Yu v Lu

[2021] VCC 923

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL DIVISION

Revised
Not Restricted
Suitable for Publication

GENERAL LIST

Case No. CI-19-05341

XIN QIANG YU	Plaintiff
v
OU LU	First Defendant
LUOU PTY LTD; as trustee of the OuLu Family Trust	Second Defendant
THE REGISTRAR OF TITLES	Third Defendant

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JUDGE:	HIS HONOUR JUDGE COSGRAVE
WHERE HELD:	Melbourne
DATE OF HEARING:	28 June 2021
DATE OF RULING:	13 July 2021
CASE MAY BE CITED AS:	Yu v Lu & Ors
MEDIUM NEUTRAL CITATION:	[2021] VCC 923

RULING
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Subject:PERMANENT STAY

Catchwords:              Permanent stay – Res judiciata – Issue estoppel – Abuse of process

Legislation Cited:      County Court Civil Procedure Rules 2018; Family Law Act 1975 (Cth); Civil Procedure Act 2010 (Vic)

Cases Cited:Blair v Curran (1939) 62 CLR 464; Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr A Kirby	Rose Chai Lawyers
For the First and Second Defendant	Mr J Gurr	TJ Lawyers
For the Third Defendant	No appearances	No appearances

HIS HONOUR:

Introduction

1In this case, the defendants seek orders that the proceeding be permanently stayed on the basis that:

(a)   the issues in dispute are res judicata or subject to issue estoppel; and/or

(b)   the proceeding is otherwise an abuse of the process of the Court.

2The defendants rely upon Rules 23.01 and 23.02 of the County Court Civil Procedure Rules 2018 (“Rules”) or alternatively the inherent power of the Court to control its own process.

3As an alternative, the defendants seek orders that the plaintiff’s amended statement of claim dated 6 November 2020 be struck out as an abuse of the process of the Court.

4For the reasons which follow, I consider that the defendants’ application should be dismissed.

Background

5In August 2015 the plaintiff (“Yu”) commenced proceedings against the first defendant (“Lu”) in the Federal Circuit Court. The proceedings were later transferred to the Family Court. In the proceeding, Yu alleged that he and Lu had been in a de facto relationship during the period between 1998 and 2014. Yu sought a declaration that the parties were in a de facto relationship, as defined by section 4AA of the Family Law Act 1975 (Cth) (“the Act”) for more than two years for the purposes of s90SB(a) of the Act. Yu also sought a declaration that, as a party to the de facto relationship, he made substantial contributions for the purposes of section 90SM(4)(a), (b) and (c) of the Act. That application assumed a finding on the threshold issue that the parties were in a de facto relationship as defined by the Act. Ultimately, Yu sought to alter the property interests as between Lu and himself.

6While Yu asserted that the parties were in a de facto relationship for more than 16 years, Lu denied this.  She said that the parties were friends and, at various times, had a relationship of employee/employer or business associates. 

7Because the substantive orders sought by Yu could not be made unless the parties were in a de facto relationship (because the Court would not have jurisdiction), the trial in the Family Court was confined to deciding the issue of whether or not the parties were in a de facto relationship pursuant to section 4AA of the Act.

8The trial was conducted over 10 days in December 2017. The parties and their witnesses gave evidence and were subjected to cross-examination. On 1 October 2018, Justice Thornton delivered a detailed judgment, comprising 481 paragraphs, in which she dismissed Yu’s claims. Her Honour held that Yu had not discharged the onus of proving that the parties were in a de facto relationship as defined in the Act. Accordingly, the Court had no jurisdiction to make the declarations or other orders which Yu sought.

Lu’s position

9Lu pointed to the application Yu made to the Family Court and the outcome of that application.  She argued that, although the decision in the Family Court was final and binding, Yu now seeks to advance substantially the same case as was rejected in that Court and, in substance, seeks the same relief.  Yu alleges that he and Lu were in a joint venture business relationship for 16 years from June 1998.  He claims that during that time, they agreed to pool their incomes as part of a joint venture between them. They agreed to save money for the purchase of businesses and investments and to both work in those businesses to generate income and profits for their joint venture. 

10From Lu’s perspective, instead of seeking an order under section 90SM of the Act to alter the parties’ property interests, Yu is now seeking declarations that the real property bought during the term of the alleged joint venture is held in trust as to a half interest for him. He wants an account of profits or equitable compensation. Alternatively, he seeks an order for the sale of the properties and the distribution of the proceeds of sale.

11Lu contends that for Yu to succeed in the County Court case, he must persuade this Court to make findings which “directly contradict the final and binding determination of the Family Court”.[1]  This is because the relief Yu seeks here is in substance the same as that sought in the Family Court.  Lu argues that such a collateral attack on the judgment of another court is impermissible as an abuse of process.

[1]      Defendants’ submissions, paragraph 13.

12Lu says that the cause of action propounded by Yu in the two proceedings encompasses the same subject matter and relies upon the same evidence.  She contends that essentially the same evidence as Yu led in the Family Court to support his claim that he made financial contributions will be the same evidence as he leads in this Court to establish his current claim.  She says that the Family Court had jurisdiction over the parties and the subject matter.  Its decision was final and determined the same substantive question which Yu seeks to raise in the present case.

13Lu submits that:

·        there is an estoppel res judicata binding on Yu which prevents him from adducing evidence which would have the effect of contradicting the earlier Family Court finding;

·        there is an issue estoppel in her favour by reason of the decision in the Family Court; and

·        the County Court proceeding constitutes and abuse of process because it seeks to re-litigate matters already conclusively determined in another court - it constitutes a collateral attack on the Family Court judgment. 

Yu’s position

14Yu begins from the proposition that the defendants’ summons is an abuse of process in circumstances where, by an earlier summons filed 30 September 2020, they sought summary judgment pursuant to section 63 of the Civil Procedure Act 2010 (Vic) and/or Rule 23.01 of the Rules. They then consented to the dismissal of their summons and agreed to various interlocutory orders including the scheduling of a trial to commence on 12 July 2021. The present summons, like the earlier one, is said to rely upon the judgment of Justice Thornton in the Family Court and the finding that the parties were not in a de facto relationship. Yu complained that the defendants, having agreed to the dismissal of the earlier summons, were effectively seeking to re-agitate the same issues in the present application.

15Yu submitted that the hearing in the Family Court was listed purely on the threshold question about whether a de facto relationship, as defined in section 4AA of the Act existed.  He argued that the present proceeding did not seek to re‑examine the question of the de facto relationship.  He said that here, he sued Lu and her trust company on the basis that:

·        Yu and Lu agreed to pool their incomes as part of a joint venture, to save money to buy businesses and make investments and to work in the businesses to derive income and profits for the joint venture;

·        pursuant to the joint venture Yu and Lu purchased various properties and businesses using funds from the joint venture and mortgages secured over the properties;

·        most of the funds of the joint venture were held in an account in the name of Lu and her father (who has always lived in China); and

·        after the personal and business relationship broke down between Yu and Lu around October 2014, the defendants have denied that Yu has any entitlement to any financial benefits generated by, or derived from, the joint venture. 

16Yu’s claim concerns the consequences of the breakdown of the joint venture.  His claim is based upon equitable doctrines relating to unconscionability and breach of fiduciary duty. 

Legal principles

17The defendants rely upon the doctrines of res judicata, issue estoppel and abuse of process as justification for the application.

Res Judicata

18The principle of res judicata prevents a party from attempting to relitigate a cause of action which has already been determined between the same parties.  The principle is narrow in its operation.  Where a plaintiff succeeds in a claim, the cause of action relied upon merges in the judgment. 

19In my opinion, the doctrine of res judicata does not apply in the present case.  First, the rights which Yu claims in this case are not the same as those dealt with by the Family Court decision.  Yu’s claim concerns equitable principles which, in the context, could not have been raised in the Family Court.  They are different in nature from the determination of the threshold issue which was the matter decided in the Family Court.  Second, the trustee of the Lu Family Trust, the second defendant, was not a party to the Family Court proceeding.

Issue Estoppel

20Issue estoppel operates to prevent a party raising in a subsequent proceeding an ultimate issue of fact or law which was necessarily resolved as a step in reaching the determination made in an earlier judgment.  It is important that the issue estoppel can arise only in respect of a matter which was an essential step in the reasoning of the earlier court.  Where a court makes findings of fact or law which are of a subsidiary or collateral nature, they do not give rise to an estoppel.  As Dixon J explained in Blair v Curran:[2]

“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 …

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. …

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 fact or law 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 the 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.”

[2](1939) 62 CLR 464, 531-2.

21Again, in my view, the doctrine of issue estoppel does not preclude the plaintiff from making his claim in this case. First, the Family Court decided that Yu and Lu were not in a de facto relationship. Yu is not seeking to re-litigate that finding in this proceeding. In my view, there is no relevant estoppel to prevent him from raising the different claim he advances in this case. Secondly, there can be no estoppel regarding claims against the second defendant when it was not party to the earlier proceeding.

22To the extent that it might be relevant, I note also that the Family Court decision, although emphatic regarding the non-existence of a de facto relationship between the parties, was more equivocal in other respects. For example, Her Honour said that she could not make findings about what financial or other contribution was made by either party to the businesses. The evidence about financial contributions and the documentary evidence was vague and unclear. Her Honour drew attention to various inadequacies or deficiencies in the evidence which rendered her unable to make particular findings. I infer from her comments that, on some points, the outcome might have been different had further evidence been adduced.

Abuse of process

23The issue of abuse of process was conveniently summarised in the joint judgment of French CJ, Bell, Gageler and Keane JJ in Tomlinson v Ramsey Food Processing Pty Ltd[3]:

“Abuse of process, which may be invoked in areas in which estoppels also apply, is inherently broader and more flexible than estoppel. Although insusceptible of a formulation which comprises closed categories (55), abuse of process is capable of application in any circumstances in which the use of a court’s procedures would be unjustifiably oppressive to a party or would bring the administration of justice into disrepute (56). It can for that reason be available to relieve against injustice to a party or impairment to the system of administration of justice which might otherwise be occasioned in circumstances where a party to a subsequent proceeding is not bound by an estoppel.

Accordingly, it has been recognised that making a claim or raising an issue which was made or raised and determined in an earlier proceeding, or which ought reasonably to have been made or raised for determination in that earlier proceeding, can constitute an abuse of process even where the earlier proceeding might not have given rise to an estoppel (57). Similarly, it has been recognised that making such a claim or raising such an issue can constitute an abuse of process where the party seeking to make the claim or to raise the issue in the later proceeding was neither a party to that earlier proceeding, nor the privy of a party to that earlier proceeding, and therefore could not be precluded by an estoppel (58).”

[3] (2015) 256 CLR 507.

24I do not regard the present case as an abuse. While I accept that there might be an overlap in some aspects of the evidence, it remains the position that the decision by the Family Court on the threshold issue meant that the detail of Yu’s claims were not heard and determined due to the absence of jurisdiction. Again, while some factual matters could be relevant both to the de facto issue and the current joint venture claim, the context will be different and different considerations will apply in determining the joint venture allegations.

25To the extent that the court is concerned not to bring the administration of justice into disrepute or to use the court in a way which is unfairly oppressive to a party, it is material to consider the consequences of ordering a stay. If a stay were granted, Yu could not raise this claim in any court. The Family Court lacked jurisdiction to hear the case Yu sought to advance about the division of property with Lu. Similarly, in the absence of a marriage or de facto relationship, the Family Court would be unable to determine a claim founded on equitable principles as the present claim is. Such a result would effectively mean that Yu was precluded from ever raising this claim. Such an outcome would be oppressive for him.

26In dismissing the defendants’ application, I am not intending to endorse in any way Yu’s present claim. Some aspects of the Family Court judgment may prove troublesome for him and he may not be able to overcome some potential obstacles. Also, I imagine the defendants might make an offer of compromise or a Calderbank offer which could increase his potential liability for costs. Nonetheless, I consider Yu is entitled to bring this proceeding.

Conclusion

27Accordingly, I make the following orders:

(a)the defendants’ summons filled 18 June 2021 is dismissed; and

(b)the first and second defendants pay the plaintiff’s costs of and incidental to the application, such costs to be taxed on a standard basis in default of agreement.