Ekes v Commonwealth Bank of Australia

In *Ekes v Commonwealth Bank of Australia*, the Court of Appeal of New South Wales considered an appeal from an order of the primary judge who had struck out the appellant's defence and refused leave to file an amended defence and cross-claim. The dispute concerned whether the appellant's pleadings were so obviously untenable that they could not possibly succeed, and whether the principles of issue and *Anshun* estoppel, as well as abuse of process, arose in the circumstances. A further issue was whether the joinder of the principal debtor was necessary for the guarantor to plead an equitable set-off, and whether exceptional circumstances justified granting leave to file a cross-claim when the debtor was in liquidation.

The Court was required to determine whether issue estoppel applied, specifically whether the appellant was privy to a party in earlier proceedings that had been dismissed by consent due to the company's inability to pay security for costs, and if the appellant's inaction in those earlier proceedings gave rise to issue estoppel. The Court also had to consider whether *Anshun* estoppel and abuse of process principles were engaged, assessing the reasonableness of not joining the appellant in the earlier proceedings and the prospect of inconsistent judgments. Additionally, the Court examined the concept of reflective loss and whether the loss claimed by the appellant was separate and distinct from the company's loss. Finally, the Court had to determine whether to grant leave to file a cross-claim, considering the exercise of discretion, potential flagrant disregard of court directions, and the relative prejudice to the parties under sections 56-58 of the *Civil Procedure Act 2005* (NSW).

The Court of Appeal allowed the appeal, finding that the primary judge had erred in striking out the defence and refusing leave to amend. The Court reasoned that the appellant's claims were not so obviously untenable as to warrant summary disposal. It held that the principles of issue and *Anshun* estoppel, and abuse of process, did not necessarily arise in the circumstances, particularly given the consent dismissal of the earlier proceedings and the lack of privity between the appellant and the corporate party in those proceedings. The Court also found that the appellant's claimed loss was not merely reflective of the company's loss. Consequently, the Court set aside the primary judge's orders and granted the appellant leave to file the amended defence and cross-claim, remitting the matter for hearing.