Cockatoo Dockyard v Commonwealth of Australia - [2004] NSWSC 841

No judgment structure available for this case.

CITATION: Cockatoo Dockyard v Commonwealth of Australia [2004] NSWSC 841

HEARING DATE(S): 19/7/04, 20/7/04, 26/7/04, 27/7/04

JUDGMENT DATE:
17 September 2004

JUDGMENT OF: McDougall J at 1

DECISION: See paras [166] and [167] of judgment

CATCHWORDS: ESTOPPEL - where interim arbitral award delivered - issue estoppel - whether interim arbitral award creates issue estoppel - whether determination fundamental to arbitrator's decision - whether bar created by issue estoppel absolute - special circumstances exception to issue estoppel - whether special circumstances exception to issue estoppel in Arnold v National Westminster Bank Plc [1991] 2 AC 93 forms part of Australian law - whether absence of right to appeal constitutes ground for non application of issue estoppel - where deed of release - whether deed of release precludes plaintiff from relying on issue estoppel - whether deed of release precludes plaintiff from relying on conventional estoppel - whether estoppel rule of evidence or rule of substantive law - Anshun estoppel - whether plaintiff precluded by Anshun estoppel from recovering ongoing workers' compensation costs - whether deed of release precluded plaintiff from recovering fee

LEGISLATION CITED: Commercial Arbitration Act 1984 (NSW)

CASES CITED: Blair v Curran (1939) 62 CLR 464, 531-532
Thoday v Thoday [1964] P 181
Fidelitas Shipping Co Ltd v V/O Exportchleb [1966] 1 QB 630
Brewer v Brewer (1953) 88 CLR 1
Murphy v Abi-Saab (1995) 37 NSWLR 280
Arnold v National Westminster Bank Plc [1991] 2 AC 93
Humphries v Humphries [1910] 2 KB 531
Cooke v Rickman [1911] 2 KB 1125
New Brunswick Railway Company v British and French Trust Corporation, Limited [1939] AC 1
O'Toole v Charles David Proprietary Limited (1991) 171 CLR 232
Linsley v Petrie [1998] 1 VR 427
Tiufino v Warland (2000) 50 NSWLR 104
Henderson v Henderson 3 Hare 100, 115 (67 ER 313, 319)
Port of Melbourne Authority v Anshun Proprietary Limited (1981) 147 CLR 589
Kingston City Council v Monash City Council [2001] VSC 41
Petrie v Linsley (1995) 21 MVR 413
Briggs v Hall & Anor (unreported, 8 November, 1994, BC 9401392)
Meates v Taylor [1992] 2 NZLR 36
Hockin v Bank of British Columbia [1995] BCJ No 688
Robb v St Joseph's Health Care Centre [2001] OJ No 606
Stellar Properties Ltd v Botham Holdings Ltd [1994] BCJ No 639
Clayton v Garrett [1995] BCJ No 364
Mills v Cooper [1967] 2 QB 459
Rogers v R (1994) 181 CLR 251, 278
R v Humphrys [1977] AC 1, 27, 48
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
Tanning Research Laboratories Inc v O'Brien (1990) 169 CLR 332
Rippon v Chilcotin Pty Ltd (2001) 53 NSWLR 198
Boles v Esanda Finance Corporation Ltd (1989) 18 NSWLR 666
Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502
Orica Ltd v CGU Insurance Ltd (2003) 59 NSWLR 14

PARTIES :
Cockatoo Dockyard Pty Limited (Plaintiff)
Commonwealth of Australia (Defendant)

FILE NUMBER(S): SC 50165/01

COUNSEL: T G R Parker/B F Katekar (Plaintiff)
P T Taylor SC/D A Caspersonn (Defendant)

SOLICITORS: Allens Arthur Robinson (Plaintiff)
Australian Government Solicitor (Defendant)

COCKATOO DOCKYARD PTY LIMITED v COMMONWEALTH OF AUSTRALIA

JUDGMENT INDEX

Paragraph

Introduction 1

The arbitration 4

The deed of settlement and final award 7

The issues in these proceedings 9

Issue estoppel 14

Codock’s claim in these proceedings 14

Codock’s claim in the arbitration 18

What the arbitrator decided 25

The relevant principles of law 43

The Commonwealth’s submissions 53

Codock’s submissions 55

Analysis 56

The Arnold issue 69

Conclusion on the Arnold issue 86

The effect of the Deed of Settlement 87

The relevant terms of the Deed 87

The Commonwealth’s submissions 92

Codock’s submissions 96

Analysis: issue estoppel and conventional estoppel 98

Analysis: the 7.5% profit margin 108

Anshun estoppel 122

Codock’s claim in the arbitration 125

Withdrawal of the claim 130

Codock’s claim in these proceedings 135

The Commonwealth’s submissions 136

Codock’s submissions 138

Analysis – the effect of the final award 142

Analysis – Anshun estoppel 149

Conclusion on Anshun estoppel 165

Conclusions and orders 166

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

McDOUGALL J

17 September 2004

COMMONWEALTH OF AUSTRALIA

JUDGMENT

Introduction

1 HIS HONOUR: For more than 59 years, from 1 March 1933 to 31 December 1992, the plaintiff (“Codock”) occupied and used the naval dockyard on Cockatoo Island (“the dockyard”) under a series of agreements made with the defendant (“the Commonwealth”) or a statutory body representing it. For many of those years, asbestos products were used for the purposes of the operations carried on by Codock on Cockatoo Island. Codock has incurred substantial liabilities for claims by workers employed by it who have contracted diseases as a result of working with, or in proximity to, asbestos products. Typically, those diseases take many years to become manifest.

2 For some claims, Codock is either uninsured or only partially insured. In these proceedings, it claims an entitlement to be indemnified by the Commonwealth in respect of those uninsured or partly insured claims. The claim for indemnity is based on the latest of the series of agreements pursuant to which Codock occupied Cockatoo Island and operated the dockyard. That agreement consists of a trading agreement and lease made for a term of 21 years, from 1 January 1972 to 31 December 1992. The parties referred to those agreements together and in the singular as the “1972 trading agreement and lease” and I will do likewise.

3 The 1972 trading agreement and lease was varied from 1 January 1976 by a written agreement known as the Substituted Mode of Performance. It was varied further from 2 September 1987 by another written agreement known as the Advance Agreement. The Advance Agreement, among other things, incorporated into the 1972 trading agreement and lease certain “Standard Conditions for the Determination of the Costs of Contracts” issued in May 1984 (“the 1984 Standard Conditions”).

The arbitration

4 On 23 December 1992, Codock and the Commonwealth gave each other notices of dispute under the 1972 trading agreement and lease. The effect was to refer to arbitration the disputes or differences stated in those notices. Mr J N West QC (“the arbitrator”) was appointed as arbitrator.

5 After many amendments to the points of claim and points of defence, many interlocutory hearings and many days of evidence, the arbitrator delivered reasons and an interim award on 8 December 1995 (“the interim award”). (He had earlier provided draft reasons to the parties and afforded them the opportunity to address him on those draft reasons.) In relation to the asbestos-related common law claims, the arbitrator concluded that the Commonwealth was bound to indemnify Codock. He found that this was so in respect of both liabilities for such claims incurred prior to the termination of the 1972 trading agreement and lease on 31 December 1992, and liabilities of the same kind incurred after 31 December 1992. In this context, the word “incurred” means that Codock paid the item of expense, or became liable to pay it, under a judgment or compromise. It is not used to relate back to the circumstances that gave rise to the liability to pay. Obviously enough, all those circumstances occurred prior to 31 December 1992.

6 The arbitrator expressed his conclusion by way of an interim award that the Commonwealth pay Codock $10,864,240, together with interest of $5,315,355. Of the amount awarded, some $810,162 (before interest) related to asbestos-related common law claims. Of that amount, some $555,181 was for costs incurred after 31 December 1992.

The deed of settlement and final award

7 The interim award did not resolve all the matters in dispute between Codock and the Commonwealth (because a claim by the Commonwealth for damages for breach of covenant had not been dealt with). The Commonwealth sought, unsuccessfully, to challenge the interim award. On 14 May 1997, Codock and the Commonwealth agreed to a compromise. They entered into a deed of settlement on that day under which the Commonwealth agreed to pay Codock $4,960,000; Codock and the Commonwealth gave each other mutual releases in respect of the subject matter of the arbitration; but Codock and the Commonwealth agreed that the releases would not extend to certain claims by Codock and any defence available to the Commonwealth in relation to those claims. The parties also agreed that they would procure the arbitrator to make a final award in an agreed form.

8 On 15 May 1997, the arbitrator by consent made a final award. He dismissed “[a]ll claims made in this arbitration which were not disposed of in my interim awards … “ and made “no award as to the costs of the arbitration”.

The issues in these proceedings

9 The parties prepared a statement of issues that raised some eleven issues, a number of which included sub issues. It was agreed that five of those eleven issues should be determined separately from and prior to the determination of the other issues in the proceedings. I therefore made an order under Pt 31 r 2 to that effect.

10 The issues that were the subject of my order, and that are the subject of these reasons are:

(1) Subject to 2, is the Commonwealth barred, by reason of an issue estoppel arising from the Commercial Case Award, from denying that it is obliged to reimburse to Codock all Workers’ Compensation Costs plus (subject to 8) a 7.5% fee?

(2) Is Codock precluded from relying upon any such issue estoppel by paras 3 and 4 of the Deed of Settlement?

(To make sense of issue 5, it is necessary to note that issue 4 dealt with a conventional estoppel alleged by Codock that was said to arise from the dealings between the parties up to the cessation of work on Cockatoo Island in 1991.)

(7) Is Codock barred from recovering reimbursement of ongoing Workers’ Compensation Costs by reasons of an Anshun estoppel arising from the conduct of the Arbitration, the Commercial Case Award and the Final Award?

11 The Commercial Case Award was defined to mean the interim award of 8 December 1995. Workers’ Compensation Costs were defined to mean costs associated with personal injury claims made against Codock in respect of activities at the dockyard during the period 1 March 1933 to 31 December 1992, as more fully defined in para 24 of Codock’s contentions in its second further amended summons (“summons”).

12 The issues fall into three groups:

(1) Issue estoppel (issue 1);

(2) The effect of cls 3 and 4 of the deed of settlement (issues 2, 5 and 8); and

Anshun

13 I will deal with them in that way.

Issue estoppel

Codock’s claim in these proceedings

14 By its summons, Codock sought judgment in the amount of $3,021,557.21. That amount was claimed as reimbursement for personal injury claims costs incurred from 1 November 1995 to 30 June 2003.

15 The basis of Codock’s claim was set out in paras 23A to 27 of its contentions in Part C of the summons. Omitting particulars, those paragraphs read as follows:

(Overhead Costs).

(Claims)

(Workers’ Compensation Costs)

(Common Law Costs);

(Excess Costs);

(Ancillary Costs).

(Deleted)

26. It was a term of the 1972 Trading Agreement, as varied by the Substituted Mode of Performance and the Advance Agreement, that the Defendant would reimburse to the Plaintiff all Overhead Costs incurred from 1 July 1987 onwards less a credit calculated by reference to commercial work undertaken by the Plaintiff in the course of its occupation of the Dockyard, plus a fee of 7.5%.

PARTICULARS

(a) 1972 Trading Agreement, clause 2(4).

(b) Substituted Mode of performance, clause A(1).

(c) Advance Agreement, clauses 3, 21 and 22(a).

26A. Further and alternatively, it was a term of each of the Wartime Agreement, the 1956 Agreement and the 1963 Agreement that the Defendant would reimburse to the Plaintiff all Overhead Costs incurred after the expiry of the relevant Agreement.

PARTICULARS

The term was implied:

(a) as a matter of law by reason of the relationship of principal and agent created by each Agreement; and/or

(b) as a matter of business efficacy.

27. Workers’ Compensation Costs were and are Overhead Costs.

PARTICULARS

1984 Standard Conditions, paragraphs 4.49 – 4.51, 1.5, 1.16 and 2.4 (definition of ‘period contract’).”

16 The reference in para 26 to “the 1972 Trading Agreement” is a reference to what I have called the 1972 trading agreement and lease. Paragraph 26A refers to some of the contractual arrangements in place between Codock and the Commonwealth (or their predecessors) before the commencement of the 1972 trading agreement and lease.

17 Put simply, Codock’s primary claim in these proceedings is that, under the 1972 trading agreement and lease as varied by the Substituted Mode of Performance and the Advance Agreement, it is entitled to be indemnified by the Commonwealth for Workers’ Compensation Costs as defined, as part of Overhead Costs, plus a 7.5% fee. Codock’s alternative claim (para 26A) is that it is entitled to be indemnified for those costs, again as part of Overhead Costs, under the prior agreements referred to in para 26A.

Codock’s claim in the arbitration

18 Codock filed amended points of claim on 26 November 1993. Its claim in relation to what were called “Workers’ Compensation Costs” was set out in para 41 as follows (I omit the particulars):

“41. Since 1 January 1993, Codock has continued to incur, and will in future incur, the following costs as a result of personal injuries claims (‘Claims”) by workers at the Dockyard relating to the period up to 31 December 1992 (“Workers’ Compensation Costs”):

(a) compensation payments, medical costs and legal costs resulting from common law Claims (in particular, for asbestos-related injuries) to the extent that these costs are not covered by Codock’s insurance (Common Law Costs”);

(b) the excess payable on Claims covered by Codock’s insurance (“Excess Costs”) and

(c) costs of administering and defending the claims (“Ancillary Costs).”

19 Paragraph 43 alleged that the workers’ compensation costs were and are overhead costs as defined in para 26B. Paragraph 26B alleged (and again I omit the particulars):

“43. The Workers’ Compensation Costs were and are overhead costs as defined in paragraph 26B above.”

20 The reference in para 26B to the “Contract” is explained by para 25, which read as follows:

“25. The 1933 Agreement, 1941 Wartime Agreement, 1954 Lease, 1956 Agreement, 1963 Agreement, Trading Agreement, Lease, Substituted Mode of Performance, 1971 Standard Conditions, 1984 Standard Conditions and the Advance Agreement, which relate to the relationship between Codock and the Commonwealth at the Dockyard, were not comprehensive or exhaustive. They were supplemented or varied by warranties, representations, modifications, collateral agreements and other agreements between the parties from time to time, all of which will be referred to as the “Contract”. To the extent that the Claimant relies on any terms of the Contract, particulars will be set out below.”

21 I will not burden these reasons by giving further details of the various agreements and leases referred to in para 25. It is sufficient to say that, between them, they constituted the principal documents from time to time having contractual effect between the parties and by which their relationship, in relation to the dockyard, was regulated.

22 The claim for recovery of workers’ compensation costs as overhead was, therefore, a claim that those costs, incorporating the elements alleged in para 41, were payable by the Commonwealth to Codock pursuant to the Contract as an item of overhead cost. The Contract relied upon included the entirety of the sources from which, from time to time, the contractual relationship and obligations of the parties might be ascertained (and, at the risk of repetition, it included supplementary or varying “warranties, representations, modifications, collateral agreements and other agreements between the parties from time to time”).

23 The claim advanced by Codock in these proceedings (in so far as it deals with reimbursement of overhead costs incurred after 31 December 1992) differs from the claim advanced by Codock in the arbitration in two ways. First, the claim in the arbitration was limited to costs of the relevant kind “to the extent that these costs are not covered by Codock’s insurance”: see para 41(a) of the amended points of claim. The claim in these proceedings is not in express words so limited: see para 24(a) of Codock’s contentions.

24 Second, Codock’s claim in the arbitration was brought under a “Contract” that included the 1933 Agreement, the 1941 Wartime Agreement, the 1954 Lease, the 1956 Agreement and the 1963 Agreement, as well as the 1972 trading agreement and lease and the substituted Mode of Performance, Standard Conditions and Advance Agreement. Codock’s primary claim in these proceedings is based only on the 1972 Trading Agreement and Lease as varied by the substituted Mode of Performance and the Advance Agreement. Some, but not all, of the other agreements that in the arbitration were alleged to form part of the Contract are relied upon by Codock in these proceedings only in its alternative claim: see para 26A of its contentions.

What the arbitrator decided

25 This aspect of Codock’s claim was analysed by the arbitrator at pages 145 and following of the interim award. At 148, he noted that Codock put its case in a number of alternative ways, but that “the principal way in which the claim is propounded is based on the terms of the 1972 TAL [trading agreement and lease] and its variation by the Substituted Mode of Performance in 1976.”

26 At 149, the arbitrator set out certain relevant provisions of the 1972 trading agreement and lease. At 153, he said of one of them (cl 2(4)) that it made it clear “that all overhead costs of the Dockyard less the fixed commercial work overhead rebate … are the responsibility of the Commonwealth and are to be charged to orders issued under the TAL” (emphasis in the original; the arbitrator was accepting a submission put by Codock).

27 At 155 and following, the arbitrator considered the question of “cost” and its ingredients, including “Contract Cost”, “Direct Cost” and “Indirect Expense”.

28 At 157, the arbitrator referred to Codock’s submissions that litigation costs could be charged to the 1972 trading agreement and lease if they were associated with a contract or could be charged to the contract in accordance with proper accounting principles.

29 At 158, the arbitrator referred to the relationship between the 1972 trading agreement and lease and its predecessors as follows:

Contract

”

The Commonwealth challenges this construction of the Contracts and arrangements at the outset.”

30 At 160, the arbitrator noted the Commonwealth’s submission that the “Contract” to which an expense (direct or indirect) was to be charged “means a Contract under which Codock is actually carrying out work for the Commonwealth, ie, actual submarine refitting work or surface ship cost plus work after 1972”. That is to be compared with Codock’s submission that the contract to which costs are to be charged was the 1972 trading agreement and lease (see para [28] above).

31 At 161, the arbitrator held that Codock’s submission was correct. In other words, he held that the “Contract” to which overhead costs (and others) were to be charged was not a specific shipbuilding or refitting contract (as the Commonwealth had submitted), but the 1972 trading agreement and lease.

32 At 162 and following, the arbitrator dealt with another submission put by the Commonwealth, which focussed on the requirement that the incurred cost be “reasonable” (para 1.16(d), as amplified by para 1.17, of the 1984 Standard Conditions). The Commonwealth submitted that costs relating to successful negligence claims could not fall within the definition of “reasonable” cost because an ordinarily prudent businessperson (para 1.17 of the 1984 Standard Conditions) would not have incurred the expense: presumably, because the exercise of ordinary prudence would have meant that the plaintiffs were not exposed to harm. The arbitrator rejected this submission.

33 At 163, the arbitrator dealt with a similar submission, based on para 3.11 of the 1984 Standard Conditions. That paragraph excluded from recoverable cost those “which could have been avoided or reduced by the exercise of reasonable standards of skill, care and efficiency” to the extent that they could have been so avoided or reduced. The Commonwealth submitted that, by definition, the common law costs (being for actions for negligence) could have been avoided by the use of reasonable care.

34 The arbitrator rejected this argument for a number of reasons. First, because it was not pleaded. Second, because it was a general provision which did not find expression in the specific provisions dealing with litigation costs. Third, because, on its proper construction, para 3.11 related to the conduct of the proceedings underlying the claim rather than the conduct that gave rise to the claim. Fourth, and somewhat obscurely, he found that even if para 3.11 did look to the nature of the underlying conduct, “it does not follow that the costs would be excluded”. The arbitrator concluded, at 166, that “[f]or all these reasons” he rejected the submissions of the Commonwealth that para 3.11 prevented recovery.

35 At 166, the arbitrator returned to the question, whether claims that had their genesis in events that occurred before 1972 were nonetheless “associated with” or could be “charged to” the 1972 trading agreement and lease. He referred to the “continuum of regulation of the commercial dealings of the parties” contained in “the series of Trading Agreements” to which reference has already been made. He referred to the evidence called by the parties dealing with the way in which their commercial relationship had been conducted.

36 At 176, the arbitrator reiterated “that on the proper construction of the contracts themselves, such costs are recoverable as part of the overhead expenses from the Commonwealth.” It is quite clear, from the context in which this observation appears, that the reference to “the contracts themselves” was to the 1972 trading agreement and lease as amended by the Substituted Mode of Performance and Advance Agreement and as incorporating the 1984 Standard Conditions. It is equally clear that the “costs” referred to were common law claim costs.

37 The arbitrator then considered a particular claim for reimbursement known as the “Ridge Case”. That was a case where the Commonwealth had admitted liability. Codock submitted that it could not be distinguished from the disputed claims. The arbitrator, at 190, agreed.

38 The arbitrator then set out his conclusion as follows, at 190-191:

“It follows in my opinion that these asbestos related common law costs may be recovered under the TAL as overheads regardless of whether the costs were incurred before or after 31 December 1992 and regardless of whether the original events which give rise to the claim, so far as they may ever be able to be known with precision – as is the nature of asbestos related diseases – occurred under earlier Trading Agreements than the 1972 TAL.”

39 At 191, the arbitrator referred to this as the “principal argument” for Codock; he recorded that, as Codock had succeeded on this argument, it was not necessary for him “to go into the alternative ways in which Codock puts its claim for the recovery of these expenses as overheads.”

40 There was another category of costs claimed by Codock. They were called “Shore Depot Costs”. They relate to the removal of a wharf and timber fender. The referee dealt with these costs at 194-195.

41 It appears that the only defence propounded by the Commonwealth was “the inability of Codock to recover from it costs otherwise within overhead if they were incurred after the cessation of the TAL”.

42 The referee noted, at 195, that he had “already dealt with that general submission”. That undoubtedly was a reference back to his reasoning on workers’ compensation (or common law) costs, to the extent that they were incurred (in the sense that they were paid or recognised) after 31 December 1992. He concluded:

“I am satisfied that the expense is within the category of overhead under the TAL and the fact that the cost was incurred after the expiry of the TAL is not a bar to its recovery.”

The relevant principles of law

43 The parties accepted the formulation of the principle stated by Dixon J in Blair v Curran (1939) 62 CLR 464, 531-532. His Honour distinguished issue estoppel from what he called “res judicata in the proper sense” and continued:

res judicata

44 His Honour emphasised that what was closed or precluded was only that which is “legally indispensable to the conclusion”. Thus, where a claim depended on a number of ingredients or ultimate facts, so that if any one were absent then the claim would fail, “the estoppel covers only the actual ground upon which the existence of the right was negatived”.

45 Nonetheless, his Honour said, the estoppel was not confined “to the final legal conclusion expressed in the judgment, decree or order”. The determination concludes not only the point actually decided but any matter which it was necessary to decide and which was actually decided as the basis of the decision. What his Honour called “matters cardinal” to the point at issue could not be relitigated if to do so would necessarily assert that the former decision was erroneous.

46 In Thoday v Thoday [1964] P 181, Diplock LJ at 198 expressed the principle thus:

“There are many causes of action which can only be established by proving that two or more different conditions are fulfilled. Such causes of action involve as many separate issues between the parties as there are conditions to be fulfilled by the plaintiff in order to establish his cause of action; and there may be cases where the fulfilment of an identical condition is a requirement common to two or more different causes of action. If in litigation upon one such cause of action any of such separate issues as to whether a particular condition has been fulfilled is determined by a court of competent jurisdiction … , neither party can, in subsequent litigation between one another upon any cause of action which depends upon the fulfilment of the identical condition, assert that the condition was fulfilled if the court has in the first litigation determined that it was not, or denied that it was fulfilled if the court in the first litigation has determined that it was.”

47 It is clear that an arbitral award may give rise to an issue estoppel: Fidelitas Shipping Co Ltd v V/O Exportchleb [1966] 1 QB 630, 643 (Diplock LJ). The parties accepted that this was so.

48 The doctrine of issue estoppel will apply to issues of fact as well as to issues of law, as Dixon J made clear in Blair at 532. But it does not apply to evidentiary facts that may have been found in the course of determining (as a matter of fact) whether an issue of fact is made out: Brewer v Brewer (1953) 88 CLR 1, 15 (Fullagar J).

49 Underlying all the decisions is the difficulty of application of the principle. That depends, as Dixon J said in Blair at 533, on distinguishing fundamental or cardinal matters from those that are not essential to the decision. His Honour said that there were two questions. The first is whether the ultimate decision necessarily involves the issue that was determined. As it is put in Spencer Bower, Turner & Handley, The Doctrine of Res Judicata (Butterworths, 3rd ed, 1996) at 105 [202], is “the determination … so fundamental to the decision that the latter cannot stand without it”? The second question is whether the determination of the issue is the immediate foundation of the decision, or collateral or subsidiary only? In other words, is it no more than part of the reasoning that supports the ultimate decision?

50 It has been suggested that one way of distinguishing the fundamental from the collateral is to ask whether an appeal could be brought from the determination of the particular issue; and, if so and if the appeal succeeded, whether the judgment would stand: Murphy v Abi-Saab (1995) 37 NSWLR 280, 288 (Gleeson CJ, with whom Kirby P and Rolfe AJA agreed). Thus, a decision of fact or law against the party who succeeded cannot be the subject of an appeal, and cannot found an estoppel: it cannot be fundamental to the decision. Again, where there are alternative factual grounds to support a cause of action and the court finds more than one in favour of the successful party, there can be no estoppel based on any of the separate grounds because an appeal against any one of them cannot displace the judgment appealed from. None of the issues can be regarded as fundamental to the decision. Accordingly, as is pointed out in The Doctrine of Res Judicata at 105 [202], the question of “appellability” (my word) is no more than a useful test, and the enquiry must always be whether the determination is such that without it the judgment – the ultimate decision - cannot stand.

51 There is a question as to whether the bar created by issue estoppel is absolute. The Commonwealth submitted that it was not. It referred to Arnold v National Westminster Bank Plc [1991] 2 AC 93. In that case, Lord Keith of Kinkel, with whose reasons Lord Griffiths, Lord Oliver of Aylmerton and Lord Jauncey of Tullichettle agreed, concluded that the bar established by issue estoppel was not absolute. He said at 109:

“In my opinion your Lordships should affirm it to be the law that there may be an exception to issue estoppel in the special circumstance that there has become available to a party further material relevant to the correct determination of a point involved in the earlier proceedings, whether or not that point was specifically raised and decided, being material which could not by reasonable diligence have been adduced in those proceedings. One of the purposes of estoppel being to work justice between the parties, it is open to courts to recognise that in special circumstances inflexible application of it may have the opposite result … “.

52 In the same case Lord Lowry, having reviewed the authorities, reached a similar view. He said at 112:

“It appears from this review that there are significant arguments in favour of the proposition that issue estoppel constitutes a complete bar to relitigating a point once it has been decided but I am now of the opinion that the court can, and in exceptional circumstances should, relax that rule”.

The Commonwealth’s submissions

53 The submissions for the Commonwealth focussed on the way that the claim had been “pleaded” in the arbitration and compared it to the “pleading” in the present case. The Commonwealth submitted that no element of the cause of action in the present proceedings had been decided in the arbitration.

54 The Commonwealth submitted that a number of issues that it sought to raise were not decided by the arbitrator, or were not decided in a way that gave rise to an estoppel. It submitted, in relation to the expenses incurred after 31 December 1992, that the issue had been abandoned by Codock in the arbitration. Finally, the Commonwealth submitted, as a matter of discretion (a reference to the decision in Arnold), no issue estoppel should be held to apply.

Codock’s submissions

55 Codock focussed on the actual decision made by the arbitrator. It noted that, although the claim had been pleaded as one based on a “Contract” that embraced a number of agreements made over a number of years, the principal claim that was argued, and the claim that the arbitrator upheld, was a claim for reimbursement that was made under the 1972 trading agreement and lease (as amended). It submitted that the basis on which it sought reimbursement in these proceedings was identical to the basis on which it had succeeded in the arbitration.

Analysis

56 Some of the expenses for which Codock sought and obtained reimbursement in the arbitration were incurred (ie, paid or recognised) after 31 December 1992. The Commonwealth had submitted by way of defence that neither the 1972 trading agreement and lease nor the earlier agreements which, together with it, were said to constitute the “Contract”, gave Codock a right of reimbursement for expenses incurred after the expiry of the relevant agreement (or contract). The arbitrator held that Codock was entitled to reimbursement of these expenses. He held that this entitlement arose under the 1972 trading agreement and lease. He did not consider the other bases on which Codock put its claim.

57 In my judgment, it was essential to the arbitrator’s decision on this point that Codock retained its right of indemnity notwithstanding the expiry, by effluxion of time, of the 1972 trading agreement and lease. A determination that the right of indemnity survived expiry of the agreement under which it was granted was fundamental to the entitlement. A decision the other way must have meant that Codock’s claim in the arbitration failed. In the words of The Doctrine of Res Judicata at 105 [202], that determination was “fundamental to the decision”. In other words, the decision was not merely a step in, or the process of, the arbitrator’s reasoning; it was essential to the conclusion. In the words of Diplock LJ in Thoday at 198, it was (ignoring questions of onus) a condition to be fulfilled before Codock could succeed.

58 The position seems to me to be in substance indistinguishable from decisions such as Humphries v Humphries [1910] 2 KB 531 and Cooke v Rickman [1911] 2 KB 1125. In each of those cases, a landlord sued a tenant for rent due under a lease and recovered judgment. In a later action between the same parties on the same lease for subsequent instalments of rent, the tenant sought to set up a defence (want of writing in Humphries and want of consideration in Cooke). In each case, it was held that the effect of the earlier judgment was to estop the tenant from doing so. That was in substance because the effect of the earlier judgment was to establish, between the parties, that the lease was valid and enforceable.

59 The same may be said of the arbitrator’s decision on Shore Depot Costs (see para [40] above). He could not have decided in Codock’s favour on that point unless the entitlement to reimbursement survived the expiry of the agreement by which it was granted. Had he decided that the right of indemnity did not survive expiry of the agreement, then the claim for reimbursement of those expenses must have failed.

60 Further, the arbitrator made it clear that the claim for common law expenses was upheld:

(1) under the 1972 trading agreement and lease;

(2) regardless of whether the expenses were incurred before or after 31 December 1992; and

(3) regardless of when – so far as it could be ascertained – the original events occurred that gave rise to the claim.

61 The way in which the arbitrator expressed his conclusion confirms not only that the particular claim was decided under and by reference to the 1972 trading agreement and lease only, but also that the question of survival of the right of indemnity was fundamental.

62 For similar reasons, I think that the arbitrator’s decisions on the “reasonable” cost issue (paras 1.16(d), 1.17 of the 1984 Standard Terms) and the “reasonable standards of skill, care and efficiency” issue (para 3.11 of the same document) were fundamental. A decision adverse to Codock on either of those issues must have meant that its case failed. To put it another way, Codock needed to show, on each of these issues (as it needed to show, on the issue in relation to survival of the right of indemnity) that the position for which it contended was correct. If it did not do so it could not succeed.

63 I do not think that it matters that the arbitrator found several different reasons for rejecting the Commonwealth’s submission on these matters. Issue estoppel is concerned with the decision of issues, not with the reasoning that supports the decision on the issue.

64 The next issue raised by the Commonwealth relates to the nature of the claims. It points out the difference in wording in para 41 in the points of claim in the arbitration compared to para 24 of the contentions in this case (the former including, and the latter excluding, the words “to the extent that these costs are not covered by the Plaintiff’s insurance”): see para [23] above.

65 I do not regard the omission of the words to which I have referred as indicating that the costs in respect of which reimbursement is sought in the present case are fundamentally different to the costs in respect of which reimbursement was sought in the arbitration. Codock’s only right is to recover to the extent that it is not entitled to be indemnified by some insurer. If some of the costs claimed in these proceedings are costs in respect of which Codock is entitled to be indemnified by an insurer, the Commonwealth is not obliged to pay them; and this could be raised in these proceedings by way of defence. That defence would not be inconsistent with, or estopped by, any determination made by the arbitrator. But the fact that Codock has not sought to define the costs by reference to the lack of entitlement of indemnity from an insurer does not, I think, alter the fundamental nature of those costs.

66 The next issue raised by the Commonwealth is that the costs in respect of which indemnity is now claimed are not the costs that were the subject of the arbitration. So much may be conceded. Indeed, if they were identical, there would be a cause of action estoppel: the claim to them would have merged in the award. But, as Diplock LJ recognised in Thoday (see para [46] above), fulfilment of an identical condition may be a requirement common to two or more different causes of action. The doctrine of issue estoppel operates precisely because the same issue is common to different causes of action between the same parties; it is not defeated because the causes of action are different.

67 In this context, the Commonwealth relied on the decision of the House of Lords in New Brunswick Railway Company v British and French Trust Corporation, Limited [1939] AC 1. In that case, the appellant issued a series of bonds. In an action by the respondent against the appellant on one bond of a particular series, the appellant did not enter an appearance and judgment was obtained by default. In a subsequent action on other bonds in the same series, couched in the same terms as the bond upon which default judgment was obtained, the appellant sought to raise defences. The House of Lords held that it was not estopped from doing so because, whatever were the estoppels that flowed from the default judgment, they related only to a cause of action founded upon the very bond that had been in suit; and different bonds were in suit in the later proceedings. That decision is clearly distinguishable. The arbitrator found in favour of Codock on its claim under the 1972 trading agreement and lease as amended. The same agreement (amended by the same subsequent agreements) is the foundation of the present claim. Lord Maugham LC said at 21 that the effect of the default judgment was to estop the defendant “from setting up in a subsequent action a defence which was necessarily and with complete precision, decided by the previous judgment. In other words, by the res judicata in the accurate sense.” It followed, as his Lordship concluded at 21-22, that application of the principle would not estop the appellant from raising any contention in an action on the other bonds. Similarly, Lord Wright at 38 noted that there was no issue before the court in the earlier case “as to any or all of the … bonds now sued on”. Lord Romer at 41-42 said that the only question of construction in the earlier proceedings “was one as to the construction of the bond then being sued upon” and that the default judgment could not “be regarded as having determined the question of the construction of the other bonds … “. It is quite clear that the reason for denying the estoppels was that the earlier and later actions were not brought on the same agreement. Here, they are.

68 There are, of course, other issues that, whilst they may arise now as they arose before the arbitrator, cannot be regarded as having been decided by the arbitrator so as to give rise to an issue estoppel. They would include whether items of cost were incurred reasonably (ie, whether in particular litigation it was reasonable for Codock to incur a particular item of expense); whether they are associated with cross-claims against the Commonwealth; and, no doubt, other matters. The award cannot give rise to any issue estoppel on those issues. They require consideration on a case by case, or claim by claim, basis.

The Arnold issue

69 The House of Lords in Arnold affirmed the decision of the Court of Appeal [1990] Ch 573. The Court of Appeal in turn affirmed the decision of Sir Nicholas Browne-Wilkinson V-C [1989] Ch 63. There was no difference of substance between the reasoning of Browne-Wilkinson V-C, the Court of Appeal and the House of Lords. That, for a judge at first instance, is a powerful body of judicial opinion.

70 In O’Toole v Charles David Proprietary Limited (1991) 171 CLR 232, Brennan J said at 258 that the decision of the Court of Appeal in Arnold “rests on an uncertain foundation”. (As I have just said, the reasoning of the House of Lords was not in substance different to that of the Court of Appeal or of Browne-Wilkinson V-C at first instance.) His Honour’s doubt was shared by Callaway JA (who referred to Brennan J’s “scepticism”) in Linsley v Petrie [1998] 1 VR 427, 449. In the same case, Hayne J had referred, at 441, to the decision in Arnold and to what Brennan JA had said of that decision in O’Toole, but did not indicate whether he, too, shared Callaway J’s scepticism. The third judge, Smith AJA, said simply at 449 that the point did not arise for decision.

71 In Tiufino v Warland (2000) 50 NSWLR 104, Handley JA (with whom Mason P and Powell JA agreed) referred both to the decision in Arnold and to Brennan J’s view of it. At 110, Handley JA said that “[i]t is doubtful whether the existence of later material relevant only to a question of law could be a special circumstance where there was a right of appeal on questions of law from the earlier decision … ”. Otherwise, the question not arising, he did not consider whether the decision in Arnold should be followed in Australia. (The Court in Tiufino did not follow the decision in Linsley, but nothing turns on this for present purposes.) This is consistent with the view expressed in The Doctrine of Res Judicata at 95 [189] where, having referred to the decision in Arnold, reference is made to the need “to keep this exception within narrow limits to avoid undermining the general rule and provoking increased litigation and uncertainty”. The view is then expressed that in Arnold “the decisive factor was the absence of an effective right of appeal” and that “[i]f a right of appeal had existed the general rule should have been applied and the estoppel enforced”.

72 Lord Keith and Lord Lowry both focussed on the words of Sir James Wigram V-C in Henderson v Henderson 3 Hare 100, 115 (67 ER 313, 319), where the Vice Chancellor referred to the need for parties “to bring forward their whole case” so that “except under special circumstances” the Court would not permit the same parties to relitigate something which might have been, but was not, brought forward in the earlier litigation. (I consider this in more detail in the section below dealing with Anshun estoppel.) Their Lordships appear to have reasoned that, since the estoppel established by Henderson was a species of issue estoppel, the exception comprehended by the reference to “special circumstances” was a characteristic of issue estoppel generally. I have difficulty in accepting this logic. Their Lordships’ reasoning in effect attributes to the entire family a characteristic of one member. Further, it appears inconsistent with the warning that the application of the Henderson principle to cases of issue estoppel is to be treated with caution: Port of Melbourne Authority v Anshun Proprietary Limited (1981) 147 CLR 589, 598-599 (Gibbs CJ, Mason and Aickin JJ). The reasoning in Arnold seems to me to be inconsistent with the insistence on finality in litigation, which underpins the doctrine of issue estoppel (as the judgment of Dixon J in Blair makes plain).

73 The Commonwealth relied on the decision of Gillard J in Kingston City Council v Monash City Council [2001] VSC 41. At [105], his Honour said that “ … it is well established that there may be special circumstances which exclude the operation of the plea of issue estoppel.” His Honour referred to what Wigram V-C had said in Henderson and to the speech of Lord Keith in Arnold. It does not appear that his Honour was referred to the doubt entertained by Brennan J in O’Toole, or to the scepticism expressed by Callaway JA in Linsley. In those circumstances, I do not think that his Honour’s acceptance of the proposition accepted by the House of Lords in Arnold relieves me of the obligation to consider the matter for myself.

74 The decision in Arnold has been referred to a number of times in this country, in New Zealand and in Canada. I have already referred to the decision in Linsley. At first instance in that case (Petrie v Linsley (1995) 21 MVR 413), Eames J gave consideration to the decision in Arnold. He noted the view expressed by Brennan J in O’Toole, and that nothing in the High Court authorities dealing with issue estoppel suggested that the operation of the doctrine might be alleviated by reference to “special circumstances” which would make its application unjust. He said at 438 that he thought that he should follow the decision where there was no direct conflict between it and a decision of an appellate court in Australia, on the basis that to deny the possibility of relief would “elevate a judge-made principle, one based on the desirability of certainty, finality and accepted correctness of decisions of the court, to a plateau which undervalues the overriding concern of the courts of justice to litigants”.

75 In Briggs v Hall & Anor (unreported, 8 November, 1994, BC 9401392), Batt J considered the decision in Arnold, noting that it had been accepted by the Court of Appeal of New Zealand (Meates v Taylor [1992] 2 NZLR 36). Batt J considered that, absent High Court authority to the contrary, considerations of “good sense and justice” required “that the exception of special circumstances should apply here in the case of fresh evidence” (BC at 9). His Honour accepted the Arnold principle in so far as it allowed of an exception in the case of fresh evidence, but was doubtful that it should be followed in so far as it allowed of an exception where the earlier decision, from which the issue estoppel proceeded, had effectively been overruled in a subsequent case.

76 The decision in Arnold has been followed in Canada; see for example Hockin v Bank of British Columbia [1995] BCJ No 688; Robb v St Joseph’s Health Care Centre [2001] OJ No 606; Stellar Properties Ltd v Botham Holdings Ltd [1994] BCJ No 639; Clayton v Garrett [1995] BCJ No 364. Those decisions do not analyse in any detail the reasoning in Arnold.

77 With some hesitation, I think that I should adopt the path taken by Batt J in Briggs and by Eames J in Petrie. That is to say, in the absence of any decision of the High Court or an intermediate appellate court in this country to the contrary, I think that I should accept that, in principle, the application of the bar created by an issue estoppel may be avoided where there are special circumstances. What are “special circumstances” must be a matter to be decided from case to case. With Batt J, I doubt that those special circumstances would include that the decision giving rise to the estoppel has been overruled in some subsequent case. As I have noted in para [75] above, Batt J would accept the Arnold principle in the case of fresh evidence. That is consistent with what Handley JA said in Tiufino (see para [71] above). I note that his Honour, writing extracurially, said in The Doctrine of Res Judicata (again, see para [71] above), that the essence of the decision in Arnold was there was no, or no effective, right of appeal. However, for reasons that I give in para [83] below, I do not think that absence of an effective right of appeal, flowing from the parties’ consensual adoption of arbitration as their dispute resolution procedure, should necessarily and of itself amount to special circumstances for this purpose.

78 The circumstances relied upon by the Commonwealth to support its argument that the bar should not apply were that there was no right of appeal from the arbitrator’s decision and that his decision was in any event, on the relevant points, wrong.

79 It is correct to say that there was no right of appeal from the interim award. By s 38(2) of the Commercial Arbitration Act 1984 (NSW), an appeal lies, subject to sub s (4), on a question of law arising out of an award. By sub s (4), absent consent, which I think was lacking in this case, the appeal may be brought only by leave of the court. Sub s (5) specifies the circumstances in which leave is to be given. They include that there must be either manifest error of law on the face of the award or strong evidence of error in circumstances where determination of the question is likely to add substantially to the certainty of commercial law (s 38(5)(b)(i), (ii) respectively).

80 In the present case, I do not think that there was manifest error of law on the face of the interim award. Nor do I think that there is evidence, strong or otherwise, that there was an error of law. On the contrary, I think that, on the relevant questions of construction, the arbitrator’s decision was correct. If I were hearing an application for leave to appeal I would not grant it; although it may be conceded that one of the requirements (that determination of the question could substantially affect the rights of one or more parties (s 38(5)(a)) would be met.

81 It follows from what I have just said that I do not agree with the second submission for the Commonwealth, namely that the arbitrator’s decision was, relevantly, wrong.

82 As to the other reason – that there is no right of appeal – I am prepared to assume (for the reasons given in para [77] above), without finally deciding, that in principle this might constitute a ground for declining to recognise the effect of issue estoppel (if it be possible to do that). Ordinarily, it would not of itself be a sufficient ground; pointing to the absence of a right of appeal is of little utility where the decision appears to have been correct (because, by hypothesis, in those circumstances, even if there were a right of appeal, the appeal would have been unlikely to succeed).

83 More fundamentally, though, I think that if recognition of the effect of an issue estoppel is to be withheld, this could only result from a balancing of all the relevant considerations. It is, in substance, a discretionary exercise. One of the factors to be taken into account is that the parties elected, by their contract, to resolve any differences by arbitration. Arbitration is a consensual process. The parties have chosen arbitration as their means of dispute resolution. They have chosen it with all its advantages (including privacy and relative informality) and all its disadvantages (including, if it be one, the absence of a right of appeal). Arbitration is inherently a process that, because there is no right of appeal, is more conducive to what might be called immediate finality than conventional litigation where there is (usually) a right of appeal. Presumably, the parties weighed all these considerations before they decided to adopt arbitration as their preferred method of dispute resolution. Presumably, the parties understood that one of the features of arbitration was the absence of a right of appeal. With the greatest of respect to the House of Lords in Arnold, I think that their Lordships’ decision may have overlooked this aspect of the balancing exercise.

84 If the method of dispute resolution were imposed by law, rather than by consensus, and if the imposed method of dispute resolution included as a feature that there was no right of appeal, then that might be a circumstance of some weight in deciding whether to decline to recognise the bar created by an issue estoppel. If however the method of dispute resolution is consensual, it seems to me that the choice of the parties must be taken to include all relevant features of the chosen method. Where the parties have chosen a method of dispute resolution that, firstly, is capable of giving rise to issue estoppels and, secondly, does not include a right of appeal, the absence of that right of appeal does not seem to me to be a powerful reason for withholding recognition of any estoppels that follow from the use of the agreed procedure.

85 In short, the parties having chosen a method of dispute resolution that includes as one of its characteristics an absence of a right of appeal, I find it hard to see that that absence could be regarded as a special circumstance to enliven the application of the Arnold doctrine.

Conclusion on the Arnold issue

86 I do not think that any basis has been shown for declining to recognise or enforce the issue estoppels created by the interim award.

The effect of the Deed of Settlement

The relevant terms of the Deed

87 Clause 2 of the Deed provided for the Commonwealth to pay Codock within 14 days $4,960,000.

88 By cl 3, the Commonwealth and Codock released each other in respect of specified claims. Each release was expressed to be subject to cl 4, and Codock’s release was also subject to cl 2. Clause 3 reads, relevantly:

“3.1 Subject to Clause 4, the Commonwealth hereby releases Codock from all claims and liabilities of any nature (including Legal Costs), the subject of, or connected with, or associated with the subject matter of:

(a) the Arbitration;

…

3.2 Subject to Clauses 2 and 4, Codock releases the Commonwealth from all claims and liabilities of any nature (including Legal Costs), the subject of, or connected with, or associated with the subject matter of:

(a) the Arbitration;

… “

89 Clause 4 limited the operation of cl 3. It provided, relevantly:

“4. LIMITATION ON RELEASES

The provisions of this Deed shall not operate so as to extinguish or limit:

…

(b) any claims Codock may have under the Trading Agreements for reimbursement of expenses incurred by Codock as a result of any Personal Injury Claim; or

(c) any defence available to the Commonwealth in relation to any claim by Codock.”

90 Clause 5 obliged the parties, among other things, to have the arbitration disposed of on the terms of the final award to which I have referred. It provided, relevantly:

5. RESOLUTION OF PROCEEDINGS

The parties undertake to take all steps necessary to have the following orders and awards made:

… “

91 Clause 8 set out some standard boilerplate provisions, intended to reinforce the finality of the settlement for which the deed provided. Since the Commonwealth relied on the terms of cl 8, I set it out:

“8. ACKNOWLEDGMENT

The parties acknowledge that they enter into this Deed fully and voluntarily on their own information and investigation. Each party to this Deed acknowledges that it is aware that it or its advisors, agents or lawyers may discover facts different from or in addition to the facts that they now know or believe to be true with respect to the subject matter of this Deed and that it is their intention to and they do, fully, finally and absolutely and forever settle according to the provisions of this Deed any and all liabilities, claims, disputes, and differences which now exist, or may exist or have ever existed between them relating in any way (save as provided by Clause 4) to the matters the subject of this Deed.”

The Commonwealth’s submissions

92 The Commonwealth submitted that the release given by cl 3.2 extended to Codock’s issue estoppel case. Codock alleges issue estoppel not in the contentions in its summons but in its reply to the Commonwealth’s defence. However, the Commonwealth submitted, it was nonetheless a claim or liability “the subject of, or connected with, or associated with the subject matter of … the Arbitration”.

93 Alternatively, the Commonwealth submitted, where Codock did bring a claim that was preserved by cl 4(b), the effect of cl 4(c) was to preserve “any defence available to the Commonwealth in relation to [that] claim”. Thus, the Commonwealth submitted, it was free to raise by way of defence to a claim brought by Codock under cl 4(d) a matter that had been considered and decided in Codock’s favour by the arbitrator, notwithstanding that the arbitrator’s decision might give rise to an issue estoppel on that matter.

94 Finally (relevant to Codock’s claim for a 7.5% profit margin), the Commonwealth submitted that the only claims preserved by claims 4(b) were claims under “the Trading Agreements for reimbursement of expenses incurred by Codock as a result of any Personal Injury Claim”. The “Trading Agreements” were defined to include the entirety of the leases and contracts from time to time in force between Codock and the Commonwealth or the Commonwealth’s agencies, including any amendment or variation thereof. Personal injury claims were defined to mean claims “arising from injuries suffered or allegedly suffered by a Third Party as a result of activities carried on at Cockatoo Island or by Codock between 1 February 1933 and 31 December 1992”. The Commonwealth submitted that a claim for a profit margin on top of expenses actually incurred was not a claim “for reimbursement of expenses incurred”, even where the expenses themselves were incurred “as a result of any Personal Injury Claim”.

95 For similar reasons, the Commonwealth submitted, the Deed precluded Codock from “maintaining an argument based upon conventional estoppel” (Commonwealth’s outline of submissions dated 23 July 2004, para 55). The Commonwealth submitted that the conventional estoppel pleaded in the reply was not a claim that Codock had under the Trading Agreements for the purposes of cl 4(b) of the deed of settlement.

Codock’s submissions

96 Codock submitted that the asserted estoppels (both issue estoppel and conventional estoppel) were not causes of action but rules of evidence requiring a party to adhere to a state of affairs. In one case, the state of affairs was established by a judicial or some other binding determination; in the other, by the prior dealings of the parties. Thus, Codock submitted, the Deed did not operate to release the Commonwealth from any restriction imposed by law.

97 As to the 7.5% profit margin, Codock submitted that the entitlement preserved by the Deed was for reimbursement “under the Trading Agreements”. It submitted that this meant reimbursement in accordance with the terms of those agreements. The contractual entitlement that was preserved included the 7.5% profit margin.

Analysis: issue estoppel and conventional estoppel

98 I do not think that it is correct to say that issue estoppel is only, or merely, a rule of evidence. Application of the principle may prevent a party from calling evidence. But, as Diplock LJ explained in Mills v Cooper [1967] 2 QB 459, 469, that is because, through application of the principle, there is no issue to which the evidence would be relevant. His Lordship explained the principle as “a particular application of the general rule of public policy that there should be finality in litigation”. His Lordship’s statement was approved in Rogers v R (1994) 181 CLR 251, 278 and in R v Humphrys [1977] AC 1, 27, 48. I think that the better view is that issue estoppel is properly regarded as a substantive rule of law. See the discussion in The Doctrine of Res Judicata (Butterworths, 3rd ed, 1996) at 4[9].

99 The position is perhaps not as clear in relation to estoppel by convention. In Feltham, Hochberg and Leech, The Law Relating to Estoppel by Representation (LexisNexis UK, 4th ed, 2004), the authors at VIII 2.1 define an estoppel by convention as “an estoppel by representation of fact, a promissory estoppel or a proprietary estoppel, in which the relevant proposition is established, not by representation or promise by one party to another, but by mutual, express or implicit, assent” (citations omitted). They continue by stating that “[t]his form of estoppel is founded, not on a representation made by a representor and believed by a representee, but on an agreed statement of facts or law, the truth of which has been assumed, by convention of the parties, as a basis of their relationship.” This analysis may provide some support for the proposition that estoppel by convention is a rule of evidence, in that it is the means by which an element of another form of estoppel is made out.

100 In Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, 415, Brennan J said that the proposition that estoppel in pais is merely a rule of evidence and not a cause of action requires some explanation. Where the estoppel relates to the existence of a contract between the parties, the legal relationship between them is ascertained by reference to the terms of the contract which is assumed to exist. As his Honour said, “[t]he source of legal obligation in that event is the assumed contract; the estoppel is not a source of legal obligation except in the sense that the estoppel compels the party bound to adhere to the assumption that the contract exists.” However, as his Honour pointed out at 416, equitable estoppel does create rights. On this analysis it would be more than a rule of evidence; it too, like issue estoppel, would be a rule of substantive law.

101 It is not necessary to reach a concluded view on Codock’s submission that the asserted estoppels are no more than rules of evidence. That is because I do not think that the relevant question is whether an estoppel is a rule of evidence or a rule of substantive law. Even if it be correct to regard the estoppels alleged by Codock as being, or giving it, causes of action, that would not resolve the question of construction in favour of the Commonwealth.

102 To the extent that the doctrine of issue estoppel applies, it prevents the Commonwealth from raising matters the subject of the estoppel in defence to Codock’s claim. That is to say, it prevents the Commonwealth from raising those matters in defence to a claim of the kind described in cl 4(b). Even if every element of the claim were made good by application of the doctrine of issue estoppel (because the Commonwealth was thereby prevented from putting in contest, or controverting, any element of the claim), that would not make the claim anything other than a claim of the kind described in cl 4(b). As a matter of language, cl 3.2 cannot support the Commonwealth’s argument. Clause 3.2 is subject to cls 2 and 4. Once it is shown that a claim is within cl 4(b), cl 3.2 ceases to have any operative effect. That is as much so where the claim is established (to the extent that it is) by the operation of the doctrine of issue estoppel as it is where the claim is established by proof in the conventional sense.

103 Codock’s release under cl 3.2 is subject to cl 4. Clause 4 establishes that cl 3.2 does not extinguish or limit Codock’s claims of the relevant kind for reimbursement. Where the establishment of that claim involves the establishment of a condition that has been determined by the arbitrator, then (subject to the point that I consider next) application of the doctrine of issue estoppel binds Codock and the Commonwealth to that determination. Clause 4(d) has nothing to say about the impact, on the Commonwealth’s position, of that doctrine. But it does not follow from this that the claim is one that (apart from the saving reference to cl 4) would fall within cl 3.2.

104 Nor do I think that the effect of cl 4(d) is, as the Commonwealth submits, to overcome the doctrine of issue estoppel if that doctrine is applicable. Clause 4(d) preserves from the operation of “[t]he provisions of this Deed” any defence that is “available to the Commonwealth”. Where the Commonwealth is bound by the doctrine of issue estoppel, the consequence is that it cannot raise the matter that is the subject of the estoppel. That matter is not “available” to it. The provisions of cl 4(d) have no application unless the defence is “available”.

105 Further, the saving effect of cl 4 is only in relation to “[t]he provisions of this Deed”. It means that nothing in the Deed takes away a defence that is otherwise available. The doctrine of issue estoppel applies (to the extent that it does) as a result of the arbitrator’s award, not as a result of the operation of any provision of the Deed.

106 I therefore conclude that cls 3 and 4 of the Deed do not prevent Codock from relying on its reply of issue estoppel, and do not preserve to the Commonwealth any defence that, apart from the operation of the Deed, it would be estopped from raising.

107 For similar reasons, I do not think that cls 3 and 4 of the Deed prevent Codock from relying on its reply of conventional estoppel. As Brennan J said in Waltons Stores, in the passage to which I have referred in para [100] above, the source of legal obligation is the assumed contract, not the estoppel that compels the party bound by it to adhere to the assumption that the contract exists. The conventional estoppel pleaded in the reply asserts that the defendant is estopped from denying (among other things) the contractual entitlements asserted by Codock in paras 26 and 27 of the contentions in its second further amended summons. The reply asserts further that, among other things, the denial of subsisting contractual obligations between Codock and the Commonwealth is not maintainable. This makes it clear, I think, that the conventional estoppel is relied upon not as a cause of action but to prevent the Commonwealth from raising certain defences to the contractual cause of action.

Analysis: the 7.5% profit margin

108 It may be accepted that the word “reimbursement” connotes repayment for expense or loss incurred, and that it would not be seen ordinarily to extend to the garnering of a profit margin on that expense. But the word is required to be construed in context, not in isolation. What is preserved under cl 4(b) are claims under the Trading Agreements for reimbursement of expenses incurred. That, I think, invites attention to the terms of the Trading Agreements to understand what it is that is to be reimbursed.

109 Codock relies upon cl 2(4) of the 1972 trading agreement and lease, cl A(1) of the Substituted Mode of Performance, and cls 3, 21 and 22(a) of the Advance Agreement. Those provisions, however, need to be read against the background of the 1972 trading agreement and lease in general and the whole of cl 2 thereof in particular.

110 In substance, Codock performed work for the Commonwealth predominantly on a “cost plus” basis but occasionally did so on a “fixed price” basis. (Where work was done for customers other than the Commonwealth, it was done on a fixed price basis; but, at least during the last 21 years of the dockyard’s operation, most of the work done by Codock was for the Commonwealth and most of it was on a cost plus basis.)

111 By cl 2(3) of the 1972 trading agreement and lease, where work was done on a “cost plus profit” basis:

· cost did not include rent;

· the profit for work on a cost plus profit basis was 5% of the costs of direct labour, direct material, direct expense (including sub-contracts) and overhead; and

· cost or costs were determined in accordance with the standard conditions applicable from time to time.

112 By cl 2(4), Codock was not to increase the overhead rate without the prior approval of the Commonwealth.

113 Clause A(i) of the Substituted Mode of Performance set out in detail the basis on which the Commonwealth would accept “the calculation of the overhead rate under sub-clause 2(4) of the Trading Agreement and Lease chargeable to cost plus profit … orders”. The effect was to deem some overhead costs to have been recovered against commercial work. What were called “residual overhead costs not deemed to have been recovered against commercial work” in accordance with those provisions were “chargeable to cost plus profit and cost incentive price orders from the Commonwealth”.

114 Clause 3 of the Advance Agreement incorporated the 1984 Standard Conditions, or other standard conditions agreed between the parties, into the 1972 trading agreement and lease (specifically for the purposes of cl 2(3)).

115 Clause 21 dealt with the cost pool to which indirect costs would be attributed.

116 Clause 22 increased the profit on cost plus work from 5% to 7.5% with effect from 1 July 1987.

117 The 1984 Standard Conditions set out, in great detail, the basis on which the costs of contracts are to be determined. They do not in terms include a profit element; nor would this be expected when the objective was to enable the determination of the cost element of a cost plus contract.

118 When cl 4(b) of the Deed is construed purposively and in context, I think that it was intended to preserve, and should be read as preserving, the existing rights of Codock under whatever agreement, or combination of agreements, might be applicable to claims of the kind referred to. That is to say, I think that the reference to claims under those agreements for reimbursement is a shorthand way of referring to the totality of the contractual provisions that govern those claims.

119 There are two matters that confirm this construction. The first is the introductory words of cl 4: “The provisions of this Deed shall not operate so as to extinguish or limit” such claims. It is clear that the intention of cl 4 was to preserve, unaffected by the release in cl 3.2, whatever rights Codock otherwise had in respect of the relevant claims. It would be quite extraordinary, in the face of those opening words, if the use of the tag “reimbursement of expenses” had the effect of limiting those rights.

120 The second matter is that the agreements themselves do not use the word “reimburse”, nor do they refer to “reimbursement”. The use of the word “reimbursement” in cl 4(b) is not picking up some contractual phrase. That, to my mind, confirms that the use of the word “reimbursement” is intended to be descriptive rather than limiting.

121 I therefore conclude that cls 3 and 4 do not take away whatever right Codock otherwise had to be paid the 7.5% profit margin or “fee”.

Anshun estoppel

122 This is not the place to consider whether the principle recognised in Anshun is a species of estoppel; nor, if it is, of what kind. As to the former question, see Meagher, Heydon and Leeming, Meagher Gummow & Lehane’s Equity Doctrines and Remedies (4th ed, Butterworths LexisNexis, 2002) at 539 [17-020] and the cases there cited; see also Maiden, Recent Steps in the Evolution of Res Judicata Cause of Action Estoppel and the Anshun Doctrine in Australia (2004) 25 ABR 130. As to the latter question, see for example Tanning Research Laboratories Inc v O’Brien (1990) 169 CLR 332, 345-346 (Brennan and Dawson JJ), 355 (Toohey J). The parties framed the issue by reference to the concept of “an Anshun estoppel”. Whatever the precise classification and nomenclature may be – and I note that in Rippon v Chilcotin Pty Ltd (2001) 53 NSWLR 198, 202-203, Handley JA (at 202) referred to “the wider form of estoppel applied in” Anshun – the issue is clearly defined and capable of answer; and neither the terms nor the effect of the answer depend upon the question of nomenclature.

123 The Commonwealth’s submissions on this issue put the matter two ways. It pointed out that Codock had made, and had not formally withdrawn, a claim for relief in respect of expenses incurred after 31 December 1992. That claim, therefore, was not “dealt with” by the arbitrator in the interim award of 8 December 1995. Thus, the Commonwealth said, the claim fell within cl 1 of the final award and was thereby dismissed. If that submission were correct, there would be what the majority in Anshun at 597 referred to as “res judicata” and what Diplock LJ in Thoday at 197 called “cause of action estoppel”.

124 Alternatively, the Commonwealth submitted, if for whatever reason the claim was not within cl 1 of the final award (perhaps, because on the whole of the evidence it should be treated as having been withdrawn), nonetheless there is an issue estoppel of the extended kind described by Wigram V-C in Henderson and recognised by the High Court in Anshun.

Codock’s claim in the arbitration

125 I have dealt above with the contractual basis, for recovery of workers’ compensation costs, alleged by Codock in its amended points of claim. The costs in respect of which recovery was sought included costs incurred after 1 January 1993, as the particulars to para 41 made clear when read in conjunction with the documents there particularised. That is also clear from para (b) of the particulars to para 42, referring to “Future Claims” which “may arise” from specified matters.

126 The continuing nature of the claim was made even clearer by paras 46, 47 and 48 of the amended points of claim. Paragraph 46 alleged that the Commonwealth was obliged to accept into overhead as at 31 December 1992 “a reasonable provision against Workers’ Compensation Costs to be incurred from 1 January 1993 onwards” and to pay that amount plus 7.5% profit. It claimed, in the alternative, that such costs be accepted into overhead as at 31 December 1993 (sic: obviously, 1992) and an order for payment of those costs plus 7.5% profit. A further alternative was propounded. Clause 47 alleged breach of that obligation, including (para (b)) by refusal to indemnify Codock against the costs or to pay it the amount necessary to make provision against them (which was referred to as “the Compensation Costs Provision”).

127 The relief claimed by Codock in respect of Workers’ Compensation Costs was set out in para 65(b). It included a determination that the Commonwealth was obliged either to indemnify Codock against those costs or to pay the Compensation Costs Provision, a determination that the Commonwealth was in breach of the Contract by refusing to do either of those things, a determination that the Commonwealth pay that provision, or alternatively that Codock have damages equivalent to it, and as a final alternative, a determination of the parties’ rights, duties and liabilities in relation to Workers’ Compensation Costs.

128 The Commonwealth did not accept that the arbitrator had power to make the determinations sought (under an earlier version of the points of claim) in respect of “Future Claims”. On 28 April 1993 the arbitrator, having received extensive submissions, decided that he did have jurisdiction to entertain the issues relating to the future claims. He said that those issues were not purely hypothetical, or theoretical, and therefore beyond his jurisdiction (reasons for decision dated 28 April 1993 at 29, 30).

129 It is necessary to bear in mind, in this context, that the future claims referred to were those that were not quantified by what became the agreed cut-off date, namely 31 October 1995. As the arbitration progressed, Codock put on evidence of further claims incurred and paid after 31 December 1992, and produced further amended versions of its points of claim to incorporate a claim for reimbursement of the expenses thus proved. However, it maintained in addition a claim to be indemnified (either by the payment of some amount by way of provision or otherwise) in respect of claims that would (it said) be incurred after the final cut-off date. This last claim, which is really what was meant by Future Claims, was pressed up until final submissions.

Withdrawal of the claim

130 In final submissions on 19 May 1995, Codock informed the arbitrator that its claim in respect of relief for costs incurred after the cut-off date was not pressed.

131 In the transcript before the arbitrator at 7234-7235, the following is recorded:

“ One of the things the Commonwealth didn’t argue, which was canvassed in our opening submissions, was that this is affected by the expiry, by influx [sic: obviously, “effluxion”] of time, of the Trading and Lease Agreement.

At one point that seemed to be the basis of some of the objection to costs, particularly costs like excesses which were paid right up to 1992 and have not been paid since.

It is not submitted anywhere in the Commonwealth’s submission, that is, that makes a difference and that has the happy consequence that we had put the argument as an alternative, in case that argument was put we were going to say: Well, we don’t accept the termination of the agreement makes a difference but if it does you have to give us a provision, it would be ridiculous if we were left with no cover.

That is no longer necessary to deal with because that is an argument that hasn’t been made by the Commonwealth. On that basis I don’t need to address any submissions to you on the provision argument. You don’t need to deal with it in your judgment.”

132 Then, at 7237, the following appears:

“ May I say one more thing on the question of relief. One of the forms of relief we asserted we were entitled to was a declaration. That is a matter we obtained instructions on since, in the light of the submissions that have been made about the difficulty in settling the form of words which may apply in the future. That aspect or that prayer for relief is not pressed. What we are asking for you to do is to determine that the costs incurred so far as set out in the latest statements are costs which are recoverable under the TAL. To order that we did get paid those costs, plus seven and a half percent.

We expect that that will set a precedent which will make any further litigation in the matter unnecessary. If it did become necessary we would simply bring proceedings at a later stage and have the argument again when more costs are incurred.”

133 The arbitrator dealt with this in the interim award at 145. He said:

“Asbestos related common law claims

Codock has also brought against the Commonwealth, a substantial claim for the recovery of monies paid away in the past and up to the time of address in reply, for appropriate orders to insulate it from liability to pay away further monies in the future, arising from asbestos related injuries suffered by ex-employees of Codock. On 19.5.1995 (Tp 7237.6) Codock dropped its claim for declaratory relief as to future liability contending instead that if I found that it had the entitlement to recover as overheads plus 7½% profit component, those monies for which it had already made payment or becomes liable, such precedent value would stand it in sufficient stead for the future in the event that further liability crystallised.”

134 The arbitrator returned to the topic briefly at 159. He had been considering the nature of the costs incurred, and to be incurred, for asbestos-related illnesses. He noted at 159 the Commonwealth’s argument “that Codock’s potential liabilities to future unknown plaintiffs cannot be recoverable costs under the Standard Conditions, and that nothing is payable under the Standard Conditions until Codock accepts legal liability to an individual plaintiff by consenting to judgment in his favour.” He then noted “that Codock does not any longer contend that it is entitled to a declaration as to an indemnity into the future for these common law costs in respect of presently unknown plaintiffs and without having incurred the costs.” The arbitrator referred (as he had done at 145) to the passage from the transcript dealing with setting a precedent, that I have set out in para [132] above.

Codock’s claim in these proceedings

135 In these proceedings, Codock claims $3,280,135.93 for reimbursement for what it calls “Workers’ Compensation Costs and Third Party Compensation Costs”. That claim includes liabilities (for costs, compensation and damages) incurred by Codock since the cut-off date before the arbitrator up until 30 June 2003 and includes claims administration costs and a 7.5% profit margin. In other words, the claim is for liabilities that were, in the proceedings before the arbitrator, described as “Future Claims” and that have since crystallised.

The Commonwealth’s submissions

136 I have summarised the Commonwealth’s position in paras [123] and [124] above. The Commonwealth acknowledged in its written submissions that “[n]o decision was made in the Arbitration with respect to the future costs because Codock abandoned any relief in respect of such costs” (outline of submissions, para 58). It submits that those future costs “properly belonged to the Arbitration and that Codock, “acting reasonably”, should have sought to have them included in the award.” It relies on the following circumstances:

(1) A claim for a determination and award in respect of those future costs had been made in the original points of claim.

(2) That claim was maintained right through to the last amended version of the points of claim, served some time after 19 May 1995 when the claim was “not pressed” (Codock’s words), “dropped” (the arbitrator’s word) or “abandoned” (the Commonwealth’s word).

137 Alternatively (but logically, an anterior submission), the Commonwealth submits that the dismissal of all outstanding claims in the final award was a dismissal of the claim in para 65 of the then current version of the amended points of claim for relief in respect of future costs. The Commonwealth submits that the deed of settlement does not preserve claims that were dismissed by the final award.

Codock’s submissions

138 Codock accepts that it “abandoned its claim to a provision against future costs” and “also did not seek any award in the nature of a declaration as to its entitlement to reimbursement of future costs” (Codock’s outline of submissions on preliminary issues, dated 23 July 2004, para 28). It points out, as the transcript makes clear, that it sought a monetary award for costs incurred to date to set a precedent for recovery of future costs.

139 Codock submits that the causes of action that it now presses had not arisen at the time the award was made. The relevant liabilities had not, at that time, been incurred. It therefore submits that there can be no question of an Anshun estoppel.

140 Alternatively, Codock submits, there is no possibility of inconsistent judgments (because it seeks relief on the basis of the award, relying on issue estoppels that it says are created by the award). Therefore, it says, the underlying evil at which the decisions in Henderson and Anshun were directed cannot arise (see Anshun at 603; see also Boles v Esanda Finance Corporation Ltd (1989) 18 NSWLR 666, 671 (Samuels JA)).

141 Finally, and again alternatively, Codock submits, the only manner in which future costs could have been addressed was by an award in the nature of a declaration of right. It submits that the making of such a declaration would have been discretionary; and that there were the practical and jurisdictional objections that the Commonwealth had foreshadowed, and that had been the subject of extensive submissions on the preliminary question. Accordingly, Codock submits, it was not unreasonable for it to have taken the course that it did, so that no Anshun estoppel arises (relying again on Boles).

Analysis – the effect of the final award

142 Paragraph 1 of the final award operated, relevantly, to dismiss “[a]ll claims made in this arbitration which were not disposed of in” the interim award. The Commonwealth’s submission therefore involves two questions:

(1) Was Codock’s claim in respect of future liabilities (ie, those incurred after the cut-off date), a “claim made in this arbitration” for the purposes of para 1?

143 There is no doubt that Codock had advanced a claim for declaratory and other relief in respect of future liabilities. Thus, at some stage, it was a claim in the arbitration. It was withdrawn in final submissions (see paras [131] and [132] above). This was acknowledged by the referee in the interim award (see paras [133] and [134] above).

144 I think that the better construction of the words “all claims made in this arbitration” in para 1 of the final award is that they refer to claims that were current when, relevantly, the interim award was made. On this basis, the claim in respect of future liabilities having been withdrawn and the arbitrator having noted that (and having acted accordingly by not deciding the claim), I do not think that it falls within para 1 of the final award.

145 This construction of the final award is supported by the circumstances in which it was brought into existence. The final award was made by consent. It was something required to be done by clause 5(a) of the Deed of Settlement. That required the parties “to take all steps necessary to have … orders and awards made … that the claims not disposed of in [the interim awards that had been made] … dismissed … “. The wording of clause 5(a) of the Deed is reflected in para 1 of the final award.

146 As a matter of construction of the Deed, the “claims not disposed of” that are referred to in clause 5(a) could not include “any claims Codock may have under the Trading Agreements for reimbursement of expenses incurred by Codock as a result of any Personal Injury Claim” referred to in clause 4(b). Clause 4 itself provided that “[t]he provisions of this Deed shall not operate so as to extinguish or limit”, relevantly, claims of the kind described in 4(b). It must follow that the awards and orders that the parties agreed by clause 5 to have made were not intended to extinguish or limit claims that were expressly preserved by clause 4(b).

147 The final award was brought into existence in fulfilment of the parties’ obligation contained in clause 5(a) of the Deed. There was no submission put, nor is there any basis to think, that the final award was intended to achieve anything other than to give effect, so far as it could, to the agreement of the parties in clause 5(a) of the Deed. If there were any relevant ambiguity in the construction of para 1 of the final award, it would be legitimate to seek to resolve that ambiguity by reference to the Deed pursuant to which the parties procured the final award to be made. Reference to the Deed would resolve any ambiguity. It would be extraordinary if the parties, having by cl 4 of the Deed preserved the relevant rights, intended the very next day to destroy those rights. It would be equally extraordinary if the words “claims … not disposed of” in para 1 of the final award were intended to embrace some subject matter different to that embraced by the words “claims not disposed of” in cl 5(a) of the Deed, that being the clause by which the parties were required to procure the final award to be made. A construction that requires such extraordinary consequences should be avoided unless the words in question are intractable. For the reasons that I have given, I do not think that they are.

148 I therefore conclude that Codock’s claim for reimbursement in respect of future costs – specifically, the claim advanced by it in these proceedings – was not dismissed by para 1 of the final award.

Analysis – Anshun estoppel

149 In Anshun, Gibbs CJ, Mason and Aickin JJ at 602 expressed the relevant test in terms of “unreasonableness”:

“ … there will be no estoppel unless it appears that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it.”

150 At 602-603, their Honours drew attention to the need to bear in mind that there may be justifiable reasons to refrain from litigating a particular issue in one proceeding, whilst wishing to litigate it in another. They instanced, as some such reasons, “expense, importance of the particular issue [and] motives extraneous to the actual litigation”.

151 In Boles, Samuels JA (with whom Priestley and Meagher JJA agreed) stated the critical test at 674 as involving an “unreasonable” failure to advance the claim in earlier proceedings:

“ … the critical test is whether the failure to advance the current claim (for the entire rent) in the prior proceedings claiming an instalment of rent was unreasonable because of the “relevance” of the current claim to the first claim on the expectation … that the respondent would raise both claims in the first proceedings.”

152 At 674, his Honour explained why it had not been unreasonable for the respondent to have taken the course that it did:

“In my opinion, upon the facts here, it was not unreasonable for the respondent to have advanced the claim it did in the first proceeding. It enabled a succinct analysis to be undertaken of the rights and obligations arising from the contract, without the factual and legal complications which would have been presented by the defences then (but not now) to be deployed in answer to a claim for the entire rent. There were tactical considerations favouring a claim for an instalment of which the appellants’ lawyers must have been aware and which therefore disposed of any contrary expectation.”

153 It will be noted that Gibbs CJ, Mason and Aickin JJ in Anshun referred to the concept of “relevance”. Samuels JA in Boles at 674 thought that the question of relevance was applicable only in the context of defences. His Honour said that it might be useful to ask whether a defence is relevant to a claim, and that the question might be susceptible of a relevant answer; but that it was meaningless to say that one claim was relevant to the other even if (for example) both arose out of the same contract. However, particularly having regard to the earlier analysis in his Honour’s reasons, I do not think that his Honour was intending to say that one should not focus on whether it was reasonable (or unreasonable) not to have raised the claim in earlier proceedings.

154 That this is so is confirmed by the judgment of Handley JA (with whom Mason P and Heydon JA agreed) in Rippon. His Honour appears to have taken the view that if the subject matter of one claim was sufficiently relevant to the subject matter of another, then the question of reasonableness would arise. He said, at 202-203:

“The purchasers could have included their claim against the accountant for negligent misrepresentation, based on the 1991 figures, in their Supreme Court proceedings. They knew that the figures came from the accountants and there would have been common issues of reliance, falsity and damage. If the claims based on the earlier figures were not worth pursuing against the vendor they were not worth pursuing against the accountants either.

Port of Melbourne Authority v Anshun

155 In Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502, 512, Dawson J, discussing the decision in Anshun, framed the question slightly differently: should the plaintiff be allowed to pursue a cause of action when the right asserted “could and should have been raised in the earlier action in which judgment had been entered”? He said that to permit this to do so might result in contradictory judgments: something “which ought not be permitted save in special circumstances”.

156 In the present case, whether the test is framed in terms of “unreasonable” conduct (in failing to pursue the cause of action in earlier litigation), or in terms of whether the cause of action could and should have been pursued in earlier litigation, the result is the same. There is no Anshun estoppel.

157 There are a number of reasons why this is so. The first is that there was no accrued cause of action at the relevant time (except, perhaps, in respect of whatever further expenses may have been incurred between the final cut-off date and the date when relief in respect of Future Claims was dropped). There were no claims, or expenses, in respect of which Codock then had a present right to be reimbursed. Nor is it immediately apparent that Codock had any right to require the Commonwealth either to pay some estimated sum by way of reimbursement in advance, or to set up some fund out of which reimbursement could be effected. At most, Codock might have been entitled to declaratory relief in respect of expenses to be incurred in the future.

158 The second reason is that there were tactical and other considerations favouring the abandonment of any claim in the arbitration for purely declaratory relief. To adapt the language of Samuels JA in Boles at 674, the Commonwealth’s lawyers must have been aware of those considerations (because it was the Commonwealth’s submissions that, to some extent, gave rise to them) so that there cannot have been any expectation, contrary to the event, that the claims would have been disposed of in the arbitration.

159 The third reason is that the claim (if framed in terms of declaratory relief) was in substance prospective. There can have been little – if any – doubt that Codock would incur further liabilities of the relevant kind. The cause of action would not accrue until a worker contracted a disease as a result of exposure to asbestos products: Orica Ltd v CGU Insurance Ltd (2003) 59 NSWLR 14. At the cut-off date, there may have been workers who had contracted a disease but had not brought proceedings; and there may have been workers who had not then contracted, but would later contract, the disease, and who would thereafter bring proceedings. It may have been possible to estimate, on some actuarial basis, the liability of Codock for claims in each category. But it does not follow that Codock should have pressed ahead for a determination in respect of such claims, either by way of declaratory relief or by way of monetary provision.

160 If an award by way of declaration were to be sought, it would be open to all the objections that the Commonwealth had raised in the preliminary hearing. It is to be noted that the arbitrator did not decide that those objections failed. He decided only that the claim was not so speculative or hypothetical as to be beyond his jurisdiction.

161 Any declaration, or determination in the nature of a declaration, that was made could really do little more than restate the applicable terms of the trading agreement and lease, and the other essential matters established by the interim award in respect of the claims that were allowed. A declaration or determination in those terms would have achieved nothing more than, in my judgment, is achieved by operation of the doctrine of issue estoppel. I therefore think that it was not unreasonable for Codock to drop its claim for future relief on the express basis that the award would “set a precedent which will make any further litigation in the matter unnecessary”. The optimism may have been unjustified; but that does not mean that it was unreasonable.

162 Any claim for a monetary amount calculated on some actuarial basis would involve numerous problems. Almost inevitably, there would be challenges to the assumptions on which the calculation of provision was based. In all likelihood, hindsight would show that the provision was inaccurate – probably erring on the side of inadequacy, but possibly erring on the side of over-compensation. Any attempt to estimate a provision, and to impose on the Commonwealth liability by way of a determination that it pay such a provision, would deprive the Commonwealth of the opportunity to raise individual, or subject-specific, defences in respect of any particular claim. To put it another way, all the problems that would attend the making of a useful determination by way of declaration would inevitably attend the making of a determination by way of monetary provision.

163 The fourth reason is that there is no likelihood of inconsistent judgments (or of a judgment that is inconsistent with the interim award). That is because, in so far as there are common issues, they have been decided by the award; and in so far as the issues are discrete or unique, no question of inconsistency can arise. To adapt the language of Samuels JA in Boles at 673, a judgment recording success or failure in a claim for expenses incurred after a certain date could not conflict with, or could not be inconsistent with, an award accepting a claim for expenses incurred prior to that date.

164 The fifth reason is that the Commonwealth apparently raised no objection to the dropping of the claims. Further, in the Deed of Settlement, it acquiesced in a position which, on the face of things, recognised the right of Codock to advance those claims in later litigation. (It must be acknowledged equally, that the Deed recognised the right of the Commonwealth to advance, in such litigation, any available defence.) The terms in which Codock announced its intention not to press the claims in the arbitration were clear. It was plain that, from Codock’s perspective, the claims remained alive, and might be enforced in later litigation. In this respect, the Deed did no more than confirm what had been apparent since 19 May 1995. Thereafter (and again to adapt the language of Samuels JA in Boles at 674), there cannot have been any expectation on the part of the Commonwealth that the claims were no longer to be pressed against it.

Conclusion on

estoppel

165 Samuels JA pointed out in Boles at 673 that the Anshun estoppel “depends upon the exercise of a broad discretion since the question of whether a litigant’s conduct was unreasonable can scarcely be determined in any other way.” In the circumstances of this case, the circumstances that are relevant to the exercise of the discretion require the conclusion that there is no Anshun estoppel.

Conclusions and order

166 I return to the five questions set out in para [10] above and answer them as follows:

(1) Q: Subject to 2, is the Commonwealth barred, by reason of an issue estoppel arising from the Commercial Case Award, from denying that it is obliged to reimburse to Codock all Workers’ Compensation Costs plus (subject to 8) a 7.5% fee?

A: No. There are, however, particular issues that the Commonwealth may not maintain by way of defence in these proceedings. See paras [57] and [62] above.

(2) Q: Is Codock precluded from relying upon any such issue estoppel by paras 3 and 4 of the Deed of Settlement?

A: No.

(5) Q: Is Codock precluded from relying upon any such conventional estoppel by reasons of paras 3 and 4 of the Deed of Settlement?

A: No.

(7) Q: Is Codock barred from recovering reimbursement of ongoing Workers’ Compensation Costs by reasons of an Anshun estoppel arising from the conduct of the Arbitration, the Commercial Case Award and the Final Award?

A: No.

(8) Q: Is Codock estopped from recovering a 7.5% fee by reason of paras 3 and 4 of the Deed of Settlement?

167 I direct the parties to bring in short minutes of order to give effect to these reasons and to provide for the future conduct of this litigation. That is to be done within 14 days, at a time to be arranged between the parties with my associate. If the parties agree on the costs order to be made, the short minutes should so provide. If they cannot, I will hear argument on costs when the short minutes of order are brought in.

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Last Modified: 09/20/2004

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Citations

Cockatoo Dockyard v Commonwealth of Australia [2004] NSWSC 841

Most Recent Citation

Police v Prilja [2006] NSWLC 19

Cases Citing This Decision

6

Commonwealth of Australia v Cockatoo Dockyard Pty Ltd [2006] NSWCA 322

Supercall Pty Limited v Vodafone Pty Limited [2005] NSWSC 541

Cockatoo Dockyard v Commonwealth of Australia [No 2] [2005] NSWSC 11

Cases Cited

15

Statutory Material Cited

1

R v Trade Practices Tribunal; ex parte Tasmanian Breweries Pty Ltd [1970] HCA 8

Blair v Curran [1939] HCA 23

CITATION:	Cockatoo Dockyard v Commonwealth of Australia [2004] NSWSC 841
HEARING DATE(S):	19/7/04, 20/7/04, 26/7/04, 27/7/04
JUDGMENT DATE:	17 September 2004
JUDGMENT OF:	McDougall J at 1
DECISION:	See paras [166] and [167] of judgment
CATCHWORDS:	ESTOPPEL - where interim arbitral award delivered - issue estoppel - whether interim arbitral award creates issue estoppel - whether determination fundamental to arbitrator's decision - whether bar created by issue estoppel absolute - special circumstances exception to issue estoppel - whether special circumstances exception to issue estoppel in Arnold v National Westminster Bank Plc [1991] 2 AC 93 forms part of Australian law - whether absence of right to appeal constitutes ground for non application of issue estoppel - where deed of release - whether deed of release precludes plaintiff from relying on issue estoppel - whether deed of release precludes plaintiff from relying on conventional estoppel - whether estoppel rule of evidence or rule of substantive law - Anshun estoppel - whether plaintiff precluded by Anshun estoppel from recovering ongoing workers' compensation costs - whether deed of release precluded plaintiff from recovering fee
LEGISLATION CITED:	Commercial Arbitration Act 1984 (NSW)
CASES CITED:	Blair v Curran (1939) 62 CLR 464, 531-532 Thoday v Thoday [1964] P 181 Fidelitas Shipping Co Ltd v V/O Exportchleb [1966] 1 QB 630 Brewer v Brewer (1953) 88 CLR 1 Murphy v Abi-Saab (1995) 37 NSWLR 280 Arnold v National Westminster Bank Plc [1991] 2 AC 93 Humphries v Humphries [1910] 2 KB 531 Cooke v Rickman [1911] 2 KB 1125 New Brunswick Railway Company v British and French Trust Corporation, Limited [1939] AC 1 O'Toole v Charles David Proprietary Limited (1991) 171 CLR 232 Linsley v Petrie [1998] 1 VR 427 Tiufino v Warland (2000) 50 NSWLR 104 Henderson v Henderson 3 Hare 100, 115 (67 ER 313, 319) Port of Melbourne Authority v Anshun Proprietary Limited (1981) 147 CLR 589 Kingston City Council v Monash City Council [2001] VSC 41 Petrie v Linsley (1995) 21 MVR 413 Briggs v Hall & Anor (unreported, 8 November, 1994, BC 9401392) Meates v Taylor [1992] 2 NZLR 36 Hockin v Bank of British Columbia [1995] BCJ No 688 Robb v St Joseph's Health Care Centre [2001] OJ No 606 Stellar Properties Ltd v Botham Holdings Ltd [1994] BCJ No 639 Clayton v Garrett [1995] BCJ No 364 Mills v Cooper [1967] 2 QB 459 Rogers v R (1994) 181 CLR 251, 278 R v Humphrys [1977] AC 1, 27, 48 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 Tanning Research Laboratories Inc v O'Brien (1990) 169 CLR 332 Rippon v Chilcotin Pty Ltd (2001) 53 NSWLR 198 Boles v Esanda Finance Corporation Ltd (1989) 18 NSWLR 666 Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502 Orica Ltd v CGU Insurance Ltd (2003) 59 NSWLR 14
PARTIES :	Cockatoo Dockyard Pty Limited (Plaintiff) Commonwealth of Australia (Defendant)
FILE NUMBER(S):	SC 50165/01
COUNSEL:	T G R Parker/B F Katekar (Plaintiff) P T Taylor SC/D A Caspersonn (Defendant)
SOLICITORS:	Allens Arthur Robinson (Plaintiff) Australian Government Solicitor (Defendant)