John Anthony Jeans v John Richard Bruce

[2004] NSWSC 545

CITATION:	John Anthony Jeans v John Richard Bruce & Ors [2004] NSWSC 545
HEARING DATE(S):	15/06/04, 16/06/04, 17/06/04, 21/06/04,
JUDGMENT DATE:	21 June 2004
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Einstein J
DECISION:	Rulings on admissibility given
CATCHWORDS:	Estoppel exception to general rule that judgment does not bind non parties
CASES CITED:	Ben Shipping Co (Pte) Ltd v An Bord Bainne (the C Joyce) [1986] 2 All ER 177 Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2) [1967] 1 AC 853 Carl Zeiss Stiftung v Rayner & Keeler Ltd. (No 3) [1970] Ch. 506 Duffield v Scott (1789) 3 Term Rep 374 Gleeson v J Wippell & Co Limited [1977] 1 WLR 510 Gracechurch Holdings Pty Ltd v Breeze & Anor (1992) 7 WAR 518 Gray v Lewis; Parker v Lewis (1873) LR8ChApp 1035 King v Norman (1847) 4 CB 884 Mangena v Wright [1909] 2 KB 958 Marginson v Blackburn Borough Council [1939] 2 KB 426 Mercantile Investment & General Trust Co v River Plate Trust, Loan & Agency Company [1894] 1 Ch 578 Millwall, The [1905] P 155 Munni Bibi v Tirloki Nath (1931) LR58IndApp 158 Sterling Engineering Co Ltd v Patchett [1955] AC 534 Taylor v Ansett Transport Industries Ltd (1987) 18 FCR 342
PARTIES :	John Anthony Jeans (Plaintiff) John Richard Bruce (First Defendant) Harpley Nominees Pty Limited (Second Defendant) Advance Publicity Pty Limited (Third Defendant)
FILE NUMBER(S):	SC 50104/03
COUNSEL:	Mr J Ireland QC (Plaintiff) Mr W Hodgekiss (First Defendant) Mr B Rayment QC, Mr D Kell (Second and Third Defendant)
SOLICITORS:	Moloney Lawyers (Plaintiff) Gary Cassim & Associates (First Defendant) Efron & Associates (Second and Third Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

Einstein J

Monday 21 June 2004 ex tempore
Revised 9 July 2004

50104/03 John Anthony Jeans v John Richard Bruce & Ors

JUDGMENT

Reasons for reserving a ruling on evidentiary tenders

1 The final hearing of these proceedings has not concluded. The plaintiff is still in his case. However a number of closely fought objections to the tender of particular documents has given rise to a degree of complexity. Convenience dictates that the Court should identify what has happened and why. I proceed accordingly.

The proceedings

2 These proceedings are conveniently divided into two separate although related sets of claims.

The claims for contribution in relation to the Guarantees of 12 June 1998

3 These claims raise a number of issues arising from two documents dated 12 June 1998 under which the plaintiff, John Anthony Jeans and the first defendant, John Richard Bruce are said by the plaintiff to have purported to guarantee the obligations of a company called Deangrove Pty Limited (Receivers and Managers Appointed) ["Deangrove"] to the Commonwealth Bank of Australia (in each case "the guarantee”). The alleged guarantees are near enough in identical terms to one another.

4 Each of Mr Jeans and Mr Bruce by different routes have become liable to the Commonwealth Bank following proceedings in the Federal Court of Australia [N 1142/2000] in which each was a cross-defendant. The proceedings were settled before judgment as between the bank and Mr Bruce. The bank succeeded and obtained a judgment against Mr Jeans.

5 Mr Jeans seeks declaratory relief upholding his contention that (to the extent that the guarantee binds him) he has a claim for contribution in equity against Mr Bruce as co-guarantor which right is unaffected by the settlement reached between Mr Bruce and the Commonwealth Bank in the Federal Court proceedings. The claim is one in terms of an alleged entitlement to be reimbursed any sums paid by him to the bank pursuant to a judgment recovered by the bank against Mr Jeans in the Federal Court in excess of 50 percent of the liability of Deangrove to the Bank under the guarantee.

6 Mr Bruce by cross-claim seeks declaratory relief upholding his contention that he has a claim for contribution in equity against Mr Jeans as co-guarantor to be reimbursed any sums paid by him to the bank pursuant to the bank's judgment recovered against Mr Bruce in the Federal Court in excess of 50 percent of the liability of Deangrove to the bank under the guarantee.

The claims relating to the Heads of Agreement

7 Mr Jeans in the summons and Mr Bruce by the cross-claim assert that:

· a binding agreement was entered into by Mr Bruce, Mr Jeans, the second defendant Harpley Nominees Pty Ltd ["Harpley Nominees"] and the third defendant, Advance Publicity Pty Ltd ["Advance Publicity"] in terms of a document called “Heads of Agreement” ["the heads of agreement "] dated 9 August 1999;

· under this agreement Mr Bruce has an indemnity from Harpley Nominees and Advance in respect of Mr Bruce's obligations under the guarantee, including an indemnity in respect of Mr Bruce's obligation to Mr Jeans for contribution as a co-guarantor.

8 An objection was taken to the tender by Mr Jeans of the guarantee to be found at PX 13-25.

9 The circumstances in which the objection was taken include the announcement by senior counsel for Mr Jeans Mr Ireland QC that it is not proposed that Mr Jeans be called as a witness.

10 The second and third defendants seek to prove that Mr Jeans has contended that he never signed the guarantee and has sworn to that effect in an affidavit apparently mobilised in the Federal Court.

11 The immediate result of the taking of the objection was the tender by the plaintiff against all defendants:

· of the orders made by the Federal Court against Mr Bruce following the compromise of the Federal Court proceedings to which he and the Commonwealth Bank were parties [which compromise led to the entry of judgment in favour of the bank and against Mr Bruce, this being a judgment entered as I have said prior to the conclusion of the trial which proceeded against Mr Jeans];

· of the cross-claim in respect of which Sackville J made orders following the delivery of judgment the orders for the entry of judgment against Mr Jeans;

· of the orders made by Sackville J against Mr Jeans;

· of certain correspondence comprising a letter of 20 August 2001 from the solicitors for Mr Bruce to the solicitors for the second and third defendants and their response of 24 August 2001 and some anterior as well as following correspondence [presently to be found in PX 331-340].

The position up to this point in the hearing

Guarantees

12 As to the guarantee by Mr Bruce, which is pages 1 to 12 of the red volume, there was no objection by any of the defendants and that material is to be regarded as included in exhibit PX.

13 As to the guarantee by Mr Jeans, which is pages 13 to 25 of the red volume, all defendants have objected and those materials have presently not been admitted into evidence as part of exhibit PX. Judgment had been reserved in terms of the tender by Mr Jeans of these documents.

Federal Court judgments

14 As to the Federal Court judgments to be found at pages 26 to 57 and 63 to 75, all defendants had objected to the admissibility of those documents and they are to be regarded as presently excluded from exhibit PX. Judgment has been reserved in terms of the tender by Mr Jeans of these documents.

Terms of settlement with Mr Bruce

15 As to the documents following page 58, namely the terms of settlement against Mr Bruce, those terms of settlement were not the subject of an objection by the first defendant to the tender as against it and those pages had been ordered to remain part of exhibit PX but only as against the first defendant. The second and third defendants had taken an objection to the admissibility of those terms of settlement against those parties and judgment had been reserved in that regard. Up to this point in time as against the second and third defendants, the page 58 and following terms of settlement have been directed not to be regarded as part of exhibit PX nor in evidence.

Res judicata against Mr Bruce

16 A later development involved Mr Ireland contending that the terms constituted a res judicata against Mr Bruce with respect to

- Deangrove's liability to the Commonwealth Bank;
- Bruce's liability to Commonwealth Bank;
- Jeans' liability to the Commonwealth Bank.

17 Mr Hodgekiss of counsel who appears for the first defendant now seeks to have the document only admitted in terms of being evidence proving Mr Bruce's liability to the Commonwealth Bank. Mr Ireland's submission has been that the document was admitted against the first defendant for all purposes and for that position to remain.

18 It seems to me that consistently with what will be said below in the judgment the proper course is to by section 136 order presently restrict the admissibility of those terms of settlement to proving Mr Bruce's liability to the Commonwealth Bank but to note that the document is tendered on the two additional bases which Mr Ireland has pursued and to note that further submissions will be taken on that topic during final address and the judgment when it is handed down will rule upon those two parameters of Mr Ireland's tender.

Orders against Mr Jeans

19 As to pages 61 to 62 of exhibit PX being the orders against Mr Jeans, all defendants have objected and those pages have been and remain not to be regarded as in evidence or as part of exhibit PX pending the reserved ruling.

Special leave application

20 As to the High Court special leave application, all the defendants had objected, namely pages 76 to 78, and those pages had been and remain presently not before the Court as part of exhibit PX or otherwise. The decision has been reserved again in relation to that tender.

Other materials

21 As to pages 329 to 330C, there had been no objection by any of the defendants to those materials going into evidence as part of the plaintiff's case and they have been and remain to be regarded as in evidence as part of exhibit PX.

22 As to pages 331 to 340, there had been no objection by the first defendant to the admissibility in evidence of that material and there had been an objection to relevance pursued by the second and third defendants. The second and third defendants' objection to relevance was not sustained. Presently the Court has ordered that the whole of pages 331 to 340 go in to evidence as part of the plaintiff's case.

The so-called 'general rule'

23 The occasion for the taking of the objections has resulted in submissions from the Bar table concerning the general rule that a judgment is not binding on a person who was not a party to the proceedings in which it was granted.

24 All defendants opposed the tender as against them principally of the guarantee said to have been signed by Mr Jeans and of the bank's cross-claim [in the Federal Court proceedings] as part of the plaintiff's case but also objected to the tender against them of the Federal Court judgments and of the Federal Court orders against Mr Jeans. All defendants also objected to the tender against them of the cross-claim against Mr Jeans in the Federal Court proceedings. The mainstay relied upon by the defendants in this regard concerned a statement of principle set out in the judgment of Ipp J (as his Honour then was) in Gracechurch HoldingsPty Ltd v Breeze & Anor (1992) 7 WAR 518 [with whose reasons for judgment Pidgeon J and Seeman J agreed].

25 The facts are conveniently summarised in the headnote in the following terms:

“The respondents [Mr and Mrs Breeze] were guarantors of liabilities incurred by the proprietary company of which they were directors. The appellant [Gracechurch Holdings] had brought two separate actions for recovery against the respondents for outstanding debts on a lease made to the company.

The first respondent [Mr Breeze] was unable to attend the court on the day of the hearing but had intended to dispute the amount of the debt. As a result of the non-attendance the appellant obtained judgment against the first respondent. The second respondent [Mrs Breeze] conceded the debt.

The second respondent had also brought third party proceedings against the first respondent. These proceedings were based on the indemnity given by the first to the second respondent in respect of liability under the guarantee.

The second respondent sought to appeal the judgment against the first respondent for payment of the debt as well as the second respondent’s judgment against it as a third party on an indemnity. In the District Court the second respondent was successful. The appellant appealed to the Full Court seeking to reinstate its judgment against the second respondent.”

26 The propositions as put by Ipp J may be gleaned from the following passages [522-524]:

“The general rule is that a judgment is not binding on a person who as not a party to the proceedings in which it was granted: see King v Norman (1847) 4 CB 884.

This rule is subject to certain exceptions but none applies to the action between Gracechurch and Mr Breeze. Therefore the judgment in favour of Gracechurch against Mrs Breeze cannot be admitted in evidence in that action. It follows that the holding of the trial of the action between Gracechurch and Mrs Breeze and the consequential granting of judgment against Mrs Breeze cannot prejudice Mr Breeze in his defence of Gracechruch’s action against him. Mr Breeze is free to raise whatever defence he wishes and no part of the judgment awarded against Mrs Breeze can be used against him.

The essential question is therefore whether the judgment against Mrs Breeze might prejudice Mr Breeze in the third party proceedings brought against him by her.

The mere bringing in of a third party does not qualify the general rule precluding the use of judgments against non-parties or non-privies and does not make the judgment in the action binding upon the third party: see The Millwall [1905] P 155 (supra) (at 165 ). In cases involving indemnities, however, circumstances can arise entitling a person being indemnified to prove a judgment obtained against him by a creditor, in proceedings against the indemnifier. This can only occur on a strictly limited basis. Ordinarily a judgment against the person being indemnified, in respect of a matter covered by the indemnity, cannot be tendered in evidence in an action between the person and the indemnifier.

A helpful illustration of this principle is King v Norman (supra). The action was in debt, by A against B. C had been appointed Collector of Taxes and A had become one of C’s sureties for his obligations as Collector. B undertook to indemnify A “from and against all loss, costs, charges, damages and expenses” which he should incur in consequence of his becoming C’s surety. B denied that A had been in any way damnified under the surety. It was held that the mere production of a judgment against A at the suit of the Receiver-General was not evidence of the loss sustained by A in consequent of his suretyship. Coltman J, delivering the judgment of the Court of Common Pleas, said (at 898):

“The judgment was, in this case, evidence that the plaintiff (A) had been sued, and coupled with proof, or (as in this case) an admission, of liability to some extent, might lead the jury to conclude that the plaintiff had been subjected to a bona fide pressure, by which he was forced and obliged to pay whatever he was legally liable to pay through (C’s) default. But, whether he was legally liable to the extent for which judgment was signed, is a matter which could only be collected by inference from the judgment: and, for such a purpose, the judgment could not be used, without holding that a stranger to a judgment, - who has had no opportunity to cross-examine the witnesses, or to dispute the conclusions to be drawn from the evidence, - can be bound by the verdict where the judgment is after verdict, or can be bound by an agreement made without his privity or intervention, between the parties to the judgment where, as in the present case, it is a judgment founded on agreement. The law, we apprehend, is not so. The judgment cannot be used for such purpose against on who is neither a party nor privy to it.””
[Emphasis added]

27 Ipp J then proceeded to discuss the exception to the general rule:

“The exception to the general rule expressed in King v Norman occurs, it is sometimes said, when the indemnifier is estopped from denying the validity of the judgment: see Halsbury’s Laws of England (4th ed), vol 20, par 313 where the following appears:

“It is not necessary in order to bring the action against the indemnifier that notice of the proceedings should have been given to the indemnifier, but if it is not given it will open to him to impugn the judgment or the compromise. It is therefore prudent to join him as a third party or, at least, to give him notice of the proceedings so as to enable him either to admit liability, or where appropriate, to be joined as a party to the proceedings. If, having been put on notice, he then refuses to act, he will, in general, be estopped from denying the validity of the judgment or the reasonableness of the compromise, and it will be difficult for him to show that any costs incurred in defending the proceedings were properly incurred. Nevertheless, if they were improperly incurred he will not be liable for them.”

According to Romer J in Mercantile Investment & General Trust Co v River Plate Trust, Loan & Agency Co [1894] 1 Ch 578 at 595 the “estoppel” arises “by virtue of a term implied in the express covenant of indemnity”: see also Gray v Lewis (1873) LR8ChApp 1035 at 1059-1060.

I appears that this means that it may be implicit, in a contract of indemnity, that where the indemnifier conducts himself in such a way that he represents that he will be content with whatever judgment is granted against the person being indemnified, he will be estopped from denying the correctness of the judgment and it may be used against him.

I have some doubt, with respect, as to whether this approach, on analysis, is strictly correct. I would have thought that in an appropriate case an estoppel to similar effect would arise, irrespective of whether there is to be a clause implied in the contract of indemnity.

I also agree, with respect, with the reservations express in Ben Shipping Co (Pte) Ltd v An Bord Bainne [1986] 2 All ER 177 by Bingham J who doubted whether an “estoppel” would always arise in the circumstances postulated in Halsbury (op cit). His Lordship was, however, prepared to accept that in limited instances an “estoppel” of the kind suggested might arise.

Further, the qualification to the rule in King v Norman may, depending on the circumstances, not rest on estoppel at all. Rather, there may well be, as explained in Res Judicata; (1969); Spencer Bower & Turner (at p 235):

“an election (implied from conduct and inaction) by the indemnifying party that he was content to treat the judgment in the first action as binding upon himself, although in fact and law, he not being a party thereto, it was not so.””

28 Spencer Bower (para 204) expresses the principle. It was put by Buller J in Duffield v Scott (3 Term Rep 374; 100 ER at 630) as follows:

“The purpose of giving notice is not in order to give a ground of action; but if a demand be made which the person indemnifying is bound to pay, and notice be given to him, and he refuse to defend the action, in consequence of which the person to be indemnified is obliged to pay the demand, that is equivalent to a judgment and estops the other party from saying that the defendant in the first action was not bound to pay the money.”

29 The second and third defendants submitted that the principles as between an indemnifier and a person indemnified have no application to the position as between co-guarantors. It was put that persons who might in the future be called upon to make equitable contribution as co-guarantors are not required to intervene in pending proceedings against persons who might one day make such a claim against them, even if they are aware of the fact that such proceedings are pending. It was put that still less is there a need for a co-guarantor to intervene in proceedings after the settlement of his own proceedings and in the knowledge that he will, in any event, make full payment to the extent required in accordance with the terms of his own settlement with the creditor.

Other principles

Estoppels in curial proceedings where focus is placed upon the position of third parties to the proceedings

30 The matter is put in Spencer Bower and Handley as follows in relation to estoppels between defendants at paragraph 217:

"[Res Judicata] estoppels may also operate between defendants…. The relevant principles were developed by the Privy Council in Indian appeals. In Munni Bibi v Tirloki Nath (1931) LR58IndApp 158 the Privy Council said:

"In such a case… three conditions are requisite: (1) There must be a conflict of interest between the defendants concerned; (2) It must be necessary to decide this conflict in order to give the plaintiff the relief he claims; and (3) The question between the defendants must have been finally decided".

31 The learned authors further cite a wider principle formulated in Taylor v Ansett Transport Limited (1987) 18 FCR 342 at 358:

"... an estoppel can only be raised by or applied against parties who were in 'controversy' at the time when the issue was first determined, either in their favour or adversely to them. If a party was not involved in the litigation of that issue, either because it was not an issue between him and another party to the proceedings, or because he was not a party at all… at the time of resolution , then he is not affected by nor can he raise an estoppel. Likewise his presence initially or subsequently cannot affect the right of other parties to raise or to rely upon issue estoppel as between themselves".

32 Spencer Bower and Handley also deal at [2 31-2 32] with the application of estoppels to privies. As the learned authors point out, an explanation of the principle is explained by Cababe inter alia as follows:

"... although the estoppel is only a personal matter between the particular parties yet to really give the parties the benefit of it, and subject them to the burden of it, it is essential that not they only, but those of whom it can be predicted that they are their representatives in interest should likewise have the benefit of and be subject to the burden of the admission.."

33 Two authorities dealing with relevant parameters are Gleeson v J Wippell & Co Ltd [1977] 1 WLR 510 and Mercantile Investment and General Trust Co v River Plate Trust, Loan and Agency Company [1894] 1 Ch 578.

34 The judgment of Megarry VC in Gleeson [at 514–515] includes the following:

“The requisite privity is said to be a privity either of blood, of title, or of interest: see Zeiss No. 2, at p. 910, per Lord Reid. Plainly there is no question of blood or title in this case, and so only privity of interest can be in question. One difficulty about this is the protean nature of the word “interest,” a term which at times seems almost capable of meaning all things to all men. Another difficulty is that, as Lord Guest pointed out in Zeiss No. 2, at p. 936, “There is a dearth of authority in England upon the question of privies.” From such authorities as there are, it is by no means easy to distil any principle. In Mercantile Investment and General Trust Co v River Plate Trust, Loan and Agency Company [1894] 1 Ch 578, a plaintiff had sued an American company. Under an indemnity given to that company by an English company the English company assisted the American company in the litigation and paid its costs. The plaintiff won, and then sued the English company, contending that the English company was really the defendant in the first action, and so was estopped from disputing the plaintiff’s claim. Romer J however, rejected this contention; and in Zeiss No 2 [1967] 1 A.C. 853, Lord Reid’s reference to this decision, at p. 911, was certainly not in terms of disapproval. The fact that there would be an estoppel as between the indemnifier and the indemnified does not produce an estoppel quoad third parties. In that respect, an agreement to indemnify creates no privity.

It has also been held that a judgment against A in one capacity does not bind in another capacity. Thus a finding of negligence against him in proceedings in which he is concerned in his personal capacity does not bind him in proceedings in which he engages in his capacity as his wife’s personal representative: Marginson v Blackburn Borough Council [1939] 2 K.B. 426. Again, if A purports to act as agent for B, and the plaintiff then successfully sues A for breach of warranty of authority, B cannot be regarded as privy to A in those proceedings: Carl Zeiss Stiftung v Rayner & Keeler Ltd. (No 3) [1970] Ch. 506. In that case, at p. 541, Buckley J. said that he had been referred to

“…no authority which indicates at all clearly what kind of interest in earlier litigation relied upon as constituting a res judicata is sufficient to render someone, who was not a party and is not a successor in title to a party to that litigation, privy to a party for the purposes of the doctrine.”

Privity for this purpose is not established merely by having “some interest in the outcome of litigation.” So far as they go, I think these authorities go some way towards supporting the contention of Mr Jacob that the doctrine of privity for these purposes is somewhat narrow, and has to be considered in relation to the fundamental principle nemo debet bis vexari pro eadem causa.”

Conclusiveness of the record

35 It may be taken as a given that the conclusive notice of the record operates in rem. The matter is put inter alia as follows in Spencer Bower and Handley Res Judicata 3rd ed at 99:

"The record is conclusive, not only as to the fact of adjudication, but as to the matters adjudicated upon, and the terms of the decision. Indeed, to this extent, the conclusive list of the record operates in rem, for it undoubtedly binds strangers, as well as parties."

36 In evaluating what has been decided in earlier proceedings, the Court may consider the pleadings and may consider the reasons for judgment to elucidate what was decided. [cf Mangena v Wright [1909] 2 KB 958; Sterling Engineering Co Ltd v Patchett [1955] AC 534 at 541. See generally Spencer Bower (5th Ed) paras 204 - 205]

Returning to the position presently before the Court

37 Anything which is said in this interlocutory judgment will of course not be binding in any final sense as the Court has determined to reserve most of these sensitive issues for final address, the rulings to be handed down in the judgment. There is however it seems to me arguably a very strong basis for the proposition that none of the defendants can be said to have been a party to the proceedings as at the time when Sackville J handed down his final judgment and orders were entered. The proposition is that the only parties to the proceedings as at those points in time were Mr Jeans, Deangrove and the Commonwealth Bank. The mere fact that Mr Bruce had been a party through an extended period of the trial and later had a judgment entered against him as a result of the settlement does not it presently seems to me mean that he can be said to have been a party to the proceedings at the material time such that for that reason the judgment finally handed down by Sackville J can be said to have been a judgment binding on him. But it is suggested by the plaintiff that there are other analyses which warrant the same result. As will be apparent from what follows those matters are triable issues and cannot be determined at this stage of these proceedings.

38 Subject to submissions which may come forward in final address, it is convenient to presently proceed upon the basis of the statements of principle to be found in the above-described judgment in Gracechurch. Even so however, the examination of the particular estoppels said to operate in these present proceedings throws up a special sophistication and multi-faceted set of considerations to be weighed.

39 Before the amendment of the pleadings referred to below, it seemed to me that there had been some muddying of the waters in the submission by Mr Ireland QC in terms of his focus upon:

· the short minutes of order of 2 April 2003 whereunder the Bank and Mr Bruce had agreed to the judgment later entered [PX58-60] and

· the Federal Court orders as against Mr Bruce.

40 In this regard Mr Ireland contended:

"that the submission [of the defendants] misunderstands the structure of our case. Our case is that there is a concluded question as between my client, Mr Jeans, and the first defendant, Mr Bruce, that they are both bound to the Commonwealth Bank for the debts of Deangrove under guarantees. That is a concluded question.” [Transcript 22]

41 As it seemed and still seems to me, plainly enough the plaintiff is a fortiori entitled to tender against Mr Bruce the Short Minutes of Order/Federal Court orders. But none of this addressed the issue which the defendants originally took in their objections to the tender as against any of them of the guarantee said to have been signed by Mr Jeans and of the cross-claim the subject of the Federal Court orders against Mr Jeans.

The attempt by the plaintiff to presently invoke the exception to the general rule

42 There was some close debate towards the end of the plaintiff's case [on 16 and 17 June] as to precisely how the plaintiff sought to put its case in relation to a number of these matters.

43 The position of the second and third defendants was at that time made reasonably clear from the Bar table by Mr Rayment QC for the second and third defendants seeking to draw a distinction between three separate questions:

· Question 1 - As between Mr Bruce and Mr Jeans, were any and if so what form of issues estoppel [or res judicata] engaged.

· Question 2 - As between the second and third defendants on the one hand and Mr Jeans on the other hand, were any and if so what form of issues estoppel [or res judicata] engaged.

· Question 3 - As between the second and third defendants on the one hand and Mr Bruce on the other hand, were any and if so what form of issues estoppel [or res judicata] engaged

As to question 1 – Bruce/Jeans

44 The second and third defendants submitted on 17 June that no such estoppel could ever arise because all that Mr Jeans could rely upon was the fact that Mr Bruce was a party to the Federal Court proceedings. [As will appear from what follows Mr Jeans' case following the amendments allowed later on the same day is now grounded upon further factors.] In any event Mr Rayment’s proposition was that:

· Mr Bruce had had no interest adverse to Mr Jeans in the Federal Court proceedings;

· Mr Jeans had had no interest adverse to Mr Bruce in the Federal Court proceedings;

· in relation to the question of whether the other person had signed the Guarantee, each of Mr Jeans and Mr Bruce were simply sued by the bank on the Guarantee and there were no claims for contribution between them;

· it had not been necessary for the Federal Court to decide against either Mr Jeans nor Mr Bruce whether the other had signed the Guarantee and in any event, Mr Bruce had left the case before judgment was handed down by the Federal Court;

· if the judgment and cross-claim against Mr Jeans was not admissible as against Mr Bruce on principles of estoppel it would necessarily follow that the judgment and the cross-claim against Mr Jeans was not admissible against the second and third defendants who were alleged to have given Mr Bruce an indemnity.

As to question 2 – Advance and Harpley/Jeans

45 The proposition propounded by the second and third defendants was that in the event that contrary to their propositions on question 1, they were subject to some form of estoppel, this could only be availed of by Mr Bruce and not by Mr Jeans. Gleeson and Mercantile were relied upon. The central proposition was that the fact that there may be an estoppel as between the indemnifier and the indemnified could not produce an estoppel quoad third parties.

As to question 3 – Advance and Harpley/Jeans

46 The second and third defendants accepted that there was a triable issue to be determined so that the Court could not presently rule on whether or not any and if so what forms of issue estoppel may have been engaged as between the second and third defendants on the one hand and Mr Bruce on the other hand. The proposition was that one would need to look at events of or around August 2001 which had occurred as between the second and third defendants on the one hand and Mr Bruce on the other hand.

The new development in the pleadings

47 During the course of the taking of the above submissions [whilst the plaintiff was still in its case in terms of the admissibility of the documents sought to be tendered by the plaintiff] it emerged that the plaintiff contended that it was entitled on its existing pleadings to conduct its case by alleging against Mr Bruce that he was estopped as an alleged co-guarantor from denying or controverting the judgment given in the Federal Court against Mr Jeans. This so Mr Rayment submitted, was seen as prejudicing the second and third defendants' anterior position taken in the proceedings and in turn to give rise to entirely new issues said never to have been pleaded.

48 At this point the Court brokered a case management accommodation in terms of giving the parties a few days during which the plaintiff would have leave to further amend the summons, consequential amendments to the defences would take place and a reply might be filed. Further arrangements for discovery were made.

49 In the result the plaintiff now included a new paragraph 11A in its summons reading:

“11A. The judgments and findings of the Federal Court in proceedings N1142 of 2000 as upheld on appeal by the Full Federal Court establish against the first defendant:


(a) that the plaintiff executed the Guarantee;

(b) that the first defendant was liable to the Bank under his guarantee in respect of Deangrove’s obligations to the Bank in a sum of $4,672,379.71;

(c) that the plaintiff was liable to the Bank under his guarantee in respect of Deangrove’s obligations to the Bank in a sum of $4,749,813.30;

(d) that Deangrove was liable to the Bank in a sum of $4,749,813.30.”

50 The stance taken by the first defendant in its amended defence was to plead:

“11A. The first defendant does not admit that the judgements and findings of the Federal Court in proceedings N1142 of 2000 as upheld on appeal by the Full Federal Court establish against the first defendant:

· that the plaintiff executed the Guarantee;

· that the first defendant was liable to the Bank under his guarantee in respect of Deangrove’s obligations to the Bank in a sum of $4,672,379.71;

· that the plaintiff was liable to the Bank under his guarantee in respect of Deangrove’s obligations to the Bank in a sum of $4,749,813.30;

· that Deangrove was liable to the Bank in a sum of $4,749,813.30.

in the circumstances where the first defendant admits that the short minutes of order in the Federal Court proceedings dated 2 April 2003 directed judgment for the Commonwealth Bank against the first defendant for $4,672,379.71.”

51 The stance taken by the second and third defendants was to plead:

“In answer to paragraph 11A of the plaintiff’s Contentions the second and third defendants:

· deny the matters alleged therein and each of them;

· deny that the plaintiff signed the Guarantee;

· deny that any issue estoppel or res judicata arises as against the first, second and third defendants, or any of them, by reason of the judgments and findings of the Federal Court of Australia in the proceedings between the Commonwealth Bank of Australia and John Anthony Jeans.”

52 The plaintiff then filed a reply in the following terms:

“In reply to the first defendant’s amended defence dated 17 June 2004 :

1. The first defendant was sued by the Commonwealth Bank of Australia (“the Bank”) as a cross-respondent in Federal Court proceedings N1142 of 2000 upon his guarantee given to the Bank for the debts of Deangrove Pty Limited (“Deangrove”) and dated 12 June 1998.

2. Prior to 3 April 2003, the first defendant was aware of and participated in the said Federal Court proceedings.

3. Prior to 3 April 2000, the first cross-defendant was aware that the Bank was also propounding a claim against the plaintiff in those proceedings pursuant to a guarantee asserted by the Bank to have been signed by the plaintiff and dated 12 June 1998.

4. The first defendant was in Court at the hearing of those proceedings when the plaintiff sought to withdraw an admission that the plaintiff had signed the asserted guarantee.

5. On 31 March 2003, the first defendant was aware that leave had been refused to the plaintiff to withdraw his admission as to due execution of the said guarantee.

6. On 2 April 2003, the second defendant as third cross-respondent propounded an amendment to his cross-claim which alleged that the plaintiff did not guarantee the obligations of Deangrove to the Bank [T p 422].

7. By such proposed amendment to his cross-claim, the first defendant became interested in the controversy that then arose concerning due execution by the plaintiff of a guarantee in favour of the Bank in respect of the debts of Deangrove.

8. In knowledge of the matters set forth in paragraphs 3 to 7 above, on 2 April 2003, the first defendant concluded a settlement with the Bank in the said Federal Court proceedings in which he consented to judgment against him in favour of the Bank in a sum of $4,672,379.71.

9. On 3 April 2003, the first defendant invited the Court to direct judgment against him upon the Bank’s cross-claim in that sum and judgment was so directed against him in the Federal Court of Australia.

10. Thereafter, the first defendant ceased to participate further in the Federal Court proceedings, in the knowledge that the plaintiff had been refused leave to withdraw admissions that he had duly executed a guarantee in favour of the Bank.

11. In the circumstances set forth in paragraphs 1 to 10 above, the first defendant is estopped from asserting the invalidity of the respective liabilities of the plaintiff and the first defendant under their guarantees Deangrove in those Federal Court proceedings.

In reply to the second and third defendants’ amended defence dated 17 June 2004:

12. By letter dated 13 August 2001 from Bull Son & Schmidt writing on behalf of the first defendant, notice was given to the second and third defendants of then pending proceedings in the Federal Court against the first defendant maintained by the Commonwealth Bank of Australia claiming against the first defendant under a guarantee given by him of the debts of Deangrove Pty Limited in June 1998.

13. By the said letter the second and third defendants were afforded an opportunity as indemnifiers of the liability of the first defendant to join in those proceedings.

14. The second and third defendants denied the existence of an indemnity on their part and declined to participate in those proceedings and thereby represented to the first defendant implicitly by their conduct they would be content with whatever judgment was granted in the Federal Court proceedings.

15. The first defendant acted on the basis of that representation and did not seek to maintain a cross-claim against the second and third defendants in those Federal Court proceedings.

16. The second and third defendants are thereby estopped from asserting the invalidity of the judgment against the plaintiff, the first defendant and Deangrove Pty Limited in those Federal Court proceedings.

17. In further answer to the amended defence of the second and third defendants the plaintiff says:


(a) on or about 17 July 2000, the third defendant retained Jennifer E Darin as solicitors to institute proceedings against Noroton Holdings Pty Limited and Australasian Property Holdings Limited to recover monies to which those parties were entitled pursuant to the said Heads of Agreement;

(b) thereafter, Jennifer E Darin solicitors maintained claims on behalf of the third defendant against Noroton Holdings Pty Limited and Australasian Property Holdings Limited;

(c) on or about 5 September 2000 Jennifer E Darin recovered a sum of $185,000 for the third defendant pursuant to its claims against Noroton Holdings Pty Limited and Australasian Property Limited;

(d) at all material times the first defendant was privy to the actions of the second and third defendants in asserting an entitlement under the Heads of Agreement and recovering and attempting to recover monies against the two companies;

(e) the second and third defendants have thereby ratified and confirm their liabilities under the Heads of Agreement dated 9 August 1999;

(f) to the detriment of the first defendant, the assertion by the second and third defendants of an entitlement to recover monies from Noroton Holdings Pty Limited and Australasian Property Holdings Limited prevented and precluded the first defendant from any such recovery;

(g) the second and third defendants are thereby estopped from asserting the invalidity of the said Heads of Agreement.”

The way forward

53 It is now quite plain that:

· the complexities involved in disentangling the respective forensic positions taken at the Bar table;

· the factual questions underpinning whether any and if so which forms of estoppel will bind which of the parties at the Bar table

render it simply presently impossible for the Court to do otherwise than to reserve a ruling on the tender of the so-called 'sensitive' documents principally being the guarantee said to have been signed by Mr Jeans and the cross-claim referred to in the judgment against him. Submissions on the admissibility of these documents will be taken during the course of final addresses and a ruling will be handed down as part of the final judgment.

54 Costs have been and remain reserved in relation to the Court having granted leave to the plaintiff to amend its pleadings in the manner already referred to.

I certify that paragraphs 1 - 54
are a true copy of the reasons
for judgment herein of
the Hon. Justice Einstein
given on 21 June 2004ex tempore
and revised 9 July 2004

___________________
Susan Piggott
Associate

Last Modified: 07/26/2004