Redowood Pty Ltd v ASX-Perpetual Registrars Ltd

[2006] NSWSC 334

Reported Decision: 57 ACSR 256

New South Wales

Supreme Court

CITATION:	Redowood Pty Ltd v ASX-Perpetual Registrars Ltd [2006] NSWSC 334
HEARING DATE(S):	8 and 24 March 2006
JUDGMENT DATE :	28 April 2006
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Rein AJ
DECISION:	See [88].
CATCHWORDS:	"Anshun" estoppel - earlier proceedings against the principal of the agent sued in the current proceedings
LEGISLATION CITED:	Australian Securities and Investments Commission Act 2001 (Cth), s 12GF Fair Trading Tribunal Act 1998, s 27(3) Home Building Act 1989, s 10(3) Housing Finance Act 1972 Legal Profession Act 1987 (NSW), s 198L Trade Practices Act 1974 (Cth), ss 51AA, 52, 60, 87 Uniform Civil Procedure Rules (NSW), Part 28 r 2
CASES CITED:	Asher v Secretary of State for the Environment [1974] Ch 208 Bryant v Commonwealth Bank of Australia (1995) 57 FCR 287 Cleary v Jeans [2006] NSWCA 9 Collen v Wright (1857) 8 El & Bl 647; 120 ER 241 Henderson v Henderson (1843) 3 Hare 100 at 115; 67 ER 313 Hunter v Chief Constable of the West Midlands Police (Birmingham Six case) [1982] AC 529; [1981] 3 All ER 727 J D'Almeida Araujo Lda v Sir Frederick Becker & Co Ltd [1953] 2 QB 329; [1953] 2 All ER 288 Jeans v Cleary [2004] NSWSC 1245 Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; 36 ALR 3 Redowood Pty Ltd v Mongoose Pty Ltd (2004) 49 ACSR 172; [2004] NSWSC 101 Redowood Pty Ltd v Mongoose Pty Ltd [2005] NSWCA 32 Reichel v Magrath (1889) 14 App Cas 665 Rippon v Chilcotin Pty Ltd (2001) 53 NSWLR 198; [2001] NSWCA 142 Secretary of State for Trade and Industry v Bairstow [2004] Ch 1; [2003] EWCA Civ 321 Stanton v Callaghan [2000] 1 QB 75; [1998] 4 All ER 961 Stephenson v Garnett [1898] 1 QB 677 Tanning Research Laboratories Incorporated v O'Brien (1990) 169 CLR 332 Trawl Industries of Australia Pty Ltd (in liq) v Effem Foods Pty Ltd (1992) 36 FCR 406 Yat Tung Investment Co Ltd v Dao Heng Bank Ltd [1975] AC 581 Zavodnyik v Alex Constructions Pty Ltd [2005] NSWCA 438
PARTIES:	Redowood Pty Limited ACN 003 365 820 ASX-Perpetual Registrars Limited ACN 083 214 537
FILE NUMBER(S):	SC 50062/04
COUNSEL:	V R W Gray (Plaintiff) A McGrath (Defendant)
SOLICITORS:	Gye Associates Lawyers (Plaintiff) Henry Davis York (Defendant)

- 1 -

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

REIN AJ

28 April 2006

50062/04 Redowood Pty Ltd v ASX-Perpetual Registrars Ltd

JUDGMENT

1 HIS HONOUR: Redowood Pty Ltd (“Redowood”), for whom Mr V Gray of counsel appears, has commenced proceedings against ASX-Perpetual Registrars Ltd (“ASX-Perpetual”), for whom Mr A McGrath of counsel appears, claiming that by reason of ASX-Perpetual’s conduct, Redowood has lost the benefit of an offer made to it by Mongoose Pty Ltd (“Mongoose”) to buy rights in Anaconda Nickel Ltd (“Anaconda”).

2 Redowood puts its claims against ASX-Perpetual on the basis of negligence, s 87 of the Trade Practices Act 1974 (“TPA”) and s 12GF of the Australian Securities and Investments Commission Act 2001 (“ASIC Act”).

3 ASX-Perpetual filed a defence disputing liability to Redowood on any basis, but also raising a defence of Anshun estoppel and abuse of process. Redowood has filed a Reply in which the estoppel and abuse of process defences are the subject of response.

4 ASX-Perpetual by Amended Notice of Motion dated 13 October 2005 sought an order pursuant to Part 28 rule 2 of the Uniform Civil Procedure Rules (“UCPR”) for separate determination of the issue of whether Redowood is estopped on the basis of Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; 36 ALR 3, “Anshun estoppel”, and alternatively that the proceedings be stayed, or alternatively that the summons be struck out as an abuse of process.

5 When I commenced hearing the motion (8 March 2006) two things became clear – that ASX-Perpetual was really only asserting the abuse of process and stay point as subsidiary to the Anshun estoppel, and secondly that Redowood agreed that the Anshun estoppel point was appropriately the subject of an order pursuant to Part 28 rule 2 of the UCPR. Further both parties had understood that the Court would hear the Anshun estoppel argument on that day. I had already received at that point two affidavits of Ms Abigail Badman, solicitor, for ASX-Perpetual to which there had been no objection, an affidavit of Ms Tania Schiff (employed solicitor for Redowood), to which there had been no objection, and an affidavit of Mr Clement Anthony Gye sworn 8 March 2006, the solicitor for Redowood, to which there had been objection. The view that I took (on the basis of the matter being a motion for separate hearing rather than the separate hearing itself) was that the contents of the affidavit were unlikely to have any bearing on whether the orders sought in the motion should be made, and that I would accept the evidence notwithstanding its very late production.

6 Once it became apparent that the parties wanted to proceed with a hearing on the separate question, the status of the affidavit of Mr Gye became more significant. The affidavit was only provided to ASX-Perpetual on the morning of 8 March 2006 and Mr McGrath indicated that he would want to cross-examine Mr Gye, and to do so after having had access to relevant material. I heard argument on the matter and deferred the question of how Mr Gye’s affidavit should be dealt with until 14 March 2006 by which time Redowood could provide what was not the subject of a claim for privilege and could determine its position on the balance.

7 Subsequently on 14 March 2006 there was argument about the extent to which Redowood had waived privilege, and I directed Redowood to make available all documents held by its solicitors, which occurred.

8 I shall return to the contents of Mr Gye’s affidavit, the documents obtained by ASX-Perpetual and the cross-examination of Mr Gye later in these reasons.

9 Prior to the hearing I received outlines of submissions from Mr McGrath and Mr Gray. Following the completion of evidence (apart from cross-examination of Mr Gye) on 8 March, I heard oral submissions from counsel. Following the evidence of Mr Gye on 24 March, I heard further oral submissions from counsel. No request for an opportunity to furnish further written submissions was made. Subsequent to the hearing on 28 March or shortly after, I received from Mr Gray further written submissions. Through my Associate I indicated that Mr McGrath’s consent to such a course should be obtained. Subsequently Mr Gray wrote to advise that Mr McGrath had not consented to further submissions being received. No application that they be received was made. I have not therefore read the further submissions but I have had them and the two faxes from Mr Gray marked “MFI-1” and placed in the Court file.

10 To understand the Anshun estoppel point it is necessary to have regard to the decision in Redowood Pty Ltd v Mongoose Pty Ltd (2004) 49 ACSR 172; [2004] NSWSC 101 per Einstein J, affirmed on appeal in Redowood Pty Ltd v Mongoose Pty Ltd [2005] NSWCA 32.

11 In Redowood Pty Ltd v Mongoose Pty Ltd (“the first proceedings”), Redowood sued Mongoose for the purchase price of renounceable rights in Anaconda under a contract for the sale of the rights to Mongoose. Mongoose had made a public offer to purchase renounceable rights issued by Anaconda. Redowood accepted the offer in respect of the rights to which it was entitled as an existing shareholder of Anaconda. A few days later Redowood purported to accept the offer in respect of an additional parcel of rights that it had subsequently bought on the market during the period when the rights were traded. There was no dispute concerning the first parcel of rights and Redowood was paid by Mongoose for those rights. The existence of a concluded contract for the purchase of the second parcel of rights was disputed on the basis of Redowood’s alleged failure to conform to Mongoose’s terms for acceptance of its offer. Redowood asserted that it had complied with those terms and argued that an agent of Mongoose, Ms Ooi, had led it to believe that its provision to ASX-Perpetual as agent of Mongoose, of a broker’s contract note evidencing Redowood’s purchase of the rights would be sufficient compliance with Mongoose’s terms for acceptance of its offer. Mongoose denied that any contract had been concluded because two requirements set out in the documentation had not been met. Mongoose joined ASX-Perpetual by way of cross claim asserting that if it (Mongoose) was held liable to Redowood then ASX-Perpetual was required to indemnify it because that liability arose out of ASX-Perpetual’s acts and omissions.

12 By agreement, the cross claim was stayed pending determination of Redowood’s claim against Mongoose and ASX-Perpetual took no further part in the proceedings, until judgment was handed down on Redowood’s claim against Mongoose. On the day that the Court made the order in relation to the stay of the cross claim, Bergin J specifically raised the possibility of adverse findings against ASX-Perpetual witnesses if there were a split hearing. Ms Badman on behalf of ASX-Perpetual informed Bergin J that ASX-Perpetual had considered this but nevertheless did not want to be involved in the Redowood proceedings (see Annexure A to Ms Schiff’s affidavit of 7 March 2006).

13 The cross claim by Mongoose against ASX-Perpetual, which was deferred, raised issues of the terms of the agreement between Mongoose and ASX-Perpetual, whether ASX-Perpetual had breached it and whether ASX-Perpetual had been negligent: see p 18 of Exhibit “A”.

14 Einstein J held that there was no contract for Mongoose’s purchase of the second parcel of rights because Redowood’s second rights acceptance form did not comply with Mongoose’s rights offer document. His Honour further held that Mongoose was not estopped from denying acceptance of its offer. He found that Ms Ooi represented to Redowood that receipt of a broker’s contract note would be sufficient for a second rights acceptance form to be sent to Redowood, as it was, but that the representation did not unequivocally extend to what was necessary to be done by Redowood in completing the form, and did not unequivocally indicate that Redowood’s obligation to comply with the Mongoose offer document had been displaced for the purposes of acceptance. The estoppel argument was not advanced until the second day of hearing and no formal defence had been required of Mongoose to deal with that amendment.

15 The defence of Mongoose did not admit liability.

16 An appeal from the decision of Einstein J was heard by the Court of Appeal in Redowood Pty Ltd v Mongoose Pty Ltd [2005] NSWCA 32 and it was dismissed by a majority (Bryson JA, with whom Handley JA concurred, Tobias JA dissenting).

17 On 19 March 2004, on the day that Einstein J had indicated he would make formal orders following his judgment, an application was made by Redowood to amend its claim to join ASX-Perpetual as a defendant.

18 There was, according to the transcript of the directions hearing before Einstein J (p 361 of Exhibit “A”), the following interchange between his Honour and Mr Gray, who then appeared for Redowood (no-one was present for ASX-Perpetual – see p 358 of Exhibit “A”), in the following terms:

“GRAY: So far as paragraph 1 is concerned I ask your Honour for leave to file in court an amended summons which will have the effect of pleading a cause of action against ASX Perpetual for the first time in these proceedings.
HIS HONOUR: Why would I permit that?
GRAY: In my submission there’s no reason in principle why that couldn’t happen. The case as it stands has been determined on the basis of a separate issue determination.
HIS HONOUR: Which didn’t involve ASX.
GRAY: Which didn’t involve ASX at all.
HIS HONOUR: Why don’t you just start a new suit against ASX?
GRAY: We can, that’s the option.
HIS HONOUR: That’s the approach that I think you should take, I’m not likely to go granting leave to file an amended summons after I’ve delivered a judgment in circumstances where a separate question order was made. There’s no prejudice to your side. You just start another suit.
GRAY: The other matter is the costs issue.
HIS HONOUR: By the way in relation to the other suit it’s not as if ASX is bound, I mean it wasn’t heard. It’s not a party so there’s no res judicata prejudice to your client. I would like to know if there’s a problem with my proposal but I’m most unlikely if there’s no problem to accede to the suggestion.
GRAY: I wouldn’t suggest that there was anything which created a forensic difficulty.”

19 On 19 March 2004 formal judgment in favour of Mongoose against Redowood and in favour of ASX-Perpetual as against Mongoose was entered.

20 I turn now to the evidence of Mr Gye and to his cross-examination on 24 March 2006. I set out in full the substantive contents of his affidavit:

“1. I acted as solicitor for the Plaintiff in proceedings in this Court No. 50045 of 2003 Redowood Pty Limited v Mongoose Pty Limited (the “ Mongoose Proceedings ”).
2. At no time before Nicole Ooi gave evidence in the Mongoose Proceedings did I or, to the best of my knowledge information and belief, anyone else associated with Redowood, have any knowledge of what had occurred in the offices of ASX-Perpetual Registrars Limited following its receipt of the documents received from Bruce Grant of Redowood referred to in paragraph 15 of Miss Ooi’s statement dated 24 February 2004 (page 26 of Ex AB1 to the affidavit of Abigail Badman sworn 14 October 2004 filed herein) which documents appear at pages 40-42 of that exhibit.
3. Without that knowledge (and the ability to lead admissible evidence of those facts) I would not have been prepared to sign a certificate under section 198L of the Legal Profession Act 1987 alleging a cause of action against the Defendant in these proceedings in the form or to the effect of the causes of action pleaded against the Defendant in these proceedings.”

21 Section 198L of the Legal Profession Act 1987 was in the following terms:

“ 198L Restrictions on commencing proceedings without reasonable prospects of success

(1) The provision of legal services without reasonable prospects of success does not constitute an offence but is capable of being professional misconduct or unsatisfactory professional conduct.

(2) A solicitor or barrister cannot file court documentation on a claim or defence of a claim for damages unless the solicitor or barrister certifies that there are reasonable grounds for believing on the basis of provable facts and a reasonably arguable view of the law that the claim or the defence (as appropriate) has reasonable prospects of success.

(3) Court documentation on a claim or defence of a claim for damages is not to be accepted for lodgment unless accompanied by the certification required by this section. Rules of court may make provision for or with respect to the form of that certification.

(4) In this section:

‘ court documentation’ means:


(a) a statement of claim, summons, cross-claim, defence or further pleading, or

(b) an amended statement of claim, summons, cross-claim, defence or further pleading, or

(c) a document amending a statement of claim, summons, cross-claim, defence or further pleading, or

(d) any other document of a kind prescribed by the regulations.

‘ cross-claim ’ includes counter-claim and cross-action.”

22 I should note that on 8 March 2006 Mr Gray during the course of his submissions appeared to concede that all of the elements in the misrepresentation case were known well before the hearing before Einstein J, but argued that this was not so in relation to the negligence claim: T33.26-34.54.

23 The bundle of documents which ASX-Perpetual obtained from Mr Gye’s files became Exhibit “D” and Mr Gye was extensively cross-examined upon it.

24 The documents consist of letters passing from Mr Gye to his client, from Mr Gye to Mr Gray of counsel, memoranda from Mr Gray to Mr Gye and notes of meetings with Mr Gray, Ms Schiff and Mr Ralph, an expert.

25 The file is quite extensive and I have had regard to its contents and the cross-examination of Mr Gye. Of particular significance are these matters:

(1) A letter of 25 March 2003 from Mr Gye to Mr Grant and Mr Chris Linegar of Redowood (pp 21-22 of Exhibit “D”) in which Mr Gye set out the advice from counsel which contained inter alia (“APR” is a reference to ASX-Perpetual):

“d. Apart from any statutory rights, Counsel is of the view that [Redowood] has a cause of action in negligence against APR.

…

f. Counsel believes that if you do not receive your monies by Friday week then we should immediately commence action in the Commercial Division of the Supreme Court.

g. Counsel is of the opinion that it is not open to APR to say that it was a mistake. If there was confusion about the numbers of ANL Rights held by Redowood then they would have telephoned Mr Grant and advised him. At all times, Mongoose had an up to date print out from ComputerShare for comparison purposes. It is hard to see a judge accepting “oversight” as an explanation, and it is no defence to negligence.”
[emphasis added]

The letter enclosed a draft letter (drafted by Mr Gray) and then said:

“We will keep you informed of further developments. Counsel has made the point that one of the reasons for writing to APR is in an attempt to draw out an explanation from APR as to how these set [sic] of circumstances could have come about.”

(2) The letter of demand sent by Mr Gye to ASX-Perpetual dated 25 March 2003 (p 25 of Exhibit “D”) asserted that ASX-Perpetual had, due to what appeared to be an “oversight”, “failed to process” the second Mongoose rights acceptance form. The letter also said:

“In the event that you choose to ignore this demand we have instructions to commence recovery proceedings without further notice to you”.


(3) On 25 March 2003 Mr Gray sent Mr Gye a draft Statement of Claim (pp 27-30 of Exhibit “D”). The claim was one against ASX-Perpetual only and pleaded a cause of action in negligence.

(4) On 1 April 2003 Mr Gye wrote to Messrs Linegar and Grant enclosing a draft statement of claim (together with a copy of a letter from Mr Gray) and Mr Gye’s letter concluded (p 60 Exhibit “D”):

“Please advise if you consider that we should join Mongoose Pty Limited to these proceedings. Mongoose Pty Limited made the offer and you did accept it in accordance with their instructions given by its appointed agent. You will recall that we did forward copies of your documentation to Black [sic] Dawson Waldron, but despite two phone calls and the facsimile, we have not yet received any comment or reply.”

(5) On 3 April 2003, Mr Gye wrote to Redowood advising that the Summons in the Commercial Division had been drafted and enclosing a copy of it (it had ASX-Perpetual as the first defendant and Mongoose as the second defendant):

“Please confirm that it is in order to issue the summons. In order to do this, please forward to us a cheque for $2,616.00 on account of filing fees.”

(6) On 4 April 2003, solicitors for ASX-Perpetual replied on behalf of ASX-Perpetual to Mr Gye’s letter of 25 March 2003. Henry Davis York (“HDY”) asserted that ASX-Perpetual’s failure to process the second rights acceptance form was:

“solely attributable to the incorrect completion of the acceptance form by your client. Specifically, your client inserted the Security Reference Number (“ SRN ”) I003002997, which is one of two holdings under your client’s registered name. It appears a new (second) holding was created when your client acquired 55,000,000 ANL rights on market and your client placed the SRN of its existing holding (the first holding) on the acceptance form. When our client checked the holding for SRN I0030002997 it found that it had already been accepted for 65,087,000 ANL rights on 10 February 2003. On this basis, no further action was taken by our client.

Our client does not manage the Anaconda Nickel share register and cannot be held responsible for the creation of a new holding.
Further, our client had and has no obligation to your client to make enquiries about other holdings of your client, to assess whether the SRN on the form was an error or to investigate whether your client intended to accept for another holding. Its only obligation was to process a correctly completed and appropriately signed form in accordance with instructions from its client, in this case Mongoose Pty Limited. It appropriately discharged its obligations in this regard. Your client should look to itself or to those that assisted it to complete the acceptance form.”


(7) By letter of 4 April 2003 Mr Gray commented on the HDY letter saying that he was “sceptical as to the truthfulness of the Henry Davis York explanation” but that Mr Gye should seek “expert evidence as to what good practice in this industry required in these circumstances”: p 102 Exhibit “D”.

(7A) On 9 April 2003, Mr Gye informed Mr Gray of the results of Mr Gye’s meeting with Mr Ralph, a chartered accountant with share registry experience. He expressed the view that ASX-Perpetual “had an obligation to contact [Redowood] if they could not identify the source” (of the holding I assume): p 111. He was of the view that the principal obligation was owed by Mongoose to Redowood, and was not as certain “as to whether there was the same clear-cut obligation due by ASXP to [Redowood]”: p 111. Mr Ralph was of the view that Mongoose had not fulfilled all of its obligations. Mr Ralph was also of the view that Mongoose “should be the First Defendant”: p 112.

(8) On 23 April 2003 (pp 129-131 of Exhibit “D”) Mr Gye wrote to Messrs Linegar and Grant relating what had occurred at the meeting. The letter contains inter alia the following (“ASXP” is a reference to ASX-Perpetual):

“Mr Gray has the very firm suspicion that the HDY letter is an untruthful rationalisation in an attempt to avoid ASXP/Mongoose having to “cough up the money.” In simple language, the most that HDY can say is that the SRN is wrong. Everything else is correct.”

and

“We went through the Statement of Claim and discussed the relative responsibilities between Mongoose and ASXP. We were concerned about the prospect of being successful against Mongoose and having ASXP say that they were only acting as an agent and therefore were not responsible to Redowood, and separately had no contractual obligation to Redowood.
Position of ASXP
It is proposed that we sue Mongoose in the first instance. If they believe that they are not liable, then they will say that it was not their responsibility, in which case we will then have to join ASXP.
Costs Orders
If we sue Mongoose, we have a direct contractual relationship. If we join ASXP and they are successful (as against Redowood), then we will ask for a “Bullock Order”, which means that any costs that Redowood are liable for to ASXP, Redowood would seek indemnity from Mongoose. ”
[emphasis added]

(9) The summons against Mongoose was issued on 6 May 2003.

(10) By letter of 14 July 2003, Mr Gray offered his views on the statement of Mr Grant, the documents, and what had been said by ASX-Perpetual representatives at the meeting. Mr Gray analysed what had occurred including ASX-Perpetual’s use of the Anaconda register and the assumption by ASX-Perpetual that the rights acceptance form related to the prior acceptance form regarding another parcel of rights and the failure of ASX-Perpetual to check. He then said (p 162):

“It follows from this belief that the ASX-Perpetual contention is not that Redowood’s acceptance of the Mongoose rights offer did not comply with the Mongoose rights offer requirements, but that by using the same SRN number in respect of the newly-acquired 55 million rights, Redowood exposed an error in the ASX-Perpetual use of the SRN numbers in processing the rights acceptances, namely that the ASX-Perpetual system did not allow for existing Anaconda rights holders to first accept the Mongoose offer in respect of their existing rights and then acquire more rights and accept the Mongoose offer in respect of the newly-acquired rights also.
I do not see why the fact that the ASX-Perpetual processing system did not recognise this possibility renders invalid Redowood’s acceptance of the Mongoose offer in respect of the 55 million rights acquired on-market.”

(11) On 23 July 2003 Mr Gye in a memorandum said that he had reviewed the issues that had arisen from the meeting with ASX-Perpetual. In relation to conduct of ASX-Perpetual he wrote (p 173):


“7. It may be correct to argue that ASX Perpetual had done nothing wrong, but that defence is not available when ASXP issued the new Rights Acceptance Form substantially completed to BG.

8. You have the issue of Mongoose using the SRNs when these should not have been available according to the Business Rules.

9. It is interesting to note in the meeting that they are suggesting that the register was provided by a “third party”. This may well mean that a shareholder obtained a copy of the register, which was issued with the SRN numbers. If this is the case, then it makes it very hard for Mongoose/ASXP to suggest that the identifiers for fraud protection purposes.”

(12) On 13 October 2003 Mr Gray reviewed the statements of Mr Hogben and Miss Cross and in a memoranda commented thus on ASX-Perpetual (pp 183-4):

“It appears to me that the critical issue is;
(i) The Mongoose offer document did not require an accepting rights holder to nominate [an] SRN in his rights acceptance form;
(ii) Mr Grant’s error in copying Redowood’s original SRN onto the rights acceptance form for the 55 million shares did not prevent ASX Perpetual correctly identifying Redowood as the intending accepting party;
(iii) ASX Perpetual knew that Redowood had purchased the 55 million rights on the market on 6 February 2003 (because Mr Grant sent a copy of the Buy contract note);
(iv) ASX Perpetual assumed that the 55 million rights were part of the 65,087,000 rights in respect of which Redowood had accepted the Mongoose offer on 10 February 2003;
(v) This assumption was made without any attempt to verify the true position with Mr Grant and when the 55 million rights were originally recorded by ASX Perpetual (on the second rights acceptance form sent to Mr Grant) as being in Mr Grant’s own name.
My view on this material is that there was a valid acceptance by Redowood of the Mongoose offer and that the “security check” which ASX Perpetual undertook (to avoid multiple acceptances in respect of the same rights) was defective in that it failed to trigger a realisation that there may have been more rights held by Redowood by 13 February than were recorded on the ANL SRN register dated 13 February 2003.”

26 From the file it is clear that originally the intention was to sue ASX-Perpetual, that later Mongoose was added, and that by the time proceedings were issued a decision had been made to sue Mongoose and join ASX-Perpetual if Mongoose did not accept liability.

27 The cross-examination of Mr Gye was thorough and vigorous and it was put to Mr Gye forcefully on a number of occasions that his affidavit of 8 March 2006 was entirely false evidence. He was invited to retract that evidence but would not do so. A number of his explanations for why he had written things in the documents were shown by subsequent cross-examination to be inaccurate, and on a number of occasions his explanations did not sit at all comfortably with the contents of his letters and memos (see T21.51-22.32; [25](8) above; T24.5-25.1; T25.2-21; T25.1-27). Mr Gye, on a number of occasions, referred to advice from Mr Gray implying that it contained a view that there was insufficient material upon which to launch a case against ASX-Perpetual (T20.35), but he pointed to no document nor gave evidence or details of any such conversation, rather, putting it at its highest that counsel said to him “you do not have any evidence as to what was the internal workings of ASXP”: T 22.30, but see also T28.16-24. There is no letter or memorandum or note in which Mr Gray expresses or is recorded as expressing a view that there was insufficient basis for joining ASX-Perpetual – and there is material which I have set out earlier to the opposite effect.

28 Whilst Mr McGrath did not shrink from putting to Mr Gye and the Court that Mr Gye’s affidavit of 8 March was a fiction, as I think he was entitled to submit, I need say no more than that having regard to the written material and the cross-examination, I am not satisfied that the reason for the failure to join ASX-Perpetual was lack of knowledge of what occurred in the office of ASX-Perpetual on any element of the claim now brought by Redowood, or an inability to provide a s 198L certificate.

29 The contents of Mr Gye’s file leave open the possibility that ASX-Perpetual was not joined because:

(1) ASX-Perpetual’s response and/or the expert opinion received induced some doubt about the strength of the case against ASX-Perpetual either standing alone or in comparison to the claim against Mongoose;

(2) Mr Gray and/or Mr Gye had such strong views of Mongoose’s liability for what occurred that they decided that it was not necessary for Redowood to join ASX-Perpetual;

(3) Mr Gye forgot that he had advised the client (by his letter of 23 April 2003) that if Mongoose did not admit liability for ASX-Perpetual’s acts and omissions, then ASX-Perpetual should be joined;

(4) the Mongoose defence was not interpreted as denying responsibility for the actions of ASX-Perpetual.

30 The contents of the letter of 14 July 2003 from Mr Gray (see [25](8) above) and Mr Gye’s note of 23 July 2003 seem to me to be quite inconsistent with (1) and Mr Gray’s views as expressed or recorded in (1), (8) and (11) and inferentially in the notes of Mr Gye’s meeting with Mr Gray on 23 April: p 127 of Exhibit “D”. Which of these possibilities and any other possible reason alone or in combination is the real reason for the non-joinder of ASX-Perpetual is of no present importance, nor does it matter that commercial reasons might have encouraged the non-joinder of ASX-Perpetual at the time because none of these reasons were the reasons put forward by Redowood (through Mr Gye).

31 In Port of Melbourne Authority v Anshun Pty Limited (1981) 147 CLR 589, a dockworker injured by operation of a crane successfully sued the Authority as owner of the crane and Anshun as hirer. Responsibility was apportioned 90% to the Authority and 10% to Anshun on the Authority’s cross claim for contribution. Subsequently, the Authority brought a claim on an indemnity given by Anshun to the Authority and the claim was rejected. The High Court agreed with the rejection: judgment on the second basis (for 100%) would be inconsistent with the earlier judgment for 10%, and it was unreasonable for the Authority not to have brought its claim for indemnity in those proceedings. Reference was made, in coming to that view, to the words of Sir James Wigram VC in Henderson v Henderson (1843) 3 Hare 100 at 115; 67 ER 313 at 319:

“Where a given matter becomes the subject of litigation in, and of adjudication by, a Court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time.”

32 An important passage in Anshun is that found at 602-3:

“In this situation we would prefer to say that there will be no estoppel unless it appears that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it. Generally speaking, it would be unreasonable not to plead a defence if, having regard to the nature of the plaintiff’s claim, and its subject matter it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in the one proceeding. In this respect, we need to recall that there are a variety of circumstances, some referred to in the earlier cases, why a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings, eg expense, importance of the particular issue, motives extraneous to the actual litigation, to mention but a few: see the illustrations given in Cromwell v County of Sac [(1876) 94 US 351 at 356-7].”

33 Justice K R Handley, in his article “Res Judicata: General Principles and Recent Developments” (1999) 18 Aust Bar Rev 214 at 219, categorised Anshun estoppel as one of four species of res judicata, the three others being res judicata, issue estoppel and merger. Mr McGrath expressly eschewed any reliance on any of the other three categories and he accepted that ASX-Perpetual was not a privy of Mongoose. In his article, Mr Justice Handley described the doctrine as based on the Court’s “extended res judicata doctrine” and one which “is based on the court’s inherent jurisdiction to prevent abuse of its process by proceedings which are vexatious, that is unreasonable. It is not necessary for this purpose to establish identity of parties or privity.”

34 In “The Doctrine of Res Judicata”, (3rd ed) of which Mr Justice Handley is the author, it is stated at para 443 that Anshun estoppel can operate where defences of merger, cause of action and issue estoppel are not strictly available. The same author has again stated that Anshun applies where parties or causes of action are different: Justice K R Handley, “Anshun Today” (1997) 71 ALJ 934, Application of his approach can be seen in Rippon v Chilcotin Pty Ltd (2001) 53 NSWLR 198; [2001] NSWCA 142, discussed below.

35 ASX-Perpetual asserts that there is such an overlap between the case that is now mounted by Redowood against it, and that which was heard and determined in the Mongoose proceedings, that it was unreasonable for Redowood not to have joined ASX-Perpetual as defendant in the Mongoose proceedings, even more so given that Mongoose had joined ASX-Perpetual as a cross defendant.

36 Redowood submits that the focus of the present case is quite different to that of the Mongoose proceedings. First, the case against ASX-Perpetual only arises because Redowood lost against Mongoose. Second, there was no claim in negligence against Mongoose, and the test for whether Mongoose was estopped from denying the existence of a contract even though based on the same conduct of ASX-Perpetual, is not the same.

37 Mr Gray submitted that Anshun is normally applicable only between the same parties – there have been only three cases, he submitted, in which it was applied against a non-party and none of those cases have any similarity to the situation here. I shall deal with those cases below.

38 Redowood also contends that it could not have commenced proceedings against ASX-Perpetual until it learnt through the process of the Mongoose proceedings what had transpired in the offices of ASX-Perpetual and that no certificate under s 198L could be issued by the solicitor in the absence of that knowledge. It is in this context that Mr Gye’s evidence was relied upon.

39 Redowood’s claim in negligence against ASX-Perpetual has two limbs to it in the statement of claim. First there is a claim of negligence in not informing Redowood that the Rights Acceptance Form would not be a valid and effectual acceptance of the Mongoose Rights Offer (see para 14 of the statement of claim). Second, there is a claim (in para 17 of the Statement of Claim) that ASX-Perpetual owed Redowood a duty to take all reasonable care to:

(a) ensure that the Buy Contract Note and Rights Acceptance Form were linked together in a way which made it clear that Redowood had accepted the Mongoose Rights Offer effectually;

(b) make any enquiry of Redowood if in any doubt;

(c) to notify ASX-Perpetual if a decision was made that there was no valid acceptance.

(I have paraphrased the contents of para 17.)

40 I shall refer to the first limb as the negligent misinformation point and the second point as the failure to act point. The two points are not entirely discrete but para 14 of the Statement of Claim seems to focus on the position as at the time the documentation was sent out by ASX-Perpetual whilst para 17 seems to focus on the position when the documentation was received back from Redowood.

41 The three cases in which Anshun has been held available against a person who was not a party to the earlier proceedings are Rippon v Chilcotin Pty Ltd (2001) 53 NSWLR 198; [2001] NSWCA 142, Asher v Secretary of State for the Environment [1974] Ch 208, and Hunter v Chief Constable of the West Midlands Police (Birmingham Six case) [1982] AC 529; [1981] 3 All ER 727. Asher and Hunter are quite different cases to Rippon.

42 In Rippon v Chilcotin Pty Ltd (2001) 53 NSWLR 198; [2001] NSWCA 142, Chilcotin sued a firm of accountants who had prepared accounts for a company that had sold its business to Chilcotin. Chilcotin had brought proceedings against the vendor and covenantors in the Supreme Court alleging breach of contract and breach of s 52 of the TPA by reason of the 1991 accounts prepared by Rippon, a firm of accountants. Brownie J held in favour of Chilcotin on the breach of contract claim, and dismissed the action because he was not satisfied the purchasers had been misled or deceived. Chilcotin (and related persons) then commenced proceedings in the District Court against Rippon, alleging negligent misrepresentation based on the accounts prepared by Rippon of 1988, 1989, 1990 and 1991. The District Court rejected the motion of Rippon to strike out the claim.

43 Handley JA (with whom Mason P and Heydon JA (as he then was) agreed) analysed the claims, first between Chilcotin and the vendors, and held that Chilcotin could not have brought fresh proceedings against the vendors based on negligent misrepresentation in respect of the 1988, 1989, 1990 or 1991 accounts. He then said (emphasis added):

“[20] The purchasers could have been expected to bring forward any claims against the vendor based on the earlier figures so that all relevant issues could be determined in the one proceeding. Moreover a judgment in favour of the purchasers based on the earlier figures would conflict with the judgment in favour of the vendor based on the 1991 figures because the judgments would declare inconsistent rights in respect of the same transaction ( Port of Melbourne Authority v Anshun (at 603-604)).

[21] The judgment in favour of the vendor on the cause of action for misleading and deceptive conduct created a cause of action estoppel against any claim against the vendor for negligent misrepresentation: see Trawl Industries of Australia Pty Ltd (In liq) v Effem Foods Pty Ltd (1992) 36 FCR 406 at 418-422. Accordingly Brownie J's decision barred all causes of action against the vendor based on the representations in annexures A and D.

[22] The purchasers could have included their claim against the accountants for negligent misrepresentation, based on the 1991 figures, in their Supreme Court proceedings. They knew that the figures came from the accountants and there would have been common issues of reliance, falsity and damage. If the claims based on the earlier figures were not worth pursuing against the vendor they were not worth pursuing against the accountants either.

[23] In those circumstances it could fairly have been said, in the language of the joint judgment in Port of Melbourne Authority v Anshun (at 602), that the claims against the accountants were so relevant to the subject matter of the first action that it was unreasonable for the purchasers not to rely upon them in that action: compare Morris v Wentworth-Stanley [1999] QB 1004 at 1011, 1017.
[24] Counsel for the appellant did not contend for an Anshun estoppel, but the fact that the present claim could, and perhaps should, have been included in the Supreme Court proceedings, emphasises the close connection between the two proceedings and is relevant in considering whether the present action is an abuse of process.

[25] The vendor and the covenantors might have raised cross-claims against the accountants for damages for professional negligence and negligent misrepresentation to cover any liability to the purchasers. The accountants would then have been parties to the proceedings and entitled to the benefit of res judicata estoppels arising from the judgment of Brownie J: see Sandtara Pty Ltd v Abigroup Ltd (1997) 42 NSWLR 5. Those estoppels would have been a complete answer to these proceedings.

[26] The vendor now has no liability to the purchasers for misleading and deceptive conduct or negligent misrepresentation for which it could claim indemnity from the accountants. Its success in the Supreme Court proceedings thus operated for the benefit of the accountants and this further emphasises the close connection between the two proceedings.
[27] The issues of duty and breach by the accountants did not arise in the earlier proceedings. The judge said that the negligent representations were "different although similar" to those previously relied on because the purchasers now relied on the earlier figures. This would not avail the purchasers in respect of the 1991 year and in my judgment the accountants would be entitled in any event to have that part of the statement of claim struck out as an abuse of process. However the addition of the earlier years is mere camouflage, a distinction without a difference, because the purchasers could not be bothered suing the vendor for those years and are now barred from doing so by an Anshun estoppel.”

44 In Asher v Secretary of State for the Environment [1974] Ch 208, the English Court of Appeal affirmed the decision of Megarry J at first instance on the basis that the plaintiff’s case disclosed no reasonable cause of action and on the basis that it was vexatious and an abuse of process. The plaintiffs were a group of urban district councillors who were held liable by determination of a district auditor for a loss of rent due to negligence and misconduct in deliberately refusing to follow the provisions of the Housing Finance Act 1972. The plaintiffs appealed to the High Court against the decision of the district auditor to impose a surcharge pursuant to a legislative (and limited) right of appeal but having lost that case before the High Court, did not appeal from that decision. The plaintiffs then commenced proceedings against the Secretary of State alleging that his direction to the district auditor was of no effect. Megarry J struck out the claim on the basis that it disclosed no reasonable cause of action because no absence of good faith was asserted and that it was vexatious against the district auditor. The second ground is the only ground relevant for present purposes. Lord Denning MR (with whom Orr LJ expressly agreed) dealt with the point at 222E-F:

“I think these proceedings are vexatious. The councillors have already had their full say against the surcharge. They appealed to the Divisional Court, who upheld it [1973] 1 WLR 1412. On that appeal the Divisional Court could and would have considered any points which the councillors wished to make, including any which went to the validity of the extraordinary audit. The councillors could then have attacked the direction made by the Secretary of State, alleging that it was improper. If they had done so, the court would no doubt have made the Secretary of State a party and had the matter thrashed out. But the councillors did not attack it then. They could have appealed to this court and raised it here. But they did not do so. Not having raised it in those proceedings, I do not think they should be allowed to raise it now in these proceedings. Strictly the matter is not res judicata, but these courts have ample power to prevent any abuse of their process. These proceedings are, in my opinion, an abuse.”

45 The district auditor was joined as second defendant in the second proceedings. Orr LJ put the focus on it being vexatious as against the district auditor. Lawton LJ said at 228 that:

“any contention, which, if valid on the facts, would have justified the Divisional Court quashing the surcharge could have been put forward in the appeal … No such contention was put forward in the appeal. As it could have been, the plaintiffs cannot now bring another action so as to get a second chance to do what they omitted to do in the appeal: see Henderson v Henderson (1843) 3 Hare 100, 114, 115.”

As to the argument that this would have been impracticable because the Secretary of State was not a party to the appeal:

“This difficulty could easily have been overcome by the court asking him to appear.”

In Hunter v Chief Constable of the West Midlands Police (Birmingham Six case) [1982] AC 529, Hunter claimed to have been assaulted by police following his arrest in connection with a terrorist bombing in Birmingham. The Constables sought to have Hunter’s claim against them struck out as an abuse of process, which application at first instance was refused by Cantley J. On appeal the English Court of Appeal unanimously held that the proceedings should be dismissed, which decision was unanimously upheld by the House of Lords (Lord Diplock, with whom Lords Russell, Keith, Roskill and Brandon agreed). Lord Diplock preferred the approach of Goff LJ (who had seen the case as one not characterisable as res judicata but rather as abuse of process). Hunter (and his accomplices) had claimed at their trial that confessions made had been obtained by physical duress. The trial judge had, after eight days of hearing on the voir dire, found that there had been no assault and the confessions made went to the jury. There was little evidence against Hunter beyond the confession and the jury were directed that if they were inclined to the view that the confessions might have been obtained by violence they should reject the confessions as worthless and acquit the defendant. The jury found Hunter and his accomplices guilty and they were all sentenced to life imprisonment.

46 Lord Diplock described the matter thus:

“The abuse of process which the instant case exemplifies is the initiation of proceedings in a court of justice for the purpose of mounting a collateral attack on 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.”

He held that the receipt of new evidence not available at the time of the original proceedings in which the matter was determined could be a reason to depart from the general policy (of not permitting collateral attack on a prior decision of the Court) but that the new evidence must be such as “entirely changes the aspect of the case” where the attack is on a court of coordinate jurisdiction (ie the trial judge’s decision on the voir dire) (p 545) which test was not satisfied here.

47 Whilst Hunter demonstrates that abuse of process can apply even where there is no uniformity of parties (the first trial was a prosecution, the second civil proceedings), I do not think it is relevant to the present situation. I think Asher is also somewhat removed because the district auditor was a defendant in both proceedings and the issue thrown up in the second proceedings was directly relevant to the liability imposed on the councillors.

48 In Hunter, Lord Diplock (and Goff LJ in the Court of Appeal) cited with approval the words of Lord Halsbury in Reichel v Magrath (1889) 14 App Cas 665 at 668 and Smith LJ in Stephenson v Garnett [1898] 1 QB 677 at 680-681.

49 Reichel concerned an attempt to raise a defence to a claim by the new vicar to be able to use the vicarage that had in proceedings between the defendant and his Bishop been determined adversely to him, namely that his resignation was ineffective. Lord Halsbury LC (with whom the other members of the House agreed) said at 668:

“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.”

50 Stephenson was a similar case but involved the same parties (there had been a finding by a Court that there had been a misrepresentation by the defendant as to his means inducing a reduction of costs). Reichel and Stephenson are probably best treated as res judicata or issue estoppel cases: see Spencer Bower at paras 231 and 445 dealing with Reichel as a res judicata case.

51 In Cleary v Jeans [2006] NSWCA 9, the NSW Court of Appeal dealt with a res judicata claim in the following circumstances. Cleary had sued the Commonwealth Bank, asserting misleading and deceptive conduct and seeking to set aside a guarantee given by Jeans in respect of a company that was involved in a real estate development. The bank cross claimed and the trial judge, Sackville J in the Federal Court, entered judgment against Jeans for $4.7 million. In the course of the hearing, Jeans had sought unsuccessfully to withdraw an admission that the guarantee had been executed by him. Jeans’ appeal to the full Federal Court was dismissed.

52 Jeans then commenced proceedings in the Supreme Court against Mr Cleary, his former bank manager, claiming that Cleary had purported to witness his signature on the guarantee when in fact he, Jeans, had not signed it. Cleary sought dismissal of the proceedings on the basis of issue estoppel, Anshun estoppel or abuse of process. Mathews AJ rejected all three grounds: Jeans v Cleary [2004] NSWSC 1245. The issue estoppel was rejected on the basis that Cleary was not a privy of the Bank and there was no appeal from that conclusion.

53 Cleary appealed to the Court of Appeal in relation to the other two conclusions. Handley JA (with whom Young CJ in Eq agreed) dismissed the appeal. Handley JA held:

“[23] The fact that the respondent has been held liable on the basis of an estoppel in one proceeding does not prevent him relying on the truth against a different party in other proceedings, particularly where the plaintiff’s liability in the first proceedings was a result of his reliance on a fraudulent misrepresentation by the person sued in the later proceedings.”

54 He pointed out at [24] that the principle is not limited to cases of fraud and said:

[25] Proceedings to recover a loss incurred as a result of a judgment in earlier proceedings are competent where the plaintiff alleges that the adverse judgment was the result of the defendant’s breach of duty.

55 He held that the claim against Cleary was not a collateral attack on the judgment of the Federal Court. Young CJ in Eq essentially agreed with Handley JA. Bryson JA was of the view that Jeans’ claim against Cleary was a collateral attack on the Federal Court’s decision. To succeed against Cleary, Jeans would have to establish that he did not in fact execute the guarantee, and was not in fact liable to the Bank when the Federal Court has found he was liable on the guarantee.

56 Bryson JA analysed Jean’s evidence about execution of other documents and failure to appreciate that his signature had been forged, even swearing in the Federal Court that he had executed the guarantee. Bryson JA at [54] categorised Jeans’ claims as:

“in the realm of the fantastic and has no claim to be adjudicated. The manner in which, according to Mr Jeans’ evidence in the Federal Court, he conducted the Federal Court proceedings and came to realise what had occurred after repeatedly asserting and averring to the contrary effect, further demonstrates the already clearly fantastic character of the allegations. It would be an abuse of power to require Mr Cleary to go to trial and answer such a fairytale.”

57 Bryson JA at [28]-[38] had earlier referred to the propositions set out by Morritt VC at 16 [37] of Secretary of State for Trade and Industry v Bairstow [2004] Ch 1; [2003] EWCA Civ 321; his Honour at [45] then quoted the following passage from Bairstow:

“’[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.’”

58 At [55] Bryson JA said that it would be manifestly unfair to Cleary to allow Jeans to litigate notwithstanding the course taken by Jeans earlier. To permit it would be “scandalous and would tend to bring the administration of justice into disrepute”, and the Court should “not require Mr Cleary to deal with or to answer so fantastic an allegation or so radical a reversal of position”.

59 Importantly, at [10] Handley JA indicated that but for the allegation of fraud he, like the trial judge, would have enforced an Anshun estoppel or dismissed the proceedings as an abuse of process, confirming that Anshun is not limited to a case against the same party as that in the first proceedings.

60 Cleary is different to the present case because it was Jeans’ case that Cleary’s conduct had induced him to make an admission in the Federal Court proceedings which on his case he should not have made. Thus the outcome of the proceedings was directly linked to the conduct of which complaint was made. Here Mongoose had refused to treat Redowood as having rights to receive money from it before any proceedings had been instituted. In a sense the only purpose of the proceedings against Mongoose so far as the claim against ASX-Perpetual is concerned, would have been to establish that Mongoose was not liable to Redowood had ASX-Perpetual asserted that Mongoose was liable – which it had not done: see p 98 of Exhibit “D”.

61 In Zavodnyik v Alex Constructions Pty Ltd [2005] NSWCA 438, proceedings had been commenced by a builder in the Fair Trading Tribunal seeking to recover a large amount for contractual variations. When the building work commenced the builder was not licensed but he subsequently obtained a licence. The builder asserted a contract in relation to each variation (he being licensed at the time of the variations). Subsequently following legislative changes to the Tribunal the builder amended his claim to include the original contract sum relying on a newly introduced legislative provision that he contended overcame his problems due to lack of registration as a builder and s 10(3) of the Home Building Act 1989. An amendment was sought and granted but in a context where it was agreed that all that would be argued on the more extensive amount was that s 27(3) of the Fair Trading Tribunal Act 1998 and the fact of subsequent registration overcame the absence of registration but not on a Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 restitutionary quantum meruit claim: para 18. The Tribunal rejected the builder’s claims and awarded the owner $321,000 on his cross-claim. The builder sought a re-hearing in the Tribunal which was refused and sought to have the decisions quashed by way of prerogative relief in the Supreme Court but those proceedings were dismissed.

62 The builder then issued a claim in restitution or alternatively quantum meruit, which came before the District Court (following transfer). Application was made to strike out the Statement of Claim but that application was rejected, on the basis that the causes of action sued on in the Tribunal and the District Court were “separate and distinct” (at [21]) and that the merits of the builder’s claim had not been adjudicated on by the Tribunal.

63 The Court of Appeal (Handley JA with whom Mason P and Latham J concurred) upheld the appeal both on the basis of cause of action estoppel and Anshun. So far as the cause of action estoppel was concerned emphasis was placed on Trawl Industries of Australia Pty Ltd (in liq) v Effem Foods Pty Ltd (1992) 36 FCR 406. So far as Anshun was concerned, Handley JA said at [40]:

“In this case there is a substantial if not total overlap in the facts underlying both claims, and the amount now sued for was comprised within the earlier claim. There is therefore every reason to require that both be litigated at the one time, minimising costs and delay to both parties, and the demands on Court time. …”

64 In Bryant v Commonwealth Bank of Australia (1995) 57 FCR 287, it was held that the Anshun estoppel can apply to a claim that was unreasonably not brought by way of cross-claim. The CBA commenced proceedings in the Common Law Division against Bryant, seeking possession of premises mortgaged to the bank. CBA also sued Bryant, claiming that he was liable to the CBA on guarantees. Those proceedings were commenced in the Commercial Division but were transferred to the Common Law Division. Bryant filed defences and cross-claims in each proceeding. He alleged that CBA had breached its contract, that CBA had made misrepresentations which had led him to execute guarantees, he also asserted a fiduciary duty and alleged breach of that duty.

65 In the Supreme Court proceedings, Bryant abandoned the misrepresentation case and fiduciary case, noting that he had commenced proceedings in the Federal Court in relation to these other causes of action. Counsel for the CBA indicated that CBA would object to these other matters being raised in the Federal Court if they were abandoned in the Supreme Court proceedings. Levine J said the following words to him:

“Pausing there, if I allow you to make the amendment the effect is that in these cases you have abandoned them as issues in these cases. It is open to you to institute proceedings in the Federal Court and Mr Nicholas has made clear that, in so far as the bank is concerned, all those issues are still and will, even in that court, be vigorously alive [sic] and defended.”

66 Levine J held that Bryant was liable on the guarantee and on the mortgage.

67 In the Federal Court, CBA raised Anshun estoppel against Bryant. Einfeld J dismissed the claim (in which Bryant alleged misrepresentation, breach of duty of care, breach of fiduciary duty and breach of contract and provisions of ss 51AA, 52 and 60 of the Trade Practices Act 1974).

68 Bryant appealed to the Full Federal Court (Beaumont, Wilcox and Moore JJ) which dismissed the appeal: Bryant v Commonwealth Bank of Australia (1995) 57 FCR 287. The Full Court held that Anshun estoppel did apply to cross-claims as well as defences. The Court noted that Anshun will ordinarily not apply to cross claims (see Tanning Research Laboratories Incorporated v O'Brien (1990) 169 CLR 332) but where relief claimed in the second set of proceedings is inconsistent with judgment in the first this will make a difference (at 297G-298B):

“Questions of substantive degree may be involved; and in contrast to defences, many cross-claims may have little or no connection with the principal claim in the action; there may be no more than an identicality of parties. Where that is so, there may be no policy justification for forcing defendants to litigate their claims as cross-claims rather than as principal claims in separate actions in the forum of their choice. But, where, as here, a defendant’s claim is intimately connected with that of the plaintiff, in the sense that each arises, substantially, out of the same matters of fact, there is every reason to require that both be litigated at the one time; thereby minimising costs and avoiding the possibility of inconsistent judgments … ”
[emphasis added]

69 The matters sought to be raised by the appellant in this Court “were all matters connected with the claims made by the Bank”: at 298B.

70 The Court rejected the assertion that an alleged inadequacy of discovery in the Supreme Court justified his splitting of the case: at 298D. The Full Court then went on to consider the exception identified in Anshun and formulated in Yat Tung Investment Co Ltd v Dao Heng Bank Ltd [1975] AC 581 at 590 as:

“The shutting out of a ‘subject of litigation’ – a power which no court should exercise but after a scrupulous examination of all the circumstances – is limited to cases where reasonable diligence would have caused a matter to be earlier raised; moreover, although negligence, inadvertence or even accident will not suffice to excuse, nevertheless ‘special circumstances’ are reserved in case justice should be found to require the non-application of the rule.”

71 Bryant argued that he had been misled by what Levine J had said to him at the time. The Court rejected that on the basis of the lack of evidence that Bryant had in fact been misled by what Levine J had said to him (at 299) coupled with the timing of his abandonment.

72 In the Mongoose proceedings, no misleading and deceptive conduct was alleged against Mongoose; rather there was an alternative case of estoppel. I have no doubt that Redowood could not subsequently have advanced any case against Mongoose based on ASX-Perpetual’s alleged conduct and upon the basis that Mongoose was liable for the conduct of its agent (whether in tort or under s 52 or its analogues), once judgment was entered in favour of Mongoose in the Mongoose proceedings.

73 It is clear that at the time that proceedings were commenced against Mongoose, or at least once Mongoose filed its defence, Mongoose disputed the existence of a contract. It also, by particulars provided to Mr Gye’s office (see paras 7 and 8 to the affidavit of Ms Badman of 23 February 2006) asserted that to the extent that ASX-Perpetual’s conduct was said to give rise to liability, it was outside the scope of any agency power possessed by ASX-Perpetual: see pp 5-7 of Ms Badman’s affidavit. Redowood knew all that there was to know about its claims based on misleading and deceptive conduct: it knew what ASX-Perpetual had said to it (on its case), it knew that it had relied on those statements (on its case), and it knew that Mongoose was denying that it was liable in contract.

74 It has been said that the possibility of conflicting decisions is an important consideration in relation to Anshun estoppel, see Anshun at 602-3, and see Justice Handley in Spencer Bower, Turner and Handley, “The Doctrine of Res Judicata” (1996), 3rd ed, Butterworths, p 454. If Redowood succeeds against ASX-Perpetual on the basis of misrepresentation by ASX-Perpetual, that will not conflict with the conclusion by Einstein J and the Court of Appeal that there was no contract between Mongoose and Redowood.

75 If Redowood succeeds on its claim that ASX-Perpetual breached a duty of care owed to it, that will not conflict with the conclusion of Einstein J and the Court of Appeal that there was no contract.

76 There is a difficulty with the misrepresentation case in relation to the estoppel claim however, because the Court found that the representation found to have been made by ASX-Perpetual did not estop Mongoose from denying the existence of the contract, there being no causative connection between the representation made (and made by ASX-Perpetual) and the non-existence of the contract. Now Mongoose wishes to assert that what ASX-Perpetual said to it, ie the same conversations but now described as a misrepresentation, did cause Redowood to lose the benefit of a contract it otherwise would have obtained.

77 For the Court to now find that the same statements did have a causative effect in Redowood losing the benefit of a contract with Mongoose, would amount to an inconsistent finding of fact. If Ms Ooi gives evidence in the current proceedings there is also the possibility that, in contrast to the finding of Einstein J that certain statements were made by her, it may be found that they were not made.

78 There is a difficulty also with the claim in negligence when compared to the estoppel. In the Court of Appeal, Bryson JA discussed the question of the failure of ASX-Perpetual to deal with the SRN/HIN number and said at [148]:

“I regard it as very doubtful whether cl 8.4(d) would have authorised Mongoose its officers and agents including ASX-Perpetual to alter the SRN/HIN reference in the Acceptance Form so as to delete the reference number, or, on 13 February 2003, to insert I0030005244 instead of the reference which there appeared; but whether or not Mongoose and ASX-Perpetual were so authorised, they did not do so, and neither subcl 8.4(d) nor any other provision of the Rights Offer document obliged them to do so. Mongoose made no express or implied promise, contractual or otherwise, to correct errors. ”

79 To the extent that Redowood asserts that ASX-Perpetual was negligent in failing to pick up an error in the SRN, the Court of Appeal has said that it is doubtful that Mongoose and ASX-Perpetual were authorised to do so and rejected the notion that they were obliged to do so. Now Redowood asserts that ASX-Perpetual was obliged to do so.

80 In my view, there is a conflict in decisions if the Court in one proceedings says neither A nor agent B had any duty to C to do anything, but in a second set of proceedings says that B had a duty to C to do something.

81 Arguments were addressed by Mr Gray in relation to the consequence of accepting ASX-Perpetual’s argument. Mr Gray referred to cases of breach of warranty of authority, a species of action well recognised (see Collen v Wright (1857) 8 El & Bl 647; 120 ER 241; J D'Almeida Araujo Lda v Sir Frederick Becker & Co Ltd [1953] 2 QB 329; [1953] 2 All ER 288, “McGregor on Damages”, 17th edition, para 31.014) in which the plaintiff sues the agent on the basis of his failure against the third party. Reference was also made by me to cases in which a client sues his professional for breach of duty to him, leading to loss. Thus a client who has brought a case on a contract against a third party and loses, may then bring suit against the solicitor for an alleged breach of retainer (or duty of care) in drafting. Another example would be a claim by an insured against his broker in which he alleges that the insurer’s successful refusal to pay (due to the existence of an exclusion clause for example) is a consequence of poor advice from the broker.

82 So far as cases against professionals are concerned, I make these comments:

(1) It is not at all uncommon for an insurance broker, for example, to be joined as a defendant once the insurer denies liability. Solicitors who have drafted a contract that is the subject of dispute may also be joined, but one complication in such a case is that the solicitors may be acting in the proceedings against the third party (after disclosure of the conflict there may well be agreement that it is preferable to await the outcome of the principal proceedings, and hence little room for an Anshun argument to be raised).

(2) The broker and solicitor, and other professionals, are almost always the agent of the client. When the party suing the professional is not the client of the professional, the case is usually framed as one based on a negligent misstatement (eg in the valuation cases) rather than inaction constituting a breach of duty of care. This is not to say that beyond negligent misstatement there can never be a claim against a professional for breach of duty not based on negligent misstatement, but the scope of such a category would appear to be narrow indeed. Where there is such a claim, as in this case, there is no impediment to joinder of the type which exists in the solicitor/client cases.

(3) There is a class of cases where is it only by reason of the result in the first case that liability is established. Claims against solicitors and barristers (leaving aside immunity issues) for their allegedly negligent handling of a case is an example of that, as is Cleary (although not a negligence case); see also as another example Stanton v Callaghan [2000] 1 QB 75; [1998] 4 All ER 961 (a claim against an expert witness in relation to his conduct during the first proceedings).

83 The claim for breach of warranty of authority is not in that category and hence needs to be considered separately. A enters into a contract with B in which B represents himself as C’s agent. A sues C on the contract and C denies that B was his agent. The Court will hear evidence about B’s activities and determine whether or not B was C’s agent. If the Court determines that B was not C’s agent and B is not a party to that proceeding, then in separate proceedings a differently constituted court might find that B was C’s agent and there would be inconsistent findings. If A wants to argue that if C is not bound by the contract then B has breached a warranty of authority, then, in my view, the appropriate time to do that (barring some exceptional circumstance) is in the same proceedings as those brought against C, (assuming that C has denied B’s agency either in correspondence or in its defence to A’s claim). In such circumstances, should C be held liable, it is to be expected that the Court would make a Bullock or Sanderson order for C to pay A’s costs of joining B.

84 That such an order would be available in this case was specifically contemplated, correctly in my view, by Mr Gye and Mr Gray: see [25](7) above.

Conclusion

85 In my view, the claims brought against ASX-Perpetual are, to use the words of Handley JA in Rippon, “so relevant to the subject matter of the [proceedings]” against Mongoose that “it was unreasonable” for Redowood not to rely upon them in those proceedings. The fact that Redowood’s solicitor actually prepared a Commercial List summons against ASX-Perpetual alone on 25 March 2004 and sought instructions on 3 April from his client for funds to pay the filing fee on a claim against both ASX-Perpetual and Mongoose, only reinforces my view about that close connection.

86 I think that the approach of Handley JA in Cleary (see [58] above) reinforces that view, as do his Honour’s comments in Zavodnyik: see [61] above and the Federal Court in Bryant set out at [68] above, since although both those cases were not cases involving third parties, they point to a common thread. Leaving aside the question of conflicting judgments, the comments of Bryson JA in Mongoose, which I have set out at [76] above, further reinforce, in my view, the conclusion that to permit Redowood to now run a case that deals with very largely the same ground as was covered in the first proceedings is inappropriate. The fact that the Commercial List is designed for the speedy resolution of disputes such as this, lends extra weight to the notion that the Court’s resources should not be further burdened by a dispute over what occurred in respect of a rights offer in February 2003. The potential for conflicting judgments, at least in part, to which I have earlier referred, is a further discrete factor pointing to an Anshun estoppel. The fact that ASX-Perpetual was joined as a cross defendant and released from liability to Mongoose is a further relevant, although limited, factor.

87 It is clear that non-joinder of a third party in earlier proceedings can be justified, but in my view Redowood has failed to demonstrate that in this case there were reasons that justified the non-joinder of ASX-Perpetual.

88 Accordingly, the summons should be dismissed. I will hear the parties on the issue of costs.

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