Estoppel as a privy of Mr Lawrence because Mr Lawrence was estopped
58 The nature of the estoppel should be appreciated. Estoppel of a claimant through privity of interest is on a different basis from Anshun estoppel by the claimant's conduct. It does not depend on unreasonableness of the claimant's conduct, but on the relationship between the claimant and another person who is Anshun estopped; as was said in Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd (1993) 43 FCR 510 at 541 per Burchett J, "in the eye of the law there is an identity between" the privy and the party bound by the estoppel. Privies are entitled to and bound by relevant estoppels because of the relationship.
59 Messrs Manojlovski and Grech submitted, relying on Ramsay v Pigram (1968) 118 CLR 271 at 279 per Barwick CJ, that an estoppel applied also to the privies of a party, and that Champerslife was a privy in interest of Mr Lawrence and was estopped because Mr Lawrence was estopped. The asserted privy of interest was again because Mr Lawrence was the sole director and shareholder of Champerslife and so its directing mind, together with agency and fiduciary duties in relation to the delivery of the Champerslife records.
60 In Ramsay v Pigram one issue was whether Pigram was estopped from asserting negligence of a police officer in a claim against the government, represented by Ramsay, because of an issue estoppel arising from earlier proceedings brought by the police officer against Pigram. Ramsay argued that privity of interest between the government and the police officer entitled him to rely on the estoppel. All members of the Court rejected the argument.
61 The Chief Justice referred to the three classes of privies of blood, of title and of interest. His Honour said that the basic requirement of a privy in interest is that the privy must claim under or through the person of whom he is said to be a privy. He held that there was no privity of interest because the action between Pigram and the police officer was personal to them, and it could not be said that the government "in any sense claims under or in virtue of the police officer or of any right of his, or … derives any relevant interest through him".
62 There may be a difficulty in applying estoppel through privity of interest to an Anshun estoppel in circumstances such as the present. An Anshun estoppel does not preclude success on a particular issue, such as the negligence of the police officer in Ramsay v Pigram. It precludes bringing a particular claim. Assume that Mr Lawrence is estopped from bringing a claim for his own loss or damage suffered from breach of cll 24 and 25 of the Deed. It makes no sense to say that Champerslife as his privy in interest is estopped from bringing a claim for Mr Lawrence's loss or damage. It must be said that Champerslife is estopped from bringing a claim for its own loss or damage. How can that be said?
63 Writing extra-judicially, Handley AJA has suggested that Anshun estoppel should be available against a privy: 71 ALJ 934 at 941. That may be so where, for example, the relationship is that of trustee and beneficiary, as in Cordes v Dr Peter Ironside Pty Ltd [2009] QCA 302 (although, as that case shows, the relevant principle may be res judicata). His Honour's suggestion was not elaborated, and privity of interest can be said to arise in a variety of circumstances. This matter was not the subject of submissions, and it need not be taken further since for other reasons the submission should not be accepted.
64 That Mr Lawrence was sole director and shareholder of Champerslife did not give rise to privity of interest in the sense considered in Ramsay v Pigram. Regrettably, the submissions on behalf of Messrs Manojlovski and Grech did not initially draw attention to Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd.
65 Trawl had sued Effem in the Supreme Court on causes of action which included contraventions of s 52 of the Trade Practices Act 1974 (C'th). Orders were made dismissing those claims. Trawl and a number of other companies and persons, including directors and shareholders of Trawl, then sued Effem in the Federal Court for contravention of s 52 of the Trade Practices Act, relying on the same misrepresentations as had previously been relied on for that purpose. The claim by Trawl was stayed. In the Full Court the question was whether a defence of res judicata would be effective against the other companies and persons as its privies.
66 Following Ramsay v Pigram, it was held that the other companies and persons were not claiming under or through Trawl and were not its privies. Northrop and Lee JJ were prepared to accept for present purposes that they had an economic or financial interest in that they would have gained financially if Trawl had succeeded in the proceedings in the Supreme Court. But their Honours declined to extend privity of interest to that situation, holding that the High Court authority did not allow it. Burchett J was of a like view, and his Honour's reasons included (at 542) -
"None of the other respondents claims under or through the respondent Trawl, or can on any basis be identified with that respondent. A director and shareholder of a company is not, as such, its privy: Clegg v Abel (1898) 14 WN (NSW) 131, a case relied on by Walsh JA in Pigram v Ramsay (supra, at 148). Assistance given in the prosecution of Trawl's action is not enough. Such assistance as was given did not mean that Trawl's action was taken on their behalf. Their claims were distinct from Trawl's."
67 In Clegg v Abel (1898) 14 WN (NSW) 131 it was held that the dismissal of an information laid against a company did not bar an identical information laid against its shareholder/director. The reasons spoke of both double jeopardy and res judicata. In Pigram v Ramsay (1966) 68 SR (NSW) 141 at 148 Walsh J referred to it in connection with res judicata estoppel against a privy. The correct principle would appear to be autrefois acquit, and Clegg v Abel may not properly support absence of privity of interest (in the sense considered in Ramsay v Pigram) between a company and its shareholder/director. Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd, however, does so.
68 Messrs Manojlovski and Grech sought to distinguish Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd on the ground that Mr Lawrence was sole director and shareholder, describing Champerslife as his alter ego. Champerslife, of course, had its separate legal identity, and contemplation of its creditors underlines that separate identity. The matter was put thus by Keane J, with the agreement of O'Flaherty and Murphy JJ, in Belton v Carlow County Council (1997) 1 IR 172 at 181, addressing privity of interest whereby third parties were bound by an issue estoppel -
"Assuming that the third parties are the owners of all the shares in the company and are the only directors (as to which there is no finding of fact in the case stated), I am satisfied that there is no such privity of interest between them and the company. It has, of course, been settled law since the decision in Salomon v Salomon [1897] AC 22 that the company on the one hand and its shareholders on the other are separate and distinct legal entitles. Moreover while the interest of the company and its controlling shareholders may very often coincide, that is not is not always the case. The interest of the shareholders is to receive a dividend, in the event of the company's profits allowing it to be paid, and to share in any surplus assets of the company on a winding-up. The company's affairs must, however, be conducted by the directors, not merely in the interests of the shareholders, but of those of any persons who may have an interest in its financial well being: specifically the creditors, whether secured or unsecured. In the event of the company becoming insolvent (and it should be said that there is no evidence that this was at any stage the case with this company) the latter's interests will become paramount: … "
69 It remains that Champerslife did not claim under or through Mr Lawrence, or claim to enforce any right or interest of Mr Lawrence. That is not to deny, as earlier indicated, that the fact that a person controls a company and can cause it to act in a particular way, may be a consideration in whether the company is Anshun estopped: again, see the consideration of Johnson v Gore Wood & Co later in these reasons.
70 For a further reason, there is no estoppel of Champerslife as a privy of Mr Lawrence.
71 Necessary to the estoppel through privity of interest is that Mr Lawrence was himself Anshun estopped from claiming in the District Court proceedings loss or damage suffered by reason of breach of cll 24 and 25 of the Deed. In my opinion, for the reasons next given Hughes DCJ was in error in upholding an estoppel. There is no appeal by Mr Lawrence from the judge's decision but, privity of interest aside, the decision in that respect does not bind Champerslife. It was not submitted that it did when the Court sought assistance on Anshun estoppel as against Mr Lawrence.
72 Mr Lawrence could have cross-claimed against Messrs Manojlovski and Grech. His loss or damage may or may not have been in the order of $653,000, but it does not matter because if transfer of the Local Court proceedings to the District Court was necessary it would probably have occurred consequent on a cross-claim brought as of right.
73 But it does not follow that Mr Lawrence should have cross-claimed against Messrs Manojlovski and Grech. The question was whether it was unreasonable for him not to have cross-claimed.
74 As earlier described, the claim to recover loss or damage went well beyond the defence of the debt claim, and would be likely significantly to enlarge the evidentiary and legal canvas. Mr Lawrence could sensibly wish to conduct a discrete defence of the debt claim - it was not a case of inevitable judgment against him on that claim, and there was a respectable argument that the obligations were reciprocal. As was said by Wilcox J in Ling v Commonwealth of Australia, there is a question of degree. In the present case, the additional matters in a cross-claim by Mr Lawrence were substantial, and in my opinion it was (to adopt Wilcox J's words) "appropriate to accept the reasonableness of separate proceedings". It was not unreasonable, in my view, for Mr Lawrence to defend the debt claim as he did, and leave his claim for subsequent proceedings in the District Court.
75 The circumstances differ from those in Davis v Hedges, but that case accepts reasonableness in leaving a claim for subsequent proceedings. Messrs Manojlovski and Grech submitted to the contrary, saying that Davis v Hedges supported an Anshun estoppel in the present case. In their submission, that case involved election to claim damages for improper performance or non-performance of work either in reduction of the price of the work, or in separate proceedings thereafter; and by raising breach of cll 24 and 25 of the Deed as a defence, Mr Lawrence had made an election equivalent to claiming damages in the Local Court and could not claim them thereafter. The submission is unsound, for two reasons. There was no election equivalent to claiming damages in the Local Court. Further, Davis v Hedges permits dividing the cause of action and partially using it in reduction of the price.