Rojanasaroj v Rachan (No 2)
[2011] WASC 271
•30 SEPTEMBER 2011
ROJANASAROJ -v- RACHAN [No 2] [2011] WASC 271
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2011] WASC 271 | |
| Case No: | CIV:1707/2008 | 4 & 11 MARCH 2011 | |
| Coram: | CORBOY J | 30/09/11 | |
| 20 | Judgment Part: | 1 of 1 | |
| Result: | Application dismissed | ||
| B | |||
| PDF Version |
| Parties: | PANIDA ROJANASAROJ CHAI RACHAN |
Catchwords: | Practice and procedure Application to strike out defence and counterclaim Effect of prior compromise of claims Res judicata and Anshun estoppel |
Legislation: | Nil |
Case References: | Barclay Mowlem Construction Pty Ltd v Dampier Port Authority [2006] WASC 281; (2006) 33 WAR 82 Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502 Commonwealth Bank of Australia Ltd v White (No 4) [2001] VSC 511 D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; (2005) 223 CLR 1 Henderson v Henderson (1843) 3 Hare 100; 67 ER 313 Isaacs v The Ocean Accident & Guarantee Corporation Ltd (1958) SR(NSW) 69 Johnson v Gore Wood & Co (a firm) [2002] 2 AC 1 Macquarie Bank Ltd v National Mutual Life Association of Australia Ltd (1996) 40 NSWLR 543 Melbourne Money Pty Ltd v Bryant (1994) ASC 56-275 Minero Pty Ltd v Redero Pty Ltd (Unreported, NSWSC, 29 July 1998) Port of Melbourne Authority v Anshun Pty Ltd (No 2) (1981) 147 CLR 589 Rogers v The Queen (1994) 181 CLR 251 Rojanasaroj v Rachan [2010] WASC 63 Running Pigmy Productions Pty Ltd v AMP General Insurance Co Ltd [2001] NSWSC 431 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
CHAI RACHAN
Defendant
Catchwords:
Practice and procedure - Application to strike out defence and counterclaim - Effect of prior compromise of claims - Res judicata and Anshun estoppel
Legislation:
Nil
Result:
Application dismissed
(Page 2)
Category: B
Representation:
Counsel:
Plaintiff : Mr M F Holler
Defendant : Mr D C Rice
Solicitors:
Plaintiff : Friedman Lurie Singh & D'Angelo
Defendant : Griffiths Rice & Co
Case(s) referred to in judgment(s):
Barclay Mowlem Construction Pty Ltd v Dampier Port Authority [2006] WASC 281; (2006) 33 WAR 82
Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502
Commonwealth Bank of Australia Ltd v White (No 4) [2001] VSC 511
D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; (2005) 223 CLR 1
Henderson v Henderson (1843) 3 Hare 100; 67 ER 313
Isaacs v The Ocean Accident & Guarantee Corporation Ltd (1958) SR(NSW) 69
Johnson v Gore Wood & Co (a firm) [2002] 2 AC 1
Macquarie Bank Ltd v National Mutual Life Association of Australia Ltd (1996) 40 NSWLR 543
Melbourne Money Pty Ltd v Bryant (1994) ASC 56-275
Minero Pty Ltd v Redero Pty Ltd (Unreported, NSWSC, 29 July 1998)
Port of Melbourne Authority v Anshun Pty Ltd (No 2) (1981) 147 CLR 589
Rogers v The Queen (1994) 181 CLR 251
Rojanasaroj v Rachan [2010] WASC 63
Running Pigmy Productions Pty Ltd v AMP General Insurance Co Ltd [2001] NSWSC 431
(Page 3)
- CORBOY J:
The application and the result
1 The plaintiff is the mother of the defendant. At the commencement of these proceedings they were the registered proprietors as joint tenants in land located in Kent Street, Rockingham (the Property).
2 This action is the second set of proceedings between the parties concerning their respective interests in the Property. The first action was also commenced by the plaintiff (the First Action). In that action she sought orders for the partition of the joint tenancy and the sale of the Property.
3 The plaintiff applied for summary judgment in the First Action. The defendant successfully opposed the application, relying on an affidavit that he made in which he alleged that the plaintiff held her interest in the Property on trust for him.
4 The action was compromised at a mediation conference held shortly afterwards. The compromise provided for the defendant to purchase the plaintiff's interest in the Property. Orders were made dismissing the plaintiff's action.
5 The plaintiff alleges in this action that the defendant breached the agreement by which the First Action was compromised (the Compromise Agreement). She seeks specific performance of the Compromise Agreement, alternatively orders for the partition of the joint tenancy and sale of the Property.
6 The defendant denies that he breached the Compromise Agreement. Rather, he alleges that the plaintiff repudiated the agreement and that it has been terminated by his acceptance of her repudiation. He maintains that the Property should not be sold and that the plaintiff still holds her interest in the Property on trust for him. He counterclaims for a declaration to that effect.
7 The plaintiff now contends that the defendant is estopped from making those allegations and has applied to strike out parts of the defence. She also contends that the defendant cannot plead various matters that he alleges are material to whether the court should order specific performance, alternatively a sale of the Property under s 126 of the Property Law Act (WA) (PLA). Finally, she complains that there are
(Page 4)
- numerous drafting defects in the minute of proposed amended defence and counterclaim (the Minute) that the defendant wishes to have stand as his defence and counterclaim.
8 I have found that the defendant's proposed defence should not be struck out on the ground that the matters alleged do not disclose a reasonably arguable defence and cause of action or are otherwise an abuse of process. There are, however, several matters concerning the identification and pleading of the issues that arise in this action that should be further considered in a strategic conference. Those matters include the plaintiff's complaints regarding the drafting of the Minute. It is to be expected that the parties will endeavour to resolve those matters according to the case management objectives prescribed in O 1 r 4A and r 4B of the Rules of the Supreme Court 1971 (WA) and keeping in mind the observations of the Chief Justice in Barclay Mowlem Construction Pty Ltd v Dampier Port Authority [2006] WASC 281; (2006) 33 WAR 82.
The background to the application
9 The plaintiff commenced the First Action against the defendant in July 2006 seeking a declaration that the joint tenancy of the Property had been severed and an order for the sale and partition of the Property pursuant to s 126 of the PLA. She applied for summary judgment. The defendant stated in his affidavit in opposition to the application that:
(a) He came to Australia with his parents from Thailand in 1988. His father often returned to Thailand for extended periods on business. The defendant looked after his mother during those trips.
(b) In 1993 his parents purchased the Property with the intention that the defendant would live with them. His parents purchased the Property with funds obtained from the sale of a property in Thailand.
(c) He lived in the Property with his parents and continued to look after them, particularly his mother when his father was away on business. His father told him on various occasions that he would eventually own the Property. That was said in response to complaints by the defendant that living at the Property was affecting his employment prospects and that he wished to move elsewhere. He continued to live with his parents and care for his mother during his father's absences as a result of those statements.
(Page 5)
- (d) In about late 1999 he paid a loan of approximately $23,000 that had been partly secured over the Property. He repaid the loan because of a promise made by his father that an interest in the Property would be transferred to him. His father's interest in the Property was transferred to him shortly afterwards so that he held the Property as a joint tenant with his mother.
(e) His father died in January 2002. Subsequently, there were disputes within the defendant's family that resulted in his mother leaving the Property in about September 2005. Attempts to reconcile with his mother had been unsuccessful.
(f) The effect of a partition and sale of the Property would be to take the Property away from him. Such an order would be contrary to his belief that he would eventually be the sole proprietor of the Property. However, he had offered to purchase his mother's interest in the Property despite that belief.
10 In his submissions in opposition to the plaintiff's application, the defendant contended that there was a triable issue as 'in essence, the defendant relies on the existence of a claim for the imposition of a constructive trust arising from the common intention of the parties, alternatively statements and representations to which, in the circumstances, give rise to an equitable proprietary estoppel'. It was further submitted that those defences 'would operate to prevent the plaintiff from asserting or exercising a legal right under s 126(1) [Property Law Act] in circumstances where the assertion or exercise of the right would constitute unconscionable conduct' (defendant's submissions for hearing dated 1 November 2006, pars 6 and 7; attachment DS1 to the affidavit of Dara Singh sworn 9 March 2011).
11 The summary judgment application was heard by Master Newnes (as his Honour then was) in November 2006. The Master dismissed the application as it raised issues of fact that had to be resolved before any determination could be made of the respective legal rights of the parties (see transcript of hearing on 8 November 2006 at ts 12 and 14).
12 The First Action was subsequently settled by the Compromise Agreement. The agreement was made at a mediation conference held on 11 December 2006. The defendant had not filed a defence by the time that the mediation conference was convened.
13 The Compromise Agreement provided for the joint tenancy of the Property to be severed and for the parties to hold their respective interests
(Page 6)
- in the Property as tenants in common in equal shares. It required the defendant to pay the plaintiff $400,000 for the plaintiff's interest in the Property and an additional amount of $80,000. The payment of those sums was to be made in two instalments. The first instalment of $300,000 was to be paid within 28 days of finance being approved and the balance was to be paid not later than the tenth anniversary of the Compromise Agreement. The defendant was given until 31 March 2007 to arrange finance, failing which the Property was to be sold and the proceeds divided between the parties. The defendant was to arrange for a mortgage over the Property to be discharged if there was a sale.
14 The Compromise Agreement also provided that the plaintiff's action was to be dismissed with each party to bear their own costs. An order was made by consent under O 43 r 16 of the Rules of the Supreme Court 1971 on 30 April 2007 dismissing the First Action.
15 The parties subsequently made a contract (the Sale Contract) dated 23 March 2007 for the sale of the plaintiff's interest in the Property to the defendant to give effect to the Compromise Agreement and a few days later the defendant advised the plaintiff that he had obtained finance to fund the acquisition of her interest.
16 This action (the Second Action) was commenced by writ dated 19 June 2008. The plaintiff alleges that the defendant has breached the Compromise Agreement by failing to settle on the Sale Contract. She further alleges that she has at all times been ready, willing and able to complete 'the terms of the Compromise [Agreement] and/or [the Sale Contract]'. She issued a notice of default in March 2008 under the Sale Contract but the default was not remedied. She claims the following relief:
(a) a declaration that the joint tenancy of the land was severed by the Compromise Agreement;
(b) an order that the Compromise Agreement be specifically enforced by the Defendant paying to the Plaintiff the amount of the first instalment of the purchase price for her interest in the Property and securing payment of the balance by either a second registered mortgage or an equitable mortgage or an equitable mortgage secured by a caveat;
(c) alternatively, an order for the partition and sale of the Property pursuant to s 126 PLA 'with the proceeds of sale to be divided between the parties equally and the Defendant is to discharge the
- mortgage and any other encumbrance on the Property at settlement from his half share of the proceeds of sale and pay $40,000 to the Plaintiff'.
17 The defendant filed a defence in October 2008. The plaintiff applied by summons dated 18 November 2009 for judgment on that part of her claim that concerned severance of the joint tenancy in the Property. She also applied in the same summons for orders striking out substantial parts of the defence and counterclaim as it then stood on the ground that they disclosed no reasonable defence or cause of action.
18 On 1 April 2010, Master Sanderson made an order declaring that the joint tenancy of the Land had been severed by the Compromise Agreement: Rojanasaroj v Rachan [2010] WASC 63. However, the Master made no order concerning the strike out application.
19 The plaintiff sought to have the balance of her summons determined after the matter had been entered into the CMC list contending that the outcome of the application would significantly impact on the factual and legal issues to be litigated at trial. I accept that the number of issues to be determined in these proceedings would be substantially reduced if the plaintiff succeeded in her application and that she ought to be permitted to bring the application regardless of the time limits that ordinarily apply.
20 The hearing of the plaintiff's application was conducted by reference to the Minute. The allegations made in the Minute can be divided into four parts. The first part (pars 4 to 27) defines the Compromise Agreement and the Sale Contract as a single agreement and alleges that:
(a) The defendant was ready and able to complete the sale of the plaintiff's interest in the Property on obtaining finance to fund the purchase in March 2007 but the plaintiff refused to settle on the sale until November 2007. The finance that the defendant had arranged was no longer available by that time or later when the plaintiff issued her notice of default.
(b) The plaintiff had breached the terms of the Sale Contract by failing to settle within a reasonable time after finance was arranged by the defendant. The defendant had been unable to maintain the finance arrangements as a result of that breach and it would be 'unjust and inequitable for the plaintiff to now demand a sale of the property'.
(Page 8)
- (c) It was an implied term of the Compromise Agreement and Sale Contract that the each party would act in good faith and do all things necessary to perform their obligations under each agreement. Further, that obligation was a condition precedent to the agreements and formed the basis upon which the defendant had entered into each of them.
(d) The plaintiff breached the Compromise Agreement and the Sale Contract by failing to do all things necessary for the performance of the agreements.
21 A number of further allegations are made about the consequences of those matters. There is some repetition in those allegations but the essence of what is pleaded is that the Compromise Agreement and the Sale Contract were terminated as a result of the plaintiff's breach; further or alternatively, the conditions precedent to the performance of the defendant's obligations under the agreements were not fulfilled.
22 The second part of the Minute (pars 27 and 28) pleads frustration of the Compromise Agreement and the Sale Contract.
23 The third part (pars 29 to 47 and 59 and 60) alleges matters that are relied on to counterclaim for a declaration that 'the plaintiff and the defendant hold their respective interest in the [Property] in trust for the defendant in law and equity pursuant to a constructive trust'. The trust is said to arise out of matters that occurred before the First Action:
(a) The Property was purchased in 1993 by the defendant's parents as joint tenants 'with the initial intention to hold the property for the benefit of the defendant'.
(b) A week prior to the acquisition of the Land, the defendant's father paid the sum of $107,000 to the defendant. On the same day, the defendant paid approximately $106,000 in part payment of the purchase price of the Property. His father contributed a further $30,000 towards the purchase price of the Property and in payment of stamp duty and settlement costs.
(c) The purpose of the payment made by the defendant's father to the defendant was to evidence 'for the future that [the defendant's] father was purchasing the property for him'. Further, it was pleaded that:
- [t]he defendant's father promised and declared to the defendant at the time of the purchase of the property that the defendant's father and mother were holding the property in trust for the defendant and that the defendant would live in and take care of the property and would also act as carer and custodian for the plaintiff while she was living in the property.
- (d) The defendant's parents 'promised and declared' to the defendant that ownership of the Property would pass to him 'on the basis that he would be carer for the plaintiff in the property'. The defendant's father 'informed and declared' to the defendant on other occasions that ownership of the Property would eventually pass to him.
(e) The defendant repaid a loan of $23,000 owed by the defendant's parents at his father's request. The defendant's father again stated at that time that the Property would eventually be owned by the defendant.
(f) The defendant cared for the plaintiff from 1993 to 2005 until the plaintiff ceased residing at the Property.
24 It can be seen that the facts alleged in this part of the Minute differ in some respects to the matters to which the defendant deposed in his affidavit in the First Action. However, the same claim is asserted: that the plaintiff held her in interest in the Property in trust for the defendant.
25 The fourth part of the Minute (pars 50 to 57) alleges that the defendant's claim to beneficial ownership of the plaintiff's share in the Property was 'revived' on the termination on the Compromise Agreement and the Sale Contract. It is further alleged that the plaintiff is estopped from pursuing the same relief in the Second Action as she claimed in the First Action but that the defendant 'asserts' his equitable interest in the plaintiff's share if she is entitled to prosecute a claim for orders under s 126 PLA. Finally, the Minute pleads various matters relied on to allege, in effect, that the court ought not to exercise any discretion under s 126 PLA to order a sale of the Property.
The plaintiff's submissions
26 The plaintiff filed two sets of written submissions. She contended in her first set of submissions that:
(Page 10)
- (a) By reason of the agreement to settle and dismiss the first action, 'any claims the defendant had up to that point merged in the settlement' (par 6).
(b) It was an abuse of process for the defendant to attempt to ventilate again assertions that had merged in the agreement to settle and dismiss the First Action, reference being made to Running Pigmy Productions Pty Ltd v AMP General Insurance Co Ltd [2001] NSWSC 431. In particular, Palmer J stated at [36] that
the category of abuse of process represented by 'Anshun estoppel', in so far as it is applicable to a plaintiff, is concerned with the situation which arises when that plaintiff prosecutes a cause of action to its conclusion by judgment or settlement and later that plaintiff … seeks to prosecute against the same defendant another cause of action which should reasonably have been prosecuted in the first proceedings.
(c) The defendant contended that the Compromise Agreement had been repudiated by the plaintiff rather than rescinded.
27 In her supplementary submissions, the plaintiff emphasised the extended operation of the doctrine of res judicata derived from Henderson v Henderson (1843) 3 Hare 100; 67 ER 313 and recognised by the High Court in Port of Melbourne Authority v Anshun Pty Ltd (No 2) (1981) 147 CLR 589. She further submitted that:
(a) Any issue that was raised in prior litigation and which was fundamental to a judgment pronounced in that litigation will be conclusively determined by the judgment.
(b) A judgment by consent, including a judgment dismissing an action, may be a res judicata, reference being made to Melbourne Money Pty Ltd v Bryant (1994) ASC 56-275.
(c) It was permissible to consider affidavits filed in prior proceedings to ascertain what was in dispute and determined by those proceedings, reference being made to Isaacs v The Ocean Accident & Guarantee Corporation Ltd (1958) SR(NSW) 69 and Rogers v The Queen (1994) 181 CLR 251.
(d) The termination of a contract operates prospectively. The defendant could not revive his prior claim to an equitable interest in the plaintiff's share of the property by alleging that the Compromise Agreement was repudiated by the plaintiff and he
- does not claim rescission. The parties would not be restored to their pre-contract position if the defendant established that the Compromise Agreement had been terminated by his acceptance of the plaintiff's alleged repudiation.
The defendant's submissions
28 The defendant filed three sets of submissions. The submissions substantially reflected the matters alleged in the Minute. In summary, he contended that:
(a) His claim to beneficial ownership of the plaintiff's share in the Property arising out of her promise to hold that share on trust for him did not merge in the Compromise Agreement.
(b) The plaintiff breached the Compromise Agreement by refusing or failing to settle on the sale within a reasonable time. He was entitled to terminate the agreement on that and other grounds.
(c) Alternatively, there were conditions precedent to the operation of the Compromise Agreement that were not performed so that the agreement did not 'come into effect and the parties are restored to their respective rights prior to the [Compromise Agreement]' (par 22).
29 In supplementary submissions the defendant contended, among other things, that only the plaintiff's claims in the First Action had merged in the judgment given that the judgment was for the dismissal of the action; there had been no determination in the First Action of the issues that he sought to raise in his defence and counterclaim in the Second Action and justice required that there be a trial of those issues; he had not been aware of the form of the consent judgment in the First Action and the terms of that judgment ought to have been limited (presumably, so as to preserve any claim that he wished to make concerning ownership of the Property); the causes of action in the First Action and the Second Action were different so that the doctrine of res judicata did not apply; the matters that he had raised in opposition to the plaintiff's application for summary judgment in the First Action did not form part of the facts necessarily decided by the judgment in the First Action; an Anshunestoppel did not apply where there had been no examination of the merits in the prior litigation and Master Sanderson had expressly left open for later determination the question of whether the Property should be sold when he declared that the joint tenancy should be severed.
(Page 12)
The plaintiff's position in the proceedings and the application
30 An odd aspect of the application is that it is the plaintiff who asserts that the defendant is estopped from now raising his claims notwithstanding that it was her action that was dismissed by the consent order made in the First Action. That does not necessarily mean that res judicata and its related doctrines do not apply. In Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502 the High Court observed that:
The fact that a judgment is entered by consent may on occasion make it hard to say what was necessarily decided by the judgment, especially where it is the defendant who wishes to bring an action at a later date … but the principle of res judicata holds good in such a case (508).
31 Nevertheless, what merges in the consent judgment made in the First Action and what issue estoppels may arise from that judgment are obviously shaped by the fact that it was the plaintiff's action that was dismissed.
32 The other aspect of the proceedings and the application that is striking concerns the relief claimed by the plaintiff. The Compromise Agreement provided for a payment to the plaintiff if the defendant obtained finance by 31 March 2007. The agreement also provided that the Property was to be sold if finance was not obtained by that date with the proceeds to be divided equally between the parties. As can be seen from the relief claimed, the plaintiff seeks specific performance of the Compromise Agreement on the basis that the defendant obtained finance by 31 March 2007. It is presumably for that reason that she does not seek specific performance of that part of the agreement that provided for a sale of the Property. She also does not seek specific performance of the Sale Contract.
33 The plaintiff further claims, in the alternative to specific performance, the same relief that she claimed in the First Action - partition and sale of the Property under s 126 PLA. That claim assumes that the Compromise Agreement is no longer capable of affecting the legal relations between the parties over the Property. The plaintiff's position is, apparently, that she may pursue the same claim that she made in the First Action if the Compromise Agreement is incapable of being enforced but that the defendant's claim that her share in the Property is held on trust for him has merged forever in the agreement notwithstanding that the agreement is unenforceable. The effect of that argument, if correct, is that the plaintiff may claim a partition and sale of the Property
(Page 13)
- and a distribution of the proceeds of the sale unaffected by any equitable interest that the defendant might have had in her share of the Property immediately prior to the Compromise Agreement. Further, the defendant is prevented from pleading matters that he contends are relevant to the question of whether the Property should be sold because his remedies are confined to whatever flows from the alleged breach of the Compromise Agreement whereas the plaintiff is free to disregard the agreement if her claim for specific performance fails - presumably, because her alternative claim is based on a statutory 'right' under s 126 PLA.
34 It would be surprising if the law countenanced that result. In my view, arguably it does not in the circumstances of this matter.
The policy underlying res judicata and the law of compromise
35 In Minero Pty Ltd v Redero Pty Ltd (Unreported, NSWSC, 29 July 1998) Santow J observed that the overlapping doctrines of res judicata, issue estoppel, Anshun estoppel and abuse of process reflect three related policy concerns: finality and litigation, the unfairness of being harassed twice for the same cause and the 'scandal' of conflicting judgments (and see D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; (2005) 223 CLR 1 on the significance of finality to the administration of justice. Those policy concerns are also reflected in the law relating to compromise: see Foskett D, The Law and Practice of Compromise (6th ed, 2005) 6-02; Johnson v Gore Wood & Co (a firm) [2002] 2 AC 1, 31 (Lord Bingham of Cornhill).
36 The operation of these doctrines is, of course, to deny a person access to the justice system to resolve a perceived dispute. Consequently, their application often requires a close analysis of the relevant circumstances notwithstanding the broad sweep of the underlying public policy. That, in my view, may impact on whether it is appropriate to consider in a summary application an argument that a party is estopped from pleading matters on the grounds of res judicata and/or a prior compromise. That will be so even though the appropriate remedy may be a stay of proceedings. As Warren J (as her Honour then was) observed in Commonwealth Bank of Australia Ltd v White (No 4) [2001] VSC 511:
As a matter of fundamental principle, an application for strike out or summary dismissal on the grounds that it does not disclose a cause of action will not be granted unless the claim is so obviously untenable that it cannot possibly succeed: Dey v Victorian Railways Commissioners (1949) 78 CLR 62, 91. These principles apply where the basis of the application for strike out or summary determination is issue estoppel or estoppel of the kind described in Anshun: see Co-ownership Land
(Page 14)
- Development Pty Ltd v Queensland Estates Pty Ltd (1973) 47 ALJR 519, 521-522; Triantafillidis v National Australia Bank Ltd (1995) V Conv R 54-536, 66, 366, 66, 371 (CA) [46].
The effect of a compromise
37 A compromise represents the end of the disputes from which it arose and the court will not permit the compromised issues to be raised afresh in a new action. The disputes are disposed of by the compromise: The Law and Practice of Compromise at 6-01 and 6-02.
38 Obviously, it is necessary for the court to determine the disputes that have been settled. It may consider a variety of materials for that purpose. The subjective intentions of the parties are, of course, irrelevant. However, an objective analysis of the 'factual matrix' within which the agreement was made may be undertaken to determine the object of the agreement and to resolve any ambiguity in its terms. It may still be necessary to undertake that analysis where the agreement or part of it is embodied in a court order.
39 In Johnson v Gore Wood,the House of Lords held that the policy expressed in Henderson v Henderson also applied where a prior action had been concluded by a compromise. The possibility that a party can be prevented from pursuing a claim in an action because the claim ought to have been made in an earlier proceeding that was compromised adds to the complexity of findings that must be made in determining what was truly disposed of by the settlement. Further, the court retains a discretion not to stay the second proceedings even if it is found that the point in issue was unreasonably omitted from the first proceedings: see for example, Macquarie Bank Ltd v National Mutual Life Association of Australia Ltd (1996) 40 NSWLR 543, 588 (Clarke JA, with whom Priestley JA agreed) (where the first action resulted in a judgment) and Johnson v Gore Wood (59) (Lord Millett) (where the first action was compromised). That is because the principle recognised in Henderson v Henderson and Port of Melbourne Authority v Anshun is concerned with preventing abuses of the court's processes. It is not a principle that operates by creating a true estoppel; that is, it is a principle of procedure concerning the proper administration of justice and not a matter of substantive law.
The effect of a breach of a compromise
40 The plaintiff's submissions assumed that a claim 'merges' in a compromise in the same way as a cause of action merges in a judgment so that the claim can never be revived by a subsequent action. Where the
(Page 15)
- compromise is breached, the innocent party is confined to its remedies in contract - at least, where rescission is not available to set aside the agreement so that the parties are restored to their original position. The passage cited from the judgment of Palmer J in Running Pigmy was then relied on to contend that those principles apply not just to a claim explicitly made in the compromised proceedings but also to any claim that ought to have been made in those proceedings.
41 However, a claim does not necessarily 'merge' in a compromise (that is, is discharged by the compromise) so that the innocent party is confined to its remedies on the contract if there is a breach. The effect of a breach of a compromise is explained in The Law and Practice of Compromise at 8-03 and 8-04:
… the usual consideration furnished in the context of a compromise is the promised or actual forbearance of one party to pursue a claim against another in return for some promised or actual act by the other. If the promised or actual forbearance to pursue the claim is construed as being in return for the promised performance of some act by the other party, such agreement will be regarded as one involving the immediate discharge of the claim. Where, however, the promised or actual forbearance is construed as being in return for the actual performance of some act by the other party, the claim foreborne will not be discharged until such performance takes place …
Where there is a clear and unconditional discharge, abandonment or release of a claim by one party in return for the promised performance by the other of a series of acts, that original claim can never be revived. Where the agreement involves merely the suspension of the claim pending the carrying out of the acts by the other party then the claim may not be lost forever. (emphasis added)
42 The primary question in this application is whether it is reasonably arguable (in the sense relevant to a strike out application) that the defendant's claim that the plaintiff held her share in the Property on trust for him was released in consideration for the promises made by the plaintiff in the Compromise Agreement or whether it was agreed that the claim would only be discharged on performance of the agreement. It is assumed in identifying that question that the defendant's trust claim formed part of the dispute that was compromised by the Compromise Agreement.
(Page 16)
Should the trust allegations be struck out?
The meaning and effect of the Compromise Agreement
43 The answer to the question posed in the previous paragraph depends on the parties' intentions objectively ascertained from the terms of the Compromise Agreement, the consent order made in the First Action and the surrounding circumstances. In my view, it is reasonably arguable that the defendant's claim was not unconditionally released and discharged by the Compromise Agreement and that the defendant should be permitted to pursue his counterclaim in this action.
44 I have reached that conclusion primarily because of the subject matter of the Compromise Agreement, the circumstances in which the agreement was made, the effect of the agreement according to the plaintiff's interpretation and the nature of her claim in each action. It is arguable that the parties intended that the defendant's claim to the plaintiff's share in the Property would only be discharged once the share had been finally disposed of either by the completion of a sale to the defendant or on a sale of the Property under the Compromise Agreement. At that point, the subject matter of any dispute over the ownership of the share was gone. The discharge of the claim would coincide with the 'destruction' of the subject matter of the dispute.
45 Further, on her case the plaintiff can pursue the same relief in the Second Action as she sought in the First Action, presumably because of the nature of the right conferred by s 126 PLA. On that analysis, the plaintiff's claim for a statutory sale of the Property can only be put to rest by a sale of her interest to the defendant or a sale of the Property. It is, in my view, reasonably arguable that the parties' intended that the defendant's claim to the plaintiff's interest in the Property would only be released when the plaintiff's claim for a sale of the Property was also 'extinguished'. If the plaintiff can be restored to her previous position in the event that the Compromise Agreement was not enforceable (or was terminated), then it must at least be arguable that the parties intended that the defendant would likewise be restored to his pre-compromise position in that event. In other words, the character of the plaintiff's cause that was compromised and dismissed in the First Action may be relevant to the intended effect of the Compromise Agreement.
46 The circumstances in which the Compromise Agreement was made, the subject matter of the agreement (the sale of an interest in land, as well as the compromise of the First Action), the relationship between the parties and the defendant's claim that the Property has a particular value to
(Page 17)
- him as the property that was acquired by his father following emigration to Australia are matters that are, in my view, relevant to the intended effect of the compromise. Those matters can only be explored through a trial.
47 I do not intend by those observations to express any view on the merits of the parties' arguments regarding the meaning and effect of the Compromise Agreement beyond accepting that the defendant's allegations are not so untenable that they should be struck out. There are obvious arguments that can be made on both sides of the issue.
48 The conclusion reached in this part of the reasons is sufficient to dispose of the plaintiff's application to strike out those allegations in the Minute that concern the defendant's claim that the plaintiff holds her share in the Property on trust for him. However, I will briefly comment on the other matters that were raised in the parties' submissions. Again, my comments are not intended to express a concluded view and I anticipate that the plaintiff will plead some of these matters by way of a reply and defence to counterclaim.
The extended operation of the Compromise Agreement
49 I would have allowed the defendant to pursue his claim that the plaintiff held her interest in the Property on trust for him even if I had concluded that the Compromise Agreement had unequivocally discharged the same claim made in the First Action. The plaintiff contends by reference to the principles in Henderson v Henderson and Port of Melbourne Authority v Anshun that the claim formed part of the dispute that was compromised by the Compromise Agreement and that it is an abuse of process for the defendant to again prosecute his trust claim. Again, I will assume that the defendant's trust claim formed part of the dispute that was compromised.
50 In my view, it would not be untenable for the defendant to seek to persuade the court that it should exercise its discretion to nevertheless allow him to pursue his claim in the particular circumstances of this matter. If the plaintiff can again seek a statutory sale of the Property, it is at least arguable that the defendant should be allowed to claim that he is the beneficial owner of the Property. Whether the court should exercise its discretion would be determined by matters that are similar to those that arise in relation to the ascertaining the meaning and effect of the Compromise Agreement and accordingly, are matters that need to be decided following a trial rather than summarily.
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The order dismissing the First Action
51 I initially thought that the fact that the First Action had been concluded by a court order could be significant for the determination of the plaintiff's application. However, on reflection I think that the correct focus is on the effect of the compromise and the fact that the order was made does not add much to the analysis. The reasons for that view follow. However, those reasons should not be taken as indicating that the plaintiff cannot plead issue and Anshun estoppels by reference to the order if she chooses. I have not reached a final view on the matter given the interlocutory nature of the application.
52 A judgment or order by consent is a res judicata: Handley K R, Spencer Bower and Handley: Res Judicata (4th ed, 2009) 2.16, 'judgments, orders and awards by consent are as efficacious as those pronounced after a contest in creating cause of action estoppels and merging the cause of action sued on'. However, what merges in the judgment is the plaintiff's cause of action. An issue raised by the Minute is whether the plaintiff's cause of action merged in the order dismissing the First Action. As previously mentioned, I assume that the plaintiff will contend that the statutory right under s 126 PLA cannot be lost by the dismissal of the First Action. The reasoning of Santow J in Minero also suggests that there may also be a question about whether the order was intended to operate as a final disposition of the plaintiff's claim in the First Action.
53 Spencer Bower and Handley state at 2.16 that the extent to which a consent judgment may give rise to issue estoppels has not been finally determined. Reference is made to Isaacs v Ocean Accident and Guarantee Corporation Ltd. However, again the analysis in that case would appear to raise questions about the plaintiff's claim rather than whether there is an issue estoppel that operates against the defendant. Similarly, an Anshun estoppel arising out of the order would not appear at first blush to apply against the defendant.
The matters alleged in the fourth part of the Minute
54 The matters alleged in what has been described as the fourth part of the Minute substantially rest on the claim that the plaintiff holds her share in the Property on trust for the defendant. It follows that the defendant should be allowed to raise those matters.
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The claim for specific performance and the Minute
55 What has been described as the first part of the Minute essentially raises for determination whether:
(a) the plaintiff breached the Compromise Agreement by failing to complete the Sale Contract on the defendant obtaining finance (it being common ground on the statement of claim and the Minute that the defendant did obtain finance);
(b) the plaintiff's alleged breach constituted a repudiation of the Compromise Agreement and the Sale Contract which was accepted by the defendant;
(c) there were conditions precedent to the performance of the defendant's obligations under the Compromise Agreement and the Sale Contract that were not fulfilled.
56 Those issues are obviously relevant to the question of whether the plaintiff is entitled to specific performance of the Compromise Agreement and the defendant should be permitted to raise them for determination.
57 As I read the plaintiff's statement of claim, those issues are not strictly relevant to his counterclaim as the plaintiff apparently accepts that the Compromise Agreement falls away if it is not capable of being enforced by her. However, the allegations made by the defendant would be relevant to his counterclaim if that is not so; establishing that the Compromise Agreement had been terminated or that there were conditions precedent to the defendant's performance that had not been fulfilled or that the plaintiff had otherwise failed to perform her obligations under the agreement would be a necessary pre-condition to reviving his trust claim.
58 I have reservations about the second part of the Minute alleging frustration. I will further consider whether the defendant should be permitted to make that allegation at the strategic conference that is proposed in the next part of the reasons.
How should the action proceed?
59 The issues that I have referred to in these reasons are generally raised in the Minute. However, there is force in the plaintiff's complaints about the drafting of the Minute even allowing for the more liberal approach to pleading that is often adopted under the case management objectives in the Rules. The Minute is repetitious and requires further refinement to
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properly limit the issues that must be determined and to define what will be relevant in the trial. The plaintiff's complaints concerning the drafting of the defendant's minute should be further considered and resolved in a strategic conference.
60 That conference should also consider the further pleadings in this matter - the plaintiff's reply and defence to counterclaim will presumably plead her contentions as to the effect of the compromise and any estoppel that she alleges arises from the consent order in the First Action and the defendant's reply to the defence to counterclaim will plead his allegations about those matters. In my view, the effective case management of this matter would be assisted by the further identification of those issues in advance of the relevant pleadings being exchanged.
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