Harman v Coram Investments Pty Ltd
[2023] VCC 1187
•12 July 2023
| IN THE COUNTY COURT OF VICTORIA AT Melbourne COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
General List
Case No. CI-22-02638
| CHERYL ANN HARMAN | Plaintiff |
| v | |
| CORAM INVESTMENTS PTY LTD (ACN 109 019 927) TRADING AS CARDINIA CONVEYANCING | Defendant |
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JUDGE: | HIS HONOUR JUDGE COSGRAVE | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 16 March 2023 | |
DATE OF RULING: | 12 July 2023 | |
CASE MAY BE CITED AS: | Harman v Coram Investments Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2023] VCC 1187 | |
RULING
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Subject:DISMISSAL OR PERMANENT STAY OF PROCEEDING
Catchwords: Anshun estoppel – related prior proceeding – defendant in initial proceeding contemplated joinder of third party – third party not joined – risk of inconsistent judgments – unreasonableness of not joining third party – not unreasonable – no abuse of process
Legislation Cited: Building Act 1993; Sale of Land Act 1962; Transfer of Land Act 1958; Wrongs Act 1958
Cases Cited:Aldi Stores Ltd v WSP Group Plc [2008] 1 WLR 748; Betts v Harman [2021] VCC 1349; Champerslife Pty Ltd v Manojlovski (2010) 75 NSWLR 245; Deep Investments Pty Ltd v Casey [2018] FCA 603; Gibbs v Kinna [1999] 2 VR 19; Habib v Radio 2UE Sydney Pty Ltd [2009] NSWCA 231; Kermani v Westpac Banking Corporation (2012) 36 VR 130; Mining Standards International Pty Ltd v Atlantic Nickel Mineracao Ltd [2022] FCA 623; Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; Redowood Pty Ltd v Link Market Services Pty Ltd (formerly known as ASX Perpetual Registrars Ltd) [2007] NSWCA 286; Solak v Registrar of Titles (2011) 33 VR 40; State Bank of New South Wales v Alexander Stenhouse Ltd (1997) Aust Tort Reports 81-423; Timbercorp Finance Pty Ltd (In Liq) v Collins (2016) 259 CLR 212; Walton v Gardiner (1993) 177 CLR 378
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr A M J Meagher Ms R McCarthy | Duffy & Simon |
| For the Defendant | Mr A Strahan KC Ms H Canham | Barry Nilsson |
HIS HONOUR:
Nature of the application
1The defendant (“Cardinia”), by summons dated 31 January 2023, applied to have the proceeding initiated by the plaintiff (“Harman”) dismissed or, alternatively, permanently stayed or the statement of claim struck out.
Background
2The current proceeding follows on from a separate but related proceeding which Judge Macnamara heard and determined in September 2021. In that case, the plaintiff (“Betts”) sought to rescind a contract for the sale of land and to recover her deposit of $550,000 from the vendor, Harman. Cardinia acted as the conveyancer on behalf of Harman with respect to that sale transaction.
3In reaching his decision, Judge Macnamara addressed the following issues:
(a) is the right to avoid a contract of sale conferred by section 137B(3) of the Building Act 1993 (“the BA”) unqualified or subject to waiver, affirmation and estoppel?
(b) had Harman made out her claims of waiver, affirmation and/or estoppel?
(c) did Betts agree to extend time for the provision of domestic warranty insurance up to and including settlement whether by reason of general condition 8 in the contract of sale of land dated 2 April 2019 or otherwise?
(d) in light of the admitted contravention of section 32B(b) of the Sale of Land Act 1962 (“the SLA”), had Harman satisfied the requirements of section 32K(4) of the SLA, being:
(i)she acted honestly and reasonably and ought fairly to be excused for the contravention; and
(ii)Betts is substantially in as good a position as if all the relevant provisions of the SLA had been complied with.
(e) was Betts precluded from exercising her statutory right to avoid and/or rescind because she failed to settle the contract on 12 December 2019 (because she was in default at the time)?
4Ultimately, the decision turned on the answer to questions (a), (b) and (e). Betts succeeded in her claim on the basis that Harman had failed to provide a certificate of section 137C warranty insurance before the contract of sale was entered. The result of failing to provide the certificate of section 137C warranty insurance was that the contract of sale did not comply with section 137B(2) of the BA and, as a result, the transaction was voidable. His Honour found that Betts had not forfeited her right to terminate the contract on the basis of waiver, affirmation or estoppel as contended by Harman. Finally, Judge Macnamara held that Betts had an absolute and unconditional right under the BA to terminate the contract in those circumstances. His Honour ordered that Betts recover her deposit of $550,000 together with interest and costs. He also dismissed Harman’s counterclaim.
5After Betts commenced the first proceeding on 11 February 2020, Harman actively contemplated joining Cardinia to the action.
6First, according to the affidavit filed by Harman’s solicitor, Matthew Abraham (“Abraham”), he and counsel acting for Harman and her husband, Philip, gave advice to the Harmans in April 2020 about the possible joinder of Cardinia as a third party to the first proceeding. Counsel’s opinion was that filing the third party notice against Cardinia would have cost implications for the persons who filed the proper basis certificate.
7On 27 April 2020, Philip emailed Abraham and instructed him to leave the third party counterclaim in the background for the time being and await the outcome of the claim by Betts.
8Secondly, after the mediation in November 2020, Abraham gave further consideration to the question of Cardinia’s liability. By letter dated 3 December 2020, Abraham wrote to Cardinia. He explained the general nature of the claim which Betts had brought and enclosed copies of the pleadings. Under the heading “Claim against Cardinia Conveyancing”, Abraham wrote:
“Our client is currently considering the suitability of joining your office as a third party to the Proceeding in which it would seek relief from the Court of an indemnity and contribution from you whereby in the event that Harman fails in its defence against the claims brought by Betts and is the recipient of an adverse cost order and decision, your office would step in and satisfy the damages suffered by Betts, together with relief to our client for their own loss and damage for what the Court will have deemed to be a defective Sale Contract by failure to comply with either the Act of the SLA. (sic)
Alternatively, our client will continue to prosecute its defence and counterclaim against Betts and await the Court’s determination. Again, should our client fail against Betts, it will immediately look to commence a separate proceeding against your office seeking her loss and damage on the basis noted above.
Fundamentally, we are of the view that your office owed our client a duty of care to exercise all reasonable skill, care and diligence in performing the conveyancing services as to avoid our client, as the owner of the Property from suffering reasonably foreseeable financial loss where the Sale Contract is found to have failed to comply with relevant provisions as set out above.”
9Later in the same letter under the heading “Resolution”, Abraham wrote:
“As a result of the above matters and prior to our client giving further consideration as to whether it formally joins you as a third-party, our client invites you to have your insurer, or solicitor correspond with the writer, to resolve any accepted liability (without admission if necessary) to settle the dispute on behalf of Harman with Betts. To this extent, we say that if your office is willing to contribute to the resolution of the Proceeding our client would be seeking the following contribution from you:
1. Payment to Betts of $550,000 (being the deposit paid under the Sale Contract) plus her legal costs;
2. Payment to Harman of $600,000 which is made up of:
(a)the diminution in the value of the Property;
(b)holding costs; and
(d)legal expenses incurred.
(These heads of damage can be found in Betts (sic) Amended Statement of Claim and Harman’s Further Amended Defence and Counterclaim.)
10Abraham advised Cardinia that if it refused to participate in the settlement discussions and contribute to a settlement of the first proceeding then, if Harman failed in her defence and counterclaim, she would issue proceedings against Cardinia to recover the entire loss and damage sustained as a result of that first proceeding.
11Around this time, Abraham considered again the risks and difficulties of joining Cardinia as a third party to the first proceeding. As he saw it, the risks and difficulties included:
(a) the loss and damage to be alleged against Cardinia had not yet been suffered;
(b) a claim for proportionate liability would not be available because section 24AF of the Wrongs Act 1958 (“the WA”) provided that Part IV AA of that Act applied to a claim for economic loss or damage to property in an action for damages arising from a failure to take reasonable care. In the first proceeding, Betts made no claim in respect of a failure to take reasonable care;
(c) a claim for contribution was unlikely to be available. Such a claim under section 23B(1) of the WA provided that a person liable in respect of any damage suffered by another person could recover contribution from any other person liable in respect of the same damage. In the first case, Cardinia was not liable to Betts in respect of the loss claimed by Betts.
12Abraham sought advice from counsel, Mr Schlicht, and wrote a letter to the Harmans on 14 December 2020 in response to Philip’s request for advice.
13In the letter, Abraham advised the Harmans that the claim against Cardinia was not hopeless but that it would only crystalise when the court ruled in favour of Betts. Thus, there was a procedural risk in joining Cardinia to the first proceeding when the loss and damage which Harman relied upon against Cardinia had not yet been suffered. Abraham said that if the third party claim were made now, then the trial date in the first proceeding would be adjourned and the Harmans would incur additional costs in preparing the claim against Cardinia.
14Abraham also commented on the defences which Cardinia might raise in any subsequent proceeding against it by Harman. He said that Cardinia would likely argue that it properly advised the Harmans of the risk of not having domestic builders warranty insurance prior to signing the contract of sale. Cardinia could also point to the doctrine of Anshun estoppel whereby a party was prevented from raising a claim or issue in subsequent proceedings if that claim or issue were so connected to the subject matter of the first proceeding that it was deemed unreasonable for the party not to have raised the issue in that first proceeding.
15By email dated 15 December 2020, Adele Grigg, a claims officer with Vero Insurance, responded to Abraham on behalf of Cardinia. She advised that Vero was the professional indemnity insurer for Cardinia. She denied that Cardinia was exposed to any liability in relation to the claim by Betts. Ms Grigg alleged that Betts purportedly rescinded the contract of sale after she received the relevant insurance documentation and that the insurance cover was in place and confirmed to Betts before she signed the contract. In the circumstances, Vero considered that Betts had no legitimate reason to rescind the contract. I note that Ms Grigg’s letter raised no issue and gave no warning that if Cardinia were not joined to the first proceeding, it would make an application of the kind now made.
16By email dated 17 December 2020, Abraham forwarded a copy of Adele Grigg’s email to Philip Harman.
17It is clear from the foregoing correspondence that Harman ultimately made a considered decision not to join Cardinia as a third party to the first proceeding.
Pleadings
18Harman began this proceeding against Cardinia on 11 July 2022.
19In the statement of claim Harman contends that:
· between about June 2011 and December 2012, she carried out work as an owner builder on the property at 35 Leppitt Road, Pakenham (“the Property”);
· the value of the work exceeded $16,000 and included the construction of a building on the Property;
· Harman told the defendant these things in January 2019 when she retained Cardinia to act as her conveyancer in relation to the sale of the Property to Betts;
· Harman was required to obtain building insurance in relation to the works and to produce a certificate of insurance before entering the contract of sale;
· Harman entered the contract of sale with Betts on 2 April 2019 for $5.5 million with settlement due on 12 December 2019;
· Harman later obtained warranty insurance in connection with the Property and provided the certificate to Betts in October 2019;
· the transaction did not settle on 12 December 2019 in accordance with the contract of sale;
· on 20 December 2019, Betts elected to avoid and rescind the contract of sale;
· on 20 September 2021, Judge Macnamara found that Betts was entitled to rescind the contract of sale and recover her deposit of $550,000;
· Cardinia breached its duty to advise Harman and to ensure that she provided Betts with a valid certificate of section 137C warranty insurance under the BA at the time of or before entering the contract of sale;
· if Cardinia had complied with its obligations and performed its duty, Harman would have obtained the necessary certificate and given it to Betts at the time of entering the contract of sale.
20In the circumstances, Harman claims damages against Cardinia in the sum of approximately $1.261 million.
21For its part, Cardinia has filed a defence in which it admits some allegations and denies others. The important points raised in the pleading are as follows:
· Cardinia admits the retainer with Harman created in January 2019 and also admits that it owed a duty to exercise reasonable care and skill in acting as Harman’s conveyancer;
· Cardinia admits that around 8 January 2019, Philip Harman, on behalf of the plaintiff, told Cardinia in substance that the Harmans had built their home as owner builders in the period between about June 2011 and December 2012; an occupancy permit was issued on 30 January 2015; no builder warranty insurance was in place in respect of the Property;
· Cardinia says that around the same time, it advised Harman that if she were an owner builder, she would need to obtain a defects inspection report; if the cost of works carried out as an owner builder during the previous seven years exceeded $16,000 she would need to provide warranty insurance to the purchaser; if she did not comply with these requirements, the purchaser of the Property could withdraw from the transaction up to the date of settlement;
· Cardinia admits that section 137B(2) of the BA makes it an offence for a person who constructs a building to enter into a contract to sell the building within six years and six months from the date of issue of an occupancy permit unless, relevantly: not more than six months before entering into the contract to sell the building, the person has obtained a report containing prescribed matters from a prescribed building practitioner; the person has given a copy of the report to the intending purchaser; the person is covered by insurance that indemnifies the purchaser of the building in respect of loss or damage arising from breach of a warranty implied in the contract of sale by section 137C of the BA; the person has given the purchaser a certificate evidencing the existence of that insurance;
· Cardinia advised Harman on 14 January 2019 that if she failed to provide section 137C warranty insurance as required, the purchasers could withdraw from the purchase up to the date of settlement;
· on 15 January 2019, Philip Harman on behalf of the plaintiff advised Cardinia that he was arranging the required insurance documentation;
· Philip Harman did not obtain section 137C warranty insurance before the preparation of the documents for the sale of the Property;
· on 25 January 2019, Cardinia:
§provided a copy of the proposed contract for the sale of the Property and the accompanying section 32 statement to Harman via her husband;
§requested that Philip read the section 32 statement and carefully check that all of the information in it was accurate;
§advised Philip that if any information in the documents was incorrect or had been omitted, a purchaser might have the right to avoid the sale in which event Harman would be liable for additional costs.
· on 25 February 2019, Philip Harman on behalf of the plaintiff confirmed to Cardinia that the information provided to him appeared to be accurate. He also failed to advise Cardinia that information, namely evidence of a section 137C warranty insurance, had been omitted;
· Cardinia admitted that Harman did not provide a certificate of section 137C warranty insurance to Betts at the time of entering into the contract of sale for the Property;
· Cardinia admits that it was reasonably foreseeable that Harman could suffer loss and damage if she failed to comply with requirements of section 137B of the BA;
· Cardinia admitted that it had a duty to advise Harman of the requirement to provide a valid certificate of section 137C warranty insurance and that failure to provide such a certificate could lead to Betts withdrawing from the contract. Cardinia said it discharged that duty;
· Cardinia said that Harman failed to mitigate her loss by not seeking leave to appeal the judgment of Judge Macnamara in favour of Betts. Cardinia referred to four grounds of appeal;
· Cardinia argued alternatively that, if an appeal from the judgment of Judge Macnamara had no real prospects of success, then insofar as Harman claimed, as part of her loss, costs associated with the first proceeding, that loss was caused by defending a case which had no reasonable prospects of success;
· Cardinia submitted that any loss and damage was caused in part by the failure of Harman to take reasonable care. It said that it had advised the Harmans in January 2019 about the need for insurance and Philip Harman said that he was arranging it, but he ultimately did not do so. He also later confirmed the accuracy of the proposed contract of sale and section 32 statement and failed to advise Cardinia that the evidence about section 137C warranty insurance was omitted;
· Philip Harman by his conduct breached his duty to his wife and, accordingly, any loss which she suffered was caused at least in part by her husband’s breach of duty.
Submissions
Cardinia’s submissions
22The central allegation in Cardinia’s submissions was that if this case proceeds, the court will face the intolerable risk of having two judgments which consider relevantly the same evidence but reach inconsistent conclusions. Combining that situation with the wasteful duplication of court resources, Cardinia submits that there is a need to protect public confidence in the court and to avoid bringing the administration of justice into disrepute.
23Cardinia argued that this proceeding puts the court in jeopardy of making findings “directly contrary to those reached by Judge Macnamara” in the first proceeding.[1] Harman defended Betts’ claim by contending that she had no lawful entitlement to rescind the contract of sale for the Property. In giving judgment for Betts, Judge Macnamara held:
(a) Harman was in contravention of section 137B(2) of the BA by entering into the contract of sale with Betts without providing her, at that time, with an owner builder insurance certificate;
(b) the right to avoid a contract of sale conferred by section 137B(3) of the BA is subject to the general law principles of waiver, affirmation and estoppel but that Betts’ entitlement to avoid the contract under section 137B(3) was not precluded by reason of the operation of those principles;
(c) Betts had not by reason of general condition 8 in the contract of sale agreed to extend the time by which the owner builder insurance certificate was to be provided; and
(d) Betts’ own default in failing to settle the contract on 12 December 2019 did not preclude the exercise of her absolute and unconditional statutory right to terminate the contract.
[1]Defendant’s submissions dated 14 March 2023 at [16]
24By its defence in the present case, Cardinia denied that it caused Harman’s loss and said that she failed to mitigate any loss she suffered by not seeking to appeal. Cardinia specifically pleaded that the appeal had real prospects of success.[2] Cardinia identified four grounds of appeal, namely, that the trial judge:
(a) erred by failing to find that Betts waived her right to avoid, was estopped from avoiding and/or elected to affirm the contract of sale;
(b) erred in failing to find that Betts agreed to extend the time for provision of the section 137C warranty insurance;
(c) having found that section 32K(4) of the SLA was satisfied, erred by failing to find that Betts was thereby precluded from avoiding the contract of sale; and
(d) erred in failing to find that Betts was precluded from terminating the contract of sale because she herself had defaulted on the contract.
[2]Defence at [28]
25Cardinia submitted that its mitigation defence “necessarily require[d] it to show that Judge Macnamara’s analysis was wrong”[3] and that there was no question of the decision in this case depending upon different evidence.[4] Cardinia said that it would endeavour to convince the trial judge in this case that on the same substantive facts and evidence, Judge Macnamara was wrong. This was in a context where the entitlement of Betts to rescind the contract for the sale of the Property was central both to Harman’s defence of that claim and also to Cardinia’s defence of the present claim. If Betts were not entitled to rescind, then Cardinia could not be liable in damages for any alleged negligence towards Harman.
[3]Defendant’s submissions dated 14 March 2023 at [20]
[4]Ibid
26Cardinia contended that the prospect of demonstrating error by Judge Macnamara was “very real”[5] – the decision was finely balanced and his Honour said his conclusion about whether Betts had elected to affirm the contract of sale before sending the solicitor’s letter to rescind it was reached “with some hesitation”.[6]
[5]Defendant’s submissions dated 14 March 2023 at [20]
[6]Betts v Harman [2021] VCC 1349 at [122]
27Cardinia acknowledged that the situation in this case is a little different from the usual Anshun estoppel case because it is Cardinia and not Harman who seeks findings which are said to be inconsistent with the first proceeding. However, Cardinia said that the Anshun doctrine was still applicable for at least two reasons. First, Harman created the problem now faced by the court by deciding not to join Cardinia as a third party to the first proceeding. Harman and her lawyers considered the matter in some detail twice before the first trial and made a forensic choice not to join Cardinia as a party. Secondly, the purpose of the stay sought here is not to favour or punish either party. Rather, the object is to protect the court in the administration of justice by preventing a scenario in which the court might publish inconsistent judgments.
Harman’s submissions
28Harman argued that the central claim in this case was that Cardinia breached its statutory duty of care in relation to the conveyance of the Property. She said that the only aspect of the first proceeding relevant to this case was the finding that Harman, in breach of a statutory requirement, failed to provide Betts with a warranty insurance certificate. This second proceeding did not contest that point so there was no risk of the new trial judge having to reach inconsistent conclusions. This was said to be an important factor in deciding whether it was appropriate to stay or strike out the proceeding on the grounds of Anshun estoppel.[7]
[7]Plaintiff’s submissions dated 14 March 2023 at [21]
29Even if there were some overlap on factual matters, the possibility of inconsistent factual findings is not a basis for the operation of Anshun estoppel.[8]
[8]Solak v Registrar of Titles (2011) 33 VR 40 at [76] citing [27] in the decision of Gibbs v Kinna [1999] 2 VR 19 (per Kenny JA, Ormiston and Phillips JJA agreeing)
30Harman argued that another factor telling against the application of Anshun estoppel was Cardinia’s failure to establish that Harman’s decision not to join it as a third party in the first proceeding was unreasonable or an abuse of process. Cardinia has the onus of proving that such a failure to join was sufficiently unreasonable and/or an abuse of process.
31Harman submitted that the question of reasonableness had to be examined in the context of the particular circumstances presented by a case. This involved consideration of the nature of the prior proceeding, the scope of the pleadings, the length and complexity of the trial, any problems in raising the claims earlier and reasons for not raising the claim sooner. Harman argued that there were good reasons for not joining Cardinia as a third party in the first proceeding.
32First, Betts’ claim was not within the scope of section 24AF of the WA so apportionment was not available. Secondly, Cardinia was not likely to be liable to Betts for the same damage as that caused by Harman. Accordingly, a contribution claim under section 23B of the WA was not available. Thirdly, at the time joinder was considered, Harman had not suffered loss and damage. It was only a potential, not actual, loss. Fourthly, if Harman joined Cardinia, it would increase the costs of the first proceeding in circumstances where Harman could not succeed against both Betts and Cardinia. Hence, it was at risk of paying the costs of one or other of them and, in a worst case scenario, both. Also, in the short term, the scheduled trial date would be lost if the joinder took place in or after December 2020.
33Harman addressed the mitigation defence raised by Cardinia noting that Cardinia said it would ask the trial judge to conclude, on the same facts and evidence, that Judge Macnamara erred.
Legal principles
34The case law regarding Anshun estoppel is significant. The applicable principles include the following.
35Anshun estoppel prevents the assertion of a claim which is so connected to the subject matter of an earlier proceeding that it was unreasonable in the context of the initial proceeding for the claim in question not to have been raised in that proceeding.[9]
[9]Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589, 602-3; Timbercorp Finance Pty Ltd (In Liq) v Collins (2016) 259 CLR 212 at [27] and [97]
36It is a fundamental error in the application of Anshun estoppel to hold that simply because a claim could have been raised in the initial proceedings that it was unreasonable not to do so. The subject claim must have been so relevant in the first proceeding that it was unreasonable for the party seeking to advance it in a subsequent proceeding not to have raised it in the initial proceeding.[10]
[10]Champerslife Pty Ltd v Manojlovski (2010) 75 NSWLR 245
37The greater the inconvenience or difficulty in making a claim or cross-claim in the initial proceeding, the less unreasonable it will be not to raise it. As a result, it will usually be even more difficult to establish that a cross-claim should have been made in the initial proceeding when it is made against an entity who was not a party to that earlier proceeding.[11]
[11]Mining Standards International Pty Ltd v Atlantic Nickel Mineracao Ltd [2022] FCA 623 at [65]
38The mere fact that the initial proceeding and the subsequent proceeding sought to be stayed are closely related is not sufficient of itself to attract the Anshun principle. The finding of Anshun estoppel is not dependent upon the degree of similarity between matters raised in the two actions.[12]
[12]Ibid at [66]
39In Anshun, Gibbs CJ, Mason and Aickin JJ noted that there is a variety of circumstances why a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings. For example, expense, importance of the particular issue, and motives extraneous to the actual litigation to mention but a few.[13]
[13]Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589, 602-3
40When an allegation of Anshun estoppel is raised, an important issue is whether the continuation of the later proceedings creates the possibility of conflicting judgments. Where the point or claim sought to be raised is in direct conflict with the determination in an earlier proceeding, that may provide a justification for staying the subsequent proceeding. However, the concern is with conflicting or inconsistent judgments, not merely inconsistent findings.[14]
[14]Mining Standards International Pty Ltd v Atlantic Nickel Mineracao Ltd [2022] FCA 623 at [69]
41It is necessary to consider the kind of case in question. Consider for example, a scenario where A has sued B and failed and then begun a separate proceeding on the same cause of action against C who was not joined to the initial proceeding. Here, the potential for conflicting judgments is obvious because the question of the plaintiff’s unreasonableness in not joining all defendants in one proceeding is plainly raised. This is different from a scenario where a defendant in the initial proceeding has not brought a claim against a third party in that proceeding. There, the authorities suggest that any unreasonableness in not joining the third party should amount to an abuse of process before the plaintiff could be denied its right to litigate a valid claim.[15]
[15]Redowood Pty Ltd v Link Market Services Pty Ltd (formerly known as ASX Perpetual Registrars Ltd) [2007] NSWCA 286 at [45]
42In considering the question of unreasonableness:
(a) there are various reasons why a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings;[16]
(b) it is important to note that shutting out a claim which a party seeks to pursue without a determination on the merits is a very serious matter. Such a power should not be exercised except after a scrupulous examination of all the circumstances.[17]
[16]Deep Investments Pty Ltd v Casey [2018] FCA 603 at [171]
[17]Habib v Radio 2UE Sydney Pty Ltd [2009] NSWCA 231 at [85] quoted with approval by Gleeson J in Deep Investments Pty Ltd v Casey [2018] FCA 603 at [171]
43In the third party situation referred to in paragraph 41 above, the unreasonableness in not joining the third party to the original action should amount to an abuse of process before a plaintiff is denied the right to litigate a valid claim in the manner most convenient to it. The case law acknowledges that there is no invariable rule that a party must bring all its claims in relation to a matter in the one proceeding, thereby complicating the litigation and making it more expensive for all parties involved.[18]
[18]Redowood Pty Ltd v Link Market Services Pty Ltd (formerly known as ASX Perpetual Registrars Ltd) [2007] NSWCA 286 at [45] and [50]; Aldi Stores Ltd v WSP Group Plc [2008] 1 WLR 748 at [25]
44In Solak v Registrar of Titles[19] Warren CJ commented that all of the Australian cases to which the court was referred where a defendant who was not a party to the first proceeding was able to rely successfully on Anshun estoppel in the second proceeding involved the estopped plaintiff attempting to assert in the second proceeding some proposition inconsistent with the judgment in the first proceeding. Her Honour commented that even if such a collateral attack by the plaintiff were not a necessary pre-condition for Anshun estoppel, its absence was a significant factor militating against a finding that Anshun estoppel had arisen.
[19](2011) 33 VR 40
45When considering the concept of “abuse of process” concerning the prior litigation of an issue, Giles CJ Comm D in State Bank of New South Wales Limited v Alexander Stenhouse Ltd[20] said:
“It is apparent from this brief review of the decisions that whether proceedings are, or an aspect of proceedings is, an abuse of process because a party seeks to relitigate an issue already decided depends very much on the particular circumstances. The guiding considerations are oppression and unfairness to the other party to the litigation and concern for the integrity of the system of administration of justice, and amongst the matters to which regard may be had are –
(a)the importance of the issue in and to the earlier proceedings, including whether it is an evidentiary issue or an ultimate issue;
(b)the opportunity available and taken to fully litigate the issue;
(c)the terms and finality of the finding as to the issue;
(d)the identity between the relevant issues in the two proceedings;
(e)any plea of fresh evidence, including the nature and significance of the evidence and the reason why it was not part of the earlier proceedings; …
(f)the extent of the oppression and unfairness to the other party if the issue is relitigated and the impact of the relitigation upon the principle of finality of judicial determination and public confidence in the administration of justice; and
(g)an overall balancing of justice to the alleged abuser against the matters supportive of abuse of process.”[21]
[20](1997) Aust Tort Reports 81-423
[21](1997) Aust Tort Reports 81-423, 64,089
46The application of these principles requires a consideration of the precise issue in question and the circumstances surrounding the reasons why it was not advanced in the initial proceedings.
47Given the significant consequence for an estopped litigant, the court’s power to stay a proceeding due to Anshun estoppel or abuse of process should be exercised with caution and only in the most exceptional or extreme case.[22]
[22]Walton v Gardiner (1993) 177 CLR 378, 392
48The risk of inconsistent judgments is the most important factor going to the existence of Anshun estoppel.[23] In Gibbs v Kinna,[24] Kenny JA (with whom Ormiston and Phillips JJA agreed) held that:
“… if any judgment or order which might be made on the cause of action in the subsequent proceeding would conflict with a judgment or order in the earlier proceeding, then it will ordinarily be unreasonable to refrain from raising the cause of action in the first proceeding”.[25]
[23]Solak v Registrar of Titles (2011) 33 VR 40, [74]
[24][1999] 2 VR 19
[25]Ibid at 27, [25]
49Of the cases referred to at the hearing, Solak v Registrar of Titles[26] was of particular significance. This arose from two factors: first, its facts were reasonably analogous to the current situation; and secondly, the decision was that of the Victorian Court of Appeal.
[26](2011) 33 VR 40
50Solak was the registered proprietor of a property. A fraudster forged Solak’s signature on a loan agreement and mortgage to obtain funds from the Bank of Western Australia. The bank took a registered mortgage over Solak’s property as security for its advances. In 2008 Solak sued the bank seeking a declaration that the mortgage was void and that the mortgage was discharged. The trial judge found that, although Solak’s signature was forged, the loan agreement was incorporated into the mortgage and by reason of the provisions of the Transfer of Land Act 1958 (“TLA”), the bank’s mortgage was indefeasible and effective. The court dismissed the proceeding.
51Solak then issued a second proceeding in which he sought an indemnity from the Registrar of Titles under the TLA for the loss which he suffered as a result of the registration of the forged mortgage. Solak relied upon his allegation of forgery and the judgment in the initial proceeding to establish his loss. The Registrar’s defence at first denied, and then did not admit, the forgery and argued in the alternative that if Solak’s signature on the mortgage were forged, then the mortgage was unenforceable due to the Consumer Credit Code. The Registrar also relied upon Anshun, saying that it was unreasonable for Solak not to have joined the Registrar in the initial proceeding. The Registrar applied for summary dismissal of Solak’s claim on the basis of Anshun estoppel. Davies J granted the application.
52The Court of Appeal found that the trial judge’s decision was vitiated by a factual error regarding the existence of an appeal. The court then decided itself to deal with the summary dismissal application. The Court of Appeal allowed Solak’s appeal thereby permitting him to sue the Registrar.
Analysis
53In resolving this case, it is important to acknowledge that it is an instance in which Cardinia, the party asserting the estoppel, was not a party to the initial proceeding. This is different from other cases where the defendant who was not a party to the initial case successfully relied upon the estoppel – the estoppel asserted in those cases prevented the plaintiff from attempting to assert in the second proceeding a proposition inconsistent with the judgment in the first proceeding.[27]
[27]Solak v Registrar of Titles (2011) 33 VR 40 at [70]
54The High Court is yet to consider the principles applicable where the party asserting estoppel was not a party to the first proceeding.[28] In Redowood Pty Ltd v Link Market Services Pty Ltd (formerly known as ASX Perpetual Registrars Ltd)[29] Hodgson JA, with whom Mason P and Bryson AJA agreed, suggested that a stricter test should be applied:
“In cases where the earlier proceedings and the later proceedings are between the same parties, as in Anshun itself, a finding of unreasonableness in not raising a matter in the earlier proceedings would almost inevitably mean that the later proceedings were oppressive and an abuse of process. Where the parties are different, the test of unreasonableness is still relevant; but in my opinion it must either be considered not conclusive, or else must be understood as involving unreasonableness of such a nature that the later proceedings against different parties are an abuse of process.”[30]
[28]See Solak v Registrar of Titles (2011) 33 VR 40 at [67]
[29][2007] NSWCA 286
[30]Ibid at [45]
55The New South Wales Court of Appeal said that Anshun should not be applied too readily where the party asserting the estoppel was not a participant in the first proceeding:
“[W]here a plaintiff may have alternative remedies against different parties, to suggest that a plaintiff should generally sue all of them, barring exceptional circumstances, would be to encourage complex and lengthy litigation, and promote the incurring of costs where there is no certainty that a Bullock or Sanderson order would be obtained... [P]laintiffs should be permitted reasonable latitude in deciding whether to sue just one defendant, or to join a number of defendants in alternative claims.”[31]
[31]Ibid at [50]
56The English Court of Appeal in Aldi Stores Ltd v WSP Group Plc[32] expressed a similar view.[33]
[32][2008] 1 WLR 748
[33]Ibid at [25]
57The Victorian Court of Appeal in Solak said that:[34]
(a) the absence of collateral attack by the plaintiff in the later action was a significant factor militating against a finding that an estoppel arose;
(b) it was not necessary to decide whether special principles or a different test applied where the party asserting estoppel was not party to the initial proceeding. The test was at least as strict as the applicable test where the parties were the same.
[34]Solak v Registrar of Titles (2011) 33 VR 40 at [70]-[71]
Was it reasonable not to join Cardinia to the first proceeding?
58An estoppel may not arise unless Harman’s claim against Cardinia was so relevant to the subject matter of the first proceeding that it was unreasonable for Harman not to join Cardinia to that proceeding. The question is not whether it would have been reasonable for Harman to have joined Cardinia, but whether it was unreasonable for Harman not to do so.
59Harman had reasons for not wanting to join Cardinia to the first proceeding. Harman’s material revealed that:
· if Harman joined Cardinia to the first proceeding, it would make the proceeding more complicated, leading to a longer and more expensive trial for all parties;
· Harman could not bring an apportionment claim because Betts’ claim was not within the ambit of section 24AF of the WA;
· it was unlikely that Harman could bring a claim for contribution against Cardinia because Cardinia was not liable for the same damage as the damage claimed by Betts against Harman;
· Harman was yet to suffer any harm which could be claimed against Cardinia;
· Harman was at risk for the costs of Betts and/or Cardinia because she could not succeed against both parties.
· the trial date of 17 March 2021 for the first proceeding would be lost if, in or after December 2020, Harman sought to join Cardinia.
60The High Court in Anshun observed that a party might have reasons for not wanting to litigate all issues in a single proceeding. This is in a context where the case law recognises that plaintiffs should have some latitude in deciding whether to sue one defendant or to join a number of defendants in alternate claims.[35] In my view, the argument should be the same for a defendant considering whether or not to join a third party. The court should also recognise that some dicta suggest that the second proceeding should proceed unless the plaintiff’s conduct in suing a different party amounts to an abuse of process.[36]
[35]Solak v Registrar of Titles (2011) 33 VR 40 at [68] citing Redowood Pty Ltd v Link Market Services Pty Ltd (formerly known as ASX Perpetual Registrars Ltd) [2007] NSWCA 286 at [50]
[36]Redowood Pty Ltd v Link Market Services Pty Ltd (formerly known as ASX Perpetual Registrars Ltd) [2007] NSWCA 286 at [45]
61In my opinion Harman acted reasonably in not joining Cardinia to the first proceeding.
62In examining the position of Cardinia, it is necessary to bear in mind several things.
63It is readily apparent that the substance of the plaintiffs’ complaints in the two proceedings is quite different. In the first case, Betts sought to avoid being bound by the contract of sale to purchase the Property. In the second case, Harman sued Cardinia for damages for negligence and breach of statutory duty to exercise reasonable skill, care and diligence in performing conveyancing work for her.
64Cardinia’s arguments about Anshun assume that it is not successful on its primary argument, namely, that it did not breach its duty to Harman. The defence asserts that:
· Cardinia informed Harman and/or her husband Philip before the signing of the contract of sale that she needed to give the buyer a warranty insurance certificate under section 137C of the BA before signing the contract;
· if Harman did not do so, the buyer could withdraw from the contract of sale up until settlement;
· Philip told Cardinia that he was arranging the requisite insurance.
If Cardinia proves these matters, then Harman’s case must fail. Accordingly, Cardinia’s application regarding the stay represents its fallback position.
65As I understand Cardinia’s position, it raised two main points as the basis of its stay application. First, it contended that Harman failed to mitigate her loss by appealing the decision of Judge Macnamara. It set out grounds of appeal which it claimed were available.[37] It argued that the mitigation defence required it to show that Judge Macnamara was wrong in the conclusions that he reached and that it would ask the trial judge to so find on effectively the same facts and evidence. Also, because Judge Macnamara’s decision was finely balanced and, in relation to the election to affirm, his Honour said that he reached his conclusion with some hesitation, Cardinia argued that the prospect of finding error was real.
[37]See defendant’s submissions at [18]
66On this aspect of the case, I do not consider that a trial judge would need to make a definitive finding contrary to that of Judge Macnamara. In the context of mitigation, it would be sufficient for the court to conclude that there were reasonable prospects on appeal. If the essence of the mitigation defence requires the court to conclude that Harman failed to mitigate her loss by not appealing on the stated grounds where they had real prospects of success, there would not be an inconsistent judgment. The finding would simply bear upon Harman’s prospects on appeal.
67The second point Cardinia made related to causation and loss. Cardinia contended that even if it breached its statutory and/or common law duty to Harman, it did not cause Harman any loss because, in the first proceeding, Betts should not have been allowed to rescind the contract of sale.
68As things stand, there is an operative court decision which says that Betts was entitled to rescind the contract of sale. The judgment was given after a contested trial in which Harman argued unsuccessfully against Betts’ contentions and sought to have the buyer bound by the contract of sale. Unless and until that decision is overturned, Harman has suffered loss and damage given that the sale was rescinded and Harman sold the Property later for a reduced price.
Abuse of process
69I have referred above to factors which the court can take into account when considering the concept of “abuse of process”.[38]
[38]See the footnotes mentioned in State Bank of New South Wales v Alexander Stenhouse Ltd (1997) Aust Tort Reports 81-423, 64,089, set out at paragraph [45] of this judgment; Robson AJA (with whom Neave and Harper JJA agreed) referred to the same factors in Kermani v Westpac Banking Corporation (2012) 36 VR 130 at [97]
70The issue of Betts’ entitlement to rescind or avoid the contract of sale was fully litigated in the first proceeding. Harman had the opportunity to lead evidence, cross-examine and make submissions. Harman was represented at the trial by experienced counsel. She advanced reasons why Betts should be held to the contract but the court nonetheless found for Betts.
71The court’s decision in the first proceeding was final. The court ruled that Betts’ claim should be allowed and Harman’s counterclaim dismissed. In her counterclaim, Harman sought confirmation that she was entitled to serve the rescission notice on Betts when the purchaser did not settle on the due date. Harman also claimed damages and consequential relief for breach of the contract of sale and a declaration that she was entitled to retain the deposit.
72As to the identity of the relevant issues in the two proceedings, it seems that they are substantially the same insofar as they concern Betts’ entitlement to rescind the contract of sale. But the fundamental causes of action are quite different in nature.
73I infer from the argument put by Cardinia that it does not dispute that, if a party entered a contract of sale without providing the other party at the time with a section 137C insurance certificate, that would usually be a contravention of section 137B(2) of the BA. However, it says the right to avoid the contract of sale is subject to general law principles of waiver, affirmation and estoppel. Cardinia argued that those principles applied here and were made out on the evidence. Judge Macnamara agreed that the right to avoid the contract of sale conferred by section 137B(3) was subject to waiver, affirmation and estoppel but held that the evidence did not make good any of those exceptions.
74His Honour also found that Betts did not agree, by virtue of general condition 8 of the contract of sale, to extend the time for provision of the certificate of insurance up to and including settlement.
75Judge Macnamara, in the context of the admitted contravention of section 32B(b) of the SLA, found that Harman satisfied section 32K(4) of the SLA in that:
· she acted honestly, reasonably and should be excused for the contravention;
· Betts was substantially in as good a position as if all the relevant provisions of the SLA had been complied with.
76The final factor to consider was whether Betts was precluded from exercising her statutory right to rescind because she was in default herself by failing to settle the contract on the due date of 12 December 2019. Although Judge Macnamara indicated that at common law, a party not ready, willing and able to perform was not entitled to terminate a contract for breach by the other party, he said that Betts’ right of termination was founded on a statutory contravention not a contractual breach by Harman. Hence, Betts’ inability to settle on the due date did not affect her unconditional right to terminate. I presume that Cardinia will seek to argue that Betts’ right to terminate the contract of sale was not unconditional and, because she was in breach of the contract, she was unable to terminate the contract of sale on the basis stated.
77The circumstances here are such that there is no real issue attaching to any reliance on fresh evidence and why it was not included in the initial proceeding. Plainly, the evidence relevant to Harman and Cardinia was not in the first proceeding because Cardinia was not a party to that proceeding and the third party issues were not litigated.
78In my view, there is no oppression or unfairness to either Harman or Cardinia in litigating the dispute between them. Those claims regarding the alleged breach of statutory duty and negligence have not been heard and determined by any court. The main question, and the point upon which Cardinia focuses, is the adverse impact which relitigating the issue of loss and damage flowing from Betts’ rescission will, or might, have upon the principle of finality of judicial determination and public confidence in the administration of justice.
79There is a clash of competing positions between the parties.
80Harman argues that:
· she has suffered loss as a result of the rescission of the contract of sale;
· Betts was allowed to rescind the contract because she did not receive the insurance certificate at the time she signed the contract of sale;
· Cardinia did not inform her, as a conveyancer acting with due skill, care and diligence in the performance of its professional obligations should have, that as vendor, she was obliged to provide the certificate. Nor did Cardinia inform or advise Harman that, in circumstances where the buyer did not receive an insurance certificate, the buyer could avoid the contract any time before settlement.
· Harman had good reasons for not joining Cardinia as a third party to the first proceeding;
· in the later proceeding, Harman was not making a collateral attack on the first decision;
· courts should be slow to stay a later proceeding especially when the party asserting estoppel was not a party to the initial proceeding. A party in Harman’s position should be given reasonable latitude in deciding how many people to join to the initial proceeding;
· suing Cardinia as a third party was not an abuse of process. It followed naturally from Harman being unsuccessful in the initial proceeding.
81On the other hand Cardinia contends that:
· the decision made in the initial proceeding is binding only between Betts and Harman;
· in defending Harman’s claim, Cardinia argues that:
§Harman failed to mitigate her loss by choosing not to appeal the decision of Judge Macnamara (whether on the grounds set out in its defence or at all);
§Cardinia did not cause the loss and damage alleged by Harman because the judgment in the initial proceeding was wrong and Betts ought not to have been permitted to rescind the contract of sale for the Property. Thus, any loss and damage which Harman suffered arose from the court decision and not any alleged breach of duty by Cardinia.
· Because Cardinia will challenge the ultimate decision of Judge Macnamara, there is a risk of conflicting judgments;
· In the circumstances, this can amount to an abuse of process because the proposed course of action risks offending the principle of finality in judicial determination and also risks adversely affecting public confidence in the administration of justice.
82If the proceedings are stayed, Harman will be unable to seek redress from Cardinia for its alleged negligence and breach of duty. Given Harman’s damages claim exceeds $1,000,000, this is a potentially significant detriment. It may mean that unless the claims between a defendant and third party are heard and determined in the same hearing as the claim between the plaintiff and defendant, the defendant will inevitably be prevented from bringing a separate proceeding. This outcome would seem a little odd. From time to time, courts allow a defendant to join a third party but, in order not to prejudice the plaintiff, the court directs that the trial between plaintiff and defendant proceed as scheduled and the third party claim be heard later.
83If the proceeding is stayed, it would be advantageous to Cardinia because it avoids the possibility of being accountable to Harman for its alleged negligence and breach of duty.
84If the proceeding continues, the dispute can be examined on its merits. This outcome disadvantages neither party. Each can conduct the litigation and the trial as it sees fit. While Cardinia contends that Harman should be bound by what it said was a forensic choice and precluded from pursuing its claim against Cardinia, Harman has not engaged in sharp practice or otherwise conducted herself improperly in the conduct of the litigation. Harman advanced clear reasons for not wishing to include Cardinia in the first proceeding. Those reasons were legitimate and not fanciful.
85Overall, I consider that the interests of justice require that Harman be permitted to pursue her claim against Cardinia. In so concluding, I accept that there remains a risk that the trial judge could decide (assuming that Harman proves Cardinia’s negligence and breach of statutory duty) that Harman did not suffer loss and damage as a result of such negligence and breach of duty because Betts was not entitled to rescind the contract of sale. However, depending on its factual findings, the court may not need to address the question of causation and loss.
86Also, as I read the authorities, a balancing exercise is required when exercising the court’s powers on this kind of application. While the risk of inconsistent judgments is a significant factor I do not understand it to be determinative in all cases.
Conclusion
87For the reasons set out, I propose to order that:
(a) the defendant’s summons filed 31 January 2023 is dismissed.
(b) the defendant pay the plaintiff’s costs of and incidental to the summons, such costs to be taxed on a standard basis in default of agreement.
88Unless the parties contact my chambers by 4.00pm on 14 July seeking to be heard about these proposed orders, they will be made on 17 July 2023.
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