FEDERAL COURT OF AUSTRALIA

Zetta Jet Pte Ltd v The Ship “Dragon Pearl” (No 2) [2018] FCA 1130

ORDERS

THE COURT ORDERS THAT:

1.    The proceeding be dismissed with costs.

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

ORDERS

THE COURT ORDERS THAT:

1.    The Plaintiff’s Amended Interlocutory Application filed on 19 July 2018 be dismissed with costs.

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

REASONS FOR JUDGMENT

PERRAM J:

1. Introduction

1    This is an application for an interlocutory injunction in proceeding VID770/2018 (‘Recognition Proceeding’). The interlocutory application seeks to restrain the Respondent, Linkage Access Limited (‘Linkage’), from removing from Australian waters the luxury cruise yacht “Dragon Pearl” or from alienating title in it pending the trial in proceeding VID737/2018 in this Court of Zetta Jet Pte Ltd v The Ship “Dragon Pearl” (‘Second Dragon Pearl Proceeding’). The Plaintiffs in that suit, and the applicants for the present injunction, are Zetta Jet Pte Ltd (‘Zetta Jet’), a Singaporean company, and Mr Jonathan D. King, a trustee appointed to Zetta Jet by the United States Bankruptcy Court for the Central District of California, Los Angeles Division under Chapter 7 of Title 11 of the United States Code.

2. Facts

2    Zetta Jet and Mr King allege that one of Zetta Jet’s former directors, Mr Geoffrey Owen Cassidy, misappropriated AU$4,492,034.82 from Zetta Jet and used it to purchase the freshly-built Dragon Pearl from an Australian shipwright, Maritimo Offshore Pty Ltd. The vessel was registered in the name of Dragon Pearl Limited (‘DPL’), a company incorporated in the Marshall Islands. Initially DPL was under the control of Mr Cassidy.

3    It is not in dispute that Zetta Jet did pay $4,492,034.82 to the shipwrights for the lavishly appointed Dragon Pearl and that this was done at the behest of Mr Cassidy. The funds were transferred in five instalments between 28 March 2016 and 14 December 2016. In a related proceeding before the High Court of Singapore Mr Cassidy filed an affidavit in which he swears that Zetta Jet and its subsidiaries were indebted to him and that the funds used to purchase the Dragon Pearl from the shipwrights were set off against those debts. A report into the affairs of Zetta Jet prepared for Mr King by PricewaterhouseCoopers concluded that no such debt existed. In terms of determining whether interim relief ought now to be granted to keep the vessel in Australian waters pending any final trial, there is clearly a sufficiently arguable case that Mr Cassidy, as a director of Zetta Jet, misappropriated $4,492,034.82 of Zetta Jet’s money to acquire the Dragon Pearl from the shipwrights.

4    On 28 September 2017 Mr Cassidy claims to have disposed of his interest in the Dragon Pearl to an entity called New Target Investments Ltd (‘New Target’). This is said to have been done in satisfaction of a personal debt owed by Mr Cassidy to New Target. New Target caused Ms Du Yan to become the sole shareholder and director of DPL as its nominee.

5    The vessel has since been caught up in litigation. At all material times the Dragon Pearl has been in Australian waters. On 13 October 2017 Zetta Jet and Mr King commenced proceeding VID1104/2017 in this Court of Zetta Jet Pte. Ltd v The Ship “Dragon Pearl” (‘First Dragon Pearl Proceeding’) which sought, inter alia, the arrest of the vessel. The Plaintiffs claimed to have a proprietary maritime claim to the possession, title or ownership of the vessel by virtue of a constructive or resulting trust arising in favour of Zetta Jet from Mr Cassidy’s alleged breaches of fiduciary duty. On the same day, the Court issued a warrant for the arrest the vessel and the Admiralty Marshal took custody and control of it pending the resolution of the First Dragon Pearl Proceeding. On 20 October 2017 Ms Du Yan and DPL entered appearances in the proceeding asserting that Ms Du Yan was the rightful possessor of the vessel on behalf of DPL.

6    That case was listed for trial for five days commencing on Tuesday 5 June 2018 before Burley J. On the first day of the trial the Plaintiffs applied for the issue of letters of request to the High Court of Singapore for the taking of the evidence of both Zetta Jet’s former finance manager and its former Chief Financial Officer. Their evidence was anticipated to be to the effect that Zetta Jet had not been indebted to Mr Cassidy so that any claim by him that the $4,492,034.82 had been paid by way of set-off could not be true. The Plaintiffs submitted that the evidence of these witnesses was critical to their case and without them they could not succeed. At the same time an adjournment of the trial to a date on or after 1 October 2018 was pursued.

7    Evidence was led before the trial judge of the efforts that the Plaintiffs’ solicitors had made to procure the evidence of these two witnesses. This evidence formed the basis of a submission that it was only recently that the two witnesses had indicated that they did not wish to co-operate. The trial judge did not accept this and concluded that the uncooperative stance of the witnesses had been known for many months and that leaving it to the day of the trial to apply for the issue of the letters of request and hoping for an adjournment with one’s fingers crossed would not do. More was this so when the outcome of the request to the High Court of Singapore could not be known in advance. His Honour refused the adjournment application.

8    The Plaintiffs’ former senior counsel then sought a further adjournment to the following day to permit the Plaintiffs to try and prove their case by other means and to allow them to apply for leave to appeal from the refusal to grant the adjournment. For various reasons the trial was adjourned to next day. At that time the Plaintiffs again attempted further to adjourn the trial to permit the taking of fresh evidence from a Mr Seagrim (another director of Zetta Jet) on the following Tuesday 11 June 2018. The trial judge refused this application for an adjournment too.

9    His Honour then indicated that the trial should commence. Junior counsel for the Plaintiffs informed his Honour that the Plaintiffs could not proceed with the consequence that their case should be dismissed. His Honour accepted this concession and dismissed the First Dragon Pearl Proceeding whilst at the same time making other ancillary orders including, relevantly, for the release of the vessel from arrest and for a short stay to permit any appeal. He subsequently published reasons for refusing the various applications which had been made by the Plaintiffs and recording his ultimate disposition of the case: Zetta Jet Pte. Ltd v The Ship "Dragon Pearl" [2018] FCA 878. The Plaintiffs then appealed to the Full Court which, on the following Monday, 18 June 2018, dismissed the appeal: Zetta Jet Pte Ltd v The Ship “Dragon Pearl” [2018] FCAFC 99.

10    The Full Court’s dismissal of the appeal at 2.15pm on Monday, 18 June 2018 was followed just half an hour later by the sale of the vessel to Linkage (from DPL) for US$1. The same solicitors acted on both sides of the sale (and, indeed, are the solicitors on the record for the Dragon Pearl in the current Second Dragon Pearl Proceeding and the former First Dragon Pearl Proceeding).

11    Not to be outdone by the provocative nature of that step, however, the Plaintiffs on the same day themselves commenced a fresh proceeding against the vessel in this Court, the Second Dragon Pearl Proceeding, and sought once more the beleaguered vessel’s arrest. The next day the application for the warrant came before Middleton J. Linkage argued that the case was barred by a res judicata arising from the First Dragon Pearl Proceeding or was, at least, an abuse of process. Without determining those issues definitively, Middleton J refused the issue of the warrant as a matter of discretion: Zetta Jet Pte Ltd v The Ship “Dragon Pearl” [2018] FCA 981. The Second Dragon Pearl Proceeding was then docketed to me.

3. Do the Plaintiffs have an arguable case?

12    I turn then to whether the injunction should be granted. I conclude, at the outset, that the Plaintiffs have an arguable case that Linkage has received property of Zetta Jet in circumstances which would bring it within the purview of the first limb of the rule in Barnes v Addy (1874) LR 9 Ch App 244 (‘Barnes v Addy’) at 251-252. Subject only to one caveat, Linkage accepted that this was so. Its single objection was that after the Full Court rejected the appeal from the orders of Burley J dismissing the proceeding in the First Dragon Pearl Proceeding, it was entitled to proceed on the basis that the title of DPL to the Dragon Pearl (from which its own title derived) was free from the trusts now asserted by Zetta Jet and Mr King since that issue had been determined judicially to be so. Whatever notice it had of Zetta Jet’s claims for the purpose of receipt under the first limb of the rules in Barnes v Addy had been, so it was submitted, extinguished by this Court’s determination that the proceeding asserting that claim had failed.

13    I do not accept that argument. The argument is only material if it be concluded that the effect of the dismissal in the First Dragon Pearl Proceeding was not to give Linkage a successful plea of res judicata in the Second Dragon Pearl Proceeding. On this view, the dismissal of the First Dragon Pearl Proceeding did not determine anything about the merits of the underlying dispute between Zetta Jet (and Mr King) and DPL but was, in effect, a procedural dismissal resulting from a failure to commence the case once called on to do so. If that were so, I do not think that the dismissal of the appeal in the Full Court or the dismissal of the proceeding by Burley J would have prevented Linkage from otherwise being sufficiently on notice of the claim for the purposes of the first limb of the rule in Barnes v Addy. As I understood Linkage’s position it was accepted, but for the Full Court’s decision, that the Plaintiffs had otherwise made out a sufficient case under that limb. If the dismissal said nothing about the merits of the notice argument against DPL then the Full Court’s judgment cannot have improved its position on that issue either, at least in the only scenario where this question is material (i.e. where Linkage’s res judicata argument otherwise fails). Consequently I accept that the Plaintiffs have an arguable case that Linkage is liable under the first limb of the rule in Barnes v Addy.

4. Issues

14    Linkage submitted that even if there was a sufficiently arguable case against it, the application for the injunction should be refused for a number of reasons. First, the Plaintiffs had no standing to bring the proceeding in this Court; secondly, the form of the Plaintiffs’ case as currently pleaded in its writ was liable to be struck out; thirdly, a res judicata arose from the dismissal of the proceeding in the First Dragon Pearl Proceeding which meant that the present case simply could not be maintained; fourthly, for related reasons the continued maintenance of the new case which had been commenced on 18 June 2018 was an abuse of process; fifthly, that even if the proceeding was not an abuse of process, the application for an injunction itself was such an abuse where the original arrest of the Dragon Pearl had been set aside and a fresh application for arrest refused; and sixthly, although Mr King proffered an undertaking as to damages on the injunction application he did not proffer any security to give that undertaking substance with the result that the application should be refused on discretionary grounds.

5. Standing

15    The standing of Zetta Jet to bring proceedings for the recovery of its property depends on the law of the United States under whose law (Chapter 7 of Title 11 of the United States Code) its insolvency is being administered. Under Chapter 7 a company subject to bankruptcy proceedings has no standing to pursue proceedings for the recovery of its property in its own name which can, instead, only be brought by its trustee. It follows that Zetta Jet itself has no standing to pursue the present injunction application. I did not understand this to be in dispute. This then directs attention to the position of the second Plaintiff, Mr King.

16    As a matter of common law, the better view is that this Court will only recognise the liquidator of an insolvent corporation (howsoever described) appointed by the Courts of the State in which the corporation was itself incorporated: Rubin v Eurofinance SA [2012] UKSC 46; [2013] 1 AC 236 at 252 [13], 256 [29]-[31]. In this case, because Zetta Jet was incorporated in Singapore and Mr King was appointed by the United States Bankruptcy Court under Chapter 7 of Title 11 of the United States Code, this means that this Court cannot recognise Mr King at common law.

17    To surmount this problem Mr King has applied for recognition under the UNICTRAL Model Law on Cross-Border Insolvency (‘Model Law’). Australia has given effect to the Model Law by means of the Cross-Border Insolvency Act 2008 (Cth) which makes provision for an application by a foreign representative, such as Mr King, for recognition under Art 15. On 28 June 2018 Mr King commenced a proceeding in this Court seeking recognition of his status as the Chapter 7 trustee for Zetta Jet entitled In the matter of Zetta Jet Pte Ltd; ex parte Jonathan D. King (the Recognition Proceeding). After some initial missteps, that application has been listed for its first hearing today immediately after judgment. It is likely, but not certain, that Mr King’s office as Chapter 7 trustee will be recognised either at the first hearing or perhaps at a subsequent hearing. At one time, it was thought that the Recognition Proceeding might be substantively opposed by Linkage on the basis that the Chapter 7 proceedings were being pursued in the face of an injunction issued by the High Court of Singapore at the instance of interests associated with Mr Cassidy. That injunction restrained, inter alia, Zetta Jet from taking any further steps in the US bankruptcy proceedings (which were initially Chapter 11 proceedings). However, by the time the injunction application was heard by me on Friday, 27 July 2018 the High Court of Singapore had dissolved by consent that injunction and that issue appears, therefore, to have receded.

18    Until an order for Mr King’s recognition is made under the Model Law it follows that he has no standing to seek an injunction under the general law. However, the Court does have jurisdiction to grant the injunctions sought by Mr King under the Cross-Border Insolvency Act 2008 (Cth). By s 6 the Model Law has the force of law in Australia. By s 10 this Court is specified as one of the courts which may exercise the jurisdiction conferred by the Model Law. Art 19(1) of the Model Law confers jurisdiction on this Court to grant, pending the determination of a foreign representative’s recognition application, urgent provisional relief. It provides:

‘Article 19

Relief that may be granted upon application for recognition of a foreign proceeding

1. From the time of filing an application for recognition until the application is decided upon, the court may, at the request of the foreign representative, where relief is urgently needed to protect the assets of the debtor or the interests of the creditors, grant relief of a provisional nature, including:

(a)     Staying execution against the debtor’s assets;

(b)     Entrusting the administration or realization of all or part of the debtor’s assets located in this State to the foreign representative or another person designated by the court, in order to protect and preserve the value of assets that, by their nature or because of other circumstances, are perishable, susceptible to devaluation or otherwise in jeopardy;

(c)     Any relief mentioned in paragraph 1 (c), (d) and (g) of article 21 below.

.…’

19    Art 19(1) is the urgent provisional form of the post-recognition relief available to a foreign representative under Art 21. The injunctions sought (i.e. non-disposition of title in, and non-removal of, the vessel from the jurisdiction) do not appear in the list of remedies which may be granted in Art 19(1) but that list is not expressed to be exclusive. It appears obvious that the remedies available must include the ability to freeze an asset which the putative foreign representative asserts an entitlement to bring into the bankruptcy. If that argument were thought to lack a textual peg, the reference to Art 21(1)(g) would otherwise suffice. It picks up the Court’s post-recognition jurisdiction to grant to a recognised foreign representative any additional relief which might have been available under the general law if Mr King were a liquidator under the Corporations Act 2001 (Cth). It was pursuant to Art 19(1) that on Thursday 19 July 2018 I granted Mr King urgent provisional relief to restrain the Dragon Pearl from being disposed of or removed from Australian waters pending this application.

20    Art 19(1) relief will, however, only be available until the recognition application is decided: Art 19(1) (‘From the time of filing an application for recognition until the application is decided…’) unless that time be extended under Art 21(1)(f). It is not clear yet when the recognition proceeding will be determined. It may be as early as today or it may be in a week or so. Regardless, the matter will then be governed by Art 21. Art 21(1) provides:

‘1.     Upon recognition of a foreign proceeding, whether main or non‑main, where necessary to protect the assets of the debtor or the interests of the creditors, the court may, at the request of the foreign representative, grant any appropriate relief, including:

(a)     Staying the commencement or continuation of individual actions or individual proceedings concerning the debtor’s assets, rights, obligations or liabilities, to the extent they have not been stayed under paragraph 1 (a) of article 20;

(b)     Staying execution against the debtor’s assets to the extent it has not been stayed under paragraph 1 (b) of article 20;

(c)     Suspending the right to transfer, encumber or otherwise dispose of any assets of the debtor to the extent this right has not been suspended under paragraph 1 (c) of article 20;

(d)     Providing for the examination of witnesses, the taking of evidence or the delivery of information concerning the debtor’s assets, affairs, rights, obligations or liabilities;

(e)     Entrusting the administration or realization of all or part of the debtor’s assets located in this State to the foreign representative or another person designated by the court;

(f)     Extending relief granted under paragraph 1 of article 19;

(g)     Granting any additional relief that may be available to [insert the title of a person or body administering a reorganization or liquidation under the law of the enacting State] under the laws of this State.’

21    For the reasons I have already given, Art 21(1)(g) would authorise the Court to grant the injunctions now sought by Mr King. The time for deciding whether Art 21(1)(g) relief should be granted has not yet, however, arrived since Mr King has not yet been recognised as a foreign representative. Although it seems likely that if relief is granted under Art 19(1) then it should be continued under Art 21(1)(g) this is not inevitably so and a decision on that issue ought to await the time at which it actually arises. In any event, Mr King certainly has standing to seek Art 19(1) relief at this stage. Further, if I were disposed to grant urgent provisional relief under Art 19(1) I would also extend those injunctions under Art 21(1)(f) if Mr King were recognised until any application for Art 21(1)(g) relief was determined. It follows that I would reject, at this stage, Linkage’s challenge to Mr King’s standing (leaving it open to Linkage subsequently to argue should the recognition application fail that he has no standing at common law).

6. Pleading defects

22    Linkage submitted that the Plaintiffs’ writ in the Second Dragon Pearl Proceeding is defective and should be struck out and that this assists it in resisting the application for the injunction. I do not agree. As part of their claim for urgent provisional relief under Art 19(1) the Plaintiffs have now identified at least four ways they put their case including the claim under the rule in Barnes v Addy to which I have already referred. They have signalled that they desire to amend their writ accordingly. There is no utility, therefore, in deciding whether the current pleading should be struck out. Even if I were to strike it out now I would still need to deal with the amendment application before dismissing the proceeding. Furthermore, whether the writ was struck out or not the question of whether Art 19(1) urgent provisional relief (or after any order for recognition, Art 21(1) relief) should be granted would need to be decided on the Court’s assessment of whether the Plaintiffs have an arguable case. So viewed, the pleading debate is a sideshow that need not be resolved.

7. Res Judicata

23    Linkage submitted that the proceeding before Burley J was a proceeding in rem, that the issue in it was whether the Dragon Pearl was subject to a constructive trust by reason of the actions of Mr Cassidy in misappropriating Zetta Jet’s funds to pay the shipwrights for the Dragon Pearl and that DPL had won that case when Burley J dismissed the First Dragon Pearl proceeding. The new proceeding commenced by Zetta Jet and Mr King was also in rem and sought to raise precisely the same argument that had been rejected in the First Dragon Pearl Proceeding. Since it had already been determined in an in rem proceeding that the Dragon Pearl was not subject to a constructive trust arising from Mr Cassidy’s actions it could not now be pleaded to the contrary in this proceeding.

24    For the Plaintiffs it was submitted that once DPL appeared in the First Dragon Pearl Proceeding the proceeding had become in personam. The significance of this was that the parties to the present Second Dragon Pearl Proceeding were the Plaintiffs and Linkage rather than the Plaintiffs and DPL. If the proceedings were in personam and the parties were different there could be no successful plea of res judicata by Linkage.

25    I reject this submission. It is true that upon DPL filing an appearance the proceeding as against it became in personam but the proceeding remained, nevertheless, an action in rem against the ship: Caltex Oil (Australia) Pty Limited v The Dredge ‘Willemstad’ [1976] HCA 65; 136 CLR 529 at 538; Comandate Marine Corp v Pan Australia Shipping Pty Ltd [2006] FCAFC 192; 157 FCR 45 at 63-64 [60]. It is true therefore that the res as between the Plaintiffs and DPL cannot bind Linkage but this is not to the point when the action remains in rem.

26    Subject to that small point, the parties’ principal focus was instead on a different point. Both sides accepted that the plea of res judicata would be available to Linkage if:

(1)    the dismissal in the first case was judicial;

(2)    the earlier decision was pronounced;

(3)    the first court had jurisdiction over the suit before it;

(4)    the first decision was:

(a)    final; and

(b)    on the merits;

(5)    the first decision determined the same question as that raised in the second proceeding; and

(6)    the parties to the first judgment were the same or it was given in rem.

27    As to (1)-(6) see, for example, Willoughby v Clayton Utz (No 2) [2009] WASCA 29; 40 WAR 98 (‘Willoughby’) at 104 [14] per Pullin JA (with whom Wheeler and Miller JJA agreed) applying the summary in Spencer Bower, Turner and Handley, Res Judicata (3rd ed, Butterworths, 1996) at [19]. There was no dispute between the parties that propositions (1), (2), (3), (4)(a) and (5) were satisfied in this case. There was a dispute as to proposition (6) which I have concluded above should be determined in Linkage’s favour, i.e., the First Dragon Pearl Proceeding was a proceeding in rem.

28    The substantive dispute between the parties was about proposition (4)(b) and the requirement that there be a hearing on the merits. Dr Bell SC, for the Plaintiffs, submitted that for there to be a hearing on the merits there had to be a decision which establishes certain facts as proved or not in dispute; states the relevant principles to be applied and expresses a conclusion with regard to the effect of applying those principles to the factual situation concerned. Authority for that proposition was to be found in the reasons for judgment of Lord Brandon of Oakbrook in D.S.V. Silo-und Verwaltungsgesellschaft mbH v Owners of The Sennar [1985] 1 WLR 490 (‘The Sennar’) at 499. Each of the other Law Lords in that case had agreed with Lord Brandon so this was said to be a unanimous view. In this case, although Burley J delivered reasons, they do not disclose the application of legal principle to facts as found. Accordingly, whatever else it was, the judgment which ensued could not be a judgment ‘on the merits’. Hence, the plea of res judicata could not succeed.

29    Mr Stewart SC for Linkage submitted that The Sennar was a case concerned with issue estoppel rather than res judicata. It was established, in relation to a plea of res judicata, that there was a hearing on the merits in the relevant sense where judgment was entered against a party consequent upon that party’s failure to attend and participate in a trial: Linprint Pty Ltd v Hexham Textiles Pty Ltd (1991) 23 NSWLR 508 at 519-521 and 526-527. What occurred before Burley J was indistinguishable from Linprint which required, therefore, the conclusion the plea was available.

30    In response, Dr Bell drew attention to decision of the Western Australian Court of Appeal in Willoughby where the Court of Appeal had applied Lord Brandon’s statement to a case involving a plea of res judicata (at 107 [29]). So far as Linprint was concerned Dr Bell submitted that it had not referred to The Sennar and, indeed, made no reference to the requirement that there be a hearing on the merits.

31    The submissions of Linkage are to be preferred. There is a distinction between a plea of res judicata and the assertion of an issue estoppel. Dixon J explained the difference in Blair v Curran [1939] HCA 23; 62 CLR 464 at 531-532:

‘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.’

32    The difference between them has strong procedural consequences for the materials from which they are proved. As Fullagar J explained in Jackson v Goldsmith [1950] HCA 22; 81 CLR 446 at 467:

‘[I]t follows from the very nature of the difference between the plea of res judicata and the plea of issue estoppel that different materials are relevant in each case. Where the plea is of res judicata, only the actual record is relevant. Where the plea is of issue estoppel, any material may be looked at which will show what issues were raised and decided. Reasons given for the judgment pronounced are likely to be particularly important for this purpose.’

33    Consequently, one is confined in considering a plea of res judicata to an examination of the pleadings and the Court’s orders: Pollnow v Armstrong [2000] NSWCA 245 (‘Pollnow’) at [13]. There is no tension between Pollnow and Lord Brandon’s dictum because The Sennar was a case concerned with an issue estoppel and not a plea of res judicata. There is a tension between the decision in Willoughby and Pollnow, however, because Willoughby was a case in which a plea of res judicata was asserted. In that case Pullin JA (with whom Wheeler and Miller JJA agreed) accepted that Pollnow was authority for the proposition that the reasons could not be examined under a plea of res judicata. At [28]-[29] his Honour said:

‘28    The result is that counsel for the respondent was correct when he submitted that reasons for judgment are not part of the record to be examined when deciding whether the Causes of Action have already been determined in an earlier action. However, the reasons for judgment are relevant and may be examined to determine whether the Causes of Action in the First Action were decided “on the merits” or were “litigated”.

29.    “Litigated” is the word used by Fullagar J in Jackson v Goldsmith (at 467). The phrase “on the merits” was used in Carl-Zeiss Stiftung v Rayner & Keeler Ltd [1967] 1 AC 853 at 918, 927, 933, 935 and 969. The expression has been referred to in a number of other cases. See, eg, Linprint Pty Ltd v Hexham Textiles Pty Ltd (1991) 23 NSWLR 508; Marshall v Town Planning Appeal Tribunal (WA) [2006] WASCA 146 at [15]; and Real Estate and Business Agents Supervisory Board v Espanol Holdings Pty Ltd (in liq) (No 2) [2008] WASCA 109 at [34]. It was not necessary in any of those cases to consider precisely what was meant by the phrase “on the merits”. Spencer Bower, Turner and Handley, Res Judicata states that this “separate requirement” had been clarified since the second edition of the book (at [173]). The author concludes that a decision which is on “purely procedural grounds” is not a decision on the merits (at [174]-[175]). In DSV Silo-und Verwaltungsgesellschaft mbH v Owners of the Sennar (No 2) [1985] 1 WLR 490, Lord Brandon said that ‘a decision on procedure alone is not a decision on the merits’ (at 499). He said that looking at the matter positively (at 499):

[A] decision on the merits is a decision which establishes certain facts as proved or not in dispute; states what are the relevant principles of law applicable to such facts; and expresses a conclusion with regard to the effect of applying those principles to the factual situation concerned.’

34    The proposition in the last sentence of [28] is not supported by authority. As I read [29] it is not said that the first set of authorities referred to are authority for what is said in [28]. His Honour does appear to have relied upon Lord Brandon’s dictum in The Sennar towards the end of [29] but it was a case of issue estoppel not res judicata. In any event, Willoughby was a case where the Master at first instance had given reasons and the inquiry posited Pullin JA was meaningful.

35    Prior to Willoughby it was accepted that a plea of res judicata could be based on a default judgment for which there were no reasons: New Brunswick Railway Co v British and French Trust Corporation [1939] AC 1 at 35 per Lord Wright; Kok Hoong v Leong Cheong Kweng Mines Ltd [1964] AC 993 at 1010 per Viscount Radcliffe (‘…there is no doubt that by the law of England…a default judgment is capable of giving rise to an estoppel per rem judicatum.’). A similar statement appears in Spencer Bower and Handley at pp 90-91. I find it difficult to accept that Pullin JA was intending to overturn cases of this kind or to ignore the High Court’s decision in Chamberlain v Deputy Commissioner of Taxation [1988] HCA 21; 164 CLR 502. That case establishes that a plea of res judicata may rest upon a consent judgment. There were no reasons for judgment in that case which could be examined to determine the facts found or the law applied to those facts. Since Willoughby was a case where the plea of res judicata rested on orders actually accompanied by dispositive reasons I do not read it as saying anything about cases where there are no reasons. That view of Willoughby is supported by the reference in [29] to Linprint which was a case in which there were no reasons and which Pullin JA did not appear to disapprove.

36    In that circumstance, I reject Dr Bell’s argument that he is assisted by the dictum of Lord Brandon in The Sennar. I reject his submission based on Willoughby because I would read that case as being concerned with a plea of res judicata where the order or judgment in the first case was accompanied with reasons. In this case, Burley J gave no reasons for dismissing the proceeding beyond at [67] ‘I was informed by junior counsel that the plaintiffs could not proceed with their case with the consequence that their claim must be dismissed’ and to record the orders made at [69] as including ‘(7) The proceedings be dismissed’.

37    In that circumstance, this case appears to be indistinguishable to Linprint. In that case a party unsuccessfully sought an adjournment of a trial which was stood down to later in the day. When the trial commenced the party did not appear and the judge dismissed the party’s claim. An attempt was then made to bring the same case again and the issue was whether the first order dismissing claim could support a plea of res judicata. The Court of Appeal held that it could. I reject the submission that Linprint should be distinguished because it does not refer to The Sennar since that was an issue estoppel case.

38    Finally, Dr Bell submitted that he obtained assistance from three decisions: Serious Fraud Office v Saleh [2015] EWHC 2119 (QB); Armacel Pty Ltd v Smurfit Stone Container Corporation [2008] FCA 592; 248 ALR 573; and Castillion v P & O Ports Limited (No 2) [2007] QCA 364; [2008] 2 Qd R 219. Each of these cases concerned issue estoppel rather than res judicata. I do not think they can affect the conclusion that this case is governed by Linprint.

39    In that circumstance and the circumstances identified at [23] and [25] above, I conclude that Linkage is entitled to rely upon a plea of res judicata in the Second Dragon Pearl Proceeding. It sought summary judgment under s 31A of the Federal Court of Australia Act 1976 (Cth) on that basis. I am satisfied that its plea would inevitably succeed if the matter were to proceed to trial, even with the Plaintiffs’ contemplated amended pleadings, and that I should therefore give it the summary judgment which it seeks. It follows that the Plaintiffs’ application for injunctive relief must be refused since it has no prospects of success. Although I am satisfied that it is arguable that Mr Cassidy has stolen the Dragon Pearl from Zetta Jet, the plaintiffs have already run that case once and lost. The public interest in the finality of litigation does not permit it to seek to run that case a second time, however unsavoury the outcome which results appears to be.

7. Remaining issues

40    In light of that conclusion it is not necessary to resolve Mr Stewart’s remaining objections.

8. Orders

41    Mr King’s application for an injunction in VID 770 of 2018 should be refused with costs and the proceeding VID 737 of 208 should be dismissed with costs.

Associate:

Dated:    31 July 2018