Tanning Research Laboratories Inc v O'Brien

[1989] HCATrans 204

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S35 of 1989

B e t w e e n -

TANNING RESEARCH LABORATORIES

INC.

Appellant

and

J. O'BRIEN

Respondent

BRENNAN J

DEANE J

Tanning(2)

DAWSON J

TOOHEY J

GAUDRON J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 13 SEPTEMBER 1989, AT 12.27 PM

Copyright in the High Court of Australia

ClT 25/1/CM 1 13/9/89

M..~ J. C. CAMPBELL, QC:  May it please the Court, I appear with

my learned friend, MR J. E. THOMSON, for the

appellant in this matter (instructed by Blake

Dawson Waldron)

MRS. D. RARES:  May it please Your Honours, I appear for

the respondent in this matter (instructed by

Hunt & Hunt)

MR CAMPBELL: 

Your Honours, could I hand up eight copies

of the outline of submissions and hand a copy to
my friend. There are also, Your Honours, a bundle
of American material which have been prepared.
There are in large part the material which was

before the judges in the lower courts. Not

necessarily all of it will be referred to in

the course of this appeal, as I understand it,
but we thought it appropriate that Your Honours

should have it and those bundles are there and
can be made available to Your Honours. I doubt that

we will be getting to them before lunch time though.

Your Honours, the first of the heads - - -

BRENNAN J: Perhaps you should just give us a moment to just

look at your outline. Yes, Mr Campbell.

MR CAMPBELL:  Your Honours, the first of the heads of this

appeal concerns the effect of the ARBITRATION

(FOREIGN AWARDS & AGREEMENTS) ACT and the relevant

provision of that Act is section 7 {2), if

I could take Your Honours to that. There is

provision in section 7(1) to define the
particular agreements to which section 7 applies. They are in broad terms international arbitration

agreements and there are various indicia by which

the international element in the arbitration

agreement is able to be identified.

Then in section 7(2) there is provision

that:  (Continued on page 3)

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Tanning(2)

MR CAMPBELL (continuing):

where -

proceedings instituted by a party to an

arbitration agreemert to which this section

applies -

where they are instituted -

against another party -

where they -

are pending in a court; and

the proceedings involve the determination

of a matter that, in pursuance of the

agreement, is capable of settlement by

arbitration -

then -

on the application of a party to the agreement,

the court shall ..... stay the proceedings -

or, however much of it involves the arbitrable matter,

and it can do that on such terms or conditions as it

thinks fit.

There is provision in section 7(3) for the

Court to make whatever interim or interlocutory orders it thinks is appropriate. There is provision in

section 7(4) that a reference to a party includes

a reference to a person claiming through or under a

party. It has been held in the court below, and we

do not contend otherwise, that the requirement under

section 7(2) is a mandatory requirement rather than a

discretionary requirement. What our contention in this

Court is is that first of all, the proceedings that are

involved in this case are not ones instituted by a party

to an arbitration agreement against another party to the

agreement, and, secondly, that the proceedings do not

involve the determination of a matter in the relevant

sense.

The proceedings that are in question are proceedings

that have been brought in the Supreme Court of New South

Wales, appealing against the rejection by Mr O'Brien, the

defendant in the proceedings and the respondent on the

appeal.	Mr O'Brien, in his role as liquidator of the
company had rejected a proof of debt.	There is some

brief chronology which may be convenient to give at this

stage. Tanning Research was a company which was a

licensor under a license agreement whereby itsproducts

were distributed in Australia b¥thecompany which went into

liquidation. The licence agreement contained an

arbitration clause.

C1T26/1/FK	3	13/9/89
Tanning(2)

MR CAMPBELL (continuing):  The Australian company went into

liquidation with the date of commencement of its

winding up being 10 April 1981.	Mr O'Brien was
appointed the liquidator on 19 April 1981.	Some

arbitral proceedings were commenced in Florida in

late 1983 by Mr O'Brien. Those proceedings were

amended in February 1984 to substitute the name

of the company as complainant. Those matters appear in the judgment of Mr Justice Kirby at

pages 247 and 248. An award was given in that

arbitration on 8 January 1985. It was not until

12 April 1985 that the plaintiff lodged a proof of

debt in the winding up. In that proof of debt it
sought an amount of $US179,000.

The issues in the Florida arbitration were ones which involved, first of all, allegations

that there had been tortious acts committed

concerning the licence agreement and concerning the

circumstances in which the licence agreement had

been terminated. There was also an application for

what was called declaratory relief concerning

the termination of the licence agreement and a

declaratory judgment reinstating the licence

agreement was sought. It will be necessary to take

Your Honours later to the precise terms of the award

that was made by the arbitrators, but - - -

BRENNAN J:  Do we need to be aware of the issues that

were litigated before the arbitrators?

MR CAMPBELL:  That will be essential, Your Honour, to be able

to deal with the second topic in this appeal which

is a topic concerning issue estoppel.

BRENNAN J:	You will be giving us the page references when you get there, will you?
MR CAMPBELL:	I shall.

(Continuing on page 5)

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MR CAMPBELL (continuing):  But for the purpose of the present

part of the appeal all that the Court need know is

the general nature of the circumstances in which

the proceedings were brought in the New South Wales

Supreme Court. In broad terms, the award of the

Florida arbitrators was that there had been owing

an amount of $US179,000 by the Australian company

to the American company, but that it had waived

its right to rely upon the failure to pay that sum

of money as a ground for terminating the licence

agreement, therefore, the licence agreement should

be reinstated.

So far as the tort claims were concerned, the

plaintiff in those proceedings failed to make

out its case and therefore no damages were awarded.

The amount for which the Tanning Research Laboratories

Incorporated sought to lodge its proof was the

amount that the United States arbitrators had held

to be the amount which had been owing. The

liquidator, having rejected that proof of debt,

appeal having been brought, then sought a stay of

those proceedings on the ground that it was necessary

for the question of how much was owing to be

arbitrated pursuant to the arbitration agreement.

BRENNAN J:	Mr Campbell, we are dealing at the moment with the question of the ARBITRATION (FOREIGN AWARDS AND
AGREEMENTS) ACT, is that correct?

MR CAMPBELL: That is so, Your Honour.

BRENNAN J: Where do we find the agreement which answers

the description in section 7(1)?

MR CAMPBELL:  The relevant clause is contained in the

judgment of His Honour Mr Justice Cohen, at page 198

in the second volume of the appeal book.

(Continued on page 6)

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Tanning(2)

MR CAMPBELL (continuing):  The general substance of the

agreement is described by His Honour on page 197,

beginning from line M:

Under the terms of the agreement Hawaiian

Tropic was entitled to manufacture and

distribute the plaintiff's goods within

its teritory and the plaintiff agreed,

amongst other matters,that it would

supply any special formulas necessary

for this purpose and that it would sell

to the licensee any of the ingredients

which might be required ..... The plaintiff

agreed that during the term of the agreement

it would not manufacture, distribute or

sell its products within the licensed

territory nor would it permit or license

any other person to do so.

BRENNAN J:  Do we have the original agreement, the total

agreement?

MR CAMPBELL:  It is at page 167, Your Honour. Your Honours

see the Tanning Research Laboratories Inc are

there described as:

a Florida corporation, with its principal

place of business -

at an address in Florida. Hawaiian Tropic Pty Ltd

described as:

an Australian Corporation, with its principal

place of business -

in Sydney. It is common ground, Your Honour, that

the United States has at all material times been

a convention country within the meaning of the

ARBITRATION (FOREIGN AWARDS AND AGREEMENTS) ACT.

BRENNAN J: Is there any provision of this agreement which

deals with the liquidation of either party?

MR CAMPBELL:  No, Your Honour. I am sorry, Your Honours,

there is provision at page 171 concerning

events of default in a.

TOOHEY J:  That was the basis upon which Tanning sought

to terminate the agreement?

MR CAMPBELL:  Yes, Your Honour.

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Tanning(2)

BRENNAN J: Then, at 174, it inures for:

the benefit of the parties ..... their legal

representatives, successors, and permitted

assigns.

MR CAMPBELL:	Yes, Your Honour.
BRENNAN J:	Does that enter into our consideration?
MR CAMPBELL:	I would submit not, Your Honour, because we

would be submitting that the liquidator, when he

is exercising his function of deciding what it is

that is owed by the company, is not enforcing rights

under this agreement but is engaged in a different

exercise altogether.

BRENNAN J:	Yes, Mr Campbell.
MR CAMPBELL:	What we say is that the analysis that has been

given by His Honour Mr Justice Mahoney in the

Court of Appeal and by His Honour Mr Justice Cohen

at first instance of the function that the liquidator
is performing in this particular job that he is doing

is correct and, Your Honours, we do not seek to read in their entirety in the course of this appeal those reasons that were given by Their Honours because

they would really need to be read in their entirety
to appreciate them all but we rely upon them as

providing an account of the role that the liquidator

plays.

BRENNAN J:	What pages are you referring to?
MR CAMPBELL:	The judgment of His Honour Mr Justice Mahoney,

the relevant portion begins at page 311 at about

point 4 on the page. His Honour summarizes his

conclusion there by saying:

The dispute here in question, that

between the liquidator and Tanning, is not,

on proper analysis, a dispute between Tanning

and Hawaiian or, I think, between Tanning and

the liquidator as a person claiming through or

under Hawaiian.

(Continued on page 8)

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Tanning(2)
MR CAMPBELL (continuing):

It is a dispute between Tanning and the
liquidator acting in the course of his statutory
duty under the applicable COMPANIES

legislation, the COMPANIES ACT 1961, and as

to the manner in which the liquidator is to

act in the performance of that duty.

And His Honour then goes on to give an account of
the way in which liquidation takes place where it is
ordered by a court and the role that the liquidator

plays in that.

BRENNAN J:  Mr Campbell, this might be a suitable time to

adjourn.	The Court will resume at 2 pm this
afternoon.

T31	AT 12.48 PM LUNCHEON ADJOURNMENT
UPON RESUMING AT 2.02 PM:
BRENNAN J: Yes, Mr Campbell.
MR CAMPBELL:  Your Honours, before continuing with the bit I

was up to just before lunch, it may be convenient if I were to outline to Your Honours just how the

parties in the issues lined up in the courts below.

Before the trial judge, the liquidator sought a stay

under the ARBITRATION (FOREIGN AWARDS AND AGREE:t'1ENTS)

ACT and he failed to get it. The company, that is

Tanning, alleged that there was an issue estoppel

concerning the quantum of the debt that was owed,

saying that they were entitled to prove for

$US179,000.

The trial judge held there was no such issue

estoppel because the finding of the arbitrators
was not sufficiently central to the decision that

they had made. The liquidator said that it ought

not be possible for Tanning to bring these proceedings

at all because, in the arbitration in the United States,

it had raised the question of how much was owing by

the Australian company to it but had raised it only

for certain limited purposes. It had not positively

brought a cross claim to seek an order that it be

paid that amount. It was said that on the basis of
the ANSHUN type of estoppel that Tanning ought not be

allowed to raise the question again.

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:MR. CAMPBELL (continuing):  When the matter went to the

Court of Appeal the judges there split in three

directions. The President, Mr Justice Kirby,

took the view that the ARBITRATION ACT point was

a good point and that there should be a stay.

He held however that there was no issue estoppel concerning the quantum of the debt, neither was there an ANSHUN estoppel preventing the liquidator

from preventing the company from bringing the

proceedings.

His Honour, Mr Justice Mahoney - - -

BRENNAN J:  How did those questions fall for determination

if His Honour thought that there should be a stay?

:MR. CAMPBELL:  They did not fall for determination, but they

were views that His Honour expressed. The decision

of His Honour Mr Justice Mahoney, was that the

ANSHUN estoppel point was a good point, however

there was no issue estoppel concerning the quantum

of the debt and there was no good ground under

the ARBITRATION (FOREIGN AWARDS AND AGREEMENTS) ACT

for staying the proceedings. His Honour

Mr Justice McHugh took a different line again.

He held that there was no ground under the

ARBITRATION (FOREIGN AWARDS AND AGREEMENTS) ACT

for preventing the proceedings from continuing,
nor was there an ANSHUN estoppel, but he held there
was an issue estoppel concerning the quantum of
the debt, and because with the three judges making

the determinations that they did, there was no ratio

that was able to emerge from the three reasons

for judgment.

His Honour Mr Justice McHugh, as the junior

judge in the court, withdrew his reasons and

concurred with the reasons of the President, so

· that the order of the Court was that there should be

a stay under the ARBITRATION ACT, but the way that

the judges views were was that Mr Justice Kirby was

the only one of the four judges below who had

decided that there should be such a stay.

If I could return Your Honours to the judgment of

Mr Justice Mahoney in the Court of Appeal on the

ARBITRATION ACT point, His Honour at 311 had said that

this was not a dispute between Tanning and the liquidator,

it was a dispute between -

the liquidator as a person claiming through or

under Hawaiian. It is a dispute between

Tanning and the liquidator acting in the course of his statutory duty -

He said at 3111:

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Tanning(2)

The liquidator's duty in this regard is to

determine the amount for which, under the

CDMPANIES ACT 1961, Tanning's claim is to

be admitted and the way in which it is to be

ranked in the winding up.

(Continued on page 11)

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MR CAMPBELL (continuing):

The Supreme Court may order that a
company be wound up by the court and
may appoint a liquidator for the purpose.

The property of the company ..... remains

in the ownership of the company ..... but the

control of it passes to the liquidator.

The liquidator is empowered to administer

the assets in accordance with the statutory

scheme for winding up and to distribute them

accordingly. When the affairs of the

company are fully wound up in accordance with

the statutory scheme, the company is dissolved.

The statutory scheme envisages that the

liquidator will determine who is to participate

in the distribution of the assets of the

company and in what order. In relation to

debts, he does this by a procedure, established

by the Act :  s 2 91 ; and by the Rules for the "proof

of debts". The procedure envisages that,

in general, debts are to be taken into account

according to the amount owing on the face of

them. But there are circumstances in which a

claim or debt may, eg, be valued and the

amount to be included in the claims which,
on winding up, will be proper for payment will

be less than the amount which might, were the events to run their course, be payable by the

company. Thus, s 291 envisages that debts

"payable on a contingency" and claims for
damages may, as there provided, be sub~ect to

"a just estimate being made" of their value.

And provision is made for the amount to be

determined in accordance with the current

bankruptcy law.

The dispute between Tanning and the

liquidator has arisen in the contextof the

submission of a proof of debt by Tanning and

the determination of it by the liquidator as

part of his statutory duty. The essence of
the dispute is the determination of the amount

for which the debt of Tanning is to be

admitted to proof in the winding up.

No doubt in order to do what he should

do under the statutory scheme, the liquidator
must determine or have regard to what,

apart from the winding up, the amount of

the debt would be. And, in the case of

dispute, such a matter may be determined by

the iudge on appeal or as he may direct.

ClT34/l/HS	11	13/9/89
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MR CAMPBELL (continuing):  Those reasons were agreed in

by His Honour Mr	Justice McHugh; he mentions it
briefly at 320.	The reasons of His Honour
Mr Justice Cohen	were - - -

DEANE J: Mr Campbell, does it appear what the position would be in the United States now that the liquidator has been appointed under our law? Could the arbitration

go ahead against the desires of the liquidator?

MR CAMPBELL: It would depend upon what was being arbitrated,

Your Honour. There has been an arbitration in the

United States in which the liquidator was the moving

party.

DEANE J: But, assume that the other party wished to have this

point determined. Could it force arbitration

proceedings in the United States? It may well be that

the liquidator might have an answer that it has

already been determined in previous arbitration

proceedings but that seems to be beside the point.

MR CAMPBELL:  We are not aware of any case that positively

decides the question. There are some American cases

which look at the converse situation which look at

the situation where a liquidator is seeking to get

in assets of the company and which hold that a

liquidator who is engaged in that sort of enterprise

can be held to an arbitration clause. We are aware

of no case that decides that when a liquidator is
engaged in the function of deciding what proofs

ought be admitted, he can be bound by an arbitration

clause and there are some cases that we can take the

Court to which show that the American courts are prepared to recognize foreign bankruptcies and to allow foreign bankruptcies to run their course.

DEANE J:  But that is not the question I was asking you. The

question I was asking you was, what if the company

in America sought to raise this question against the

company in liquidation? Could it force the company

in liquidation to arbitration?

(Continued on page 13)

ClT35/l/SH	13/9/89
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MR CAMPBELL:	No.

DEANE J: It could not?

MR CAMPBELL:  No, it is established that the stay of

proceedings that arises upon the liquidation

of a company has only a territorial limit

so that a United States corporation would not be

bound by it. However, it would be open to the

American company to institute arbitration

proceedings, but that does not mean that the

liquidator has to go there. If an award were

given that was a default judgment he would not

be bound by it because it is well established

that a liquidator is entitled to go behind a

default judgment. So, I suppose the answer to Your Honour's question is there could be

an arbitration but it would not do the
American company any good because the liquidator
would not be bound bv it. Were the liquidator to
choose to appear in the arbitration, that may be

a different thing, but he courd not be forced.

BRENNAN J:	Why would he not be bound by it?
MR CAMPBELL:	He would not be, we would say, someone who

in the language of our Act was a party to the

arbitration agreement.

BRENNNAN J:  No, the arbitration might be instituted

by Tanning against Hawaii.

MR CAMPBELL:  Yes, and if there were an arbitration

instituted by Tanning against Hawaiian it is

possible for the liquidator to go behind any

default judgment that is obtained.

DEANE J:	But why is it a default judgment if it is brought pursuant to an arbitration agreement by which
both uarties bind themselves for the resolution
of that sort of dispute?
MR CAMPBELL:	It is a default judgment in the sense that

it is a judgment that has been given without

one party appearing.

BRENNAN J:  On what basis do you go behind a default judgment

if the party was none the less bound by the arbitration clause and chose not to appear?

(Continued on page 14)

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MR CAMPBELL:  There is a series of decisions that I could take

Your Honours to on that.

DEANE J: Relating to arbitration clauses where the party had

agreed to be bound, that say that that is a default

judgment?

MR CAMPBELL:	No, that relate to judgments.
DEANE J:	But they are not comparable.
MR CAMPBELL:	But in the course of that situation - in the course

of those judgments, reasons are given concerning the
circumstances in which liquidators are entitled to go

behind a judgment and the gist of it is that if there

is a default judgmen4 fraud, collusion or other

sufficient cause - "other sufficient cause" meaning

any reason which shows why the ultimate result that

has been reached in the arbitration proceedings is
not the correct result.

DAWSON J:  But a default judgnent is one on which there has been

no hearing on the merits, is it not? This would not

be that sort of judgment.

MR CAMPBELL:  But there would be no hearing on the merits in the

sense of a contested hearing on the merits.

DAWSON J: Well, that does not matter.

BRENNAN J:  A party who is liable cannot avoid liability simply

by choosing not to contest it.

MR CAMPBELL: But, if there are circumstances where the judgment

that has been arrived at - or the award that has been

arrived at in the arbitration proceedings is not the

correct amount, then still the liquidator, in

exercise of his statutory functions, is entitled to

go behind it.

If I could perhaps take Your Honours to the cases which deal with this right of a liquidator

to go behind judgments.

BRENNAN J:	Does that really touch the question of the operation of the Act? If proceedings can be brought by Tanning
against Hawaiin by way of arbitration, in Florida,
why is it that that is not a proceeding which establishes that the subject-matter in litigation here could be dealt with under the arbitration?

(Continued on page 15)

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MR CAMPBELL:  That the subject-matter is capable of being dealt

with under the arbitration clause is, we would submit,

a different question to whether the liquidator, in

exercising his function, is bound by the results of

any such arbitr8.tion.

BRENNAN J: That may be so, but looking at the words of

subsection (2), do these proceedings involve the
determination of the matter which, in pursuance of

the agreement, is capable of settlement by arbitration?

MR CAMPBELL: Well, we submit not, because we adopt some reasons

of His Honour Mr Justice Mahoney as to what is

meant by "the matter that it capable of settlement

by arbitration". It involves more than just some

question that requires to be determined. The phrase,

"determination of a· matter" is something that is

picked up from the convention which appears in the

schedule to the ARBITRATION (FOREIGN AWARDS AND

AGREEMENTS) ACT.

BRENNAN J:  But is not the matter the debt which is to be

admitted for the purposes of section 291 of the

COMPANIES ACT?

MR CAMPBELL:  If that be the matter, then that is something

which would not, we would submit, be able to be

determined by arbitration because, in doing what he

is doing, the liquidator is not acting as the

company.

BRENNAN J: That might be in relation to the admission of the

debt - - -

MR CAMPBELL:	Yes.
BRENNAN J:	- - - but the debt itself, is that not a matter

which is both the matter to be admitted under 291

and the matter susceptible of determination by

arbitration under section 7(2)?

MR CAMPBELL:  The quantum of the debt is an issue that arises in deciding whether the proof should be admitted

but it is not what the actual matter is.

(Continued on page 16)

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MR CAMPBELL (continuing):  The actual matter is should

this proof be admitted and, if so, for how much?

DEANE J:  Or is that so, or is there a debt, if so how much,

should it be admitted, if so to what extent?

MR CAMPBELL:  If that be the matter, then it does not follow

that the entirety of the matter is capable of

determination by arbitration.

DEANE J:	Except it says "the proceedings involve".
MR CAMPBELL:	Yes.
DEANE J:	Why would they not involve that matter, namely

the existence of the debt and how much?

MR CAMPBELL: If the matter is the list of four items that

Your Honour gave me, then the proceedings constitute

that list of four and - - -

DEANE J:  I did not mean to say the matter was those four

matters. I no doubt said it. I will rephrase it -

if the case or if the whole contest involves those

four issues, does the question become whether 'matter'

in subsection (2)(b) means the whole four of them

and not any one or two of them?

MR CAMPBELL:  On this limb of the argument, yes.

DEANE J:  So on that approach, if the liquidator were

plaintiff the answer would be different.

MR CAMPBELL:	I am sorry, I do not follow that, Your Honour.
DEANE J:	If the liquidator were going for a declaration

of the amount of the debt before he passed to how

much should be admitted, the answer would be

different.

MR CAMPBELL:  That would be so, but it is difficult to see why

a liquidator would do that.

DEANE J:  He might want to adhere to the sp1r1t of an

arbitration agreement, Mr Campbell.

MR CAMPBELL:  Yes, but we would submit that he has his

statutory duties to carry out and - - -

DEANE J:  I was not being critical. I was just g1v1ng a

hypothetical example as to why he might.

MR CAMPBELL:	Yes, Your Honour.
BRENNAN J:	We will need to consider the meaning of the word

"involve'', will we not, in subsection (2)(b)?

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MR CAMPBELL:	Yes, and that does contemplate that proceedings could have more than one matter in them as does the
bit towards the end of (2)(b) that says that so much
of the proceedings as involves the determination of
matter can be stayed.
BRENNAN J:	Does that mean that the scope of proceedings is

not coterminous with the scope of matter or determination

of matter?

MR CAMPBELL: Certainly the scope of proceedings can be greater

than that which involves the determination of a matter.

That must necessarily follow from the fact that so

much of the proceedings as involves the determination

of the matter can be stayed. But, Your Honours, the

question of whether the liquidator may be able to
enforce determination of the arbitration agreement

or the question of whether Tanning could, in some

circumstances, enforce the determination of the

arbitration agreement does not necessarily answer

the question that there is before this Court because

the question that it is necessary to decide is whether,
when the liquidator is engaged in admitting or rejecting
a proof of debt or in fighting an appeal therefrom, he

is in the position of being a party to the arbitration

agreement or someone claiming through or urider him.

GAUDRON J: That is more accurately it is, in terms of

subsection (2)(a), is it not, when he is respondent
to a proceeding called "an appeal" in respect of

his admission or rejection of a proof of debt?

MR CAMPBELL:	Yes.
GAUDRON J:	Because that appeal is really a review of his administrative decision, is it not, rather than an
appeal as we properly understand it?

MR CAMPBELL:  Yes. The practice is that the entire matter is

heard afresh and -

GAUDRON J:  And the question is whether in those proceedings

he can be said to be claiming anything.

MR CAMPBELL:  Indeed, and we say that he is claiming nothing.

He is resisting, if anything. He is resisting the

claim that is being made by the creditor to be
admitted as a creditor for a certain number of

dollars.

BRENNAN J: But it is not claiming a right, is it? It is

claiming through or under a party. Why is that not
broad enough to i~clude claiming - and I need not

put it in Hohfeld1an terms - claiming a defence.

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Tanning(2)
MR CAMPBELL:	He only comes to claim that defence once he

seeks the stay.

BRENNAN J: But, the word "party" in subsection (4), refers

back, does it not, to both of the parties in (2)(a)?

MR CAMPBELL: It does.

BRENNAN J: Why is it, then, that subsection (4) does not apply

to him who is claiming through or under the defendant

party in (2)(a)?

(Continued on page 19)

C1T40/2/SH	18	14/9/89
Tanning(2)

1:1R. CAMPBELL:  The reason, Your Honour, would be that when

he is in this particular position of deciding what

debts should be admitted to proof, it is not as

though he is asserting the rights of the company at all. He is in a position of being a delegate

of the court in the courts task of winding the

company up and in that position he is no more

making a claim than a judge who determines a litigant's rights is making a claim. When a

judge says 'What about this point; what about

that point'" the judge is not making a cl aim and

similarly a liquidator,in appropriately testing

the claim that the creditor brings to be admitted

to proof, is not himself making a claim. He is

fulfilling a special statutory function of making

sure that only the correct debts get admitted to proof and that the liquidation of the company is

carried out in an orderly way and in one place,

which has been something that has been regarded as being of great importance to the administration of

companies for a long time.

DEANE J: Let us assume that Hawaiian, instead of being a

company was Mr Hawaiian, and let us assume that he

had died and these were proceedings against his

executor, would that fey not be covered by clause 7(2)?

1:1R. CAMPBELL:  Yes.

DEANE J: Well then the only difference is that the liquidator

has a different statutory function to perform which

enables him to reject proof of debt in some

circumstances, notwithstanding that the existence

and the amount of the debt is established?

1:1R. CAMPBELL:	Yes.
DEANE J:	But the issue here would seem to be as to the existence and the amount of the debt. You may have assented too readily to my question that the only
difference between the liquidator and the executor
is that function.  I was not ass~rting it, I was
asking you.
MR CAMPBELL:	Yes, but so far as the executor is concerned

the executor stands, in all respects, in the position

of the person whose estate he is representing and

the essential difference, we say, is that a liquidator

is not, as it were, an executor of a dead or dying

company,that the liquidator has this special function.

GAUDRON J:  But does he also have that function as respondent

in proceedings called an appeal from his decision?

Because that, I would have thought, is what one

must look to under (2)(a).

CIT41/l/CM	19	13/9/89
Tanning(2)

MR CAMPBELL:  In those proceedings it would be, for a start,

very odd if the court in an appeal from a liquidator's

decision were to decide that a difference result

could come about than that which the liquidator

would have reached had he been deciding it properly,

and so we say that - - -

GAUDRON J:  I did not mean to divert you from Justice Deane's

question, but it seems to me that that is the
point at which you must make your comparison with
the executor in proceedings, not at the point of

admitting the debt.

MR CAMPBELL:  Yes, but we say that in the appeal against the

liquidator's decision, what the court is endeavouring

to do is to ensure that the correct decision that
the liquidator should have reached is the one which

actually obtains and the liquidator, in acting as

a respondent to the appeal, has functions to look

after the interests of the creditor as a whole,

but in running the defence to such an appeal for

instance, the liquidator would still be subject to

the rule in ex parte JAMES, as to the judicial

manner in which he is required to carry out his

functions.

(Continued on page 21)

CIT41/2/CM	20	13/9/89
Tanning(2)

:t1R CAMPBELL (continuing):  He would not be entitled to

adopt a "boots-and-all", "take-any-point" approach

in the same way that a private litigant is

entitled to behave. So we say that the essential

nature of an appeal to the Court from a

liquidator's decision is not different to that

of the decision appealed from.

BRENNAN J: Are there any cases which deal with the role

of a liquidator as a party to proceedings which

challenge the rejection of the proof of debt?

:t1R CAMPBELL:  Not that I am aware of, Your Honour.

His Honour Mr Justice Cohen has examined the

role of a liquidator in this function in his judgment

in the portion from page 217 through to page 222.

If I could perhaps take Your Honours to that. He

begins at the top of page 217, the first complete

sentence there, by saying the proceedings, that is to which the ARBITRATION (FOREIGN AWARDS AND

AGREEMENTS ACT) can apply:

however, under sub-s (2)(a) are required to

be proceedings instituted by one party to

the arbitration agreement against another

party to that agreement. The plaintiff

submits that the parties to the agreement

were itself and Hawaiian Tropic Pty Limited.

It says that these are not the parties to

the present proceedings nor is the defendant

a party as a representative of that company.

The issue which is raised therefore is

whether an appeal against a liquidator's

rejection of a proof of debt is a proceeding
against the other party to the agreement,

that is the company. The resolution of this issue requires a consideration of the nature

of the proceedings and of the question whether

the liquidator is for all practical purposes
the company to which he was appointed. The

liquidation is subject to the provisions of the COMPANIES ACT 1961. (Continued on page 22)

CIT42/l/JM	21	13/9/89
Tanning(2)

MR CAMPBELL (continuing):

Bys 230(3) of that Act no further

proceedings or action may be brought against

the company other than with the consent of

the Court.

He recites the various rules that are relevant to

proof, and at the foot of the page say:

In passing it should be noted that the endorsement on the rejection of the proof of debt in the present case was made in accordance with that Rule.·

That is, advising of the availability of an appeal to

the court.

DAWSON J: But all of that is to confuse the functions of the

liquidator with the matter to be determined. Of course

the liquidator has functions which were not the

functions of the company being liquidated.

But, if you look at the Act, there are proceedings

instituted by a party to an arbitration agreement,

Tanning, against someone who is not a party to the

arbitration agreement. The proceedings do involve

the determination of a matter, do they not? And that

matter is the existence of a debt, and if it does

exist, how much?

MR CAMPBELL:  We submit that that is not the relevant matter,

but - - -

DAWSON J: That is what is to be determined, is it not, in

these proceedings? At least, there may be other

things to be determined as well, but at least that

is to be determined.

MR CAMPBELL:  We submit that that is not a matter within the

meaning of section 7(2)(b).

DAWSON J: Well, assuming that it is, you then go down to (4)

and the way in which the liquidator resist the claim

by the party to the arbitration agreement, namely

Tanning, is by raising defences which were Hawaiians

defences, that is, he claims through or under

Hawaiian, and therefore, in relation to that matter

he is to be taken to be a party. What is wrong with

that?

MR CAMPBELL:  What is wrong with it, with respect, is that

it is circular, because it assumes the availability

of this defence to it.

DAWSON J: Well, whether he has got a defence or not, what he

is claiming he could only claim tt._·ough Hawaiian. He

cannot think up something on his own account - - -

ClT43/l/FK	22	13/9/89
Tanning(2)

MR CAMPBELL:	Indeed.
DAWSON J:	- - - in relation to the matter 'Whicl.1 I have said is, and which you dispute, the existence or non-existence of a debt and the amount.
MR CAMPBELL:	But, the mere fact that he makes the claim,that

he says, "This is what I want", is not something - - -

DAWSON J:	He is not doing anything; he is resisting a claim
by Tanning.
MR CAMPBELL:	When he makes a claim in the sense of saying,

"I am entitled to this def enc::," namely a stay

there must be a question as to whether that is something

that he can properly say in his role as liquidator

who has responded to an appeal.

DAWSON J:	We have not got to the stay yet, we are just
determining what the proceedings are about in the
appeal, and the proceedings are about the existence or non-existence of a debt, and in relation to that the only things that he can say are things which would
have been said by Hawa:iian that is, whatever he
claims he claims by or through Hawaii-an
MR CAMPBELL:	The only things that he ca:.1 say are things

that Hawaiian could have said, but that does not mean
that he has some right of his own that he is

asserting in the proceedings.

DAWSON J:	No, no one is suggesting that, but the rights which
he does assert, he asserts through Hawa:iian, or under
Hawaiian, if that is the appropriate phrase.
MR CAMPBELL:	We would submit that rather it should be seen as

that he brings to the attention of the court whatever

matters there might be that are appropriate for

deciding how much Hawaiia.n owed -

(Continued on page 24)

ClT43/2/FK	23	13/9/89
Tanning(2)

DAWSON J: Certainly, he does but in relation to the existence

or non-existence of the debt and the amount he does

not go beyond the scope of Hawaiian's rights or

defences.

MR CAMPBELL:  Yes, but that does not mean that when he is there

he is claiming through Hawaiian.

DAWSON J: Well, he is not asserting rights or defences of his

own, is he, in relation to that matter?

MR CAMPBELL:  In relation to that matter he is not.

DAWSON J: You are saying that Hawaiian did not owe this money.

Now, surely, that is asserting something through or

under Hawaiian?

MR CAMPBELL:  It is no more so, we would submit, than when,

for instance, an incapable person has a tutor appointed.

The tutor is able to put to the court whatever things

could be said for or against any claim that might

be brought against, for instance, the estate of the

person who was in tutelage.

BRENNAN J: Is that a fair analogy in proceedings which are

brought against the liquidator?

MR CAMPBELL:  I would submit it is, Your Honour, because the

liquidator is somewhat like a person who is looking

after a company that is incapable of looking after

itself.

BRENNAN J:	But you do not see the tutor, do you?
MR CAMPBELL:	No, but the person whose name is on the proceedings

is not essential to the reality of what is going on

in the proceedings. Here, the liquidator is putting

forward whatever it is that can be said about whether

or not the company owes this money or not. We submit

that he is not there as agent of the company but,

just as when he is in the first place exercising a

should do about the proof, so he is exercising a job	job as the delegate of the court in deciding what he
that he has in the public interest in the orderly
administration of the liquidation by being there as
a respondent to the appeal.

(Continued on page 25)

ClT44/l/DR	24	13/9/89
TAnning(2)

MR CAMPBELL (continuing):  There needs to be someone

who can present the argument and let the appeal be

properly determined. It is the liquidator's job

to do it.

GAUDRON J:  Mr Campbell, what are th~ issues in the appeal?

They might be that the liquidator made an error of

law in rejecting the proof of debt, or they might

be whether or not the debt was owing and its amount.

MR CAMPBELL:	Yes.
GAUDRON J:	Whichever way you frame them as the issues, the

questions are, are they not, "Was there a debt owing?"

and, "What was the amount?".

MR CAMPBELL:	Yes.
GAUDRON J:	They are the only issues in the proceedings.
MR CAMPBELL:	In some cases there are extra issues involved

such as ought a liquidator take a limitations

defence, and other matters of that kind that are

relevant to EX PARTE JAMES.

BRENNAN J:  Is it correct to say that the problems we have

to consider under this are whether or not these are

proceedings, or whether they are proceedings which

are against a party in any relevant sense, whether

the liquidator is a party and what is the matter

which is involved in the proceedings?

MR CAMPBELL:  Yes, including in whether the liquidator is a

party, whether he is claiming through or under a

party.

BRENNAN J:  Of course, yes. Now, is there anything you can

add to what you have said about those points?

MR CAMPBELL:  There is, first of all, the fact, as pointed

out by His Honour Justice Mahoney, that the exercise

that is involved in admission of proof of debts is

not necessarily always the same as what is owed

because of the way that sometimes there are

valuations of debts involved, debts owing on a

contingency can be admitted to proof.

(Continued on page 26)

ClT45/l/HS	25	13/9/89
Tanning(2)

MR CAMPBELL (continuing): There is the fact that in the

proceedings the rights of the parties get adjusted
in a different way to the way in which they would

in ordinary court proceedings. There is a decision

of His Honour Mr Justice Wootten in RE A. FORSYTH &

CO LTD, (1975) 1 ACLR 274. It concerned a question

of the availability of interest under section 94 of
the SUPREME COURT ACT in proceedings that were brought

to admit a proof of debt and the decision of His Honour

was one where no such interest was available.

At page 275, he said:

I do not think that this section -

that is section 94

is applicable, because these are not

proceedings for the recovery of any money
and will not result in judgment being given

for any sum. This proceeding is one in

which the court is asked to reverse or

modify an act or decision of a liquidator,

the court's jurisdiction arising either

under the general power ins. 279 ..... or,

more specifically under r. 160 of the

Companies Rules, which provides that if a

creditor or contributory is dissatisfied

with the decision of the liquidator in

respect of a proof, the court may, on the

application of the creditor or contributory,

reverse or vary the decision. Far from this

proceeding or the winding-up in relation to
which it occurs being a proceeding for the

recovery of money in which the court will

give a judgment, it is a procedure for

determining ar:d meeting the liabilities of

the company without the necessity for such

proceedings.

GAUDRON J: If you take the last words and change "it is a

proceeding for determining and meeting the liabilities

of the company" et cetera, do you have any difficulty

with that sentence?

MR CAMPBELL:	I do not think I could say I did, Your Honour, no. Also, Your Honours, there are some old English
cases which have considered this phrase "claiming
through or under" in the context of trustees in bankruptcy and if I could take Your Honours to those, the first of them was a case of STURGIS V LORD CURZON,
(1851) 7 EX 17 and, more conveniently, in 155 ER 837.
That was a case where, after some proceedings in
court, the parties agreed to submit their differences
to arbitration.  The arbitration was part heard before
one of the parties became insolvent. That person's
trustee in bankruptcy then brought some court
proceedings on an identical action to that which

ClT46/l/SH	26	13/9/89
Tanning(2)

had been submitted to arbitration and the defendant

to those court proceedings sought a stay. If I

could ask Your Honours to pick it up on 837 at about

point 8. In the course of the argument of Mr Keane,

he said:

The plaintiffs cannot succeed to the rights

of the insolvent, and, at the same time,

divest themselves of the burthens which

accompany them. The defendant therefore is

entitled to be released from this second

action for the same cause as the former,

and to have the benefit of those proceedings

in it which have already cost him so much.

Baron Parke said:

Bankruptcy is no revocation of a submission

to arbitration. A person who agrees to

refer a cause to arbitration does not thereby

impliedly undertake not to become bankrupt.

Mr Keane continued:

It is conceded, that bankruptcy is no

revocation ..... but, under the circumstances

of this case, the defendant seeks for relief

from the Court, since he clearly suffers a

wrong by this section action to which the

pendency of the former cannot be pleaded.

(Continued on page 28)

ClT46/2/SH	27	13/9/89
Tanning(2)

:MR CAMPBELL (continuing):  Baron Alderson said:

Who has broken faith with him? Not the present plaintiffs, for they were no parties to the former reference; not the

former plaintiff, for he has not revoked

the submission, and is not a party to

this action. We cannot comnel the

assignees to become parties-to the reference,

then whv should we stay proceedings in this

action? The Court will not keep faith

with the defendant if they allow this action

to proceed -

et cetera. Baron Alderson said:

The Court only undertook to enforce the

submission under circumstances which would

give it jurisdiction to interfere; the

defendant took upon himself the risk of

circumstances arising, under which the Court
could not interfere for want of jurisdiction.

Insolvency is a misfortune, against the

consequences of which the defendant has no

remedy.

And the stay was therefore refused. That case
was followed in PENNELL V WALKER, (1856) 18 CB 650,

more conveniently reported in 139 ER 1525. Reading

from the headnote in that case:

F. and S. having brough an action against W.

to recover the price of timber delivered

under a contract, and W. having brought

a cross-action in which he sought to recover
damages against F. and S. for alleged breaches

by them of the same contract, the two actions,

and all matters in difference between the

parties, were referred to arbitration. Before

anything was done under the reference, F. anc

S. became bankrupts; and their assignees

brought a fresh action against W. for the

price of the timber. - Upon a motion under the

11th section of the Connnon Law Procedure Act,

1854 ..... to stay the proceedings in the

last-mentioned action, - Held, that, assuming

the section to apply to such a case (which
the court inclined to think it did not), it

was not one in which they would in the

exercise of their discretion interfere.

The terms of the 11th section of the COMMON LAW PROCEDURE ACT are set out on page 1526 just

below the heavy print page number 653

Your Honours will see that it provides that:

"whenever the oarties to any deed or

instrument ..... or any of them, shall agree that

any then existing or future differences between

CIT47/1/JM	28	13/9/89
Tanning(2)

them .... shall be referred to arbitration,

and any one or more of the parties so

agreeing, or any person or persons claiming

through or under him or them, shall

nevertheless connnence any action at law or

suit in equity -

then there can be a stay. The argument as to whether the asignees were claiming through or under was clearly raised over on page 1527,

around the middle of the page, just before the

heavy print number 555 . Counsel said:

Then, the assignees are not "persons claiming

through or under" the bankrupt, within the

meaning of the section. They claim

adversely to the bankrupts.

That is something which could be said here,

that in a way the liquidator is claiming in a

way that is adverse to the company because he is

claiming for the purpose of distributing amongst

the creditQrs.

(Continued on page 30)

CIT47/2/JM	29	13/9/89
Tanning(2)

DAWSON J: That was the argument. The court did not really

express any view, did it?

MR CAMPBELL:  Yes. The court did express a view, but did

not make it the ratio. Over on 1528 in the

Chief Justice's judgment, he said:

I am of opinion that this rule must be

discharged. I very much doubt, that, even

if so inclined, the court has the pc,w-er to make the rule

absolute, and I think, that, by making the

11th section of the

Act -

applicable to mutual credits, we should be

giving it an effect which the legislature

never contemplated, and altering the course of

proceedings in bankruptcy.	But it is unnecessary
to decide that -

Then he goes on to talk about discretionary matters and then four lines from the end of his judgment he

returns to the topic, saying again:

I do not think that this is a case to which

the statute was intended to apply.

And if the statute gave us power to interfere, I do not think it is a case in which we would

properly exercise our discretion. Justice Cresswell

said he was of the same opinion and he gave as a

reason, a few lines down:

The assignees are not to be deprived of their

privilege of repudiating the arrangement of the bankrupt in this case more than in that.

Justice Williams at 1529, just before the end of

his judgment said:

I cannot think that the 11th section of the

COMMON LAW PROCEDURE ACT, 1854, was intended

to apply to such a case -

Mr Justice Willies was of the same opinion and so - - -

BRENNAN J:  How did he distinquish EX PARTE MICHIE,

whereas he said "the assignees were held to be

equitably bound by that agreement"?

MR CAMPBELL: It appears there - - -

GAUDRON J: Might it have something to do with the nature of set-off?

BRENNAN J: Yes.

CIT48/l/CM	30	13/9/89
Tanning ( 2)

MR CAMPBELL:  It was part of the - there there was a judge's

order made by consent, in a case in which the

bankrupt was a plaintiff concerning pending

reference between the parties and it was the

agreement to allow a set-off that the trustee

was equitably bound to rather than the agreement

of the bankrupt to submit to arbitration. The

question of whether the trustee in bankruptcy

was someone claiming through or under is also

raised in argument in PIERCY V YOUNG, which I

have given Court a reference to.	The court there
expressly left the question alone.

(Continued on page 32)

CIT48/2/CM	31	13/9/89
Tanning(2)

MR CAMPBELL (continuing):  PIERCY V YOUNG has got caught up

in some of the references in Russell on

Arbitration and some other texts as being relevant on this topic. We say that that line of cases

shows the way in which a liquidator is not

regarded as claiming through or under the bankrupt.

Another basis on which we put it is that the

liquidator here has a special statutory function

to perform so that it is not only by virtue of a

contract that he comes to court, and that that is

analogous to a situation that was considered by

the Court in BONNIN V NEAME, (1910) 1 Ch 732.

That was a partnership case. A partnership deed

contained an arbitration clause, one of the partners

assigned his interest in the partnership- mortgaged his interest. Reading from about half-way down the headnote:

Questions had arisen as to the right of the continuing partners to purchase the outgoing partner's share, and the amount

of interest in the goodwill, which

depended on the construction of the

partnership deed. The continuing partners

gave notice to the outgoing partner that

they had appointed an arbitrator and

requiring him to do the same. He did

this, and the arbitrators agreed on an

umpire, but nothing more had been done

in the arbitration. The mortgagees

brought this action against all three

partners for an account of the outgoing

partner's share	from the date of
dissolution.	The continuing partners moved

for a stay of proceedings under the

ARBITRATION ACT.

It was held that:

the right of the mortgagees to an account

was an independent right, given by the

PARTNERSHIP ACT, and not depending upon

the partnership deed; that, the

arbitration clause not including in

terms persons claiming under the partners,

the mortgagees were not bound by the

clause and would not be bound by any

account taken in the arbitration, and

therefore their action for an account

could not be stayed.

The relevant passage in the judgment is at page 738,

about half-way down the page:

ClT49/l/HS	32	13/9/89
Tanning(2)

The first objection taken on behalf of

the plaintiffs is that the matter is not

really withins. 4 of the ARBITRATION

ACT at all. It is quite clear that under

s. 31 of the PARTNERSHIP ACT the
plaintiffs are entitled to an account;

and I pressed counsel for the motion to

say whether he contended that the

plaintiffs would be bound by the result

of any account taken in the arbitration.

It appears to me they would not be

bound. The statute recognizes their

right to an account, that is, to have

that account taken. They cannot be

compelled to come into the arbitration.

No notice to appoint an arbitrator has been served upon them. They have not

appointed any arbitrator.	No such
notice could be served upon them;	they
could not be required to appoint an
arbitrator.	Then how can an account

taken behind their backs, and to which

they are not parties, bind them?

(Continued on page 34)

ClT49/2/HS	33	13/9/89
Tanning(2)

MR CAMPBELL (continuing):

If I were to determine that they were bound by an account taken as between the partners, it would be not to allow them the right which

the statute confers upon them. They are

entitled to an account, and to hold that they

are to be bound by an account taken in their

absence and that unless they can shew some fraud

or some manifest error they are not to be
entitled to come to the Court for an account

would be to ignore the language of the statute

altogether.

And, similarly here, we say that there is an

independent statutory function that the liquidator

is performing when he is both examining the proofs of

debt for himself and also when he is appearing in court as a respondent to an appeal of his initial decision. There are three cases that concern the

question of whether an assignee of a debt is bound

by an arbitration clause in the contract to which I

give the Court references in the outline of submissions.

But they are, I would ultimately submit, inconclusive

and they are not really determinative of this question,

in any event, because the assignee of a debt, of course,

is seeking to enforce rights that arise under the

very contract and he does not have the situation of

being in an independen~ statutorily conferred

position.

The next matter that we rely upon is the fact that section 7(4) is an Australian invention, or

addition, to what was required by the New York

convention. The New York convention simply says

nothing about what is to happen on the insolvency

of someone who is a party to an arbitration agreement.

We say that when the Australian Parliament enacted

subsection (4) at a time when there was a long

established system for the proof of debts in

liquidation that it ought not be taken to be

intending to overthrow that well-established system

when it has not used words that are clearly apt,

for so overthrowing it, and when the point of the

Act is to give effect to the New York convention and the New York convention does not require any such

thing to be done.

There are some United States authorities that

are relevant at this point. If I could take

Your Honours to the United States authorities that have been collected.

ClTS0/1/DR	34	13/9/89
Tanning(2)

MR CAMPBELL (continuing):  If I could ask Your Honours to

turn to the second of the cases, called

FOTOCHROME, INC. V COPAL COMPANY, LIMITED, the

decision of the United States Court of Appeal

second circuit. It is a case that was concerned

with the recognition in bankruptcy of an arbitration

award, where the award was given in an arbitration

that had been connnenced before the filing of the

bankruptcy petition, but was completed afterwards.

So, it is not quite on point, but the relevant

passage for present purposes appears at page 517,

on page 35 of the bundle, where, at the paragraph

numbered 5, it was said that:

Neither the Convention -

this is the New York Convention -

nor the arbitration statutes indicates

what should be done in the event of the

bankruptcy of one of the parties to an

arbitration. Nor does the Bankruptcy Act

reveal how a Bankruptcy Judge should handle

an arbitration award filed as proof of

directors of the company did in happier days. But,

because he is the person who is the decision-making organ

of the company does not mean it is not the company

that it is the real party.

TOOHEY J:  But, at what point in relation to the arbitration

proceedings did Hawaiian go into liquidation?

:t-1R CAMPBELL:	Before.
DAWSON J:	It was the liquidator that corrnnenced the

arbitration and then his name was removed and the

company's nam~ for reasons that are known to the Florida law,

was replaced.

ClT75/l/JH	67	13/9/89
Tanning(2)

MR CAMPBELL:  Yes, but there is a finding by His Honour

Mr Justice Cohen that the proceedings were commenced

by the liquidator. His Honour Mr Justice Kirby goes into it in slightly more detail about the

parties - - -

DEANE J:  Do not let me delay you with my query. I had not

appreciated it before, no doubt I had at some stage.

TOOHEY J:	The document described as "Final Judgment" has a heading slightly different from that on the award
itself, pages 25 and 26.  The final judgment refers
to Hawaiian:

by and through DONALD C. LANGER,

on behalf of himself and all other

stockholders.

MR CAMPBELL:  Yes. Mr Langer was apparently acting as agent

of Mr O'Brien in so doing.

TOOHEY J: Except it says, "and all other stockholders".

MR CAMPBELL: Yes. Langer had been a shareholder in the

company but, in a way, it is probably the proceedings

in their regularized form, but, Your Honours, when

one looks at the sort of issues that have been caught

up in this description that His Honour Mr Justice Dixon
uses one finds that they do go to various subsidiary issues in the course of proceedings. BLAIR V CURRAN

itself illustrates this where there was a finding as to construction of a will which was held to be

binding even when a somewhat different question of construction, or the application of the will arose for determination.

(Continued on page 69)

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MR CAMPBELL (continuing):  I have set out various references

there and shall not take the Court to the detail of

them.

Another example of the way that matters that are steps on the way to a final conclusion can be the

subject of issue estoppel emerges from the Privy Council's

decision in HOYSTEAD V COMMISSIONER OF TAXATION, (1926)

AC 155. The relevant passage there begins about

two-thirds of the way down page 165 where

Their Lordships said:

Very numerous authorities 'vere referred to. In the opinion of their Lordships it is

settled, first, that the admission of a fact

fundamental to the decision arrived at cannot

be withdrawn and a fresh litigation started,

with a view of obtaining another judgment

upon a different assumption of fact; secondly,

the same principle applies not only to an erroneous admission of a fundamental fact, but to an erroneous assumption as to the

legal quality of that fact.

They go on to refer to OUTRAM V MOREWOOD, over on

page 166:

An action of trespass over a certain vein of

coals lying under the close of the plaintiff,

it was held that if a verdict be found on any

fact or title, distinctly put in issue in an

action of trespass, such verdict may be pleaded

by way of estoppel in another action between

the same parties or their privies, in respect

of the same fact or title.

In a previous action an issue was found

for the plaintiff and against the wife, one
of the two subsequent defendants, her husband

being the other defendant with her in the

action under decision. Lord Ellenborough C.J.,

said:  "The operation and effect of this finding,

if it operate at all as a conclusive bar, must

be by way of estoppel. If the wife were bound
by this finding, as an estoppel and precluded

from averring the contrary of what was then so found, the husband, in respect of his privity,

either in estate, or in law, would be equally

bound." And in subsequent portions of his

judgment he spoke as follows:  "A finding upon

title in trespass not only operates as a bar

to the future recovery of damages for a trespass

founded on the same injury, but also operates

by way of estoppel to any action for an injury
to the same supposed right of possession ..... And

it is not the recovery, but the matter alleged

by the party, and upon which the recovery proceeds

which creates the estoppel.

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MR CAMPBELL (continuing):

The recovery of itself in an action of

trespass is only a bar to the future
recovery of damages for the same injury:

but the estoppel precludes parties and

privies from contending to the contrary

of that point, or matter of fact, which having

been once distinctly put in issue by them,

or by those to whom they are privy in estate

or law, has been, on such issue joined, solemnly

found against them.

And that appears to be a passage which casts	some
light on the question which Your Honour

Mr Justice Brennan asked me earlier, about whether

it is just on issus that there can be an estoppel?

BRENNAN J:  I notice that there is reference there to the pleading

of an estoppel, which would rather suggest that -

that is in the paragraph under OUTRAM V MOREWOOD -

which rather suggests that if an estoppel 11111st:
be pleaded it must be a fact in-issue because one

would not plead evidence -

MR CAMPBELL:  But what one could plead, ~for-instance, -in this

case, the liquidator is es~opped from derijing that
as at the date of liquidation the company was

indebted in the sum of $179,000.

BRENNAN J: And then this argument would come in to say that

was the finding in fact made. My question before,

I think, was posited on the proposition that

there was evidence of a fact of a death at some

time as against the fact in

issue in this case, which is a present debt, so

that that is where the difficulty, it seems to

me, lies.

MR CAMPBELL:  The point I was seeking to make is that the

passage from Lord Ellenborough's judgment which

is approved by the board seems to suggest that it

is the fact that a matter has once been litigated

which gives rise to the estoppel and not that that

is qualified in any way by reference to issues in

future litigation.

(Continued on page 71)

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BRENNAN J: Whenever that issue, that is the issue found,

arises again for determination, then the finding

is conclusive. The question is does that apply

when in the current litigation a different issue

is involved that the first finding is relevant

to it?

MR CAMPBELL: 

Yes, and I would seek to draw from the fact

that the way it is put here is that the estoppel
precludes parties from contending to the
contrary of that point or matter of fact

which has once been found and distinctly put in

issue by them and that there is no qualification

as to for what purpose one seeks the preclusion.

Would this be a convenient time, Your Honours.

BRENNAN J: 

It would be a convenient time. We will

adjourn until 9.30 tomorrow morning.

AT 4.50 PM THE MATTER WAS ADJOURNED

UNTIL THURSDAY, 14 SEPTEMBER 1989

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