FEDERAL COURT OF AUSTRALIA
SK Foods LP v SK Foods Australia Pty Limited (in Liquidation) (No 3) [2013] FCA 526
IN THE FEDERAL COURT OF AUSTRALIA | |
DATE OF ORDER: | |
WHERE MADE: |
THE COURT ORDERS THAT:
1. The parties bring in Short Minutes of Orders to give effect to these reasons within 21 days.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
NEW SOUTH WALES DISTRICT REGISTRY | |
GENERAL DIVISION | NSD 262 of 2012 |
BETWEEN: | SK FOODS LP, A CALIFORNIA LIMITED PARTNERSHIP (UNDER CHAPTER 11) First Plaintiff BRADLEY D SHARP, AS TRUSTEE IN BANKRUPTCY OF SK FOODS LP (UNDER CHAPTER 11) Second Plaintiff
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AND: | SK FOODS AUSTRALIA PTY LTD (IN LIQUIDATION) (ACN 009 245 735) First Defendant CEDENCO JV AUSTRALIA PTY LTD (IN LIQUIDATION) (ACN 075 836 010) Second Defendant SS FARMS AUSTRALIA PTY LTD (IN LIQUIDATION) (ACN 107 746 716) Third Defendant JOHN SHEAHAN AND IAN RUSSELL LOCK AS JOINT AND SEVERAL LIQUIDATORS OF SK FOODS AUSTRALIA PTY LTD (IN LIQUIDATION) (ACN 009 245 735), CEDENCO JV AUSTRALIA PTY LTD (IN LIQUIDATION) (ACN 075 836 010), SS FARMS AUSTRALIA PTY LTD (IN LIQUIDATION) (ACN 107 746 716) Fourth Defendant SK PM CORPORATION Fifth Defendant FREDERICK SCOTT SALYER (AKA SCOTT SALYER) AS TRUSTEE OF THE SCOTT SALYER REVOCABLE TRUST Sixth Defendant MONTEREY PENINSULA FARMING LLC Seventh Defendant FAST FALCON LLC Eighth Defendant SS FARMS LLC Ninth Defendant ROBERT PRUETT IN HIS CAPACITY AS TRUSTEE FOR THE SSC&L 2007 TRUST Tenth Defendant NEAL ALEXANDER IN HIS CAPACITY AS TRUSTEE FOR THE SSC&L 2007 TRUST Eleventh Defendant SSRT HOLDING PTY LIMITED (ACN 162 384 045) AS TRUSTEE OF THE SCOTT SALYER REVOCABLE TRUST Twelfth Defendant SSC&L 2007 PTY LIMITED (ACN 162 383 940) AS TRUSTEE OF THE SSC&L 2007 TRUST Thirteenth Defendant
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JUDGE: | FLICK J |
DATE: | 30 MAY 2013 |
PLACE: | SYDNEY |
REASONS FOR JUDGMENT
1 The present proceeding was initially commenced by way of an Originating Process filed on 20 February 2012. That Originating Process has been amended on a number of occasions. A Statement of Claim was ultimately filed on 8 January 2013. The most recent initiating documents are a Fourth Further Amended Originating Process and an Amended Statement of Claim, both filed in Court on 20 March 2013. A Defence to the Amended Statement of Claim was also filed on 20 March 2013.
2 Perhaps not surprisingly, a variety of Interlocutory Applications have also been filed. Those Applications seek a variety of orders, including:
summary judgment;
the preliminary determination of a separate issue;
various declarations relating to the legal and beneficial ownership of particular assets and debts; and
leave to further amend the Originating Process filed in this Court.
With a view to narrowing the issues to be resolved, the Plaintiffs only pressed those parts of their Amended Interlocutory Application as related to their summary judgment application. In support of their application, the Plaintiffs argue that the doctrine of res judicata applies to the present proceeding by reason of a decision of the United States Bankruptcy Court published in 2012 in S K Foods L P et al v S K PM Corp Inc et ors, (East. Dist. of Calif, 29 November 2012). That Court was constituted by the Honourable Judge Bardwil. Another way in which the Plaintiffs seek to secure summary judgment is by reliance upon the doctrine of abuse of process. Even if there be a res judicata or an abuse of process, a separate question arises as to whether or not the Court should exercise its discretion by entering summary judgment in favour of the Plaintiffs to the present proceeding.
THE PARTIES AND THE ISSUES SAID TO HAVE BEEN RESOLVED
3 The facts giving rise to the present applications are within a relatively narrow compass.
4 In the present proceeding, SK Foods LP is the First Plaintiff. SK Foods LP is a California limited partnership. The Second Plaintiff, Mr Bradley Sharp, is the trustee-in-bankruptcy of SK Foods LP. The First Defendant is SK Foods Australia Pty Ltd (“SK Foods Australia”). There were originally eight other Defendants, but that number has increased to be thirteen in total. Included as Defendants are Cedenco JV Australia Pty Ltd (“Cedenco JV Australia” as Second Defendant), SS Farms Australia Pty Ltd (“SS Farms Australia” as Third Defendant) and Messrs John Sheahan and Ian Lock (as Fourth Defendants). Messrs Sheahan and Lock are (inter alia) the liquidators of SK Foods Australia, Cedenco JV Australia and SS Farms Australia. The First to Fourth Defendants, with leave of the Court, did not participate in this hearing. The Defendants who oppose the summary judgment application now made by the Plaintiffs are the Fifth to Ninth and Twelfth to Thirteenth Defendants, who may conveniently be referred to as “the other Defendants”. The other Defendants are:
SK PM Corporation – as Fifth Defendant;
Frederick Scott Salyer as Trustee of the Scott Salyer Revocable Trust – as Sixth Defendant;
Monterey Peninsula Farming LLC – as Seventh Defendant;
Fast Falcon LLC – as Eighth Defendant;
SS Farms LLC – as Ninth Defendant;
SSRT Holding Pty Limited ACN 162 384 045 as Trustee of the Scott Salyer Revocable Trust – as Twelfth Defendant; and
SSC&L 2007 Pty Limited ACN 162 383 940 as Trustee of the SSC&L 2007 Trust – as Thirteenth Defendant.
Also listed as Defendants were:
Robert Pruett in his capacity as Trustee for the SSC&L 2007 Trust – as Tenth Defendant; and
Neal Alexander in his capacity as Trustee for the SSC&L 2007 Trust – as Eleventh Defendant;
Neither the Tenth nor Eleventh Defendants participated in the hearing. The hearing of an earlier Interlocutory Application in this matter came before Justice Emmett in December 2012 (before the Tenth to Thirteenth Defendants had been joined, to reflect subsequent changes in trustee). In his reasons, Emmett J refers to the Fifth to Ninth Defendants as “the Salyer interests”: SK Foods LP v SK Foods Australia Pty Ltd (No 2) [2012] FCA 1509 at [4].
5 In the American proceeding before the Honourable Judge Bardwil, the Plaintiff was Mr Sharp as Trustee for SK Foods LP. The defendants to that proceeding were listed as:
SK PM Corp., Inc.;
Scott Salyer Revocable Trust;
SSC&L 2007 Trust;
Monterey Peninsula Farms, LLC;
Frederick Scott Salyer aka Scott Salyer in his capacity as Trustee for the Scott Salyer Revocable Trust;
Robert Pruett in his capacity as Trustee for the SSC&L 2007 Trust; and
Fast Falcon, LLC.
Neither SK Foods Australia nor its liquidators were parties to the American proceeding.
6 Part of the relief claimed by the Plaintiffs in their Fourth Further Amended Originating Process in the present proceeding in this Court is a declaration that SK Foods LP is “the legal and beneficial owner of 100 fully paid ordinary shares issued by” SK Foods Australia. The Plaintiffs also seek an order that the Fourth Defendants (the liquidators) accept their proof of debt which was lodged in relation to an “Intercompany Loan” whereby SK Foods LP transferred monies in February 2002 “for the benefit of” SK Foods Australia. At the time of transfer, the value of the monies transferred was AUD $12,131,152.95. That sum is now greater and is in excess of AUD $17,000,000. The other Defendants dispute the entitlement of the Plaintiffs to these assets, and claim that these assets are more properly the property of entities within the other Defendants’ group.
7 A Notice of Dispute filed by the Plaintiffs in this proceeding on 14 March 2013 states that the Australian liquidators have come to the following conclusions:
(a) The true beneficial owner of 55 of the Shares is SK PM Corporation (SKPM).
(b) The true beneficial owner of 46 of the Shares is the trustee of the Scott Salyer Revocable Trust (SSRT).
(c) That, despite having initially recognised [SK Foods LP] as the true beneficial owner of the Intercompany Debt, that decision was incorrect.
The reference to ‘46’ shares appears to be a typographical error. The other paragraphs of the Notice of Dispute refer to the number of shares as 45. The Notice goes on to state (in part) as follows:
There is a genuine dispute between the plaintiffs on the one hand, and the fifth to ninth defendants on the other hand as to the following matters:
(a) Whether between 1 September 2006 and 30 June 2008 the 100 of the Shares owned by [SK Foods LP] were transferred, 55 to SKPM and 45 to SSRT.
(b) The accuracy of the conclusions reached by the Liquidators’ counsel in his advice dated 6 March 2012.
(c) Whether the true beneficial owner of 55 of the Shares is SKPM or [SK Foods LP].
(d) Whether the true beneficial owner of 45 of the Shares is the SSRT or SK Foods LP.
(e) Whether [SK Foods LP], the trustee of the SSC&L 2007 Trust (SSC&L), or Fast Falcon LLC (Fast Falcon) is owed the Intercompany Loan.
(f) Whether as at commencement of [SK Foods LP’s] bankruptcy case on 5 May 2009, any of the Fifth to Ninth Defendants held a cognizable interest in the Intercompany Loan.
The written submissions filed by the other Defendants maintain that after “considerable investigations and some interim decisions partly favourable to the plaintiffs, [the liquidators] have finally ruled in favour of the other defendants on both issues…”.
8 Clearly there is a dispute as to ownership. The other Defendants want the resolution of ownership “determined on evidence at a full trial…”.
9 Contrary to the position of the other Defendants on these issues, in the American proceeding the Honourable Judge Bardwil concluded that “SK Foods [LP] owned the [SK Foods Australia] Stock and held the rights to the Intercompany Loan as of the Petition date, and therefore, those assets are property of the estate within the meaning of 11 U.S.C. ss 541(A)…”.
10 In very summary form, the Plaintiffs in the present proceeding claim that the legal and beneficial ownership in the shares and the entitlement to the Intercompany Loan have already been resolved by the Honourable Judge Bardwil. That decision, so the Plaintiffs contend, gives rise to a res judicata such that they are entitled to summary judgment in this Court and that those issues should not be permitted to be re-litigated. The res judicata – or an issue estoppel – is said to arise as between the Plaintiffs and the other Defendants.
AN OVERVIEW OF THE BACKGROUND FACTS
11 The Plaintiffs and the other Defendants to the present proceeding filed a Statement of Agreed Facts. As such, evidence is not required to prove the existence of those facts that have been agreed: Evidence Act 1995, s 191(2)(a) (Cth).
12 Although somewhat extensive, it is convenient to set forth as follows an abridged chronology of some of those events, as agreed in the Statement of Agreed Facts, which assume relevance in resolving one or other of the competing submissions being advanced:
Date | Event |
11 January 2002 | SK Foods LP became the legal and beneficial owner and registered holder of 100 fully paid ordinary shares in SK Foods Australia |
27 February 2002 | SK Foods LP transfers monies from America to Australia for the benefit of SK Foods Australia (the Intercompany Loan) |
14 May 2009 | Mr Bradley Sharp was appointed trustee-in-bankruptcy of SK Foods LP, the appointment being approved by the United States Bankruptcy Court on 18 May 2009 |
6 May 2010 | Mr Ian Lock and Mr John Sheahan were appointed as administrators of SK Foods Australia, Cedenco JV Australia and SS Farms Australia |
11 August 2010 | Mr Ian Lock and Mr John Sheahan were appointed as liquidators of SK Foods Australia, Cedenco JV and SS Farms Australia |
4 May 2011 | Mr Sharp files a complaint in the United States Bankruptcy Court, Eastern District of California, Sacramento Division. That complaint stated “Whether the Loan Transfers transferred the Intercompany Loan is an issue being decided in the context of the Australian Liquidation”. The complaint also stated “Whether the Equity Transfers transferred the [SK Foods Australia shares] is an issue being decided in the context of the Australian Liquidation.” |
31 July 2011(?) to 24 June 2012 | The United States proceedings were stayed |
1 and 2 December 2011 | Senior and junior counsel retained by the liquidators advise that the Intercompany Loan had not been effectively transferred from SK Foods LP and that the proof of debt of SK Foods LP in respect to the Intercompany Loan was admissible |
2 December 2011 | The liquidators admitted SK Foods LP as a creditor for the Intercompany Loan, subject to set off amounts allegedly owed. The liquidators rejected the proof of debt lodged by Fast Falcon LLC (to whom the Intercompany Loan was purportedly transferred). |
20 December 2011 | The liquidators vary the amount for which SK Foods LP had been admitted as a creditor for the Intercompany Loan |
22 December 2011 | Mr Sharp and SK Foods LP commence related proceedings in this Court disputing the liquidators’ decision in relation to the set off amounts |
21 February 2012 | Mr Sharp and SK Foods LP commence proceedings in this Court seeking declaratory relief as to the legal and beneficial ownership of the SK Foods Australia shares. (The Court records show that this date is in fact 20 February 2012). |
April 2012 | Counsel acting for the defendants in the American proceedings cease to act |
4 June 2012 | This Court directs the liquidators to either revoke the admission of SK Foods LP’s proof of debt in SK Foods Australia or pay a dividend |
15 June 2012 | The liquidators revoke their 2 December 2011 decision to admit SK Foods as a creditor of the Intercompany Loan |
3 July 2012 | Mr Sharp files an amended complaint in the American proceeding seeking declaratory relief as to the ownership of the Intercompany Loan and the SK Foods Australia shares |
1 August 2012 | Mr Sharp files a motion seeking summary judgment in the American proceeding |
26 September 2012 | The US Bankruptcy Court dismisses an objection raised by the defendants to the American proceeding, objecting to that Court exercising jurisdiction |
29 November 2012 | The US Bankruptcy Court hands down judgment and makes orders declaring that SK Foods LP is the owner of the Intercompany Loan and the SK Foods Australia shares |
5 February 2013 | The US Bankruptcy Appellate Panel refused an Emergency Stay Motion |
Late 2013-early 2014 | In the ordinary course, the United States appeal would be “determined” |
In addition to this chronological sequence of events, it was also agreed that there had been a series of retirements and appointments of persons as trustees for the two trusts: the Scott Salyer Revocable Trust (the “SSRT”); and the SSC&L 2007 Trust. It was agreed, for example, that Mr Frederick Scott Salyer was the Trustee of the SSRT until 25 January 2013. Each person who has held the position of Trustee in either of these trusts has been added as defendants to the Australian proceeding, and constitute the Sixth, and Tenth to Thirteenth Defendants.
Res judicata and issue estoppel
13 The principal submissions advanced on behalf of the Plaintiffs are that the decision of the Honourable Judge Bardwil gives rise to either:
a res judicata – at least as between the Plaintiffs and the other Defendants; or
an issue estoppel as between those parties.
The preferred argument is that there is a res judicata. In seeking summary judgment, the Plaintiffs further contend that it would be an abuse of process to permit the other Defendants to re-litigate issues which have already been judicially resolved.
14 There was no disagreement between the Plaintiffs and the other Defendants as to the general principles relating to the doctrine of res judicata, including the proposition that a decision of a foreign court or tribunal could give rise to a res judicata. What divided those parties were the submissions advanced by Senior Counsel on behalf of the other Defendants that a res judicata did not arise in the present case because:
the doctrine of res judicata cannot be invoked where the judgment relied upon is made in later, not earlier, litigation – the present proceeding in this Court having been commenced in February 2012 and in advance of the amendment in July 2012 of the complaint filed in the American litigation, albeit that litigation having been commenced in May 2011;
the decision of the Honourable Judge Bardwil did not resolve the beneficial interest in the shares and the Intercompany Loan – but only the legal interest;
the failure to join “necessary parties” to the American proceeding had the consequence that the United States Bankruptcy Court was deprived of “jurisdiction” to resolve the issues under consideration; and/or
the decision of the Honourable Judge Bardwil was affected by legal and factual error.
Senior Counsel on behalf of the other Defendants also maintained that the application for summary judgment being advanced by the Plaintiffs sought to “perfect an abuse of process…”.
15 Although the submissions advanced on behalf of the other Defendants as to an abuse of process necessarily overlapped to some extent with their submissions as to the doctrine of res judicata, those Defendants further submitted that there had been an abuse of process such that the Plaintiffs could not rely upon the American decision because:
the mere commencement of the American proceeding, being the July 2012 amendment, was prima facie vexatious and oppressive; and
irrespective of the prima facie position, the pursuit of the American proceeding was in fact vexatious and oppressive by reason of the pursuit of a “plan” or “strategy” to deliberately “overlap” the issues to be resolved in the American proceeding with a view to “shutting down” the present proceeding in this Court.
One or other of these submissions assumed greater or lesser emphasis at various stages in both the oral and written submissions. Each of these submissions, however, should nevertheless be dealt with in turn.
Res judicata – general principles
16 In those circumstances where there is a res judicata, a “cause of action” of a party becomes merged in a judgment: Gibbs v Kinna [1999] 2 VR 19. Kenny JA (with whom Ormiston and Phillips JJA agreed) there summarised the general principle as follows:
[21] The rule of res judicata is that, generally speaking, no proceeding can be maintained on a cause of action upon which judgment has been entered. The cause of action is said to merge in the judgment, in the sense that it no longer has an existence independent of the judgment: see Blair v Curran (1939) 62 CLR 464 at 532 per Dixon J; Jackson v Goldsmith (1950) 81 CLR 446 at 466 per Fullagar J dissenting on other issues; Anshun's case 147 CLR at 597, and Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502 at 507-8…
17 For there to be a res judicata it has thus been said that the “cause of action” in each proceeding must be the same: Ramsay v Pigram (1968) 118 CLR 271 at 280. And, notwithstanding uncertainty as to the expression, the content of a “cause of action” is to be determined as a matter of substance and not form: Trawl Industries of Australia Pty Ltd (in liq) v Effem Foods Pty Ltd (1992) 36 FCR 406 at 418. Gummow J, when a member of this Court, there said:
It is said that for the estoppel to operate, the cause of action in each proceeding must be the same … But, as Brennan J pointed out in Anshun (at 610-613) the phrase “cause of action” is used imprecisely and in several senses. These include:
(i) the series of facts which the plaintiff must allege and prove to substantiate a right to judgment;
(ii) the legal right which has been infringed; and
(iii) the substance of the action as distinct from its form.
...
In Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502 at 508, Deane, Gaudron, Toohey JJ drew attention to what Brennan J had said as to the imprecision of the phrase “cause of action”, but did not espouse any particular formulation.
However ... for the law of Australia it is most suitable to focus upon the substance of the two proceedings as distinct from their form. This reflects the constitutional basis of federal jurisdiction ... Also, it allows for the very many controversies which now come before superior courts, federal and State, without pleadings. And even where pleadings are necessary or are ordered, the effect of the judicature system of pleading, now in general operation in Australia, is as described by Barwick CJ:
“[T]here is no necessity to assert or identify a legal category of action ... It is sufficient in matters in the Federal Court to assert the facts on which the plaintiff or applicant party relies and to nominate the remedies which he seeks as a consequence of the occurrence of those facts.”
An appeal from that decision was dismissed: Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd (in liq) (1993) 43 FCR 510.
18 The merging of rights by reason of an earlier decision – and the doctrine of res judicata – is well illustrated by Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502. A proceeding had there been instituted by the Deputy Commissioner in the Supreme Court of the Australian Capital Territory seeking the recovery of tax. The proceeding sought the recovery of $25,557.92 and $115.00 in costs. The amount disclosed as the tax due was stated in the assessments as being $255,579.20. Whoever drafted the writ commencing the proceeding mistakenly put the “comma” in the wrong place. The taxpayer, perhaps unsurprisingly, did not seek to correct this mistake. Terms of settlement were negotiated and judgment was entered in the sum claimed in the proceeding. The Deputy Commissioner thereafter commenced a separate proceeding seeking recovery of the balance between the amount claimed in the assessment and the amount recovered in the Supreme Court proceeding. It was concluded that the second proceeding was not maintainable. In so concluding, Deane, Toohey and Gaudron JJ reasoned:
The point of the present appeal is that the respondent brought an action against the appellant and recovered judgment against him. He obtained a judgment of the Court in which the cause of action upon which he relied merged, thereby destroying its independent existence so long as that judgment stood. And, so long as that judgment stands, it is not competent for the respondent to bring further proceedings in respect of the same cause of action. It is no answer to say that the Court might, if appropriate, stay the second action as an abuse of process. The impediment goes deeper than that; res judicata may sustain a plea of abuse of process but in that case the appropriate remedy is to strike out the later action ... So long as the respondent chooses, as he does, to take no step to set aside the judgment and to raise no issue in the second action as to the circumstances in which that judgment was obtained, he must accept the consequences of res judicata. There is nothing in the Act or arising from the position of the respondent as a public officer that precludes the operation of that doctrine. The matter is not one for the discretion of the Court; by operation of law the cause of action relied upon by the respondent has ceased to exist: (1988) 164 CLR at 510-511.
Brennan and Dawson JJ further concluded that the doctrine of res judicata does not admit of any exception in respect to “special circumstances”. In so concluding, Brennan J thus said:
… A phrase used by Wigram V.C. in Henderson v. Henderson [(1843) 3 Hare at 115] may be understood as meaning that in “special circumstances” the doctrine of res judicata does not or may not apply. For reasons which I gave in Port of Melbourne Authority v. Anshun Pty. Ltd. [(1981) 147 CLR 589 at 613-614], Wigram V.C. was not, in my view, advancing any exception to the doctrine but was referring to the equity practice of that time which allowed for the impeaching of the first judgment in special circumstances. As the doctrine of res judicata does not admit of any exception so long as the first judgment stands, I do not find it necessary to consider the “special circumstances” exception addressed in the joint judgment: (1988) 164 CLR at 504-505.
See also: (1988) 164 CLR at 512 per Dawson J. See: KR Handley, “Res Judicata: General Principles and Recent Developments” (1999) 18 Aust Bar Rev 214.
19 When distinguishing between res judicata and issue estoppel, Dixon J in Blair v Curran (1939) 62 CLR 464 at 531-532 said:
The decretal order does not, of course, deal with the title to the undisposed of three-twentieths share of income. The case is, therefore, not one of res judicata in the proper sense. The principle upon which the parties are precluded from denying to the clause an operation and effect sufficient to catch the undisposed of share of income is called estoppel by record or issue estoppel.
A judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or their privies. The estoppel covers only those matters which the prior judgment, decree or order necessarily established as the legal foundation or justification of its conclusion, whether that conclusion is that a money sum be recovered or that the doing of an act be commanded or be restrained or that rights be declared. The distinction between res judicata and issue estoppel is that in the first the very right or cause of action claimed or put in suit has in the former proceedings passed into judgment, so that it is merged and has no longer an independent existence, while in the second, for the purpose of some other claim or cause of action, a state of fact or law is alleged or denied the existence of which is a matter necessarily decided by the prior judgment, decree or order.
Nothing but what is legally indispensable to the conclusion is thus finally closed or precluded. In matters of fact the issue estoppel is confined to those ultimate facts which form the ingredients in the cause of action, that is, the title to the right established. Where the conclusion is against the existence of a right or claim which in point of law depends upon a number of ingredients or ultimate facts the absence of any one of which would be enough to defeat the claim, the estoppel covers only the actual ground upon which the existence of the right was negatived. But in neither case is the estoppel confined to the final legal conclusion expressed in the judgment, decree or order.
In the context of addressing issue estoppel, Gleeson CJ, McHugh, Gummow, Kirby, Hayne, Callinan and Heydon JJ in Kuligowski v Metrobus [2004] HCA 34, 220 CLR 363 at 369 set forth as follows what they regarded as “uncontroversial matters”:
[21] In his speech in Carl Zeiss Stiftung v Rayner & Keeler Ltd [No 2], Lord Guest, after noting that the doctrine of issue estoppel had been accepted by Australian courts for a number of years, indicated that, for the doctrine to apply in the second set of proceedings, the requirements were:
“(1) that the same question has been decided; (2) that the judicial decision which is said to create the estoppel was final; and, (3) that the parties to the judicial decision or their privies were the same persons as the parties to the proceedings in which the estoppel is raised or their privies.”
See also: Armacel Pty Ltd v Smurfit Stone Container Corporation [2008] FCA 592 at [56], 248 ALR 573 at 580 per Jacobson J; Dale v Western Australia [2011] FCAFC 46 at [69], 191 FCR 521 at 535 per Moore, North and Mansfield JJ.
20 And, when discussing abuse of process and cause of action and issue estoppel, Lord Bingham in Johnson v Gore Wood & Co [2002] 2 AC 1 at 31 said:
… The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all.
21 When advancing submissions, little distinction was drawn by either the Plaintiffs or the other Defendants between such reliance as was sought to be placed upon res judicata as opposed to issue estoppel. In terms of the ultimate conclusions which have been reached, it has similarly proved unnecessary to draw any distinction.
A foreign court or tribunal
22 Senior Counsel for the other Defendants wisely did not seek to put in issue the proposition that a decision of a foreign court or tribunal could give rise to a res judicata.
23 Long gone are the days when the doctrine of res judicata was confined to Courts of Record and where “foreign courts” were not afforded the “privilege” of “certain Courts in England”: Walker v Witter (1778) 1 Doug KB 1, 99 ER 1. Initially, it was there stated that:
… The difficulty in the case had arisen from not fixing accurately what a Court of Record is in the eye of the law. That description is confined properly to certain Courts in England, and their judgments cannot be controverted. Foreign Courts, and Courts in England not of record, have not that privilege, nor the Courts in Wales, &c. but the doctrine in the case of Sinclair v Fraser, was unquestionable. Foreign judgments are a ground of action every where, but they are examinable.
But this decision soon came under criticism. In Galbraith v Neville (1789) 1 Doug KB 6n Lord Kenyon wrote:
… I cannot help entertaining very serious doubts concerning the doctrine laid down in Walker v Witter, that foreign judgments are not binding on the parties here. But when I am told that Lord Hardwicke did not hold himself bound by a decree on the Chancery side of the Court of Great Sessions in Wales, affirmed in the House of Lords, I own I am quite lost in a maze.
After referring to a decision of the Ecclesiastical Court being set aside for fraud, Lord Kenyon went on to say:
The Judges, there, were of opinion, that you might reply per fraudem to a judgment. That is not an authority for saying, that we can revise the judgments of the lowest Courts in foreign countries, where they have competent jurisdiction.
Notwithstanding this earlier reluctance, it would seem that English Courts have accepted since the decision in Godard v Gray (1870) LR 6 QB 139 that a decision of a foreign court or tribunal may give rise to a res judicata. See: Barnett, “Res Judicata, Estoppel, and Foreign Judgments” at [1.21] (Oxford University Press, 2001).
24 From initially not being recognised through to a stage of providing prima facie evidence, it is now the case that a decision of a foreign court or tribunal may give rise to a res judicata: Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2) [1967] AC 853. Lord Reid there summarised the prevailing position as follows:
Next I must consider whether it makes any difference that the former judgment was the judgment of a foreign court. At one time foreign judgments were regarded as being only evidence and not conclusive. But at least since the decision in Godard v. Gray they have been regarded as equally conclusive with English judgments (subject to any difference there may be resulting from there being no merger of a cause of action in a foreign judgment). The same pleas, for example, fraud or lack of jurisdiction, are good against both. It would seem that the only plea which may be available against foreign judgments alone is perversity, if Simpson v. Fogo [(1862) 1 H & M 195] was rightly decided. In that case Page Wood V.-C. refused to give effect to a judgment of the Supreme Court of Louisiana. There was no question of perversity in the ordinary sense of obstinately or dishonestly shutting one's eyes to what one knows to be right. The Supreme Court had applied what they believed to be their common law, but it was at variance with a generally accepted rule of private international law, which required foreign (in this case, English) law to be applied in the circumstances of that case. Page Wood V.-C. called [(1862) 1 H & M at 247] this "a perverse and deliberate refusal to recognise the law of the country by which title has been validly conferred." …
I can see no reason in principle why we should deny the possibility of issue estoppel based on a foreign judgment, but there appear to me to be at least three reasons for being cautious in any particular case. In the first place, we are not familiar with modes of procedure in many foreign countries, and it may not be easy to be sure that a particular issue has been decided or that its decision was a basis of the foreign judgment and not merely collateral or obiter. Secondly, I have already alluded to the practical difficulties of a defendant in deciding whether, even in this country, he should incur the trouble and expense of deploying his full case in a trivial case: it might be most unjust to hold that a litigant here should be estopped from putting forward his case because it was impracticable for him to do so in an earlier case of a trivial character abroad, with the result that the decision in that case went against him. These two reasons do not apply in the present case. The case for the Stiftung, or on this issue those who purported to represent it, was fought as tenaciously in West Germany as this case has been fought here, and it is not difficult to see what were the grounds on which the West German judgment was based. But the third reason for caution does raise a difficult problem with which I must now deal.
It is clear that there can be no estoppel of this character unless the former judgment was a final judgment on the merits. But what does that mean in connection with issue estoppel? When we are dealing with cause of action estoppel it means that the merits of the cause of action must be finally disposed of so that the matter cannot be raised again in the foreign country…: [1967] AC at 917-918.
25 So much was not put in issue by Senior Counsel for the other Defendants. It was not disputed that a decision of the United States Bankruptcy Court could give rise to a res judicata or an issue estoppel; what was put in issue was whether this particular judgment of the Honourable Judge Bardwil – and the manner in which it was obtained – fell within the doctrine.
A judgment in later and not earlier litigation?
26 One of the submissions advanced by Senior Counsel on behalf of the other Defendants in their written submissions was that the doctrine of res judicata could not be invoked because the judgment of the Honourable Judge Bardwil “was made in later, not earlier, litigation”. The judgment, it was understood, was said to have been given in “later … litigation” because the amendment to the complaint in the American proceeding took place in July 2012 and “later” than the commencement of the present proceeding in this Court in February 2012.
27 The written submissions of the other Defendants contended that there “is no case which the other defendants have been able to locate where a later commenced application which fast tracked its way to judgment (ie the US Summary Judgment here) was able to be used to shut down an earlier proceeding (this proceeding in the Federal Court) on grounds of res judicata”. The written submissions went on to contend that if “the principle of res judicata did apply to earlier litigation, it would not promote finality of litigation, rather, it would lead to multiplicity and to people try to get [sic] as quickly as possible the later proceeding to shut down the earlier proceeding …”.
28 So expressed the submission has potentially two elements: first, that a judgment obtained in “later litigation” cannot give rise to a res judicata; and, secondly, that to embrace such a prospect may encourage parties to obtain a judgment quickly in one jurisdiction with a view to “shutting down” litigation in another jurisdiction.
29 In support of its submission that the factor that is determinative is “later” or “subsequent litigation”, reliance was placed upon the following summary in Spencer Bower, Turner and Handley “Res Judicata” (3rd ed, 1996):
The principle of res judicata estoppel
9. The rule of estoppel by res judicata was formerly said to be a rule of evidence but has recently been considered to be a rule of public policy. It has been said to be part of adjectival law. However Lord Wright said that estoppel by representation “is more correctly viewed as a substantive rule of law” and this must also be true of res judicata estoppel. It may thus be stated: Where a final judicial decision has been pronounced on the merits by an English or (with certain exceptions) a foreign judicial tribunal with jurisdiction over the parties and the subject matter, any party to such litigation, as against any other party (and in a case of a decision in rem, any person whatsoever, as against any other person) is estopped in any subsequent litigation from disputing such decision on the merits, whether it be used as the foundation of an action, or as a bar to any claim, indictment, affirmative defence or allegation, provided the party entitled raises the point at the proper time. This rule is sometimes expressed in the maxim res judicata pro veritate accipitur.
In contrast stands the following statement in the later edition of Spencer Bower and Handley, “Res Judicata” (4th ed, 2009):
[3.01] Anyone setting up a res judicata as a bar to a claim or defence must establish that the decision was pronounced and remains in force. It is not enough that other proceedings are pending. The material date is when the second proceedings are heard. The decision in the first proceeding is treated as conclusive evidence in the second. A judgment given before the second proceedings are heard may be relied upon, unless it has been set aside.
Gone is any reference to “subsequent litigation.”
30 The submission that res judicata cannot arise where the judgment relied upon has been obtained in “later litigation” is rejected. It is not the date of commencement of litigation (or the date upon which a pleading is amended) which is determinative of the operation of the doctrine; it is the judicial resolution of the issues presented in a judgment which merges the rights and interests of the parties in the judgment. Until there is a judgment, there can be no question of any res judicata arising for consideration. But once a judgment has been obtained the doctrine – and the reasons of public policy behind the doctrine – make it oppressive for a losing party to seek to re-litigate issues that have been resolved.
31 The forensic concern of the other Defendants that a party may seek to “fast track” a proceeding in a foreign forum, possibly by way of a more recently commenced proceeding or amendment to an existing proceeding, it is respectfully concluded, is already adequately addressed in the law by way of (for example):
the disfavour with which the law views a party seeking the same relief in two or more different forums, especially in those circumstances where one party is improperly seeking to secure some forensic advantage; or
the control which a Court can exercise over the conduct of parties, including its ability to grant relief where a party has (for example) deliberately pursued a course of seeking to vex or oppress an opponent.
It is thus concluded that a judgment between parties should not be denied the effect of merging the rights of the parties in the judgment simply because it was obtained in a proceeding which may have been commenced at a later point of time.
32 This submission of the other Defendants is thus rejected.
The American decision – a resolution of both legal and equitable interests?
33 A further submission advanced by Senior Counsel on behalf of the interests of the other Defendants was that the American decision did not resolve both the legal and equitable rights and interests in either the shares or the Intercompany Loan.
34 This submission is also rejected.
35 The reasons for decision of the Honourable Judge Bardwil, it is concluded, resolve both the legal and equitable rights in both the shares and the Intercompany Loan. To conclude otherwise would be to impermissibly parse and analyse discrete sentences in the reasons for decision and to divorce those sentences from the issues being resolved by the United States Bankruptcy Court and the judgment as a whole. This submission seeks to impermissibly construe the reasons for decision in a manner which the judgment simply does not bear.
36 At the outset of his Honour’s reasons, there was the following account of the motion before him:
This motion concerns the bankruptcy estate’s interest in two assets. The plaintiff alleges that, as of the commencement of the debtor’s bankruptcy case on May 5, 2009 (the “Petition Date”), (1) SK Foods owned 100 shares of stock (the “SKFA Stock”) in an affiliated foreign entity known as SK Foods Australia Pty Ltd. (“SKFA”), and (2) that SK Foods owned and held the sole and exclusive right to collect a loan made by the debtor to SKFA (the “Intercompany Loan”).
His Honour goes on to set forth a summary of the conclusions reached as follows:
As discussed below, the court finds that SK Foods owned the SKFA Stock and held the rights to the Intercompany Loan as of the Petition Date, and therefore, those assets are property of the estate within the meaning of 11 U.S.C. § 541(a). After reviewing the record, the court finds that there is no genuine issue of material fact regarding SK Foods’s ownership of such property as of the Petition Date; the pre-petition transactions involving SK Foods and the defendants did not operate to divest SK Foods of its legal or equitable rights in such property.
There is no ambiguity in the reference to the “legal and equitable rights in such property”. The reasons go on to describe the “bankruptcy estate” under American law as follows:
The commencement of a bankruptcy case under section 301, 302, or 303 of title 11 creates a bankruptcy estate, which is comprised of all legal or equitable interests of the debtor in property, wherever located and by whomever held, as of the commencement of the case.
When addressing submissions directed to Australian law, the Honourable Judge Bardwil also observes:
… Instead of focusing on the appropriate line of demarcation - the Petition Date - the defendants rely on the legal arguments and representations of the Australian liquidators in the bankruptcy proceedings of SKFA. Because the defendants concede that SK Foods remained listed on the register of members of SKFA through July 2009, it is clear that, under the applicable foreign law, the debtor held legally operative rights as members in SKFA as of the Petition Date. This is all that matters for a property of the estate determination under 11 U.S.C. § 541(a). The federal bankruptcy law defines the scope of what property rights compose the bankruptcy estate - that is, all legal and equitable interests as of the Petition Date - and the Australian laws determine whether the property right exists in the first place.
37 The submission advanced on behalf of the other Defendants that the American decision does not give rise to a res judicata as between the Plaintiffs and the other Defendants because that judgment only resolved the legal interests in property – and not also the equitable interests – is without substance.
The American proceeding – an absence of jurisdiction for non-joinder of necessary parties
38 A further submission advanced on behalf of the other Defendants was that a res judicata could not arise by reason of the American decision because it had failed to join two necessary parties – SK Foods Australia and the liquidators. In the absence of the liquidators being joined as a party, it was said that crucial relief could not be obtained – namely, an order that property held by the liquidators be transferred.
39 Why the failure to join those parties to the American proceeding would deny a res judicata or an issue estoppel as between the parties to that proceeding was not at all self-evident.
40 It was initially unclear whether the other Defendants invoked the proposition that a decision of a foreign tribunal or court could not give rise to a res judicata unless the foreign tribunal or court had jurisdiction to determine the relevant dispute: Attorney-General for Trinidad & Tobago v Eriche [1893] AC 518. Lord Hobhouse, in delivering the judgment of the Privy Council, there said:
It is hardly necessary to refer at length to authorities for the elementary principle that in order to establish the plea of res judicata the judgment relied on must have been pronounced by a Court having concurrent or exclusive jurisdiction directly upon the point: [1893] AC at 522-523.
It was there concluded that a decision of a magistrate did not give rise to a res judicata as the magistrate had no jurisdiction to determine conclusively a question as to title to land. This decision has been followed by this Court: Norris v Manteit (1997) 78 FCR 594 at 599 per Spender J. Similarly, in Ex parte Amalgamated Engineering Union (Australian Section); re Jackson (1937) 38 SR (NSW) 13 it was concluded that a magistrate, who had jurisdiction to determine whether a fine or dues were payable by members of a union had no jurisdiction to determine conclusively collateral matters such as membership and registration of the union. In so concluding, Jordan CJ said:
… No jurisdiction is expressed to be conferred upon a Court of Petty Sessions to determine whether the claimant organisation has been duly registered or proclaimed, or whether the defendant is a member thereof, or whether its rules are valid. No doubt, it may in a particular case be necessary for a magistrate to form an opinion upon some or all of these matters for the purpose of deciding the matter which he is invested with jurisdiction to decide; but any opinion which he may so form does not constitute a judicial decision inter partes, and does not bind the parties in any future proceedings whether before the same magistrate or in any other Court of Petty Sessions: (1937) 38 SR (NSW) at 21.
The Chief Justice had earlier stated:
But in order that a judicial decision may involve an estoppel as to the matter decided, it is necessary that the tribunal should possess jurisdiction to decide the matter conclusively and for all purposes between the parties, and not merely incidentally and for a limited purpose: (1938) 38 SR (NSW) at 19.
See also: Cachia v Isaacs (1985) 3 NSWLR 366 at 387 per McHugh JA. See also: Miller v University of New South Wales [2003] FCAFC 180 at [67], 132 FCR 147 at 170 per Ryan and Gyles JJ.
41 Perhaps not surprisingly, the written submission initially advanced by the other Defendants expressed the present submission more narrowly and confined the submission as follows:
The claim of the other defendants in relation to the shares is that there is an equitable right or interest in those 100 shares which gives rise to an entitlement to have the register rectified. That arises because the interest is such as to require the plaintiffs to perfect the equitable interest via a transfer and if the plaintiffs do not, to have the register rectified over opposition. The proper parties to such a suit necessarily involve SK Foods Australia and the liquidators. The plaintiffs deliberately chose not to join SK Foods Australia and the liquidators to the US proceedings (presumably for their own perceived juridical advantages). The consequence is that the US proceeding could not have had jurisdiction to determine the relevant issues (and in any event it did not do so).
Putting this another way, to create a res judicata such as to defeat the other defendants’ claimed entitlement to have the register of the members rectified, it would have been necessary for the US court to have exercised jurisdiction over SK Foods Australia and the liquidators. It did not have that jurisdiction and in any event the company and its liquidators were simply not joined because of the plaintiffs’ own decision not to seek to join them. The company and the liquidators were not in California and perhaps there was a doubt whether their joinder would have even been possible; but that issue does not matter because they were not joined.
Supplementary written submissions filed by the other Defendants narrowed the proposition such that they contended that “the US Judgment does not create a res because it cannot bind all the relevant parties…. It is not just a question of the US Summary Judgment not being binding on the Australian company and its liquidators; self evidently it is not. The US Summary Judgment is simply not binding at all on the points because of the want of necessary parties…”.
42 If consideration is confined to a decision of a domestic or local court, it may be accepted that a failure to join a necessary party may have the consequence that orders made may not be enforceable: News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410. Lockhart, Von Doussa and Sackville JJ there concluded:
In our opinion, the non-joinder of the players and coaches, to the extent that orders made did so affect them, is not cured by the fact that they were permitted to make submissions after the delivery of judgment to the trial judge as to the form of the orders. By that stage, they had been deprived of the opportunity to participate in the trial of the issues that had already been determined in a way that the trial judge thought required redress in terms of the orders made. It follows that, regardless of whether Orders 12(a), 12(b), 15, 15A and 15B should be set aside on other grounds, they should be discharged by reason of the failure of the cross-claimants to join the Super League players and coaches in the proceedings: (1996) 64 FCR 410 at 527.
It was assumed – and not controverted by the Plaintiffs – that a similar failure to join a necessary party to an overseas proceeding may have the like consequence that a foreign judgment would be equally unenforceable in a domestic or local court.
43 If attention is confined to the proposition that the United States Bankruptcy Court did not have jurisdiction to resolve the legal and beneficial ownership of the shares or the Intercompany Loan by reason simply of SK Foods Australia and the Australian liquidators not being joined as a party, that proposition is rejected. The American decision, it is respectfully concluded, resolved the legal and beneficial ownership to both the shares and the Intercompany Loan in a manner which was binding as between the parties to that litigation. The parties who advanced opposing submissions in the American proceedings were:
Mr Sharp as trustee-in-bankruptcy for SK Foods LP;
SK PM Corp., Inc.;
Scott Salyer Revocable Trust and the trustee thereof;
SSC&L 2007 Trust and the trustee thereof;
Monterey Peninsula Farms, LLC; and
Fast Falcon, LLC.
In the present proceeding, the only defendant who was not a party to the American proceeding was the Ninth Defendant, SS Farms LLC. The Tenth to Thirteenth Defendants are only joined in their capacity as Trustee of one or other of the two trusts, and thus their interests were represented in the American proceeding.
44 The United States Bankruptcy Court had jurisdiction to resolve the issues before it and did so in a manner which merges the rights of the parties into the judgment. No question arises of any right of SK Foods Australia (or the liquidators) being resolved in the American proceeding. No res judicata or issue estoppel is sought to be raised by the Plaintiffs as against SK Foods Australia or the liquidators. The only res judicata or issue estoppel which is sought to be relied upon is between the Plaintiffs and the other Defendants. And all of the other Defendants – with the exception of the ninth Defendant – had their interests represented in the American proceeding.
45 To the extent that the written submissions separately maintain that the decision to not join SK Foods Australia or the liquidators as parties to the American proceeding “for their own perceived juridical advantages”, the submission is also rejected.
46 Mr Kevin Coleman was one of the American attorneys who had been “principally in charge of representing Mr Sharp in connection with the SK Foods bankruptcy proceeding and related adversary proceedings that have arisen in that case”. The failure to join the liquidators in the American proceeding was pursued with him as follows in his cross-examination:
And in June 2012, the position that you understood obtained was one whereby until that point the liquidators had made rulings partly in favour of the plaintiffs, but they had reversed the position?---Yes, I did understand that they had reversed their original decision.
And at that point there were numerous discussions to formulate a strategy to bring forward the proceedings in the United States; correct?---Those discussions were ongoing starting right after Mr Salyer entered his guilty plea, so they actually started in March.
Mr Coleman, shortly after 15 June there were numerous meetings and strategy discussions concerning steps that could be taken to bring forward the proceedings in the United States; that’s correct, isn’t it?---Yes, it’s true. We did have discussions. There was a series of ongoing discussions. We had some discussions after 15 June.
And there was – part of the strategy that was adopted was to work out a way to resolve the proceeding in the United States on a summary judgment basis. Correct?---Yes.
And part of the strategy involved doing so in a proceeding in which the liquidators were not to be joined. Correct?---Well, the Salyer parties were defendants in the action. We were not aware of a basis upon which we could join the liquidators in the US proceedings.
The strategy involved choosing not to join the liquidators. Is that correct?---I don’t think it was a question of choice. Our understanding was that we did not have a basis to join the liquidators in the US proceedings.
And part of the strategy involved – so you’re saying that it was not possible to join the US – in the US proceeding – the liquidators? You’re not saying that, are you?---That’s my understanding.
Mr Coleman, part of the strategy involved joining the what you call the Salyer parties to a US summary judgment application. Correct?---Yes.
And the desirable outcome from the strategy would be that in that US summary judgment application there would be a submission made there was no genuine dispute as to the underlying facts. Correct?---that’s correct. That’s a requirement for prevailing on a motion for summary judgment.
The fact that the Australian liquidators were not joined as a party (or the fact that SK Foods Australia was not joined) cannot be ascribed to any deliberate and inappropriate forensic choice which was being pursued for “perceived juridical advantages”. The explanation provided by Mr Coleman on this issue is accepted.
47 The consequences, however, of the non-joinder of SK Foods Australia and the liquidators are separate from the reasons for any forensic decision as to why some parties were joined and other parties not joined to the American proceedings.
48 For present purposes, it is not considered that the failure to join SK Foods Australia and/or the liquidators to the American proceedings precludes a conclusion that a judgment in that proceeding cannot give rise to a res judicata as between the Plaintiffs and the other Defendants (other than the Ninth Defendant).
49 The significance of the Ninth Defendant not being a party to the American proceeding was not a matter which attracted any attention during the course of the hearing or submissions. Whether it has any significance, however, is a matter which should not be peremptorily foreclosed. Although it is a matter which should have received attention during the hearing, a further opportunity should be extended to the parties to provide further submissions. The costs consequences flowing from such a further opportunity being provided is a matter which can be separately addressed.
The American decision – a mistake as to Australian law?
50 A further submission advanced on behalf of the other Defendants was that the Honourable Judge Bardwil had made a mistake in applying Australian law.
51 When advancing this submission, Senior Counsel for the other Defendants maintained that the following observations of the American primary judge manifested the mistake, namely:
… Rights under equity will not override an express provision in the statute; therefore equity will not grant an unregistered member an interest as against the company. Re Exclusive Master Book-Biding And Manufacturing Pty Ltd (1977) 2 ACLR 549 (holder of unregistered shares had no entitlement in liquidation of company).
In light of the foregoing, the court finds that the evidence presented by the Plaintiff, and not controverted by the defendants, shows that the SKFA Stock was property of the estate as of the Petition Date…
Written submissions filed on behalf of the other Defendants maintained that reliance was mistakenly placed upon the decision in Re Exclusive Master Book-Binding “for the proposition that the holder of unregistered shares has no entitlement in the liquidation of a company”. It was then submitted that the Honourable Judge Bardwil “took that proposition several steps further to say ‘rights under equity will not override an express provision in the statute’ …”. On behalf of the other Defendants it is submitted that that decision “does not support that proposition” and that any such proposition is in any event not relevant. When addressing a different submission, Senior Counsel for the other Defendants also maintained that the American judge had also erred in concluding that there was no genuine dispute as to the facts.
52 Both submissions as to any mistake that may have been committed by the American primary Judge can be resolved together.
53 The short answer is that any mistake, assuming there to have been a mistake, matters not: Godard v Gray (1870) LR 6 QB 139. It was there decided that the defendant could not set up a mistake as to English law as an excuse for not paying monies awarded by a judgment of a foreign tribunal. In so concluding, Blackburn J (together with Mellor J) observed:
… that the defendant can no more set up as an excuse, relieving him from the duty of paying the amount awarded by the judgment of a foreign tribunal having jurisdiction over him and the cause, that the judgment proceeded on a mistake as to English law, than he could set up as an excuse that there had been a mistake as to the law of some third country incidentally involved, or as to any other question of fact.
It can make no difference that the mistake appears on the face of the proceedings. That, no doubt, greatly facilitates the proof of the mistake; but if the principle be to inquire whether the defendant is relieved from a prima facie duty to obey the judgment, he must be equally relieved, whether the mistake appears on the face of the proceedings or is to be proved by extraneous evidence. Nor can there be any difference between a mistake made by the foreign tribunal as to English law, and any other mistake… : (1870) LR 6 QB at 151.
Similarly, in Meyers v Casey (1913) 17 CLR 90 at 115, Isaacs J observed:
… That rests on the well known rule that a competent Court or other tribunal has jurisdiction to give a wrong judgment, and if there is no appeal in the strict sense, then its decision, whether right or wrong, must stand, and cannot be questioned in any subsequent proceeding elsewhere.
See also: Norsemeter Holdings AS v Boele (No 1) [2002] NSWSC 370 at [14] per Einstein J; Benefit Strategies Group Inc v Prider [2005] SASC 194 at [78] to [79] per Bleby J (Vanstone and Anderson JJ agreeing). See also: Spencer Bower and Handley, “Res Judicata” at [1.14] (4th ed, 2009).
54 Any reliance placed by the other Defendants upon any mistake or error said to have been committed by the Honourable Judge Bardwil is misplaced. Any mistake or error does not preclude the operation of the doctrine of res judicata. Nor does any mistake or error constitute a reason why any consideration of the application made by the Plaintiffs for summary judgment should be deferred.
ABUSE OF PROCESS
55 Both the Plaintiffs and the other Defendants seek to rely upon an abuse of process.
56 On the part of the Plaintiffs, and as an alternative to their reliance upon the doctrine of res judicata or issue estoppel, the Plaintiffs maintain that the legal and beneficial ownership of both the Intercompany Loan and the shares have been resolved and that it would be an abuse of process for the other Defendants to seek to re-litigate those issues in the proceeding in this Court.
57 Conversely, the written submissions filed on behalf of the other Defendants contend that the “plaintiffs’ applications seek to perfect an abuse of process and should, for that reason alone, be dismissed”. Those submissions further contend that it is “axiomatic that the court will not allow its process to be abused”.
58 It is acknowledged that there is a degree of overlap between these submissions and the alternate submissions of the other Defendants that the particular facts of the case cannot give rise to a res judicata. In any event, Senior Counsel for the other Defendants maintained that it would be an abuse of the processes of this Court if the Plaintiffs could rely upon the decision of the Honourable Judge Bardwil.
59 Given the commonality of issues common to both the American proceeding and the current proceeding in this Court it was perhaps not surprising that both the Plaintiffs and the other Defendants sought to take refuge in the doctrine of abuse of process.
60 Again, there was no disagreement between the parties as to general principles of what constituted an abuse of process. That which divided the parties was outlined in the submissions advanced on behalf of the other Defendants, namely: an abuse of process was made out by reason of:
the amendment of the American proceeding, the mere fact of amendment being said to be prima facie vexatious and oppressive; and/or
the amendment of the American proceeding being said to be pursuant to a “plan” or “strategy” to ensure that there was an “overlap” of issues between the present proceedings and the American proceedings.
61 The other Defendants’ written submissions identify the “essential components” of the abuse of process as being:
the commencement of the Australian proceeding in February 2012;
the relief claimed in the Originating Process as to the ownership of the shares and the Intercompany Debt;
the Australian liquidators “ruling in favour of the other defendants on both issues” on 15 June 2012;
the Plaintiffs thereafter amending the claims made in the American proceeding to seek the same relief in July 2012;
the Plaintiffs submitting to the United States Bankruptcy Court that there was no genuine dispute in relation to factual matters relevant to determination of the equitable rights and interests in the shares and the Intercompany Loan; and
the Plaintiffs obtaining summary judgment in the United States Bankruptcy Court “in an attempt to prevent the determination of these proceedings on the merits”.
The steps pursued by the Plaintiffs in the United States are submitted to have been “all done pursuant to a plan” which included a desire “to bring about a faster resolution of the disputes between the plaintiffs and the other defendants than was perceived would take place in these proceedings”. Part of the “plan” is also said to be a desire “to bring about a resolution of the disputes that was more likely to be favourable to the plaintiffs than would occur in these proceedings; this included taking steps to bypass funded opposition by the liquidators…”.
62 The other Defendants contend that the conduct of the Plaintiffs constitutes an abuse of process. Conversely, the Plaintiffs contend that to permit the other Defendants to now re-litigate the same issues in these proceedings would itself constitute an abuse of process.
Abuse of process – general principles
63 “What amounts to abuse of court process is insusceptible of a formulation comprising closed categories. Development continues”: Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27 at [9], 226 CLR 256 at 265 per Gleeson CJ, Gummow, Hayne and Crennan JJ. From “early times” the courts have “had inherent power to see that their processes were not abused, and that the power existed to enable the courts to protect themselves and thereby safeguard the administration of justice”: Dupas v The Queen [2010] HCA 20 at [14], 241 CLR 237 at 243 per French CJ, Gummow, Hayne, Heydon, Crennan, Kiefel and Bell JJ.
64 In Spalla v St George Motor Finance Ltd (No 6) [2004] FCA 1699, French J (as his Honour then was) observed as follows as to the nature of what might constitute an abuse of process:
[67] The considerations of public policy which underlie res judicata and issue estoppel help to define the scope of abuse of process by relitigation generally. As Lord Hoffman said in Arthur JS Hall & Co v Simons [2000] 3 WLR 543 at 572, the underlying policies are that a defendant should not be troubled twice for the same reason and that there is ‘a general public interest in the same issue not being litigated over again’. Lord Hoffman observed that the second rationale could be used to justify the extension of the rules of issue estoppel to cases in which the parties are not the same but the circumstances are such as to bring the parties within the spirit of the rule. In that regard he referred to Reichel v Magrath and Hunter v Chief Constable of the West Midland Police.
…
[69] The public interest considerations underlying the power of courts to stay or dismiss the proceedings for abuse of process extend to preventing the waste of judicial resources and their use for purposes unrelated to the determination of genuine disputes. They include the necessity of maintaining confidence in, and respect for, the authority of the courts …
[70] The power to strike out a statement of claim or to dismiss an application as an abuse of process is to be exercised sparingly and upon an examination of the relevant circumstances of the particular case before the Court. As Giles CJ said in State Bank of New South Wales Ltd v Stenhouse Ltd (1997) Aust Torts Reports 81-423 (at 64, 089):
‘... whether proceedings are, or an aspect of proceedings is, an abuse of process because a party seeks to relitigate a issue already decided depends very much on the particular circumstances. The guiding considerations are oppression and unfairness to the other party to the litigation and concern for the integrity of the system of administration of justice...’
His Honour set out a non-exhaustive list of matters relevant to the determination whether there was an abuse of process in connection with the issue to be litigated in the second proceedings. These factors were:
‘(a) the importance of the issue in and to the earlier proceedings, including whether it is an evidentiary issue or an ultimate issue;
(b) the opportunity available and taken to fully litigate the issue;
(c) the terms and finality of the finding as to the issue;
(d) the identity between the relevant issues in the two proceedings;
(e) any plea of fresh evidence, including the nature and significance of the evidence and the reason why it was not part of the earlier proceedings; all part of –
(f) the extent of the oppression and unfairness to the other party if the issue is relitigated and the impact of the relitigation upon the principle of finality of judicial determination and public confidence in the administration of justice; and
(g) an overall balancing of justice to the alleged abuser against the matters supportive of abuse of process.’
Appl’d: Worchild v University of Queensland Law Society [2006] FCA 1078 at [47] to [48], 234 ALR 179 at 189-190 per Spender J.
65 An abuse of process may arise even if the facts are not sufficient to give rise to an estoppel: Walton v Gardiner (1977) 177 CLR 378 at 393. Mason CJ, Deane and Dawson JJ there relevantly observed:
… proceedings 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. The jurisdiction of a superior court in such a case was correctly described by Lord Diplock in Hunter v Chief Constable of the West Midlands Police ([1982] AC 529 at 536) as “the inherent power which any court of justice must possess to prevent misuse of its procedure in a way which, although not inconsistent with the literal application of its procedural rules, would nevertheless be manifestly unfair to a party to litigation before it, or would otherwise bring the administration of justice into disrepute among right-thinking people”.
The commencement of subsequent litigation – general principles
66 The difficulties which emerge where the same subject matter is the subject of different proceedings in different forums are well recognised. Those difficulties are not confined to those circumstances in which one party seeks to agitate the same subject matter by commencing a separate and subsequent proceeding in a foreign forum.
67 The Court’s reluctance to allow a party to be “vexed” by facing the need to confront the same factual issues in two (or more) different jurisdictions may, for example, arise for consideration where an application is made to stay a proceeding in one jurisdiction by reason of a proceeding in a different forum in respect of the same subject matter: e.g., Australian Commercial Research and Development Ltd v ANZ McCaughan Merchant Bank Ltd [1989] 3 All ER 65. A variant is where a party to one proceeding seeks to restrain another party from prosecuting or taking any steps in a proceeding pending in a foreign forum: e.g., Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 1) [2012] VSC 1. The latter example is but an instance of what have become known as “anti-suit injunctions”: CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345. The historical basis for the granting of an anti-suit injunction has been traced back to 1665: A Bell and J Gleeson, “The Anti-Suit Injunction” (1997) 71 ALJ 955 at 956. “The jurisdiction”, according to those authors, “has its historical root in the ‘common injunction’ issued by Courts of Chancery to restrain a party from commencing or continuing a suit in the courts of common law where to do so would be contrary to conscience…”.
68 Although the manner in which the power may be exercised is obviously dependent upon the relief being sought, a common rationale underlying an exercise of power is the concern of the Court to protect the integrity of its own processes and procedures – including the need to ensure that the Court’s processes are not being invoked in a manner which occasions “vexation or oppression” to a party.
69 It may thus be readily accepted that it is prima facie vexatious and oppressive to commence subsequent proceedings in which the same relief or the same issues are raised for resolution: Henry v Henry (1996) 185 CLR 571. Dawson, Gaudron, McHugh and Gummow JJ there observed:
It is prima facie vexatious and oppressive, in the strict sense of those terms, to commence a second or subsequent action in the courts of this country if an action is already pending with respect to the matter in issue. And although there are cases in which it has been held that it is not prima facie vexatious, in the strict sense of that word, to bring proceedings in different countries, the problems which arise if the identical issue or the same controversy is to be litigated in different countries which have jurisdiction with respect to the matter are such, in our view, that, prima facie, the continuation of one or the other should be seen as vexatious or oppressive within the Voth [(1990) 171 CLR 538] sense of those words.
It does not follow that, because one or other of the proceedings is prima facie vexatious or oppressive within the Voth sense of those words, the local proceedings should be stayed. However, it does follow that the fact that there are or, even, that there may be simultaneous proceedings in different countries with respect to the same controversy is highly relevant to the question whether the local proceedings are oppressive in the sense of "seriously and unfairly burdensome, prejudicial or damaging", or, vexatious, in the sense of "productive of serious and unjustified trouble and harassment". And it also follows that courts should strive, to the extent that Voth permits, to avoid that situation: (1996) 185 CLR at 591.
The reference to Voth is a reference to Voth v Manildra Flours Pty Ltd (1990) 171 CLR 538. See also: Oliver v Commonwealth Bank of Australia (No 2) [2012] FCA 755 at [1], 205 FCR 540 at 541 per Perram J.
70 The general principle is accepted. It is a principle long recognised by both decisions in the United Kingdom (e.g., Logan v Bank of Scotland (No 2) [1906] 1 KB 141 at 150; Slough Estates Ltd v Slough Borough Council [1968] Ch 299 at 314-315) and Australia (e.g., Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 1) [2012] VSC 1 at [16] per Croft J).
71 As recognised by their Honours in Henry v Henry, reference may be made to decisions in which it has been held that “it is not prima facie vexatious, in the strict sense of that word, to bring proceedings in different countries…”. Cases in which it has been concluded that the commencement of a subsequent proceeding seeking substantially the same relief did not amount to an abuse of process include Telesto Investments Ltd v UBS AG [2012] NSWSC 44 at [163] and Guardian Group Australia Pty Ltd v Alice Lu [2005] NSWSC 1299 at [58]-[59].
72 When subsequently commenting upon the earlier decision in Henry v Henry, supra, Dawson, Toohey, Gaudron, McHugh, Gummow and Kirby JJ in CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345 at 399 observed:
It was held by this Court in Henry v Henry that, where proceedings are pending both in an Australian court and in a court of another country, it is necessary for the Australian court to have regard to the existence of the foreign proceedings in determining whether to stay its own proceedings on forum non conveniens grounds. In reaching that conclusion, the majority pointed out that, although it is not necessarily vexatious or oppressive to bring proceedings in different countries, "the problems which arise if the identical issue or the same controversy is to be litigated in different countries which have jurisdiction with respect to the matter are such ... that, prima facie, the continuation of one or the other should be seen as vexatious or oppressive within the Voth sense of those words”.
Insurance claims had there been made in respect to persons suffering from exposure to asbestos. Proceedings had been commenced in both New Jersey in the United States and in the Supreme Court of New South Wales in Australia. Their Honours continued:
The situation involved in the present case is not precisely the same as that considered in Henry v Henry. In that case, the parties were identical and the same subject matter, namely, the parties' marital relationship, was involved in both proceedings. There is not the same correspondence of subject matter in this case. As already indicated, the NSW proceedings, but not the US proceedings, extend to the Australian asbestos claims as well as the American asbestos claims. More importantly, the US proceedings, but not the NSW proceedings, involve claims for damages against Cigna Corporation. And the parties accept that one of those claims, namely, the claim for statutory treble damages under the Sherman Act, cannot be pursued in the NSW proceedings.
When directing attention to the proceedings which had there been instituted in the United States, their Honours had earlier concluded:
The US proceedings are not vexatious or oppressive according to the principles of equity
It is to be remembered that CSR and CSR America have instituted but one set of proceedings, namely, the US proceedings. Neither principle nor authority supports the view that the institution of foreign proceedings is, of itself, vexation or oppression according to the principles of equity. Similarly, neither principle nor authority supports the view that foreign proceedings become vexatious or oppressive in accordance with those principles in the event that the party against whom they are brought later commences proceedings with respect to the same subject matter in this country.
Moreover, the fact that CSR seeks treble damages under the Sherman Act in the US proceedings – relief which is not available in the NSW proceedings or, at least, not shown to be available in those proceedings – is sufficient to take the US proceedings outside that category of case in which the co-existence of foreign proceedings is properly to be viewed as vexation or oppression for the purposes of equity.
It follows that there is no proper basis for viewing the US proceedings as vexatious or oppressive, in the sense that those terms are used in the equitable jurisdiction…: (1997) 189 CLR at 395.
But the proceedings which had been instituted in the New South Wales Supreme Court attracted different considerations. With respect to those proceedings their Honours concluded:
The NSW proceedings are oppressive
There can be no doubt that the central purpose of the respondents in instituting the NSW proceedings was to prevent the continuation of the US proceedings. Those proceedings, so far as appears from the materials before this Court, were regularly instituted by the appellants in pursuit of remedies available to them under the law of the United States, not all of which could or can be pursued in New South Wales. In particular, it would seem that CSR could not pursue any remedy against Cigna Corporation in New South Wales unless it submitted to the jurisdiction, which only occurred on the commencement of the NSW proceedings. And as has already been pointed out, these appeals have been conducted on the basis that, even though Cigna Corporation has now submitted to the jurisdiction of the Supreme Court of New South Wales, CSR cannot pursue its claim for statutory damages under the Sherman Act in the NSW proceedings.
Proceedings which are brought for the dominant purpose of preventing another party from pursuing remedies available in the courts of another country and not available in this country are “seriously and unfairly ... prejudicial [and] damaging”. They are, thus, oppressive in the Voth sense of that word: (1997) 189 CLR at 401.
73 When considering whether or not the amendment of the American proceeding constituted an abuse of process, either by reference to the mere fact of those proceedings being amended or by reference to the asserted “plan” or “strategy” relied upon by the other Defendants, it is concluded as a matter of general principle that:
it is “prima facie vexatious and oppressive” for a party to commence a second or subsequent action if an action is already pending with respect to the matter in issue;
the mere fact that there are contemporaneous proceedings in different forums does not necessarily constitute “vexation or oppression”; and
a variety of factors are relevant to a determination as to whether contemporaneous proceedings constitute an abuse of process, including whether the same relief is available in each forum and the motive or purpose of the party in pursuing an opponent in a particular forum.
The mere effect of amending the American proceeding
74 The reach of abuse of process, it should be noted, at the outset, is not confined to those circumstances in which a party commences a subsequent proceeding for the purpose of causing oppression or vexation; an abuse of process may arise simply because that is the effect of the commencement of the subsequent proceeding.
75 In Rogers v The Queen (1994) 181 CLR 251 at 255, Mason CJ thus observed:
… The concept of abuse of process is not confined to cases in which the purpose of the moving party is to achieve some foreign or ulterior object, in that it is not that party's genuine purpose to obtain the relief sought in the second proceedings. The circumstances in which abuse of process may arise are extremely varied and it would be unwise to limit those circumstances to fixed categories…
76 The issue in need of resolution in the present proceeding is whether the filing of the amended complaint in the American proceeding in July 2012 seeking substantially the same relief as that previously sought in this proceeding is sufficient to bring this case within the general principle. Prima facie so much may be accepted. Indeed, the complaint as originally filed in the American proceeding in May 2011 noted that the “Loan Transfers” and the “Equity Transfers” were issues “being decided in the context of the Australian Liquidation”. The filing of the amended complaint, it is accepted, was a deliberate choice to have the American Court decide issues which were known to be then pending before this Court for resolution.
77 As with the resolution of many questions by reference to mere statements of general principle, however, difficulties arise in the detail. As recognised by Lord Upjohn in Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2) [1967] AC 853 at 947:
… As my noble and learned friend, Lord Reid, has already pointed out there may be many reasons why a litigant in the earlier litigation has not pressed or may even for good reason have abandoned a particular issue. It may be most unjust to hold him precluded from raising that issue in subsequent litigation … All estoppels are not odious but must be applied so as to work justice and not injustice and I think the principle of issue estoppel must be applied to the circumstances of the subsequent case with this overriding consideration in mind…
78 The reasons for concluding that this prima facie position should not prevail, such that it should be concluded that it was not oppressive or vexatious to amend the complaint in the American proceeding, are the following.
79 First, it could not be said that the commencement of the proceeding in the United States in May 2011 was anything other than a proper invocation of a jurisdiction available to Mr Sharp as the trustee-in-bankruptcy of SK Foods LP. SK Foods LP was a Californian limited partnership.
80 Second, even though neither SK Foods Australia nor its liquidators were parties to the American proceeding (either at first instance or when an application was made to the United States Bankruptcy Appellate Panel), all those who had an interest in the issues to be resolved as to the legal and beneficial ownership of the 100 shares and the Intercompany Loan (other than SS Farms LLC) were parties.
81 Third, no adverse inference is to be drawn from the amendment to the American complaint or the timing of that amendment in July 2012. The time at which the amendment was made was the product of pending criminal proceedings in the United States against Mr Salyer and his entry of a guilty plea in March 2012. The chronological sequence of events was explained by Mr Coleman in his evidence. Reference had been made to the entry of a guilty plea in criminal proceedings then pending against Mr Salyer in cross-examination and in re-examination the following exchange occurred:
You mentioned in your evidence in response to Mr Marshall’s question that discussions about this strategy started when Mr Salyer entered his guilty plea?---That’s correct.
Could you explain to his Honour what that guilty plea meant in the context of the civil proceedings that you were bringing and how the stay had arisen in the first place?---Various entities controlled by Scott Salyer sought stays of litigation that the trustee had commenced against them, based upon the idea that at that – because at that time Scott Salyer was the subject of pending criminal proceedings, and if he were expected to testify in any of the civil proceedings that it might undermine his Fifth Amendment rights – under the US Constitution, Fifth Amendment rights against self-incrimination, and therefore, since he had these rights, he was going to make himself unavailable as a witness, and because they claimed that Mr Salyer’s testimony was important or essential to their case, it would be – it would deny them due process to have to try to defend our actions without Mr Salyer’s testimony. So they – are you with me on that so far?
Yes?---Okay. So what they did is file a motion initially in the Bankruptcy Court seeking to stay all of the litigation until the end of the criminal proceedings. Bardwil J denied the request for a stay initially. They appealed that to the US District Court, which – and I’m summarising here but, in essence, he reversed the decision to deny the request for a stay and directed Bardwil J to enter a stay in any litigation where Salyer’s testimony was reasonably necessary for their defence, which in June 2011 Bardwil J proceeded to do. There were some narrow exceptions to the stay, but that’s I thin[k] irrelevant for this. Since the whole notion of a stay on the litigation was predicated on the pendency of the criminal proceedings, once Mr Salyer entered the guilty plea it was clear that that stay was going to be evaporating in a very short period of time. And so at that point we began to work in earnest to try to move all of these cases forward, including the action which has given rise to the judgment.
The decision to amend the civil proceeding was thus the product of Mr Salyer entering a guilty plea and it was unnecessary thereafter to address the prospect of claims of privilege against self-incrimination. That was the reason for the amendment – not some perceived and inappropriate or impermissible forensic “plan”.
82 Fourth, although this Court has jurisdiction to resolve the claims presently sought to be pursued by the Plaintiffs, it is considered that no question arises as to the American Court not also being a natural and appropriate forum in which Mr Sharp as trustee-in-bankruptcy of SK Foods LP could also seek relief.
83 Fifth, no conclusion is open – or, at least, should be reached – that the conduct of the American attorneys in the American proceeding was being pursued in any impermissible “rush to judgment”. There is no obligation upon parties to proceedings in a foreign forum to delay approaching a foreign court to seek relief merely because the same relief may also be the subject of a proceeding in this Court.
84 It follows that the Plaintiffs have not engaged in any conduct which could be characterised as an abuse of process simply by reason of amending the American proceeding in July 2012 and in seeking summary judgment in the American proceeding. Any abuse of process, accordingly, has to be found – if at all – not in the mere chronological sequence of events but in the improper pursuit of some “plan” or “strategy” being pursued by the American attorneys in the American proceeding and thereafter in Australia.
The plan or strategy being pursued
85 It is, however, concluded that this alternative way in which the other Defendants sought to advance their abuse of process submission is also to be rejected.
86 According to this alternative submission, Senior Counsel for the other Defendants maintained that the chronological sequence of events did not stand alone. If that sequence of events did not of itself expose an abuse of process, an abuse of process was exposed when viewed as against the actual “plan” or “strategy” being pursued by the American attorneys.
87 Two aspects of the procedure of the present proceeding should be noted.
88 First, a question arose even before Mr Coleman entered the witness box. Left unresolved was whether any cross-examination at all was to be permitted. Presumably, given the reliance placed upon submissions as to an abuse of process, that was a legitimate area of factual inquiry. Whether or not any cross-examination was to be permitted, the pragmatic course which was ultimately pursued was that Mr Coleman did travel to Sydney from San Francisco to give evidence and was cross-examined. Given his attendance in Sydney, the Plaintiffs did not resist calling him as a witness. He was cross-examined on all such issues as Senior Counsel for the other Defendants presumably thought appropriate and relevant.
89 Second, an application had been made prior to the hearing commencing by the Plaintiffs for any cross-examination of Mr Coleman to be conducted by way of a video link. Such a course may be permitted if directed or allowed by the Court pursuant to s 47A of the Federal Court of Australian Act 1976 (Cth) (“Federal Court of Australia Act”). Instances can be provided where the cross-examination of an overseas witness has been permitted (e.g, Joyce v Sunland Waterfront (BVI) Ltd [2011] FCAFC 95 at [60] per Keane CJ, Dowsett and Greenwood JJ) and where it has been refused (e.g., Australian Competition & Consumer Commission v Storesonline International Inc [2009] FCA 717). See: Cremean, “Comity and Video-link Evidence” (2011) 19 AJ Admin L 4. Given the seriousness of the propositions that inevitably had to be put to any American attorney who was to be cross-examined, there was a reluctance to accede to the application being made. In retrospect, the view previously expressed is maintained. It was best for Mr Coleman to attend in person. A true appreciation of the care with which Mr Coleman gave his evidence, it is respectfully considered, could probably not have been gained had his evidence been given by way of a video link.
90 Moreover, Mr Coleman’s oral evidence also served to reject (or at least qualify) a number of the steps in the sequence relied upon by the other Defendants.
91 Thus, for example, an issue arose in the present proceeding as to the extent to which the parties to the American proceeding had an opportunity to canvas the facts upon which the American summary judgment application was to proceed. The reasons for decision of the Honourable Judge Bardwil addressed in part the principles he was to apply as follows:
Summary judgment is appropriate when there exists “no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). The Supreme Court discussed the standards for summary judgment in a trilogy of cases: Celotex Corp. v. Catrett, 477 U.S. 317 (1986); Anderson v Liberty Lobby, Inc., 477 U.S. 242 (1986); and Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986). In a motion for summary judgment, the moving party bears the initial burden of persuasion in demonstrating that no issues of material fact exist. Anderson, 477 U.S. at 255. A genuine issue of material fact exists when the trier of fact could reasonably find for the non-moving party. Id. at 248. The court may consider pleadings, depositions, answers to interrogatories, and any affidavits. Celotex at 323. To demonstrate the presence or absence of a genuine dispute, a party must cite to specific materials in the record, or submit an affidavit or declaration by a competent witness based on personal knowledge. See Fed. R. Civ. P. 56(c)(1), (4). Where the movant bears the burden of persuasion as to the claim, it must point to evidence in the record that satisfies its claim. Anderson, 477 U.S. at 252. Once the moving party has met its initial burden, the non-moving party must show specific facts demonstrating the existence of genuine issues of fact for trial. Id. at 256.
The other Defendants accepted that the principles being applied there were much the same as those applied by this Court when entertaining a summary judgment application.
92 But, with specific reference to the opportunity to present evidence which would or could give rise to a “genuine issue of material fact”, the following exchange occurred between Mr Coleman and his cross-examiner after reference had been made to the amendment of the American proceeding:
And at the time that it was amended it was part of the strategy that if the summary application was successful it would be deployed in this proceeding in Australia to shut this proceeding down on a summary basis?---I think – yes.
And if that strategy was successful it would result in there never having been a trial to determine the underlying factual matters. Correct?---No, because in the United States if the defendants – if the respondents to a motion for summary judgment come forward with evidence to show that there is a genuine issue for trial the court must deny the motion for summary judgment and then schedule a trial. What wound up happening is that the Salyer parties failed to introduce any evidence from which Bardwil J could conclude that there was a – a reason to go to trial. They just hadn’t disputed the facts.
An application was then made that the last answer be “struck out” on the basis that it was not responsive to the question or that the answer should be disregarded. Having reviewed the transcript, it is concluded that the answer was responsive and that regard may be had to the answer given. The cross-examination then continued as follows:
Mr Coleman, what you described as Salyer interests did assert in the US proceeding there was a genuine dispute, didn’t they?---Yes, they did.
And they did put forward material, did they not?---Yes, they did.
And what happened was that Bardwil J took your view that the material didn’t constitute a genuine dispute?---Bardwil J reviewed the evidence that they had submitted and concluded that the – it did not create a triable issue. The judge – I mean, that was an argument we were making, certainly, that what they had put before the court didn’t create a triable issue, and he agreed with us. Yes.
What the “material” was that had been placed before the American Court was not further explored.
93 The evidence of Mr Coleman is accepted. The submission advanced by Senior Counsel on behalf of the other Defendants that there had been no opportunity to put in issue the facts upon which the American Court was being asked to proceed when entertaining the summary judgment application is rejected. “Material” was advanced for consideration and the Honourable Judge Bardwil concluded that there was no “triable issue”.
94 Of more immediate relevance to the abuse of process argument being advanced by the other Defendants is the evidence sought to be adduced from Mr Coleman as to the “plan” or “strategy” being pursued by the American attorneys.
95 The content of this “plan” or “strategy” said to have been pursued in the United States, with respect, was never formulated with any degree of precision. Notwithstanding this lack of certainty, the other Defendants sought to intertwine a number of themes or contentions, including the following:
that the American proceeding was amended in July 2012 so as to ensure an “overlap” of the issues with the Australian proceeding such that any American judgment could then be relied upon for the purpose of “shutting down” the current Australian proceeding;
that the American proceeding was amended in July 2012 at a time when the other Defendants became unrepresented, those Defendants having become unrepresented in May 2012, and at a point of time when the Australian liquidators decided in June 2012 that the issues as to ownership were to be resolved in favour of the other Defendants; and
that a deliberate decision was made not to join SK Foods Australia or the Australian liquidators as parties to the American proceeding.
In one way or another, these issues were pursued in the cross-examination and evidence of Mr Coleman.
96 The objective of “overlapping” the issues in both the American and Australian proceedings and the objective of “shutting down” the Australian proceeding was a theme returned to on a number of occasions during the cross-examination of Mr Coleman. On one occasion, after referring to Mr Sharp, the cross-examination of Mr Coleman continued:
And he’s one of the plaintiffs in this proceeding?---Yes.
He filed the amended complaint in the US proceeding, and that amended complaint sought declarations in relation to the intercompany debt and the relevant shares that are in dispute?---That’s correct.
And it was part of a strategy to make sure that the US proceeding overlapped with issues that were before the court in Australia, correct?---I’m having a little – I’m struggling a little bit with your - your question. There’s certainly, we would acknowledge, overlap in some of the issues in the US proceedings and the proceedings here. There’s no question about that. We had other claims for relief in our first amended complaint that arose out of the same factual grounds. But I’m – I’m struggling with this concept that we were – well, I’m sorry, can you rephrase your question because I’m …
All right?---I apologise for the - I’ve been on a plane for …
Well, Mr Coleman, part of the strategy was that if the US summary judgment application was successful, the US summary judgment would be deployed in the Australian proceeding?---Yes. Yes.
All right. Therefore, I suggest to you, it was an essential part of the strategy that the US proceeding be amended so as to sufficiently overlap with the Australian proceeding so that when you were successful or if you were successful in the US summary judgment application, it could be deployed in Australia?---Not necessarily because we had alternative theories under the Bankruptcy Code where - which would entitle us to those assets even if the courts in Australia concluded that equitable transfers of those assets should be recognised, fraudulent conveyance theories and so forth.
Not necessarily, I suggest to you, means that in this particular context that was one of the elements of the strategy to make sure there was sufficient overlap. That’s correct, isn’t it, Mr Coleman?---In order to establish our claims, we wanted all the facts to be brought out. And – and I’m not sure how else I can respond to that question. I mean, yes, we wanted to include the claims with respect to, you know, what the facts were on who owned the – the shares and the intercompany debt. That was unquestionably part of the US proceedings as well as our bankruptcy claims.
Mr Coleman, at the time of the – you’ve already agreed with this, I suggest – which is at the time of the amendment to bring the US summary judgment, it was part of the intention to use that judgment to shut down the proceedings in Australia if you were successful in the US? Yes.
And I want to suggest that you knew that to do that you would have to make sure that the American proceeding and the Australian proceeding were sufficiently overlapping otherwise it wouldn’t have the result of shutting down the Australian proceeding.
It was then contended by Senior Counsel for the Plaintiffs that that proposition was “wrong as a matter of law…”. The cross-examiner regrouped and continued:
I want to suggest to you that one of the reasons for the strategy behind amending the US proceeding was a concern that if there was a hearing in Australia on all the evidence the liquidators would appear as the relevant contradictors, correct?--- It – if, at the time - are you saying that if there was a trial in Australia the liquidators would be acting as the contradictors, yes.
And one of the reasons for the strategy to amend the US proceeding was to avoid that outcome, correct?--- I would say no. I mean, it’s – I’m speaking very narrowly about avoiding the – the liquidators.
The outcome – I’m sorry, avoiding the outcome that you just agreed with a moment ago, do you or don’t you accept that?--- I’m sorry, now – now I’m a little confused.
One of the reasons for the strategy was the concern that the liquidators if the matter proceeded in Australia on a full [hearing] would act as contradictors, that’s correct, isn’t it?--- If there was a full trial, if there was a need for a full trial in Australia, it was my understanding that the liquidators would be acting as the contradictors in that proceeding.
And one of the advantages of the strategy that was devised was that that particular eventuality would not take place?---It was not an intended outcome, but it would be – it would be a consistent outcome.
Well, it was an outcome that you were aware of at the time the strategy was being devised. Call it a collateral benefit, if you like, it was certainly part of what was contemplated, wasn’t it?--- Well, I – I would – I would with the characterisation that it was a collateral benefit.
But you won’t accept that it was actually one of the main reasons, is that right?--- That’s correct.
Again, this evidence of Mr Coleman is accepted.
97 Whether it be correct to characterise the conduct being pursued as a “plan” or a “strategy”, which may have some negative or pejorative connotations, may be left to one side. That which is manifestly apparent from the evidence of Mr Coleman is that steps were deliberately being taken in the American proceeding with a view to there obtaining summary judgment if possible. At the same time as taking those steps, the American attorneys were being kept up to date with the steps also being pursued in this proceeding in Australia. That is hardly surprising. Indeed, criticism could potentially be directed at a legal adviser who did not keep themself so informed. It may also be accepted that the American attorneys were also conscious of any “collateral benefit” that may be achieved if they were successful in obtaining summary judgment in the United States. Again, that is hardly surprising. All that has been established is the professional pursuit of a client’s legal interests in a forum having jurisdiction to grant the relief being sought.
98 What is missing from the conduct being pursued in the American proceeding is any feature sufficient to provide a foundation for concluding that that conduct trespasses from the area of professional conduct in the conduct of litigation into the realm of an “abuse of process” for the purposes of the present proceeding. Mere consciousness of “collateral benefits” or forensic advantages that may follow upon success in the American proceeding, it is considered, is not sufficient. A “collateral benefit” – albeit not an “intended outcome” – was that:
if the course being pursued in the American proceeding (including the joinder of “the Salyer interests”) was successful, there would then be no “full trial”.
But no finding should be made that:
there was any “rush to judgment” in the American proceeding, the timing of the decisions being taken as to the course to be pursued in that proceeding largely having their origins in the entry of a guilty plea by Mr Salyer in March 2012 and not in the timing of when (for example) the other Defendants became unrepresented or when the Australian liquidators reached their final conclusions as to ownership of the shares and the Intercompany Loan;
or that:
any step taken in the American proceeding was taken for the purpose of precluding this Court from exercising jurisdiction – notwithstanding an awareness of such “collateral benefits” as may flow from success in the American proceeding.
Nor should any finding be made that:
the Australia liquidators, for example, were deliberately not joined and not joined so as to ensure that there was no “genuine dispute as to the facts”.
These findings are not an exhaustive statement of what conduct could attract a characterisation of “abuse of process”. Indeed, given the ill-defined perimeters of that doctrine, no exhaustive statement could or should be attempted. The pursuit of a forensic course which achieved a desired outcome without the necessity for a “full trial” – and a forensic course which had acknowledged “collateral benefits” – it is respectfully concluded falls short of conduct which evidences an “abuse of process”. Indeed, a forensic course which exposed a party to unnecessary expense could well attract the criticism of both that party and the Court itself. There is no necessity for a forensic course to be pursued by a party which ensures that there is a fully contested hearing on the facts and for a forensic course to be pursued which ensures that there are no consequential “collateral benefits”. The ultimate guardian against a party impermissibly or inappropriately seeking (for example) summary judgment remains the Court that is exercising jurisdiction – the parties to the present proceeding having to confront two guardians : the first being the United States Bankruptcy Court and the second being this Court.
99 All that has been established, it is respectfully concluded, is the pursuit of the American proceeding in a manner designed to achieve a forensic objective, relevantly the obtaining of relief in respect to the shares and the Intercompany Loan. Such “collateral benefits” as would flow from the obtaining of that relief in America was obviously not a matter of indifference to the American attorneys advising the Plaintiffs. But the recognition of there being a “collateral benefit” certainly does not transform a legitimate forensic objective into an abuse of process.
SUMMARY JUDGMENT
100 The Plaintiffs in their amended Interlocutory Application filed on 5 April 2013 seek (inter alia) summary judgment.
101 In resisting that application, the other Defendants rely upon their submissions as to there being no res judicata or issue estoppel; alternatively, the other Defendants rely upon the asserted abuse of process on the part of the Plaintiffs.
102 The other Defendants also submitted that there were further and separate reasons for not entertaining the application for summary judgment, namely:
the absence of authority on the manner in which legal issues of central relevance to the application of the doctrine of res judicata are to be applied; and
the potential for “problems” that may arise by reason of the manner in which an appeal from the American decision may be resolved.
The principles to be applied when seeking summary judgment should be briefly referred to in advance of resolving these two more specific submissions.
Summary judgment – general principles
103 In the present proceeding, the Plaintiffs contend that if the American decision gives rise to a res judicata or if the other Defendants should not be permitted to re-litigate legal and factual issues which were resolved by that proceeding, summary judgment should be entered.
104 Power to enter summary judgment is conferred by s 31A of the Federal Court of Australia Act and is further addressed in r 26.01 of the Federal Court Rules 2011 (Cth).
105 Section 31A provides as follows:
Summary judgment
(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.
(5) This section does not apply to criminal proceedings.
It is sufficient for present purposes to note that the object and purpose of amending the Federal Court of Australia Act by inserting s 31A in 2005 was “to impose a lower requirement to dismiss an action by way of summary judgment than that which was imposed in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125”: Hicks v Ruddock [2007] FCA 299 at [12]. Tamberlin J there went on to observe that in General Steel “the requirement was expressed in terms of ‘manifestly groundless’ or ‘obviously untenable’”. The same approach has been expressed in a number of different ways. Thus, in Kowalski v MMAL Staff Superannuation Fund Pty Ltd [2009] FCAFC 117 at [25], 178 FCR 401 at 408, Spender, Graham and Gilmour JJ said that the effect of s 31A is to “soften the test for a successful application for summary judgment”. The section, it is said, “is concerned with the bringing and defending of proceedings, not just with pleadings; with substance, not just with form”: White Industries Australia Ltd v Federal Commissioner of Taxation (2007) 160 FCR 298 at [50]. Similarly, in Dandaven v Harbeth Holdings Pty Ltd [2008] FCA 955 at [5], Gilmour J said that s 31A “lowers the bar for obtaining summary judgment”.
106 When addressing the terms of s 31A and in repeating the oft-acknowledged warning to exercise the power “with caution”, French CJ and Gummow J in Spencer v Commonwealth [2010] HCA 28, 241 CLR 570 observed:
[22] In the Federal Court … the criterion of a “reasonable prospect” of success has been understood in analogous statutory settings to mean a “real” rather than “fanciful” prospect. This exegesis adds little to the words of s 31A. The section authorises summary disposition of proceedings on a variety of bases under its general rubric. It will apply to the case in which the pleadings disclose no reasonable cause of action and their deficiency is incurable. It will include the case in which there is unanswerable or unanswered evidence of a fact fatal to the pleaded case and any case which might be propounded by permissible amendment. It will include the class of case in the longstanding category of cases which are “frivolous or vexatious or an abuse of process”. The application of s 31A is not, in terms, limited to those categories.
[23] Accepting that there are a number of ways in which s 31A may be applied to empower the Federal Court to dismiss a proceeding, it is to be distinguished, in its application to deficient pleadings, from rules (such as O 11 r 16 of the Federal Court Rules) which provide for the striking out of pleadings. …
[24] The exercise of powers to summarily terminate proceedings must always be attended with caution. That is so whether such disposition is sought on the basis that the pleadings fail to disclose a reasonable cause of action or on the basis that the action is frivolous or vexatious or an abuse of process. The same applies where such a disposition is sought in a summary judgment application supported by evidence. …
[25] Section 31A(2) requires a practical judgment by the Federal Court as to whether the applicant has more than a "fanciful" prospect of success. That may be a judgment of law or of fact, or of mixed law and fact. Where there are factual issues capable of being disputed and in dispute, summary dismissal should not be awarded to the respondent simply because the Court has formed the view that the applicant is unlikely to succeed on the factual issue. Where the success of a proceeding depends upon propositions of law apparently precluded by existing authority, that may not always be the end of the matter. Existing authority may be overruled, qualified or further explained. Summary processes must not be used to stultify the development of the law. But where the success of proceedings is critically dependent upon a proposition of law which would contradict a binding decision of this Court, the court hearing the application under s 31A could justifiably conclude that the proceedings had no reasonable prospect of success.
See also: [2010] HCA 28 at [59] to [60] per Hayne, Crennan, Kiefel and Bell JJ.
107 Rule 26.01 provides as follows:
26.01 Summary judgment
(1) A party may apply to the Court for an order that judgment be given against another party because:
(a) the applicant has no reasonable prospect of successfully prosecuting the proceeding or part of the proceeding; or
(b) the proceeding is frivolous or vexatious; or
(c) no reasonable cause of action is disclosed; or
(d) the proceeding is an abuse of the process of the Court; or
(e) the respondent has no reasonable prospect of successfully defending the proceeding or part of the proceeding.
Particular reliance is placed by the Plaintiffs upon r 26.01(1)(d). Indeed, given the fact that SK Foods Australia and the Australian liquidators were not parties to the American proceeding, it was perhaps to be expected that the Plaintiffs would ultimately place greater reliance upon concepts of an abuse of process rather than any strict application of the doctrine of res judicata.
108 When considering the application made by the Plaintiffs and the terms of r 26.01(1)(d), it is thus to be recognised that the application is one in respect to which “considerable caution” should be exercised. The need for caution, is well-established, “especially where the estoppel is said to arise from a judgment of a foreign court…”: Armacel Pty Ltd v Smurfit Stone Container Corporation [2008] FCA 592 at [63], 248 ALR 573 at 581 per Jacobson J. Even where an “abuse of process” has been made out, the Court nevertheless retains a discretion to not enter summary judgment.
109 Again, these general principles were not put in issue by Senior Counsel for the other Defendants. In seeking to resist their application, however, he sought refuge in either or both of his more confined submissions as to the absence of authority and the problems that the grant of summary judgment may occasion.
110 Each of these submissions should be addressed. But neither, it is concluded, should prevail.
The absence of authority
111 Placed at the forefront of the submissions advanced by Senior Counsel on behalf of the other Defendants were the propositions either that the American decision did not give rise to a res judicata or, alternatively, the Plaintiffs had by their conduct engaged in an abuse of process. To some extent these two propositions overlapped.
112 For some of the propositions advanced by the other Defendants, it was submitted that there was no authority. Thus, for example, the other Defendants in their written submissions maintained that they had “not found any case where the lack of a necessary party in proceeding 1 was held to matter or not to matter when a res judicata question was argued in proceeding 2”. For other propositions, the other Defendants advanced their submissions free of any discussion of – or reference to – available authorities. Other than a reference to the text of Spencer Bower, Turner and Handley “Res Judicata” (3rd ed, 1996), there was no discussion of any authorities which could throw light upon the “problems” should this Court now enter judgment in advance of (for example) a decision on appeal from the decision of his Honour Judge Bardwil.
113 It was the absence of authority on some of the centrally relevant propositions being advanced, however, that was relied upon by the other Defendants as a reason for not proceeding summarily.
114 That submission is rejected.
115 An application for summary judgment may be entertained even if the questions raised for resolution involve some complexity: cf. Civil & Civic Pty Ltd v Pioneer Concrete (NT) Pty Ltd (1991) 103 FLR 196 at 215 per Asche CJ. The fact that a case may present complexity – either by reason of the law to be applied or the facts to be found – does not preclude an application being made for summary judgment. But caution must be exercised before entering summary judgment: Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91. Dixon J there observed:
The application is really made to the inherent jurisdiction of the court to stop the abuse of its process when it is employed for groundless claims. The principles upon which that jurisdiction is exercisable are well settled. 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.
This passage has since been endorsed by (for example) Hayne J in Re Application by Green [2011] HCA 5 at [6], 85 ALJR 423 at 424-425. See also: General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 128-129 per Barwick CJ; Silverton Ltd v Harvey [1975] 1 NSWLR 659 at 665 per Rath J.
116 A distinction nevertheless may be drawn between those cases where the complexity is founded in a factual dispute as opposed to the complexity being found in the legal principles to be applied or, as in this case, by an asserted lack of legal authority. The present application being made by the Plaintiffs, obviously enough, does not seek to enter the colosseum of disputed facts going to the Intercompany Loan or the shares or purported transfer of the 100 fully paid shares. The Plaintiffs seek to take refuge in the decision of the Honourable Judge Bardwil and those limited facts which were explored as to the manner in which the American proceeding was amended and conducted. Their application, so the Plaintiffs maintain, is the application of established principles of res judicata and issue estoppel.
117 Any absence of authority as to those legal principles will presumably be the same now as when any appeal from the present decision is resolved. Nor will the submissions be able to be better resolved at a final hearing than during the course of the present interlocutory hearing. The only potential area of forensic dispute which could have called for evidence and the need for findings of fact to have been made, namely the reasons motivating the July 2012 amendment of the American proceeding, has been now explored. That area of factual dispute was pursued in the cross-examination of Mr Coleman. No relevant limitation was placed upon Senior Counsel for the other Defendants in the factual issues he sought to explore. The balance of the submissions depends upon the resolution of largely admitted or non-disputed facts. Indeed, on one view, it is better to resolve the issues sooner rather than later. To do so brings certainty to the present proceeding – albeit subject to what may well be expected to be an application for leave to appeal, the present decision being an interlocutory and not a final judgment: Kowalski v MMAL Staff Superannuation Fund Pty Ltd [2009] FCAFC 117 at [32] to [44], 178 FCR 401 at 409 -412 per Spender, Graham and Gilmour JJ. And it is preferable for any appellate process in respect to the American proceeding to be conducted on the basis of such certainty as the present decision may bring to the future table of litigious battle.
Problems that may arise
118 Senior Counsel for the other Defendants raised two scenarios that may or may not ultimately eventuate, namely:
the consequences to the other Defendants in the event that the present proceeding results in a summary judgment against their interests with effect being given to the American decision – but the American decision thereafter being reversed on appeal; and
the consequences that would arise by reason of a judgment in the present proceeding resulting in a res judicata which could then be relied upon as a reason to “shut down” the appeal from the American decision.
Notwithstanding these perceived problems, it is considered that the only objective fact of relevance is that there is an outstanding appeal from the decision of Bardwil J. According to the Agreed Statement of Facts, it is agreed that “in the ordinary course of events the appeal would be expected to be determined in or about late 2013 or early 2014”. There was no agreement as to whether “determined” was intended to refer to the hearing of the appeal with judgment then reserved or a reference to the appellate judgment being published.
119 Whatever may be the position as to the expected date of publication of any American appellate judgment, the concerns of the other Defendants remain concerns that cannot be summarily dismissed.
120 But so much, with respect, is the inevitable outcome of any application of the doctrine of res judicata. In the absence of any abuse of the processes of this Court, it is respectfully considered that it is the duty and function of this Court to resolve all such applications – including interlocutory applications – in the ordinary course of the discharge of those functions. The Court should generally neither hurry to judgment – nor delay judgment – to accommodate the forensic objectives of one or other of the parties.
121 In the event of an appeal from the present decision being successful, and an American appellate judgment intervening, the Full Court of this Court will make such orders as it considers appropriate. Similarly, an American appellate court hearing any appeal from the present decision will give the present reasons for decision such consideration as that Court considers appropriate.
122 Neither difficulty as advanced by the other Defendants is, with respect, a sufficient reason to defer resolving the present Interlocutory Application in accordance with law. The fact that there is an appeal pending from the decision of Bardwil J is not, with respect, a sufficient reason to deny to that judgment the finality that attaches to any decision which may be subject to appeal. In Spencer Bower and Handley, “Res Judicata” (4th ed, 2009) the authors there summarise the position as follows:
FINALITY NOT AFFECTED BY APPEAL
5.19 A judgment can be final, although it may be reserved or varied by an appellate court, and is under appeal when set up as a res judicata. Although only part of a judgment is challenged on appeal, there is no estoppel for the rest because the appeal trumps any estoppel. … Finality is not affected although execution has been stayed or levied.
One of the decisions there relied upon is Marchioness of Huntley v Gaskell [1905] 2 Ch 656 where Cozens-Hardy LJ observed:
It is urged that the judgment of the Scotch Court of Session is not a final judgment; but when the word “final” is used, as I think it is in some authorities with reference to judgments, that does not mean, I apprehend, a judgment which is not open to appeal, but merely “final” as opposed to “interlocutory.” A judgment is, in my opinion, not the less an estoppel between the parties to the action because it may be reversed on appeal to the House of Lords…
These observations were approved by Fisher J in Taylor v Ansett Transport Industries (1987) 18 FCR 342 at 354.
123 Notwithstanding the reliance placed by Senior Counsel for the other Defendants upon the problems that he submitted could eventuate in the event that it were to be now concluded that the decision of Bardwil J gave rise to a res judicata or an abuse of process, no authorities or discussion of the available authorities were cited or canvassed in either oral or written submissions.
124 There is no reason to believe that any appeal from the present decision, or the resolution of the outstanding appeal from the decision of Bardwil J, will proceed in any manner other than in accordance with law. To the extent that the other Defendants may wish to submit in the appeal from the decision of Bardwil J that there was an error in the application of Australian law, that will presumably be a submission which can be resolved during the course of that appeal.
125 The problems relied upon by Senior Counsel for the other Defendants, in short, provide no reason to delay consideration of the application made by the Plaintiffs for summary judgment.
126 One further consideration should, perhaps, be finally addressed. Although not expressly addressed or addressed in any great detail as a discretionary reason for not entering summary judgment was the submission implicitly advanced by the other Defendants that summary judgment should not be entered based upon the American decision because that decision was itself the product of a summary judgment application. The other Defendants want a fully contested factual hearing addressing the ownership of both the shares and the Intercompany Loan. A recurring concern of the other Defendants was that the Plaintiffs were pursuing a course “to prevent the merits ever being decided by a court”. In the absence of the present application for summary judgment, this Court may have resolved the competing claims after a contested hearing on the facts. But that is not the manner in which the issues were resolved in the United States Bankruptcy Court. With the exception of the Ninth Defendant, all of the other Defendants had their interests represented in that proceeding. In the absence of some finding being made, and none is made, that those Defendants were deprived (for example) of a proper opportunity to participate in the American proceeding, the decision of the Honourable Judge Bardwil is final. There is no reason why it should not be now relied upon by the Plaintiffs, even as a matter of discretion, in not now entering summary judgment in this Court.
CONCLUSIONS
127 The manner in which the competing submissions have been resolved, it is accepted, may well have departed from the manner in which the submissions have been advanced by the Plaintiffs and the other Defendants. One submission, or area of factual inquiry, was relied upon in a variety of different ways.
128 Notwithstanding the diverse ways in which the same submission may have been advanced by either the Plaintiffs or the other Defendants, it is concluded that:
questions as to both the legal and beneficial ownership of both the 100 shares and the Intercompany Loan have been resolved by the decision of the Honourable Judge Bardwil; and
the decision of the Honourable Judge Bardwil resolves all questions as to the legal and beneficial ownership of both the 100 shares and the Intercompany Loan.
It is further concluded that:
the decision of the Honourable Judge Bardwil gives rise to a res judicata such that the rights of the parties to that proceeding have become merged in the judgment given by his Honour;
or, alternatively, that:
to permit the other Defendants to re-litigate the issues resolved by the Honourable Judge Bardwil would constitute an abuse of the processes of this Court.
It is also concluded that:
the Plaintiffs in the present proceeding are entitled to judgment. In seeking such summary relief, the Plaintiffs have not engaged in any abuse of process.
129 A belated attempt was made by the other Defendants to rely upon an affidavit of Mr Edney sworn on 28 March 2013. Irrespective of the form of the affidavit, no sufficient reason has been suggested as to why evidence should be admitted after the close of oral submissions. The affidavit is thus rejected.
130 During the course of the hearing no submissions were directed to any significance that may attach to the fact that the Ninth Defendant was not a party to the American proceeding. If further submissions are sought to be advanced in respect to the Ninth Defendant as a reason for qualifying the more generally expressed conclusions, such further submissions should be filed and served within 7 days.
131 Alternatively, the parties are to bring in Short Minutes of Orders to give effect to these reasons within 21 days. In order to address the concerns of the other Defendants as to (inter alia) the prospect of an appeal from the decision of the Honourable Judge Bardwil being successful, the Plaintiffs have proposed a form of undertaking. The Short Minutes of Order may seek to incorporate, if it is considered appropriate to do so, an undertaking to that or like effect.
ORDERS
1. The parties bring in Short Minutes of Orders to give effect to these reasons within 21 days.
I certify that the preceding one hundred and thirty-one (131) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Flick. |
Associate:
