Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd

EFFEM FOODS PTY LIMITED v. TRAWL INDUSTRIES OF AUSTRALIA PTY LIMITED
(RECEIVERS AND MANAGERS APPOINTED - IN LIQUIDATION); LAKE CUMBELINE PTY
LIMITED; IDOBOOK PTY LIMITED and OTHERS
No. NG508 of 1992
FED No. 488
Number of pages - 41
Estoppel; Judgments and Orders - Evidence
(1993) 115 ALR 377
(1993) 43 FCR 510

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Northrop(1) Burchett(2) and Lee(1) JJ

CATCHWORDS

Estoppel; Judgments and Orders - res judicata and issue estoppel - abuse of process - principle in Port of Melbourne Authority v. Anshun Proprietary Limited - whether dismissal of a company's action based on s. 52 of the Trade Practices Act created a res judicata binding directors and shareholders and other companies associated with the plaintiff, who had in various ways promoted its action, so as to estop them from maintaining separate actions under s. 52 for damage claimed to have been suffered by reliance on the same representations which founded the first action - discussion of res judicata as a defence requiring to be raised by the pleading of appropriate facts - whether a defence of res judicata may be raised by a motion for dismissal or a stay of proceedings - principles relating to the pleading of such a defence - whether any matter necessarily decided in the first action created an estoppel against the applicants in the later action - whether the applicants in the later action were privies of the plaintiff in the first action - examination of the doctrine of privity for the purposes of res judicata and issue estoppel - principle that there is no discretion in respect of an estoppel if it is actually applicable - reciprocity of estoppels - whether American authorities dealing with collateral estoppel and extending the doctrine of res judicata are applicable in Australia - application of principles of res judicata and issue estoppel to consent judgments.

Evidence - whether unverified pleadings in an action can be used as admissions.

Trade Practices Act 1974 (Cth), ss. 52 and 53

Trawl Industries of Australia Pty Limited (in liquidation) v. Effem Foods Pty Limited (1992) 36 FCR 406

Blair v. Curran (1939) 62 CLR 464

Jackson v. Goldsmith (1950) 81 CLR 446

Pigram v. Ramsay (1966) 68 SR (NSW) 141

Ramsay v. Pigram (1968) 118 CLR 271

Chamberlain v. Deputy Commissioner of Taxation (1988) 164 CLR 502

Port of Melbourne Authority v. Anshun Proprietary Limited (1981) 147 CLR 589

Sawtell v. Gay (1894) 20 VLR 559

Dallal v. Bank Mellat (1986) QB 441

Arnold v. National Westminster Bank Plc (1991) 2 AC 93

Golski v. Fink (1987) 14 FCR 143

Hines v. Birkbeck College (1992) Ch 33

New Brunswick Railway Co v. British and French Trust Corporation, Ltd (1939) AC 1

Shiels v. Blakeley (1986) 2 NZLR 262

Isaacs v. The Ocean Accident and Guarantee Corporation Ltd (1958) SR(NSW) 69

Marr (Contracting) Pty Limited v. White Constructions (ACT) Pty Limited (1991) 32 FCR 425

Carl Zeiss Stiftung v. Rayner and Keeler Ltd (1967) 1 AC 853

Young v. Public Service Board (1982) 2 NSWLR 456

Manners v. Transfield Pty Ltd (1992) 110 ALR 70

Bain v. Cooper (1841) 8 M and W 751; 151 ER 1242

Tobacco Institute of Australia Ltd v. Australian Federation of Consumer Organisations Inc (1988) 19 FCR 469

Saffron v. Commissioner of Taxation (1991) 30 FCR 578

Laws v. Australian Broadcasting Tribunal (1990) 170 CLR 70

HEARING

SYDNEY, 22-23 September 1992

#DATE 23:7:1993

Counsel for the Appellant: Mr J.N. West QC

with Mr R.M. Smith

Solicitors for the Appellant: Messrs Sly and Weigall

Counsel for the Second to Mr A.J. Sullivan QC
Sixth Respondents: with Mr J.B. Whittle

and Mr M.H. Southwick

Solicitors for the Second Messrs Blake Dawson
to Sixth Respondents: Waldron

ORDER

The Court orders that:

1. The appeal be dismissed.

2. The appellant pay the respondents' costs.

3. The first respondent cease to be a party to the appeal.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

NORTHROP AND LEE JJ This appeal involves a consideration of the doctrine of res judicata and in particular its nature and the relationship between parties and their privies in the application of the doctrine. The doctrine is stated in Spencer Bower and Turner, the Doctrine of Res Judicata 2nd Ed at paras 1-4 as follows:

"Introductory

1. In English jurisprudence a res judicata, that is to say a final judicial decision pronounced by a judicial tribunal having competent jurisdiction over the cause or matter in litigation, and over the parties thereto, disposes once and for all of the matters decided, so that they cannot afterwards be raised for re-litigation between the same parties or their privies. The effect of such a decision is two-fold.

Parties estopped from averring to the contrary

2. In the first place, the judicial decision estops or precludes any party to the litigation from disputing, against any other party thereto, in any later litigation, the correctness of the earlier decision in law and fact. The same issue cannot be raised again between them, and this principle extends to all matters of law and fact which the judgment, decree, or order necessarily established as the legal foundation or justification of the conclusion reached by the Court. Transit in rem judicatam

3. In the second place, by virtue of the decision the right or cause of action set up in the suit is extinguished, merging in the judgment which is pronounced. Transit in rem judicatam. The result is that no further claim may be made upon the same cause of action in any subsequent proceedings between the same parties or their privies.

4. Every judicial decision such as is described in paragraph 1 above operates, in a word, both as an estoppel and as a merger. ..."

In principle, res judicata is a defence to a claim in a legal proceeding. Traditionally it is a technical defence allowing no discretion in the court. The defence, if made out, is a complete bar to the claim. Unfortunately lack of a clear dichotomy between the defence of res judicata and similar defences based upon estoppel can give, and has given, rise to confusion in Australia, England and the USA. To some extent the absence of a clear dichotomy in this area of the law is apparent in this case.
At this stage it is useful to draw attention to an aspect of the lack of a clear dichotomy by referring to what was said by Fullagar J in Jackson v Goldsmith (1950) 81 CLR 446. Although Fullagar J dissented in the judgment of the High Court, his exposition on this aspect of the matter can be treated as authority since his dissent was based upon the application of the principle to the facts of that case. That case involved pre Judicature Act pleadings and there was some doubt as to what was involved in the pleadings, but it appears that there was a plea of res judicata and issue estoppel. At pages 466 to 468 Fullagar J said:

"Before examining the nature and effect of the plea thus in question it is necessary to consider for a moment the rules of law involved. Those rules are not, I think, in doubt, and they are not likely often to give rise to serious difficulty so long as it is recognized that there are two quite distinct and different principles. The distinction has been sometimes obscured by the absence of a generally accepted terminology. But it was clearly understood and appreciated by all the learned judges of the Full Court in the present case. On the whole I think myself that the two best terms to use are "res judicata" and "issue estoppel." The latter term seems to have been first used by Higgins J in Hoysted v. Federal Commissioner of Taxation

(1921) 29 CLR, at p 561. It has often been used since, and it was adopted by Dixon J in Blair v. Curran (1939) 62 CLR, at pp 531, 532. It has the great advantage of being quite unambiguous. The term "estoppel by record" is an alternative to "issue estoppel" and it is a term which has been in use for a very long time. But while it is not open to any prima-facie objection, it has become ancipitis usus, being used sometimes as equivalent to issue estoppel, sometimes as equivalent to res judicata and sometimes as describing a supposed common principle from which both the rule as to res judicata and the rule as to issue estoppel are derived.

The rule as to res judicata can be stated sufficiently for present purposes by saying that, where an action has been brought and judgment has been entered in that action, no other proceedings can thereafter be maintained on the same cause of action. This rule is not, to my mind, correctly classified under the heading of estoppel at all. It is a broad rule of public policy based on the principles expressed in the maxims "interest reipublicae ut sit finis litium" and "nemo debet bis vexari pro eadem causa."

The rule as to issue estoppel is generally stated in the words of Lord Ellenborough in Outram v. Morewood (1803) 3 East, at p 355 (102 ER, at p 633). His Lordship said that parties and privies are "precluded from contending to the contrary of that point, or matter of fact, which having been once distinctly put in issue by them . . . has been, on such issue joined, solemnly found against them." This is, I think, a true case of estoppel, analogous to estoppel by deed and estoppel by representation. The same rule was concisely stated by Dixon J in Blair v. Curran (1939) 62 CLR, at p 531 where his Honour said:- "A judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or their privies." It is unnecessary here to discuss these two principles further beyond noting two points.

In the first place, if A sues B to judgment and in subsequent proceedings between them a plea of res judicata is raised, the primary question will be whether the cause of action in the later proceedings is the same as that which was litigated in the former proceedings. This was the question which arose in the well-known case of Brunsden v. Humphrey (1884) 14 QBD 141. It was held there that the causes of action were not the same. The injuria was the same but the damnum was different, and, since damage was "of the gist" of the particular action, the causes of action were not the same. The plea therefore failed. On the other hand, if A sues B to judgment and in subsequent proceedings between them a plea of issue estoppel is raised, the plea may succeed although the causes of action in the two cases are entirely different. The question will be whether an issue of fact or law which is raised in the later proceedings was an issue of fact or law which was also raised in the earlier proceedings and therein determined.

In the second place, it follows from the very nature of the difference between the plea of res judicata and the plea of issue estoppel that different materials are relevant in each case. Where the plea is of res judicata, only the actual record is relevant. Where the plea is of issue estoppel, any material may be looked at which will show what issues were raised and decided. Reasons given for the judgment pronounced are likely to be particularly important for this purpose: see Ord v. Ord (1923) 2 KB, at p 440 and Marginson v. Blackburn Borough Council (1939) 2 KB, at p 437. Both those cases were cases of issue estoppel and were clearly treated as such, though I think, with great respect, that both illustrate the unfortunate absence of a clear legal terminology, to which I have already referred. It should perhaps be added that, as Dixon J pointed out in Blair v. Curran (1939) 62 CLR, at p 532, the estoppel, so far is it applies to facts, is confined to ultimate facts. It does not extend to mere evidentiary facts.

The only difficulty of the present case seems to me to lie in determining whether the plea in question is to be regarded as a plea of res judicata or as a plea of issue estoppel. If it is a plea of res judicata, it seems obvious that it cannot stand. It is plain from the face of the pleadings that such a plea is wholly inappropriate. ...

On the other hand, Jackson, in his declaration of third party claim, alleges that Goldsmith "so negligently drove and managed his motor car upon a public highway that the same collided with a motor cycle driven by Jackson." This allegation, of course, states by no means the whole of Jackson's alleged cause of action against Goldsmith. But it states something which Jackson must allege and prove in order to succeed in his claim to contribution or indemnity. On that allegation issue has been joined between Jackson and Goldsmith. If in former proceedings between Jackson and Goldsmith that very issue was determined in Goldsmith's favour as between him and Jackson, then Jackson is now precluded from alleging the contrary against Goldsmith. And a plea that that very issue was so determined in those former proceedings will be a good plea of issue estoppel."

Thus it is clear that the defence of res judicata is different from the defence of issue estoppel. The matter becomes more confusing when other phrases are used to describe the same defences. In addition there are a number of other phrases used to describe similar and related matters.
In England it appears the leading authority is now Carl-Zeiss-Stiftung v Rayner and Keeler Ltd (No 2) (1967) 1 AC 853. There are a number of unusual features about that case. It involved a lengthy hearing. It was heard before the House of Lords on 24 days. It arose out of proceedings which had been commenced in England in which the defendants, by summons, sought to have the proceeding dismissed on the ground that it had been begun by the solicitors for the plaintiffs and was being maintained without the authority of the plaintiff. A large number of issues were raised before the House of Lords, one of which related to res judicata. One aspect of that issue was whether the plaintiff was a privy of a party in a earlier action which had been determined by a legal authority in the German Democratic Republic. At p 909 to 910 Lord Reid said:

"This question, whether these solicitors are maintaining this action without the authority of the Stiftung, is the sole question which your Lordships now have to determine. There is a vast amount of authority on estoppel per rem judicatam.

"The object of the rule of res judicata is always put upon two grounds - the one public policy, that it is the interest of the state that there should be an end of litigation, and the other, the hardship on the individual, that he should be vexed twice for the same cause" (per Lord Blackburn in Lockyer v. Ferryman (1877) 2 App Cas 519, 530, HL(Sc.)).

And the general principle is clear that the earlier judgment relied on must have been a final judgment, and that there must be identity of parties and of subject matter in the former and in the present litigation. But each of these three requirements can give rise - and in the present case does give rise - to difficult questions. ...

Again there is no doubt that the requirement of identity of parties is satisfied if there is privity between a party to the former litigation and a party to the present litigation. The only way in which that could be satisfied in this case would be if there were privity between the Council of Gera and the solicitors."

At pages 933 to 934 Lord Guest said:

"The first question which arises on what may conveniently be described as the second stage of the case is whether the appellants are estopped per rem judicatam by the judgment of the West German court from arguing, in answer to the respondents' summons to stay the proceedings, that the appellants have authority to raise this action in name of the Carl-Zeiss-Stiftung. A considerable part of the argument was devoted to this question, which is not without difficulty and raises a number of complicated issues.

The doctrine of estoppel per rem judicatam is reflected in two Latin maxims, (1) interest rei publicae ut sit finis litium, and

(2) nemo debet bis vexari pro una et eadem causa. The former is public policy and the latter is private justice. The rule of estoppel by res judicata, which is a rule of evidence, is that where a final decision has been pronounced by a judicial tribunal of competent jurisdiction over the parties to and the subject-matter of the litigation, any party or privy to such litigation as against any other party or privy is estopped in any subsequent litigation from disputing or questioning such decision on the merits (Spencer Bower on Res Judicata, p 3). As originally categorised, res judicata was known as "estoppel by record." But as it is now quite immaterial whether the judicial decision is pronounced by a tribunal which is required to keep a written record of its decisions, this nomenclature has disappeared and it may be convenient to describe res judicata in its true and original form as "cause of action estoppel." This has long been recognised as operating as a complete bar if the necessary conditions are present. Within recent years the principle has developed so as to extend to what is now described as "issue estoppel," that is to say, where in a judicial decision between the same parties some issue which was in controversy between the parties and was incidental to the main decision has been decided, then that may create an estoppel per rem judicatam."

In discussing the doctrine of res judicata and the relationship between a party and a privy Lord Upjohn said at pages 945 to 947:

"I can see nothing in the solicitors' relationship with his client which renders them privy to one another in the ordinary sense in which privy or privity is used for the purposes of the doctrine.

As has been said in Halsbury's Laws of England, 3rd ed., Vol. 15

(1956), pp 196-197, para. 372, privies are of three classes:

(1) privies in blood, (2) privies in law and (3) privies in estate, but they all have an interest in the subject-matter of the action. Though your Lordships have been referred to a number of authorities in other courts which may expand the meaning of privy, none touch on the question before your Lordships, where the lis has nothing to do with the substance of the action itself.

In my opinion, Courts and Co. cannot be described as privy to the council so as to preclude them from trying to establish their authority to issue the writ, unless, by reason of some requirement of the law to meet new conditions, a greatly extended meaning beyond anything it has borne before is to be given to the word, a matter to which I shall return later. ... The broader principle of res judicata is founded upon the twin principles so frequently expressed in Latin that there should be an end to litigation and justice demands that the same party shall not be harassed twice for the same cause. It goes beyond the mere record; it is part of the law of evidence for, to see whether it applies, the facts established and reasons given by the judge, his judgment, the pleadings, the evidence and even the history of the matter may be taken into account (see Marginson v. Blackburn Borough Council (1939) 2 KB 426). Res judicata itself has two branches: (1) cause of action estoppel - that is where the cause of action in the second case has already been determined in the first. To such a case the observations of Wigram V.-C. in Henderson v. Henderson 3 Hare 100, 115 apply in their full rigour. These observations have been so often approved in your Lordships' House that I will not repeat them. I need not pursue this matter further for the alleged res judicata with which your Lordships are concerned certainly has nothing to do with any cause of action in the proceedings. (2) Issue estoppel - a convenient phrase first coined apparently by Higgins J in the High Court of Australia in Hoystead (sic) v. Federal Commissioner of Taxation (1921) 29 CLR 537, 561, whose dissenting judgment was upheld by the Privy Council in 1926

(1926) AC 155; 42 TLR 207, PC. But issue estoppel has been recognised ever since The Duchess of Kingston's Case 20 St Tr 355 and there are many quite early examples of it, see, for example, Reg. v. Inhabitants of the Township of Hartington Middle Quarter 4 E and B 780 and many others."

In the High Court in Ramsay v Pigram (1968) 118 CLR 271, in speaking on the nature of the relationship between a party and privy, Barwick CJ said at p 279:

"Of the three classes of privies of blood, of title and of interest, the only one which is submitted and indeed could be submitted to be relevant is that of a privy in interest. But I am unable to conclude that the Government or the Police Department was in this sense a privy of the police officer. The basic requirement of a privy in interest is that the privy must claim under or through the person of whom he is said to be a privy. Here it is quite clear that the Government had no interest in the action between the respondent and the police officer: nor can it be said that the action brought by the police officer was brought by him in any sense on behalf of the Government or that in relation to the defence of contributory negligence the respondent could have been treating the Government as the real "defendant" to that claim. In every respect the action between the respondent and the police officer was personal to each of them, neither being in any sense in relation to the action or any of the issues involved in it, representative of another. Nor can it be said that the Government in any sense claims under or in virtue of the police officer or of any right of his, or that it derives any relevant interest through him."

The facts giving rise to the present appeal are lengthy and confusing but for the purposes of the appeal can be summarized. The appellant, Effem Foods Pty Ltd (Effem), and Trawl Industries of Australia Pty Ltd (Trawl) were opposing parties in proceedings in the Supreme Court of New South Wales. Trawl sought relief against Effem based on a number of causes of action. Effem counter-claimed for relief against Trawl. The causes of action relied on by Trawl included rectification of agreement, breach of agreement, claims based upon s52 of the Trade Practices Act 1974, and estoppel. Effem relied upon causes of action including breach of agreement. By agreement between the parties to that proceeding a trial was held on the issues of the agreement, the other claims being deferred. On 26 October 1989 the Supreme Court gave judgment in favour of Effem. On 9 November 1989 judgment was entered in the Supreme Court proceeding. Although the only issue tried related to the contract between the parties, final orders which, apparently, were by consent, related to all of the claims made by Trawl, including claims based upon s52 of the Trade Practices Act. The order as entered was as follows:

"THE COURT ORDERS that:

1. Verdict and judgment be entered for the Defendant on the Plaintiff's Further Amended Points of Claim.

2. Verdict and judgment be entered for the Defendant on the Defendant's Cross-Claim.

3. The proceedings be referred to a Master for assessment of the Defendant's damages.

4. The Plaintiff pay the Defendant's costs. THE COURT DECLARES that:

5. The Plaintiff has repudiated the agreement dated 7 June 1988 between the Plaintiff and the Defendant and that agreement has been terminated by acceptance of that repudiation by the Defendant."

The parties accept that this order constituted a final order between Trawl and Effem in relation to the cause of action by Trawl based upon the Trade Practices Act.
On 20 March 1990 the respondents to this appeal, as applicants, instituted proceedings in the Federal Court against Effem as respondent. It is important to note the relationships of the applicants in that proceeding in which Trawl and the other parties had joined to bring action against Effem. By that time receivers and managers had been appointed with respect to the affairs of Trawl. The second applicant, Lake Cumbeline, Pty Ltd (Cumbeline), owned all the shares in Trawl. The fourth applicant, Peter Horrobin (Horrobin) was a director of Trawl and of Cumbeline and owned a third interest in Cumbeline. The fifth applicant, Richard Sands (Sands), was a director of Trawl and Cumbeline and owned a third interest in Cumbeline. The sixth applicant, Raymond Pridmore (Pridmore), was a director of Trawl and Cumbeline. The remaining third interest in Cumbeline was owned by Meriodoc Pty Ltd but there is no evidence to show who controlled that company. The third applicant Idobook Pty Ltd (Idobook), had lent money to Trawl and Cumbeline. Sands and his wife were directors of Idobook which was owned by Sands, his wife and a company owned by members of Sands family.
By the proceedings in the Federal Court the applicants sought relief under s82 of the Trade Practices Act. They sought to recover their alleged loss or damage suffered by reason of conduct by Effem in contravention of sections 52 and 53 of the Trade Practices Act. Damages were claimed also in tort for negligence. To quote from the judgment under appeal the position was as follows:

"Put broadly, these complaints are based upon allegations of representations by Effem which were made on a number of occasions between March 1987 and March 1988, that is to say before entry by Trawl and Effem into the Heads of Agreement on 7 June 1988 and which concerned the prospective business relationships later consummated by Trawl and Effem in the heads of agreement."

It was these Heads of Agreement which formed the basis of the proceedings in the Supreme Court of New South Wales between Trawl and Effem and the representations were the same as the representations which had been alleged in the Supreme Court of New South Wales proceedings.

The applicants filed a Statement of Claim with their application. By Notice of Motion dated 2 May 1990 Effem sought orders that the proceedings be transferred to the Commercial Division of the Supreme Court of New South Wales, alternatively "that these proceedings be stayed or dismissed". In the meantime Trawl had appealed to the Court of Appeal in New South Wales against the order of the Supreme Court entered on 9 November 1989. In these circumstances the hearing of the motion was stood over to wait the outcome of that appeal. On 19 March 1992 the New South Wales Court of Appeal dismissed the appeal by Trawl and also dismissed a cross-appeal by Effem. Earlier on 8 August 1990, a liquidator to Trawl was appointed by the Supreme Court of Victoria on the application of a creditor being a stranger to the existing litigation in New South Wales and in the Federal Court.
The motion came on for hearing before the Federal Court constituted by Gummow J on 11 and 12 May 1992. The essence of the contention in support of the motion by Effem was that Trawl; "having agreed to split the first case, suffered an adverse finding on credit in respect of the evidence bearing upon the critical legal term, consented to judgment against it on the whole of its Further Amended Points of Claim, and lost an appeal, still seeks in this Court to vex it (Effem) a second time in respect of the factual matrix", per Gummow J.
An interesting illustration of how a defence of res judicata operates appears in Sawtell v Gay (1894) 20 VLR 559 in the judgment of Holroyd J In that case, the question was at what stage should the defence of res judicata be determined. What was made clear was that res judicata was a defence to be raised by alleging facts which gave rise to that defence. In that case, a mining warden proposed to dismiss a summons on the ground of res judicata before the complainant had entered upon his case. The warden was persuaded to state a case to the Supreme Court. At p 560 Holroyd J said:

"In my opinion the warden was wrong in not entertaining the case. Any defendant who is entitled and desires to avail himself of the defence of res adjudicata must prove that the matter in issue on the second summons was determined on the hearing of the first. This defence having been proved will be a bar to the suit in favour of such defendants or defendant. But the proof cannot be given until after the complainant has closed his case. The procedure in the Warden's Court does not, as it seems to me, admit of a plea of res adjudicata being heard and disposed of before the complainant calls evidence. In Summers v Cooper 5 VLR

(M) 42 the complainant called all his witnesses in the second suit, adding to the evidence he had adduced in the first; and afterwards the identity of the matter in issue in the second suit having been established, the second suit was held to be barred by the previous adjudication. Ordinarily the defence of res adjudicata would be good only between persons who were parties to the former proceedings; but if in this second suit the new defendant, who was not a party to the first, claims under the other defendants or any of them, the defence may be good as to him also. I shall answer the question reserved by stating that in my opinion the warden was wrong in not entertaining the case; but that the defence of res adjudicata may be proved after the plaintiff has closed his case."

Modern Rules of Court normally contain provisions allowing for specific matters to be determined before trial. In the present case, Effem has not asserted that the statement of claim comes within O11 r16 or O20 r2 of the Federal Court Rules. If Effem had filed a defence raising an issue of res judicata, that defence should have set out the material facts on which it relied, but not the evidence by which those facts were to be proved; O11 r2. No demurrer is permitted under the Federal Court Rules, O20 r2(3), but if so advised the applicants could have moved the Court under O11 r16 for an order that the defence disclosed no reasonable defence. On such a motion, the facts as stated in the defence would have to be taken as proved. Alternatively, at the close of the pleadings, the defence of res judicata could be directed to be heard and determined as a separate issue before trial; see O29. If that course was followed, it would be necessary to have evidence before the Court as on any trial of an issue.
In the present case Effem, as respondent in the Federal Court proceeding, moved the Court presumably pursuant to O20 r2 or O11 r16 of the Federal Court Rules. Order 20 r2 is as follows:

"2.(1) Where in any proceeding it appears to the Court that in relation to the proceeding generally or in relation to any claim for relief in the proceeding:

(a) no reasonable cause of action is disclosed;

(b) the proceeding is frivolous or vexatious; or

(c) the proceeding is an abuse of the process of the Court, the Court may order that the proceeding be stayed or dismissed generally or in relation to any claim for relief in the proceeding.

(2) The Court may receive evidence on the hearing of an application for an order under subrule (1)."

Order 11 r16 is as follows:

"16. Where a pleading:

(a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading;

(b) has a tendency to cause prejudice, embarrassment or delay in the proceeding; or

(c) is otherwise an abuse of the process of the Court, the Court may at any stage of the proceeding order that the whole or any part of the pleading be struck out."

Problems arose on the hearing of the appeal because Effem did not rely upon any of the grounds set out in those rules. Other problems arose because the issues between the parties had not been defined by pleadings or otherwise. Effem had not filed or served a defence to the statement of claim. On one view, the correct procedure to have been followed was for Effem to plead to the statement of claim and raise res judicata as a defence. The defence should have stated the facts upon which that defence was based. Similar defences based upon estoppel or other conduct could have been raised. In any event, on a defence of res judicata being raised, the applicants could have moved the Court to strike out the defence, or the issue could have been determined as a separate question under O29. In the present case, it seems to have been assumed that a defence of res judicata would be taken and that this affected the nature of the claims being made by the applicants. In truth, res judicata is a defence to be raised by a pleading. In the absence of a properly pleaded defence, the hearing of the motions and this appeal appear to have become unlimited in scope.
On 9 June 1992, Gummow J ordered that the proceedings by Trawl be stayed but that otherwise the motion be dismissed. At the same time his Honour published his reasons for those orders. As a result of the orders made, Cumbeline, Idobook, Horrobin, Sands and Pridmore, as applicants, were free to prosecute their claims against Effem as respondent. Trawl did not seek to appeal from the order of Gummow J. Effem did not seek leave to appeal from the order of Gummow J.
By notice dated 1 July 1992, Effem gave notice that it would move the Court on 10 July 1992 for leave to re-open the hearing of its motion notice of which had been filed on 2 May 1990 and was the subject of the orders made on 9 June 1992 and sought "such further or others orders as the Court thinks fit". That motion was heard by the Court constituted by Gummow J on 10 July 1992. On 17 July 1992 the Court ordered that Effem have leave to re-open its case, that the orders pronounced on 9 June 1992 be not varied and that Effem pay the costs of its motion filed 1 July 1992. At the same time the Court published its reasons for those orders. Those reasons are to be read with the reasons published on 9 June 1992. On the same day the Court ordered that Effem have leave to appeal from the orders dismissing the motion as against the applicants to the proceeding other than Trawl.
On the second motion, Effem relied on material filed in proceedings in the Supreme Court of Victoria supporting the view that Cumbeline, Idobook, Horrobin and Sands had in reality participated so actively in the conduct of the proceedings of Trawl in the Supreme Court of New South Wales that they had assumed the roles of actual parties in that action with the result that the doctrine of res judicata should apply to stay the action in the Federal Court. The findings of Gummow J were:

"However, having regard to the whole of the evidence as it now stands, I would conclude that the second, third, fourth and fifth applicants participated so actively in the conduct of the Supreme Court litigation that in substance they assumed the roles of actual parties. The receivers were funded by Lake Cumbeline, which indemnified them. The receivers acted upon Mr Horrobin's advice as to the significant chances of success in the litigation. I would further conclude that Mr Horrobin and the other relevant applicants acted as they did in implementation of concerted arrangements and understandings between them, and that the ANZ Bank, although holder of the first ranking security over the assets of Trawl, stood by while the litigation (Trawl's remaining substantial asset) was conducted in this fashion. But I would not conclude that the sixth applicant, Mr Pridmore, participated so actively in the carriage of the litigation that in substance he assumed the role of a party thereto. Had I regarded it as open for me to do so I would have held that, within the meaning of the United States authorities, to which I referred, there was available in the Court against the second, third, fourth and fifth applicants a plea of res judicata on the ground of privity in interest.

However, given the position I have taken as to the effect of the present High Court authority, the views I have expressed above do not dictate a different outcome to that already indicated in the reasons for judgment delivered 9 June 1992."

Before turning to the submissions made on behalf of Effem, it is necessary to make some comments concerning the limits to the issues raised by this appeal. Effem has not filed any defence in the Federal Court proceeding but at the hearing of the motions before Gummow J counsel for Effem expressly disavowed any reliance by way of defence on either issue estoppel or upon the concept of abuse of process of the Court. In the result, the only issue related to whether a defence of res judicata, if pleaded, would be effective. The only way that the defence of res judicata could be effective against the applicants other than Trawl would be if they were privies of Trawl. In the present case, the relevant class of privy is that of interest. The traditional view is that the basic requirement of a privy in interest is that the privy must claim under or through the person of whom he is said to be a privy; see Barwick CJ in Ramsay v Pigram at p 279. On the facts of this appeal, it cannot be said that the applicants in the Federal Court proceeding, other than Trawl, are claiming under or through Trawl. In these circumstances, counsel for Effem is attempting to extend the concept of privy of interest to include economic interest in conformity with developments in the jurisprudence of the United States of America.
The causes of action determined in the Supreme Court of New South Wales arose as between Trawl and Effem. The phrase "cause of action" has been described by Lord Esher MR in Read v Brown (1888) 22 QBD 128 at p 131 as:

" ... every fact which it would be necessary for the plaintiff to prove, if traversed, in order to support his right to the judgment of the court. It does not comprise every piece of evidence which is necessary to prove each fact, but every fact which is necessary to be proved."

The definition was accepted by Kelly J in Golski v Fink (1987) 14 FCR 143 at p 145. At the same page Kelly J referred to the manner in which Diplock LJ defined a "cause of action" in Letang v Cooper (1965) 1 QB 232 at 242-243 as:

"simply a factual situation the existence of which entitles one person to obtain from the court a remedy against another person."

See also Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 per Gibbs CJ, Mason and Aicken JJ at p 597 and per Brennan J at pp 608-613.
In the proceeding in the Federal Court, the causes of action relied upon by the applicants, other than Trawl, are completely separate and distinct from the causes of action the subject of the judgment in the action between Trawl and Effem in the Supreme Court of New South Wales. The causes of action involve different parties. Those applicants do not in any way rely on any right arising from that judgment either directly or by derivation. The passage already cited from the judgment in Ramsay v Pigram has direct application. Gummow J so held.
At the hearing of the second motion, counsel for Effem sought to rely upon affidavits and pleadings filed by the applicants, other than Trawl, in the proceedings in the Supreme Court of Victoria as admissions. This was done without objection. It seems clear that pleadings in an action, unless verified, cannot be used as admissions; see Laws v Australian Broadcasting Tribunal (1990) 170 CLR 70 per Mason CJ and Brennan J at pp 84-86. This matter, however, does not arise as an issue in this appeal and, for present purposes, it is appropriate to accept the findings made by Gummow J in his reasons for judgment for the second motion as set out earlier in these reasons. At the present time, the position of Pridmore can be put to one side. Earlier in those reasons, Gummow J had said:

"The effect of additional evidence is to strengthen the factual basis for what the respondent says should be the application of the United States decisions dealing with privity in interest. In the earlier reasons for judgment I concluded that any introduction into Australia of these doctrines was a matter for the High Court, after reconsideration of Ramsay v Pigram (1968) 118 CLR 271."

There is much to support the opinion so expressed in the second of those paragraphs.
Before the Full Court, the primary submission put by counsel for the appellant was that the ratio decidendi in Ramsay v Pigram did not limit the application of the defence of res judicata, in so far as privity of interest was concerned, to persons claiming through a party to the earlier proceedings. This involved a detailed analysis of the judgments in that case.
In Ramsay v Pigram, the issue was raised by way of demurrer thus no evidence had been led. On one view the issue raised was a plea of issue estoppel, but that phrase appears to have been used to include a plea of res judicata. The proceedings arose out of a motor car collision between a car driven by Pigram and a car driven by a Mr Thrift who was driving a car owned by the Government of New South Wales (the Police Department) in the course of his employment by the Police Department. Mr Thrift sued Pigram for damages in the District Court of New South Wales and recovered damages. A plea of contributory negligence by Pigram failed. In separate proceedings in the Supreme Court of New South Wales, Pigram sued Thrift and Mr Ramsay, the latter being a nominal defendant appointed in that behalf pursuant to Claims Against the Government and Crown Suits Act 1912 NSW, seeking damages for personal injury. The action against Thrift was discontinued. Mr Ramsay, the remaining defendant, raised a plea based on issue estoppel arising from the judgment in the District Court. As Barwick CJ said at p 275 "... the appellant (Ramsay) has claimed that because of the findings involved in the verdict and judgment for the police officer (Thrift) ---, the respondent (Ramsay) is estopped from asserting in this action that the police officer by his want of reasonable care in the driving of the Government's car had caused the collision and its resultant damage."
Mr Pigram demurred to the plea. The Supreme Court (Court of Appeal Division) upheld the demurrer on the basis that no issue estoppel was available to Ramsay because of the lack of identity of the parties to the two actions and of any relevant privity between the Police Department and Thrift.
The High Court judgments contain overtones of policy considerations relating to the peculiar problems arising from injuries caused by motor car accidents and involving negligence and contributory negligence but those overtones do not affect the legal principles applied. The Chief Justice held that the causes of action were different and so no issue estoppel could arise. By analogy, that reasoning should apply to the present case. At pp 278-9 His Honour said:

"Thus, though the act in question be the same in each case and, if you will, though I think it not to matter, the evidence establishing it be the same, the issues raised in each case are not, upon a proper analysis, identical. In the District Court what was involved is the defence of contributory negligence was, inter alia, the police officer's personal duty towards the respondent. In this action it is a breach of the Government's duty towards the respondent which is alleged. For lack of the necessary identity in the issues, the appellant's plea in this action, in my opinion, was demurrable."

His Honour then continued:

"However, as it may be thought by some, though I may say I do not, that even though estoppels be odious, this is a very narrow ground on which to decide the matter, and as the argument before this Court ranged over other aspects of the subject, I propose to deal with the appeal from hereon on the footing that the issues in the two cases are identical.

Clearly in this case the actual parties to the Supreme Court action are not the same as the parties to the District Court action. But it is said that the Government was a privy of the police officer who in its service drove its vehicle on the occasion out of which the claims of the parties arose. The question in this case therefore at this point is simply whether there was relevant privity between the Government and the police officer."

There then appears the passage set out at the beginning of these reasons. Counsel for Effem contended before us that that passage was mere obiter because His Honour had already expressed his opinion that the demurrer should be disallowed. However, it seems clear that by using the words "I propose to deal with the appeal from hereon on the footing that the issues in the two cases are identical" the Chief Justice was basing his judgment on facts assumed in favour of Mr Pigram but nevertheless finding against him on the basis of there being no privity of interest. In the present case, it cannot be disputed that the causes of action in the Supreme Court of New South Wales and in the Federal Court are different (with the exception of Trawl) because the parties are different. Thus, here, the only issue relates to the question of privity of interest.
Earlier in his reasons, the Chief Justice had said at pp 275-6:

"The question is whether the respondent is prevented by any of the findings in the former action from asserting in this action that the police officer drove the appellant's car with lack of that care which the circumstances required. The principles applicable to the resolution of that question in Australian law are well settled. The relevant law is the common law and both English and Australian decisions as to it indicate a clear conclusion. In thus emphasizing the position in Australia, I mean to acknowledge that there has been divergent treatment of the question in some parts of the United States of America. In my opinion, apart from the obligation to respect binding precedent, I would not be prepared to accept the approach manifest in the American decisions on this question to which we were referred in argument."

McTiernan J allowed the appeal on two grounds, namely that the want of identity of duties involved in the two actions led to the conclusion that the relevant issues in the two actions were not the same; see p 284. His Honour also decided the matter on the absence of privity of interest. At p 282-3 His Honour said:

"As the parties in the two relevant actions are not the same it is necessary in order to make applicable the doctrine of estoppel that the present action involves one of the parties to the earlier action and a privy of the other. The submission on behalf of the appellant was that a person can be privy to a party where there is a community or privity of interest between them (Carl-Zeiss-Stiftung v Rayner and Keeler Ltd (1967) 1 AC 853, at p 935). It is claimed by the appellant that where, in an action for personal injury arising out of the use of a motor car, the legal responsibility of the owner is purely vicarious and dependent upon the doctrine of respondeat superior, the owner and driver have such a community of interest as defendants, or potential defendants, to be entitled to have the benefit of an issue estoppel arising in favour of one or the other. According to the appellant's argument, this proposition is restricted to cases where the so-called privies are in the position of defendants. This proposition is, I think, in conflict with the requirement of mutuality which has been accepted as being essential in cases of estoppel similar to the present case. No substantial reason has been advanced for departing from the well-established principle that no one can take advantage of a judgment unless he would also have been concluded by the judgment had it gone against him. No finding in the action in the District Court at Gundagai, if Thrift had lost it, could have operated as an estoppel against the present appellant in a subsequent proceeding. Antecedent to the application of the rule that estoppels ought to be mutual is, however, the establishment of the necessary relationship or privity between the parties. In my opinion, s16 of the Motor Vehicles (Third Party Insurance Act 1942 (NSW) does not operate to create sufficient community of interest between the owner (as defined in the Act) of a vehicle and the driver for this purpose. Section 16 provides that the driver of certain insured vehicles is deemed to be the agent of the owner, acting within the scope of his authority, for the purpose of enabling a third party injured by the negligence of the driver to recover against the owner who is obliged to procure insurance against liability for bodily injuries or death caused by the use of the vehicle. It is to be observed that s16 does not speak in terms of liability, it speaks in terms of agency (cf Behrendorff v Soblusky (1957) 98 CLR 619 at p 622). This section does not necessarily create between such parties a relationship of vicarious liability similar to that existing between two joint tortfeasors. It merely attributes the liability of the statutory or imputed agent to the defined owner for purposes of recovery of damages for injury caused by the driving of certain vehicles by the former. The statutory fiction of agency created is for purposes of the Act only."

Kitto J agreed with the reasons of Taylor J who relied upon the absence of any relevant privity of interest between Ramsay and Thrift. Most of the reasons of Taylor J relate to the principles arising as between joint tort-feasors. At p 288 His Honour said:

"Further a release of one of two joint tortfeasors would also provide an answer to an action by the plaintiff against the other and, finally, it would seem that judgment for the defendant in favour of one joint tortfeasor may well have provided an answer to a subsequent action by the plaintiff against the other. But by s5 of the Law Reform (Miscellaneous Provisions) Act 1946, it is provided that:

"Where damage is suffered by any person as a result of a tort - judgment recovered against any tort-feasor liable in respect of that damage shall not be a bar to an action against any other person who would, if sued, have been liable as a joint tort-feasor in respect of the same damage." The effect of this legislative enactment is, of course, to permit successive actions to be brought against individual joint tortfeasors and the result of this must be to destroy the basis upon which it might, perhaps, have been asserted that at common law joint tortfeasors were in the same situation as privies for relevant purposes. That being so, and there being no other ground upon which it can be thought that the appellant and Thrift were privies, I am of the opinion that the plea cannot be sustained and that the appeal should be dismissed. In reaching this conclusion I have not overlooked the United States decisions to which we were referred and the long line of authority on the point which exists in that country. But the law in this country has developed along different lines and, if it is to be changed at this stage to accord with the submissions of the appellant, it is a matter for the legislature."

At p 289 Windeyer J said:

"Whatever the way by which it is said that the appellant would be liable for the consequences of negligence on the part of Thrift, the first question which arises is whether the appellant was in a relevant sense a privy of Thrift. Unless that be so the plea of estoppel fails at the outset. If the appellant and Thrift were in the relevant sense privies, the next question would then arise - whether the critical issue in this case is identical with any issue raised and determined in the case in the District Court. In my opinion each of these questions should be answered in the negative."

His Honour held there was no sufficient privity of interest between Thrift and Ramsay in order to establish the plea, see pp 289-90. His Honour then turned to consider the question of whether the issues in the two were identical. On this aspect, he agreed with the views of the Chief Justice. At p 290 His Honour said:

"It was said that there are considerations of policy, illuminated by judgments in the United States, which tell against our upholding the demurrer to the plea of estoppel in this case. I think the state of the law forces us to do so."

From this analysis, it is apparent that each member of the High Court considered, referred to and applied the doctrine of "privy" in relation to the determination of issue estoppel. The words "res judicata" were not mentioned, but the doctrine of "privy" has equal application to the defences of "res judicata" and "issue estoppel" and even "estoppel by record". In fact, the phrases "res judicata" and "issue estoppel" and even "estoppel by record" are often used interchangeably. The nature of "privy" had been raised by counsel in submissions. At p 273-4, the submissions of Mr W.P. Deane QC, as he then was, who appeared for Pigram are summarized as follows:

"In relation to estoppel by record the cases make it clear that mutuality is a requirement and there is no room for any exceptions. On the meaning of "privy" in relation to issue estoppel we adopt the statement in Everest and Strode on The Law of Estoppel, 3rd ed (1923), p 55. As regards estoppel, the same doctrine applies to each category, namely that one who claims through another is, to the extent of his claim, subject to and able to take advantage of all estoppels affecting the person through whom he claims. The essential nature of a privy for the purpose of estoppel is not one subjected to a vicarious liability because of something; it is one who claims a title or right or makes a claim by virtue of a title or right in someone before him."

It is apparent also that the High Court expressly declined to introduce a new concept of "privy" based upon developments in the United States of America.
As stated earlier the critical question in this appeal is whether the privity of interest necessary to ground res judicata is limited to a legal interest or may be extended to include an economic or financial interest. For the purposes of these reasons Gummow J found that Cumbeline, Idobook, Horrobin and Sands:

" ... participated so actively in the conduct of the Supreme Court litigation that in substance they assumed the roles of actual parties. The receivers were funded by Lake Cumbeline, which indemnified them. The receivers acted upon Mr Horrobin's advice as to the significant chances of success in the litigation. I would further conclude that Mr Horrobin and the other relevant applicants acted as they did in implementation of concerted arrangements and understandings between them, and that the ANZ Bank, although holder of the first ranking security over the assets of Trawl, stood by while the litigation (Trawl's remaining substantial asset) was conducted in this fashion."

We are prepared to accept that this, for the purposes of the motion, amounted to a finding that they had an economic or financial interest in the New South Wales Supreme Court action and that they would have gained financially if Trawl had succeeded in that action. The details of why this was so need not be developed in these reasons.
Counsel for Effem contended that Ramsay v Pigram was not authority for the proposition that parties having a financial interest of the kind present in this appeal cannot have the requisite privity of interest. There, no question of financial interest, whether legal or not, arose, and therefore that authority is not binding on the Federal Court on this issue. This construction, however, ignores the fact that the High Court accepted the principles of the doctrine of privity enunciated in England and Australia are stated so clearly with respect to privity of interest, being, for example as stated by Deane QC in argument, that privity of interest is limited to cases where a person claims a title or right or makes a claim by virtue of a title or right in someone before him.
Counsel sought support for the view that classes of privity could be extended by reference to Carl-Zeiss-Stifting v Rayner and Keeler Ltd. There it was suggested that privity in interest could arise in an agency case. The position is explored in a long passage in the speech of Lord Reid at pp 911-912:

"There does, however, seem to me to be a possible extension of the doctrine of privity as commonly understood. A party against whom a previous decision was pronounced may employ a servant or engage a third party to do something which infringes the right established in the earlier litigation and so raise the whole matter again in his interest. Then, if the other party to the earlier litigation brings an action against the servant or agent, the real defendant could be said to be the employer, who alone has the real interest, and it might well be thought unjust if he could vex his opponent by relitigating the original question by means of the device of putting forward his servant. But this is not a case of that character. The Council of Gera has no substantial interest in this litigation. If the plaintiff succeeds, the only persons who can benefit are the Stiftung or the two nationalised firms in Jena to which I shall refer later. The Council of Gera is merely a local public authority, like a county council, on which there has been imposed the duty of acting as the special board of the Stiftung and there is nothing to show that the council or any of its members will gain anything if the plaintiff wins, or lose anything if the plaintiff loses this case. And here the respondents are seeking to make these solicitors personally liable to them in solicitor and client costs - in effect seeking damages against them for breach of warranty of authority. In my view, the solicitors cannot properly be held to be estopped from defending themselves, and showing that they have authority to act, by a judgment which had nothing to do with them.

There is little authority bearing on a question of this kind. The only modern English case cited was Mercantile Investment and General Trust Co v River Plate Trust, Loan and Agency Co (1894) 1 Ch 578; 10 TLR 186. The facts were complicated but it is sufficient, for present purposes, to say that the plaintiffs in this action had obtained a judgment against another company ("the American company") and they maintained this as an estoppel against the defendants in this action ("the English company") on the ground that, by reason of an indemnity given by the English company, the English company had assisted the American company in the previous action and had paid their costs, so that they were virtually parties to the previous action. Romer J dealt with this point very briefly and held that there was no estoppel. I should also refer to Kinnersley v Orpe (1780) 2 Dougl KB 517, 518 which was cited as relevant on privity. There Dr Cotton claimed a right to fish and sent a servant, Orpe, to assert it. Kinnersley brought an action of trespass and succeeded. Then Dr Cotton sent another servant, also called Orpe, to fish and this action was brought against him. The plaintiff simply produced the record in the former case and Perryn B held this evidence conclusive, "both the Orpes having acted under the authority of Cotton, who was the real defendant in both causes." On a rule "the court also thought that the record in the former cause, though admissible evidence, was not conclusive." With regard to this case Lord Ellenborough CJ said in Outram v Morewood (1803) 3 East 346, 366:

"As to the case of Kinnersley v Orpe 2 Dougl KB 517, it is extraordinary that it should ever have been for a moment supposed that there could be an estoppel in such a case. It was not pleaded as such; neither were the parties in the second suit the same with those in the first." And a little later he referred to "the defendant, who was no party to the former action."

One should not attach too much weight to this, because it was a very minor point in Lord Ellenborough's elaborate and learned judgment. But at least it never occurred to him that the doctrine of privity could be stretched to affect a defendant from whom a penalty was claimed and who had no connection with the previous case, merely because his employer had been concerned with it.

The respondent sought to rely on American authorities. Their effect is summarised in the American Restatement (Judgments), Chap IV. The only section which seemed to me to come near to applying to the appellant solicitors is at pp 402-403, s85(2): "Where a person is bound by or entitled to the benefit of the rules of res judicata because of a judgment for or against him with reference to a particular subject-matter, such rules apply in a subsequent action brought or defended by another on his account."

With that I would agree; and, if these solicitors were bringing this action on account of or for the benefit of the Council of Gera, I would hold that res judicata could be pleaded against them."

In the present case, Effem does not assert that Trawl brought the action in the Supreme Court of New South Wales as agent for the other applicants. In the Federal Court proceeding, Effem does not assert that those applicants brought the Federal Court proceeding as agents for Trawl. Those applicants are seeking to enforce rights for their own benefit, rights which did not and could not arise in the New South Wales action.
As in Ramsay v Pigram, the causes of action determined by the judgment in the first action were separate and distinct from the causes of action in the second action, so also in the present case, the causes of action relied upon by the applicants, other than Trawl, in the Federal Court proceeding are separate and distinct from the causes of action in the earlier Supreme Court action. The only way Effem could plead successfully the defence of res judicata would be to show that those applicants were privies in interest with Trawl in the earlier action. In our opinion, the law relating to privity of interest in this respect in Australia is so settled that this Court is bound by the earlier authorities.
Relying upon a number of United States of America authorities, counsel for Effem submitted that the nature of privity in interest may be extended. The acceptance of the submission was not made easier by the absence of any clear statement of the principle sought to be applied. We are prepared to accept the opinions expressed in Ramsay v Pigram by Barwick CJ at pp 275-6, by Taylor J at p 288 and Windeyer J at p 290, each referred to earlier in these reasons. These opinions show that the state of the law in Australia is not consonant with developments of the law, in this respect, in the United States of America. Accordingly, it is not necessary to consider those authorities.
We are fortified in reaching this conclusion by the absence of any defence being filed by Effem and the absence of any clearly defined principle sought to be applied to the facts relevant to this appeal.
The two grounds of appeal relevant for present purposes are set out in Effem's further amended notice of appeal as follows:

"3. That His Honour erred in holding that as a matter of law a party ("the alleged privy") could only be a privy of another ("the first party") if the alleged privy was claiming a legal right or interest, rather than a financial right or interest through or under the first party." "7A. That His Honour erred in failing to find a res judicata against the claims being propounded by the second to sixth respondents."

For the reasons given, neither of those grounds have been made out.

During the course of the hearing of the appeal, it became apparent that Trawl should not have been made a party to the appeal. Accordingly, an order should be made that Trawl cease to be a party to the appeal, see O6 r9 of the Federal Court Rules. Trawl did not appear at the hearing of the appeal but any costs it may have incurred by reason of the joinder should be paid. The appeal should be dismissed with costs to be paid by Effem.

JUDGE2

BURCHETT J The appellant, being sued by the respondents for relief in respect of alleged contraventions of ss. 52 and 53 of the Trade Practices Act 1974, applied upon Notice of Motion for an order that the proceedings be stayed or dismissed. The proceedings were stayed by a judge of the Court so far as concerned the claim by the first respondent only, and the motion was otherwise dismissed. The appellant then obtained leave to re-open its case, but these orders were not varied. By leave, it now appeals against the dismissal of the motion as against the respondents other than Trawl Industries of Australia Pty Limited ("Trawl").

The foundation of all the appellant's arguments upon this appeal is the entry, prior to the institution of the proceedings in this Court, of a judgment in the Supreme Court of New South Wales, in favour of the appellant, in an action brought against it by Trawl. In the Supreme Court action, a number of claims were pleaded, including claims based on alleged contraventions of ss. 52 and 53 of the Trade Practices Act. These claims under the Trade Practices Act were not pursued to a hearing, there being a general dismissal of Trawl's action after it had failed at a hearing limited to contractual issues and to a claim for rectification of contract. It was because so much of the pleading in the Supreme Court action as referred to ss. 52 and 53 of the Trade Practices Act raised the same, or substantially the same, claims as Trawl made in this Court that the action here was stayed, so far as Trawl was concerned. But the appellant says the circumstances are such as to require the claims of the other respondents to be stayed also.
It is unnecessary for the purposes of these reasons to recapitulate in full detail the facts of the matter; they have been set out in the judgment at first instance, which is reported as Trawl Industries of Australia Pty Limited (in liquidation) v. Effem Foods Pty Limited (1992) 36 FCR 406. Pruned of inessentials, these are the circumstances. During a period of a number of months prior to the entry, on 7 June 1988, of the appellant and Trawl into contractual arrangements upon which the dispute between the parties centres, negotiations took place between the appellant and the individual respondents, Peter Horrobin ("Horrobin"), Richard Sands ("Sands") and Raymond Pridmore ("Pridmore"), who were directors of both Trawl and the respondent Lake Cumbeline Pty Limited ("Lake Cumbeline"). The respondent Sands was also a director and shareholder in the respondent Idobook Pty Limited ("Idobook"). There were other shareholders in Idobook, but none of the other respondents was a shareholder or director. Lake Cumbeline owned half of the share capital in Trawl and acquired the balance during the currency of the arrangements between Trawl and the appellant. It also held a security, which ranked second to a security held by ANZ Bank Limited, over the whole of the assets of Trawl. Horrobin, Sands and Pridmore guaranteed the indebtedness of Trawl to the Bank. Horrobin and Sands each held one third of the capital in Lake Cumbeline, the remaining one third being held by another company, Meriadoc Pty Limited. Lake Cumbeline also guaranteed the indebtedness of Trawl to the Bank. Idobook lent moneys both to Trawl and to Lake Cumbeline.
It is the respondents' case that Lake Cumbeline invested in Trawl, and lent moneys to Trawl; Idobook lent moneys to Lake Cumbeline to enable it to do so; and the individual respondents entered into the guarantees which have been mentioned, each of them, that is, Lake Cumbeline, Idobook and the individual respondents, being induced by misrepresentations made on behalf of the appellant, which also induced Trawl to enter into the agreement with the appellant. The misrepresentations are said to have amounted to contraventions of ss. 52 and 53 of the Trade Practices Act, and to have caused loss and damage to each of the respondents. The alleged misrepresentations, as I have said, are substantially the same as those pleaded in the Supreme Court on behalf of Trawl, although in this Court the same conduct is also relied upon as establishing a case of negligence. That was not pleaded in the Supreme Court.
When a dispute erupted between the appellant and Trawl, Lake Cumbeline appointed a receiver and manager over Trawl with a view to the prosecution of the Supreme Court proceedings against the appellant. The individual respondents, as directors of Trawl and of Lake Cumbeline, gave instructions for the conduct of the proceeding. Lake Cumbeline indemnified the receivers in respect of it, and provided funds for that purpose. The Judge at first instance inferred that these funds were procured by Messrs Horrobin and Sands, and by Idobook, but not by the respondent Pridmore. Plainly enough, there was reason for each of the other respondents to assist Trawl; they stood to gain, to some extent, if it succeeded. The extent of any gain to them was, however, uncertain. That must have depended, in practical terms, upon a number of factors, including the debt position of Trawl vis-a-vis the Bank.
It is in this situation that the appellant claims to be entitled to a stay of the proceedings in this Court, not only as concerns Trawl, but also as concerns each of the other respondents. The ground of that claim is res judicata by reason of the judgment in the Supreme Court of New South Wales. The appellant recognizes, of course, that only Trawl, among the respondents, was a party to the Supreme Court action. However it argues that each of the other respondents is a privy of Trawl, equally bound by the estoppel per rem judicatam binding it. In addition, the appellant calls in aid the principle of Port of Melbourne Authority v. Anshun Proprietary Limited (1981) 147 CLR 589, and what is said to be the American doctrine extending the scope of the rule as to privity, in certain circumstances, to persons having particular types of interest in concluded litigation.
Before turning to the possible application of res judicata in this case, I should note some important limitations upon the range of the appellant's arguments. At the hearing at first instance, the appellant expressly disavowed any reliance upon the principle of issue estoppel, or upon the concept of abuse of process. The appellant did not attempt to resile from this position upon the appeal. However, I do not understand its renunciation of abuse of process to have the self-contradictory effect of withdrawing res judicata from consideration, to the extent that the motion for a stay of the action on the ground of res judicata necessarily involves the proposition that pursuit of an action barred by res judicata is an abuse of process. I take the appellant to have meant rather that no abuse of process is asserted other than that which is implicit in its reliance on the defence of res judicata as the basis of its motion.
But so far as the disavowal of issue estoppel is concerned, that must mean, in an Australian court, exactly what it says. Although in England a tendency has persisted to speak of res judicata and estoppel per rem judicatam as generic terms including two species sub-titled "cause of action estoppel" and "issue estoppel", in Australia the term res judicata, and its synonym estoppel per rem judicatam, do not embrace issue estoppel; they refer only to cause of action estoppel, that is to cases where a cause of action has merged in a judgment. A recent statement of the English usage will be found in Hines v. Birkbeck College (No. 2) (1992) Ch 33 at 41, per Nourse LJ citing Diplock LJ in Thoday v. Thoday (1964) P 181 at 197-198. In Australia, the distinction, although older, is usually taken to have been established definitively in the judgments of Dixon J in Blair v. Curran (1939) 62 CLR 464 at 531-532 and Fullagar J in Jackson v. Goldsmith (1950) 81 CLR 446 at 466. In the latter case (ubi cit) Fullagar J described the expression "issue estoppel" as having "the great advantage of being quite unambiguous". Since it is unambiguous, and forms a contrast to res judicata, which is not in Australia an ancipital expression, there can be no doubt that the appellant is confined to the ground it has expressly chosen.
In an appropriate case, I think a party sued is entitled to take the course the appellant took here when it sought a summary stay of the proceeding on the ground of res judicata. But that is because the impediment to a barred action may make its maintenance an abuse of process: Chamberlain v. Deputy Commissioner of Taxation (1988) 164 CLR 502 at 510-511, where the judgment of the majority cited Greenhalgh v. Mallard (1947) 2 All ER 255 at 257 and Dallal v. Bank Mellat (1986) QB 441 at 451-454. In Dallal at 451-452 Hobhouse J said:

"(I)f there is an obviously available defence of res judicata to either a part or the whole of the plaintiff's action, then the courts are willing to exercise the remedy of striking out notwithstanding that the defence would be pleadable and triable, albeit with an entirely predictable outcome. ... There must be an end to litigation. A defendant must be protected against the repeated bringing of actions by the same person in respect of substantially the same subject matter. Therefore, where this procedural abuse is identified, the courts provide the defendant with the procedural remedy of striking out."

The same approach to the procedural question was taken by the Privy Council in Yat Tung Investment Co Ltd v. Dao Heng Bank Ltd (1975) AC 581 at 590-591, where a claim held to have been instituted in the face of an applicable res judicata was struck out as an abuse of the process of the court. (As to the substantial question of the test adopted in finding that there was an applicable estoppel per rem judicatam in Yat Tung, it should be noted that the majority of the High Court took a different view in Port of Melbourne Authority v. Anshun Proprietary Limited (supra, at 602-603).)

But while an action may be stayed (or preferably struck out) on this ground, it is fundamental that such an application, which shuts the door of the court to a litigant, involves the exercise of "a power which no court should exercise but after a scrupulous examination of all the circumstances": Yat Tung at 590; Dallal v. Bank Mellat at 453. In the latter case, it was also pointed out (at 451) that the remedy is a procedural one and subject to a discretion whether or not it should be granted. A discretion to stay proceedings as an abuse of the process of the Court, whether on the ground now under consideration or on any other ground, while it should be exercised fearlessly where it is required, ought always to be exercised with great caution: see authorities cited in Australian Federation of Consumer Organisations Inc v. Tobacco Institute of Australia Ltd (1988) 81 ALR 701 at 708; Arnold v. National Westminster Bank Plc (1991) 2 AC 93 at 107.
The nature of a res judicata was stated by Dixon J in Blair v. Curran (supra, at 532), in the course of expressing the distinction between res judicata and issue estoppel. He said:

"The distinction between res judicata and issue-estoppel is that in the first the very right or cause of action claimed or put in suit has in the former proceedings passed into judgment, so that it is merged and has no longer an independent existence, while in the second, for the purpose of some other claim or cause of action, a state of fact or law is alleged or denied the existence of which is a matter necessarily decided by the prior judgment, decree or order."

In the same case, Starke J (at 510) made it clear that essential to res judicata is the identity of what was formerly adjudged with what now falls for determination. Cf. Hines v. Birkbeck College (supra, at 43) where Nourse LJ said: "(B)efore you can say that there is a res judicata you must identify the res upon which an adjudication has been made." In Jackson v. Goldsmith (1950) 81 CLR 446 at 460, Williams J said that a plea of res judicata, filed in a Supreme Court action on the basis of a District Court judgment, "would only be good if the causes of action in the Supreme Court and in the District Court were precisely the same".

Fullagar J dissented in Jackson v. Goldsmith, but only on the ground that the plea in question was capable of being understood as a plea of issue estoppel rather than a plea of res judicata, and that so understood it was not demurrable. However, he added (at 469): "Whether the plea could ever be substantiated is, of course, beside the point." But his Honour's exposition of the law concerning res judicata was not a dissenting exposition. On that point, he was in agreement with the majority, and his disagreement, so far as the plea could be construed as one of issue estoppel, did not relate to the law of issue estoppel but to the law concerning the approach which a court should take to a pleading upon a demurrer. Fullagar J stated the principle upon which the defence of res judicata rests in the following terms (at 466):

"The rule as to res judicata can be stated sufficiently for present purposes by saying that, where an action has been brought and judgment has been entered in that action, no other proceedings can thereafter be maintained on the same cause of action. This rule is not, to my mind, correctly classified under the heading of estoppel at all. It is a broad rule of public policy based on the principles expressed in the maxims 'interest reipublicae ut sit finis litium' and 'nemo debet bis vexari pro eadem causa'."

For present purposes, it is important to note one point which Fullagar J made, illustrating it by reference to the leading case of Brunsden v. Humphrey (1884) 14 QBD 141 where a previous judgment upon an action in the County Court, for damage to a cab occasioned by the defendant's negligence, was held not to bar a later action in the High Court of Justice for damages for personal injury sustained through the same negligence. Fullagar J said (at 467):

"In the first place, if A sues B to judgment and in subsequent proceedings between them a plea of res judicata is raised, the primary question will be whether the cause of action in the later proceedings is the same as that which was litigated in the former proceedings. This was the question which arose in the well-known case of Brunsden v. Humphrey. ... It was held there that the causes of action were not the same. The injuria was the same but the damnum was different, and, since damage was 'of the gist' of the particular action, the causes of action were not the same. The plea therefore failed. On the other hand, if A sues B to judgment and in subsequent proceedings between them a plea of issue estoppel is raised, the plea may succeed although the causes of action in the two cases are entirely different. The question will be whether an issue of fact or law which is raised in the later proceedings was an issue of fact or law which was also raised in the earlier proceedings and therein determined."

What Fullagar J said seems to me to apply a fortiori to the present case. Here also damage is of the gist of the particular action brought by each of the respondents. And the damage claimed to have been suffered by each is plainly different. In the Supreme Court action, Trawl claimed to have suffered the consequences of entry by it into an unprofitable contract. In the action in this Court, each of the other respondents claims for the particular damage sustained, not by entry into the contract between the appellant and Trawl, into which they did not enter, but by entry into the various arrangements in which they respectively became involved - guarantees in the case of the directors, unprofitable loans in the cases of Lake Cumbeline and Idobook, and again in the case of Lake Cumbeline the making of an investment in Trawl. It follows from Fullagar J's explanation of Brunsden v. Humphrey (and see also the remarks with reference to the same case of Brennan J in Port of Melbourne Authority v. Anshun Proprietary Limited (supra, at 611)) that no cause of action under s. 52 or s. 53 of the Trade Practices Act of any one of the respondents is the same as any cause of action of any of the others. For damage is the gist of an action for contravention of either of those sections. But the present case is, of course, further removed from identity of causes of action than that. A necessary ingredient of each of the causes of action in question is the causative link between the alleged misrepresentation and the suffering of damage, commonly called reliance. This means that the cause of action in the Supreme Court involved, as an essential element, the reliance of Trawl upon the alleged misrepresentation, that is, that Trawl actually did, or refrained from doing, something by reason of the misrepresentation so as to incur the damage claimed. This is not an element of any of the causes of action of the other respondents. Instead, each of those causes of action involves an allegation of a quite distinct reliance by the different person, legal or natural, pursuing the particular cause of action.

On top of the considerations just mentioned is the matter which really first meets the eye to distinguish these cases from Brunsden v. Humphrey, the difference of identity of the plaintiff in the Supreme Court from each of the respondents other than Trawl; I have left that to last because the appellant contends that, in the peculiar circumstances of the case, the other respondents are bound as if they were plaintiffs in the Supreme Court action. But even if the appellant were right in this particular contention, the result would simply be to remit the appellant and the respondents other than Trawl to the very position which the parties occupied in Brunsden v. Humphrey, so far as the absence of identity of damage is concerned. That alone would be sufficient to defeat the appellant, according to Fullagar J. Additionally, there would remain an absence of identity of reliance, with the same result.
Since the appellant has chosen to fight only on the narrow field of res judicata, it follows that the appeal should fail, even if the respondents other than Trawl are bound by the Supreme Court judgment, a matter to which I will return. That judgment does not cover their causes of action. And their causes of action cannot be merged in it, being different from the cause of action which founds it. They have not "passed into judgment"; they have never lost their "independent existence" (Chamberlain v. Deputy Commissioner of Taxation (supra, at 508)).
Although the appellant renounced any reliance on issue estoppel, I think it is appropriate in the circumstances to add some comment in relation to this doctrine. Appeal was made to cases which actually depend on issue estoppel. As a result, the battle lines between the parties tended to become, at times during the argument of the appeal, somewhat blurred. The crucial question is whether any matter "necessarily decided by the prior judgment" in the Supreme Court action estops the respondents, other than Trawl, from maintaining their respective causes of action. Again, I shall for the present assume that these respondents are to be treated as if they had been parties to the earlier action.
The circumstances in which a defence of issue estoppel may be raised were explored in detail by the High Court in Ramsay v. Pigram (1968) 118 CLR 271. Ramsay was a nominal defendant, representing the government of New South Wales, in an action brought by Pigram to recover damages for personal injuries sustained when a motor vehicle, driven by a police officer, came into collision with Pigram's motor vehicle. Ramsay asserted there was an issue estoppel against the allegation of negligence, made by Pigram, in the driving of the government vehicle by the police officer, because the police officer had sued Pigram for his own personal injuries sustained in the same collision, and established both negligence against Pigram and an absence of contributory negligence on his own part. The High Court held unanimously that Pigram was not estopped. The first thing to note is that the case was a case about issue estoppel, not res judicata. Counsel for the appellant Ramsay (at 272-273) put his submission on the basis that the appellant was "entitled to the benefit of an issue estoppel"; Barwick CJ (at 275) commenced his judgment by stating the question in terms appropriate to issue estoppel; McTiernan J (at 281) described "(t)he plea in question (as) a plea of issue estoppel"; Taylor J (with whom Kitto J agreed) said (at 285) that the question was "whether the findings in the earlier case may properly be made the subject of a plea of issue estoppel in the present action"; and Windeyer J (at 289) plainly considered the matter on the footing of an allegation of issue estoppel. It had been so considered by the Supreme Court: Pigram v. Ramsay (1966) 68 SR (NSW) 141 at 146, per Walsh JA and 150, per Holmes JA (Wallace P at 143 accepted Walsh JA's statement of the issues).
Although a prominent issue in Ramsay v. Pigram was whether the government was a privy of the police officer, so as to entitle Ramsay to the benefit of any issue estoppel in the officer's favour, that was not the only issue. Barwick CJ (at 276) stated the basis upon which an issue estoppel may be raised. He said:

"Long standing authorities, in my opinion, warrant the statement that, as a mechanism in the process of accumulating material for the determination of issues in a proceeding between parties, an estoppel is available to prevent the assertion in those proceedings of a matter of fact or of law in a sense contrary to that in which that precise matter has already been necessarily and directly decided by a competent tribunal in resolving rights or obligations between the same parties in the same respective interests or capacities, or between a privy of each, or between one of them and a privy of the other in each instance in the same interest or capacity. The issue thus determined, as distinct from the cause of action in relation to which it arose, must have been identical in each case. Of its nature such an estoppel must be available to and operative in respect of each party; or, as it is said, estoppels must be mutual."

The Chief Justice went on (at 277) to emphasize "(t)he importance of the identification of the precise issue decided in the first place in order to ascertain whether it is identical with what is sought to be litigated in the second place". In this connection, he referred to New Brunswick Railway Co v. British and French Trust Corporation, Ltd (1938) 4 All ER 747 at 756, 767, 770 (also reported at (1939) AC 1) as being "most illustrative". That was a case in which the first action involved one only of a series of bonds of like amount, tenor, and date, the remainder of which were the subject of the second action. A particular construction having been put upon the one bond in the first action, an issue estoppel was set up against a contrary contention in the second action. The House of Lords rejected the estoppel. At the first of the pages cited by Barwick CJ in Ramsay v. Pigram, Lord Maugham, LC said there was an estoppel "from setting up in a subsequent action a defence which was necessarily, and with complete precision, decided by the previous judgment", a principle which did not prevent the raising of the defence in question in respect of the bonds other than the bond the subject of the earlier judgment. At the second page referred to by Barwick CJ, Lord Wright said the declaration made in the earlier judgment was "limited to bond No. 3,300". He continued:

"There was no issue before the court as to any or all of the 992 bonds now sued on. The construction of each and any of these bonds was not a traversable issue in the previous action. The appellants could not be charged with the omission to traverse a claim which could not be traversed in that action because it was not before the court."

At the third page cited by Barwick CJ, Lord Romer said:

"It is no doubt true to say that, whenever a question has in substance been decided, or has in substance formed the ratio of, or been fundamental to, the decision in an earlier action between the same parties, each party is estopped from litigating the same question thereafter. However, this is very different from saying that he may not thereafter litigate, not the same question, but a question that is merely substantially similar to the one that has already been decided. If, in an action, the question of the construction of a particular document has been in substance decided, each party to the action is estopped from subsequently litigating the same question of construction of that particular document. However, he is not estopped from subsequently litigating the question of construction of another document, even though the second one be in substantially identical words, for the documents are two distinct documents, and the questions of their construction are two distinct questions."

Barwick CJ concluded his discussion of this aspect of the matter (at 278-279) as follows:

"Thus, though the act in question be the same in each case and, if you will, though I think it not to matter, the evidence establishing it be the same, the issues raised in each case are not, upon a proper analysis, identical. In the District Court what was involved in the defence of contributory negligence was, inter alia, the police officer's personal duty towards the respondent. In this action it is a breach of the Government's duty towards the respondent which is alleged. For lack of the necessary identity in the issues, the appellant's plea in this action, in my opinion, was demurrable."

McTiernan J (at 284) and Windeyer J (at 290) reached the same conclusion. In doing so, both placed reliance on Jackson v. Goldsmith (supra).

In my opinion, the reasoning of Barwick CJ, the reasoning of the House of Lords in New Brunswick Railway, which he plainly approved (as, I think, did Windeyer J, for after expressing some general agreement with the judgment of Barwick CJ, he specifically agreed (at 290) with what was said by Lawton J in Randolph v. Tuck (1962) 1 QB 175, where particular reliance was placed on New Brunswick Railway, and notably on the speech of Lord Romer), and the reasoning in Jackson v. Goldsmith rule out any application of issue estoppel in the present case. I have not overlooked the New Zealand case Shiels v. Blakeley (1986) 2 NZLR 262, but this Court is bound by the authority of Ramsay v. Pigram and Jackson v. Goldsmith. The judgment in the Supreme Court followed a hearing upon contractual issues and upon an issue as to rectification of contract; there was no hearing in respect of Trawl's claims under ss. 52 and 53 of the Trade Practices Act, which appear simply to have been abandoned. In those circumstances, it is impossible to say that the dismissal of the action necessarily involved a decision adverse to Trawl upon a precise issue which any of the other respondents now seeks to litigate. Since an essential issue in Trawl's cause of action was its own reliance on the misrepresentations alleged against the appellant, and failure to establish that one element must necessarily have defeated Trawl's action, the dismissal of that action cannot be said to have necessarily involved a determination of any other issue at all. Likewise, since damage was of the gist of the action, its dismissal cannot necessarily be said to have involved any other issue than the issue of Trawl's damages. Neither of those issues is an issue in any of the claims with which the Court is presently concerned.
The difficulty of showing that some particular finding, as to which an issue estoppel is sought to be raised, was necessarily made by a decision which did not involve an identification of particular issues, and a decision upon them, was noted in the majority judgment in the High Court in Chamberlain v. Deputy Commissioner of Taxation (supra, at 508), where Deane, Toohey and Gaudron JJ said: "The fact that a judgment is entered by consent may on occasion make it hard to say what was necessarily decided by the judgment ... ." Their Honours cited Isaacs v. The Ocean Accident and Guarantee Corporation Ltd (1958) SR(NSW) 69, where Street CJ and Roper CJ in Eq. said (at 75):

"It is clear that the mere fact that the judgment is by consent does not detract from its conclusive effect upon the issues determined by it ... . But a judgment operates by way of estoppel only as to those matters which are necessarily decided by it."

They proceeded to quote a passage from Spencer Bower on Res Judicata, as follows:

"Though consent judgments and orders are undoubtedly in every case decisions in the sense that the actual mandatory or prohibitive parts of the judgment or order are conclusively binding upon ... the parties ... it may often be a matter of legitimate doubt and debate as to what, if any, particular questions or issues of right, title, or liability were, expressly or impliedly, the subject of the consent, and of the decision."

They also referred to a further passage in the same work suggesting the necessity, in such a case, to look at pleadings or affidavits "in order to ascertain what, if any, decision of particular questions or issues was impliedly consented or submitted to by the party against whom such consent ... judgment or order was made".

In Isaacs, an examination of the Court file showed, it was held, that no issue of liability had been determined. This conclusion was based on an express reservation, at the time judgment was consented to, that no admission was made. However, the logic of what Dixon J said in Blair v. Curran (supra, at 532) demands the same result wherever there is involved a number of issues no one of which must necessarily have been decided in order to justify the judgment, since a decision upon others could have justified it. Dixon J said:

"Where the conclusion is against the existence of a right or claim which in point of law depends upon a number of ingredients or ultimate facts the absence of any one of which would be enough to defeat the claim, the estoppel covers only the actual ground upon which the existence of the right was negatived."

He held the estoppel extended "to a matter which it was necessary to decide and which was actually decided as the ground work of the decision itself". (Emphasis added.) Cf. the observations of Taylor J (with whom Kitto J agreed) in Ramsay v. Pigram (supra, at 287) concerning the case of Phillips v. Ward (1863) 2 H and C 717.

Lest this view, although founded on the cases which I have cited, and consistent with the recent decision of this court in Marr (Contracting) Pty Limited v. White Constructions (ACT) Pty Limited (1991) 32 FCR 425, be thought too strict, the dangers of an over liberal application of the principles of issue estoppel and res judicata should be borne in mind. As was pointed out in the House of Lords case cited by Barwick CJ, an early proceeding may be allowed to go by default for reasons which have nothing to do with the validity of a party's case. Save perhaps in the very restricted situation dealt with in Arnold v. National Westminster Bank Plc (supra), once it is held that a res judicata or issue estoppel applies, the Court has no discretion to waive its effect upon the rights of the parties. As far as res judicata is concerned, the absence of any discretion was expressly affirmed by the High Court in Chamberlain v. Deputy Commissioner of Taxation (supra). See also Port of Melbourne Authority v. Anshun Proprietary Limited (supra, at 605) where Murphy J, who did not distinguish between res judicata and issue estoppel for the purposes of the case, said there was "no discretion to allow the raising of that issue against the unwilling defendant". Statements of the principles of issue estoppel and res judicata, made by courts of the highest authority, including the relevant passages in the High Court judgments to which I have earlier referred, do not suggest the existence of some general discretion to alleviate the application in particular circumstances of an issue estoppel. If the estoppel applies, effect must be given to it. And that effect may be to tape the mouth of truth. It is essentially for this reason that courts have traditionally given a narrow scope to the doctrines of issue estoppel and res judicata: see the reference by McTiernan J to Stephen's Principles of Pleading in Jackson v. Goldsmith (supra, at 458), the comments of Latham CJ in the same case at 455, and Marr (Contracting) (supra, at 437).
Although it is strictly unnecessary to do so, I think I should make some comments about the use the appellant seeks to make of Port of Melbourne Authority v. Anshun Proprietary Limited (supra) and of the doctrine of privity, both of which are said to be illuminated by certain American decisions.
In Port of Melbourne Authority, a party defended proceedings without raising a matter which would have constituted a complete defence, and then sought, in later proceedings, to raise that very matter as the foundation of a claim that would have reversed the result of the previous proceeding. Brennan J held there was a res judicata barring the later action. Murphy J thought it unnecessary to consider whether res judicata or issue estoppel applied, holding directly that the second proceeding was an abuse of process. But the majority of the High Court (Gibbs CJ, Mason and Aickin JJ) held (at 597) that this was "not a case of res judicata" (see, as to that conclusion, the comment of Dawson J in Chamberlain v. Deputy Commissioner of Taxation (supra, at 512)), nor "a case of issue estoppel in the strict sense". Their Honours held (at 598-599) that there was an extended principle of res judicata, the application of which to cases of issue estoppel "is to be treated with caution". It applied in the instant case. Their Honours formulated the test for its application (at 602-603) in terms which asserted that "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". That proposition was expanded and explained. But it should not be overlooked that the case was one in which the same parties were parties to each action. Plainly there would be a difficulty in applying this principle to a privy on the basis that he had acted unreasonably in not raising an issue in an action to which he had not even been a party. At all events, I am clearly of the opinion that it could not be said of any of the respondents other than Trawl that he or it should have taken steps to join in the Supreme Court action. I do not think the principle of Port of Melbourne Authority has any application to this case. Should the question require further discussion, I refer to what Gibbs CJ, Mason and Aickin JJ said in Port of Melbourne Authority at 603.
If, contrary to my conclusion, Trawl's cause of action in the Supreme Court proceeding under s. 52 or s. 53 had been the same as any of the causes of action maintained by any of the respondents other than Trawl, it would have been necessary to decide whether the particular respondent was a privy of Trawl. For the principles of issue estoppel and res judicata apply not only to the immediate parties, but also to persons who are in law their privies. What constituted a relationship of privity was a principal issue debated in Ramsay v. Pigram (supra). Barwick CJ (at 279) referred to "the three classes of privies of blood, of title and of interest". He said:

"The basic requirement of a privy in interest is that the privy must claim under or through the person of whom he is said to be a privy. Here it is quite clear that the Government had no interest in the action between the respondent and the police officer: nor can it be said that the action brought by the police officer was brought by him in any sense on behalf of the Government or that in relation to the defence of contributory negligence the respondent could have been treating the Government as the real 'defendant' to that claim. In every respect the action between the respondent and the police officer was personal to each of them, neither being in any sense in relation to the action or any of the issues involved in it, representative of another. Nor can it be said that the Government in any sense claims under or in virtue of the police officer or of any right of his, or that it derives any relevant interest through him."

This statement echoes the submission (at 273-274) of Deane QC (as he then was), counsel for the respondent, who adopted the statement on the meaning of "privy" in relation to issue estoppel in Everest and Strode on the Law of Estoppel 3rd ed. (1923) p 55, and submitted:

"As regards estoppel, the same doctrine applies to each category, namely that one who claims through another is, to the extent of his claim, subject to and able to take advantage of all estoppels affecting the person through whom he claims. The essential nature of a privy for the purpose of estoppel is ... one who claims a title or right or makes a claim by virtue of a title or right in someone before him."

In Everest and Strode, op cit, at 55, the following passage appears:

"Lord Coke classes privies under the three heads of: 1. Privies in blood; 2. Privies in law; and 3. Privies by estate. As regards estoppel, the same doctrine applies to each, viz., that one who claims through another is, to the extent of his claim, subject to, and able to take advantage of, all estoppels affecting the person through whom he claims."

After giving a series of examples of these three categories, all of which are far removed from the circumstances of the present case, the learned authors continue (at 56-57):

"The rules (sic) that a record inter partes binds parties and privies, is subject to the general limitation that no one can plead a record for estoppel, unless he himself may be estopped by it. Thus, it has been laid down that nobody can take benefit by a verdict, that would not have been prejudiced by it, had it gone contrary. For an example, a stranger to a record inter partes cannot take advantage of an estoppel arising therefrom. Neither, it appears, is he bound by any estoppel arising therefrom. The general rule as laid down in the opinions of the judges in the Duchess of Kingston's Case 20 St Tr pp 355-651, is that, with certain exceptions, a transaction between two parties in judicial proceedings ought not to bind a third. Thus although, if parties litigate a question in a Court of competent jurisdiction, and a final decision is given thereon, such parties, or those claiming through them, cannot afterwards re-open the same question in another Court, this restriction does not extend to other persons whose interest is almost identical with that of one of the parties to the first action, if they do not actually claim through such party." (Emphasis original.)

Among recent authorities on the doctrine of privity are Young v. Public Service Board (1982) 2 NSWLR 456 and Manners v. Transfield Pty Ltd (1992) 110 ALR 70. In the former, reference was made to Carl Zeiss Stiftung v. Rayner and Keeler Ltd (1967) 1 AC 853, where Lord Reid (at 910) said a privy in interest "must have had some kind of interest in the previous litigation or its subject-matter", and Lord Upjohn (at 945) said privies "all have an interest in the subject-matter of the action". Carl Zeiss was cited to the High Court in Ramsay v. Pigram, but did not receive detailed consideration. Lee J held (at 466) there was no privity of interest between an industrial association and individual members, within the doctrine, as they "do not in these proceedings claim through or under the association". In Manner, an employee was paid workers' compensation for injuries said to have been sustained when his car was struck by another car. He also sued the other driver for damages, and failed. The employer then sued the other driver for an indemnity in respect of the compensation paid. The majority of the Full Court of the Supreme Court of Western Australia held the employer's action estopped because it was relevantly a privy of the worker. The ground of the decision was stated by Murray J (at 94):

"In my opinion, in respect of the question of privity which arises, it is important to appreciate that the right to an indemnity given to the employer is, in a real sense, derivative from the right of the worker to recover damages in respect of the disability independently of the Act, or better put, the liability in that regard of the party who may be called upon to indemnify the employer."

His Honour added (at 95) that the employer "in its claim for an indemnity ... was in a relevant sense claiming under or through the worker ... and his right to recover damages".

In New Zealand, a less precise test has found favour: whether

"there must be shown such a union or nexus, such a community or mutuality of interest, such an identity between a party to the first proceeding and the person claimed to be estopped in the subsequent proceeding, that to estop the latter will produce a fair and just result having regard to the purposes of the doctrine of estoppel and its effect on the party estopped."

(Shiels v. Blakeley (supra, at 268)). But the decisions binding us have required the privity which raises an issue estoppel or a res judicata to pass the test of a finer sieve than that.

Cases where a party is bound by, and reciprocally may assert the benefit of, an estoppel on the basis of privity proceed upon a principle entirely different from that of Port of Melbourne Authority v. Anshun Proprietary Limited. It is not a question of being bound because a defence ought reasonably to have been raised. The privy may never have had an opportunity of involvement in the earlier action. But in the eye of the law there is an identity between the privy and that party, as, for example, in the case of an executor and his testator, or, in respect of the derivative right at issue in Manners, the case of the employer and the worker in virtue of whose right the claim arose. In Bain v. Cooper (1841) 8 M and W 751; 151 ER 1242 at 754 Parke B. referred to examples of privies and added:

"(I)n all these cases there is a privity between the parties, which constitutes an identity of person. But that is not so in the present case, where the parties are only in the relation of principal and surety, and there is no privity of interest between them, since the surety contracts with the creditor: they are not one person in law, and are not jointly liable to the plaintiff."

This passage was cited, as reflecting a fundamental principle of the common law, in Lecture X of the celebrated lectures of Holmes J on The Common Law. It should be pointed out that, although the example of the testator and his executor may seem special, both Parke B. and Holmes J. do not limit their view of privity to such a case. Holmes J, in the same lecture, referring to privies in title, says:

"One who buys land of another gets the very same estate which his seller had. He is in of the same fee, or hereditas, which means, as I have shown, that he sustains the same persona."

The purpose of the identification of a privy with the party whose privy he is was indicated by Starke J in Partridge v. McIntosh and Sons Limited (1933) 49 CLR 453 at 462-463, where he said:

"Estoppel, however, is only a personal matter, between the particular parties. 'Outside this transaction, and in respect of matters unconnected with it, there is no ground whatever for exacting the admission, from either party; and, of course, so far as third parties not privy with nor claiming under either of them are concerned, their rights cannot be thereby affected in any way, either beneficially or prejudicially; the rights and liabilities of such parties depending upon the actual facts, which must be proved in the ordinary way. ... But although the estoppel is only a personal matter between the particular parties, yet to really give the parties the benefit of it, and subject them to the burden of it, it is essential that not they only, but those of whom it can be predicated, that they are their 'representatives in interest' should likewise have the benefit of and be subject to the burden of the admission. Upon any one, therefore, upon whom all the rights and obligations of any legal entity devolve, such as an executor, administrator, or trustee in bankruptcy, there will devolve, as one of such rights and obligations, the right to exact, or the obligation to be subjected to the admission; and so, too, upon any one, upon whom the rights and obligations arising out of the particular transaction that give rise to the estoppel devolve, as, for example, a purchaser or assignee, that will also devolve this right and this obligation' (Cababe, Principles of Estoppel, (1888), pp 111-113; Ewart on Estoppel (1900), pp 187 et seqq.; Richards v. Jenkins

(1887) 18 QBD 451)."

It is a corollary of the same identification of parties that estoppels must be mutual. This aspect of the settled rule was referred to in a passage I have earlier cited from the judgment of Barwick CJ in Ramsay v. Pigram, and in the discussion of privity I have quoted from Everest and Strode. It is emphasized in a number of the cases. In Spencer v. Williams (1871) 2 LRPD 230 at 237 Lord Penzance said:

"There is another principle applicable to the doctrine of estoppel; it must be mutual. If Williams is barred from further proceedings against the plaintiffs, they must have been barred against him if the decision in the Court of Chancery had been in his favour. But it would be contrary to justice to hold that because somebody else had litigated this question without success the plaintiffs should suffer. Everybody litigates on his own responsibility, and no one can be deprived of his rights because somebody else has taken proceedings which have turned out unsuccessful. It is impossible to say that the defendant was barred by the proceedings in Chancery."

The same point was made by Lord Herschell LC in Concha v. Concha (1886) 11 AC 541 at 553 when he said:

"I do not think that it is possible to contend successfully that Adelinda Concha would be conclusively bound by that determination ... unless the appellant would also be bound by it, so that if the decision had been the other way Adelinda Concha might have relied upon that determination by way of estoppel as securing to her the rights which she claimed."

In my opinion these principles need only to be stated to make it clear that the doctrine of privity has no application to the present case. None of the other respondents claims under or through the respondent Trawl, or can on any basis be identified with that respondent. A director and shareholder of a company is not, as such, its privy: Clegg v. Abel (1898) 14 WN (NSW) 131, a case relied on by Walsh JA in Pigram v. Ramsay (supra, at 148). Assistance given in the prosecution of Trawl's action is not enough. Such assistance as was given did not mean that Trawl's action was taken on their behalf. Their claims were distinct from Trawl's. That the mere promotion of someone else's claim, in circumstances where some advantage might accrue from its success, is not enough to constitute a party a privy is made clear by a comment in the joint judgment of the Full Court in Tobacco Institute of Australia Ltd v. Australian Federation of Consumer Organisations Inc (1988) 19 FCR 469 at 472. There, the Federation was not a privy of the Trade Practices Commission in respect of a claim of a breach of s. 52 of the Trade Practices Act, although it had sought to have the Commission take action in respect of the claim, which it had raised.
It would be sufficient to deny the appellant's assertion of privity to apply the words of Lord Penzance and Lord Herschell LC, on the basis that there could not have been a reciprocal estoppel had the action in the Supreme Court of New South Wales succeeded on the grounds raised under ss. 52 and 53 of the Trade Practices Act. For it could not be said that the mere assistance given by the other respondents in relation to Trawl's action, in the absence of any agreement making that action a test case, could have bound the defendant in the action (who may not even have known at the time of the assistance being given) to accept an estoppel in favour of all of the other respondents in respect of their various causes of action, in the event of success of the Supreme Court case. For want of mutuality alone, the claim of estoppel on the basis of privity must fail.
The appellant, however, seeks to enlarge the class of persons who may be regarded as privies, sufficiently to include the respondents other than Trawl, by asking the Court to adopt a doctrine which has been developed in the American case law. It may be doubted whether this doctrine really amounts to a relevant enlargement of the concept of privity, or whether it establishes, for the United States, a separate doctrine known as collateral estoppel. Whichever it is, upon a true analysis it involves so fundamental a shift from the course of Anglo-Australian authority as to require legislative intervention if it is to be accepted into our jurisprudence. Acceptance of it would involve jettisoning the principle of mutuality of estoppels. The adoption of collateral estoppel would also involve the introduction of a broad discretion, hitherto unknown, into this area of the law. For these reasons, the American principles of collateral estoppel and issue preclusion were unanimously rejected by a Full Court in Saffron v. Commissioner of Taxation (1991) 30 FCR 578. American authorities in this area formed the basis of the appeal to the High Court in Ramsay v. Pigram (supra). Counsel for the appellant (at 273) expressly submitted that these authorities had created an exception to the rule of mutuality. Barwick CJ (at 275-276) emphasized that the principles of Australian law in this area "are well settled", while "there has been divergent treatment of the question in some parts of the United States of America". He declined to accept the approach manifest in the American decisions. Taylor J (with whom Kitto J agreed) referred to the United States decisions, and said (at 288):

"But the law in this country has developed along different lines, and if it is to be changed at this stage to accord with the submissions of the appellant, it is a matter for the legislature."

Windeyer J (at 290) made it clear that he took the same view. In Carl Zeiss Stiftung (supra) the House of Lords too was pressed with the American doctrine: Lord Guest (at 937) roundly rejected it, while Lord Reid (at 912), Lord Hodson (at 928) and Lord Upjohn (at 945) appear to have derived little from it. Only the dissentient, Lord Wilberforce (at 969), found it of any assistance.

In my opinion, this Court is bound by the development of the law of res judicata and issue estoppel, which has evolved along the same lines in Australia and in England. In a case where a litigant is found to have so thrust himself into the prosecution of another's claim as to make it unjust for him to be permitted to litigate the same matters again in his own name, but where there is no relationship of privity, the proper remedy will not be found in a distortion of the doctrine of privity, but in an application of the rules concerning abuse of process. This is not such a case, and the appellant, as I have said, expressly renounced any reliance upon abuse of process.
The appeal should be dismissed with costs. I agree that an order should be made that the respondent Trawl cease to be a party to the appeal, but I would not deny it an order in respect of any costs it may have incurred, since the appellant chose to join it as a respondent.

[1993] FCA 488

23 JULY 1993