Supreme Court of WA|2009-05-28|Before: Beech J

STEWART -v- BIODIESEL PRODUCERS LTD [2009] WASC 145 (28 May 2009)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : STEWART -v- BIODIESEL PRODUCERS LTD [2009] WASC 145

Estoppel - Res judicata - Cause of action estoppel - General principles - Whether record restricted to formal orders and pleadings or whether record includes evidence in earlier proceedings

Estoppel - Anshun estoppel - General principles - Plaintiff in this action cross-claimant in earlier proceedings - Whether Anshun estoppel precludes claims in this action

Plaintiff's claims not barred by cause of action estoppel

Biodiesel Producers Ltd v Stewart [2007] FCA 722

Boles v Esanda Finance Corp Ltd (1989) 18 NSWLR 666

Bryant v Commonwealth Bank of Australia [1995] FCA 1299; (1995) 57 FCR 287

Chamberlain v Deputy Commissioner of Taxation [1988] HCA 21; (1988) 164 CLR 502

DP World Australia Ltd v Fremantle Port Authority [2009] WASCA 16

Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd (in liq) [1993] FCA 342; (1993) 43 FCR 510

Giumelli v Giumelli [1999] HCA 10; (1999) 196 CLR 101

Jackson v Goldsmith [1950] HCA 22; (1950) 81 CLR 446

Ling v Commonwealth [1996] FCA 1646; (1996) 68 FCR 180

Macquarie Bank v National Mutual Life Association of Australia Ltd (1996) 40 NSWLR 543

Pollnow v Armstrong [2000] NSWCA 245

Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589

Rahme v Commonwealth Bank of Australia [1991] NSWCA 230

Stewart v Biodiesel Producers Ltd [2008] FCAFC 66

Thoday v Thoday [1964] P 181

Trawl Industries of Australia Pty Ltd (in liq) v Effem Foods Pty Ltd [1992] FCA 272; (1992) 36 FCR 406

Verwayen v The Commonwealth [1990] HCA 39; (1990) 170 CLR 394

Willoughby v Clayton Utz [No 2] [2009] WASCA 29

Zavodnyik v Alex Constructions Pty Ltd [2005] NSWCA 438; (2005) 67 NSWLR 457

1 The plaintiff, Mr Anthony Stewart, has commenced an action in this court against Biodiesel Producers Ltd (BPL). Mr Stewart and BPL were parties to an action in the Federal Court. Judgment was delivered on 16 May 2007. In substance, BPL succeeded in the Federal Court action.

2 BPL pleads in its defence in this action that Mr Stewart is estopped by virtue of the Federal Court proceedings from bringing any of the claims the subject of this action. On 23 October 2008 I ordered that the issues arising from those pleas by BPL be tried as preliminary issues.

3 BPL contends that Mr Stewart's claims are precluded by cause of action estoppel or, alternatively, Anshun estoppel.

4 I will begin by outlining the legal principles relevant to cause of action estoppel and Anshun estoppel. Next, I will analyse the pleadings in this action and the pleadings in the earlier Federal Court action. I will then turn to each of the four claims made by Mr Stewart in this action to determine, in each case, whether the claim is precluded by cause of action estoppel or Anshun estoppel.

5 I begin with the principles relating to cause of action estoppel.

6 In this area of the law there are numerous inconsistencies in terminology and taxonomy. However, the basic principle is clear enough. The final decision in a case estops or precludes any party to the litigation from disputing against any other party in later litigation the correctness of the earlier decision, except on appeal. The same claim cannot be raised again between them: Spencer Bower, Turner & Handley, The Doctrine of Res Judicata (3rd ed, 1996) [2], [9]. As Fullagar J said in Jackson v Goldsmith [1950] HCA 22; (1950) 81 CLR 446, 466, where an action has been brought and judgment has been entered in that action, no other proceedings can thereafter be maintained on the same cause of action between the same parties. (The principle extends to privies, but as the parties in this action were both parties to the Federal Court action I will say no more about privies.)

7 In Spencer Bower, Turner & Handley [3] - [6] it is suggested that the estoppel effect and the merger effect of a judgment should be distinguished. The learned authors state that the doctrine of merger arises only when a claim is successful, because only then has the cause of action merged into the judgment. By contrast, the estoppel effect of the broad principle stated in [6] above applies to preclude a party from raising the same claim again in later litigation whether the claim in the earlier action succeeded or failed. The authors describe this as 'cause of action estoppel' (which is the term used by Diplock LJ in Thoday v Thoday [1964] P 181, 197). The merger effect is described as 'merger in judgment', and the estoppel effect as 'res judicata estoppel'. Res judicata estoppel is used to refer both to cause of action estoppel and to issue estoppel.

8 The distinction between the two effects of a judgment, the estoppel effect and the merger effect, was also explained by Clarke JA in Macquarie Bank v National Mutual Life Association of Australia Ltd (1996) 40 NSWLR 543, 556 - 557.

9 There are a number of decisions of the High Court in which the concept of 'res judicata' is discussed. These include Blair v Curran [1939] HCA 23; (1939) 62 CLR 464, 532; Jackson v Goldsmith (466 - 467); Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589, 597 (Anshun's Case); and Chamberlain v Deputy Commissioner of Taxation [1988] HCA 21; (1988) 164 CLR 502, 510 - 511. In all of these cases, the term 'res judicata' was used to refer to the situation where the cause of action litigated in the earlier action had merged into judgment.

10 I propose to adopt the term 'cause of action estoppel'.

11 In any case, leaving aside issues of terminology, it is clear that the estoppel effect of the earlier decision, precluding the same claim from being made again in later proceedings between the same parties, applies whether the claim in the first proceedings succeeded or failed. See, for example, Willoughby v Clayton Utz [No 2] [2009] WASCA 29; Trawl Industries of Australia Pty Ltd (in liq) v Effem Foods Pty Ltd [1992] FCA 272; (1992) 36 FCR 406, 409; Zavodnyik v Alex Constructions Pty Ltd [2005] NSWCA 438; (2005) 67 NSWLR 457 [33]; Macquarie Bank v NML (556 - 557).

12 In Willoughby [14] Pullin JA quoted with approval the statement in Spencer Bower, Turner & Handley [19] that a party setting up a res judicata estoppel (expressed by Pullin JA as 'res judicata') as a bar to an opponent's claim must establish the following elements:

(a) the decision was judicial in the relevant sense;

(e) it determined the same question as that raised in the later litigation; and

(f) the parties to the later litigation were either parties to the earlier litigation or their privies, or the earlier decision was in rem.

14 In cases of a plea of res judicata or cause of action estoppel, the primary question will be whether the cause of action in the later proceedings is the same as that which was litigated in the former proceedings: Jackson v Goldsmith (467); Willoughby [11]; Macquarie Bank v NML (558 - 559).

15 That proposition invites attention to the meaning of 'cause of action' in this context. As Brennan J said in Anshun's Case (610 - 613), the phrase 'cause of action' may be used in several senses including:

(1) The series of facts which the plaintiff must allege and prove to substantiate a right to judgment;

(3) The substance of the action as distinct from its form.

16 Brennan J's statement was referred to by Deane, Toohey & Gaudron JJ in Chamberlain (508), without choosing between any of these formulations.

17 The weight of authority in Australia is that the identity or otherwise of the causes of action is determined by matters of substance rather than the technical identity of the legal form of action or category of claim invoked: Trawl Industries (411 - 412, 418, 422); Zavodnyik [25], [30] - [31]; Lee v Kim [2006] NSWCA 384; (2006) 68 NSWLR 433 [24] - [25]; Macquarie Bank v NML (559); but cf Boles v Esanda Finance Corp Ltd (1989) 18 NSWLR 666, 672 - 673.

18 That approach was said by Gummow J in Trawl Industries to be consistent with the requirements arising from the fact that, in that case (as in this case) both proceedings were in federal jurisdiction. The identification of a matter the subject of the exercise of federal jurisdiction directs attention to the substance of the controversy, not the form in which the legal proceeding is framed (411 - 412).

19 The same cases, apart from Macquarie Bank v NML, support the view that in determining whether as a matter of substance the causes of action are the same in the two proceedings, attention is to be directed to whether the same factual matrix is relied upon and to the remedy claimed in each proceeding. In Macquarie Bank v NML (559) Clarke JA stated that what is required is 'an examination of the factual circumstances relied upon to establish the right to relief in each case in order to determine whether there is a sufficient identity between them to found the conclusion that the same cause of action was in question in both cases'. Clarke JA suggested that Gummow J's test in Trawl Industries may be wider than the test favoured by him.

20 In a passage cited with approval in both Zavodnyik and Lee, Gummow J tested whether the same factual matrix is relied upon by reference to whether the same evidence would be led to prove the case that the claimant had propounded in its pleadings in both actions: Trawl Industries (422).

21 The question whether the causes of action in the two proceedings are the same is influenced by the level of particularity at which the examination of the factual situation is conducted: Macquarie Bank v NML (560). It involves an evaluative judgment on which minds may reasonably differ: compare the majority approach of Clarke JA (556 - 561) with that of Powell JA in dissent (616 - 617).

22 There is an important question as to the material to which a court may have regard to in applying these principles. In determining whether the same factual matrix has generated the controversy in the two cases and whether the claimant would call, in the second action, the same evidence to prove its case, can regard be had to the evidence led in the earlier proceedings, or only to the pleadings?

23 This was the only question of legal principle on which Mr Stewart took any substantial issue with the legal principles advanced by BPL. BPL submitted that regard may be had to the evidence led in the earlier case and that it did not matter that in the second case facts were relied upon which were not pleaded in the first case. It was, BPL submitted, sufficient if the evidence to be relied on in both cases would be substantially the same. Against this Mr Stewart submitted that, in determining a question of res judicata or cause of action estoppel, regard could be had only to the formal order of the court and the pleadings in the earlier action, and not to the evidence. Mr Stewart submitted that that constituted the binding holding of the Court of Appeal in Willoughby.

24 For the reasons that follow, I accept Mr Stewart's submission in this regard.

25 In considering the competing submissions it is, I think, useful to consider the decisions relied upon by the parties in some detail. I begin with the decisions relied upon by BPL.

26 In Trawl Industries, the applicant in the Federal Court proceedings (Trawl) brought an action for damages by reason of alleged contraventions of s 52 of the Trade Practices Act 1974 (Cth) by the respondent (Effem) and a claim for negligence. (There were other applicants in the Federal Court proceedings but that is not presently relevant.) Trawl had already unsuccessfully brought proceedings against Effem in the Supreme Court of New South Wales. In the Supreme Court action Trawl had relied on contravention of s 52 of the Trade Practices Act but did not include any claim for negligence.

27 Gummow J found that Effem had made out its case of cause of action estoppel against Trawl.

28 In considering the claim of cause of action estoppel, Gummow J analysed the pleading in the Supreme Court action in detail (419). In doing so, his Honour also referred to evidence adduced in the Supreme Court action, particularly in the form of witness statements which became exhibits. He then analysed the pleading in the Federal Court action (419 - 422). Again, in doing so, he referred to particular alleged representations which had been dealt with in paragraphs of witness statements relied upon by Trawl in the Supreme Court proceedings.

What emerges from this review of the matter in broad terms is that in the present proceeding Trawl seeks to recover a loss measured in the same way and in the same quantum as it did on the trade practices claim it propounded in the Supreme Court proceeding. Not all of the misrepresentations alleged in this Court are found in the pleading in the Supreme Court, but some are. The second, fifth and sixth set of claims in this Court are examples. Further, all of the alleged misrepresentations precede entry into the heads of agreement dated 7 June 1988.

It is true that the contract dated 26 March 1987, said to have been released and discharged before entry into the heads of agreement, was not pleaded in the Supreme Court. Although not all of it had been taken to trial, the whole of the action by Trawl in the Supreme Court was disposed of. But each set of claims in this Court is particularised by reference to statements which were in evidence in the Supreme Court. Thus, this is a case where it can be said that the same evidence would be led to prove the case Trawl propounded in its pleadings in both actions. The one factual matrix has generated the controversy which is given legal form in the two pleadings. As a matter of substance, in this Court Trawl seeks to attack Effem again upon a corresponding cause of action.

In my view, Effem has made out its case of cause of action estoppel against Trawl. This is so, even though no claim previously was made in negligence. The substance of the controversy embraces such a claim. The gist of the recovery sought both in negligence and for contravention of the TP Act is the same; the question is how much worse off is Trawl as a consequence of the acts and omissions of Effem? (422)

30 I accept BPL's submission that the decision in Trawl Industries supports the proposition that it does not matter that in the second case the facts relied upon were facts which were not pleaded in the first case; it is sufficient if the evidence to be relied upon in both cases will be the same. Both Gummow J's approach to analysis of the material (419 - 422), and his conclusions (422), seem to me to support that view.

31 An appeal against Gummow J's decision was dismissed: Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd (in liq) [1993] FCA 342; (1993) 43 FCR 510. The appeal related to other aspects of his decision (namely, his refusal of Effem's motion against the other applicants, who had not been parties to the earlier proceedings in the Supreme Court of New South Wales). There was no challenge to the decision to stay the proceedings by Trawl.

32 I accept BPL's submission that the relevant passages of the decision of Gummow J in Trawl Industries have been cited with approval in the New South Wales Court of Appeal decisions in Zavodnyik and Lee.

33 In Zavodnyik a builder brought proceedings in the Fair Trading Tribunal in respect of work done under a residential building contract. The builder was not licensed when it entered into the contract. The Home Building Act 1989 (NSW) meant that the contract could not be enforced by the builder. During the hearing before the Fair Trading Tribunal, the builder sought to amend its pleading to include a claim for restitution. This was opposed by the owners. The upshot of exchanges between counsel and the Tribunal was that the builder's claim would be advanced only on the ground that it was licensed when subsequent variations were agreed to, or that strict compliance with the licensing requirements had not been required because of a provision of the Act governing the procedure of the Fair Trading Tribunal. Thus the builder abandoned any claim to recover in restitution. The claim was unsuccessful. Subsequently the builder made a fresh application, which was transferred to the District Court, to recover for the work it had done in restitution or on a quantum meruit basis. The New South Wales Court of Appeal (Handley JA, Mason P & Latham J agreeing) held that the District Court proceedings were barred by cause of action estoppel.

34 Handley JA applied the decision and reasoning of Gummow J in Trawl Industries, setting out substantial portions of the passages at 422 I have already set out: [25]. Handley JA stated that a non-exhaustive comparison between the particulars of the claim in the Tribunal, and the claim in the District Court, demonstrated there was substantial overlap and that the builder would have to call substantially all the evidence it called in the Tribunal: [27] - [28]. His Honour concluded as follows:

When the analysis in Trawl Industries of Australia is applied, and the question considered as a matter of substance, it is evident that the restitution claim, although reduced in amount, is based on building work, architect's instructions, and evidence that were relied on by the builder in the Tribunal. As Gummow J said (quoted at 462 [25] supra): 'The one factual matrix has generated the controversy which is given legal form in the two pleadings ... This is so, even though no claim previously was made in negligence. The substance of the controversy embraces such a claim' [30].

35 For present purposes, the reference to evidence relied on by the builder in the Tribunal should be noticed.

36 In Zavodnyik the cause of action in contract and the claim in restitution were alternative and inconsistent remedies based on the same facts. That the causes of action were alternate did not prevent a cause of action estoppel from applying [31], [32].

37 Lee concerned successive actions for defamation brought by the respondent. At [24] - [25] of that case, Handley JA (Beazley & Santow JJA agreeing) applied Trawl Industries, quoting a substantial portion of the passage at 422 in Trawl Industries I have set out earlier. His Honour concluded that 'the overlap between the causes of action pleaded in the first and second statements of claim is almost complete. Both actions relate to the same defamatory imputations in the same articles in the same issues' [27]. The text of the matters complained of in the two proceedings were very similar.

38 In determining the question of cause of action estoppel in Lee the New South Wales Court of Appeal had regard to the course of the first defamation case [5] - [8]. However, this decision does not seem to me to deal squarely with the issue I am presently considering, namely whether regard can be had to the evidence in the first proceeding in deciding whether cause of action estoppel arises. Nevertheless, Handley JA cited with approval a substantial portion of the relevant passage in Trawl Industries.

39 As I have said, it seems to me that both Trawl Industries and Zavodnyik support the view that regard may be had to the evidence in the first proceeding.

40 I turn to the decision of the WA Court of Appeal in Willoughby. The appellants brought an earlier action against the respondent which was dismissed. Subsequently, the appellants commenced a new action against the respondent pleading what was eventually conceded to be essentially the same causes of action as had been pleaded in the first action. One of the issues in the appeal was whether the judgment dismissing the first action meant that the causes of action had been judicially determined and were therefore res judicata. Pullin JA delivered reasons for decision with which Wheeler & Miller JJA agreed. As I have said, Pullin JA set out the elements identified in Spencer Bower, Turner & Handley for a party to establish in setting up a res judicata estoppel. Pullin JA identified a question as to what may be examined in order to decide whether causes of action are res judicata. He began with a statement of Fullagar J in Jackson v Goldsmith (467) that 'where the plea is of res judicata, only the actual record is relevant'. The question which then arose in Willoughby was what constitutes the actual record. Counsel for the appellant submitted that the reasons for judgment in the first action should be examined. Counsel for the respondent submitted that the record consisted only of the statement of claim in the first action, the judgment in the first action and the statement of claim in the second action, submitting that reference to the reasons for judgment was impermissible.

41 Pullin JA referred [21] - [22] to what was said at [204] in Spencer Bower, Turner & Handley, saying that that paragraph is dealt with in Pollnow v Armstrong [2000] NSWCA 245.

42 Paragraph [204] in Spencer Bower, Turner & Handley is in the following terms:

It was formerly considered that the subject matter of a decision for the purposes of res judicata could only be ascertained from the formal judgment or order and the court could not examine 'what was said by the judges'. The previous author was in some doubt but preferred the view that the court's reasons could be considered. There were then many case favouring the broader view.

Since then the law has been settled in favour of the broader view. In R v Humphreys [1977] AC 1 Lord Hailsham said: 'The court will inquire into realities, and not mere technicalities', and in Rogers v R (1994) 181 CLR 251 Brennan J said that the court could look at 'any material that shows what issues were raised and decided'. The point now seems to be assumed. Thus, in Thrasyvoulou [1990] 2 AC 273 the House considered reports of planning inspectors. In Arnold [1991] 2 AC 93 it held that issue estoppel was excluded because of the special circumstances but that question could not be investigated if the court were confined to the pleadings and the order.

The court can consider the pleadings, particulars, evidence, the notice of appeal or cross-appeal, the reasons for judgment, the summing up, any questions put to the jury and its answers. (footnotes omitted)

43 Pullin JA described Pollnow as authority for the proposition that the record consists of the pleadings and the judgment or order, but not the reasons for judgment. He quoted [24] - [25] the following passages from the decision of Meagher JA (Priestley & Sheller JJA agreeing):

The doctrine of res judicata is concerned with results not reasons. Whether the trust failed because oral evidence to the contrary was believed, or because the deed relied on had been revoked, or because it related to different property from that claimed, or because it could not be proved ... simply does not matter: if the trust alleged is found not to exist, the doctrine of res judicata will prevent further proceedings based on the same allegation [9].

...

In the circumstances, and in the absence of any binding authority requiring the application of Arnold's case to res judicata, I am of the view that for the purposes of res judicata one is restricted to the examination of the plaintiff's pleadings and the court's orders [13].

44 Pullin JA also set out [26] the following statement by Priestley JA in Pollnow:

In regard to para 204 of the third edition of Spencer, Bower on Res Judicata, on the second paragraph of which counsel for the appellant relied (and which is set out in Meagher JA's reasons), I think counsel's reliance on it was due to a misunderstanding. The passages preceding para 204, and the cases cited in the second paragraph of para 204 itself for that matter, make it plain that the second paragraph is dealing with that branch of res judicata called issue estoppel, and not the main and original doctrine of res judicata, now frequently called in England cause of action estoppel. The two branches are substantially different and confusion between them would be lessened if the English habit of describing issue estoppel as a branch of res judicata were abandoned. At all events, none of the cases cited in para 204 gives the appellant in the present case any basis for escaping from the established rules of res judicata (properly so called and distinct from issue estoppel) referred to by Meagher JA in his reasons [2].

45 Pullin JA stated that in his view Pollnow's case is correct [27]. His Honour concluded that the submission of counsel for the respondent was correct in that reasons for judgment are not part of the record to be examined when deciding whether causes of action have already been determined in an earlier action [28].

46 BPL submits that Willoughby did not decide whether the evidence adduced in the earlier proceeding forms part of the 'record'. All that Willoughby decided, BPL's submission continues, is that the reasons are not part of the record, referring to [28]. I accept that such a reading of Willoughby is open. However, on balance, I am not persuaded by BPL's submission. That is so for the following reasons.

47 First, it is difficult to identify a principled reason why the record would include the evidence adduced at the earlier trial, but not include the reasons for decision. I accept Mr Stewart's submission in this regard.

48 Secondly, in Pollnow, Meagher JA stated that the record is restricted to the pleadings and the court's formal orders. Pullin JA cited that passage. In expressing the view that Pollnow was correct, I take his Honour to be referring not only to the decision in that case but also to the reasoning.

49 For these reasons, I consider that I am bound by the decision in Willoughby to hold that in considering the question of cause of action estoppel regard can be had to the formal order and the pleadings in the earlier action, but not to the evidence or the reasons for decision.

50 BPL advanced an argument that principle and practical considerations support regard being had to the evidence in the earlier proceedings in determining a cause of action estoppel, referring to what was said by Gummow J in Trawl Industries (418). However, my conclusion that I am bound by Willoughby to hold that regard may not be had to the evidence in the earlier proceeding means that these considerations do not arise or do not assist me.

51 The principles relating to Anshun estoppel were recently outlined by Newnes AJA in DP World Australia Ltd v Fremantle Port Authority [2009] WASCA 16 [73] - [84] (McLure JA agreeing). The following outline draws heavily on what was said in that case.

52 Anshun estoppel rests on the principle that parties to litigation should bring forward their whole case, so that the court will not permit a party to reserve a claim and make it later when it could and should have been made in the earlier proceedings. The starting point for the principle is the often cited statement of Wigram VC in Henderson v Henderson [1843] EngR 917; (1843) 3 Hare 100, 115; [1843] EngR 917; (1843) 67 ER 313, 319 as follows:

[W]here a given matter becomes the subject of litigation in, and of adjudication by, a court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time.

53 This principle was approved by the High Court in Anshun's Case (598).

54 Different views have been expressed on whether the principle in Henderson should be seen as relating to the scope of cause of action estoppel, or as espousing a separate principle. Handley JA (with whom the other members of the New South Wales Court of Appeal have agreed) has applied the statement in Henderson to cause of action estoppel: Zavodnyik [24]; Lee [22]. However, in Chamberlain (509) Deane, Toohey & Gaudron JJ stated that Henderson was not concerned with res judicata in its strict sense but rather with its implications when an issue is sought to be raised 'which could and should have been litigated in the earlier proceedings'. Their Honours referred to Anshun's Case (598); see also Chamberlain (512) (Dawson J). Unless and until the High Court states otherwise, I propose to characterise an Anshun estoppel in the way stated in Chamberlain.

55 Anshun's Case considered the principle in Henderson in the context of a failure to plead a defence in an earlier action. The High Court rejected the proposition that it was an abuse of process to raise in subsequent proceedings matters which could and should have been litigated in earlier proceedings. Gibbs CJ, Mason & Aickin JJ said:

In this situation we would prefer to say that there will be no estoppel unless it appears that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it. Generally speaking, it would be unreasonable not to plead a defence if, having regard to the nature of the plaintiff's claim, and its subject matter it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in the one proceeding. In this respect, we need to recall that there are a variety of circumstances, some referred to in the earlier cases, why a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings eg expense, importance of the particular issue, motives extraneous to the actual litigation, to mention but a few (602 - 603).

56 Their Honours emphasised the significance of the potential for conflicting judgments as an important factor in this context. They said as follows:

The likelihood that the omission to plead a defence will contribute to the existence of conflicting judgments is obviously an important factor to be taken into account in deciding whether the omission to plead can found an estoppel against the assertion of the same matter as a foundation for a cause of action in a second proceeding. By 'conflicting' judgments we include judgments which are contradictory, though they may not be pronounced on the same cause of action. It is enough that they appear to declare rights which are inconsistent in respect of the same transaction.

It is for this reason that we regard the judgment that the Authority seeks to obtain as one which would conflict with the existing judgment, though the new judgment would be based on a different cause of action, a contractual indemnity (603 - 604).

57 In Rahme v Commonwealth Bank of Australia [1991] NSWCA 230, Anshun estoppel was applied where a party brought a subsequent action on a cause of action which could have been raised in earlier proceedings. Priestley JA considered that Anshun's Case was authority for the following propositions:

Wigram VC's extended principle as stated in Henderson is accepted as good law by the High Court;
that principle applies... to a proceeding in which a party is asserting a cause of action which could have been raised, but was not, in a previous proceeding in which the same party was asserting a different cause of action based on substantially the same facts against the same party as the second proceeding is being brought; and
the extended principle of Henderson will be applied to the second proceeding when it was unreasonable for the party asserting the cause of action in that second proceeding to refrain from raising it in the earlier proceeding against the same opponent party (4).

58 In Rahme the Court of Appeal held that the failure of the plaintiffs to raise the Contracts Review Act 1980 (NSW) in the earlier proceeding was unreasonable and that later claim would cover much of the same ground, involve waste on a large scale and give rise to the possibility of inconsistent results.

59 In DP World Australia Ltd, Newnes AJA said as follows in relation to the Full Federal Court decisions in Bryant v Commonwealth Bank of Australia [1995] FCA 1299; (1995) 57 FCR 287 and Ling v Commonwealth [1996] FCA 1646; (1996) 68 FCR 180:

In Bryant v Commonwealth Bank of Australia [1995] FCA 1299; (1995) 57 FCR 287, the question was whether Anshun estoppel applied where there had been a failure to raise a cross-claim in earlier proceedings. In that case, Bryant had been sued by the Bank in the Supreme Court of New South Wales for recovery of possession of mortgaged property and for debt. He raised various defences and cross-claims but later amended his pleadings to withdraw some of the cross-claims. He then brought separate proceedings in the Federal Court based on the cross-claims he had withdrawn. The Full Court of the Federal Court held that the proceedings were barred by Anshun estoppel. The court followed the approach taken in Rahme, noting that it was consonant with the High Court's emphasis in Anshun on looking at the substance of the issue sought to be raised in the later case, rather than its form. The court went on:

It is true that, in [Tanning Research Laboratories Inc v O'Brien [1990] HCA 8; (1990) 169 CLR 332] Brennan and Dawson JJ stated that the Anshun principle will ordinarily not apply to cross-claims. They made an exception of cases where the relief claimed in the second proceedings is inconsistent with the judgment in the first. In making this distinction, their Honours may have had in mind a situation such as the one before them in that case, where the cross-claim depended on facts remote from those of the principal claim. Questions of substantive degree may be involved; and in contrast to defences, many cross-claims may have little or no connection with the principal claim in the action; there may be no more than an identicality of parties. Where that is so, there may be no policy justification for forcing defendants to litigate their claims as cross-claims rather than as principal claims in separate actions in the forum of their choice. But, where, as here, a defendant's claim is intimately connected with that of the plaintiff, in the sense that each arises, substantially, out of the same matters of fact, there is every reason to require that both be litigated at the one time; thereby minimising costs and avoiding the possibility of inconsistent judgments (297 - 298).

In Ling v Commonwealth [1996] FCA 1646; (1996) 68 FCR 180, the Full Federal Court (184, 195) emphasised that the fundamental issue in the application of an Anshun estoppel is whether it was unreasonable for the party bringing the second action to have failed to raise its subject in the first action. Wilcox J (with whom Whitlam J agreed) went on to make the following comments in relation to reasonableness in this context:

In considering reasonableness ... consideration must be given to all aspects of the case. They include the extent of the overlap between the facts underlying each claim; the greater the overlap, the easier it is to argue that it was unreasonable not to raise the matter in the first case. They also include any difficulties that existed, or might reasonably have been perceived, in raising the matter earlier ... In assessing the reasonableness of Mr Ling's failure to raise his claim against the Commonwealth when he was sued by it in the earlier action, it is necessary to look at the whole of the circumstances that he then confronted (184).

Wilcox J also uttered a note of caution about the application of the principle in Anshun to cross-claims. His Honour (who had been a member of the Full Court in Bryant) said:

The decision in Bryant does not mean that it will always be appropriate to apply the Anshun principle to cross-claims. Some cross-claims have little or no connection with the claim in the action. There may be no more than an identicality of parties. It is difficult to see any justification for applying the Anshun principle to a case of that kind. Some cross-claims overlap the facts of the principal claim but involve additional facts. Where this occurs, a question of degree arises. It would be wrong to say that the Anshun principle is excluded whenever there are additional facts; to go so far would be to render it nugatory. However, where the additional facts are substantial, it may be appropriate to accept the reasonableness of separate proceedings (183).

Wilcox J referred with approval to the observation of the Judicial Committee of the Privy Council in Yat Tung Investment Co Ltd v Dao Heng Bank Ltd [1975] AC 581, 590, that to shut a party out of bringing a case on the basis of such a principle is a serious step, a power not to be exercised except 'after a scrupulous examination of all the circumstances'. As his Honour noted, if the Anshun principle is too readily applied, there is a possibility of serious injustice [80] - [83].

60 Thus an Anshun estoppel can arise where in the first proceeding a respondent has cross-claimed but has unreasonably failed to raise all his grounds of cross-claim: Bryant (297 - 298). In that case the court observed that attention should be given to the degree of connection between the primary claim and the cross-claim in the earlier action. If the two have little or no connection then it may not be appropriate to require the defendant in the earlier action to litigate all of its claims as cross-claims. But where the defendant's claim is intimately connected with that of the plaintiff in the earlier action, in the sense that it arises substantially out of the same matters of fact, then it is, generally at least, reasonable to require that both be litigated at the same time (298).

61 In order that Anshun estoppel apply, it is necessary but not sufficient that the cause of action raised in the later proceeding could have been raised in the previous proceeding, and that the later proceeding will involve the same or substantially the same facts as the earlier proceeding: Gibbs v Kinna [1998] VSCA 52; [1999] 2 VR 19 [27].

62 Anshun estoppel involves preventing a litigant from having a court adjudicate on the merits of a claim. For that reason, it is only to be applied in the clearest of cases: Gibbs v Kinna [33]. (See also the note of caution of Wilcox J in Ling (184), quoted with approval by Newnes AJA in DP World Australia Ltd in the passage set out at [59] above.)

63 A significant consideration is whether the later proceeding may give rise to inconsistent judgments. Where there is no risk of inconsistent judgments, the decision whether it was unreasonable for the plaintiff not to litigate closely related issues in the earlier proceedings requires consideration of all the relevant facts. This includes the character of the previous proceedings, the scope of any pleadings, the length and complexity of any trial, any real or reasonably perceived difficulties in raising the relevant claim earlier, and any other explanation for the failure to raise the claim previously: Gibbs v Kinna [28]. In Anshun's Case, the majority stated that there may be a variety of circumstances why a party may justifiably abstain from litigating an issue in one proceeding yet wish to litigate the issue in subsequent proceedings, including expense, importance of the particular issue, and motives extraneous to the actual litigation (603).

64 In order for judgments to be 'conflicting', it is enough that they are contradictory even though they may not be pronounced on the same cause of action. It is sufficient if they appear to declare rights which are inconsistent in respect of the same transaction: Anshun's Case (603 - 604); Trawl Industries (423).

65 In Zavodnyik, there was no risk of conflicting judgments. Nonetheless, the court held that even if there was no cause of action estoppel, there was an Anshun estoppel. Handley JA emphasised that there was a substantial if not total overlap in the facts, and that the amount now sued for was comprised within the earlier claim. Therefore, there was said to be every reason to require both claims to be litigated at the one time, minimising costs and delay to both parties and the demands on court time [40]. The extent of the overlap in the evidence in the earlier proceeding and that which would be required in the second was also emphasised as a significant consideration in Bryant (297 - 298).

66 An element in Anshun estoppel is the notion that a party cannot improve his position by bringing separate actions: Trawl Industries (423).

67 BPL submitted that Mr Stewart's claims in this action were doomed to fail, and that that was or may be relevant to any discretion the court may have in relation to the application of Anshun estoppel. I am not persuaded that any attempt to assess the merits of the claim sought to be made in the later proceedings is of any assistance in determining whether the claim is precluded by Anshun estoppel.

68 The principles I have stated respecting cause of action estoppel mean that it is necessary to give close attention to the statement of claim in this action and to the pleadings in the Federal Court action. I begin with the statement of claim in this action.

69 There are four claims pleaded in Mr Stewart's statement of claim in this action:

(b) a claim for quantum meruit for services provided;

(d) a claim for damages for loss arising from BPL's misleading and deceptive conduct.

70 I outline the allegations in the statement of claim as follows.

71 From March 2002 to June 2003, Mr Stewart was orally engaged by Mr Dennis Barron on behalf of BPL to undertake accounting, fundraising and secretarial services. The terms of the agreement were that insofar as BPL did not have available funds to pay Mr Stewart, he would accrue an entitlement for the issue by BPL to him of ordinary fully paid 20 cent shares in BPL accruing at the rate of $75 per hour of time spent by Mr Stewart (par 4). This is referred to as 'the Engagement'. In reliance on the Engagement, Mr Stewart accepted the position of company secretary of BPL and provided accounting, fundraising and secretarial services, without being paid but with the expectation of receiving shares (par 5).

72 Mr Stewart pleads in par 6 that he agreed with Mr Dennis Barron on behalf of BPL that he would continue providing services to BPL on the basis that he would receive 20 cent shares to be issued to him at various stages when certain milestones were reached by BPL. That is, Mr Stewart would receive:

(a) 0.5 million shares upon raising the required capital;

(b) 2 million shares upon completion of the operating plant;

(d) 1 million shares upon BPL achieving a NPAT (net profit after tax) of $4 million; and

(e) 1 million shares upon BPL achieving a NPAT of $6 million.

74 It is also pleaded that Mr Stewart would be available on call by BPL, and that he would continue to act as company secretary and would also continue his then occupation as the finance manager of Clinipath Pathology (par 6).

75 The Agreement was approved by the board of BPL on 9 July 2003 (par 7) and 'referred to or evidenced in alternative formats' in a heads of agreement dated August 2003 and a Shareholders Agreement dated April 2004 (par 8).

76 In reliance on the Agreement 'as varied', Mr Stewart continued to provide services to BPL up to 6 June 2005 (par 9). The particulars of the services provided state that 3,000 hours of professional time was spent. A detailed list of tasks said to have been undertaken by Mr Stewart is set out in the particulars.

77 Mr Stewart pleads that the following milestones were achieved (par 10):

(a) the raising of required capital occurred by a subscription agreement dated 5 August 2005;

(b) completion of the operating plant occurred by September 2007; and

78 BPL has not issued the shares to Mr Stewart in accordance with the Agreement (par 11).

79 The quantum meruit claim is pleaded in par 12. Mr Stewart pleads that BPL benefited from his services (meaning the services particularised under par 9); that BPL has been unjustifiably enriched by the services; and that it would be unconscionable for BPL to retain that benefit without Mr Stewart receiving any benefit. He claims a reasonable return for the activities that he undertook as pleaded and particularised in par 9. He particularises that return as the sum of $1,573,000 by reference to a report by Javelin Partners Pty Ltd dated 29 August 2006. (As will be seen, this report was served but not tendered in the Federal Court proceedings: exhibit 2C.)

80 In par 13 Mr Stewart pleads a collateral contract (the Grant Bonus Agreement). He pleads that BPL undertook to pay to him a sum of $120,000 (representing 1.25% of the Commonwealth Government biofuels capital grant of $9.6 million) in addition to his accruing share entitlement under the Agreement, for doing all things necessary to facilitate the grant to BPL of that sum. Mr Stewart pleads that he pursued the grant which was obtained, and that he has not been paid the sum of $120,000. Particulars were given in relation to this claim. I will say more about the particulars when I deal with the question of whether Mr Stewart's claim is precluded by an Anshun estoppel.

81 Finally, Mr Stewart pleads a claim based on misleading and deceptive conduct. He pleads that the making and entering into of the Engagement, the Agreement, and the Grant Bonus Agreement was conduct in trade and commerce (par 15). Mr Stewart says that at no time did BPL indicate that it reserved the right to resile from the obligations it undertook, and thus in effect represented that such obligations would be performed (par 15A). Further, Mr Stewart relies on s 51A insofar as the representations related to future matters, and says that the representations were made without reasonable grounds (pars 15A, 15B).

82 He pleads that the conduct referred to was misleading or deceptive in that BPL (par 16(b)):

(a) entered into the obligations pleaded in par 15;

(d) Mr Stewart performed the obligations imposed on him.

83 Mr Stewart says that, insofar as he has not been rewarded as contemplated, he has suffered loss and damage by reason of BPL's breach of the Trade Practices Act (par 16(c)).

(a) a declaration that BPL has engaged in misleading and deceptive conduct;

(b) an order that BPL issue to Mr Stewart 3.5 million ordinary fully paid shares;

(d) an order that BPL pay to Mr Stewart the determined value of the services together with the additional sum of $120,000;

(e) alternatively, an order that BPL pay Mr Stewart damages.

(a) the claim based on the Agreement pleaded in pars 4 to 11, as the Agreement Claim;

(b) the claim for quantum meruit in par 12 as the Quantum Meruit Claim;

(d) the claim for damages for misleading and deceptive conduct in pars 15, 15A, 15B and 16 as the Trade Practices Act Claim.

86 In its amended application dated 5 September 2005 BPL sought an order setting aside the issue of performance shares (as defined), and an order rectifying BPL's register of members. It also sought relief in relation to the circular resolution dated 30 November 2004 (the Circular Resolution).

87 By its statement of claim BPL pleaded that Mr Stewart was the company secretary of BPL from 7 June 2002 until 6 June 2005.

88 BPL pleaded in par 5, and Mr Stewart admitted, that by the Circular Resolution the directors of BPL resolved to issue to Mr Stewart 5,500 Performance Shares and to Mr Barron 9,000 Performance Shares (as defined in the Circular Resolution) on the terms and conditions contained in annexure A to the resolution.

89 BPL pleaded that Mr Stewart received legal advice that the issue of shares to Mr Barron was a related party transaction, and that the Corporations Act 2001 (Cth) required approval of the shareholders of BPL before Performance Shares could be issued to Mr Barron. BPL further pleaded that Mr Stewart did not disclose that legal advice to the board (par 4). That was said to support the conclusion that the Circular Resolution and the Performance Shares issued pursuant to it were voidable or should be set aside.

90 That was the basis of the ultimate decision of Lander J in the Federal Court action.

91 Further, BPL pleaded that the Circular Resolution had no effect because it purported to vary the rights attaching to the issued ordinary shares of BPL and it was not consented to by 75% of the holders of ordinary shares in accordance with s 246B(2) of the Corporations Act and cl 2.4 of BPL's Constitution (par 5).

92 Next, it was pleaded that in causing BPL to issue the Performance Shares, Mr Stewart acted in excess of the authority conferred by the Circular Resolution and in breach of his fiduciary and statutory duties as company secretary (par 6). In support of that plea, BPL pleaded matters going to the proper construction of the Circular Resolution which, BPL said, led to the conclusion that the performance criteria on which the Performance Shares hinged had not been achieved; that Mr Stewart knew that that was so; and that he knew that the performance criteria must be achieved before the Performance Shares could be issued (par 7).

93 BPL also pleaded that it was a condition precedent to the issue of Mr Stewart's Performance Shares that at the date that each performance criteria was achieved Mr Stewart remained BPL's company secretary (see pars 8.2 and 8.3).

94 In par 8A.2 there was a plea by BPL of estoppel arising from conduct of Mr Barron and Mr Stewart at various times in or immediately before November 2004 (see also par 8A.3 and 8A.4). This estoppel plea was abandoned at the trial of the Federal Court action: Biodiesel Producers Ltd v Stewart [2007] FCA 722 [294].

95 In par 8B BPL also alleged that the statements at par 8A.2 were misleading conduct in trade and commerce.

96 BPL pleaded that by resolution on 18 July 2005, its board clarified or amended the Circular Resolution to provide as to when the performance criteria would be satisfied. It was further pleaded that none of the performance criteria had been satisfied (par 10).

97 In response to BPL's plea in relation to the Circular Resolution, Mr Stewart pleaded in par 4.3 of his defence that in an information memorandum dated May 2003, prepared in support of a capital raising of $400,000, BPL advised prospective shareholders that Mr Barron would receive a further 19.5 million shares upon the attainment of certain milestones set out in that memorandum. In par 4.4 of his defence Mr Stewart pleaded that Mr Barron agreed to grant to Mr Stewart 5.5 million shares from the entitlement Mr Stewart had based upon the attainment of milestones as follows:

0.5 million shares upon raising required capital;
2 million shares upon completion of construction of the operating plant;
1 million shares upon receiving a government grant of at least $2 million;
1 million shares upon BPL receiving a net profit after tax of $4 million;
1 million shares upon BPL achieving a net profit after tax of $6 million.

98 Mr Stewart gave detailed particulars of this agreement: exhibit 1 page 99.

99 The plea and particulars make it clear that Mr Stewart's case in the Federal Court was that Mr Barron agreed to grant Mr Stewart some of Mr Barron's entitlement. For example, it is pleaded that Mr Barron told Mr Stewart that he had spoken to other directors of BPL to 'inform them of his decision' (my emphasis) (exhibit 1 page 99).

100 In par 4.5 Mr Stewart pleaded that those matters were formalised, that is reduced to writing in a formal agreement, (see particulars at exhibit 1 page 100) in a Shareholders Agreement dated 20 April 2004. By the Shareholders Agreement Mr Stewart and Mr Barron were required to subscribe at 0.1c each to 5,500 and 9,000 Performances Shares respectively, such Performance Shares to be convertible to 1,000 ordinary shares upon attainment of milestones there set out.

101 Mr Stewart denied that he acted in excess of the authority conferred by the Circular Resolution and in breach of his duties to BPL when he caused BPL to issue the Performance Shares. Mr Stewart denied BPL's construction of the Circular Resolution saying that it authorised the issue of shares forthwith upon payment of the subscription money, provided that the conversion of the Performance Shares into B-class shares could only occur when the performance criteria was satisfied.

102 In par 8 of his defence, in response to par 7 of BPL's plea, Mr Stewart pleaded that the directors of BPL, as at the date of the Circular Resolution, were aware that since March 2002 Mr Stewart had worked for BPL without remuneration or reimbursement of expenses. Further, Mr Stewart pleaded that during that period he had sent or received over 2,000 emails, made or received over 1,000 telephone calls, had satisfied any requests of directors of BPL, in particular worked closely with and under the direction of Mr Barron, and had performed a number of tasks listed. The tasks listed substantially mirror the particulars under par 9 of the statement of claim in this action.

103 Mr Stewart denied substantially all of the claims made by BPL.

104 In response to BPL's estoppel claim, by the conclusion of the trial Mr Stewart pleaded that BPL was estopped from asserting that the issue of shares was unconscionable in that (par 22):

(a) the Circular Resolution embodied therein gave effect to the Shareholders' Agreement dated 20 [April] 2004 and in the circumstances amounted to a promise that Mr Stewart would be rewarded for his work which was otherwise to be unremunerated; and

(b) that in reliance on that, Mr Stewart had worked for BPL in the period November 2004 to May 2005.

105 Mr Stewart pleaded that any purported amendment of the Circular Resolution by the board of BPL was of no force and effect. He also pleaded that BPL was estopped from amending the Circular Resolution because of the work that he did after 30 November 2004 (par 29).

106 Both of Mr Stewart's estoppel pleas had, at the beginning of the trial, been put on a wider basis, that is including all the work done as pleaded in par 8 of the defence (exhibit 1 pages 28 - 29). The pleas at the beginning of the trial were not restricted to work done after 30 November 2004.

107 The trial was heard over 10 days. On 1 September 2006, after five days of hearing, it was adjourned part-heard. The trial resumed on 9 October 2006. During the adjournment, on 5 September 2006, Mr Stewart amended his defence, having given notice of his intention to do so on 1 September 2006. Thus the first five days of the trial were conducted on the basis that the estoppel pleas relied on all of the work done by Mr Stewart from March 02 to June 05. I will return to this point.

108 In par 5 of its reply (exhibit 1 page 106) BPL responded to par 4.4 of Mr Stewart's defence. BPL says that in circumstances unknown to it Mr Barron decided to give, and informed Mr Stewart that he would give him, 5.5 million of the 19.5 million shares then proposed to be issued by BPL. BPL pleaded that the agreement between Mr Barron and Mr Stewart was a private transaction between them. BPL pleaded that its agreement after late 2003 to issue Performance Shares or B-class shares to Mr Stewart was done at the request of Mr Barron and was treated by BPL (and Mr Barron and Mr Stewart) as part of an issue of a larger parcel of shares by BPL to Mr Barron. BPL says the issue of these shares was as a reward for Mr Barron's achievements and encouragement for him to continue to make further achievements, not as a reward to Mr Stewart or an incentive for further achievement by him.

109 BPL admitted the existence of the Shareholders Agreement and pleaded that as a consequence of its express terms it ceased to have any effect on 30 September 2004.

110 In par 10 of its reply BPL took issue with par 8 of Mr Stewart's defence. BPL pleaded that from March 2002 until 6 June 2005 Mr Stewart worked on a full-time basis as the chief financial officer of Clinipath and performed his function as company secretary of BPL in his spare time. BPL pleaded in par 10.3 that achievements made by BPL up to May 2005 were not as a result of work performed by Mr Stewart but as a result of work performed by Mr Barron and ANZIS, a third party entity. Detailed particulars of this plea were given: see exhibit 1 pages 117 - 119 which set out what work was said to have been done by each of Mr Barron and ANZIS.

111 BPL pleaded in par 10.4 that Mr Stewart was aware that BPL regarded the issue of Performance Shares as recognition of Mr Barron's achievement as BPL's executive officer, and not as a recognition of any contribution made by Mr Stewart. BPL also gave detailed particulars of that plea. In those particulars BPL pleaded that its board had, up to July 2003, agreed in principle to issue Performance Shares to Mr Barron and that in or about July 2003 Mr Barron and Mr Stewart agreed between themselves that Mr Stewart would receive part of Mr Barron's allocation of Performance Shares. Further, BPL pleaded that its board agreed to Mr Stewart receiving a part of Mr Barron's allocation of performance shares on the basis that the total number of performance shares to be issued would not be increased.

112 In par 1 of his cross-claim, Mr Stewart repeated his defence (exhibit 1 page 121).

113 Mr Stewart pleaded that by the terms of the Circular Resolution BPL agreed to issue 3 million B-class shares to him upon raising sufficient funds to enable commencement of the construction of the operating plant. He pleaded that the condition had been fulfilled, as a result of which BPL was obliged to issue to Mr Stewart 3 million B-class shares (par 4).

114 Mr Stewart also cross-claimed for damages for repudiation by BPL of an Executive Services Agreement (as distinguished from the Engagement and the Agreement pleaded in this action) said to have been made in or about June 2004. By the Executive Services Agreement Mr Stewart alleged that BPL engaged him as company secretary and chief financial officer for a period of five years (par 5). Terms of the Executive Services Agreement were pleaded. One of the terms pleaded was that Mr Stewart's remuneration would include 1.25% of any Federal or State grant received by BPL.

115 In its defence to cross-claim BPL admitted the existence of the Circular Resolution, but said that the Resolution did not constitute an agreement between Mr Stewart and BPL (par 2.2). Further, BPL repeated various aspects of its statement of claim and reply. It pleaded that, for various reasons, Mr Stewart was not entitled to be issued with 3 million B-class shares in BPL.

116 BPL pleaded a number of defences to Mr Stewart's claim based upon the Executive Services Agreement. BPL said that there were various express conditions precedent, a number of which had not been satisfied before Mr Stewart's removal as company secretary. One of those conditions precedent was that the Executive Services Agreement be ratified by the board of directors which, on 18 July 2005, the board decided not to do.

117 BPL pleaded that it was entitled to terminate the employment of Mr Stewart or not to perform the Executive Services Agreement on account of Mr Stewart's poor performance or breaches of contract. That conduct was set out in par 7.3.

118 Following the trial in the Federal Court, on 16 May 2005 Lander J made the following orders:

1. That the resolution of the Board of directors of [BPL] made on 30 November 2004 whereby it was resolved:

(1) to issue 9,000 performance shares to Mr Dennis Barron subject to the receipt of the subscription money;

(2) to issue 5,500 performance shares to Mr Anthony Stewart subject to the receipt of the subscription money;

be rescinded.

2. Subject to [BPL] paying to [Mr Stewart] the subscription money of $55.00 paid by [Mr Stewart] on 29 March 2005, the issue of the performance shares to [Mr Stewart] be set aside.

3. [BPL's] register of members be corrected by deleting any reference to the issue of the performance shares to [Mr Stewart] on 10 January 2005 (wrongly described in the register as 2004).

4. The cross-claim be dismissed.

119 I will refer to some aspects of Lander J's reasons in considering whether an Anshun estoppel precludes any of the claims made by Mr Stewart in this action.

120 The Full Federal Court dismissed Mr Stewart's appeal against Lander J's decision: Stewart v Biodiesel Producers Ltd [2008] FCAFC 66. Although there were seven grounds of appeal (exhibit 1 pages 390 - 393), it appears from the decision of the Full Federal Court that the only ground of appeal argued was that the primary judge had failed to mould the relief granted in such a way as to make due allowance in favour of Mr Stewart for the work, time and skill exercised by him on behalf of BPL. It was conceded that no submission to this effect had been advanced on behalf of Mr Stewart before the primary judge. The court declined to grant leave to Mr Stewart to raise an argument not advanced before the primary judge. The Full Federal Court observed that it was common ground on the appeal that Mr Stewart had elected before the primary judge not to make any claim for remuneration on a quantum meruit basis in respect to work done by him [15]. I will return to this point.

121 This brings me to the four claims advanced in this action, and the question whether each of those claims is precluded by cause of action estoppel or by Anshun estoppel. I begin with the Agreement Claim.

122 In accordance with the legal principles I have stated, whether the claim is precluded by cause of action estoppel is to be assessed by reference to the pleadings and orders in the Federal Court action, not the evidence in that action.

123 The primary subject matter of the Federal Court action was the validity and proper construction of the Circular Resolution of 30 November 2004 and whether Mr Stewart was entitled to the Performance Shares he caused BPL to issue to him pursuant to the Circular Resolution.

124 Paragraphs 4.3 to 4.5 of Mr Stewart's defence responded to BPL's plea in relation to the Circular Resolution. I have outlined those pleas earlier in these reasons [97] - [100]. In summary Mr Stewart pleaded Mr Barron's entitlement as at May 2003 to 19.5 million incentive shares, and also pleaded Mr Barron's agreement in June 2003 to grant Mr Stewart 5.5 million shares from that entitlement. The milestones for achievement of those entitlements precisely mirror the milestones pleaded by Mr Stewart in the statement of claim in this action.

125 Consideration of the plea and the particulars in the Federal Court action and in this action seem to me to make it clear that it is the same events which are said to give rise to the Agreement relied on in this action and the agreement pleaded in par 4.4 of the defence in the Federal Court action. That is so, in my opinion, notwithstanding one obvious difference between the two agreements: in the Federal Court Mr Stewart pleaded an agreement by Mr Barron to grant shares from his entitlement; in the Supreme Court Mr Stewart pleads an agreement by BPL for BPL to grant the shares to him.

126 In this and other respects, the case advanced by Mr Stewart in the Federal Court and the case he advances in this action are inconsistent and, therefore, alternative cases. BPL's written submissions appear to suggest that that itself is a positive factor supporting a conclusion that a cause of action estoppel arises. However in oral argument counsel for BPL accepted, rightly in my opinion, that the fact that the case sought to be proved in the subsequent proceedings is inconsistent with the case made in the earlier proceedings is not a positive factor in favour of a conclusion that a cause of action estoppel arises. The inconsistency of the cases seems to me to be relevant to whether an Anshun estoppel arises. I will return to the question of inconsistency in that context.

127 In the Federal Court action, Mr Stewart's cross-claim repeated his defence. By his cross-claim he sought the issue to him of 3 million B-class shares by the conversion of the Performance Shares issued to him pursuant to the Circular Resolution.

128 BPL submits that that relief is substantially the same as the claim made by the Agreement Claim. The difference between B-class shares and ordinary shares is said to be insubstantial, for present purposes. The right to the shares is said to arise from the course of the relationship between BPL and Mr Stewart from 2003 to 2005.

129 Characterised in that way, at that level of generality, the two claims can be seen to have a great deal in common. But there is a question as to whether the actions should be analysed at that level of generality (cf Macquarie Bank v NML (560)). I am not persuaded that they should be analysed at such a general level for the purposes of the question of cause of action estoppel.

130 While the contrary conclusion is readily arguable, I am not persuaded that the cause of action in the Agreement Claim is the same as that which was litigated in the Federal Court action. I accept that substantially all of the facts relied upon in the Agreement Claim were pleaded in the Federal Court action, albeit with some differences, including as to who was agreeing to grant shares to Mr Stewart. The substantial commonality of fact seems to me to be significant for the question of whether an Anshun estoppel arises. I will return to it in that context. However, the Agreement Claim is founded on oral statements said to have given rise to an agreement made in June 2003. While those statements were pleaded in the Federal Court action, they were pleaded as background to the Shareholders' Agreement which was in turn background to the Circular Resolution. It was the validity and construction of the Circular Resolution which was at the heart of the Federal Court action. For these reasons, I am not satisfied that the cause of action in the Agreement Claim is the same as the cause of action litigated in the Federal Court.

131 I turn to the question of whether an Anshun estoppel arises in relation to the Agreement Claim.

132 In determining whether an Anshun estoppel precludes this claim (and the other claims) I take into account the principle stated above [62] that Anshun estoppel is only to be applied in a clear case.

133 In considering whether an Anshun estoppel arises it is important to keep in mind that Mr Stewart was the respondent in the Federal Court action. He brought a cross-claim. The application of Anshun estoppel depends upon the conclusion that it was unreasonable for Mr Stewart to refrain from raising the Agreement Claim in the Federal Court action. Whether that is so invites attention to the degree of connection between the claim now made (the Agreement Claim) and the original claim and cross-claim in the Federal Court: see Bryant and Ling, discussed earlier in these reasons. It will be relevant (although not determinative) to ask whether the Agreement Claim arises out of substantially the same facts as the claim and cross-claim in the Federal Court.

Biodiesel Producers Ltd v Stewart

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (350 paragraphs)

STEWART -v- BIODIESEL PRODUCERS LTD [2009] WASC 145 (28 May 2009)

Anshun estoppel: the conduct of the Federal Court action

Parties

Legislation Cited (3)

Cases Cited (20)