Slater v Nye
[1998] VSC 100
•13 October 1998
SUPREME COURT OF VICTORIA
CAUSES JURISDICTION Not Restricted
No. 6889 of 1998
| WILLIAM KEITH AND JANET GLEN SLATER | Applicants |
| v | |
| ANTHONY GRAHAM NYE AND DIANNE KATHRYN NYE | Respondents |
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JUDGE: | Ashley J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 22 September 1998 | |
DATE OF JUDGMENT: | 13 October 1998 | |
CASE MAY BE CITED AS: | Slater v. Nye | |
MEDIA NEUTRAL CITATION: | [1998] VSC 100 | |
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Appeal - Application for extension of time - Application for leave to appeal from order made by County Court Master - Order made by Master under R23.01 dismissing proceeding - Issue estoppel - "Anshun estoppel" - Abuse of process
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APPEARANCES: | Counsel | Solicitors |
For the Applicants | MR P. FINKELSTEIN of | F.L.A. Partners |
| For the Respondents | MR D. CHRISTIE | Macpherson & Kelley |
HIS HONOUR:
The Application
By summons dated 14 July 1998 the defendants in this proceeding sought judgment in their favour, alternatively a stay of the proceeding. Their application was founded upon R.23.01(1)(b) or (c) of the County Court Rules and alternatively upon the inherent jurisdiction of that court.
On 7 August the County Court Master ordered that the proceeding be dismissed with costs.
On 19 August the plaintiffs in the proceeding filed an application for leave to appeal and notice of appeal. Rules 58.02(1) and 58.03(2) of Chapter 1 of the Rules are pertinent. The consequence is that the plaintiffs' application was late filed.
Before me the plaintiffs sought:
· an extension of the time fixed by R.58.03(2);
· leave to appeal;
· determination of the appeal in their favour.
In order to best deal with those matters I heard argument generally.
Pertinent Principles
The power which I have to extend time is discretionary. In the exercise of that discretion I should consider, inter alia, the length of and reasons for the delay, the prospects of success of the appeal, and any prejudice occasioned to the respondents by an exercise of my discretion in favour of the applicants.
The principles relevant to my consideration whether to grant leave to the applicants to appeal are these:
· First, the well known principles upon which leave will be granted to appeal from an interlocutory judgment or order of a Judge of this Court to the Court of Appeal (see Niemann v Electronic Industries Ltd [1978] VR 431) are in point: see, for example, Deputy Federal Commissioner of Taxation v Reading (1991) 91 ATC 4711 (Young CJ, judgment 30 July 1991).
· Second, the requirement that the applicants must show that the decision below was wrong, or was at least attended with sufficient doubt to justify the grant of leave, may be the more easily satisfied where the order sought to be impugned is final in effect: Reading at 4713. That is this case.
· Third, the power conferred on the court by Rule 23.01 is to be exercised where it is clear on the pleadings, supplemented if necessary by extrinsic evidence (see R.23.04(1)) that the claim is obviously unsustainable in fact or in law.
· Fourth, where relief is sought under the rule on the ground, inter alia, that the proceeding is an abuse of process, that description properly attaches to a situation where the process of the court is used for an improper purpose: Williams, Civil Procedure Victoria, para. 23.01.47.
· Fifth, the burden of establishing circumstances for the exercise by the court of its powers under R.23.01 lies on the party invoking the rule.
· Sixth, it has been repeatedly emphasised that it is not enough for an applicant to show that the decision below was wrong, or at least attended by sufficient doubt to justify granting leave. The applicant must also show that substantial injustice would be done by leaving the decision unreversed. An applicant will generally find it more difficult to show substantial injustice if the order below was interlocutory rather than final in its effect; or if it did not change substantive rights. That approach, enunciated in Niemann, was applied by Young CJ in Reading - that is, in an application brought under Rule 58.02(1); and by McDonald J in Swinstead & Ors v. Chiappalone & Ors (Supreme Court of Victoria, judgment 10 November 1993, unreported). Here the order was final in effect.
The Respondents’ Contentions Summarised
The thrust of the respondents’ contentions, both before the Master and before me, was this: that the applicants are precluded from succeeding upon any of the causes of action set out in the statement of claim endorsed on the writ filed on 25 June 1998 (the second proceeding) by operation of issue estoppel and/or “Anshun estoppel” (Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 C.L.R. 589); that in several instances the causes of action which are pleaded are for other reasons obviously untenable; and that the second proceeding is shown to be an abuse of process, having been brought for an improper motive. In support of the contentions founded upon estoppel the respondents referred to and relied upon the pleadings in County Court proceeding 9611255 (the first proceeding), the Reasons for decision of his Honour Judge Ostrowski and the judgment entered in that matter, and the matters pleaded by the plaintiffs in the statement of claim in the second proceeding.
Mr P. Finkelstein, for the applicant, described the causes of action raised by the second proceeding this way:
“(a)Breach of Contract of Sale - paragraphs 2 to 5, both inclusive, being sale of shares.
(b)Breach of Promissory Estoppel - paragraph 6 only based upon the fresh promise to pay after the trial period.
(c)Breach of Contract of Service - paragraphs 7, 9 and 10 (except the first 8 words of paragraph 10) as service manager.
(c)Breach of Statutory Duty - paragraph 8 and 10 (in relying upon both the broken promise and incompetence in his duties.”
I have no doubt that Mr Finkelstein conceded, in argument, that the matters raised by (a) and (c) had been raised by and had been disposed of in the first proceeding. He conceded also that so much of (d) as dealt with “incompetence” had been raised by and dealt with in that proceeding; although there the issue had not been pleaded in reliance on statute. He contended that all of the subject matter of (b) and part of the subject matter of (d) was new. He told me that he was instructed to contend that principles of estoppel could not operate against his clients because the parties in the first and second proceedings were not identical. He did not support those instructions by reference to any authority, as he might have done. He submitted that the second proceeding was not brought for an improper motive. He referred to and relied upon an affidavit sworn by the first applicant, William Slater, on 18 August 1998 in this last connection.
Issue estoppel, Anshun estoppel, and abuse of process
The respondents did not rely upon the doctrine of res judicata, a doctrine founded on the merger of a cause of action in a judgment. Rather, they relied (in part) upon what Adam, J in Azzopardi v. Bois [1968] V.R. 183 at 185 described as "the distinctive doctrine of issue estoppel". I shall approach consideration of the matter on the basis argued for the respondents, not adverting to the question whether res judicata could have any application in the circumstances.
In Azzopardi, Adam, J described the doctrine of issue estoppel as follows (at 185):
" ... This doctrine, founded on the public policy that there should be an end to litigation, operates to preclude a party in subsequent litigation from contending as against another party to the contrary of any point which, having been once distinctly put in issue in prior litigation between them, has been solemnly found against him. ...
... for issue estoppel to operate, the issue in question must have been the subject of adjudication in previous litigation between the same parties or their privies. And ... the very issue sought to be litigated in the subsequent proceedings must, in substance at least, be identical with the issue previously adjudicated upon. ...
... The requirement that the issue must have been fundamental to the earlier court's decision is stressed by Dixon, J. (as he then was), in what has long been recognized as a classic statement of the doctrine of issue estoppel. In Blair v. Curran, (1939) 62 C.L.R. 464 at pp.531-2, his Honour said: 'The estoppel covers only those matters which the prior judgment ... necessarily established as the legal foundation or justification of its conclusion ... . Nothing but what is legally indispensable to the conclusion is thus finally closed or precluded. In matters of fact the issue‑estoppel is confined to those ultimate facts which form the ingredients in the cause of action ... . In the phraseology of Coleridge, J., in R. v. Inhabitants of the Township of Hartington Middle Quarter (1855), 4 El. & Bl. 780; 119 E.R. 288, the judicial determination concludes not merely as to the point actually decided, but as to a matter which it was necessary to decide and which was actually decided as the groundwork of the decision itself, though not then directly the point at issue. Matters cardinal to the latter claim or contention cannot be raised if to raise them is necessarily to assert that the former decision was erroneous."
Adam, J referred to the necessity that the same issue had been subject to prior litigation between "the same parties or their privies". That consideration was pertinent to the decision of Sholl, J in Edwards v. Joyce [1954] V.L.R. 216; see at 229-230. I refer also to Ramsay v. Pigram (1968) 118 C.L.R. 271, and Shears v. Chisholm & Ors [1994] 2 V.R. 535 at 544-545, in each of which cases the issue of privies was of importance. Jackson v. Goldsmith (1950) 81 C.L.R. 446 was decided upon a different basis; but again there was intrusion of a new party in the subsequent proceeding.
Mr Christie, counsel for the respondents, referred me to the interesting judgment of Drake, J in North West Water Ltd v. Binnie & Partners (a firm) [1990] 3 All E.R. 547. His Lordship preferred what he described as the broad school of thought on estoppels - that is, "the true test of an issue estoppel is whether for all practical purposes the party seeking to put forward some issue has already had that issue determined against him by a court of competent jurisdiction, even if the parties to the two actions are different" (at 552, and see also at 561). I cannot follow that approach. Australian authority binds me to the contrary.
The determinative consideration in North West Water was not in fact issue estoppel. The case was one in which the defendant was attempting to relitigate an issue decided against it in an earlier proceeding, brought by a different plaintiff, to which proceeding it and the plaintiff in the second proceeding had been defendants. His Lordship, referring to Hunter v. Chief Constable of West Midlands [1982] A.C. 529, held that the defendant's attempt to relitigate the issue was an abuse of process, and that the pertinent plea should be struck out. There was nothing novel in that approach: see, for example Walton v. Gardiner (1993) 177 C.L.R. 378, D.A. Christie Pty Ltd v. Baker [1996] 2 V.R. 532; and in a criminal law context Rogers v. R. (1994) 181 C.L.R. 251 and R. v. Young [1998] 1 V.R. 402.
I turn to the so-called Anshun estoppel: Port of Melbourne Authority v. Anshun Pty Ltd (1981) 147 C.L.R. 589. There the High Court decided that a party to a second proceeding was estopped from relying upon an indemnity agreement in a proceeding brought against it by the other party to the agreement in circumstances where the two parties had been defendants in an earlier proceeding. In the earlier proceeding notices of contribution had been served by the defendants; but the defendant to the second proceeding had not relied upon the indemnity agreement. The estoppel, not an issue estoppel, was described this way in the joint judgment of Gibbs, CJ, Mason & Aickin, JJ (at 602-604):
" ... 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 ... .
...
It has generally been accepted that a party will be estopped from bringing an action which, if it succeeds, will result in a judgment which conflicts with an earlier judgment.
...
... The likelihood that the omission to plead a defence will contribute to the existence of conflicting judgments is obviously an important factor to be taken into account in deciding whether the omission to plead can found an estoppel against the assertion of the same matter as a foundation for a cause of action in a second proceeding. ...
...
... It is enough that they appear to declare rights which are inconsistent in respect of the same transaction."
The scope - and even the existence - of Anshun estoppel has been debated: Chamberlain v. Deputy Commissioner of Taxation (1988) 164 C.L.R. 502, Tanning Research Laboratories Inc v. O'Brien (1990) 169 C.L.R. 332, Christie, op cit, at 602, Rogers, op cit, at 275, and (probably) Linsley v. Petrie [1998] 1 V.R. 427 at 433-436. See also, recently, Bill Gibbs & McAllion Lloyd Pty Ltd v. Kinna [1998] V.S.C.A. 52. But I do not understand that the doctrine has been rejected out of hand. Indeed, there are factual circumstances where its application is likely to be entirely compatible with the achievement of justice.
Concerning Anshun estoppel I add this: Anshun denied to the defendant in the second proceeding the opportunity of raising a matter which should have been, but was not, litigated in the first proceeding; a matter which it was unreasonable not then to have litigated. The Full Court of the Federal Court has held that, in some cases, the doctrine may also deny to the plaintiff in the second proceeding the opportunity of raising a matter which should have been, but was not, litigated by way of counterclaim or cross claim in the first proceeding: Bryant v. Commonwealth Bank of Australia (1995) 130 A.L.R. 129; see particularly at 139-140. The remarks of Brennan and Dawson, JJ in Tanning, op cit, at 346 upon this point were, I respectfully consider, satisfactorily explained by the Full Court in Bryant.
Analysis of the pleadings in the first and second proceedings and of the Reasons for Decision and Judgment in the first proceeding
It was said by counsel for the respondents from the bar table, and not disputed by Mr Finkelstein, that a particular concession was made before the Master which was withdrawn before me. I am, therefore, perhaps needlessly, wary of acting upon the concessions which, as I understand it, were made by Mr Finkelstein before me. Perhaps it might be said hereafter that I misunderstood the situation. In the event, I consider that the only safe course is to consider the entirety of the respondents’ attack on the second proceeding.
The starting point is the further amended statement of claim and the amended defence in the first proceeding. The parties to that proceeding were Anthony Nye (plaintiff) and William Slater, Cytrix Pty Ltd and Aban Australia Pty Ltd (defendants). Mr Slater is the first plaintiff in the second proceeding. His wife is the second plaintiff. Mr Nye is the first defendant in the second proceeding. His wife is the second defendant.
By the further amended statement of claim in the first proceeding (“the first statement of claim”) the plaintiff alleged and the defendants admitted that Mr Slater was a director and shareholder of Cytrix, the sole director of and a shareholder in Aban, a director and shareholder in Lifelong Pty Ltd and in effective control of the three companies and the businesses which they conducted.
The plaintiff then alleged that he and Mr Slater made an agreement in or about July 1996 by which the plaintiff agreed to invest $50,000 with one or both of Cytrix and Aban in consideration of the defendants undertaking to procure the transfer by Lifelong of its blinds and awnings business to one or both of those companies, the transfer of 25% of the issued capital in the two companies to the plaintiff, and the employment of the plaintiff by one or both of those companies.
The defendants admitted the making of an agreement. They alleged that the agreement was made on 20 June 1996; that Mr Slater acted as agent for the two companies; that Mr Slater was to procure the purchase of the business Pakenham Discount Blinds; that the agreement was to commence on 1 July, the plaintiff then advancing the sum of $50,000 in full, the plaintiff taking over the management of the business by the expiration of six months from 1 July, and the plaintiff being “just and faithful" towards his employer and acting at all times only in its/their best interests.
According to paragraph 5 of the first statement of claim the agreement made provision for payment of interest to the plaintiff. Further, investment moneys were to be used in part to pay a debt due to Yellow Pages and otherwise in advertising and promoting the business, and they were not to be used (save in respect of Yellow Pages) to meet any existing debt or obligation of any of the defendants.
The defendants, by a somewhat contradictory paragraph in their defence, admitted the allegations made in paragraph 5 of the statement of claim. But they alleged that there was to be no restriction in utilising the moneys for future liabilities of the two companies, and that the moneys were authorised to be used, if necessary, in purchasing Pakenham Discount Blinds.
By paragraph 6 of the first statement of claim the plaintiff alleged that he lent $50,000 to Cytrix between 1 July and 12 August 1996; and that he commenced employment with one or both companies on 1 July.
The defendants admitted those allegations, but alleged that the plaintiff purported, without their prior consent, to engage in a two week trial before becoming committed to perform his obligations, and to delay advancing loan moneys until one month after completion of the trial period.
By paragraph 7 of the first statement of claim the plaintiff alleged that Mr Slater had failed to procure the transfer to him of 25% of the issued capital in the two companies.
The defendants admitted that allegation. They alleged that they had always been “willing and able” to do so, but “their ability to do so was frustrated and/or deferred” by the plaintiff's failure to advance the $50,000 on 1 July and to nominate a transferee.
The plaintiffs alleged and the defendants denied that Mr Slater had failed to procure the use of the advance in the manner provided for by the agreement.
The plaintiffs alleged, and the defendants denied that, the asserted breach entitled the plaintiff to treat the agreement as being discharged - which he elected to do on about 23 October 1996 when he demanded repayment of the advance.
According to paragraph 9 of the defence, not only was the plaintiff not entitled to treat the contract as discharged, but he was obliged to remedy his own breaches. These were said to be:
· failure to advance the $50,000 in full on 1 July 1996;
· failure to perform his duties as an employee adequately;
· failure to act justly and fairly in the best interests of the employer.
It was common ground that the moneys advanced were not repaid. It was common ground that the two companies were, as at December 1996 and thereafter, insolvent and without assets.
The plaintiff in the first proceeding put his claim in respect of the $50,000 investment moneys another way. It was founded upon pre-contractual representations allegedly made by Mr Slater and/or the companies (see para.13). The making of the representations was for the most part admitted by the defendants. But, significantly, they denied that representations had been made to the effect alleged by the plaintiff about the use to which moneys invested by him would be put; and they emphasised that the representations had contemplated that the entirety of those moneys would be paid on 1 July 1996.
The plaintiff alleged that he had been induced to enter into the contract by the representations. Subject to the qualifications raised in connection with the representations by the defendants, inducement was admitted.
The plaintiffs alleged and the defendants denied that there were no reasonable grounds for the making of the representations. The plaintiff alleged and the defendants denied their falsity. Some of the allegations of falsity depended on events which occurred after the representations were made.
The plaintiff raised a claim against the two companies under the Trade Practices Act 1974 (Cth); and against Mr Slater, reliant on the Fair Trading Act 1985 and on the footing that he had been involved in a contravention of s.52 of the Trade Practices Act. The defendants denied those allegations.
The plaintiff put his claim in respect of the investment moneys a third way. He alleged that Mr Slater was in possession of information concerning the situation of the two companies and in all the circumstances owed fiduciary duties to him. The defendants admitted that Mr Slater owed such duties, although they qualified the ambit thereof. The plaintiff alleged breach of fiduciary duties. The defendants denied breach.
The plaintiff raised two distinct claims. The first related to later advances which it was admitted that he made to the two companies - $3,800 to Cytrix, and $4,500 to Aban. It was common ground that those advances were repayable on demand. The defendants did not admit either that demand had been made or that repayment had not been made.
The second distinct claim was for remuneration for work done by the plaintiff for one or both companies between September and October 1996. That claim which was not admitted, was for $1800. The plaintiff alleged that it was evidenced by dishonoured cheques drawn on the account of Cytrix.
Certain positive allegations were made by the defendants concerning the admitted insolvency of the companies as at December 1996. This was said to have resulted from matters outside Mr Slater’s control - the weather, a downturn in the economy, the plaintiff’s incompetence as sales manager and the disturbing effect which that had upon other staff. The plaintiff's alleged incompetence was particularised.
It can be seen, then, that the statement of claim and defence in the first proceeding each alleged the making of a share purchase contract in 1996. It was in dispute whether the agreement was made in July 1996 or on 20 June 1996. For the most part it was common ground who were the parties to that agreement. Mr Nye alleged that the parties were he and Mr Slater. The defendants said the parties were Mr Nye and Mr Slater as agent for one or both companies. No suggestion was made by the defendants that the true contracting parties were Mr and Mrs Nye and Mr and Mrs Slater; not the companies at all.
Returning to the alleged agreement, it was common ground that the plaintiff was to invest $50,000 in one or both of the companies, and was to be employed by one or both of them. The defendants alleged that, under the contract, the plaintiff was to invest all the money by 1 July 1996. They alleged that the plaintiff had purported, contrary to the contract, to be entitled to a two week trial of work; his obligation to invest the money only falling due one month after the completion of that trial period.
It was next common ground that the moneys, when advanced, had been advanced to Cytrix. The plaintiff alleged that the moneys had been applied in breach of contract, and that he was entitled to and had treated the contract as at an end. The defendants alleged that the plaintiff had breached the contract both in respect of delay in investing moneys and in the performance of his duties. They contended that the admitted insolvency of the companies as at December 1996 was caused, inter alia, by the default of the plaintiff in the performance of his duties.
The defendants did not raise any counterclaim, either before or at trial. Mrs Nye could have been made a defendant to such a counterclaim: see R.10.03. Nor was any cross-action - in which Mrs Slater could have been a plaintiff - commenced. The potential subject matter of a counterclaim or cross-action, intimately related to the proceeding brought by Mr Nye, is clear indeed - particularly when the second statement of claim is considered.
The judgment in the County Court, on the first proceeding, was:
(1)against Cytrix, in respect of the plaintiff’s claim in connection with the $50,000 investment moneys;
(2)against Cytrix, in respect of the plaintiff’s claim concerning later advances totalling $3,800, and in respect of the remuneration claim for $1,800;
(3) against Aban, in respect of the plaintiff’s claim for a later advance of $4,500;
(4)against Mr Slater, in respect of so much of the $50,000 (plus interest) as was not paid by Cytrix.
The Reasons for Decision of the learned County Court judge show that the statement of claim was brought into final form (that is, as I have described it) only after the evidence was at an end, so as to bring the issues which were pleaded into contact with the evidence which had been given.
His Honour concluded that, upon the confused state of the evidence (evidence had been given, inter alia, by Mr and Mrs Nye and Mr and Mrs Slater) the plaintiff had not established that a contract had been made between the parties. The arrangement lacked sufficient certainty. That conclusion was reached notwithstanding that the parties all took the position that some share sale contract had been made.
His Honour next concluded that the statutory claims failed. They did so on the footing that the plaintiff had not shown that he had suffered loss by conduct of any defendant in contravention of either s.52 of the Trade Practices Act or s. 11 of the Fair Trading Act.
His Honour decided that the plaintiff’s case founded on breach of fiduciary duties succeeded. There had been a misstatement of the true financial state of “the business” in which investment was to be made. Pertinent information had been withheld. “The business” had a long and notable history of difficulties in a series of corporate guises. There should be judgment against Cytrix (to whom the $50,000 had been advanced); and against Mr Slater, who had breached the fiduciary duties which he owed to the plaintiff, to the extent that the plaintiff did not recover the amount of the advance from Cytrix.
Concerning the small claims - in respect of later advances and remuneration not paid - his Honour held that there were no defences.
Mr Slater, only, has appealed against the judgment in the first proceeding. His appeal is in respect of the judgment entered against him personally, and the order for costs made against all defendants. The appeal was filed, by leave, out of time. It is not necessary to refer to the grounds of appeal.
I next observe that the plaintiff in the first proceeding issued a bankruptcy notice against Mr Slater based upon the judgment debt. The notice was served upon Mr Slater on 24 June 1998. The second proceeding, in which Mr Slater and his wife are plaintiffs, and Mr Nye and his wife are defendants, was filed one day later. The timing of the commencement of the second proceeding, Mr Slater has deposed, is simply a coincidence. Be that as it may, the second proceeding has been relied upon together with the appeal, in an application brought by Mr Slater in the Federal Court by which he seeks to set aside (or alternatively have enlargement of time for compliance with) the bankruptcy notice. In support of the application he asserts that the second proceeding makes a cross demand which equals or exceeds the sum specified in the bankruptcy notice, and that the cross claim could not have been set up in the first proceeding. In the second proceeding, as will be seen, Mr Slater and his wife claim from the defendants damages in the sum of $150,000.
I turn to consider the statement of claim in the second proceeding. Its starting point is an allegation that the plaintiffs are and were material times directors and equal shareholders in Cytrix; and that Mr Slater has been and remains sole director of and shareholder in Aban.
Paragraph 2 of the statement of claim alleges that an agreement was entered into on 20 June 1996 between Mr Slater (on behalf of himself and his wife) and Mr Nye (on behalf of himself and his wife). The core allegations are that the plaintiffs agreed to sell the defendants 25% of the shareholding of Cytrix and Aban for $50,000, the money to be paid in full by 1 July 1996; that the plaintiffs (not the companies) would enter upon certain financial transactions once the money was paid; that Mr Nye would commence work as sales manager of the business from 1 July 1996, his remuneration being not less than a certain sum; that the $50,000 would be reimbursed to the defendants when circumstances permitted, the defendants being paid (also when circumstances permitted) an “allowance” equal to 10% per annum. The agreement although allegedly reached on 20 June 1996, is said to be evidenced in part by an undated and unsigned “shareholding agreement” handed by Mr Slater to Mr Nye on 11 July 1996.
Paragraph 4 of the statement of claim alleges that the defendants breached the agreement by not paying the $50,000 by 1 July 1996, and by not informing the plaintiffs to whom the shares were to be transferred. The plaintiffs allege that they suffered loss and damage to the extent of the value of their shares in the companies. That value, on the footing that the agreed value of “the business” was $200,000, is claimed to be $150,000 - that is, 75% of the shareholding. The plaintiffs say that the loss occurred because the companies became worthless.
Central to the claim for breach of contract made in the first proceeding was the requirement that a share sale contract had come into existence. Mr Nye alleged that such was the case. So did Mr Slater, as one of the defendants. The allegations made by the defendants in the first proceeding as to the content of the contract very closely mirror the content of the contract which (according to paragraph 2 of the second statement of claim) was entered into between the Slaters and the Nyes. Insofar as the content of the contract alleged by the second statement of claim travels beyond the content pleaded by the defendants in the first proceeding some of that additional content seems to be purely mechanical (para. 2(a)), other of it to have been elsewhere pleaded in the first statement of claim (compare para. 7(b) of the first statement of claim and part of para. 2(c) of the second statement of claim), other of it again to pick up and paper over differences in the evidence at trial of the first proceeding (para. 2(f)).
So far as the parties to the alleged contract are concerned, it will be recalled that by the first proceeding Mr Nye alleged that the contract was made between himself and Mr Slater, the latter undertaking to procure certain results in consideration of the former investing $50,000 in one or both of the companies. The defence alleged that Mr Slater acted “as agent for and on behalf of Cytrix and/or Aban”. It admitted that the other party to the contract was Mr Nye. By the second statement of claim Mr Slater pleads the matter differently. The parties to the contract are alleged to have been Mr and Mrs Slater and Mr and Mrs Nye.
The learned judge considered in the first proceeding whether a contract had been made either of the nature alleged by the statement of claim or of the nature alleged by the defence. He was not satisfied that any such contract had been made. His finding did not depend upon the identity of the alleged contracting parties. The content of the contract, as alleged by the defendants in the first proceeding, closely mirrors the content of the contract alleged by the second statement of claim. Any additional content, plainly, could and should have been alleged and could have been the subject of evidence (if it was not) at the that trial of the first proceeding. If the true position, as Mr Slater understood it, was that he and his wife (not the companies) were parties to the contract, that issue could and should have been raised in the first proceeding. It seems only too obvious why that issue was not raised. It would have potentially laid him (and his wife) open to personal liability.
Paragraph 6 of the second statement of claim is said to found a claim in “breach of promissory estoppel”. The paragraph asserts, at the outset, that the delay in making the $50,000 payment was subject to circumstances in which, in relation to that failure, the plaintiffs are entitled to rely upon the doctrine of promissory estoppel. The pertinent circumstances as I understand it, are said to be:
· Mr Nye’s alleged attempt to vary the agreement by proposing a two week trial period of work and delayed payment of the $50,000, such payment being conditional on Mr Nye being satisfied with the viability of the business;
· an allegation that this proposal was agreed to by Mr and Mrs Slater;
· an implicit representation by Mr Nye, because he worked in the business beyond the two week period, that he was satisfied with the viability of the business; and that the plaintiffs could expect the money to be paid.
· reliance by the plaintiffs upon the representation to their detriment - they borrowed funds to meet the obligations of the companies, and the value of their shares in the companies was wiped out.
· preclusion, in the circumstances, of Mr and Mrs Nye denying that the plaintiffs relied upon the alleged representation.
The circumstances upon which the plaintiffs seek to rely set up a case different to that which the opening portion of paragraph 6 would suggest. That is not the only problem with this paragraph. For example, the representation set out in paragraph 6(a) was fulfilled; paragraph 4 so asserts.
Putting such problems to one side, the first circumstance upon which the Slaters rely assumes that a contract was made in the terms earlier alleged. That assumption cannot be made; for, as will be seen, it is my opinion that the plaintiffs are precluded from pleading that such a contract was made.
Building upon that assumption, sub-paragraphs (a) and (b) of paragraph 6 allege, in substance, that there was an agreed variation of the agreement. Those allegations are at odds with the substance of the matters alleged by Mr Slater and the other defendants by paragraphs 6, 7(a), 9 and 10 of their defence in the first proceeding. At the heart of that defence was the proposition that Mr Nye by his actions breached the asserted contract. Certainly, however, those defendants were not precluded from pleading a variation of the contract to the effect now alleged. It seems likely that they did not do so because their case was that non-payment of the $50,000 on 1 July 1996 was a breach of contract by Mr Nye. It can of course be said, in respect of the variation of contract now alleged, that it was not an issue raised or passed upon in the first proceeding. That is because, unreasonably, it was not raised by the defendants. It may, of course, equally be said that, had the allegation of variation of contract been made in the first proceeding it must have failed - there being, on his Honour’s findings, no contract to vary.
The representation upon which the plaintiffs seek to rely is, according to paragraph 6 of the second statement of claim, in substance to be discerned in a breach of the contract as allegedly varied. The plaintiffs' assertion that reliance on the alleged representation resulted, inter alia, in Cytrix suffering trading losses of $92,000 (although all of the $50,000 had been paid by Mr Nye by 12 August 1996) was not an allegation raised in the first proceeding. Then, as I have said, no counterclaim or cross action was pursued - although it was common ground that the learned judge raised the matter of a counterclaim at trial.
Mr Finkelstein told me that, if the application and appeal were allowed, it was intended to amend the particulars of damage by making a claim for additional loss and damage. The proposed further particulars, which I shall not set out, appear to me to create further problems for the plaintiffs. The allegations of damage raised and foreshadowed might well be regarded as a window on the bankruptcy of their claim.
Paragraphs 9 and 10 of the second statement of claim raise, I was told, a claim for damages for breach of contract of service; whilst paragraphs 6 (pressed into service in a different way), 8 and 10 found a claim under s. 11 of the Fair Trading Act 1985.
The claim for damages for breach of contract of service has unusual features. The plaintiffs, as shareholders of companies, seek to sue an employee of “the business” who became an employee by reason of an agreement made between the plaintiffs and the employee. Moreover, the damages suffered by the plaintiffs are said to be the destruction of the value of their shareholdings by the incompetence of the employee.
Those matters aside, in the first proceeding Mr Nye made a claim for remuneration not paid to him as an employee. The defendants alleged, inter alia, that Mr Nye was in breach of the share sale contract because he failed to perform his duties adequately, and failed to act justly and faithfully in the best interests of his employer. The insolvency of the companies was said to be contributed to by Mr Nye’s incompetence and its disruptive and demoralising effect upon other staff.
The learned judge found that there was no share sale contract pursuant to which Mr Nye was employed, but that he was entitled to remuneration for work performed. The judge referred to “the claim on the basis of dishonoured cheques”, although that claim was not brought under the Instruments Act.
Be that as it may, Mr Nye’s alleged incompetence had been tied to other aspects of the defence. So the judge did not consider it. The allegations of incompetence were made only by the defence. There was not, as I have said, any counterclaim in the first proceeding; nor any cross action.
The claim for damages for breach of the Fair Trading Act alleges, as I understand it, that Mr and Mrs Nye contravened s.11 of that Act because Mr Nye made the implicit representation set out in paragraph 6 of the statement of claim and because he was an incompetent employee. The second aspect of the impugned conduct seems to me to bear no relationship to the operation of the statute. The first aspect harks back to the plea that a share sale contract was made and varied, breach of the contract as varied constituting a representation upon which the Slaters relied to their detriment. I have already commented upon the difficulties faced by those allegations in light of the issues litigated in the first proceeding.
An exhibited affidavit is pertinent
I consider it necessary to refer to Mr Slater’s affidavit sworn 29 July 1998. It is an exhibit to his affidavit sworn 18 August. I note four matters. First, by paragraph 7 Mr Slater deposes that he was advised by his counsel in the course of the first trial that “a counterclaim could now be supported”, but “it was procedurally too late to do so” - this being at the end of the second day of the six day trial. Second, the basis for the advice that a counterclaim was supportable was allegedly admissions made by Mr Nye in cross‑examination. Mr Slater deposes that he was told that a separate claim could be brought “based upon the deception which led to the delay”. The allegedly admitted deception (see para 6(a)-(d) of the affidavit) is not expressly raised by the statement of claim in the second proceeding. Third, by paragraph 5 of the affidavit Mr Slater deposes that at the end of the two week trial period Mr Nye told him that he was still unable to pay the $50,000. Regardless of the explanation said to have then been given, I cannot see how that disclosure sits with the allegation made by paragraph 6(c) of the second statement of claim that the Slaters were in some way misled into believing that the $50,000 would be paid (which it was, in fact). Fourth, Mr Slater deposes that it had always been the intention of the defendants in the first proceeding to bring a counterclaim. They did not do so. They do not do so now. The only plaintiffs in the second proceeding are the Slaters.
Extension of time and leave to appeal
I have formed the very clear opinion that I should not order that time be extended for filing the application for leave to appeal. That is because I have formed the very clear opinion that an application for leave to appeal must be refused. That in turn is because I have formed the very clear opinion that the applicants have not shown that the Master’s decision was wrong, or attended by sufficient doubt to justify the grant of leave - even without proceeding to discretionary considerations. Though it is unnecessary to go so far, it is my opinion that the Master was right to order that the second proceeding be dismissed.
I readily accept the need for caution before taking a step which denies to a litigant the right to ventilate his or her claim at trial. I readily accept, also, that the doctrine of issue estoppel should be cautiously applied, perhaps particularly in such a context. Again, I recognise that the Anshun estoppel is not to be given an indiscriminate application.
Bearing those consideration steadily in mind, it nonetheless appears to me that issue estoppel, Anshun estoppel, and abuse of process are pertinent to and fully justify the Master’s order.
In the course of discussing the pleadings in the first and second proceedings, the reasons for decision and judgment in the first proceeding, and Mr Slater’s affidavit sworn 29 July 1998 (exhibited to his later affidavit) I have, I think, said a good deal to explain the conclusion which I have just expressed. But at risk of repetition I should expand upon my reasoning.
Putting the question of non-correspondence of parties to the two proceedings to one side for the moment, in the first proceeding it was alleged by both sides that a share sale contract had been made. Mr Slater, as a defendant, alleged that the contract had been made on the date of the contract whose making is alleged by the second proceeding. The defendants in the first proceeding made allegations as to the content of the contract which closely mirror the content of the contract alleged by the plaintiffs in the second proceeding. The learned judge was not satisfied that any share sale contract had been made. As I earlier observed, his conclusion did not rest on doubt as to the identity of the contracting parties. The way in which the parties pleaded their cases, each side contending that a share sale contract had been made, means that the outcome could not sensibly be described as depending upon the onus of proof. Had the defendants counterclaimed, relying upon a contract whose terms wholly or very largely emerged from their defence, they must logically have failed to establish that such a contract had been made.
The second proceeding, I have no doubt, is an attempt to relitigate the question whether a share sale contract was made in July 1996 - an issue which the County Court judge considered and resolved in the negative. But, it is said, the parties to the second proceeding do not correspond with the parties to the first proceeding; and the plaintiffs in the second proceeding seek relief for breach of contract which was not before the court in the first proceeding. The first of those matters is true - although, so far as Mr Slater and Mr Nye are concerned, it may well be the case that the decision in the first proceeding is conclusive that they did not make a contract as is now alleged.
I turn to the situation of Mrs Slater. The defendants to the first proceeding alleged that the contracting parties were Mr Nye and the companies. There was not a word of an allegation that the contracting parties were Mr (or Mr and Mrs) Nye and the Slaters personally. Indeed, the defence specifically alleged that Mr Slater acted as agent for his companies in making the contract.
I make these observations. First, the variation in the pleadings concerning the contracting parties on the Slater side, in the circumstances which I have described, leads me to the conclusion that the present pleading is no more than an artifice whereby the Slater side seeks to relitigate a concluded question. That is properly described as an abuse of process.
Second, the alternative explanation is that the Slater side has no idea who were the parties to the alleged contract - a contract which the County Court judge found was not made. That may be said to be a very good indication that there is no cause of action as pleaded.
Third, whether or not Mrs Slater had been said in the first proceeding to be a party to the alleged contract, the finding that no contract had been made could have been no different. Whether or not her being named as a plaintiff in the second proceeding is a mere artifice whereby the Slater side seeks to relitigate a concluded question, to permit her to relitigate that question in the circumstances described would be to permit an abuse of process.
I refer next to the situation of Mrs Nye. She was not alleged by the defendants in the first proceeding to be a party to the alleged contract. She gave evidence at the first hearing. If the defendants had wished to contend that she was a contracting party - contrary to their pleading - they could have amended their pleading and cross-examined her about the matter. She was not made, as she might have been, party to a counterclaim. The finding that no share sale contract had been made did not depend on her presence or absence as an alleged contracting party. It appears to me that naming Mrs Nye as a party to the alleged contract is an artifice designed to permit relitigation of a concluded issue; or that it shows that the Slater side has no idea who were the parties to the alleged contract.
So far as the plaintiffs say that the relief claimed by them in the second proceeding for breach of contract was not before the court in the first proceeding, two points should be made. First, on Anshun principles it could and should have been - at least in the case of Mr Slater (if it had been alleged that he, personally, was a contracting party). Second, such a claim for relief must have failed, no contract having been established.
Generally, then, the plaintiffs should not be permitted to allege again the making of a share sale contract. Elements of issue estoppel (in the case of Mr Slater), Anshun estoppel, and abuse of process all come into play. So far as the second of those doctrines is concerned, the conduct of the defendants is not raising issues which I have identified was in my opinion unreasonable.
I turn to the claim for "breach of promissory estoppel". The pleading itself is open to serious criticism. But it appears to me, such criticism aside, that the claim sought to be raised cannot be permitted. Its starting point is that a share sale contract was made. I have concluded that such an allegation cannot be made.
Absent such an agreement, there could be no variation thereof. Absent the variation, the alleged representation could not have been implied from the circumstances.
That is enough to show that, although the particular claim was not raised by the first proceeding, it cannot now be permitted. Other matters, however, reinforce that conclusion. First, the claim is so bound up with the matters alleged in the first proceeding that it ought to have then been raised - if there was anything to it - by the defendants to that claim (one of whom was Mr Slater).
Second, the pleading of the defendants in the first proceeding was really at odds with the allegation now made. This divergence remaining unexplained, my clear impression is that the plaintiffs are illegitimately seeking to relitigate, in substance, the subject matter of the first proceeding. I add only that the presence of Mrs Slater and Mrs Nye as parties to the present proceeding does not lead to any different conclusion. Matters to which I referred when dealing with the claim based on breach of the share sale contract are in point.
The claim for damages for breach of contract of service by Mr Nye was not raised in the first proceeding. On the other hand, the defendants to that proceeding were alive to the allegation that he had performed his work incompetently. They raised it in several contexts. If there was anything to the allegation, there was every reason why it should have been pursued by counterclaim; or, if necessary, by cross action. If it was said by the present plaintiffs that there were other defendants to the first proceeding, and that this may have complicated the bringing of any counterclaim or cross action, the short answer would be that Mr Slater - then a defendant, now a plaintiff - chose to plead the defence of he and his companies in a way quite contrary to the way in which the second statement of claim asserts the situation to have been.
The claim under the statute was not made in the first proceeding. In part it appears to be without possible foundation. As to the balance it relies upon the implicit representation set out in paragraph 6(d) of the second statement of claim. That representation cannot be alleged by the plaintiffs for reasons earlier described.
Order
I shall order that the application for an order extending time under R58.03(4) be refused; and that the applicants pay the respondents' costs.