Brett Seymour Mathews, Stirling Mall Partners P/L & Stirling Mall (SA) P/L v Lotus Stones (SA) P/L - [2017] SASC 27

SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeals: Civil)
BRETT SEYMOUR MATHEWS, STIRLING MALL PARTNERS P/L & STIRLING MALL (SA) P/L v LOTUS STONES (SA) P/L
[2017] SASC 27
Judgment of The Honourable Justice Stanley
6 March 2017
ESTOPPEL - ESTOPPEL BY JUDGMENT - ISSUE ESTOPPEL
ESTOPPEL - ESTOPPEL BY JUDGMENT - PARTIES - IDENTITY OF PARTIES - PRIVITY
ESTOPPEL - ESTOPPEL BY CONDUCT - EQUITABLE ESTOPPEL GENERALLY
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - PLEADINGS
ESTOPPEL - ESTOPPEL BY JUDGMENT - RES JUDICATA OR CAUSE OF ACTION ESTOPPEL
This is an appeal from a decision of a magistrate to refuse an amendment to a pleading.
The decision being a discretionary one, the appeal must be decided in accordance with the principles in House v The King.
The action concerns a dispute over the ownership of certain items claimed by the respondent in shop premises owned by the second and third appellants. At issue is whether those items are fixtures or chattels, with consequential implications as to their ownership. The appellants are the defendants and the respondent is the plaintiff in the principal action in the Magistrates Court.
The respondent and Mr and Mrs Borg filed a claim in 2015. The appellants filed a defence and counterclaim in August 2015 alleging a debt of $100,000 owed by Mr and Mrs Borg to the appellants as payment for part of the fit out of the shop premises. On 30 March 2016 the appellants amended their defence and counterclaim to confine liability over the $100,000 to Mr Borg. On 21 September 2016 a consent order was made in the Magistrates Court dismissing the counterclaim against Mr Borg with no order as to costs. On 18 October 2016 the appellants sought leave to further amend their defence to include a particular concerning an agreement which had been alleged in the counterclaim. Her Honour Magistrate Schammer refused the application to further amend the defence on the basis that the appellants were estopped from pleading an agreement that had already been pleaded in the counterclaim which was dismissed by the consent order. The appeal concerns this decision to refuse leave to amend a pleading.
Held, per Stanley J:
1. The learned magistrate fell into error by concluding that there was an issue estoppel preventing the appellants from pleading evidence of an agreement (at [12]).
2. The Court should exercise its discretion in favour of permitting the amendment to be made (at [43]).
3. Allow the appeal (at [44]).
4. Grant permission to the appellants to further amend their second amended defence filed with the Magistrates Court on 2 December 2016, so that the particulars to paragraph 2 of the defence read as contained in the judgment (at [44]).
5. Appellants to pay the costs of the application to amend. (at [45]).
6. Court to hear the parties as to the costs of the appeal. (at [45]).
Kuligowski v Metrobus (2004) 220 CLR 363; O’Donel v Commissioner for Road Transport & Tramways (NSW) (1938) 59 CLR 744; Jackson v Goldsmith (1950) 81 CLR 446; Somodaj v Australian Iron and Steel Ltd (1963) 109 CLR 285; Somanader v Minister for Immigration and Multicultural Affairs (2000) 178 ALR 677, discussed.
House v The King (1936) 55 CLR 499; Blair v Curran (1939) 62 CLR 464; Makhoul v Barnes (1995) 60 FCR 572; Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502; Isaacs v Ocean Accident and Guarantee Corp Ltd (1957) 58 SR (NSW) 69; Gleeson v J Wippell & Co Ltd [1977] 3 All ER 54; Ramsay v Pigram (1968) 118 CLR 271; Shears v Chisholm [1994] 2 VR 535; L H Markwell Pty Ltd v L A & D E Fitzgerald Pty Ltd [2000] QCA 319; Trawl Industries of Australia Pty Ltd (in liq) v Effem Foods Pty Ltd (1992) 36 FCR 406, (1992) 108 ALR 335; Farah Constructions v Say-Dee Pty Ltd (2007) 230 CLR 89; Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, considered.

BRETT SEYMOUR MATHEWS, STIRLING MALL PARTNERS P/L & STIRLING MALL (SA) P/L v LOTUS STONES (SA) P/L
[2017] SASC 27
Magistrates Appeal
STANLEY J:
Introduction

This is an appeal from a decision of a magistrate to refuse an amendment to a pleading.
The decision being a discretionary one, the appeal must be decided in accordance with the principles in House v The King.[1]
[1] [1936] HCA 40, (1936) 55 CLR 499.
The action concerns a dispute over the ownership of certain items claimed by the respondent in shop premises owned by the second and third appellants.[2] At issue is whether those items are fixtures or chattels, with consequential implications as to their ownership. By their defence, the appellants deny that Lotus Stones (SA) P/L (Lotus Stones) is the owner of the disputed items. It pleads that those items are fixtures and, therefore, the property of the second and third appellants. In the alternative, they plead that if the items are not fixtures the items are the property of Barn Fresh Fruiterers Pty Ltd (In Liquidation) (Barn Fresh), and the appellants rely on an agreement to lease entered into between the second and third appellants and Barn Fresh, dated 27 August 2014 (the lease agreement).
[2] The appellants are the defendants and the respondent is the plaintiff in the principal action in the Magistrates Court.
The appellants sought to amend the defence to plead, by way of a particular of the alternative allegation that Barn Fresh is the owner of the items in dispute, that they “rely on the agreement between the defendants and Barn Fresh whereby the defendants agreed to advance to Barn Fresh the sum of $115,059.20 (excluding GST) to carry out the lessee fit-out which was repayable in instalments of principal and interest over the term of the lease”.
It was this amendment that was refused by the learned magistrate.
In order to understand the grounds of appeal, it is necessary to refer to certain aspects of the procedural history of this matter.
Procedural history
The respondent and Mr and Mrs Borg instituted the proceedings in the Magistrates Court in 2015.[3] The appellants entered a defence and counterclaim on 7 August 2015. The appellants alleged, inter alia, that Mr and Mrs Borg were, in effect, the controlling minds of Barn Fresh. The counterclaim alleged that Mr and Mrs Borg were liable to the second and third appellants for damages in the sum of $100,000. On 30 March 2016, the appellants amended the counterclaim to confine the counterclaim to a claim against Mr Borg for the sum of $100,000. Effectively, the second and third appellants discontinued the counterclaim against Mrs Borg. Pursuant to Magistrates Court Rule 88(5), that discontinuance had the effect of an order dismissing the claim against Mrs Borg. The outstanding counterclaim against Mr Borg relied upon an oral agreement alleged to have been made between Mr Borg and the first appellant. The appellants alleged that at a meeting at the Stirling Hotel in about September 2014, Mr Borg and Mr Mathews discussed the fit-out of shop premises the subject of the lease agreement. In this regard, the appellants pleaded that Mr Borg acted as if he was a director of Barn Fresh or, in the alternative, was authorised by Barn Fresh to negotiate on behalf of Barn Fresh with the second and third appellants. The appellants pleaded that, as a result of the discussion in about September 2014, the second and third appellants engaged contractors to carry out the lessee fit-out work. They allege that, on 23 November 2014, Mr Mathews and Mr Borg had a further meeting at which it was agreed that a sum of $100,000 incurred with respect to the lessee fit-out was a debt payable by Mr Borg. In effect, the appellants were pleading a collateral agreement with Mr Borg to personally assume liability for the Barn Fresh debt in respect of the lessee fit-out. This was the basis of the amended counterclaim.
[3] Mr and Mrs Borg subsequently discontinued their claim and no longer are parties to the proceedings.
The matter was listed for trial on 20 September 2016. On that date, the appellants’ counterclaim against Mr Borg was dismissed, by consent, with no order as to costs as a result of a settlement reached between the parties. At this time, the appellants sought and obtained leave to amend to raise the alternative plea by way of defence that the disputed items, if not the property of the second and third appellants, are the property of Barn Fresh. That amendment was granted and, as a consequence, the trial was adjourned to 22 March 2017.
Subsequently, on 18 October 2016, the appellants made the application to further amend their defence. That application was dismissed and is the subject matter of the appeal.
Reasons of the magistrate
The magistrate dismissed the application to amend on three bases. First, on the basis of issue estoppel. The magistrate held that the appellants are estopped by the consent order dismissing the counterclaim against Mr Borg from seeking to argue a defence based on an allegation that there was an agreement, between Barn Fresh and the second and third appellants to fund part of the fit-out of the premises, evidenced by the same conversation between Mr Borg and the first appellant. Second, on the basis of equitable estoppel. The magistrate found that, in consenting to the dismissal of the counterclaim, the appellants, in effect, were representing to the respondent that they were abandoning any reliance upon an alleged agreement between Mr Borg and themselves to fund part of the fit-out of the shop premises. In reliance upon that promise or representation the respondent consented to the dismissal of the counterclaim with no order as to costs. Accordingly, it acted to its detriment on the question of costs. In these circumstances, the magistrate held the appellants are estopped from pleading by way of defence the alleged agreement made by Mr Borg on behalf of Barn Fresh. Third, on the basis that if the application to amend, which has been rejected, had been made at the same time as the application to amend to plead, in the alternative, that the chattels were the property of Barn Fresh, that earlier amendment may not have been granted.
Did the magistrate err?
It is sufficient to enliven the Court’s power to exercise the discretion afresh that it is established that the magistrate’s reasons are infected by a House v The King error.
In my view, the magistrate fell into error. That error concerns her conclusion that there was an issue estoppel preventing the appellants from pleading by way of defence evidence of an agreement between Barn Fresh and the appellants that the appellants agreed to advance Barn Fresh the sum of $115,059.20 (excluding GST) to carry out the lessee fit-out. The magistrate’s reasoning that the consent order dismissing the counterclaim against Mr Borg, where the defence sought to rely upon the same conversation between Mr Borg and Mr Mathews to evidence the agreement between Barn Fresh and the second and third appellants, failed to appreciate the separate legal personalities of Mr Borg and Barn Fresh. The magistrate said:[4]
[4] Reasons for Decision of Magistrate Schammer (AMCCI-15-2677) delivered 18 November 2016 at [45] – [52].
If the Amended Counterclaim had proceeded, the defendants needed to establish the following facts for there to be a legal basis for that claim (leaving aside matters pertaining to the claim for property damage):
1The second and third defendants expended a sum of money to retain contractors to carry out the lessee fit out of the premises;
2That they did so at the request of Sonny Borg;
3That a sum not exceeding $100,000 with respect to such expenditure was a debt payable by Borg to them;
4That such sum or part of such sum remained unpaid; and
5That such sum or part of such sum had passed.
Absent any of these five findings of fact, the Counterclaim could not succeed.
Counsel for the defendants submitted, in the absence of evidence on this issue, that the defendants had made the decision to abandon the counterclaim as it was considered unlikely that the court would make the third of these five findings, given the lessee was Barn Fresh, rather than Sonny Borg.
There was no Reply (or Defence) filed to the Amended Defence and Counterclaim. Rule 34(1) states that a plaintiff will be taken to have filed a defence forthwith to a counterclaim or set-off and pleaded to the general issue.
The (then) plaintiffs did file a Reply to the Defence and Counterclaim. In that Reply the second and third plaintiffs denied the allegations contained in (then) para.7 of the Counterclaim and denied that the defendants had any entitlement to any remedy as sought or otherwise. Although the pleading at para.7 of the Counterclaim was expressed in terms of an agreement specifically between Barn Fresh and the second and third defendants, it is apparent that the plaintiff denied the existence of any such agreement.
The matters sought to be agitated by the defendants by way of the proposed Amended Defence relate to the same alleged agreement as pleaded by the defendants in the Defence and Counterclaim before it was amended.
Although the Amended Defence and Counterclaim pleaded slightly different facts by way of the alleged agreement, the factual basis for the pleading was substantially the same. The second and third defendants alleged that they had in fact agreed with Sonny Borg (on the initial pleading, on behalf of Barn Fresh, on the amended pleading, again on behalf of Barn Fresh but on the basis that he also assumed a personal liability with respect to the same) to fund part of the fit out of the premises.
In my view, the Counterclaim having been dismissed by consent, in circumstances where it was fundamental to its success that there be a finding that the second and third defendants agreed with Sonny Borg, on behalf of Barn Fresh, to fund part of the fit out of the premises, the defendants are now estopped from seeking to argue a defence based on that same contention by virtue of that dismissal.
Issue estoppel
In Blair v Curran,[5] Dixon J (as he then was) said:[6]
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.
[5] (1939) 62 CLR 464.
[6] (1939) 62 CLR 464 at 531-532.
A final judgment, including a consent judgment, creates an issue estoppel in that it precludes the parties to the judgment, and all those who claim through them as privies, from re-litigating between themselves any issue of fact or law which was legally indispensable to that judgment.[7] The parties are bound in the sense that they are precluded in subsequent proceedings from asserting, as against other parties to the judgment, or their privies, any proposition of fact or law contrary to any issue fundamental to the judgment. For the doctrine of issue estoppel to apply in the second set of proceedings, the same question must have been decided in the earlier proceedings and the parties, or their privies, must be the same.
[7] Kuligowski v Metrobus [2004] HCA 34 at [21], (2004) 220 CLR 363 at 373.
In determining whether an issue estoppel has been established, the Court may look at the record, including the reasons for a judgment, of the court whose determinations are said to create the estoppel.[8]
[8] O’Donel v Commissioner for Road Transport & Tramways(NSW) (1938) 59 CLR 744 at 757; Jackson v Goldsmith (1950) 81 CLR 446 at 467; Somodaj v Australian Iron and Steel Ltd (1963) 109 CLR 285 at 299.
Difficulty arises, however, where the judgment, upon which the plea of issue estoppel is based, is a consent judgment. It is well established that consent judgments or orders are as effective and as binding as those pronounced after a trial of an action. A consent judgment can give rise to a plea of issue estoppel and res judicata.[9] The fact that the judgment is by consent does not detract from its conclusive effect upon the issues determined by it, but the issue estoppel operates only as to those matters which were necessarily decided by it.
[9] Somanader v Minister for Immigration and Multicultural Affairs [2000] FCA 1192 at [35]-[37], (2000) 178 ALR 677 at 686-687.
In Makhoul v Barnes,[10] the Full Court of the Federal Court said:[11]
... it seems now to be clear that a judgment entered by consent is as much as judgment as one obtained after a full argument and as such capable of founding an estoppel: see G Spencer-Bower and A K Turner, Res Judicata (2^nd ed, 1969), p 37 and cases cited at note 5. Thus, provided it is clear what the issues involved in the consent order may be, those issues will be taken as having been conclusively determined so as to prevent [their] being raised in subsequent proceedings: cf Thompson v Moore (1889) 23 LR Ir 599.
[10] (1995) 60 FCR 572.
[11] (1995) 60 FCR 572 at 582.
In Chamberlain v Deputy Commissioner of Taxation,[12] Deane, Toohey and Gaudron JJ said:[13]
The fact that a judgment is entered by consent may on occasion make it hard to say what was necessarily decided by the judgment, especially where it is the defendant who wishes to bring action at a later date.
[12] (1988) 164 CLR 502, 78 ALR 271.
[13] (1988) 164 CLR 502 at 508, 78 ALR 271 at 275.
In Isaacs v Ocean Accident and Guarantee Corp Ltd,[14] Street CJ and Roper CJ in Eq said:[15]
It is clear that the mere fact that the judgment is by consent does not detract from its conclusive effect upon the issues determined by it: Re South American and Mexican Co; Ex parte Bank of England. But a judgment operates by way of estoppel only as to those matters which are necessarily decided by it. (Cf Blair v Curran; Jackson v Goldsmith.) “Though consent judgments and orders are undoubtedly in every case decisions in the sense that the actual mandatory or prohibitive parts of the judgment or order are conclusively binding upon ... the parties ... it may often be a matter of legitimate doubt and debate as to what, if any, particular questions or issues of right, title, or liability were, expressly or impliedly, the subject of the consent, and of the decision. For this purpose, as for all other purposes connected with the ascertainment of the subject-matter of a decision, the court will closely examine all such evidence, if any, as is available and admissible, and, by the aid of such materials, will ascertain whether any and what adjudication of matters in dispute was expressed, or necessarily involved, in the actual decision assented to” (Spencer Bower on Res Judicata, p 24, para 34). Again, at p 114, para 174, the learned author says: “In the case of judgments and orders by consent ... it is absolutely essential to refer to the pleadings or affidavits of the parties, if the judgment or order is in a naked and general form, in order to ascertain what, if any, decision of particular questions or issues was impliedly consented or submitted to by the party against whom such consent ... judgment or order was made”.
[14] (1957) 58 SR (NSW) 69.
[15] (1957) 58 SR (NSW) 69 at 75.

Those authorities identify the difficulty with the learned magistrate’s conclusion that the appellants were estopped from pleading an agreement between Barn Fresh and the second and third appellants, based on discussions between Mr Borg and the first appellant, because of the consent judgment dismissing the counterclaim against Mr Borg. It is far from clear what issues of fact and law were necessarily decided by the consent order. That difficulty is amplified by the principle that an issue estoppel only operates against the parties to the earlier judgment and their privies.
In this case, the consent judgment dismissed the counterclaim against Mr Borg. It did not dismiss a claim against Barn Fresh, which was not a party to the proceedings in the Magistrates Court. The respondent contends that Barn Fresh is a privy of Mr Borg and, accordingly, the magistrate was correct to find an issue estoppel which precluded the appellants from relying upon an alleged agreement between Barn Fresh and the second and third appellants based on the same conversation between Mr Borg and the first appellant which was the basis for the counterclaim against Mr Borg.
The respondent sought to rely upon a judgment of Gleeson v J Wippell & Co Ltd.[16] Megarry V-C identified the requisite privity for the doctrine of issue estoppel as being a privity either of blood, title or interest. He referred to privity of interest as constituting something more than mere curiosity or concern. What is required is a sufficient degree of identity between the party and the privy. The Vice-Chancellor said:[17]
I do not say that one must be the alter ego of the other: but it does seem to me that, having due regard to the subject-matter of the dispute, there must be a sufficient degree of identification between the two to make it just to hold that the decision to which one was party should be binding in proceedings to which the other is party. It is in that sense that I would regard the phrase ‘privity of interest’. Thus in relation to trust property I think there will normally be a sufficient privity between the trustees and their beneficiaries to make a decision that is binding on the trustees also binding on the beneficiaries, and vice versa.
[16] [1977] 3 All ER 54.
[17] [1977] 3 All ER 54 at 60.
The respondent submits the privity in this case is privity of interest. It submits that there is a sufficient degree of identity between Mr Borg and Barn Fresh. This is established by the appellants’ plea that Mr Borg acted as if he was a director of Barn Fresh or, in the alternative, was authorised by Barn Fresh to negotiate on behalf of Barn Fresh with the second and third appellants.
In my view, there are two answers to this submission. First, in Ramsay v Pigram,[18] Barwick CJ considered that privity of interest basically requires that the privy must claim under or through the person of whom he is said to be a privy. In an action for damages for personal injury in negligence brought by the respondent against the appellant, appointed as the nominal defendant to represent the government of New South Wales, caused when a motor vehicle owned by the government and alleged to have been driven negligently by a New South Wales police officer came into collision with the respondent’s motor vehicle, the appellant pleaded that the respondent was estopped from asserting negligence on the part of the police officer. He relied on an issue estoppel said to arise from a jury verdict in favour of the police officer who brought his own claim for damages for personal injuries arising from the same collision. Barwick CJ found that there was no privity of interest between the appellant and the police officer to entitle the appellant to rely upon the findings in the police officer’s proceedings. He said:[19]
Here it is quite clear that the government had no interest in the action between the respondent and the police officer: nor can it be said that the action brought by the police officer was brought by him in any sense on behalf of the Government or that in relation to the defence of contributory negligence the respondent could have been treating the Government as the real “defendant” to that claim. In every respect the action between the respondent and the police officer was personal to each of them, neither being in any sense in relation to the action or any of the issues involved in it, representative of another. Nor can it be said that the Government in any sense claims under or in virtue of the police officer or any right of his, or that it derives any relevant interest through him.
[18] (1968) 118 CLR 271.
[19] (1968) 118 CLR 271 at 279.
While the relationship of the police officer to the government is not directly analogous to the relationship of a de facto director to a company, it is clear in my mind that an action brought against a company cannot be said to be an action brought against a director or vice versa. It cannot be that the liability of the company, if there is one, is in any sense the liability of the director, or one that derives any relevant interest through the other. The directors and the company are separate legal personalities.
Second, this analysis is supported by the authority of Shears v Chisholm,[20] and L H Markwell Pty Ltd v L A & D E Fitzgerald Pty Ltd.[21] In Shears v Chisholm, Phillips J held that there was no basis for a plea of issue estoppel against the directors or general manager of a company as a result of an earlier judgment of the Court against the company, concerning similar subject matter, because there was no privity between the company and the directors and the general manager. Phillips J came to that conclusion applying the test for privity of interest adopted in Gleeson v J Wippell & Co Ltd, holding that there was not a sufficient degree of identification to make it just to hold that the judgment to which the company had been a party should be binding in the proceedings to which the directors and the general manager were parties.
[20] [1994] 2 VR 535.
[21] [2000] QCA 319.
Subsequently, in Markwell v Fitzgerald,[22] the Queensland Court of Appeal held that a judgment against a company director and shareholder in their personal capacity was not binding on the company. In a joint judgment, Thomas JA and Mullins J, with whom McPherson JA agreed, expressly declined to follow the test adopted in Gleeson v J Wippell & Co Ltd, relying upon the criticism of the reasoning in Wippell by Gummow J in Trawl Industries of Australia Pty Ltd (in liq) v Effem Foods Pty Ltd[23] and his subsequent judgment in the matter.[24] They said:[25]
[22] [2000] QCA 319.
[23] (1992) 36 FCR 406, (1992) 108 ALR 335.
[24] (1992) 36 FCR 406, (1992) 108 ALR 335.
[25] [2000] QCA 319 at [23]-[31].
In the first judgment, Gummow J pointed out that Megarry V-C on the facts in Wippell was able to find that there was no privity of interest, and that Megarry V-C stated at 61 that:
“I am conscious that I have been unable to state any clear principle as to what does and does not constitute privity of interest for this purpose ... . Whatever the test, and wherever the line will finally be drawn, the plaintiff seems to me to be on the right side of any reasonable line that could be drawn – right, that is, from the plaintiff's point of view.”
In respect of authorities which purported to apply the test of Megarry V-C set out in Wippell, Gummow J then stated at 416:
“(i)     Megarry V-C has been treated as doing that which he expressly professed not to be doing;
(ii)     the law as to privity has been a subject of some technicality and it would be a large step to supplant it with a loosely phrased, however alluring, invitation to judicial idiosyncrasy;
(iii)     the High Court decisions such as Jackson v Goldsmith and Ramsay v Pigram approach the subject at quite a different level of analysis.”
In the matter before Gummow J, the first applicant (“Trawl”) and the second to sixth applicants had commenced proceedings in the Federal Court against the respondent (“Effem”). Earlier proceedings had been brought by Trawl against Effem in the New South Wales Supreme Court, arising out of the same transactions which had concluded in favour of Effem. Gummow J found that cause of action estoppel was not made out against the second to sixth applicants, because they were not parties to the Supreme Court proceedings and had no privity in interest in those proceedings. Gummow J was prepared to conclude that the second to fifth applicants participated so actively in the conduct of the Supreme Court litigation that in substance they assumed the roles of actual parties. The second applicant was the shareholder of Trawl and the holder of security granted by Trawl in its favour over the whole of Trawl's assets. The third applicant was a lender to both Trawl and the second applicant and the equity in the third applicant was held by the fifth applicant. The fourth, fifth and sixth applicants were directors of Trawl and the second applicant. The second and fourth to sixth applicants had guaranteed the indebtedness of Trawl to another lender.
Gummow J's decision was affirmed on appeal in Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd (Receivers and Managers Appointed – In Liquidation) (1993) 43 FCR 510. On the appeal only the doctrine of res judicata was considered. It was stated by Northrop and Lee JJ at 525-526 that "the doctrine of 'privy' has equal application to the defences of 'res judicata' and 'issue estoppel'". They applied Ramsay v Pigram and concluded that privity of interest is limited to a legal interest and may not be extended to include an economic or financial interest. The same conclusion was reached by Burchett J.
The respondent relies on the adoption of the words of Megarry V-C in Wippell by Phillips J in Shears v Chisholm [1994] 2 VR 535, 546. That decision was given on 30 November 1992 and no reference is made in the judgment to the decision of Gummow J in Trawl. In that case the plaintiff sought to plead issue estoppel against the first six defendants. Those six defendants were five directors and the general manager of Phosphate Co-operative Company of Australia Ltd ("Phosphate"). The plaintiff was a shareholder of Phosphate who was claiming damages arising out of the circumstances surrounding a scheme of arrangement with its shareholders proposed by Phosphate. The plaintiff had opposed court approval being given to the scheme of arrangement and was successful in so doing before Brooking J. The plaintiff then brought the action for damages and claimed that the first six defendants could not in that proceeding dispute the findings of Brooking J. Those six defendants were not parties to the application before Brooking J.
Phillips J held that Phosphate was the only relevant party before Brooking J and, applying Ramsay v Pigram, held that neither the directors nor the general manager had any such privity of interest as would justify a plea of issue estoppel against them. Phillips J's reference to the dictum of Megarry V-C in Wippell supported the conclusion that he had reached applying the doctrine of privity in Ramsay v Pigram.
Since the decision of the Full Court of the Federal Court in Trawl, the nature of privity in interest sufficient to support an issue estoppel or res judicata has not been reconsidered by the High Court. The view expressed in Ramsay v Pigram therefore remains authoritative and has not been displaced in Australia by the dictum of Megarry V-C in Wippell.
The respondent in the supplementary written submissions sought leave to file a further affidavit which exhibited a current search of the applicant obtained from the Australian Securities and Indemnity Commission. We would grant that leave. That search shows that at all material times Mr Markwell has held 50 per cent of the issued shares in the applicant and has been one of two directors of the applicant.
There is therefore a close relationship between Mr Markwell and the applicant. Privity in interest for the purpose of issue estoppel must be a strict legal interest. In the circumstances of this matter, the applicant is not claiming through or under Mr Markwell.
In accordance with recent authority of the High Court[26] I am bound to follow the decision of an intermediate appeal Court in another jurisdiction unless satisfied that decision is plainly wrong. I am not persuaded there is anything wrong with the reasoning of the Queensland Court of Appeal in Markwell v Fitzgerald.[27]On the contrary I find the reasons for judgment persuasive.
[26] Farah Constructions v Say-Dee Pty Ltd [2007] HCA 22 at [135], (2007) 230 CLR 89 at 151-152.
[27] [2000] QCA 319.
For these reasons, I consider that the learned magistrate erred in finding issue estoppel was made out. There was not a sufficient basis in the material to which the Court could have regard, which would enable the Court to be satisfied that the consent judgment was entered because it could not be proved that the conversation between Mr Borg and the first appellant, relied upon for proof of the agreement upon which the counterclaim was based, had occurred. Absent such a conclusion, there could be no identity of issues between the parties, in any event, there is no privity of interest between Mr Borg and Barn Fresh which would have founded an issue estoppel preventing the appellants from pleading an agreement between Barn Fresh and the second and third appellants, as a basis for their defence of the respondent’s claim.
There are House v The King errors warranting the setting aside of the order made by the magistrate dismissing the application to amend the defence. In these circumstances, it is unnecessary to consider the other grounds of appeal.
The Court must exercise afresh the discretion to grant or refuse the proposed amendment.
Should the amendment be allowed?
The respondent submits that if the Court comes to exercise the discretion afresh, it should refuse the application to amend the defence in any event. It puts that submission on three grounds. First, that the appellants have not challenged the magistrate’s finding that the amendment should have been articulated at an earlier stage of the proceedings at which point it might have adversely impacted on the appellants’ earlier application to amend the defence. Second, there are good reasons to prevent a party who has caused another party to rely upon a particular understanding as to the issues in dispute, in this case by consenting to judgment on the counterclaim, to resile from that position at a late stage. Third, that the factors identified in Aon Risk Services Australia Ltd v Australian National University,[28] uniformly weigh against allowing the amendment.
[28] [2009] HCA 27, (2009) 239 CLR 175.
I address each of these submissions seriatim.
First, I do not accept the submission that the amendment sought should be refused because if it had been sought at the time the magistrate allowed the appellants to amend to plead by way of a defence that the items in dispute were the property of Barn Fresh, the magistrate may not have allowed that amendment. The fact is the magistrate allowed the amendment. In any event, what the magistrate may have done in different circumstances is not to the point. The Court is now exercising the discretion afresh. It is no answer to consideration of how the discretion should be exercised to speculate as to what the magistrate may or may not have done in circumstances that did not arise.
Second, while I accept that there are cogent reasons to prevent a party who has caused another party to rely upon a particular understanding as to the issues in dispute by, for example, consenting to judgment on the counterclaim, to resile from that position, I do not consider that accurately reflects the position in this case. On the hearing of the appeal, the appellants sought to adduce correspondence from the respondent’s solicitors dated 19 September 2016, and a responding letter from the appellants’ solicitors of the same date. The importance of the timing of this correspondence is that it antedates the making of the consent orders dismissing the counterclaim.
The letter from the respondent’s solicitors identifies a concern that the appellants may seek to raise issues at trial which are not open to them on their pleaded case. They assert that there is no issue at trial concerning the ownership by the respondent of its current business and any alleged breach of any agreement by the respondent or any other person. By way of response, the appellants’ solicitors assert that the issue of ownership of the items is in issue at the trial and that, on their case, according to their agreement with Barn Fresh, Barn Fresh was to own the fit‑out and that a loan was made for the fit-out which is relevant to the issue of ownership.
Objection was taken by counsel for the respondent to the admission of this correspondence on the appeal. I received the correspondence de bene esse. I would receive the correspondence on the issue of the fresh exercise of the discretion, pursuant to 6SCR 286(3)(a), which empowers the Court on an appeal to hear further evidence on a question of fact.
I am satisfied that the evidence is relevant to the fresh exercise of the discretion whether to allow the amendment. It evidences the fact that the appellants represented to the respondent prior to the consent order being made that the appellants intended to assert, in the alternative, that Barn Fresh is the owner of the items in dispute and that this is evidenced by a loan agreement between the parties. In these circumstances it cannot be said that, in consenting to the dismissal of the counterclaim, the appellants had unfairly or unconscionably induced the respondent to consent to the order for dismissal of the counterclaim on the basis that the appellants had no intention of relying upon the agreement as evidence of its alternative allegation that the items in dispute were the property of Barn Fresh.
Third, I do not accept that the Aon criteria uniformly weighs against allowing the amendment. Aon considered the factors to be weighed by a court when considering an application for an extension of time. Aon involved an application for an adjournment in order to amend the statement of claim, made on the third day of a four-week trial in a proceeding that had been on foot for two years. The factors identified by the plurality in Aon are also relevant to an application for an amendment at an interlocutory stage of proceedings. The factors identified in Aon relevantly include:
·the effect on other litigants;
·the just resolution of proceedings;
·the capacity of the amending party to meet a costs order;
·the strain of litigation generally to litigants, including non‑compensable inconvenience and stress;
·the nature and importance of the amendment to the party applying;
·the point the litigation has reached; and
·whether the party making the application has had sufficient opportunity to plead their case.
The reasons of the plurality in Aon emphasise that the achievement of a just resolution of litigation in the contemporary context is to be understood by reference not just to the narrow concerns of the parties to the proceedings. The Court must have regard to the limited public resources available to be expended on litigation and the delay which can be occasioned to the speedy and just resolution of other litigants’ disputes. They said:[29]
Speed and efficiency, in a sense of minimum delay and expense, are seen as essential to a just resolution of proceedings. This should not detract from a proper opportunity being given to the parties to plead their case, but it suggests that limits may be placed upon re‑pleading, when delay and cost are taken into account. ... an order for costs may not always provide sufficient compensation and therefore achieve a just resolution. It cannot therefore be said that a just resolution requires that a party be permitted to raise any arguable case at any point in the proceedings, on payment of costs.
[29] [2009] HCA 27 at [98], (2009) 239 CLR 175 at 213.

There can be no doubt that the appellants had sufficient opportunity to plead their case and seek this amendment at an earlier stage of the proceedings. No satisfactory explanation for the delay in bringing the application for amendment has been provided by the appellants. Nonetheless, at the time that the application was made, the trial date was more than five months away. If the amendment had been allowed, it would not have had any effect on other litigants waiting for a trial of their case. The amendment sought is simple and straightforward as a matter of fact. It relies on evidence of one, or at most, two conversations between Mr Borg and the first appellant. The subject matter of these conversations had previously been a live issue in the proceedings. Accordingly, it can be assumed that the parties were familiar with the content of the conversations which form the subject matter of the amendment sought. There can be no doubt that, in the circumstances of the litigation, if the amendment is not allowed the appellants will be precluded from being able to adduce evidence of the agreement. The amendment sought does not raise any new issue. It merely seeks to plead a further basis upon which the appellants assert, in the alternative, that the items in dispute are the property of Barn Fresh. I do not accept that allowing the amendment would impose any great additional strain upon the respondent. I am satisfied that it is relevant to the appellants’ defence.
While I recognise things have moved on since the application was made on 18 October 2016, argued on 26 October 2016 and decided on 18 November 2016, such that the trial is now only a little more than a fortnight away, I consider that the Court should not refuse the application now if it should have been allowed last November.
While there are factors that weigh against allowing the amendment, I am satisfied that, when balancing the factors in favour of allowing the amendment, the Court should exercise its discretion in favour of permitting the amendment to be made so that the matter can be decided entirely on the real issues in the proceedings.
Conclusion
I would allow the appeal. I would grant permission to the appellants to further amend their second amended defence filed with the Magistrates Court on 2 December 2016, so that the particulars to paragraph 2 read as follows:
Particulars
The defendants rely on:
2.1 an Agreement to Lease dated 27 August 2014 between the defendants and Barn Fresh; and
2.2 the agreement between the defendants and Barn Fresh whereby the defendants agreed to advance to Barn Fresh the sum of $115,059.20 (excluding GST) to carry out the lessee fit‑out which was repayable in instalments of principal and interest over the term of the lease.
I would order that the appellants pay the costs of the application to amend. I would hear the parties as to the costs of the appeal.