In the matter of HIH Insurance Limited (in liquidation; De Bortoli Wines (Superannuation) Pty Ltd v McGrath

[2014] NSWSC 774

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of HIH Insurance Limited (in liquidation; De Bortoli Wines (Superannuation) Pty Ltd & anor v McGrath & ors [2014] NSWSC 774
Hearing dates:	9 May 2014
Decision date:	11 June 2014
Jurisdiction:	Equity Division - Corporations List
Before:	Brereton J
Decision:	Second plaintiff's claim dismissed as an abuse of process. Motion for dismissal otherwise dismissed.
Catchwords:	ESTOPPEL - former adjudication and matters of record or quasi of record - former adjudication - judgment inter partes - issue estoppel - parties - who are bound
Legislation Cited:	Corporations Act 2001 (Cth) s 596B, s1321 Corporations Law (repealed) s 995, s 999, s1005 Human Rights and Equal Opportunity Commission Act 1986 (Cth), s 46PO Trade Practices Act 1974 (Cth) s 52, s 82 Uniform Civil Procedure Rules 2005 (NSW), r 13.4
Cases Cited:	Ann Street Mezzanine Pty Ltd (in liq) v Beck (2009) 175 FCR 532 Arthur JS Hall & Co v Simons [2002] 1 AC 615 Ashmore v British Coal Corpn [1990] 2 QB 338 Blair v Curran (1939) 62 CLR 464 Brewer v Brewer (1953) 88 CLR 1 Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 Champerslife Pty Ltd v Manojlovski (2010) 75 NSWLR 245 Clambake Pty Ltd v Tipperary Projects Pty Ltd (No 5) [2009] WASC 141 Coffey v Secretary, Department of Social Security (1999) 86 FCR 434 De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq) and Ors (2011) 200 FCR 253 De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq) and Ors [2012] FCAFC 28 De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq) and Ors [2012] HCASL157 Gracechurch Holdings Pty Ltd v Breeze (1992) 7 WAR 518 Gleeson v J Wippell & Co Ltd [1977] 1 WLR 510 Haines v Australian Broadcasting Authority (1995) 43 NSWLR 404 Henderson v Henderson (1843) 3 Hare 100; 67 ER 313 Hunter v Chief Constable of West Midlands & Anor [1982] AC 529 Jackson v Goldsmith (1950) 81 CLR 446 Johnston v McGrath (2008) 67 ACSR 169 Nana Ofori Atta II v Nana Abu Bonsra II [1958] AC 95 Official Custodian for Charities v Mackey (No 2) [1985] 1 WLR 1308 O'Shane v Harbour Radio Pty Ltd [2013] NSWCA 315 Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 Ramsay v Pigram (1968) 118 CLR 271 Rana v University of South Australia [2008] FCA 1903 Re Teltronics Services Inc 762 F 2d 185 (1985) Reichel v Magrath (1889) 14 App Cas 665 Rippon v Chilcotin Pty Ltd (2001) 53 NSWLR 198 Rogers v The Queen (1994) 181 CLR 251 Sea Culture International v Scoles (1991) 32 FCR 275 Shiels v Blakeley [1986] 2 NZLR 262 Johnson v Gore Wood & Co [2002] 2 AC 1 Spalla v St George Motor Finance Ltd (No 6) [2004] FCA1699 State Bank of New South Wales Ltd v Stenhouse Ltd & Ors (1997) Aust Torts Reports ¶81-423 State of New South Wales v Williams [2014] NSWCA 177 The Secretary of State for Trade and Industry v Bairstow [2003] EWCA Civ 321 Thomas v Balanced Securities Ltd [2011] QCA 258; [2012] 2 Qd R 482 Trawl Industries of Australia Pty Limited v Effem Foods Pty Ltd (1992) 36 FCR 406 Walton v Gardiner (1993) 177 CLR 378 Wytcherley v Andrews (1871) LR 2 P & D 327
Category:	Interlocutory applications
Parties:	De Bortoli Wines (Superannuation) Pty Ltd (first plaintiff/respondent) Aabrofay Pty Ltd (second plaintiff/respondent) Anthony Gregory McGrath as liquidator of HIH Insurance Limited (first defendant/applicant) Christopher John Honey as liquidator of HIH Insurance Limited (second defendant/applicant) Anthony Gregory McGrath as scheme administrator of FAI General Insurance Company Ltd (third defendant/applicant) Christopher John Honey as scheme administrator of FAI General Insurance Company Ltd (fourth defendant/applicant) Anthony Gregory McGrath as scheme administrator of HIH Casualty and General Insurance Limited (fifth defendant/applicant) Christopher John Honey as scheme administrator of HIH Casualty and General Insurance Limited (sixth defendant/applicant) Anthony Gregory McGrath as scheme administrator of CIC Insurance Limited (in liquidation) (seventh defendant/applicant) Christopher John Honey as scheme administrator of CIC Insurance Limited (in liquidation) (eighth defendant/applicant)
File Number(s):	2013/358152

Judgment

1. In these proceedings, commenced by originating process filed on 27 November 2013, the first plaintiff De Bortoli Wines (Superannuation) Pty Ltd ("DBSuper") and the second plaintiff Aabrofay Pty Limited ("Aabrofay") claim relief pursuant to Corporations Act 2001 (Cth), s 1321, to the effect that the decisions of the first and second defendants ("the liquidators"), who are the liquidators of HIH Insurance Limited ("HIH"), and of the third to eighth defendants ("the administrators"), who are the scheme administrators of FAI General Insurance Company Limited ("FAI"), HIH Casualty and General Insurance Ltd ("C&G") and CIC Insurance Limited ("CIC"), not to admit, or not to adjudicate on, proofs of debt and/or claims submitted by the plaintiffs in the respective liquidation and schemes of arrangement, be reversed or modified. Aabrofay also seeks an extension of time in which to lodge its claims in the schemes of FAI, C&G and CIC. By interlocutory process filed on 13 February 2014, the liquidators and administrators seek that the proceedings be dismissed, pursuant to UCPR rules 13.4(a) and/or (c), and alternatively in the Court's inherent jurisdiction, on the basis that the proceedings are frivolous or vexatious and amount to an abuse of process by reason that they amount to an attempt to relitigate matters that have already been determined, or could and should have been determined, in prior proceedings.

Background

1. HIH, which was formerly listed on the Australian Stock Exchange (ASX), was wound up by order of the Court made on 27 August 2001. Each of FAI, C&G and CIC ("the subsidiaries") is a subsidiary of HIH, in liquidation and subject to a scheme of arrangement. The final date for lodgement of creditor claims in the schemes of arrangement of the subsidiaries was 2 September 2013.

1. During the period June to December 2000 - while HIH's share price fell from $1.04 to 22 cents - each of DBSuper, Aabrofay, and Aabrofay's parent company De Bortoli Wines Pty Limited ("DBWines"), acquired shares in HIH. DBSuper made a single acquisition of 50,000 HIH shares for $52,841.25, on 13 June 2000; Aabrofay acquired a total of 3,345,192 shares in 17 separate transactions between 15 June and 29 December 2000 at a total cost of $2,046,232.18; and DBWines acquired a total of 19,683,128 shares in 66 separate transactions between 11 August and 22 December 2000 at a total cost of $7,140,179. In these proceedings, the plaintiffs allege that they paid more for their HIH shares than their true value, by reason of certain representations made in documents published by HIH and lodged with the ASX which are said to have been misleading and deceptive, or likely to mislead or deceive, in contravention of Trade Practices Act 1974 (Cth), s 52, or Corporations Law, ss 995 or 999 ("the contravening conduct"). Each of the subsidiaries is alleged to have been knowingly involved in, or to have aided and abetted, the contravening conduct, and thus to have incurred accessorial liability as a "person involved" in the contravention.

1. On or about 13 May 2008, DBSuper submitted to the liquidators a proof of debt in respect of its claim against HIH. On or about 13 November 2008, in response to a request made by the liquidators, DBSuper provided further information in support of its proof of debt, including a statutory declaration by Darren Vittorio De Bortoli ("Mr De Bortoli"), in his capacity as managing director of DBSuper, which identified passages within documents published by HIH that Mr De Bortoli claimed to have read and relied upon when the acquisition was made. On or about 13 January 2009, the liquidators admitted DBSuper's proof of debt in the amount of $52,841.25.

1. Shortly thereafter, on or about 6 February 2009, DBWines lodged a proof of debt in respect of its claim against HIH for the sum of $9,213,510.19, being the total cost of the HIH shares acquired by DBWines and Aabrofay, supported by a statutory declaration of Mr De Bortoli in his capacity as managing director of DBWines, claiming reliance upon misleading statements by HIH. In connection with their consideration of this claim, the liquidators examined Mr De Bortoli, under Corporations Act, s 596B, on 17 August and 19 October 2009. On or about 4 February 2010, the liquidators rejected DBWines' claim in whole, on the bases that the cost of the shares purchased by Aabrofay (which was at the time deregistered, having been voluntarily deregistered on or about 16 August 2002) was not a loss suffered by DBWines, and that there was insufficient evidence to establish that DBWines purchased its HIH shares in reliance on the misleading and deceptive representations of HIH. By originating process and statement of claim filed in the Federal Court of Australia on 17 February 2010, DBWines applied, pursuant to Corporations Act, s 1321, to have the liquidators' decision set aside in relation to the HIH shares purchased by DBWines, and its proof of debt admitted, save for that part which related to the shares purchased by Aabrofay ("the DBWines proceedings").

1. On or about 6 July 2010, DBSuper gave notice to the administrators of claims against the subsidiaries. The administrators characterise these as "informal" claims, presumably because they were not on the prescribed form, but it is not necessary to consider this point in the present application. On or about 28 July 2010, Aabrofay - which had been reinstated on or about 26 May 2010, apparently pursuant to an application made on or about 1 March 2010 - lodged with the liquidators a proof of debt in the amount of $2,045,707.10 against HIH (reflecting the claim that DBWines had originally included in its proof, but excluded from relief sought in the Federal Court). The Aabrofay proof of debt was also accompanied by a letter and a statutory declaration by Mr De Bortoli, in his capacity as managing director of Aabrofay, which was materially identical to those he had made in support of the DBSuper and DBWines claims.

1. The DBWines proceedings were heard on 14 and 15 September 2010. In a judgment delivered on 9 June 2011, Stone J dismissed those proceedings, with costs [De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq) and Ors (2011) 200 FCR 253]. Her Honour found that Mr De Bortoli, who was the person responsible for the acquisition of the HIH shares by Aabrofay and DBWines, did not rely upon any misrepresentations by HIH. In particular, her Honour said (at [83]):

Again, Mr De Bortoli was vague about when he had read the documents but asserted that he had read them in their entirety and that it would have been before the purchase of HIH shares on 15 June 2000. In purchasing those shares, Mr De Bortoli was acting on behalf of Aabrofay. The present appeal from the liquidators' decision does not concern shares purchased by Aabrofay and the purchase is relevant only for context.

1. Her Honour continued (at [92]):

On the evidence, it is more than likely that his interest, and his purchase of shares for Aabrofay in June 2000, was prompted by his broker telling him that Rodney Adler was buying shares and the potential for premium if there was to be a takeover of the company. In any event, on the evidence presented by the applicant, I am not satisfied that Mr De Bortoli relied on any misleading representations by HIH in investing in HIH shares in August.

1. Importantly, her Honour concluded (at [111] - [112]):

Mr De Bortoli was an experienced share trader who had purchased significant parcels of shares for Aabrofay as well as DBW. His assertions, made time and again, that he knew better than the market and that he relied on his own assessment are inconsistent with his claim to have relied on the representations of HIH. If Mr De Bortoli had merely been careless it would not, as explained above at [74]-[75], be sufficient to bar him from recovery under s 82. However, the problem here is not carelessness or even reckless neglect of DBW's interest. It is the absence of reliance on HIH's representations and thus the absence of the necessary causal link between representations and conduct that is fatal to DBW's claim.

The applicant submitted that "HIH shares only had some market value and were able to be traded at all on the share market" as a result of the representations of HIH which have been admitted to be false. In making this submission Mr Gracie expressly disclaimed any reliance on the 'fraud on the market' theory. He confined his submission to saying that the market must have been contaminated by HIH's conduct and that the respondents had not adduced any evidence to the contrary. If the true position had been known, it was submitted, the shares could not have been traded at all. This submission must be rejected for two reasons. First there is no evidence to support the proposition and secondly it is clear from the evidence that was adduced that Mr De Bortoli was betting against the market rather than relying on it. Why Mr De Bortoli chose to do so is a matter of conjecture which it is not appropriate for the court to engage in.

1. On 15 March 2012, the Full Federal Court (Jacobson, Siopis and Nicholas JJ) dismissed DBWines' appeal, with costs [De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq) and Ors [2012] FCAFC 28]. Their Honours observed (at [14]):

DBW's proof of debt claimed losses suffered on an additional 3,345,000 shares in HIH purchased by a related company, Aabrofay Pty Ltd. Mr De Bortoli started purchasing shares on behalf of Aabrofay on 15 June 2000.

1. The Court continued (at [76]):

The primary judge made an express finding that Mr De Bortoli's initial foray into the market on behalf of Aabrofay was "more likely" to have been prompted by his broker telling him about Mr Adler's share purchases. She said at [92]:

In any event, on the evidence presented by the applicant, I am not satisfied that Mr De Bortoli relied on any misleading representations by HIH in investing in HIH shares in August.

1. Their Honours held (at [93]):

In our view, a proper analysis of the evidence to which we were taken in argument on appeal, and of the primary judge's reasons, shows that there was no error in her Honour's ultimate finding that Mr De Bortoli did not rely on any misleading statement made by HIH.

1. The Court observed (at [105] -[107] and [111]):

Second, Mr De Bortoli's continued purchases of HIH shares from September onward were made in a falling market. As the primary judge found, Mr De Bortoli insisted that he knew better than the market. Her Honour correctly found at [111] that this was inconsistent with his claim to have relied upon the misleading statements made by HIH in the documents.

It is theoretically possible that Mr De Bortoli was purchasing HIH shares on the strength of his own judgment based upon statements made in HIH's accounts. But a finding to that effect is not open on the facts of this case. No attempt was made to support such a finding by any evidence that Mr De Bortoli undertook a detailed analysis of the financial accounts for the purpose of supporting his judgment as to the worth of his investment.

Instead, the evidence revealed that Mr De Bortoli's strategy was not, relevantly, linked to the financial accounts. As he said in cross-examination in the passage set out at [57] above, he had previously invested in companies where the share price had dropped significantly and still made money by taking a longer term view.

...

Fifth, although Mr De Bortoli claimed to have relied on statements made by Mr Clarke over a period of time commencing in June 2000, he conceded that the event which led him to speak to Mr Clarke was the continued fall in the share price and the rumour that Mr Adler was selling out of the company. The issue therefore turned on what was said at Grappa Restaurant in October 2000.

1. On 13 November 2012, the High Court of Australia (Heydon and Bell JJ) refused special leave to appeal, with costs [De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq) and Ors [2012] HCASL157]. Their Honours said (at [6]):

The applicant's second special leave question contends that the Full Court erred in approaching the appeal upon a view that it was necessary to prove reliance in order to establish that it had suffered loss and damage by the conduct of HIH for the purposes of the claim under s 82 of the TPA ... As the respondent submits, this was not the way the applicant's case was put and met below. The factual findings do not make the application a suitable one in which to consider any wider issues of causation.

1. I have set out these passages in some detail, because the liquidators rely on them to contend that the case of indirect causation now mounted by DBSuper would be inconsistent with the conclusions of fact in the earlier proceedings to the effect that Mr De Bortoli did not rely on any misleading representations by HIH in investing in HIH shares in August, and was betting against the market rather than relying on it. I return to this below.

1. On or about 27 September 2013 - after the final disposition of the DBWines proceedings by the High Court - Aabrofay submitted an amended proof of debt, dated 1 September 2013, for $2,046,232 against HIH, and also (for the first time) against the subsidiaries; and DBSuper requested the administrators to take into consideration, in respect of the claims previously notified against the subsidiaries, the matters raised in proceedings Cuong Ly &Others v HIH Insurance Limited (in liquidation) NSD 1454 of 2013 in the Federal Court of Australia - in which the "fraud on the market" or "indirect causation" case, eschewed in the DBWines case, was advanced.

1. On 13 November 2013, the administrators rejected DBSuper's claim against CIC, and requested provision within seven days of copies of any claim made prior to 2 September 2013 (the final date for lodgement of claims) by DBSuper against FAI and C&G. Although none were produced, within the nominated timeframe or at all, and it appears that no formal final claim form was lodged, it does not seem to be any longer disputed by the administrators that claims by DBSuper against FAI and C&G were notified on or about 6 July 2010. On the same day, the liquidators rejected Aabrofay's claim in its amended proof against HIH; and the administrators advised that, as no final claim form had been submitted by the final lodgement date under the scheme of arrangement, they were unable to make any determination in respect of the claims asserted by Aabrofay in its amended proof against the subsidiaries. The grounds given by the liquidators for In rejecting Aabrofay's claim against HIH were that Mr De Bortoli was the person responsible for making the decision on behalf of Aabrofay to purchase the HIH shares, that in the DBWines proceedings it had been found that Mr De Bortoli did not rely on the alleged misrepresentations of HIH when making contemporaneous purchases of HIH shares on behalf of DBWines, and that that finding was applicable to his purchases on behalf of Aabrofay.

1. DBSuper and Aabrofay responded by commencing these proceedings on 27 November 2013. By them, ultimately, DBSuper seeks to have its claims against the subsidiaries admitted (its claim against HIH having already been admitted); and Aabrofay seeks to have its claims against HIH and the subsidiaries admitted. DBSuper and Aabrofay do not assert direct reliance upon the contravening conduct, but say that they acquired shares in HIH in a market that was regulated by the ASX and the Corporations Law, and that the contravening conduct caused HIH shares to trade on the ASX at a higher price than would otherwise have been the case, so that the plaintiffs suffered loss, being the difference between the price they paid for the shares and the true value of the shares, which they seek to recover under Trade Practices Act, s 82, and/or Corporations Law, s 1005. This raises a case of "fraud on the market", or "indirect causation", of the type eschewed in the DBWines case. The liquidators and administrators contend that these proceedings are an impermissible attempt to relitigate the question of causation which was resolved adversely to DBWines in the earlier proceedings.

Abuse of process by relitigation

1. Proceedings that are an abuse of process may be dismissed under UCPR r 13.4(c), and/or in the exercise of the Court's implied incidental power to prevent an abuse of its processes [as to which see Reichel v Magrath (1889) 14 App Cas 665, 668; Hunter v Chief Constable of West Midlands & Anor [1982] AC 529, 536; Walton v Gardiner (1993) 177 CLR 378, 393; Spalla v St George Motor Finance Ltd (No 6) [2004] FCA1699, [59]-[60]; Cardile v LED Builders Pty Ltd (1999) 198 CLR 380, 393]. An attempt to relitigate an issue resolved in earlier proceedings in a court of competent jurisdiction may, depending on the facts, involve an abuse of process, even in the absence of an estoppel or res judicata [Reichel v Magrath, 668; Sea Culture International v Scoles (1991) 32 FCR 275, 279; Walton v Gardiner, 393; Coffey v Secretary, Department of Social Security (1999) 86 FCR 434, 443; Spalla v St George, [66]-[67]; O'Shane v Harbour Radio Pty Ltd [2013] NSWCA 315, [99]-[105]; State of New South Wales v Williams [2014] NSWCA 177, [49]]. In Reichel v Magrath, Lord Halsbury LC put this on the basis that "It would be a scandal to the administration of justice if, the same question having been disposed of by one case, the litigant were to be permitted by changing the form of the proceedings to set up the same case again" (at 668). In Walton v Gardiner, Mason CJ, Deane and Dawson JJ said that proceedings should be stayed as an abuse of process "if, notwithstanding that the circumstances do not give rise to an estoppel, their continuance would be unjustifiably vexatious and oppressive for the reason that it is sought to litigate anew a case which has already been disposed of by earlier proceedings" (at 393). In JS Hall & Co v Simons [2002] 1 AC 615, Lord Hoffman identified the policies that underlie the doctrine as being, first, that a defendant should not be troubled twice for the same reason, and secondly, that there is 'a general public interest in the same issue not being litigated over again'.

1. A party will only be prevented from relitigating an issue that has been resolved adversely to that party. In Rippon v Chilcotin Pty Ltd (2001) 53 NSWLR 198, Handley JA referred to the statement of Hunt CJ at CL in Haines v Australian Broadcasting Authority (1995) 43 NSWLR 404, including the proposition that "the issue to be determined in the earlier case which is sought to be litigated in the later case must be one which the party propounding it in the latter lost in the former ... It must be an issue which was necessarily determined in the earlier case, and one of importance to the final result" (at [31]). (While Giles CJ Comm D, as he then was, expressed some difficulty with that statement in State Bank of New South Wales Ltd v Stenhouse Ltd & Ors (1997) Aust Torts Reports ¶81-423 (at 64,088) - because in Rogers v The Queen (1994) 181 CLR 251, Rogers had been the successful party on the relevant issue in the earlier litigation, having had his "confession" excluded as involuntary - I respectfully do not share that difficulty: the Crown was precluded from relitigating the question of voluntariness, which it had lost, in later proceedings). Two concepts are involved: first, that the issue be one that was determined in the earlier proceeding (which for convenience I will call "identity of issue", though as will appear, neither precise identity nor express determination is essential), and secondly, that the party concerned be the unsuccessful party in the earlier proceeding (which, similarly, I shall call "identity of party", although again, as will appear, precise identity is not always necessary).

Identity of issue

1. As I have said, in this case the plaintiffs seek to make a case based on indirect causation, or as it sometimes called, "fraud on the market". While the liquidators and administrators submitted that, on the current state of the law, the plaintiffs would have to establish either that they relied on the contravening conduct or that they would have acted differently had the material omission been disclosed, it was not suggested that I should find that, in principle, a case of indirect causation was not arguable.

1. Although I do not accept the plaintiffs' submission that the issue in this case is sufficiently distinguishable from that in the DBWines case merely by reason that the transactions in suit in this case (the purchases of HIH shares by DBSuper and Aabrofay) are different transactions from those the subject of the DBWines proceedings (purchases of HIH shares by DBWines) - because while it is true that the transactions in suit are different transactions, they were entered into during the same period, by the same agent (Mr De Bortoli), and in circumstances that are relevantly indistinguishable - nonetheless, I do not accept the liquidators' submission that the indirect causation case now mounted by the plaintiffs is inconsistent with the express findings of fact in the earlier proceedings to the effect that Mr De Bortoli did not rely on any misleading representations by HIH in acquiring HIH shares, and was betting against the market rather than relying on it. The case now advanced by the plaintiffs does not depend upon Mr De Bortoli's state of mind. His assertions that he knew better than the market, while inconsistent with actual reliance, are not inconsistent with the proposition that, betting against the market, he paid the price for the shares that the market set, whereas but for the contravening conduct, the price so set (and paid) would have been lower. Thus it could be found, not inconsistently with the findings of fact in the DBWines proceedings, that, but for the contravening conduct, Mr De Bortoli would still have acquired HIH shares on behalf of the plaintiffs, but would have done so at a lower price than in fact was paid. Of course that is not conclusive of causation of loss, and it may be that he would have ended up investing the same amount at the same time (and merely acquired more shares but incurred the same loss); but that is a question of fact that cannot be foreclosed at this stage.

1. However, that does not conclude the question of "identity of issue". A judicial decision finally resolves and closes all those matters which are essential, or legally indispensable, to the conclusion [Blair v Curran (1939) 62 CLR 464, 532; Brewer v Brewer (1953) 88 CLR 1, 15-16]. Further, the parties will not be permitted to re-open the same subject of litigation in respect of matter which could have been but was not brought forward in the proceedings, and the estoppel extends not only to the points upon which the Court was actually required to adjudicate but "to every point which properly belonged to the subject matter of the litigation and which the parties, exercising reasonable diligence, might have brought forward at the time" [Henderson v Henderson (1843) 3 Hare 100, 115; 67 ER 313, 319; Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589]. Moreover, there may be an abuse of process where the technical requirements of the doctrines of res judicata and/or issue estoppel are not satisfied, for example, where even though the cause of action in the second proceedings could not have been brought in the first, it nonetheless constitutes an attempt to relitigate the same events and subject matter. It was on that basis that, in Rana v University of South Australia [2008] FCA 1903, Besanko J stayed as an abuse of process a claim under Human Rights and Equal Opportunity Commission Act 1986 (Cth), s 46PO, for unlawful discrimination under, notwithstanding that that claim could not have been brought in earlier unsuccessful proceedings instituted by the same applicant against the same respondents under the Trade Practices Act arising out of the same events, because the later claim represented an attempt to relitigate those events (at [43]).

1. The judgment in the DBWines proceedings determined - albeit negatively - that HIH's contravening conduct did not cause loss to DBWines. That concluded the question of causation, however it might be put, so far as concerns DBWines. Even if "indirect causation" or "fraud on the market" was not litigated in the earlier proceeding - and it seems that it was consciously disclaimed [see at [112], quoted at [9] above] - it would not be open to DBWines now to mount a new case based on "indirect causation". Such a case had to be raised, if at all, in the earlier proceeding, and DBWines would be precluded from bringing fresh proceedings against HIH propounding a claim founded on indirect causation.

Identity of party

1. While the doctrines of res judicata and issue estoppel only apply in proceedings between the same parties or their privies, abuse of process by relitigation has a wider reach. The party who lost the issue in the earlier proceedings may be precluded from seeking to relitigate it in proceedings against a person who was not party to the original proceedings. Reichel v Magrath itself is an early example of this. As later explained by Lord Hoffman in Arthur JS Hall, the case was within the spirit of the issue estoppel rule (at 701, emphasis added):

In Reichel v Magrath (1889) 14 App Cas 665 Mr Reichel, the vicar of Sparsholt, resigned. The Bishop of Oxford accepted his resignation. Then the vicar changed his mind. He brought an action against the Bishop and the Queen's College, Oxford, which had the right of presentation, for a declaration that his resignation had been void. The judge held that it had been valid and that the living was vacant. His decision was affirmed on appeal. The college appointed its Provost, Dr Magrath, as the new vicar. Mr Reichel refused to move out of the vicarage. Dr Magrath brought an action for possession. Mr Reichel pleaded in defence that his resignation had been void and he was still the vicar. The court struck out the defence as an "abuse of the process of the court". Although the parties were different, the case was within the spirit of the issue estoppel rule. Dr Magrath was claiming through the college, which had been a party to the earlier litigation.

1. Nonetheless, it was Mr Reichel, who had been the unsuccessful party in the previous action, who was held not entitled to relitigate it.

1. A more recent illustration is provided by Rippon v Chilcotin, in which the Court of Appeal held that proceedings which involved an attempt to relitigate an adverse causation finding made in previous proceedings against a concurrent tortfeasor should be summarily dismissed as an abuse of process. The Rippons' previous claim for damages for misleading and deceptive conduct, against the vendors from whom they had purchased a business, had been dismissed for failure to prove reliance on the misrepresentations. The plaintiffs then brought fresh proceedings, against the vendors' accountants, on the same grounds. Handley JA held that the second proceedings were "an attempt to litigate or re-litigate issues which were either decided in or are barred by the earlier proceedings. In substance, ignoring the camouflage, the purchasers are attempting to re-litigate the issue of reliance on the 1991 figures which they lost" (at [28]). His Honour explained that although there was no question of oppression and unfairness, because the accountants had not been parties to the earlier action, the second proceedings "threaten the integrity of the administration of justice and raise the prospect of conflicting judgments" (at [36]).

1. Similarly, in Johnston v McGrath (2008) 67 ACSR 169, the plaintiff had previously unsuccessfully appealed to the Court from the liquidators' rejection of his proof of debt for losses arising from the alleged misleading and deceptive conduct of HIH, on the ground that Mr Johnston had not relied on the misrepresentations in purchasing HIH shares. Mr Johnston then brought new proceedings against subsidiaries of HIH, claiming they were liable as accessories of HIH. Barrett J, as his Honour then was, said that the causation and reliance issue in the second case was exactly the same as that determined in first case, and was an issue of central importance that was fully litigated in the first case (at [51]); and that having failed to establish in the first case an essential element that was common to both claims (that of causation), the plaintiff could not be allowed to attempt to do so again (at [52], emphasis added):

The essential elements of the right to recover the amount of loss or damage suffered, as against the six HIH subsidiaries, are the essential elements of the right to recover as against HIH itself - plus the further elements going to the status of each subsidiary as a person involved in the contravention by HIH and other elements peculiar to the particular provision upon which reliance is placed (including, in the case of the Corporations Law, a relevant connection with a dealing in securities). Having failed to establish on the earlier occasion one of the essential elements common to both claims (the element concerning the causative effect of HIH's conduct), the plaintiff cannot be allowed to attempt to do so again. To afford him any such opportunity would be manifestly unfair to the liquidators of the HIH subsidiaries. It would countenance a collateral attack on the earlier decision involving the same issue and thus have the potential to undermine the integrity of that judgment. It would raise the very real prospect of conflicting judgments. And it would threaten the integrity of the administration of justice.

1. It follows that, although HIH was the only defendant in the DBWines case, a claim by DBWines against the subsidiaries alleging that they were liable as accessories would involve an abuse of process by way of collateral attack on the decision in the DBWines case. The decision in the DBWines case against HIH must be regarded as also concluding DBWines case against the subsidiaries on the basis of accessorial liability.

1. The critical question in this case, then, is whether the decision in the DBWines case should be regarded as precluding DBSuper and Aabrofay, from maintaining their "indirect causation" and "accessorial liability" claims, neither of which were litigated in the DBWines case, but which DBWines itself could not now raise in later proceedings. As in Reichel v Magrath, so in both Rippon v Chilcotin and Johnston v McGrath, it was the person who had been the unsuccessful party in the earlier proceedings who was precluded from relitigating the issue in later proceedings, albeit against a different opponent. In this case, neither DBSuper nor Aabrofay were party to the DBWines proceedings. To answer the critical question in this case therefore requires consideration of the circumstances in which a person not party to the original litigation may be precluded from maintaining new proceedings that involve relitigation of an issue decided, expressly or implicitly, in the earlier litigation.

1. One instance where this will be so is where the person concerned, though not a party to the earlier proceedings, was in privity with the unsuccessful party in those proceedings. An issue estoppel binds privies of the parties in the strict sense, and this includes an Anshun estoppel: those who claim through a predecessor who is Anshun estopped, cannot be in a better position than the predecessor when enforcing derived rights (although this does not mean that successors are bound when enforcing their own rights): see Champerslife Pty Ltd v Manojlovski (2010) 75 NSWLR 245, 265 [117] (Handley AJA). Thus, as it would not be open to DBWines to bring new proceedings reliant on "indirect causation" against the alleged accessories as well as against the alleged principal, so it would not be open to DBWines' privy to do so. It follows that, if DBSuper and/or Aabrofay is a privy in the strict sense of DBWines, then the circumstance that they eschew a case of direct causation in favour of one of indirect causation will not avail them. But it does not follow that they cannot enforce their own rights, as distinct from those derived from or shared with DBWines.

1. Privity of interest involves a mutual or successive relationship to the same right. The privy must claim "under or through" the person whose privy he or she is said to be. The concept is illustrated, albeit in the negative, by the judgment of Barwick CJ in Ramsay v Pigram (1968) 118 CLR 271 (at 279):

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

1. In Gleeson v J Wippell & Co Ltd [1977] 1 WLR 510; [1977] 3 All ER 54, Megarry V-C described the concept of privity of interest in terms that included "alter ego" and "a sufficient degree of identity between the successful defendant and the third party" (at 515; 60, emphasis added):

... it seems to me that the substratum of the doctrine is that a man ought not to be allowed to litigate a second time what has already been decided between himself and the other party to the litigation. This is in the interest both of the successful party and of the public. But I cannot see that this provides any basis for a successful defendant to say that the successful defence is a bar to the plaintiff suing some third party, or for that third party to say that the successful defence prevents the plaintiff from suing him, unless there is a sufficient degree of identity between the successful defendant and the third party. I do not say that one must be the alter ego of the other: but it does seem to me that, having due regard to the subject matter of the dispute, there must be a sufficient degree of identification between the two to make it just to hold that the decision to which one was party should be binding in proceedings to which the other is party. It is in that sense that I would regard the phrase 'privity of interest'.

1. In Trawl Industries of Australia Pty Limited v Effem Foods Pty Ltd (1992) 36 FCR 406, Gummow J pointed out that to regard this as having established a principle that there must be a sufficient degree of identification between the two parties "to make it just to hold that the decision to which one was party should be binding in proceedings to which the other is party" would treat Megarry V-C as doing that which he expressly professed not to be doing (at 61), would supplant the somewhat technical law of privity with a loosely phrased albeit alluring invitation to judicial idiosyncrasy, and would depart from the approach adopted by the High Court in cases such as Jackson v Goldsmith (1950) 81 CLR 446 and Ramsay v Pigram (at 416). Nonetheless, Megarry V-C's statement has been influential [Official Custodian for Charities v Mackey (No 2) [1985] 1 WLR 1308, 1316; [1985] 2 All ER 1016, 1022 (Nourse J); Shiels v Blakeley [1986] 2 NZLR 262, 268; Johnson v Gore Wood & Co [2002] 2 AC 1, 32 (Lord Bingham); Champerslife v Manojlovski, 260 [83] (Giles JA), 265 [119] (Handley AJA); Thomas v Balanced Securities Ltd [2011] QCA 258; [2012] 2 Qd R 482, 494 [39] (White JA)], though particularly in the broader concept of "privity" that obtains in the context of abuse of process by relitigation as distinct from issue estoppel [see Champerslife v Manojlovski, 261 [88] (Giles JA)], to which I come below. However, his Lordship's observations do not, at least in terms, refer to the present circumstances, which involve a successful defendant saying that the successful defence prevents a third party from suing the defendant - although, as will be seen, this extension was made by the Queensland Court of Appeal in Thomas v Balanced Securities, discussed below.

1. In the United States, a controlling shareholder who has directed or effectively controlled litigation by or against the corporation may be bound by the result [Re Teltronics Services Inc 762 F 2d 185 (1985), 191]. However, in Australia, adoption of the "financial interest" theory that underlies this extended view of privity was rejected in Trawl Industries (at 417), as inconsistent with the approach of the High Court in Ramsay v Pigram. Generally, there is no privity between a company and its shareholder/director [Champerslife v Manojlovski, 258 [67]-[68] (Giles JA); but cf 267 [131] (Handley AJA)].

1. Neither DBSuper nor Aabrofay is a privy of DBWines in the strict sense described in Ramsay v Pigram. They do not claim under or through DBWines. They do not seek to enforce any right or interest of DBWines, and their claims do not involve or depend on any right of DBWines. Neither had even a financial interest in the outcome of the DBWines case: it made no economic difference to their position whether DBWines' case succeeded or failed (although DBWines, as a shareholder, does have a financial interest in Aabrofay's claim). On the current state of the law in Australia, neither is a privy of DBWines in the strict sense that would, without more, see them bound by the judgment to which DBWines is a party.

1. However, there are cases in which, despite the absence of privity in the strict sense, a person has been held precluded - whether by estoppel or abuse of process - from litigating a claim which could and should have been litigated in earlier proceedings, albeit that the person in question was not a party to those proceedings.

1. In Wytcherley v Andrews (1871) LR 2 P & D 327, Lord Penzance referred (at 328) to the practice of the Probate court, "founded on justice and common sense", that if a person with an interest in a suit, knowing of the proceedings, was content to stand by and see his battle fought by somebody else in the same interest, he should be bound by the result, and not be allowed to re-open the case:

There is a practice in this court, by which any person having an interest may make himself a party to the suit by intervening; and it was because of the existence of that practice that the judges of the Prerogative Court held, that if a person, knowing what was passing, was content to stand by and see his battle fought by somebody else in the same interest, he should be bound by the result, and not be allowed to re-open the case. That principle is founded on justice and common sense, and is acted upon in courts of equity, where, if the persons interested are too numerous to be all made parties to the suit, one or two of the class are allowed to represent them; and if it appears to the court that everything has been done bona fide in the interests of the parties seeking to disturb the arrangement, it will not allow the matter to be re-opened.

1. While that was admittedly said in the context of probate litigation, the Privy Council in Nana Ofori Atta II v Nana Abu Bonsra II [1958] AC 95 (a West African appeal) recognized it as having general application (at 102).

1. The principle espoused by Lord Diplock, with whom the other Law Lords agreed, in Hunter v Chief Constable (at 541), that it was an abuse of process to initiate "proceedings in a court of justice for the purpose of mounting a collateral attack upon a final decision against the intending plaintiff which has been made by another court of competent jurisdiction in previous proceedings in which the intending plaintiff had a full opportunity of contesting the decision in the court by which it was made", was applied to preclude the maintenance of proceedings by a plaintiff who was not a party to the earlier decision in Ashmore v British Coal Corpn [1990] 2 QB 338. Again as later explained by Lord Hoffman in Arthur JS Hall (at 701):

Ms Ashmore worked in the canteen of a coal mine in Nottingham. She complained to an industrial tribunal that she was paid less than men were being paid for similar work, contrary to the Equal Pay Act 1970. Over 1,500 other women employees of the corporation made similar complaints. The industrial tribunal decided to hear 14 sample cases, six selected by the employees and eight by the employers, to lay down general principles according to which the others could be decided. Ms Ashmore was aware of these arrangements. The tribunal decided all the cases adversely to the applicants on grounds which were equally applicable to Ms Ashmore's application. She then asked for a separate hearing of her case. The Court of Appeal decided that it should be struck out as an abuse of the process of the court. Ms Ashmore had not been a party to the sample proceedings but the sensible procedure there adopted would be undermined if all other members of the group were entitled to demand a separate hearing.

1. Stuart-Smith LJ, with whom Lord Donaldson MR and Farquharson LJ agreed, delivered the leading judgment in Ashmore. His Lordship said (at 349):

[Counsel for Ms Ashmore] has submitted that, if we uphold this decision, we are going further than courts have previously done. This may be so, although in my opinion we should not hesitate to do so if the interests of justice and public policy demand it. In fact, I adopted a similar course dealing at first instance in Godfrey v. Department of Health and Social Security (unreported), 25 July1988. It was a decision in chambers and not reported. It arose out of the claims for damages in connection with whooping cough vaccine. In these cases it was alleged that various doctors, nurses and health authorities had been negligent in giving those injections to young children with the result that they had suffered serious brain damage. There were a considerable number of such cases. Those in which proceedings were started were assigned to me. I stayed all but one action, Loveday v. Renton, The Times, 31 March 1988, in which I directed that there should be a trial of the issue of causation as a preliminary issue, namely whether it was proved that the vaccine could cause brain damage. That issue was tried at great length, and no expense was spared on behalf of the plaintiff who was legally aided; very many expert witnesses were called, both from this country and overseas. I decided that the plaintiff had not proved the case on causation. Subsequently the plaintiff Godfrey sought to bring a similar action, but against a different defendant. It was said that the vaccination was given at a time when the concentration of the pertussis vaccine was greater than it was later and therefore a more potent source of damage. In my judgment, this was not a material distinction. On the defendants' application I struck out the action ... I held that it was an abuse of the process of the court to relitigate the same issue in the absence of fresh evidence that bore materially on the issue of causation.

1. While expressed in terms of the principle in Hunter v Chief Constable, the decision in Ashmore - and for that matter Loveday - is covered by the principle expressed by Lord Penzance: in each of those cases, the plaintiffs were involved in arrangements by which, in effect, another case was selected to be the vehicle for resolution of the issues, which others were then precluded from relitigating.

1. The principle in Hunter v Chief Constable was further considered by the House of Lords in Arthur JS Hall. Lord Browne-Wilkinson said that it should be confined to cases where the prospective relitigation would be manifestly unfair to the defendant or would bring the administration of justice into disrepute (at 685). Lord Hoffman observed that the extension of the rules of issue estoppel to cases in which the parties are not the same but the circumstances are such as to bring the parties within the spirit of the rule was justified by the general public interest in the same issue not being litigated over again (at 701):

The second policy can be used to justify the extension of the rules of issue estoppel to cases in which the parties are not the same but the circumstances are such as to bring the case within the spirit of the rules. I shall give two examples.

1. His Lordship then referred to Reichel v Magrath and Ashmore in the terms quoted above, and concluded that the principle in Hunter v Chief Constable applied only in cases where relitigation would be manifestly unfair to a party, or would bring the administration of justice into disrepute. Lord Hutton (at 727) and Lord Millett (at 752) agreed with Lord Hoffman. Lord Hobhouse characterised Ashmore as a case in which the plaintiff was covered by "an order for the marshalling of litigation", but referred also to the concept of vexation of a defendant by successive actions (at 743, emphasis added):

There is no general rule preventing a party inviting a court to arrive at a decision inconsistent with that arrived at in another case. The law of estoppel per rem judicatam (and issue estoppel) define when a party is entitled to do this. Generally there must be an identification of the parties in the instant case with those in the previous case and there are exceptions. ... A party is not in general bound by a previous decision unless he has been a party or privy to it or has been expressly or implicitly covered by some order for the marshalling of litigation (Ashmore v British Coal Corpn [1990] 2 QB 338). This overlaps with the concept of vexation where the same person is faced with successive actions making the same allegations which have already been fully investigated in a previous case in which the later claimant had an opportunity to take part.

1. Lord Hoffman's statement that the extension of the rules of issue estoppel to cases in which the parties are not the same but the circumstances are such as to bring the parties within the spirit of the rule was justified by the general public interest in the same issue not being litigated over again, was referred to with apparent approval by French J, as his Honour then was, in Spalla v St George (at [67]).

1. In The Secretary of State for Trade and Industry v Bairstow [2003] EWCA Civ 321; [2004] Ch 1, Morritt V-C, after extensive reference to authority, including Reichel v Magrath, Hunter v Chief Constable and Arthur JS Hall, said (at [38]):

In my view these cases establish the following propositions. (a) A collateral attack on an earlier decision of a court of competent jurisdiction may be but is not necessarily an abuse of the process of the court... (c) If the earlier decision is that of a court exercising a civil jurisdiction then it is binding on the parties to that action and their privies in any later civil proceedings. (d) If the parties to the later civil proceedings were not parties to or privies of those who were parties to the earlier proceedings then it will only be an abuse of the process of the court to challenge the factual findings and conclusions of the judge or jury in the earlier action if (i) it would be manifestly unfair to a party to the later proceedings that the same issues should be relitigated or (ii) to permit such relitigation would bring the administration of justice into disrepute.

1. But in Johnson v Gore Wood & Co [2002] 2 AC 1, the House of Lords had spoken to somewhat different effect, that an additional element was not essential, although it would usually be present. Mr Johnson, who controlled Westway Homes Ltd, instructed Gore Wood & Co, solicitors, to act in a transaction. Subsequently, Westway sued Gore Wood for damages for professional negligence and obtained damages through a settlement. Thereafter, Mr Johnson brought separate professional negligence proceedings against Gore Wood, alleging that they had acted for him also in the same transaction and that he too had suffered his own loss. The House of Lords held that his proceedings were not an abuse of process for the purposes of Henderson v Henderson (which in England is regarded as a species of abuse of process, rather than estoppel as it is regarded in Australia: see Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589, 602), because in the particular circumstances of the case, it was - to put the conclusion in the terms authorised by Anshun - not unreasonable for Mr Johnson not to bring his personal claim in the earlier proceedings. Those circumstances included that the defendants' solicitors had been notified, before settlement of Westway's claim, that Mr Johnson also had a personal claim which he intended to pursue in due course. Lord Bingham said (at 31, emphasis added):

But Henderson v Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all. I would not accept that it is necessary, before abuse may be found, to identify any additional element such as a collateral attack on a previous decision or some dishonesty, but where those elements are present the later proceedings will be much more obviously abusive, and there will rarely be a finding of abuse unless the later proceeding involves what the court regards as unjust harassment of a party. It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focussing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before.

1. Making due allowance for the English characterisation of the rule as one relating to abuse of process, while in the Australia it is regarded a species of estoppel founded on unreasonable conduct, that passage otherwise entirely accords with Anshun.

1. Of importance for present purposes, his Lordship, with whom Lords Goff, Cooke and Hutton agreed, held that the rule in Henderson v Henderson was not rendered inapplicable by the circumstance that Mr Johnson was not the plaintiff in the first action, because he controlled the company (at 32):

A formulaic approach to application of the rule would be mistaken. [The company] was the corporate embodiment of Mr Johnson. He made decisions and gave instructions on its behalf. If he had wished to include his personal claim in the company's action, or to issue proceedings in tandem with those of the company, he had power to do so.

1. His Lordship cited the passage from Megarry V-C's judgment in Gleeson v J Wippell, quoted above, and added that "On the present facts that test was clearly satisfied".

1. In Champerslife v Manojlovski, the Court of Appeal overturned the judgment of District Court, which had dismissed Champerlife's claim on the basis that it could and therefore should have been brought in earlier proceedings to which its sole director and shareholder Mr Lawrence was party. The Court of Appeal held that the relation of a company with its sole director and shareholder was not one of privity in the strict sense, and that on the facts, it was not unreasonable for Champerslife to have refrained from intervening in the earlier proceedings. However, all thee members of the Court acknowledged that the Anshun doctrine could operate to preclude a person who though not party to proceedings was sufficiently connected with that party from later litigating a claim that it could and reasonably should have brought in the earlier proceeding. Allsop P, as his Honour then was, said (at 247 [5]):

That is not to say, however, that in an appropriate case (which might be thought to be unusual) it might be that X, which was not a party to litigation to which Y was a party, could, by the operation of the Anshun doctrine, be prevented from bringing a case that Y, if it controlled X, could have caused X to bring in the earlier proceedings: cf Johnson v Gore Wood & Co.

1. Giles JA said (at 258 [69]):

That is not to deny, as earlier indicated, that the fact that a person controls a company and can cause it to act in a particular way, may be a consideration in whether the company is Anshun estopped: again, see the consideration of Johnson v Gore Wood & Co later in these reasons.

1. Handley AJA referred to the passage from Lord Bingham's judgment cited (at [49]) above with evident approval, describing the conclusion as "hardly surprising" (at 264-5 [113]-[114]). His Honour continued:

Earlier proceedings by one litigant could not make later proceedings by another an abuse of process unless there was a relevant connection between the litigants. Since the issue was abuse of process realities must be relevant. The "broad merits-based judgment" excluded any narrow or artificial approach.

Here the order of events is reversed. Mr Lawrence was the defendant in the first case, and his company the plaintiff in the second. The company did not control Mr Lawrence, but the order of events cannot affect the result in such a case. Mr Lawrence could have had the company issue proceedings and applied to have them heard in tandem with the proceedings against himself. The existence of an Anshun estoppel must be determined in the light of such realities.

Lord Bingham's reasoning ... above, would apply with equal force where the second plaintiff was another company controlled by Mr Johnson which had no interest as shareholder or creditor in the first.

1. His Honour saw no reason in principle why an issue estoppel binding on a company should not bind its controlling shareholder/director and vice versa where, as would generally be the case, the shareholder had a real financial "interest" in the proceedings brought by the company (at 267 [131]).

1. In Ann Street Mezzanine Pty Ltd (in liq) v Beck (2009) 175 FCR 532, Finkelstein J accepted that a person who stands by and waits to see the outcome of a case in which he has a distinct interest without making himself a party is bound by the result (at [33]-[34]):

For example, if a person stands by and waits to see the outcome of a case in which he has a distinct interest without making himself a party, he is bound by the result and is not allowed to re-open the issue in another piece of litigation. This principle is derived from the speech of Lord Penzance in Wytcherley v Andrews (1871) LR 2 PD 327 at 328; cited with approval in Nana Ofori Atta II v Nana Abu Bonsra II [1958] AC 95 at 102.

More generally, it may be accepted that any attempt to re-litigate an issue may be an abuse. But there must be some 'special reason' that prevents a person raising an issue that has been decided by another court but by which he is not strictly bound: Bragg v Oceanus Mutual Underwriting Association (Bermuda) Ltd v CE Heath & Co (Marine) Ltd [1982] 2 Lloyd's Rep 132 at 138. Hence, in Bradford & Bingley Building Society v Seddon Hancock [1999] 1 WLR 1482 at 1492 Auld LJ said the mere attempt to re-litigate does not necessarily give rise to an abuse of process. Some additional element is required, such as a collateral attack on a previous decision as in Hunter, some dishonesty, or successive actions amounting into unjust harassment: Bradford [1999] 1 WLR at 1493.

1. In Clambake Pty Ltd v Tipperary Projects Pty Ltd (No 5) [2009] WASC 141, EM Heenan J said that the jurisdiction of the court to prevent an abuse of process may be invoked to prevent a party litigating in one proceeding an issue determined in other proceedings between different parties to which he nevertheless had a sufficiently proximate interest (at [72], emphasis added):

The point made by Ipp J in Gracechurch Holdings (supra), by Finkelstein J in Ann Street Mezzanine (supra) and by Gummow J in Trawl Industries is that if a person closely affiliated with the subject matter of an action and with notice of the claim stands by and takes no steps to advance or to defend his own personal interest, he will become bound as a matter of issue estoppel by the result determined between those other parties on an identical issue which affects him. There is also an alternative view that rather than treat such a result as constituting an issue estoppel, the jurisdiction of the court to prevent an abuse of process may be invoked to prevent a party litigating in one proceeding an issue determined in other proceedings between different parties to which he nevertheless had a sufficiently proximate interest.

1. In Thomas v Balanced Securities Ltd, a company of which Mr Thomas was the sole director unsuccessfully brought proceedings against Balanced Securities, a financier, challenging certain fees and charges levied by Balanced in connection with a loan to the company under a facility agreement, which was guaranteed by Mr Thomas. The company was ordered to pay the costs of the proceedings on the indemnity basis, pursuant to the terms of the facility agreement. After the costs were assessed, Balanced sued Mr Thomas for them on the guarantee. The Court of Appeal held that, notwithstanding the absence of evidence of the shareholding, it was appropriate to infer that Mr Thomas was the guiding mind and controller of a company, as he was its sole director, had executed the relevant facility agreement on its behalf as sole director and secretary, had given evidence in the earlier proceedings, and was the negotiator on its behalf for the loan; and that he ought not be permitted to challenge the conclusion that the facility agreement entitled the respondent to an indemnity costs order, because to do so would constitute an abuse of process in light of the appellant's close identification with the company and the earlier proceedings. White JA (with whom Margaret Wilson AJA and Martin J agreed) referred to the above-cited passage from the judgment of Megarry V-C in Gleeson v J Wippell (at [39]), and to a "body of dicta to the effect that where a person, such as a guarantor, is closely associated with the subject matter of the proceedings and takes no steps to defend (or advance) his own interest (where he is in a position to do so) he will become bound as a matter of issue estoppel by the result determined between those other parties on an identical issue which affects him", citing Clambake v Tipperary Projects; Ann Street Mezzanine Pty Ltd; Canon Australia Pty Ltd v Patton (2007) 244 ALR 759, 762 [8] (Basten JA), cf 773 [68] (Campbell JA); and Gracechurch Holdings Pty Ltd v Breeze (1992) 7 WAR 518 (at [40]). With reference to the view expressed by EM Heenan J in Clambake v Tipperary Projects that as an alternative to treating the matter as one of issue estoppel, "the jurisdiction of the court to prevent an abuse of process may be invoked to prevent a party litigating in one proceeding an issue determined in other proceedings between different parties to which he nevertheless had a sufficiently proximate interest", her Honour added "This is especially so when the "issue" or argument was never raised, but might have been, in the earlier proceedings".

1. Thomas v Balanced Securities was recently applied in this Court by S G Campbell J in Commonwealth Bank of Australia v Susan Hannaford Pty Ltd (No 5) [2013] NSWSC 1175 (at [26]-[27]), where a person who was sole director and majority shareholder was precluded from disputing a judgment against her company:

27 I accept the argument advanced by Mr White that accordingly it is not open to the third defendant to run that case, had she been here, for one of two reasons. The first reason in my view is that she was a party to that decision, is bound by it, and is bound by it by operation of that part of the doctrine of res judicata relating to issue estoppel. Against the possibility that I am wrong about that, I also agree with Mr White's argument based upon Thomas v Balanced Securities Ltd [2011] QCA 258; 2 Qd R 482.

28 To put this matter in context, I should also point out that - by reference to the company search introduced into evidence as an annexure to Ms Denkha's affidavit of 31 May 2011 - the third defendant as at the date of Hidden J's decision was the sole director of the first defendant, and accordingly, and clearly, its guiding mind. Moreover, she enjoyed a majority shareholding, being entitled to three of the four issued shares in the company. On this basis, applying, as I am bound to, the decision of the Queensland Court of Appeal in Thomas (White JA, Margaret Wilson JA and Martin J agreeing), in my judgment to permit the third defendant to re-ventilate the switching agreement argument would "constitute an abuse of the Court's processes in light of [her] close identification with [the company] and the earlier proceedings" rather than by way of an estoppel. (See Thomas at 497 [49]).

1. The above authorities establish that a person who was not party to earlier proceedings may nonetheless be precluded from maintaining later proceedings in respect of substantially the same subject matter, even though not in privity in the strict sense with the unsuccessful party in the earlier proceedings, if the person is sufficiently identified with a party to the earlier proceedings, and it was unreasonable to stand by and allow the earlier proceedings to be determined without intervening. In my view, in Australia these cases are best explained as a sub-species of Anshun estoppel; such that where a given matter becomes the subject of litigation and adjudication, the court requires not only the parties to bring forward their whole case, but other persons with a sufficient interest also to do so. Short of privity in the strict sense, there will be sufficient identification where there is control of one by the other - because it is offensive to the efficient administration of justice for a party who could have caused others with a similar interest to join in the proceedings to refrain from doing so and then seek indirectly to relitigate the issue through a controlled entity. In addition, the requisite relationship will be taken to exist where there has been what Lord Hobhouse called an "order for the marshalling of litigation", because where a court has put in place arrangements to facilitate the quick, just and inexpensive resolution of complex related litigation, it is offensive to the administration of justice that a person involved in those arrangement subsequently be able to circumvent them [cf Ashmore, 348H-349A]. However, the existence of the requisite identification is not of itself enough; as with the more familiar form of Anshun estoppel, a non-party will be precluded from later litigating the issue only where it was unreasonable to stand by without intervening in the earlier proceedings.

1. At this point it is necessary to consider, separately, the position of DBSuper and Aabrofay, because, as will appear, there are material differences.

1. As to DBSuper, its two issued ordinary shares are held by Emeri Anne De Bortoli; but it is said to be a superannuation trustee. The evidence does not reveal who are the members of the superannuation fund of which DBSuper is apparently the trustee, but there is every prospect that its beneficial ownership may not be the same as that of DBWines (in which the issued shares are held, as to 100 by Emeri Anne De Bortoli, as to12800 by Vittorio De Bortoli Investments Pty Ltd, and as to 3900 by Deen De Bortoli Investments Pty Ltd); in any event, the evidence does not establish that the underlying beneficial interests are the same. DBSuper has four directors, who are also four of the six directors of DBWines, and Mr De Bortoli is the managing director of both. However, DBWines does not control DBSuper; nor is it established that the same ultimate interests control both.

1. As has been pointed out, DBSuper did not have a legal or financial interest in the DBWines proceedings; nor does DBWines have a legal or financial interest in the DBSuper claim. It cannot be said that DBWines claimed under or in virtue of any legal right of DBSuper, nor did it derive any relevant interest through DBSuper. The argument that it should for relevant purposes be identified with DBWines depends on the identification of Mr De Bortoli as the relevant controlling mind of DBSuper, and thus attributing to DBSuper's acquisition of HIH shares the adverse causation findings made against DBWines.

1. I accept that in respect of its acquisition of HIH shares in June 2000, Mr De Bortoli was the controlling mind of DBSuper. The plaintiffs, who had initially indicated that, for the purposes of the present application, they accepted this to be so, were granted leave - to the extent that it be required - to resile from that position. Nonetheless, on this question of fact, the evidence before the court plainly establishes that Mr De Bortoli was the controlling mind of DBSuper in connection with the share acquisitions. His statutory declaration of 13 November 2008, which was evidently intended to establish reliance, deposes to the steps he took to purchase HIH shares on behalf of DBSuper, and makes patently clear that it was he who acquired the shares on behalf of DBSuper. There is no evidence to the contrary; the highest the opposing argument rises is a bare assertion (in a letter from the solicitors then acting for DBSuper) dated 15 April 2011 to the effect that Mr De Bortoli was not the person responsible for making the decision on behalf of DBSuper when purchasing the relevant shares, later elaborated (on 12 May 2011) by explaining that DBSuper is a superannuation fund and as such makes its decisions through its board, so that the board is therefore said to be the person responsible for the decision.

1. However, I do not accept that the presence of a "common controlling mind" in respect of the relevant share transactions is sufficient to identify DBSuper with DBWines for relevant purposes. That Mr De Bortoli was the person who made the decisions to acquire shares on behalf of both companies, does not establish that he controls the company in the sense required to attract the doctrine. He was not the controlling shareholder of either. He was not a sole director of either.

1. In essence, Mr De Bortoli was no more than the relevant agent of both companies. There is a fundamental difference between being the controlling mind of the company for the purpose of a particular transaction, and being the controller of the company in a way in which the company is to be regarded as the corporate embodiment of its controller. The point can be illustrated by analogy. If two unrelated parties each entrusted funds for investment to the same professional funds manager, and the funds manager invested each client's funds in the same company, which failed, it could not be suggested that one client would be precluded from bringing a case of misleading and deceptive conduct against the company by the other's earlier failure, notwithstanding that in each case the critical issue was reliance on the part of the manager - at least unless there were some order or arrangement for the marshalling of the litigation the effect of which was to treat the first case as a "test case". There is no abuse of process in merely seeking to have a witness believed in later proceedings between different parties, who has previously been disbelieved on the same facts.

1. Moreover, it was not unreasonable for DBSuper to refrain from intervening in the DBWines case. DBSuper's claim against HIH had been admitted, so there was no further need for it to establish causation against HIH. There was no occasion for DBSuper to participate in the DBWines proceedings, when its claim had been admitted. While in later correspondence the liquidators protested that this was for commercial reasons and without admission of the underlying facts, there was simply no reason for DBSuper to dispute the liquidators' decision in respect of its claim. While DBSuper's accessorial liability claim against the subsidiaries had not yet been adjudicated, the DBWines case did not involve accessorial liability claims against the subsidiaries.

1. In addition, DBSuper made clear to the administrators that it rejected the proposition that the DBWines case had any relevant connection with its claim against the subsidiaries. The solicitors for DBSuper pressed the liquidators to adjudicate and accept the claim against the subsidiaries, arguing that all that remained to be decided (the principal claim against HIH having been admitted) was whether those companies were "persons involved" in the contravening conduct. The solicitors for the administrators maintained (on 5 May 2011) that it was "inappropriate for our clients to undertake considerations of, or make any determination in relation to, the alleged claims by [DBSuper against the subsidiaries] until, at least, such time as [the DBWines proceedings] have been concluded and the asserted claims have been sufficiently particularised". DBSuper's solicitors responded (on 12 May 2011) that "We cannot understand why a determination cannot be made now as the proceedings in the Federal Court of Australia relating to the purchase of the shares by [DBWines] have nothing to do with this claim. The principal claim has been admitted by your Clients and all that now remains is for the Aiding and Abetting and the dishonesty of FAI, CIC and HIH Casualty aspects to be accepted by your Clients". They foreshadowed an application to the Court to compel the administrators to proceed with determination of the claims, to which the response (of 20 May 2011) was that "since the submission of your client's claims against each of [the subsidiaries] our client has consistently maintained the position that ... given both the nature of your client's claim and its factual relationship with [the DBWines claim] which is presently before the Court, a detailed consideration of the claims against [the subsidiaries] was premature", and that if proceedings were brought that letter and earlier correspondence would be relied upon in relation to costs. The administrators could not have been under any impression that there was acquiescence on the part of DBSuper to the DBWines case being a vehicle for determination of the DBSuper claim against the subsidiaries [cf Johnson v Gore Wood].

1. Thus, DBSuper had no interest in the DBWines case that could justify its intervention, let alone render it unreasonable not to intervene. There was simply no reason for it to do so: its claim against HIH had been admitted, and accessorial liability was not in issue in the DBWines case.

1. The position with Aabrofay is different. Not only are Aabrofay's five directors also five of the six directors of DBWines, and Mr De Bortoli is managing director of both. DBWines holds one A class share and 200,000 C class shares in Aabrofay, with 1 B class share held by Emeri Anna De Bortoli. Accordingly, DBWines controls Aabrofay. Moreover, as a shareholder in Aabrofay, DBWines has a financial interest in Aabrofay's claim. In its original proof of debt, DBWines made a claim (albeit a misconceived one) in respect of Aabrofay's legal rights: the loss said to have been incurred as a result of the acquisition of Aabrofay's HIH shares formed part of DBWines' original proof of debt, though not in the subsequent proceedings in the Federal Court. To that extent at least, DBWines had purported to claim in respect of Aabrofay's interests.

1. Aabrofay's acquisitions took place over the same period as DBWines'. The evidence in the DBWines proceedings covered the circumstances in which Aabrofay acquired its HIH shares. Aabrofay's claim against DBWines had been lodged well before the hearing of the DBWines proceedings. Aabrofay's principal claim, like DBWines' claim, was against HIH (although accessorial liability claims against the subsidiaries were added subsequently).

1. All this must be viewed in the context of the corporate liquidation and scheme administration of the HIH Group, where the liquidators and administrators are faced with multiple claims, and it is highly desirable to avoid unnecessary duplication of effort and cost, in order to maximise returns, so that the efficiency of management of claims is at a premium. Although the liquidators had not yet adjudicated it, there appears to have been no such agitation on the part of Aabrofay for early adjudication prior to determination of the DBWines proceedings as there was in the case of DBSuper. DBWines could have caused Aabrofay (which it presumably caused to be reinstated for the very purpose of making its claim against HIH) to join in the DBWines case - if not by way of appeal from the liquidators' decision, then by seeking leave to proceed against the company. This amounted to tacit acquiescence in the use of the DBWines case as the vehicle for determining the issue of causation. It was unreasonable for DBWines not to cause Aabrofay to seek leave to proceed against HIH in conjunction with the DBWines case, or for Aabrofay, being controlled by DBWines, not to do so.

1. While whether the contravening conduct caused loss to Aabrofay is not the same question as whether it caused loss to DBWines, and in that sense the Aabrofay claim does not directly involve a collateral attack on the earlier decision, nonetheless given the common circumstances and timeframe of the acquisitions by both companies, and the common agency of Mr De Bortoli, Aabrofay's case would require the liquidators to defend, a second time, a case founded on purchases of HIH shares by Mr De Bortoli during the relevant period in indistinguishable circumstances. It is beside the point that the factual basis on which causation is asserted may be different. Aabrofay's claim amounts to an attempt by DBWines to relitigate, by a controlled entity, the matters which were, or should have been, the subject of the DBWines case. In those circumstances, it would be bring the administration of justice - particularly in the context of the HIH liquidation and scheme administration - into disrepute, to permit Aabrofay to now relitigate the issues that were decided in the DBWines case, including causation, albeit on a different factual or theoretical basis.

1. While Stone J explained that the Aabrofay acquisitions were not in issue in the DBWines case, and were relevant only for context (at [83]; see [8] above), that is not inconsistent with the view that if they were to be litigated, they should have been litigated in that case [cf Ashmore, 346]. I have not overlooked that, if the case were to proceed, it would do so concurrently with many other similar claims by other investors, entirely unrelated to the De Bortoli interests, who also seek to propound a case of indirect causation, and in respect of whom there is no suggestions of abuse of process or estoppel. But the fact that analogous claims by unrelated parties are not precluded and will proceed, cannot logically render permissible a claim by a controlled entity that would otherwise be precluded.

Conclusion

1. My reasons may be summarised as follows.

1. The judgment in the DBWines case determined, albeit negatively, that HIH's contravening conduct did not cause loss to DBWines. That concluded the question of causation, however it might be put, so far as concerns DBWines. It would not now be open to DBWines to mount a new case based on "indirect causation"; such a case had to be raised, if at all, in the earlier proceeding. Moreover, it would be an abuse of process by way of collateral attack on the decision in the DBWines case, although HIH was the only defendant, for DBWines to bring an accessorial liability claim against the subsidiaries.

1. The critical question is therefore whether the decision in the DBWines case should be regarded as precluding DBSuper and Aabrofay, who were not parties to the DBWines proceedings, from maintaining their "indirect causation" and "accessorial liability" claims, which were not (but could have been) litigated in the DBWines proceedings.

1. A person not party to the original litigation may be precluded from maintaining new proceedings that involve relitigation of an issue previously decided, where the person concerned, though not a party to the earlier proceedings, was in privity with the unsuccessful party in those proceedings. Neither DBSuper, nor Aabrofay, claimed under or by virtue of any legal right of DBWines, or vice versa; accordingly, there was no privity in the strict sense that this doctrine requires.

1. However, a person who was not party to earlier proceedings may nonetheless also be precluded from maintaining later proceedings in respect of substantially the same subject matter, even though not in privity in the strict sense with the unsuccessful party in the earlier proceedings, if the person is sufficiently identified with a party to the earlier proceedings, and it was unreasonable to stand by and allow the earlier proceedings to be determined without intervening. This is a form of Anshun estoppel; so that where a given matter becomes the subject of litigation and adjudication, the court requires not only that the parties bring forward their whole case, but also that other persons with notice of the claim who have a sufficient interest in the subject matter and a sufficient identification with a party, to do so. One relevant type of identification with a party is where the party controls, or is controlled by, the other person. Consistent with Anshun, proceedings will be precluded only where it was unreasonable for the other person not to intervene in the earlier proceedings.

1. DBSuper was not controlled by, and did not control, DBWines; nor is it established that the underlying beneficial interests in them were the same. Neither had any legal, or even financial, interest in the success or failure of the other's claim. Moreover, given that DBSuper's claim against HIH had been admitted, and that the accessorial liability of the subsidiaries was not in issue in the DBWines case, there was no occasion for DBSuper to intervene in the DBWines proceedings; in other words, it was not unreasonable for DBSuper to refrain from intervening in the DBWines case. In the light of the contemporaneous exchanges between the solicitors, it cannot be said that there was acquiescence in the DBWines case being treated as a vehicle for the determination of the DBSuper claim against the subsidiaries, or any aspect of it. DBSuper is not precluded by estoppel from maintaining its claim in these proceedings and it is not an abuse of process for it to do so.

1. Aabrofay, on the other hand, is controlled by DBWines. DBWines as a shareholder has a financial interest in Aabrofay's claim. Aabrofay's principal claim, which had not been adjudicated, was against HIH, which corresponded with the DBWines claim. DBWines had included Aabrofay's claim in its original proof. Aabrofay had been reinstated, and its claim lodged in its own name, prior to the hearing of the DBWines proceedings. Evidence pertaining to the Aabrofay acquisitions of HIH shares was given in the DBWines proceedings. There appears to have been no such agitation on the part of Aabrofay for early adjudication prior to determination of the DBWines proceedings as there was in the case of DBSuper. DBWines could have caused Aabrofay to seek leave to proceed against HIH in tandem with the DBWines proceedings, but instead tacitly acquiesced in the utilisation of the DBWines case as the vehicle for determining the issue of causation. In those circumstances, it would bring the administration of justice - particularly in the context of the HIH liquidation and scheme administration - into disrepute to permit the causation issue to be relitigated by Aabrofay, albeit on a different basis. It was unreasonable for Aabrofay not to raise the issue, if it was ever to raise it, by intervening in the DBWines proceedings.

1. It follows that the Aabrofay proceedings, but not the DBSuper proceedings, should be dismissed.

1. The defendants have thus succeeded against one plaintiff but failed against the other. The plaintiffs had common legal representation. It seems to me that leaving each party to bear its own costs conveniently and justly reflects the outcome, but I will hear the parties on costs if desired.

1. Subject to any submissions that may be made as to costs, the Court orders that:

(1)   The proceedings by the second plaintiff Aabrofay be dismissed with costs.

(2)   The motion be otherwise dismissed.

(3)   There be no order as to costs of the motion, to the intent that each party bear its own costs.

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Decision last updated: 12 June 2014