FEDERAL COURT OF AUSTRALIA
J F Keir Pty Limited v Sparks [2008] FCA 611
Federal Court of Australia Act 1976 (Cth) s 31A
Corporations Act 2001 (Cth) ss 436A and 440D
Trade Practices Act 1974 (Cth) ss 51AC , 51AD, 52, 75B and 82
Migration Litigation Reform Bill 2005 (Cth)
Federal Court Rules Order 20 r5, Order 29 r2, r3 and r4
J F Keir Pty Ltd v Priority Management Systems Pty Ltd (administrators appointed) [2007] NSWSC 789
Theseus Exploration N.L. v. Foyster (1972) 126 CLR 507
General Steel Industries Inc. v. Commissioner for Railways (N.S.W.) (1964) 112 CLR 125
Jefferson Ford Pty Ltd v Ford Motor Company of Australia Limited [2008] FCAFC 60
Fancourt v Mercantile Credits Limited (1983) 154 CLR 87
Boston Commercial Services Pty Ltd (ACN 114 658 070) v GE Capital Finance Australasia Pty Ltd (ACN 070 396 020) (2006) 236 ALR 720
Paramasivam v University of New South Wales [2007] FCA 875
White Industries Australia Ltd v FC of T (2007) ATC 4441
Reichel v Magrath (1889) 14 App Cas 665
Port of Melbourne Authority v Anshun Proprietary Limited (No. 2) (1981) 147 CLR 589
Rippon v Chilcotin Pty Ltd (2001) 53 NSWLR 198
QBE Workers Compensation (NSW) Ltd v BAE Systems Regional Aircraft Ltd [2005] NSWSC 232
Johnson v Gore Wood & Co [2001] 2 WLR 72
Dey v Victorian Railways Commissioners (1949) 78 CLR 62
Anderson Formrite Pty Limited v Baulderstone Hornibrook Pty Ltd [2008] FCA 473
Wong v Minister for Immigration and Multicultural and Indigenous Affairs (2004) 146 FCR 10
Blair v Curran (1939) 62 CLR 464
Somanader v Minister for Immigration and Multicultural Affairs (2000) 178 ALR 677
Henderson v Henderson (1843) 3 Hare 100
Port Melbourne Authority v Anshun Proprietary Limited (No. 1) (1980) 147 CLR 35
Willis v Earl Beauchamp [1886] 11 PD 59
Macquarie Bank Ltd v National Mutual Life Association of Australia Ltd (1996) 40 NSWLR 543
J F KEIR PTY LIMITED (ACN 003 966 747) v GREGORY SPARKS
NSD 2439 of 2007
GRAHAM J
7 MAY 2008
SYDNEY
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IN THE FEDERAL COURT OF AUSTRALIA |
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NEW SOUTH WALES DISTRICT REGISTRY |
NSD 2439 of 2007 |
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BETWEEN: |
J F KEIR PTY LIMITED (ACN 003 966 747) Applicant
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AND: |
GREGORY SPARKS Respondent
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GRAHAM J |
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DATE OF ORDER: |
7 MAY 2008 |
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WHERE MADE: |
SYDNEY |
THE COURT ORDERS THAT:
1. The respondent’s Notice of Motion filed 20 February 2008 be dismissed.
2. The respondent pay the applicant’s costs of the motion.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
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IN THE FEDERAL COURT OF AUSTRALIA |
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NEW SOUTH WALES DISTRICT REGISTRY |
NSD 2439 of 2007 |
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BETWEEN: |
J F KEIR PTY LIMITED (ACN 003 966 747) Applicant
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AND: |
GREGORY SPARKS Respondent
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JUDGE: |
GRAHAM J |
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DATE: |
7 MAY 2008 |
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PLACE: |
SYDNEY |
REASONS FOR JUDGMENT
1 The primary issue for determination on the Motion presently before the Court is whether the applicant has no reasonable prospect of successfully prosecuting the proceeding because of estoppels said, by the respondent, to arise from a judgment of Rein AJ in J F Keir Pty Ltd v Priority Management Systems Pty Ltd (administrators appointed) [2007] NSWSC 789 (‘the Supreme Court proceeding’). There is also an issue as to whether the proceedings constitute an abuse of process.
2 The substantive relief sought in the respondent’s Notice of Motion filed 20 February 2008 was as follows:
‘1. That the Application and proceeding be dismissed pursuant to s 31A of the Federal Court of Australia Act 1976 and/or FCR Order 20, r5.
2. In the alternative to 1, that the proceeding be permanently stayed pursuant to FCR Order 20, r5.’
3 Section 31A of the Federal Court of Australia Act 1976 (Cth) (‘the Federal Court of Australia Act’) was inserted into the Federal Court of Australia Act by the Migration Litigation Reform Act 2005 (Cth). Section 31A made provision for the Court to give summary judgment for an applicant in relation to the whole or any part of a proceeding upon it being satisfied that the respondent had no reasonable prospect of successfully defending the proceeding or that part of the proceeding. It also provided for a judgment in the nature of summary dismissal of the whole or any part of a proceeding on the application of a respondent in the event that it was satisfied that the applicant had no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.
4 The effect of s 31A was to soften the test for a successful application for summary judgment as stated by the High Court in Theseus Exploration N.L. v. Foyster (1972) 126 CLR 507 (‘Theseus Exploration’) and also the test for a successful application for summary dismissal as stated by Barwick CJ in General Steel Industries Inc. v. Commissioner for Railways (N.S.W.) (1964) 112 CLR 125 (‘General Steel Industries’). See also Jefferson Ford Pty Ltd v Ford Motor Company of Australia Limited [2008] FCAFC 60 (‘Jefferson Ford’) at [45], [57], [63], [124]).
5 Section 31A of the Federal Court of Australia Act provides as follows:
‘31A(1) The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:
(a) the first party is prosecuting the proceeding or that part of the proceeding; and
(b) the Court is satisfied that the other party has no reasonable prospect of successfully defending the proceeding or that part of the proceeding.
(2) The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:
(a) the first party is defending the proceeding or that part of the proceeding; and
(b) the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.
(3) For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:
(a) hopeless; or
(b) bound to fail;
for it to have no reasonable prospect of success.
(4) This section does not limit any powers that the Court has apart from this section.’
6 In General Steel Industries which, of course, was decided before the passage of s 31A(3) of the Federal Court of Australia Act, Barwick CJ stated the then test for summary dismissal at 128-130 as follows:
‘The plaintiff rightly points out that the jurisdiction summarily to terminate an action is to be sparingly employed and is not to be used except in a clear case where the Court is satisfied that it has the requisite material and the necessary assistance from the parties to reach a definite and certain conclusion. … [the] cases uniformly adhere to the view that the plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of a cause of action – if that be the ground on which the court is invited, as in this case, to exercise its powers of summary dismissal – is clearly demonstrated. The test to be applied has been variously expressed; “so obviously untenable that it cannot possibly succeed”; “manifestly groundless”; “so manifestly faulty that it does not admit of argument”; “discloses a case which the Court is satisfied cannot succeed”; “under no possibility can there be a good cause of action”; “be manifest that to allow them” (the pleadings) “to stand would involve useless expense”.
…
… Dixon J. (as he then was) sums up a number of authorities in Dey v Victorian Railways Commissioners where he says: “A case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner by the court with or without a jury. The fact that a transaction is intricate may not disentitle the court to examine a cause of action alleged to grow out of it for the purpose of seeing whether the proceeding amounts to an abuse of process or is vexatious. But once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process.” Although I can agree with Latham C.J. in the same case when he said that the defendant should be saved from the vexation of the continuance of useless and futile proceedings, in my opinion great care must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal. On the other hand, I do not think that the exercise of the jurisdiction should be reserved for those cases where argument is unnecessary to evoke the futility of the plaintiff’s claim. Argument, perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed.’
…
[Footnotes omitted]
7 In Theseus Exploration an application for summary judgment, as opposed to summary dismissal, was refused by the primary judge. By special leave the plaintiff appealed from that refusal to the High Court. Having entertained full argument upon the legal matters in dispute between the parties and in circumstances where there were no disputed issues of fact, the High Court allowed the appeal and ordered that summary judgment be entered for the plaintiff. However, the High Court did not formally rule upon the primary judge’s refusal of the application for summary judgment. Theseus Exploration was also decided before the passage of s 31A(3) of the Federal Court of Australia Act. At 514 Barwick CJ said:
‘… The jurisdiction to give summary judgement 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 but there is sufficient correspondence in the two situations to make apposite to this case much of what I said in General Steel Industries Inc. v. Commissioner for Railways (N.S.W.).’
[Footnotes omitted]
8 Gibbs J, as his Honour then was, considered that the primary judge had been completely justified in dismissing the application for summary judgment. At 514-5 his Honour said:
‘… Indeed, on one view of the law as stated in Bundock Bros. v. Bergl and Co., he was bound to dismiss it. In that case Griffith C.J., speaking for the Full Court of the Supreme Court of Queensland in a case arising under an earlier rule ... said,:
“It is settled that when there is a serious point of law raised by a defendant, the Judge in Chambers ought not to decide it, but ought to give unconditional leave to defend.”
Similarly in Commonwealth Dairy Produce Equalisation Committee Ltd. v. Hansen Mansfield J., as he then was, said that leave to defend should be given where there is a difficult question of law, and cited Electric and General Contract Corporation v. Thomson-Houston Electric Co. in support of this proposition. No doubt the remarks in these cases were not intended to preclude the exercise of some discretion by a judge to whom application for summary judgment is made in deciding whether the question of law raised is so difficult that it ought not to be decided summarily, and no doubt also sometimes some explanation or reference to authorities will be necessary to enable a judge to decide whether a question is really unarguable. However, in the present case the questions were serious and disputable and, assuming that the learned primary judge had a discretion, it was entirely proper for him to decline to dispose of them in chambers.’
[Footnotes omitted]
See also per Finkelstein J in Jefferson Ford at [18] and [23].
9 In Fancourt v Mercantile Credits Limited (1983) 154 CLR 87 Mason, Murphy, Wilson, Deane and Dawson JJ said in respect of an application for summary judgment at 99:
‘The power to order summary or final judgment is one that should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried: see Clarke v. Union Bank of Australia Ltd.; Jones v. Stone; Jacobs v. Booth’s Distillery Co.’
[Footnotes omitted]
10 The Explanatory Memorandum circulated by authority of the Attorney-General in relation to the Migration Litigation Reform Bill 2005 (Cth) revealed the purpose of the new s 31A of the Federal Court of Australia Act. It relevantly provided:
‘21 … Section 31A provides that the Court may give summary judgment in a matter where it is satisfied that a proceeding or part of a proceeding, or a defence to a proceeding or part of a proceeding, has no reasonable prospect of success.
22. Subsection 31A(3) provides that for the purposes of giving summary judgment, a proceeding or part of a proceeding, or a defence to a proceeding or part of a proceeding, need not be hopeless or bound to fail for it to have no reasonable prospect of success. This moves away from the approach taken by the courts in construing the conditions for summary judgment by reference to the ‘no reasonable cause of action’ test, in Dey v Victorian Railways Commissioners … and General Steel Industries Inc v Commissioner for Railways (NSW) … [both of which were summary dismissal cases]. These cases demonstrate the great caution which the courts have exercised in regard to summary disposal, limiting this to cases which are manifestly groundless or clearly untenable.
23. Section 31A will allow the Court greater flexibility in giving summary judgment and will therefore be a useful addition to the Court’s powers in dealing with unmeritorious proceedings.
…’
11 In his Second Reading Speech in the House of Representatives (Hansard 10 March 2005 at p.3) the Attorney-General said, amongst other things:
‘The bill also strengthens the power of the courts to deal with unmeritorious matters, by broadening the grounds on which federal courts can summarily dispose of unsustainable cases. …’
A like observation was made by the Minister delivering the Second Reading Speech in the Senate (Hansard 11 May 2005 at p.139).
12 It may be observed that the word ‘may’ in the expression ‘may give judgment’ in s 31A(1) and s 31A(2) is, in the context in which it is used, permissive, not mandatory. Furthermore the use of the word ‘unmeritorious’ in the Explanatory Memorandum and both of the second reading speeches, along with the use of the word ‘unsustainable’ in both of the second reading speeches, indicates that a cautious approach should be adopted to the exercise of the Court’s powers under s 31A.
In relation to the use of the word ‘may’ it is instructive to note the recent observations of Gordon J in Jefferson Ford at [128]. However, in my respectful opinion, the preconditions for the exercise of the relevant power, which require value judgments to be made in the absence of a full and complete factual matrix and full argument thereon, lead me to the view that a discretion is reposed in the judge hearing the relevant application to grant summary judgment or not.
13 The concept of ‘no reasonable prospect of successfully prosecuting’ a proceeding, which is a relevant issue where summary dismissal is sought under s 31A(2) of the Federal Court of Australia Act, was addressed by Rares J in Boston Commercial Services Pty Ltd (ACN 114 658 070) v GE Capital Finance Australasia Pty Ltd (ACN 070 396 020) (2006) 236 ALR 720. At [43] his Honour said:
‘… The concept of a party having “no reasonable prospect of successfully prosecuting a proceeding” has some similarity to the test at common law for determining whether a jury properly instructed could reach a verdict for the plaintiff. …’
[Emphasis added]
At [44] Rares J said:
‘[44] In a case to which s 31A applies, where there is a real issue of fact to be decided in the sense identified in the above principle [a reference to [43] and to Hocking v Bell (1945) 71 CLR 430 at 441-2], and, possibly, where there is a real issue of law of a similar kind, it is obviously appropriate that the matter goes to trial. …’
14 In Paramasivam v University of New South Wales [2007] FCA 875, another summary dismissal case under s 31A(2), Tamberlin J said at [14]:
‘… it is essential that the Court must be careful not to do an injustice by summarily dismissing proceedings, or denying an applicant an opportunity to ventilate their case. …’
15 In White Industries Australia Ltd v FC of T (2007) ATC 4441 Lindgren J said at [50] that s 31A ‘is concerned with the bringing and defending of proceedings, not just with pleadings; with substance, not just with form’.
16 Order 20 rule 5 of the Federal Court Rules provides as follows:
‘(1) This rule applies to a proceeding commenced on or after 1 December 2005 if the Court is satisfied that, for the proceeding generally or for a claim for relief in the proceeding
(a) the proceeding or claim is frivolous or vexatious; or
(b) the proceeding or claim is an abuse of the process of the Court.
(2) The Court may order that the proceeding be stayed or dismissed generally or in relation to the claim for relief.
(3) The Court may receive evidence on the hearing of an application for an order under subrule (2).’
17 The respondent’s reliance on Order 20 rule 5 is focussed upon rule 5(1)(b) rather the rule 5(1)(a).
18 Gregory Sparks, the respondent in this proceeding, was not a party to the Supreme Court proceeding.
19 The Supreme Court proceeding was commenced on 26 September 2006 by a summons filed in the Equity Division of the Supreme Court of New South Wales.
20 J F Keir Pty Limited, the applicant in the current proceeding and the plaintiff in the Supreme Court proceeding, was a franchisee of Priority Management Systems Pty Limited, the defendant in the Supreme Court proceedings. Priority Management Systems Pty Limited engaged in the franchising of the right to market and sell personal time and information systems under and by reference to the name ‘Priority Management Products’.
21 J F Keir Pty Limited was a franchisee which traded under the business name ‘PM – Annandale’.
22 Other franchisees included related or semi-related companies of Priority Management Systems Pty Limited, including Priority Management – Sydney Pty Limited (ACN 099 237 199), which carried on business as ‘PM – North Sydney’, and Priority Management – Melbourne Pty Limited (ACN 099 257 726), which carried on business as ‘PM – Melbourne’.
23 Each of PM – Annandale and PM – North Sydney had franchises which were defined geographically by reference to the ‘Sydney metropolitan area’. The Statement of Claim in the Supreme Court proceeding was filed on 9 October 2006. Paragraph 10 was as follows:
‘10. At all material times, Gregory Sparks:
(a) was and is the sole director of the Defendant and controls the operations of the Defendant;
(b) holds 50% of the issued share capital of the Defendant;
(c) was and is a director of Priority Management – Sydney Pty Ltd and Priority Management – Melbourne Pty Ltd and controls the operations of those entities;
(d) holds, indirectly, 375 of the 1250 issued shares in Priority Management – Sydney Pty Ltd;
(e) holds, indirectly, 900 of the 1000 issued shares of Priority Management – Melbourne Pty Ltd.’
24 In the Amended Statement of Claim in the current proceeding the applicant alleged that Mr Sparks was the sole director of Priority Management Systems Pty Limited, the beneficial owner of 50% of the shares in that company and until 5 July 2007 the controller of the administration and operations of that company. It also alleged that he was one of the two directors of Priority Management – Sydney Pty Limited, the beneficial owner of 80% of the issued shares in that company and the controller of the operations of that company. Furthermore it alleged that Mr Sparks was the sole director of Priority Management – Melbourne Pty Limited, the beneficial owner of 100% of the shares in that company and the controller of the operations of that company. The plaintiff’s claims in the Supreme Court proceeding, as set out in the Summons, were for:
‘1. A declaration that the written notice of the breach of the Franchise Agreement dated 22 August 2006 and served by the Defendant on the Plaintiff on or about that date (the “Breach Notice”) is invalid and of no force or effect.
2. An order that the Breach Notice be set aside.
3. An order that the Defendant and its servants or agents be restrained from taking any steps in reliance upon the Breach Notice to terminate the Franchise Agreement between the Plaintiff and the Defendant dated 25 November 2001 (“the Franchise Agreement”).
4. A declaration that the written Notice of Termination of the Franchise Agreement dated 25 September 2006 and served by the Defendant on the Plaintiff on or about that date (the “Termination Notice”) is invalid and of no force or effect.
5. An order that the Termination Notice be set aside.
6. A declaration that the Defendant has engaged in conduct that is unconscionable with respect to the Breach Notice and the Termination Notice and in contravention of s51AC of the Trade Practices Act 1974 (Comm.).
7. An order pursuant to s80 of the Trade Practices Act 1974 (Comm.) restraining the Defendant and its servants or agents from taking any step in reliance upon the Breach Notice to terminate the Franchise Agreement.
8. Damages.
9. An order that the Defendant pay the Plaintiff’s costs of the proceedings.’
25 The trial of the Supreme Court proceeding against Priority Management Systems Pty Ltd ACN 010 786 955 took place before Rein AJ on 19 – 22 June and 9 – 10 July 2007. His Honour delivered his reasons for judgment on 24 July 2007. At [17]-[18] his Honour said:
‘17 The hearing commenced on 19 June 2007 and was on 22 June 2007 stood over part heard to 9 July 2007. Both Greenwood [Wayne Greenwood, a director and shareholder of the plaintiff] and Sparks had been extensively cross-examined … leaving a number of other witnesses for both Annandale [referring to the plaintiff] and PMS [referring to the defendant] whose affidavits had been filed and served yet to be cross-examined. On 5 July 2007, administrators were appointed to PMS.
18 Annandale, having been informed of the administration, sought leave to proceed against PMS under administration ...’
26 On 10 July 2007 Rein AJ granted the plaintiff leave to proceed under s 440D Corporations Act 2001 (Cth) (‘the Corporations Act’).
27 At [18] his Honour continued by saying:
‘… according to a minute of a directors’ meeting of PMS, Sparks, as director of PMS, had resolved to place it under voluntary administration “as the Company is likely to become insolvent at some future time”.’
28 At [19] Rein AJ said:
‘19 As is recorded in my reasons for judgment of 10 July 2007, the administrators indicated that they did not intend to defend the proceedings and Sparks, through his counsel, indicated that his position was that were his views relevant he would not oppose the relief sought by Annandale in its statement of claim …’
29 The respondent in the current proceeding, Gregory Sparks, was not a party to the Supreme Court proceeding. Nevertheless, Rein AJ’s judgment of 10 July 2007 records that, on the application for leave to proceed, the plaintiff was represented by Matthews Folbigg Pty Ltd, solicitors (who remain the applicant’s solicitors in the current proceeding), the administrators of the defendant were represented by Kemp Strang, solicitors and Mr Gregory Sparks was represented by Baker & McKenzie, solicitors.
30 Rein AJ’s judgment of 10 July 2007 on the leave application included at [1]-[5]:
‘1 … On 19 June 2007 I commenced hearing [the] suit … The case did not finish in the time allotted and I fixed 9 July 2007 with an estimate of a further four days for the balance of the case. Mr C Harris SC with Mrs C Champion appeared for Annandale and Mr C R C Newlinds SC with Ms J Chambers for PMS.
…
3 Yesterday when the motion was called on for hearing Mr C Harris and Mrs C Champion appeared for the plaintiff (Annandale) and Mr J M White of counsel appeared for the administrators. Mr Newlinds, counsel formerly briefed on behalf of PMS, sought to appear for Mr Gregory Sparks – acknowledging that there was doubt as to whether he had any right to be heard. No objection to him being heard was made by Mr Harris or Mr White. … Mr Newlinds indicated that his client made no submissions on whether leave should be granted but if leave were granted Mr Sparks would not oppose orders being made that would see the franchise agreement remain on foot.
4 Mr Newlinds indicated that his client was concerned that if the administrators did not defend the case and the Court were forced to deliver judgment on the merits of the case in circumstances where evidence that was to be relied on by PMS was not read, and submissions that would have been relied on by PMS not made, the decision of the Court might be significantly adverse to Mr Sparks. Mr Sparks is the sole director and a 50 per cent shareholder of PMS, but he is also the person who made all decisions on behalf of PMS and he was the principal witness for PMS in the proceedings.
5 Mr White and Mr Newlinds then sought leave to withdraw and I granted that leave. …’
31 Sections 436A and 440D(1) of the Corporations Act, as at 5 July 2007, provided as follows:
‘436A(1) A company may, by writing, appoint an administrator of the company if the board has resolved to the effect that:
(a) in the opinion of the directors voting for the resolution, the company is insolvent, or is likely to become insolvent at some future time; and
(b) an administrator of the company should be appointed.
…
440D(1) During the administration of a company, a proceeding in a court against the company or in relation to any of its property cannot be begun or proceeded with, except:
(a) with the administrator’s written consent; or
(b) with the leave of the Court and in accordance with such terms (if any) as the Court imposes.’
32 In his reasons for judgment of 24 July 2007 Rein AJ referred to a notice of breach sent by Priority Management Systems Pty Limited to the plaintiff on 22 August 2006 which Priority Management Systems Pty Limited claimed was a valid notice of termination of the PM – Annandale franchise agreement.
Under the heading ‘Conclusion’ Rein AJ said at [78]:
‘78 In my view Annandale has established that it was not in breach of the franchise agreement and hence that the Notices purporting to terminate [the plural appears to have been used because of a reference to a second notice dated 11 April 2007 which was referred to by his Honour at [13] and [22]-[23]] were invalid and it is entitled to declarations to that effect. Annandale is also entitled to an order that PMS pay its costs. Annandale should prepare short minutes of order to reflect the conclusions which I have reached.’
At [13] and [22]-[23] Rein AJ said:
‘13 On the first day of the hearing PMS made an application to expand the hearing to include consideration of further alleged breaches contained in a notice dated 11 April 2007 (“the Second Notice”). The Second Notice alleges breach of the Policy statement to which I have referred by virtue of Annandale having sold products and services in areas where another franchise operates. A cross summons asserting these further breaches was filed by consent on 22 June 2007. These breaches, which I shall refer to as “the further marketing breaches”, involved training provided to Ericsson Australia Ltd and TCN Channel Nine Pty Ltd, both of which were established clients of Annandale.
…
22 So far as the cross-summons is concerned, PMS is not here to pursue it and hence it could be dismissed. Once again however, evidence has been received relevant to the issues raised in the cross-summons.
23 I accept Mr Harris’s submission that in the circumstances the Court should proceed to deal with all matters of which it was seized before the administrators were appointed.’
33 The orders of the Court in the Supreme Court proceeding made on 27 July 2007 were entered on 31 July 2007. They were as follows:
‘The Court:
1. Declares that the Notice of Breach dated 22 August 2006 is invalid and of no force or effect.
2. Orders that the Notice of Breach dated 22 August 2006 be set aside.
3. Declares that the Notice of Termination dated 25 September 2006 is invalid and of nor (sic) force or effect.
4. Orders that the Notice of Termination be set aside.
5. Orders that the exhibits be returned to the parties.
6. Orders that the Defendant pay the Plaintiff’s costs, including reserved costs, of the proceedings.’
34 The Amended Statement of Claim filed 4 April 2008 in the current proceeding provided, on pages 28-30 thereof as follows:
‘SUPREME COURT PROCEEDINGS
88. On 24 July 2007 the Supreme Court of New South Wales handed down judgment in the Proceedings in which it found in favour of the Applicant and ordered PMS to pay the Applicant’s costs.
PARTICULARS
JF Keir Pty Ltd v Priority Management Systems Pty Ltd (administrator appointed) [2007] NSWSC 789. Orders made on 27 July 2007 and entered on 31 July 2007.
89. The sums of money incurred and paid by the Applicant in respect of the preparation and conduct of the Proceedings total $522,546.21 (“Applicant’s Costs”).
90. As a result of the unconscionable conduct referred to in paragraphs 87 and 87A above, PMS has no assets which can be used for the payment of the Applicant’s Costs or any of them and the Applicant has lost the sum of $522,546.21 which it would have been able to recover, in whole or in part, from PMS if PMS had not engaged in the unconscionable conduct referred to in paragraphs 87 and 87A [paragraphs 87 and 87A taken on their own are not particularly helpful, but they are set out below].
UNCONSCIONABLE CONDUCT
91. Considered in the context of the Relevant Circumstances, the Pre 22 August Circumstances, the Breach Notice Circumstances and the matters pleaded in paragraphs 61-65, 67-69, 71-74 and 88-90, individually or in combination, each and every matter referred to in paragraphs 77, 81 and 84 above when considered individually or in combination with any one or more of the others, was unconscionable within the meaning of section 51AC of the Trade Practices Act 1974 (Cth).
CONDUCT OF THE RESPODNENT
92. The Respondent was the sole director and manager of PMS who:
(i) was the person responsible for the conduct of PMS set out in paragraphs 18-23, 25, 27, 29, 31-35, 39, 41, 48, 50, 53, 56, 58, 61, 65, 67, 68, 77, 80 and 84 above;
(ii) made the decision to issue the Breach Notice referred to in paragraph 41 above, and signed the Breach Notice on behalf of PMS;
(ii) made the decision to refuse to provide the Applicant with the information referred to in paragraph 64(b) above;
(iii) made the decision to issue the Notice of Termination referred to in paragraph 67 above, and signed the Notice of Termination on behalf of PMS;
(ii) made the decision, on behalf of PMS, to declare and pay the dividend referred to in paragraph 77 above.
(iii) made the decision, on behalf of PMS, to enter into the Loan Agreements referred to paragraph 80 above (sic).
(iv) made the decision, on behalf of PMS, to put PMS into administration, as referred to in paragraph 84 above.
93. In addition to the matters set out in paragraph 92 above, the Respondent was in a position of conflict when dealing with matters that related to both the Applicant and PM North Sydney and their respective PM Training Services business.
PARTICULARS
The Applicant repeats the matters set out in paragraph 3 above.
94. In the circumstances referred to in paragraph 92 and/or 93 above, the Respondent:
(i) aided, abetted, counselled or procured the contraventions by PMS of section 51AC of the Trade Practices Act 1974 (Cth) referred to above; and/or
(ii) was, directly, or indirectly, knowingly concerned in, or a party to PMS’ contraventions of section 51AC of the Trade Practices Act 1974 (Cth) referred to above.
(iii) aided, abetted, counselled or procured the contraventions by PMS of section 51AD of the Trade Practices Act 1974 (Cth) referred to above; and/or
(iv) was, directly, or indirectly, knowingly concerned in, or a party to PMS’ contraventions of section 51AD of the Trade Practices Act 1974 (Cth) referred to above.
PARTICULARS
Section 75B of the Trade Practices Act 1974 (Cth).
95. As a result of the conduct of the Respondent referred to in paragraph 94 above, the Applicant has suffered loss and damage.
PARTICULARS
(a) The amount of costs (legal and otherwise) expended by the Applicant in respect of the Proceedings being $522,546.21; or, alternatively
(b) The assessed costs payable by PMS to the Applicant pursuant to the Orders made by the Supreme Court in the Proceedings.
The Applicant seeks the relief sought in the Application.’
35 Paragraphs 87 and 87A of the Amended Statement of Claim were as follows:
‘UNCONSCIONABILITY
87. Each and every matter referred to in paragraphs 77-79, 80-83 and 84-86 above, when considered individually or in combination with any one or more of the others, was unconscionable within the meaning of section 51AC of the Trade Practices Act 1974 (Cth).
87A. Considered in the context of the Relevant Circumstances, the Pre 22 August Circumstances, the Breach Notice Circumstances and the matters pleaded in paragraphs 61-69 and 71-74, individually or in combination, each and every matter referred to in paragraphs 77-79, 80-83 and 84-86 above when considered individually or in combination with any one or more of the others, was unconscionable within the meaning of section 51AC of the Trade Practices Act 1974 (Cth).’
36 In the current proceeding the relief claimed in the Application filed 13 December 2007 was as follows:
‘1. A declaration that the Respondent has been involved in a contravention of section 51AC of the Trade Practices Act 1974 (Cth).
2. A declaration that the Respondent has been involved in a contravention of section 51AD of the Trade Practices Act 1974 (Cth).
3. An order for damages under section 82(1) of the Trade Practices Act 1974 (Cth).
4. Interest.
5. Costs.
6. Such further or other orders as the Court sees fit.’
37 In its Statement of Claim in the Supreme Court proceeding, the plaintiff, who is also the applicant in the current proceeding, disputed the entitlement of Priority Management Systems Pty Limited to rely upon the notice sent on 22 August 2006 and also the notice of termination dated 25 September 2006. Amongst other things, the plaintiff pleaded that there was no reasonable or proper basis for alleging that the plaintiff had breached the franchise agreement in relation to any of the matters alleged by Priority Management Systems Pty Limited in the 22 August 2006 notice.
38 Similar claims were contained in the Amended Statement of Claim in the current proceeding. In addition, in paragraph 44(i) and (ii) the applicant pleaded that Priority Management Systems Pty Limited knew [through Mr Sparks] that when it issued the 22 August 2006 notice, there was no foundation for the assertions of breach contained therein and further that, if true, they were otiose.
39 In his reasons for judgment of 24 July 2007 Rein AJ summarised the plaintiff’s case in the Supreme Court proceedings at [16] as follows:
‘16 Annandale asserts that it was not in breach of the agreement and also asserts that there were formal defects in the First Notice [the notice of 22 August 2006]. Annandale also asserts that PMS was subject to a contractual duty to act in good faith and that it has by its conduct breached the obligation in issuing the notices. Further, Annandale asserts that if its contentions concerning the effect of the franchise agreement and the notices are not upheld, the conduct of PMS amounted to unconscionable conduct within the meaning of s 51AC of the TPA [Trade Practices Act 1974 (Cth)].’
40 Rein AJ proceeded to decide the matter favourably to the plaintiff without the necessity of dealing with the claims of unconscionability under s 51AC of the Trade Practices Act. At [77] his Honour said:
‘77 Given my conclusions on the breaches and good faith, I do not need to consider whether or not s 51AC of the Trade Practices Act was breached, or whether either of the Notices was defective in form.’
41 In the current proceeding the applicant contends that it incurred costs in relation to the Supreme Court proceeding in the sum of $522,546.21. Whilst it did not make Mr Sparks a defendant in the Supreme Court proceeding and claim relief against him in respect of the unconscionable conduct complained of by virtue of his accessorial liability under s 75B of the Trade Practices Act, it now wishes to say that he should pay the costs which the applicant as plaintiff in the Supreme Court proceeding incurred, or at least so much thereof as would have been payable by Priority Management Systems Pty Limited under the orders made in the Supreme Court proceeding.
42 In the current proceeding the applicant complained that Priority Management Systems Pty Limited engaged in further conduct which was unconscionable within the meaning of s 51AC of the Trade Practices Act
(a) in declaring a dividend of $400,000 on 30 June 2006, $163,326 of which it claims has been paid to the respondent and $200,000 of which it claims has been paid to the respondent’s de facto wife,
(b) entering into agreements on 31 May 2007 with each of PM – North Sydney and PM – Melbourne by virtue of which the payment of $110,000 which was then owing by PM – North Sydney to Priority Management Systems Pty Limited and $35,000 which was then owing by PM – Melbourne to Priority Management Systems Pty Limited was deferred so that such amounts would not become payable until 31 May 2012, and
(c) appointing the administrators pursuant to s 436A(1) of the Corporations Act on 5 July 2007.
Once again the applicant contends that accessorial liability for the unconscionable conduct referred to should be visited upon the respondent pursuant to s 75B of the Trade Practices Act 1974 (Cth) (‘the Trade Practices Act’).
43 Sections 51AC and 51AD of the Trade Practices Act relevantly provided:
‘51AC(1) A corporation must not, in trade or commerce, in connection with:
(a) the supply or possible supply of … services to a person (other than a listed public company); …
…
engage in conduct that is, in all the circumstances, unconscionable.
(2) A person must not, in trade or commerce, in connection with:
(a) the supply or possible supply of … services to a corporation (other than a listed public company);
…
engage in conduct that is, in all the circumstances, unconscionable.
…
51AD A corporation must not, in trade or commerce, contravene an applicable industry code.’
44 In relation to accessorial liability s 75B of the Trade Practices Act relevantly provided:
‘75B(1) A reference in this Part [Part VI] to a person involved in a contravention of a provision of Part … IVA [which includes s 51AC], IVB [which includes s 51AD] … shall be read as a reference to a person who:
(a) has aided, abetted, counselled or procured the contravention;
(b) has induced, whether by threats or promises or otherwise, the contravention;
(c) has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; or
(d) has conspired with others to effect the contravention.
…’
45 With respect to actions for damages, s 82 of the Trade Practices Act, which falls within Part VI, relevantly provided:
‘82(1) … a person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part … IVA, IVB … may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.
…’
46 On the hearing of the motion presently before the Court the respondent, Mr Sparks, was represented by M R Hall of counsel and the applicant by C M Harris SC and C Champion.
47 Mr Hall submitted that the applicant could not now make the claims which it has against Mr Sparks because of the risk of inconsistent judgments in the Supreme Court proceeding and in this proceeding. He further submits that estoppels arise both in respect of the matters decided in the Supreme Court proceeding and also in respect of the matters that could have been decided in that proceeding.
48 Mr Hall places reliance upon Reichel v Magrath (1889) 14 App Cas 665 (‘Reichel’), Port of Melbourne Authority v Anshun Proprietary Limited (No. 2) (1981) 147 CLR 589 (‘Anshun’), Rippon v Chilcotin Pty Ltd (2001) 53 NSWLR 198 (‘Rippon’) and QBE Workers Compensation (NSW) Ltd v BAE Systems Regional Aircraft Ltd [2005] NSWSC 232 (‘QBE’) and Johnson v Gore Wood & Co [2001] 2 WLR 72 (‘Gore Wood’).
49 In Mr Hall’s Outline of Submissions he has said:
‘2. The substantive proceeding is bound to fail, and its continuance constitutes an abuse of the process of the Court, because:
2.1. The issues pleaded in paragraphs 1-75 of the Statement of Claim were or ought to have been litigated and finally adjudicated upon in [the Supreme Court proceeding].
2.2 The rest of the conduct alleged against Mr Sparks is said to be unconscionable because of and in the context of the matters pleaded in paragraphs 1-75, and stands or falls with those paragraphs.
2.3 In any event, the remaining issues alleged in the statement of claim are matters being pursued or capable of being pursued by the liquidator of Priority Management Systems Pty Limited (in liquidation) … for the benefit of all of its creditors …
…
8. In substance, the whole of paragraphs 1 to 75 of the Statement of Claim in the current proceeding contain matters also pleaded in the Supreme Court Proceeding.
…
11. … On 9 July 2007 … Mr Sparks appeared by counsel [in the Supreme Court proceeding]. No application was made to join him as a defendant … then or at any other time.
…
16. It was open to [the applicant] to name Mr Sparks as a party to the Supreme Court Proceeding, either when it was commenced, or (subject to consent or leave) at any stage down to at least 9 July 2007 and probably until final orders were entered. …
17. … as between [the applicant] and Mr Sparks, all the matters alleged in paragraphs 1-75 could and should have been litigated to a conclusion in the Supreme Court Proceeding, and it would be an abuse of the process of this Court for [the applicant] to seek to raise them now.
18. … the Court has the power to prevent the abuse of its process which would arise if an issue which could and should have been raised in an earlier proceeding were to be raised instead in a separate, later action. The exact boundaries of that principle are elusive and to some extent unsettled [emphasis added], but the following propositions are clearly established:
18.1 The principle is broader than issue estoppel strictly so called, and extends to causes of action which were not determined in the earlier hearing if they could and should have been raised and argued …
18.2 It can apply against or in favour of a party who was not joined in the earlier proceeding where that party is a privy of one of the parties to the earlier trial or where the party was so closely involved in the earlier dispute that it was unreasonable not to join them …
18.3 Where a judgment in the later proceeding could cause an inconsistency with a judgment in the earlier proceeding, that is a clear indication that the later proceeding should be estopped …
18.4 The principle is also enlivened where permitting or requiring the matter to be relitigated would be unfair, or would make a fair trial unlikely or impossible. …
19. Any finding for Mr Sparks in the current proceeding would be likely to be inconsistent with the judgment of Rein AJ. Arguably, such a finding would be necessarily inconsistent with that judgment. But if Mr Sparks is not entitled to seek and obtain such a finding, then he has effectively been condemned without being heard. Either alternative reveals an abuse of process.
…
25. It would be an abuse of the process of this Court and of the court supervising the winding up of [Priority Management Systems Pty Limited], for [the applicant] to seek to litigate the issues raised in paragraphs 77-87A [of the Amended Statement of Claim] in competition with the liquidators. That course would be unfair to Mr Sparks who would face a form of double jeopardy in (potentially) defending the same allegation against separate attack in separate proceedings. It would give rise to a risk of inconsistent judgments. And it would suborn the principle underlying insolvency law and the winding up provisions of the Corporations Act that such claims should be available to all of the creditors equally.
…’
50 As Mr Hall recognised in his submissions the exact boundaries of the principle in relation to abuse of process where an issue is raised in a separate and later action which could and should have been raised in an earlier proceeding are ‘elusive and to some extent unsettled’.
51 Such a concession highlights the undesirability of shutting out an applicant on the basis that the applicant has ‘no reasonable prospect of successfully prosecuting the proceeding’.
Where a respondent’s case turns upon real questions of law, such as those which arise in this case, being determined favourably to the respondent, the Court should rush slowly into finding, as the respondent invites the Court to do, that the applicant has no reasonable prospect of successfully prosecuting its application (see Dey v Victorian Railways Commissioners (1949) 78 CLR 62 (‘Dey’) at 91-92 and General Steel Industries at 130; see also Theseus Exploration at 514-515). It is worth noting the remarks in Dey which followed the passage, cited with approval by Barwick CJ in General Steel Industries and set out above, where Dixon J said at 91-92:
‘In Burton v. Shire of Bairnsdale, O’Connor J. said: “Prima facie every litigant has a right to have matters of law as well as of fact decided according to the ordinary rules of procedure, which give him full time and opportunity for the presentation of his case to the ordinary tribunals and the inherent jurisdiction of the court to protect its process from abuse by depriving a litigant of these rights and summarily disposing of an action as frivolous and vexatious will never be exercised unless the plaintiff’s claim is so obviously untenable that it cannot possibly succeed.” Higgins J. made some observations which may be applied to the present case. “It is my opinion” he said “that the Full Court were led, by a very natural process I admit, to take a wrong attitude. They dealt with the matter as if they were deciding it on the merits whereas they had merely to decide whether there was anything in fact or in law that was fairly triable or arguable.” Then his Honour said, “It is surely absurd to argue for days as to a plaintiff’s case being arguable.” “It cannot be doubted,” said Lord Herschell in Lawrance v. Norreys, “that the court has an inherent jurisdiction to dismiss an action which is an abuse of the process of the court. It is a jurisdiction which ought to be very sparingly exercised and only in very exceptional cases.”
…
It is in my opinion of more importance to maintain the integrity of the principle that under cover of the inherent jurisdiction to stop abuse of process litigants are not to be deprived of the right to submit real and genuine controversies to the determination of the courts by the due procedure appropriate for the purpose than for this Court to add another to the many judicial attempts that have been made to construe and apply the perplexing provisions that stand in Victoria as s. 5(2)(b) of the Workers’ Compensation Act 1928.’
[Footnotes omitted]
52 Where ‘real’, ‘difficult’, ‘serious’ or ‘important’ questions of law arise, orders for summary judgment or summary dismissal should not in my opinion be made under s 31A of the Federal Court of Australia Act (see also [7] and [8] above and Anderson Formrite Pty Limited v Baulderstone Hornibrook Pty Ltd [2008] FCA 473 at [46]). With great respect, I disagree with the observations of Gordon J in Jefferson Ford at [131]. Section 31A is not in my opinion directed at displacing Order 29 rules 2-4 of the Federal Court Rules.
53 In this case real, difficult, serious or important questions arise as to whether:
(a) in the proceedings now before the Court the applicant is estopped from bringing forward matter to provide a foundation for its claims against the respondent, that was brought forward and could have been, but was not, decided in the Supreme Court proceeding, the judge having refrained from dealing with the matter;
(b) the applicant can be prevented from bringing a case of unconscionable conduct founded upon and compounded by admissions made by the respondent in the Supreme Court proceeding as to his knowledge of the falsity of the claims of breach of the applicant’s franchise agreement, upon which Priority Management Systems Pty Limited had relied;
(c) the principles relating to inconsistent judgments have any application where an applicant seeks no findings which are inconsistent with those obtained by it in the Supreme Court proceeding;
(d) a claim that the declaration of a dividend by Priority Management Systems Pty Limited on 30 June 2006 was unconscionable, properly belonged to the subject of the litigation of the Supreme Court proceeding;
(e) if so, whether ‘special circumstances’ exist which would warrant the Court permitting the applicant to bring forward such a claim in the present proceeding to make out a case for accessorial liability under s 75B of the Trade Practices Act, against the respondent;
(f) the applicant should be precluded from making a claim that the declaration of the dividend by Priority Management Systems Pty Limited on 30 June 2006 was unconscionable, as a foundation for its claim for accessorial liability against the respondent, because such a claim should be maintained, if at all, by the liquidator of Priority Management Systems Pty Limited;
(g) the applicant should be precluded from making a claim that the conduct of Priority Management Systems Pty Limited in entering into the debt deferral agreements with PM – North Sydney and PM – Melbourne on 31 May 2007 was unconscionable, as a foundation for its claim of accessorial liability against the respondent, because such a claim should be maintained, if at all, by the liquidator of Priority Management Systems Pty Limited.
54 I dare say that I have failed to record all of the real, difficult, serious or important questions that arise, but sufficient, I trust, to make it clear that this is not a proper case for summary dismissal. It should be noted that, amongst other things, the applicant wishes to put its case in respect of unconscionability by taking the various elements of Priority Management Systems Pty Limited’s conduct and of the respondent’s involvement in that conduct, both separately and collectively.
55 The relevant legal principles in relation to res judicata, issue estoppel and Anshun estoppel were set out by Emmett, Conti and Selway JJ in Wong v Minister for Immigration and Multicultural and Indigenous Affairs (‘Wong’) (2004) 146 FCR 10. An application for special leave to appeal to the High Court from that judgment was refused on 4 February 2005.
In Wong the Full Court had before it three separate appeals and one application for an extension of time within which to file an application for leave to appeal and also for leave to appeal. The three appeals were from a decision of Wilcox J in [2002] FCA 1436, a decision of Lindgren J in matter N297 of 2003 and another decision of Lindgren J in matter N298 of 2003, both of which were the subject of his Honour’s reasons for judgment in [2004] FCA 51, reported as Wong v Minister for Immigration and Multicultural and Indigenous Affairs (2004) 204 ALR 722. The decision, the subject of the application for an extension of time within which to file an application for leave to appeal and for leave to appeal, was that of Lindgren J in [2004] FCA 422, reported as Wong v Minister for Immigration and Multicultural and Indigenous Affairs (2004) 146 FCR 1.
56 The appeal against the decision of Wilcox J was dismissed. The appeal against the decision of Lindgren J in matter N297 of 2003 was dismissed. The appeal against the decision of Lindgren J in relation to matter N298 of 2003 was allowed and the application for leave to appeal the decision of Lindgren J [2004] FCA 422 was dismissed.
57 The relevant legal principles were stated by Emmett, Conti and Selway JJ in Wong at [36]-[38] as follows:
‘The relevant legal principles
36. The doctrines of res judicata and issue estoppel are founded on the broad rules of public policy expressed in the maxims nemo debet bis vexari pro una et eadem causa (‘a person ought not to be vexed twice for one and the same cause’) and interest reipublicae ut sit finis litium (‘it is in the interests of the State that there be an end to litigation’). It would be an abuse of process to allow parties to litigate repeatedly matters that have been finally determined by the Court. Also, quite apart from any psychological detriment that might flow from an individual having to undertake litigation of the same issue a second time, the State has an interest in ensuring that, once an issue has been determined according to law and all rights of appeal have been exhausted, that should be an end of the matter. The resources of the community ought not to be expended in the litigation, more than once, of the same issue.
37. A plea in bar may be raised in respect of an issue, not only if the Court in the earlier proceeding was actually required by the parties to form an opinion and pronounce a judgment, but also in relation to every issue that properly belonged to the subject of the earlier litigation and which the parties, exercising reasonable diligence, might have brought forward at the time of the earlier litigation: Port of Melbourne Authority v Anshun Pty Ltd [No 2] (1981) 147 CLR 589 at 598 and 602. Anshun estoppel arises where the issue, now raised for the first time, properly belonged to the subject of the earlier proceeding but, by negligence, omission or accident, was not raised in earlier proceeding. In essence, where the issue was so relevant to the subject matter of the earlier action that it would be unreasonable not to have raised it at that time, it is an abuse of process to endeavour to raise that issue for the first time in a subsequent proceeding between the parties: Anshun at 602
38. Nevertheless, where an issue has not actually been litigated and decided before, there must be exceptions to that general rule (cf the operation of res judicata and issue estoppel where the action/issue has been determined on a final basis). As foreshadowed in Anshun, there will be instances where, even though there is every reason why the matter should have been raised earlier but was not, there are special circumstances that prevail to permit a party to raise the issue in a subsequent proceeding. The Court therefore has a discretion, if it determines that special circumstances exist, to allow an issue to be raised, even where it is found that the point was unreasonably omitted from the earlier proceeding: see Macquarie Bank Ltd v National Mutual Life Association of Australia Ltd (1996) 40 NSWLR 543 at 558. However, the circumstances in which that would be permitted must, because of the principles referred to above, be exceptional, constituting “special circumstances” : see BC v Minister for Immigration and Multicultural Affairs [2002] FCAFC 221 at [30]. What will be sufficient to constitute special circumstances is by no means fixed and may involve consideration of a wide range of factors, all of which bear upon the general discretion of the Court where justice requires the non-application of the general principle: see BC v Minister for Immigration and Multicultural Affairs (2001) 67 ALD 60 (Sackville J) at [50] referring to Port of Melbourne v Anshun (No 2) [1981] VR 81; see also Bryant v Commonwealth Bank of Australia (1995) 57 FCR 287 at 296, 298-299, citing Yat Tung Investments Co Ltd v Dao Heng Bank Ltd [1975] AC 581.’
58 Issue estoppel will arise where 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 a prior judgment, decree or order (per Dixon J in Blair v Curran (‘Blair’) (1939) 62 CLR 464 at 532). A judicial determination concludes not merely the point actually decided but also a matter which it was necessary to decide and which was actually decided as the groundwork for the decision itself, though not then directly the point in issue. Matters cardinal to a later claim or contention cannot be raised if to raise them would necessarily involve an assertion that the judicial determination previously made was erroneous. However matters of law or fact which are subsidiary or collateral are not covered by issue estoppel. Findings which concern only evidentiary facts and not ultimate facts forming the very title to rights are not affected. Decisions upon matters of law which amount to no more than steps in a process of reasoning tending to establish or support the proposition upon which the rights depend do not estop the parties if the same matters of law arise in subsequent litigation (see Blair at p 532-3).
59 Unlike res judicata, issue estoppel may arise when the cause of action in each proceeding is entirely different (per Merkel J in Somanader v Minister for Immigration and Multicultural Affairs (‘Somanader’) (2000) 178 ALR 677at [69]).
60 As indicated in Wong at [37], Anshun estoppel occurs when an applicant puts forward in a later proceeding matters which might have been put in the earlier proceeding. In Henderson v Henderson (1843) 3 Hare 100, at 115 (67 ER at 319) Sir James Wigram VC expressed the principle in these terms:-
‘… where a given matter becomes the subject of litigation in, and of adjudication by, a court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence or even accident, omitted part of their case. …’
61 Plainly an attempt to re-litigate an issue which is res judicata or one which is affected by issue estoppel or by Anshun estoppel would constitute an abuse of process of the Court in respect of which an order could be made under Order 20 rule 5(1)(b) of the Federal Court Rules (see Port Melbourne Authority v Anshun Proprietary Limited (No. 1) (1980) 147 CLR 35at pp 37-8.)
62 An action can be stayed as vexatious ‘if it can really lead to no possible good’. The inherent power which every Court has to prevent the abuse of legal machinery may be invoked ‘if for no possible benefit’, a respondent is to be ‘dragged through litigation which must be long and expensive’ (see per Bowen LJ in Willis v Earl Beauchamp [1886] 11 PD 59 at 63 which was cited with approval by Lopez LJ in the Court of Appeal in Reichel (referred to at 667).
63 The facts in Reichel were that the Reverend Oswald Joseph Reichel had been the vicar of Sparsholt cum Kingston Lisle. On 2 June 1886 he submitted his resignation which was, with the approval and consent of the Bishop of Oxford, accepted as from 1 October 1886. After the receipt by the Bishop of the resignation, Reichel attempted to revoke it. Reichel brought an action against the Bishop of Oxford and others seeking a declaration that the instrument of resignation was null and void and consequential injunctive relief. That action was dismissed by North J, whose decision was affirmed by the Court of Appeal and, thereafter, the House of Lords.
64 Following the appointment of the Reverend John Richard Magrath as vicar, Reichel refused to give up possession of the parsonage-house and glebe lands. Magrath brought an action against Reichel restraining him from continuing in possession and other relief. By his statement of defence Reichel attempted to relitigate the issue on which he had lost in his action against the Bishop of Oxford. He sought to put in issue the correctness of the decision at first instance, on appeal to the Court of Appeal and later the House of Lords in his earlier action. In the Queen’s Bench Division a bench of two judges ordered that the statement of defence in the second matter be struck out and that judgment be entered for Magrath against Reichel. That order was affirmed by the Court of Appeal upon different grounds, namely that to set up the defence and attempt to prove it was an abuse of the process of the court. An appeal from that judgment to the House of Lords was dismissed. The House of Lords focussed its attention on whether the Court had the inherent jurisdiction to strike out the statement of defence. It found that the Court had such jurisdiction.
In his judgment Lord Herschell said at 669:
‘After fully considering all that he [Reichel appearing in person] has said, it appears to me that he has not a shadow of defence, and I am unable, therefore, to differ from the conclusion to which the Court below came.’
65 Plainly, there is no similarity between the present case and Reichel. The applicant in the proceedings before this Court does not seek to set up a case upon which it was defeated in the Supreme Court proceeding (cf QBE at [64] – a case where QBE Workers’ Compensation (NSW) Limited sought to argue in later proceedings a case which was contrary to that upon which it had relied in earlier workers’ compensation proceedings to which BAE Systems Regional Aircraft Limited was not a party).
66 Rippon was at the forefront of Mr Hall’s argument on the current s 31A(2) application. The facts leading up to the decision of the New South Wales Court of Appeal in Rippon were that two purchasers of a business under two separate contracts, one dealing with one part of the business and the other with the remainder, enjoyed the benefit of warranties by the vendor and its directors as to the reliability and accuracy of financial information provided in six annexures to the contracts of sale identified as annexures A to F. The purchasers became dissatisfied with their purchase and brought an action in the Supreme Court of New South Wales against the vendor and its directors. The allegation relied upon was that annexure D represented the net profit of the business for the year ended 30 June 1991 to be $187,921 when the correct figure was $106,713. The purchasers pleaded that the representations in annexure D had been made fraudulently. Furthermore the purchasers pleaded that by making the representations the vendor and the directors as covenantors engaged in conduct in contravention of s 52 of the Trade Practices Act 1974 (Cth). The matter was heard by a single judge in the Supreme Court. At the trial the allegation of fraud was not pressed. The trial judge awarded damages in favour of the purchasers of $22,722 for breach of contract. However, he dismissed the s 52 claim as he was not satisfied that the purchasers had been misled or deceived. Amongst other things he found that the person who controlled the purchasers, a Mr Hoefl, lacked credibility. An appeal by the purchasers to the New South Wales Court of Appeal was dismissed.
In the interregnum between the determination of the matter at first instance and the consideration of the appeal, a fresh proceeding was instituted by the purchasers in the District Court of New South Wales against the vendors’ accountants claiming damages for negligent misrepresentation. The misrepresentations were said to be contained in annexures A and D to the contracts of sale. These annexures apparently included accounts covering the years ended 30 June 1988, 30 June 1989, 30 June 1990 and 30 June 1991. In the earlier proceedings the case had been confined to the accounts for the year ended 30 June 1991.
67 The accountants whom the purchasers sued in the District Court proceedings would appear to have been a firm comprising two partners. One of the partners appears to have been responsible for an application in the District Court for summary dismissal of the District Court action as an abuse of process. The application for summary dismissal was dismissed by a judge in the District Court. On appeal, the primary judge’s decision was set aside, and in lieu thereof, an order was made by the New South Wales Court of Appeal that the action be dismissed pursuant to the relevant District Court rule, as an abuse of process.
68 On the hearing of the appeal the moving party appears to have been one of the members of the accounting firm, the other being named as the third respondent, who presumably took a passive role in the matter. The first and second respondents were the purchasers who had been the plaintiffs in the District Court proceeding. At [27]-]28] Handley JA with whose reasons for judgment Mason P and Heydon JA, as his Honour then was, agreed, said:
‘[27] The issues of duty and breach by the accountants did not arise in the earlier proceedings. The Judge said that the negligent representations were “different although similar” to those previously relied on because the purchasers now relied on the earlier figures. This would not avail the purchasers in respect of the 1991 year and in my judgment the accountants would be entitled in any event to have that part of the statement of claim struck out as an abuse of process. However the addition of the earlier years is mere camouflage, a distinction without a difference, because the purchasers could not be bothered suing the vendor for those years and are now barred from doing so by an Anshun estoppel.
[28] The present proceedings are an attempt to litigate or re-litigate issues which were either decided in or are barred by the earlier proceedings. In substance, ignoring the camouflage, the purchasers are attempting to re-litigate the issue of reliance on the 1991 figures which they lost. If they cannot succeed against anyone in respect of the 1991 figures because they did not rely on them, they could hardly succeed in establishing reliance on the earlier figures.’
69 It may be seen that the purchasers were, in the District Court proceedings, attempting to relitigate an issue which had been the subject of a determination in the Supreme Court proceedings, albeit against a different party, on which they had lost.
70 In the present case the applicant does not contest any findings of Rein AJ in the earlier proceedings which it brought against Priority Management Systems Pty Limited.
71 The present case is quite unlike Rippon. The respondent, Mr Sparks, is not contending that it would be an abuse of process for the applicant to seek to raise matters in the current proceedings on which it lost in the proceedings against Priority Management Systems Pty Limited, with a view to securing different findings.
72 Handley JA did not determine the appeal in Rippon on the basis that the purchasers were precluded by res judicata, issue estoppel or Anshun estoppel from suing the accountants (see Rippon at [15] and [22]-[24]). His Honour did not say that the claim by the purchasers against the accountants should have been made in the first proceeding against the vendor. Rather, he said that the claim against the accountants ‘could,and perhaps should’ have been included in the first proceeding (at [24]).
73 In my opinion it would be inappropriate to reach any final view on the questions of law which arise in this case. Relevant issues which will bear upon the ultimate outcome of the current proceeding include:
(a) the different parties in the Supreme Court proceeding and the current proceeding;
(b) whether Mr Sparks was a privy of Priority Management Systems Pty Limited or was the converse the case;
(c) whether the respondent can claim the benefit of any Anshun estoppel;
(d) whether, if the respondent were able to claim any Anshun estoppel, the applicant could rely upon special circumstances to take it outside the Anshun rule.
74 As Mr Harris SC pointed out, in my view correctly, it would be quite inappropriate for courts to require litigants to introduce multiple parties, who would be forced to litigate a multiplicity of issues in the one proceeding, in circumstances where it may be neither convenient nor efficient (in terms of time and cost) to do so (see per Clarke JA in Macquarie Bank Ltd v National Mutual Life Association of Australia Ltd (1996) 40 NSWLR 543 at 561-562).
75 In my opinion, the present proceeding does not constitute an abuse of the process of the Court. I am not satisfied that the applicant has no reasonable prospect of successfully prosecuting the proceeding against Mr Sparks.
76 In my opinion, the respondent’s Notice of Motion filed 20 February 2008 should be dismissed with costs.
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I certify that the preceding seventy-six (76) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Graham. |
Associate:
Dated: 7 May 2008
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Counsel for the Applicant in the proceeding: |
C M Harris SC and C Champion |
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Solicitor for the Applicant in the proceeding: |
Matthews Folbigg Pty Limited |
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Counsel for the Respondent in the proceeding: |
M R Hall |
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Solicitor for the Respondent in the proceeding: |
Finlaysons |
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Date of Hearing: |
8 April 2008 |
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Date of Judgment: |
7 May 2008 |
