Theo, Sol & Anor v Official Trustee In Bankruptcy Theo, Sol v Official Trustee in Bankruptcy
[1996] FCA 1036
•7 Nov 1996
CATCHWORDS
PRACTICE AND PROCEDURE - issue estoppel - prior determination that notices under Bankruptcy Act 1966 (Cth), s 139ZQ invalid - findings made in relation to Bankruptcy Act, s 121 - whether findings part of legal foundation for conclusion - whether challenge to findings precluded in subsequent litigation between the parties seeking orders in relation to Bankruptcy Act, s 121 - principles of issue estoppel.
Bankruptcy Act, 1966 (Cth), s 121
Blair v Curran (1939) 62 CLR 464
Rogers v The Queen (1994) 181 CLR 151
SOL THEO & ANOR v OFFICIAL TRUSTEE IN BANKRUPTCY
QG 141 of 1996
SOL THEO v OFFICIAL TRUSTEE IN BANKRUPTCY
QG 160 of 1996
Black, Sackville, Finn, JJ
Brisbane
7 November 1996
IN THE FEDERAL COURT OF AUSTRALIA )
QUEENSLAND DISTRICT REGISTRY )
GENERAL DIVISION )
ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA
Matter No. QG 141 of 1996
BETWEEN: SOL THEO and
ATHINA THEO
AppellantsAND:OFFICIAL TRUSTEE IN BANKRUPTCY
Respondent
MATTER NO. QG 160 of 1996
BETWEEN:SOL THEO
Appellant
AND: OFFICIAL TRUSTEE IN BANKRUPTCY
Respondent
CORAM: BLACK CJ, SACKVILLE, FINN, JJ.
PLACE: BRISBANE
DATE: 7 NOVEMBER, 1996
ORDERS
THE COURT ORDERS THAT:
The appeal be allowed.
The declarations and orders of the trial Judge be set aside.
The respondent's application be dismissed.
The respondent pay the costs of the first appellant before the trial Judge and on appeal.
The application for leave to appeal from the orders of Kiefel J refusing a stay be dismissed.
Liberty be reserved to the trustees for sale appointed by the orders of the trial Judge to apply to the Court within 21 days or such further time as the Court may order.
NOTE:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
QUEENSLAND DISTRICT REGISTRY )
GENERAL DIVISION )
ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA
Matter No. QG 141 of 1996
BETWEEN: SOL THEO and
ATHINA THEO
Appellants
AND:OFFICIAL TRUSTEE IN BANKRUPTCY
Respondent
MATTER NO. QG 160 of 1996
BETWEEN: SOL THEO
Appellant
AND:OFFICIAL TRUSTEE IN BANKRUPTCY
Respondent
CORAM: BLACK CJ, SACKVILLE, FINN, JJ.
PLACE: BRISBANE
DATE: 7 NOVEMBER, 1996
REASONS FOR JUDGMENT
THE COURT:
Mr Sol Theo is a discharged bankrupt. He has been engaged in litigation with the Official Trustee in Bankruptcy and the Official Receiver. The present appeal, in which Mr Theo and his wife are named as appellants, concerns the relationship between two stages of this litigation and, in particular, whether the trial Judge in the present proceedings correctly applied the doctrine of issue estoppel, as he was urged to do by the Official Trustee.
The notice of appeal challenges declarations and orders made by a Judge of this Court in proceedings commenced by the Official Trustee against Mr and Mrs Theo. The trial Judge made declarations that two transfers executed by Mr Theo, each dated 27 December 1984, whereby Mr Theo transferred his interest in two properties to Mrs Athina Theo, were void as against the Official Trustee, pursuant to s.121(1) of the Bankruptcy Act 1966 (Cth) (the "Bankruptcy Act"). Section 121 provides as follows:
"121(1) Subject to this section, a disposition of property, whether made before or after the commencement of this Act, with intent to defraud creditors, not being a disposition for valuable consideration in favour of a person who acted in good faith, is, if the person making the disposition subsequently becomes a bankrupt, void as against the trustee in the bankruptcy.
Nothing in this section shall be taken to affect or prejudice the title or interest of a person who has, in good faith and for valuable consideration, purchased or acquired the property the subject of the disposition or any interest in that property.
In this section, `disposition of property' includes a mortgage of property or a charge on or in respect of property."
The trial Judge also made orders for the appointment of trustees for the sale of the two properties and the division of the net proceeds between the Official Trustee and Mrs Theo, in equal shares.
In the proceedings before the trial Judge, the Official Trustee did not adduce evidence of facts capable of proving that Mr Theo had executed the transfers with intent to defraud his creditors. Nor did the Official Trustee adduce evidence of facts capable of proving that Mrs Theo was not a purchaser in good faith and for valuable consideration. Rather, the Official Trustee relied on findings made in earlier proceedings to which Mr Theo, the trustees of the S. Theo Family Trust ("the trustees") and the Official Trustee were parties.
In the earlier proceedings, Mr Theo and the trustees attacked the validity of certain notices issued by the Official Receiver under s.139ZQ of the Bankruptcy Act. In those proceedings, another Judge of the Court, Cooper J, made orders inter alia, setting aside the notices. However, his Honour also made findings that the elements required by s.121(1) of the Bankruptcy Act had been made out. In particular, his Honour found that Mr Theo had disposed of his interest in the two properties in order to defraud his creditors and that Mrs Theo, the transferee, was not a purchaser for valuable consideration. (It should be noted that in the proceedings before Cooper J the Official Receiver was named as the respondent, although on the appeal the Official Trustee was said to be the respondent. The present proceedings were brought by the Official Trustee. Nothing seems to turn on these differences: Bankruptcy Act, s.18(8A), which provides that all things done on behalf of the Official Trustee by the Official Receiver are deemed to have been done by the Official Trustee.)
The trial Judge in the present case accepted a submission that Mr Theo and the Official Trustee were bound by Cooper J's findings that the elements required by s.121(1) of the Bankruptcy Act had been established. He gave effect to those findings in the declarations and orders he made. Although the trial Judge did not say so expressly, he appears to have regarded Mrs Theo as also bound by the earlier findings, since the declarations and orders made by him were clearly intended to bind her. In this connection, Cooper J had stated in his judgment that it was clear that the second applicant in the proceedings before him was Mrs Theo, in her capacity as trustee of the S. Theo Family Trust. It therefore seems that Mrs Theo was a party both to the proceedings before Cooper J and to the proceedings determined by the trial Judge.
In the appeal before us, Mr Theo represented himself, but not Mrs Theo. Mr Theo contended the trial Judge erred in giving effect to the earlier findings made by Cooper J. Although his written submissions were not put with any precision, they put forward as a ground that the trial Judge
"erred in relying heavily and exclusively on [Cooper J's] findings, which were incorporated wrongly in [Cooper J's] decision of [24 August 1995]."
This ground is sufficient, in our view, to raise the question of whether the trial Judge correctly applied the doctrine of issue estoppel.
Background Facts
There is no dispute concerning the sequence of events relevant to the present appeal. The following statement of facts is taken in part from the reasons for judgment of the Full Federal Court in Theo v Official Trustee in Bankruptcy, 23 November 1995, unreported. The Full Court in that judgment dismissed an appeal by Mr Theo and the trustees against a costs order made by Cooper J in the proceedings to which we have already referred.
In August 1996, Mr and Mrs Theo were registered as joint tenants of two properties located, respectively, at 15 - 17 Kipling Street, Caboolture, and 69 Webster Road, Deception Bay. They remained joint tenants of these properties until the registration of the transfers to which we have already referred.
In 1983 and 1984 the Australian Taxation Office investigated the affairs of Mr Theo. In April 1984, Mr Theo was presented with an asset betterment statement, covering the years 1980, 1981 and 1982. After further interviews, Mr Theo was presented, on 16 August 1984, with a second asset betterment statement for the years 1976-1983 inclusive. Mr Theo challenged the correctness of the second statement, but failed to produce evidence in support of his contentions or to establish specific errors.
On 11 December 1984, the Deputy Commissioner of Taxation wrote to Mr Theo, stating, inter alia, that amended assessments would issue in the near future.
By two memoranda of transfer, each dated 27 December 1984 (that is sixteen days after the letter from the Deputy Commissioner), Mr and Mrs Theo transferred their joint interests in the Caboolture land and the Deception Bay land to Mrs Theo alone. The stated consideration was, in the case of the Caboolture land, $10,000, and in the case of the Deception Bay land, $40,000. Mrs Theo became the sole registered proprietor of the Deception Bay land in January 1985 and of the Caboolture land in March 1985. It was accepted by Cooper J that the stated consideration was never paid by Mrs Theo.
On 24 April 1985, assessments and amended assessments of income tax were made and notices served on Mr Theo. Subsequent review proceedings by Mr Theo in the Administrative Appeals Tribunal were substantially unsuccessful.
On 19 October 1990, Mr Theo presented his own petition for bankruptcy. That petition was accepted by the Registrar on that day. The trustee of the estate was the Official Trustee. The Australian Taxation Office ("ATO") proved in the estate, in an amount of $86,975. The ATO was the only creditor to prove in the bankruptcy.
On 27 May 1993 and 16 July 1993, respectively, the acting Official Trustee issued two notices under s.139ZQ of the Bankruptcy Act to Mrs Theo. Section 139ZQ provides as follows:
"(1)If a person has received any money or property as the result of a transaction that is void against the trustee of a bankrupt under Division 3 [including s.121], the Official Receiver:
(a)if the Official Trustee is the trustee - on the initiative of the Official Receiver; or
(b)if a registered trustee is the trustee - on application by the trustee;
may require the person, by written notice given to the person, to pay the trustee an amount equal to the money or the value of the property received.
(2)The notice must set out the facts and circumstances because of which the Official Receiver considers that the transaction is void against the trustee."
The notice issued on 27 May 1993 required Mrs Theo to pay the sum of $60,000, representing what was said to be half of the value of the Deception Bay property. The notice asserted that Mrs Theo had provided no monetary consideration for the transfer and that she was not a purchaser in good faith for valuable consideration. The notice also asserted that the transfer was a fraudulent disposition within s.121(1) of the Bankruptcy Act and, not being made in favour of a purchaser in good faith and for valuable consideration, was voidable at the option of the Official Trustee by virtue of s.121.
The second notice was issued on 16 July 1993, and related to the Caboolture property. In fact, a notice dated 15 June 1993 was served on Mrs Theo on 15 July 1993, but this was revoked and made way for the second notice dated 16 July 1993. This notice required the payment of $40,171, said to be one half of the value of the Caboolture property.
Proceedings Before Cooper J
By an application filed on 25 June 1993, and subsequently amended, Mr Theo and the trustees applied to the Court for orders:
•that the notices under s.139ZQ be set aside, pursuant to s.139ZS of the Bankruptcy Act;
•that Mr Theo's bankruptcy be annulled pursuant to s.153B of the Bankruptcy Act; and
•that the Official Trustee pay damages for "negligence and criminal inaction".
The hearing of the application commenced before Cooper J on 31 August 1993 and continued on 21, 22 and 23 February 1994. Cooper J delivered judgment on 24 August 1995.
In his judgment, his Honour rejected a contention by Mr Theo that he was merely a trustee of the two properties. Cooper J found that the properties were beneficially owned by Mr and Mrs Theo jointly. His Honour also went on to make the findings of fact to which we have already referred.
His Honour then cited Re Lucera; Ex parte Official Trustee in Bankruptcy v Lucera (1994) 53 FCR 329, a case decided after the hearing had concluded, for the proposition that "the value of the property" for the purposes of s.139ZQ(1) of the Bankruptcy Act means the value of the property at the time it was received. His Honour pointed out that no evidence had been adduced to support the alleged value of the properties received by Mrs Theo as a result of what he described as the "void transactions". His Honour reached these conclusions:
"Because of the deficiencies in relation to the issue of valuation the notices are irregular and should be set aside under s.139ZQ(1) or, if that is not sufficient authority, pursuant to s.30 of the Act. By s.139ZS(2), the notices are taken as not having been given and no liability has been created by reason of them....
The respondent has resisted the application on the basis that the s.139ZQ notices were valid. There were no separate proceedings by the Official Trustee, nor by the Official Receiver seeking any declaratory or other relief. Accordingly the only available order is to set aside the notices."
His Honour went on to reject Mr Theo's application for annulment. He did so on the basis that Mr Theo had been unable to demonstrate that the debtor's petition ought not to have been presented or accepted. His Honour noted that there were discretionary reasons against the annulment of the bankruptcy. The judgment includes this passage:
"Although it was not argued, it would seem to follow that such a consequence [an annulment which sets aside the bankruptcy ab initio] would deny to the Official Trustee property which might otherwise be amenable to the operation of s.121 of the Act. Such a result would tend to mitigate against a favourable exercise of the discretion to annul."
However, his Honour also referred to the fact that Mr Theo had been discharged from bankruptcy in the ordinary course and would suffer no prejudice if the application for annulment was refused.
Mr Theo's claim for damages against the Official Trustee was also rejected. His Honour noted that Mr Theo had made numerous allegations relating to the conduct of staff in the office of the Official Receiver. His Honour found that these allegations were baseless. On this issue his Honour concluded as follows:
"Put simply, the claim is misconceived. There is no jurisdiction in this Court sitting in bankruptcy to hear an application of this kind. Nor has Mr Theo put forward any evidence that would found an action for damages for negligence."
Cooper J concluded that Mr Theo had succeeded in his application to have the s.139ZQ notices set aside, on the ground that the values alleged in the notices had not been supported by evidence, but on no other grounds. His Honour observed that the time taken on the hearing of the matter was almost entirely taken up by issues on which Mr Theo failed. For that reason, he took the view that the applicants in the proceedings (Mr Theo and the trustees) should pay 80% of the Official Receiver's costs.
The formal orders made by Cooper J were as follows:
"1.The notices issued by the Official Receiver dated 27 May 1993 and 16 July 1993 and directed to Athina Theologidis be set aside.
2.The application filed 25 June 1993 be otherwise dismissed.
3.The applicants pay eighty percent (80%) of the respondent's costs of and incidental to the application including reserved costs, if any, to be taxed if not agreed."
The Appeal
On 14 September 1995, Mr Theo and the trustees filed a notice of appeal against the costs order made by Cooper J. That appeal came on before the Full Court on 9 November 1995. On 23 November 1995, the Full Court dismissed the appeal with costs.
The Full Court summarised the reasons given by Cooper J for reaching the conclusions recorded in his judgment. The summary included his Honour's findings on the issues raised by s.121 of the Bankruptcy Act. In addition, the Full Court noted that his Honour had rejected the numerous allegations made by Mr Theo relating to the conduct of staff in the office of the Official Receiver, in the course of the administration of his estate in bankruptcy.
The Full Court concluded that, in essence, Cooper J had made findings of fact in relation to the primary case advanced by Mr Theo and the trustees. Those findings involved an assessment of the credibility of Mr and Mrs Theo. The Full Court could find no basis for overturning any of the findings made by the trial Judge. The judgment commented that the documentation to which his Honour referred provided very powerful support for the conclusions expressed in the judgment. Nor could the Full Court find any error of law in the principles applied by Cooper J in making the costs order.
It should be noted that an application for special leave to appeal to the High Court from the decision of the Full Court has apparently been filed, but not yet determined.
The Proceedings Below
On 1 September 1995, the Official Trustee filed an application seeking
•declarations that the two transfers were void as against the Official Trustee;
•declarations that Mrs Theo held a one-half interest in the two properties in trust for the Official Trustee; and
•the appointment of statutory trustees for sale, pursuant to s.38 of the Property Law Act 1974 (Qld).
We were informed by Mr Hack, who appeared for the Official Trustee, that directions were given for the filing of evidence on the Official Trustee's application, ultimately determined by the trial Judge. The Official Trustee filed no evidence other than an affidavit annexing a letter inviting Mr Theo to consent to the transfer of a half interest in each of the properties to the Official Trustee. In its application, the Official Trustee stated that it intended to adduce no oral evidence.
For their part, the respondents to the application (the present appellants, Mr and Mrs Theo) stated their intention to oppose the application on grounds including the following:
"It is based selectively on the order handed down by the honourable Federal Court of Australia, on the 24.8.95, when the Honourable Justice Cooper handed down his decision AS A COLLECTIVE DECISION. Such selective reliability by the APPLICANT on the said order, is a contempt of the Court, and should be treated as such."
The hearing took place on 1 August 1996. It appears that the Official Trustee tendered a copy of Cooper J's judgment and invited the trial Judge to apply the findings made by Cooper J adversely to Mr and Mrs Theo. The trial Judge delivered an ex tempore judgment, which included the following passage:
"On 24 August 1995 his Honour delivered judgment upholding the application. However it is important for the purposes of the present application to note the grounds on which his Honour so held. His Honour found that the requisite elements of s.121, that is to say disposition with intent to defraud creditors, and lack of valuable consideration and good faith, were made out. However, the notices were set aside
because there was no evidence to support the alleged value of the property received by Mrs Theo as a result of the transactions; see especially page 41 of the judgment.
That being so, the findings as to the elements of s.121(1) create an issue estoppel between the parties. Both the Official Trustee and Mr Theo are bound by the findings of fact and law of his Honour on these issues, arising as they did after a contested hearing."
His Honour then made the declarations and orders to which we have already referred.
On 28 August 1996, Mr Theo applied for a stay of the orders made by the trial Judge. That application was rejected by Kiefel J on 2 September 1996.
The Present Appeal
On 21 August 1996, Mr and Mrs Theo filed a notice of appeal against the whole of the judgment of the trial Judge. The appeal was said to be as of right. On 9 September 1996, Mr Theo filed a further notice of appeal against the judgment of Kiefel J refusing a stay. That notice of appeal also purported to be brought as of right. However, Mr Theo subsequently filed a motion seeking leave to appeal from the interlocutory order made by Kiefel J.
Issue Estoppel
The classic statement of the doctrine of issue estoppel is that of Dixon J in Blair v Curran (1939) 62 CLR 464, at 531-533.
"A judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or their privies. The estoppel covers only those matters which the prior judgment, decree or order necessarily established as the legal foundation or justification of its conclusion, whether that conclusion is that a money sum be recovered or that the doing of an act be commanded or be restrained or that rights be declared. The distinction between res judicata and issue-estoppel is that in the first the very right or cause of action claimed or put in suit has in the former proceedings passed into judgment, so that it is merged and has no longer an independent existence, while in the second, for the purpose of some other claim or cause of action, a state of fact or law is alleged or denied the existence of which is a matter necessarily decided by the prior judgment, decree or order.
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, that is, the title to the right established. Where the conclusion is against the existence of a right or claim which in point of law depends upon a number of ingredients or ultimate facts the absence of any one of which would be enough to defeat the claim, the estoppel covers only the actual ground upon which the existence of the right was negatived. But in neither case is the estoppel confined to the final legal conclusion expressed in the judgment, decree or order. In the phraseology of Coleridge J in R. v Inhabitants of the Township of Hartington Middle Quarter[[1855] 4 E. & B. 780, at 794], 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.
In the phraseology of Lord Shaw, `a fact fundamental to the decision arrived at' in the former proceedings and `the legal quality of the fact' must be taken as finally and conclusively established (Hoystead v Commissioner of Taxation[(1926) AC 155]. But matters of law or fact which are subsidiary or collateral are not covered by the estoppel. Findings, however deliberate and formal, which concern only evidentiary facts and not ultimate
facts forming the very title to rights give rise to no preclusion. Decisions upon matters of law which amount to no more than steps in a process of reasoning tending to establish or support the proposition upon which the rights depend do not estop the parties if the same matters of law arise in subsequent litigation." [Emphasis added.]
As Dixon J recognised (at 533), the difficulty in the actual application of these principles is to distinguish matters fundamental or cardinal to the prior decision or judgment, decree or order, or necessarily involved in it as its legal justification or foundation, from matters which even though actually raised and decided, are not, in point of law, the essential foundation or groundwork of the judgment, decree or order.
In Blair v Curran (at 510) Starke J confined the scope of the doctrine in these terms:
"But it is contended that the construction of clause S was the foundation of the declaration and consequently that an estoppel by judgment arises. It is well settled that a judgment concludes not merely the point decided but matters which were necessary to decide and which were actually decided as the groundwork of the decision itself though not then directly the point at issue and that a judgment is conclusive evidence not merely of the facts directly decided but of those facts which are necessary steps to the decision - so cardinal to it that without them it cannot stand."
In Rogers v The Queen (1994) 181 CLR 251, at 262, Brennan J stated that
"issue estoppel does not extend to findings of fact which, though contested and probative of the ultimate issue, are not necessary to, or are not the
legal foundation of, the decision made".
His Honour referred to the latter part of the passage from the judgment of Starke J as correctly confining the scope of the doctrine. He also pointed out that subsequent decisions "can be made untrammelled by the prior determination provided they are not necessarily inconsistent with it". See also at 274-275, per Deane and Gaudron JJ; at 283, per McHugh J; Mills v Cooper [1967] 2 QB 459, at 468-469, per Diplock LJ.
The point is put this way in the American Law Institute's Restatement of the Law of Judgments, Second (1982), s.27(h):
"Determinations not essential to the judgment. If issues are determined but the judgment is not dependent upon the determinations, relitigation of those issues in a subsequent action between the parties is not precluded. Such determinations have the characteristics of dicta, and may not ordinarily be the subject of an appeal by the party against whom they were made. In these circumstances, the interest in providing an opportunity for a considered determination, which if adverse may be the subject of an appeal, outweighs the interest in avoiding the burden of relitigation.
Illustrations:
[1]A brings an action against B to recover interest on a promissory note payable to A, the principal not yet being due. B alleges that he was induced by the fraud of A to execute the note, and further alleges that A gave him a release under seal of the obligation to pay interest. The court, sitting without a jury, finds that A had given such a release but that B was not induced by A's fraud to execute the note, and gives verdict for B on which judgment is entered. After the note matures A brings an action against B for the principal of the note. B is not precluded from defending this action on the ground that B was induced by A's fraud to execute the note.
[2]A, as owner of a trademark, brings an action
against B for infringement. B denies the validity of the trademark and denies infringement. The court finds that the trademark is valid, but that B had not infringed it, and gives judgment for B. Thereafter A brings an action against B alleging that since the rendition of the judgment B infringed the trademark. B is not precluded from defending this action on the ground that the trademark is invalid."
Issue Estoppel in the Present Case
The ultimate issue to be determined by Cooper J was whether the notices issued under s.139ZQ of the Bankruptcy Act should be set aside. The Official Trustee did not file a cross-claim seeking declaratory or other relief in relation to s.121(1) of the Bankruptcy Act. Doubtless it was open to the Official Trustee to file such a cross-claim, but the step was not taken. This is a matter of fundamental significance to the outcome of this appeal.
The decision made by Cooper J was that the notices should be set aside. This decision was reflected in paragraph 1 of the orders made by his Honour. In substance, Mr and Mrs Theo (assuming that she was correctly regarded as a party to the proceedings) succeeded in obtaining the relief that they had sought. In the absence of a cross-claim, no other relief was granted by Cooper J, except otherwise to dismiss the application and to make the costs order.
As the passages from Blair v Curran establish, issue estoppel covers only those matters which the judgment or order necessarily establishes as the legal foundation for the conclusion. The factual findings made by Cooper J adverse to Mr Theo, relied on by the trial Judge in the present case as founding an issue estoppel, plainly did not form part of the legal foundation for the conclusion reached by Cooper J. As Mr Hack conceded, Cooper J could have reached the conclusion he did on the valuation point, without making any finding that Mr Theo intended to defraud creditors or that Mrs Theo was not a purchaser for valuable consideration. The simple fact of the matter is that Cooper J found in favour of Mr and Mrs Theo, on the ground that the notices were fundamentally flawed and should be set aside.
Mr Hack contended that the factual issues determined by Cooper J were squarely raised. We accept that this is so. But findings can be made (to adopt the language of Dixon J) deliberately and formally, yet not support an estoppel in subsequent litigation between the same parties. As Brennan J said in the passage we have cited from Rogers v The Queen (at 262), issue estoppel does not extend to findings of fact on contested issues if they are not necessary to or the legal foundation for the decision made. In this case, the findings relied on as founding the issue estoppel might or might not be regarded as probative of the ultimate issue. However, they were clearly not necessary to or the legal foundation for the decision made by Cooper J.
The practical importance of the doctrine being limited in this way can be illustrated by considering the availability of an appeal against the findings made by Cooper J. As it happens, Mr and Mrs Theo appealed unsuccessfully to the Full Court against the costs order made by Cooper J. Had Cooper J made an order for costs in their favour (leaving to one side the other issues in the case), there would have been nothing at all against which they could have appealed. They could not, of course, have appealed against the decision in their favour to set aside the notices under s.139ZQ of the Bankruptcy Act and they could not have challenged the adverse findings of fact made by Cooper J in the course of reaching that decision. Yet on the Official Trustee's argument, those findings could have founded an issue estoppel.
We should add that it was not suggested by Mr Hack that the costs order made by Cooper J could have founded an issue estoppel in relation to the adverse findings of fact. The costs order was an exercise of discretion, which took into account a number of facts, including Mr Theo's failure to establish a claim for damages based on alleged conduct of staff in the Office of the Official Receiver. The findings of fact relied on by the trial Judge were not necessary to, nor the legal foundation for, the costs order made by Cooper J.
It follows that the trial Judge erred in applying the doctrine of issue estoppel to make the declarations and orders that he did. Those declarations and orders must be set aside.
A Further Hearing?
Mr Hack, on behalf of the Official Trustee, submitted that, in the event of the appeal being allowed, the matter should be remitted for rehearing. Mr Hack accepted that this would result, in effect, in a third hearing in which the Official Trustee has sought relief against Mr and Mrs Theo. Nonetheless, the Official Trustee argued that this Court should be reluctant to dismiss the application on what was described as "a technicality".
If technicality it be, the Official Trustee made a deliberate choice to adduce no oral evidence in support of its application to the trial Judge, and to rely solely upon the findings of Cooper J. The notice of opposition to the application made plain that Mr and Mrs Theo were objecting to the judgment being used for this purpose. A lay person cannot be expected to have an informed understanding of the rationale and limits of issue estoppel. But this said, given that the Official Trustee had elected to found its case on issue estoppel, it should reasonably have apprehended that Mr and Mrs Theo were objecting to the use it intended to make of Cooper J's findings.
In these circumstances, we consider that it would not be appropriate to remit the matter for rehearing. The Official Trustee has elected to rely upon the conclusive effect of findings which it knew were contested. It has been unsuccessful in this endeavour. It should not have the opportunity yet again to proceed against Mr and Mrs Theo. Whatever the factual findings that might be made on any further hearing, the point has been reached where an end must be brought to this litigation.
Conclusion
The appeal should be allowed. The declarations and orders made by the trial Judge must be set aside. The Official Trustee's application must be dismissed. The Official Trustee must pay the costs of the first appellant here and below. The application for leave to appeal from the orders of Kiefel J refusing a stay is refused on the basis that it is unnecessary in view of the other orders we have made. We reserve liberty to the trustees for sale to apply within 21 days or such further time as the Court allows.
I certify that this and the preceding 21 pages are a true copy of the reasons for judgment of the Court.
Associate.
Date: 7 November, 1996
Heard:7 November, 1996
Place: Brisbane
Decision: 7 November, 1996
Appearances:
First Appellant: Self Represented
Counsel for the
Respondent: Mr P.E. Hack
Solicitors for
the Respondent: Australian Government Solicitor.
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