Chamberlain v Commissioner of Taxation

[1991] FCA 70

JUDGMENT No. 70 ./?l..-

RPTOPPEL - Res jmdicata - issue estoppel - action to set aside consent judgment - whether

issue should have been raised in previous proceedings - whether party could subsequently

litigate the issue - whether judgment should be put aside for mistake.

v. d?(PUtv Commissioner of Taxation (1988) 164 C.L.R. 502

Port of Melhpll~llc Authorit1 v. - fJ (1981) 147 C.L.R. 589

m v. Benderson (1843) 3 Hare 100

TERENCE J. CHAMBERLAIN v .

.DEPUTY CO-	OF TAXATION
No. ACT G21 o t 1990
Davies, Ryan & Foster JJ.
8 March 1991
Sydney

REDISTRY

RECEIVED
- 8 MAR 1991
FEDERAL COURT OF
AUSTRAUA
PRINCIPAL

AL COURT O F AUSTRA1,Lb	)
)

AUSTRALIAN CAPITAL TERRITORY	)
)
-	) No. ACT G21 of 1990
1
W E R A L DIVISION	)

Q n a n n d from a single Judge of the

Federal Court of Australia

BETWEEN:

Appellant

m:  DEPUTY COMMISSIONER O F

Respondent

Davies, Ryan & Foster 11.
8 March 1991

Sydney

REASONS FOR JUDGMENT

m:	This is an appeal from a Judgment of a single judge of the Court given in the
long-running dispute between Terence J. Chamberlain, a solicitor and taxpayer, and the

Deputy Commissioner of Taxation. Earlier aspects of the litigation between the parties were

described and discussed in Chamberlain v. P e ~ u t v	Commissioner of Taxation (1988) 164
C.L.R. 502.

In brief, in 1984 in proceedings 697 of 1984, the Deputy Commissioner of Taxation sued Mr Cbamberlain in tbe Supreme Court of the Australian Capital Territory for the balance of moneys due under income tax assessments. The moneys due, which were h l l y

deserlbed in the writ, amounted to 5255,579.20.	However, in the typing or preparation of
the writ, an error occurred and the sum claim was expressed as 525,557.92.	This error was
patent on the face of the wrlt.	The wrlt was sewed on 1 August 1984. Taking advantage of

the error and before the error had been perceived by any person acting for the Deputy

Commissioner of Taxation, Messrr Crowley and Cbamberlain, solicitors for Mr Chamberlain,

offered to consent to judgment for the erroneous amount claimed in the wrlt, 525,557.92,

together with the costs claimed therein. The trial Judge described the events of 3 August

'The writ was served during the evening of Wednesday, 1 August 1984. Mr Chamberlain perceived the error and determined to take advantage of it. At about 3 pm on Friday, 3 August 1984 MS ..., a solicitor employed by Crowley & Cbamberlain, telephoned MS Joanne Heaiey, a clerk in the Australian Capital Territory Brancb of the Australian Taxation Office. MS ... said that she was acting for Mr Chamberlain and tbat he 'would like to pay the total on the writ and costs, subject to a judgment by consent'. She asked whether she could come in that afternoon and pay. Ms

Healey sought the advice of her supervisor and then agreed to this suggestion.	MS ...
arrived a t the taxation office a t about 3.45 pm.	She brought with ber a cheque for

the amount claimed on the writ and a document entitled 'Terms of Settlement'. Ms Heaiey took her to Mr Geoff Besgrove, Assistant Director of the Enforcement Branch, who signed the Terms of Settlement. This document provided for judgment for the plaintiff in the mm of $25,577.92 together with costs agreed at $115. Mr Besgrove had no personal knowledge of the case. He signed the Terms of S e t t i e m a gniv after being informed tbat the amount beinn d aid was the full amount claimd.'

(The emphasis is ours.)

Oa 6 Anlust 1984, the terms of settlement and a draft minute of judgment were filed in the

Supreme Court. The Registrar accordingly entered judgment in favour of the Deputy

Commissioner of Taxation for 525,557.92 for debt and S115 for costs.

The trial Judge described the above conduct of Mr Cbamberlain and the solicitor acting on his instructions as "a shabby trick and indubitably unconscionable". Mr Chamberlain has appealed against this finding. However, it was clear that $25,557.92 was

not the total claimed In the writ but merely a balance specified in error, conflicling with the amounts of tax stated and claimed in the writ. Therefore, the solicitor acting for Mr Chamberlain misrepresented to the officers of the Taxation Office, MS Healey and Mr

Beagrove, that $25,557.92 was the total claimed, wblch patently it was not.

Althongb Mr Cbamherlaln's cheque for the $25,557.92 and costs was handed over on

3 August 1984, the solicitor made it a condition of payment that tbere be judgment by

consent. The object was, of course, to lock the Deputy Commlssloner into the mistake through Jndgment, and thereby to frustrate the claim made in the writ. Because of the

solicitor's misrepresentation, Mr Besgrove signed the terms of settlement under the mistake that they provided for payment of the full amount of the claim, which they did not. The

consent given was not a true consent. The processes of the Supreme Court, which were deslgned to facilitate entry of judgment and for the convenience of litigants and

practitioners, were improperly used. What occurred was an abuse of process. The Depnty

Commlssloner was entitled to come to the Court to have the judgment set aside, ex debito justitiae, tor the mistake of his officers was a mistake as to the subject matter of the

consent, which Mr Chamberlain well knew and took advantage of.

In the present proceedings before the learned trial Judge, which were commenced In the Supreme Court of the Australian Capital Territory but were later transferred to the Federal Court of Australia, the Deputy Commissioner of Taxation sought to have that

consent judgment set aside tor mistake.	The trial Judge considered that the judgment
should be set aside and so ordered.

Had the proceedings been instituted promptly by the Deputy Commissioner of

Taxation and had tbere been no intervening litigation between the parties, we would have no

hesitation in agreeing with his Honour.

However, the present proceedings were not brought promptly. Rather, on 10 August

1984, after discovering the mistake, the Deputy Commissioner of Taxation instituted further

proceedings in the Supreme Court of the Australian Capital Territory, No. 755 of 1984,

claiming the sum of $230,021.28, which was made up of the items set out in the earlier writ but also allowed further credit tor the payment of $25.557.92 received on 3 August 1984. In

that action, the Deputy Commissioner of Taxation dld not seek to set aside the consent

Judgment entered on 6 August 1984 but submitted that 9.209 of the income Tax

& 1936 (Cth) empowered the Deputy Commissioner to sue for and recover any tax unpaid,

notwithstanding the ordinary principles of law a s to estoppel and res judicata. In m m b e r i a b v. penutv Commissioner of Taxatleg, cited above, when the matter came to the High Court, Brennan, Deane, Dawson, Toohey and Caudron JJ. rejected tbat argument and

held that the defence taken by Mr Chamberlain, tbat of res jndicata, was a good defence. The Court ordered that there be judgment for Mr Chamberlain with costs. At p.510, Deane, Toohey and Caudron JJ. said:-

'The point of the present appeal is tbat the respondent (the Deputy Commissioner of Taxation) brought an action against the appellant (Mr Chamberlain) and recovered Judgment against him. He obtained a judgment of the Court in which the cause of action upon which be relied merged, thereby destroying its independent existence so long as that judgment stood. And, so long as that judgment stands, it i s not competent for the respondent to bring further proceedings In respect of the same cause of action."

Brennan J., a t p.505, and Deane, Toohey and Caudron JJ . at p.507 and pp.510-511 ail

commented upon the fact that the Deputy Commissloner of Taxation had chosen not to seek to set aside the consent judgment. They disposed of the appeal on that basis and held that the claim made in the second proceeding was barred by res judicata, for the claim had merged in the consent judgment and could not be further pursued.

The present proceedings seek that which could have been but was not sought in proceedings No. 755 of 1984, namely to have the consent judgment set aside. These present proceedings w e n brought with the intent that , If the consent judgment was set aside, a further action would be Instituted seeklng recovery of the sum of $230,021.28, as claimed In

the second writ, or whatever be the balance due.

But such a clalm cannot now be brought. It was open to be pursued by the Deputy

Commissioner of Taxation in proceedings No. 755 of 1984, but he chose not to make it.

Judgment was entered against him, so he is estopped from alleging tbat tbe sums claimed for

tax were recoverable by him. The Deputy Commissioner of Taxation has litigated that issue

and, because be failed to seek to have the consent judgment set aside, he failed on his claim and t h e n was judgment in favour of Mr Chamberlain. The Deputy Commisrioner cannot now re-litigate the iswe and he cannot now claim to have the consent jndgment set aside. That is a claim wblch, if brought at all, ougbt to have been raised in those proceedings, for

it was fnndamental to the success of the clalm In those proceedings that the consent

judgment be set aside.

An issue which ougbt to have been raised in one proceeding cannot subsequently be

raised between the same parties in a subsequent proceeding. In Port of Melbourne Authority

m v. Penutv Commissioner of Taxation, a second action was stayed on the ground	v. Anshun Ptv L imi td (1981) 147 C.L.R. 589, a case which was cited with approval in	that the plaintiff was estopped from raising an indemnity agreement because tbat agreement
should have been raised in an earlier action since it was a defence to a claim for contribution In tbat action and because a judgment in tbe second action on the indemnity would conflict with the judgment entered in the contribution proceedings. Gibbs C.J., Mason and Aickin
JJ. referred at p.598 to "the extended principle" expressed by Sir James Wigram V.C. In
Henderson v. Msndersop (1843) 3 Hare 100, a t p.115 where his Lordship said:-

'... where a given matter becomes the subject of litigation in, and of adjndication by,
a Court of competent jurisdiction, the Court requires the parties to that litigation to brlng forward their whole case, and will not (except under special circumstances) permit the same parties to open tbe same subject of litigation in respect of the matter that might bave been brought forward as part of the subject in costest, but whlcb was not brought forward, only because they have, from negligeace, inadvertence, or even accident, omitted part of their case."

At pp.602-4, their Honours, after referring to Greenhai~h v. M 119471 2 Ail E.R. 255

and m s b a n e Citv C - v. m e v - G e n e r a l (0161 [l9791 A.C. 411 a t p.425. went on t o

"In these cases in applying the - v. H k J principle to a plaintiff said to be estopped lrom bringing a new action by reason of the dismissal of an earlier action, Somewell L.J. and Lord Wilberforce insisted that the issue In question was so clearly part of the subject matter of the initial litigation and SO clearly could have been raised that it would be an abuse of process to allow a new proceeding. Even

then the abuse of process test is not one of great utility.	And its utility is no more
evident when i t is applied to a plaintiff's	new proceeding which is said to be estopped

because the plaintiff omitted to plead a defence in an earlier action.

In this situation we would prefer to say that there will be no estoppel unless it appears that the matter relied upon ss a defence in the second action was so relevant to the subject matter of the first action that it would bave been unrewonabie not to rely on it. Generally speaking, it would be unreasonable not to plead a defence if, havlng regard to the nature of the plaintiff's claim, and its subject matter it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in one proceeding. In this respect, we need to recall that there w e a variety of circumstances, some referred to in the earlier cases, why a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings e.g. expense, importance of the particular issue, motives extraneous to the actual litigation, to mention but a few. See the illoatrations given in Cromwell v. Countv of Ss& (1876) 94 U.S. 351, a t pp.356-357

124 Law. Ed., a t p.1991.

It has generally been accepted that a party will be estopped from brlnging an action which, if it succeeds, will result in a judgment which conflicts with an earlier judgment. In this respect the discussion in Brewer v. Brewer (1953) 88 C.L.R. 1 is illuminating.

The iikeilhood that the omission to plead a defence will contribute to tbe existence of conflicting judgments is obviously an important factor to be taken into account in deciding whether the omission to plead can found an estoppei against the assertion of the same matter as a foundation for a cause of action in a second proceeding. By 'conflicting' Judgments we include judgments which are contradictory, though they may not be pronounced on the same cause of action. It is enough that they appear to declare rlghts whlch are inconsistent in respect of the same transaction."

The views expressed by Murphy J. and Brennan J. were consistent with the above. A t p.605,

'These notions o f res jndlcata and issue estoppei are fonnded on the necessity, i f t h e n is to be an orderly administration of justice, o f avoiding re-agitat ion o f issues, and o f preventing the raising o f issues which could have been and should have been decided in earlier iitigation."

A t p.612, Brennan J. said:-

'The party entitled to rel ief cannot improve his position by bringing separate actions. Though he may elect between inconsistent remedies pursued in the one action, or between the actions t o be pursued in order to recover a judgment giving the remedy he chooses, the merger in the judgment first recovered of a r igh t t o another remedy takes effect by operation of law. When those rights (or causes of action) are extinguished, no further l i t igation may be pursued to recover a second judgment upon them.'

Thus, in v. m (1886) 33 Ch.D. 22, proceedings seeking rectif ication o f an

agreement were held t o be barred by the judgment given in an earlier action on the
agreement. As Lopes L.J. said at p.36:-

'The Piaintiffs had full opportunity of commencing these proceedings while the former action was pending, and they ought to have done so as soon as the point was taken before the Registrar. They cannot now succeed.'

In v. Commissloner of Taxation [l9261 AC 155, an appeal as to income tax had

been decided on the assumption that certain beneficiaries under a w i l l were jo in t owners. When, in a subsequent year, the Commissioner sought to chaiicnge that issue, he was held to be estopped. Lord Shaw, delivering the opinion of their Lordships, said at pp.165-6:-

'Parties are not permitted t o begin fresh ilt igations because of new views they may entertain of the law o f the case, or new versions which they present as t o what should be a proper apprehension by the Court of the legal result either of the construction of the documents o r the weight of certain circumstances. If th is were permitted lit igation would have no end, except when legal ingenuity is exhausted. I t is a principle of iaw that th is cannot be permitted, and there is abundant authority reiterating that principle. Thirdly, the same principie - namely, that o f setting to rest rights of litigants, applies t o the case where a point, fundamental to the decision, taken or assumed by the p la in t i f f and traversable by the defendant, has not been traversed."

In Fldeiitas S h i ~ n i n n Co. Ltd, v. V10 Exnortchleh I19661 1 Q.B. 630, it was held that an

issue as to waiver, which was not raised in a lint arbitration, could not be raised in a

subsequent ub i t ra t i on between the same parties. These cases are hut examples.

In the present proceedings, i t is sought t o l i t igate an issue, the r igh t to set aside the

consent judgment, which i f lit igated at a i l ought t o have been raised in the proceedings No. 755 of 1984, proceedings i n which the H i g h Court o f Australia ordered that judgment be

entered in favour of Mr Chamberlain. The claim brought by the Deputy Commissioner o l Taxation for the recovery o f the unpaid tax was there considered and was dismissed because

the Deputy Commissioner chose not to put in issue the questlon o f the consent judgment.

Having taken that course, he may not do so now for the purpose o f reviving and re-l i t igating

his claim for tax.	The Deputy Commissioner o f Taxation has bad his day in court and has
lost.	The claim now made is inconsistent w i th the judgment o f the H igh Court.

We shall allow the appeal, set aside the orders made by the t r ia l Judge and substitute

therefor an order tbat the proceedings be dismissed wi th costs.	The respondent should pay
the costs of the appeal.	Counsel for Mr Chamberlain sought costs on a solicitor and client

basis hut we see no reason for departing from the ordinary rule.

I cert i ly tbat this and the preceding 7 pages

are a true copy o f the reasons for judgment herein

Date:	8 March 1991
Counsel for the appellant:	D.M.J. Bennett Q.C. & Mr W.B. Loftus
Sollcltors for the appellant:	Gallens Crowley & Chamberlain
Counsel for the respondent:	B.A. Coles
Sollcltor for the respondent:	Australian Government Solicitor
Date of hearing:	13 November 1990
Date of Judgment:	8 March 1991