Glen Eira City Council v Kingston City Council
[2001] VSCA 150
•7 September 2001
SUPREME COURT OF VICTORIA
COURT OF APPEAL
No.6357 of 2000
| GLEN EIRA CITY COUNCIL | |
| Appellant | |
| v. | |
| KINGSTON CITY COUNCIL | Respondent |
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JUDGES: | WINNEKE, P., CHARLES and CHERNOV, JJ.A. | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 17 July 2001 | |
DATE OF JUDGMENT: | 7 September 2001 | |
MEDIUM NEUTRAL CITATION: | [2001] VSCA 150 | |
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Local Government Act 1989 – Amalgamation of municipalities – Proposed arbitration concerning apportionment of contingent liabilities of former municipalities – Whether there is an issue to be arbitrated - Issue estoppel – Whether finding fundamental to decision – Whether finding that cannot be rectified on appeal can give rise to issue estoppel.
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| APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Mr. H.C. Berkeley Q.C. with Mr. S. O’Bryan | Deacons |
| For the Respondent | Mr. J.G. Santamaria Q.C. with Mr. D.M. MacLean | Mills Oakley Lawyers Pty. Ltd. |
WINNEKE, P.:
For the reasons given by Chernov, J.A., I agree that this appeal should be dismissed.
CHARLES, J.A.:
Having had the advantage of reading the reasons for judgment prepared by Chernov, J.A., I agree that this appeal should be dismissed, and for the reasons given by his Honour.
CHERNOV, J.A.:
The appeal
The appellant, Glen Eira City Council, (“Glen Eira”) and the respondent, Kingston City Council (“Kingston”), are bodies corporate under the Local Government Act 1989, and are two of the new cities that were formed as a result of the amalgamation of municipalities in the Melbourne area in 1994. I will later refer to the circumstances in which the amalgamations occurred. On 1 March 2001 Gillard, J. ordered pursuant to Section 10 of the Commercial Arbitration Act 1984, on an application made by Kingston, that Mr. Colin Wight be appointed arbitrator in respect of disputes that Kingston claimed existed between it on the one hand and each of Glen Eira and the several other new cities that were formed in 1994 on the other. It is not necessary, however, to deal here with the disputes between Kingston and the municipalities other than Glen Eira because they do not affect the issues raised in this appeal. Before Gillard, J. Glen Eira resisted Kingston’s application for the appointment of an arbitrator, principally on the basis that the dispute which Kingston alleged existed between it and Glen Eira and which Kingston claimed should be the subject of the arbitration had already been determined by Beach, J. on 16 December 1999 in the context of a proceeding between the two parties. In the alternative, it was claimed on Glen Eira’s behalf that, on a proper construction of the
amalgamation agreement to which I will refer later, no dispute in fact existed between the parties. Hence, it was argued that there was no live issue to go before the arbitrator and, consequently, that such an appointment would be futile and should not be made. The learned judge, however, rejected Glen Eira’s claims, and, as I have said, appointed Mr. Wight arbitrator. Glen Eira now appeals, with leave, against that decision.
Background to the appeal
Before dealing with its case, I shall summarise the circumstances which led to the litigation. Kingston and Glen Eira were established as new cities pursuant to the Order in Council made on 13 December 1994, under Part 10C of the Local Government Act 1989. In general terms, the Order in Council had the effect of dissolving a number of cities, including the City of Moorabbin (“Moorabbin”), that were then in existence in Melbourne and creating new, and much larger, cities by amalgamating parts of former municipalities. Thus, for example, Kingston took in areas that were parts of the former cities of Chelsea, Mordialloc, Moorabbin, Oakleigh and Springvale. Presumably in order to preserve such legal rights and obligations as existed at the time when the former municipalities were dissolved, the Order in Council provided that each of a number of designated new cities would be a successor in law of a former municipality notwithstanding that some of the area of that municipality had been divided between, and thus constituted part of, a number of other new cities. In the case of the former Moorabbin its successor in law became Kingston and all the rights and liabilities of Moorabbin became vested in Kingston notwithstanding that approximately 45 percent of its municipal area became part of Glen Eira. Similarly, although Kingston became the legal employer of staff who were Moorabbin’s employees at the end of 14 December 1994, a significant number of them worked for Glen Eira after that date. Because areas of a former municipality and its other assets were apportioned between a number of new cities but only one of them became its successor in law, financial arrangements had to be made between the new corporations to reflect the reality of the transfers. To that end, clause 81(3) of the Order in Council required that new cities like Kingston and Glen Eira come to an agreement on the “apportionment, settlement, transfer, adjustment or determination of any property, income, assets, liabilities, expenses, staff or other matters in relation to [the area that formed part of Moorabbin]”.
Consequently, on 3 May 1995 Kingston and Glen Eira entered into an agreement (“the amalgamation agreement”), clause 4 of which is in the following terms:
“4. Non-fixed Assets and all Liabilities
4.1The newly constituted Council [Kingston] agrees to credit respectively the neighbouring Council [Glen Eira] an amount equivalent to 45.0% of the book value of all non-fixed assets which were, as at 14 December 1994, vested in the former Council [Moorabbin].
4.2The newly constituted Council agrees to debit the neighbouring council an amount equivalent to 45.0% of the value of all liabilities (other than to the loan liability value in clause 4.3) which was, as at 14 December 1994, owed by the former Council.
4.3The loan liability value to be distributed under clause 4.2 will be discounted by $2.19M.”
“Liabilities” are defined by clause 1.1 as including current, non current and contingent liabilities. The latter term is defined to include liabilities “not otherwise included as liabilities as recorded in [Moorabbin’s] financial accounts that relate to a condition existing at 14 December 1994”.
Clause 12 of the amalgamation agreement is an arbitration clause. It records an undertaking of the parties to use all reasonable endeavours in good faith to settle “any dispute or difference between [them] in connection with the agreement” by negotiation. If that fails, the parties are to refer the dispute or difference to arbitration for resolution in accordance with the Commercial Arbitration Act within 21 days after a dispute notice is given by either of them; “the dispute notice is to be taken to be the reference of the dispute or difference to arbitration”.
The dispute which Kingston claims exists between it and Glen Eira relates to their alleged respective obligations for the unfunded superannuation liabilities and redundancy costs in respect of Moorabbin’s former staff. For many years prior to the amalgamation of the municipalities, their employees and the municipalities themselves as employers, made contributions to the Local Authorities Superannuation Fund (“the fund”) pursuant to the Local AuthoritiesSuperannuation Act 1988 (“the Act”) which was at all relevant times administered by the Local Authorities Superannuation Board (“the board”). Staff of, inter alia, Moorabbin were members of the fund and thus were entitled to benefits in accordance with the Act irrespective of the contributions made by them or by their employer to the fund which was, until July 1997, a mutual fund. Similarly, the contributions to the fund by the employer councils were unrelated to the claims or likely claims on the fund by the staff. It was the board that determined the amount of the levy that councils were to pay into the fund and, until July 1997, each council paid a fixed percentage of the salaries it paid to its staff. As I have said, the amounts so contributed by the councils bore no relationship to the demands on the fund upon the retirement of council employees.
In the circumstances, it is probably not surprising that the fund became exposed to potential liabilities which were unfunded. In 1989 the board determined that the amount of the unfunded liability was $410m. In order to eliminate this liability by 30 June 2007, the board imposed on the councils a surcharge of 4 percent of the salaries paid to their employees. The surcharge, however, was not imposed as a separate levy, but formed part of the 13.25% levy that was paid annually by councils as their contribution to the fund. Between 1989 and 14 December 1994, Moorabbin paid the 4 percent surcharge as part of its 13.25% levy, but after Kingston took over its affairs, Kingston continued making the above payments until 30 June 1997. As a result of the surcharge contributions that were made by the councils, the unfunded liability of the fund progressively fell so that by 1992, for example, the amount had dropped to $314m. In 1997, the Act was amended so as to implement a new policy of the government relating to employer contributions to the fund. So far as is relevant, three changes were brought about:
(a)the councils were required to continue to contribute 9.25 percent of the employees’ salaries (the ongoing contributions);
(b)the 4 percent surcharge was removed, but each council became responsible for paying a proportion of the estimated unfunded liability of the fund in so far as it related to its employees as actuarially calculated;
(c)each council also became liable to pay any increase in liability for retrenchment benefits paid to its employees from 1 July 1997 (the retrenchment increment).
As I have said, this constituted a marked departure from the earlier requirements. Whereas before 1 July 1997, Kingston, like other councils, paid a surcharge of 4 percent of the salaries in question irrespective of whether such contribution bore any relationship to the anticipated calls on the fund by its employees, after that date its contributions were determined on an actuarial basis and were related to the anticipated claims of its employees on the fund. In relation to the fund’s unfunded liability, the board maintained for the first time a separate unfunded liability account for each council. In the result, Kingston was advised by the board that it was required to pay $9,497,994 over a 10 year period.
In the light of this development, Kingston sought to recoup some of the liability under the amalgamation agreements from the other councils which had taken over some of the areas and assets of the former municipality of Moorabbin. The councils included Glen Eira and the other new cities to which I have referred in paragraph [3] above. So far as Glen Eira is concerned, Kingston claimed from it $5.68m on the following bases:
(a)$896,000 representing 45 percent of Moorabbin’s alleged unfunded liability to the fund;
(b)$4.991m being 45 percent of the redundancy costs in respect of the former Moorabbin staff.
The claim was disputed by Glen Eira and in the result, the government, by Order in Council made on 19 November 1998, appointed Mr. Wayne Walker of William Mercer Pty Ltd as a Board pursuant to Section 9(2) of the Local Government Act 1989 to inquire into and determine the amount that, inter alia, Glen Eira was liable to pay Kingston in respect of the unfunded superannuation liabilities “of the former City of Moorabbin” under the amalgamation agreement. Later, Mr. Walker was asked to undertake the same exercise in respect of “redundancy costs”. On 17 June 1999 he handed down his determination recommending, in effect, that Glen Eira take up $2,343,166 of Kingston’s relevant liability.
Glen Eira, being aggrieved by the determination, applied to the Supreme Court on 16 December 1999 to review the determination under the Administrative Law Act 1978 on two broad grounds, namely, that the Board made an error of law in its interpretation of the amalgamation agreement and that, in making the determination, it failed to observe the rules of natural justice. The Master ordered that the Board’s determination be reviewed on those two grounds. He also ordered that Kingston be made a party to the proceeding (in addition to Mr. Walker who was named as respondent and who later informed the Court that he did not intend to take an active role in the proceeding but would abide by its decision). By letter dated 11 October 1999 Kingston’s solicitors informed Glen Eira’s solicitors that Kingston would not make any submission when the matter came on for trial and would abide by the decision of the Court. It seems that it was accepted by Kingston (at least inferentially) that the Board had failed to accord natural justice to Glen Eira and that for that reason its decision could not stand. At the commencement of the hearing before Beach, J. Kingston’s counsel confirmed that his client did not oppose the orders sought by Glen Eira.
Beach, J. considered that the Board erred in law in interpreting the amalgamation agreement and that it failed to accord Glen Eira natural justice. In the result, on 16 December 1999, he quashed the Board’s determination. In the course of his reasons, his Honour also said in para. [32] that Moorabbin had no liability at the relevant date to make contributions to the fund.
On 26 May 2000, Kingston served a Notice of Dispute on Glen Eira claiming in recital E that the parties were in dispute “as to the amount [Glen Eira] shall pay [Kingston] in respect of unfunded superannuation liabilities and redundancy costs of the former City of Moorabbin [as at 14 December 1994]”. It also sought the appointment of an arbitrator to arbitrate the dispute. A like notice was served on several other councils which took up some of the area and assets of the former Moorabbin and to which I have already made reference. Because of the disagreements between the parties as to, inter alia, the identity of the arbitrator to be appointed, Kingston filed an originating motion on 2 August 2000 seeking an order under the Commercial Arbitration Act for the appointment of a nominated accountant as arbitrator to hear and determine the disputes referred to in the Notices of Dispute. On the return of the originating motion before Gillard, J., Glen Eira contended, as I have said, that there was no dispute between it and Kingston because the issue which was the subject of the Notice of Dispute had been determined by Beach, J. Glen Eira also opposed the appointment of the arbitrator on the ground that, on a proper construction of the amalgamation agreement, it was plain that no moneys were due by Glen Eira. Consequently, the appellant argued, it would be futile to appoint an arbitrator. Gillard, J. found that no estoppel was created by the decision of Beach, J. His Honour declined to construe the amalgamation agreement as sought by Glen Eira, considering that to be a matter that should be dealt with by the arbitrator. As I have said, his Honour appointed an arbitrator, although not the person whom Kingston had nominated. On 29 March 2001 Glen Eira obtained leave from this Court to appeal against that decision and on 11 May 2001 this Court further ordered that the arbitration be stayed pending the hearing and determination of this appeal or further order.
The appellant’s case
Mr. Berkeley who appeared with Mr. O’Bryan for Glen Eira argued first that, on a proper construction of the amalgamation agreement and in the events that have occurred, there was no dispute between the parties that could properly be put before an arbitrator under the amalgamation agreement and, therefore, his Honour should have refused to appoint an arbitrator. Secondly, it was said that the issue that is sought to be canvassed in the Notice of Dispute has been authoritatively determined by Beach, J. (against Kingston) and, therefore, it is estopped from agitating it in the arbitration.
Proper construction of amalgamation agreement
It is apparent that in the arbitration Kingston seeks what is, in effect, a contribution from Glen Eira under clause 4.2 of the amalgamation agreement in respect of its obligation to pay unfunded superannuation liabilities and retrenchment increments in so far as they can be said to relate to Moorabbin. Mr. Berkeley submitted that, on a proper interpretation of the amalgamation agreement, clause 4.2 contemplates that what is to be apportioned between Kingston and Glen Eira is Moorabbin’s relevant legal, as distinct from actuarial, liability as at 14 December 1994. Hence, said counsel, the real question is whether Moorabbin was exposed to a contingent legal liability at 14 December 1994 in respect of the unfunded superannuation liability and retrenchment increments. It was said that in order to determine whether such a liability existed, and if so, what its quantum was, one must look at the legislation that is said to have imposed it and that could only be the Act. Mr. Berkeley emphasised that between 1 March 1989 and 14 December 1994, Moorabbin fulfilled its obligations under the Act to contribute to the fund at the rate of 13.25%, inclusive of the 4% surcharge, of the salaries it paid to its employees/contributors. It was submitted that what occurred as a consequence of the 1997 amendments to the Act, namely, the imposition of an obligation to make contribution on an actuarial basis, could not be regarded as affecting the question whether Moorabbin had any, and if so what, contingent liability as at 14 December 1994. A contingent liability, it was said, is an existing legal obligation which may or may not crystallise in the future upon the happening of an event and, since the question whether such a liability existed in Moorabbin had to be determined as at 14 December 1994, one must have regard to the relevant legislative obligations that existed as at that date and not in 1997. Mr. Berkeley contended that no contingent liability could have existed in Moorabbin in respect of a liability that came into existence in 1997. Consequently, it was said, there can be no dispute between the parties on this issue and Kingston should not be permitted to go through the futile exercise of seeking to have a non existent dispute put before an arbitrator.
The appellant’s argument, however, confuses the meaning to be given to “liabilities” in clause 4 of the amalgamation agreement in so far as it relates to any relevant liability Moorabbin may have had on 14 December 1994 with the various mechanisms adopted by the legislation to reduce the unfunded liability of the fund. It is obvious that the question whether Moorabbin was subject to such a liability and if so, what were Glen Eira’s responsibilities for it under clause 4.2 necessarily involves, inter alia, construing the agreement. Gillard, J. regarded it as inappropriate that he should seek to do so. He considered that the agreement should be interpreted in its matrix of facts which were not before him and that, in any event, it was a task that should be undertaken in the context of the proposed arbitration. His Honour, therefore, declined to engage in that analysis. In my view he was clearly right in so deciding. It is plain enough that it will be for the arbitrator, and not for the Court prior to the arbitration, to determine what is the proper meaning of the amalgamation agreement and in particular, what meaning the parties intended to give to the word “liabilities”. It is not necessarily the case that the context in which the agreement or the Notice of Dispute is to be construed is confined to the Act, including the 1997 amendments, bearing in mind particularly that neither document refers to the Act. As Mr. Santamaria, who appeared with Mr. McLean for Kingston, submitted, it cannot be assumed at this stage what was the parties’ intention as to the meaning of “liabilities”. Consequently, in my view, the issue raised in the Notice of Dispute reflects a real dispute between the parties which is relevantly related to the amalgamation agreement and it should be determined by an arbitrator as is provided for by the agreement.
Hence, this aspect of the appellant’s case should be rejected.
Issue estoppel
It will be recalled that the subject matter of the arbitration is Kingston’s claim that Glen Eira pay its due proportion of the unfunded superannuation liabilities and redundancy costs of Moorabbin that existed as at 14 December 1994. As I have said, the appellant contends that the issue underlying this claim, namely, whether Moorabbin was subject to any such liability as at the relevant date, has been decided against Kingston by Beach, J. Consequently, it was submitted on its behalf, Gillard, J. should have held that Kingston was estopped from pursuing its claim in the arbitration. In my view, however, his Honour was correct in concluding that no such estoppel operates to prevent Kingston from pressing on with the arbitration.
So far as is relevant, in order to make good its claim that Kingston is so estopped, Glen Eira must establish at least the following. First, that there is an identity of issue in the sense that the very issue which is sought to be raised by Kingston in the arbitration has been determined by Beach, J. As Gillard, J. noted, Browne, LJ. said in Turner v London Transport[1]:
“The essential foundation of a plea of issue estoppel must be that the issue or issues raised in the first proceedings, and the issue or issues raised in the second proceedings are identical.”
Secondly, it must be shown that his Honour’s finding on the question of Moorabbin’s liability on 14 December 1994 was fundamental or “legally indispensable” to the ultimate decision that the determination of the Board must be set aside. The essence of the doctrine of estoppel was explained by Dixon, J. in the well known, and often cited, passage in his judgment in Blair v. Curran[2] in the following words[3]: “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”. His Honour went on to say[4]:
“Nothing but what is legally indispensable to the conclusion is thus finally closed or precluded. In matters of fact the issue estoppel is confined to those ultimate facts which form the ingredients in the cause of action, that is, the title to the right established. 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.”
[1](1977) ICR 952 at 964.
[2](1939) 62 C.L.R. 464.
[3]At 531. See also Rogers v. The Queen (1994) 181 C.L.R. 251 at 261 per Brennan, C.J.
[4]At 532.
It was contended by Mr. Santamaria that there is no identity of issue in this case. Although there is force in that claim, it is not necessary to pronounce on it having regard to my view that the second requirement for issue estoppel referred to above has not been made out by the appellant. I have come to this conclusion for the following reasons.
There being no pleadings in the proceeding before Beach, J., it is necessary to have regard to the substance of the action that was before him for the purpose of determining whether the finding in question was fundamental to the decision.[5] What was before Beach, J. was an order nisi for review that was made consequent upon the application of Glen Eira under the Administrative Law Act. So far as is relevant, the grounds on which the order was made were that the Board erred in law in its interpretation of the amalgamation agreement - there were eight specific alleged errors of interpretation – and that in making its determination, the Board failed to observe the rules of natural justice. There is no doubt, however, that, given the terms of the order nisi and the way the case was presented, the principal issue before the Court was whether the Board had erred in its interpretation of the amalgamation agreement.
[5]Trawl Industries of Australia Pty. Ltd. (In Liq.) v. Effem Foods Pty. Ltd. (1992) 108 A.L.R. 335 at 347 per Gummow, J.
In concluding that it did so err, Beach, J. found that the Board wrongly concluded that, because from an actuarial perspective Moorabbin had a pre-existing liability as at 14 December 1994 in respect of the unfunded superannuation liability, such a liability was a contingent liability and thus a “liability” of Moorabbin for the purposes of clause 4.2. As his Honour pointed out, the clause limits the liability adjustments to those that were owed by Moorabbin as at 14 December 1994 and does not encompass liabilities that are actuarially deduced. A little later, his Honour said: “What the Tribunal appears to have done is to notionally construct a liability as if an actuary had in the past been given the task of re-assessing the amount which Moorabbin ought to have been paying to the board. In my opinion the Tribunal had no power to make such a notional reconstruction of liability. What the amalgamation agreement intended to adjust was legal liabilities whether contingent or otherwise actually in existence as at 14 December 1994”. (Beach J. found that a like error was made by the Board in relation to redundancy costs). His Honour was thus concluding that the Board had erred in construing clause 4. He was not thereby deciding that there was no contingent liability existing in Moorabbin as at 14 December 1994.
This conclusion disposed of the principal ground of the order nisi. Nevertheless, his Honour went on to refer, “in this connection”, to provisions of ss.23 and 47G(1) of the Act[6] and then said[7]:
“It follows therefore that there was no obligation upon Moorabbin to contribute any liability (sic) to the fund, its only obligation was to pay to the [board] a proportion of salaries payable to employees to ensure there was no shortfall under the Commonwealth legislation”.
Although it is not readily apparent how this conclusion “follows” from what his Honour had earlier said in his reasons, Glen Eira relied on it in support of its claim that there was identity of issue. It argued that this finding relates to the same issue that is raised in the Notice of Dispute. It was also contended on its behalf that this finding was indispensable to the ultimate conclusion that the Board had erred in law. As I have said, even if it is assumed that the issue which Beach, J. resolved in para. [32] of his reasons is the same issue that is sought to be raised for determination by the arbitrator, I am not persuaded that the finding was fundamental. This is because his Honour had resolved the principal ground of the order nisi essentially on the basis that the Board had wrongly construed the amalgamation agreement in the way in which I have earlier described. The conclusion that Moorabbin had no liability as at 14 December 1994 formed no relevant part of the judge’s reasoning which led him to conclude that the Board had misconstrued the amalgamation agreement. For that reason alone I am of the view that what his Honour said about Moorabbin’s relevant liability could not be characterised as being legally indispensable to the ultimate decision.
[6]Section 23 requires the authorities to pay to the Board the proportion of salaries paid to employees as determined by an actuary. Section 47G(1) requires the parties to contribute to the fund amounts that would result in there being no individual guarantee shortfall under the Commonwealth Superannuation Administration Act 1992.
[7]In para. [32].
There are, however, at least two other reasons for saying that the finding in question was not fundamental to the decision. First, Kingston had no practical way in which it could have challenged it by way of appeal. The second reason is that, as Mr. Berkeley himself has said, the finding was an alternative basis for the decision, the other findings being that the board erred in law and that it had failed to accord natural justice to Glen Eira. I will deal later with the reasons why I have concluded that Kingston could not have appealed against the decision of Beach, J., but first, I will refer to the authorities that support the view that in the above circumstances it cannot be said that the finding in question was fundamental to the decision. In Murphy v. Abi-Saab[8] Gleeson, C.J. said[9]:
[8](1995) 37 N.S.W.L.R. 280.
[9]At 288.
“A practical test of whether a decision is fundamental is to ask whether it is possible to appeal against the finding: Spencer Bower and Turner, The Doctrine of Res Judicata, 2nd ed (1969) at 182; Talyancich v Index Developments Ltd [1992] 3 NZLR 28. Since finality of litigation is a primary object of the principle underlying issue estoppel, it would be incongruous if the doctrine operated so as to force a litigant to appeal in order to displace part of the reasoning of a court whilst having no intention, and perhaps no hope, of displacing the judgment: Joseph Lynch Land Co Ltd v. Lynch [1995] 1 NZLR 37.”
Similarly, the learned author[10] of Spencer Bower, Turner and Handley, The Doctrine of Res Judicata[11], said[12]:
“A decision of fact or law against the party who succeeded will not found an estoppel because it cannot be fundamental to the decision. It would be unjust to make such a decision the foundation of an estoppel, for no appeal is available to the person against whom it was given. A similar argument applies where several factual grounds are advanced as alternative bases for a cause of action and the court finds more than one in favour for the party who succeeds. No estoppel can be founded on any of the separate findings, for the party failing on such issues cannot appeal any of them separately. To succeed on appeal he must succeed on all the issues, and if the finding on one is good, this will be fatal. There will be a cause of action estoppel, but the separate issues will not ground issue estoppels because none was fundamental to the decision.”
The cases cited as supporting this statement of law include Penn-Texas Corporation v. Murat Anstalt (No. 2)[13] and James v. The Commonwealth[14].
[10]The Hon. Mr. Justice Handley of the New South Wales Court of Appeal.
[11]3rd ed. (1996).
[12]Paragraph [205].
[13][1964] 2 Q.B. 647 at 660-661.
[14](1935) 52 C.L.R. 570 at 584 and 590-1.
In Penn-Texas the English company was not estopped from contesting at the second appeal the finding made in the first appeal that there was power in the court to order a limited company to produce documents under the relevant Act. It was held that the first ruling did not ground an estoppel because the English company had no effective right of challenging it since it had succeeded in the proceeding, albeit on another basis, namely, that the notice claiming the documents was insufficiently particularised and, therefore, was ineffective.
Similarly in James, it was held that the plaintiff was not estopped from contending that s.92 of the Australian Constitution bound the Commonwealth notwithstanding that in the earlier proceeding involving the same parties[15] the High Court had expressed the view that s.92 did not bind the Commonwealth. It was said that the earlier decision on the s.92 question did not create an estoppel because James could not have appealed against that decision because he had succeeded on the other ground.
[15](1928) 41 C.L.R. 442.
Mr. Berkeley sought to distinguish Penn-Texas and James. He contended that the plaintiff in those cases succeeded on one issue but failed on the other and, therefore, it was understandable that in practice no appeal lay against the court’s determination and, hence, the decision against the successful party could not be treated as raising an issue estoppel. He argued, however, that where the plaintiff succeeds on both issues, that gives rise to an estoppel in respect of each issue. In support of that contention he cited Mitsubishi Motors Australia Ltd. v. Harboard[16]. That decision, however, does not assist the appellant. In Mitsubishi there was only one cause of action on which the worker relied, namely, negligence. In an earlier proceeding the District Court judge found against him on two issues – whether Mitsubishi failed to take the identified precautions against the presence of oil on the floor and whether the plaintiff slipped on it. Although Doyle, C.J., with whom the other members of the court agreed, considered[17] that “a decision on either [issue] would have sufficed to defeat the [worker’s] claim”, he approached the question of whether the findings gave rise to issue estoppel by looking “in a practical way at what was in fact decided”. His Honour concluded that, in the circumstances, the findings were “the actual ground upon which the existence of the right was negatived” and that, in the circumstances, both findings were “the essential foundation or the groundwork of the judgment”[18]. Thus, the two findings in Mitsubishi were not treated as alternative bases for the decision, but rather as forming the essential foundation for the conclusion that the worker had failed to establish his cause of action.
[16](1997) 69 S.A.S.R. 75.
[17]At 96. Notwithstanding that the Chief Justice said at 94 that he did not regard the test of ability to appeal as “a universal test” and was “rather cautious” in adopting it, he did not reject it as a useful test. Moreover, his Honour cited with apparent approval what Gleeson, C.J. said in Murphy to which reference has been made above.
[18]Blair v. Curran at 533 per Dixon, J.
The situation here, however, is materially different. First, even if one accepts Mr. Berkeley’s claim that the two relevant findings of Beach, J. were that there was no relevant liability in Moorabbin as at 14 December 1994 and that there was a denial of natural justice, such findings were, as Mr. Berkeley himself said, alternative findings. Secondly, as I have said in paragraph [22] above, the reasons for judgment of Beach, J. themselves make it plain that the finding in question was not fundamental to the decision.
Thus, if the position is that Kingston could not have challenged the finding in question because, as a matter of reality, it could not have appealed against the decision of Beach, J., that is yet another reason for concluding that the finding was not fundamental to the decision and thus does not give rise to an estoppel. Mr. Berkeley argued that Kingston did have a practical right of appealing against the decision of Beach, J. He submitted that it was its decision not to make submissions to the Court on the question whether the board had erred in law, just as it was its decision not to appeal against the judgment in favour of Glen Eira. There was, however, no point to Kingston making submissions to Beach, J. on the issue of whether the Board erred in law when it took the view (as did Gillard, J.) that it was a “foregone conclusion” that the decision had to be set aside because the Board had failed to accord natural justice to Glen Eira. It is trite that Kingston could not have appealed against the reasons of Beach, J.; it could only have appealed against the “judgment” but, given what I have just said, it would have had no realistic hope of displacing it. In those circumstances, it is apparent that it would be relevantly “incongruous” and “unjust” to make the finding in question the foundation of an estoppel.
For these reasons, I am of the opinion that the finding by Beach, J. that Moorabbin was not subject to a relevant liability as at 14 December 1994 did not give rise to an estoppel precluding Kingston from pursing its claim in the arbitration in accordance with its Notice of Dispute.
Given this conclusion, it is unnecessary to deal with the arguments advanced on behalf of the respondent that issue estoppel did not arise here in any event given the “special circumstances” that prevailed in this case as that concept has been recognised and explained in Arnold v. National Westminster Bank plc[19]. Similarly, it is not necessary to deal with the question whether issue estoppel can arise in the context of a judicial review proceeding[20].
[19][1991] 2 A.C. 93 at 109 per Lord Keith of Kinkel. See, however, the observations of the members of the High Court in Chamberlain v. Deputy Commissioner of Taxation (1988) 164 C.L.R. 502 at 504 per Brennan, J. at 509-510 per Deane, Toohey and Gaudron, JJ. and at 512 per Dawson, J. on the relevance of “special circumstances” in relation to res judicata although their reasons also probably apply to issue estoppel.
[20]On that issue, see R. v. Secretary of State for the Environment (1983) 1 W.L.R. 524 at 537-539; (1984) 1 W.L.R. 592 at 602 and 606; Wade and Forsyth Administrative Law (7th ed.) pp.282-283; compare Taylor v. Ansett Transport Industries Ltd. (1987) 18 F.C.R. 342.
For these reasons, I am of the view that the appeal should be dismissed.
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