Blair v Curran

A brings an action against B to recover interest on a promissory note payable to A, the principal not yet being due. B alleges that he was induced by the fraud of A to execute the note, and further alleges that A gave him a release under seal of the obligation to pay interest. The court, sitting without a jury, finds that A had given such a release but that B was not induced by A's fraud to execute the note, and gives verdict for B on which judgment is entered. After the note matures A brings an action against B for the principal of the note. B is not precluded from defending this action on the ground that B was induced by A's fraud to execute the note.

A, as owner of a trademark, brings an action against B for infringement. B denies the validity of the trademark and denies infringement. The court finds that the trademark is valid, but that B had not infringed it, and gives judgment for B. Thereafter A brings an action against B alleging that since the rendition of the judgment B infringed the trademark. B is not precluded from defending this action on the ground that the trademark is invalid." Issue Estoppel in the Present Case The ultimate issue to be determined by Cooper J was whether the notices issued under s.139ZQ of the Bankruptcy Act should be set aside. The Official Trustee did not file a cross-claim seeking declaratory or other relief in relation to s.121(1) of the Bankruptcy Act. Doubtless it was open to the Official Trustee to file such a cross-claim, but the step was not taken. This is a matter of fundamental significance to the outcome of this appeal. The decision made by Cooper J was that the notices should be set aside. This decision was reflected in paragraph 1 of the orders made by his Honour. In substance, Mr and Mrs Theo (assuming that she was correctly regarded as a party to the proceedings) succeeded in obtaining the relief that they had sought. In the absence of a cross-claim, no other relief was granted by Cooper J, except otherwise to dismiss the application and to make the costs order. As the passages from Blair v Curran establish, issue estoppel covers only those matters which the judgment or order necessarily establishes as the legal foundation for the conclusion. The factual findings made by Cooper J adverse to Mr Theo, relied on by the trial Judge in the present case as founding an issue estoppel, plainly did not form part of the legal foundation for the conclusion reached by Cooper J. As Mr Hack conceded, Cooper J could have reached the conclusion he did on the valuation point, without making any finding that Mr Theo intended to defraud creditors or that Mrs Theo was not a purchaser for valuable consideration. The simple fact of the matter is that Cooper J found in favour of Mr and Mrs Theo, on the ground that the notices were fundamentally flawed and should be set aside. Mr Hack contended that the factual issues determined by Cooper J were squarely raised. We accept that this is so. But findings can be made (to adopt the language of Dixon J) deliberately and formally, yet not support an estoppel in subsequent litigation between the same parties. As Brennan J said in the passage we have cited from Rogers v The Queen (at 262), issue estoppel does not extend to findings of fact on contested issues if they are not necessary to or the legal foundation for the decision made. In this case, the findings relied on as founding the issue estoppel might or might not be regarded as probative of the ultimate issue. However, they were clearly not necessary to or the legal foundation for the decision made by Cooper J. The practical importance of the doctrine being limited in this way can be illustrated by considering the availability of an appeal against the findings made by Cooper J. As it happens, Mr and Mrs Theo appealed unsuccessfully to the Full Court against the costs order made by Cooper J. Had Cooper J made an order for costs in their favour (leaving to one side the other issues in the case), there would have been nothing at all against which they could have appealed. They could not, of course, have appealed against the decision in their favour to set aside the notices under s.139ZQ of the Bankruptcy Act and they could not have challenged the adverse findings of fact made by Cooper J in the course of reaching that decision. Yet on the Official Trustee's argument, those findings could have founded an issue estoppel. We should add that it was not suggested by Mr Hack that the costs order made by Cooper J could have founded an issue estoppel in relation to the adverse findings of fact. The costs order was an exercise of discretion, which took into account a number of facts, including Mr Theo's failure to establish a claim for damages based on alleged conduct of staff in the Office of the Official Receiver. The findings of fact relied on by the trial Judge were not necessary to, nor the legal foundation for, the costs order made by Cooper J. It follows that the trial Judge erred in applying the doctrine of issue estoppel to make the declarations and orders that he did. Those declarations and orders must be set aside. A Further Hearing? Mr Hack, on behalf of the Official Trustee, submitted that, in the event of the appeal being allowed, the matter should be remitted for rehearing. Mr Hack accepted that this would result, in effect, in a third hearing in which the Official Trustee has sought relief against Mr and Mrs Theo. Nonetheless, the Official Trustee argued that this Court should be reluctant to dismiss the application on what was described as "a technicality". If technicality it be, the Official Trustee made a deliberate choice to adduce no oral evidence in support of its application to the trial Judge, and to rely solely upon the findings of Cooper J. The notice of opposition to the application made plain that Mr and Mrs Theo were objecting to the judgment being used for this purpose. A lay person cannot be expected to have an informed understanding of the rationale and limits of issue estoppel. But this said, given that the Official Trustee had elected to found its case on issue estoppel, it should reasonably have apprehended that Mr and Mrs Theo were objecting to the use it intended to make of Cooper J's findings. In these circumstances, we consider that it would not be appropriate to remit the matter for rehearing. The Official Trustee has elected to rely upon the conclusive effect of findings which it knew were contested. It has been unsuccessful in this endeavour. It should not have the opportunity yet again to proceed against Mr and Mrs Theo. Whatever the factual findings that might be made on any further hearing, the point has been reached where an end must be brought to this litigation. Conclusion The appeal should be allowed. The declarations and orders made by the trial Judge must be set aside. The Official Trustee's application must be dismissed. The Official Trustee must pay the costs of the first appellant here and below. The application for leave to appeal from the orders of Kiefel J refusing a stay is refused on the basis that it is unnecessary in view of the other orders we have made. We reserve liberty to the trustees for sale to apply within 21 days or such further time as the Court allows. I certify that this and the preceding 21 pages are a true copy of the reasons for judgment of the Court. Associate. Date: 7 November, 1996 Heard: 7 November, 1996 Place: Brisbane Decision: 7 November, 1996 Appearances: First Appellant: Self Represented Counsel for the Respondent: Mr P.E. Hack Solicitors for the Respondent: Australian Government Solicitor.