City of Swan v McGraw-Hill Companies Inc.

The relevant issues in the Wingecarribee proceedings 13 In July 2010, the Wingecarribee proceedings were reconstituted as representative proceedings so that Swan and Parkes also became applicants: Wingecarribee Shire Council v Lehman Brothers Australia Limited (No 3) [2010] FCA 747. That led to the Councils filing their second further amended statement of claim on 10 August 2010. 14 That statement of claim alleged (in par 22.4) that Grange had not advised them that modelling used to assess risk attaching to SCDOs was limited by the relatively short time that they had been available as investment products and by the circumstance that, in that period of time, market conditions had been favourable to SCDOs or that the risk modelling had not been tested in adverse market conditions. The pleading gave particulars that asserted, first, that the historical data used by the ratings agencies in modelling risks were gathered in benign conditions, secondly, that the agencies "were inherently conflicted … in that they were commissioned by the issuers of SCDOs for the provision of a rating on a success fee basis and had a conflicted interest in ensuring repeated commissions and other fees" and, thirdly, that the ratings did not reflect the potential impact of all risks related to the structure, market and other factors that might affect the value of the SCDOs, "in particular the level of correlation between credit events" (correlation is the measure of probability that if one of the reference entities in the reference portfolio used for the SCDO defaults, others will also default: see Wingecarribee 301 ALR at 88 [302]).

The general features of SCDOs 15 In general, SCDOs are highly complex financial products. Because of their nature, they have many risks, some of which justify the higher interest rates the products offered over similarly-rated securities. Grange used the high ratings of the SCDOs as a significant selling point to its risk-averse Council clients. In a very broad sense, which is oversimplified from what I described in detail in my reasons in Wingecarribee 301 ALR 1, an SCDO is a sophisticated bet. I gave the following general description of an SCDO in a summary of my reasons in Wingecarribee 301 ALR 1, which should assist in providing a basic understanding of the relevant terminology I have used in these reasons. 16 A bank or financial institution puts together, or arranges, a product that offers investors a return at a marginal interest rate above the 90 day bank bill swap rate (BBSW) and which has a high credit rating. The SCDO will mature after a period and, if all goes well, the investors will receive their capital back. The product is issued by a specially incorporated company whose only business is to issue notes to investors and enter a credit default swap with the arranging bank. The swap works this way. The arranger identifies a portfolio of investment grade securities, usually being BBB or better rated, issued by corporations around the world. This is called a "reference portfolio". Because it involves a number of companies' loans or notes, the instrument is like a collateralised debt obligation. But, it is not necessary that the arranging bank have any loan or credit exposure to any of the corporations, or "reference entities", in the reference portfolio. That is why these products are called "synthetic" - they involve a collection of reference entities that may or may not default on their debts owed to persons who may have no connection to the arranging bank, or the terms of the SCDO may provide that a ratings downgrade or some other event affecting one of the reference entities will be a default. All such circumstances are called "credit events". 17 Next, the arranger and issuer of the SCDO select a range of the possible number of credit events that investors are asked to bet will not occur. Thus, typically an SCDO will provide that a tranche of, say, between the first 5% and 6% of the total reference portfolio will not suffer credit events, but if it does, then some or all of the investors' capital will be lost. So, for example, 5 credit events in a reference portfolio of 100 reference entities will have to occur before the next credit event affects the tranche between 5% and 6% of the reference portfolio. If that next credit event occurs, then the credit default swap requires that the issuer of the SCDO pay a percentage or the whole of the investors' capital to the swap counterparty, often the arranging bank. Once that occurs, then part or all of the investors' investment is lost, and the issuer ceases to pay interest on it. So, even if reference entities suffer ratings downgrades, or default, but later pay their debts, the synthetic nature of the SCDO means that no actual loss needs to be suffered by the swap counterparty for the investors to lose some or all their capital. 18 On 20 December 2010, Grange filed an amended defence to the second further amended statement of claim in the Wingecarribee proceedings that by then had been fixed for a hearing commencing on 2 March 2011. In it, Grange raised a new defence of proportionate liability that alleged that the ratings agencies, including S & P, which were responsible for the ratings that the Councils had pleaded, including those in par 22.4 of the second further amended statement of claim referred to at [14] above, were concurrent wrongdoers. Grange pleaded that each of the respondents, which I have described as S & P in these reasons, was a "ratings agency". 19 I described the issues of proportionate liability in the Wingecarribee proceedings that remained live at trial in my reasons as follows (Wingecarribee 301 ALR at 283 [1085] and will, as did the parties, refer to the three representations below with the same letters): "Grange's defence pleaded that when a ratings agency published a rating for a Claim SCDO, it made the following representations: (A) the claim SCDO was equivalent, as regards risk profile, to other types of financial products carrying the same rating from the same ratings agency; (B) the ratings agency's assessment of the risk of default or loss in respect of the Claim SCDO, represented by the published rating for that product, had a reasonable basis; (C) the risk of future loss or default in respect of that Claim SCDO was at a particular level." 20 I held that the expression "risk profile" as used in representation (A) conveyed the meaning of "material risks" (see 301 ALR at 284-285 [1090]-[1094]). Grange gave the following particulars for representation (C): "The level of the risk of future loss or default was specified according to the ratings scale published by the relevant Ratings Agency, so that, for example, an 'AAA' rating published by Standard & Poor's was defined, in terms of the ratings scale published by Standard & Poor's, as indicating an 'extremely strong capacity to meet financial commitments'." 21 Grange also pleaded as a further or alternative defence that each of representations (A), (B) and (C) was as to a future matter, within the meaning of s 12BB of the ASIC Act and its analogues, namely that the risk of future loss or default in respect of the particular products was at a particular level and that there were no reasonable grounds for that representation because of factors that the Councils had pleaded in par 22.4 of earlier versions of the, and the then current second further amended, statement of claim. 22 Grange maintained this new defence in its defence filed on 28 March 2011 to the Councils' third further amended statement of claim that had been filed, during the hearing, on 15 March 2011. That was the Councils' final pleaded claim and it abandoned their earlier allegations referred to at [14] above concerning the modelling used for ratings and their lack of independence. Grange pleaded back, in its defence to the third further amended statement of claim, the allegations formerly in par 22.4 of earlier versions of the statement of claim that the Councils had abandoned in their new pleading. 23 Thus, at the trial, Grange had assumed in its defence the burden of establishing its pleaded issues that the ratings agencies were concurrent wrongdoers on all of the bases of those allegations.

The findings in the Wingecarribee proceedings 24 I found that a "AAA" rating was a credit rating and not a rating of risk profile or material risks (301 ALR at 285-286 [1095]) and then said at 286 [1097]: "In substance, Grange's argument seeks to make the ratings agencies responsible for the misleading way in which Grange used the ratings in promoting the SCDOs to persons who were not fully informed of what the ratings agencies had said or done or what the ratings did not deal with. It is important to emphasise that there is no issue about the accuracy or appropriateness of the ratings of any of the Claim SCDOs when they were conveyed to the Councils. The present issue is what the ratings agencies conveyed merely by allowing the rating they had assigned to a Claim SCDO to be communicated to potential investors as the rating for that product." (emphasis added) 25 I found that representation (A) had been made to the Councils by Grange, and that it had not been made to any of the Councils by any ratings agency. Thus, I held that none of the ratings agencies was a concurrent wrongdoer with Grange in respect of representation (A). 26 I then explained why I rejected Grange's defence that the ratings agencies were concurrent wrongdoers with it in respect of representations (B) and (C) as follows (301 ALR at 286-287 [1099]-[1101]): "Grange did not allege that it, as distinct from the ratings agencies, had made Grange's representations (B) and (C) to the Councils. Grange did not elaborate how, in the context of its promotion and marketing of the Claim SCDOs to the Councils, the ratings agencies' publication or assignment of a rating was an independent or joint cause of the economic loss that the Councils suffered. As I have found above, it was Grange's use, or misuse, of the ratings that was a cause of the Councils deciding to invest in SCDOs (including the Claim SCDOs). Grange used the fact of the rating, and the implication of its having a reasonable basis, to explain, promote and market the Claim (and other) SCDOs to the Councils in combination with Grange's own chosen context. Grange did this to persuade the Councils that the products had the particular features that I have found to have been misleading and deceptive representations by Grange. The ratings agencies had no control over, or responsibility for, the way in which Grange used their ratings or what it told the Councils. Grange's argument is fallacious in seeking to attribute responsibility for the Councils' economic loss to the ratings agencies or what they said or did in rating the Claim SCDOs in the context of what Grange did. The argument is as valid as if a driver were to argue that because he bought a sports car from a manufacturer, the manufacturer was responsible for his deliberate use of the car to drive over the speed limit, when booked for doing so. The whole context and circumstances are critical to characterising whether a person's conduct is misleading or deceptive for the purposes of s 12DA of the ASIC Act and that person is a concurrent wrongdoer to whose conduct responsibility should be attributed for a third party's economic loss for the purposes of s 12GR (and their statutory analogues). I am of opinion that it would not be just to attribute any share of responsibility for the Councils' economic losses to any conduct of the ratings agencies. The Banque de France article quoted in [83] noted: "Investors in CDOs that focus on excess returns, only using ratings to assess the risk, might thus be exposing themselves to greater-than-expected losses." It is not as if the Councils went to Grange and instructed it to buy the SCDOs without receiving any information from Grange other than the rating. Grange promoted and explained the products to the Councils by using, among other information, the ratings. But Grange did not, or did not sufficiently, put the ratings, and the use to which they could be put, into context or explain to the Councils the limitations of the ratings in respect of identifying all material risks of SCDOs or their risk profile. Those limitations were identified in the Banque de France article, the 2005 Working Group report on which it drew (see [847]) and the other material of which Grange was, or ought to have been, aware to which I have referred in sections 3.5, 6.2.2, 6.2.5 and 6.4.4." (emphasis added) 27 On 3 December 2012, I made orders reflecting my findings in the Wingecarribee proceedings on common questions of law and fact pursuant to s 332(1)(a) and (b) of the Federal Court Act, including the following: "Question 9. In determining the liability of Grange for damages, what apportionment of liability (if any) should there be to reflect the extent of the responsibility of credit rating agencies rating the Claim SCDOs? Answer to Question 9. There should be no apportionment of liability." 28 Although Grange filed a notice of appeal from orders made in the Wingecarribee proceedings, the appeal was settled on the basis of a compromise that Jacobson J approved under s 33V of the Federal Court Act: Wingecarribee Shire Council v Lehman Bros (Australia) Ltd (In Liq) No 9) (2013) 97 ACSR 227. One aspect of the compromise included a provision to be included in a claims resolution process for members of the representative group that imposed a discount of 15% for contributory negligence for non-IMP client creditors (i.e. clients of Grange who had not entered an individual managed portfolio (IMP) agreement with it (97 ACSR at 233 [40])). The consequence is that non-IMP client creditors of Grange in the class will only be entitled to prove in its liquidation for 85% of their loss. Grange did not raise any ground of appeal concerning my findings that the ratings agencies were not concurrent wrongdoers with it.

These proceedings 29 Swan and Moree commenced these proceedings on 17 April 2013. On the previous day, IMF (Australia) Ltd, the litigation funder that financed the Councils' pursuit of both the Wingecarribee and Bathurst proceedings, issued a release to the Australian Securities Exchange (ASX) that it had entered into a funding agreement for these representative proceedings. The release noted that the funded parties would claim the balance of their losses after receipt of any moneys from Grange, plus interest. 30 There is a considerable, but by no means complete, overlap in the identities of approximately 90 members of the class in these proceedings and the smaller class of approximately 70 in the Wingecarribee proceedings. S & P submitted that 42 members of the class in these proceedings are not bound by the resolution of the Wingecarribee proceedings. 31 Swan and Moree pleaded that, in rating various SCDOs as AAA, AA+, AA and AA-, S & P had made representations that: it had concluded that the capacity of the relevant SCDO was of a particular strength (varying between extreme for the AAA product to very strong for the others); it had concluded that that SCDO would be able to withstand a particular level of stress (varying between extreme for the AAA product to severe for the others); there were reasonable grounds for each of the two above conclusions; it had exercised reasonable care and skill in reaching each conclusion (the rating representations); the rating was objective, independent and uninfluenced by any conflicts of interest that might compromise S & P's analytical judgment and reflected its true current opinion regarding the credit risks that the SCDO posed to investors (the independence representation). 32 Swan and Moree pleaded that S & P made the rating representations based on its uses of particular assumptions as to default rates, stress scenarios, modelling techniques and a version of the statistical concept or tool known as a Gaussian copula when that version was not a suitable tool to employ in analysing the appropriate rating for the SCDOs. They gave detailed particulars in the statement of claim about the alleged deficiencies of the assumptions, default rates, stress scenarios, modelling techniques and Gaussian copula that S & P used for the purpose of rating the SCDOs. 33 Next, Swan and Moree pleaded that S & P made the independence representation in circumstances where it caused, permitted or authorised the arranger of each SCDO to communicate its rating for that product to potential investors as S & P's expert opinion on which they could rely in deciding whether to invest in that SCDO. 34 In addition, Swan and Moree pleaded that each of them had relied on the rating representations and the independence representation in deciding to invest in each relevant SCDO in the following way. Each Council pleaded that, first, it was aware, before investing, that S & P had assigned a particular rating to the relevant SCDO and, secondly, it "relied substantially on the ratings assigned to those SCDOs by [S & P] on the basis of [its] … belief that those ratings were a reliable, independent indicator of the creditworthiness of those SCDOs.

S & P's submissions 35 S & P argued that, in substance, the ratings representations in these, and the Bathurst, proceedings are relevantly identical to representations (B) and (C) that I had found in the Wingecarribee proceedings that, so the argument ran, S & P had not been a concurrent wrongdoer with Grange when those representations were made to the Councils. And S & P contended that the Councils initially had pleaded, but subsequently abandoned in the Wingecarribee proceedings, and maintained in the Bathurst proceedings, a representation relevantly made by S & P that was similar to the independence representation. S & P argued that there was an apparent or substantial congruence of the issues in these proceedings that Swan and Moree raised by the ratings and independence representations with the same or similar issues in the Wingecarribee proceedings. 36 S & P submitted that, in substance, that congruence had one or more of the following consequences of creating an abuse of the process of the Court, each of which was fatal to Swan and Moree maintaining or prosecuting these proceedings, namely: (1) even though S & P was not a party to the Wingecarribee proceedings, the substantial issue arising from the ratings representations had been resolved in its favour on the basis that S & P had not been a concurrent wrongdoer, because I had found that the Council officers (including Swan's) did not rely on the ratings in developing their understanding of the risks of investing in the SCDOs and that Grange had been 100% responsible for their loss based on its contraventions of s 12DA(1) of the ASIC Act, breaches of contract and negligence and that it would be unjust to attribute any responsibility to the ratings agencies; (2) there was a risk of conflicting judgments if a finding were now to be made in these proceedings that S & P had made, and Swan or Moree had relied on, the ratings representations as to both whether S & P caused any loss to the Councils and whether it was a concurrent wrongdoer for the purposes of the proportionate liability proceedings. S & P relied particularly on Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 and Rippon v Chilcotin Pty Ltd (2001) 53 NSWLR 198 as establishing that Swan and Moree were seeking to obtain in these proceedings a judgment that would conflict with the answer to question 9 in the Wingecarribee proceedings and the attribution there of 100% liability to Grange for the Councils' damage or loss that is now claimed in these proceedings; (3) the proportionate liability legislation entailed that Swan and Moree had no cause of action against it as a result of S & P being found, in the Wingecarribee proceedings, not to be a concurrent wrongdoer with Grange; (4) Swan and Moree were seeking to re-litigate issues that either (in the case of the ratings representations) had been resolved in the Wingecarribee proceedings or (in the case of the independence representation) could, and should, have been resolved in the earlier proceedings. 37 Next, S & P argued that, by reason of the finding in S & P's favour in the Wingecarribee proceedings in respect of the issues sought to be raised here, Swan and Moree have no reasonable prospect of successfully prosecuting these proceedings. S & P contended that, accordingly, based on my findings as to its role in the Wingecarribee proceedings, these proceedings should be either summarily dismissed under s 31A(2) of the Federal Court Act or permanently stayed as an abuse of process. 38 Finally, S & P submitted that Jacobson J's order granting Swan and Moree leave to serve it in the United States should be set aside. S & P argued that that was because of the material non-disclosure to his Honour, by Swan and Moree, of my finding that S & P was not a concurrent wrongdoer and the asserted strength of S & P's arguments referred to above being sufficient to establish either that these proceedings were an abuse of process or Swan and Moree had failed to establish a sufficient prima facie case against S & P for the purposes of r 10.43(4)(c). S & P contended that it was necessary for Swan and Moree to put on evidence of a person who believed that they had a good cause of action against S & P in support of their application to serve S & P outside the jurisdiction. It submitted that Swan and Moree had informed Jacobson J of some evidence given in the Bathurst proceedings about the alleged problems with the Gaussian copula model, but did so without explaining that this evidence applied only to what was in issue before Jagot J, concerning the CPDO, which was a different financial product from SCDOs. S & P argued that, as a result, service on it should be set aside. 39 After the hearing, both sides, by leave, prepared a joint bundle of extrinsic materials that related to the enactment of the proportionate liability legislation and both filed submissions on that material. I had asked for that material because of the critical significance of the proportionate liability legislation in resolving the present application. Swan and Moree's subsequent submissions relied on Reinhold v New South Wales Lotteries Corporation (No 2) (2008) 82 NSWLR 762, to which neither side had referred at the hearing. S & P objected to this as a new submission made after the hearing without leave, but made submissions on it if I were prepared to consider that decision. Both sides then made further submissions, without leave, about that decision. 40 Reinhold 82 NSWLR 762 is relevant to the construction of the legislation in issue and its consideration does not involve any further evidence. Accordingly, I have considered all the further submissions. 41 In essence, in the two rounds of submissions following the hearing, S & P argued that in Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd (2013) 247 CLR 613 at 626 [15] per French CJ, Hayne and Kiefel JJ as well as per Bell and Gageler JJ at 644-645 [79], the Court had identified that there was a clear connection between the proportionate liability legislation and the report of stage two of the Commonwealth's and New South Wales' Inquiry into the Law of Joint and Several Liability by Professor JRL Davis (the Davis Report). S & P submitted that the Davis Report did not envisage that a plaintiff could contend for a different proportionate liability to be attributed to the same concurrent wrongdoer in successive proceedings. Rather, it argued, the Davis Report recommended that in all cases the degree of liability be proportionate to each defendant's degree of fault. S & P also referred to the Explanatory Memorandum for the Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Bill 2003 (Cth) that introduced the proportionate liability reforms into Commonwealth legislation, including Subdiv GA of Div 2 of Pt 2 of the ASIC Act. That explanation suggested that a plaintiff would be given additional protection from the requirement that a defendant notify the plaintiff of other potential defendants. S & P contended that Reinhold 82 NSWLR 187 had to be read subject to the subsequent decision in Hunt & Hunt 247 CLR 613 and was also distinguishable on its facts.

The extrinsic materials 42 The Davis Report had recommended the abolition of joint and several liability in all actions for negligence in which the plaintiff's claim was for property damage or purely economic loss and in statutory causes of action for misleading or deceptive conduct. Prof Davis saw his proposal as requiring "only the attribution of fault, and degrees of fault, to a defendant against whom action is brought". He said that once a defendant had been "found to bear a certain proportion of the blame for a particular loss, that defendant can be assured that the extent of his or her liability will not increase solely because another defendant is insolvent or only has minimal assets with which to satisfy a judgment". He postulated that it was not just that one defendant should continue to bear the burden of satisfying the whole loss (as was required by the then rule of law providing for joint and several liability) when the principal reason for that loss lay in the activities of others over whom the one solvent defendant had no real control. 43 A Regulation Impact Statement appeared at the commencement of the Explanatory Memorandum for the 2003 Bill. It explained that the proportionate liability legislation was developed as a nationally-agreed model. The Statement identified the objective of the proposed amendments as, first, preventing "deep pocketed" professionals from being targeted as defendants not because of their culpability but because they had insurance allowing them to pay large damages awards, secondly, allowing insurers to more accurately price risk based on their insured's proportionate responsibility, thirdly, assisting professionals to obtain suitable cover at more reasonable premiums and, fourthly¸ to "limit the liability of defendants for the loss suffered by a plaintiff to the extent to which each defendant is responsible for the plaintiff's loss" (at 27 [4.100]). 44 The Statement discussed the options for reform considered in the Davis Report (at 31-33 [4.124]-[4.131]). It supported implementing the Davis Report's recommendations (at 34 [4.138]). It stated that there would be three procedural protections for plaintiffs in what became ss 12GR(1)(a) (that requires that the Court fix a just proportion of responsibility among concurrent wrongdoers) and 12GS(1) (that requires the defendant to notify a plaintiff of other potential defendants together with their roles and provides for a sanction of costs orders against a defendant that did not do so). The Statement concluded that, given those procedural protections: "it is highly unlikely that consumers will be materially disadvantaged by these reforms. Fundamentally, they are intended to ensure that professional indemnity insurance can be purchased at reasonable prices and that consumers therefore can have greater confidence the professionals with whom they deal are in fact covered by such insurance." (at 32-33 [4.130]-[4.131]) 45 The Explanatory Memorandum subsequently discussed the proposed amendments (at 154-158 [5.346]-[5.373]). It reiterated that the reforms were a key measure, agreed by all of the nation's governments, in order to improve the availability and affordability of professional indemnity insurance ([5.348]).

Consideration - construction of the proportionate liability legislation 46 In Hunt & Hunt 247 CLR at 626 [16], French CJ, Hayne and Kiefel JJ said of the analogue of SubDiv GA that is Pt 4 of the NSW Act: "The evident purpose of Pt 4 is to give effect to a legislative policy that, in respect of certain claims such as those for economic loss or property damage, a defendant should be liable only to the extent of his or her responsibility. The court has the task of apportioning that responsibility where the defendant can show that he or she is a 'concurrent wrongdoer', which is to say that there are others whose acts or omissions can be said to have caused the damage the plaintiff claims, whether jointly with the defendant's acts or independently of them. If there are other wrongdoers they, together with the defendant, are all concurrent wrongdoers." 47 Their Honours noted that ss 34(2) and 35(1)(a) of the NSW Act, which are the analogues of ss 12GP(3) and 12GR(1)(a), require the Court to determine the proportion of damage or loss claimed that the defendant should bear having regard to the extent of the defendant's responsibility for that loss or damage. They said, however, that the word "damage" in the sense used in the proportionate liability legislation was not equivalent to the amount of damages. Rather, the word referred to the harm suffered to a plaintiff's economic interests (247 CLR at 628-629 [23]-[24]). They held that the Court had to address the essentially factual question of whether the alleged concurrent wrongdoer was also a cause of the loss (i.e. harm to the plaintiff's economic interests) as claimed against the defendant (247 CLR at 635 [45]-[48]). 48 I am of opinion that a court needs evidence, based on an identifiable and intelligible issue, as to why an apportionable claim between concurrent wrongdoers can be made good, in order to determine, for the purposes of s 35(1)(a) or s 12GR(1)(a), the extent of a defendant's responsibility for the damage or loss suffered by a plaintiff. Importantly, s 12GR(1)(b) provides that the Court can give judgment against a defendant whose liability it has found to be limited under s 12GR(1)(a) for not more than an amount fixed by reference to the proportionate share of damage or loss for which it found that defendant liable. A defendant must show on the evidence (whether or not that evidence had been tendered or led by that defendant) that he, she or it is a concurrent wrongdoer before the Court can undertake any apportionment: cf: Hunt & Hunt 247 CLR at 626 [16]. That is why, where the plaintiff does not sue all potential concurrent wrongdoers, s 12GS(1) enables a defendant to raise the matter by giving notice of the information it has about the identity of, and the circumstances that may make the person, a concurrent wrongdoer. If a defendant wishes to establish that someone else has a concurrent liability for the damage or loss claimed by a plaintiff, ordinarily the defendant will have to persuade the Court of the amount by which the defendant's responsibility for that damage or loss is less than 100% for the purposes of s 12GR(1)(a). 49 The statutory criteria for fixing the proportion in s 12GR(1)(a) are, first, that the proceedings involve an apportionable claim (the chapeau in s 12GR(1)), secondly, the defendant is a concurrent wrongdoer, and thirdly, having regard to the defendant's responsibility for the loss and damage. The Court must make a finding of what proportion it is just for that defendant to bear. 50 Essentially, the establishment that someone is a concurrent wrongdoer with a, or another, defendant creates a defence to the plaintiff's entitlement to recover from each defendant 100% of the loss or damage claimed. Once another person, be it another defendant or a stranger to the proceedings, has been found to be a concurrent wrongdoer, each defendant who is liable has a partial defence to the plaintiff's claim to the proportionate extent of the other wrongdoer's proven responsibility for the damage or loss. The substance of that partial defence is that the Court will have decided that that the defendant is excused from any liability to pay the proportion of the loss or damage that is just. The Court fixes such a limitation of liability to pay compensation under s 12GR(1)(a) and its analogues as a defence to the full responsibility for that liability that, absent the finding that a concurrent wrongdoer exists, the defendant would otherwise have to bear. 51 A plaintiff may sue more than one defendant so as to create an immediately apparent apportionable claim. Alternatively, the plaintiff may sue only one defendant who then pleads a defence raising an apparent apportionable claim. In each case, a defendant has an interest in defeating or minimising the proportion of liability that the Court will find it just to attribute to it. A plaintiff may also seek to target one or more defendants as the person or persons to whom the Court should apportion all or a larger share of liability. 52 However, none of these scenarios, involving forensic tactical considerations, should be allowed to obscure the evident purpose of the proportionate liability legislation. That purpose is to create a defence that protects a defendant from having to bear more than a just share of liability as determined in proceedings brought against that defendant. The essential criterion that there be "proceedings involving an apportionable claim" exists throughout Subdiv GA. Moreover, a defendant whose liability has been found to be that of a concurrent wrongdoer gains the following statutory protections: first, regardless of the financial position of any co-defendant or other concurrent wrongdoer (s 12GP(5)), that defendant's proportionate responsibility to pay damages is both limited and fixed by a decision under s 12GR(1)(b), and, secondly, that defendant cannot subsequently be sued by any other person who is a concurrent wrongdoer for contribution or indemnity in respect of the apportionable claim by force of s 12GT. In contrast, the proportionate liability legislation does not, in terms, give a concurrent wrongdoer who is not a defendant in "proceedings involving an apportionable claim" any protection from being sued by a plaintiff or by a defendant found to be liable provided that in the subsequent proceedings, by force of s 12GU(2), the plaintiff cannot receive an amount more than the amount of damage or loss actually sustained. 53 Importantly, s 12GU(1) preserves the right of a plaintiff to sue another alleged concurrent wrongdoer, after recovering judgment against a concurrent wrongdoer, "for an apportionable part of any damage or loss". Nonetheless, s 12GU(2) precludes the plaintiff from recovering an amount of damages that, after taking into account the amount recovered already in respect of the damage or loss, would result in any recovery greater than the damage or loss sustained. That reflects the general law as explained by Gleeson CJ and Callinan J in Baxter v Obacelo Pty Limited (2001) 205 CLR 635 at 656-657 [47]-[48]. Their Honours discussed the position where a judicial assessment of the whole of a plaintiff's loss results in a judgment for damages in that amount against one tortfeasor. They said that when that tortfeasor satisfied the judgment that satisfaction "put an end to any claim, or possible claim, against another tortfeasor, whether a joint tortfeasor or one of several tortfeasors, for two reasons". Those reasons were that, first, full recoupment of the judicially determined damages had the consequence that any claim against another tortfeasor "lacks a subject matter", and secondly, it would be inequitable to permit additional recovery. 54 They then discussed the position if the plaintiff settled a claim against one tortfeasor, whether joint or concurrent, saying (at 656-657 [48]): "If it would be unconscientious of the plaintiff to pursue a claim against another tortfeasor, or if the amount received pursuant to the settlement is, or ought to be regarded as, recoupment of the whole of the plaintiff's loss or damage, then action against another tortfeasor, whether in separate proceedings, or, where the other tortfeasor was a party to the original proceedings, by way of continuation of those proceedings, must fail. If, either expressly or by implication, a settlement agreement manifested a common intention of the parties to the agreement that the settlement sum was to be paid and received in full satisfaction of the rights of the plaintiff, against the defendant or anyone else, in relation to the loss or damage incurred, then, for both of those reasons, a further claim would fail. The most obvious way to negative such an intention would be by an express reservation of rights. While the effect of the settlement agreement, in the ordinary case, will be the most significant factor bearing upon either or both of the two possible grounds mentioned, it is not possible to eliminate any other circumstances which, in a given case, could indicate unconscientiousness, or loss of the subject matter of a claim." (emphasis added) 55 Gummow and Hayne JJ said (205 CLR at 661 [64] and see too per Kirby J at 664-665 [75], 670 [92]): "Where it is accepted that the recovery under a settlement of the first action is of a sum less than that otherwise recoverable by judgment in the second action, it is not apparent that a question of "double satisfaction" arises. There will be no breach of the universal rule that the plaintiff cannot recover more than he or she has lost if the judgment in the second action gives credit for the recovery upon settlement of the first." (emphasis added) 56 Here, s 12GU(1) provides expressly that, despite having recovered a judgment against one concurrent wrongdoer "for an apportionable part of any damage or loss", the plaintiff can bring "another action against any other concurrent wrongdoer for that damage or loss" (emphasis added): i.e. in respect of the same harm to the plaintiff's economic interest that the original defendant had been found to have infringed. That right is constrained only by the prohibition imposed in s 12GU(2) against the plaintiff recovering an amount of damages in the second action that would result in him, her or it receiving compensation for damage or loss that is greater than the loss actually sustained. In other words, s 12GU in its very terms contemplates that, subsequently, events may occur that allow a plaintiff to sue another concurrent wrongdoer for a shortfall in recovery of a previously apportioned part of the damage or loss, provided that there is no double recovery involved. If, as S & P argued, the proportionate liability legislation precluded such an action, s 12GU would have no work to do. Likewise, s 12GU permits a plaintiff to sue in subsequent proceedings another person who was known, before judgment in the first proceeding, to be a potential concurrent wrongdoer. 57 Once the apportionment of an apportionable claim has occurred, s 12GU can only operate if it allows recovery of the unrecovered whole or part of the same damage or loss (i.e. harm to the economic interest infringed) as the first judgment had apportioned against the first concurrent wrongdoer. There could never be a question of double recovery if the initial apportionment resolved once for all the question of who was liable for the apportioned share of damage or loss. Rather, s 12GU only operates where the plaintiff has not recovered the full amount of the apportioned damage or loss from the wrongdoer(s) found liable by the first judgment. 58 The apportionment in the first judgment, ordinarily, but not exhaustively, will fix the responsibilities of all concurrent wrongdoers. The reason it will not do so exhaustively is not far to seek. It is because facts may emerge subsequently that demonstrate that a concurrent wrongdoer, not party to the original proceedings, had an, or a greater, apportionable share of responsibility for the plaintiff's damage or loss than appeared in the first proceeding. Ordinarily, the initial apportionment will resolve, as most litigation resolves, issues finally. But, where not all persons whose rights and liabilities may be in issue are party to one proceeding, the law has long recognised that litigation between different parties in different proceedings may bring about different, and possibly not wholly consistent, results, as does s 12GU in terms. 59 This does not mean that, ordinarily, a plaintiff who obtained a judgment against a concurrent wrongdoer who was, or became, insolvent can use s 12GU to recover the shortfall between the judgment sum including interest and the total dividend paid to the plaintiff from the insolvent's estate. If the plaintiff had sued other defendants together with the insolvent, or if the insolvent or another defendant had raised and proved that some other person who had not been sued was also a concurrent wrongdoer, the court would find and apportion responsibility among those defendants and the other person. 60 But, neither the plaintiff nor the other person would be bound in subsequent proceedings by any such finding as to the fact, or the share, of the other person's responsibility as a concurrent wrongdoer. That other person's liability will be limited by two mechanisms, first, the general law principle, now given statutory effect in s 12GU(2), that the plaintiff cannot recover more than full compensation for the damage or loss he, she or it sustained and, secondly, the apportionment that the Court makes in the proceedings in which that person is a party pursuant to s 12GR(1)(a) or its analogues. 61 Moreover, s 12GS makes provision in respect of a defendant affected by s 12GS(1)(a) who fails to give a plaintiff written notice of information that the defendant has about the identity and role of another potential defendant who may be a concurrent wrongdoer. But, Subdiv GA is silent on the position, other than as to costs, if the defendant does not do so. That is, the proportionate liability legislation does not provide a consequence barring, or otherwise affecting, a plaintiff from bringing subsequent proceedings against someone as a concurrent wrongdoer to recover no more than the damage or loss actually sustained by the plaintiff. 62 I do not accept S & P's contention that the findings, that Grange was the sole wrongdoer and the answer to question 9 in the Wingecarribee proceedings, amounted to a judgment that was inconsistent with the relief sought in these proceedings. It put that contention on the basis the decision in Rennie Golledge Pty Ltd v Ballard (2012) 82 NSWLR 231 at 236 [16] per Basten JA and 266-267 [154]-[157] per Barrett JA. That decision is distinguishable. It concerned the effect of a consent judgment, against a sole defendant, for damages to be assessed on the ability of that defendant to seek leave to amend its defence on the basis that the claims against it were apportionable claims under the NSW Act. Each of Basten JA and Barrett JA held that, while the judgment for damages to be assessed remained in place solely against the defendant, the defendant could not claim that there was anyone else who was capable of being found to be a concurrent wrongdoer. They held that any apportionment would be inconsistent with the defendant's admission of admitted sole liability for the plaintiff's damage or loss and, accordingly, they held that the amendment had been properly refused by the trial judge. Because that case concerned the defendant's position, their Honours did not need to, and did not, consider the operation of the proportionate liability legislation on a plaintiff exercising his, her or its right to bring further proceedings, including under s 12GU. 63 In essence, their Honours held that, because the sole defendant had not raised a defence of proportionate liability when consenting to judgment against it, it could not contend that the damages to be assessed were apportionable to anyone else. That recognised that a finding of proportionate liability is a partial defence to the plaintiff's cause of action for the harm to the economic interest infringed. In other words, the finding that the defence has been established is distinct from and anterior to the quantification of the amount of damages assessed in the proceedings. As I explain in these reasons, the proportionate liability legislation does not envisage that the quantification of the plaintiff's damages necessarily will be finalised in the first proceedings; those proceedings will only crystallise and finalise the proportion of liability of the defendant(s) to them and the amounts which he, she, it or they must pay. Subsequent proceedings can arrive at differing apportionments for other concurrent wrongdoers and different judgment sums, subject to the cap on recoveries mandated by s 12GU(2). 64 The evident intent of s 12GU is that the plaintiff can sue to recover the outstanding balance from anyone who is another concurrent wrongdoer. Considerable inconvenience, expense and injustice could be caused to a plaintiff if the proportionate liability legislation operated in the once for all way propounded by S & P. That is because, as Swan and Moree argued was the case in the Wingecarribee proceedings, the bare identification of a concurrent wrongdoer and circumstances that "may make" it a concurrent wrongdoer may be insufficient, within the meaning of s 12GS(1)(b), to justify the plaintiff pursuing that person. The defendant may not have an interest in highlighting or developing why the potential concurrent wrongdoer is also liable, because to do so might make the defendant's forensic position worse. 65 The construction of the proportionate liability legislation advanced by S & P also could lead to serious injustice if a defendant gave notice of a potential other concurrent wrongdoer pursuant to s 12GS(1) and pleaded, but did not prove, a defence based on that person's alleged responsibility. The proportionate liability legislation does not require the plaintiff to join such a person or undertake the risk, and expense, of suing him, her or it in the proceedings. The legislation does not extinguish or affect a plaintiff's cause of action against any third person merely because a defendant alleges or relies on a defence that the person was a concurrent wrongdoer based upon allegations that the defendant failed to establish in the proceedings. A plaintiff may consider that the case against the person notified by the defendant as a potential concurrent wrongdoer is weak. If the plaintiff fails to join that person and the defendant proves that the person is a concurrent wrongdoer so that the defendant's liability is apportioned below 100%, the defendant will have limited its own liability and to that extent established a partial defence. 66 But, if the plaintiff subsequently sued the other person, pursuant to s 12GU, that person would not be bound by the findings in the earlier proceeding as to liability or apportionment, save that s 12GU(2) would limit the compensation that the plaintiff could recover to no more than the damage or loss actually sustained. In particular, the court could find in the second proceedings, on the evidence, that the other person bore a lesser share of apportioned liability than found in respect of him, her or it in the first. But, in such a case, the defendant in the first proceedings would not be at risk of any adjustment in the judgment that had earlier established his, her or its apportioned degree of responsibility or, by force of ss 12GT and 12 GV(2), of any claims for contribution or indemnity. 67 Alternatively, the defendant in the first proceedings may have raised the issue of the potential liability of the other person, but then run no, or a desultory, case to establish that liability, so that no apportionment is found justified. In such a case, the plaintiff may have no interest in assisting the defendant in the effort of establishing a lesser share of liability. If S & P's argument were correct, nonetheless, despite s 12GU(1), the plaintiff would lose all its rights against the person if the court decided, in accordance with its function under s 12GR(1)(a), that the defendant's liability to the plaintiff should not be affected by apportioning any responsibility to the non-party. 68 A defendant can always protect his, her or its position by bringing a cross-claim seeking declaratory relief against a third person, whom he, she or it believed was a concurrent wrongdoer, as well as the plaintiff, if the plaintiff did not join that person after being given notice under s 12GS(1), in order to establish an entitlement to an apportionment of responsibility for the damage or loss found. That cross-claim would create a binding decision on all relevant parties. For example, in the Wingecarribee proceedings, it is not hard to imagine why Grange would not have developed a detailed evidentiary case that the ratings agencies were negligent, given both its own expertise and failure to advise its clients, the Councils, about that subject matter. Had Grange put such a case, it may well have shown that it had no appropriate product to sell and thus would have proven that, as the Councils had alleged, it had engaged in misleading and deceptive conduct, was negligent and in breach of its fiduciary duties to them. 69 Critically, s 12GR(1)(a) limits the liability of a defendant to proceedings who is a concurrent wrongdoer in relation to a single apportionable claim in respect of damage or loss. The concurrent wrongdoers are persons whose act(s) or omission(s) caused independently or jointly the damage or loss that is the subject of that claim by force of s 12GP(3). The provisions of Subdiv GA and its analogues do not refer to the liability of potential or other possible concurrent wrongdoers who are not made defendants in proceedings in respect of the single apportionable claim. Instead, s 12GS requires a defendant only to give notice to a plaintiff about the existence and role of a person whom the defendant has reasonable grounds to believe is a concurrent wrongdoer. 70 The use of these provisions in the structure of the proportionate liability legislation indicates that the apportionment of liability in proceedings is a substantive defence established after a trial on identified issues. A court can only arrive at an apportionment under s 12GR(1)(a) that it "considers just having regard to the extent of the defendant's responsibility for the damage or loss" after making findings of fact on the evidence of each defendant's responsibility. Barrett J arrived at this conclusion in respect of the NSW Act in Reinhold 82 NSWLR at 769-771 at [19]-[24], [29]-[32]. He followed what Middleton J had said, obiter dicta, in Dartberg Pty Ltd v Wealthcare Financial Planning Pty Ltd (2007) 164 FCR 450 at 458 [30]-[31]. Middleton J had held that the Victorian proportionate liability legislation in Pt IVAA of the Wrongs Act 1958 (Vic) was not picked up as a surrogate federal law by s 79 of the Judiciary Act 1903 (Cth) because that legislation made no provision for proportionate liability for claims made there under the Corporations Act 2001 (Cth): see 164 FCR at 456-457 [18]-[20], 458 [32]. 71 I reject S & P's argument that what Barrett J decided as to this construction was affected by the reasoning of French CJ, Hayne and Kiefel JJ in Hunt & Hunt 247 CLR 613. Indeed, their Honours' construction was consistent with that of Barrett J, Middleton J and my own. 72 I should also note that Swan and Moree argued that the proportionate liability legislation had no application here because the Councils in the Wingecarribee proceedings recovered no damages. They submitted that s 12GU(2) did not prevent them seeking to recover their losses in full in these proceedings. They argued that the Councils had merely established the sums for which they should be admitted to proof in Grange's liquidation. I reject that argument. It ignored the express terms of s 12GP(5) and its analogues. That provided that, for the purposes of Subdiv GA, it did not matter that a concurrent wrongdoer was insolvent or was being wound up. The expression "damages previously recovered" in s 12GU(2) must include any amounts received or receivable as dividends from an insolvent estate or a company in liquidation. The principle against double recovery is reflected in s 12GU(2) as explained above. 73 For these reasons, I am of opinion that the proportionate liability legislation creates an effective defence for a defendant who can persuade a court that his, her or its responsibility for a claim should be limited, as French CJ, Hayne and Kiefel JJ said, by "apportioning that responsibility where the defendant can show that he or she is a 'concurrent wrongdoer'" (Hunt & Hunt 247 CLR at 626 [16]). A defendant who can show - i.e. prove - that, gets the benefit of a limitation, once for all, of his, her or its liability. And, if there is more than one concurrent wrongdoer joined as a party in the action, all of them will seek to have their respective liabilities to the plaintiff apportioned to as little as possible so as to thrust the balance onto each other defendant. The consequence of the court's determination, once made, will be that that apportioned share(s) cannot later be altered (subject to the principles affecting judgments obtained by fraud or other irregularities, none of which need be considered here) and, by force of ss 12GT and 12GV(2), those concurrent wrongdoer defendants cannot be called upon to make contribution or indemnity to a person who is later sued in a separate proceeding to which s 12GU applies. 74 Thus, the effect of a defendant succeeding in having his, her or its responsibility for a claim apportioned is only to limit the liability to the plaintiff of that defendant. That result does not limit a plaintiff's available remedies against other concurrent wrongdoers who are not defendants in the proceedings to recover any damage or loss actually sustained that is not recovered from that defendant. 75 I am of opinion that there is nothing in Subdiv GA that operates to exclude the availability of any cause of action to Swan or Moree to seek recovery, pursuant to s 12GU, of any damage or loss from S & P that they do not recover from Grange and that they actually sustained from investing in SCDOs.

Consideration - abuse of process 76 I reject S & P's argument that Swan and Moree are precluded from bringing these proceedings because of the findings in the Wingecarribee proceedings that the ratings agencies, including S & P, were not concurrent wrongdoers and that Grange was solely liable for the Councils' damage or loss. Those findings effectively rejected Grange's defence that the ratings agencies were concurrent wrongdoers with it. The findings were based on the evidence and facts in issue in the Wingecarribee proceedings, to which none of the ratings agencies was a party. For the reasons I have given, s 12GU permits Swan and Moree to make the claims they seek to have determined in these proceedings so as to recover the difference between their actual losses and whatever total dividend or other payment each receives in the liquidation of Grange in respect of those losses. 77 In those proceedings, as I found, there was no issue about the accuracy or appropriateness of the ratings of any of what were called "the claim SCDOs", being those for which the Councils claimed damages (Wingecarribee 301 ALR at 286 [1097] see [21] above). The claim SCDOs there included each of the 8 SCDOs in issue in these proceedings. That was the context in which I found that the Council officers' reliance on the ratings for each of the claim SCDOs was not a cause of the Council's loss or damage. There was no issue, and no evidence, in the Wingecarribee proceedings to support the falsification of representations (B) and (C). Hence, I arrived at the findings set out above from Wingecarribee 301 ALR at 286-287 [1097], [1099]-[1101]. 78 In contrast, here, Swan and Moree have contended that the ratings given by S & P for the 8 SCDOs were not accurate or appropriate. That is because of the alleged deficiencies with S & P's rating methodology and S & P's alleged lack of independence. The two Councils' complaint about the rating representations is that, had the deficiencies in the methodology not operated, then the 8 SCDOs would not have been given the high ratings that S & P allocated to them. That complaint was never an issue in the Wingecarribee proceedings. And, the complaint about the independence representation was also not on issue at the trial in the Wingecarribee proceedings. Accordingly, the findings in the Wingecarribee proceedings that the ratings agencies were not concurrent wrongdoers with Grange were arrived at on different facts and issues from those that Swan and Moree seek to raise in these proceedings. S & P will be able to allege that Grange was a concurrent wrongdoer, if these proceedings go to trial and if S & P is found liable, and issues as to any apportionment of responsibility between it and Grange will be able to be considered at that time.

Consideration - conflicting judgments 79 I reject S & P's argument that these proceedings are an abuse of process or otherwise not maintainable by Swan or Moree because of any risk that a judgment in them will conflict with the findings in the Wingecarribee proceedings that the ratings agencies were not concurrent wrongdoers. First, S & P's argument was based on its construction of a once for all apportionment between all concurrent wrongdoers under the proportionate liability legislation that I have rejected. Secondly, I rejected Grange's defence on the issues that it litigated. In the Wingecarribee proceedings I found that Grange had accepted that it had to establish that any alleged concurrent wrongdoer was responsible for the economic loss that the Councils claimed (301 ALR at 283 [1083]). And I found on the facts that I was not satisfied that Grange had established that the ratings agencies were concurrent wrongdoers. That was because, as I found, Grange had not alleged how the ratings agencies' publication of representations (B) and (C) was an independent or joint cause of the damage or loss that the Councils suffered (301 ALR at 286-287 [1099]). 80 In these proceedings, the two Councils have pleaded a case that S & P's making of representations (B) and (C) did cause them that economic loss because, for among other reasons, there was an underlying problem with S & P's use of the Gaussian copula in arriving at the rating it gave to each of the 8 SCDOs. 81 I also reject S & P's argument that these proceedings are not maintainable, or are an abuse of process, because Swan and Moree seek in them a judgment that would conflict with the judgment in the Wingecarribee proceedings, being the answer to question 9 and the finding that Grange was 100% liable for the damage and loss claimed here. First, Swan and Moree are not precluded by any res judicata arising from the Wingecarribee proceedings because their cause of action against S & P was never litigated there. That cause of action against S & P could not have merged in any judgment given in the Wingecarribee proceedings because S & P was never a party to those earlier proceedings or a privy of a party: Blair v Curran (1939) 62 CLR 464 at 531-532 per Dixon J; Anshun 147 CLR at 597 per Gibbs CJ, Mason and Aickin JJ. Nor is there any issue estoppel arising from the Wingecarribee proceedings that precludes Swan and Moree from bringing these proceedings against S & P because, as Dixon J said in Blair 62 CLR at 531-532: "A judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or their privies. The estoppel covers only those matters which the prior judgment, decree or order necessarily established as the legal foundation or justification of its conclusion, whether that conclusion is that a money sum be recovered or that the doing of an act be commanded or be restrained or that rights be declared. The distinction between res judicata and issue-estoppel is that in the first the very right or cause of action claimed or put in suit has in the former proceedings passed into judgment, so that it is merged and has no longer an independent existence, while in the second, for the purpose of some other claim or cause of action, a state of fact or law is alleged or denied the existence of which is a matter necessarily decided by the prior judgment, decree or order. Nothing but what is legally indispensable to the conclusion is thus finally closed or precluded. In matters of fact the issue-estoppel is confined to those ultimate facts which form the ingredients in the cause of action, that is, the title to the right established. Where the conclusion is against the existence of a right or claim which in point of law depends upon a number of ingredients or ultimate facts the absence of any one of which would be enough to defeat the claim, the estoppel covers only the actual ground upon which the existence of the right was negatived. But in neither case is the estoppel confined to the final legal conclusion expressed in the judgment, decree or order." (emphasis added) 82 Grange could not be a privy of S & P because each would seek to make the other bear the damage or loss claimed in the two proceedings. Their interests were antipathetic to one another. Thus, a finding for or against Grange could not bind S & P. Indeed, if Grange had established a defence in the Wingecarribee proceedings that S & P was a concurrent, or the sole, wrongdoer, that finding could have no preclusive affect to prevent S & P from challenging it. S & P would have been free to challenge in these proceedings any such finding against it made in the Wingecarribee proceedings, had such a finding been made. Only the existence of any right of Grange to an apportionment of its liability was negatived in the Wingecarribee proceedings. Those proceedings did not negate any cause of action that the Councils or their privies had, or may have had, against S & P: Blair 62 CLR at 532. 83 It follows that no res judicata or issue estoppel could operate between Swan and Moree on the one hand and S & P on the other arising out of the Wingecarribee proceedings. Nor does S & P find support for its argument from the principle in Henderson v Henderson (1843) 3 Hare 100 at 115; 67 ER 313 at 319 that was applied in Anshun 147 CLR at 598 (and see 602-603) where Gibbs CJ, Mason and Aickin JJ said: "The critical issue, then, is whether the case falls within the extended principle expressed by Sir James Wigram VC in Henderson v Henderson [(1843) 3 Hare at p 115 [67 ER at p 319]] . The Vice-Chancellor expressed the principle in these terms: "where 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." (emphasis added) 84 That led their Honours to formulate an extension of the principle stated by Wigram VC in respect of a cause of action that the parties or one of them could have but did not litigate in the earlier proceedings as follows (Anshun 147 CLR at 602-603): "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 e.g. expense, importance of the particular issue, motives extraneous to the actual litigation, to mention but a few. See the illustrations given in Cromwell v County of Sac [(1876) 94 US [24 Law Ed at p 199]]. It has generally been accepted that a party will be estopped from bringing an action which, if it succeeds, will result in a judgment which conflicts with an earlier judgment." (emphasis added) 85 And in the case their Honours cited for the last preposition, Cromwell v County of Sac 94 US 351 at 356 (1876), Field J giving the opinion of the Court said: "Various considerations, other than the actual merits, may govern a party in bringing forward grounds of recovery or defence in one action, which may not exist in another action upon a different demand, such as the smallness of the amount or the value of the property in controversy, the difficulty of obtaining the necessary evidence, the expense of the litigation, and his own situation at the time. A party acting upon considerations like these ought not to be precluded from contesting in a subsequent action other demands arising out of the same transaction." (emphasis added) 86 Gibbs CJ, Mason and Aickin JJ explained that "conflicting" judgments included judgments that are contradictory, though they may not have been pronounced on the same cause of action. They said that it suffices if the judgments appear to declare rights that are inconsistent in respect of the same transaction: Anshun 147 CLR at 603-604. There was no requirement in the proportionate liability legislation for S & P to be joined as a party in the Wingecarribee proceedings. That follows because s 12GU(1) expressly provided that nothing in Subdiv GA prevented a party in Swan's or Moree's position from bringing another action against a different concurrent wrongdoer for an apportionable part of any damage or loss. 87 If the Councils or Grange had sought to join S & P at the time that Grange first pleaded that S & P was a concurrent wrongdoer on the basis presently relevant on 20 December 2010, less than three months before the trial was fixed to begin, that joinder would have caused an adjournment so that S & P could be served and prepare its defence for a hearing. The Court would have had to consider whether an adjournment would have been in the interests of either the Councils or Grange or that it was appropriate in all the circumstances. Both sides had agreed on a timetable to bring the very complex proceedings to trial promptly. 88 Moreover, the liquidators of Grange wished to have guidance by having the issues raised on the pleadings between it and the Councils resolved that would assist them in determining the admission of debts in the liquidation: Wingecarribee (No 3) [2010] FCA 747 at [8]-[10]. The expert evidence of Prof SchlÖghl on which the applicants relied, in the Bathurst proceedings in relation to the ratings methodology, and in particular the Gaussian copula, was only filed in May 2011, almost two months after other experts had given concurrent evidence in the Wingecarribee proceedings. In those circumstances, it was not unreasonable for the Councils in the Wingecarribee proceedings to have proceeded without seeking to join S & P. 89 Accordingly, no estoppel on the principles in Anshun 147 CLR at 602-603 and Cromwell 94 US at 356 operated against Swan and Moree to preclude them bringing these proceedings. 90 Nor does the principle in Rippon 53 NSWLR 198 preclude Swan and Moree from prosecuting these proceedings. There, the purchasers of a business had sued the vendors in earlier proceedings in which the trial judge had found that the purchasers had not been misled or deceived by any inaccuracy in the latest, being the 1991, financial statements of the business in deciding to purchase. He made a finding that the purchasers had not relied on the 1991 financial statements: Rippon 53 NSWLR at 200 [3]-[8]. Subsequently, the purchasers sued the accountants who had prepared the business' financial statements for the financial years ending 30 June 1988, 1989, 1990 and 1991. The purchasers had not based their previous claim against the vendors on any financial statements earlier than those for the 1991 accounts. In the second proceedings, they sought to recover damages against the accountants, who had not been parties to the first, for negligent misrepresentations in the earlier accounts for 1988, 1989 and 1990. 91 Handley JA, with whom Mason P and Heydon JA agreed, held that the second proceedings were an attempt to litigate or re-litigate issues that were either decided in or barred by the first proceedings. He said that the purchasers could not have succeeded in the second proceedings on the issue of reliance on the 1991 figures because the judge in the first case held that they had not relied on them and "they could hardly succeed in the establishing reliance on the earlier figures" (53 NSWLR at 203 [28]). Handley JA held that, while there was no question of oppression or unfairness being visited on the accountants who were not parties to the first proceedings, "these proceedings do threaten the integrity of the administration of justice and raise the prospect of conflicting judgments" (53 NSWLR at 205 [36]). That was because, as his Honour held, in the second proceedings, the purchasers had (53 NSWLR at 204 [30]): "sued the accountants for what is in substance the same misrepresentations. In the first proceedings they had to prove that they relied upon those misrepresentations. This turned on the evidence of Mr Hoefl, the contemporary documents, and the surrounding circumstances. The purchasers lost that issue and seek to re-litigate it against the accountants on substantially the same evidence in the hope that this time Mr Hoefl will be believed." (emphasis added) 92 That situation is far removed from the present. Here, the evidence as to the rating and independence representations will be very different from the evidence in the Wingecarribee proceedings, where those matters were not in issue. Moreover, in the Wingecarribee proceedings, the Councils defeated Grange's defence that the ratings agencies were concurrent wrongdoers with it, where there was no issue, unlike the position in these proceedings, about the accuracy of the ratings or the independence of the ratings agencies. Grange, not the Councils, had the burden of proving that the ratings agencies, including S & P, were concurrent wrongdoers with it. Grange lost that issue. The ground on which it fought that issue that did not involve any suggestion of inaccuracy or falsity of representations (B) and (C) or the ratings representations. The Councils did not need to, and did not, litigate about the accuracy of the ratings or the independence of the ratings agencies in the Wingecarribee proceedings. The judgment in those proceedings established only that, on the issues and evidence there, Grange was the only proven wrongdoer. 93 Ordinarily, a plaintiff who has an unadjudicated cause of action that can be enforced in fresh proceedings cannot be precluded from bringing any fresh proceedings merely because he, she or it could, or even should, have brought a cross-claim on that cause of action in a forum chosen by an opposite party who commenced the original proceedings: Tanning Research Laboratories Inc v O'Brien (1990) 169 CLR 332 at 346 per Brennan and Dawson JJ. Had Grange succeeded in the Wingecarribee proceedings in establishing that the ratings agencies were concurrent wrongdoers with it, the Councils (including Swan as an applicant and Moree as a member of the representative group) would have been bound by that result, to two consequences, namely, first, Grange would have been liable only for a proportion of their claimed damage or loss and, secondly, s 12GU permitted the Councils and members of the representative group to sue any, and all, other persons who were allegedly concurrent wrongdoers with Grange for an amount up to the total amount of their damage and loss. 94 Notably, one ordinary consequence of inter partes litigation would not have arisen from that result. The ratings agencies, including S & P, were not, and could not have been, bound by it in any way and were free to contest all questions as to their liability, if sued in fresh proceedings. The only substantive outcome of the Wingecarribee proceedings in relation to the position of the ratings agencies was that Grange had failed to prove its defence that they were concurrent wrongdoers so that Grange's liability remained entire, rather than, as it had sought to prove, limited to a proportion of the Councils' (and group's) damage or loss. No issue estoppel arose in favour of S & P: Blair 62 CLR at 532. 95 There is no evidence that, when the issues for trial were settled in early March 2011, the Councils knew, or were aware of, what the expert report would say about the Gaussian copula that was served in late May 2011 in the Bathurst proceedings. 96 I am not satisfied that it is arguable that these proceedings would be capable of being seen as raking over the coals of the Wingecarribee proceedings so as to re-litigate any substantive issue that they decided in a way that creates any estoppel or abuse of process. It is important to appreciate that a court will exercise great caution before it will conclude that proceedings are an abuse of process. In Williams v Spautz (1992) 174 CLR 509 at 529 Mason CJ, Dawson, Toohey and McHugh JJ said: "It is, of course, well established that the onus of satisfying the court that there is an abuse of process lies upon the party alleging it. The onus is 'a heavy one', to use the words of Scarman LJ in Goldsmith v Sperrings Ltd [[1977] 1 WLR at 498; [[1977] 2 All ER at p 582] and the power to grant a permanent stay is one to be exercised only in the most exceptional circumstances [Jago v The District Court of New South Wales (1989) 168 CLR at 34; see also Reg v Sang [1980] AC at 455]." 97 S & P contended that this was an appropriate case to exercise the Court's power to prevent an abuse of process so as to avert the scandal that would be caused to the administration of justice if the same question, having been disposed of by one case, a litigant were "permitted by changing the form of the proceedings to set up the same case again" within the principle expressed by Lord Halsbury LC in Reichel v Magrath (1889) 14 App Cas 665 at 668. But, as Hunt CJ at CL held in Haines v Australian Broadcasting Corporation (1995) 43 NSWLR 404 at 414B-D, the issue determined in the earlier case must be one that the party propounding it in the later one had lost in the former. He said that that principle did not work in reverse to enable a party who had won on the issue in the earlier case to prevent it being litigated by a person who had not been a party to the previous action. Moreover, Hunt CJ at CL explained that the discretion to stay a later action as an abuse of process requires a consideration of all of the circumstances of the earlier action. 98 In State Bank of New South Wales v Stenhouse Ltd (1997) Aust Torts Reports ¶81-423 at 64,089, Giles CJ Comm D also discussed the applicable principles. He said that the guiding considerations were oppression and unfairness to the other party to the litigation and concern for the integrity of the administration of justice. Giles CJ Comm D also explained that, in considering whether a stay should be granted on this principle, the court can have regard to, among other matters, whether and how any fresh evidence is sought to be used, its potential significance and the reasons why it had not been advanced in the earlier proceedings. And as Heydon JA pointed out, with the agreement of Spigelman CJ and Mason P in R v O'Halloran (2000) 159 FLR 260 at 293 [112], the precise identification of the issues in both proceedings is of importance in evaluating whether the second is an abuse of process; see too Kermani v Westpac Banking Corporation (2012) 36 VR 130 at 157 [110] per Robson AJA, with whom Neave and Harper JJA agreed. 99 Here, the issues are not the same, albeit that there is a similarity between representations (B) and (C) in both the Wingecarribee proceedings and the ratings representations in these proceedings. Critically, however, in the former proceedings there was no issue that the ratings for the SCDOs were other than accurate and appropriate. In these proceedings, challenges to the accuracy and appropriateness of the ratings are to be central features. Thus, the making and the causative effect of the relevant representations in inducing the various Councils to invest in SCDOs is likely to be common ground in both proceedings. But the crucial difference is that, in the Wingecarribee proceedings, the parties proceeded on the basis that representations (B) and (C) were accurate. I found that Grange had not elaborated "how, in the context of its promotion and marketing of the claim SCDOs to the Councils, the ratings agencies' publication or assignment of a rating was an independent or joint cause of the economic loss that the Councils suffered' (301 ALR at 286 [1099]). That position is a world away from the issues that the two Councils now seek to bring to trial in these proceedings where they propound a positive set of allegations in support of their case that the high ratings for the 8 SCDOs should never have been assigned by S & P. 100 S & P has not established that the evidence on which Swan and Moree seek to challenge the accuracy and appropriateness of the ratings was available to the Councils in the Wingecarribee proceedings at a time and in a form that it could and should have been used by them to join and sue S & P and the other ratings agencies in those proceedings. Moreover, that evidence or the underlying facts on which it was based was not adverted to or tendered by Grange to support its defence that the ratings agencies were concurrent wrongdoers. The trial of the Bathurst proceedings occurred after I had reserved judgment in the Wingecarribee proceedings. 101 In addition, there is no injustice to or oppression of S & P in allowing these proceedings to go to trial since it had not been a party to the Wingecarribee proceedings. The decision of Jagot J established that Swan and Moree have an arguable case, albeit that the Full Court has reserved its decision in the appeal from her Honour's orders. The independence representation was not in issue at the trial in the Wingecarribee proceedings and is open to be alleged here against S & P, which will be a proper contradictor.

Consideration - summary disposal 102 The Court is not concerned with mere pleading points when considering whether to exercise its power to give judgment under s 31A of the Federal Court Act: Wills v Australian Broadcasting Corporation (2009) 173 FCR 284 at 292-293 [43]-[44] per myself, Emmett J agreeing. The decision to grant relief under s 31A(2) requires the Court to be satisfied that there is no reasonable prospect of success for an applicant's case and the power to dismiss it summarily cannot be exercised lightly: Spencer v The Commonwealth (2010) 241 CLR 118 at 141 [60] per Hayne, Crennan, Kiefel and Bell JJ. French CJ and Gummow J (at 132 [25]-[26]) also suggested that the test under s 31A(2) requires a practical judgment as to whether an applicant has more than a fanciful prospect of success. Moreover, there is a need for some caution where, as here, there are apparently complex factual issues to be resolved: see too Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd (2006) 236 ALR 720 at 731 [44]-[45], where I discussed the principles in a passage that was approved by Spender, Graham and Gilmour JJ in Kowalski v MMAL Staff Superannuation Fund Pty Ltd (2009) 178 FCR 401 at 409 [29]-[30]. 103 For the reasons I have explained in dealing with S & P's arguments on abuse of process, these proceedings cannot be determined by reference to the findings in the Wingecarribee proceedings that Grange had not proved the ratings agencies in that litigation to be concurrent wrongdoers. The decision of Jagot J identified that there are reasonably arguable bases to question the accuracy and appropriateness of the ratings based on the challenges to their methodology that Swan and Moree have pleaded. 104 It is notable that S & P led no evidence of its own procedures or methods on this application to suggest the existence of a case that has no reasonable prospects of success under s 31A(2) of the Federal Court Act. Rather, S & P relied on the, for it, adventitious findings in the Wingecarribee proceedings that did not deal with the substantive issues that Swan and Moree have raised in these proceedings. 105 Accordingly, I reject S & P's application for an order summarily dismissing these proceedings under s 31A(2).

Should service on S & P be set aside? 106 The courts require a high standard of candour and responsibility to be exhibited when a party seeks an order against another party or person in their absence as Mahoney AP, with whom Clarke JA agreed, explained in Garrard (t/a Arthur Anderson & Co) v Email Furniture Pty Ltd (1993) 32 NSWLR 662 at 676B-677G adopting the principles stated by Isaacs J in Thomas A Edison Ltd v Bullock (1912) 15 CLR 679 at 681-682. It is the duty of a party seeking such an order in the absence of the party or person affected to bring to the notice of the court all facts material to the grant of relief sought. The discharge of the duty requires the party to draw to the court's attention all material facts and arguments that the absent party or person would have put or tendered as a defence or reason against the grant of the relief. In this way, the court is able to consider the material facts and issues on both sides as a part of the process of deciding whether or not to grant the relief sought. 107 S & P argued that Swan and Moree failed to inform Jacobson J, when seeking the order for service on it out of the jurisdiction, that I had found in the Wingecarribee proceedings that the ratings agencies, including S & P, were not concurrent wrongdoers and that representations (B) and (C) made by Grange were not misleading or deceptive, or had no reasonable basis as to future matters that they represented, in relation to 8 of the same SCDOs that are the subject of the rating representations alleged in these proceedings. 108 S & P's interlocutory application under r 13.01(1)(a) and (d) sought orders that the originating application be set aside and the order giving leave to serve it outside Australia be discharged. The hearing of an application for the discharge of service out of the jurisdiction is in the nature of a review by way of rehearing of the original decision giving leave for that service: Ho v Akai Pty Ltd (In Liq) (2006) 24 ACLC 1,526 at 1,529 [9] per Finn, Weinberg and Rares JJ. There, the Full Court said (24 ACLC at 1,529 [10]): "As has been observed on many occasions, the prima facie case requirement has to be met at the outset, usually on an ex parte basis, and without the advantage of discovery and other procedural aids to the making out of a case: see e.g. Merpro Montassa Ltd v Conoco Specialty Products Inc (1991) 28 FCR 387 at 390. It "should not call for a substantial inquiry": WSGAL Pty Ltd v Trade Practices Commission (1992) 39 FCR 472 at 476; see also Sydbank Soenderjylland A/S v Bannerton Holdings Pty Ltd (1996) 68 FCR 539 at 549. For present purposes it is sufficient to say that a prima facie case for relief is made out if, on the material before the court, inferences are open which, if translated into findings of fact, would support the relief claimed: Western Australia v Vetter Trittler Pty Ltd (in liq) (1991) 30 FCR 102 at 110. Or, to put the matter more prosaically as Lee J did in Century Insurance (in provisional liquidation) v New Zealand Guardian Trust [1996] FCA 376: 'What the Court must determine is whether the case made out on the material presented shows that a controversy exists between the parties that warrants the use of the Court's processes to resolve it and whether causing a proposed respondent to be involved in litigation in the Court in Australia is justified.'" 109 The basis of S & P's argument that there was a material non-disclosure in the application made to Jacobson J was its argument that the operation of the proportionate liability legislation, in light of the outcome in the Wingecarribee proceedings, precluded Swan and Moree from seeking to make S & P liable as a concurrent wrongdoer. That argument was by no means obvious and, in any event, I have rejected it. I am not persuaded that the argument even occurred to those acting for Swan and Moree at the time that they sought leave to serve S & P. However, this being a rehearing, I am fully satisfied that the order made by Jacobson J for service on S & P ought to have been made and should not be discharged. 110 There is, on the material before me, a controversy between the present parties that warrants the use of the Court's resources to resolve it and the involvement of S & P in this litigation is justified: Ho 24 ACLC at 1,529 [10]. Although the corporate location of S & P is physically in the United States, the ratings that it promulgates were provided to Swan, Moree and others in this jurisdiction. It is part of S & P's ordinary business to publish ratings that will be provided to investors who are considering investing in the products that it rates and to others in Australia, and indeed, throughout the world. S & P does not have some accidental connection here in respect of an investor claiming that S & P has a liability because the investor suffered loss or damage from relying on a credit rating that S & P gave to a financial product. 111 Contrary to S & P's argument, there is no requirement in the Rules that an applicant for leave to serve outside Australia must be supported by an affidavit stating the deponent's belief that the applicant has a good cause of action as had been required in earlier Rules of Court first developed in the nineteenth century in England: cf Agar v Hyde (2000) 201 CLR 552 at 572 [46] per Gaudron, McHugh, Gummow and Hayne JJ. 112 Additionally, I accept Swan's and Moree's further argument that S & P submitted to the jurisdiction in bringing its interlocutory application on a wider basis than merely seeking the discharge of the order giving leave to serve it outside Australia. 113 S & P sought substantive relief, namely that the originating application be set aside, or struck out, and its summary dismissal under s 31A(2) of the Federal Court Act. While there was considerable overlap between S & P's argument in support of the various orders that it sought, it did not confine itself to contending that the non-disclosure it alleged was material or that Swan and Moree did not have a prima facie case for any of the relief claimed under r 10.42(4)(c). Rather, S & P argued that the proceedings should be dismissed because they had no reasonable prospect of success. S & P argued the merits of the claims that Swan and Moree made in the proceedings, as opposed to merely contesting the Court's exercise of long arm jurisdiction over it. 114 In Brealey v Board of Management of Royal Perth Hospital (1999) 21 WAR 79 at 87 [38], Ipp J, with whom Malcolm CJ agreed, said: "In determining whether steps taken by a party in the course of proceedings amount to a submission to jurisdiction, the question to be considered is whether the steps were necessary or useful to any action taken by the party other than in objecting to the jurisdiction. A step that is not consistent with or relevant to the challenge to the jurisdiction, will usually be a submission to that jurisdiction. The court must consider the matter objectively and, where the steps relied on are the actions of a solicitor, they must be considered in the context of all the relevant circumstances: see Akai Pty Ltd v People's Insurance Co Ltd [1998] 1 Lloyd's Rep 90 at 97; Rein v Stein (1892) 66 LT 469 at 471; Williams & Glyn's Bank Plc v Astro Dinamico Compania Naviera SA [1984] 1 Lloyd's Rep 453; [1984] 1 WLR 438; Adams v Cape Industries Plc [1990] Ch 433 at 459." (emphasis added) 115 And, in Astro Exito Navegacion SA v W.T. Hsu (The "Messiniaki Tolmi") [1984] 1 Lloyd's Rep 266 at 270, Oliver, Slade and Robert Goff LJJ applied the same principle to determine whether a person had voluntarily submitted to the jurisdiction of the Court. There, a defendant had applied to strike out part of the claim in a writ. Earlier that defendant had applied for a stay on the grounds that Taiwan was a more convenient forum. Both motions were subsequently heard together by Mustill J who dismissed them. Oliver, Slade and Robert Goff LJ held that a person voluntarily submitted to the jurisdiction if he, she or it voluntarily recognises, or has recognised, that the Court has jurisdiction to hear and determine the claim which is the subject matter of the proceedings, adding ([1984] 1 Lloyd's Rep at 270): "In particular, he makes a voluntary submission to the jurisdiction if he takes a step in proceedings which in all the circumstances amounts to a recognition of the Court's jurisdiction in respect of the claim which is the subject matter of those proceedings. The effect of a party's submission to the jurisdiction is that he is precluded thereafter from objecting to the Court exercising its jurisdiction in respect of such claim. Whether any particular matter, for example an application to the Court, amounts to a voluntary submission to the jurisdiction must depend on the circumstances of the particular case." (emphasis added) 116 Their Lordships held that the defendant had clearly submitted to the jurisdiction by applying to strike out part of the claim, saying ([1984] 1 Lloyd's Rep at 271): "For if he had been successful in that application the Court would have decided that issue in his favour and against the respondents. The Court's decision on the point would then have created an issue estoppel against the respondents, which the appellant could have invoked to prevent the respondents pursuing such a claim in the Courts of this country, and possibly also in Courts overseas. Plainly, therefore, by making his application for an order striking out par. 4, the appellant was voluntarily submitting to the jurisdiction of the Court. In these circumstances, it was in any event not open for the appellant thereafter to dispute the jurisdiction of the Court." (emphasis added) 117 If a defendant seeks relief from the Court wider than relief setting aside service or associated with such relief, such as relief on the merits of a claim, ordinarily, he, she or it will have waived the objection to jurisdiction: Laurie v Carroll (1958) 98 CLR 310 at 335-336 per Dixon CJ, Williams and Webb JJ; National Commercial Bank v Wimborne (1979) 11 NSWLR 156 at 176E-F, 177D-E, 182D-F per Holland J; Walker v Newmont Australia Ltd [2010] FCA 298 at [27] per Gordon J. In In re Dulles' Settlement (No. 2). Dulles v Vidler [1951] Ch 842 at 847, Evershed MR put the issue pithily as follows: "It is, of course, plain that where a question of jurisdiction arises a man cannot both have his cake and eat it. He cannot fight the issue on the merits, and at the same time preserve the right to say, if the worst comes to the worst, that the court has no jurisdiction to decide against him. And he cannot, consistently with that principle, take any step unequivocally referable to the issue on the merits." (emphasis added) 118 I am of opinion that, here, S & P has tried to have its cake and eat it. It has attacked the merits of the originating application and statement of claim at a fundamental level in the course of its seeking to have service on it set aside. Were S & P to have succeeded on its merits-based attack in having the proceedings dismissed or the originating application set aside, an issue estoppel would have been created as explained in The Messiniaki Tolmi [1984] 1 Lloyd's Rep at 271. 119 For these reasons, I would also refuse to set aside service because S & P submitted to the jurisdiction.

Conclusion 120 As explained above, I am of opinion that S & P's interlocutory application must be dismissed with costs. The proceedings must be re-listed promptly for directions as to the filing of a defence and their future conduct. I certify that the preceding one hundred and twenty (120) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares.