McGougan v Deput International Limited
[2016] NZHC 3170
•20 December 2016
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2015-485-001049 [2016] NZHC 3170
BETWEEN MICHAEL JOHN MCGOUGAN AND
BRIAN FREDERICK DINGLE First Plaintiffs
BEVAN MALCOLM SANSON Second Plaintiff
AND
DEPUY INTERNATIONAL LIMITED Defendant
Hearing: 12 December 2016 Counsel:
D J Goddard QC and L Theron for Plaintiffs
C A McLachlan QC with J L W Wass, D A Campbell and O J Welsh for Defendant
Judgment:
20 December 2016
JUDGMENT OF COLLINS J
Introduction
[1] This judgment answers the following question:
Are 25 of the plaintiffs1 in this proceeding estopped from suing the defendant (DePuy) in New Zealand for compensatory damages in circumstances where:
(1)they commenced proceedings in England seeking compensatory damages against DePuy in relation to conduct that forms the basis of their claim in New Zealand; and
(2)a court of competent jurisdiction in England has determined that a sample of the New Zealand claimants
1 In this judgment the term “plaintiffs” is used in reference to proceedings commenced in New Zealand and the term “claimants” is used in reference to proceedings commenced in England.
MCGOUGAN v DEPUY INTERNATIONAL LTD (No. 2) [2016] NZHC 3170 [20 December 2016]
were barred by the law of New Zealand from seeking compensatory damages against DePuy?
[2] In the context of this case, the question posed in paragraph [1] raises the following two sub-questions:
(1)Were the 25 plaintiffs parties to, or privies of the claimants in, the sample proceedings determined by the court in England?
(2)If not, is it nevertheless an abuse of process for the 25 plaintiffs to continue their claim for compensatory damages in New Zealand?
[3] This judgment explains why the 25 plaintiffs are estopped from bringing their claim for compensatory damages in New Zealand because they were privies to the sample claimants in the proceedings determined by the High Court of Justice in England. This judgment also explains why, in the alternative, it would be an abuse of process to permit the 25 plaintiffs to continue their claim for compensatory damages in New Zealand.
[4] To assist readers this judgment is divided into two parts. Part I sets out the background and explains the issues in further detail. Part II explains the conclusions summarised in [3].
PART I BACKGROUND
[5] In an earlier judgment (ACC bar judgment)2 I answered the following
question posed by the plaintiffs:3
May claims for compensatory damages be brought by the plaintiffs in New Zealand for personal injury they have suffered in this country, and for which they have cover under the Accident Compensation Act 2001 … in circumstances where the conduct giving rise to their claims occurred in a foreign jurisdiction?
2 McGougan v DePuy International Ltd [2016] NZHC 2511.
3 At [1].
[6] In concluding the answer to that question was “no”, I reasoned that s 317(1) of the Accident Compensation Act 20014 prevented the plaintiffs from bringing their claims for compensatory damages in New Zealand because they had cover under that Act, even though the conduct giving rise to their claims occurred in England.
[7] In the ACC bar judgment I set out the background to the proceedings and explained the plaintiffs’ claims against DePuy. I will repeat in paragraphs [8] to [14] of this judgment the background parts of the ACC judgment that are common to both judgments.
The parties
[8] DePuy is a company registered in England. It manufactures medical devices, including prosthetic hip implants. Two hip implant systems designed and manufactured by DePuy between July 2003 and August 2010 (DePuy hip implants) feature in this proceeding.5
[9] The three named plaintiffs in this proceeding represented a larger group of 38
New Zealanders who, between 2006 and 2009 received DePuy hip implants in New Zealand. Twenty-five of the larger group of plaintiffs were claimants in proceedings in England, including the three named plaintiffs.
The claims
[10] DePuy designed and manufactured its hip implant systems primarily in Leeds, England. The hip implants were supplied by DePuy to related companies, including companies in New Zealand, which in turn supplied the DePuy hip implants
in this country.
4 317 Proceedings for personal injury
(1) No person may bring proceedings independently of this Act, whether under any rule of law or any enactment, in any court in New Zealand, for damages arising directly or indirectly out of—
(a) personal injury covered by this Act; or
(b) personal injury covered by the former Acts.
…
5 The DePuy ASR Hip Resurfacing System and the DePuy ASR XL Acetabular System.
[11] After the plaintiffs received their DePuy hip implants serious questions began to emerge concerning the effectiveness and the safety of those implants. DePuy recalled its hip implants in August 2010. The plaintiffs underwent revision surgery in 2011 and 2012 to replace the DePuy hip implants.
[12] The statement of claim alleges the DePuy implants were designed and/or manufactured with defects that led to the breakdown of part of the implants which in turn led to the release of cobalt and chromium into patients. This is said to have led to metal poisoning and tissue damage.
[13] The plaintiffs plead that DePuy failed to undertake a proper risk assessment and testing of the hip implants before they were distributed. It is also alleged DePuy failed to adequately monitor the implants after they were placed into patients.
[14] Two causes of action are pleaded by the plaintiffs. They say DePuy committed the tort of negligence and breached the Consumer Guarantees Act 1993. The relief sought by the plaintiffs includes a prayer for a declaration that DePuy acted negligently and unlawfully in designing, manufacturing, marketing and distributing the DePuy hip implants, compensatory damages and exemplary damages.
[15] The effect of the ACC bar judgment is that the plaintiffs’ claims for compensatory damages cannot continue unless an appellate court rules otherwise. The plaintiffs have appealed that judgment. It is anticipated that any appeal from this judgment will be heard in conjunction with the appeal from the ACC bar judgment.
Proceedings in England
[16] Seven groups of claimants commenced proceedings in England against DePuy between 2012 and 2014. Sixty-three New Zealanders became claimants in England. All the New Zealand claimants were represented by Mr Preston QC of PLI Legal Services. DePuy was represented by Kennedys LLP and their counsel.
[17] One of the seven groups of claimants in England comprised 10 claimants, four of whom were New Zealanders. The others in that group were from South Africa and Australia. The first named claimant in that claim group was Mr Allen, a New Zealander. That group of claimants is known as the “Allen claimants”. The New Zealand Allen claimants are described as the New Zealand sample claimants. They each filed full particulars of their respective claims.
[18] On 1 November 2013, Master Cook ordered that there should be a preliminary issue trial in respect of the Allen claimants (including the New Zealand sample claimants), primarily to determine whether English law applied to the claims.
[19] On 18 March 2014, Stewart J determined that New Zealand law applied to the claims of the New Zealand sample claimants (Allen (No. 1)).6
[20] The New Zealand sample claimants then re-pleaded their claims alleging a breach of the New Zealand Consumer Guarantees Act. Thereafter, DePuy filed a re- amended statement of defence pleading that the New Zealand sample claimants’ claims for compensatory damages were barred by s 317 of the Accident Compensation Act.
[21] The legal representatives for each side then exchanged correspondence in which they reached agreement on a procedure for resolving whether or not s 317 of the Accident Compensation Act barred claimants from seeking compensatory damages in England. The parties agreed that a preliminary issue trial in relation to the meaning and effect of s 317 of the Accident Compensation Act was appropriate. The question then became which cases should be heard in that preliminary issue trial.
[22] Mr Preston QC suggested three options. The second of the options he proposed was framed in the following way:
… the second option is that the NZ Claims are consolidated as a group, but with only the four NZ Claimants in Allen and others proceeding to the preliminary issue hearing as sample cases, as those are the cases that have progressed actively to date and findings have already been made as to the
6 Allen v DePuy International Ltd [2014] EWHC 753, [2015] 2 WLR 442 (QB).
applicability of NZ law, with the remaining NZ claims being stayed pending
the outcome of that hearing …
A necessary ingredient in this solution would … be that a costs sharing order is made, ensuring that liability for any adverse costs order made against those four [New Zealand sample] claimants in respect of the [ACC bar] preliminary issue trial will be shared severally by the whole cohort of NZ Claims in the consolidated group. The logic behind that proposal is that once a ruling on the NZ law preliminary issue has been given, that will in practice be dispositive for any other claims that are subject to NZ law.
[23] This proposal was accepted by DePuy. As a consequence, on 2 July 2014
Master Cook made an order that contained in the intitulement a reference to the Allen proceedings and the other claim numbers that covered all of the New Zealand claimants. The order made by Master Cook:
(1) referred to claimants listed in Schedule 1 of the order as “the NZ
claimants”;
(2) identified the first four New Zealand claimants, from the Allen
claimants, as “the New Zealand sample claimants”;
(3) said, “save for the claims of the NZ sample claimants, the claims of
the NZ claimants shall be stayed until further order of the Court”; and
(4)explained that each New Zealand claimant was severally liable for the “common costs” of “the NZ sample claimants up to and including the final resolution (including any appeal) of the preliminary [ACC bar] issue …”.
[24] The Schedule to Master Cook’s order identified the New Zealand sample claimants as being Mr Allen, Mr Monks, Mr Myson and Mr Fletcher (Mr Fletcher was subsequently removed as a New Zealand sample claimant after it was discovered he had received his hip implant in Australia). Fifty-nine other New Zealand claimants were listed in the Schedule to Master Cook’s order. Thus, a total of 63 New Zealand claimants were identified.
[25] On 1 April 2015, Simler J concluded that s 317 of the Accident Compensation Act barred the claims for compensatory damages brought in England by the New Zealand sample claimants and that New Zealand claimants as defined in Master Cook’s order of 2 July 2014 were to pay DePuy’s costs in relation to the preliminary issues trial (Allen (No.2)).7
[26] Simler J’s understanding of the procedure that had been agreed to is set out in her judgment in the following way:8
If the preliminary issue is determined in the defendant’s favour it will bring the New Zealand claimants’ claims to an end. If it is determined in the claimants’ favour then they (and others) will be able to proceed with their claims in the English court, under the [Consumer Guarantees Act], applying New Zealand law.
[27] The orders that were sealed on 9 April 2015 following the delivery of Allen (No. 2) contained in the intitulement a reference to the claim numbers that covered all the New Zealand claimants. In that order it was stated that the claims of each New Zealand claimant would be struck out unless the claimant in question applied “for permission to amend his/her statement of case or alternatively has applied for further directions or discontinued his/her claim by 4pm 29 May 2015
…”.
[28] Each of the New Zealand claimants discontinued their claims on or about
28 May 2015.
[29] The three New Zealand sample claimants accept the doctrine of res judicata prevents them from initiating proceedings in New Zealand and they have therefore not endeavoured to do so.
[30] As noted earlier, 25 of the 63 New Zealand claimants in the English proceedings have however joined the proceedings commenced in New Zealand, including Mr McGougan, Mr Dingle and Mr Sanson, who are the named plaintiffs in
the application before me.
7 Allen v Depuy International Ltd [2015] EWHC 926 (QB).
8 At [8].
[31] In addition, 16 New Zealanders who were not claimants in England have become plaintiffs in the New Zealand proceedings. The ACC bar judgment applies to all plaintiffs in the New Zealand proceedings.
[32] This judgment however, only concerns the 25 New Zealand claimants in England who have become plaintiffs in New Zealand and relates only to their claims for compensatory damages.
[33] Despite having succeeded in the ACC bar judgment, DePuy also seeks to have a judgment in its favour in relation to the estoppel and/or abuse of process questions recorded in paragraphs [1] and [2] of this judgment. DePuy wishes to have the questions posed in this judgment resolved in its favour in case the ACC bar judgment is overturned by an appellate court.
PART II ANALYSIS
Issue estoppel
Underlying principles
[34] The principles that underpin issue estoppel, cause of action estoppel and abuse of process were explained in the following way by Somers J in New Zealand Social Credit Political League Inc v O’Brien:9
… a matter once determined may not be again litigated, … a matter which could and should have been raised in proceedings which have been determined should not be allowed to be raised subsequently, and … a collateral attack upon a final decision in other proceedings will not be permitted. The dual objects are finality of litigation and fair use of curial procedures.
[35] A foreign judgment may lead to a cause of action estoppel, an issue estoppel or a finding of abuse of process in New Zealand where the foreign court has
9 New Zealand Social Credit Political League Inc v O’Brien [1984] 1 NZLR 84 (CA) at 95.
determined the claim or an issue in the proceeding in circumstances that bind a party in New Zealand.10
[36] In Arnold v National Westminster Bank plc, Lord Keith explained issue estoppel in the following way:11
Issue estoppel may arise where a particular issue forming a necessary ingredient in a cause of action has been litigated and decided and in subsequent proceedings between the same parties involving a different cause of action to which the same issue is relevant one of the parties seeks to re- open that issue.
Although Lord Keith did not refer to privies when proffering his definition of “issue estoppel”,12 there is no logical basis upon which issue estoppel could not be engaged where both sets of proceedings involve the same parties or their privies.13
[37] The parties agree that this case only concerns issue estoppel and abuse of process. Issue estoppel is engaged because Simler J determined an issue in the proceedings in favour of DePuy, namely that s 317 of the Accident Compensation Act barred claims for compensatory damages where the claimant has cover under the Accident Compensation Act. Simler J did not formally determine a cause of action and the pleadings before her did not include the cause of action in negligence now pleaded by the plaintiffs in New Zealand.
Requirements of issue estoppel
[38] In order for DePuy to succeed in its claim that the 25 New Zealand plaintiffs are prevented by issue estoppel from bringing their proceedings in New Zealand, the
following four requirements must be established.14
10 Carl-Zeiss-Stiftung v Rayner & Keeler (No. 2) [1967] 1 AC 853 (HL) and Owens Bank Ltd v
Etoile Commercials SA [1995] 1 WLR 44 (PC).
11 Arnold v National Westminster Bank plc [1991] 2 AC 93 (HL) at 105.
12 Lord Keith referred to both parties and privies when defining cause of action estoppel in Arnold v Westminster Bank plc, above n 11, at 104.
13 See also Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2013] UKSC 46, [2014] AC 160 per Lord Sumption at [17].
14 Carl-Zeiss-Stiftung v Rayner & Keeler Ltd, above n 10 at 935 and Americhip, Inc v Dean [2015] NZHC 700, [2015] 3 NZLR 498 at [32].
[39] First, that there was jurisdiction for Simler J to hear and determine Allen (No. 2). This requirement is satisfied. The claimants in the proceedings in England voluntarily submitted to the jurisdiction of the courts of England by commencing their proceedings in that jurisdiction. Mr Goddard QC, senior counsel for the plaintiffs, accepted the High Court of Justice had jurisdiction when it decided Allen (No. 2).
[40] Second, that Simler J’s judgment decided the same issue that is in contention in the New Zealand proceedings, and that it was necessary for her to decide that issue.
[41] This requirement of issue estoppel is also established. The issue before Simler J in Allen (No. 2) and the issue before me in the ACC bar judgment was whether the plaintiffs’ claims for compensatory damages were barred by s 317 of the Accident Compensation Act.
[42] In addition, it was necessary for Simler J to decide whether s 317 of the Accident Compensation Act barred the plaintiffs’ claims for compensatory damages so as to determine whether or not the claimants could continue with their claim for compensatory damages in England.
[43] Third, the decision in Allen (No. 2) had to be final, conclusive and on the merits. Mr Goddard accepts this requirement has also been established. The New Zealand sample claimants in Allen (No. 2) did not seek permission to appeal and the judgment of Simler J was conclusive of the claims for compensatory damages by the claimants in the English proceedings. The issue in Allen (No. 2) was determined on the merits after full argument and with the benefit of expert evidence relating to New Zealand law from Mr Goddard and Mr McLachlan QC.
[44] Fourth, DePuy must establish that the litigation in England was between the same parties or their privies as in the New Zealand proceedings. This criterion is in issue. The 25 New Zealand plaintiffs say they were neither parties nor privies to the parties in the Allen (No. 2) proceeding and as such they maintain they are not bound by Simler J’s judgment.
[45] Finally, the 25 New Zealand plaintiffs rely on a “special circumstances exception” they say arises in this case because it would be unjust to rigidly apply the principles of issue estoppel in their circumstances.
Parties/privies
Parties
[46] In Carl-Zeiss-Stiftung v Rayner & Keeler Ltd (No. 2),15 the House of Lords explained that it is difficult to define with precision the terms “parties” and “privies” in a concise and exhaustive manner because there are so many permutations associated with both concepts. In Carl-Zeiss-Stiftung v Rayner & Keeler Ltd (No. 2) Lord Guest identified four elements to being a party, namely:
(1) an appearance in the proceeding;
(2) being represented in the proceeding;
(3)whether there was an order for costs that could be made against the person or entity in question; and
(4) whether they had an interest in the subject matter of the proceeding.
[47] In the present case, Mr McLachlan submitted that the issue as to who is a party should be approached from the stand point of substance rather than form. He refers to the following four factors in support of DePuy’s argument that the 25
New Zealand plaintiffs were parties in Allen (No. 2).
[48] First, the order of 2 July 2014 made by Master Cook was in respect of all actions brought by all the New Zealand claimants. He says those claimants were accordingly “parties to the order and bound to comply with the order in so far as it
specified the procedure for the preliminary issues trial”.16
15 Carl-Zeiss-Stiftung v Rayner & Keeler Ltd (No. 2), above n 10 at 882.
16 Submissions for First Defendant, 19 September 2015 at [30](a).
[49] Second, all the New Zealand claimants were seeking a determination of the fundamental question concerning the meaning and effect of the bar in s 317 of the Accident Compensation Act and whether it prevented all the New Zealand claimants from continuing their claims for compensatory damages.
[50] Third, the orders that were sealed following Allen (No. 2) were intituled with all the claim numbers that covered all of the claims brought by all New Zealand claimants.
[51] Fourth, estoppels must be mutual. The expert evidence of Mr Palmer QC, an English barrister who gave evidence for DePuy on the law of issue estoppel in England, was that if the judgment in Allen (No. 2) had been adverse to DePuy, no English Court would have permitted DePuy to relitigate the ACC bar question on behalf of the remaining New Zealand claimants.
[52] There are three reasons why I have concluded that in the circumstances of this case the 25 New Zealand plaintiffs were not parties to Allen (No. 2).
[53] First, the New Zealand claimants in the English proceedings filed their own separate proceedings and were not a party on the record of the Allen proceeding.
[54] Second, the New Zealand claimants’ proceedings were stayed at the time Allen (No. 2) was heard and determined. They were therefore not directly engaged in the Allen (No. 2) hearing.
[55] Third, although they had the same counsel as the New Zealand sample claimants, the New Zealand claimants were not represented in the Allen (No. 2) hearing.
Privies
[56] There is a high degree of overlap between the New Zealand and English cases that have analysed whether or not a plaintiff who was not a party in earlier litigation is nevertheless estopped from pursuing later proceedings by reason of being a privy of one of the parties in the earlier proceeding.
[57] In Gleeson v J Wippell & Co Ltd, Sir Robert Megarry V-C explained that:17
... the doctrine of privity for these purposes is somewhat narrow, and has to be considered in relation to the fundamental principle nemo debet bis vexari pro eadem causa.18
[58] The principles that guide whether or not a person is a privy to a party in earlier proceedings have been summarised recently by the Court of Appeal for England and Wales in the following way:19
… a court which has the task of assessing whether there is privity of interest between a new party and a party to previous proceedings needs to examine (a) the extent to which the new party had an interest in the subject matter of the previous action; (b) the extent to which the new party can be said to be, in reality, the party to the original proceedings by reason of his relationship with that party; and (c) against this background to ask whether it is just that the new party should be bound by the outcome of the previous litigation.
[59] These concepts can also be found in Shiels v Blakely,20 where the Court of
Appeal said that privity in the circumstances of the present case requires:
… such a union or nexus, such a community or mutuality of interest, such an identity between a party to the first proceeding and the person claimed to be estopped in the subsequent proceeding, that to estop the latter will produce a fair and just result having regard to the purposes of the doctrine of estoppel and its effect on the party estopped.
[60] I have found it helpful to follow the three steps set out by the Court of Appeal of England and Wales in Resolution Chemicals Ltd v H Lundbeck A/S referred to in paragraph [58] of this judgment. In doing so I have reached the following conclusions.
[61] All the New Zealand claimants, including the 25 plaintiffs had a clear and obvious interest in the subject matter of Allen (No. 2). The ability of the New Zealand claimants to continue with their claim for compensatory damages in the proceeding they had initiated in England was going to be determined by the outcome of Allen (No. 2). The issues in Allen (No. 2) directly affected the
New Zealand claimants, who were not parties to that proceeding.
17 Gleeson v J Wippell & Co Ltd [1977] 3 All ER 54 (Ch) at 515.
18 No one should be vexed twice in respect of the same matter.
19 Resolution Chemicals Ltd v H Lundbeck A/S [2013] EWCA Civ 924 at [32].
20 Shiels v Blakely [1986] 2 NZLR 262 (CA) at 268.
[62] The parties in Allen (No. 2) were acting not only on their own behalf but, in reality, on behalf of all New Zealand claimants. Any minor differences in the circumstances of the New Zealand claimants were irrelevant to the preliminary issue, namely whether s 317 of the Accident Compensation Act barred the claim for compensatory damages brought by the parties in Allen (No. 2) from proceeding and thus other New Zealand claimants. The procedure that the parties agreed upon was designed to achieve a cost-effective resolution of the preliminary issue, founded on a common interest. One element of the cost-effective procedure agreed upon included all the New Zealand claimants being severally liable for the costs in Allen (No. 2).
[63] Mr Goddard submitted that the failure to adopt the Group Litigation Order (GLO) procedure under r 19 of the Criminal Procedure Rules (UK) is indicative of the New Zealand claimants not being privies. However, the failure to put in place a formal GLO is not determinative in the circumstances of this case where the parties agreed upon a clear procedure to determine the preliminary issue in a way that was binding on all claimants.
[64] Crucially, the justice of this case demands that the New Zealand claimants be bound by Allen (No. 2). The reasons for this stem from the fact that the procedure agreed upon for Allen (No. 2) was suggested by counsel for all New Zealand claimants and in circumstances where their counsel explained “the logic behind [his] proposal [was] that once a ruling on the NZ law preliminary issue [had] been given, that [would] in practice be dispositive for any other claims that [were] subject to NZ law”.
[65] Mr Goddard endeavoured to suggest a distinction could be drawn between the practical disposition of the New Zealand claims and the legal disposition of those claims. If there is such a distinction then it is very elusive. Had all the New Zealand claimants been asked prior to Simler J’s judgment if they understood that any judgment in Allen (No. 2) would bind them then they would undoubtedly have answered that question “yes”. At the time the procedure for resolving the preliminary issues trial was agreed upon, no distinction was contemplated between the “practical” and “legal” disposition of all the New Zealand claims.
[66] In addition, it is a well-established principle that a person cannot avoid the consequences of litigation from which they have “stood aside” in circumstances where they have agreed to the litigation continuing as a means of resolving his or her separate proceeding.21 This principle was confirmed by the Court of Appeal of England and Wales in Resolution Chemicals,22 where it was said that privity exists “where C knows of proceedings between A and B in which his rights are being tested
but stands back and does nothing”.
[67] In the present case, the 25 plaintiffs were claimants in the English proceeding. They agreed to a cost-effective procedure to determine an issue in Allen (No. 2) that was common to all the New Zealand claimants. Their agreement to that procedure included an agreement to be severally liable for costs in Allen (No. 2). Having agreed to that procedure and having “stood aside” while the New Zealand sample claimants shouldered the burdens of arguing Allen (No. 2), the
25 plaintiffs cannot now escape the consequences of Simler J’s judgment.
[68] For these reasons I am satisfied the 25 New Zealand plaintiffs were privies of the New Zealand sample claimants in Allen (No. 2).
Special circumstances exception
[69] In addition to challenging the existence of the parties and/or privies requirement for issue estoppel, Mr Goddard submitted that the present case falls within the “special circumstances exception” to the application of issue estoppel. Two elements to the special circumstances exception were advanced by Mr Goddard.
Materially altered circumstance
[70] The first aspect of this part of Mr Goddard’s case relies on the proposition that an injustice would arise because of a materially altered circumstance between Allen (No. 2) and the New Zealand proceedings. The origins of this special
circumstance exception can be traced to Arnold v National Westminster Bank plc.23
21 Shiels v Blakely, above n 20; Wytcherley v Andrews (1871) LR 2 P&D 327 (HL); Re Lart [1896]
2 Ch 788 (Ch) and House of Spring Gardens Ltd v Waite [1991] 1 QB 241 (CA).
22 Resolution Chemicals Ltd v H Lundbeck A/S, above n 19, at [26].
23 Arnold v National Westminster Bank plc, above n 11.
The exception has since been explained further by Lord Sumption in Virgin Atlantic
Airways Ltd v Zodiac Seats UK Ltd.24
[71] In Arnold, the special circumstances exception to issue estoppel arose because in earlier litigation Walton J had interpreted a rent review clause in a lease in a way that was adverse to the tenants. Walton J declined the tenants’ application for leave to appeal. In subsequent cases involving different parties the Court of Appeal for England and Wales cast doubt over Walton J’s interpretation of the clause in question. In a subsequent rent review between the same parties that appeared before Walton J, the tenants endeavoured to challenge the construction of the rent review clause previously favoured by Walton J. Ultimately, the House of Lords decided that the second proceeding raised a question of issue estoppel but that the rejection of Walton J’s interpretation of the rent review clause by the Court of Appeal in subsequent cases constituted a materially altered circumstance that warranted allowing the parties to re-litigate the very point that Walton J had rejected. The House of Lords held that a special circumstance exception to the principle of issue estoppel needed to be invoked in Arnold in order to avoid what would otherwise be an injustice.
[72] The House of Lords in Arnold proceeded on the basis that it was considering a special circumstance exception to the doctrine of issue estoppel, and not a case relating to cause of action estoppel. In Virgin Atlantic Lord Sumption said however:25
… it is important to appreciate that the critical distinction in Arnold was not between issue estoppel and cause of action estoppel, but between a case where the relevant point had been considered and decided in the earlier occasion and a case where it had not been considered and decided but arguably should have been. The tenant in Arnold had not failed to bring his whole case forward before Walton J. On the contrary, he had argued the very point which he now wished to reopen and had lost.
[73] Lord Sumption went on to explain the special circumstances exception in cases of issue estoppel in the following way:26
24 Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd, above n 13.
25 At [20].
26 At [22](3).
Except in special circumstances where this would cause injustice, issue estoppel bars the raising in subsequent proceedings of points which (i) were not raised in the earlier proceedings or (ii) were raised but unsuccessfully. If the relevant point was not raised, the bar will usually be absolute if it could with reasonable diligence and should in all the circumstances have been raised.
[74] In the present case Mr Goddard endeavoured to prise his clients’ case into the second special circumstance set out by Lord Sumption in Virgin Atlantic. As I explain in paragraphs [76] to [78] the present case does not fall within the Arnold special circumstances exception or the exception as it has been explained by Lord Sumption in Virgin Atlantic.
[75] An intriguing question is what impact the special circumstances exception articulated in Arnold and by Lord Sumption has upon the well-established principle that a foreign judgment cannot be re-examined even if the foreign court has made an obvious mistake concerning New Zealand law.27 One possible answer is that the principle in Godard v Gray applies only to the doctrine of cause of action estoppel. Another answer may lie in drawing a distinction between the conclusiveness of
foreign judgments and those of domestic courts. As foreshadowed however, for reasons I shall now explain, this is not a case in which the special circumstances exception to the doctrine of issue estoppel described in Arnold and by Lord Sumption applies.
[76] The special circumstances exception to issue estoppel, set out in Arnold and explained further in Virgin Atlantic, is significantly different from the circumstances of the present case.
[77] There has been no materially altered circumstance between Allen (No. 2) and the hearing of the present application. On the contrary, in the ACC bar judgment I reached the same conclusions as Simler J in relation to the meaning and effect of s 317 of the Accident Compensation Act. Thus, the law at this stage concerning the meaning and effect of s 317 of the Accident Compensation Act is as explained by
Simler J and myself. I must determine the present application on the basis of the law
27 Godard v Gray (1870) LR 6 QB 139 (CA); Dicey, Morris & Collins (eds) The Conflict of Laws
(15th ed, Sweet & Maxwell, London, 2012) at [14-119] and [14-120].
as it is and not speculate what might happen when a higher court hears the appeal from the ACC bar judgment.
[78] The second limb of the special circumstances exception explained by Lord Sumption in Virgin Atlantic, and which I have set out in paragraph [73], could only be engaged where the point in issue was raised and wrongly determined in earlier proceedings. That criterion does not currently apply in this case.
Lack of right of an appeal
[79] The second element to Mr Goddard’s argument is based on the contention that an injustice would arise in the present case if the 25 plaintiffs are barred from continuing their proceeding in New Zealand by reason of issue estoppel because they had no right to appeal Allen (No. 2).
[80] Mr Goddard submitted that in Arbuthnot v Chief Executive of the Department of Work and Income,28 the “Supreme Court has treated the ability (both as a matter of law and in practice) to appeal the point in issue as fundamental to whether an issue estoppel arises”.29 He submitted that this approach reflected the “obvious unfairness” of holding a party to a finding which they had no ability to appeal.
[81] Both counsel accept that the observations of the Supreme Court in Arbuthnot relied upon by Mr Goddard were in the nature of obiter dicta. The comments in question however require very careful consideration, particularly in the context of the right to justice enshrined in s 27 of the New Zealand Bill of Rights Act 1990.
[82] The Supreme Court judgment in Arbuthnot concerned rights of appeal in the context of decisions that emanated with the Benefits Review Committee under s 10A of the Social Security Act 1964. That Committee decided Mr Arbuthnot was entitled to receive a community wage benefit because, contrary to the assessment of the Department of Work and Income, Mr Arbuthnot was not living in a de facto
relationship. The Benefits Review Committee decided, however, Mr Arbuthnot was
28 Arbuthnot v Chief Executive of the Department of Work and Income [2007] NZSC 55, [2008] 1
NZLR 13.
29 Submissions of Plaintiffs, 19 September 2016 at [6.5].
not entitled to receive an accommodation supplement benefit because he had failed to notify the Department of Work and Income of a change of his address. Mr Arbuthnot appealed to the Social Security Appeal Authority pursuant to s 12J of the Social Security Act. That section provided only Mr Arbuthnot with a right of an appeal. The Chief Executive endeavoured to uphold the decision of the Benefits Review Committee by arguing Mr Arbuthnot had been living in a de facto relationship. The Social Security Appeal Authority ruled this argument was not available to the Chief Executive because he had no right of appeal from the decision of the Benefits Review Committee. Thereafter, appeals were pursued in the High Court and Court of Appeal. Ultimately, Mr Arbuthnot was granted leave to appeal to the Supreme Court where he argued, amongst other matters, that his appeal to the Social Security Appeal Authority had been confined to the finding by the Benefits Review Committee concerning his change of address and that the Chief Executive’s inability to appeal the decision of the Benefits Review Committee meant the Chief Executive could not challenge the finding that Mr Arbuthnot had not been living in a de facto relationship. The Supreme Court concluded the Social Security Act did not preclude the Chief Executive from asking the Social Security Appeal Authority to consider whether or not Mr Arbuthnot had been living in a de facto relationship when determining his appeal from the finding that he was not entitled to receive an accommodation supplement benefit.
[83] The Supreme Court held that issue estoppel could not arise in Mr Arbuthnot’s case because the Benefits Review Committee was an administrative body, and not an entity that exercised judicial functions.
[84] The Supreme Court then added:30
Even if the [Benefits Review Committee] had been a judicial tribunal before which the chief executive or the Department appeared as a party we would still have considered that no issue estoppel arose from its finding in relation to the community wage that Mr Arbuthnot was not in a conjugal relationship. This is because there would be obvious unfairness in holding the chief executive and his department bound in other proceedings by a finding against which he had no ability to appeal … care must be taken not to allow the doctrine of issue estoppel, designed to prevent injustice to one litigant (namely the unfairness of allowing relitigation of a matter which has been
30 Arbuthnot v Chief Executive of the Department of Work and Income, above n 28, at [29], citing
Joseph Lynch Land Co Ltd v Lynch [1995] 1 NZLR 37 (CA) at 43.
finally decided), from causing greater injustice to the other. An over- rigorous application of the issue estoppel doctrine to circumstances where there was no right of appeal, or where, … it was not reasonable to expect any such right to be exercised in practice, would indeed produce unfairness disproportionate to the object of achieving finality in litigation.
[85] The Supreme Court proceeded to explain that courts have adopted “a cautious and flexible approach” to issue estoppel:31
They have determined for example, that a finding of fact or law against a successful party, which has no right of appeal against the decision in its favour, will not found an estoppel because it could not have been fundamental to the decision.
[86] The circumstance that the Supreme Court had in mind in Arbuthnot when it explained that issue estoppel should not be invoked where the party against whom the doctrine is raised had no right to appeal the earlier decision is quite distinct from the present case.
[87] In this case, the New Zealand sample claimants did not seek permission to appeal Allen (No. 2) and the wider group of New Zealand claimants also did not seek to intervene in order to try and obtain leave to appeal. Instead, all of the New Zealand claimants discontinued their proceedings in England.
[88] It is accepted that any possible avenue for appeal by the New Zealand claimants who were not New Zealand sample claimants, was particularly narrow. It cannot be said however that the New Zealand claimants were categorically denied an opportunity to seek leave to appeal, even though any opportunity to appeal was remote.32
[89] More significantly, all the New Zealand claimants in England agreed to the procedure that led to the judgment in Allen (No. 2). They did so with the benefit of legal advice and in circumstances where they must have appreciated that the procedure they agreed to greatly limited their opportunity to appeal the judgment of
Simler J. Having agreed to that procedure, it cannot be said that the 25 plaintiffs are
31 Arbuthnot v Chief Executive of the Department of Work and Income, above n 28, at [30], citing Spencer Bower, Turner and Handley (eds) The Doctrine of Res Judicata (3rd ed, Butterworths, London, 1996) at [205].
32 The New Zealand claimants had 21 days to file for leave to appeal after the date of Simler J’s
decision pursuant to r 52.12(b) of the Civil Procedure Rules (UK).
denied justice because they had only a very remote prospect of appealing
Allen (No. 2).
Abuse of process
[90] Having concluded that the doctrine of issue estoppel prevents the 25 plaintiffs from continuing their claim for compensatory damages in New Zealand I can deal briefly with DePuy’s alternative argument that allowing the 25 plaintiffs to continue with their claim for compensatory damages amounts to an abuse of the processes of the New Zealand High Court.
[91] Mr Goddard and Mr McLachlan both submitted that a distinction between the doctrines of issue estoppel and abuse of process is that the latter is concerned with the exercise of the Court’s inherent procedural powers and is therefore discretionary.33 The suggestion that the power to strike out or stay proceedings that are an abuse of process is discretionary may be an unnecessary appendix to the Court’s abuse of process jurisdiction because it is very difficult to conceive of a situation in which a Court would conclude that a proceeding was an abuse of process and yet exercise its discretion to not strike out or stay the proceeding.
[92] The abuse of process doctrine is usually invoked in circumstances where allowing a plaintiff to proceed with his or her proceeding would constitute an impermissible collateral attack on a judgment of a court of competent jurisdiction.34
[93] In Chamberlains v Lai,35 Elias CJ referred to the opinions of Lord Bingham and Lord Millett in Johnson v Gore Wood & Co36 and explained the concept of abuse of process in the following way:
Lord Bingham considered that what constituted abuse is a “broad, merits- based judgment”, incapable of capture in hard and fast rules of determination and not limited to further litigation between the same parties or their privies. Lord Millett in the same case thought it “primarily an ancillary and salutary principle” which prevents res judicata and issue estoppel being “deliberately or inadvertently subverted”.
33 Hunter v Chief Constable [1982] AC 529 (HL) at 536.
34 Above n 33 and W v W [1999] UKPC 2, [1999] 2 NZLR 1.
35 Chamberlains v Lai [2006] NZSC 70, [2007] 2 NZLR 7 at [62].
36 Johnson v Gore Wood & Co [2002] 2 AC 1 (HL).
[94] If I am wrong in my conclusion that the 25 plaintiffs were privies of the New Zealand sample claimants in Allen (No. 2) then I am satisfied that this is a rare case in which it would be an abuse of process of the New Zealand High Court for the
25 plaintiffs to continue with their proceeding in New Zealand.
[95] The reasons for this conclusion reflect the reasons why I have concluded there is no injustice in finding issue estoppel applies in this case. The 25 plaintiffs agreed to the procedure that was followed in Allen (No. 2). That procedure was suggested by counsel in England for all the New Zealand claimants, including the 25 plaintiffs, in an effort to achieve a cost-effective determination in that country of the issue concerning the scope and effect of s 317 of the Accident Compensation Act. That procedure was designed to determine that issue for the benefit of all New Zealand claimants in England. The procedure was put forward by Mr Preston knowing that if Simler J decided in favour of DePuy, her judgment would determine the claims of all New Zealand claimants. Simler J had the same understanding of the consequences of her judgment.
[96] The 25 plaintiffs opted to become claimants against DePuy in England and agreed to a procedure that they knew would determine whether or not their claims for compensatory damages were barred by s 317 of the Accident Compensation Act. In these circumstances, allowing the 25 plaintiffs to “have another bite of the
cherry”37 would amount to an abuse of the processes of the New Zealand High Court
because to decide otherwise would countenance an impermissible collateral attack on
Allen (No. 2).
[97] Ashmore v British Coal Corporation38 provides support for my conclusion that the doctrine of abuse of process is engaged in the present case. In that case
1,500 workers commenced claims in the Industrial Tribunal claiming a breach of equal pay legislation. The Tribunal ordered that sample cases be selected to determine the issues common to all claimants. Ms Ashmore chose not to put forward her claim for selection and it was stayed. The sample cases failed and Ms Ashmore
then sought to pursue her claim separately. The Court of Appeal for England and
37 Refer McGowan LJ in House of Spring Gardens Ltd v Waite, above n 21, at 258.
38 Ashmore v British Coal Corporation [1990] 2 QB 338 (CA).
Wales struck out her claim as an abuse of process on the basis that it was contrary to the interests of justice to allow the same issues to be re-litigated.
[98] As the 25 plaintiffs in this case wish to pursue a similar strategy to Ms Ashmore it is appropriate that, like the Court of Appeal of England and Wales, I find that their strategy constitutes an abuse of process.
Conclusion
[99] The 25 plaintiffs are estopped from seeking compensatory damages in New Zealand because they were privies to the plaintiffs in Allen (No. 2). Alternatively, it would be an abuse of process to permit the 25 plaintiffs to continue their claim for compensatory damages in New Zealand.
[100] I reserve leave to the parties to file any further memoranda if agreement is not able to be reached in relation to the question of costs.
[101] I also reserve leave for the parties to return to the Court in relation to the formulation of any orders that flow from this decision.
D B Collins J
Solicitors:
Meredith Connell – Wellington Branch, Wellington for Plaintiffs
Kensington Swan, Auckland for Defendant
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