlin J also referred to a further reason why the application failed.  He said that even if it were shown that many pumps supplied by Davey Products were being returned because of their unsatisfactory performance, that would not assist the applicants.  Branson J had held that there was

“… a relationship between the established failure of a significant proportion of the Doc 3 pumps supplied by Septic Products by the respondent and the modifications effected by Mr Brookfield to the Parco Beaver System.”

As noted earlier, that use of the pumps in the modified water treatment system of the applicants was not a particular use which the applicants had made known to Davey Products.

33                  O’Loughlin J then addressed the question whether there was sufficient material to stay the execution of a regularly obtained judgment.  In light of the evidence, including the acknowledgments of error made by the witnesses called for by Davey Products, he described the allegation of perjury by Mr Wilsdon as having “dissipated”.  The real issue, in light of his findings, was the consequence of having failed to discover the non-discovered documents.  His Honour did not regard that failure as of sufficient substance to warrant the granting of the stay sought.  He had regard to the fact that the existence of those documents was there to be seen by the applicants and their advisers, and that they could have demanded discovery of those documents.  He added:

“Insofar as Mr Brookfield seeks a stay of judgment based upon his intended application to have judgment set aside, I must rate his chances of succeeding in that latter application, on the information presently before the Court, as very slight.  I have therefore come to the conclusion that this is not a case where it would be appropriate to stay the execution of the judgment.”  (My emphasis)

Consideration of Davey Products’ motion

34                  The principles upon which the Court should be guided in considering an application to dismiss or permanently stay a claim are well known.  They are not in issue.  An order under O 20 r 2 should only be made in a very clear case:  Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91 (“Dey”); General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 130; Walton v Gardiner (1993) 177 CLR 378 at 393.  The power is to be exercised only where the Court is persuaded that the prospects of the claim succeeding are so small that the claim ought not to be allowed to proceed to trial.  Sometimes, however, the assessment of those prospects can only be made by consideration of complex legal argument, or extensive documentation:  Dey at 91.  The Court’s role in such an application may be fulfilled by being satisfied that a particular view of the facts, or of the law applicable to those facts, is arguable.  It is not obliged at that point to finally decide what the facts are, or what is the law applicable to those facts.  Those matters are commonly left to the trial.

35                  In Theseus Exploration NL v Foyster (1972) 126 CLR 507, Barwick CJ said at 514:

“The jurisdiction to give summary judgment should not be exercised “where a difficult question of law is raised:  - see generally the Supreme Court Practice (1970) vol 1, pp 126-130.  Perhaps the summary intervention to prevent the continuance of a plaintiff’s action ought to be much rarer than the giving of summary judgment …” [in favour of an applicant].”

36                  In that case the Court regarded it as a proper exercise of the discretion of the primary judge not to have proceeded to hear and determine an application based upon uncontroverted documentary material:  see eg. per Gibbs J at 515.

37                  The respondents contend firstly that the decision of O’Loughlin J gave rise to an estoppel by res judicata with respect to the current claim.  It is true that the parties are the same in the stay proceedings as in the current claim.  However, in my judgment, it is not clearly made out by the respondents that a res judicata arose by reason of the disposition of the stay proceedings.  I am not satisfied that O’Loughlin J’s decision amounted to a final decision on the merits of the current claim.  I am inclined to the view that it is not a judgment finally determining the rights of the parties.  It was a discretionary judgment which was made expressly in the context that a claim such as the current claim would be pursued, although his Honour expressed a view about the prospects of a claim such as the current claim succeeding.  His Honour did not purport to make final orders on issues such as the current claim addresses, that is he did not intend to finally determine that the applicants could not set aside the decision in the primary claim.  Nor did he intend to adjudicate upon such a claim.  His Honour’s decision was arguably made under O 37 r 6 and r 10.  Those rules do not entitle the Court to set aside a judgment regularly entered because new facts or circumstances have arisen:  Gamser v Nominal Defendant (1977) 136 CLR 145.  Accordingly, Davey Products has not persuaded me to the necessary degree that the judgment in the stay proceedings gives rise to a res judicata with respect to the current claim.

38                  In Blair v Curran (1939) 62 CLR 464 (“Blair”) at 532 Dixon J explained the distinction between res judicata and issue estoppel as follows:

“… 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.”

39                  For an issue estoppel to arise on the current claim, it is necessary that in the stay proceedings the issue or an issue in the current claim was the subject of adjudication:  Ramsay v Pigram (1968) 118 CLR 271.  It is also necessary that that adjudication was made in final proceedings in respect of any issue of fact or law which was legally indispensable to the decision:  Blair (above); Jackson v Goldsmith (1950) 81 CLR 446 at 466; Ramsay v Pigram (1968) 118 CLR 271 at 276; Administration of the Territory of Papua New Guinea v Guba (1973) 130 CLR 353.  In Morton v Vouris (1996) 21 ACSR 497 at 516, Sackville J pointed out that the issue estoppel is confined to the ultimate facts which form the ingredients in the relevant cause of action.  The estoppel does not extend to findings of fact which, although probative of the ultimate issue, are not necessary to, or are not the legal foundation of the decision made:  Rogers v R (1994) 181 CLR 251 at 262, 274 and 283.

40                  Davey Products contends that O’Loughlin J in the stay decision, determined

·                      that the failure on its part to give discovery during the primary proceedings was not a deliberate one, in the sense that there was a conscious decision not to discover relevant documents, and

·                      the documents which Davey Products did not discover in the course of the primary claim, on the appeal from the decision given on the primary claim, could not have altered the outcome of the primary claim

and that that determination was made as part of a final judgment in the stay proceedings.

41                  In my judgment, for reasons already given, I am not persuaded that the decision in the stay proceedings was a judgment finally determining the rights of the parties.  See also Licul v Corney (1976) 180 CLR 213 and Carr v Finance Corporation of Australia Ltd (1981) 147 CLR 246.

42                  The applicants also submit that the facts alleged now the subject of the current claim are different from the facts alleged at the time of the stay proceeding.  The Points of Claim do allege that the non-discovered documents were “at all material times concealed from the Court and the applicants”, and that those documents were “deliberately withheld” from the applicants.  Paragraphs 22(c) and (d) of the Points of Claim are also significant.  It may be a matter of argument whether those allegations do really differ from the allegations before O’Loughlin J and which his Honour rejected.  However, as I am not satisfied to the necessary degree that the decision in the stay proceedings was a final judgment, it is not necessary to determine that question.  The fact that O’Loughlin J did not regard the stay proceedings as presenting any obstacle to a claim such as the present being pursued, in which the essence of the claim would be that there was an unconscionable failure to provide discovery in the primary proceedings, really fortifies that view.  So, too, does the clear indication of O’Loughlin J in the passage in his reasons referred to in par 33 above that in such a claim the information before the Court may be different from that which was then before his Honour.

43                  O’Loughlin J did reject the claim that the non-discovered documents, if discovered in a timely manner, would assist the applicants in setting aside the judgment in the primary claim.  He did this because Branson J had decided that there was a relationship between the failure of the pumps supplied to the applicants and the modification to the waste water treatment system.  The applicants contend that the current claim, in the terms employed by the High Court in Quade, requires them to show that there is a real possibility that the outcome of the primary claim would have been different if Davey Products had given proper discovery.  They submit that O’Loughlin J did not determine that precise question.  They also argue that, if it be shown by the non-discovered records that the pumps returned to or replaced by Davey Products from other acquirers were of the same proportion, or for the same reasons, as those which failed when supplied to Septic Products or Mr Brookfield, the conclusion that the cause of those failures was the modifications to the water treatment system of the applicants may not be so clear cut.  There is some affidavit evidence of Andrew Leishman and Michael Freame each sworn in November 1999 which may be capable of establishing that picture.  Again, as I am not persuaded that the decision in the stay proceedings was a final judgment, it is not necessary to consider those particular submissions further.

44                  Davey Products next claims that the Court should, in its discretion, permanently stay the current claim because it could and should have been made in the stay proceeding.  Reliance is placed upon Anshun.

45                  I have expressed the view that it is at least arguable, and is probably the case, that the stay proceedings did not give rise to a final judgment.  In  D A Christie Pty Ltd v Baker [1996] 2 VR 582, Hayne JA at 602 made the point that Anshun does not apply in respect of earlier interlocutory as opposed to final proceedings.  It presupposes an earlier final decision on the matter.  Charles JA at 606 adopted the same view.  In my view, that decision is sufficient warrant to decline to accede to the claim for summary judgment on the basis of an Anshun type estoppel.

46                  Finally, on this aspect of their claim, Davey Products submits that it is an abuse of process for the current proceedings to be maintained.  In Walton v Gardiner (1993) 177 CLR 378 at 393, Mason CJ, Deane and Dawson JJ said:

“[P]roceedings before a court should be stayed as an abuse of process if, notwithstanding that the circumstances do not give rise to an estoppel, their continuance would be unjustifiably vexatious and oppressive for the reason that it is sought to litigate anew a case which has already been disposed of by earlier proceedings.”

47                  As my reasons already indicate, I do not consider that the applicants are seeking to litigate anew a case which has already been dealt with in the stay proceedings.  The current claim was foreshadowed in the course of the stay proceeding, and it is plain from the reasons for decision of O’Loughlin J that his Honour was not intending to adjudicate upon the current claim or to foreclose it.  To the contrary, whilst expressing a less than sanguine view about the prospects of the applicants succeeding upon such a claim on the material before him, his Honour anticipated that a claim such as the current claim might be pursued.  I have also discussed above the matters which Davey Products claimed gave rise to issues estoppel.  The stay proceedings were determined necessarily upon the information then before the Court.  Those proceedings were not, or at least arguably were not, final proceedings.  The evidence to be adduced on those issues on the current claim will or may well be different from the information then before the Court.  That was also anticipated by O’Loughlin J.  In those circumstances, I am not persuaded to the necessary degree that the applicants’ current claim should be dismissed or permanently stayed.

The adequacy of the pleadings

48                  Davey Products complains that the applicants have failed to plead proper particulars of fraud or dishonesty as required by the Federal Court Rules:  O 11 r 10.  The applicants’ response, which in my view is somewhat surprising, is that they have not pleaded fraud or dishonesty.

49                  Order 11 r 10 of the Rules requires a party to plead specifically any matter of fact or point of law that, if not specifically pleaded, might take the other party by surprise.  The rule gives, by way of example, an allegation of fraud.  Order 12 r 3 obliges a party to give particulars of the facts relied upon for which a condition of mind is alleged, including any malice or fraudulent intent.

50                  The nature of the applicants’ allegations are, in my view, such as to attract those obligations.  As I have noted earlier, it is expressly alleged that the existence of the non-discovered documents was concealed by Davey Products.  “Conceal” means the act of hiding or removing from cover, or keeping from sight (The Macquarie Concise Dictionary, 2ed, 1988, 189).  It is a term which connotes some conscious mental decision to forbear from disclosing the documents.

51                  It is consistent with that view that it is alleged in par 22 of the Points of Claim that Davey Products deliberately withheld from the applicants documents relating to the extent of failures of Davey Lowara pumps, that it “turned a blind eye” to its discovery obligations and permitted its solicitors to defend the claim on grounds which it knew were false (presumably a reference to the successful defence that such problems with the pumps as the applicants experienced were not due to the quality of the pumps generally, but due to the modification by the applicants to their water treatment systems), and that Davey Products knowing that the pumps were failing in large numbers instructed their solicitors falsely, that is knowing the claim to be false, to assert that the pumps supplied to the applicants failed due to those modifications.  In my view, they are all matters upon which, in the interests of justice, the applicants should clearly reveal the nature of the allegations, including the person or persons in Davey Products whose state of mind is alleged to be that of Davey Products.

52                  In my judgment, the applicants should now provide particulars of pars 17 and 22 of the Points of Claim.

53                  The particulars of par 17 to be given should oblige the applicants to identify by name, so far as the applicants are able, the persons who on behalf of Davey Products concealed the existence of the documents referred to.  If there were different persons responsible for the concealment in respect of one or more of those documents, they should identify each such person and the particular documents or documents which that person concealed.

54                  The particulars of par 22 to be given by the applicants should identify by name, so far as the applicants are able, the persons who on behalf of Davey Products deliberately withheld from the applicants the documents referred to.  In respect of the alternative allegation; again the applicants should identify by name, so far as the applicants are able, the persons who on behalf of Davey Products were recklessly indifferent to the discovery obligation.  They should also identify the persons who “well knew” the documents not discovered would negate the basis of the defence and identify the particular basis of the defence referred to; and they should further identify the circumstances by which it is alleged that each such person was recklessly indifferent to the obligation to make discovery and the circumstances by which each such person is alleged to have turned a blind eye to the obligation to make discovery.  They should further identify the circumstances by which it is alleged that each such person permitted the solicitors for Davey Products to defend the claim on grounds which it knew or ought to have known to be false, including identifying the ground or grounds, and with respect to each ground, describing the knowledge of the person or persons concerned and the circumstances which give rise to the allegations that such persons ought to have known the ground to be false.  They should also identify the persons who well knew the pumps were failing in large numbers, and that the numbers of Lowara pumps were failing in exactly the same manner in other applications which did not involve modification as the applicants carried out to their water treatment system, and what those persons knew about those other failures; they should, so far as they can, identify the person or persons who gave the solicitors the instruction referred to.  Finally, I consider that the applicants should identify, so far as they can, the persons who caused the documents to be destroyed and the facts, matters and circumstances, with respect to each of those persons, upon which it is alleged that they knew the documents had been withheld from discovery, and that they knew the documents would support the appeal and would be relevant in any new trial ordered by the Court.

55                  I will make formal orders directing the provision of particulars, to reflect those rulings.  It may be unnecessary to do so if the applicants provide the particulars.

The claim for security for costs

56                  The evidence on this aspect is sparse.  Septic Products is in liquidation, and Mr Brookfield  acknowledges that he has no significant realisable assets and this his income is confined to the receipt of benefits under the Social Security Act 1991 (Cth).  Mr Brookfield has acknowledged that he is impecunious.  Solicitors for the applicants were invited to provide evidence of their clients’ ability to pay the costs of the proceedings “when they are dismissed”.  They did not do so.

57                  Before the hearing of the primary claim before Branson J, Davey Products sought security for costs against Septic Products only.  On 7 April 1994, Heerey J dismissed that application.  On 9 May 1994, the Full Court (Wilcox, Drummond and Beazley JJ) refused leave to appeal from that decision.

58                  Heerey J was satisfied that he had power to order that Septic Products provide security for costs, either under s 56 of the Federal Court of Australia Act 1976 (Cth) and O 28 r 3(1)(b) of the Rules, or under s 1335 of the Corporations Law.  It is now doubtful if the Court has jurisdiction to make an order under the Corporations Law:  Re Wakim; ex parte McNally (1999) 163 ALR 270; Edensor Nominees Pty Ltd v Australian Securities & Investment Commission [1999] FCA 1722.  His Honour declined to make such an order, in his discretion, firstly because he regarded the applicant’s claim as bona fide and not a sham; secondly because he considered that if the claim were successful then it was the conduct of Davey Products which precipitated the collapse of Septic Products; and thirdly that Septic Products was insolvent and that in reality it was Mr Brookfield (by reason of an arrangement between himself and the liquidator of Septic Products) who would in a practical sense be liable for the costs of the proceeding if it were unsuccessful.  The costs order of Branson J made on 19 December 1997 seems to reflect that practical position.

59                  In Pearson v Naydler [1977] 1 WLR 899 at 902, Megarry VC said:

“The basic rule that a natural person who sues will not be ordered to give security for costs, however poor he is, is ancient and well-established.  …  The power to require security for costs ought not to be used so as to bar even the poorest man from the courts.”

That passage was cited with approval by Heerey J and in Fletcher v Federal Commissioner for Taxation (1992) 92 ATC 4437 at 4439.

60                  Mr Brookfield is clearly unable to give security for costs.  That is a factor relevant to the exercise of my discretion:  Lucas v Yorke (1983) 50 ALR 228 (“Lucas”).  To make an order for security for costs would stultify the current claim.  Moreover, there is at least an arguable case that a factor in the dismissal of the applicant’s primary claim was the failure of Davey Products to give proper discovery when it was sought.  The affidavits of Andrew Leishman and Michael Freane of November 1999 lend some support to the applicant’s claims as to the existence of, and the potential significance of, at least some of the non-discovered documents.  In Lucas (at 230), Brennan J said:

“It is an important consideration that the making of an order for security for costs will effectively shut out an appeal designed to recover losses which have caused an appellant’s impecuniosity:  see Farrer v Lacy, Hartland & Co(1885) 28 Ch.D. 482 at 485.”

I think those comments may properly be applied to the present circumstances.

61                  In addition, I have reached the view that the current claim is one which, it is arguable, has been brought about, at least in part, by the failure of Davey Products to give discovery of the non-discovered documents.  If it were necessary to extend that consideration further, the reasons of Heerey J for refusing to order security for costs in the first place included that the economic circumstances of Septic Products, and by inference of Mr Brookfield, may have been brought about by the conduct of Davey Products.  That issue was, of course, decided adversely to them in the primary claim, but it will be a consequence of the current claim if it is successful that that decision may be set aside.

62                  There are also, in my judgment, important considerations to the administration of justice which lead to the view that the current claim should not be stultified by an order for security for costs.  The proper fulfilment of the obligation to give discovery is one which is very important to the proper administration of justice:  Bray, The Principles and Practice of Discovery, 1885, Book 1 Ch.1 (Reeves and Turner); “The Use of Discovery and Interrogatories in Civil Litigation”, The Australian institute of Judicial Administration, 1990; Rockwell Machine Tool Co Ltd v E P Barrus (Concessionaires) Ltd [1968] 2 All ER 98.  Although the extent of discovery is now, in many jurisdictions, controlled by rules of court which restrict the previous scope of the obligation as described in Compagnie Financiere et Commerciale du Pacifique v The Peruvian Guano Co (1882) 11 QBD 55, for example in O 15 r 2 of the Rules, the rationale underlying the discovery process remains.  It is to achieve the fair and efficient disposition of legal proceedings.  It is self evident that the concealment of documents directly relevant to a claim, particularly those documents which are adverse to a party’s interests, might result in the determination of the claim other than on its merits.  Although the adducing of evidence is the responsibility of the parties, the discovery process is directed to ensuring that the parties have access to materials of the other party which are relevant to the claims.  They may then better prepare for trial.  They may be in a better position to resolve the issues before trial, as discovery facilitates the parties’ appreciation of their respective positions.  The parties may be able to limit the issues to go to trial.  Those possible outcomes are steps which secure the better administration of justice.  The deliberate failure of a party to give proper discovery, as is now alleged against Davey Products, potentially subverts those objectives and may lead to the claim being determined other than on its merits.

63                  There were no particular countervailing considerations pressed on behalf of Davey Products.

64                  For those reasons, and in all the circumstances, I do not propose to order that Mr Brookfield provide security for costs.  In the exercise of my discretion, I also do not propose to order that Septic Products provide security for costs.  It, too, is apparently impecunious.  An order for security for costs would stultify its current claim.  There is no reason to think that the claim will be more prolonged or more complex because Septic Products remains as an applicant with Mr Brookfield.  Indeed, the submissions have treated them effectively as a unit.  I was not referred to any material touching upon the relationship of the liquidator of Septic Products and Mr Brookfield such as that which was apparently before Heerey J when his Honour made his decision on 7 April 1994.  The submissions seemed to accept that the circumstances of that relationship as then described still obtained.  The other reasons for deciding that security for costs should not be ordered against Mr Brookfield generally apply to my consideration of the current claim by Septic Products.

65                  This is not a case where persons standing behind an impecunious corporate applicant who are likely to benefit from its success in the proceedings are in a position to provide security:  cp. Bell Wholesale Co Pty Ltd v Gates Export Corporation (No 2) (1984) 2 FCR 1; Reches Pty Ltd v Tadiran Pty Ltd (1998) 85 FCR 514.

Orders

66                  On the notice of motion of Davey Products dated 22 September 1999, I make the following orders:

1.         The claims made in pars 1, 2 and 4 of the notice of motion be refused.

2.                  The applicants provide particulars of pars 17 and 22 of the Points of Claim in accordance with these reasons.  Davey Products to prepare minutes of order.  Liberty to the parties to speak to the terms of the minutes of order.

67                  I will hear the parties as to costs.

Associate:

Dated:              12 April 2000